<PAGE>
June 30, 1997
The
Fulcrum
Fund/SM/
Variable
Annuity
[LOGO OF ALLMERICA FINANCIAL(R) APPEARS HERE]
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
OFFICERS OF ALLMERICA FINANCIAL
LIFE INSURANCE AND ANNUITY COMPANY
John F. O'Brien, Chairman of the Board
Richard M. Reilly, President and CEO
Edward J. Parry, III, Vice President,
CFO and Treasurer
Abigail M. Armstrong, Secretary
and Counsel
INVESTMENT MANAGER
Allmerica Investment
Management Company, Inc.
440 Lincoln Street
Worcester, MA 01653
GENERAL DISTRIBUTOR
Allmerica Investments, Inc.
440 Lincoln Street
Worcester, MA 01653
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
CUSTODIAN
Bankers Trust Company
16 Wall Street
New York, NY 10005
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
ADMINISTRATOR
First Data Investor Services Group
4400 Computer Drive
Westborough, MA 01581
OFFICERS OF ALLMERICA
INVESTMENT TRUST (AIT)
Richard M. Reilly, President
Thomas P. Cunningham, Treasurer
BOARD OF TRUSTEES OF AIT
John F. O'Brien, Chairman
Russell E. Fuller*
Gordon Holmes*
John P. Kavanaugh
Bruce E. Langton*
Attiat F. Ott*
Richard M. Reilly
Ranne P. Warner*
*Independent Trustees
INVESTMENT SUB-ADVISER
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
- -----------------------------------
CONTENTS
- -----------------------------------
A LETTER FROM THE CHAIRMAN....... 2
PRODUCT PERFORMANCE SUMMARY...... 3
BOND & MONEY
MARKET OVERVIEW.................. 4
Money Market Fund................ 6
FINANCIALS..................... F-1
See Client Notices on page F-10.
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1
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<PAGE>
- --------------------------------------------------------------------------------
A LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
[PHOTO APPEARS HERE]
Dear Client:
The U.S. economy was nearly ideal for investors during the first six months of
1997, with solid economic growth and low inflation. Through June 30th, the U.S.
stock market increased approximately 20%, bonds earned their coupons returning
approximately 3% for the period and international stocks were up roughly 10%.
However, these broad market figures hide the considerable amount of
volatility which occurred in individual securities and sectors of the market.
The U.S. stock and bond markets reacted strongly to the Federal Reserve Board's
0.25% increase in the Discount Rate during March. This contributed to keeping
broad stock market indices down over 4% during March, causing the Russell 2000
Index of small-cap stocks to lose over 5% for the quarter. At one point, the
disparity between large and small company stock returns was wider than at any
point in the last fifty years. International stocks also struggled as the
unmanaged EAFE Index declined 1.5% during the first quarter.
Fortunately, very strong second quarter returns offset these mediocre first
quarter results. The S&P 500(R) returned 17.5% during the second quarter, the
strongest second quarter results since 1938. Compelling valuations on small
company stocks finally attracted buyers and the Russell 2000 increased more than
11% in May alone. International stocks also bounced back, increasing in each of
the second quarter months. The U.S. bond market also rebounded as investors
reacted positively to slower economic data and restraint by the Federal Reserve
Board regarding further increases in interest rates.
So while the overall news for the first six months of 1997 was very good,
it's important to recognize that the markets continue to be highly volatile over
short periods. And that's a key point. Investing is a long-term business and
requires the fortitude to ride out the inevitable down periods. Patient
investors investing in a diversified pool of well-managed companies have
historically been well rewarded.
At Allmerica, we hire some of the leading money managers to seek out
well-managed companies and attractive stocks in which to invest your money. We
urge you to take advantage of this broad array of investment options and
diversify your investments across asset classes, investment styles and
economies. This may help you participate in strong segments of the investment
markets while offering some protection against the inevitable downturns.
On behalf of the Board of Trustees,
/s/ John F. O'Brien
John F. O'Brien
Chairman of the Board
Allmerica Financial Life Insurance and Annuity Company
- --------------------------------------------------------------------------------
"We hire some of the leading money managers to seek out well-managed companies
and attractive stocks in which to invest your money."
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2
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<PAGE>
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PRODUCT PERFORMANCE SUMMARY
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THE FULCRUM FUND/SM/ VARIABLE ANNUITY . Average Annual Total Returns as of
6/30/97
For easy reference, the total returns for The Fulcrum Fund/SM/ Variable
Annuity sub-account is summarized below. Keep in mind, however, that these
returns are net of all product charges except for the annual policy fee. For
returns that do not reflect the deduction of product charges, please refer to
the individual Portfolio Review on page 6.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
ONE FIVE ONE FIVE
SUB-ACCOUNT YEAR YEARS TEN YEARS YEAR YEARS TEN YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLMERICA INVESTMENT TRUST
Money Market Fund 3.88% 3.02% 4.37% -2.30% 2.49% 4.37%
</TABLE>
Performance returns shown above are for the sub-account of The Fulcrum Fund/SM/
Variable Annuity and assume an investment in the Money Market Fund on the date
of inception, April 29, 1985. All full surrenders or withdrawals in excess of
the free amount may be subject to a declining sales charge. The maximum
contingent deferred sales charge is 7.0%.
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
For more information about the performance of the underlying fund, see the
Performance Review on Page 6.
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3
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<PAGE>
BOND & MONEY MARKET OVERVIEW
1992: Government and corporate bonds outperformed the stock market.
1993: U.S. economy gains momentum. Consumer spending and installment debt
increase.
1994: Federal Reserve Board raises interest rates six times in an effort to
slow down the economy and keep inflation in check, sending bond prices sharply
lower.
1995: U.S. bond market enjoys its third best performance in 30 years, thanks to
strong total returns from 30-year U.S. Treasuries and corporate issues.
1996: Outlook for Federal Reserve policy affects U.S. bond market.
Long-predicted interest rate cuts, which would have fueled this market, never
occur.
1997: Despite the favorable outlook for bonds, a surprisingly strong economy
kindles fears about inflationary pressures and causes the Federal Reserve to
raise interest rates 0.25%.
Moving into 1997, many analysts predicted strong returns for the U.S. bond
market. But stable interest rates, despite an expanding economy, generated
sluggish returns for the bond market.
As the first quarter progressed, strong economic data, particularly in the
retail and housing segments, revealed possible signs of an overheated economy.
In an effort to squelch any uptick in inflation, the Federal Reserve Board
raised the Federal Funds rate by one quarter of one percent in the first quarter
to 5.50% on March 25, 1997. The bond market reacted sharply as investors sold
bonds, thereby driving prices lower and yields higher. As a result, most bond
funds lost money through the first quarter. The second quarter evolved with most
indicators pointing to signs of more moderate economic growth and subdued
inflation, which reduced pressure on the Federal Reserve Board to further
increase rates.
As fears of additional interest rate hikes subsided, the bond market
rallied and produced a positive 3.67% return for the second quarter. By mid-
year, the bond market's six month total return was a modest 3.07%.
Throughout the first half of 1997, the bond market was most affected by the
fact that there was little, if any, inflation. Historically, periods of low
unemployment have spurred higher inflation. But after four years of declining
unemployment, the rate of inflation in the U.S. has remained almost nonexistent.
Economic growth remains solid but not too strong. U.S.
[TIME LINE APPEARS HERE]
Signs of a strong economy raise fears over increasing interest rates and the
market softens.
Convinced domestic growth will slow from 1996 levels, investors favor bonds at
the start of the year.
[GRAPHIC APPEARS HERE]
[GRAPHIC APPEARS HERE]
In response to signs of a strong economy the Federal Reserve raises interest
rates 0.25% to head off inflation. The bond market declines.
- --
4
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<PAGE>
corporations are currently spending the equivalent of nearly 11.5% of real
GDP on business investments and dedicating a significant amount to information
technology.
The predominant beneficiaries of all this solid domestic growth and
increased corporate spending were corporate bonds. As of June 30, 1997, they
represented one of the best performing segments of the bond market, along with
mortgage-backed and asset-backed securities.
In contrast, yields on U.S. Treasuries dwindled. As a result of the healthy
economy and the strong equity market, the budget deficit for the fiscal year
ending September 30, 1997, is now estimated to be less than one third of the
original $155 billion forecast. This, in turn, has significantly reduced the
need for Treasury financing in the bond market and will reduce the supply of new
Treasury bonds coming into the market. Fixed income investors are therefore
fighting not only low interest rates, but a dwindling supply of new investment
opportunities. Steady demand for good fixed income securities has caused the
spread between most sectors of the bond market and U.S. Treasuries to narrow.
Overall, this means that managers are having to work harder than ever to add
value to their portfolios.
As for shorter-term money market instruments, they've become less
attractive as investors could seek to garner higher returns -- albeit with added
risk -- from other investments.
Looking ahead, most market analysts predict that domestic growth will
continue to strengthen before slowing sometime in the fourth quarter of 1997.
Since projections are also calling for continued subdued inflation, interest
rates are anticipated to remain in the stable-to-low range. As in the past six
months, many analysts believe that incremental return for bond investors is
likely to come from selective investments in spread assets, such as corporate
bonds and mortgage-backed securities.
[TIME LINE APPEARS HERE]
Stable-to-declining interest rates bode well for mortgage-backed securities and
corporate bonds.
[GRAPHIC APPEARS HERE]
By mid-year, the bond market overall posted a below-average return of 3.07%
[GRAPHIC APPEARS HERE]
Interest rates begin to decline as slower economic growth emerges and the bond
market begins to recover.
Reduced estimates for the budget deficit limit the need for U.S. Treasury
financing.
[GRAPHIC APPEARS HERE]
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5
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<PAGE>
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MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
Strives to maximize current income for investors with preservation of capital
and liquidity.
PORTFOLIO COMPOSITION:
As of June 30, 1997, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Commercial Paper 55%
U.S. Government and Agency Obligations 19%
Corporate Notes and Bonds 18%
Other Short-Term Investments 2%
Other 6%
</TABLE>
The Money Market Fund is a portfolio of the Allmerica Investment Trust.
The Fund is neither insured nor guaranteed by the U.S. government. There can be
no assurance that the Fund will be able to maintain its net asset value of $1.00
per share.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
IBC/Donoghue is an independent firm that tracks 2a-7 regulated money market
funds on a yield, shareholder, asset size and portfolio allocation basis. The
Lipper Money Market Fund Average is an unmanaged index of 292 funds within the
Money Market category.
For the six-month period ended June 30, 1997, the Money Market Fund
provided a competitive return of 2.62% versus the 2.38% semi-annual return
posted by its peer group, the Lipper Money Market Fund Average.
Potential changes in monetary policy affected the entire money market
sector throughout the first half of 1997, as concerns of robust growth in the
U.S. mounted. Primarily driven by strong economic data in the retail and housing
segments, the Federal Reserve moved to raise the Federal Funds Rate by one
quarter of one percent in the first quarter to 5.50%. As the year continued,
however, all indicators pointed to signs of more moderate economic growth and
subdued inflation, which reduced pressure on the Federal Reserve to raise
interest rates further. Despite these overall economic concerns, the managers
for the Money Market Fund remained focused on three primary goals: preservation
of capital, maintenance of liquidity and the production of maximum current
income.
To garner some incremental yield, the Fund has maintained a slightly longer
average weighted maturity than its index. In addition, the portfolio has been
overweighted in top-tier commercial paper and government agency discount notes.
These moves provide incremental yield for the Fund and have capitalized on
stable-to-declining interest rates in the second quarter.
As the Fund's managers look toward the remainder of 1997, they believe
inflation will remain subdued. Therefore, they plan to adhere to their current
investment strategy as well as evaluate the value and credit worthiness of all
short-term financial products.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
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GROWTH OF A $10,000 INVESTMENT SINCE 1987
- --------------------------------------------------------------------------------
<S>
Money Market Fund $17,668
IBC/Donoghue First Tier Money Market Index $17,095
Lipper Money Market Fund Average $16,895
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
Years ended June 30, 1997 1 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 5.36% 4.49% 5.86%
IBC/Donoghue First Tier Money Market Index 4.90% 4.11% 5.51%
Lipper Money Market Fund Average 4.82% 4.09% 5.48%
</TABLE>
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6
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<PAGE>
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Financials
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7
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This page intentionally left blank.
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8
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<PAGE>
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MONEY MARKET FUND
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PORTFOLIO OF INVESTMENTS . June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
U.S. AGENCY OBLIGATIONS - 18.76%
Federal Home Loan Mortgage Corporation - 9.77%
$10,000,000 5.41%, 07/15/97 $ 9,978,961
13,120,000 5.22%, 08/15/97 13,030,688
1,930,000 5.24%, 01/30/98 1,870,164
---------------
24,879,813
---------------
Federal Farm Credit Bank - 4.71%
7,500,000 5.55%, 08/01/97 7,499,233
2,625,000 5.25%, 10/31/97 2,578,629
2,000,000 5.47%, 03/23/98 1,919,469
---------------
11,997,331
---------------
Federal National Mortgage Association - 3.69%
500,000 5.64%, 09/03/97 500,158
9,000,000 5.55%, 09/25/97 8,880,675
---------------
9,380,833
---------------
Federal Home Loan Bank - 0.59%
1,500,000 5.61%, 07/07/97 1,498,598
---------------
Total U.S. Agency Obligations 47,756,575
(Cost $47,756,575) ---------------
CORPORATE NOTES AND BONDS - 18.27%
Finance - 6.81%
3,000,000 American Honda Finance Corp., MTN
5.92%, 08/15/97 (B) * 3,000,000
925,000 Beneficial Corp., Series E, MTN
6.99%, 12/11/97 928,162
255,000 Ford Capital BV, Yankee Debenture
9.13%, 05/01/98
Guaranteed: Ford Motor Co. 260,539
5,750,000 General Electric Capital Corp., Series A, MTN
5.36%, 01/20/98 5,730,450
1,400,000 General Motors Acceptance Corp., MTN
7.30%, 02/02/98 1,410,817
1,100,000 General Motors Acceptance Corp., MTN
6.50%, 07/25/97 1,100,579
3,000,000 General Motors Acceptance Corp., MTN
6.07%, 08/01/97 * 3,000,358
1,000,000 Southwestern Bell Capital Corp., Series C, MTN
7.75%, 10/30/97 1,005,801
899,000 Texaco Capital, Inc., MTN
8.65%, 07/23/97
Guaranteed: Texaco, Inc. 900,646
---------------
17,337,352
---------------
Securities Brokers and Dealers - 4.69%
3,500,000 Goldman Sachs Group, LP
Series E, Euro MTN
6.20%, 05/29/98 * 3,507,713
1,000,000 Bear Stearns Cos., Inc., Series B, MTN
6.07%, 02/17/98 * 1,001,180
2,500,000 Bear Stearns Cos., Inc., Series B, MTN
6.16%, 02/23/98 * 2,506,568
3,000,000 Bear Stearns Cos., Inc., Series B, MTN
5.75%, 10/08/97 * 3,000,000
1,915,000 Lehman Brothers Holdings, Inc., Series E, MTN
6.73%, 02/27/98 1,924,595
---------------
11,940,056
---------------
Banking - 3.55%
4,000,000 BankAmerica Corp., Series G, MTN
6.88%, 11/20/97 4,014,090
2,000,000 MBNA Corp., Senior MTN
7.25%, 12/10/97 2,011,245
3,000,000 Wells Fargo & Co., Series B, MTN
5.89%, 12/29/97 * 3,000,767
---------------
9,026,102
---------------
Utilities - 1.62%
1,000,000 Virginia Electric & Power Co.
First Mortgage, Series A
9.38%, 06/01/98 1,027,014
3,060,000 WMX Technologies, Inc.
8.13%, 02/01/98 3,099,826
---------------
4,126,840
---------------
Consumer Goods - 0.99%
2,500,000 PepsiCo, Inc.
6.13%, 01/15/98 2,504,802
---------------
Retail - 0.61%
1,525,000 Sears Roebuck & Co., Debenture
9.25%, 04/15/98 1,558,794
---------------
Total Corporate Notes and Bonds 46,493,946
(Cost $46,493,946) ---------------
MUNICIPAL BOND - 1.57%
4,000,000 Nebraska Higher Education Loan Program, Inc.
5.60%, 07/17/97 3,990,044
---------------
Total Municipal Bond 3,990,044
(Cost $3,990,044) ---------------
</TABLE>
See Notes to Financial Statements.
---------------------------------------------------
F-1
<PAGE>
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MONEY MARKET FUND
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PORTFOLIO OF INVESTMENTS, Continued . June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER - 55.36%
Finance - 22.78%
$ 5,000,000 Asset Backed Capital Finance, Inc.
5.83%, 11/14/97 $ 4,999,640
9,000,000 Associates Corp. of North America
5.62%, 07/21/97 8,971,900
2,500,000 Bil North America, Inc.
5.65%, 12/10/97 2,436,438
3,000,000 Jefferson Smurfit Finance Corp., Series A
5.60%, 08/28/97 2,972,933
4,500,000 Jefferson Smurfit Finance Corp., Series A
5.60%, 09/02/97 4,455,900
3,163,000 Madison Funding, Inc.
5.70%, 08/05/97 3,145,472
600,000 National Fleet Funding Corp.
7.00%, 08/15/97 595,725
8,500,000 Norwest Financial, Inc.
5.53%, 07/28/97 8,464,746
5,000,000 Prudential Funding Corp.
5.54%, 07/14/97 4,989,997
4,200,000 Toshiba Capital Asia Corp.
5.75%, 07/22/97 4,185,913
2,500,000 Toshiba International Finance
5.70%, 08/14/97 2,482,583
5,355,000 UBS Finance, Inc.
6.20%, 07/01/97 5,355,000
5,000,000 Unifunding, Inc.
5.58%, 09/17/97 4,939,550
---------------
57,995,797
---------------
Security Brokers and Dealers - 9.89%
2,000,000 Bear Stearns Cos., Inc.
5.58%, 09/18/97 1,975,510
3,000,000 European Investment Bank
5.76%, 11/03/97 2,940,104
2,500,000 Goldman Sachs Group, LP
5.85%, 11/17/97 2,443,821
8,000,000 Merrill Lynch & Co., Inc.
5.62%, 09/18/97 7,901,338
2,500,000 Paine Webber Group, Inc.
5.45%, 08/13/97 2,483,726
4,500,000 Paine Webber Group, Inc.
5.77%, 08/22/97 4,462,495
3,000,000 Paine Webber Group, Inc.
5.70%, 09/16/97 2,963,425
---------------
25,170,419
---------------
Banking - 7.05%
5,000,000 Citicorp
6.25%, 07/01/97 4,999,997
7,000,000 Citicorp
5.72%, 07/07/97 6,993,327
1,000,000 Bank of Boston Corp.
5.70%, 10/31/97 980,683
2,000,000 Corestates Bank of North America
5.72%, 11/03/97 1,960,278
3,000,000 Societe Generale of North America, Inc.
5.36%, 07/14/97 2,994,193
---------------
17,928,478
---------------
Automotive - 4.48%
2,500,000 Hyundai Motor Finance Co.
5.38%, 07/02/97 2,499,626
9,000,000 Mitsubishi Motors Credit of America, Inc.
5.69%, 09/11/97 8,897,680
---------------
11,397,306
---------------
Utilities - 3.61%
2,050,000 Narragansett Electric Co.
6.25%, 07/01/97 2,050,000
7,185,000 Songs Fuel Co.
5.68%, 08/04/97 7,146,456
---------------
9,196,456
---------------
Electronics - 2.90%
4,200,000 Avnet, Inc.
6.25%, 07/01/97 4,200,000
3,200,000 Sharp Electronics Corp.
5.57%, 08/15/97 3,177,720
---------------
7,377,720
---------------
Insurance - 2.73%
7,000,000 Internationale Nederlanden
U.S. Insurance Holdings, Inc.
5.58%, 08/19/97 6,946,835
---------------
Consumer Goods - 1.44%
3,700,000 Stanley Works
5.57%, 08/19/97 3,671,899
---------------
Industrial - 0.29%
750,000 Anheuser-Busch Cos., Inc.
5.67%, 12/19/97 729,801
---------------
Energy - 0.19%
490,000 Laclede Gas Co.
5.60%, 07/18/97 488,704
---------------
Total Commercial Paper 140,903,415
---------------
(Cost $140,903,415)
</TABLE>
See Notes to Financial Statements.
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F-2
<PAGE>
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MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<S> <C>
CERTIFICATE OF DEPOSIT - 3.93%
$10,000,000 Skandinaviska Enskilda Banken
6.54%, 06/03/98 * $ 10,000,000
---------------
Total Certificate of Deposit 10,000,000
---------------
(Cost $10,000,000)
BANKERS' ACCEPTANCE - 1.18%
3,000,000 Suntrust Bank Atlanta
5.58%, 07/08/97 2,996,745
---------------
Total Bankers' Acceptance 2,996,745
---------------
(Cost $2,996,745)
Shares
------
INVESTMENT COMPANY - 0.01%
26,174 State Street Bank Temp Fund 26,174
---------------
Total Investment Company 26,174
---------------
(Cost $26,174)
Total Investments - 99.08% 252,166,899
---------------
(Cost $252,166,899)
Net Other Assets and Liabilities - 0.92% 2,344,562
---------------
Net Assets - 100.00% $ 254,511,461
===============
</TABLE>
- -------------------------------------
* Interest is reset at various time intervals. The rate shown reflects the
rate currently in effect at June 30, 1997.
(A) Effective yield at time of purchase.
(B) Securities exempt from registration under rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualfied institutional buyers. As of June 30, 1997,
these securities amounted to $3,000,000 or 1.18% of net assets.
MTN Medium Term Note
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At June 30, 1997, the aggregate cost of investment securities for tax purposes
was $252,166,899.
As of December 31, 1996, the portfolio had capital loss carryforwards which
expire as follows: $347 in 2002; $144 in 2003; and $35,977 in 2004.
OTHER INFORMATION
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
<TABLE>
<CAPTION>
Moody's Ratings
<S> <C>
Aaa 100.00%
=======
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-3
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES . June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments (Cost $252,166,899)........................ $ 252,166,899
Cash................................................... 78,855
Receivable for shares sold............................. 1,663,347
Interest and dividend receivables...................... 855,957
-------------
Total Assets........................................ 254,765,058
-------------
LIABILITIES:
Payable for shares repurchased......................... 150,915
Advisory fee payable (Note 3).......................... 55,208
Accrued expenses and other payables.................... 47,474
-------------
Total Liabilities................................... 253,597
-------------
NET ASSETS................................................. $ 254,511,461
=============
NET ASSETS consist of
Paid-in capital (Note 5)............................... $ 254,554,165
Accumulated (distribution in excess of)
net realized gain (loss) on investments sold,
foreign currency transactions and futures contracts.. (42,704)
-------------
TOTAL NET ASSETS........................................... $ 254,511,461
=============
Shares of beneficial interest outstanding
(unlimited authorization, no par value)................ 254,554,165
NET ASSET VALUE,
Offering and redemption price per share
(Net Assets/Shares Outstanding)........................ $ 1.000
=============
STATEMENTS OF OPERATIONS . For six months ended June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest (Note 2)...................................... $ 6,342,349
Dividends (Note 2)..................................... 145,021
-------------
Total investment income............................. 6,487,370
-------------
EXPENSES
Investment advisory fees (Notes 3 and 4)............... 313,851
Custodian fees (Note 3)................................ 33,265
Fund accounting fees (Note 3).......................... 28,912
Legal fees............................................. 2,252
Audit fees............................................. 4,325
Trustees' fees and expenses (Note 3)................... 3,024
Reports to shareholders................................ 47,267
-------------
Total expenses...................................... 432,896
-------------
NET INVESTMENT INCOME (LOSS)............................... 6,054,474
-------------
NET GAIN (LOSS) ON INVESTMENTS............................. (6,067)
-------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS....................... $ 6,048,407
-------------
</TABLE>
See Notes to Financial Statements.
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F-4
<PAGE>
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ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Money Market Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1997 December 31,
(Unaudited) 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS at beginning of period........................................................ $ 217,255,732 $ 155,211,174
------------- -------------
Increase (Decrease) in net assets resulting from operations:
Net investment income (loss)......................................................... 6,054,474 9,613,835
Net realized gain (loss) on investments sold and foreign currency transactions....... (6,067) (35,900)
------------- -------------
Net increase (decrease) in net assets resulting from operations...................... 6,048,407 9,577,935
------------- -------------
Distributions to shareholders from:
Net investment income................................................................ (6,054,474) (9,613,835)
------------- -------------
Capital share transactions:
Net proceeds from sales of shares.................................................... 105,829,327 189,973,951
Issued to shareholders in reinvestment of distributions.............................. 6,054,474 9,613,835
Cost of shares repurchased........................................................... (74,622,005) (137,507,328)
------------- -------------
Net increase (decrease) from capital share transactions........................... 37,261,796 62,080,458
------------- -------------
Total increase (decrease) in net assets........................................... 37,255,729 62,044,558
------------- -------------
NET ASSETS at end of period (including line A)........................................... $ 254,511,461 $ 217,255,732
============= =============
(A) Undistributed (distribution in excess of) net investment income (loss)............... $ -- $ --
============= =============
OTHER INFORMATION:
Share transactions:
Sold................................................................................. 105,829,327 189,973,951
Issued to shareholders in reinvestment of distributions.............................. 6,054,474 9,613,835
Repurchased.......................................................................... (74,622,005) (137,507,328)
------------- -------------
Net increase (decrease) in shares outstanding..................................... 37,261,796 62,080,458
============= =============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-5
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
--------------------------------------------- ---------------------------------------------
Net Realized Net
Net and Distributions Increase
Asset Unrealized Dividends from Net (Decrease)
Value Net Gain (Loss) Total from from Net Realized Distributions in
Year Ended Beginning Investment on Investment Investment Capital in Return of Total Net Asset
December 31, of Period Income/(1)/ Investments Operations Income Gains Excess Capital Distributions Value
- ------------ --------- ---------- ----------- ---------- ---------- ---------- ---------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market
Fund
1997(E) 1.000 0.026 -- 0.026 (0.026) -- -- -- (0.026) --
1996 1.000 0.052 -- 0.052 (0.052) -- -- -- (0.052) --
1995 1.000 0.057 -- 0.057 (0.057) -- -- -- (0.057) --
1994 1.000 0.039 -- 0.039 (0.039) -- -- -- (0.039) --
1993 1.000 0.030 -- 0.030 (0.030) -- -- -- (0.030) --
1992 1.000 0.037 -- 0.037 (0.037) -- -- -- (0.037) --
1991 1.000 0.060 -- 0.060 (0.060) -- -- -- (0.060) --
1990 1.000 0.078 -- 0.078 (0.078) -- -- -- (0.078) --
1989 1.000 0.086 -- 0.086 (0.086) -- -- -- (0.086) --
1988 1.000 0.071 -- 0.071 (0.071) -- -- -- (0.071) --
1987 1.000 0.061 -- 0.061 (0.061) -- -- -- (0.061) --
</TABLE>
- --------------------------------------
* Annualized
** Not Annualized
(A) Including reimbursements and reductions.
(B) Excluding reductions. Certain Portfolios have entered into varying
arrangements with brokers who reduced a portion of the Portfolio's
expenses.
(C) Excluding reimbursements and reductions.
(D) For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for trades for
which commissions are charged. This rate generally does not reflect mark-
ups, mark-downs, or spreads on shares traded on a principal basis.
(E) For the six months ended June 30, 1997. (unaudited)
(1) Net investment income per share before reimbursement of fees by the
investment adviser or reductions was $0.030 in 1993, $0.084/(2)/ in 1988,
and $0.076/(2)/ in 1987 for Money Market Fund.
(2) Unaudited.
See Notes to Financial Statements.
----------------------------------------------------------
F-6
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------------
Ratios To Average Net Assets
----------------------------------------
<TABLE>
<CAPTION>
Net Asset Net Assets
Value End of Net Portfolio Average
End of Total Period Investment Operating Expenses Management Fee Turnover Commissions
Period Return (000's) Income (A) (B) (C) Gross Net Rate Rate(D)
-------- -------- ---------- ---------- --- --- --- ----- --- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.000 2.62%** 254,511 5.24%* 0.37%* 0.37%* 0.37%* 0.27%* 0.27%* N/A --
1.000 5.36% 217,256 5.22% 0.34% 0.34% 0.34% 0.28% 0.28% N/A --
1.000 5.84% 155,211 5.68% 0.36% -- 0.36% 0.29% 0.29% N/A --
1.000 3.93% 95,991 3.94% 0.45% -- 0.45% 0.31% 0.31% N/A --
1.000 3.00% 71,052 2.95% 0.42% -- 0.43% 0.32% 0.31% N/A --
1.000 3.78% 64,506 3.65% 0.44% -- 0.44% N/A N/A N/A --
1.000 6.22% 39,909 5.98% 0.43% -- 0.43% N/A N/A N/A --
1.000 8.17% 28,330 8.22% 0.42% -- 0.42% N/A N/A N/A --
1.000 9.07% 12,060 8.62% 0.58% -- 0.58% N/A N/A N/A --
1.000 7.30%/(2)/ 7,156 7.13% 0.60% -- 0.71% N/A N/A N/A --
1.000 6.20%/(2)/ 4,726 6.14% 0.60% -- 0.75% N/A N/A N/A --
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-7
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Allmerica Investment Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company established as a Massachusetts business trust for the purpose
of providing a vehicle for the investment of assets of various separate accounts
established by Allmerica Financial Life Insurance and Annuity Company, a
wholly-owned subsidiary of First Allmerica Financial Life Insurance Company
("First Allmerica") or other affiliated insurance companies. As of the date of
this report, the Trust offered twelve managed investment portfolios. The
accompanying financial statements and financial highlights are those of the
Money Market Fund (the "Portfolio") only.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires 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 amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies which are in conformity with generally accepted accounting
principles and consistently followed by the Trust in the preparation of its
financial statements.
Security Valuation: Securities of the Portfolio are valued utilizing the
amortized cost valuation method permitted in accordance with Rule 2a-7 under the
Investment Company Act of 1940. This method involves valuing a portfolio
security initially at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium.
Security Transactions and Investment Income: Security transactions are
recorded on the trade date. Net realized gains and losses from security
transactions are recorded on the basis of identified cost. Interest income is
recorded on the accrual basis and consists of interest accrued and, if
applicable, discounts earned on original issue discount bonds, zero coupton
bonds, stepped-coupon bonds and payment in kind bond, which are accreted.
Dividend income is recorded on the ex-dividend date.
Federal Income Taxes: The Trust treats each Portfolio as a separate entity for
Federal income tax purposes. Each Portfolio intends to continue to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, each Portfolio will not be subject to
Federal income taxes to the extent it distributes all of its taxable income and
net realized gains for the tax year ending December 31. In addition, by
distributing during each calendar year substantially all of its net investment
income, capital gains and certain other amounts, if any, each Portfolio will not
be subject to Federal excise tax. Therefore, no Federal income tax provision is
required. Withholding taxes on foreign dividend income and gains have been paid
or provided for in accordance with the applicable country's tax rules and rates.
Distributions to Shareholders: Dividends from net investment income are declared
and reinvested daily for the Money Market Fund. The distributions are recorded
on the ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing book and
tax treatments in the timing of the recognition of gains or losses and forwards,
including "Post October Losses" and permanent differences due to differing
treatments for paydown gains/losses on certain securities, foreign currency
transactions, market discount, non-taxable dividends and losses deferred due to
wash sales. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
Permanent book-tax differences, if any, are not included in ending undistributed
net investment income for the purpose of calculating net investment income per
share in the Financial Highlights.
Expenses: The Trust accounts separately for assets, liabilities and operations
of each Portfolio. Expenses directly attributed to a Portfolio are charged to
the Portfolio, while expenses which are attributable to more than one Portfolio
of the Trust are allocated among the respective Portfolios.
-----------------------------------
F-8
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued (Unaudited)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY, ADMINISTRATION
AND OTHER RELATED PARTY TRANSACTIONS
Allmerica Investment Management Company, Inc. (the "Manager"), a wholly-owned
subsidiary of First Allmerica, serves as Investment Adviser and Administrator to
the Trust. Under the terms of the management agreement, the Portfolio pays a
management fee, calculated daily and payable monthly, at an annual rate of 0.35%
for the first $50,000,000 of average daily net asset value, 0.25% of the next
$200,000,000 average daily net asset value, and 0.20% on the remainder of the
Portfolio's average daily net asset value.
The Manager has entered into Sub-Adviser Agreement for the management of
the investments in the Portfolio. The Manager is solely responsible for the
payment of all fees to the Sub-Advisers. The Sub-Advisers for the Portfolios
Allmerica Asset Management, Inc.
The Manager has entered into an Administrative Services Agreement with First
Data Investor Services Group, Inc. ("FDISG"), a wholly-owned subsidiary of First
Data Corporation, whereby FDISG performs administrative services for the
Portfolios and is entitled to receive an administrative fee and certain
out-of-pocket expenses. The Manager is solely responsible for the payment of the
administration fee to FDISG. In a separate agreement, FDISG receives separate
fees from the Portfolios for certain fund accounting services provided in its
capacity as pricing and bookkeeping agent.
The Trust pays no salaries or compensation to any of its officers. Trustees who
are not directors, officers, or employees of the Trust or any investment adviser
are reimbursed for their travel expenses in attending meetings of the Trustees,
and receive quarterly meeting and retainer fees for their services. Such amounts
are paid by the Trust.
4. REIMBURSEMENT OF EXPENSES AND WAIVER OF FEES
In the event normal operating expenses of each Portfolio, excluding taxes,
interest, broker commissions and extraordinary expenses, but including the
advisory fee, exceed certain voluntary expense limitation of 0.60%, the Manager
will bear such expenses directly or reduce its compensation from the Portfolio
by the excess of the stated expense limitations. Expense limitations may be
removed or revised at any time after a Portfolio's first fiscal year of
operations without prior notice to existing shareholders. The Manager will
voluntarily reimburse its fees and any expenses in excess of the expense
limitations.
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest for the Portfolios, each without a par
value.
- --------------------------------------- F-9
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
REGULATORY DISCLOSURES
- --------------------------------------------------------------------------------
The performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
An investment in the Money Market Fund is neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund and is not authorized for
distribution to prospective investors in the flexible premium variable life
insurance or annuity products of Allmerica Financial Life Insurance and Annuity
Company or First Allmerica Financial Life Insurance Company unless accompanied
or preceded by effective prospectuses for the flexible premium variable life
insurance or annuity products of Allmerica Financial Life Insurance and Annuity
Company or First Allmerica Financial Life Insurance Company, Allmerica
Investment Trust, Variable Insurance Products Fund, Variable Insurance Products
Fund II, Delaware Group Premium Fund International Equity Series, and T. Rowe
Price International Stock Portfolio, which include important information related
to charges and expenses.
CLIENT NOTICES
- --------------------------------------------------------------------------------
This semi-annual report includes financial statements for Allmerica Investment
Trust. It does not include financial statements for the separate accounts that
correspond to the Fulcrum Fund(TM) Variable Annuity contracts. Separate account
financial statements will not be provided in the semi-annual report.
F-10 -----------------------------------------
