<PAGE>
ANNUAL REPORT
December 31, 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, MA02110
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
George M. Boyd, Secretary
BOARD OF TRUSTEES OF AIT
John F. O'Brien, Chairman
Cynthia A. Hargadon*
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
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CONTENTS
- --------------------------------------------------------------------------------
A LETTER FROM THE CHAIRMAN...................................................2
PERFORMANCE SUMMARY..........................................................3
BOND AND MONEY
MARKET OVERVIEW..............................................................4
MONEY MARKET FUND............................................................6
FINANCIALS.................................................................F-1
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-15.
<PAGE>
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A LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
[PHOTO OF JOHN F. O'BRIEN APPEARS HERE]
Dear Client:
During 1997, investors benefited from generally healthy U.S. financial
markets. The stock market delivered an unprecedented third consecutive year of
returns over 20% and the bond market enjoyed its best results since 1995.
This year's exceptional performance, however, masks the volatility which
occurred, particularly in the U.S. equity markets. In fact, market volatility in
1997 was the fourth highest in the last 50 years. Moreover, not only did almost
all of the gain in the S&P 500(R) occur during the first seven months of the
year, returns were concentrated in just a handful of large company stocks.
Understandably, this proved particularly frustrating to investors in smaller
company stocks and to those large-cap managers with broadly diversified
portfolios.
Internationally, the markets proved quite challenging. The larger developed
countries in the Morgan Stanley EAFE Index delivered solid returns through July
but ended the year with a modest total return of approximately 2%. While Europe
delivered strong returns to investors, a 21% decline in the Japanese market and
the effects of a strong U.S. dollar eroded results. Emerging markets in Asia had
a particularly tough year as many of these markets declined dramatically in the
the face of spiraling debt and asset deflation.
One outcome of 1997's international turmoil was that many investors sought
shelter in the relative safety of the U.S. bond market which returned over 9%
for the year.
While we continue to have a positive outlook for the U.S. and world
economies, we encourage you to set realistic return expectations and remain
focused on your long-term goals. As the past has so clearly shown, even when
unprecedented annual returns have been achieved in U.S. markets, sudden downward
movements can be quite severe and unsettling. We, therefore, encourage you to
continue to work with your financial advisor to develop and implement a
diversified and disciplined investment program. We believe one prudent way to
participate in any future market potential is through long-term, tax-deferred
professionally managed investment vehicles.
We are pleased to report that almost two-thirds of our investment managers
outperformed their peer group during 1997 as measured by Lipper Analytical
Services. Over a more meaningful three-year period, almost 90% of these managers
outperformed their competitors. We feel these results validate our disciplined
approach to investment management which includes carefully defining investment
parameters and rigorously monitoring managers' results.
As we begin a new year, a tax issue has arisen that warrants our attention.
As part of its Fiscal 1999 budget submission, the Administration has proposed
troubling taxes on new variable annuity and variable life policyholders. While
the details are not yet final and are subject to change, and would as proposed
apply only to policies acquired after the effective date of any new legislation,
we believe the spirit of these proposals is inconsistent with broad national,
social and tax policies and would make it more difficult for Americans to save
for retirement and achieve financial security. On your behalf and the behalf of
others who seek to plan responsibly for retirement, we have joined a strong,
broad-based industry coalition to defeat this legislation. We are confident our
voice will be heard.
We continue to work hard to earn your trust and thank all of you who
supported the proxy initiatives of the Fund's trustees and management during the
past year. We look forward to continuing to serve your investment and retirement
needs in the future.
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
2
<PAGE>
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PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
THE FULCRUM FUND(SM) VARIABLE ANNUITY . Average Annual Total Return as of
12/31/97
For easy reference, the total returns for The Fulcrum Fund(SM) Variable
Annuity sub-account are 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.
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
------------------------ ---------------------
One Five Ten One Five Ten
Sub-account Year Years Years Year Years Years
- --------------------------------------------------------------------------------
Allmerica Investment Trust
Money Market Fund 3.94% 3.19% 4.26% -2.25% 2.66% 4.26%
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.
---------------------------
3
<PAGE>
Bond & Money Market Overview
1992: Government and corporate bonds outperform 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: Low inflation and declining interest rates fuel the bond market, which
enjoys its best returns since 1995.
1997 proved to be a very good year for bond investors. Falling inflation,
declining interest rates and a healthy economy were just some of the key factors
contributing to the positive market environment.
During 1997, fixed income markets enjoyed outstanding results. The year
began cautiously as economic indicators showed robust growth and favorable
employment continuing from 1996. This prompted the Federal Reserve Board to
increase the Federal Funds Rate by 25 basis points to 5.50% in a preemptive
strike against inflation. The move proved to be successful and rates were left
unchanged for the remainder of the year, as economic indices continued to
exhibit signs of a strong economy, with little evidence of inflation.
As economic growth continued at a strong pace, the budget deficit began to
evaporate. This decreased the need for Treasury financing in the bond market and
fostered lower yields. These factors led to a strong rally and as prices rose,
interest rates on the thirty-year bond, declined from 6.64% at the start of the
year to 5.92% by year-end.
Increased activity in the fixed income markets also surfaced in the third
quarter when the August consumer price index (CPI) indicated the lowest rate of
inflation since May 1966. The announcement sparked a strong rally in the bond
market. Later in the year, investor concerns about the financial crisis in
Asia -- and its possible effects on the domestic economy -- also caused bonds to
rally as nervous investors once again retreated from the stock market in favor
of bonds.
In terms of performance, bond investors enjoyed their best gains since 1995
largely because of low inflation and decreasing interest rates. For instance,
the
[TIME LINE APPEARS HERE]
Convinced domestic growth will slow from 1996 levels, investors favor bonds at
the start of the year.
[GRAPHIC APPEARS HERE]
Signs of a strong economy raise fears over increasing interest rates and the
market softens.
To ward off inflation, the Federal Reserve raises interest rates .25%. In
response, the bond market declines.
[GRAPHIC APPEARS HERE]
The budget deficit significantly declines, decreasing the need for Treasury
financing. The bond market rallies.
[GRAPHIC APPEARS HERE]
Stable-to-declining interest rates bode well for corporate and high-yield
bonds as well as mortgage-backed securities.
4
<PAGE>
Lehman Brothers Aggregate Bond Index turned in an impressive 9.65% total return
for the year, up considerably from 1996's dismal showing of 3.61%. Longer
maturity bonds did quite well and 30-year U.S. Treasury bonds returned as much
as 15% this year. Investment-grade bonds and high-yield issues also rewarded
investors with gains of 9.7% and 13.2% respectively. Strong returns in both the
bond and stock markets caused some investors to review the asset mix of their
portfolios. Many large institutions tended to favor bonds later in the year to
rebalance their portfolios, take advantage of rising prices and avoid what they
judged to be an overvalued stock market.
Overall winners for the year were corporate, high-yield and emerging market
bonds. Amid the turmoil in world markets, high-grade U.S. bonds emerged as an
attractive investment later in the year.
Even the money market, which was generally characterized by stability
during 1997, produced solid returns. At year-end, the average yield on a
one-year Treasury Bill was 5.48%, essentially even with the 5.49% yield at the
end of 1996 but only 0.44% less than the yield on a 30-year Treasury bond.
Banking issues in Japan and currency problems in many Asian countries increased
the demand for domestic commercial paper and certificates of deposits as
investors felt more comfortable investing in high-quality issues.
Going forward, the fundamentals of the bond market remain intact. Inflation
is under control and the strong dollar encourages foreign investors to buy U.S.
bonds. And even though unemployment is at a 24-year low and wages are climbing,
productivity gains appear to be keeping a lid on prices.
Despite these strong underpinnings, industry experts point out that there
is limited capital appreciation potential for bonds due to falling interest
rates. Rates are not expected to move significantly lower unless real weakness
in the economy emerges and the prospect of interest rate cuts by the Federal
Reserve develops. The outlook for bond investors then, focuses on their yield
which continues to deliver strong real returns to investors in this low
inflation environment.
While the outlook for the bond and money markets remains generally
favorable, the European Monetary Union slated to take place in January 1999
could emerge as an important issue during the latter part of this year. At that
point, investors will have to consider the possibility that a strong union could
hurt the U.S. dollar and dollar-denominated bonds.
[TIME LINE APPEARS HERE]
[GRAPHIC APPEARS HERE]
CPI indicates the lowest rate of inflation since May 1966 which causes the bond
market to rally.
[GRAPHIC APPEARS HERE]
Institutional investors take advantage of rising bond prices, avoiding what they
consider to be an overvalued stock market.
[GRAPHIC APPEARS HERE]
Concerns grow over the crisis in Asian markets and its possible effect on the
U.S. economy. Investors flee to high-quality U.S. bonds.
Bond investors enjoy their best gains since 1995 largely due to low inflation
and stable to declining interest rates.
5
<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 December 31, 1997, the sector
allocation of net assets was:
[PIE CHART APPEARS HERE]
Cash Equivalents 35%
U.S. Government and
Agency Obligations 10%
Repurchase Agreements 10%
Corporate Notes and Bonds 28%
Other 17%
The Money Market Fund is a portfolio of the Allmerica Investment Trust.
Portfolio composition will vary over time.
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 the average investment performance of 303
funds within the Money Market category.
For the one-year period ended December 31, 1997, the Money Market Fund posted a
5.47% return significantly outpacing the Lipper Money Market Fund Average return
of 4.90% for the same period.
The money market was generally characterized by stability during 1997. As
economic indicators showed robust growth and favorable employment continuing
from 1996 into the beginning of the new year, the Federal Reserve Board moved to
increase Federal Funds Rate by 25 basis points to 5.50%. These rates were left
unchanged for the remainder of the year as economic indices continued to exhibit
signs of a strong, yet stable economy.
Later in the year, concerns about the potential impact of the financial
crisis in Asia -- and its possible effects on the domestic economy -- led to a
rally in the bond market. Banking issues in Japan and currency problems in many
Asian countries increased the demand for domestic commercial paper and
certificates of deposits as investors felt more comfortable investing in
high-quality paper. Thus, prices rose and the yields on those assets declined
quite rapidly.
To take advantage of this rally, the Fund's managers invested the Fund's
assets in top-tier commercial paper, agency discount notes, repurchase
agreements and floating rate notes. The portfolio also maintained a longer
average weighted maturity than the Fund's benchmark to capture incremental yield
in a declining interest rate environment.
Currently, the portfolio is concentrated in commercial paper and has a 27%
position in floating rate notes which the managers believe adds yield for the
Fund.
Throughout 1997, the Fund's managers focused on three primary investment
objectives: preserving capital, maintaining liquidity and seeking attractive
current income. As 1998 begins, the Money Market Fund is structured to
capitalize on short-term technical factors. For example, the quarterly funding
of the U.S. Treasury often causes rates to rise for a brief period. This
sometimes creates a good investment opportunity for nimble, short-term
investors.
GROWTH OF A $10,000 INVESTMENT SINCE 1987
[LINE GRAPH APPEARS HERE]
IBC/Donoghue First Tier
Date Money Market Fund Money Market Index
---- ----------------- ------------------------
12/87 $10,000 $10,000
12/97 $17,569 $16,344
AVERAGE ANNUAL TOTAL RETURNS
Years ended December 31, 1997 One Year Five Years Ten Years
- --------------------------------------------------------------------------------
Money Market Fund 5.47% 4.71% 5.80%
IBC/Donoghue First Tier Money Market Index 5.01% 4.33% 5.44%
Lipper Money Market Fund Average 4.90% 4.31% 5.40%
6
<PAGE>
------------
Financials
------------
7
<PAGE>
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MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1997
- -------------------------------------------------------------------------------
Value
Par Value (Note 2)
- -------------------------------------------------------------------------------
CORPORATE NOTES AND BONDS - 28.44%
Securities Brokers and Dealers - 11.09%
$1,000,000 Bear Stearns Cos., Inc., Series B, MTN
6.13%, 02/17/98* $ 1,000,240
2,500,000 Bear Stearns Cos., Inc., Series B, MTN
6.44%, 02/23/98* 2,501,469
5,000,000 Bear Stearns Cos., Inc., Series B, MTN
5.74%, 08/25/98* 5,000,000
3,500,000 Goldman Sachs Group, LP, Series E, MTN
6.26%, 05/29/98* 3,503,438
1,915,000 Lehman Brothers Holdings, Inc., Series E, MTN
6.73%, 02/27/98 1,917,269
1,504,000 Lehman Brothers Holdings, Inc., Senior Note
6.38%, 06/01/98 1,506,333
2,000,000 Merrill Lynch & Co., Inc., Series B, MTN
6.21%, 05/19/98* 2,001,975
5,000,000 Paine Webber Group, Inc., Series C, Senior MTN
6.06%, 09/16/98* 5,000,000
5,500,000 Paine Webber Group, Inc., Series C, MTN
5.93%, 11/04/98* 5,500,000
975,000 Shearson Lehman Brothers Holdings, Inc., Series D,
MTN 6.25%, 06/29/98 975,716
-------------
28,906,440
-------------
Finance - 10.94%
3,165,000 Abbey National Treasury Services Plc
6.50%, 12/21/98 3,178,625
697,000 Asset Backed Capital Finance, Inc., MTN
5.93%, 05/08/98 682,419
2,000,000 Asset-Backed Capital, Ltd., MTN
5.76%, 09/23/98* 2,000,000
2,500,000 Avco Financial Service
5.90%, 11/17/98* 2,500,000
5,750,000 General Electric Capital Corp., Series A, MTN
5.36%, 01/20/98 5,748,170
1,400,000 General Motors Acceptance Corp., MTN
7.30%, 02/02/98 1,401,603
4,000,000 General Motors Acceptance Corp., MTN
5.87%, 09/21/98* 3,998,027
3,000,000 Green Tree Lease Finance, LLC, 1997-1, Series A1
5.91%, 01/20/99 3,000,000
6,000,000 New England Education Loan Marketing Corp., MTN
6.14%, 09/18/98* 6,008,001
-------------
28,516,845
-------------
Commercial Banks - 3.37%
3,800,000 Bank of Boston, Senior MTN
5.82%, 04/22/98* 3,800,746
2,500,000 First USA Bank, MTN
5.98%, 04/28/98* 2,501,049
1,500,000 Morgan (J.P.) & Co., Inc., Subordinated Note
5.48%, 04/01/98 1,479,444
1,000,000 Norwest Corp., Series G, Senior MTN
6.00%, 10/13/98 1,000,558
-------------
8,781,797
-------------
Communication - 1.21%
3,100,000 Nippon Telegraph and Telephone Corp.
9.50%, 07/27/98 3,160,563
-------------
Retail - 0.98%
1,000,000 Albertson's, Inc., Series A, MTN
5.71%, 03/23/98 999,815
1,525,000 Sears Roebuck & Co.
9.25%, 04/15/98 1,537,203
-------------
2,537,018
-------------
Utilities - 0.85%
1,000,000 Virginia Electric & Power Co., Series A
9.38%, 06/01/98 1,012,177
1,200,000 Virginia Electric & Power Co., Series E, MTN
6.35%, 06/08/98 1,202,402
-------------
2,214,579
-------------
Total Corporate Notes and Bonds 74,117,242
(Cost $74,117,242) -------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 9.86%
Federal National Mortgage Association - 4.18%
5,000,000 5.44%, 02/04/98 4,974,311
4,000,000 5.43%, 03/30/98 3,946,955
1,000,000 5.55%, 05/07/98 980,575
1,000,000 5.38%, 06/10/98 998,774
-------------
10,900,615
-------------
Federal Farm Credit Bank - 3.08%
3,210,000 5.44%, 06/01/98 3,136,755
3,026,000 5.34%, 06/25/98 2,947,450
2,000,000 5.50%, 08/12/98 1,931,860
-------------
8,016,065
-------------
Federal Home Loan Mortgage Corp. - 1.61%
1,930,000 5.24%, 01/30/98 1,921,852
2,300,000 5.47%, 02/06/98 2,287,419
-------------
4,209,271
-------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
F-1
<PAGE>
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MONEY MARKET FUND
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PORTFOLIO OF INVESTMENTS, Continued . December 31, 1997
- ------------------------------------------------------------------------------
Value
Par Value (Note 2)
- ------------------------------------------------------------------------------
Federal Home Loan Bank - 0.99%
$2,000,000 5.40%, 02/11/98 $ 1,987,700
595,000 5.45%, 05/28/98 581,759
------------
2,569,459
------------
Total U.S. Government
and Agency Obligations 25,695,410
(Cost $25,695,410) ------------
COMMERCIAL PAPER (A) - 35.00%
Finance - 23.19%
4,368,000 Bil North America
5.60%, 01/09/98 4,362,564
3,650,000 Budget Funding Corp.
5.85%, 01/30/98 3,632,799
4,000,000 Centre Square Funding Corp.
5.67%, 01/20/98 3,988,030
255,000 Ford Capital BV
9.13%, 05/01/98 257,186
4,000,000 General Electric Capital Corp.
5.53%, 01/20/98 3,988,326
1,000,000 General Electric Capital Corp.
7.25%, 03/03/98 1,001,927
9,100,000 Grand Metropolitan Capital Corp.
5.54%, 01/07/98 9,091,598
4,000,000 Jefferson Smurfit Finance Corp., Series B
5.75%, 02/18/98 3,969,333
5,000,000 Lexington Parker Capital Corp.
5.93%, 01/21/98 4,983,528
293,000 Lexington-Parker Capital Corp, LLC
5.95%, 04/03/98 288,545
2,500,000 National Rural Utilities Cooperative Finance Corp.
5.55%, 02/13/98 2,483,427
6,878,000 Pegasus Two, Ltd.
5.86%, 03/18/98 6,792,912
6,000,000 Sanyo Electric Finance Co.
6.60%, 02/12/98 5,953,800
1,500,000 Toshiba Capital Asia Corp.
5.61%, 03/05/98 1,485,274
1,096,000 Toshiba International Finance
6.00%, 01/28/98 1,091,068
1,084,000 Toshiba International Finance
6.00%, 02/02/98 1,078,219
6,000,000 Westpac Capital Corp.
5.70%, 01/27/98 5,975,658
------------
60,424,194
------------
Consumer Goods - 3.25%
2,500,000 PepsiCo, Inc.
6.13%, 01/15/98 2,500,340
6,000,000 Stanley Works
5.58%, 02/04/98 5,968,380
------------
8,468,720
------------
Industry - 3.18%
350,000 Archer-Daniels-Midland Co.
6.20%, 01/22/98 348,775
8,000,000 China International Marine Containers Group, Ltd.
5.59%, 02/13/98 7,946,298
------------
8,295,073
------------
Rubber Fabricating - 2.67%
7,000,000 Bridgestone/Firestone, Inc.
7.35%, 01/27/98 6,962,842
------------
Energy - 1.94%
5,160,000 Songs Fuel Co.
5.62%, 05/19/98 5,048,836
------------
Utilities - 0.39%
1,012,000 Idaho Power Co.
6.05%, 01/23/98 1,008,258
------------
Commercial Bank - 0.38%
1,000,000 First Union Corp.
6.75%, 01/15/98 1,000,313
------------
Total Commercial Paper 91,208,236
(Cost $91,208,236) ------------
CERTIFICATES OF DEPOSIT - 15.54%
2,500,000 Bankers Trust Co.
5.92%, 07/17/98 2,499,615
5,000,000 Barclays Bank Plc
5.75%, 12/16/98 4,998,588
5,000,000 Barclays Bank Plc
5.73%, 04/16/98 4,999,792
5,000,000 Corestates Bank of North America
5.81%, 09/08/98 5,000,000
3,000,000 Deutsche Bank AG
5.95%, 10/26/98 2,998,836
7,000,000 Sanwa Bank, Ltd., New York
6.55%, 06/24/98 7,000,324
10,000,000 Skandinaviska Enskilda Banken
5.88%, 06/03/98 10,000,000
3,000,000 Societe Generale
5.97%, 09/15/98 3,000,202
------------
Total Certificates of Deposit 40,497,357
(Cost $40,497,357) ------------
See Notes to Financial Statements.
----------------------------------------------------------
F-2
<PAGE>
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MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1997
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 9.94%
$ 8,000,000 First Union Repurchase Agreement
5.88%, 1/2/98, Dated 12/03/97
Repurchase Price $8,039,200
(Collateralized by Heller Financial 6.39%,
Due 5/25/05; Total Par $8,390,000;
Market Value $8,494,928) $ 8,000,000
17,900,000 First Union Repurchase Agreement
7.50%, 1/2/98, Dated 12/31/97
Repurchase Price $17,907,458 (Collateralized by
Green Tree Lease Finance 5.91%, due 1/20/99;
Total Par $14,500,000 and Green Tree Lease
Finance 6.20%, due 9/20/05; Total Par $3,860,000;
Total Market Value of $19,253,880) 17,900,000
--------------
Total Repurchase Agreements 25,900,000
(Cost $25,900,000) --------------
INVESTMENT COMPANY - 0.47%
1,236,333 State Street Bank Temporary Fund 1,236,333
--------------
Total Investment Company 1,236,333
(Cost $1,236,333) --------------
Total Investments - 99.25% 258,654,578
(Cost $258,654,578) --------------
Net Other Assets and Liabilities - 0.75% 1,964,929
--------------
Net Assets - 100.00% $ 260,619,507
==============
- ---------------------------
* Variable rate security. The rate shown reflects rate currently in effect.
(A) Effective yield at time of purchase.
(B) Zero Coupon Bond. Rate shown reflects effective yield to maturity.
MTN Medium Term Note
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1997, the aggregate cost of investment securities for tax
purposes was $258,654,578.
As of December 31, 1997, the Portfolio had capital loss carryforwards which
expire as follows: $347 in 2002; $144 in 2003; $35,977 in 2004; and $8,154 in
2005.
For the year ended December 31, 1997, the Portfolio has elected to defer $321 of
capital losses attributable to Post-October Losses.
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:
Moody's Ratings (Unaudited)
Aaa 89.50%
NR (Not Rated) 10.50
--------
100.00%
========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-3
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES . December 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost ................................................................................... $ 232,754,578
Repurchase agreements at cost ......................................................................... 25,900,000
-------------
Total investments at value ......................................................................... 258,654,578
Cash .................................................................................................... 8,350
Receivable for shares sold .............................................................................. 459,451
Interest and dividend receivables ....................................................................... 1,581,840
-------------
Total Assets ....................................................................................... 260,704,219
-------------
LIABILITIES:
Advisory fee payable (Note 3) ........................................................................... 59,896
Accrued expenses and other payables ..................................................................... 24,816
-------------
Total Liabilities .................................................................................. 84,712
-------------
NET ASSETS .................................................................................................. $ 260,619,507
=============
NET ASSETS consist of
Paid-in capital (Note 6) ................................................................................ $ 260,664,450
Accumulated (distribution in excess of) net realized gain (loss) on investments sold .................... (44,943)
-------------
TOTAL NET ASSETS ............................................................................................ $ 260,619,507
=============
Shares of beneficial interest outstanding (unlimited authorization, no par value) ........................... 260,664,450
NET ASSET VALUE,
Offering and redemption price per share (Net Assets/Shares Outstanding) ................................. $ 1.000
=============
</TABLE>
STATEMENT OF OPERATIONS . For year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest (Note 2) ................................................................................ $ 13,319,005
Dividends (Note 2) ............................................................................... 293,092
------------
Total investment income ......................................................................... 13,612,097
------------
EXPENSES
Investment advisory fees (Notes 3and 4) .......................................................... 647,964
Custodian fees (Note 3) .......................................................................... 42,720
Fund accounting fees (Note 3) .................................................................... 57,184
Audit fees ....................................................................................... 2,688
Trustees' fees and expenses (Note 3) ............................................................. 5,869
Reports to shareholders .......................................................................... 80,315
------------
Total expenses .................................................................................. 836,740
------------
NET INVESTMENT INCOME (LOSS) .......................................................................... 12,775,357
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ..................................................... (8,306)
------------
NET GAIN (LOSS) ON INVESTMENTS ........................................................................... (8,306)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................................................ $ 12,767,051
============
</TABLE>
F-4
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Money Market
Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS at beginning of year..................................................... $217,255,732 $155,211,174
------------ ------------
Increase in net assets resulting from operations:
Net investment income............................................................ 12,775,357 9,613,835
Net realized gain (loss) on investments sold..................................... (8,306) (35,900)
------------ ------------
Net increase in net assets resulting from operations............................. 12,767,051 9,577,935
------------ ------------
Distributions to shareholders from:
Net investment income............................................................ (12,775,357) (9,613,835)
------------ ------------
Capital share transactions:
Net proceeds from sales of shares................................................ 198,110,523 189,973,951
Issued to shareholders in reinvestment of distributions.......................... 12,775,357 9,613,835
Cost of shares repurchased....................................................... (167,513,799) (137,507,328)
------------ ------------
Net increase from capital share transactions................................. 43,372,081 62,080,458
------------ ------------
Total increase in net assets.................................................. 43,363,775 62,044,558
------------ ------------
NET ASSETS at end of year (including line A)........................................ $260,619,507 $217,255,732
============ ============
(A) Undistributed (distributions in excess of) net investment income (loss)......... $ -- $ --
============ ============
OTHER INFORMATION:
Share transactions:
Sold............................................................................. 198,110,523 189,973,951
Issued to shareholders in reinvestment of distributions.......................... 12,775,357 9,613,835
Repurchased...................................................................... (167,513,799) (137,507,328)
------------ ------------
Net increase in shares outstanding............................................ 43,372,081 62,080,458
============ ============
</TABLE>
See Notes to Financial Statements.
- ---------------------------------------------------------
F-5
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<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 Net
Year Ended Beginning Investment on Investment Investment Capital in Return of Total Asset
December 31, of Year Income/(2)/ Investments Operations Income Gains Excess Capital Distributions Value
------------ ---------- ---------- ----------- ---------- --------- --------- ------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market
Fund
1997 $ 1.000 $ 0.053 $ -- $ 0.053 $(0.053) $ -- $ -- $ -- $ (0.053) $ --
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) --
</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.
(1) Unaudited.
(2) Net investment income per share before reimbursement of fees by the
investment adviser was $0.030 in 1993 and $0.084/(1)/ in 1988 for Money
Market Fund.
See Notes to Financial Statements.
----------------------------------------------------------
F-6
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------------------
Ratios To Average Net Assets
------------------------------------------
<TABLE>
<CAPTION>
Net Asset Net Assets
Value End of Net Portfolio Average
End of Total Year Investment Operating Expenses Management Fee Turnover Commissions
Year 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 5.47% $ 260,620 5.33% 0.35% 0.35% 0.35% 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 6.67% 39,909 5.98% 0.43% -- 0.43% N/A N/A N/A --
1.000 8.63% 28,330 8.22% 0.42% -- 0.42% N/A N/A N/A --
1.000 9.69% 12,060 8.62% 0.58% -- 0.58% N/A N/A N/A --
1.000 7.30%/(1)/ 7,156 7.13% 0.60% -- 0.71% N/A N/A N/A --
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-7
<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 (see Note
9). 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 coupon 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
- --------------------------------------------------------------------------------
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 based
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 a Sub-Adviser Agreement for the management of the
investments of the Portfolio. The Manager is solely responsible for the payment
of the fee to the Sub-Adviser. The Sub-Adviser for the Portfolio is Allmerica
Asset Management, Inc.
The Manager has entered into an Administrative Services Agreement with First
Data Investor Services Group, Inc. ("Investor Services Group"), a wholly-owned
subsidiary of First Data Corporation, whereby Investor Services Group 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 Investor Services
Group. In a separate agreement, Investor Services Group 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 a voluntary expense limitation of 0.60%, the Manager will
voluntarily reimburse its fees and any expenses in excess of the expense
limitation. 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.
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>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders
of Allmerica Investment Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments (except for Moody's Ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Money Market Fund, (one of the Portfolios constituting the Allmerica
Investment Trust, hereafter referred to as the "Trust") at December 31, 1997,
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 Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where investments purchased were not yet received by the custodian,
provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 11, 1998
F-10
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS: (Unaudited)
A special meeting of the Trust's shareholders was held on August 15, 1997 in
which they approved twelve proposals. The results were as follows:
Proposal 1 To elect as Trustees the following eight nominees:
- ----------
Shares Shares Percent of
For Withheld Shares Voted
------------- ---------- ------------
Cynthia A. Hargadon 1,938,258,984 31,269,098 100.00%
Gordon Holmes 1,939,243,085 30,284,997 100.00%
John P. Kavanaugh 1,939,797,208 29,730,874 100.00%
Bruce E. Langton 1,937,762,009 31,766,074 100.00%
John F. O'Brien 1,939,501,868 30,026,214 100.00%
Attiat F. Ott 1,938,512,953 31,015,129 100.00%
Richard M. Reilly 1,940,655,029 28,873,054 100.00%
Ranne P. Warner 1,938,603,816 30,924,266 100.00%
Proposal 2 To ratify the selection of Price Waterhouse LLP as independent
- ---------- accountants for the Trust:
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
------------- ---------- ---------- ------------
Price Waterhouse LLP 1,905,804,327 16,680,566 47,043,189 100.00%
Proposal 3 To amend the management fee schedules in the Management
- ---------- Agreement between Allmerica Investment Management Company, Inc.
and Allmerica Investment Trust for the Funds below:
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ---------- ---------- ------------
Select Aggressive Growth 210,913,895 5,360,717 7,081,745 100.00%
Select Capital Appreciation 114,202,372 3,265,814 3,442,617 100.00%
Select International Equity 220,386,752 4,564,117 7,695,067 100.00%
Growth 222,195,807 14,056,428 8,369,802 100.00%
Select Growth and Income 227,489,980 5,863,093 8,109,903 100.00%
Select Income 78,873,767 1,233,240 5,176,275 100.00%
Investment Grade Income 142,274,939 7,145,607 4,262,609 100.00%
Proposal 4 To amend the sub-adviser fee schedule in the Sub-Adviser
- ---------- Agreement between Allmerica Investment Management Company, Inc.
and Nicholas-Applegate Capital Management, L.P. relating to the
Select Aggressive Growth Fund:
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- --------- ---------- ------------
Select Aggressive Growth 211,648,040 3,985,212 7,723,105 100.00%
- -----------------------------------
F-11
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
Proposal 5 To amend the sub-adviser fee schedule in the Sub-Adviser
- ---------- Agreement between Allmerica Investment Management Company,
Inc. and Janus Capital Corporation relating to the Select
Capital Appreciation Fund:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Select Capital Appreciation 114,086,423 3,046,035 3,778,346 100.00%
</TABLE>
Proposal 6 To approve an arrangement that would permit the Invesment
- ---------- Manager of the Trust to enter into and materially amend sub-
advisory agreements with non-affiliated sub-advisers without
obtaining shareholder approval relating to the Funds below:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Select Aggressive Growth 202,036,453 13,599,240 7,720,664 100.00%
Select Capital Appreciation 109,284,768 7,510,075 4,115,960 100.00%
Select Value Opportunity 79,769,789 7,689,239 2,213,323 100.00%
Select International Equity 209,996,997 14,324,566 8,324,373 100.00%
Select Growth 179,696,429 11,284,076 8,477,958 100.00%
Growth 212,156,478 22,705,825 9,759,733 100.00%
Select Growth and Income 215,564,920 15,676,684 10,221,371 100.00%
Select Income 75,878,564 3,137,643 6,267,075 100.00%
</TABLE>
Proposal 7 To change the status of the investment objective of each Fund
- ---------- of the Trust from fundamental to non-fundamental:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
--------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Select Aggressive Growth 199,892,080 15,656,151 7,808,127 100.00%
Select Capital Appreciation 108,482,011 8,778,200 3,650,593 100.00%
Select Value Opportunity 78,734,323 8,501,412 2,436,617 100.00%
Select International Equity 207,396,063 16,754,817 8,495,056 100.00%
Select Growth 176,524,469 14,761,165 8,172,830 100.00%
Growth 207,638,770 27,600,709 9,382,558 100.00%
Equity Index 76,633,944 7,821,946 2,211,602 100.00%
Select Growth and Income 212,516,025 19,542,689 9,404,262 100.00%
Select Income 75,285,571 3,586,410 6,411,300 100.00%
Investment Grade Income 136,062,950 12,797,731 4,822,474 100.00%
Government Bond 38,759,285 4,497,417 1,465,727 100.00%
Money Market 215,353,047 18,194,661 13,495,093 100.00%
</TABLE>
F-12
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
Proposal 8 To revise the investment restrictions of each Fund of the Trust
- ---------- to permit the Fund to borrow money for temporary purposes when the
aggregate amount borrowed does not exceed 33 1/3% of the value of
the Fund's total assets at the time such borrow is made:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Select Aggressive Growth 191,754,480 23,649,250 7,952,627 100.00%
Select Capital Appreciation 102,008,709 14,085,611 4,816,484 100.00%
Select Value Opportunity 74,750,173 12,319,606 2,602,573 100.00%
Select International Equity 198,505,712 24,736,579 9,403,645 100.00%
Select Growth 168,311,152 22,211,984 8,935,328 100.00%
Growth 199,904,328 34,837,588 9,880,121 100.00%
Equity Index 72,418,535 11,777,318 2,471,639 100.00%
Select Growth and Income 203,469,878 26,878,157 11,114,941 100.00%
Select Income 73,158,611 5,875,439 6,249,232 100.00%
Investment Grade Income 131,877,958 17,190,516 4,614,681 100.00%
Government Bond 37,150,526 6,044,470 1,527,433 100.00%
Money Market 202,129,620 30,802,423 14,110,757 100.00%
</TABLE>
Proposal 9 To change the status of the investment restrictions of each fund
- ---------- of the Trust relating to financial futures and related options
from fundamental to non-fundamental:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Select Aggressive Growth 197,382,652 17,966,640 8,007,066 100.00%
Select Capital Appreciation 107,113,209 9,612,369 4,185,225 100.00%
Select Value Opportunity 78,077,748 8,978,651 2,615,953 100.00%
Select International Equity 205,428,153 18,335,742 8,882,040 100.00%
Select Growth 174,587,490 16,485,541 8,385,432 100.00%
Growth 205,011,067 29,451,137 10,159,833 100.00%
Equity Index 75,341,614 9,159,968 2,165,910 100.00%
Select Growth and Income 210,679,129 20,453,649 10,330,197 100.00%
Select Income 74,957,488 4,092,658 6,233,135 100.00%
Investment Grade Income 135,817,086 13,212,694 4,653,375 100.00%
Government Bond 38,525,164 4,814,161 1,383,104 100.00%
Money Market 212,675,590 20,750,585 13,616,626 100.00%
</TABLE>
Proposal 10 To revise the investment policies of the Select Value Opportunity
- ----------- Fund to permit the Fund to engage in financial futures and related
options transactions:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Select Value Opportunity 78,603,876 8,271,306 2,797,170 100.00%
</TABLE>
Proposal 11 To change the status of certain investment policies of the Growth
- ----------- Fund relating to the types of securities in which the Fund may
invest and related limitations, if any, from fundamental to non-
fundamental:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Growth 208,052,803 26,700,986 9,868,247 100.00%
</TABLE>
F-13
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
Proposal 12 To revise the investment restrictions of the funds listed below to
- ----------- permit such Funds to invest in securities which are restricted as
to disposition under Federal securities laws:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Growth 211,745,319 22,642,962 10,233,756 100.00%
Equity Index 76,319,871 7,976,776 2,370,845 100.00%
Investment Grade Income 137,897,454 11,258,361 4,527,340 100.00%
Government Bond 39,298,062 3,968,040 1,456,327 100.00%
Money Market 215,152,360 18,978,223 12,912,217 100.00%
</TABLE>
At a special meeting of shareholders of the Select Value Opportunity Fund held
on December 30, 1997, shareholders approved the new Sub-Adviser Agreement
between Allmerica Investment Management Company, Inc. and Cramer Rosenthal
McGlynn, LLC. The results were as follows:
<TABLE>
<CAPTION>
Shares Shares Shares Percent of
For Against Abstaining Shares Voted
---------- --------- ---------- ------------
<S> <C> <C> <C>
96,229,373 3,268,212 4,051,344 100.00%
</TABLE>
F-14
<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 Portfolios and are 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 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 contract. Separate account
financial statements will no longer be provided.
F-15
<PAGE>
The Fulcrum Fund(SM) Variable Annuity
The Fulcrum Fund(SM) Variable Annuity is issued by Allmerica Financial Life
Insurance and Annuity Company and is distributed by Allmerica Investments, Inc.
To be preceded or accompanied by the current prospectus. Read it carefully
before investing.
[LOGO OF ALLMERICA FINANCIAL(R) APPEARS HERE]
First Allmerica Financial Life Insurance Company . Allmerica Financial Life
Insurance and Annuity Company (licensed in all states except NY & HI) .
Allmerica Trust Company, N.A. . Allmerica Investments, Inc. . Allmerica
Investment Management Company., Inc. . The Hanover Insurance Company . AMGRO,
Inc. . Allmerica Financial Alliance Insurance Company . Allmerica Asset
Management, Inc. . Allmerica Financial Benefit Insurance Company . Sterling Risk
Management Services, Inc. . Citizens Corporation . Citizens Insurance Company of
America . Citizens Management Inc.
440 Lincoln Street, Worcester, Massachusetts 01653
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