GROUP VEL ACCOUNT OF ALLMERICA FINANCIAL LIFE INS & ANN CO, 497, 1997-05-09

GROUP VEL ACCOUNT OF ALLMERICA FINANCIAL LIFE INS & ANN CO
497, 1997-05-09

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CONTENTS OF THE REGISTRATION STATEMENT

(Group VEL)

This registration statement comprises the following papers and documents:

The facing sheet.

Cross-reference to items required by Form N-8B-2.

The prospectus consists of pages.

The undertaking to file reports.

The undertaking pursuant to Rule 484 under the Securities Act of 1933.

Representations Pursuant to Section 26(e) of the Investment Company Act of 1940

The signatures.

Written opinions and consents of the following persons:

1. Opinion of Counsel

2. Actuarial Opinion

3. Independent Accountants

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 November 22, 1993 establishing the Group VEL Account was previously
filed with Registrant's initial Registration Statement 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 with
Registrant's initial Registration statement and is herein incorporated by
reference.
(b) Registered Representative Agreement and Resident Sponsor Agreement
of Allmerica Investments, Inc. (formerly "SMA Equities, Inc.") were
previously filed by the Company on June 3, 1987 Registration No.
33-14672, and are incorporated herein by reference.

(4) Not Applicable.

(5) The Form of Policy and initial Riders were previously filed with
Registrant's initial Registration Statement and are herein incorporated
by reference. The following endorsements are included as Exhibit I (5):

- Preferred Loan Endorsement

- Exchange to Term Rider

(6) Company's Bylaws were previously filed by the Registrant on May 1, 1995
and amended Articles of Incorporation were filed on October 1, 1995 and
are herein incorporated by reference.

(7) Not Applicable.

(8) (a) Form of Participation Agreement with Allmerica Investment Trust
was previously filed by the Company on June 3, 1987 in Registration
Statement No. 33-14672, and is incorporated herein by reference.
(b) Form of Participation Agreement with Variable Insurance Products
Fund and Variable Insurance Products Fund II was previously filed by the
Registrant, Registration No. 33-14672, on June 3, 1987 and is herein
incorporated by reference.
(c) Form of Participation Agreement with Delaware Group Premium Fund,
Inc. was previously filed by the Registrant, Registration No. 33-44830 on
December 27, 1991 and is herein incorporated by reference.
(d) Form of Participation Agreement with T. Rowe Price International
Series, Inc. was previously filed with Registrant's pre-effective
amendment No. 1 and is herein incorporated by reference.
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(e) Form of Participation Agreement with INVESCO Variable Investment
Funds, Inc. was previously filed in Registrants Post-effective Amendment
No. 2, and is herein incorporated by reference.
(f) Fidelity Service Agreement as of November 1, 1995 was previously was
filed on April 30, 1996 in Post-Effective Amendment No. 6, and is
incorporated herein by reference. An Amendment to the Fidelity Service
Agreement, effective as of January 1, 1997, is filed herewith. A Proposed
Form of Fidelity Service Contract is filed herewith.
(g) Proposed Form of Service Agreement with Rowe Price-Fleming
International, Inc.

(9) Not Applicable.

(10) Form of Application was previously filed with Registrant's initial
registration Statement and is incorporated herein by reference.

2. See Item (1(5), above

3. Opinion of Counsel is filed herewith.

4. Not Applicable.

5. Not Applicable.

6. Actuarial consent is filed herewith

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 with Registrant's initial
Registration Statement and is herein incorporated by reference.

8. Consent of Independent Accountants is filed herewith.

9. None
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FORMS S-6 EXHIBIT TABLE

Exhibit 1(5) Endorsements/Riders

- Preferred Loan Endorsement

- Exchange to Term Rider

Exhibit (1)(8)(f) Amendment to Fidelity Service Agreement

Proposed Form of Fidelity Service Contract

Exhibit (1)(8)(g) Proposed Form of Service Agreement with Rowe
Price-Fleming International, Inc.

Exhibit 3 Opinion of Counsel

Exhibit 6 Actuarial Consent

Exhibit 8 Consent of Independent Accountants
<PAGE>
This prospectus describes certificates issued under group flexible premium
variable life insurance policies ("Certificates") offered by Allmerica Financial
Life Insurance and Annuity Company ("Company") to eligible applicants
("Certificate Owners") who are members of a non-qualified benefit plan having a
minimum of five or more members, depending on the group, and are age 80 years
old and under. Within limits, you may choose the amount of initial premium
desired and the initial Death Benefit. 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 Certificate's surrender value, or
the Certificate may be fully surrendered at any time, subject to certain
limitations.

The Certificates permit you to allocate Net Premiums among up to seven of twenty
sub-accounts ("Sub-Accounts") of the Group VEL 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 ("Fidelity VIP"), Variable Insurance Products Fund II ("Fidelity
VIP II"), T. Rowe Price International Series, Inc. ("T. Rowe Price"), Delaware
Group Premium Fund, Inc. ("DGPF") or INVESCO Variable Investment Funds, Inc.
("INVESCO VIF"). The following underlying funds are available under the
Certificates:

<TABLE>
<S> <C>
ALLMERICA INVESTMENT TRUST FIDELITY VIP
- ---------------------------------- --------------
Select International Equity Fund Overseas Portfolio
Select Aggressive Growth Fund Equity-Income Portfolio
Select Capital Appreciation Fund Growth Portfolio
Small-Mid Cap Value Fund High Income Portfolio
Select Growth Fund FIDELITY VIP II
Growth Fund ----------------
Equity Index Fund Asset Manager Portfolio
Select Growth and Income Fund T. ROWE PRICE
Investment Grade Income Fund ---------------
Government Bond Fund T. Rowe Price
Money Market Fund International Stock
DGPF Portfolio
- ----- INVESCO*
International Equity Series ---------
Total Return Fund*
Industrial Income Fund*
</TABLE>

*The Total Return Fund and the Industrial Income Fund of INVESCO VIF are
available only to employees of INVESCO and its affiliates.

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

DATED MAY 1, 1997
440 LINCOLN STREET, WORCESTER, MASSACHUSETTS 01653
(508) 855-1000
<PAGE>
(Continued from cover page)

There is no guaranteed minimum Certificate value. The value of a Certificate
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 Certificate value will also be adjusted for other factors,
including the amount of charges imposed. The Certificate will remain in effect
so long as the Certificate value less any outstanding debt is sufficient to pay
certain monthly charges imposed in connection with the Certificate. The
Certificate value may decrease to the point where the Certificate will lapse and
provide no further death benefit without additional premium payments.

If the Certificate 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 Death Benefit, less any
debt, partial withdrawals, and any due and unpaid charges. After the Final
Premium Payment Date, the Death Proceeds equal the Surrender Value of the
Certificate. If the Guideline Premium Test is in effect (See "ELECTION OF DEATH
BENEFIT OPTIONS"), you may choose either Death Benefit Option 1 (the Death
Benefit is fixed in amount) or Death Benefit Option 2 (the Death Benefit
includes the Certificate value in addition to a fixed insurance amount) and may
change between Death Benefit Option 1 and Option 2, subject to certain
conditions. If the Cash Value Accumulation Test is in effect, Death Benefit
Option 3 (the Death Benefit is fixed in amount) will apply. A Minimum Death
Benefit, equivalent to a percentage of the Certificate value, will apply if
greater than the Death Benefit otherwise payable under Option 1, Option 2 or
Option 3.

In certain circumstances, a Certificate may be considered a "modified endowment
contract." Under the Internal Revenue Code, any Certificate 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 OR CERTIFICATE.

2
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TABLE OF CONTENTS

<TABLE>
<S> <C>
SPECIAL TERMS........................................................................ 5
SUMMARY.............................................................................. 8
PERFORMANCE INFORMATION.............................................................. 17
DESCRIPTION OF THE COMPANY, THE GROUP VEL ACCOUNT, ALLMERICA INVESTMENT TRUST,
VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, T. ROWE PRICE
INTERNATIONAL SERIES, DELAWARE GROUP PREMIUM FUND, INC., AND INVESCO VARIABLE
INVESTMENT FUNDS, INC............................................................... 20
INVESTMENT OBJECTIVES AND POLICIES................................................... 22
INVESTMENT ADVISORY SERVICES......................................................... 24
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.................................... 28
VOTING RIGHTS........................................................................ 28
THE CERTIFICATE...................................................................... 29
Enrollment Form for a Certificate.................................................. 29
Free Look Period................................................................... 30
Conversion Privileges.............................................................. 30
Premium Payments................................................................... 30
Allocation of Net Premiums......................................................... 31
Transfer Privilege................................................................. 32
Election of Death Benefit Options.................................................. 32
Guideline Premium Test and Cash Value Accumulation Test............................ 33
Death Proceeds..................................................................... 33
Change in Death Benefit Option..................................................... 36
Change in Face Amount.............................................................. 36
Certificate Value and Surrender Value.............................................. 37
Payment Options.................................................................... 39
Optional Insurance Benefits........................................................ 39
Surrender.......................................................................... 39
Paid-Up Insurance Option........................................................... 39
Partial Withdrawal................................................................. 40
CHARGES AND DEDUCTIONS............................................................... 40
Premium Expense Charge............................................................. 40
Monthly Deduction from Certificate Value........................................... 41
Charges Reflected in the Assets of the Group VEL Account........................... 44
Surrender Charge................................................................... 44
Charges on Partial Withdrawal...................................................... 45
Transfer Charges................................................................... 46
Charge for Change in Face Amount................................................... 46
Other Administrative Charges....................................................... 47
CERTIFICATE LOANS.................................................................... 47
CERTIFICATE TERMINATION AND REINSTATEMENT............................................ 48
OTHER CERTIFICATE PROVISIONS......................................................... 49
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY...................................... 51
DISTRIBUTION......................................................................... 52
SERVICES............................................................................. 52
REPORTS.............................................................................. 52
LEGAL PROCEEDINGS.................................................................... 53
FURTHER INFORMATION.................................................................. 53
INDEPENDENT ACCOUNTANTS.............................................................. 53
FEDERAL TAX CONSIDERATIONS........................................................... 53
</TABLE>

3
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<TABLE>
<S> <C>
Taxation of the Certificates....................................................... 54
Policy Loans....................................................................... 54
Modified Endowment Contracts....................................................... 55
MORE INFORMATION ABOUT THE GENERAL ACCOUNT........................................... 55
FINANCIAL STATEMENTS................................................................. F-1
APPENDIX A -- OPTIONAL BENEFITS...................................................... A-1
APPENDIX B -- PAYMENT OPTIONS........................................................ A-2
APPENDIX C -- ILLUSTRATIONS OF SUM INSURED, CERTIFICATE VALUES AND ACCUMULATED
PREMIUMS............................................................................ A-3
APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGES............................... A-11
</TABLE>

4
<PAGE>
SPECIAL TERMS

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

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

CERTIFICATE CHANGE: Any change in the Face Amount, the addition or deletion of
a rider, or a change in the Death Benefit Option.

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

COMPANY: Allmerica Financial Life Insurance and Annuity Company.

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

DEATH BENEFIT: 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 Death Benefit
will depend on the Death Benefit Option chosen, but will always be at least
equal to the Face Amount.

DEATH PROCEEDS: Prior to the Final Premium Payment Date, the Death Proceeds
equal the amount calculated under the applicable Death Benefit Option, 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
Certificate.

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

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

EVIDENCE OF INSURABILITY: Information, satisfactory to the Company, that is
used to determine the Insured's Underwriting Class.

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

FINAL PREMIUM PAYMENT DATE: The Certificate 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 Certificate.

GENERAL ACCOUNT: All the assets of the Company other than those held in a
Separate Account.

GROUP VEL ACCOUNT: A Separate Account of the Company to which the Certificate
Owner may make Net Premium allocations.

GUIDELINE ANNUAL PREMIUM: The annual amount of premium that would be payable
through the Final Premium Payment Date of a Certificate for the specified Death
Benefit, 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, for unisex
Certificates), net investment earnings at an annual effective rate of 5%, and
fees and charges as set forth in the Certificate and any Certificate riders. The
Death Benefit Option 1 Guideline Annual Premium is used when calculating the
maximum surrender charge.

5
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INSURANCE AMOUNT AT RISK: The Death Benefit less the Certificate Value.

ISSUANCE AND ACCEPTANCE: The date the Company mails the Certificate if the
enrollment form is approved with no changes requiring your consent; otherwise,
the date the Company receives your written consent to any changes.

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

MINIMUM DEATH BENEFIT: The minimum Death Benefit required to qualify the
Certificate as "life insurance" under Federal tax laws. The Minimum Death
Benefit varies by Age. It is calculated by multiplying the Certificate Value by
a percentage determined by the Insured's Age.

MONTHLY PROCESSING DATE: The date on which the Monthly Deduction is deducted
from Certificate Value.

MONTHLY DEDUCTION: Charges deducted monthly from the Certificate Value of a
Certificate prior to the Final Premium Payment Date. The charges include the
monthly cost of insurance, the monthly cost of any benefits provided by rider,
the monthly Certificate administrative charge, the monthly Group VEL Account
administrative charge and the monthly mortality and expense risk charge.

MONTHLY DEDUCTION SUB-ACCOUNT: A Sub-Account of the Separate Account to which
the payor that you name under the Payor Option may allocate Net Premiums to pay
all or a portion of the insurance charges and administrative charges. The
Monthly Deduction Sub-Account is currently the Sub-Account which invests in the
Money Market Fund of Allmerica Investment Trust.

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

PAID-UP INSURANCE: Life insurance coverage for the life of the Insured, with no
further premiums due.

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 Certificate
Value will be allocated. If you do not, the Company will allocate the deduction
or Certificate Value among the General Account and the Sub-Accounts excluding
the Monthly Deduction Sub-Account in the same proportion that the Certificate
Value in the General Account and the Certificate Value in each Sub-Account bear
to the total Certificate 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 subdivision of the Group VEL 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 the
Variable Insurance Products Fund II, the T. Rowe Price International Stock
Portfolio of T. Rowe Price International Series, Inc. or the International
Equity Series of the Delaware Group Premium Fund, Inc. The Total Return Fund and
the Industrial Income Fund of INVESCO VIF are available to employees of INVESCO
Inc., and its affiliates.

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

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

6
<PAGE>
UNDERLYING INVESTMENT COMPANIES: Allmerica Investment Trust, Variable Insurance
Products Fund, Variable Insurance Products Fund II, T. Rowe Price International
Series, Inc., Delaware Group Premium Fund, Inc., and INVESCO Variable Investment
Funds, Inc.

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

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

VALUATION DATE: A day on which the net asset value of the shares of any of the
Underlying Funds is determined and 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 Certificate 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.

WRITTEN REQUEST: A Request by the Certificate Owner in writing, satisfactory to
the Company.

YOU OR YOUR: The Certificate Owner, as shown in the enrollment form or the
latest change filed with the Company.

7
<PAGE>
SUMMARY

THE CERTIFICATE

The Certificate issued under a group flexible premium variable life policy
offered by this prospectus allows you, subject to certain limitations, to make
premium payments in any amount and frequency. As long as the Certificate remains
in force, it will provide for:

- - life insurance coverage on the named Insured;

- - Certificate Value;

- - surrender rights and partial withdrawal rights;

- - loan privileges; and

- - in some cases, additional insurance benefits available by rider for an
additional charge.

The Certificates provide death benefits, Certificate Value, and other features
traditionally associated with life insurance policies. The Certificates are
"variable" because, unlike the fixed benefits of ordinary whole life insurance,
the Certificate Value will, and under certain circumstances the Death Proceeds
may, increase or decrease depending on the investment experience of the
Sub-Accounts of the Group VEL Account. They are "flexible premium" Certificates,
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 Certificate to lapse nor will making the planned premium
payments guarantee that a Certificate will remain in force. Thus, you may, but
are not required to, pay additional premiums.

The Certificate 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.

SURRENDER CHARGES

At any time that a Certificate is in effect, a Certificate Owner may elect to
surrender the Certificate and receive its Surrender Value. A surrender charge
may be calculated upon issuance of the Certificate and upon each increase in
Face Amount. The surrender charge may be imposed, depending on the group to
which the Certificate is issued, for up to 15 years from the Date of Issue or
any increase in the Face Amount and you request a full surrender or a decrease
in Face Amount.

SURRENDER CHARGES FOR THE INITIAL FACE AMOUNT

The maximum surrender charge calculated upon issuance of the Certificate is
equal to the sum of (a) plus (b) where (a) is a deferred administrative charge
of up to $8.50 per thousand dollars of the initial Face Amount and (b) is a
deferred sales charge of up to 50% (less any premium expense charge not
associated with state and local premium taxes) of premiums received up to the
Guideline Annual Premium, depending on the group to which the Certificate is
issued. In accordance with limitations under state insurance regulations, the
amount of the maximum surrender charge will not exceed a specified amount per
thousand dollars of initial Face Amount, as indicated in "APPENDIX C --
CALCULATION OF MAXIMUM SURRENDER CHARGES." The maximum surrender charge remains
level for up to 24 Certificate months, reduces uniformly each month for the
balance of the surrender charge period, and is zero thereafter. If you surrender
the Certificate during the first two 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 actual surrender charge imposed
may be less than the maximum. See "THE CERTIFICATE -- Surrender" and "CHARGES
AND DEDUCTIONS -- Surrender Charge."

8
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SURRENDER CHARGES FOR AN INCREASE IN FACE AMOUNT

A separate surrender charge may apply to and be 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 a deferred administrative charge of up to $8.50 per
thousand dollars of increase, and (b) is a deferred sales charge of up to 50%
(less any premium expense charge not associated with state and local premium
taxes) of premiums associated with the increase, up to the Guideline Annual
Premium for the increase. In accordance with limitations under state insurance
regulations, the amount of the surrender charge will not exceed a specified
amount per thousand dollars of increase, as indicated in "APPENDIX C --
CALCULATION OF MAXIMUM SURRENDER CHARGES."

This maximum surrender charge with respect to an increase remains level for up
to 24 Certificate months following the increase, reduces uniformly each month
for the balance of the surrender charge period, and is zero thereafter. During
the first two Certificate 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 actual surrender charge with
respect to the increase may be less than the maximum. See "THE CERTIFICATE --
Surrender" and "CHARGES AND DEDUCTIONS -- Surrender Charge."

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

PREMIUM EXPENSE CHARGE

A charge may be deducted from each premium payment for state and local premium
taxes paid by the Company for the Policy and to compensate the Company for
federal taxes imposed for deferred acquisition costs ("DAC taxes") and for sales
expenses related to the Certificates. State premium taxes generally range from
0.75% to 5%, while local premium taxes (if any) vary by jurisdiction within a
state. The DAC tax deduction may range from zero to 1% of premiums, depending on
the group to which the Policy is issued. The charge for sales expenses may range
from zero to 5%, depending on the characteristics of the group to which the
Policy is issued and the actual sales expense incurred by the Company. See
"CHARGES AND DEDUCTIONS -- Premium Expense Charge."

MONTHLY DEDUCTIONS FROM CERTIFICATE VALUE

On the Date of Issue and each Monthly Processing Date thereafter prior to the
Final Premium Payment Date, certain charges ("Monthly Deductions") will be
deducted from the Certificate Value. The Monthly Deduction includes a charge for
cost of insurance, a charge for the cost of any additional benefits provided by
rider, and a charge for administrative expenses that may be up to $10, depending
on the group to which the Policy is issued. The Monthly Deduction may also
include a charge for Group VEL administrative expenses and a charge for
mortality and expense risks. The Group VEL administrative charge may continue
for up to 10 Certificate years and may be up to 0.25% of Certificate Value in
each Sub-Account, depending on the group to which the Certificate was issued.
The mortality and expense risk charge may be up to 0.90% of Certificate Value in
each Sub-Account.

You may specify from which Sub-Account the cost of insurance charge, the charge
for Certificate administrative expenses and the charge for the cost of
additional benefits provided by rider will be deducted. If the Payor Provision
is in force, all cost of insurance charges and administrative charges will be
deducted from the Monthly Deduction Sub-Account. If no allocation is specified,
the Company will make a Pro-Rata Allocation.

The Group VEL administrative charge and the mortality and expense risk charge
are assessed against each Sub-Account that generates a charge. In the event that
a charge is greater than the value of the Sub-Account to which it relates on a
Monthly Processing Date, the unpaid balance will be totaled and the Company will
make a Pro-Rata Allocation.

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<PAGE>
Monthly Deductions are made on the Date of Issue and on each Monthly Processing
Date until the Final Premium Payment Date. No Monthly Deductions will be made on
or after the Final Premium Payment Date. See "CHARGES AND DEDUCTIONS -- Monthly
Deductions from Certificate Value."

TRANSACTION CHARGES

Each of the charges listed below is designed to reimburse the Company for
administrative costs incurred in the applicable transaction.

TRANSACTION CHARGE ON PARTIAL WITHDRAWALS

A transaction charge, which is up to 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 CHANGE IN FACE AMOUNT

For each increase or decrease in Face Amount, a charge of $2.50 per $1,000 of
increase or decrease up to $40, will be deducted from Certificate Value. This
charge is designed to reimburse the Company for underwriting and administrative
costs associated with the change. See "THE CERTIFICATE -- Change In Face Amount"
and "CHARGES AND DEDUCTIONS -- Charge For Change In Face Amount."

TRANSFER CHARGE

The first twelve transfers of Certificate Value in a Certificate 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 CERTIFICATE -- Transfer Privilege" and
"CHARGES AND DEDUCTIONS -- Transfer Charges."

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 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 Reflected in the Assets of the Group VEL Account." The
levels of fees and expenses vary among the Underlying Investment Companies.

CERTIFICATE VALUE AND SURRENDER VALUE

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

10
<PAGE>
The Surrender Value will be the Certificate Value, less any Debt and surrender
charges. The Surrender Value is relevant, for example, in the computation of the
amounts available upon partial withdrawals, Certificate loans or surrender.

DEATH PROCEEDS

The Certificate 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 Death Benefit, reduced by any
outstanding Debt, partial withdrawals, partial withdrawal charges, and any
Monthly Deductions due and not yet deducted through the Certificate month in
which the Insured dies. Three Death Benefit Options are available. Under Option
1 and Option 3, the Death Benefit is the greater of the Face Amount of the
Certificate or the applicable Minimum Death Benefit. Under Option 2, the Death
Benefit is the greater of the Face Amount of the Certificate plus the
Certificate Value or the Minimum Death Benefit. The Minimum Death Benefit is
equivalent to a percentage (determined each month based on the Insured's Age) of
the Certificate Value. On or after the Final Premium Payment Date, the Death
Proceeds will equal the Surrender Value. See "THE CERTIFICATE -- Death
Proceeds."

The Death Proceeds under the Certificate may be received in a lump sum or under
one of the Payment Options the Company offers. See "APPENDIX B -- PAYMENT
OPTIONS."

FLEXIBILITY TO ADJUST DEATH BENEFIT

Subject to certain limitations, you may adjust the Death Benefit, and thus the
Death Proceeds, at any time prior to the Final Premium Payment Date, by
increasing or decreasing the Face Amount of the Certificate. 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 Certificate Value is reduced by the amount of the
charge. See "THE CERTIFICATE -- Change In Face Amount."

The minimum increase in Face Amount will vary by group, but will in no event
exceed $10,000. 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 CERTIFICATE -- Free Look Period -- Conversion Privileges."

You may, depending on the group to which the Policy is issued, have the
flexibility to add additional insurance benefits by rider. These may include the
Waiver of Premium Rider, Other Insured Rider, Children's Insurance Rider,
Accidental Death Benefit Rider, Option to Accelerate Benefits Rider and Exchange
Option Rider. See "APPENDIX A -- OPTIONAL BENEFITS."

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

CERTIFICATE ISSUANCE

At the time of enrollment, the proposed insured will complete an enrollment
form, which lists the proposed amount of insurance and indicates how much of
that insurance is considered eligible for simplified underwriting. If the
eligibility questions on the enrollment form are answered "No," the Company will
provide immediate coverage equal to the simplified underwriting amount. If the
proposed insured is in a standard premium class, any insurance in excess of the
simplified underwriting amount will begin on the date the enrollment form and
medical examinations, if any, are completed. If the proposed insured cannot
answer the eligibility questions "No" and if the proposed insured is not a
standard risk, insurance coverage will begin only after the Company (1) approves
the enrollment form, (2) the Certificate is delivered and accepted, and (3) the
first premium is paid.

11
<PAGE>
If any premiums are paid prior to the issuance of the Certificate, such premiums
will be held in the Company's General Account. If your enrollment form is
approved and the Certificate 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 CERTIFICATE IS NOT ISSUED AND ACCEPTED, THE INITIAL
PREMIUMS WILL BE RETURNED TO YOU WITHOUT INTEREST.

If your Certificate provides for a full refund of the initial payment under its
"Right to Examine Certificate" provision as required in your state, all
Certificate Value in the General Account that you initially designated to go to
the Sub-Accounts will be allocated to the Money Market Fund of the Trust upon
Issuance and Acceptance of the Certificate. All Certificate Value will be
allocated as you have chosen no later than the expiration of the period during
which you may exercise the "Right to Examine Certificate" provision.

ALLOCATION OF NET PREMIUMS

Net Premiums are the premiums paid less any premium expense charge. The
Certificate together with its attached enrollment form constitutes the entire
agreement between the Company and you. Net Premiums may be allocated to one or
more Sub-Accounts of the Group VEL 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 CERTIFICATE -- 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 Certificates permit Net Premiums to be allocated either to the Company's
General Account or to the Group VEL Account. The Group VEL Account is currently
comprised of twenty Sub-Accounts. Each Sub-Account invests exclusively in a
corresponding Underlying Fund of the Allmerica Investment Trust ("Trust")
managed by Allmerica Investment, of the Variable Insurance Products Fund
("Fidelity VIP") or the Variable Insurance Products Fund II ("Fidelity VIP II")
managed by Fidelity Management, of T. Rowe Price International Series, Inc. ("T.
Rowe Price") managed by Rowe Price-Fleming International, Inc., of the Delaware
Group Premium Fund, Inc. ("DGPF") managed by Delaware International, or of the
INVESCO Variable Investment Funds, Inc., (available only to employees of INVESCO
and its affiliates) managed by INVESCO. In some states, insurance regulations
may restrict the availability of particular Underlying Funds. The Certificates
permit you to transfer Certificate 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 CERTIFICATE -- Transfer Privilege."

12
<PAGE>
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 Funds. The levels of fees and
expenses vary among the Underlying Funds. The following table shows the expenses
of the Underlying Funds for 1996. For more information concerning fees and
expenses, see the prospectuses of the Underlying Funds.

<TABLE>
<CAPTION>
OTHER FUND
EXPENSES
(AFTER ANY
MANAGEMENT APPLICABLE TOTAL FUND
UNDERLYING FUND FEE REIMBURSEMENTS) EXPENSES
- ------------------------------------------------ --------------- ------------------- ---------------
<S> <C> <C> <C>
Select International Equity Fund 1.00% 0.23%* 1.23%**
DGPF International Equity Series 0.64% 0.16%** 0.80%
Fidelity VIP Overseas Portfolio 0.76% 0.17% 0.93%****
T. Rowe Price International Stock Portfolio 1.05% 0.00% 1.05%
Select Aggressive Growth Fund 1.00% 0.08%* 1.08%
Select Capital Appreciation Fund 1.00% 0.13%* 1.13%
Small-Mid Cap Value Fund 0.85% 0.12%* 0.97%
Select Growth Fund 0.85% 0.08%* 0.93%***
Growth Fund 0.44% 0.07%* 0.51%
Fidelity VIP Growth Portfolio 0.61% 0.08% 0.69%**
Equity Index Fund 0.32% 0.14%* 0.46%
Select Growth and Income Fund 0.75% 0.08%* 0.83%***
Fidelity VIP Equity-Income Portfolio 0.51% 0.07% 0.58%****
Fidelity VIP II Asset Manager Portfolio 0.64% 0.10% 0.74%****
Fidelity VIP High Income Portfolio 0.59% 0.12% 0.71%
Investment Grade Income Fund 0.40% 0.14%* 0.54%
Government Bond Fund 0.50% 0.16%* 0.66%
Money Market Fund 0.28% 0.06%* 0.34%

INVESCO VIF Industrial Income 0.75% 0.20% 0.95%#
INVESCO VIF Total Return 0.75% 0.19% 0.94%#
</TABLE>

* Under the Management Agreement with Allmerica Investment Trust, Allmerica
Investment Management Company, Inc. ("Manager") has declared a voluntary expense
limitation of 1.50% of average net assets for the Select International Equity
Fund, 1.35% for the Select Aggressive Growth Fund and Select Capital
Appreciation Fund, 1.25% for the Small-Mid Cap Value Fund, 1.20% for the Growth
Fund and Select Growth Fund, 1.10% for the Select Growth and Income Fund, 1.00%
for the Investment Grade Income Fund and Government Bond Fund, and 0.60% for the
Money Market Fund and Equity Index Fund. The total operating expenses of the
Funds of the Trust were less than their respective expense limitations
throughout 1996. The declaration of a voluntary expense limitation in any year
does not bind the Manager to declare future expense limitations with respect to
these funds.

** Delaware International Advisers Ltd., the investment adviser for the
International Equity Series, has agreed to waive its management fee and
reimburse the International Equity Series to limit certain expenses to 8/10 of
1% of the corresponding net assets. This waiver has been in effect from the
commencement of the public offering for the Series and has been extended through
June 30, 1997. Without the expense limitation, in 1996 the total annual expenses
of the International Equity Series would have been 1.04%. 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,

13
<PAGE>

see "DESCRIPTION OF THE COMPANY, THE GROUP VEL ACCOUNT, ALLMERICA INVESTMENT
TRUST, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, T.
ROWE PRICE INTERNATIONAL SERIES, INC., DELAWARE GROUP PREMIUM FUND, INC. AND
INVESCO VARIABLE INVESTMENT FUNDS, INC."

*** These funds have entered into agreements with brokers whereby brokers rebate
a portion of commissions. Had these amounts been treated as reductions of
expenses the total operating expenses would have been 1.20% for the Select
International Equity Fund, 0.92% for the Select Growth Fund and 0.80% for the
Select Growth and Income Fund.

**** A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into arrangements
with their custodian and transfer agent whereby interest earned on uninvested
cash balances was used to reduce custodian and transfer agent expenses.
Including these reductions, the total operating expenses presented in the table
would have been 0.56% for Fidelity VIP Equity Income Portfolio, 0.67% for
Fidelity VIP Growth Portfolio, 0.92% for Fidelity VIP Overseas Portfolio and
0.73% for Fidelity VIP II Asset Manager Portfolio.

# Various expenses of the Industrial Income Portfolio and Total Return Portfolio
were voluntarily absorbed by INVESCO in 1996. If such expenses had not been
voluntarily absorbed, the total operating expenses would have been 1.19% and
1.30%, respectively.

FREE LOOK PERIOD

The Certificate provides for an initial Free Look Period. You may cancel the
Certificate 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 enrollment form
for the Certificate is signed, (b) 10 days after you receive the Certificate, or
(c) 10 days (20 or 30 days if required in your state) after the Company mails or
personally delivers a Notice of Withdrawal Rights to you.

If your Certificate provides for a full refund of the initial premium under its
"Right to Examine Certificate" provision as required in your state, your refund
will be the greater of (a) your entire premium or (b) the Certificate Value plus
deductions under the Certificate or by the Underlying Funds for taxes, charges
or fees. If your Certificate does not provide for a full refund of the initial
premium, you will receive the Certificate Value in the Group VEL Account, plus
premiums paid, including fees and charges, minus the amounts allocated to the
Group VEL Account, plus the fees and charges imposed on amounts in the Group VEL
Account. After an increase in Face Amount, a right to cancel the increase also
applies. See "THE CERTIFICATE -- Free Look Period."

CONVERSION PRIVILEGES

During the first 24 Certificate months after the Date of Issue, subject to
certain restrictions, you may convert this Certificate to a flexible premium
fixed adjustable life insurance Certificate by simultaneously transferring all
accumulated value in the Sub-Accounts to the General Account and instructing the
Company to allocate all future premiums to the General Account. A similar
conversion privilege is in effect for 24 Certificate months after the date of an
increase in Face Amount. Where required by state law, and at your request, the
Company will issue a flexible premium adjustable life insurance Certificate to
you. The new Certificate will have the same face amount, issue age, date of
issue, and risk classifications as the original Certificate. See "THE
CERTIFICATE -- Conversion Privileges."

PARTIAL WITHDRAWAL

After the first Certificate year, you may make partial withdrawals in a minimum
amount of $500 from the Certificate Value. Under Option 1 or Option 3, 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.

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<PAGE>
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
Certificate year in excess of 10% of the Certificate 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 Certificate's outstanding
surrender charge will be reduced by the amount of the partial withdrawal charge
deducted. See "THE CERTIFICATE -- Partial Withdrawal" and "CHARGES AND
DEDUCTIONS -- Charges on Partial Withdrawal."

LOAN PRIVILEGE

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

Certificate 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, Certificate Value equal to the Certificate 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 Certificate
loan may have a permanent impact on the Certificate Value even though it is
eventually repaid. Although the loan amount is a part of the Certificate Value,
the Death Proceeds will be reduced by the amount of outstanding Debt at the time
of death.

Certificate loans will bear interest at a fixed rate of 8% per year, due and
payable in arrears at the end of each Certificate year. If interest is not paid
when due, it will be added to the loan balance. Certificate 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 "CERTIFICATE LOANS."

PREFERRED LOAN OPTION

A preferred loan option is available under the Certificates. The preferred loan
option will be available upon written request. It may be revoked by you at any
time. If this option has been selected, after the tenth certificate anniversary
Certificate Value in the General Account equal to the loan amount will be
credited with interest at an effective annual yield of at least 7.5%. Our
current practice is to credit a rate of interest equal to the rate being charged
for the preferred loan.

There is some uncertainty as to the tax treatment of preferred loans. Consult a
qualified tax adviser (and see "FEDERAL TAX CONSIDERATIONS"). THE PREFERRED LOAN
OPTION IS NOT AVAILABLE IN ALL STATES.

CERTIFICATE LAPSE AND REINSTATEMENT

The failure to make premium payments will not cause a Certificate 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 Certificate
Value. A 62-day grace period applies to each situation. 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 Certificate may be reinstated at any time within 3 years
after the expiration of the grace period and prior to the Final Premium Payment
Date. See "CERTIFICATE TERMINATION AND REINSTATEMENT."

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<PAGE>
TAX TREATMENT

A Certificate 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 Certificate Value
withdrawn from the Certificate 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 Certificate years, however, an
"interest first" rule applies to any distribution of cash that is required under
Section 7702 of the Internal Revenue Code (the "Code") because of a reduction in
benefits under the Certificate. Death Proceeds under the Certificate are
excludable from the gross income of the Beneficiary, but in some circumstances
the Death Proceeds or the Certificate Value may be subject to federal estate
tax. See "FEDERAL TAX CONSIDERATIONS -- Taxation of the Certificates."

A Certificate offered by this prospectus may be considered a "modified endowment
contract" if it fails a "seven-pay" test. A Certificate fails to satisfy the
seven-pay test if the cumulative premiums paid under the Certificate at any time
during the first seven Certificate years exceeds the sum of the net level
premiums that would have been paid, had the Certificate provided for paid-up
future benefits after the payment of seven level premiums. If the Certificate is
considered a modified endowment contract, all distributions (including
Certificate loans, partial withdrawals, surrenders or assignments) will be taxed
on an "income-first" basis. 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 Certificate summarizes the provisions of the group policy under which it is
issued, which has the purpose of providing insurance protection for the
Beneficiary named therein. References to Certificate rights and features are
intended to represent a Certificate Owner's rights and benefits under the group
policy. This Summary is intended to provide only a very brief overview of the
more significant aspects of the Certificate. Further detail is provided in this
prospectus, the Certificate and the group policy. No claim is made that the
Certificate is in any way similar or comparable to a systematic investment plan
of a mutual fund.

16
<PAGE>
PERFORMANCE INFORMATION

The Certificates were first offered to the public in 1995. 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 Certificates being offered
will be calculated as if the Certificates 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" Certificate that is
surrendered at the end of the applicable period. For more information on charges
under the Certificates, 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,
1996. "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.

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 Certificate
Owners and prospective Certificate Owners 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.

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.

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<PAGE>
TABLE I: SUB-ACCOUNT PERFORMANCE
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE CERTIFICATE

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 Certificate charges
(including surrender charges) for a representative Certificate. It is assumed
that the Insured is male, Age 36, standard (nonsmoker) Premium Class, that the
Face Amount of the Certificate is $250,000, that an annual premium payment of
$3,000 (approximately one Guideline Annual Premium) was made at the beginning of
each Certificate year, that ALL premiums were allocated to EACH Sub-Account
individually, and that there was a full surrender of the Certificate at the end
of the applicable period.

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/96

Years
10 Years Since
One-Year or Life Inception*
Total 5 of Fund (if less
Underlying Fund Return Years (if less) than 10)
<S> <C> <C> <C> <C>
Select International Equity Fund -100.00% N/A -71.72% 2.67
DGPF International Equity Series -100.00% N/A -15.73% 4.17
Fidelity VIP Overseas Portfolio -100.00% -13.33% -2.18% 9.92
T. Rowe Price International Stock Portfolio -100.00% N/A -46.42% 2.58
Select Aggressive Growth Fund -100.00% N/A -5.56% 4.36
Select Capital Appreciation Fund -100.00% N/A -59.92% 1.67
Small-Mid Cap Value Fund -100.00% N/A -18.87% 3.67
Select Growth Fund -100.00% N/A -14.02% 4.36
Growth Fund -100.00% -8.92% 5.64% 10.00
Fidelity VIP Growth Portfolio -100.00% -6.15% 6.04% 10.00
Equity Index Fund -100.00% -6.79% 2.08% 6.26
Select Growth and Income Fund -100.00% N/A -12.66% 4.36
Fidelity VIP Equity-Income Portfolio -100.00% -2.87% 4.49% 10.00
Fidelity VIP II Asset Manager Portfolio -100.00% -10.77% -1.93% 7.32
Fidelity VIP High Income Portfolio -100.00% -6.38% 1.58% 10.00
Investment Grade Income Fund -100.00% -15.62% -1.60% 10.00
Government Bond Fund -100.00% -17.40% -14.43% 5.35
Money Market Fund -100.00% -19.27% -4.41% 10.00

INVESCO VIF Industrial Income -100.00% N/A -35.55% 2.42
INVESCO VIF Total Return -100.00% N/A -40.21% 2.59
</TABLE>

* 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-Mid Cap Value; 5/01/94 for Select
International Equity; 4/28/95 for Select Capital Appreciation; 10/09/86 for
Fidelity VIP Equity-Income and Fidelity VIP Growth; 9/19/85 for Fidelity VIP
High Income; 1/28/87 for Fidelity VIP Overseas; 9/06/89 for Fidelity VIP II
Asset Manager; 10/29/92 for DGPF International Equity; and 3/31/94 for the T.
Rowe Price International Stock; 8/10/94 for the INVESCO VIF Industrial Income
and 6/2/94 for the INVESCO VIF Total Return.

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<PAGE>
TABLE II: SUB-ACCOUNT PERFORMANCE
EXCLUDING MONTHLY CERTIFICATE 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
CERTIFICATES 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 Certificate year and that ALL premiums were allocated to EACH
Sub-Account individually.

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/96

Years
10 Years Since
One-Year or Life Inception*
Total 5 of Fund (if less
Underlying Fund Return Years (if less) than 10)
<S> <C> <C> <C> <C>
Select International Equity Fund 21.15% N/A 12.94% 2.67
DGPF International Equity Series 19.25% N/A 11.72% 4.17
Fidelity VIP Overseas Portfolio 12.41% 8.44% 7.18% 9.92
T. Rowe Price International Stock Portfolio 13.95% N/A 9.22% 2.58
Select Aggressive Growth Fund 17.78% N/A 18.99% 4.36
Select Capital Appreciation Fund 8.09% N/A 27.50% 1.67
Small-Mid Cap Value Fund 27.69% N/A 14.11% 3.67
Select Growth Fund 21.23% N/A 11.92% 4.36
Growth Fund 19.41% 12.07% 14.04% 10.00
Fidelity VIP Growth Portfolio 13.96% 14.41% 14.06% 10.00
Equity Index Fund 21.50% 13.86% 16.99% 6.26
Select Growth and Income Fund 20.47% N/A 13.04% 4.36
Fidelity VIP Equity-Income Portfolio 13.54% 17.21% 13.00% 10.00
Fidelity VIP II Asset Manager Portfolio 13.85% 10.54% 10.96% 7.32
Fidelity VIP High Income Portfolio 13.29% 14.21% 10.40% 10.00
Investment Grade Income Fund 2.89% 6.59% 7.60% 10.00
Government Bond Fund 2.84% 5.17% 6.21% 5.35
Money Market Fund 4.67% 3.70% 5.18% 10.00

INVESCO VIF Industrial Income 21.48% N/A 20.67% 2.42
INVESCO VIF Total Return 11.45% N/A 13.22% 2.59
</TABLE>

19
<PAGE>
DESCRIPTION OF THE COMPANY, THE GROUP VEL ACCOUNT,
ALLMERICA INVESTMENT TRUST, VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II,
T. ROWE PRICE INTERNATIONAL SERIES,
DELAWARE GROUP PREMIUM FUND, INC.,
AND INVESCO VARIABLE INVESTMENT FUNDS, INC.

THE COMPANY

The Company is a life insurance company organized under the laws of Delaware in
July, 1974. Its Principal Office is located at 440 Lincoln Street, Worcester,
Massachusetts 01653, Telephone 508-855-1000. Prior to October 1, 1995, the
Company was known as SMA Life Assurance Company. The Company is subject to the
laws of the State of Delaware governing insurance companies and to regulation by
the Commissioner of Insurance of Delaware. In addition, the Company is subject
to the insurance laws and regulations of other states and jurisdictions in which
it is licensed to operate. The Company is an indirectly wholly-owned subsidiary
of First Allmerica Financial Life Insurance Company (formerly State Mutual Life
Assurance Company of America), 440 Lincoln Street, Worcester, Massachusetts.
First Allmerica, organized under the laws of Massachusetts in 1844, is the fifth
oldest life insurance company in America.

THE GROUP VEL ACCOUNT

The Group VEL Account was authorized by vote of the Board of Directors of the
Company on November 22, 1993. The Group VEL 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 Group VEL Account or the Company by the Commission.

The assets used to fund the variable portion of the Certificates are set aside
in the Group VEL Account and are kept separate and apart from the general assets
of the Company. Under Delaware law, assets equal to the reserves and other
liabilities of the Group VEL Account may not be charged with any liabilities
arising out of any other business of the Company. The Group VEL Account
currently has twenty 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 of the Allmerica Investment Trust, the
Variable Insurance Products Fund, the Variable Insurance Products Fund II, T.
Rowe Price International Series, Inc., the Delaware Group Premium Fund, Inc. or
the INVESCO Variable Investment Fund Inc. ("Underlying Investment Companies").

ALLMERICA INVESTMENT TRUST

Allmerica Investment Trust, formerly SMA 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 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 First Allmerica, the Company, or other
affiliated insurance companies. Eleven investment portfolios of the Trust
("Funds") are available under the Certificates, 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-Mid Cap Value Fund. The assets of each Fund are held
separate from the assets of the other Funds. Each Fund operates as a separate
investment vehicle and the

20
<PAGE>
income or losses of one Fund generally have no effect on the investment
performance of another Fund. Shares of the Trust are not offered to the general
public but solely to such separate accounts.

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

Various Fidelity companies perform certain activities required to operate
Fidelity VIP. FMR is one of America's largest investment management
organizations and has its principal business address at 82 Devonshire Street,
Boston MA. It is composed of a number of different companies, which provide a
variety of financial services and products. FMR is the original Fidelity
company, founded in 1946. It provides a number of mutual funds and other clients
with investment research and portfolio management services. The Portfolios of
Fidelity VIP as part of their operating expenses pay an investment management
fee to FMR. See "INVESTMENT ADVISORY SERVICES TO FIDELITY VIP AND FIDELITY VIP
II."

VARIABLE INSURANCE PRODUCTS FUND II

Variable Insurance Products Fund II ("Fidelity VIP II"), managed by FMR (see
"INVESTMENT ADVISORY SERVICES TO FIDELITY VIP AND FIDELITY VIP II"), 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 Certificates: the Fidelity VIP II Asset Manager Portfolio.

T. ROWE PRICE INTERNATIONAL SERIES, INC.

T. Rowe Price International Series, Inc. ("T. Rowe Price"), managed by Rowe
Price-Fleming International, Inc. ("Price-Fleming") (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 Certificates: the T. Rowe Price 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.
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 Certificates, 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."

INVESCO VARIABLE INVESTMENT FUNDS, INC.

INVESCO Variable Investment Funds, Inc. ("INVESCO VIF") is an open-end,
diversified, management investment company that was organized as a Maryland
Corporation on August 19, 1993 and is registered with the Commission under the
1940 Act. INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser of the
Industrial Income Fund and the Total Return Fund, the only Funds of INVESCO VIF
that are available under the Certificates. These two Funds are available only to
employees of INVESCO and its affiliates.

21
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

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

SELECT INTERNATIONAL EQUITY FUND -- 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.

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

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

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

SELECT AGGRESSIVE GROWTH FUND -- The Select Aggressive Growth Fund 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 CAPITAL APPRECIATION FUND -- 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 invests primarily in common stock
of industries and companies which are believed to be experiencing favorable
demand for their products and services, and which operate in a favorable
competitive environment and regulatory climate.

SMALL-MID CAP VALUE FUND -- The Small-Mid Cap Value Fund of the Trust seeks
long-term growth by investing principally in a diversified portfolio of common
stocks of small and mid-size companies whose securities at the time of purchase
are considered by the Sub-Adviser to be undervalued.

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

GROWTH FUND -- 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.

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

EQUITY INDEX FUND -- The Equity Index Fund of the Trust seeks to provide
investment results that correspond to the aggregate price and yield performance
of a representative selection of United States

22
<PAGE>
publicly traded common stocks. The Equity Index Fund seeks to achieve its
objective by attempting to replicate the aggregate price and yield performance
of the Standard & Poor's Composite Index of 500 Stocks.

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

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

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

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

INVESTMENT GRADE INCOME FUND -- 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
capital appreciation) as is consistent with prudent investment management.

GOVERNMENT BOND FUND -- 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.

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

THE FOLLOWING FUNDS ARE AVAILABLE ONLY TO EMPLOYEES OF INVESCO AND ITS
AFFILIATES:

INDUSTRIAL INCOME FUND OF INVESCO VIF -- The Industrial Income Fund VIF seeks
the best possible current income while following sound investment practices.
Capital growth potential is an additional but secondary consideration in the
selection of portfolio securities. The Industrial Income Fund Seeks to achieve
its objective by investing in securities which will provide a relatively high
yield and stable return and which, over a period of years, may also provide
capital appreciation.

TOTAL RETURN FUND OF INVESCO VIF -- The Total Return Fund of INVESCO VIF seeks a
high total return on investment through capital appreciation and current income
by investing in a combination of equity securities (consisting of common stocks
and, to a lesser degree, securities convertible into common stock) and fixed
income securities.

CERTAIN UNDERLYING FUNDS HAVE INVESTMENT OBJECTIVES AND/OR POLICIES SIMILAR TO
THOSE OF CERTAIN OTHER UNDERLYING FUNDS. THEREFORE, TO CHOOSE THE SUB-ACCOUNTS
WHICH WILL BEST MEET YOUR NEEDS AND OBJECTIVES, CAREFULLY READ THE PROSPECTUSES
OF THE TRUST, FIDELITY VIP, FIDELITY VIP II, T. ROWE PRICE,

23
<PAGE>
DGPF, AND INVESCO VIF ALONG WITH THIS PROSPECTUS. IN SOME STATES, INSURANCE
REGULATIONS MAY RESTRICT THE AVAILABILITY OF PARTICULAR SUB-ACCOUNTS.

If required in your state, 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. If you have Certificate 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 (1) the effective date of such
change in the investment policy or (2) the receipt of the notice of your right
to transfer. You may then change your premium and deduction allocation
percentages.

INVESTMENT ADVISORY SERVICES

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 First Allmerica, 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.

24
<PAGE>
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:

<TABLE>
<S> <C> <C>
Select International Equity Fund * 1.00%

Select Aggressive Growth Fund * 1.00%

Select Capital Appreciation Fund * 1.00%

Small-Mid Cap Value Fund First $100 million 1.00%
$100 - 250 million 0.85%
$250 - $500 million 0.80%
$500 - $750 million 0.75%
Over $750 million 0.70%

Select Growth Fund * 0.85%

Growth Fund First $50 million 0.60%
$50 - 250 million 0.50%
Over $250 million 0.35%

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

Select Growth and Income Fund * 0.75%

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

Government Bond Fund * 0.50%

Money Market Fund First $50 million 0.35%
$50 - 250 million 0.25%
Over $250 million 0.20%
</TABLE>

* For the Government Bond Fund, Select International Equity Fund, Select
Aggressive Growth Fund, Select Capital Appreciation Fund, Select Growth Fund,
and Select Growth and Income 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:

25
<PAGE>

<TABLE>
<CAPTION>
Sub-Adviser Fund Net Asset Value Rate
- ---------------------------------------- ---------------------------------------- ------------------------ ---------

<S> <C> <C> <C>
Bank of Ireland Asset Management (U.S.) Select International Equity Fund First $50 million 0.45%
Limited Next $50 million 0.40%
Over $100 million 0.30%

Nicholas-Applegate Capital Management, Select Aggressive Growth Fund ** 0.60%
L.P.

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

CRM Advisors, LLC Small-Mid Cap Value Fund First $100 million 0.60%
$100 - 250 million 0.50%
$250 - $500 million 0.40%
$500 - $750 million 0.375%
Over $750 million 0.35%

Putnam Investment Management, Inc. Select Growth Fund First $50 million 0.50%
$50 - 150 million 0.45%
$150 - 250 million 0.35%
$250 - 350 million 0.30%
Over $350 million 0.25%

Miller, Anderson & Sherrerd, LLP Growth Fund * *

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

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

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

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

Allmerica Asset Management, Inc. Money Market Fund ** 0.10%
</TABLE>

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

<TABLE>
<CAPTION>
Aggregate Average Net
Assets Rate
- --------------------------- ---------
<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, and Select Aggressive Growth 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 FIDELITY VIP AND FIDELITY VIP II

For managing investments and business affairs, each Portfolio pays a monthly fee
to FMR. The Prospectuses of Fidelity VIP and Fidelity 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.

26
<PAGE>

The Fidelity VIP High Income Portfolio pays a monthly fee to FMR 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 FMR. 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 Fidelity VIP 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 Fidelity VIP Equity-Income, Fidelity VIP Growth, Fidelity VIP Overseas and
the Fidelity VIP II Asset Manager 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 FMR. 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 Fidelity VIP Equity-Income
Portfolio, 0.30% for the Fidelity VIP Growth Portfolio, 0.45% for the
Fidelity VIP Overseas Portfolio and 0.25% for the Fidelity VIP II Asset
Manager 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 Fidelity VIP High Income Portfolio may have a fee of as high as 0.82%
of its average net assets. The Fidelity VIP Equity-Income Portfolio may have a
fee of as high as 0.72% of its average net assets. The Fidelity VIP Growth
Portfolio may have a fee of as high as 0.82% of its average net assets. The
Fidelity VIP Overseas Portfolio may have a fee of as high as 0.97% of its
average net assets. The Fidelity VIP II Asset Manager Portfolio may have a fee
of as high as 0.77% of its average net assets. The actual fee rate may be less
depending on the total assets in the funds advised by FMR.

INVESTMENT ADVISORY SERVICES TO T. ROWE PRICE

The Investment Adviser for the T. Rowe Price 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 $25 billion under management in its offices in
Baltimore, London, Tokyo and Hong Kong. To cover investment management and
operating expenses, the T. Rowe Price 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.

INVESTMENT ADVISORY SERVICES TO INVESCO VIF

INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for INVESCO VIF,
and is primarily responsible for providing various administration services and
supervising daily business affairs. INVESCO Trust Company serves as sub-adviser
to the Industrial Income Fund. INVESCO Capital Management, Inc. serves as
sub-adviser to the Total Return Fund.

The Industrial Income Fund and the Total Return Fund each pay INVESCO a monthly
fee equal to 0.75% annually of the first $500 million of the Fund's average
daily net assets; 0.65% of the next $500 million of

27
<PAGE>
the Fund's average net assets and 0.55% of the Fund's average net assets in
excess of $1 billion. The Prospectus of INVESCO VIF contains additional
information concerning other expenses paid by the Funds.

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 Group VEL 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 Certificate interest in a Sub-Account
without notice to the Certificate Owner and prior approval of the Commission and
state insurance authorities, to the extent required by the 1940 Act or other
applicable law. The Group VEL Account may, to the extent permitted by law,
purchase other securities for other policies or permit a conversion between
policies upon request by a Certificate Owner.

The Company also reserves the right to establish additional Sub-Accounts of the
Group VEL 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 Certificate Owners 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 Fidelity VIP and Fidelity VIP II, the
Portfolio of T. Rowe Price, the Series of DGPF, and the Funds of INVESCO VIF are
also issued to variable annuity and variable life separate accounts of other
unaffiliated insurance companies ("mixed and shared funding"). It is conceivable
that in the future such mixed funding or shared funding may be disadvantageous
for variable life contract owners or variable annuity contract owners. Although
the Company and the Underlying Investment Companies do not currently foresee any
such disadvantages to either variable life insurance contract owners or variable
annuity contract owners, the Company and the respective Trustees intend to
monitor events in order to identify any material conflicts between such contract
owners and to determine what action, if any, should be taken in response
thereto. If the Trustees were to conclude that separate funds should be
established for variable life and variable annuity separate accounts, the
Company will bear the attendant expenses.

If any of these substitutions or changes are made, the Company may by
appropriate endorsement change the Certificate to reflect the substitution or
change and will notify Certificate Owners of all such changes. If the Company
deems it to be in the best interest of Certificate Owners, and subject to any
approvals that may be required under applicable law, the Group VEL 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 Certificate
Owners with Certificate 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 Certificates, the Company reserves the right to do so.

28
<PAGE>
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 Group VEL Account that it owns and which are not attributable to
Certificates in the same proportion.

The number of votes which a Certificate Owner 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 Certificate Owner's Certificate
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 (1) to cause a change in the subclassification or investment
objective of one or more of the Underlying Funds or (2) 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 Certificate Owners 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 Certificate Owners.

THE CERTIFICATE

ENROLLMENT FORM FOR A CERTIFICATE

Upon receipt at its Principal Office of a completed enrollment form from a
prospective Certificate Owner, 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 Certificate Owner before a determination of insurability can be made. A
Certificate cannot be issued until this underwriting procedure has been
completed. The Company reserves the right to reject an enrollment form 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.

Pending completion of insurance underwriting and Certificate issuance
procedures, any initial premiums will be held in the Company's General Account.
If the enrollment form is approved and the Certificate 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 CERTIFICATE IS NOT ISSUED, THE PREMIUMS WILL BE RETURNED TO YOU
WITHOUT INTEREST.

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Market Fund of the Trust upon Issuance and Acceptance of the Certificate. All
Certificate Value will be allocated as you have chosen not later than the
expiration of the period during which you may exercise the "Right to Examine
Certificate" provision. If the "Payor Provision" is in effect, (see "CERTIFICATE
TERMINATION AND REINSTATEMENT -- Payor Provisions") Payor premiums which are not
"excess premiums" will be transferred to the Monthly Deduction Sub-Account not
later than 3 days after underwriting approval of the Certificate.

FREE LOOK PERIOD

The Certificate provides for an initial Free Look Period. You may cancel the
Certificate 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 enrollment form
for the Certificate is signed, (b) 10 days (20 or 30 days if required in your
state) after you receive the Certificate, or (c) 10 days after the Company mails
or personally delivers a Notice of Withdrawal Rights to you.

When you return the Certificate, the Company will mail within seven days a
refund. (The refund of any premium paid by check may be delayed until the check
has cleared your bank.) If your Certificate provides for a full refund of the
initial premium under its "Right to Examine Certificate" provision as required
in your state, your refund will be the greater of (a) your entire premium or (b)
the Certificate Value plus deductions under the Certificate or by the Underlying
Funds for taxes, charges or fees. If your Certificate does not provide for a
full refund of the initial premium, you will receive the Certificate Value in
the Group VEL Account, plus premiums paid, including fees and charges, minus the
amounts allocated to the Group VEL Account, plus the fees and charges imposed on
amounts in the Group VEL Account.

After an increase in Face Amount, a right to cancel the increase also applies.
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 enrollment form for the increase is signed,
(b) 10 days after you receive the new specification pages issued for the
increase, or (c) 10 days (20 or 30 days if required in your state) after the
Company mails or delivers a notice of withdrawal rights to you. Upon canceling
the increase, you will receive a credit to your Certificate 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

Once during the first 24 months after the Date of Issue or after the effective
date of an increase in Face Amount, while the Certificate is in force, you may
convert your Certificate without Evidence of Insurability to a flexible premium
adjustable life insurance policy with fixed and guaranteed minimum benefits.
Assuming that there have been no increases in the initial Face Amount, you can
accomplish this within 24 months after the Date of Issue by transferring,
without charge, the Certificate Value in the Group VEL Account to the General
Account and by simultaneously changing your premium allocation instructions to
allocate future premium payments to the General Account. Within 24 months after
the effective date of each increase, you can transfer, without charge, all or
part of the Certificate Value in the Group VEL 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.

Where required by state law, and at your request, the Company will issue a
flexible premium adjustable life insurance policy to you. The new policy will
have the same face amount, issue ages, dates of issue, and risk classifications
as the original Certificate.

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 Group VEL Account or
General Account as of date of receipt at the Principal Office.

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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 Certificate 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
Certificate 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 Processing Date, from your checking account and applied
as a premium under a Certificate. 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 cover the next Monthly Deduction plus loan interest
accrued, or the Certificate may lapse. See "CERTIFICATE TERMINATION AND
REINSTATEMENT."

In no event may the total of all premiums paid exceed the current maximum
premium limitations set forth in the Certificate, if 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
Death Benefit 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 Certificate during
a Certificate year. See "CERTIFICATE TERMINATION AND REINSTATEMENT."

ALLOCATION OF NET PREMIUMS

The Net Premium equals the premium paid less any premium expense charge. In the
enrollment form for a Certificate, you indicate the initial allocation of Net
Premiums among the General Account and the Sub-Accounts of the Group VEL
Account. You may allocate premiums to one or more Sub-Accounts, but may not have
Certificate Value in more than seven 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 Certificate Owner, 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 Certificate Owner identify themselves
by name and identify the Certificate Owner 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 Certificate 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. Certificate Owners should periodically review their
allocations of premiums and Certificate Value in light of market conditions and
overall financial planning requirements.

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TRANSFER PRIVILEGE

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

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

These rules are subject to change by the Company.

DOLLAR COST AVERAGING AND AUTOMATIC REBALANCING OPTIONS

You may have automatic transfers of at least $100 each made on a periodic basis
(a) from the Sub-Accounts which invests in the Money Market Fund and Government
Bond Fund of the Trust to one or more of the other Sub-Accounts ("Dollar Cost
Averaging Option") or (b) to automatically reallocate Certificate value among
the Sub-Accounts ("Automatic Rebalancing Option"). 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 Processing Date,
the automatic transfer will be processed on the next business day. The Dollar
Cost Averaging Option and the Automatic Rebalancing Option may not be in effect
at the same time.

TRANSFER PRIVILEGE SUBJECT TO POSSIBLE LIMITATIONS

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, (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.

The first twelve transfers in a Certificate year will be free of any charge.
Thereafter, a $10 transfer charge will be deducted from the amount transferred
for each transfer in that Certificate 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 twelve free transfers allowed in
each Certificate 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, Certificate
loan or material change in investment policy will not count towards the twelve
free transfers.

ELECTION OF DEATH BENEFIT OPTIONS

Federal tax law requires a minimum death benefit in relation to cash value for a
Certificate to qualify as life insurance. Under current Federal tax law, either
the Guideline Premium test or the Cash Value Accumulation test can be used to
determine if a Certificate complies with the definition of "life insurance" in
Section 7702 of the Code. At the time of application, the Employer may elect
either of the tests.

The Guideline Premium Test Limits the amount of premiums payable under a
Certificate to a certain amount for an insured of a particular age and sex.
Under the Guideline Premium test, the Certificate Owner may choose between Death
Benefit Option 1 and Option 2, as described below. After issuance of

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the Certificate, the Certificate Owner may change the selection from Option 1 to
Option 2 or vice versa. The Cash Value Accumulation Test requires that the Death
Benefit must be sufficient so that the cash surrender value, as defined in
Section 7702, does not at any time exceed the net single premium required to
fund the future benefits under the Certificate. If the Cash Value Accumulation
test is chosen by the employer, ONLY Death Benefit Option 3 will apply. Death
Benefits Option 1 and Option 2 are NOT available under the Cash Value
Accumulation test.

GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST

There are two main differences between the Guideline Premium test and the Cash
Value Accumulation test. First, the Guideline Premium test limits the amount of
premium that may be paid into a Certificate, while no such limits apply under
the Cash Value Accumulation test. Second, the factors that determine the minimum
Death Benefit relative to the Certificate Value are different. Required
increases in the minimum Death Benefit due to growth in Certificate Value will
generally be greater under the Cash Value Accumulation test than under the
Guideline Premium test. APPLICANTS FOR A POLICY SHOULD CONSULT A QUALIFIED TAX
ADVISER IN CHOOSING A DEATH BENEFIT ELECTION.

OPTION 1 -- LEVEL DEATH BENEFIT.

Under Option 1, the Death Benefit is equal to the greater of Face Amount or the
Minimum Death Benefit, as set forth in the table below. Under Option 1, the
Death Benefit will remain level unless the Minimum Death Benefit is greater than
the Face Amount, in which case the Death Benefit will vary as the Certificate
Value varies. Option 1 will offer the best opportunity for the Certificate Value
under a Certificate to increase without increasing the death benefit as quickly
as it might under the other options. The Death Benefit will never go below the
Face Amount.

OPTION 2 -- ADJUSTABLE DEATH BENEFIT.

Under Option 2, the Death Benefit is equal to the greater of the Face Amount
plus the Certificate Value or the Minimum Death Benefit, as set forth in the
Table below. The Death Benefit will therefore vary as the Certificate Value
changes, but will never be less than the Face Amount. Option 2 will offer the
best opportunity for the Certificate Owner who would like to have an increasing
death benefit as early as possible. The death benefit will increase whenever
there is an increase in the Certificate Value and will decrease whenever there
is a decrease in the Certificate Value, but will never go below the Face Amount.

OPTION 3 -- LEVEL DEATH BENEFIT WITH CASH VALUE ACCUMULATION TEST.

Under Option 3, the Death Benefit will equal the Face Amount, unless the
Certificate Value, multiplied by the applicable Option 3 Death Benefit Factor,
gives a higher Death Benefit. A complete list of Option 3 Death Benefit Factors
is set forth in the Certificate. The applicable Death Benefit Factor depends
upon the sex, risk classification, and then-attained age of the insured. The
Death Benefit Factor decreases slightly from year to year as the attained age of
the insured increases. Option 3 will offer the best opportunity for the
Certificate Owner who is looking for an increasing death benefit in later
Certificate years and/or would like to fund the Certificate at the "7-pay" limit
for the full seven years. When the Certificate Value multiplied by the
applicable Death Benefit Factor exceeds the Face Amount, the death benefit will
increase whenever there is an increase in the Certificate Value and will
decrease whenever there is a decrease in the Certificate Level, but will never
go below the Face Amount. OPTION 3 MAY NOT BE AVAILABLE IN ALL STATES.

DEATH PROCEEDS

As long as the Certificate remains in force (see "CERTIFICATE TERMINATION AND
REINSTATEMENT"), the Company will, upon due proof of the Insured's death, pay
the Death Proceeds of the Certificate 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

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circumstances. See "OTHER CERTIFICATE PROVISIONS -- Postponement of Payments."
The Death Proceeds may be received by the Beneficiary in a lump sum or under one
or more of the payment options the Company offers. See "APPENDIX B -- PAYMENT
OPTIONS." The Death Proceeds payable depends on the current Face Amount and the
Death Benefit Option that is in effect on the date of death. Prior to the Final
Premium Payment Date, the Death Proceeds are: (a) The Death Benefit provided
under Option 1, Option 2, or Option 3, whichever is 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
Certificate month in which the Insured dies. After the Final Premium Payment
Date, the Death Proceeds equal the surrender Value of the Certificate. 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.

MORE INFORMATION ABOUT DEATH BENEFIT OPTIONS 1 AND 2

If the Guideline Premium Test is chosen by the Employer, the Certificate Owner
may choose between Death Benefit Option 1 or Option 2. The Certificate Owner may
designate the desired Death Benefit Option in the enrollment form, and may
change the option once per Certificate year by written request. There is no
charge for a change in option.

MINIMUM DEATH BENEFIT UNDER OPTION 1 AND OPTION 2

The Minimum Death Benefit under Option 1 or Option 2 is equal to a percentage of
the Certificate Value as set forth below. The Minimum Death Benefit is
determined in accordance with the Code regulations to ensure that the
Certificate qualifies as a life insurance contract and that the insurance
proceeds may be excluded from the gross income of the Beneficiary.

MINIMUM DEATH BENEFIT TABLE
(OPTION 1 AND OPTION 2)

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

For any Face Amount, the amount of the Death Benefit and thus the Death Proceeds
will be greater under Option 2 than under Option 1, since the Certificate 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 Certificate Value will accumulate
will be slower, under Option 2 than under Option 1. See "CHARGES AND DEDUCTIONS
- -- Monthly Deduction From Certificate Value."

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<PAGE>
If you desire to have premium payments and investment performance reflected in
the amount of the Death Benefit, you should choose Option 2. If you desire
premium payments and investment performance reflected to the maximum extent in
the Certificate 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 Certificate with a $50,000 Face Amount will generally have a Death
Benefit equal to $50,000. However, because the Death Benefit must be equal to or
greater than 250% of Certificate Value, if at any time the Certificate Value
exceeds $20,000, the Death Benefit will exceed the $50,000 Face Amount. In this
example, each additional dollar of Certificate Value above $20,000 will increase
the Death Benefit by $2.50. For example, a Certificate with a Certificate Value
of $35,000 will have a Minimum Death Benefit of $87,500 ($35,000 x 2.50);
Certificate Value of $40,000 will produce a Minimum Death Benefit of $100,000
($40,000 x 2.50); and Certificate Value of $50,000 will produce a Minimum Death
Benefit of $125,000 ($50,000 x 2.50).

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

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 Death Benefit would not
exceed the $50,000 Face Amount unless the Certificate Value exceeded $27,027
(rather than $20,000), and each dollar then added to or taken from Certificate
Value would change the Death Benefit 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 Certificate with a Face Amount of $50,000 will generally
produce a Death Benefit of $50,000 plus Certificate Value. For example, a
Certificate with Certificate Value of $5,000 will produce a Death Benefit of
$55,000 ($50,000 + $5,000); Certificate Value of $10,000 will produce a Death
Benefit of $60,000 ($50,000 + $10,000); Certificate Value of $25,000 will
produce a Death Benefit of $75,000 ($50,000 + $25,000). However, the Death
Benefit must be at least 250% of the Certificate Value. Therefore, if the
Certificate Value is greater than $33,333, 250% of that amount will be the Death
Benefit, which will be greater than the Face Amount plus Certificate Value. In
this example, each additional dollar of Certificate Value above $33,333 will
increase the Death Benefit by $2.50. For example, if the Certificate Value is
$35,000, the Minimum Death Benefit will be $87,500 ($35,000 x 2.50); Certificate
Value of $40,000 will produce a Minimum Death Benefit of $100,000 ($40,000 x
2.50); and Certificate Value of $50,000 will produce a Minimum Death Benefit of
$125,000 ($50,000 x 2.50).

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

The applicable percentage becomes lower as the Insured's Age increases. If the
Insured's Age in the above example were 50, the Death Benefit must be at least
1.85 times the Certificate Value. The amount of the Death Benefit would be the
sum of the Certificate Value plus $50,000 unless the Certificate Value exceeded
$58,824 (rather than $33,333). Each dollar added to or subtracted from the
Certificate would change the Death Benefit by $1.85.

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<PAGE>
The Death Benefit under Option 2 will always be the greater of the Face Amount
plus Certificate Value or the Certificate Value multiplied by the applicable
percentage.

CHANGE IN DEATH BENEFIT OPTION

Generally, if Death Benefit Option 1 or Option 2 is in effect, the Death Benefit
Option in effect may be changed once each Certificate year by sending a written
request for change to the Principal Office. The effective date of any such
change will be the Monthly Processing Date on or following the date of receipt
of the request. No charges will be imposed on changes in Death Benefit Options.
IF OPTION 3 IS IN EFFECT, YOU MAY NOT CHANGE TO EITHER OPTION 1 OR OPTION 2.

If the Death Benefit Option is changed from Option 2 to Option 1, the Face
Amount will be increased to equal the Death Benefit 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 Certificate Value on the date of the
change). The amount of the Death Benefit will not be altered at the time of the
change. However, the change in option will affect the determination of the Death
Benefit from that point on, since the Certificate Value will no longer be added
to the Face Amount in determining the Death Benefit; the Death Benefit will
equal the new Face Amount (or, if higher, the Minimum Death Benefit). The cost
of insurance may be higher or lower than it otherwise would have been since any
increases or decreases in Certificate 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 Group VEL Account, changing
the Death Benefit 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 Death Benefit Option is changed from Option 1 to Option
2, the Face Amount will be decreased to equal the Death Benefit less the
Certificate 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 Death Benefit at the time of the
change, but will affect the determination of the Death Benefit from that point
on. Because the Certificate Value will be added to the new specified Face
Amount, the Death Benefit will vary with the Certificate Value. Thus, under
Option 2, the Insurance Amount at Risk will always equal the Face Amount unless
the Minimum Death Benefit is in effect. The cost of insurance may also be higher
or lower than it otherwise would have been without the change in Death Benefit
Option. See "CHARGES AND DEDUCTIONS -- Monthly Deduction From Certificate
Value."

A change in Death Benefit 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 Certificate Owner.
See "THE CERTIFICATE -- Premium Payments."

CHANGE IN FACE AMOUNT

Subject to certain limitations, you may increase or decrease the specified Face
Amount of a Certificate 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 Processing 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 an amount determined by the Company. This amount varies by group
but in no event will this amount exceed $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 Certificate Value is less than $50 plus an amount
equal to the sum of two Monthly Deductions. On the effective date of each
increase in Face Amount, a transaction charge of $2.50 per $1,000 of increase up
to $40, will be deducted

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<PAGE>
from Certificate Value for administrative costs. The effective date of the
increase will be the first Monthly Processing 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 Underwriting Classes (if more than one Underwriting Class applies), both
of which 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 Certificate Value, -- Surrender Charge."

After increasing the Face Amount, you will have the right (1) during a Free Look
Period, to have the increase canceled and the charges which would not have been
deducted but for the increase will be credited to the Certificate and (2) during
the first 24 months following the increase, to transfer any or all Certificate
Value to the General Account free of charge. See "THE CERTIFICATE -- 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. By current Company
practice, the Face Amount in force after any decrease may not be less than
$50,000. If, following a decrease in Face Amount, the Certificate would not
comply with the maximum premium limitation applicable under the Internal Revenue
Service Rules, the decrease may be limited or Certificate Value may be returned
to the Certificate Owner (at your election) to the extent necessary to meet the
requirements. A return of Certificate 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 Underwriting
Classes, both of which may affect a Certificate Owner's monthly cost of
insurance charges. See "CHARGES AND DEDUCTIONS -- Monthly Deduction From
Certificate 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: (a) the Face
Amount provided by the most recent increase; (b) the next most recent increases
successively; and (c) the initial Face Amount. This order will also be used to
determine whether a surrender charge will be deducted and in what amount. If the
Face Amount is decreased while the "Payor Provisions" apply (see "CERTIFICATE
TERMINATION AND REINSTATEMENT -- Termination"), the above order may be modified
to determine the cost of insurance charge. You may then reduce or eliminate any
Face Amount for which you are paying the insurance charges, on a last-in,
first-out basis, before you reduce or eliminate amounts of insurance which are
paid by the Payor.

If you request a decrease in the Face Amount, the amount of any surrender charge
deducted will reduce the current Certificate Value. On the effective date of
each decrease in Face Amount, a transaction charge of $2.50 per $1,000 of
decrease, up to a maximum of $40, will be deducted from Certificate Value for
administrative costs. You may specify one Sub-Account from which the transaction
charge and, if applicable, any surrender charge will be deducted. If you do not
specify a Sub-Account, the Company will make a Pro-Rata Allocation. The current
surrender charge will be reduced by the amount of any surrender charge deducted.
See "CHARGES AND DEDUCTIONS -- Surrender Charge."

CERTIFICATE VALUE AND SURRENDER VALUE

The Certificate 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 Units
in the Sub-Accounts. The Certificate Value is used in determining the Surrender
Value (the Certificate Value less any Debt and any surrender charge). See "THE
CERTIFICATE -- Surrender." There is no guaranteed minimum Certificate Value.
Because Certificate Value on any date depends upon a number of variables, it
cannot be predetermined.

Certificate 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-

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Accounts, any partial withdrawals, any loans, any loan repayments, any loan
interest paid or credited, and any charges assessed in connection with the
Certificate.

CALCULATION OF CERTIFICATE VALUE

The Certificate Value is determined on the Date of Issue and on each Valuation
Date. On the Date of Issue, the Certificate 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 Group VEL Account; see "THE
CERTIFICATE -- Enrollment Form For a Certificate") less any Monthly Deductions
due. On each Valuation Date after the Date of Issue the Certificate Value will
be:

(1) the sum of the values in each of the Sub-Accounts on the Valuation Date,
determined for each Sub-Account by multiplying the value of a Unit in that
Sub-Account on that date by the number of such Units allocated to the
Certificate; PLUS

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

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

THE UNIT

You allocate the Net Premiums among the Sub-Account(s). Allocations to the
Sub-Accounts are credited to the Certificate in the form of Units. Units are
credited separately for each Sub-Account.

The number of Units of each Sub-Account credited to the Certificate is equal to
the portion of the Net Premium allocated to the Sub-Account, divided by the
dollar value of the applicable Unit as of the Valuation Date the payment is
received at the Company's Principal Office. The number of Units will remain
fixed unless changed by a subsequent split of 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 Units equal in value to the amount deducted.

The dollar value of a 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 a Unit was set at $1.00
on the first Valuation Date for each Sub-Account. The dollar value of a Unit on
a given Valuation Date is determined by multiplying the dollar value of the
corresponding 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 Group VEL 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), 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; and

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

The net investment factor may be greater or less than one. Therefore, the value
of a Unit may increase or decrease. You bear the investment risk. Subject to
applicable state and federal laws, the Company reserves the right to change the
methodology used to determine the net investment factor.

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

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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 payment options then offered by the
Company. These payment options are also available at the Final Premium Payment
Date and if the Certificate is surrendered. If no election is made, the Company
will pay the Death Proceeds in a single sum. See "APPENDIX B -- PAYMENT
OPTIONS."

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 Certificate 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
Certificate Value."

SURRENDER

You may at any time surrender the Certificate and receive its Surrender Value.
The Surrender Value is the Certificate Value, less 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 Certificate are received at the
Principal Office. A surrender charge may be deducted when a Certificate is
surrendered if less than 15 full Certificate years have elapsed from the Date of
Issue of the Certificate 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 the Company offers. See "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 CERTIFICATE PROVISIONS --
Postponement of Payments."

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

PAID-UP INSURANCE OPTION

On written request, you may elect life insurance coverage, usually for a reduced
amount, for the life of the Insured with no further premiums due. The Paid-Up
Insurance will be the amount that the Surrender Value can purchase for a net
single premium at the Insured's age and underwriting class on the date this
option is elected. If the surrender value exceeds the net single premium, we
will pay the excess to you. The net single premium is based on the Commissioners
1980 Standard Ordinary Mortality Tables, Smoker or Non-Smoker (Table B for
unisex policies) with increases in the tables for non-standard risks. Interest
will not be less than 4.5%.

IF THE PAID-UP INSURANCE OPTION IS ELECTED, THE FOLLOWING CERTIFICATE OWNER
RIGHTS AND BENEFITS WILL BE AFFECTED:

- - As described above, the paid-up insurance benefit will be computed differently
from the net death benefit and the death benefit options will not apply

- - We will not allow transfers of Certificate Value from the fixed account back
to the Group VEL Account

- - You may not make further payments

- - You may not increase or decrease the Face Amount or make partial withdrawals

- - Riders will continue only with our consent

You may, after electing Paid-Up Insurance, surrender the Certificate for its net
cash value. The guaranteed cash value is the net single premium for the Paid-Up
Insurance at the Insured's attained age. The net cash

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<PAGE>

value is the cash value less any outstanding loan. We will transfer the
Certificate Value in the Group VEL Account to the fixed account on the date we
receive written request to elect the option.

On election of Paid-Up Insurance, the Certificate often will become a modified
endowment contract. If a Certificate becomes a modified endowment contract,
Certificate loans, partial withdrawals or surrender will receive unfavorable
federal tax treatment. See "FEDERAL TAX CONSIDERATIONS -- Modified Endowment
Contracts."

PARTIAL WITHDRAWAL

Any time after the first Certificate year, you may withdraw a portion of the
Surrender Value of your Certificate, 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 or Option 3, 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 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 CERTIFICATE 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 Certificate to compensate the
Company for providing the insurance benefits set forth in the Certificate and
any additional benefits added by rider, administering the Certificate, incurring
distribution expenses, and assuming certain risks in connection with the
Certificates. 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.

Certain of the charges and deductions described below may be reduced for
Certificates issued in connection with a specific group in accordance with the
Company's rules in effect as of the date an enrollment form for a Certificate is
approved. To qualify for such a reduction, a group must satisfy certain criteria
as to, for example, size of the group, expected number of participants and
anticipated premium payments from the group. Generally, the sales contacts and
effort, administrative costs and mortality cost per Certificate vary based on
such factors as the size of the group, the purposes for which Certificates are
purchased and certain characteristics of the group's members. The amount of
reduction and the criteria for qualification will reflect in the reduced sales
effort and administrative costs resulting from, and the different mortality
experience expected as a result of, sales to qualifying groups. The Company may
modify from time to time on a uniform basis both the amounts of reductions and
the criteria for qualification. Reductions in these charges will not be unfairly
discriminatory against any person, including the affected Certificate Owners and
all other Certificate Owners funded by the Group VEL Account.

PREMIUM EXPENSE CHARGE

A charge may be deducted from each premium payment for state and local premium
taxes paid by the Company. State premium taxes generally range from 0.75% to 5%,
while local premium taxes (if any) vary by jurisdiction within a state. The
Company guarantees that the charge for premium taxes will not exceed 10%. The
premium tax charge may change when either the applicable jurisdiction changes or
the tax rate

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within the applicable jurisdiction changes. The Company should be notified of
any change in address of the Insured as soon as possible.

Additional charges are made to compensate the Company for federal taxes imposed
for deferred acquisition costs ("DAC taxes") and for sales expenses related to
the Certificates. The DAC tax deduction may range from zero to 1% of premiums,
depending on the group to which the Certificate is issued. The charge for sales
expenses may range from zero to 5%. The sales charge may vary depending on the
group to which the Certificates are issued, including average number of
participants, average Face Amount of the Certificates, anticipated average
annual premiums and the actual sales expense incurred by the Company.

MONTHLY DEDUCTION FROM CERTIFICATE VALUE

On the Date of Issue and each Monthly Processing Date thereafter prior to the
Final Premium Payment Date, certain charges ("Monthly Deduction") will be
deducted from the Certificate Value. The Monthly Deduction includes a charge for
cost of insurance, a charge for the cost of any additional benefits provided by
rider and a charge for Certificate administrative expenses that may be up to
$10, depending on the group to which the Certificate is issued. The Monthly
Deduction may also include a charge for Group VEL administrative expenses and a
charge for mortality and expense risks. The Group VEL administrative charge may
continue for up to 10 Certificate years and may be up to 0.25% of Certificate
Value in each Sub-Account, depending on the group to which the Certificate was
issued. The mortality and expense risk charge may be up to 0.90% of Certificate
Value in each Sub-Account. The Monthly Deduction on or following the effective
date of a requested change in the Face Amount will also include a charge of
$2.50 per $1,000 of increase or decrease, to a maximum of $40, for
administrative costs associated with the change. See "THE CERTIFICATE -- Charge
for Change In Face Amount."

The Group VEL administrative charge and the mortality and expense risk charge
are assessed against each Sub-Account that generates a charge. In the event that
a charge is greater than the value of the Sub-Account to which it relates on a
Monthly Processing Date, the Company will make a Pro-Rata Allocation of the
unpaid balance.

Monthly Deductions are made on the Date of Issue and on each Monthly Processing
Date until the Final Premium Payment Date. No Monthly Deductions will be made on
or after the Final Premium Payment Date.

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 and from group to group.

CALCULATION OF THE CHARGE

If Death Benefit Option 2 is in effect, 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 Death Benefit Option 1 or Option 3 is
in effect, however, the applicable cost of insurance rate will be multiplied by
the initial Face Amount less the Certificate Value (minus charges for rider
benefits) at the beginning of the Certificate month. Thus, the cost of insurance
charge may be greater if Death Benefit Option 2 is in effect

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than if Death Benefit Option 1 or Option 3 is in effect, assuming the same Face
Amount in each case and assuming that the Minimum Death Benefit is not in
effect.

In other words, since the Death Benefit under Option 1 or Option 3 remains
constant while the Death Benefit under Option 2 varies with the Certificate
Value, any Certificate Value increases will reduce the insurance charge under
Option 1 or Option 3, but not under Option 2.

If Death Benefit Option 2 is in effect, the monthly insurance charge for each
increase in Face Amount (other than an increase caused by a change in Death
Benefit Option) will be equal to the cost of insurance rate applicable to that
increase multiplied by the increase in Face Amount. If Death Benefit Option 1 or
Option 3 is in effect, the applicable cost of insurance rate will be multiplied
by the increase in the Face Amount reduced by any Certificate Value (minus rider
charges) in excess of the initial Face Amount at the beginning of the
Certificate month.

If the Minimum Death Benefit is in effect under any Option, a monthly cost of
insurance charge will also be calculated for that portion of the Death Benefit
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 Minimum Death Benefit (Certificate Value times the applicable
percentage), MINUS

- the greater of the Face Amount or the Certificate Value under Death Benefit
Option 1 or Option 3, or

- the Face Amount plus the Certificate Value under Death Benefit Option 2.

When the Minimum Death Benefit is in effect, the cost under 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 CERTIFICATE -- Change In Face Amount: Decreases."

COST OF INSURANCE RATES

This Certificate is sold to eligible individuals who are members of a
non-qualified benefit plan having a minimum, depending on the group, of five or
more members. A portion of the initial face amount may be issued on a guaranteed
or simplified underwriting basis. The amount of this portion will be determined
for each group, and may vary based on characteristics within the group.

The determination of the underwriting class for the guaranteed or simplified
issue portion will, in part, be based on the type of group; the number of
persons eligible to participate in the plan; expected percentage of eligible
persons participating in the plan; and the amount of guaranteed or simplified
underwriting insurance to be issued. Larger groups, higher participation rates
and occupations with historically favorable mortality rates will generally
result in the individuals within that group being placed in a more favorable
underwriting class.

Cost of insurance rates are based on a blended unisex rate table, Age and
Underwriting 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 any
debt and any partial withdrawals and withdrawal charges. For those Certificates
issued on a unisex basis, sex-distinct rates do not apply. The cost of insurance
rates are determined at the beginning of each Certificate 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 Certificate. These guaranteed rates are based on the 1980 Commissioners
Standard Ordinary Mortality Tables (Mortality Table B, Smoker or Non-smoker, for
unisex Certificates) and the Insured's Age. The Tables used for this purpose may
set forth different mortality estimates for smokers and non-smokers. Any change
in the cost

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<PAGE>
of insurance rates will apply to all persons of the same insuring Age and
Underwriting Class whose Certificates have been in force for the same length of
time.

The Underwriting Class of an Insured will affect the cost of insurance rates.
The Company currently places Insureds into preferred Underwriting Classes,
standard Underwriting Classes and substandard Underwriting Classes. In an
otherwise identical Contract, an Insured in the preferred Underwriting Class
will have a lower cost of insurance than an Insured in a standard Underwriting
Class who, in turn, will have a lower cost of insurance than an Insured in a
substandard Underwriting Class with a higher mortality risk. The Underwriting
Classes may be divided into two categories or aggregated: 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
Underwriting Class. Any Insured with an Age at issuance under 18 will be
classified initially as regular, unless 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
Underwriting 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 Underwriting Class previously applicable. On the other hand, if the
Insured's Underwriting Class improves on an increase, the lower cost of
insurance rate generally will apply to the entire Insurance Amount at Risk.

MONTHLY CERTIFICATE ADMINISTRATIVE CHARGE

Prior to the Final Premium Payment Date a monthly Certificate administrative
charge of up to $10 per month, depending on the group to which the Certificate
was issued, will be deducted from the Certificate Value. This charge will be
used to compensate the Company for expenses incurred in the administration of
the Certificate and will compensate the Company for first year underwriting and
other start-up expenses incurred in connection with the Certificate. These
expenses include the cost of processing enrollment forms, conducting medical
examinations, determining insurability and the Insured's Underwriting Class, and
establishing Certificate records. The Company does not expect to derive a profit
from these charges.

MONTHLY GROUP VEL ACCOUNT ADMINISTRATIVE CHARGE

The Company can make an administrative charge on an annual basis of up to 0.25%
of the Certificate Value in each Sub-Account. The duration of this charge can be
for up to 10 years. This charge is designed to reimburse the Company for the
costs of administering the Group VEL Account and Sub-Accounts. The charge is not
expected to be a source of profit. The administrative expenses assumed by the
Company in connection with the Group VEL Account and 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.

MONTHLY MORTALITY AND EXPENSE RISK CHARGE

The Company can make a mortality and expense risk charge on an annual basis of
up to 0.90% of the Certificate 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 Certificates. The total charges may be different between
groups and increased or decreased within a group, subject to compliance with
applicable state and federal requirements, but may not exceed 0.90% on an annual
basis.

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
Certificates will

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exceed the amounts realized from the administrative charges provided in the
Certificates. 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.

CHARGES REFLECTED IN THE ASSETS OF THE GROUP VEL ACCOUNT

Because the Sub-Accounts purchase shares of the Underlying Investment Companies,
the value of the 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, Fidelity
VIP, Fidelity VIP II, T. Rowe Price, DGPF and INVESCO VIF 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 Certificate Value in the Sub-Accounts.

SURRENDER CHARGE

The Certificate may provide for a contingent surrender charge. A separate
surrender charge, described in more detail below, may be calculated upon the
issuance of the Certificate and for each increase in the Face Amount. The
surrender charge is comprised of a contingent deferred administrative charge and
a contingent deferred sales charge. The contingent deferred administrative
charge compensates the Company for expenses incurred in administering the
Certificate. The contingent deferred sales charge compensates the Company for
expenses relating to the distribution of the Certificate, including agents'
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
Certificate or a decrease in Face Amount. The duration of the surrender charge
may be up to 15 years from the Date of Issue or from the effective date of any
increase in the Face Amount. The maximum surrender charge calculated upon
issuance of the Certificate is an amount up 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 up to 50% (less any
premium expense charge not associated with state and local premium taxes) of
premiums received up to the Guideline Annual Premium. In accordance with
limitations under state insurance regulations, the amount of the maximum
surrender charge will not exceed a specified amount per thousand dollars of
initial Face Amount, as indicated in "APPENDIX C -- CALCULATION OF MAXIMUM
SURRENDER CHARGES." The maximum surrender charge remains level for up to 24
Certificate months, reduces uniformly each month for the balance of the
surrender charge period, and is zero thereafter. This reduction in the maximum
surrender charge will reduce the deferred sales charge and the deferred
administrative charge proportionately.

If you surrender the Certificate during the first two 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 30% (less any
premium expense charge not associated with state and local premium taxes) of
premiums received, up to one Guideline Annual Premium, plus 9% of premiums
received in excess of one Guideline Annual Premium. See "APPENDIX C --
CALCULATION OF MAXIMUM SURRENDER CHARGES."

A separate surrender charge may 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

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surrender charge for the increase is up to the sum of (a) plus (b), where (a) is
up to $8.50 per thousand dollars of increase, and (b) is a deferred sales charge
of up to 50% (less any premium expense charge not associated with state and
local premium taxes) of premiums associated with the increase, up to the
Guideline Annual Premium for the increase. In accordance with limitations under
state insurance regulations, the amount of the surrender charge will not exceed
a specified amount per thousand dollars of increase, as indicated in "APPENDIX C
- -- 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 remains level for up to 24
Certificate months, reduces uniformly each month for the balance of the
surrender charge period, and is zero thereafter. During the first two
Certificate 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 increase in Face Amount, 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 30% (less any
premium expense charge not associated with state and local premium taxes) 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. See "APPENDIX C -- 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 Certificate Value to the
increase and to allocate subsequent premium payments between the initial
Certificate 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 Certificate 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 Certificate Value associated with
the increase will equal the portion of Certificate 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 C -- 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.

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 Certificate. 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 Certificate), 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 Certificate year, partial withdrawals of Surrender Value may be
made. The minimum withdrawal is $500. Under Option 1 or Option 3, 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

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<PAGE>
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 Certificate Value. For
each partial withdrawal you may withdraw an amount equal to 10% of the
Certificate Value on the date the written withdrawal request is received by the
Company less the total of any prior withdrawals in that Certificate 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. There will be no partial
withdrawal charge if there is no surrender charge on the date of withdrawal
(i.e., 15 years have passed from the Date of Issue and from the effective date
of any increase in the Face Amount).

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

The Certificate'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:

- - first, the surrender charge for the most recent increase in Face Amount;

- - second, the surrender charge for the next most recent increase successively;

- - last, the surrender charge for the initial Face Amount.

See "APPENDIX C -- CALCULATION OF MAXIMUM SURRENDER CHARGES" for an example
illustrating the calculation of the charges on partial withdrawal and their
impact on the surrender charge(s).

TRANSFER CHARGES

The first twelve transfers in a Certificate 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 Certificate Year. See "THE CERTIFICATE --
Transfer Privilege."

You may have automatic transfers of at least $100 made on a periodic basis,
every 1, 2 or 3 months (a) from the Sub-Accounts 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 reallocate Certificate Value among the
Sub-Accounts. The first automatic transfer counts as one transfer towards the
twelve free transfers allowed in each Certificate 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
Certificate Value within 20 days of the Date of Issue of the Certificate, any
resulting transfer of Certificate Value from the Sub-Accounts to the General
Account will be free of charge, and in addition to the twelve free transfers in
a Certificate year. See "THE CERTIFICATE -- Conversion Privileges" and
"CERTIFICATE LOANS."

CHARGE FOR CHANGE IN FACE AMOUNT

For each increase or decrease in Face Amount you request, a transaction charge
of $2.50 per $1,000 of increase or decrease, to a maximum of $40, will be
deducted from Certificate Value to reimburse the Company for administrative
costs associated with the change. This charge is guaranteed not to increase and
the Company does not expect to make a profit on this charge.

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<PAGE>
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.

CERTIFICATE LOANS

Loans may be obtained by request to the Company on the sole security of this
Certificate. The total amount which may be borrowed is the Loan Value. In the
first Certificate year, the Loan Value is 75% of Certificate Value reduced by
applicable surrender charges as well as Monthly Deductions and interest on Debt
to the end of the Certificate year. The Loan Value in the second Certificate
year and thereafter is 90% of an amount equal to Certificate 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 CERTIFICATE PROVISIONS --
Postponement of Payments."

A Certificate 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. Certificate Value in each Sub-Account equal to the Certificate
loan allocated to such Sub-Account will be transferred to the General Account,
and the number of Units equal to the Certificate Value so transferred will be
canceled. This will reduce the Certificate Value in these Sub-Accounts. These
transactions are not treated as transfers for purposes of the transfer charge.

As long as the Certificate is in force, Certificate 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 (8% for preferred loans). NO ADDITIONAL
INTEREST WILL BE CREDITED TO SUCH CERTIFICATE VALUE.

PREFERRED LOAN OPTION

There is some uncertainty as to the tax treatment of preferred loans. Consult a
qualified tax adviser (and see "FEDERAL TAX CONSIDERATIONS"). THE PREFERRED LOAN
OPTION IS NOT AVAILABLE IN ALL STATES.

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 Certificate 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 Certificate Value in the General Account, the Company will transfer
Certificate Value equal to that excess loan amount from the Certificate 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 Certificate Value in each Sub-Account bears to the
total Certificate Value in all Sub-Accounts.

REPAYMENT OF DEBT

Loans may be repaid at any time prior to the lapse of the Certificate. Upon
repayment of Debt, the portion of the Certificate Value that is in the General
Account securing the Debt repaid will be allocated to the various Accounts and
increase the Certificate Value in such accounts in accordance with your
instructions.

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<PAGE>
If you do not make a repayment allocation, the Company will allocate Certificate
Value in accordance with your most recent premium allocation instructions;
provided, however, that loan repayments allocated to the Group VEL Account
cannot exceed Certificate Value previously transferred from the Group VEL
Account to secure the Debt.

If Debt exceeds the Certificate Value less the surrender charge, the Certificate
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 Certificate will terminate with
no value. See "CERTIFICATE TERMINATION AND REINSTATEMENT."

EFFECT OF CERTIFICATE LOANS

Although Certificate loans may be repaid at any time prior to the lapse of the
Certificate, Certificate loans will permanently affect the Certificate 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
Certificate Value in the General Account attributable to the loan.

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

CERTIFICATE TERMINATION AND REINSTATEMENT

TERMINATION

The failure to make premium payments will not cause the Certificate to lapse
unless:

- - the Surrender Value is insufficient to cover the next Monthly Deduction plus
loan interest accrued; or

- - if Debt exceeds the Certificate Value.

If one of these situations occurs, the Certificate 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.

Failure to make a sufficient payment within the grace period will result in
termination of the Certificate. If the Insured dies during the grace period, the
Death Proceeds will still be payable, but any Monthly Deductions due and unpaid
through the Certificate month in which the Insured dies and any other overdue
charges will be deducted from the Death Proceeds.

PAYOR PROVISIONS

Subject to approval in the state in which your Certificate was issued, if you
name a "Payor" in your enrollment form supplement, the following "Payor
Provisions" will apply:

The Payor may designate what portion, if any, of each payment of a premium is
"excess premium." You may allocate the excess premium among General Account and
Sub-Accounts. The remaining Payor's premium which is not excess premium
("Payor's premium") will automatically be allocated to the Monthly Deduction
Sub-Account, from which the Monthly Deduction charges will be made. Payor
premiums are initially held in the General Account, and will be transferred to
the Monthly Deduction Sub-Account not later than 3 days after underwriting
approval of the Certificate. No Certificate loans, partial withdrawals or
transfers may be made from the amount in the Monthly Deduction Sub-Account
attributable to Payor's premiums.

If the amount in the Monthly Deduction Sub-Account attributable to Payor's
premiums is insufficient to cover the next Monthly Deduction, the Company will
send to the Payor a notice of the due date and amount of premium which is due.
The premium may be paid during a grace period of 62 days, beginning on the
premium due date. If the necessary premium is not received by the Company within
31 days of the

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<PAGE>
end of the grace period, a second notice will be sent to the Payor. A 31-day
grace period notice at this time will also be sent to you if your Certificate
Value is insufficient to cover the Monthly Deductions then due.

If the amount in Monthly Deduction Sub-Account attributable to Payor premiums is
insufficient to cover the Monthly Deductions due at the end of the grace period,
the balance of such Monthly Deductions will be withdrawn on a Pro-Rata
Allocation from the Certificate Value, if any, in the General Account and the
Sub-Accounts.

A lapse occurs if the Certificate Value is insufficient, at the end of the grace
period, to pay the Monthly Deductions which are due. The Certificate terminates
on the date of lapse. Any death benefit payable during the grace period will be
reduced by any overdue charges.

The above Payor Provisions, if applicable, are in lieu of the grace-period
notice and default provisions applicable when the Surrender Value is
insufficient to cover the next Monthly Deduction plus loan interest accrued.
However, they do not apply if Debt exceeds the Certificate Value. See the
discussion under "Termination," above. You or the Payor may upon written request
discontinue the above Payor Provisions. If the Payor makes a written request to
discontinue the Payor Provisions, we will send you a notice of the
discontinuance to your last known address.

REINSTATEMENT

If the Certificate has not been surrendered and the Insured is alive, the
terminated Certificate 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 Processing Date following the date you submit the
following to the Company:

- - a written enrollment form for reinstatement,

- - Evidence of Insurability; and

- - a premium that, after the deduction of the premium expense charge, is large
enough to cover the Monthly Deductions for the three-month period beginning on
the date of reinstatement.

SURRENDER CHARGE

The surrender charge on the date of reinstatement is the surrender charge which
should have been in effect had the Certificate remained in force from the Date
of Issue.

CERTIFICATE VALUE ON REINSTATEMENT

The Certificate Value on the date of reinstatement is:

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

- - an amount equal to the Certificate Value less Debt on the date of default;
MINUS

- - the Monthly Deduction due on the date of reinstatement. You may reinstate any
Debt outstanding on the date of default or foreclosure.

OTHER CERTIFICATE PROVISIONS

CERTIFICATE OWNER

The Certificate Owner is the Insured unless another Certificate Owner has been
named in the enrollment form for the Certificate. The Certificate Owner is
generally entitled to exercise all rights under a Certificate 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.

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<PAGE>
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 Certificate,
the Beneficiary has no rights in the Certificate 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 proportionately.

ASSIGNMENT

The owner may assign a Certificate as collateral or make an absolute assignment
of the Certificate. All rights under the Certificate 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 Certificate. 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.

THE FOLLOWING CERTIFICATE PROVISIONS MAY VARY BY STATE:

INCONTESTABILITY

The Company will not contest the validity of a Certificate 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 rider or any increase in the Face
Amount after such rider or increase 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, while sane
or insane, within two years from the Date of Issue. Instead, the Company will
pay the Beneficiary an amount equal to all premiums paid for the Certificate,
without interest, less any outstanding Debt and less any partial withdrawals. If
the Insured commits suicide, while sane or insane, within two years from the
effective date of any increase in the Death Benefit, 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

If the Insured's Age as stated in the enrollment form for a Certificate is not
correct, benefits under a Certificate will be adjusted to reflect the correct
Age, 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. In no event will the Death Benefit be reduced to
less than the Minimum Death Benefit.

POSTPONEMENT OF PAYMENTS

Payments of any amount due from the Group VEL Account upon surrender, partial
withdrawals, or death of the Insured, as well as payments of a Certificate loan
and transfers may be postponed whenever: (i) the New York Stock Exchange is
closed other than customary weekend and holiday closings, or trading on the New
York Stock Exchange is restricted as determined by the SEC or (ii) 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 Group VEL Account's net assets. Payments under the

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<PAGE>
Certificate 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 Certificate loans and transfers from the General Account,
for a period not to exceed six months.

DIRECTORS AND PRINCIPAL OFFICERS

<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION(S) DURING
WITH COMPANY PAST FIVE YEARS
- ----------------------------------------- -------------------------------------------------
<S> <C>
Bruce C. Anderson Director of First Allmerica since 1996; Vice
Director President, First Allmerica

Abigail M. Armstrong Secretary of First Allmerica since 1996; Counsel,
Secretary and Counsel First Allmerica

John P. Kavanaugh Director and Chief Investment Officer of First
Director, Vice President and Chief Allmerica since 1996; Vice President, First
Investment Officer Allmerica since 1991

John F. Kelly Director of First Allmerica since 1996; Senior
Director Vice President, General Counsel and Assistant
Secretary, First Allmerica

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

James R. McAuliffe Director of First Allmerica since 1996; President
Director and CEO, Citizens Insurance Company of America
since 1994; Vice President 1982 to 1994 and
Chief Investment Officer, First Allmerica 1986
to 1994

John F. O'Brien Director, Chairman of the Board, President and
Director and Chairman of the Board Chief Executive Officer, First Allmerica since
1989

Edward J. Parry, III Director and Chief Financial Officer of First
Director, Vice President, Chief Allmerica since 1996; Vice President and
Financial Officer and Treasurer Treasurer, First Allmerica since 1993

Richard M. Reilly Director of First Allmerica since 1996; Vice
Director, President and Chief Executive President, First Allmerica since 1990; Director,
Officer Allmerica Investments, Inc. since 1990; Director
and President, Allmerica Investment Management
Company, Inc. since 1990

Larry C. Renfro Director of First Allmerica since 1996; Vice
Director President, First Allmerica since 1990

Eric A. Simonsen Director of First Allmerica since 1996; Vice
Director and Vice President President, First Allmerica since 1990; Chief
Financial Officer, First Allmerica 1990 to 1996

Phillip E. Soule Director of First Allmerica since 1996; Vice
Director President, First Allmerica
</TABLE>

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<PAGE>
DISTRIBUTION

Allmerica Investments, Inc., an indirect subsidiary of First Allmerica, acts as
the principal underwriter of the Certificates pursuant to a Sales and
Administrative Services Agreement with the Company and the Group VEL 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 Certificates are sold by agents of the Company
who are registered representatives of Allmerica Investments, Inc. or of
independent broker-dealers.

The Company pays commissions to broker-dealers which sell the Certificates based
on a commission schedule. After issue of the Certificate or an increase in Face
Amount, commissions may be up to 25% of the first year premiums up to a basic
premium amount established by the Company. Thereafter, commissions may be up to
10% of any additional premiums. Alternative commission schedules are available
with lower initial commission amounts based on premium payments, plus ongoing
annual compensation of up to 0.50% of Certificate Value. 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 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 2.5% of first year or
4% of renewal premiums. To the extent permitted by NASD rules, promotional
incentives or payments may also be provided to broker-dealers based on sales
volumes, the assumption of wholesaling functions or other sales-related
criteria. Other payments may be made for other services that do not directly
involve the sale of the Certificates. These services may include the recruitment
and training of personnel, production of promotional literature, and similar
services.

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 the Certificate
Owners or to the Group VEL Account. Any surrender charge assessed on a
Certificate 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.

SERVICES

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

REPORTS

The Company will maintain the records relating to the Group VEL Account. You
will be promptly sent statements of significant transactions such as premium
payments (other than payments made pursuant to the MAP procedure), changes in
specified Face Amount, changes in Death Benefit 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. The annual
statement will summarize all of the above transactions and deductions of charges
during

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<PAGE>
the Certificate year. It will also set forth the status of the Death Proceeds,
Certificate Value, Surrender Value, amounts in the Sub-Accounts and General
Account, and any Certificate loan(s).

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

LEGAL PROCEEDINGS

There are no legal proceedings pending to which the Group VEL Account is a
party, or to which the assets of the Group VEL 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 Group VEL Account.

FURTHER INFORMATION

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

INDEPENDENT ACCOUNTANTS

The financial statements of Allmerica Financial Life Insurance and Annuity
Company prepared in accordance with generally accepted accounting principles as
of and for the year ended December 31, 1996 and the statutory basis financial
statements of Allmerica Financial Life Insurance and Annuity Company for 1995
and each of the three years ended December 31, 1995 and the financial statements
for the Group VEL Account of the Company as of December 31, 1996 and for the
periods indicated included in this Prospectus constituting part of this
Registration Statement, have been so included in reliance on the reports of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

The financial statements of Allmerica Financial Insurance and Annuity Company
included herein should be considered only as bearing on the ability of Allmerica
Financial Life Insurance and Annuity Company to meet its obligations under the
Policies.

FEDERAL TAX CONSIDERATIONS

The effect of federal income taxes on the value of a Certificate, 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 Certificates. 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.

It should be recognized that the following summary of federal income tax aspects
of amounts received under the Certificates 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 Certificate Owner is a corporation or the Trustee of an employee benefit
plan. A qualified tax adviser should always be consulted with regard to the
enrollment form of law to individual circumstances.

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<PAGE>
THE COMPANY AND THE GROUP VEL ACCOUNT

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

The Company will review periodically the question of a charge to the Group VEL
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 Group VEL
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
Group VEL Account.

TAXATION OF THE CERTIFICATES

The Company believes that the Certificates 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 Certificate 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 Certificate Value is not
taxable until received by the Certificate Owner or the Certificate Owner's
designee. 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 Certificate 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 Certificate Owners 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 Certificates may need to be modified to comply with
such regulations. For these reasons, the Certificates or the Company's
administrative rules may be modified as necessary to prevent a Certificate Owner
from being considered the owner of the assets of the Group VEL Account.

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

POLICY LOANS

The Company believes that non-preferred loans received under a Certificate will
be treated as indebtedness of the Certificate Owner for federal income tax
purposes. Under current law, these loans will not

54
<PAGE>
constitute income for the Certificate Owner while the Certificate is in force.
See "MODIFIED ENDOWMENT CONTRACTS." However, there is a risk that a preferred
loan may be characterized by the IRS as a withdrawal and taxed accordingly. At
the present time, the IRS has not issued any guidance on whether loans with the
attributes of a preferred loan should be treated differently than a
non-preferred loan. This lack of specific guidance makes the tax treatment of
preferred loans uncertain. In the event IRS guidelines are issued in the future,
you may revoke your request for a preferred loan.

Section 264 of the Code restricts the deduction of interest on Policy loans.
Consumer interest paid on Policy loans under an individually-owned Policy is not
tax deductible. Generally, no tax deduction for interest is allowed on Policy
loans, if the insured is an officer or employee of, or is financially interested
in, any business carried on by the taxpayer. There is an exception to this rule
which permits a deduction for interest on loans up to $50,000 related to any
policies covering the greater of (1) five individuals or (2) the lesser of (a)
5% of the total number of officers and employees of the corporation or (b) 20
individuals.

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

If a Certificate is considered a modified endowment contract, all distributions
under the Certificate will be taxed on an "income first" basis. Most
distributions received by a Certificate Owner directly or indirectly (including
loans, withdrawals, partial surrenders, or the assignment or pledge of any
portion of the value of the Certificate) will be includible in gross income to
the extent that the cash Surrender Value of the Certificate exceeds the
Certificate Owner's investment in the contract. Any additional amounts will be
treated as a return of capital to the extent of the Certificate Owner's basis in
the Certificate. 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 Certificate
Owner during any 12-month period will be treated as a single modified endowment
contract in determining taxable distributions.

Currently, each Certificate is reviewed when premiums are received to determine
if it satisfies the seven-pay test. If the Certificate does not satisfy the
seven-pay test, the Company will notify the Certificate Owner of the option of
requesting a refund of the excess premium. The refund process must be completed
within 60 days after the Certificate anniversary, or the Certificate 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 Certificate
Value to the General Account. Because of exemption and exclusionary provisions
in the securities law, 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 Certificate 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

55
<PAGE>
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 Certificate Owner's
Certificate Value in the General Account will not be less than an annual rate of
4% ("Guaranteed Minimum Rate"). (Under a Certificate, the Guaranteed Minimum
Rate may be higher than 4%.)

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 the Guaranteed Minimum Rate, 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
Certificate Value associated with the premium becomes security for a Certificate
loan. AFTER SUCH INITIAL ONE YEAR GUARANTEE OF INTEREST ON NET PREMIUM, ANY
INTEREST CREDITED ON THE CERTIFICATE 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 CERTIFICATE OWNER 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 Certificate Value
which is equal to Debt. However, such Certificate Value will be credited
interest at an effective annual yield of at least 6%.

The Company guarantees that, on each Monthly Processing Date, the Certificate
Value in the General Account will be the amount of the Net Premiums allocated or
Certificate Value transferred to the General Account, plus interest at the
Guaranteed Minimum Rate, plus any excess interest which the Company credits,
less the sum of all Certificate charges allocable to the General Account and any
amounts deducted from the General Account in connection with loans, partial
withdrawals, surrenders or transfers.

THE CERTIFICATE

This prospectus describes certificates issued under a flexible premium variable
life insurance Certificate and is generally intended to serve as a disclosure
document only for the aspects of the Certificate relating to the Group VEL
Account. For complete details regarding the General Account, see the Certificate
itself.

TRANSFERS, SURRENDERS, PARTIAL WITHDRAWALS AND CERTIFICATE LOANS

If a Certificate is surrendered or if a partial withdrawal is made, a surrender
charge or partial withdrawal charge, as applicable, is imposed if such event
occurs before the Certificate, or an increase in Face Amount, has been in force
for 15 Certificate years. 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 Certificate. Partial withdrawals are made on a
last-in/first-out basis from Certificate Value allocated to the General Account.

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

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

56
<PAGE>
Transfers, surrenders, partial withdrawals, Death Proceeds and Certificate loans
payable from the General Account may be delayed up to six months. However, if
payment is delayed for 30 days or more, the Company will pay interest at least
equal to an effective annual yield of 3% 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 Group VEL Account are included
in this prospectus beginning immediately after this section. The financial
statements of the Company and for the Group VEL Account should be considered
only as bearing on the ability of the Company to meet its obligations under the
Certificate. They should not be considered as bearing on the investment
performance of the assets held in the Group VEL Account.

57
<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY

FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the accompanying balance sheet and the related statement of
income, of shareholder's equity, and of cash flows present fairly, in all
material respects, the financial position of Allmerica Financial Life Insurance
and Annuity Company at December 31, 1996, and the results of their operations
and their cash flows for the year 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 audit. We conducted our audit 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 audit provides a
reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

Price Waterhouse LLP

Boston, Massachusetts
February 3, 1997
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
STATEMENT OF INCOME

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
(IN MILLIONS) 1996
----------------------------------------------- ---------
<S> <C>
REVENUES
Premiums..................................... $ 32.7
Universal life and investment product
policy fees............................... 176.2
Net investment income...................... 171.7
Net realized investment losses............. (3.6)
Other income............................... 0.9
---------
Total revenues......................... 377.9
---------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses....................... 192.6
Policy acquisition expenses................ 49.9
Other operating expenses................... 86.6
---------
Total benefits, losses and expenses.... 329.1
---------
Income before federal income taxes............. 48.8
---------
FEDERAL INCOME TAX EXPENSE (BENEFIT)
Current.................................... 26.9
Deferred................................... (9.8)
---------
Total federal income tax expense....... 17.1
---------
Net income..................................... $ 31.7
---------
---------
</TABLE>

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

F-1
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1996
-------------------------------------------------------- ----------
<S> <C>
ASSETS
Investments:
Fixed maturities-at fair value (amortized cost of
$1,660.2).......................................... $ 1,698.0
Equity securities-at fair value (cost of $33.0)..... 41.5
Mortgage loans...................................... 221.6
Real estate......................................... 26.1
Policy loans........................................ 131.7
Other long-term investments......................... 7.9
----------
Total investments............................... 2,126.8
----------
Cash and cash equivalents............................. 18.8
Accrued investment income............................. 37.7
Deferred policy acquisition costs..................... 632.7
----------
Reinsurance receivables:
Future policy benefits.............................. 68.1
Outstanding claims, losses and loss adjustment
expenses........................................... 3.5
Other............................................... 0.9
----------
Total reinsurance receivables................... 72.5
----------
Other assets.......................................... 8.2
Separate account assets............................... 4,524.0
----------
Total assets.................................... $ 7,420.7
----------
----------
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,163.0
Outstanding claims, losses and loss adjustment
expenses........................................... 15.4
Unearned premiums................................... 2.7
Contractholder deposit funds and other policy
liabilities........................................ 32.8
----------
Total policy liabilities and accruals........... 2,213.9
----------
Expenses and taxes payable............................ 77.3
Deferred federal income taxes......................... 60.2
Separate account liabilities.......................... 4,523.6
----------
Total liabilities............................... 6,875.0
----------
Commitments and contingencies (Note 12)
SHAREHOLDER'S EQUITY
Common stock, $1,000 par value, 10,000 shares
authorized, 2,518 shares issued and outstanding..... 2.5
Additional paid-in-capital............................ 346.3
Unrealized appreciation on investments, net........... 20.5
Retained earnings..................................... 176.4
----------
Total shareholder's equity...................... 545.7
----------
Total liabilities and shareholder's equity...... $ 7,420.7
----------
----------
</TABLE>

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

F-2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
STATEMENTS OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
(IN MILLIONS) 1996
----------------------------------------------- ---------
<S> <C>
COMMON STOCK
Balance at beginning of year............... $ 2.5
Issued during year......................... --
---------
Balance at end of year..................... 2.5
---------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year............... 324.3
Contributed from parent.................... 22.0
---------
Balance at end of year..................... 346.3
---------
RETAINED EARNINGS
Balance at beginning of year............... 144.7
Net income................................. 31.7
---------
Balance at end of year..................... 176.4
---------
NET UNREALIZED APPRECIATION (DEPRECIATION) ON
INVESTMENTS
Balance at beginning of year............... 23.8
---------
Appreciation (depreciation) during the
period:
Net appreciation (depreciation) on
available-for-sale securities.......... (5.1)
(Provision) benefit for deferred
federal income taxes................... 1.8
---------
(3.3)
---------
Balance at end of year................. 20.5
---------
Total shareholder's equity......... $ 545.7
---------
---------
</TABLE>

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

F-3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
(IN MILLIONS) 1996
-------------------------------------------- ----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 31.7
Adjustments to reconcile net income to
net cash provided by operating
activities:
Net realized losses................. 3.6
Net amortization and depreciation... 3.5
Deferred federal income taxes
(benefits).......................... (9.8)
Change in deferred policy
acquisition costs................... (66.8)
Change in premiums and notes
receivable, net of reinsurance
payable............................. (0.2)
Change in accrued investment
income.............................. 1.2
Change in policy liabilities and
accruals, net....................... (39.9)
Change in reinsurance receivable.... (1.5)
Change in expenses and taxes
payable............................. 32.3
Separate account activity, net...... 10.5
Other, net.......................... (0.2)
----------
Net cash provided by operating
activities................... (35.6)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................. 809.4
Proceeds from disposals of equity
securities............................. 1.5
Proceeds from disposals of other
investments............................ 17.5
Proceeds from mortgages matured or
collected.............................. 34.0
Purchase of available-for-sale fixed
maturities............................. (795.8)
Purchase of equity securities........... (13.2)
Purchase of other investments........... (36.2)
Other investing activities, net......... (2.1)
----------
Net cash (used in) provided by
investing activities......... 15.1
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock and
capital paid in........................ 22.0
----------
Net cash provided by financing
activities................... 22.0
----------
Net change in cash and cash equivalents..... 1.5
Cash and cash equivalents, beginning of
year....................................... 17.3
----------
Cash and cash equivalents, end of year...... $ 18.8
----------
----------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................... $ 3.4
Income taxes paid....................... $ 16.5
</TABLE>

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

F-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION

Allmerica Financial Life Insurance and Annuity Company ("AFLIAC" or the
"Company") is organized as a stock life insurance company, and is a wholly-owned
subsidiary of SMA Financial Corporation, which is wholly owned by First
Allmerica Financial Life Insurance Company ("FAFLIC"). FAFLIC is a wholly-owned
subsidiary of Allmerica Financial Corporation ("AFC").

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

The preparation of financial statements in conformity with generally
accepted accounting principles requires 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. VALUATION OF INVESTMENTS

The Company classifies all debt and equity securities as available-for-sale.

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.

F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

C. FINANCIAL INSTRUMENTS

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

D. CASH AND CASH EQUIVALENTS

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

E. DEFERRED POLICY ACQUISITION COSTS

Acquisition costs consist of commissions, underwriting costs and other
costs, which vary with, and are primarily related to, the production of
revenues. Acquisition costs related to universal life and group variable
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.

F. SEPARATE ACCOUNTS

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

G. POLICY LIABILITIES AND ACCRUALS

Future policy benefits are liabilities for life, 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. 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.

F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

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

Liabilities for outstanding claims, losses and loss adjustment expenses are
estimates of payments to be made for reported claims and estimates of claims
incurred but not reported. These liabilities are determined using case basis
evaluations and statistical analyses and represent estimates of the ultimate
cost of all claims incurred but not paid. These estimates are continually
reviewed and adjusted as necessary; such adjustments are reflected in current
operations.

Premiums for individual 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.

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

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

H. PREMIUM AND FEE REVENUE AND RELATED EXPENSES

Premiums for individual life and health insurance and individual annuity
products, excluding universal life and investment-related products, are
considered revenue when due. Individual 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 and group variable 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 benefits in excess of fund values and net investment income credited to
universal life fund values.

I. FEDERAL INCOME TAXES

AFC, FAFLIC, AFLIAC and FAFLIC's non-insurance domestic subsidiaries file a
life-nonlife 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.

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

Deferred income taxes are generally recognized when assets and liabilities
have different values for financial statement and tax reporting purposes, and
for other temporary taxable and deductible differences

F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

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.

J. 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. The adoption of this statement has not
had a material effect on the financial statements.

2. INVESTMENTS

A. SUMMARY OF INVESTMENTS

The Company accounts for its investments, all of which are classified as
available-for-sale, in accordance with the provisions of SFAS No. 115. The
amortized cost and fair value of available-for-sale fixed maturities and equity
securities were as follows:

<TABLE>
<CAPTION>
1996
--------------------------------------------
GROSS GROSS
DECEMBER 31 AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ---------------------------------------- ---------- -------- --------- --------

<S> <C> <C> <C> <C>
U.S. Treasury securities and U.S.
government and agency securities....... $ 15.7 $ 0.5 $ 0.2 $ 16.0
States and political subdivisions....... 8.9 1.6 -- 10.5
Foreign governments..................... 53.2 2.9 -- 56.1
Corporate fixed maturities.............. 1,437.2 38.6 6.1 1,469.7
Mortgage-backed securities.............. 145.2 2.2 1.7 145.7
---------- -------- --------- --------
Total fixed maturities
available-for-sale..................... $1,660.2 $45.8 $ 8.0 $1,698.0
---------- -------- --------- --------
Equity securities....................... $ 33.0 $10.2 $ 1.7 $ 41.5
---------- -------- --------- --------
---------- -------- --------- --------
</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, 1996, the amortized cost and market value of assets
on deposit were $284.9 million and $292.2 million, respectively. In addition,
fixed maturities, excluding those securities on deposit in New York, with an
amortized cost of $4.2 million were on deposit with various state and
governmental authorities at December 31, 1996.

There were no contractual fixed maturity investment commitments at December
31, 1996.

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

F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

the obligations back to the issuers. Mortgage backed securities are included in
the category representing their ultimate maturity.

<TABLE>
<CAPTION>
1996
--------------------
DECEMBER 31 AMORTIZED FAIR
(IN MILLIONS) COST VALUE
- ------------------------------------------------------------ --------- ---------

<S> <C> <C>
Due in one year or less..................................... $ 129.2 $ 130.0
Due after one year through five years....................... 459.0 473.4
Due after five years through ten years...................... 735.1 751.1
Due after ten years......................................... 336.9 343.5
--------- ---------
Total................................................... $1,660.2 $1,698.0
--------- ---------
--------- ---------
</TABLE>

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

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31 PROCEEDS FROM GROSS GROSS
(IN MILLIONS) VOLUNTARY SALES GAINS LOSSES
- ------------------------------------------------------------ ------------------ ----- ------

<S> <C> <C> <C>
1996

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

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

<TABLE>
<CAPTION>
EQUITY
FOR THE YEAR ENDED DECEMBER 31 FIXED SECURITIES
(IN MILLIONS) MATURITIES AND OTHER (1) TOTAL
- ------------------------------------------------------------ ---------- ------------- ------

<S> <C> <C> <C>
1996

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

(1) Includes net appreciation on other investments of $2.2 million.

B. MORTGAGE LOANS AND REAL ESTATE

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

F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

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

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1996
- ---------------------------------------- ------

<S> <C>
Mortgage loans.......................... $221.6
------
Real estate:
Held for sale......................... 26.1
Held for production of income......... --
------
Total real estate................... 26.1
------
Total mortgage loans and real estate.... $247.7
------
------
</TABLE>

Reserves for mortgage loans were $9.5 million at December 31, 1996.

During 1996, non-cash investing activities included real estate acquired
through foreclosure of mortgage loans, which had a fair value of $0.9 million.

At December 31, 1996, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $16.0 million.
These commitments generally expire within one year.

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

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1996
- ---------------------------------------- ------

<S> <C>
Property type:
Office building....................... $ 86.1
Residential........................... 39.0
Retail................................ 55.9
Industrial / warehouse................ 52.6
Other................................. 25.3
Valuation allowances.................. (11.2)
------
Total................................... $247.7
------
------
Geographic region:

South Atlantic........................ $ 72.9
Pacific............................... 37.0
East North Central.................... 58.3
Middle Atlantic....................... 35.0
West South Central.................... 5.7
New England........................... 21.9
Other................................. 28.1
Valuation allowances.................. (11.2)
------
Total................................... $247.7
------
------
</TABLE>

At December 31, 1996, scheduled mortgage loan maturities were as follows:
1997 -- $58.6 million; 1998 -- $53.1 million; 1999 -- $21.5 million; 2000 --
$52.3 million; 2001 -- $7.7 million; and $28.4 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 1996, the Company refinanced $7.8 million of mortgage
loans based on terms which differed from those granted to new borrowers.

F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

C. INVESTMENT VALUATION ALLOWANCES

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

<TABLE>
<CAPTION>
FOR THE YEAR ENDED BALANCE AT
DECEMBER 31 BALANCE AT DECEMBER
(IN MILLIONS) JANUARY 1 ADDITIONS DEDUCTIONS 31
- ------------------------- ---------- --------- ---------- ----------

<S> <C> <C> <C> <C>
1996

Mortgage loans........... $12.5 $4.5 $7.5 $ 9.5
Real estate.............. 2.1 -- 0.4 1.7
---------- --------- ---------- ----------
Total................ $14.6 $4.5 $7.9 $11.2
---------- --------- ---------- ----------
---------- --------- ---------- ----------
</TABLE>

The carrying value of impaired loans was $21.5 million with related reserves
of $7.3 million as of December 31, 1996. All impaired loans were reserved as of
December 31, 1996.

The average carrying value of impaired loans was $26.3 million, with related
interest income while such loans were impaired, of $3.4 million as of December
31, 1996.

D. OTHER

At December 31, 1996, AFLIAC had no concentration of investments in a single
investee exceeding 10% of shareholder's equity.

3. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
(IN MILLIONS) 1996
- --------------------------------------------- ------

<S> <C>
Fixed maturities............................. $137.2
Mortgage loans............................... 22.0
Equity securities............................ 0.7
Policy loans................................. 10.2
Real estate.................................. 6.2
Other long-term investments.................. 0.8
Short-term investments....................... 1.4
------
Gross investment income...................... 178.5
Less investment expenses..................... (6.8)
------
Net investment income........................ $171.7
------
------
</TABLE>

At December 31, 1996, mortgage loans on non-accrual status were $5.0
million, including restructured loans of $2.6 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 $0.1 million in 1996. There were no fixed maturities on non-accrual status at
December 31, 1996.

The payment terms of mortgage loans may from time to time be restructured or
modified. The investment in restructured mortgage loans, based on amortized
cost, amounted to $25.4 million at December 31, 1996. Interest income on
restructured mortgage loans that would have been recorded in accordance with the
original terms of such loans amounted to $3.6 million in 1996. Actual interest
income on these loans included in net investment income aggregated $2.2 million
in 1996.

F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

There were no fixed maturities or mortgage loans which were non-income
producing for the twelve months ended December 31, 1996.

B. REALIZED INVESTMENT GAINS AND LOSSES

Realized gains (losses) on investments were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
(IN MILLIONS) 1996
- --------------------------------------------- -----

<S> <C>
Fixed maturities............................. $(3.3)
Mortgage loans............................... (3.2)
Equity securities............................ 0.3
Real estate.................................. 2.5
Other........................................ 0.1
-----
Net realized investment losses............... $(3.6)
-----
-----
</TABLE>

Proceeds from voluntary sales of investments in fixed maturities were $496.6
million in 1996. Realized gains on such sales were $4.3 million, and realized
losses were $8.3 million for 1996.

4. 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 which, in many cases, may differ significantly from
the amounts which could be realized upon immediate liquidation. In cases where
market prices are not available, estimates of fair value are based on discounted
cash flow analyses which utilize current interest rates for similar financial
instruments which have comparable terms and credit quality.

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

CASH AND CASH EQUIVALENTS

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

FIXED MATURITIES

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

EQUITY SECURITIES

MORTGAGE LOANS

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

F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

REINSURANCE RECEIVABLES

The carrying amount of the reinsurance receivable for outstanding claims, losses
and loss adjustment expenses. reported in the balance sheet approximates fair
value.

POLICY LOANS

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

INVESTMENT CONTRACTS (WITHOUT MORTALITY FEATURES)

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

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

<TABLE>
<CAPTION>
1996
--------------------
DECEMBER 31 CARRYING FAIR
(IN MILLIONS) VALUE VALUE
- --------------------------------------------- --------- --------

<S> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents.................. $ 18.8 $ 18.8
Fixed maturities........................... 1,698.0 1,698.0
Equity securities.......................... 41.5 41.5
Mortgage loans............................. 221.6 229.3
Policy loans............................... 131.7 131.7
Reinsurance receivables.................... 72.5 72.5
--------- --------
$2,184.1 $2,191.8
--------- --------
--------- --------

FINANCIAL LIABILITIES
Individual annuity contracts............... 910.2 703.6
Supplemental contracts without life
contingencies............................ 15.9 15.9
Other individual contract deposit funds.... 0.3 0.3
--------- --------
$ 926.4 $ 719.8
--------- --------
--------- --------
</TABLE>

5. DEBT

During 1996, the Company utilized repurchase agreements to finance certain
investments. Although the repurchase agreements were entirely settled by year
end, management may utilize this policy again in future periods.

Interest expense was $3.4 million in 1996, relating to interest payments on
repurchase agreements, and is recorded in other operating expenses.

F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

6. 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 statement of income is shown below:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
(IN MILLIONS) 1996
- --------------------------------------------- -----
<S> <C>
Federal income tax expense (benefit)
Current.................................... $26.9
Deferred................................... (9.8)
-----
Total........................................ $17.1
-----
-----
</TABLE>

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

The deferred tax (assets) liabilities are comprised of the following at
December 31, 1996:

<TABLE>
<CAPTION>
DECEMBER 31
(IN MILLIONS) 1996
- --------------------------------------------- -------
<S> <C>
Deferred tax (assets) liabilities
Loss reserves.............................. (137.0)
Deferred acquisition costs................. 186.9
Investments, net........................... 14.2
Bad debt reserve........................... (1.1)
Other, net................................. (2.8)
-------
Deferred tax liability, net.................. $ 60.2
-------
-------
</TABLE>

Gross deferred income tax liabilities totaled $201.1 million at December 31,
1996. Gross deferred income tax assets totaled $140.9 million at December 31,
1996.

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.

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 life-nonlife consolidated
group's federal income tax returns through 1991. The Company is currently
considering its response to certain adjustments proposed by the IRS with respect
to the life-nonlife consolidated group's federal income tax returns for 1989,
1990, and 1991. 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.

7. RELATED PARTY TRANSACTIONS

The Company has no employees of its own, but has agreements under which FAFLIC
provides management, space and other services, including accounting, electronic
data processing, human resources, legal and other staff functions. Charges for
these services are based on full cost including all direct and indirect overhead
costs, and amounted to $112.4 million in 1996. The net amounts payable to FAFLIC
and affiliates for accrued expenses and various other liabilities and
receivables were $13.3 million at December 31, 1996.

F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

8. DIVIDEND RESTRICTIONS

Delaware has enacted laws governing the payment of dividends to stockholders by
insurers. These laws affect the dividend paying ability of the Company.

Pursuant to Delaware's statute, the maximum amount of dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the Delaware Commissioner of Insurance, is limited to the
greater of (i) 10% of its policyholders' surplus as of the preceding December 31
or (ii) the individual company's statutory net gain from operations for the
preceding calendar year (if such insurer is a life company) or its net income
(not including realized capital gains) for the preceding calendar year (if such
insurer is not a life company). Any dividends to be paid by an insurer, whether
or not in excess of the aforementioned threshold, from a source other than
statutory earned surplus would also require the prior approval of the Delaware
Commissioner of Insurance.

At January 1, 1997, AFLIAC could pay dividends of $11.9 million to FAFLIC
without prior approval.

9. REINSURANCE

In the normal course of business, the Company seeks to reduce the loss that may
arise from events that cause unfavorable underwriting results by reinsuring
certain levels of risk in various areas of exposure with other insurance
enterprises or reinsurers. Reinsurance transactions are accounted for in
accordance with the provisions of 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 effects of reinsurance were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
(IN MILLIONS) 1996
----------------------------------------------- ---------
<S> <C>
Life insurance premiums:
Direct....................................... $ 53.3
Assumed...................................... 3.1
Ceded........................................ (23.7)
---------
Net premiums................................... $ 32.7
---------
Life insurance and other individual policy
benefits, claims, losses and loss adjustment
expenses:
Direct....................................... $ 206.4
Assumed...................................... 4.5
Ceded........................................ (18.3)
---------
Net policy benefits, claims, losses and loss
adjustment expenses........................... $ 192.6
---------
---------
</TABLE>

F-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

10. DEFERRED POLICY ACQUISITION EXPENSES

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

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
(IN MILLIONS) 1996
-------------------------------------------------- --------
<S> <C>
Balance at beginning of year...................... $ 555.7
Acquisition expenses deferred................... 116.6
Amortized to expense during the year............ (49.9)
Adjustment to equity during the year............ 10.3
--------
Balance at end of year............................ $ 632.7
--------
--------
</TABLE>

11. LIABILITIES FOR INDIVIDUAL ACCIDENT AND HEALTH BENEFITS

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

The liability for future policy benefits and outstanding claims, losses and
loss adjustment expenses related to the Company's accident and health business
was $178.6 million at December 31, 1996. Accident and health claim liabilities
have been re-estimated for all prior years and were increased by $3.2 million in
1996.

12. CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

Unfavorable economic conditions may contribute to an increase in the number
of insurance companies that are under regulatory supervision. This may result in
an increase in mandatory assessments by state guaranty funds, or voluntary
payments by solvent insurance companies to cover losses to policyholders of
insolvent or rehabilitated companies. Mandatory assessments, which are subject
to statutory limits, can be partially recovered through a reduction in future
premium taxes in some states. The Company is not able to reasonably estimate the
potential effect on it of any such future assessments or voluntary payments.

LITIGATION

The Company has been named a defendant in various 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 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.

13. STATUTORY FINANCIAL INFORMATION

The Company is required to file annual statements with state regulatory
authorities prepared on an accounting basis prescribed or permitted by such
authorities (statutory basis). Statutory surplus differs from shareholder's
equity reported in accordance with generally accepted accounting principles for
stock

F-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED

life insurance companies primarily because policy acquisition costs are expensed
when incurred, investment reserves are based on different assumptions, life
insurance reserves are based on different assumptions and income tax expense
reflects only taxes paid or currently payable. Statutory net income and surplus
are as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1996
--------------------------------------------------- ---------
<S> <C>
Statutory net income............................... $ 5.4
Statutory Surplus.................................. $ 234.0
---------
</TABLE>

14. SUBSEQUENT EVENT (UNAUDITED)

On April 14, 1997, the Company entered into an agreement in principle to
transfer the Company's individual disability income business under a 100%
coninsurance arrangement to Metroplitan Life Insurance Company. The consummation
of the transaction is subject to the negotiation of definitive agreements and
regulatory approvals and is expected to occur on or before October 1, 1997. In
connection with this transaction, the Company has recorded an after-tax charge
of $35 million to net income in the first quarter of 1997 related to the
reinsurance of this business.

F-17
<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY
(FORMERLY SMA LIFE ASSURANCE COMPANY)
STATUTORY FINANCIAL STATEMENTS
DECEMBER 31, 1995

F-18
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
DECEMBER 31, 1995

<TABLE>
<S> <C>
Statutory Financial Statements

Report of Independent Accountants.................................................... F-20

Statement of Assets, Liabilities, Surplus and Other Funds............................ F-22

Statement of Operations and Changes in Capital and Surplus........................... F-23

Statement of Cash Flows.............................................................. F-24

Notes to Statutory Financial Statements.............................................. F-25
</TABLE>

F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
Allmerica Financial Life Insurance and Annuity Company
(formerly known as SMA Life Assurance Company)

We have audited the accompanying statutory basis statement of assets,
liabilities, surplus and other funds of Allmerica Financial Life Insurance and
Annuity Company as of December 31, 1995 and 1994, and the related statutory
basis statements of operations and changes in capital and surplus, and of cash
flows for each of the three years ended December 31, 1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described more fully in Note 1 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed or
permitted by the Insurance Department of the State of Delaware, which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of accounting
and generally accepted accounting principles, although not reasonably
determinable, are presumed to be material.

In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Allmerica Financial Life Insurance and Annuity Company as of December 31,
1995 and 1994, or the results of its operations or its cash flows for each of
the three years ended December 31, 1995.

F-20
<PAGE>
To the Board of Directors and Stockholder of
Allmerica Financial Life Insurance and Annuity Company
(formerly known as SMA Life Assurance Company)

Page 2

In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities, surplus and other funds of
Allmerica Financial Life Insurance and Annuity Company as of December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years ended December 31, 1995, on the basis of accounting described in
Note 1.

As discussed in Note 1 to the financial statements, the Company's parent, State
Mutual Life Assurance Company of America, converted from a Massachusetts mutual
life insurance company to a Massachusetts stock life insurance company on
October 16, 1995. In connection with this transaction, the Company changed its
name to Allmerica Financial Life Insurance and Annuity Company and its parent
became a wholly-owned subsidiary of Allmerica Financial Corporation.

[LOGO]

/s/ Price Waterhouse LLP

Price Waterhouse LLP

Boston, MA

February 5, 1996

F-21
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

STATEMENT OF ASSETS, LIABILITIES, SURPLUS AND OTHER FUNDS
AS OF DECEMBER 31,
(IN THOUSANDS)

<TABLE>
<CAPTION>
ASSETS 1995 1994
---------- ----------

<S> <C> <C>
Cash......................................... $ 7,791 $ 7,248
Investments:
Bonds...................................... 1,659,575 1,595,275
Stocks..................................... 18,132 12,283
Mortgage loans............................. 239,522 295,532
Policy loans............................... 122,696 116,600
Real estate................................ 40,967 51,288
Short term investments..................... 3,500 45,239
Other invested assets...................... 40,196 27,443
---------- ----------
Total cash and investments............. 2,132,379 2,150,908

Premiums deferred and uncollected............ (1,231) 5,452
Investment income due and accrued............ 38,413 39,442
Other assets................................. 6,060 10,569
Assets held in separate accounts............. 2,978,409 1,869,695
---------- ----------
$5,154,030 $4,076,066
---------- ----------
---------- ----------

LIABILITIES, SURPLUS AND OTHER FUNDS

Liabilities:

Policy liabilities:
Life reserves.............................. $ 856,239 $ 890,880
Annuity and other fund reserves............ 865,216 928,325
Accident and health reserves............... 167,246 121,580
Claims payable............................. 11,047 11,720
---------- ----------
Total policy liabilities............... 1,899,748 1,952,505

Expenses and taxes payable................... 20,824 17,484
Other liabilities............................ 27,499 36,466
Asset valuation reserve...................... 31,556 20,786
Obligations related to separate account
business.................................... 2,967,547 1,859,502
---------- ----------
Total liabilities...................... 4,947,174 3,886,743
---------- ----------

Surplus and Other Funds:
Common stock, $1,000 par value
Authorized -- 10,000 shares
Issued and outstanding -- 2,517
shares................................... 2,517 2,517
Paid-in surplus............................ 199,307 199,307
Unassigned surplus (deficit)............... 4,282 (13,621)
Special contingency reserves............... 750 1,120
---------- ----------
Total surplus and other funds.......... 206,856 189,323
---------- ----------
$5,154,030 $4,076,066
---------- ----------
---------- ----------
</TABLE>

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

F-22
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

STATEMENT OF OPERATIONS AND CHANGES IN CAPITAL AND SURPLUS
FOR THE YEAR ENDED DECEMBER 31,
(IN THOUSANDS)

<TABLE>
<CAPTION>
REVENUE 1995 1994 1993
----------- ----------- -----------

<S> <C> <C> <C>
Premiums and other considerations:
Life..................................... $ 156,864 $ 195,633 $ 189,285
Annuities................................ 729,222 707,172 660,143
Accident and health...................... 31,790 31,927 35,718
Reinsurance commissions and reserve
adjustments............................ 20,198 4,195 2,309
----------- ----------- -----------
Total premiums and other
considerations....................... 938,074 938,927 887,455

Net investment income...................... 167,470 170,430 177,612
Realized capital losses, net of tax........ (2,295) (17,172) (7,225)
Other revenue.............................. 37,466 26,065 19,055
----------- ----------- -----------
Total revenue.......................... 1,140,715 1,118,250 1,076,897
----------- ----------- -----------

POLICY BENEFITS AND OPERATING EXPENSES

Policy benefits:
Claims, surrenders and other benefits.... 391,254 331,418 275,290
Increase (decrease) in policy reserves... (22,669) 40,113 15,292
----------- ----------- -----------
Total policy benefits.................. 368,585 371,531 290,582
Operating and selling expenses............. 150,215 164,175 160,928
Taxes, except capital gains tax............ 26,536 22,846 19,066
Net transfers to separate accounts......... 556,856 553,295 586,539
----------- ----------- -----------
Total policy benefits and operating
expenses............................. 1,102,192 1,111,847 1,057,115
----------- ----------- -----------

NET INCOME................................... 38,523 6,403 19,782

Capital and Surplus, Beginning of Year....... 189,323 182,216 171,941
Unrealized capital gains (losses) on
investments.............................. 8,279 12,170 (9,052)
Transfer from (to) asset valuation
reserve.................................. (10,770) (9,822) 1,974
Other adjustments.......................... (18,499) (1,644) (2,429)
----------- ----------- -----------

CAPITAL AND SURPLUS, END OF YEAR............. $ 206,856 $ 189,323 $ 182,216
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

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

F-23
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
(IN THOUSANDS)

<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES 1995 1994 1993
---------- ---------- ----------

<S> <C> <C> <C>
Premiums, deposits and other income......... $ 964,129 $ 962,147 $ 902,725
Allowances and reserve adjustments on
reinsurance ceded........................ 20,693 3,279 22,185
Net investment income...................... 170,949 173,294 182,843
Net increase in policy loans............... (6,096) (7,585) (7,812)
Benefits to policyholders and
beneficiaries............................ (393,472) (330,900) (298,612)
Operating and selling expenses and taxes... (153,504) (193,796) (171,533)
Net transfers to separate accounts......... (608,480) (600,760) (634,021)
Federal income tax (excluding tax on
capital gains)........................... (6,771) (19,603) (4828)
Other sources (applications)............... (13,642) 19,868 7,757
---------- ---------- ----------

NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES.................................. (26,194) 5,944 (1,296)
---------- ---------- ----------

CASH FLOW FROM INVESTING ACTIVITIES

Sales and maturities of long term
investments:
Bonds.................................... 572,640 478,512 386,414
Stocks................................... 481 63 64
Real estate and other invested assets.... 13,008 3,008 11,094
Repayment of mortgage principal.......... 55,202 65,334 79,844
Capital gains tax........................ (400) (968) (3,296)
Acquisition of long term investments:
Bonds.................................... (640,339) (508,603) (466,086)
Stocks................................... (44) -- --
Real estate and other invested assets.... (11,929) (24,544) (2,392)
Mortgage loans........................... (415) (364) (2,266)
Other investing activities............... (3,206) 18,934 (27,254)
---------- ---------- ----------

NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES.................................. (15,002) 31,372 (23,878)
---------- ---------- ----------
Net change in cash and short term
investments................................. (41,196) 37,316 (25,174)

CASH AND SHORT TERM INVESTMENTS

Beginning of the year...................... 52,487 15,171 40,345
---------- ---------- ----------
End of the year............................ $ 11,291 $ 52,487 $ 15,171
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

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

F-24
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION -- Allmerica Financial Life Insurance and
Annuity Company ("Allmerica Financial" or the "Company", formerly SMA Life
Assurance Company) is a wholly owned subsidiary of SMA Financial Corp., which is
wholly owned by First Allmerica Financial Life Insurance Company ("First
Allmerica", formerly, State Mutual Life Assurance Company of America), a stock
life insurance company. On October 16, 1995, First Allmerica converted from a
mutual life insurance company to a stock life insurance company. Concurrent with
this transaction, First Allmerica became a wholly owned subsidiary of Allmerica
Financial Corporation ("AFC").

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

The Company's financial statements have been prepared on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
Delaware and in conformity with practices prescribed by the National Association
of Insurance Commissioners (NAIC), which while common in the industry, vary in
some respects from generally accepted accounting principles. Significant
differences include:

-Bonds considered to be "available-for-sale" or "trading" are not
carried at fair value and changes in fair value are not
recognized through surplus or the statement of operations,
respectively;

-The Asset Valuation Reserve, represents a reserve against
possible losses on investments and is recorded as a liability
through a charge to surplus. The Interest Maintenance Reserve is
designed to include deferred realized gains and losses (net of
applicable federal income taxes) due to interest rate changes and
is also recorded as a liability, however, the deferred net
realized investment gains and losses are amortized into future
income generally over the original period to maturity of the
assets sold. These liabilities are not required under generally
accepted accounting principles;

-Total premiums, deposits and benefits on certain investment-type
contracts are reflected in the statement of operations, instead
of using the deposit method of accounting;

-Policy acquisition costs, such as commissions, premium taxes and
other items, are not deferred and amortized in relation to the
revenue/gross profit streams from the related contracts;

-Benefit reserves are determined using statutorily prescribed
interest, morbidity and mortality assumptions instead of using
more realistic expense, interest, morbidity, mortality and
voluntary withdrawal assumptions with provision made for adverse
deviation;

-Amounts recoverable from reinsurers for unpaid losses are not
recorded as assets, but as offsets against the respective
liabilities;

-Deferred federal income taxes are not provided for temporary
differences between amounts reported in the financial statements
and those included in the tax returns;

F-25
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

-Certain adjustments related to prior years are recorded as direct
charges or credits to surplus;

-Certain assets, designated as "non-admitted" assets (principally
agents' balances), are not recorded as assets, but are charged to
surplus; and,

-Costs related to other postretirement benefits are recognized
only for employees that are fully vested.

The preparation of financial statements in accordance with practices prescribed
or permitted by the Insurance Department of the State of Delaware and in
conformity with practices prescribed by the NAIC 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.

Certain reclassifications have been made to prior year amounts to conform with
the current year presentation.

VALUATION OF INVESTMENTS -- Investments in bonds are carried principally at
amortized cost, in accordance with NAIC guidelines. Preferred stocks are carried
generally at cost and common stocks are carried at market value. Policy loans
are carried principally at unpaid principal balances.

Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts. Mortgage loans are reduced for 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 determining
the amount of the loss, management considers, among other things, the estimated
fair value of the underlying collateral. Investment real estate and real estate
acquired through foreclosure are carried at the lower of depreciated cost or
market value. Depreciation is generally calculated using the straight-line
method.

An asset valuation reserve (AVR) for bonds, mortgage loans, stocks, real estate,
and other invested assets is maintained by appropriations from surplus in
accordance with a formula specified by the NAIC and is classified as a
liability.

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

RECOGNITION OF PREMIUM INCOME AND ACQUISITION COSTS -- In general, premiums are
recognized as revenue over the premium paying period of the policies;
commissions and other costs of acquiring the policies are charged to operations
when incurred.

SEPARATE ACCOUNTS -- Separate account assets and liabilities represent
segregated funds administered and invested by the Company for the benefit of
certain variable annuity and variable life contract holders. 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 contract holders 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 capital and surplus.

F-26
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

INSURANCE RESERVES AND ANNUITY AND OTHER FUND RESERVES -- Reserves for life
insurance, annuities, and accident and health insurance are established in
amounts adequate to meet the estimated future obligations of policies in force.
These liabilities are computed based upon mortality, morbidity and interest rate
assumptions applicable to these coverages, including provision for adverse
deviation. Reserves are computed using interest rates ranging from 3% to 6% for
individual life insurance policies, 3% to 5 1/2% for accident and health
policies and 3 1/2% to 9 1/2% for annuity contracts. Mortality, morbidity and
withdrawal assumptions for all policies are based on the Company's own
experience and industry standards. The assumptions vary by plan, age at issue,
year of issue and duration. Claims reserves are computed based on historical
experience modified for expected trends in frequency and severity. Withdrawal
characteristics of annuity and other fund reserves vary by contract. At December
31, 1995 and 1994, approximately 84% and 77%, respectively, of the contracts
(included in both the general account and separate accounts of the Company) were
not subject to discretionary withdrawal or were subject to withdrawal at book
value less surrender charge.

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.

FEDERAL INCOME TAXES -- AFC, its life insurance subsidiaries, First Allmerica
and Allmerica Financial and its non-insurance domestic subsidiaries file a
life-nonlife 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 taxable operating 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.

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

CAPITAL GAINS AND LOSSES -- Realized capital gains and losses, net of applicable
capital gains tax or benefit, exclusive of those transferred to the interest
maintenance reserve ("IMR"), are included in the statement of operations.
Unrealized capital gains and losses are reflected as direct credits or charges
to capital and surplus. The IMR, which is included in other liabilities,
establishes a reserve for realized gains and losses, net of tax, resulting from
changes in interest rates on short and long term fixed income investments. Net
realized gains and losses charged to the IMR are amortized into net investment
income over the remaining life of the investment sold. The Company uses the
seriatim method of amortization for interest related gains and losses arising
from the sale of mortgages, and uses the group method to amortize interest
related gains and losses arising from all other fixed income investments.

F-27
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

NOTE 2 -- INVESTMENTS

BONDS -- The carrying value and fair value of investments in bonds are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
(IN THOUSANDS) VALUE APPRECIATION DEPRECIATION VALUE
---------- ------------- ------------- ----------

<S> <C> <C> <C> <C>
Federal government bonds.................................. $ 67,039 $ 3,063 $ -- $ 70,102
State, local and government agency bonds.................. 13,607 2,290 23 15,874
Foreign government bonds.................................. 12,121 772 249 12,644
Corporate securities...................................... 1,471,422 55,836 6,275 1,520,983
Mortgage-backed securities................................ 95,385 951 -- 96,336
---------- ------------- ------------- ----------
Total..................................................... $1,659,574 $62,912 $ 6,457 $1,715,939
---------- ------------- ------------- ----------
---------- ------------- ------------- ----------

DECEMBER 31, 1994
------------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
(IN THOUSANDS) VALUE APPRECIATION DEPRECIATION VALUE
---------- ------------- ------------- ----------
<S> <C> <C> <C> <C>

Federal government bonds.................................. $ 17,651 $ 8 $ 762 $ 16,897
State, local and government agency bonds.................. 1,110 54 -- 1,164
Foreign government bonds.................................. 31,863 83 3,735 28,211
Corporate securities...................................... 1,462,871 8,145 56,011 1,415,005
Mortgage-backed securities................................ 81,780 268 1,737 80,311
---------- ------------- ------------- ----------
Total..................................................... $1,595,275 $ 8,558 $62,245 $1,541,588
---------- ------------- ------------- ----------
---------- ------------- ------------- ----------
</TABLE>

The carrying value and fair value by contractual maturity at December 31, 1995,
are shown below. Actual maturities will 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 obligation back to the issuer. Mortgage-backed securities are
classified based on expected maturities.

<TABLE>
<CAPTION>
CARRYING FAIR
(IN THOUSANDS) VALUE VALUE
--------------------

<S> <C> <C>
Due in one year or less................. $ 250,578 $ 258,436
Due after one year through five years... 736,003 763,179
Due after five years through ten
years.................................. 538,897 558,445
Due after ten years..................... 134,097 135,880
--------------------
Total................................... $1,659,575 $1,715,940
--------------------
--------------------
</TABLE>

MORTGAGE LOANS AND REAL ESTATE -- Mortgage loans and real estate investments,
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 are generally no more than 75% of the property value

F-28
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

at the time the original loan is made. At December 31, 1995 and 1994, mortgage
loan and real estate investments were distributed by the following types and
geographic regions:
<TABLE>
<CAPTION>
(IN THOUSANDS)
PROPERTY TYPE 1995 1994
- ---------------------------------------- -------- --------

<S> <C> <C>
Office buildings........................ $127,149 $140,292
Residential............................. 59,934 57,061
Retail.................................. 29,578 72,787
Industrial/Warehouse.................... 38,192 39,424
Other................................... 25,636 37,256
-------- --------
Total................................... $280,489 $346,820
-------- --------
-------- --------

GEOGRAPHIC REGION 1995 1994
- ---------------------------------------- -------- --------
<S> <C> <C>

South Atlantic.......................... $ 86,410 $ 92,934
East North Central...................... 55,991 72,704
Middle Atlantic......................... 38,666 48,688
Pacific................................. 32,803 39,892
West North Central...................... 21,486 27,377
Mountain................................ 9,939 12,211
New England............................. 24,886 26,613
East South Central...................... 5,487 6,224
West South Central...................... 4,821 20,177
-------- --------
Total................................... $280,489 $346,820
-------- --------
-------- --------
</TABLE>

Reserves for mortgage loans and real estate reflected in the above amounts were
$18.9 million and $21.0 million at December 31, 1995 and 1994, respectively.

NET INVESTMENT INCOME -- The components of net investment income for the year
ended December 31 were as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Bonds........................................ $122,318 $123,495 $126,729
Stocks....................................... 1,653 1,799 953
Mortgage loans............................... 26,356 31,945 40,823
Real estate.................................. 9,139 8,425 9,493
Policy loans................................. 9,486 8,797 8,215
Other investments............................ 3,951 1,651 674
Short term investments....................... 2,252 1,378 840
-------- -------- --------
175,155 177,490 187,727
Less investment expenses................... 9,703 9,138 11,026
-------- -------- --------
Net investment income, before IMR
amortization................................ 165,452 168,352 176,701
IMR amortization........................... 2,018 2,078 911
-------- -------- --------
Net investment income........................ $167,470 $170,430 $177,612
-------- -------- --------
-------- -------- --------
</TABLE>

F-29
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

REALIZED CAPITAL GAINS AND LOSSES -- Realized capital gains (losses) on
investments for the years ended December 31 were as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Bonds........................................ $ 727 $ 645 $ 10,133
Stocks....................................... (263) (62) 16
Mortgage loans............................... (1,083) (17,142) (83)
Real estate.................................. (1,892) 605 (2,044)
-------- -------- --------
(2,511) (15,954) 8,022
Less income tax.............................. 400 968 3,296
-------- -------- --------

Net realized capital gains (losses) before
transfer to IMR............................. (2,911) (16,922) 4,726
Net realized capital gains transferred to
IMR......................................... 616 (250) (11,951)
-------- -------- --------

Net realized capital gains (losses).......... $ (2,295) $(17,172) $ (7,225)
-------- -------- --------
-------- -------- --------
</TABLE>

Proceeds from voluntary sales of investments in bonds during 1995, 1994 and 1993
were $22.4 million, $17.9 million, and $13.2 million, respectively. Gross gains
of $4.3 million, $3.0 million, and $4.5 million and gross losses of $5.2
million, $4.6 million, and $.5 million, respectively, were realized on those
sales.

NOTE 3 -- FAIR VALUE DISCLOSURES OF FINANCIAL INFORMATION

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

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

FINANCIAL ASSETS:

CASH AND SHORT TERM INVESTMENTS -- The carrying amounts reported in the
statement of assets, liabilities, surplus and other funds approximate fair
value.

BONDS -- 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.

STOCKS -- 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.

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

F-30
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

POLICY LOANS -- The carrying amount reported in the statement of assets,
liabilities, surplus and other funds approximates fair value since policy loans
have no defined maturity dates and are inseparable from the insurance contracts.

FINANCIAL LIABILITIES:

ANNUITY AND OTHER FUND RESERVES (WITHOUT MORTALITY/MORBIDITY FEATURES) -- Fair
values for the Company's liabilities under individual annuity contracts are
estimated based on current surrender values.

The estimated fair values of the financial instruments as of December 31 were as
follows:

<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
(IN THOUSANDS) VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------

<S> <C> <C> <C> <C>
Financial Assets:
Cash.................................. $ 7,791 $ 7,791 $ 7,248 $ 7,248
Short term investments................ 3,500 3,500 45,239 45,239
Bonds................................. 1,659,575 1,715,940 1,595,275 1,541,588
Stocks................................ 18,132 18,414 12,283 12,590
Mortgage loans........................ 239,522 250,196 295,532 291,704
Policy loans.......................... 122,696 122,696 116,600 116,600

Financial Liabilities:
Individual annuity contracts.......... 803,099 797,024 869,230 862,662
Supplemental contracts without life
contingencies....................... 16,796 16,796 16,673 16,673
Other contract deposit funds............ 632 632 1,105 1,105
</TABLE>

NOTE 4 -- FEDERAL INCOME TAXES

The federal income tax provisions for 1995, 1994 and 1993 were $17.4 million,
$13.1 million and $8.6 million, respectively, which include taxes applicable to
realized capital gains of $.4 million, $1.0 million and $3.3 million.

The effective federal income tax rates were 27%, 67% and 30% in 1995, 1994 and
1993, respectively. The differences between the federal statutory rate and the
Company's effective tax rates are primarily related to decreases in taxable
income for the write-offs of mortgage loans; and increases in taxable income for
differences in policyholder liabilities for federal income tax purposes and
financial reporting purposes and the deferral of policy acquisition costs for
federal tax purposes.

The consolidated federal income tax returns are routinely audited by the
Internal Revenue Service (IRS) and provisions are routinely made in the
financial statements in anticipation of the results of these audits. The IRS has
completed its examination of all of the consolidated federal income tax returns
through 1988. In management's opinion, adequate tax liabilities have been
established for all years. However, the amount of these liabilities could be
revised in the near term if estimates of the Company's ultimate liability are
revised.

F-31
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

NOTE 5 -- REINSURANCE

The Company participates in reinsurance to reduce overall risks, including
exposure to large losses and to permit recovery of a portion of direct losses.
Reinsurance contracts do not relieve the Company from its obligation to its
policyholders. Reinsurance financial data for the years ended December 31, is as
follows:

<TABLE>
<CAPTION>
(IN THOUSANDS) 1995 1994 1993
------- ------- -------

<S> <C> <C> <C>
Reinsurance premiums assumed................. $ 3,442 $ 3,788 $ 4,190
Reinsurance premiums ceded................... 42,914 17,430 14,798
Deduction from insurance liability including
reinsurance recoverable on unpaid claims.... 82,227 46,734 42,805
</TABLE>

Individual life premiums ceded to First Allmerica aggregated $6.8 million, $7.8
million and $9.0 million in 1995, 1994 and 1993, respectively. The Company has
also entered into various reinsurance agreements with First Allmerica under
which certain insurance risks related to individual accident and health
business, premium income and related expenses are assumed by the Company from
First Allmerica. Premiums assumed pursuant to these agreements aggregated $3.4
million, $3.8 million and $4.2 million in 1995, 1994 and 1993, respectively.

During the year Allmerica Financial entered into a coinsurance agreement to
reinsure substantially all of its yearly renewable term life insurance. Premiums
ceded and reinsurance credits taken under this agreement amounted to $25.4
million and $20.7 million, respectively. At December 31, 1995, the deduction
from insurance liability, including reinsurance recoverable on unpaid claims
under this agreement was $12.7 million.

NOTE 6 -- ACCIDENT AND HEALTH POLICY AND CLAIM LIABILITIES

The Company regularly updates its estimates of policy and claims liabilities as
new information becomes available and further events occur which may impact the
resolution of unsettled claims for its accident and health line of business.
Changes in prior estimates are generally reflected in results of operations in
the year such changes are determined to be needed and recorded.

The policy and claims liabilities related to the Company's accident and health
business were $169.7 million and $123.5 million at December 31, 1995 and 1994,
respectively. Accident and health policy and claims liabilities have been
re-estimated for all prior years and were increased by $42.5 million, $10.9
million and $13.2 million, in 1995, 1994 and 1993, respectively, including $21.9
million and $2.8 million recorded as an adjustment to surplus in 1995 and 1993,
respectively. The unfavorable development is primarily due to reserve
strengthening and adverse experience in the Company's individual accident and
health line of business.

NOTE 7 -- DIVIDEND RESTRICTIONS

Delaware has enacted laws governing the payment of dividends to stockholders by
insurers. These laws affect the dividend paying ability of the Company. Pursuant
to Delaware's statute, the maximum amount of dividends and other distributions
that an insurer may pay in any twelve month period, without the prior approval
of the Delaware Commissioner of Insurance, is limited to the greater of (i) 10%
of its 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 (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

F-32
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(A WHOLLY OWNED SUBSIDIARY OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY)

NOTES TO STATUTORY FINANCIAL STATEMENTS --CONTINUED

Commissioner of Insurance. At January 1, 1996, the Company could pay dividends
of $4.3 million to First Allmerica, without prior approval.

NOTE 8 -- OTHER RELATED PARTY TRANSACTIONS

First Allmerica provides management, operating personnel and facilities on a
cost reimbursement basis to the Company. Expenses for services received from
First Allmerica were $85.8 million, $102.5 million and $98.9 million in 1995,
1994 and 1993, respectively. The net amounts payable to First Allmerica and
affiliates for accrued expenses and various other liabilities and receivables
were $12.6 million and $8.3 million at December 31, 1995 and 1994, respectively.

NOTE 9 -- FUNDS ON DEPOSIT

In March 1994, the Company voluntarily withdrew from being licensed in New York.
In connection with the withdrawal First Allmerica, which is licensed in New
York, became qualified to sell the products previously sold by Allmerica
Financial in New York. The Company 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 the Company for New York
policyholders, claimants and creditors. As of December 31, 1995, the carrying
value and fair value of the assets or deposit was $295.0 million and $303.6
million, respectively, which is in excess of the required amount.

Additional securities with a carrying value of $4.2 million and $3.9 million
were on deposit with various other state and governmental authorities as of
December 31, 1995 and 1994, respectively.

NOTE 10 -- LITIGATION

F-33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Allmerica Financial Life Insurance
and Annuity Company and Policyowners of Group VEL Account
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 (1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 12, 102, 103, 104, 105, 106, 150,
207, 301 and 302) constituting the Group VEL Account of Allmerica Financial Life
Insurance and Annuity Company at December 31, 1996, and 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 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, 1996 by
correspondence with the Funds, provide a reasonable basis for the opinion
expressed above.

/s/ Price Waterhouse LLP

Price Waterhouse LLP

Boston, Massachusetts
March 26, 1997

F-34
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INVESTMENT EQUITY
GROWTH GRADE INCOME MONEY MARKET INDEX GOVERNMENT BOND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
1 2 3 4 5
----------- ------------ ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS (NOTES 3 AND 6):
Investments in shares of Allmerica
Investment Trust.......................... $ 658,226 $ 230 $ 78,099 $ 6,685 $ 2,917
Investments in shares of Fidelity Variable
Insurance Products Funds.................. -- -- -- -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- -- -- --
Investment in shares of Delaware Group
Premium Fund, Inc......................... -- -- -- -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc..................... -- -- -- -- --
----------- ------------ ------------ ----------- ---------------
Total assets.............................. 658,226 230 78,099 6,685 2,917

LIABILITIES: -- -- -- -- --
----------- ------------ ------------ ----------- ---------------
Net assets................................ $ 658,226 $ 230 $ 78,099 $ 6,685 $ 2,917
----------- ------------ ------------ ----------- ---------------
----------- ------------ ------------ ----------- ---------------

Net asset distribution by category:
Variable life policies.................... $ 658,226 $ -- $ 78,099 $ 6,685 $ 2,917
Value of investment by Allmerica Financial
Life Insurance and Annuity Company
(Sponsor)............................... -- 230 -- -- --
----------- ------------ ------------ ----------- ---------------
$ 658,226 $ 230 $ 78,099 $ 6,685 $ 2,917
----------- ------------ ------------ ----------- ---------------
----------- ------------ ------------ ----------- ---------------
Units outstanding, December 31, 1996........ 458,003 200 71,786 4,514 2,606
Net asset value per unit, December 31,
1996...................................... $1.437168 $1.147997 $1.087934 $1.480953 $1.118474

<CAPTION>
SELECT
AGGRESSIVE GROWTH SELECT GROWTH
SUB-ACCOUNT SUB-ACCOUNT
6 7
----------------- -------------
<S> <C> <C>
ASSETS (NOTES 3 AND 6):
Investments in shares of Allmerica
Investment Trust.......................... $ 8,452 $ 1,806
Investments in shares of Fidelity Variable
Insurance Products Funds.................. -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- --
Investment in shares of Delaware Group
Premium Fund, Inc......................... -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc..................... -- --
----------------- -------------
Total assets.............................. 8,452 1,806
LIABILITIES: -- --
----------------- -------------
Net assets................................ $ 8,452 $ 1,806
----------------- -------------
----------------- -------------
Net asset distribution by category:
Variable life policies.................... $ 8,452 $ 1,806
Value of investment by Allmerica Financial
Life Insurance and Annuity Company
(Sponsor)............................... -- --
----------------- -------------
$ 8,452 $ 1,806
----------------- -------------
----------------- -------------
Units outstanding, December 31, 1996........ 5,721 1,255
Net asset value per unit, December 31,
1996...................................... $1.477263 $1.438967
</TABLE>

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

F-35
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SELECT SMALL CAP SELECT SELECT
GROWTH AND INCOME VALUE INTERNATIONAL EQUITY CAPITAL APPRECIATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
8 9 11 12
----------------- ----------- -------------------- --------------------
<S> <C> <C> <C> <C>
ASSETS (NOTES 3 AND 6):
Investments in shares of Allmerica
Investment Trust.......................... $ 2,365 $ 5,997 $ 62,676 $ 14,998
Investments in shares of Fidelity Variable
Insurance Products Funds.................. -- -- -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- -- --
Investment in shares of Delaware Group
Premium Fund, Inc......................... -- -- -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc..................... -- -- -- --
----------------- ----------- ---------- ----------
Total assets.............................. 2,365 5,997 62,676 14,998

LIABILITIES: -- -- -- --
----------------- ----------- ---------- ----------
Net assets................................ $ 2,365 $ 5,997 $ 62,676 $ 14,998
----------------- ----------- ---------- ----------
----------------- ----------- ---------- ----------

Net asset distribution by category:
Variable life policies.................... $ 2,365 $ 5,997 $ 62,676 $ 14,998
Value of investment by Allmerica Financial
Life Insurance and Annuity Company
(Sponsor)............................... -- -- -- --
----------------- ----------- ---------- ----------
$ 2,365 $ 5,997 $ 62,676 $ 14,998
----------------- ----------- ---------- ----------
----------------- ----------- ---------- ----------
Units outstanding, December 31, 1996........ 1,616 4,219 45,463 9,897
Net asset value per unit, December 31,
1996...................................... $1.463563 $1.421493 $1.378607 $1.515410

<CAPTION>
VIPF VIPF VIPF
HIGH INCOME EQUITY-INCOME GROWTH
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
102 103 104
----------- ------------- -----------
<S> <C> <C> <C>
ASSETS (NOTES 3 AND 6):
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds.................. 4,051 4,446 328,329
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- --
Investment in shares of Delaware Group
Premium Fund, Inc......................... -- -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc..................... -- -- --
----------- ------------- -----------
Total assets.............................. 4,051 4,446 328,329
LIABILITIES: -- -- --
----------- ------------- -----------
Net assets................................ $ 4,051 $ 4,446 $ 328,329
----------- ------------- -----------
----------- ------------- -----------
Net asset distribution by category:
Variable life policies.................... $ 4,051 $ 4,446 $ 328,329
Value of investment by Allmerica Financial
Life Insurance and Annuity Company
(Sponsor)............................... -- -- --
----------- ------------- -----------
$ 4,051 $ 4,446 $ 328,329
----------- ------------- -----------
----------- ------------- -----------
Units outstanding, December 31, 1996........ 3,213 3,242 229,877
Net asset value per unit, December 31,
1996...................................... $1.260898 $1.371126 $1.428286
</TABLE>

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

F-36
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996

<TABLE>
<CAPTION>
VIPF VIPF II T. ROWE PRICE DGPF
OVERSEAS ASSET MANAGER INTERNATIONAL STOCK INTERNATIONAL EQUITY
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
105 106 150 207
----------- ------------- ------------------- --------------------
<S> <C> <C> <C> <C>
ASSETS (NOTES 3 AND 6):
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ -- $-- $--
Investments in shares of Fidelity Variable
Insurance Products Funds.................. 18,314 191,687 -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- 60,066 --
Investment in shares of Delaware Group
Premium Fund, Inc......................... -- -- -- 2,730
Investments in shares of INVESCO Variable
Investment Funds, Inc..................... -- -- -- --
----------- ------------- ---------- ----------
Total assets.............................. 18,314 191,687 60,066 2,730

LIABILITIES: -- -- -- --
----------- ------------- ---------- ----------
Net assets................................ $ 18,314 $ 191,687 $ 60,066 $ 2,730
----------- ------------- ---------- ----------
----------- ------------- ---------- ----------

Net asset distribution by category:
Variable life policies.................... $ 18,314 $ 191,687 $ 60,066 $ 2,730
Value of investment by Allmerica Financial
Life Insurance and Annuity Company
(Sponsor)............................... -- -- -- --
----------- ------------- ---------- ----------
$ 18,314 $ 191,687 $ 60,066 $ 2,730
----------- ------------- ---------- ----------
----------- ------------- ---------- ----------
Units outstanding, December 31, 1996........ 15,045 148,802 53,861 2,494
Net asset value per unit, December 31,
1996...................................... $1.217256 $1.288205 $1.115198 $1.094489

<CAPTION>
INVESCO INVESCO
INDUSTRIAL INCOME TOTAL RETURN
SUB-ACCOUNT SUB-ACCOUNT
301 302
----------------- ------------
<S> <C> <C>
ASSETS (NOTES 3 AND 6):
Investments in shares of Allmerica
Investment Trust.......................... $-- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds.................. -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- --
Investment in shares of Delaware Group
Premium Fund, Inc......................... -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc..................... 3,317 17,602
----------------- ------------
Total assets.............................. 3,317 17,602
LIABILITIES: -- --
----------------- ------------
Net assets................................ $ 3,317 $ 17,602
----------------- ------------
----------------- ------------
Net asset distribution by category:
Variable life policies.................... $ 3,317 $ 17,602
Value of investment by Allmerica Financial
Life Insurance and Annuity Company
(Sponsor)............................... -- --
----------------- ------------
$ 3,317 $ 17,602
----------------- ------------
----------------- ------------
Units outstanding, December 31, 1996........ 3,047 16,491
Net asset value per unit, December 31,
1996...................................... $1.088590 $1.067333
</TABLE>

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

F-37
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH
SUB-ACCOUNT 1 INVESTMENT GRADE INCOME
FOR THE YEAR SUB-ACCOUNT 2
ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 54,246 $22 $14 $11

EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 1,681 -- -- --
-------- --- --- ---
Net investment income
(loss).................. 52,565 22 14 11
-------- --- --- ---
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 35 -- -- --
Net unrealized gain
(loss).................. (33,389) 17 (6) 11
-------- --- --- ---
Net realized and
unrealized gain (loss)
on investments.......... (33,354) 17 (6) 11
-------- --- --- ---
Net increase (decrease) in
net assets from
operations.............. $ 19,211 $39 $ 8 $22
-------- --- --- ---
-------- --- --- ---

MONEY MARKET
SUB-ACCOUNT 3
FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95
------------------ -------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................. $2,028 $ 7
EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 682 --
------ ---
Net investment income
(loss).................. 1,346 7
------ ---
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. (1) --
Net unrealized gain
(loss).................. -- --
------ ---
Net realized and
unrealized gain (loss)
on investments.......... (1) --
------ ---
Net increase (decrease) in
net assets from
operations.............. $1,345 $ 7
------ ---
------ ---
</TABLE>

* Date of initial investment.

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

F-38
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INDEX
SUB-ACCOUNT 4 GOVERNMENT BOND
FOR THE YEAR SUB-ACCOUNT 5
ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 123 $17 $57 $ 9

EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 7 -- 8 --
----- --- --- ---
Net investment income
(loss).................. 116 17 49 9
----- --- --- ---

REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 128 -- 5 --
Net unrealized gain
(loss).................. (123) 25 (2) 7
----- --- --- ---
Net realized and
unrealized gain (loss)
on investments.......... 5 25 3 7
----- --- --- ---
Net increase (decrease) in
net assets from
operations.............. $ 121 $42 $52 $16
----- --- --- ---
----- --- --- ---

SELECT AGGRESSIVE GROWTH
SUB-ACCOUNT 6
FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95
------------------ -------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 464 -- $
EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 10 --
----- ---
Net investment income
(loss).................. 454 --
----- ---
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 182 --
Net unrealized gain
(loss).................. (425) 49
----- ---
Net realized and
unrealized gain (loss)
on investments.......... (243) 49
----- ---
Net increase (decrease) in
net assets from
operations.............. $ 211 $49
----- ---
----- ---
</TABLE>

* Date of initial investment.

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

F-39
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
SELECT GROWTH
SUB-ACCOUNT 7 SELECT GROWTH AND INCOME
FOR THE YEAR SUB-ACCOUNT 8
ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 238 -- $ $ 153 $11

EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 2 -- 2 --
----- --- ----- ---
Net investment income
(loss).................. 236 -- 151 11
----- --- ----- ---

REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 92 -- 63 --
Net unrealized gain
(loss).................. (229) 37 (126) 30
----- --- ----- ---
Net realized and
unrealized gain (loss)
on investments.......... (137) 37 (63) 30
----- --- ----- ---
Net increase (decrease) in
net assets from
operations.............. $ 99 $37 $ 88 $41
----- --- ----- ---
----- --- ----- ---

SMALL CAP VALUE
SUB-ACCOUNT 9
FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95
------------------ -------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................. $292 $ 7
EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 19 --
----- ---
Net investment income
(loss).................. 273 7
----- ---
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 142 --
Net unrealized gain
(loss).................. 195 14
----- ---
Net realized and
unrealized gain (loss)
on investments.......... 337 14
----- ---
Net increase (decrease) in
net assets from
operations.............. $610 $21
----- ---
----- ---
</TABLE>

* Date of initial investment.

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

F-40
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
SELECT INTERNATIONAL EQUITY
SUB-ACCOUNT 11 SELECT CAPITAL APPRECIATION
FOR THE YEAR SUB-ACCOUNT 12
ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................. $1,260 $ 3 $ 28 $ 5

EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 119 -- 58 --
------ --- ----- ---
Net investment income
(loss).................. 1,141 3 (30) 5
------ --- ----- ---

REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 70 -- 53 --
Net unrealized gain
(loss).................. 3,759 23 (147) 74
------ --- ----- ---
Net realized and
unrealized gain (loss)
on investments.......... 3,829 23 (94) 74
------ --- ----- ---
Net increase (decrease) in
net assets from
operations.............. $4,970 $26 $(124) $79
------ --- ----- ---
------ --- ----- ---

VIPF HIGH INCOME
SUB-ACCOUNT 102
FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95
------------------ -------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 23 $--
EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 5 --
----- ---
Net investment income
(loss).................. 18 --
----- ---
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 42 --
Net unrealized gain
(loss).................. 66 21
----- ---
Net realized and
unrealized gain (loss)
on investments.......... 108 21
----- ---
Net increase (decrease) in
net assets from
operations.............. $126 $21
----- ---
----- ---
</TABLE>

* Date of initial investment.

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

F-41
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
VIPF EQUITY-INCOME
SUB-ACCOUNT 103 VIPF GROWTH
FOR THE YEAR SUB-ACCOUNT 104
ENDED FOR THE PERIOD FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------------- ------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 17 $ 4 $ 22 -- $

EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 7 -- 832 --
----- --- ------ ---
Net investment income
(loss).................. 10 4 (810) --
----- --- ------ ---

REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 68 -- 151 --
Net unrealized gain
(loss).................. 87 36 2,233 48
----- --- ------ ---
Net realized and
unrealized gain (loss)
on investments.......... 155 36 2,384 48
----- --- ------ ---
Net increase (decrease) in
net assets from
operations.............. $165 $40 $1,574 $48
----- --- ------ ---
----- --- ------ ---

VIPF OVERSEAS
SUB-ACCOUNT 105
FOR THE YEAR ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95
------------------ -------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 6 -- $
EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 76 --
------ ---
Net investment income
(loss).................. (70) --
------ ---
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 138 --
Net unrealized gain
(loss).................. 1,222 15
------ ---
Net realized and
unrealized gain (loss)
on investments.......... 1,360 15
------ ---
Net increase (decrease) in
net assets from
operations.............. $1,290 $15
------ ---
------ ---
</TABLE>

* Date of initial investment.

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

F-42
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
VIPF II ASSET MANAGER
SUB-ACCOUNT 106
FOR THE YEAR
ENDED FOR THE PERIOD
12/31/96 5/1/95* TO 12/31/95
---------------- --------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 18 -- $

EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 501 --
-------- ---
Net investment income
(loss).................. (483) --
-------- ---

REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 130 --
Net unrealized gain
(loss).................. 7,451 25
-------- ---
Net realized and
unrealized gain (loss)
on investments.......... 7,581 25
-------- ---
Net increase (decrease) in
net assets from
operations.............. $ 7,098 $25
-------- ---
-------- ---

<CAPTION>
T. ROWE PRICE INTERNATIONAL STOCK DGPF INTERNATIONAL EQUITY
SUB-ACCOUNT 150 SUB-ACCOUNT 207
FOR THE PERIOD FOR THE PERIOD
FOR THE YEAR ENDED ENDED FOR THE YEAR ENDED ENDED
12/31/96 12/31/95(A) 12/31/96 12/31/95(A)
------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 749 -- $ -- $ -- $
EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 352 -- 2 --
------ --- --- ---
Net investment income
(loss).................. 397 -- (2) --
------ --- --- ---
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 921 -- 18 --
Net unrealized gain
(loss).................. 3,447 -- 68 --
------ --- --- ---
Net realized and
unrealized gain (loss)
on investments.......... 4,368 -- 86 --
------ --- --- ---
Net increase (decrease) in
net assets from
operations.............. $4,765 -- $ $84 -- $
------ --- --- ---
------ --- --- ---
</TABLE>

* Date of initial investment.

(a) For the period ended December 31, 1995, there were no transactions for
Sub-Accounts 150 and 207.

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

F-43
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
INVESCO INVESCO
INDUSTRIAL INCOME TOTAL RETURN
SUB-ACCOUNT 301 SUB-ACCOUNT 302
FOR THE PERIOD FOR THE PERIOD
7/2/96* TO 12/31/96 7/2/96* TO 12/31/96
------------------------- --------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................. $ 210 $459

EXPENSES (NOTE 4):
Mortality and expense risk
fees.................... 2 22
----- -----
Net investment income
(loss).................. 208 437
----- -----

REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain
(loss).................. 25 247
Net unrealized gain
(loss).................. (141) (38)
----- -----
Net realized and
unrealized gain (loss)
on investments.......... (116) 209
----- -----
Net increase (decrease) in
net assets from
operations.............. $ 92 $646
----- -----
----- -----
</TABLE>

* Date of initial investment.

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

F-44
<PAGE>
GROUP VEL 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
12/31/96 5/10/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------- -------------------- ---------- --------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 52,565 $ 22 $ 14 $ 11
Net realized gain (loss)
on investments.......... 35 -- -- --
Net unrealized gain (loss)
on investments.......... (33,389) 17 (6) 11
---------- ----- ----- -----
Net increase (decrease) in
net assets from
operations.............. 19,211 39 8 22
---------- ----- ----- -----

FROM CAPITAL TRANSACTIONS:
Net premiums.............. 638,444 -- -- --
Terminations.............. -- -- -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... 615 -- -- --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (283) 200 -- 200
---------- ----- ----- -----
Net increase in net assets
from capital
transactions............ 638,776 200 -- 200
---------- ----- ----- -----
Net increase in net
assets.................. 657,987 239 8 222
NET ASSETS:
Beginning of period....... 239 -- 222 --
---------- ----- ----- -----
End of period............. $658,226 $ 239 $230 $ 222
---------- ----- ----- -----
---------- ----- ----- -----

<CAPTION>
MONEY MARKET
SUB-ACCOUNT 3
YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95
---------- --------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 1,346 $ 7
Net realized gain (loss)
on investments.......... (1) --
Net unrealized gain (loss)
on investments.......... -- --
---------- -----
Net increase (decrease) in
net assets from
operations.............. 1,345 7
---------- -----
FROM CAPITAL TRANSACTIONS:
Net premiums.............. 924,390 --
Terminations.............. (13) --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... (847,613) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (217) 200
---------- -----
Net increase in net assets
from capital
transactions............ 76,547 200
---------- -----
Net increase in net
assets.................. 77,892 207
NET ASSETS:
Beginning of period....... 207 --
---------- -----
End of period............. $ 78,099 $ 207
---------- -----
---------- -----
</TABLE>

* Date of initial investment.

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

F-45
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INDEX GOVERNMENT BOND
SUB-ACCOUNT 4 SUB-ACCOUNT 5
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 116 $ 17 $ 49 $ 9
Net realized gain (loss)
on investments.......... 128 -- 5 --
Net unrealized gain (loss)
on investments.......... (123) 25 (2) 7
---------- ----- ---------- -----
Net increase (decrease) in
net assets from
operations.............. 121 42 52 16
---------- ----- ---------- -----

FROM CAPITAL TRANSACTIONS:
Net premiums.............. 6,564 -- 2,984 --
Terminations.............. -- -- -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... 14 -- (112) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (256) 200 (223) 200
---------- ----- ---------- -----
Net increase in net assets
from capital
transactions............ 6,322 200 2,649 200
---------- ----- ---------- -----
Net increase in net
assets.................. 6,443 242 2,701 216

NET ASSETS:
Beginning of period....... 242 -- 216 --
---------- ----- ---------- -----
End of period............. $6,685 $242 $2,917 $216
---------- ----- ---------- -----
---------- ----- ---------- -----

<CAPTION>
SELECT AGGRESSIVE GROWTH
SUB-ACCOUNT 6
YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95
---------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 454 -- $
Net realized gain (loss)
on investments.......... 182 --
Net unrealized gain (loss)
on investments.......... (425) 49
---------- -----
Net increase (decrease) in
net assets from
operations.............. 211 49
---------- -----
FROM CAPITAL TRANSACTIONS:
Net premiums.............. 8,376 --
Terminations.............. -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... (88) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (296) 200
---------- -----
Net increase in net assets
from capital
transactions............ 7,992 200
---------- -----
Net increase in net
assets.................. 8,203 249
NET ASSETS:
Beginning of period....... 249 --
---------- -----
End of period............. $ 8,452 $249
---------- -----
---------- -----
</TABLE>

* Date of initial investment.

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

F-46
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SELECT GROWTH SELECT GROWTH AND INCOME
SUB-ACCOUNT 7 SUB-ACCOUNT 8
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 236 -- $ $ 151 $ 11
Net realized gain (loss)
on investments.......... 92 -- 63 --
Net unrealized gain (loss)
on investments.......... (229) 37 (126) 30
---------- ----- ---------- -----
Net increase (decrease) in
net assets from
operations.............. 99 37 88 41
---------- ----- ---------- -----

FROM CAPITAL TRANSACTIONS:
Net premiums.............. 1,756 -- 2,353 --
Terminations.............. -- -- -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... -- (1) (31) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (285) 200 (286) 200
---------- ----- ---------- -----
Net increase in net assets
from capital
transactions............ 1,471 199 2,036 200
---------- ----- ---------- -----
Net increase in net
assets.................. 1,570 236 2,124 241

NET ASSETS:
Beginning of period....... 236 -- 241 --
---------- ----- ---------- -----
End of period............. $1,806 $236 $2,365 $241
---------- ----- ---------- -----
---------- ----- ---------- -----

<CAPTION>
SMALL CAP VALUE
SUB-ACCOUNT 9
YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95
---------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 273 $ 7
Net realized gain (loss)
on investments.......... 142 --
Net unrealized gain (loss)
on investments.......... 195 14
---------- -----
Net increase (decrease) in
net assets from
operations.............. 610 21
---------- -----
FROM CAPITAL TRANSACTIONS:
Net premiums.............. 5,481 --
Terminations.............. -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... (40) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (275) 200
---------- -----
Net increase in net assets
from capital
transactions............ 5,166 200
---------- -----
Net increase in net
assets.................. 5,776 221
NET ASSETS:
Beginning of period....... 221 --
---------- -----
End of period............. $5,997 $221
---------- -----
---------- -----
</TABLE>

* Date of initial investment.

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

F-47
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SELECT INTERNATIONAL EQUITY SELECT CAPITAL APPRECIATION
SUB-ACCOUNT 11 SUB-ACCOUNT 12
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 1,141 $ 3 $ (30) $ 5
Net realized gain (loss)
on investments.......... 70 -- 53 --
Net unrealized gain (loss)
on investments.......... 3,759 23 (147) 74
---------- ----- ---------- -----
Net increase (decrease) in
net assets from
operations.............. 4,970 26 (124) 79
---------- ----- ---------- -----

FROM CAPITAL TRANSACTIONS:
Net premiums.............. 57,697 -- 15,400 --
Terminations.............. -- -- -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... 49 -- (258) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (266) 200 (299) 200
---------- ----- ---------- -----
Net increase in net assets
from capital
transactions............ 57,480 200 14,843 200
---------- ----- ---------- -----
Net increase in net
assets.................. 62,450 226 14,719 279

NET ASSETS:
Beginning of period....... 226 -- 279 --
---------- ----- ---------- -----
End of period............. $62,676 $226 $14,998 $279
---------- ----- ---------- -----
---------- ----- ---------- -----

<CAPTION>
VIPF HIGH INCOME
SUB-ACCOUNT 102
YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95
---------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 18 -- $
Net realized gain (loss)
on investments.......... 42 --
Net unrealized gain (loss)
on investments.......... 66 21
---------- -----
Net increase (decrease) in
net assets from
operations.............. 126 21
---------- -----
FROM CAPITAL TRANSACTIONS:
Net premiums.............. 3,933 --
Terminations.............. -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... 21 --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (250) 200
---------- -----
Net increase in net assets
from capital
transactions............ 3,704 200
---------- -----
Net increase in net
assets.................. 3,830 221
NET ASSETS:
Beginning of period....... 221 --
---------- -----
End of period............. $4,051 $221
---------- -----
---------- -----
</TABLE>

* Date of initial investment.

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

F-48
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
VIPF EQUITY-INCOME VIPF GROWTH
SUB-ACCOUNT 103 SUB-ACCOUNT 104
YEAR ENDED PERIOD FROM YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95 12/31/96 5/1/95* TO 12/31/95
---------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 10 $ 4 $ (810) -- $
Net realized gain (loss)
on investments.......... 68 -- 151 --
Net unrealized gain (loss)
on investments.......... 87 36 2,233 48
---------- ----- ---------- -----
Net increase (decrease) in
net assets from
operations.............. 165 40 1,574 48
---------- ----- ---------- -----

FROM CAPITAL TRANSACTIONS:
Net premiums.............. 4,266 -- 326,955 --
Terminations.............. -- -- (2) --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... 46 -- (162) 1
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (271) 200 (285) 200
---------- ----- ---------- -----
Net increase in net assets
from capital
transactions............ 4,041 200 326,506 201
---------- ----- ---------- -----
Net increase in net
assets.................. 4,206 240 328,080 249

NET ASSETS:
Beginning of period....... 240 -- 249 --
---------- ----- ---------- -----
End of period............. $4,446 $240 $328,329 $249
---------- ----- ---------- -----
---------- ----- ---------- -----

<CAPTION>
VIPF OVERSEAS
SUB-ACCOUNT 105
YEAR ENDED PERIOD FROM
12/31/96 5/1/95* TO 12/31/95
---------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ (70) -- $
Net realized gain (loss)
on investments.......... 138 --
Net unrealized gain (loss)
on investments.......... 1,222 15
---------- -----
Net increase (decrease) in
net assets from
operations.............. 1,290 15
---------- -----
FROM CAPITAL TRANSACTIONS:
Net premiums.............. 17,543 --
Terminations.............. (1) --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... (496) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (237) 200
---------- -----
Net increase in net assets
from capital
transactions............ 16,809 200
---------- -----
Net increase in net
assets.................. 18,099 215
NET ASSETS:
Beginning of period....... 215 --
---------- -----
End of period............. $18,314 $215
---------- -----
---------- -----
</TABLE>

* Date of initial investment.

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

F-49
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
VIPF II ASSET MANAGER T. ROWE PRICE INTERNATIONAL
SUB-ACCOUNT 106 STOCK
PERIOD FROM SUB-ACCOUNT 150
YEAR ENDED 5/10/95* TO YEAR ENDED PERIOD ENDED
12/31/96 12/31/95 12/31/96 12/31/95(A)
---------- ------------------- ---------- -------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ (483) -- $ $ 397 -- $
Net realized gain (loss)
on investments.......... 130 -- 921 --
Net unrealized gain (loss)
on investments.......... 7,451 25 3,447 --
---------- ----- ---------- -----
Net increase (decrease) in
net assets from
operations.............. 7,098 25 4,765 --
---------- ----- ---------- -----

FROM CAPITAL TRANSACTIONS:
Net premiums.............. 184,389 -- 55,319 --
Terminations.............. (1) -- 0 --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... 233 -- (18) --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... (257) 200 -- --
---------- ----- ---------- -----
Net increase in net assets
from capital
transactions............ 184,364 200 55,301 --
---------- ----- ---------- -----
Net increase in net
assets.................. 191,462 225 60,066 --

NET ASSETS:
Beginning of period....... 225 -- -- --
---------- ----- ---------- -----
End of period............. $191,687 $225 $60,066 -- $
---------- ----- ---------- -----
---------- ----- ---------- -----

DGPF INTERNATIONAL EQUITY

SUB-ACCOUNT 207
YEAR ENDED PERIOD ENDED
12/31/96 12/31/95(A)
---------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ (2) -- $
Net realized gain (loss)
on investments.......... 18 --
Net unrealized gain (loss)
on investments.......... 68 --
---------- ---
Net increase (decrease) in
net assets from
operations.............. 84 --
---------- ---
FROM CAPITAL TRANSACTIONS:
Net premiums.............. 2,639 --
Terminations.............. -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... 7 --
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... -- --
---------- ---
Net increase in net assets
from capital
transactions............ 2,646 --
---------- ---
Net increase in net
assets.................. 2,730 --
NET ASSETS:
Beginning of period....... -- --
---------- ---
End of period............. $2,730 -- $
---------- ---
---------- ---
</TABLE>

* Date of initial investment.

(a) For the period ended December 31, 1995, there were no transactions for
Sub-Accounts 150 and 207.

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

F-50
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
INVESCO INVESCO
INDUSTRIAL INCOME TOTAL RETURN
SUB-ACCOUNT 301 SUB-ACCOUNT 302
PERIOD FROM PERIOD FROM
7/2/96* TO 12/31/96 7/2/96* TO 12/31/96
------------------------- --------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 208 $ 437
Net realized gain (loss)
on investments.......... 25 247
Net unrealized gain (loss)
on investments.......... (141) (38)
------ -------
Net increase (decrease) in
net assets from
operations.............. 92 646
------ -------

FROM CAPITAL TRANSACTIONS:
Net premiums.............. 3,228 17,025
Terminations.............. -- --
Other transfers from (to)
the General Account of
Allmerica Financial Life
Insurance and Annuity
Company (Sponsor)....... (3) (69)
Net increase (decrease) in
net assets from
investments by Allmerica
Financial Life Insurance
and Annuity Company
(Sponsor)............... -- --
------ -------
Net increase in net assets
from capital
transactions............ 3,225 16,956
------ -------
Net increase in net
assets.................. 3,317 17,602

NET ASSETS:
Beginning of period....... -- --
------ -------
End of period............. $3,317 $17,602
------ -------
------ -------
</TABLE>

* Date of initial investment.

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

F-51
<PAGE>
GROUP VEL ACCOUNT

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1996

NOTE 1 -- ORGANIZATION

The Group VEL Account (Group VEL) is a separate investment account of
Allmerica Financial Life Insurance and Annuity Company (the Company) established
on May 1, 1995 for the purpose of separating from the general assets of the
Company, those assets used to fund the variable portion of certain flexible
premium variable life policies issued by the Company. The Company is a
wholly-owned subsidiary of First Allmerica Financial Life Insurance Company
(First Allmerica). First Allmerica is a wholly-owned subsidiary of Allmerica
Financial Corporation (AFC). Under applicable insurance law, the assets and
liabilities of Group VEL are clearly identified and distinguished from the other
assets and liabilities of the Company. Group VEL cannot be charged with
liabilities arising out of any other business of the Company.

Group VEL is registered as a unit investment trust under the Investment Company
Act of 1940, as amended (the 1940 Act). Group VEL currently offers twenty
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 First
Allmerica, or of the Variable Insurance Products Fund (VIPF) or the Variable
Insurance Products Fund II (VIPF II) managed by Fidelity Management & Research
Company (FMR), or of the T. Rowe Price International Series, Inc. (T. Rowe)
managed by Rowe Price-Fleming International, Inc., or of the Delaware Group
Premium Fund, Inc. (DGPF) managed by Delaware International Advisers, Ltd., or
of INVESCO Variable Investment Funds, Inc. (INVESCO) managed by INVESCO Funds
Group, Inc.. The Trust, VIPF, VIPF II, T. Rowe, DGPF, and INVESCO (the Funds)
are open-end, diversified 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, VIPF II, T. Rowe, DGPF, or
INVESCO. 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, VIPF II, T. Rowe, DGPF, or INVESCO 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 Group VEL. Therefore, no provision for income
taxes has been charged against Group VEL.

F-52
<PAGE>
GROUP VEL ACCOUNT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

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, VIPF II, T. Rowe, DGPF and
INVESCO at December 31, 1996 were as follows:

<TABLE>
<CAPTION>
PORTFOLIO INFORMATION
---------------------------------
NET ASSET
NUMBER OF AGGREGATE VALUE
SUB-ACCOUNT INVESTMENT PORTFOLIO SHARES COST PER SHARE
----------- ---------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Allmerica Investment Trust:
1 Growth.......................................................... 282,137 $ 691,599 $ 2.333
2 Investment Grade Income......................................... 212 225 1.084
3 Money Market.................................................... 78,099 78,099 1.000
4 Equity Index.................................................... 3,088 6,783 2.165
5 Government Bond................................................. 2,816 2,912 1.036
6 Select Aggressive Growth........................................ 4,149 8,828 2.037
7 Select Growth................................................... 1,263 2,000 1.430
8 Select Growth and Income........................................ 1,683 2,461 1.405
9 Small Cap Value................................................. 3,969 5,788 1.511
11 Select International Equity..................................... 46,221 58,895 1.356
12 Select Capital Appreciation..................................... 10,100 15,072 1.485

Fidelity Variable Insurance Products Fund:
102 High Income..................................................... 324 3,964 12.520
103 Equity-Income................................................... 211 4,322 21.030
104 Growth.......................................................... 10,544 326,046 31.140
105 Overseas........................................................ 972 17,077 18.840

Fidelity Variable Insurance Products Fund II:
106 Asset Manager................................................... 11,322 184,211 16.930

T. Rowe Price International Series, Inc.:
150 International Stock............................................. 4,752 56,619 12.640

Delaware Group Premium Fund, Inc.:
207 International Equity............................................ 181 2,662 15.110

INVESCO Variable Investment Funds, Inc.:
301 Industrial Income............................................... 232 3,459 14.330
302 Total Return.................................................... 1,332 17,640 13.210
</TABLE>

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 up to $10. 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 year ended December 31, 1996, these monthly deductions from
sub-account policy values amounted to $335,040. For the year ended December 31,
1995, there were no monthly deductions from

F-53
<PAGE>
GROUP VEL ACCOUNT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

NOTE 4 -- RELATED PARTY TRANSACTIONS (CONTINUED)
sub-account policy values. These amounts are included on the statements of
changes in net assets with other transfers to the General Account.

The Company makes a charge of up to .90% per annum based on the average daily
net assets of each Sub-Account at each valuation date for mortality and expense
risks. This 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.
During the first 15 policy years, the Company also charges each Sub-Account up
to .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 First Allmerica, is principal underwriter and general distributor of Group
VEL, and does not receive any compensation for sales of Group VEL policies.
Commissions are paid to registered representatives of Allmerica Investments by
the Company. As the current series of policies have a surrender charge, no
deduction is made for sales charges at the time of the sale. For the years ended
December 31, 1996 and 1995, there were no surrender charges applicable to Group
VEL.

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 Group VEL satisfies the current requirements of
the regulations, and it intends that Group VEL will continue to meet such
requirements.

F-54
<PAGE>
GROUP VEL ACCOUNT

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

NOTE 6 -- PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of the Trust, VIPF, VIPF II, T.
Rowe, DGPF and INVESCO shares by Group VEL during the period ended December 31,
1996 were as follows:

<TABLE>
<CAPTION>
SUB-ACCOUNT INVESTMENT PORTFOLIO PURCHASES SALES
------------ -------------------------------------------------------------------------- ---------- --------
<C> <S> <C> <C>
Allmerica Investment Trust:
1 Growth.................................................................... $ 692,923 $ 1,581
2 Investment Grade Income................................................... 14 --
3 Money Market.............................................................. 847,187 769,294
4 Equity Index.............................................................. 11,021 4,584
5 Government Bond........................................................... 3,172 473
6 Select Aggressive Growth.................................................. 12,160 3,714
7 Select Growth............................................................. 2,866 1,159
8 Select Growth and Income.................................................. 3,749 1,563
9 Small Cap Value........................................................... 16,501 11,062
11 Select International Equity............................................... 68,954 10,332
12 Select Capital Appreciation............................................... 34,018 19,205

Fidelity Variable Insurance Products Fund:
102 High Income............................................................... 5,492 1,769
103 Equity-Income............................................................. 5,542 1,492
104 Growth.................................................................... 336,316 10,621
105 Overseas.................................................................. 31,373 14,633

Fidelity Variable Insurance Products Fund II:
106 Asset Manager............................................................. 206,903 23,023

T. Rowe Price International Series, Inc.:
150 International Stock....................................................... 163,954 108,256

Delaware Group Premium Fund, Inc.:
207 International Equity...................................................... 3,517 874

INVESCO Variable Investment Funds, Inc.:
301 Industrial Income......................................................... 4,158 724
302 Total Return.............................................................. 25,705 8,312
---------- --------
Totals.................................................................... $2,475,525 $992,671
---------- --------
---------- --------
</TABLE>

F-55
<PAGE>
APPENDIX A -- OPTIONAL BENEFITS

This Appendix is intended to provide only a very brief overview of additional
insurance benefits available by rider. The following supplemental benefits are
available for issue under the Certificates for an additional charge.

WAIVER OF PREMIUM RIDER

This rider provides that, during periods of total disability continuing for
more than the period of time specified in the rider, the Company will add to
the Certificate Value each month an amount selected by you or the amount
necessary to maintain Certificate in force, whichever is greater. This
benefit is subject to the Company's maximum issue benefits. Its cost may
change yearly.

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 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 Certificate.

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 Certificate anniversary nearest the Insured's Age 70.

OPTION TO ACCELERATE BENEFITS RIDER

This rider permits part of the proceeds of the Certificate to be available
before death if the Insured becomes terminally ill and, depending on the
group to which the Certificate is issued, may also pay part of the proceeds
if the Insured is permanently confined to a nursing home.

EXCHANGE OPTION RIDER

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

EXCHANGE TO TERM INSURANCE RIDER

This rider allows a Certificate Owner which is a corporation or corporate
grantor trust to exchange the Certificate prior to the third Certificate
anniversary for a five-year non-convertible term insurance policy. An
exchange credit will be paid to the Certificate Owner.

A-1
<PAGE>
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 then 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 Death Benefit.

The amounts payable under a payment option are paid from the General Account.
These amounts are not based on the investment experience of the Group VEL
Account.

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 becomes payable. If you make no selection, the
Beneficiary may select an option when the Death Proceeds becomes payable.

A-2
<PAGE>
APPENDIX C -- ILLUSTRATIONS OF SUM INSURED, CERTIFICATE VALUES
AND ACCUMULATED PREMIUMS

The tables illustrate the way in which a Certificate's Sum Insured and
Certificate Value could vary over an extended period of time.

ASSUMPTIONS

The tables illustrate a Certificate issued to a person, Age 30, under a standard
Premium Class and qualifying for the non-smoker discount and a Certificate
issued to a person, Age 45, under a standard Premium Class and qualifying for
the non-smoker discount. The tables illustrate the guaranteed cost of insurance
rates the current cost of insurance rates as presently in effect.

The tables illustrate the Certificate Values that would result based upon the
assumptions that no Certificate 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
Certificate year (so that no transaction or transfer charges have been
incurred).

The tables assume that all premiums are allocated to and remain in the Group VEL
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 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 Certificate 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
Certificate years. The values would also be different depending on the
allocation of a Certificate's total Certificate Value among the Sub-Accounts of
the Group VEL 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.

DEDUCTIONS FOR CHARGES

The amounts shown for the Death Proceeds and Certificate Values take into
account the deduction from premium for the premium tax charge, the Monthly
Deduction from Certificate Value, and the daily charge against the Group VEL
Account for mortality and expense risks equivalent to an effective annual rate
of 0.90% of the average daily value of the assets in the Group VEL Account
attributable to the Certificates.

EXPENSES OF THE UNDERLYING FUNDS

The amounts shown in the tables also take into account the Underlying Fund
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 Fund. The actual fees
and expenses of each Underlying Fund vary, and, in 1996, ranged from an annual
rate of 0.34% to an annual rate of 1.23% of average daily net assets. The fees
and expenses associated with the Policy may be more or less than 0.85% in the
aggregate, depending upon how you make allocations of the 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-Mid Cap Value Fund. In 1996 the expenses of the Funds of the Trust did
not exceed the expense limitations.

A-3
<PAGE>
Delaware International has voluntarily agreed 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. Without the expense limitation, in 1996 the
total annual expenses of the International Equity Series would have been 1.04%.

For the Industrial Income Fund and Total Return Fund of INVESCO VIF, the ratio
of total expenses, less expenses voluntarily absorbed by the investment adviser,
were 0.95% and 0.94%, respectively. If such expenses had not been voluntarily
absorbed, the total operating expenses would have been 1.19% and 1.30%,
respectively.

NET ANNUAL RATES OF INVESTMENT

Taking into account the 0.90% charge to the Group VEL Account 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 -1.75%, 4.25% and 10.25%, respectively.

The hypothetical returns shown in the table do not reflect any charges for
income taxes against the Group VEL 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.

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.

A-4
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE PLUS CERTIFICATE

NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 1

CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0%
PAID PLUS GROSS INVESTMENT RETURN
INTEREST ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- ----------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
1 4,410 153 3,502 250,000
2 9,040 3,565 6,914 250,000
3 13,903 6,887 10,236 250,000
4 19,008 10,249 13,464 250,000
5 24,368 13,787 16,601 250,000

6 29,996 17,232 19,644 250,000
7 35,906 20,577 22,587 250,000
8 42,112 23,823 25,431 250,000
9 48,627 26,969 28,174 250,000
10 55,469 30,010 30,814 250,000

11 62,652 33,346 33,346 250,000
12 70,195 35,735 35,735 250,000
13 78,114 37,977 37,977 250,000
14 86,430 40,076 40,076 250,000
15 95,161 42,023 42,023 250,000

16 104,330 43,806 43,806 250,000
17 113,956 45,448 45,448 250,000
18 124,064 46,935 46,935 250,000
19 134,677 48,253 48,253 250,000
20 145,820 49,388 49,388 250,000

Age 60 95,161 42,023 42,023 250,000
Age 65 145,820 49,388 49,388 250,000
Age 70 210,477 51,357 51,357 250,000
Age 75 292,995 44,916 44,916 250,000

<CAPTION>
HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
---------------------------------- ----------------------------------
CERTIFICATE SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ---------- ----------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
1 382 3,731 250,000 611 3,960 250,000
2 4,242 7,591 250,000 4,948 8,297 250,000
3 8,236 11,585 250,000 9,699 13,048 250,000
4 12,500 15,715 250,000 15,039 18,254 250,000
5 17,174 19,987 250,000 21,150 23,963 250,000
6 21,993 24,405 250,000 27,814 30,225 250,000
7 26,958 28,967 250,000 35,083 37,093 250,000
8 32,074 33,682 250,000 43,024 44,632 250,000
9 37,348 38,554 250,000 51,708 52,913 250,000
10 42,783 43,587 250,000 61,212 62,015 250,000
11 48,784 48,784 250,000 72,025 72,025 250,000
12 54,122 54,122 250,000 83,014 83,014 250,000
13 59,604 59,604 250,000 95,092 95,092 250,000
14 65,244 65,244 250,000 108,393 108,393 250,000
15 71,043 71,043 250,000 123,055 123,055 250,000
16 77,002 77,002 250,000 139,237 139,237 250,000
17 83,155 83,155 250,000 157,141 157,141 250,000
18 89,504 89,504 250,000 176,973 176,973 250,000
19 96,054 96,054 250,000 198,972 198,972 250,000
20 102,813 102,813 250,000 223,320 223,320 272,451
Age 60 71,043 71,043 250,000 123,055 123,055 250,000
Age 65 102,813 102,813 250,000 223,320 223,320 272,451
Age 70 139,910 139,910 250,000 386,432 386,432 448,262
Age 75 184,624 184,624 250,000 649,170 649,170 694,611
</TABLE>

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

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate 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 CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE FUNDS. THE VALUE OF
UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE 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 CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE
TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.

A-5
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE PLUS CERTIFICATE

NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 1

GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0%
PAID PLUS GROSS INVESTMENT RETURN
INTEREST ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- ----------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
1 4,410 0 3,167 250,000
2 9,040 2,879 6,228 250,000
3 13,903 5,833 9,182 250,000
4 19,008 8,807 12,022 250,000
5 24,368 11,935 14,748 250,000

6 29,996 14,947 17,358 250,000
7 35,906 17,829 19,839 250,000
8 42,112 20,574 22,182 250,000
9 48,627 23,170 24,376 250,000
10 55,469 25,603 26,407 250,000

11 62,652 28,268 28,268 250,000
12 70,195 29,950 29,950 250,000
13 78,114 31,445 31,445 250,000
14 86,430 32,744 32,744 250,000
15 95,161 33,837 33,837 250,000

16 104,330 34,697 34,697 250,000
17 113,956 35,302 35,302 250,000
18 124,064 35,617 35,617 250,000
19 134,677 35,596 35,596 250,000
20 145,820 35,194 35,194 250,000

Age 60 95,161 33,837 33,837 250,000
Age 65 145,820 35,194 35,194 250,000
Age 70 210,477 26,069 26,069 250,000
Age 75 292,995 0 0 0

<CAPTION>
HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
---------------------------------- ----------------------------------
CERTIFICATE SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ---------- ----------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
1 36 3,385 250,000 255 3,604 250,000
2 3,514 6,863 250,000 4,177 7,526 250,000
3 7,087 10,436 250,000 8,447 11,796 250,000
4 10,884 14,099 250,000 13,231 16,446 250,000
5 15,043 17,857 250,000 18,702 21,515 250,000
6 19,298 21,709 250,000 24,635 27,046 250,000
7 23,639 25,648 250,000 31,066 33,075 250,000
8 28,061 29,669 250,000 38,044 39,651 250,000
9 32,558 33,764 250,000 45,619 46,825 250,000
10 37,119 37,923 250,000 53,849 54,652 250,000
11 42,145 42,145 250,000 63,206 63,206 250,000
12 46,426 46,426 250,000 72,568 72,568 250,000
13 50,762 50,762 250,000 82,830 82,830 250,000
14 55,154 55,154 250,000 94,103 94,103 250,000
15 59,598 59,598 250,000 106,511 106,511 250,000
16 64,077 64,077 250,000 120,186 120,186 250,000
17 68,583 68,583 250,000 135,293 135,293 250,000
18 73,094 73,094 250,000 152,015 152,015 250,000
19 77,583 77,583 250,000 170,572 170,572 250,000
20 82,028 82,028 250,000 191,230 191,230 250,000
Age 60 59,598 59,598 250,000 106,511 106,511 250,000
Age 65 82,028 82,028 250,000 191,230 191,230 250,000
Age 70 103,101 103,101 250,000 331,550 331,550 384,598
Age 75 119,588 119,588 250,000 555,584 555,584 594,475
</TABLE>

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

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate 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 CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE 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 CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.

A-6
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE PLUS CERTIFICATE

NON-SMOKER AGE 30
SPECIFIED FACE AMOUNT = $75,000
SUM INSURED OPTION 2

CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0%
PAID PLUS GROSS INVESTMENT RETURN
INTEREST ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- ----------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
1 1,470 393 1,221 76,221
2 3,014 1,592 2,420 77,420
3 4,634 2,768 3,596 78,596
4 6,336 3,955 4,750 79,750
5 8,123 5,185 5,881 80,881

6 9,999 6,392 6,989 81,989
7 11,969 7,576 8,073 83,073
8 14,037 8,737 9,135 84,135
9 16,209 9,874 10,172 85,172
10 18,490 10,986 11,185 86,185

11 20,884 12,174 12,174 87,174
12 23,398 13,137 13,137 88,137
13 26,038 14,077 14,077 89,077
14 28,810 14,991 14,991 89,991
15 31,720 15,880 15,880 90,880

16 34,777 16,743 16,743 91,743
17 37,985 17,580 17,580 92,580
18 41,355 18,391 18,391 93,391
19 44,892 19,174 19,174 94,174
20 48,607 19,930 19,930 94,930

Age 60 97,665 25,579 25,579 100,579
Age 65 132,771 26,546 26,546 101,546
Age 70 177,576 25,537 25,537 100,537
Age 75 234,759 21,566 21,566 96,566

<CAPTION>
HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
---------------------------------- -------------------------------------
CERTIFICATE SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ---------- ----------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 471 1,299 76,299 549 1,377 76,377
2 1,824 2,652 77,652 2,066 2,894 77,894
3 3,234 4,062 79,062 3,738 4,566 79,566
4 4,734 5,529 80,529 5,611 6,406 81,406
5 6,360 7,055 82,055 7,736 8,432 83,432
6 8,048 8,644 83,644 10,066 10,663 85,663
7 9,799 10,296 85,296 12,621 13,118 88,118
8 11,616 12,013 87,013 15,422 15,820 90,820
9 13,500 13,798 88,798 18,495 18,793 93,793
10 15,454 15,653 90,653 22,865 22,064 97,064
11 17,579 17,579 92,579 25,664 25,664 100,664
12 19,580 19,580 94,580 29,625 29,625 104,625
13 21,657 21,657 96,657 33,983 33,983 108,983
14 23,814 23,814 98,814 38,779 38,779 113,779
15 26,054 26,054 01.054 44,057 44,057 119,057
16 28,377 28,377 103,377 49,865 49,865 124,865
17 30,788 30,788 105,788 56,256 56,256 131,256
18 33,290 33,290 108,290 63,290 63,290 138,290
19 35,884 35,884 110.884 71,031 71,031 146,031
20 38,574 38,574 113,574 79,550 79,550 154,550
Age 60 71,166 71,166 146,166 229,234 229,234 307,173
Age 65 91,516 91,516 166,516 378,082 378,082 461,260
Age 70 114,403 114,403 189,403 617,137 617,137 715,879
Age 75 139,062 139,062 214,062 1,001,969 1,001,969 1,076,969
</TABLE>

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

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate 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 CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE 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 CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.

A-7
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE PLUS CERTIFICATE

NON-SMOKER AGE 30
SPECIFIED FACE AMOUNT = $75,000
SUM INSURED OPTION 2

GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0%
PAID PLUS GROSS INVESTMENT RETURN
INTEREST ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- ----------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
1 1,470 349 1,178 76,178
2 3,014 1,504 2,332 77,332
3 4,634 2,637 3,465 78,465
4 6,336 3,779 4,574 79,574
5 8,123 4,963 5,658 80,658

6 9,999 6,123 6,719 81,719
7 11,969 7,258 7,755 82,755
8 14,037 8,367 8,765 83,765
9 16,209 9,449 9,747 84,747
10 18,490 10,503 10,702 85,702

11 20,884 11,629 11,629 86,629
12 23,398 12,526 12,526 87,526
13 26,038 13,396 13,396 88,396
14 28,810 14,234 14,234 89,234
15 31,720 15,042 15,042 90,042

16 34,777 15,818 15,818 90,818
17 37,985 16,562 16,562 91,562
18 41,355 17,272 17,272 92,272
19 44,892 17,947 17,947 92,947
20 48,607 18,586 18,586 93,586

Age 60 97,665 22,267 22,267 97,267
Age 65 132,771 21,310 21,310 96,310
Age 70 177,576 16,934 16,934 91,934
Age 75 234,759 7,121 7,121 82,121

<CAPTION>
HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
---------------------------------- -------------------------------------
CERTIFICATE SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ---------- ----------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 426 1,254 76,254 503 1,331 76,331
2 1,731 2,559 77,559 1,968 2,796 77,796
3 3,090 3,918 78,918 3,580 4,408 79,408
4 4,536 5,331 80,331 5,388 6,183 81,183
5 6,102 6,798 81,798 7,438 8,133 83,133
6 7,726 8,322 83,322 9,683 10,279 85,279
7 9,408 9,905 84,905 12,140 12,637 87,637
8 11,149 11,547 86,547 14,832 15,229 90,229
9 12,951 13,249 88,249 17,779 18,077 93,077
10 14,813 15,012 90,012 21,006 21,205 96,205
11 16,839 16,839 91,839 24,642 24,642 99,642
12 18,730 18,730 93,730 28,417 28,417 103,417
13 20,688 20,688 95,688 32,565 32,565 107,565
14 22,712 22,712 97,712 37,122 37,122 112,122
15 24,808 24,808 99,808 42,131 42,131 117,131
16 26,974 26,974 101,974 47,632 47,632 122,632
17 29,212 29,212 104,212 53,678 53,678 128,678
18 31,524 31,524 106,524 60,322 60,322 135,322
19 33,911 33,911 108,911 67,623 67,623 142,623
20 36,375 36,375 111,375 75,646 75,646 150,646
Age 60 64,992 64,992 139,992 215,170 215,170 290,170
Age 65 81,383 81,383 156,383 352,366 352,366 429,887
Age 70 97,538 97,538 172,538 570,328 570,328 661,581
Age 75 110,763 110,763 185,763 917,144 917,144 992,144
</TABLE>

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

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate 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 CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE 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 CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.

A-8
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE PLUS CERTIFICATE*

NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 3

GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0%
PAID PLUS GROSS INVESTMENT RETURN
INTEREST ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- ----------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
1 13,818 8,429 11,778 250,000
2 28,327 19,983 23,332 250,000
3 43,561 31,317 34,666 250,000
4 59,557 42,566 45,781 250,000
5 76,353 53,872 56,685 250,000

6 93,989 64,971 67,382 250,000
7 112,506 75,862 77,871 250,000
8 131,950 86,546 88,154 250,000
9 152,365 97,028 98,234 250,000
10 173,801 108,044 108,044 256,065

11 196,309 117,547 117,547 270,357
12 219,943 126,743 126,743 282,638
13 244,758 135,641 135,641 292,984
14 270,814 144,235 144,235 302,894
15 298,173 152,532 152,532 311,165

16 326,899 160,510 160,510 319,414
17 357,062 168,192 168,192 324,611
18 388,733 175,554 175,554 330,041
19 421,988 182,586 182,586 334,133
20 456,905 189,291 189,291 336,938

Age 60 298,173 152,532 152,532 311,165
Age 65 456,905 189,291 189,291 336,938
Age 70 659,493 217,841 217,841 344,189
Age 75 918,052 238,343 238,343 338,447

<CAPTION>
HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
---------------------------------- -------------------------------------
CERTIFICATE SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ---------- ----------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 9,173 12,522 250,000 9,918 13,267 250,000
2 22,213 25,562 250,000 24,533 27,882 250,000
3 35,795 39,144 250,000 40,643 43,992 250,000
4 50,080 53,295 250,000 58,544 61,759 250,000
5 65,235 68,048 250,000 78,555 81,368 250,000
6 81,024 83,435 250,000 100,551 102,962 275,938
7 97,456 99,465 258,608 124,533 126,542 329,009
8 114,395 116,003 292,327 150,669 152,277 383,738
9 131,846 133,052 324,646 179,141 180,347 440,048
10 150,604 150,604 356,931 210,931 210,931 499,905
11 168,663 168,663 387,926 244,236 244,236 561,744
12 187,237 187,237 417,538 280,493 280,493 625,498
13 206,332 206,332 445,676 319,950 319,950 691,092
14 225,942 225,942 474,479 362,856 362,856 761,997
15 246,075 246,075 501,993 409,498 409,498 835,375
16 266,692 266,692 530,717 460,110 460,110 915,618
17 287,824 287,824 555,501 515,061 515,061 994,067
18 309,420 309,420 581,710 574,599 574,599 1,080,247
19 331,452 331,452 606,557 639,032 639,032 1,169,429
20 353,905 353,905 629,951 708,707 708,707 1,261,499
Age 60 246,075 246,075 501,993 409,498 409,498 835,375
Age 65 353,905 353,905 629,951 708,707 708,707 1,261,499
Age 70 471,552 471,552 745,053 1,148,569 1,148,569 1,814,739
Age 75 595,761 595,761 845,980 1,780,948 1,780,948 2,528,946
</TABLE>

(1) Assumes a $13,160 premium is paid at the beginning of each Certificate Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate 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 CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE 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 CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.

A-9
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE EXCEPTIONAL LIFE PLUS CERTIFICATE*

NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
SUM INSURED OPTION 3

CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0%
PAID PLUS GROSS INVESTMENT RETURN
INTEREST ----------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH
YEAR PER YEAR VALUE VALUE BENEFIT
- ----------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C>
1 13,818 8,752 12,101 250,000
2 28,327 20,632 23,981 250,000
3 43,561 32,294 35,643 250,000
4 59,557 43,875 47,090 250,000
5 76,353 55,515 58,328 250,000

6 93,989 66,950 69,361 250,000
7 112,506 78,181 80,190 250,000
8 131,950 89,215 90,823 250,000
9 152,365 100,055 101,260 250,000
10 173,801 111,447 111,447 264,129

11 196,309 121,382 121,382 279,179
12 219,943 131,047 131,047 292,234
13 244,758 140,442 140,442 303,355
14 270,814 149,574 149,574 314,106
15 298,173 158,441 158,441 323,220

16 326,899 167,033 167,033 332,396
17 357,062 175,391 175,391 338,505
18 388,733 183,504 183,504 344,987
19 421,988 191,372 191,372 350,211
20 456,905 199,000 199,000 354,221

Age 60 298,173 158,441 158,441 323,220
Age 65 456,905 199,000 199,000 354,221
Age 70 659,493 233,168 233,168 368,406
Age 75 918,052 261,169 261,169 370,860

<CAPTION>
HYPOTHETICAL 6% HYPOTHETICAL 12%
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
---------------------------------- -------------------------------------
CERTIFICATE SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ---------- ----------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 9,506 12,855 250,000 10,261 13,610 250,000
2 22,900 26,249 250,000 25,259 28,608 250,000
3 36,857 40,206 250,000 41,795 45,144 250,000
4 51,537 54,753 250,000 60,163 63,378 250,000
5 67,105 69,918 250,000 80,683 83,496 250,000
6 83,324 85,735 250,000 103,233 105,644 283,127
7 100,190 102,199 265,718 127,918 129,927 337,811
8 117,656 119,264 300,544 154,940 156,548 394,501
9 135,742 136,947 334,151 184,522 185,728 453,176
10 155,262 155,262 367,972 217,699 217,699 515,946
11 174,227 174,227 400,722 252,719 252,719 581,254
12 193,825 193,825 432,229 291,022 291,022 648,979
13 214,070 214,070 462,390 332,901 332,901 719,067
14 234,978 234,978 493,454 378,683 378,683 795,234
15 256,560 256,560 523,382 428,707 428,707 874,562
16 278,805 278,805 554,822 483,312 483,312 961,790
17 301,791 301,791 582,457 543,016 543,016 1,048,020
18 325,511 325,511 611,960 608,234 608,234 1,143,480
19 349,977 349,977 640,458 679,453 679,453 1,243,398
20 375,207 375,207 667,868 757,208 757,208 1,347,831
Age 60 256,560 256,560 523,382 428,707 428,707 874,562
Age 65 375,207 375,207 667,868 757,208 757,208 1,347,831
Age 70 512,262 512,262 809,374 1,263,390 1,263,390 1,996,156
Age 75 668,451 668,451 949,200 2,035,582 2,035,582 2,890,526
</TABLE>

(1) Assumes a $13,160 premium is paid at the beginning of each Certificate Year.
Values will be different if premiums are paid with a different frequency or
in different amounts.

(2) Assumes that no Certificate loan has been made. Excessive loans or
withdrawals may cause this Certificate to lapse because of insufficient
Certificate 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 CERTIFICATE
OWNER, AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS.
THE VALUE OF UNITS, CASH VALUE, AND DEATH BENEFIT FOR A CERTIFICATE 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 CERTIFICATE YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIVES CAN BE MADE THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.

A-10
<PAGE>
APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGES

A separate surrender charge may be calculated upon issuance of the Certificate
and upon each increase in Face Amount. The maximum surrender charge calculated
upon issuance of the Certificate is equal to $8.50 per thousand dollars of the
initial Face Amount plus up to 50% (less any premium expense charge not
associated with state and local premium taxes) of the Guideline Annual Premium,
depending on the group to which the Certificate is issued. The maximum surrender
charge for an increase in Face Amount is $8.50 per thousand dollars of increase,
plus up to 50% (less any premium expense charge not associated with state and
local premium taxes) of the Guideline Annual Premium for the increase. The
calculation may be summarized in the following formula:

<TABLE>
<C> <C> <S>
Face Amount
Maximum Surrender Charge = (8.5 X ----------- ) + (up to 50% X Guideline Annual Premium)
1000
</TABLE>

A further limitation is imposed based on the Standard Non-Forfeiture Law of each
state. The maximum surrender charges upon issuance of the Certificate and upon
each increase in Face Amount are shown in the table below. During the first two
Certificate 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 remains level for up to the first 24 Certificate
months, reduces uniformly for the balance of the surrender charge period, and is
zero thereafter. The actual surrender charge imposed may be less than the
maximum.

The Factors used in calculating the maximum surrender charges vary with the
issue Age and Underwriting Class as indicated in the table below.

A-11
<PAGE>
MAXIMUM SURRENDER CHARGE PER $1000 FACE AMOUNT

<TABLE>
<CAPTION>
Age at Age at
issue or Unisex Unisex Unisex issue or Unisex Unisex Unisex
increase Nonsmoker Smoker Unismoker increase Nonsmoker Smoker Unismoker
- ----------- ------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
0 14.89 14.37 41 27.74 32.73 29.39
1 14.84 14.31 42 28.55 33.79 30.27
2 15.00 14.44 43 29.41 34.91 31.19
3 15.17 14.58 44 30.31 36.08 32.17
4 15.35 14.73 45 31.26 37.31 33.19
5 15.53 14.88 46 32.27 38.60 34.27
6 15.73 15.05 47 33.33 39.95 35.40
7 15.94 15.23 48 34.46 41.38 36.59
8 16.16 15.41 49 35.64 42.89 37.86
9 16.39 15.61 50 36.90 44.48 39.19
10 16.64 15.82 51 38.24 46.17 40.60
11 16.91 16.05 52 39.66 47.95 42.10
12 17.18 16.28 53 41.17 49.84 43.68
13 17.47 16.52 54 42.76 51.82 45.36
14 17.77 16.77 55 44.46 53.91 47.12
15 18.08 17.02 56 46.25 56.11 48.98
16 18.38 17.28 57 48.16 56.87 50.95
17 18.67 17.54 58 50.18 56.76 53.03
18 17.15 18.98 17.80 59 52.34 56.65 55.24
19 17.40 19.29 18.07 60 54.64 56.54 56.71
20 17.65 19.62 18.35 61 56.54 56.44 56.59
21 17.92 19.95 18.64 62 56.41 56.34 56.47
22 18.20 20.31 18.95 63 56.29 56.26 56.36
23 18.49 20.68 19.27 64 56.16 56.18 56.25
24 18.80 21.08 19.61 65 56.03 56.10 56.13
25 19.13 21.49 19.97 66 55.90 56.01 56.00
26 19.48 21.94 20.35 67 55.74 55.90 55.85
27 19.85 22.42 20.75 68 55.58 55.76 55.70
28 20.24 22.92 21.18 69 55.41 55.63 55.53
29 20.65 23.45 21.63 70 55.27 55.49 55.37
30 21.08 24.02 22.11 71 55.12 55.38 55.22
31 21.54 24.62 22.61 72 54.96 55.29 55.10
32 22.03 25.25 23.15 73 54.85 55.23 54.99
33 22.54 25.92 23.71 74 54.75 55.19 54.89
34 23.03 26.62 24.30 75 54.64 55.16 54.80
35 23.64 27.36 24.92 76 54.52 55.10 54.69
36 24.24 28.15 25.57 77 54.36 55.01 54.53
37 24.87 28.97 26.26 78 54.18 54.86 54.35
38 25.53 29.84 26.99 79 53.97 54.68 54.14
39 26.23 30.76 27.75 80 53.75 54.49 53.91
40 26.97 31.72 28.55
</TABLE>

A-12
<PAGE>
EXAMPLES

For the purposes of these examples, assume that a unisex, Age 35, non-smoker
purchases a $100,000 Certificate. In this example the Guideline Annual Premium
("GAP") equals $944.21. The maximum surrender charge is calculated as follows:

<TABLE>
<S> <C> <C>
(1) Deferred Administrative Charge $ 850.00
($8.50/$1,000 of Face Amount)

(2) Deferred Sales Charge $ 472.11
(50% x GAP)
---------
$1,322.11
Maximum Surrender Charge per Table (23.64 x 100) $2,364.00
</TABLE>

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

<TABLE>
<S> <C> <C>
(1) Deferred Administrative Charge ($8.50/$1,000 of Face $ 850.00
Amount)

(2) Deferred Sales Charge Varies
(not to exceed 30% of premiums received, up to one GAP,
plus 9% of premiums received in excess of one GAP)
---------
Sum of (1) and (2)
</TABLE>

The maximum surrender charge is $1,322.11. All premiums are associated with the
initial Face Amount unless the Face Amount is increased.

Example 1:

Assume the Certificate Owner surrenders the Certificate in the 10th
Certificate month, having paid total premiums of $900. The actual surrender
charge would be $1,120.

Example 2:

Assume the Certificate Owner surrenders the Certificate in the 120th month.
Also assume that after the 24th Certificate month, the maximum surrender charge
decreases by 1/156 per month thereby reaching zero at the end of the 15th
Certificate year. In this example, the maximum surrender charge would be
$508.50.

A-13