GROUP VEL ACCOUNT OF ALLMERICA FINANCIAL LIFE INS & ANN CO, 485BPOS, 1999-04-26

GROUP VEL ACCOUNT OF ALLMERICA FINANCIAL LIFE INS & ANN CO
485BPOS, 1999-04-26

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<PAGE>
Registration No. 33-82658
811-8704

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2

Post-Effective Amendment No. 11

GROUP VEL ACCOUNT
OF ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(Exact Name of Registrant)

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

Abigail M. Armstrong, Esq.
440 Lincoln Street
Worcester, MA 01653
(Name and Address of Agent for Service of Process)

It is proposed that this filing will become effective:

_____ immediately upon filing pursuant to paragraph (b)
__X__ on May 1, 1999 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a) (1)
_____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.

FLEXIBLE PREMIUM VARIABLE LIFE

Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940 ("1940
Act"), Registrant hereby declares that an indefinite amount of its securities is
being registered under the Securities Act of 1933 ("1933 Act"). The Rule 24f-2
Notice for the issuer's fiscal year ended December 31, 1998 was filed on or
about March 30, 1999.
<PAGE>

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

<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS A
- ----------- -----------------------
<S> <C>
1. . . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . . Cover Page
3. . . . . . . . . . . . . . . Not Applicable
4. . . . . . . . . . . . . . . Distribution
5. . . . . . . . . . . . . . . The Company, The Separate Account
6. . . . . . . . . . . . . . . The Separate Account
7. . . . . . . . . . . . . . . Not Applicable
8. . . . . . . . . . . . . . . Not Applicable
9. . . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . . Summary; Description of the Company, The
Separate Account and the Underlying Funds;
The Certificate; Certificate Termination and
Reinstatement; Other Certificate Provisions
11 . . . . . . . . . . . . . . Summary; The Trust, Investment Objectives and
Policies
12 . . . . . . . . . . . . . . Summary; The Trust
13 . . . . . . . . . . . . . . Summary; The Trust; VIP; VIP II; T. Rowe Price;
DGPF; INVESCO VIF; and Morgan Stanley;
Investment Advisory Services to the Trust;
Investment Advisory Services to VIP; Investment
Advisory Services to VIP II; Investment Advisory
Services to T. Rowe Price; Investment Advisory
Services to DGPF; Investment Advisory Services
to INVESCO VIF; and Investment Advisory Services
to Morgan Stanley: Charges and Deductions
14 . . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate
15 . . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate;
Premium Payments; Allocation of Net Premiums
16 . . . . . . . . . . . . . . The Separate Account; The Trust; VIP; VIP II;
T. Rowe Price; DGPF; INVESCO VIF; and Morgan
Stanley; Premium Payments; Allocation of Net
Premiums
17 . . . . . . . . . . . . . . Summary; Surrender; Partial Withdrawal; Charges
and Deductions; Certificate Termination and
Reinstatement
18 . . . . . . . . . . . . . . The Separate Account; The Trust; VIP; VIP II;
T. Rowe Price; DGPF; INVESCO VIF; and Morgan
Stanley; Premium Payments
19 . . . . . . . . . . . . . . Reports; Voting Rights
20 . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . Summary; Certificate Loans; Other Certificate
Provisions
22 . . . . . . . . . . . . . . Other Certificate Provisions
23 . . . . . . . . . . . . . . Not Required
24 . . . . . . . . . . . . . . Other Certificate Provisions
25 . . . . . . . . . . . . . . The Company
26 . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . The Company
28 . . . . . . . . . . . . . . Directors and Principal Officers of the Company
29 . . . . . . . . . . . . . . The Company
30 . . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . Not Applicable

<PAGE>

33 . . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . Distribution
36 . . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . . Summary; Distribution
39 . . . . . . . . . . . . . . Summary; Distribution
40 . . . . . . . . . . . . . . Not Applicable
41 . . . . . . . . . . . . . . The Company, Distribution
42 . . . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . . Premium Payments; Certificate Value and
Surrender Value
45 . . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . . Certificate Value and Surrender Value; Federal
Tax Considerations
47 . . . . . . . . . . . . . . The Company
48 . . . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . . The Separate Account
51 . . . . . . . . . . . . . . Cover Page; Summary; Charges and Deductions; The
Certificate; Certificate Termination and
Reinstatement; Other Certificate Provisions
52 . . . . . . . . . . . . . . Addition, Deletion or Substitution of
Investments
53 . . . . . . . . . . . . . . Federal Tax Considerations
54 . . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . . Not Applicable
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS B
- ----------- -----------------------
<S> <C>
1. . . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . . Cover Page
3. . . . . . . . . . . . . . . Not Applicable
4. . . . . . . . . . . . . . . Distribution
5. . . . . . . . . . . . . . . The Company, The Separate Account
6. . . . . . . . . . . . . . . The Separate Account
7. . . . . . . . . . . . . . . Not Applicable
8. . . . . . . . . . . . . . . Not Applicable
9. . . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . . Summary; Description of the Company, The
Separate Account and the Underlying Funds;
The Certificate; Certificate Termination and
Reinstatement; Other Certificate Provisions
11 . . . . . . . . . . . . . . Summary; The Trust, Investment Objectives and
Policies
12 . . . . . . . . . . . . . . Summary; The Trust
13 . . . . . . . . . . . . . . Summary; The Trust; MFVAT; DGPF; and T. Rowe
Price; Investment Advisory Services to the
Trust; Investment Advisory Services to MFVAT;
Investment Advisory Services to DGPF; and
Investment Advisory Services to T. Rowe Price;
Charges and Deductions
14 . . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate
15 . . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate;
Premium Payments; Allocation of Net Premiums
16 . . . . . . . . . . . . . . The Separate Account; The Trust; MFVAT; DGPF;
and T. Rowe Price; Premium Payments; Allocation
of Net Premiums
17 . . . . . . . . . . . . . . Summary; Surrender; Partial Withdrawal; Charges
and Deductions; Certificate Termination and
Reinstatement
18 . . . . . . . . . . . . . . The Separate Account; The Trust; MFVAT; DGPF;
and T. Rowe Price; Premium Payments
19 . . . . . . . . . . . . . . Reports; Voting Rights
20 . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . Summary; Certificate Loans; Other Certificate
Provisions
22 . . . . . . . . . . . . . . Other Certificate Provisions
23 . . . . . . . . . . . . . . Not Required
24 . . . . . . . . . . . . . . Other Certificate Provisions
25 . . . . . . . . . . . . . . The Company
26 . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . The Company
28 . . . . . . . . . . . . . . Directors and Principal Officers of the Company
29 . . . . . . . . . . . . . . The Company
30 . . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . Distribution

<PAGE>

36 . . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . . Summary; Distribution
39 . . . . . . . . . . . . . . Summary; Distribution
40 . . . . . . . . . . . . . . Not Applicable
41 . . . . . . . . . . . . . . The Company, Distribution
42 . . . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . . Premium Payments; Certificate Value and
Surrender Value
45 . . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . . Certificate Value and Surrender Value; Federal
Tax Considerations
47 . . . . . . . . . . . . . . The Company
48 . . . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . . The Separate Account
51 . . . . . . . . . . . . . . Cover Page; Summary; Charges and Deductions; The
Certificate; Certificate Termination and
Reinstatement; Other Certificate Provisions
52 . . . . . . . . . . . . . . Addition, Deletion or Substitution of
Investments
53 . . . . . . . . . . . . . . Federal Tax Considerations
54 . . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . . Not Applicable
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS C
- ----------- -----------------------
<S> <C>
1. . . . . . . . . . . . . . . Cover Page
2. . . . . . . . . . . . . . . Cover Page
3. . . . . . . . . . . . . . . Not Applicable
4. . . . . . . . . . . . . . . Distribution
5. . . . . . . . . . . . . . . The Company, The Group VEL Account
6. . . . . . . . . . . . . . . The Group VEL Account
7. . . . . . . . . . . . . . . Not Applicable
8. . . . . . . . . . . . . . . Not Applicable
9. . . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . . Summary; Description of the Company, The Group
VEL Account and the Underlying Funds; The
Certificate; Certificate Termination and
Reinstatement; Other Certificate Provisions
11 . . . . . . . . . . . . . . Summary; DGPF; Investment Objectives and
Policies
12 . . . . . . . . . . . . . . Summary; DGPF
13 . . . . . . . . . . . . . . Summary; DGPF and the Trust; Investment Advisory
Services; Charges and Deductions
14 . . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate
15 . . . . . . . . . . . . . . Summary; Enrollment Form for a Certificate;
Premium Payments; Allocation of Net Premiums
16 . . . . . . . . . . . . . . The Group VEL Account; DGPF and the Trust;
Premium Payments; Allocation of Net Premiums
17 . . . . . . . . . . . . . . Summary; Surrender; Partial Withdrawal; Charges
and Deductions; Certificate Termination and
Reinstatement
18 . . . . . . . . . . . . . . The Group VEL Account; DGPF and the Trust;
Premium Payments
19 . . . . . . . . . . . . . . Reports; Voting Rights
20 . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . Summary; Certificate Loans; Other Certificate
Provisions
22 . . . . . . . . . . . . . . Other Certificate Provisions
23 . . . . . . . . . . . . . . Not Required
24 . . . . . . . . . . . . . . Other Certificate Provisions
25 . . . . . . . . . . . . . . The Company
26 . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . The Company
28 . . . . . . . . . . . . . . Directors and Principal Officers of the Company
29 . . . . . . . . . . . . . . The Company
30 . . . . . . . . . . . . . . Not Applicable
31 . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . Distribution
36 . . . . . . . . . . . . . . Not Applicable
37 . . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . . Summary; Distribution

<PAGE>

39 . . . . . . . . . . . . . . Summary; Distribution
40 . . . . . . . . . . . . . . Not Applicable
41 . . . . . . . . . . . . . . The Company, Distribution
42 . . . . . . . . . . . . . . Not Applicable
43 . . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . . Premium Payments; Certificate Value and
Surrender Value
45 . . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . . Certificate Value and Surrender Value; Federal
Tax Considerations
47 . . . . . . . . . . . . . . The Company
48 . . . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . . The Group VEL Account
51 . . . . . . . . . . . . . . Cover Page; Summary; Charges and Deductions; The
Certificate; Certificate Termination and
Reinstatement; Other Certificate Provisions
52 . . . . . . . . . . . . . . Addition, Deletion or Substitution of
Investments
53 . . . . . . . . . . . . . . Federal Tax Considerations
54 . . . . . . . . . . . . . . Not Applicable
55 . . . . . . . . . . . . . . Not Applicable
56 . . . . . . . . . . . . . . Not Applicable
57 . . . . . . . . . . . . . . Not Applicable
58 . . . . . . . . . . . . . . Not Applicable
59 . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
WORCESTER, MASSACHUSETTS
GROUP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACTS
GROUP VARI-EXCEPTIONAL LIFE PLUS

This Prospectus provides important information about
Group Vari-Exceptional Life Plus, a group flexible
premium variable life insurance contract offered by
Allmerica Financial Life Insurance and Annuity
Company. Certificates under the Contract are
available to eligible applicants who are members of a
non-qualified benefit plan having a minimum of five
or more members, depending on the group, and who are
PLEASE READ THIS Age 80 years old and under.
PROSPECTUS CAREFULLY
BEFORE INVESTING AND
KEEP IT FOR FUTURE
REFERENCE.

The certificates are funded through the Group VEL
Account, a separate investment account of the Company
that is referred to as the Separate Account. The
Separate Account is subdivided into Sub-Accounts.
Each Sub-Account invests exclusively in shares of one
of the following Funds of Allmerica Investment Trust,
Variable Insurance Products Fund, Variable Insurance
Products Fund II, T. Rowe Price International Series,
Inc., Delaware Group Premium Fund, Inc., INVESCO
Variable Investment Funds, Inc., and Morgan Stanley
Universal Funds, Inc.
VARIABLE LIFE
POLICIES INVOLVE
RISKS
INCLUDING POSSIBLE
LOSS OF PRINCIPAL.

<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST VARIABLE INSURANCE PRODUCTS FUND
-------------------------------------------------- --------------------------------------------------
<C> <S> <C>
THIS PROSPECTUS MUST Select Aggressive Growth Fund Fidelity VIP Overseas Portfolio
BE ACCOMPANIED BY Select Capital Appreciation Fund Fidelity VIP Equity-Income Portfolio
PROSPECTUSES OF THE Select Value Opportunity Fund Fidelity VIP Growth Portfolio
FUNDS. Select Emerging Markets Fund Fidelity VIP High Income Portfolio
Select International Equity Fund VARIABLE INSURANCE PRODUCTS FUND II
Select Growth Fund --------------------------------
Select Strategic Growth Fund FIDELITY VIP II ASSET MANAGER PORTFOLIO
Growth Fund Fidelity VIP II Index 500 Portfolio
Equity Index Fund T. ROWE PRICE INTERNATIONAL SERIES, INC.
Select Growth and Income Fund ----------------------------------
Investment Grade Income Fund T. Rowe Price International Stock Portfolio
Government Bond Fund INVESCO VARIABLE INVESTMENT FUNDS, INC.*
Money Market Fund --------------------------------------
DELAWARE GROUP PREMIUM FUND, INC. INVESCO VIF Total Return Fund
-------------------------------- INVESCO VIF Equity Income Fund
DGPF International Equity Series MORGAN STANLEY UNIVERSAL FUNDS, INC.**
-----------------------------------
Morgan Stanley Fixed Income Portfolio
</TABLE>

*The Total Return Fund and the Equity Income Fund
of INVESCO VIF are
THE CERTIFICATES ARE available only to employees of INVESCO and its
NOT: affiliates.
- A BANK DEPOSIT OR **The Morgan Stanley Fixed Income Portfolio of
OBLIGATION; Morgan Stanley is available only to
- FEDERALLY INSURED; employees of Duke Energy Corporation and its
- ENDORSED BY ANY affiliates.
BANK OR This Prospectus can also be obtained from the
GOVERNMENTAL Securities and Exchange Commission's website
AGENCY. (http://www.sec.gov).
IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING
INSURANCE WITH THE POLICY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED THAT THE INFORMATION IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<C> <S> <C>
CORRESPONDENCE MAY BE MAILED TO DATED MAY 1, 1999
ALLMERICA LIFE 440 LINCOLN STREET
P.O. BOX 8179 WORCESTER, MASSACHUSETTS 01653
BOSTON, MA 02266-8179 (508) 855-1000
</TABLE>

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
SPECIAL TERMS......................................................................... 4
SUMMARY............................................................................... 7
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE UNDERLYING FUNDS............ 17
INVESTMENT OBJECTIVES AND POLICIES.................................................... 19
INVESTMENT ADVISORY SERVICES.......................................................... 21
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS..................................... 24
VOTING RIGHTS......................................................................... 25
THE CERTIFICATE....................................................................... 25
Enrollment Form for a Certificate................................................... 25
Free-Look Period.................................................................... 26
Conversion Privileges............................................................... 26
Premium Payments.................................................................... 27
Allocation of Net Premiums.......................................................... 27
Transfer Privilege.................................................................. 28
Election of Death Benefit Options................................................... 29
Guideline Premium Test and Cash Value Accumulation Test............................. 29
Death Proceeds...................................................................... 30
Change in Death Benefit Option...................................................... 32
Change in Face Amount............................................................... 33
Certificate Value and Surrender Value............................................... 34
Payment Options..................................................................... 35
Optional Insurance Benefits......................................................... 35
Surrender........................................................................... 36
Paid-Up Insurance Option............................................................ 36
Partial Withdrawal.................................................................. 37
CHARGES AND DEDUCTIONS................................................................ 37
Premium Expense Charge.............................................................. 37
Monthly Deduction from Certificate Value............................................ 38
Charges Reflected in the Assets of the Separate Account............................. 41
Surrender Charge.................................................................... 41
Charges on Partial Withdrawal....................................................... 42
Transfer Charges.................................................................... 43
Charge for Change in Face Amount.................................................... 43
Other Administrative Charges........................................................ 44
CERTIFICATE LOANS..................................................................... 44
CERTIFICATE TERMINATION AND REINSTATEMENT............................................. 45
OTHER CERTIFICATE PROVISIONS.......................................................... 47
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY....................................... 48
DISTRIBUTION.......................................................................... 49
SERVICES.............................................................................. 50
REPORTS............................................................................... 50
LEGAL PROCEEDINGS..................................................................... 50
FURTHER INFORMATION................................................................... 50
INDEPENDENT ACCOUNTANTS............................................................... 51
FEDERAL TAX CONSIDERATIONS............................................................ 51
The Company and the Separate Account................................................ 51
Taxation of the Certificates........................................................ 51
Certificate Loans................................................................... 52
Modified Endowment Contracts........................................................ 52
MORE INFORMATION ABOUT THE GENERAL ACCOUNT............................................ 53
YEAR 2000 DISCLOSURE.................................................................. 54
</TABLE>

2
<PAGE>

<TABLE>
<S> <C>
FINANCIAL STATEMENTS.................................................................. 55
APPENDIX A -- OPTIONAL BENEFITS....................................................... A-1
APPENDIX B -- PAYMENT OPTIONS......................................................... B-1
APPENDIX C -- ILLUSTRATIONS OF SUM INSURED, CERTIFICATE VALUES AND ACCUMULATED
PREMIUMS............................................................................. C-1
APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGES................................ D-1
APPENDIX E -- PERFORMANCE INFORMATION................................................. E-1
FINANCIAL STATEMENTS.................................................................. F-1
</TABLE>

3
<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 OWNER: The persons or entity entitled to exercise the rights and
privileges under the certificate.

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. "We," "our,"
"us," and "the Company" refer to Allmerica Financial Life Insurance and Annuity
Company in this Prospectus.

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 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 specifications 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.

GUIDELINE ANNUAL PREMIUM: The annual amount of premium that would be payable
through the Final Premium Payment Date 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

4
<PAGE>
Ordinary Mortality Tables, Smoker or Non-Smoker (Mortality Table B 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.

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 DEDUCTION: Charges deducted monthly from the Certificate Value 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 Separate 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.

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

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 Separate 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 Equity Income Fund of INVESCO VIF are available only to

5
<PAGE>

employees of INVESCO. and its affiliates. The Fixed Income Portfolio of Morgan
Stanley Universal Funds, Inc. is available only to employees of Duke Energy
Corporation 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 ("FUNDS"): The Funds of the Allmerica Investment Trust
("Trust"), the Portfolios of the Variable Insurance Products Fund ("Fidelity
VIP") and Variable Insurance Products Fund II ("Fidelity VIP II"), the Portfolio
of T. Rowe Price International Series, Inc. ("T. Rowe Price"), the Series of the
Delaware Group Premium Fund, Inc. ("DGPF"), the Funds of INVESCO Variable
Investment Funds, Inc. ("INVESCO VIF"), and the Portfolio of Morgan Stanley
Universal Funds, Inc. ("Morgan Stanley"), which are available under the
Certificates.

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.

6
<PAGE>
SUMMARY

The following is a summary of the Certificates and the Policy. It highlights key
points from the Prospectus which follows. If you are considering the purchase of
this product, you should read the Prospectus carefully before making a decision.
It offers a more complete presentation of the topics presented here, and will
help you better understand the product.

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.

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 ("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."

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.

7
<PAGE>
The Certificates provide Death Benefits, Certificate Values, 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 Separate 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 the
Face Amount. The surrender charge may be imposed, depending on the group to
which the Policy 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
the 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 Policy 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 D -- 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."

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 D --
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."

8
<PAGE>

In the event of a decrease in the 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" and APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGE.

PREMIUM EXPENSE CHARGE

A charge may be deducted from each premium payment for state and local premium
taxes paid by the Company, to compensate the Company for federal taxes imposed
for deferred acquisition cost ("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 distribution expenses may range from zero
to 10%. 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 Separate Account administrative expenses and a charge for
mortality and expense risks. The Separate Account 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 Policy 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, the mortality and expense risk charge,
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 Separate Account 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.

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

9
<PAGE>

CHARGES AND DEDUCTIONS -- "Charges on Partial Withdrawal." The transaction fee
applies to all partial withdrawals, including a Withdrawal without a surrender
charge.

CHARGE FOR CHANGE IN FACE AMOUNT

For each increase or decrease in the Face Amount, a charge of $2.50 per $1,000
of increase or decrease up to $40, may be deducted from the 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 FUNDS

In addition to the charges described above, certain fees and expenses are
deducted from the assets of the Underlying Investment Funds. See CHARGES AND
DEDUCTIONS -- "Charges Reflected in the Assets of the Separate Account." The
levels of fees and expenses vary among the Underlying Investment Funds.

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 Separate 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-Accounts 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 Separate Account. The Company does
not guarantee a minimum Certificate Value.

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 or the
applicable Minimum Death Benefit. Under Option 2, the Death Benefit is the
greater of the

10
<PAGE>
Face Amount 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 the Face Amount will vary by group, but will in no event
exceed $10,000. Any increase may also require additional Evidence of
Insurability. 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" and "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 the
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 examination, 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.

If any premiums are paid prior to the issuance of the Certificate, such premiums
will be held in the 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.

ALLOCATION OF NET PREMIUMS

11
<PAGE>
combination of Accounts. You bear the investment risk of Net Premiums allocated
to the Sub-Accounts. Allocations may be made to no more than 20 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 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 General
Account or to the Separate Account. The Separate Account consists of 46
Sub-Accounts, of which 24 are available under the Certificates. Each Sub-Account
invests exclusively in a corresponding Underlying Fund of the Allmerica
Investment Trust ("Trust") managed by Allmerica Financial Investment Management
Services, Inc. ("AFIMS"), of the Fidelity Variable Insurance Products Fund
("Fidelity VIP") or the Fidelity Variable Insurance Products Fund II ("Fidelity
VIP II") managed by Fidelity Management & Research Company, 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 Advisers Ltd., of INVESCO Variable Investment Funds,
Inc. ("INVESCO VIF") managed by INVESCO Funds Group, Inc., or of Morgan Stanley
Universal Funds, Inc. ("Morgan Stanley"), managed by Miller, Anderson and
Sherrerd, LLP ("MAS"). INVESCO VIF is available only to employees of INVESCO and
its affiliates, and Morgan Stanley is available only to employees of Duke Energy
Corporation and its affiliates. 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, subject to certain limitations
described under THE CERTIFICATE -- "Transfer Privilege."

The value of each Sub-Account will vary daily depending upon the performance of
the Underlying Fund in which it invests. Each Sub-Account reinvests dividends or
capital gains distributions received from an Underlying Fund in additional
shares of that Underlying Fund. There can be no assurance that the investment
objectives of the Underlying Funds can be achieved. For more information, see
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE UNDERLYING FUNDS.

CHARGES OF THE UNDERLYING FUNDS

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

12
<PAGE>

shows the expenses of the Underlying Funds for 1998. For more information
concerning fees and expenses, see the prospectuses of the Underlying Funds.

<TABLE>
<CAPTION>
MANAGEMENT FEE OTHER EXPENSES TOTAL FUND EXPENSES
(AFTER VOLUNTARY (AFTER APPLICABLE (AFTER WAIVERS/
UNDERLYING FUND WAIVERS) REIMBURSEMENTS) REIMBURSEMENTS)
- ---------------------------------------------------------- ------------------ ------------------ ----------------------
<S> <C> <C> <C>
Select Aggressive Growth Fund............................. 0.88% 0.07% 0.95%(1)(2)
Select Capital Appreciation Fund.......................... 0.94% 0.10% 1.04%(1)(2)
Select Value Opportunity Fund............................. 0.90%(1)* 0.08% 0.98%(1)(2)*
Select Emerging Markets Fund(@)........................... 1.00%* 1.19% 2.19%(1)(2)*
Select International Equity Fund.......................... 0.90% 0.12% 1.02%(1)(2)
DGPF International Equity Series.......................... 0.82%(4) 0.13% 0.95%(4)
Fidelity VIP Overseas Portfolio........................... 0.74% 0.17% 0.91%(3)
T. Rowe Price International Stock Portfolio............... 1.05% 0.00% 1.05%
Select Growth Fund........................................ 0.81%** 0.05% 0.86%(1)(2)**
Select Strategic Growth Fund(@)........................... 0.39%* 0.81% 1.20%(1)(2)*
Growth Fund............................................... 0.44% 0.05% 0.49%(1)(2)
Fidelity VIP Growth Portfolio............................. 0.59% 0.09% 0.68%(3)
Fidelity VIP II Index 500 Portfolio....................... 0.24% 0.11% 0.35%(3)
Equity Index Fund......................................... 0.29% 0.07% 0.36%(1)
Fidelity VIP Equity-Income Portfolio...................... 0.49% 0.09% 0.58%(3)
Select Growth and Income Fund............................. 0.68% 0.05% 0.73%(1)(2)
Fidelity VIP II Asset Manager Portfolio................... 0.54% 0.10% 0.64%(3)
Fidelity VIP High Income Portfolio........................ 0.58% 0.12% 0.70%
Investment Grade Income Fund.............................. 0.43% 0.09% 0.52%(1)
Government Bond Fund...................................... 0.50% 0.14% 0.64%(1)
Money Market Fund......................................... 0.26% 0.06% 0.32%(1)
INVESCO VIF Equity Income Fund............................ 0.75% 0.18% 0.93%(##)
INVESCO VIF Total Return Fund............................. 0.75% 0.42% 1.17%(##)
Morgan Stanley Fixed Income Portfolio..................... 0.06% 0.64% 0.70%(+)
</TABLE>

(@) Select Emerging Markets Fund and Select Strategic Growth Fund commenced
operations on February 20, 1998. Expenses shown are annualized.

* Amount has been adjusted to reflect a voluntary expense limitation currently
in effect for Select Emerging Markets Fund, Select Value Opportunity Fund, and
Select Strategic Growth Fund. Without these adjustments, the Management Fees and
Total Fund Expenses would have been 1.35% and 2.54%, respectively, for Select
Emerging Markets Fund, 0.91% and 0.99%, respectively, for Select Value
Opportunity Fund, and 0.85% and 1.66%, respectively, for Select Strategic Growth
Fund.

** Effective June 1, 1998, the management fee rate for the Select Growth Fund
was revised. The Management Fee and Total Fund Expense ratios shown in the table
above have been adjusted to assume that the revised rates took effect January 1,
1998.

(1) Until further notice, Allmerica Financial Investment Management Services,
Inc. ("AFIMS") has declared a voluntary expense limitation of 1.35% of average
net assets for Select Aggressive Growth Fund and Select Capital Appreciation
Fund, 1.25% for Select Value Opportunity Fund, 1.50% for Select International
Equity Fund, 1.20% for Growth Fund and Select Growth Fund, 1.10% for Select
Growth and Income Fund, 1.00% for Investment Grade Income Fund and Government
Bond Fund, and 0.60% for Money Market Fund and Equity Index Fund. The total
operating expenses of these Funds of the Trust were less than their respective
expense limitations throughout 1998.

Until further notice, AFIMS has declared a voluntary expense limitation of 1.20%
of average daily net assets for the Select Strategic Growth Fund. In addition,
AFIMS has agreed to voluntarily waive its management fee to the extent that
expenses of the Select Emerging Markets Fund exceed 2.00% of the Fund's average
daily net assets, except that such waiver shall not exceed the net amount of
management fees earned by AFIMS from the Fund after subtracting fees paid by
AFIMS to a sub-adviser.

13
<PAGE>

Until further notice, the Select Value Opportunity Fund's management fee rate
has been voluntarily limited to an annual rate of 0.90% of average daily net
assets, and total expenses are limited to 1.25% of average daily net assets.

The declaration of a voluntary management fee or expense limitation in any year
does not bind the Manager to declare future expense limitations with respect to
these Funds. These limitations may be terminated at any time.

(2) These funds have entered into agreements with brokers whereby brokers rebate
a portion of commissions. Had these amounts been treated as reductions of
expenses, the total annual fund operating expense ratios would have been 2.19%
for Select Emerging Markets Fund, 0.92% for Select Aggressive Growth Fund, 1.02%
for Select Capital Appreciation Fund, 0.94% for Select Value Opportunity Fund,
1.01% for Select International Equity Fund, 0.84% for Select Growth Fund, 1.14%
for Select Strategic Growth Fund, 0.46% for Growth Fund, and 0.70% for Select
Growth and Income Fund.

(3) A portion of the brokerage commissions that certain funds paid was used to
reduce Fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances were used to reduce custodian
expenses. Including these reductions, the total fund expenses presented in the
table would have been 0.57% for Fidelity VIP Equity-Income Portfolio, 0.66% for
Fidelity VIP Growth Portfolio, 0.89% for Fidelity VIP Overseas VIP Overseas
Portfolio, 0.63% for Fidelity VIP II Asset Manager, and 0.28% for Fidelity VIP
II Index 500 Portfolio.

(4) Effective May 1, 1999, Delaware International Advisers Ltd., the investment
adviser for the DGPF International Equity Series, has agreed to limit total
annual expenses of the fund to 0.95%. This limitation replaces a prior
limitation of 0.95% that expired on April 30, 1999. The new limitation will be
in effect through October 31, 1999. For the fiscal year ended December 31, 1998,
the actual ratio of total annual expenses was 0.98%.

(##) Various expenses of the Equity Income Fund and Total Return Fund were
voluntarily absorbed by INVESCO in 1998. If such expenses had not been
voluntarily absorbed, the total operating expense ratios would have been 1.17%
and 1.24%, respectively.

(+) MAS has voluntarily agreed to waive its management fees and to reimburse the
Fixed Income Portfolio if processing of such fees would cause the total annual
operating expense of the portfolio to exceed 0.70% of average daily net assets.
This fee waiver is voluntary and may be terminated by MAS at any time without
notice.

The Underlying Fund information above was provided by the Underlying Funds and
was not independently verified by the Company.

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.

When you return the Certificate, the Company will mail a refund to you within
seven days. 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 you 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 Separate Account, plus premiums paid (including fees
and charges), minus the amounts allocated to the Separate Account, plus the fees
and charges imposed on amounts in the Separate Account. After an increase in The
Face Amount, a right to cancel the increase also applies. See THE CERTIFICATE --
"Free-Look Period."

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<PAGE>
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 the 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.

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 the Certificate Value less surrender charge, Monthly Deductions, and
interest on the Certificate loan 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-Accounts 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

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<PAGE>

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

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 the 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), the Certificate may be reinstated at any time within three years after
the expiration of the grace period and prior to the Final Premium Payment Date.
See CERTIFICATE TERMINATION AND REINSTATEMENT.

TAX TREATMENT

The 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 the 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 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."

The 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, or within seven years of a
material change in the Certificate, 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 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>
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT,
AND THE UNDERLYING FUNDS

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 ("Principal Office"). Prior to
October 1, 1995, the Company was known as SMA Life Assurance Company. As of
December 31, 1998, the Company had over $14 billion in assets and over $26
billion of life insurance in force. 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 ("First Allmerica"), 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 Company is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.

THE SEPARATE ACCOUNT

The Separate Account was authorized by vote of the Board of Directors of the
Company on November 22, 1993. The Separate Account is registered with the
Securities and Exchange Commission ("SEC") 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
Separate Account or the Company by the SEC.

The assets used to fund the variable portion of the Certificates are set aside
in the Separate 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 Separate Account may not be charged with any liabilities
arising out of any other business of the Company. The Separate Account currently
has 24 Sub-Accounts. Each Sub-Account is administered and accounted for as part
of the general business of the Company, but the income, capital gains, or
capital losses of each Sub-Account are allocated to such Sub-Account, without
regard to other income, capital gains, or capital losses of the Company or the
other Sub-Accounts. Each Sub-Account invests exclusively in a corresponding
investment portfolio ("Underlying Fund") of the Allmerica Investment Trust, the
Fidelity Variable Insurance Products Fund, the Fidelity Variable Insurance
Products Fund II, T. Rowe Price International Series, Inc., the Delaware Group
Premium Fund, Inc., the INVESCO Variable Investment Fund, Inc., or the Morgan
Stanley Universal Funds, Inc.

ALLMERICA INVESTMENT TRUST

Allmerica Investment Trust, formerly SMA Investment Trust (the "Trust") is an
open-end, diversified, management investment company registered with the SEC
under the 1940 Act. Such registration does not involve supervision by the SEC 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
insurance companies. Thirteen investment portfolios of the Trust ("Funds") are
available

17
<PAGE>
under the Certificates, each issuing a series of shares: Select Aggressive
Growth Fund, Select Capital Appreciation Fund, Select Value Opportunity Fund,
Select Emerging Markets Fund, Select International Equity Fund, Select Growth
Fund, Select Strategic Growth Fund, Growth Fund, Equity Index Fund, Select
Growth and Income Fund, Investment Grade Income Fund, Government Bond Fund, and
Money Market Fund. The assets of each Fund are held separate from the assets of
the other Funds. Each Fund operates as a separate investment vehicle and the
income or losses of one Fund 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.

AFIMS 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.

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 is registered with the SEC 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, Massachusetts. It is composed of a number of different companies which
provide a variety of financial services and products. FMR is the original
Fidelity company, founded in 1946. It provides a number of mutual funds and
other clients with investment research and portfolio management services. 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 Funds."

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 Funds"), is an
open-end, diversified, management investment company organized as a
Massachusetts business trust on March 21, 1988 and registered with the SEC under
the 1940 Act. Two of its investment portfolios are available under the
Certificates: the Fidelity VIP II Asset Manager Portfolio and Fidelity VIP II
Index 500 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 SEC
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.

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<PAGE>
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 SEC under the 1940
Act. INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser of the
Equity 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. See "Investment Advisory Services to
INVESCO VIF."

MORGAN STANLEY UNIVERSAL FUNDS, INC.

Morgan Stanley Universal Funds, Inc. ("Morgan Stanley") is an open-end,
management investment company that was organized as a Maryland corporation, and
is registered with the SEC under the 1940 Act. Miller Anderson & Sherrerd, LLP
("MAS") is the investment adviser for the Morgan Stanley Fixed Income Portfolio.
The Morgan Stanley Fixed Income Portfolio is the only portfolio of Morgan
Stanley Universal Funds, Inc. that is available under the Certificates. This
Portfolio is available only to employees of Duke Energy Corporation and its
affiliates. See "Investment Advisory Services to Morgan Stanley."

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 AGGRESSIVE GROWTH FUND -- seeks above-average capital appreciation by
investing primarily in common stocks of companies which are believed to have
significant potential for capital appreciation.

SELECT CAPITAL APPRECIATION FUND -- seeks long-term growth of capital.
Realization of income is not a significant investment consideration and any
income realized on the Fund's investments will be incidental to its primary
objective. The Fund 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.

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

SELECT INTERNATIONAL EQUITY FUND -- 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 -- 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 -- 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.

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<PAGE>
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 GROWTH FUND -- 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.

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

GROWTH FUND -- is invested in common stocks and securities convertible into
common stocks that are believed to represent significant underlying value in
relation to current market prices. 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 -- seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation also may be found
in other types of securities, including bonds and preferred stocks.

FIDELITY VIP II INDEX 500 PORTFOLIO -- The Index 500 Portfolio of Fidelity VIP
II seeks investment results that correspond to the total return of a broad range
of common stocks publicly traded in the United States. To achieve this
objective, the fund attempts to duplicate the composition and total return of
the S&P 500.

EQUITY INDEX FUND -- seeks to provide investment results that correspond to the
aggregate price and yield performance of a representative selection of United
States publicly traded common stocks. The Equity Index Fund seeks to achieve its
objective by attempting to replicate the aggregate price and yield performance
of the S&P 500.

FIDELITY VIP EQUITY-INCOME PORTFOLIO -- 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. The Portfolio may invest in high yielding,
lower-rated fixed-income securities (commonly referred to as "junk bonds") which
are subject to greater risk than investments in higher-rated securities. See
"Risks of Lower-Rated Debt Securities" in the Fidelity VIP prospectus.

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 II ASSET MANAGER PORTFOLIO -- seeks high total return with reduced
risk over the long term by allocating its assets among domestic and foreign
stocks, bonds and short-term money market instruments.

FIDELITY VIP HIGH INCOME PORTFOLIO -- 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.

INVESTMENT GRADE INCOME FUND -- 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 -- 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.

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<PAGE>
MONEY MARKET FUND -- 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 OF INVESCO VARIABLE INVESTMENT FUNDS, INC. ARE AVAILABLE
ONLY TO EMPLOYEES OF INVESCO AND ITS AFFILIATES:

INVESCO VIF EQUITY INCOME FUND -- 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 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.

INVESCO VIF TOTAL RETURN FUND -- 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.

THE FOLLOWING PORTFOLIO OF MORGAN STANLEY UNIVERSAL FUNDS, INC. IS AVAILABLE
ONLY TO EMPLOYEES OF DUKE ENERGY CORPORATION AND ITS AFFILIATES:

FIXED INCOME PORTFOLIO -- seeks above-average return over a market cycle of
three to five years by investing primarily in a diversified portfolio of U.S.
Governments and Agencies, Corporate Bonds, Mortgage-Backed Securities, Foreign
Bonds and other Fixed-Income Securities and Derivatives as further described in
the Morgan Stanley Universal Funds, Inc. prospectus. The Portfolio's average
weighted maturity will ordinarily exceed five years, and will usually be between
five and fifteen years.

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 UNDERLYING FUNDS 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 Financial Investment Management Services, Inc. ("AFIMS"), an indirect
wholly owned subsidiary of First Allmerica, to handle the day-to-day affairs of
the Trust. AFIMS, subject to review by the Trustees, is responsible for the
general management of the Funds. AFIMS 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 AFIMS.

Other than the expenses specifically assumed by AFIMS 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 ("1933 Act"), other fees
payable to the SEC, independent public accountant, legal and custodian fees,
association membership dues, taxes, interest, insurance premiums, brokerage
commissions, fees and expenses of the Trustees who are not affiliated with
AFIMS, expenses for proxies, prospectuses, and reports to shareholders, and
other expenses.

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<PAGE>

Pursuant to the Management Agreement with the Trust, AFIMS 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.

For providing its services under the Management Agreement, AFIMS 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 Aggressive Growth Fund First $100 million 1.00%
Next $150 million 0.90%
Over $250 million 0.85%

Select Capital Appreciation First $100 million
Fund 1.00%
Next $150 million 0.90%
Over $250 million 0.85%

Select Value Opportunity Fund First $100 million 1.00%
Next $150 million 0.85%
Next $250 million 0.80%
Next $250 million 0.75%
Over $750 million 0.70%

Select Emerging Markets Fund * 1.35%

Select International Equity First $100 million
Fund 1.00%
Next $150 million 0.90%
Over $250 million 0.85%

Select Growth Fund First $250 million 0.85%
Next $250 million 0.80%
Next $250 million 0.75%
Over $750 million 0.70%

Select Strategic Growth Fund * 0.85%

Growth Fund First $250 million 0.60%
Next $250 million 0.40%
Over $500 million 0.35%

Equity Index Fund First $50 million 0.35%
Next $200 million 0.30%
Over $250 million 0.25%

Select Growth and Income Fund First $100 million 0.75%
Next $150 million 0.70%
Over $250 million 0.65%

Investment Grade Income Fund First $50 million 0.50%
Next $50 million 0.45%
Over $100 million 0.40%

Government Bond Fund * 0.50%

Money Market Fund First $50 million 0.35%
Next $200 million 0.25%
Over $250 million 0.20%
</TABLE>

* For the Select Emerging Markets Fund, the Select Strategic Growth Fund, and
the Government Bond Fund, the investment management fee does not vary according
to the level of assets in the Fund.

AFIMS' fee computed for each Fund will be paid from the assets of such Fund.
AFIMS is solely responsible for the payment of all fees for investment
management services to the Sub-Advisers.

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<PAGE>
The prospectus of the Trust contains additional information concerning the
Funds, including information concerning additional expenses paid by the Funds,
and paid to the Sub-Advisers, and should be read in conjunction with this
Prospectus.

INVESTMENT ADVISORY SERVICES TO FIDELITY VIP AND FIDELITY VIP II FUNDS

For managing investments and business affairs, each Portfolio pays a monthly
management 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.

The fee for each fund is calculated by adding a group fee rate to an individual
fund fee rate, multiplying the result by the fund's monthly average net assets,
and dividing by twelve.

The Fidelity VIP High Income Portfolio's annual fee rate is 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 under management increase.

2. An individual fund fee rate of 0.45% for the Fidelity VIP High Income
Portfolio's average net assets throughout the 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 average net assets of all the mutual funds
advised by FMR. On an annual basis, this rate cannot rise above 0.52%, and
drops as total assets under management increase.

2. An individual Fund 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, 0.25% for the Fidelity VIP II Asset Manager
Portfolio.

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. The management and
sub-advisory fees for Fidelity VIP II Index 500 Portfolio are calculated and
paid every month to FMR and Banker Trust Company ("BT"), respectively. Index 500
Portfolio pays the fees at the annual rate of 0.24% of its average net assets.
These fees include a management fee of 0.24% payable to FMR and an estimated
sub-advisory fee of less than 0.01% payable to BT (representing 40% of net
income from securities lending).

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 the largest no-load international mutual
fund asset managers with approximately $32 billion (as of December 31, 1998)
under management in its offices in Baltimore, London, Tokyo, Hong Kong,
Singapore and Buenos Aires. 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

23
<PAGE>

Series to Delaware International is based on the average daily net assets of the
Series as follows: 0.85% on the first $500 million, 0.80% on the next $500
million, 0.75% on the next $1,500 million and 0.70% on net assets in excess of
$2,500 million.

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 investment management
administration services and supervising daily business affairs. The Equity
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 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.

INVESTMENT ADVISORY SERVICES TO MORGAN STANLEY

Miller Anderson & Sherrerd, LLP ("MAS") is the investment adviser for the Morgan
Stanley Fixed Income Portfolio. MAS makes the Portfolio's day-to-day investment
decisions, arranges for the execution of Portfolio transactions, and generally
manages the Portfolio's investments. MAS is entitled to receive a management fee
from the Morgan Stanley Fixed Income Portfolio, payable quarterly, at an annual
rate of 0.40% of the first $500 million of the Portfolio's average daily net
assets; 0.35% from $500 million to $1 billion of the Portfolio's average daily
net assets and 0.30% of the Portfolio's net assets in excess of $1 billion.

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 Separate 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 SEC and state
insurance authorities, to the extent required by the 1940 Act or other
applicable law. The Separate Account may, to the extent permitted by law,
purchase other securities for other certificates or permit a conversion between
certificates upon request by a Certificate Owner.

The Company also reserves the right to establish additional Sub-Accounts of the
Separate Account, each of which would invest in shares corresponding to a new
Underlying Fund, or in shares of another investment company having a specified
investment objective.

Subject to applicable law and any required SEC approval, the Company may, in its
sole discretion, establish new Sub-Accounts or eliminate one or more
Sub-Accounts if marketing needs, tax considerations or investment conditions
warrant. Any new Sub-Accounts may be made available to existing 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, the Funds of INVESCO VIF and the
Portfolio of Morgan Stanley 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

24
<PAGE>
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 Separate Account or any
Sub-Accounts 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.

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 Separate 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.

We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that the Fund shares be voted so
as (1) to cause a change in the subclassification or investment objective of one
or more of the Funds, or (2) to approve or disapprove an investment advisory
contract for the Funds. In addition, the Company may disregard voting
instructions that are in favor of any change in the investment policies or in
any investment adviser or principal underwriter if the change has been initiated
by Certificate Owners or the Trustees. Our 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 Funds. In the event we do 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.

25
<PAGE>
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.

Pending completion of insurance underwriting and Certificate issuance
procedures, any initial premiums will be held in the 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 Principal Office. If the
Certificate is not issued, the premiums will be returned to you without
interest.

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 a refund to you within
seven days. (The refund of any premium paid by check may be delayed until the
check has cleared your bank.) If the 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 the Certificate does not
provide for a full refund of the initial premium, you will receive the
Certificate Value in the Separate Account, plus premiums paid (including fees
and charges), minus the amounts allocated to the Separate Account, plus the fees
and charges imposed on amounts in the Separate Account.

After an increase in the 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 specifications 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 the 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 Separate 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 Separate Account to the General

26
<PAGE>
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 age, date of issue, and risk classification 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 Separate Account or
General Account as of date of receipt at the Principal Office.

You may establish a schedule of planned premiums which will be billed by the
Company at regular intervals. Failure to pay planned premiums, however, will not
itself cause the 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 from your
checking account each month, generally on the Monthly Processing Date, and
applied as a premium under the 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 ("IRS") rules. Notwithstanding
the current maximum premium limitations, however, 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

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

27
<PAGE>

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 may include requirements that callers on
behalf of a Certificate Owner identify themselves by name and identify the
Certificate Owner by name, date of birth, or 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.

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 Accounts 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 invest 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.

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<PAGE>
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 the 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 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. In the event the maximum premium
limit applies, we reserve the right to obtain evidence of insurability which is
satisfactory to us as a condition to accepting excess premium. 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 the 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.

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<PAGE>
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,
results in 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 "seven-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 Value, 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 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 depend 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.

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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."

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, if 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

31
<PAGE>
(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.

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.

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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 the 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 the Face Amount, a transaction charge of $2.50 per $1,000 of
increase up to $40, will be deducted from the 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" and "Surrender Charge."

After increasing the Face Amount, you will have the right (1) during a Free-Look
Period, to have the increase cancelled and the charges which would not have been
deducted but for the increase will be credited to the 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" and "Conversion Privileges." A refund of charges which would
not have been deducted but for the increase will be made at your request.

DECREASES

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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 the Face Amount, a transaction charge of $2.50 per $1,000 of
decrease, up to a maximum of $40, will be deducted from the 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" and APPENDIX D
- -- CALCULATION OF MAXIMUM SURRENDER CHARGES.

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-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 Separate 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).

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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-Accounts. 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 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 Separate 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.

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."

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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 the Face
Amount. See CHARGES AND DEDUCTIONS -- "Surrender Charge."

The proceeds on surrender may be paid in a 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 certificates) 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 General Account
back to the Separate 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 value is the cash value
less any outstanding Debt. We will transfer the Certificate Value in the
Separate Account to the General 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."

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PARTIAL WITHDRAWAL

Any time after the first Certificate year, you may withdraw a portion of the
Surrender Value of the 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 to compensate the Company for providing the insurance
benefits set forth in the Certificate and any additional benefits added by
rider, providing servicing, incurring distribution expenses, and assuming
certain risks in connection with the Certificates. Certain of the charges
described below may be reduced for Certificates issued in connection with a
specific group under a non-qualified benefit plan. Charges and deductions may
vary based on criteria, for example, such as the purpose for which the
Certificates are purchased, the size of the benefit plan and the expected number
of participants, the underwriting characteristics of the group, the levels and
types of administrative services provided to the benefit plan and participants,
and anticipated aggregate premium payments. From time to time the Company may
modify both the amounts and criteria for reductions, which will not be unfairly
discriminatory against any person.

PREMIUM EXPENSE CHARGE

The premium tax charge may change when either the applicable jurisdiction
changes or the tax rate 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 cost ("DAC") taxes and for distribution expenses
related to the Certificates. 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
distribution expenses may range from zero to 10%. The distribution charge may
vary, depending upon such factors, for example, as the type of the benefit plan,
average number of participants, average Face Amount of the Certificates,
anticipated average annual premiums, and the actual distribution expenses
incurred by the Company.

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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 Policy is issued. The Monthly Deduction
may also include a charge for Separate Account administrative expenses and a
charge for mortality and expense risks. The Separate Account 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
Policy 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 Separate Account 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.

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 the 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 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 the 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 the 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

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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,

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

When the Minimum Death Benefit is in effect, the cost of insurance charge for
the initial Face Amount and for any increases will be calculated as set forth in
the preceding two paragraphs.

The monthly cost of insurance charge will also be adjusted for any decreases in
the 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 the 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, Non-smoker or
Uni-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 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.

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Classes. In an otherwise identical Certificate, 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 non-smokers. Non-smoking 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 non-smoker. The Company will provide notice to
you of the opportunity for the Insured to be classified as a non-smoker 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 the Face Amount. For each increase in the
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 Policy 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 SEPARATE 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 Separate 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 Separate 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 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

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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 SEPARATE 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 Underlying Funds
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 the 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 D -- 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 D --
CALCULATION OF MAXIMUM SURRENDER CHARGES.

A separate surrender charge may apply to and is calculated for each increase in
the Face Amount. The surrender charge for the increase is in addition to that
for the initial Face Amount. The maximum surrender charge for the increase is 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 D --

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<PAGE>
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 the Face Amount before making premium
payments associated with the increase in the 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 the 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 D --
CALCULATION OF MAXIMUM SURRENDER CHARGES. The premiums associated with the
increase are determined as described below. Additional premium payments may not
be required to fund a requested increase in the Face Amount.

Therefore, a special rule, which is based on relative Guideline Annual Premium
payments, applies whereby the Certificate Value will be allocated between the
initial Face Amount and the increase. Subsequent premium payments are allocated
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 D -- CALCULATION OF MAXIMUM SURRENDER CHARGES, for examples
illustrating the calculation of the maximum surrender charge for the initial
Face Amount and for any increases, as well as for the surrender charge based on
actual premiums paid or associated with any increases.

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 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. The transaction fee applies to all partial withdrawals,
including Withdrawal without a surrender charge.

42
<PAGE>
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 was 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 the Face
Amount;

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

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

See APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGES for an example
illustrating the calculation of the charges on partial withdrawal and their
impact on the surrender charges.

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 the Face Amount you request, a transaction
charge of $2.50 per $1,000 of increase or decrease, to a maximum of $40, may be
deducted from the 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 (not to exceed $25) 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.

CERTIFICATE LOANS

Loans may be obtained by request to the Company on the sole security of the
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 the
loan 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
cancelled. This will reduce the Certificate Value in these Sub-Accounts. These
transactions are not treated as transfers for purposes of the transfer charge.

LOAN AMOUNT EARNS INTEREST IN THE GENERAL ACCOUNT

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 (7.5% for preferred loans). The current
credited rate is 7.1% (8% for preferred loans). NO ADDITIONAL INTEREST WILL BE
CREDITED TO SUCH CERTIFICATE VALUE.

PREFERRED LOAN OPTION

A preferred loan option is available under the Certificate. 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 4.4%. The
current rate is 4.9%. The Company's 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.

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 the 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

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<PAGE>
Accounts and increase the Certificate Value in such Accounts in accordance with
your instructions. 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 Separate Account cannot exceed Certificate Value previously transferred from
the Separate 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-Accounts 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 surrender or the death of the Insured.

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 the 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 the 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 three 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.

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<PAGE>
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 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 the
Certificate Value is insufficient to cover the Monthly Deductions then due.

If the amount in the 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, the Company 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 three 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 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.

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<PAGE>
OTHER CERTIFICATE PROVISIONS

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

CERTIFICATE OWNER

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

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 Certificate Owner (or the Certificate 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 Certificate 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 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.

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.

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<PAGE>
AGE

If the Insured's Age as stated in the enrollment form for the Certificate is not
correct, benefits under the 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 Separate Account upon surrender, partial
withdrawals, or death of the Insured, as well as payments of a Certificate loan
and transfers may be postponed whenever: (1) 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 (2) 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 Separate Account's net assets. Payments under the 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 OF THE COMPANY

<TABLE>
<CAPTION>
NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ---------------------------------- --------------------------------------------------------
<S> <C>
Bruce C. Anderson Director (since 1996), Vice President (since 1984) and
Director Assistant Secretary (since 1992) of First Allmerica

Abigail M. Armstrong Secretary (since 1996) and Counsel (since 1991) of First
Secretary and Counsel Allmerica; Secretary (since 1988) and Counsel (since
1994) of Allmerica Investments, Inc.; and Secretary
(since 1990) of Allmerica Financial Investment
Management Services, Inc.

Warren E. Barnes
Vice President and Corporate Vice President (since 1996) and Corporate Controller
Controller (since 1998) of First Allmerica

Robert E. Bruce Director and Chief Information Officer (since 1997) and
Director and Chief Information Vice President (since 1995) of First Allmerica; and
Officer Corporate Manager (1979 to 1995) of Digital Equipment
Corporation

John P. Kavanaugh Director and Chief Investment Officer (since 1996) and
Director, Vice President and Vice President (since 1991) of First Allmerica; and Vice
Chief Investment Officer President (since 1998) of Allmerica Financial Investment
Management Services, Inc.

John F. Kelly Director (since 1996), Senior Vice President (since
Director, Vice President and 1986), General Counsel (since 1981) and Assistant
General Counsel Secretary (since 1991) of First Allmerica; Director
(since 1985) of Allmerica Investments, Inc.; and
Director (since 1990) of Allmerica Financial Investment
Management Services, Inc.

J. Barry May Director (since 1996) of First Allmerica; Director and
Director President (since 1996) of The Hanover Insurance Company;
and Vice President (1993 to 1996) of The Hanover
Insurance Company
</TABLE>

48
<PAGE>

<TABLE>
<CAPTION>
NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ---------------------------------- --------------------------------------------------------
<S> <C>
James R. McAuliffe Director (since 1996) of First Allmerica; Director
Director (since 1992), President (since 1994) and Chief Executive
Officer (since 1996) of Citizens Insurance Company of
America

John F. O'Brien Director, President and Chief Executive Officer (since
Director and Chairman of the 1989) of First Allmerica; Director (since 1989) of
Board Allmerica Investments, Inc.; and Director and Chairman
of the Board (since 1990) of Allmerica Financial
Investment Management Services, Inc.

Edward J. Parry, III Director and Chief Financial Officer (since 1996) and
Director, Vice President, Chief Vice President and Treasurer (since 1993) of First
Financial Officer and Treasurer Allmerica; Treasurer (since 1993) of Allmerica
Investments, Inc.; and Treasurer (since 1993) of
Allmerica Financial Investment Management Services, Inc.

Richard M. Reilly Director (since 1996) and Vice President (since 1990) of
Director, President and Chief First Allmerica; Director (since 1990) of Allmerica
Executive Officer Investments, Inc.; and Director and President (since
1998) of Allmerica Financial Investment Management
Services, Inc.

Robert P. Restrepo, Jr. Director and Vice President (since 1998) of First
Director Allmerica; Chief Executive Officer (1996 to 1998) of
Travelers Property & Casualty; Senior Vice President
(1993 to 1996) of Aetna Life & Casualty Company

Eric A. Simonsen Director (since 1996) and Vice President (since 1990) of
Director and Vice President First Allmerica; Director (since 1991) of Allmerica
Investments, Inc.; and Director (since 1991) of
Allmerica Financial Investment Management Services, Inc.

Phillip E. Soule Director (since 1996) and Vice President (since 1987) of
Director First Allmerica
</TABLE>

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 Separate Account.
Allmerica Investments, Inc. is registered with the SEC 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 and registered representatives
which sell the Certificates based on a commission schedule. After issuance of a
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
compensation schedules, which may include ongoing annual compensation of up to
0.50% of Certificate Value, are available based on premium payments and the
level of enrollment and ongoing administrative services provided to participants
and benefit plans by the broker-dealer or registered representative. 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

49
<PAGE>
wholesaling functions or other sales related criteria. Other payments may be
made for other services that do not directly involve the sales 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 expenses through a
combination of the deferred sales charge component of the anticipated surrender
and partial withdrawal charges through a portion of the premium expense charge,
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 Separate 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%, and 0.04% with
respect to Fidelity VIP II Index 500 Portfolio, of the aggregate net asset value
respectively, of the shares of such Underlying Funds held by the Separate
Account. With respect to the T. Rowe Price International Stock Portfolio and the
Morgan Stanley Fixed Income 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 Separate 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 Separate 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 the
specified Face Amount, changes in the 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 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 Separate Account and the Underlying Investment
Companies as required by the 1940 Act.

LEGAL PROCEEDINGS

There are no legal proceedings pending to which the Separate Account is a party,
or to which the assets of the Separate Account are subject. The Company and
Allmerica Investments, Inc. are not involved in any litigation that is of
material importance in relation to their total assets or that relates to the
Separate Account.

FURTHER INFORMATION

A Registration Statement under the 1933 Act relating to this offering has been
filed with the SEC. Certain portions of the Registration Statement and
amendments have been omitted from this Prospectus pursuant to the rules and
regulations of the SEC. 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 SEC's principal office in
Washington, DC, upon payment of the SEC's prescribed fees.

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<PAGE>
INDEPENDENT ACCOUNTANTS

The financial statements of the Company as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998, and the financial
statements for Group VEL Account as of December 31, 1998 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
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

The financial statements of the Company included herein should be considered
only as bearing on the ability of the Company to meet its obligations under the
Certificate.

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 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.

THE COMPANY AND THE SEPARATE 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 Separate Account. Based on these expectations,
no charge is made for federal income taxes which may be attributable to the
Separate Account.

The Company will review periodically the question of a charge to the Separate
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 Separate
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
Separate 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."

51
<PAGE>
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 Separate 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 15 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.

CERTIFICATE 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 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 a loan 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 pertinent 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 or
certificate loans. Consumer interest paid on policy or certificate loans under
an individually owned policy or certificate is not tax deductible. Generally, no
tax deduction for interest is allowed on policy or certificate 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
or certificates 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 ("1988 Act") adversely
affects the tax treatment of distributions under so-called "modified endowment
contracts." Under the 1988 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, or within seven years of a material
change in the certificate, 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.

52
<PAGE>
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 1933 Act or the 1940 Act.
Accordingly, the disclosures in this Section have not been reviewed by the SEC.
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 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 the 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%.

53
<PAGE>
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 Separate
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, may be imposed if such event
occurs before the Certificate, or an increase in the Face Amount, has been in
force for 15 Certificate years. In the event of a decrease in the 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.

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% for the period of deferment. Amounts
from the General Account used to pay premiums on policies with the Company will
not be delayed.

YEAR 2000 DISCLOSURE

The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.

Based on a third party assessment, the Company determined that significant
portions of its software required modification or replacement to enable its
computer systems to properly process dates beyond December 31, 1999. The Company
is presently completing the process of modifying or replacing existing software
and believes that this action will resolve the Year 2000 issue. However, if such
modifications and conversions are not made, or are not completed timely, or
should there be serious unanticipated interruptions from unknown sources, the
Year 2000 issue could have a material adverse impact on the operations of the
Company. Specifically, the Company could experience, among other things, an
interruption in its ability to collect and process premiums, process claim
payments, safeguard and manage its invested assets, accurately maintain
policyholder information, accurately maintain accounting records, and perform
customer service. Any of these specific events, depending on duration, could
have a material adverse impact on the results of operations and the financial
position of the Company.

54
<PAGE>

Company's total Year 2000 project cost and estimates to complete the project
include the estimated costs and time associated with the Company's involvement
on a third party's Year 2000 issue, and are based on presently available
information. However, there can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted, or that
a failure to convert by another company, or a conversion that is incompatible
with the Company's systems, would not have material adverse effect on the
Company. The Company does not believe that it has material exposure to
contingencies related to the Year 2000 issue for the products it has sold.
Although the Company does not believe that there is a material contingency
associated with the Year 2000 project, there can be no assurance that exposure
for material contingencies will not arise.

The cost of the Year 2000 project will be expensed as incurred and is being
funded primarily through a reallocation of resources from discretionary projects
and a reduction in systems maintenance and support costs. Therefore, the Year
2000 project is not expected to result in any significant incremental technology
cost and is not expected to have a material effect on the results of operations.
The Company and its affiliates have incurred and expensed approximately $54
million related to the assessment, plan development and substantial completion
of the Year 2000 project, through December 31, 1998. The total remaining cost of
the project is estimated between $20-30 million.

FINANCIAL STATEMENTS

Financial Statements for the Company and for the Separate Account are included
in this Prospectus, beginning immediately after the Appendices. The financial
statements of the Company and for the Separate 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 Separate Account.

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 the 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 stepchildren.

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 Policy 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, a corporate
grantor trust, or a corporate assignee in the case of a split dollar
arrangement, 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 or the corporate
assignee in the case of a corporate-sponsored collateral assignment split
dollar arrangement.

CERTAIN OF THESE RIDERS MAY NOT BE AVAILABLE IN ALL STATES.

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

B-1
<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 and 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 12 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 Separate
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
shows the amount which would accumulate if an amount equal to the Guideline
Annual Premium were invested each year 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 Separate 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 expense charge, the Monthly
Deduction from Certificate Value, and the monthly charge against the Separate
Account for mortality and expense risks. In both the Current Cost of Insurance
Charges tables and the Guaranteed Cost of Insurance Charges tables, the Separate
Account charge for mortality and expense risks is equivalent to an effective
annual rate of 0.90% of the average monthly value of the assets in the Separate
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 Funds. The actual
fees and expenses of each Underlying Fund vary and, in 1998, ranged from an
annual rate of 0.32% to an annual rate of 2.19% of average daily net assets. The
fees and expenses associated with the Certificate may be more or less than 0.85%
in the aggregate, depending upon how you make allocations of Certificate Value
among the Sub-Accounts.

Until further notice, Allmerica Financial Investment Management Services, Inc.
("AFIMS") has declared a voluntary expense limitation of 1.35% of average net
assets for the Select Aggressive Growth Fund and Select Capital Appreciation
Fund, 1.50% for the Select International Equity Fund, 1.25% for the Select Value
Opportunity Fund, 1.20% for the Growth Fund and Select Growth Fund, 1.10% for
the Select Growth and

C-1
<PAGE>

Income, 1.00% 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
these Funds of the Trust were less than their respective expense limitations
throughout 1998.

Effective May 1, 1999, Delaware International Advisers Ltd., the investment
adviser for the DGPF International Equity Series, has agreed to limit total
annual expenses of the fund to 0.95%. This limitation replaces a prior
limitation of 0.95% that expired on April 30, 1999. The new limitation will be
in effect through October 31, 1999. For fiscal year ended December 31, 1998, the
actual ratio of total annual expenses was 0.98%.

Various expenses of the Equity Income Fund and Total Return Fund were
voluntarily absorbed by INVESCO in 1998. If such expenses had not been
voluntarily absorbed, the total operating expense ratios would have been 1.17%
and 1.24%, respectively.

MAS has voluntarily agreed to waive its management fees and to reimburse the
Fixed Income Portfolio if processing of such fees would cause the total annual
operating expense of the portfolio to exceed 0.70% of average daily net assets.
This fee waiver is voluntary and may be terminated by MAS at any time without
notice.

The Underlying Fund information above was provided by the Underlying Funds and
was not independently verified by the Company.

NET ANNUAL RATES OF INVESTMENT

Taking into account the 0.90% charge to the Separate 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 Separate 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.

C-2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARI-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% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN HYPOTHETICAL 12%
INTEREST ---------------------------- ----------------------------- GROSS INVESTMENT RETURN
AT 5% CERTIFICATE CERTIFICATE -------------------------------
CERTIFICATE PER YEAR SURRENDER VALUE DEATH SURRENDER VALUE DEATH SURRENDER CERTIFICATE DEATH
YEAR (1) VALUE (2) BENEFIT VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ --------- --------- ------- ------- --------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 65 3,450 250,000 291 3,676 250,000 518 3,903 250,000
2 9,041 2,951 6,805 250,000 3,620 7,473 250,000 4,316 8,169 250,000
3 13,903 7,934 10,065 250,000 9,263 11,395 250,000 10,704 12,836 250,000
4 19,008 12,163 13,228 250,000 14,377 15,442 250,000 16,873 17,939 250,000
5 24,368 16,296 16,296 250,000 19,621 19,621 250,000 23,525 23,525 250,000
6 29,996 19,268 19,268 250,000 23,935 23,935 250,000 29,640 29,640 250,000
7 35,906 22,138 22,138 250,000 28,382 28,382 250,000 36,334 36,334 250,000
8 42,112 24,908 24,908 250,000 32,969 32,969 250,000 43,667 43,667 250,000
9 48,627 27,576 27,576 250,000 37,701 37,701 250,000 51,705 51,705 250,000
10 55,469 30,140 30,140 250,000 42,579 42,579 250,000 60,520 60,520 250,000
11 62,652 32,682 32,682 250,000 47,723 47,723 250,000 70,353 70,353 250,000
12 70,195 35,090 35,090 250,000 53,013 53,013 250,000 81,150 81,150 250,000
13 78,114 37,361 37,361 250,000 58,452 58,452 250,000 93,019 93,019 250,000
14 86,430 39,499 39,499 250,000 64,054 64,054 250,000 106,088 106,088 250,000
15 95,161 41,496 41,496 250,000 69,820 69,820 250,000 120,492 120,492 250,000
16 104,330 43,340 43,340 250,000 75,753 75,753 250,000 136,384 136,384 250,000
17 113,956 45,054 45,054 250,000 81,883 81,883 250,000 153,957 153,957 250,000
18 124,064 46,624 46,624 250,000 88,214 88,214 250,000 173,412 173,412 250,000
19 134,677 48,039 48,039 250,000 94,752 94,752 250,000 194,975 194,975 250,000
20 145,821 49,286 49,286 250,000 101,503 101,503 250,000 218,864 218,864 267,014
Age 60 95,161 41,496 41,496 250,000 69,820 69,820 250,000 120,492 120,492 250,000
Age 65 145,821 49,286 49,286 250,000 101,503 101,503 250,000 218,864 218,864 267,014
Age 70 210,477 52,152 52,152 250,000 138,660 138,660 250,000 379,123 379,123 439,783
Age 75 292,995 47,495 47,495 250,000 183,503 183,503 250,000 637,554 637,554 682,183
</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, CERTIFICATE VALUE, AND DEATH BENEFIT FOR A CERTIFICATE WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED
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
CERTIFICATE VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.

C-3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARI-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% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN HYPOTHETICAL 12%
INTEREST ---------------------------- ----------------------------- GROSS INVESTMENT RETURN
AT 5% CERTIFICATE CERTIFICATE -------------------------------
CERTIFICATE PER YEAR SURRENDER VALUE DEATH SURRENDER VALUE DEATH SURRENDER CERTIFICATE DEATH
YEAR (1) VALUE (2) BENEFIT VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ --------- --------- ------- ------- --------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,410 0 2,644 250,000 0 2,833 250,000 0 3,021 250,000
2 9,041 1,330 5,183 250,000 1,872 5,726 250,000 2,438 6,291 250,000
3 13,903 5,484 7,616 250,000 6,547 8,678 250,000 7,701 9,832 250,000
4 19,008 8,869 9,935 250,000 10,619 11,684 250,000 12,599 13,664 250,000
5 24,368 12,141 12,141 250,000 14,746 14,746 250,000 17,818 17,818 250,000
6 29,996 14,231 14,231 250,000 17,862 17,862 250,000 22,323 22,323 250,000
7 35,906 16,191 16,191 250,000 21,018 21,018 250,000 27,202 27,202 250,000
8 42,112 18,014 18,014 250,000 24,209 24,209 250,000 32,488 32,488 250,000
9 48,627 19,686 19,686 250,000 27,422 27,422 250,000 38,214 38,214 250,000
10 55,469 21,195 21,195 250,000 30,644 30,644 250,000 44,414 44,414 250,000
11 62,652 22,592 22,592 250,000 33,953 33,953 250,000 51,257 51,257 250,000
12 70,195 23,810 23,810 250,000 37,268 37,268 250,000 58,707 58,707 250,000
13 78,114 24,839 24,839 250,000 40,580 40,580 250,000 66,832 66,832 250,000
14 86,430 25,672 25,672 250,000 43,886 43,886 250,000 75,712 75,712 250,000
15 95,161 26,295 26,295 250,000 47,174 47,174 250,000 85,436 85,436 250,000
16 104,330 26,679 26,679 250,000 50,422 50,422 250,000 96,095 96,095 250,000
17 113,956 26,801 26,801 250,000 53,611 53,611 250,000 107,803 107,803 250,000
18 124,064 26,623 26,623 250,000 56,708 56,708 250,000 120,688 120,688 250,000
19 134,677 26,095 26,095 250,000 59,675 59,675 250,000 134,895 134,895 250,000
20 145,821 25,171 25,171 250,000 62,471 62,471 250,000 150,609 150,609 250,000
Age 60 95,161 26,295 26,295 250,000 47,174 47,174 250,000 85,436 85,436 250,000
Age 65 145,821 25,171 25,171 250,000 62,471 62,471 250,000 150,609 150,609 250,000
Age 70 210,477 13,032 13,032 250,000 72,707 72,707 250,000 260,185 260,185 301,814
Age 75 292,995 0 0 250,000 70,410 70,410 250,000 438,328 438,328 469,011
</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, CERTIFICATE VALUE, AND DEATH BENEFIT FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 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 CERTIFICATE
VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE THAT
THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.

C-4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARI-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% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN HYPOTHETICAL 12%
INTEREST ---------------------------- ----------------------------- GROSS INVESTMENT RETURN
AT 5% CERTIFICATE CERTIFICATE ---------------------------------
CERTIFICATE PER YEAR SURRENDER VALUE DEATH SURRENDER VALUE DEATH SURRENDER CERTIFICATE DEATH
YEAR (1) VALUE (2) BENEFIT VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ --------- --------- ------- ------- --------- -------- ------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 239 1,163 76,163 315 1,239 76,239 390 1,315 76,315
2 3,014 1,251 2,301 77,301 1,476 2,526 77,526 1,709 2,759 77,759
3 4,634 2,926 3,416 78,416 3,373 3,863 78,863 3,858 4,347 79,347
4 6,336 4,262 4,506 79,506 5,007 5,252 80,252 5,848 6,092 81,092
5 8,123 5,572 5,572 80,572 6,694 6,694 81,694 8,009 8,009 83,009
6 9,999 6,614 6,614 81,614 8,190 8,190 83,190 10,114 10,114 85,114
7 11,969 7,632 7,632 82,632 9,743 9,743 84,743 12,426 12,426 87,426
8 14,037 8,626 8,626 83,626 11,355 11,355 86,355 14,966 14,966 89,966
9 16,209 9,594 9,594 84,594 13,025 13,025 88,025 17,754 17,754 92,754
10 18,490 10,538 10,538 85,538 14,757 14,757 89,757 20,815 20,815 95,815
11 20,884 11,487 11,487 86,487 16,591 16,591 91,591 24,231 24,231 99,231
12 23,398 12,412 12,412 87,412 18,497 18,497 93,497 27,989 27,989 102,989
13 26,038 13,314 13,314 88,314 20,477 20,477 95,477 32,126 32,126 107,126
14 28,810 14,192 14,192 89,192 22,532 22,532 97,532 36,679 36,679 111,679
15 31,720 15,047 15,047 90,047 24,667 24,667 99,667 41,689 41,689 116,689
16 34,777 15,877 15,877 90,877 26,882 26,882 101,882 47,203 47,203 122,203
17 37,985 16,683 16,683 91,683 29,182 29,182 104,182 53,272 53,272 128,272
18 41,355 17,465 17,465 92,465 31,568 31,568 106,568 59,951 59,951 134,951
19 44,892 18,221 18,221 93,221 34,044 34,044 109,044 67,302 67,302 142,302
20 48,607 18,951 18,951 93,951 36,611 36,611 111,611 75,394 75,394 150,394
Age 60 97,665 24,489 24,489 99,489 67,803 67,803 142,803 217,674 217,674 292,674
Age 65 132,771 25,558 25,558 100,558 87,380 87,380 162,380 359,341 359,341 438,396
Age 70 177,576 24,833 24,833 99,833 109,533 109,533 184,533 587,281 587,281 681,246
Age 75 234,759 21,425 21,425 96,425 133,642 133,642 208,642 954,540 954,540 1,029,540
</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.

C-5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARI-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% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN HYPOTHETICAL 12%
INTEREST ---------------------------- ----------------------------- GROSS INVESTMENT RETURN
AT 5% CERTIFICATE CERTIFICATE -------------------------------
CERTIFICATE PER YEAR SURRENDER VALUE DEATH SURRENDER VALUE DEATH SURRENDER CERTIFICATE DEATH
YEAR (1) VALUE (2) BENEFIT VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ --------- --------- ------- ------- --------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,470 40 964 75,964 105 1,030 76,030 171 1,095 76,095
2 3,014 857 1,907 76,907 1,048 2,098 77,098 1,247 2,297 77,297
3 4,634 2,339 2,828 77,828 2,717 3,207 78,207 3,128 3,617 78,617
4 6,336 3,484 3,728 78,728 4,112 4,357 79,357 4,821 5,066 80,066
5 8,123 4,605 4,605 79,605 5,547 5,547 80,547 6,653 6,653 81,653
6 9,999 5,459 5,459 80,459 6,780 6,780 81,780 8,395 8,395 83,395
7 11,969 6,289 6,289 81,289 8,055 8,055 83,055 10,303 10,303 85,303
8 14,037 7,096 7,096 82,096 9,374 9,374 84,374 12,394 12,394 87,394
9 16,209 7,876 7,876 82,876 10,735 10,735 85,735 14,684 14,684 89,684
10 18,490 8,631 8,631 83,631 12,141 12,141 87,141 17,192 17,192 92,192
11 20,884 9,384 9,384 84,384 13,623 13,623 88,623 19,985 19,985 94,985
12 23,398 10,109 10,109 85,109 15,155 15,155 90,155 23,050 23,050 98,050
13 26,038 10,810 10,810 85,810 16,740 16,740 91,740 26,415 26,415 101,415
14 28,810 11,483 11,483 86,483 18,375 18,375 93,375 30,108 30,108 105,108
15 31,720 12,129 12,129 87,129 20,064 20,064 95,064 34,164 34,164 109,164
16 34,777 12,745 12,745 87,745 21,806 21,806 96,806 38,616 38,616 113,616
17 37,985 13,332 13,332 88,332 23,603 23,603 98,603 43,505 43,505 118,505
18 41,355 13,888 13,888 88,888 25,455 25,455 100,455 48,873 48,873 123,873
19 44,892 14,411 14,411 89,411 27,362 27,362 102,362 54,767 54,767 129,767
20 48,607 14,902 14,902 89,902 29,326 29,326 104,326 61,239 61,239 136,239
Age 60 97,665 17,230 17,230 92,230 51,608 51,608 126,608 173,185 173,185 248,185
Age 65 132,771 15,680 15,680 90,680 63,695 63,695 138,695 282,555 282,555 357,555
Age 70 177,576 10,763 10,763 85,763 74,549 74,549 149,549 456,075 456,075 531,075
Age 75 234,759 454 454 75,454 81,247 81,247 156,247 731,074 731,074 806,074
</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.

C-6
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARI-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% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN HYPOTHETICAL 12%
INTEREST ------------------------------- ----------------------------- GROSS INVESTMENT RETURN
AT 5% CERTIFICATE CERTIFICATE -------------------------------------
CERTIFICATE PER YEAR SURRENDER VALUE DEATH SURRENDER VALUE DEATH SURRENDER CERTIFICATE DEATH
YEAR (1) VALUE (2) BENEFIT VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ --------- ----------- -------- ------- --------- -------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,818 7,656 11,938 250,000 8,402 12,684 250,000 9,148 13,430 250,000
2 28,327 18,161 23,627 250,000 20,401 25,867 250,000 22,731 28,197 250,000
3 43,561 32,943 35,074 250,000 37,441 39,572 250,000 42,308 44,440 250,000
4 59,557 45,216 46,281 250,000 52,756 53,821 250,000 61,244 62,309 250,000
5 76,353 57,256 57,256 250,000 68,641 68,641 250,000 81,978 81,978 250,000
6 93,989 68,004 68,004 250,000 84,057 84,057 250,000 103,596 103,596 277,638
7 112,506 78,525 78,525 250,000 100,081 100,081 260,210 127,257 127,257 330,869
8 131,950 88,828 88,828 250,000 116,658 116,658 293,978 153,152 153,152 385,944
9 152,365 98,918 98,918 250,000 133,806 133,806 326,486 181,488 181,488 442,831
10 173,801 108,762 108,762 257,765 151,535 151,535 359,138 212,483 212,483 503,585
11 196,309 118,647 118,647 272,888 170,269 170,269 391,619 246,940 246,940 567,961
12 219,943 128,273 128,273 286,048 189,647 189,647 422,912 284,656 284,656 634,782
13 244,758 137,642 137,642 297,306 209,683 209,683 452,915 325,929 325,929 704,007
14 270,814 146,758 146,758 308,191 230,396 230,396 483,832 371,087 371,087 779,282
15 298,173 155,621 155,621 317,467 251,798 251,798 513,668 420,474 420,474 857,768
16 326,899 164,222 164,222 326,801 273,884 273,884 545,029 474,439 474,439 944,134
17 357,062 172,597 172,597 333,113 296,726 296,726 572,681 533,492 533,492 1,029,640
18 388,733 180,737 180,737 339,786 320,322 320,322 602,205 598,060 598,060 1,124,354
19 421,988 188,643 188,643 345,217 344,687 344,687 630,777 668,638 668,638 1,223,607
20 456,905 196,319 196,319 349,448 369,840 369,840 658,316 745,769 745,769 1,327,469
Age 60 298,173 155,621 155,621 317,467 251,798 251,798 513,668 420,474 420,474 857,768
Age 65 456,905 196,319 196,319 349,448 369,840 369,840 658,316 745,769 745,769 1,327,469
Age 70 659,493 230,918 230,918 364,851 507,106 507,106 801,227 1,249,851 1,249,851 1,974,765
Age 75 918,052 259,634 259,634 368,680 664,813 664,813 944,034 2,024,008 2,024,008 2,874,091
</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.

C-7
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARI-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% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN HYPOTHETICAL 12%
INTEREST ------------------------------- ----------------------------- GROSS INVESTMENT RETURN
AT 5% CERTIFICATE CERTIFICATE -------------------------------------
CERTIFICATE PER YEAR SURRENDER VALUE DEATH SURRENDER VALUE DEATH SURRENDER CERTIFICATE DEATH
YEAR (1) VALUE (2) BENEFIT VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
------ --------- ----------- -------- ------- --------- -------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 13,818 5,983 10,265 250,000 6,638 10,919 250,000 7,293 11,575 250,000
2 28,327 14,834 20,300 250,000 16,788 22,254 250,000 18,822 24,289 250,000
3 43,561 27,979 30,110 250,000 31,893 34,024 250,000 36,131 38,262 250,000
4 59,557 38,630 39,696 250,000 45,180 46,246 250,000 52,561 53,626 250,000
5 76,353 49,065 49,065 250,000 58,946 58,946 250,000 70,534 70,534 250,000
6 93,989 58,221 58,221 250,000 72,148 72,148 250,000 89,154 89,154 250,000
7 112,506 67,161 67,161 250,000 85,872 85,872 250,000 109,550 109,550 284,829
8 131,950 75,887 75,887 250,000 100,145 100,145 252,365 131,759 131,759 332,033
9 152,365 84,398 84,398 250,000 114,834 114,834 280,195 155,928 155,928 380,465
10 173,801 92,695 92,695 250,000 129,920 129,920 307,911 182,201 182,201 431,817
11 196,309 101,042 101,042 250,000 145,755 145,755 335,237 211,227 211,227 485,821
12 219,943 109,203 109,203 250,000 162,041 162,041 361,351 242,824 242,824 541,497
13 244,758 117,121 117,121 252,981 178,785 178,785 386,176 277,211 277,211 598,776
14 270,814 124,770 124,770 262,017 195,982 195,982 411,563 314,605 314,605 660,670
15 298,173 132,156 132,156 269,599 213,638 213,638 435,822 355,255 355,255 724,720
16 326,899 139,260 139,260 277,128 231,720 231,720 461,122 399,366 399,366 794,739
17 357,062 146,103 146,103 281,978 250,254 250,254 482,990 447,259 447,259 863,211
18 388,733 152,661 152,661 287,003 269,196 269,196 506,088 499,152 499,152 938,406
19 421,988 158,929 158,929 290,839 288,521 288,521 527,994 555,311 555,311 1,016,220
20 456,905 164,906 164,906 293,533 308,218 308,218 548,628 616,041 616,041 1,096,552
Age 60 298,173 132,156 132,156 269,599 213,638 213,638 435,822 355,255 355,255 724,720
Age 65 456,905 164,906 164,906 293,533 308,218 308,218 548,628 616,041 616,041 1,096,552
Age 70 659,493 190,397 190,397 300,827 411,444 411,444 650,081 999,444 999,444 1,579,121
Age 75 918,052 208,764 208,764 296,445 520,467 520,467 739,063 1,550,685 1,550,685 2,201,973
</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.

C-8
<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 the 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 Policy is issued. The
maximum surrender charge for an increase in the 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:

Maximum Surrender Charge = (8.5 X Face Amount) + (up to 50% X Guideline Annual
Premium)

1000

A further limitation is imposed based on the Standard Nonforfeiture Law of each
state. The maximum surrender charges upon issuance of the Certificate and upon
each increase in the Face Amount are shown in the following table. 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 following table.

D-1
<PAGE>
MAXIMUM SURRENDER CHARGE PER $1000 FACE AMOUNT

<TABLE>
<CAPTION>
Age at
Issue or Unisex Unisex Unisex
Increase Non-smoker Smoker Uni-smoker
- --------- ------------- ----------- -------------
<S> <C> <C> <C>

0 14.89 14.37
1 14.84 14.31
2 15.00 14.44
3 15.17 14.58
4 15.35 14.73
5 15.53 14.88
6 15.73 15.05
7 15.94 15.23
8 16.16 15.41
9 16.39 15.61
10 16.64 15.82
11 16.91 16.05
12 17.18 16.28
13 17.47 16.52
14 17.77 16.77
15 18.08 17.02
16 18.38 17.28
17 18.67 17.54
18 17.15 18.98 17.80
19 17.40 19.29 18.07
20 17.65 19.62 18.35
21 17.92 19.95 18.64
22 18.20 20.31 18.95
23 18.49 20.68 19.27
24 18.80 21.08 19.61
25 19.13 21.49 19.97
26 19.48 21.94 20.35
27 19.85 22.42 20.75
28 20.24 22.92 21.18
29 20.65 23.45 21.63
30 21.08 24.02 22.11
31 21.54 24.62 22.61
32 22.03 25.25 23.15
33 22.54 25.92 23.71
34 23.03 26.62 24.30
35 23.64 27.36 24.92
36 24.24 28.15 25.57
37 24.87 28.97 26.26
38 25.53 29.84 26.99
39 26.23 30.76 27.75
40 26.97 31.72 28.55
41 27.74 32.73 29.39
42 28.55 33.79 30.27
43 29.41 34.91 31.19
44 30.31 36.08 32.17
45 31.26 37.31 33.19
46 32.27 38.60 34.27
</TABLE>

D-2
<PAGE>
<TABLE>
<CAPTION>
Age at
Issue or Unisex Unisex Unisex
Increase Non-smoker Smoker Uni-smoker
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
47 33.33 39.95 35.40
48 34.46 41.38 36.59
49 35.64 42.89 37.86
50 36.90 44.48 39.19
51 38.24 46.17 40.60
52 39.66 47.95 42.10
53 41.17 49.84 43.68
54 42.76 51.82 45.36
55 44.46 53.91 47.12
56 46.25 56.11 48.98
57 48.16 56.87 50.95
58 50.18 56.76 53.03
59 52.34 56.65 55.24
60 54.64 56.54 56.71
61 56.54 56.44 56.59
62 56.41 56.34 56.47
63 56.29 56.26 56.36
64 56.16 56.18 56.25
65 56.03 56.10 56.13
66 55.90 56.01 56.00
67 55.74 55.90 55.85
68 55.58 55.76 55.70
69 55.41 55.63 55.53
70 55.27 55.49 55.37
71 55.12 55.38 55.22
72 54.96 55.29 55.10
73 54.85 55.23 54.99
74 54.75 55.19 54.89
75 54.64 55.16 54.80
76 54.52 55.10 54.69
77 54.36 55.01 54.53
78 54.18 54.86 54.35
79 53.97 54.68 54.14
80 53.75 54.49 53.91
</TABLE>

D-3
<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 $1,032.25. The maximum surrender charge is calculated as follows:

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

(2) Deferred Sales Charge $516.13
(50% X GAP)

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

$1,366.13

Maximum surrender charge per Table (23.64 X 100)

$2,364.00

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:

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

The maximum surrender charge is $1,366.13. 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 Certificate
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
$525.43.

D-4
<PAGE>

APPENDIX E
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 Sub-Accounts have been in existence
(Tables I(A) and I(B)), and based on the periods that the Underlying Funds have
been in existence (Tables II (A) and II (B)). 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 Tables I(A) and
II(A)) 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 in Appendix E, "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,
1998. "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: (1) 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; (2) other groups of variable life separate accounts or other
investment products tracked by Lipper Inc., 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 (3) 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.

At times, the Company may also advertise the ratings and other information
assigned to it by independent rating organizations such as A.M. Best Company
("A.M. Best"), Moody's Investors Services ("Moody's"), Standard & Poor's
Insurance Rating Services ("S&P") and Duff & Phelps. A.M. Best's and Moody's
ratings reflect their current opinion of the Company's relative financial
strength and operating performance in comparison to the norms of the life/health
insurance industry. S&P's and Duff & Phelps' ratings measure the ability of an
insurance company to meet its obligations under insurance policies it issues and
do not measure the ability of such companies to meet other non-policy
obligations. The ratings also do not relate to the performance of the Underlying
Portfolios.

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 invest ment scenarios, financial management and tax
and retirement planning, and investment alternatives to certificates of deposit
and other financial instruments.

E-1
<PAGE>

TABLE I(A)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1998
SINCE INCEPTION OF THE SUB-ACCOUNTS
NET OF ALL CHARGES AND ASSUMING SURRENDER OF THE CERTIFICATE

The following performance information is based on the periods that the
Sub-Accounts 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 (unisex rates), Age 36, standard (non-smoker) 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.

<TABLE>
<CAPTION>
TEN YEARS
OR
ONE-YEAR LIFE OF
TOTAL 5 SUB-ACCOUNT
UNDERLYING FUND RETURN YEARS (IF LESS)
<S> <C> <C> <C>
Select Aggressive Growth Fund -100.00% N/A 7.95%
Select Capital Appreciation Fund -100.00% N/A 8.52%
Select Value Opportunity Fund -100.00% N/A 6.55%
Select Emerging Markets Fund N/A N/A -100.00%
T. Rowe Price International Stock Portfolio -100.00% N/A -11.79%
Fidelity VIP Overseas Portfolio -100.00% N/A 0.05%
Select International Equity Fund -99.40% N/A 3.12%
DGPF International Equity Series -100.00% N/A -25.07%
Fidelity VIP Growth Portfolio -78.34% N/A 16.34%
Select Growth Fund -82.05% N/A 18.54%
Select Strategic Growth Fund N/A N/A N/A
Growth Fund -96.80% N/A 11.47%
Fidelity VIP II Index 500 Portfolio N/A N/A N/A
Equity Index Fund -88.56% N/A 17.16%
Fidelity VIP Equity-Income Portfolio -100.00% N/A 8.34%
Select Growth and Income Fund -99.45% N/A 10.51%
Fidelity VIP II Asset Manager Portfolio -100.00% N/A 5.20%
Fidelity VIP High Income Portfolio -100.00% N/A -2.39%
Investment Grade Income Fund -100.00% N/A -3.84%
Government Bond Fund -100.00% N/A -5.43%
Money Market Fund -100.00% N/A -7.41%
INVESCO VIF Equity Income Fund -100.00% N/A -100.00%
INVESCO VIF Total Return Fund -100.00% N/A -100.00%
</TABLE>

The inception dates for the Sub-Accounts are: 5/1/95 for Growth, Investment
Grade Income, Money Market, Equity Index, Government Bond, Select Aggressive
Growth, Select Growth, Select Growth and Income, Select Value Opportunity,
Select International Equity, Fidelity VIP Equity-Income, Fidelity VIP Growth,
Fidelity VIP High Income, Fidelity VIP Overseas and Fidelity VIP II Asset
Manager; 5/3/95 for Select Capital Appreciation; 7/2/96 for DGPF International
Equity; 2/12/96 for T. Rowe Price International Stock; 7/2/96 for INVESCO VIF
Equity Income and INVESCO VIF Total Return; and 11/9/98 for Select Emerging
Markets.

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.

E-2
<PAGE>

TABLE I(B)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1998
SINCE INCEPTION OF THE SUB-ACCOUNTS
EXCLUDING MONTHLY CERTIFICATE CHARGES AND SURRENDER CHARGES

The following performance information is based on the periods that the
Sub-Accounts have been in existence. The performance information is net of total
Underlying Fund expenses and all Sub-Account charges. THE DATA DOES NOT REFLECT
MONTHLY CHARGES UNDER THE CERTIFICATE 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.

<TABLE>
<CAPTION>
TEN YEARS
OR
ONE-YEAR LIFE OF
TOTAL 5 SUB-ACCOUNT
UNDERLYING FUND RETURN YEARS (IF LESS)
<S> <C> <C> <C>
Select Aggressive Growth Fund 9.57% N/A 18.70%
Select Capital Appreciation Fund 12.86% N/A 19.28%
Select Value Opportunity Fund 3.93% N/A 17.38%
Select Emerging Markets Fund N/A N/A 1.47%
T. Rowe Price International Stock Portfolio 14.82% N/A 9.46%
Fidelity VIP Overseas Portfolio 11.74% N/A 11.30%
Select International Equity Fund 15.43% N/A 14.16%
DGPF International Equity Series 9.34% N/A 9.64%
Fidelity VIP Growth Portfolio 38.24% N/A 26.66%
Select Growth Fund 34.22% N/A 28.76%
Select Strategic Growth Fund N/A N/A N/A
Growth Fund 18.25% N/A 22.03%
Fidelity VIP II Index 500 Portfolio N/A N/A N/A
Equity Index Fund 27.18% N/A 27.44%
Fidelity VIP Equity-Income Portfolio 10.63% N/A 19.06%
Select Growth and Income Fund 15.38% N/A 21.12%
Fidelity VIP II Asset Manager Portfolio 14.01% N/A 16.11%
Fidelity VIP High Income Portfolio -5.19% N/A 9.03%
Investment Grade Income Fund 7.00% N/A 7.69%
Government Bond Fund 6.70% N/A 6.22%
Money Market Fund 4.56% N/A 4.40%
INVESCO VIF Equity Income Fund 14.26% N/A -100.00%
INVESCO VIF Total Return Fund 8.57% N/A -100.00%
</TABLE>

E-3
<PAGE>

TABLE II(A):
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1998
SINCE INCEPTION OF THE UNDERLYING FUNDS
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 (unisex rates), 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.

<TABLE>
<CAPTION>
TEN YEARS
OR
ONE-YEAR LIFE OF
TOTAL 5 FUND
UNDERLYING FUND RETURN YEARS (IF LESS)
<S> <C> <C> <C>
Select Aggressive Growth Fund -100.00% 9.17% 13.18%
Select Capital Appreciation Fund -100.00% N/A 8.64%
Select Value Opportunity Fund -100.00% 7.27% 9.35%
Select Emerging Markets Fund N/A N/A -100.00%
T. Rowe Price International Stock Portfolio -100.00% N/A 2.94%
Fidelity VIP Overseas Portfolio -100.00% 3.89% 6.39%
Select International Equity Fund -99.40% N/A 5.24%
DGPF International Equity Series -100.00% 4.74% 6.08%
Fidelity VIP Growth Portfolio -78.34% 15.88% 15.88%
Select Growth Fund -82.05% 16.29% 14.25%
Select Strategic Growth Fund N/A N/A -100.00%
Growth Fund -96.80% 13.17% 13.41%
Fidelity VIP II Index 500 Portfolio -88.58% 17.86% 16.22%
Equity Index Fund -88.56% 17.52% 16.62%
Fidelity VIP Equity-Income Portfolio -100.00% 12.93% 12.03%
Select Growth and Income Fund -99.45% 11.99% 10.59%
Fidelity VIP II Asset Manager Portfolio -100.00% 6.00% 9.16%
Fidelity VIP High Income Portfolio -100.00% 3.00% 7.41%
Investment Grade Income Fund -100.00% 1.16% 5.46%
Government Bond Fund -100.00% 0.20% 2.45%
Money Market Fund -100.00% -0.58% 1.81%
INVESCO VIF Equity Income Fund -100.00% N/A 13.80%
INVESCO VIF Total Return Fund -100.00% N/A 7.59%
</TABLE>

The inception dates for the Underlying Funds are: 4/29/85 for Growth, Investment
Grade Income 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 Select Value Opportunity; 5/2/94 for Select International
Equity; 4/28/95 for Select Capital Appreciation; 10/9/86 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; 3/31/94 for T. Rowe Price International
Stock; 8/10/94 for INVESCO VIF Equity Income; 6/2/94 for INVESCO VIF Total
Return; 11/9/98 for Select Emerging Markets, Select Strategic Growth, and
8/27/92 for Fidelity VIP II Index 500.

E-4
<PAGE>

TABLE II(B)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1998
SINCE INCEPTION OF THE UNDERLYING FUNDS
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 and all Sub-Account charges. THE DATA DOES NOT
REFLECT MONTHLY CHARGES UNDER THE CERTIFICATE 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.

<TABLE>
<CAPTION>
TEN YEARS
OR
ONE-YEAR LIFE OF
TOTAL 5 FUND
UNDERLYING FUND RETURN YEARS (IF LESS)
<S> <C> <C> <C>
Select Aggressive Growth Fund 9.57% 13.96% 17.05%
Select Capital Appreciation Fund 12.86% N/A 19.29%
Select Value Opportunity Fund 3.93% 12.07% 13.68%
Select Emerging Markets Fund N/A N/A -22.07%
T. Rowe Price International Stock Portfolio 14.82% N/A 8.67%
Fidelity VIP Overseas Portfolio 11.74% 8.71% 9.09%
Select International Equity Fund 15.43% N/A 11.25%
DGPF International Equity Series 9.34% 9.55% 10.14%
Fidelity VIP Growth Portfolio 38.24% 20.64% 18.34%
Select Growth Fund 34.22% 21.05% 18.11%
Select Strategic Growth Fund N/A N/A -3.23%
Growth Fund 18.25% 17.94% 15.93%
Fidelity VIP II Index 500 Portfolio 27.16% 22.61% 20.07%
Equity Index Fund 27.18% 22.28% 19.60%
Fidelity VIP Equity-Income Portfolio 10.63% 17.70% 14.58%
Select Growth and Income Fund 15.38% 16.76% 14.49%
Fidelity VIP II Asset Manager Portfolio 14.01% 10.80% 11.96%
Fidelity VIP High Income Portfolio -5.19% 7.82% 10.08%
Investment Grade Income Fund 7.00% 5.99% 8.19%
Government Bond Fund 6.70% 5.04% 6.04%
Money Market Fund 4.56% 4.27% 4.67%
INVESCO VIF Equity Income Fund 14.26% N/A 20.54%
INVESCO VIF Total Return Fund 8.57% N/A 13.84%
</TABLE>

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

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income, shareholder's equity
and cash flows present fairly, in all material respects, the financial position
of Allmerica Financial Life Insurance and Annuity Company (the "Company") at
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers LLP

Boston, Massachusetts
February 2, 1999, except for paragraph 2 of Note 12,
which is as of March 19, 1999
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
----------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
REVENUES
Premiums................................... $ 0.5 $ 22.8 $ 32.7
Universal life and investment product
policy fees.............................. 267.4 212.2 176.2
Net investment income...................... 151.3 164.2 171.7
Net realized investment gains (losses)..... 20.0 2.9 (3.6)
Other income............................... 0.6 1.4 0.9
------- ------- -------
Total revenues......................... 439.8 403.5 377.9
------- ------- -------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses and loss
adjustment expenses...................... 153.9 187.8 192.6
Policy acquisition expenses................ 64.6 2.8 49.9
Sales practice litigation.................. 21.0 -- --
Loss from cession of disability income
business................................. -- 53.9 --
Other operating expenses................... 104.1 101.3 86.6
------- ------- -------
Total benefits, losses and expenses.... 343.6 345.8 329.1
------- ------- -------
Income before federal income taxes............. 96.2 57.7 48.8
------- ------- -------
FEDERAL INCOME TAX EXPENSE (BENEFIT)
Current.................................... 22.1 13.9 26.9
Deferred................................... 11.8 7.1 (9.8)
------- ------- -------
Total federal income tax expense....... 33.9 21.0 17.1
------- ------- -------
Net income..................................... $ 62.3 $ 36.7 $ 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)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
-------------------------------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities at fair value (amortized cost of
$1,284.6 and $1,340.5)............................ $ 1,330.4 $ 1,402.5
Equity securities at fair value (cost of $27.4 and
$34.4)............................................ 31.8 54.0
Mortgage loans...................................... 230.0 228.2
Real estate......................................... 14.5 12.0
Policy loans........................................ 151.5 140.1
Other long-term investments......................... 9.1 20.3
---------- ----------
Total investments............................... 1,767.3 1,857.1
---------- ----------
Cash and cash equivalents............................. 217.9 31.1
Accrued investment income............................. 33.5 34.2
Deferred policy acquisition costs..................... 950.5 765.3
Reinsurance receivables on paid and unpaid losses,
future policy benefits and unearned premiums........ 308.0 251.1
Other assets.......................................... 46.9 10.7
Separate account assets............................... 11,020.4 7,567.3
---------- ----------
Total assets.................................... $ 14,344.5 $ 10,516.8
---------- ----------
---------- ----------
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,284.8 $ 2,097.3
Outstanding claims, losses and loss adjustment
expenses.......................................... 17.9 18.5
Unearned premiums................................... 2.7 1.8
Contractholder deposit funds and other policy
liabilities....................................... 38.1 32.5
---------- ----------
Total policy liabilities and accruals........... 2,343.5 2,150.1
---------- ----------
Expenses and taxes payable............................ 146.2 77.6
Reinsurance premiums payable.......................... 45.7 4.9
Deferred federal income taxes......................... 78.8 75.9
Separate account liabilities.......................... 11,020.4 7,567.3
---------- ----------
Total liabilities............................... 13,634.6 9,875.8
---------- ----------
Commitments and contingencies (Note 12)
SHAREHOLDER'S EQUITY
Common stock, $1,000 par value, 10,000 shares
authorized, 2,524 and 2,521 shares issued and
outstanding......................................... 2.5 2.5
Additional paid-in capital............................ 407.9 386.9
Accumulated other comprehensive income................ 24.1 38.5
Retained earnings..................................... 275.4 213.1
---------- ----------
Total shareholder's equity...................... 709.9 641.0
---------- ----------
Total liabilities and shareholder's equity...... $ 14,344.5 $ 10,516.8
---------- ----------
---------- ----------
</TABLE>

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

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

(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
----------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
COMMON STOCK................................... $ 2.5 $ 2.5 $ 2.5
-------- -------- --------

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period............. 386.9 346.3 324.3
Issuance of common stock................... 21.0 40.6 22.0
-------- -------- --------
Balance at end of period................... 407.9 386.9 346.3
-------- -------- --------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Net unrealized appreciation on investments:
Balance at beginning of period............. 38.5 20.5 23.8
Appreciation (depreciation) during the
period:
Net (depreciation) appreciation on
available-for-sale securities........ (23.4) 27.0 (5.1)
Benefit (provision) for deferred
federal income taxes................. 9.0 (9.0) 1.8
-------- -------- --------
(14.4) 18.0 (3.3)
-------- -------- --------
Balance at end of period................... 24.1 38.5 20.5
-------- -------- --------
RETAINED EARNINGS
Balance at beginning of period............. 213.1 176.4 144.7
Net income................................. 62.3 36.7 31.7
-------- -------- --------
Balance at end of period................... 275.4 213.1 176.4
-------- -------- --------
Total shareholder's equity............. $ 709.9 $ 641.0 $ 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)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
-------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net income.................................. $ 62.3 $ 36.7 $ 31.7
Other comprehensive income:
Net (depreciation) appreciation on
available-for-sale securities......... (23.4) 27.0 (5.1)
Benefit (provision) for deferred federal
income taxes.......................... 9.0 (9.0) 1.8
------- ------- -------
Other comprehensive income.......... (14.4) 18.0 (3.3)
------- ------- -------
Comprehensive income.................... 47.9 $ 54.7 $ 28.4
------- ------- -------
------- ------- -------
</TABLE>

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

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

(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
-------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 62.3 $ 36.7 $ 31.7
Adjustments to reconcile net income to
net cash used in operating activities:
Net realized gains.................. (20.0) (2.9) 3.6
Net amortization and depreciation... (7.1) -- 3.5
Sales practice litigation expense... 21.0
Loss from cession of disability
income business................... -- 53.9 --
Deferred federal income taxes....... 11.8 7.1 (9.8)
Payment related to cession of
disability income business........ -- (207.0) --
Change in deferred acquisition
costs............................. (177.8) (181.3) (66.8)
Change in reinsurance premiums
payable........................... 40.8 3.9 (0.2)
Change in accrued investment
income............................ 0.7 3.5 1.2
Change in policy liabilities and
accruals, net..................... 193.1 (72.4) (39.9)
Change in reinsurance receivable.... (56.9) 22.1 (1.5)
Change in expenses and taxes
payable........................... 55.4 0.2 32.3
Separate account activity, net...... (0.5) 1.6 8.0
Other, net.......................... (28.0) (8.7) 2.3
-------- -------- --------
Net cash provided by (used in)
operating activities.......... 94.8 (343.3) (35.6)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................ 187.0 909.7 809.4
Proceeds from disposals of equity
securities............................ 53.3 2.4 1.5
Proceeds from disposals of other
investments........................... 22.7 23.7 17.4
Proceeds from mortgages matured or
collected............................. 60.1 62.9 34.0
Purchase of available-for-sale fixed
maturities............................ (136.0) (579.7) (795.8)
Purchase of equity securities........... (30.6) (3.2) (13.2)
Purchase of other investments........... (22.7) (9.0) (13.9)
Purchase of mortgages................... (58.9) (70.4) (22.3)
Other investing activities, net......... (3.9) -- (2.0)
-------- -------- --------
Net cash provided by investing
activities........................ 71.0 336.4 15.1
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock and
capital paid in....................... 21.0 19.2 22.0
-------- -------- --------
Net cash provided by financing
activities........................ 21.0 19.2 22.0
-------- -------- --------
Net change in cash and cash equivalents..... 186.8 12.3 1.5
Cash and cash equivalents, beginning of
period..................................... 31.1 18.8 17.3
-------- -------- --------
Cash and cash equivalents, end of period.... $ 217.9 $ 31.1 $ 18.8
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................... $ 0.6 $ -- $ 3.4
Income taxes paid....................... $ 36.2 $ 5.4 $ 16.5
</TABLE>

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

F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

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

The consolidated financial statements of AFLIAC include the accounts of Somerset
Square, Inc., a wholly-owned non-insurance company, which was transferred from
SMAFCO effective November 30, 1997 and dissolved as a subsidiary, effective
November 30, 1998. Its results of operations are included for 11 months of 1998
and for the month of December, 1997.

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

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

B. VALUATION OF INVESTMENTS

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

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

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

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

Policy loans are carried principally at unpaid principal balances.

During 1997, the Company adopted to a plan to dispose of all real estate assets
by the end of 1998. As of December 31, 1998, there was 1 property remaining in
the Company's real estate portfolio, which is being actively marketed. As a
result of the Plan, real estate held by the Company and real estate joint
ventures were written down to the estimated fair value less cost of disposal.
Depreciation is not recorded on this asset while it is held for disposal.

F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

C. FINANCIAL INSTRUMENTS

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

D. CASH AND CASH EQUIVALENTS

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

E. DEFERRED POLICY ACQUISITION COSTS

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

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

F. SEPARATE ACCOUNTS

Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of 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, disability income and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. The liabilities associated
with traditional life insurance products are computed using the net level
premium method for

F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

individual life and annuity policies, and are based upon estimates as to future
investment yield, mortality and withdrawals that include provisions for adverse
deviation. Future policy benefits for individual life insurance and annuity
policies are computed using interest rates ranging from 3% to 6% for life
insurance and 3 1/2% to 9 1/2% for annuities. Mortality, morbidity and
withdrawal assumptions for all policies are based on the Company's own
experience and industry standards. Liabilities for universal life 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.

Individual disability income 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 for individual life and disability income policies.
These estimates are continually reviewed and adjusted as necessary; such
adjustments are reflected in current operations.

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

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

H. PREMIUM AND FEE REVENUE AND RELATED EXPENSES

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

I. FEDERAL INCOME TAXES

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

The Board of Directors has delegated to AFC management, the development and
maintenance of appropriate federal income tax allocation policies and
procedures, which are subject to written agreement between the

F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

J. NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"), which establishes
accounting and reporting standards for derivative instruments. Statement No. 133
requires that an entity recognize all derivatives as either assets or
liabilities at fair value in the statement of financial position, and
establishes special accounting for the following three types of hedges; fair
value hedges, cash flow hedges, and hedges of foreign currency exposures of net
investment in foreign operations. This statement is effective for fiscal years
beginning after June 15, 1999. The Company is currently assessing the impact of
adoption of Statement No. 133.

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

In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments" ("SoP 97-3"). SoP 97-3 provides
guidance when a liability should be recognized for guaranty fund and other
assessments and how to measure the liability. This statement allows for the
discounting of the liability if the amount and timing of the cash payments are
fixed and determinable. In addition, it provides criteria for when an asset may
be recognized for a portion or all of the assessment liability or paid
assessment that can be recovered through premium tax offsets or policy
surcharges. This statement is effective for fiscal years beginning after
December 15, 1998. The Company believes that the adoption of this statement will
not have a material effect on the results of operations or financial position.

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

F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

beginning after December 15, 1997. AFLIAC consists of one segment, Allmerica
Financial Services, which underwrites and distributes variable annuities and
variable universal life via retail channels.

In June 1997, the FASB also issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement No. 130"), which established standards for the reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. All items that are required to be
recognized under accounting standards as components of comprehensive income are
to be reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement stipulates that
comprehensive income reflect the change in equity of an enterprise during a
period from transactions and other events and circumstances from non-owner
sources. This statement is effective for fiscal years beginning after December
15, 1997. The Company adopted Statement No. 130 for the first quarter of 1998,
which resulted primarily in reporting unrealized gains and losses on investments
in debt and equity securities in comprehensive income.

2. SIGNIFICANT TRANSACTIONS

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

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

During 1998, 1997 and 1996 , SMAFCO contributed $21.0 million, $40.6 million and
$22.0 million, respectively, of additional paid-in capital to the Company. The
nature of the 1997 contribution was $19.2 million in cash and $21.4 million in
other assets including Somerset Square, Inc.

3. INVESTMENTS

A. SUMMARY OF INVESTMENTS

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

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

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

F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C> <C> <C> <C>
1997
----------------------------------------------

<CAPTION>
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....... $ 6.3 $ 0.5 $-- $ 6.8
States and political subdivisions....... 2.8 0.2 -- 3.0
Foreign governments..................... 50.1 2.0 -- 52.1
Corporate fixed maturities.............. 1,147.5 58.7 3.3 1,202.9
Mortgage-backed securities.............. 133.8 5.2 1.3 137.7
--------- ----- ----- --------
Total fixed maturities.................. $ 1,340.5 $66.6 $ 4.6 $1,402.5
--------- ----- ----- --------
--------- ----- ----- --------
Equity securities....................... $ 34.4 $19.9 $ 0.3 $ 54.0
--------- ----- ----- --------
--------- ----- ----- --------
</TABLE>

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

In connection with AFLIAC's voluntary withdrawal of its license in New York,
AFLIAC agreed with the New York Department of Insurance to maintain, through a
custodial account in New York, a security deposit, the market value of which
will at all times equal 102% of all outstanding liabilities of AFLIAC for New
York policyholders, claimants and creditors. At December 31, 1998, the amortized
cost and market value of these assets on deposit in New York were $268.5 million
and $284.1 million, respectively. At December 31, 1997, the amortized cost and
market value of assets on deposit were $276.8 million and $291.7 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, 1998 and 1997.

There were no contractual fixed maturity investment commitments at December 31,
1998 and 1997, respectively.

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

<TABLE>
<CAPTION>
1998
--------------------
DECEMBER 31, AMORTIZED FAIR
(IN MILLIONS) COST VALUE
- ------------------------------------------------------------ --------- --------
<S> <C> <C>
Due in one year or less..................................... $ 97.7 $ 98.9
Due after one year through five years....................... 269.1 278.3
Due after five years through ten years...................... 638.2 658.5
Due after ten years......................................... 279.6 294.7
--------- --------
Total....................................................... $ 1,284.6 $1,330.4
--------- --------
--------- --------
</TABLE>

F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 YEARS ENDED DECEMBER 31, PROCEEDS FROM GROSS GROSS
(IN MILLIONS) VOLUNTARY SALES GAINS LOSSES
- ------------------------------------------------------------ --------------- ----- ------
<S> <C> <C> <C>
1998
Fixed maturities............................................ $ 60.0 $ 2.0 $ 2.0
Equity securities........................................... $ 52.6 $17.5 $ 0.9

1997
Fixed maturities............................................ $702.9 $11.4 $ 5.0
Equity securities........................................... $ 1.3 $ 0.5 $ --

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 YEARS ENDED DECEMBER 31, FIXED SECURITIES
(IN MILLIONS) MATURITIES AND OTHER (1) TOTAL
- ------------------------------------------------------------ ---------- ------------- -------
<S> <C> <C> <C>
1998
Net appreciation, beginning of year......................... $ 22.1 $ 16.4 $ 38.5
---------- ------ -------
Net depreciation on available-for-sale securities........... (16.2) (14.3) (30.5)
Net appreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ 7.1 -- 7.1
Benefit from deferred federal income taxes.................. 3.2 5.8 9.0
---------- ------ -------
(5.9) (8.5) (14.4)
---------- ------ -------
Net appreciation, end of year............................... $ 16.2 $ 7.9 $ 24.1
---------- ------ -------
---------- ------ -------

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

1996
Net appreciation, 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
Benefit (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>

F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) Includes net appreciation on other investments of $.9 million, $1.3 million,
and $2.2 million in 1998, 1997, and 1996, respectively.

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.

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

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
- ------------------------------------------------------------ ------- -------
<S> <C> <C>
Mortgage loans.............................................. $ 230.0 $ 228.2
Real estate held for sale................................... 14.5 12.0
------- -------
Total mortgage loans and real estate........................ $ 244.5 $ 240.2
------- -------
------- -------
</TABLE>

Reserves for mortgage loans were $3.3 million and $9.4 million at December 31,
1998 and 1997, respectively.

During 1997, the Company committed to a plan to dispose of all real estate
assets by the end of 1998. At December 31, 1998, there was 1 property remaining
in the Company's real estate portfolio, which is being actively marketed. As a
result of the Plan, during 1997, real estate assets with a carrying amount of
$15.7 million were written down to the estimated fair value less cost to sell of
$12.0 million, and a net realized investment loss of $3.7 million was
recognized. Depreciation was not recorded on these assets while they were held
for disposal.

There were no non-cash investing activities, including real estate acquired
through foreclosure of mortgage loans, in 1998 and 1997. During 1996, non-cash
investing activities included real estate acquired through foreclosure of
mortgage loans, which had a fair value of $0.9 million.

There were no contractual commitments to extend credit under commercial mortgage
loan agreements at December 31, 1998. 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) 1998 1997
- ------------------------------------------------------------ ------ ------
<S> <C> <C>
Property type:
Office building........................................... $129.2 $101.7
Residential............................................... 18.9 19.3
Retail.................................................... 37.4 42.2
Industrial/warehouse...................................... 59.2 61.9
Other..................................................... 3.1 24.5
Valuation allowances...................................... (3.3) (9.4)
------ ------
Total....................................................... $244.5 $240.2
------ ------
------ ------
</TABLE>

F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
- ------------------------------------------------------------ ------ ------
Geographic region:
<S> <C> <C>
South Atlantic............................................ $ 55.5 $ 68.7
Pacific................................................... 80.0 56.6
East North Central........................................ 41.4 61.4
Middle Atlantic........................................... 22.5 29.8
West South Central........................................ 6.7 6.9
New England............................................... 26.9 12.4
Other..................................................... 14.8 13.8
Valuation allowances...................................... (3.3) (9.4)
------ ------
Total....................................................... $244.5 $240.2
------ ------
------ ------
</TABLE>

At December 31, 1998, scheduled mortgage loan maturities were as follows: 1999
- -- $24.8 million; 2000 -- $43.5 million; 2001 -- $6.6 million; 2002 -- $11.5
million; 2003 -- $0.6 million; and $143.0 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 1998, the Company did not refinance any mortgage loans based
on terms which differed from those granted to new borrowers.

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

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

The carrying value of impaired loans was $15.3 million and $20.6 million, with
related reserves of $1.5 million and $7.1 million as of December 31, 1998 and
1997, respectively. All impaired loans were reserved as of December 31, 1998 and
1997.

The average carrying value of impaired loans was $17.0 million, $19.8 million
and $26.3 million, with related interest income while such loans were impaired
of $2.0 million, $2.2 million and $3.4 million as of December 31, 1998, 1997 and
1996, respectively.

F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

D. OTHER

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

4. INVESTMENT INCOME AND GAINS AND LOSSES

A. NET INVESTMENT INCOME

The components of net investment income were as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Fixed maturities............................................ $107.7 $130.0 $137.2
Mortgage loans.............................................. 25.5 20.4 22.0
Equity securities........................................... 0.3 1.3 0.7
Policy loans................................................ 11.7 10.8 10.2
Real estate................................................. 3.3 3.9 6.2
Other long-term investments................................. 1.5 1.0 0.8
Short-term investments...................................... 4.2 1.4 1.4
------ ------ ------
Gross investment income..................................... 154.2 168.8 178.5
Less investment expenses.................................... (2.9) (4.6) (6.8)
------ ------ ------
Net investment income....................................... $151.3 $164.2 $171.7
------ ------ ------
------ ------ ------
</TABLE>

There were no mortgage loans or fixed maturities on non-accrual status at
December 31, 1998. The effect of non-accruals, compared with amounts that would
have been recognized in accordance with the original terms of the investment,
had no impact in 1998 and 1997, and reduced net income by $0.1 million in 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 $12.6 million, $21.1 million and $25.4 million at December 31,
1998, 1997 and 1996, respectively. Interest income on restructured mortgage
loans that would have been recorded in accordance with the original terms of
such loans amounted to $1.4 million, $1.9 million and $3.6 million in 1998,
1997, and 1996, respectively. Actual interest income on these loans included in
net investment income aggregated $1.8 million, $2.1 million and $2.2 million in
1998, 1997, and 1996, respectively.

There were no fixed maturities or mortgage loans which, were non-income
producing for the twelve months ended December 31, 1998.

B. REALIZED INVESTMENT GAINS AND LOSSES

Realized gains (losses) on investments were as follows:

F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C. OTHER COMPREHENSIVE INCOME RECONCILIATION

The following table provides a reconciliation of gross unrealized gains to the
net balance shown in the Statement of Comprehensive income:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------- ------- -------
<S> <C> <C> <C>
Unrealized gains on securities:
Unrealized holding gains arising during period (net of taxes
of $(5.6) million, $10.2 million and $(2.9) million in
1998, 1997 and 1996 respectively).......................... $ (8.2) $ 20.3 $ (5.3)
Less: reclassification adjustment for gains included in net
income (net of taxes of $3.4 million, $1.2 million and
$(1.0) million in 1998, 1997 and 1996 respectively)........ 6.2 2.3 (2.0)
------- ------- -------
Other comprehensive income.................................. $ (14.4) $ 18.0 $ (3.3)
------- ------- -------
------- ------- -------
</TABLE>

5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

Statement No. 107, "Disclosures about Fair Value of Financial Instruments"
("Statement No, 107"), 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 is
limited to the lesser of the present value of the cash flows or book value.

F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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>
1998 1997
--------------------- ---------------------
DECEMBER 31, CARRYING FAIR CARRYING FAIR
(IN MILLIONS) VALUE VALUE VALUE VALUE
- ------------------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents................................. $ 217.9 $ 217.9 $ 31.1 $ 31.1
Fixed maturities.......................................... 1,330.4 1,330.4 1,402.5 1,402.5
Equity securities......................................... 31.8 31.8 54.0 54.0
Mortgage loans............................................ 230.0 241.9 228.2 239.8
Policy loans.............................................. 151.5 151.5 140.1 140.1
--------- --------- --------- ---------
$ 1,961.6 $ 1,973.5 $ 1,855.9 $ 1,867.5
--------- --------- --------- ---------
--------- --------- --------- ---------
FINANCIAL LIABILITIES
Individual fixed annuity contracts........................ $ 1,069.4 $ 1,034.6 $ 876.0 $ 850.6
Supplemental contracts without life Contingencies......... 16.6 16.6 15.3 15.3
--------- --------- --------- ---------
$ 1,086.0 $ 1,051.2 $ 891.3 $ 865.9
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

6. FEDERAL INCOME TAXES

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

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ----- ----- -----
<S> <C> <C> <C>
Federal income tax expense (benefit)
Current................................................... $22.1 $13.9 $26.9
Deferred.................................................. 11.8 7.1 (9.8)
----- ----- -----
Total....................................................... $33.9 $21.0 $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.

F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The deferred tax liabilities are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1998 1997
- ------------------------------------------------------------ -------- --------
<S> <C> <C>
Deferred tax (assets) liabilities
Policy reserves........................................... $ (205.1) $ (175.8)
Deferred acquisition costs................................ 278.8 226.4
Investments, net.......................................... 12.5 27.0
Sales practice litigation................................. (7.4) --
Bad debt reserve.......................................... (0.4) (2.0)
Other, net................................................ 0.4 0.3
-------- --------
Deferred tax liability, net................................. $ 78.8 $ 75.9
-------- --------
-------- --------
</TABLE>

Gross deferred income tax liabilities totaled $291.7 million and $253.7 million
at December 31, 1998 and 1997, respectively. Gross deferred income tax assets
totaled $212.9 million and $177.8 at December 31, 1998 and 1997, respectively.

The Company believes, based on its recent earnings history and its future
expectations, that the Company's taxable income in future years will be
sufficient to realize all deferred tax assets. In determining the adequacy of
future income, the Company considered the future reversal of its existing
temporary differences and available tax planning strategies that could be
implemented, if necessary.

The Company's federal income tax returns are routinely audited by the IRS, and
provisions are routinely made in the financial statements in anticipation of the
results of these audits. The IRS has examined the consolidated group's federal
income tax returns through 1994. The Company has appealed certain adjustments
proposed by the IRS with respect to the consolidated group's federal income tax
returns for 1992, 1993, and 1994. Also, certain adjustments proposed by the IRS
with respect to FAFLIC/AFLIAC's federal income tax returns for 1982 and 1983
remain unresolved. If upheld, these adjustments would result in additional
payments; however, the Company will vigorously defend its position with respect
to these adjustments. In the Company's opinion, adequate tax liabilities have
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 $145.4 million and $124.1 million in 1998 and 1997. The
net amounts payable to FAFLIC and affiliates for accrued expenses and various
other liabilities and receivables were $16.4 million and $15.0 million at
December 31, 1998 and 1997, respectively.

8. DIVIDEND RESTRICTIONS

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

Pursuant to Delaware's statute, the maximum amount of dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the Delaware Commissioner of Insurance, is limited to the
greater of (i) 10% of its policyholders' surplus as of the preceding December 31
or (ii) the individual company's statutory net gain from operations for the
preceding calendar year (if such insurer is a

F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

life company) or its net income (not including realized capital gains) for the
preceding calendar year (if such insurer is not a life company). Any dividends
to be paid by an insurer, whether or not in excess of the aforementioned
threshold, from a source other than statutory earned surplus would also require
the prior approval of the Delaware Commissioner of Insurance.

No dividends were declared by the Company during 1998, 1997 and 1996. During
1999, AFLIAC could pay dividends of $26.1 million to FAFLIC without prior
approval.

9. REINSURANCE

In the normal course of business, the Company seeks to reduce the loss that may
arise from events that cause unfavorable underwriting results by reinsuring
certain levels of risk in various areas of exposure with other insurance
enterprises or reinsurers. Reinsurance transactions are accounted for in
accordance with the provisions of Statement No. 113, "Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts" ("Statement No.
113").

The Company reinsures 100% of its traditional individual life and certain blocks
of its universal life business, substantially all of its disability income
business, and effective January 1, 1998, the mortality risk on the variable
universal life and remaining universal life blocks of business in-force at
December 31, 1997.

Amounts recoverable from reinsurers are estimated in a manner consistent with
the claim liability associated with the reinsured policy. Reinsurance contracts
do not relieve the Company from its obligations to policyholders. Failure of
reinsurers to honor their obligations could result in losses to the Company;
consequently, allowances are established for amounts deemed uncollectible. The
Company determines the appropriate amount of reinsurance based on evaluation of
the risks accepted and analyses prepared by consultants and reinsurers and on
market conditions (including the availability and pricing of reinsurance). The
Company also believes that the terms of its reinsurance contracts are consistent
with industry practice in that they contain standard terms with respect to lines
of business covered, limit and retention, arbitration and occurrence. Based on
its review of its reinsurers' financial statements and reputations in the
reinsurance marketplace, the Company believes that its reinsurers are
financially sound.

Amounts recoverable from reinsurers at December 31, 1998 and 1997 for the
disability income business were $230.8 million and $216.1 million, respectively,
traditional life were $11.4 million and $15.2 million, respectively, and
universal and variable universal life were $65.8 million and $19.8 million,
respectively.

The effects of reinsurance were as follows:

F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
Insurance and other individual policy benefits, claims,
losses and loss adjustment expenses:
<S> <C> <C> <C>
Direct.................................................... $204.0 $226.0 $206.4
Assumed................................................... -- 4.2 4.5
Ceded..................................................... (50.1) (42.4) (18.3)
------ ------ ------
Net policy benefits, claims, losses and loss adjustment
expenses................................................... $153.9 $187.8 $192.6
------ ------ ------
------ ------ ------
</TABLE>

10. DEFERRED POLICY ACQUISITION COSTS

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

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year................................ $765.3 $632.7 $555.7
Acquisition expenses deferred............................. 242.4 184.2 116.6
Amortized to expense during the year...................... (64.6) (53.1) (49.9)
Adjustment to equity during the year...................... 7.4 (10.2) 10.3
Adjustment for cession of disability income insurance..... -- (38.6) --
Adjustment for revision of universal life and variable
universal life insurance mortality assumptions.......... -- 50.3 --
------ ------ ------
Balance at end of year...................................... $950.5 $765.3 $632.7
------ ------ ------
------ ------ ------
</TABLE>

On October 1, 1997, the Company revised the mortality assumptions for universal
life and variable universal life product lines. These revisions resulted in a
$50.3 million recapitalization of deferred policy acquisition costs.

11. LIABILITIES FOR INDIVIDUAL DISABILITY INCOME BENEFITS

The Company regularly updates its estimates of liabilities for future policy
benefits and outstanding claims, 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 recorded in
results of operations in the year such changes are determined to be needed.

The liability for future policy benefits and outstanding claims, losses and loss
adjustment expenses related to the Company's disability income business was
$233.3 million and $219.9 million at December 31, 1998 and 1997. Due to the
reinsurance agreement whereby the Company has ceded substantially all of its
disability income business to a highly rated reinsurer, the Company believes
that no material adverse development of losses will occur. However, the amount
of the liabilities could be revised in the near term if the estimates are
revised.

12. CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

Unfavorable economic conditions may contribute to an increase in the number of
insurance companies that are under regulatory supervision. This may result in an
increase in mandatory assessments by state guaranty funds, or voluntary payments
by solvent insurance companies to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments, which are subject to statutory
limits, can be partially

F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

recovered through a reduction in future premium taxes in some states. The
Company is not able to reasonably estimate the potential effect on it of any
such future assessments or voluntary payments.

LITIGATION

In July 1997, a lawsuit on behalf of a putative class was instituted in
Louisiana against AFC and certain of its subsidiaries including AFLIAC, by
individual plaintiffs alleging fraud, unfair or deceptive acts, breach of
contract, misrepresentation, and related claims in the sale of life insurance
policies. In October 1997, plaintiffs voluntarily dismissed the Louisiana suit
and filed a substantially similar action in Federal District Court in Worcester,
Massachusetts. In early November 1998, AFC and the plaintiffs entered into a
settlement agreement, to which the court granted preliminary approval on
December 4, 1998. A hearing was held on March 19, 1999 to consider final
approval of the settlement agreement. A decision by the court is expected to be
rendered in the near future. Accordingly, AFLIAC recognized a $21.0 million
pre-tax expense during the third quarter of 1998 related to this litigation.
Although the Company believes that this expense reflects appropriate recognition
of its obligation under the settlement, this estimate assumes the availability
of insurance coverage for certain claims, and the estimate may be revised based
on the amount of reimbursement actually tendered by AFC's insurance carriers, if
any, and based on changes in the Company's estimate of the ultimate cost of the
benefits to be provided to members of the class.

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

YEAR 2000

The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

Although the Company does not believe that there is a material contingency
associated with the Year 2000 project, there can be no assurance that exposure
for material contingencies will not arise.

13. STATUTORY FINANCIAL INFORMATION

The Company is required to file annual statements with state regulatory
authorities prepared on an accounting basis prescribed or permitted by such
authorities (statutory basis). Statutory surplus differs from shareholder's
equity reported in accordance with generally accepted accounting principles
primarily because policy acquisition costs are expensed when incurred,
investment reserves are based on different assumptions, life insurance reserves
are based on different assumptions and income tax expense reflects only taxes
paid or currently payable. Statutory net income and surplus are as follows:

<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997 1996
- ------------------------------------------------------------ ------ ------ ------
<S> <C> <C> <C>
Statutory net income........................................ $ (8.2) $ 31.5 $ 5.4
Statutory shareholder's surplus............................. $309.7 $307.1 $234.0
</TABLE>

F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Allmerica Financial Life Insurance and Annuity
Company and the Policyowners of the 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 changes in net assets present fairly, in
all material respects, the financial position of each of the Sub-Accounts
constituting the Group VEL Account of Allmerica Financial Life Insurance and
Annuity Company at December 31, 1998, the results of each of their operations
and the changes in each of their net assets for each of 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 securities at December 31, 1998 by correspondence with the
Funds, provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
March 26, 1999
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998

<TABLE>
<CAPTION>
SELECT
INVESTMENT SELECT GROWTH
GRADE MONEY EQUITY GOVERNMENT AGGRESSIVE SELECT AND
GROWTH INCOME MARKET INDEX BOND GROWTH GROWTH INCOME
---------- ----------- --------- ----------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in shares of
Allmerica Investment Trust... $2,680,734 $15,353,008 $ 239,493 $46,130,996 $ 23,338 $805,199 $10,725,821 $232,628
Investments in shares of
Fidelity Variable Insurance
Products Funds (VIP)......... -- -- -- -- -- -- -- --
Investment in shares of T.
Rowe Price International
Series, Inc.................. -- -- -- -- -- -- -- --
Investment in shares of
Delaware Group Premium Fund,
Inc.......................... -- -- -- -- -- -- -- --
Investments in shares of
INVESCO Variable Investment
Funds, Inc................... -- -- -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds,
Inc.......................... -- -- -- -- -- -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor).... -- 72 133 -- -- -- -- --
---------- ----------- --------- ----------- ---------- --------- ----------- ---------
Total assets................ 2,680,734 15,353,080 239,626 46,130,996 23,338 805,199 10,725,821 232,628

LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)............ 8 -- -- 329 -- -- 61 --
---------- ----------- --------- ----------- ---------- --------- ----------- ---------
Net assets.................. $2,680,726 $15,353,080 $ 239,626 $46,130,667 $ 23,338 $805,199 $10,725,760 $232,628
---------- ----------- --------- ----------- ---------- --------- ----------- ---------
---------- ----------- --------- ----------- ---------- --------- ----------- ---------

Net asset distribution by
category:
Variable life policies...... $2,680,726 $15,353,080 $ 239,626 $46,130,667 $ 23,338 $805,199 $10,725,760 $232,628
---------- ----------- --------- ----------- ---------- --------- ----------- ---------
---------- ----------- --------- ----------- ---------- --------- ----------- ---------

Units outstanding, December
31, 1998.................. 1,249,203 11,317,314 197,949 18,332,380 18,091 415,299 4,105,152 111,435
Net asset value per unit,
December 31, 1998......... $ 2.145949 $ 1.356601 $1.210540 $ 2.516349 $1.289894 $1.938842 $ 2.612756 $2.087564
</TABLE>

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

SA-1
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
VALUE INTERNATIONAL CAPITAL EMERGING STRATEGIC FIDELITY VIP FIDELITY VIP
OPPORTUNITY* EQUITY APPRECIATION MARKETS GROWTH(a) HIGH INCOME EQUITY-INCOME
----------- ------------- ------------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in shares of
Allmerica Investment Trust... $ 633,602 $9,078,542 $ 248,088 $ 11 $ -- $ -- $ --
Investments in shares of
Fidelity Variable Insurance
Products Funds (VIP)......... -- -- -- -- -- 89,094 159,323
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................... -- -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds,
Inc.......................... -- -- -- -- -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor).... -- -- -- -- -- -- --
----------- ------------- ------------ ---------- ---------- ------------ -------------
Total assets................ 633,602 9,078,542 248,088 11 -- 89,094 159,323

LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)............ -- -- -- -- -- -- --
----------- ------------- ------------ ---------- ---------- ------------ -------------
Net assets.................. $ 633,602 $9,078,542 $ 248,088 $ 11 $ -- $ 89,094 $ 159,323
----------- ------------- ------------ ---------- ---------- ------------ -------------
----------- ------------- ------------ ---------- ---------- ------------ -------------

Net asset distribution by
category:
Variable life policies...... $ 633,602 $9,078,542 $ 248,088 $ 11 $ -- $ 89,094 $ 159,323
----------- ------------- ------------ ---------- ---------- ------------ -------------
----------- ------------- ------------ ---------- ---------- ------------ -------------

Units outstanding, December
31, 1998.................. 340,442 5,402,498 125,801 11 -- 62,767 81,257
Net asset value per unit,
December 31, 1998......... $1.861103 $ 1.680435 $1.972072 $ 1.016052 $1.000000 $1.419419 $1.960736

<CAPTION>
FIDELITY
VIP
GROWTH
-----------
<S> <C>
ASSETS:
Investments in shares of
Allmerica Investment Trust... $ --
Investments in shares of
Fidelity Variable Insurance
Products Funds (VIP)......... 1,151,463
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................... --
Investment in shares of Morgan
Stanley Universal Funds,
Inc.......................... --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor).... --
-----------
Total assets................ 1,151,463
LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)............ --
-----------
Net assets.................. $1,151,463
-----------
-----------
Net asset distribution by
category:
Variable life policies...... $1,151,463
-----------
-----------
Units outstanding, December
31, 1998.................. 468,052
Net asset value per unit,
December 31, 1998......... $ 2.460125
</TABLE>

* Name changed. See Note 1.
(a) For the period ended 12/31/98, there were no transactions.

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

SA-2
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998

<TABLE>
<CAPTION>
FIDELITY VIP T. ROWE PRICE DGPF INVESCO
FIDELITY VIP II INTERNATIONAL INTERNATIONAL INDUSTRIAL INVESCO MORGAN STANLEY
OVERSEAS ASSET MANAGER STOCK EQUITY INCOME TOTAL RETURN FIXED INCOME
------------ ------------- ------------- ------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in shares of
Allmerica Investment Trust... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of
Fidelity Variable Insurance
Products Funds (VIP)......... 67,581 648,373 -- -- -- -- --
Investment in shares of T.
Rowe Price International
Series, Inc.................. -- -- 372,143 -- -- -- --
Investment in shares of
Delaware Group Premium Fund,
Inc.......................... -- -- -- 8,551,074 -- -- --
Investments in shares of
INVESCO Variable Investment
Funds, Inc................... -- -- -- -- 9,229 61,907 --
Investment in shares of Morgan
Stanley Universal Funds,
Inc.......................... -- -- -- -- -- -- 19,841,859
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor).... -- -- -- -- -- -- --
------------ ------------- ------------- ------------- ---------- ------------ --------------
Total assets................ 67,581 648,373 372,143 8,551,074 9,229 61,907 19,841,859

LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)............ -- -- -- 14 -- -- 8
------------ ------------- ------------- ------------- ---------- ------------ --------------
Net assets.................. $ 67,581 $ 648,373 $ 372,143 $8,551,060 $ 9,229 $ 61,907 $19,841,851
------------ ------------- ------------- ------------- ---------- ------------ --------------
------------ ------------- ------------- ------------- ---------- ------------ --------------
Net asset distribution by
category:
Variable life policies...... $ 67,581 $ 648,373 $ 372,143 $8,551,060 $ 9,229 $ 61,907 $19,841,851
------------ ------------- ------------- ------------- ---------- ------------ --------------
------------ ------------- ------------- ------------- ---------- ------------ --------------

Units outstanding, December
31, 1998.................. 44,140 362,598 279,392 6,643,452 5,737 43,070 18,333,601
Net asset value per unit,
December 31, 1998......... $1.531045 $1.788131 $1.331963 $ 1.287141 $1.608670 $1.437355 $ 1.082267
</TABLE>

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

SA-3
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH INVESTMENT GRADE INCOME
-------------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
---------- ---------- -------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends................... $ 24,155 $ 19,495 $ 2,650 $ 882,578 $ 611,287 $ 14
Mortality and expense risk
fees...................... (12,008) (6,270) (1,681) (92,564) (61,160) --
---------- ---------- -------- ----------- ---------- -----
Net investment income
(loss).................. 12,147 13,225 969 790,014 550,127 14
---------- ---------- -------- ----------- ---------- -----
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors... 21,129 282,628 51,596 -- -- --
Net realized gain (loss)
from sales of
investments............... (4,698) 22,096 35 20,005 7,069 --
---------- ---------- -------- ----------- ---------- -----
Net realized gain (loss).... 16,431 304,724 51,631 20,005 7,069 --
Net unrealized gain
(loss).................... 330,418 (57,127) (33,389) 166,355 282,868 (6)
---------- ---------- -------- ----------- ---------- -----
Net realized and
unrealized gain
(loss).................. 346,849 247,597 18,242 186,360 289,937 (6)
---------- ---------- -------- ----------- ---------- -----

Net increase (decrease) in
net assets from
operations................ 358,996 260,822 19,211 976,374 840,064 8
---------- ---------- -------- ----------- ---------- -----
POLICY TRANSACTIONS:
Net premiums................ 675,094 793,195 638,444 2,981,137 9,313,499 --
Terminations................ (48,810) (2,053) -- (53,707) -- --
Insurance and other
charges................... (7,692) (3,267) (2) (451,085) (447,871) --
Transfers between
sub-accounts (including
fixed account), net....... (72,668) 75,006 30 2,055,119 138,291 --
Other transfers from (to)
the General Account....... 492 (6,615) 587 892 402 --
Net increase (decrease) in
investment by Sponsor..... -- -- (283) (265) -- --
---------- ---------- -------- ----------- ---------- -----
Net increase (decrease) in
net assets from policy
transactions.............. 546,416 856,266 638,776 4,532,091 9,004,321 --
---------- ---------- -------- ----------- ---------- -----

Net increase (decrease) in
net assets................ 905,412 1,117,088 657,987 5,508,465 9,844,385 8

NET ASSETS:
Beginning of year........... 1,775,314 658,226 239 9,844,615 230 222
---------- ---------- -------- ----------- ---------- -----
End of year................. $2,680,726 $1,775,314 $658,226 $15,353,080 $9,844,615 $ 230
---------- ---------- -------- ----------- ---------- -----
---------- ---------- -------- ----------- ---------- -----

<CAPTION>
MONEY MARKET
-------------------------------------

YEAR ENDED DECEMBER 31,
1998 1997 1996
------------ ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends................... $ 222,239 $ 168,681 $ 2,028
Mortality and expense risk
fees...................... (21,736) (24,667) (683)
------------ ----------- ----------
Net investment income
(loss).................. 200,503 144,014 1,345
------------ ----------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors... -- -- --
Net realized gain (loss)
from sales of
investments............... -- -- --
------------ ----------- ----------
Net realized gain (loss).... -- -- --
Net unrealized gain
(loss).................... -- -- --
------------ ----------- ----------
Net realized and
unrealized gain
(loss).................. -- -- --
------------ ----------- ----------
Net increase (decrease) in
net assets from
operations................ 200,503 144,014 1,345
------------ ----------- ----------
POLICY TRANSACTIONS:
Net premiums................ 1,928,083 30,656,799 924,390
Terminations................ (47,901) (31) (13)
Insurance and other
charges................... (830,359) (704,864) (110,367)
Transfers between
sub-accounts (including
fixed account), net....... (29,510,393) (1,673,588) (737,370)
Other transfers from (to)
the General Account....... (771) 35 124
Net increase (decrease) in
investment by Sponsor..... -- -- (217)
------------ ----------- ----------
Net increase (decrease) in
net assets from policy
transactions.............. (28,461,341) 28,278,351 76,547
------------ ----------- ----------
Net increase (decrease) in
net assets................ (28,260,838) 28,422,365 77,892
NET ASSETS:
Beginning of year........... 28,500,464 78,099 207
------------ ----------- ----------
End of year................. $ 239,626 $28,500,464 $ 78,099
------------ ----------- ----------
------------ ----------- ----------
</TABLE>

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

SA-4
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
EQUITY INDEX GOVERNMENT BOND
------------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
----------- ---------- ------ --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 340,554 $ 99,982 $ 29 $ 911 $ 837 $ 57
Mortality and expense risk fees............ (122,802) (49,283) (7) (103) (19) (8)
----------- ---------- ------ --------- -------- -------
Net investment income (loss)............. 217,752 50,699 22 808 818 49
----------- ---------- ------ --------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 1,091,932 231,984 94 -- -- --
Net realized gain (loss) from sales of
investments.............................. 313,038 57,606 128 926 1 5
----------- ---------- ------ --------- -------- -------
Net realized gain (loss)................... 1,404,970 289,590 222 926 1 5
Net unrealized gain (loss)................. 5,974,791 1,759,333 (123) 83 (88) (2)
----------- ---------- ------ --------- -------- -------
Net realized and unrealized gain
(loss).................................. 7,379,761 2,048,923 99 1,009 (87) 3
----------- ---------- ------ --------- -------- -------

Net increase (decrease) in net assets from
operations............................... 7,597,513 2,099,622 121 1,817 731 52
----------- ---------- ------ --------- -------- -------
POLICY TRANSACTIONS:
Net premiums............................... 17,533,507 6,793,979 6,564 13,471 5,649 2,983
Terminations............................... (86,149) (198) -- (81) (713) --
Insurance and other charges................ (998,917) (364,580) 2 (216) (163) (53)
Transfers between sub-accounts (including
fixed account), net...................... 13,535,625 8,426 -- (30,874) 31,189 --
Other transfers from (to) the General
Account.................................. 5,188 (34) 12 (389) -- (58)
Net increase (decrease) in investment by
Sponsor.................................. -- -- (256) -- -- (223)
----------- ---------- ------ --------- -------- -------
Net increase (decrease) in net assets from
policy transactions...................... 29,989,254 6,437,593 6,322 (18,089) 35,962 2,649
----------- ---------- ------ --------- -------- -------

Net increase (decrease) in net assets...... 37,586,767 8,537,215 6,443 (16,272) 36,693 2,701

NET ASSETS:
Beginning of year.......................... 8,543,900 6,685 242 39,610 2,917 216
----------- ---------- ------ --------- -------- -------
End of year................................ $46,130,667 $8,543,900 $6,685 $ 23,338 $ 39,610 $ 2,917
----------- ---------- ------ --------- -------- -------
----------- ---------- ------ --------- -------- -------

<CAPTION>
SELECT AGGRESSIVE GROWTH
-------------------------------

YEAR ENDED DECEMBER 31,
1998 1997 1996
--------- --------- -------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ -- $ -- $ --
Mortality and expense risk fees............ (3,950) (706) (10)
--------- --------- -------
Net investment income (loss)............. (3,950) (706) (10)
--------- --------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. -- 17,916 464
Net realized gain (loss) from sales of
investments.............................. (3,058) 748 182
--------- --------- -------
Net realized gain (loss)................... (3,058) 18,664 646
Net unrealized gain (loss)................. 42,784 3,863 (425)
--------- --------- -------
Net realized and unrealized gain
(loss).................................. 39,726 22,527 221
--------- --------- -------
Net increase (decrease) in net assets from
operations............................... 35,776 21,821 211
--------- --------- -------
POLICY TRANSACTIONS:
Net premiums............................... 448,702 98,882 8,375
Terminations............................... (76,946) (3,662) --
Insurance and other charges................ (18,498) (3,465) (70)
Transfers between sub-accounts (including
fixed account), net...................... 181,020 115,907 --
Other transfers from (to) the General
Account.................................. (3,910) 1,120 (17)
Net increase (decrease) in investment by
Sponsor.................................. -- -- (296)
--------- --------- -------
Net increase (decrease) in net assets from
policy transactions...................... 530,368 208,782 7,992
--------- --------- -------
Net increase (decrease) in net assets...... 566,144 230,603 8,203
NET ASSETS:
Beginning of year.......................... 239,055 8,452 249
--------- --------- -------
End of year................................ $ 805,199 $ 239,055 $ 8,452
--------- --------- -------
--------- --------- -------
</TABLE>

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

SA-5
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SELECT GROWTH
SELECT GROWTH AND INCOME
-------------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
----------- ---------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 7,079 $ 20,160 $ 5 $ 2,753 $ 1,134 $ 10
Mortality and expense risk fees............ (58,229) (39,740) (2) (1,576) (365) (2)
----------- ---------- ------- --------- --------- -------
Net investment income (loss)............. (51,150) (19,580) 3 1,177 769 8
----------- ---------- ------- --------- --------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 93,491 363,902 233 922 13,936 143
Net realized gain (loss) from sales of
investments.............................. 576,009 51,101 92 1,778 296 63
----------- ---------- ------- --------- --------- -------
Net realized gain (loss)................... 669,500 415,003 325 2,700 14,232 206
Net unrealized gain (loss)................. 2,339,939 1,431,596 (229) 25,056 (5,403) (126)
----------- ---------- ------- --------- --------- -------
Net realized and unrealized gain
(loss).................................. 3,009,439 1,846,599 96 27,756 8,829 80
----------- ---------- ------- --------- --------- -------

Net increase (decrease) in net assets from
operations............................... 2,958,289 1,827,019 99 28,933 9,598 88
----------- ---------- ------- --------- --------- -------
POLICY TRANSACTIONS:
Net premiums............................... 2,111,416 5,368,817 1,756 155,220 65,720 2,352
Terminations............................... (97,238) (18) -- (44,778) (4,379) --
Insurance and other charges................ (281,352) (292,989) (4) (7,462) (3,633) (4)
Transfers between sub-accounts (including
fixed account), net...................... (952,256) 76,402 -- (70,127) 101,691 --
Other transfers from (to) the General
Account.................................. 4,794 1,070 4 (1,320) 800 (26)
Net increase (decrease) in investment by
Sponsor.................................. -- -- (285) -- -- (286)
----------- ---------- ------- --------- --------- -------
Net increase (decrease) in net assets from
policy transactions...................... 785,364 5,153,282 1,471 31,533 160,199 2,036
----------- ---------- ------- --------- --------- -------

Net increase (decrease) in net assets...... 3,743,653 6,980,301 1,570 60,466 169,797 2,124

NET ASSETS:
Beginning of year.......................... 6,982,107 1,806 236 172,162 2,365 241
----------- ---------- ------- --------- --------- -------
End of year................................ $10,725,760 $6,982,107 $ 1,806 $ 232,628 $ 172,162 $ 2,365
----------- ---------- ------- --------- --------- -------
----------- ---------- ------- --------- --------- -------

<CAPTION>
SELECT VALUE
OPPORTUNITY*
-------------------------------

YEAR ENDED DECEMBER 31,
1998 1997 1996
--------- --------- -------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 5,317 $ 1,289 $ 40
Mortality and expense risk fees............ (2,543) (633) (19)
--------- --------- -------
Net investment income (loss)............. 2,774 656 21
--------- --------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 1,651 30,900 252
Net realized gain (loss) from sales of
investments.............................. (3,746) 700 142
--------- --------- -------
Net realized gain (loss)................... (2,095) 31,600 394
Net unrealized gain (loss)................. 16,497 (5,610) 195
--------- --------- -------
Net realized and unrealized gain
(loss).................................. 14,402 25,990 589
--------- --------- -------
Net increase (decrease) in net assets from
operations............................... 17,176 26,646 610
--------- --------- -------
POLICY TRANSACTIONS:
Net premiums............................... 245,642 151,059 5,482
Terminations............................... (32,190) (3,904) --
Insurance and other charges................ (12,119) (4,266) 7
Transfers between sub-accounts (including
fixed account), net...................... 182,286 59,070 --
Other transfers from (to) the General
Account.................................. (2,227) 432 (48)
Net increase (decrease) in investment by
Sponsor.................................. -- -- (275)
--------- --------- -------
Net increase (decrease) in net assets from
policy transactions...................... 381,392 202,391 5,166
--------- --------- -------
Net increase (decrease) in net assets...... 398,568 229,037 5,776
NET ASSETS:
Beginning of year.......................... 235,034 5,997 221
--------- --------- -------
End of year................................ $ 633,602 $ 235,034 $ 5,997
--------- --------- -------
--------- --------- -------
</TABLE>

*Name changed. See Note 1.

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

SA-6
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
SELECT SELECT CAPITAL SELECT
INTERNATIONAL EQUITY APPRECIATION EMERGING MARKETS
--------------------------------- ------------------------------- ----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, PERIOD FROM
1998 1997 1996 1998 1997 1996 11/9/98** TO 12/31/98
---------- ---------- --------- --------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends................... $ 117,829 $ 131,715 $ 1,124 $ -- $ -- $ -- $ --
Mortality and expense risk
fees...................... (53,990) (35,909) (119) (914) (204) (58) --
---------- ---------- --------- --------- -------- -------- -----
Net investment income
(loss)................... 63,839 95,806 1,005 (914) (204) (58) --
---------- ---------- --------- --------- -------- -------- -----
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors... -- 182,156 136 37,550 -- 28 --
Net realized gain (loss)
from sales of
investments............... 77,352 11,256 70 (803) 544 53 --
---------- ---------- --------- --------- -------- -------- -----
Net realized gain (loss).... 77,352 193,412 206 36,747 544 81 --
Net unrealized gain
(loss).................... 1,085,145 (15,069) 3,759 (13,375) 6,529 (147) --
---------- ---------- --------- --------- -------- -------- -----
Net realized and
unrealized gain (loss)... 1,162,497 178,343 3,965 23,372 7,073 (66) --
---------- ---------- --------- --------- -------- -------- -----

Net increase (decrease) in
net assets from
operations................ 1,226,336 274,149 4,970 22,458 6,869 (124) --
---------- ---------- --------- --------- -------- -------- -----
POLICY TRANSACTIONS:
Net premiums................ 1,910,773 5,449,561 57,697 105,063 53,911 15,400 11
Terminations................ (85,614) (8) -- (8,341) (3,829) -- --
Insurance and other
charges................... (257,943) (259,243) (59) (5,861) (1,570) (213) --
Transfers between
sub-accounts (including
fixed account), net....... 655,125 108,744 -- 69,728 (4,978) -- --
Other transfers from (to)
the General Account....... (6,961) 947 108 (344) (16) (45) --
Net increase (decrease) in
investment by Sponsor..... -- -- (266) -- -- (299) --
---------- ---------- --------- --------- -------- -------- -----
Net increase (decrease) in
net assets from policy
transactions.............. 2,215,380 5,300,001 57,480 160,245 43,518 14,843 11
---------- ---------- --------- --------- -------- -------- -----

Net increase (decrease) in
net assets................ 3,441,716 5,574,150 62,450 182,703 50,387 14,719 11

NET ASSETS:
Beginning of year........... 5,636,826 62,676 226 65,385 14,998 279 --
---------- ---------- --------- --------- -------- -------- -----
End of year................. $9,078,542 $5,636,826 $ 62,676 $ 248,088 $ 65,385 $ 14,998 $ 11
---------- ---------- --------- --------- -------- -------- -----
---------- ---------- --------- --------- -------- -------- -----
</TABLE>

**Date of initial investment.

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

SA-7
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP
HIGH INCOME EQUITY-INCOME
----------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
-------- -------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends................... $ 3,501 $ 351 $ 19 $ 898 $ 91 $ 1
Mortality and expense risk
fees...................... (354) (119) (5) (569) (177) (7)
-------- -------- ------- --------- -------- -------
Net investment income
(loss)................... 3,147 232 14 329 (86) (6)
-------- -------- ------- --------- -------- -------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors... 2,225 43 4 3,197 457 16
Net realized gain (loss)
from sales of
investments............... (683) 94 42 802 242 68
-------- -------- ------- --------- -------- -------
Net realized gain (loss).... 1,542 137 46 3,999 699 84
Net unrealized gain
(loss).................... (8,346) 2,892 66 5,752 5,483 87
-------- -------- ------- --------- -------- -------
Net realized and
unrealized gain (loss)... (6,804) 3,029 112 9,751 6,182 171
-------- -------- ------- --------- -------- -------

Net increase (decrease) in
net assets from
operations................ (3,657) 3,261 126 10,080 6,096 165
-------- -------- ------- --------- -------- -------
POLICY TRANSACTIONS:
Net premiums................ 36,812 37,542 3,933 116,536 49,237 4,266
Terminations................ (4,930) (1,972) -- (23,881) (817) --
Insurance and Other
Charges................... (3,521) (1,317) (16) (6,484) (1,985) 1
Transfers between
sub-accounts (including
fixed account), net....... 21,213 1,849 36 4,066 1,915 131
Other transfers from (to)
the General Account....... (252) 15 1 25 89 (86)
Net increase (decrease) in
investment by Sponsor..... -- -- (250) -- -- (271)
-------- -------- ------- --------- -------- -------
Net increase (decrease) in
net assets from policy
transactions.............. 49,322 36,117 3,704 90,262 48,439 4,041
-------- -------- ------- --------- -------- -------

Net increase (decrease) in
net assets................ 45,665 39,378 3,830 100,342 54,535 4,206

NET ASSETS:
Beginning of year........... 43,429 4,051 221 58,981 4,446 240
-------- -------- ------- --------- -------- -------
End of year................. $ 89,094 $ 43,429 $ 4,051 $ 159,323 $ 58,981 $ 4,446
-------- -------- ------- --------- -------- -------
-------- -------- ------- --------- -------- -------

<CAPTION>
FIDELITY VIP
GROWTH
---------------------------------

YEAR ENDED DECEMBER 31,
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends................... $ 1,819 $ 2,224 $ 1
Mortality and expense risk
fees...................... (2,312) (1,311) (832)
---------- --------- ---------
Net investment income
(loss)................... (493) 913 (831)
---------- --------- ---------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors... 47,583 9,956 21
Net realized gain (loss)
from sales of
investments............... 37,911 16,498 151
---------- --------- ---------
Net realized gain (loss).... 85,494 26,454 172
Net unrealized gain
(loss).................... 115,549 43,944 2,233
---------- --------- ---------
Net realized and
unrealized gain (loss)... 201,043 70,398 2,405
---------- --------- ---------
Net increase (decrease) in
net assets from
operations................ 200,550 71,311 1,574
---------- --------- ---------
POLICY TRANSACTIONS:
Net premiums................ 267,715 137,061 326,955
Terminations................ (25,480) (17,376) (2)
Insurance and Other
Charges................... (8,916) (4,065) (261)
Transfers between
sub-accounts (including
fixed account), net....... 375,715 (169,900) 65
Other transfers from (to)
the General Account....... (3,680) 199 34
Net increase (decrease) in
investment by Sponsor..... -- -- (285)
---------- --------- ---------
Net increase (decrease) in
net assets from policy
transactions.............. 605,354 (54,081) 326,506
---------- --------- ---------
Net increase (decrease) in
net assets................ 805,904 17,230 328,080
NET ASSETS:
Beginning of year........... 345,559 328,329 249
---------- --------- ---------
End of year................. $1,151,463 $ 345,559 $ 328,329
---------- --------- ---------
---------- --------- ---------
</TABLE>

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

SA-8
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
FIDELITY VIP FIDELITY VIP II T. ROWE PRICE
OVERSEAS ASSET MANAGER INTERNATIONAL STOCK
------------------------------- ---------------------------- ----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996 1998 1997 1996
--------- -------- -------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends................... $ 1,056 $ 344 $ 3 $ 11,971 $ 6,739 $ 10 $ 4,272 $ 898 $ 468
Mortality and expense risk
fees...................... (338) (205) (76) (2,662) (994) (501) (1,337) (560) (352)
--------- -------- -------- -------- -------- -------- -------- ------- --------
Net investment income
(loss)................... 718 139 (73) 9,309 5,745 (491) 2,935 338 116
--------- -------- -------- -------- -------- -------- -------- ------- --------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors... 3,112 1,365 3 35,913 16,905 8 1,508 1,272 281
Net realized gain (loss)
from sales of
investments............... 165 201 138 5,268 499 130 318 183 921
--------- -------- -------- -------- -------- -------- -------- ------- --------
Net realized gain (loss).... 3,277 1,566 141 41,181 17,404 138 1,826 1,455 1,202
Net unrealized gain
(loss).................... 1,086 285 1,222 15,917 28,899 7,451 23,676 (326) 3,447
--------- -------- -------- -------- -------- -------- -------- ------- --------
Net realized and
unrealized gain (loss)... 4,363 1,851 1,363 57,098 46,303 7,589 25,502 1,129 4,649
--------- -------- -------- -------- -------- -------- -------- ------- --------

Net increase (decrease) in
net assets from
operations................ 5,081 1,990 1,290 66,407 52,048 7,098 28,437 1,467 4,765
--------- -------- -------- -------- -------- -------- -------- ------- --------
POLICY TRANSACTIONS:
Net premiums................ 38,586 31,760 17,544 216,035 142,926 184,389 104,206 36,785 55,319
Terminations................ (1,996) (184) (1) (219) (172) (1) (2,000) -- --
Insurance and other
charges................... (3,619) (1,796) (460) (759) (455) (13) (5,246) (1,021) 115
Transfers between
sub-accounts (including
fixed account), net....... (20,410) 685 36 (2,565) (14,401) 47 148,557 533 --
Other transfers from (to)
the General Account....... (832) 2 (72) (1,965) (194) 199 360 (1) (133)
Net increase (decrease) in
investment by Sponsor..... -- -- (238) -- -- (257) -- -- --
--------- -------- -------- -------- -------- -------- -------- ------- --------
Net increase (decrease) in
net assets from policy
transactions.............. 11,729 30,467 16,809 210,527 127,704 184,364 245,877 36,296 55,301
--------- -------- -------- -------- -------- -------- -------- ------- --------

Net increase (decrease) in
net assets................ 16,810 32,457 18,099 276,934 179,752 191,462 274,314 37,763 60,066

NET ASSETS:
Beginning of year........... 50,771 18,314 215 371,439 191,687 225 97,829 60,066 --
--------- -------- -------- -------- -------- -------- -------- ------- --------
End of year................. $ 67,581 $ 50,771 $ 18,314 $648,373 $371,439 $191,687 $372,143 $97,829 $ 60,066
--------- -------- -------- -------- -------- -------- -------- ------- --------
--------- -------- -------- -------- -------- -------- -------- ------- --------
</TABLE>

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

SA-9
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
DGPF INVESCO
INTERNATIONAL EQUITY INDUSTRIAL INCOME
------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED PERIOD FROM
1998 1997 1996 12/31/98 12/31/97 7/2/96** TO 12/31/96
---------- -------- ------- -------- ------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 11,680 $ 118 $ -- $ 150 $ 112 $ 56
Mortality and expense risk fees............ (16,877) (251) (2) (38) (23) (2)
---------- -------- ------- -------- ------- ------
Net investment income (loss)............. (5,197) (133) (2) 112 89 54
---------- -------- ------- -------- ------- ------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. -- -- -- 311 398 154
Net realized gain (loss) from sales of
investments.............................. 7,893 164 18 401 25 25
---------- -------- ------- -------- ------- ------
Net realized gain (loss)................... 7,893 164 18 712 423 179
Net unrealized gain (loss)................. 442,761 (695) 68 312 752 (141)
---------- -------- ------- -------- ------- ------
Net realized and unrealized gain
(loss).................................. 450,654 (531) 86 1,024 1,175 38
---------- -------- ------- -------- ------- ------

Net increase (decrease) in net assets from
operations............................... 445,457 (664) 84 1,136 1,264 92
---------- -------- ------- -------- ------- ------
POLICY TRANSACTIONS:
Net premiums............................... 3,720,116 82,362 2,639 6,284 2,869 3,229
Terminations............................... (370) (1,381) -- (916) -- --
Insurance and other charges................ (204,104) (1,510) -- (4,494) (242) (9)
Transfers between sub-accounts (including
fixed account), net...................... 4,507,084 1,085 -- -- -- --
Other transfers from (to) the General
Account.................................. 244 11 7 8 3 5
Net increase (decrease) in investment by
Sponsor.................................. -- -- -- -- -- --
---------- -------- ------- -------- ------- ------
Net increase (decrease) in net assets from
policy transactions...................... 8,022,970 80,567 2,646 882 2,630 3,225
---------- -------- ------- -------- ------- ------

Net increase (decrease) in net assets...... 8,468,427 79,903 2,730 2,018 3,894 3,317

NET ASSETS:
Beginning of year.......................... 82,633 2,730 -- 7,211 3,317 --
---------- -------- ------- -------- ------- ------
End of year................................ $8,551,060 $ 82,633 $ 2,730 $ 9,229 $7,211 $3,317
---------- -------- ------- -------- ------- ------
---------- -------- ------- -------- ------- ------
</TABLE>

**Date of initial investment.

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

SA-10
<PAGE>
GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
MORGAN STANLEY
INVESCO TOTAL RETURN FIXED INCOME
-------------------------------------------- ----------------------
YEAR ENDED PERIOD FROM PERIOD FROM
12/31/98 12/31/97 7/2/96** TO 12/31/96 2/17/98** TO 12/31/98
-------- -------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividends.................................. $ 1,276 $ 1,045 $ 458 $ 648,460
Mortality and expense risk fees............ (257) (137) (22) (35,898)
-------- -------- ------- ------------
Net investment income (loss)............. 1,019 908 436 612,562
-------- -------- ------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................. 1,325 245 1 256,451
Net realized gain (loss) from sales of
investments.............................. 553 31 247 8,635
-------- -------- ------- ------------
Net realized gain (loss)................... 1,878 276 248 265,086
Net unrealized gain (loss)................. 2,122 5,287 (38) (179,067)
-------- -------- ------- ------------
Net realized and unrealized gain
(loss).................................. 4,000 5,563 210 86,019
-------- -------- ------- ------------

Net increase (decrease) in net assets from
operations............................... 5,019 6,471 646 698,581
-------- -------- ------- ------------
POLICY TRANSACTIONS:
Net premiums............................... 7,489 26,884 17,026 9,708,358
Terminations............................... (8) -- -- --
Insurance and other charges................ (860) (764) (117) (446,219)
Transfers between sub-accounts (including
fixed account), net...................... -- -- -- 9,881,316
Other transfers from (to) the General
Account.................................. 42 32 47 (185)
Net increase (decrease) in investment by
Sponsor.................................. -- -- -- --
-------- -------- ------- ------------
Net increase (decrease) in net assets from
policy transactions...................... 6,663 26,152 16,956 19,143,270
-------- -------- ------- ------------

Net increase (decrease) in net assets...... 11,682 32,623 17,602 19,841,851

NET ASSETS:
Beginning of year.......................... 50,225 17,602 -- --
-------- -------- ------- ------------
End of year................................ $61,907 $50,225 $17,602 $19,841,851
-------- -------- ------- ------------
-------- -------- ------- ------------
</TABLE>

**Date of initial investment.

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

SA-11
<PAGE>
GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS

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
forty-two Sub-Accounts. In addition to the Sub-Accounts disclosed on the
Statements of Assets and Liabilities, Group VEL established nineteen additional
Sub-Accounts effective December 15, 1998. The initial public offering of these
Sub-Accounts did not occur in 1998, therefore, these Sub-Accounts are not
included in the financial statements. Each Sub-Account invests exclusively in a
corresponding investment portfolio of the Allmerica Investment Trust (the Trust)
managed by Allmerica Financial Investment Management Services, Inc.
(AFIMS)(successor to Allmerica Investment Management Company, Inc.), a
wholly-owned subsidiary of First Allmerica; or of the Variable Insurance
Products Fund (Fidelity VIP) or the Variable Insurance Products Fund II
(Fidelity VIP II), managed by Fidelity Management & Research Company (FMR); or
of the T. Rowe Price International Series, Inc. (T.Rowe Price) managed by Rowe
Price-Fleming International, Inc.; or of the Delaware Group Premium Fund, Inc.
(DGPF) managed by Delaware Management Company or Delaware International Advisers
Ltd.; or of the INVESCO Variable Investment Funds, Inc. (INVESCO) managed by
INVESCO Funds Group, Inc.; or of the Morgan Stanley Universal Funds, Inc.
(Morgan Stanley) managed by Miller Anderson & Sherrerd, LLP; or of the Mutual
Fund Variable Annuity Trust (MFVAT) managed by Chase Manhattan Bank, N.A. The
Trust, Fidelity VIP, Fidelity VIP II, T. Rowe Price, DGPF, INVESCO, Morgan
Stanley and MFVAT (the Funds) are open-end, management investment companies
registered under the 1940 Act. INVESCO is available only to employees of INVESCO
and its affiliates. Morgan Stanley is available only to employees of Duke Energy
Corporation and its affiliates.

Effective January 9, 1998, Small-Mid Cap Value Fund was renamed Select Value
Opportunity Fund.

Certain prior year balances have been reclassified to conform with current
year presentation.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS -- Security transactions are recorded on the trade date.
Investments held by the Sub-Accounts are stated at the net asset value per share
of the respective investment portfolio of the Funds. Net realized gains and
losses on securities sold are determined using the average cost method.
Dividends and capital gain distributions are recorded on the ex-dividend date
and are reinvested in additional shares of the respective investment portfolio
of the Funds at net asset value.

FEDERAL INCOME TAXES -- The Company is taxed as a "life insurance company"
under Subchapter L of the Internal Revenue Code (the Code) and files a
consolidated federal income tax return with First Allmerica. The Company
anticipates no tax liability resulting from the operations of Group VEL.
Therefore, no provision for income taxes has been charged against Group VEL.

SA-12
<PAGE>
GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 -- INVESTMENTS

The number of shares owned, aggregate cost, and net asset value per share of
each Sub-Account's investment in the Funds at December 31, 1998 were as follows:

<TABLE>
<CAPTION>
PORTFOLIO INFORMATION
------------------------------------
NET ASSET
NUMBER OF AGGREGATE VALUE
INVESTMENT PORTFOLIO SHARES COST PER SHARE
- ---------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
Growth.................................. 948,932 $ 2,440,814 $ 2.825
Investment Grade Income................. 13,562,728 14,903,780 1.132
Money Market............................ 239,493 239,493 1.000
Equity Index............................ 13,536,090 38,396,970 3.408
Government Bond......................... 21,852 23,339 1.068
Select Aggressive Growth................ 327,317 758,928 2.460
Select Growth........................... 4,417,554 6,954,480 2.428
Select Growth and Income................ 130,763 213,071 1.779
Select Value Opportunity*............... 376,025 622,506 1.685
Select International Equity............. 5,887,511 8,004,685 1.542
Select Capital Appreciation............. 151,273 255,007 1.640
Select Emerging Markets................. 14 11 0.784
Select Strategic Growth................. -- -- 0.973
Fidelity VIP High Income................ 7,727 94,460 11.530
Fidelity VIP Equity-Income.............. 6,268 147,964 25.420
Fidelity VIP Growth..................... 25,662 989,688 44.870
Fidelity VIP Overseas................... 3,371 64,973 20.050
Fidelity VIP II Asset Manager........... 35,703 596,082 18.160
T. Rowe Price International Stock....... 25,630 345,346 14.520
DGPF International Equity............... 518,876 8,108,940 16.480
INVESCO Industrial Income............... 496 8,306 18.610
INVESCO Total Return Fund............... 3,734 54,535 16.580
Morgan Stanley Fixed Income............. 1,854,379 20,020,925 10.700
</TABLE>

* Name changed. See Note 1.

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. 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.

The Company makes a charge of up to 0.90% per annum based on the average
daily net asset value of each certificate (certificate value) in each
Sub-Account for mortality and expense risks. This charge may be different
between groups and increased or decreased within a group, subject to compliance
with applicable state and federal requirements, but the total charge may not
exceed 0.90% per annum. During the first 10

SA-13
<PAGE>
GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- RELATED PARTY TRANSACTIONS (CONTINUED)

policy years, the Company may charge up to 0.25% per annum of the certificate
value in each Sub-Account for administrative expenses. These expenses are
included in insurance and other charges on the statements of operations and
changes in net assets.

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 and to independent broker-dealers by the Company. The current series
of policies have a surrender charge and no deduction is made for sales charges
at the time of the sale. For the years ended December 31, 1998, 1997 and 1996,
there were no surrender charges applicable to Group VEL.

NOTE 5 -- DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Code, a variable life
insurance policy, other than a policy issued in connection with certain types of
employee benefit plans, will not be treated as a variable life insurance policy
for federal income tax purposes for any period for which the investments of the
segregated asset account on which the policy is based are not adequately
diversified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor test
or diversification requirements set forth in regulations issued by the Secretary
of The Treasury.

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

SA-14
<PAGE>
GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 -- PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of shares of the Funds by Group
VEL during the year ended December 31, 1998 were as follows:

<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO PURCHASES SALES
- ------------------------------------------------------- ----------- -----------
<S> <C> <C>
Growth................................................. $ 2,052,447 $ 1,472,739
Investment Grade Income................................ 5,969,134 647,046
Money Market........................................... 2,114,103 30,375,103
Equity Index........................................... 33,572,328 2,273,111
Government Bond........................................ 255,140 272,421
Select Aggressive Growth............................... 885,682 359,264
Select Growth.......................................... 2,934,986 2,107,270
Select Growth and Income............................... 178,977 145,345
Select Value Opportunity*.............................. 474,714 88,897
Select International Equity............................ 3,195,622 916,403
Select Capital Appreciation............................ 277,803 80,922
Select Emerging Markets................................ 11 --
Select Strategic Growth................................ -- --
Fidelity VIP High Income............................... 70,465 15,771
Fidelity VIP Equity-Income............................. 142,165 48,377
Fidelity VIP Growth.................................... 1,365,432 712,988
Fidelity VIP Overseas.................................. 44,455 28,896
Fidelity VIP II Asset Manager.......................... 1,146,029 890,280
T. Rowe Price International Stock...................... 258,653 8,333
DGPF International Equity.............................. 8,257,164 239,377
INVESCO Industrial Income.............................. 5,344 4,039
INVESCO Total Return Fund.............................. 13,238 4,231
Morgan Stanley Fixed Income............................ 20,494,409 482,118
----------- -----------
Totals............................................... $83,708,301 $41,172,931
----------- -----------
----------- -----------
</TABLE>

* Name changed. See Note 1.

SA-15
<PAGE>

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
WORCESTER, MASSACHUSETTS
GROUP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
GROUP VARI-EXCEPTIONAL LIFE PLUS

This Prospectus provides important information about
Group Vari-Exceptional Life Plus, a group flexible
premium variable life insurance policy offered by
Allmerica Financial Life Insurance and Annuity
Company. Certificates under the Policy are available
to eligible applicants who are members of a
non-qualified benefit plan having a minimum of five
or more members, depending on the group, and who are
PLEASE READ THIS Age 80 years old and under.
PROSPECTUS CAREFULLY
BEFORE INVESTING AND
KEEP IT FOR FUTURE
REFERENCE.

The certificates are funded through the Group VEL
Account, a separate investment account of the Company
that is referred to as the Separate Account, and a
fixed interest account of the Company referred to as
the General Account. The Separate Account is
subdivided into Sub-Accounts. Each Sub-Account
invests exclusively in shares of one of the following
Funds of Allmerica Investment Trust, Mutual Fund
Variable Annuity Trust, Delaware Group Premium Fund,
Inc. and T. Rowe Price International Series, Inc.
VARIABLE LIFE
POLICIES INVOLVE
RISKS
INCLUDING POSSIBLE
LOSS OF PRINCIPAL.

<TABLE>
<C> <S> <C>
THIS PROSPECTUS MUST ALLMERICA INVESTMENT TRUST MUTUAL FUND VARIABLE ANNUITY TRUST
BE ACCOMPANIED BY ------------------------- ----------------------------------
PROSPECTUSES OF Select Aggressive Growth Fund MFVAT International Equity Portfolio
ALLMERICA INVESTMENT Select Capital Appreciation Fund MFVAT Capital Growth Portfolio
TRUST, MUTUAL FUND Select Value Opportunity Fund MFVAT Growth and Income Portfolio
VARIABLE ANNUITY Select Growth Fund MFVAT Asset Allocation Portfolio
TRUST, DELAWARE Equity Index Fund MFVAT U.S. Government Income Portfolio
GROUP PREMIUM FUND, Investment Grade Income Fund T. ROWE PRICE INTERNATIONAL SERIES, INC.
INC., AND T. ROWE Money Market Fund ------------------------------------
PRICE INTERNATIONAL DELAWARE GROUP PREMIUM FUND, INC. T. Rowe Price International Stock Portfolio
SERIES, INC. ----------------------------------
DGPF International Equity Series
</TABLE>

THE CERTIFICATES ARE This Prospectus can also be obtained from the
NOT: Securities and Exchange Commission's website
- A BANK DEPOSIT OR (http://www.sec.gov).
OBLIGATION; IT MAY NOT BE ADVANTAGEOUS TO REPLACE EXISTING
- FEDERALLY INSURED; INSURANCE WITH THE POLICY.
- ENDORSED BY ANY THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
BANK OR APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED THAT THE INFORMATION IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C>
GOVERNMENTAL CORRESPONDENCE MAY BE MAILED TO DATED MAY 1, 1999
AGENCY. ALLMERICA LIFE 440 LINCOLN STREET
P.O. BOX 8014 WORCESTER, MASSACHUSETTS 01653
BOSTON, MASSACHUSETTS 02266-8014 (508) 855-1000
</TABLE>

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
SPECIAL TERMS......................................................................... 4
SUMMARY............................................................................... 7
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE UNDERLYING FUNDS............ 16
INVESTMENT OBJECTIVES AND POLICIES.................................................... 18
INVESTMENT ADVISORY SERVICES.......................................................... 20
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS..................................... 21
VOTING RIGHTS......................................................................... 22
THE CERTIFICATE....................................................................... 23
Enrollment Form for a Certificate................................................... 23
Free-Look Period.................................................................... 24
Conversion Privileges............................................................... 24
Premium Payments.................................................................... 24
Allocation of Net Premiums.......................................................... 25
Transfer Privilege.................................................................. 26
Election of Death Benefit Options................................................... 26
Guideline Premium Test and Cash Value Accumulation Test............................. 27
Death Proceeds...................................................................... 27
Change in Death Benefit Option...................................................... 30
Change in Face Amount............................................................... 30
Certificate Value and Surrender Value............................................... 32
Payment Options..................................................................... 33
Optional Insurance Benefits......................................................... 33
Surrender........................................................................... 33
Paid-Up Insurance Option............................................................ 33
Partial Withdrawal.................................................................. 34
CHARGES AND DEDUCTIONS................................................................ 35
Premium Expense Charge.............................................................. 35
Monthly Deduction from Certificate Value............................................ 35
Charges Reflected in the Assets of the Separate Account............................. 38
Surrender Charge.................................................................... 38
Charges on Partial Withdrawal....................................................... 40
Transfer Charges.................................................................... 41
Charge for Change in Face Amount.................................................... 41
Other Administrative Charges........................................................ 41
CERTIFICATE LOANS..................................................................... 41
CERTIFICATE TERMINATION AND REINSTATEMENT............................................. 43
OTHER CERTIFICATE PROVISIONS.......................................................... 44
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY....................................... 46
DISTRIBUTION.......................................................................... 47
SERVICES.............................................................................. 47
REPORTS............................................................................... 48
LEGAL PROCEEDINGS..................................................................... 48
FURTHER INFORMATION................................................................... 48
INDEPENDENT ACCOUNTANTS............................................................... 48
FEDERAL TAX CONSIDERATIONS............................................................ 48
The Company and the Separate Account................................................ 49
Taxation of the Certificates........................................................ 49
Certificate Loans................................................................... 50
Modified Endowment Contracts........................................................ 50
</TABLE>

2
<PAGE>

<TABLE>
<S> <C>
MORE INFORMATION ABOUT THE GENERAL ACCOUNT............................................ 51
YEAR 2000 DISCLOSURE.................................................................. 52
FINANCIAL STATEMENTS.................................................................. 53
APPENDIX A -- OPTIONAL BENEFITS....................................................... A-1
APPENDIX B -- PAYMENT OPTIONS......................................................... B-1
APPENDIX C -- ILLUSTRATIONS OF SUM INSURED, CERTIFICATE VALUES AND ACCUMULATED
PREMIUMS............................................................................. C-1
APPENDIX D -- CALCULATION OF MAXIMUM SURRENDER CHARGES................................ D-1
FINANCIAL STATEMENTS.................................................................. F-1
</TABLE>

3
<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 OWNER: The persons or entity entitled to exercise the rights and
privileges under the certificate.

COMPANY: Allmerica Financial Life Insurance and Annuity Company. "We," "our,"
"us," and "the "Company" also refer to Allmerica Financial Life Insurance and
Annuity Company in this prospectus.