<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES - DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF DGPF
EQUITY INCOME HIGH YIELD CAPITAL RESERVES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
201 202 203
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment in shares of Delaware Group Premium Fund, Inc. $ 76,463,303 $ 49,835,924 $ 23,877,321
Accrued investment income........................ ....... -- 407,870 127,602
Receivable from Allmerica Financial Life Insurance
and Annuity Company (Sponsor).................. ....... -- -- --
------------ ------------ ------------
Total assets.................................. ....... 76,463,303 50,243,794 24,004,923
============ ============ ============
LIABILITIES:
Payable to Allmerica Financial Life Insurance
and Annuity Company (Sponsor).................. ....... 49,346 107,415 35,114
------------ ------------ ------------
Net assets............................................ $ 76,413,957 $ 50,136,379 $ 23,969,809
============ ============ ============
Net asset distribution by category:
Qualified variable annuity policies.................... $ 20,911,543 $ 14,656,079 $ 5,526,354
Non-qualified variable annuity policies................ 55,502,414 35,480,300 18,443,455
------------ ------------ ------------
$ 76,413,957 $ 50,136,379 $ 23,969,809
============ ============ ============
Qualified units outstanding, December 31, 1995........... 13,219,307 11,055,009 4,569,198
Net asset value per qualified unit, December 31, 1995.... $ 1.581894 $ 1.325741 $ 1.209480
Non-qualified units outstanding, December 31, 1995....... 35,086,051 26,762,619 15,249,078
Net asset value per non-qualified unit, December 31, 1995 $ 1.581894 $ 1.325741 $ 1.209480
The accompanying notes are an integral part of these financial statements.
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF DGPF DGPF DGPF DGPF
MONEY MARKET GROWTH MULTIPLE STRATEGY INTERNATIONAL EQUITY VALUE EMERGING GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
204 205 206 207 208 209
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 12,585,034 $ 50,462,674 $ 52,670,993 $ 28,134,693 $ 11,490,483 $ 18,226,642
58,539 -- -- -- -- --
-- -- -- -- 3,703 --
------------ ------------ ------------ ------------ ------------ ------------
12,643,573 50,462,674 52,670,993 28,134,693 11,494,186 18,226,642
============ ============ ============ ============ ============ ============
74,616 55,142 55,072 20,548 -- 13,787
------------ ------------ ------------ ------------ ------------ ------------
$ 12,568,957 $ 50,407,532 $ 52,615,921 $ 8,114,145 $ 11,494,186 $ 18,212,855
============ ============ ============ ============ ============ ============
$ 3,261,236 $ 15,328,952 $ 14,976,218 $ 7,670,937 $ 3,939,957 $ 5,263,020
9,307,721 35,078,580 37,639,703 20,443,208 7,554,229 12,949,835
------------ ------------ ------------ ------------ ------------ ------------
$ 12,568,957 $ 50,407,532 $ 52,615,921 $ 28,114,145 $ 11,494,186 $ 18,212,855
============ ============ ============ ============ ============ ============
3,001,554 10,705,630 10,589,318 5,894,147 3,245,076 3,875,056
$ 1.086516 $ 1.431859 $ 1.414276 $ 1.301450 $ 1.214134 $ 1.358179
8,566,575 24,498,627 26,614,114 15,708,024 6,221,907 9,534,704
$ 1.086516 $ 1.431859 $ 1.414276 $ 1.301450 $ 1.214134 $ 1.358179
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF DGPF
EQUITY INCOME HIGH YIELD CAPITAL RESERVES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
201 202 203
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends......................................... $ 2,712,649 $ 4,457,302 $ 1,500,392
------------- ------------ ------------
EXPENSES:
Mortality and expense risk fees................... 732,463 561,304 280,312
Administrative expense charges.................... 87,895 67,357 33,638
------------- ------------ ------------
Total expenses................................... 820,358 628,661 313,950
------------- ------------ ------------
Net investment income (loss)...................... 1,892,291 3,828,641 1,186,442
------------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss).......................... 351,231 (333,660) (182,041)
Net unrealized gain............................... 14,864,268 2,308,842 1,645,315
------------- ------------ ------------
Net realized and unrealized gain on investments... 15,215,499 1,975,182 1,463,274
------------- ------------ ------------
Net increase in net assets from operations........ $ 17,107,790 $ 5,803,823 $ 2,649,716
============= ============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF DGPF DGPF DGPF DGPF
MONEY MARKET GROWTH MULTIPLE STRATEGY INTERNATIONAL EQUITY VALUE EMERGING GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
204 205 206 207 208 209
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 765,440 $ 208,522 $1,378,902 $ 615,593 $ 133,051 $ 54,841
---------- ---------- ---------- ---------- ---------- ----------
177,722 508,004 554,677 313,971 103,790 135,254
21,328 60,961 66,561 37,677 12,455 16,231
---------- ---------- ---------- ---------- ---------- ----------
199,050 568,965 621,238 351,648 116,245 151,485
---------- ---------- ---------- ---------- ---------- ----------
566,390 (360,443) 757,664 263,945 16,806 (96,644)
---------- ---------- ---------- ---------- ---------- ----------
-- 469,048 233,085 242,722 46,388 220,458
-- 9,842,970 8,991,892 2,434,397 1,696,345 3,031,765
---------- ---------- ---------- ---------- ---------- ----------
-- 10,312,018 9,224,977 2,677,119 1,742,733 3,252,223
---------- ---------- ---------- ---------- ---------- ----------
$ 566,390 $9,951,575 $9,982,641 $2,941,064 $1,759,539 $3,155,579
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF
EQUITY INCOME HIGH YIELD
SUB-ACCOUNT 201 SUB-ACCOUNT 202
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss).................................. $ 1,892,291 $ 2,267,865 $ 3,828,641 $ 3,088,388
Net realized gain (loss) from security transactions........... 351,231 3,449 (333,660) (308,296)
Net unrealized gain (loss) on investments....... 14,864,268 (2,965,177) 2,308,842 (4,224,440)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations......... 17,107,790 (693,863) 5,803,823 (1,444,348)
----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS:
Net purchase payments......................................... 12,611,903 14,802,843 6,631,293 14,433,874
Terminations.................................................. (2,880,389) (1,651,909) (2,405,303) (1,534,910)
Annuity benefits.............................................. (1,019,742) (353,256) (785,046) (391,703)
Other transfers from (to) the General Account of
Allmerica Financial Life Insurance and
Annuity Company (Sponsor)........................................ 5,127,464 3,332,690 3,958,649 (1,197,665)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from capital transactions.. 13,839,236 16,130,368 7,399,593 11,309,596
----------- ----------- ----------- -----------
Net increase (decrease) in net assets............................ 30,947,026 15,436,505 13,203,416 9,865,248
NET ASSETS:
Beginning of year............................................. 45,466,931 30,030,426 36,932,963 27,067,715
----------- ----------- ----------- -----------
End of year................................................... $76,413,957 $45,466,931 $50,136,379 $36,932,963
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF DGPF
CAPITAL RESERVES MONEY MARKET GROWTH
SUB-ACCOUNT 203 SUB-ACCOUNT 204 SUB-ACCOUNT 205
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 1,186,442 $ 1,171,043 $ 566,390 $ 259,597 $ (360,443) $ (258,550)
(182,041) (240,991) -- -- 469,048 263,853
1,645,315 (1,747,833) -- -- 9,842,970 (1,509,855)
------------ ------------ ------------ ------------ ------------ ------------
2,649,716 (817,781) 566,390 259,597 9,951,575 (1,504,552)
------------ ------------ ------------ ------------ ------------ ------------
2,286,246 8,493,873 22,144,514 27,816,729 5,639,806 9,040,443
(1,066,956) (725,896) (2,008,989) (593,317) (2,178,906 (1,052,599)
(219,799) (322,325) (603,945) -- (542,098) (445,753)
(1,691,704) (3,379,667) (22,149,008) (18,463,931) 4,925,391 2,069,057
------------ ------------ ------------ ------------ ------------ ------------
(692,213) 4,065,985 (2,617,428) 8,759,481 7,844,193 9,611,148
------------ ------------ ------------ ------------ ------------ ------------
1,957,503 3,248,204 (2,051,038) 9,019,078 17,795,768 8,106,596
22,012,306 18,764,102 14,619,995 5,600,917 32,611,764 24,505,168
------------ ------------ ------------ ------------ ------------ ------------
$ 23,969,809 $ 22,012,306 $ 12,568,957 $ 14,619,995 $ 50,407,532 $ 32,611,764
============ ============ ============ ============ ============ ============
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF
MULTIPLE STRATEGY INTERNATIONAL EQUITY
SUB-ACCOUNT 206 SUB-ACCOUNT 207
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)........................... $ 757,664 $ 889,593 $ 263,945 $ (147,736)
Net realized gain (loss) from security transactions.... 233,085 (21,360) 242,722 35,518
Net unrealized gain (loss) on investments.............. 8,991,892 (1,495,074) 2,434,397 (133,482)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from operations.. 9,982,641 (626,841) 2,941,064 (245,700)
------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS:
Net purchase payments.................................. 6,717,347 13,465,944 4,058,453 9,837,628
Terminations........................................... (2,312,816) (1,201,117) (1,156,726) (533,917)
Annuity benefits....................................... (877,372) (493,674) (380,631) (132,866)
Other transfers from the General Account of
Allmerica Financial Life Insurance and
Annuity Company (Sponsor)............................. 1,349,350 1,254,523 913,674 5,788,068
------------ ------------ ------------ ------------
Net increase in net assets from capital transactions... 4,876,509 13,025,676 3,434,770 14,958,913
------------ ------------ ------------ ------------
Net increase in net assets............................. 14,859,150 12,398,835 6,375,834 14,713,213
NET ASSETS:
Beginning of year...................................... 37,756,771 25,357,936 21,738,311 7,025,098
------------ ------------ ------------ ------------
End of year............................................ $ 52,615,921 $ 37,756,771 $ 28,114,145 $ 21,738,311
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DGPF DGPF
VALUE EMERGING GROWTH
SUB-ACCOUNT 208 SUB-ACCOUNT 209
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
$ 16,806 $ (44,094) $ (96,644) $ (46,109)
46,388 350 220,458 (7,906)
1,696,345 26,014 3,031,765 24,080
------------ ----------- ------------ ------------
1,759,539 (17,730) 3,155,579 (29,935)
------------ ----------- ------------ ------------
2,180,809 3,146,569 3,777,567 3,321,192
(318,373) (67,564) (529,800) (159,504)
(62,760) (19,428) (30,371) (10,501)
1,931,543 2,955,309 5,710,419 2,957,173
------------ ----------- ------------ ------------
3,731,219 6,014,886 8,927,815 6,108,360
------------ ----------- ------------ ------------
5,490,758 5,997,156 12,083,394 6,078,425
6,003,428 6,272 6,129,461 51,036
------------ ----------- ------------ ------------
$ 11,494,186 $ 6,003,428 $ 18,212,855 $ 6,129,461
============ =========== ============ ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT VA-K - DELAWARE MEDALLION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE 1 - ORGANIZATION
Separate Account VA-K - Delaware Medallion (VA-K) is a separate investment
account of Allmerica Financial Life Insurance and Annuity Company (formerly
named SMA Life Assurance Company) (the Company), established on November 1, 1990
for the purpose of separating from the general assets of the Company those
assets used to fund certain variable annuity policies issued by the Company.
Effective October 16, 1995, concurrent with the demutualization, State Mutual
Life Assurance Company of America changed their name to First Allmerica
Financial Life Insurance Company (First Allmerica). The Company is a
wholly-owned subsidiary of First Allmerica. Under applicable insurance law, the
assets and liabilities of VA-K are clearly identified and distinguished from the
other assets and liabilities of the Company. VA-K cannot be charged with
liabilities arising out of any other business of the Company.
VA-K is registered as a unit investment trust under the Investment Company Act
of 1940, as amended (the 1940 Act). VA-K currently offers nine Sub-Accounts
under the Delaware Medallion policies. Each Sub-Account invests exclusively in a
corresponding investment portfolio of the Delaware Group Premium Fund, Inc.
(DGPF or the Fund), managed by Delaware Management Company, Inc., or Delaware
International Advisors, Ltd. DGPF is an open-end, diversified series management
investment company registered under the 1940 Act.
Separate Account VA-K has two types of variable annuity policies, "qualified"
policies and "non-qualified" policies. A qualified policy is one that is
purchased in connection with a retirement plan which meets the requirements of
Section 401, 403, 408, or 457 of the Internal Revenue Code, while a
non-qualified policy is one that is not purchased in connection with one of the
indicated retirement plans. The tax treatment for certain partial redemptions or
surrenders will vary according to whether they are made from a qualified policy
or a non-qualified policy.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Investments - Security transactions are recorded on the trade date.
Investments in shares of DGPF are stated at the net asset value per share of the
respective investment portfolio of 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 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 with First Allmerica. The Company anticipates no tax liability
resulting from the operations of VA-K. Therefore, no provision for income taxes
has been charged against VA-K .
NOTE 3 - INVESTMENTS
The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in 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
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
201 Equity Income.................. 5,155,988 $ 63,111,192 $ 14.83
202 High Yield..................... 5,574,488 51,242,233 8.94
203 Capital Reserves............... 2,404,564 24,091,782 9.93
204 Money Market................... 1,258,503 12,585,034 10.00
205 Growth......................... 3,335,273 39,745,113 15.13
206 Multiple Strategy.............. 3,398,129 44,474,987 15.50
207 International Equity........... 2,146,048 25,326,463 13.11
208 Value.......................... 921,450 9,768,124 12.47
209 Emerging Growth................ 1,300,046 15,170,507 14.02
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company makes a charge of 1.25% per annum based on the average daily net
assets of each Sub-Account at each valuation date for mortality and expense
risks. The Company also charges each Sub-Account .15% per annum based on the
average daily net assets of each Sub-Account for administrative expenses. These
charges are deducted from the daily value of each Sub-Account but are paid to
the Company on a monthly basis.
A policy fee is currently deducted on the policy anniversary date and upon
full surrender of the policy when the accumulated value is $50,000 or less. The
policy fee is $30. The policy fee is currently waived for policies originally
issued as part of a 401(k) plan. For the year ended December 31, 1995, policy
fees deducted from accumulated value in VA-K amounted to $111,927.
Allmerica Investments, Inc. (Allmerica Investments), a wholly-owned subsidiary
of First Allmerica, is principal underwriter and general distributor of VA-K,
and does not receive any compensation for sales of the VA-K - Delaware Medallion
policies. Commissions are paid by the Company to registered representatives of
broker-dealers who are registered under the Securities Exchange Act of 1934 and
are members of the National Association of Securities Dealers. 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 year ended December 31, 1995,
the Company received $447,478 for contingent deferred sales charges applicable
to VA-K.
<PAGE>
NOTE 5 - POLICYOWNERS AND SPONSOR TRANSACTIONS
Transactions from policyowners were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994
UNITS AMOUNT UNITS AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equity Income
Sub-Account 201
Issuance of units................. 16,817,312 $ 23,691,234 19,171,947 $ 22,831,542
Redemption of units............... (7,103,035) (9,851,998) (5,666,972) (6,701,174)
----------- ------------ ------------ -------------
Net increase...................... 9,714,277 $ 13,839,236 13,504,975 $ 16,130,368
=========== ============ ============ =============
High Yield
Sub-Account 202
Issuance of units................. 13,701,843 $ 16,906,107 19,488,761 $ 23,253,050
Redemption of units............... (7,619,617) (9,506,514) (10,034,596) (11,943,454)
----------- ------------ ------------ -------------
Net increase...................... 6,082,226 $ 7,399,593 9,454,165 $ 11,309,596
=========== ============ ============ =============
Capital Reserves
Sub-Account 203
Issuance of units................. 4,266,217 $ 4,976,279 11,238,496 $ 12,211,124
Redemption of units............... (4,924,028) (5,668,492) (7,515,413) (8,145,139)
----------- ------------ ------------ -------------
Net increase (decrease)........... (657,811) $ (692,213) 3,723,083 $ 4,065,985
=========== ============ ============ =============
Money Market
Sub-Account 204
Issuance of unit.................. 39,103,291 $ 41,569,167 42,330,436 $ 43,599,780
Redemption of units............... (41,533,117) (44,186,595) (33,815,190) (34,840,299)
----------- ------------ ------------ -------------
Net increase (decrease)........... (2,429,826) $ (2,617,428) 8,515,246 $ 8,759,481
=========== ============ ============ =============
Growth
Sub-Account 205
Issuance of units................. 13,019,605 $ 16,432,159 15,645,616 $ 18,116,419
Redemption of units (6,915,534) (8,587,966) (7,347,214) (8,505,271)
----------- ------------ ------------ -------------
Net increase...................... 6,104,071 $ 7,844,193 8,298,402 $ 9,611,148
=========== ============ ============ =============
Multiple Strategy
Sub-Account 206
Issuance of units................. 8,419,696 $ 10,930,861 16,287,349 $ 18,753,977
Redemption of units............... (4,548,601) (6,054,352) (5,000,350) (5,728,301)
----------- ------------ ------------ -------------
Net increase...................... 3,871,095 $ 4,876,509 11,286,999 $ 13,025,676
=========== ============ ============ =============
International Equity
Sub-Account 207
Issuance of units................. 9,412,885 $ 11,535,614 15,701,936 $ 18,561,102
Redemption of units............... (6,571,322) (8,100,844) (3,079,760) (3,602,189)
----------- ------------ ------------ -------------
Net increase...................... 2,841,563 $ 3,434,770 12,622,176 $ 14,958,913
=========== ============ ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31,
1995 1994
UNITS AMOUNT UNITS AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value
Sub-Account 208
Issuance of units................. 4,656,792 $ 5,103,171 6,433,373 $ 6,412,580
Redemption of units............... (1,229,779) (1,371,952) (399,675) (397,694)
----------- ------------ ------------ -------------
Net increase...................... 3,427,013 $ 3,731,219 6,033,698 $ 6,014,886
=========== ============ ============ =============
Emerging Growth
Sub-Account 209
Issuance of units................. 9,842,931 $ 12,048,818 7,129,299 $ 7,066,268
Redemption of units............... (2,630,518) (3,121,003) (982,590) (957,908)
----------- ------------ ------------ -------------
Net increase...................... 7,212,413 $ 8,927,815 6,146,709 $ 6,108,360
=========== ============ ============ =============
</TABLE>
NOTE 6 - DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code, a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal income tax purposes for any period for which the
investments of the segregated asset account on which the contract is based are
not adequately diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of
the Code. The Company believes that VA-K satisfies the current requirements of
the regulations, and it intends that VA-K will continue to meet such
requirements.
NOTE 7 - PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of the DGPF shares by VA-K during
the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SUB-
ACCOUNT INVESTMENT PORTFOLIO PURCHASES SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
201 Equity Income................................ $ 20,683,947 $ 4,944,675
202 High Yield................................... 17,379,753 6,125,619
203 Capital Reserves............................. 4,543,667 4,021,898
204 Money Market................................. 27,099,066 29,026,441
205 Growth....................................... 12,692,122 5,197,139
206 Multiple Strategy............................ 9,091,071 3,443,276
207 International Equity......................... 9,126,168 5,416,662
208 Value........................................ 4,572,637 817,161
209 Emerging Growth.............................. 10,861,874 2,003,623
-------------- --------------
Totals....................................... $ 116,050,305 $ 60,996,494
============== ==============
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Allmerica Financial Life Insurance
and Annuity Company and Policyowners
of Separate Account VA-K - Delaware Medallion of Allmerica Financial
Life Insurance and Annuity Company
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of each of the Sub-Accounts (201,
202, 203, 204, 205, 206, 207, 208, and 209) constituting the Separate Account
VA-K - Delaware Medallion of Allmerica Financial Life and Annuity Company at
December 31, 1995, and the results of each of their operations for the year then
ended and the changes in each of their net assets for each of the two years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Allmerica
Financial Life Insurance and Annuity Company's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at December 31, 1995 by
correspondence with the Fund, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 23, 1996
