VEL II ACCT OF STATE MUTUAL LIFE ASSUR CO OF AMERICA, 485BPOS, 1996-04-26

VEL II ACCT OF STATE MUTUAL LIFE ASSUR CO OF AMERICA
485BPOS, 1996-04-26

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<PAGE>

File 33-71056
811-8130

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
Post-Effective Amendment No. 4
-----
VEL II ACCOUNT OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
------------------------------------------------------------------
(Exact Name of Registrant)

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
440 Lincoln Street
Worcester MA 01653
(Address of Principal Executive Office)

Richard J. Baker, Vice President and Secretary
First Allmerica Financial Life Insurance 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)
-----
X On April 30, 1996 pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a) (1)
-----
On (date) pursuant to paragraph (a) (1)
-----
On (date) pursuant to paragraph (a) (2) of Rule 485
-----

FLEXIBLE PREMIUM VARIABLE LIFE

Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940,
Registrant hereby declares that an indefinite amount of its securities is being
registered under the Securities Act of 1933. The Rule 24f-2 Notice for the
issuer's fiscal year ended December 31, 1995 was filed on February 29, 1996.

<PAGE>

RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8b-2 AND THE PROSPECTUS

Item No. of
Form N-8B-82 Caption In Prospectus
- ------------ ---------------------

1. . . . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . . . Cover Page
3. . . . . . . . . . . . . . . . Not Applicable
4. . . . . . . . . . . . . . . . Distribution
5. . . . . . . . . . . . . . . . The Company, The VEL II Account
6. . . . . . . . . . . . . . . . The VEL II Account
7. . . . . . . . . . . . . . . . Not Applicable
8. . . . . . . . . . . . . . . . Not Applicable
9. . . . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . . . Summary; Description of the Company, The
VEL II Account, Allmerica Investment Trust,
Variable Insurance Products Fund, Variable
Insurance Products Fund II, T. Rowe Price
International Series, Inc. and Delaware Group
Premium Fund; The Policy; Policy Termination
and Reinstatement; Other Policy Provisions
11 . . . . . . . . . . . . . . . Summary; Allmerica Investment Trust;
Variable Insurance Products Fund; Variable
Insurance Products Fund II; T. Rowe Price
International Series, Inc.; Delaware Group
Premium Fund, Inc.; Investment Objectives and
Policies
12 . . . . . . . . . . . . . . . Summary; Allmerica Investment Trust;
Variable Insurance Products Fund; Variable
Insurance Products Fund II; T. Rowe Price
International Series, Inc.; Delaware Group
Premium Fund, Inc.
13 . . . . . . . . . . . . . . . Summary; Allmerica Investment Trust;
Variable Insurance Products Fund; Variable
Insurance Products Fund II; T. Rowe Price
International Series, Inc.; Delaware Group
Premium Fund, Inc.; Investment Advisory
Services to the Trust; Investment Advisory
Services to Variable Insurance Products Fund;
Investment Advisory Services to Variable
Insurance Products Fund II; Investment
Advisory Services to T. Rowe Price
International Series, Inc.; Investment
Advisory Services to Delaware Group Premium
Fund, Inc.; Charges and Deductions
14 . . . . . . . . . . . . . . . Summary; Application for a Policy
15 . . . . . . . . . . . . . . . Summary; Application for a Policy; Premium
Payments; Allocation of Net Premiums
16 . . . . . . . . . . . . . . . The VEL II Account; Allmerica
Investment Trust; Variable Insurance
Products Fund; Variable Insurance Products
Fund II; T. Rowe Price International Series,
Inc.; Delaware Group Premium Fund, Inc.;
Premium Payments; Allocation of Net Premiums
17 . . . . . . . . . . . . . . . Summary; Surrender; Partial Withdrawal;
Charges and Deductions; Policy Termination
and Reinstatement

<PAGE>

18 . . . . . . . . . . . . . . . The VEL II Account; Allmerica Investment
Trust; Variable Insurance Products
Fund; Variable Insurance Products Fund II; T.
Rowe Price International Series, Inc.;
Delaware Group Premium Fund, Inc.; Premium
Payments
19 . . . . . . . . . . . . . . . Reports; Voting Rights
20 . . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . . Summary; Policy Loans; Other Policy
Provisions
22 . . . . . . . . . . . . . . . Other Policy Provisions
23 . . . . . . . . . . . . . . . Not Required
24 . . . . . . . . . . . . . . . Other Policy Provisions
25 . . . . . . . . . . . . . . . The Company
26 . . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . . The Company
28 . . . . . . . . . . . . . . . Directors and Principal Officers of the
Company
29 . . . . . . . . . . . . . . . The Company
30 . . . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . . Distribution
36 . . . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . . . Summary; Distribution
39 . . . . . . . . . . . . . . . Summary; Distribution
40 . . . . . . . . . . . . . . . Not Applicable
41 . . . . . . . . . . . . . . . The Company, Distribution
42 . . . . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . . . Premium Payments; Policy Value and Cash
Surrender Value
45 . . . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . . . Policy Value and Cash Surrender Value;
Federal Tax Considerations
47 . . . . . . . . . . . . . . . The Company
48 . . . . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . . . The VEL II Account
51 . . . . . . . . . . . . . . . Cover Page; Summary; Charges and Deductions;
The Policy; Policy Termination and
Reinstatement; Other Policy Provisions
52 . . . . . . . . . . . . . . . Addition, Deletion or Substitution of
Investments
53 . . . . . . . . . . . . . . . Federal Tax Considerations
54 . . . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . . . Not Applicable
<PAGE>

This prospectus describes individual flexible premium variable life insurance
policies ("Policies") offered by First Allmerica Financial Life Insurance
Company ("Company") to applicants Age 80 years old and under. Within limits,
you may choose the amount of initial premium desired and the initial Sum
Insured. You have the flexibility to vary the frequency and amount of premium
payments, subject to certain restrictions and conditions. You may withdraw a
portion of the Policy's surrender value, or the Policy may be fully surrendered
at any time, subject to certain limitations. Because of the substantial nature
of the surrender charge, the Policy is not suitable for short-term investment
purposes. A Policyowner contemplating surrender of a Policy should pay special
attention to the limitation of deferred sales charges on surrenders in the first
two years following issuance or Face Amount increase.

The Policies permit you to allocate net premiums among up to seven of
eighteen sub-accounts ("Sub-Accounts") of the VEL II Account, a separate
account of the Company, and a fixed interest account ("General Account") of
the Company (together "Accounts"). Each Sub-Account invests its assets in a
corresponding investment portfolio of Allmerica Investment Trust ("Trust"),
Variable Insurance Products Fund ("VIP"), Variable Insurance Products Fund II
("VIP II"), T. Rowe Price International Series, Inc ("T. Rowe Price") or
Delaware Group Premium Fund, Inc. ("DGPF"). The Trust is managed by
Allmerica Investment Management Company, Inc. ("Allmerica Investment"). VIP
and VIP II are managed by Fidelity Management & Research Company ("Fidelity
Management"). T. Rowe Price is managed by Rowe Price-Fleming International,
Inc. ("Price-Fleming"). The International Equity Series, which is the only
investment portfolio of DGPF available under the Policies, is managed by
Delaware International Advisers Ltd. ("Delaware International").

In certain circumstances, a Policy may be considered a "modified endowment
contract." Under the Internal Revenue Code, any policy loan, partial withdrawal
or surrender from a modified endowment contract may be subject to tax and tax
penalties. See "FEDERAL TAX CONSIDERATIONS - Modified Endowment Contracts."

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

IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE OR IF YOU ALREADY OWN A
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.

THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF THE
ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, T. ROWE PRICE INTERNATIONAL SERIES, INC. AND DELAWARE GROUP
PREMIUM FUND, INC. FIDELITY'S HIGH INCOME PORTFOLIO INVESTS IN HIGHER YIELDING,
HIGHER RISK, LOWER RATED DEBT SECURITIES (SEE "INVESTMENT OBJECTIVES AND
POLICIES" IN THIS PROSPECTUS). INVESTORS SHOULD RETAIN A COPY OF THIS
PROSPECTUS FOR FUTURE REFERENCE.

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

THE POLICIES ARE OBLIGATIONS OF ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY
COMPANY AND ARE DISTRIBUTED BY ALMERICA INVESTMENTS, INC. THE POLICIES ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR CREDIT
UNION. THE POLICIES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), OR ANY OTHER FDERAL AGENCY. INVESTMENTZ IN THE
POLICIES ARE SUBJECT TO VARIOUS RISKS, INCLUDING THE FLUCTUATION OF VALUE AND
POSSIBLE LOSS OF PRINCIPAL.

Dated April 30, 1996

<PAGE>

(Continued from cover page)
The Trust, VIP, VIP II,T. Rowe Price and DGPF are open-end, diversified series
investment companies. Eleven different investment portfolios of the Trust are
available under the Policies: the Growth Fund, Investment Grade Income Fund,
Money Market Fund, Equity Index Fund, Government Bond Fund, Select International
Equity Fund, Select Aggressive Growth Fund, Select Capital Appreciation Fund,
Select Growth Fund, Select Growth and Income Fund and Small Cap Value Fund (the
"Funds"). Four different investment portfolios of VIP are available under the
Policies: High Income Portfolio, Equity-Income Portfolio, Growth Portfolio, and
Overseas Portfolio ("Portfolios"). One investment portfolio of VIP II
("Portfolio") is available under the Policies: the Asset Manager Portfolio.
One investment portfolio of T. Rowe Price ("Portfolio") is available under the
Policies: the International Stock Portfolio. One investment portfolio of DGPF
("Series") is available under the Policies: the International Equity Series.
Each Fund, Portfolio and Series has its own investment objectives. The
accompanying prospectuses of the Trust, VIP, VIP II, T. Rowe Price and DGPF
describe the investment objectives and certain attendant risks of each
Underlying Fund. The International Stock Portfolio of T. Rowe Price is not
available in all states.

There is no guaranteed minimum Policy value. The value of a Policy will vary up
or down to reflect the investment experience of allocations to the Sub-Accounts
and the fixed rates of interest earned by allocations to the General Account.
The Policy value will also be adjusted for other factors, including the amount
of charges imposed. The Policy will remain in effect so long as the Policy
value less any surrender charges and less any outstanding debt is sufficient to
pay certain monthly charges imposed in connection with the Policy. The Policy
value may decrease to the point where the Policy will lapse and provide no
further death benefit without additional premium payments.

If the Policy is in effect at the death of the Insured, the Company will pay a
death benefit (the "Death Proceeds") to the beneficiary. Prior to the Final
Premium Payment Date, the Death Proceeds equal the Sum Insured, less any debt,
partial withdrawals, and any due and unpaid charges. You may choose either Sum
Insured Option 1 (the Sum Insured is fixed in amount) or Sum Insured Option 2
(the Sum Insured includes the Policy value in addition to a fixed insurance
amount). A Policyowner has the right to change the Sum Insured Option, subject
to certain conditions. A Guideline Minimum Sum Insured, equivalent to a
percentage of the Policy value, will apply if greater than the Sum Insured
otherwise payable under Option 1 or Option 2.

<PAGE>

TABLE OF CONTENTS
<S> <C>
SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 14

DESCRIPTION OF THE COMPANY, THE VEL II ACCOUNT, ALLMERICA
INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II, T. ROWE PRICE INTERNATIONAL
SERIES, INC. AND DELAWARE GROUP PREMIUM FUND, INC. . . . . . . . . . . . . . 17
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
THE VEL II ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ALLMERICA INVESTMENT TRUST . . . . . . . . . . . . . . . . . . . . . . 17
VARIABLE INSURANCE PRODUCTS FUND. . . . . . . . . . . . . . . . . . . . 18
VARIABLE INSURANCE PRODUCTS FUND II . . . . . . . . . . . . . . . . . . 18
T. ROWE PRICE INTERNATIONAL SERIES, INC.. . . . . . . . . . . . . . . . 18
DELAWARE GROUP PREMIUM FUND, INC. . . . . . . . . . . . . . . . . . . . 18
INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . . . 18
INVESTMENT ADVISORY SERVICES TO THE TRUST . . . . . . . . . . . . . . . 20
INVESTMENT ADVISORY SERVICES TO VIP AND VIP II. . . . . . . . . . . . . 23
INVESTMENT ADVISORY SERVICES TO T. ROWE PRICE. . . . . . . . . . . . . . 23
INVESTMENT ADVISORY SERVICES TO DGPF. . . . . . . . . . . . . . . . . . 23
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS . . . . . . . . . . . 23
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

THE POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
APPLICATION FOR A POLICY. . . . . . . . . . . . . . . . . . . . . . . . 25
FREE LOOK PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
CONVERSION PRIVILEGES . . . . . . . . . . . . . . . . . . . . . . . . . 26
PREMIUM PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ALLOCATION OF NET PREMIUMS. . . . . . . . . . . . . . . . . . . . . . . 27
TRANSFER PRIVILEGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
DEATH PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SUM INSURED OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CHANGE IN SUM INSURED OPTION. . . . . . . . . . . . . . . . . . . . . . 30
CHANGE IN FACE AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . 30
POLICY VALUE AND SURRENDER VALUE. . . . . . . . . . . . . . . . . . . . 31
PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
OPTIONAL INSURANCE BENEFITS . . . . . . . . . . . . . . . . . . . . . . 32
SURRENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PARTIAL WITHDRAWAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 33

CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
TAX EXPENSE CHARGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
MONTHLY DEDUCTION FROM POLICY VALUE . . . . . . . . . . . . . . . . . . 33
CHARGES AGAINST ASSETS OF THE VEL II ACCOUNT. . . . . . . . . . . . . . 35
SURRENDER CHARGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
CHARGES ON PARTIAL WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . 37
TRANSFER CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
CHARGE FOR INCREASE IN FACE AMOUNT. . . . . . . . . . . . . . . . . . . 38
OTHER ADMINISTRATIVE CHARGES. . . . . . . . . . . . . . . . . . . . . . 38

POLICY LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
LOAN INTEREST CHARGED . . . . . . . . . . . . . . . . . . . . . . . . . 39
REPAYMENT OF DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
EFFECT OF POLICY LOANS. . . . . . . . . . . . . . . . . . . . . . . . . 39

POLICY TERMINATION AND REINSTATEMENT . . . . . . . . . . . . . . . . . . . . 39
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

OTHER POLICY PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
POLICYOWNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>

<PAGE>

<TABLE>
<S> <C>
INCONTESTABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SUICIDE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
AGE AND SEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
POSTPONEMENT OF PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . 41

DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY. . . . . . . . . . . . . . . 42

DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

FURTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

INDEPENDENT ACCOUNTANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 47

FEDERAL TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 48
THE COMPANY AND THE VEL II ACCOUNT. . . . . . . . . . . . . . . . . . . 48
TAXATION OF THE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . 48
MODIFIED ENDOWMENT CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 49

MORE INFORMATION ABOUT THE GENERAL ACCOUNT . . . . . . . . . . . . . . . . . 49
GENERAL DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . 49
GENERAL ACCOUNT VALUE . . . . . . . . . . . . . . . . . . . . . . . . . 49
THE POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS
AND POLICY LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

APPENDIX A - OPTIONAL BENEFITS . . . . . . . . . . . . . . . . . . . . . . . 87
APPENDIX B - PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 87
APPENDIX C - ILLUSTRATIONS OF SUM INSURED, POLICY VALUES
AND ACCUMULATED PREMIUMS . . . . . . . . . . . . . . . . . . . 89
APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES. . . . . . . . . . . . 95
</TABLE>

<PAGE>

SPECIAL TERMS

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

AGE: The Insured's age as of the nearest birthday measured from a Policy
anniversary.

BENEFICIARY: The person(s) designated by the owner of the Policy to receive the
insurance proceeds upon the death of the Insured.

COMPANY: First Allmerica Financial Life Insurance Company

DATE OF ISSUE: The date set forth in the Policy used to determine the Monthly
Payment Date, Policy months, Policy years, and Policy anniversaries.

DEATH PROCEEDS: Prior to the Final Premium Payment Date, the Death Proceeds
equal the amount calculated under the applicable Sum Insured Option (Option 1 or
Option 2), less Debt outstanding at the time of the Insured's death, partial
withdrawals, if any, partial withdrawal charges, and any due and unpaid Monthly
Deductions. After the Final Premium Payment Date, the Death Proceeds equal the
Surrender Value of the Policy.

DEBT: All unpaid Policy loans plus interest due or accrued on such loans.

DELIVERY RECEIPT: An acknowledgment, signed by the Policyowner and returned to
the Company's Principal Office, that the Policyowner has received the Policy and
the Notice of Withdrawal Rights.

EVIDENCE OF INSURABILITY: Information, including medical information
satisfactory to the Company, that is used to determine the Insured's Premium
Class.

FACE AMOUNT: The amount of insurance coverage applied for. The Face Amount of
each Policy is set forth in the specification pages of the Policy.

FINAL PREMIUM PAYMENT DATE: The Policy anniversary nearest the Insured's 95th
birthday. The Final Premium Payment Date is the latest date on which a premium
payment may be made. After this date, the Death Proceeds equal the Surrender
Value of the Policy.

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

GUIDELINE ANNUAL PREMIUM: The annual amount of premium that would be payable
through the Final Premium Payment Date of a Policy for the specified Sum
Insured, if premiums were fixed by the Company as to both timing and amount, and
monthly cost of insurance charges were based on the 1980 Commissioners Standard
Ordinary Mortality Tables (Mortality Table B, Smoker or Non-Smoker, Male or
Female), net investment earnings at an annual effective rate of 5%, and fees and
charges as set forth in the Policy and any Policy riders. The Sum Insured
Option 1 Guideline Annual Premium is used when calculating the maximum surrender
charge.

GUIDELINE MINIMUM SUM INSURED: The minimum Sum Insured required to qualify the
Policy as "life insurance" under Federal tax laws. The Guideline Minimum Sum
Insured varies by Age. It is calculated by multiplying the Policy Value by a
percentage determined by the Insured's Age.

INSURANCE AMOUNT AT RISK: The Sum Insured less the Policy Value.

LOAN VALUE: The maximum amount that may be borrowed under the Policy.

MINIMUM MONTHLY FACTOR: A monthly premium amount calculated by the Company and
specified in your Policy. If you pay this amount, the Company guarantees that
your Policy will not lapse prior to the 49th Monthly Deduction after the Date of
Issue or the effective date of an increase in the Face Amount. However, making
payments at least equal to the Minimum Monthly Factors will not prevent the
Policy from lapsing if (a) Debt exceeds Policy Value less surrender charges or
(b) partial withdrawals and partial withdrawal charges have reduced premium
payments below an amount equal to the Minimum Monthly Factor multiplied by the
number of months since the Date of Issue or the effective date of an increase.

MONTHLY DEDUCTION: Charges deducted monthly from the Policy Value of a Policy
prior to the Final Premium Payment Date. The charges include the monthly cost
of insurance, the monthly cost of any benefits provided by riders, and the
monthly

<PAGE>

administrative charge.

MONTHLY PAYMENT DATE: The date on which the Monthly Deduction is deducted from
Policy Value.

NET PREMIUM: An amount equal to the premium less a tax expense charge.

POLICY CHANGE: Any change in the Face Amount, the addition or deletion of a
rider, or a change in the Sum Insured Option.

POLICY VALUE: The total amount available for investment under a Policy at any
time. It is equal to the sum of (a) the value of the Accumulation Units
credited to a Policy in the Sub-Accounts and (b) the accumulation in the General
Account credited to that Policy.

PREMIUM CLASS: The risk classification that the Company assigns the Insured
based on the information in the application and any other Evidence of
Insurability considered by the Company. The Insured's Premium Class will affect
the cost of insurance charge and the amount of premium required to keep the
Policy in force.

PRINCIPAL OFFICE: The Company's office, located at 440 Lincoln Street,
Worcester, Massachusetts 01653.

PRO RATA ALLOCATION: In certain circumstances, you may specify from which
Sub-Account certain deductions will be made or to which Sub-Account Policy Value
will be allocated. If you do not, the Company will allocate the deduction or
Policy Value among the General Account and the Sub-Accounts in the same
proportion that the Policy Value in the General Account and the Policy Value in
each Sub-Account bear to the total Policy Value on the date of deduction or
allocation.

SEPARATE ACCOUNT: A separate account consists of assets segregated from the
Company's other assets. The investment performance of the assets of each
separate account is determined separately from the other assets of the Company.
The assets of a separate account which are equal to the reserves and other
contract liabilities are not chargeable with liabilities arising out of any
other business which the Company may conduct.

SUB-ACCOUNT: A division of the VEL II Account. Each Sub-Account invests
exclusively in the shares of a corresponding Fund of the Allmerica Investment
Trust, a corresponding Portfolio of the Variable Insurance Products Fund or
Variable Insurance Products Fund II, the International Stock Portfolio of T.
Rowe Price International Series, Inc. or T. Rowe Price the International Equity
Series of the Delaware Group Premium Fund, Inc.

SUM INSURED: The amount payable upon the death of the Insured, before the Final
Premium Payment Date, prior to deductions for Debt outstanding at the time of
the Insured's death, partial withdrawals and partial withdrawal charges, if any,
and any due and unpaid Monthly Deductions. The amount of the Sum Insured will
depend on the Sum Insured Option chosen, but will always be at least equal to
the Face Amount.

SURRENDER VALUE: The amount payable upon a full surrender of the Policy. It is
the Policy Value less any Debt and applicable surrender charges.

UNDERLYING FUNDS: The Funds of the Allmerica Investment Trust, the Portfolios of
the Variable Insurance Products Fund and the Variable Insurance Products Fund
II, the Portfolio of T. Rowe Price International Series, Inc. and the Series of
the Delaware Group Premium Fund, Inc. available under the Policies.

UNDERLYING INVESTMENT COMPANIES: Allmerica Investment Trust, Variable Insurance
Products Fund, Variable Insurance Products Fund II, T. Rowe Price International
Series, Inc. and Delaware Group Premium Fund, Inc.

VALUATION DATE: A day on which the net asset value of the shares of any of the
Underlying Funds is determined and Accumulation 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, partial withdrawal, or surrender of a Policy is
received) when there is a sufficient degree of trading in an Underlying Fund's
securities such that the current net asset value of the Sub-Accounts may be
materially affected.

VALUATION PERIOD: The interval between two consecutive Valuation Dates.

VEL II ACCOUNT: A separate account of the Company to which the Policyowner may
make Net Premium allocations.

WRITTEN REQUEST: A request by the Policyowner in writing, satisfactory to the
Company.

<PAGE>

YOU OR YOUR: The Policyowner, as shown in the application or the latest change
filed with the Company.

SUMMARY

THE POLICY - The flexible premium variable life policy (the "Policy") offered by
this prospectus allows you, subject to certain limitations, to make premium
payments in any amount and frequency. As long as the Policy remains in force,
it will provide for: (1) life insurance coverage on the named Insured; (2)
Policy Value; (3) surrender rights and partial withdrawal rights; (4) loan
privileges; and (5) in some cases, additional insurance benefits available by
rider for an additional charge.

The Policies are life insurance contracts, with death benefits, Policy Value,
and other features traditionally associated with life insurance. The Policies
are "variable" because, unlike the fixed benefits of ordinary whole life
insurance, the Policy Value will, and under certain circumstances the Death
Proceeds may, increase or decrease depending on the investment experience of the
Sub-Accounts of the VEL II Account. They are "flexible premium" policies,
because, unlike traditional insurance policies, there is no fixed schedule for
premium payments. Although you may establish a schedule of premium payments
("planned premium payments"), failure to make the planned premium payments will
not necessarily cause a Policy to lapse nor will making the planned premium
payments guarantee that a Policy will remain in force. Thus, you may, but are
not required to, pay additional premiums.

The Policy will remain in force until the Surrender Value is insufficient to
cover the next Monthly Deduction and loan interest accrued, if any, and a grace
period of 62 days has expired without adequate payment being made by you.
During the first 48 Policy months after the Date of Issue or the effective date
of an increase in Face Amount, the Policy will not lapse if the total premiums
paid less debt, partial withdrawals and withdrawal charges are equal to or
exceed the sum of the Minimum Monthly Factors for the number of months the
Policy, increase, or a Policy Change which causes a change in the Minimum
Monthly Factor has been in force. However, even during these periods making
payments at least equal to the Minimum Monthly Factors will not prevent the
Policy from lapsing if Debt equals or exceeds Policy Value less surrender
charges.

SURRENDER CHARGES - At any time that a Policy is in effect, a Policyowner may
elect to surrender the Policy and receive its Surrender Value. A surrender
charge is calculated upon issuance of the Policy and upon each increase in Face
Amount. The duration of the surrender charge is 15 years for issue Ages 0
through 50, grading down to 10 years for issue Ages 55 and above. The surrender
charge is only imposed if, during its duration, you request a full surrender or
a decrease in Face Amount.

The maximum surrender charge calculated upon issuance of the Policy is equal to
the sum of (a) plus (b) where (a) is a deferred administrative charge equal to
$8.50 per thousand dollars of the initial Face Amount and (b) is a deferred
sales charge of 49% of premiums received up to a maximum number of Guideline
Annual Premiums subject to the deferred sales charge that varies by issue Age
from 1.660714 (for Ages 0 through 55) to 0.948980 (for Age 80). In accordance
with limitations under state insurance regulations, the amount of the maximum
surrender charge will not exceed a specified amount per $1,000 of initial Face
Amount, as indicated in "APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES."
The maximum surrender charge remains level for the first 40 Policy months and
reduces by 0.5% or more per month (depending on issue Age) thereafter, as
described in "APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES." If you
surrender the Policy during the first two Policy years before making premium
payments associated with the initial Face Amount which are at least equal to one
Guideline Annual Premium, the actual surrender charge imposed may be less than
the maximum. See "THE POLICY - Surrender" and "CHARGES AND DEDUCTIONS -
Surrender Charge."

A separate surrender charge will apply to and is calculated for each increase in
Face Amount. The maximum surrender charge for the increase is equal to the sum
of (a) plus (b) where (a) is equal to $8.50 per thousand dollars of increase,
and (b) is a deferred sales charge, of 49% of premiums associated with the
increase, up to a maximum number of Guideline Annual Premiums (for the increase)
subject to the deferred sales charge that varies by Age (at the time of
increase) from 1.660714 (for Ages 0 through 55) to 0.948980 (for Age 80). In
accordance with limitations under state insurance regulations, the amount of the
surrender charge will not exceed a specified amount per $1,000 of increase, as
indicated in "APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES." As is
true for the initial Face Amount, (a) is a deferred administrative charge and
(b) is a deferred sales charge. This maximum surrender charge remains level for
the first 40 Policy months following the increase and reduces by 0.5% or more
per month (depending on Age at increase) thereafter, as described in "APPENDIX D
- - CALCULATION OF MAXIMUM SURRENDER CHARGES." The actual surrender charge with
respect to the increase may be less than the maximum. See "THE POLICY -
Surrender" and "CHARGES AND DEDUCTIONS - Surrender Charge."

<PAGE>

In the event of a decrease in Face Amount, the surrender charge imposed is
proportional to the charge that would apply to a full surrender. See "THE
POLICY - Surrender" and "CHARGES AND DEDUCTIONS - Surrender Charge.''

TAX EXPENSE CHARGE - A current charge of 2.25% of premiums will be deducted from
each premium payment to compensate the Company for premium taxes imposed by
various states and local jurisdictions and for federal taxes imposed

for deferred acquisition costs ("DAC tax"). The DAC tax deduction is a factor
the Company must use when calculating the maximum sales load it can charge under
SEC rules. See "CHARGES AND DEDUCTIONS - Tax Expense Charge."

MONTHLY DEDUCTIONS FROM POLICY VALUE - On the Date of Issue and each Monthly
Payment Date thereafter prior to the Final Premium Payment Date, certain charges
("Monthly Deductions") will be deducted from the Policy Value. The Monthly
Deduction consists of a charge for cost of insurance, a charge for the cost of
any additional benefits provided by rider, and a charge for administrative
expenses. You may instruct the Company to deduct the Monthly Deduction from one
specific Sub-Account. If you do not, the Company will make a Pro Rata
Allocation of the charge. No Monthly Deductions are made on or after the Final
Premium Payment Date.

The monthly cost of insurance charge is determined by multiplying the Insurance
Amount at Risk (the Sum Insured minus the Policy Value) for each Policy month by
the applicable cost of insurance rate or rates. The Insurance Amount at Risk
will be affected by any decreases or increases in the Face Amount.

As noted above, certain additional insurance rider benefits are available under
the Policy for an additional monthly charge. See "APPENDIX A - Optional
Benefits."

The monthly administrative charge is described in "CHARGES AND DEDUCTIONS -
Monthly Deduction From Policy Value."

POLICY ADMINISTRATIVE CHARGES - Each of the charges listed below is designed to
reimburse the Company for actual Policy administrative costs incurred. None of
these charges is designed to result in a profit to the Company.

DEFERRED ADMINISTRATIVE CHARGE - A component of the surrender charge is a charge
for administrative expenses. This deferred administrative charge is $8.50 per
thousand dollars of the initial Face Amount or of an increase in Face Amount.
The charge is designed to reimburse the Company for administrative costs
associated with product research and development, underwriting, policy
administration, decreasing the Face Amount, and surrendering a Policy. Because
the maximum surrender charge reduces by 0.5% or more per month (depending on
issue Age) after the 40th Policy month from the Date of Issue or the effective
date of an increase in Face Amount, in certain situations some or all of the
deferred administrative charge may not be assessed upon surrender of the Policy.
See "THE POLICY - Surrender" and "CHARGES AND DEDUCTIONS - Surrender Charge."

MONTHLY ADMINISTRATIVE CHARGES - A component of the Monthly Deduction from
Policy Value is a charge for administrative expenses. Prior to the Final
Premium Payment Date, the charge is $5 per month. The charges are designed to
reimburse the Company for the costs associated with issuing and administering
the Policies, such as processing premium payments, policy loans and loan
repayments, change in Sum Insured Options, and death claims. These charges also
help cover the cost of providing annual statements and responding to
Policyholder inquiries. See "CHARGES AND DEDUCTIONS- Monthly Deduction From
Policy Value."

TRANSACTION CHARGE ON PARTIAL WITHDRAWALS - A transaction charge, which is the
smaller of 2% of the amount withdrawn or $25, is assessed at the time of each
partial withdrawal to reimburse the Company for the cost of processing the
withdrawal. In addition to the transaction charge, a partial withdrawal charge
may also be made under certain circumstances. See "CHARGES AND DEDUCTIONS -
Charges On Partial Withdrawal."

CHARGE FOR INCREASE IN FACE AMOUNT - For each increase in Face Amount, a charge
of $50 will be deducted from Policy Value. This charge is designed to reimburse
the Company for underwriting and administrative costs associated with the
increase. See "THE POLICY - Change In Face Amount" and "CHARGES AND DEDUCTIONS
- - Charge For Increase In Face Amount."

TRANSFER CHARGE - The first six transfers of Policy Value in a Policy year will
be free of charge. Thereafter, with certain exceptions, a transfer charge of
$10 will be imposed for each transfer request to reimburse the Company for the
costs of processing the transfer. See "THE POLICY - Transfer Privilege" and
"CHARGES AND DEDUCTIONS - Transfer Charges."

<PAGE>

OTHER ADMINISTRATIVE CHARGES - The Company reserves the right to impose a charge
for the administrative costs associated with changing the Net Premium allocation
instructions, for changing the allocation of any Monthly Deductions among the
various Sub-Accounts, or for a projection of values. See "CHARGES AND
DEDUCTIONS - Other Administrative Charges."

CHARGES AGAINST THE VEL II ACCOUNT - A daily charge equivalent to an effective
annual rate of 1.15% of the average daily net asset value of each Sub-Account
of the VEL II Account is imposed to compensate the Company for its assumption
of certain mortality and expense risks and for administrative costs associated
with the VEL II Account. The rate is 0.90% for the mortality and expense
risk and 0.25% for the VEL II Account administrative charge, which
administrative charge is eliminated after the tenth Policy year. See "CHARGES
AND DEDUCTIONS - Charges Against Assets Of The VEL II Account."

CHARGES OF THE UNDERLYING INVESTMENT COMPANIES - In addition to the charges
described above, certain fees and expenses are deducted from the assets of the
Underlying Investment Companies. See "CHARGES AND DEDUCTIONS - Charges Against
Assets Of The VEL II Account." The levels of fees and expenses vary among the
Underlying Investment Companies.

POLICY VALUE AND SURRENDER VALUE - The Policy Value is the total amount
available for investment under a Policy at any time. It is the sum of the value
of all Accumulation Units in the Sub-Accounts of the VEL II Account and all
accumulations in the General Account of the Company credited to the Policy. The
Policy Value reflects the amount and frequency of Net Premiums paid, charges and
deductions imposed under the Policy, interest credited to accumulations in the
General Account, investment performance of the Sub-Account(s) to which Policy
Value has been allocated, and partial withdrawals. The Policy Value may be
relevant to the computation of the Death Proceeds. You bear the entire
investment risk for amounts allocated to the VEL II Account. The Company does
not guarantee a minimum Policy Value. See "SUMMARY - Minimum Monthly Factor."

The Surrender Value will be the Policy Value less any Debt and applicable
surrender charges. The Surrender Value is relevant, for example, to the
continuation of the Policy and in the computation of the amounts available upon
partial withdrawals, Policy loans or surrender.

DEATH PROCEEDS - The Policy provides for the payment of certain Death Proceeds
to the named Beneficiary upon the death of the Insured. Prior to the Final
Premium Payment Date, the Death Proceeds will be equal to the Sum Insured,
reduced by any outstanding Debt, partial withdrawals, partial withdrawal
charges, and any Monthly Deductions due and not yet deducted through the policy
month in which the Insured dies. Two Sum Insured Options are available. Under
Option 1, the Sum Insured is the greater of the Face Amount of the Policy or the
Guideline Minimum Sum Insured. Under Option 2, the Sum Insured is the greater
of the Face Amount of the Policy plus the Policy Value or the Guideline Minimum
Sum Insured. The Guideline Minimum Sum Insured is equivalent to a percentage
(determined each month based on the Insured's Age) of the Policy Value. On or
after the Final Premium Payment Date, the Death Proceeds will equal the
Surrender Value. See "THE POLICY - Death Proceeds."

The Death Proceeds under the Policy may be received in a lump sum or under one
of the Payment Options described in the Policy. See "APPENDIX B - Payment
Options."

FLEXIBILITY TO ADJUST SUM INSURED - Subject to certain limitations, you may
adjust the Sum Insured, and thus the Death Proceeds, at any time prior to the
Final Premium Payment Date, by increasing or decreasing the Face Amount of the
Policy. Any change in the Face Amount will affect the monthly cost of insurance
charges and the amount of the surrender charge. If the Face Amount is
decreased, a pro rata surrender charge may be imposed. The Policy Value is
reduced by the amount of the charge. See "THE POLICY - Change In Face Amount."

The minimum increase in Face Amount is $10,000, and any increase may also
require additional Evidence of Insurability satisfactory to the Company. The
increase is subject to a "free look period" and, during the first 24 months
after the increase, to a conversion privilege. See "THE POLICY - Free Look
Period - Conversion Privileges."

ADDITIONAL INSURANCE BENEFITS - You have the flexibility to add additional
insurance benefits by rider. These include the Waiver of Premium Rider,
Accidental Death Benefit Rider, Guaranteed Insurability Rider, Other Insured
Rider, Children's Insurance Rider, Exchange Option Rider and Living Benefits
Rider. See "APPENDIX A - Optional Benefits."

The cost of these optional insurance benefits will be deducted from Policy Value
as part of the Monthly Deduction. See "CHARGES AND DEDUCTIONS - Monthly
Deduction From Policy Value."

<PAGE>

POLICY ISSUANCE - If at the time of application you make a payment equal to at
least one Minimum Monthly Factor for the Policy as applied for, the Company will
provide conditional insurance, equal to the amount applied for but not to exceed
$500,000. If the application is approved, the Policy will be issued as of the
date the terms of the conditional insurance agreement are met. If you do not
wish to make any payment at the time of application, insurance coverage will not
be in force until delivery of the Policy and payment of sufficient premium
during the lifetime of the Insured.

If any premiums are paid prior to the issuance of the Policy, such premiums will
be held in the Company's General Account. If your application is approved and
the Policy is issued and accepted, the initial premiums held in the General
Account will be credited with interest at a specified rate beginning not later
than the date of receipt of the premiums at the Company's Principal Office. IF
A POLICY IS NOT ISSUED AND ACCEPTED, THE INITIAL PREMIUMS WILL BE RETURNED TO
YOU WITHOUT INTEREST.

Upon completion of issuance procedures, delivery of the Policy, and receipt of
any additional premiums, if less than $10,000 of initial Net Premiums have been
received by the Company, such Net Premiums will be allocated to the Sub-Accounts
according to your instructions. If initial Net Premiums equal or exceed
$10,000, or if the Policy provides for planned premium payments during the first
year equal to or exceeding $10,000 annually, $5,000 semi-annually, $2,500
quarterly or $1,000 monthly, the entire Net Premium plus any interest earned
will be allocated to the Sub-Accounts upon return to the Company of a Delivery
Receipt. See "THE POLICY - Application For A Policy."

MINIMUM MONTHLY FACTOR - The Policy is guaranteed not to lapse prior to the 49th
Monthly Deduction after Date of Issue or the effective date of an increase in
the Face Amount, if you make premium payments, less partial withdrawals and
partial withdrawal charges, at least equal to the sum of the Minimum Monthly
Factors for the number of months the Policy increase, or Policy Change which
causes a change in the Minimum Monthly Factor, has been in force. Policy
Changes which cause a change in the Minimum Monthly Factor are changes in Face
Amount and the addition or deletion of a rider. However, at all other times,
payments of such premiums do not guarantee that the Policy will remain in force.
See "THE POLICY - Premium Payments." Moreover, even during the 48 month
periods, if Debt exceeds Policy Value less surrender charges, then making
payments at least equal to the Minimum Monthly Factors will not prevent the
Policy from lapsing.

ALLOCATION OF NET PREMIUMS - Net premiums are the premiums paid less the tax
expense charge. Net premiums may be allocated to one or more Sub-Accounts of
the VEL II Account, to the General Account, or to any combination of Accounts.
You bear the investment risk of Net Premiums allocated to the Sub-Accounts.
Allocations may be made to no more than seven Sub-Accounts at any one time. The
minimum allocation is 1% of Net Premium. All allocations must be in whole
numbers and must total 100%. See "THE POLICY - Allocation Of Net Premiums."

Premiums allocated to the Company's General Account will earn a fixed rate of
interest. Net premiums and minimum interest are guaranteed by the Company. For
more information, see "MORE INFORMATION ABOUT THE GENERAL ACCOUNT."

INVESTMENT OPTIONS - The Policies permit Net Premiums to be allocated either to
the Company's General Account or to the VEL II Account. The VEL II Account is
currently comprised of eighteen Sub-Accounts ("Sub-Accounts"). Each Sub-Account
invests exclusively in a corresponding Underlying Fund of the Allmerica
Investment Trust ("Trust") managed by Allmerica Investment, the Variable
Insurance Products Fund ("VIP") or the Variable Insurance Products Fund II ("VIP
II") managed by Fidelity Management, T. Rowe Price International Series, Inc.
("T. Rowe Price") managed by Rowe Price-Fleming International, Inc. with
respect to the International Stock Portfolio or the Delaware Group Premium
Fund, Inc. ("DGPF") managed by Delaware International with respect to the
International Equity Series. The Policies permit you to transfer Policy Value
among the available Sub-Accounts and between the Sub-Accounts and the General
Account of the Company, subject to certain limitations described under "THE
POLICY - Transfer Privilege."

The Trust, VIP, VIP II, T. Rowe Price and DGPF are open-end, diversified series
management investment companies. Eleven different Underlying Funds of the Trust
(each a "Fund") are available under the Policies: the Growth Fund, Investment
Grade Income Fund, Money Market Fund, Equity Index Fund, Government Bond Fund,
Select International Equity Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund and Small
Cap Value Fund. Four different Underlying Funds of VIP (each a "Portfolio") are
available under the Policies: the High Income Portfolio, Equity-Income
Portfolio, Growth Portfolio and Overseas Portfolio. One Underlying Fund of VIP
II ("Portfolio") is available under the Policies: the Asset Manager Portfolio.
One Underlying Fund of T. Rowe Price ("Portfolio") is available under the
Policies: the T. Rowe Price International Stock Portfolio. One Underlying
Fund of DGPF ("Series") is available under the Policies: the International
Equity Series.

<PAGE>

Each of the Underlying Funds has its own investment objectives. However,
certain Portfolios have investment objectives similar to certain Funds or
Series.

The value of each Sub-Account will vary daily depending upon the performance of
the Underlying Fund in which it invests. Each Sub-Account reinvests dividends
or capital gains distributions received from an Underlying Fund in additional
shares of that Underlying Fund.

There can be no assurance that the investment objectives of the Underlying Funds
can be achieved. For more information, see "DESCRIPTION OF THE COMPANY, THE VEL
II ACCOUNT, ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II, T. ROWE PRICE INTERNATIONAL SERIES, INC.
AND DELAWARE GROUP PREMIUM FUND, INC."

FREE LOOK PERIOD - The Policy provides for an initial Free Look Period. You may
cancel the Policy by mailing or delivering it to the Principal Office or to an
agent of the Company on or before the latest of (a) 45 days after the
application for the Policy is signed, (b) 10 days after you receive the Policy,
or (c) 10 days after the Company mails or personally delivers a Notice of
Withdrawal Rights to you. Upon returning the Policy you will receive a refund
equal to the premiums paid. A free look privilege also applies after a
requested increase in Face Amount. See "THE POLICY - Free Look Period."

CONVERSION PRIVILEGES - During the first 24 Policy months after the Date of
Issue, or within 60 days after the later of a material change in the investment
policy of a Sub-Account or notice thereof, subject to certain restrictions you
may convert this Policy to a flexible premium fixed adjustable life insurance
policy. The new policy, including any riders then in effect, will have the same
face amount, issue age, date of issue, and risk classifications as the original
Policy. A different conversion privilege is in effect for 24 Policy months
after the date of an increase in Face Amount. See "THE POLICY - Conversion
Privileges."

PARTIAL WITHDRAWAL - After the first Policy year, you may make partial
withdrawals in a minimum amount of $500 from the Policy Value. Under Option 1,
the Face Amount is reduced by the amount of the partial withdrawal, and a
partial withdrawal will not be allowed if it would reduce the Face Amount below
$40,000.

A transaction charge which is described in "CHARGES AND DEDUCTIONS - Charges On
Partial Withdrawal," will be assessed to reimburse the Company for the cost of
processing each partial withdrawal. A partial withdrawal charge may also be
imposed upon a partial withdrawal. Generally, amounts withdrawn during each
Policy year in excess of 10% of the Policy Value ("excess withdrawal") are
subject to the partial withdrawal charge. The partial withdrawal charge is
equal to 5% of the excess withdrawal up to the surrender charge on the date of
withdrawal. If no surrender charge is applicable at the time of withdrawal, no
partial withdrawal charge will be deducted. The Policy's outstanding surrender
charge will be reduced by the amount of the partial withdrawal charge deducted.
See "THE POLICY - Partial Withdrawal" and "CHARGES AND DEDUCTIONS - Charges On
Partial Withdrawal."

LOAN PRIVILEGE - You may borrow against the Policy Value. The total amount you
may borrow is the Loan Value. Loan Value in the first Policy Year is 75% of an
amount equal to Policy Value less surrender charge, Monthly Deductions, and
interest on Debt to the end of the Policy year. Thereafter, Loan Value is 90%
of an amount equal to Policy Value less the surrender charge.

Policy loans will be allocated among the General Account and the Sub-Accounts in
accordance with your instructions. If no allocation is made by you, the Company
will make a Pro Rata Allocation among the Accounts. In either case, Policy
Value equal to the Policy loan will be transferred from the appropriate
Sub-Account(s) to the General Account, and will earn monthly interest at an
effective annual rate of at least 6%. Therefore, a Policy loan may have a
permanent impact on the Policy Value even though it is eventually repaid.
Although the loan amount is a part of the Policy Value, the Death Proceeds will
be reduced by the amount of outstanding Debt at the time of death.

Policy loans will bear interest at a fixed rate of 8% per year, due and payable
in arrears at the end of each Policy year. If interest is not paid when due, it
will be added to the loan balance. Policy loans may be repaid at any time. You
must notify the Company if a payment is a loan repayment; otherwise, it will be
considered a premium payment. Any partial or full repayment of Debt by you will
be allocated to the General Account or Sub-Accounts in accordance with your
instructions. If you do not specify an allocation, the Company will allocate
the loan repayment in accordance with your most recent premium allocation
instructions. See "POLICY LOANS."

<PAGE>

POLICY LAPSE AND REINSTATEMENT - The failure to make premium payments will not
cause a Policy to lapse unless: (a) the Surrender Value is insufficient to
cover the next Monthly Deduction plus loan interest accrued, if any, or (b)
Debt exceeds Policy Value less surrender charges. A 62-day grace period applies
to each situation. Except for the situation described in (b) above, the Policy
will not lapse prior to the 49th Monthly Deduction following the Date of Issue
or the effective date of an increase in Face Amount, if you make premium
payments, less Debt, partial withdrawals and partial withdrawal charges, at
least equal to the sum of the Minimum Monthly Factors for the number of months
the Policy, increase, or Policy Change which causes a change in the Minimum
Monthly Factor, has been in force. Subject to certain conditions
(including Evidence of Insurability showing that the Insured is insurable
according to the Company's underwriting rules and the payment of sufficient
premium), a Policy may be reinstated at any time within 3 years after the
expiration of the grace period and prior to the Final Premium Payment Date. The
Company Reserves the right to increase the Minimum Monthly Factor upon
reinstatement. See "POLICY TERMINATION AND REINSTATEMENT."

TAX TREATMENT - A Policy is generally subject to the same federal income tax
treatment as a conventional fixed benefit life insurance policy. Under current
tax law, to the extent there is no change in benefits, you will be taxed on
Policy Value withdrawn from the Policy only to the extent that the amount
withdrawn exceeds the total premiums paid. Withdrawals in excess of premiums
paid will be treated as ordinary income. During the first 15 Policy years,
however, an "interest first" rule applies to any distribution of cash that is
required under Section 7702 of the Internal Revenue Code because of a reduction
in benefits under the Policy. Death Proceeds under the Policy are excludable
from the gross income of the Beneficiary, but in some circumstances the Death
Proceeds or the Policy Value may be subject to federal estate tax. See "FEDERAL
TAX CONSIDERATIONS - Taxation Of The Policies."

A Policy offered by this prospectus may be considered a "modified endowment
contract" if it fails a " 7 - pay " test. A Policy fails to satisfy the 7 - pay
test if the cumulative premiums paid under the Policy at any time during the
first seven policy years exceeds the sum of the net level premiums that would
have been paid, had the Policy provided for paid-up future benefits after the
payment of seven level premiums. If the Policy is considered a modified
endowment contract, all distributions (including policy loans, partial
withdrawals, surrenders or assignments) will be taxed on an "income-first"
basis. In addition, with certain exceptions, an additional 10% penalty will be
imposed on the portion of any distribution that is includible in income. For
more information, see "FEDERAL TAX CONSIDERATIONS - Modified Endowment
Contracts."

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

The purpose of the Policy is to provide insurance protection for the Beneficiary
named therein. This Summary is intended to provide only a very brief overview
of the more significant aspects of the Policy. Further detail is provided in
this prospectus and in the Policy. No claim is made that the Policy is in any
way similar or comparable to a systematic investment plan of a mutual fund. The
Policy together with its attached application constitutes the entire agreement
between the Company and you.

<PAGE>
PERFORMANCE INFORMATION

The Policies were first offered to the public in 1994. However, the Company may
advertise "Total Return" and "Average Annual Total Return" performance
information based on the periods that the Underlying Funds have been in
existence. The results for any period prior to the Policies being offered will
be calculated as if the Policies had been offered during that period of time,
with all charges assumed to be those applicable to the Sub-Accounts, the
Underlying Funds, and (in Table I) under a "representative" Policy that is
surrendered at the end of the applicable period. FOR MORE INFORMATION ON
CHARGES UNDER THE POLICIES, SEE CHARGES AND DEDUCTIONS.

In each Table below, "One-Year Total Return" refers to the total of the income
generated by a sub-account, based on certain charges and assumptions as
described in the respective tables, for the one-year period ended December 31,
1995. "Average Annual Total Return" is based on the same charges and
assumptions, but reflects the hypothetical annually compounded return that would
have produced the same cumulative return if the Sub-Account's performance had
been constant over the entire period. Because average annual total returns tend
to smooth out variations in annual performance return, they are not the same as
actual year-by-year results.

TABLE I: SUB-ACCOUNT PERFORMANCE
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE POLICY
-------------------------------------------------------
The following performance information is based on the periods that the
Underlying Funds have been in existence. The data is net of expenses of the
Underlying Funds, all Sub-Account charges, and all Policy charges (including
surrender charges) for a representative Policy. It is assumed that the Insured
is male, Age 36, standard (nonsmoker) Premium Class, that the Face Amount of the
Policy is $250,000, that an annual premium payment of $3,000 (approximately one
Guideline Annual Premium) was made at the beginning of each Policy year, that
ALL premiums were allocated to EACH Sub-Account individually, and that there was
a full surrender of the Policy at the end of the applicable period.

<TABLE>
<CAPTION>
Average Annual Total Return as of 12/31/95
Sub- Underlying One-Year Since Year Since
Account Fund Total Return 3 years 5 years Inception Inception*
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Growth -84.93% -25.38% -1.76% 10.18% 10.00%
2 Investment Grade -98.43% -31.54% -6.31% 3.75% 10.00%
3 Money Market -100.00% -37.67% -13.33% -0.31% 10.00%
4 Equity Index -81.88% -22.09% -6.06% 3.44% 5.26%
5 Governement Bond -100.00% -34.29% N/A -14.18% 4.35%
6 Select Aggressive Growth -85.40% -20.76% N/A -9.39% 3.36%
7 Select Growth -92.35% -32.83% N/A -23.37% 3.36%
8 Select Growth and Income -87.17% -24.22% N/A -21.01% 3.36%
9 Small Cap Value -98.65% N/A N/A -33.93% 2.67%
11 Select Int'l Equity -96.82% N/A N/A -64.07% 1.67%
12 Select Cap. Appreciation N/A N/A N/A -84.95% 0.67%
102 VIP High Volume -95.84% -24.96% 4.86% 6.28% 10.00%
103 VIP Equity Income -82.86% -15.22% 7.71% 7.34% 9.23%
104 VIP Growth -82.62% -18.32% 7.06% 9.00% 9.23%
105 VIP Oversees -100.00% -21.19% -8.58% 0.26% 8.92%
106 VIP II Asset Manager -99.23% -28.83% -2.67% 0.35% 6.32%
150 T. Rowe Price Int'l Stock -100.00% N/A N/A -69.97% 1.58%
207 DGPF Intl'l Equity -100.00% N/A N/A -26.14% 3.17%
</TABLE>

Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. One-Year total return and average annual total return figures are based
on historical earnings and are not intended to indicate future performance.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Underlying Fund in which a 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.

<PAGE>

TABLE II: SUB-ACCOUNT PERFORMANCE
EXCLUDING MONTHLY POLICY CHARGES AND SURRENDER CHARGES
------------------------------------------------------
The following performance information is based on the periods that the
Underlying Funds have been in existence. The performance information is net of
total Underlying Fund expenses, all Sub-Account charges, and premium tax and
expense charges. THE DATA DOES NOT REFLECT MONTHLY CHARGES UNDER THE POLICIES
OR SURRENDER CHARGES. It is assumed that an annual premium payment of $3,000
(approximately one Guideline Annual Premium) was made at the beginning of each
Policy year and that ALL premiums were allocated to EACH Sub-Account
individually.

<TABLE>
<CAPTION>
Average Annual Total Return as of 12/31/95
Sub- Underlying One-Year Since Year Since
Account Fund Total Return 3 years 5 years Inception Inception
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Growth 31.74% 11.46% 15.44% 14.45% 10.00%
2 investment Grade 16.90% 7.34% 9.01% 8.66% 10.00%
3 Money Market 4.99% 3.42% 3.71% 5.11% 10.00%
4 Equity Index 35.09% 13.74% 9.20% 15.99% 5.26%
5 Governement Bond 12.16% 5.56% N/A 6.86% 4.35%
6 Select Aggressive Growth 31.22% 14.67% N/A 19.20% 3.36%
7 Select Growth 23.59% 6.50% N/A 9.13% 3.36%
8 Select Growth and Income 29.28% 12.26% N/A 10.77% 3.36%
9 Small Cap Value 16.66% N/A N/A 9.26% 2.67%
11 Select Int'l Equity 18.67% N/A N/A 8.14% 1.67%
12 Select Cap. Appreciation N/A N/A N/A 38.81% 0.67%
102 VIP High Volume 19.75% 11.75% 17.97% 10.91% 10.00%
103 VIP Equity Income 34.01% 18.64% 20.35% 12.42% 9.23%
104 VIP Growth 34.28% 16.40% 19.81% 13.91% 9.23%
105 VIP Oversees 8.80% 14.37% 7.26% 6.45% 8.92%
106 VIP II Asset Manager 16.02% 9.13% 11.86% 10.35% 6.32%
150 T. Rowe Int'l Stock 10.29% N/A N/A 6.45% 1.58%
207 DGPF Intl'l Equity 12.81% N/A N/A 7.84% 3.17%
</TABLE>

Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. One-year total return and average annual total return figures are based
on historical earnings and are not intended to indicate future performance.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Underlying Fund in which a 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.
- - - -

*The inception dates for the Underlying Funds are: 4/29/85 for Growth,
Investment Grade and Money Market; 9/28/90 for Equity Index; 8/26/91 for
Government Bond; 8/21/92 for Select Aggressive Growth, Select Growth, and Select
Growth and Income; 4/30/93 for Small Cap Value; 5/01/94 for Select International
Equity;4/28/95 for Select Capital Appreciation; 10/09/86 for VIP Equity-Income
and VIP Growth; 9/19/85 for VIP High Income; 1/28/87 for VIP Overseas; 9/06/89
for VIP II Asset Manager; 10/29/92 for DGPF International Equity; and 3/31/94
for the T. Rowe Price International Stock.

Performance information may be compared, in reports and promotional literature,
to: (i) the Standard & Poor's 500 Stock Index ("S & P 500"), Dow Jones
Industrial Average ("DJIA"), Shearson Lehman Aggregate Bond Index or other
unmanaged indices so that investors may compare results with those of a group of
unmanaged securities widely regarded by investors as representative of the
securities markets in general; (ii) other groups of variable life 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, such as
Morningstar, Inc., who rank such investment products on overall performance or
other criteria; or (iii) the Consumer Price Index (a measure for inflation) to
assess the real rate of return from an investment. Unmanaged indices may assume
the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

The Company may provide information on various topics of interest to
Policyowners and prospective Policyowners in sales literature, periodic
publications or other materials. 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.

14
<PAGE>

THE COMPANY - The Company organized under the laws of Massachusetts in 1844, is
the fifth oldest life insurance company in America. As of December 31, 1995,
the company and its subsidiaries had over $11 billion in combined assets and
over $18 billion of life insurance in force. Effective October 16, 1995, the
Company 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. The Company is a wholly-owned subsidiary of Allmerica
Financial Corporation ("AFC"). The Company's principal office is located at
440 Lincoln Street, Worcester, Massachusetts 01653, telephone 508-855-1000
("Principal Office")

The Company 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, the Company is subject to the insurance laws and
regulations of other states and jurisdictions in which it is licensed to
operate.

THE VEL II ACCOUNT - The VEL II Account was established pursuant to a vote of
the Board of Directors of the Company on August 20, 1991. The VEL II Account is
registered with the Securities and Exchange Commission ("Commission") as a unit
investment trust under the Investment Company Act of 1940 ("1940 Act"). Such
registration does not involve the supervision of its management or investment
practices or policies of the VEL II Account or the Company by the Commission.

The assets used to fund the variable portion of the Policies are set aside in
the VEL II Account and are kept separate and apart from the general assets of
the Company. Under Massachusetts law, assets equal to the reserves and other
liabilities of the VEL II Account may not be charged with any liabilities
arising out of any other business of the Company. The VEL II Account currently
has sixteen Sub-Accounts. Each Sub-Account is administered and accounted for as
part of the general business of the Company, 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 or the
other Sub-Accounts. Each Sub-Account invests exclusively in a corresponding
investment portfolio ("Underlying Fund") of the Allmerica Investment Trust, the
Variable Insurance Products Fund, the Variable Insurance Products Fund II, T.
Rowe Price International Series, Inc. or the Delaware Group Premium Fund, Inc.
("Underlying Investment Companies"). The assets of each Underlying Fund are
held separate from the assets of the other Underlying Funds. Each Underlying
Fund operates as a separate investment vehicle and the income or losses of one
Underlying Fund generally have no effect on the investment performance of
another Underlying Fund. Shares of each Underlying Fund are not offered to
the general public but solely to separate accounts of life insurance companies,
such as the VEL II Account. Each Sub-Account has two sub-divisions. One
sub-division applies to Policies during their first ten Policy years, which are
subject to a VEL II Account administrative charge. See "CHARGES AND DEDUCTIONS
- - Charges Against Assets of the VEL II Account." Thereafter, such Policies are
automatically allocated to the second sub-division to account for the
elimination of the VEL II Account administrative charge.

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

ALLMERICA INVESTMENT TRUST - Allmerica Investment Trust (the "Trust") is an
open-end, diversified management investment company registered with the
Commission under the 1940 Act. Such registration does not involve supervision
by the Commission of the investments or investment policy of the Trust or its
separate investment Funds.

The Trust was established by the Company 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 and other
affiliated insurance companies. Eleven investment portfolios ("Funds") of the
Trust are available under the Policies, each issuing a series of shares: the
Growth Fund, Investment Grade Income Fund, Money Market Fund, Equity Index Fund,
Government Bond Fund, Select International Equity Fund, Select Aggressive Growth
Fund, Select Capital Appreciation Fund, Select Growth Fund, Select Growth and
Income Fund, and Small Cap Value Fund.

Allmerica Investment serves as investment adviser of the Trust and has entered
into sub-advisory agreements with other investment managers ("Sub-Advisers") who
manage the investments of the Funds. See "INVESTMENT ADVISORY SERVICES TO THE
TRUST."

VARIABLE INSURANCE PRODUCTS FUND - Variable Insurance Products Fund ("VIP"),
managed by Fidelity Management & Research Company ("Fidelity Management"), is an
open-end, diversified, management investment company organized as a
Massachusetts business trust on November 13, 1981 and registered with the
Commission under the 1940 Act. Four of its investment portfolios are available
under the Policies: High Income Portfolio, Equity-Income Portfolio, Growth
Portfolio and Overseas Portfolio.

Various Fidelity companies perform certain activities required to operate VIP.
Fidelity Management, a registered investment adviser under the Investment
Advisers Act of 1940, is one of America's largest investment management
organizations and has its principal business address at 82 Devonshire Street,
Boston MA. It is composed of a number of different companies, which provide a
variety of financial services and products. Fidelity Management 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. The
Portfolios of VIP as part of their operating expenses pay an investment
management fee to Fidelity Management. See "INVESTMENT ADVISORY SERVICES TO VIP
AND VIP II."

15
<PAGE>

VARIABLE INSURANCE PRODUCTS FUND II - Variable Insurance Products Fund II ("VIP
II"), managed by Fidelity Management (see discussion under "VARIABLE INSURANCE
PRODUCTS FUND"), is an open-end , diversified, management investment company
organized as a Massachusetts business trust on March 21, 1988 and registered
with the Commission under the 1940 Act. One of its investment portfolios is
available under the Policies: the Asset Manager Portfolio.

T. ROWE PRICE INTERNATIONAL SERIES, INC. - T. Rowe Price International Series,
Inc. ("T. Rowe"), managed by Rowe Price-Fleming International, Inc. ("Price-
Fleming") (See "INVESTMENT ADVISORY SERVICES TO T. ROWE PRICE"), is an open-end,
diversified, management investment company organized as a Maryland corporation
in 1994 and registered with the Commission under the 1940 Act. One of its
investment portfolios is available under the Policies: the International Stock
Portfolio.

DELAWARE GROUP PREMIUM FUND, INC.- Delaware Group Premium Fund, Inc. ("DGPF") is
an open-end, diversified management investment company registered with the
Commission under the 1940 Act. Such registration does not involve supervision
by the Commission of the investments or investment policy of DGPF or its
separate investment series.

DGPF was established to provide a vehicle for the investment of assets of
various separate accounts supporting variable insurance policies. One
investment portfolio ("Series") is available under the Policies: the
International Equity Series.

The Investment adviser for the International Equity Series is Delaware
International Advisers Ltd. ("Delaware International"). See "INVESTMENT
ADVISORY SERVICES TO DGPF."

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 AND SHOULD BE READ CAREFULLY BEFORE INVESTING. The
Statements of Additional Information of the Underlying Funds are available upon
request. There can be no assurance that the investment objectives of the
Underlying funds can be achieved.

GROWTH FUND (SUB-ACCOUNT 1) - The Growth Fund of the Trust is invested in common
stocks and securities convertible into common stocks that are believed to
represent significant underlying value in relation to current market prices.
The objective of the Growth Fund is to achieve long-term growth of capital.
Realization of current investment income, if any, is incidental to this
objective.

INVESTMENT GRADE INCOME FUND (SUB-ACCOUNT 2) - The Investment Grade Income Fund
of the Trust is invested in a diversified portfolio of fixed income securities
with the objective of seeking as high a level of total return (including both
income and realized and unrealized capital gains) as is consistent with prudent
investment management.

MONEY MARKET FUND (SUB-ACCOUNT 3) - The Money Market Fund of the Trust is
invested in a diversified portfolio of high-quality, short-term debt instruments
with the objective of obtaining maximum current income consistent with the
preservation of capital and liquidity.

EQUITY INDEX FUND (SUB-ACCOUNT 4) - The Equity Index Fund of the Trust seeks to
provide investment results that correspond generally to the composite price and
yield performance of United States publicly traded common stocks. The Equity
Index Fund seeks to achieve its objective by attempting to replicate the
composite price and yield performance of the Standard & Poor's 500 Composite
Stock Price Index.

GOVERNMENT BOND FUND (SUB-ACCOUNT 5) - The Government Bond Fund of the Trust has
the investment objectives of seeking high income, preservation of capital and
maintenance of liquidity, primarily through investments in debt instruments
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
and in related options, futures and repurchase agreements.

SELECT AGGRESSIVE GROWTH FUND (SUB-ACCOUNT 6) - The Select Aggressive Growth
Fund of the Trust seeks above-average capital appreciation by investing
primarily in common stocks of companies which are believed to have significant
potential for capital appreciation.

SELECT GROWTH FUND (SUB-ACCOUNT 7) - The Select Growth Fund of the Trust 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.

SELECT GROWTH AND INCOME FUND (SUB-ACCOUNT 8) - The select Growth and Income
Fund of the Trust 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.

SMALL CAP VALUE FUND (SUB-ACCOUNT 9) - The Small Cap Value Fund of the Trust
seeks long-term growth by investing principally in a diversified portfolio of
common stocks of smaller, faster-growing companies considered to be attractively
valued in the smaller company sector of the market.

SELECT INTERNATIONAL EQUITY FUND (SUB-ACCOUNT 11) - The Select International
Equity Fund of the Trust seeks maximum long-term total return (capital
appreciation and income) primarily by investing in common stocks of established
non-U.S. companies.

16
<PAGE>

SELECT CAPITAL APPRECIATION FUND (SUB-ACCOUNT 12) - The Select Capital
Appreciation Fund of the Trust seeks long-term growth of capital in a manner
consistent with the preservation 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. The Sub-Adviser for
the Select Capital Appreciation Fund is Janus Capital Corporation.

HIGH INCOME PORTFOLIO (SUB-ACCOUNT 102) - The High Income Portfolio of VIP seeks
to obtain a high level of current income by investing primarily in
high-yielding, lower-rated fixed-income securities (commonly referred to as
"junk bonds"), while also considering growth of capital. These securities 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 "Risks of Lower-Rated Debt Securities"
in the VIP prospectus.

EQUITY-INCOME PORTFOLIO (SUB-ACCOUNT 103) -The Equity-Income Portfolio of VIP
seeks reasonable income by investing primarily in income-producing equity
securities. In choosing these securities, the Portfolio will also 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 Standard &
Poor's 500 Composite Stock Price Index. The Portfolio may invest in high
yielding, lower-rated fixed-income securities (commonly referred to as "junk
bonds") which are subject to greater risk than investments in higher-rated
securities. For a further discussion of lower-rated securities, please see
"Risks of Lower-Rated Debt Securities" in the VIP prospectus.

GROWTH PORTFOLIO (SUB-ACCOUNT 104) -The Growth Portfolio of VIP seeks to achieve
capital appreciation. The Portfolio normally purchases common stocks, although
its investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including bonds and
preferred stocks.

OVERSEAS PORTFOLIO (SUB-ACCOUNT 105) -The Overseas Portfolio of VIP 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.

ASSET MANAGER PORTFOLIO (SUB-ACCOUNT 106) - The Asset Manager Portfolio of VIP
II seeks high total return with reduced risk over the long-term by allocating
its assets among stocks, bonds and short-term fixed-income instruments.

INTERNATIONAL STOCK PORTFOLIO (SUB-ACCOUNT 150) - The T. Rowe Price
International Stock Portfolio seeks long-term growth of capital through
investments primarily in common stocks of established, non-U.S. companies.

INTERNATIONAL EQUITY SERIES (SUB-ACCOUNT 207) - The International Equity Series
of DGPF seeks long-term growth without undue risk to principal by investing
primarily in equity securities of foreign issuers providing the potential for
capital appreciation and income.

CERTAIN PORTFOLIOS HAVE INVESTMENT OBJECTIVES AND/OR POLICIES SIMILAR TO THOSE
OF CERTAIN FUNDS OR SERIES. THEREFORE, TO CHOOSE THE SUB-ACCOUNTS WHICH WILL
BEST MEET YOUR NEEDS AND OBJECTIVES, CAREFULLY READ THE PROSPECTUSES OF THE
TRUST, VIP, VIP II,T. ROWE PRICE AND DGPF ALONG WITH THIS PROSPECTUS.

In the event of a material change in the investment policy of a Sub-Account or
the Underlying Fund in which it invests, you will be notified of the change. No
material change in the investment policy of a Sub-Account will be made without
approval pursuant to the applicable state insurance laws. If you have Policy
Value in that Sub-Account, the Company will transfer it without charge on
written request by you to another Sub-Account or to the General Account. The
Company must receive your written request within sixty (60) days of the later of
(a) the effective date of such change in the investment policy or (b) the
receipt of the notice of your right to transfer. You may then change your
premium and deduction allocation percentages.

INVESTMENT ADVISORY SERVICES TO THE TRUST - The overall responsibility for the
supervision of the affairs of the Trust vests in the Trustees. The Trust has
entered into a Management Agreement with Allmerica Investment Management
Company, Inc. ("Allmerica Investment"), an indirect wholly-owned subsidiary of
the Company, to handle the day-to-day affairs of the Trust. Allmerica
Investment, subject to review by the Trustees, is responsible for the general
management of the Funds. Allmerica Investment also performs certain
administrative and management services for the Trust, furnishes to the Trust all
necessary office space, facilities, and equipment, and pays the compensation, if
any, of officers and Trustees who are affiliated with Allmerica Investment.

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

Pursuant to the Management Agreement with the Trust, Allmerica Investment has
entered into agreements ("Sub-Adviser Agreements") with other investment
advisers ("Sub-Advisers") under which each Sub-Adviser manages the investments
of one or more of the Funds. Under the Sub-Adviser Agreement, the Sub-Adviser
is authorized to engage in portfolio transactions on behalf of the applicable
Fund, subject to such general or specific instructions as may be given by the
Trustees. The terms of a Sub-Adviser Agreement cannot be materially changed
without the approval of a majority in interest of the shareholders of the
affected fund.

The Sub-Advisers of each of the Funds are as follows:

17
<PAGE>

Growth Fund Miller, Anderson & Sherrerd
Investment Grade Income Allmerica Asset Management, Inc.
Money Market Fund Allmerica Asset Management, Inc.
Equity Index Fund Allmerica Asset Management, Inc.
Government Bond Fund Allmerica Asset Management, Inc.
Select International Equity Fund Bank of Ireland Asset Management
Select Aggressive Growth Fund Nicholas-Applegate Capital Management
Select Capital Appreciation Fund Janus Capital Corporation
Select Growth Fund United Asset Management Corporation
Select Growth and Income Fund John A. Levin & Co., Inc.
Small Cap Value Fund David L. Babson & Co. Inc.

Allmerica Asset Management, Inc. is an indirect wholly owned subsidiary of the
Company.

For providing its services under the Management Agreement, Allmerica Investment
will receive a fee, computed daily at an annual rate based on the average daily
net asset value of each Fund as follows:

<PAGE>
FUND Net Asset Value RATE
---- --------------- ----

<S> <C> <C>
Growth First $50 million 0.60%
$50-250 million 0.50%
Over $250 million 0.35%

Investment Grade Income First $50 million 0.50%
$50-250 million 0.35%
Over $250 million 0.25%

Money Market First $50 million 0.35%
$50-250 million 0.30%
Over $250 million 0.25%

Equity Index First $50 million 0.35%
$50-250 million 0.30%
Over $250 million 0.25%

Government Bond * 0.50%

Select International Equity * 1.00%

Select Aggressive Growth * 1.00%

Select Capital Appreciation * 1.00%

Select Growth * 0.85%

Select Growth and Income * 0.75%

Small Cap Value * 0.85%

</TABLE>

* For the Government Bond Fund, Select International Equity Fund, Select
Aggressive Growth Fund, Select Capital Appreciation Fund, Select Growth Fund,
Select Growth and Income Fund and Small Cap Value Fund, each rate applicable to
Allmerica Investment does not vary according to the level of assets in the Fund.
Allmerica Investment's fee computed for each Fund will be paid from the assets
of such Fund. Allmerica Investment is solely responsible for the payment of all
fees for investment management services to the Sub-Advisers, who will receive
from Allmerica Investment a fee, computed daily at an annual rate based on the
average daily net asset value of each Fund as follows:

<PAGE>

SUB-ADVISER Fund NET ASSET VALUE Rate
- ----------- ---- --------------- ----

<S> <C> <C> <C>
Miller, Anderson Growth * *
& Sherrerd

Allmerica Asset Investment Grade ** 0.20%
Management, Inc. Income

Allmerica Asset Money Market ** 0.10%
Management, Inc.

Allmerica Asset Equity Index ** 0.10%
Management, Inc.

Allmerica Asset Government Bond ** 0.20%
Management, Inc.

Bank of Ireland Asset Select International First $50 million 0.45%
Management Limited Equity Next $50 million 0.40%
Over $100 million 0.30%

Nicholas-Applegate Select Aggressive Growth ** 0.60%
Capital
Management

Janus Capital Corporation Select Capital First $100 million 0.60%
Appreciation Over $100 million 0.55%

United Asset Select Growth First $50 million 0.50%
Management Corporation $50 - 100 million 0.45%
$150 - 250 million 0.35%
$250 - 350 million 0.30%
Over $350 million 0.25%

John A. Levin & Co., Inc. Select Growth and First $100 million 0.40%
Income Next $200 million 0.25%
Over $300 miilion 0.30%

David L. Babson Small Cap Value ** 0.50%
& Co. Inc.

</TABLE>

* Allmerica Investment will pay a fee to Miller, Anderson & Sherrerd based on
the aggregate assets of the Growth Fund and certain other accounts of the
Company and its affiliates (collectively, the "Affiliated Accounts") which are
managed by Miller, Anderson & Sherrerd, under the following schedule:
<TABLE>
<CAPTION>

AGGREGATE AVERAGE Rate
----------------- ----
ASSETS
------
<S> <C>
First $50 million 0.500%
$50 - 100 million 0.375%
$100 - 500 million 0.250%
$500 - 850 million 0.200%
Over $850 million 0.150%
</TABLE>

** For the Investment Grade Income Fund, Money Market Fund, Equity Index Fund,
Government Bond Fund, Select Aggressive Growth Fund and Small Cap Value Fund,
each rate applicable to the Sub-Advisers does not vary according to the level of
assets in the Fund.

The prospectus of the Trust contains additional information concerning the
Funds, including information concerning additional expenses paid by the Funds,
and should be read in conjunction with this prospectus.

INVESTMENT ADVISORY SERVICES TO VIP AND VIP II - For managing investments and
business affairs, each Portfolio pays a monthly fee to Fidelity Management.

The prospectuses of VIP and VIP II contain additional information concerning the
Portfolios, including information concerning additional expenses paid by the
Portfolios, and should be read in conjunction with this prospectus.

<PAGE>

VIP AND VIP II PORTFOLIOS - The High Income Portfolio pays a monthly fee to
Fidelity Management at an annual fee rate made up of the sum of two components:

1. A group fee rate based on the monthly average net assets of all the
mutual funds advised by Fidelity Management. On an annual basis this
rate cannot rise above 0.37%, and drops as total assets in all these
funds rise.

2. An individual fund fee rate of 0.45% of the High Income Portfolio's
average net assets throughout the month. One-twelfth of the annual
management fee rate is applied to net assets averaged over the most
recent month, resulting in a dollar amount which is the management fee
for that month.

The Equity-Income, Growth, Asset Manager and Overseas Portfolios' fee rates are
each made of two components:

1. A group fee rate based on the monthly average net assets of all of the
mutual funds advised by Fidelity Management. On an annual basis, this
rate cannot rise above 0.52%, and drops as total assets in all these
mutual funds rise.

2. An individual Portfolio fee rate of 0.20% for the Equity-Income
Portfolio, 0.30% for the Growth Portfolio, 0.40% for the Asset Manager
Portfolio and 0.45% for the Overseas Portfolio.

One-twelfth of the sum of these two rates is applied to the respective
Portfolio's net assets averaged over the most recent month, giving a dollar
amount which is the fee for that month.

Thus, the High Income Portfolio may have a fee of as high as 0.82% of its
average net assets. The Equity-Income Portfolio may have a fee of as high as
0.72% of its average net assets. The Growth Portfolio may have a fee of as high
as 0.82% of its average net assets. The Asset Manager Portfolio may have a fee
as high as 0.92% of its average net assets. The Overseas Portfolio may have a
fee of as high as 0.97% of its average net assets. The actual fee rate may be
less depending on the total assets in the funds advised by Fidelity Management.

INVESTMENT ADVISORY SERVICES TO T. ROWE PRICE - The Investment Adviser for the
International Stock Portfolio is Rowe Price-Fleming International, Inc. ("Price-
Fleming"). Price-Fleming, founded in 1979 as a joint venture between T. Rowe
Price Associates, Inc. and Robert Fleming Holdings, Limited, is one of America's
largest international mutual fund asset managers with approximately $9 billion
under management in its offices in Baltimore, London, Tokyo and Hong Kong. To
cover investment management and operating expenses, the International Stock
Portfolio pays Price-Fleming a single, all-inclusive fee of 1.05% of its average
daily net assets.

INVESTMENT ADVISORY SERVICES TO DGPF - Each Series of DGPF pays an investment
adviser an annual fee for managing the portfolios and making the investment
decisions for the Series. The investment adviser for the International Equity
Series is Delaware International Advisers Ltd. ("Delaware International"). The
annual fee paid by the International Equity Series to Delaware International is
equal to 0.75% of the average daily net assets of the Series.

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 are no longer
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
VEL II Account or the affected Sub-Account, the Company may redeem 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 Policy interest in a Sub-Account without notice to the Policyowner and prior
approval of the Commission and state insurance authorities, to the extent
required by the 1940 Act or other applicable law. The VEL II Account may,
to the extent permitted by law, purchase other securities for other policies
or permit a conversion between policies upon request by a Policyowner.

The Company also reserves the right to establish additional Sub-Accounts of the
VEL II 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 Commission
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 Policyowners on a basis to be determined by the Company.

Shares of the Funds of the Trust are also issued to separate accounts of the
Company and its affiliates which issue variable annuity contracts ("mixed
funding"). Shares of the Portfolios of VIP and VIP II, the Portfolio ofT. Rowe
Price and the Series of DGPF are also issued to other unaffiliated insurance
companies ("shared funding"). It is conceivable that in the future such mixed
funding or shared funding may be disadvantageous for variable life Policyowners
or variable annuity Policyowners. Although the Company and the Underlying
Investment Companies do not currently foresee any such disadvantages to either
variable life insurance Policyowners or variable annuity Policyowners, the
Company and the respective Trustees intend to monitor events in order to
identify any material conflicts between such Policyowners 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.

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

VOTING RIGHTS - To the extent required by law, the Company will vote Underlying
Fund shares held by each Sub-Account in accordance with instructions received
from Policyowners with Policy Value in such Sub-Account. 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 Policies, the Company reserves the

21
<PAGE>
the right to do so.

Each person having a voting interest will be provided with proxy materials of
the respective Underlying Fund together with an appropriate form with which to
give voting instructions to the Company. Shares held in each Sub-Account for
which no timely instructions are received will be voted in proportion to the
instructions received from all persons with an interest in such Sub-Account
furnishing instructions to the Company. The Company will also vote shares held
in the VEL II Account that it owns and which are not attributable to Policies in
the same proportion.

The number of votes which a Policyowner has the right to instruct will be
determined by the Company as of the record date established for the Underlying
Fund. This number is determined by dividing each Policyowner's Policy Value in
the Sub-Account, if any, by the net asset value of one share in the
corresponding Underlying Fund in which the assets of the Sub-Account are
invested.

The Company may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that the shares be
voted so as (a) to cause a change in the subclassification or investment
objective of one or more of the Underlying Funds, or (b) to approve or
disapprove an investment advisory contract for the Underlying Funds. In
addition, the Company may disregard voting instructions in favor of any change
in the investment policies or in any investment adviser or principal underwriter
initiated by Policyowners or the Trustees. The Company's disapproval of any
such change must be reasonable and, in the case of a change in investment
policies or investment adviser, based on a good faith determination that such
change would be contrary to state law or otherwise is inappropriate in light of
the objectives and purposes of the Underlying Funds. In the event the Company
does disregard voting instructions, a summary of and the reasons for that action
will be included in the next periodic report to Policyowners.

THE POLICY

APPLICATION FOR A POLICY - Upon receipt at its Principal Office of a completed
application from a prospective Policyowner, the Company will follow certain
insurance underwriting procedures designed to determine whether the proposed
Insured is insurable. This process may involve such verification procedures as
medical examinations and may require that further information be provided by the
proposed Policyowner before a determination of insurability can be made. A
Policy cannot be issued until this underwriting procedure has been completed.
The Company reserves the right to reject an application which does not meet the
Company's underwriting guidelines, but in underwriting insurance, the Company
shall comply with all applicable federal and state prohibitions concerning
unfair discrimination.

If at the time of application a prospective Policyowner makes a payment equal to
at least one Minimum Monthly Factor for the Policy as applied for, pending
underwriting approval, the Company will provide fixed conditional insurance
pursuant to a Conditional Insurance Agreement in the amount of insurance applied
for, up to a maximum of $500,000. This coverage will generally continue for a
maximum of 90 days from the date of the application or the completion of a
medical exam, should one be required. In no event will any insurance proceeds
be paid under the Conditional Insurance Agreement if death is by suicide.

If the application is approved, the Policy will be issued as of the date the
terms of the Conditional Insurance Agreement were met. If no Conditional
Insurance Agreement is in effect because the prospective Policyowner does not
wish to make any payment until the Policy is issued or has paid an initial
premium that is not sufficient to place the Policy in force, upon delivery of
the Policy the Company will require payment of sufficient premium to place the
insurance in force.

Pending completion of insurance underwriting and Policy issuance procedures, the
initial premium will be held in the Company's General Account. If the
application is approved and the Policy is issued and accepted, the initial
premium held in the General Account will be credited with interest not later
than the date of receipt of the premium at the Company's Principal Office. IF A
POLICY IS NOT ISSUED, THE PREMIUMS WILL BE RETURNED TO YOU WITHOUT INTEREST.

If the Policy is issued to the Trustee of an employee benefit plan, the amounts
held in the Company's General Account will be allocated to the Sub-Accounts
according to the Policyowner's instructions, upon return of a Delivery Receipt
to the Principal Office. For all other Policyowners, if the initial net
premiums are less than $10,000, the amounts held in the Company's General
Account will be allocated to the Sub-Accounts (according to your instructions)
not later than three days after underwriting approval of the Policy. If the
initial net premiums equal or exceed $10,000, or if the Policy provides for
planned premium payments during the first year equal to or exceeding $10,000
annually, $5,000 semi-annually, $2,500 quarterly or $1,000 monthly, the entire
Net Premium plus any interest earned will remain in the General Account until
return of a Delivery Receipt to the Principal Office. The entire amount held in
the General Account for allocation to the VEL Account will then be allocated to
the Sub-Accounts according to your instructions. Amounts remaining in the
General Account will continue to be credited interest from date of receipt of
the premium at the Principal Office.

FREE LOOK PERIOD - The Policy provides for an initial Free Look Period. You may
cancel the Policy by mailing or delivering the Policy to the Principal Office or
an agent of the Company on or before the latest of (a) 45 days after the
application for the Policy is signed, (b) 10 days after you receive the Policy,
or (c) 10 days after the Company mails or personally delivers a notice of
withdrawal rights to you. When you return the Policy, the Company will mail
within 7 days a refund equal to the premiums paid. The refund of any premium
paid by check, however, may be delayed until the check has cleared your bank.

After an increase in Face Amount, the Company will mail or personally deliver a
notice of a "Free Look" with respect to the increase. You will have the right
to cancel the increase before the latest of (a) 45 days after the application
for the increase is signed, (b) 10 days after you receive the new specification
pages issued for the increase, or (c) 10 days after the Company mails or
delivers a notice of withdrawal rights to you. Upon cancelling the increase,
you will receive a credit to your Policy Value of charges which would not have
been deducted but for the increase. The amount to be credited will be refunded
if you so request. The Company will also waive any surrender charge calculated
for the increase.

CONVERSION PRIVILEGES - Without Evidence of Insurability, you may convert this
Policy to a flexible premium adjustable life insurance policy with fixed and
guaranteed minimum benefits if your request is made: (a) within 24 months of
the Date of Issue, or (b) within 60 days after the later of the effective date
of a material change in the

22
<PAGE>

investment policy of a Sub-Account or the date notice is mailed to your last
known address. The new policy, including any riders then in effect, will have
the same Face Amount, issue ages, dates of issue, and risk classifications as
the original Policy.

Within 24 months after the effective date of each increase in Face Amount, you
can transfer, without charge, all or part of the Policy Value in the VEL II
Account to the General Account and simultaneously change your premium allocation
instructions to allocate all or part of future premium payments to the General
Account.

PREMIUM PAYMENTS - Premium Payments are payable to the Company, and may be
mailed to the Principal Office or paid through an authorized agent of the
Company. All premium payments after the initial premium payment are credited to
the VEL II Account or General Account as of date of receipt at the Principal
Office.

You may establish a schedule of planned premiums which will be billed by the
Company at regular intervals. Failure to pay planned premiums, however, will
not itself cause the Policy to lapse. You may also make unscheduled premium
payments at any time prior to the Final Premium Payment Date or skip planned
premium payments, subject to the maximum and minimum premium limitations
described below. Therefore, unlike conventional insurance policies, a Policy
does not obligate you to pay premiums in accordance with a rigid and inflexible
premium schedule.

You may also elect to pay premiums by means of a monthly automatic payment
("MAP") procedure. Under a MAP procedure, amounts will be deducted each month,
generally on the Monthly Payment Date, from your checking account and applied as
a premium under a Policy. The minimum payment permitted under MAP is $50.

Premiums are not limited as to frequency and number. However, no premium
payment may be less than $100 without the Company's consent. Moreover, premium
payments must be sufficient to provide a positive Surrender Value at the end of
each Policy month, or the Policy may lapse. See "POLICY TERMINATION AND
REINSTATEMENT." If, in the first 48 policy months following issue or an
increase in the Face Amount, you make premium payments, less partial withdrawals
and partial withdrawal charges, at least equal to the sum of the Minimum Monthly
Factors for the number of months the Policy, increase in Face Amount, or Policy
Change which causes a change in the Minimum Monthly Factor has been in force,
the Policy is guaranteed not to lapse during that period. EXCEPT FOR THE 48
POLICY MONTHS AFTER THE DATE OF ISSUE OR THE EFFECTIVE DATE OF AN INCREASE IN
FACE AMOUNT, MAKING MONTHLY PAYMENTS AT LEAST EQUAL TO THE MINIMUM MONTHLY
FACTORS DOES NOT GUARANTEE THAT THE POLICY WILL REMAIN IN FORCE.

In no event may the total of all premiums paid exceed the current maximum
premium limitations set forth in the Policy, which are required by Federal tax
laws. These maximum premium limitations will change whenever there is any
change in the Face Amount, the addition or deletion of a rider, or a change in
the Sum Insured Option. If a premium is paid which would result in total
premiums exceeding the current maximum premium limitations, the Company will
only accept that portion of the premiums which shall make total premiums equal
the maximum. Any part of the premiums in excess of that amount will be returned
and no further premiums will be accepted until allowed by the current maximum
premium limitation prescribed by Internal Revenue Service rules. However,
notwithstanding the current maximum premium limitations, the Company will accept
a premium which is needed in order to prevent a lapse of the Policy during a
policy year. See "POLICY TERMINATION AND REINSTATEMENT."

ALLOCATION OF NET PREMIUMS - The Net Premium equals the premium paid less the
tax expense charge. In the application for a Policy, you indicate the initial
allocation of Net Premiums among the General Account and the Sub-Accounts of the
VEL II Account. You may allocate premiums to one or more Sub-Accounts, but may
not have Policy Value in more than seven (7) Sub-Accounts at any one time. The
minimum amount which may be allocated to a Sub-Account is 1% of Net Premium
paid. Allocation percentages must be in whole numbers (for example, 33 1/3%
may not be chosen) and must total 100%.

You may change the allocation of future Net Premiums at any time pursuant to
written or telephone request. If allocation changes by telephone are elected by
the Policyowner, a properly completed authorization form must be on file before
telephone requests will be honored. The policy of the Company and its agents
and affiliates is that they will not be responsible for losses resulting from
acting upon telephone requests reasonably believed to be genuine. The Company
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine; otherwise, the Company may be liable for any losses due
to unauthorized or fraudulent instructions. The procedures the Company follows
for transactions initiated by telephone include requirements that callers on
behalf of a Policyowner identify themselves by name and identify the Policyowner
by name, date of birth and social security number. All transfer instructions by
telephone are tape recorded. An allocation change will be effective as of the
date of receipt of the notice at the Principal Office. No charge is currently
imposed for changing premium allocation instructions. The Company reserves the
right to impose such a charge in the future, but guarantees that the charge will
not exceed $25.

The Policy Value in the Sub-Accounts will vary with their investment experience;
you bear this investment risk. The investment performance may affect the Death
Proceeds as well. Policyowners should periodically review their allocations of
premiums and Policy Value in light of market conditions and overall financial
planning requirements.

TRANSFER PRIVILEGE - Subject to the Company's then current rules, you may at any
time transfer the Policy Value among the Sub-Accounts or between a Sub-Account
and the General Account. However, the Policy Value held in the General Account
to secure a Policy loan may not be transferred.

All requests for transfers must be made to the Principal Office. The amount
transferred will be based on the Policy Value in the Account(s) next computed
after receipt of the transfer order. The Company will make transfers pursuant
to written or telephone request. As discussed under "THE POLICY - Allocation of
Net Premiums," a properly completed authorization form must be on file at the
Principal Office before telephone instructions will be honored.

Transfers involving the General Account are currently permitted only if:

(a) There has been at least a ninety (90) day period since the last
transfer from the General Account; and

(b) The amount transferred from the General Account in each transfer does
not exceed the lesser of $100,000 or 25% of the Accumulated Value
under the Policy.

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<PAGE>

These rules are subject to change by the Company.

You may have automatic transfers of at least $100 each made on a periodic basis
(a) from Sub-Account 3 or Sub-Account 5 (which invest in the Money Market Fund
and Government Bond Fund of the Trust, respectively) to one or more of the other
Sub-Accounts or (b) to automatically reallocate Policy Value among the
Sub-Accounts. Automatic transfers may be made on a monthly, bimonthly,
quarterly, semiannual or annual schedule. Generally, all transfers will be
processed on the 15th of each scheduled month. However, if the 15th is not a
business day or is the Monthly Payment Date, the automatic transfer will be
processed on the next business day.

The transfer privilege is subject to the consent of the Company. The Company
reserves the right to impose limitations on transfers including, but not limited
to: (1) the minimum amount that may be transferred (which minimum amount will
never be greater than $500), (2) the minimum amount that may remain in a Sub-
Account following a transfer from that Sub-Account, (3) the minimum period of
time between transfers involving the General Account, and (4) the maximum amount
that may be transferred each time from the General Account (which maximum amount
will never be less than the lesser of $100,000 or 10% of Policy Value).

The first six transfers in a Policy year will be free of any charge. Thereafter
a $10 transfer charge will be deducted from the amount transferred for each
transfer in that Policy year. The Company may increase or decrease this charge,
but it is guaranteed never to exceed $25. The first automatic transfer counts
as one transfer towards the six free transfers allowed in each policy year; each
subsequent automatic transfer is without charge and does not reduce the
remaining number of transfers which may be made free of charge. Any transfers
made with respect to a conversion privilege, Policy loan or material change in
investment policy will not count towards the six free transfers.

DEATH PROCEEDS - As long as the Policy remains in force (see "POLICY TERMINATION
AND REINSTATEMENT"), the Company will, upon due proof of the Insured's death,
pay the Death Proceeds of the Policy to the named Beneficiary. The Company will
normally pay the Death Proceeds within seven days of receiving due proof of the
Insured's death, but the Company may delay payments under certain circumstances.
See "OTHER POLICY PROVISIONS - Postponement Of Payments." The Death Proceeds
may be received by the Beneficiary in cash or under one or more of the payment
options set forth in the Policy. See "APPENDIX B - PAYMENT OPTIONS."

Prior to the Final Premium Payment Date, the Death Proceeds are: (a) The Sum
Insured provided under Option 1 or Option 2, whichever is elected and in effect
on the date of death; plus (b) any additional insurance on the Insured's life
that is provided by rider; minus (c) any outstanding Debt, any partial
withdrawals and partial withdrawal charges, and any Monthly Deductions due and
unpaid through the Policy month in which the Insured dies. After the Final
Premium Payment Date, the Death Proceeds equal the surrender Value of the
Policy. The amount of Death Proceeds payable will be determined as of the date
of the Company's receipt of due proof of the Insured's death.

SUM INSURED OPTIONS - The Policy provides two Sum Insured Options: Option 1 and
Option 2, as described below. You designate the desired Sum Insured Option in
the application. You may change the option once per Policy year by written
request. There is no charge for a change in option.

Under Option 1, the Sum Insured is equal to the greater of the Face Amount of
insurance or the Guideline Minimum Sum Insured.

Under Option 2, the Sum Insured is equal to the greater of the Face Amount of
insurance plus the Policy Value or the Guideline Minimum Sum Insured.

GUIDELINE MINIMUM SUM INSURED - The Guideline Minimum Sum Insured is equal to a
percentage of the Policy Value as set forth in the table below. The Guideline
Minimum Sum Insured is determined in accordance with Internal Revenue Code
regulations to ensure that the Policy qualifies as a life insurance contract and
that the insurance proceeds will be excluded from the gross income of the
Beneficiary.

GUIDELINE MINIMUM SUM INSURED TABLE

Age of Insured
on Date of Percentage of
Death Policy Value
<S> <C>
40 and under. . . . . . . . . . . . . . . 250%
45. . . . . . . . . . . . . . . . . . . . 215%
50. . . . . . . . . . . . . . . . . . . . 185%
55. . . . . . . . . . . . . . . . . . . . 150%
60. . . . . . . . . . . . . . . . . . . . 130%

24
<PAGE>

65. . . . . . . . . . . . . . . . . . . . 120%
70. . . . . . . . . . . . . . . . . . . . 115%
75. . . . . . . . . . . . . . . . . . . . 105%
80. . . . . . . . . . . . . . . . . . . . 105%
85. . . . . . . . . . . . . . . . . . . . 105%
90. . . . . . . . . . . . . . . . . . . . 105%
95 and above. . . . . . . . . . . . . . . 100%
</TABLE>

For the Ages not listed, the progression between the listed Ages is linear.

Under both Option 1 and Option 2 the Sum Insured provides insurance protection.
Under Option 1, the Sum Insured remains level unless the applicable percentage
of Policy Value under Guideline Minimum Sum Insured exceeds the Face Amount, in
which case the Sum Insured will vary as the Policy Value varies. Under Option
2, the Sum Insured varies as the Policy Value changes.

For any Face Amount, the amount of the Sum Insured and thus the Death Proceeds
will be greater under Option 2 than under Option 1, since the Policy Value is
added to the specified Face Amount and included in the Death Proceeds only under
Option 2. However, the cost of insurance included in the Monthly Deduction will
be greater, and thus the rate at which Policy Value will accumulate will be
slower, under Option 2 than under Option 1 (assuming the same specified Face
Amount and the same actual premiums paid). See "CHARGES AND DEDUCTIONS -
Monthly Deduction From Policy Value." If you desire to have premium payments
and investment performance reflected in the amount of the Sum Insured, you
should choose Option 2. If you desire premium payments and investment
performance reflected to the maximum extent in the Policy Value, you should
select Option 1.

ILLUSTRATION OF OPTION 1 - For purposes of this illustration, assume that the
Insured is under the Age of 40, and that there is no outstanding Debt.

Under Option 1, a Policy with a $50,000 Face Amount will generally have a Sum
Insured equal to $50,000. However, because the Sum Insured must be equal to or
greater than 250% of Policy Value, if at any time the Policy Value exceeds
$20,000, the Sum Insured will exceed the $50,000 Face Amount. In this example,
each additional dollar of Policy Value above $20,000 will increase the Sum
Insured by $2.50. For example, a Policy with a Policy Value of $35,000 will
have a Guideline Minimum Sum Insured of $87,500 ($35,000 x 2.50); Policy Value
of $40,000 will produce a Guideline Minimum Sum Insured of $100,000 ($40,000 x
2.50); and Policy Value of $50,000 will produce a Guideline Minimum Sum Insured
of $125,000 ($50,000 x 2.50).

Similarly, so long as Policy Value exceeds $20,000, each dollar taken out of
Policy Value will reduce the Sum Insured by $2.50. If, for example, the Policy
Value is reduced from $25,000 to $20,000 because of partial withdrawals, charges
or negative investment performance, the Sum Insured will be reduced from $62,500
to $50,000. If at any time, however, the Policy Value multiplied by the
applicable percentage is less than the Face Amount, the Sum Insured will equal
the Face Amount of the Policy.

The applicable percentage becomes lower as the Insured's Age increases. If the
Insured's Age in the above example were, for example, 50 (rather than between 0
and 40), the applicable percentage would be 185%. The Sum Insured would not
exceed the $50,000 Face Amount unless the Policy Value exceeded $27,027 (rather
than $20,000), and each dollar then added to or taken from Policy Value would
change the Sum Insured by $1.85.

ILLUSTRATION OF OPTION 2 - For purposes of this illustration, assume that the
Insured is under the Age of 40 and that there is no outstanding Debt.

Under Option 2, a Policy with a Face Amount of $50,000 will generally produce a
Sum Insured of $50,000 plus Policy Value. For example, a Policy with Policy
Value of $5,000 will produce a Sum Insured of $55,000 ($50,000 + $5,000); Policy
Value of $10,000 will produce a Sum Insured of $60,000 ($50,000 + $10,000);
Policy Value of $25,000 will produce a Sum Insured of $75,000 ($50,000 +
$25,000). However, the Sum Insured must be at least 250% of the Policy Value.
Therefore, if the Policy Value is greater than $33,333, 250% of that amount will
be the Sum Insured, which will be greater than the Face Amount plus Policy
Value. In this example, each additional dollar of Policy Value above $33,333
will increase the Sum Insured by $2.50. For example, if the Policy Value is
$35,000, the Guideline Minimum Sum Insured will be $87,500 ($35,000 x 2.50);
Policy Value of $40,000 will produce a Guideline Minimum Sum Insured of $100,000
($40,000 x 2.50); and Policy Value of $50,000 will produce a Guideline Minimum
Sum Insured of $125,000 ($50,000 x 2.50).

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<PAGE>

Similarly, if Policy Value exceeds $33,333, each dollar taken out of Policy
Value will reduce the Sum Insured by $2.50. If, for example, the Policy Value
is reduced from $45,000 to $40,000 because of partial withdrawals, charges or
negative investment performance, the Sum Insured will be reduced from $112,500
to $100,000. If at any time, however, Policy Value multiplied by the applicable
percentage is less than the Face Amount plus Policy Value, then the Sum Insured
will be the current Face Amount plus Policy Value.

The applicable percentage becomes lower as the Insured's Age increases. If the
Insured's Age in the above example were 50, the Sum Insured must be at least
1.85 times the Policy Value. The amount of the Sum Insured would be the sum of
the Policy Value plus $50,000 unless the Policy Value exceeded $58,824 (rather
than $33,000). Each dollar added to or subtracted from the Policy would change
the Sum Insured by $1.85.

The Sum Insured under Option 2 will always be the greater of the Face Amount
plus Policy Value or the Policy Value multiplied by the applicable percentage.

CHANGE IN SUM INSURED OPTION - Generally, the Sum Insured Option in effect may
be changed once each Policy year by sending a written request for change to the
Principal Office. Changing Sum Insured Options will not require Evidence of
Insurability. The effective date of any such change will be the Monthly Payment
Date on or following the date of receipt of the request. No charges will be
imposed on changes in Sum Insured Options.

If the Sum Insured Option is changed from Option 2 to Option 1, the Face Amount
will be increased to equal the Sum Insured which would have been payable under
Option 2 on the effective date of the change (i.e. the Face Amount immediately
prior to the change plus the Policy Value on the date of the change). The
amount of the Sum Insured will not be altered at the time of the change.
However, the change in option will affect the determination of the Sum Insured
from that point on, since the Policy Value will no longer be added to the Face
Amount in determining the Sum Insured; the Sum Insured will equal the new Face
Amount (or, if higher, the Guideline Minimum Sum Insured). The cost of
insurance may be higher or lower than it otherwise would have been since any
increases or decreases in Policy Value will, respectively, reduce or increase
the Insurance Amount at Risk under Option 1. Assuming a positive net investment
return with respect to any amounts in the VEL II Account, changing the Sum
Insured Option from Option 2 to Option 1 will reduce the Insurance Amount at
Risk and therefore the cost of insurance charge for all subsequent Monthly
Deductions, compared to what such charge would have been if no such change were
made.

If the Sum Insured Option is changed from Option 1 to Option 2, the Face Amount
will be decreased to equal the Sum Insured less the Policy Value on the
effective date of the change. This change may not be made if it would result in
a Face Amount less than $40,000. A change from Option 1 to Option 2 will not
alter the amount of the Sum Insured at the time of the change, but will affect
the determination of the Sum Insured from that point on. Because the Policy
Value will be added to the new specified Face Amount, the Sum Insured will vary
with the Policy Value. Thus, under Option 2, the Insurance Amount at Risk will
always equal the Face Amount unless the Guideline Minimum Sum Insured is in
effect. The cost of insurance may also be higher or lower than it otherwise
would have been without the change in Sum Insured Option. See "CHARGES AND
DEDUCTIONS - Monthly Deduction From Policy Value."

A change in Sum Insured Option may result in total premiums paid exceeding the
then current maximum premium limitation determined by Internal Revenue Service
Rules. In such event, the Company will pay the excess to the Policyowner. See
"THE POLICY - Premium Payments."

CHANGE IN FACE AMOUNT - Subject to certain limitations, you may increase or
decrease the specified Face Amount of a Policy at any time by submitting a
written request to the Company. Any increase or decrease in the specified Face
Amount requested by you will become effective on the Monthly Payment Date on or
next following the date of receipt of the request at the Principal Office, or,
if Evidence of Insurability is required, the date of approval of the request.

INCREASES - Along with the written request for an increase, you must submit
satisfactory Evidence of Insurability. The consent of the Insured is also
required whenever the Face Amount is increased. A request for an increase in
Face Amount may not be less than $10,000. You may not increase the Face Amount
after the Insured reaches Age 80. An increase must be accompanied by an
additional premium if the Surrender Value is less than $50 plus an amount equal
to the sum of two Minimum Monthly Factors. On the effective date of each
increase in Face Amount, a transaction charge of $50 will be deducted from
Policy Value for administrative costs. The effective date of the increase will
be the first Monthly Payment Date on or following the date all of the conditions
for the increase are met.

An increase in the Face Amount will generally affect the Insurance Amount at
Risk and may affect the portion of the Insurance Amount at Risk included in
various Premium Classes (if more than one Premium Class applies), both of which

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may affect the monthly cost of insurance charges. A surrender charge will
also be calculated for the increase. See "CHARGES AND DEDUCTIONS - Monthly
Deduction From Policy Value - Surrender Charge."

After increasing the Face Amount, you will have the right (1) during a Free Look
Period, to have the increase cancelled and the charges which would not have been
deducted but for the increase will be credited to the Policy, and (2) during the
first 24 months following the increase, to transfer any or all Policy Value to
the General Account free of charge. See "THE POLICY - Free Look Period -
Conversion Privileges." A refund of charges which would not have been deducted
but for the increase will be made at your request.

DECREASES - The minimum amount for a decrease in Face Amount is $10,000. The
Face Amount in force after any decrease may not be less than $50,000. If,
following a decrease in Face Amount, the Policy would not comply with the
maximum premium limitation applicable under the Internal Revenue Service Rules,
the decrease may be limited or Policy Value may be returned to the Policyowner
(at your election) to the extent necessary to meet the requirements. A return
of Policy Value may result in tax liability to you.

A decrease in the Face Amount will affect the total Insurance Amount at Risk and
the portion of the Insurance Amount at Risk covered by various Premium Classes,
both of which may affect a Policyowner's monthly cost of insurance charges. See

"CHARGES AND DEDUCTIONS - Monthly Deduction From Policy Value." For purposes of
determining the cost of insurance charge, any decrease in the Face Amount will
reduce the Face Amount in the following order: (1) the Face Amount provided by
the most recent increase; (2) the next most recent increases successively; and
(3) the initial Face Amount. This order will also be used to determine whether
a surrender charge will be deducted and in what amount. If you request a
decrease in the Face Amount, the amount of any surrender charge deducted will
reduce the current Policy Value. You may specify one Sub-Account from which the
surrender charge will be deducted. If no specification is provided, the Company
will make a Pro Rata Allocation. The current surrender charge will be reduced
by the amount deducted. See "CHARGES AND DEDUCTIONS - Surrender Charge."

POLICY VALUE AND SURRENDER VALUE - The Policy Value is the total amount
available for investment and is equal to the sum of the accumulation in the
General Account and the value of the Accumulation Units in the Sub-Accounts.
The Policy Value is used in determining the Surrender Value (the Policy Value
less any Debt and applicable surrender charges). See "THE POLICY -
Surrender." There is no guaranteed minimum Policy Value. Because Policy Value
on any date depends upon a number of variables, it cannot be predetermined.

Policy Value and Surrender Value will reflect frequency and amount of Net
Premiums paid, interest credited to accumulations in the General Account, the
investment performance of the chosen Sub-Accounts, any partial withdrawals, any
loans, any loan repayments, any loan interest paid or credited, and any charges
assessed in connection with the Policy.

CALCULATION OF POLICY VALUE - The Policy Value is determined first on the Date
of Issue and thereafter on each Valuation Date. On the Date of Issue, the
Policy Value will be the Net Premiums received, plus any interest earned during
the period when premiums are held in the General Account (before being
transferred to the VEL II Account; see THE POLICY - Application For A Policy")
less any Monthly Deductions due. On each Valuation Date after the Date of Issue
the Policy Value will be:

(a) the aggregate of the values in each of the Sub-Accounts on the
Valuation Date, determined for each Sub-Account by multiplying the
value of an Accumulation Unit in that Sub-Account on that date by the
number of such Accumulations Units allocated to the Policy; plus

(b) the value in the General Account (including any amounts transferred to
the General Account with respect to a loan).

Thus, the Policy Value is determined by multiplying the number of Accumulation
Units in each Sub-Account by the value of the applicable Accumulation Units on
the particular Valuation Date, adding the products, and adding the amount of the
accumulations in the General Account, if any.

THE ACCUMULATION UNIT - Each Net Premium is allocated to the Sub-Account(s)
selected by you. Allocations to the Sub-Accounts are credited to the Policy 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 Policy is
equal to the portion of the Net Premium allocated to the Sub-Account, divided by
the dollar value of the applicable Accumulation Unit as of the Valuation Date
the

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<PAGE>

payment is received at the Company's Principal Office. The number of
Accumulation Units will remain fixed unless changed by a subsequent split of
Accumulation Unit value, transfer, partial withdrawal or surrender. In
addition, if the Company is deducting the Monthly Deduction or other charges
from a Sub-Account, each such deduction will result in cancellation of a number
of Accumulation Units equal in value to the amount deducted.

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. That experience, in turn, will reflect the investment performance,
expenses and charges of the respective Underlying Fund. The value of an
Accumulation Unit was set at $1.00 on the first Valuation Date for each
Sub-Account. The dollar value of an Accumulation Unit on 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.

NET INVESTMENT FACTOR - The net investment factor measures the investment
performance of a Sub-Account of the VEL II Account during the Valuation Period
just ended. The net investment factor for each Sub-Account is equal to 1.0000
plus the number arrived at by dividing (a) by (b) and subtracting (c) and (d)
from the result, where:

(a) is the investment income of that Sub-Account for the Valuation Period,
plus capital gains, realized or unrealized,

credited during the Valuation Period; minus capital losses, realized
or unrealized, charged during the Valuation Period; adjusted for
provisions made for taxes, if any;

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

(c) is a charge for each day in the Valuation Period equal on an annual
basis to .90% of the daily net asset value of that Sub-Account for
mortality and expense risks. This charge may be increased or
decreased by the Company, but may not exceed 1.275%; and

(d) is the VEL II Account administrative charge for each day in the
Valuation Period equal on an annual basis to 0.25% of the daily net
asset value of that Sub-Account. This charge is applicable only
during the first ten Policy years.

The net investment factor may be greater or less than one. Therefore, the value
of an Accumulation Unit may increase or decrease. You bear the investment risk.

Allocations to the General Account are not converted into Accumulation Units,
but are credited interest at a rate periodically set by the Company. See "MORE
INFORMATION ABOUT THE GENERAL ACCOUNT."

PAYMENT OPTIONS - During the Insured's lifetime, you may arrange for the Death
Proceeds to be paid in a single sum or under one or more of the available
payment options. The payment options currently available are described in
Appendix B, "PAYMENT OPTIONS." These choices are also available at the Final
Premium Payment Date and if the Policy is surrendered. The Company may make
more payment options available in the future. If no election is made, the
Company will pay the Death Proceeds in a single sum. When the Death Proceeds
are payable in a single sum, the Beneficiary may, within one year of the
Insured's death, select one or more of the payment options, if no payments have
yet been made.

OPTIONAL INSURANCE BENEFITS - Subject to certain requirements, one or more of
the optional insurance benefits described in "APPENDIX A - OPTIONAL BENEFITS"
may be added to a Policy by rider. The cost of any optional insurance benefits
will be deducted as part of the Monthly Deduction. See "CHARGES AND DEDUCTIONS
- - Monthly Deduction From Policy Value."

SURRENDER - You may at any time surrender the Policy and receive its Surrender
Value. The Surrender Value is the Policy Value less any Debt and applicable
surrender charges. The Surrender Value will be calculated as of the Valuation
Date on which a written request for surrender and the Policy are received at the
Principal Office. A surrender charge will be deducted when a Policy is
surrendered if less than 15 full Policy years have elapsed from the Date of
Issue of the Policy or from the effective date of any increase in Face Amount.
See "CHARGES AND DEDUCTIONS - Surrender Charge."

The proceeds on surrender may be paid in a single lump sum or under one of the
payment options described in "APPENDIX B - PAYMENT OPTIONS." The Company will
normally pay the Surrender Value within seven days following the Company's
receipt of the surrender request, but the Company may delay payment under the
circumstances described in "OTHER POLICY PROVISIONS - Postponement Of Payments."

<PAGE>

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

PARTIAL WITHDRAWAL - Any time after the first Policy year, you may withdraw a
portion of the Surrender Value of your Policy, subject to the limits stated
below, upon written request filed at the Principal Office. The written request
must indicate the dollar amount you wish to receive and the Accounts from which
such amount is to be withdrawn. You may allocate the amount withdrawn among the
Sub-Accounts and the General Account. If you do not provide allocation
instructions the Company will make a Pro Rata Allocation. Each partial
withdrawal must be in a minimum amount of $500. Under Option 1, the Face Amount
is reduced by the amount of the partial withdrawal, and a partial withdrawal
will not be allowed if it would reduce the Face Amount below $40,000.

A partial withdrawal from a Sub-Account will result in the cancellation of the
number of Accumulation Units equivalent in value to the amount withdrawn. The
amount withdrawn equals the amount requested by you plus the transaction charge
and any applicable partial withdrawal charge as described under "CHARGES AND
DEDUCTIONS - Charges On Partial Withdrawal." The Company will normally pay the
amount of the partial withdrawal within seven days following the Company's
receipt of the partial withdrawal request, but the Company may delay payment
under certain circumstances described in "OTHER POLICY PROVISIONS - Postponement
Of Payments."

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

CHARGES AND DEDUCTIONS

Charges will be deducted in connection with the Policy to compensate the Company
for providing the insurance benefits set forth in the Policy and any additional
benefits added by rider, administering the Policy, incurring distribution
expenses, and assuming certain risks in connection with the Policies. Each of
the charges identified as an administrative charge is intended to reimburse the
Company for actual administrative costs incurred, and is not intended to result
in a profit to the Company.

TAX EXPENSE CHARGE - Currently, a deduction of 2.25% of premiums for state and
local premium taxes and federal taxes imposed for deferred acquisition costs
("DAC taxes") is made from each premium payment. The premium payment less the
tax expense charge equals the Net Premium. The total charge is a combined state
and local premium tax deduction of 1.25% of premiums and a DAC tax deduction of
1% of premiums. While the premium tax of 1.25% is deducted from each premium
payment, some jurisdictions may not impose premium taxes. Premium taxes vary
from state to state, ranging from zero to 4.0%, and the 1.25% rate attributable
to premiums for state and local premium taxes approximates the average expenses
to the Company associated with the premium taxes. The 1.25% charge may be
higher or lower than the actual premium tax imposed by the applicable
jurisdiction. However, the Company does not expect to make a profit from this
charge.

The 1% rate attributable to premiums for DAC taxes approximates the Company's
expenses in paying federal taxes for deferred acquisition costs associated with
the changes in the Company's expenses for premium taxes and DAC taxes. The DAC
tax deduction is a factor the Company must use when calculating the maximum
sales load it can charge under SEC rules.

MONTHLY DEDUCTION FROM POLICY VALUE - Prior to the Final Premium Payment Date, a
Monthly Deduction from Policy Value will be made to cover a charge for the cost
of insurance, a charge for any optional insurance benefits added by rider and a
monthly administrative charge. The cost of insurance charge and the monthly
administrative charges are discussed below. The Monthly Deduction on or
following the effective date of a requested increase in the Face Amount will
also include a $50 administrative charge for the increase. See "THE POLICY -
Change In Face Amount."

Prior to the Final Premium Payment Date, the Monthly Deduction will be deducted
as of each Monthly Payment Date commencing with the Date of Issue of the Policy.
It will be allocated to one Sub-Account according to your instructions, or, if
no allocation is specified, the Company will make a Pro Rata Allocation. If the
Sub-Account you specify does not have sufficient funds to cover the Monthly
Deduction, the Company will deduct the charge for that month as if no
specification were made. However, if on subsequent Monthly Payment Dates there
is sufficient Policy Value in the Sub-Account you specified, the Monthly
Deduction will be deducted from that Sub-Account. No Monthly Deductions will be
made on or after the Final Premium Payment Date.

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<PAGE>

COST OF INSURANCE - This charge is designed to compensate the Company for the
anticipated cost of providing Death Proceeds to Beneficiaries of those Insureds
who die prior to the Final Premium Payment Date. The cost of insurance is
determined on a monthly basis, and is determined separately for the initial Face
Amount and for each subsequent increase in Face Amount. Because the cost of
insurance depends upon a number of variables, it can vary from month to month.

CALCULATION OF THE CHARGE - If you select Sum Insured Option 2, the monthly cost
of insurance charge for the initial Face Amount will equal the applicable cost
of insurance rate multiplied by the initial Face Amount. If you select Sum
Insured Option 1, however, the applicable cost of insurance rate will be
multiplied by the initial Face Amount less the Policy Value (minus charges for
rider benefits) at the beginning of the policy month. Thus, the cost of
insurance charge may be greater for owners who have selected Sum Insured Option
2 than for those who have selected Sum Insured Option 1, assuming the same Face
Amount in each case and assuming that the Guideline Minimum Sum Insured is not
in effect. In other words, since the Sum Insured under Option 1 remains
constant while the Sum Insured under Option 2 varies with the Policy Value, any
Policy Value increases will reduce the insurance charge under Option 1 but not
under Option 2.

If you select Sum Insured Option 2, the monthly insurance charge for each
increase in Face Amount (other than an increase caused by a change in Sum
Insured Option) will be equal to the cost of insurance rate applicable to that
increase multiplied by the increase in Face Amount. If you select Sum Insured
Option 1, the applicable cost of insurance rate will be multiplied by the
increase in the Face Amount reduced by any Policy Value (minus rider charges)
in excess of the initial Face Amount at the beginning of the policy month.

If the Guideline Minimum Sum Insured is in effect under either Option, a monthly
cost of insurance charge will also be calculated for that portion of the Sum
Insured which exceeds the current Face Amount. This charge will be calculated
by multiplying the cost of insurance rate applicable to the initial Face Amount
times the Guideline Minimum Sum Insured (Policy Value times the applicable
percentage) less the greater of the Face Amount or the Policy Value if you
selected Sum Insured Option 1, or less the Face Amount plus the Policy Value if
you selected Sum Insured Option 2. When the Guideline Minimum Sum Insured is in
effect, the cost of insurance charge for the initial Face Amount and for any
increases will be calculated as set forth in the preceding two paragraphs.

The monthly cost of insurance charge will also be adjusted for any decreases in
Face Amount. See "THE POLICY - Change In Face Amount: Decreases."

COST OF INSURANCE RATES - Cost of insurance rates are based on male and female
rate tables, Age and Premium Class of the Insured at the Date of Issue, the
effective date of an increase or date of rider, as applicable, the amount of
premiums paid less debt, any partial withdrawals and withdrawal charges, and
risk classification. The cost of insurance rates are determined at the
beginning of each Policy year for the initial Face Amount. The cost of
insurance rates for an increase in Face Amount or rider are determined annually
on the anniversary of the effective date of each increase or rider. The cost of
insurance rates generally increase as the Insured's Age increases. The actual
monthly cost of insurance rates will be based on the Company's expectations as
to future mortality experience. They will not, however, be greater than the
guaranteed cost of insurance rates set forth in the Policy. These guaranteed
rates are based on the 1980 Commissioners Standard Ordinary Mortality Tables
(Mortality Table B, Smoker or Non-Smoker, Male or Female) and the Insured's sex
and Age. The Tables used for this purpose set forth different mortality
estimates for males and females and for smokers and non-smokers. Any change in
the cost of insurance rates will apply to all persons of the same insuring Age,
sex and Premium Class whose Policies have been in force for the same length of
time.

The premium class of an Insured will affect the cost of insurance rates. The
Company currently places Insureds into preferred premium classes, standard
premium classes and substandard premium classes. In an otherwise identical
Contract, an Insured in the preferred premium class will have a lower cost of
insurance than an Insured in a standard premium class who, in turn, will have a
lower cost of insurance than an Insured in a substandard premium class with a
higher mortality risk. The premium classes are also divided into two
categories: smokers and nonsmokers. Nonsmoking Insureds will incur lower cost
of insurance rates than Insureds who are classified as smokers but who are
otherwise in the same premium class. Any Insured with an Age at issuance under
18 will be classified initially as regular or substandard. The Insured then
will be classified as a smoker at Age 18 unless the Insured provides
satisfactory evidence that the Insured is a nonsmoker. The Company will provide
notice to you of the opportunity for the Insured to be classified as a nonsmoker
when the Insured reaches Age 18.

The cost of insurance rate is determined separately for the initial Face Amount
and for the amount of any increase in Face Amount. For each increase in Face
Amount you request, at a time when the Insured is in a less favorable Premium
Class than previously, a correspondingly higher cost of insurance rate will
apply only to that portion of the Insurance Amount at Risk for the increase.
For the initial Face Amount and any prior increases, the Company will use the
Premium Class

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<PAGE>

previously applicable. On the other hand, if the Insured's Premium Class
improves on an increase, the lower cost of insurance rate generally will apply
to the entire Insurance Amount at Risk.

MONTHLY ADMINISTRATIVE CHARGES - Prior to the Final Premium Payment Date, a
monthly administrative charge of $5 per month will be deducted from Policy
Value. This charge will be used to compensate the Company for expenses incurred
in the administration of the Policy and will compensate the Company for first
year underwriting and other start-up expenses incurred in connection with the
Policy. These expenses include the cost of processing applications, conducting
medical examinations, determining insurability and the Insured's Premium Class,
and establishing Policy records. The Company does not expect to derive a profit
from these charges.

CHARGES AGAINST ASSETS OF THE VEL II ACCOUNT - The Company assesses each
Sub-Account with a charge for mortality and expense risks assumed by the Company
and a charge for administrative expenses of the VEL II Account.

MORTALITY AND EXPENSE RISK CHARGE - The Company currently makes a charge on an
annual basis of 0.65% of the daily net asset value in each Sub-Account. This
charge is for the mortality risk and expense risk which the Company assumes in
relation to the variable portion of the Policies. The total charges may be
increased or decreased by the Board of Directors of the Company once each year,
subject to compliance with applicable state and federal requirements, but it
may not exceed 1.275% on an annual basis.

Any mortality and expense risk charge above 0.90% is currently considered above
the range of industry practice. To increase the charge above the range of
industry practice, the Company must file a request with the Securities and
Exchange Commission ("SEC") for an exemption from certain SEC rules, in which it
would be necessary to demonstrate that the proposed charge is reasonable in
relation to the risks assumed under the Policy. Even with such a demonstration,
there is no assurance that the SEC would issue an exemption order.

The mortality risk assumed by the Company is that Insureds may live for a
shorter time than anticipated, and that the Company will therefore pay an
aggregate amount of Death Proceeds greater than anticipated. The expense risk
assumed is that the expenses incurred in issuing and administering the Policies
will exceed the amounts realized from the administrative charges provided in the
Policies. 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 costs are less than the amounts provided, the difference will be a
profit to the Company. To the extent this charge results in a current 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. Since
mortality and expense risks involve future contingencies which are not subject
to precise determination in advance, it is not feasible to identify specifically
the portion of the charge which is applicable to each.

VEL II ACCOUNT ADMINISTRATIVE CHARGE - During the first ten Policy years, the
Company assesses a charge on an annual basis of 0.15% of the daily net asset
value in each Sub-Account. The charge is assessed to help defray administrative
expenses actually incurred in the administration of the VEL II Account and the
Sub-Accounts and is not expected to be a source of profit. The administrative
functions and expenses assumed by the Company in connection with the VEL II
Account and the Sub-Accounts 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, expenses of preparing and typesetting prospectuses and the cost of
printing prospectuses not allocable to sales expense, filing and other fees. No
VEL II Account administrative charge is imposed after the tenth Policy year.

OTHER CHARGES AGAINST THE ASSETS OF THE VEL II ACCOUNT - Because the
Sub-Accounts purchase shares of the Underlying Investment Companies, the value
of the Accumulation Units of the Sub-Accounts will reflect the investment
advisory fee and other expenses incurred by the Underlying Investment Companies.
The prospectuses and statements of additional information of the Trust, VIP, VIP
II,T. Rowe Price and DGPF contain additional information concerning such fees
and expenses.

No charges are currently made against the Sub-Accounts for federal or state
income taxes. Should the Company determine that taxes will be imposed, the
Company may make deductions from the Sub-Account to pay such taxes. See
"FEDERAL TAX CONSIDERATIONS." The imposition of such taxes would result in a
reduction of the Policy Value in the Sub-Accounts.

SURRENDER CHARGE - The Policy provides for a contingent surrender charge. A
separate surrender charge, described in more detail below, is calculated upon
issuance of the Policy and for each increase in Face Amount. The surrender
charge is comprised of a contingent deferred administrative charge and a
contingent deferred sales charge. The contingent deferred

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<PAGE>

administrative charge compensates the Company for expenses incurred in
administering the Policy. The contingent deferred sales charge compensates
the Company for expenses relating to the distribution of the Policy, including
Agent's commissions, advertising and the printing of the prospectus and sales
literature.

A surrender charge may be deducted if you request a full surrender of the Policy
or a decrease in Face Amount. The duration of the surrender charge is 15 years
from Date of Issue or from the effective date of any increase in the Face Amount
for issue Ages 0 through 50, grading down to 10 years for issue Ages 55 and
above. The maximum surrender charge calculated upon issuance of the Policy is
equal to the sum of (a) plus (b), where (a) is equal to $8.50 per thousand
dollars of increase, and (b) is a deferred sales charge of 49% of premiums
associated with the increase, up to a maximum number of Guideline Annual
Premiums (for the increase) subject to the deferred sales charge that varies by
Age (at the time of increase) from 1.660714 (for Ages 0 through 55) to 0.948980
(for Age 80). In accordance with limitations under state insurance regulations,
the amount of the surrender charge will not exceed a specified amount per $1,000
of increase, as indicated in "APPENDIX D - CALCULATION OF MAXIMUM SURRENDER
CHARGES." The maximum surrender charge continues in a level amount for 40
Policy months and reduces by 0.5% or more per month (depending on issue Age)
thereafter, as described in "APPENDIX D - CALCULATION OF MAXIMUM SURRENDER
CHARGES." This reduction in the maximum surrender charge will reduce the
deferred sales charge and the deferred administrative charge proportionately.

If you surrender the Policy during the first two Policy years following the Date
of Issue before making premium payments associated with the initial Face Amount
which are at least equal to one Guideline Annual Premium, the deferred
administrative charge will be $8.50 per thousand dollars of initial Face Amount,
as described above, but the deferred sales charge will not exceed 29% of
premiums received, up to one Guideline Annual Premium, plus 9% of premiums
received in excess of one Guideline Annual Premium, but less than the maximum
number of Guideline Annual Premiums subject to the deferred sales charge. See
"APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES."

A separate surrender charge will apply to and is calculated for each increase in
Face Amount. The surrender charge for the increase is in addition to that for
the initial Face Amount. The maximum surrender charge for the increase is equal
to the sum of (a) plus (b), where (a) is equal to $8.50 per thousand dollars of
increase, and (b) is a deferred sales charge of 49% of premiums associated with
the increase, up to a maximum number of Guideline Annual Premiums (for the
increase) subject to the deferred sales charge that varies by Age (at the time
of increase) from 1.660714 (for Ages 0 through 55) to 0.948980 (for Age 80). In
accordance with limitations under state insurance regulations, the amount of the
surrender charge will not exceed a specified amount per $1,000 of increase, as
indicated in "APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES." As is
true for the initial Face Amount, (a) is a deferred administrative charge and
(b) is a deferred sales charge. The maximum surrender charge for the increase
continues in a level amount for 40 Policy months and reduces by 0.5% or more per
month (depending on Age) thereafter, as provided in"APPENDIX D - CALCULATION OF
MAXIMUM SURRENDER CHARGES." During the first two Policy years following an
increase in Face Amount before making premium payments associated with the
increase in Face Amount which are at least equal to one Guideline Annual
Premium, the deferred administrative charge will be $8.50 per thousand dollars
of Face Amount increase, as described above, but the deferred sales charge
imposed will be less than the maximum described above. Upon such a surrender,
the deferred sales charge will not exceed 29% of premiums associated with the
increase, up to one Guideline Annual Premium (for the increase), plus 9% of
premiums associated with the increase in excess of one Guideline Annual Premium,
but less than the maximum number of Guideline Annual Premiums (for the increase)
subject to the deferred sales charge. See "APPENDIX D - CALCULATION OF MAXIMUM
SURRENDER CHARGES." The premiums associated with the increase are determined as
described below.

Additional premium payments may not be required to fund a requested increase in
Face Amount. Therefore, a special rule, which is based on relative Guideline
Annual Premium payments, applies to allocate a portion of existing Policy Value
to the increase and to allocate subsequent premium payments between the initial
Policy and the increase. For example, suppose the Guideline Annual Premium is
equal to $1,500 before an increase and is equal to $2,000 as a result of the
increase. The Policy Value on the effective date of the increase would be
allocated 75% ($1,500/$2,000) to the initial Face Amount and 25% to the
increase. All future premiums would also be allocated 75% to the initial Face
Amount and 25% to the increase. Thus, existing Policy Value associated with the
increase will equal the portion of Policy Value allocated to the increase on the
effective date of the increase, before any deductions are made. Premiums
associated with the increase will equal the portion of the premium payments
actually made on or after the effective date of the increase which are allocated
to the increase.

See "APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES," for examples
illustrating the calculation of the maximum surrender charge for the initial
Face Amount and for any increases, as well as for the surrender charge based on
actual premiums paid or associated with any increases.

32
<PAGE>

A surrender charge may be deducted on a decrease in the Face Amount. In the
event of a decrease, the surrender charge deducted is a fraction of the charge
that would apply to a full surrender of the Policy. The fraction will be
determined by dividing the amount of the decrease by the current Face Amount and
multiplying the result by the surrender charge. If more than one surrender
charge is in effect (i.e., pursuant to one or more increases in the Face Amount
of a Policy), the surrender charge will be applied in the following order: (1)
the most recent increase; (2) the next most recent increases successively, and
(3) the initial Face Amount. Where a decrease causes a partial reduction in an
increase or in the initial Face Amount, a proportionate share of the surrender
charge for that increase or for the initial Face Amount will be deducted.

CHARGES ON PARTIAL WITHDRAWAL - After the first policy year, partial withdrawals
of Surrender Value may be made. The minimum withdrawal is $500. Under Option
1, the Face Amount is reduced by the amount of the partial withdrawal, and a
partial withdrawal will not be allowed if it would reduce the Face Amount below
$40,000.

A transaction charge which is the smaller of 2% of the amount withdrawn or $25
will be assessed on each partial withdrawal to reimburse the Company for the
cost of processing the withdrawal. The Company does not expect to make a profit
on this charge.

A partial withdrawal charge may also be deducted from Policy Value. For each
partial withdrawal you may withdraw an amount equal to 10% of the Policy Value
on the date the written withdrawal request is received by the Company less the
total of any prior withdrawals in that Policy year which were not subject to the
Partial Withdrawal charge, without incurring a partial withdrawal charge. Any
partial withdrawal in excess of this amount ("excess withdrawal") will be
subject to the partial withdrawal charge. The partial withdrawal charge is
equal to 5% of the excess withdrawal up to the amount of the surrender charge(s)
on the date of withdrawal.

This right is not cumulative from Policy year to Policy year. For example, if
only 8% of Policy Value were withdrawn in Policy year two, the amount you could
withdraw in subsequent Policy years would not be increased by the amount you did
not withdraw in the second Policy year.

The Policy's outstanding surrender charge will be reduced by the amount of the
partial withdrawal charge deducted, by proportionately reducing the deferred
sales charge component and the deferred administrative charge component. The
partial withdrawal charge deducted will decrease existing surrender charges in
the following order: (1) the most recent increase in Face Amount; (2) the next
most recent increases successively, and (3) the initial Face Amount.

TRANSFER CHARGES - The first six transfers in a Policy year will be free of
charge. Thereafter, a transfer charge of $10 will be imposed for each transfer
request to reimburse the Company for the administrative costs incurred in
processing the transfer request. The Company reserves the right to increase the
charge, but it will never exceed $25. The Company also reserves the right to
change the number of free transfers allowed in a Policy Year. See "THE POLICY -
Transfer Privilege."

You may have automatic transfers of at least $100 a month made on a periodic
basis from (a) Sub-Account 3 or Sub-Account 5 (which invest in the Money Market
Fund and Government Bond Fund of the Trust, respectively) to one or more of the
other Sub-Accounts or (b) reallocate Policy Value among the Sub-Accounts. The
first automatic transfer counts as one transfer towards the six free transfers
allowed in each policy year. Each subsequent automatic transfer is without
charge and does not reduce the remaining number of transfers which may be made
without charge.

If you utilize the Conversion Privilege, Loan Privilege or reallocate Policy
Value within 20 days of the Date of Issue of the Policy, any resulting transfer
of Policy Value from the Sub-Accounts to the General Account will be free of
charge, and in addition to the six free transfers in a Policy year. See "THE
POLICY - Conversion Privileges" and "POLICY LOANS."

CHARGE FOR INCREASE IN FACE AMOUNT - For each increase in Face Amount you
request, a transaction charge of $50 will be deducted from Policy Value to
reimburse the Company for administrative costs associated with the increase.
This charge is guaranteed not to increase and the Company does not expect to
make a profit on this charge.

OTHER ADMINISTRATIVE CHARGES - The Company reserves the right to impose a charge
for the administrative costs incurred for changing the Net Premium allocation
instructions, for changing the allocation of any Monthly Deductions among the
various Sub-Accounts, or for a projection of values. No such charges are
currently imposed and any such charge is guaranteed not to exceed $25.

POLICY LOANS

33
<PAGE>

Loans may be obtained by request to the Company on the sole security of this
Policy. The total amount which may be borrowed is the Loan Value. In the first
Policy year, the Loan Value is 75% of Policy Value reduced by applicable
surrender charges as well as Monthly Deductions and interest on Debt to the end
of the Policy year. The Loan Value in the second Policy year and thereafter is
90% of an amount equal to Policy Value reduced by applicable surrender charges.
There is no minimum limit on the amount of the loan. The loan amount will
normally be paid within seven days after the Company receives the loan request
at its Principal Office, but the Company may delay payments under certain
circumstances. See "OTHER POLICY PROVISIONS - Postponement Of Payments."

A Policy loan may be allocated among the General Account and one or more
Sub-Accounts. If you do not make an allocation, the Company will make a Pro
Rata Allocation based on the amounts in the Accounts on the date the Company
receives the loan request. Policy Value in each Sub-Account equal to the Policy
loan allocated to such Sub-Account will be transferred to the General Account,
and the number of Accumulation Units equal to the Policy Value so transferred
will be cancelled. This will reduce the Policy Value in these Sub-Accounts.
These transactions are not treated as transfers for purposes of the transfer
charge.

As long as the Policy is in force, Policy Value in the General Account equal to
the loan amount will be credited with interest at an effective annual yield of
at least 6.00% per year. NO ADDITIONAL INTEREST WILL BE CREDITED TO SUCH POLICY
VALUE.

LOAN INTEREST CHARGED - Interest accrues daily and is payable in arrears at the
annual rate of 8%. Interest is due and payable at the end of each Policy year
or on a pro rata basis for such shorter period as the loan may exist. Interest
not paid when due will be added to the loan amount and bear interest at the same
rate. After the due and unpaid interest is added to loan amount, if the new
loan amount exceeds the Policy Value in the General Account, the Company will
transfer Policy Value equal to that excess loan amount from the Policy Value in
each Sub-Account to the General Account as security for the excess loan amount.
The Company will allocate the amount transferred among the Sub-Accounts in the
same proportion that the Policy Value in each Sub-Account bears to the total
Policy Value in all Sub-Accounts.

REPAYMENT OF DEBT - Loans may be repaid at any time prior to the lapse of the
Policy. Upon repayment of Debt, the portion of the Policy Value that is in the
General Account securing the Debt repaid will be allocated to the various
Accounts and increase the Policy Value in such accounts in accordance with your
instructions. If you do not make a repayment allocation, the Company will
allocate Policy Value in accordance with your most recent premium allocation
instructions; provided, however, that loan repayments allocated to the VEL II
Account cannot exceed Policy Value previously transferred from the VEL II
Account to secure the Debt.

If Debt exceeds the Policy Value less the surrender charge, the Policy will
terminate. A notice of such pending termination will be mailed to the last
known address of you and any assignee. If you do not make sufficient payment
within 62 days after this notice is mailed, the Policy will terminate with no
value. See "POLICY TERMINATION AND REINSTATEMENT."

EFFECT OF POLICY LOANS - Although Policy loans may be repaid at any time prior
to the lapse of the Policy, Policy loans will permanently affect the Policy
Value and Surrender Value, and may permanently affect the Death Proceeds. The
effect could be favorable or unfavorable, depending upon whether the investment
performance of the Sub-Account(s) is less than or greater than the interest
credited to the Policy Value in the General Account attributable to the loan.

Moreover, outstanding Policy loans and the accrued interest will be deducted
from the proceeds payable upon the death of the Insured or surrender.

POLICY TERMINATION AND REINSTATEMENT

TERMINATION - The failure to make premium payments will not cause the Policy to
lapse unless: (a) the Surrender Value is insufficient to cover the next Monthly
Deduction plus loan interest accrued; or (b) Debt exceeds the Policy Value less
surrender charges. If one of these situations occurs, the Policy will be in
default. You will then have a grace period of 62 days, measured from the date of
default, to make sufficient payments to prevent termination. On the date of
default, the Company will send a notice to you and to any assignee of record.
The notice will state the amount of premium due and the date on which it is due.
The Company will also send a notice to you at least 15 days and not more than 45
days prior to the end of the grace period if the surrender value is not adequate
to prevent lapse.

Failure to make a sufficient payment within the grace period will result in
termination of the Policy. If the Insured dies during the grace period, the
Death Proceeds will still be payable, but any Monthly Deductions due and unpaid
through the

34
<PAGE>

policy month in which the Insured dies and any other overdue charge
will be deducted from the Death Proceeds.

Except for the situation described in (b) above, if, during the first 48 months
after the Date of Issue or the effective date of an increase in Face Amount, you
make premium payments, less Debt, partial withdrawals and partial withdrawal
charges, at least equal to the sum of the Minimum Monthly Factors for the number
of months the Policy, increase, or Policy Change which causes a change in the
Minimum Monthly Factor has been in force, the Policy is guaranteed not to lapse
during that period. A Policy Change which causes a change in the Minimum
Monthly Factor is a change in the Face Amount or the addition or deletion of a
rider. Except for the first 48 months after the Date of Issue or the effective
date of an increase, payments equal to the Minimum Monthly Factor do not
guarantee that the Policy will remain in force.

REINSTATEMENT - If the Policy has not been surrendered and the Insured is alive,
the terminated Policy may be reinstated anytime within 3 years after the date of
default and before the Final Premium Payment Date. The reinstatement will be
effective on the Monthly Payment Date following the date you submit the
following to the Company: (1) a written application for reinstatement; (2)
Evidence of Insurability showing that the Insured is insurable according to the
Company's underwriting rules; and (3) a premium that, after the deduction of the
tax expense charge, is large enough to cover the minimum amount payable, as
described below.

MINIMUM AMOUNT PAYABLE - If reinstatement is requested when less than 48 Monthly
Deductions have been made since the Date of Issue or the effective date of an
increase in the Face Amount, you must pay the lesser of the amount shown in A or
B:

Under A, the minimum amount payable is the Minimum Monthly Factor for the
three-month period beginning on the date of reinstatement.

Under B, the minimum amount payable is the sum of

- the amount by which the surrender charge as of the date of
reinstatement exceeds the Policy Value on the date of default; plus

- Monthly Deductions for the three-month period beginning on the date of
reinstatement.

If reinstatement is requested after 48 Monthly Deductions have been made since
the Date of Issue of the policy or any increase in the Face Amount, you must pay
the amount shown in B above. The Company reserves the right to increase the
Minimum Monthly Factor upon reinstatement.

SURRENDER CHARGE - The surrender charge on the date of reinstatement is the
surrender charge which would have been in effect had the Policy remained in
force from the Date of Issue. The Policy Value less Debt on the date of default
will be restored to the Policy to the extent it does not exceed the surrender
charge on the date of reinstatement. Any Policy Value less Debt as of the date
of default which exceeds the surrender charge on the date of reinstatement will
not be restored.

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

. the Net Premium paid to reinstate the Policy increased by interest
from the date the payment was received at the Company's Principal
Office;

. plus an amount equal to the Policy Value less Debt on the date of
default to the extent it does not exceed the surrender charge on the
date of reinstatement;

. minus the Monthly Deduction due on the date of reinstatement.

You may not reinstate any Debt outstanding on the date of default or
foreclosure.

OTHER POLICY PROVISIONS

The following Policy provisions may vary in certain states in order to comply
with requirements of the insurance laws, regulations, and insurance regulatory
agencies in those states.

POLICYOWNER - The Policyowner is the Insured unless another Policyowner has been
named in the application for the

35
<PAGE>

Policy. The Policyowner is generally entitled to exercise all rights under a
Policy while the Insured is alive, subject to the consent of any irrevocable
Beneficiary (the consent of a revocable Beneficiary is not required). The
consent of the Insured is required whenever the Face Amount of insurance is
increased.

BENEFICIARY -The Beneficiary is the person or persons to whom the insurance
proceeds are payable upon the Insured's death. Unless otherwise stated in the
Policy, the Beneficiary has no rights in the Policy before the death of the
Insured. While the Insured is alive, you may change any Beneficiary unless you
have declared a Beneficiary to be irrevocable. If no Beneficiary is alive when
the Insured dies, the owner (or the owner's estate) will be the Beneficiary. If
more than one Beneficiary is alive when the Insured dies, they will be paid in
equal shares, unless you have chosen otherwise. Where there is more than one
Beneficiary, the interest of a Beneficiary who dies before the Insured will pass
to surviving Beneficiaries proportionally.

INCONTESTABILITY - The Company will not contest the validity of a Policy after
it has been in force during the Insured's lifetime for two years from the Date
of Issue. The Company will not contest the validity of any increase in the Face
Amount after such increase or rider has been in force during the Insured's
lifetime for two years from its effective date.

SUICIDE - The Death Proceeds will not be paid if the Insured commits suicide
within two years from the Date of Issue. Instead, the Company will pay the
Beneficiary an amount equal to all premiums paid for the Policy, without
interest, less any outstanding Debt and less any partial withdrawals. If the
Insured commits suicide generally within two years from the effective date of
any increase in the Sum Insured, the Company's liability with respect to such
increase will be limited to a refund of the cost thereof. The Beneficiary will
receive the administrative charges and insurance charges paid for such
increase.

AGE AND SEX - If the Insured's Age or sex as stated in the application for a
Policy is not correct, benefits under a Policy will be adjusted to reflect the
correct Age and sex, if death occurs prior to the Final Premium Payment Date.
The adjusted benefit will be that which the most recent cost of insurance charge
would have purchased for the correct Age and sex. In no event will the Sum
Insured be reduced to less than the Guideline Minimum Sum Insured.

ASSIGNMENT - The owner may assign a Policy as collateral or make an absolute
assignment of the Policy. All rights under the Policy will be transferred to
the extent of the assignee's interest. The Consent of the assignee may be
required in order to make changes in premium allocations, to make transfers, or
to exercise other rights under the Policy. The Company is not bound by an
assignment or release thereof, unless it is in writing and is recorded at the
Company's Principal Office. When recorded, the assignment will take effect as
of the date the written request was signed. Any rights created by the
assignment will be subject to any payments made or actions taken by the Company
before the assignment is recorded. The Company is not responsible for
determining the validity of any assignment or release.

POSTPONEMENT OF PAYMENTS - Payments of any amount due from the VEL II Account
upon surrender, partial withdrawals, or death of the Insured, as well as
payments of a Policy loan and transfers may be postponed whenever: (a) the New
York Stock Exchange is closed other than customary weekend and holiday closings,
or (b) an emergency exists, as determined by the SEC, as a result of which
disposal of securities is not reasonably practicable or it is not reasonably
practicable to determine the value of the VEL II Account's net assets. Payments
under the Policy of any amounts derived from the premiums paid by check may be
delayed until such time as the check has cleared your bank.

The Company also reserves the right to defer payment of any amount due from the
General Account upon surrender, partial withdrawal or death of the Insured, as
well as payments of policy loans and transfers from the General Account, for a
period not to exceed six months. (No payment will be deferred to pay premiums
on policies with the Company.) If payment is not mailed or delivered within ten
days of receipt of your written request, the Company will pay interest at least
equal to an effective annual yield of 3 1/2% per year for the period of
deferment; however, no interest will be paid if less than $25 or the delay in
payment is pursuant to state law.

<PAGE>

DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

Item 25. DIRECTORS AND EXECUTIVE OFFICERS OF THE DEPOSITOR.

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

NAME POSITION
- ---- --------
<S> <C>
Bruce C. Anderson Vice President and Assistant Secretary
First Allmerica Financial Life Insurance
Company

Abigail M. Armstrong Secretary and Counsel, First Allmerica
Financial Life Insurance Company

Mark R. Colborn Vice President and Controller, First
Allmerica Financial Life Insurance
Company

Kruno Huitzingh Vice President and Chief Information
Officer, First Allmerica Financial Life
Insurance Company

John F. Kelly Senior Vice President, General Counsel
and Assistant Secretary First Allmerica
Financial Life Insurance Company

James R. McAuliffe Director of First Allmerica since
1996; President and CEO, Citizens Insurance
Company of America since 1995; Vice
President and Chief Investment
Officer, First Allmerica, 1986 to 1994

John F. O'Brien President and Chief Executive Officer,
First Allmerica Financial Life Insurance
and Company

Edward J. Parry, III Vice President and Treasurer, First
Allmerica Financial Life Insurance
Company

Richard M. Reilly Vice President, First Allmerica
Financial Life Insurance Company

Larry C. Renfro Vice President, First Allmerica
Financial Life Insurance Company

Theodore J. Rupley Director, First Allmerica Financial Life
Insurance Company

Eric P. Simonsen Vice President and Chief Financial
Officer, First Allmerica Financial Life
Insurance Company

Philip E. Soule Vice President, First Allmerica
Financial Life Insurance Company

Diane E. Wood Vice President, First Allmerica
Financial Life Insurance Company
</TABLE>

DISTRIBUTION

Allmerica Investments, Inc. an indirect wholly owned subsidiary of the Company,
acts as the principal underwriter of the Policies pursuant to a Sales and
Administrative Services Agreement with the Company and the VEL II Account.
Allmerica Investments, Inc. is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers ("NASD"). The Policies are sold by agents of the Company who
are registered representatives of Allmerica Investments, Inc. or of certain
independent broker-dealers which are members of the NASD.

The Company pays registered representatives who sell the Policy commissions
based on a commission schedule. After issue of the Policy or an increase in
Face Amount, commissions generally will equal 50 percent of the first year
premiums up to a basic premium amount established by the Company. Thereafter,
commissions will generally equal 4 percent of any additional premiums. Certain
registered representatives, including registered representatives enrolled in the
Company's training program for new agents, may receive additional first year and
renewal commissions and training

<PAGE>

reimbursements. General Agents of the Company and certain registered
representatives may also be eligible to receive expense reimbursements based on
the amount of earned commissions. General Agents may also receive overriding
commissions, which will not exceed 10 percent of first year or 14 percent of
renewal premiums.

The Company intends to recoup the commission and other sales expense through a
combination of the deferred sales charge component of the anticipated surrender
and partial withdrawal charges, and the investment earnings on amounts allocated
to accumulate on a fixed basis in excess of the interest credited on fixed
accumulations by the Company. There is no additional charge to Policy Owners or
the Separate Account. Any surrender charge assessed on a Policy will be
retained by the Company except for amounts it may pay to Allmerica Investments,
Inc. for services it performs and expenses it may incur as principal underwriter
and general distributor.

REPORTS

The Company will maintain the records relating to the VEL II Account. You will
be promptly sent statements of significant transactions such as premium
payments, changes in specified Face Amount, changes in Sum Insured Option,
transfers among Sub-Accounts and the General Account, partial withdrawals,
increases in loan amount by you, loan repayments, lapse, termination for any
reason, and reinstatement. An annual statement will also be sent to you within
30 days after a Policy Anniversary. The annual statement will summarize all of
the above transactions and deductions of charges during the Policy year. It
will also set forth the status of the Death Proceeds, Policy Value, Surrender
Value, amounts in the Sub-Accounts and General Account, and any Policy loan(s).

In addition, you will be sent periodic reports containing financial statements
and other information for the VEL II Account and the Underlying Investment
Companies as required by the Investment Company Act of 1940.

LEGAL PROCEEDINGS

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

FURTHER INFORMATION

A Registration Statement under the Securities Act of 1933 relating to this
offering has been filed with the Securities and Exchange Commission. Certain
portions of the Registration Statement and amendments have been omitted from
this prospectus pursuant to the rules and regulations of the Securities and
Exchange Commission. Statements contained in this prospectus concerning the
Policy and other legal documents are summaries. The complete documents and
omitted information may be obtained from the Securities and Exchange
Commission's principal office in Washington, D.C., upon payment of the
Securities and Exchange Commission's prescribed fees.

INDEPENDENT ACCOUNTANTS

The financial statements of the Company as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995 and of the VEL II
Account of First Allmerica Financial Life Insurance Company as of December 31,
1995 and for the periods indicated, included in this Prospectus constituting
part of the Registration Statement, have been so included in reliance on the
report of Price Waterhouse 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
Policies.

FEDERAL TAX CONSIDERATIONS

The effect of federal income taxes on the value of a Policy, on loans,
withdrawals, or surrenders, on death benefit payments, and on the economic
benefit to you or the Beneficiary depends upon a variety of factors. The
following discussion is based upon the Company's understanding of the present
federal income tax laws as they are currently interpreted. From time to time
legislation is proposed which, if passed, could significantly, adversely and
possibly retroactively affect the taxation of the Policies. No representation
is made regarding the likelihood of continuation of current federal income tax
laws or of current interpretations by the Internal Revenue Service (IRS).
Moreover, no attempt has been made to consider any applicable state or other tax
laws.

<PAGE>

It should be recognized that the following summary of federal income tax aspects
of amounts received under the Policies is not exhaustive, does not purport to
cover all situations and is not intended as tax advice. Specifically, the
discussion below does not address certain tax provisions that may be applicable
if the Policyowner is a corporation or the Trustee of an employee benefit plan.
A qualified tax adviser should always be consulted with regard to the
application of law to individual circumstances.

THE COMPANY AND THE VEL II ACCOUNT - The Company is taxed as a life insurance
company under Subchapter L of the Internal Revenue Code of 1986 (the "Code")
and files a consolidated tax return with its affiliates. The Company does not
expect to incur any income tax upon the earnings or realized capital gains
attributable to the VEL II Account. Based on these expectations, no charge is
made for federal income taxes which may be attributable to the VEL II Account.

The Company will review periodically the question of a charge to the VEL II
Account for federal income taxes. Such a charge may be made in future years for
any federal income taxes incurred by the Company. This might become necessary
if the tax treatment of the Company is ultimately determined to be other than
what the Company believes it to be, if there are changes made in the federal
income tax treatment of variable life insurance at the Company level, or if
there is a change in the Company's tax status. Any such charge would be
designed to cover the federal income taxes attributable to the investment
results of the VEL II Account.

Under current laws the Company may also incur state and local taxes (in addition
to premium taxes) in several states. At present these taxes are not
significant. If there is a material change in applicable state or local tax
laws, charges may be made for such taxes paid, or reserves for such taxes,
attributable to the VEL II Account.

TAXATION OF THE POLICIES - The Company believes that the Policies described in
this prospectus will be considered life insurance contracts under Section 7702
of the Code, which generally provides for the taxation of life insurance
policies and places limitations on the relationship of the Policy Value to the
Insurance Amount at Risk. As a result, the Death Proceeds payable are
excludable from the gross income of the Beneficiary. Moreover, any increase in
Policy Value is not taxable until received by the Policyowner or the
Policyowner's designee. But see "MODIFIED ENDOWMENT CONTRACTS."

The Code also requires that the investment of each Sub-Account be adequately
diversified in accordance with Treasury regulations in order to be treated as a
life insurance policy for tax purposes. Although the Company does not have
control over the investments of the Underlying Funds, the Company believes that
the Underlying Funds currently meet the Treasury's diversification requirements,
and the Company will monitor continued compliance with these requirements. In
connection with the issuance of previous regulations relating to diversification
requirements, the Treasury Department announced that such regulations do not
provide guidance concerning the extent to which Policyowners may direct their
investments to particular divisions of a separate account. Regulations in this
regard may be issued in the future. It is possible that if and when regulations
are issued, the Policies may need to be modified to comply with such
regulations. For these reasons, the Policies or the Company's administrative
rules may be modified as necessary to prevent a Policyowner from being
considered the owner of the assets of the VEL II Account.

The Company believes that loans received under a Policy will be treated as
indebtedness of the Policyowner for federal tax purposes, and under current law
will not constitute income to the Policyowner so long as the Policy remains in
force. But see "MODIFIED ENDOWMENT CONTRACTS." Deducting interest on policy
loans is, however, subject to the restrictions of Section 264 of the Code.
Consumer interest paid on Policy loans under a Policy owned by an individual is
not tax deductible. In addition, no tax deduction is allowed for any interest
on any loan under one or more life insurance policies (purchased after June 20,
1986) owned by a taxpayer covering the life of any individual who is an officer
or employee of or is financially interested in, any business carried on by that
taxpayer, to the extent the aggregate amount of such loans exceeds $50,000.

Depending upon the circumstances, a surrender, partial withdrawal, change in the
Sum Insured Option, change in the Face Amount, lapse with policy loan
outstanding, or assignment of the Policy may have tax consequences. In
particular, under specified conditions, a distribution under the Policy during
the first fifteen years from Date of Issue that reduces future benefits under
the Policy will be taxed to the Policyowner as ordinary income to the extent of
any investment earnings in the Policy. Federal, state and local income, estate,
inheritance, and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Insured, Policyowner, or
Beneficiary.

MODIFIED ENDOWMENT CONTRACTS - The Technical and Miscellaneous Revenue Act of
1988 ("Act") adversely affects the tax treatment of distributions under
so-called "modified endowment contracts." Under the Act, any

<PAGE>

life insurance policy, including a Policy offered by this prospectus, that fails
to satisfy a "7-pay" test is considered a modified endowment contract. A Policy
fails to satisfy the 7-pay test if the cumulative premiums paid under the Policy
at any time during the first seven policy years exceeds the sum of the net level
premiums that would have been paid, had the Policy provided for paid-up future
benefits after the payment of seven level premiums.

If a Policy is considered a modified endowment contract, all distributions under
the Policy will be taxed on an "income first" basis. Most distributions
received by a Policyowner directly or indirectly (including loans, withdrawals,
partial surrenders, or the assignment or pledge of any portion of the value of
the Policy) will be includible in gross income to the extent that the cash
Surrender Value of the Policy exceeds the Policyowner's investment in the
contract. Any additional amounts will be treated as a return of capital to the
extent of the Policyowner's basis in the Policy. With certain exceptions, an
additional 10% tax will be imposed on the portion of any distribution that is
includible in income. All modified endowment contracts issued by the same
insurance company to the same policyowner during any 12-month period will be
treated as a single modified endowment contract in determining taxable
distributions.

Currently, each Policy is reviewed when premiums are received to determine if it
satisfies the 7-pay test. If the Policy does not satisfy the 7-pay test, the
Company will notify the Policyowner of the option of requesting a refund of the
excess premium, with interest at the General Account interest rate in effect
when the premium was paid. The refund process must be completed within 60 days
after the Policy anniversary, or the Policy will be permanently classified as a
modified endowment contract.

MORE INFORMATION ABOUT THE GENERAL ACCOUNT

As discussed earlier, you may allocate Net Premiums and transfer Policy Value to
the General Account. Because of exemption and exclusionary provisions in the
securities laws, any amount in the General Account is not generally subject to
regulation under the provisions of the Securities Act of 1933 or the Investment
Company Act of 1940. Accordingly, the disclosures in this Section have not been
reviewed by the Securities and Exchange Commission. Disclosures regarding the
fixed portion of the Policy and the General Account may, however, be subject to
certain generally applicable provisions of the Federal securities laws
concerning the accuracy and completeness of statements made in prospectuses.

GENERAL DESCRIPTION - The General Account of the Company is made up of all of
the general assets of the Company other than those allocated to any separate
account. Allocations to the General Account become part of the assets of the
Company and are used to support insurance and annuity obligations. Subject to
applicable law, the Company has sole discretion over the investment of assets of
the General Account.

A portion or all of Net Premiums may be allocated or transferred to accumulate
at a fixed rate of interest in the General Account. Such net amounts are
guaranteed by the Company as to principal and a minimum rate of interest. The
allocation or transfer of funds to the General Account does not entitle you to
share in the investment experience of the General Account.

GENERAL ACCOUNT VALUE - The Company bears the full investment risk for amounts
allocated to the General Account and guarantees that interest credited to each
Policyowner's Policy Value in the General Account will not be less than an
annual rate of 4% ("Guaranteed Minimum Rate").

The Company may, AT ITS SOLE DISCRETION, credit a higher rate of interest
("excess interest"), although it is not obligated to credit interest in excess
of 4% per year, and might not do so. However, the excess interest rate, if any,
in effect on the date a premium is received at the Principal Office is
guaranteed on that premium for one year, unless the Policy Value associated with
the premium becomes security for a Policy loan. AFTER SUCH INITIAL ONE YEAR
GUARANTEE OF INTEREST ON NET PREMIUM, ANY INTEREST CREDITED ON THE POLICY'S
ACCUMULATED VALUE IN THE GENERAL ACCOUNT IN EXCESS OF THE GUARANTEED MINIMUM
RATE PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE
POLICYOWNER ASSUMES THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE
GUARANTEED MINIMUM RATE.

Even if excess interest is credited to accumulated value in the General Account,
no excess interest will be credited to that portion of the Policy Value which is
equal to Debt. However, such Policy Value will be credited interest at an
effective annual yield of at least 6%.

The Company guarantees that, on each Monthly Payment Date, the Policy Value in
the General Account will be the

<PAGE>

amount of the Net Premiums allocated or Policy Value transferred to the General
Account, plus interest at an annual rate of 4% per year, plus any excess
interest which the Company credits, less the sum of all Policy charges allocable
to the General Account and any amounts deducted from the General Account in
connection with loans, partial withdrawals, surrenders or transfers.

THE POLICY - This prospectus describes a flexible premium variable life
insurance policy and is generally intended to serve as a disclosure document
only for the aspects of the Policy relating to the VEL II Account. For complete
details regarding the General Account, see the Policy itself.

TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND POLICY LOANS - If a Policy is
surrendered or if a partial withdrawal is made, a surrender charge or partial
withdrawal charge, as applicable, may be imposed. In the event of a decrease in
Face Amount, the surrender charge deducted is a fraction of the charge that
would apply to a full surrender of the Policy. Partial withdrawals are made on
a last-in/first-out basis from Policy Value allocated to the General Account.

The first six transfers in a policy year are free of charge. Thereafter, a $10
transfer charge will be deducted for each transfer in that Policy year. The
transfer privilege is subject to the consent of the Company and to the Company's
then current rules.

Policy loans may also be made from the Policy Value in the General Account.

Transfers, surrenders, partial withdrawals, Death Proceeds and Policy loans
payable from the General Account may be delayed up to six months. However, if
payment is delayed for 10 days or more, the Company will pay interest at least
equal to an effective annual yield of 3 1/2% per year for the period of
deferment. Amounts from the General Account used to pay premiums on policies
with the Company will not be delayed.

FINANCIAL STATEMENTS

Financial Statements for the Company and for the VEL II Account are included in
this prospectus beginning immediately after this section. The financial
statements of the Company should be considered only as bearing on the ability of
the Company to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
VEL II Account

APPENDIX A - OPTIONAL BENEFITS

This Appendix is intended to provide only a very brief overview of additional
insurance benefits available by rider. For more information, contact your
agent.

The following supplemental benefits are available for issue under the Policies
for an additional charge.

WAIVER OF PREMIUM RIDER
This rider provides that during periods of total disability continuing
more than four months the Company will add to the Policy Value each
month an amount selected by you or the amount needed to pay the Policy
charges, whichever is greater. This value will be used to keep the
Policy in force. This benefit is subject to the Company's maximum
issue benefits. Its cost will change yearly.

GUARANTEED INSURABILITY RIDER

This rider guarantees that insurance may be added at various option
dates without Evidence of Insurability. This benefit may be exercised
on the option dates even if the Insured is disabled.

OTHER INSURED RIDER

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

<PAGE>

CHILDREN'S INSURANCE RIDER
This rider provides coverage for eligible minor children. It also
covers future children, including adopted children and step children.

ACCIDENTAL DEATH BENEFIT RIDER

This rider pays an additional benefit for death resulting from a
covered accident prior to the Policy anniversary nearest the Insured's
Age 70.

EXCHANGE OPTION RIDER

This rider allows you to use the Policy to insure a different person,
subject to Company guidelines.

LIVING BENEFITS RIDER

This rider permits part of the proceeds of the Policy to be available
before death if the Insured becomes terminally ill or is permanently
confined to a nursing home.

APPENDIX B - PAYMENT OPTIONS

PAYMENT OPTIONS - Upon written request, the Surrender Value or all or part of
the Death Proceeds may be placed under one or more of the payment options below
or any other option offered by the Company. If you do not make an election, the
Company will pay the benefits in a single sum. A certificate will be provided
to the payee describing the payment option selected.

If a payment option is selected, the Beneficiary may pay to the Company any
amount that would otherwise be deducted from the Sum Insured.

The amounts payable under a payment option for each $1,000 value applied will be
the greater of:

(a) the rate per $1,000 of value applied based on the Company's
non-guaranteed current payment option rates for the Policies; or

(b) the rate in the Policy for the applicable payment option.

The following payment options are currently available. The amounts payable
under these options are paid from the General Account. None are based on the
investment experience of the VEL II Account.

Option A: PAYMENTS FOR A SPECIFIED NUMBER OF YEARS. The Company will make
equal payments for any selected number of years (not greater than
thirty). Payments may be made annually, semi-annually, quarterly
or monthly.

Option B: LIFETIME MONTHLY PAYMENTS. Payments are based on the payee's Age
on the date the first payment will be made. One of three
variations may be chosen. Depending upon this choice, payments
will end:

(a) upon the death of the payee, with no further payments due (Life
Annuity), or

(b) upon the death of the payee, but not before the sum of the
payments made first equals or exceeds the amount applied under
this option (Life Annuity with Installment Refund),

(c) upon the death of the payee, but not before a selected period (5,
10 or 20 years) has elapsed (Life Annuity with Period Certain).

<PAGE>

Option C: INTEREST PAYMENTS. The Company will pay interest at a rate
determined by the Company each year but which will not be less
than 3 1/2%. Payments may be made annually, semi-annually,
quarterly or monthly. Payments will end when the amount left
with the Company has been withdrawn. However, payments will not
continue after the death of the payee. Any unpaid balance plus
accrued interest will be paid in a lump sum.

Option D: PAYMENTS FOR A SPECIFIED AMOUNT. Payments will be made until the
unpaid balance is exhausted. Interest will be credited to the
unpaid balance. The rate of interest will be determined by the
Company each year but will not be less than 3 1/2%. Payments may
be made annually, semi-annually, quarterly or monthly. The
payment level selected must provide for the payment each year of
at least 8% of the amount applied.

Option E: LIFETIME MONTHLY PAYMENTS FOR TWO PAYEES. One of three
variations may be chosen. After the death of one payee, payments
will continue to the survivor:

(a) in the same amount as the original amount;

(b) in an amount equal to 2/3 of the original amount; or

Payments are based on the payees' ages on the date the firs t
payment is due. Payments will end upon the death of the
surviving payee.

SELECTION OF PAYMENT OPTIONS - The amount applied under any one option for any
one payee must be at least $5,000. The periodic payment for any one payee must
be at least $50. Subject to your and/or the Beneficiary's provision, any option
selection may be changed before the Death Proceeds become payable. If you make
no selection, the Beneficiary may select an option when the Death Proceeds
become payable.

If the amount of monthly income payments under Option B, choice (c) for the
attained Age of the payee are the same for different periods certain, the
Company will deem an election to have been made for the longest period certain
which could have been elected for such Age and amount.

You may give the Beneficiary the right to change from Option C or D to any other
option at any time. If the payee selects Option C or D when this policy becomes
a claim, the right may be reserved to change to any other option. The payee who
elects to change options must be a payee under the option selected.

ADDITIONAL DEPOSITS - An additional deposit may be made to any proceeds when
they are applied under Option B or E. A charge not to exceed 3% will be made.
The Company may limit the amount of this deposit.

RIGHTS AND LIMITATIONS - A payee does not have the right to assign any amount
payable under any option. A payee does not have the right to commute any amount
payable under Option B or E. A payee will have the right to commute any amount
payable under Option A only if the right is reserved in the written request
selecting the option. If the right to commute is exercised, the commuted values
will be computed at the interest rates used to calculate the benefits. The
amount left under Option C, and any unpaid balance under Option D, may be
withdrawn by the payee only as set forth in the written request selecting the
option.

A corporation or fiduciary payee may select only option A, C or D. Such
selection will be subject to the consent of the Company.

PAYMENT DATES - The first payment under any option, except Option C, will be due
on the date this policy matures by death or otherwise, unless another date is
designated. Payments under Option C begin at the end of the first payment
period.

The last payment under any option will be made as stated in the description of
that option. However, should a payee under Option B or E die prior to the due
date of the second monthly payment, the amount applied less the first monthly
payment will be paid in a lump sum or under any option other than Option E. A
lump sum payment will be made to the surviving payee under Option E or the
succeeding payee under Option B.

<PAGE>

APPENDIX C - ILLUSTRATIONS OF SUM INSURED, POLICY VALUES
AND ACCUMULATED PREMIUMS

The following tables illustrate the way in which a Policy's Sum Insured and
Policy Value could vary over an extended period of time. They assume that
all premiums are allocated to and remain in the VEL II Account for the entire
period shown and are based on hypothetical gross investment rates of return
for the Underlying Fund (i.e., investment income and capital gains and
losses, realized or unrealized) equivalent to constant gross (after tax)
annual rates of 0%, 6%, and 12%.

The tables illustrate a Policy issued to a male, Age 30, under a standard
Premium Class and qualifying for the non-smoker discount, and a Policy issued
to a male, Age 45, under a standard Premium Class and qualifying for the
non-smoker discount.

The tables illustrate the guaranteed cost of insurance rates; and the current
cost of insurance rates as presently in effect.

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

The amounts shown for the Death Proceeds and Policy Values take into account the
deduction from premium for the tax expense charge, the Monthly Deduction from
Policy Value, and the daily charge against the VEL II Account for mortality and
expense risks and the VEL II Account administrative charge for the first ten
Policy years, equivalent to an effective annual rate of 1.15% of the average
daily value of the assets in the VEL II Account attributable to the Policies,
and 0.90% thereafter. The actual mortality and expense risk charge is
currently 0.65%.

The amounts shown in the tables also take into account
the Underlying Investment Company advisory fees and operating expenses, which
are assumed to be at an annual rate of 0.85% of the average daily net assets of
the Underlying Investment Company. The actual fees and expenses of each
Underlying Investment Company vary, and in 1995 ranged from an annual rate of
0.36% to an annual rate of 1.55% of average daily net assets. The fees and
expenses associated with your Policy may be more or less than 0.85% in the
aggregate, depending upon how you make allocations of Policy Value among the
Sub-Accounts.

Under its Management Agreement with the Trust, Allmerica Investments has
declared a voluntary expense limitation of 1.50% of average net average
assets for the Select International Equity Fund, 1.20% for the Growth Fund,
1.00% for the Investment Grade Income Fund, 0.60% for the Money Market Fund,
0.60% for the Equity Index Fund, 1.00% for the Government Bond Fund, 1.35%
for the Select Capital Appreciation Fund and the Select Aggressive Growth
Fund, 1.20% for the Select Growth Fund, 1.10% for the Select Growth and
Income Fund, and 1.25% for the Small Cap Value Fund. Without the effect of
the expense limitation, in 1995 the total operation expenses of the Select
Capital Appreciation Fund would have been 1.42%, of average net assets.
Fidelity Management has voluntarily agreed to temporarily limit the total
operating expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) of the Equity-Income, Growth and Overseas Portfolios
to an annual rate of 1.50%, and of the High Income Portfolio to an annual
rate of 1.00%, and of the Asset Manager Portfolio to an annual rate of 1.25%,
of each Portfolio's average net assets. Delaware International has agreed
voluntarily to waive its management fees and reimburse the International
Equity Series to limit certain expenses to 8/10 of 1% of the average daily
net assets. Except as noted, in 1995 the expenses of the Underlying Funds
did not exceed the expense limitations.

Taking into account the mortality and expense risk charge and the VEL II Account
administrative charge and the assumed 0.85% charge for Underlying Investment
Company advisory fees and operating expenses, the gross annual rates of
investment return of 0%, 6% and 12% correspond to net annual rates of -2.00%,
4.00%, 10.00%, respectively, during the first 10 Policy years and -1.75%, 4.25%
and 10.25%, respectively, thereafter.

The hypothetical returns shown in the table do not reflect any charges for
income taxes against the VEL II Account since no charges are currently made.
However, if in the future such charges are made, in order to produce illustrated
death benefits and cash values, the gross annual investment rate of return would
have to exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges.

<PAGE>

The second column of the tables show the amount which would accumulate if an
amount equal to the Guideline Annual Premium were invested to earn interest
(after taxes) at 5% compounded annually.

The tables illustrate the Policy Values that would result based upon the
assumptions that no Policy loans have been made, that you have not requested an
increase or decrease in the initial Face Amount, that no partial withdrawals
have been made, and that no transfers above 6 have been made in any Policy year
(so that no transaction or transfer charges have been incurred).

Upon request, the Company will provide a comparable illustration based upon the
proposed Insured's Age, sex, and underwriting classification, and the requested
Face Amount, Sum Insured Option, and riders.

TO CHOOSE THE SUB-ACCOUNTS WHICH WILL BEST MEET YOUR NEEDS AND OBJECTIVES,
CAREFULLY READ THE PROSPECTUSES OF THE TRUST, VIP, VIP, VIP II,T. ROWE PRICE AND
DGPF ALONG WITH THIS PROSPECTUS.

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
VARI-EXCEPTIONAL LIFE POLICY
Male Non-Smoker Age 30
Specified Face Amount = $75,000
Sum Insured Option 2

GAURANTEED CURRENT COST OF INSURANCE CHARGES
Rremiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest

Policy At 5% Surrender Policy Death Surrender Policy Death Surrender Policy Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 297 1,191 76,191 375 1,268 76,268 452 1,345 76,345
2 3,014 1,335 2,354 77,354 1,563 2,583 77,583 1,802 2,821 77,821
3 4,634 2,423 3,491 78,491 2,880 3,947 78,947 3,374 4,441 79,441
4 6,336 3,575 4,599 79,599 4,335 5,360 80,360 5,193 6,217 81,217
5 8,123 4,720 5,681 80,681 5,864 6,825 81,825 7,205 8,166 83,166

6 9,999 5,839 6,735 81,735 7,445 8,342 83,342 9,407 10,303 85,303
7 11,969 6,930 7,762 82,762 9,081 9,913 84,913 11,815 12,648 87,648
8 14,037 7,988 8,757 83,757 10,767 11,536 86,536 14,446 15,214 90,214
9 16,209 9,020 9,724 84,724 12,511 13,215 88,215 17,325 18,030 93,030
10 18,490 10,013 9,020 85,653 14,302 14,942 89,942 20,466 21,106 96,106

11 20,884 11,612 11,612 86,612 16,286 16,798 91,798 24,054 24,566 99,566
12 23,398 11,100 12,545 87,545 18,340 18,724 93,724 27,987 28,371 103,371
13 26,038 12,161 13,452 88,452 20,465 20,721 95,721 32,300 32,556 107,556
14 28,810 13,196 14,330 89,330 22,662 22,790 97,790 37,028 37,156 112,156
15 31,720 14,202 15,179 90,179 24,932 24,932 99,932 42,212 42,212 117,212

16 34,777 15,996 15,996 90,996 27,147 27,147 102,147 47,768 47,768 122,768
17 37,985 15,996 16,775 91,775 29,433 29,433 104,433 53,869 53,869 128,869
18 41,355 16,775 17,514 92,514 31,789 31,789 106,789 60,568 60,568 135,568
19 44,892 17,514 18,214 93,214 34,217 34,217 109,217 67,925 67,925 142,925
20 48,607 18,214 18,871 93,871 36,718 36,718 111,718 76,004 76,004 151,004

Age 60 97,665 23,046 23,046 98,046 66,184 66,184 141,184 216,966 216,966 291,966
Age 65 132,771 23,046 22,890 97,890 83,841 83,841 158,841 356,415 356,415 434,826
Age 70 177,576 20,395 20,395 95,395 102,867 102,867 177,867 579,651 579,651 672,395
Age 75 234,759 20,395 14,625 89,625 122,284 102,867 197,284 579,651 938,228 1,013,228

</TABLE>

(1) Assumes a $1,400 premium is paid at the beginning of each Policy Year.
Values will be different if premiums are paid with a different
frequency or in different amounts.

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

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

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE
VARI-EXCEPTIONAL LIFE POLICY
Male Non-Smoker Age 30
Specified Face Amount = $75,000
Sum Insured Option 2

GUARANTEED COST OF INSURANCE CHARGES
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest

Policy At 5% Surrender Policy Death Surrender Policy Death Surrender Policy Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 281 1,175 76,175 358 1,251 76,251 435 1,328 76,328
2 3,014 1,304 2,324 77,324 1,531 2,551 77,551 1,767 2,787 77,787
3 4,634 2,381 3,448 78,448 2,832 3,900 78,900 3,322 4,389 79,389
4 6,336 3,521 4,546 79,546 4,274 5,299 80,299 5,123 6,148 81,148
5 8,123 4,656 5,617 80,617 5,789 6,749 81,749 7,117 8,077 83,077

6 9,999 5,764 6,661 81,661 7,355 8,252 83,252 9,297 10,194 85,194
7 11,969 6,846 7,678 82,678 8,975 9,808 84,808 11,683 12,515 87,515
8 14,037 7,898 8,667 83,667 10,650 11,418 86,418 14,292 15,060 90,060
9 16,209 8,922 9,627 84,627 12,379 13,083 88,083 17,146 17,850 92,850
10 18,490 9,917 10,557 85,557 14,164 14,804 89,804 20,268 20,908 95,908

11 20,884 10,975 11,487 86,487 16,111 16,623 91,623 23,803 24,315 99,315
12 23,398 12,003 12,387 87,387 18,121 18,505 93,505 27,673 28,058 103,058
13 26,038 13,002 13,259 88,259 20,197 20,453 95,453 31,913 32,169 107,169
14 28,810 13,971 14,099 89,099 22,340 22,468 97,468 36,557 36,685 111,685
15 31,720 14,909 14,909 89,909 24,552 24,552 99,552 41,648 41,648 116,648

16 34,777 15,686 15,686 90,686 26,706 26,706 101,706 47,099 47,099 122,099
17 37,985 16,429 16,429 91,429 28,930 28,930 103,930 53,088 53,088 128,088
18 41,355 17,138 17,138 92,138 31,227 31,227 106,227 59,667 59,667 134,667
19 44,892 17,811 17,811 92,811 33,597 33,597 108,597 66,896 66,896 141,897
20 48,607 18,447 18,447 93,447 36,041 36,041 111,041 74,839 74,839 149,839

Age 60 97,665 21,926 21,926 96,926 64,210 64,210 139,210 212,687 212,687 287,687
Age 65 132,771 20,604 20,604 95,604 79,971 79,971 154,971 347,814 347,814 424,333
Age 70 177,576 15,553 15,553 90,553 94,955 94,955 169,955 562,022 562,022 651,946
Age 75 234,759 4,472 4,472 79,166 105,993 105,993 180,993 901,865 901,865 976,865
</TABLE>
(1) Assumes a $1,400 premium is paid at the beginning of each Policy Year.
Values will be different premiums are paid with a different frequency or in
different amounts.

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

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

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
VARI-EXCEPTIONAL LIFE POLICY
Male Non-Smoker Age 45
Specified Face Amount = $250,000
Sum Insured Option 1

CURRENT COST OF INSURANCE CHARGES
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest

Policy At 5% Surrender Policy Death Surrender Policy Death Surrender Policy Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 3,239 250,000 117 3,460 250,000 339 3,682 250,000
2 9,040 2,643 6,367 250,000 3,287 7,011 250,000 3,960 7,684 250,000
3 13,903 3,466 9,369 250,000 4,739 10,641 250,000 6,120 12,023 250,000
4 19,008 6,582 12,248 250,000 8,689 14,355 250,000 11,070 16,737 250,000
5 24,368 9,692 15,004 250,000 12,842 18,154 250,000 16,549 21,862 250,000

6 29,996 12,663 17,621 250,000 17,067 22,025 250,000 22,467 27,425 250,000
7 35,906 15,510 20,114 250,000 21,381 25,985 250,000 28,885 33,489 250,000
8 42,112 18,231 22,481 250,000 25,785 30,035 250,000 35,854 40,104 250,000
9 48,627 20,827 24,722 250,000 30,284 34,180 250,000 43,436 47,332 250,000
10 55,469 23,285 26,826 250,000 34,869 38,411 250,000 51,686 55,228 250,000

11 62,652 26,158 28,991 250,000 40,125 42,958 250,000 61,296 64,129 250,000
12 70,195 28,900 31,025 250,000 45,500 47,625 250,000 71,785 73,910 250,000
13 78,114 31,493 32,910 250,000 50,987 52,404 250,000 83,243 84,659 250,000
14 86,430 33,928 34,637 250,000 56,584 57,292 250,000 95,779 96,488 250,000
15 95,161 36,189 36,189 250,000 62,285 62,285 250,000 109,517 109,517 250,000

16 104,330 37,583 37,583 250,000 67,405 67,405 250,000 123,910 123,910 250,000
17 113,956 38,799 38,799 250,000 72,647 72,647 250,000 139,828 139,828 250,000
18 124,064 39,818 39,818 250,000 78,006 78,006 250,000 157,460 157,460 250,000
19 134,677 40,597 40,597 250,000 83,461 83,461 250,000 177,017 177,017 250,000
20 145,820 41,162 41,162 250,000 89,048 89,048 250,000 198,776 198,776 250,000

Age 60 95,161 36,189 36,189 250,000 62,285 62,285 250,000 109,517 109,517 250,000
Age 65 142,820 41,162 41,162 250,000 89,048 89,048 250,000 198,776 198,776 250,000
Age 70 210,477 39,920 39,920 250,000 119,010 119,010 250,000 345,970 345,970 401,325
Age 75 292,995 29,328 29,328 250,000 153,524 153,524 250,000 582,985 582,985 623,794
</TABLE>

(1) Assumes a $4,200 premium is paid at the beginning of each Policy Year.
Values will be different premiums are paid with a different frequency or in
different amounts.

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

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

48
<PAGE>
<TABLE>
<CAPTION>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
VARI-EXCEPTIONAL LIFE POLICY
Male Non-Smoker Age 45
Specified Face Amount = $250,000
Sum Insured Option 1

GUARANTEED COST OF INSURANCE CHARGES
Premiums Hypothetical 0% Hypothetical 6% Hypothetical 12%
Paid Plus Gross Investment Return Gross Investment Return Gross Investment Return
Interest

Policy At 5% Surrender Policy Death Surrender Policy Death Surrender Policy Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 3,154 250,000 29 3,372 250,000 248 3,591 250,000
2 9,040 2,465 6,189 250,000 3,099 6,823 250,000 3,760 7,484 250,000
3 13,903 3,203 9,105 250,000 4,451 10,354 250,000 5,806 11,709 250,000
4 19,008 6,235 11,901 250,000 8,298 13,965 250,000 10,631 16,298 250,000
5 24,368 9,259 14,571 250,000 12,340 17,653 250,000 15,969 21,281 250,000

6 29,996 12,155 17,113 250,000 16,460 21,418 250,000 21,742 26,701 250,000
7 35,906 14,913 19,517 250,000 20,649 25,253 250,000 27,985 32,589 250,000
8 42,112 17,519 21,769 250,000 24,896 29,145 250,000 34,736 38,986 250,000
9 48,627 19,966 23,861 250,000 29,195 33,090 250,000 42,044 45,940 250,000
10 55,469 22,237 25,778 250,000 33,533 37,075 250,000 49,957 53,499 250,000

11 62,652 24,747 27,581 250,000 38,359 41,192 250,000 59,034 61,868 250,000
12 70,195 27,062 29,187 250,000 43,221 45,346 250,000 68,885 71,010 250,000
13 78,114 29,175 30,591 250,000 48,118 49,535 250,000 79,601 81,018 250,000
14 86,430 31,073 31,782 250,000 53,046 53,755 250,000 91,288 91,996 250,000
15 95,161 32,735 32,735 250,000 57,990 57,990 250,000 104,058 104,058 250,000

16 104,330 33,430 33,430 250,000 62,228 62,228 250,000 117,338 117,338 250,000
17 113,956 33,839 33,839 250,000 66,453 66,453 250,000 131,992 131,992 250,000
18 124,064 33,926 33,926 250,000 70,642 70,642 250,000 148,204 148,204 250,000
19 134,677 33,646 33,646 250,000 74,767 74,767 250,000 166,190 166,190 250,000
20 145,820 32,949 32,949 250,000 78,799 78,799 250,000 186,214 186,214 250,000

Age 60 95,161 32,735 32,735 250,000 57,990 57,990 250,000 104,058 104,058 250,000
Age 65 142,820 32,949 32,949 250,000 78,799 78,799 250,000 186,214 186,214 250,000
Age 70 210,477 21,466 21,466 250,000 96,725 96,725 250,000 322,843 322,843 374,498
Age 75 292,995 0 0 0 106,594 106,594 250,000 540,681 540,681 578,528
</TABLE>

(1) Assumes a $4,200 premium is paid at the beginning of each Policy Year.
Values will be different premiums are paid with a different frequency or in
different amounts.

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

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

<PAGE>

APPENDIX D - CALCULATION OF MAXIMUM SURRENDER CHARGES

A separate surrender charge is calculated upon issuance of the Policy and upon
each increase in Face Amount. The maximum surrender charge is equal to the sum
of (a) plus (b), where (a) is a deferred administrative charge equal to $8.50
per $1,000 of initial Face Amount (or Face Amount increase) and (b) is a
deferred sales charge of 49% of premiums received up to a maximum number of
Guideline Annual Premiums (GAPs) subject to the deferred sales charge that
varies by issue Age or Age at time of increase as applicable:

Applicable Age Maximum GAPs Applicable Age Maximum GAPs
- -------------- ------------ -------------- ------------
<S> <C> <C> <C>
0-55 1.660714 68 1.290612
56 1.632245 69 1.262143
57 1.603776 70 1.233673
58 1.575306 71 1.205204
59 1.546837 72 1.176735
60 1.518367 73 1.148265
61 1.489898 74 1.119796
62 1.461429 75 1.091327
63 1.432959 76 1.062857
64 1.404490 77 1.034388
65 1.376020 78 1.005918
66 1.347551 79 0.977449
67 1.319082 80 0.948980
</TABLE>

A further limitation is imposed based on the Standard Non-Forfeiture Law of each
state. The maximum surrender charges upon issuance of the Policy and upon each
increase in Face Amount are shown in the table below. During the first two
Policy years following issue or an increase in Face Amount, the actual surrender
charge may be less than the maximum. See "CHARGES AND DEDUCTIONS - Surrender
Charge."

The maximum surrender charge initially remains level and then grades down
according to the following schedule:

Ages
- ----
0-50 The maximum surrender charge remains level for the first 40 Policy
months, reduces by 0.5% for the next 80 Policy months, then decreases
by 1% per month to zero at the end of 180 Policy months (15 Policy
years).

51 and The maximum surrender charge remains level for 40 Policy months and
above decreases per month by the percentages below:

age 51 - 0.78% per month for 128 months
age 52 - 0.86% per month for 116 months
age 53 - 0.96% per month for 104 months
age 54 - 1.09% per month for 92 months
age 55 and over - 1.25% per month for 80 months

<PAGE>

The Factors used in calculating the maximum surrender charges vary with the
issue Age, sex and Premium Class (Smoker) as indicated in the table below.

MAXIMUM SURRENDER CHARGE PER $1,000 FACE AMOUNT

Age of
issue or Male Male Female Female
increase Nonsmoker Smoker Nonsmoker Smoker
-------- --------- ------ --------- ------
<S> <C> <C> <C> <C>
0 8.63 7.68
1 8.63 7.70
2 8.78 7.81
3 8.94 7.93
4 9.10 8.05
5 9.27 8.18
6 9.46 8.32
7 9.65 8.47
8 9.86 8.62
9 10.08 8.78
10 10.31 8.95
11 10.55 9.13
12 10.81 9.32
13 11.07 9.51
14 11.34 9.71
15 11.62 9.92
16 11.89 10.14
17 12.16 10.36
18 10.65 12.44 9.73 10.59
19 10.87 12.73 9.93 10.83
20 11.10 13.02 10.15 11.09
21 11.34 13.33 10.37 11.35
22 11.59 13.66 10.60 11.63
23 11.85 14.01 10.85 11.92
24 12.14 14.38 11.10 12.22
25 12.44 14.77 11.37 12.54
26 12.75 15.19 11.66 12.88
27 13.09 15.64 11.95 13.23
28 13.45 16.11 12.26 13.60
29 13.83 16.62 12.59 13.99
30 14.23 17.15 12.93 14.40
31 14.66 17.72 13.29 14.83
32 15.10 18.32 13.67 15.28
33 15.58 18.96 14.07 15.75
34 16.08 19.63 14.49 16.25
35 16.60 20.35 14.93 16.77
</TABLE>
51

<PAGE>

MAXIMUM SURRENDER CHARGE PER $1,000 FACE AMOUNT (continued)

Age of
issue or Male Male Female Female
increase Nonsmoker Smoker Nonsmoker Smoker
-------- --------- ------ --------- ------
<S> <C> <C> <C> <C>

36 17.16 21.10 15.39 17.33
37 17.75 21.89 15.88 17.91
38 18.37 22.73 16.39 18.51
39 19.02 23.55 16.93 19.15
40 19.71 24.28 17.50 19.81
41 20.44 25.04 18.09 20.51
42 21.20 25.85 18.71 21.23
43 22.02 26.71 19.36 21.98
44 22.87 27.61 20.04 22.77
45 23.61 28.56 20.76 23.56
46 24.36 29.57 21.52 24.23
47 25.15 30.63 22.33 24.94
48 26.00 31.16 23.14 24.69
49 26.90 32.95 23.83 26.47
50 27.85 34.21 24.57 27.31
51 28.87 35.56 25.35 28.18
52 29.96 36.99 26.17 29.11
53 31.12 38.25 27.05 30.09
54 32.56 38.25 27.95 31.12
55 33.67 38.25 28.97 32.21
56 34.62 38.25 29.65 32.94
57 35.61 38.25 30.36 33.70
58 36.65 38.25 31.11 34.49
59 37.73 38.25 31.90 35.33
60 38.25 38.25 32.74 36.23
</TABLE>

<PAGE>

MAXIMUM SURRENDER CHARGE PER $1,000 FACE AMOUNT (continued)

Age of
issue or Male Male Female Female
increase Nonsmoker Smoker Nonsmoker Smoker
-------- --------- ------ --------- ------
<S> <C> <C> <C> <C>

61 38.25 38.25 33.63 37.18
62 38.25 38.25 34.57 38.18
63 38.25 38.25 35.56 38.25
64 38.25 38.25 36.60 38.25
65 38.25 38.25 37.68 38.25
66 38.25 38.25 38.25 38.25
67 38.25 38.25 38.25 38.25
68 38.25 38.25 38.25 38.25
69 38.25 38.25 38.25 38.25
70 38.25 38.25 38.25 38.25
71 38.25 38.25 38.25 38.25
72 38.25 38.25 38.25 38.25
73 38.25 38.25 38.25 38.25
74 38.25 38.25 38.25 38.25
75 38.25 38.25 38.25 38.25
76 38.25 38.25 38.25 38.25
77 38.25 38.25 38.25 38.25
78 38.25 38.25 38.25 38.25
79 38.25 38.25 38.25 38.25
80 38.25 38.25 38.25 38.25

</TABLE>

EXAMPLES

For the purposes of these examples, assume that a male, Age 35, non-smoker
purchases a $100,000 Policy. In this example the Guideline Annual Premium
("GAP") equals $1,118.22. His maximum surrender charge is calculated as
follows:

(a) Deferred Administrative Charge $850.00
($8.50/$1,000 of Face Amount)

(b) Deferred Sales Charge $909.95
(49% x 1.660714 GAPs)
-----------

TOTAL $1,759.95

Maximum Surrender Charge per Table on page 84 (16.60 x 100) $1,660.00

<PAGE>

During the first two Policy years after the Date of Issue, the actual surrender
charge is the smaller of the maximum surrender charge and the following sum:

(a) Deferred Administrative Charge $850.00
($8.50/$1,000 of Face Amount)

(b) Deferred Sales Charge Varies
(not to exceed 29% of Premiums received,
up to one GAP, plus 9% of premiums
received in excess of one GAP, but
less than the maximum number of GAPs
subject to the deferred sales charge)

-----------
Sum of (a) and (b)

The maximum surrender charge is $1,660.00. All premiums are associated with the
initial face amount unless the face amount is increased.

EXAMPLE 1:

Assume the Policyowner surrenders the Policy in the 10th policy month, having
paid total premiums of $900. The actual surrender charge would be $1,111.

EXAMPLE 2:

Assume the Policyowner surrenders the Policy in the 120th month. After the 40th
policy month, the maximum surrender charge decreases by 0.5% per month ($8.30
per month in this example). In this example, the maximum surrender charge would
be $996.00.

54
<PAGE>

FIRST ALLMERICA
FINANCIAL LIFE
INSURANCE COMPANY

FINANCIAL STATEMENTS
DECEMBER 31, 1995

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholder of
First Allmerica Financial Life Insurance Company
(formerly known as State Mutual Life Assurance Company of America)

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholder's equity, and of cash flows
present fairly, in all material respects, the financial position of First
Allmerica Financial Life Insurance Company and its subsidiaries at December
31, 1995 and 1994, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

As discussed in the accompanying notes to the consolidated financial
statements, the Company changed its method of accounting for investments
(Notes 1 and 3) and postemployment benefits (Notes 11) in 1994 and for
postretirement benefits (Note 10) in 1993.

/s/ Price Waterhouse LLP

Boston, Massachusetts
February 5, 1996

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Allmerica Financial Corporation)

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
For the Years Ended December 31
(In millions, except per share data) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums $ 2,222.8 $ 2,181.8 $ 2,079.3
Universal life and investment product policy fees 170.4 156.8 143.7
Net investment income 710.1 743.1 782.8
Net realized investment gains 19.1 1.1 61.0
Realized gain on sale of subsidiary -- -- 35.7
Realized gain on sale of mutual fund processing business 20.7 -- --
Realized gain on issuance of subsidiary common stock -- -- 62.9
Other income 95.4 112.3 73.8
----------------------------------------
Total revenues 3,238.5 3,195.1 3,239.2
----------------------------------------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss adjustment expenses 2,008.3 2,047.0 1,987.2
Policy acquisition expenses 470.3 475.7 435.8
Other operating expenses 455.0 518.9 421.3
----------------------------------------
Total benefits, losses and expenses 2,933.6 3,041.6 2,844.3
----------------------------------------
Income before federal income taxes 304.9 153.5 394.9
----------------------------------------
FEDERAL INCOME TAX EXPENSE (BENEFIT)
Current 119.7 45.4 95.1
Deferred (37.0) 8.0 (20.4)
----------------------------------------
Total federal income tax expense 82.7 53.4 74.7
----------------------------------------
Income before minority interest, extraordinary item, and
cumulative effect of accounting change 222.2 100.1 320.2
Minority interest (73.1) (51.0) (122.8)
----------------------------------------
Income before extraordinary item and cumulative effect of
accounting changes 149.1 49.1 197.4
Extraordinary item - demutualization expenses (12.1) (9.2) (4.6)
Cumulative effect of changes in accounting principles -- (1.9) (35.4)
----------------------------------------
Net income $ 137.0 $ 38.0 $ 157.4
----------------------------------------
----------------------------------------
</TABLE>

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

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Allmerica Financial Corporation)

CONSOLIDATED BALANCE SHEETS

December 31
(In millions, except per share data) 1995 1994
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities-at amortized cost (fair value of $949.9 in 1994) $ -- $ 959.3
Fixed maturities-at fair value (amortized cost of $7,467.9 and $6,724.6) 7,739.3 6,512.0
Equity securities-at fair value (cost of $410.6 and $260.4) 517.2 286.4
Mortgage loans 799.5 1,106.7
Real estate 179.6 180.3
Policy loans 123.2 364.9
Other long-term investments 71.9 68.1
-------------------------------
Total investments 9,430.7 9,477.7
-------------------------------
Cash and cash equivalents 236.6 539.7
Accrued investment income 163.0 186.6
Deferred policy acquisition costs 735.7 802.8
-------------------------------
Reinsurance receivables:
Future policy benefits 97.1 59.7
Outstanding claims, losses and loss adjustment expenses 799.6 741.0
Unearned premiums 43.8 61.9
Other 58.9 62.1
-------------------------------
Total reinsurance receivables 999.4 924.7
-------------------------------
Deferred federal income taxes 81.2 189.1
Premiums, accounts and notes receivable 526.7 510.3
Other assets 361.4 324.9
Closed Block assets 818.9 --
Separate account assets 4,348.8 2,965.7
-------------------------------
Total assets $ 17,702.4 $ 15,921.5
-------------------------------
-------------------------------
LIABILITIES
Policy liabilities and accruals:
Future policy benefits $ 2,639.3 $ 3,416.4
Outstanding claims, losses and loss adjustment expenses 3,081.3 2,991.5
Unearned premiums 800.9 796.6
Contractholder deposit funds and other policy liabilities 2,737.4 3,435.7
-------------------------------
Total policy liabilities and accruals 9,258.9 10,640.2
-------------------------------
Expenses and taxes payable 600.3 589.2
Reinsurance premiums payable 42.0 65.8
Short-term debt 28.0 32.8
Deferred federal income taxes 47.8 13.8
Long-term debt 2.8 2.7
Closed Block liabilities 902.0 --
Separate account liabilities 4,337.8 2,954.9
-------------------------------
Total liabilities 15,219.6 14,299.4
-------------------------------
Minority interest 758.5 629.7
Commitments and contingencies (Notes 14 and 19)

SHAREHOLDERS' EQUITY
Common stock, $10 par value, 1 million shares authorized, 500,000
shares issued and outstanding 5.0 --
Additional paid-in-capital 392.4 --
Unrealized appreciation (depreciation) on investments, net 153.0 (79.0)
Retained earnings 1,173.9 1,071.4
-------------------------------
Total shareholders' equity 1,724.3 992.4
-------------------------------
Total liabilities and shareholders' equity $ 17,702.4 $ 15,921.5
-------------------------------
-------------------------------
</TABLE>

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

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Allmerica Financial Corporation)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Years Ended December 31
(In millions) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ -- $ -- $ --
Demutualization transaction 5.0 -- --
----------------------------------------
Balance at end of year 5.0 -- --
----------------------------------------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year -- -- --
Contributed from parent 392.4 -- --
----------------------------------------
Balance at end of year 392.4 -- --
----------------------------------------
RETAINED EARNINGS
Balance at beginning of year 1,071.4 1,033.4 876.0
Net income prior to demutualization 93.2 38.0 157.4
----------------------------------------
1,164.6 1,071.4 1,033.4
Demutualization transaction (34.5) -- --
Net income subsequent to demutualization 43.8 -- --
----------------------------------------
Balance at end of year 1,173.9 1,071.4 1,033.4
----------------------------------------
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS
Balance at beginning of year (79.0) 17.5 20.6
----------------------------------------
Cumulative effect of accounting change:
Net appreciation on available-for-sale debt securities -- 296.1 --
Provision for deferred federal income taxes and minority interest -- (149.1) --
----------------------------------------
-- 147.0 --
----------------------------------------
Effect of transfer of securities from held-to-maturity to available-for-sale:
Net appreciation on available-for-sale debt securities 22.4 -- --
Provision for deferred federal income taxes and minority interest (9.6) -- --
----------------------------------------
12.8 -- --
----------------------------------------
Appreciation (depreciation) during the period:
Net appreciation (depreciation) on available-for-sale securities 466.0 (492.1) (9.6)
(Provision) benefit for deferred federal income taxes (163.1) 171.9 2.8
Minority interest (83.7) 76.7 3.7
----------------------------------------
219.2 (243.5) (3.1)
----------------------------------------
Balance at end of year 153.0 (79.0) 17.5
----------------------------------------
Total shareholders' equity $1,724.3 $ 992.4 $ 1,050.9
----------------------------------------
----------------------------------------
</TABLE>

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

3
<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
(a wholly owned subsidiary of Allmerica Financial Corporation)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31
(In millions) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 137.0 $ 38.0 $ 157.4
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest 73.1 50.1 112.7
Net realized gains (39.8) (1.1) (159.6)
Deferred federal income taxes (benefits) (37.0) 8.0 (20.4)
Increase in deferred policy acquisition costs (38.4) (34.6) (51.8)
Increase in premiums and notes receivable, net of reinsurance payable (42.0) (25.6) (37.5)
(Increase) decrease in accrued investment income 7.0 4.6 (1.6)
Increase in policy liabilities and accruals, net 116.2 175.9 131.7
(Increase) decrease in reinsurance receivable (75.6) (31.9) 18.6
Increase in expenses and taxes payable 7.5 88.0 104.7
Separate account activity, net (0.1) 0.4 21.4
Other, net 23.9 59.9 2.7
-----------------------------------------
Net cash provided by operating activities 131.8 331.7 278.3
-----------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities of available-for-sale
fixed maturities 2,738.4 2,097.8 --
Proceeds from disposals of held-to-maturity fixed maturities 271.3 304.4 2,094.9
Proceeds from disposals of equity securities 120.0 143.9 585.8
Proceeds from disposals of other investments 40.5 25.9 74.0
Proceeds from mortgages matured or collected 230.3 256.4 291.2
Purchase of available-for-sale fixed maturities (3,273.3) (2,150.1) --
Purchase of held-to-maturity fixed maturities -- (111.6) (2,577.1)
Purchase of equity securities (254.0) (172.2) (673.3)
Purchase of other investments (24.8) (26.6) (46.5)
Proceeds from sale of businesses 32.9 -- 79.5
Capital expenditures (14.1) (43.1) (37.5)
Other investing activities, net 4.7 2.4 1.3
-----------------------------------------
Net cash (used in) provided by investing activities (128.1) 327.2 (207.7)
-----------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits and interest credited to contractholder deposit funds 445.8 786.3 738.7
Withdrawals from contractholder deposit funds (1,069.9) (1,187.0) (894.0)
Change in short-term debt (4.8) (6.0) 1.4
Change in long-term debt 0.2 0.3 --
Dividends paid to minority shareholders (4.1) (4.2) (3.9)
Capital contributed from parent 392.4 -- 156.2
Payments for policyholders' membership interests (27.9) -- --
Net proceeds from issuance of long-term debt -- -- --
Other, net (20.9) -- (1.3)
-----------------------------------------
Net cash used in financing activities (289.2) (410.6) (2.9)
-----------------------------------------
Net (decrease) increase in cash and cash equivalents (285.5) 248.3 67.7
Net change in cash held in the Closed Block (17.6) -- --
Cash and cash equivalents, beginning of year 539.7 291.4 223.7
-----------------------------------------
Cash and cash equivalents, end of year $ 236.6 $ 539.7 $ 291.4
-----------------------------------------
-----------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 4.1 $ 4.3 $ 1.7
Income taxes paid $ 90.6 $ 46.1 $ 57.3
</TABLE>

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

4
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

First Allmerica Financial Life Insurance Company ("FAFLIC" or the "Company",
formerly State Mutual Life Assurance Company of America ["State Mutual"]) was
organized as a mutual life insurance company until October 16, 1995. FAFLIC
converted to a stock life insurance company pursuant to a plan of
reorganization effective October 16, 1995 and became a wholly owned
subsidiary of Allmerica Financial Corporation ("AFC"). The consolidated
financial statements have been prepared as if FAFLIC were organized as a
stock life insurance company for all periods presented. Thus, generally
accepted accounting principles for stock life insurance companies have been
applied retroactively for all periods presented.

The consolidated financial statements of FAFLIC include the accounts of
Allmerica Financial Life Insurance and Annuity Company ("AFLIAC", formerly
SMA Life Assurance Company) its wholly owned life insurance subsidiary,
non-insurance subsidiaries (principally brokerage and investment advisory
subsidiaries), and Allmerica Property and Casualty Companies, Inc.
("Allmerica P&C", a 58.3%-owned non-insurance holding company). The Closed
Block assets and liabilities at December 31, 1995 and its results of
operations subsequent to demutualization are presented in the consolidated
financial statements as single line items. Prior to demutualization such
amounts are presented line by line in the consolidated financial statements
(see Note 6). Unless specifically stated, all disclosures contained herein
supporting the consolidated financial statements as of December 31, 1995 and
the year then ended exclude the Closed Block related amounts. All significant
intercompany accounts and transactions have been eliminated.

Minority interest relates to the Company's investment in Allmerica P&C
and its only significant subsidiary, The Hanover Insurance Company
("Hanover"). Hanover's 81.1%-owned subsidiary is Citizens Corporation, the
holding company for Citizens Insurance Company of America ("Citizens").
Minority interest also includes an amount related to the minority interest in
Citizens Corporation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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. CLOSED BLOCK

As of October 16, 1995, the Company established and began operating a closed
block (the "Closed Block") for the benefit of the participating policies
included therein, consisting of certain individual life insurance participating
policies, individual deferred annuity contracts and supplementary contracts not
involving life contingencies which were in force on October 16, 1995; such
policies constitute the "Closed Block Business". The purpose of the Closed Block
is to protect the policy dividend expectations of such FAFLIC dividend paying
policies and contracts after the demutualization. Unless the Commissioner
consents to an earlier termination, the Closed Block will continue to be in
effect until the date none of the Closed Block policies are in force. On
October 16, 1995, FAFLIC allocated to the Closed Block assets in an amount that
is expected to produce cash flows which, together with future revenues from the
Closed Block Business, are reasonably sufficient to support the Closed Block
Business, including provision for payment of policy benefits, certain future
expenses and taxes and for continuation of policyholder dividend scales payable
in 1994 so long as the experience underlying such dividend scales continues. The
Company expects that the factors underlying such experience will fluctuate in
the future and policyholder dividend scales for Closed Block Business will be
set accordingly.

Although the assets and income allocated to the Closed Block inure solely
to the benefit of the holders of policies included in the Closed Block, the
excess of Closed Block liabilities over Closed Block assets at October 16, 1995
measured on a GAAP basis represent the expected future post-tax income from the
Closed Block which may be recognized in income over the period the policies and
contracts in the Closed Block remain in force.

If the actual income from the Closed Block in any given period equals or
exceeds the expected income for such period as determined at October 16, 1995,
the expected income would be recognized in income for that period. Further, any
excess of the actual income over the expected income would also be recognized in
income to the extent that the aggregate expected income for all prior periods
exceeded the aggregate actual income. Any remaining excess of actual income over
expected income would be accrued as a liability for policyholder dividends in
the Closed Block to be paid to the Closed Block policyholders. This accrual for
future dividends effectively limits the actual Closed Block income recognized in
income to the Closed Block income expected to emerge from operation of the
Closed Block as determined as of October 16, 1995.

If, over the period the policies and contracts in the Closed Block remain
in force, the actual income from the Closed Block is less than the expected
income from the Closed Block, only such actual income

<PAGE>

(which could reflect a loss) would be recognized in income. If the actual income
from the Closed Block in any given period is less than the expected income for
that period and changes in dividends scales are inadequate to offset the
negative performance in relation to the expected performance, the income inuring
to shareholders of the Company will be reduced. If a policyholder dividend
liability had been previously established in the Closed Block because the actual
income to the relevant date had exceeded the expected income to such date, such
liability would be reduced by this reduction in income (but not below zero) in
any periods in which the actual income for that period is less than the expected
income for such period.

C. VALUATION OF INVESTMENTS

Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS No. 115). SFAS No. 115 requires that an
enterprise classify debt and equity securities into one of three categories;
held-to-maturity, available-for-sale, or trading. Investments classified as
held-to-maturity shall be investments that the enterprise has the positive
intent and ability to hold until maturity. Trading securities are investments
which are bought and held principally for the purpose of selling them in the
near term. Investments classified as neither trading securities nor
held-to-maturity shall be classified as available-for-sale securities. SFAS No.
115 also requires that unrealized holding gains and losses for trading
securities be included in earnings, while unrealized gains and losses for
available-for-sale securities be excluded from earnings and reported as a
separate component of shareholder equity until realized. SFAS No. 115 also
requires that for a decline in the fair value which is judged to be other than
temporary, the cost basis of the security should be written down to fair value,
and the amount of the write-down recognized in earnings as a realized loss.

Previously, the Company classified all of its fixed maturities and equity
securities as available-for-sale or held-to-maturity investments. Fixed
maturities held-to-maturity consist of certain bonds, presented at amortized
cost, that management intends and has the ability to hold until maturity. Fixed
maturities available-for-sale consist of certain bonds and redeemable preferred
stocks, presented at fair value, that management may not hold until maturity.
Equity securities available-for-sale are comprised of common stocks which are
carried at fair value. Prior to January 1, 1994, all fixed maturity investments,
which included bonds and redeemable preferred stocks, were principally carried
at amortized cost. Equity securities, which included common and non-redeemable
preferred stock, were carried at fair value. Unrealized gains or losses on
investments classified as available-for-sale, net of deferred federal income
taxes, minority interest, deferred policy acquisition expenses and amounts
attributable to participating contractholders, are included as a separate
component of shareholders' equity. As discussed in Note 3, the Company
transferred all securities classified as held-to-maturity to available-for-sale
on November 30, 1995.

Realized gains and losses on sales of fixed maturities and equity
securities are determined on the specific-identification basis using amortized
cost for fixed maturities and cost for equity securities. Fixed maturities and
equity securities with other than temporary declines in fair value are written
down to estimated fair value resulting in the recognition of realized losses.

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 management 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 management believes may not be collectible in
full. In establishing reserves, management 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.

Real estate that has been acquired through the foreclosure of mortgage
loans is valued at the estimated fair value at the time of foreclosure. The
Company considers several methods in determining fair value at foreclosure,
using primarily third-party appraisals and discounted cash flow analyses. After
foreclosure, the Company makes a determination as to whether the asset should be
held for production of income or held for sale.

Real estate investments held for the production of income and held for sale
are carried at depreciated cost less valuation allowances, if necessary, to
reduce the carrying value to fair value. Depreciation is generally calculated
using the straight-line method.

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 and real
estate are included in realized investment gains or losses.

<PAGE>

D. 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, investment and loan
commitments, and interest rate futures contracts. 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.

E. CASH AND CASH EQUIVALENTS

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

F. 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.
Property and casualty, group life and group health insurance business
acquisition costs are deferred and amortized over the terms of the insurance
policies. Acquisition costs related to universal life products and
contractholder deposit funds are deferred and amortized in proportion to total
estimated gross profits over the expected life of the contracts using a revised
interest rate applied to the remaining benefit period. Acquisition costs related
to annuity and other life insurance businesses are deferred and amortized,
generally in proportion to the ratio of annual revenue to the estimated total
revenues over the contract periods based upon the same assumptions used in
estimating the liability for future policy benefits. Deferred acquisition costs
for each product are reviewed to determine if they are recoverable from future
income, including investment income. If such costs are determined to be
unrecoverable, they are expensed at the time of determination.

Although realization of deferred policy acquisition costs is not assured,
management 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.

G. PROPERTY AND EQUIPMENT

Property, equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation is provided using the
straight-line or accelerated method over the estimated useful lives of the
related assets which generally range from 3 to 30 years. Amortization of
leasehold improvements is provided using the straight-line method over the
lesser of the term of the leases or the estimated useful life of the
improvements.

H. SEPARATE ACCOUNTS

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

I. POLICY LIABILITIES AND ACCRUALS

Future policy benefits are liabilities for life, health 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 2 1/2% to 6% for
life insurance and 2% to 9 1/2% for annuities. Estimated liabilities are
established for group life and health policies that contain experience rating
provisions. Mortality, morbidity and withdrawal assumptions for all policies are
based on the Company's own experience and industry standards. Liabilities for
universal life include deposits received from customers and investment earnings
on their fund balances, less administrative charges. Universal life fund
balances are also assessed mortality and surrender charges.

Liabilities for outstanding claims, losses and loss adjustment expenses are
estimates of payments to be made on property and casualty and health insurance
for reported losses and estimates of losses incurred but not reported. These
liabilities are determined using case basis evaluations and statistical analyses
and represent estimates of the ultimate cost of all losses incurred but not
paid. These estimates are continually reviewed and adjusted as necessary; such
adjustments are reflected in current operations. Estimated amounts of salvage
and subrogation on unpaid property and casualty losses are deducted from the
liability for unpaid claims.

Premiums for property and casualty, group life, and accident and health
insurance are reported as earned on a pro-rata basis over the contract period.
The unexpired portion of these premiums is recorded as unearned premiums.

7
<PAGE>

Contractholder deposit funds and other policy liabilities include
investment-related products such as guaranteed investment contracts, deposit
administration funds and immediate participation guarantee funds and consist of
deposits received from customers and investment earnings on their fund balances.

All policy liabilities and accruals are based on the various estimates
discussed above. Although the adequacy of these amounts cannot be assured,
management 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.

J. PREMIUM AND FEE REVENUE AND RELATED EXPENSES

Premiums for individual life and health insurance and individual and group
annuity products, excluding universal life and investment-related products, are
considered revenue when due. Property and casualty and group life, accident and
health insurance premiums are recognized as revenue over the related contract
periods. Benefits, losses and related expenses are matched with premiums,
resulting in their recognition over the lives of the contracts. This matching is
accomplished through the provision for future benefits, estimated and unpaid
losses and amortization of deferred policy acquisition costs. Revenues for
investment-related products consist of net investment income and contract
charges assessed against the fund values. Related benefit expenses primarily
consist of net investment income credited to the fund values after deduction for
investment and risk charges. Revenues for universal life products consist of net
investment income, and 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.

K. POLICYHOLDER DIVIDENDS

Prior to demutualization, certain life, health and annuity insurance policies
contained dividend payment provisions that enabled the policyholder to
participate in the earnings of the Company. The amount of policyholders'
dividends was determined annually by the Board of Directors. The aggregate
amount of policyholders' dividends was related to the actual interest,
mortality, morbidity and expense experience for the year and the Company's
judgment as to the appropriate level of statutory surplus to be retained. The
participating life insurance in force was 16.2% of the face value of total life
insurance in force at December 31, 1994. The premiums on participating life,
health and annuity policies were 11.3%, 6.4% and 6.6% of total life, health and
annuity statutory premiums prior to demutualization in 1995, 1994 and 1993,
respectively. Total policyholders' dividends were $23.3 million, $32.8 million
and $24.2 million prior to demutualization in 1995, 1994 and 1993, respectively.

L. FEDERAL INCOME TAXES

AFC, FAFLIC, AFLIAC and FAFLIC's non-insurance domestic subsidiaries file a
consolidated United States federal income tax return. Entities included within
the consolidated group are segregated into either a life insurance or non-life
insurance company subgroup. The consolidation of these subgroups is subject to
certain statutory restrictions on the percentage of eligible non-life tax losses
that can be applied to offset life company taxable income. Allmerica P&C and its
subsidiaries file a separate United States federal income tax return.

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" (SFAS
No. 109). These differences result primarily from loss reserves, policy
acquisition expenses, and unrealized appreciation/depreciation on investments.

M. NEW ACCOUNTING PRONOUNCEMENTS

In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" was issued. This statement requires
companies to write down to fair value long-lived assets whose carrying value is
greater than the undiscounted cash flows of those assets. The statement also
requires that long-lived assets of which management is committed to dispose,
either by sale or abandonment, be valued at the lower of their carrying amount
or fair value less costs to sell. This statement is effective for fiscal years
beginning after December 15, 1995. Management expects that adoption of this
statement will not have a material effect on the financial statements.

N. RECLASSIFICATIONS

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

<PAGE>

2. SIGNIFICANT TRANSACTIONS

Pursuant to the plan of reorganization effective October 16, 1995, AFC issued
37.5 million shares of its common stock to eligible policyholders. AFC also
issued 12.6 million shares of its common stock at a price of $21.00 per share in
a public offering, resulting in net proceeds of $248.0 million, and issued
Senior Debentures in the principal amount of $200.0 million which resulted in
net proceeds of $197.2 million. AFC contributed $392.4 million of these proceeds
to FAFLIC.

Effective March 31, 1995, the Company entered into an agreement with TSSG,
a division of First Data Corporation, pursuant to which the Company sold its
mutual fund processing business and agreed not to engage in this business for
four years after that date. In accordance with this agreement, the Company
received proceeds of $32.1 million. A gain of $13.5 million, net of taxes of
$7.2 million, was recorded in March 1995.

In March and April, 1993, Citizens Corporation, a newly formed holding
company for Citizens, issued approximately 19.35% of its common stock in an
initial public offering, generating net proceeds of $156.2 million (7.0 million
shares at $24.00 per share). Proceeds to Citizens Corporation were reduced by
underwriting and other stock issuance costs. A non-taxable gain of $62.9 million
was recorded in 1993 in connection with this initial public offering. This gain
is non-taxable because only newly-issued shares of Citizens Corporation were
issued to the public.

Effective December 31, 1992, Hanover entered into a definitive agreement to
sell its wholly owned subsidiary, Beacon Insurance Company of America, and its
wholly owned subsidiary, American Select Insurance Company, for $89.7 million. A
gain of $20.7 million, net of taxes of $15.0 million, was recorded in 1993.

3. INVESTMENTS

A. FIXED MATURITIES AND EQUITY SECURITIES

Effective January 1, 1994, the Company adopted SFAS No. 115, which requires that
investments be classified into one of three categories: held-to-maturity,
available-for-sale, or trading.

The effect of implementing SFAS No. 115 as of January 1, 1994 was an
increase in the carrying value of fixed maturity investments of $335.3 million,
a decrease in deferred policy acquisition costs of $20.8 million, an increase in
policyholder liabilities of $18.4 million, a net increase in deferred income tax
liabilities of $103.7 million, an increase in minority interest of $45.4
million, and an increase in shareholders' equity of $147.0 million, which
resulted from changing the carrying value of certain fixed maturities from
amortized cost to fair value and related adjustments. The implementation had no
effect on net income.

In November 1995, the Financial Accounting Standards Board issued a Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES, which permitted companies to
reclassify securities, where appropriate, based on the new guidance. As a
result, the Company transferred securities with amortized cost and fair value of
$696.4 million and $725.6 million, respectively, from the held-to-maturity
category to the available-for-sale category, which resulted in a net increase in
shareholders' equity of $12.8 million.

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

December 31
(In millions) 1995
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE Gross Gross
Amortized Unrealized Unrealized Fair
Cost (1) Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and U.S. government and agency securities $ 377.0 $ 21.0 $ -- $ 398.0

States and political subdivisions 2,110.6 60.7 4.0 2,167.3

Foreign governments 60.6 3.4 0.6 63.4

Corporate fixed maturities 4,582.1 200.8 16.4 4,766.5

U.S. government mortgage-backed securities 337.6 8.6 2.1 344.1

Total fixed maturities available-for-sale $ 7,467.9 $ 294.5 $ 23.1 $ 7,739.3
---------------------------------------------------------
Equity securities $ 410.6 $ 111.7 $ 5.1 $ 517.2
---------------------------------------------------------
---------------------------------------------------------
</TABLE>

9
<PAGE>

December 31
(In millions) 1994
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE Gross Gross
Amortized Unrealized Unrealized Fair
Cost (1) Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and U.S. government and agency securities $ 280.2 $ 4.8 $ 9.1 $ 275.9

States and political subdivisions 2,011.3 14.9 76.2 1,950.0

Foreign governments 96.8 1.8 12.8 85.8

Corporate fixed maturities 4,201.4 24.7 157.4 4,068.7

U.S. government mortgage-backed securities 134.9 0.4 3.7 131.6
----------------------------------------------------------
Total fixed maturities available-for-sale $ 6,724.6 $ 46.6 $ 259.2 $ 6,512.0
----------------------------------------------------------
----------------------------------------------------------
Equity securities $ 260.4 $ 35.3 $ 9.3 $ 286.4
----------------------------------------------------------
----------------------------------------------------------
HELD-TO-MATURITY

State and political subdivisions $ 8.1 $ 0.1 $ 0.8 7.4

Foreign governments 20.7 0.2 0.2 20.7

Corporate fixed maturities 927.3 13.7 22.5 918.5

Corporate mortgage-backed securities 3.2 0.1 -- 3.3
----------------------------------------------------------
Total fixed maturities held-to-maturity $ 959.3 $ 14.1 $ 23.5 $ 949.9
----------------------------------------------------------
----------------------------------------------------------
</TABLE>

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

In March 1994, AFLIAC voluntarily withdrew its license in New York in order
to provide for certain commission arrangements prohibited by New York comparable
to AFLIAC's competitors. In connection with the withdrawal, FAFLIC, which is
licensed in New York, became qualified to sell the products previously sold by
AFLIAC 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 general
account liabilities of AFLIAC for New York policyholders, claimants and
creditors. At December 31, 1995, the amortized cost and market value of assets
on deposit were $295.0 million and $303.6 million, respectively. At December 31,
1994, the amortized cost and market value of assets on deposit were $327.9
million and $323.5 million, respectively. In addition, fixed maturities,
excluding those securities on deposit in New York, with an amortized cost of
$82.2 million and $67.0 million were on deposit with various state and
governmental authorities at December 31, 1995 and 1994, respectively.

There were approximately $21.8 million of contractual fixed maturity
investment commitments at December 31, 1994 and none at December 31, 1995.

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.

<PAGE>

Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 970.8 $ 975.6

Due after one year through five years 3,507.9 3,657.1

Due after five years through ten years 1,794.0 1,866.0

Due after ten years 1,195.2 1,240.6
-----------------------------
Total $ 7,467.9 $ 7,739.3
-----------------------------
-----------------------------
</TABLE>

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

For the Years Ended December 31
(In millions)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Proceeds from Sales
of Available-for-Sale Gross Gross
1995 Securities Gains Losses
<S> <C> <C> <C>
Fixed maturities $ 1,612.3 $ 23.7 $ 33.0
---------------------------------------
Equity securities $ 122.2 $ 23.1 $ 6.9
---------------------------------------
1994

Fixed maturities $ 1,026.2 $ 12.6 $ 21.6
---------------------------------------
Equity securities $ 124.3 $ 17.4 $ 4.5
---------------------------------------
</TABLE>

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

For the Years Ended December 31
(In millions)
Equity
Fixed Securities
Maturities and Other (1) Total
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
Net appreciation (depreciation),
beginning of year $ (89.4) $ 10.4 $ (79.0)
---------------------------------------
Effect of transfer of securities
between classifications:
Net appreciation on available-
for-sale fixed maturities 29.2 -- 29.2
Effect of transfer on deferred
policy acquisition costs and
on policy liabilities (6.8) -- (6.8)
Provision for deferred federal
income taxes and minority
interest (9.6) -- (9.6)
---------------------------------------
12.8 -- 12.8
---------------------------------------
Net appreciation on available-
for-sale securities 465.4 87.5 552.9
Net depreciation from the effect
on deferred policy acquisition
costs and on policy liabilities (86.9) (86.9)
Provision for deferred federal
income taxes and minority interest (193.2) (53.6) (246.8)
---------------------------------------
185.3 33.9 219.2
---------------------------------------
Net appreciation, end of year $ 108.7 $ 44.3 $ 153.0
---------------------------------------
---------------------------------------
1994
Net appreciation, beginning of year $ -- $ 17.5 $ 17.5
---------------------------------------
Cumulative effect of accounting
change:
Net appreciation on available-
for-sale fixed maturities 335.3 -- 335.3
Net depreciation from the effect
of accounting change on
deferred policy acquisition
costs and on policy liabilities (39.2) -- (39.2)
Provision for deferred federal
income taxes and minority
interest (149.1) -- (149.1)
---------------------------------------
147.0 17.5 164.5
---------------------------------------
Net depreciation on available-
for-sale securities (547.9) (17.4) (565.3)
Net appreciation from the effect
on deferred policy acquisition
costs and on policy liabilities 73.2 -- 73.2
Benefit for deferred federal income
taxes and minority interest 238.3 10.3 248.6
---------------------------------------
Net appreciation (depreciation),
end of year $ (89.4) $ 10.4 $ (79.0)
---------------------------------------
---------------------------------------
</TABLE>

(1) Includes net appreciation on other investments of $6.9 million and $0.6
million in 1995 and 1994, respectively.

11
<PAGE>

B. MORTGAGE LOANS AND REAL ESTATE

FAFLIC's mortgage loans and real estate are diversified by property type and
location. Real estate investments have been obtained primarily through
foreclosure. Mortgage loans are collateralized by the related properties and
generally are no more than 75% of the property's value at the time the original
loan is made.

The carrying values of mortgage loans and real estate investments net of
applicable reserves were as follows:

December 31
(In millions) 1995 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 799.5 $ 1,106.7
-----------------------
Real estate:
Held for sale 168.9 134.5
Held for production of income 10.7 45.8
-----------------------
Total real estate 179.6 180.3
-----------------------
Total mortgage loans and real estate $ 979.1 $ 1,287.0
-----------------------
-----------------------
</TABLE>

Reserves for mortgage loans were $33.8 million and $47.2 million as of
December 31, 1995 and 1994, respectively.

During 1995, 1994 and 1993, non-cash investing activities included real
estate acquired through foreclosure of mortgage loans, which had a fair value of
$26.1 million, $39.2 million and $26.7 million, respectively.

At December 31, 1995, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $8.2 million in
the Closed Block. These commitments generally expire within one year. There
are no contractual commitments to extend credit under commercial mortgage
loan agreements outside the Closed Block.

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

December 31
(In millions) 1995 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Property type:
Office building $ 435.9 $ 553.6
Residential 145.3 207.3
Retail 205.6 246.5
Industrial / warehouse 93.8 144.1
Other 151.9 205.6
Valuation allowances (53.4) (70.1)
-----------------------
Total $ 979.1 $ 1,287.0
-----------------------
-----------------------
Geographic region:
South Atlantic $ 281.4 $ 374.2
Pacific 191.9 238.7
East North Central 118.2 138.5
Middle Atlantic 148.9 151.2
West South Central 79.7 102.3
New England 94.9 103.1
Other 117.5 249.1
Valuation allowances (53.4) (70.1)
-----------------------
Total $ 979.1 $ 1,287.0
-----------------------
-----------------------
</TABLE>

At December 31, 1995, scheduled mortgage loan maturities were as follows:
1996 - $206.1 million; 1997 - $143.7 million; 1998 - $167.4 million; 1999 -
$109.9 million; 2000 - $124.2 million; and $48.2 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 1995, the Company refinanced $24.0 million of mortgage
loans based on terms which differed from those granted to new borrowers.

<PAGE>

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.

For the Years Ended December 31
(In millions)
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
1995 Balance at Balance at
January 1 Additions Deductions December 31
<S> <C> <C> <C> <C>
Mortgage loans $ 47.2 $ 1.5 $ 14.9 $ 33.8
Real estate 22.9 (0.6) 2.7 19.6
-----------------------------------------------------
Total $ 70.1 $ 0.9 $ 17.6 $ 53.4
-----------------------------------------------------
-----------------------------------------------------
1994
Mortgage loans $ 73.8 $ 14.6 $ 41.2 $ 47.2
Real estate 21.0 3.2 1.3 22.9
-----------------------------------------------------
Total $ 94.8 $ 17.8 $ 42.5 $ 70.1
-----------------------------------------------------
-----------------------------------------------------
1993
Mortgage loans $ 86.7 $ 4.6 $ 17.5 $ 73.8
Real estate 8.3 12.7 -- 21.0
-----------------------------------------------------
Total $ 95.0 $ 17.3 $ 17.5 $ 94.8
-----------------------------------------------------
-----------------------------------------------------
</TABLE>

D. FUTURES CONTRACTS

FAFLIC purchases and sells futures contracts on margin to hedge against interest
rate fluctuations and their effect on the net cash flows from the sales of
guaranteed investment contracts. The notional amount of such futures contracts
outstanding were $74.7 million and $126.6 million at December 31, 1995 and 1994,
respectively. Because the Company purchases and sells futures contracts through
brokers who assume the risk of loss, the Company's exposure to credit risk under
futures contracts is limited to the margin deposited with the broker. The
maturity of all futures contracts outstanding are less than one year. The fair
value of futures contracts outstanding were $75.7 million and $126.5 million at
December 31, 1995 and 1994, respectively.

Gains and losses on hedge contracts related to interest rate fluctuations
are deferred and recognized in income over the period being hedged corresponding
to related guaranteed investment contracts. Deferred hedging gains and (losses)
were $5.6 million, $(7.7) million, and $6.9 million in 1995, 1994 and 1993,
respectively. Gains and losses on hedge contracts that are deemed ineffective by
management are realized immediately.

A reconciliation of the notional amount of futures contracts is as follows:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contracts outstanding,
beginning of year $ 126.6 $ 141.7 $ 120.0
New contracts 343.5 816.0 493.3
Contracts terminated (395.4) (831.1) $ (471.6)
---------------------------------------
Contracts outstanding, end of year $ 74.7 $ 126.6 $ 141.7
---------------------------------------
---------------------------------------
</TABLE>

E. FOREIGN CURRENCY SWAP CONTRACTS

The Company enters into foreign currency swap contracts to hedge exposure to
currency risk on foreign fixed maturity investments. Interest and principal
related to foreign fixed maturity investments payable in foreign currencies, at
current exchange rates, are exchanged for the equivalent payment translated at a
specific currency exchange rate. The Company's maximum exposure to counterparty
credit risk is the difference between the foreign currency exchange rate, as
agreed

13
<PAGE>

upon in the swap contract, and the foreign currency spot rate on the date of the
exchange. The fair values of the foreign currency swap contracts outstanding
were $104.2 million and $117.5 million at December 31, 1995 and 1994,
respectively.

The difference between amounts paid and received on foreign currency swap
contracts is reflected in the net investment income related to the underlying
assets and is not material in 1995, 1994, and 1993. The Company had no deferred
gains or losses on foreign currency swap contracts.

A reconciliation of the notional amount of swap contracts is as follows:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contracts outstanding, beginning
of year $ 118.7 $ 128.8 $ 95.0
New Contracts -- 5.0 50.8
Contracts expired -- (10.1) (17.0)
Contracts terminated (14.1) (5.0) --
---------------------------------------
Contracts outstanding, end
of year $ 104.6 $ 118.7 $ 128.8
---------------------------------------
---------------------------------------
</TABLE>

Expected maturities of foreign currency swap contracts are $36.0 million in
1996, $28.8 million in 1997, and $39.8 million in 1998 and thereafter.

F. OTHER

At December 31, 1995, FAFLIC had no concentration of investments in a single
investee exceeding 10% of shareholders' equity.

4. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 554.0 $ 578.3 $ 601.5
Mortgage loans 97.0 119.9 155.7
Equity securities 16.8 12.1 7.1
Policy loans 20.3 23.3 23.5
Real estate 48.5 44.6 43.4
Other long-term investments 4.4 4.3 2.1
Short-term investments 21.4 9.5 7.4
---------------------------------------
Gross investment income 762.4 792.0 840.7
Less investment expenses (52.3) (48.9) (57.9)
---------------------------------------
Net investment income $ 710.1 $ 743.1 $ 782.8
---------------------------------------
---------------------------------------
</TABLE>

As of December 31, 1995, fixed maturities and mortgage loans on non-accrual
status were $1.4 million and $85.4 million, including restructured loans of
$46.8 million. The effect of non-accruals, compared with amounts that would have
been recognized in accordance with the original terms of the investments, was to
reduce net income by $0.6 million, $5.1 million and $14.0 million in 1995, 1994
and 1993, respectively.

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 $98.9 million , $126.8 million and $167.0 million at
December 31, 1995, 1994 and 1993, respectively. Interest income on restructured
mortgage loans that would have been recorded in accordance with the original
terms of such loans amounted to $11.1 million, $14.4 million and $18.1 million
in 1995, 1994 and 1993, respectively. Actual interest income on these loans
included in net investment income aggregated $7.1 million, $8.2 million and
$10.6 million in 1995, 1994 and 1993, respectively.

At December 31, 1995, fixed maturities with a carrying value of $1.4
million were non-income producing for the twelve months ended December 31, 1995.
There were no mortgage loans which were non-income producing for the twelve
months ended December 31, 1995.

B. REALIZED INVESTMENT GAINS AND LOSSES

Realized gains (losses) on investments were as follows:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ (7.0) $ 2.4 $ 48.8
Mortgage loans 1.4 (12.1) (0.5)
Equity securities 16.2 12.4 29.8
Real estate 5.3 1.4 (14.5)
Other 3.2 (3.0) (2.6)
--------------------------------------
Net realized investment gains $ 19.1 $ 1.1 $ 61.0
--------------------------------------
--------------------------------------
</TABLE>

Proceeds from voluntary sales of investments in fixed maturities were
$1,612.3 million, $1,036.5 million and $817.5 million in 1995, 1994 and 1993,
respectively. Realized gains on such sales were $23.7 million, $12.9 million and
$38.8 million; and realized losses were $33.0 million, $21.6 million and $2.6
million for 1995, 1994 and 1993, respectively.

5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

SFAS 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

<PAGE>

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. Fair values of interest rate futures
were not material at December 31, 1995 and 1994.

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

CASH AND CASH EQUIVALENTS

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

FIXED MATURITIES

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

EQUITY SECURITIES

MORTGAGE LOANS

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

REINSURANCE RECEIVABLES

The carrying amount reported in the consolidated balance sheets approximates
fair value.

POLICY LOANS

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

INVESTMENT CONTRACTS (WITHOUT MORTALITY FEATURES)

Fair values for the Company's liabilities under guaranteed investment type
contracts are estimated using discounted cash flow calculations using current
interest rates for similar contracts with maturities consistent with those
remaining for the contracts being valued. Other liabilities are based on
surrender values.

DEBT

The carrying value of short-term debt reported in the balance sheet approximates
fair value. The fair value of long-term debt was estimated using market quotes,
when available, and, when not available, discounted cash flow analyses.

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

December 31
(In millions) 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents $ 236.6 $ 236.6 $ 539.7 $ 539.7
Fixed maturities 7,739.3 7,739.3 7,471.3 7,461.9
Equity securities 517.2 517.2 286.4 286.4
Mortgage loans 799.5 845.4 1,106.7 1,105.8
Policy loans 123.2 123.2 364.9 364.9
------------------------------------------------------------
$ 9,415.8 $ 9,461.7 $ 9,769.0 $ 9,758.7
------------------------------------------------------------
------------------------------------------------------------
FINANCIAL LIABILITIES
Guaranteed investment contracts $ 1,632.8 $ 1,677.0 $ 2,170.6 $ 2,134.0
Supplemental contracts without life contingencies 24.4 24.4 25.3 25.3
Dividend accumulations 86.2 86.2 84.5 84.5
Other individual contract deposit funds 95.7 92.8 111.3 108.0
Other group contract deposit funds 894.0 902.8 980.3 969.6
Individual annuity contracts 966.3 810.0 988.9 870.6
Short-term debt 28.0 28.0 32.8 32.8
Long-term debt 2.8 2.9 2.7 2.7
------------------------------------------------------------
$ 3,730.2 $ 3,624.1 $ 4,396.4 $ 4,227.5
------------------------------------------------------------
------------------------------------------------------------
</TABLE>

15
<PAGE>

6. CLOSED BLOCK

Included in other income in the Consolidated Statement of Income in 1995 is a
net pre-tax contribution from the Closed Block of $2.9 million. Summarized
financial information of the Closed Block as of September 30, 1995 (date used to
estimate financial information for the date of establishment of October 16,
1995) and December 31, 1995 and for the period October 1, 1995 through December
31, 1995 is as follows:

(In millions) 1995
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
December 31 September 30
<S> <C> <C>
Assets
Fixed maturities, at fair value
(amortized cost of $447.4 and
$313.3, respectively) $ 458.0 $ 318.4
Mortgage loans 57.1 61.6
Policy loans 242.4 245.3
Cash and cash equivalents 17.6 12.3
Accrued investment income 16.6 15.3
Deferred policy acquisition costs 24.5 24.8
Other assets 2.7 6.4
-----------------------
Total assets $ 818.9 $ 684.1
-----------------------
-----------------------
Liabilities
Policy liabilities and accruals $ 899.2 $ 894.3
Other liabilities 2.8 4.2
-----------------------
Total liabilities $ 902.0 $ 898.5
-----------------------
-----------------------
</TABLE>

Period from October 1 through December 31
(In millions) 1995
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
<S> <C>
Revenues
Premiums $ 11.5
Net investment income 12.8
---------
Total revenues 24.3
---------
Benefits and expenses
Policy benefits 20.6
Policy acquisition expenses 0.8
---------
Total benefits and expenses 21.4
---------
Contribution from the Closed Block $ 2.9
---------
---------
Cash flows
Cash flows from operating activities:
Contribution from the Closed Block $ 2.9
Initial cash transferred to the Closed Block 139.7
Change in deferred policy acquisition costs, net 0.4
Change in premiums and other receivables (0.1)
Change in policy liabilities and accruals 2.0
Change in accrued investment income (1.3)
Other, net 0.8
---------
Net cash provided by operating activities 144.4
---------
---------
Cash flows from investing activities:
Sales, maturities and repayments of investments 29.0
Purchases of investments (158.8)
Other, net 3.0
---------
Net cash used by investing activities (126.8)
---------
Change in cash and cash equivalents and ending balance $ 17.6
---------
---------
</TABLE>

On October 16, 1995, there were no valuation allowances transferred to the
Closed Block on mortgage loans. There are no valuation allowances on mortgage
loans at December 31, 1995.

Many expenses related to Closed Block operations are charged to operations
outside the Closed Block; accordingly, the contribution from the Closed Block
does not represent the actual profitability of the Closed Block operations.
Operating costs and expenses outside of the Closed Block are, therefore,
disproportionate to the business outside the Closed Block.

<PAGE>

7. DEBT

Short- and long-term debt consisted of the following:

FAFLIC issues commercial paper primarily to manage imbalances between
operating cash flows and existing commitments. Commercial paper borrowing
arrangements are supported by various lines of credit. As of December 31, 1995,
the weighted average interest rate for outstanding commercial paper was 5.8%.

As of December 31, 1995, FAFLIC had approximately $245.0 million in
committed lines of credit provided by U.S. banks, of which $217.3 million was
available for borrowing. These lines of credit generally have terms of less than
one year, and require the Company to pay annual commitment fees ranging from
0.10% to 0.125% of the available credit. Interest that would be charged for
usage of these lines of credit is based upon negotiated arrangements.

Interest expense was $4.1 million, $4.3 million and $1.6 million in 1995,
1994 and 1993, respectively.

In October, 1995, AFC issued $200.0 million face amount of Senior
Debentures for proceeds of $197.2 million net of discounts and issuance costs.
These securities have an effective interest rate of 7.65%, and mature on October
16, 2025. Interest is payable semiannually on October 15 and April 15 of each
year. The Senior Debentures are subject to certain restrictive covenants,
including limitations on issuance of or disposition of stock of restricted
subsidiaries and limitations on liens. AFC is in compliance with all covenants.
The primary source of cash for repayment of the debt by AFC is dividends from
FAFLIC.

8. FEDERAL INCOME TAXES

Provisions for federal income taxes have been calculated in accordance with the
provisions of SFAS No. 109. A summary of the federal income tax expense
(benefit) in the consolidated statements of income is shown below:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax expense (benefit)
Current $ 119.7 $ 45.4 $ 95.1
Deferred (37.0) 8.0 (20.4)
---------------------------------------
Total $ 82.7 $ 53.4 $ 74.7
---------------------------------------
---------------------------------------
</TABLE>

The federal income taxes attributable to the consolidated results of
operations are different from the amounts determined by multiplying income
before federal income taxes by the expected federal income tax rate. The sources
of the difference and the tax effects of each were as follows:

Until conversion to a stock life insurance company, FAFLIC, as a mutual
company, reduced its deduction for policyholder dividends by the differential
earnings amount. This amount was computed, for each tax year, by multiplying the
average equity base of the FAFLIC/AFLIAC consolidated group, as determined for
tax purposes, by the estimate of an excess of an imputed earnings rate over the
average mutual life insurance companies' earnings rate. The differential
earnings amount for each tax year was subsequently recomputed when actual
earnings rates were published by the Internal Revenue Service (IRS). For its
1995 federal income tax return, FAFLIC has estimated that there will be no tax
effect from a differential earnings amount, including the expected effect of
future recomputations by the IRS. As a stock life company, FAFLIC is no longer
required to reduce its policyholder dividend deduction by the differential
earnings amount.

17
<PAGE>

The deferred income tax asset represents the tax effects of temporary
differences attributable to Allmerica P&C, a separate consolidated group for
federal tax return purposes. Its components were as follows:

December 31
(In millions) 1995 1994
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax (assets) liabilities
AMT carryforwards $ (9.8) $ (11.9)
Loss reserve discounting (178.3) (187.6)
Deferred acquisition costs 55.1 54.2
Employee benefit plans (25.5) (22.0)
Investments, net 77.4 (22.7)
Fixed assets 2.5 4.5
Bad debt reserve (1.8) (1.8)
Other, net (0.8) (1.8)
------------------------
Deferred tax asset, net $ (81.2) $ (189.1)
------------------------
------------------------
</TABLE>

The deferred income tax liability represents the tax effects of temporary
differences attributable to the FAFLIC/AFLIAC consolidated federal tax return
group. Its components were as follows:

December 31
(In millions) 1995 1994
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax (assets) liabilities
NOL carryforwards $ -- $ (3.3)
AMT carryforwards -- (1.5)
Loss reserve discounting (129.1) (118.2)
Deferred acquisition costs 169.7 199.0
Differential earnings amount -- 27.7
Employee benefit plans (14.6) (15.4)
Investments, net 67.0 (30.9)
Fixed assets (1.7) (0.9)
Bad debt reserve (26.3) (27.9)
Other, net (17.2) (14.8)
------------------------
Deferred tax liability, net $ 47.8 $ 13.8
------------------------
------------------------
</TABLE>

Gross deferred income tax assets totaled $405.1 million and $460.7 million
at December 31, 1995 and 1994, respectively. Gross deferred income tax
liabilities totaled $371.1 million and $285.4 million at December 31, 1995 and
1994, respectively.

Management believes, based on the Company's 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, management considered the future reversal of its existing
temporary differences and available tax planning strategies that could be
implemented, if necessary. At December 31, 1995, there are no available non-life
net operating loss carryforwards, and there are available alternative minimum
tax credit carryforwards of $9.8 million.

The Company's federal income tax returns are routinely audited by the IRS,
and provisions are routinely made in the financial statements in anticipation of
the results of these audits. The IRS has examined the FAFLIC/AFLIAC consolidated
group's federal income tax returns through 1988. The IRS has also examined the
Allmerica P&C consolidated group's federal income tax returns through 1988.
Deficiencies asserted with respect to tax years 1977 through 1981 have been paid
and recorded, and the Company has filed a recomputation of such years with
appeals claiming a refund with respect to certain agreed upon issues. The
Company is currently considering its response to certain adjustments proposed by
the IRS with respect to FAFLIC/AFLIAC's federal income tax returns for 1982 and
1983, and to possible adjustments under consideration by the IRS with respect to
Allmerica P&C's federal income tax returns for 1989, 1990, and 1991. If upheld,
these adjustments would result in additional payments; however, the Company will
vigorously defend its position with respect to these adjustments. In
management's opinion, adequate tax liabilities have been established for all
years. However, the amount of these tax liabilities could be revised in the near
term if estimates of the Company's ultimate liability are revised.

9. PENSION PLANS

FAFLIC provides retirement benefits to substantially all of its employees under
three separate defined benefit pension plans. Through December 31, 1994,
retirement benefits were based primarily on employees' years of service and
compensation during the highest five consecutive plan years of employment.
Benefits under this defined benefit formula were frozen for most employees (but
not for eligible agents) effective December 31, 1994. In their place, the
Company adopted a defined benefit cash balance formula, under which the Company
annually provides an allocation to each eligible employee as a percentage of
that employee's salary, similar to a defined contribution plan arrangement. The
1995 allocation was based on 7.0% of each eligible employee's salary.
Continuation of the defined benefit cash balance formula is subject to the
resolution of certain technical issues, and may be subject to receipt of a
favorable determination letter from the IRS that the Company's pension plans, as
amended to reflect the cash balance formula, will continue to satisfy the
requirements of Section 401(a) of the Internal Revenue Code. The Company's
policy for the plans is to fund at least the minimum amount required by the
Employee Retirement Income Security Act of 1974.

18
<PAGE>

Components of net pension expense were as follows:

The following table summarizes the combined status of the three pension
plans. At December 31, 1995 and 1994, each plan's projected benefit obligation
exceeded its assets.

December 31
(In millions) 1995 1994
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $ 325.6 $ 221.7
Unvested benefit obligation 5.0 3.5
-----------------------
Accumulated benefit obligation $ 330.6 $ 225.2
-----------------------
-----------------------
Pension liability included in
Consolidated Balance Sheets:
Projected benefit obligation $ 367.1 $ 254.6
Plan assets at fair value 321.2 239.7
-----------------------
Plan assets less than projected
benefit obligation (45.9) (14.9)
Unrecognized net loss from
past experience 48.8 42.3
Unrecognized prior service benefit (13.8) (17.3)
Unamortized transition asset (26.5) (28.3)
-----------------------
Net pension liability $ (37.4) $ (18.2)
-----------------------
-----------------------
</TABLE>

Determination of the projected benefit obligations was based on a weighted
average discount rate of 7.0% in 1995 and 8.5% in 1994, and the assumed
long-term rate of return on plan assets was 9%. The actuarial present value of
the projected benefit obligations was determined using assumed rates of increase
in future compensation levels ranging from 5.5% to 6.5%. The effect of changes
in actuarial assumptions, including the decrease in the weighted average
discount rate, was an increase in the Company's projected benefit obligation of
$76.7 million at December 31, 1995. Plan assets are invested primarily in
various separate accounts and the general account of FAFLIC. The plans also hold
stock of AFC.

The Company has a profit sharing and 401(k) plan for its employees.
Effective for plan years beginning after 1994, the profit sharing formula for
employees has been discontinued and a 401(k) match feature has been added to the
continuing 401(k) plan for the employees. Total plan expense in 1995, 1994 and
1993 was $5.2 million, $12.6 million and $22.6 million, respectively. In
addition to this Plan, the Company has a defined contribution plan for
substantially all of its agents. The Plan expense in 1995, 1994 and 1993 was
$3.5 million, $2.7 million and $2.4 million, respectively.

10. OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the Company's pension plans, the Company currently provides
postretirement medical and death benefits to certain full-time employees and
dependents, under several plans sponsored by FAFLIC, Hanover and Citizens.
Generally, employees become eligible at age 55 with at least 15 years of
service. Spousal coverage is generally provided for up to two years after death
of the retiree. Benefits include hospital, major medical and a payment at death
equal to retirees' final compensation up to certain limits. Effective January 1,
1996, the Company revised these benefits so as to establish limits on future
benefit payments and to restrict eligibility to current employees. The medical
plans have varying copayments and deductibles, depending on the plan. These
plans are unfunded.

Effective January 1, 1993, the Company adopted the provisions of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions".
SFAS No. 106 requires employers to recognize the costs and obligations of
postretirement benefits other than pensions over the period ending with the date
an employee is fully eligible to receive benefits. Previously, such costs were
generally recognized as expenses when paid. The adoption increased accrued
liabilities by $69.1 million. The effect on the consolidated income statement
was $35.4 million, net of tax of $23.5 million and minority interest of $10.2
million, reported as a cumulative effect of a change in accounting principle.
The ongoing effect of adopting the new standard increased 1993 net periodic
postretirement benefit expense by $6.6 million, and decreased net income by $4.3
million.

19
<PAGE>

The plans' funded status reconciled with amounts recognized in the
Company's consolidated balance sheet were as follows:

December 31
(In millions) 1995 1994
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 44.9 $ 35.2
Fully eligible active plan participants 14.0 15.2
Other active plan participants 45.9 38.5
-----------------------
104.8 88.9
Plan assets at fair value -- --
-----------------------
Accumulated postretirement benefit
obligation in excess of plan assets 104.8 88.9
Unrecognized loss 13.4 4.7
-----------------------
Accrued postretirement benefit costs $ 91.4 $ 84.2
-----------------------
-----------------------
</TABLE>

The components of net periodic postretirement benefit expense were as
follows:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <S> <C> <C>
Service cost $ 4.2 $ 6.6 $ 3.8
Interest cost 6.9 6.9 5.7
Amortization of (gain) loss (0.5) 1.4 --
-------------------------------------
Net periodic postretirement
benefit expense $ 10.6 $ 14.9 $ 9.5
-------------------------------------
-------------------------------------
</TABLE>

For purposes of measuring the accumulated postretirement benefit obligation
at December 31, 1995, health care costs were assumed to increase 10% in 1996,
declining thereafter until the ultimate rate of 5.5% is reached in 2001 and
remains at that level thereafter. The health care cost trend rate assumption has
a significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation at December 31, 1995
by $10.1 million, and the aggregate of the service and interest cost components
of net periodic postretirement benefit expense for 1995 by $1.2 million.

The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation at January 1, 1993 was 8.5%. The rate was 7.0%
and 8.5% at December 31, 1995 and 1994, respectively. The effect of changes in
actuarial assumptions, including the decrease in the weighted average discount
rate, was an increase in the Company's accumulated postretirement benefit
obligation of $15.1 million at December 31, 1995.

11. POSTEMPLOYMENT BENEFITS

Effective January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 112, (SFAS No. 112), "Employers' Accounting
for Postemployment Benefits", which requires employers to recognize the costs
and obligations of severance, disability and related life insurance and health
care benefits to be paid to inactive or former employees after employment but
before retirement. Prior to adoption, the Company had recognized the cost of
these benefits on an accrual or paid basis, depending on the plan.
Implementation of SFAS No. 112 resulted in a transition obligation of $1.9
million, net of federal income taxes and minority interest, and is reported as a
cumulative effect of a change in accounting principle in the consolidated
statement of income. The impact of this accounting change, after recognition of
the cumulative effect, was not significant.

12. DIVIDEND RESTRICTIONS

Massachusetts, Delaware, New Hampshire and Michigan have enacted laws governing
the payment of dividends to stockholders by insurers. These laws affect the
dividend paying ability of FAFLIC, AFLIAC, Hanover and Citizens, respectively.

Massachusetts' statute limits the dividends an insurer may pay in any
twelve month period, without the prior permission of the Commonwealth of
Massachusetts Insurance Commissioner, to the greater of (i) 10% of its statutory
policyholder 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 for the preceding calendar
year (if such insurer is not a life company). In addition, under Massachusetts
law, no domestic insurer shall pay a dividend or make any distribution to its
shareholders from other than unassigned funds unless the Commissioner shall have
approved such dividend or distribution. At January 1, 1996, FAFLIC could pay
dividends of $144.9 million to AFC without prior approval of the Commissioner.

Dividends from FAFLIC to AFC will be the primary source of cash for
repayment of the debt by AFC and payment of dividends to AFC stockholders.

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

<PAGE>

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. At January 1,
1996, AFLIAC could pay dividends of $4.3 million to FAFLIC without prior
approval.

Pursuant to New Hampshire's statute, the maximum dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the New Hampshire Insurance Commissioner, is limited to 10% of
such insurer's statutory policyholder surplus as of the preceding December 31.
At January 1, 1996, the maximum dividend and other distributions that could be
paid to Allmerica P&C by Hanover, without prior approval of the Insurance
Commissioner, was approximately $72.8 million.

Pursuant to Michigan's statute, the maximum dividends and other
distributions that an insurer may pay in any twelve month period, without prior
approval of the Michigan Insurance Commissioner, is limited to the greater of
10% of policyholders' surplus as of December 31 of the immediately preceding
year or the statutory net income less realized gains, for the immediately
preceding calendar year. At January 1, 1996, Citizens Insurance could pay
dividends of $45.6 million to Citizens Corporation without prior approval.

13. SEGMENT INFORMATION

The Company offers financial products and services in two major areas: Risk
Management and Retirement and Asset Management. Within these broad areas, the
Company conducts business principally in five operating segments.

The Risk Management group includes two segments: Regional Property and
Casualty and Corporate Risk Management Services. The Regional Property and
Casualty segment includes property and casualty insurance products, such as
automobile insurance, homeowners insurance, commercial multiple-peril insurance,
and workers' compensation insurance. These products are offered by Allmerica P&C
through its operating subsidiaries, Hanover and Citizens. Substantially all of
the Regional Property and Casualty segment's earnings are generated in Michigan
and the Northeast (Connecticut, Massachusetts, New York, New Jersey, New
Hampshire, Rhode Island, Vermont and Maine). The Corporate Risk Management
Services segment, formerly known as the Employee Benefit Services segment,
includes group life and health insurance products and services which assist
employers in administering employee benefit programs and in managing the related
risks.

The Retirement and Asset Management group includes three segments: Retail
Financial Services, Institutional Services and Allmerica Asset Management. The
Retail Financial Services segment, formerly known as the Individual Financial
Services segment, includes variable annuities, variable universal life-type,
traditional and health insurance products distributed via retail channels to
individuals across the country. The Institutional Services segment includes
primarily group retirement products such as 401(k) plans, tax-sheltered
annuities and GIC contracts which are distributed to institutions across the
country via work-site marketing and other arrangements. Allmerica Asset
Management, formerly included in the results of the Institutional Services
segment, is a Registered Investment Advisor which provides investment advisory
services to other institutions, such as insurance companies and pension plans.

21
<PAGE>
Summarized below is financial information with respect to business segments
for the year ended and as of December 31.

<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Risk Management
Regional Property and Casualty $ 2,095.1 $ 2,004.8 $ 2,051.1
Corporate Risk Management 328.5 302.4 296.0
-----------------------------------------
Subtotal 2,423.6 2,307.2 2,347.1
-----------------------------------------
Retirement and Asset Management
Retail Financial Services 486.7 507.9 524.0
Institutional Services 344.1 397.9 382.0
Allmerica Asset Management 4.4 4.0 -
-----------------------------------------
Subtotal 835.2 909.8 906.0
Eliminations (20.3) (21.9) (13.9)
-----------------------------------------
Total $ 3,238.5 $ 3,195.1 $ 3,239.2
-----------------------------------------
-----------------------------------------
Income (loss) from continuing
operations before income taxes:
Risk Management
Regional Property and Casualty $ 206.3 $ 113.1 $ 331.3
Corporate Risk Management 18.3 19.9 18.1
-----------------------------------------
Subtotal 224.6 133.0 349.4
-----------------------------------------
-----------------------------------------
Retirement and Asset Management
Retail Financial Services 35.2 14.2 61.6
Institutional Services 42.8 4.4 (16.1)
Allmerica Asset Management 2.3 1.9 --
-----------------------------------------
Subtotal 80.3 20.5 45.5
-----------------------------------------
Total $ 304.9 $ 153.5 $ 394.9
-----------------------------------------
-----------------------------------------
Identifiable assets:
Risk Management
Regional Property and Casualty $ 5,741.8 $ 5,408.7 $ 5,198.1
Corporate Risk Management 458.9 386.3 367.6
-----------------------------------------
Subtotal 6,200.7 5,795.0 5,565.7
-----------------------------------------
Retirement and Asset Management
Retail Financial Services 7,218.7 5,639.8 5,104.5
Institutional Services 4,280.9 4,484.5 4,708.2
Allmerica Asset Management 2.1 2.2 --
-----------------------------------------
Subtotal 11,501.7 10,126.5 9,812.7
-----------------------------------------
Total $ 17,702.4 $ 15,921.5 $ 15,378.4
-----------------------------------------
-----------------------------------------
</TABLE>

14. LEASE COMMITMENTS

Rental expenses for operating leases, principally with respect to buildings,
amounted to $36.4 million, $35.2 million and $31.9 million in 1995, 1994 and
1993, respectively. At December 31, 1995, future minimum rental payments under
non-cancelable operating leases were approximately $84.6 million, payable as
follows: 1996 - $29.4 million; 1997 - $21.5 million; 1998 - $14.6 million; 1999
- - $8.7 million; 2000 - $5.5 million; and $4.9 million thereafter.

15. REINSURANCE

In the normal course of business, the Company seeks to reduce the loss that may
arise from catastrophes or other 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 SFAS No. 113.
Amounts recoverable from reinsurers are estimated in a manner consistent
with the claim liability associated with the reinsured policy. Reinsurance
contracts do not relieve the Company from its obligations to policyholders.
Failure of reinsurers to honor their obligations could result in losses to the
Company; consequently, allowances are established for amounts deemed
uncollectible. The Company determines the appropriate amount of reinsurance
based on evaluation of the risks accepted and analyses prepared by consultants
and reinsurers and on market conditions (including the availability and pricing
of reinsurance). The Company also believes that the terms of its reinsurance
contracts are consistent with industry practice in that they contain standard
terms with respect to lines of business covered, limit and retention,
arbitration and occurrence. Based on its review of its reinsurers' financial
statements and reputations in the reinsurance marketplace, the Company believes
that its reinsurers are financially sound.

The Company is subject to concentration of risk with respect to reinsurance
ceded to various residual market mechanisms. As a condition to the ability to
conduct certain business in various states, the Company is required to
participate in various residual market mechanisms and pooling arrangements which
provide various insurance coverages to individuals or other entities that are
otherwise unable to purchase such coverage voluntarily provided by private
insurers. These market mechanisms and pooling arrangements include the
Massachusetts Commonwealth Automobile Reinsurers ("CAR"), the Maine Workers'
Compensation Residual

22
<PAGE>

Market Pool ("MWCRP") and the Michigan Catastrophic Claims Association ("MCCA").
As of December 31, 1995, the MCCA and CAR were the only two reinsurers which
represented 10% or more of the Company's reinsurance business. As a servicing
carrier in Massachusetts, the Company cedes a significant portion of its private
passenger and commercial automobile premiums to CAR. Net premiums earned and
losses and loss adjustment expenses ceded to CAR in 1995, 1994 and 1993 were
$49.1 million and $37.9 million, $50.0 million and $34.6 million, and $45.0
million and $31.7 million, respectively.

From 1988 through 1992, the Company was a servicing carrier in Maine, and
ceded a significant portion of its workers' compensation premiums to the Maine
Workers' Compensation Residual Market Pool, which is administered by The
National Council on Compensation Insurance ("NCCI"). The Company is currently
involved in legal proceedings regarding the MWCRP's deficit which through a
legislated settlement issued on June 23, 1995 provided for an initial funding of
$220.0 million, of which the insurance carriers were responsible for $65.0
million. Hanover paid its allocation of $4.2 million in December 1995. Some of
the small carriers are currently appealing this decision. The Company's right to
recover reinsurance balances for claims properly paid is not at issue in any
such proceedings. The Company expects to collect its reinsurance balance;
however, funding of the cash flow needs of the MWCRP may in the future be
affected by issues related to certain litigation, the outcome of which the
Company cannot predict. The Company ceded to MCCA net premiums earned and losses
and loss adjustment expenses in 1995, 1994 and 1993 of $66.8 million and $62.9
million, $80.0 million and $24.2 million, and $76.4 million and $126.8 million,
respectively. Because the MCCA is supported by assessments permitted by statute,
and all amounts billed by the Company to CAR, MWCRP and MCCA have been paid when
due, the Company believes that it has no significant exposure to uncollectible
reinsurance balances.

The effects of reinsurance were as follows:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Life insurance premiums:
Direct $ 438.9 $ 447.2 $ 453.0
Assumed 71.0 54.3 31.3
Ceded (150.3) (111.0) (83.2)
----------------------------------------
Net premiums $ 359.6 $ 390.5 $ 401.1
----------------------------------------
----------------------------------------
Property and casualty
premiums written:
Direct $ 2,039.4 $ 1,992.4 $ 1,906.2
Assumed 125.0 128.6 106.3
Ceded (279.1) (298.1) (267.4)
----------------------------------------
Net premiums $ 1,885.3 $ 1,822.9 $ 1,745.1
----------------------------------------
----------------------------------------
Property and casualty
premiums earned:
Direct $ 2,021.7 $ 1,967.1 $ 1,870.1
Assumed 137.7 116.1 114.8
Ceded (296.2) (291.9) (306.7)
----------------------------------------
Net premiums $ 1,863.2 $ 1,791.3 $ 1,678.2
----------------------------------------
----------------------------------------
Life insurance and other individual
policy benefits, claims, losses and
loss adjustment expenses:
Direct $ 749.6 $ 773.0 $ 819.4
Assumed 38.5 28.9 6.8
Ceded (69.5) (61.6) (38.4)
----------------------------------------
Net policy benefits, claims, losses
and loss adjustment expenses $ 718.6 $ 740.3 $ 787.8
----------------------------------------
----------------------------------------
Property and casualty benefits,
claims, losses and loss
adjustment expenses:
Direct $ 1,372.7 $ 1,364.4 $ 1,310.3
Assumed 146.1 102.7 98.8
Ceded (229.1) (160.4) (209.7)
----------------------------------------
Net policy benefits, claims, losses
and loss adjustment expenses $ 1,289.7 $ 1,306.7 $ 1,199.4
----------------------------------------
----------------------------------------
</TABLE>

23
<PAGE>

16. DEFERRED POLICY ACQUISITION EXPENSES

The following reflects the amount of policy acquisition expenses deferred and
amortized:

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 802.8 $ 746.9 $ 700.4
Acquisition expenses deferred 504.8 510.3 482.3
Amortized to expense
during the year (470.3) (475.7) (435.8)
Adjustment to equity
during the year (50.4) 21.3 --
Transferred to the Closed Block (24.8) -- --
Adjustment for cession of
term life insurance (26.4) -- --
---------------------------------------
Balance at end of year $ 735.7 $ 802.8 $ 746.9
---------------------------------------
---------------------------------------
</TABLE>

17. LIABILITIES FOR OUTSTANDING CLAIMS, LOSSES AND LOSS ADJUSTMENT EXPENSES

The Company regularly updates its estimates at liabilities for outstanding
claims, losses and loss adjustment expenses as new information becomes available
and further events occur which may impact the resolution of unsettled claims for
its property and casualty and its accident and health lines of business. Changes
in prior estimates are reflected in results of operations in the year such
changes are determined to be needed and recorded.

The liability for outstanding claims, losses and loss adjustment expenses
related to the Company's accident and health business was $375.9 million, $305.0
million and $276.3 million at December 31, 1995, 1994 and 1993, respectively.
Accident and health claim liabilities have been re-estimated for all prior years
and were increased by $26.4 million, $6.5 million and $12.7 million in 1995,
1994 and 1993, respectively. Unfavorable development in the accident and health
business during 1995 is primarily due to reserve strengthening and adverse
experience in the Company's individual disability line of business.

The following table provides a reconciliation of the beginning and ending
property and casualty reserve for unpaid losses and loss adjustment expenses
(LAE):

For the Years Ended December 31
(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reserve for losses and LAE,
beginning of year $ 2,821.7 $ 2,717.3 $ 2,598.9
Incurred losses and LAE, net
of reinsurance recoverable:
Provision for insured events of
the current year 1,427.3 1,434.8 1,268.2
Decrease in provision for insured
events of prior years (137.6) (128.1) (68.8)
----------------------------------------
Total incurred losses and LAE 1,289.7 1,306.7 1,199.4
----------------------------------------
Payments, net of reinsurance
recoverable:
Losses and LAE attributable to
insured events of current year 652.2 650.2 523.5
Losses and LAE attributable to
insured events of prior years 614.3 566.9 564.3
----------------------------------------
Total payments 1,266.5 1,217.1 1,087.8
----------------------------------------
Less reserves assumed by purchaser
of Beacon -- -- (28.8)
----------------------------------------
Change in reinsurance recoverable
on unpaid losses 51.1 14.8 35.6
----------------------------------------
Reserve for losses and LAE,
end of year $ 2,896.0 $ 2,821.7 $ 2,717.3
----------------------------------------
----------------------------------------
</TABLE>

As part of an ongoing process, the property and casualty reserves have been
re-estimated for all prior accident years and were decreased by $137.6 million,
$128.1 million and $68.8 million in 1995, 1994 and 1993, respectively. The
increase in favorable development on prior years' reserves of $9.5 million in
1995 results primarily from a $34.6 million increase in favorable development at
Citizens. Favorable development in Citizens' personal automobile and workers'
compensation lines increased $16.6 million and $15.5 million, to favorable
development of $4.4 million and $32.7 million, respectively. Hanover's favorable
development, not including the effect of voluntary and involuntary pools, was
relatively unchanged at $90.2 million in 1995 compared to $91.7 million in 1994.
Favorable development in Hanover's workers' compensation line increased $27.7
million to $31.0 million during 1995. This was offset by decreases of $14.6
million and

<PAGE>

$12.6 million, to $45.5 million and $0.1 million, in the personal automobile
and commercial multiple peril lines, respectively. Favorable development in
Hanover's voluntary and involuntary pools decreased $23.6 million to $0.4
million during 1995.

The increase in favorable development on prior years' reserves of $59.3
million in 1994 primarily results from an increase in favorable development in
the voluntary and involuntary pools of $47.0 million in 1994. The remainder of
the favorable reserve development in 1994 is the result of favorable severity
trends, primarily in the personal automobile and commercial multiple peril
lines.

This favorable development reflects the Regional Property and Casualty
subsidiaries' reserving philosophy consistently applied over these periods.
Conditions and trends that have affected development of the loss and LAE
reserves in the past may not necessarily occur in the future.

Due to the nature of business written by the Regional Property and Casualty
subsidiaries, the exposure to environmental liabilities is relatively small.
Losses and LAE reserves related to environmental damage and toxic tort
liability, included in the total reserve for losses and LAE, were $28.6 million
and $19.4 million, net of reinsurance of $8.4 million and $8.1 million, at the
end of 1995 and 1994, respectively. During 1995, the Regional Property and
Casualty subsidiaries redefined their environmental liabilities in conformity
with new guidelines issued by the NAIC. The 1994 liability has been conformed to
the 1995 presentation. This had no impact on results of operations. Management
believes that, notwithstanding the evolution of case law expanding such
liability, recorded reserves for environmental liability are adequate, and is
not aware of any litigation or pending claims that may result in additional
material liabilities in excess of recorded reserves. During 1995, Hanover
performed an actuarial review of its environmental reserves. This resulted in
Hanover's providing additional reserves for "IBNR" (incurred but not reported)
claims, in addition to existing reserves for reported claims. At Citizens,
environmental reserves are primarily related to reported claims. Although these
claims are not material, their existence gives rise to uncertainty and is
discussed because of the possibility, however remote, that they may become
material. The environmental liability could be revised in the near term if the
estimates used in determining the liability are revised.

18. MINORITY INTEREST

The Company's interest in Allmerica P&C, is represented by ownership of 58.3%,
57.4% and 57.4% of the outstanding shares of common stock at December 31, 1995,
1994 and 1993, respectively. Earnings and shareholders' equity attributable to
minority shareholders are included in minority interest in the consolidated
financial statements.

19. CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

Unfavorable economic conditions have contributed to an increase in the number of
insurance companies that are under regulatory supervision. This is expected to
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

On June 23, 1995, the governor of Maine approved a legislative settlement for
the Maine Workers' Compensation Residual Market Pool deficit for the years 1988
through 1992. The settlement provides for an initial funding of $220.0 million
toward the deficit. The insurance carriers are liable for $65.0 million payable
on or before January 1, 1996, and employers will contribute $110.0 million
payable through surcharges on premiums over the course of the next ten years.
The major insurers are responsible for 90% of the $65.0 million. Hanover's
allocated share of the settlement is approximately $4.2 million, which was paid
in December 1995. The remainder of the deficit of $45.0 million will be paid by
the Maine Guaranty Fund Surplus payable in quarterly contributions over ten
years. The smaller carriers have recently filed litigation to appeal the
settlement. The Company believes that adequate reserves have been established
for any additional liability.

The Company has been named a defendant in various other legal proceedings
arising in the normal course of business. In the opinion of management, 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.

RESIDUAL MARKETS

The Company is required to participate in residual markets in various states.
The results of the residual markets are not subject to the predictability
associated with the Company's own managed business, and are significant to the
workers' compensation line of business and both the private passenger and
commercial automobile lines of business.

25
<PAGE>

20. STATUTORY FINANCIAL INFORMATION

The insurance subsidiaries are 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
shareholders' equity reported in accordance with generally accepted accounting
principles for stock life insurance companies primarily because policy
acquisition costs are expensed when incurred, investment reserves are based on
different assumptions, postretirement benefit costs are based on different
assumptions and reflect a different method of adoption, life insurance reserves
are based on different assumptions and income tax expense reflects only taxes
paid or currently payable. Statutory net income and surplus are as follows:

(In millions) 1995 1994 1993
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory net income (Unconsolidated)
Property and Casualty Companies $ 139.8 $ 74.5 $ 166.8
Life and Health Companies 134.3 40.7 114.8
----------------------------------------
Statutory Shareholders'
Surplus (Unconsolidated)
Property and Casualty Companies $ 1,151.7 $ 989.8 $ 960.1
Life and Health Companies 965.6 465.3 526.4
----------------------------------------
</TABLE>

21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The quarterly results of operations for 1995 and 1994 are summarized below:

For the Three Months Ended
(In millions)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 March 31 June 30 Sept. 30 Dec. 31
Total revenues $ 841.4 $ 793.4 $ 819.2 $ 784.5
------------------------------------------------------
Income before extraordinary item $ 39.2 $ 29.9 $ 34.8 $ 45.2
Extraordinary item - demutualization expenses (2.5) (3.5) (4.7) (1.4)
------------------------------------------------------
Net income $ 36.7 $ 26.4 $ 30.1 $ 43.8
------------------------------------------------------
------------------------------------------------------
1994
Total revenues $ 815.4 $ 786.8 $ 799.3 $ 793.6
------------------------------------------------------
Income (loss) before extraordinary item $ (10.9) $ 15.7 $ 26.6 $ 17.7
Extraordinary item - demutualization expenses (1.6) (2.5) (2.8) (2.3)
Cumulative effect of changes in accounting principles (1.9) -- -- --
------------------------------------------------------
Net income $ (14.4) $ 13.2 $ 23.8 $ 15.4
------------------------------------------------------
------------------------------------------------------
</TABLE>

<PAGE>

VEL II ACCOUNT

STATEMENTS OF ASSETS AND LIABILITIES - December 31, 1995

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INVESTMENT
GROWTH GRADE INCOME MONEY MARKET EQUITY INDEX
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
1 2 3 4
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica
Investment Trust . . . . . . . . . . . $ 199,122 $ 129,784 $ 366,514 $ 107,571

LIABILITIES:
Payable to First Allmerica Financial
Life Insurance Company (Sponsor) . . . 274 161 955 58
---------- ---------- ---------- ----------
Net assets. . . . . . . . . . . . . . $ 198,848 $ 129,623 $ 365,559 $ 107,513
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Net asset distribution by category:
Variable life policies . . . . . . . . $ 198,848 $ 129,623 $ 365,559 $ 107,513
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Units outstanding, December 31, 1995 . . 149,166 111,480 342,253 75,887
Net asset value per unit,
December 31, 1995. . . . . . . . . . . $ 1.333059 $ 1.162752 $ 1.068095 $ 1.416746

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SELECT SELECT VIPF VIPF
INTERNATIONAL EQUITY CAPITAL APPRECIATION HIGH INCOME EQUITY INCOME
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
11 12 102 103
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica
Investment Trust . . . . . . . . . . . $ 155,947 $ 111,983 -- --
Investment in shares of Fidelity
Variable Insurance Products Fund . . . -- -- $ 232,892 $ 676,409
Investment in shares of T. Rowe Price
International Series, Inc. . . . . . . -- -- -- --
Investment in shares of Delaware Group
Premium Fund, Inc. . . . . . . . . . . -- -- -- --
Receivable from First Allmerica
Financial Life Insurance Company
(Sponsor). . . . . . . . . . . . . . . -- -- 251 361
---------- ---------- ---------- ----------
Total assets. . . . . . . . . . . . . 155,947 111,983 233,143 676,770

LIABILITIES:
Payable to First Allmerica Financial
Life Insurance Company (Sponsor) . . . 102 69 -- --
---------- ---------- ---------- ----------
Net assets. . . . . . . . . . . . . . $ 155,845 $ 111,914 $ 233,143 $ 676,770
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Net asset distribution by category:
Variable life policies . . . . . . . . $ 155,732 $ 111,637 $ 233,143 $ 676,770
Value of investment by First Allmerica
Financial Life Insurance Company
(Sponsor). . . . . . . . . . . . . . 113 277 -- --
---------- ---------- ---------- ----------
$ 155,845 $ 111,914 $ 233,143 $ 676,770
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Units outstanding, December 31, 1995 . . 137,567 80,794 198,246 469,354
Net asset value per unit,
December 31, 1995. . . . . . . . . . . $ 1.132869 $ 1.385177 $ 1.176030 $ 1.441918

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

<PAGE>

VEL II ACCOUNT

<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SELECT SELECT SELECT SMALL
BOND AGGRESSIVE GROWTH GROWTH GROWTH AND INCOME CAP VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
5 6 7 8 9
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica
Investment Trust . . . . . . . . . . . $ 185,199 $ 429,068 $ 154,620 $ 157,995 $ 185,815

LIABILITIES:
Payable to First Allmerica Financial
Life Insurance Company (Sponsor) . . . 147 359 164 142 290
---------- ---------- ---------- ---------- ----------
Net assets. . . . . . . . . . . . . . $ 185,052 $ 428,709 $ 154,456 $ 157,853 $ 185,525
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Net asset distribution by category:
Variable life policies . . . . . . . . $ 185,052 $ 428,709 $ 154,456 $ 157,853 $ 185,525
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Units outstanding, December 31, 1995 . . 162,785 347,682 125,803 118,937 169,148
Net asset value per unit,
December 31, 1995. . . . . . . . . . . $ 1.136789 $ 1.233048 $ 1.227765 $ 1.327197 $ 1.096824

<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
VIPF VIPF VIPF II T. ROWE DGPF
GROWTH OVERSEAS ASSET MANAGER INTERNATIONAL STOCK INTERNATIONAL EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
104 105 106 150 207
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in shares of Allmerica
Investment Trust . . . . . . . . . . . -- -- -- -- --
Investment in shares of Fidelity
Variable Insurance Products Fund . . . $ 643,055 $ 417,483 $ 312,946 -- --
Investment in shares of T. Rowe Price
International Series, Inc. . . . . . . -- -- -- $ 26,086 --
Investment in shares of Delaware Group
Premium Fund, Inc. . . . . . . . . . . -- -- -- -- $ 164,192
Receivable from First Allmerica
Financial Life Insurance Company
(Sponsor). . . . . . . . . . . . . . . 553 81 -- -- --
---------- ---------- ---------- ---------- ----------
Total assets. . . . . . . . . . . . . 643,608 417,564 312,946 26,086 164,192

LIABILITIES:
Payable to First Allmerica Financial
Life Insurance Company (Sponsor) . . . -- -- 328 31 237
---------- ---------- ---------- ---------- ----------
Net assets. . . . . . . . . . . . . . $ 643,608 $ 417,564 $ 312,618 $ 26,055 $ 163,955
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Net asset distribution by category:
Variable life policies . . . . . . . . $ 643,608 $ 417,564 $ 312,504 $ 26,055 $ 163,955
Value of investment by First Allmerica
Financial Life Insurance Company
(Sponsor). . . . . . . . . . . . . . -- -- 114 -- --
---------- ---------- ---------- ---------- ----------
$ 643,608 $ 417,564 $ 312,618 $ 26,055 $ 163,955
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Units outstanding, December 31, 1995 . . 480,189 389,710 273,691 24,722 144,377
Net asset value per unit,
December 31, 1995. . . . . . . . . . . $ 1.340323 $ 1.071474 $ 1.142231 $ 1.053908 $ 1.135602

</TABLE>

<PAGE>

VEL II ACCOUNT

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME
SUB-ACCOUNT 1 SUB-ACCOUNT 2
FOR THE YEAR ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 4/6/94* TO 12/31/94 12/31/95 4/19/94* TO 12/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . $ 17,788 $ 1,998 $ 8,047 $ 1,541
EXPENSES:
Mortality and expense risk fees . . . . 1,111 69 1,014 137
Administrative expense fees . . . . . . 308 19 282 38
-------- -------- -------- --------
Total expenses . . . . . . . . . . . . 1,419 88 1,296 175
-------- -------- -------- --------
Net investment income. . . . . . . . 16,369 1,910 6,751 1,366
-------- -------- -------- --------
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . . 4,355 6 1,691 (4)
Net unrealized gain (loss). . . . . . . 11,702 (1,891) 8,501 (1,166)
-------- -------- -------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . 16,057 (1,885) 10,192 (1,170)
-------- -------- -------- --------
Net increase (decrease) in net assets
from operations. . . . . . . . . . . $ 32,426 $ 25 $ 16,943 $ 196
-------- -------- -------- --------
-------- -------- -------- --------

<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET EQUITY INDEX
SUB-ACCOUNT 3 SUB-ACCOUNT 4
FOR THE YEAR ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 5/3/94* TO 12/31/94 12/31/95 4/19/94* TO 12/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . $ 19,962 $ 2,989 $ 4,030 $ 551
EXPENSES:
Mortality and expense risk fees . . . . 3,134 563 491 92
Administrative expense fees . . . . . . 870 156 136 26
-------- -------- -------- --------
Total expenses . . . . . . . . . . . . 4,004 719 627 118
-------- -------- -------- --------
Net investment income. . . . . . . . 15,958 2,270 3,403 433
-------- -------- -------- --------
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . . -- -- 100 1
Net unrealized gain (loss). . . . . . . -- -- 10,948 (631)
-------- -------- -------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . -- -- 11,048 (630)
-------- -------- -------- --------
Net increase (decrease) in net assets
from operations. . . . . . . . . . . $ 15,958 $ 2,270 $ 14,451 $ (197)
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
- ---------------------------------------------------------------------------------------
GOVERNMENT BOND
SUB-ACCOUNT 5
FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 5/9/94* TO 12/31/94
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . $ 11,211 $ 2,751
EXPENSES:
Mortality and expense risk fees . . . . 1,678 246
Administrative expense fees . . . . . . 466 68
-------- --------
Total expenses . . . . . . . . . . . . 2,144 314
-------- --------
Net investment income. . . . . . . . 9,067 2,437
-------- --------
-------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . . 1,190 35
Net unrealized gain (loss). . . . . . . 10,688 (2,305)
-------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . 11,878 (2,270)
-------- --------
Net increase (decrease) in net assets
from operations. . . . . . . . . . . $ 20,945 $ 167
-------- --------
-------- --------
</TABLE>

<PAGE>

VEL II ACCOUNT

SELECT AGGRESSIVE GROWTH SELECT GROWTH

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT AGGRESSIVE GROWTH SELECT GROWTH
SUB-ACCOUNT 6 SUB-ACCOUNT 7
FOR THE YEAR ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 4/5/94* TO 12/31/94 12/31/95 4/6/94* TO 12/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . -- -- $ 23 $ 113
EXPENSES:
Mortality and expense risk fees . . . . $ 2,474 $ 449 875 45
Administrative expense fees . . . . . . 687 125 243 12
-------- -------- -------- --------
Total expenses . . . . . . . . . . . 3,161 574 1,118 57
-------- -------- -------- --------
Net investment income (loss). . . . . . (3,161) (574) (1,095) 56
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . . 1,962 (10) 1,381 23
Net unrealized gain (loss). . . . . . . 72,394 563 13,793 47
-------- -------- -------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . 74,356 553 15,174 70
-------- -------- -------- --------
Net increase (decrease) in net assets
from operations. . . . . . . . . . . $ 71,195 $ (21) $ 14,079 $ 126
-------- -------- -------- --------
-------- -------- -------- --------

<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SELECT GROWTH AND INCOME SMALL CAP VALUE
SUB-ACCOUNT 8 SUB-ACCOUNT 9
FOR THE YEAR ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 4/15/94* to 12/31/94 12/31/95 4/5/94* to 12/31/94
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . $ 7,647 $ 1,673 $ 6,195 $ 370
EXPENSES:
Mortality and expense risk fees . . . . 876 174 1,266 327
Administrative expense fees . . . . . . 244 48 352 91
-------- -------- -------- --------
Total expenses . . . . . . . . . . . 1,120 222 1,618 418
-------- -------- -------- --------
Net investment income (loss). . . . . . 6,527 1,451 4,577 (48)
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . . 390 (24) 2,486 (244)
Net unrealized gain (loss). . . . . . . 17,723 (2,617) 14,137 (1,797)
-------- -------- -------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . 18,113 (2,641) 16,623 (2,041)
-------- -------- -------- --------
Net increase (decrease) in net assets
from operations. . . . . . . . . . . $ 24,640 $ (1,190) $ 21,200 $ (2,089)
-------- -------- -------- --------
-------- -------- -------- --------

<CAPTION>
- ------------------------------------------------------------------------------------------
SELECT INTERNATIONAL EQUITY
SUB-ACCOUNT 11
FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 5/20/94* to 12/31/94
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . $ 2,081 $ 31
EXPENSES:
Mortality and expense risk fees . . . . 700 35
Administrative expense fees . . . . . . 194 10
-------- --------
Total expenses . . . . . . . . . . . 894 45
-------- --------
Net investment income (loss). . . . . . 1,187 (14)
-------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss). . . . . . . . 441 (6)
Net unrealized gain (loss). . . . . . . 9,816 (537)
-------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . 10,257 (543)
-------- --------
Net increase (decrease) in net assets
from operations. . . . . . . . . . . $ 11,444 $ (557)
-------- --------
-------- --------
</TABLE>

* Date of initial investment.

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

83
<PAGE>

VEL II ACCOUNT

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SELECT CAPITAL APPRECIATION VIPF HIGH INCOME
SUB-ACCOUNT 12 SUB-ACCOUNT 102
FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
4/28/95* TO 12/31/95 12/31/95 4/5/94* TO 12/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . $ 2,134 $ 8,429 --
EXPENSES:
Mortality and expense risk fees. . . . . 312 1,535 $ 297
Administrative expense fees. . . . . . . 87 426 82
-------- -------- --------
Total expenses . . . . . . . . . . . . 399 1,961 379
-------- -------- --------
Net investment income (loss). . . . . 1,735 6,468 (379)
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) . . . . . . . . 169 2,195 (38)
Net unrealized gain (loss) . . . . . . . 12,007 20,200 (163)
-------- -------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . . 12,176 22,395 (201)
-------- -------- --------
Net increase (decrease) in net assets
from operations . . . . . . . . . . . . $ 13,911 $ 28,863 $ (580)
-------- -------- ----------
-------- -------- ----------

<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
VIPF EQUITY INCOME VIPF GROWTH
SUB-ACCOUNT 103 SUB-ACCOUNT 104
FOR THE YEAR ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 4/5/94* TO 12/31/94 12/31/95 4/5/94* TO 12/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . $ 21,950 $ 2,239 $ 1,164 --
EXPENSES:
Mortality and expense risk fees. . . . . 3,803 413 3,677 $ 524
Administrative expense fees. . . . . . . 1,056 115 1,021 146
-------- -------- -------- --------
Total expenses . . . . . . . . . . . . 4,859 528 4,698 670
-------- -------- -------- --------
Net investment income (loss). . . . . 17,091 1,711 (3,534) (670)
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) . . . . . . . . 1,925 129 25,500 101
Net unrealized gain (loss) . . . . . . . 100,571 1,283 74,665 8,600
-------- -------- -------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . . 102,496 1,412 100,165 8,701
-------- -------- -------- --------
Net increase (decrease) in net assets
from operations . . . . . . . . . . . . $ 119,587 $ 3,123 $ 96,631 $ 8,031
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
- -----------------------------------------------------------------------------------------
VIPF OVERSEAS
SUB-ACCOUNT 105
FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 4/5/94* TO 12/31/94
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . $ 1,981 --
EXPENSES:
Mortality and expense risk fees. . . . . 2,877 $ 724
Administrative expense fees. . . . . . . 799 201
-------- --------
Total expenses . . . . . . . . . . . . 3,676 925
-------- --------
Net investment income (loss). . . . . (1,695) (925)
-------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) . . . . . . . . 6,939 14
Net unrealized gain (loss) . . . . . . . 25,493 (5,398)
-------- --------
Net realized and unrealized gain
(loss) on investments. . . . . . . . . 32,432 (5,384)
-------- --------
Net increase (decrease) in net assets
from operations . . . . . . . . . . . . $ 30,737 $ (6,309)
-------- --------
-------- --------
</TABLE>

<PAGE>

VEL II ACCOUNT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
VIPF II ASSET MANAGER T. ROWE INTERNATIONAL STOCK
SUB-ACCOUNT 106 SUB-ACCOUNT 150
FOR THE YEAR ENDED FOR THE PERIOD FOR THE PERIOD
12/31/95 4/6/94* to 12/31/94 6/21/95* to 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . $ 4,679 $ 27 --
EXPENSES:
Mortality and expense risk fees. . . . . 2,345 410 $ 60
Administrative expense fees. . . . . . . 651 114 17
-------- -------- --------
Total expenses . . . . . . . . . . . . 2,996 524 77
-------- -------- --------
Net investment income (loss). . . . . 1,683 (497) (77)
-------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) . . . . . . . . 1,938 39 7
Net unrealized gain (loss) . . . . . . . 36,035 (4,843) 984
-------- -------- --------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . 37,973 (4,804) 991
-------- -------- --------
Net increase (decrease) in net assets in
from operations . . . . . . . . . . . . $ 39,656 $ (5,301) $ 914
-------- -------- --------
-------- -------- --------

<CAPTION>
- --------------------------------------------------------------------------------------------
DGPF INTERNATIONAL EQUITY
SUB-ACCOUNT 207
FOR THE YEAR ENDED FOR THE PERIOD
12/31/95 4/5/94* TO 12/31/94
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends. . . . . . . . . . . . . . . . $ 2,054 --
EXPENSES:
Mortality and expense risk fees. . . . . 1,028 $ 150
Administrative expense fees. . . . . . . 285 42
-------- --------
Total expenses . . . . . . . . . . . . 1,313 192
-------- --------
Net investment income (loss). . . . . 741 (192)
-------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) . . . . . . . . 533 (4)
Net unrealized gain (loss) . . . . . . . 13,079 (840)
-------- --------
Net realized and unrealized gain
(loss) on investments . . . . . . . . . 13,612 (844)
-------- --------
Net increase (decrease) in net assets in
from operations . . . . . . . . . . . . $ 14,353 $ (1,036)
-------- --------
-------- --------
</TABLE>

* Date of initial investment.

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

<PAGE>

VEL II ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GROWTH INVESTMENT GRADE INCOME
SUB-ACCOUNT 1 SUB-ACCOUNT 2
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/95 4/6/94* TO 12/31/94 12/31/95 4/19/94* TO 12/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . $ 16,369 $ 1,910 $ 6,751 $ 1,366
Net realized gain (loss) from security transactions. . 4,355 6 1,691 (4)
Net unrealized gain (loss) on investments. . . . . . . 11,702 (1,891) 8,501 (1,166)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets from operations. 32,426 25 16,943 196
---------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . 84,927 27,126 46,181 43,549
Terminations . . . . . . . . . . . . . . . . . . . . . (1,044) (1,879) (3,228) (1,473)
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) 45,543 11,724 2,432 25,023
---------- ---------- ---------- ----------
Net increase in net assets from capital transactions . 129,426 36,971 45,385 67,099
---------- ---------- ---------- ----------
Net increase in net assets . . . . . . . . . . . . . . 161,852 36,996 62,328 67,295

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . 36,996 -- 67,295 --
---------- ---------- ---------- ----------
End of period . . . . . . . . . . . . . . . . . . . . $ 198,848 $ 36,996 $ 129,623 $ 67,295
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET EQUITY INDEX
SUB-ACCOUNT 3 SUB-ACCOUNT 4
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/95 5/3/94* TO 12/31/94 12/31/95 4/19/94* TO 12/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . $ 15,958 $ 2,270 $ 3,403 $ 433
Net realized gain (loss) from security transactions. . -- -- 100 1
Net unrealized gain (loss) on investments. . . . . . . -- -- 10,948 (631)
---------- ---------- ---------- ----------
Net increase (decrease) in net assets from operations . 15,958 2,270 14,451 (197)
---------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . 446,809 368,294 42,559 11,918
Terminations . . . . . . . . . . . . . . . . . . . . . (443) (146) (100) --
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) . (414,373) (52,810) 24,073 14,809
---------- ---------- ---------- ----------
Net increase in net assets from capital transactions . 31,993 315,338 66,532 26,727
---------- ---------- ---------- ----------
Net increase in net assets . . . . . . . . . . . . . . 47,951 317,608 80,983 26,530

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . 317,608 -- 26,530 153,360
---------- ---------- ---------- ----------
End of period . . . . . . . . . . . . . . . . . . . . . $ 365,559 $ 317,608 $ 107,513 $ 26,530
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

<CAPTION>
- --------------------------------------------------------------------------------------------------
GOVERNMENT BOND
SUB-ACCOUNT 5
YEAR ENDED PERIOD FROM
12/31/95 5/9/94* TO 12/31/94
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . $ 9,067 $ 2,437
Net realized gain (loss) from security transactions. . 1,190 35
Net unrealized gain (loss) on investments. . . . . . . 10,688 (2,305)
---------- ----------
Net increase (decrease) in net assets from operations . 20,945 167
---------- ----------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . 24,923 150,537
Terminations . . . . . . . . . . . . . . . . . . . . . (81) --
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) . (14,095) 2,656
---------- ----------
Net increase in net assets from capital transactions . 10,747 153,193
---------- ----------
Net increase in net assets . . . . . . . . . . . . . . 31,692 153,360

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . 153,360 --
---------- ----------
End of period . . . . . . . . . . . . . . . . . . . . . $ 185,052 $ 153,360
---------- ----------
---------- ----------
</TABLE>

<PAGE>
- --------------------------------------------------------------------------------
VEL II ACCOUNT
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECT AGGRESSIVE GROWTH SELECT GROWTH
SUB-ACCOUNT 6 SUB-ACCOUNT 7
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/95 4/5/94* TO 12/31/94 12/31/95 4/6/94* TO 12/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . $ (3,161) $ (574) $ (1,095) $ 56
Net realized gain (loss) from security transactions. . 1,962 (10) 1,381 23
Net unrealized gain (loss) on investments. . . . . . . 72,394 563 13,793 47
---------- ---------- ---------- ----------
Net increase (decrease) in net assets from operations. 71,195 (21) 14,079 126
---------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . 171,463 81,409 66,424 23,133
Terminations . . . . . . . . . . . . . . . . . . . . . (2,228) (1,652) (792) (48)
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) 51,490 57,053 36,695 14,839
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) -- -- --
---------- ---------- ---------- ----------
Net increase in net assets from capital transactions . 220,725 136,810 102,327 37,924
---------- ---------- ---------- ----------
Net increase in net assets . . . . . . . . . . . . . . 291,920 136,789 116,406 38,050

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . 136,789 -- 38,050 --
---------- ---------- ---------- ----------
End of period . . . . . . . . . . . . . . . . . . . . $ 428,709 $ 136,789 $ 154,456 $ 38,050
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SELECT GROWTH AND INCOME SMALL CAP VALUE
SUB-ACCOUNT 8 SUB-ACCOUNT 9
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/95 4/15/94* TO 12/31/94 12/31/95 4/05/94* TO 12/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . $ 6,527 $ 1,451 $ 4,577 $ (48)
Net realized gain (loss) from security transactions. . 390 (24) 2,486 (244)
Net unrealized gain (loss) on investments. . . . . . . 17,723 (2,617) 14,137 (1,797)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations. 24,640 (1,190) 21,200 (2,089)
----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . 65,999 45,043 102,108 77,321
Terminations . . . . . . . . . . . . . . . . . . . . . (54) (206) (372) (367)
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) 14,335 9,286 (22,257) 9,981
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) -- -- -- --
----------- ----------- ----------- -----------
Net increase in net assets from capital transactions . 80,280 54,123 79,479 86,935
----------- ----------- ----------- -----------
Net increase in net assets . . . . . . . . . . . . . . 104,920 52,933 100,679 84,846

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . 52,933 -- 84,846 --
----------- ----------- ----------- -----------
End of period . . . . . . . . . . . . . . . . . . . . $ 157,853 $ 52,933 $ 185,525 $ 84,846
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

<CAPTION>
- -----------------------------------------------------------------------------------------------------
SELECT INTERNATIONAL EQUITY
SUB-ACCOUNT 11
YEAR ENDED PERIOD FROM
12/31/95 5/20/94* TO 12/31/94
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . $ 1,187 $ (14)
Net realized gain (loss) from security transactions. . 441 (6)
Net unrealized gain (loss) on investments. . . . . . . 9,816 (537)
----------- -----------
Net increase (decrease) in net assets from operations. 11,444 (557)
----------- -----------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . 54,409 9,176
Terminations . . . . . . . . . . . . . . . . . . . . . (309) --
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) 76,026 5,556
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) -- 100
----------- -----------
Net increase in net assets from capital transactions . 130,126 14,832
----------- -----------
Net increase in net assets . . . . . . . . . . . . . . 141,570 14,275

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . 14,275 --
----------- -----------
End of period . . . . . . . . . . . . . . . . . . . . $ 155,845 $ 14,275
----------- -----------
----------- -----------
</TABLE>

* Date of initial investment.

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

<PAGE>

VEL II ACCOUNT

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SELECT CAPITAL APPRECIATION VIIPF HIGH INCOME
SUB-ACCOUNT 12 SUB-ACCOUNT 102
PERIOD FROM YEAR ENDED PERIOD FROM
4/28/95* TO 12/31/95 12/31/95 4/5/94* TO 12/31/94
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . $ 1,735 $ 6,468 $ (379)
Net realized gain (loss) from security transactions. . . . 169 2,195 (38)
Net unrealized gain (loss) on investments. . . . . . . . . 12,007 20,200 (163)
--------- --------- ---------
Net increase (decrease) in net assets from operations. . . 13,911 28,863 (580)
--------- --------- ---------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . . . 33,186 137,014 90,016
Terminations . . . . . . . . . . . . . . . . . . . . . . . -- (4,400) (714)
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) . . 64,617 (22,591) 5,535
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) . . 200 -- --
--------- --------- ---------
Net increase in net assets from capital transactions. . . . 98,003 110,023 94,837
--------- --------- ---------
Net increase in net assets . . . . . . . . . . . . . . . . 111,914 138,886 94,257

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . -- 94,257 --
--------- --------- ---------
End of period. . . . . . . . . . . . . . . . . . . . . . . $ 111,914 $ 233,143 $ 94,257
--------- --------- ---------
--------- --------- ---------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
VIPF EQUITY INCOME VIPF GROWTH
SUB-ACCOUNT 103 SUB-ACCOUNT 104
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/95 4/5/94* TO 12/31/94 12/31/95 4/5/94* TO 12/31/94
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . $ 17,091 $ 1,711 $ (3,534) $ (670)
Net realized gain (loss) from security transactions. . . . . 1,925 129 25,500 101
Net unrealized gain (loss) on investments. . . . . . . . . . 100,571 1,283 74,665 8,600
--------- --------- --------- ---------
Net increase (decrease) in net assets from operations. . . . 119,587 3,123 96,631 8,031
--------- --------- --------- ---------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . . . . 293,480 130,274 291,237 142,021
Terminations . . . . . . . . . . . . . . . . . . . . . . . . (5,120) (1,557) (6,100) (2,575)
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) . . . 75,382 61,601 45,930 68,433
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) . . . -- -- -- --
--------- --------- --------- ---------
Net increase in net assets from capital transactions. . . . . 363,742 190,318 331,067 207,879
--------- --------- --------- ---------
Net increase in net assets . . . . . . . . . . . . . . . . 483,329 193,441 427,698 215,910

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . 193,441 -- 215,910 --
--------- --------- --------- ---------
End of period . . . . . . . . . . . . . . . . . . . . . . . $ 676,770 $ 193,441 $ 643,608 $ 215,910
--------- --------- --------- ---------
--------- --------- --------- ---------

<CAPTION>
- --------------------------------------------------------------------------------------------------
VIPF OVERSEAS
SUB-ACCOUNT 105
YEAR ENDED PERIOD FROM
12/31/95 4/5/94* TO 12/31/94
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . $ (1,695) $ (925)
Net realized gain (loss) from security transactions. . . . 6,939 14
Net unrealized gain (loss) on investments. . . . . . . . . 25,493 (5,398)
--------- ---------
Net increase (decrease) in net assets from operations. . . 30,737 (6,309)
--------- ---------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . . . 203,407 163,685
Terminations . . . . . . . . . . . . . . . . . . . . . . . (4,920) (1,640)
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) . . (23,786) 56,390
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) . . -- --
--------- ---------
Net increase in net assets from capital transactions. . . . 174,701 218,435
--------- ---------
Net increase in net assets . . . . . . . . . . . . . . . . 205,438 212,126

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . 212,126 --
--------- ---------
End of period . . . . . . . . . . . . . . . . . . . . . . $ 417,564 $ 212,126
--------- ---------
--------- ---------
</TABLE>

* Date of initial investment

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

<PAGE>

VEL II ACCOUNT

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
VIPF II ASSET MANAGER T. ROWE INTERNATIONAL
SUB-ACCOUNT 106 SUB-ACCOUNT 150
YEAR ENDED PERIOD FROM PERIOD FROM
12/31/95 4/6/94* TO 12/31/94 6/21/95* TO 12/31/95
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . $ 1,683 $ (497) $ (77)
Net realized gain (loss) from security transactions. . . . . 1,938 39 7
Net unrealized gain (loss) on investments. . . . . . . . . . 36,035 (4,843) 984
--------- --------- ---------
Net increase (decrease) in net assets from operations. . . . 39,656 (5,301) 914
--------- --------- ---------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . . . . 153,730 84,953 6,491
Terminations . . . . . . . . . . . . . . . . . . . . . . . . (287) -- --
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) . . . (69,108) 108,875 18,650
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) . . . -- 100 --
--------- --------- ---------
Net increase in net assets from capital transactions. . . . . 84,335 193,928 25,141
--------- --------- ---------
Net increase in net assets . . . . . . . . . . . . . . . . . 123,991 188,627 26,055

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . 188,627 -- --
--------- --------- ---------
End of period . . . . . . . . . . . . . . . . . . . . . . . $ 312,618 $ 188,627 $ 26,055
--------- --------- ---------
--------- --------- ---------

<CAPTION>
- ----------------------------------------------------------------------------------------------
DGPF INTERNATIONAL EQUITY
SUB-ACCOUNT 207
YEAR ENDED PERIOD FROM
12/31/95 4/5/94* TO 12/31/94
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) . . . . . . . . . . . . . . . . $ 741 $ (192)
Net realized gain (loss) from security transactions. . . . . 533 (4)
Net unrealized gain (loss) on investments. . . . . . . . . . 13,079 (840)
--------- ----------
Net increase (decrease) in net assets from operations. . . . 14,353 (1,036)
--------- ----------
FROM CAPITAL TRANSACTIONS:
Net premiums . . . . . . . . . . . . . . . . . . . . . . . . 99,444 47,581
Terminations . . . . . . . . . . . . . . . . . . . . . . . . (1,057) --
Other transfers from (to) the General Account of First
Allmerica Financial Life Insurance Company (Sponsor) . . . (5,037) 9,707
Net increase in net assets from investments by First
Allmerica Financial Life Insurance Company (Sponsor) . . . -- --
--------- ----------
Net increase in net assets from capital transactions. . . . . 93,350 57,288
--------- ----------
Net increase in net assets . . . . . . . . . . . . . . . . . 107,703 56,252

NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . 56,252 --
--------- ----------
End of period . . . . . . . . . . . . . . . . . . . . . . . $ 163,955 $ 56,252
--------- ----------
--------- ----------
</TABLE>

<PAGE>

VEL II ACCOUNT

NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995

NOTE 1 - ORGANIZATION

The VEL II Account (VEL II) is a separate investment account of First
Allmerica Financial Life Insurance Company (the Company), established on April
1, 1994 for the purpose of separating from the general assets of the Company
those assets used to fund the variable portion of flexible premium variable life
policies issued by the Company. Effective October 16, 1995, concurrent with the
demutualization, the Company's name changed from State Mutual Life Assurance
Company of America. Under applicable insurance law, the assets and liabilities
of VEL II are clearly identified and distinguished from the other assets and
liabilities of the Company. VEL II cannot be charged with liabilities arising
out of any other business of the Company.

VEL II is registered as a unit investment trust under the Investment Company
Act of 1940, as amended (the 1940 Act). VEL II currently offers eighteen Sub-
Accounts. Each Sub-Account invests exclusively in a corresponding investment
portfolio of the Allmerica Investment Trust (the Trust) managed by Allmerica
Investment Management Company, Inc., a wholly-owned subsidiary of the Company,
of the Variable Insurance Products Fund (VIPF) or the Variable Insurance
Products Fund II (VIPF II) managed by Fidelity Management & Research Company
(Fidelity Management), or of T. Rowe Price International Series, Inc. (T. Rowe)
managed by Price-Fleming, or of the Delaware Group Premium Fund, Inc. (DGPF)
managed by Delaware International Advisors, Ltd. The Trust, VIPF, VIPF II, T.
Rowe, and DGPF (the Funds) are open-end, diversified series management
investment companies registered under the 1940 Act.

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 Trust, VIPF, VIPFII, T. Rowe, or
DGPF. Net realized gains and losses on securities sold are determined on 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 Trust, VIPF, VIPFII, T. Rowe, or DGPF at net asset
value.

Federal Income Taxes - The Company is taxed as a "life insurance company"
under Subchapter L of the Internal Revenue Code and files a consolidated federal
income tax return. The Company anticipates no tax liability resulting from the
operations of VEL II. Therefore, no provision for income taxes has been charged
against VEL II.

NOTE 3 - INVESTMENTS

The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Trust, VIPF, VIPFII, T. Rowe, and DGPF at
December 31, 1995 were as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PORTFOLIO INFORMATION
SUB- INVESTMENT NUMBER OF AGGREGATE NET ASSET
ACCOUNT PORTFOLIO SHARES COST VALUE PER SHARE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allmerica Investment Trust:
1 Growth . . . . . . . . . . . . . . . . . . . . . . 91,508 $ 189,310 $ 2.176
2 Investment Grade Income. . . . . . . . . . . . . . 116,190 122,449 1.117
3 Money Market . . . . . . . . . . . . . . . . . . . 366,514 366,514 1.000
4 Equity Index . . . . . . . . . . . . . . . . . . . 58,878 97,254 1.827
5 Government Bond. . . . . . . . . . . . . . . . . . 174,387 176,817 1.062
6 Select Aggressive Growth . . . . . . . . . . . . . 232,180 356,111 1.848
7 Select Growth. . . . . . . . . . . . . . . . . . . 112,944 140,779 1.369
8 Select Growth and Income . . . . . . . . . . . . . 124,602 142,889 1.268
9 Small Cap Value. . . . . . . . . . . . . . . . . . 150,093 173,474 1.238
11 Select International Equity. . . . . . . . . . . . 137,278 146,669 1.136
12 Select Capital Appreciation. . . . . . . . . . . . 81,799 99,975 1.369

Fidelity Variable Insurance Products Fund:
102 High Income. . . . . . . . . . . . . . . . . . . . 19,327 212,855 12.050
103 Equity Income. . . . . . . . . . . . . . . . . . . 35,102 574,555 19.270
104 Growth . . . . . . . . . . . . . . . . . . . . . . 22,022 559,790 29.200
105 Overseas . . . . . . . . . . . . . . . . . . . . . 24,486 397,389 17.050

Fidelity Variable Insurance Products Fund II:
106 Asset Manager. . . . . . . . . . . . . . . . . . . 19,819 281,754 15.790
T. Rowe Price International Series, Inc.:
150 International Stock. . . . . . . . . . . . . . . . 2,317 25,102 11.260
Delaware Group Premium Fund:
207 International Equity . . . . . . . . . . . . . . . 12,524 151,953 13.110
</TABLE>

<PAGE>

VEL II ACCOUNT

NOTE 4 - RELATED PARTY TRANSACTIONS

On the date of issue and each monthly payment date thereafter, a monthly
charge is deducted from the policy value to compensate the Company for the
cost of insurance, which varies by policy, the cost of any additional
benefits provided by rider, and a monthly administrative charge of $5. The
policyowner may instruct the Company to deduct this monthly charge from a
specific Sub-Account, but if not so specified, it will be deducted on a
pro-rata basis of allocation which is the same proportion that the policy
value in the General Account of the Company and in each Sub- Account bear to
the total policy value. For the years ended December 31, 1995 and 1994, these
monthly deductions from Sub-Account policy values amounted to $465,796 and
$127,002, respectively.

The Company makes a charge of .90% per annum based on the average daily net
assets of each Sub-Account at each valuation date for mortality and expense
risks. The mortality and expense risk annual charge may be increased or
decreased by the Board of Directors of the Company once each year, subject to
compliance with applicable state and federal requirements, but the total charge
may not exceed 1.275% per annum. The Company also charges each Sub-Account .25%
per annum based on the average daily net assets of each Sub-Account for
administrative expenses. These charges are deducted in the daily computation of
unit values but paid to the Company on a monthly basis.

Allmerica Investments, Inc., (Allmerica Investments), a wholly-owned
subsidiary of the Company, is the principal underwriter and general distributor
of VEL II, and does not receive any compensation for sales of VEL II policies.
Commissions are paid to registered representatives of Allmerica Investments and
of certain independent broker-dealers by the Company. As the current series of
policies have a contingent deferred sales charge, no deduction is made for sales
charges at the time of the sale. For the years ended December 31, 1995 and 1994,
the Company received $14,169 and $8,186, respectively, for contingent deferred
sales charges applicable to VEL II.

NOTE 5 - DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Internal Revenue Code, a
variable life insurance contract, other than a contract issued in connection
with certain types of employee benefit plans, will not be treated as a variable
life insurance 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 Treasury.

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

NOTE 6 - PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of the Trust, VIPF, VIPFII, T.
Rowe,and DGPF shares by VEL II during the period ended December 31, 1995 were
as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SUB-
ACCOUNT INVESTMENT PORTFOLIO PURCHASES SALES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Allmerica Investment Trust:
1 Growth $ 199,129 $ 52,390
2 Investment Grade Income 88,966 36,734
3 Money Market 911,046 862,531
4 Equity Index 88,445 18,477
5 Government Bond 57,810 37,987
6 Select Aggressive Growth 246,641 27,906
7 Select Growth 115,598 13,509
8 Select Growth and Income 92,485 5,512
9 Small Cap Value 134,301 49,231
11 Select International Equity 139,264 7,862
12 Select Capital Appreciation 101,670 1,864

Fidelity Variable Insurance Products Fund:
102 High Income 173,612 57,215
103 Equity Income 409,231 28,867
104 Growth 520,953 192,969
105 Overseas. 475,112 301,660

Fidelity Variable Insurance Products Fund II:
106 Asset Manager 180,620 94,384

T. Rowe Price International Series, Inc.:
150 International Stock 25,726 631

Delaware Group Premium Fund:
207 International Equity 106,453 11,638
----------- -----------
Totals $ 4,067,062 $ 1,801,367
----------- -----------
----------- -----------
</TABLE>

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of First Allmerica
Financial Life Insurance Company and Policyowners
of VEL II Account of First Allmerica Financial Life Insurance 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
(1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 12, 102, 103, 104, 105, 106, 150, and 207)
constituting the VEL II Account of First Allmerica Financial Life Insurance
Company at December 31, 1995, the results of each of their operations and the
changes in each of their net assets for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of First Allmerica Financial Life Insurance Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of investments owned at December 31, 1995 by
correspondence with the Funds, provide a reasonable basis for the opinion
expressed above.

PRICE WATERHOUSE LLP
Boston, Massachusetts

February 23, 1996

<PAGE>

Part II

UNDERTAKING TO FILE REPORTS
---------------------------

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

RULE 484 UNDERTAKING
--------------------

To the fullest extent permissible under Massachusetts General Laws, no director
shall be personally liable to the Company or any policy holder for monetary
damages for any breach of fiduciary duty as a director, notwithstanding any
provisions of law to the contrary; provided, however, that this provision shall
not eliminate or limit the liability of a director;

1. for any breach of the director's duty of loyalty to the Company or its
policy holders;

2. for acts or omissions not in good faith, or which involve intentional
misconduct or a knowing violation of law;

3. for liability, if any, imposed on directors of mutual insurance companies
pursuant to M.G.L.A. c. 156B Section 61 or M.G.L.A. c. 156B Section 62;

4. for any transactions from which the director derived an improper personal
benefit.

RULE 6E-3(T) REPRESENTATIONS, DESCRIPTIONS AND UNDERTAKINGS
-----------------------------------------------------------

Registrant makes the following representations pursuant to the requirements of
Rule 6e-3(T) under the Investment Company Act of 1940:

A. Risk Charge

Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(1), Registrant represents that Rule 6e-
3(T)(b)(13)(iii)(F) has been relied upon in deducting charges for mortality
expense and risks assumed by First Allmerica Financial Life Insurance Company
(the "Company").

Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(2), Registrant represents that the
mortality and expense risk charge is within the range of industry practice for
comparable flexible premium variable life insurance contracts. The methodology
used to support this representation is based upon an analysis of the mortality
and expense risk charges adopted under other flexible premium variable life
insurance contracts. Registrant undertakes to keep and make available to the
Commission on request the documents used to support the foregoing
representation.

<PAGE>

B. Distribution Costs

Pursuant to Rule 6e-3(T)(b)(13)(iii)(F)(4)(ii)(A), Registrant represents that
the Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the Registrant will benefit the Registrant
and contract holders and will keep and make available to the Commission on
request a memorandum setting forth the basis for this representation. Pursuant
to Section 6e-3(T)(b)(13)(iii)(F)(4)(ii)(B)(2), Registrant also represents that
it will invest only in management investment companies which have undertaken to
have a board of directors, a majority of whom are not interested persons of the
company, formulate and approve any plan under Rule 12b-1 under the Investment
Company Act of 1940 to finance distribution expenses.

UNDERTAKINGS CONCERNING MORTALITY AND EXPENSE RISK CHARGE
---------------------------------------------------------

The flexible premium variable life policies offered by this registration
statement provide for a mortality and expense risk charge of 0.65%, on an annual
basis, of the daily net asset value of each Sub-Account of the VEL II Account.
The Company acknowledges that any mortality and expense risk charge above 0.90%
is currently considered above the range of industry practice. If the Company
proposes to increase the charges above the range of industry practice, the
Company hereby undertakes to file an exemption request with the Securities and
Exchange Commission ("Commission") in which it would demonstrate that the
proposed charge is reasonable in relation to the risks assumed under the Policy.

This undertaking is given subject to the applicability of future federal
legislation or Commission rules or regulation which might permit an increase in
the mortality and expense risk charge beyond the range of industry practice,
without submitting an exemption application and/or making the demonstration
described above. In such case, in lieu of the undertaking described above, the
Company hereby undertakes to comply with the provisions of such legislation,
rules, or regulations in implementing any increase in the mortality and expense
risk charge.

CONTENTS OF THE REGISTRATION STATEMENT
--------------------------------------

This registration statement comprises the following papers and documents:

The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of ____ pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484 under the Securities Act of 1933.
Representatives, descriptions and undertaking pursuant to Rule 6e-
3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940 (the "1940
Act").
The signatures.

<PAGE>

Written consents of the following persons:

1. Price Waterhouse

2. Actuarial Consent

3. Opinion of Counsel

4. Consent of Newly elected Directors

The following exhibits:

1. Exhibit 1

(Exhibits required by paragraph A of the instructions to Form N-8B-2)

(1) Certified copy of Resolutions of the Board of
Directors of the Company of August 20, 1991
authorizing the VEL II Account was previously
filed on November 1, 1993 and is herein
incorporated by reference.

(2) Not Applicable.

(3) (a) Form of Underwriting and Administrative Services Agreement
between the Company and Allmerica Investments, Inc. was
previously filed on November 1, 1993 and is herein
incorporated by reference.

(b) Sales Agreement between Allmerica
Investments, Inc. and G.R. Phelps & Co.,
Inc. was previously filed on February
27, 1995 and is herein incorporated by
reference.

(4) Not Applicable.

(5) Forms of Policy and Policy riders were previously
filed on November 1, 1993 and is herein
incorporated by reference.

(6) (a) Company's Restated Articles or Organization and
Bylaws were previously filed in Post-effective
Amendment No.___ and are herein incorporated by
reference.

(b) Revised Bylaws

(7) Not Applicable.

(8) (a) Form of Participation Agreement with
Allmerica Investment Trust was
previously filed by the Company on May
11, 1992 in Registration Statement No.
33-47858, and is incorporated herein by
reference.

(b) Form of Participation Agreement with
Variable Insurance Products Fund was
previously filed on June 3, 1987 in
Registration Statement No. 33-14672 and
is incorporated herein by reference.

(c) Form of Participation Agreement with Delaware Group Premium
Fund, Inc. was previously filed on June 3, 1987 in
Registration Statement No. 33-14672 and is incorporated
herein by reference.

(d) Form of Participation Agreement with T. Rowe Price
International Series, Inc. was previously filed on May 1,
1995 and is incorporated herein by reference.

(e) Fidelity Services Agreement

(9) Not Applicable.

(10) Form of Application was previously filed on
November 1, 1993 and is herein incorporated by
reference..

<PAGE>

2. Form of Policy and Policy riders are included in Exhibit 1 above.

3. Opinion of Counsel.

4. Not Applicable.

5. Not Applicable.

6. Actuarial Consent.

7. Procedures Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii)
under the 1940 Act which includes conversion procedures
pursuant to Rule 6e-3(T)(b)(13)(v)(B) was previously filed
on November 1, 1993 and is incorporated herein by reference.

8. Consent of Independent Accountants.

9. AUV Calculation Services Agreement with The Shareholder Services Group
dated March 31, 1995 was previously filed on May 1, 1995 and is
incorporated herein by reference.

10. Consent of newly elected Directors.

15. Power of Attorney

27. Financial Data Schedules.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this 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
26 th.day of April, 1996.

First Allmerica Financial Life Insurance Company
VEL II Account
(Registrant)

By: /s/ Richard J. Baker
--------------------
Richard J. Baker
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.

Signature Title Date
- --------- ----- ----

/s/ John F. O'Brien Director, President and April 26,1996
- ------------------- Chief Executive Officer
John F. O'Brien

/s/ Eric A. Simonsen Vice President and April 26,1996
- -------------------- Chief Financial Officer
Eric A. Simonsen

/s/ Mark R. Colborn Vice President and April 26,1996
- ------------------- Controller
Mark R. Colborn

Michael P. Angelini, Esq.
Mr. David A. Barrett
Ms. Gail L. Harrison
Mr. J. Terrence Murray A majority of the Directors
Mr. Guy W. Nichols
Dr. John L. Sprague
Robert G. Stachler, Esq.
Mr. Herbert M. Varnum
Richard Manning Wall, Esq.

Richard J. Baker, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named Directors of First Allmerica Financial Life
Insurance Company pursuant to the Powers of Attorney duly executed by such
persons and attached hereto as Exhibit ________.
/s/ Richard J. Baker
- --------------------
Richard J. Baker
Attorney-In-Fact

<PAGE>

EXHIBIT TABLE
-------------

Exhibit 1(6)(b) Company's Restated Bylaws

Exhibit 1(8)(e) Fidelity Services Agreement

Exhibit 3 Opinion of Counsel

Exhibit 6 Actuarial Consent

Exhibit 8 Consent of Independent Accountants

Exhibit 10 Consent of Newly Elected Directors

Exhibit 15 Power of Attorney

Exhibit 27 Financial Data Schedules

<PAGE>

REVISED BYLAWS
OF
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY

Section 1. ARTICLES OF ORGANIZATION

The name and purposes of the corporation shall be as set forth in the Articles
of Organization. These Bylaws, the powers of the corporation and of its
Directors and stockholders, or of any class of stockholders if there shall be
more than one class of stock, and all matters concerning the conduct and
regulation of the business and affairs of the corporation shall be subject to
such provisions in regard thereto, if any, as are set forth in the Articles of
Organization as from time to time in effect.

Section 2. STOCKHOLDERS

2.1. ANNUAL MEETING. The annual meeting of stockholders shall be held at 10:00
A.M. on the third Tuesday in March, if not a legal holiday, and if a legal
holiday, then on the next business day, at the principal offices of the
corporation in Massachusetts, or at such other time and place as may be
determined from time to time by the Board of Directors. In the event an Annual
Meeting has not been held on the date fixed by these Bylaws or established by
the Board of Directors, a special meeting in lieu of the Annual Meeting may be
held with all the force and effect of an Annual Meeting. The purposes for which
an annual meeting is to be held, in addition to those prescribed by law or by
the Articles of Organization, may be specified by the President or by the
Directors.

2.2. SPECIAL MEETINGS. A special meeting of the stockholders may be called at
any time by the President or by the Directors. Each call of a meeting shall
state the place, date, hour and purposes of the meeting.

2.3. NOTICE OF MEETINGS. A written notice of each meeting of stockholders,
stating the place, date and hour and the purposes of the meeting, shall be given
at least seven days before the meeting to each stockholder entitled to vote at
the meeting and to each stockholder who, by law, by the Articles of Organization
or by these Bylaws, is entitled to notice, by leaving such notice with him or at
his residence or usual place of business, or by mailing it, postage prepaid,
addressed to such stockholder at his address

<PAGE>

as it appears in the records of the corporation. Such notice shall be given by
the Secretary or an Assistant Secretary or by an officer designated by the
Directors. Whenever notice of a meeting is required to be given to a
stockholder under any provision of the Business Corporation or Insurance Law of
the Commonwealth of Massachusetts or of the Articles of Organization or these
Bylaws, a written waiver thereof, executed before or after the meeting by such
stockholder or his attorney thereunto authorized and filed with the records of
the meeting, or the execution by the stockholder of a written consent, shall be
deemed equivalent to such notice. Attendance at any meeting in person or by
proxy without protesting prior thereto or at its commencement shall constitute
waiver of notice, and in such case written waiver of notice need not be
executed.

2.4. QUORUM OF STOCKHOLDERS. At any meeting of the stockholders, a quorum as
to any matter shall consist of a majority of the votes entitled to be cast on
the matter, except when a larger quorum is required by law, by the Articles of
Organization or by these Bylaws. Any meeting may be adjourned from time to time
by a majority of the votes properly cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.

2.5. ACTION BY VOTE. When a quorum is present at any meeting, a plurality of
the votes properly cast for election to any office shall elect to such office,
and a majority of the votes properly cast upon any question other than an
election to an office shall decide the question, except when a larger vote is
required by law or by the Articles of Organization. Stockholders entitled to
vote shall have one vote for each share of stock entitled to vote held by them
of record according to the records of the corporation, unless otherwise provided
by Articles of Organization. No ballot shall be required for any election
unless requested by a stockholder present or represented at the meeting and
entitled to vote in the election.

2.6. ACTION BY CONSENT. Any action required or permitted to be taken at any
meeting of the stockholders may be taken without a meeting if all stockholders
entitled to vote on the matter consent to the action in writing and the written
consents are filed with the records of the meetings of stockholders. Such
consents shall

<PAGE>

be treated for all purposes as a vote at a meeting.

2.7. PROXIES. To the extent permitted by law, stockholders entitled to vote
may vote either in person or by proxy. Except to the extent permitted by law,
no proxy dated more than six months before the meeting named therein shall be
valid. Unless otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such meeting but shall
not be valid after the final adjournment of such meeting.

Section 3. BOARD OF DIRECTORS

3.1. NUMBER. The number of Directors shall be not less than seven nor more
than fifteen. Within these limits, the number of Directors shall be determined
from time to time by resolution of the stockholders or the Board of Directors.
The number of Directors may be increased at any time or from time to time either
by the stockholders or by the Directors by vote of majority of the Directors
then in office. The number of Directors may be decreased to any number
permitted by law at any time or from time to time either by the stockholders or
by the Directors by a vote of a majority of Directors then in office. No
Director need be a stockholder.

3.2. TENURE. Except as otherwise provided by law or by the Articles of
Organization, each Director shall hold office until the next annual meeting of
the stockholders and until his successor is duly elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified. Notwithstanding the
term of office to which a Director may be elected, such term shall be subject to
reduction by the retirement policy adopted from time to time by the Board of
Directors. Any vacancy in the Board of Directors between annual meetings of
stockholders, including a vacancy resulting from the enlargement of the Board,
may be filled by the Directors by vote of a majority of the Directors then in
office.

3.3. POWERS. Except as reserved to the stockholders by law or by the Articles
of Organization, the business of the corporation shall be managed by the
Directors who shall have and may exercise all the powers of the corporation. In
particular, and without limiting the generality of the foregoing, the Directors
may at any time and from time to time issue all or any part of the unissued
capital stock of

<PAGE>

the corporation authorized under the Articles of Organization and may determine,
subject to any requirements of law, the consideration for which stock is to be
issued and the manner of allocating such consideration between capital and
surplus.

3.4. COMMITTEES. The Directors may, by vote of a majority of the Directors
then in office, elect from their number an executive committee and other
committees and delegate to any such committee or committees some or all of the
powers of the Directors except those which by law, by the Articles of
Organization or by these Bylaws they are prohibited from delegating. Except as
the Directors may otherwise determine, any such committee may make rules for the
conduct of its business.

3.5. REGULAR MEETINGS. Regular meetings of the Directors may be held without
call or notice at such places and at such times as the Directors may from time
to time determine, provided that reasonable notice of the first regular meeting
following any such determination shall be given to absent Directors. A regular
meeting of the Directors may be held without call or notice immediately after
and at the same place as the annual meeting of the stockholders.

3.6. SPECIAL MEETINGS. Special meetings of the Directors may be held at any
time and at any place designated in the call of the meeting. Notice shall be
sent to a Director by mail at least forty-eight hours or by telegram or other
forms of telecommunication at least twenty-four hours before the meeting,
addressed to the Director at the Director's usual or last known business or
residence address, or by person or by telephone at least twenty-four hours
before the meeting. Notice of a meeting need not be given to any Director if a
written waiver of notice, executed by the Director before or after the meeting,
is filed with the records of the meeting, or to any Director who attends the
meeting unless attendance is for the purpose of objecting to the transaction of
business. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.

3.7. QUORUM. At any meeting of the Directors a majority of the Directors then
in office shall constitute a quorum; provided, however, that at least five
directors must be present to constitute a quorum. Any meeting may be adjourned
by a majority of the votes cast upon the question, whether or not a quorum is
present, and the

<PAGE>

meeting may be held as adjourned without further notice. When a quorum is
present at any meeting, a majority of the Directors present may take any action,
except when a larger vote is required by law or by the Articles of Organization.

3.8. ACTION BY CONSENT. Unless the Articles of Organization otherwise provide,
any action required or permitted to be taken at any meeting of the Directors may
be taken without a meeting if all the Directors consent to the action in writing
and the written consents are filed with the records of the meetings of the
Directors. Such consents shall be treated for all purposes as a vote taken at a
meeting.

3.9. PRESENCE THROUGH COMMUNICATIONS EQUIPMENT. Unless otherwise provided by
law or the Articles of Organization, members of the Board of Directors may
participate in a meeting of such Board by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.

Section 4. OFFICERS AND AGENTS

4.1. ENUMERATION; QUALIFICATION. The officers of the corporation shall consist
of a Chairman of the Board (if such officer be deemed desirable), a President,
Vice-Presidents (including such Executive Vice Presidents, Senior Vice-
Presidents, Vice Presidents, Second Vice Presidents, and Assistant Vice
Presidents as the Directors may elect), a Treasurer, a Secretary, Assistant
Secretaries and Assistant Treasurers, and such other officers as the Directors
may from time to time in their discretion elect or appoint. The corporation may
also have such agents, if any, as the Directors may from time to time in their
discretion appoint. Any officer may be, but none need be, a Director or
stockholder. Any two or more offices may be held by the same person; provided,
however, that the same person shall not serve as President and as Secretary of
the corporation. Any officer may be required by the Directors to give bond for
the faithful performance of such officer's duties to the corporation in such
amount and with such sureties as the Directors may determine.

<PAGE>

4.2. ELECTION AND TENURE. Officers may be elected by the Board of Directors at
the regular meeting following the annual stockholders meeting, or at any
Directors meeting. All officers shall hold office until the next regular
election of officers following the annual stockholders meeting, and until their
successors are elected and qualified, or in each case until such officer sooner
dies, resigns, is removed or becomes disqualified. The Directors may in their
discretion at any time remove any officer. Vacancies in any office may be
filled by the Directors.

4.3 CHAIRMAN OF THE BOARD. If a Chairman of the Board of Directors is elected,
the Chairman of the Board shall have the duties and powers specified in these
Bylaws and shall have such other duties and powers as may be determined by the
Directors. Unless the Board of Directors otherwise specifies, the Chairman of
the Board shall preside, or designate the person who shall preside, at all
meetings of the stockholders and of the Board of Directors.

4.4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the corporation
shall be the Chairman of the Board, if any, the President, or such other officer
as may be designated by the Directors and shall, subject to the control of the
Directors, have general charge and supervision of the business of the
corporation. If no such designation is made, the President shall be the Chief
Executive Officer. If there is no Chairman of the Board, the Chief Executive
Officer shall preside, or designate the person who shall preside, at all
meetings of the stockholders and of the Board of Directors, unless the Board of
Directors otherwise specifies.

4.5 PRESIDENT AND VICE PRESIDENTS. The President and Vice Presidents (including
Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Second Vice
Presidents, and Assistant Vice-Presidents, if any) shall have the duties and
powers specified in these Bylaws and such additional duties and powers as shall
be designated from time to time by the Directors.

4.6. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall be in charge of
the funds, securities and valuable papers of the corporation, shall collect all
proceeds from investments which the corporation's records establish to be due,
shall have the duties and powers specified in these Bylaws, and shall have such
additional duties and powers as may be designated from time to time by the
Directors.

<PAGE>

The Treasurer or an Assistant Treasurer shall have authority to transfer
securities; to execute releases, extensions, partial releases, and assignments
without recourse of mortgages; to execute deeds and other instruments or
documents on behalf of the Corporation, and whenever necessary to affix the seal
of the Corporation to the same; and shall have power to vote, on behalf of the
Corporation, in any case where the Corporation, as holder of any security, is
entitled to vote.

If the Treasurer is absent or unable to discharge the duties of office, an
Assistant Treasurer may act. Any Assistant Treasurers shall have such additional
duties and powers as shall be designated from time to time by the Directors.

4.7. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall keep a record of
the meetings of the corporation, the proceedings of the Board of Directors, and
any Committees of the Board. The Secretary shall keep such other records as may
be required by the Board. The Secretary shall have custody of the seal of the
corporation and the Secretary or an Assistant Secretary may, whenever required,
affix the seal of the corporation to legal documents and when affixed, may
attest such documents. The Secretary shall perform all acts usually incident to
the office of secretary, and such other duties as are assigned by the Chief
Executive Officer or the Board of Directors.

If the Secretary is absent or unable to discharge the duties of office, an
Assistant Secretary may act. Any Assistant Secretaries shall have such
additional duties and powers as shall be designated from time to time by the
Directors.

4.8. OTHER POWERS. The Chief Executive Officer, Chairman of the Board,
President or any Vice Presidents (including any Executive Vice President, Senior
Vice President, Second Vice President or Assistant Vice President), and such
other employees of the Corporation specifically authorized by the Chief
Executive Officer shall have authority to transfer securities, to execute
releases, extensions, partial releases, and assignments without recourse of
mortgages, and to execute deeds and other instruments or documents on behalf of
the Corporation, and whenever necessary to affix the seal of the Corporation to
the same. The Chief Executive Officer, Chairman of the Board, the President,
any Vice President (including any Executive Vice President, Senior Vice
President, Vice

<PAGE>

President, Second Vice President, or Assistant Vice President,) or the
Treasurer may, whenever necessary, delegate authority to perform any of the acts
referred to in this paragraph to any person pursuant to a special power of
attorney.

Officers shall have, in addition to the duties and powers herein set forth, such
duties and powers as are commonly incident to their respective offices and such
duties and powers as the Directors may lawfully designate.

Section 5. RESIGNATIONS AND REMOVALS

5.1. RESIGNATIONS. Any Director or officer may resign at any time by delivering
his resignation in writing to the Chairman of the Board, if any, the President,
or the Secretary. In addition, a Director may resign by delivering his
resignation in writing to a meeting of the Directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.

5.2 REMOVALS. A Director may be removed from office (a) with or without
cause by the vote of the holders of a majority of the shares issued and
outstanding and entitled to vote in the election of Directors, provided that
the Directors of a class elected by a particular class of stockholders may be
removed only by the vote of the holders of a majority of the shares of such
class, or (b) with cause by the vote of a majority of the Directors then in
office. A Director may be removed for cause only after reasonable notice and
opportunity to be heard before the body proposing to remove him. The Directors
may remove any officer elected by them with or without cause by the vote of a
majority of the Directors then in office. No Director or officer removed
shall have any right to any compensation as Director or officer for any period
following removal, or any right to damages on account of such removal, unless
the body acting on the removal shall in their or its discretion provide for
compensation.

Section 6. CAPITAL STOCK

6.1. NUMBER AND PAR VALUE. The total number of shares and the par value, if
any, of each class of stock which the corporation is authorized to issue shall
be as stated in the Articles of Organization.

<PAGE>

6.2. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED SHARES. The Board
of Directors may provide by resolution that some or all of any or all classes
and series of shares shall be uncertificated shares. Unless such resolution has
been adopted, a stockholder shall be entitled to a certificate stating the
number and the class and the designation of the series, if any, of the shares
held by him, in such form as shall, in conformity to law, be prescribed from
time to time by the Directors. Such certificate shall be signed by the Chairman
of the Board, if any, the President or a Vice President (including any Executive
Vice President, Senior Vice President, Vice President, Second Vice President, or
Assistant Vice President) and by the Treasurer or an Assistant Treasurer. Such
signatures may be facsimiles if the certificate is signed by a transfer agent,
or by a registrar, other than a Director, officer or employee of the
corporation. In case any officer who has signed or whose facsimile signature
has been placed on such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the time of its issue.

6.3. LOSS OF CERTIFICATES. In the case of the alleged loss or destruction or
the mutilation of a certificate of stock, a duplicate certificate may be issued
in place thereof, provided that such lost , destroyed, or mutilated certificate
is first canceled on the books of the corporation, and upon such other
conditions as the Directors may prescribe.

Section 7. TRANSFER OF SHARES OF STOCK

7.1. TRANSFER ON BOOKS. Subject to the restrictions, if any, stated or noted
on the stock certificates, shares of stock may be transferred on the books of
the corporation by the surrender to the corporation or its transfer agent of the
certificate therefor, properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the Directors or the
transfer agent of the corporation may reasonably require. Except as may be
otherwise required by law, by the Articles or Organization or by these By-laws,
the corporation shall be entitled to treat the record holder of stock as shown
on its books as the owner of such stock for all purposes, including the payment
of dividends and the right to receive notice and to

<PAGE>

vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these Bylaws.

It shall be the duty of each stockholder to notify the corporation of his post
office address.

7.2. RECORD DATE AND CLOSING TRANSFER BOOKS. The Directors may fix in advance
a time, which shall not be more than sixty days before the date of any meeting
of stockholders or the date for the payment of any dividend or making of any
distribution to stockholders, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting and any
adjournment thereof or the right to receive such dividend, and in such case only
stockholders of record on such record date shall have such right,
notwithstanding any transfer of stock on the books of the corporation after the
record date; or without fixing such record date the Directors may for any of
such purposes close the transfer books for all or any part of such period. If
no record date is fixed and the transfer books are not closed:

(a) The record date for determining stockholders having the right to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the date next preceding the day on which notice is given.

(b) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
acts with respect thereto.

Section 8. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall, to the fullest extent legally permissible, indemnify and
save harmless each present and former Director, officer, and Home Office
employee against all liabilities and reasonable expenses imposed upon or
incurred by any such person as a result of a final judgment in, or as a result
of a judicially approved settlement of, any action, suit or proceeding brought
by reason of being or having been a Director, officer or Home Office employee of
the corporation or a Director, officer, trustee, employee or fiduciary of any
other corporation, trust, partnership, association or other entity, or by reason
of serving or having
10

<PAGE>

served as a fiduciary or in any other capacity with respect to any employee
benefit plan, at the request of the corporation.

To the fullest extent legally permissible, the Directors may authorize the
corporation to indemnify and save harmless any person for which indemnification
is provided in these Bylaws or in their discretion any other person acting on
behalf of the corporation, in connection with the defense or disposition of any
claim, action, suit or other proceeding in which such person may be involved or
may be threatened because of any action or omission or alleged action or
omission (including those antedating the adoption of these Bylaws), whether or
not the actual or threatened claim, action, suit or proceeding has resulted in a
final judgment or in a judicially approved settlement. The corporation may, in
advance of final disposition of any such claim, action, suit or proceeding, pay
incurred expenses upon receipt of an undertaking by the person indemnified to
repay such payment if it is determined that indemnification is not authorized
under this section, which undertaking may be accepted without reference to the
financial ability of such person to make repayment. The Directors shall have the
power to authorize that insurance be purchased and maintained against any of the
foregoing liabilities and expenses on behalf of any or all of the foregoing
persons, whether or not the corporation would have the power to indemnify them
against such liabilities and expenses.

Notwithstanding the foregoing, no indemnification shall be provided for any
person with respect to:

(a) any matter as to which such person shall have been adjudicated not to
have acted in good faith in the reasonable belief that the action was in
the best interests of the corporation or, to the extent such matter relates
to service with respect to an employee benefit plan, in the best interests
of the participants or beneficiaries of such employee benefit plan;

(b) any matter as to which such person shall agree or be ordered by any
court of competent jurisdiction to make payment to the corporation;

(c) any matter as to which the corporation shall be prohibited by law or by
order of any court of competent jurisdiction from

<PAGE>

providing indemnification; or

(d) any matter as to which such person shall have been determined by a
majority of the Board of Directors not to be entitled to indemnification
under this section, provided that there has been obtained an opinion in
writing of legal counsel to the effect that, with respect to the matter in
questions, such person had not acted in good faith in the reasonable belief
that the action was in the best interests of the corporation or, to the
extent such matter relates to service with respect to an employee benefit
plan, in the best interests of the participants or beneficiaries of such
employee benefit plan.

No matter disposed of by settlement, compromise, the entry of a consent decree
or the entry of any plea in a criminal proceeding, shall of itself be deemed an
adjudication of not having acted in the reasonable belief that the action taken
or omitted was in the best interest of the corporation.

As used in this section, the terms "Director," "officer," and "Home Office
employee" includes the person's heirs, executors and administrators. "Home
Office employee" means any employee of the corporation, other than an employee
within the class of employees eligible to participate in a qualified retirement
plan maintained by the corporation for its individual insurance sales force,
including, but not limited, to career agents, field associate middle managers
and general agents. "Expenses" include but are not limited to amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees.

The rights of indemnification contained in this section shall not be exclusive
of or affect any other rights to which any Director, officer, or Home Office
employee may be entitled by contract or otherwise under law.

12
<PAGE>

Section 9. CORPORATE SEAL

The seal of the corporation shall, subject to alteration by the Directors,
consist of a flat-faced circular die with the word "Massachusetts", together
with the name of the corporation and the year of its organization, cut or
engraved thereon.

Section 10. FISCAL YEAR

The fiscal year of the corporation shall end on December 31.

Section 11. AMENDMENTS

These Bylaws may be altered, amended or repealed at any annual or special
meeting of the stockholders or by vote of a majority of the Directors then in
office, except that the Directors shall not take any action which provides for
indemnification of Directors nor any action to amend this Section 11.

<PAGE>

SERVICE AGREEMENT

This Agreement is entered into and effective as of the 1st day of November,
1995, by and between FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY
("FIIOC") and ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
("Company").

WHEREAS, FIIOC provides transfer agency and other services to Fidelity's
Variable Insurance Products Fund and Variable Insurance Products Fund II
(collectively "Funds"); and

WHEREAS, the services provided by FIIOC on behalf of the Funds include
responding to inquiries about the Funds, including the provision of information
about the Funds' investment objectives, investment policies, portfolio holdings,
etc.; and

WHEREAS, Company holds shares of the Funds in order to fund certain
variable annuity contracts, group annuity contracts, and/or variable life
insurance policies, the beneficial interests in which are held by individuals,
plan trustees, or others who look to Company to provide information about the
Funds similar to the information provided by FIIOC; and

WHEREAS, the Company and one or both of the Funds have entered into one or
more Participation Agreements, under which the Company agrees not to provide
information about the Funds except for information provided by the Funds or
their designees; and

WHEREAS, FIIOC and Company desire that Company be able to respond to
inquiries about the Funds from individual variable annuity owners, participants
in group annuity contracts issued by the Company, and owners and participants
under variable life insurance policies issued by the Company, and prospective
customers for any of the above; and

WHEREAS, FIIOC and Company recognize that Company's efforts in responding
to customer inquiries will reduce the burden that such inquiries would place on
FIIOC should such inquiries be directed to FIIOC.

NOW, THEREFORE, the parties do agree as follows:

1. INFORMATION TO BE PROVIDED TO COMPANY. FIIOC agrees to provide to
Company, on a periodic basis, directly or through a designee, information about
the Funds' investment objectives, investment policies, portfolio holdings,
performance, etc. The content and format of such information shall be as FIIOC,
in its sole discretion, shall choose. FIIOC may change the format and/or
content of such informational reports, and the frequency with which such
information is provided. For purposes of Section 4.2 of each of the Company's
Participation Agreement(s) with the Funds, FIIOC represents that it is the
designee of the Funds, and Company may therefore use the information provided by
FIIOC without seeking additional permission from the Funds.

2. USE OF INFORMATION BY COMPANY. Company may use the information
provided by FIIOC in communications to individuals, plan trustees, or others
who have legal title or beneficial interest in the annuity or life insurance
products issued by Company, and to prospective purchasers of such products or
beneficial interests thereunder. If such information is contained as part of
larger pieces of sales literature, advertising, etc., such pieces shall be
furnished for review to the Funds in accordance with the terms of the Company's
Participation Agreements with the Funds. Nothing herein shall give the Company
the right to expand upon, reformat or otherwise alter the information provided
by FIIOC. Company acknowledges that the information provided it by FIIOC may
need to be supplemented with additional qualifying information, regulatory
disclaimers, or other information before it may be conveyed to persons outside
the Company.

1
<PAGE>

3. COMPENSATION TO COMPANY. In recognition of the fact that Company will
respond to inquiries that otherwise would be handled by FIIOC, FIIOC agrees to
pay Company a quarterly fee computed as follows:

At the close of each calendar quarter, FIIOC will determine the Average
Daily Assets held in the Funds by the Company. Average Daily Assets shall be
the sum of the daily assets for each calendar day in the quarter divided by the
number of calendar days in the quarter. The Average Daily Assets shall be
multiplied by 0.0002 (2 basis points) and that sum shall be divided by four.
The resulting number shall be the quarterly fee for that quarter, which shall be
paid to Company during the following month.

Should the Participation Agreement(s) between Company and the Fund(s) be
terminated effective before the last day of a quarter, Company shall be entitled
to a fee for that portion of the quarter during which the Participation
Agreement was still in effect, unless such termination is due to misconduct on
the part of the Company. For such a stub quarter, Average Daily Assets shall be
the sum of the daily assets for each calendar day in the quarter through and
including the date of termination of the Participation Agreement(s), divided by
the number of calendar days in that quarter for which the Participation
Agreement was in effect. Such Average Daily Assets shall be multiplied by
0.0002 (2 basis points) and that number shall be multiplied by the number of
days in such quarter that the Participation Agreement was in effect, then
divided by three hundred sixty-five. The resulting number shall be the
quarterly fee for the stub quarter, which shall be paid to Company during the
following month.

4. TERMINATION. This Agreement may be terminated by Company at any time
upon written notice to FIIOC. FIIOC may terminate this Agreement at any time
upon ninety (90) days' written notice to Company. FIIOC may terminate this
Agreement immediately upon written notice to Company (1) if required by any
applicable law or regulation, (2) if so required by action of the Fund(s) Board
of Trustees, or (3) if Company engages in any material breach of this Agreement.
This Agreement shall terminate immediately and automatically upon the
termination of Company's Participation Agreement(s) with the Funds, and in such
event no notice need be given hereunder.

5. INDEMNIFICATION. Company agrees to indemnify and hold harmless FIIOC
for any misuse by Company, its affiliates, its agents, its brokers, and any
persons controlling Company, under common control with Company, or controlled by
Company, of the information provided by FIIOC under this Agreement.

6. APPLICABLE LAW. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.

7. ASSIGNMENT. This Agreement may not be assigned, except that it shall
be assigned automatically to any successor to FIIOC as the Funds' transfer
agent, and any such successor shall be bound by the terms of this Agreement.

IN WITNESS WHEREOF, the parties have set their hands as of the date first
written above.

FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY

By: /s/ Virginia Meany
--------------------------------
Virginia Meany
Senior Vice President

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

By: /s/ Richard M. Reilly
--------------------------------
Name: Richard M. Reilly
--------------------------------
Title: President
-------------------------------

<PAGE>

April 17, 1995

First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester MA 01653

Gentlemen:

In my capacity as Counsel of First Allmerica Financial Life Insurance Company
(the "Company"), I have participated in the preparation of the Post-Effective
Amendment to the Registration Statement for the VEL II Account on Form S-6 under
the Securities Act of 1933 with respect to the Company's individual flexible
premium variable life insurance policies.

I am of the following opinion:

1. VEL II Account is a separate account of the Company validly existing
pursuant to the Massachusetts Insurance Code and the regulations issued
thereunder.

2. The assets held in the VEL II Account equal to the reserves in other policy
liabilities of the Policies which are supported by the VEL II Account are
not chargeable with liabilities arising out of any other business the
Company may conduct.

3. The individual flexible premium variable life insurance policies, when
issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable local law, will be legal and
binding obligations of the Company in accordance with their terms and when
sold will be legally issued, fully paid and non-assessable.

In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.

I hereby consent to the filing of this opinion as an exhibit to the Post-
Effective Amendment to the Registration Statement of the VEL II Account on Form
S-6 filed under the Securities Act of 1933.

Very truly yours,

/s/ Sheila B. St. Hilaire
Sheila B. St. Hilaire
Counsel

<PAGE>

April 22, 1996

First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester MA 01653

Gentlemen:

This opinion is furnished in connection with the filing by First Allmerica
Financial Life Insurance Company of an amendment to the Registration Statement
on Form S-6 of its flexible premium variable life insurance policies
("Policies") allocated to the VEL II Account under the Securities Act of 1933.
The prospectus included in the amendment to the Registration Statement describes
the Policies. I am familiar with and have provided actuarial advice concerning
the preparation of the amendment to the Registration Statement, including
exhibits.

In my professional opinion, the illustration of death benefits and cash values
included in Appendix C of the prospectus, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. The rate
structure of the Policies has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Policy for a person age 30 or a person
age 45 than to prospective purchasers of Policies for people at other ages or
underwriting classes.

I hereby consent to the use of this opinion as an exhibit to the amendment to
the Registration Statement.

Sincerely,

/s/William H. Mawdsley
William H. Mawdsley, FSA, MAAA
Vice President and Actuary

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 4 to the Registration Statement on Form S-6 of
our report dated February 5, 1996, relating to the consolidated financial
statements of First Allmerica Financial Life Insurance Company and our report
dated February 23, 1996, relating to the financial statements of the VEL II
Account of First Allmerica Financial Life Insurance Company, both of which
appear in such Prospectus. We also consent to the reference to us under the
heading "Independent Accountants" in such Prospectus.

/s/ Price Waterhouse LLP

Price Waterhouse LLP
Boston, Massachusetts

April 25, 1996

<PAGE>

FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Consent of Newly Elected Director

Having been duly elected as a Director of First Allmerica Financial Life
Insurance Company ("Company"), effective April 30, 1996, each of the
undersigned hereby consents to being named as a Director of the Company in such
post-effective amendments to Registration Statements for the Company's variable
annuity and variable life contracts as will be filed with the Securities and
Exchange Commission on or before April 30, 1996, with an effective date on or
after April 30, 1996, pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940.

Signed this 25th day of April, 1996

/s/ Bruce C. Anderson /s/ Theodore J. Rupley
- ------------------------------ ------------------------------
Bruce C. Anderson Theodore J. Rupley

/s/ Kruno Huitzingh /s/ Phillip E. Soule
- ------------------------------ ------------------------------
Kruno Huitzingh Phillip E. Soule

/s/ John F. Kelly /s/ Eric A. Simonsen
- ------------------------------ ------------------------------
John F. Kelly Eric A. Simonsen

/s/ Richard M. Reilly /s/ Diane E. Wood
- ------------------------------ ------------------------------
Richard M. Reilly Diane E. Wood

/s/ Larry C. Renfro
- ------------------------------
Larry C. Renfro

<PAGE>
POWER OF ATTORNEY

We, the undersigned, hereby severally constitute and appoint John F.
O'Brien, Richard J. Baker and Joseph W. MacDougall,Jr., and each of them singly,
our true and lawful attorneys, with full power to them and each of them, to sign
for us, and in our names and in any and all capacities, any and all Registration
Statements (including post-effective amendments) to be filed, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys and each of them, acting
alone, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys or any of them may lawfully do or cause to be
done by virtue hereof. Witness our hands and common seal on the date set forth
below, which signatures may be signed in counterpart.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John F. O'Brien President, Chief Executive April 26, 1996
- ------------------------- Officer, and Director
John F. O'Brien

/s/ Michael P. Angelini Director April 26, 1996
- -------------------------
Michael P. Angelini

/s/ David A. Barrett Director April 26, 1996
- -------------------------
David A. Barrett

/s/ Gail L. Harrison Director April 26, 1996
- -------------------------
Gail L. Harrison

/s/ J. Terrence Murray Director April 26, 1996
- -------------------------
J. Terrence Murray

/s/ Guy W. Nichols Director April 26, 1996
- -------------------------
Guy W. Nichols

/s/ John L. Sprague Director April 26, 1996
- -------------------------
John L. Sprague

/s/ Robert G. Stachler Director April 26, 1996
- -------------------------
Robert G. Stachler

/s/ Herbert M. Varnum Director April 26, 1996
- -------------------------
Herbert M. Varnum

/s/ Richard M. Wall Director April 26, 1996
- -------------------------
Richard M. Wall

</TABLE>

<PAGE>

EXHIBIT 15

POWER OF ATTORNEY

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 101
<NAME> ALVL2001

<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> DEC-31-1995
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<INVESTMENTS-AT-VALUE> 199122
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
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<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 149166
<SHARES-COMMON-PRIOR> 36441
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9812
<NET-ASSETS> 198848
<DIVIDEND-INCOME> 17788
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1419
<NET-INVESTMENT-INCOME> 16369
<REALIZED-GAINS-CURRENT> 4355
<APPREC-INCREASE-CURRENT> 11702
<NET-CHANGE-FROM-OPS> 32426
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 161852
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<ACCUMULATED-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 123391
<PER-SHARE-NAV-BEGIN> 1.015
<PER-SHARE-NII> .161
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<PER-SHARE-NAV-END> 1.333
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 102
<NAME> ALVL2002

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 122449
<INVESTMENTS-AT-VALUE> 129784
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<ASSETS-OTHER> 0
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<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 161
<TOTAL-LIABILITIES> 161
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 111480
<SHARES-COMMON-PRIOR> 67437
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7335
<NET-ASSETS> 129623
<DIVIDEND-INCOME> 8047
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1296
<NET-INVESTMENT-INCOME> 6751
<REALIZED-GAINS-CURRENT> 1691
<APPREC-INCREASE-CURRENT> 8501
<NET-CHANGE-FROM-OPS> 16943
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 62328
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 112696
<PER-SHARE-NAV-BEGIN> .998
<PER-SHARE-NII> .066
<PER-SHARE-GAIN-APPREC> .099
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.163
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 103
<NAME> ALVL2003

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 366514
<INVESTMENTS-AT-VALUE> 366514
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 366514
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 955
<TOTAL-LIABILITIES> 955
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 342253
<SHARES-COMMON-PRIOR> 311160
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 365559
<DIVIDEND-INCOME> 19962
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4004
<NET-INVESTMENT-INCOME> 15958
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 47951
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 348174
<PER-SHARE-NAV-BEGIN> 1.021
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.068
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 104
<NAME> ALVL2004

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 97254
<INVESTMENTS-AT-VALUE> 107571
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 107571
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 58
<TOTAL-LIABILITIES> 58
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 75887
<SHARES-COMMON-PRIOR> 25217
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10317
<NET-ASSETS> 107513
<DIVIDEND-INCOME> 4030
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 627
<NET-INVESTMENT-INCOME> 3403
<REALIZED-GAINS-CURRENT> 100
<APPREC-INCREASE-CURRENT> 10948
<NET-CHANGE-FROM-OPS> 14451
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 80983
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 54522
<PER-SHARE-NAV-BEGIN> 1.052
<PER-SHARE-NII> .086
<PER-SHARE-GAIN-APPREC> .279
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.417
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 105
<NAME> ALVL2005

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 176817
<INVESTMENTS-AT-VALUE> 185199
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<PAYABLE-FOR-SECURITIES> 0
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<SHARES-COMMON-STOCK> 150890
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8382
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<DIVIDEND-INCOME> 11211
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2144
<NET-INVESTMENT-INCOME> 9067
<REALIZED-GAINS-CURRENT> 1190
<APPREC-INCREASE-CURRENT> 10688
<NET-CHANGE-FROM-OPS> 20945
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 31692
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 186435
<PER-SHARE-NAV-BEGIN> 1.017
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> .068
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.137
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 106
<NAME> ALVL2006

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 356111
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 429068
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 359
<TOTAL-LIABILITIES> 359
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 347682
<SHARES-COMMON-PRIOR> 145112
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72957
<NET-ASSETS> 428709
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 3161
<NET-INVESTMENT-INCOME> (3161)
<REALIZED-GAINS-CURRENT> 1962
<APPREC-INCREASE-CURRENT> 72394
<NET-CHANGE-FROM-OPS> 71195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<NET-CHANGE-IN-ASSETS> 291920
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 274870
<PER-SHARE-NAV-BEGIN> .943
<PER-SHARE-NII> (.013)
<PER-SHARE-GAIN-APPREC> .303
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.233
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 107
<NAME> ALVL2007

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 140779
<INVESTMENTS-AT-VALUE> 154620
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 154620
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 164
<TOTAL-LIABILITIES> 164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 125803
<SHARES-COMMON-PRIOR> 38177
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13841
<NET-ASSETS> 154456
<DIVIDEND-INCOME> 23
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
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<NAME> ALVL2008

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<NAME> ALVL2009

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<NAME> ALVL2011

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<NAME> ALVL2102

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<PAGE>
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<NAME> ALVL2103

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<NAME> ALVL2104

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<NAME> ALVL2105

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<PAGE>
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<NAME> ALVL2106

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<PAGE>
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<NAME> ALVL2207

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<NAME> ALVL2150

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</TABLE>