<PAGE>
PROSPECTUS SUPPLEMENT
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
INHEIRITAGE ACCOUNT (PROSPECTUS A), VEL ACCOUNT (87 AND 91),
VEL II ACCOUNT (VEL 93) AND SEPARATE ACCOUNT VA-K (ALLMERICA ADVANTAGE)
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
INHEIRITAGE ACCOUNT (PROSPECTUS A), VEL II ACCOUNT (VEL 93) AND
SEPARATE ACCOUNT VA-K (EXECANNUITY, ALLMERICA ADVANTAGE)
ALLMERICA INVESTMENT TRUST
(SUPPLEMENT EFFECTIVE AUGUST 15, 1997 TO PROSPECTUSES DATED MAY 1, 1997)
At the Special Meeting of Shareholders of Allmerica Investment Trust
("Trust") which was held on August 15, 1997, shareholders approved all
proposals, including (1) amendments to the Trust's Management Agreement
and certain Sub-adviser Agreements and (2) amendments to the investment
objectives, policies and restrictions of certain Funds of the Trust.
The attached variable insurance product prospectus and Trust prospectus
are hereby amended as follows (all references are to the Trust
prospectus unless otherwise noted):
The second paragraph under "What are the Investment Objectives and
Policies?" is amended to read:
A Fund's investment objective and investment policies are not
fundamental and may be changed without shareholder approval.
-------------------
The fifth paragraph under "Growth Fund - Investment Policies" in the
section entitled "What are the Investment Objective and Policies?" is
deleted.
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The following is included under "Investment Policies" in the section
entitled "What are the Investment Objectives and Policies?" for the
Growth Fund, Equity Index Fund, Investment Grade Income Fund and
Government Bond Fund:
The Fund may invest up to 15% of its net assets in securities
which are illiquid because they are not readily marketable.
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The following is included under "Investment Policies" in the section
entitled "What are the Investment Objectives and Policies?" for the
Select Income Fund:
The Fund may invest up to 25% of its assets in lower-rated
securities, commonly known as "junk bonds," which involve
risks discussed under "Certain Investment Strategies and
Policies." For more information concerning the rating
categories of corporate debt securities, see the Appendix to
the Prospectus.
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The following is included under "Investment Policies" in the section
entitled "What are the Investment Objectives and Policies?" for the
Investment Grade Income Fund and Government Bond Fund:
<PAGE>
Obligations in which the Fund may invest include debt
obligations of supranational entities. Supranational entities
include international organizations designed or supported by
governmental entities to promote economic reconstruction or
development and international banking institutions and related
government agencies. Obligations of supranational entities
may be supported by appropriated but unpaid commitments of
their member countries, and there is no assurance that these
commitments will be undertaken or met in the future. The Fund
may not invest more than 25% of its assets in debt obligations
of supranational entities.
The following replaces the third from last paragraph under "Investment
Policies" in the section entitled "What are the Investment Objectives
and Policies?" for the Investment Grade Income Fund:
The Fund may invest up to 25% of its assets in foreign
securities (not including its investments in American
Depositary Receipts).
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The following is included under "Investment Policies" in the section
entitled "What are the Investment Objectives and Policies?" for the
Money Market Fund:
The Fund may invest up to 25% of its assets in U.S. dollar
denominated foreign securities (not including its investments in
American Depositary Receipts).
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The following is included under "Investment Policies" in the section
entitled "What are the Investment Objectives and Policies?" for the
Money Market Fund:
The Fund may invest up to 10% of its net assets in securities
which are illiquid because they are not readily marketable.
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The management and sub-advisory fee tables under "Management Fees and
Expenses" of the Trust prospectus and the management and sub-advisory
fee sections in the variable product prospectus are amended to read as
follows:
For the services to the Funds, the Manager receives fees
computed daily at an annual rate based on the average daily
net asset value of each Fund as set forth below.
<TABLE>
<CAPTION>
SELECT SELECT CAPITAL SMALL-MID SELECT SELECT
AGGRESSIVE APPRECIATION CAP INTERNATIONAL GROWTH GROWTH
GROWTH FUND FUND VALUE FUND EQUITY FUND FUND FUND
----------- -------------- ---------- ------------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Manager Fee (1) (1) (2) (1) 0.85% (1)
<CAPTION>
EQUITY SELECT GROWTH SELECT INVESTMENT GOVERNMENT MONEY
INDEX AND INCOME INCOME GRADE INCOME BOND MARKET
FUND FUND FUND FUND FUND FUND
------ ------------- ------ ------------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Manager Fee (3) (1) (4) (4) 0.50% (3)
</TABLE>
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<PAGE>
(1) The Manager's fees for the Select Aggressive Growth Fund, Select
Capital Appreciation Fund, Select International Equity Fund, Growth
Fund and Select Growth and Income Fund, computed daily at an annual
rate based on the average daily net assets of each Fund, are based
on the following schedule:
<TABLE>
<CAPTION>
SELECT SELECT GROWTH
SELECT AGGRESSIVE SELECT CAPITAL INTERNATIONAL GROWTH AND INCOME
ASSETS GROWTH FUND APPRECIATION FUND EQUITY FUND FUND FUND
------ ----------------- ----------------- ------------- ------ -------------
<S> <C> <C> <C> <C> <C>
First $100 Million...... 1.00% 1.00% 1.00% 0.60% 0.75%
$100 to $250 Million.... 0.90% 0.90% 0.90% 0.60% 0.70%
$250 to $500 Million.... 0.85% 0.85% 0.85% 0.40% 0.65%
Over $500 Million....... 0.85% 0.85% 0.85% 0.35% 0.65%
</TABLE>
(2) The Manager's fee for the Small-Mid Cap Value Fund, computed daily
at an annual rate based on the average daily net assets of the
Fund, is based on the following schedule:
ASSETS FEE RATE
------ --------
First $100 Million...................... 1.00%
Next $150 Million....................... 0.85%
Next $250 Million....................... 0.80%
Next $250 Million....................... 0.75%
Over $750 Million....................... 0.70%
The Manager voluntarily has agreed to limit its fees to an annual
rate of 0.90% of average daily net assets until further notice.
(3) The Manager's fees for the Equity Index Fund and Money Market Fund,
computed daily at an annual rate based on the average daily net
assets of each Fund, are based on the following schedule:
EQUITY MONEY
INDEX MARKET
ASSETS FUND FUND
------ ------ ------
First $50 Million.............. 0.35% 0.35%
Next $200 Million.............. 0.30% 0.25%
Over $250 Million.............. 0.25% 0.20%
(4) The Manager's fees for the Select Income Fund and Investment Grade
Income Fund, computed daily at an annual rate based on the average
daily net assets of each Fund, are based on the following schedule:
SELECT INVESTMENT
INCOME GRADE
ASSETS FUND INCOME FUND
------ ------ -----------
First $50 Million........... 0.60% 0.50%
$50 to $100 Million......... 0.55% 0.45%
Over $100 Million........ 0.45% 0.40%
The Manager is responsible for the payment of all fees to the Sub-
Advisers. The Manager pays each Sub-Adviser fees computed daily at
an annual rate based on the average daily net asset value of each
Fund as set forth below. In certain Funds, Sub-Adviser fees vary
according to the level of assets in such Funds, which will reduce
the fees paid by the Manager as Fund assets grow but will
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<PAGE>
not reduce the operating expenses of such Funds.
<TABLE>
<CAPTION>
SELECT SELECT CAPITAL SMALL-MID SELECT SELECT
AGGRESSIVE APPRECIATION CAP INTERNATIONAL GROWTH GROWTH
GROWTH FUND FUND VALUE FUND EQUITY FUND FUND FUND
----------- -------------- ---------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Sub-Adviser Fee (5) (5) (6) (7) (8) (9)
EQUITY SELECT GROWTH SELECT INVESTMENT GOVERNMENT MONEY
INDEX AND INCOME INCOME GRADE INCOME BOND MARKET
FUND FUND FUND FUND FUND FUND
------ ------------- ------ ------------ ---------- ------
Sub-Adviser Fee 0.10% (10) 0.20% 0.20% 0.20% 0.10%
</TABLE>
(5) For their services, NACM and JCC will receive a fee computed daily
at an annual rate based on the average daily net assets of the
Select Aggressive Growth Fund and Select Capital Appreciation Fund,
respectively, under the following schedule:
ASSETS RATE
------ ----
First $100 Million........... 0.60%
Next $150 Million............ 0.55%
Next $250 Million............ 0.50%
Over $500 Million............ 0.45%
(6) For its services, CRM will receive a fee computed daily at an
annual rate based on the average daily net assets of the Small-Mid
Cap Value Fund, under the following schedule:
ASSETS RATE
------ ----
First $100 Million........... 0.60%
Next $150 Million............ 0.50%
Next $250 Million............ 0.40%
Next $250 Million............ 0.375%
Over $750 Million............ 0.35%
(7) For its services, BIAM will receive a fee computed daily at an
annual rate based on the average daily net assets of the Select
International Equity Fund, under the following schedule:
ASSETS RATE
------ ----
First $50 Million............ 0.45%
Next $50 Million............. 0.40%
Over $100 Million............ 0.30%
(8) For its services, Putnam will receive a fee computed daily at an
annual rate based on the average daily net assets of the Select
Growth Fund, under the following schedule:
ASSETS RATE
------ ----
First $50 Million............ 0.50%
Next $100 Million............ 0.45%
Next $100 Million............ 0.35%
Next $100 Million............ 0.30%
Over $350 Million............ 0.25%
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<PAGE>
(9) For its services, MAS will receive a fee based on the aggregate
assets of the Growth Fund and certain other accounts of the Manager
and its affiliates which are managed by MAS, under the following
schedule:
ASSETS RATE
------ ----
First $50 Million............. 0.50%
$50 Million to $100 Million... 0.375%
$100 Million to $500 Million.. 0.25%
$500 Million to $850 Million.. 0.20%
Over $850 Million............. 0.15%
(10) For its services, JAL will receive a fee computed daily at an
annual rate based on the average daily net assets of the Select
Growth and Income Fund, under the following schedule:
ASSETS RATE
------ ----
First $100 Million............ 0.40%
Next $200 Million............. 0.25%
Over $300 Million............. 0.30%
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The section on Foreign Securities under "Certain Investment Strategies
and Policies" is amended to change the heading as follows and insert the
following sentence after the fourth sentence of the first paragraph.
(The last paragraph of the section is deleted).
Foreign Securities (applicable to each Fund except the
Government Bond Fund).
The Money Market Fund may invest only in U.S. dollar
denominated foreign securities.
The heading, first sentence of the first paragraph and the second
paragraph of the section on Options and Futures Transactions under
"Certain Investment Strategies and Policies" are amended to read:
Options and Futures Transactions (applicable to each Fund
except the Money Market Fund), Forward Contracts
(applicable to Select Capital Appreciation Fund and
Select International Equity Fund) and swaps (applicable
to the Select Capital Appreciation Fund)
Through the writing and purchase of put and call options on its
securities, financial indices and foreign currencies, and the purchase
and sale of futures contracts and related options with respect to
securities, financial indices and (in the case of the Select Capital
Appreciation Fund and Select International Equity Fund) foreign
currencies in which it may invest, each Fund except the Money Market
Fund at times may seek to hedge against fluctuations in net asset value.
Additionally, the Select Capital Appreciation Fund and Select
International Equity Fund may invest in forward contracts and the Select
Capital Appreciation Fund in Swaps which may expose these Funds to
additional risks and transaction costs.
-------------------
The parenthetical phrase in the heading for the section on Restricted
Securities under "Certain Investment Strategies and Policies" is deleted
and the second sentence in the section is amended to read:
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<PAGE>
However, each Fund will not invest more than 15% (10% for
the Money Market Fund) of its net assets in restricted
securities (and other securities deemed to be illiquid)
unless the Board of Trustees determines, based upon a
continuing review of the trading markets for the specific
restricted security, that such restricted securities are
liquid.
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The heading and first two paragraphs of the section on High Yield
Securities under "Certain Investment Strategies and Policies" are
amended to read as follows. Also, "25%" is added to the percentages
listed in the next to last sentence of the last paragraph in the
section.
HIGH YIELD SECURITIES (APPLICABLE TO THE SELECT CAPITAL
APPRECIATION FUND, SELECT GROWTH FUND, SELECT GROWTH AND INCOME FUND AND
SELECT INCOME FUND)
Corporate debt securities purchased by the Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and
Income Fund and Select Income Fund will be rated at the time
of purchase B or better by Moody's or S&P, or equivalently
rated by another NRSRO, or unrated but believed by the Sub-
adviser to be of comparable quality under the guidelines
established for the Funds. The Select Growth Fund and the
Select Growth and Income Fund may not invest more than 15% of
their assets, the Select Income Fund may not invest more than
25% of its assets and the Select Capital Appreciation Fund may
not invest more than 35% of its assets at the time of
investment in securities rated below Baa by Moody's or BBB by
S&P, or equivalently rated by another NRSRO, or unrated but
believed by the Sub-Adviser to be of comparable quality.
Securities rated B by Moody's or S&P (or equivalently by
another NRSRO) are below investment grade and are considered,
on balance, to be predominantly speculative with respect to
capacity to pay interest and repay principal and will
generally involve more credit risk than securities in the
higher rating categories.
Periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of lower-rated
securities, commonly known as "high yield" securities or "junk
bonds," and of the asset value of the Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and
Income Fund and Select Income Fund. Many issuers of high
yield corporate debt securities are leveraged substantially at
times, which may impair their ability to meet debt service
obligations. Also, during an economic downturn or substantial
period of rising interest rates, highly leveraged issuers may
experience financial stress.
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The heading and next to last sentence of the first paragraph of the
section on Asset-Backed Securities and Mortgage-Backed Securities under
"Certain Investment Strategies and Policies" are amended to read as
follows: (The last sentence of the first paragraph is deleted.)
Asset-Backed Securities and Mortgage-Backed Securities
(applicable to Select Income Fund, Investment Grade Income
Fund, Government Bond Fund and Money Market Fund)
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<PAGE>
A Fund will not invest more than 20% of its total assets in
asset-backed securities.
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The heading for the section on Stripped Mortgage-Backed Securities under
"Certain Investment Strategies and Policies" is amended to read:
Stripped Mortgage-Backed Securities (applicable to Select
Income Fund, Investment Grade Income Fund, Government Bond
Fund and Money Market Fund)
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The following is inserted at the end of the section entitled "Certain
Investment Strategies and Policies":
STAND-BY COMMITMENTS (applicable to Select Income Fund,
Investment Grade Income Fund, Government Bond Fund and Money
Market Fund)
Under a stand-by commitment, a dealer agrees to purchase from
the Fund, at the Fund's option, specified securities at a
specified price. Stand-by commitments are exercisable by the
Fund at any time before the maturity of the underlying
security, and may be sold, transferred or assigned by the Fund
only with respect to the underlying instruments.
Although stand-by commitments are often available without the
payment of any direct or indirect consideration, if necessary
or advisable, the Fund may pay for a stand-by commitment
either separately in cash or by paying a higher price for
securities which are acquired subject to the commitment.
Where the Fund pays any consideration directly or indirectly
for a stand-by commitment, its cost will be reflected as
unrealized depreciation for the period during which the
commitment is held by the Fund.
The Fund will enter into stand-by commitments only with banks
and broker-dealers which present minimal credit risks. In
evaluating the creditworthiness of the issuer of a stand-by
commitment, the Sub-Adviser will review periodically the
issuer's assets, liabilities, contingent claims and other
relevant financial information.
The Fund will acquire stand-by commitments solely to
facilitate liquidity and does not intend to exercise its
rights thereunder for trading purposes. Stand-by commitments
will be valued at zero in determining the Fund's net asset
value.
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