Registration No. 333-39798
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

Pre-Effective Amendment No. 1

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)

Mary Eldridge, Secretary
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)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date) 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, 1999 was filed on or
before March 30, 2000.

Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall become effective in accordance with Section 8(a) of the Securities Act of
1933 or until this Registration Statement shall become effective on such date or
dates as the Commission, acting pursuant to said Section 8(a) may determine.

Registrant is making this filing in order to register a new flexible premium
variable life policy, under Securities Act of 1933.

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

ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------

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; The Underlying Funds; Investment Objectives and Policies
12..................................Summary; The Underlying Funds
13..................................Summary; The Underlying Funds; 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; The Underlying Funds; Premium Payments;
Allocation of Net Premiums
17..................................Summary; Surrender; Partial Withdrawal; Charges and Deductions;
Certificate Termination and Reinstatement
18..................................The Group VEL Account; The Underlying Funds; 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
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

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER, 2000

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
440 LINCOLN STREET, WORCESTER, MASSACHUSETTS 01653
GROUP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACTS
GROUP VARIABLE LIFE

This Prospectus provides important information about a group and individual
flexible premium variable life insurance contract offered by Allmerica Financial
Life Insurance and Annuity Company. (Individual policies or certificates under a
group contract are collectively referred to as Certificates). Certificates are
available to eligible applicants who are members of a non-qualified benefit plan
generally having a minimum of five or more members, depending on the group, and
who are Age 85 years old and under. PLEASE READ THIS 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 through
the Fixed Account. The Separate Account is subdivided into Sub-Accounts. Each
Sub-Account invests exclusively in shares of one of the following Funds:

ALLMERICA INVESTMENT TRUST FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Allmerica Investment Trust Fidelity VIP II Contrafund Portfolio
Select Aggressive Growth Fund
Select Capital Appreciation Fund GOLDMAN SACHS VARIABLE INSURANCE TRUST
Select Value Opportunity Fund Goldman Sachs VIT Capital Growth Fund
Select Emerging Markets Fund Goldman Sachs VIT CORE Large Cap Growth Fund
Select International Equity Fund Goldman Sachs VIT CORE Small Cap Equity Fund
Select Growth Fund
Select Strategic Growth Fund J.P. MORGAN SERIES TRUST II
Core Equity Fund J.P. Morgan Small Company Portfolio
Select Growth and Income Fund
Select Investment Grade Income Fund MORGAN STANLEY DEAN WITTER UNIVERSAL
Government Bond Fund FUNDS, INC.
Money Market Fund MSDW Technology Portfolio
DEUTSCHE ASSET MANAGEMENT VIT FUNDS PIMCO VARIABLE INSURANCE TRUST
Deutsche VIT Equity 500 Index PIMCO Total Return Bond Portfolio II
Deutsche VIT Small Cap Index T. ROWE PRICE INTERNATIONAL SERIES, INC.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND T. Rowe Price International Stock Portfolio
Fidelity VIP Overseas Portfolio
Fidelity VIP Equity-Income Portfolio WARBURG PINCUS TRUST
Fidelity VIP Growth Portfolio Warburg Pincus Small Company Growth Portfolio
Fidelity VIP High Income Portfolio Warburg Pincus Global Post-Venture Capital
Portfolio

THE CERTIFICATES ARE NOT SUITABLE FOR SHORT-TERM INVESTMENT. VARIABLE LIFE
POLICIES INVOLVE RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. IT MAY NOT BE
ADVANTAGEOUS TO REPLACE EXISTING INSURANCE WITH THE CERTIFICATE.

THIS LIFE CERTIFICATE IS NOT: A BANK DEPOSIT OR OBLIGATION; OR FEDERALLY
INSURED; OR ENDORSED BY ANY BANK OR GOVERNMENTAL AGENCY. 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.

This Prospectus can also be obtained from the Securities and Exchange
Commission's website (http://www.sec.gov).

CORRESPONDENCE MAY BE MAILED TO:
ALLMERICA LIFE
P.O. BOX 8179
BOSTON, MA 02266-8179

TABLE OF CONTENTS

SPECIAL TERMS............................................... 4
SUMMARY OF FEES AND CHARGES................................. 7
SUMMARY OF CERTIFICATE FEATURES............................. 12
DESCRIPTION OF THE COMPANY, THE SEPARATE ACCOUNT, AND THE
UNDERLYING FUNDS........................................... 18
INVESTMENT OBJECTIVES AND POLICIES.......................... 21
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 24
VOTING RIGHTS............................................... 23
THE CERTIFICATE............................................. 25
Enrollment Form for a Certificate......................... 25
Free-Look Period.......................................... 25
Conversion Privileges..................................... 26
Premium Payments.......................................... 26
Allocation of Net Premiums................................ 27
Transfer Privilege........................................ 27
Election of Death Benefit Options......................... 28
Guideline Premium Test and Cash Value Accumulation Test... 29
Death Proceeds............................................ 30
Change in Death Benefit Option............................ 31
Change in Face Amount..................................... 31
Certificate Value and Surrender Value..................... 32
Payment Options........................................... 33
Optional Insurance Benefits............................... 34
Surrender................................................. 34
Partial Withdrawal........................................ 34
CHARGES AND DEDUCTIONS...................................... 34
Premium Expense Charge.................................... 35
Monthly Deduction from Certificate Value.................. 36
Charges Reflected in the Assets of the Separate Account... 39
Transaction Charge on Partial Withdrawal.................. 39
Transfer Charges.......................................... 39
Other Administrative Charges.............................. 39
CERTIFICATE LOANS........................................... 39
CERTIFICATE TERMINATION AND REINSTATEMENT................... 41
OTHER CERTIFICATE PROVISIONS................................ 42
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY............. 44
DISTRIBUTION................................................ 45
REPORTS..................................................... 45
LEGAL PROCEEDINGS........................................... 46
FURTHER INFORMATION......................................... 46
FEDERAL TAX CONSIDERATIONS.................................. 46
The Company and the Separate Account...................... 46
Taxation of the Certificates.............................. 47
Certificate Loans......................................... 47
Modified Endowment Contracts.............................. 48
MORE INFORMATION ABOUT THE FIXED ACCOUNT.................... 48
INDEPENDENT ACCOUNTANTS..................................... 49
FINANCIAL STATEMENTS........................................ 50
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........................................ FIN-1

SPECIAL TERMS

AGE: The Insured's age as of the last 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 Fixed 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 any Outstanding Loan at the
time of the Insured's death, and partial withdrawals, 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 any
Outstanding Loan at the time of the Insured's death, partial withdrawals, if
any, and any due and unpaid Monthly Deductions. After the Final Premium Payment
Date, the Death Proceeds equal the Surrender Value of the Certificate.

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.

ENROLLMENT FORM OR APPLICATION: The form that is completed and signed by the
Owner and employee, if applicable, when applying for insurance coverage.

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

FACE AMOUNT: The total amount of insurance coverage applied for, including the
base amount of insurance coverage ("Base Amount") and the benefit provided under
the Insured Term Rider, if any. 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
100th 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. The Net Death Benefit may be different
before and after the Final Payment Date. See DEATH PROCEEDS.

FIXED ACCOUNT: The Fixed Account is an investment option that is funded by the
Company's general account. The general account includes all of 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 Ordinary
Mortality Tables (Age Last Birthday), Smoker or Non-Smoker, Male, Female, Unisex
(Table B), net investment earnings at an annual effective rate of 5%, and fees
and charges as set forth in the Certificate and any Certificate riders.

GUIDELINE MINIMUM DEATH BENEFIT: The Guideline Minimum Death Benefit required to
qualify the Certificate as "life insurance" under federal tax laws. The
Guideline Minimum Death Benefit varies by Age. It is calculated by multiplying
the Certificate Value by a percentage determined by the Insured's Age. The
percentage factor is a percentage that, when multiplied by the Certificate
Value, determines the Guideline Minimum death benefit required under federal tax
laws. If Option 3 is in effect, the percentage factor is based on the Insured's
attained age, sex, risk classification, as set forth in the Certificate. For
both the Option 1 and the Option 2, the percentage factor is based on the
Insured's attained age, as set forth in GUIDELINE MINIMUM DEATH BENEFIT TABLE in
DEATH PROCEEDS -- "GUIDELINE MINIMUM DEATH BENEFIT UNDER OPTION 1 AND OPTION 2."

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

ISSUANCE: 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.

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 expense charge, the monthly
Separate Account administrative charge and the monthly mortality and expense
risk charge.

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.

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

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 Fixed Account and the Sub-Accounts, in the same
proportion that the Certificate Value in the Fixed Account and the Certificate
Value in each Sub-Account bear to the total unloaned 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 Underlying Fund.

SURRENDER CHARGE: There is no surrender charge.

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

UNDERLYING FUND ("FUNDS"): The Funds of the Allmerica Investment Trust ("AIT"),
the Funds of Deutsche Asset Management VIT Funds, the Portfolios of the Fidelity
Variable Insurance Products Fund ("Fidelity VIP") and Fidelity Variable
Insurance Products Fund II ("Fidelity VIP II"), the Funds of Goldman Sachs
Variable Insurance Trust, the Portfolio of J.P. Morgan Series Trust II, and the
Portfolio of Morgan Stanley Dean Witter Universal Funds, Inc. ("MSDW Universal
Funds or MSDW"), the Portfolio of PIMCO Variable Insurance Trust, the Portfolio
of T. Rowe Price International Series, Inc. ("T. Rowe Price"), the Portfolios of
Warburg Pincus Trust, 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, the monthly expense 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.

SUMMARY OF FEES AND CHARGES

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 Federal
DAC tax deduction may range from zero up to 2% (up to 4% for certain COLI
policies) of premiums, depending on the group to which the Policy is issued The
charge for distribution expenses may range from zero to 10%.

For more information, 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 the
following charges:

- The cost of insurance. The amount charged for the cost of insurance will
vary with the age and underwriting class of the Insured. See CHARGES AND
DEDUCTIONS -- "Cost of Insurance".

- Certificate administrative expenses. The charge may be up to $10 monthly,
depending on the group to which the Policy is issued.

- For the first five Certificate years, a monthly expense charge to
reimburse the Company for underwriting and acquisition costs. The charge
is equal to a specified amount that varies with the Insured's Age and
underwriting class for each $1,000 of the Certificate's Base Amount on the
Date of Issue. For more information, see APPENDIX D -- MONTHLY EXPENSE
CHARGES.

- Separate Account administrative expenses. 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.

- Mortality and expense risks. 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 Monthly Expense Charge, the
mortality and expense risk charge, and any charge for the cost of additional
benefits provided by rider will be deducted. 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 Certificate Value in 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. After the Final Premium Payment Date,
a deduction for mortality and expense risk charges will continue to be assessed
monthly. No other 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 $25 or 2% of the amount
withdrawn, is assessed at the time of each partial withdrawal to reimburse the
Company for the cost of processing the withdrawal. See CHARGES AND
DEDUCTIONS --"Transaction Charge on Partial Withdrawal." The transaction fee
applies to all partial withdrawals.

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. This charge may be increased, but is guaranteed not
to exceed $25. See THE CERTIFICATE -- "Transfer Privilege" and CHARGES AND
DEDUCTIONS -- "Transfer Charges."

OTHER ADMINISTRATIVE CHARGES -- The Company reserves the right to impose a
charge (not to exceed $25) for the administrative costs associated with changing
the Net Premium allocation instructions, for changes in face amount, 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."

OPTIONAL RIDER CHARGES -- ADDITIONAL INSURANCE BENEFITS MAY BE MADE AVAILABLE
UNDER CERTAIN OPTIONAL INSURANCE RIDERS FOR AN ADDITIONAL CHARGE. SEE APPENDIX
A -- OPTIONAL BENEFITS.

CHARGES OF THE UNDERLYING FUNDS

In addition to the charges described above, certain fees and expenses are
deducted from the assets of the Underlying Investment Funds. The levels of fees
and expenses vary among the Underlying Funds. The following table shows the
expenses of the Underlying Funds for 1999.

OTHER EXPENSES TOTAL
MANAGEMENT FEE (AFTER ANY FUND EXPENSES
(AFTER ANY 12-B-1 WAIVERS/ (AFTER ANY WAIVERS/
UNDERLYING FUND VOLUNTARY WAIVERS) FEES REIMBURSEMENTS) REIMBURSEMENTS)
- --------------- ------------------ -------- --------------- -------------------

MSDW Technology Portfolio............ 0.80% 0.00% 0.35% 1.15%(+)
Select Strategic Growth Fund......... 0.85% 0.00% 0.35% 1.20%(1)(2)
Warburg Pincus Small Company Growth
Portfolio........................... 0.90% 0.00% 0.24% 1.14%
Warburg Pincus Global Post-Venture
Capital Portfolio................... 1.07% 0.00% 0.33%(6) 1.40%(6)
Select Aggressive Growth Fund........ 0.81%* 0.00% 0.06% 0.87%(1)(2)*
Deutsche VIT Small Cap Index......... 0.13% 0.00% 0.32% 0.45%(4)
Select Capital Appreciation Fund..... 0.90%* 0.00% 0.07% 0.97%(1)*
Goldman Sachs CORE Small Cap Equity
Fund................................ 0.75% 0.00% 0.25%(8) 1.00%
J.P. Morgan Small Company
Portfolio........................... 0.60% 0.00% 0.55%(5) 1.15%(5)
Select Value Opportunity Fund........ 0.90% 0.00% 0.07% 0.97%(1)(2)
Select Emerging Markets Fund......... 1.35% 0.00% 0.57% 1.92%(1)(2)
Select International Equity Fund..... 0.89% 0.00% 0.13% 1.02%(1)(2)
Fidelity VIP Overseas Portfolio...... 0.73% 0.00% 0.18% 0.91%(3)
T. Rowe Price International Stock
Portfolio........................... 1.05% 0.00% 0.00% 1.05%
Fidelity VIP Growth Portfolio........ 0.58% 0.00% 0.08% 0.66%(3)
Select Growth Fund................... 0.78% 0.00% 0.05% 0.83%(1)(2)
Goldman Sachs Capital Growth Fund.... 0.75% 0.00% 0.25%(8) 1.00%
Core Equity Fund..................... 0.43% 0.00% 0.05% 0.48%(1)(2)
Fidelity VIP II Contrafund
Portfolio........................... 0.58% 0.00% 0.09% 0.67%(3)
Goldman Sachs CORE Large Cap Growth
Fund................................ 0.70% 0.00% 0.20%(8) 0.90%
Select Growth and Income Fund........ 0.67% 0.00% 0.07% 0.74%(1)(2)
Deutsche VIT Equity 500 Index........ 0.00% 0.00% 0.45% 0.45%(4)
Fidelity VIP Equity-Income
Portfolio........................... 0.48% 0.00% 0.09% 0.57%(3)
Fidelity VIP High Income Portfolio... 0.58% 0.00% 0.11% 0.69%
PIMCO Total Return Bond Portfolio
II.................................. 0.25% 0.15% 0.25%(7) 0.65%
Select Investment Grade Income
Fund................................ 0.43% 0.00% 0.07% 0.50%(1)
Government Bond Fund................. 0.50% 0.00% 0.12% 0.62%(1)
Money Market Fund.................... 0.24% 0.00% 0.05% 0.29%(1)

* Effective September 1, 1999, the management fee rates for the Select
Aggressive Growth Fund and Select Capital Appreciation Fund were 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, 1999.

(1) Until further notice, Allmerica Financial Investment Management Services,
Inc. ("AFIMS") has declared a voluntary expense limitation of 1.50% of average
net assets for Select International Equity Fund, 1.35% for Select Aggressive
Growth Fund and Select Capital Appreciation Fund, 1.25% for Select Value
Opportunity Fund, 1.20% for Select Growth Fund and Core Equity Fund, 1.10% for
Select Growth and Income Fund, 1.00% for Select Investment Grade Income Fund,
and Government Bond Fund, and 0.60% for Money Market Fund. The total operating
expenses of these Funds of the Trust were less than their respective expense
limitations throughout 1999.

Until further notice, 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-advisor.

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 AFIMS 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 the brokers
rebate a portion of commissions. These amounts have been treated as reductions
of expenses. Including these reductions, total annual fund operating expenses
were 1.01% for Select International Equity Fund, 1.88% for Select Emerging
Markets, 0.84% for Select Aggressive Growth Fund, 0.88% for Select Value
Opportunity Fund, 0.81% for Select Growth Fund, 1.17% for Select Strategic
Growth Fund, 0.45% for Core Equity Fund, and 0.73% 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, through arrangements with certain funds, or
Fidelity Management & Research Company on behalf of certain funds, custodian
credits realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. Including these reductions, total operating
expenses presented in the table would have been 0.87% for the Fidelity VIP
Overseas Portfolio; 0.65% for the Fidelity Contrafund Portfolio; 0.56% for the
Fidelity VIP Equity-Income Portfolio 0.65% for the Fidelity VIP Growth
Portfolio; and 0.28% for the Fidelity VIP II Contrafund Portfolio.

(4) The Advisor has voluntarily undertaken to waive and reimburse its fee to the
Funds so that the Funds' total operating expenses will not exceed 0.45% for the
Deutsche VIT Small Cap Index and will not exceed 0.30% for the Deutsche VIT
Equity 500 Index. Without the reimbursement to the Funds for the year ended
12/31/99, the Management Fee, Other and Total Expenses would have been 0.35%,
0.83%, and 1.18% for the Deutsche VIT Small Cap Index and 0.20%, 0.23%, and
0.43% for the Deutsche VIT Equity 500 Index.

(5) These fees reflect an agreement by Morgan Guaranty Trust Company of New
York, an affiliate of J.P. Morgan, to reimburse the portfolio, to the extent
certain expenses exceed 1.15% of the portfolio's average daily net assets during
fiscal year 2000. Had there been no fee waiver and expense reimbursements, Other
Expenses and Total Fund Expenses would have been 1.97% and 2.57%, respectively.

(6) The investment adviser of the Warburg Pincus Global Post-Venture Capital
Portfolio has voluntarily agreed to waive or reimburse a portion of the
management fees and/or other expenses resulting in a reduction of total
expenses. Absent any waiver or reimbursement, the Management Fee, Other Expenses
and Total Portfolio Expenses would have been 1.25%, 0.33% and 1.58% for the
Warburg Pincus Global Post-Venture Capital Portfolio, respectively, for the year
ended December 31, 1999.

(7) Other Expenses reflect a 0.25% Administrative Fee and 0.13% representing the
Portfolio's organizational expenses as attributed to the class and prorata
Trustees' fees.

(8) Goldman Sachs Asset Management has voluntarily agreed to reduce or limit
certain other expenses (excluding management fees, taxes, interest, brokerage
fees, and other expenses). Without any such limitation or reduction, the Other
Expenses would have been 0.42% for the Goldman Sachs VIT CORE Large Cap Growth
Fund, 0.96% for the Goldman Sachs VIT CORE Small Cap Equity Fund, and 1.06% for
the Goldman Sachs VIT Capital Growth Fund.

(+) MSDW Investment Management has voluntarily agreed to waive its management
fees and to reimburse the MSDW Technology Portfolio if processing of such fees
would cause the total annual operating expense of the portfolio to exceed 1.15%
of average daily net assets. This fee waiver is voluntary and may be terminated
by Miller, Anderson and Sherrerd, LLP ("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.

SUMMARY OF CERTIFICATE FEATURES

This Summary is intended to provide only a very brief overview of the more
significant aspects of the Certificate. If you are considering the purchase of
this product, you should read the remainder of this 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. However, the
Certificate, together with its attached application, constitutes the entire
agreement between you and the Company.

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 Fixed
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 Loan 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.

You may choose among three Death Benefit Options. See THE CERTIFICATE --
"Election of Death Benefit Options" and "Guideline Premium Test and Cash Value
Accumulation Test." 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 Outstanding Loan, partial withdrawals, and any due and unpaid
charges. After the Final Premium Payment Date, the Death Proceeds equal the
Surrender Value of the Certificate. A Minimum Death Benefit, equivalent to a
percentage of the Certificate Value, will apply if greater than the Death
Benefit otherwise payable.

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 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.

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. However, you may be required to
provide evidence of insurability as a condition to our accepting any payment
that would increase the Insurance Amount at Risk (the Death Benefit less the
Certificate Value). See THE CERTIFICATE -- "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 Company may limit the maximum payment received in any certificate
year, but in no event will the limit be less than the maximum Level Premium
shown in the Certificate.

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.
See CERTIFICATE TERMINATION AND REINSTATEMENT.

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 Fixed 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 Fixed 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 Outstanding Loan.
The Surrender Value is relevant, for example, in the computation of the amounts
available upon partial withdrawals, Certificate loans or surrender.

ALLOCATION OF NET PREMIUMS

Net Premiums are the premiums paid less any premium expense charge. The
Certificate, together with its attached enrollment form, constitutes the entire
agreement between you and the Company. Net Premiums may be allocated to one or
more Sub-Accounts of the Separate Account, to the Fixed Account, or to any
combination of accounts. You bear the investment risk of Net Premiums allocated
to the Sub-Accounts. Allocations may be made to no more than 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."

CERTIFICATE ISSUANCE

At the time of enrollment, the Owner and Insured, if applicable will complete an
enrollment form. Upon payment of the initial premium, temporary insurance will
be provided. If any premiums are paid prior to the issuance of the Certificate,
such premiums will be held in the Fixed Account. If your enrollment form is
approved and the Certificate is issued and accepted, the initial premiums held
in the Fixed 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.

Premiums allocated to the Fixed 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 FIXED ACCOUNT.

If your Certificate provides for a full refund of the initial payment under its
"Right to Examine Certificate" provision (as may be required in your state),
upon issuance all Certificate Value in the Fixed Account that you initially
designated to go to the Separate Account will be transferred to the Sub-Account
investing in the Money Market Fund of AIT. All Certificate Value will be
allocated as you have chosen not later than the expiration of the period during
which you may exercise the "Right to Examine Certificate" provision. See THE
CERTIFICATE -- "Enrollment Form for a Certificate" and "Free Look Period."

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, or (b) 10 days after receiving the Certificate
(20 or 30 days if required in your state). After an increase in The Face Amount,
a right to cancel the increase also applies. 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."
For more information, see THE CERTIFICATE -- "Free-Look Period."

CONVERSION PRIVILEGES

During the first 24 Certificate months after the Date of Issue, subject to
certain restrictions, you may convert the Certificate to a flexible premium
fixed adjustable life insurance Certificate by simultaneously transferring all
accumulated value in the Sub-Accounts to the Fixed Account and instructing the
Company to allocate all future premiums to the Fixed 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 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 will be assessed to reimburse the Company for the cost of
processing each partial withdrawal. See THE CERTIFICATE -- "Partial Withdrawal"
and CHARGES AND DEDUCTIONS -- "Transaction Charge on Partial Withdrawal."

LOAN PRIVILEGE

You may borrow against the Certificate Value. The total amount you may borrow is
the Loan Value. The Loan Value is 90% of an amount equal to Certificate Value.

Certificate loans will be allocated among the Fixed 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 Fixed Account, and will earn monthly interest at
an effective annual rate of not less than 4%. 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 any Outstanding Loan at the
time of death.

Certificate loans will bear interest at a fixed rate of 4.9%, guaranteed not to
be greater than 5.5% 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 any Outstanding Loan by you
will be allocated to the Fixed 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

If approved in your state, a preferred loan option is automatically available
under the Certificates. It may be revoked by you upon written request at any
time. If this option is available, after the tenth certificate anniversary
Certificate Value in the Fixed Account equal to the loan amount will be credited
with interest at an effective annual yield of not less than 4%. Preferred loans
currently bear interest at a fixed rate of 4% (guaranteed not to be greater than
4.5%).

There is some uncertainty as to the tax treatment of a preferred loan, which may
be treated as a taxable withdrawal from the Certificate. See FEDERAL TAX
CONSIDERATIONS -- "Certificate 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 Certificate Value is insufficient to cover the next Monthly Deduction
plus loan interest accrued, if any, or (b) Outstanding Loan 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.

DEATH PROCEEDS

The Certificate provides for the payment of certain Death Proceeds to the named
Beneficiary upon the death of the Insured. 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.

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 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. See THE CERTIFICATE -- "Election of
Death Benefit Options" and "Guideline Premium Test and Cash Value Accumulation
Test."

Prior to the Final Premium Payment Date, the Death Proceeds will be equal to the
Death Benefit, reduced by any Outstanding Loan, partial withdrawals, and any
Monthly Deductions due and not yet deducted through the Certificate month in
which the Insured dies. On or after the Final Premium Payment Date, the Death
Proceeds will equal the Surrender Value. See THE CERTIFICATE -- "Death
Proceeds."

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. 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
Insured Term Rider and the Option to Accelerate Benefits Rider. See APPENDIX
A -- OPTIONAL BENEFITS.

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

INVESTMENT OPTIONS

The Certificates permit Net Premiums to be allocated either to the Fixed Account
or to the Separate Account. The Separate Account consists of 55 Sub-Accounts, of
which 28 are available under the Certificates. Currently, the Policyholder may
select up to 22 Sub-Accounts (the 12 Sub-Accounts investing in the Underlying
Funds of AIT plus up to 10 other Sub-Accounts), and the Certificates Owners may
make allocations only to those selected Sub-Accounts over the life of the
Policy.

Each Sub-Account invests exclusively in a corresponding Underlying Fund of one
of the following:

- Allmerica Investment Trust ("AIT") managed by Allmerica Financial
Investment Management Services, Inc. ("AFIMS")

- Deutsche Asset Management VIT Funds managed by Bankers Trust Company

- Fidelity Variable Insurance Products Fund ("Fidelity VIP") or the Fidelity
Variable Insurance Products Fund II ("Fidelity VIP II") managed by
Fidelity Management & Research Company ("FMR")

- Goldman Sachs Variable Insurance Trust managed by Goldman Sachs Asset
Management

- J.P. Morgan Series Trust II managed by J.P. Morgan Investment Management
Inc.

- Morgan Stanley Dean Witter Universal Funds, Inc. ("MSDW Universal Funds"),
managed by Miller, Anderson and Sherrerd, LLP.

- PIMCO Variable Insurance Trust managed by Pacific Investment Management
Co. ("PIMCO")

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

- Warburg Pincus Trust managed by Credit Suisse Asset Management, LLC
("CSAM").

The value of each Sub-Account will vary daily depending upon the performance of
the Underlying Fund in which it invests. The Certificates permit you to transfer
Certificate Value among the available Sub-Accounts

and between the Sub-Accounts and the Fixed Account, subject to certain
limitations described under THE CERTIFICATE -- "Transfer Privilege." In some
states, insurance regulations may restrict the availability of particular
Underlying Funds. 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.

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 annual 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."

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

THIS SUMMARY IS INTENDED TO PROVIDE ONLY A VERY BRIEF OVERVIEW OF THE MORE
SIGNIFICANT ASPECTS OF THE CERTIFICATE. THE PROSPECTUS AND THE CERTIFICATE
PROVIDE FURTHER DETAIL. THE CERTIFICATE PROVIDES INSURANCE PROTECTION FOR THE
NAMED BENEFICIARY. THE CERTIFICATE AND ITS ATTACHED APPLICATION OR ENROLLMENT
FORM ARE THE ENTIRE AGREEMENT BETWEEN YOU AND THE COMPANY.

THE PURPOSE OF THE CERTIFICATE IS TO PROVIDE INSURANCE PROTECTION FOR THE
BENEFICIARY. IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE, OR IF YOU
ALREADY OWN A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CERTIFICATE.

NO CLAIM IS MADE THAT THE CERTIFICATE IS IN ANY WAY SIMILAR OR COMPARABLE TO A
SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.

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, 1999, the Company had over $17 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 55 Sub-Accounts, of which 28 are available under the Certificates.
Currently, the Policyholder may select up to 22 Sub-Accounts (the 12 Sub-
Accounts investing in the Underlying Funds of AIT plus 10 other Sub-Accounts),
and the Certificate Owners may make allocations only to those selected
Sub-Accounts over the life of the Policy.

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 Deutsche
Asset Management VIT Funds, the Fidelity Variable Insurance Products Fund, the
Fidelity Variable Insurance Products Fund II, the Goldman Sachs Variable
Insurance Trust, the J.P. Morgan Series Trust II, the PIMCO Variable Insurance
Trust, T. Rowe Price International Series, Inc., the Morgan Stanley Dean Witter
Universal Funds, Inc., or the Warburg Pincus Trust.

THE UNDERLYING FUNDS

Each Underlying Fund pays a management fee to an investment manager or adviser
for managing and providing services to the Underlying Fund. However, management
fee waivers and/or reimbursements may be in effect for certain or all of the
Underlying Funds. For specific information regarding the existence and effect

of any waiver/reimbursements see "CHARGES OF THE UNDERLYING FUNDS" under the
SUMMARY OF FEES AND CHARGES section. The prospectuses of the Underlying Funds
also contain information regarding fees for advisory services and should be read
in conjunction with this prospectus.

ALLMERICA INVESTMENT TRUST

Allmerica Investment Trust ("AIT") is an open-end, diversified, management
investment company. AIT 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. Twelve investment portfolios ("Funds") of AIT are
available 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, Core Equity Fund, Select
Growth and Income Fund, Select Investment Grade Income Fund, Government Bond
Fund, and Money Market Fund.

Allmerica Financial Investment Management Services, Inc. ("AFIMS"), which is a
wholly-owned subsidiary of Allmerica Financial, serves as overall investment
manager of AIT under the terms of a Management Agreement. Subject to Trustee
review, AFIMS is responsible for the daily affairs of AIT and the general
management of the Funds. AFIMS performs administrative and management services
for AIT, furnishes to AIT all necessary office space, facilities and equipment,
and pays the compensation, if any, of officers and Trustees who are affiliated
with AFIMS. AIT bears all expenses incurred in its operation, other than the
expenses AFIMS assumes under the management agreement.

Under the Management Agreement with AIT, AFIMS has entered into agreements with
investment advisers ("Sub-Advisers") selected by AFIMS and Trustees in
consultation with BARRA RogersCasey, Inc. Under each Sub-Adviser Agreement, the
Sub-Adviser is authorized to engage in portfolio transactions on behalf of the
Fund, subject to the Trustee's instructions. The Sub-Advisers (other than
Allmerica Asset Management, Inc.) are not affiliated with the Company or AIT.

DEUTSCHE ASSET MANAGEMENT VIT FUNDS

Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche Asset
Management Investment Services Limited. Bankers Trust Company is the investment
advisor for the Deutsche VIT Equity 500 Index and the Deutsche VIT Small Cap
Index which are available under the Certificate. Bankers Trust Company is an
indirect wholly-owned subsidiary of Deutsche Bank A.G.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND

Fidelity Variable Insurance Products Fund ("Fidelity VIP"), managed by Fidelity
Management & Research Company ("FMR"), is an open-end, diversified, management
investment company organized as a Massachu-setts 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.

FMR is one of America's largest investment management organizations, and has its
principal business address at 82 Devonshire Street, Boston, Massachusetts. 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 a monthly management fee to FMR for managing investments and business
affairs. Various Fidelity companies perform certain activities required to
operate VIP. The prospectus of Fidelity VIP contains additional information
concerning the Portfolios, including information concerning additional expenses
paid by the Portfolios, and should be read in conjunction with this Prospectus.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND II

Fidelity Variable Insurance Products Fund II ("Fidelity VIP II"), managed by FMR
(see discussion under "Fidelity Variable Insurance Products Fund"), is an
open-end, diversified, management investment company organized as a
Massachusetts business trust on March 21, 1988 and is registered with the SEC
under the 1940 Act. One of its investment portfolios is available under the
Certificate: Fidelity VIP II Contrafund Portfolio.

GOLDMAN SACHS VARIABLE INSURANCE TRUST

Goldman Sachs Variable Insurance Trust is an open-end, management investment
company, which was formed under the laws of the state of Delaware on September
16, 1997. Goldman Sachs Asset Management, a unit of the Investment Management
Division of Goldman, Sachs & Co., serves as investment adviser to the Capital
Growth Fund, CORE Large Cap Growth Fund, and CORE Large Cap Value Fund.

J.P. MORGAN SERIES TRUST II

J.P. Morgan Series Trust II (the "Trust"), a Delaware Business Trust, is an
open-end diversified management investment company established to provide for
the investment of assets of separate accounts of life insurance companies and of
qualified pension and retirement plans outside of the separate account context.
J.P. Morgan Investment Management Inc. is the investment adviser for the J.P.
Morgan Small Company Portfolio.

MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.

Morgan Stanley Dean Witter Universal Funds, Inc. ("Morgan Stanley" or "MSDW") is
an open-end, management investment company that was organized as a Maryland
corporation. Miller Anderson & Sherrerd, LLP is the investment adviser for the
Morgan Stanley MSDW Technology Portfolio. The investment portfolio available
under the Certificate is the MSDW Technology Portfolio.

PIMCO VARIABLE INSURANCE TRUST

PIMCO Variable Insurance Trust (the "Trust"), a Delaware business trust, is a
open-end management investment Company established under a Trust Instrument
dated October 3, 1997. Pacific Investment Management Company LLC ("PIMCO") is
the investment adviser for the PIMCO Variable Insurance Trust that was organized
in 1971. PIMCO provides investment management and advisory services to private
accounts of institutional and individual clients and to mutual funds. One of its
investment Portfolios is currently available under the Certificate: PIMCO Total
Return Bond Portfolio II.

T. ROWE PRICE INTERNATIONAL SERIES, INC.

T. Rowe Price International Series, Inc. ("T. Rowe Price"), managed by Rowe
Price-Fleming International, Inc. ("Price-Fleming"), is an open-end, diversified
management investment company organized in 1994 as a Maryland corporation.
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 $42.5
billion (as of December 31, 1999) under management in its offices in Baltimore,
London, Tokyo, Hong Kong, Singapore and Buenos Aires. One of its investment
portfolios is available under the Certificates: the T. Rowe Price International
Stock Portfolio. An affiliate of Price-Fleming, T. Rowe Price Associates, Inc.
serves as Sub-Adviser to the Select Capital Appreciation Fund of AIT.

WARBURG PINCUS TRUST

Warburg Pincus Trust is an open-end, management investment company registered
with the SEC that was organized as a Massachusetts business trust on March 15,
1995. Credit Suisse Asset Management, LLC is the investment adviser of the
Warburg Pincus Trust. Two of its Portfolios are currently available under this
Certificates: Small Company Growth and Global Post-Venture Capital Portfolio.
Abbott Capital Management, LLC serves as sub-investment adviser for the Global
Post-Venture Capital Portfolio with respect to the Portfolio's investments in
private-equity portfolios.

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.

MSDW TECHNOLOGY PORTFOLIO -- seeks to achieve long-term capital appreciation by
investing primarily in equity securities of companies that the investment
adviser expect to benefit from their involvement in technology and
technology-related industries. The focus of the Portfolio is to identify
significant long-term technology trends. Stocks selected for the Portfolio are
also expected to meet comprehensive selection criteria. The Portfolio may invest
up to 35% of its total assets in securities of foreign companies to participate
sufficiently in the global technology market.

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

WARBURG PINCUS GLOBAL SMALL COMPANY GROWTH PORTFOLIO -- seeks long-term growth
of capital. To pursue this goal, it invests in equity securities of small U.S.
growth companies.

WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL PORTFOLIO -- seeks long-term growth
of capital. To pursue this goal, it invests primarily in equity securities of
U.S. and foreign companies considered to be in their post-venture capital stage
of development.

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.

DEUTSCHE VIT SMALL CAP INDEX -- seeks to match, as closely as possible, before
expenses, the performance of the Russell 2000 Small Stock Index, which
emphasizes stocks of small U.S. companies.

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.

GOLDMAN SACHS VIT CORE SMALL CAP EQUITY FUND -- seeks long-term growth of
capital. The fund seeks this objective through a broadly diversified portfolio
of equity securities of U.S. issuers which are included in the Russell 2000
Index at the time of investment.

J.P. MORGAN SMALL COMPANY PORTFOLIO -- seeks to provide high total return from a
portfolio of small company stocks.

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.

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.

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

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.

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.

GOLDMAN SACHS VIT CAPITAL GROWTH FUND -- seeks long-term growth of capital.

CORE EQUITY 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 Core Equity Fund is to
achieve long-term growth of capital. Realization of current investment income,
if any, is incidental to this objective.

FIDELITY VIP II CONTRAFUND PORTFOLIO -- seeks long-term capital appreciation.
The Portfolio invests primarily in common stocks of domestic and foreign issuers
whose value is not fully recognized by the public. The Portfolio may invest in
either growth stocks or value stocks or both.

GOLDMAN SACHS VIT CORE LARGE CAP GROWTH FUND -- seeks long-term growth of
capital. The fund seeks this objective through a broadly diversified portfolio
of equity securities of U.S. issuers that are expected to have better prospects
for earnings growth than the growth rate of the general domestic economy.
Dividend income is a secondary consideration.

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.

DEUTSCHE VIT EQUITY 500 INDEX -- seeks to match, as closely as possible, before
expenses, the performance of the Standard & Poor's Composite Stock Price Index
(the "S&P Index"), which emphasizes stocks of large U.S. Companies.

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.

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.

PIMCO TOTAL RETURN BOND PORTFOLIO II -- seeks to maximize total return,
consistent with preservation of capital and prudent investment management.

SELECT 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.

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.

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 Fixed 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.

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
that are received. 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.

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.

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.

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.

Shares of the Funds of AIT are also issued to separate accounts of the Company
and its affiliates which issue variable annuity contracts ("mixed funding").
Shares of the portfolios of the Underlying Funds 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 Funds do not currently foresee any such disadvantages, the
Company and the respective Trustees intend to monitor events in order to
identify any material conflicts between such contract owners and to determine
what action, if any, should be taken in response thereto. If the Trustees were
to conclude that separate funds should be established for variable life and
variable annuity separate accounts, the Company will bear the 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.

THE CERTIFICATE

The Certificates may be issued either as certificates under a group policy or as
individual policies to members of a particular group. The Insured is generally
an individual who is an employee or a member of a group. Under a group policy,
the owner of the Certificates is generally an employer or a trustee of a trust.
However, the Certificates may be owned either by the employer/trustee or by
individuals.

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.

At the time of enrollment, the Owner and Insured, if applicable, will generally
complete an enrollment form. Upon payment of the initial premium, temporary
insurance will be provided. Issuance of the continuing insurance coverage
provided under the Certificate is dependent upon completion of the underwriting
requirements, payment of sufficient initial premium, and delivery of the
Certificate while the Insured is still living.

Pending completion of insurance underwriting and Certificate issuance
procedures, any initial premiums will be held in the Fixed Account. If the
enrollment form is approved and the Certificate is issued and accepted, the
initial premium held in the Fixed 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

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, or (b) 10 days after you receive the new specifications pages issued for
the increase. 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.

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 Fixed
Account and by simultaneously changing your premium allocation instructions to
allocate future premium payments to the Fixed 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 Fixed Account and
simultaneously change your premium allocation instructions to allocate all or
part of future premium payments to the Fixed 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 Fixed
Account as of date of receipt at the Principal Office.

You may establish a schedule of planned premiums that 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 $400.

Premiums are not limited as to frequency and number. However, you may be
required to provide evidence of insurability as a condition to our accepting any
payment that would increase the Insurance Amount at Risk (the Death Benefit less
the Certificate Value). If evidence of insurability is required, the Company
will return the payment to you and if your payment exceeds our maximum limit
(defined below) the Company may not accept any additional payments which would
increase the Insurance Amount at Risk and shall not provide any additional death
benefit until (1) evidence of insurability for the Insured has been received by
the Company and (2) the Company has notified you that the Insured is in a
satisfactory underwriting class. You may then

make payments that increase the Insurance Amount at Risk for 60 days (but not
later than the Final Payment Date) following the date of such notification by
the Company.

No premium payment may be less than $400 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.

The Company may limit the maximum payment received in any certificate year but
in no event will the limit be less than the maximum premium shown in the
Certificate. In no event may the total of all premiums paid exceed the current
maximum premium limitations set forth in the Certificate. 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 under Federal tax laws, the Company may 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

The Net Premium equals the premium paid less any premium expense charge. In the
enrollment form for the Certificate, you indicate the initial allocation of Net
Premiums among the Fixed Account and the Sub-Accounts of the Separate Account.
You may allocate premiums to one or more Sub-Accounts, but may not have
Certificate Value in more than twenty Sub-Accounts at any one time. The minimum
amount which may be allocated to a Sub-Account is 1% of Net Premium paid.
Allocation percentages must be in whole numbers (for example, 33 1/3% may not be
chosen) and must total 100%.

You may change the allocation of future Net Premiums at any time pursuant to
written or telephone request. If allocation changes by telephone are elected by
the Certificate Owner, a properly completed authorization form must be on file
before telephone requests will be honored. The policy of the Company and its
agents and affiliates is that they will not be responsible for losses resulting
from acting upon telephone requests reasonably believed to be genuine. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; otherwise, the Company may be liable for
any losses due to unauthorized or fraudulent instructions. Such procedures may
include, among other things, requiring some form of personal identification
prior to acting upon instructions received by telephone. 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 Fixed
Account. However, the Certificate Value held in the

Fixed Account to secure a Certificate loan may not be transferred. The Company
may at any time revoke, modify, or limit the transfer privilege.

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 to and from the Fixed Account are currently permitted only if:

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

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

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.

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 AIT 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 Fixed Account, and (4)
the maximum amount that may be transferred each time from the Fixed Account.

The Certificates are not designed for use by individuals, professional market
timing organizations, or other entities that do "market timing," programmed
transfers, or frequent transfers. These and similar activities may be disruptive
to the Underlying Funds, and may adversely affect an Underlying Fund's ability
to invest effectively in accordance with its investment objectives and policies.
If it appears that there is a pattern of transfers that coincides with a market
timing strategy and/or that is disruptive to the Underlying Funds, the Company
reserves the right to refuse transfers or to take other action to prevent or
limit the use of such activities.

ELECTION OF DEATH BENEFIT OPTIONS

Federal tax law requires a Guideline 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 Certificate 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
Guideline Minimum Death Benefit relative to the Certificate Value are different.
Required increases in the Guideline 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 Guideline Minimum Death Benefit, as set forth in the table below. Under
Option 1, the Death Benefit will remain level unless the Guideline 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 Guideline Minimum Death Benefit, as set forth
in the table below. The Death Benefit will, therefore, vary as the Certificate
Value changes, but will never be less than the Face Amount. Option 2 will offer
the best opportunity for the Certificate Owner who would like to have an
increasing Death Benefit as early as possible. The Death Benefit will increase
whenever there is an increase in the Certificate Value, and will decrease
whenever there is a decrease in the Certificate Value, but will never go below
the Face Amount.

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

Under Option 3, the Death Benefit will equal the Face Amount, unless the
Certificate Value, multiplied by the applicable Option 3 Death Benefit Factor,
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.

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; minus (b) any Outstanding Loan, any partial withdrawals, 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 the Company receives due proof of the Insured's death
for Option 2 and date of death for Options 1 and 3.

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.

GUIDELINE MINIMUM DEATH BENEFIT UNDER OPTION 1 AND OPTION 2

The Guideline Minimum Death Benefit under Option 1 or Option 2 is equal to a
percentage of the Certificate Value as set forth below. The Guideline 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.

GUIDELINE MINIMUM DEATH BENEFIT TABLE
(Option 1 and Option 2)

Age of Insured Percentage of
on Date of Death Certificate Value
- ---------------- -----------------

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%

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.

CHANGE IN DEATH BENEFIT OPTION

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

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

If the Death Benefit Option is changed from Option 1 to Option 2, the Face
Amount will be decreased to equal the Death Benefit less the Certificate Value
on the effective date of the change. This change may not be made if it would
result in a Face Amount less than $10,000. 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 Guideline
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. If the Insured Term Rider is in effect, any increase will be under the
Insured Term Rider. Any increase or decrease in the specified Face Amount
requested by you will generally 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 may also be 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 85. An increase
must be accompanied by an additional premium if the Certificate Value is less
than the sum of three Monthly Deductions. The effective date of the increase
will generally 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. See CHARGES AND
DEDUCTIONS -- "Monthly Deduction from Certificate Value."

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 Fixed 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

The minimum amount for a decrease in the Face Amount is $10,000. By current
Company practice, the Face Amount in force after any decrease may not be less
than $50,000. If, following a decrease in the Face Amount, the Certificate would
not comply with the maximum premium limitation applicable under the IRS rules,
the decrease may be limited or Certificate Value may be returned to the
Certificate Owner (at your election) to the extent necessary to meet the
requirements. A return of Certificate Value may result in tax liability to you.
A decrease in the Face Amount will affect the total Insurance Amount at Risk and
the portion of the Insurance Amount at Risk covered by various Underwriting
Classes, both of which may affect a Certificate Owner's monthly cost of
insurance charges. See CHARGES AND DEDUCTIONS -- "Monthly Deduction from
Certificate Value."

For purposes of determining the cost of insurance charge, any decrease in the
Face Amount will reduce the Face Amount in the following order: (a) the Face
Amount provided by the most recent increase; (b) the next most recent increases
successively; and (c) the initial Base Amount.

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 Fixed 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 Outstanding Loan). 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 Fixed 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 underwriting period when premiums
are held in the Fixed 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 Fixed Account (including any amounts transferred to the
Fixed Account with respect to a loan).

Thus, the Certificate Value is determined by multiplying the number of Units in
each Sub-Account by their value on the particular Valuation Date, adding the
products, and adding accumulations in the Fixed 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 Fixed Account are not converted into Units, but are credited
interest at a rate periodically set by the Company. See MORE INFORMATION ABOUT
THE FIXED 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, if any, of optional insurance benefits added by rider will be
deducted as part of the Monthly Deduction. See CHARGES AND DEDUCTIONS --
"Monthly Deduction from Certificate Value."

SURRENDER

You may at any time surrender the Certificate and receive its Surrender Value.
The Surrender Value is the Certificate Value, less any Outstanding Loan. 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.

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 that may result from surrender see FEDERAL TAX
CONSIDERATIONS.

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 Fixed 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 partial withdrawal
transaction charge as described under CHARGES AND DEDUCTIONS -- "Transaction
Charge 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,
total assets under management, nature of relationship among individual insureds,
the expected persistency of individual policies 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.

The Certificate may be issued with an Insured Term Rider. Depending on your
circumstances, it may be less costly to purchase more insurance coverage under
the Insured Term Rider than under the Base Amount of insurance coverage. The
current cost of insurance charges for the insurance coverage provided by the
Insured Term Rider are equal to or lower than for the insurance coverage
provided by the Base Amount. In addition, the Monthly Expense Charge does not
apply to insurance coverage provided by the Insured Term Rider.

Upon full surrender of a group Policy within the first three Policy years, in
certain situations the Company will, upon written request, refund a percentage
of the portion of the previously paid Premium Expense Charge that exceeded our
local, state and federal tax expenses. The following conditions apply:

- The original owner of the Policy and Certificates thereunder is a
corporation, a corporate grantor trust, or an individual or trust under a
corporate sponsored collateral assignment split dollar agreement, and the
ownership has not been changed;

- The request to surrender the Policy and all Certificates thereunder must
be received prior to the end of the third Policy year; and

- The Policy and Certificates have not been exchanged to another carrier.

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
under Section 848 of the Code for deferred acquisition cost, and for
distribution expenses related to the Certificates. Upon request, the Company may
permit all or part of the Premium Expense Charge to be deducted as part of the
monthly deduction.

STATE PREMIUM TAXES. State premium taxes generally range from 0.75% to 5%, while
local premium taxes (if any) vary by jurisdiction within a state. The Company
guarantees that the charge for premium taxes will not exceed 10%. The premium
tax charge may change when either the applicable jurisdiction changes or the tax
rate within the applicable jurisdiction changes. The Company should be notified
of any change in address of the Insured as soon as possible.

DAC TAX. Section 848 of the Code requires insurance companies to capitalize
certain specified policy acquisition costs and defer their deduction in
determining the insurer's tax liability. This is known as the "DAC tax." The
Company deducts a charge for the DAC tax that may range from zero up to 2% (up
to 4% for certain corporate or trust-owned policies described below) of
premiums, depending on the group to which the Policy is issued.

Over time, the Company will realize an economic benefit from the tax deductions
it receives as the capitalized policy acquisition costs are amortized. If
Certificates are issued under a corporate or trust-owned life insurance policy
("COLI Policy"), at the request of the Policyholder the Company may "pass
through" this economic benefit to the Policyholder. Under the pass through, the
DAC tax will be higher (up to 4%) than it would be without the pass through (up
to 2%). The DAC tax is charged on each premium payment and each DAC tax "load"
is tracked separately. Over a period (currently 11 years) that reflects the
amortization provisions of Section 848 of the Code, on each Certificate
anniversary the Company will refund a portion of each DAC tax load. The amount
of the refund is a percentage of each load, based on the number of Certificate
anniversaries after the respective premium payment was made. If a Certificate is
surrendered or if the Insured dies, any remaining load will be refunded to the
Policyholder.

DISTRIBUTION EXPENSES. 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.

MONTHLY DEDUCTION FROM CERTIFICATE VALUE

- The cost of insurance. The cost of insurance rates will vary with the age
and underwriting class of the Insured.

- Certificate administrative expenses. The charge may be up to $10 monthly,
depending on the group to which the Policy is issued.

- For the first five Certificate years, a Monthly Expense Charge to
reimburse the Company for underwriting and acquisition costs. The charge
is equal to a specified amount that varies with the Insured's Age and
underwriting class for each $1,000 of the Certificate's Base Amount on the
Date of Issue. For more information, see APPENDIX D -- MONTHLY EXPENSE
CHARGES.

- Mortality and expense risks. 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 monthly expense charge, the
mortality and expense risk charge, and the charge, if any, for the cost of
additional benefits provided by rider will be deducted. 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 based on
the prior month's sub-account value. 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 Base Amount and Insured Term
Rider, if any, and for each subsequent increase in the Base Amount and Insured
Term Rider. Because the cost of insurance depends upon a number of variables, it
can vary from month to month and from group to group. Generally, the current
cost of insurance for the Base Amount will be higher than the cost of insurance
under an Insured Term Rider.

COST OF INSURANCE RATES. The Certificates are 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 fully underwritten, guaranteed or simplified underwriting basis, and
may vary based on characteristics within a 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 purpose for which the Certificates are
purchased; the number of persons eligible to participate in the plan; expected
percentage of eligible persons participating in the plan; aggregate premiums
paid; and the amount of guaranteed or simplified underwriting insurance to be
issued.

Cost of insurance rates are based on an appropriate 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 cost of insurance rates are
determined at the beginning of each Certificate year for the initial Base Amount
of insurance coverage and the initial amount of the Insured Term Rider, if any.
The cost of insurance rates for an increase in the initial Base Amount or the
initial amount of the Insured Term Rider, if any, 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. Generally,
the cost of insurance rates for insurance coverage under the Base Amount are
higher than for insurance coverage under the Insured Term Rider.

The actual monthly cost of insurance rates will be based on the Company's
expectations as to future expenses and 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 (Age Last Birthday) (Male, Female or Unisex Table B,
Smoker, Non-smoker or Uni-smoker) 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
in the group of the same insuring Age and Underwriting Class whose Certificates
have been in force for the same length of time.

The Underwriting Class of an Insured will affect the cost of insurance rates.
The Company currently places Insureds into the following Underwriting Classes:
preferred, standard, substandard, guaranteed issue and simplified issue, each
with separate ratings for the Base Amount and for the Insured Term Rider. In an
otherwise identical Certificate, an Insured in the preferred Underwriting Class
will generally 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 rates are 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.

GROUP EXPERIENCE RATING. If Certificates are issued under a corporate or
trust-owned life insurance policy ("COLI Policy") covering at least 500
Insureds, at the request of the Policyholder the COLI Policy may be issued on
the basis of group experience rating. The Company will establish a target for
the mortality reserve that is equal to a percentage of the current year's cost
of insurance charges. If the group has favorable mortality experience (actual
claims are less than expected), the mortality reserve may eventually exceed the
target reserve. At the end of any experience period, if the mortality reserve
exceeds the target reserve, at the

Policyholder's request, an experience credit will be paid to the Policyholder
from the mortality reserve. At the end of each experience period, the cost of
insurance charges for the group may be adjusted prospectively (for the next
experience period), but will never exceed the guaranteed cost of insurance
charges.

If the number of Insureds under the COLI Policy falls below 100, the experience
rating of the group will cease. Any positive reserve will be distributed to the
Policyholder over an 18-month period in order to cover any incurred but not yet
reported claims.

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 EXPENSE CHARGE

The Monthly Expense Charge may be charged on the monthly processing date for the
first five years after issuance of the Certificate. This charge will be used to
reimburse the Company for underwriting and acquisition costs. The charge is
equal to a specified amount that varies based on age, and the Insured's
Underwriting class (Smoker/Non-Smoker) for each $1,000 of the Certificate's Base
Amount. The maximum rate per $1000 of Base Amount, considering all possible
combinations of Ages and Underwriting Classes, is $0.2175 for an Insured who Age
65 and a smoker. For more information, see APPENDIX D -- MONTHLY EXPENSE
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 expense risks involve future contingencies that
are not subject to precise determination in advance, it is not feasible to
identify specifically the portion of the charge that is applicable to each.

CHARGES REFLECTED IN THE ASSETS OF THE SEPARATE ACCOUNT

Because the Sub-Accounts purchase shares of the Underlying Funds, the value of
the Units of the Sub-Accounts will reflect the investment advisory fee and other
expenses incurred by the Underlying Funds. 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.

TRANSACTION CHARGE 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 $25 or 2% of the amount withdrawn,
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.

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 AIT, 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 Fixed
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.

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 face amount, 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. The Loan
Value is 90% of an amount equal to Certificate Value. 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 Fixed 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 Fixed 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 INTEREST CHARGED

As long as the Certificate is in force, Certificate Value in the Fixed Account
equal to the loan amount will be credited with interest at an effective annual
yield of at least 4.00% per year. The current credited rate is 4.0%. NO
ADDITIONAL INTEREST WILL BE CREDITED TO SUCH CERTIFICATE VALUE.

Interest accrues daily, and is payable in arrears at the annual rate of 4.9%,
guaranteed not to be greater than 5.5%. 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
Fixed Account, the Company will transfer Certificate Value equal to that excess
loan amount from the Certificate Value in each Sub-Account to the Fixed 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.

PREFERRED LOAN OPTION

A preferred loan option is automatically included under the Certificate if
approved in the state. You may change a preferred loan to a non-preferred loan
at any time upon written request. If this option has been included, after the
tenth Certificate anniversary Certificate Value in the Fixed Account equal to
the loan amount will be credited with interest at an effective annual yield of
at least 4.0%. Certificate loans will bear interest at a fixed rate of 4.0%,
guaranteed not to be greater than 4.5%. 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 a preferred loan, which may
be treated as a taxable withdrawal from the Certificate. Consult a qualified tax
adviser (and see FEDERAL TAX CONSIDERATIONS). THE PREFERRED LOAN OPTION IS NOT
AVAILABLE IN ALL STATES.

REPAYMENT OF OUTSTANDING LOAN

Loans may be repaid at any time prior to the lapse of the Certificate. Upon
repayment of any Outstanding Loan, the portion of the Certificate Value that is
in the Fixed Account securing the Outstanding Loan repaid will be allocated to
the various 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 Outstanding Loan.

If an Outstanding Loan exceeds the Certificate Value, 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 Fixed 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 an Outstanding Loan 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.

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.

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 any Outstanding Loan on the
date of default; minus

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

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 named in the enrollment form or as subsequently
changed. 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 may be required when 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 Loan and less any partial withdrawals. If
the Insured commits suicide, while sane or insane, within two years from the
effective date of any increase in the Death Benefit, the Company's liability
with respect to such increase will be limited to a refund of the cost thereof.
The Beneficiary will receive the administrative charges and insurance charges
paid for such increase.

AGE

If the Insured's Age as stated in the enrollment form for 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
Fixed Account upon surrender, partial withdrawal, or death of the Insured, as
well as payments of Certificate loans and transfers from the Fixed Account, for
a period not to exceed six months.

DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY

NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------ ----------------------------------------------

Bruce C. Anderson Director (since 1996), Vice President (since 1984)
Director and Assistant Secretary (since 1992) of First
Allmerica

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

Mark R. Colborn Director (since 2000) and Vice President (since 1992)
Director and Vice President of First Allmerica

Charles F. Cronin Secretary and Counsel (since 2000) of First
Secretary and Counsel Allmerica; Counsel (since 1996) of First Allmerica;
Attorney (1991-1996) of Nutter, McClennen & Fish

J. Kendall Huber Director, Vice President and General Counsel of First
Director, Vice President and Allmerica (since 2000); Vice President (1999) of
General Counsel Promos Hotel Corporation; Vice President & Deputy
General Counsel (1998-1999) of Legg Mason, Inc.; Vice
President and Deputy General Counsel (1995-1998) of
USF&G Corporation.

John P. Kavanaugh Director and Chief Investment Officer (since 1996)
Director, Vice President and Chief and Vice President (since 1991) of First Allmerica;
Investment Officer Vice President (since 1998) of Allmerica Financial
Investment Management Services, Inc.; and President
(since 1995) and Director (since 1996) of Allmerica
Asset Management, Inc.

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

Mark C. McGivney Vice President (since 1997) and Treasurer (since
Vice President and Treasurer 2000) of First Allmerica; Associate, Investment
Banking (1996-1997) of Merrill Lynch & Co.;
Associate, Investment Banking (1995) of Salomon
Brothers, Inc.; Treasurer (since 2000) of Allmerica
Investments, Inc., Allmerica Asset Management, Inc.
and Allmerica Financial Investment Management
Services, Inc.

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

Edward J. Parry, III Director and Chief Financial Officer (since 1996),
Director, Vice President Chief Vice President (since 1993), and Treasurer
Financial Officer (1993-2000) of First Allmerica

Richard M. Reilly Director (since 1996) and Vice President (since 1990)
Director, President and Chief of First Allmerica; President (since 1995) of
Executive Officer Allmerica Financial Life Insurance and Annuity
Company; Director (since 1990) of Allmerica
Investments, Inc.; and Director and President (since
1998) of Allmerica Financial Investment Management
Services, Inc.

NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------ ----------------------------------------------

Robert P. Restrepo, Jr. Director and Vice President (since 1998) of First
Director Allmerica; Director (since 1998) of The Hanover
Insurance Company; 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)
Director and Vice President of First Allmerica; Director (since 1991) of
Allmerica Investments, Inc.; and Director (since
1991) of Allmerica Financial Investment Management
Services, Inc.

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
0.75% 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
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 commissions and other sales expenses through a
combination of 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.

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 Fixed 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
Fixed Account, and any Certificate loan(s). The Owner should review the
information in all statements carefully. All errors or corrections must be
reported to the Company immediately to assure proper crediting to the
Certificate. The Company will assume that all transactions are

accurately reported on confirmation statements and quarterly/annual statements
unless the Owner notifies the Principal Office in writing within 30 days after
receipt of the statement. 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.

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."

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 convert your
preferred loan to a non-preferred loan. However, it is possible that,
notwithstanding the conversion, some or all of the loan could be treated as a
taxable withdrawal from the Certificate.

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
business-owned policies or certificates covering officers or 20-percent owners,
up to a maximum equal to 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 annual premiums. In addition, if benefits are reduced
at anytime during the life of the Certificate, there may be adverse tax
consequences. Please consult your tax adviser.

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

As discussed earlier, you may allocate Net Premiums and transfer Certificate
Value to the Fixed Account. The Fixed Account is an investment option that is
funded by the general account of the Company. Because of exemption and
exclusionary provisions in the securities law, any amount in the general account
of the Company 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, the Fixed Account, 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 Fixed 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 Fixed Account.

A portion or all of Net Premiums may be allocated or transferred to accumulate
at a fixed rate of interest in the Fixed 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 Fixed Account does not entitle you to
share in the investment experience of the Fixed Account or the general account.

FIXED ACCOUNT VALUE AND CERTIFICATE LOANS

The Company bears the full investment risk for amounts allocated to the Fixed
Account and guarantees that interest credited to each Certificate Owner's
Certificate Value in the Fixed 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 until the next Certificate
anniversary, 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
FIXED 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 Fixed Account,
no excess interest will be credited to that portion of the Certificate Value
which is equal to an Outstanding Loan. The Company guarantees that, on each
Monthly Processing Date, the Certificate Value in the Fixed Account will be the
amount of the Net Premiums allocated or Certificate Value transferred to the
Fixed 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 Fixed Account and any amounts deducted from the Fixed Account
in connection with loans, partial withdrawals, surrenders or transfers.

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

Transfers, surrenders, partial withdrawals, Death Proceeds and Certificate loans
payable from the Fixed 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 Fixed Account used to pay premiums on policies with the Company will
not be delayed.

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 Fixed Account, see the Certificate
itself.

TRANSFERS, SURRENDERS, AND PARTIAL WITHDRAWALS

Partial withdrawals are made on a last-in/first-out basis from Certificate Value
allocated to the Fixed Account. This means that the last payments allocated to
Fixed Account will be withdrawn first.

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.

INDEPENDENT ACCOUNTANTS

The financial statements of the Company as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, and the financial
statements for Group VEL Account of the Company as of December 31, 1999 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.

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.

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 benefit may be
available for issue under the Certificates for an additional charge.

INSURED TERM RIDER

This rider provides an additional term insurance benefit for the primary
insured.

THIS RIDER MAY NOT BE AVAILABLE IN ALL STATES.

A-1

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 Fixed 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

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 male, Age 30, under a standard
Premium Class and qualifying for the non-smoker discount, a Certificate issued
to a male, Age 40, under a standard Premium Class and qualifying for the
non-smoker discount and a male, Age 45, under a standard Premium Class and
qualifying for the non-smoker discount. The tables illustrate the guaranteed
cost of insurance rates and the current cost of insurance rates as presently in
effect.

The 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 premiums paid
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
Deductions from Certificate Value, and the monthly charge for mortality and
expense risks. In the Current Cost of Insurance Charges tables, the charge for
mortality and expense risks is equivalent to an effective annual rate of 0.45%
of the average monthly value of the assets in the Separate Account attributable
to the Certificates. In the Guaranteed Cost of Insurance Charges table, the
Separate Account charge for mortality and expense risks is illustrated at 0.90%.
There is also a separate account administrative charge of 0.25% for 10 years in
the Guaranteed tables.

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 0.90% of the average daily net assets of the Underlying Funds. The actual
fees and expenses of each Underlying Fund vary and, in 1999, ranged from an
annual rate of 0.29% to an annual rate of 1.92% 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 1.50% of average net
assets for Select International Equity Fund, 1.35% for

C-1

Select Aggressive Growth Fund and Select Capital Appreciation Fund, 1.25% for
Select Value Opportunity Fund, 1.20% for Select Growth Fund and Core Equity
Fund, 1.10% for Select Growth and Income Fund, 1.00% for Select Investment Grade
Income Fund, and Government Bond Fund, and 0.60% for Money Market Fund. The
total operating expenses of these Funds of AIT were less than their respective
expense limitations throughout 1999.

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 1999 the
Select Strategic Growth Fund received a reimbursement of $813 under its expense
limitation. However, this amount was not enough to make a difference in the
percentage shown as the Fund's total operating expenses and expense limitation
(both 1.20%). Until further notice, 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-advisor. 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 AFIMS to declare
future expense limitations with respect to these Funds. These limitations may be
terminated at any time.

The Advisor has voluntarily undertaken to waive and reimburse its fees to the
Funds so that the Funds' total operating expenses will not exceed 0.45% for the
Deutsche VIT Small Cap Index and will not exceed 0.30% for the Deutsche VIT
Equity 500 Index. Without the reimbursement to the Funds for the year ended
12/31/99, the Management Fee, Other and Total Expenses would have been 0.35%,
0.83%, and 1.18% for the Deutsche VIT Small Cap Index and 0.20%, 0.23%, and
0.43% for the Deutsche VIT Equity 500 Index.

These fees reflect an agreement by the Morgan Guaranty Trust Company of New
York, an affiliate of J.P. Morgan, to reimburse the portfolio, to the extent
certain expenses exceed 1.15% of the portfolio's average daily net assets during
fiscal year 2000. had there been no fee waiver and expense reimbursements, Other
Expenses and Total Fund Expenses would have been 1.97% and 2.57%, respectively.

The investment adviser of the Warburg Pincus Global Post-Venture Capital
Portfolio has voluntarily agreed to waive or reimburse a portion of the
management fees and/or other expenses resulting in a reduction of total
expenses. Absent any waiver or reimbursement, the management fees, Other
Expenses and Total Portfolio Expenses would have been 1.25%, 0.33% and 1.58% for
the Warburg Pincus Global Post-Venture Capital Portfolio, respectively, for the
year ended December 31, 1999.

Goldman Sachs Asset Management has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, taxes, interest, brokerage fees, such
expenses). Without any such limitation or reduction, the Other Expenses would
have been 0.42% for the Goldman Sachs VIT CORE Large Cap Growth Fund, 0.96% for
the Goldman Sachs VIT CORE Small Cap Equity Fund, and 1.06% for the Goldman
Sachs VIT Capital Growth Fund.

MSDW Investment Management has voluntarily agreed to waive its management fees
and to reimburse the MSDW Technology Portfolio if processing of such fees would
cause the total annual operating expense of the portfolio to exceed 1.15 of
average daily net assets. This fee waiver is voluntary and may be terminated by
MSDW at any time without notice.

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

C-2

NET ANNUAL RATES OF INVESTMENT

Taking into account the assumed 0.90% 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 -0.85%, 5.15% and
11.15%, 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-3

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE LIFE CERTIFICATE

MALE NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
DEATH BENEFIT OPTION 1
GUARANTEED ISSUE

CURRENT COST OF INSURANCE CHARGES

PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- ------------------------------- ---------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
----------- ------------ --------- ----------- ------- --------- ----------- ------- --------- ----------- ---------

1 6,330 0 4,234 250,000 0 4,529 250,000 0 4,825 250,000
2 12,977 1,789 8,347 250,000 2,646 9,203 250,000 3,540 10,097 250,000
3 19,957 6,605 12,343 250,000 8,296 14,034 250,000 10,132 15,870 250,000
4 27,285 11,321 16,240 250,000 14,127 19,045 250,000 17,297 22,215 250,000
5 34,980 15,952 20,051 250,000 20,160 24,259 250,000 25,112 29,211 250,000
6 43,059 20,503 23,782 250,000 26,412 29,691 250,000 33,654 36,933 250,000
7 51,543 24,981 27,440 250,000 32,900 35,360 250,000 43,010 45,469 250,000
8 60,450 29,383 31,022 250,000 39,633 41,273 250,000 53,269 54,909 250,000
9 69,803 33,703 34,523 250,000 46,617 47,437 250,000 64,527 65,346 250,000
10 79,624 37,936 37,936 250,000 53,861 53,861 250,000 76,891 76,891 250,000
11 89,935 42,391 42,391 250,000 61,771 61,771 250,000 90,983 90,983 250,000
12 100,763 46,732 46,732 250,000 70,027 70,027 250,000 106,617 106,617 250,000
13 112,131 50,939 50,939 250,000 78,635 78,635 250,000 123,967 123,967 250,000
14 124,068 55,008 55,008 250,000 87,615 87,615 250,000 143,244 143,244 250,000
15 136,602 58,937 58,937 250,000 96,993 96,993 250,000 164,693 164,693 250,000
16 149,763 62,704 62,704 250,000 106,781 106,781 250,000 188,585 188,585 250,000
17 163,581 66,347 66,347 250,000 117,044 117,044 250,000 215,178 215,178 275,428
18 178,091 69,861 69,861 250,000 127,813 127,813 250,000 244,644 244,644 308,251
19 193,326 73,241 73,241 250,000 139,129 139,129 250,000 277,295 277,295 343,846
20 209,322 76,496 76,496 250,000 151,041 151,041 250,000 313,485 313,485 382,452
Age 60 136,602 58,937 58,937 250,000 96,993 96,993 250,000 164,693 164,693 250,000
Age 65 209,322 76,496 76,496 250,000 151,041 151,041 250,000 313,485 313,485 382,452
Age 70 302,134 90,033 90,033 250,000 221,195 221,195 256,586 561,821 561,821 651,712
Age 75 420,588 97,859 97,859 250,000 312,061 312,061 333,905 976,977 976,977 1,045,365

(1) Assumes a $6,029 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 SURRENDER 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

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE LIFE CERTIFICATE

MALE NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
DEATH BENEFIT OPTION 1
GUARANTEED ISSUE

GUARANTEED COST OF INSURANCE CHARGES

PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- ------------------------------- --------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
----------- ------------ --------- ----------- ------- --------- ----------- ------- --------- ----------- --------

1 6,330 0 3,651 250,000 0 3,928 250,000 0 4,206 250,000
2 12,977 637 7,195 250,000 1,422 7,980 250,000 2,243 8,801 250,000
3 19,957 4,891 10,629 250,000 6,420 12,158 250,000 8,085 13,823 250,000
4 27,285 9,033 13,952 250,000 11,549 16,467 250,000 14,401 19,319 250,000
5 34,980 13,059 17,158 250,000 16,808 20,907 250,000 21,235 25,333 250,000
6 43,059 16,967 20,246 250,000 22,203 25,482 250,000 28,645 31,924 250,000
7 51,543 20,744 23,203 250,000 27,728 30,187 250,000 36,684 39,143 250,000
8 60,450 24,379 26,019 250,000 33,378 35,017 250,000 45,413 47,052 250,000
9 69,803 27,863 28,683 250,000 39,151 39,971 250,000 54,904 55,724 250,000
10 79,624 31,181 31,181 250,000 45,041 45,041 250,000 65,237 65,237 250,000
11 89,935 34,626 34,626 250,000 51,426 51,426 250,000 76,979 76,979 250,000
12 100,763 37,884 37,884 250,000 58,009 58,009 250,000 89,950 89,950 250,000
13 112,131 40,952 40,952 250,000 64,801 64,801 250,000 104,307 104,307 250,000
14 124,068 43,821 43,821 250,000 71,814 71,814 250,000 120,232 120,232 250,000
15 136,602 46,471 46,471 250,000 79,054 79,054 250,000 137,929 137,929 250,000
16 149,763 48,884 48,884 250,000 86,528 86,528 250,000 157,638 157,638 250,000
17 163,581 51,039 51,039 250,000 94,248 94,248 250,000 179,644 179,644 250,000
18 178,091 52,906 52,906 250,000 102,222 102,222 250,000 204,268 204,268 257,378
19 193,326 54,448 54,448 250,000 110,459 110,459 250,000 231,529 231,529 287,096
20 209,322 55,624 55,624 250,000 118,976 118,976 250,000 261,588 261,588 319,138
Age 60 136,602 46,471 46,471 250,000 79,054 79,054 250,000 137,929 137,929 250,000
Age 65 209,322 55,624 55,624 250,000 118,976 118,976 250,000 261,588 261,588 319,138
Age 70 302,134 54,693 54,693 250,000 167,091 167,091 250,000 464,326 464,326 538,619
Age 75 420,588 35,174 35,174 250,000 231,250 231,250 250,000 795,155 795,155 850,815

(1) Assumes a $6,029 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

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE LIFE CERTIFICATE

MALE NON-SMOKER AGE 30
SPECIFIED FACE AMOUNT = $75,000
DEATH BENEFIT OPTION 2
GUARANTEED ISSUE

CURRENT COST OF INSURANCE CHARGES

PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- ------------------------------- -------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
----------- ------------ --------- ----------- ------- --------- ----------- ------- --------- ----------- -------

1 1,092 0 659 75,659 0 708 75,708 0 757 75,757
2 2,239 0 1,313 76,313 101 1,452 76,452 246 1,597 76,597
3 3,443 774 1,956 76,956 1,047 2,229 77,229 1,344 2,526 77,526
4 4,707 1,578 2,591 77,591 2,030 3,043 78,043 2,541 3,554 78,554
5 6,034 2,373 3,218 78,218 3,051 3,895 78,895 3,848 4,693 79,693
6 7,428 3,161 3,836 78,836 4,112 4,787 79,787 5,277 5,953 80,953
7 8,891 3,934 4,441 79,441 5,209 5,716 80,716 6,836 7,342 82,342
8 10,428 4,696 5,034 80,034 6,346 6,684 81,684 8,539 8,877 83,877
9 12,041 5,444 5,613 80,613 7,522 7,691 82,691 10,400 10,569 85,569
10 13,735 6,179 6,179 81,179 8,741 8,741 83,741 12,438 12,438 87,438
11 15,514 6,902 6,902 81,902 10,017 10,017 85,017 14,699 14,699 89,699
12 17,382 7,613 7,613 82,613 11,352 11,352 86,352 17,205 17,205 92,205
13 19,343 8,306 8,306 83,306 12,742 12,742 87,742 19,975 19,975 94,975
14 21,402 8,986 8,986 83,986 14,196 14,196 89,196 23,045 23,045 98,045
15 23,564 9,649 9,649 84,649 15,712 15,712 90,712 26,442 26,442 101,442
16 25,834 10,295 10,295 85,295 17,295 17,295 92,295 30,204 30,204 105,204
17 28,218 10,923 10,923 85,923 18,945 18,945 93,945 34,369 34,369 109,369
18 30,721 11,531 11,531 86,531 20,663 20,663 95,663 38,979 38,979 113,979
19 33,349 12,117 12,117 87,117 22,452 22,452 97,452 44,082 44,082 119,082
20 36,108 12,682 12,682 87,682 24,315 24,315 99,315 49,731 49,731 124,731
Age 60 72,551 16,777 16,777 91,777 47,447 47,447 122,447 153,003 153,003 228,003
Age 65 98,630 17,195 17,195 92,195 62,285 62,285 137,285 260,449 260,449 335,449
Age 70 131,913 15,672 15,672 90,672 79,062 79,062 154,062 439,382 439,382 514,382
Age 75 174,393 11,120 11,120 86,120 96,947 96,947 171,947 737,450 737,450 812,450

(1) Assumes a $1,040 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

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE LIFE CERTIFICATE

MALE NON-SMOKER AGE 30
SPECIFIED FACE AMOUNT = $75,000
DEATH BENEFIT OPTION 2
GUARANTEED ISSUE

GUARANTEED COST OF INSURANCE CHARGES

PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- ------------------------------- -------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
----------- ------------ --------- ----------- ------- --------- ----------- ------- --------- ----------- -------

1 1,092 0 611 75,611 0 658 75,658 0 705 75,705
2 2,239 0 1,211 76,211 0 1,344 76,344 132 1,483 76,483
3 3,443 618 1,799 76,799 876 2,058 77,058 1,157 2,339 77,339
4 4,707 1,362 2,375 77,375 1,787 2,800 77,800 2,269 3,282 78,282
5 6,034 2,094 2,938 77,938 2,727 3,571 78,571 3,474 4,318 79,318
6 7,428 2,811 3,487 78,487 3,696 4,371 79,371 4,782 5,457 80,457
7 8,891 3,514 4,021 79,021 4,694 5,201 80,201 6,203 6,710 81,710
8 10,428 4,201 4,539 79,539 5,721 6,059 81,059 7,747 8,085 83,085
9 12,041 4,871 5,040 80,040 6,778 6,947 81,947 9,426 9,595 84,595
10 13,735 5,524 5,524 80,524 7,864 7,864 82,864 11,252 11,252 86,252
11 15,514 6,159 6,159 81,159 8,993 8,993 83,993 13,269 13,269 88,269
12 17,382 6,774 6,774 81,774 10,163 10,163 85,163 15,490 15,490 90,490
13 19,343 7,368 7,368 82,368 11,375 11,375 86,375 17,937 17,937 92,937
14 21,402 7,939 7,939 82,939 12,629 12,629 87,629 20,631 20,631 95,631
15 23,564 8,488 8,488 83,488 13,927 13,927 88,927 23,599 23,599 98,599
16 25,834 9,011 9,011 84,011 15,268 15,268 90,268 26,868 26,868 101,868
17 28,218 9,508 9,508 84,508 16,653 16,653 91,653 30,468 30,468 105,468
18 30,721 9,977 9,977 84,977 18,082 18,082 93,082 34,434 34,434 109,434
19 33,349 10,417 10,417 85,417 19,555 19,555 94,555 38,804 38,804 113,804
20 36,108 10,826 10,826 85,826 21,072 21,072 96,072 43,618 43,618 118,618
Age 60 72,551 12,324 12,324 87,324 38,058 38,058 113,058 128,505 128,505 203,505
Age 65 98,630 10,123 10,123 85,123 46,620 46,620 121,620 213,114 213,114 288,114
Age 70 131,913 4,174 4,174 79,174 52,980 52,980 127,980 349,274 349,274 424,274
Age 75 174,393 0 0 0 53,558 53,558 128,558 568,093 568,093 643,093

(1) Assumes a $1,040 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

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE LIFE CERTIFICATE

MALE NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
DEATH BENEFIT OPTION 3
GUARANTEED ISSUE

CURRENT COST OF INSURANCE CHARGES

1 6,330 0 4,234 250,000 0 4,529 250,000 0 4,825 250,000
2 12,977 1,789 8,347 250,000 2,646 9,203 250,000 3,540 10,097 250,000
3 19,957 6,605 12,343 250,000 8,296 14,034 250,000 10,132 15,870 250,000
4 27,285 11,321 16,240 250,000 14,127 19,045 250,000 17,297 22,215 250,000
5 34,980 15,952 20,051 250,000 20,160 24,259 250,000 25,112 29,211 250,000
6 43,059 20,503 23,782 250,000 26,412 29,691 250,000 33,654 36,933 250,000
7 51,543 24,981 27,440 250,000 32,900 35,360 250,000 43,010 45,469 250,000
8 60,450 29,383 31,022 250,000 39,633 41,273 250,000 53,269 54,909 250,000
9 69,803 33,703 34,523 250,000 46,617 47,437 250,000 64,527 65,346 250,000
10 79,624 37,936 37,936 250,000 53,861 53,861 250,000 76,891 76,891 250,000
11 89,935 42,391 42,391 250,000 61,771 61,771 250,000 90,983 90,983 250,000
12 100,763 46,732 46,732 250,000 70,027 70,027 250,000 106,617 106,617 250,000
13 112,131 50,939 50,939 250,000 78,635 78,635 250,000 123,956 123,956 262,153
14 124,068 55,008 55,008 250,000 87,615 87,615 250,000 143,084 143,084 293,999
15 136,602 58,937 58,937 250,000 96,993 96,993 250,000 164,157 164,157 327,837
16 149,763 62,704 62,704 250,000 106,781 106,781 250,000 187,347 187,347 363,816
17 163,581 66,347 66,347 250,000 117,044 117,044 250,000 212,901 212,901 402,207
18 178,091 69,861 69,861 250,000 127,813 127,813 250,000 241,053 241,053 443,231
19 193,326 73,241 73,241 250,000 139,129 139,129 250,000 272,060 272,060 487,148
20 209,322 76,496 76,496 250,000 150,971 150,971 263,404 306,224 306,224 534,280
Age 60 136,602 58,937 58,937 250,000 96,993 96,993 250,000 164,157 164,157 327,837
Age 65 209,322 76,496 76,496 250,000 150,971 150,971 263,404 306,224 306,224 534,280
Age 70 302,134 90,033 90,033 250,000 217,424 217,424 336,361 535,326 535,326 828,164
Age 75 420,588 97,859 97,859 250,000 297,334 297,334 414,425 901,764 901,764 1,256,882

(1) Assumes a $6,029 premium is paid at the beginning of each Certificate year
for seven years. 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

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
GROUP VARIABLE LIFE CERTIFICATE

MALE NON-SMOKER AGE 45
SPECIFIED FACE AMOUNT = $250,000
DEATH BENEFIT OPTION 3

GUARANTEED COST OF INSURANCE CHARGES

PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6% HYPOTHETICAL 12%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST ------------------------------- ------------------------------- --------------------------------
CERTIFICATE AT 5% SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH SURRENDER CERTIFICATE DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
----------- ------------ --------- ----------- ------- --------- ----------- ------- --------- ----------- --------

1 6,330 0 3,651 250,000 0 3,928 250,000 0 4,206 250,000
2 12,977 637 7,195 250,000 1,422 7,980 250,000 2,243 8,801 250,000
3 19,957 4,891 10,629 250,000 6,420 12,158 250,000 8,085 13,823 250,000
4 27,285 9,033 13,952 250,000 11,549 16,467 250,000 14,401 19,319 250,000
5 34,980 13,059 17,158 250,000 16,808 20,907 250,000 21,235 25,333 250,000
6 43,059 16,967 20,246 250,000 22,203 25,482 250,000 28,645 31,924 250,000
7 51,543 20,744 23,203 250,000 27,728 30,187 250,000 36,684 39,143 250,000
8 60,450 24,379 26,019 250,000 33,378 35,017 250,000 45,413 47,052 250,000
9 69,803 27,863 28,683 250,000 39,151 39,971 250,000 54,904 55,724 250,000
10 79,624 31,181 31,181 250,000 45,041 45,041 250,000 65,237 65,237 250,000
11 89,935 34,626 34,626 250,000 51,426 51,426 250,000 76,979 76,979 250,000
12 100,763 37,884 37,884 250,000 58,009 58,009 250,000 89,950 89,950 250,000
13 112,131 40,952 40,952 250,000 64,801 64,801 250,000 104,307 104,307 250,000
14 124,068 43,821 43,821 250,000 71,814 71,814 250,000 120,232 120,232 250,000
15 136,602 46,471 46,471 250,000 79,054 79,054 250,000 137,784 137,784 275,168
16 149,763 48,884 48,884 250,000 86,528 86,528 250,000 156,933 156,933 304,754
17 163,581 51,039 51,039 250,000 94,248 94,248 250,000 177,809 177,809 335,911
18 178,091 52,906 52,906 250,000 102,222 102,222 250,000 200,541 200,541 368,742
19 193,326 54,448 54,448 250,000 110,459 110,459 250,000 225,266 225,266 403,359
20 209,322 55,624 55,624 250,000 118,976 118,976 250,000 252,124 252,124 439,890
Age 60 136,602 46,471 46,471 250,000 79,054 79,054 250,000 137,784 137,784 275,168
Age 65 209,322 55,624 55,624 250,000 118,976 118,976 250,000 252,124 252,124 439,890
Age 70 302,134 54,693 54,693 250,000 166,952 166,952 258,279 424,474 424,474 656,673
Age 75 420,588 35,174 35,174 250,000 221,380 221,380 308,560 678,183 678,183 945,253

(1) Assumes a $6,029 premium is paid at the beginning of each Certificate year
for seven years. 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-9

APPENDIX D
MONTHLY EXPENSE CHARGE TABLE
PER THOUSAND OF BASE FACE AMOUNT

Unit Charges/per $1,000 Face
Issue Age Non-smoker Smoker
--------- ---------- ------

0 0.0250 0.0250
1 0.0275 0.0275
2 0.0275 0.0275
3 0.0275 0.0275
4 0.0275 0.0275
5 0.0300 0.0300
6 0.0300 0.0300
7 0.0300 0.0300
8 0.0300 0.0300
9 0.0325 0.0325
10 0.0325 0.0325
11 0.0325 0.0325
12 0.0350 0.0350
13 0.0350 0.0350
14 0.0350 0.0350
15 0.0375 0.0375
16 0.0375 0.0375
17 0.0375 0.0375
18 0.0300 0.0400
19 0.0300 0.0400
20 0.0325 0.0400
21 0.0325 0.0425
22 0.0325 0.0425
23 0.0350 0.0425
24 0.0350 0.0450
25 0.0375 0.0450
26 0.0375 0.0475
27 0.0375 0.0475
28 0.0400 0.0475
29 0.0400 0.0500
30 0.0425 0.0500
31 0.0425 0.0525
32 0.0425 0.0525
33 0.0450 0.0525
34 0.0450 0.0550
35 0.0450 0.0550
36 0.0500 0.0600
37 0.0525 0.0650
38 0.0575 0.0700
39 0.0600 0.0725
40 0.0650 0.0775
41 0.0675 0.0825
42 0.0725 0.0875
43 0.0750 0.0925
44 0.0800 0.0975
45 0.0825 0.1000
46 0.0875 0.1050
47 0.0900 0.1100
48 0.0950 0.1150

D-1

Unit Charges/per $1,000 Face
Issue Age Non-smoker Smoker
--------- ---------- ------

49 0.1000 0.1200
50 0.1050 0.1250
51 0.1075 0.1300
52 0.1100 0.1325
53 0.1150 0.1375
54 0.1175 0.1425
55 0.1200 0.1475
56 0.1275 0.1550
57 0.1375 0.1650
58 0.1450 0.1750
59 0.1525 0.1825
60 0.1600 0.1925
61 0.1700 0.1975
62 0.1775 0.2025
63 0.1875 0.2075
64 0.1975 0.2125
65 0.2075 0.2175
66 0.2075 0.2150
67 0.2050 0.2150
68 0.2050 0.2125
69 0.2050 0.2125
70 0.2050 0.2100
71 0.2050 0.2100
72 0.2050 0.2100
73 0.2050 0.2100
74 0.2050 0.2100
75 0.2050 0.2100
76 0.2050 0.2100
77 0.2050 0.2100
78 0.2050 0.2100
79 0.2050 0.2100
80 0.2050 0.2100
81 0.2050 0.2100
82 0.2050 0.2100
83 0.2050 0.2100
84 0.2050 0.2100
85 0.2050 0.2100

Example 1

Assume that a Nonsmoker, Age 40, purchases a Certificate with a Face Amount of
$100,000, of which $50,000 is attributable to the Base Amount and $50,000 is
attributable to the Insured Term Rider. The Monthly Expense Charge, if
applicable, is assessed only on the Base Amount. From the table above, the
Monthly Expense Charge would be $3.25 per month or (0.0650 per $1000 Base Face
*$50,000 Base Amount).

Example 2

Assume that a Nonsmoker, Age 40, purchases a Certificate with a Face Amount of
$100,000, all of which is attributable to the Base Amount (there is no Insured
Term Rider). From the table above, the monthly expense charge would be $6.50 per
month or (0.0650 per $1000 Base Face *$100,000 Base Face).

D-2

APPENDIX E
PERFORMANCE INFORMATION

The Certificates will first be offered to the public in 2000. 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,
1999. "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 investment scenarios, financial management and tax and
retirement planning, and investment alternatives to certificates of deposit and
other financial instruments.

E-1

TABLE I(A)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
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 for a
representative Certificate. It is assumed that the Insured is male, 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.

TEN YEARS OR
LIFE OF
ONE-YEAR 5 SUB-ACCOUNT
UNDERLYING FUND TOTAL RETURN YEARS (IF LESS)

MSDW Technology Portfolio N/A N/A N/A
Select Strategic Growth Fund -15.51% N/A -7.43%
Warburg Pincus Small Company Growth Portfolio N/A N/A N/A
Warburg Pincus Global Post-Venture Capital Portfolio N/A N/A N/A
Select Aggressive Growth Fund 2.31% 9.82% 14.60%
Deutsche VIT Small Cap Index N/A N/A N/A
Select Capital Appreciation Fund -8.19% N/A 7.15%
Goldman Sachs CORE Small Cap Equity Fund N/A N/A N/A
J.P. Morgan Small Company Portfolio N/A N/A N/A
Select Value Opportunity Fund -31.80% 0.11% 3.20%
Select Emerging Markets Fund 23.74% N/A 27.48%
Select International Equity Fund -3.18% 5.09% 6.71%
Fidelity VIP Overseas Portfolio 5.38% 3.93% 11.69%
T. Rowe Price International Stock Portfolio -1.91% 1.80% 4.34%
Fidelity VIP Growth Portfolio 1.34% 16.15% 23.15%
Select Growth Fund -4.69% 15.48% 20.50%
Goldman Sachs Capital Growth Fund N/A N/A N/A
Core Equity Fund -5.06% 11.71% 17.84%
Fidelity VIP II Contrafund Portfolio N/A N/A N/A
Goldman Sachs CORE Large Cap Growth Fund N/A N/A N/A
Select Growth and Income Fund -13.65% 8.21% 12.43%
Deutsche VIT Equity 500 Index N/A N/A N/A
Fidelity VIP Equity-Income Portfolio -23.16% 5.16% 10.53%
Fidelity VIP High Income Portfolio -21.73% -2.52% 3.13%
PIMCO Total Return Bond Portfolio II N/A N/A N/A
Select Investment Grade Income Fund -28.88% -6.01% 0.04%
Government Bond Fund -27.94% -7.17% -2.10%
Money Market Fund -24.05% -7.92% -1.18%

The inception dates for the Sub-Accounts are: 5/1/95 for Core Equity, Select
Investment Grade Income, Money Market, 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, and Fidelity VIP Overseas; 5/3/95 for Select Capital
Appreciation; 2/12/96 for T. Rowe Price International Stock; and 11/9/98 for
Select Emerging Markets. No performance information is given for the other
Sub-Accounts because they had not begun operations as of the date of this
Prospectus.

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

TABLE I(B)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF THE SUB-ACCOUNTS
EXCLUDING MONTHLY CERTIFICATE 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. 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.

TEN YEARS OR
PORTFOLIO LIFE OF
INCEPTION 1 5 PORTFOLIO
UNDERLYING FUND DATE YEAR YEARS (IF LESS)

MSDW Technology Portfolio N/A N/A N/A N/A
Select Strategic Growth Fund 2/20/98 15.02% N/A 16.69%
Warburg Pincus Small Company Growth Portfolio N/A N/A N/A N/A
Warburg Pincus Global Post-Venture Capital
Portfolio N/A N/A N/A N/A
Select Aggressive Growth Fund 8/21/92 37.41% 22.21% 22.47%
Deutsche VIT Small Cap Index N/A N/A N/A N/A
Select Capital Appreciation Fund 4/28/95 24.23% N/A 20.32%
Goldman Sachs CORE Small Cap Equity Fund N/A N/A N/A N/A
J.P. Morgan Small Company Portfolio N/A N/A N/A N/A
Select Value Opportunity Fund 4/30/93 -5.56% 12.50% 12.03%
Select Emerging Markets Fund 2/20/98 64.23% N/A 56.38%
Select International Equity Fund 5/2/94 30.53% 17.47% 17.47%
Fidelity VIP Overseas Portfolio 1/28/87 41.27% 16.31% 17.14%
T. Rowe Price International Stock Portfolio 3/31/94 32.12% 14.18% 14.89%
Fidelity VIP Growth Portfolio 10/9/86 36.20% 28.57% 28.63%
Select Growth Fund 8/21/92 28.63% 27.90% 28.71%
Goldman Sachs Capital Growth Fund N/A N/A N/A N/A
Core Equity Fund 4/29/85 28.17% 24.10% 23.30%
Fidelity VIP II Contrafund Portfolio N/A N/A N/A N/A
Goldman Sachs CORE Large Cap Growth Fund N/A N/A N/A N/A
Select Growth and Income Fund 8/21/92 17.36% 20.60% 20.29%
Deutsche VIT Equity 500 Index N/A N/A N/A N/A
Fidelity VIP Equity-Income Portfolio 10/9/86 5.37% 17.54% 15.98%
Fidelity VIP High Income Portfolio 9/19/85 7.18% 9.88% 8.62%
PIMCO Total Return Bond Portfolio II N/A N/A N/A N/A
Select Investment Grade Income Fund 4/29/85 -1.86% 6.41% 5.57%
Government Bond Fund 8/26/91 -0.67% 5.26% 4.70%
Money Market Fund 4/29/85 4.24% 4.52% 4.36%

E-3

TABLE II(A)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF THE UNDERLYING FUNDS
NET OF ALL CHARGES

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

TEN YEARS OR
ONE-YEAR 5 LIFE OF FUND
UNDERLYING FUND TOTAL RETURN YEARS (IF LESS)

MSDW Technology Portfolio N/A N/A -13.13%
Select Strategic Growth Fund -15.51% N/A -16.85%
Warburg Pincus Small Company Growth Portfolio 26.41% N/A 9.96%
Warburg Pincus Global Post-Venture Capital Portfolio 21.53% N/A 3.77%
Select Aggressive Growth Fund 2.31% 9.82% 11.76%
Deutsche VIT Small Cap Index -12.29% N/A -12.12%
Select Capital Appreciation Fund -8.19% N/A 7.16%
Goldman Sachs CORE Small Cap Equity Fund -14.35% N/A -19.70%
J.P. Morgan Small Company Portfolio 6.84% 8.52% 8.53%
Select Value Opportunity Fund -31.80% 0.11% 1.73%
Select Emerging Markets Fund 23.74% N/A -9.62%
Select International Equity Fund -3.18% 5.09% 3.67%
Fidelity VIP Overseas Portfolio 5.38% 3.93% 4.95%
T. Rowe Price International Stock Portfolio -1.91% 1.80% 1.88%
Fidelity VIP Growth Portfolio 1.34% 16.15% 13.41%
Select Growth Fund -4.69% 15.48% 11.63%
Goldman Sachs Capital Growth Fund -6.80% N/A -3.22%
Core Equity Fund -5.06% 11.71% 10.80%
Fidelity VIP II Contrafund Portfolio -9.07% N/A 14.16%
Goldman Sachs CORE Large Cap Growth Fund -0.25% N/A 1.38%
Select Growth and Income Fund -13.65% 8.21% 7.03%
Deutsche VIT Equity 500 Index -12.11% N/A -0.81%
Fidelity VIP Equity-Income Portfolio -23.16% 5.16% 8.00%
Fidelity VIP High Income Portfolio -21.73% -2.52% 5.94%
PIMCO Total Return Bond Portfolio II -28.58% N/A -18.52%
Select Investment Grade Income Fund -28.88% -6.01% 1.21%
Government Bond Fund -27.94% -7.17% -1.59%
Money Market Fund -24.05% -7.92% -1.26%

The inception dates for the Underlying Funds are: 4/29/85 for Core Equity,
Select Investment Grade Income and Money Market; 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; 3/31/94 for T. Rowe Price International
Stock; 11/9/98 for Select Emerging Markets, Select Strategic Growth; and 8/27/92
for Fidelity VIP II Contrafund; 11/30/99 for MSDW Technology; 6/30/95 for
Warburg Pincus Trust Small Company Growth Portfolio; 9/30/96 for Warburg Pincus
Trust Global Post-Venture Capital Portfolio; 8/.25/97 for Deutsche Small Cap
Index; 2/13/98 for Goldman Sachs CORE Small Cap Equity Fund; 12/31/94 for J.P.
Morgan Small Company Portfolio; 4/30/98 for Goldman Sachs Capital Growth Fund;
2/13/98 for Goldman Sachs CORE Large Cap Growth Fund; 10/1/97 for Deutsche
Equity 500 Index; and 12/31/97 for PIMCO Total Return Bond Portfolio II.

E-4

TABLE II(B)
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 1999
SINCE INCEPTION OF THE UNDERLYING FUNDS
EXCLUDING MONTHLY CERTIFICATE 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 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.

TEN YEARS OR
ONE-YEAR 5 LIFE OF FUND
UNDERLYING FUND TOTAL RETURN YEARS (IF LESS)

MSDW Technology Portfolio N/A N/A 23.04%
Select Strategic Growth Fund 15.02% N/A 5.93%
Warburg Pincus Small Company Growth Portfolio 67.56% N/A 23.59%
Warburg Pincus Global Post-Venture Capital Portfolio 61.47% N/A 21.21%
Select Aggressive Growth Fund 37.41% 22.21% 19.62%
Deutsche VIT Small Cap Index 19.08% N/A 8.40%
Select Capital Appreciation Fund 24.23% N/A 20.33%
Goldman Sachs CORE Small Cap Equity Fund 16.48% N/A 2.53%
J.P. Morgan Small Company Portfolio 43.09% 20.91% 20.91%
Select Value Opportunity Fund -5.56% 12.50% 10.57%
Select Emerging Markets Fund 64.23% N/A 14.18%
Select International Equity Fund 30.53% 17.47% 14.43%
Fidelity VIP Overseas Portfolio 41.27% 16.31% 10.43%
T. Rowe Price International Stock Portfolio 32.12% 14.18% 12.43%
Fidelity VIP Growth Portfolio 36.20% 28.57% 18.86%
Select Growth Fund 28.63% 27.90% 19.49%
Goldman Sachs Capital Growth Fund 25.98% N/A 23.31%
Core Equity Fund 28.17% 24.10% 16.25%
Fidelity VIP II Contrafund Portfolio 23.13% N/A 26.58%
Goldman Sachs CORE Large Cap Growth Fund 34.20% N/A 26.54%
Select Growth and Income Fund 17.36% 20.60% 14.88%
Deutsche VIT Equity 500 Index 19.30% N/A 21.43%
Fidelity VIP Equity-Income Portfolio 5.37% 17.54% 13.46%
Fidelity VIP High Income Portfolio 7.18% 9.88% 11.42%
PIMCO Total Return Bond Portfolio II -1.48% N/A 2.97%
Select Investment Grade Income Fund -1.86% 6.41% 6.72%
Government Bond Fund -0.67% 5.26% 5.20%
Money Market Fund 4.24% 4.52% 4.28%

The inception dates for the Underlying Funds are: 4/29/85 for Core Equity,
Select 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; 11/9/98 for Select Emerging Markets,
Select Strategic Growth, and 8/27/92 Fidelity VIP II Contrafund; 11/30/99 for
MSDW Technology; 6/30/95 for Warburg Pincus Trust Small Company Growth
Portfolio; 9/30/96 for Warburg Pincus Trust Global Post-Venture Capital
Portfolio; 8/.25/97 for Deutsche Small Cap Index; 2/13/98 for Goldman Sachs CORE
Small Cap Equity Fund; 12/31/94 for J.P. Morgan Small Company Portfolio; 4/30/98
for Goldman Sachs Capital Growth Fund; 2/13/98 for Goldman Sachs CORE Large Cap
Growth Fund; 10/1/97 for Deutsche Equity 500 Index; and 12/31/97 for PIMCO Total
Return Bond Portfolio II.

E-5

ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY

CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED) (UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(IN MILLIONS) 2000 1999 2000 1999
------------- ---- ---- ---- ----

REVENUES
Premiums................................... $ 0.4 $ 0.1 $ 0.8 $ 0.2
Universal life and investment product
policy fees.............................. 94.0 81.2 187.1 156.7
Net investment income...................... 34.6 37.5 70.4 74.2
Net realized investment losses............. (5.8) (4.2) (7.5) (4.6)
Other income (losses)...................... 22.0 (0.3) 42.2 (0.4)
------ ------ ------ ------
Total revenues......................... 145.2 114.3 293.0 226.1
------ ------ ------ ------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims, losses............ 35.3 42.8 79.9 90.3
Policy acquisition expenses................ 18.6 15.8 40.5 18.5
Other operating expenses................... 50.9 23.7 98.2 55.3
Restructuring costs........................ 4.6 - 4.6 -
------ ------ ------ ------
Total benefits, losses and expenses.... 109.4 82.3 223.2 164.1
------ ------ ------ ------
Income before federal income taxes............. 35.8 32.0 69.8 62.0
------ ------ ------ ------
FEDERAL INCOME TAX EXPENSE
Current.................................... (1.6) 2.6 (5.6) 4.3
Deferred................................... 14.2 8.6 30.1 17.4
------ ------ ------ ------
Total federal income tax expense....... 12.6 11.2 24.5 21.7
------ ------ ------ ------
Net income..................................... $ 23.2 $ 20.8 $ 45.3 $ 40.3
====== ====== ====== ======

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

F-1

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED BALANCE SHEETS

(UNAUDITED) (AUDITED)
JUNE 30, DECEMBER 31,
(IN MILLIONS) 2000 1999
------------- ----------- -------------

ASSETS
Investments:
Fixed maturities at fair value (amortized cost of
$1,241.9 and $1,354.2)............................ $ 1,211.8 $ 1,324.6
Equity securities at fair value (cost of $25.2 and
$25.2)............................................ 29.0 32.6
Mortgage loans...................................... 207.0 223.7
Policy loans........................................ 177.3 166.8
Real estate and other long term investments......... 14.8 25.1
--------- ---------
Total investments............................... 1,639.9 1,772.8
--------- ---------
Cash and cash equivalents............................. 85.4 132.9
Accrued investment income............................. 33.0 36.0
Deferred policy acquisition costs..................... 1,261.2 1,156.4
Reinsurance receivables on paid and unpaid losses,
benefits and unearned premiums...................... 297.3 287.2
Premiums, accounts and notes receivable............... 3.4 --
Other assets.......................................... 77.4 64.8
Separate account assets............................... 15,355.2 14,527.9
--------- ---------
Total assets.................................... $18,752.8 $17,978.0
========= =========
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,154.6 $ 2,274.7
Outstanding claims and losses....................... 21.4 13.7
Unearned premiums................................... 2.6 2.6
Contractholder deposit funds and other policy
liabilities....................................... 43.2 44.3
--------- ---------
Total policy liabilities and accruals........... 2,221.8 2,335.3
--------- ---------
Expenses and taxes payable............................ 194.8 216.8
Reinsurance premiums payable.......................... 26.8 17.9
Deferred federal income taxes......................... 124.7 94.8
Separate account liabilities.......................... 15,354.5 14,527.9
--------- ---------
Total liabilities............................... 17,922.6 17,192.7
--------- ---------
Commitments and Contingencies (Note 5)
SHAREHOLDER'S EQUITY
Common stock, $1,000 par value, 10,000 shares
authorized, 2,526 shares issued and outstanding..... 2.5 2.5
Additional paid in capital............................ 423.8 423.7
Accumulated other comprehensive losses................ (3.1) (2.6)
Retained earnings..................................... 407.0 361.7
--------- ---------
Total shareholder's equity...................... 830.2 785.3
--------- ---------
Total liabilities and shareholder's equity...... $18,752.8 $17,978.0
========= =========

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

F-2

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
(IN MILLIONS) 2000 1999
------------- ------- -------

COMMON STOCK................................... $ 2.5 $ 2.5
------ ------

ADDITIONAL PAID IN CAPITAL
Balance at beginning of period............. 423.7 407.9
Issuance of common stock................... -- 4.0
------ ------
Balance at end of period................... 423.7 411.9
------ ------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Net unrealized (depreciation) appreciation
on investments
Balance at beginning of period............. (2.7) 24.1
Net depreciation on available for sale
securities............................... (0.6) (28.9)
Benefit for deferred federal income
taxes.................................... 0.2 10.1
------ ------
Other comprehensive loss............... (0.5) (18.8)
------ ------
Balance at end of period................... (3.1) 5.3
------ ------
RETAINED EARNINGS
Balance at beginning of period............... 361.7 275.5
Net income................................... 45.3 40.3
------ ------
Balance at end of period..................... 407.0 315.8
------ ------
Total shareholder's equity............. $830.2 $735.5
====== ======

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

F-3

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED) (UNAUDITED)
QUARTER ENDED SIX MONTHS
JUNE 30, ENDED JUNE 30,
(IN MILLIONS) 2000 1999 2000 1999
------------- ------ ------ ------- -------

Net Income.................................. $ 18.2 $ 20.8 $45.3 $ 40.3
Other comprehensive income:
Net depreciation on available for sale
securities................................. (31.1) (11.9) (0.7) (28.9)
Benefit for deferred federal income taxes... 10.8 4.2 0.2 10.1
------ ------ ----- ------
Other comprehensive income.......... (20.3) (7.7) (0.5) (18.8)
------ ------ ----- ------
Comprehensive (losses) income........... $ (2.1) $ 13.1 $44.9 $ 21.5
====== ====== ===== ======

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

F-4

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
(IN MILLIONS) 2000 1999
------------- ------- -------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 45.3 $ 40.3
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Net realized gains.................. 7.4 4.6
Net amortization and depreciation... (1.6) --
Deferred federal income taxes....... 30.1 17.4
Change in deferred acquisition
costs............................. (103.2) (92.2)
Change in premiums and notes
receivable, net of reinsurance.... 9.1 (34.2)
Change in accrued investment
income............................ 2.9 0.4
Change in policy liabilities and
accruals, net..................... (109.6) 73.4
Change in reinsurance receivable.... (10.0) 21.6
Change in expenses and taxes
payable........................... (47.6) (9.7)
Separate account activity, net...... (0.1) (0.6)
Other, net.......................... (4.7) (2.9)
------- -------
Net cash provided (used in) by
operating activities.......... (182.0) 18.1
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................ 275.0 140.1
Proceeds from disposals of equity
securities............................ 0.7 17.2
Proceeds from disposals of other
investments........................... 14.9 0.4
Proceeds from mortgages matured or
collected............................. 24.6 10.5
Purchase of available-for-sale fixed
maturities............................ (175.2) (145.2)
Purchase of equity securities........... -- (17.3)
Purchase of other investments........... (19.3) (5.7)
Other investing activities, net......... 13.8 --
------- -------
Net cash provided by investing
activities........................ 134.5 --
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock and
capital paid in....................... -- 4.0
Change in short term debt............... -- --
------- -------
Net cash provided by financing
activities........................ -- 4.0
------- -------
Net change in cash and cash equivalents..... (47.5) 22.1
Cash and cash equivalents, beginning of
period..................................... 132.9 217.9
------- -------
Cash and cash equivalents, end of period.... $ 85.4 $ 239.9
======= =======

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

F-5

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

Allmerica Financial Life Insurance and Annuity Company ("AFLIAC" or the
"Company") is organized as a stock life insurance company, and is a wholly-owned
subsidiary of First Allmerica Financial Life Insurance Company ("FAFLIC") which
is a wholly-owned subsidiary of Allmerica Financial Corporation ("AFC"). As
noted below, the consolidated accounts of AFLIAC include the accounts of certain
wholly-owned non-insurance subsidiaries (principally brokerage and investment
advisory subsidiaries).

Prior to July 1, 1999, AFLIAC was a wholly-owned subsidiary of SMA Financial
Corporation ("SMAFCO"), which was a wholly-owned subsidiary of FAFLIC. Effective
July 1, 1999 and in connection with AFC's restructuring activities, SMAFCO was
renamed Allmerica Asset Management, Inc. ("AAM") and contributed its ownership
of AFLIAC to FAFLIC. AAM also contributed Allmerica Investments, Inc., Allmerica
Investment Management Company, Inc., Allmerica Financial Investment Management
Services, Inc., and Allmerica Financial Services Insurance Agency, Inc., to
AFLIAC in exchange for one share of AFLIAC common stock. The equity of these
four companies on July 1, 1999 was $11.8 million. For the six months ended
June 30, 2000, the subsidiaries of AFLIAC had total revenue of $45.1 million and
total benefits, losses and expenses of $31.0 million. All significant
intercompany accounts and transactions have been eliminated.

In addition, effective November 1, 1999, the Company's consolidated financial
statements include five wholly-owned insurance agencies. These agencies are
Allmerica Investments Insurance Agency Inc. of Alabama, Allmerica Investments
Insurance Agency of Florida Inc., Allmerica Investment Insurance Agency Inc. of
Georgia, Allmerica Investment Insurance Agency Inc. of Kentucky, and Allmerica
Investments Insurance Agency Inc. of Mississippi.

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.

2. NEW ACCOUNTING PRONOUNCEMENTS

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation -- an interpretation of APB Opinion
No. 25" ("FIN44"). FIN 44 clarifies the application of APB Opinion No. 25
regarding the definition of employee, the criteria for determining a
noncompensatory plan, the accounting for changes to the terms of a previously
fixed stock option or award, the accounting for an exchange of stock
compensation awards in a business combination, and other stock compensation
related issues. FIN 44 is effective July 1, 2000, but to the extent that it
covers certain events occurring during the period after December 15, 1998, and
certain other events occurring during the period after January 12, 2000, but
before the effective date of July 1, 2000, the effects of applying the
Interpretation are recognized on a prospective basis from July 1, 2000. The
Company does not expect the application of FIN 44 to have a material impact on
the Company's financial position or results of operations.

F-6

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

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. In
June 2000, the FASB issued Statement of Financial Accounting Standards No. 138,
"Accounting for Certain Derivative Instruments and Hedging Activities -- an
amendment of FASB Statement No. 133 ("Statement No. 138"), which further
addresses the accounting for hedges and the application of certain exceptions to
Statement No. 133. These statements are effective for fiscal years beginning
after June 15, 2000. The Company is currently assessing the impact of the
adoption of Statement No. 133 and Statement No. 138.

3. SIGNIFICANT TRANSACTIONS

During the second quarter of 2000, the Company adopted a formal company-wide
restructuring plan. This plan is the result of a corporate initiative that began
in the fall of 1999, intended to reduce expenses and enhance revenues. As a
result of the Company's restructuring plan, it recognized a pre-tax charge of
$4.6 million for the quarter ended June 30, 2000 as reflected in restructuring
costs in the Consolidated Statements of Income.

During the second quarter 1999, AFLIAC's parent contributed $4.0 million in
cash. There have been no capital contributions in 2000.

4. FEDERAL INCOME TAXES

Federal income tax expense for the periods ended June 30, 2000 and 1999, has
been computed using estimated effective tax rates. These rates are revised, if
necessary, at the end of each successive interim period to reflect the current
estimates of the annual effective tax rates.

5. COMMITMENTS AND CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

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

LITIGATION

In 1997, a lawsuit on behalf of a putative class was instituted against the
Company alleging fraud, unfair or deceptive acts, breach of contract,
misrepresentation, and related claims in the sale of life insurance policies. In
November 1998, the Company and the plaintiffs entered into a settlement
agreement and in May 1999, the Federal District Court in Worcester,
Massachusetts approved the settlement agreement and certified the class for this
purpose. 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,

F-7

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

and the estimate may be revised based on the amount of reimbursement actually
tendered by AFC's insurance carriers, 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, based on the advice of
legal counsel, the ultimate resolution of these proceedings will not have a
material effect on the Company's consolidated financial statements. However,
liabilities related to these proceedings could be established in the near term
if estimates of the ultimate resolution of these proceedings are revised.

F-8

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)

SELECT
INVESTMENT MONEY EQUITY GOVERNMENT AGGRESSIVE SELECT
GROWTH GRADE INCOME MARKET INDEX BOND GROWTH GROWTH
---------- ------------- --------- ---------- ----------- ---------- -----------

ASSETS:
Investments in shares of
Allmerica Investment Trust..... $5,589,929 $39,901,389 $ 573,679 $4,047,990 $1,031,000 $2,694,884 $20,727,485
Investments in shares of Fidelity
Variable Insurance Products
Funds (VIP).................... -- -- -- -- -- -- --
Investment in shares of T. Rowe
Price International
Series, Inc.................... -- -- -- -- -- -- --
Investments in shares of Delaware
Group Premium Fund............. -- -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment
Funds, Inc. (VIF).............. -- -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc.
(MSDW)......................... -- -- -- -- -- -- --
Investment in shares of Goldman
Sachs Variable Insurance
Trust.......................... -- -- -- -- -- -- --
Investment in shares of Warburg
Pincus Trust................... -- -- -- -- -- -- --
Investment in shares of PIMCO
Variable Insurance Trust....... -- -- -- -- -- -- --
Investment in shares of J.P.
Morgan Series Trust II......... -- -- -- -- -- -- --
Investment in shares of AIM
Variable Insurance Funds....... -- -- -- -- -- -- --
Investment in shares of The Alger
American Fund Portfolios....... -- -- -- -- -- -- --
Investment in shares of Alliance
Variable Products
Series Fund, Inc............... -- -- -- -- -- -- --
Investment in shares of Franklin
Templeton Insurance Products
Trust (Class 2) ............... -- -- -- -- -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor)...... -- -- 163 -- -- -- --
---------- ----------- --------- ---------- ---------- ---------- -----------
Total assets................... 5,589,929 39,901,389 573,842 4,047,990 1,031,000 2,694,884 20,727,485

LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor).............. 29 9 -- 212 3 10 254
---------- ----------- --------- ---------- ---------- ---------- -----------
Net assets..................... $5,589,900 $39,901,380 $ 573,842 $4,047,778 $1,030,997 $2,694,874 $20,727,231
========== =========== ========= ========== ========== ========== ===========

Net asset distribution by
category:
Variable life policies......... $5,589,900 $39,901,380 $ 573,842 $4,047,778 $1,030,997 $2,694,874 $20,727,231
========== =========== ========= ========== ========== ========== ===========

Units outstanding, June 30,
2000........................... 2,002,070 28,820,643 437,465 1,342,054 774,048 986,112 6,268,127
Net asset value per unit,
June 30, 2000.................. $ 2.792057 $ 1.384466 $1.311721 $ 3.016119 $ 1.331952 $2.732843 $ 3.306756

SELECT SELECT SELECT
GROWTH VALUE INTERNATIONAL
AND INCOME OPPORTUNITY EQUITY
----------- ----------- -------------

ASSETS:
Investments in shares of
Allmerica Investment Trust..... $1,745,901 $24,378,368 $6,866,876
Investments in shares of Fidelity
Variable Insurance Products
Funds (VIP).................... -- -- --
Investment in shares of T. Rowe
Price International
Series, Inc.................... -- -- --
Investments in shares of Delaware
Group Premium Fund............. -- -- --
Investments in shares of INVESCO
Variable Investment
Funds, Inc. (VIF).............. -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc.
(MSDW)......................... -- -- --
Investment in shares of Goldman
Sachs Variable Insurance
Trust.......................... -- -- --
Investment in shares of Warburg
Pincus Trust................... -- -- --
Investment in shares of PIMCO
Variable Insurance Trust....... -- -- --
Investment in shares of J.P.
Morgan Series Trust II......... -- -- --
Investment in shares of AIM
Variable Insurance Funds....... -- -- --
Investment in shares of The Alger
American Fund Portfolios....... -- -- --
Investment in shares of Alliance
Variable Products
Series Fund, Inc............... -- -- --
Investment in shares of Franklin
Templeton Insurance Products
Trust (Class 2) ............... -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor)...... -- -- --
---------- ----------- ----------
Total assets................... 1,745,901 24,378,368 6,866,876
LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor).............. -- 76 2
---------- ----------- ----------
Net assets..................... $1,745,901 $24,378,292 $6,866,874
========== =========== ==========
Net asset distribution by
category:
Variable life policies......... $1,745,901 $24,378,292 $6,866,874
========== =========== ==========
Units outstanding, June 30,
2000........................... 716,861 12,500,759 3,143,779
Net asset value per unit,
June 30, 2000.................. $ 2.435497 $ 1.950143 $ 2.184267

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

SA-1

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2000 (UNAUDITED)

SELECT SELECT FIDELITY FIDELITY FIDELITY
SELECT CAPITAL EMERGING STRATEGIC VIP HIGH FIDELITY VIP VIP VIP
APPRECIATION MARKETS GROWTH INCOME EQUITY-INCOME GROWTH OVERSEAS
-------------- --------- --------- ---------- ------------- ---------- ---------

ASSETS:
Investments in shares of
Allmerica Investment Trust..... $ 954,121 $ 256,111 $ 78,416 $ -- $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products
Funds (VIP).................... -- -- -- 1,142,684 600,402 3,576,010 607,620
Investment in shares of T. Rowe
Price International
Series, Inc.................... -- -- -- -- -- -- --
Investments in shares of Delaware
Group Premium Fund............. -- -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment
Funds, Inc. (VIF).............. -- -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc.
(MSDW)......................... -- -- -- -- -- -- --
Investment in shares of Goldman
Sachs Variable Insurance
Trust.......................... -- -- -- -- -- -- --
Investment in shares of Warburg
Pincus Trust................... -- -- -- -- -- -- --
Investment in shares of PIMCO
Variable Insurance Trust....... -- -- -- -- -- -- --
Investment in shares of J.P.
Morgan Series Trust II......... -- -- -- -- -- -- --
Investment in shares of AIM
Variable Insurance Funds....... -- -- -- -- -- -- --
Investment in shares of The Alger
American Fund Portfolios....... -- -- -- -- -- -- --
Investment in shares of Alliance
Variable Products
Series Fund, Inc............... -- -- -- -- -- -- --
Investment in shares of Franklin
Templeton Insurance Products
Trust (Class 2) ............... -- -- -- -- -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor)...... -- -- -- -- 2 -- --
--------- --------- --------- ---------- --------- ---------- ---------
Total assets................... 954,121 256,111 78,416 1,142,684 600,404 3,576,010 607,620

LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor).............. -- 3 -- -- -- 5 --
--------- --------- --------- ---------- --------- ---------- ---------
Net assets..................... $ 954,121 $ 256,108 $ 78,416 $1,142,684 $ 600,404 $3,576,005 $ 607,620
========= ========= ========= ========== ========= ========== =========

Net asset distribution by
category:
Variable life policies......... $ 954,121 $ 256,108 $ 78,416 $1,142,684 $ 600,404 $3,576,005 $ 607,620
========= ========= ========= ========== ========= ========== =========

Units outstanding, June 30,
2000........................... 364,761 170,347 67,773 782,244 295,882 1,006,225 293,109
Net asset value per unit,
June 30, 2000.................. $2.615753 $1.503466 $1.157039 $ 1.460774 $2.029190 $ 3.553892 $2.073017

FIDELITY FIDELITY Fidelity
VIP II ASSET VIP II VIP II
MANAGER CONTRAFUND(a) Index 500
------------ ------------- -----------

ASSETS:
Investments in shares of
Allmerica Investment Trust..... $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products
Funds (VIP).................... 1,159,347 -- 53,314,947
Investment in shares of T. Rowe
Price International
Series, Inc.................... -- -- --
Investments in shares of Delaware
Group Premium Fund............. -- -- --
Investments in shares of INVESCO
Variable Investment
Funds, Inc. (VIF).............. -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc.
(MSDW)......................... -- -- --
Investment in shares of Goldman
Sachs Variable Insurance
Trust.......................... -- -- --
Investment in shares of Warburg
Pincus Trust................... -- -- --
Investment in shares of PIMCO
Variable Insurance Trust....... -- -- --
Investment in shares of J.P.
Morgan Series Trust II......... -- -- --
Investment in shares of AIM
Variable Insurance Funds....... -- -- --
Investment in shares of The Alger
American Fund Portfolios....... -- -- --
Investment in shares of Alliance
Variable Products
Series Fund, Inc............... -- -- --
Investment in shares of Franklin
Templeton Insurance Products
Trust (Class 2) ............... -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company (Sponsor)...... -- -- --
---------- --------- -----------
Total assets................... 1,159,347 -- 53,314,947
LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor).............. 5 -- 123
---------- --------- -----------
Net assets..................... $1,159,342 $ -- $53,314,824
========== ========= ===========
Net asset distribution by
category:
Variable life policies......... $1,159,342 $ -- $53,314,824
========== ========= ===========
Units outstanding, June 30,
2000........................... 587,657 -- 46,606,748
Net asset value per unit,
June 30, 2000.................. $ 1.972820 $1.000000 $ 1.143929

(a) For the period ending June 30, 2000, there were no transactions.

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

SA-2

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2000 (UNAUDITED)

T. ROWE PRICE DGPF DGPF DGPF
INTERNATIONAL GROWTH & DGPF Capital Cash DGPF
STOCK INCOME DELCHESTER(a) Reserves Reserves DelCap
------------- --------- ------------- --------- --------- ---------

ASSETS:
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............ -- -- -- -- -- --
Investment in shares of T. Rowe Price
International Series, Inc................. 1,319,035 -- -- -- -- --
Investments in shares of Delaware Group
Premium Fund.............................. -- 34,757 -- 46 167,789 16,715
Investments in shares of INVESCO Variable
Investment Funds, Inc. (VIF).............. -- -- -- -- -- --
Investment in shares of Morgan Stanley
Universal Funds, Inc. (MSDW).............. -- -- -- -- -- --
Investment in shares of Goldman Sachs
Variable Insurance Trust.................. -- -- -- -- -- --
Investment in shares of Warburg Pincus
Trust..................................... -- -- -- -- -- --
Investment in shares of PIMCO Variable
Insurance Trust........................... -- -- -- -- -- --
Investment in shares of J.P. Morgan
Series Trust II........................... -- -- -- -- -- --
Investment in shares of AIM Variable
Insurance Funds........................... -- -- -- -- -- --
Investment in shares of The Alger American
Fund Portfolios........................... -- -- -- -- -- --
Investment in shares of Alliance Variable
Products Series Fund, Inc................. -- -- -- -- -- --
Investment in shares of Franklin Templeton
Insurance Products Trust (Class 2)........ -- -- -- -- -- --
Receivable from Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)................................. -- -- -- -- -- --
---------- --------- --------- --------- --------- ---------
Total assets.............................. 1,319,035 34,757 -- 46 167,789 16,715

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company (Sponsor)... 6 -- -- -- -- --
---------- --------- --------- --------- --------- ---------
Net assets................................ $1,319,029 $ 34,757 $ -- $ 46 $ 167,789 $ 16,715
========== ========= ========= ========= ========= =========

Net asset distribution by category:
Variable life policies.................... $1,319,029 $ 34,757 $ -- $ 46 $ 167,789 $ 16,715
========== ========= ========= ========= ========= =========

Units outstanding, June 30, 2000............ 779,649 35,288 -- 46 166,378 20,288
Net asset value per unit, June 30, 2000..... $ 1.691827 $0.984944 $1.000000 $1.010121 $1.009820 $0.823869

DGPF
DGPF DGPF Small
Delaware International Cap DGPF
Balanced Equity Value Trend
--------- ------------- ---------- ---------

ASSETS:
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............ -- -- -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- -- --
Investments in shares of Delaware Group
Premium Fund.............................. 2,264 44,385,167 115 15,844
Investments in shares of INVESCO Variable
Investment Funds, Inc. (VIF).............. -- -- -- --
Investment in shares of Morgan Stanley
Universal Funds, Inc. (MSDW).............. -- -- -- --
Investment in shares of Goldman Sachs
Variable Insurance Trust.................. -- -- -- --
Investment in shares of Warburg Pincus
Trust..................................... -- -- -- --
Investment in shares of PIMCO Variable
Insurance Trust........................... -- -- -- --
Investment in shares of J.P. Morgan
Series Trust II........................... -- -- -- --
Investment in shares of AIM Variable
Insurance Funds........................... -- -- -- --
Investment in shares of The Alger American
Fund Portfolios........................... -- -- -- --
Investment in shares of Alliance Variable
Products Series Fund, Inc................. -- -- -- --
Investment in shares of Franklin Templeton
Insurance Products Trust (Class 2)........ -- -- -- --
Receivable from Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)................................. -- -- -- --
--------- ----------- --------- ---------
Total assets.............................. 2,264 44,385,167 115 15,844
LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company (Sponsor)... -- 3 -- --
--------- ----------- --------- ---------
Net assets................................ $ 2,264 $44,385,164 $ 115 $ 15,844
========= =========== ========= =========
Net asset distribution by category:
Variable life policies.................... $ 2,264 $44,385,164 $ 115 $ 15,844
========= =========== ========= =========
Units outstanding, June 30, 2000............ 2,127 29,631,832 105 18,030
Net asset value per unit, June 30, 2000..... $1.064452 $ 1.497886 $1.096433 $0.878753

(a) For the period ending June 30, 2000, there were no transactions.

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

SA-3

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2000 (UNAUDITED)

DGPF DGPF DGPF DGPF
STRATEGIC DGPF EMERGING SOCIAL DGPF Aggressive DGPF U.S.
INCOME DEVON MARKETS AWARENESS REIT(a) Growth Growth
--------- --------- --------- --------- --------- ---------- -----------

ASSETS:
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............ -- -- -- -- -- -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- -- -- -- -- --
Investments in shares of Delaware Group
Premium Fund.............................. 16 16,766 736 4,964 -- 40,067 3,932
Investments in shares of INVESCO Variable
Investment Funds, Inc. (VIF).............. -- -- -- -- -- -- --
Investment in shares of Morgan Stanley
Universal Funds, Inc. (MSDW).............. -- -- -- -- -- -- --
Investment in shares of Goldman Sachs
Variable Insurance Trust.................. -- -- -- -- -- -- --
Investment in shares of Warburg Pincus
Trust..................................... -- -- -- -- -- -- --
Investment in shares of PIMCO Variable
Insurance Trust........................... -- -- -- -- -- -- --
Investment in shares of J.P. Morgan
Series Trust II........................... -- -- -- -- -- -- --
Investment in shares of AIM Variable
Insurance Funds........................... -- -- -- -- -- -- --
Investment in shares of The Alger American
Fund Portfolios........................... -- -- -- -- -- -- --
Investment in shares of Alliance Variable
Products Series Fund, Inc................. -- -- -- -- -- -- --
Investment in shares of Franklin Templeton
Insurance Products Trust (Class 2) ....... -- -- -- -- -- -- --
Receivable from Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)................................. -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total assets.............................. 16 16,766 736 4,964 -- 40,067 3,932

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company (Sponsor)... -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net assets................................ $ 16 $ 16,766 $ 736 $ 4,964 $ -- $ 40,067 $ 3,932
========= ========= ========= ========= ========= ========= =========

Net asset distribution by category:
Variable life policies.................... $ 16 $ 16,766 $ 736 $ 4,964 $ -- $ 40,067 $ 3,932
========= ========= ========= ========= ========= ========= =========

Units outstanding, June 30, 2000............ 16 15,099 821 5,071 -- 48,570 3,818
Net asset value per unit, June 30, 2000..... $1.005753 $1.110420 $0.897353 $0.978353 $1.000000 $0.824947 $1.029856

INVESCO INVESCO
VIF VIF MDSW
Equity Total Fixed
Income Return Income
---------- ---------- ------------

ASSETS:
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............ -- -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- --
Investments in shares of Delaware Group
Premium Fund.............................. -- -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc. (VIF).............. 416 14 --
Investment in shares of Morgan Stanley
Universal Funds, Inc. (MSDW).............. -- -- 30,582,707
Investment in shares of Goldman Sachs
Variable Insurance Trust.................. -- -- --
Investment in shares of Warburg Pincus
Trust..................................... -- -- --
Investment in shares of PIMCO Variable
Insurance Trust........................... -- -- --
Investment in shares of J.P. Morgan
Series Trust II........................... -- -- --
Investment in shares of AIM Variable
Insurance Funds........................... -- -- --
Investment in shares of The Alger American
Fund Portfolios........................... -- -- --
Investment in shares of Alliance Variable
Products Series Fund, Inc................. -- -- --
Investment in shares of Franklin Templeton
Insurance Products Trust (Class 2) ....... -- -- --
Receivable from Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)................................. -- -- 12
--------- --------- -----------
Total assets.............................. 416 14 30,582,719
LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company (Sponsor)... -- -- --
--------- --------- -----------
Net assets................................ $ 416 $ 14 $30,582,719
========= ========= ===========
Net asset distribution by category:
Variable life policies.................... $ 416 $ 14 $30,582,719
========= ========= ===========
Units outstanding, June 30, 2000............ 222 10 27,812,262
Net asset value per unit, June 30, 2000..... $1.878237 $1.334202 $ 1.099606

(a) For the period ending June 30, 2000, there were no transactions.

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

SA-4

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2000 (UNAUDITED)

Goldman Warburg
GOLDMAN Sachs VIT Goldman Pincus Warburg
SACHS VIT CORE Sachs Global Pincus Deutsche
CORE LARGE Small VIT Post- Small Equity
MSDW CAP Cap Capital Venture Company 500
TECHNOLOGY GROWTH(a) Equity(a) Growth(a) Capital(a) Growth(a) Index(a)
---------- ------------ ------------ ---------- ----------- --------- ---------

ASSETS:
Investments in shares of
Allmerica Investment Trust..... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products
Funds (VIP).................... -- -- -- -- -- -- --
Investment in shares of T. Rowe
Price International
Series, Inc.................... -- -- -- -- -- -- --
Investments in shares of Delaware
Group Premium Fund............. -- -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment
Funds, Inc. (VIF).............. -- -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc.
(MSDW)......................... 119,942 -- -- -- -- -- --
Investment in shares of Goldman
Sachs Variable Insurance
Trust.......................... -- -- -- -- -- -- --
Investment in shares of Warburg
Pincus Trust................... -- -- -- -- -- -- --
Investment in shares of Deutsche
Asset Management VIT Funds..... -- -- -- -- -- -- --
Investment in shares of PIMCO
Variable Insurance Trust....... -- -- -- -- -- -- --
Investment in shares of J.P.
Morgan Series Trust II......... -- -- -- -- -- -- --
Investment in shares of AIM
Variable Insurance Funds....... -- -- -- -- -- -- --
Investment in shares of The Alger
American Fund Portfolios....... -- -- -- -- -- -- --
Investment in shares of Alliance
Variable Products
Series Fund, Inc............... -- -- -- -- -- -- --
Investment in shares of Franklin
Templeton Insurance Products
Trust (Class 2) ............... -- -- -- -- -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company
(Sponsor)...................... -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total assets................... 119,942 -- -- -- -- -- --

LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor).............. -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net assets..................... $ 119,942 $ -- $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= ========= =========

Net asset distribution by
category:
Variable life policies......... $ 119,942 $ -- $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= ========= =========

Units outstanding, June 30,
2000........................... 99,564 -- -- -- -- -- --
Net asset value per unit,
June 30, 2000.................. $1.204681 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000

PIMCO
Total
Deutsche Return J.P.
Small Bond Morgan
Cap Portfolio Small
Index(a) II(a) Company(a)
--------- ------------ -----------

ASSETS:
Investments in shares of
Allmerica Investment Trust..... $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products
Funds (VIP).................... -- -- --
Investment in shares of T. Rowe
Price International
Series, Inc.................... -- -- --
Investments in shares of Delaware
Group Premium Fund............. -- -- --
Investments in shares of INVESCO
Variable Investment
Funds, Inc. (VIF).............. -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc.
(MSDW)......................... -- -- --
Investment in shares of Goldman
Sachs Variable Insurance
Trust.......................... -- -- --
Investment in shares of Warburg
Pincus Trust................... -- -- --
Investment in shares of Deutsche
Asset Management VIT Funds..... -- -- --
Investment in shares of PIMCO
Variable Insurance Trust....... -- -- --
Investment in shares of J.P.
Morgan Series Trust II......... -- -- --
Investment in shares of AIM
Variable Insurance Funds....... -- -- --
Investment in shares of The Alger
American Fund Portfolios....... -- -- --
Investment in shares of Alliance
Variable Products
Series Fund, Inc............... -- -- --
Investment in shares of Franklin
Templeton Insurance Products
Trust (Class 2) ............... -- -- --
Receivable from Allmerica
Financial Life Insurance and
Annuity Company
(Sponsor)...................... -- -- --
--------- --------- ---------
Total assets................... -- -- --
LIABILITIES:
Payable to Allmerica Financial
Life Insurance and Annuity
Company (Sponsor).............. -- -- --
--------- --------- ---------
Net assets..................... $ -- $ -- $ --
========= ========= =========
Net asset distribution by
category:
Variable life policies......... $ -- $ -- $ --
========= ========= =========
Units outstanding, June 30,
2000........................... -- -- --
Net asset value per unit,
June 30, 2000.................. $1.000000 $1.000000 $1.000000

(a) For the period ending June 30, 2000, there were no transactions.

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

SA-5

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
JUNE 30, 2000 (UNAUDITED)

Alliance
Growth
AIM Alger Alger and
AIM V.I. AIM American American Income
V.I. HIGH V.I. Small Leveraged (Class
GROWTH YIELD(a) Value(a) Capitalization AllCap(a) B)(a)
--------- --------- --------- -------------- --------- -----------

ASSETS:
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............ -- -- -- -- -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- -- -- -- -- --
Investments in shares of Delaware Group
Premium Fund.............................. -- -- -- -- -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc. (VIF).............. -- -- -- -- -- --
Investment in shares of Morgan Stanley
Universal Funds, Inc. (MSDW).............. -- -- -- -- -- --
Investment in shares of Goldman Sachs
Variable Insurance Trust.................. -- -- -- -- -- --
Investment in shares of Warburg Pincus
Trust..................................... -- -- -- -- -- --
Investment in shares of PIMCO Variable
Insurance Trust........................... -- -- -- -- -- --
Investment in shares of J.P. Morgan
Series Trust II........................... -- -- -- -- -- --
Investment in shares of AIM Variable
Insurance Funds........................... 81 -- -- -- -- --
Investment in shares of The Alger American
Fund Portfolios........................... -- -- -- 38 -- --
Investment in shares of Alliance Variable
Products Series Fund, Inc................. -- -- -- -- -- --
Investment in shares of Franklin Templeton
Insurance Products Trust (Class 2) ....... -- -- -- -- -- --
Receivable from Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)................................. -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Total assets.............................. 81 -- -- 38 -- --

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company (Sponsor)... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net assets................................ $ 81 $ -- $ -- $ 38 $ -- $ --
========= ========= ========= ========= ========= =========

Net asset distribution by category:
Variable life policies.................... $ 81 $ -- $ -- $ 38 $ -- $ --
========= ========= ========= ========= ========= =========

Units outstanding, June 30, 2000............ 82 -- -- 35 -- --
Net asset value per unit, June 30, 2000..... $0.991351 $1.000000 $1.000000 $1.068749 $1.000000 $1.000000

Alliance Templeton
Technology International
(Class B) Securities
---------- -------------

ASSETS:
Investments in shares of Allmerica
Investment Trust.......................... $ -- $ --
Investments in shares of Fidelity Variable
Insurance Products Funds (VIP)............ -- --
Investment in shares of T. Rowe Price
International Series, Inc................. -- --
Investments in shares of Delaware Group
Premium Fund.............................. -- --
Investments in shares of INVESCO Variable
Investment Funds, Inc. (VIF).............. -- --
Investment in shares of Morgan Stanley
Universal Funds, Inc. (MSDW).............. -- --
Investment in shares of Goldman Sachs
Variable Insurance Trust.................. -- --
Investment in shares of Warburg Pincus
Trust..................................... --
Investment in shares of PIMCO Variable
Insurance Trust........................... -- --
Investment in shares of J.P. Morgan
Series Trust II........................... -- --
Investment in shares of AIM Variable
Insurance Funds........................... -- --
Investment in shares of The Alger American
Fund Portfolios........................... -- --
Investment in shares of Alliance Variable
Products Series Fund, Inc................. 35 --
Investment in shares of Franklin Templeton
Insurance Products Trust (Class 2) ....... -- 35
Receivable from Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)................................. -- --
--------- ---------
Total assets.............................. 35 35
LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company (Sponsor)... -- --
--------- ---------
Net assets................................ $ 35 $ 35
========= =========
Net asset distribution by category:
Variable life policies.................... $ 35 $ 35
========= =========
Units outstanding, June 30, 2000............ 35 35
Net asset value per unit, June 30, 2000..... $1.002846 $1.005400

(a) For the period ending June 30, 2000, there were no transactions.

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

SA-6

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS

GROWTH INVESTMENT GRADE INCOME
------------------------------------------ ------------------------------------------
FOR THE FOR THE
FOR THE YEAR ENDED FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------- JUNE 30, --------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ 11,945 $ 23,481 $ 24,155 $1,059,112 $1,343,154 $882,578

EXPENSES:
Mortality and expense risk
fees......................... 2,394 4,376 9,398 57,467 91,954 72,441
Administrative expense fees.... 665 1,216 2,610 15,964 25,544 20,123
--------- -------- -------- ---------- ---------- --------
Total expenses................. 3,059 5,592 12,008 73,431 117,498 92,564
--------- -------- -------- ---------- ---------- --------
Net investment income
(loss)..................... 8,886 17,889 12,147 985,681 1,225,656 790,014
--------- -------- -------- ---------- ---------- --------

REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 547,020 286,696 21,129 -- 18,099 --
Net realized gain (loss) from
sales of investments......... 18,114 47,530 (4,698) (41,757) (42,607) 20,005
--------- -------- -------- ---------- ---------- --------
Net realized gain (loss)..... 565,134 334,226 16,431 (41,757) (24,508) 20,005
Net unrealized gain (loss)..... (522,292) 456,438 330,418 (86,342) (1,572,308) 166,355
--------- -------- -------- ---------- ---------- --------
Net realized and unrealized
gain (loss)................ 42,842 790,664 346,849 (128,099) (1,596,816) 186,360
--------- -------- -------- ---------- ---------- --------
Net increase (decrease) in
net assets from
operations................. $ 51,728 $808,553 $358,996 $ 857,582 $ (371,160) $976,374
========= ======== ======== ========== ========== ========

MONEY MARKET
------------------------------------------
FOR THE
FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $64,197 $63,607 $222,239
EXPENSES:
Mortality and expense risk
fees......................... 6,689 5,960 17,011
Administrative expense fees.... 1,859 1,656 4,725
------- ------- --------
Total expenses................. 8,548 7,616 21,736
------- ------- --------
Net investment income
(loss)..................... 55,649 55,991 200,503
------- ------- --------
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................. $55,649 $55,991 $200,503
======= ======= ========

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

SA-7

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

EQUITY INDEX GOVERNMENT BOND
------------------------------------------ ------------------------------------------
FOR THE FOR THE
FOR THE YEAR ENDED FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------- JUNE 30, --------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ 16,825 $ 130,745 $ 340,554 $ 29,291 $1,412 $ 911

EXPENSES:
Mortality and expense risk
fees......................... 7,640 76,555 96,105 883 61 80
Administrative expense fees.... 2,123 21,267 26,697 245 17 23
--------- ----------- ---------- -------- ------ ------
Total expenses................. 9,763 97,822 122,802 1,128 78 103
--------- ----------- ---------- -------- ------ ------
Net investment income
(loss)..................... 7,062 32,923 217,752 28,163 1,334 808
--------- ----------- ---------- -------- ------ ------

REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 396,801 3,576 1,091,932 -- -- --
Net realized gain (loss) from
sales of investments......... 62,214 11,658,579 313,038 204 (153) 926
--------- ----------- ---------- -------- ------ ------
Net realized gain (loss)..... 459,015 11,662,155 1,404,970 204 (153) 926
Net unrealized gain (loss)..... (445,490) (7,166,459) 5,974,791 (3,021) (596) 83
--------- ----------- ---------- -------- ------ ------
Net realized and unrealized
gain (loss)................ 13,525 4,495,696 7,379,761 (2,817) (749) 1,009
--------- ----------- ---------- -------- ------ ------
Net increase (decrease) in
net assets from
operations................. $ 20,587 $4,528,619 $7,597,513 $ 25,346 $ 585 $1,817
========= =========== ========== ======== ====== ======

SELECT AGGRESSIVE GROWTH
------------------------------------------
FOR THE
FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ -- $ -- $ --
EXPENSES:
Mortality and expense risk
fees......................... 4,132 4,457 3,092
Administrative expense fees.... 1,148 1,238 858
--------- -------- -------
Total expenses................. 5,280 5,695 3,950
--------- -------- -------
Net investment income
(loss)..................... (5,280) (5,695) (3,950)
--------- -------- -------
REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 478,859 -- --
Net realized gain (loss) from
sales of investments......... 20,423 16,919 (3,058)
--------- -------- -------
Net realized gain (loss)..... 499,282 16,919 (3,058)
Net unrealized gain (loss)..... (394,331) 356,020 42,784
--------- -------- -------
Net realized and unrealized
gain (loss)................ 104,951 372,939 39,726
--------- -------- -------
Net increase (decrease) in
net assets from
operations................. $ 99,671 $367,244 $35,776
========= ======== =======

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

SA-8

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

SELECT GROWTH SELECT GROWTH AND INCOME
------------------------------------------ ------------------------------------------
FOR THE FOR THE
FOR THE YEAR ENDED FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------- JUNE 30, --------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ -- $ 8,328 $ 7,079 $ 6,655 $ 3,501 $ 2,753

EXPENSES:
Mortality and expense risk
fees......................... 42,928 65,337 45,570 2,642 1,457 1,234
Administrative expense fees.... 11,925 18,150 12,659 734 405 342
----------- ---------- ---------- --------- ------- -------
Total expenses................. 54,853 83,487 58,229 3,376 1,862 1,576
----------- ---------- ---------- --------- ------- -------
Net investment income
(loss)..................... (54,853) (75,159) (51,150) 3,279 1,639 1,177
----------- ---------- ---------- --------- ------- -------

REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 2,411,948 529,243 93,491 288,694 23,247 922
Net realized gain (loss) from
sales of investments......... 228,527 518,323 576,009 2,098 1,849 1,778
----------- ---------- ---------- --------- ------- -------
Net realized gain (loss)..... 2,640,475 1,047,566 669,500 290,792 25,096 2,700
Net unrealized gain (loss)..... (3,133,334) 3,239,541 2,339,939 (256,680) 22,927 25,056
----------- ---------- ---------- --------- ------- -------
Net realized and unrealized
gain (loss)................ (492,859) 4,287,107 3,009,439 34,112 48,023 27,756
----------- ---------- ---------- --------- ------- -------
Net increase (decrease) in
net assets from
operations................. $ (547,712) $4,211,948 $2,958,289 $ 37,391 $49,662 $28,933
=========== ========== ========== ========= ======= =======

SELECT VALUE OPPORTUNITY
------------------------------------------
FOR THE
FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ 86,459 $ 118 $ 5,317
EXPENSES:
Mortality and expense risk
fees......................... 48,207 50,465 1,990
Administrative expense fees.... 13,392 14,018 553
---------- ----------- -------
Total expenses................. 61,599 64,483 2,543
---------- ----------- -------
Net investment income
(loss)..................... 24,860 (64,365) 2,774
---------- ----------- -------
REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 225,949 1,173,968 1,651
Net realized gain (loss) from
sales of investments......... 12,127 (58,716) (3,746)
---------- ----------- -------
Net realized gain (loss)..... 238,076 1,115,252 (2,095)
Net unrealized gain (loss)..... 2,271,004 (2,332,303) 16,497
---------- ----------- -------
Net realized and unrealized
gain (loss)................ 2,509,080 (1,217,051) 14,402
---------- ----------- -------
Net increase (decrease) in
net assets from
operations................. $2,533,940 $(1,281,416) $17,176
========== =========== =======

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

SA-9

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

SELECT INTERNATIONAL EQUITY SELECT CAPITAL APPRECIATION
------------------------------------------ ------------------------------------------
FOR THE FOR THE
FOR THE YEAR ENDED FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------- JUNE 30, --------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ 31,722 $ -- $ 117,829 $ -- $ -- $ --

EXPENSES:
Mortality and expense risk
fees......................... 13,479 33,034 42,253 1,713 1,316 715
Administrative expense fees.... 3,744 9,177 11,737 475 365 199
--------- ---------- ---------- ------- ------- -------
Total expenses................. 17,223 42,211 53,990 2,188 1,681 914
--------- ---------- ---------- ------- ------- -------
Net investment income
(loss)..................... 14,499 (42,211) 63,839 (2,188) (1,681) (914)
--------- ---------- ---------- ------- ------- -------

REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 216,644 -- -- 30,506 412 37,550
Net realized gain (loss) from
sales of investments......... 93,191 803,256 77,352 7,427 28 (803)
--------- ---------- ---------- ------- ------- -------
Net realized gain (loss)..... 309,835 803,256 77,352 37,933 440 36,747
Net unrealized gain (loss)..... (410,157) 900,525 1,085,145 7,931 74,213 (13,375)
--------- ---------- ---------- ------- ------- -------
Net realized and unrealized
gain (loss)................ (100,322) 1,703,781 1,162,497 45,864 74,653 23,372
--------- ---------- ---------- ------- ------- -------
Net increase (decrease) in
net assets from
operations................. $ (85,823) $1,661,570 $1,226,336 $43,676 $72,972 $22,458
========= ========== ========== ======= ======= =======

SELECT EMERGING MARKETS
---------------------------------------------
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD
JUNE 30, DECEMBER 31, 11/9/98*
2000 1999 TO 12/31/98
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ -------------

INVESTMENT INCOME:
Dividends...................... $ 347 $ 100 $ --
EXPENSES:
Mortality and expense risk
fees......................... 240 32 --
Administrative expense fees.... 67 8 --
-------- ------ ----
Total expenses................. 307 40 --
-------- ------ ----
Net investment income
(loss)..................... 40 60 --
-------- ------ ----
REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... -- -- --
Net realized gain (loss) from
sales of investments......... 339 21 --
-------- ------ ----
Net realized gain (loss)..... 339 21 --
Net unrealized gain (loss)..... (12,457) 5,716 --
-------- ------ ----
Net realized and unrealized
gain (loss)................ (12,118) 5,737 --
-------- ------ ----
Net increase (decrease) in
net assets from
operations................. $(12,078) $5,797 $ --
======== ====== ====

* Date of initial investment.

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

SA-10

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

FIDELITY VIP HIGH INCOME
SELECT STRATEGIC GROWTH ------------------------------------------
--------------------------- FOR THE
FOR THE FOR THE FOR THE YEAR ENDED
PERIOD ENDED PERIOD PERIOD ENDED DECEMBER 31,
JUNE 30, 3/5/99* JUNE 30, --------------------------
2000 TO 12/31/99 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ 4 $ 40 $ 18,351 $ 8,271 $ 3,501

EXPENSES:
Mortality and expense risk fees........... 82 16 1,852 613 277
Administrative expense fees............... 22 4 514 170 77
------ ---- -------- ------- -------
Total expenses............................ 104 20 2,366 783 354
------ ---- -------- ------- -------
Net investment income (loss)............ (100) 20 15,985 7,488 3,147
------ ---- -------- ------- -------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ 654 -- -- 309 2,225
Net realized gain (loss) from sales of
investments............................. (274) (17) (34,957) (2,862) (683)
------ ---- -------- ------- -------
Net realized gain (loss)................ 380 (17) (34,957) (2,553) 1,542
Net unrealized gain (loss)................ 5,437 918 (45,623) 2,236 (8,346)
------ ---- -------- ------- -------
Net realized and unrealized gain
(loss)................................ 5,817 901 (80,580) (317) (6,804)
------ ---- -------- ------- -------
Net increase (decrease) in net assets
from operations....................... $5,717 $921 $(64,595) $ 7,171 $(3,657)
====== ==== ======== ======= =======

FIDELITY VIP EQUITY-INCOME
------------------------------------------
FOR THE
FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ 6,947 $2,402 $ 898
EXPENSES:
Mortality and expense risk fees........... 1,553 1,158 445
Administrative expense fees............... 432 321 124
-------- ------ -------
Total expenses............................ 1,985 1,479 569
-------- ------ -------
Net investment income (loss)............ 4,962 923 329
-------- ------ -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ 26,171 5,309 3,197
Net realized gain (loss) from sales of
investments............................. (3,153) 3,125 802
-------- ------ -------
Net realized gain (loss)................ 23,018 8,434 3,999
Net unrealized gain (loss)................ (28,295) (277) 5,752
-------- ------ -------
Net realized and unrealized gain
(loss)................................ (5,277) 8,157 9,751
-------- ------ -------
Net increase (decrease) in net assets
from operations....................... $ (315) $9,080 $10,080
======== ====== =======

* Date of initial investment.

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

SA-11

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

FIDELITY VIP GROWTH FIDELITY VIP OVERSEAS
------------------------------------------ ------------------------------------------
FOR THE FOR THE
FOR THE YEAR ENDED FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------- JUNE 30, --------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ 2,189 $ 2,233 $ 1,819 $ 1,606 $ 1,054 $1,056

EXPENSES:
Mortality and expense risk
fees......................... 6,427 5,307 1,810 344 393 265
Administrative expense fees.... 1,785 1,474 502 95 109 73
-------- -------- -------- ------- ------- ------
Total expenses................. 8,212 6,781 2,312 439 502 338
-------- -------- -------- ------- ------- ------
Net investment income
(loss)..................... (6,023) (4,548) (493) 1,167 552 718
-------- -------- -------- ------- ------- ------

REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 217,791 140,400 47,583 10,112 1,699 3,112
Net realized gain (loss) from
sales of investments......... 22,663 114,230 37,911 6,025 1,721 165
-------- -------- -------- ------- ------- ------
Net realized gain (loss)..... 240,454 254,630 85,494 16,137 3,420 3,277
Net unrealized gain (loss)..... (90,597) 242,219 115,549 11,475 30,111 1,086
-------- -------- -------- ------- ------- ------
Net realized and unrealized
gain (loss)................ 149,857 496,849 201,043 27,612 33,531 4,363
-------- -------- -------- ------- ------- ------
Net increase (decrease) in
net assets from
operations................. $143,834 $492,301 $200,550 $28,779 $34,083 $5,081
======== ======== ======== ======= ======= ======

FIDELITY VIP II ASSET MANAGER
------------------------------------------
FOR THE
FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INVESTMENT INCOME:
Dividends...................... $ 29,783 $20,569 $11,971
EXPENSES:
Mortality and expense risk
fees......................... 616 976 2,083
Administrative expense fees.... 171 271 579
--------- ------- -------
Total expenses................. 787 1,247 2,662
--------- ------- -------
Net investment income
(loss)..................... 28,996 19,322 9,309
--------- ------- -------
REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 70,166 26,054 35,913
Net realized gain (loss) from
sales of investments......... (1,487) 1,785 5,268
--------- ------- -------
Net realized gain (loss)..... 68,679 27,839 41,181
Net unrealized gain (loss)..... (103,491) 12,862 15,917
--------- ------- -------
Net realized and unrealized
gain (loss)................ (34,812) 40,701 57,098
--------- ------- -------
Net increase (decrease) in
net assets from
operations................. $ (5,816) $60,023 $66,407
========= ======= =======

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

SA-12

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

T. ROWE PRICE INTERNATIONAL STOCK
FIDELITY VIP II INDEX 500 ------------------------------------------
--------------------------- FOR THE
FOR THE FOR THE FOR THE YEAR ENDED
PERIOD ENDED PERIOD PERIOD ENDED DECEMBER 31,
JUNE 30, 5/4/99* TO JUNE 30, --------------------------
2000 12/31/99 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ 526,695 $ -- $ -- $ 2,334 $ 4,272

EXPENSES:
Mortality and expense risk fees........... 71,953 44,356 2,004 1,945 1,046
Administrative expense fees............... 19,988 12,321 557 540 291
----------- ---------- -------- -------- -------
Total expenses............................ 91,941 56,677 2,561 2,485 1,337
----------- ---------- -------- -------- -------
Net investment income (loss)............ 434,754 (56,677) (2,561) (151) 2,935
----------- ---------- -------- -------- -------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ 230,232 -- -- 7,335 1,508
Net realized gain (loss) from sales of
investments............................. 54,224 1,274 11,104 1,538 318
----------- ---------- -------- -------- -------
Net realized gain (loss)................ 284,456 1,274 11,104 8,873 1,826
Net unrealized gain (loss)................ (1,064,101) 4,566,606 (18,281) 144,131 23,676
----------- ---------- -------- -------- -------
Net realized and unrealized gain
(loss)................................ (779,645) 4,567,880 (7,177) 153,004 25,502
----------- ---------- -------- -------- -------
Net increase (decrease) in net assets
from operations....................... $ (344,891) $4,511,203 $ (9,738) $152,853 $28,437
=========== ========== ======== ======== =======

DGPF DGPF DGPF
GROWTH CAPITAL CASH
& INCOME RESERVES RESERVES
----------- ----------- -----------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
4/5/00* TO 4/5/00* TO 4/28/00* TO
06/30/00 06/30/00 06/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ 231 $ -- $1,650
EXPENSES:
Mortality and expense risk fees........... 29 -- 166
Administrative expense fees............... 8 -- 46
------- ---- ------
Total expenses............................ 37 -- 212
------- ---- ------
Net investment income (loss)............ 194 -- 1,438
------- ---- ------
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)................ (1,678) -- --
------- ---- ------
Net realized and unrealized gain
(loss)................................ (1,678) -- --
------- ---- ------
Net increase (decrease) in net assets
from operations....................... $(1,484) $ -- $1,438
======= ==== ======

* Date of initial investment.

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

SA-13

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

DGPF
DGPF DELAWARE DGPF INTERNATIONAL EQUITY
DELCAP BALANCED ------------------------------------------
----------- ----------- FOR THE
FOR THE FOR THE FOR THE YEAR ENDED
PERIOD PERIOD PERIOD ENDED DECEMBER 31,
3/8/00* TO 3/8/00* TO JUNE 30, --------------------------
6/30/00 6/30/00 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ------------ ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ -- $ 6 $ 965,713 $ 183,862 $ 11,680

EXPENSES:
Mortality and expense risk fees........... 9 3 58,105 39,715 13,208
Administrative expense fees............... 3 -- 16,141 11,032 3,669
---- --- ----------- ---------- --------
Total expenses............................ 12 3 74,246 50,747 16,877
---- --- ----------- ---------- --------
Net investment income (loss)............ (12) 3 891,467 133,115 (5,197)
---- --- ----------- ---------- --------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ 14 2 791,646 13,428 --
Net realized gain (loss) from sales of
investments............................. -- -- 2,663 20,862 7,893
---- --- ----------- ---------- --------
Net realized gain (loss)................ 14 2 794,309 34,290 7,893
Net unrealized gain (loss)................ 783 84 (1,555,989) 2,827,542 442,761
---- --- ----------- ---------- --------
Net realized and unrealized gain
(loss)................................ 797 86 (761,680) 2,861,832 450,654
---- --- ----------- ---------- --------
Net increase (decrease) in net assets
from operations....................... $785 $89 $ 129,787 $2,994,947 $445,457
==== === =========== ========== ========

DGPF DGPF
SMALL CAP DGPF STRATEGIC
VALUE TREND INCOME
----------- ----------- -----------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
3/8/00* TO 3/8/00* TO 3/8/00* TO
6/30/00 6/30/00 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ -- $ -- $ --
EXPENSES:
Mortality and expense risk fees........... -- 7 --
Administrative expense fees............... -- 2 --
---- ------ ----
Total expenses............................ -- 9 --
---- ------ ----
Net investment income (loss)............ -- (9) --
---- ------ ----
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ -- 8 --
Net realized gain (loss) from sales of
investments............................. -- -- --
---- ------ ----
Net realized gain (loss)................ -- 8 --
Net unrealized gain (loss)................ -- 1,007 --
---- ------ ----
Net realized and unrealized gain
(loss)................................ -- 1,015 --
---- ------ ----
Net increase (decrease) in net assets
from operations....................... $ -- $1,006 $ --
==== ====== ====

* Date of initial investment.

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

SA-14

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

DGPF DGPF DGPF DGPF
DGPF EMERGING SOCIAL AGGRESSIVE U.S.
DEVON MARKETS AWARENESS GROWTH GROWTH
----------- ----------- ----------- ----------- -----------
FOR THE FOR THE FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD PERIOD PERIOD
3/8/00* TO 3/8/00* TO 4/3/00* TO 3/8/00* TO 4/3/00* TO
6/30/00 6/30/00 6/30/00 6/30/00 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ -- $ 2 $ -- $ -- $ --

EXPENSES:
Mortality and expense risk fees........... 7 -- -- 29 1
Administrative expense fees............... 2 -- -- 8 --
----- ---------- ---- ----- ----
Total expenses............................ 9 -- -- 37 1
----- ---------- ---- ----- ----
Net investment income (loss)............ (9) 2 -- (37) (1)
----- ---------- ---- ----- ----

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ -- -- -- 3 --
Net realized gain (loss) from sales of
investments............................. -- (1) -- 1 --
----- ---------- ---- ----- ----
Net realized gain (loss)................ -- (1) -- 4 --
Net unrealized gain (loss)................ (739) (1) (76) (224) 173
----- ---------- ---- ----- ----
Net realized and unrealized gain
(loss)................................ (739) (2) (76) (220) 173
----- ---------- ---- ----- ----
Net increase (decrease) in net assets
from operations....................... $(748) $ -- $(76) $(257) $172
===== ========== ==== ===== ====

INVESCO VIF EQUITY INCOME
------------------------------------------
FOR THE
FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ -- $ 123 $ 150
EXPENSES:
Mortality and expense risk fees........... 9 31 30
Administrative expense fees............... 3 8 8
------- ------ ------
Total expenses............................ 12 39 38
------- ------ ------
Net investment income (loss)............ (12) 84 112
------- ------ ------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ -- 55 311
Net realized gain (loss) from sales of
investments............................. 2,058 234 401
------- ------ ------
Net realized gain (loss)................ 2,058 289 712
Net unrealized gain (loss)................ (1,827) 947 312
------- ------ ------
Net realized and unrealized gain
(loss)................................ 231 1,236 1,024
------- ------ ------
Net increase (decrease) in net assets
from operations....................... $ 219 $1,320 $1,136
======= ====== ======

* Date of initial investment.

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

SA-15

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

INVESCO VIF TOTAL RETURN
------------------------------------------
FOR THE
FOR THE YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INVESTMENT INCOME:
Dividends................................. $ -- $ 642 $1,276

EXPENSES:
Mortality and expense risk fees........... 8 116 201
Administrative expense fees............... 2 33 56
------- ------- ------
Total expenses............................ 10 149 257
------- ------- ------
Net investment income (loss)............ (10) 493 1,019
------- ------- ------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ -- 107 1,325
Net realized gain (loss) from sales of
investments............................. 938 4,008 553
------- ------- ------
Net realized gain (loss)................ 938 4,115 1,878
Net unrealized gain (loss)................ (1,536) (5,835) 2,122
------- ------- ------
Net realized and unrealized gain
(loss)................................ (598) (1,720) 4,000
------- ------- ------
Net increase (decrease) in net assets
from operations....................... $ (608) $(1,227) $5,019
======= ======= ======

MSDW
MSDW FIXED INCOME TECHNOLOGY
------------------------------------------- -----------------
FOR THE FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD PERIOD
JUNE 30, DECEMBER 31, 2/17/98* 5/31/00*
2000 1999 TO 12/31/98 TO 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ----------- -----------------

INVESTMENT INCOME:
Dividends................................. $ -- $ 1,356,031 $ 648,460 $ --
EXPENSES:
Mortality and expense risk fees........... 41,065 61,310 28,094 --
Administrative expense fees............... 11,408 17,031 7,804 --
-------- ----------- --------- -------
Total expenses............................ 52,473 78,341 35,898 --
-------- ----------- --------- -------
Net investment income (loss)............ (52,473) 1,277,690 612,562 --
-------- ----------- --------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from portfolio
sponsors................................ -- 3,424 256,451 --
Net realized gain (loss) from sales of
investments............................. (16,788) (11,666) 8,635 31
-------- ----------- --------- -------
Net realized gain (loss)................ (16,788) (8,242) 265,086 31
Net unrealized gain (loss)................ 991,055 (1,680,097) (179,067) 20,379
-------- ----------- --------- -------
Net realized and unrealized gain
(loss)................................ 974,267 (1,688,339) 86,019 20,410
-------- ----------- --------- -------
Net increase (decrease) in net assets
from operations....................... $921,794 $ (410,649) $ 698,581 $20,410
======== =========== ========= =======

* Date of initial investment.

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

SA-16

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

ALGER
AIM AMERICAN ALLIANCE TEMPLETON
V.I. SMALL TECHNOLOGY INTERNATIONAL
GROWTH CAPITALIZATION (CLASS B) SECURITIES
--------------- --------------- --------------- ---------------
FOR THE FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD PERIOD
6/14/00* TO 6/14/00* TO 6/14/00* TO 6/14/00* TO
6/30/00 6/30/00 6/30/00 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- --------------- --------------- ---------------

INVESTMENT INCOME:
Dividends................................. $ -- $ -- $ -- $ --

EXPENSES:
Mortality and expense risk fees........... -- -- -- --
Administrative expense fees............... -- -- -- --
----------- ----------- ----------- -----------
Total expenses............................ -- -- -- --
----------- ----------- ----------- -----------
Net investment income (loss)............ -- -- -- --
----------- ----------- ----------- -----------

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)................ (1) 2 -- --
----------- ----------- ----------- -----------
Net realized and unrealized gain
(loss)................................. (1) 2 -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations........................ $ (1) $ 2 $ -- $ --
=========== =========== =========== ===========

* Date of initial investment.

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

SA-17

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS

GROWTH INVESTMENT GRADE INCOME
---------------------------------------- ---------------------------------------
YEAR ENDED PERIOD YEAR ENDED
PERIOD ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, ------------------------- JUNE 30, -------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ----------- ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 8,886 $ 17,889 $ 12,147 $ 985,681 $1,225,656 $ 790,014
Net realized gain (loss)....... 565,134 334,226 16,431 (41,757) (24,508) 20,005
Net unrealized gain (loss)..... (522,292) 456,438 330,418 (86,342) (1,572,308) 166,355
---------- ---------- ---------- ----------- ----------- -----------
Net increase (decrease) in net
assets from operations....... 51,728 808,553 358,996 857,582 (371,160) 976,374
---------- ---------- ---------- ----------- ----------- -----------

FROM POLICY TRANSACTIONS:
Net premiums................... 558,137 873,749 675,094 13,248,581 8,011,892 2,981,137
Terminations................... (18,202) (337,479) (48,810) (72,773) (13,958) (53,707)
Insurance and other charges.... (17,851) (13,900) (7,692) (407,749) (633,839) (451,085)
Transfers between sub-accounts
(including fixed account),
net.......................... 350,356 540,030 (72,668) 1,823,188 2,113,615 2,055,119
Other transfers from (to) the
General Account.............. (2,760) 116,813 492 (221) (6,858) 892
Net increase (decrease) in
investment by Sponsor........ -- -- -- -- -- (265)
---------- ---------- ---------- ----------- ----------- -----------
Net increase (decrease) in net
assets from policy
transactions................. 869,680 1,179,213 546,416 14,591,026 9,470,852 4,532,091
---------- ---------- ---------- ----------- ----------- -----------
Net increase (decrease) in net
assets....................... 921,408 1,987,766 905,412 15,448,608 9,099,692 5,508,465

NET ASSETS:
Beginning of period............ 4,668,492 2,680,726 1,775,314 24,452,772 15,353,080 9,844,615
---------- ---------- ---------- ----------- ----------- -----------
End of period.................. $5,589,900 $4,668,492 $2,680,726 $39,901,380 $24,452,772 $15,353,080
========== ========== ========== =========== =========== ===========

MONEY MARKET
----------------------------------------
PERIOD YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, --------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ------------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 55,649 $ 55,991 $ 200,503
Net realized gain (loss)....... -- -- --
Net unrealized gain (loss)..... -- -- --
----------- ---------- ------------
Net increase (decrease) in net
assets from operations....... 55,649 55,991 200,503
----------- ---------- ------------
FROM POLICY TRANSACTIONS:
Net premiums................... 3,887,116 6,325,820 1,928,083
Terminations................... (5,029) (69,826) (47,901)
Insurance and other charges.... (367,719) (709,087) (830,359)
Transfers between sub-accounts
(including fixed account),
net.......................... (8,440,040) (391,608) (29,510,393)
Other transfers from (to) the
General Account.............. 3,585 (10,636) (771)
Net increase (decrease) in
investment by Sponsor........ -- -- --
----------- ---------- ------------
Net increase (decrease) in net
assets from policy
transactions................. (4,922,087) 5,144,663 (28,461,341)
----------- ---------- ------------
Net increase (decrease) in net
assets....................... (4,866,438) 5,200,654 (28,260,838)
NET ASSETS:
Beginning of period............ 5,440,280 239,626 28,500,464
----------- ---------- ------------
End of period.................. $ 573,842 $5,440,280 $ 239,626
=========== ========== ============

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

SA-18

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

EQUITY INDEX GOVERNMENT BOND
----------------------------------------- ---------------------------------------
YEAR ENDED PERIOD YEAR ENDED
PERIOD ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, -------------------------- JUNE 30, -------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ----------- ----------- ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 7,062 $ 32,923 $ 217,752 $ 28,163 $ 1,334 $ 808
Net realized gain (loss)....... 459,015 11,662,155 1,404,970 204 (153) 926
Net unrealized gain (loss)..... (445,490) (7,166,459) 5,974,791 (3,021) (596) 83
---------- ------------ ----------- ---------- -------- --------
Net increase (decrease) in net
assets from operations....... 20,587 4,528,619 7,597,513 25,346 585 1,817
---------- ------------ ----------- ---------- -------- --------

FROM POLICY TRANSACTIONS:
Net premiums................... 1,029,386 2,363,320 17,533,507 73,012 12,424 13,471
Terminations................... (117,500) (172,583) (86,149) (2,761) (12,517) (81)
Insurance and other charges.... (63,984) (587,637) (998,917) (9,009) (554) (216)
Transfers between sub-accounts
(including fixed account),
net.......................... 719,809 (49,801,441) 13,535,625 918,625 3,007 (30,874)
Other transfers from (to) the
General Account.............. 912 (2,377) 5,188 84 (583) (389)
Net increase (decrease) in
investment by Sponsor........ -- -- -- -- -- --
---------- ------------ ----------- ---------- -------- --------
Net increase (decrease) in net
assets from policy
transactions................. 1,568,623 (48,200,718) 29,989,254 979,951 1,777 (18,089)
---------- ------------ ----------- ---------- -------- --------
Net increase (decrease) in net
assets....................... 1,589,210 (43,672,099) 37,586,767 1,005,297 2,362 (16,272)

NET ASSETS:
Beginning of period............ 2,458,568 46,130,667 8,543,900 25,700 23,338 39,610
---------- ------------ ----------- ---------- -------- --------
End of period.................. $4,047,778 $ 2,458,568 $46,130,667 $1,030,997 $ 25,700 $ 23,338
========== ============ =========== ========== ======== ========

SELECT AGGRESSIVE GROWTH
---------------------------------------
PERIOD YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, -------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (5,280) $ (5,695) $ (3,950)
Net realized gain (loss)....... 499,282 16,919 (3,058)
Net unrealized gain (loss)..... (394,331) 356,020 42,784
---------- ---------- --------
Net increase (decrease) in net
assets from operations....... 99,671 367,244 35,776
---------- ---------- --------
FROM POLICY TRANSACTIONS:
Net premiums................... 613,142 298,089 448,702
Terminations................... (27,245) (29,100) (76,946)
Insurance and other charges.... (29,000) (29,164) (18,498)
Transfers between sub-accounts
(including fixed account),
net.......................... 659,849 (17,644) 181,020
Other transfers from (to) the
General Account.............. 1,655 (17,822) (3,910)
Net increase (decrease) in
investment by Sponsor........ -- -- --
---------- ---------- --------
Net increase (decrease) in net
assets from policy
transactions................. 1,218,401 204,359 530,368
---------- ---------- --------
Net increase (decrease) in net
assets....................... 1,318,072 571,603 566,144
NET ASSETS:
Beginning of period............ 1,376,802 805,199 239,055
---------- ---------- --------
End of period.................. $2,694,874 $1,376,802 $805,199
========== ========== ========

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

SA-19

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

SELECT GROWTH SELECT GROWTH AND INCOME
---------------------------------------- ----------------------------------------
YEAR ENDED YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, ------------------------- JUNE 30, -------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (54,853) $ (75,159) $ (51,150) $ 3,279 $ 1,639 $ 1,177
Net realized gain (loss)....... 2,640,475 1,047,566 669,500 290,792 25,096 2,700
Net unrealized gain (loss)..... (3,133,334) 3,239,541 2,339,939 (256,680) 22,927 25,056
----------- ----------- ----------- ---------- -------- --------
Net increase (decrease) in net
assets from operations....... (547,712) 4,211,948 2,958,289 37,391 49,662 28,933
----------- ----------- ----------- ---------- -------- --------

FROM POLICY TRANSACTIONS:
Net premiums................... 1,266,496 3,049,445 2,111,416 399,774 88,966 155,220
Terminations................... (11,517) (33,196) (97,238) (19,787) (7,618) (44,778)
Insurance and other charges.... (214,033) (345,255) (281,352) (24,972) (5,494) (7,462)
Transfers between sub-accounts
(including fixed account),
net.......................... 499,457 2,130,460 (952,256) 991,299 3,125 (70,127)
Other transfers from (to) the
General Account.............. 4,165 (8,787) 4,794 1,566 (639) (1,320)
Net increase (decrease) in
investment by Sponsor........ -- -- -- -- -- --
----------- ----------- ----------- ---------- -------- --------
Net increase (decrease) in net
assets from policy
transactions................. 1,544,568 4,792,667 785,364 1,347,880 78,340 31,533
----------- ----------- ----------- ---------- -------- --------
Net increase (decrease) in net
assets....................... 996,856 9,004,615 3,743,653 1,385,271 128,002 60,466

NET ASSETS:
Beginning of period............ 19,730,375 10,725,760 6,982,107 360,630 232,628 172,162
----------- ----------- ----------- ---------- -------- --------
End of period.................. $20,727,231 $19,730,375 $10,725,760 $1,745,901 $360,630 $232,628
=========== =========== =========== ========== ======== ========

SELECT VALUE OPPORTUNITY
----------------------------------------
YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 24,860 $ (64,365) $ 2,774
Net realized gain (loss)....... 238,076 1,115,252 (2,095)
Net unrealized gain (loss)..... 2,271,004 (2,332,303) 16,497
----------- ----------- --------
Net increase (decrease) in net
assets from operations....... 2,533,940 (1,281,416) 17,176
----------- ----------- --------
FROM POLICY TRANSACTIONS:
Net premiums................... 2,917,931 7,573,904 245,642
Terminations................... (98,728) (10,156) (32,190)
Insurance and other charges.... (333,045) (504,046) (12,119)
Transfers between sub-accounts
(including fixed account),
net.......................... (1,785,297) 14,728,048 182,286
Other transfers from (to) the
General Account.............. (35) 3,590 (2,227)
Net increase (decrease) in
investment by Sponsor........ -- -- --
----------- ----------- --------
Net increase (decrease) in net
assets from policy
transactions................. 700,826 21,791,340 381,392
----------- ----------- --------
Net increase (decrease) in net
assets....................... 3,234,766 20,509,924 398,568
NET ASSETS:
Beginning of period............ 21,143,526 633,602 235,034
----------- ----------- --------
End of period.................. $24,378,292 $21,143,526 $633,602
=========== =========== ========

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

SA-20

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

SELECT INTERNATIONAL EQUITY SELECT CAPITAL APPRECIATION
---------------------------------------- ----------------------------------------
YEAR ENDED YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, ------------------------- JUNE 30, -------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 14,499 $ (42,211) $ 63,839 $ (2,188) $ (1,681) $ (914)
Net realized gain (loss)....... 309,835 803,256 77,352 37,933 440 36,747
Net unrealized gain (loss)..... (410,157) 900,525 1,085,145 7,931 74,213 (13,375)
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) in net
assets from operations....... (85,823) 1,661,570 1,226,336 43,676 72,972 22,458
---------- ---------- ---------- -------- -------- --------

FROM POLICY TRANSACTIONS:
Net premiums................... 383,850 1,382,581 1,910,773 307,019 118,843 105,063
Terminations................... (43,865) (40,201) (85,614) (12,102) (14,254) (8,341)
Insurance and other charges.... (64,131) (135,408) (257,943) (15,465) (9,399) (5,861)
Transfers between sub-accounts
(including fixed account),
net.......................... 276,510 (5,542,260) 655,125 213,820 4,812 69,728
Other transfers from (to) the
General Account.............. 668 (5,159) (6,961) 386 (4,275) (344)
Net increase (decrease) in
investment by Sponsor........ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) in net
assets from policy
transactions................. 553,032 (4,340,447) 2,215,380 493,658 95,727 160,245
---------- ---------- ---------- -------- -------- --------
Net increase (decrease) in net
assets....................... 467,209 (2,678,877) 3,441,716 537,334 168,699 182,703

NET ASSETS:
Beginning of period............ 6,399,665 9,078,542 5,636,826 416,787 248,088 65,385
---------- ---------- ---------- -------- -------- --------
End of period.................. $6,866,874 $6,399,665 $9,078,542 $954,121 $416,787 $248,088
========== ========== ========== ======== ======== ========

SELECT EMERGING MARKETS
-----------------------------------------
PERIOD
PERIOD ENDED YEAR ENDED FROM
JUNE 30, DECEMBER 31, 11/9/98*
2000 1999 TO 12/31/98
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 40 $ 60 $--
Net realized gain (loss)....... 339 21 --
Net unrealized gain (loss)..... (12,457) 5,716 --
-------- ------- ---
Net increase (decrease) in net
assets from operations....... (12,078) 5,797 --
-------- ------- ---
FROM POLICY TRANSACTIONS:
Net premiums................... 115,135 21,690 11
Terminations................... -- -- --
Insurance and other charges.... (3,104) (399) --
Transfers between sub-accounts
(including fixed account),
net.......................... 117,552 11,082 --
Other transfers from (to) the
General Account.............. 180 242 --
Net increase (decrease) in
investment by Sponsor........ -- -- --
-------- ------- ---
Net increase (decrease) in net
assets from policy
transactions................. 229,763 32,615 11
-------- ------- ---
Net increase (decrease) in net
assets....................... 217,685 38,412 11
NET ASSETS:
Beginning of period............ 38,423 11 --
-------- ------- ---
End of period.................. $256,108 $38,423 $11
======== ======= ===

* Date of initial investment.

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

SA-21

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

SELECT FIDELITY VIP HIGH INCOME
STRATEGIC GROWTH ----------------------------------------
--------------------------- YEAR ENDED
PERIOD ENDED PERIOD PERIOD ENDED DECEMBER 31,
JUNE 30, FROM 3/5/99* JUNE 30, -------------------------
2000 TO 12/31/99 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (100) $ 20 $ 15,985 $ 7,488 $ 3,147
Net realized gain (loss)....... 380 (17) (34,957) (2,553) 1,542
Net unrealized gain (loss)..... 5,437 918 (45,623) 2,236 (8,346)
------- ------- ---------- -------- --------
Net increase (decrease) in net
assets from operations........ 5,717 921 (64,595) 7,171 (3,657)
------- ------- ---------- -------- --------

FROM POLICY TRANSACTIONS:
Net premiums................... 48,123 12,853 532,178 180,207 36,812
Terminations................... (1) -- (35,686) (21,248) (4,930)
Insurance and other charges.... (1,226) (1,346) (23,198) (15,258) (3,521)
Transfers between sub-accounts
(including fixed account),
net........................... 11,057 1,952 505,486 (6,975) 21,213
Other transfers from (to) the
General Account............... 321 45 (933) (3,559) (252)
Net increase (decrease) in
investment by Sponsor......... -- -- -- -- --
------- ------- ---------- -------- --------
Net increase (decrease) in net
assets from policy
transactions.................. 58,274 13,504 977,847 133,167 49,322
------- ------- ---------- -------- --------
Net increase (decrease) in net
assets........................ 63,991 14,425 913,252 140,338 45,665

NET ASSETS:
Beginning of period............ 14,425 -- 229,432 89,094 43,429
------- ------- ---------- -------- --------
End of period.................. $78,416 $14,425 $1,142,684 $229,432 $ 89,094
======= ======= ========== ======== ========

FIDELITY VIP EQUITY-INCOME
----------------------------------------
YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 4,962 $ 923 $ 329
Net realized gain (loss)....... 23,018 8,434 3,999
Net unrealized gain (loss)..... (28,295) (277) 5,752
--------- -------- --------
Net increase (decrease) in net
assets from operations........ (315) 9,080 10,080
--------- -------- --------
FROM POLICY TRANSACTIONS:
Net premiums................... 469,343 187,400 116,536
Terminations................... (6,780) (33,829) (23,881)
Insurance and other charges.... (16,766) (15,364) (6,484)
Transfers between sub-accounts
(including fixed account),
net........................... (233,379) 92,974 4,066
Other transfers from (to) the
General Account............... (3,880) (7,403) 25
Net increase (decrease) in
investment by Sponsor......... -- -- --
--------- -------- --------
Net increase (decrease) in net
assets from policy
transactions.................. 208,538 223,778 90,262
--------- -------- --------
Net increase (decrease) in net
assets........................ 208,223 232,858 100,342
NET ASSETS:
Beginning of period............ 392,181 159,323 58,981
--------- -------- --------
End of period.................. $ 600,404 $392,181 $159,323
========= ======== ========

* Date of initial investment.

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

SA-22

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FIDELITY VIP GROWTH FIDELITY VIP OVERSEAS
---------------------------------------- ----------------------------------------
YEAR ENDED YEAR ENDED
PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31,
JUNE 30, ------------------------- JUNE 30, -------------------------
2000 1999 1998 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ------------ ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (6,023) $ (4,548) $ (493) $ 1,167 $ 552 $ 718
Net realized gain (loss)....... 240,454 254,630 85,494 16,137 3,420 3,277
Net unrealized gain (loss)..... (90,597) 242,219 115,549 11,475 30,111 1,086
----------- ----------- ----------- ---------- -------- --------
Net increase (decrease) in net
assets from operations....... 143,834 492,301 200,550 28,779 34,083 5,081
----------- ----------- ----------- ---------- -------- --------

FROM POLICY TRANSACTIONS:
Net premiums................... 1,010,078 444,886 267,715 106,752 33,875 38,586
Terminations................... (61,299) (337,035) (25,480) (41,948) (2,242) (1,996)
Insurance and other charges.... (49,458) (37,954) (8,916) (5,720) (4,895) (3,619)
Transfers between sub-accounts
(including fixed account),
net.......................... 520,732 266,957 375,715 398,110 475 (20,410)
Other transfers from (to) the
General Account.............. 1,053 30,447 (3,680) 207 (7,437) (832)
Net increase (decrease) in
investment by Sponsor........ -- -- -- -- -- --
----------- ----------- ----------- ---------- -------- --------
Net increase (decrease) in net
assets from policy
transactions................. 1,421,106 367,301 605,354 457,401 19,776 11,729
----------- ----------- ----------- ---------- -------- --------
Net increase (decrease) in net
assets....................... 1,564,940 859,602 805,904 486,180 53,859 16,810

NET ASSETS:
Beginning of period............ 2,011,065 1,151,463 345,559 121,440 67,581 50,771
----------- ----------- ----------- ---------- -------- --------
End of period.................. $ 3,576,005 $2,011,065 $1,151,463 $ 607,620 $121,440 $ 67,581
=========== =========== =========== ========== ======== ========

FIDELITY VIP II ASSET MANAGER
----------------------------------------
YEAR ENDED
PERIOD ENDED DECEMBER 31,
JUNE 30, -------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 28,996 $ 19,322 $ 9,309
Net realized gain (loss)....... 68,679 27,839 41,181
Net unrealized gain (loss)..... (103,491) 12,862 15,917
----------- ----------- --------
Net increase (decrease) in net
assets from operations....... (5,816) 60,023 66,407
----------- ----------- --------
FROM POLICY TRANSACTIONS:
Net premiums................... 178,656 333,909 216,035
Terminations................... (1,670) (84,288) (219)
Insurance and other charges.... (6,436) (4,448) (759)
Transfers between sub-accounts
(including fixed account),
net.......................... 52,027 (34,218) (2,565)
Other transfers from (to) the
General Account.............. (40) 23,270 (1,965)
Net increase (decrease) in
investment by Sponsor........ -- -- --
----------- ----------- --------
Net increase (decrease) in net
assets from policy
transactions................. 222,537 234,225 210,527
----------- ----------- --------
Net increase (decrease) in net
assets....................... 216,721 294,248 276,934
NET ASSETS:
Beginning of period............ 942,621 648,373 371,439
----------- ----------- --------
End of period.................. $ 1,159,342 $ 942,621 $648,373
=========== =========== ========

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

SA-23

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

DGPF DGPF
T. ROWE PRICE INTERNATIONAL STOCK GROWTH CAPITAL
FIDELITY VIP II INDEX 500 ---------------------------------------- & INCOME RESERVES
--------------------------- YEAR ENDED ------------ ------------
PERIOD ENDED PERIOD PERIOD ENDED DECEMBER 31, PERIOD PERIOD
JUNE 30, FROM 5/4/99* JUNE 30, ------------------------- FROM 4/5/00* FROM 4/5/00*
2000 TO 12/31/99 2000 1999 1998 TO 6/30/00 TO 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ----------- ----------- ------------ ------------

INCREASE (DECREASE) IN NET
ASSETS:
FROM OPERATIONS:
Net investment income
(loss)................ $ 434,754 $ (56,677) $ (2,561) $ (151) $ 2,935 $ 194 $--
Net realized gain
(loss)................ 284,456 1,274 11,104 8,873 1,826 -- --
Net unrealized gain
(loss)................ (1,064,101) 4,566,606 (18,281) 144,131 23,676 (1,678) --
----------- ----------- ---------- -------- -------- ------- ---
Net increase (decrease)
in net assets from
operations............ (344,891) 4,511,203 (9,738) 152,853 28,437 (1,484) --
----------- ----------- ---------- -------- -------- ------- ---

FROM POLICY TRANSACTIONS:
Net premiums........... 466,321 16,597,260 287,249 152,351 104,206 19,615 49
Terminations........... (7,406) -- (5,719) (4,759) (2,000) -- --
Insurance and other
charges............... (453,569) (418,198) (14,632) (12,033) (5,246) (482) (3)
Transfers between
sub-accounts
(including fixed
account), net......... 674,204 32,276,822 390,812 10,736 148,557 17,125 --
Other transfers from
(to) the General
Account............... 13,033 45 89 (323) 360 (17) --
Net increase (decrease)
in investment by
Sponsor............... -- -- -- -- -- -- --
----------- ----------- ---------- -------- -------- ------- ---
Net increase (decrease)
in net assets from
policy transactions... 692,583 48,455,929 657,799 145,972 245,877 36,241 46
----------- ----------- ---------- -------- -------- ------- ---
Net increase (decrease)
in net assets......... 347,692 52,967,132 648,061 298,825 274,314 34,757 46

NET ASSETS:
Beginning of period.... 52,967,132 -- 670,968 372,143 97,829 -- --
----------- ----------- ---------- -------- -------- ------- ---
End of period.......... $53,314,824 $52,967,132 $1,319,029 $670,968 $372,143 $34,757 $46
=========== =========== ========== ======== ======== ======= ===

* Date of initial investment.

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

SA-24

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

DGPF DGPF
CASH DGPF DELAWARE
RESERVES DELCAP BALANCED DGPF INTERNATIONAL EQUITY
----------- ----------- ----------- ---------------------------------------
PERIOD PERIOD PERIOD PERIOD YEAR ENDED
FROM FROM FROM ENDED DECEMBER 31,
4/28/00* 3/8/00* 3/8/00* JUNE 30, -------------------------
TO 6/30/00 TO 6/30/00 TO 6/30/00 2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 1,438 $ (12) $ 3 $ 891,467 $ 133,115 $ (5,197)
Net realized gain (loss)....... -- 14 2 794,309 34,290 7,893
Net unrealized gain (loss)..... -- 783 84 (1,555,989) 2,827,542 442,761
-------- ------- ------ ----------- ----------- ----------
Net increase (decrease) in net
assets from operations....... 1,438 785 89 129,787 2,994,947 445,457
-------- ------- ------ ----------- ----------- ----------

FROM POLICY TRANSACTIONS:
Net premiums................... 224,271 4,754 2,263 65,390 33,755,687 3,720,116
Terminations................... -- -- -- (5,888) (3,114) (370)
Insurance and other charges.... (616) (230) (88) (636,627) (501,577) (204,104)
Transfers between sub-accounts
(including fixed account),
net.......................... (57,082) 11,416 -- 37,491 (1,808) 4,507,084
Other transfers from (to) the
General Account.............. (222) (10) -- 170 (354) 244
Net increase (decrease) in
investment by Sponsor........ -- -- -- -- -- --
-------- ------- ------ ----------- ----------- ----------
Net increase (decrease) in net
assets from policy
transactions................. 166,351 15,930 2,175 (539,464) 33,248,834 8,022,970
-------- ------- ------ ----------- ----------- ----------
Net increase (decrease) in net
assets....................... 167,789 16,715 2,264 (409,677) 36,243,781 8,468,427

NET ASSETS:
Beginning of period............ -- -- -- 44,794,841 8,551,060 82,633
-------- ------- ------ ----------- ----------- ----------
End of period.................. $167,789 $16,715 $2,264 $44,385,164 $44,794,841 $8,551,060
======== ======= ====== =========== =========== ==========

DGPF DGPF
SMALL CAP DGPF STRATEGIC
VALUE TREND INCOME
----------- ----------- -----------
PERIOD PERIOD PERIOD
FROM FROM FROM
3/8/00* 3/8/00* 3/8/00*
TO 6/30/00 TO 6/30/00 TO 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ -- $ (9) $--
Net realized gain (loss)....... -- 8 --
Net unrealized gain (loss)..... -- 1,007 --
---- ------- ---
Net increase (decrease) in net
assets from operations....... -- 1,006 --
---- ------- ---
FROM POLICY TRANSACTIONS:
Net premiums................... 122 15,074 16
Terminations................... -- -- --
Insurance and other charges.... (7) (407) --
Transfers between sub-accounts
(including fixed account),
net.......................... -- -- --
Other transfers from (to) the
General Account.............. -- 171 --
Net increase (decrease) in
investment by Sponsor........ -- -- --
---- ------- ---
Net increase (decrease) in net
assets from policy
transactions................. 115 14,838 16
---- ------- ---
Net increase (decrease) in net
assets....................... 115 15,844 16
NET ASSETS:
Beginning of period............ -- -- --
---- ------- ---
End of period.................. $115 $15,844 $16
==== ======= ===

* Date of initial investment.

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

SA-25

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

DGPF DGPF DGPF DGPF
DGPF EMERGING SOCIAL AGGRESSIVE U.S.
DEVON MARKETS AWARENESS GROWTH GROWTH
----------- ----------- ----------- ----------- -----------
PERIOD PERIOD PERIOD PERIOD PERIOD
FROM FROM FROM FROM FROM
3/8/00* 3/8/00* 4/3/00* 3/8/00* 4/3/00*
TO 6/30/00 TO 6/30/00 TO 6/30/00 TO 6/30/00 TO 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (9) $ 2 $ -- $ (37) $ (1)
Net realized gain (loss)....... -- (1) -- 4 --
Net unrealized gain (loss)..... (739) (1) (76) (224) 173
------- ---- ------ ------- ------
Net increase (decrease) in net
assets from operations........ (748) -- (76) (257) 172
------- ---- ------ ------- ------

FROM POLICY TRANSACTIONS:
Net premiums................... 471 805 4,998 41,257 3,722
Terminations................... -- -- -- -- --
Insurance and other charges.... (82) (66) (29) (915) (108)
Transfers between sub-accounts
(including fixed account),
net........................... 17,125 -- -- -- --
Other transfers from (to) the
General Account............... -- (3) 71 (18) 146
Net increase (decrease) in
investment by Sponsor......... -- -- -- -- --
------- ---- ------ ------- ------
Net increase (decrease) in net
assets from policy
transactions.................. 17,514 736 5,040 40,324 3,760
------- ---- ------ ------- ------
Net increase (decrease) in net
assets........................ 16,766 736 4,964 40,067 3,932

NET ASSETS:
Beginning of period............ -- -- -- -- --
------- ---- ------ ------- ------
End of period.................. $16,766 $736 $4,964 $40,067 $3,932
======= ==== ====== ======= ======

INVESCO VIF EQUITY INCOME
---------------------------------------
PERIOD YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, -------------------------
2000 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (12) $ 84 $ 112
Net realized gain (loss)....... 2,058 289 712
Net unrealized gain (loss)..... (1,827) 947 312
-------- ------- ------
Net increase (decrease) in net
assets from operations........ 219 1,320 1,136
-------- ------- ------
FROM POLICY TRANSACTIONS:
Net premiums................... 326 2,113 6,284
Terminations................... (10,026) (149) (916)
Insurance and other charges.... (352) (1,958) (4,494)
Transfers between sub-accounts
(including fixed account),
net........................... (305) -- --
Other transfers from (to) the
General Account............... (1) -- 8
Net increase (decrease) in
investment by Sponsor......... -- -- --
-------- ------- ------
Net increase (decrease) in net
assets from policy
transactions.................. (10,358) 6 882
-------- ------- ------
Net increase (decrease) in net
assets........................ (10,139) 1,326 2,018
NET ASSETS:
Beginning of period............ 10,555 9,229 7,211
-------- ------- ------
End of period.................. $ 416 $10,555 $9,229
======== ======= ======

* Date of initial investment.

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

SA-26

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

MSDW
INVESCO VIP TOTAL RETURN MSDW FIXED INCOME TECHNOLOGY
---------------------------------------- ---------------------------------------- -----------
YEAR ENDED PERIOD PERIOD PERIOD
PERIOD ENDED DECEMBER 31, ENDED YEAR ENDED FROM FROM
JUNE 30, ------------------------- JUNE 30, DECEMBER 31, 2/17/98* 5/31/00*
2000 1999 1998 2000 1999 TO 12/31/98 TO 6/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ----------- ----------- ----------- ------------ ----------- -----------

INCREASE (DECREASE) IN NET
ASSETS:
FROM OPERATIONS:
Net investment income
(loss)................... $ (10) $ 493 $ 1,019 $ (52,473) $ 1,277,690 $ 612,562 $ --
Net realized gain
(loss)................... 938 4,115 1,878 (16,788) (8,242) 265,086 31
Net unrealized gain
(loss)................... (1,536) (5,835) 2,122 991,055 (1,680,097) (179,067) 20,379
---------- ---------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net assets from
operations............... (608) (1,227) 5,019 921,794 (410,649) 698,581 20,410
---------- ---------- ---------- ----------- ----------- ----------- -----------

FROM POLICY TRANSACTIONS:
Net premiums.............. -- 1,559 7,489 -- 7,703,567 9,708,358 --
Terminations.............. (4,172) (32,859) (8) -- -- -- --
Insurance and other
charges.................. (370) (1,694) (860) (251,538) (522,326) (446,219) (468)
Transfers between
sub-accounts (including
fixed account), net...... (22,602) -- -- -- 3,300,001 9,881,316 100,000
Other transfers from (to)
the General Account...... 81 (1) 42 -- 19 (185) --
Net increase (decrease) in
investment by Sponsor.... -- -- -- -- -- -- --
---------- ---------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net assets from policy
transactions............. (27,063) (32,995) 6,663 (251,538) 10,481,261 19,143,270 99,532
---------- ---------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net assets............... (27,671) (34,222) 11,682 670,256 10,070,612 19,841,851 119,942

NET ASSETS:
Beginning of period....... 27,685 61,907 50,225 29,912,463 19,841,851 -- --
---------- ---------- ---------- ----------- ----------- ----------- -----------
End of period............. $ 14 $ 27,685 $ 61,907 $30,582,719 $29,912,463 $19,841,851 $ 119,942
========== ========== ========== =========== =========== =========== ===========

* Date of initial investment.

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

SA-27

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

ALGER
AIM AMERICAN ALLIANCE TEMPLETON
V.I. SMALL TECHNOLOGY INTERNATIONAL
GROWTH CAPITALIZATION (CLASS B) SECURITIES
----------- -------------- ----------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
6/14/00* TO 6/14/00* TO 6/14/00* TO 6/14/00* TO
06/30/00 06/30/00 06/30/00 06/30/00
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- -------------- ----------- -------------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)............................ $ -- $ -- $ -- $ --
Net realized gain (loss)................................ -- -- -- --
Net unrealized gain (loss).............................. (1) 2 -- --
---------- ---------- ---------- ----------
Net increase (decrease) in net assets from operations... (1) 2 -- --
---------- ---------- ---------- ----------

FROM POLICY TRANSACTIONS:
Net premiums............................................ 86 36 37 37
Terminations............................................ -- -- -- --
Insurance and other charges............................. (4) -- (2) (2)
Transfers between sub-accounts (including fixed
account), net.......................................... -- -- -- --
Other transfers from (to) the General Account........... -- -- -- --
Net increase (decrease) in investment by Sponsor........ -- -- -- --
---------- ---------- ---------- ----------
Net increase (decrease) in net assets from policy
transactions........................................... 82 36 35 35
---------- ---------- ---------- ----------
Net increase (decrease) in net assets................... 81 38 35 35

NET ASSETS:
Beginning of period..................................... -- -- -- --
---------- ---------- ---------- ----------
End of period........................................... $ 81 $ 38 $ 35 $ 35
========== ========== ========== ==========

* Date of initial investment.

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

SA-28

GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)

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 insurance 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
fifty-eight Sub-Accounts. 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), a
wholly-owned subsidiary of the Company; 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 (DGPF) managed by
Delaware Management Company or Delaware International Advisers Ltd.; or of the
INVESCO Variable Investment Funds, Inc. (INVESCO VIF) managed by INVESCO Funds
Group, Inc.; or of the Morgan Stanley Universal Funds, Inc. (MSDW) managed by
Miller Anderson & Sherrerd, LLP; or of the Goldman Sachs Variable Insurance
Trust (Goldman) managed by Goldman Sachs Asset Management; or of Warburg Pincus
Trust (Warburg) managed by Credit Suisse Asset Management, LLC; or of Deutsche
Asset Management VIT Funds (Deutsche) managed by Bankers Trust Company; or of
PIMCO Variable Insurance Trust (PIMCO) managed by Pacific Investment Management
Co.; or of J.P. Morgan Series Trust II (J.P. Morgan) managed by J.P. Morgan
Investment Management Inc.; or of AIM Variable Insurance Funds (AVIF) managed by
A I M Advisors, Inc.; or of The Alger American Fund (Alger) managed by Fred
Alger Management, Inc.; or of Alliance Variable Products Series Fund (Alliance),
managed by Alliance Capital Managment, L.P.; or of Franklin Templeton Variable
Insurance Products Trust (FT VIP) managed by Templeton Investment Counsel, Inc.
The Trust, Fidelity VIP, Fidelity VIP II, T. Rowe Price, DGPF, INVESCO, MSDW,
Goldman, Warburg, Deutsche, PIMCO, J.P. Morgan, AVIF, Alger, Alliance, and FT
VIP (the Funds) are open-end, management investment companies registered under
the 1940 Act. INVESCO is available only to employees of INVESCO VIF and its
affiliates. Morgan Stanley is available only to employees of Duke Energy
Corporation and its affiliates.

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. 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-29

ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999

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, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
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
auditing standards generally accepted in the United States 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 LLP

Boston, Massachusetts
February 1, 2000

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ---- ---- ----

REVENUES
Premiums................................... $ 0.5 $ 0.5 $ 22.8
Universal life and investment product
policy fees.............................. 328.1 267.4 212.2
Net investment income...................... 150.2 151.3 164.2
Net realized investment (losses) gains..... (8.7) 20.0 2.9
Other income............................... 36.9 0.6 1.4
------ ------ ------
Total revenues......................... 507.0 439.8 403.5
------ ------ ------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims and losses......... 173.6 153.9 187.8
Policy acquisition expenses................ 49.8 64.6 2.8
Sales practice litigation.................. -- 21.0 --
Loss from cession of disability income
business................................. -- -- 53.9
Other operating expenses................... 151.3 104.1 101.3
------ ------ ------
Total benefits, losses and expenses.... 374.7 343.6 345.8
------ ------ ------
Income before federal income taxes............. 132.3 96.2 57.7
------ ------ ------
FEDERAL INCOME TAX EXPENSE
Current.................................... 15.5 22.1 13.9
Deferred................................... 30.5 11.8 7.1
------ ------ ------
Total federal income tax expense....... 46.0 33.9 21.0
------ ------ ------
Net income..................................... $ 86.3 $ 62.3 $ 36.7
====== ====== ======

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

F-1

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 1999 1998
------------------------------------ --------- ---------

ASSETS
Investments:
Fixed maturities at fair value (amortized cost of
$1,354.2 and $1,284.6)............................ $ 1,324.6 $ 1,330.4
Equity securities at fair value (cost of $25.2 and
$27.4)............................................ 32.6 31.8
Mortgage loans...................................... 223.7 230.0
Policy loans........................................ 166.8 151.5
Real estate and other long-term investments......... 25.1 23.6
--------- ---------
Total investments............................... 1,772.8 1,767.3
--------- ---------
Cash and cash equivalents............................. 132.9 217.9
Accrued investment income............................. 36.0 33.5
Deferred policy acquisition costs..................... 1,156.4 950.5
Reinsurance receivable on paid and unpaid losses,
benefits and unearned premiums...................... 287.2 308.0
Other assets.......................................... 64.8 46.9
Separate account assets............................... 14,527.9 11,020.4
--------- ---------
Total assets.................................... $17,978.0 $14,344.5
========= =========
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,274.7 $ 2,284.8
Outstanding claims and losses....................... 13.7 17.9
Unearned premiums................................... 2.6 2.7
Contractholder deposit funds and other policy
liabilities....................................... 44.3 38.1
--------- ---------
Total policy liabilities and accruals........... 2,335.3 2,343.5
--------- ---------
Expenses and taxes payable............................ 216.8 146.2
Reinsurance premiums payable.......................... 17.9 45.7
Deferred federal income taxes......................... 94.8 78.8
Separate account liabilities.......................... 14,527.9 11,020.4
--------- ---------
Total liabilities............................... 17,192.7 13,634.6
--------- ---------
Contingencies (Note 12)
SHAREHOLDER'S EQUITY
Common stock, $1,000 par value, 10,000 shares
authorized, 2,526 and 2,524 shares, issued and
outstanding......................................... 2.5 2.5
Additional paid-in capital............................ 423.7 407.9
Accumulated other comprehensive (loss) income......... (2.6) 24.1
Retained earnings..................................... 361.7 275.4
--------- ---------
Total shareholder's equity...................... 785.3 709.9
--------- ---------
Total liabilities and shareholder's equity...... $17,978.0 $14,344.5
========= =========

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

F-2

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------- ------- -------

COMMON STOCK................................... $ 2.5 $ 2.5 $ 2.5
------ ------ ------

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period............. 407.9 386.9 346.3
Issuance of common stock................... 15.8 21.0 40.6
------ ------ ------
Balance at end of period................... 423.7 407.9 386.9
------ ------ ------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Net unrealized (depreciation) appreciation
on investments:
Balance at beginning of period............. 24.1 38.5 20.5
(Depreciation) appreciation during the
period:
Net (depreciation) appreciation on
available-for-sale securities........ (41.1) (23.4) 27.0
Benefit (provision) for deferred
federal income taxes................. 14.4 9.0 (9.0)
------ ------ ------
(26.7) (14.4) 18.0
------ ------ ------
Balance at end of period................... (2.6) 24.1 38.5
------ ------ ------
RETAINED EARNINGS
Balance at beginning of period............. 275.4 213.1 176.4
Net income................................. 86.3 62.3 36.7
------ ------ ------
Balance at end of period................... 361.7 275.4 213.1
------ ------ ------
Total shareholder's equity............. $785.3 $709.9 $641.0
====== ====== ======

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

F-3

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------ ------ ------

Net income.................................. $ 86.3 $ 62.3 $36.7
Other comprehensive (loss) income:
Net (depreciation) appreciation on
available-for-sale securities......... (41.1) (23.4) 27.0
Benefit (provision) for deferred federal
income taxes.......................... 14.4 9.0 (9.0)
------ ------ -----
Other comprehensive (loss) income... (26.7) (14.4) 18.0
------ ------ -----
Comprehensive income.................... $ 59.6 $ 47.9 $54.7
====== ====== =====

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

F-4

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------- ------- -------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 86.3 $ 62.3 $ 36.7
Adjustments to reconcile net income to
net cash used in operating activities:
Net realized losses/(gains)......... 8.7 (20.0) (2.9)
Net amortization and depreciation... (2.3) (7.1) --
Sales practice litigation expense... -- 21.0 --
Loss from cession of disability
income business................... -- -- 53.9
Deferred federal income taxes....... 30.5 11.8 7.1
Payment related to cession of
disability income business........ -- -- (207.0)
Change in deferred acquisition
costs............................. (169.7) (177.8) (181.3)
Change in reinsurance premiums
payable........................... (31.5) 40.8 3.9
Change in accrued investment
income............................ (2.5) 0.7 3.5
Change in policy liabilities and
accruals, net..................... (8.4) 193.1 (72.4)
Change in reinsurance receivable.... 20.7 (56.9) 22.1
Change in expenses and taxes
payable........................... 64.1 55.4 0.2
Other, net.......................... (14.8) (28.5) (7.1)
------- ------- -------
Net cash (used in) provided by
operating activities.......... (18.9) 94.8 (343.3)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................ 330.9 187.0 909.7
Proceeds from disposals of equity
securities............................ 30.9 53.3 2.4
Proceeds from disposals of other
investments........................... 0.8 22.7 23.7
Proceeds from mortgages matured or
collected............................. 30.5 60.1 62.9
Purchase of available-for-sale fixed
maturities............................ (415.5) (136.0) (579.7)
Purchase of equity securities........... (20.2) (30.6) (3.2)
Purchase of other investments........... (44.1) (22.7) (9.0)
Purchase of mortgages................... -- (58.9) (70.4)
Other investing activities, net......... 2.0 (3.9) --
------- ------- -------
Net cash (used in) provided by
investing activities.............. (84.7) 71.0 336.4
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution from subsidiaries.......... 14.6 -- --
Proceeds from issuance of stock and
capital paid in....................... 4.0 21.0 19.2
------- ------- -------
Net cash provided by financing
activities........................ 18.6 21.0 19.2
------- ------- -------
Net change in cash and cash equivalents..... (85.0) 186.8 12.3
Cash and cash equivalents, beginning of
period..................................... 217.9 31.1 18.8
------- ------- -------
Cash and cash equivalents, end of period.... $ 132.9 $ 217.9 $ 31.1
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................... $ -- $ -- $ --
Income taxes paid....................... $ 4.4 $ 36.2 $ 5.4

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

F-5

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Prior to July 1, 1999, AFLIAC was a wholly-owned subsidiary of SMA Financial
Corporation ("SMAFCO"), which was a wholly-owned subsidiary of FAFLIC. Effective
July 1, 1999 and in connection with AFC's restructuring activities, SMAFCO was
renamed Allmerica Asset Management , Inc. ("AAM") and contributed it's ownership
of AFLIAC to FAFLIC. AAM also contributed Allmerica Investments, Inc., Allmerica
Investment Management Company, Inc., Allmerica Financial Investment Management
Services, Inc., and Allmerica Financial Services Insurance Agency, Inc., to
AFLIAC in exchange for one share of AFLIAC common stock. The equity of these
four companies on July 1, 1999 was $11.8 million. For the six months ended
December 31, 1999, the subsidiaries of AFLIAC had total revenue of $35.5 million
and total benefits, losses and expenses of $24.4 million. All significant
intercompany accounts and transactions have been eliminated.

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 eleven months of
1998 and for the month of December, 1997.

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.

F-6

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Debt securities and marketable equity 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 a plan to dispose of all real estate assets. As
of December 31, 1999, there was one property remaining in the Company's real
estate portfolio, which is being actively marketed. This asset is carried at the
estimated fair value less costs of disposal. Depreciation is not recorded on
this asset while it is held for disposal.

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

F-7

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 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 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
3.0% to 6.0% 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, variable
universal life and variable annuities include deposits received from customers
and investment earnings on their fund balances, less administrative charges.
Universal life fund balances are also assessed mortality and surrender charges.
Liabilities for variable annuities include a reserve for benefit claims in
excess of a guaranteed minimum fund value.

Individual disability income benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future morbidity 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 and losses 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.

F-8

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 insurance and individual and group 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 include annuity benefit claims in excess of a guaranteed
minimum fund value, and 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 (including certain non-insurance operations)
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 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. OTHER INCOME AND OTHER OPERATING EXPENSES

Other income and other operating expenses for the year ended December 31, 1999
include investment management and brokerage income and sub-advisory expenses
arising from the activities of the non-insurance subsidiaries that were
transferred to AFLIAC during 1999, as more fully described in Note 1A.

F-9

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K. 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
investments in foreign operations. This statement is effective for fiscal
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (an indirect wholly-owned
subsidiary of Allmerica Financial Corporation) years beginning after June 15,
2000. 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 of 1998, 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 adoption of this statement had no effect on the results
of operations or financial position of the Company.

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

In June 1997, the FASB also issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement No. 130"). Statement No. 130 establishes 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

F-10

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

L. RECLASSIFICATIONS

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

2. SIGNIFICANT TRANSACTIONS

During 1999, AFLIAC's parent contributed $11.8 million of additional paid-in
capital to the Company in the form of four subsidiaries as disclosed in Note 1A
above. These subsidiaries consisted of assets of $22.0 million, of which $14.6
million was cash and cash equivalents, and liabilities of $10.2 million. During
1999, 1998 and 1997, SMAFCO contributed $4.0 million, $21.0 million, and $40.6
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.

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 did 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.

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:

1999
-------------------------------------------
GROSS GROSS
DECEMBER 31, AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ------------- --------- ---------- ---------- --------

U.S. Treasury securities and U.S.
government and agency securities....... $ 5.2 $ 0.2 $-- $ 5.4
States and political subdivisions....... 12.4 0.1 -- 12.5
Foreign governments..................... 38.6 0.9 0.6 38.9
Corporate fixed maturities.............. 1,180.0 10.3 38.9 1,151.4
Mortgage-backed securities.............. 118.0 1.1 2.7 116.4
-------- ----- ----- --------
Total fixed maturities.................. $1,354.2 $12.6 $42.2 $1,324.6
======== ===== ===== ========
Equity securities....................... $ 25.2 $ 7.4 $-- $ 32.6
======== ===== ===== ========

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

F-11

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1998
-------------------------------------------
GROSS GROSS
DECEMBER 31, AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ------------- --------- ---------- ---------- --------

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
======== ===== ===== ========

(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, 1999, the amortized
cost and market value of these assets on deposit in New York were
$196.4 million and $193.0 million, respectively. At December 31, 1998, the
amortized cost and market value of assets on deposit were $268.5 million and
$284.1 million, respectively. In addition, fixed maturities, excluding those
securities on deposit in New York, with an amortized cost of $4.1 million and
$4.2 million were on deposit with various state and governmental authorities at
December 31, 1999 and 1998, respectively.

There were no contractual fixed maturity investment commitments at December 31,
1999.

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.

1999
-------------------
DECEMBER 31, AMORTIZED FAIR
(IN MILLIONS) COST VALUE
- ------------- --------- --------

Due in one year or less..................................... $ 54.5 $ 54.8
Due after one year through five years....................... 349.1 347.2
Due after five years through ten years...................... 652.9 637.1
Due after ten years......................................... 297.7 285.5
-------- --------
Total....................................................... $1,354.2 $1,324.6
======== ========

F-12

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

EQUITY
FOR THE YEARS ENDED DECEMBER 31, FIXED SECURITIES
(IN MILLIONS) MATURITIES AND OTHER (1) TOTAL
- ------------- ---------- ------------- ------

1999
Net appreciation, beginning of year......................... $ 16.2 $ 7.9 $ 24.1
------ ------ ------
Net depreciation on available-for-sale securities........... (75.3) (0.2) (75.5)
Net appreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ 34.4 -- 34.4
Benefit from deferred federal income taxes.................. 14.3 0.1 14.4
------ ------ ------
(26.6) (0.1) (26.7)
------ ------ ------
Net (depreciation) appreciation, end of year................ $(10.4) $ 7.8 $ (2.6)
====== ====== ======

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
====== ====== ======

(1) Includes net (depreciation) appreciation on other investments of $(3.1)
million, $0.9 million, and $1.3 million in 1999, 1998, and 1997,
respectively.

B. MORTGAGE LOANS AND REAL ESTATE

AFLIAC's mortgage loans are diversified by property type and location. The real
estate investment was obtained by an affiliate 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 the real estate investment net of
applicable reserves were $234.6 million and $244.5 million at December 31, 1999
and 1998, respectively. Reserves for mortgage loans were $2.4 million and
$3.3 million at December 31, 1999 and 1998, respectively.

F-13

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During 1997, the Company committed to a plan to dispose of all real estate
assets. At December 31, 1999, there was one property remaining in the Company's
real estate portfolio which is being actively marketed. Depreciation is not
recorded on this asset while it is held for disposal.

There were no non-cash investing activities, including real estate acquired
through foreclosure of mortgage loans, in 1999, 1998 and 1997.

There were no material contractual commitments to extend credit under commercial
mortgage loan agreements at December 31, 1999.

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

DECEMBER 31,
(IN MILLIONS) 1999 1998
- ------------- ------ ------

Property type:
Office building........................................... $136.1 $129.2
Residential............................................... 18.5 18.9
Retail.................................................... 28.3 37.4
Industrial/warehouse...................................... 51.1 59.2
Other..................................................... 3.0 3.1
Valuation allowances...................................... (2.4) (3.3)
------ ------
Total....................................................... $234.6 $244.5
====== ======
Geographic region:
South Atlantic............................................ $ 60.7 $ 55.5
Pacific................................................... 76.2 80.0
East North Central........................................ 35.9 41.4
Middle Atlantic........................................... 20.1 22.5
New England............................................... 29.9 26.9
West South Central........................................ 1.9 6.7
Other..................................................... 12.3 14.8
Valuation allowances...................................... (2.4) (3.3)
------ ------
Total....................................................... $234.6 $244.5
====== ======

At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 -- $40.8 million; 2001 -- $6.3 million; 2002 -- $11.2 million; 2003 --
$0.5 million; 2004 -- $23.7 million; and $141.2 million thereafter. Actual
maturities could differ from contractual maturities because borrowers may have
the right to prepay obligations with or without prepayment penalties and loans
may be refinanced. During 1999, the Company did not refinance any mortgage loans
based on terms which differed from those granted to new borrowers.

F-14

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C. INVESTMENT VALUATION ALLOWANCES

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

FOR THE YEARS ENDED DECEMBER 31, BALANCE AT BALANCE AT
(IN MILLIONS) JANUARY 1 PROVISIONS WRITE-OFFS DECEMBER 31
- ------------- ---------- ---------- ---------- ------------

1999
Mortgage loans.............................................. $ 3.3 $(0.8) $0.1 $2.4
===== ===== ==== ====
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
===== ===== ==== ====

Provisions on mortgages during 1999 and 1998 reflect the release of redundant
specific 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 costs to sell pursuant to the aforementioned 1997 plan
of disposal.

The carrying value of impaired loans was $11.4 million and $15.3 million, with
related reserves of $0.7 million and $1.5 million as of December 31, 1999 and
1998, respectively. All impaired loans were reserved for as of December 31, 1999
and 1998.

The average carrying value of impaired loans was $14.3 million, $17.0 million
and $19.8 million, with related interest income while such loans were impaired
of $1.5 million, $2.0 million and $2.2 million as of December 31, 1999, 1998 and
1997, respectively.

D. OTHER

At December 31, 1999 and 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:

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------

Fixed maturities............................................ $107.2 $107.7 $130.0
Mortgage loans.............................................. 19.0 25.5 20.4
Equity securities........................................... 0.4 0.3 1.3
Policy loans................................................ 12.4 11.7 10.8
Real estate and other long-term investments................. 4.0 4.8 4.9
Short-term investments...................................... 9.5 4.2 1.4
------ ------ ------
Gross investment income................................. 152.5 154.2 168.8
Less investment expenses.................................... (2.3) (2.9) (4.6)
------ ------ ------
Net investment income................................... $150.2 $151.3 $164.2
====== ====== ======

F-15

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At December 31, 1999, the Company had fixed maturities with a carrying value of
$0.8 million on non-accrual status. There were no mortgage loans on non-accrual
status at December 31, 1999. 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 investments, was a reduction in net income of $1.2 million in 1999,
and had no impact in 1998 and 1997.

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 $12.2 million, $12.6 million and $21.1 million at December 31,
1999, 1998 and 1997, respectively. Interest income on restructured mortgage
loans that would have been recorded in accordance with the original terms of
such loans amounted to $0.9 million, $1.4 million and $1.9 million in 1999,
1998, and 1997, respectively. Actual interest income on these loans included in
net investment income aggregated $1.1 million, $1.8 million and $2.1 million in
1999, 1998 and 1997, respectively.

There were no fixed maturities or mortgage loans which were non-income producing
for the year ended December 31, 1999.

Included in other long-term investments is income from limited partnerships of
$0.9 million and $0.7 million in 1999 and 1998, respectively. There was no
income from limited partnerships included in other long-term investments in
1997.

B. NET REALIZED INVESTMENT GAINS AND LOSSES

Realized (losses) gains on investments were as follows:

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ----- -----

Fixed maturities............................................ $(18.8) $(6.1) $ 3.0
Mortgage loans.............................................. 0.8 8.0 (1.1)
Equity securities........................................... 8.5 15.7 0.5
Real estate and other....................................... 0.8 2.4 0.5
------ ----- -----
Net realized investment (losses) gains...................... $ (8.7) $20.0 $ 2.9
====== ===== =====

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:

PROCEEDS FROM
FOR THE YEARS ENDED DECEMBER 31, VOLUNTARY GROSS GROSS
(IN MILLIONS) SALES GAINS LOSSES
- ------------- ------------- ----- ------

1999
Fixed maturities............................................ $162.3 $ 2.7 $4.3
Equity securities........................................... $ 30.4 $10.1 $1.6
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 $--

F-16

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C. OTHER COMPREHENSIVE INCOME RECONCILIATION

The following table provides a reconciliation of gross unrealized (losses) gains
to the net balance shown in the consolidated statements of comprehensive income:

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ -----

Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during period (net
of taxes of $(18.0) million, $(5.6) million and
$10.2 million in 1999, 1998 and 1997, respectively)........ $(33.4) $ (8.2) $20.3
Less: reclassification adjustment for (losses) gains
included in net income (net of taxes of $(3.6) million,
$3.4 million and $1.2 million in 1999, 1998 and 1997,
respectively).............................................. (6.7) 6.2 2.3
------ ------ -----
Other comprehensive (loss) income........................... $(26.7) $(14.4) $18.0
====== ====== =====

5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

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

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

CASH AND CASH EQUIVALENTS

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

FIXED MATURITIES

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

EQUITY SECURITIES

F-17

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MORTGAGE LOANS

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

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.

FIXED ANNUITY AND OTHER CONTRACTS (WITHOUT MORTALITY FEATURES)

Fair values for the Company's liabilities under individual fixed annuity
contracts are estimated based on current surrender values, supplemental
contracts without life contingencies reflect current fund balances, and other
individual contract funds represent the present value of future policy benefits.

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

1999 1998
------------------ ------------------
DECEMBER 31, CARRYING FAIR CARRYING FAIR
(IN MILLIONS) VALUE VALUE VALUE VALUE
- ------------- -------- -------- -------- --------

FINANCIAL ASSETS
Cash and cash equivalents................................. $ 132.9 $ 132.9 $ 217.9 $ 217.9
Fixed maturities.......................................... 1,324.6 1,324.6 1,330.4 1,330.4
Equity securities......................................... 32.6 32.6 31.8 31.8
Mortgage loans............................................ 223.7 222.8 230.0 241.9
Policy loans.............................................. 166.8 166.8 151.5 151.5
-------- -------- -------- --------
$1,880.6 $1,879.7 $1,961.6 $1,973.5
======== ======== ======== ========
FINANCIAL LIABILITIES
Individual fixed annuity contracts........................ $1,048.0 $1,014.9 $1,069.4 $1,034.6
Supplemental contracts without life contingencies......... 25.0 25.0 21.0 21.0
Other individual contract deposit funds................... 19.3 19.3 17.0 17.0
-------- -------- -------- --------
$1,092.3 $1,059.2 $1,107.4 $1,072.6
======== ======== ======== ========

F-18

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 in
the consolidated statement of income is shown below:

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ----- ----- -----

Federal income tax expense
Current................................................... $15.5 $22.1 $13.9
Deferred.................................................. 30.5 11.8 7.1
----- ----- -----
Total....................................................... $46.0 $33.9 $21.0
===== ===== =====

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

The deferred income tax (asset) liability represents the tax effects of
temporary differences:

DECEMBER 31,
(IN MILLIONS) 1999 1998
- ------------- ------- -------

Deferred tax (assets) liabilities
Policy reserves........................................... $(233.7) $(205.1)
Deferred acquisition costs................................ 339.7 278.8
Investments, net.......................................... (4.0) 12.5
Litigation reserves....................................... (4.3) (7.4)
Bad debt reserve.......................................... -- (0.4)
Other, net................................................ (2.9) 0.4
------- -------
Deferred tax liability, net................................. $ 94.8 $ 78.8
======= =======

Gross deferred income tax liabilities totaled $360.4 million and $291.7 million
at December 31, 1999 and 1998, respectively. Gross deferred income tax assets
totaled $265.6 million and $212.9 million at December 31, 1999 and 1998,
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 Internal
Revenue Service ("IRS"), and provisions are routinely made in the financial
statements in anticipation of the results of these audits. The IRS has examined
the FAFLIC/AFLIAC consolidated group's federal income tax returns through 1994.
The Company has appealed certain adjustments proposed by the IRS with respect
federal income tax returns for 1992, 1993, and 1994 for the FAFLIC/AFLIAC
consolidated group. 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

F-19

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 $173.9 million, $145.4 million and $124.1 million in
1999, 1998 and 1997 respectively. The net amounts payable to FAFLIC and
affiliates for accrued expenses and various other liabilities and receivables
were $48.6 million and $16.4 million at December 31, 1999 and 1998,
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 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 1999, 1998 or 1997. During
2000, AFLIAC could pay dividends of $34.3 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

F-20

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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, 1999 and 1998 for the
disability income business were $241.5 million and $230.8 million, respectively,
traditional life were $9.7 million and $11.4 million, respectively, and
universal and variable universal life were $36.0 million and $65.8 million,
respectively.

The effects of reinsurance were as follows:

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------

Insurance premiums:
Direct.................................................... $ 41.3 $ 45.5 $ 48.8
Assumed................................................... -- -- 2.6
Ceded..................................................... (40.8) (45.0) (28.6)
------ ------ ------
Net premiums................................................ $ 0.5 $ 0.5 $ 22.8
====== ====== ======
Insurance and other individual policy benefits, claims and
losses:
Direct.................................................... $210.6 $204.0 $226.0
Assumed................................................... -- -- 4.2
Ceded..................................................... (37.0) (50.1) (42.4)
------ ------ ------
Net policy benefits, claims and losses...................... $173.6 $153.9 $187.8
====== ====== ======

10. DEFERRED POLICY ACQUISITION COSTS

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

FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- -------- ------ ------

Balance at beginning of year................................ $ 950.5 $765.3 $632.7
Acquisition expenses deferred............................. 219.5 242.4 184.2
Amortized to expense during the year...................... (49.8) (64.6) (53.1)
Adjustment to equity during the year...................... 36.2 7.4 (10.2)
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...................................... $1,156.4 $950.5 $765.3
======== ====== ======

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 and losses as new information becomes available
and further events occur which may impact the resolution of

F-21

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 and losses
related to the Company's disability income business was $240.7 million and
$233.3 million at December 31, 1999 and 1998. 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 used in determining the
liability are revised.

12. CONTINGENCIES

REGULATORY AND INDUSTRY DEVELOPMENTS

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. The court granted preliminary approval of the settlement
on December 4, 1998. On May 19, 1999, the Court issued an order certifying the
class for settlement purposes and granting final approval of the settlement
agreement. 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, and based on
changes in the Company's estimate of the ultimate cost of the benefits to be
provided to members of the class.

YEAR 2000

The Year 2000 issue resulted from computer programs being written using two
digits rather than four to define the applicable year. 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.

F-22

ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Although the Company does not believe that there is a material contingency
associated with the Year 2000 issue, 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. In 1999, 49 out of 50 states have adopted the
National Association of Insurance Commissioners proposed Codification, which
provides for uniform statutory accounting principles. These principles are
effective January 1, 2001. The Company is currently assessing the impact that
the adoption of Codification will have on its statutory results of operations
and financial position. Statutory net income and surplus are as follows:

(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------

Statutory net income........................................ $ 5.0 $ (8.2) $ 31.5
Statutory shareholder's surplus............................. $342.7 $312.2 $309.7

14. EVENTS SUBSEQUENT TO DATE OF INDEPENDENT ACCOUNTANTS' REPORT (UNAUDITED)

During the second quarter of 2000, AFC adopted a formal company-wide
restructuring plan. This plan is the result of a corporate initiative that began
in the fall of 1999, intended to reduce expenses and enhance revenues. As a
result of this restructuring plan, AFLIAC recognized a pre-tax charge relating
to one-time project costs of $4.6 million for the quarter ended June 30, 2000.

F-23

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 of 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, 1999, 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 accounting principles generally accepted in the United
States. These financial statements are the responsibility of Allmerica Financial
Life Insurance and Annuity Company; 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 auditing standards generally
accepted in the United States, 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, 1999 by
correspondence with the Funds, provide a reasonable basis for the opinion
expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
April 3, 2000

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999

SELECT
INVESTMENT MONEY EQUITY GOVERNMENT AGGRESSIVE SELECT
GROWTH GRADE INCOME MARKET INDEX BOND GROWTH GROWTH
---------- ------------- ---------- ---------- ----------- ---------- -----------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $4,668,521 $24,452,781 $5,440,130 $2,458,780 $ 25,703 $1,376,807 $19,730,630
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ -- -- -- -- -- -- --
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- -- -- -- -- -- --
Investments in shares of Delaware
Group Premium Fund............... -- -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- -- -- -- -- -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- -- -- -- -- -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- -- 150 -- -- -- --
---------- ----------- ---------- ---------- --------- ---------- -----------
Total assets..................... 4,668,521 24,452,781 5,440,280 2,458,780 25,703 1,376,807 19,730,630

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ 29 9 -- 212 3 5 255
---------- ----------- ---------- ---------- --------- ---------- -----------
Net assets....................... $4,668,492 $24,452,772 $5,440,280 $2,458,568 $ 25,700 $1,376,802 $19,730,375
========== =========== ========== ========== ========= ========== ===========

Net asset distribution by category:
Variable life policies........... $4,668,492 $24,452,772 $5,440,280 $2,458,568 $ 25,700 $1,376,802 $19,730,375
========== =========== ========== ========== ========= ========== ===========

Units outstanding, December 31,
1999............................. 1,682,116 18,201,719 4,272,526 811,422 19,878 512,135 5,817,688
Net asset value per unit, December
31, 1999......................... $ 2.775368 $ 1.343432 $ 1.273317 $ 3.029949 $1.292882 $2.688360 $ 3.391446

SELECT SELECT
GROWTH VALUE
AND INCOME OPPORTUNITY
----------- -----------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $ 360,630 $21,143,601
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ -- --
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- --
Investments in shares of Delaware
Group Premium Fund............... -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- --
--------- -----------
Total assets..................... 360,630 21,143,601
LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ -- 75
--------- -----------
Net assets....................... $ 360,630 $21,143,526
========= ===========
Net asset distribution by category:
Variable life policies........... $ 360,630 $21,143,526
========= ===========
Units outstanding, December 31,
1999............................. 145,870 11,920,865
Net asset value per unit, December
31, 1999......................... $2.472277 $ 1.773657

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

SA-1

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999

SELECT SELECT SELECT FIDELITY
INTERNATIONAL SELECT CAPITAL EMERGING STRATEGIC VIP HIGH FIDELITY VIP
EQUITY APPRECIATION MARKETS GROWTH INCOME EQUITY-INCOME
------------- -------------- --------- --------- --------- -------------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $6,399,666 $ 416,787 $ 38,426 $ 14,425 $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ -- -- -- -- 229,432 392,179
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- -- -- -- -- --
Investments in shares of Delaware
Group Premium Fund............... -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- -- -- -- -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- -- -- -- -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- -- -- -- -- 2
---------- --------- --------- --------- --------- ---------
Total assets..................... 6,399,666 416,787 38,426 14,425 229,432 392,181

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ 1 -- 3 -- -- --
---------- --------- --------- --------- --------- ---------
Net assets....................... $6,399,665 $ 416,787 $ 38,423 $ 14,425 $ 229,432 $ 392,181
========== ========= ========= ========= ========= =========

Net asset distribution by category:
Variable life policies........... $6,399,665 $ 416,787 $ 38,423 $ 14,425 $ 229,432 $ 392,181
========== ========= ========= ========= ========= =========

Units outstanding, December 31,
1999............................. 2,891,414 168,585 22,820 12,251 149,451 188,109
Net asset value per unit, December
31, 1999......................... $ 2.213334 $2.472283 $1.683890 $1.177443 $1.535166 $2.084855

FIDELITY FIDELITY FIDELITY
VIP VIP VIP II ASSET
GROWTH OVERSEAS MANAGER
---------- --------- ------------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ 2,011,071 121,440 942,626
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- -- --
Investments in shares of Delaware
Group Premium Fund............... -- -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- -- --
---------- --------- ---------
Total assets..................... 2,011,071 121,440 942,626
LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ 6 -- 5
---------- --------- ---------
Net assets....................... $2,011,065 $ 121,440 $ 942,621
========== ========= =========
Net asset distribution by category:
Variable life policies........... $2,011,065 $ 121,440 $ 942,621
========== ========= =========
Units outstanding, December 31,
1999............................. 594,798 55,613 474,523
Net asset value per unit, December
31, 1999......................... $ 3.381090 $2.183667 $1.986462

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

SA-2

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999

T. ROWE PRICE DGPF DGPF DGPF
FIDELITY VIP II INTERNATIONAL GROWTH & DGPF Capital Cash
INDEX 500 STOCK INCOME(a) Delchester(a) Reserves(a) Reserves(a)
--------------- ------------- --------- ------------- ----------- -----------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ 52,967,255 -- -- -- -- --
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- 670,974 -- -- -- --
Investments in shares of Delaware
Group Premium Fund............... -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- -- -- -- -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- -- -- -- -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- -- -- -- -- --
----------- --------- --------- --------- --------- ---------
Total assets..................... 52,967,255 670,974 -- -- -- --

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ 123 6 -- -- -- --
----------- --------- --------- --------- --------- ---------
Net assets....................... $52,967,132 $ 670,968 $ -- $ -- $ -- $ --
=========== ========= ========= ========= ========= =========

Net asset distribution by category:
Variable life policies........... $52,967,132 $ 670,968 $ -- $ -- $ -- $ --
=========== ========= ========= ========= ========= =========

Units outstanding, December 31,
1999............................. 46,033,157 377,847 -- -- -- --
Net asset value per unit, December
31, 1999......................... $ 1.150630 $1.775768 $1.000000 $1.000000 $1.000000 $1.000000

DGPF DGPF
DGPF Delaware International
DelCap(a) Balanced(a) Equity
--------- ----------- -------------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ -- -- --
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- -- --
Investments in shares of Delaware
Group Premium Fund............... -- -- 44,794,844
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- -- --
--------- --------- -----------
Total assets..................... -- -- 44,794,844
LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ -- -- 3
--------- --------- -----------
Net assets....................... $ -- $ -- $44,794,841
========= ========= ===========
Net asset distribution by category:
Variable life policies........... $ -- $ -- $44,794,841
========= ========= ===========
Units outstanding, December 31,
1999............................. -- -- 30,064,075
Net asset value per unit, December
31, 1999......................... $1.000000 $1.000000 $ 1.489979

(a) For the year ended 12/31/99, there were no transactions.

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

SA-3

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999

DGPF DGPF DGPF DGPF
SMALL CAP DGPF Strategic DGPF Emerging Social DGPF
VALUE(a) Trend(a) Income(a) Devon(a) Markets(a) Awareness(a) REIT(a)
---------- --------- --------- --------- ---------- ------------ ---------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ -- -- -- -- -- -- --
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- -- -- -- -- -- --
Investments in shares of Delaware
Group Premium Fund............... -- -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- -- -- -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- -- -- -- -- -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- -- -- -- -- -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total assets..................... -- -- -- -- -- -- --

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net assets....................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= ========= =========

Net asset distribution by category:
Variable life policies........... $ -- $ -- $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= ========= ========= =========

Units outstanding, December 31,
1999............................. -- -- -- -- -- -- --
Net asset value per unit, December
31, 1999......................... $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 $1.000000

DGPF
Aggressive DGPF U.S.
Growth(a) Growth(a)
---------- -------------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ -- --
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- --
Investments in shares of Delaware
Group Premium Fund............... -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- --
--------- ---------
Total assets..................... -- --
LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ -- --
--------- ---------
Net assets....................... $ -- $ --
========= =========
Net asset distribution by category:
Variable life policies........... $ -- $ --
========= =========
Units outstanding, December 31,
1999............................. -- --
Net asset value per unit, December
31, 1999......................... $1.000000 $1.000000

(a) For the year ended 12/31/99, there were no transactions.

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

SA-4

GROUP VEL ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1999

MFVAT
INVESCO INVESCO MFVAT U.S. MFVAT Growth
VIF EQUITY VIF TOTAL MORGAN STANLEY GOVERNMENT Asset &
INCOME* RETURN FIXED INCOME INCOME(a) Allocation(a) Income(a)
---------- ---------- -------------- --------------- ------------- ---------

ASSETS:
Investments in shares of Allmerica
Investment Trust................. $ -- $ -- $ -- $ -- $ -- $ --
Investments in shares of Fidelity
Variable Insurance Products Funds
(VIP)............................ -- -- -- -- -- --
Investment in shares of T. Rowe
Price International Series,
Inc.............................. -- -- -- -- -- --
Investments in shares of Delaware
Group Premium Fund............... -- -- -- -- -- --
Investments in shares of INVESCO
Variable Investment Funds, Inc.
(VIF)............................ 10,555 27,685 -- -- -- --
Investment in shares of Morgan
Stanley Universal Funds, Inc..... -- -- 29,912,451 -- -- --
Investments in shares of Mutual
Fund Variable Annuity Trust
(MFVAT).......................... -- -- -- -- -- --
Receivable from Allmerica Financial
Life Insurance and Annuity
Company (Sponsor)................ -- -- 12 -- -- --
--------- --------- ----------- --------- --------- ---------
Total assets..................... 10,555 27,685 29,912,463 -- -- --

LIABILITIES:
Payable to Allmerica Financial Life
Insurance and Annuity Company
(Sponsor)........................ -- -- -- -- -- --
--------- --------- ----------- --------- --------- ---------
Net assets....................... $ 10,555 $ 27,685 $29,912,463 $ -- $ -- $ --
========= ========= =========== ========= ========= =========

Net asset distribution by category:
Variable life policies........... $ 10,555 $ 27,685 $29,912,463 $ -- $ -- $ --
========= ========= =========== ========= ========= =========

Units outstanding, December 31,
1999............................. 5,713 19,938 28,095,948 -- -- --
Net asset value per unit, December
31, 1999......................... $1.847415 $1.388528 $ 1.064654 $1.000000 $1.000000 $1.000000

MFVAT MFVAT
Capital International
Growth(a) Equity(a)
--------- -------------

* Name changed. See Note 1.
(a) For the year ended 12/31/99, there were no transactions.

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

SA-5

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS

GROWTH INVESTMENT GRADE INCOME
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- ----------- -------- --------

INVESTMENT INCOME:
Dividends...................... $ 23,481 $ 24,155 $ 19,495 $ 1,343,154 $882,578 $611,287

EXPENSES:
Mortality and expense risk
fees......................... 5,592 12,008 6,270 117,498 92,564 61,160
-------- -------- -------- ----------- -------- --------
Net investment income
(loss)..................... 17,889 12,147 13,225 1,225,656 790,014 550,127
-------- -------- -------- ----------- -------- --------

REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... 286,696 21,129 282,628 18,099 -- --
Net realized gain (loss) from
sales of investments......... 47,530 (4,698) 22,096 (42,607) 20,005 7,069
-------- -------- -------- ----------- -------- --------
Net realized gain (loss)..... 334,226 16,431 304,724 (24,508) 20,005 7,069
Net unrealized gain (loss)..... 456,438 330,418 (57,127) (1,572,308) 166,355 282,868
-------- -------- -------- ----------- -------- --------

Net realized and unrealized
gain (loss)................ 790,664 346,849 247,597 (1,596,816) 186,360 289,937
-------- -------- -------- ----------- -------- --------
Net increase (decrease) in
net assets from
operations................. $808,553 $358,996 $260,822 $ (371,160) $976,374 $840,064
======== ======== ======== =========== ======== ========

MONEY MARKET EQUITY INDEX
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- ----------- ---------- ----------

INVESTMENT INCOME:
Dividends...................... $63,607 $222,239 $168,681 $ 130,745 $ 340,554 $ 99,982
EXPENSES:
Mortality and expense risk
fees......................... 7,616 21,736 24,667 97,822 122,802 49,283
------- -------- -------- ----------- ---------- ----------
Net investment income
(loss)..................... 55,991 200,503 144,014 32,923 217,752 50,699
------- -------- -------- ----------- ---------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions
from portfolio sponsors...... -- -- -- 3,576 1,091,932 231,984
Net realized gain (loss) from
sales of investments......... -- -- -- 11,658,579 313,038 57,606
------- -------- -------- ----------- ---------- ----------
Net realized gain (loss)..... -- -- -- 11,662,155 1,404,970 289,590
Net unrealized gain (loss)..... -- -- -- (7,166,459) 5,974,791 1,759,333
------- -------- -------- ----------- ---------- ----------
Net realized and unrealized
gain (loss)................ -- -- -- 4,495,696 7,379,761 2,048,923
------- -------- -------- ----------- ---------- ----------
Net increase (decrease) in
net assets from
operations................. $55,991 $200,503 $144,014 $ 4,528,619 $7,597,513 $2,099,622
======= ======== ======== =========== ========== ==========

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

SA-6

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

GOVERNMENT BOND SELECT AGGRESSIVE GROWTH
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------

INVESTMENT INCOME:
Dividends........................ $1,412 $ 911 $837 $ -- $ -- $ --

EXPENSES:
Mortality and expense risk
fees........................... 78 103 19 5,695 3,950 706
------ ------ ---- -------- ------- -------
Net investment income (loss)... 1,334 808 818 (5,695) (3,950) (706)
------ ------ ---- -------- ------- -------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. -- -- -- -- -- 17,916
Net realized gain (loss) from
sales of investments........... (153) 926 1 16,919 (3,058) 748
------ ------ ---- -------- ------- -------
Net realized gain (loss)....... (153) 926 1 16,919 (3,058) 18,664
Net unrealized gain (loss)....... (596) 83 (88) 356,020 42,784 3,863
------ ------ ---- -------- ------- -------

Net realized and unrealized
gain (loss).................. (749) 1,009 (87) 372,939 39,726 22,527
------ ------ ---- -------- ------- -------
Net increase (decrease) in net
assets from
operations................... $ 585 $1,817 $731 $367,244 $35,776 $21,821
====== ====== ==== ======== ======= =======

SELECT GROWTH SELECT GROWTH AND INCOME
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- -------- -------- --------

INVESTMENT INCOME:
Dividends........................ $ 8,328 $ 7,079 $ 20,160 $ 3,501 $ 2,753 $1,134
EXPENSES:
Mortality and expense risk
fees........................... 83,487 58,229 39,740 1,862 1,576 365
---------- ---------- ---------- ------- ------- ------
Net investment income (loss)... (75,159) (51,150) (19,580) 1,639 1,177 769
---------- ---------- ---------- ------- ------- ------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. 529,243 93,491 363,902 23,247 922 13,936
Net realized gain (loss) from
sales of investments........... 518,323 576,009 51,101 1,849 1,778 296
---------- ---------- ---------- ------- ------- ------
Net realized gain (loss)....... 1,047,566 669,500 415,003 25,096 2,700 14,232
Net unrealized gain (loss)....... 3,239,541 2,339,939 1,431,596 22,927 25,056 (5,403)
---------- ---------- ---------- ------- ------- ------
Net realized and unrealized
gain (loss).................. 4,287,107 3,009,439 1,846,599 48,023 27,756 8,829
---------- ---------- ---------- ------- ------- ------
Net increase (decrease) in net
assets from
operations................... $4,211,948 $2,958,289 $1,827,019 $49,662 $28,933 $9,598
========== ========== ========== ======= ======= ======

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

SA-7

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

SELECT VALUE OPPORTUNITY SELECT INTERNATIONAL EQUITY
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
----------- -------- -------- ---------- ---------- --------

INVESTMENT INCOME:
Dividends....................... $ 118 $ 5,317 $ 1,289 $ -- $ 117,829 $131,715

EXPENSES:
Mortality and expense risk
fees.......................... 64,483 2,543 633 42,211 53,990 35,909
----------- ------- ------- ---------- ---------- --------
Net investment income
(loss)...................... (64,365) 2,774 656 (42,211) 63,839 95,806
----------- ------- ------- ---------- ---------- --------

REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............ 1,173,968 1,651 30,900 -- -- 182,156
Net realized gain (loss) from
sales of investments.......... (58,716) (3,746) 700 803,256 77,352 11,256
----------- ------- ------- ---------- ---------- --------
Net realized gain (loss)...... 1,115,252 (2,095) 31,600 803,256 77,352 193,412
Net unrealized gain (loss)...... (2,332,303) 16,497 (5,610) 900,525 1,085,145 (15,069)
----------- ------- ------- ---------- ---------- --------

Net realized and unrealized
gain (loss)................. (1,217,051) 14,402 25,990 1,703,781 1,162,497 178,343
----------- ------- ------- ---------- ---------- --------
Net increase (decrease) in net
assets from
operations.................. $(1,281,416) $17,176 $26,646 $1,661,570 $1,226,336 $274,149
=========== ======= ======= ========== ========== ========

SELECT EMERGING MARKETS
SELECT CAPITAL APPRECIATION
FOR THE YEAR ENDED FOR THE FOR THE
DECEMBER 31, YEAR ENDED PERIOD
-------------------------------- DECEMBER 31, 11/9/98* TO
1999 1998 1997 1999 12/31/98
-------- -------- -------- ------------ ---------------

INVESTMENT INCOME:
Dividends....................... $ -- $ -- $ -- $ 100 $ --
EXPENSES:
Mortality and expense risk
fees.......................... 1,681 914 204 40 --
------- -------- ------ ------ ---------------
Net investment income
(loss)...................... (1,681) (914) (204) 60 --
------- -------- ------ ------ ---------------
REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............ 412 37,550 -- -- --
Net realized gain (loss) from
sales of investments.......... 28 (803) 544 21 --
------- -------- ------ ------ ---------------
Net realized gain (loss)...... 440 36,747 544 21 --
Net unrealized gain (loss)...... 74,213 (13,375) 6,529 5,716 --
------- -------- ------ ------ ---------------
Net realized and unrealized
gain (loss)................. 74,653 23,372 7,073 5,737 --
------- -------- ------ ------ ---------------
Net increase (decrease) in net
assets from
operations.................. $72,972 $ 22,458 $6,869 $5,797 $ --
======= ======== ====== ====== ===============

* Date of initial investment.

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

SA-8

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

SELECT STRATEGIC FIDELITY VIP HIGH INCOME FIDELITY VIP EQUITY-INCOME
GROWTH FOR THE YEAR ENDED FOR THE YEAR ENDED
FOR THE DECEMBER 31, DECEMBER 31,
PERIOD 3/5/99* -------------------------------- --------------------------------
TO 12/31/99 1999 1998 1997 1999 1998 1997
---------------- -------- -------- -------- -------- -------- --------

INVESTMENT INCOME:
Dividends........................ $ 40 $ 8,271 $ 3,501 $ 351 $2,402 $ 898 $ 91

EXPENSES:
Mortality and expense risk
fees........................... 20 783 354 119 1,479 569 177
---- ------- ------- ------ ------ ------- ------
Net investment income (loss)... 20 7,488 3,147 232 923 329 (86)
---- ------- ------- ------ ------ ------- ------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. -- 309 2,225 43 5,309 3,197 457
Net realized gain (loss) from
sales of investments........... (17) (2,862) (683) 94 3,125 802 242
---- ------- ------- ------ ------ ------- ------
Net realized gain (loss)....... (17) (2,553) 1,542 137 8,434 3,999 699
Net unrealized gain (loss)....... 918 2,236 (8,346) 2,892 (277) 5,752 5,483
---- ------- ------- ------ ------ ------- ------

Net realized and unrealized
gain (loss).................. 901 (317) (6,804) 3,029 8,157 9,751 6,182
---- ------- ------- ------ ------ ------- ------
Net increase (decrease) in net
assets from
operations................... $921 $ 7,171 $(3,657) $3,261 $9,080 $10,080 $6,096
==== ======= ======= ====== ====== ======= ======

FIDELITY VIP GROWTH
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------

INVESTMENT INCOME:
Dividends........................ $ 2,233 $ 1,819 $ 2,224
EXPENSES:
Mortality and expense risk
fees........................... 6,781 2,312 1,311
-------- -------- -------
Net investment income (loss)... (4,548) (493) 913
-------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. 140,400 47,583 9,956
Net realized gain (loss) from
sales of investments........... 114,230 37,911 16,498
-------- -------- -------
Net realized gain (loss)....... 254,630 85,494 26,454
Net unrealized gain (loss)....... 242,219 115,549 43,944
-------- -------- -------
Net realized and unrealized
gain (loss).................. 496,849 201,043 70,398
-------- -------- -------
Net increase (decrease) in net
assets from
operations................... $492,301 $200,550 $71,311
======== ======== =======

* Date of initial investment.

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

SA-9

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

FIDELITY VIP OVERSEAS FIDELITY VIP II FIDELITY VIP II
FOR THE ASSET MANAGER INDEX 500
YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, FOR THE
-------------------------------- -------------------------------- PERIOD
1999 1998 1997 1999 1998 1997 5/4/99* TO 12/31/99
-------- -------- -------- -------- -------- -------- -------------------

INVESTMENT INCOME:
Dividends........................ $ 1,054 $1,056 $ 344 $20,569 $11,971 $ 6,739 $ --

EXPENSES:
Mortality and expense risk
fees........................... 502 338 205 1,247 2,662 994 56,677
------- ------ ------ ------- ------- ------- ----------
Net investment income (loss)... 552 718 139 19,322 9,309 5,745 (56,677)
------- ------ ------ ------- ------- ------- ----------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. 1,699 3,112 1,365 26,054 35,913 16,905 --
Net realized gain (loss) from
sales of investments........... 1,721 165 201 1,785 5,268 499 1,274
------- ------ ------ ------- ------- ------- ----------
Net realized gain (loss)....... 3,420 3,277 1,566 27,839 41,181 17,404 1,274
Net unrealized gain (loss)....... 30,111 1,086 285 12,862 15,917 28,899 4,566,606
------- ------ ------ ------- ------- ------- ----------

Net realized and unrealized
gain (loss).................. 33,531 4,363 1,851 40,701 57,098 46,303 4,567,880
------- ------ ------ ------- ------- ------- ----------
Net increase (decrease) in net
assets from
operations................... $34,083 $5,081 $1,990 $60,023 $66,407 $52,048 $4,511,203
======= ====== ====== ======= ======= ======= ==========

T. ROWE PRICE
INTERNATIONAL STOCK
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------

INVESTMENT INCOME:
Dividends........................ $ 2,334 $ 4,272 $ 898
EXPENSES:
Mortality and expense risk
fees........................... 2,485 1,337 560
-------- ------- ------
Net investment income (loss)... (151) 2,935 338
-------- ------- ------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. 7,335 1,508 1,272
Net realized gain (loss) from
sales of investments........... 1,538 318 183
-------- ------- ------
Net realized gain (loss)....... 8,873 1,826 1,455
Net unrealized gain (loss)....... 144,131 23,676 (326)
-------- ------- ------
Net realized and unrealized
gain (loss).................. 153,004 25,502 1,129
-------- ------- ------
Net increase (decrease) in net
assets from
operations................... $152,853 $28,437 $1,467
======== ======= ======

* Date of initial investment.

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

SA-10

GROUP VEL ACCOUNT
STATEMENTS OF OPERATIONS (CONTINUED)

INVESCO VIF
DGPF INTERNATIONAL EQUITY EQUITY INCOME**
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
---------- -------- -------- -------- -------- --------

INVESTMENT INCOME:
Dividends........................ $ 183,862 $ 11,680 $ 118 $ 123 $ 150 $ 112

EXPENSES:
Mortality and expense risk
fees........................... 50,747 16,877 251 39 38 23
---------- -------- ----- ------ ------ ------
Net investment income (loss)... 133,115 (5,197) (133) 84 112 89
---------- -------- ----- ------ ------ ------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. 13,428 -- -- 55 311 398
Net realized gain (loss) from
sales of investments........... 20,862 7,893 164 234 401 25
---------- -------- ----- ------ ------ ------
Net realized gain (loss)....... 34,290 7,893 164 289 712 423
Net unrealized gain (loss)....... 2,827,542 442,761 (695) 947 312 752
---------- -------- ----- ------ ------ ------

Net realized and unrealized
gain (loss).................. 2,861,832 450,654 (531) 1,236 1,024 1,175
---------- -------- ----- ------ ------ ------
Net increase (decrease) in net
assets from
operations................... $2,994,947 $445,457 $(664) $1,320 $1,136 $1,264
========== ======== ===== ====== ====== ======

INVESCO VIF MORGAN STANLEY FIXED INCOME
TOTAL RETURN
FOR THE YEAR ENDED FOR THE FOR THE
DECEMBER 31, YEAR ENDED PERIOD
-------------------------------- DECEMBER 31, 2/17/98* TO
1999 1998 1997 1999 12/31/98
-------- -------- -------- ------------ -----------

INVESTMENT INCOME:
Dividends........................ $ 642 $1,276 $1,045 $ 1,356,031 $648,460
EXPENSES:
Mortality and expense risk
fees........................... 149 257 137 78,341 35,898
------- ------ ------ ----------- --------
Net investment income (loss)... 493 1,019 908 1,277,690 612,562
------- ------ ------ ----------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain distributions from
portfolio sponsors............. 107 1,325 245 3,424 256,451
Net realized gain (loss) from
sales of investments........... 4,008 553 31 (11,666) 8,635
------- ------ ------ ----------- --------
Net realized gain (loss)....... 4,115 1,878 276 (8,242) 265,086
Net unrealized gain (loss)....... (5,835) 2,122 5,287 (1,680,097) (179,067)
------- ------ ------ ----------- --------
Net realized and unrealized
gain (loss).................. (1,720) 4,000 5,563 (1,688,339) 86,019
------- ------ ------ ----------- --------
Net increase (decrease) in net
assets from
operations................... $(1,227) $5,019 $6,471 $ (410,649) $698,581
======= ====== ====== =========== ========

* Date of initial investment.
** Name changed. See Note 1.

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

SA-11

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS

GROWTH INVESTMENT GRADE INCOME
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ----------- ----------- ----------

INCREASE (DECREASE) IN NET
ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 17,889 $ 12,147 $ 13,225 $ 1,225,656 $ 790,014 $ 550,127
Net realized gain
(loss).................. 334,226 16,431 304,724 (24,508) 20,005 7,069
Net unrealized gain
(loss).................. 456,438 330,418 (57,127) (1,572,308) 166,355 282,868
---------- ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in
net assets from
operations.............. 808,553 358,996 260,822 (371,160) 976,374 840,064
---------- ---------- ---------- ----------- ----------- ----------

FROM POLICY TRANSACTIONS:
Net premiums.............. 873,749 675,094 793,195 8,011,892 2,981,137 9,313,499
Terminations.............. (337,479) (48,810) (2,053) (13,958) (53,707) --
Insurance and other
charges................. (13,900) (7,692) (3,267) (633,839) (451,085) (447,871)
Transfers between
sub-accounts (including
fixed
account), net........... 540,030 (72,668) 75,006 2,113,615 2,055,119 138,291
Other transfers from (to)
the General Account..... 116,813 492 (6,615) (6,858) 892 402
Net increase (decrease) in
investment by
Sponsor................. -- -- -- -- (265) --
---------- ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in
net assets from policy
transactions............ 1,179,213 546,416 856,266 9,470,852 4,532,091 9,004,321
---------- ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in
net assets.............. 1,987,766 905,412 1,117,088 9,099,692 5,508,465 9,844,385

NET ASSETS:
Beginning of year........... 2,680,726 1,775,314 658,226 15,353,080 9,844,615 230
---------- ---------- ---------- ----------- ----------- ----------
End of year................. $4,668,492 $2,680,726 $1,775,314 $24,452,772 $15,353,080 $9,844,615
========== ========== ========== =========== =========== ==========

MONEY MARKET EQUITY INDEX
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
---------- ------------ ----------- ------------ ----------- ----------

INCREASE (DECREASE) IN NET
ASSETS:
FROM OPERATIONS:
Net investment income
(loss).................. $ 55,991 $ 200,503 $ 144,014 $ 32,923 $ 217,752 $ 50,699
Net realized gain
(loss).................. -- -- -- 11,662,155 1,404,970 289,590
Net unrealized gain
(loss).................. -- -- -- (7,166,459) 5,974,791 1,759,333
---------- ------------ ----------- ------------ ----------- ----------
Net increase (decrease) in
net assets from
operations.............. 55,991 200,503 144,014 4,528,619 7,597,513 2,099,622
---------- ------------ ----------- ------------ ----------- ----------
FROM POLICY TRANSACTIONS:
Net premiums.............. 6,325,820 1,928,083 30,656,799 2,363,320 17,533,507 6,793,979
Terminations.............. (69,826) (47,901) (31) (172,583) (86,149) (198)
Insurance and other
charges................. (709,087) (830,359) (704,864) (587,637) (998,917) (364,580)
Transfers between
sub-accounts (including
fixed
account), net........... (391,608) (29,510,393) (1,673,588) (49,801,441) 13,535,625 8,426
Other transfers from (to)
the General Account..... (10,636) (771) 35 (2,377) 5,188 (34)
Net increase (decrease) in
investment by
Sponsor................. -- -- -- -- -- --
---------- ------------ ----------- ------------ ----------- ----------
Net increase (decrease) in
net assets from policy
transactions............ 5,144,663 (28,461,341) 28,278,351 (48,200,718) 29,989,254 6,437,593
---------- ------------ ----------- ------------ ----------- ----------
Net increase (decrease) in
net assets.............. 5,200,654 (28,260,838) 28,422,365 (43,672,099) 37,586,767 8,537,215
NET ASSETS:
Beginning of year........... 239,626 28,500,464 78,099 46,130,667 8,543,900 6,685
---------- ------------ ----------- ------------ ----------- ----------
End of year................. $5,440,280 $ 239,626 $28,500,464 $ 2,458,568 $46,130,667 $8,543,900
========== ============ =========== ============ =========== ==========

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

SA-12

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

GOVERNMENT BOND SELECT AGGRESSIVE GROWTH
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- ---------- -------- --------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)............. $ 1,334 $ 808 $ 818 $ (5,695) $ (3,950) $ (706)
Net realized gain (loss)................. (153) 926 1 16,919 (3,058) 18,664
Net unrealized gain (loss)............... (596) 83 (88) 356,020 42,784 3,863
-------- -------- ------- ---------- -------- --------
Net increase (decrease) in net assets
from
operations............................. 585 1,817 731 367,244 35,776 21,821
-------- -------- ------- ---------- -------- --------

FROM POLICY TRANSACTIONS:
Net premiums............................. 12,424 13,471 5,649 298,089 448,702 98,882
Terminations............................. (12,517) (81) (713) (29,100) (76,946) (3,662)
Insurance and other charges.............. (554) (216) (163) (29,164) (18,498) (3,465)
Transfers between sub-accounts (including
fixed
account), net.......................... 3,007 (30,874) 31,189 (17,644) 181,020 115,907
Other transfers from (to) the General
Account................................ (583) (389) -- (17,822) (3,910) 1,120
Net increase (decrease) in investment by
Sponsor................................ -- -- -- -- -- --
-------- -------- ------- ---------- -------- --------
Net increase (decrease) in net assets
from policy
transactions........................... 1,777 (18,089) 35,962 204,359 530,368 208,782
-------- -------- ------- ---------- -------- --------
Net increase (decrease) in net assets.... 2,362 (16,272) 36,693 571,603 566,144 230,603

NET ASSETS:
Beginning of year.......................... 23,338 39,610 2,917 805,199 239,055 8,452
-------- -------- ------- ---------- -------- --------
End of year................................ $ 25,700 $ 23,338 $39,610 $1,376,802 $805,199 $239,055
======== ======== ======= ========== ======== ========

SELECT GROWTH SELECT GROWTH AND INCOME
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- -------- -------- --------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)............. $ (75,159) $ (51,150) $ (19,580) $ 1,639 $ 1,177 $ 769
Net realized gain (loss)................. 1,047,566 669,500 415,003 25,096 2,700 14,232
Net unrealized gain (loss)............... 3,239,541 2,339,939 1,431,596 22,927 25,056 (5,403)
----------- ----------- ---------- -------- -------- --------
Net increase (decrease) in net assets
from
operations............................. 4,211,948 2,958,289 1,827,019 49,662 28,933 9,598
----------- ----------- ---------- -------- -------- --------
FROM POLICY TRANSACTIONS:
Net premiums............................. 3,049,445 2,111,416 5,368,817 88,966 155,220 65,720
Terminations............................. (33,196) (97,238) (18) (7,618) (44,778) (4,379)
Insurance and other charges.............. (345,255) (281,352) (292,989) (5,494) (7,462) (3,633)
Transfers between sub-accounts (including
fixed
account), net.......................... 2,130,460 (952,256) 76,402 3,125 (70,127) 101,691
Other transfers from (to) the General
Account................................ (8,787) 4,794 1,070 (639) (1,320) 800
Net increase (decrease) in investment by
Sponsor................................ -- -- -- -- -- --
----------- ----------- ---------- -------- -------- --------
Net increase (decrease) in net assets
from policy
transactions........................... 4,792,667 785,364 5,153,282 78,340 31,533 160,199
----------- ----------- ---------- -------- -------- --------
Net increase (decrease) in net assets.... 9,004,615 3,743,653 6,980,301 128,002 60,466 169,797
NET ASSETS:
Beginning of year.......................... 10,725,760 6,982,107 1,806 232,628 172,162 2,365
----------- ----------- ---------- -------- -------- --------
End of year................................ $19,730,375 $10,725,760 $6,982,107 $360,630 $232,628 $172,162
=========== =========== ========== ======== ======== ========

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

SA-13

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

SELECT VALUE OPPORTUNITY SELECT INTERNATIONAL EQUITY
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
----------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
----------- -------- -------- ----------- ---------- ----------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss)...................... $ (64,365) $ 2,774 $ 656 $ (42,211) $ 63,839 $ 95,806
Net realized gain (loss)...... 1,115,252 (2,095) 31,600 803,256 77,352 193,412
Net unrealized gain (loss).... (2,332,303) 16,497 (5,610) 900,525 1,085,145 (15,069)
----------- -------- -------- ----------- ---------- ----------
Net increase (decrease) in net
assets from
operations.................. (1,281,416) 17,176 26,646 1,661,570 1,226,336 274,149
----------- -------- -------- ----------- ---------- ----------

FROM POLICY TRANSACTIONS:
Net premiums.................. 7,573,904 245,642 151,059 1,382,581 1,910,773 5,449,561
Terminations.................. (10,156) (32,190) (3,904) (40,201) (85,614) (8)
Insurance and other charges... (504,046) (12,119) (4,266) (135,408) (257,943) (259,243)
Transfers between sub-accounts
(including fixed
account), net............... 14,728,048 182,286 59,070 (5,542,260) 655,125 108,744
Other transfers from (to) the
General Account............. 3,590 (2,227) 432 (5,159) (6,961) 947
Net increase (decrease) in
investment by
Sponsor..................... -- -- -- -- -- --
----------- -------- -------- ----------- ---------- ----------
Net increase (decrease) in net
assets from policy
transactions................ 21,791,340 381,392 202,391 (4,340,447) 2,215,380 5,300,001
----------- -------- -------- ----------- ---------- ----------
Net increase (decrease) in net
assets...................... 20,509,924 398,568 229,037 (2,678,877) 3,441,716 5,574,150

NET ASSETS:
Beginning of year............... 633,602 235,034 5,997 9,078,542 5,636,826 62,676
----------- -------- -------- ----------- ---------- ----------
End of year..................... $21,143,526 $633,602 $235,034 $ 6,399,665 $9,078,542 $5,636,826
=========== ======== ======== =========== ========== ==========

SELECT CAPITAL APPRECIATION SELECT EMERGING MARKETS
YEAR ENDED
DECEMBER 31, YEAR ENDED PERIOD
-------------------------------- DECEMBER 31, FROM 11/9/98*
1999 1998 1997 1999 TO 12/31/98
-------- -------- -------- ------------- -------------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss)...................... $ (1,681) $ (914) $ (204) $ 60 $--
Net realized gain (loss)...... 440 36,747 544 21 --
Net unrealized gain (loss).... 74,213 (13,375) 6,529 5,716 --
-------- -------- ------- ------- ---
Net increase (decrease) in net
assets from
operations.................. 72,972 22,458 6,869 5,797 --
-------- -------- ------- ------- ---
FROM POLICY TRANSACTIONS:
Net premiums.................. 118,843 105,063 53,911 21,690 11
Terminations.................. (14,254) (8,341) (3,829) -- --
Insurance and other charges... (9,399) (5,861) (1,570) (399) --
Transfers between sub-accounts
(including fixed
account), net............... 4,812 69,728 (4,978) 11,082 --
Other transfers from (to) the
General Account............. (4,275) (344) (16) 242 --
Net increase (decrease) in
investment by
Sponsor..................... -- -- -- -- --
-------- -------- ------- ------- ---
Net increase (decrease) in net
assets from policy
transactions................ 95,727 160,245 43,518 32,615 11
-------- -------- ------- ------- ---
Net increase (decrease) in net
assets...................... 168,699 182,703 50,387 38,412 11
NET ASSETS:
Beginning of year............... 248,088 65,385 14,998 11 --
-------- -------- ------- ------- ---
End of year..................... $416,787 $248,088 $65,385 $38,423 $11
======== ======== ======= ======= ===

* Date of initial investment.

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

SA-14

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

SELECT STRATEGIC FIDELITY VIP HIGH INCOME FIDELITY VIP EQUITY-INCOME
GROWTH YEAR ENDED YEAR ENDED
PERIOD DECEMBER 31, DECEMBER 31,
FROM 3/5/99* -------------------------------- --------------------------------
TO 12/31/99 1999 1998 1997 1999 1998 1997
---------------- -------- -------- -------- -------- -------- --------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 20 $ 7,488 $ 3,147 $ 232 $ 923 $ 329 $ (86)
Net realized gain (loss)....... (17) (2,553) 1,542 137 8,434 3,999 699
Net unrealized gain (loss)..... 918 2,236 (8,346) 2,892 (277) 5,752 5,483
------- -------- ------- ------- -------- -------- -------
Net increase (decrease) in net
assets from
operations................... 921 7,171 (3,657) 3,261 9,080 10,080 6,096
------- -------- ------- ------- -------- -------- -------

FROM POLICY TRANSACTIONS:
Net premiums................... 12,853 180,207 36,812 37,542 187,400 116,536 49,237
Terminations................... -- (21,248) (4,930) (1,972) (33,829) (23,881) (817)
Insurance and other charges.... (1,346) (15,258) (3,521) (1,317) (15,364) (6,484) (1,985)
Transfers between sub-accounts
(including fixed
account), net................ 1,952 (6,975) 21,213 1,849 92,974 4,066 1,915
Other transfers from (to) the
General Account.............. 45 (3,559) (252) 15 (7,403) 25 89
Net increase (decrease) in
investment by
Sponsor...................... -- -- -- -- -- -- --
------- -------- ------- ------- -------- -------- -------
Net increase (decrease) in net
assets from policy
transactions................. 13,504 133,167 49,322 36,117 223,778 90,262 48,439
------- -------- ------- ------- -------- -------- -------
Net increase (decrease) in net
assets....................... 14,425 140,338 45,665 39,378 232,858 100,342 54,535

NET ASSETS:
Beginning of year................ -- 89,094 43,429 4,051 159,323 58,981 4,446
------- -------- ------- ------- -------- -------- -------
End of year...................... $14,425 $229,432 $89,094 $43,429 $392,181 $159,323 $58,981
======= ======== ======= ======= ======== ======== =======

FIDELITY VIP GROWTH
YEAR ENDED
DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- --------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (4,548) $ (493) $ 913
Net realized gain (loss)....... 254,630 85,494 26,454
Net unrealized gain (loss)..... 242,219 115,549 43,944
---------- ---------- --------
Net increase (decrease) in net
assets from
operations................... 492,301 200,550 71,311
---------- ---------- --------
FROM POLICY TRANSACTIONS:
Net premiums................... 444,886 267,715 137,061
Terminations................... (337,035) (25,480) (17,376)
Insurance and other charges.... (37,954) (8,916) (4,065)
Transfers between sub-accounts
(including fixed
account), net................ 266,957 375,715 (169,900)
Other transfers from (to) the
General Account.............. 30,447 (3,680) 199
Net increase (decrease) in
investment by
Sponsor...................... -- -- --
---------- ---------- --------
Net increase (decrease) in net
assets from policy
transactions................. 367,301 605,354 (54,081)
---------- ---------- --------
Net increase (decrease) in net
assets....................... 859,602 805,904 17,230
NET ASSETS:
Beginning of year................ 1,151,463 345,559 328,329
---------- ---------- --------
End of year...................... $2,011,065 $1,151,463 $345,559
========== ========== ========

* Date of initial investment.

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

SA-15

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FIDELITY VIP OVERSEAS FIDELITY VIP II ASSET MANAGER
YEAR ENDED YEAR ENDED FIDELITY VIP II
DECEMBER 31, DECEMBER 31, INDEX 500
-------------------------------- -------------------------------- PERIOD FROM 5/4/99*
1999 1998 1997 1999 1998 1997 TO 12/31/99
-------- -------- -------- -------- -------- -------- -------------------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ 552 $ 718 $ 139 $ 19,322 $ 9,309 $ 5,745 $ (56,677)
Net realized gain (loss)....... 3,420 3,277 1,566 27,839 41,181 17,404 1,274
Net unrealized gain (loss)..... 30,111 1,086 285 12,862 15,917 28,899 4,566,606
-------- -------- ------- -------- -------- -------- -----------
Net increase (decrease) in net
assets from
operations................... 34,083 5,081 1,990 60,023 66,407 52,048 4,511,203
-------- -------- ------- -------- -------- -------- -----------

FROM POLICY TRANSACTIONS:
Net premiums................... 33,875 38,586 31,760 333,909 216,035 142,926 16,597,260
Terminations................... (2,242) (1,996) (184) (84,288) (219) (172) --
Insurance and other charges.... (4,895) (3,619) (1,796) (4,448) (759) (455) (418,198)
Transfers between sub-accounts
(including fixed
account), net................ 475 (20,410) 685 (34,218) (2,565) (14,401) 32,276,822
Other transfers from (to) the
General Account.............. (7,437) (832) 2 23,270 (1,965) (194) 45
Net increase (decrease) in
investment by
Sponsor...................... -- -- -- -- -- -- --
-------- -------- ------- -------- -------- -------- -----------
Net increase (decrease) in net
assets from policy
transactions................. 19,776 11,729 30,467 234,225 210,527 127,704 48,455,929
-------- -------- ------- -------- -------- -------- -----------
Net increase (decrease) in net
assets....................... 53,859 16,810 32,457 294,248 276,934 179,752 52,967,132

NET ASSETS:
Beginning of year................ 67,581 50,771 18,314 648,373 371,439 191,687 --
-------- -------- ------- -------- -------- -------- -----------
End of year...................... $121,440 $ 67,581 $50,771 $942,621 $648,373 $371,439 $52,967,132
======== ======== ======= ======== ======== ======== ===========

T. ROWE PRICE INTERNATIONAL STOCK
YEAR ENDED
DECEMBER 31,
------------------------------------
1999 1998 1997
-------- -------- --------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss)... $ (151) $ 2,935 $ 338
Net realized gain (loss)....... 8,873 1,826 1,455
Net unrealized gain (loss)..... 144,131 23,676 (326)
-------- -------- -------
Net increase (decrease) in net
assets from
operations................... 152,853 28,437 1,467
-------- -------- -------
FROM POLICY TRANSACTIONS:
Net premiums................... 152,351 104,206 36,785
Terminations................... (4,759) (2,000) --
Insurance and other charges.... (12,033) (5,246) (1,021)
Transfers between sub-accounts
(including fixed
account), net................ 10,736 148,557 533
Other transfers from (to) the
General Account.............. (323) 360 (1)
Net increase (decrease) in
investment by
Sponsor...................... -- -- --
-------- -------- -------
Net increase (decrease) in net
assets from policy
transactions................. 145,972 245,877 36,296
-------- -------- -------
Net increase (decrease) in net
assets....................... 298,825 274,314 37,763
NET ASSETS:
Beginning of year................ 372,143 97,829 60,066
-------- -------- -------
End of year...................... $670,968 $372,143 $97,829
======== ======== =======

* Date of initial investment.

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

SA-16

GROUP VEL ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

DGPF INTERNATIONAL EQUITY INVESCO VIF EQUITY INCOME**
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- -------- -------- -------- --------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss)...................... $ 133,115 $ (5,197) $ (133) $ 84 $ 112 $ 89
Net realized gain (loss)...... 34,290 7,893 164 289 712 423
Net unrealized gain (loss).... 2,827,542 442,761 (695) 947 312 752
----------- ---------- ------- ------- ------- ------
Net increase (decrease) in net
assets from
operations.................. 2,994,947 445,457 (664) 1,320 1,136 1,264
----------- ---------- ------- ------- ------- ------

FROM POLICY TRANSACTIONS:
Net premiums.................. 33,755,687 3,720,116 82,362 2,113 6,284 2,869
Terminations.................. (3,114) (370) (1,381) (149) (916) --
Insurance and other charges... (501,577) (204,104) (1,510) (1,958) (4,494) (242)
Transfers between sub-accounts
(including fixed
account), net............... (1,808) 4,507,084 1,085 -- -- --
Other transfers from (to) the
General Account............. (354) 244 11 -- 8 3
Net increase (decrease) in
investment by
Sponsor..................... -- -- -- -- -- --
----------- ---------- ------- ------- ------- ------
Net increase (decrease) in net
assets from policy
transactions................ 33,248,834 8,022,970 80,567 6 882 2,630
----------- ---------- ------- ------- ------- ------
Net increase (decrease) in net
assets...................... 36,243,781 8,468,427 79,903 1,326 2,018 3,894

NET ASSETS:
Beginning of year............... 8,551,060 82,633 2,730 9,229 7,211 3,317
----------- ---------- ------- ------- ------- ------
End of year..................... $44,794,841 $8,551,060 $82,633 $10,555 $ 9,229 $7,211
=========== ========== ======= ======= ======= ======

INVESCO VIF TOTAL RETURN MORGAN STANLEY FIXED INCOME
YEAR ENDED
DECEMBER 31, YEAR ENDED PERIOD
-------------------------------- DECEMBER 31, FROM 2/17/98*
1999 1998 1997 1999 TO 12/31/98
-------- -------- -------- ------------ -------------

INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss)...................... $ 493 $ 1,019 $ 908 $ 1,277,690 $ 612,562
Net realized gain (loss)...... 4,115 1,878 276 (8,242) 265,086
Net unrealized gain (loss).... (5,835) 2,122 5,287 (1,680,097) (179,067)
-------- ------- ------- ----------- -----------
Net increase (decrease) in net
assets from
operations.................. (1,227) 5,019 6,471 (410,649) 698,581
-------- ------- ------- ----------- -----------
FROM POLICY TRANSACTIONS:
Net premiums.................. 1,559 7,489 26,884 7,703,567 9,708,358
Terminations.................. (32,859) (8) -- -- --
Insurance and other charges... (1,694) (860) (764) (522,326) (446,219)
Transfers between sub-accounts
(including fixed
account), net............... -- -- -- 3,300,001 9,881,316
Other transfers from (to) the
General Account............. (1) 42 32 19 (185)
Net increase (decrease) in
investment by
Sponsor..................... -- -- -- -- --
-------- ------- ------- ----------- -----------
Net increase (decrease) in net
assets from policy
transactions................ (32,995) 6,663 26,152 10,481,261 19,143,270
-------- ------- ------- ----------- -----------
Net increase (decrease) in net
assets...................... (34,222) 11,682 32,623 10,070,612 19,841,851
NET ASSETS:
Beginning of year............... 61,907 50,225 17,602 19,841,851 --
-------- ------- ------- ----------- -----------
End of year..................... $ 27,685 $61,907 $50,225 $29,912,463 $19,841,851
======== ======= ======= =========== ===========

* Date of initial investment.
** Name changed. See Note 1.

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

SA-17

GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION

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-four Sub-Accounts. 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), a wholly-owned
subsidiary of the Company; 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 (DGPF) managed by
Delaware Management Company or Delaware International Advisers Ltd.; or of the
INVESCO Variable Investment Funds, Inc. (INVESCO VIF) 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 VIF and its
affiliates. Morgan Stanley is available only to employees of Duke Energy
Corporation and its affiliates.

Effective May 1, 1999, Decatur Total Return Fund was renamed Growth and
Income Fund and Delaware Fund was renamed Delaware Balanced Fund. Effective
September 1, 1999, INVESCO VIF Industrial Income Fund was renamed Equity Income.
Effective May 1, 2000, AIT Investment Grade Income Fund will be renamed Select
Investment Grade Income Fund and AIT Growth Fund will be renamed Core Equity
Fund.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

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-18

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, 1999 were as follows:

PORTFOLIO INFORMATION
------------------------------------
NET ASSET
NUMBER OF AGGREGATE VALUE
INVESTMENT PORTFOLIO SHARES COST PER SHARE
- -------------------- ---------- ----------- ---------

Growth............................................... 1,410,003 $ 3,972,164 $ 3.311
Investment Grade Income.............................. 23,266,205 25,575,861 1.051
Money Market......................................... 5,440,130 5,440,130 1.000
Equity Index......................................... 605,611 1,891,214 4.060
Government Bond...................................... 25,424 26,300 1.011
Select Aggressive Growth............................. 403,637 974,516 3.411
Select Growth........................................ 6,471,181 12,719,748 3.049
Select Growth and Income............................. 186,565 318,146 1.933
Select Value Opportunity............................. 13,901,118 23,464,808 1.521
Select International Equity.......................... 3,150,993 4,425,284 2.031
Select Capital Appreciation.......................... 203,014 349,493 2.053
Select Emerging Markets.............................. 29,741 32,710 1.292
Select Strategic Growth.............................. 12,811 13,507 1.126
Fidelity VIP High Income............................. 20,286 232,562 11.310
Fidelity VIP Equity-Income........................... 15,254 381,097 25.710
Fidelity VIP Growth.................................. 36,612 1,607,076 54.930
Fidelity VIP Overseas................................ 4,426 88,722 27.440
Fidelity VIP II Asset Manager........................ 50,489 877,472 18.670
Fidelity VIP II Index 500............................ 316,392 48,400,649 167.410
T. Rowe Price International Stock.................... 35,240 500,046 19.040
DGPF Growth & Income*................................ -- -- --
DGPF Delchester...................................... -- -- --
DGPF Capital Reserves................................ -- -- --
DGPF Cash Reserves................................... -- -- --
DGPF DelCap.......................................... -- -- --
DGPF Delaware Balanced*.............................. -- -- --
DGPF International Equity............................ 2,404,447 41,525,167 18.630
DGPF Small Cap Value................................. -- -- --
DGPF Trend........................................... -- -- --
DGPF Strategic Income................................ -- -- --
DGPF Devon........................................... -- -- --
DGPF Emerging Markets................................ -- -- --
DGPF Social Awareness................................ -- -- --
DGPF REIT............................................ -- -- --
DGPF Aggressive Growth............................... -- -- --
DGPF U.S. Growth..................................... -- -- --
INVESCO VIF Equity Income*........................... 502 8,685 21.010
INVESCO VIF Total Return Fund........................ 1,777 26,149 15.580
Morgan Stanley Fixed Income.......................... 2,976,363 31,771,615 10.050
MFVAT U.S. Government Income......................... -- -- --
MFVAT Asset Allocation............................... -- -- --
MFVAT Growth & Income................................ -- -- --
MFVAT Capital Growth................................. -- -- --
MFVAT International Equity........................... -- -- --

* Name changed. See Note 1.

SA-19

GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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 policy years, the Company may charge
up to 0.25% per annum of the certificate value in each Sub-Account for
administrative expenses.

Allmerica Investments, Inc., (Allmerica Investments), a wholly-owned
subsidiary of the Company, 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.

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-20

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, 1999 were as follows:

INVESTMENT PORTFOLIO PURCHASES SALES
- -------------------- ------------ -----------

Growth...................................................... $ 6,209,905 $ 4,726,086
Investment Grade Income..................................... 13,304,771 2,590,083
Money Market................................................ 6,728,412 1,527,775
Equity Index................................................ 2,778,482 50,942,818
Government Bond............................................. 100,147 97,033
Select Aggressive Growth.................................... 367,494 168,825
Select Growth............................................... 7,082,831 1,835,886
Select Growth and Income.................................... 118,228 15,002
Select Value Opportunity.................................... 23,459,039 558,021
Select International Equity................................. 1,547,678 5,930,335
Select Capital Appreciation................................. 136,005 41,547
Select Emerging Markets..................................... 33,137 459
Select Strategic Growth..................................... 13,989 465
Fidelity VIP High Income.................................... 196,679 55,715
Fidelity VIP Equity-Income.................................. 279,813 49,803
Fidelity VIP Growth......................................... 1,740,132 1,236,973
Fidelity VIP Overseas....................................... 37,059 15,032
Fidelity VIP II Asset Manager............................... 1,715,193 1,435,587
Fidelity VIP II Index 500................................... 48,857,756 458,381
T. Rowe Price International Stock........................... 172,083 18,921
DGPF Growth & Income*....................................... -- --
DGPF Delchester............................................. -- --
DGPF Capital Reserves....................................... -- --
DGPF Cash Reserves.......................................... -- --
DGPF DelCap................................................. -- --
DGPF Delaware Balanced*..................................... -- --
DGPF International Equity................................... 33,669,161 273,795
DGPF Small Cap Value........................................ -- --
DGPF Trend.................................................. -- --
DGPF Strategic Income....................................... -- --
DGPF Devon.................................................. -- --
DGPF Emerging Markets....................................... -- --
DGPF Social Awareness....................................... -- --
DGPF REIT................................................... -- --
DGPF Aggressive Growth...................................... -- --
DGPF U.S. Growth............................................ -- --
INVESCO VIF Equity Income*.................................. 1,693 1,548
INVESCO VIF Total Return Fund............................... 2,251 34,646
Morgan Stanley Fixed Income................................. 12,363,038 600,667
MFVAT U.S. Government Income................................ -- --
MFVAT Asset Allocation...................................... -- --
MFVAT Growth & Income....................................... -- --
MFVAT Capital Growth........................................ -- --
MFVAT International Equity.................................. -- --
------------ -----------
Totals...................................................... $160,914,976 $72,615,403
============ ===========

* Name changed. See Note 1.

SA-21

GROUP VEL ACCOUNT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- PLAN OF SUBSTITUTION FOR PORTFOLIO OF THE TRUST

An application has been filed with the Securities and Exchange Commission
(SEC) seeking an order approving the substitution of shares of the Select
Investment Grade Income Fund (SIGIF) for all of the shares of the Select Income
Fund (SIF). To the extent required by law, approvals of such substitution will
also be obtained from the state insurance regulators in certain jurisdictions.
The effect of the substitution will be to replace SIF shares with SIGIF shares.
The substitution is planned to be effective on or about July 1, 2000.

SA-22

PART II

UNDERTAKING TO FILE REPORTS

Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission ("SEC") such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the SEC heretofore or hereafter duly adopted pursuant to authority
conferred in that section.

RULE 484 UNDERTAKING

Article VIII of Registrant's Bylaws provides: Each Director and each officer of
the Corporation, whether or not in office, (and his executors or
administrators), shall be indemnified or reimbursed by the Corporation against
all expenses actually and necessarily incurred by him in the defense or
reasonable settlement of any action, suit, or proceeding in which he is made a
party by reason of his being or having been a Director or officer of the
Corporation, including any sums paid in settlement or to discharge judgment,
except in relation to matters as to which he shall be finally adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of his duties as such Director or officer; and the foregoing right
of indemnification or reimbursement shall not affect any other rights to which
he may be entitled under the Articles of Incorporation, any statute, bylaw,
agreement, vote of stockholders, or otherwise.

Insofar as indemnification for liability arising under the 1933 Act may be
permitted to Directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.

REPRESENTATIONS PURSUANT TO SECTION 26(e) OF THE INVESTMENT COMPANY ACT OF 1940

The Company hereby represents that the aggregate fees and charges under the
Policy are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the Company.

CONTENTS OF THE REGISTRATION STATEMENT

This registration statement comprises the following papers and documents:

The facing sheet.
Cross-references for Prospectus to items required by Form N-8B-2.
The prospectus consisting of _____ pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484 under the 1933 Act.
Representations pursuant to Section 26(e) of the 1940 Act.
The signatures.

Written consents of the following persons:

1. Actuarial Consent
2. Opinion of Counsel
3. Consent of Independent Accountants

The following exhibits:

1. Exhibit 1 (Exhibits required by paragraph A of the instructions to
Form N-8B-2)

(1) Certified copy of Resolutions of the Board of Directors of the
Company of November 22, 1993 establishing the Group VEL Account
was previously filed in Post-Effective Amendment No. 9 on April
16, 1998, and is incorporated by reference herein.

(2) Not Applicable.

(3) (a) Underwriting and Administrative Services Agreement between
the Company and Allmerica Investments, Inc. was previously
filed in Post-Effective Amendment No. 9 of Registration
Statement No. 33-82658/811-8704 on April 16, 1998, and is
incorporated by reference herein.

(b) Registered Representatives/Agents Agreement was previously
filed in Post-Effective Amendment No. 9 of Registration
Statement No. 33-82658/811-8704 on April 16, 1998, and is
incorporated by reference herein.

(c) Sales Agreements were previously filed in Post-Effective
Amendment No. 9 of Registration Statement No.
33-82658/811-8704 on April 16, 1998, and are incorporated by
reference herein.

(d) Commission Schedule was previously filed in Post-Effective
Amendment No. 9 of Registration Statement No.
33-82658/811-8704 on April 16, 1998, and is incorporated by
reference herein.

(e) General Agent's Agreement was previously filed in
Post-Effective Amendment No. 9 of Registration Statement No.
33-82658/811-8704 on April 16, 1998, and is incorporated by
reference herein.

(f) Career Agent Agreement was previously filed in
Post-Effective Amendment No. 9 of Registration Statement No.
33-82658/811-8704 on April 16, 1998, and is incorporated by
reference herein.

(4) Not Applicable.

(5) Form of Policy and Riders were previously filed on June 21, 2000
in Registrant's Initial Registration Statement of Group VEL
Account (Registration Statement No. 333-39798/811-8704), and are
incorporated by reference herein.

(6) Articles of Incorporation and Bylaws, as amended, of the Company
were previously filed in Post-Effective Amendment No. 1 on
October 1, 1995, and are incorporated by reference herein.

(7) Not Applicable.

(8) (a) Amendment dated June 1, 2000 to the Participation Agreement
between the Company and Allmerica Investment Trust is filed
herewith. Participation Agreement between the Company and
Allmerica Investment Trust dated March 22, 2000 was
previously filed on April 12, 2000 in Post-Effective
Amendment No. 14 of Registration Statement No.
33-57792/811-7466, and is incorporated by reference herein.

(b) Amendment dated August 1, 2000 to the Variable Insurance
Products Fund Participation Agreement is filed herewith.
Amendment dated March 29, 2000 and Amendment dated November
13, 1998 to the Variable Insurance Products Fund
Participation Agreement were previously filed on April 12,
2000 in Post-Effective Amendment No. 14 of Registration
Statement No. 33-57792/811-7466, and are incorporated by
reference herein. Participation Agreement, as amended, with
Variable Insurance Products Fund was previously filed in
Post-Effective Amendment No. 9 of Registration Statement No.
33-82658/811-8704 on April 16, 1998, and is incorporated by
reference herein.

(c) Amendment dated August 1, 2000 to the Variable Insurance
Products Fund II Participation Agreement is filed herewith.
Amendment dated March 29, 2000 and Amendment dated November
13, 1998 to the Variable Insurance Products Fund II
Participation Agreement were previously filed on April 12,
2000 in Post-Effective Amendment No. 14 of Registration
Statement No. 33-57792/811-7466, and are incorporated by
reference herein. Participation Agreement, as amended, with
Variable Insurance Products Fund II was previously filed in
Post-Effective Amendment No. 9 of Registration Statement No.
33-82658/811-8704 on April 16, 1998, and is incorporated by
reference herein.

(d) Participation Agreement with T. Rowe Price International
Series, Inc. was previously filed in Post-Effective
Amendment No. 9 of Registration Statement No.
33-82658/811-8704 on April 16, 1998, and is incorporated by
reference herein.

(e) Fidelity Service Agreement, effective as of November 1,
1995, was previously filed on April 30, 1996 in
Post-Effective Amendment No. 3, and is incorporated by
reference herein.

(f) An Amendment to the Fidelity Services Agreement, effective
as of January 1, 1997, was previously filed on April 30,
1997 in Post-Effective Amendment No. 3, and is incorporated
by reference herein.

(g) Fidelity Service Contract, effective as of January 1, 1997,
was previously filed on April 30, 1997 in Post-Effective
Amendment No. 3, and is incorporated by reference herein

(h) Service Agreement with Rowe Price-Fleming International,
Inc. was previously filed in Post-Effective Amendment No. 9
of Registration Statement No. 33-82658/811-8704 on April 16,
1998, and is incorporated by reference herein.

(i) Amendment to the Service Fee Agreement Letter with Morgan
Stanley Asset Management, Inc. was previously filed on April
26, 2000 in Post-Effective Amendment No. 13 of Registration
Statement No. 33-82658/811-8704, and is incorporated by
reference herein. Service Fee Agreement Letter with Morgan
Stanley Asset Management, Inc., was previously filed in
Post-Effective Amendment No. 9 on April 16, 1998, and is
incorporated by reference herein.

(j) Amendment to the Participation Agreement with Morgan Stanley
was previously filed on April 26, 2000 in Post-Effective
Amendment No. 13 of Registration Statement No.
33-82658/811-8704, and is incorporated by reference herein.
Participation Agreement with Morgan Stanley was previously
filed in Post-Effective Amendment No. 9 of Registration
Statement No. 33-82658/811-8704 on April 16, 1998, and is
incorporated by reference herein.

(k) Form of Participation Agreement with Goldman Sachs Variable
Insurance Trust is filed herewith.

(l) Form of Participation Agreement with J.P. Morgan Series
Trust II is filed herewith.

(m) Form of Participation Agreement with PIMCO Variable
Insurance Trust is filed herewith.

(9) Directors' Power of Attorney is filed herewith.

(10) Application is filed herewith.

2. Policy and Policy riders are as set forth in Item 1(5) above.

3. Opinion of Counsel is filed herewith.

4. Not Applicable.

5. Not Applicable.

6. Actuarial Consent is filed herewith.

7. Procedures Memorandum was previously filed on June 21, 2000 in
Registrant's Initial Registration Statement of Group VEL Account
(Registration Statement No. 333-39798/811-8704), and is incorporated
by reference herein.

8. Consent of Independent Accountants will be filed by Pre-Effective
Amendment.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Pre-Effective to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Worcester, and Commonwealth of Massachusetts, on
the 1st day of September, 2000.

GROUP VEL ACCOUNT OF
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY

By: /s/ Charles F. Cronin
Charles F. Cronin, Secretary

Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.

Signatures Title Date
- ---------- ----- ----

/s/ Warren E. Barnes Vice President and Corporate Controller September 1, 2000
- ------------------------
Warren E. Barnes

Edward J. Parry III* Director, Vice President, Chief Financial
- ------------------------ Officer and Treasurer

Richard M. Reilly* Director, President and
- ------------------------ Chief Executive Officer

John F. O'Brien* Director and Chairman of the Board
- ------------------------

Bruce C. Anderson* Director
- ------------------------

Mark R. Colborn* Director and Vice President
- ------------------------

J. Kendall Huber* Director, Vice President and
- ------------------------ General Counsel

John P. Kavanaugh* Director, Vice President and
- ------------------------ Chief Investment Officer

J. Barry May* Director
- ------------------------

Robert P. Restrepo, Jr.* Director
- ------------------------

Eric A. Simonsen* Director and Vice President
- ------------------------

* Sheila B. St. Hilaire, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named Directors and Officers of the
Registrant pursuant to the Power of Attorney dated April 2, 2000 duly executed
by such persons.

/s/ Sheila B. St. Hilaire
- ---------------------------------------
Sheila B. St. Hilaire, Attorney-in-Fact
(333-39798/811-8704)

FORM S-6 EXHIBIT TABLE

Exhibit 1(5) Form of Policy and Policy Riders

Exhibit 1(8)(a) Amendment dated June 1, 2000 to the Participation Agreement
between the Company and Allmerica Investment Trust

Exhibit 1(8)(b) Amendment dated August 1, 2000 to the Variable Insurance
Products Fund Participation Agreement

Exhibit 1(8)(c) Amendment dated August 1, 2000 to the Variable Insurance
Products Fund II Participation Agreement

Exhibit 1(8)(k) Form of Participation Agreement with Goldman Sachs Variable
Insurance Trust

Exhibit 1(8)(l) Form of Participation Agreement with J.P. Morgan Series
Trust II

Exhibit 1(8)(m) Form of Participation Agreement with PIMCO Variable Insurance
Trust

Exhibit 1(9) Directors' Power of Attorney

Exhibit 1(10) Application

Exhibit 3 Opinion of Counsel

Exhibit 6 Actuarial Consent

Exhibit 8 Consent of Independent Accountants