SEP ACCT VA K EXECANNUITY OF ALLMERICA FIN LFE INS & ANN CO, N-4/A, 2000-09-01

SEP ACCT VA K EXECANNUITY OF ALLMERICA FIN LFE INS & ANN CO
N-4/A, 2000-09-01

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<PAGE>

File Nos. 333-38274
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. 47

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)

Charles F. Cronin, 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 CONTRACTS

Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940
("1940 Act"), Registrant hereby declares that an indefinite amount of its
securities is being registered under the Securities Act of 1933 ("1933 Act").
No filing fee is submitted as a filing fee is not required for this type of
filing. The Rule 24f-2 Notice for the issuer's fiscal year ended December 31,
1999 was filed on or before March 30, 2000.

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

<TABLE>
<CAPTION>
FORM N-4 ITEM NO. CAPTION IN PROSPECTUS
----------------- ---------------------
<S> <C>
1.....................Cover Page

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

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

4.....................Condensed Financial Information; Performance Information

5.....................Description of the Companies, the Variable Accounts, and the Underlying
Investment Companies

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

7.....................Description of the Contract - The Accumulation Phase

8.....................Electing the Annuity Date; Description of Annuity Payout Options; Variable
Annuity Benefit Payments

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

10....................Payments; Computation of Values; Distribution

11....................Surrender and Withdrawals; Surrender Charge; Withdrawals After the Annuity Date

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

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

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

FORM N-4 ITEM NO. CAPTION IN 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
</TABLE>
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
WORCESTER, MASSACHUSETTS

This Prospectus provides important information about a variable annuity contract
issued by Allmerica Financial Life Insurance and Annuity Company (in all
jurisdictions except New York) and by First Allmerica Financial Life Insurance
Company (in New York). The contract is a flexible payment tax-deferred
combination variable and fixed annuity offered on both a group and individual
basis. PLEASE READ THIS PROSPECTUS CAREFULLY BEFORE INVESTING AND KEEP IT FOR
FUTURE REFERENCE. ANNUITIES INVOLVE RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.

A Statement of Additional Information dated ____________, 2000 containing more
information about this annuity is on file with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. A copy may be
obtained free of charge by calling Allmerica Investments, Inc. at
1-800-533-7881. The Table of Contents of the Statement of Additional Information
is listed on page 4 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 Variable Account, known as Separate Account VA-K, is subdivided into
Sub-Accounts. Each Sub-Account invests exclusively in shares of one of the
following funds:

<TABLE>
<S> <C>
ALLMERICA INVESTMENT TRUST FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
AIT Core Equity Fund (SERVICE CLASS 2)
AIT Equity Index Fund Fidelity VIP II Asset Manager Portfolio
AIT Government Bond Fund
AIT Money Market Fund FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
AIT Select Aggressive Growth Fund (SERVICE CLASS 2)
AIT Select Capital Appreciation Fund Fidelity VIP III Growth Opportunities Portfolio
AIT Select Emerging Markets Fund
AIT Select Growth Fund FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
AIT Select Growth and Income Fund (CLASS 2)
AIT Select International Equity Fund Franklin Natural Resources Securities Fund
AIT Select Investment Grade Income Fund Franklin Small Cap Fund
AIT Select Strategic Growth Fund
AIT Select Value Opportunity Fund INVESCO VARIABLE INVESTMENT FUNDS, INC.
AIM VARIABLE INSURANCE FUNDS INVESCO VIF Health Sciences Fund
AIM V.I. Aggressive Growth Fund JANUS ASPEN SERIES (SERVICE SHARES)
AIM V.I. Value Fund Janus Aspen Growth Portfolio
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. Janus Aspen Growth and Income Portfolio
(CLASS B) KEMPER VARIABLE SERIES
Alliance Growth and Income Portfolio KVS Dreman Financial Services Portfolio
Alliance Premier Growth Portfolio Kemper Technology Growth Portfolio
DELAWARE GROUP PREMIUM FUND PIONEER VARIABLE CONTRACTS TRUST (CLASS II)
(SERVICE CLASS) Pioneer Emerging Markets VCT Portfolio
DGPF International Equity Series Pioneer Real Estate Growth VCT Portfolio
DGPF Growth Opportunities Series T. ROWE PRICE INTERNATIONAL SERIES, INC.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND T. Rowe Price International Stock Portfolio
(SERVICE CLASS 2)
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP High Income Portfolio
Fidelity VIP Overseas Portfolio
</TABLE>

THIS ANNUITY IS NOT A BANK DEPOSIT OR OBLIGATION; FEDERALLY INSURED; OR ENDORSED
BY ANY BANK OR GOVERNMENTAL AGENCY.

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

DATED ______, 2000
<PAGE>

In most jurisdictions, values may also be allocated on a fixed basis to the
Fixed Account, which is part of the Company's General Account. The Fixed Account
is an investment option that pays an interest rate guaranteed for one year from
the time a payment is received. Another investment option, the Guarantee Period
Accounts, offers fixed rates of interest for specified periods. Guarantee Period
Accounts may not be available in all states. A Market Value Adjustment is
applied to payments removed from a Guarantee Period Account before the end of
the specified period. The Market Value Adjustment may be positive or negative.
Payments allocated to a Guarantee Period Account are held in the Company's
Separate Account GPA (except in California where they are allocated to the
General Account).

We offer a variety of fixed and variable annuity contracts. They may offer
features, including investment options, fees and/or charges that are different
from those in the contracts offered by this Prospectus. The contracts may be
offered through different distributors. Upon request, your financial
representative can show you information regarding other annuity contracts
offered by the Company. You can also contact us directly to find out more about
these annuity contracts.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
SPECIAL TERMS............................................... 5
SUMMARY OF FEES AND EXPENSES................................ 7
SUMMARY OF CONTRACT FEATURES................................ 17
DESCRIPTION OF THE COMPANIES, THE VARIABLE ACCOUNTS, AND THE
UNDERLYING INVESTMENT COMPANIES............................ 22
INVESTMENT OBJECTIVES AND POLICIES.......................... 26
DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE....... 29
A. Payments............................................. 29
B. Computation of Values................................ 29
The Accumulation Unit............................... 30
Net Investment Factor............................... 30
C. Right to Cancel...................................... 30
D. Transfer Privilege................................... 31
Automatic Transfers (Dollar Cost Averaging)......... 31
Automatic Account Rebalancing....................... 32
E. Surrender and Withdrawals............................ 32
Systematic Withdrawals.............................. 33
Life Expectancy Distributions....................... 34
Systematic Level Free of Surrender Charge Withdrawal
Program............................................. 34
F. Death Benefit........................................ 35
Standard Death Benefit.............................. 35
Optional Enhanced Death Benefit Rider............... 35
Payment of the Death Benefit Prior to the Annuity
Date................................................ 36
G. The Spouse of the Owner as Beneficiary............... 36
H. Optional Minimum Guaranteed Annuity Payout (M-GAP)
Rider................................................... 36
I. Assignment........................................... 39
ANNUITIZATION -- THE PAYOUT PHASE........................... 40
A. Electing the Annuity Date............................ 40
B. Choosing the Annuity Payout Option................... 40
Fixed Annuity Payout Options........................ 41
Variable Annuity Payout Options..................... 41
C. Description of Annuity Payout Options................ 41
D. Variable Annuity Benefit Payments.................... 42
The Annuity Unit.................................... 42
Determination of the First Annuity Benefit
Payment............................................. 42
Determination of the Number of Annuity Units........ 43
Dollar Amount of Subsequent Variable Annuity Benefit
Payments............................................ 43
Payment of Annuity Benefit Payments................. 43
E. Transfers of Annuity Units........................... 43
F. Withdrawals After the Annuity Date................... 44
Calculation of Proportionate Reduction.............. 45
Calculation of Present Value........................ 46
Deferral of Withdrawals............................. 47
G. Reversal of Annuitization............................ 47
H. NORRIS Decision...................................... 48
CHARGES AND DEDUCTIONS...................................... 49
A. Variable Account Deductions.......................... 49
Mortality and Expense Risk Charge................... 49
Administrative Expense Charge....................... 49
Other Charges....................................... 49
B. Contract Fee......................................... 50
</TABLE>

3
<PAGE>

<TABLE>
<S> <C>
C. Optional Rider Charges............................... 50
D. Premium Taxes........................................ 50
E. Surrender Charge..................................... 51
Calculation of Surrender Charge..................... 51
Withdrawal Without Surrender Charge................. 52
Effect of Withdrawal Without Surrender Charge
Amount.............................................. 54
Reduction or Elimination of Surrender Charge and
Additional Amounts Credited......................... 55
F. Transfer Charge...................................... 56
G. Withdrawal Adjustment Charge......................... 56
GUARANTEE PERIOD ACCOUNTS................................... 58
FEDERAL TAX CONSIDERATIONS.................................. 60
A. General.............................................. 60
The Company......................................... 60
Diversification Requirements........................ 60
Investor Control.................................... 60
B. Qualified and Non-Qualified Contracts................ 61
C. Taxation of the Contract in General.................. 61
Withdrawals Prior to Annuitization.................. 61
Withdrawals After Annuitization..................... 61
Annuity Payouts After Annuitization................. 62
Penalty on Distribution............................. 62
Assignments or Transfers............................ 62
Nonnatural Owners................................... 62
Deferred Compensation Plans of State and Local
Government and Tax-Exempt Organizations............. 63
D. Tax Withholding...................................... 63
E. Individual Retirement Annuities...................... 63
STATEMENTS AND REPORTS...................................... 63
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 64
CHANGES TO COMPLY WITH LAW AND AMENDMENTS................... 65
VOTING RIGHTS............................................... 65
DISTRIBUTION................................................ 65
LEGAL MATTERS............................................... 66
FURTHER INFORMATION......................................... 66
APPENDIX A -- MORE INFORMATION ABOUT THE FIXED ACCOUNT...... A-1
APPENDIX B -- PERFORMANCE INFORMATION....................... B-1
APPENDIX C -- SURRENDER CHARGES AND THE MARKET VALUE
ADJUSTMENT................................................. C-1
APPENDIX D -- CONDENSED FINANCIAL INFORMATION............... D-1
APPENDIX E -- EXAMPLES OF PRESENT VALUE WITHDRAWALS AND
PAYMENT WITHDRAWALS........................................ E-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................................................ 3
ANNUITY BENEFIT PAYMENTS.................................... 4
ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING)
PROGRAM.................................................... 5
PERFORMANCE INFORMATION..................................... 6
FINANCIAL STATEMENTS........................................ F-1
</TABLE>

4
<PAGE>
SPECIAL TERMS

ACCUMULATED VALUE: the total dollar amount of all values in the Sub-Accounts,
the Fixed Account and the Guarantee Period Accounts credited to the Contract on
any day before the Annuity Date.

ACCUMULATION UNIT: a measure used to calculate the value of a Sub-Account before
annuity benefit payments begin.

ANNUITANT: the person designated in the Contract whose life is used to determine
the duration of annuity benefit payments involving a life contingency. Joint
Annuitants are permitted and, unless otherwise indicated, any reference to
Annuitant shall include Joint Annuitants.

ANNUITY BENEFIT PAYMENT CHANGE FREQUENCY: the frequency (monthly, quarterly,
semi-annually or annually) that changes due to investment performance will be
reflected in the dollar value of an annuity benefit payment under a variable
annuity payout option.

ANNUITY DATE: the date specified in the Contract or a date elected later by the
Owner to begin annuity benefit payments. This date must be at least one year
after the issue date and may not be later than the Owner's (or youngest Joint
Owner's) 99th birthday.

ANNUITY UNIT: a measure used to calculate annuity benefit payments under a
variable payout option.

ANNUITY VALUE: the value of the amount applied under an annuity payout option.

COMPANY: unless otherwise specified, any reference to the Company shall refer
exclusively to either Allmerica Financial Life Insurance and Annuity Company or
First Allmerica Financial Life Insurance Company.

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

FIXED ACCOUNT: an investment option under the Contract that guarantees principal
and a fixed minimum interest rate and which is part of the Company's General
Account.

FIXED ANNUITY PAYOUT: an annuity payout option with annuity benefit payments
that are fixed in amount and guaranteed throughout the annuity benefit payment
period.

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

GROSS PAYMENT BASE: the total of all payments invested in the Contract, less any
withdrawals that exceed the Withdrawal Without Surrender Charge amount.

GUARANTEE PERIOD: the number of years that a Guaranteed Interest Rate is
credited.

GUARANTEE PERIOD ACCOUNT: an account that corresponds to a Guaranteed Interest
Rate for a specified Guarantee Period.

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

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

5
<PAGE>
MARKET VALUE ADJUSTMENT: a positive or negative adjustment assessed if any
portion of a Guarantee Period Account is withdrawn or transferred prior to the
end of its Guarantee Period.

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

SUB-ACCOUNT: a subdivision of the Variable Account investing exclusively in the
shares of a corresponding fund of Allmerica Investment Trust ("AIT"), a
corresponding fund of AIM Variable Insurance Funds ("AVIF"), a corresponding
portfolio of Alliance Variable Products Series Fund, Inc. ("Alliance"), a
corresponding series of Delaware Group Premium Fund ("DGPF"), a corresponding
portfolio of the Fidelity Variable Insurance Products Fund ("Fidelity VIP"), a
corresponding portfolio of Fidelity Variable Insurance Products Fund II
("Fidelity VIP II"), a corresponding portfolio of Fidelity Variable Insurance
Products Fund III ("Fidelity VIP III"), a corresponding fund of Franklin
Templeton Variable Insurance Products Trust ("FT VIP"), a corresponding fund of
INVESCO Variable Investment Funds, Inc. ("INVESCO VIF"), a corresponding
portfolio of Janus Aspen Series ("Janus Aspen"), a corresponding portfolio of
Kemper Variable Series ("KVS"), a corresponding portfolio of Pioneer Variable
Contracts Trust ("Pioneer VCT") or a corresponding portfolio of T. Rowe Price
International Series, Inc. ("T. Rowe Price").

SURRENDER VALUE: the Accumulated Value of the Contract on full surrender after
application of any applicable Contract fee, surrender charge, rider charges and
Market Value Adjustment.

UNDERLYING FUND (OR FUNDS): an investment portfolio of AIT, AVIF, Alliance,
DGPF, Fidelity VIP, Fidelity VIP II, Fidelity VIP III, FT VIP, INVESCO VIF,
Janus Aspen, KVS, Pioneer VCT or T. Rowe Price in which a Sub-Account invests.

VALUATION DATE: a day on which 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, and on such other days (other than a day
during which no payment, withdrawal or surrender of a Contract was received)
when there is a sufficient degree of trading in an Underlying Fund's portfolio
securities such that the current unit value of the Sub-Accounts may be affected
materially.

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

VARIABLE ANNUITY PAYOUT: an annuity payout option providing for payments varying
in amount in accordance with the investment experience of the Underlying Funds.

6
<PAGE>
SUMMARY OF FEES AND EXPENSES

There are certain fees and expenses that you will incur directly or indirectly
under the Contract. The purpose of the following tables is to help you
understand these various charges. The tables show (1) charges under the
Contract, (2) annual expenses of the Sub-Accounts, and (3) annual expenses of
the Funds during the accumulation phase. In addition to the charges and expenses
described below, premium taxes are applicable in some states and are deducted as
described under "D. Premium Taxes" under CHARGES AND DEDUCTIONS.

<TABLE>
<CAPTION>
COMPLETE YEARS
FROM DATE OF
PAYMENT CHARGE
(1) CONTRACT CHARGES: -------------- ------
<S> <C> <C>
Less than 1 8.0%
Less than 2 8.0%
Less than 3 8.0%
Less than 4 7.0%
Less than 5 7.0%
Less than 6 6.0%
Less than 7 5.0%
Less than 8 3.0%
Less than 9 1.0%
Thereafter 0%
SURRENDER CHARGE:*
This charge may be assessed upon surrender, withdrawals
or reversal of annuitization. The charge is a percentage
of payments applied to the amount surrendered (in excess
of any amount that is free of surrender charge) within
the indicated time period.

None
TRANSFER CHARGE:
The Company currently does not charge for processing
transfers and guarantees that the first 12 transfers in
a Contract year will not be subject to a transfer
charge. For each subsequent transfer, the Company
reserves the right to assess a charge, guaranteed never
to exceed $25, to reimburse the Company for the costs of
processing the transfer.

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

OPTIONAL RIDER CHARGE:
If an Optional Rider is elected, 1/12th of the annual
charge is deducted pro-rata from the invested accounts
on a monthly basis at the end of each Contract month. A
pro-rated charge will be deducted upon termination of
the Rider. The charge on an annual basis as a percentage
of Accumulated Value is:

1. Minimum Guaranteed Annuity Payout (M-GAP) Rider with
a ten-year waiting period: 0.35%
2. Minimum Guaranteed Annuity Payout (M-GAP) Rider with
a fifteen year waiting period: 0.20%
3. 6% Enhanced Death Benefit Rider With Annual Step-up: 0.25%
4. Enhanced Death Benefit Rider With Annual Step-up
(only available in New York): 0.15%
</TABLE>

*From time to time, the Company may reduce or eliminate the surrender charge,
the period during which it applies, or both, and/or credit additional amounts on
Contracts when Contracts are sold to individuals or groups in a manner that
reduces sales expenses or where the Owner and Annuitant on the date of issue is
within certain classes of eligible individuals. For more information see
"Reduction or Elimination of Surrender Charge and Additional Amounts Credited"
under "E. Surrender Charge" in the CHARGES AND DEDUCTIONS section.

7
<PAGE>
**The fee may be lower in some jurisdictions. See Contract Specifications for
specific charge.

WITHDRAWAL ADJUSTMENT CHARGE AFTER THE ANNUITY DATE:

During the Annuity Payout Phase, 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 of the Issue Date, the Assumed
Investment Return ("AIR") you have chosen (in the case of a variable annuity
payout option) or the interest rate (in the case of a fixed annuity payout
option) used to determine the Present Value is increased by a Withdrawal
Adjustment Charge in the following manner:

<TABLE>
<S> <C>
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%*
</TABLE>

The increase to the AIR or the interest rate used to determine the Present Value
results in a greater proportionate reduction in the number of Annuity Units
(under a variable annuity payout option) or dollar amount (under a fixed annuity
payout option), than if the increase had not been made. Because each variable
annuity benefit 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 benefit payments. See "D. Variable
Annuity Benefit Payments" and "F. Withdrawals After the Annuity Date" under
ANNUITIZATION -- THE PAYOUT PHASE for additional information.

*The Withdrawal Adjustment Charge may be lower in some jurisdictions. See
Contract Specifications for the specific charge.

<TABLE>
<S> <C>
(2) ANNUAL SUB-ACCOUNT EXPENSES:
(on an annual basis as a percentage of average daily net
assets)
Mortality and Expense Risk Charge: 1.20%
Administrative Expense Charge: 0.20%
------
Total Annual Expenses: 1.40%
</TABLE>

(3) ANNUAL UNDERLYING FUND EXPENSES: Total expenses of the Underlying Funds are
not fixed or specified under the terms of the Contract and will vary from year
to year. The levels of fees and expenses also vary among the Underlying Funds.
The following table shows the expenses of the Underlying Funds as a percentage
of average net assets for the year ended December 31, 1999, as adjusted for any
material changes.

8
<PAGE>

<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT OTHER EXPENSES EXPENSES
FEE (AFTER ANY (AFTER ANY (AFTER ANY
VOLUNTARY WAIVERS/REIM- WAIVERS/REIM-
UNDERLYING FUND WAIVERS) 12B-1 FEES BURSEMENTS) BURSEMENTS)
--------------- -------------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
AIT Select Strategic Growth Fund........... 0.85% - 0.35% 1.20%(1)(2)
AIT Select Value Opportunity Fund.......... 0.90% - 0.07% 0.97%(1)(2)
AIM V.I. Aggressive Growth Fund............ 0.00% - 1.19% 1.19%(3)
AIM V.I. Value Fund........................ 0.61% - 0.15% 0.76%
Alliance Growth and Income Portfolio
(Class B)................................. 0.63% 0.25% 0.09% 0.97%
Alliance Premier Growth Portfolio
(Class B)................................. 1.00% 0.25% 0.04% 1.29%
DGPF Growth Opportunities Series
(Service Class)........................... 0.75% 0.15% 0.07% 0.97%(4)
DGPF International Equity Series
(Service Class)........................... 0.83% 0.15% 0.12% 1.10%(5)
Fidelity VIP Equity-Income Portfolio
(Service Class 2)......................... 0.48% 0.25% 0.10% 0.83%(6)
Fidelity VIP Growth Portfolio
(Service Class 2)......................... 0.58% 0.25% 0.10% 0.93%(6)
Fidelity VIP High Income Portfolio
(Service Class 2)......................... 0.58% 0.25% 0.12% 0.95%(6)
Fidelity VIP Overseas Portfolio
(Service Class 2)......................... 0.73% 0.25% 0.18% 1.16%(6)
Fidelity VIP II Asset Manager Portfolio
(Service Class 2)......................... 0.53% 0.25% 0.11% 0.89%(6)
Fidelity VIP III Growth Opportunities
Portfolio
(Service Class 2)......................... 0.58% 0.25% 0.13% 0.96%(6)
Franklin Natural Resources Securities Fund
(Class 2)................................. 0.62% 0.25% 0.04% 0.91%(7)
Franklin Small Cap Fund (Class 2).......... 0.55% 0.25% 0.27% 1.07%(7)(8)
INVESCO VIF Health Sciences Fund........... 0.75% - 0.73% 1.48%(9)
Janus Aspen Growth Portfolio (Service
Shares)................................... 0.65% 0.25% 0.02% 0.92%(10)
Janus Aspen Growth and Income Portfolio
(Service Shares).......................... 0.65% 0.25% 0.40% 1.30%(10)
KVS Dreman Financial Services Portfolio.... 0.70% - 0.29% 0.99%(11)
Kemper Technology Growth Portfolio......... 0.51% - 0.44% 0.95%(11)(12)
Pioneer Emerging Markets VCT Portfolio
(Class II)................................ 0.00% 0.25% 1.88% 2.13%(13)(14)
Pioneer Real Estate Growth VCT Portfolio
(Class II)................................ 0.85% 0.25% 0.30% 1.40%(13)(14)
T. Rowe Price International Stock
Portfolio................................. 1.05% - 0.00% 1.05%
</TABLE>

9
<PAGE>

* 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 Expense ratios shown in the table above have been
adjusted to assume that the revised rates took effect January 1, 1999.

(1) Until further notice, Allmerica Financial Investment Management
Services, Inc. ("AFIMS") has declared a voluntary expense limitation of 1.50% of
average net assets for Select International Equity Fund, 1.35% for Select
Aggressive Growth Fund and Select Capital Appreciation Fund, 1.25% for Select
Value Opportunity Fund, 1.20% for Select Growth Fund and Core Equity Fund, 1.10%
for Select Growth and Income Fund, 1.00% for Select Investment Grade Income Fund
and Government Bond Fund, and 0.60% for Equity Index Fund and Money Market Fund.
The total operating expenses of these Funds of the Trust were less than their
respective expense limitations throughout 1999.

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.

The total operating expenses of the funds were less than or equal to their
respective expense limitations throughout 1999 except the Select Strategic
Growth Fund which received a reimbursement of $813.00 in 1999 under its expense
limitation. However, this amount was not enough to make a difference in the
percentage shown for the Fund's total operating expense and expense limitation
(both 1.20%).

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. These amounts have been treated as reductions
of expenses. Including these reductions to the operating expenses, total annual
fund operating expenses were 1.88% for the Select Emerging Markets Fund, 1.01%
for Select International Equity Fund, 0.84% for Select Aggressive Growth Fund,
0.88% for Select Value Opportunity Fund, 0.81% for Select Growth Fund, 1.17% for
Select Strategic Growth Fund, 0.45% for Core Equity Fund, and 0.73% for Select
Growth and Income Fund.

(3) Had there been no fee waivers or expense reimbursements, the Management Fee,
Other Expenses and Total Fund Expenses of the AIM V.I. Aggressive Growth Fund
would have been 0.80%, 1.62% and 2.42%, respectively.

(4) Service Class inception is May 1, 2000. Fees and Expenses shown are based on
those for the Standard Class. The investment advisor for the DGPF Growth
Opportunities Series is Delaware Management Company ("Delaware Management").
Effective May 1, 2000 through October 31, 2000, the investment advisor has
voluntarily agreed to waive its management fee and reimburse the Series for
expenses to the extent that total expenses, exclusive of 12b-1 fees, will not
exceed 0.85%. The declaration of a voluntary expense limitation does not bind
Delaware Management to declare future expense limitations with respect to this
Series.

(5) Service Class inception is May 1, 2000. Fees and Expenses shown are based on
those for the Standard Class. The investment advisor for the DGPF International
Equity Series is Delaware International Advisers Ltd. ("DIAL"). Effective
May 1, 2000 through October 31, 2000, DIAL has voluntarily agreed to waive its
management fee and reimburse the Series for expenses to the extent that total
expenses, exclusive of 12b-1

10
<PAGE>

fees, will not exceed 0.95%. Without such an arrangement, the total annual
operating expenses for the Series would have been 0.97% (exclusive of 12b-1
fees). The Service Class shares are subject to an annual 12b-1 fee of not more
than 0.30% (currently set at 0.15%). Without the waiver and reimbursement
arrangement and including the 12b-1 fee at its current level, total annual
operating expenses for the Series would have been 1.12%.

(6) Service Class 2 expenses are based on the estimated expenses for the first
year.

(7) The Funds' Class 2 distribution plan or "rule 12b-1 plan" is described in
the Funds' prospectus. The fund administration fee of the Franklin Natural
Resources Securities Fund is paid indirectly through the management fee. The
Franklin Small Cap Fund pays for similar services directly.

(8) On 2/8/00, a merger and reorganization was approved that combined the assets
of the Franklin Small Cap Fund with a similar fund of the Templeton Variable
Products Series Fund, effective 5/1/00. On 2/8/00, fund shareholders approved
new management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and assets of the fund
as of 12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses after
5/1/00 would be estimated to be the same.

(9) The Fund's actual Total Annual Fund Operating Expenses were lower than the
figures shown because its custodian fees were reduced under an expense offset
arrangement. Including the reduction for the expense offset arrangement and
voluntary expense waiver, the Fund's Management Fees, Other Expenses and Total
Fund Expenses would have been 0.75%, 0.50% and 1.25% respectively. Certain
expenses of the Fund were absorbed voluntarily by INVESCO in order to ensure
that expenses for the Fund did not exceed 1.25% of the Fund's average net
expenses pursuant to a commitment between the Fund and INVESCO. This commitment
may be changed at any time following consultation with the board of directors.
The Fund's Management Fees, Other Expenses and Total Fund Expenses for the
fiscal year ended December 31, 1999, excluding any voluntary expense waiver and
expense offset arrangements, would have been 0.75%, 2.11% and 2.86%
respectively.

(10) Expenses are based on the estimated expenses that the new Service Shares
Class of each Portfolio expects to incur in its initial fiscal year.

(11)Pursuant to their respective agreements with KVS, the investment manager and
the accounting agent have agreed, for the one year period commencing on May 1,
2000, to limit their respective fees and to reimburse other expenses to the
extent necessary to limit total operating expenses of the KVS Dreman Financial
Services and the Kemper Technology Growth Portfolios to the amounts set forth in
the Total Fund Expenses column of the table above. Without taking into effect
these expense caps, for the KVS Dreman Financial Services and the Kemper
Technology Growth Portfolios of KVS, management fees are estimated to be 0.75%
and 0.75%, respectively. Other expenses are estimated to be 0.44% and 0.29%,
respectively; and total operating expenses would have been 1.19% and 1.04%,
respectively.

(12)The Kemper Technology Growth Portfolio commenced operations on May 1, 1999,
therefore "other expenses" are annualized. Actual expenses may be greater or
less than shown.

(13)Class II shares of the Pioneer Emerging Markets VCT Portfolio and Pioneer
Real Estate Growth VCT Portfolio commenced operations on May 1, 2000; therefore,
expenses shown are estimated and annualized.

(14)Fees and expenses reflect waivers/reimbursements currently applicable to the
portfolios. As of May 1, 2000, Pioneer Investment Management, Inc. has agreed
voluntarily to limit its management fee and, if necessary, to limit other
operating expenses of Class I shares of the Pioneer Emerging Markets VCT
Portfolio and the Pioneer Real Estate Growth VCT Portfolio to 1.75% and 1.25%,
respectively, of the average daily net assets attributable to Class I shares.
The portion of portfolio expenses attributable to Class II shares will be

11
<PAGE>

reduced only to the extent such expenses are reduced for Class I shares. This
agreement is voluntary and temporary and may be revised or terminated at any
time.

THE UNDERLYING FUND INFORMATION ABOVE WAS PROVIDED BY THE UNDERLYING FUNDS AND
WAS NOT INDEPENDENTLY VERIFIED BY THE COMPANY.

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 and further assumes that the voluntary expense
limitations and the Underlying Fund expenses listed above remain the same in
each of the 1, 3, 5, and 10-year intervals. As required by rules of the
Securities and Exchange Commission ("SEC"), the Contract fee is reflected in the
examples by a method designed to show the average impact on an investment in the
Variable Account. The total Contract fees collected are divided by the total
average net assets attributable to the Contracts. The resulting percentage is
0.04%, and the amount of the Contract fee is assumed to be $0.40 in the
examples. The Contract fee is only deducted when the Accumulated Value is less
than $75,000. 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 LESS THAN THOSE SHOWN.

12
<PAGE>
(1)(a) If, at the end of the applicable time period, you surrender your
Contract, you would have paid the following expenses on a $1,000 investment,
assuming a 5% annual return on assets, and no Riders.

<TABLE>
<CAPTION>
WITH SURRENDER CHARGE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
AIT Core Equity Fund....................................... $ 94 $140 $173 $224
AIT Equity Index Fund...................................... $ 93 $136 $167 $210
AIT Government Bond Fund................................... $ 95 $144 $181 $238
AIT Money Market Fund...................................... $ 92 $134 $164 $204
AIT Select Aggressive Growth Fund.......................... $ 98 $151 $193 $264
AIT Select Capital Appreciation Fund....................... $ 98 $153 $198 $274
AIT Select Emerging Markets Fund........................... $107 $179 $244 $364
AIT Select Growth Fund..................................... $ 97 $150 $191 $260
AIT Select Growth and Income Fund.......................... $ 96 $147 $187 $251
AIT Select International Equity Fund....................... $ 99 $155 $201 $279
AIT Select Investment Grade Income Fund.................... $ 94 $140 $174 $226
AIT Select Strategic Growth Fund........................... $101 $160 $210 $297
AIT Select Value Opportunity Fund.......................... $ 98 $153 $198 $274
AIM V.I. Aggressive Growth Fund............................ $100 $159 $209 $296
AIM V.I. Value Fund........................................ $ 97 $148 $188 $253
Alliance Growth and Income Portfolio....................... $ 98 $153 $198 $274
Alliance Premier Growth Portfolio.......................... $101 $162 $214 $306
DGPF International Equity Series........................... $ 98 $153 $198 $274
DGPF Growth Opportunities Series........................... $100 $157 $205 $287
Fidelity VIP Equity-Income Portfolio....................... $ 97 $150 $191 $260
Fidelity VIP Growth Portfolio.............................. $ 98 $152 $196 $270
Fidelity VIP High Income Portfolio......................... $ 98 $153 $197 $272
Fidelity VIP Overseas Portfolio............................ $100 $159 $208 $293
Fidelity VIP II Asset Manager Portfolio.................... $ 98 $151 $194 $266
Fidelity VIP III Growth Opportunities Portfolio............ $ 98 $153 $198 $273
Franklin Natural Resources Securities Fund................. $ 98 $152 $195 $268
Franklin Small Cap Fund.................................... $ 99 $156 $203 $284
INVESCO VIF Health Sciences Fund........................... $103 $167 $224 $324
Janus Aspen Growth Portfolio............................... $ 98 $152 $196 $269
Janus Aspen Growth and Income Portfolio.................... $101 $162 $215 $307
KVS Dreman Financial Services Portfolio.................... $ 99 $154 $199 $276
Kemper Technology Growth Portfolio......................... $ 98 $153 $197 $272
Pioneer Emerging Markets VCT Portfolio..................... $109 $185 $253 $383
Pioneer Real Estate Growth VCT Portfolio................... $102 $165 $220 $316
T. Rowe Price International Stock Portfolio................ $ 99 $156 $202 $282
</TABLE>

13
<PAGE>
(1)(b) If, at the end of the applicable time period, you surrender your
Contract, you would have paid the following expenses on a $1,000 investment,
assuming a 5% annual return on assets and election at issue of the Minimum
Guaranteed Annuity Payout Rider with a ten-year waiting period and the 6%
Enhanced Death Benefit Rider With Annual Step-Up.

<TABLE>
<CAPTION>
WITH SURRENDER CHARGE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIT Core Equity Fund....................................... $ 99 $156 $204 $285
AIT Equity Index Fund...................................... $ 98 $153 $197 $272
AIT Government Bond Fund................................... $101 $160 $211 $299
AIT Money Market Fund...................................... $ 98 $151 $194 $266
AIT Select Aggressive Growth Fund.......................... $103 $167 $223 $323
AIT Select Capital Appreciation Fund....................... $104 $170 $228 $332
AIT Select Emerging Markets Fund........................... $113 $195 $270 $417
AIT Select Growth Fund..................................... $103 $166 $221 $319
AIT Select Growth and Income Fund.......................... $102 $164 $217 $310
AIT Select International Equity Fund....................... $104 $171 $230 $337
AIT Select Investment Grade Income Fund.................... $100 $157 $205 $287
AIT Select Strategic Growth Fund........................... $106 $176 $238 $354
AIT Select Value Opportunity Fund.......................... $104 $170 $228 $332
AIM V.I. Aggressive Growth Fund............................ $106 $176 $238 $353
AIM V.I. Value Fund........................................ $102 $164 $218 $312
Alliance Growth and Income Portfolio....................... $104 $170 $228 $332
Alliance Premier Growth Portfolio.......................... $107 $178 $242 $362
DGPF International Equity Series........................... $104 $170 $228 $332
DGPF Growth Opportunities Series........................... $105 $173 $234 $344
Fidelity VIP Equity-Income Portfolio....................... $103 $166 $221 $319
Fidelity VIP Growth Portfolio.............................. $104 $169 $226 $328
Fidelity VIP High Income Portfolio......................... $104 $169 $227 $330
Fidelity VIP Overseas Portfolio............................ $106 $175 $237 $350
Fidelity VIP II Asset Manager Portfolio.................... $103 $168 $224 $325
Fidelity VIP III Growth Opportunities Portfolio............ $104 $169 $227 $331
Franklin Natural Resources Securities Fund................. $103 $168 $225 $327
Franklin Small Cap Fund.................................... $105 $172 $233 $342
INVESCO VIF Health Sciences Fund........................... $109 $183 $251 $379
Janus Aspen Growth Portfolio............................... $103 $168 $225 $328
Janus Aspen Growth and Income Portfolio.................... $107 $179 $243 $363
KVS Dreman Financial Services Portfolio.................... $104 $170 $229 $334
Kemper Technology Growth Portfolio......................... $104 $169 $227 $330
Pioneer Emerging Markets VCT Portfolio..................... $114 $201 $279 $434
Pioneer Real Estate Growth VCT Portfolio................... $108 $181 $247 $372
T. Rowe Price International Stock Portfolio................ $105 $172 $232 $340
</TABLE>

14
<PAGE>
(2)(a) If, at the end of the applicable time period, you do not surrender your
Contract or you annuitize,* you would have paid the following expenses on a
$1,000 investment, assuming a 5% annual return on assets, and no Riders.

<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
AIT Core Equity Fund....................................... $19 $ 60 $103 $224
AIT Equity Index Fund...................................... $18 $ 56 $ 97 $210
AIT Government Bond Fund................................... $21 $ 64 $111 $238
AIT Money Market Fund...................................... $18 $ 54 $ 94 $204
AIT Select Aggressive Growth Fund.......................... $23 $ 72 $123 $264
AIT Select Capital Appreciation Fund....................... $24 $ 75 $128 $274
AIT Select Emerging Markets Fund........................... $34 $103 $175 $364
AIT Select Growth Fund..................................... $23 $ 71 $121 $260
AIT Select Growth and Income Fund.......................... $22 $ 68 $117 $251
AIT Select International Equity Fund....................... $25 $ 77 $131 $279
AIT Select Investment Grade Income Fund.................... $20 $ 61 $104 $226
AIT Select Strategic Growth Fund........................... $27 $ 82 $140 $297
AIT Select Value Opportunity Fund.......................... $24 $ 75 $128 $274
AIM V.I. Aggressive Growth Fund............................ $27 $ 82 $139 $296
AIM V.I. Value Fund........................................ $22 $ 69 $118 $253
Alliance Growth and Income Portfolio....................... $24 $ 75 $128 $274
Alliance Premier Growth Portfolio.......................... $28 $ 85 $144 $306
DGPF International Equity Series........................... $24 $ 75 $128 $274
DGPF Growth Opportunities Series........................... $26 $ 79 $135 $287
Fidelity VIP Equity-Income Portfolio....................... $23 $ 71 $121 $260
Fidelity VIP Growth Portfolio.............................. $24 $ 74 $126 $270
Fidelity VIP High Income Portfolio......................... $24 $ 74 $127 $272
Fidelity VIP Overseas Portfolio............................ $26 $ 81 $138 $293
Fidelity VIP II Asset Manager Portfolio.................... $24 $ 73 $124 $266
Fidelity VIP III Growth Opportunities Portfolio............ $24 $ 75 $128 $273
Franklin Natural Resources Securities Fund................. $24 $ 73 $125 $268
Franklin Small Cap Fund.................................... $25 $ 78 $133 $284
INVESCO VIF Health Sciences Fund........................... $29 $ 90 $154 $324
Janus Aspen Growth Portfolio............................... $24 $ 73 $126 $269
Janus Aspen Growth and Income Portfolio.................... $28 $ 85 $145 $307
KVS Dreman Financial Services Portfolio.................... $25 $ 76 $129 $276
Kemper Technology Growth Portfolio......................... $24 $ 74 $127 $272
Pioneer Emerging Markets VCT Portfolio..................... $36 $109 $185 $383
Pioneer Real Estate Growth VCT Portfolio................... $29 $ 88 $150 $316
T. Rowe Price International Stock Portfolio................ $25 $ 77 $132 $282
</TABLE>

15
<PAGE>
(2)(b) If, at the end of the applicable time period, you do not surrender your
Contract or you annuitize,* you would have paid the following expenses on a
$1,000 investment, assuming an annual 5% return on assets and election at issue
of the Minimum Guaranteed Annuity Payout Rider with a ten-year waiting period
and the 6% Enhanced Death Benefit Rider With Annual Step-Up.

<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
AIT Core Equity Fund....................................... $25 $ 78 $134 $285
AIT Equity Index Fund...................................... $24 $ 74 $127 $272
AIT Government Bond Fund................................... $27 $ 82 $141 $299
AIT Money Market Fund...................................... $24 $ 73 $124 $266
AIT Select Aggressive Growth Fund.......................... $29 $ 90 $153 $323
AIT Select Capital Appreciation Fund....................... $30 $ 93 $158 $332
AIT Select Emerging Markets Fund........................... $40 $121 $203 $417
AIT Select Growth Fund..................................... $29 $ 89 $151 $319
AIT Select Growth and Income Fund.......................... $28 $ 86 $147 $310
AIT Select International Equity Fund....................... $31 $ 94 $160 $337
AIT Select Investment Grade Income Fund.................... $26 $ 79 $135 $287
AIT Select Strategic Growth Fund........................... $33 $100 $169 $354
AIT Select Value Opportunity Fund.......................... $30 $ 93 $158 $332
AIM V.I. Aggressive Growth Fund............................ $33 $ 99 $169 $353
AIM V.I. Value Fund........................................ $28 $ 87 $148 $312
Alliance Growth and Income Portfolio....................... $30 $ 93 $158 $332
Alliance Premier Growth Portfolio.......................... $34 $102 $173 $362
DGPF International Equity Series........................... $30 $ 93 $158 $332
DGPF Growth Opportunities Series........................... $32 $ 97 $164 $344
Fidelity VIP Equity-Income Portfolio....................... $29 $ 89 $151 $319
Fidelity VIP Growth Portfolio.............................. $30 $ 92 $156 $328
Fidelity VIP High Income Portfolio......................... $30 $ 92 $157 $330
Fidelity VIP Overseas Portfolio............................ $32 $ 98 $167 $350
Fidelity VIP II Asset Manager Portfolio.................... $30 $ 91 $154 $325
Fidelity VIP III Growth Opportunities Portfolio............ $30 $ 93 $157 $331
Franklin Natural Resources Securities Fund................. $30 $ 91 $155 $327
Franklin Small Cap Fund.................................... $31 $ 96 $163 $342
INVESCO VIF Health Sciences Fund........................... $35 $108 $182 $379
Janus Aspen Growth Portfolio............................... $30 $ 91 $155 $328
Janus Aspen Growth and Income Portfolio.................... $34 $103 $174 $363
KVS Dreman Financial Services Portfolio.................... $31 $ 93 $159 $334
Kemper Technology Growth Portfolio......................... $30 $ 92 $157 $330
Pioneer Emerging Markets VCT Portfolio..................... $42 $127 $213 $434
Pioneer Real Estate Growth VCT Portfolio................... $35 $105 $179 $372
T. Rowe Price International Stock Portfolio................ $31 $ 95 $162 $340
</TABLE>

* The Contract fee is not deducted after annuitization. No surrender charges are
deducted at or after annuitization under any of the available annuity payout
options.

16
<PAGE>
SUMMARY OF CONTRACT FEATURES

WHAT ARE SOME OF THE FEATURES OF THIS VARIABLE ANNUITY CONTRACT?

The variable annuity contract ("Contract") is an insurance contract designed to
help you, the Owner, accumulate assets for your retirement or other important
financial goals on a tax-deferred basis. The Contract may be purchased up to age
90 of the oldest Owner or, if the Owner is not a natural person, the oldest
Annuitant. The Contract combines the concept of professional money management
with the attributes of an annuity contract. Features available through the
Contract include:

- a customized investment portfolio;

- experienced professional investment advisers;

- tax deferral on earnings;

- guarantees that can protect your family;

- withdrawals during the accumulation and annuitization phases; and

- income that you can receive for life.

WHAT HAPPENS IN THE ACCUMULATION PHASE?

The Contract has two phases: an accumulation phase and, if you choose to
annuitize, an annuity payout phase (described below). During the accumulation
phase, you may allocate your initial payment and any additional payments to the
combination of portfolios of securities ("Underlying Funds") under your
Contract, to the Guarantee Period Accounts, and to the Fixed Account
(collectively "the investment options"). You select the investment options most
appropriate for your investment needs. As those needs change, you may also
change your allocation without incurring any tax consequences. Your Contract's
Accumulated Value is based on the investment performance of the Underlying Funds
and any accumulations in the Guarantee Period Accounts and the Fixed Account.
You do not pay taxes on any earnings under the Contract until you withdraw
money. In addition, during the accumulation phase, your beneficiaries receive
certain protections in the event of your death. See discussion below: WHAT
HAPPENS UPON MY DEATH DURING THE ACCUMULATION PHASE?

WHAT HAPPENS UPON MY DEATH DURING THE ACCUMULATION PHASE?

If you or a Joint Owner dies before the Annuity Date, a standard death benefit
will be paid to the beneficiary. (No death benefit is payable at the death of
any Annuitant except when the Owner is not a natural person.) An optional
Enhanced Death Benefit Rider is also available at issue for a separate monthly
charge. See "F. Death Benefit" under DESCRIPTION OF THE CONTRACT -- THE
ACCUMULATION PHASE.

WHAT HAPPENS IN THE ANNUITY PAYOUT PHASE?

During the annuity payout phase, you, or the payee you designate, can receive
income based on one of the numerous annuity payout options available under the
Contract. You choose:

- the annuity payout option;

- the date annuity benefit payments begin but no earlier than 1 year after
the Issue Date;

- whether you want variable annuity benefit payments based on the investment
performance of the Underlying Funds, fixed-amount annuity benefit payments
with payment amounts guaranteed by the Company, or a combination of
fixed-amount and variable annuity benefit payments; and

- whether you want certain protections provided under an optional rider.

17
<PAGE>
You may also take withdrawals during the annuity payout phase. The type of
withdrawal and the number of withdrawals that may be made each calendar year
depend upon whether the Owner annuitizes under an annuity payout option with
payments based on the life of one or more Annuitants with no guaranteed payments
(a "Life" annuity payout option), under a life annuity payout option that in
part provides for a guaranteed number of payments (a "Life With Period Certain"
or "Life With Cash Back" annuity payout option), or an annuity payout option
based on a guaranteed number of payments (a "Period Certain" annuity payout
option). Under a Life annuity payout option, the Owner may make one Payment
Withdrawal each calendar year. Under a Life with Period Certain or Life with
Cash Back annuity payout option, the Owner may make one Payment Withdrawal and
one Present Value Withdrawal in each calendar year. Under a Period Certain
annuity payout option, the Owner may make multiple Present Value Withdrawals
each calendar year. For more information, see "F. Withdrawals After the Annuity
Date" under ANNUITIZATION -- THE PAYOUT PHASE. In addition, if you choose a
variable payout option, you may transfer among the available Sub-Accounts.

M-GAP RIDER (NOT AVAILABLE IN NEW YORK). When applying for the Contract, in most
jurisdictions, the Owner currently may elect to purchase the Minimum Guaranteed
Annuity Payout ("M-GAP") Rider for a separate monthly charge. This optional
rider provides a guaranteed minimum amount of income after a specified waiting
period under a life contingent fixed annuity payout option, subject to certain
conditions. The M-GAP Rider is based on the Company's guaranteed fixed annuity
option rates as set forth in the Contract. These annuity option rates determine
the dollar amount of the first payment under each life contingent fixed annuity
payout option for each $1,000 of applied value. The rates are based on the
Annuity 2000 Mortality Table and a 3% Assumed Investment Return ("AIR"). The
M-GAP Rider is not available at all ages.

For more information on this optional rider, see "H. Optional Minimum Guaranteed
Annuity Payout (M-GAP) Rider" under DESCRIPTION OF THE CONTRACT -- THE
ACCUMULATION PHASE.

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) and First Allmerica Financial Life Insurance Company (in New York).
Each Contract has an Owner (or an Owner and a Joint Owner), an Annuitant (or an
Annuitant and a Joint Annuitant) and one or more beneficiaries. As Owner, you
may:

- make payments

- choose investment allocations

- choose annuity payout options

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

- select the Annuitant and beneficiary.

The Annuitant is the person whose life is used to determine the duration of
annuity benefit payments involving a life contingency. There must be at least
one Annuitant at all times. If an Annuitant dies and a replacement is not named,
the Owner will become the new Annuitant. The beneficiary is the person(s) or
entity entitled to the death benefit at the death of a sole Owner prior to the
Annuity Date. In the case of the death of a Joint Owner, the surviving Joint
Owner will receive the death benefit. Under certain circumstances, the
beneficiary may be entitled to annuity benefit payments upon the death of an
Owner on or after the Annuity Date.

HOW MUCH CAN I INVEST AND HOW OFTEN?

During the Accumulation Phase, you may make additional payments. Total payments
under the Contract can exceed $5,000,000 only with the Company's prior approval.
The number and frequency of your payments are

18
<PAGE>
flexible, subject only to a $5,000 minimum for your initial payment and a $50
minimum for any additional payments. A lower initial payment is permitted for
certain qualified plans and where monthly payments are being forwarded directly
from a financial institution. A minimum of $1,000 is always required to
establish a Guarantee Period Account.

WHAT ARE MY INVESTMENT CHOICES?

You may choose among the Sub-Accounts investing in the Underlying Funds, the
Guarantee Period Accounts, and the Fixed Account. The Underlying Funds are:

<TABLE>
<S> <C>
ALLMERICA INVESTMENT TRUST FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
AIT Core Equity Fund (SERVICE CLASS 2)*
AIT Equity Index Fund Fidelity VIP II Asset Manager Portfolio
AIT Government Bond Fund FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
AIT Money Market Fund (SERVICE CLASS 2)*
AIT Select Aggressive Growth Fund Fidelity VIP III Growth Opportunities Portfolio
AIT Select Capital Appreciation Fund FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
AIT Select Emerging Markets Fund (CLASS 2)*
AIT Select Growth Fund Franklin Natural Resources Securities Fund
AIT Select Growth and Income Fund Franklin Small Cap Fund
AIT Select International Equity Fund INVESCO VARIABLE INVESTMENT FUNDS, INC.
AIT Select Investment Grade Income Fund INVESCO VIF Health Sciences Fund
AIT Select Strategic Growth Fund JANUS ASPEN SERIES (SERVICE SHARES)*
AIT Select Value Opportunity Fund Janus Aspen Growth Portfolio
AIM VARIABLE INSURANCE FUNDS Janus Aspen Growth and Income Portfolio
AIM V.I. Aggressive Growth Fund KEMPER VARIABLE SERIES
AIM V.I. Value Fund KVS Dreman Financial Services Portfolio
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. Kemper Technology Growth Portfolio
(CLASS B)* PIONEER VARIABLE CONTRACTS TRUST (CLASS II)*
Alliance Growth and Income Portfolio Pioneer Emerging Markets VCT Portfolio
Alliance Premier Growth Portfolio Pioneer Real Estate Growth VCT Portfolio
DELAWARE GROUP PREMIUM FUND (SERVICE CLASS)* T. ROWE PRICE INTERNATIONAL SERIES, INC.
DGPF International Equity Series T. Rowe Price International Stock Portfolio
DGPF Growth Opportunities Series
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
(SERVICE CLASS 2)*
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP High Income Portfolio
Fidelity VIP Overseas Portfolio
</TABLE>

*Class B, Service Class, Service Class 2, Class 2, Service Shares and Class II
all refer to share classes that include 12b-1 fees.

Each Underlying Fund operates pursuant to different investment objectives and
this range of investment options enables you to allocate your money among the
Underlying Funds to meet your particular investment needs. For a more detailed
description of the Underlying Funds, see INVESTMENT OBJECTIVES AND POLICIES.

19
<PAGE>
GUARANTEE PERIOD ACCOUNTS. Assets supporting the guarantees under the Guarantee
Period Accounts are held in the Company's Separate Account GPA, a non-unitized
insulated separate account (except in California, where assets are held in the
Company's General Account). Values and benefits calculated on the basis of
Guarantee Period Account allocations, however, are obligations of the Company's
General Account. Amounts allocated to a Guarantee Period Account earn a
Guaranteed Interest Rate declared by the Company. The level of the Guaranteed
Interest Rate depends on the number of years of the Guarantee Period selected.
The Company may offer up to nine Guarantee Periods ranging from two to ten years
in duration. Once declared, the Guaranteed Interest Rate will not change during
the duration of the Guarantee Period.

If amounts allocated to a Guarantee Period Account are transferred, surrendered
or applied to any annuity payout option at any time other than the day following
the last day of the applicable Guarantee Period, a Market Value Adjustment will
apply that may increase or decrease the value. However, this adjustment will
never be applied against your principal. In addition, earnings in the GPA AFTER
application of the Market Value Adjustment will not be less than an effective
annual rate of 3%. For more information about the Guarantee Period Accounts and
the Market Value Adjustment, see GUARANTEE PERIOD ACCOUNTS.

THE GUARANTEE PERIOD ACCOUNTS ARE NOT AVAILABLE IN ALL STATES AND ARE NOT
OFFERED AFTER ANNUITIZATION.

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

CAN I MAKE TRANSFERS AMONG THE INVESTMENT OPTIONS?

Yes. Prior to the Annuity Date, you may transfer among the Sub-Accounts
investing in the Underlying Funds, the Guarantee Period Accounts, and the Fixed
Account. On and after the Annuity Date, if you have elected a variable option,
you may transfer only among the Sub-Accounts. You will incur no current taxes on
transfers while your money remains in the Contract. See "D. Transfer Privilege"
under DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE and "E. Transfers of
Annuity Units" under ANNUITIZATION -- THE PAYOUT PHASE.

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 charge
guaranteed never to exceed $25.

If you authorize automatic periodic transfers (under an Automatic Transfers
program (Dollar Cost Averaging) or Automatic Account Rebalancing program), the
first automatic transfer or rebalancing under a request counts as one transfer
for purposes of the 12 transfers guaranteed to be free of a transfer charge in
each Contract year. Each subsequent automatic transfer or rebalancing under that
request 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 MY MONEY BEFORE THE ANNUITY PAYOUT PHASE BEGINS?

Before the annuity payout phase begins, you may surrender your Contract or make
withdrawals at any time. Each calendar year you can withdraw without a surrender
charge the greater of:

(1) 100% of cumulative earnings; or

(2) 10% of the Gross Payment Base, reduced by any prior Withdrawal Without
Surrender Charge made in the same calendar year

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When the first withdrawal is taken, the Gross Payment Base is equal to total
payments made to the Contract. When subsequent withdrawals are taken, the Gross
Payment Base reduces. For a detailed discussion of how the Withdrawal Without
Surrender Charge amount is calculated, please see CHARGES AND DEDUCTIONS --
SURRENDER CHARGE.

To the extent it exceeds the amount described in the previous paragraph, the
Owner of a Qualified Contract or a Contract issued under a Section 457 Deferred
Compensation Plan may take each calendar year, without surrender charge, an
amount calculated by the Company based on his or her life expectancy. A 10% tax
penalty may apply on all amounts deemed to be earnings if you are under age
59 1/2.

In addition, WHERE PERMITTED BY LAW, the Company will waive surrender charges
if, after the Contract is issued:

- you become disabled before you attain age 65; or

- you are diagnosed with a fatal illness or are confined in a medical care
facility for the later of 90 consecutive days or one year after the Issue
Date.

Additional amounts may be withdrawn at any time. However, the withdrawal of
payments that have not been invested in the Contract for more than nine years
may be subject to a surrender charge. A Market Value Adjustment will apply to
withdrawals from a Guarantee Period Account prior to the expiration of the
Guarantee Period.

CAN I EXAMINE THE CONTRACT?

Yes. Your Contract will be delivered to you after your purchase. If you return
the Contract to the Company within ten days of receipt, the Contract will be
cancelled. There may be a longer period in certain jurisdictions; see the "Right
to Examine" provision on the cover of your Contract.

If you cancel the Contract, you will receive the Contract's Accumulated Value
adjusted for any Market Value Adjustment for amounts allocated to a Guarantee
Period Account, plus any fees or charges that may have been deducted. However,
if required in your state or if the Contract was issued as an Individual
Retirement Annuity (IRA), you will generally receive a refund of your gross
payment(s). In certain jurisdictions this refund may be the greater of (1) your
gross payment(s) or (2) the Accumulated Value adjusted for any Market Value
Adjustment, plus any fees or charges previously deducted. See "C. Right to
Cancel" under DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE.

CAN I MAKE FUTURE CHANGES UNDER MY CONTRACT?

You can make several changes after receiving your Contract:

- You may assign your ownership to someone else, except under certain
qualified plans.

- You may change the beneficiary, unless you have designated an irrevocable
beneficiary.

- You may change your allocation of payments.

- You may make transfers among the Sub-Accounts without any tax
consequences.

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

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DESCRIPTION OF THE COMPANIES, THE VARIABLE ACCOUNTS,
AND THE UNDERLYING INVESTMENT COMPANIES

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, 1999,
Allmerica Financial had over $17 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 ("First Allmerica") which, in turn, is a wholly owned
subsidiary of Allmerica Financial Corporation ("AFC").

First Allmerica Financial Life Insurance Company ("First Allmerica"), organized
under the laws of Massachusetts in 1844, is among the five oldest life insurance
companies in America. As of December 31, 1999, First Allmerica and its
subsidiaries had over $25 billion in combined assets and over $43 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 companies are charter members of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.

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 the Board of Directors of the
Company on November 1, 1990 and the Variable Account of First Allmerica was
authorized by vote of the Board of Directors of the Company on August 20, 1991.
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 Account or the
Company by the SEC.

The Variable Account 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.

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THE UNDERLYING INVESTMENT COMPANIES

ALLMERICA INVESTMENT TRUST. Allmerica Investment Trust ("AIT") is an open-end,
diversified, management investment company registered with the SEC under the
1940 Act. AIT was established as a Massachusetts business trust on October 11,
1984, for the purpose of providing a vehicle for the investment of assets of
various separate accounts established by the Company or other affiliated
insurance companies. Thirteen investment portfolios of AIT currently are
available under the Contract, each issuing a series of shares: Core Equity Fund,
Equity Index Fund, Government Bond Fund, Money Market Fund, Select Aggressive
Growth Fund, Select Capital Appreciation Fund, Select Emerging Markets Fund,
Select Growth Fund, Select Growth and Income Fund, Select International Equity
Fund, Select Investment Grade Income Fund, Select Strategic Growth Fund, and the
Select Value Opportunity Fund. The assets of each Fund are held separate from
the assets of the other Funds. Each Fund operates as a separate investment
vehicle and the income or losses of one Fund have no effect on the investment
performance of another Fund. Shares of AIT are not offered to the general public
but solely to such variable accounts.

The trustees have overall responsibility for the supervision of the affairs of
AIT. The Trustees have entered into a management agreement ("Management
Agreement") with Allmerica Financial Investment Management Services, Inc.
("AFIMS"), a wholly owned subsidiary of Allmerica Financial, to handle the
day-to-day affairs of AIT. AFIMS, subject to Trustee review, is responsible for
the general management of the Funds. AFIMS also performs certain administrative
and management services for AIT, furnishes to AIT all necessary office space,
facilities and equipment and pays the compensation, if any, of officers and
Trustees who are affiliated with AFIMS.

AFIMS has entered into agreements with other investment advisers
("Sub-Advisers") under which each Sub-Adviser manages the investments of one or
more of the Funds of AIT. Under each Sub-Adviser agreement, the Sub-Adviser is
authorized to engage in portfolio transactions on behalf of the Fund, subject to
AFIMS and the Trustees instructions. AFIMS is solely responsible for the payment
of all fees for investment management services to the Sub-Advisers. The
Sub-Advisers, other than Allmerica Asset Management, Inc., are not affiliated
with the Company or AIT.

Other than expenses specifically assumed by AFIMS under the Management
Agreement, AIT bears all expenses incurred in its operation including fees and
expenses associated with the registration and qualification of AIT's shares
under the Securities Act of 1933, other fees payable to the SEC, independent
public accountant fees, legal and custodian fees, association membership dues,
taxes, interest, insurance premiums, brokerage commissions, fees and expenses of
the Trustees who are not affiliated with AFIMS, expenses for proxies,
prospectuses, reports to shareholders and other expenses.

AIM VARIABLE INSURANCE FUNDS. AIM Variable Insurance Funds ("AVIF"), an
open-end, series, management investment company, was organized as a Maryland
corporation on January 22, 1993, changed to a Delaware business trust on May 1,
2000, and is registered with the SEC under the 1940 Act. The investment advisor
for the AIM V.I. Aggressive Growth Fund and the AIM V.I. Value Fund is A I M
Advisors, Inc. ("AIM"). AIM was organized in 1976, and, together with its
subsidiaries, manages or advises over 120 investment company portfolios
encompassing a broad range of investment objectives.

ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. Alliance Variable Products Series
Fund, Inc. ("Alliance") is registered with the SEC as an open-end, management
investment company under the 1940 Act. Two of its separate investment portfolios
are currently available under the Contract: the Alliance Growth and Income
Portfolio and the Alliance Premier Growth Portfolio. Alliance Capital
Management, L.P. ("Alliance Capital") serves as the investment adviser to
Alliance. Alliance Capital Management Corporation, the sole general partner of
Alliance Capital, is an indirect wholly owned subsidiary of The Equitable Life
Assurance Society of the United States, which is in turn a wholly owned
subsidiary of the Equitable Companies Incorporated, a holding company which is
controlled by AXA, a French insurance holding company.

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DELAWARE GROUP PREMIUM FUND. Delaware Group Premium Fund ("DGPF"), previously a
Maryland Corporation organized on February 19, 1987 and reorganized as a
Delaware business trust on December 15, 1999, is an open-end management
investment company registered with the SEC under the 1940 Act. Delaware
Management Company, a series of Delaware Management Business Trust ("Delaware
Management") is the investment adviser for the DGPF Growth Opportunities Series.
The investment advisor for the DGPF International Equity Series is Delaware
International Advisers Ltd. ("Delaware International").

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 organized as
a Massachusetts business trust on November 13, 1981 and registered with the SEC
under the 1940 Act. Four of its investment portfolios are available under the
Contract: Fidelity VIP Equity-Income Portfolio, Fidelity VIP Growth Portfolio,
Fidelity VIP High Income Portfolio and Fidelity VIP Overseas Portfolio.

Various Fidelity companies perform certain activities required to operate
Fidelity VIP. FMR is one of America's largest investment management
organizations, and has its principal business address at 82 Devonshire Street,
Boston, Massachusetts. It is composed of a number of different companies which
provide a variety of financial services and products. FMR is the original
Fidelity company, founded in 1946. It provides a number of mutual funds and
other clients with investment research and portfolio management services. As
part of their operating expenses, the portfolios of Fidelity VIP pay a monthly
investment management fee to FMR for managing investment and business affairs.
The prospectus of Fidelity VIP contains additional information concerning the
portfolios, including information about additional expenses paid by the
portfolios, and should be read in conjunction with this Prospectus.

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 organized as a
Massachusetts business trust on March 21, 1988, and registered with the SEC
under the 1940 Act. One of its investment portfolios is available under the
Contract: the Fidelity VIP II Asset Manager Portfolio.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND III. Fidelity Variable Insurance
Products Fund III ("Fidelity VIP III"), 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: the Fidelity VIP III Growth Opportunities Portfolio.

FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST. Franklin Templeton
Variable Insurance Products Trust ("FT VIP") and the funds' investment managers
and their affiliates manage over $224 billion in assets (as of December 31,
1999). The investment adviser to the Franklin Natural Resources Securities Fund
and the Franklin Small Cap Fund is Franklin Advisers, Inc.

INVESCO VARIABLE INVESTMENT FUNDS, INC. INVESCO Variable Investment
Funds, Inc. ("INVESCO VIF") is an open-end, diversified, no-load management
investment company which was incorporated under the laws of Maryland on
August 19, 1993. The investment adviser to the INVESCO VIF Health Sciences Fund
is INVESCO Funds Group, Inc.

JANUS ASPEN SERIES. Janus Aspen Series ("Janus Aspen") is an open-end,
management investment company registered with the SEC. It was organized as a
Delaware business trust on May 20, 1993. Janus Capital is the investment adviser
of Janus Aspen. Two of its investment portfolios are available under the
Contract: the Janus Aspen Growth Portfolio and Janus Aspen Growth and Income
Portfolio.

KEMPER VARIABLE SERIES. Kemper Variable Series ("KVS"), is a series-type mutual
fund registered with the SEC as an open-end, management investment company. The
KVS Dreman Financial Services Portfolio and

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the Kemper Technology Growth Portfolio are offered under the Contract. Scudder
Kemper Investments, Inc. serves as the investment adviser of KVS.

PIONEER VARIABLE CONTRACTS TRUST. Pioneer Variable Contracts Trust ("Pioneer
VCT") is an open-end, management investment company registered with the SEC
under the 1940 Act. Pioneer Investment Management, Inc. ("Pioneer") is the
investment adviser to the Pioneer Emerging Markets VCT Portfolio and the Pioneer
Real Estate Growth VCT Portfolio which are offered under the Contract. Pioneer
is a wholly owned subsidiary of The Pioneer Group, Inc. ("PGI"). PGI,
established in 1928, is one of America's oldest investment managers.

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
organized as a Maryland corporation in 1994 and registered with the SEC under
the 1940 Act. Price-Fleming, founded in 1979 as a joint venture between T. Rowe
Price Associates, Inc. and Robert Fleming Holdings, Limited, is one of the
largest no-load international mutual fund asset managers with approximately
$42.5 billion (as of December 31, 1999) under management in its offices in
Baltimore, London, Tokyo, Hong Kong, Singapore and Buenos Aires. One of its
investment portfolios is available under the Contract: the T. Rowe Price
International Stock Portfolio.

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INVESTMENT OBJECTIVES AND POLICIES

A summary of investment objectives of each of the Underlying Funds is set forth
below. 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. PLEASE READ
THEM CAREFULLY BEFORE INVESTING. The Statements of Additional Information
("SAI") of the Underlying Funds are available upon request. There can be no
assurance that the investment objectives of the Underlying Funds can be achieved
or that the value of the Contract will equal or exceed the aggregate amount of
the purchase payments made under the Contract.

AIT CORE EQUITY FUND -- seeks long-term growth of capital. Realization of
current investment income, if any, is incidental to this objective. The Core
Equity 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.

AIT 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.

AIT GOVERNMENT BOND FUND -- seeks 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.

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

AIT 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.

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

AIT SELECT EMERGING MARKETS FUND -- seeks long-term growth of capital by
investing in the world's emerging markets.

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

AIT 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.

AIT SELECT INTERNATIONAL EQUITY FUND -- seeks maximum long-term total return
(capital appreciation and income). The Fund will invest primarily in common
stocks of established non-U.S. companies.

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

AIT SELECT STRATEGIC GROWTH FUND -- seeks long-term growth of capital by
investing primarily in common stocks of established companies.

AIT SELECT VALUE OPPORTUNITY FUND -- seeks long-term growth of capital by
investing principally in 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.

AIM V.I. AGGRESSIVE GROWTH FUND -- seeks to achieve long-term growth of capital
by investing primarily in common stocks, convertible bonds, convertible
preferred stocks and warrants of small and medium sized companies.

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

ALLIANCE GROWTH AND INCOME PORTFOLIO (CLASS B) -- seeks reasonable current
income and reasonable opportunity for appreciation through investments primarily
in dividend paying common stocks of good quality. The Portfolio invests
primarily in stock of large, well established "blue chip" companies, fixed
income and convertible securities, and securities of foreign issuers.

ALLIANCE PREMIER GROWTH PORTFOLIO (CLASS B) -- seeks growth of capital by
pursuing aggressive investment policies. The Portfolio invests primarily in
equity securities in a small number (40-50) of intensely researched U.S.
companies.

DGPF GROWTH OPPORTUNITIES SERIES (SERVICE CLASS) -- seeks long-term capital
appreciation by investing its assets in a diversified portfolio of securities
exhibiting the potential for significant growth.

DGPF INTERNATIONAL EQUITY SERIES (SERVICE CLASS) -- 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 EQUITY-INCOME PORTFOLIO (SERVICE CLASS 2) -- 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 GROWTH PORTFOLIO (SERVICE CLASS 2) -- 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.

FIDELITY VIP HIGH INCOME PORTFOLIO (SERVICE CLASS 2) -- seeks to obtain a high
level of current income by investing primarily in high-yielding, lower-rated
fixed-income securities (commonly referred to as "junk bonds"), while also
considering growth of capital. These securities are often considered to be
speculative and involve greater risk of default or price changes than securities
assigned a high quality rating. For more information about these lower-rated
securities, see the Fidelity VIP prospectus.

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FIDELITY VIP OVERSEAS PORTFOLIO (SERVICE CLASS 2) -- seeks long-term growth of
capital primarily through investments in foreign securities and provides a means
for aggressive investors to diversify their own portfolios by participating in
companies and economies outside of the United States.

FIDELITY VIP II ASSET MANAGER PORTFOLIO (SERVICE CLASS 2) -- 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 III GROWTH OPPORTUNITIES PORTFOLIO (SERVICE CLASS 2) -- seeks to
provide capital growth by primarily investing in common stocks of domestic and
foreign issuers. The Portfolio may also invest in other types of securities
including bonds.

FRANKLIN NATURAL RESOURCES SECURITIES FUND (CLASS 2) -- seeks capital
appreciation. The secondary goal is to provide current income. The Fund invests
primarily in equity securities of companies principally engaged in the natural
resources sector.

FRANKLIN SMALL CAP FUND (CLASS 2) -- seeks capital growth. The Fund invests
primarily in equity securities of small cap U.S. companies.

INVESCO VIF HEALTH SCIENCES FUND -- seeks to make an investment grow. The fund
is aggressively managed and invests primarily in equity securities of companies
that develop, produce or distribute products or services related to health care.

JANUS ASPEN GROWTH PORTFOLIO (SERVICE SHARES) -- seeks long-term growth of
capital in a manner consistent with the preservation of capital. The Portfolio
invests primarily in common stocks of larger, more established companies
selected for their growth potential.

JANUS ASPEN GROWTH AND INCOME PORTFOLIO (SERVICE SHARES) -- seeks long-term
capital growth and income. The Portfolio normally emphasizes investments in
common stocks.

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

KEMPER TECHNOLOGY GROWTH PORTFOLIO -- seeks growth of capital.

PIONEER EMERGING MARKETS VCT PORTFOLIO (CLASS II) -- seeks to invest in
securities of emerging market issuers for long-term growth of capital.

PIONEER REAL ESTATE GROWTH VCT PORTFOLIO (CLASS II) -- seeks to invest primarily
in REITs and other real estate industry companies for long-term growth of
capital. Current income is the portfolio's secondary investment objective.

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

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

If there is a material change in the investment policy of a Sub-Account or the
Fund in which it invests, the Owner will be notified of the change. If the Owner
has Accumulated Value allocated to that Fund, he or she may have the Accumulated
Value reallocated without charge to another Fund or to the Fixed Account, where
available, on written request received by the Company within sixty (60) days of
the later of (1) the effective date of such change in the investment policy, or
(2) the receipt of the notice of the Owner's right to transfer.

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DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE

A. PAYMENTS

The latest Issue Date is age 90 of the oldest Owner, or, if the Owner is not a
natural person, the oldest Annuitant. The Company will issue a Contract when its
underwriting requirements are met. These requirements include receipt of the
initial payment and allocation instructions by the Company at its Principal
Office and may include the proper completion of an application; however, where
permitted by law, the Company may issue a Contract without completion of an
application. If all issue requirements are not completed within five business
days of the Company's receipt of the initial payment, the payment will be
returned immediately unless the applicant authorizes the Company to retain it
pending completion of all issue requirements.

Payments may be made to the Contract at any time prior to the Annuity Date, or
prior to the death of an Owner, subject to certain minimums:

- Currently, the initial payment must be at least $5,000.

- Under a salary deduction or monthly automatic payment plan, the minimum
initial payment is $50.

- Each subsequent payment must be at least $50.

- The minimum allocation to a Guarantee Period Account is $1,000. If less
than $1,000 is allocated to a Guarantee Period Account, the Company
reserves the right to apply that amount to the AIT Money Market Fund.

Payments are to be made payable to the Company. The Company may reduce a payment
by any applicable premium tax before applying it to the Contract. The initial
net payment is credited to the Contract and allocated among the requested
investment options as of the date that all issue requirements are properly met.
The allocation instructions for the initial net payment will serve as the
allocation instructions for all future payments. You can change the allocation
instructions for future payments by notifying the Company. To the extent
permitted by law, however, if the Contract is issued as an IRA or is issued in
certain states, any portion of the initial net payment and additional net
payments received during the Contract's first 15 days measured from the Issue
Date, allocated to any Sub-Account and/or any Guarantee Period Account, will be
held in the AIT Money Market Fund until the end of the 15-day period.
Thereafter, these amounts will be allocated as requested.

You also have the option of specifying how a specific payment should be
allocated. This will not change the allocation instructions for any subsequent
payment.

For a discussion of future payments to an Automatic Transfer Program (Dollar
Cost Averaging), please see "Automatic Transfers (Dollar Cost Averaging)" below.

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.

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B. COMPUTATION OF VALUES

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

The Accumulated Value under the Contract is determined by:

(1) multiplying the number of Accumulation Units in each Sub-Account by the
value of an Accumulation Unit of that Sub-Account on the Valuation Date,

(2) adding together the values of each Sub-Account, and

(3) adding the amount of the accumulations in the Fixed Account and
Guarantee Period Accounts, if any.

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

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 (which may be positive or
negative) from dividing (1) by (2) and subtracting (3) and (4) where:

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

(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 1.20% 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 dollar value of an Accumulation Unit as of a given Valuation Date is
determined by multiplying the dollar value of the corresponding Accumulation
Unit as of the immediately preceding Valuation Date by the appropriate net
investment factor.

For an illustration of an Accumulation Unit calculation using a hypothetical
example see the SAI.

C. RIGHT TO CANCEL

An Owner may cancel the Contract at any time within ten days after receipt of
the Contract (or longer if required by law) and receive a refund. In order to
cancel the Contract, the Owner must mail or deliver it to the Company's
Principal Office at 440 Lincoln Street, Worcester, MA 01653, or to an authorized
representative. Mailing or delivery must occur within ten days after receipt of
the Contract for cancellation to be effective.

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In most states, the Company will pay the Owner the Contract's Accumulated Value,
adjusted for any Market Value Adjustment for amounts allocated to a Guarantee
Period Account, plus any amounts deducted for taxes, charges or fees. However,
if the Contract was purchased as an IRA or issued in a state that requires a
full refund of the initial payment(s), the Company will provide a refund equal
to your gross payment(s). In some states, the refund may equal the greater of
(a) your gross payment(s) or (b) the Accumulated Value adjusted for any Market
Value Adjustment, plus any amounts deducted for taxes, charges or fees. At the
time the Contract is issued, the "Right to Examine" provision on the cover of
the Contract will specifically indicate what the refund will be and the time
period allowed to exercise the right to cancel.

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

In order to comply with New York regulations concerning the purchase of a new
annuity contract to replace an existing life or annuity contract (a
"replacement"), an Owner who purchases the Contract in New York as a replacement
may cancel within 60 days after receipt. In order to cancel the Contract, the
Owner must mail or deliver it to the Company's Principal Office or to one of its
authorized representatives. The Company will refund an amount equal to the
Surrender Value plus all fees and charges and the Contract will be void from the
beginning.

D. TRANSFER PRIVILEGE

Prior to the Annuity Date, the Owner may transfer amounts among investment
options at any time upon written or telephone request to the Company. As
discussed in "A. Payments," a properly completed authorization form must be on
file before telephone requests will be honored. Transfer values will be based on
the Accumulated Value next computed after receipt of the transfer request.

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

Currently, the Company does 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, the Company reserves the right to assess
a charge, guaranteed never to exceed $25, to reimburse it for the expense of
processing transfers. The first automatic transfer or rebalancing under an
Automatic Transfers (Dollar Cost Averaging) program, or Automatic Account
Rebalancing program counts as one transfer for purposes of the 12 transfers
guaranteed to be free of a transfer charge in each Contract year. Each
subsequent automatic transfer or rebalancing under that request is without
charge and does not reduce the remaining number of transfers which may be made
free of charge in that Contract year.

The Contracts are not designed for use by individuals, professional market
timing organizations, or other entities that do "market timing," programmed
transfers, frequent transfers, or transfers that are large in relation to the
total assets of an Underlying Fund. These and similar activities may be
disruptive to the Underlying Funds, and may adversely affect an Underlying
Fund's ability to invest effectively in accordance with its investment
objectives and policies. If it appears that there is a pattern of transfers that
coincides with a market timing strategy and/or that is disruptive to the
Underlying Funds, the Company reserves the right to refuse transfers or to take
other action to prevent or limit the use of such activities.

AUTOMATIC TRANSFERS (DOLLAR COST AVERAGING). You may elect automatic transfers
of a predetermined dollar amount on a periodic basis from the Fixed Account or
the Sub-Accounts investing in the AIT Money

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<PAGE>

Market Fund and the AIT Select Investment Grade Income Fund ("source accounts").
You may elect automatic transfers to one or more Sub-Accounts, subject to the
following:

- the predetermined dollar amount may not be less than $100;

- the periodic basis may be monthly, quarterly, semi-annually or annually;

- automatic transfers may not be made into the selected source account,
Fixed Account, or the Guarantee Period Accounts; and

- if an automatic transfer would reduce the balance in the source account(s)
to less than $100, the entire balance will be transferred proportionately
to the chosen Sub-Accounts.

Automatic transfers from a particular source account will continue until the
earlier of:

- the amount in the source account on a transfer date is zero; or

- the Owner's request to terminate the option is received by the Company.

If additional amounts are allocated to a source account before its balance has
fallen to zero, those additional amounts will also be automatically transferred.
The original automatic transfer allocations will apply to all amounts in that
source account unless you provide new allocation instructions. New allocation
instructions will apply to the entire balance in the source account. If
additional amounts are allocated to a source account after its balance has
fallen to zero, automatic transfers will not begin again unless you specifically
instruct the Company to do so.

To the extent permitted by law, the Company reserves the right, from time to
time, to credit an enhanced interest rate to an initial and/or subsequent
payment made to the Fixed Account, which is then used as the source account from
which to process automatic transfers. For more information see ENHANCED
AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAM in the SAI.

AUTOMATIC ACCOUNT REBALANCING. The Owner may request automatic rebalancing of
Sub-Account allocations on a monthly, quarterly, semi-annual or annual basis in
accordance with his/her specified percentage allocations. As frequently as
elected by the Owner, the Company will review the percentage allocations in the
Underlying 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 (1) the Owner's request to
terminate or change the option is received by the Company or (2) the end date
designated by the Owner when the option was elected. If a subsequent payment is
allocated in a manner different from the percentage allocation mix in effect on
the date the payment is received, on the next scheduled rebalancing date the
payment will be reallocated in accordance with the existing mix.

Currently, Dollar Cost Averaging and Automatic Account Rebalancing may not be in
effect simultaneously. Either option may be elected at no additional charge when
the Contract is purchased or at a later date. The Company reserves the right to
limit the number of Sub-Accounts that may be utilized for automatic transfers
and rebalancing, and to discontinue either option upon advance written notice.

E. SURRENDER AND WITHDRAWALS

Before the Annuity Date, an Owner may surrender the Contract for its Surrender
Value or withdraw a portion of its Accumulated Value. In the case of surrender,
the Owner must send the Contract and a signed written

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<PAGE>
request for surrender, satisfactory to the Company, to the Principal Office. The
Surrender Value will be calculated based on the Contract's Accumulated Value as
of the Valuation Date.

In the case of a withdrawal, the Owner must submit to the Principal Office a
signed, written request indicating the desired dollar amount and the investment
option from which such amount is to be withdrawn. A withdrawal from a
Sub-Account will result in cancellation of a number of units equivalent in value
to the amount withdrawn. The amount withdrawn will equal the amount requested by
the Owner plus any applicable surrender charge. Each withdrawal must be a
minimum of $100 and the Accumulated Value of the Contract may not be reduced to
less than $1,000.

A surrender charge and a Contract fee may apply when a withdrawal is made or a
Contract is surrendered. See CHARGES AND DEDUCTIONS. However, each calendar year
prior to the Annuity Date, an Owner may withdraw a portion of the Contract's
Surrender Value without any applicable surrender charge; see "E. Surrender
Charge," "Withdrawal Without Surrender Charge" under CHARGES AND DEDUCTIONS.
Amounts withdrawn from a Guarantee Period Account prior to the end of the
applicable Guarantee Period will be subject to a Market Value Adjustment, as
described under GUARANTEE PERIOD ACCOUNTS.

Any distribution is normally payable within seven days following the Company's
receipt of the surrender or withdrawal request. The Company reserves the right
to defer surrenders and withdrawals of amounts allocated to the Company's Fixed
Account and Guarantee Period Accounts for a period not to exceed six months. The
Company reserves the right to defer surrenders and withdrawals of 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 separate account is not
reasonably practicable.

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

For information about Withdrawals after the Annuity Date, see "F. Withdrawals
After the Annuity Date" under ANNUITIZATION -- THE PAYOUT PHASE.

SYSTEMATIC WITHDRAWALS. The Owner may elect an automatic schedule of
withdrawals (systematic withdrawals) from amounts in the Sub-Accounts and/or the
Fixed Account on a periodic basis (monthly, bimonthly, quarterly, semi-annually
or annually). Systematic withdrawals from Guarantee Period Accounts are not
available. The Owner may request:

- the withdrawal of a SPECIFIC DOLLAR AMOUNT and the percentage of this
amount to be taken from each designated Sub-Account and/or the Fixed
Account; or

- the withdrawal of a SPECIFIC PERCENTAGE of the Accumulated Value
calculated as of the withdrawal dates, and may designate the percentage of
this amount which should be taken from each account.

The first withdrawal will take place on the latest of 15 days after Issue Date,
the date the written request is received at the Principal Office, or on a date
specified by the Owner.

Systematic withdrawals will first be taken from amounts available as a
"Withdrawal Without Surrender Charge" (see "E. Surrender Charge," "Withdrawal
Without Surrender Charge" under CHARGES AND

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<PAGE>
DEDUCTIONS); then from any applicable payments not subject to a surrender
charge, if any; then from payments subject to a surrender charge. Any applicable
surrender charge will be deducted from the Contract's remaining Accumulated
Value.

The minimum amount of each automatic withdrawal is $100 and the Accumulated
Value of the Contract may not be reduced to less than $1,000. Systematic
withdrawals will cease automatically on the Annuity Date. The Owner may change
or terminate systematic withdrawals only by written request to the Principal
Office.

LIFE EXPECTANCY DISTRIBUTIONS (for Qualified Contracts and Contracts issued
under Section 457 Deferred Compensation Plans only). Prior to the Annuity Date,
an Owner may elect to make a series of systematic withdrawals from the Contract
according to the Company's life expectancy distribution ("LED") option by
returning a properly signed LED request form to the Principal Office. Where the
Owner is a trust or other nonnatural person, the Owner may elect the LED option
based on the Annuitant's life expectancy.

If an Owner elects the Company's LED option, in each calendar year a fraction of
the Accumulated Value is withdrawn without a surrender charge, based on the
Owner's life expectancy (or the joint life expectancy of the Owner and a
beneficiary.) The numerator of the fraction is 1 (one). The denominator of the
fraction will be either:

- the remaining life expectancy of the Owner (or Owner and beneficiary), as
determined annually by the Company; or

- the prior year's life expectancy, minus one.

The resulting fraction, expressed as a percentage, is then applied to the
Accumulated Value at the beginning of the year to determine the amount to be
distributed during the year. The Owner may choose to have the applicable life
expectancy redetermined each year or use the prior year's life expectancy, minus
one. Under the Company's LED option, the amount withdrawn from the Contract
changes each year.

The Owner may elect periodic LED distributions on a monthly, bi-monthly,
quarterly, semi-annual, or annual basis. The Owner may terminate the LED option
at any time. The LED option will terminate automatically on the latest possible
Annuity Date permitted under the Contract, at which time an annuity payout
option must be selected.

The LED option may not produce annual distributions that meet the definition of
"substantially equal periodic payments" as defined under Code Section 72(t). The
withdrawals may be treated by the Internal Revenue Service (IRS) as premature
distributions from the Contract and may be subject to a 10% federal tax penalty.
Owners seeking distributions over their life under this definition should
consult their tax advisor. For more information, see "C. Taxation of the
Contract in General" under FEDERAL TAX CONSIDERATIONS. IN ADDITION, IF THE
AMOUNT NECESSARY TO MEET THE "SUBSTANTIALLY EQUAL PERIODIC PAYMENT" DEFINITION
IS GREATER THAN THE COMPANY'S LED AMOUNT, A SURRENDER CHARGE MAY APPLY TO THE
AMOUNT IN EXCESS OF THE LED AMOUNT.

SYSTEMATIC LEVEL FREE OF SURRENDER CHARGE WITHDRAWAL PROGRAM. In order to
receive withdrawals without application of any surrender charge, the Owner may
pre-authorize level periodic withdrawals under the Systematic Level Free of
Surrender Charge Withdrawal Program. Withdrawals under the Program may be made
on a monthly, bi-monthly, quarterly, semi-annual or annual basis. In order to
ensure that no surrender charge is ever applied, the periodic withdrawals in any
calendar year are limited to 10% of the total of all payments invested in the
Contract as reduced by certain prior withdrawal(s) of payments. For more
information on how this amount is calculated, see "E. Surrender Charge,"
"Withdrawal Without Surrender Charge" under CHARGES AND DEDUCTIONS.

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<PAGE>
The program will automatically terminate if a withdrawal that is not part of the
program is made. Otherwise, withdrawals will continue until all available
Accumulated Value has been exhausted or until the Owner terminates the program
by written request.

F. DEATH BENEFIT

A death benefit is payable if the Owner or the first of Joint Owners dies prior
to the Annuity Date. If the Owner is a natural person, no death benefit is
payable at the death of any Annuitant. If the Owner is not a natural person, a
death benefit will be paid upon the death of any Annuitant. A spousal
beneficiary may elect to continue the Contract rather than receive the death
benefit as provided in "G. The Spouse of the Owner as Beneficiary."

STANDARD DEATH BENEFIT. Unless an enhanced death benefit is elected at issue,
the standard death benefit will be paid. The standard death benefit is equal to
the greater of (a) the Contract's Accumulated Value on the Valuation Date that
the Company receives proof of death, increased by any positive Market Value
Adjustment or (b) gross payments prior to the date of death, proportionately
reduced to reflect withdrawals.

For each withdrawal under (b), the proportionate reduction is calculated by
multiplying the standard death benefit immediately prior to the withdrawal by
the following fraction:

Amount of the withdrawal
------------------------------------------------
Accumulated Value immediately prior to the withdrawal

OPTIONAL ENHANCED DEATH BENEFIT RIDER. When applying for the Contract, an Owner
may elect the optional 6% Enhanced Death Benefit With Annual Step-Up Rider. In
New York, the Enhanced Death Benefit With Annual Step-Up does not offer the 6%
accumulation. A separate charge for an Enhanced Death Benefit Rider is made
against the Contract's Accumulated Value on the last day of each Contract month
for the coverage provided during that month and, if applicable, a prorated
amount on the date the Rider is terminated. The charge is made through a
pro-rata reduction from the invested accounts (based on relative values) of
Accumulation Units in the Sub-Accounts and dollar amounts in the Fixed and
Guarantee Period Accounts. For specific charges and more detail, see
"C. Optional Rider Charges" under CHARGES AND DEDUCTIONS.

The 6% Enhanced Death Benefit With Annual Step-Up Rider provides a death benefit
guarantee if death of an Owner (or an Annuitant if the Owner is not a natural
person) occurs before the Annuity Date. The calculation of the death benefit
depends upon whether death occurs before or on or after the 80th birthday:

I. DEATH BEFORE 80TH BIRTHDAY. If an Owner (or an Annuitant if the Owner is not
a natural person) dies before the Annuity Date and before his/her 80th birthday,
the death benefit is equal to the GREATEST of:

(a) the Accumulated Value on the Valuation Date that the Company receives
proof of death, increased by any positive Market Value Adjustment;

(b) gross payments, accumulated daily at an effective annual yield of 6%
from the date each payment is applied until the date of death,
proportionately reduced to reflect withdrawals (in New York, the 6% is
not available; therefore (b) equals gross payments proportionately
reduced to reflect withdrawals); and

(c) the highest Accumulated Value on any Contract anniversary date prior to
the date of death, as determined after being increased for any positive
Market Value Adjustment and subsequent payments and proportionately
reduced for subsequent withdrawals.

The value determined in section (b) above cannot exceed 200% of the total of
gross payments, proportionately reduced for subsequent withdrawals.

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<PAGE>
II. DEATH ON OR AFTER 80TH BIRTHDAY. If an Owner (or the Annuitant if the
Owner is not a natural person) dies before the Annuity Date but on or after
his/her 80th birthday, the death benefit is equal to the GREATER of:

(a) the Accumulated Value on the Valuation Date that the Company receives
proof of death, increased by any positive Market Value Adjustment; or

(b) the death benefit, as calculated under Section I above, that would have
been payable on the Contract anniversary prior to the deceased's 80th
birthday, increased for subsequent payments and proportionately reduced
for subsequent withdrawals.

Proportionate reductions are calculated in the same manner as described above
under "Standard Death Benefit."

PAYMENT OF THE DEATH BENEFIT PRIOR TO THE ANNUITY DATE. The death benefit
generally will be paid to the beneficiary in one sum upon receipt of proof of
death at the Principal Office, unless the Owner has elected to apply the
proceeds to a life annuity not extending beyond the beneficiary's life
expectancy. Instead of payment in one sum, the beneficiary may, by written
request, elect to:

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

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

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

G. THE SPOUSE OF THE OWNER AS BENEFICIARY

If the sole beneficiary is the deceased Owner's spouse, he or she may, by
written request, continue the Contract in lieu of receiving payment of the death
benefit. The spouse will then become the Owner and Annuitant subject to the
following:

(1) any value in the Guarantee Period Accounts will be transferred to the
AIT Money Market Sub-Account; and

(2) the excess, if any, of the death benefit over the Contract's
Accumulated Value also will be added to the AIT Money Market Sub-Account.

The resulting value will never be subject to a surrender charge when withdrawn.
The new Owner may also make additional payments, but a surrender charge will
apply to these additional amounts if they are withdrawn before they have been
invested in the Contract for at least nine years. All other rights and benefits
provided in the Contract will continue, except that any subsequent spouse of the
new Owner, if named as beneficiary, will not be entitled to continue the
Contract when the new Owner dies.

H. OPTIONAL MINIMUM GUARANTEED ANNUITY PAYOUT (M-GAP) RIDER (NOT AVAILABLE IN
NEW YORK)

An optional Minimum Guaranteed Annuity Payout (M-GAP) Rider is currently
available in most jurisdictions on the Issue Date for a separate monthly charge
(see, "C. Optional Rider Charges" under CHARGES AND DEDUCTIONS). The M-GAP Rider
guarantees a minimum amount of fixed annuity lifetime income during the annuity
payout phase after a ten-year or a fifteen-year waiting period, subject to the
conditions described below. The M-GAP Rider may not be available in all
jurisdictions. The Company reserves the right to

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<PAGE>
terminate the availability of the M-GAP Rider at any time. Such a termination
would not effect Riders issued prior to the termination date but, as noted
below, Owners would not be able to purchase a new Rider under the repurchase
feature. (See "Repurchase Feature.")

The M-GAP Rider does not create Accumulated Value or guarantee performance of
any investment option. Annuitization under the terms of this Rider will occur at
the Company's guaranteed fixed annuity option rates listed under the Annuity
Option Tables in the Contract. Because this Rider is based on guaranteed
actuarial factors, the level of lifetime income that it guarantees may often be
less than the level that would be provided by applying the then current annuity
factors. Therefore, the Rider should be regarded as providing a guarantee of a
minimum amount of annuity income.

An M-GAP Benefit Base is determined on the Rider's effective date and each
applicable Contract anniversary thereafter. The M-GAP Benefit Base, less any
applicable premium tax, is the value that will be annuitized at the Company's
guaranteed fixed annuity option rates if the Rider is exercised. As described
below, withdrawals will reduce the Benefit Base.

The M-GAP Benefit Base is equal to the greatest of:

(a) the Accumulated Value, increased by any positive Market Value
Adjustment, if applicable, on the Contract Anniversary that the M-GAP
Benefit Base is being determined;

(b) the Accumulated Value on the effective date of the Rider, accumulated
daily at an effective annual yield of 5%, plus gross payments made
thereafter accumulated daily at an effective annual yield of 5%, starting
on the date each payment is applied, proportionately reduced to reflect
withdrawals; and

(c) the highest Accumulated Value on any Contract anniversary since the
Rider's effective date as determined after being increased for any
subsequent payments and any positive Market Value Adjustment, if
applicable, and proportionately reduced for subsequent withdrawals.

For each withdrawal described above, the proportionate reduction is calculated
by multiplying the (b) or (c) value, whichever is applicable, determined
immediately prior to the withdrawal by the following fraction:

Amount of the withdrawal
----------------------------------------------------------
Accumulated Value determined immediately prior to the withdrawal

CONDITIONS ON ELECTION OF THE M-GAP RIDER. The following conditions apply to
the election of the M-GAP Rider:

- The Owner must elect the M-GAP Rider at Contract issue.

- The Owner may not elect to purchase or repurchase a Rider with a ten-year
waiting period if at the time of election the youngest Owner has reached
his or her 87th birthday.

- The Owner may not elect to purchase or repurchase a Rider with a
fifteen-year waiting period if at the time of election the youngest Owner
has reached his or her 82nd birthday (the age limitations may be lower in
some jurisdictions.)

REPURCHASE FEATURE. On any Contract anniversary or within thirty days
immediately following any Contract anniversary, if the M-GAP Rider is still
being offered by the Company, the Owner may elect to terminate and repurchase
the Rider, thereby resetting the benefit based on the Contract's then current
Accumulated Value. The repurchase will be effective as of the termination date
of the prior Rider. A new waiting period, equal to or greater than the prior
waiting period, will commence as of that date. If the benefit is repurchased,
the Company's then current monthly charge for the M-GAP Rider will apply.

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<PAGE>
EXERCISING THE M-GAP RIDER. The following conditions apply to the exercise of
the M-GAP Rider:

- The Owner may only exercise the M-GAP Rider within thirty days after any
Contract anniversary following the expiration of a ten or fifteen-year
waiting period (whichever was elected) from the effective date of the
Rider.

- The Owner may only annuitize under a fixed annuity payout option involving
a life contingency, as provided under "C. Description of Annuity Payout
Options."

- The Owner may only annuitize at the Company's guaranteed fixed annuity
option rates listed under the Annuity Option Tables in the Contract.

TERMINATING THE M-GAP RIDER. The following conditions apply to the termination
of the M-GAP Rider:

- The Owner may not terminate the M-GAP Rider prior to the seventh Contract
anniversary after the effective date of the Rider, unless such termination
occurs (1) on or within thirty days after a Contract anniversary and
(2) in conjunction with the repurchase of an M-GAP Rider with a waiting
period of equal or greater length, if available.

- The Owner may terminate the M-GAP Rider any time after the seventh
Contract anniversary following the effective date of the Rider.

- Other than in the event of a repurchase, once terminated the M-GAP Rider
may not be purchased again.

- The M-GAP Rider will terminate on the date the Contract is surrendered or
annuitized, or on the date that a death benefit is payable unless the
Contract is continued under "G. The Spouse of the Owner as Beneficiary"
(see DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE).

From time to time the Company may illustrate minimum guaranteed income amounts
under the M-GAP Rider for individuals based on a variety of assumptions,
including varying rates of return on the value of the Contract during the
accumulation phase, annuity payout periods, annuity payout options and M-GAP
Rider waiting periods. Any assumed rates of return are for purposes of
illustration only and are not intended as a representation of past or future
investment rates of return.

For example, the illustration below assumes an initial payment of $100,000 for a
male age 60 (at issue) and exercise of a M-GAP Rider with a ten-year waiting
period. The illustration assumes that no subsequent payments or withdrawals are
made and that the annuity payout option is a Life Annuity With Payments
Guaranteed For 10 Years. The values below have been computed based on a 5% net
rate of return and are the guaranteed minimums that would be received under the
M-GAP Rider. The minimum guaranteed benefit base amounts are the values that
will be annuitized if the Rider is exercised. Minimum guaranteed annual income
values are based on a fixed annuity payout.

<TABLE>
<CAPTION>
CONTRACT MINIMUM MINIMUM
ANNIVERSARY GUARANTEED GUARANTEED
AT EXERCISE BENEFIT BASE ANNUAL INCOME(1)
----------- ------------ ----------------
<S> <C> <C>
10 $162,889 $12,178
15 $207,893 $17,688
</TABLE>

(1)Other fixed annuity options involving a life contingency other than Life
Annuity With Payments Guaranteed for 10 Years are available. See "D. Description
of Annuity Payout Options."

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<PAGE>
I. ASSIGNMENT

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

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<PAGE>
ANNUITIZATION -- THE PAYOUT PHASE

Subject to certain restrictions discussed below, at annuitization the Owner has
the right:

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

- to determine whether those payments are to be made on a fixed basis, a
variable basis, or a combination fixed and variable basis. If a variable
payout annuity option is selected, the Owner must choose an Annuity
Benefit Payment Change Frequency ("Change Frequency") and the date the
first Change Frequency will occur; and

- to select one of the available Assumed Investment Returns ("AIR") for a
variable option (see "D. Variable Annuity Benefit Payments" below for
details);

A. ELECTING THE ANNUITY DATE

Generally, annuity benefit payments under the Contract will begin on the Annuity
Date. The Annuity Date:

- may not be earlier than the first Contract Anniversary; and

- must occur on the first day of any month before the Owner's 99th birthday.
In some states, the Annuity Date may be earlier than Owner's 99th
birthday.

If the Owner does not select an Annuity Date, the Annuity Date will be the later
of (a) the Owner's age 85 or (b) one year after the Issue Date.

If there are Joint Owners, the age of the younger will determine the latest
possible Annuity Date. The Owner may elect to change the Annuity Date by sending
a written request to the Principal Office at least one month before the earlier
of the new Annuity Date or the currently scheduled date.

If the Annuity Date occurs when the Owner is at an advanced age, it is possible
that the Contract will not be considered an annuity for federal tax purposes. In
addition, the Internal Revenue Code ("the Code") and/or the terms of qualified
plans may impose limitations on the age at which annuity benefit payments may
commence and the type of annuity payout option that may be elected. The Owner
should carefully review the Annuity Date and the annuity payout options with
his/her tax adviser. See also FEDERAL TAX CONSIDERATIONS for further
information.

B. CHOOSING THE ANNUITY PAYOUT OPTION

Regardless of how payments were allocated during the accumulation phase, the
Owner may choose a variable annuity payout option, a fixed annuity payout option
or a combination fixed and variable annuity payout option. Currently, all of the
variable annuity payout options described below are available and may be funded
through all of the variable Sub-Accounts. In addition, each of the variable
annuity payout options is also available on a fixed basis. The Company may offer
other annuity payout options.

The Owner may change the annuity payout option up to one month before the
Annuity Date. If the Owner fails to choose an annuity payout option, monthly
benefit payments will be made under a variable Life with Cash Back annuity
payout option. If the Owner exercises the M-GAP Rider, annuity benefit payments
must be made under a fixed annuity payout option involving a life contingency
option.

The annuity payout option selected must result in an initial payment of at least
$100 (a lower amount may be required in certain jurisdictions.) The Company
reserves the right to increase this minimum amount. If the

40
<PAGE>
annuity payout option selected does not produce an initial payment which meets
this minimum, a single payment may be made.

FIXED ANNUITY PAYOUT OPTIONS. If the Owner selects a fixed annuity payout
option, each monthly annuity benefit payment will be equal to the first (unless
a withdrawal is made or as otherwise described under certain reduced survivor
annuity benefits.) Any portion of the Contract's Accumulated Value converted to
a fixed annuity will be held in the Company's General Account. The Contract
provides guaranteed fixed annuity option rates that determine the dollar amount
of the first payment under each form of fixed annuity for each $1,000 of applied
value. These rates are based on the Annuity 2000 Mortality Table and a 3% AIR.
The Company may offer annuity rates more favorable than those contained in the
Contract. Any such rates will be applied uniformly to all Owners of the same
class. For more specific information about fixed annuity payout options, see the
Contract.

VARIABLE ANNUITY PAYOUT OPTIONS. If the Owner selects a variable annuity payout
option, he/she will receive monthly payments equal to the value of the fixed
number of Annuity Units in the chosen Sub-Account(s). The first variable annuity
benefit payment will be based on the current annuity option rates made available
by the Company at the time the variable annuity payout option is selected.
Annuity option rates determine the dollar amount of the first payment for each
$1,000 of applied value. The annuity option rates are based on the Annuity 2000
Mortality Table and a 3% AIR.

Since the value of an Annuity Unit in a Sub-Account reflects the investment
performance of the Sub-Account, the amount of each monthly annuity benefit
payment will usually vary. However, under this Contract, if the Owner elects a
variable payout option, he or she must also select a monthly, quarterly,
semi-annual or annual Change Frequency. 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 benefit payment. As such, the Change
Frequency chosen will determine how frequently monthly variable annuity payments
will vary. 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.

At the time the Change Frequency is elected, the Owner must also select the date
the first change is to occur. This date may not be later than the length of the
Change Frequency elected. For example, if a semi-annual Change Frequency is
elected, the date of the first change may not be later than six months after the
Annuity Date. If a quarterly Change Frequency is elected, the date of the first
change may not be later than three months after the Annuity Date.

C. DESCRIPTION OF ANNUITY PAYOUT OPTIONS

The Company currently provides the following annuity payout options:

LIFE ANNUITY PAYOUT OPTION

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

- JOINT AND SURVIVOR ANNUITIES -- Monthly payments during the Annuitant's
and Joint Annuitant's joint lifetimes. Upon the first death, payments will
continue for the remaining lifetime of the survivor at a previously
elected level of 100%, two-thirds or one-half of the total number of
Annuity Units.

LIFE WITH PERIOD CERTAIN ANNUITY PAYOUT OPTION

- 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

41
<PAGE>

been made, the remaining payments continue to the Owner or the Beneficiary
(whichever is applicable).

- JOINT AND SURVIVOR ANNUITIES -- Monthly payments guaranteed for a
specified number of years and continuing during the Annuitant's and Joint
Annuitant's joint lifetimes. Upon the first death, payments continue for
the survivor's remaining lifetime at the previously elected level of 100%,
two-thirds or one-half of the Annuity Units. If the surviving Annuitant
dies before all guaranteed payments have been made, the remaining payments
continue to the Owner or the Beneficiary (whichever is applicable).

LIFE WITH CASH BACK ANNUITY PAYOUT OPTION

- SINGLE LIFE ANNUITY -- Monthly payments during the Annuitant's life.
Thereafter, any excess of the original applied Annuity Value, over the
total amount of annuity benefit payments made and withdrawals taken, will
be paid to the Owner or the Beneficiary (whichever is applicable).

- JOINT AND SURVIVOR ANNUITIES -- Monthly payments during the Annuitant's
and Joint Annuitant's joint lifetimes. At the first death, payments
continue for the survivor's remaining lifetime at the previously elected
level of 100%, two-thirds or one-half of the Annuity Units. Thereafter,
any excess of the original applied Annuity Value, over the total amount of
annuity benefit payments made and withdrawals taken, will be paid to the
Owner or the Beneficiary (whichever is applicable).

PERIOD CERTAIN ANNUITY PAYOUT OPTION

Monthly annuity benefit payments for a chosen number of years ranging from five
to thirty or any other period currently offered by the Company are paid. If the
Annuitant dies before the end of the period, remaining payments will continue.
The period certain option does not involve a life contingency. In the
computation of the payments under this option, the charge for annuity rate
guarantees, which includes a factor for mortality risks, is made.

D. VARIABLE ANNUITY BENEFIT PAYMENTS

THE ANNUITY UNIT. On and after the Annuity Date, the Annuity Unit is a measure
of the value of the monthly annuity benefit payments under a variable annuity
payout 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 of 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 AIR; and

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

Annuity benefit payments will increase from one payment date to the next if the
annualized net rate of return during that period is greater than the AIR and
will decrease if the annualized net rate of return 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 THE FIRST ANNUITY BENEFIT PAYMENT. The amount of the first
periodic variable annuity benefit payment depends on the:

- annuity payout option chosen;

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<PAGE>
- length of the annuity payout option elected;

- age of the Annuitant;

- gender of the Annuitant (if applicable, see "H. NORRIS Decision");

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

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

- AIR selected.

The dollar amount of the first periodic annuity benefit payment is determined by
multiplying:

(1) the Accumulated Value applied under that option after application of any
Market Value Adjustment and less premium tax, if any, (or the amount of
the death benefit, if applicable) divided by $1,000, by

(2) the applicable amount of the first monthly payment per $1,000 of value.

DETERMINATION OF THE NUMBER OF ANNUITY UNITS. The dollar amount of the first
variable annuity benefit payment is then divided by the value of an Annuity Unit
of the selected Sub-Account(s) to determine the number of Annuity Units
represented by the first payment. The number of Annuity Units remains fixed
under all annuity payout options (except for the survivor annuity benefit
payment under the joint and two-thirds or joint and one-half option) unless the
Owner transfers among Sub-Accounts, makes a withdrawal, or units are split.

DOLLAR AMOUNT OF SUBSEQUENT VARIABLE ANNUITY BENEFIT PAYMENTS. For each
subsequent payment, the dollar amount of the variable annuity benefit payment is
determined by multiplying this fixed number of Annuity Units by the value of an
Annuity Unit on the applicable Valuation Date. The dollar amount of each
periodic variable annuity benefit payment after the first will vary with
subsequent variations in the value of the Annuity Unit of the selected
Sub-Account(s).

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

PAYMENT OF ANNUITY BENEFIT PAYMENTS. The Owner will receive the annuity benefit
payments unless he/ she requests in writing that payments be made to another
person, persons, or entity. If the Owner (or, if there are Joint Owners, the
surviving Joint Owner) dies on or after the Annuity Date, the beneficiary will
become the Owner of the Contract. Any remaining annuity benefit payments will
continue to the beneficiary in accordance with the terms of the annuity benefit
payment option selected. If there are Joint Owners on or after the Annuity Date,
upon the first Owner's death, any remaining annuity benefit payments will
continue to the surviving Joint Owner in accordance with the terms of the
annuity benefit payment option selected.

If an Annuitant dies on or after the Annuity Date but before all guaranteed
annuity benefit payments have been made, any remaining guaranteed payments will
continue to be paid to the Owner or the payee the Owner has designated. Unless
otherwise indicated by the Owner, the present value of any remaining guaranteed
annuity benefit payments may be paid in a single sum to the Owner. For
discussion of present value calculation, see "Calculation of Present Value"
below.

E. TRANSFERS OF ANNUITY UNITS

After the Annuity Date and prior to the death of the Annuitant, the Owner may
transfer among the available Sub-Accounts upon written or telephone request to
the Company. As discussed in "A. Payments," a properly

43
<PAGE>
completed authorization form must be on file before telephone requests will be
honored. 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 Value
next computed after receipt of the transfer request.

Automatic transfers (Automatic Account Rebalancing) are available during the
annuitization phase subject to the same rules described in "D. Transfer
Privilege."

F. WITHDRAWALS AFTER THE ANNUITY DATE

WITHDRAWALS AFTER THE ANNUITY DATE FROM QUALIFIED AND NON-QUALIFIED CONTRACTS
MAY HAVE ADVERSE TAX CONSEQUENCES. BEFORE MAKING A WITHDRAWAL, PLEASE CONSULT
YOUR TAX ADVISOR AND SEE "C. TAXATION OF THE CONTRACT IN GENERAL," "WITHDRAWALS
AFTER ANNUITIZATION" UNDER FEDERAL TAX CONSIDERATIONS.

After the Annuity Date and prior to the death of the Annuitant, the Owner may
take withdrawals from the Contract. The Owner must submit to the Principal
Office a signed, written request indicating the desired dollar amount of the
withdrawal. The minimum amount of a withdrawal is $1,000. 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 type of withdrawal and the number of withdrawals that may be made each
calendar year depend upon whether the Owner annuitizes under a life annuity
payout option with payments based on the life of one or more Annuitants with no
guaranteed payments (a "Life" annuity payout option), under a life annuity
payout option that in part provides for a guaranteed number of payments (a "Life
With Period Certain" or "Life With Cash Back" annuity payout option), or an
annuity payout option based on a guaranteed number of payments (a "Period
Certain" annuity payout option).

WITHDRAWALS UNDER LIFE ANNUITY PAYOUT OPTIONS

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

WITHDRAWALS UNDER LIFE WITH PERIOD CERTAIN OR LIFE WITH CASH BACK ANNUITY PAYOUT
OPTIONS

The Owner may make one Present Value Withdrawal in each calendar year, if there
are remaining GUARANTEED annuity benefit payments. The amount of each Present
Value Withdrawal represents a percentage of the present value of the remaining
guaranteed annuity benefit payments. Each year a Present Value Withdrawal is
taken, the Company records the percentage of the present value of the then
remaining guaranteed annuity benefit 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 remaining guaranteed annuity benefit
payments. In year seven, the Owner withdraws 20% of the then current

44
<PAGE>
present value of the remaining guaranteed annuity benefit payments. Through year
seven the total percentage withdrawn is 35%. 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 benefit payments).

Under a Life with Period Certain annuity payout option or Life with Cash Back
annuity payout option, if the Annuitant is still living after the guaranteed
annuity benefit payments have been made, the number of Annuity Units or dollar
amount applied to future annuity benefit 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 PERIOD CERTAIN ANNUITY PAYOUT OPTIONS

The Owner may make multiple Present Value Withdrawals in each calendar year, up
to 100% of the present value of the guaranteed annuity benefit payments.
Withdrawal of 100% of the present value of the guaranteed annuity benefit
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 benefit payments or
remaining guaranteed annuity benefit payments, respectively, and proportionately
reduces the number of Annuity Units (under a variable annuity payout option) or
dollar amount (under a fixed annuity payout option) applied to future annuity
benefit payments. Because each variable annuity benefit 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 benefit 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
benefit payment or the dollar amount applied to each future fixed annuity
benefit payment. Each Present Value Withdrawal proportionately reduces the
number of Annuity Units applied to each future GUARANTEED variable annuity
benefit payment or the dollar amount applied to each future GUARANTEED fixed
annuity benefit payment. Because each variable annuity benefit 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 benefit payments.

- PAYMENT WITHDRAWALS. Payment Withdrawals are available under Life, Life with
Period Certain, or Life with Cash Back annuity payout options. The Owner may
make one Payment Withdrawal in each calendar year.

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

Amount of the variable withdrawal
------------------------------------------------

Present value of all remaining variable annuity
benefit payments immediately prior to the withdrawal

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

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<PAGE>
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.

- PRESENT VALUE WITHDRAWALS. Present Value Withdrawals are available under Life
with Period Certain or Life with Cash Back annuity payout options (the Owner
may make one Present Value Withdrawal in each calendar year, if there are
remaining guaranteed annuity benefit payments) and under Period Certain
annuity payout options (the Owner may make multiple Present Value Withdrawals
in each calendar year).

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

Amount of the variable withdrawal
-------------------------------------------------

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

Because each variable annuity benefit 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 benefit payments
with respect to the guaranteed payments. Under a fixed annuity payout option,
the proportionate reduction will result in lower fixed annuity benefit
payments with respect to the guaranteed payments. However, under a Life with
Period Certain annuity payout option or Life with Cash Back annuity payout
option, if the Annuitant is still living after the guaranteed number of
annuity benefit payments has been made, the number of Annuity Units or dollar
amount of future annuity benefit 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 benefit payments is calculated based on 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
benefit payments (currently the Annuity 2000 Mortality Table with male, female,
or unisex rates, as appropriate). The discount rate is the AIR (for a variable
annuity payout option) or the interest rate (for a fixed annuity payout option)
that was used at the time of annuitization to determine the annuity benefit
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 benefit payments being valued -- 1.00%*

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

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

*The Withdrawal Adjustment Charge may be lower in some jurisdictions. See
Contract Specifications for the specific charge.

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.

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<PAGE>
mortality table that will be equal to the mortality table used at the time of
annuitization to determine the annuity benefit payments (currently the Annuity
2000 Mortality Table).

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

- For a Payment Withdrawal, the present value calculation (including any
applicable adjustments) affects the proportionate reduction of the
remaining number of Annuity Units (under a variable annuity payout option)
or dollar amount (under a fixed annuity payout option), applied to each
future annuity benefit 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 benefit payment. This will result in lower future annuity benefit
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 benefit payment. This will result in lower future
annuity benefit 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 D -- EXAMPLES OF PRESENT VALUE WITHDRAWALS AND PAYMENT WITHDRAWALS.

DEFERRAL OF WITHDRAWALS. A withdrawal is normally payable within seven days
following the Company's receipt of the withdrawal request. However, the Company
reserves the right to defer withdrawals of 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 separate account is not
reasonably practicable.

The Company reserves the right to defer withdrawals of amounts allocated to the
Company's General Account for a period not to exceed six months.

G. REVERSAL OF ANNUITIZATION

The Owner may reverse the decision to annuitize by written request to the
Company within 90 days of the Annuity Date. Upon receipt of such request, the
Company will return the Contract to the Accumulation Phase, subject to the
following:

(1) The value applied under a fixed annuity payout option at the time of
annuitization (except for the excess value of the M-GAP Benefit Base over
the Annuity Value, if applicable) will be treated as if it had been
invested in the Fixed Account of the Contract on that same date.

(2) The Sub-Account allocations that were in effect at the time of
annuitization will first be used for calculating the reversal. Any
transfers between variable Sub-Accounts during the Annuity Payout phase
will then be treated as transfers during the Accumulation Phase (As a
result, the Contract's

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<PAGE>
Accumulated Value after the reversal will reflect the same Sub-Account
allocations that were in effect immediately prior to the reversal).

(3) Any annuity benefit payments paid and any withdrawals taken during the
Annuity Payout phase will be treated as a withdrawal of the Surrender
Value in the Accumulation Phase, as of the date of the payment or
withdrawal. Surrender charges may apply to these withdrawals, and there
may be adverse tax consequences. See "C. Taxation of the Contract in
General" under FEDERAL TAX CONSIDERATIONS.

If the Company learns of the Owner's decision to reverse annuitization after the
latest possible Annuity Date permitted under the Contract, the Company will
contact the Owner. The Owner must then immediately select an annuity payout
option (either the original annuity payout option or a different annuity payout
option). If the Owner does not select an annuity payout option, payments will
begin under a variable Life with Cash Back annuity payout option.

H. 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 payout 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.

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<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 Underlying
Funds.

A. VARIABLE ACCOUNT DEDUCTIONS

MORTALITY AND EXPENSE RISK CHARGE. The Company assesses a charge against the
assets of each Sub-Account to compensate for certain mortality and expense risks
it has assumed. The mortality and expense risk charge is assessed daily at an
annual rate of 1.20% of each Sub-Account's assets. The charge is imposed during
both the accumulation phase and the annuity payout phase. The mortality risk
arises from the Company's guarantee that it will make annuity benefit payments
in accordance with annuity rate provisions established at the time the Contract
is issued for the life of the Annuitant (or in accordance with the annuity
payout 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 during
the annuity payout phase on all Contracts, including those that do not involve a
life contingency, even though the Company does not bear direct mortality risk
with respect to variable annuity settlement options that do not involve life
contingencies. The expense risk arises from the Company's guarantee that the
charges it makes will not exceed the limits described in the Contract and in
this Prospectus.

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

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

ADMINISTRATIVE EXPENSE CHARGE. The Company assesses each Sub-Account with a
daily Administrative Expense Charge at an annual rate of 0.20% of the average
daily net assets of the Sub-Account. The charge is imposed during both the
accumulation phase and the annuity payout phase. This charge may not be
increased. The daily Administrative Expense Charge is assessed to help defray
administrative expenses actually incurred in the administration of the
Sub-Account. There is no direct relationship, however, between the amount of
administrative expenses imposed on a given Contract and the amount of expenses
actually attributable to that Contract.

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

OTHER CHARGES. Because the Sub-Accounts 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.
Management fee waivers and/or reimbursements may be in effect for certain or all
of the Underlying Funds. For specific information regarding the existence and
effect of any waivers/reimbursements see "Annual Underlying Fund Expenses" under
SUMMARY OF FEES AND EXPENSES. The prospectuses

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<PAGE>
and SAIs for the Underlying Funds also contain additional information concerning
expenses of the Underlying Funds and should be read in conjunction with the
Prospectus.

B. CONTRACT FEE

A $35 Contract fee (a lower fee may apply in some states) currently is deducted
during the accumulation phase, on the Contract anniversary date and upon full
surrender of the Contract if the Accumulated Value on any of these dates is less
than $75,000.

Where Accumulated Value has been allocated to more than one account, a
percentage of the total Contract fee will be deducted from the value in each
account. The portion of the charge deducted from each account will be equal to
the percentage which the value in that account bears to the Accumulated Value
under the Contract. The deduction of the Contract fee from a Sub-Account will
result in cancellation of a number of Accumulation Units equal in value to the
portion of the charge deducted from that Sub-Account.

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

C. OPTIONAL RIDER CHARGES

Subject to state availability, the Company offers a number of Riders that are
only available if elected by the Owner at issue. A separate monthly charge is
made for each Rider through a pro-rata reduction of the Accumulated Value of the
Sub-Accounts, the Fixed Account and the Guarantee Period Accounts. The pro-rata
reduction is based on the relative value that the Accumulation Units of the
Sub-Accounts, the dollar amounts in the Fixed Account and the dollar amounts in
the Guarantee Period Accounts bear to the total Accumulated Value.

The applicable charge for the following Riders is assessed on the Accumulated
Value on the last day of each Contract month and, if applicable, a pro-rated
charge on the date the Rider is terminated, multiplied by 1/12th of the
following annual percentage rate:

<TABLE>
<S> <C>
Minimum Guaranteed Annuity Payout Rider with ten-year
waiting period............................................ 0.35%
Minimum Guaranteed Annuity Payout Rider with fifteen-year
waiting period............................................ 0.20%
6% Enhanced Death Benefit Rider With Annual Step-Up......... 0.25%
Enhanced Death Benefit Rider With Annual Step-Up (only
available in New York).................................... 0.15%
</TABLE>

For a description of the Riders, see "Optional Enhanced Death Benefit Rider"
under "F. Death Benefit" and "H. Optional Minimum Guaranteed Annuity Payout
(M-GAP) Rider" under DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE,
above.

D. PREMIUM TAXES

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

1. if the premium tax was paid by the Company when payments were received,
the premium tax charge is deducted on a pro-rata basis when withdrawals
are made, upon surrender of the Contract, or when

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<PAGE>
annuity benefit payments begin (the Company reserves the right instead to
deduct the premium tax charge for a Contract at the time payments are
received); or

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

In no event will a deduction be taken before the Company has incurred a tax
liability under applicable state law.

If no amount for premium tax was deducted at the time the payment was received,
but subsequently tax is determined to be due prior to the Annuity Date, the
Company reserves the right to deduct the premium tax from the Contract value at
the time such determination is made.

E. SURRENDER CHARGE

No charge for sales expense is deducted from payments at the time the payments
are made. A surrender charge, however, may be deducted from the Accumulated
Value in the case of surrender or withdrawal within certain time limits
described below.

CALCULATION OF SURRENDER CHARGE. For purposes of determining the surrender
charge, the Accumulated Value is divided into four categories:

- The amount available under the Withdrawal Without Surrender Charge
provision, described below;

- Old Payments -- total payments invested in the Contract for more than nine
years; and

- New Payments -- payments received by the Company during the nine years
preceding the date of the surrender or withdrawal.

Amounts available as a Withdrawal Without Surrender Charge, followed by Old
Payments, may be withdrawn from the Contract at any time without the imposition
of a surrender charge. However, if a withdrawal or surrender is attributable all
or in part to New Payments, a surrender charge may be imposed.

The amount of the charge will depend upon the number of years that any New
Payments to which the withdrawal is attributed have remained credited under the
Contract. For the purpose of calculating surrender charges for New Payments, all
amounts withdrawn are assumed to be deducted first from the oldest New Payment
and then from the next oldest New Payment and so on, until all New Payments have
been exhausted pursuant to the first-in-first-out ("FIFO") method of accounting.
(See FEDERAL TAX CONSIDERATIONS for a discussion of how withdrawals are treated
for income tax purposes.)

The following surrender charge table outlines these charges:

<TABLE>
<CAPTION>
YEARS FROM DATE OF PAYMENT SURRENDER CHARGE AS A PERCENTAGE
TO DATE OF WITHDRAWAL OF THE PAYMENTS WITHDRAWN
--------------------- -------------------------
<S> <C>
Less than 1 8.0%
Less than 2 8.0%
Less than 3 8.0%
Less than 4 7.0%
Less than 5 7.0%
Less than 6 6.0%
Less than 7 5.0%
Less than 8 3.0%
Less than 9 1.0%
Thereafter 0%
</TABLE>

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<PAGE>
The amount withdrawn equals the amount requested by the Owner plus the surrender
charge, if any. The charge is applied as a percentage of the New Payments
withdrawn.

The total charge equals the aggregate of all applicable surrender charges for a
surrender and withdrawals, including the Withdrawal Adjustment Charge that may
apply if a withdrawal is taken during the Annuity Payout phase (see "F.
Withdrawals after the Annuity Date" under ANNUITIZATION -- THE PAYOUT PHASE). In
no event will the total surrender and withdrawal charges exceed a maximum limit
of 8.5% of total gross New Payments.

WITHDRAWAL WITHOUT SURRENDER CHARGE. Each calendar year prior to the Annuity
Date, an Owner may withdraw a portion of the Contract's Surrender Value without
any applicable surrender charge ("Withdrawal Without Surrender Charge Amount" or
"WWSC amount"). The WWSC amount is equal to the greater of A or B where:

A is earnings at the time of withdrawal and

B is 10% times (X less Y)* less Z where:

X is the total gross payments made to the contract

Y is any previous withdrawals that exceed the WWSC amount

Z is any previous WWSC amount withdrawn in the same CALENDAR year

* In the contract, X less Y is referred to as the Gross Payment
Base

To illustrate how this works assume the following:

- The issue date is February 1, 2000.

- The initial payment to the contract is $100,000.

- No subsequent payments are made to the contract.

- The Owner makes the following withdrawals:

<TABLE>
<CAPTION>
CONTRACT YEAR IN
WHICH EARNINGS AT THE
DATE OF WITHDRAWAL TIME OF AMOUNT OF
WITHDRAWAL MADE WITHDRAWAL WITHDRAWAL
-------------- ---------------- --------------- ----------
<S> <C> <C> <C> <C>
Withdrawal #1 April 1, 2000 1st $2,000 $ 8,000
Withdrawal #2 August 1, 2000 1st $3,680 $ 4,000
Withdrawal #3 April 1, 2001 2nd $7,414 $15,000
Withdrawal #4 August 1, 2001 2nd $3,404 $ 2,000
</TABLE>

WITHDRAWAL #1

First, determine the WWSC amount available at the time of the withdrawal:

A is $2,000

B is 10% times (X less Y) less Z where:

X is $100,000

Y is $0 (no previous withdrawals have been made)

52
<PAGE>

Z is $0 (no previous withdrawals have been made)

10% times ($100,000 less $0) less $0 =

10% times ($100,000) less $0 =

$10,000 less $0 = $10,000

The greater of A or B is $10,000. This is the available WWSC amount at the time
of Withdrawal #1.

Second, compare the amount withdrawn to the available WWSC amount:

Withdrawal #1 of $8,000 is less than the WWSC amount of $10,000.
Thus, it is not subject to surrender charges.

WITHDRAWAL #2

First, determine the WWSC amount available at the time of the withdrawal:

A is $3,680

B is 10% times (X less Y) less Z where:

X is $100,000

Y is $0 (Withdrawal #1, did not exceed the WWSC amount)

Z is $8,000 (Withdrawal #1 was made in the same CALENDAR year)

10% times ($100,000 less $0) less $8,000 =

10% times ($100,000) less $8,000 =

$10,000 less $8,000 = $2,000

The greater of A or B is $3,680. This is the available WWSC amount at the time
of Withdrawal #2.

Second, compare the amount withdrawn to the available WWSC amount:

Withdrawal #2 of $4,000 exceeds the available WWSC amount of $3,680.
Only $3,680 of Withdrawal #2 is part of the WWSC amount and $320
exceeds the WWSC amount.

WITHDRAWAL #3

First, determine the WWSC amount available at the time of the withdrawal:

A is $7,414

B is 10% times (X less Y) less Z where:

X is $100,000

Y is $320 ($320 of Withdrawal #2 exceeded the WWSC amount)

Z is $0 (This is the first withdrawal of this CALENDAR year)

10% times ($100,000 less $320) less $0 =

10% times ($99,680) less $0 =

$9,968 less $0 = $9,968

The greater of A or B is $9,968. This is the available WWSC amount at the time
of Withdrawal #3.

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<PAGE>

Second, compare the amount withdrawn to the available WWSC amount:

Withdrawal #3 of $15,000 exceeds the available WWSC amount of
$9,968. Only $9,968 of Withdrawal #3 is part of the WWSC amount and
$5,032 exceeds the WWSC amount.

WITHDRAWAL #4

First, determine the WWSC amount available at the time of the withdrawal:

A is $3,404

B is 10% times (X less Y) less Z where:

X is $100,000

Y is $5,352 ($320 of Withdrawal #2 and $5,032 of Withdrawal #3
exceeded the WWSC amount)

Z is $9,968 (Withdrawal #3 was made in the same CALENDAR year.
$9,968 of the total withdrawal of $15,000 was a withdrawal of the
WWSC amount.)

10% times ($100,000 less $5,352) less $9,968 =

10% times ($94,648) less $9,968 =

$9,464.80 less $9,968 = $503.20

The greater of A or B is $3,404. This is the available WWSC amount at the time
of Withdrawal #4.

Second, compare the amount withdrawn to the available WWSC amount:

Withdrawal #4 of $2,000 is less than the available WWSC amount of
$3,404. Thus it, is not subject to surrender charges.

IF YOU NEVER MAKE A WITHDRAWAL IN ANY CALENDAR YEAR THAT EXCEEDS THE WWSC
AMOUNT, THEN THE MAXIMUM AVAILABLE WWSC AMOUNT EACH CALENDAR YEAR WILL NEVER BE
LESS THAN 10% TIMES THE GROSS PAYMENTS MADE TO THE CONTRACT.

EFFECT OF WITHDRAWAL WITHOUT SURRENDER CHARGE AMOUNT. When a withdrawal is
taken, the Company deducts the WWSC amount in the following order.

- The Company first deducts the WWSC Amount from cumulative earnings.

- If the WWSC amount exceeds cumulative earnings, the Company will deem the
excess to be withdrawn from New Payments on a last-in-first-out (LIFO)
basis, so that the newest New Payments are withdrawn first. This results
in those New Payments, which are otherwise subject to the highest
surrender charge at that point in time, being withdrawn first without a
surrender charge.

- If more than one withdrawal is made during the calendar year, on each
subsequent withdrawal the Company will waive the surrender charge, if any,
until the entire Withdrawal Without Surrender Charge amount has been
withdrawn.

After the entire WWSC amount available in a calendar year has been withdrawn,
for the purposes of determining the amount of the surrender charge, if any,
withdrawals will be deemed to be taken in the following order:

- First from Old Payments

54
<PAGE>

- Since Old Payments have been invested in the Contract for more than 9
years, the surrender charge is 0%.

- Second from New Payments

- Payments are now withdrawn from this category on a first-in-first-out
(FIFO) basis, so that the oldest New Payments are now withdrawn first.
This results in the withdrawal of New Payments with the lowest
surrender charge first.

- Third from Earnings

For Qualified Contracts and Contracts issued under Section 457 Deferred
Compensation Plans only, the maximum amount available without a surrender charge
during any calendar year will be the greatest of the WWSC amount described above
and the amount available as a Life Expectancy Distribution less Z (where Z has
the same value as outlined above).

For further information on surrender and withdrawals, including minimum limits
on amount withdrawn and amount remaining under the Contract in the case of
withdrawals, and important tax considerations, see "F. Surrender and
Withdrawals" under DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE and see
FEDERAL TAX CONSIDERATIONS.

REDUCTION OR ELIMINATION OF SURRENDER CHARGE AND ADDITIONAL AMOUNTS
CREDITED. Where permitted by law, the Company will waive the surrender charge
in the event that the Owner (or the Annuitant, if the Owner is not an
individual) becomes physically disabled after the Issue Date of the Contract (or
in the event that the original Owner or Annuitant has changed since issue, after
being named Owner or Annuitant) and before attaining age 65. The Company may
require proof of such disability and continuing disability and reserves the
right to obtain an examination by a licensed physician of its choice and at its
expense.

In addition, the Company will waive the surrender charge in the event that an
Owner (or the Annuitant, if the Owner is not an individual) is:

(1) admitted to a medical care facility after becoming the Owner or
Annuitant under the Contract and remains confined there until the later
of one year after the Issue Date or 90 consecutive days; or

(2) first diagnosed by a licensed physician as having a fatal illness after
the Issue Date of the Contract and after being named Owner or Annuitant.

For purposes of the above provision, "medical care facility" means any
state-licensed facility or, in a state that does not require licensing, a
facility that is operating pursuant to state law, providing medically necessary
inpatient care which is prescribed by a licensed "physician" in writing and
based on physical limitations which prohibit daily living in a non-institutional
setting. "Fatal illness" means a condition diagnosed by a licensed "physician"
which is expected to result in death within two years of the diagnosis.
"Physician" means a person (other than the Owner, Annuitant or a member of one
of their families) who is state licensed to give medical care or treatment and
is acting within the scope of that license. "Physically disabled" means that the
Owner or Annuitant, as applicable, has been unable to engage in an occupation or
to conduct daily activities for a period of at least 12 consecutive months as a
result of disease or bodily injury.

Where surrender charges have been waived under any of the situations discussed
above, no additional payments under this Contract will be accepted unless
required by state law.

In addition, from time to time the Company may allow a reduction in or
elimination of the surrender charges, the period during which the charges apply,
or both, and/or credit additional amounts on Contracts, when Contracts are sold
to individuals or groups of individuals in a manner that reduces sales expenses.
The Company will consider factors such as the following:

55
<PAGE>
- the size and type of group or class, and the persistency expected from
that group or class;

- the total amount of payments to be received, and the manner in which
payments are remitted;

- the purpose for which the Contracts are being purchased, and whether that
purpose makes it likely that costs and expenses will be reduced;

- other transactions where sales expenses are likely to be reduced; or

- the level of commissions paid to selling broker-dealers or certain
financial institutions with respect to Contracts within the same group or
class (for example, broker-dealers who offer this Contract in connection
with financial planning services offered on a fee-for-service basis).

The Company also may reduce or waive the surrender charge, and/or credit
additional amounts on Contracts, where either the Owner or the Annuitant on the
Issue Date is within the following class of individuals ("eligible persons"):

- employees and registered representatives of any broker-dealer which has
entered into a sales agreement with the Company to sell the Contract;

- employees of the Company, its affiliates and subsidiaries; officers,
directors, trustees and employees of any of the Underlying Funds;

- investment managers or sub-advisers of the Underlying Funds; and

- the spouses of and immediate family members residing in the same household
with such eligible persons. "Immediate family members" means children,
siblings, parents, and grandparents.

Any reduction or elimination in the amount or duration of the surrender charge
will not discriminate unfairly among purchasers of this Contract. The Company
will not make any changes to this charge where prohibited by law.

F. TRANSFER CHARGE

The Company currently does not assess a charge for processing transfers. The
Company guarantees that the first 12 transfers in a Contract Year will be free
of transfer charge, but reserves the right to assess a charge, guaranteed never
to exceed $25, for each subsequent transfer in a Contract Year to reimburse it
for the expense of processing transfers. For more information, see "D. Transfer
Privilege" under DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE and "E.
Transfers of Annuity Units" under ANNUITIZATION -- THE PAYOUT PHASE.

G. WITHDRAWAL ADJUSTMENT CHARGE

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

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

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

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

*The Withdrawal Adjustment Charge may be lower in some jurisdictions. See
Contract Specifications for the specific charge.

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<PAGE>
The adjustment to the AIR or interest rate used to determine the present value
results in lower future annuity benefit 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 each Payment Withdrawal, the number of years of annuity benefit 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 that will
be equal to the mortality table used at the time of annuitization to determine
the annuity benefit payments (currently the Annuity 2000 Mortality Table with
male, female, or unisex rates, as appropriate).

For more information see "F. Withdrawals After the Annuity Date," under
ANNUITIZATION -- THE PAYOUT PHASE.

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<PAGE>
GUARANTEE PERIOD ACCOUNTS

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

INVESTMENT OPTIONS. In most jurisdictions, Guarantee Periods ranging from two
through ten years may be available. Each Guarantee Period established for the
Owner is accounted for separately in a non-unitized segregated account except in
California where it is accounted for in the Company's General Account. Each
Guarantee Period Account provides for the accumulation of interest at a
Guaranteed Interest Rate. The Guaranteed Interest Rate on amounts allocated or
transferred to a Guarantee Period Account is determined from time to time by the
Company in accordance with market conditions. Once an interest rate is in effect
for a Guarantee Period Account, however, the Company may not change it during
the duration of its Guarantee Period. In no event will the Guaranteed Interest
Rate be less than 3%. The Guarantee Period Accounts are not available in New
York, Oregon, Maryland, and Pennsylvania.

To the extent permitted by law, the Company reserves the right at any time to
offer Guarantee Periods with durations that differ from those which were
available when a Contract initially was issued and to stop accepting new
allocations, transfers or renewals to a particular Guarantee Period.

Owners may allocate net payments or make transfers from any of the Sub-Accounts,
the Fixed Account or an existing Guarantee Period Account to establish a new
Guarantee Period Account at any time prior to the Annuity Date. Transfers from a
Guarantee Period Account on any date other than on the day following the
expiration of that Guarantee Period will be subject to a Market Value
Adjustment. The Company establishes a separate investment account each time the
Owner allocates or transfers amounts to a Guarantee Period except that amounts
allocated to the same Guarantee Period on the same day will be treated as one
Guarantee Period Account. The minimum that may be allocated to establish a
Guarantee Period Account is $1,000. If less than $1,000 is allocated, the
Company reserves the right to apply that amount to the AIT Money Market Sub-
Account. The Owner may allocate amounts to any of the Guarantee Periods
available.

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

MARKET VALUE ADJUSTMENT. No Market Value Adjustment will be applied to
transfers, withdrawals, or surrender from a Guarantee Period Account on the
expiration of its Guarantee Period. In addition, no negative Market Value
Adjustment will be applied to a death benefit although a positive Market Value
Adjustment, if any, will be applied to increase the value of the death benefit
when based on the Contract's Accumulated Value. See "F. Death Benefit" under
DESCRIPTION OF THE CONTRACT -- THE ACCUMULATION PHASE. All other transfers,
withdrawals, or a surrender prior to the end of a Guarantee Period will be
subject

58
<PAGE>
to a Market Value Adjustment, which may increase or decrease the value. Amounts
applied under an annuity option are treated as withdrawals when calculating the
Market Value Adjustment. The Market Value Adjustment will be determined by
multiplying the amount taken from each Guarantee Period Account before deduction
of any Surrender Charge by the market value factor. The market value factor for
each Guarantee Period Account is equal to:

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

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

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

n is the number of days remaining from the Valuation Date to the
end of the current Guarantee Period.

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

WITHDRAWALS. Prior to the Annuity Date, the Owner may make withdrawals of
amounts held in the Guarantee Period Accounts. Withdrawals from these accounts
will be made in the same manner and be subject to the same rules as set forth
under "E. Surrender and Withdrawals" under DESCRIPTION OF THE CONTRACT -- THE
ACCUMULATION PHASE. In addition, the following provisions also apply to
withdrawals from a Guarantee Period Account: (1) a Market Value Adjustment will
apply to all withdrawals, including Withdrawals Without Surrender Charge, unless
made at the end of the Guarantee Period; and (2) the Company reserves the right
to defer payments of amounts withdrawn from a Guarantee Period Account for up to
six months from the date it receives the withdrawal request. If deferred for 30
days or more, the Company will pay interest on the amount deferred at a rate of
at least 3%.

In the event that a Market Value Adjustment applies to a withdrawal of a portion
of the value of a Guarantee Period Account, it will be calculated on the amount
requested and deducted from or added to the amount withdrawn. If a surrender
charge applies to the withdrawal, it will be calculated as set forth under
"E. Surrender Charge" after application of the Market Value Adjustment.

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<PAGE>
FEDERAL TAX CONSIDERATIONS

The effect of federal income taxes on the value of a Contract, on withdrawals or
surrenders, on annuity benefit payments, and on the economic benefit to the
Owner, Annuitant, or beneficiary depends upon a variety of factors. The
following discussion is based upon the Company's understanding of current
federal income tax laws as they are interpreted as of the date of this
Prospectus. No representation is made regarding the likelihood of continuation
of current federal income tax laws or of current interpretations by the IRS. In
addition, this discussion does not address state or local tax consequences that
may be associated with the Contract.

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

A. GENERAL

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

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

DIVERSIFICATION REQUIREMENTS. The IRS has issued regulations under Section
817(h) of the Code relating to the diversification requirements for variable
annuity and variable life insurance contracts. The regulations prescribed by the
Treasury Department provide that the investments of a segregated asset account
underlying a variable annuity contract are adequately diversified if no more
than 55% of the value of its assets is represented by any one investment, no
more than 70% by any two investments, no more than 80% by any three investments,
and no more than 90% by any four investments. Under this section of the Code, if
the investments are not adequately diversified, the Contract will not be treated
as an annuity contract, and therefore the income on the Contract, for any
taxable year of the Owner, would be treated as ordinary income received or
accrued by the Owner. It is anticipated that the Underlying Portfolios will
comply with the current diversification requirements. In the event that future
IRS regulations and/or rulings would require Contract modifications in order to
remain in compliance with the diversification standards, the Company will make
reasonable efforts to comply, and it reserves the right to make such changes as
it deems appropriate for that purpose.

INVESTOR CONTROL. In order for a variable annuity contract to qualify for tax
deferral, the Company, and not the variable contract owner, must be considered
to be the owner for tax purposes of the assets in the segregated asset account
underlying the variable annuity contract. In certain circumstances, however,
variable annuity contract owners may now be considered the owners of these
assets for federal income tax purposes. Specifically, the IRS has stated in
published rulings that a variable annuity contract owner may be considered the
owner of segregated account assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury Department has also announced, in connection with
the issuance of regulations concerning investment diversification, that those
regulations do not provide guidance governing the circumstances in which
investor control of the investments of a segregated asset account may cause the
investor (i.e., the contract owner), rather than the insurance company, to be
treated as the owner of the assets in the account. This announcement also states
that guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their

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investments to particular sub-accounts without being treated as owners of the
underlying assets." As of the date of this Prospectus, no such guidance has been
issued. The Company therefore additionally reserves the right to modify the
Contract as necessary in order to attempt to prevent a contract owner from being
considered the owner of a pro rata share of the assets of the segregated asset
account underlying the variable annuity contracts.

B. QUALIFIED AND NON-QUALIFIED CONTRACTS

From a federal tax viewpoint there are two types of variable annuity contracts,
"qualified" contracts and "non-qualified" contracts. A qualified contract is one
that is purchased in connection with a retirement plan which meets the
requirements of Sections 408 or 408A of the Code, while a non-qualified contract
is one that is not purchased in connection with one of the indicated retirement
plans. The tax treatment for certain withdrawals or surrenders will vary,
depending on whether they are made from a qualified contract or a non-qualified
contract. For more information on the tax provisions applicable to qualified
contracts, see "E. Individual Retirement Annuities" below.

C. TAXATION OF THE CONTRACT IN GENERAL

The Company believes that the Contract described in this Prospectus will, with
certain exceptions (see "Nonnatural Owner" below), be considered an annuity
contract under Section 72 of the Code. Please note, however, if the Owner
chooses an Annuity Date beyond the Owner's 85th birthday, it is possible that
the Contract may not be considered an annuity for tax purposes, and therefore,
the Owner will be taxed on the annual increase in Accumulated Value. The Owner
should consult tax and financial advisors for more information. This section
governs the taxation of annuities. The following discussion concerns annuities
subject to Section 72.

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

WITHDRAWALS AFTER ANNUITIZATION. A withdrawal from a qualified or non-qualified
contract may create significant adverse tax consequences. It is possible that
the Internal Revenue Service may take the view that when withdrawals (other than
annuity payments) are taken during the annuity payout phase of the Contract, 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 during the annuity payout phase.
Under this view, the Contract owner would pay income taxes on the entire $20,000
amount in that tax year. For some taxpayers, such as those under age 59 1/2,
additional tax penalties may also apply.

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 ADVISER PRIOR TO MAKING WITHDRAWALS.

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ANNUITY PAYOUTS AFTER ANNUITIZATION. When annuity benefit payments begin under
the Contract, generally a portion of each payment may be excluded from gross
income. The excludable portion generally is determined by a formula that
establishes the ratio that the investment in the Contract bears to the expected
return under the Contract. The portion of the payment in excess of this
excludable amount is taxable as ordinary income. Once all the investment in the
Contract is recovered, the entire payment is taxable. If the annuitant dies
before cost basis is recovered, a deduction for the difference is allowed on the
Owner's final tax return.

PENALTY ON DISTRIBUTION. A 10% penalty tax may be imposed on the withdrawal of
investment gains if the withdrawal is made prior to age 59 1/2. The penalty tax
will not be imposed on withdrawals:

- taken on or after age 59 1/2; or

- if the withdrawal follows the death of the Owner (or, if the Owner is not
an individual, the death of the primary Annuitant, as defined in the
Code); or

- in the case of the Owner's "total disability" (as defined in the Code); or

- if withdrawals from a qualified Contract are made to an employee who has
terminated employment after reaching age 55; or

- irrespective of age, if the amount received is one of a series of
"substantially equal" periodic payments made at least annually for the
life or life expectancy of the payee.

The requirement of "substantially equal" periodic payments is met when the Owner
elects to have distributions made over the Owner's life expectancy, or over the
joint life expectancy of the Owner and beneficiary. The requirement is also met
when the number of units withdrawn to make each distribution is substantially
the same. Any modification, other than by reason of death or disability, of
distributions which are part of a series of substantially equal periodic
payments that occurs before the later of the Owner's age 59 1/2 or five years,
will subject the Owner to the 10% penalty tax on the prior distributions.

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

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

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

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however, will not apply in cases of any employer who is the owner of an annuity
contract under a non-qualified deferred compensation plan.

DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS. Under Section 457 of the Code, deferred compensation plans
established by governmental and certain other tax-exempt employers for their
employees may invest in annuity contracts. Contributions and investment earnings
are not taxable to employees until distributed; however, with respect to
payments made after February 28, 1986, a Contract owned by a state or local
government or a tax-exempt organization will not be treated as an annuity under
Section 72 as well.

D. TAX WITHHOLDING

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

E. INDIVIDUAL RETIREMENT ANNUITIES

Federal income taxation of assets held inside an individual retirement annuity
and of earnings on those assets is deferred until distribution of plan benefits
begin. As such, it is not necessary to purchase a variable annuity contract
solely to obtain its tax deferral feature. However, other features offered under
this Contract and described in this Prospectus -- such as the minimum guaranteed
death benefit, the guaranteed fixed annuity rates and the wide variety of
investment options -- may make this Contract a suitable investment for your
individual retirement annuity.

Sections 408 and 408A of the Code permits eligible individuals to contribute to
an individual retirement program known as an Individual Retirement Annuity
("IRA"). Note: This term covers all IRAs permitted under Sections 408 and 408A
of the Code, including Roth IRAs. IRAs are subject to limits on the amounts that
may be contributed, the persons who may be eligible, and on the time when
distributions may commence. In addition, certain distributions from other types
of retirement plans may be "rolled over," on a tax-deferred basis, to an IRA.
Purchasers of an IRA Contract will be provided with supplementary information as
may be required by the IRS or other appropriate agency, and will have the right
to cancel the Contract as described in this Prospectus. See "C. Right to
Cancel."

Eligible employers that meet specified criteria may establish simplified
employee pension plans (SEP-IRAs) for their employees using IRAs. Employer
contributions that may be made to such plans are larger than the amounts that
may be contributed to regular IRAs and may be deductible to the employer.

STATEMENTS AND REPORTS

An Owner is sent a report semi-annually which provides certain financial
information about the Underlying Funds. At least annually, but possibly as
frequently as quarterly, the Company will furnish a statement to the Owner
containing information about his or her Contract, including Accumulation Unit
Values and other information as required by applicable law, rules and
regulations. The Company will also send a confirmation statement to Owners each
time a transaction is made affecting the Contract Value. (Certain transactions
made under recurring payment plans may in the future be confirmed quarterly
rather than by immediate confirmations.) The Owner should review the information
in all statements carefully. All errors or corrections must be reported to the
Company immediately to assure proper crediting to the Contract. The Company will
assume that all transactions are accurately reported on confirmation statements
and quarterly/annual statements unless the Owner notifies the Principal Office
in writing within 30 days after receipt of the statement.

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ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

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

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

Shares of the Underlying Funds also are issued to variable accounts of the
Company and its affiliates which issue variable life contracts ("mixed
funding"). Shares of the Underlying 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 the Company and the underlying
investment companies do not currently foresee any such disadvantages to either
variable life insurance owners or variable annuity owners, the Company 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,
the Company will bear the attendant expenses.

The Company reserves the right, subject to compliance with applicable law, to:

(1) transfer assets from the Variable Account or Sub-Account to another of
the Company's variable accounts or sub-accounts having assets of the same
class,

(2) to operate the Variable Account or any Sub-Account as a management
investment company under the 1940 Act or in any other form permitted by
law,

(3) to deregister the Variable Account under the 1940 Act in accordance with
the requirements of the 1940 Act,

(4) to substitute the shares of any other registered investment company for
the Fund shares held by a Sub-Account, in the event that Fund shares are
unavailable for investment, or if the Company determines that further
investment in such Fund shares is inappropriate in view of the purpose of
the Sub-Account,

(5) to change the methodology for determining the net investment factor,

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

(7) to combine with other Sub-Accounts or other Separate Accounts of the
Company.

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If any of these substitutions or changes are made, the Company may endorse the
Contract to reflect the substitution or change, and will notify Owners of all
such changes. In no event will the changes described above be made without
notice to Owners in accordance with the 1940 Act.

CHANGES TO COMPLY WITH LAW AND AMENDMENTS

The Company reserves the right, without the consent of Owners, to suspend sales
of the Contract as presently offered, and to make any change to provisions of
the Contract to comply with, or give Owners the benefit of, any federal or state
statute, rule or regulation (or any laws, regulations or rules of any
jurisdiction in which the Company is doing business), 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. Owners will be given written
notice of such changes.

VOTING RIGHTS

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

The number of votes which an Owner may cast will be determined by the Company as
of the record date established by the Underlying Fund. During the accumulation
period, the number of Underlying Fund shares attributable to each Owner will be
determined by dividing the dollar value of the Accumulation Units of the
Sub-Account credited to the Contract by the net asset value of one Underlying
Fund share. During the annuity payout phase, the number of Underlying Fund
shares attributable to each Owner will be determined by dividing the reserve
held in each Sub-Account for the Owner's variable annuity by the net asset value
of one Underlying Fund share. Ordinarily, the Owner's 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
and Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. ("NASD") or independent broker-dealers. Allmerica Investments,
Inc., 440 Lincoln Street, Worcester, MA 01653, is also the principal underwriter
and distributor and is an indirect wholly owned subsidiary of First Allmerica.
The Contract may also be purchased from certain independent broker-dealers that
are NASD members.

The Company pays commissions not to exceed 5.00% of payments to representatives
of Allmerica Investments, Inc. or to independent broker-dealers who sell the
Contract. Alternative commission schedules are available with lower initial
commission amounts based on payments, plus ongoing annual compensation of up to
1% of Contract value. To the extent permitted by NASD rules, promotional
incentives or payments also may be provided to representatives of Allmerica
Investments, Inc. or to such independent broker-dealers based on sales volumes,
the assumption of wholesaling functions, or other sales-related criteria.
Additional payments may be made for other services not directly related to the
sale of the Contract, including the recruitment and training of personnel,
production of promotional literature, and similar services.

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The Company intends to recoup commissions and other sales expenses through a
combination of anticipated surrender charges and profits from the Company's
General Account, which may include amounts derived from mortality and risk
charges. Commissions paid on the Contract, including additional incentives or
payments, do not result in any additional charge to Owners or to the Variable
Account. The Company will retain any surrender charges assessed on a Contract.

Owners may direct any inquiries to their financial representative or to
Allmerica Investments, Inc., 440 Lincoln Street, Worcester, MA 01653, telephone
1-800-366-1492.

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 its total assets or that relates to the Separate
Account.

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.

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APPENDIX A
MORE INFORMATION ABOUT THE FIXED ACCOUNT

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

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

STATE RESTRICTIONS. Certain states may impose restrictions on payments and
transfers to the Fixed Account.

A-1
<PAGE>
APPENDIX B
PERFORMANCE INFORMATION

This Contract was first offered to the public in 2000. 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 Table 1 reflect the applicable deductions
for the Contract fee, Sub-Account charges and Underlying Fund charges under this
Contract and also assume that the Contract is surrendered at the end of the
applicable period. Performance results in Table 2 do not include the Contract
fee and assume that the Contract is not surrendered at the end of the applicable
period. Neither set of tables include optional Rider charges. 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 AIT 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 1 are calculated in
the manner prescribed by the SEC and show the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year period or for a period covering the time the Sub-Account has been in
existence, if less than the prescribed periods. The calculation is adjusted to
reflect the deduction of the annual Sub-Account asset charge of 1.40%, the
effect of the $35 annual Contract fee ($30 Contract fee for First Allmerica),
the Underlying Fund charges and the surrender charge which would be assessed if
the investment were completely withdrawn at the end of the specified period. The
calculation is not adjusted to reflect the deduction of any optional Rider
charges. Quotations of supplemental average total returns, as shown in Table 2,
are calculated in exactly the same manner and for the same periods of time
except that it does not reflect the Contract fee and assumes that the Contract
is not surrendered at the end of the periods shown.

For more detailed information about these performance calculations, including
actual formulas, see the SAI.

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.

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

B-1
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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; or

(2) other groups of variable annuity separate accounts or other investment
products tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds and other investment products by
overall performance, investment objectives, and assets, or tracked by
other services, companies, publications, or persons, who rank such
investment products on overall performance or other criteria; or

(3) the Consumer Price Index (a measure for inflation) to assess the real
rate of return from an investment in the Sub-Account. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses. In
addition, relevant broad-based indices and performance from independent
sources may be used to illustrate the performance of certain Contract
features.

At times, the Company may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Service ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of the Company's relative financial
strength and operating performance in comparison to the norms of the life/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.

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ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
TABLE 1
AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF UNDERLYING FUND*
(ASSUMING COMPLETE WITHDRAWAL OF THE INVESTMENT)

<TABLE>
<CAPTION>
FOR YEAR 10 YEARS OR SINCE
UNDERLYING FUND ENDED INCEPTION
SUB-ACCOUNT INVESTING IN UNDERLYING FUND INCEPTION DATE 12/31/99 5 YEARS IF LESS
---------------------------------------- --------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
AIT Core Equity Fund.................. 4/29/85 19.52% 22.88% 15.67%
AIT Equity Index Fund................. 9/28/90 10.72% 25.43% 18.79%
AIT Government Bond Fund.............. 8/26/91 -8.28% 3.54% 4.56%
AIT Money Market Fund................. 4/29/85 -3.76% 2.75% 3.72%
AIT Select Aggressive Growth Fund..... 8/21/92 28.71% 20.96% 18.64%
AIT Select Capital Appreciation Fund... 4/28/95 15.61% N/A 18.83%
AIT Select Emerging Markets Fund...... 2/20/98 55.41% N/A 9.71%
AIT Select Growth Fund................ 8/21/92 19.99% 26.72% 18.50%
AIT Select Growth and Income Fund..... 8/21/92 8.77% 19.30% 14.08%
AIT Select International Equity Fund... 5/2/94 21.85% 16.13% 13.10%
AIT Select Investment Grade Income
Fund................................. 4/29/85 -9.39% 4.74% 6.18%
AIT Select Strategic Growth Fund...... 2/20/98 6.42% N/A 1.19%
AIT Select Value Opportunity Fund..... 4/30/93 -12.80% 11.02% 9.42%
AIM V.I. Aggressive Growth Fund....... 5/1/98 34.63% N/A 17.73%
AIM V.I. Value Fund................... 5/5/93 20.08% 24.87% 20.94%
Alliance Growth and Income
Portfolio**.......................... 1/14/91 1.64% 21.22% 13.43%
Alliance Premier Growth Portfolio**... 6/26/92 22.13% 33.34% 23.94%
DGPF International Equity Series**.... 10/29/92 5.96% 10.56% 9.60%
DGPF Growth Opportunities Series**.... 7/12/91 52.39% 24.40% 14.54%
Fidelity VIP Equity-Income
Portfolio**.......................... 10/9/86 -2.96% 15.89% 12.59%
Fidelity VIP Growth Portfolio**....... 10/9/86 27.15% 27.06% 17.95%
Fidelity VIP High Income Portfolio**... 9/19/85 -1.30% 8.04% 10.57%
Fidelity VIP Overseas Portfolio**..... 1/28/87 32.20% 14.63% 9.58%
Fidelity VIP II Asset Manager
Portfolio**.......................... 9/6/89 1.38% 12.86% 11.27%
Fidelity VIP III Growth Opportunities
Portfolio**.......................... 1/3/95 -4.84% N/A 18.80%
Franklin Natural Resources Securities
Fund**............................... 1/24/89 22.05% -6.01% -1.29%
Franklin Small Cap Fund**............. 11/1/95 85.68% N/A 27.04%
INVESCO VIF Health Sciences Fund...... 5/22/97 -4.62% N/A 11.51%
Janus Aspen Growth Portfolio**........ 9/13/93 33.63% 27.20% 21.65%
Janus Aspen Growth and Income
Portfolio**.......................... 5/1/98 63.16% N/A 48.60%
KVS Dreman Financial Services
Portfolio............................ 5/4/98 -13.13% N/A -10.13%
Kemper Technology Growth Portfolio.... 5/3/99 N/A N/A 67.20%
Pioneer Emerging Markets VCT
Portfolio**.......................... 10/30/98 67.78% N/A 60.03%
Pioneer Real Estate Growth VCT
Portfolio**.......................... 10/30/98 -12.78% N/A 5.42%
T. Rowe Price International Stock
Portfolio............................ 3/31/94 23.44% 12.74% 11.16%
</TABLE>

* Normally an additional table would be included that illustrates the
performance of the Sub-Accounts for the one, five and ten year periods or
since the inception of the Sub-Accounts. This table has been omitted since the
Sub-Accounts are new.

**These funds include a charge for 12b-1 fees ("Class 2 shares"). These
hypothetical performance figures are based upon the historical performance of
the non 12b-1 class of shares, but increased to reflect the effect of the
12b-1 fee on Class 2 shares performance.

B-3
<PAGE>

TABLE 2
SUPPLEMENTAL AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF UNDERLYING FUND*
(ASSUMING NO WITHDRAWAL OF THE INVESTMENT AND NO CONTRACT FEES)

<TABLE>
<CAPTION>
FOR YEAR 10 YEARS OR SINCE
UNDERLYING FUND ENDED INCEPTION
SUB-ACCOUNT INVESTING IN UNDERLYING FUND INCEPTION DATE 12/31/99 5 YEARS IF LESS
---------------------------------------- --------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
AIT Core Equity Fund.................. 4/29/85 27.52% 23.50% 15.67%
AIT Equity Index Fund................. 9/28/90 18.72% 25.99% 18.82%
AIT Government Bond Fund.............. 8/26/91 -1.16% 4.74% 4.57%
AIT Money Market Fund................. 4/29/85 3.71% 3.98% 3.73%
AIT Select Aggressive Growth Fund..... 8/21/92 36.72% 21.61% 18.88%
AIT Select Capital Appreciation Fund... 4/28/95 23.62% N/A 19.63%
AIT Select Emerging Markets Fund...... 2/20/98 63.43% N/A 13.63%
AIT Select Growth Fund................ 8/21/92 27.99% 27.27% 18.73%
AIT Select Growth and Income Fund..... 8/21/92 16.77% 19.99% 14.38%
AIT Select International Equity Fund... 5/2/94 29.86% 16.90% 13.80%
AIT Select Investment Grade Income
Fund................................. 4/29/85 -2.35% 5.89% 6.18%
AIT Select Strategic Growth Fund...... 2/20/98 14.43% N/A 5.34%
AIT Select Value Opportunity Fund..... 4/30/93 -6.03% 11.94% 9.96%
AIM V.I. Aggressive Growth Fund....... 5/1/98 42.64% N/A 21.99%
AIM V.I. Value Fund................... 5/5/93 28.08% 25.45% 21.25%
Alliance Growth and Income
Portfolio**.......................... 1/14/91 9.81% 22.17% 13.85%
Alliance Premier Growth Portfolio**... 6/26/92 30.13% 33.79% 24.11%
DGPF International Equity Series**.... 10/29/92 13.97% 11.49% 9.84%
DGPF Growth Opportunities Series**.... 7/12/91 60.40% 24.98% 14.68%
Fidelity VIP Equity-Income
Portfolio**.......................... 10/9/86 4.58% 16.66% 12.60%
Fidelity VIP Growth Portfolio**....... 10/9/86 35.15% 27.60% 17.96%
Fidelity VIP High Income Portfolio**... 9/19/85 6.36% 9.05% 10.58%
Fidelity VIP Overseas Portfolio**..... 1/28/87 40.20% 15.43% 9.59%
Fidelity VIP II Asset Manager
Portfolio**.......................... 9/6/89 9.25% 13.72% 11.28%
Fidelity VIP III Growth Opportunities
Portfolio**.......................... 1/3/95 2.55% N/A 19.51%
Franklin Natural Resources Securities
Fund**............................... 1/24/89 30.06% -4.77% -1.28%
Franklin Small Cap Fund**............. 11/1/95 93.69% N/A 27.83%
INVESCO VIF Health Sciences Fund...... 5/22/97 3.39% N/A 19.52%
Janus Aspen Growth Portfolio**........ 9/13/93 41.63% 27.74% 21.99%
Janus Aspen Growth and Income
Portfolio**.......................... 5/1/98 71.17% N/A 52.26%
KVS Dreman Financial Services
Portfolio............................ 5/4/98 -6.38% N/A -5.98%
Kemper Technology Growth Portfolio.... 5/3/99 N/A N/A 75.21%
Pioneer Emerging Markets VCT
Portfolio**.......................... 10/30/98 75.79% N/A 66.34%
Pioneer Real Estate Growth VCT
Portfolio**.......................... 10/30/98 -6.00% N/A 6.59%
T. Rowe Price International Stock
Portfolio............................ 3/31/94 31.45% 13.61% 11.79%
</TABLE>

B-4
<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
TABLE 1
AVERAGE ANNUAL TOTAL RETURNS OF SUB-ACCOUNT
FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF UNDERLYING FUND*
(ASSUMING COMPLETE WITHDRAWAL OF THE INVESTMENT)

<TABLE>
<CAPTION>
UNDERLYING FOR YEAR 10 YEARS OR
FUND ENDED SINCE INCEPTION
SUB-ACCOUNT INVESTING IN UNDERLYING FUND INCEPTION DATE 12/31/99 5 YEARS IF LESS
---------------------------------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
AIT Core Equity Fund................... 4/29/85 19.52% 22.89% 15.67%
AIT Equity Index Fund.................. 9/28/90 10.72% 25.43% 18.79%
AIT Government Bond Fund............... 8/26/91 -8.28% 3.54% 4.56%
AIT Money Market Fund.................. 4/29/85 -3.76% 2.75% 3.72%
AIT Select Aggressive Growth Fund...... 8/21/92 28.72% 20.96% 18.64%
AIT Select Capital Appreciation Fund... 4/28/95 15.61% N/A 18.84%
AIT Select Emerging Markets Fund....... 2/20/98 55.42% N/A 9.71%
AIT Select Growth Fund................. 8/21/92 19.99% 26.72% 18.50%
AIT Select Growth and Income Fund...... 8/21/92 8.77% 19.31% 14.08%
AIT Select International Equity Fund... 5/2/94 21.85% 16.13% 13.10%
AIT Select Investment Grade Income
Fund.................................. 4/29/85 -9.38% 4.74% 6.18%
AIT Select Strategic Growth Fund....... 2/20/98 6.43% N/A 1.19%
AIT Select Value Opportunity Fund...... 4/30/93 -12.80% 11.03% 9.42%
AIM V.I. Aggressive Growth Fund........ 5/1/98 34.64% N/A 17.73%
AIM V.I. Value Fund.................... 5/5/93 20.08% 24.87% 20.94%
Alliance Growth and Income
Portfolio**........................... 1/14/91 1.64% 21.22% 13.43%
Alliance Premier Growth Portfolio**.... 6/26/92 22.13% 33.34% 23.94%
DGPF International Equity Series**..... 10/29/92 5.96% 10.56% 9.60%
DGPF Growth Opportunities Series**..... 7/12/91 52.39% 24.40% 14.55%
Fidelity VIP Equity-Income
Portfolio**........................... 10/9/86 -2.96% 15.89% 12.60%
Fidelity VIP Growth Portfolio**........ 10/9/86 27.15% 27.06% 17.95%
Fidelity VIP High Income Portfolio**... 9/19/85 -1.30% 8.04% 10.57%
Fidelity VIP Overseas Portfolio**...... 1/28/87 32.20% 14.63% 9.58%
Fidelity VIP II Asset Manager
Portfolio**........................... 9/6/89 1.38% 12.86% 11.27%
Fidelity VIP III Growth Opportunities
Portfolio**........................... 1/3/95 -4.84% N/A 18.81%
Franklin Natural Resources Securities
Fund**................................ 1/24/89 22.05% -6.01% -1.29%
Franklin Small Cap Fund**.............. 11/1/95 85.68% N/A 27.04%
INVESCO VIF Health Sciences Fund....... 5/22/97 -4.62% N/A 11.51%
Janus Aspen Growth Portfolio**......... 9/13/93 33.63% 27.20% 21.65%
Janus Aspen Growth and Income
Portfolio**........................... 5/1/98 63.16% N/A 48.60%
KVS Dreman Financial Services
Portfolio............................. 5/4/98 -13.13% N/A -10.13%
Kemper Technology Growth Portfolio..... 5/3/99 N/A N/A 67.20%
Pioneer Emerging Markets VCT
Portfolio**........................... 10/30/98 67.78% N/A 60.03%
Pioneer Real Estate Growth VCT
Portfolio**........................... 10/30/98 -12.77% N/A 5.43%
T. Rowe Price International Stock
Portfolio............................. 3/31/94 23.45% 12.74% 11.16%
</TABLE>

B-5
<PAGE>

<TABLE>
<CAPTION>
FOR YEAR 10 YEARS OR SINCE
UNDERLYING FUND ENDED INCEPTION
SUB-ACCOUNT INVESTING IN UNDERLYING FUND INCEPTION DATE 12/31/99 5 YEARS IF LESS
---------------------------------------- --------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
AIT Core Equity Fund................. 4/29/85 27.52% 23.50% 15.67%
AIT Equity Index Fund................ 9/28/90 18.72% 25.99% 18.82%
AIT Government Bond Fund............. 8/26/91 -1.16% 4.74% 4.57%
AIT Money Market Fund................ 4/29/85 3.71% 3.98% 3.73%
AIT Select Aggressive Growth Fund.... 8/21/92 36.72% 21.61% 18.88%
AIT Select Capital Appreciation Fund... 4/28/95 23.62% N/A 19.63%
AIT Select Emerging Markets Fund..... 2/20/98 63.43% N/A 13.63%
AIT Select Growth Fund............... 8/21/92 27.99% 27.27% 18.73%
AIT Select Growth and Income Fund.... 8/21/92 16.77% 19.99% 14.38%
AIT Select International Equity Fund... 5/2/94 29.86% 16.90% 13.80%
AIT Select Investment Grade Income
Fund................................ 4/29/85 -2.35% 5.89% 6.18%
AIT Select Strategic Growth Fund..... 2/20/98 14.43% N/A 5.34%
AIT Select Value Opportunity Fund.... 4/30/93 -6.03% 11.94% 9.96%
AIM V.I. Aggressive Growth Fund...... 5/1/98 42.64% N/A 21.99%
AIM V.I. Value Fund.................. 5/5/93 28.08% 25.45% 21.25%
Alliance Growth and Income
Portfolio**......................... 1/14/91 9.81% 22.17% 13.85%
Alliance Premier Growth Portfolio**... 6/26/92 30.13% 33.79% 24.11%
DGPF International Equity Series**... 10/29/92 13.97% 11.49% 9.84%
DGPF Growth Opportunities Series**... 7/12/91 60.40% 24.98% 14.68%
Fidelity VIP Equity-Income
Portfolio**......................... 10/9/86 4.58% 16.66% 12.60%
Fidelity VIP Growth Portfolio**...... 10/9/86 35.15% 27.60% 17.96%
Fidelity VIP High Income Portfolio**... 9/19/85 6.36% 9.05% 10.58%
Fidelity VIP Overseas Portfolio**.... 1/28/87 40.20% 15.43% 9.59%
Fidelity VIP II Asset Manager
Portfolio**......................... 9/6/89 9.25% 13.72% 11.28%
Fidelity VIP III Growth Opportunities
Portfolio**......................... 1/3/95 2.55% N/A 19.51%
Franklin Natural Resources Securities
Fund**.............................. 1/24/89 30.06% -4.77% -1.28%
Franklin Small Cap Fund**............ 11/1/95 93.69% N/A 27.83%
INVESCO VIF Health Sciences Fund..... 5/22/97 3.39% N/A 19.52%
Janus Aspen Growth Portfolio**....... 9/13/93 41.63% 27.74% 21.99%
Janus Aspen Growth and Income
Portfolio**......................... 5/1/98 71.17% N/A 52.26%
KVS Dreman Financial Services
Portfolio........................... 5/4/98 -6.38% N/A -5.98%
Kemper Technology Growth Portfolio... 5/3/99 N/A N/A 75.21%
Pioneer Emerging Markets VCT
Portfolio**......................... 10/30/98 75.79% N/A 66.34%
Pioneer Real Estate Growth VCT
Portfolio**......................... 10/30/98 -6.00% N/A 6.59%
T. Rowe Price International Stock
Portfolio........................... 3/31/94 31.45% 13.61% 11.79%
</TABLE>

B-6
<PAGE>
APPENDIX C
SURRENDER CHARGES AND THE MARKET VALUE ADJUSTMENT

PART 1: SURRENDER CHARGES

FULL SURRENDER -- Assume a payment of $50,000 is made on the Issue Date and no
additional payments are made. Assume there are no partial withdrawals are made
and that the Withdrawal Without Surrender Charge Amount is equal to the greater
of 10% of the Gross Premium Base or the cumulative earnings in the Contract. The
table below presents examples of the surrender charge resulting from a full
surrender, based on Hypothetical Accumulated Values.

<TABLE>
<CAPTION>
HYPOTHETICAL WITHDRAWAL SURRENDER
CONTRACT ACCUMULATED WITHOUT SURRENDER CHARGE SURRENDER
YEAR VALUE CHARGE AMOUNT PERCENTAGE CHARGE
---- ----- ------------- ---------- ------
<S> <C> <C> <C> <C>
1 $54,000 $ 5,000 8.0% $3,920
2 58,320 8,320 8.0% 4,000
3 62,986 12,986 8.0% 4,000
4 68,024 18,024 7.0% 3,500
5 73,466 23,466 7.0% 3,500
6 79,343 29,343 6.0% 3,000
7 85,691 35,691 5.0% 2,500
8 92,547 42,547 3.0% 1,500
9 99,950 49,950 1.0% 500
10 107,946 57,946 0.0% 0
</TABLE>

WITHDRAWALS -- Assume a payment of $50,000 is made on the Issue Date and no
additional payments are made and there are withdrawals as detailed below. The
table below presents examples of the surrender charge resulting from
withdrawals, based on Hypothetical Accumulated Values:

<TABLE>
<CAPTION>
HYPOTHETICAL WITHDRAWAL SURRENDER
CONTRACT ACCUMULATED WITHOUT SURRENDER CHARGE SURRENDER
YEAR VALUE WITHDRAWALS CHARGE AMOUNT PERCENTAGE CHARGE
---- ----- ----------- ------------- ---------- ------
<S> <C> <C> <C> <C> <C>
1 $54,000 $ 0 $ 5,000 8.0% $ 0
2 58,320 0 8,320 8.0% 0
3 62,986 0 12,986 8.0% 0
4 68,024 30,000 18,024 7.0% 838
5 41,066 10,000 3,802 7.0% 487
6 33,552 5,000 3,182 6.0% 151
7 30,836 10,000 3,001 5.0% 386
8 22,503 15,000 2,301 3.0% 400
9 8,103 5,000 1,031 1.0% 44
10 3,351 3,000 634 0.0% 0
</TABLE>

C-1
<PAGE>

PART 2: MARKET VALUE ADJUSTMENT (NOT APPLICABLE TO CONTRACTS OFFERED IN STATES
WHERE GUARANTEE PERIOD ACCOUNTS ARE NOT AVAILABLE)

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

The following examples assume:

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

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

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

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

5. Surrender charges, if any, are calculated in the same manner as shown in
the examples in Part 1.

NEGATIVE MARKET VALUE ADJUSTMENT (UNCAPPED)*

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

<TABLE>
<C> <C> <S>
The market value factor = [(1+i)/(1+j)] to the power of n/365 - 1
= [(1+.08)/(1+.10)] to the power of 2555/365 - 1
= (.98182) to the power of 7 - 1
= -.12054

The market value adjustment = the market value factor multiplied by the withdrawal
= -.12054 x $62,985.60
= -$7,592.11
</TABLE>

POSITIVE MARKET VALUE ADJUSTMENT (UNCAPPED)*

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

<TABLE>
<C> <C> <S>
The market value factor = [(1+i)/(1+j)] to the power of n/365 - 1
= [(1+.08)/(1+.07)] to the power of 2555/365 - 1
= (1.00935) to the power of 7 - 1
= .06728

The market value adjustment = the market value factor multiplied by the withdrawal
= .06728 x $62,985.60
= $4,237.90
</TABLE>

*Uncapped is a straight application of the Market Value Adjustment formula when
the value produced is less than the cap.

C-2
<PAGE>
NEGATIVE MARKET VALUE ADJUSTMENT (CAPPED)*

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

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

The market value adjustment = Minimum of the market value factor multiplied by the
withdrawal or the negative of the excess interest earned
over 3%
= Minimum (-.17454 x $62,985.60 or -$8,349.25)
= Minimum (-$10,992.38 or -$8,349.25)
= -$8,349.25
</TABLE>

POSITIVE MARKET VALUE ADJUSTMENT (CAPPED)*

Assume that on the date of surrender, the current rate (j) is 5.00% or 0.05

<TABLE>
<C> <C> <S>
The market value factor = [(1+i)/(1+j)] to the power of n/365 - 1
= [(1+.08)/(1+.05)] to the power of 2555/365 - 1
= (1.02857) to the power of 7 - 1
= .21798

The market value adjustment = Minimum of the market value factor multiplied by the
withdrawal or the excess interest earned over 3%
= Minimum of (.21798 x $62,985.60 or $8,349.25)
= Minimum of ($13,729.78 or $8,349.25)
= $8,349.25
</TABLE>

*Capped takes into account the excess interest part of the Market Value
Adjustment formula when the value produced is greater than the cap.

C-3
<PAGE>
APPENDIX D
EXAMPLES OF PRESENT VALUE WITHDRAWALS AND PAYMENT WITHDRAWALS

Assume in the examples below that a 65-year-old male annuitizes his contract
exactly two years after the Issue Date. The annuitization amount is $250,000.
Further assume that he selects a variable Life with Period Certain annuity
payout option of Single Life with Payments Guaranteed for 10 Years, an Assumed
Investment Return ("AIR") of 3%, and an annual Change Frequency. Assume that the
Annuity Value purchases 1,370 Annuity Units and the first monthly annuity
benefit payment is equal to $1,370. The following examples assume a net return
of 8% (gross return of 9.35 %).

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 fifth 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 Benefit Payment prior to withdrawal = $1,506.24

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

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

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

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Present Value Determination 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 tenth 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 Benefit Payment prior to withdrawal = $1,909.09

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

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

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

Because the withdrawal is being made more than 5 years after the Issue Date, the
rate used in the Present Value Determination 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.

D-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 fifth 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 Benefit Payment = $1,436.50
Withdrawal Amount = $14,365.00 (10 X 1,436.50)

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

Rate used in Present Value Determination = 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 X (1 -
(14,365.00/234,482.77)))
Annuity Unit Value on the date of withdrawal = 1.09944
Monthly Annuity Benefit Payment after withdrawal = $1,413.96

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Present Value Determination 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 tenth contract year (eighth year of the Annuity
Payout phase).

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

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

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

Annuity Units after withdrawal = 1,272.71 (1,370 X (1 -
(18,207.10/268,826.18)))
Annuity Unit Value on the date of withdrawal = 1.39350
Monthly Annuity Benefit 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 Present Value Determination 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.

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 fifth 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.

D-2
<PAGE>
PRESENT VALUE WITHDRAWAL

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

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

Withdrawal = $10,000

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

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Present Value Determination 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 Benefit Payment prior to withdrawal = $1,506.24

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

Withdrawal = $10,000

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

Because the withdrawal is being made within 5 years of the Issue Date, the rate
used in the Present Value Determination 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.

D-3
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

STATEMENT OF ADDITIONAL INFORMATION

OF
FLEXIBLE PAYMENT DEFERRED VARIABLE AND FIXED ANNUITY CONTRACTS
FUNDED THROUGH

SUB-ACCOUNTS OF

SEPARATE ACCOUNT VA-K

INVESTING IN SHARES OF THE UNDERLYING FUNDS

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE ALLMERICA ULTIMATE ADVANTAGE PROSPECTUS FOR
SEPARATE ACCOUNT VA-K DATED __, 2000 ("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 1-800-533-7881.

DATED __, 2000

<PAGE>

TABLE OF CONTENTS

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

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

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

UNDERWRITERS.............................................................3

ANNUITY BENEFIT PAYMENTS.................................................4

ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAM ............5

PERFORMANCE INFORMATION .................................................5

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") authorized 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, 1999, the Company had over $17 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 a 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, 1999, First Allmerica and
its subsidiaries (including the Company) had over $25 billion in combined
assets and over $43 billion in life insurance in force.

Currently, 35 Sub-Accounts of the Variable Account are available under the
Allmerica Ultimate Advantage contract (the "Contract"). Each Sub-Account
invests in a corresponding investment portfolio of Allmerica Investment Trust
("AIT"), AIM Variable Insurance Funds ("AVIF"), Alliance Variable Products
Series Fund, Inc. ("Alliance"), Delaware Group Premium Fund ("DGPF"),
Fidelity Variable Insurance Products Fund ("Fidelity VIP"), Fidelity Variable
Insurance Products Fund II ("Fidelity VIP II"), Fidelity Variable Insurance
Products Fund III ("Fidelity VIP III"), Franklin Templeton Variable Insurance
Products Trust ("FT VIP"), INVESCO Variable Investment Funds, Inc. ("INVESCO
VIF"), Janus Aspen Series ("Janus Aspen"), Kemper Variable Series ("KVS"),
Pioneer Variable Contracts Trust ("Pioneer VCT") and T. Rowe Price
International Series, Inc. ("T. Rowe Price").

AIT, AVIF, Alliance, DGPF, Fidelity VIP, Fidelity VIP II, Fidelity VIP III,
FT VIP, INVESCO VIF, Janus Aspen, KVS, Pioneer VCT and T. Rowe Price, are
open-end, diversified management investment companies. Thirteen funds of AIT
are available under the Contract: the Core Equity Fund, Equity Index Fund,
Government Bond Fund, Money Market Fund, Select Aggressive Growth Fund,
Select Capital Appreciation Fund, Select Emerging Markets Fund, Select Growth
Fund, Select Growth and Income Fund, Select International Equity Fund, Select
Investment Grade Income Fund, Select Strategic Growth Fund, and the Select
Value Opportunity Fund. Two funds of AVIF are

<PAGE>

available under the Contract: the AIM V.I. Aggressive Growth Fund and the AIM
V.I. Value Fund. Two portfolios of Alliance are available under the Contract:
the Alliance Growth and Income Portfolio and the Alliance Premier Growth
Portfolio. Two series of DGPF are available under the Contract: the DGPF
International Equity Series and the DGPF Growth Opportunities Series. Four
portfolios of Fidelity VIP are available under the Contract: the Fidelity VIP
Equity-Income Portfolio, Fidelity VIP Growth Portfolio, Fidelity VIP High
Income Portfolio and the Fidelity VIP Overseas Portfolio. One portfolio of
Fidelity VIP II is available under the Contract: the Fidelity VIP II Asset
Manager Portfolio. One Fidelity VIP III portfolio is available under the
Contract: the Fidelity VIP III Growth Opportunities Portfolio. Two FT VIP
funds are available under the Contract: the Franklin Natural Resources
Securities Fund and the Franklin Small Cap Fund. One fund of INVESCO VIF is
available under the Contract: the INVESCO VIF Health Sciences Fund. Two Janus
Aspen portfolios are available under the Contract: the Janus Aspen Growth
Portfolio and the Janus Aspen Growth and Income Portfolio. Two KVS portfolios
are available under the Contract: the KVS Dreman Financial Services Portfolio
and the Kemper Technology Growth Portfolio. Two Pioneer VCT portfolios are
available under the Contract: the Pioneer Emerging Markets VCT Portfolio and
the Pioneer Real Estate Growth VCT Portfolio. Each fund 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, 1999 and
1998 and for each of the three years in the period ended December 31, 1999,
and the financial statements of Separate Account VA-K of the Company as of
December 31, 1999 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.

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

<PAGE>

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 First Allmerica, 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 surrender charges, withdrawal
charges, annuitization withdrawal charges (Withdrawal Adjustment Charge),
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 not to exceed 5% of purchase payments. Independent broker-dealers
receive commissions of up to 5% of purchase payments, of which a portion is
paid to their registered representatives. To the extent permitted by NASD
rules, promotional incentives or payments also may be provided to such
entities based on sales volumes, the assumption of wholesaling functions or
other sales-related criteria. Additional payments may be made for other
services not directly related to the sale of the Contract, including the
recruitment and training of personnel, production of promotional literature
and similar services.

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.

The aggregate amounts of commissions paid to Allmerica Investments for sales
of all contracts funded by Separate Account VA-K (including contracts not
described in the Prospectus) for the years 1997, 1998 and 1999 were
$34,693,060, $36,853,601 and $38,326,089.

No commissions were retained by Allmerica Investments for sales of all
contracts funded by Separate Account VA-K (including contracts not described
in the Prospectus) for the years 1997, 1998 and 1999.

ANNUITY BENEFIT PAYMENTS

The method by which the Accumulated Value under the Contract is determined is
described in detail under "Computation of Values" in the Prospectus.

ILLUSTRATION OF ACCUMULATION UNIT CALCULATION USING HYPOTHETICAL EXAMPLE. The
Accumulation Unit calculation for a daily Valuation Period may be illustrated
by the following hypothetical example: Assume that the assets of a
Sub-Account at the beginning of a one-day Valuation Period were $5,000,000;
that the value of an Accumulation Unit on the previous date was $1.135000;
and that during the Valuation Period, the investment income and net realized
and unrealized capital gains exceed net realized and unrealized capital
losses by $1,675. The Accumulation Unit Value at the end of the current
Valuation Period would be calculated as follows:

<S> <C>
(1) Accumulation Unit Value -- Previous Valuation Period....................................$ 1.135000

(2) Value of Assets -- Beginning of Valuation Period.......................................$ 5,000,000

(3) Excess of Investment Income and Net Gains Over Capital Losses..............................$ 1,675

(4) Adjusted Gross Investment Rate for the Valuation Period (3) divided by (2)................0.000335

(5) Annual Charge (one-day equivalent of 1.40% per annum).....................................0.000038

(6) Net Investment Rate (4) - (5).............................................................0.000297

(7) Net Investment Factor 1.000000 + (6)......................................................1.000297

(8) Accumulation Unit Value -- Current Period (1) x (7)..................................... $1.135337
</TABLE>

<PAGE>

Conversely, if unrealized capital losses and charges for expenses and taxes
exceeded investment income and net realized capital gains of $1,675, the
Accumulation Unit Value at the end of the Valuation Period would have been
$1.134577.

The method for determining the amount of annuity benefit payments is
described in detail under " Annuity Benefit Payments" in the Prospectus.

ILLUSTRATION OF VARIABLE ANNUITY BENEFIT PAYMENT CALCULATION USING
HYPOTHETICAL EXAMPLE. The determination of the Annuity Unit Value and the
variable annuity benefit 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 or surrender charge, the first monthly
payment would be $44.80 ($44,800 divided by 1,000) 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. Annuity Unit Values will not be the same as
Accumulation Unit Values because the former reflect the 3.0% assumed
investment return used in the annuity rate calculations. 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 $1.105121 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 $1.105121, which produces a current monthly payment of $295.71.

ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAM

ENHANCED AUTOMATIC TRANSFER (DOLLAR COST AVERAGING) PROGRAMS. To the extent
permitted by law, the Company reserves the right to offer Enhanced Automatic
Transfer Program(s) from time to time. If you elect to participate, the
Company will credit an enhanced interest rate to payments made to the
Enhanced Automatic Transfer Program. Eligible payments:

- must be new payments to the Contract, including the initial payment,

- must be allocated to the Fixed Account, which will be the source account,

- must be automatically transferred out of the Fixed Account to one or more
Sub- Accounts over a specified time period and

- will receive the enhanced rate while they remain in the Fixed Account.

You may be able to establish more than one Enhanced Automatic Transfer
Program.

<PAGE>

PERFORMANCE INFORMATION

Performance information for a Sub-Account may be compared, in reports and
promotional literature, to certain indices described in the Prospectus under
"APPENDIX B-PERFORMANCE INFORMATION." In addition, the Company may provide
advertising, sales literature, periodic publications or other material
information on various topics of interest to Owners and prospective Owners.
These topics may include the relationship between sectors of the economy and
the economy as a whole and its effect on various securities markets,
investment strategies and techniques (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer and account
rebalancing), the advantages and disadvantages of investing in tax-deferred
and taxable investments, customer profiles and hypothetical purchase and
investment scenarios, financial management and tax and retirement planning,
and investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the Contract and the
characteristics of and market for such financial instruments. Total return
data and supplemental total return information may be advertised based on the
period of time that an Underlying Fund and/or an underlying Sub-Account have
been in existence, even if longer than the period of time that the Contract
has been offered. The results for any period prior to a Contract being
offered will be calculated as if the Contract had been offered during that
period of time, with all charges assumed to be those applicable to the
Contract.

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 1.40% 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

<PAGE>

the end of the period. The deduction of the surrender charge, if any,
applicable at the end of the period is included in the calculation, according
to the following schedule:

Years From Date of Payment to Surrender Charge as a Percentage of
Date of Withdrawal the Payments Withdrawn*
----------------------------- -----------------------------------
less than 1 8.0%
less than 2 8.0%
less than 3 8.0%
less than 4 7.0%
less than 5 7.0%
less than 6 6.0%
less than 7 5.0%
less than 8 3.0%
less than 9 1.0%
Thereafter 0%

* Subject to the maximum limit described in the Prospectus.

No surrender charge is deducted upon expiration of the periods specified
above. In each calendar year, a certain amount (withdrawal without surrender
charge amount, as described in the Prospectus) is not subject to the
surrender charge.

The calculations of Total Return include the deduction of the $35 annual
Contract fee.

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, 1999:

Yield N/A
Effective Yield N/A

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

The calculations of yield and effective yield reflect the $35 annual Contract
fee.

FINANCIAL STATEMENTS

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

<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY

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

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

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

/s/ PRICEWATERHOUSECOOPERS LLP

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

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

CONSOLIDATED STATEMENTS OF INCOME

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

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

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

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

CONSOLIDATED BALANCE SHEETS

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

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

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

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

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

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

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

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

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

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

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

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

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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

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

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

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

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

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

B. VALUATION OF INVESTMENTS

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Policy loans are carried principally at unpaid principal balances.

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

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

C. FINANCIAL INSTRUMENTS

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

D. CASH AND CASH EQUIVALENTS

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

E. DEFERRED POLICY ACQUISITION COSTS

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

F. SEPARATE ACCOUNTS

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

G. POLICY LIABILITIES AND ACCRUALS

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

H. PREMIUM AND FEE REVENUE AND RELATED EXPENSES

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

I. FEDERAL INCOME TAXES

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

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

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

J. OTHER INCOME AND OTHER OPERATING EXPENSES

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

K. NEW ACCOUNTING PRONOUNCEMENTS

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

L. RECLASSIFICATIONS

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

2. SIGNIFICANT TRANSACTIONS

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

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

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

3. INVESTMENTS

A. SUMMARY OF INVESTMENTS

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

B. MORTGAGE LOANS AND REAL ESTATE

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

C. INVESTMENT VALUATION ALLOWANCES

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

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

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

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

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

D. OTHER

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

4. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

B. NET REALIZED INVESTMENT GAINS AND LOSSES

Realized (losses) gains on investments were as follows:

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

C. OTHER COMPREHENSIVE INCOME RECONCILIATION

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

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

5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

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

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

CASH AND CASH EQUIVALENTS

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

FIXED MATURITIES

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

EQUITY SECURITIES

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MORTGAGE LOANS

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

POLICY LOANS

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

FIXED ANNUITY AND OTHER CONTRACTS (WITHOUT MORTALITY FEATURES)

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. FEDERAL INCOME TAXES

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

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

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

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

7. RELATED PARTY TRANSACTIONS

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

8. DIVIDEND RESTRICTIONS

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

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

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

9. REINSURANCE

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The effects of reinsurance were as follows:

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

10. DEFERRED POLICY ACQUISITION COSTS

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

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

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

11. LIABILITIES FOR INDIVIDUAL DISABILITY INCOME BENEFITS

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

12. CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

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

LITIGATION

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

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

YEAR 2000

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

13. STATUTORY FINANCIAL INFORMATION

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

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

F-23
<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 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 of 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 of Allmerica Financial Life Insurance and
Annuity Company at December 31, 1999, the results of each of their operations
for the year then ended and the changes in each of their net assets for each of
the two years in the period then ended, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of Allmerica Financial Life Insurance and Annuity Company; 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 auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the Funds, provide a
reasonable basis for the opinion expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
April 3, 2000

<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF ASSETS AND LIABILITIES

DECEMBER 31, 1999

<TABLE>
<CAPTION>
INVESTMENT
GROWTH GRADE INCOME MONEY MARKET
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica Investment Trust. . . . . . . . . . . . . . $ 588,408,994 $ 169,732,101 $ 269,093,323
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. . . . . . . . . . . . . . - - -
------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588,408,994 169,732,101 269,093,323

LIABILITIES:
Payable to Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 615,471 1,467 38,105
------------- -------------- --------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 587,793,523 $ 169,730,634 $ 269,055,218
============= ============== ==============
Net asset distribution by category:
Variable annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . $ 587,793,523 $ 169,730,634 $ 269,055,218
============= ============== ==============

Units outstanding, December 31, 1999 . . . . . . . . . . . . . . . . . . . . . 167,814,475 106,780,323 205,622,363
Net asset value per unit, December 31, 1999 . . . . . . . . . . . . . . . . . $ 3.502639 $ 1.589531 $ 1.308492

SELECT
GOVERNMENT AGGRESSIVE
EQUITY INDEX BOND GROWTH
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica Investment Trust . . . . . . . . . . . . . $ 510,648,067 $ 75,019,142 $ 423,464,970
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. . . . . . . . . . . . . . - - -
------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510,648,067 75,019,142 423,464,970

LIABILITIES:
Payable to Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 603,151 827 2,368
------------- -------------- --------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 510,044,916 $ 75,018,315 $ 423,462,602
============= ============== ==============

Net asset distribution by category:
Variable annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . $ 510,044,916 $ 75,018,315 $ 423,462,602
============= ============== ==============

Units outstanding, December 31, 1999 . . . . . . . . . . . . . . . . . . . . . 131,643,587 51,710,700 123,336,801
Net asset value per unit, December 31, 1999 . . . . . . . . . . . . . . . . . $ 3.874438 $ 1.450731 $ 3.433384

SELECT
GROWTH AND SELECT VALUE
SELECT GROWTH INCOME OPPORTUNITY
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica Investment Trust . . . . . . . . . . . . . $ 467,897,356 $ 351,326,204 $ 195,384,598
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. . . . . . . . . . . . . . - - -
------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,897,356 351,326,204 195,384,598

LIABILITIES:
Payable to Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 2,183 445,147 3,946
------------- -------------- --------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 467,895,173 $ 350,881,057 $ 195,380,652
============= ============== ==============

Net asset distribution by category:
Variable annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . $ 467,895,173 $ 350,881,057 $ 195,380,652
============= ============== ==============

Units outstanding, December 31, 1999 . . . . . . . . . . . . . . . . . . . . . 136,938,944 132,427,536 103,456,199
Net asset value per unit, December 31, 1999 . . . . . . . . . . . . . . . . . $ 3.416816 $ 2.649608 $ 1.888535
</TABLE>

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

SA-1

<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 1999

<TABLE>
<CAPTION>
SELECT DGPF
INTERNATIONAL SELECT CAPITAL INTERNATIONAL
EQUITY APPRECIATION EQUITY
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica Investment Trust . . . . . . . . . . . . . $ 270,745,196 $ 187,912,111 $ -
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. . . . . . . . . . . . . . - - 125,520,913
------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,745,196 187,912,111 125,520,913

LIABILITIES:
Payable to Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 1,303 523 1,185
------------- -------------- --------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,743,893 $ 187,911,588 $ 125,519,728
============= ============== ==============

Net asset distribution by category:
Variable annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,743,893 $ 187,911,588 $ 125,519,728
============= ============== ==============

Units outstanding, December 31, 1999 . . . . . . . . . . . . . . . . . . . . 129,946,299 81,133,076 63,396,332
Net asset value per unit, December 31, 1999 . . . . . . . . . . . . . . . . . $ 2.083506 $ 2.316091 $ 1.979921

FIDELITY VIP FIDELITY VIP FIDELITY VIP
HIGH INCOME EQUITY-INCOME GROWTH
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica Investment Trust . . . . . . . . . . . . . $ - $ - $ -
Investments in shares of Fidelity Variable Insurance Products Funds (VIP). . . 222,647,220 613,369,225 778,451,280
Investment in shares of T. Rowe Price International Series, Inc. . . . . . . . - - -
Investment in shares of Delaware Group Premium Fund . . . . . . . . . . . . . - - -
------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,647,220 613,369,225 778,451,280

LIABILITIES:
Payable to Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 530 10,571 11,539
------------- -------------- --------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 222,646,690 $ 613,358,654 $ 778,439,741
============= ============== ==============

Net asset distribution by category:
Variable annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . $ 222,646,690 $ 613,358,654 $ 778,439,741
============= ============== ==============

Units outstanding, December 31, 1999 . . . . . . . . . . . . . . . . . . . . . 97,498,284 188,373,684 160,261,887
Net asset value per unit, December 31, 1999 . . . . . . . . . . . . . . . . . $ 2.283596 $ 3.256074 $ 4.857298

FIDELITY T. ROWE PRICE
FIDELITY VIP VIP II INTERNATIONAL
OVERSEAS ASSET MANAGER STOCK
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of Allmerica Investment Trust . . . . . . . . . . . . . $ - $ - $ -
Investments in shares of Fidelity Variable Insurance Products Funds (VIP). . . 150,015,159 148,205,042 -
Investment in shares of T. Rowe Price International Series, Inc. . . . . . . - - 124,782,121
Investment in shares of Delaware Group Premium Fund. . . . . . . . . . . . . . - - -
------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,015,159 148,205,042 124,782,121

LIABILITIES:
Payable to Allmerica Financial Life Insurance and
Annuity Company (Sponsor). . . . . . . . . . . . . . . . . . . . . . . . . . 5,147 293 366
------------- -------------- --------------
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,010,012 $ 148,204,749 $ 124,781,755
============= ============== ==============

Net asset distribution by category:
Variable annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,010,012 $ 148,204,749 $ 124,781,755
============= ============== ==============

Units outstanding, December 31, 1999 . . . . . . . . . . . . . . . . . . . . . 58,820,789 78,861,006 68,032,173
Net asset value per unit, December 31, 1999 . . . . . . . . . . . . . . . . . $ 2.550289 $ 1.879316 $ 1.834158
</TABLE>

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

SA-2
<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
INVESTMENT
GROWTH GRADE INCOME MONEY MARKET
-------------- ---------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,215,021 $ 11,215,239 $ 11,186,884

EXPENSES:
Mortality and expense risk fees . . . . . . . . . . . . . . . . . . . . 6,322,001 2,224,044 2,754,778
Administrative expense fees. . . . . . . . . . . . . . . . . . . . . . . 1,029,163 362,053 448,452
-------------- ---------------- ---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,351,164 2,586,097 3,203,230
-------------- ---------------- ---------------

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . (4,136,143) 8,629,142 7,983,654
-------------- ---------------- ---------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain distributions from portfolio sponsors . . . . . . . . . . 46,156,698 144,883 -
Net realized gain (loss) from sales of investments . . . . . . . . . . . 6,450,537 (539,927) -
-------------- ---------------- ---------------
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 52,607,235 (395,044) -
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 76,594,230 (12,501,948) -
-------------- ---------------- ---------------

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . 129,201,465 (12,896,992) -
-------------- ---------------- ---------------
Net increase (decrease) in net assets from operations . . . . . . . . $ 125,065,322 $ (4,267,850) $ 7,983,654
============== ================ ===============

SELECT
AGGRESSIVE
EQUITY INDEX GOVERNMENT BOND GROWTH
-------------- ---------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,046,190 $ 4,781,846 $ -
EXPENSES:
Mortality and expense risk fees . . . . . . . . . . . . . . . . . . . . 5,350,928 1,050,246 4,221,340
Administrative expense fees. . . . . . . . . . . . . . . . . . . . . . . 871,082 170,971 687,195
-------------- ---------------- ---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,222,010 1,221,217 4,908,535
-------------- ---------------- ---------------

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . (2,175,820) 3,560,629 (4,908,535)
-------------- ---------------- ---------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain distributions from portfolio sponsors. . . . . . . . . . . 648,530 - -
Net realized gain (loss) from sales of investments . . . . . . . . . . . 6,768,876 (566,090) 10,735,234
-------------- ---------------- ---------------
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 7,417,406 (566,090) 10,735,234

Net unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 69,889,480 (3,996,251) 107,103,552
-------------- ---------------- ---------------

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . 77,306,886 (4,562,341) 117,838,786
-------------- ---------------- ---------------
Net increase (decrease) in net assets from operations . . . . . . . . $ 75,131,066 $ (1,001,712) $ 112,930,251
============== ================ ===============

SELECT
GROWTH AND SELECT VALUE
SELECT GROWTH INCOME OPPORTUNITY
-------------- ---------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 194,192 $ 3,378,939 $ 1,098

EXPENSES:
Mortality and expense risk fees . . . . . . . . . . . . . . . . . . . . 4,684,369 3,787,227 2,404,751
Administrative expense fees. . . . . . . . . . . . . . . . . . . . . . . 762,572 616,526 391,471
-------------- ---------------- ---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,446,941 4,403,753 2,796,222
-------------- ---------------- ---------------

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . (5,252,749) (1,024,814) (2,795,124)
-------------- ---------------- ---------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain distributions from portfolio sponsors. . . . . . . . . . . 12,340,626 22,388,235 10,966,273
Net realized gain (loss) from sales of investments . . . . . . . . . . . 4,723,235 2,540,986 1,818,904
-------------- ---------------- ---------------
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 17,063,861 24,929,221 12,785,177
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 88,659,011 23,354,193 (21,271,499)
-------------- ---------------- ---------------

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . 105,722,872 48,283,414 (8,486,322)
-------------- ---------------- ---------------
Net increase (decrease) in net assets from operations . . . . . . . . $ 100,470,123 $ 47,258,600 $ (11,281,446)
============== ================ ===============
</TABLE>

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

SA-3

<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
SELECT DGPF
INTERNATIONAL SELECT CAPITAL INTERNATIONAL
EQUITY APPRECIATION EQUITY
-------------- ---------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ 2,575,294

EXPENSES:
Mortality and expense risk fees . . . . . . . . . . . . . . . . . . . . 2,820,506 1,951,545 1,502,291
Administrative expense fees. . . . . . . . . . . . . . . . . . . . . . . 459,153 317,693 244,559
-------------- ---------------- ---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,279,659 2,269,238 1,746,850
-------------- ---------------- ---------------

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . (3,279,659) (2,269,238) 828,444
-------------- ---------------- ---------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain distributions from portfolio sponsors. . . . . . . . . . . - 236,069 188,083
Net realized gain (loss) from sales of investments . . . . . . . . . . . 3,471,561 2,476,490 3,268,843
-------------- ---------------- ---------------
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 3,471,561 2,712,559 3,456,926
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 61,875,342 35,111,252 11,844,338
-------------- ---------------- ---------------

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . 65,346,903 37,823,811 15,301,264
-------------- ---------------- ---------------
Net increase (decrease) in net assets from operations . . . . . . . . $ 62,067,244 $ 35,554,573 $ 16,129,708
============== ================ ===============

FIDELITY VIP FIDELITY VIP FIDELITY VIP
HIGH INCOME EQUITY-INCOME GROWTH
-------------- ---------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,278,607 $ 8,724,904 $ 957,346

EXPENSES:
Mortality and expense risk fees . . . . . . . . . . . . . . . . . . . . 2,748,973 7,627,328 7,834,599
Administrative expense fees. . . . . . . . . . . . . . . . . . . . . . . 447,507 1,241,659 1,275,399
-------------- ---------------- ---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,196,480 8,868,987 9,109,998
-------------- ---------------- ---------------

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . 16,082,127 (144,083) (8,152,652)
-------------- ---------------- ---------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain distributions from portfolio sponsors . . . . . . . . . . 720,696 19,286,629 60,193,116
Net realized gain (loss) from sales of investments . . . . . . . . . . . (940,790) 10,491,497 10,853,416
-------------- ---------------- ---------------
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . (220,094) 29,778,126 71,046,532
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . (2,152,485) (1,182,641) 136,395,117
-------------- ---------------- ---------------

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . (2,372,579) 28,595,485 207,441,649
-------------- ---------------- ---------------
Net increase (decrease) in net assets from operations . . . . . . . . $ 13,709,548 $ 28,451,402 $ 199,288,997
============== ================ ===============

T. ROWE PRICE
FIDELITY VIP FIDELITY VIP II INTERNATIONAL
OVERSEAS ASSET MANAGER STOCK
-------------- ---------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,651,575 $ 3,989,011 $ 450,610

EXPENSES:
Mortality and expense risk fees . . . . . . . . . . . . . . . . . . . . 1,448,508 1,641,096 1,270,009
Administrative expense fees. . . . . . . . . . . . . . . . . . . . . . . 235,803 267,156 206,746
-------------- ---------------- ---------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,684,311 1,908,252 1,476,755
-------------- ---------------- ---------------

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . (32,736) 2,080,759 (1,026,145)
-------------- ---------------- ---------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain distributions from portfolio sponsors . . . . . . . . . . 2,663,830 5,052,747 1,416,204
Net realized gain (loss) from sales of investments . . . . . . . . . . . 2,688,416 734,454 1,950,488
-------------- ---------------- ---------------
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 5,352,246 5,787,201 3,366,692
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . 36,901,156 4,342,270 27,606,832
-------------- ---------------- ---------------

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . 42,253,402 10,129,471 30,973,524
-------------- ---------------- ---------------
Net increase (decrease) in net assets from operations . . . . . . . . $ 42,220,666 $ 12,210,230 $ 29,947,379
============== ================ ===============
</TABLE>

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

SA-4
<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
INVESTMENT
GROWTH GRADE INCOME
-------------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ (4,136,143) $ (1,452,248) $ 8,629,142 $ 6,945,206
Net realized gain (loss). . . . . . . . . . . . . . . . . . 52,607,235 5,783,402 (395,044) 309,825
Net unrealized gain (loss). . . . . . . . . . . . . . . . . 76,594,230 61,966,017 (12,501,948) 2,193,617
-------------- -------------- -------------- -------------

Net increase (decrease) in net assets from operations . . . 125,065,322 66,297,171 (4,267,850) 9,448,648
-------------- -------------- -------------- -------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 24,016,712 23,152,380 9,701,880 10,363,995
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (36,550,023) (22,500,816) (13,783,618) (9,709,421)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (3,298,297) (2,796,974) (1,023,087) (929,739)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (158,010) (147,854) (41,373) (42,918)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . 23,663,744 20,863,894 14,591,086 22,142,688
Other transfers from (to) the General Account . . . . . . . 1,857,336 3,452,255 (1,721,300) 2,166,365
-------------- -------------- -------------- -------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . 9,531,462 22,022,885 7,723,588 23,990,970
-------------- -------------- -------------- -------------

Net increase (decrease) in net assets . . . . . . . . . . . 134,596,784 88,320,056 3,455,738 33,439,618

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 453,196,739 364,876,683 166,274,896 132,835,278
-------------- -------------- -------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 587,793,523 $ 453,196,739 $ 169,730,634 $ 166,274,896
============== ============== ============== =============

MONEY MARKET EQUITY INDEX
------------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ 7,983,654 $ 5,079,118 $ (2,175,820) $ (693,387)
Net realized gain (loss). . . . . . . . . . . . . . . . . . - - 7,417,406 11,505,568
Net unrealized gain (loss). . . . . . . . . . . . . . . . . - - 69,889,480 55,881,208
-------------- -------------- ------------- --------------

Net increase (decrease) in net assets from operations . . . 7,983,654 5,079,118 75,131,066 66,693,389
-------------- -------------- ------------- --------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 438,987,405 388,698,585 32,887,575 25,436,203
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (34,391,134) (15,069,288) (29,625,579) (13,594,962)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (1,483,815) (1,010,367) (2,868,514) (2,098,286)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (32,718) (24,514) (119,189) (84,863)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . (330,361,387) (364,921,954) 77,092,509 47,344,643
Other transfers from (to) the General Account . . . . . . . 25,859,621 38,477,265 6,152,084 7,492,994
-------------- -------------- ------------- --------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . 98,577,972 46,149,727 83,518,886 64,495,729
-------------- -------------- ------------- --------------

Net increase (decrease) in net assets . . . . . . . . . . . 106,561,626 51,228,845 158,649,952 131,189,118

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 162,493,592 111,264,747 351,394,964 220,205,846
-------------- -------------- ------------- --------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 269,055,218 $162,493,592 $510,044,916 $351,394,964
============== ============== ============= ==============

GOVERNMENT BOND
-----------------------------
YEAR ENDED DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ 3,560,629 $ 2,493,711
Net realized gain (loss). . . . . . . . . . . . . . . . . . (566,090) 79,202
Net unrealized gain (loss). . . . . . . . . . . . . . . . . (3,996,251) 920,202
------------- -------------

Net increase (decrease) in net assets from operations . . . (1,001,712) 3,493,115
------------- -------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 8,933,342 9,387,842
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (7,188,109) (4,327,463)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (468,436) (646,947)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (14,843) (14,294)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . 4,441,216 13,782,410
Other transfers from (to) the General Account . . . . . . . (1,546,231) 1,396,680
------------- -------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . 4,156,939 19,578,228
------------- -------------

Net increase (decrease) in net assets . . . . . . . . . . . 3,155,227 23,071,343

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 71,863,088 48,791,745
------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,018,315 $ 71,863,088
============= =============
</TABLE>

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

SA-5
<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
SELECT
AGGRESSIVE GROWTH SELECT GROWTH
------------------------------ --------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ (4,908,535) $ (3,991,300) $ (5,252,749) $ (3,349,010)
Net realized gain (loss). . . . . . . . . . . . . . . . . . 10,735,234 1,315,125 17,063,861 3,910,913
Net unrealized gain (loss). . . . . . . . . . . . . . . . . 107,103,552 28,554,242 88,659,011 73,132,113
------------- ------------- -------------- -------------

Net increase (decrease) in net assets from operations . . . 112,930,251 25,878,067 100,470,123 73,694,016
------------- ------------- -------------- -------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 18,504,192 21,281,666 24,842,639 22,206,826
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (25,549,834) (15,897,301) (26,571,683) (10,783,834)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (1,081,675) (842,853) (1,371,717) (896,543)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (127,147) (115,070) (111,678) (77,520)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . 1,573,493 35,552,684 42,559,914 43,402,629
Other transfers from (to) the General Account . . . . . . . 1,244,022 3,919,867 4,876,229 6,310,988
------------- ------------- -------------- -------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . (5,436,949) 43,898,993 44,223,704 60,162,546
------------- ------------- -------------- -------------

Net increase (decrease) in net assets . . . . . . . . . . . 107,493,302 69,777,060 144,693,827 133,856,562

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 315,969,300 246,192,240 323,201,346 189,344,784
------------- ------------- -------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 423,462,602 $ 315,969,300 $ 467,895,173 $ 323,201,346
============= ============= ============== =============

SELECT SELECT VALUE
GROWTH AND INCOME OPPORTUNITY
----------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ (1,024,814) $ (438,542) $ (2,795,124) $ (955,786)
Net realized gain (loss). . . . . . . . . . . . . . . . . . 24,929,221 1,952,332 12,785,177 1,076,083
Net unrealized gain (loss). . . . . . . . . . . . . . . . . 23,354,193 30,548,177 (21,271,499) 5,479,539
------------- -------------- ------------- --------------

Net increase (decrease) in net assets from operations . . . 47,258,600 32,061,967 (11,281,446) 5,599,836
------------- -------------- ------------- --------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 17,142,639 15,264,363 9,033,922 12,662,724
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (21,533,465) (11,976,840) (14,328,750) (8,295,446)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (2,866,072) (2,094,743) (630,503) (575,288)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (74,816) (65,775) (59,148) (59,441)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . 35,114,290 26,940,573 10,800,586 22,459,345
Other transfers from (to) the General Account . . . . . . . 5,443,707 5,446,574 1,268,839 3,197,294
------------- -------------- ------------- --------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . 33,226,283 33,514,152 6,084,946 29,389,188
------------- -------------- ------------- --------------

Net increase (decrease) in net assets . . . . . . . . . . . 80,484,883 65,576,119 (5,196,500) 34,989,024

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 270,396,174 204,820,055 200,577,152 165,588,128
------------- -------------- ------------- --------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 350,881,057 $ 270,396,174 $ 195,380,652 $ 200,577,152
============= ============== ============= ==============
</TABLE>

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

SA-6

<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
SELECT INTERNATIONAL SELECT CAPITAL
EQUITY APPRECIATION
------------------------------ ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ (3,279,659) $ (61,946) $ (2,269,238) $ (1,821,358)
Net realized gain (loss). . . . . . . . . . . . . . . . . . 3,471,561 463,309 2,712,559 23,638,698
Net unrealized gain (loss). . . . . . . . . . . . . . . . . 61,875,342 24,779,920 35,111,252 (5,203,690)
------------- ------------- ------------- -------------

Net increase (decrease) in net assets from operations . . . 62,067,244 25,181,283 35,554,573 16,613,650
------------- ------------- ------------- -------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 11,344,784 13,306,352 8,595,028 9,353,854
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (14,712,183) (7,314,601) (11,932,699) (5,713,842)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (759,130) (685,709) (595,054) (419,195)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (69,281) (64,103) (50,131) (46,233)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . 2,775,341 14,347,051 4,910,062 9,998,422
Other transfers from (to) the General Account . . . . . . . 1,417,921 2,330,088 1,368,660 1,818,486
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . (2,548) 21,919,078 2,295,866 14,991,492
------------- ------------- ------------- -------------

Net increase (decrease) in net assets . . . . . . . . . . . 62,064,696 47,100,361 37,850,439 31,605,142

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 208,679,197 161,578,836 150,061,149 118,456,007
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,743,893 $ 208,679,197 $ 187,911,588 $ 150,061,149
============= ============= ============= =============

DGPF FIDELITY VIP
INTERNATIONAL EQUITY HIGH INCOME
----------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ 828,444 $ 2,232,442 $ 16,082,127 $ 9,750,617
Net realized gain (loss). . . . . . . . . . . . . . . . . . 3,456,926 524,782 (220,094) 7,946,249
Net unrealized gain (loss). . . . . . . . . . . . . . . . . 11,844,338 6,030,154 (2,152,485) (29,941,145)
------------- ------------- ------------- -------------

Net increase (decrease) in net assets from operations . . . 16,129,708 8,787,378 13,709,548 (12,244,279)
------------- ------------- ------------- -------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 4,614,436 6,454,592 11,140,024 16,334,143
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (8,759,974) (5,616,866 (17,342,745) (10,795,966)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (477,836) (369,791 (1,180,063) (1,097,609)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (34,245) (34,104 (59,343) (58,071)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . (3,009,304) 8,564,109 7,983,019 38,988,866
Other transfers from (to) the General Account . . . . . . . (1,443,372) 1,556,191 (1,197,799) 5,027,099
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . (9,110,295) 10,554,131 (656,907) 48,398,462
------------- ------------- ------------- --------------

Net increase (decrease) in net assets . . . . . . . . . . . 7,019,413 19,341,509 13,052,641 36,154,183

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 118,500,315 99,158,806 209,594,049 173,439,866
------------- ------------- ------------- --------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,519,728 $ 118,500,315 $ 222,646,690 $ 209,594,049
============= ============= ============= =============
</TABLE>

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

SA-7

<PAGE>

SEPARATE ACCOUNT VA-K

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
EQUITY-INCOME GROWTH
----------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ (144,083) $ (744,651) $ (8,152,652) $ (4,433,739)
Net realized gain (loss). . . . . . . . . . . . . . . . . . 29,778,126 30,422,305 71,046,532 58,013,994
Net unrealized gain (loss). . . . . . . . . . . . . . . . . (1,182,641) 21,541,366 136,395,117 92,401,524
------------- ------------- ------------- -------------

Net increase (decrease) in net assets from operations . . . 28,451,402 51,219,020 199,288,997 145,981,779
------------- ------------- ------------- -------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 27,773,097 31,978,182 33,765,170 24,189,477
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (46,417,375) (31,513,789) (51,125,474) (27,468,965)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (2,971,372) (2,356,266) (2,589,245) (2,039,146)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (199,771) (203,860) (215,967) (191,465)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . 21,098,544 24,052,204 63,466,803 5,764,814
Other transfers from (to) the General Account . . . . . . . 1,492,354 2,652,365 1,482,283 1,580,856
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . 775,477 24,608,836 44,783,570 1,835,571
------------- ------------- ------------- -------------

Net increase (decrease) in net assets . . . . . . . . . . . 29,226,879 75,827,856 244,072,567 147,817,350

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 584,131,775 508,303,919 534,367,174 386,549,824
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 613,358,654 $ 584,131,775 $ 778,439,741 $ 534,367,174
============= ============= ============= =============

FIDELITY VIP FIDELITY VIP II
OVERSEAS ASSET MANAGER
----------------------------- -----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1999 1998 1999 1998
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ (32,736) $ 351,217 $ 2,080,759 $ 1,273,208
Net realized gain (loss). . . . . . . . . . . . . . . . . . 5,352,246 6,217,656 5,787,201 8,311,168
Net unrealized gain (loss). . . . . . . . . . . . . . . . . 36,901,156 3,731,753 4,342,270 3,240,712
------------- ------------- ------------- -------------

Net increase (decrease) in net assets from operations . . . 42,220,666 10,300,626 12,210,230 12,825,088
------------- ------------- ------------- -------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 5,861,684 6,122,888 7,716,542 8,512,565
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (9,499,501) (6,424,320) (10,097,109) (5,321,586)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (321,424) (413,395) (461,585) (653,162)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (45,992) (46,447) (30,076) (23,772)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . 4,693,132 4,525,206 18,710,626 18,036,934
Other transfers from (to) the General Account . . . . . . . (40,730) 534,379 504,270 2,193,311
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . 647,169 4,298,311 16,342,668 22,744,290
------------- ------------- ------------- -------------

Net increase (decrease) in net assets . . . . . . . . . . . 42,867,835 14,598,937 28,552,898 35,569,378

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 107,142,177 92,543,240 119,651,851 84,082,473
------------- ------------- ------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,010,012 $ 107,142,177 $ 148,204,749 $ 119,651,851
============= ============= ============= =============

T. ROWE PRICE
INTERNATIONAL STOCK
------------------------------
YEAR ENDED DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss). . . . . . . . . . . . . . . . $ (1,026,145) $ (128,622)
Net realized gain (loss). . . . . . . . . . . . . . . . . . 3,366,692 624,973
Net unrealized gain (loss). . . . . . . . . . . . . . . . . 27,606,832 10,425,832
------------- ------------

Net increase (decrease) in net assets from operations. . . 29,947,379 10,922,183
------------- ------------
FROM CONTRACT TRANSACTIONS:
Net purchase payments . . . . . . . . . . . . . . . . . . . 4,736,022 5,708,803
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . (6,622,362) (3,090,733)
Contract benefits . . . . . . . . . . . . . . . . . . . . . (437,587) (234,511)
Contract charges. . . . . . . . . . . . . . . . . . . . . . (24,690) (21,793)
Transfers between sub-accounts (including fixed
account), net. . . . . . . . . . . . . . . . . . . . . . . (134,325) 7,450,376
Other transfers from (to) the General Account . . . . . . . 1,879,994 1,566,892
------------- ------------
Net increase (decrease) in net assets from contract
transactions . . . . . . . . . . . . . . . . . . . . . . . (602,948) 11,379,034
------------- ------------

Net increase (decrease) in net assets . . . . . . . . . . . 29,344,431 22,301,217

NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 95,437,324 73,136,107
------------- ------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . . $ 124,781,755 $ 95,437,324
============= ============
</TABLE>

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

SA-8
<PAGE>

SEPARATE ACCOUNT VA-K

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION

Separate Account VA-K, which funds the Allmerica Advantage, ExecAnnuity Plus
and Allmerica Immediate Advantage 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 and twenty Sub-Accounts under the
Allmerica Immediate Advantage 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), a wholly-owned subsidiary of the Company; 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 (DGPF) managed by Delaware
International Advisers Ltd.; or of the T. Rowe Price International Series, Inc.
(T. Rowe Price) managed by 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.

Effective May 1, 2000, AIT Investment Grade Income Fund will be renamed
Select Investment Grade Income Fund and AIT Growth Fund will be renamed Core
Equity Fund.

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. 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 Internal Revenue Code (the Code) and files a
consolidated federal income tax return with First Allmerica. The Company
anticipates no tax liability resulting from the operations of Separate
Account VA-K. Therefore, no provision for income taxes has been charged against
Separate Account VA-K.

SA-9
<PAGE>

SEPARATE ACCOUNT VA-K

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 - INVESTMENTS

The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Funds at December 31, 1999 were as follows:

<TABLE>
<CAPTION>
PORTFOLIO INFORMATION
------------------------------------------------------------
NET ASSET
NUMBER OF AGGREGATE VALUE
INVESTMENT PORTFOLIO SHARES COST PER SHARE
-------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Growth. . . . . . . . . . . . . . . . . . . . . 177,713,378 $ 418,243,148 $ 3.311
Investment Grade Income . . . . . . . . . . . . 161,495,814 178,408,995 1.051
Money Market. . . . . . . . . . . . . . . . . . 269,093,323 269,093,323 1.000
Equity Index. . . . . . . . . . . . . . . . . . 125,775,386 324,403,051 4.060
Government Bond . . . . . . . . . . . . . . . . 74,202,910 78,446,559 1.011
Select Aggressive Growth. . . . . . . . . . . . 124,146,869 234,758,538 3.411
Select Growth . . . . . . . . . . . . . . . . . 153,459,284 267,182,963 3.049
Select Growth and Income. . . . . . . . . . . . 181,751,787 261,454,424 1.933
Select Value Opportunity. . . . . . . . . . . . 128,457,987 188,265,674 1.521
Select International Equity . . . . . . . . . . 133,306,350 171,706,833 2.031
Select Capital Appreciation . . . . . . . . . . 91,530,497 139,405,749 2.053
DGPF International Equity . . . . . . . . . . . 6,737,569 93,854,254 18.630
Fidelity VIP High Income. . . . . . . . . . . . 19,685,873 231,278,049 11.310
Fidelity VIP Equity-Income. . . . . . . . . . . 23,857,224 439,346,743 25.710
Fidelity VIP Growth . . . . . . . . . . . . . . 14,171,696 419,450,253 54.930
Fidelity VIP Overseas . . . . . . . . . . . . . 5,467,025 92,916,124 27.440
Fidelity VIP II Asset Manager . . . . . . . . . 7,938,138 127,437,991 18.670
T. Rowe Price International Stock . . . . . . . 6,553,683 84,324,143 19.040
</TABLE>

NOTE 4 - RELATED PARTY TRANSACTIONS

The Company makes a charge of 1.25% per annum to Allmerica Advantage,
ExecAnnuity Plus and to Allmerica Immediate Advantage based on the average daily
net assets of each Sub-Account at each valuation date for mortality and expense
risks. The Company also charges each Sub-Account of Allmerica Advantage,
ExecAnnuity Plus and Allmerica Immediate Advantage 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 Form A3018-94 (ExecAnnuity Plus), 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 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 the Company, 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. Allmerica Advantage and ExecAnnuity Plus contracts
have a contingent deferred sales charge and no deduction is made for sales
charges at the time of the sale.

SA-10
<PAGE>

SEPARATE ACCOUNT VA-K

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 - CONTRACTOWNERS AND SPONSOR TRANSACTIONS

Transactions from contractowners and sponsor were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
--------------------------------------- --------------------------------------
UNITS AMOUNT UNITS AMOUNT
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Growth
Issuance of Units . . . . . . . . . . . . . 31,322,880 $ 118,251,467 35,414,157 $ 88,002,941
Redemption of Units . . . . . . . . . . . . (28,422,600) (108,720,005) (26,666,754) (65,980,056)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 2,900,280 $ 9,531,462 8,747,403 $ 22,022,885
================== ================== ================== =================

Investment Grade Income
Issuance of Units . . . . . . . . . . . . . 38,928,138 $ 62,414,120 40,947,469 $ 67,361,561
Redemption of Units . . . . . . . . . . . . (34,236,306) (54,690,532) (25,662,004) (43,370,591)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 4,691,832 $ 7,723,588 15,285,465 $ 23,990,970
================== ================== ================== =================
Money Market
Issuance of Units . . . . . . . . . . . . . 584,789,664 $ 725,476,037 480,585,830 $ 576,517,573
Redemption of Units . . . . . . . . . . . . (507,897,119) (626,898,065) (443,526,171) (530,367,846)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 76,892,545 $ 98,577,972 37,059,659 $ 46,149,727
================== ================== ================== =================
Equity Index
Issuance of Units . . . . . . . . . . . . . 55,764,065 $ 194,646,213 43,689,479 $ 125,016,046
Redemption of Units . . . . . . . . . . . . (31,745,632) (111,127,327) (21,378,757) (60,520,317)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 24,018,433 $ 83,518,886 22,310,722 $ 64,495,729
================== ================== ================== =================
Government Bond
Issuance of Units . . . . . . . . . . . . . 39,868,338 $ 57,035,078 36,235,069 $ 51,588,649
Redemption of Units . . . . . . . . . . . . (37,088,130) (52,878,139) (22,565,149) (32,010,421)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 2,780,208 $ 4,156,939 13,669,920 $ 19,578,228
================== ================== ================== =================
Select Aggressive Growth
Issuance of Units . . . . . . . . . . . . . 36,883,059 $ 100,664,989 41,209,415 $ 96,835,317
Redemption of Units . . . . . . . . . . . . (39,304,433) (106,101,938) (22,240,992) (52,936,324)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . (2,421,374) $ (5,436,949) 18,968,423 $ 43,898,993
================== ================== ================== =================
Select Growth
Issuance of Units . . . . . . . . . . . . . 49,096,616 $ 139,643,547 50,148,994 $ 113,239,811
Redemption of Units . . . . . . . . . . . . (33,162,768) (95,419,843) (23,786,903) (53,077,265)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 15,933,848 $ 44,223,704 26,362,091 $ 60,162,546
================== ================== ================== =================
Select Growth and Income
Issuance of Units . . . . . . . . . . . . . 41,070,387 $ 101,335,880 37,081,023 $ 77,642,713
Redemption of Units . . . . . . . . . . . . (27,750,086) (68,109,597) (21,516,678) (44,128,561)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 13,320,301 $ 33,226,283 15,564,345 $ 33,514,152
================== ================== ================== =================
Select Value Opportunity
Issuance of Units . . . . . . . . . . . . . 37,813,556 $ 70,885,921 32,164,349 $ 63,580,221
Redemption of Units . . . . . . . . . . . . (34,107,084) (64,800,975) (17,540,671) (34,191,033)
------------------ ------------------ ------------------ -----------------
Net increase (decrease) . . . . . . . . . 3,706,472 $ 6,084,946 14,623,678 $ 29,389,188
================== ================== ================== =================

SA-11
<PAGE>

SEPARATE ACCOUNT VA-K

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 - CONTRACTOWNERS AND SPONSOR TRANSACTIONS (CONTINUED)

<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998
--------------------------------------- --------------------------------------
UNITS AMOUNT UNITS AMOUNT
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Select International Equity
Issuance of Units . . . . . . . . . . . . . 34,451,914 $ 59,813,091 37,484,996 $ 56,306,351
Redemption of Units . . . . . . . . . . . . (34,516,516) (59,815,639) (23,060,019) (34,387,273)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . (64,602) $ (2,548) 14,424,977 $ 21,919,078
================== ================== ================== ==============
Select Capital Appreciation
Issuance of Units . . . . . . . . . . . . . 26,842,924 $ 53,598,764 25,808,681 $ 42,819,894
Redemption of Units . . . . . . . . . . . . (25,758,043) (51,302,898) (16,692,015) (27,828,402)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . 1,084,881 $ 2,295,866 9,116,666 $ 14,991,492
================== ================== ================== ==============
DGPF International Equity
Issuance of Units . . . . . . . . . . . . . 15,808,205 $ 28,915,615 19,548,692 $ 32,754,499
Redemption of Units . . . . . . . . . . . . (20,690,476) (38,025,910) (13,404,183) (22,200,368)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . (4,882,271) $ (9,110,295) 6,144,509 $ 10,554,131
================== ================== ================== ==============
Fidelity VIP High Income
Issuance of Units . . . . . . . . . . . . . 29,297,659 $ 65,617,874 41,047,554 $ 91,158,751
Redemption of Units . . . . . . . . . . . . (29,628,016) (66,274,781) (19,562,695) (42,760,289)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . (330,357) $ (656,907) 21,484,859 $ 48,398,462
================== ================== ================== ==============
Fidelity VIP Equity-Income
Issuance of Units . . . . . . . . . . . . . 39,554,082 $ 130,745,589 40,370,670 $ 120,358,364
Redemption of Units . . . . . . . . . . . . (39,169,623) (129,970,112) (32,382,953) (95,749,528)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . 384,459 $ 775,477 7,987,717 $ 24,608,836
================== ================== ================== ==============
Fidelity VIP Growth
Issuance of Units . . . . . . . . . . . . . 47,966,342 $ 194,692,684 27,217,433 $ 81,585,030
Redemption of Units . . . . . . . . . . . . (36,713,176) (149,909,114) (26,419,759) (79,749,459)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . 11,253,166 $ 44,783,570 797,674 $ 1,835,571
================== ================== ================== ==============
Fidelity VIP Overseas
Issuance of Units . . . . . . . . . . . . . 15,850,862 $ 33,264,942 14,517,190 $ 25,690,826
Redemption of Units . . . . . . . . . . . . (16,082,430) (32,617,773) (12,153,924) (21,392,515)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . (231,568) $ 647,169 2,363,266 $ 4,298,311
================== ================== ================== ==============
Fidelity VIP II Asset Manager
Issuance of Units . . . . . . . . . . . . . 30,018,403 $ 53,424,410 27,248,291 $ 42,989,274
Redemption of Units . . . . . . . . . . . . (20,861,754) (37,081,742) (13,095,360) (20,244,984)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . 9,156,649 $ 16,342,668 14,152,931 $ 22,744,290
================== ================== ================== ==============
T. Rowe Price International Stock
Issuance of Units . . . . . . . . . . . . . 21,856,983 $ 32,448,759 22,433,345 $ 29,223,947
Redemption of Units . . . . . . . . . . . . (22,191,417) (33,051,707) (13,899,360) (17,844,913)
------------------ ------------------ ------------------ --------------
Net increase (decrease) . . . . . . . . . (334,434) $ (602,948) 8,533,985 $ 11,379,034
================== ================== ================== ==============

</TABLE>

SA-12
<PAGE>

SEPARATE ACCOUNT VA-K

NOTES TO FINANCIAL STATEMENTS (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.

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, 1999 were as follows:

<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO PURCHASES SALES
-------------------- --------------- ---------------
<S> <C> <C>
Growth . . . . . . . . . . . . . . . . . . . . $ 77,621,443 $ 25,587,130
Investment Grade Income . . . . . . . . . . . 34,258,333 17,739,647
Money Market . . . . . . . . . . . . . . . . . 221,634,343 115,122,901
Equity Index . . . . . . . . . . . . . . . . . 102,791,841 20,280,449
Government Bond . . . . . . . . . . . . . . . 28,987,471 21,269,182
Select Aggressive Growth . . . . . . . . . . . 25,686,132 36,030,908
Select Growth. . . . . . . . . . . . . . . . . 64,316,389 13,004,936
Select Growth and Income . . . . . . . . . . . 64,611,446 9,608,131
Select Value Opportunity . . . . . . . . . . . 31,858,315 17,600,136
Select International Equity. . . . . . . . . . 11,678,795 14,961,612
Select Capital Appreciation. . . . . . . . . . 17,377,030 17,114,816
DGPF International Equity. . . . . . . . . . . 8,273,670 16,367,324
Fidelity VIP High Income . . . . . . . . . . . 34,768,712 18,622,522
Fidelity VIP Equity-Income . . . . . . . . . . 55,051,097 35,127,319
Fidelity VIP Growth. . . . . . . . . . . . . . 125,744,797 28,914,368
Fidelity VIP Overseas. . . . . . . . . . . . . 14,934,875 11,653,977
Fidelity VIP II Asset Manager. . . . . . . . . 31,231,512 7,755,748
T. Rowe Price International Stock. . . . . . . 10,245,120 10,458,723
--------------- ---------------
Totals . . . . . . . . . . . . . . . . . . . $ 961,071,321 $ 437,219,829
=============== ===============
</TABLE>

NOTE 8 - PLAN OF SUBSTITUTION FOR PORTFOLIO OF THE TRUST

An application has been filed with the Securities and Exchange Commission
(SEC) seeking an order approving the substitution of shares of the Select
Investment Grade Income Fund (SIGIF) for all of the shares of the Select Income
Fund (SIF). To the extent required by law, approvals of such substitution will
also be obtained from the state insurance regulators in certain jurisdictions.
The effect of the substitution will be to replace SIF shares with SIGIF shares.
The substitution is planned to be effective on or about July 1, 2000.

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 Post-Effective Amendment No. 14 of
Registration Statement No. 33-39702/811-6293, 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 Services Agreement was
previously filed on April 24, 1998 in Post-Effective
Amendment No. 14 of Registration Statement
No. 33-39702/811-6293, and is incorporated by reference
herein.

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

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

(d) Commission Schedule is filed herewith. Career Agent
Agreement with Commission Schedule was previously filed
on April 24, 1998 in Post-Effective Amendment No. 14 of
Registration Statement No. 33-39702/811-6293, and is
incorporated by reference herein.

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

<PAGE>

EXHIBIT 4 (a) Contract Form A3033-00 and Specs Pages (Form A8033-00)
was previously filed on June 1, 2000 in Registrant's
initial Registration Statement No. 333-38274/811-6293,
and is incorporated by reference herein.

(b) Enhanced Death Benefit Rider with 6% Accumulation and
Ratchet (Form 3264-99) was previously filed on June 1,
2000 in Registrant's initial Registration Statement
No. 333-38274/811-6293, and is incorporated by
reference herein.

(c) Minimum Guaranteed Annuity Payout (M-GAP) Rider
(Form 3287-00) was previously filed on June 1, 2000 in
Registrant's initial Registration Statement
No. 333-38274/811-6293, and is incorporated by
reference herein.

EXHIBIT 5 Application Form 11637 was previously filed on June 1, 2000
in Registrant's initial Registration Statement
No. 333-38274/811-6293, 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 Post-Effective Amendment No. 9 of
Registration Statement No. 33-39702/811-6293, and are
incorporated by reference herein.

EXHIBIT 7 Not Applicable.

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

(b) 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 was
previously filed on December 20, 1999 in Pre-Effective
Amendment No. 1 of Registration Statement No. 333-87099/
811-6293 and is incorporated by reference herein.

EXHIBIT 14 Not Applicable.

EXHIBIT 15 (a) Participation Agreement between the Company and
Allmerica Investment Trust dated March 22, 2000 was
previously filed on April 21, 2000 in Registrant's
Post-Effective Amendment No. 17, and is incorporated by
reference herein.

(b) Amendment dated March 29, 2000 and Amendment dated
November 13, 1998 to the Variable Insurance Products
Fund Participation Agreement was previously filed on

<PAGE>

April 21, 2000 in Registrant's Post-Effective
Amendment No. 17, and is incorporated by reference
herein. Participation Agreement, as amended, with
Variable Insurance Products Fund was previously filed
on April 24, 1998 in Post-Effective Amendment No. 14,
and is incorporated by reference herein.

(c) Amendment dated March 29, 2000 and Amendment dated
November 13, 1998 to the Variable Insurance Products
Fund II Participation Agreement was previously filed
on April 21, 2000 in Post-Effective Amendment No. 17,
and is incorporated by reference herein. Participation
Agreement, as amended, with Variable Insurance
Products Fund II was previously filed on April 24,
1998 in Post-Effective Amendment No. 14, and is
incorporated by reference herein.

(d) Participation Agreement with Variable Insurance
Products Fund III was previously filed on April 21,
2000 in Post-Effective Amendment No. 1 of
Registration Statement No. 333-87099/811-6293 and is
incorporated by reference herein.

(e) Form of Amendment to the Delaware Group Premium Fund
Participation Agreement was previously filed in April
2000 in Post-Effective Amendment No. 19 of
Registration Statement No. 33-44830/811-6293, and is
incorporated by reference herein. Participation
Agreement with Delaware Group Premium Fund and
Amendment was previously filed on April 24, 1998 in
Post-Effective Amendment No. 14, and is incorporated
by reference herein.

(f) Participation Agreement with T. Rowe Price
International Series, Inc. was previously filed on
April 24, 1998 in Post-Effective Amendment No. 14, and
is incorporated by reference herein.

(g) Form of Amendment was previously filed in April 2000
in Post-Effective Amendment No. 19 of Registration
Statement No. 33-44830/811-6293 and is incorporated by
reference herein. Participation Agreement with AIM
Variable Insurance Funds was previously filed on
August 27, 1998 in Post-Effective Amendment No. 3 in
Registration Statement No. 333-11377/811-7799, and is
incorporated by reference herein.

(h) Form of Participation Agreement with Alliance was
previously filed in April 2000 in Post-Effective
Amendment No. 14 of Registration Statement No.
33-85916/811-8848, and is incorporated by reference
herein.

(i) Form of Participation Agreement with Franklin
Templeton was previously filed in April 2000 in
Post-Effective Amendment No. 19 of Registration
Statement No. 33-44830/811-6293 and is incorporated by
reference herein.

(j) Participation Agreement with INVESCO was previously
filed on April 21, 2000 in Post-Effective Amendment
No. 1 of Registration Statement No. 333-87099/811-6293
and is incorporated by reference herein.

(k) Participation Agreement with Janus was previously
filed on April 21, 2000 in Post-Effective Amendment
No. 1 of Registration Statement No. 333-87099/811-6293
and is incorporated by reference herein.

<PAGE>

(l) Amendment to Kemper Participation Agreement was
previously filed in April 2000 in Post-Effective
Amendment No. 7 of Registration Statement
No. 333-09965/811-7767 and is incorporated by
reference herein. Participation Agreement with Kemper
was previously filed on November 6, 1996 in
Pre-Effective Amendment No. 1 in Registration Statement
No. 333-00965/811-7767, and is incorporated by
reference herein.

(m) Form of Amendment to Pioneer Participation Agreement
was previously filed in April 2000 in Post-Effective
Amendment No. 14 of Registration Statement
No. 33-85916/811-8848, and is incorporated by
reference herein. Participation Agreement with Pioneer
was previously filed on April 24, 1998 in
Post-Effective Amendment No. 9 of Registration
Statement No. 33-85916/811-8848, 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

<PAGE>

DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

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

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

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

Charles F. Cronin Secretary (since 2000) and Counsel (since 1996) of First
Secretary Allmerica; Secretary and Counsel (since 1998) of Allmerica
Financial Corporation; Attorney (1991-1996) of Nutter,
McClennen & Fish

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

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

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

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

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

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

<PAGE>

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

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

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

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

<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% 100% 100% 100% 100% 100%
| Allmerica Allmerica Allmerica Allmerica Allmerica Allmerica Allmerica Allmerica Allmerica
| Investments, Investment Financial Financial Investments Investments Investments Investments Investments
| Inc. Management Investment Services Insurance Insurance Insurance Insurance Insurance
| Company, Inc. Management Insurance Agency Inc. Agency of Agency Inc. Agency Inc. Agency Inc.
| Services, Inc. Agency, Inc. of Alabama Florida Inc. of Georgia of Kentucky of Mississippi
|
|Massachusetts Massachusetts Massachusetts Massachusetts Alabama Florida Georgia Kentucky Mississippi
|
________________________________________________________________
| | | |
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

<TABLE>
<CAPTION>
NAME ADDRESS TYPE OF BUSINESS
---- ------- ----------------
<S> <C> <C>
AAM Equity Fund 440 Lincoln Street Massachusetts Grantor Trust
Worcester MA 01653

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

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

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

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

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

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

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

<PAGE>

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 Corporation 440 Lincoln Street Holding Company
Worcester MA 01653

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

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

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

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

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

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

Allmerica Investments Insurance 200 Southbridge Parkway Insurance Agency
Agency Inc. of Alabama Suite 400
Birmingham, AL 35209

Allmerica Investments Insurance 14211 Commerce Way Insurance Agency
Agency of Florida, Inc. Miami Lakes, FL 33016

Allmerica Investment Insurance 1455 Lincoln Parkway Insurance Agency
Agency Inc. of Georgia Suite 300
Atlanta, GA 30346

Allmerica Investment Insurance Barkley Bldg-Suite 105 Insurance Agency
Agency Inc. of Kentucky 12700 Shelbyville Road
Louisiana, KY 40423

<PAGE>

Allmerica Investments Insurance 631 Lakeland East Drive Insurance Agency
Agency Inc. of Mississippi Flowood, MS 39208

Allmerica Investment Trust 440 Lincoln Street Investment Company
Worcester MA 01653

Allmerica Plus Insurance Agency, Inc. 440 Lincoln Street Insurance Agency
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

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 America 645 West Grand River Multi-line property and
Howell MI 48843 casualty insurance

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

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

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

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

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

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

First Sterling Limited 440 Lincoln Street Holding Company
Worcester MA 01653

<PAGE>

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

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

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

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

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

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

SMA Financial Corp. 440 Lincoln Street Holding Company
Worcester MA 01653

Sterling Risk Management 440 Lincoln Street Risk management services
Services, Inc. Worcester MA 01653
</TABLE>

ITEM 27. NUMBER OF CONTRACT OWNERS

As of July 31, 2000, there were 79,893 Contract holders of qualified Contracts
and 24,791 Contract holders of non-qualified Contracts.

ITEM 28. INDEMNIFICATION

Article VIII of the Bylaws of the Depositor state: 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 judgement,
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.

<PAGE>

ITEM 29. PRINCIPAL UNDERWRITERS

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

- VEL Account, VEL II Account, VEL Account III, Select Account III,
Inheiritage Account, Separate Account IMO, Separate Account SPL-D,
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, Separate Account FUVUL,
Separate Account IMO, and Allmerica Select Separate Account of
Allmerica Financial Life Insurance and Annuity Company

- 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

<TABLE>
<CAPTION>
NAME POSITION OR OFFICE WITH UNDERWRITER
---- -----------------------------------
<S> <C>
Margaret L. Abbott Vice President

Emil J. Aberizk, Jr Vice President

Edward T. Berger Vice President and Chief Compliance Officer

Michael J. Brodeur Vice President Operations

Mark R. Colborn Vice President

Charles F. Cronin Secretary/Clerk

Claudia J. Eckels Vice President

Philip L. Heffernan Vice President

J. Kendall Huber Director

Mark C. McGivney Treasurer

William F. Monroe, Jr. President, Director and Chief Executive Officer

David J. Mueller Vice President, Chief Financial Officer, Financial
Operations Principal and Controller

<PAGE>

Stephen Parker Vice President and Director

Richard M. Reilly Director and Chairman of the Board

Eric A. Simonsen Director
</TABLE>

(c) As indicated in Part B (Statement of Additional Information) in
response to Item 20(c), there were no commissions retained by
Allmerica Investments, Inc., the principal underwriter of the
Contracts for sales of variable contracts funded by the Registrant in
1999. No other commissions or 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 Investment Company Act of 1940 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) The Registrant hereby undertakes to file a post-effective amendment
to this registration statement as frequently as is necessary to
ensure that the audited financial statements in the registration
statement are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted.

(b) The Registrant hereby undertakes 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.

(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
Securities and Exchange Commission, 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

<PAGE>

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 16th day of August, 2000.

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

By: /s/ Sheila B. St. Hilaire
------------------------------
Sheila B. St. Hilaire
Assistant Vice President and Counsel

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

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Warren E. Barnes
---------------------------------- Vice President and Corporate Controller August 16, 2000
Warren E. Barnes

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

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

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

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

Mark R. Colborn*
---------------------------------- Director and Vice President

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

J. Kendall Huber*
---------------------------------- Director, Vice President and General Counsel

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

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

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

Eric A. Simonsen*
---------------------------------- Director and Vice President
</TABLE>

*Sheila B. St. Hilaire, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named Directors and Officers of the
Registrant pursuant to the Power of Attorney dated April 2, 2000 duly executed
by such persons.

/s/ Sheila B. St. Hilaire
---------------------------------------------
Sheila B. St. Hilaire, Attorney-in-Fact
333-38274

<PAGE>

EXHIBIT TABLE

Exhibit 3(d) Commission Schedule

Exhibit 8(b) Directors' Power of Attorney

Exhibit 9 Opinion of Counsel

Exhibit 10 Consent of Independent Accountants