<PAGE>
Annual Report
-------------------------
December 31, 1996
The
Fulcrum
Fund/SM/
Variable
Annuity
-------------------------
[LOGO OF ALLMERICA FINANCIAL 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 Accountant
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
Investment Sub-Adviser
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
CONTENTS
<TABLE>
<S> <C>
A Letter From the Chairman.........................................2
Performance Summary................................................3
Bond and Money
Market Overview..................................................4-5
Money Market Fund..................................................6
Financials.......................................................F-1
</TABLE>
For further information, see the accompanying annual reports.
For information on ordering a copy of the separate account annual report, see
Client Notices on page F-9.
1
<PAGE>
- --------------------------------------------------------------------------------
A Letter From the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF JOHN F. O'BRIEN]
Dear Client:
The U.S. stock market turned in yet another outstanding year. This marked the
sixth straight year of positive returns for the Dow Jones Industrial Average -
a record. For the year, the Dow rose 28% on top of 1995's 37% increase. The
combined return for the two-year period was 75%, the strongest in 40 years!
In contrast, the bond market was characterized by volatility as investors'
expectations changed throughout the year. January's optimism gave way to fears
of a strong economy and potential interest rate increases by the Federal
Reserve. These increases never occurred and the economy cooled off by itself
during the second half of the year. The net effect of these swings was to
produce a mediocre year in the bond market with the Lehman Aggregate Bond Index,
a benchmark used by many bond investors, up a modest 3.61%. In the end, even
conservative money market accounts did better, returning approximately 5.0%.
International stock markets were generally quite positive. Sweden, Finland,
Ireland, Spain, Portugal and Hong Kong all had returns greater than 30% in 1996.
But these returns paled in comparison to many emerging markets like Poland's 87%
return. However, not everything was rosy overseas. Japan, for example, declined
15.4%, as measured by Morgan Stanley's Country Index.
Where will the best returns come from in 1997? Obviously, we don't know. What
we do know, however, is that helping each individual to plan and strive to meet
her or his saving and retirement goals is a business we take quite seriously.
That's why we work so hard on what we can control - building a comprehensive
investment program, hiring disciplined investment managers and constantly
evaluating their performance. At Allmerica, we offer distinct investment choices
across a wide variety of asset classes, investment strategies and styles. We
also encourage our clients to implement disciplined investment programs which
include building diversified portfolios, making ongoing contributions whenever
possible and appropriate.
Our Manager Evaluation Committee continuously seeks to refine our investment
program and rigorously monitors our sub-advisers. Based on their work, we made
two significant changes during 1996. On July 1, 1996, Putnam Investment
Management, Inc. assumed sub-advisory responsibility for the Select Growth Fund
as announced in the semi-annual report. With this report, we are pleased to
announce that CRM Advisors, LLC, an affiliate of Cramer Rosenthal McGlynn, Inc.
assumed sub-advisory responsibility for the Small Cap Value Fund effective
January 1, 1997. This is part of a larger change in which we are seeking to
broaden the investment mandate of the Small Cap Value Fund to incorporate both
small- and mid-cap value stocks. These changes reflect our ongoing commitment to
bring you a diversified array of complementary investment choices and
outstanding money managers.
We encourage our clients to develop and implement a disciplined investment
program that includes diversification, ongoing contributions in both up and down
markets, and utilization of tax deferred savings vehicles whenever possible and
appropriate. We also encourage you to periodically review your financial goals
and risk tolerance, to insure that your investments are right for you.
On behalf of the Board of Trustees,
/s/ John F. O'Brien
John F. O'Brien
Chairman of the Board
- --------------------------------------
Helping each individual to plan
and strive to meet her or his saving
and retirement goals is a business
we take quite seriously.
- --------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Performance Summary
- --------------------------------------------------------------------------------
THE FULCRUM FUND/SM/ VARIABLE ANNUITY . Average Annual Total Returns as of
12/31/96
For easy reference, the total returns for The Fulcrum Fund/SM/ Variable Annuity
subaccount 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
------------------------ ---------------------
Ten Years Ten Years
One Five or Life One Five or Life
Subaccounts Year Years of Fund Year Years of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Money Market Fund 3.83% 2.86% 4.33% -3.65% 1.58% 4.33%
</TABLE>
Performance returns shown above are for the subaccount 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.
--------------------------------
3
<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.
After experiencing the euphoria of double-digit returns in 1995, investors
entered 1996 with expectations of strong performance. Poised for positive
results, investors expected a series of short-term interest rate reductions.
Recessionary fears dominated the outlook for the economy and forced the Federal
Reserve to lower interest rates by one-fourth of a percentage point early in the
first quarter.
While most market experts predicted further interest rate reductions, those
cuts never materialized. In fact, economic data showed the economy was growing
at a much faster rate than expected, as evidenced by the February Employment
Report which showed a 705,000 increase in jobs.
From that point on, investors and analysts alike worried which way interest
rates would move, leaving the fixed income market extremely vulnerable to sudden
shifts. Just as one economic indicator would point toward a reviving economy,
another one would show signs of slowing growth.
By the end of June, several signs of moderating growth seemed to calm investor
concerns that the economy was overheated. Prices of most commodities as well as
consumer goods remained subdued. The consumer, hampered by existing high debt
burdens, showed little inclination to go on a spending spree. And the
manufacturing sector, outside of autos, exhibited only modest signs of
improvement.
In the fall, the market settled down as it became apparent President Clinton
would be re-elected and the Republicans would control the House and Senate.
Consequently, the bond market performed well, especially in October and
November, as yields on the 30-year Treasury bond fell to about 6.3%.
Unfortunately, year-end investor anxiety ultimately limited market gains.
[TIME LINE APPEARS HERE]
Investors worry all year about which way interest rates will move, leaving the
bond market vulnerable to sudden shifts.
[GRAPHIC APPEARS HERE]
Anticipating a recession, Federal Reserve lowers target rate for Federal Funds
by 0.25%.
[GRAPHIC APPEARS HERE]
Economic data shows economy growing at a much faster rate than expected, bad
news for bond investors.
[GRAPHIC APPEARS HERE]
High yield bonds prove to be highest performing sector of fixed income market.
4
<PAGE>
Overall, results were varied for different fixed income sectors. The effect of
the market's volatility was reflected in 30-year U.S. Treasury yields, as their
yield fluctuated from a low of 5.95% in January to a July high of 7.2%. The
Lehman Brothers Aggregate Bond Index, an industry benchmark, produced a total
return of 3.61% as of December 31, 1996, which was down from 1995's spectacular
18.47% results.
Investing in corporate bonds in 1996, on the other hand, proved to be a
particularly sound strategy, as this segment of the bond market was one of the
year's best performers. Strong credit fundamentals, ongoing demand and a
moderate level of supply all contributed to its success. Among the top-returning
corporate sectors were energy, driven by stabilizing oil prices and airlines,
benefiting from the first industry profits since 1979.
Another truly bright spot in the fixed income securities market was high-yield
bonds, which returned approximately 13.5% for the year. Their relatively strong
performance can be attributed to two key factors. First, high-yield bonds are
less sensitive to changes in interest rates than other types of bonds. Secondly,
the strong U.S. economy allayed investors' concerns about credit risk over the
near-term. So even though the supply of new high-yield issues increased during
the second quarter of 1996, heavy demand sustained prices, because investors
sought higher yields.
In addition, mortgage-backed securities performed admirably for the year. This
sector of the fixed income market outperformed comparable Treasuries by nearly
one percentage point.
In the money markets, yields on bank certificates of deposits ended the year
just slightly higher than where they began the year. A one-year certificate of
deposit, for example, yielded approximately 4.95% - almost 1995's year-end
yield. As a result, the total return for Money Market funds closely approximated
their end of the year yield. The average seven-day compound yield on a taxable
money fund hovered around 4.85% for most of the year, while the yield on tax-
free funds fell to 2.98%.
For 1997, fixed income market analysts predict a sluggish global economy,
little inflation and robust employment and consumer confidence levels. These
factors seem to indicate that bond yields should remain fairly steady and total
returns for bond investors are likely to approximate their current yield.
Corporate bonds outpace Treasury bonds, driven by improving outlook and strong
demand.
[GRAPHIC APPEARS HERE]
Markets rebound as it becomes apparent President Clinton will win upcoming
election with few changes in the House and Senate.
[GRAPHIC APPEARS HERE]
JULY 96 AUG 96 SEPT 96 OCT 96 NOV 96 DEC 96
Market volatility affects U.S. Treasury bonds, as they fluctuate from 5.95% to a
July high of 7.2%.
[GRAPHIC APPEARS HERE]
Mortgage-backed securities outperform comparable Treasuries by nearly a
percentage point.
[GRAPHIC APPEARS HERE]
Fears persist that Federal Reserve may again raise rates to tighten money
supply.
[GRAPHIC APPEARS HERE]
5
<PAGE>
- --------------------------------------------------------------------------------
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 December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
Commercial Paper 62.50%
U.S. Government and Agency Obligations 16.33%
Corporate Notes and Bonds 13.41%
Other Short-Term Investments 5.52%
Other 2.24%
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 290 funds within the
Money Market category.
While short-term interest rates and yields were both lackluster for the year,
the Money Market Fund delivered an impressive 5.36% return in 1996,
outperforming its benchmark, the IBC/Donoghue First Tier Money Market Index.
Throughout the year, investors and analysts alike worried which way interest
rates would move, leaving the fixed income market extremely vulnerable to sudden
shifts. Just as one economic indicator would point toward a reviving economy,
another one would show signs of slowing growth. The effect of all this activity
on the 30-year U.S. Treasury bond was evident, as its yield fluctuated from a
low of 5.95% on January 1 to its July high of 7.19%.
Despite these fluctuations, short-term interest rates remained relatively
stable and the Money Market Fund was able to deliver a surprisingly strong
performance relative to its benchmark. Not only was it able to preserve capital
and maintain liquidity, it generated attractive current income - largely because
it maintained a modestly longer average weighted maturity than the benchmark. As
a result, the Fund was rated one of the top-performing First Tier Taxable Funds
in IBC/Donoghue's Money Fund Report.
Against the backdrop of continually fluctuating economic growth, the Fund's
management focused on securities which tend to appreciate quickly during a
rising interest rate environment. Over the year, its holdings remained
concentrated in top-tier commercial paper and government agency discount notes.
Going forward, the Fund's management expects that inflation will remain in
check, under the watchful eye of the Federal Reserve and deterred by the ongoing
sluggishness of worldwide economies. Therefore, management plans to maintain a
longer average weighted maturity than its index, believing that this strategy
will help maximize income while minimizing risk.
Growth of a $10,000 Investment Since 1986
<TABLE>
<CAPTION>
12/86 12/96
- ----------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund $10,000 $18,475
IBC/Donoghue First Tier Money Market Index $10,000 $17,147
Lipper Money Market Fund Average $10,000 $17,113
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year 10 year
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 5.36% 4.38% 5.87%
IBC/Donoghue First Tier Money Market Index 4.88% 3.99% 5.54%
Lipper Money Market Fund Average 4.80% 3.96% 5.52%
</TABLE>
6
<PAGE>
-------------------------
Financials
-------------------------
<PAGE>
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<S> <C>
CORPORATE NOTES AND BONDS - 13.41%
Automotive - 4.97%
$3,000,000 American Honda Finance Corp., MTN
5.62%, 08/15/97* (B) $ 3,000,000
1,000,000 Ford Motor Credit Co., MTN
5.49%, 05/05/97* 999,851
200,000 General Motors Acceptance Corp., MTN
7.00%, 05/19/97 200,863
2,500,000 General Motors Acceptance Corp., MTN
5.46%, 06/04/97* 2,498,382
1,100,000 General Motors Acceptance Corp., MTN
6.50%, 07/25/97 1,104,943
3,000,000 General Motors Acceptance Corp., MTN
5.72%, 08/01/97* 3,002,449
------------
10,806,488
------------
Security Brokers, Dealers and Exchanges - 3.46%
3,000,000 Bear Stearns Cos., Inc., MTN
5.60%, 10/08/97* 3,000,000
2,500,000 Morgan Stanley Group, Inc., MTN
5.79%, 02/14/97* 2,500,527
2,000,000 Paine Webber Group, Inc., MTN
Senior Note
8.63%, 03/03/97 2,010,047
------------
7,510,574
------------
Finance - 2.30%
1,000,000 Associates Corp. of North America
Senior Note
6.88%, 01/15/97 1,000,410
1,000,000 NBD Bank of North America, MTN
4.60%, 02/03/97 998,956
500,000 NBD Bank of North America, MTN
6.50%, 05/27/97 501,127
2,500,000 PNC Bank, MTN
5.32%, 03/24/97* 2,499,512
------------
5,000,005
------------
Food and Beverage - 1.15%
2,500,000 PepsiCo, Inc.
6.13%, 01/15/98 2,509,191
------------
Utilities - 0.93%
1,000,000 Potomac Electric Power Co., MTN
6.70%, 05/28/97 1,002,687
1,000,000 Southwestern Bell Capital Corp., MTN
7.75%, 10/30/97 1,014,477
------------
2,017,164
------------
Retail - 0.60%
1,300,000 Sears Roebuck & Co., MTN
5.22%, 02/24/97 1,298,322
------------
Total Corporate Notes and Bonds 29,141,744
(Cost $29,141,744) ------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 16.33%
Federal Home Loan Bank (A) - 6.90%
$ 770,000 5.24%, 02/19/97 764,508
3,000,000 5.22%, 03/07/97 2,971,725
7,000,000 5.25%, 05/02/97 6,876,479
1,500,000 5.17%, 06/23/97 1,462,733
1,500,000 5.61%, 07/07/97 1,456,289
1,500,000 5.22%, 08/15/97 1,450,845
------------
14,982,579
------------
Federal Farm Credit Bank (A) - 5.53%
5,000,000 5.19%, 05/28/97 4,894,038
335,000 5.19%, 05/29/97 327,852
1,000,000 5.27%, 06/18/97 975,407
2,625,000 5.25%, 10/31/97 2,509,833
3,500,000 5.28%, 12/18/97 3,319,991
------------
12,027,121
------------
U.S. Treasury Notes - 2.30%
2,000,000 5.50%, 07/31/97 1,996,406
3,000,000 6.00%, 08/31/97 3,005,118
------------
5,001,524
------------
Federal National Mortgage Association (A) - 1.60%
3,500,000 5.47%, 02/27/97 3,469,521
------------
Total U.S. Government
and Agency Obligations 35,480,745
(Cost $ 35,480,745) ------------
MUNICIPAL BOND - 1.15%
2,500,000 De Kalb County, Georgia
Development Authority Revenue
5.55%, 02/04/97 2,500,000
------------
Total Municipal Bond 2,500,000
(Cost $2,500,000) ------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-1
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER (A) - 62.50%
Finance - 22.41%
$3,520,000 Asset Backed Capital Finance, Inc.
5.51%, 03/17/97* $ 3,480,267
1,000,000 Asset Backed Capital Finance, Inc.
5.45%, 05/12/97 980,168
5,000,000 Asset Backed Capital Finance, Inc.
5.53%, 11/14/97* 4,999,160
5,000,000 Clipper Receivables Corp.
5.45%, 01/16/97 4,988,646
2,000,000 Cofco Capital Corp.
5.40%, 02/14/97 1,986,800
2,000,000 Cofco Capital Corp.
5.55%, 02/19/97 1,984,892
2,400,000 Finance One Funding Corp.
5.45%, 02/13/97 2,384,377
3,000,000 Galacia Funding Corp.
5.67%, 03/05/97 2,970,233
2,000,000 Pegasus Two, Ltd.
5.55%, 02/21/97 1,984,275
3,000,000 Pegasus Two, Ltd.
5.42%, 03/10/97 2,969,287
4,000,000 Receivables Capital Corp.
5.48%, 01/17/97 3,990,258
5,493,000 Receivables Capital Corp.
5.30%, 02/07/97 5,462,740
5,000,000 Standard Credit Card Master Trust I
5.52%, 01/14/97 4,990,033
1,200,000 Toshiba International Finance
5.55%, 01/24/97 1,195,745
2,400,000 Toshiba International Finance
5.35%, 04/15/97 2,362,907
2,000,000 Toshiba International Finance
5.42%, 06/09/97 1,952,123
--------------
48,681,911
--------------
Consumer Goods - 6.47%
5,000,000 Den Danske Corp.
5.37%, 01/09/97 4,994,033
3,000,000 Den Danske Corp.
5.34%, 02/10/97 2,982,200
1,000,000 Duracell Inc.
6.00%, 01/02/97 999,833
2,500,000 Penney (J.C.) Funding Corp.
5.39%, 03/19/97 2,471,178
630,000 Sharp Electronics Corp.
5.34%, 02/14/97 625,888
2,000,000 Sharp Electronics Corp.
5.33%, 02/21/97 1,984,898
--------------
14,058,030
--------------
Other - 5.49%
4,000,000 Massachusetts Educational Finance Authority
6.10%, 01/02/97 3,999,322
8,000,000 Nebhelp Capital Services, Inc.
5.34%, 02/24/97 7,935,920
--------------
11,935,242
--------------
Banking - 5.41%
5,000,000 Banco Bradesco SA Grand Cayman
5.30%, 04/28/97 4,913,875
3,000,000 Banco De Credito Nacional SA
5.65%, 06/06/97 2,926,550
4,000,000 Unifunding, Inc.
5.32%, 05/12/97 3,922,564
--------------
11,762,989
--------------
Security Brokers, Dealers and Exchanges - 5.23%
3,000,000 CS First Boston, Inc.,
5.29%, 04/02/97 2,959,884
2,500,000 Merrill Lynch & Co., Inc.
5.36%, 04/23/97 2,458,311
3,000,000 Paine Webber Group, Inc.
5.55%, 01/10/97 2,995,838
3,000,000 Paine Webber Group, Inc.
5.35%, 05/12/97 2,941,596
--------------
11,355,629
--------------
Automotive Financing - 4.32%
2,500,000 General Motors Acceptance Corp.
5.72%, 02/14/97 2,482,522
925,000 General Motors Acceptance Corp.
5.37%, 05/01/97 908,443
6,000,000 Mitsubishi Motors Credit Of America
5.97%, 01/15/97 5,987,330
--------------
9,378,295
--------------
Utilities - 3.55%
1,200,000 Electricite De France
6.00%, 01/02/97 1,199,800
800,000 Laclede Gas Co.
5.65%, 01/21/97 797,489
3,000,000 Northern Indiana Public Service Co.
5.40%, 02/03/97 2,985,150
2,750,000 Northern Indiana Public Service Co.
5.41%, 02/07/97 2,734,709
--------------
7,717,148
--------------
Industrial - 3.45%
5,000,000 Cargill
5.90%, 01/06/97 4,995,904
2,500,000 Corporate Receivables Corp.
5.42%, 01/13/97 2,495,483
--------------
7,491,387
--------------
Transportation - 3.44%
2,500,000 Cooperative Association of Tractor Dealers
5.60%, 01/21/97 2,492,222
1,000,000 Cooperative Association of Tractor Dealers
5.33%, 02/03/97 995,114
2,500,000 Cooperative Association of Tractor Dealers
5.40%, 02/04/97 2,487,250
1,500,000 Daimler-Benz North America Corp.
5.40%, 02/12/97 1,490,550
--------------
7,465,136
--------------
</TABLE>
See Notes to Financial Statements.
----------------------------------------------------------
F-2
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Paper - 2.73%
$6,000,000 Jefferson Smurfit Finance Corp.
5.40%, 03/18/97 $ 5,931,600
--------------
Total Commercial Paper 135,777,367
(Cost $135,777,367) --------------
BANKERS' ACCEPTANCE - 4.07%
1,157,242 Bank of Boston
5.50%, 02/24/97 1,147,695
1,900,000 Chase Manhattan Bank
5.45%, 03/04/97 1,882,166
2,000,000 Corestates Capital Corp.
5.43%, 01/23/97 1,993,363
1,419,450 European Investment Bank
5.50%, 03/24/97 1,401,667
1,308,708 European Investment Bank
5.35%, 04/28/97 1,285,953
1,150,000 Republic National Bank of New York
5.45%, 03/14/97 1,137,465
--------------
Total Bankers' Acceptance 8,848,309
(Cost $8,848,309) --------------
<CAPTION>
Value
SHARES (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY - 0.30%
642,025 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund $ 642,025
--------------
Total Investment Company 642,025
(Cost $642,025) --------------
Total Investments - 97.76% 212,390,190
(Cost $212,390,190) --------------
Net Other Assets and Liabilities - 2.24% 4,865,542
--------------
Net Assets - 100.00% $ 217,255,732
==============
</TABLE>
- ---------------------------------------
* Interest is reset at various time intervals. The rate shown is that in
effect at December 31, 1996.
(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 qualified institutional buyers. As of December 31, 1996,
these securities amounted to $3,000,000 or 1.38% of net assets.
MTN Medium Term Note
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $212,390,359.
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 for both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
Moody's Ratings (unaudited)
Aaa 100.00%
See Notes to Financial Statements.
- --------------------------------------------------------
F-3
<PAGE>
- -------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES . December 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS:
<S> <C>
Investments at value (Cost $212,390,190)............................................................. $ 212,390,190
Cash................................................................................................. 104,813
Receivable for shares sold........................................................................... 4,222,021
Interest and dividend receivables.................................................................... 603,717
-------------
Total Assets..................................................................................... 217,320,741
-------------
LIABILITIES:
Advisory fee payable (Note 3)........................................................................ 49,517
Accrued expenses and other payables.................................................................. 15,492
-------------
Total Liabilities................................................................................ 65,009
-------------
NET ASSETS.............................................................................................. $ 217,255,732
=============
NET ASSETS consist of
Paid-in capital (Note 6)............................................................................. $ 217,292,369
Accumulated net realized gain (loss) on investments sold............................................ (36,637)
-------------
TOTAL NET ASSETS........................................................................................ $ 217,255,732
=============
Shares of beneficial interest outstanding(unlimited authorization, no par value)........................ 217,292,369
NET ASSET VALUE,
Offering and redemption price per share.............................................................. $ 1.000
=============
<CAPTION>
STATEMENT OF OPERATIONS . For Year Ended December 31, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest (Note 2).................................................................................... $ 10,087,550
Dividends (Note 2)................................................................................... 156,281
-------------
Total investment income............................................................................ 10,243,831
-------------
EXPENSES
Investment advisory fees (Note 3and 4)............................................................... 510,258
Custodian fees (Note 3).............................................................................. 20,630
Fund accounting fees (Note 3)........................................................................ 36,779
Legal fees........................................................................................... 1,349
Audit fees........................................................................................... 7,800
Trustees' fees and expenses (Note 3)................................................................. 5,109
Reports to shareholders.............................................................................. 40,748
Insurance............................................................................................ 1,311
Miscellaneous........................................................................................ 6,012
-------------
Total expenses..................................................................................... 629,996
-------------
NET INVESTMENT INCOME................................................................................... 9,613,835
-------------
NET REALIZED GAIN (LOSS) ON INVESTMENTS................................................................. (35,900)
-------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS..................................................................... $ 9,577,935
=============
</TABLE>
See Notes to Financial Statements.
----------------------------------------------------------
F-4
<PAGE>
- -------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Money Market Fund
- --------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS at beginning of year..................................................... $ 155,211,174 $ 95,991,332
------------- -----------
Increase (Decrease) in net assets resulting from operations:
Net investment income (loss) .................................................... 9,613,835 7,715,400
Net realized gain (loss) on investments sold..................................... (35,900) (390)
------------- -----------
Net increase (decrease) in net assets resulting from operations.................. 9,577,935 7,715,010
------------- -----------
Distributions to shareholders from:
Net investment income............................................................ (9,613,835) (7,715,400)
------------- -----------
Capital share transactions:
Net proceeds from sales of shares................................................ 189,973,951 178,261,897
Issued to shareholders in reinvestment of distributions.......................... 9,613,835 7,715,400
Cost of shares repurchased....................................................... (137,507,328) (126,757,065)
------------- -----------
Net increase (decrease) from capital share transactions........................ 62,080,458 59,220,232
------------- -----------
Total increase (decrease) in net assets........................................ 62,044,558 59,219,842
------------- -----------
NET ASSETS at the end of year (including line A).................................... $ 217,255,732 $ 155,211,174
============= ===========
(A) Undistributed (distributions in excess of) net investment income (loss)......... $ -- $ --
============= ===========
OTHER INFORMATION:
Share transactions:
Sold............................................................................. 189,973,951 178,261,897
Issued to shareholders in reinvestment of distributions.......................... 9,613,835 7,715,400
Repurchased...................................................................... (137,507,328) (126,757,065)
------------- -----------
Net increase (decrease) in shares outstanding.................................. 62,080,458 59,220,232
============= ===========
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-5
<PAGE>
- -------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------ ------------- ------------- -------------
Income from Investment Operations:
Net Investment Income (1)..................... 0.052 0.057 0.039 0.030 0.037
Net Realized Gain (Loss) on Investments....... -- -- -- -- --
------------- ------------ ------------- ------------- -------------
Total from Investment Operations............ 0.052 0.057 0.039 0.030 0.037
------------- ------------ ------------- ------------- -------------
Less Distributions:
Distributions from Net Investment Income...... (0.052) (0.057) (0.039) (0.030) (0.037)
------------- ------------ ------------- ------------- -------------
Net Increase (Decrease) in Net Asset Value....... -- -- -- -- --
------------- ------------ ------------- ------------- -------------
Net Asset Value, End of Year..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
============= ============ ============= ============= =============
Total Return..................................... 5.36% 5.84% 3.93% 3.00% 3.78%
Ratios/Supplemental Data:
Net Assets, End of Year (000's).................. $ 217,256 $ 155,211 $ 95,991 $ 71,052 $ 64,506
Ratios to Average Net Assets:
Net Investment Income......................... 5.22% 5.68% 3.94% 2.95% 3.65%
Operating Expenses Including Reimbursement.... 0.34% 0.36% 0.45% 0.42% 0.44%
Operating Expenses Excluding Reimbursement.... 0.34% 0.36% 0.45% 0.43% 0.44%
Gross Management Fee.......................... 0.28% 0.29% 0.32% N/A N/A
Net Management Fee............................ 0.28% 0.29% 0.31% N/A N/A
</TABLE>
- --------------------------------------------------------------------
(1) Net investment income per share before reimbursement of fees by the
investment adviser were $0.030 in 1993 for Money Market Fund.
See Notes to Financial Statements.
----------------------------------------------------------
F-6
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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
(individually, a "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 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.
Federal Income Taxes: The Trust treats the Portfolio as a separate entity for
Federal income tax purposes. The 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, the 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, the Portfolio will not
be subject to Federal excise tax. Therefore, no Federal income tax provision is
required.
Distributions to Shareholders: Dividends from net investment income are declared
and reinvested daily for the Money Market Fund. The Portfolio declares and
distributes all net realized capital gains, if any, at least annually. The
distributions are recorded on the ex-dividend date.
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.
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 Portfolios pay a
management fee, calculated daily and payable monthly, at an annual rate of 0.35%
of the net asset value on the first $50,000,000, 0.25% on the next $200,000,000
and 0.20% on the remainder of the Portfolio's assets
The Manager has entered into a Sub-Adviser Agreement for the management of the
investments of the Portfolio. The Manager is solely responsible for the payment
of all fees to the Sub-Adviser. The Sub-Adviser for the Portfolio is Allmerica
Asset Management, Inc.
F-7
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
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
Portfolio 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 Portfolio 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
In the event normal operating expenses of the Portfolio, excluding taxes,
interest, broker commissions and extraordinary expenses, but including the
advisory fee, exceed a 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 limitation. The expense limitation
may be removed or revised without prior notice to existing shareholders. The
Manager will voluntarily reimburse its fees and any expenses in excess of the
expense limitation.
6. 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 Portfolio, without a par value.
F-8
<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 Funds 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 and Allmerica
Investment Trust, which include important information related to charges and
expenses.
CLIENT NOTICES
- --------------------------------------------------------------------------------
This 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(SM) Variable Annuity contracts. Separate account
financial statements will not be provided in the annual report. If you would
like to receive separate account financial statements as of December 31, 1996,
they may be obtained from Allmerica Investments, Inc., 440 Lincoln Street,
Worcester, MA 01653, 1-800-828-0540, extension 201.
F-9
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders
of the Allmerica Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statement of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Allmerica Investment Trust
Money Market Fund, (hereafter referred to as the "Fund") at December 31, 1996,
and the results of its operations, the changes in its net assets, and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1996 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 14, 1997
F-10
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