<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1998
File Nos. 811-4138 and 2-94067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 36 [ ]
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 37
----
ALLMERICA INVESTMENT TRUST
--------------------------
(Name of Registrant)
440 Lincoln Street
WORCESTER, MASSACHUSETTS 01653
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(508) 855-1000
(Names and Addresses of Agents for Service:)
George M. Boyd, Esq. Gregory D. Sheehan, Esq.
Allmerica Financial Ropes & Gray
440 Lincoln Street One International Place
Worcester, MA 01653 Boston, Massachusetts 02110
Approximate Date of Proposed Public Offering as soon after filing as practicable
-----------------------------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
- ----
X on May 1, 1998 pursuant to paragraph (b)
- ----
60 days after filing pursuant to paragraph (a)(1)
- ----
on (date) pursuant to paragraph (a)(1)
- ----
75 days after filing pursuant to paragraph (a)(2)
- ----
on (date) pursuant to paragraph (a)(2) of rule 485.
- ----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
- ----
previously filed post-effective amendment.
Title of Securities Being Registered Shares of Beneficial Interest
-----------------------------
<PAGE>
ALLMERICA INVESTMENT TRUST
Cross-Reference Sheet
<TABLE>
<CAPTION>
Item No. of Form N-1A Prospectus Caption
- --------------------- ------------------
<S> <C>
1............................ Prospectus Cover Page
2............................ Prospectus Cover Page, Management Fees and Expenses, Sale and
Redemption of Shares
3............................ Financial Highlights
4 (a)........................ Prospectus Cover Page, Organization and Capitalization of the
Trust, What are the Investment Objectives and Policies?
4(b) and (c)................. What are the Investment Objectives and Policies?, Investment
Restrictions, Certain Investment Strategies and Policies
5(a)......................... How are the Funds Managed?
5 (b)........................ How are the Funds Managed?, Management Fees and Expenses, What
are the Investment Objectives and Policies?
5(c)......................... Fund Manager Information
5(d) and (e)................. How are the Funds Managed?
5(f) ........................ Not Applicable
5(g) ........................ Brokerage Allocation (Statement of Additional Information)
6(a) and (b) ................ Organization and Capitalization of the Trust
6(c) and (d) ................ Not Applicable
6(e)......................... Cover Page, Organization and Capitalization of the Trust
6(f) and (g)................. Taxes and Distributions to Shareholders
6(h)......................... Not Applicable
7............................ Sale and Redemption of Shares
7(a) ........................ Sale and Redemption of Shares
7(b) ........................ How are Shares Valued?
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Item No. of Form N-1A Prospectus Caption
- --------------------- ------------------
<S> <C>
7(c)-(g)..................... Not Applicable
8(a)......................... Sale and Redemption of Shares
8(b)-(d)..................... Not Applicable
9............................ Not Applicable
Caption in Statement of Additional Information
----------------------------------------------
10(a) and (b)................ Cover Page
11........................... Table of Contents
12........................... General Information, Organization of the Trust
13(a)........................ Investment Objectives and Policies
13(b) ....................... Investment Restrictions
13(c) ....................... Investment Objectives and Policies, Investment Restrictions
13(d)........................ Portfolio Turnover
14(a) and (b)................ Management of Allmerica Investment Trust
14(c) ....................... Management of Allmerica Investment Trust
15(a) and (b)................ Control Person and Principal Holder of Securities
15 (c)....................... Not Applicable
16(a) and (b) ............... Investment Management and Other Services
16(c)-(g).................... Not Applicable
16(h) ....................... Investment Management and Other Services, Organization of the
Trust
16(i) ....................... Not Applicable
17(a)-(d).................... Brokerage Allocation
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Item No. of Form N-1A Caption in Statement of Additional Information
- --------------------- ----------------------------------------------
<S> <C>
17(e)........................ Not Applicable
18........................... Not Applicable
19(a) and (b)................ Purchase, Redemption and Pricing of Securities Being Offered
19(c) ....................... Not Applicable
20........................... Not Applicable
21........................... Investment Management and Other Services
22........................... Performance
23 .......................... Financial Statements
</TABLE>
4
<PAGE>
PART A:
- ------
5
<PAGE>
ALLMERICA INVESTMENT TRUST
440 Lincoln Street
Worcester, Massachusetts 01653
(508) 855-1000
Allmerica Investment Trust (the "Trust") is a professionally managed, open-end
investment company designed to provide the underlying investment vehicles for
insurance-related accounts. The ten separate portfolios of the Trust
(collectively, the "Funds" and individually, the "Fund") currently offered by
this Prospectus are as follows:
SELECT EMERGING MARKETS FUND
SELECT AGGRESSIVE GROWTH FUND
SELECT CAPITAL APPRECIATION FUND
SELECT VALUE OPPORTUNITY FUND
SELECT INTERNATIONAL EQUITY FUND
SELECT GROWTH FUND
SELECT STRATEGIC GROWTH FUND
SELECT GROWTH AND INCOME FUND
SELECT INCOME FUND
MONEY MARKET FUND
Currently, shares of each Fund may be purchased only by separate accounts
("Separate Accounts") established by First Allmerica Financial Life Insurance
Company ("First Allmerica") or Allmerica Financial Life Insurance and Annuity
Company ("Allmerica Financial Life"), an indirect, wholly-owned subsidiary of
First Allmerica, for the purpose of funding variable annuity contracts and
variable life insurance policies. A particular Fund may not be available under
the Allmerica Select Variable Annuity contract or Allmerica Select Life policy
which you have chosen. The Prospectus of the specific insurance product you
have chosen will indicate which Funds are available and should be read in
conjunction with this Prospectus. Inclusion in this Prospectus of a Fund which
is not available under your contract or policy is not to be considered a
solicitation.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Certain additional
information is contained in the Statement of Additional Information dated May 1,
1998 (the "SAI"), which has been filed with the Securities and Exchange
Commission ("SEC"), is incorporated herein by reference and is available upon
request without charge from Allmerica Investments, Inc. ("Distributor"), 440
Lincoln Street, Worcester, MA 01653, (508) 855-1000.
Investment in the Funds is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Money Market Fund will be able
to maintain a stable net asset value of $1.00 per share.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY, AND ARE SUBJECT TO VARIOUS RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DATED MAY 1, 1998
--------------------------
Allmerica Investment Trust
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS................................................. 3
HOW ARE THE FUNDS MANAGED?........................................... 8
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?..................... 9
Select Emerging Markets Fund....................................... 9
Select Aggressive Growth Fund...................................... 10
Select Capital Appreciation Fund................................... 11
Select Value Opportunity Fund...................................... 12
Select International Equity Fund................................... 13
Select Growth Fund................................................. 13
Select Strategic Growth Fund....................................... 14
Select Growth and Income Fund...................................... 15
Select Income Fund................................................. 15
Money Market Fund.................................................. 16
MANAGEMENT FEES AND EXPENSES......................................... 17
FUND MANAGER INFORMATION............................................. 21
HOW ARE SHARES VALUED?............................................... 23
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS.............................. 23
SALE AND REDEMPTION OF SHARES........................................ 24
HOW IS PERFORMANCE DETERMINED?....................................... 24
ORGANIZATION AND CAPITALIZATION OF THE TRUST......................... 25
INVESTMENT RESTRICTIONS.............................................. 25
CERTAIN INVESTMENT STRATEGIES AND POLICIES........................... 25
APPENDIX............................................................. 32
</TABLE>
2
- --------------------------
Allmerica Investment Trust
<PAGE>
FINANCIAL HIGHLIGHTS
The following Financial Highlights have been audited by Price Waterhouse LLP,
independent accountants of the Trust. This information should be read in
conjunction with the financial statements and notes thereto which appear in the
Policyowner's annual report for the year ended December 31, 1997 ("Annual
Report") and which are incorporated by reference in the Trust's SAI. Further
information about the performance of the Funds is contained in the Annual Report
which may be obtained without charge from the Trust, 440 Lincoln Street,
Worcester, MA 01653, (508) 855-1000.
3
--------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(2)/ INVESTMENTS OPERATIONS
- --------------------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $2.037 $(0.009) $ 0.387 $ 0.378
1996 1.848 (0.009) 0.351 0.342
1995 1.397 (0.001) 0.452 0.451
1994 1.431 (0.002) (0.032) (0.034)
1993 1.197 0.001 0.234 0.235
1992 1.000 0.001 0.197 0.198
Select Capital
Appreciation Fund/(1)/
1997 1.485 (0.005) 0.218 0.213
1996 1.369 (0.003) 0.124 0.121
1995 1.000 (0.001) 0.397 0.396
Select Value
Opportunity Fund/(1)/
1997 1.511 0.010 0.364 0.374
1996 1.238 0.011 0.342 0.353
1995 1.089 0.009 0.183 0.192
1994 1.170 0.005 (0.081) (0.076)
1993 1.000 0.002 0.176 0.178
Select International
Equity Fund/(1)/
1997 1.356 0.015 0.049 0.064
1996 1.136 0.011 0.238 0.249
1995 0.963 0.013 0.176 0.189
1994 1.000 0.003 (0.038) (0.035)
Select Growth
Fund/(1)/
1997 1.430 0.006 0.480 0.486
1996 1.369 0.005 0.297 0.302
1995 1.099 -- 0.270 0.270
1994 1.119 0.003 (0.020) (0.017)
1993 1.111 0.001 0.008 0.009
1992 1.000 0.001 0.111 0.112
</TABLE>
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS
------------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS RETURN IN
YEAR ENDED INVESTMENT CAPITAL IN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
- --------------------------- ----------- -------------- ----------------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $ -- $(0.182) $(0.008)/(3)/ $-- $(0.190) $ 0.188
1996 -- (0.153) -- -- (0.153) 0.189
1995 -- -- -- -- -- 0.451
1994 -- -- -- -- -- (0.034)
1993 (0.001) -- -- -- (0.001) 0.234
1992 (0.001) -- -- -- (0.001) 0.197
Select Capital
Appreciation Fund/(1)/
1997 -- -- -- -- -- 0.213
1996 -- (0.005) -- -- (0.005) 0.116
1995 -- (0.027) -- -- (0.027) 0.369
Select Value
Opportunity Fund/(1)/
1997 (0.010) (0.249) -- -- (0.259) 0.115
1996 (0.011) (0.069) -- -- (0.080) 0.273
1995 (0.009) (0.033) (0.001)/(3)/ -- (0.043) 0.149
1994 (0.005) -- -- -- (0.005) (0.081)
1993 (0.002) (0.006) -- -- (0.008) 0.170
Select International
Equity Fund/(1)/
1997 (0.019) (0.046) (0.014)/(4)/ -- (0.079) (0.015)
1996 (0.012) (0.003) (0.014)/(4)/ -- (0.029) 0.220
1995 (0.011) (0.005) -- -- (0.016) 0.173
1994 (0.001) (0.001) -- -- (0.002) (0.037)
Select Growth
Fund/(1)/
1997 (0.006) (0.099) -- -- (0.105) 0.381
1996 (0.005) (0.236) -- -- (0.241) 0.061
1995 -- -- -- -- -- 0.270
1994 (0.003) -- -- -- (0.003) (0.020)
1993 (0.001) -- -- -- (0.001) 0.008
1992 (0.001) -- -- -- (0.001) 0.111
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
(A) Including reimbursements, waivers, 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) The Select Aggressive Growth Fund commenced operations on August 21, 1992.
The Select Capital Appreciation Fund commenced operations on April 28, 1995.
The Select Value Opportunity Fund (formerly the Small-Mid Cap Value Fund)
commenced operations on April 30, 1993 and changed investment sub-adviser on
January 1, 1997. The Select International Equity Fund commenced operations
on May 2, 1994. The Select Growth Fund commenced operations on August
21, 1992 and changed investment sub-adviser on July 1, 1996.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $(0.010) in 1997, $0.000 in 1993 and
$(0.001) in 1992 for Select Aggressive Growth Fund; $(0.001) in 1995 for
Select Capital Appreciation Fund; $0.009 in 1997, $0.010 in 1996, $0.005 in
1994 and $(0.001) in 1993 for Select Value Opportunity Fund; $0.015 in 1997,
$0.011 in 1996 and $0.002 in 1994 for Select International Equity Fund; and
$0.006 in 1997, $0.005 in 1996, $0.001 in 1993 and $0.000 in 1992 for Select
Growth Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
4
- --------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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>
$ 2.225 18.71% $604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95% $0.0617
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113% 0.0597
1.848 32.28% 254,872 (0.07)% 1.09% -- 1.09% 1.00% 1.00% 104% --
1.397 (2.31)% 136,573 (0.21)% 1.16% -- 1.16% 1.00% 1.00% 100% --
1.431 19.51% 66,251 0.10% 1.19% -- 1.23% 1.00% 0.96% 76% --
1.197 19.85%** 9,270 0.34%* 1.35%* -- 1.88%* N/A N/A 33% --
1.698 14.28% 240,526 (0.38)% 1.13% 1.13% 1.13% 0.98% 0.98% 133% 0.0444
1.485 8.80% 142,680 (0.32)% 1.13% 1.13% 1.13% 1.00% 1.00% 98% 0.0414
1.369 39.56%** 41,376 (0.25)%* 1.35%* -- 1.42%* 1.00%* 0.93%* 95% --
1.626 24.85% 202,139 0.73% 0.98% 1.04% 1.06% 0.92% 0.90% 110% 0.0587
1.511 28.53% 113,969 0.91% 0.95% 0.97% 0.97% 0.85% 0.85% 20% 0.0497
1.238 17.60% 64,575 0.86% 1.01% -- 1.01% 0.85% 0.85% 17% --
1.089 (6.51)% 41,342 0.64% 1.08% -- 1.09% 0.85% 0.84% 4% --
1.170 17.74%** 12,731 0.52%* 1.22%* -- 2.03%* 0.85%* 0.04%* 8% --
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20% 0.0229
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18% 0.0248
1.136 19.63% 104,312 1.68% 1.24% -- 1.24% 1.00% 1.00% 24% --
0.963 (3.49)%** 40,498 0.87%* 1.50%* -- 1.78%* 1.00%* 0.72%* 19% --
1.811 34.06% 470,356 0.42% 0.91% 0.93% 0.93% 0.85% 0.85% 75% 0.0470
1.430 22.02% 228,551 0.38% 0.92% 0.93% 0.93% 0.85% 0.85% 159% 0.0457
1.369 24.59% 143,125 0.02% 0.97% -- 0.97% 0.85% 0.85% 51% --
1.099 (1.49)% 88,263 0.37% 1.03% -- 1.03% 0.85% 0.85% 55% --
1.119 0.84% 53,854 0.15% 1.05% -- 1.08% 0.85% 0.82% 65% --
1.111 11.25%** 9,308 0.40%* 1.20%* -- 1.72%* N/A N/A 3% --
</TABLE>
5
--------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
-------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(2)/ INVESTMENTS OPERATIONS
- --------------------------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Select Growth and
Income Fund/(1)/
1997 $1.405 $0.020 $ 0.293 $ 0.313
1996 1.268 0.020 0.246 0.266
1995 1.027 0.019 0.290 0.309
1994 1.069 0.025 (0.018) 0.007
1993 0.990 0.023 0.079 0.102
1992 1.000 0.008 (0.009) (0.001)
Select Income Fund/(1)/
1997 0.995 0.060 0.028 0.088
1996 1.024 0.061 (0.029) 0.032
1995 0.930 0.060 0.095 0.155
1994 1.035 0.055 (0.105) (0.050)
1993 0.988 0.052 0.055 0.107
1992 1.000 0.018 (0.012) 0.006
Money Market
Fund
1997 1.000 0.053 -- 0.053
1996 1.000 0.052 -- 0.052
1995 1.000 0.057 -- 0.057
1994 1.000 0.039 -- 0.039
1993 1.000 0.030 -- 0.030
1992 1.000 0.037 -- 0.037
1991 1.000 0.060 -- 0.060
1990 1.000 0.078 -- 0.078
1989 1.000 0.086 -- 0.086
1988 1.000 0.071 -- 0.071
</TABLE>
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS
----------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS IN
YEAR ENDED INVESTMENT CAPITAL IN RETURN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
- --------------------------- ----------- -------------- ------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Select Growth and
Income Fund/(1)/
1997 $(0.020) $(0.146) $ -- $ -- $(0.166) $ 0.147
1996 (0.020) (0.109) -- -- (0.129) 0.137
1995 (0.019) (0.049) -- -- (0.068) 0.241
1994 (0.025) (0.017) (0.007)/(3)/ -- (0.049) (0.042)
1993 (0.023) -- -- -- (0.023) 0.079
1992 (0.008) (0.001) -- -- (0.009) (0.010)
Select Income Fund/(1)/ -- -- -- (0.061) 0.027
1997 (0.061) -- -- -- (0.061) (0.029)
1996 (0.061) -- (0.001)/(4)/ -- (0.061) 0.094
1995 (0.060) -- -- -- (0.055) (0.105)
1994 (0.055) (0.008) -- -- (0.060) 0.047
1993 (0.052) -- -- -- (0.018) (0.012)
1992 (0.018)
Money Market
Fund
1997 (0.053) -- -- -- (0.053) --
1996 (0.052) -- -- -- (0.052) --
1995 (0.057) -- -- -- (0.057) --
1994 (0.039) -- -- -- (0.039) --
1993 (0.030) -- -- -- (0.030) --
1992 (0.037) -- -- -- (0.037) --
1991 (0.060) -- -- -- (0.060) --
1990 (0.078) -- -- -- (0.078) --
1989 (0.086) -- -- -- (0.086) --
1988 (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) The Select Growth and Income Fund and Select Income Fund commenced
operations on August 21, 1992.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $0.019 in 1997, $0.019 in 1996, $0.023
in 1993 and $0.005 in 1992 for Select Growth and Income Fund; $0.060 in
1995, $0.055 in 1994, $0.050 in 1993, and $0.015 in 1992 for Select Income
Fund; and $0.030 in 1993 and $0.084(5) in 1998 for Money Market Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
(5) Unaudited.
6
- --------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-----------------------------------
NET ASSET NET ASSETS
VALUE END OF NET
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES
YEAR RETURN (000'S) INCOME (A)
---- ------ ------- ------ ---
<S> <C> <C> <C> <C>
$ 1.552 22.51% $473,552 1.34% 0.77%
1.405 21.26% 295,638 1.44% 0.80%
1.268 30.32% 191,610 1.69% 0.85%
1.027 0.73% 110,213 2.51% 0.91%
1.069 10.37% 60,518 2.73% 0.99%
0.990 (0.11)%** 7,302 3.20%* 1.10%*
1.022 9.17% 104,253 6.12% 0.72%
0.995 3.32% 77,498 6.29% 0.74%
1.024 16.96% 60,368 6.24% 0.79%
0.930 (4.82)% 40,784 6.07% 0.83%
1.035 10.95% 25,302 5.91% 0.91%
0.988 0.62%** 5,380 5.38%* 1.00%*
1.000 5.47% 260,620 5.33% 0.35%
1.000 5.36% 217,256 5.22% 0.34%
1.000 5.84% 155,211 5.68% 0.36%
1.000 3.93% 95,991 3.94% 0.45%
1.000 3.00% 71,052 2.95% 0.42%
1.000 3.78% 64,506 3.65% 0.44%
1.000 6.67% 39,909 5.98% 0.43%
1.000 8.63% 28,330 8.22% 0.42%
1.000 9.69% 12,060 8.62% 0.58%
1.000 7.30%(5) 7,156 7.13% 0.60%
</TABLE>
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------
PORTFOLIO AVERAGE
OPERATING EXPENSES MANAGEMENT FEES TURNOVER COMMISSIONS
(B) (C) GROSS NET RATE RATE/(D)/
--- --- ----- --- ---- ---------
<S> <C> <C> <C> <C> <C>
0.80% 0.80% 0.73% 0.73% 71% $0.0569
0.83% 0.83% 0.75% 0.75% 78% 0.0563
-- 0.85% 0.75% 0.75% 112% --
-- 0.91% 0.75% 0.75% 107% --
-- 1.03% 0.75% 0.71% 25% --
-- 2.37%* N/A N/A 4% --
0.72% 0.72% 0.59% 0.59% 79% --
0.74% 0.74% 0.60% 0.60% 108% --
-- 0.80% 0.60% 0.59% 131% --
-- 0.85% 0.60% 0.58% 105% --
-- 1.08% 0.60% 0.43% 171% --
-- 1.67%* N/A N/A 119% --
0.35% 0.35% 0.27% 0.27% N/A --
0.34% 0.34% 0.28% 0.28% N/A --
-- 0.36% 0.29% 0.29% N/A --
-- 0.45% 0.31% 0.31% N/A --
-- 0.43% 0.32% 0.31% N/A --
-- 0.44% N/A N/A N/A --
-- 0.43% N/A N/A N/A --
-- 0.42% N/A N/A N/A --
-- 0.58% N/A N/A N/A --
-- 0.71% N/A N/A N/A --
</TABLE>
7
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Allmerica Investment Trust
<PAGE>
HOW ARE THE FUNDS MANAGED?
The overall responsibility for the supervision of the affairs of the Trust
vests in the Board of Trustees of the Trust which meets on a quarterly basis.
Allmerica Financial Investment Management Services, Inc. (the "Manager") is
responsible for the management of the Trust's day-to-day business affairs and
has general responsibility for the management of the investments of the Funds.
The Manager, at its expense, has contracted with certain Sub-Advisers to manage
the investments of the Funds subject to the requirements of the Investment
Company Act of 1940, as amended (the "1940").
The Manager is an indirect, wholly-owned subsidiary of Allmerica Financial
Corporation ("AFC"), a Delaware holding company for a group of affiliated
companies, the largest of which is First Allmerica, a life insurance company
organized in Massachusetts in 1844. The Manager, AFC and First Allmerica are
located at 440 Lincoln Street, Worcester, Massachusetts 01653. The Manager
succeeded Allmerica Investment Management Company, Inc. ("AIMCO") as manager of
the Trust on April 16, 1998. As part of a reorganization, AIMCO transferred to
the Manager that portion of its business relating to the provision of investment
advisory services exclusively to investment companies registered under the 1940
Act such as the Trust while AIMCO retained its financial planning business. The
same personnel and procedures previously employed by AIMCO to service the Trust
will be used by the Manager. The Manager also serves as investment manager of
the Palladian Trust, another open-end investment company.
The Manager has entered into Sub-Adviser Agreements for the management of the
investments of each of the Funds. Each Sub-Adviser, which has been selected on
the basis of various factors, including management experience, investment
techniques, and staffing, is authorized to engage in portfolio transactions on
behalf of the applicable Fund subject to such general or specific instructions
as may be given by the Trustees and/or the Manager. The terms of a Sub-Adviser
Agreement cannot be changed materially without the approval of a majority
interest of the shareholders of the affected Fund. The Trust and Manager have
filed an application with the SEC for an order of exemption that would permit
the Manager to enter into and materially amend sub-advisory agreements with non-
affiliated Sub-Advisers without obtaining shareholder approval. If the requested
relief is granted by the SEC, the Manager will have the ability, subject to
approval of the Trustees, to hire and terminate Sub-Advisers to the Funds and to
change materially the terms of the Sub-Advisory Agreements, including the
compensation paid to the Sub-Advisers, without the approval of the shareholders
of the Funds. The Sub-Advisers have been selected by the Manager and Trustees in
consultation with RogersCasey & Associates, Inc. ("RogersCasey"), a leading
pension consulting firm. RogersCasey is a wholly-owned subsidiary of BARRA, Inc.
The cost of such consultation is borne by the Manager.
RogersCasey provides consulting services to pension plans representing over
$500 billion in total assets and, in its consulting capacity, monitors the
investment performance of over 1,800 investment advisers. From time to time,
specific clients of RogersCasey and the Sub-Advisers will be named in sales
materials. At times, RogersCasey assists in the development of asset allocation
strategies which may be used by shareholders in the diversification of their
portfolios across different asset classes.
Ongoing performance of the Sub-Advisers is reviewed and evaluated by a
committee of the Board of Trustees, which also includes members who are officers
of First Allmerica or its affiliates, in consultation with RogersCasey.
Historical performance data for all Funds is set forth under "Financial
Highlights." The Manager is responsible for the payment of all fees to the Sub-
Advisers. The Sub-Advisers for each of the Funds are as follows:
<TABLE>
<CAPTION>
<S> <C>
Select Emerging Markets Fund Schroder Capital Management International Inc.
Select Aggressive Growth Fund Nicholas-Applegate Capital Management, L.P.
Select Capital Appreciation Fund T. Rowe Price Associates, Inc.*
Select Value Opportunity Fund Cramer Rosenthal McGlynn, LLC**
Select International Equity Fund Bank of Ireland Asset Management (U.S.) Limited
Select Growth Fund Putnam Investment Management, Inc.
Select Strategic Growth Fund Cambiar Investors, Inc.
Select Growth and Income Fund John A. Levin & Co., Inc.
Select Income Fund Standish, Ayer & Wood, Inc.
Money Market Fund Allmerica Asset Management, Inc.
</TABLE>
----------------------------------------
* T. Rowe Price Associates, Inc. assumed Sub-Adviser responsibilities from
Janus Capital Corporation on April 1, 1998. The Sub-Adviser Agreement
between T. Rowe Price Associates, Inc. and the Manager is subject to
shareholder approval at a meeting scheduled for June 3, 1998.
** Cramer Rosenthal McGlynn, LLC assumed Sub-Adviser responsibilities from CRM
Advisors, LLC on January 2, 1998.
8
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Allmerica Investment Trust
<PAGE>
For a sample listing of certain of the Sub-Advisers' clients, see "Investment
Management and Other Services" in the SAI. For more information on each of the
Sub-Advisers, see "What Are the Investment Objectives and Policies?" and "Fund
Manager Information."
The Manager also 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 each of the Funds and is entitled to
receive an administrative fee and certain out-of-pocket expenses. The Manager is
responsible for the payment of the administrative fee to Investor Services
Group.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?
Each Fund has a separate investment objective and policies designed to meet
different investment and financial needs, as described below. There is no
assurance that a Fund will achieve its investment objective.
A Fund's investment objective and investment policies are not fundamental and
may be changed without shareholder approval.
SELECT EMERGING MARKETS FUND
Investment Objective: The Select Emerging Markets Fund seeks long-term growth
of capital by investing in the world's emerging markets.
Sub-Adviser: Schroder Capital Management International Inc. ("SCMI") serves as
Sub-Adviser to the Select Emerging Markets Fund. SCMI, a wholly-owned U.S.
subsidiary of Schroders U.S. Holdings Inc., the indirect wholly-owned U.S.
subsidiary of Schroders plc, was organized in 1980 as an investment adviser and
had more than $25 billion in assets under management as of December 31, 1997.
SCMI provides global equity and fixed income management services to North
American state and local governments, corporations, endowments, foundations,
investment companies and family trusts. Its main U.S. offices are located at
787 Seventh Avenue, New York, New York 10019.
Investment Policies: Under normal circumstances, the Fund invests at least 65%
of its total assets in equity securities of companies that are domiciled or
primarily doing business in developing countries with emerging markets, which
include those in the Morgan Stanley Capital International Emerging Markets Free
Index ("MSCI EMF"). Investments are not limited to one or more specific regions
because the Sub-Adviser believes that emerging market investment opportunities
can be found throughout the world. The Fund ordinarily maintains investments in
at least five developing countries.
A company is considered to be domiciled in a developing country if it is
organized under the laws of, or has a principal office in, that country. A
company is considered as primarily doing business in a developing country if (i)
the company derives at least 50% of its gross revenues or profits from either
goods or services produced or sold in the developing country or (ii) at least
50% of the company's assets are situated in the developing country.
The Fund may invest in the following types of equity securities: common stock,
preferred stock, securities convertible into common stock, rights and warrants
to acquire such securities and substantially similar forms of equity with
comparable risk characteristics.
The Fund invests in those emerging markets that the Sub-Adviser believes have
strongly developing economies and potential for long-term future growth. In
selecting securities for investment in the Fund, the Sub-Adviser assesses the
general attractiveness of specific countries based on an analysis of various
factors, including political stability, financial practices, economic prospects,
interest rates and inflation, general market valuations and potential currency
movements. Investments are made in those companies that the Sub-Adviser
believes are best positioned and managed to achieve above-average growth.
The Fund may also invest up to 35% of its total assets in debt securities of
government or corporate issuers in emerging markets, equity and debt securities
of issuers in developed countries, including the United States, and cash and
money market instruments. Some or all of the debt securities held by the Fund
may be rated below investment grade. These securities, commonly known as "junk
bonds", involve significant risks as discussed under "Certain Investment
Strategies and Policies-High Yield Securities." Emerging market debt securities
often are rated below investment grade or not rated by U.S. rating agencies.
Pending investment of proceeds from new sales of Fund shares or to meet daily
cash needs, the Fund may hold cash and money market instruments.
The Sub-Adviser may employ a temporary defensive strategy if deemed by it to
be appropriate due to economic or political conditions in emerging markets. When
using a defensive strategy, the Fund may invest up to 100% of its assets in
cash, high-quality
9
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Allmerica Investment Trust
<PAGE>
debt securities or money market instruments of U.S. or foreign issuers. In
addition, most or all of its investments may be made in the United States and in
U.S. dollars for temporary defensive purposes.
The Fund may invest up to 15% of its net assets in securities which are
illiquid and may engage in the options and futures strategies and currency
hedging techniques described under "Certain Investment Strategies and Policies-
Options and Futures Transactions" and "Hedging Techniques and Investment
Practices."
Investing in the Fund entails a substantial degree of risk. Investors are
strongly advised to consider carefully the special risks involved in investing
in emerging markets, which are in addition to the usual risks of investing in
developed countries around the world. See "Certain Investment Strategies and
Policies-Foreign Securities." The portfolio turnover rate for the Fund may vary
greatly from year to year.
SELECT AGGRESSIVE GROWTH FUND
Investment Objective: The Select Aggressive Growth Fund seeks above-average
capital appreciation by investing primarily in common stocks of companies which
are believed to have significant potential for capital appreciation.
Sub-Adviser: Nicholas-Applegate Capital Management, L.P. ("NACM") serves as Sub-
Adviser to the Select Aggressive Growth Fund. NACM is an investment manager
supervising accounts with assets totaling approximately $30 billion in total
assets as of December 31, 1997. NACM's clients are primarily major corporate
employee benefit funds, public employee retirement plans, foundations and
endowment funds, investment companies and individuals. Founded in 1984, NACM is
located at 600 West Broadway, Suite 2900, San Diego, California 92101.
Investment Policies: Under normal circumstances, at least 65% of the assets of
the Select Aggressive Growth Fund will be invested in equity securities
consisting of common stocks, securities convertible into common stocks
(including bonds, notes and preferred stocks), and warrants. The Fund's assets
may also be invested in other debt securities and preferred stocks when such
securities are believed appropriate in light of the Fund's investment objective
and market conditions.
The selection of securities is made solely on the basis of their potential for
capital appreciation. Dividend and interest income from portfolio securities, if
any, is incidental to the Fund's investment objective. While investments may be
made in well-known and established companies, a significant portion of the
Fund's investments is expected to be in securities of newer and relatively
unseasoned companies or companies which represent new or changing industries.
At any given point, a substantial portion of the Fund's equity investments may
be in securities which are not listed for trading on national securities
exchanges and which, although publicly traded, may be less liquid than
securities issued by larger, more seasoned companies which trade on national
securities exchanges. Up to 15% of the Fund's net assets may be invested in
securities which are illiquid.
Securities of newer companies may be closely held with only a small portion of
their outstanding securities owned by the general public. Newer companies may
have relatively small revenue, lack depth of management and have a small share
of the market for their products or services; thus, they may be more vulnerable
to changes in economic conditions, market fluctuations and other factors
affecting the profitability or marketability of companies. Due to these and
other factors, the price movement of the securities held by the Fund can be
expected to be more volatile than is the case for the market as a whole, and the
net asset value of a share of the Fund may fluctuate significantly.
Consequently, the Fund should not be considered suitable for investors who are
unable or unwilling to assume the risk of loss inherent in an aggressive growth
portfolio, nor should investment in the Fund be considered a balanced or
complete investment program.
When NACM determines that market conditions warrant a temporary, defensive
position, the Fund may invest without limitation in high-grade, fixed-income
securities or U.S. Government securities or hold assets in cash or cash
equivalents. For hedging purposes, the Fund may engage in the options and
futures strategies described under "Certain Investment Strategies and Policies."
The Fund may also invest up to 25% of its assets in foreign securities (not
including its investments in American Depositary Receipts ("ADRs")).
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 95%. The portfolio turnover rate was the result of the Sub-
Adviser's investment process which typically results in above-average portfolio
turnover. Portfolio turnover rates may vary greatly from year to year. A high
portfolio turnover rate will likely result in greater brokerage costs to the
Fund.
10
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Allmerica Investment Trust
<PAGE>
SELECT CAPITAL APPRECIATION FUND
Investment Objective: The Select Capital Appreciation Fund seeks long-term
growth of capital in a manner consistent with the preservation of capital.
Realization of income is not a significant investment consideration and any
income realized on the Fund's investments will be incidental to its primary
objective.
Sub-Adviser: T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as Sub-
Adviser to the Select Capital Appreciation Fund. Founded in 1937, T. Rowe Price
is a publicly held company located at 100 East Pratt Street, Baltimore, Maryland
21202. As of December 31, 1997, T. Rowe Price and its affiliates managed assets
totaling approximately $125 billion for more than five million individual and
institutional investor accounts. T. Rowe Price International Series, Inc., an
investment company managed by a T. Rowe Price affiliate, is currently used as an
investment vehicle for certain insurance products sponsored by First Allmerica
and Allmerica Financial Life. In addition, a T. Rowe Price affiliate currently
serves as investment adviser to an investment account offered to institutional
clients of First Allmerica and Allmerica Financial Life.
Investment Policies: The Fund invests in common stocks when the Sub-Adviser
believes that the relevant market environment favors profitable investing in
those securities. The Fund pursues its objective normally by investing at least
50% of its equity assets in securities issued by medium-sized companies. Medium-
sized companies are those whose market capitalizations fall within the range of
companies in the S&P MidCap 400 Index (the "MidCap Index"). Companies whose
capitalization falls outside this range after the Fund's initial purchase
continue to be considered medium-sized companies for the purpose of this policy.
As of December 31, 1997, the MidCap Index included companies with
capitalizations between approximately $200 million to $12 billion. The range of
the MidCap Index is expected to change on a regular basis. Subject to the above
policy, the Fund may also invest in smaller or large issuers. Common stock
investments are selected in industries and companies that the Sub-Adviser
believes are experiencing favorable demand for their products and services and
which operate in a favorable competitive environment and regulatory climate. The
Sub-Adviser's analysis and selection process focuses on stocks with earnings
growth potential that may not be recognized by the market. Such securities are
selected solely for their capital growth potential; investment income is not a
consideration. Medium-sized companies may suffer more significant losses as well
as realize more substantial growth than larger issuers; thus, investments in
such companies tend to be more volatile and somewhat speculative.
The selection criteria for domestic issuers apply equally to stocks of foreign
issuers. In addition, factors such as expected levels of inflation; government
policies influencing business conditions; the outlook for currency relationships
and prospects for relative economic growth among countries, regions or
geographic areas may warrant greater consideration in selecting foreign stocks.
The Fund may invest without limitation in foreign securities. The Fund may
invest directly in foreign securities denominated in foreign currency and not
publicly traded in the United States. The Fund also may purchase foreign
securities through ADRs, European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs"), and other types of receipts or shares evidencing
ownership of the underlying foreign securities. In addition, the Fund may invest
indirectly in foreign securities through foreign investment funds or trusts
(including passive foreign investment companies). Certain state insurance
regulations may impose additional restrictions on the Fund's holdings of foreign
securities. Investments in foreign securities carry additional risks not present
in domestic securities. See "Certain Investment Strategies and Policies -
Foreign Securities."
Although the Fund normally invests primarily in common stocks, the Fund's cash
position may increase when the Sub-Adviser is unable to locate investment
opportunities with desirable risk/reward characteristics. The Fund also may
invest in preferred stocks, warrants, government securities, corporate bonds and
debentures, high-grade commercial paper, certificates of deposit, other debt
securities, or repurchase agreement or reverse repurchase agreements when the
Sub-Adviser perceives an opportunity for capital growth from such securities or
so that the Fund may receive a return on its idle cash. The Fund also may invest
up to 35% of its assets in such lower-rated securities commonly known as "junk
bonds." Fixed-income securities rated in the fourth highest grade by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Service, a
division of McGraw-Hill Companies, Inc. ("S&P"), (Baa and BBB, respectively) are
investment grade but are considered to have some speculative characteristics.
Lower-rated securities or "junk bonds" (rated Ba/BB or lower) involve the risks
discussed under "Certain Investment Strategies and Policies-High Yield
Securities." When the Fund invests in such securities, investment income will
increase and may constitute a large portion of the return realized by the Fund
and the Fund probably will not participate in market advances or declines to the
extent that it would if it remained fully invested in common stocks. Up to 15%
of the Fund's net assets may be invested in securities which are illiquid.
The Fund may invest in "special situations" from time to time. A special
situation arises when, in the opinion of the Sub-Adviser, the securities of a
particular issuer will be recognized and appreciate in value due to a specific
development with respect to that issuer. Developments creating a special
situation might include, among others, a new product or process, a technological
breakthrough, a management change or other extraordinary corporate event, or
differences in market supply of and demand for the security. Investment in
special situations may carry an additional risk of loss in the event that the
anticipated development does not occur or does not attract the expected
attention.
11
--------------------------
Allmerica Investment Trust
<PAGE>
For hedging purposes, the Fund may engage in options and futures strategies
and may utilize forward contracts, interest rate swaps and swap-related
products. See "Certain Investment Strategies and Policies." For the fiscal year
ended December 31, 1997, the portfolio turnover rate for the Fund was 133%. The
portfolio turnover rate was the result of the investment approach of Janus
Capital Corporation ("JCC"), the Fund's previous Sub-Adviser, which typically
resulted in above-average portfolio turnover as securities were sold when the
Sub-Adviser believed the reasons for their initial purchase were no longer valid
or when it believed that the sale of a security owned by the Fund and the
purchase of another security could enhance return. JCC was replaced by T. Rowe
Price as Sub-Adviser for the Fund effective April 1, 1998. Portfolio turnover
rates may vary greatly from year to year. A high portfolio turnover rate will
likely result in greater brokerage costs to the Fund.
SELECT VALUE OPPORTUNITY FUND (FORMERLY KNOWN AS "SMALL-MID CAP VALUE FUND")
Investment Objective: The Select Value Opportunity Fund seeks long-term growth
of capital by investing primarily in a diversified portfolio of common stocks of
small and mid-size companies, whose securities at the time of purchase are
considered by the Sub-Adviser to be undervalued.
Sub-Adviser: Cramer Rosenthal McGlynn, LLC ("CRM") serves as Sub-Adviser to the
Select Value Opportunity Fund. CRM provides advisory and sub-advisory services
to mutual funds with a total of over $500 million in assets under management as
of December 31, 1997. CRM is owned by its active investment professionals,
Cramer Rosenthal McGlynn, Inc. ("Cramer Rosenthal") and WT Investments, Inc., an
indirect, wholly-owned subsidiary of Wilmington Trust Corporation. Founded in
1973, Cramer Rosenthal had over $3.7 billion in assets under management as of
December 31, 1997 and provides investment advice to individuals, state and local
government agencies, pension and profit sharing plans, trusts, estates,
endowments and other organizations. The Sub-Adviser is located at 707
Westchester Avenue, White Plains, New York 10604.
Investment Policies: A stock will be considered to be attractively valued and,
therefore, eligible for investment in the Fund, if it is trading at a price
which the Sub-Adviser believes is reasonable relative to its own past valuation
history as well as compared to a large universe of stocks selected by the Sub-
Adviser, based on one or more of the following comparisons:
1. price relative to cash flow;
2. price relative to earnings;
3. price relative to sales; and
4. price relative to assets as measured by book value.
The Select Value Opportunity Fund generally intends to invest at least 65% of
its total assets in stocks of companies with market capitalization between $200
million and $5 billion at the time of purchase and which are listed on a
national or regional exchange or over-the-counter with prices quoted daily in
the financial press. The Fund at times may invest temporarily in preferred
stocks, bonds or other defensive issues. Normally, however, the Fund will
maintain at least 80% of the portfolio in common stocks. There are no
restrictions or guidelines regarding the investment of Fund assets in shares
listed on an exchange or traded over-the-counter. The Fund may invest up to 25%
of its assets in foreign securities (not including its investments in ADRs).
The Select Value Opportunity Fund seeks investment opportunities in companies
whose stocks are trading at attractive valuations relative to the market as a
whole. The most attractive of these companies often exist among those securities
which have been out of favor, where Wall Street coverage is limited and where
there is a degree of misunderstanding or neglect resulting in low expectations.
Value investing may reduce downside risk while offering potential for capital
appreciation as a company gains favor among other investors and its stock price
rises. The portfolio normally will be diversified among different industry
sectors, but is not an index approach. Stocks are bought as investments and
generally held for the long term, rather than as active trading vehicles.
Small-mid cap companies may present greater opportunities for capital
appreciation, but also may involve greater risk. Smaller cap companies, when
compared with larger cap companies, may be more dependent upon a single product,
have limited financial resources, have fewer securities outstanding, experience
greater price fluctuations and be somewhat less liquid than securities of larger
companies.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 110%. The portfolio turnover rate for the Fund may vary from year
to year. The Fund experienced such a rate of turnover due to a new Sub-Adviser
assuming responsibility for the Fund on January 1, 1997 and subsequently
repositioning the portfolio.
12
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Allmerica Investment Trust
<PAGE>
SELECT INTERNATIONAL EQUITY FUND
Investment Objective: The Select International Equity Fund seeks maximum long-
term total return (capital appreciation and income) primarily by investing in
common stocks of established non-U.S. companies.
Sub-Adviser: Bank of Ireland Asset Management (U.S.) Limited ("BIAM") serves as
Sub-Adviser for the Select International Equity Fund. BIAM is an indirect
wholly-owned subsidiary of Bank of Ireland. Its main offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. Its U.S. headquarters are at 20 Horseneck
Lane, Greenwich, CT 06830. Bank of Ireland provides investment management
services through a network of affiliated companies, including BIAM which
represents North American clients. As of December 31, 1997, Bank of Ireland
managed approximately $27 billion in global securities for Irish, United
Kingdom, European, Australian, South African, Canadian and U.S. clients.
Investment Policies: To achieve its objective, the Select International Equity
Fund will invest primarily in common stocks of established non-U.S. companies.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in the securities of companies domiciled in at least five foreign
countries, not including the United States. The Fund may also acquire fixed-
income debt securities. It will do so, at the discretion of BIAM, primarily for
defensive purposes. The Fund may invest up to 15% of its net assets in
securities which are illiquid.
The Fund's investments may include ADRs which may be sponsored or unsponsored
by the underlying issuer. The Fund may also utilize EDRs, which are similar to
ADRs, in bearer form, designed for use in the European securities market and
GDRs. Investments in foreign securities carry additional risks not present in
domestic securities. See "Certain Investment Strategies and Policies - Foreign
Securities." For hedging purposes, the Fund may engage in the options and
futures strategies described under "Certain Investment Strategies and Policies."
Certain state insurance regulations may impose additional restrictions on the
Fund's holdings of foreign securities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 20%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
SELECT GROWTH FUND
Investment Objective: The Select Growth Fund seeks to achieve long-term growth
of capital by investing in a diversified portfolio consisting primarily of
common stocks selected on the basis of their long-term growth potential.
Sub-Adviser: Putnam Investment Management, Inc. ("Putnam"), One Post Office
Square, Boston, Massachusetts 02109, serves as Sub-Adviser to the Select Growth
Fund. Putnam has been an investment manager since 1937. As of December 31, 1997,
Putnam and its affiliates had assets under management of approximately $235
billion. Putnam is a wholly-owned subsidiary of Putnam Investments, Inc., a
holding company which, other than a minority interest owned by employees, in
turn is wholly-owned by Marsh & McLennan Companies, Inc., a publicly-owned
holding company whose principal businesses are international insurance and
reinsurance brokerage, employee benefit consulting and investment management.
Investment Policies: The Select Growth Fund seeks to attain its objective by
investing in securities of companies that appear to have favorable long-term
growth characteristics. Potential for long-term growth is the determinative
factor in the selection of all portfolio securities. Although the Fund may
invest in dividend-paying stocks, the generation of current income is not an
objective of the Fund. Any income that is received is incidental to the Fund's
objective of long-term growth of capital.
When choosing securities for the portfolio, the Sub-Adviser for the Select
Growth Fund focuses on companies that display strong financial characteristics
and earnings growth potential whereas the Sub-Adviser for the Select Strategic
Growth Fund emphasizes value-oriented characteristics as well as growth
potential.
At least 65% of the Fund's assets under normal conditions will consist of
growth-oriented common stocks. The Fund may invest in common stocks of large
well-known companies as well as smaller growth companies, which generally
include companies with a market capitalization of $500 million or less ("smaller
growth companies"). The stocks of smaller growth companies may involve a higher
degree of risk than other types of securities and the price movement of such
securities can be expected to be more volatile than is the case of the market as
a whole. The Fund may hold stocks traded on one or more of the national
exchanges as well as in the over-the-counter markets. Because opportunities for
capital growth may exist not only in new and expanding areas of the economy but
also in mature and cyclical industries, the Fund's portfolio investments are not
limited to any particular type of company or industry. The Fund may also
purchase convertible bonds and preferred stocks, warrants and debt securities if
the Fund's Sub-Adviser believes they would help achieve the Fund's objective of
long-term growth.
13
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Allmerica Investment Trust
<PAGE>
The Fund may invest up to 35% of its assets in both higher-rated and lower-
rated fixed-income securities in seeking its objective of long-term growth of
capital. The Fund may invest up to 15% of its assets in lower-rated securities,
commonly known as "junk bonds," which involve risks discussed under "Certain
Investment Strategies and Policies-High Yield Securities." For more information
concerning the rating categories of corporate debt securities, see the Appendix
to the Prospectus.
When the Sub-Adviser determines that market conditions warrant a temporary,
defensive position, the Fund may invest without limitation in high-grade, fixed-
income securities or U.S. Government securities, or hold assets in cash or cash
equivalents. To the extent the Fund is so invested it is not achieving its
objective to the same degree as under normal conditions. For hedging purposes,
the Fund may engage in the options and futures strategies described under
"Certain Investment Strategies and Policies."
The Select Growth Fund's objective of seeking long-term growth of capital
means that its assets generally will be subject to greater risk than may be
involved in investing in securities that are not selected for growth potential.
The Fund may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 75%. The portfolio turnover for the Fund may vary greatly from year
to year.
SELECT STRATEGIC GROWTH FUND
Investment Objective: The Select Strategic Growth Fund seeks long-term growth of
capital by investing primarily in common stocks of established companies.
Sub-Adviser: Cambiar Investors, Inc. ("Cambiar"), 8400 East Prentice Avenue,
Suite 460, Englewood, Colorado 80111, serves as Sub-Adviser to the Select
Strategic Growth Fund. Cambiar is a registered investment adviser that began
operations in 1973 and became a wholly-owned subsidiary of United Asset
Management Corporation in 1990. Cambiar manages portfolios for major corporate
clients, pension plans and financial institutions. As of December 31, 1997,
Cambiar had approximately $1.9 billion in assets under management.
Investment Policies: Under normal market conditions, the Fund invests at least
65% of its total assets in the common stocks of companies with a market
capitalization of more than $1 billion at the time of investment. In seeking to
achieve its objective, the Fund emphasizes investments in common stocks of well-
known companies that the Sub-Adviser believes have the potential for earnings
growth and capital appreciation.
In selecting stocks for the Fund, the Sub-Adviser seeks quality companies
selling at low relative valuation levels, experiencing unrecognized positive
developments and exhibiting high appreciation potential. Many of the stocks in
the Fund's portfolio are expected to pay regular dividends. However, in the
evaluation of a company, greater consideration normally is given to growth
potential than to dividend income. The Sub-Adviser believes that it is more
important to evaluate a company's probable future earnings, dividends,
competitive position and financial strength than simply to seek current dividend
income. While emphasis is placed on a company's prospects for future growth,
the Fund seeks stocks which are attractively priced relative to their
anticipated long-term value.
In addition to common stocks, the Fund may purchase preferred stocks, debt
securities and securities convertible into or exchangeable for common stocks if
the Sub-Adviser believes they would help achieve the Fund's objective. The Fund
may invest up to 20% of its assets in foreign securities (not including its
investments in ADRs) and up to 15% of its net assets in securities which are
illiquid. The Fund also may engage in options and futures strategies. See
"Certain Investment Strategies and Policies."
The Fund at any time may hold a portion of its assets in cash or money market
instruments. When a defensive position is deemed advisable, the Fund may
temporarily invest without limit in high-grade debt securities, securities of
the U.S. Government and its agencies and money market instruments, or retain
cash.
The Fund is not restricted as to portfolio turnover and will make changes in
its portfolio from time to time based on market prices, economic conditions and
other factors. The Fund generally attempts to avoid speculative securities. The
companies in which the Fund invests typically have a large number of publicly
held shares and a high trading volume, resulting in a high degree of liquidity.
The value of the Fund's investments fluctuates in response to many factors,
including activities of individual companies and general market and economic
conditions. The Sub-Adviser attempts to reduce risk through diversification of
the Fund's portfolio and thorough
14
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Allmerica Investment Trust
<PAGE>
research. However, there are risks inherent in the investment in any security,
including shares of the Fund, and there is no guarantee that the Fund's
investment strategies will be successful.
SELECT GROWTH AND INCOME FUND
Investment Objective: The Select Growth and Income Fund seeks a combination of
long-term growth of capital and current income. The Fund will invest primarily
in dividend-paying common stocks and securities convertible into common stocks.
Sub-Adviser: John A. Levin & Co., Inc. ("JAL"), One Rockefeller Place, 25th
Floor, New York, New York 10020, serves as Sub-Adviser to the Select Growth and
Income Fund. JAL was founded as a Delaware corporation in 1982 and is wholly
owned by Baker, Fentress & Company, a non-diversified closed-end management
investment company registered under the 1940 Act. JAL had approximately $7.4
billion in assets under management as of December 31, 1997. JAL's clients
include U.S. and foreign individuals and their related trusts and charitable
organizations, private investment partnerships, college and university
endowments, foundations and public and private pension and profit sharing plans.
Investment Policies: To achieve its objective of long-term growth of capital and
current income, the Select Growth and Income Fund will invest primarily in
dividend-paying common stocks and securities convertible into common stocks. It
may invest in a wide range of equity securities, consisting of both dividend-
paying and non-dividend-paying common stocks, preferred stocks, securities
convertible into common and preferred stocks and warrants. These may include
securities of large well-known companies as well as smaller growth companies.
The securities of smaller growth companies involve certain risks as described
above under the "Select Growth Fund." The Fund may hold securities traded on one
or more of the national exchanges as well as in the over-the-counter markets.
The Fund's portfolio investments are not limited to any particular type of
company or industry. The Fund may purchase individual stocks not presently
paying dividends which offer opportunities for capital growth or future income,
provided that the Sub-Adviser believes the overall portfolio is positioned
appropriately to achieve its income objective. To achieve current income, the
Fund may invest up to 35% of its assets in both higher-rated and lower-rated
fixed-income securities, including not more than 15% in lower-rated securities,
commonly known as "junk bonds." In certain circumstances, fixed-income
securities may be purchased by the Fund for long-term growth potential.
(However, the Fund expects to have substantially less than 35% of its assets
invested in fixed-income securities in most circumstances.) Lower-rated fixed-
income securities involve risks discussed under "Certain Investment Strategies
and Policies-High Yield Securities." For more information concerning the rating
categories of corporate debt securities, see the Appendix to the Prospectus. The
dollar average weighted maturity of the Fund's fixed-income securities will vary
depending on, among other things, current market conditions. Purchases and sales
of portfolio securities are made at such times and in such amounts as deemed
advisable in light of market, economic, and other conditions.
The Fund may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
When the Sub-Adviser determines that market conditions warrant a temporary,
defensive position, the Fund may invest without limitation in high-grade, fixed-
income or U.S. Government securities, or hold assets in cash or cash
equivalents. To the extent the Fund is so invested, it is not achieving its
objective to the same degree as under normal conditions. For hedging purposes,
the Fund may engage in the options and futures strategies described under
"Certain Investment Strategies and Policies." There can be no assurance of
growth of capital, of course, and, because the Fund invests a substantial
portion of its assets in common stocks and other securities which fluctuate in
value, there is substantial risk of market decline. The Fund's Sub-Adviser seeks
to minimize this risk through detailed analyses of financial markets and issuers
of equity securities and through investment in a diversified portfolio of such
securities.
For the fiscal year ended December 31, 1997, the portfolio turnover for the
Fund was 71%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
SELECT INCOME FUND
Investment Objective: The Select Income Fund seeks a high level of current
income. The Fund will invest primarily in investment grade, fixed-income
securities.
Sub-Adviser: Standish, Ayer & Wood, Inc. ("SAW") serves as Sub-Adviser to the
Select Income Fund. SAW was founded in 1933 to provide investment management
services to high net worth individuals and institutions. As of December 31,
1997, total client assets exceeded $39 billion. SAW manages fixed-income
portfolios for major corporate and governmental pension plans, financial
institutions and endowment and foundation funds. Through its affiliate, Standish
International Investment Management Company,
15
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Allmerica Investment Trust
<PAGE>
L.P., SAW offers international investment services. SAW is an independent
investment counseling firm owned by its twenty-four directors who are active
with the firm. SAW is located at One Financial Center, Boston, Massachusetts
02111.
Investment Policies: Under normal circumstances, at least 65% of the Select
Income Fund's assets, at the time of investment, will be invested in investment
grade corporate debt securities and securities issued or guaranteed as to
principal or interest by the U.S. Government or its agencies or
instrumentalities. Investment grade corporate debt securities are (a) assigned a
rating within the four highest grades (Baa/BBB or higher) by either Moody's or
S&P, (b) equivalently rated by another nationally recognized statistical rating
organization ("NRSRO") or (c) unrated securities but determined by the Sub-
Adviser to be of comparable quality. Securities rated in the fourth highest
grade (rated Baa and BBB by Moody's and S&P, respectively) are considered to
have some speculative characteristics. For more information concerning the
rating categories of corporate debt securities and commercial paper, see the
Appendix to the Prospectus. The types of securities in which the Fund invests
are corporate debt obligations such as bonds, notes and debentures, and
obligations convertible into common stock; "money market" instruments, such as
bankers acceptances, or negotiable certificates of deposit issued by the 25
largest U.S. banks (in terms of deposits); commercial paper rated Prime-1 by
Moody's or A-1 by S&P; obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; asset-backed securities; mortgage-backed
securities and stripped mortgage-backed securities. The Fund may also invest in
U.S. dollar obligations of, or guaranteed by, the government of Canada or a
province of Canada or any instrumentality or political subdivision thereof, and
U.S. dollar obligations of supranational entities such as the World Bank,
European Investment Bank and African Development Bank. For more information
about asset-backed securities and mortgage-backed securities and stripped
mortgage-backed securities, see "Certain Investment Strategies and Policies."
The Fund's investments in corporate debt securities are not limited to any
particular type of company or industry.
The Fund's dollar average weighted maturity and the mix of permitted portfolio
securities as described above will vary from time to time depending, among other
things, on current market and economic conditions and the comparative yields on
instruments in different sectors, such as corporate and Treasuries, and with
different maturities. The dollar average weighted maturity of the portfolio,
excluding money market instruments, is expected to range between 5 and 20 years
under normal market conditions. The Fund may invest up to 35% of its assets in
money market instruments under normal conditions. Although the Fund does not
invest for short-term trading purposes, portfolio securities may be sold from
time to time without regard to the length of time they have been held. The value
of the Fund's portfolio securities generally will vary inversely with changes in
prevailing interest rates, declining as interest rates rise and increasing as
rates decline. The value will also be affected by other market and economic
factors. There is the risk with corporate debt securities that the issuers may
not be able to meet their obligations on interest and principal payments.
The Fund may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
The Fund may invest up to 25% of its assets in lower-rated securities,
commonly known as "junk bonds," which involve risks discussed under "Certain
Investment Strategies and Policies-High Yield Securities." For more information
concerning the rating categories of corporate debt securities, see the Appendix
to the Prospectus.
Obligations in which the Select Income Fund may invest include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Obligations of supranational
entities may be supported by appropriated but unpaid commitments of their member
countries, and there is no assurance that these commitments will be undertaken
or met in the future. The Fund may not invest more than 25% of its assets in
debt obligations of supranational entities.
For hedging purposes, the Fund may engage in the options and futures
strategies described under "Certain Investment Strategies and Policies."
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 79%. The portfolio turnover rate for the Fund may vary from year to
year. A high portfolio turnover rate may result in greater brokerage costs to
the Fund.
MONEY MARKET FUND
Investment Objective: The Money Market Fund seeks to obtain maximum current
income consistent with preservation of capital and liquidity.
Sub-Adviser: Allmerica Asset Management, Inc. ("AAM") serves as Sub-Adviser to
the Money Market Fund. AAM, an indirect wholly-owned subsidiary of AFC, was
incorporated in 1993 and is located at 440 Lincoln Street, Worcester,
Massachusetts 01653. As
16
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Allmerica Investment Trust
<PAGE>
of December 31, 1997, AAM had approximately $11 billion in assets under
management. AAM serves as investment adviser to First Allmerica's General
Account and to a number of affiliated insurance companies and other affiliated
accounts, as Sub-Adviser to three other series of the Trust and as Adviser for
Allmerica Securities Trust, a diversified, closed-end investment company.
Investment Policies: The Money Market Fund seeks to achieve its objective by
investing in the following high quality money market instruments:
(a) Obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities;
(b) Commercial paper which meets the ratings requirements as set forth in the
paragraph below;
(c) Obligations of banks or savings and loan associations (such as bankers
acceptances and certificates of deposit, including dollar-denominated
obligations of foreign branches of U.S. banks ("Eurodollars") and U.S.
branches of foreign banks if such U.S. branches are subject to state
banking requirements and Federal Reserve reporting requirements) which at
the date of the investment have deposits of at least $1 billion as of
their most recently published financial statements;
(d) Repurchase agreements with respect to obligations described under (a)
above (such obligations subject to repurchase agreement may bear
maturities of more than one year). For more information concerning
repurchase agreements, see "Certain Investment Strategies and Policies;"
and
(e) Cash and cash equivalents.
The Money Market Fund will not purchase any security unless (i) the security
has received the highest or second highest quality rating by at least two NRSROs
or by one NRSRO if only one has rated the security, or (ii) the security is
unrated and in the opinion of AAM, as Sub-Adviser, in accordance with guidelines
adopted by the Trustees, is of a quality comparable to one of the two highest
ratings of an NRSRO. These standards must be satisfied at the time an investment
is made. If the quality of the investment later declines, the Fund may continue
to hold the investment, but the Trustees will evaluate whether the security
continues to present minimal credit risks. See the Appendix for an explanation
of NRSRO ratings.
The Fund will limit its portfolio investments to securities with a remaining
maturity of 397 days or less as of the time of purchase, in accordance with the
Trustees' guidelines. The portfolio will be managed so as to maintain a dollar-
weighted maturity of 90 days or less. In order to maximize the yield on its
assets, the Money Market Fund intends to be as fully invested at all times as is
reasonably practicable. There is always the risk that the issuer of an
instrument may be unable to make payment upon maturity.
The Fund may invest up to 25% of its assets in U.S. dollar denominated foreign
securities (not including its investments in ADRs). The Fund may invest up to
10% of its net assets in securities which are illiquid.
MANAGEMENT FEES AND EXPENSES
Under its Management Agreement with the Trust, the Manager is obligated to
perform certain administrative and management services for the Trust; furnishes
to the Trust all necessary office space, facilities, and equipment; and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager. Other than the expenses specifically assumed by the Manager under the
Management Agreement, all expenses incurred in the operation of the Trust are
borne by the Trust, including fees and expenses associated with the registration
and qualification of the Trust's shares under the Securities Act of 1933 (the
"1933 Act"); other fees payable to the SEC; independent accountant, legal and
custodian fees; association membership dues; taxes; interest, insurance
premiums, brokerage commissions, fees and expenses of the Trustees who are not
affiliated with the Manager; expenses for proxies, prospectuses and reports to
shareholders; Fund recordkeeping expenses and other expenses.
For the services to the Funds, the Manager receives fees computed daily at an
annual rate based on the average daily net asset value of each Fund as set forth
below:
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE SELECT
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY INTERNATIONAL
MARKETS FUND GROWTH FUND FUND FUND EQUITY FUND
------------ ---------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Manager Fee 1.35%* (1) (1) (2) (1)
</TABLE>
17
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
SELECT
SELECT STRATEGIC SELECT GROWTH SELECT MONEY
GROWTH GROWTH AND INCOME INCOME MARKET
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Manager Fee 0.85% 0.85% (1) (3) (4)
</TABLE>
- -----------------------------------------
*The Manager voluntarily has agreed until further notice to waive its management
fee in the event that expenses of the Select Emerging Markets Fund exceed 2.00%
of the Fund's average daily net assets. The amount of such waiver will be
limited to the net amount of management fees earned by the Manager from the
Fund after subtracting the fees paid by the Manager to SCMI for sub-advisory
services.
(1) The Manager's fees for the Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select International Equity Fund, and Select Growth and
Income Fund, computed daily at an annual rate based on the average daily net
assets of each Fund, are based on the following schedule:
<TABLE>
<CAPTION>
SELECT SELECT GROWTH
SELECT AGGRESSIVE SELECT CAPITAL INTERNATIONAL AND INCOME
ASSETS GROWTH FUND APPRECIATION FUND EQUITY FUND FUND
------ ----------- ----------------- ----------- ----
<S> <C> <C> <C> <C>
First $100 Million...... 1.00% 1.00% 1.00% 0.75%
Next $150 Million....... 0.90% 0.90% 0.90% 0.70%
Next $250 Million....... 0.85% 0.85% 0.85% 0.65%
Over $500 Million....... 0.85% 0.85% 0.85% 0.65%
</TABLE>
(2) The Manager's fee for the Select Value Opportunity Fund, computed daily at
an annual rate based on the average daily net assets of the Fund, is based
on the following schedule:
ASSETS RATE
------ ----
First $100 Million............... 1.00%
Next $150 Million................ 0.85%
Next $250 Million................ 0.80%
Next $250 Million................ 0.75%
Over $750 Million................ 0.70%
The Manager voluntarily has agreed to limit its management fees to an annual
rate of 0.90% of average daily net assets of the Select Value Opportunity
Fund until further notice.
(3) The Manager's fee for the Select Income Fund, computed daily at an annual
rate based on the average daily net assets of the Fund, is based on the
following schedule:
ASSETS RATE
------ ----
First $50 Million................ 0.60%
Next $50 Million................. 0.55%
Over $100 Million................ 0.45%
(4) The Manager's fee for the Money Market Fund, computed daily at an annual
rate based on the average daily net assets of the Fund, is based on the
following schedule:
ASSETS RATE
------ ----
First $50 Million................ 0.35%
Next $200 Million................ 0.25%
Over $250 Million................ 0.20%
The Manager is responsible for the payment of all fees to the Sub-Advisers.
The Manager pays each Sub-Adviser fees computed daily at an annual rate based on
the average daily net asset value of each Fund as set forth below. In certain
Funds, Sub-Adviser fees
18
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Allmerica Investment Trust
<PAGE>
vary according to the level of assets in such Funds, which will reduce the fees
paid by the Manager as Fund assets grow but will not reduce the operating
expenses of such Funds.
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE SELECT
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY INTERNATIONAL
MARKETS FUND GROWTH FUND FUND FUND EQUITY FUND
------------ ----------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Sub-Adviser Fee (5) (6) 0.50% (7) (8)
</TABLE>
<TABLE>
<CAPTION>
SELECT
SELECT STRATEGIC SELECT GROWTH SELECT MONEY
GROWTH GROWTH AND INCOME INCOME MARKET
FUND FUND FUND FUND FUND
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sub-Adviser Fee (9) (9) (10) 0.20% 0.10%
</TABLE>
(5) For its services, SCMI will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Emerging Markets Fund,
under the following schedule:
ASSETS RATE
------ ----
First $50 Million....................... 1.00%
Next $50 Million........................ 0.85%
Next $150 Million....................... 0.75%
Over $250 Million....................... 0.60%
(6) For its services, NACM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Aggressive Growth Fund,
under the following schedule:
ASSETS RATE
------ ----
First $100 Million...................... 0.60%
Next $150 Million....................... 0.55%
Next $250 Million....................... 0.50%
Over $500 Million....................... 0.45%
(7) For its services, CRM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Value Opportunity Fund,
under the following schedule:
ASSETS RATE
------ ----
First $100 Million...................... 0.60%
Next $150 Million....................... 0.50%
Next $250 Million....................... 0.40%
Next $250 Million....................... 0.375%
Over $750 Million....................... 0.35%
(8) For its services, BIAM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select International Equity
Fund, under the following schedule:
ASSETS RATE
------ ----
First $50 Million....................... 0.45%
Next $50 Million........................ 0.40%
Over $100 Million....................... 0.30%
19
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Allmerica Investment Trust
<PAGE>
(9) For their services, Putnam and Cambiar will receive a fee computed daily at
an annual rate based on the average daily net assets of the Select Growth
Fund and Select Strategic Growth Fund, respectively, under the following
schedule:
ASSETS RATE
------ ----
First $50 Million....................... 0.50%
Next $100 Million....................... 0.45%
Next $100 Million....................... 0.35%
Next $100 Million....................... 0.30%
Over $350 Million....................... 0.25%
(10) For its services, JAL will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Growth and Income Fund,
under the following schedule:
ASSETS RATE
------ ----
First $100 Million...................... 0.40%
Next $200 Million....................... 0.25%
Over $300 Million....................... 0.30%
For the fiscal year ended December 31, 1997, each Fund (except the Select
Emerging Markets Fund and Select Strategic Growth Fund which had not commenced
operations) paid the Manager gross fees before reimbursement at the following
effective rates based on the Fund's average daily net assets:
FUND RATE
---- ----
Select Aggressive Growth Fund............................. 0.95%
Select Capital Appreciation Fund.......................... 0.98%
Select Value Opportunity Fund............................. 0.92%
Select International Equity Fund.......................... 0.97%
Select Growth Fund........................................ 0.85%
Select Growth and Income Fund............................. 0.73%
Select Income Fund........................................ 0.59%
Money Market Fund......................................... 0.27%
The following table shows voluntary expense limitations which the Manager has
declared for each Fund and the operating expenses incurred for the fiscal year
ended December 31, 1997 for each Fund (except the Select Emerging Markets Fund
and Select Strategic Growth Fund which had not commenced operations):
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY ASSETS
----------------------------------
VOLUNTARY EXPENSE OPERATING
FUND LIMITATIONS EXPENSES+
---- ----------- ---------
<S> <C> <C>
Select Emerging Markets Fund * N/A
Select Aggressive Growth Fund 1.35% 0.99%
Select Capital Appreciation Fund 1.35% 1.13%
Select Value Opportunity Fund 1.25% 0.98%
Select International Equity Fund 1.50% 1.15%
Select Growth Fund 1.20% 0.91%
Select Strategic Growth Fund 1.20% N/A
Select Growth and Income Fund 1.10% 0.77%
Select Income Fund 1.00% 0.72%
Money Market Fund 0.60% 0.35%
</TABLE>
- --------------------------------
+Including reductions such as directed brokerage credits. See "Brokerage
Allocation - Directed Brokerage Program" in the SAI.
*The Manager has agreed until further notice to waive voluntarily its
management fee in the event that expenses of the Select Emerging Markets Fund
exceed 2.00% of the Fund's average daily net assets. The amount of such waiver
will be limited to the net amount of management fees earned by the Manager from
the Fund after subtracting fees paid by the Manager to SCMI for sub-advisory
services.
20
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Allmerica Investment Trust
<PAGE>
The Manager will voluntarily reimburse its fees and any expenses above the
expense limitations. The expense limitations are voluntary and may be removed
any time after the Fund's first fiscal year of operations with notice to
existing shareholders. The Manager reserves the right to recover from a Fund any
fees, within a current fiscal year period, which were reimbursed in that same
year to the extent that total annual expenses did not exceed the applicable
expense limitation. The expenses which are subject to the voluntary expense
limitations include management fees, independent accountant, legal and custodian
fees; recordkeeping expenses; fees and expenses of Trustees who are not
affiliated with the Manager; association membership dues, insurance; expenses
for proxies, prospectuses and reports to shareholders and fees associated with
the registration of Fund shares. Non-recurring and extraordinary expenses
generally are excluded in the determination of expense ratios of the Funds for
purposes of determining any applicable expense waiver or reimbursement.
Quotations of yield or total return for any period when an expense limitation is
in effect will be greater than if the limitation had not been in effect.
FUND MANAGER INFORMATION
The following individuals are responsible primarily for the day-to-day
management of the particular Funds as indicated below:
The following portfolio managers are involved in the investment process
utilized for the SELECT EMERGING MARKETS FUND: ]
John A. Troiano, Chief Executive and Chairman of Emerging Markets Committee,
joined SCMI in 1981 as an investment analyst specializing in engineering and
technology. In 1989, he set up SCMI's Latin American team.
Mark Bridgeman, First Vice President, joined SCMI in 1990 and is a Fund Manager
specializing in the African markets.
Heather F. Crighton, Director, joined SCMI in 1993 as a Fund Manager
specializing in the Asian emerging markets.
The following individuals have served as members of a committee of fund
managers for the SELECT AGGRESSIVE GROWTH FUND since March 1994:
Lawrence S. Speidell is a Partner and Director of Global/Systematic Portfolio
Management and Research at NACM. Prior to joining NACM in 1994, Mr. Speidell
spent ten years with Batterymarch Financial Management. He was also Senior Vice
President and Portfolio Manager at Putnam Management Company from 1971 to 1983.
John J. Kane is a Partner and Senior Portfolio Manager for the U.S. Systematic
portfolios at NACM. He has 28 years of economic/investment experience. Prior to
joining NACM in 1994, Mr. Kane was employed by ARCO Investment Management
Company and General Electric Company.
Mark W. Stuckelman, Portfolio Manager, U.S. Systematic, joined NACM in 1995.
Prior to joining NACM, he was employed for five years with Wells Fargo Bank's
Investment Management Group, Fidelity Management Trust Co., and BARRA, Inc.
The following portfolio managers are involved in the investment process
utilized for the SELECT CAPITAL APPRECIATION FUND:
Brian W.H. Berghuis is a Chartered Financial Analyst who has been with T. Rowe
Price for 13 years. He has 15 years' experience in equity research and
portfolio management. He is head of the investment team for the Fund.
John F. Wakeman has been with T. Rowe Price for 9 years as a research analyst
and portfolio manager. He has 11 years' experience in equity research. He is
part of the investment team for the Fund.
Marc L. Baylin is a Chartered Financial Analyst who has 7 years of investment
experience in equity research. He has been with T. Rowe Price for 5 years as a
Research Analyst and is part of the investment team for the Fund.
The following individuals have served as fund managers for the SELECT VALUE
OPPORTUNITY FUND since January 1, 1997:
Ronald H. McGlynn, Chief Executive Officer and President of Cramer Rosenthal,
has been with Cramer Rosenthal since 1973 and CRM since its founding in 1995.
He has 29 years of investment experience and serves as Co-Chief Investment
Officer and Portfolio Manager.
Jay B. Abramson, who is an Executive Vice President, Director of Research and
Co-Chief Investment Officer, has been with Cramer Rosenthal since 1985 and CRM
since its founding in 1995 and has overall responsibility for investment
research.
21
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Allmerica Investment Trust
<PAGE>
Eileen M. Fitzsimons, Vice President and portfolio manager, joined Cramer
Rosenthal in 1996. Previously she was a Managing Director with Dreman Value
Advisors, Inc.
The following portfolio managers are involved in the investment process
utilized for the SELECT INTERNATIONAL EQUITY FUND:
Christopher Reilly, Chief Investment Officer, joined BIAM in 1980 and has had
overall responsibility for asset management since 1985. Previously, he worked
in the United Kingdom in stockbrokering and investment management.
Denis Donovan, Director - Portfolio Management, received an MBA from University
College Dublin. Prior to joining BIAM in 1985, he spent more than 13 years in
the money market and foreign exchange operations of the Central Bank of
Ireland, the Irish equivalent of the U.S. Federal Reserve. He has overall
responsibility for the portfolio management function for all of BIAM's client
base.
Peter Wood joined BIAM in 1985 after spending five years with another leading
investment management firm. He is responsible for portfolio construction.
Jane Neill, Senior Equity Analyst, joined BIAM in 1994. Previously, she was
Chief Investment Officer with another leading Irish investment management firm.
The following individuals have served as members of a committee of fund
managers for the SELECT GROWTH FUND since July 1, 1996:
Carol C. McMullen, Chief Investment Officer, Global Growth Equities, has been
an investment professional with Putnam since 1995. Prior to 1995, Ms. McMullen
was Senior Vice President of Baring Asset Management.
C. Beth Cotner, CFA and Chief Investment Officer, Large Cap Growth Equity, has
been with Putnam since 1995. Prior to 1995, Ms. Cotner was Executive Vice
President at Kemper Financial Services.
Manual Weiss, CFA and Senior Vice President, has been an investment
professional with Putnam since 1987.
The following portfolio managers are involved in the investment process
utilized for the SELECT STRATEGIC GROWTH FUND:
Michael S. Barish, CFA and President, founded Cambiar in 1973 and has 36 years
of investment experience. He is a generalist and is responsible for the
consumer goods and healthcare securities.
Darrel J. Hershey, Senior Vice President, joined Cambiar in 1985 and has 22
years of investment experience. Prior to 1985, Mr. Hershey was employed by
Financial Programs for 10 years as a portfolio manager. He is responsible for
the technology-hardware securities, consumer services and transportation
securities.
Kathleen M. McCarty, CFA, Senior Vice President, joined Cambiar in 1987. Prior
to 1987, Ms. McCarty was employed by Dain Bosworth as the Vice President of
Research. She is responsible for financial services, communication services
and utilities securities.
Michael J. Gardner, CFA and Vice President, joined Cambiar in 1995. Prior to
1995, Mr. Gardner was employed by Simmons & Co. He is responsible for energy
and capital goods securities.
Brian M. Barish, CFA and Vice President, was a Vice President at Lazard Freres
& Co. prior to joining Cambiar in 1997. He is responsible for technology-
software, consumer goods, transportation and international securities.
The following individuals have served as members of a committee of fund
managers of the SELECT GROWTH AND INCOME FUND since September 1994:
John A. Levin, Chairman and Chief Investment Officer, has over 33 years
experience in the investment industry and has been with JAL since 1982. Prior
to 1982, Mr. Levin was a Partner at Steinhardt Partners and a Partner and
Director of Research at Loeb, Rhoades & Co.
Jeffrey A. Kigner, Co-Chairman and Chief Investment Officer, has over 14 years
of investment industry experience and has been with JAL since 1984. Prior to
1984, Mr. Kigner was employed by Cralin & Co.
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Allmerica Investment Trust
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The following individuals have served as members of a committee of fund
managers for the SELECT INCOME FUND since the Fund's inception in August 1992:
Edward H. Ladd, Chairman and Managing Director, joined SAW in 1962 and is the
firm's economist. He also assists clients in establishing investment
strategies. Mr. Ladd is a Director of the Federal Reserve Bank of Boston, New
England Electric System, Greylock Management and Harvard Management Corporation
and a member of SAW's Executive Committee.
George W. Noyes, President and Managing Director, joined SAW in 1970 and
directs bond policy formulation and manages institutional bond portfolios at
SAW. Mr. Noyes is Vice Chairman of the ICFA Research Foundation and serves on
SAW's Executive Committee.
Dolores S. Driscoll, Managing Director, joined SAW in 1974 and manages fixed-
income portfolios with specific emphasis on mortgage pass-throughs and original
issue discount bonds. Ms. Driscoll also serves on SAW's Executive Committee.
Richard C. Doll, Manager, joined SAW in 1984 and is a portfolio manager with
research responsibilities in convertible bonds. Prior to joining SAW, Mr. Doll
was a Vice President with the Bank of New England.
Maria D. Furman, Vice President and Director, joined SAW in 1976. She is head
of the tax-exempt area and manages insurance and pension fund accounts. Ms.
Furman currently serves on SAW's Executive Committee.
The following individual has served as fund manager for the MONEY MARKET FUND
since March, 1995:
John C. Donohue, Assistant Vice President of AAM, was a portfolio manager at CS
First Boston Investment Management prior to joining AAM in 1995.
HOW ARE SHARES VALUED?
The net asset value of the shares of each Fund is determined once daily as of
the close of regular trading on the New York Stock Exchange (the "Exchange") on
each day on which the Exchange is open for trading.
Equity securities are valued on the basis of their market value if market
quotations are readily available from the primary market on which the security
is traded. In other cases, they are valued at their fair value as determined in
good faith by the Trustees, although the actual calculations may be performed by
persons acting pursuant to the direction of the Trustees. Debt securities (other
than short-term obligations) normally are valued on the basis of valuations
formulated by a pricing service which utilizes data processing methods to
determine valuations for normal, institutional-size trading units of such
securities. Such methods include the use of market transactions for comparable
securities and various relationships between securities which generally are
recognized by institutional traders. All securities of the Money Market Fund are
valued at amortized cost. Debt obligations in the other Funds having a remaining
maturity of 60 days or less are valued at amortized cost when it is determined
that amortized cost approximates fair value. Short-term obligations of the other
Funds having a remaining maturity of more than 60 days are marked to market
based upon readily available market quotations for such obligations or similar
securities.
Unlike the Money Market Fund which attempts to maintain a stable net asset
value, the net asset value of the other Funds will fluctuate.
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS
It is the policy of the Trust to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies, so that the Trust
will not be subject to federal income tax on any net income and any capital
gains to the extent they are distributed or are deemed to have been distributed
to shareholders. Dividends out of net investment income will be declared and
paid quarterly in the case of the Select Growth and Income Fund and Select
Income Fund; annually in the case of the Select Emerging Markets Fund, Select
Aggressive Growth Fund, Select Capital Appreciation Fund, Select Value
Opportunity Fund, Select International Equity Fund, Select Growth Fund and
Select Strategic Growth Fund; and daily in the case of the Money Market Fund.
Distributions of net capital gains for the year, if any, are made annually. All
dividends and capital gain distributions are applied to purchase additional Fund
shares at net asset value as of the payment date. Fund shares are held by the
Separate Accounts and any distributions are reinvested automatically by the
Separate Account. Tax consequences to investors in the Separate Accounts which
are invested in the Trust are described in the prospectuses for such Accounts.
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SALE AND REDEMPTION OF SHARES
Shares of the Funds are sold in a continuous offering and currently may be
purchased only by Allmerica Select Separate Accounts. The Separate Accounts are
the funding mechanisms for variable annuity contracts and variable life
insurance policies. The Separate Accounts invest in shares of one or more of the
Funds. Shares of each Fund are sold at their net asset value as next computed
after receipt of the purchase order without the addition of any selling
commission or "sales load." The Distributor, Allmerica Investments, Inc., at its
expense, may provide promotional incentives to dealers that sell variable
annuity contracts for which the Funds serve as investment vehicles.
Shares of the Trust are also currently being issued to Separate Accounts of
Allmerica Financial Life, First Allmerica and subsidiaries of First Allmerica
which issue variable or group annuity policies or variable premium life
insurance policies ("mixed funding"). Although neither Allmerica Financial Life
nor the Trust currently foresees any disadvantage, it is conceivable that in the
future such mixed funding may be disadvantageous for variable or group annuity
policyowners or variable premium life insurance policyowners ("Policyowners").
The Trustees of the Trust intend to monitor events in order to identify any
conflicts that may arise between such Policyowners and to determine what action,
if any, should be taken in response thereto. If the Trustees were to conclude
that separate funds should be established for variable annuity and variable
premium life separate accounts, Allmerica Financial Life would pay the attendant
expenses. The Trust has filed an application with the SEC for an exemptive order
to permit Fund shares to be sold to variable annuity and life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
qualified pension and retirement plans outside of the separate account context.
If the requested order is granted, any Fund may serve as a funding vehicle for
all types of variable annuity contracts and variable life insurance contracts
offered by various participating insurance companies and for qualified plans;
material irreconcilable conflicts may possibly arise among various contract
owners and plan participants and the Board of Trustees will monitor events in
order to identify the existence of any material irreconcilable conflict and
determine what action, if any, should be taken in response to such conflict.
The Trust redeems shares of each Fund at its net asset value as next computed
after receipt of the request for redemption. The redemption price may be more or
less than the shareholder's cost. No fee is charged by the Trust on redemption.
The variable contracts funded through the Separate Accounts are sold subject to
certain fees and charges, which may include sales and redemption charges as
described in the prospectuses for such Separate Accounts.
Redemption payments will be paid within seven days after receipt of the
written request therefor by the Trust, except that the right of redemption may
be suspended or payments postponed whenever permitted by applicable law and
regulations.
HOW IS PERFORMANCE DETERMINED?
Each Fund's performance may be quoted in advertising. A Fund's performance may
be compared with the performance of other investments or relevant indices. All
performance information is based on historical results and is not intended to
indicate future performance.
For Funds other than the Money Market Fund, "yield" is calculated by dividing
a Fund's annualized net investment income per share during a recent 30-day
period by the net asset value per share on the last day of that period. For the
Money Market Fund, "yield" represents an annualization of the change in value of
an investment (excluding any capital changes) in the Fund for a specific seven-
day period; "effective yield" compounds that yield for a year and is, for that
reason, greater than the Fund's yield.
Total returns are based on the overall dollar or percentage change in value of
a hypothetical investment in a Fund assuming all dividends and capital gain
distributions are reinvested. Cumulative total return reflects the Fund's
performance over a stated period of time. Average annual total return reflects
the hypothetical, annually-compounded return that would have produced the same
cumulative return if the Fund's performance had been constant over the entire
period. Because average annual returns tend to smooth out variations in the
Fund's return, they are not the same as actual year-by-year results.
YIELDS AND TOTAL RETURNS QUOTED FOR THE FUNDS INCLUDE THE EFFECT OF DEDUCTING
THE FUNDS' EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO A
PARTICULAR INSURANCE PRODUCT. SINCE SHARES OF THE FUNDS CAN BE PURCHASED ONLY
THROUGH A VARIABLE ANNUITY CONTRACT OR VARIABLE LIFE CONTRACT, YOU SHOULD REVIEW
CAREFULLY THE PROSPECTUS FOR THE SEPARATE ACCOUNTS FOR INFORMATION ON RELEVANT
CHARGES AND EXPENSES. INCLUDING THESE CHARGES IN THE QUOTATIONS OF THE FUNDS'
YIELDS AND TOTAL RETURNS WOULD HAVE THE EFFECT OF DECREASING PERFORMANCE.
PERFORMANCE INFORMATION FOR THE FUNDS MUST ALWAYS BE ACCOMPANIED BY, AND BE
REVIEWED WITH, PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNTS WHICH INVEST IN
THE FUNDS.
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ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated October 11, 1984
(the "Trust Declaration"). A copy of the Trust Declaration is on file with the
Secretary of the Commonwealth of Massachusetts.
The Trust has an unlimited authorized number of shares of beneficial interest
which may be divided into an unlimited number of series of such shares, and
which are divided presently into 14 series of shares, one series underlying each
Fund. Four of the series are not available under Allmerica Select and are not
included in this Prospectus. The Trust's shares are entitled to one vote per
share (with proportional voting for fractional shares). The rights accompanying
Fund shares are vested legally in the Separate Accounts. As a matter of policy,
however, holders of variable annuity contracts funded through the Separate
Accounts have the right to instruct the Separate Accounts as to voting Fund
shares on all matters to be voted on by Fund shareholders. Voting rights of the
participants in the Separate Accounts are set forth more fully in the
prospectuses relating to those Accounts. See "Organization of the Trust" in the
SAI for the definition of a "majority vote" of shareholders.
The Trust is not required to hold annual meetings of shareholders. The
Trustees or shareholders holding at least 10% of the outstanding shares may call
special meetings of shareholders.
FUND RECORDKEEPING AGENT
INVESTOR Services Group calculates net asset value per share and maintains
general accounting records for each Fund. Investor Services Group is entitled to
receive an annual Fund recordkeeping fee based on Fund assets and certain out-
of-pocket expenses.
CUSTODIAN
Bankers Trust Company, 130 Liberty Street, New York, New York 10006, is the
Custodian of the investment securities and other assets of the Trust.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Fund without shareholder
approval. For a description of certain other investment restrictions, reference
should be made to the SAI.
1. No Fund will concentrate its investments in particular industries,
including debt obligations of supranational entities and foreign governments,
but a Fund may invest up to 25% of the value of its total assets in a particular
industry. The restriction does not apply to investments in obligations issued or
guaranteed by the United States of America, its agencies or instrumentalities,
or to investments by the Money Market Fund in securities issued or guaranteed by
domestic branches of U.S. banks.
2. As to 75% of the value of its total assets (100% for the Money Market
Fund), no Fund will invest more than 5% of the value of its total assets in the
securities of any one issuer (other than securities issued by or guaranteed as
to principal or interest by the United States Government or any agency or
instrumentality thereof) or acquire more than 10% of the voting securities of
any issuer. The remaining 25% of assets (other than for the Money Market Fund)
may be invested in the securities of one or more issuers without regard to such
limitations.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Fund will not be required to reduce
the amount of its holdings in such investments.
CERTAIN INVESTMENT STRATEGIES AND POLICIES
REPURCHASE AGREEMENTS (APPLICABLE TO ALL FUNDS) AND REVERSE REPURCHASE
AGREEMENTS (APPLICABLE TO THE SELECT CAPITAL APPRECIATION FUND)
Each Fund may invest in repurchase agreements, under which the Fund acquires
ownership of a security (ordinarily U.S. Government securities) but the seller
agrees, at the time of sale to purchase the security at a mutually agreed upon
time and price. Should any seller of a repurchase agreement fail to repurchase
the underlying security, or should any seller become insolvent or involved in a
bankruptcy proceeding, a Fund could incur disposition costs and losses.
Repurchase agreements maturing in more than seven days are subject to the 15%
(10% for the Money Market Fund) limit on illiquid securities.
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When the Select Capital Appreciation Fund invests in a reverse repurchase
agreement, it sells a security to another party such as a banker or broker-
dealer in return for cash and agrees to buy the security back at a future date
and price. Reverse repurchase agreement transactions can be considered a form of
borrowing by the Fund. Reverse repurchase agreements may be used to provide cash
to satisfy unusually heavy redemption requests or for other temporary or
emergency purposes without the necessity of selling portfolio securities or to
earn additional income on portfolio securities, such as treasury bills and
notes.
"WHEN-ISSUED" SECURITIES (APPLICABLE TO ALL FUNDS)
Each Fund may purchase securities on a when-issued or delayed delivery basis.
Delivery and payment normally take place 15 to 45 days after the commitment to
purchase. No income accrues on when-issued securities prior to delivery.
Purchase of when-issued securities involves the risk that yields available in
the market when delivery occurs may be higher than those available when the
when-issued order is placed resulting in a decline in the market value of the
security. There is also the risk that under some circumstances the purchase of
when-issued securities may act to leverage the Fund.
LENDING OF SECURITIES (APPLICABLE TO ALL FUNDS)
For the purpose of realizing additional income, the Funds may lend portfolio
securities to broker-dealers or financial institutions amounting to not more
than 33% of their respective total assets taken at current value. While any such
loan is outstanding, a Fund will continue to receive amounts equal to the
interest or dividends paid by the issuer on the securities, as well as interest
(less any rebates to be paid to the borrower) on the investment of the
collateral or a fee from the borrower. Each Fund will have the right to call
each loan and obtain the securities. Lending portfolio securities involves
certain risks, including possible delays in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made in accordance with
guidelines established by the Board of Trustees.
FOREIGN SECURITIES (APPLICABLE TO ALL FUNDS)
Investments in foreign markets involve substantial risks typically not
associated with investing in the U.S. which should be considered carefully by
the investor. Such risks may include political and economic instability,
differing accounting and financial reporting standards, higher commission rates
on foreign portfolio transactions, less readily available public information
regarding issuers, potentially adverse changes in tax and exchange control
regulations, and the potentially for restrictions on the flow of international
capital. Foreign securities also involve currency risks. Accordingly, the
relative strength of the U.S. dollar may be an important factor in the
performance of the Fund, depending on the extent of the Fund's foreign
investments. The Money Market Fund may invest only in U.S. dollar denominated
foreign securities. Some foreign securities exchanges may not be as developed or
efficient as those in the United States and securities traded on foreign
securities exchanges generally are subject to greater price volatility. There is
also the possibility of adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation and limitations on the
removal of funds or other assets.
Investments in emerging countries involve exposure to economic structures that
are generally less diverse and mature than in the United States, and to
political systems which may be less stable. In addition, securities of issuers
located in emerging countries may have limited marketability and may be subject
to more abrupt or erratic price fluctuations. The risk also exists that an
emergency situation may arise in one or more emerging markets as a result of
which trading of securities may cease or may be substantially curtailed and
prices for a Fund's portfolio securities in such markets may not be readily
available. Many emerging market countries have experienced high rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have negative effects on the economies and
securities markets of certain countries with emerging markets. Emerging markets
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be affected adversely by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed by the countries with which they trade. In
certain markets there have been times when settlements of securities
transactions have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions.
The Funds may buy or sell foreign currencies, options on foreign currencies
and foreign currency futures contracts and options thereon and, in addition, the
Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund may invest in foreign currency
forward contracts. Although such instruments may reduce the risk of loss due to
a decline in the value of the currency that is sold, they also limit any
possible gain which might result should the value of the currency increase. Such
instruments will be used primarily to protect a Fund from adverse currency
movements; however, they also involve the risk that anticipated currency
movements will not be accurately predicted, thus adversely affecting a Fund's
total return. See "Options and Futures Transactions."
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The Funds' investments may include ADRs. For many foreign securities, there
are U.S. dollar-denominated ADRs which are traded in the United States on
exchanges or over the counter. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank. An ADR may
be sponsored by the issuer of the underlying foreign security, or it may be
issued in unsponsored form. The holder of a sponsored ADR is likely to receive
more frequent and extensive financial disclosure concerning the foreign issuer
than the holder of an unsponsored ADR and generally will bear lower transaction
charges. Each Fund may invest in both sponsored and unsponsored ADRs. The Select
International Equity Fund and the Select Capital Appreciation Fund also may
utilize EDRs, which are designed for use in European securities markets, and
also may invest in GDRs.
Obligations in which the Select Income Fund may invest include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Obligations of supranational
entities may be supported by appropriated but unpaid commitments of their member
countries, and there is no assurance that these commitments will be undertaken
or met in the future. The Fund may not invest more than 25% of its assets in
debt obligations of supranational entities.
Certain state insurance regulations may impose additional restrictions on a
Fund's holdings of foreign securities.
OPTIONS AND FUTURES TRANSACTIONS (APPLICABLE TO EACH FUND EXCEPT THE MONEY
MARKET FUND), FORWARD CONTRACTS (APPLICABLE TO THE SELECT EMERGING MARKETS FUND,
SELECT CAPITAL APPRECIATION FUND, SELECT INTERNATIONAL EQUITY FUND AND SELECT
INCOME FUND) AND SWAPS (APPLICABLE TO THE SELECT CAPITAL APPRECIATION FUND)
Through the writing and purchase of put and call options on its securities,
financial indices and foreign currencies, and the purchase and sale of futures
contracts and related options with respect to securities, financial indices and
(in the case of the Select Emerging Markets Fund, Select Capital Appreciation
Fund, Select International Equity Fund and Select Income Fund) foreign
currencies in which it may invest, each Fund except the Money Market Fund may at
times seek to hedge against fluctuations in net asset value, or to a limited
extent, to engage in non-hedging strategies. A Fund may not purchase or sell a
futures contract for non-hedging purposes if immediately thereafter the sum of
the amount of margin deposits and amount of variation margins paid from time to
time on a Fund's existing futures and related options positions and premiums
paid for related options would exceed 5% of the market value of the Fund's total
assets. The Select Emerging Markets Fund, Select Capital Appreciation Fund,
Select International Equity Fund and Select Income Fund may invest without
limitation in foreign currency options. Each Fund's ability to engage in options
and futures strategies will depend on the availability of liquid markets in such
instruments. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures contracts. Therefore, there is no
assurance that a Fund will be able to utilize these instruments effectively for
the purposes stated above.
Additionally, the Select Emerging Markets Fund, Select Capital Appreciation
Fund, Select International Equity Fund and Select Income Fund may invest in
forward currency contracts with the stated contract value of up to the value of
the Fund's assets and the Select Capital Appreciation Fund in swaps which may
expose these Funds to additional risks and transaction costs.
Risks inherent in the use of futures, options, forward contracts and swaps
("derivative instruments") include (1) the risk that movements in interest
rates, securities prices and currency markets will not be accurately anticipated
and a Fund's total return could be adversely affected as a result; (2) imperfect
correlation, or even no correlation, between the price of derivative instruments
and movements in the prices of the securities, interest rates or currencies
being hedged; (3) the fact that skills and techniques needed to use these
strategies are different from those needed to select portfolio securities; (4)
the lack of assurance that a liquid secondary market will exist for any
particular instrument at any time and, as a result, contractual positions cannot
be closed out easily; (5) the possible loss of principal under certain
conditions; (6) the possible inability of a Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable to do so due to the need
for the Fund to maintain "cover" or set aside securities in connection with
hedging techniques; and (7) the risk of a loss if the counterparty to the
transaction does not perform as promised. These techniques may increase
volatility of a Fund and may involve a small investment of cash relative to the
magnitude of the risk assumed.
The Fund will purchase futures and options only on exchanges or boards of
trade when there appears to be an active secondary market, but there can be no
assurance that a liquid secondary market will exist for any future or option at
any particular time.
In connection with transactions in futures and related options, the Funds will
be required to deposit as "initial margin" an amount of cash and/or securities.
Thereafter, subsequent payments are made to and from the broker to reflect
changes in the value of the future contract.
A more detailed explanation of futures, options and other derivative
instruments, and the risks associated with them, is included in the SAI.
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RESTRICTED SECURITIES (APPLICABLE TO ALL FUNDS)
The Funds also may purchase fixed-income securities that are not registered
under the 1933 Act ("restricted securities"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act. However, each
Fund will not invest more than 15% (10% for the Money Market Fund) of its net
assets in restricted securities (and securities deemed to be illiquid) unless
the Board of Trustees determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Trustees has adopted guidelines and delegated to the
Manager the daily function of determining and monitoring liquidity of restricted
securities. The Board, however, will retain sufficient oversight and be
responsible ultimately for the determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities sold
and offered under Rule 144A will develop, the Board will monitor carefully a
Fund's investments in securities, focusing on such important factors, among
others, as valuation, liquidity and availability of information. This investment
practice could have the effect of increasing the level of illiquidity in a Fund
to the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities. As a result, a Fund might not be able
to sell these securities when its Sub-Adviser wishes to do so, or might have to
sell them at less than fair value. In addition, market quotations are less
readily available. Therefore, judgment at times may play a greater role in
valuing these securities than in the case of unrestricted securities.
INVESTMENT IN MONEY MARKET SECURITIES (APPLICABLE TO ALL FUNDS)
Any Fund may hold at least a portion of its assets in cash equivalents or
money market instruments. There is always the risk that the issuer of a money
market instrument may be unable to make payment upon maturity.
The Money Market Fund may hold uninvested cash reserves pending investment
during temporary, defensive periods or if, in the opinion of the Sub-Adviser,
suitable securities are not available for investment. Securities in which the
Money Market Fund may invest may not earn as high a level of current income as
long term, lower quality securities which, however, generally have less
liquidity, greater market risk and more fluctuation in market value.
HIGH YIELD SECURITIES (APPLICABLE TO THE SELECT EMERGING MARKETS FUND, SELECT
CAPITAL APPRECIATION FUND, SELECT GROWTH FUND, SELECT GROWTH AND INCOME FUND AND
SELECT INCOME FUND)
Corporate debt securities purchased by the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select Growth Fund, Select Growth and Income
Fund and Select Income Fund will be rated at the time of purchase B or better by
Moody's or S&P, or equivalently rated by another NRSRO, or unrated but believed
by the Sub-Adviser to be of comparable quality under the guidelines established
for the Funds. The Select Growth Fund and the Select Growth and Income Fund may
not invest more than 15% of their assets, the Select Income Fund may not invest
more than 25% of its assets and the Select Emerging Markets Fund and Select
Capital Appreciation Fund may not invest more than 35% of their assets at the
time of investment in securities rated below Baa by Moody's or BBB by S&P, or
equivalently rated by another NRSRO, or unrated but believed by the Sub-Adviser
to be of comparable quality. Securities rated B by Moody's or S&P (or
equivalently by another NRSRO) are below investment grade and are considered, on
balance, to be predominantly speculative with respect to capacity to pay
interest and repay principal and will generally involve more credit risk than
securities in the higher rating categories.
Periods of economic uncertainty and changes can be expected to result in
increased volatility of market prices of lower-rated securities, commonly known
as "high yield" securities or "junk bonds," and of the asset value of the Select
Emerging Markets Fund, Select Capital Appreciation Fund, Select Growth Fund,
Select Growth and Income Fund and Select Income Fund. Many issuers of high yield
corporate debt securities are leveraged substantially at times, which may impair
their ability to meet debt service obligations. Also, during an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress.
The lack of a liquid secondary market in certain lower-rated securities may
have an adverse impact on their market price and the ability of a Fund to
dispose of particular issues when necessary to meet its liquidity needs or in
response to a specific economic event such as a deterioration in the credit-
worthiness of the issuer. In addition, a less liquid market may interfere with
the ability of a Fund to value accurately high yield securities and,
consequently, value a Fund's assets. Furthermore, adverse publicity and investor
perceptions may decrease the value and liquidity of high yield securities. It is
reasonable to expect any recession to disrupt severely the market for high yield
fixed-income securities, have an adverse impact on the value of such securities
and adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon. The market prices of lower-rated securities
are generally less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic or political changes or
individual developments specific to the issuer. Periods of economic or political
uncertainty and change can be expected to result in volatility of price of these
securities.
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The Funds also may invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments generally is rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, the Sub-Adviser may treat such securities as unrated debt. Unrated
debt securities and securities with different ratings from more than one agency
will be included in the 15%, 25% and 35% limits of the Funds as stated above,
unless such Fund's Sub-Adviser deems such securities to be the equivalent of
investment grade securities. See the Appendix for a description of the bond
ratings.
ASSET-BACKED SECURITIES (APPLICABLE TO SELECT GROWTH AND INCOME FUND, SELECT
INCOME FUND AND MONEY MARKET FUND)
The Funds may purchase asset-backed securities, which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, frequently a pool of assets similar to one
another. Assets generating such payments include instruments such as motor
vehicle installment purchase obligations, credit card receivables and home
equity loans. Payment of principal and interest may be guaranteed for certain
amounts and time periods by a letter of credit issued by a financial institution
unaffiliated with the issuer of the securities. The estimated life of an asset-
backed security varies with the prepayment experience of the underlying debt
instruments. The rate of such prepayments, and hence the life of the asset-
backed security, will be primarily a function of current market rates, although
other economic and demographic factors will be involved. Under certain interest
rate and prepayment rate scenarios, the Funds may fail to recoup fully their
investment in asset-backed securities. A Fund will not invest more than 20% of
its total assets in asset-backed securities.
MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE SELECT INCOME FUND)
The Fund may invest in mortgage-backed securities which are debt obligations
secured by real estate loans and pools of loans on single family homes, multi-
family homes, mobile homes and, in some cases, commercial properties. The Fund
may acquire securities representing an interest in a pool of mortgage loans that
are issued or guaranteed by a U.S. government agency such as Ginnie Mae, Fannie
Mae and Freddie Mac.
Mortgage-backed securities are in most cases "pass-through" instruments
through which the holder receives a share of all interest and principal payments
from the mortgages underlying the certificate. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life or realized yields of a particular issue of pass-
through certificates. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Fund reinvests the prepaid
amounts in securities, the yield of which reflects interest rates prevailing at
the time. Moreover, prepayment of mortgages that underlie securities purchased
at a premium could result in losses.
The Fund also may invest in multiple class securities issued by U.S.
government agencies and instrumentalities such as Fannie Mae, Freddie Mac and
Ginnie Mae, including guaranteed collateralized mortgage obligations ("CMOs")
and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or
participation certificates, when consistent with the Fund's investment
objective, policies and limitations. A CMO is a type of bond secured by an
underlying pool of mortgages or mortgage pass-through certificates that are
structured to direct payment on underlying collateral to different series or
classes of obligations. A REMIC is a CMO that qualifies for special tax
treatment under the Internal Revenue Code and invests in certain mortgages
principally secured by interests in real property and other permitted
investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple pass-
through securities. Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests or "residual" interests. The Funds currently do
not intend to purchase residual interests in REMICs. The REMIC Certificates
represent beneficial ownership interests in a REMIC trust, generally consisting
of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage
pass-through certificates. The obligations of Fannie Mae or Freddie Mac under
their respective guaranty of the REMIC Certificates are obligations solely of
Fannie Mae or Freddie Mac, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are available otherwise.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment
of interest and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("PCs"). PCs represent undivided interests in specified residential mortgages or
participations therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCs referred to as "Gold PCs."
Ginnie Mae REMIC Certificates guarantee the full and timely payment of
interest and principal on each class of securities (in accordance with the terms
of those classes). This Ginnie Mae guarantee is backed by the full faith and
credit of the United States.
29
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Allmerica Investment Trust
<PAGE>
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are
treated as U.S. government securities for purposes of investment policies. There
can be no assurance that the U.S. Government will continue to provide financial
support to Fannie Mae, Freddie Mac or Ginnie Mae in the future.
STRIPPED MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE SELECT INCOME FUND)
The Fund may invest in stripped mortgage-backed securities ("SMBS"). SMBS are
derivative multiclass mortgage securities. SMBS may be issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose entities of the
foregoing.
SMBS usually are structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. One type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In some cases,
one class will receive all of the interest (the interest-only or "IO" class)
while the other class will receive all of the principal (the principal-only or
"PO" class). The yield to maturity on an IO class is extremely sensitive to the
rate of principal payments (including prepayment on the related underlying
mortgage assets), and a rapid rate of principal payments may have a material,
adverse effect on a portfolio yield to maturity from these securities. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup fully their initial investment in
these securities even if the security is in one of the highest rating
categories. Certain SMBS may be deemed "illiquid" and subject to the Fund's
limitations on investment in illiquid securities. The market value of the PO
class generally is unusually volatile in response to changes in interest rates.
The yields on a class of SMBS that receives all or most of the interest from
mortgage assets are generally higher than prevailing market yields in other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be recouped
fully. The Sub-Adviser will seek to manage these risks (and potential benefits)
by investing in a variety of such securities and by using certain hedging
techniques.
HEDGING TECHNIQUES AND INVESTMENT PRACTICES (APPLICABLE TO THE SELECT EMERGING
MARKETS FUND, SELECT CAPITAL APPRECIATION FUND AND SELECT INTERNATIONAL EQUITY
FUND)
The Select Emerging Markets Fund, Select Capital Appreciation Fund and Select
International Equity Fund may employ certain strategies in order to manage
exchange rate risks. For example, the Funds may hedge some or all of their
investments denominated in a foreign currency against a decline in the value of
that currency. The Funds may enter into contracts to sell that foreign currency
for U.S. dollars (not exceeding the value of a Fund's assets denominated in or
exposed to that currency) or by participating in options on futures contracts
with respect to such currency ("position hedge"). The Funds also could hedge
that position by selling a second currency, that is expected to perform
similarly to the currency in which portfolio investments are denominated for
U.S. dollars ("proxy hedge"). The Funds also may enter into a forward contract
to sell the currency in which the security is denominated for a second currency
that is expected to perform better relative to the U.S. dollar if their Sub-
Adviser believes there is a reasonable degree of correlation between movements
in the two currencies ("cross-hedge"). As an operational policy, the Funds will
not commit more than 10% of their assets to the consummation of cross-hedge
contracts and either will cover currency hedging transactions with liquid
portfolio securities denominated in or whose value is tied to the applicable
currency or segregate liquid assets in the amount of such commitments. In
addition, when the Funds anticipate repurchasing securities denominated in a
particular currency, the Funds may enter into a forward contract to purchase
such currency in exchange for the dollar or another currency ("anticipatory
hedge").
These strategies minimize the effect of currency appreciation as well as
depreciation, but do not protect against a decline in the underlying value of
the hedged security. In addition, such strategies may reduce or eliminate the
opportunity to profit from increases in the value of the original currency and
may have an adverse impact on a Fund's performance if their Sub-Adviser's
projection of future exchange rates is inaccurate.
STAND-BY COMMITMENTS (APPLICABLE TO SELECT INCOME FUND AND MONEY MARKET FUND)
Under a stand-by commitment, a dealer agrees to purchase from the Fund, at the
Fund's option, specified securities at a specified price. Stand-by commitments
are exercisable by the Fund at any time before the maturity of the underlying
security, and may be sold, transferred or assigned by the Fund only with respect
to the underlying instruments.
Although stand-by commitments are often available without the payment of any
direct or indirect consideration, if necessary or advisable, the Fund may pay
for a stand-by commitment either separately in cash or by paying a higher price
for securities which are acquired subject to the commitment.
30
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Allmerica Investment Trust
<PAGE>
Where the Fund pays any consideration directly or indirectly for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held by the Fund.
The Fund will enter into stand-by commitments only with banks and broker-
dealers which present minimal credit risks. In evaluating the creditworthiness
of the issuer of a stand-by commitment, the Sub-Adviser will review periodically
the issuer's assets, liabilities, contingent claims and other relevant financial
information.
The Fund will acquire stand-by commitments solely to facilitate liquidity and
does not intend to exercise its rights thereunder for trading purposes. Stand-
by commitments will be valued at zero in determining the Fund's net asset value.
31
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Allmerica Investment Trust
<PAGE>
APPENDIX
Descriptions of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Service, a division of McGraw-Hill Companies, Inc. ("S&P")
commercial paper and bond ratings:
COMMERCIAL PAPER RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE TWO HIGHEST
DESIGNATIONS ARE AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity normally will be evidenced by the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This normally
will be evidenced by many of the characteristics cited above, but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be subject more
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
S&P COMMERCIAL PAPER RATINGS ARE GRADED INTO SEVERAL CATEGORIES, RANGING FROM
"A-1" FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE TWO HIGHEST
RATING CATEGORIES ARE DESCRIBED AS FOLLOWS:
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in the short-term borrowing, while various factors of the first
importance in long-term borrowing risk are of lesser importance in the long run.
Symbols used will be as follows:
MIG-1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
A short-term rating also may be assigned on an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event that demand is not met.
VMIG-1 and VMIG-2 ratings carry the same definitions as MIG-1 and MIG-2,
respectively.
32
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<PAGE>
DESCRIPTION OF MOODY'S BOND RATINGS
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than in
Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present that suggest a susceptibility to impairment some time in the
future.
Baa - Bonds that are rated Baa are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Those bonds within the Aa, A, Baa, Ba and B categories that Moody's believes
possess the strongest credit attributes within those categories are designated
by the symbols Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF S&P'S DEBT RATINGS
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
Plus (+) or (-): The ratings from AA to CCC may be modified by the addition of
a plus or minus sign to show relative standing within the major categories.
33
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Allmerica Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
440 Lincoln Street
Worcester, Massachusetts 01653
(508) 855-1000
Allmerica Investment Trust (the "Trust") is a professionally managed, open-end
investment company designed to provide the underlying investment vehicles for
insurance-related accounts. The seven separate portfolios of the Trust
(collectively, the "Funds" and individually, the "Fund") currently offered by
this Prospectus are as follows:
SELECT AGGRESSIVE GROWTH FUND
SELECT INTERNATIONAL EQUITY FUND
GROWTH FUND
EQUITY INDEX FUND
INVESTMENT GRADE INCOME FUND
GOVERNMENT BOND FUND
MONEY MARKET FUND
Currently, shares of each Fund may be purchased only by the separate accounts
("Separate Accounts") established by First Allmerica Financial Life Insurance
Company ("First Allmerica") or Allmerica Financial Life Insurance and Annuity
Company ("Allmerica Financial Life"), an indirect, wholly-owned subsidiary of
First Allmerica, for the purpose of funding variable annuity or variable life
insurance policies. A particular Fund may not be available under the variable
annuity or variable life insurance policy which you have chosen. The Prospectus
of the specific insurance product you have chosen will indicate which Funds are
available and should be read in conjunction with this Prospectus. Inclusion in
this Prospectus of a Fund which is not available under your policy is not to be
considered a solicitation.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Certain additional
information is contained in the Statement of Additional Information dated May 1,
1998 (the "SAI"), which has been filed with the Securities and Exchange
Commission ("SEC"), is incorporated herein by reference and is available upon
request without charge from the Trust, 440 Lincoln Street, Worcester, MA 01653,
(508) 855-1000.
Investment in the Funds is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Money Market Fund will be able to
maintain a stable net asset value of $1.00 per share.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY, AND ARE SUBJECT TO VARIOUS RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DATED MAY 1, 1998
---------------------------
Allmerica Investment Trust
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS................................................. 3
HOW ARE THE FUNDS MANAGED?........................................... 8
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?..................... 9
Select Aggressive Growth Fund...................................... 9
Select International Equity Fund................................... 10
Growth Fund........................................................ 10
Equity Index Fund.................................................. 11
Investment Grade Income Fund....................................... 12
Government Bond Fund............................................... 13
Money Market Fund.................................................. 14
MANAGEMENT FEES AND EXPENSES......................................... 14
FUND MANAGER INFORMATION............................................. 17
HOW ARE SHARES VALUED?............................................... 18
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS.............................. 19
SALE AND REDEMPTION OF SHARES........................................ 19
HOW IS PERFORMANCE DETERMINED?....................................... 19
ORGANIZATION AND CAPITALIZATION OF THE TRUST......................... 20
INVESTMENT RESTRICTIONS.............................................. 20
CERTAIN INVESTMENT STRATEGIES AND POLICIES........................... 21
APPENDIX............................................................. 26
</TABLE>
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Allmerica Investment Trust
<PAGE>
FINANCIAL HIGHLIGHTS
The following Financial Highlights have been audited by Price Waterhouse LLP,
the independent accountants of the Trust. This information should be read in
conjunction with the financial statements and notes thereto which appear in the
Policyowner's annual report for the year ended December 31, 1997 ("Annual
Report"), and which are incorporated by reference in the Trust's SAI. Further
information about the performance of the Funds is contained in the Annual Report
which may be obtained without charge from the Trust, 440 Lincoln Street,
Worcester, MA 01653, (508) 855-1000.
3
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Allmerica Investment Trust
<PAGE>
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ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(2)/ INVESTMENTS OPERATIONS
- ------------ ------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $ 2.037 $(0.009) $ 0.387 $ 0.378
1996 1.848 (0.009) 0.351 0.342
1995 1.397 (0.001) 0.452 0.451
1994 1.431 (0.002) (0.032) (0.034)
1993 1.197 0.001 0.234 0.235
1992 1.000 0.001 0.197 0.198
Select International
Equity Fund/(1)/
1997 1.356 0.015 0.049 0.064
1996 1.136 0.011 0.238 0.249
1995 0.963 0.013 0.176 0.189
1994 1.000 0.003 (0.038) (0.035)
Growth Fund/(1)/
1997 2.333 0.039 0.540 0.579
1996 2.176 0.047 0.386 0.433
1995 1.814 0.049 0.539 0.588
1994 1.939 0.043 (0.041) 0.002
1993 2.034 0.039 0.095 0.134
1992 1.976 0.034 0.105 0.139
1991 1.471 0.038 0.548 0.586
1990 1.558 0.041 (0.047) (0.006)
1989 1.308 0.043 0.289 0.332
1988 1.147 0.037 0.200 0.237
Equity Index Fund/(1)/
1997 2.165 0.034 0.664 0.698
1996 1.827 0.035 0.370 0.405
1995 1.468 0.035 0.474 0.509
1994 1.505 0.033 (0.018) 0.015
1993 1.409 0.032 0.102 0.134
1992 1.354 0.030 0.066 0.096
1991 1.080 0.032 0.279 0.311
1990 1.000 0.009 0.080 0.089
<CAPTION>
LESS DISTRIBUTIONS
-----------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS IN
YEAR ENDED INVESTMENT CAPITAL IN RETURN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
- ------------ ------ ----- ------ ------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $ -- $(0.182) $ (0.008)/(3)/ $ -- $(0.190) $ 0.188
1996 -- (0.153) -- -- (0.153) 0.189
1995 -- -- -- -- -- 0.451
1994 -- -- -- -- -- (0.034)
1993 (0.001) -- -- -- (0.001) 0.234
1992 (0.001) -- -- -- (0.001) 0.197
Select International
Equity Fund/(1)/
1997 (0.019) (0.046) (0.014)/(4)/ -- (0.079) (0.015)
1996 (0.012) (0.003) (0.014)/(4)/ -- (0.029) 0.220
1995 (0.011) (0.005) -- -- (0.016) 0.173
1994 (0.001) (0.001) -- -- (0.002) (0.037)
Growth Fund/(1)/
1997 (0.038) (0.458) -- -- (0.496) 0.083
1996 (0.048) (0.228) -- -- (0.276) 0.157
1995 (0.049) (0.177) -- -- (0.226) 0.362
1994 (0.043) (0.084) -- -- (0.127) (0.125)
1993 (0.039) (0.180) -- (0.010) (0.229) (0.095)
1992 (0.034) (0.047) -- -- (0.081) 0.058
1991 (0.039) (0.042) -- -- (0.081) 0.505
1990 (0.041) (0.040) -- -- (0.081) (0.087)
1989 (0.046) (0.036) -- -- (0.082) 0.250
1988 (0.037) (0.039) -- -- (0.076) 0.161
Equity Index Fund/(1)/
1997 (0.033) (0.077) -- -- (0.110) 0.588
1996 (0.035) (0.032) -- -- (0.067) 0.338
1995 (0.035) (0.047) (0.002)/(3)/ (0.066) (0.150) 0.359
1994 (0.033) (0.019) -- -- (0.052) (0.037)
1993 (0.031) (0.007) -- -- (0.038) 0.096
1992 (0.031) (0.010) -- -- (0.041) 0.055
1991 (0.032) (0.005) -- -- (0.037) 0.274
1990 (0.009) -- -- -- (0.009) 0.080
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
(A) Including reimbursements, waivers, 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) The Select Aggressive Growth Fund commenced operations on August 21, 1992.
The Select International Equity Fund commenced operations on May 2, 1994.
The Growth Fund changed Investment Sub-Adviser on April 1, 1988. The Equity
Index Fund commenced operations on September 28, 1990.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $(0.010) in 1997, $0.000 in 1993 and
$(0.001) in 1992 for Select Aggressive Growth Fund ; $0.015 in 1997, $0.011
in 1996 and $0.002 in 1994 for Select International Equity Fund; $0.038 in
1997, $0.046 in 1996 and $0.0.38 in 1993 for Growth Fund; and $0.031 in
1993, $0.028 in 1992 and $0.031 in 1991 for Equity Index Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
(5) Unaudited.
4
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<PAGE>
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ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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>
$ 2.225 18.71% $604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95% $0.0617
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113% 0.0597
1.848 32.28% 254,872 (0.07)% 1.09% -- 1.09% 1.00% 1.00% 104% --
1.397 (2.31)% 136,573 (0.21)% 1.16% -- 1.16% 1.00% 1.00% 100% --
1.431 19.51% 66,251 0.10% 1.19% -- 1.23% 1.00% 0.96% 76% --
1.197 19.85%** 9,270 0.34%* 1.35%* -- 1.88%* N/A N/A 33% --
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20% 0.0229
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18% 0.0248
1.136 19.63% 104,312 1.68% 1.24% -- 1.24% 1.00% 1.00% 24% --
0.963 (3.49)%** 40,498 0.87%* 1.50%* -- 1.78%* 1.00%* 0.72%* 19% --
2.416 25.14% 728,679 1.48% 0.47% 0.49% 0.49% 0.43% 0.43% 79% 0.0575
2.333 20.19% 556,751 2.04% 0.48% 0.51% 0.51% 0.44% 0.44% 72% 0.0576
2.176 32.80% 444,871 2.34% 0.54% -- 0.54% 0.46% 0.46% 64% --
1.814 0.16% 335,714 2.25% 0.56% -- 0.56% 0.48% 0.48% 46% --
1.939 6.66% 338,545 1.92% 0.54% -- 0.55% 0.49% 0.48% 42% --
2.034 7.11% 270,828 1.85% 0.58% -- 0.58% N/A N/A 19% --
1.976 40.44% 182,965 2.26% 0.57% -- 0.57% N/A N/A 24% --
1.471 (0.30)% 97,179 2.82% 0.60% -- 0.60% N/A N/A 39% --
1.558 25.64% 76,783 2.98% 0.71% -- 0.71% N/A N/A 33% --
1.308 20.80%/(5)/ 52,439 2.93% 0.75% -- 0.75% N/A N/A 99% --
2.753 32.41% 297,191 1.38% 0.44% 0.44% 0.44% 0.31% 0.31% 9% 0.0385
2.165 22.30% 151,130 1.79% 0.46% 0.46% 0.46% 0.32% 0.32% 12% 0.0395
1.827 36.18% 90,889 1.96% 0.55% -- 0.55% 0.34% 0.34% 8% --
1.468 1.06% 52,246 2.25% 0.57% -- 0.57% 0.35% 0.35% 7% --
1.505 9.53% 42,842 2.28% 0.57% -- 0.63% 0.35% 0.29% 4% --
1.409 7.25% 22,393 2.47% 0.57% -- 0.75% N/A N/A 6% --
1.354 29.16% 9,700 2.73% 0.55% -- 0.64% N/A N/A 6% --
1.080 8.90%** 5,469 3.39%* 0.38%* -- 0.38%* N/A N/A 0.24% --
</TABLE>
5
---------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(4)/ INVESTMENTS OPERATIONS
- ------------ ------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Investment Grade
Income Fund/(1)/
1997 $1.084 $0.071 $ 0.028 $ 0.099
1996 1.117 0.070 (0.033) 0.037
1995 1.012 0.071 0.106 0.177
1994 1.111 0.066 (0.099) (0.033)
1993 1.074 0.065 0.049 0.114
1992 1.085 0.075 0.013 0.088
1991 1.004 0.080 0.081 0.161
1990 1.011 0.083 (0.006) 0.077
1989 0.968 0.082 0.044 0.126
1988 0.974 0.084 (0.006) 0.078
Government
Bond Fund/(1)/
1997 1.036 0.061 0.011 0.072
1996 1.062 0.062 (0.026) 0.036
1995 0.997 0.062 0.066 0.128
1994 1.070 0.063 (0.073) (0.010)
1993 1.051 0.055 0.024 0.079
1992 1.047 0.057 0.009 0.066
1991 1.000 0.022 0.051 0.073
Money Market
Fund
1997 1.000 0.053 -- 0.053
1996 1.000 0.052 -- 0.052
1995 1.000 0.057 -- 0.057
1994 1.000 0.039 -- 0.039
1993 1.000 0.030 -- 0.030
1992 1.000 0.037 -- 0.037
1991 1.000 0.060 -- 0.060
1990 1.000 0.078 -- 0.078
1989 1.000 0.086 -- 0.086
1988 1.000 0.071 -- 0.071
<CAPTION>
LESS DISTRIBUTIONS
-------------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS IN
YEAR ENDED INVESTMENT CAPITAL IN RETURN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
- ------------ ------ ----- ------ ------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment Grade
Income Fund/(1)/
1997 $(0.071) $ -- $ -- $ -- $(0.071) $ 0.028
1996 (0.070) -- -- -- (0.070) (0.033)
1995 (0.071) -- (0.001)/(2)/ -- (0.072) 0.105
1994 (0.066) -- -- -- (0.066) (0.099)
1993 (0.065) (0.012) -- -- (0.077) 0.037
1992 (0.075) (0.024) -- -- (0.099) (0.011)
1991 (0.080) -- -- -- (0.080) 0.081
1990 (0.084) -- -- -- (0.084) (0.007)
1989 (0.083) -- -- -- (0.083) 0.043
1988 (0.084) -- -- -- (0.084) (0.006)
Government
Bond Fund/(1)/
1997 (0.061) -- -- -- (0.061) 0.011
1996 (0.062) -- -- -- (0.062) (0.026)
1995 (0.062) -- (0.001)/(2)/ -- (0.063) 0.065
1994 (0.063) -- -- -- (0.063) (0.073)
1993 (0.055) (0.003) -- (0.002) (0.060) 0.019
1992 (0.057) (0.005) -- -- (0.062) 0.004
1991 (0.022) (0.004) -- -- (0.026) 0.047
Money Market
Fund
1997 (0.053) -- -- -- (0.053) --
1996 (0.052) -- -- -- (0.052) --
1995 (0.057) -- -- -- (0.057) --
1994 (0.039) -- -- -- (0.039) --
1993 (0.030) -- -- -- (0.030) --
1992 (0.037) -- -- -- (0.037) --
1991 (0.060) -- -- -- (0.060) --
1990 (0.078) -- -- -- (0.078) --
1989 (0.086) -- -- -- (0.086) --
1988 (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) The Government Bond Fund commenced operations on August 26, 1991. The
Investment Grade Income Fund was formerly known as Income Appreciation Fund.
(2) Distributions in excess of net investment income.
(3) Unaudited.
(4) Net investment income per share before reimbursement of fees by the
investment adviser were $0.065 in 1993 for Investment Grade Income Fund;
$0.055 in 1993 and $0.056 in 1992 for Government Bond Fund; and $0.030 in
1993 and $0.084/(3)/ in 1988 for Money Market Fund.
6
- ---------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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>
$ 1.112 9.45% $189,503 6.48% 0.51% 0.51% 0.51% 0.41% 0.41% 48% $ --
1.084 3.56% 157,327 6.50% 0.52% 0.52% 0.52% 0.40% 0.40% 108% --
1.117 17.84% 141,625 6.66% 0.53% -- 0.53% 0.41% 0.41% 126% --
1.012 (2.96)% 109,972 6.25% 0.58% -- 0.58% 0.42% 0.42% 129% --
1.111 10.80% 107,124 6.16% 0.54% -- 0.55% 0.45% 0.44% 55% --
1.074 8.33% 52,874 7.25% 0.59% -- 0.59% N/A N/A 71% --
1.085 16.75% 29,018 8.10% 0.60% -- 0.60% N/A N/A 52% --
1.004 8.02% 18,226 9.14% 0.56% -- 0.56% N/A N/A 5% --
1.011 13.52% 13,171 8.67% 0.78% -- 0.78% N/A N/A 4% --
0.968 8.20%/(3)/ 8,951 8.57% 0.77% -- 0.77% N/A N/A 12% --
1.047 7.08% 55,513 5.92% 0.67% 0.67% 0.67% 0.50% 0.50% 56% --
1.036 3.51% 46,396 5.90% 0.66% 0.66% 0.66% 0.50% 0.50% 112% --
1.062 13.06% 45,778 5.91% 0.69% -- 0.69% 0.50% 0.50% 180% --
0.997 (0.88)% 42,078 5.60% 0.70% -- 0.70% 0.50% 0.50% 106% --
1.070 7.51% 77,105 5.51% 0.61% -- 0.62% 0.50% 0.49% 35% --
1.051 6.59% 33,689 6.13% 0.68% -- 0.69% N/A N/A 67% --
1.047 7.60%** 7,591 5.55%* 0.54%* -- 0.54%* N/A N/A 65% --
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%/(3)/ 7,156 7.13% 0.60% -- 0.71% N/A N/A N/A --
</TABLE>
7
---------------------------
Allmerica Investment Trust
<PAGE>
HOW ARE THE FUNDS MANAGED?
The overall responsibility for the supervision of the affairs of the Trust
vests in the Board of Trustees of the Trust which meets on a quarterly basis.
Allmerica Financial Investment Management Services, Inc. (the "Manager") is
responsible for the management of the Trust's day-to-day business affairs and
has general responsibility for the management of the investments of the Funds.
The Manager, at its expense, has contracted with certain Sub-Advisers to manage
the investments of the Funds, subject to the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act").
The Manager is an indirect, wholly-owned subsidiary of Allmerica Financial
Company ("AFC"), a Delaware holding company for a group of affiliated companies,
the largest of which is First Allmerica, a life insurance company organized in
Massachusetts in 1844. The Manager, AFC and First Allmerica are located at 440
Lincoln Street, Worcester, Massachusetts 01653. The Manager succeeded Allmerica
Investment Management Company, Inc. ("AIMCO") as manager of the Trust on April
16, 1998. As part of a reorganization, AIMCO transferred to the Manager that
portion of its business relating to the provision of investment advisory
services exclusively to investment companies registered under the 1940 Act such
as the Trust while AIMCO retained its financial planning business. The same
personnel and procedures previously employed by AIMCO to service the Trust will
be used by the Manager. The Manager also serves as investment manager of the
Palladian Trust, another open-end investment management company.
The Manager has entered into Sub-Adviser Agreements for the management of the
investments of each of the Funds. Each Sub-Adviser, which has been selected on
the basis of various factors including management experience, investment
techniques, and staffing, is authorized to engage in portfolio transactions on
behalf of the applicable Fund subject to such general or specific instructions
as may be given by the Trustees and/or the Manager. The terms of a Sub-Adviser
Agreement cannot be changed materially without the approval of a majority
interest of the Shareholders of the affected Fund. The Trust and Manager have
filed an application with the SEC for an order of exemption that would permit
the Manager to enter into and materially amend sub-advisory agreements with non-
affiliated Sub-Advisers without obtaining shareholder approval. If the requested
relief is granted by the SEC, the Manager will have the ability, subject to
approval of the Trustees, to hire and terminate Sub-Advisers to the Funds and to
change materially the terms of the Sub-Advisory Agreements, including the
compensation paid to the Sub-Advisers, without the approval of the shareholders
of the Funds. The Sub-Advisers have been selected by the Manager and the
Trustees in consultation with RogersCasey & Associates, Inc. ("RogersCasey"), a
leading pension consulting firm. The cost of such consultation is borne by the
Manager.
RogersCasey provides consulting services to pension plans representing over
$500 billion in total assets and, in its consulting capacity, monitors the
investment performance of over 1,800 investment advisers. From time to time,
specific clients of RogersCasey and the Sub-Advisers will be named in sales
materials. At times, RogersCasey assists in the development of asset allocation
strategies which may be used by shareholders in the diversification of their
portfolios across different asset classes.
Ongoing performance of the Sub-Adviser is reviewed and evaluated by a
committee of the Board of Trustees, which also includes members who are officers
of First Allmerica or its affiliates, in consultation with RogersCasey.
Historical performance data for the Funds is set forth under "Financial
Highlights." The Manager is responsible for the payment of all fees to the Sub-
Advisers. The Sub-Advisers for each of the Funds are as follows:
<TABLE>
<S> <C>
Select Aggressive Growth Fund Nicholas-Applegate Capital Management, L.P.
Select International Equity Fund Bank of Ireland Asset Management (U.S.) Limited
Growth Fund Miller Anderson & Sherrerd, LLP
Equity Index Fund Allmerica Asset Management, Inc.
Investment Grade Income Fund Allmerica Asset Management, Inc.
Government Bond Fund Allmerica Asset Management, Inc.
Money Market Fund Allmerica Asset Management, Inc.
</TABLE>
For a sample listing of certain of the independent Sub-Adviser's clients, see
"Investment Management and Other Services" in the SAI. For more information on
the Sub-Advisers, see "What Are The Investment Objectives and Policies?" and
"Fund Manager Information."
The Manager also 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 each of the Funds and is entitled to
receive an administrative fee and certain out-of-pocket expenses. The Manager is
responsible for the payment of the administrative fee to Investor Services
Group.
8
- ---------------------------
Allmerica Investment Trust
<PAGE>
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?
Each Fund has a separate investment objective and policies designed to meet
different investment and financial needs, as described below. There is no
assurance that a Fund will achieve its investment objective.
A Fund's investment objective and investment policies are not fundamental and
may be changed without shareholder approval.
SELECT AGGRESSIVE GROWTH FUND
Investment Objective: The Select Aggressive Growth Fund seeks above-average
capital appreciation by investing primarily in common stocks of companies which
are believed to have significant potential for capital appreciation.
Sub-Adviser: Nicholas-Applegate Capital Management, L.P. ("NACM") serves as Sub-
Adviser to the Select Aggressive Growth Fund. NACM is an investment manager
supervising accounts with assets totaling approximately $30 billion in total
assets as of December 31, 1997. NACM's clients are primarily major corporate
employee benefit funds, public employee retirement plans, foundations and
endowment funds, investment companies and individuals. Founded in 1984, NACM is
located at 600 West Broadway, Suite 2900, San Diego, California 92101.
Investment Policies: Under normal circumstances, at least 65% of the assets of
the Select Aggressive Growth Fund will be invested in equity securities
consisting of common stocks, securities convertible into common stocks
(including bonds, notes and preferred stocks), and warrants. The Fund's assets
also may be invested in other debt securities and preferred stocks when such
securities are believed appropriate in light of the Fund's investment objective
and market conditions.
The selection of securities is made solely on the basis of their potential for
capital appreciation. Dividend and interest income from portfolio securities, if
any, is incidental to the Fund's investment objective. While investments may be
made in well-known and established companies, a significant portion of the
Fund's investments is expected to be in securities of newer and relatively
unseasoned companies or companies which represent new or changing industries.
At any given point, a substantial portion of the Fund's equity investments may
be in securities which are not listed for trading on national securities
exchanges and which, although publicly traded, may be less liquid than
securities issued by larger, more seasoned companies which trade on national
securities exchanges. Up to 15% of the Fund's net assets may be invested in
securities which are illiquid.
Securities of newer companies may be closely held with only a small portion of
their outstanding securities owned by the general public. Newer companies may
have relatively small revenue, lack depth of management and have a small share
of the market for their products or services; thus, they may be more vulnerable
to changes in economic conditions, market fluctuations and other factors
affecting the profitability or marketability of companies. Due to these and
other factors, the price movement of the securities held by the Fund can be
expected to be more volatile than is the case for the market as a whole, and the
net asset value of a share of the Fund may fluctuate significantly.
Consequently, the Fund should not be considered suitable for investors who are
unable or unwilling to assume the risk of loss inherent in an aggressive growth
portfolio, nor should investment in the Fund be considered a balanced or
complete investment program.
When NACM determines that market conditions warrant a temporary defensive
position, the Fund may invest without limitation in high-grade, fixed-income
securities or U.S. Government securities or hold assets in cash or cash
equivalents. For hedging purposes, the Fund may engage in the options and
futures strategies described under "Certain Investment Strategies and
Policies."
The Fund may also invest up to 25% of its assets in foreign securities (not
including its investments in American Depositary Receipts ("ADRs")).
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 95%. The portfolio turnover rate was the result of the Sub-
Adviser's investment process which typically results in above-average portfolio
turnover. Portfolio turnover rates may vary greatly from year to year. A high
portfolio turnover rate will likely result in greater brokerage costs to the
Fund.
9
---------------------------
Allmerica Investment Trust
<PAGE>
SELECT INTERNATIONAL EQUITY FUND
Investment Objective: The Select International Equity Fund seeks maximum long-
term total return (capital appreciation and income) primarily by investing in
common stocks of established non-U.S. companies.
Sub-Adviser: Bank of Ireland Asset Management (U.S.) Limited ("BIAM") serves as
Sub-Adviser for the Select International Equity Fund. BIAM is an indirect,
wholly-owned subsidiary of Bank of Ireland. Its main offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. Its U.S. headquarters are at 20 Horseneck
Lane, Greenwich, CT 06830. Bank of Ireland provides investment management
services through a network of affiliated companies, including BIAM which
represents North American clients. As of December 31, 1997, Bank of Ireland
managed approximately $27 billion in global securities for Irish, United
Kingdom, Australian, South African, Canadian and U.S. clients.
Investment Policies: To achieve its objective, the Select International Equity
Fund will invest primarily in common stocks of established non-U.S. companies.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in the securities of companies domiciled in at least five foreign
countries, not including the United States. The Fund may also acquire fixed-
income debt securities. It will do so, at the discretion of BIAM, primarily for
defensive purposes. The Fund may invest up to 15% of its net assets on
securities which are illiquid.
The Fund's investments may include ADRs which may be sponsored or unsponsored
by the underlying issuer. The Fund may also utilize European Depositary Receipts
("EDRs"), which are similar to ADRs, in bearer form, designed for use in the
European securities market and Global Depositary Receipts ("GDRs"). Investments
in foreign securities carry additional risks not present in domestic securities.
See "Certain Investment Strategies and Policies - Foreign Securities." For
hedging purposes, the Fund may engage in the options and futures strategies
described under "Certain Investment Strategies and Policies." Certain state
insurance regulations may impose additional restrictions on the Fund's holdings
of foreign securities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 20%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
GROWTH FUND
Investment Objective: The Growth Fund seeks to achieve long-term growth of
capital through investments primarily in common stocks and securities
convertible into common stocks that are believed to represent significant
underlying value in relation to current market prices and which are experiencing
positive earnings revisions. Realization of current income, if any, is
incidental to this objective.
Sub-Adviser: Miller Anderson & Sherrerd, LLP ("MAS") serves as Sub-Adviser for
the Growth Fund. MAS, which is a wholly owned indirect subsidiary of Morgan
Stanley, Dean Witter, Discover & Co., was organized in 1969 and is located at
One Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides investment
counseling services to employee benefit plans, endowment funds, foundations and
other institutional investors and had over $60 billion in assets under
management as of December 31, 1997. MAS is the adviser of the MAS Funds, a
registered investment company offering investment alternatives to institutional
clients with a minimum initial investment of $1 million. MAS also manages
certain assets for First Allmerica and its affiliates.
Investment Policies: The Growth Fund is not limited to investments in any
particular type of company and may invest in any company which, in the opinion
of management, is likely to further its investment objective. The Growth Fund
will pursue its investment objective by maintaining a flexible position
regarding the type of companies, as well as the types of securities, in which it
will invest. Investments may include, but are not limited to, developing or
well-established companies, whether small or large. It is anticipated that there
will be a mix of assets in the Growth Fund. For example, portions of the Growth
Fund may be invested in equity securities of good quality or in well-established
companies considered to represent good value, based on factors including
historical investment standards (such as price/book value ratios and
price/earnings ratios) or in smaller emerging growth companies which are in the
development stage and are expected to achieve above-average earnings growth
because of special factors (such as changes in the economy, the relative
attractiveness of the various securities markets or changes in consumer demand).
The Growth Fund proposes to keep its assets fully invested, but may maintain
reasonable amounts in cash or in high-grade, short-term debt securities to meet
current expenses and anticipated redemptions, and during temporary periods
pending investment in accordance with its policies. The term "high-grade, short-
term debt securities" means the money market instruments described under the
Investment Grade Income Fund's Investment Policies.
10
- ---------------------------
Allmerica Investment Trust
<PAGE>
The Growth Fund normally will invest substantially all of its assets in
equity-type securities, including common stocks, warrants (which are options to
purchase common stock at specified prices during a specified time period with
the investment risk that the market value of the underlying common stock may not
be high enough in relation to the warrant exercise price to justify purchase
pursuant to the terms of the warrant), preferred stocks and debt securities
convertible into or carrying rights to purchase common stock or to participate
in earnings, and real estate securities to the extent permitted by paragraph
four under "Investment Restrictions" in the SAI. In periods considered by
management to warrant a more defensive position, the Growth Fund may place a
larger proportion of its portfolio in high-grade preferred stocks, bonds or
other fixed income securities, including U.S. Government securities, whether or
not convertible into stock or with rights attached, or retain cash. The Fund may
engage in the options and futures strategies described under "Certain Investment
Strategies and Policies."
The Growth Fund may invest in both listed and unlisted securities. The Growth
Fund also may invest in foreign as well as domestic securities. The Fund may
invest up to 25% of its assets in foreign securities (not including its
investments in ADRs). The Growth Fund will not concentrate its foreign
investments in any particular foreign country, or limit its investments to
issuers listed on particular exchanges or traded in particular money market
centers. Investments in foreign securities carry additional risks not present in
domestic securities. See "Certain Investment Strategies and Policies." The Sub-
Adviser will consider these and other factors before investing and will not
cause the Growth Fund to invest in foreign securities unless, in its opinion,
such investments will meet the standards and objectives of the Growth Fund.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 79%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
EQUITY INDEX FUND
Investment Objective: The Equity Index Fund seeks to achieve investment results
that correspond to the aggregate price and yield performance of a representative
selection of common stocks that are publicly traded in the United States.
Sub-Adviser: Allmerica Asset Management, Inc. ("AAM") serves as Sub-Adviser to
the Equity Index Fund as well as the Investment Grade Income Fund, Government
Bond Fund and Money Market Fund, other series of the Trust. AAM, an indirect,
wholly-owned subsidiary of AFC, was incorporated in 1993 and is located at 440
Lincoln Street, Worcester, Massachusetts 01653. As of December 31, 1997, AAM had
approximately $11 billion in assets under management. AAM serves as investment
adviser to First Allmerica's General Account and to a number of affiliated
insurance companies and other affiliated accounts and as Adviser to Allmerica
Securities Trust, a diversified, closed-end investment management company.
Investment Policies: The Equity Index Fund will seek to achieve its objective by
attempting to replicate the aggregate price and yield performance of the
Standard & Poor's Composite Index of 500 Stocks ("S&P 500"). The Fund uses the
S&P 500 as the performance standard because it represents over 70 percent of the
total market value of all publicly-traded common stocks in the U.S., is well-
known to investors and, in the opinion of the Sub-Adviser, is representative of
the performance of common stocks publicly traded in the United States. Many, but
not all, of the stocks in the S&P 500 are issued by companies that are among the
500 largest as measured by the aggregate market value of their outstanding stock
(market price per share multiplied by number of shares outstanding). Inclusion
of a stock in the S&P 500 does not imply that S&P has endorsed it as an
investment. With respect to investing in common stocks, there can be no
assurance of capital appreciation and there is a substantial risk of market
decline.
The method used to select investments for the Fund involves investing in
common stocks in approximately the order of their weightings in the S&P 500
Index. In addition, the Fund purchases stocks with smaller weightings in order
to represent other sectors of the S&P 500 for diversification purposes.
The Equity Index Fund will invest only in those stocks, and in such amounts,
as its Sub-Adviser determines to be necessary or appropriate for the Fund to
approximate the performance of the S&P 500. Under normal circumstances, it is
expected that the Fund will hold approximately 500 different stocks included in
the S&P 500. The Fund may compensate for the omission of a stock that is
included in the S&P 500, or for purchasing stocks in other than the same
proportions that they are represented in the S&P 500, by purchasing stocks that
are believed to have characteristics that correspond to those of the omitted
stocks. The Fund may invest in short-term debt securities to maintain liquidity
or pending investment in stocks. The Fund also may engage in the options and
futures strategies described under "Certain Investment Strategies and Policies."
The Fund may invest up to 25% of its assets in foreign securities (not including
its investments in ADRs). The Fund may invest up to 15% of its net assets in
securities which are illiquid.
11
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Allmerica Investment Trust
<PAGE>
Because of its policy of tracking the S&P 500, the Equity Index Fund is not
managed according to traditional methods of active investment management, which
involve the buying and selling of securities based upon investment analysis of
economic, financial and market factors. Consequently, the projected adverse
financial performance of a company normally would not result in the sale of the
company's stock and projected superior financial performance by a company
normally would not lead to an increase in the holdings of the company. From time
to time, the Sub-Adviser may make adjustments in the portfolio because of cash
flows, mergers, changes in the composition of the S&P 500 and other similar
reasons. Portfolio turnover is expected to be lower than that of most funds
investing in common stock. For the fiscal year ended December 31, 1997, the
portfolio turnover rate for the Fund was 9%.
The Equity Index Fund's ability to duplicate the performance of the S&P 500
will be influenced by the size and timing of cash flows into or out of the Fund
the liquidity of the securities included in the S&P 500, transaction and
operating expenses and other factors. In addition, the Fund will incur expenses
(including advisory and administrative fees) that are not reflected in the
performance results of the S&P 500. These factors, among others, may result in
"tracking error," which is a measure of the degree to which the Fund's results
differ from the results of the S&P 500. Due to such factors, the return of the
Fund may be lower than the return of the S&P 500.
Tracking error is measured by the difference between total return for the S&P
500 with dividends reinvested and total return for the Fund with dividends
reinvested after deductions of transaction and operating expenses. For the 12
months ended December 31, 1997, the S&P 500 gained 33.36% versus a gain of
32.41% for the Equity Index Fund producing a tracking error of 0.95% before
advisory and administrative fees. Tracking error is monitored by the Sub-Adviser
on a regular basis. All tracking error deviations are reviewed to determine the
effectiveness of investment policies and techniques. If the tracking error
deviation exceeds industry standards for the Fund's asset size, the Sub-Adviser
will bring the deviation to the attention of the Trustees.
While the Board of Trustees of the Trust has selected the S&P 500 as the index
the Fund will attempt to replicate, the Trustees reserve the right to select
another index at any time without seeking shareholder approval if they believe
that the S&P 500 no longer represents a broad spectrum of common stocks that are
publicly traded in the United States or if there are legal, economic, or other
factors limiting the use of any particular index. If the Trustees change the
index which the Equity Index Fund attempts to replicate, the Equity Index Fund
may incur significant transaction costs in switching from one index to another.
S&P is not in any way affiliated with the Equity Index Fund or the Trust.
"Standard & Poor's," "Standard & Poor's 500" and "500" are trademarks of S&P.
INVESTMENT GRADE INCOME FUND
Investment Objective: The Investment Grade Income Fund seeks as high a level of
total return, which includes capital appreciation as well as income, as is
consistent with prudent investment management.
Sub-Adviser: AAM serves as Sub-Adviser to the Investment Grade Income Fund. See
"Equity Index Fund" for more information about AAM.
Investment Policies: The Fund will invest its assets in the following debt
securities and money market instruments.
Debt Securities:
(a) Obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities;
(b) Debt securities which are rated Aaa, Aa, A, or Baa by Moody's Investors
Service, Inc. ("Moody's"); AAA, AA, A, or BBB by Standard & Poor's Ratings
Service, a division of McGraw-Hill Companies, Inc. ("S&P"); or unrated but
determined by the Sub-Adviser to be of comparable quality;
(c) Obligations (payable in U.S. dollars) of, or guaranteed by, the Government
of Canada or of a Province of Canada or any instrumentality or political
subdivision thereof.
Money market instruments include obligations issued or guaranteed by the
United States Government, its agencies, or instrumentalities; commercial paper
rated Prime-1 by Moody's, or A-1 by S&P; or unrated, but determined by the Sub-
Adviser to be of comparable quality; bankers acceptances or negotiable
certificates of deposit issued by the 25 largest U.S. banks (in terms of
deposits); and cash and cash equivalents.
12
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Allmerica Investment Trust
<PAGE>
The Fund may engage in the options and futures strategies described under
"Certain Investment Strategies and Policies."
The debt securities in which the Fund may invest are considered "investment
grade" in that they generally are suitable for purchase by prudent investors.
However, the lowest category of investment grade securities (rated Baa by
Moody's or BBB by S&P) may have speculative characteristics, such that changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case of
debt securities with higher ratings. The portfolio of the Fund is managed
actively by AAM, as Sub-Adviser, in order to anticipate events leading to price
or ratings changes. If the rating of a security falls below investment grade, or
an unrated security is deemed to have fallen below investment grade, AAM
analyzes relevant economic and market data in making a determination of whether
to retain or dispose of the investment. The performance of the securities in the
portfolio is monitored continuously, and they are purchased and sold as
conditions warrant and permit.
The Fund may invest up to 25% of its assets in foreign securities (not
including its investments in ADRs) including those listed in (c) above. The Fund
may invest up to 15% of its net assets in securities which are illiquid.
Obligations in which the Fund may invest include debt obligations of
supranational entities. Supranational entities include international
organizations designed or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Obligations of supranational entities may be supported by
appropriated but unpaid commitments of their member countries, and there is no
assurance that these commitments will be undertaken or met in the future. The
Fund may not invest more than 25% of its assets in debt obligations of
supranational entities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 48%. The portfolio turnover rate for the Fund may vary greatly from
year to year. A high portfolio turnover rate may result in greater brokerage
costs to the Fund.
See the Appendix to the Prospectus for an explanation of the ratings of
Moody's and S&P.
GOVERNMENT BOND FUND
Investment Objective: The Government Bond Fund seeks high income, preservation
of capital, and maintenance of liquidity primarily through investments in debt
instruments issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government securities") and in related options,
futures, and repurchase agreements. Under normal conditions, at least 80% of the
Fund's assets will be invested in U.S. Government securities.
Sub-Adviser: AAM serves as Sub-Adviser to the Government Bond Fund. See "Equity
Index Fund" for more information about AAM.
Investment Policies: Some U.S. Government securities, such as Treasury bills,
notes, and bonds, which differ only in their interest rates, maturities, and
times of issuance, are supported by the full faith and credit of the United
States. Other U. S. Government securities are supported by (i) the right of the
issuer to borrow from the U.S. Treasury, (ii) discretionary authority of the
U.S. Government to purchase the obligations of the agency or instrumentality, or
(iii) only the credit of the instrumentality itself. No assurances can be given
that the U.S. Government would provide financial support to U.S. Government
sponsored instrumentalities if it is not obligated to do so by law. The Fund may
invest in mortgage-backed government securities, including pass-through
securities and participation certificates of the Government National Mortgage
Association ("Ginnie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie
Mac") and the Federal National Mortgage Association ("Fannie Mae").
The Government Bond Fund may invest in any other security or agreement
collateralized or otherwise secured by U.S. Government securities. The Fund also
may invest in separately traded principal and interest components of securities
guaranteed or issued by the U.S. Treasury if such components are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities Program. The Fund may enter into repurchase agreements and from time
to time may have temporary investments in short-term debt obligations (including
certificates of deposit, bankers acceptances and commercial paper) pending the
making of other investments or for liquidity purposes.
The Government Bond Fund may engage in several active management strategies,
including the lending of portfolio securities, forward commitment purchases of
securities, writing covered call and covered put options on U.S. Government
securities, purchasing such call and put options and entering into closing
purchase and sale transactions. The Fund also may engage in the options and
futures strategies described under "Certain Investment Strategies and Policies."
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
13
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Allmerica Investment Trust
<PAGE>
Obligations in which the Fund may invest include debt obligations of
supranational entities. Supranational entities include international
organizations designed or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Obligations of supranational entities may be supported by
appropriated but unpaid commitments of their member countries, and there is no
assurance that these commitments will be undertaken or met in the future. The
Fund may not invest more than 25% of its assets in debt obligations of
supranational entities.
U.S. Government securities may be purchased or sold without regard to the
length of time they have been held to attempt to take advantage of short-term
differentials in yields, with the objective of seeking income while conserving
capital. While short-term trading increases portfolio turnover, the Government
Bond Fund incurs little or no brokerage costs for U.S. Government securities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for the
Fund was 56%.
MONEY MARKET FUND
Investment Objective: The Money Market Fund seeks to obtain maximum current
income consistent with preservation of capital and liquidity.
Sub-Adviser: AAM serves as Sub-Adviser to the Money Market Fund. See "Equity
Index Fund" for more information about AAM.
Investment Policies: The Fund seeks to achieve its objective by investing in the
following high quality money market instruments:
(a) Obligations issued or guaranteed by the United States Government, its
agencies, or instrumentalities;
(b) Commercial paper which meets the ratings requirements as set forth in the
paragraph below;
(c) Obligations of banks or savings and loan associations (such as bankers
acceptances and certificates of deposit, including dollar-denominated
obligations of foreign branches of U.S. banks ("Eurodollars") and U.S.
branches of foreign banks if such U.S. branches are subject to state
banking requirements and Federal Reserve reporting requirements) which at
the date of the investment have deposits of at least $1 billion as of
their most recently published financial statements;
(d) Repurchase agreements with respect to obligations described under (a)
above (such obligations subject to repurchase agreement may bear
maturities of more than one year) (For more information concerning
repurchase agreements, see "Certain Investment Strategies and Policies.");
and
(e) Cash and cash equivalents.
The Money Market Fund will not purchase any security unless (i) the security
has received the highest or second highest quality rating by at least two NRSROs
or by one NRSRO if only one has rated the security, or (ii) the security is
unrated and in the opinion of AAM, as Sub-Adviser, in accordance with guidelines
adopted by the Trustees, is of a quality comparable to one of the two highest
ratings of an NRSRO. These standards must be satisfied at the time an investment
is made. If the quality of the investment later declines, the Fund may continue
to hold the investment, but the Trustees will evaluate whether the security
continues to present minimal credit risks. See the Appendix for an explanation
of NRSRO ratings.
The Fund will limit its portfolio investments to securities with a remaining
maturity of 397 days as of the time of purchase, in accordance with the
Trustees' guidelines. The portfolio will be managed so as to maintain a dollar
weighted maturity of 90 days or less. In order to maximize the yield on its
assets, the Fund intends to be as fully invested at all times as is reasonably
practicable. There is always the risk that the issuer of an instrument may be
unable to make payment upon maturity.
The Fund may invest up to 25% of its assets in U.S. dollar denominated foreign
securities (not including its investments in ADRs). The Fund may invest up to
10% of its net assets in securities which are illiquid.
MANAGEMENT FEES AND EXPENSES
Under its Management Agreement with the Trust, the Manager is obligated to
perform certain administrative and management services for the Trust; furnishes
to the Trust all necessary office space, facilities, and equipment; and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager. Other than the expenses specifically assumed by the Manager under the
Management Agreement, all expenses incurred in the operation of the Trust are
borne by the Trust, including fees and expenses associated with the registration
and qualification of the Trust's shares under the Securities Act of 1933 (the
"1933 Act"); other fees
14
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Allmerica Investment Trust
<PAGE>
payable to the SEC; independent accountant, legal and custodian fees;
association membership dues; taxes; interest; insurance premiums; brokerage
commissions; fees and expenses of the Trustees who are not affiliated with the
Manager; expenses for proxies, prospectuses and reports to shareholders; Fund
recordkeeping expenses and other expenses.
For its services to the Funds, the Manager receives fees computed daily at an
annual rate based on the average daily net asset value of each Fund as set forth
below:
<TABLE>
<CAPTION>
SELECT SELECT EQUITY INVESTMENT
AGGRESSIVE INTERNATIONAL GROWTH INDEX GRADE
GROWTH FUND EQUITY FUND FUND FUND INCOME FUND
----------- ----------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Manager Fee (1) (1) (1) (2) (3)
<CAPTION>
GOVERNMENT MONEY
BOND MARKET
FUND FUND
---- ----
<S> <C> <C>
Manager Fee 0.50% (2)
</TABLE>
(1) The Manager's fees for the Select Aggressive Growth Fund, Select
International Equity Fund and Growth Fund, computed daily at an annual rate
based on the average daily net assets of each Fund, are based on the
following schedule:
<TABLE>
<CAPTION>
SELECT
SELECT AGGRESSIVE INTERNATIONAL
ASSETS GROWTH FUND EQUITY FUND GROWTH FUND
------------ ----------- ----------- -----------
<S> <C> <C> <C>
First $100 Million....... 1.00% 1.00% 0.60%
Next $150 Million........ 0.90% 0.90% 0.60%
Next $250 Million........ 0.85% 0.85% 0.40%
Over $500 Million........ 0.85% 0.85% 0.35%
</TABLE>
(2) The Manager's fees for the Equity Index Fund and Money Market Fund, computed
daily at an annual rate based on the average daily net assets of each Fund,
are based on the following schedule:
<TABLE>
<CAPTION>
EQUITY MONEY
INDEX MARKET
ASSETS FUND FUND
------ ---- ----
<S> <C> <C>
First $50 Million.................. 0.35% 0.35%
Next $200 Million.................. 0.30% 0.25%
Over $250 Million.................. 0.25% 0.20%
</TABLE>
(3) The Manager's fees for the Investment Grade Income Fund, computed daily at
an annual rate based on the average daily net assets of each Fund, are based
on the following schedule:
<TABLE>
<CAPTION>
INVESTMENT
GRADE
ASSETS INCOME FUND
------ -----------
<S> <C>
First $50 Million.................. 0.50%
Next $50 Million.................. 0.45%
Over $100 Million.................. 0.40%
</TABLE>
The Manager is responsible for the payment of all fees to the Sub-Advisers.
The Manager pays each Sub-Adviser fees computed daily at an annual rate based on
the average daily net asset value of each Fund as set forth below. In certain
Funds, Sub-Adviser fees vary according to the level of assets in such Funds,
which will reduce the fees paid by the Manager as Fund assets grow but will not
reduce the operating expenses of such Funds.
15
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Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
SELECT SELECT EQUITY INVESTMENT
AGGRESSIVE INTERNATIONAL GROWTH INDEX GRADE
GROWTH FUND EQUITY FUND FUND FUND INCOME FUND
----------- ----------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Sub-Adviser Fee (4) (5) (6) 0.10% 0.20%
<CAPTION>
GOVERNMENT MONEY
BOND MARKET
FUND FUND
---- ----
<S> <C> <C>
Sub-Adviser Fee 0.20% 0.10%
</TABLE>
(4) For its services, NACM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Aggressive Growth Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million.................. 0.60%
Next $150 Million.................. 0.55%
Next $250 Million.................. 0.50%
Over $500 Million.................. 0.45%
</TABLE>
(5) For its services, BIAM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select International Equity
Fund, under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million.................. 0.45%
Next $50 Million.................. 0.40%
Over $100 Million.................. 0.30%
</TABLE>
(6) For its services, MAS will receive a fee based on the aggregate assets of
the Growth Fund and certain other accounts of the Manager and its affiliates
which are managed by MAS, under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million.................. 0.50%
Next $50 Million.................. 0.375%
Next $400 Million.................. 0.25%
Next $350 Million.................. 0.20%
Over $850 Million.................. 0.15%
</TABLE>
For the fiscal year ended December 31, 1997, each Fund paid the Manager gross
fees before reimbursement at the following effective rates based on the Fund's
average daily net assets:
<TABLE>
<CAPTION>
FUND RATE
---- ----
<S> <C>
Select Aggressive Growth Fund........................ 0.95%
Select International Equity Fund..................... 0.97%
Growth Fund.......................................... 0.43%
Equity Index Fund.................................... 0.31%
Investment Grade Income Fund......................... 0.41%
Government Bond Fund................................. 0.50%
Money Market Fund.................................... 0.27%
</TABLE>
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Allmerica Investment Trust
<PAGE>
The following table shows voluntary expense limitations which the Manager has
declared for each Fund and the operating expenses incurred for the fiscal year
ended December 31, 1997 for each Fund):
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY ASSETS
----------------------------------
VOLUNTARY EXPENSE OPERATING
FUND LIMITATIONS EXPENSES+
---- ----------- ---------
<S> <C> <C>
Select Aggressive Growth Fund 1.35% 0.99%
Select International Equity Fund 1.50% 1.15%
Growth Fund 1.20% 0.47%
Equity Index Fund 0.60% 0.44%
Investment Grade Income Fund 1.00% 0.51%
Government Bond Fund 1.00% 0.67%
Money Market Fund 0.60% 0.35%
</TABLE>
- ---------------------------------------
+ Including reductions such as directed brokerage credits. See "Brokerage
Allocation - Directed Brokerage Program" in the SAI.
The Manager will voluntarily reimburse its fees and any expenses above the
expense limitations. The expense limitations are voluntary and may be removed at
any time after a Fund's first fiscal year of operations with notice to existing
shareholders. The Manager reserves the right to recover from a Fund any fees,
within a current fiscal year period, which were reimbursed in that same year to
the extent that total annual expenses did not exceed the applicable expense
limitation. The expenses which are subject to the voluntary expense limitations
include management fees, independent accountant, legal and custodian fees;
recordkeeping expenses; fees and expenses of Trustees who are not affiliated
with the Manager; association membership dues, insurance; expenses for proxies,
prospectuses and reports to shareholders and fees associated with the
registration of Fund shares. Non-recurring and extraordinary expenses generally
are excluded in the determination of expense ratios of the Funds for purposes of
determining any applicable expense waiver or reimbursement. Quotations of yield
or total return for any period when an expense limitation is in effect will be
greater than if the limitation had not been in effect.
FUND MANAGER INFORMATION
The following individuals are primarily responsible for the day-to-day
management of the particular Funds as indicated below:
The following individuals have served as members of a committee of fund
managers for the SELECT AGGRESSIVE GROWTH FUND since March 1994:
Lawrence S. Speidell is a Partner and Director of Global/Systematic Portfolio
Management and Research at NACM. Prior to joining NACM in 1994, Mr. Speidell
spent ten years with Batterymarch Financial Management. He was also Senior Vice
President and Portfolio Manager at Putnam Management Company from 1971 to 1983.
John J. Kane is a Partner and Senior Portfolio Manager for the U.S. Systematic
portfolios at NACM. He has 28 years of economic/investment experience. Prior to
joining NACM in 1994, Mr. Kane was employed by ARCO Investment Management
Company and General Electric Company.
Mark W. Stuckelman, Portfolio Manager, U.S. Systematic, joined NACM in 1995.
Prior to joining NACM, he was employed for five years with Wells Fargo Bank's
Investment Management Group, Fidelity Management Trust Co., and BARRA, Inc.
The following portfolio managers are involved in the investment process
utilized for the SELECT INTERNATIONAL EQUITY FUND:
Christopher Reilly, Chief Investment Officer, joined BIAM in 1980 and has had
overall responsibility for asset management since 1985. Previously, he worked
in the United Kingdom in stockbrokering and investment management.
Denis Donovan, Director-Portfolio Management, received an MBA from University
College Dublin. Prior to joining BIAM in 1985, he spent more than 13 years in
the money market and foreign exchange operations of the Central Bank of
Ireland, the Irish equivalent of the U.S. Federal Reserve. He has overall
responsibility for the portfolio management function for all of BIAM's client
base.
17
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Allmerica Investment Trust
<PAGE>
Peter Wood joined BIAM in 1985 after spending five years with another leading
investment management firm. He is responsible for portfolio construction.
Jane Neill, Senior Equity Analyst, joined BIAM in 1994. Previously, she was
Chief Investment Officer with another leading Irish investment management
firm.
The following individuals serve as members of a committee of fund managers
for the GROWTH FUND:
Gary G. Schlarbaum, CFA and Managing Director, joined MAS in 1987 and has
served on the committee since 1993. Prior to 1987, Mr. Schlarbaum was employed
by First Chicago Investment Advisors from 1984 to 1987. Prior to First Chicago,
Mr. Schlarbaum held teaching positions at Purdue University and the University
of Pennsylvania.
Arden C. Armstrong, CFA and Managing Director, joined the firm in 1986. Prior
to joining MAS, Ms. Armstrong was employed by Evans Economics, Inc.
Nicholas Kovich, CFA and Managing Director, joined MAS in 1988 and has served
on the committee since the Fund's inception in April 1988. Prior to MAS, Mr.
Kovich was employed by Waddell & Reed Asset Management Company from 1982 to
1988 as an Investment Research Analyst and as Assistant Vice President and
Portfolio Manager.
Robert J. Marcin, CFA and Managing Director, joined MAS in 1988. Prior to
joining MAS in 1988, Mr. Marcin was an Account Executive at Smith Barney Harris
Upham and Company, Inc.
Brian Kramp, CFA and Vice President, joined MAS in 1997. Mr. Kramp was employed
as an analyst and portfolio manager by Meridian Investment Company from 1985 to
1997.
James J. Jolinger, Principal, joined MAS in 1994 and has served on the
committee since 1997. Prior to 1994, Mr. Jolinger was employed by Oppenheimer
Capital as an Equity Analyst from 1987 to 1994.
The following individual has served as fund manager for the INVESTMENT GRADE
INCOME FUND since May 1994:
Lisa M. Coleman, CFA and Vice President of AAM, was a Deputy Manager/Portfolio
Manager in the global fixed income area for Brown Brothers Harriman & Company
in New York prior to joining AAM in May 1994.
The following individual has served as fund manager for the GOVERNMENT BOND
FUND since May 1995:
Richard J. Litchfield, CFA and Vice President of AAM, was a mortgage-backed
securities analyst and trader at Keystone Investments, Inc. prior to joining
AAM in May 1995.
The following individual has served as fund manager for the EQUITY INDEX FUND
and MONEY MARKET FUND since March 1995:
John C. Donohue, Assistant Vice President of AAM, was a portfolio manager at CS
First Boston Investment Management prior to joining AAM in 1995.
HOW ARE SHARES VALUED?
The net asset value of the shares of each Fund is determined once daily as of
the close of regular trading on the New York Stock Exchange (the "Exchange") on
each day on which the Exchange is open for trading.
Equity securities are valued on the basis of their market value if market
quotations are readily available from the primary market on which the security
is traded. In other cases, they are valued at their fair value as determined in
good faith by the Trustees, although the actual calculations may be performed by
persons acting pursuant to the direction of the Trustees. Debt securities (other
than short-term obligations) normally are valued on the basis of valuations
formulated by a pricing service which utilizes data processing methods to
determine valuations for normal, institutional-size trading units of such
securities. Such methods include the use of market transactions for comparable
securities and various relationships between securities which generally are
recognized by institutional traders. All securities of the Money Market Fund are
valued at amortized cost. Debt obligations in the other Funds having a remaining
maturity of 60 days or less are valued at amortized cost when it is determined
that amortized cost approximates fair value. Short-term
18
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Allmerica Investment Trust
<PAGE>
obligations of the other Funds having a remaining maturity of more than 60 days
are marked to market based upon readily available market quotations for such
obligations or similar securities.
Unlike the Money Market Fund which attempts to maintain a stable net asset
value, the net asset value of the other Funds will fluctuate.
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS
It is the policy of the Trust to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies so that the Trust will
not be subject to federal income tax on any net income and any capital gains to
the extent they are distributed or are deemed to have been distributed to
shareholders. Dividends out of net investment income will be declared and paid
quarterly in the case of the Growth Fund, Equity Index Fund, Investment Grade
Income Fund and Government Bond Fund; annually in the case of the Select
Aggressive Growth Fund and Select International Equity Fund; and daily in the
case of the Money Market Fund. Distributions of net capital gains for the year,
if any, are made annually. All dividends and capital gain distributions are
applied to purchase additional Fund shares at net asset value as of the payment
date. Fund shares are held by the Separate Accounts and any distributions are
reinvested automatically by the Separate Accounts. Tax consequences to investors
in the Separate Accounts which are invested in the Trust are described in the
prospectuses for such Accounts.
SALE AND REDEMPTION OF SHARES
Shares of the Funds are sold in a continuous offering and currently may be
purchased only by the Separate Accounts of First Allmerica or its subsidiaries.
The Separate Accounts are the funding mechanisms for variable annuity contracts
and variable life insurance policies. The Separate Account invests in shares of
one or more of the Funds. Shares of each Fund are sold at their net asset value
as next computed after receipt of the purchase order without the addition of any
selling commission or "sales load." The Distributor, Allmerica Investments,
Inc., at its expense, may provide promotional incentives to dealers that sell
variable annuity contracts for which the Funds serve as investment
vehicles.
Shares of the Trust are also currently being issued under separate
prospectuses to Separate Accounts of Allmerica Financial Life, First Allmerica
and subsidiaries of First Allmerica which issue variable or group annuity
policies or variable premium life insurance policies ("mixed funding"). Although
neither Allmerica Financial Life nor the Trust currently foresees any
disadvantage, it is conceivable that in the future such mixed funding may be
disadvantageous for variable or group annuity policyowners or variable premium
life insurance policyowners ("Policyowners"). The Trustees of the Trust intend
to monitor events in order to identify any conflicts that may arise between such
Policyowners and to determine what action, if any, should be taken in response
thereto. If the Trustees were to conclude that separate funds should be
established for variable annuity, group annuity, and variable premium life
Separate Accounts, Allmerica Financial Life would pay the attendant expenses.
The Trust has filed an application with the SEC for an exemptive order to permit
Fund shares to be sold to variable annuity and life insurance separate accounts
of both affiliated and unaffiliated life insurance companies and qualified
pension and retirement plans outside of the separate account context. If the
requested order is granted, any Fund may serve as a funding vehicle for all
types of variable annuity contracts and variable life insurance contracts
offered by various participating insurance companies and for qualified plans;
material irreconcilable conflicts may possibly arise among various contract
owners and plan participants and the Board of Trustees will monitor events in
order to identify the existence of any material irreconcilable conflict and
determine what action, if any, should be taken in response to such
conflict.
The Trust redeems shares of each Fund at their net asset value as next
computed after receipt of the request for redemption. The redemption price may
be more or less than the shareholder's cost. No fee is charged by the Trust on
redemption. The variable contracts funded through the Separate Accounts are sold
subject to certain fees and charges which may include sales and redemption
charges as described in the prospectus or offering circular for the Separate
Account.
Redemption payments will be paid within seven days after receipt of the
written request therefor by the Trust, except that the right of redemption may
be suspended or payments postponed whenever permitted by applicable law and
regulations.
HOW IS PERFORMANCE DETERMINED?
A Fund's performance may be quoted in advertising. A Fund's performance may be
compared with the performance of other investments or relevant indices. All
performance information is based on historical results and is not intended to
indicate future performance.
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For Funds other than the Money Market Fund, "yield" is calculated by dividing
a Fund's annualized net investment income per share during a recent 30-day
period by the net asset value per share on the last day of that period. For the
Money Market Fund, "yield" represents an annualization of the change in value of
an investment (excluding any capital changes) in the Fund for a specific seven-
day period; "effective yield" compounds that yield for a year and is, for that
reason, greater than the Fund's yield.
Total returns are based on the overall dollar or percentage change in value of
a hypothetical investment in a Fund assuming all dividends and capital gain
distributions are reinvested. Cumulative total return reflects the Fund's
performance over a stated period of time. Average annual total return reflects
the hypothetical, annually-compounded return that would have produced the same
cumulative return if the Fund's performance had been constant over the entire
period. Because average annual returns tend to smooth out variations in the
Fund's return, they are not the same as actual year-by-year results.
YIELDS AND TOTAL RETURNS QUOTED FOR THE FUNDS INCLUDE THE EFFECT OF DEDUCTING
THE FUNDS' EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO A
PARTICULAR INSURANCE PRODUCT. SINCE SHARES OF THE FUNDS CAN BE PURCHASED ONLY
THROUGH A VARIABLE ANNUITY CONTRACT OR VARIABLE LIFE CONTRACT, YOU SHOULD REVIEW
CAREFULLY THE PROSPECTUS FOR THE SEPARATE ACCOUNTS FOR INFORMATION ON RELEVANT
CHARGES AND EXPENSES. INCLUDING THESE CHARGES IN THE QUOTATIONS OF THE FUNDS'
YIELDS AND TOTAL RETURNS WOULD HAVE THE EFFECT OF DECREASING PERFORMANCE.
PERFORMANCE INFORMATION FOR THE FUNDS MUST ALWAYS BE ACCOMPANIED BY, AND BE
REVIEWED WITH, PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNTS WHICH INVEST IN
THE FUNDS.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated October 11, 1984
(the "Trust Declaration"). A copy of the Trust Declaration is on file with the
Secretary of the Commonwealth of Massachusetts.
The Trust has an unlimited authorized number of shares of beneficial interest
which may be divided into an unlimited number of series of such shares, and
which are divided presently into 14 series of shares, one series underlying each
Fund. Seven of the series are not included in this Prospectus. The Trust's
shares are entitled to one vote per share (with proportional voting for
fractional shares). The rights accompanying Fund shares are vested legally in
the Separate Accounts. As a matter of policy, however, holders of variable
premium life insurance or variable annuity contracts funded through the Separate
Accounts have the right to instruct the Separate Accounts as to voting Fund
shares on all matters to be voted on by Fund shareholders. Voting rights of the
participants in the Separate Accounts are set forth in the prospectus or
offering circular relating to the Separate Accounts. See "Organization of the
Trust" in the SAI for the definition of a "majority vote" of shareholders.
The Trust is not required to hold annual meetings of shareholders. The
Trustees or shareholders holding at least 10% of the outstanding shares may call
special meetings of shareholders.
FUND RECORDKEEPING AGENT
Investor Services Group calculates net asset value per share and maintains
general accounting records for each Fund. Investor Services Group is entitled to
receive an annual Fund recordkeeping fee based on Fund assets and certain out-
of-pocket expenses.
CUSTODIAN
Bankers Trust Company, 130 Liberty Street, New York, New York 10006, is the
Custodian of the investment securities and other assets of the Trust.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Fund without shareholder
approval. For a description of certain other investment restrictions, reference
should be made to the SAI.
1. No Fund will concentrate its investments in particular industries,
including debt obligations of supranational entities and foreign governments,
but a Fund may invest up to 25% of the value of its total assets in a particular
industry. The restriction does not apply to investments in obligations issued or
guaranteed by the United States of America, its agencies or instrumentalities,
or to investments by the Money Market Fund in securities issued or guaranteed by
domestic branches of U.S. banks.
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2. As to 75% of the value of its total assets (100% for the Money Market
Fund), no Fund will invest more than 5% of the value of its total assets in the
securities of any one issuer (other than securities issued by or guaranteed as
to principal or interest by the United States Government or any agency or
instrumentality thereof) or acquire more than 10% of the voting securities of
any issuer. The remaining 25% of assets (other than for the Money Market Fund)
may be invested in the securities of one or more issuers without regard to such
limitations.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Fund will not be required to reduce
the amount of its holdings in such investments.
CERTAIN INVESTMENT STRATEGIES AND POLICIES
REPURCHASE AGREEMENTS (APPLICABLE TO ALL FUNDS)
Each Fund may invest in repurchase agreements, under which the Fund acquires
ownership of a security (ordinarily U.S. Government securities) but the seller
agrees at the time of sale to purchase the security at a mutually agreed upon
time and price. Should any seller of a repurchase agreement fail to repurchase
the underlying security, or should any seller become insolvent or involved in a
bankruptcy proceeding, a Fund could incur disposition costs and losses.
Repurchase agreements maturing in more than seven days are subject to the 15%
(10% for the Money Market Fund) limit on illiquid securities.
"WHEN-ISSUED" SECURITIES (APPLICABLE TO ALL FUNDS)
Each Fund may purchase securities on a when-issued or delayed delivery basis.
Delivery and payment normally take place 15 to 45 days after the commitment to
purchase. No income accrues on when-issued securities prior to delivery.
Purchase of when-issued securities involves the risk that yields available in
the market when delivery occurs may be higher than those available when the
when-issued order is placed resulting in a decline in the market value of the
security. There is also the risk that under some circumstances the purchase of
when-issued securities may act to leverage the Fund.
LENDING OF SECURITIES (APPLICABLE TO ALL FUNDS)
For the purpose of realizing additional income, the Funds may lend portfolio
securities to broker-dealers or financial institutions amounting to not more
than 33% of their respective total assets taken at current value. While any such
loan is outstanding, a Fund will continue to receive amounts equal to the
interest or dividends paid by the issuer on the securities, as well as interest
(less any rebates to be paid to the borrower) on the investment of the
collateral or a fee from the borrower. Each Fund will have the right to call
each loan and obtain the securities. Lending portfolio securities involves
certain risks, including possible delays in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made in accordance with
guidelines established by the Board of Trustees.
FOREIGN SECURITIES (APPLICABLE TO EACH FUND EXCEPT THE GOVERNMENT BOND
FUND)
Investments in foreign markets involve substantial risks typically not
associated with investing in the U. S., which should be considered carefully by
the investor. Such risks may include political and economic instability,
differing accounting and financial reporting standards, higher commission rates
on foreign portfolio transactions, less readily available public information
regarding issuers, potentially adverse changes in tax and exchange control
regulations, and the potential for restrictions on the flow of international
capital. Foreign securities also involve currency risks. Accordingly, the
relative strength of the U.S. dollar may be an important factor in the
performance of the Fund, depending on the extent of the Fund's foreign
investments. The Money Market Fund may invest only in U.S. dollar denominated
foreign securities. Some foreign securities exchanges may not be as developed or
efficient as those in the United States and securities traded on foreign
securities exchanges generally are subject to greater price volatility. There is
also the possibility of adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation and limitations on the
removal of funds or other assets.
Investments in emerging countries involve exposure to economic structures that
generally are less diverse and mature than in the United States, and to
political systems which may be less stable. In addition, securities of issuers
located in emerging countries may have limited marketability and may be subject
to more abrupt or erratic price fluctuations.
The Funds may buy or sell foreign currencies, options on foreign currencies
and foreign currency futures contracts and options thereon and, in addition, the
Select International Equity Fund may invest in foreign currency forward
contracts. Although such instruments may reduce the risk of loss due to a
decline in the value of the currency that is sold, they also limit any possible
gain
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which might result should the value of the currency increase. Such instruments
will be used primarily to protect a Fund from adverse currency movements;
however, they also involve the risk that anticipated currency movements will not
be accurately predicted, thus adversely affecting a Fund's total return. See
"Options and Futures Transactions."
The Funds' investments may include ADRs. For many foreign securities, there
are U.S. dollar-denominated ADRs which are traded in the United States on
exchanges or over the counter. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank. An ADR may
be sponsored by the issuer of the underlying foreign security, or it may be
issued in unsponsored form. The holder of a sponsored ADR is likely to receive
more frequent and extensive financial disclosure concerning the foreign issuer
than the holder of an unsponsored ADR and generally will bear lower transaction
charges. Each Fund may invest in both sponsored and unsponsored ADRs. The Select
International Equity Fund also may utilize EDRs, which are designed for use in
European securities markets, and also may invest in GDRs.
Obligations in which the Investment Grade Income Fund and Government Bond Fund
may invest include debt obligations of supranational entities. Supranational
entities include international organizations designated or supported by
governmental entities to promote economic reconstruction or development and
international banking institutions and related government agencies. Obligations
of supranational entities may be supported by appropriated but unpaid
commitments of their member countries, and there is no assurance that these
commitments will be undertaken or met in the future. A Fund may not invest more
than 25% of its assets in debt obligations of supranational entities.
Certain state insurance regulations may impose additional restrictions on a
Fund's holdings of foreign securities.
OPTIONS AND FUTURES TRANSACTIONS (APPLICABLE TO EACH FUND EXCEPT THE MONEY
MARKET FUND), FORWARD CONTRACTS (APPLICABLE TO THE SELECT INTERNATIONAL EQUITY
FUND)
Through the writing and purchase of put and call options on its securities,
financial indices and foreign currencies, and the purchase and sale of futures
contracts and related options with respect to securities, financial indices and
(in the case of the Select International Equity Fund) foreign currencies in
which it may invest, each Fund except the Money Market Fund may at times seek to
hedge against fluctuations in net asset value, or to a limited extent to engage
in non-hedging strategies. A Fund may not purchase or sell a futures contract
for non-hedging purposes if immediately thereafter the sum of the amount of
margin deposits and amount of variation margins paid from time to time on a
Fund's existing futures and related options positions and premiums paid for
related options would exceed 5% of the market value of the Fund's total assets.
The Select International Equity Fund may invest without limitation in foreign
currency options. Each Fund's ability to engage in options and futures
strategies will depend on the availability of liquid markets in such
instruments. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures contracts. Therefore, there is no
assurance that a Fund will be able to utilize these instruments effectively for
the purposes stated above.
Additionally, the Select International Equity Fund may invest in forward
currency contracts with the stated contract value of up to the value of the
Fund's assets which may expose the Fund to additional risks and transaction
costs.
Risks inherent in the use of futures, options and forward contracts
("derivative instruments") include (1) the risk that movements in interest
rates, securities prices and currency markets will not be accurately anticipated
and a Fund's total return could be adversely affected as a result; (2) imperfect
correlation, or even no correlation, between the price of derivative instruments
and movements in the prices of the securities, interest rates or currencies
being hedged; (3) the fact that skills and techniques needed to use these
strategies are different from those needed to select portfolio securities; (4)
the lack of assurance that a liquid secondary market will exist for any
particular instrument at any time and, as a result, contractual positions cannot
be closed out easily; (5) the possible loss of principal under certain
conditions; (6) the possible inability of a Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable to do so due to the need
for the Fund to maintain "cover" or set aside securities in connection with
hedging techniques; and (7) the risk of a loss if the counterparty to the
transaction does not perform as promised. These techniques may increase
volatility of a Fund and may involve a small investment of cash relative to the
magnitude of the risk assumed.
The Funds will purchase futures and options only on exchanges or boards of
trade when there appears to be an active secondary market, but there can be no
assurance that a liquid secondary market will exist for any future or option at
any particular time.
In connection with transactions in futures and related options, the Funds will
be required to deposit as "initial margin" an amount of cash and/or securities.
Thereafter, subsequent payments are made to and from the broker to reflect
changes in the value of the future contract.
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A more detailed explanation of futures, options, and other derivative
instruments, and the risks associated with them, is included in the SAI.
RESTRICTED SECURITIES (APPLICABLE TO ALL FUNDS)
The Funds also may purchase fixed-income securities that are not registered
under the 1933 Act ("restricted securities"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act. However, each
Fund will not invest more than 15% (10% for the Money Market Fund) of its net
assets in restricted securities (and securities deemed to be illiquid) unless
the Board of Trustees determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Trustees has adopted guidelines and delegated to the
Manager the daily function of determining and monitoring liquidity of restricted
securities. The Board, however, will retain sufficient oversight and be
responsible ultimately for the determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities sold
and offered under Rule 144A will develop, the Board will monitor carefully a
Fund's investments in securities, focusing on such important factors, among
others, as valuation, liquidity and availability of information. This investment
practice could have the effect of increasing the level of illiquidity in a Fund
to the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities. As a result, a Fund might not be able
to sell these securities when its Sub-Adviser wishes to do so, or might have to
sell them at less than fair value. In addition, market quotations are less
readily available. Therefore, judgment at times may play a greater role in
valuing these securities than in the case of unrestricted securities.
INVESTMENTS IN MONEY MARKET SECURITIES (APPLICABLE TO ALL FUNDS)
Any Fund may hold at least a portion of its assets in cash equivalents or
money market instruments. There is always the risk that the issuer of a money
market instrument may be unable to make payment upon maturity.
The Money Market Fund may hold uninvested cash reserves pending investment
during temporary, defensive periods or if, in the opinion of the Sub-Adviser,
suitable securities are not available for investment. Securities in which the
Money Market Fund may invest may not earn as high a level of current income as
long-term, lower-quality securities which, however, generally have less
liquidity, greater market risk and more fluctuation in market value.
ASSET-BACKED SECURITIES (APPLICABLE TO GROWTH FUND, INVESTMENT GRADE INCOME
FUND, GOVERNMENT BOND FUND AND MONEY MARKET FUND)
The Funds may purchase asset-backed securities, which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, frequently a pool of assets similar to one
another. Assets generating such payments include instruments such as motor
vehicle installment purchase obligations, credit card receivables and home
equity loans. Payment of principal and interest may be guaranteed for certain
amounts and time periods by a letter of credit issued by a financial institution
unaffiliated with the issuer of the securities. The estimated life of an asset-
backed security varies with the prepayment experience of the underlying debt
instruments. The rate of such prepayments, and hence the life of the asset-
backed security, will be primarily a function of current market rates, although
other economic and demographic factors will be involved. Under certain interest
rate and prepayment rate scenarios, the Funds may fail to recoup fully their
investment in asset-backed securities. A Fund will not invest more than 20% of
its total assets in asset-backed securities.
MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE INVESTMENT GRADE INCOME FUND AND
GOVERNMENT BOND FUND)
The Funds may invest in mortgage-backed securities which are debt obligations
secured by real estate loans and pools of loans on single family homes, multi-
family homes, mobile homes and, in some cases, commercial properties. The Funds
may acquire securities representing an interest in a pool of mortgage loans that
are issued or guaranteed by a U.S. government agency such as Ginnie Mae, Fannie
Mae and Freddie Mac.
Mortgage-backed securities are in most cases "pass-through" instruments
through which the holder receives a share of all interest and principal payments
from the mortgages underlying the certificate. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life or realized yields of a particular issue of pass-
through certificates. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Funds reinvest the prepaid
amounts in securities, the yield of which reflects interest rates prevailing at
the time. Moreover, prepayment of mortgages that underlie securities purchased
at a premium could result in losses.
The Funds also may invest in multiple class securities issued by U.S.
government agencies and instrumentalities such as Fannie Mae, Freddie Mac and
Ginnie Mae, including guaranteed collateralized mortgage obligations ("CMOs")
and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or
participation certificates, when consistent with the Funds' investment
objective, policies and limitations.
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A CMO is a type of bond secured by an underlying pool of mortgages or mortgage
pass-through certificates that are structured to direct payment on underlying
collateral to different series or classes of obligations. A REMIC is a CMO that
qualifies for special tax treatment under the Internal Revenue Code and invests
in certain mortgages principally secured by interests in real property and other
permitted investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple pass-
through securities. Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests or "residual" interests. The Funds currently do
not intend to purchase residual interests in REMICs. The REMIC Certificates
represent beneficial ownership interests in a REMIC trust, generally consisting
of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage
pass-through certificates. The obligations of Fannie Mae or Freddie Mac under
their respective guaranty of the REMIC Certificates are obligations solely of
Fannie Mae or Freddie Mac, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are available otherwise.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment
of interest and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("PCs"). PCs represent undivided interests in specified residential mortgages or
participations therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCs referred to as "Gold PCs."
Ginnie Mae REMIC Certificates guarantee the full and timely payment of
interest and principal on each class of securities (in accordance with the terms
of those classes). This Ginnie Mae guarantee is backed by the full faith and
credit of the United States.
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are
treated as U.S. government securities for purposes of investment policies. There
can be no assurance that the U.S. Government will continue to provide financial
support to Fannie Mae, Freddie Mac or Ginnie Mae in the future.
STRIPPED MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE INVESTMENT GRADE INCOME
FUND AND GOVERNMENT BOND FUND)
The Funds may invest in stripped mortgage-backed securities ("SMBS"). SMBS are
derivative multiclass mortgage securities. SMBS may be issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose entities of the
foregoing.
SMBS usually are structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. One type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In some cases,
one class will receive all of the interest (the interest-only or "IO" class)
while the other class will receive all of the principal (the principal-only or
"PO" class). The yield to maturity on an IO class is extremely sensitive to the
rate of principal payments (including prepayments on the related underlying
mortgage assets), and a rapid rate of principal payments may have a material,
adverse effect on a portfolio yield to maturity from these securities. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Funds may fail to recoup fully their initial investment in these
securities even if the security is in one of the highest rating categories.
Certain SMBS may be deemed "illiquid" and subject to a Fund's limitations on
investment in illiquid securities. The market value of the PO class generally is
unusually volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the interest from mortgage assets
generally are higher than prevailing market yields on other mortgage-backed
securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be recouped fully. The Sub-
Adviser will seek to manage these risks (and potential benefits) by investing in
a variety of such securities and by using certain hedging techniques.
HEDGING TECHNIQUES AND INVESTMENT PRACTICES (APPLICABLE TO THE SELECT
INTERNATIONAL EQUITY FUND)
The Select International Equity Fund may employ certain strategies in order to
manage exchange rate risks. For example, the Fund may hedge some or all of its
investments denominated in a foreign currency against a decline in the value of
that currency. The Fund may enter into contracts to sell that foreign currency
for U.S. dollars (not exceeding the value of the Fund's assets denominated in or
exposed to that currency) or by participating in options on futures contracts
with respect to such currency ("position hedge"). The Fund also could hedge that
position by selling a second currency that is expected to perform similarly to
the currency in which portfolio investments are denominated for U.S. dollars
("proxy hedge"). The Fund also may enter into a forward contract to sell the
currency in
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which the security is denominated for a second currency that is expected to
perform better relative to the U.S. dollar if their Sub-Adviser believes there
is a reasonable degree of correlation between movements in the two currencies
("cross-hedge"). As an operational policy, the Fund will not commit more than
10% of their assets to the consummation of cross-hedge contracts and either will
cover currency hedging transactions with liquid portfolio securities denominated
in or whose value is tied to the applicable currency or segregate liquid assets
in the amount of such commitments. In addition, when the Fund anticipates
repurchasing securities denominated in a particular currency, the Fund may enter
into a forward contract to purchase such currency in exchange for the dollar or
another currency ("anticipatory hedge").
These strategies minimize the effect of currency appreciation as well as
depreciation, but do not protect against a decline in the underlying value of
the hedged security. In addition, such strategies may reduce or eliminate the
opportunity to profit from increases in the value of the original currency and
may have an adverse impact on a Fund's performance if its Sub-Adviser's
projection of future exchange rates is inaccurate.
STAND-BY COMMITMENTS (APPLICABLE TO INVESTMENT GRADE INCOME FUND, GOVERNMENT
BOND FUND AND MONEY MARKET FUND)
Under a stand-by commitment, a dealer agrees to purchase from the Fund, at the
Fund's option, specified securities at a specified price. Stand-by commitments
are exercisable by the Fund at any time before the maturity of the underlying
security, and may be sold, transferred or assigned by the Fund only with respect
to the underlying instruments.
Although stand-by commitments are often available without the payment of any
direct or indirect consideration, if necessary or advisable, the Fund may pay
for a stand-by commitment either separately in cash or by paying a higher price
for securities which are acquired subject to the commitment.
Where the Fund pays any consideration directly or indirectly for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held by the Fund.
The Fund will enter into stand-by commitments only with banks and broker-
dealers which present minimal credit risks. In evaluating the creditworthiness
of the issuer of a stand-by commitment, the Sub-Adviser will review periodically
the issuer's assets, liabilities, contingent claims and other relevant financial
information.
The Fund will acquire stand-by commitments solely to facilitate liquidity and
does not intend to exercise its rights thereunder for trading purposes. Stand-
by commitments will be valued at zero in determining the Fund's net asset
value.
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APPENDIX
Descriptions of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Service, a division of McGraw-Hill Companies, Inc. ("S&P")
commercial paper and bond ratings:
COMMERCIAL PAPER RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE TWO HIGHEST
DESIGNATIONS ARE AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity normally will be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This normally
will be evidenced by many of the characteristics cited above, but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be subject more
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
S&P COMMERCIAL PAPER RATINGS ARE GRADED INTO SEVERAL CATEGORIES, RANGING FROM
"A-1" FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE TWO HIGHEST
RATING CATEGORIES ARE DESCRIBED AS FOLLOWS:
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in the short-term borrowing, while various factors of the first
importance in long-term borrowing risk are of lesser importance in the long run.
Symbols used will be as follows:
MIG-1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
A short-term rating also may be assigned on an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event that demand is not met.
VMIG-1 and VMIG-2 ratings carry the same definitions as MIG-1 and MIG-2,
respectively.
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Allmerica Investment Trust
<PAGE>
DESCRIPTION OF MOODY'S BOND RATINGS
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to as
"gilt edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what generally are known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present that suggest a susceptibility to impairment some time in the
future.
Baa - Bonds that are rated Baa are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Those bonds within the Aa, A, Baa, Ba, and B categories that Moody's believes
possess the strongest credit attributes within those categories are designated
by the symbols Aa1, A1, Baa1, Ba1, and B1.
Description of S&P's Debt Ratings
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, or C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
Plus (+) or (-): The ratings from AA to CCC may be modified by the addition of
a plus or minus sign to show relative standing within the major categories.
27
---------------------------
Allmerica Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
440 Lincoln Street
Worcester, Massachusetts 01653
(508) 855-1000
Allmerica Investment Trust (the "Trust") is a professionally managed, open-end
investment company designed to provide the underlying investment vehicles for
insurance related accounts. The investment objectives of the eight separate
portfolios of the Trust (collectively, the "Funds," and individually, the
"Fund") currently offered by this Prospectus are as follows:
SELECT EMERGING MARKETS FUND
SELECT AGGRESSIVE GROWTH FUND
SELECT CAPITAL APPRECIATION FUND
SELECT VALUE OPPORTUNITY FUND
SELECT INTERNATIONAL EQUITY FUND
SELECT GROWTH FUND
SELECT STRATEGIC GROWTH FUND
SELECT INCOME FUND
Currently, shares of each Fund may be purchased only by separate accounts
("Separate Accounts") established by First Allmerica Financial Life Insurance
Company ("First Allmerica") for the purpose of funding group annuity contracts
issued by First Allmerica. A particular Fund may not be available under the
variable annuity or variable life insurance policy which you have chosen. The
Prospectus of the specific insurance product you have chosen will indicate which
Funds are available and should be read in conjunction with this Prospectus.
Inclusion in this Prospectus of a Fund which is not available under your policy
is not to be considered a solicitation.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Certain additional
information is contained in the Statement of Additional Information dated May 1,
1998 (the "SAI"), which has been filed with the Securities and Exchange
Commission ("SEC"), is incorporated herein by reference and is available upon
request without charge from the Trust, 440 Lincoln Street, Worcester, MA 01653,
(508) 855-1000.
Investment in the Funds is neither insured nor guaranteed by the U.S.
Government.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY, AND ARE SUBJECT TO VARIOUS RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DATED MAY 1, 1998
---------------------------
Allmerica Investment Trust
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS................................................. 3
HOW ARE THE FUNDS MANAGED?........................................... 8
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?..................... 9
Select Emerging Markets Fund....................................... 9
Select Aggressive Growth Fund...................................... 10
Select Capital Appreciation Fund................................... 11
Select Value Opportunity Fund...................................... 12
Select International Equity Fund................................... 13
Select Growth Fund................................................. 13
Select Strategic Growth Fund....................................... 14
Select Income Fund................................................. 15
MANAGEMENT FEES AND EXPENSES......................................... 16
FUND MANAGER INFORMATION............................................. 19
HOW ARE SHARES VALUED?............................................... 21
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS.............................. 21
SALE AND REDEMPTION OF SHARES........................................ 21
HOW IS PERFORMANCE DETERMINED?....................................... 22
ORGANIZATION AND CAPITALIZATION OF THE TRUST......................... 22
INVESTMENT RESTRICTIONS.............................................. 23
CERTAIN INVESTMENT STRATEGIES AND POLICIES........................... 23
APPENDIX............................................................. 30
</TABLE>
2
- ---------------------------
Allmerica Investment Trust
<PAGE>
FINANCIAL HIGHLIGHTS
The following Financial Highlights have been audited by Price Waterhouse LLP,
independent accountants of the Trust. This information should be read in
conjunction with the financial statements and notes thereto which appear in the
Policyowner's annual report for the year ended December 31, 1997 ("Annual
Report"), and which are incorporated by reference in the Trust's SAI. Further
information about the performance of the Funds is contained in the Annual Report
which may be obtained without charge from the Trust, 440 Lincoln Street,
Worcester, MA 01653, (508) 855-1000.
3
---------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(2)/ INVESTMENTS OPERATIONS
- ------------ ------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $ 2.037 $(0.009) $ 0.387 $ 0.378
1996 1.848 (0.009) 0.351 0.342
1995 1.397 (0.001) 0.452 0.451
1994 1.431 (0.002) (0.032) (0.034)
1993 1.197 0.001 0.234 0.235
1992 1.000 0.001 0.197 0.198
Select Capital
Appreciation Fund/(1)/
1997 1.485 (0.005) 0.218 0.213
1996 1.369 (0.003) 0.124 0.121
1995 1.000 (0.001) 0.397 0.396
Select Value
Opportunity Fund/(1)/
1997 1.511 0.010 0.364 0.374
1996 1.238 0.011 0.342 0.353
1995 1.089 0.009 0.183 0.192
1994 1.170 0.005 (0.081) (0.076)
1993 1.000 0.002 0.176 0.178
Select International
Equity Fund/(1)/
1997 1.356 0.015 0.049 0.064
1996 1.136 0.011 0.238 0.249
1995 0.963 0.013 0.176 0.189
1994 1.000 0.003 (0.038) (0.035)
Select Growth Fund/(1)/
1997 1.430 0.006 0.480 0.486
1996 1.369 0.005 0.297 0.302
1995 1.099 -- 0.270 0.270
1994 1.119 0.003 (0.020) (0.017)
1993 1.111 0.001 0.008 0.009
1992 1.000 0.001 0.111 0.112
<CAPTION>
LESS DISTRIBUTIONS
--------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS IN
YEAR ENDED INVESTMENT CAPITAL IN RETURN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
- ------------ ------ ----- ------ ------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $ -- $(0.182) $(0.008)/(3)/ $ -- $(0.190) $ 0.188
1996 -- (0.153) -- -- (0.153) 0.189
1995 -- -- -- -- -- 0.451
1994 -- -- -- -- -- (0.034)
1993 (0.001) -- -- -- (0.001) 0.234
1992 (0.001) -- -- -- (0.001) 0.197
Select Capital
Appreciation Fund/(1)/
1997 -- -- -- -- -- 0.213
1996 -- (0.005) -- -- (0.005) 0.116
1995 -- (0.027) -- -- (0.027) 0.369
Select Value
Opportunity Fund/(1)/
1997 (0.010) (0.249) -- -- (0.259) 0.115
1996 (0.011) (0.069) -- -- (0.080) 0.273
1995 (0.009) (0.033) (0.001)/(3)/ -- (0.043) 0.149
1994 (0.005) -- -- -- (0.005) (0.081)
1993 (0.002) (0.006) -- -- (0.008) 0.170
Select International
Equity Fund/(1)/
1997 (0.019) (0.046) (0.014)/(4)/ -- (0.079) (0.015)
1996 (0.012) (0.003) (0.014)/(4)/ -- (0.029) 0.220
1995 (0.011) (0.005) -- -- (0.016) 0.173
1994 (0.001) (0.001) -- -- (0.002) (0.037)
Select Growth Fund/(1)/
1997 (0.006) (0.099) -- -- (0.105) 0.381
1996 (0.005) (0.236) -- -- (0.241) 0.061
1995 -- -- -- -- -- 0.270
1994 (0.003) -- -- -- (0.003) (0.020)
1993 (0.001) -- -- -- (0.001) 0.008
1992 (0.001) -- -- -- (0.001) 0.111
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
(A) Including reimbursements, waivers, 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) The Select Aggressive Growth Fund commenced operations on August 21, 1992.
The Select Capital Appreciation Fund commenced operations on April 28, 1995.
The Select Value Opportunity Fund (formerly the Small-Mid Cap Value Fund)
commenced operations on April 30, 1993 and changed investment sub-adviser on
January 1, 1997. The Select International Equity Fund commenced operations
on May 2, 1994. The Select Growth Fund commenced operations on August
21,1992 and changed investment sub-adviser on July 1, 1996.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $(0.010) in 1997, $0.000 in 1993 and
$(0.001) in 1992 for Select Aggressive Growth Fund; $(0.001) in 1995 for
Select Capital Appreciation Fund; $0.009 in 1997, $0.010 in 1996, $0.005 in
1994 and $(0.001) in 1993 for Select Value Opportunity Fund; $0.015 in 1997,
$0.011 in 1996 and $0.002 in 1994 for Select International Equity Fund; and
$0.006 in 1997, $0.005 in 1996, $0.001 in 1993 and $0.000 in 1992 for Select
Growth Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
4
- ---------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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>
$ 2.225 18.71% $604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95% $0.0617
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113% 0.0597
1.848 32.28% 254,872 (0.07)% 1.09% -- 1.09% 1.00% 1.00% 104% --
1.397 (2.31)% 136,573 (0.21)% 1.16% -- 1.16% 1.00% 1.00% 100% --
1.431 19.51% 66,251 0.10% 1.19% -- 1.23% 1.00% 0.96% 76% --
1.197 19.85%** 9,270 0.34%* 1.35%* -- 1.88%* N/A N/A 33% --
1.698 14.28% 240,526 (0.38)% 1.13% 1.13% 1.13% 0.98% 0.98% 133% 0.0444
1.485 8.80% 142,680 (0.32)% 1.13% 1.13% 1.13% 1.00% 1.00% 98% 0.0414
1.369 39.56%** 41,376 (0.25)%* 1.35%* -- 1.42%* 1.00%* 0.93%* 95% --
1.626 24.85% 202,139 0.73% 0.98% 1.04% 1.06% 0.92% 0.90% 110% 0.0587
1.511 28.53% 113,969 0.91% 0.95% 0.97% 0.97% 0.85% 0.85% 20% 0.0497
1.238 17.60% 64,575 0.86% 1.01% -- 1.01% 0.85% 0.85% 17% --
1.089 (6.51)% 41,342 0.64% 1.08% -- 1.09% 0.85% 0.84% 4% --
1.170 17.74%** 12,731 0.52%* 1.22%* -- 2.03%* 0.85%* 0.04%* 8% --
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20% 0.0229
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18% 0.0248
1.136 19.63% 104,312 1.68% 1.24% -- 1.24% 1.00% 1.00% 24% --
0.963 (3.49)%** 40,498 0.87%* 1.50%* -- 1.78%* 1.00%* 0.72%* 19% --
1.811 34.06% 470,356 0.42% 0.91% 0.93% 0.93% 0.85% 0.85% 75% 0.0470
1.430 22.02% 228,551 0.38% 0.92% 0.93% 0.93% 0.85% 0.85% 159% 0.0457
1.369 24.59% 143,125 0.02% 0.97% -- 0.97% 0.85% 0.85% 51% --
1.099 (1.49)% 88,263 0.37% 1.03% -- 1.03% 0.85% 0.85% 55% --
1.119 0.84% 53,854 0.15% 1.05% -- 1.08% 0.85% 0.82% 65% --
1.111 11.25%** 9,308 0.40%* 1.20%* -- 1.72%* N/A N/A 3% --
</TABLE>
5
---------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(2)/ INVESTMENTS OPERATIONS
- ------------ ------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Select Income Fund/(1)/
1997 $0.995 $0.060 $ 0.028 $ 0.088
1996 1.024 0.061 (0.029) 0.032
1995 0.930 0.060 0.095 0.155
1994 1.035 0.055 (0.105) (0.050)
1993 0.988 0.052 0.055 0.107
1992 1.000 0.018 (0.012) 0.006
<CAPTION>
LESS DISTRIBUTIONS
---------------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS IN
YEAR ENDED INVESTMENT CAPITAL IN RETURN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
- ------------ ------ ----- ------ ------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Select Income Fund/(1)/
1997 $(0.061) $ -- $ -- $ -- $ (0.061) $ 0.027
1996 (0.061) -- -- -- (0.061) (0.029)
1995 (0.060) -- (0.001)/(3)/ -- (0.061) 0.094
1994 (0.055) -- -- -- (0.055) (0.105)
1993 (0.052) (0.008) -- -- (0.060) 0.047
1992 (0.018) -- -- -- (0.018) (0.012)
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
(A) Including reimbursements, waivers, 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) The Select Income Fund commenced operations on August 21, 1992.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $0.060 in 1995, $0.055 in 1994, $0.050
in 1993, and $0.015 in 1992 for Select Income Fund.
(3) Distributions in excess of net investment income.
6
- ---------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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>
$1.022 9.17% $104,253 6.12% 0.72% 0.72% 0.72% 0.59% 0.59% 79% $ --
0.995 3.32% 77,498 6.29% 0.74% 0.74% 0.74% 0.60% 0.60% 108% --
1.024 16.96% 60,368 6.24% 0.79% -- 0.80% 0.60% 0.59% 131% --
0.930 (4.82)% 40,784 6.07% 0.83% -- 0.85% 0.60% 0.58% 105% --
1.035 10.95% 25,302 5.91% 0.91% -- 1.08% 0.60% 0.43% 171% --
0.988 0.62%** 5,380 5.38%* 1.00%* -- 1.67%* N/A N/A 119% --
</TABLE>
7
---------------------------
Allmerica Investment Trust
<PAGE>
HOW ARE THE FUNDS MANAGED?
The overall responsibility for the supervision of the affairs of the Trust
vests in the Board of Trustees of the Trust which meets on a quarterly basis.
Allmerica Financial Investment Management Services, Inc. (the "Manager") is
responsible for the management of the Trust's day-to-day business affairs and
has general responsibility for the management of the investments of the Funds.
The Manager, at its expense, has contracted with certain Sub-Advisers to manage
the investments of the Funds subject to the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act").
The Manager is an indirect, wholly-owned subsidiary of Allmerica Financial
Corporation ("AFC"), a Delaware holding company for a group of affiliated
companies, the largest of which is First Allmerica, a life insurance company
organized in Massachusetts in 1844. The Manager, AFC and First Allmerica are
located at 440 Lincoln Street, Worcester, Massachusetts 01653. The Manager
succeeded Allmerica Investment Management Company, Inc. ("AIMCO") as manager of
the Trust on April 16, 1998. As part of a reorganization, AIMCO transferred to
the Manager that portion of its business relating to the provision of investment
advisory services exclusively to investment companies registered under the 1940
Act such as the Trust while AIMCO retained its financial planning business. The
same personnel and procedures previously employed by AIMCO to service the Trust
will be used by the Manager. The Manager also serves as investment manager of
the Palladian Trust, another open-end investment management company.
The Manager has entered into Sub-Adviser Agreements for the management of the
investments of each of the Funds. Each Sub-Adviser, which has been selected on
the basis of various factors, including management experience, investment
techniques, and staffing, is authorized to engage in portfolio transactions on
behalf of the applicable Fund subject to such general or specific instructions
as may be given by the Trustees and/or the Manager. The terms of a Sub-Adviser
Agreement cannot be changed materially without the approval of a majority
interest of the shareholders of the affected Fund. The Trust and Manager have
filed an application with the SEC for an order of exemption that would permit
the Manager to enter into and materially amend sub-advisory agreements with non-
affiliated Sub-Advisers without obtaining shareholder approval. If the requested
relief is granted by the SEC, the Manager will have the ability, subject to
approval of the Trustees, to hire and terminate Sub-Advisers to the Funds and to
change materially the terms of the Sub-Advisory Agreements, including the
compensation paid to the Sub-Advisers, without the approval of the shareholders
of the Funds. The Sub-Advisers have been selected by the Manager and the
Trustees in consultation with RogersCasey & Associates, Inc. ("RogersCasey"), a
leading pension consulting firm. RogersCasey is a wholly-owned subsidiary of
BARRA, Inc. The cost of such consultation is borne by the Manager.
RogersCasey provides consulting services to pension plans representing over
$500 billion in total assets and, in its consulting capacity, monitors the
investment performance of over 1,800 investment advisers. From time to time,
specific clients of RogersCasey and the Sub-Advisers will be named in sales
materials. At times, RogersCasey assists in the development of asset allocation
strategies which may be used by shareholders in the diversification of their
portfolios across different asset classes.
Ongoing performance of the Sub-Advisers is reviewed and evaluated by a
committee of the Board of Trustees, which also includes members who are officers
of First Allmerica or its affiliates, in consultation with RogersCasey.
Historical performance data for all of the Funds is set forth under "Financial
Highlights." The Manager is responsible for the payment of all fees to the Sub-
Advisers. The Sub-Advisers for each of the Funds are as follows:
<TABLE>
<S> <C>
Select Emerging Markets Fund Schroder Capital Management International, Inc.
Select Aggressive Growth Fund Nicholas-Applegate Capital Management, L.P.
Select Capital Appreciation Fund T. Rowe Price Associates, Inc. *
Select Value Opportunity Fund Cramer Rosenthal McGlynn, LLC**
Select International Equity Fund Bank of Ireland Asset Management (U.S.) Limited
Select Growth Fund Putnam Investment Management, Inc.
Select Strategic Growth Fund Cambiar Investors, Inc.
Select Income Fund Standish, Ayer & Wood, Inc.
</TABLE>
- -------------------------------
* T. Rowe Price Associates, Inc. assumed Sub-Adviser responsibilities from
Janus Capital Corporation on April 1, 1998. The Sub-Adviser Agreement between T.
Rowe Price Associates, Inc. and the Manager is subject to shareholder approval
at a meeting scheduled for June 3, 1998.
** Cramer Rosenthal McGlynn, LLC assumed Sub-Adviser responsibilities from CRM
Advisors, LLC on January 2, 1998.
8
- ---------------------------
Allmerica Investment Trust
<PAGE>
For a sample listing of certain of the Sub-Advisers' clients, see "Investment
Management and Other Services" in the SAI. For more information on each of the
Sub-Advisers, see "What Are the Investment Objectives and Policies?" and "Fund
Manager Information."
The Manager also 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 each of the Funds and is entitled to
receive an administrative fee and certain out-of-pocket expenses. The Manager is
responsible for the payment of the administrative fee to Investor Services
Group.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?
Each Fund has a separate investment objective and policies designed to meet
different investment and financial needs, as described below. There is no
assurance that a Fund will achieve its investment objective.
A Fund's investment objective and investment policies are not fundamental and
may be changed without shareholder approval.
SELECT EMERGING MARKETS FUND
Investment Objective: The Select Emerging Markets Fund seeks long-term growth of
capital by investing in the world's emerging markets.
Sub-Adviser: Schroder Capital Management International Inc. ("SCMI") serves as
Sub-Adviser to the Select Emerging Markets Fund. SCMI, a wholly-owned U.S.
subsidiary of Schroders U.S. Holdings, Inc., the indirect wholly-owned U.S.
subsidiary of Schroders plc, was organized in 1980 as an investment adviser and
had more than $25 billion in assets under management as of December 31, 1997.
SCMI provides global equity and fixed income management services to North
American state and local governments, corporations, endowments, foundations,
investment companies and family trusts. Its main U.S. offices are located at 787
Seventh Avenue, New York, New York 10019.
Investment Policies: Under normal circumstances, the Fund invests at least 65%
of its total assets in equity securities of companies that are domiciled or
primarily doing business in developing countries with emerging markets, which
include those in the Morgan Stanley Capital International Emerging Markets Free
Index ("MSCI EMF"). Investments are not limited to one or more specific regions
because the Sub-Adviser believes that emerging market investment opportunities
can be found throughout the world. The Fund ordinarily maintains investments in
at least five developing countries.
A company is considered to be domiciled in a developing country if it is
organized under the laws of, or has a principal office in, that country. A
company is considered as primarily doing business in a developing country if (i)
the company derives at least 50% of its gross revenues or profits from either
goods or services produced or sold in the developing country or (ii) at least
50% of the company's assets are situated in the developing country.
The Fund may invest in the following types of equity securities: common stock,
preferred stock, securities convertible into common stock, rights and warrants
to acquire such securities and substantially similar forms of equity with
comparable risk characteristics.
The Fund invests in those emerging markets that the Sub-Adviser believes have
strongly developing economies and potential for long-term future growth. In
selecting securities for investment in the Fund, the Sub-Adviser assesses the
general attractiveness of specific countries based on an analysis of various
factors, including political stability, financial practices, economic prospects,
interest rates and inflation, general market valuations and potential currency
movements. Investments are made in those companies that the Sub-Adviser believes
are best positioned and managed to achieve above-average growth.
The Fund may also invest up to 35% of its total assets in debt securities of
government or corporate issuers in emerging markets, equity and debt securities
of issuers in developed countries, including the United States, and cash and
money market instruments. Some or all of the debt securities held by the Fund
may be rated below investment grade. These securities, commonly known as "junk
bonds", involve significant risks as discussed under "Certain Investment
Strategies and Policies-High Yield Securities." Emerging market debt securities
often are rated below investment grade or not rated by U.S. rating agencies.
Pending investment of proceeds from new sales of Fund shares or to meet daily
cash needs, the Fund may hold cash and money market instruments.
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The Sub-Adviser may employ a temporary defensive strategy if deemed by it to
be appropriate due to economic or political conditions in emerging markets. When
using a defensive strategy, the Fund may invest up to 100% of its assets in
cash, high-quality debt securities or money market instruments of U.S. or
foreign issuers. In addition, most or all of its investments may be made in the
United States and in U.S. dollars for temporary defensive purposes.
The Fund may invest up to 15% of its net assets in securities which are
illiquid and may engage in the options and futures strategies and currency
hedging techniques described under "Certain Investment Strategies and Policies-
Options and Futures Transactions" and "Hedging Techniques and Investment
Practices."
Investing in the Fund entails a substantial degree of risk. Investors are
strongly advised to consider carefully the special risks involved in investing
in emerging markets, which are in addition to the usual risks of investing in
developed countries around the world. See "Certain Investment Strategies and
Policies-Foreign Securities." The portfolio turnover rate for the Fund may vary
greatly from year to year.
SELECT AGGRESSIVE GROWTH FUND
Investment Objective: The Select Aggressive Growth Fund seeks above-average
capital appreciation by investing primarily in common stocks of companies which
are believed to have significant potential for capital appreciation.
Sub-Adviser: Nicholas-Applegate Capital Management, L.P. ("NACM") serves as Sub-
Adviser to the Select Aggressive Growth Fund. NACM is an investment manager
supervising accounts with approximately $30 billion in total assets as of
December 31, 1997. NACM's clients are primarily major corporate employee benefit
funds, public employee retirement plans, foundations and endowment funds,
investment companies and individuals. Founded in 1984, NACM is located at 600
West Broadway, Suite 2900, San Diego, California 92101.
Investment Policies: Under normal circumstances, at least 65% of the assets of
the Select Aggressive Growth Fund will be invested in equity securities,
consisting of common stocks, securities convertible into common stocks
(including bonds, notes and preferred stocks), and warrants. The Fund's assets
also may be invested in other debt securities and preferred stocks when such
securities are believed appropriate in light of the Fund's investment objective
and market conditions.
The selection of securities is made solely on the basis of their potential for
capital appreciation. Dividend and interest income from portfolio securities, if
any, is incidental to the Fund's investment objective. While investments may be
made in well-known and established companies, a significant portion of the
Fund's investments is expected to be in securities of newer and relatively
unseasoned companies or companies which represent new or changing industries.
At any given point, a substantial portion of the Fund's equity investments may
be in securities which are not listed for trading on national securities
exchanges and which, although publicly traded, may be less liquid than
securities issued by larger, more seasoned companies which trade on national
securities exchanges. Up to 15% of the Fund's net assets may be invested in
securities which are illiquid.
Securities of newer companies may be closely held with only a small portion of
their outstanding securities owned by the general public. Newer companies may
have relatively small revenue, lack depth of management and have a small share
of the market for their products or services; thus, they may be more vulnerable
to changes in economic conditions, market fluctuations and other factors
affecting the profitability or marketability of companies. Due to these and
other factors, the price movement of the securities held by the Fund can be
expected to be more volatile than is the case for the market as a whole, and the
net asset value of a share of the Fund may fluctuate significantly.
Consequently, the Fund should not be considered suitable for investors who are
unable or unwilling to assume the risk of loss inherent in an aggressive growth
portfolio, nor should investment in the Fund be considered a balanced or
complete investment program.
When NACM determines that market conditions warrant a temporary defensive
position, the Fund may invest without limitation in high-grade, fixed-income
securities or U.S. Government securities or hold assets in cash or cash
equivalents. For hedging purposes, the Fund may engage in the options and
futures strategies described under "Certain Investment Strategies and
Policies."
The Fund also may invest up to 25% of its assets in foreign securities (not
including its investments in American Depositary Receipts ("ADRs")).
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For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 95%. The portfolio turnover rate was the result of the Sub-
Adviser's investment process which typically results in above-average portfolio
turnover. Portfolio turnover rates may vary greatly from year to year. A high
portfolio turnover rate will likely result in greater brokerage costs to the
Fund.
SELECT CAPITAL APPRECIATION FUND
Investment Objective: The Select Capital Appreciation Fund seeks long-term
growth of capital in a manner consistent with the preservation of capital.
Realization of income is not a significant investment consideration and any
income realized on the Fund's investments will be incidental to its primary
objective.
Sub-Adviser: T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as Sub-
Adviser to the Select Capital Appreciation Fund. Founded in 1937, T. Rowe Price
is a publicly held company located at 100 East Pratt Street, Baltimore, Maryland
21202. As of December 31, 1997, T. Rowe Price and its affiliates managed assets
totaling approximately $125 billion for more than five million individual and
institutional investor accounts. T. Rowe Price International Series, Inc., an
investment company managed by a T. Rowe Price affiliate, is currently used as an
investment vehicle for certain insurance products sponsored by First Allmerica
and Allmerica Financial Life. In addition, a T. Rowe Price affiliate currently
serves as investment adviser to an investment account offered to institutional
clients of First Allmerica and Allmerica Financial Life.
Investment Policies: The Fund invests in common stocks when the Sub-Adviser
believes that the relevant market environment favors profitable investing in
those securities. The Fund pursues its objective normally by investing at least
50% of its equity assets in securities issued by medium-sized companies. Medium-
sized companies are those whose market capitalizations fall within the range of
companies in the S&P MidCap 400 Index (the "MidCap Index"). Companies whose
capitalization falls outside this range after the Fund's initial purchase
continue to be considered medium-sized companies for the purpose of this policy.
As of December 31, 1997, the MidCap Index included companies with
capitalizations between approximately $200 million to $12 billion. The range of
the MidCap Index is expected to change on a regular basis. Subject to the above
policy, the Fund also may invest in smaller or larger issuers. Common stock
investments are selected in industries and companies that the Sub-Adviser
believes are experiencing favorable demand for their products and services and
which operate in a favorable competitive environment and regulatory climate. The
Sub-Adviser's analysis and selection process focuses on stocks with earnings
growth potential that may not be recognized by the market. Such securities are
selected solely for their capital growth potential; investment income is not a
consideration. Medium-sized companies may suffer more significant losses as well
as realize more substantial growth than larger issuers; thus, investments in
such companies tend to be more volatile and somewhat speculative.
The selection criteria for domestic issuers apply equally to stocks of foreign
issuers. In addition, factors such as expected levels of inflation, government
policies influencing business conditions, the outlook for currency relationships
and prospects for relative economic growth among countries, regions or
geographic areas may warrant greater consideration in selecting foreign stocks.
The Fund may invest without limitation in foreign securities. The Fund may
invest directly in foreign securities denominated in foreign currency and not
publicly traded in the United States. The Fund also may purchase foreign
securities through ADRs, European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs"), and other types of receipts or shares evidencing
ownership of the underlying foreign securities. In addition, the Fund may invest
indirectly in foreign securities through foreign investment funds or trusts
(including passive foreign investment companies). Certain state insurance
regulations may impose additional restrictions on the Fund's holdings of foreign
securities. Investments in foreign securities carry additional risks not present
in domestic securities. See "Certain Investment Strategies and Policies -
Foreign Securities."
Although the Fund normally invests primarily in common stocks, the Fund's cash
position may increase when the Sub-Adviser is unable to locate investment
opportunities with desirable risk/reward characteristics. The Fund also may
invest in preferred stocks, warrants, government securities, corporation bonds
and debentures, high-grade commercial papers, certificates of deposit, other
debt securities or repurchase agreements or reverse repurchase agreements when
the Sub-Adviser perceives an opportunity for capital growth from such securities
or so that the Fund may receive a return on its idle cash. The Fund also may
invest up to 35% of its assets in such lower-rated securities commonly known as
"junk bonds." Fixed income securities rated in the fourth highest grade by
Moody's Investors Service, Inc. (Moody's) or Standard & Poor's Ratings Service,
a division of McGraw-Hill Companies, Inc. ("S&P") (Baa and BBB, respectively)
are investment grade but are considered to have some speculative
characteristics. Lower-rated securities or "junk bonds" (rated Ba/BB or lower)
involve the risks discussed under "Certain Investment Strategies and Policies-
High Yield Securities." When the Fund invests in such securities, investment
income will increase and may constitute a large portion of the return realized
by the Fund and the Fund probably will not participate in market advances or
declines to the extent that it would if it remained fully invested in common
stocks. Up to 15% of the Fund's net assets may be invested in securities which
are illiquid.
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<PAGE>
The Fund may invest in "special situations" from time to time. A special
situation arises when, in the opinion of the Sub-Adviser, the securities of a
particular issuer will be recognized and appreciate in value due to a specific
development with respect to that issuer. Developments creating a special
situation might include, among others, a new product or process, a technological
breakthrough, a management change or other extraordinary corporate event, or
differences in market supply of and demand for the security. Investment in
special situations may carry an additional risk of loss in the event that the
anticipated development does not occur or does not attract the expected
attention.
For hedging purposes, the Fund may engage in options and futures strategies
and may utilize forward contracts, interest rate swaps and swap-related
products. See "Certain Investment Strategies and Policies." For the fiscal year
ended December 31, 1997, the portfolio turnover rate for the Fund was 133%. The
portfolio turnover rate was the result of the investment approach of Janus
Capital Corporation ("JCC"), the Fund's previous Sub-Adviser, which typically
resulted in above-average portfolio turnover as securities were sold when the
Sub-Adviser believed the reasons for their initial purchase were no longer valid
or when it believed that the sale of a security owned by the Fund and the
purchase of another security could enhance return. JCC was replaced by T. Rowe
Price as Sub-Adviser for the Fund effective April 1, 1998. Portfolio turnover
rates may vary greatly from year to year. A high portfolio turnover rate will
likely result in greater brokerage costs to the Fund.
SELECT VALUE OPPORTUNITY FUND (FORMERLY SMALL-MID CAP VALUE FUND)
Investment Objective: The Select Value Opportunity Fund seeks long-term growth
of capital by investing primarily in a diversified portfolio of common stocks of
small and mid-size companies, whose securities at the time of purchase are
considered by the Sub-Adviser to be undervalued.
Sub-Adviser: Cramer Rosenthal McGlynn, LLC ("CRM") serves as Sub-Adviser to the
Select Value Opportunity Fund. CRM provides advisory and sub-advisory services
to mutual funds with a total of over $500 million in assets under management as
of December 31, 1997. CRM is owned by its active investment professionals,
Cramer Rosenthal McGlynn, Inc. ("Cramer Rosenthal") and WT Investments, Inc., an
indirect, wholly-owned subsidiary of Wilmington Trust Corporation. Founded in
1973, Cramer Rosenthal had over $3.7 billion in assets under management as of
December 31, 1997 and provides investment advice to individuals, state and local
government agencies, pension and profit sharing plans, trusts, estates,
endowments and other organizations. The Sub-Adviser is located at 707
Westchester Avenue, White Plains, New York 10604.
Investment Policies: A stock will be considered to be attractively valued and,
therefore, eligible for investment in the Fund, if it is trading at a price
which the Sub-Adviser believes is reasonable relative to its own past valuation
history as well as compared to a large universe of stocks selected by the Sub-
Adviser, based on one or more of the following comparisons:
1. price relative to cash flow;
2. price relative to earnings;
3. price relative to sales; and
4. price relative to assets as measured by book value.
The Select Value Opportunity Fund generally intends to invest at least 65% of
its total assets in stocks of companies with market capitalization between $200
million and $5 billion at the time of purchase and which are listed on a
national or regional exchange or over-the-counter with prices quoted daily in
the financial press. The Fund at times may invest temporarily in preferred
stocks, bonds or other defensive issues. Normally, however, the Fund will
maintain at least 80% of the portfolio in common stocks. There are no
restrictions or guidelines regarding the investment of Fund assets in shares
listed on an exchange or traded over-the-counter. The Fund may invest up to 25%
of its assets in foreign securities (not including its investments in
ADRs).
The Select Value Opportunity Fund seeks investment opportunities in companies
whose stocks are trading at attractive valuations relative to the market as a
whole. The most attractive of these companies often exist among those securities
which have been out of favor, where Wall Street coverage is limited and where
there is a degree of misunderstanding or neglect resulting in low expectations.
Value investing may reduce downside risk while offering potential for capital
appreciation as a company gains favor among other investors and its stock price
rises. The portfolio normally will be diversified among different industry
sectors, but is not an index approach. Stocks are bought as investments and
generally held for the long term, rather than as active trading vehicles.
Small-mid cap companies may present greater opportunities for capital
appreciation, but also may involve greater risk. Smaller cap companies, when
compared with larger cap companies, may be more dependent upon a single product,
have limited financial resources, have fewer securities outstanding, experience
greater price fluctuations and be somewhat less liquid than securities of larger
companies.
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The Fund may invest up to 15% of its net assets in securities which are
illiquid.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 110%. The portfolio turnover rate for the Fund may vary from year
to year. The Fund experienced such a rate of turnover due to a new Sub-Adviser
assuming responsibility for the Fund on January 1, 1997 and subsequently
repositioning the portfolio.
SELECT INTERNATIONAL EQUITY FUND
Investment Objective: The Select International Equity Fund seeks maximum long-
term total return (capital appreciation and income) primarily by investing in
common stocks of established non-U.S. companies.
Sub-Adviser: Bank of Ireland Asset Management (U.S.) Limited ("BIAM") serves as
Sub-Adviser for the Select International Equity Fund. BIAM is an indirect,
wholly-owned subsidiary of Bank of Ireland. Its main offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. Its U.S. headquarters are at 20 Horseneck
Lane, Greenwich, CT 06830. Bank of Ireland provides investment management
services through a network of affiliated companies, including BIAM which
represents North American clients. As of December 31, 1997, Bank of Ireland
managed approximately $27 billion in global securities for Irish, United
Kingdom, European, Australian, South African, Canadian and U.S. clients.
Investment Policies: To achieve its objective, the Select International Equity
Fund will invest primarily in common stocks of established non-U.S. companies.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in the securities of companies domiciled in at least five foreign
countries, not including the United States. The Fund may also acquire fixed
income debt securities. It will do so, at the discretion of BIAM, primarily for
defensive purposes. The Fund may invest up to 15% of its net assets in
securities which are illiquid.
The Fund's investments may include ADRs which may be sponsored or unsponsored
by the underlying issuer. The Fund may also utilize EDRs, which are similar to
ADRs, in bearer form, designed for use in the European securities market and
GDRs. Investments in foreign securities carry additional risks not present in
domestic securities. See "Certain Investment Strategies and Policies-Foreign
Securities." For hedging purposes, the Fund may engage in the options and
futures strategies described under "Certain Investment Strategies and Policies."
Certain state insurance regulations may impose additional restrictions on the
Fund's holdings of foreign securities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 20%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
SELECT GROWTH FUND
Investment Objective: The Select Growth Fund seeks to achieve long-term growth
of capital by investing in a diversified portfolio consisting primarily of
common stocks selected on the basis of their long-term growth potential.
Sub-Adviser: Putnam Investment Management, Inc. ("Putnam"), One Post Office
Square, Boston, Massachusetts 02109, serves as Sub-Adviser to the Select Growth
Fund. Putnam has been an investment manager since 1937. As of December 31, 1997,
Putnam and its affiliates had assets under management of approximately $235
billion. Putnam is a wholly-owned subsidiary of Putnam Investments, Inc., a
holding company which, other than a minority interest owned by employees, is in
turn wholly-owned by Marsh & McLennan Companies, Inc., a publicly-owned holding
company whose principal businesses are international insurance and reinsurance
brokerage, employee benefit consulting and investment management.
Investment Policies: The Select Growth Fund seeks to attain its objective by
investing in securities of companies that appear to have favorable long-term
growth characteristics. Potential for long-term growth is the determinative
factor in the selection of all portfolio securities. Although the Fund may
invest in dividend-paying stocks, the generation of current income is not an
objective of the Fund. Any income that is received is incidental to the Fund's
objective of long-term growth of capital whereas the Sub-Adviser for the Select
Strategic Growth Fund emphasizes value-oriented characteristics as well as
growth potential.
When choosing securities for the portfolio, the Sub-Adviser for the Select
Growth Fund focuses on companies that display strong financial characteristics
and earnings growth potential.
At least 65% of the Fund's assets under normal conditions will consist of
growth-oriented common stocks. The Fund may invest in common stocks of large
well-known companies as well as smaller growth companies, which generally
include companies with a
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market capitalization of $500 million or less ("smaller growth companies"). The
stocks of smaller growth companies may involve a higher degree of risk than
other types of securities and the price movement of such securities can be
expected to be more volatile than is the case of the market as a whole. The Fund
may hold stocks traded on one or more of the national exchanges as well as in
the over-the-counter markets. Because opportunities for capital growth may exist
not only in new and expanding areas of the economy but also in mature and
cyclical industries, the Fund's portfolio investments are not limited to any
particular type of company or industry. The Fund may also purchase convertible
bonds and preferred stocks, warrants and debt securities if the Fund's Sub-
Adviser believes they would help achieve the Fund's objective of long-term
growth.
The Fund may invest up to 35% of its assets in both higher-rated and lower-
rated fixed-income securities in seeking its objective of long-term growth of
capital. The Fund may invest up to 15% of its assets in lower-rated securities,
commonly known as "junk bonds," which involve risks discussed under "Certain
Investment Strategies and Policies-High Yield Securities." For more information
concerning the rating categories of corporate debt securities, see the Appendix
to the Prospectus.
When the Sub-Adviser determines that market conditions warrant a temporary,
defensive position, the Fund may invest without limitation in high-grade, fixed-
income securities or U.S. Government securities, or hold assets in cash or cash
equivalents. To the extent the Fund is so invested it is not achieving its
objective to the same degree as under normal conditions. For hedging purposes,
the Fund may engage in the options and futures strategies described under
"Certain Investment Strategies and Policies."
The Select Growth Fund's objective of seeking long-term growth of capital
means that its assets generally will be subject to greater risk than may be
involved in investing in securities that are not selected for growth potential.
The Fund may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 75%. The portfolio turnover for the Fund may vary greatly from year
to year.
SELECT STRATEGIC GROWTH FUND
Investment Objective: The Select Strategic Growth Fund seeks long-term growth of
capital by investing primarily in common stocks of established companies.
Sub-Adviser: Cambiar Investors, Inc. ("Cambiar"), 8400 East Prentice Avenue,
Suite 460, Englewood, Colorado 80111, serves as Sub-Adviser to the Select
Strategic Growth Fund. Cambiar is a registered investment adviser that began
operations in 1973 and became a wholly-owned subsidiary of United Asset
Management Corporation in 1990. Cambiar manages portfolios for major corporate
clients, pension plans and financial institutions. As of December 31, 1997,
Cambiar had approximately $1.9 billion in assets under management.
Investment Policies: Under normal market conditions, the Fund invests at least
65% of its total assets in the common stocks of companies with a market
capitalization of more than $1 billion at the time of investment. In seeking to
achieve its objective, the Fund emphasizes investments in common stocks of well-
known companies that the Sub-Adviser believes have the potential for earnings
growth and capital appreciation.
In selecting stocks for the Fund, the Sub-Adviser seeks quality companies
selling at low relative valuation levels, experiencing unrecognized positive
developments and exhibiting high appreciation potential. Many of the stocks in
the Fund's portfolio are expected to pay regular dividends. However, in the
evaluation of a company, greater consideration normally is given to growth
potential than to dividend income. The Sub-Adviser believes that it is more
important to evaluate a company's probable future earnings, dividends,
competitive position and financial strength than simply to seek current dividend
income. While emphasis is placed on a company's prospects for future growth, the
Fund seeks stocks which are attractively priced relative to their anticipated
long-term value.
In addition to common stocks, the Fund may purchase preferred stocks, debt
securities and securities convertible into or exchangeable for common stocks if
the Sub-Adviser believes they would help achieve the Fund's objective. The Fund
may invest up to 20% of its assets in foreign securities (not including its
investments in ADRs) and up to 15% of its net assets in securities which are
illiquid. The Fund also may engage in options and futures strategies. See
"Certain Investment Strategies and Policies."
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The Fund at any time may hold a portion of its assets in cash or money market
instruments. When a defensive position is deemed advisable, the Fund may
temporarily invest without limit in high-grade debt securities, securities of
the U.S. Government and its agencies and money market instruments, or retain
cash.
The Fund is not restricted as to portfolio turnover and will make changes in
its portfolio from time to time based on market prices, economic conditions and
other factors. The Fund generally attempts to avoid speculative securities. The
companies in which the Fund invests typically have a large number of publicly
held shares and a high trading volume, resulting in a high degree of liquidity.
The value of the Fund's investments fluctuates in response to many factors,
including activities of individual companies and general market and economic
conditions. The Sub-Adviser attempts to reduce risk through diversification of
the Fund's portfolio and thorough research. However, there are risks inherent in
the investment in any security, including shares of the Fund, and there is no
guarantee that the Fund's investment strategies will be successful.
SELECT INCOME FUND
Investment Objective: The Select Income Fund seeks a high level of current
income. The Fund will invest primarily in investment grade, fixed-income
securities.
Sub-Adviser: Standish, Ayer & Wood, Inc. ("SAW") serves as Sub-Adviser to the
Select Income Fund. SAW was founded in 1933 to provide investment management
services to high net worth individuals and institutions. As of December 31,
1997, total client assets exceeded $39 billion. SAW manages fixed-income
portfolios for major corporate and governmental pension plans, financial
institutions, and endowment and foundation funds. Through its affiliate,
Standish International Investment Management Company, L.P., SAW offers
international investment services. SAW is an independent investment counseling
firm owned by its twenty-four directors who are active with the firm. SAW is
located at One Financial Center, Boston, Massachusetts 02111.
Investment Policies: Under normal circumstances, at least 65% of the Select
Income Fund's assets, at the time of investment, will be invested in investment
grade corporate debt securities and securities issued or guaranteed as to
principal or interest by the U.S. Government or its agencies or
instrumentalities. Investment grade corporate debt securities are: (a) assigned
a rating within the four highest grades (Baa/BBB or higher) by either Moody's or
S&P, (b) equivalently rated by another nationally recognized statistical rating
organization ("NRSRO") or (c) unrated securities but determined by the Sub-
Adviser to be of comparable quality. Securities rated in the fourth highest
grade (rated Baa and BBB by Moody's and S&P, respectively) are considered to
have some speculative characteristics. For more information concerning the
rating categories of corporate debt securities and commercial paper, see the
Appendix to the Prospectus. The types of securities in which the Fund invests
are corporate debt obligations such as bonds, notes and debentures, and
obligations convertible into common stock; "money market" instruments, such as
bankers acceptances, or negotiable certificates of deposit issued by the 25
largest U.S. banks (in terms of deposits); commercial paper rated Prime-1 by
Moody's or A-1 by S&P; obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; asset-backed securities; mortgage-backed
securities; and stripped mortgage-backed securities. The Fund also may invest in
U.S. dollar obligations of, or guaranteed by, the government of Canada or a
province of Canada or any instrumentality or political subdivision thereof, and
U.S. dollar obligations of supranational entities such as the World Bank,
European Investment Bank and African Development Bank. For more information
about asset-backed securities and mortgage-backed securities and stripped
mortgage-backed securities, see "Certain Investment Strategies and
Policies."
The Fund's investments in corporate debt securities are not limited to any
particular type of company or industry.
The Fund's dollar average weighted maturity and the mix of permitted portfolio
securities as described above will vary from time to time depending, among other
things, on current market and economic conditions and the comparative yields on
instruments in different sectors, such as corporate and Treasuries, and with
different maturities. The dollar average weighted maturity of the portfolio,
excluding money market instruments, is expected to range between 5 and 20 years
under normal market conditions. The Fund may invest up to 35% of its assets in
money market instruments under normal conditions. Although the Fund does not
invest for short-term trading purposes, portfolio securities may be sold from
time to time without regard to the length of time they have been held. The value
of the Fund's portfolio securities generally will vary inversely with changes in
prevailing interest rates, declining as interest rates rise and increasing as
rates decline. The value will also be affected by other market and economic
factors. There is the risk with corporate debt securities that the issuers may
not be able to meet their obligations on interest and principal payments.
The Fund also may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
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The Fund may invest up to 25% of its assets in lower-rated securities,
commonly known as "junk bonds," which involve risks discussed under "Certain
Investment Strategies and Policies-High Yield Securities." For more information
concerning the rating categories of corporate debt securities, see the Appendix
to the Prospectus.
Obligations in which the Select Income Fund may invest include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Obligations of supranational
entities may be supported by appropriated but unpaid commitments of their member
countries, and there is no assurance that these commitments will be undertaken
or met in the future. The Fund may not invest more than 25% of its assets in
debt obligations of supranational entities.
For hedging purposes, the Fund may engage in the options and futures
strategies described under "Certain Investment Strategies and Policies."
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 79%. The portfolio turnover rate for the Fund may vary from year to
year. A high portfolio turnover rate may result in greater brokerage costs to
the Fund.
MANAGEMENT FEES AND EXPENSES
Under its Management Agreement with the Trust, the Manager is obligated to
perform certain administrative and management services for the Trust; furnishes
to the Trust all necessary office space, facilities, and equipment; and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager. Other than the expenses specifically assumed by the Manager under the
Management Agreement, all expenses incurred in the operation of the Trust are
borne by the Trust, including fees and expenses associated with the registration
and qualification of the Trust's shares under the Securities Act of 1933 (the
"1933 Act"); other fees payable to the SEC; independent accountant, legal and
custodian fees; association membership dues; taxes; interest; insurance
premiums; brokerage commissions; fees and expenses of the Trustees who are not
affiliated with the Manager; expenses for proxies, prospectuses and reports to
shareholders; Fund recordkeeping expenses and other expenses.
For the services to the Funds, the Manager receives fees computed daily at an
annual rate based on the average daily net asset value of each Fund as set forth
below:
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY
MARKETS FUND GROWTH FUND FUND FUND
------------ ----------- ---- ----
<S> <C> <C> <C> <C>
Manager Fee 1.35%* (1) (1) (2)
<CAPTION>
SELECT
SELECT SELECT STRATEGIC SELECT
INTERNATIONAL GROWTH GROWTH INCOME
EQUITY FUND FUND FUND FUND
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Manager Fee (1) 0.85% 0.85% (3)
</TABLE>
- -------------------------------------------
* The Manager voluntarily has agreed until further notice to waive its
management fee in the event that expenses of the Select Emerging Markets Fund
exceed 2.00% of the Fund's average daily net assets. The amount of such waiver
will be limited to the net amount of management fees earned by the Manager
from the Fund after subtracting the fees paid by the Manager to SCMI for sub-
advisory services.
(1) The Manager's fees for the Select Aggressive Growth Fund, Select Capital
Appreciation Fund and Select International Equity Fund, computed daily at an
annual rate based on the average daily net assets of each Fund, are based on
the following schedule:
<TABLE>
<CAPTION>
SELECT
SELECT AGGRESSIVE SELECT CAPITAL INTERNATIONAL
ASSETS GROWTH FUND APPRECIATION FUND EQUITY FUND
------------- ----------- ----------------- -----------
<S> <C> <C> <C>
First $100 Million.......... 1.00% 1.00% 1.00%
Next $150 Million........... 0.90% 0.90% 0.90%
Next $250 Million........... 0.85% 0.85% 0.85%
Over $500 Million........... 0.85% 0.85% 0.85%
</TABLE>
16
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Allmerica Investment Trust
<PAGE>
(2) The Manager's fee for the Select Value Opportunity Fund, computed daily at
an annual rate based on the average daily net assets of the Fund, is based
on the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million..................... 1.00%
Next $150 Million..................... 0.85%
Next $250 Million..................... 0.80%
Next $250 Million..................... 0.75%
Over $750 Million..................... 0.70%
</TABLE>
The Manager voluntarily has agreed to limit its management fees to an annual
rate of 0.90% of average daily net assets of the Select Value Opportunity
Fund until further notice.
(3) The Manager's fee for the Select Income Fund, computed daily at an annual
rate based on the average daily net assets of the Fund, is based on the
following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million..................... 0.60%
Next $50 Million..................... 0.55%
Over $100 Million..................... 0.45%
</TABLE>
The Manager is responsible for the payment of all fees to the Sub-Advisers.
The Manager pays each Sub-Adviser fees computed daily at an annual rate based on
the average daily net asset value of each Fund as set forth below. In certain
Funds, Sub-Adviser fees vary according to the level of assets in such Funds,
which will reduce the fees paid by the Manager as Fund assets grow but will not
reduce the operating expenses of such Funds.
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY
MARKETS FUND GROWTH FUND FUND FUND
------------ ----------- ---- ----
<S> <C> <C> <C> <C>
Sub-Adviser Fee (4) (5) 0.50% (6)
<CAPTION>
SELECT
SELECT SELECT STRATEGIC SELECT
INTERNATIONAL GROWTH GROWTH INCOME
EQUITY FUND FUND FUND FUND
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Sub-Adviser Fee (7) (8) (8) 0.20%
</TABLE>
(4) For its services, SCMI will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Emerging Markets Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million..................... 1.00%
Next $50 Million..................... 0.85%
Next $150 Million..................... 0.75%
Over $250 Million..................... 0.60%
</TABLE>
(5) For its services, NACM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Aggressive Growth Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million..................... 0.60%
Next $150 Million..................... 0.55%
Next $250 Million..................... 0.50%
Over $500 Million..................... 0.45%
</TABLE>
17
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Allmerica Investment Trust
<PAGE>
(6) For its services, CRM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Value Opportunity Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million..................... 0.60%
Next $150 Million..................... 0.50%
Next $250 Million..................... 0.40%
Next $250 Million..................... 0.375%
Over $750 Million..................... 0.35%
</TABLE>
(7) For its services, BIAM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select International Equity
Fund, under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million..................... 0.45%
Next $50 Million..................... 0.40%
Over $100 Million..................... 0.30%
</TABLE>
(8) For their services, Putnam and Cambiar will receive a fee computed daily at
an annual rate based on the average daily net assets of the Select Growth
Fund and Select Strategic Growth Fund, respectively, under the following
schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million..................... 0.50%
Next $100 Million..................... 0.45%
Next $100 Million..................... 0.35%
Next $100 Million..................... 0.30%
Over $350 Million..................... 0.25%
</TABLE>
For the fiscal year ended December 31, 1997, each Fund (except the Select
Emerging Markets Fund and Select Strategic Growth Fund which had not commenced
operations) paid the Manager gross fees before reimbursement at the following
effective rates based on the Fund's average daily net assets:
<TABLE>
<CAPTION>
FUND RATE
---- ----
<S> <C>
Select Aggressive Growth Fund...................... 0.95%
Select Capital Appreciation Fund................... 0.98%
Select Value Opportunity Fund...................... 0.92%
Select International Equity Fund................... 0.97%
Select Growth Fund................................. 0.85%
Select Income Fund................................. 0.59%
</TABLE>
The following table shows voluntary expense limitations which the Manager has
declared for each Fund and the operating expenses incurred for the fiscal year
ended December 31, 1997 for each Fund (except the Select Emerging Markets Fund
and the Select Strategic Growth Fund which had not commenced operations):
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY ASSETS
----------------------------------
VOLUNTARY EXPENSE OPERATING
FUND LIMITATIONS EXPENSES+
---- ----------- ---------
<S> <C> <C>
Select Emerging Markets Fund * N/A
Select Aggressive Growth Fund 1.35% 0.99%
Select Capital Appreciation Fund 1.35% 1.13%
Select Value Opportunity Fund 1.25% 0.98%
Select International Equity Fund 1.50% 1.15%
Select Growth Fund 1.20% 0.91%
Select Strategic Growth Fund 1.20% N/A
Select Income Fund 1.00% 0.72%
</TABLE>
- -----------------------------------
+ Including reductions such as directed brokerage credits. See "Brokerage
Allocation - Directed Brokerage Program" in the SAI.
18
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Allmerica Investment Trust
<PAGE>
* The Manager has agreed until further notice to waive voluntarily its
management fee in the event that expenses of the Select Emerging Markets Fund
exceed 2.00% of the Fund's average daily net assets. The amount of such waiver
will be limited to the net amount of management fees earned by the Manager from
the Fund after subtracting fees paid by the Manager to SCMI for sub-advisory
services.
The Manager will voluntarily reimburse its fees and any expenses above the
expense limitations. The expense limitations are voluntary and may be removed at
any time after the Fund's first fiscal year of operations with notice to
existing shareholders. The Manager reserves the right to recover from a Fund any
fees, within a current fiscal year period, which were reimbursed in that same
year to the extent that total annual expenses did not exceed the applicable
expense limitation. The expenses which are subject to the voluntary expense
limitations include management fees, independent accountant, legal and custodian
fees; recordkeeping expenses; fees and expenses of Trustees who are not
affiliated with the Manager; association membership dues, insurance; expenses
for proxies, prospectuses and reports to shareholders and fees associated with
the registration of Fund shares. Non-recurring and extraordinary expenses
generally are excluded in the determination of expense ratios of the Funds for
purposes of determining any applicable expense waiver or reimbursement.
Quotations of yield or total return for any period when an expense limitation is
in effect will be greater than if the limitation had not been in effect.
FUND MANAGER INFORMATION
The following individuals are responsible primarily for the day-to-day
management of the particular Funds as indicated below:
The following portfolio managers are involved in the investment process
utilized for the SELECT EMERGING MARKETS FUND:
John A. Troiano, Chief Executive and Chairman of Emerging Markets Committee,
joined SCMI in 1981 as an investment analyst specializing in engineering and
technology. In 1989, he set up SCMI's Latin American team.
Mark Bridgeman, First Vice President, joined SCMI in 1990 and is a Fund Manager
specializing in the African markets.
Heather F. Crighton, Director, joined SCMI in 1993 as a Fund Manager
specializing in the Asian emerging markets.
The following individuals have served as members of a committee of fund
managers for the SELECT AGGRESSIVE GROWTH FUND since March 1994:
Lawrence S. Speidell is a Partner and Director of Global/Systematic Portfolio
Management and Research at NACM. Prior to joining NACM in 1994, Mr. Speidell
spent ten years with Batterymarch Financial Management. He was also Senior Vice
President and Portfolio Manager at Putnam Management Company from 1971 to 1983.
John J. Kane is a Partner and Senior Portfolio Manager for the U.S. Systematic
portfolios at NACM. He has 28 years of economic/investment experience. Prior to
joining NACM in 1994, Mr. Kane was employed by ARCO Investment Management
Company and General Electric Company.
Mark W. Stuckelman, Portfolio Manager, U.S. Systematic, joined NACM in 1995.
Prior to joining NACM, he was employed for five years with Wells Fargo Bank's
Investment Management Group, Fidelity Management Trust Co., and BARRA, Inc.
The following portfolio managers are involved in the investment process
utilized for the SELECT CAPITAL APPRECIATION FUND:
Brian W.H. Berghuis is a Chartered Financial Analyst who has been with T. Rowe
Price for 13 years. He has 15 years' experience in equity research and
portfolio management. He is head of the investment team for the Fund.
John F. Wakeman has been with T. Rowe Price for 9 years as a research analyst
and portfolio manager. He has 11 years' experience in equity research. He is
part of the investment team for the Fund.
Marc L. Baylin is a Chartered Financial Analyst who has 7 years of investment
experience in equity research. He has been with T. Rowe Price for 5 years as a
Research Analyst and is part of the investment team for the Fund.
19
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Allmerica Investment Trust
<PAGE>
The following individuals have served as fund managers for the SELECT VALUE
OPPORTUNITY FUND since January 1, 1997:
Ronald H. McGlynn, Chief Executive Officer and President of Cramer Rosenthal,
has been with Cramer Rosenthal since 1973 and CRM since its founding in 1995.
He has 29 years of investment experience and serves as Co-Chief Investment
Officer and Portfolio Manager.
Jay B. Abramson, who is an Executive Vice President, Director of Research and
Co-Chief Investment Officer, has been with Cramer Rosenthal since 1985 and CRM
since its founding in 1995 and has overall responsibility for investment
research.
Eileen M. Fitzsimons, Vice President and portfolio manager, joined Cramer
Rosenthal in 1996. Previously she was a Managing Director with Dreman Value
Advisors, Inc.
The following portfolio managers are involved in the investment process
utilized for the SELECT INTERNATIONAL EQUITY FUND:
Christopher Reilly, Chief Investment Officer, joined BIAM in 1980 and has had
overall responsibility for asset management since 1985. Previously, he worked
in the United Kingdom in stockbrokering and investment management.
Denis Donovan, Director-Portfolio Management, received an MBA from University
College Dublin. Prior to joining BIAM in 1985, he spent more than 13 years in
the money market and foreign exchange operations of the Central Bank of
Ireland, the Irish equivalent of the U.S. Federal Reserve. He has overall
responsibility for the portfolio management function for all of BIAM's client
base.
Peter Wood joined BIAM in 1985 after spending five years with another leading
investment management firm. He is responsible for portfolio construction.
Jane Neill, Senior Equity Analyst, joined BIAM in 1994. Previously, she was
Chief Investment Officer with another leading Irish investment management
firm.
The following individuals have served as members of a committee of fund
managers for the SELECT GROWTH FUND since July 1, 1996:
Carol C. McMullen, Chief Investment Officer, Global Growth Equities, has been
an investment professional with Putnam since 1995. Prior to 1995, Ms. McMullen
was Senior Vice President of Baring Asset Management.
C. Beth Cotner, CFA and Chief Investment Officer, Large Cap Growth Equity, has
been with Putnam since 1995. Prior to 1995, Ms. Cotner was Executive Vice
President at Kemper Financial Services.
Manual Weiss, CFA and Senior Vice President, has been an investment
professional with Putnam since 1987.
The following portfolio managers are involved in the investment process
utilized for the SELECT STRATEGIC GROWTH FUND:
Michael S. Barish, CFA and President, founded Cambiar in 1973 and has 36 years
of investment experience. He is a generalist and is responsible for the
consumer goods and healthcare securities.
Darrel J. Hershey, Senior Vice President, joined Cambiar in 1985 and has 22
years of investment experience. Prior to 1985, Mr. Hershey was employed by
Financial Programs for 10 years as a portfolio manager. He is responsible for
the technology-hardware securities, consumer services and transportation
securities.
Kathleen M. McCarty, CFA, Senior Vice President, joined Cambiar in 1987. Prior
to 1987, Ms. McCarty was employed by Dain Bosworth as the Vice President of
Research. She is responsible for financial services, communication services and
utilities securities.
Michael J. Gardner, CFA and Vice President, joined Cambiar in 1995. Prior to
1995, Mr. Gardner was employed by Simmons & Co. He is responsible for energy
and capital goods securities.
20
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Allmerica Investment Trust
<PAGE>
Brian M. Barish, CFA and Vice President, was a Vice President at Lazard Freres
& Co. prior to joining Cambiar in 1997. He is responsible for technology-
software, consumer goods, transportation and international securities.
The following individuals have served as members of a committee of fund
managers for the SELECT INCOME FUND since the Fund's inception in August 1992:
Edward H. Ladd, Chairman and Managing Director, joined SAW in 1962 and is the
firm's economist. He also assists clients in establishing investment
strategies. Mr. Ladd is a Director of the Federal Reserve Bank of Boston, New
England Electric System, Greylock Management and Harvard Management Corporation
and a member of SAW's Executive Committee.
George W. Noyes, President and Managing Director, joined SAW in 1970 and
directs bond policy formulation and manages institutional bond portfolios at
SAW. Mr. Noyes is Vice Chairman of the ICFA Research Foundation and serves on
SAW's Executive Committee.
Dolores S. Driscoll, Managing Director, joined SAW in 1974 and manages fixed-
income portfolios with specific emphasis on mortgage pass-throughs and original
issue discount bonds. Ms. Driscoll also serves on SAW's Executive Committee.
Richard C. Doll, Manager, joined SAW in 1984 and is a portfolio manager with
research responsibilities in convertible bonds. Prior to joining SAW, Mr. Doll
was a Vice President with the Bank of New England.
Maria D. Furman, Vice President and Director, joined SAW in 1976. She is head
of the tax-exempt area and manages insurance and pension fund accounts. Ms.
Furman currently serves on SAW's Executive Committee.
HOW ARE SHARES VALUED?
The net asset value of the shares of each Fund is determined once daily as of
the close of regular trading on the New York Stock Exchange (the "Exchange") on
each day on which the Exchange is open for trading.
Equity securities are valued on the basis of their market value if market
quotations are readily available from the primary market on which the security
is traded. In other cases, they are valued at their fair value as determined in
good faith by the Trustees, although the actual calculations may be performed by
persons acting pursuant to the direction of the Trustees. Debt securities (other
than short-term obligations) are normally valued on the basis of valuations
formulated by a pricing service which utilizes data processing methods to
determine valuations for normal, institutional-size trading units of such
securities. Such methods include the use of market transactions for comparable
securities and various relationships between securities which generally are
recognized by institutional traders. Debt obligations in Funds having a
remaining maturity of 60 days or less are valued at amortized cost when it is
determined that amortized cost approximates fair value. Short-term obligations
of Funds having a remaining maturity of more than 60 days are marked to market
based upon readily available market quotations for such obligations or similar
securities.
The net asset value of the Funds will fluctuate.
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS
It is the policy of the Trust to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies so that the Trust will
not be subject to federal income tax on any net income and any capital gains to
the extent they are distributed or are deemed to have been distributed to
shareholders. Dividends out of net investment income will be declared and paid
quarterly in the case of the Select Income Fund and annually in the case of the
Select Emerging Markets Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Value Opportunity Fund, Select International Equity
Fund, Select Growth Fund and Select Strategic Growth Fund. Distributions of net
capital gains for the year, if any, are made annually. All dividends and capital
gain distributions are applied to purchase additional Fund shares at net asset
value as of the payment date. Fund shares are held by the Separate Accounts and
any distributions are reinvested automatically by the Separate Accounts. Tax
consequences to investors in the Separate Accounts which are invested in the
Trust are described in the prospectus or offering circular for such
Accounts.
SALE AND REDEMPTION OF SHARES
Shares of the Funds are sold in a continuous offering and currently may be
purchased only by Separate Accounts established by First Allmerica. The Separate
Accounts are the funding mechanisms for group annuity contracts and variable
life insurance policies.
21
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Allmerica Investment Trust
<PAGE>
The Separate Accounts invest in shares of one or more of the Funds. Shares of
each Fund are sold at its net asset value as next computed after receipt of the
purchase order without the addition of any selling commission or "sales load."
The Distributor, Allmerica Investments, Inc., at its expense, may provide
promotional incentives to dealers that sell variable annuity contracts for which
the Funds serve as investment vehicles.
Shares of the Trust are also currently being issued under separate
prospectuses to Separate Accounts of Allmerica Financial Life Insurance and
Annuity Company ("Allmerica Financial Life"), a subsidiary of First Allmerica,
First Allmerica and subsidiaries of First Allmerica which issue variable or
group annuity policies or variable premium life insurance policies ("mixed
funding"). Although neither Allmerica Financial Life nor the Trust currently
foresees any disadvantage, it is conceivable that in the future such mixed
funding may be disadvantageous for variable or group annuity policyowners or
variable premium life insurance policyowners ("Policyowners"). The Trustees of
the Trust intend to monitor events in order to identify any conflicts that may
arise between such Policyowners and to determine what action, if any, should be
taken in response thereto. If the Trustees were to conclude that separate funds
should be established for variable annuity, group annuity and variable premium
life separate accounts, Allmerica Financial Life would pay the attendant
expenses. The Trust has filed an application with the SEC for an exemptive order
to permit Fund shares to be sold to variable annuity and life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
qualified pension and retirement plans outside of the separate account context.
If the requested order is granted, any Fund may serve as a funding vehicle for
all types of variable annuity contracts and variable life insurance contracts
offered by various participating insurance companies and for qualified plans;
material irreconcilable conflicts may possibly arise among various contract
owners and plan participants and the Board of Trustees will monitor events in
order to identify the existence of any material irreconcilable conflict and
determine what action, if any, should be taken in response to such
conflict.
The Trust redeems shares of each Fund at its net asset value as next computed
after receipt of the request for redemption. The redemption price may be more or
less than the shareholder's cost. No fee is charged by the Trust on redemption.
The group contracts funded through the Separate Accounts are sold subject to
certain fees and charges which may include sales and redemption charges as
described in the prospectus or offering circular for such Separate Account.
Redemption payments will be paid within seven days after receipt of the
written request therefor by the Trust, except that the right of redemption may
be suspended or payments postponed whenever permitted by applicable law and
regulations.
HOW IS PERFORMANCE DETERMINED?
Each Fund's performance may be quoted in advertising. A Fund's performance may
be compared with the performance of other investments or relevant indices. All
performance information is based on historical results and is not intended to
indicate future performance.
A Fund's "yield" is calculated by dividing the Fund's annualized net
investment income per share during a recent 30-day period by the net asset value
per share on the last day of that period.
Total returns are based on the overall dollar or percentage change in value of
a hypothetical investment in a Fund assuming all dividends and capital gain
distributions are reinvested. Cumulative total return reflects the Fund's
performance over a stated period of time. Average annual total return reflects
the hypothetical, annually-compounded return that would have produced the same
cumulative return if the Fund's performance had been constant over the entire
period. Because average annual returns tend to smooth out variations in the
Fund's return, they are not the same as actual year-by-year results.
YIELDS AND TOTAL RETURNS QUOTED FOR THE FUNDS INCLUDE THE EFFECT OF DEDUCTING
THE FUNDS' EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO A
PARTICULAR INSURANCE PRODUCT. SINCE SHARES OF THE FUNDS CAN BE PURCHASED ONLY
THROUGH A GROUP ANNUITY, YOU SHOULD REVIEW CAREFULLY THE PROSPECTUS OR OFFERING
CIRCULAR FOR THE SEPARATE ACCOUNTS FOR INFORMATION ON RELEVANT CHARGES AND
EXPENSES. INCLUDING THESE CHARGES IN THE QUOTATIONS OF THE FUNDS' YIELDS AND
TOTAL RETURNS WOULD HAVE THE EFFECT OF DECREASING PERFORMANCE. PERFORMANCE
INFORMATION FOR THE FUNDS MUST ALWAYS BE ACCOMPANIED BY, AND BE REVIEWED WITH,
PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNTS WHICH INVEST IN THE FUNDS.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated October 11, 1984
(the "Trust Declaration"). A copy of the Trust Declaration is on file with the
Secretary of the Commonwealth of Massachusetts.
22
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Allmerica Investment Trust
<PAGE>
The Trust has an unlimited authorized number of shares of beneficial interest
which may be divided into an unlimited number of series of such shares, and
which are divided presently into 14 series of shares, one series underlying each
Fund. The eight Funds described in this Prospectus may be purchased by the
Separate Accounts established by First Allmerica. The Trust's shares are
entitled to one vote per share (with proportional voting for fractional shares).
The rights accompanying Fund shares are vested legally in the Separate Accounts.
As a matter of policy, however, holders of group annuity contracts funded
through the Separate Accounts have the right to instruct the Separate Accounts
as to voting Fund shares on all matters to be voted on by Fund shareholders.
Voting rights of the participants in the Separate Accounts are set forth more
fully in the prospectus or offering circular relating to those Accounts. See
"Organization of the Trust" in the SAI for a definition of a "majority vote" of
shareholders.
The Trust is not required to hold annual meetings of shareholders. The
Trustees or shareholders holding at least 10% of the outstanding shares may call
special meetings of shareholders.
FUND RECORDKEEPING AGENT
Investor Services Group calculates net asset value per share and maintains
general accounting records for each Fund. Investor Services Group is entitled to
receive an annual Fund recordkeeping fee based on Fund assets and certain out-
of-pocket expenses.
CUSTODIAN
Bankers Trust Company, 130 Liberty Street, New York, New York 10006, is the
Custodian of the investment securities and other assets of the Trust.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Fund without shareholder
approval. For a description of certain other investment restrictions, reference
should be made to the SAI.
1. No Fund will concentrate its investments in particular industries,
including debt obligations of supranational entities and foreign governments,
but a Fund may invest up to 25% of the value of its total assets in a particular
industry. The restriction does not apply to investments in obligations issued or
guaranteed by the United States of America, its agencies or instrumentalities.
2. As to 75% of the value of its total assets, no Fund will invest more
than 5% of the value of its total assets in the securities of any one issuer
(other than securities issued by or guaranteed as to principal or interest by
the United States Government or any agency or instrumentality thereof) or
acquire more than 10% of the voting securities of any issuer. The remaining 25%
of assets may be invested in the securities of one or more issuer without regard
to such limitations.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Fund will not be required to reduce
the amount of its holdings in such investments.
CERTAIN INVESTMENT STRATEGIES AND POLICIES
REPURCHASE AGREEMENTS (APPLICABLE TO ALL FUNDS) AND REVERSE REPURCHASE
AGREEMENTS (APPLICABLE TO THE SELECT CAPITAL APPRECIATION FUND)
Each Fund may invest in repurchase agreements, under which the Fund acquires
ownership of a security (ordinarily U.S. Government Securities) but the seller
agrees at the time of sale to purchase the security at a mutually agreed upon
time and price. Should any seller of a repurchase agreement fail to repurchase
the underlying security or should any seller become insolvent or involved in a
bankruptcy proceeding, a Fund could incur disposition costs and losses.
Repurchase agreements maturing in more than seven days are subject to the 15%
limit on illiquid securities.
When the Select Capital Appreciation Fund invests in a reverse repurchase
agreement, it sells a security to another party such as a banker or broker-
dealer in return for cash and agrees to buy the security back at a future date
and price. Reverse repurchase agreement transactions can be considered a form of
borrowing by the Fund. Reverse repurchase agreements may be used to provide cash
to satisfy unusually heavy redemption requests or for other temporary or
emergency purposes without the necessity of selling portfolio securities or to
earn additional income on portfolio securities, such as treasury bills and
notes.
23
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Allmerica Investment Trust
<PAGE>
"WHEN-ISSUED" SECURITIES (APPLICABLE TO ALL FUNDS)
Each Fund may purchase securities on a when-issued or delayed delivery basis.
Delivery and payment normally take place 15 to 45 days after the commitment to
purchase. No income accrues on when-issued securities prior to delivery.
Purchase of when-issued securities involves the risk that yields available in
the market when delivery occurs may be higher than those available when the
when-issued order is placed resulting in a decline in the market value of the
security. There is also the risk that under some circumstances the purchase of
when-issued securities may act to leverage the Fund.
LENDING OF SECURITIES (APPLICABLE TO ALL FUNDS)
For the purpose of realizing additional income, the Funds may lend portfolio
securities to broker-dealers or financial institutions amounting to not more
than 33% of their respective total assets taken at current value. While any such
loan is outstanding, a Fund will continue to receive amounts equal to the
interest or dividends paid by the issuer on the securities, as well as interest
(less any rebates to be paid to the borrower) on the investment of the
collateral or a fee from the borrower. Each Fund will have the right to call
each loan and obtain the securities. Lending portfolio securities involves
certain risks, including possible delays in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made in accordance with
guidelines established by the Board of Trustees.
FOREIGN SECURITIES (APPLICABLE TO ALL FUNDS)
Investments in foreign markets involve substantial risks typically not
associated with investing in the U. S. which should be considered carefully by
the investor. Such risks may include political and economic instability,
differing accounting and financial reporting standards, higher commission rates
on foreign portfolio transactions, less readily available public information
regarding issuers, potentially adverse changes in tax and exchange control
regulations and the potential for restrictions on the flow of international
capital. Foreign securities also involve currency risks. Accordingly, the
relative strength of the U.S. dollar may be an important factor in the
performance of the Fund, depending on the extent of such Fund's foreign
investments. Some foreign securities exchanges may not be as developed or
efficient as those in the United States and securities traded on foreign
securities exchanges generally are subject to greater price volatility. There is
also the possibility of adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation and limitations on the
removal of funds or other assets.
Investments in emerging countries involve exposure to economic structures that
are generally less diverse and mature than in the United States, and to
political systems which may be less stable. In addition, securities of issuers
located in emerging countries may have limited marketability and may be subject
to more abrupt or erratic price fluctuations. The risk also exists that an
emergency situation may arise in one or more emerging markets as a result of
which trading of securities may cease or may be substantially curtailed and
prices for a Fund's portfolio securities in such markets may not be readily
available. Many emerging market countries have experienced high rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have negative effects on the economies and
securities markets of certain countries with emerging markets. Emerging markets
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be affected adversely by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed by the countries with which they trade. In
certain markets there have been times when settlements of securities
transactions have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions.
The Funds may buy or sell foreign currencies, options on foreign currencies
and foreign currency futures contracts and options thereon and, in addition, the
Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund may invest in foreign currency
forward contracts. Although such instruments may reduce the risk of loss due to
a decline in the value of the currency that is sold, they also limit any
possible gain which might result should the value of the currency increase. Such
instruments will be used primarily to protect a Fund from adverse currency
movements, however, they also involve the risk that anticipated currency
movements will not be accurately predicted, thus adversely affecting a Fund's
total return. See "Options and Futures Transactions."
The Funds' investments may include ADRs. For many foreign securities, there
are U.S. dollar-denominated ADRs which are traded in the United States on
exchanges or over the counter. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank. An ADR may
be sponsored by the issuer of the underlying foreign security, or it may be
issued in unsponsored form. The holder of a sponsored ADR is likely to receive
more frequent and extensive financial disclosure concerning the foreign issuer
than the holder of an unsponsored ADR and generally will bear lower transaction
charges. The Funds
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will invest in both sponsored and unsponsored ADRs. The Select International
Equity Fund and the Select Capital Appreciation Fund also may utilize EDRs,
which are designed for use in European securities markets, and also may invest
in GDRs.
Obligations in which the Select Income Fund may invest include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Obligations of supranational
entities may be supported by appropriated but unpaid commitments of their member
countries, and there is no assurance that these commitments will be undertaken
or met in the future. The Fund may not invest more than 25% of its assets in
debt obligations of supranational entities.
Certain state insurance regulations may impose additional restrictions on a
Fund's holdings of foreign securities.
OPTIONS AND FUTURES TRANSACTIONS (APPLICABLE TO ALL FUNDS), FORWARD CONTRACTS
(APPLICABLE TO THE SELECT EMERGING MARKETS FUND, SELECT CAPITAL APPRECIATION
FUND, SELECT INTERNATIONAL EQUITY FUND AND SELECT INCOME FUND) AND SWAPS
(APPLICABLE TO THE SELECT CAPITAL APPRECIATION FUND)
Through the writing and purchase of put and call options on its securities,
financial indices and foreign currencies, and the purchase and sale of futures
contracts and related options with respect to securities, financial indices and
(in the case of the Select Emerging Markets Fund, Select Capital Appreciation
Fund, Select International Equity Fund and Select Income Fund) foreign
currencies in which it may invest, each Fund may at times seek to hedge against
fluctuations in net asset value, or to a limited extent to engage in non-hedging
strategies. A Fund may not purchase or sell a futures contract for non-hedging
purposes if immediately thereafter the sum of the amount of margin deposits and
amount of variation margins paid from time to time on a Fund's existing futures
and related options positions and premiums paid for related options would exceed
5% of the market value of the Fund's total assets. The Select Emerging Markets
Fund, Select Capital Appreciation Fund, Select International Equity Fund and
Select Income Fund may invest without limitation in foreign currency options.
Each Fund's ability to engage in options and futures strategies will depend on
the availability of liquid markets in such instruments. It is impossible to
predict the amount of trading interest that may exist in various types of
options or futures contracts. Therefore, there is no assurance that a Fund will
be able to utilize these instruments effectively for the purposes stated
above.
Additionally, the Select Emerging Markets Fund, Select Capital Appreciation
Fund, Select International Equity Fund and Select Income Fund may invest in
forward currency contracts with the stated contract value of up to the value of
the Fund's assets and the Select Capital Appreciation Fund in swaps which may
expose these Funds to additional risks and transaction costs.
Risks inherent in the use of futures, options, forward contracts and swaps
("derivative instruments") include (1) the risk that movements in interest
rates, securities prices and currency markets will not be accurately anticipated
and a Fund's total return could be adversely affected as a result; (2) imperfect
correlation, or even no correlation, between the price of derivative instruments
and movements in the prices of the securities, interest rates or currencies
being hedged; (3) the fact that skills and techniques needed to use these
strategies are different from those needed to select portfolio securities; (4)
the lack of assurance that a liquid secondary market will exist for any
particular instrument at any time and, as a result, contractual positions cannot
be closed out easily; (5) the possible loss of principal under certain
conditions; (6) the possible inability of a Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable to do so due to the need
for the Fund to maintain "cover" or set aside securities in connection with
hedging techniques; and (7) the risk of a loss if the counterparty to the
transaction does not perform as promised. These techniques may increase
volatility of a Fund and may involve a small investment of cash relative to the
magnitude of the risk assumed.
The Funds will purchase futures and options only on exchanges or boards of
trade when there appears to be an active secondary market, but there can be no
assurance that a liquid secondary market will exist for any future or option at
any particular time.
In connection with transactions in futures and related options, the Funds will
be required to deposit as "initial margin" an amount of cash and/or securities.
Thereafter, subsequent payments are made to and from the broker to reflect
changes in the value of the futures contract.
A more detailed explanation of futures, options and other derivative
instruments, and the risks associated with them, is included in the SAI.
RESTRICTED SECURITIES (APPLICABLE TO ALL FUNDS)
The Funds also may purchase fixed-income securities that are not registered
under the 1933 Act ("restricted securities"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act. However, each
Fund will not invest more than
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15% of its net assets in restricted securities (and securities deemed to be
illiquid) unless the Board of Trustees determines, based upon a continuing
review of the trading markets for the specific restricted security, that such
restricted securities are liquid. The Board of Trustees has adopted guidelines
and delegated to the Manager the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain sufficient
oversight and be responsible ultimately for the determinations. Since it is not
possible to predict with assurance exactly how this market for restricted
securities sold and offered under Rule 144A will develop, the Board will monitor
carefully a Funds' investments in securities, focusing on such important
factors, among others, as valuation, liquidity and availability of information.
This investment practice could have the effect of increasing the level of
illiquidity in a Fund to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities. As a result,
a Fund might not be able to sell these securities when its Sub-Adviser wishes to
do so, or might have to sell them at less than fair value. In addition, market
quotations are less readily available. Therefore judgment at times may play a
greater role in valuing these securities than in the case of unrestricted
securities.
INVESTMENTS IN MONEY MARKET SECURITIES (APPLICABLE TO ALL FUNDS)
Any Fund may hold at least a portion of its assets in cash equivalents or
money market instruments. There is always the risk that the issuer of a money
market instrument may be unable to make payment upon maturity.
HIGH YIELD SECURITIES (APPLICABLE TO THE SELECT EMERGING MARKETS FUND, SELECT
CAPITAL APPRECIATION FUND, SELECT GROWTH FUND AND SELECT INCOME FUND)
Corporate debt securities purchased by the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select Growth Fund and Select Income Fund will
be rated at the time of purchase B or better by Moody's or S&P, or equivalently
rated by another NRSRO, or unrated but believed by the Sub-Adviser to be of
comparable quality under the guidelines established for the Funds. The Select
Growth Fund may not invest more than 15% of its assets, the Select Income Fund
may not invest more than 25% of its assets and the Select Emerging Markets Fund
and Select Capital Appreciation Fund may not invest more than 35% of their
assets at the time of investment in securities rated below Baa by Moody's or BBB
by S&P, or equivalently rated by another NRSRO, or unrated but believed by the
Sub-Adviser to be of comparable quality. Securities rated B by Moody's or S&P
(or equivalently by another NRSRO) are below investment grade and are
considered, on balance, to be predominantly speculative with respect to capacity
to pay interest and repay principal and will generally involve more credit risk
than securities in the higher rating categories.
Periods of economic uncertainty and changes can be expected to result in
increased volatility of market prices of lower-rated securities, commonly known
as "high yield" securities or "junk bonds," and of the asset value of the Select
Emerging Markets Fund, Select Capital Appreciation Fund, Select Growth Fund and
Select Income Fund. Many issuers of high yield corporate debt securities are
leveraged substantially at times, which may impair their ability to meet debt
service obligations. Also, during an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial
stress.
The lack of a liquid secondary market in certain lower-rated securities may
have an adverse impact on their market price and the ability of a Fund to
dispose of particular issues when necessary to meet its liquidity needs or in
response to a specific economic event such as a deterioration in the credit-
worthiness of the issuer. In addition, a less liquid market may interfere with
the ability of a Fund to value accurately high yield securities and,
consequently, value a Fund's assets. Furthermore, adverse publicity and investor
perceptions may decrease the value and liquidity of high yield securities. It is
reasonable to expect any recession to disrupt severely the market for high yield
fixed-income securities, have an adverse impact on the value of such securities
and adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon. The market prices of lower-rated securities
generally are less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic or political changes or
individual developments specific to the issuer. Periods of economic or political
uncertainty and change can be expected to result in volatility of price of these
securities.
The Funds also may invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments generally is rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, the Sub-Adviser may treat such securities as unrated debt. Unrated
debt securities and securities with different ratings from more than one agency
will be included in the 15%, 25% and 35% limits of the Funds as stated above,
unless such Fund's Sub-Adviser deems such securities to be the equivalent of
investment grade securities. See the Appendix for a description of the bond
ratings.
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ASSET-BACKED SECURITIES (APPLICABLE TO THE SELECT INCOME FUND)
The Fund may purchase asset-backed securities, which represent a participation
in, or are secured by and payable from, a stream of payments generated by
particular assets, frequently a pool of assets similar to one another. Assets
generating such payments include instruments such as motor vehicle installment
purchase obligations, credit card receivables and home equity loans. Payment of
principal and interest may be guaranteed for certain amounts and time periods by
a letter of credit issued by a financial institution unaffiliated with the
issuer of the securities. The estimated life of an asset-backed security varies
with the prepayment experience of the underlying debt instruments. The rate of
such prepayments, and hence the life of the asset-backed security, will be
primarily a function of current market rates, although other economic and
demographic factors will be involved. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in asset-
backed securities. The Fund will not invest more than 20% of its total assets
in asset-backed securities.
MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE SELECT INCOME FUND)
The Fund may invest in mortgage-backed securities which are debt obligations
secured by real estate loans and pools of loans on single family homes, multi-
family homes, mobile homes and, in some cases, commercial properties. The Fund
may acquire securities representing an interest in a pool of mortgage loans that
are issued or guaranteed by a U.S. government agency such as Ginnie Mae, Fannie
Mae and Freddie Mac.
Mortgage-backed securities are in most cases "pass-through" instruments
through which the holder receives a share of all interest and principal payments
from the mortgages underlying the certificate. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life or realized yields of a particular issue of pass-
through certificates. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Fund reinvests the prepaid
amounts in securities, the yield of which reflects interest rates prevailing at
the time. Moreover, prepayment of mortgages that underlie securities purchased
at a premium could result in losses.
The Fund also may invest in multiple class securities issued by U.S.
government agencies and instrumentalities such as Fannie Mae, Freddie Mac and
Ginnie Mae, including guaranteed collateralized mortgage obligations ("CMOs")
and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or
participation certificates, when consistent with the Fund's investment
objective, policies and limitations. A CMO is a type of bond secured by an
underlying pool of mortgages or mortgage pass-through certificates that are
structured to direct payment on underlying collateral to different series or
classes of obligations. A REMIC is a CMO that qualifies for special tax
treatment under the Internal Revenue Code and invests in certain mortgages
principally secured by interests in real property and other permitted
investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple pass-
through securities. Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests or "residual" interests. The Fund currently
does not intend to purchase residual interests in REMICs. The REMIC Certificates
represent beneficial ownership interests in a REMIC trust, generally consisting
of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage
pass-through certificates. The obligations of Fannie Mae or Freddie Mac under
their respective guaranty of the REMIC Certificates are obligations solely of
Fannie Mae or Freddie Mac, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are available otherwise.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment
of interest and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("PCs"). PCs represent undivided interests in specified residential mortgages or
participations therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCs referred to as "Gold PCs."
Ginnie Mae REMIC Certificates guarantee the full and timely payment of
interest and principal on each class of securities (in accordance with the terms
of those classes). This Ginnie Mae guarantee is backed by the full faith and
credit of the United States.
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are
treated as U.S. government securities for purposes of investment policies. There
can be no assurance that the U.S. Government will continue to provide financial
support to Fannie Mae, Freddie Mac or Ginnie Mae in the future.
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STRIPPED MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE SELECT INCOME FUND)
The Fund may invest in stripped mortgage-backed securities ("SMBS"). SMBS are
derivative multiclass mortgage securities. SMBS may be issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose entities of the
foregoing.
SMBS usually are structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. One type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In some cases,
one class will receive all of the interest (the interest-only or "IO" class)
while the other class will receive all of the principal (the principal-only or
"PO" class). The yield to maturity on an IO class is extremely sensitive to the
rate of principal payments (including prepayment on the related underlying
mortgage assets), and a rapid rate of principal payments may have a material,
adverse effect on a portfolio yield to maturity from these securities. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may fail to recoup fully their initial investment in these
securities even if the security is in one of the highest rating categories.
Certain SMBS may be deemed "illiquid" and subject to the Fund's limitations on
investment in illiquid securities. The market value of the PO class generally is
unusually volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the interest from mortgage assets
generally are higher than prevailing market yields in other mortgage-backed
securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be recouped fully. The Sub-
Adviser will seek to manage these risks (and potential benefits) by investing in
a variety of such securities and by using certain hedging techniques.
HEDGING TECHNIQUES AND INVESTMENT PRACTICES (APPLICABLE TO THE SELECT EMERGING
MARKETS FUND, SELECT CAPITAL APPRECIATION FUND AND SELECT INTERNATIONAL EQUITY
FUND)
The Select Emerging Markets Fund, Select Capital Appreciation Fund and Select
International Equity Fund may employ certain strategies in order to manage
exchange rate risks. For example, each Fund may hedge some or all of its
investments denominated in a foreign currency against a decline in the value of
that currency. The Funds may enter into contracts to sell that foreign currency
for U.S. dollars (not exceeding the value of the Fund's assets denominated in or
exposed to that currency) or by participating in options on futures contracts
with respect to such currency ("position hedge"). The Funds also could hedge
that position by selling a second currency that is expected to perform similarly
to the currency in which portfolio investments are denominated, for U.S. dollars
("proxy hedge"). The Funds also may enter into a forward contract to sell the
currency in which the security is denominated for a second currency that is
expected to perform better relative to the U.S. dollar if the Sub-Adviser
believes there is a reasonable degree of correlation between movements in the
two currencies ("cross-hedge"). As an operational policy, the Funds will not
commit more than 10% of their assets to the consummation of cross-hedge
contracts and either will cover currency hedging transactions with liquid
portfolio securities denominated in or whose value is tied to the applicable
currency or segregate liquid assets in the amount of such commitments. In
addition, when a Fund anticipates purchasing securities denominated in a
particular currency, the Fund may enter into a forward contract to purchase such
currency in exchange for the dollar or another currency ("anticipatory
hedge").
These strategies minimize the effect of currency appreciation as well as
depreciation, but do not protect against a decline in the underlying value of
the hedged security. In addition, such strategies may reduce or eliminate the
opportunity to profit from increases in the value of the original currency and
may have an adverse impact on a Fund's performance if its Sub-Adviser's
projection of future exchange rates is inaccurate.
STAND-BY COMMITMENTS (APPLICABLE TO SELECT INCOME FUND)
Under a stand-by commitment, a dealer agrees to purchase from the Fund, at the
Fund's option, specified securities at a specified price. Stand-by commitments
are exercisable by the Fund at any time before the maturity of the underlying
security, and may be sold, transferred or assigned by the Fund only with respect
to the underlying instruments.
Although stand-by commitments are often available without the payment of any
direct or indirect consideration, if necessary or advisable, the Fund may pay
for a stand-by commitment either separately in cash or by paying a higher price
for securities which are acquired subject to the commitment.
Where the Fund pays any consideration directly or indirectly for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held by the Fund.
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The Fund will enter into stand-by commitments only with banks and broker-
dealers which present minimal credit risks. In evaluating the creditworthiness
of the issuer of a stand-by commitment, the Sub-Adviser will review periodically
the issuer's assets, liabilities, contingent claims and other relevant financial
information.
The Fund will acquire stand-by commitments solely to facilitate liquidity and
does not intend to exercise its rights thereunder for trading purposes. Stand-by
commitments will be valued at zero in determining the Fund's net asset
value.
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APPENDIX
Descriptions of Moody's Investors Service, Inc. ("Moody's") and Standard and
Poor's Ratings Service, a division of McGraw-Hill Companies, Inc. ("S&P")
commercial paper and bond ratings:
COMMERCIAL PAPER RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE TWO HIGHEST
DESIGNATIONS ARE AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-l repayment
capacity normally will be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of returns on funds employed.
- Conservation capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This normally
will be evidenced by many of the characteristics cited above, but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be subject more
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
S&P COMMERCIAL PAPER RATINGS ARE GRADED INTO SEVERAL CATEGORIES, RANGING FROM
"A-1" FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE TWO HIGHEST
RATING CATEGORIES ARE DESCRIBED AS FOLLOWS:
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in long-term borrowing risk are of lesser importance in the long run.
Symbols used will be as follows:
MIG-1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG-2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
A short-term rating also may be assigned on an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event the demand is not met.
VMIG-1 and VMIG-2 ratings carry the same definitions as MIG-1 and MIG-2,
respectively.
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DESCRIPTION OF MOODY'S BOND RATINGS
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and generally are referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment some time in the future.
Baa - Bonds that are rated Baa are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Those bonds within the Aa, A, Baa, Ba and B categories that Moody's believes
possess the strongest credit attributes within those categories are designated
by the symbols Aa1, A1, Baa1, Ba1 and B1.
DESCRIPTION OF S&P'S DEBT RATINGS
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, or C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.
Plus (+) or (-): The ratings from AA to CCC may be modified by the addition of
a plus or minus sign to show relative standing within the major categories.
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ALLMERICA INVESTMENT TRUST
MONEY MARKET FUND
440 Lincoln Street
Worcester, Massachusetts 01653
(508) 855-1000
Money Market Fund (the "Fund") is a separate portfolio of Allmerica Investment
Trust (the "Trust"), a professionally-managed, open-end investment company
designed to provide an underlying investment vehicle for insurance-related
accounts. Only one of the separate portfolios of the Trust, the Fund, is offered
by this Prospectus.
Currently, shares of the Fund may only be purchased by the separate accounts
("Separate Accounts") established by First Allmerica Financial Life Insurance
Company ("First Allmerica") or Allmerica Financial Life Insurance and Annuity
Company ("Allmerica Financial Life"), an indirect, wholly-owned subsidiary of
First Allmerica, for the purpose of funding variable annuity contracts or
variable life insurance policies. The prospectus of the specific insurance
product you have chosen should be read in conjunction with this Prospectus.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Certain additional
information is contained in the Statement of Additional Information dated May 1,
1998 (the SAI"), which has been filed with the Securities and Exchange
Commission (the "SEC"), is incorporated herein by reference and is available
upon request without charge from the Trust, 440 Lincoln Street, Worcester, MA
01653, (508) 855-1000.
Investment in 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 a
stable net asset value of $1.00 per share.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY, AND ARE SUBJECT TO VARIOUS RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DATED MAY 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS...................................................... 3
HOW IS THE FUNDS MANAGED?................................................. 6
WHAT ARE THE INVESTMENT OBJECTIVE AND POLICIES?........................... 6
MANAGEMENT FEES AND EXPENSES.............................................. 7
HOW ARE SHARES VALUED?.................................................... 8
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS................................... 8
SALE AND REDEMPTION OF SHARES............................................. 8
HOW IS PERFORMANCE DETERMINED?............................................ 9
ORGANIZATION AND CAPITALIZATION OF THE TRUST.............................. 9
INVESTMENT RESTRICTIONS................................................... 9
CERTAIN INVESTMENT STRATEGIES AND POLICIES................................ 10
APPENDIX.................................................................. 12
</TABLE>
2
- ---------------------------
Allmerica Investment Trust
<PAGE>
FINANCIAL HIGHLIGHTS
The following Financial Highlights have been audited by Price Waterhouse LLP,
independent accountants of the Trust. This information should be read in
conjunction with the financial statements and notes thereto which appear in the
Trust's annual report for the year ended December 31, 1997 ("Annual Report"),
and which are incorporated by reference in the SAI. Further information about
the performance of the Fund and the Trust is contained in the Annual Report
which may be obtained without charge from the Trust, 440 Lincoln Street,
Worcester, MA 01653, (508) 855-1000.
3
-----------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ ----------------------------------------
NET REALIZED DISTRI- NET
NET AND BUTIONS INCREASE
ASSET UNREALIZED DIVIDENDS FROM NET DISTRI- (DECREASE)
VALUE NET GAIN (LOSS) TOTAL FROM FROM NET REALIZED BUTIONS RETURN IN
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT INVESTMENT CAPITAL IN OF TOTAL NET ASSET
DECEMBER 31, OF YEAR INCOME/(1)/ INVESTMENTS OPERATIONS INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
- ------------ ------- ------ ----------- ---------- ------ ----- ------ ------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market
Fund
1997 $ 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>
- --------------------------------------------------------------------------------
(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) Net investment income per share before reimbursement of fees by the
investment adviser were and $0.030 in 1993 and $0.084/(2)/ in 1988
for Money Market Fund.
(2) Unaudited.
4
- ---------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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%/(2)/ 7,156 7.13% 0.60% -- 0.71% N/A N/A N/A --
</TABLE>
5
-----------------------------
Allmerica Investment Trust
<PAGE>
HOW IS THE FUND MANAGED?
The overall responsibility for the supervision of the affairs of the Trust
vests in the Board of Trustees of the Trust which meets on a quarterly basis.
Allmerica Financial Investment Management Services, Inc. (the "Manager") is
responsible for the management of the Trust's day-to-day business affairs and
has general responsibility for the management of the investments of the Fund.
The Manager, at its expense, has contracted with Allmerica Asset Management,
Inc. ("AAM" or the "Sub-Adviser") to manage the investments of the Fund, subject
to the requirements of the Investment Company Act of 1940, as amended (the "1940
Act").
The Manager is an indirect, wholly-owned subsidiary of Allmerica Financial
Corporation ("AFC"), a Delaware holding company for a group of affiliated
companies, the largest of which is First Allmerica, a life insurance company
which was organized in Massachusetts in 1844. The Manager, AFC and First
Allmerica are located at 440 Lincoln Street, Worcester, Massachusetts 01653. The
Manager succeeded Allmerica Investment Management Company, Inc. ("AIMCO") as
manager of the Trust on April 16, 1998. As part of a reorganization, AIMCO
transferred to the Manager that portion of its business relating to the
provision of investment advisory services exclusively to investment companies
registered under the 1940 Act such as the Trust while AIMCO retained its
financial planning business. The same personnel and procedures previously
employed by AIMCO to service the Trust will be used by the Manager. The
Manager also serves as investment manager of the Palladian Trust, another
open-end investment management company.
The Sub-Adviser, which has been selected on the basis of various factors
including management experience, investment techniques, and staffing, is
authorized to engage in portfolio transactions on behalf of the Fund subject to
such general or specific instructions as may be given by the Trustees and/or the
Manager. The terms of the Sub-Adviser Agreement cannot be changed materially
without the approval of a majority interest of the shareholders of the Fund.
The Sub-Adviser has been selected by the Manager and the Trustees in
consultation with RogersCasey & Associates, Inc. ("RogersCasey"), a leading
pension consulting firm. RogersCasey is a wholly-owned subsidiary of BARRA, Inc.
The cost of such consultation is borne by the Manager.
RogersCasey provides consulting services to pension plans representing over
$500 billion in total assets and, in its consulting capacity, monitors the
investment performance of over 1,800 investment advisers. From time to time,
specific clients of RogersCasey and the Sub-Adviser will be named in sales
materials. At times, RogersCasey assists in the development of asset allocation
strategies which may be used by shareholders in the diversification of their
portfolios across different asset classes.
Ongoing performance of the Sub-Adviser is reviewed and evaluated by a
committee of the Board of Trustees, which also includes members who are officers
of First Allmerica or its affiliates, in consultation with RogersCasey.
Historical performance data for the Fund is set forth under "Financial
Highlights." The Manager is responsible for the payment of all fees to the Sub-
Adviser.
The Manager also 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 Fund and is entitled to receive an
administrative fee and certain out-of-pocket expenses. The Manager is
responsible for the payment of the administrative fee to Investor Services
Group.
WHAT ARE THE INVESTMENT OBJECTIVE AND POLICIES?
Investment Objective: The Fund seeks to obtain maximum current income consistent
with preservation of capital and liquidity. There is no assurance that the Fund
will achieve its investment objective.
Sub-Adviser: AAM, an indirect wholly-owned subsidiary of AFC, was incorporated
in 1993 and is located at 440 Lincoln Street, Worcester, Massachusetts 01653. As
of December 31, 1997, AAM had approximately $11 billion in assets under
management. AAM serves as investment adviser to First Allmerica's General
Account and to a number of affiliated insurance companies and other affiliated
accounts and as adviser to Allmerica Securities Trust, a diversified, closed-end
management investment company.
The Fund's investment objective and investment policies are not fundamental
and may be changed without shareholder approval.
6
- ---------------------------
Allmerica Investment Trust
<PAGE>
Investment Policies: The Fund seeks to achieve its objective by investing in the
following high quality money market instruments:
(a) Obligations issued or guaranteed by the United States Government, its
agencies, or instrumentalities;
(b) Commercial paper which meets the ratings requirements as set forth in the
paragraph below;
(c) Obligations of banks or savings and loan associations (such as bankers
acceptances and certificates of deposit, including dollar-denominated
obligations of foreign branches of U.S. banks ("Eurodollars") and U.S.
branches of foreign banks if such U.S. branches are subject to state
banking requirements and Federal Reserve reporting requirements) which at
the date of the investment have deposits of at least $1 billion as of
their most recently published financial statements;
(d) Repurchase agreements with respect to obligations described under (a)
above (such obligations subject to repurchase agreement may bear
maturities of more than one year); and
(e) Cash and cash equivalents.
The Fund will not purchase any security unless (i) the security has received
the highest or second highest quality rating by at least two nationally-
recognized statistical rating organizations ("NRSROs") or by one NRSRO if only
one has rated the security, or (ii) the security is unrated and in the opinion
of AAM, as Sub-Adviser, in accordance with guidelines adopted by the Trustees,
is of a quality comparable to one of the two highest ratings of an NRSRO. These
standards must be satisfied at the time an investment is made. If the quality of
the investment later declines, the Fund may continue to hold the investment, but
the Trustees will evaluate whether the security continues to present minimal
credit risks. See the Appendix for an explanation of NRSRO ratings.
The Fund will limit its portfolio investments to securities with a remaining
maturity of 397 days or less as of the time of purchase, in accordance with the
Trustees' guidelines. The portfolio will be managed so as to maintain a dollar-
weighted maturity of 90 days or less. In order to maximize the yield on its
assets, the Fund intends to be as fully invested at all times as is reasonably
practicable. There is always the risk that the issuer of an instrument may be
unable to make payment upon maturity.
The Fund may hold uninvested cash reserves pending investment during
temporary, defensive periods or if, in the opinion of the Sub-Adviser, suitable
securities are not available for investment. Securities in which the Fund may
invest may not earn as high a level of current income as long-term, lower
quality securities which, however, generally have less liquidity, greater market
risk and more fluctuation in market value.
The Fund may invest up to 25% of its assets in U.S. dollar denominated foreign
securities (not including its investments in American Depositary Receipts
("ADRs")). The Fund may invest up to 10% of its net assets in securities which
are illiquid.
MANAGEMENT FEES AND EXPENSES
Under its Management Agreement with the Trust, the Manager is obligated to
perform certain administrative and management services for the Trust; furnishes
to the Trust all necessary office space, facilities, and equipment; and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager. Other than the expenses specifically assumed by the Manager under the
Management Agreement, all expenses incurred in the operation of the Trust are
borne by the Trust, including: fees and expenses associated with the
registration and qualification of the Trust's shares under the Securities Act of
1933 (the "1933 Act"); other fees payable to the SEC; independent accountant,
legal and custodial fees; association membership dues; taxes; interest;
insurance premiums; brokerage commissions; fees and expenses of the Trustees who
are not affiliated with the Manager; expenses for proxies, prospectuses and
reports to shareholders; Fund recordkeeping expenses and other expenses.
For services to the Fund, the Manager receives fees computed daily at an
annual rate based on the average daily net asset value of the Fund in accordance
with the following schedule:
Assets Rate
------ ----
First $50 Million......... 0.35%
Next $200 Million......... 0.25%
Over $250 Million......... 0.20%
The Manager is responsible for the payment of all fees to the Sub-Adviser. The
Manager pays the Sub-Adviser fees computed daily at an annual rate of 0.10%
based on the average daily net asset value of the Fund. For the fiscal year
ended December 31, 1997, the Fund paid the Manager gross fees before
reimbursement at the effective rate of 0.27% of the Fund's average daily net
assets.
7
-----------------------------
Allmerica Investment Trust
<PAGE>
The voluntary expense limitation which the Manager has declared for the Fund
and the operating expenses incurred for the fiscal year ended December 31, 1997
for the Fund were 0.60% and 0.35%, respectively.
The Manager will voluntarily reimburse its fees and any expenses above the
expense limitation. The expense limitation is voluntary and may be removed at
any time with notice to existing shareholders. The Manager reserves the right to
recover from the Fund any fees, within a current fiscal year period, which were
reimbursed in that same year to the extent that total annual expenses did not
exceed the applicable expense limitation. The expenses which are subject to the
voluntary expense limitations include management fees, independent accountant,
legal and custodian fees; recordkeeping expenses; fees and expenses of Trustees
who are not affiliated with the Manager; association membership dues, insurance;
expenses for proxies, prospectuses and reports to shareholders and fees
associated with the registration of Fund shares. Non-recurring and extraordinary
expenses are generally excluded in the determination of expense ratios of the
Fund for purposes of determining any applicable expense waiver or reimbursement.
Quotations of yield or total return for any period when an expense limitation is
in effect will be greater than if the limitation had not been in effect.
FUND MANAGER INFORMATION
John C. Donohue, Assistant Vice President of AAM, has served as fund manager
for the Money Market Fund since March, 1995. Mr. Donohue was a portfolio manager
at CS First Boston Investment Management prior to joining AAM in 1995.
HOW ARE SHARES VALUED?
The net asset value of the shares of the Fund is determined once daily as of
the close of regular trading on the New York Stock Exchange (the "Exchange") on
each day on which the Exchange is open for trading. All securities of the Fund
are valued at amortized cost. The Fund attempts to maintain a stable net asset
value of $1.00 per share, but there is no assurance that it will be able to do
so.
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS
It is the policy of the Trust to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies so that the Trust will
not be subject to federal income tax on any net income and any capital gains to
the extent they are distributed or are deemed to have been distributed to
shareholders. Dividends out of net investment income will be declared and paid
daily. Distributions of net capital gains for the year, if any, are made
annually. All dividends and capital gain distributions are applied to purchase
additional Fund shares at net asset value as of the payment date. Fund shares
are held by the Separate Accounts and any distributions are reinvested
automatically by the Separate Accounts. Tax consequences to investors in the
Separate Accounts which are invested in the Fund are described in the
prospectuses for such accounts.
SALE AND REDEMPTION OF SHARES
Shares of the Fund are sold in a continuous offering and currently may be
purchased only by Separate Accounts of First Allmerica or its subsidiaries. The
Separate Accounts are the funding mechanisms for variable annuity contracts and
variable life insurance policies. Shares of the Fund are sold at their net asset
value as next computed after receipt of the purchase order without the addition
of any selling commission or "sales load." The Distributor, Allmerica
Investments, Inc., at its expense, may provide promotional incentives to dealers
that sell variable annuity contracts for which the Fund serves as an investment
vehicle.
Shares of the Fund are also currently being issued under separate prospectuses
to Separate Accounts of Allmerica Financial Life, First Allmerica and
subsidiaries of First Allmerica which issue variable or group annuity policies
or variable life insurance policies ("mixed funding"). Although neither
Allmerica Financial Life nor the Trust currently foresees any disadvantage, it
is conceivable that in the future such mixed funding may be disadvantageous for
variable or group annuity policyowners or variable life insurance policyowners
("Policyowners"). The Trustees of the Trust intend to monitor events in order to
identify any conflicts that may arise between such Policyowners and to determine
what action, if any, should be taken in response thereto. If the Trustees were
to conclude that separate funds should be established for variable annuity and
variable life separate accounts, Allmerica Financial Life will pay the attendant
expenses. The Trust has filed an application with the SEC for an exemptive order
to permit Fund shares to be sold to variable annuity and life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
qualified pension and retirement plans outside of the separate account context.
If the requested order is granted, any Fund may serve as a funding vehicle for
all types of variable annuity contracts and variable life insurance contracts
offered by various participating insurance companies and for qualified plans;
material irreconcilable conflicts may possibly arise among various contract
owners and plan participants and the Board of Trustees will monitor events in
order to identify the existence of any material irreconcilable conflict and
determine what action, if any, should be taken in response to such conflict.
The Trust redeems shares of the Fund at net asset value as next computed after
receipt of a request for redemption. No fee is charged by the Trust on
redemption. The variable contracts funded through the Separate Accounts are sold
subject to certain fees and charges, which may include sales and redemption
charges, as described in the prospectuses for such Separate Accounts.
8
- ---------------------------
Allmerica Investment Trust
<PAGE>
Redemption payments will be paid within seven days after receipt by the Trust
of a written request, except that the right of redemption may be suspended or
payments postponed whenever permitted by applicable law and regulations.
HOW IS PERFORMANCE DETERMINED?
The Fund's performance may be quoted in advertising. The Fund's performance
may be compared with the performance of other investments or relevant indices.
All performance information is based on historical results and is not intended
to indicate future performance.
For the Fund, "yield" represents an annualization of the change in value of an
investment (excluding any capital changes) in the Fund for a specific seven-day
period; "effective yield" compounds that yield for a year and is, for that
reason, greater than the Fund's yield.
Total return is based on the overall dollar or percentage change in value of a
hypothetical investment in the Fund assuming all dividends and capital gain
distributions are reinvested. Cumulative total return reflects the Fund's
performance over a stated period of time. Average annual total return reflects
the hypothetical, annually-compounded return that would have produced the same
cumulative return if the Fund's performance had been constant over the entire
period. Because average annual returns tend to smooth out variations in the
Fund's return, they are not the same as actual year-by-year results.
YIELDS AND TOTAL RETURNS QUOTED FOR THE FUND INCLUDE THE EFFECT OF DEDUCTING
THE FUND'S EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO A
PARTICULAR INSURANCE PRODUCT. SINCE SHARES OF THE FUND CAN BE PURCHASED ONLY
THROUGH A VARIABLE ANNUITY CONTRACT OR VARIABLE LIFE CONTRACT, YOU SHOULD
CAREFULLY REVIEW THE PROSPECTUS FOR THE SEPARATE ACCOUNTS FOR INFORMATION ON
RELEVANT CHARGES AND EXPENSES. INCLUDING THESE CHARGES IN THE QUOTATIONS OF THE
FUND'S YIELD AND TOTAL RETURN WOULD HAVE THE EFFECT OF DECREASING PERFORMANCE.
PERFORMANCE INFORMATION FOR THE FUND MUST ALWAYS BE ACCOMPANIED BY, AND BE
REVIEWED WITH, PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNTS WHICH INVEST IN
THE FUND.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated October 11, 1984
(the "Trust Declaration"). A copy of the Trust Declaration is on file with the
Secretary of the Commonwealth of Massachusetts.
The Trust has an unlimited authorized number of shares of beneficial interest
which may be divided into an unlimited number of series of such shares, and
which are divided presently into 14 series of shares, one series underlying the
Fund. The Trust's shares are entitled to one vote per share (with proportional
voting for fractional shares). The rights accompanying Fund shares are legally
vested in the Separate Accounts. As a matter of policy, however, holders of
variable life insurance or variable annuity contracts funded through the
Separate Accounts have the right to instruct the Separate Accounts as to voting
Fund shares on all matters to be voted on by Fund shareholders. Voting rights of
the participants in the Separate Accounts are set forth more fully in the
prospectuses or offering circular relating to those Accounts. See "Organization
of the Trust" in the SAI for the definition of a "majority vote" of
shareholders.
The Trust is not required to hold annual meetings of shareholders. The
Trustees or shareholders holding at least 10% of the outstanding shares may call
special meetings of shareholders.
FUND RECORDKEEPING AGENT
Investor Services Group calculates net asset value per share and maintains
general accounting records for the Fund. Investor Services Group is entitled to
receive an annual Fund recordkeeping fee based on Fund assets and certain out-
of-pocket expenses.
CUSTODIAN
Bankers Trust Company, 130 Liberty Street, New York, New York 10006, is the
custodian of the investment securities and other assets of the Fund.
INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to the Fund without shareholder
approval. For a description of certain other investment restrictions, reference
should be made to the SAI.
9
-----------------------------
Allmerica Investment Trust
<PAGE>
1. The Fund will not concentrate its investments in particular
industries, including debt obligations of supranational entities and foreign
governments, but it may invest up to 25% of the value of its total assets in a
particular industry. The restriction does not apply to investments in
obligations issued or guaranteed by the United States of America, its agencies
or instrumentalities, or to investments by the Fund in securities issued or
guaranteed by domestic branches of U.S. banks.
2. The Fund will not invest more than 5% of the value of its total assets
in the securities of any one issuer (other than securities issued by or
guaranteed as to principal or interest by the United States Government or any
agency or instrumentality thereof) or acquire more than 10% of the voting
securities of any one issuer.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Fund will not be required to reduce
the amount of its holding in such investments.
CERTAIN INVESTMENT STRATEGIES AND POLICIES
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements, under which the Fund acquires
ownership of a security (ordinarily U.S. Government securities) but the seller
agrees, at the time of sale, to purchase the security at a mutually agreed upon
time and price. Should any seller of a repurchase agreement fail to repurchase
the underlying security, or should any seller become insolvent or involved in a
bankruptcy proceeding, the Fund could incur disposition costs and losses.
Repurchase Agreements maturing in more than seven days are subject to the 10%
limit on illiquid securities.
"WHEN-ISSUED" SECURITIES
The Fund may purchase securities on a when-issued or delayed delivery basis.
Delivery and payment normally take place 15 to 45 days after the commitment to
purchase. No income accrues on when-issued securities prior to delivery.
Purchase of when-issued securities involves the risk that yields available in
the market when delivery occurs may be higher than those available when the
when-issued order is placed, resulting in a decline in the market value of the
security. There is also the risk that under some circumstances the purchase of
when-issued securities may act to leverage the Fund.
LENDING OF SECURITIES
For the purpose of realizing additional income, the Fund may lend portfolio
securities to broker-dealers or financial institutions amounting to not more
than 33 1/3% of its total assets taken at current value. While any such loan is
outstanding, the Fund will continue to receive amounts equal to the interest or
dividends paid by the issuer on the securities, as well as interest (less any
rebates to be paid to the borrower) on the investment of the collateral or a fee
from the borrower. The Fund will have the right to call each loan and obtain the
securities. Lending portfolio securities involves certain risks, including
possible delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made in accordance with guidelines established by the
Board of Trustees.
FOREIGN SECURITIES
Investments in foreign markets involve substantial risks typically not
associated with investing in the U.S. which should be considered carefully by
the investor. Such risks may include political and economic instability,
differing accounting and financial reporting standards, higher commission rates
on foreign portfolio transactions, less readily available public information
regarding issuers, potentially adverse changes in tax and exchange control
regulations and the potential for restrictions on the flow of international
capital. Foreign securities also involve currency risks. The Money Market Fund
may invest only in U.S. dollar denominated foreign securities. Some foreign
securities exchanges may not be as developed or efficient as those in the United
States and securities traded on foreign securities exchanges generally are
subject to greater price volatility. There is also the possibility of adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation and limitations on the removal of funds or other assets.
Investments in emerging countries involve exposure to economic structures that
are generally less diverse and mature than in the United States, and to
political systems which may be less stable. In addition, securities of issuers
located in emerging countries may have limited marketability and may be subject
to more abrupt or erratic price fluctuations.
The Fund's investments may include ADRs. For many foreign securities, there
are U.S. dollar-denominated ADRs which are
10
- ---------------------------
Allmerica Investment Trust
<PAGE>
traded in the United States on exchanges or over the counter. ADRs represent the
right to receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. An ADR may be sponsored by the issuer of the underlying
foreign security, or it may be issued in unsponsored form. The holder of a
sponsored ADR is likely to receive more frequent and extensive financial
disclosure concerning the foreign issuer than the holder of an unsponsored ADR
and generally will bear lower transaction charges. The Fund may invest in both
sponsored and unsponsored ADRs.
RESTRICTED SECURITIES
The Fund also may purchase fixed-income securities that are not registered
under the 1933 Act ("restricted securities"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act. However, the
Fund will not invest more than 10% of its assets in restricted securities (and
securities deemed to be illiquid) unless the Board of Trustees determines, based
upon a continuing review of the trading markets for the specific restricted
security, that such restricted securities are liquid. The Board of Trustees has
adopted guidelines and delegated to the Manager the daily function of
determining and monitoring liquidity of restricted securities. The Board,
however, will retain sufficient oversight and be responsible ultimately for the
determinations. Since it is not possible to predict with assurance exactly how
this market for restricted securities sold and offered under Rule 144A will
develop, the Board will monitor carefully the Fund's investments in securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities. As a result, the Fund might not be able to sell these
securities when its Sub-Adviser wishes to do so, or might have to sell them at
less than fair value. In addition, market quotations are less readily
available. Therefore, judgment at times may play a greater role in valuing
these securities than in the case of unrestricted securities.
ASSET-BACKED SECURITIES
The Fund may purchase asset-backed securities, which represent a participation
in, or are secured by and payable from, a stream of payments generated by
particular assets, frequently a pool of assets similar to one another. Assets
generating such payments include instruments such as motor vehicle installment
purchase obligations, credit card receivables and home equity loans. Payment of
principal and interest may be guaranteed for certain amounts and time periods by
a letter of credit issued by a financial institution unaffiliated with the
issuer of the securities. The estimated life of an asset-backed security varies
with the prepayment experience of the underlying debt instruments. The rate of
such prepayments, and hence the life of the asset-backed security, will be
primarily a function of current market rates, although other economic and
demographic factors will be involved. Under certain interest rate and prepayment
rate scenarios, the Funds may fail to recoup fully their investment in asset-
backed securities. The Fund will not invest more than 20% of its total assets
in asset-backed securities.
STAND-BY COMMITMENTS
Under a stand-by commitment, a dealer agrees to purchase from the Fund, at the
Fund's option, specified securities at a specified price. Stand-by commitments
are exercisable by the Fund at any time before the maturity of the underlying
security, and may be sold, transferred or assigned by the Fund only with respect
to the underlying instruments.
Although stand-by commitments are often available without the payment of any
direct or indirect consideration, if necessary or advisable, the Fund may pay
for a stand-by commitment either separately in cash or by paying a higher price
for securities which are acquired subject to the commitment.
Where the Fund pays any consideration directly or indirectly for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held by the Fund.
The Fund will enter into stand-by commitments only with banks and broker-
dealers which present minimal credit risks. In evaluating the creditworthiness
of the issuer of a stand-by commitment, the Sub-Adviser will review periodically
the issuer's assets, liabilities, contingent claims and other relevant financial
information.
The Fund will acquire stand-by commitments solely to facilitate liquidity and
does not intend to exercise its rights thereunder for trading purposes. Stand-by
commitments will be valued at zero in determining the Fund's net asset value.
11
-----------------------------
Allmerica Investment Trust
<PAGE>
APPENDIX
Description of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Service ("S&P"), a division of McGraw-Hill Companies, Inc.,
commercial paper ratings:
COMMERCIAL PAPER RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE TWO HIGHEST
DESIGNATIONS ARE AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This normally
will be evidenced by many of the characteristics cited above, but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be subject more
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
S&P COMMERCIAL PAPER RATINGS ARE GRADED INTO SEVERAL CATEGORIES, RANGING FROM
"A-1" FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE TWO HIGHEST
RATING CATEGORIES ARE AS FOLLOWS:
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
12
- ----------------------------
Allmerican Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
440 LINCOLN STREET
WORCESTER, MASSACHUSETTS 01653
(508) 855-1000
Allmerica Investment Trust (the "Trust") is a professionally managed, open-end
investment company designed to provide the underlying investment vehicles for
insurance-related accounts. The fourteen separate portfolios of the Trust
(collectively, the "Funds" and individually, the "Fund") currently offered by
this Prospectus are as follows:
SELECT EMERGING MARKETS FUND
SELECT AGGRESSIVE GROWTH FUND
SELECT CAPITAL APPRECIATION FUND
SELECT VALUE OPPORTUNITY FUND
SELECT INTERNATIONAL EQUITY FUND
SELECT GROWTH FUND
SELECT STRATEGIC GROWTH FUND
GROWTH FUND
EQUITY INDEX FUND
SELECT GROWTH AND INCOME FUND
SELECT INCOME FUND
INVESTMENT GRADE INCOME FUND
GOVERNMENT BOND FUND
MONEY MARKET FUND
Currently, shares of each Fund may be purchased only by the separate accounts
("Separate Accounts") established by First Allmerica Financial Life Insurance
Company ("First Allmerica") or Allmerica Financial Life Insurance and Annuity
Company ("Allmerica Financial Life"), an indirect, wholly-owned subsidiary of
First Allmerica, for the purpose of funding variable annuity contracts and
variable life insurance policies. A particular Fund may not be available under
the variable annuity or variable life insurance policy which you have chosen.
The Prospectus of the specific insurance product you have chosen will indicate
which Funds are available and should be read in conjunction with this
Prospectus. Inclusion in this Prospectus of a Fund which is not available under
your policy is not to be considered a solicitation.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing. Certain additional
information is contained in the Statement of Additional Information dated May 1,
1998 (the "SAI"), which has been filed with the Securities and Exchange
Commission ("SEC"), is incorporated herein by reference and is available upon
request without charge from the Trust, 440 Lincoln Street, Worcester, MA 01653,
(508) 855-1000.
Investment in the Funds is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Money Market Fund will be able to
maintain a stable net asset value of $1.00 per share.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY, AND ARE SUBJECT TO VARIOUS RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DATED MAY 1, 1998
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
FINANCIAL HIGHLIGHTS.......................................... 3
HOW ARE THE FUNDS MANAGED?.................................... 10
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?.............. 11
Select Emerging Markets Fund................................ 11
Select Aggressive Growth Fund............................... 12
Select Capital Appreciation Fund............................ 13
Select Value Opportunity Fund.............................. 14
Select International Equity Fund............................ 15
Select Growth Fund.......................................... 15
Select Strategic Growth Fund................................ 16
Growth Fund................................................. 17
Equity Index Fund........................................... 18
Select Growth and Income Fund............................... 19
Select Income Fund.......................................... 20
Investment Grade Income Fund................................ 21
Government Bond Fund........................................ 22
Money Market Fund........................................... 22
MANAGEMENT FEES AND EXPENSES.................................. 23
FUND MANAGER INFORMATION...................................... 28
HOW ARE SHARES VALUED?........................................ 30
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS....................... 31
SALE AND REDEMPTION OF SHARES................................. 31
HOW IS PERFORMANCE DETERMINED?................................ 32
ORGANIZATION AND CAPITALIZATION OF THE TRUST.................. 32
INVESTMENT RESTRICTIONS....................................... 33
CERTAIN INVESTMENT STRATEGIES AND POLICIES.................... 33
APPENDIX...................................................... 39
</TABLE>
2
- --------------------------
Allmerica Investment Trust
<PAGE>
FINANCIAL HIGHLIGHTS
The following Financial Highlights have been audited by Price Waterhouse LLP,
independent accountants of the Trust. This information should be read in
conjunction with the financial statements and notes thereto which appear in the
Policyowner's annual report for the year ended December 31, 1997 ("Annual
Report") and which are incorporated by reference in the Trust's SAI. Further
information about the performance of the Funds is contained in the Annual Report
which may be obtained without charge from the Trust, 440 Lincoln Street,
Worcester, MA 01653, (508) 855-1000.
3
--------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(2)/ INVESTMENTS OPERATIONS
------------ ------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $2.037 $(0.009) $ 0.387 $ 0.378
1996 1.848 (0.009) 0.351 0.342
1995 1.397 (0.001) 0.452 0.451
1994 1.431 (0.002) (0.032) (0.034)
1993 1.197 0.001 0.234 0.235
1992 1.000 0.001 0.197 0.198
Select Capital
Appreciation Fund/(1)/
1997 1.485 (0.005) 0.218 0.213
1996 1.369 (0.003) 0.124 0.121
1995 1.000 (0.001) 0.397 0.396
Select Value
Opportunity Fund/(1)/
1997 1.511 0.010 0.364 0.374
1996 1.238 0.011 0.342 0.353
1995 1.089 0.009 0.183 0.192
1994 1.170 0.005 (0.081) (0.076)
1993 1.000 0.002 0.176 0.178
Select International
Equity Fund/(1)/
1997 1.356 0.015 0.049 0.064
1996 1.136 0.011 0.238 0.249
1995 0.963 0.013 0.176 0.189
1994 1.000 0.003 (0.038) (0.035)
Select Growth
Fund/(1)/
1997 1.430 0.006 0.480 0.486
1996 1.369 0.005 0.297 0.302
1995 1.099 -- 0.270 0.270
1994 1.119 0.003 (0.020) (0.017)
1993 1.111 0.001 0.008 0.009
1992 1.000 0.001 0.111 0.112
<CAPTION>
LESS DISTRIBUTIONS
-----------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS RETURN IN
YEAR ENDED INVESTMENT CAPITAL IN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
------------ ------ ----- ------ -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1997 $ -- $(0.182) $(0.008)/(3)/ -- $(0.190) $ 0.188
1996 -- (0.153) -- -- (0.153) 0.189
1995 -- -- -- -- -- 0.451
1994 -- -- -- -- -- (0.034)
1993 (0.001) -- -- -- (0.001) 0.234
1992 (0.001) -- -- -- (0.001) 0.197
Select Capital
Appreciation Fund/(1)/
1997 -- -- -- -- -- 0.213
1996 -- (0.005) -- -- (0.005) 0.116
1995 -- (0.027) -- -- (0.027) 0.369
Select Value
Opportunity Fund/(1)/
1997 (0.010) (0.249) -- -- (0.259) 0.115
1996 (0.011) (0.069) -- -- (0.080) 0.273
1995 (0.009) (0.033) (0.001)/(3)/ -- (0.043) 0.149
1994 (0.005) -- -- -- (0.005) (0.081)
1993 (0.002) (0.006) -- -- (0.008) 0.170
Select International
Equity Fund/(1)/
1997 (0.019) (0.046) (0.014)/(4)/ -- (0.079) (0.015)
1996 (0.012) (0.003) (0.014)/(4)/ -- (0.029) 0.220
1995 (0.011) (0.005) -- -- (0.016) 0.173
1994 (0.001) (0.001) -- -- (0.002) (0.037)
Select Growth
Fund/(1)/
1997 (0.006) (0.099) -- -- (0.105) 0.381
1996 (0.005) (0.236) -- -- (0.241) 0.061
1995 -- -- -- -- -- 0.270
1994 (0.003) -- -- -- (0.003) (0.020)
1993 (0.001) -- -- -- (0.001) 0.008
1992 (0.001) -- -- -- (0.001) 0.111
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not Annualized
(A) Including reimbusements, waivers, 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) The Select Aggressive Growth Fund commenced operations on August 21, 1992.
The Select Capital Appreciation Fund commenced operations on April 28, 1995.
The Select Value Opportunity Fund (formerly the Small-Mid Cap Value Fund)
commenced operations on April 30, 1993 and changed investment sub-adviser on
January 1, 1997. The Select International Equity Fund commenced operations
on May 2, 1994. The Select Growth Fund commenced operations on August
21, 1992 and changed investment sub-adviser on July 1, 1996.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $(0.010) in 1997, $0.000 in 1993 and
$(0.001) in 1992 for Select Aggressive Growth Fund; $(0.001) in 1995 for
Select Capital Appreciation Fund; $0.009 in 1997, $0.010 in 1996, $0.005 in
1994 and $(0.001) in 1993 for Select Value Opportunity Fund; $0.015 in 1997,
$0.011 in 1996 and $0.002 in 1994 for Select International Equity Fund; and
$0.006 in 1997, $0.005 in 1996, $0.001 in 1993 and $0.000 in 1992 for Select
Growth Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
4
- --------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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>
$ 2.225 18.71% $604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95% $0.0617
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113% 0.0597
1.848 32.28% 254,872 (0.07)% 1.09% -- 1.09% 1.00% 1.00% 104% --
1.397 (2.31)% 136,573 (0.21)% 1.16% -- 1.16% 1.00% 1.00% 100% --
1.431 19.51% 66,251 0.10% 1.19% -- 1.23% 1.00% 0.96% 76% --
1.197 19.85%** 9,270 0.34%* 1.35%* -- 1.88%* N/A N/A 33% --
1.698 14.28% 240,526 (0.38)% 1.13% 1.13% 1.13% 0.98% 0.98% 133% 0.0444
1.485 8.80% 142,680 (0.32)% 1.13% 1.13% 1.13% 1.00% 1.00% 98% 0.0414
1.369 39.56%** 41,376 (0.25)%* 1.35%* -- 1.42%* 1.00%* 0.93%* 95% --
1.626 24.85% 202,139 0.73% 0.98% 1.04% 1.06% 0.92% 0.90% 110% 0.0587
1.511 28.53% 113,969 0.91% 0.95% 0.97% 0.97% 0.85% 0.85% 20% 0.0497
1.238 17.60% 64,575 0.86% 1.01% -- 1.01% 0.85% 0.85% 17% --
1.089 (6.51)% 41,342 0.64% 1.08% -- 1.09% 0.85% 0.84% 4% --
1.170 17.74%** 12,731 0.52%* 1.22%* -- 2.03%* 0.85%* 0.04%* 8% --
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20% 0.0229
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18% 0.0248
1.136 19.63% 104,312 1.68% 1.24% -- 1.24% 1.00% 1.00% 24% --
0.963 (3.49)%** 40,498 0.87%* 1.50%* -- 1.78%* 1.00%* 0.72%* 19% --
1.811 34.06% 470,356 0.42% 0.91% 0.93% 0.93% 0.85% 0.85% 75% 0.0470
1.430 22.02% 228,551 0.38% 0.92% 0.93% 0.93% 0.85% 0.85% 159% 0.0457
1.369 24.59% 143,125 0.02% 0.97% -- 0.97% 0.85% 0.85% 51% --
1.099 (1.49)% 88,263 0.37% 1.03% -- 1.03% 0.85% 0.85% 55% --
1.119 0.84% 53,854 0.15% 1.05% -- 1.08% 0.85% 0.82% 65% --
1.111 11.25%** 9,308 0.40%* 1.20%* -- 1.72%* N/A N/A 3% --
</TABLE>
5
--------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------------
NET REALIZED
NET AND
ASSET UNREALIZED
VALUE NET GAIN (LOSS) TOTAL FROM
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT
DECEMBER 31, OF YEAR INCOME/(2)/ INVESTMENTS OPERATIONS
------------ ------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Growth Fund/(1)/
1997 $2.333 $0.039 $ 0.540 $ 0.579
1996 2.176 0.047 0.386 0.433
1995 1.814 0.049 0.539 0.588
1994 1.939 0.043 (0.041) 0.002
1993 2.034 0.039 0.095 0.134
1992 1.976 0.034 0.105 0.139
1991 1.471 0.038 0.548 0.586
1990 1.558 0.041 (0.047) (0.006)
1989 1.308 0.043 0.289 0.332
1988 1.147 0.037 0.200 0.237
Equity Index Fund/(1)/
1997 2.165 0.034 0.664 0.698
1996 1.827 0.035 0.370 0.405
1995 1.468 0.035 0.474 0.509
1994 1.505 0.033 (0.018) 0.015
1993 1.409 0.032 0.102 0.134
1992 1.354 0.030 0.066 0.096
1991 1.080 0.032 0.279 0.311
1990 1.000 0.009 0.080 0.089
Select Growth and
Income Fund/(1)/
1997 1.405 0.020 0.293 0.313
1996 1.268 0.020 0.246 0.266
1995 1.027 0.019 0.290 0.309
1994 1.069 0.025 (0.018) 0.007
1993 0.990 0.023 0.079 0.102
1992 1.000 0.008 (0.009) (0.001)
Select Income Fund/(1)/
1997 0.995 0.060 0.028 0.088
1996 1.024 0.061 (0.029) 0.032
1995 0.930 0.060 0.095 0.155
1994 1.035 0.055 (0.105) (0.050)
1993 0.988 0.052 0.055 0.107
1992 1.000 0.018 (0.012) 0.006
<CAPTION>
LESS DISTRIBUTIONS
----------------------------------------------------------
NET
DISTRIBUTIONS INCREASE
DIVIDENDS FROM NET (DECREASE)
FROM NET REALIZED DISTRIBUTIONS IN
YEAR ENDED INVESTMENT CAPITAL IN RETURN OF TOTAL NET ASSET
DECEMBER 31, INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS VALUE
------------ ------ ----- ------ ------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Growth Fund/(1)/
1997 $(0.038) $(0.458) $ -- $ -- $(0.496) $ 0.083
1996 (0.048) (0.228) -- -- (0.276) 0.157
1995 (0.049) (0.177) -- -- (0.226) 0.362
1994 (0.043) (0.084) -- -- (0.127) (0.125)
1993 (0.039) (0.180) -- (0.010) (0.229) (0.095)
1992 (0.034) (0.047) -- -- (0.081) 0.058
1991 (0.039) (0.042) -- -- (0.081) 0.505
1990 (0.041) (0.040) -- -- (0.081) (0.087)
1989 (0.046) (0.036) -- -- (0.082) 0.250
1988 (0.037) (0.039) -- -- (0.076) 0.161
Equity Index Fund/(1)/
1997 (0.033) (0.077) -- -- (0.110) 0.588
1996 (0.035) (0.032) -- -- (0.067) 0.338
1995 (0.035) (0.047) (0.002)/(3)/ (0.066) (0.150) 0.359
1994 (0.033) (0.019) -- -- (0.052) (0.037)
1993 (0.031) (0.007) -- -- (0.038) 0.096
1992 (0.031) (0.010) -- -- (0.041) 0.055
1991 (0.032) (0.005) -- -- (0.037) 0.274
1990 (0.009) -- -- -- (0.009) 0.080
Select Growth and
Income Fund/(1)/
1997 (0.020) (0.146) -- -- (0.166) 0.147
1996 (0.020) (0.109) -- -- (0.129) 0.137
1995 (0.019) (0.049) -- -- (0.068) 0.241
1994 (0.025) (0.017) (0.007)/(3)/ -- (0.049) (0.042)
1993 (0.023) -- -- -- (0.023) 0.079
1992 (0.008) (0.001) -- -- (0.009) (0.010)
Select Income Fund/(1)/
1997 (0.061) -- -- -- (0.061) 0.027
1996 (0.061) -- -- -- (0.061) (0.029)
1995 (0.060) -- (0.001)/(4)/ -- (0.061) 0.094
1994 (0.055) -- -- -- (0.055) (0.105)
1993 (0.052) (0.008) -- -- (0.060) 0.047
1992 (0.018) -- -- -- (0.018) (0.012)
- ------------------------------------------------------------------------------------------------------------------------------------
</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) The Equity Index Fund commenced operations on September 28, 1990. The Select
Growth and Income Fund and Select Income Fund commenced operations on August
21, 1992. The Growth Fund changed Investment Sub-Adviser on April 1, 1988.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $0.038 in 1997, $0.046 in 1996 and
$0.038 in 1993 for Growth Fund; $0.031 in 1993, $0.028 in 1992, and $0.031
in 1991 for Equity Index Fund; $0.019 in 1997, $0.019 in 1996, $0.023 in
1993 and $0.005 in 1992 for Select Growth and Income Fund; and $0.060 in
1995, $0.055 in 1994, $0.050 in 1993, and $0.015 in 1992 for Select Income
Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
(5) Unaudited.
6
- --------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------
NET ASSET NET ASSETS
VALUE END OF NET
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES
YEAR RETURN (000'S) INCOME (A)
---- ------ ------- ------ ---
<S> <C> <C> <C> <C>
$ 2.416 25.14% $728,679 1.48% 0.47%
2.333 20.19% 556,751 2.04% 0.48%
2.176 32.80% 444,871 2.34% 0.54%
1.814 0.16% 335,714 2.25% 0.56%
1.939 6.66% 338,545 1.92% 0.54%
2.034 7.11% 270,828 1.85% 0.58%
1.976 40.44% 182,965 2.26% 0.57%
1.471 (0.30)% 97,179 2.82% 0.60%
1.558 25.64% 76,783 2.98% 0.71%
1.308 20.80%/(5)/ 52,439 2.93% 0.75%
2.753 32.41% 297,191 1.38% 0.44%
2.165 22.30% 151,130 1.79% 0.46%
1.827 36.18% 90,889 1.96% 0.55%
1.468 1.06% 52,246 2.25% 0.57%
1.505 9.53% 42,842 2.28% 0.57%
1.409 7.25% 22,393 2.47% 0.57%
1.354 29.16% 9,700 2.73% 0.55%
1.080 8.90%** 5,469 3.39%* 0.38%*
1.552 22.51% 473,552 1.34% 0.77%
1.405 21.26% 295,638 1.44% 0.80%
1.268 30.32% 191,610 1.69% 0.85%
1.027 0.73% 110,213 2.51% 0.91%
1.069 10.37% 60,518 2.73% 0.99%
0.990 (0.11)%** 7,302 3.20%* 1.10%*
1.022 9.17% 104,253 6.12% 0.72%
0.995 3.32% 77,498 6.29% 0.74%
1.024 16.96% 60,368 6.24% 0.79%
0.930 (4.82)% 40,784 6.07% 0.83%
1.035 10.95% 25,302 5.91% 0.91%
0.988 0.62%** 5,380 5.38%* 1.00%*
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------
PORTFOLIO AVERAGE
OPERATING EXPENSES MANAGEMENT FEES TURNOVER COMMISSIONS
(B) (C) GROSS NET RATE RATE/(D)/
--- --- ----- --- ---- ---------
<S> <C> <C> <C> <C> <C>
0.49% 0.49% 0.43% 0.43% 79% $0.0575
0.51% 0.51% 0.44% 0.44% 72% 0.0576
-- 0.54% 0.46% 0.46% 64% --
-- 0.56% 0.48% 0.48% 46% --
-- 0.55% 0.49% 0.48% 42% --
-- 0.58% N/A N/A 19% --
-- 0.57% N/A N/A 24% --
-- 0.60% N/A N/A 39% --
-- 0.71% N/A N/A 33% --
-- 0.75% N/A N/A 99% --
0.44% 0.44% 0.31% 0.31% 9% 0.0385
0.46% 0.46% 0.32% 0.32% 12% 0.0395
-- 0.55% 0.34% 0.34% 8% --
-- 0.57% 0.35% 0.35% 7% --
-- 0.63% 0.35% 0.29% 4% --
-- 0.75% N/A N/A 6% --
-- 0.64% N/A N/A 6% --
-- 0.38%* N/A N/A 0.24% --
0.80% 0.80% 0.73% 0.73% 71% 0.0569
0.83% 0.83% 0.75% 0.75% 78% 0.0563
-- 0.85% 0.75% 0.75% 112% --
-- 0.91% 0.75% 0.75% 107% --
-- 1.03% 0.75% 0.71% 25% --
-- 2.37%* N/A N/A 4% --
0.72% 0.72% 0.59% 0.59% 79% --
0.74% 0.74% 0.60% 0.60% 108% --
-- 0.80% 0.60% 0.59% 131% --
-- 0.85% 0.60% 0.58% 105% --
-- 1.08% 0.60% 0.43% 171% --
-- 1.67%* N/A N/A 119% --
</TABLE>
7
--------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ -------------------------------
NET REALIZED
NET AND DISTRIBUTIONS
ASSET UNREALIZED DIVIDENDS FROM NET
VALUE NET GAIN (LOSS) TOTAL FROM FROM NET REALIZED
YEAR ENDED BEGINNING INVESTMENT ON INVESTMENT INVESTMENT CAPITAL
DECEMBER 31, OF YEAR INCOME/(4)/ INVESTMENTS OPERATIONS INCOME GAINS
------------ ------ ---------- ----------- ---------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Investment Grade
Income Fund/(1)/
1997 $1.084 $0.071 $ 0.028 $ 0.099 $(0.071) $ --
1996 1.117 0.070 (0.033) 0.037 (0.070) --
1995 1.012 0.071 0.106 0.177 (0.071) --
1994 1.111 0.066 (0.099) (0.033) (0.066) --
1993 1.074 0.065 0.049 0.114 (0.065) (0.012)
1992 1.085 0.075 0.013 0.088 (0.075) (0.024)
1991 1.004 0.080 0.081 0.161 (0.080) --
1990 1.011 0.083 (0.006) 0.077 (0.084) --
1989 0.968 0.082 0.044 0.126 (0.083) --
1988 0.974 0.084 (0.006) 0.078 (0.084) --
Government
Bond Fund/(1)/
1997 1.036 0.061 0.011 0.072 (0.061) --
1996 1.062 0.062 (0.026) 0.036 (0.062) --
1995 0.997 0.062 0.066 0.128 (0.062) --
1994 1.070 0.063 (0.073) (0.010) (0.063) --
1993 1.051 0.055 0.024 0.079 (0.055) (0.003)
1992 1.047 0.057 0.009 0.066 (0.057) (0.005)
1991 1.000 0.022 0.051 0.073 (0.022) (0.004)
Money Market
Fund
1997 1.000 0.053 -- 0.053 (0.053) --
1996 1.000 0.052 -- 0.052 (0.052) --
1995 1.000 0.057 -- 0.057 (0.057) --
1994 1.000 0.039 -- 0.039 (0.039) --
1993 1.000 0.030 -- 0.030 (0.030) --
1992 1.000 0.037 -- 0.037 (0.037) --
1991 1.000 0.060 -- 0.060 (0.060) --
1990 1.000 0.078 -- 0.078 (0.078) --
1989 1.000 0.086 -- 0.086 (0.086) --
1988 1.000 0.071 -- 0.071 (0.071) --
<CAPTION>
LESS DISTRIBUTIONS
---------------------------
NET
INCREASE
(DECREASE)
DISTRIBUTIONS IN
YEAR ENDED IN RETURN OF TOTAL NET ASSET
DECEMBER 31, EXCESS CAPITAL DISTRIBUTIONS VALUE
------------ ------ ------- ------------- -----
<S> <C> <C> <C> <C>
Investment Grade
Income Fund/(1)/
1997 $ -- $ -- $(0.071) $ 0.028
1996 -- -- (0.070) (0.033)
1995 (0.001)/(2) -- (0.072) 0.105
1994 -- -- (0.066) (0.099)
1993 -- -- (0.077) 0.037
1992 -- -- (0.099) (0.011)
1991 -- -- (0.080) 0.081
1990 -- -- (0.084) (0.007)
1989 -- -- (0.083) 0.043
1988 -- -- (0.084) (0.006)
Government
Bond Fund/(1)/
1997 -- -- (0.061) 0.011
1996 -- -- (0.062) (0.026)
1995 (0.001)/(2)/ -- (0.063) 0.065
1994 -- -- (0.063) (0.073)
1993 -- (0.002) (0.060) 0.019
1992 -- -- (0.062) 0.004
1991 -- -- (0.026) 0.047
Money Market
Fund
1997 -- -- (0.053) --
1996 -- -- (0.052) --
1995 -- -- (0.057) --
1994 -- -- (0.039) --
1993 -- -- (0.030) --
1992 -- -- (0.037) --
1991 -- -- (0.060) --
1990 -- -- (0.078) --
1989 -- -- (0.086) --
1988 -- -- (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) The Government Bond Fund commenced operations on August 26, 1991. The
Investment Grade Income Fund was formerly known as Income Appreciation Fund.
(2) Distributions in excess of net investment income.
(3) Unaudited.
(4) Net investment income per share before reimbursement of fees by the
investment adviser were $0.065 in 1993 for Investment Grade Income Fund;
$0.055 in 1993 and $0.056 in 1992 for Government Bond Fund; and $0.030 in
1993 and $0.084/(3)/ in 1988 for Money Market Fund.
8
- --------------------------
Allmerica Investment Trust
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA INVESTMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------------------------
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO AVERAGE
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEES 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>
$ 1.112 9.45% $189,503 6.48% 0.51% 0.51% 0.51% 0.41% 0.41% 48% $--
1.084 3.56% 157,327 6.50% 0.52% 0.52% 0.52% 0.40% 0.40% 108% --
1.117 17.84% 141,625 6.66% 0.53% -- 0.53% 0.41% 0.41% 126% --
1.012 (2.96)% 109,972 6.25% 0.58% -- 0.58% 0.42% 0.42% 129% --
1.111 10.80% 107,124 6.16% 0.54% -- 0.55% 0.45% 0.44% 55% --
1.074 8.33% 52,874 7.25% 0.59% -- 0.59% N/A N/A 71% --
1.085 16.75% 29,018 8.10% 0.60% -- 0.60% N/A N/A 52% --
1.004 8.02% 18,226 9.14% 0.56% -- 0.56% N/A N/A 5% --
1.011 13.52% 13,171 8.67% 0.78% -- 0.78% N/A N/A 4% --
0.968 8.20%/(3)/ 8,951 8.57% 0.77% -- 0.77% N/A N/A 12% --
1.047 7.08% 55,513 5.92% 0.67% 0.67% 0.67% 0.50% 0.50% 56% --
1.036 3.51% 46,396 5.90% 0.66% 0.66% 0.66% 0.50% 0.50% 112% --
1.062 13.06% 45,778 5.91% 0.69% -- 0.69% 0.50% 0.50% 180% --
0.997 (0.88)% 42,078 5.60% 0.70% -- 0.70% 0.50% 0.50% 106% --
1.070 7.51% 77,105 5.51% 0.61% -- 0.62% 0.50% 0.49% 35% --
1.051 6.59% 33,689 6.13% 0.68% -- 0.69% N/A N/A 67% --
1.047 7.60%** 7,591 5.55%* 0.54%* -- 0.54%* N/A N/A 65% --
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%/(3)/ 7,156 7.13% 0.60% -- 0.71% N/A N/A N/A --
</TABLE>
9
--------------------------
Allmerica Investment Trust
<PAGE>
HOW ARE THE FUNDS MANAGED?
The overall responsibility for the supervision of the affairs of the Trust
vests in the Board of Trustees of the Trust which meets on a quarterly basis.
Allmerica Financial Investment Management Services, Inc. (the "Manager") is
responsible for the management of the Trust's day-to-day business affairs and
has general responsibility for the management of the investments of the Funds.
The Manager, at its expense, has contracted with certain Sub-Advisers to manage
the investments of the Funds, subject to the requirements of the Investment
Company Act of 1940, as amended (the "1940 Act").
The Manager is an indirect, wholly-owned subsidiary of Allmerica Financial
Corporation ("AFC"), a Delaware holding company for a group of affiliated
companies, the largest of which is First Allmerica, a life insurance company
organized in Massachusetts in 1844. The Manager, AFC and First Allmerica are
located at 440 Lincoln Street, Worcester, Massachusetts 01653. The Manager
succeeded Allmerica Investment Management Company, Inc. ("AIMCO") as manager of
the Trust on April 16, 1998. As part of a reorganization, AIMCO transferred to
the Manager that portion of its business relating to the provision of investment
advisory services exclusively to investment companies registered under the 1940
Act such as the Trust while AIMCO retained its financial planning business. The
same personnel and procedures previously employed by AIMCO to service the Trust
will be used by the Manager. The Manager also serves as investment manager of
the Palladian Trust, another open-end investment management company.
The Manager has entered into Sub-Adviser Agreements for the management of the
investments of each of the Funds. Each Sub-Adviser, which has been selected on
the basis of various factors including management experience, investment
techniques, and staffing, is authorized to engage in portfolio transactions on
behalf of the applicable Fund subject to such general or specific instructions
as may be given by the Trustees and/or the Manager. The terms of a Sub-Adviser
Agreement cannot be changed materially without the approval of a majority
interest of the shareholders of the affected Fund. The Trust and Manager have
filed an application with the SEC for an order of exemption that would permit
the Manager to enter into and materially amend sub-advisory agreements with non-
affiliated Sub-Advisers without obtaining shareholder approval. If the requested
relief is granted by the SEC, the Manager will have the ability, subject to
approval of the Trustees, to hire and terminate Sub-Advisers to the Funds and to
change materially the terms of the Sub-Advisory Agreements, including the
compensation paid to the Sub-Advisers, without the approval of the shareholders
of the Funds. The Sub-Advisers have been selected by the Manager and Trustees in
consultation with RogersCasey & Associates, Inc. ("RogersCasey"), a leading
pension consulting firm. RogersCasey is a wholly-owned subsidiary of BARRA, Inc.
The cost of such consultation is borne by the Manager.
RogersCasey provides consulting services to pension plans representing over
$500 billion in total assets and, in its consulting capacity, monitors the
investment performance of over 1,800 investment advisers. From time to time,
specific clients of RogersCasey and the Sub-Advisers will be named in sales
materials. At times, RogersCasey assists in the development of asset allocation
strategies which may be used by shareholders in the diversification of their
portfolios across different asset classes.
Ongoing performance of the Sub-Advisers is reviewed and evaluated by a
committee of the Board of Trustees, which also includes members who are officers
of First Allmerica or its affiliates, in consultation with RogersCasey.
Historical performance data for all Funds is set forth under "Financial
Highlights." The Manager is responsible for the payment of all fees to the Sub-
Advisers. The Sub-Advisers for each of the Funds are as follows:
<TABLE>
<S> <C>
Select Emerging Markets Fund Schroder Capital Management International Inc.
Select Aggressive Growth Fund Nicholas-Applegate Capital Management, L.P.
Select Capital Appreciation Fund T. Rowe Price Associates, Inc.*
Select Value Opportunity Fund Cramer Rosenthal McGlynn, LLC**
Select International Equity Fund Bank of Ireland Asset Management (U.S.) Limited
Select Growth Fund Putnam Investment Management, Inc.
Select Strategic Growth Fund Cambiar Investors, Inc.
Growth Fund Miller Anderson & Sherrerd, LLP
Equity Index Fund Allmerica Asset Management, Inc.
Select Growth and Income Fund John A. Levin & Co., Inc.
Select Income Fund Standish, Ayer & Wood, Inc.
Investment Grade Income Fund Allmerica Asset Management, Inc.
Government Bond Fund Allmerica Asset Management, Inc.
Money Market Fund Allmerica Asset Management, Inc.
</TABLE>
10
- --------------------------
Allmerica Investment Trust
<PAGE>
- -------------------------------
* T. Rowe Price Associates, Inc. assumed Sub-Adviser responsibilities from
Janus Capital Corporation on April 1, 1998. The Sub-Adviser Agreement between T.
Rowe Price Associates, Inc. and the Manager is subject to shareholder approval
at a meeting scheduled for June 3, 1998.
** Cramer Rosenthal McGlynn, LLC assumed Sub-Adviser responsibilities from CRM
Advisors, LLC on January 2, 1998.
For a sample listing of certain of the Sub-Advisers' clients, see "Investment
Management and Other Services" in the SAI. For more information on each of the
Sub-Advisers, see "What Are the Investment Objectives and Policies?" and "Fund
Manager Information."
The Manager also 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 each of the Funds and is entitled to
receive an administrative fee and certain out-of-pocket expenses. The Manager is
responsible for the payment of the administrative fee to Investor Services
Group.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES?
Each Fund has a separate investment objective and policies designed to meet
different investment and financial needs, as described below. There is no
assurance that a Fund will achieve its investment objective.
A Fund's investment objective and investment policies are not fundamental and
may be changed without shareholder approval.
SELECT EMERGING MARKETS FUND
Investment Objective: The Select Emerging Markets Fund seeks long-term growth
of capital by investing in the world's emerging markets.
Sub-Adviser: Schroder Capital Management International Inc. ("SCMI") serves as
Sub-Adviser to the Select Emerging Markets Fund. SCMI, a wholly-owned U.S.
subsidiary of Schroders U.S. Holdings, Inc., the indirect wholly-owned U.S.
subsidiary of Schroders plc, was organized in 1980 as an investment adviser and
had more than $25 billion in assets under management as of December 31, 1997.
SCMI provides global equity and fixed income management services to North
American state and local governments, corporations, endowments, foundations,
investment companies and family trusts. Its main U.S. offices are located at
787 Seventh Avenue, New York, New York 10019.
Investment Policies: Under normal circumstances, the Fund invests at least 65%
of its total assets in equity securities of companies that are domiciled or
primarily doing business in developing countries with emerging markets, which
include those in the Morgan Stanley Capital International Emerging Markets Free
Index ("MSCI EMF"). Investments are not limited to one or more specific regions
because the Sub-Adviser believes that emerging market investment opportunities
can be found throughout the world. The Fund ordinarily maintains investments in
at least five developing countries.
A company is considered to be domiciled in a developing country if it is
organized under the laws of, or has a principal office in, that country. A
company is considered as primarily doing business in a developing country if (i)
the company derives at least 50% of its gross revenues or profits from either
goods or services produced or sold in the developing country or (ii) at least
50% of the company's assets are situated in the developing country.
The Fund may invest in the following types of equity securities: common
stock, preferred stock, securities convertible into common stock, rights and
warrants to acquire such securities and substantially similar forms of equity
with comparable risk characteristics.
The Fund invests in those emerging markets that the Sub-Adviser believes have
strongly developing economies and potential for long-term future growth. In
selecting securities for investment in the Fund, the Sub-Adviser assesses the
general attractiveness of specific countries based on an analysis of various
factors, including political stability, financial practices, economic prospects,
interest rates and inflation, general market valuations and potential currency
movements. Investments are made in those companies that the Sub-Adviser believes
are best positioned and managed to achieve above-average growth.
11
--------------------------
Allmerica Investment Trust
<PAGE>
The Fund may also invest up to 35% of its total assets in debt securities of
government or corporate issuers in emerging markets, equity and debt securities
of issuers in developed countries, including the United States, and cash and
money market instruments. Some or all of the debt securities held by the Fund
may be rated below investment grade. These securities, commonly known as "junk
bonds", involve significant risks as discussed under "Certain Investment
Strategies and Policies-High Yield Securities." Emerging market debt securities
often are rated below investment grade or not rated by U.S. rating agencies.
Pending investment of proceeds from new sales of Fund shares or to meet daily
cash needs, the Fund may hold cash and money market instruments.
The Sub-Adviser may employ a temporary defensive strategy if deemed by it to
be appropriate due to economic or political conditions in emerging markets. When
using a defensive strategy, the Fund may invest up to 100% of its assets in
cash, high-quality debt securities or money market instruments of U.S. or
foreign issuers. In addition, most or all of its investments may be made in the
United States and in U.S. dollars for temporary defensive purposes.
The Fund may invest up to 15% of its net assets in securities which are
illiquid and may engage in the options and futures strategies and currency
hedging techniques described under "Certain Investment Strategies and Policies-
Options and Futures Transactions" and "Hedging Techniques and Investment
Practices."
Investing in the Fund entails a substantial degree of risk. Investors are
strongly advised to consider carefully the special risks involved in investing
in emerging markets, which are in addition to the usual risks of investing in
developed countries around the world. See "Certain Investment Strategies and
Policies-Foreign Securities." The portfolio turnover rate for the Fund may vary
greatly from year to year.
SELECT AGGRESSIVE GROWTH FUND
Investment Objective: The Select Aggressive Growth Fund seeks above-average
capital appreciation by investing primarily in common stocks of companies which
are believed to have significant potential for capital appreciation.
Sub-Adviser: Nicholas-Applegate Capital Management, L.P. ("NACM") serves as Sub-
Adviser to the Select Aggressive Growth Fund. NACM is an investment manager
supervising accounts with approximately $30 billion in total assets as of
December 31, 1997. NACM's clients are primarily major corporate employee benefit
funds, public employee retirement plans, foundations and endowment funds,
investment companies and individuals. Founded in 1984, NACM is located at 600
West Broadway, Suite 2900, San Diego, California 92101.
Investment Policies: Under normal circumstances, at least 65% of the assets of
the Select Aggressive Growth Fund will be invested in equity securities
consisting of common stocks, securities convertible into common stocks
(including bonds, notes and preferred stocks), and warrants. The Fund's assets
also may be invested in other debt securities and preferred stocks when such
securities are believed appropriate in light of the Fund's investment objective
and market conditions.
The selection of securities is made solely on the basis of their potential for
capital appreciation. Dividend and interest income from portfolio securities, if
any, is incidental to the Fund's investment objective. While investments may be
made in well-known and established companies, a significant portion of the
Fund's investments is expected to be in securities of newer and relatively
unseasoned companies or companies which represent new or changing industries.
At any given point, a substantial portion of the Fund's equity investments may
be in securities which are not listed for trading on national securities
exchanges and which, although publicly traded, may be less liquid than
securities issued by larger, more seasoned companies which trade on national
securities exchanges. Up to 15% of the Fund's net assets may be invested in
securities which are illiquid.
Securities of newer companies may be closely held with only a small portion of
their outstanding securities owned by the general public. Newer companies may
have relatively small revenue, lack depth of management and have a small share
of the market for their products or services; thus, they may be more vulnerable
to changes in economic conditions, market fluctuations and other factors
affecting the profitability or marketability of companies. Due to these and
other factors, the price movement of the securities held by the Fund can be
expected to be more volatile than is the case for the market as a whole, and the
net asset value of a share of the Fund may fluctuate significantly.
Consequently, the Fund should not be considered suitable for investors who are
unable or unwilling to assume the risk of loss inherent in an aggressive growth
portfolio, nor should investment in the Fund be considered a balanced or
complete investment program.
12
- --------------------------
Allmerica Investment Trust
<PAGE>
When NACM determines that market conditions warrant a temporary defensive
position, the Fund may invest without limitation in high-grade, fixed-income
securities or U.S. Government securities, or hold assets in cash or cash
equivalents. For hedging purposes, the Fund may engage in the options and
futures strategies described under "Certain Investment Strategies and Policies."
The Fund may also invest up to 25% of its assets in foreign securities (not
including its investments in American Depositary Receipts ("ADRs")).
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 95%. The portfolio turnover rate was the result of the Sub-
Adviser's investment process which typically results in above-average portfolio
turnover. Portfolio turnover rates may vary greatly from year to year. A high
portfolio turnover rate will likely result in greater brokerage costs to the
Fund.
SELECT CAPITAL APPRECIATION FUND
Investment Objective: The Select Capital Appreciation Fund seeks long-term
growth of capital in a manner consistent with the preservation of capital.
Realization of income is not a significant investment consideration and any
income realized on the Fund's investments will be incidental to its primary
objective.
Sub-Adviser: T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as Sub-
Adviser to the Select Capital Appreciation Fund. Founded in 1937, T. Rowe Price
is a publicly held company located at 100 East Pratt Street, Baltimore, Maryland
21202. As of December 31, 1997, T. Rowe Price and its affiliates managed assets
totaling approximately $125 billion for more than five million individual and
institutional investor accounts. T. Rowe Price International Series, Inc., an
investment company managed by a T. Rowe Price affiliate, is currently used as an
investment vehicle for certain insurance products sponsored by First Allmerica
and Allmerica Financial Life. In addition, a T. Rowe Price affiliate currently
serves as investment adviser to an investment account offered to institutional
clients of First Allmerica and Allmerica Financial Life.
Investment Policies: The Fund invests in common stocks when the Sub-Adviser
believes that the relevant market environment favors profitable investing in
those securities. The Fund pursues its objective normally by investing at least
50% of its equity assets in securities issued by medium-sized companies.
Medium-sized companies are those whose market capitalizations fall within the
range of companies in the S&P MidCap 400 Index (the "MidCap Index"). Companies
whose capitalization falls outside this range after the Fund's initial purchase
continue to be considered medium-sized companies for the purpose of this policy.
As of December 31, 1997, the MidCap Index included companies with
capitalizations between approximately $200 million to $12 billion. The range of
the MidCap Index is expected to change on a regular basis. Subject to the above
policy, the Fund may also invest in smaller or large issuers. Common stock
investments are selected in industries and companies that the Sub-Adviser
believes are experiencing favorable demand for their products and services and
which operate in a favorable competitive environment and regulatory climate. The
Sub-Adviser's analysis and selection process focuses on stocks with earnings
growth potential that may not be recognized by the market. Such securities are
selected solely for their capital growth potential; investment income is not a
consideration. Medium-sized companies may suffer more significant losses as well
as realize more substantial growth than larger issuers; thus, investments in
such companies tend to be more volatile and somewhat speculative.
The selection criteria for domestic issuers apply equally to stocks of foreign
issuers. In addition, factors such as expected levels of inflation, government
policies influencing business conditions, the outlook for currency relationships
and prospects for relative economic growth among countries, regions or
geographic areas may warrant greater consideration in selecting foreign stocks.
The Fund may invest without limitation in foreign securities. The Fund may
invest directly in foreign securities denominated in foreign currency and not
publicly traded in the United States. The Fund also may purchase foreign
securities through ADRs, European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") and other types of receipts or shares evidencing
ownership of the underlying foreign securities. In addition, the Fund may invest
indirectly in foreign securities through foreign investment funds or trusts
(including passive foreign investment companies). Certain state insurance
regulations may impose additional restrictions on the Fund's holdings of foreign
securities. Investments in foreign securities carry additional risks not present
in domestic securities. See "Certain Investment Strategies and Policies -
Foreign Securities."
Although the Fund normally invests primarily in common stocks, the Fund's cash
position may increase when the Sub-Adviser is unable to locate investment
opportunities with desirable risk/reward characteristics. The Fund also may
invest in preferred stocks, warrants, government securities, corporate bonds and
debentures, high-grade commercial paper, certificates of deposit, other debt
securities or repurchase agreements or reverse repurchase agreements when the
Sub-Adviser perceives an opportunity for capital growth from such securities or
so that the Fund may receive a return on its idle cash. The Fund also may invest
up to 35% of its assets
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in such lower-rated securities commonly known as "junk bonds." Fixed-income
securities rated in the fourth highest grade by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc. ("S&P") (Baa and BBB, respectively) are investment grade but are
considered to have some speculative characteristics. Lower-rated securities or
"junk bonds" (rated Ba/BB or lower) involve the risks discussed under "Certain
Investment Strategies and Policies-High Yield Securities." When the Fund invests
in such securities, investment income will increase and may constitute a large
portion of the return realized by the Fund and the Fund probably will not
participate in market advances or declines to the extent that it would if it
remained fully invested in common stocks. Up to 15% of the Fund's net assets may
be invested in securities which are illiquid.
The Fund may invest in "special situations" from time to time. A special
situation arises when, in the opinion of the Sub-Adviser, the securities of a
particular issuer will be recognized and appreciate in value due to a specific
development with respect to that issuer. Developments creating a special
situation might include, among others, a new product or process, a technological
breakthrough, a management change or other extraordinary corporate event, or
differences in market supply of and demand for the security. Investment in
special situations may carry an additional risk of loss in the event that the
anticipated development does not occur or does not attract the expected
attention.
For hedging purposes, the Fund may engage in options and futures strategies
and may utilize forward contracts, interest rate swaps and swap-related
products. See "Certain Investment Strategies and Policies." For the fiscal year
ended December 31, 1997, the portfolio turnover rate for the Fund was 133%. The
portfolio turnover rate was the result of the investment approach of Janus
Capital Corporation ("JCC"), the Fund's previous Sub-Adviser, which typically
resulted in above-average portfolio turnover as securities were sold when the
Sub-Adviser believed the reasons for their initial purchase were no longer valid
or when it believed that the sale of a security owned by the Fund and the
purchase of another security could enhance return. JCC was replaced by T. Rowe
Price as Sub-Adviser for the Fund effective April 1, 1998. Portfolio turnover
rates may vary greatly from year to year. A high portfolio turnover rate will
likely result in greater brokerage costs to the Fund.
SELECT VALUE OPPORTUNITY FUND (FORMERLY SMALL-MID CAP VALUE FUND)
Investment Objective: The Select Value Opportunity Fund seeks long-term growth
of capital by investing primarily in a diversified portfolio of common stocks of
small and mid-size companies, whose securities at the time of purchase are
considered by the Sub-Adviser to be undervalued.
Sub-Adviser: Cramer Rosenthal McGlynn, LLC ("CRM") serves as Sub-Adviser to the
Select Value Opportunity Fund. CRM provides advisory and sub-advisory services
to mutual funds with a total of over $500 million in assets under management as
of December 31, 1997. CRM is owned by its active investment professionals,
Cramer Rosenthal McGlynn, Inc. ("Cramer Rosenthal") and WT Investments, Inc., an
indirect, wholly-owned subsidiary of Wilmington Trust Corporation. Founded in
1973, Cramer Rosenthal had over $3.7 billion in assets under management as of
December 31, 1997 and provides investment advice to individuals, state and local
government agencies, pension and profit sharing plans, trusts, estates,
endowments and other organizations. The Sub-Adviser is located at 707
Westchester Avenue, White Plains, New York 10604.
Investment Policies: A stock will be considered to be attractively valued and,
therefore, eligible for investment in the Fund, if it is trading at a price
which the Sub-Adviser believes is reasonable relative to its own past valuation
history as well as compared to a large universe of stocks selected by the Sub-
Adviser, based on one or more of the following comparisons:
1. price relative to cash flow;
2. price relative to earnings;
3. price relative to sales; and
4. price relative to assets as measured by book value.
The Select Value Opportunity Fund generally intends to invest at least 65% of
its total assets in stocks of companies with market capitalization between $200
million and $5 billion at the time of purchase and which are listed on a
national or regional exchange or over-the-counter with prices quoted daily in
the financial press. The Fund at times may invest temporarily in preferred
stocks, bonds or other defensive issues. Normally, however, the Fund will
maintain at least 80% of the portfolio in common stocks. There are no
restrictions or guidelines regarding the investment of Fund assets in shares
listed on an exchange or traded over-the-counter. The Fund may invest up to 25%
of its assets in foreign securities (not including its investments in ADRs).
The Select Value Opportunity Fund seeks investment opportunities in companies
whose stocks are trading at attractive valuations relative to the market as a
whole. The most attractive of these companies often exist among those securities
which have been out of favor, where Wall Street coverage is limited and where
there is a degree of misunderstanding or neglect resulting in low expectations.
Value investing may reduce downside risk while offering potential for capital
appreciation as a company gains favor among other investors and its stock price
rises.
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The portfolio normally will be diversified among different industry sectors, but
is not an index approach. Stocks are bought as investments and generally held
for the long term, rather than as active trading vehicles.
Small-mid cap companies may present greater opportunities for capital
appreciation, but also may involve greater risk. Smaller cap companies, when
compared with larger cap companies, may be more dependent upon a single product,
have limited financial resources, have fewer securities outstanding, experience
greater price fluctuations and be somewhat less liquid than securities of larger
companies.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 110%. The portfolio turnover rate for the Fund may vary from year
to year. The Fund experienced such a rate of turnover due to a new Sub-Adviser
assuming responsibility for the Fund on January 1, 1997 and subsequently
repositioning the portfolio.
SELECT INTERNATIONAL EQUITY FUND
Investment Objective: The Select International Equity Fund seeks maximum long-
term total return (capital appreciation and income) primarily by investing in
common stocks of established non-U.S. companies.
Sub-Adviser: Bank of Ireland Asset Management (U.S.) Limited ("BIAM") serves as
Sub-Adviser for the Select International Equity Fund. BIAM is an indirect,
wholly-owned subsidiary of Bank of Ireland. Its main offices are at 26
Fitzwilliam Place, Dublin 2, Ireland. Its U.S. headquarters are at 20 Horseneck
Lane, Greenwich, CT 06830. Bank of Ireland provides investment management
services through a network of affiliated companies, including BIAM which
represents North American clients. As of December 31, 1997, Bank of Ireland
managed approximately $27 billion in global securities for Irish, United
Kingdom, European, Australian, South African, Canadian and U.S. clients.
Investment Policies: To achieve its objective, the Select International Equity
Fund will invest primarily in common stocks of established non-U.S. companies.
Under normal market conditions, at least 65% of the Fund's total assets will be
invested in the securities of companies domiciled in at least five foreign
countries, not including the United States. The Fund may also acquire fixed-
income debt securities. It will do so, at the discretion of BIAM, primarily for
defensive purposes. The Fund may invest up to 15% of its net assets in
securities which are illiquid.
The Fund's investments may include ADRs which may be sponsored or unsponsored
by the underlying issuer. The Fund may also utilize EDRs, which are similar to
ADRs, in bearer form, designed for use in the European securities market and
GDRs. Investments in foreign securities carry additional risks not present in
domestic securities. See "Certain Investment Strategies and Policies - Foreign
Securities." For hedging purposes, the Fund may engage in the options and
futures strategies described under "Certain Investment Strategies and Policies."
Certain state insurance regulations may impose additional restrictions on the
Fund's holdings of foreign securities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 20%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
SELECT GROWTH FUND
Investment Objective: The Select Growth Fund seeks to achieve long-term growth
of capital by investing in a diversified portfolio consisting primarily of
common stocks selected on the basis of their long-term growth potential.
Sub-Adviser: Putnam Investment Management, Inc. ("Putnam"), One Post Office
Square, Boston, Massachusetts 02109, serves as Sub-Adviser to the Select Growth
Fund. Putnam has been an investment manager since 1937. As of December 31, 1997,
Putnam and its affiliates had assets under management of approximately $235
billion. Putnam is a wholly-owned subsidiary of Putnam Investments, Inc., a
holding company which, other than a minority interest owned by employees, is in
turn wholly-owned by Marsh & McLennan Companies, Inc., a publicly-owned holding
company whose principal businesses are international insurance and reinsurance
brokerage, employee benefit consulting and investment management.
Investment Policies: The Select Growth Fund seeks to attain its objective by
investing in securities of companies that appear to have favorable long-term
growth characteristics. Potential for long-term growth is the determinative
factor in the selection of all portfolio
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securities. Although the Fund may invest in dividend-paying stocks, the
generation of current income is not an objective of the Fund. Any income that is
received is incidental to the Fund's objective of long-term growth of capital.
When choosing securities for the portfolio, the Sub-Adviser for the Select
Growth Fund focuses on companies that display strong financial characteristics
and earnings growth potential whereas the Sub-Advisers for the Select Strategic
Growth Fund and Growth Fund emphasize value-oriented characteristics as well as
growth potential.
At least 65% of the Fund's assets under normal conditions will consist of
growth-oriented common stocks. The Fund may invest in common stocks of large
well-known companies as well as smaller growth companies, which generally
include companies with a market capitalization of $500 million or less ("smaller
growth companies"). The stocks of smaller growth companies may involve a higher
degree of risk than other types of securities and the price movement of such
securities can be expected to be more volatile than is the case of the market on
the whole. The Fund may hold stocks traded on one or more of the national
exchanges as well as in the over-the-counter markets. Because opportunities for
capital growth may exist not only in new and expanding areas of the economy but
also in mature and cyclical industries, the Fund's portfolio investments are not
limited to any particular type of company or industry. The Fund may also
purchase convertible bonds and preferred stocks, warrants and debt securities if
the Fund's Sub-Adviser believes they would help achieve the Fund's objective of
long-term growth.
The Fund may invest up to 35% of its assets in both higher-rated and lower-
rated fixed-income securities in seeking its objective of long-term growth of
capital. The Fund may invest up to 15% of its assets in lower-rated securities,
commonly known as "junk bonds," which involve risks discussed under "Certain
Investment Strategies and Policies-High Yield Securities." For more information
concerning the rating categories of corporate debt securities, see the Appendix
to the Prospectus.
When the Sub-Adviser determines that market conditions warrant a temporary,
defensive position, the Fund may invest without limitation in high-grade, fixed-
income securities or U.S. Government securities, or hold assets in cash or cash
equivalents. To the extent the Fund is so invested it is not achieving its
objective to the same degree as under normal conditions. For hedging purposes,
the Fund may engage in the options and futures strategies described under
"Certain Investment Strategies and Policies."
The Select Growth Fund's objective of seeking long-term growth of capital
means that its assets generally will be subject to greater risk than may be
involved in investing in securities that are not selected for growth potential.
The Fund may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 75%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
SELECT STRATEGIC GROWTH FUND
Investment Objective: The Select Strategic Growth Fund seeks long-term growth of
capital by investing primarily in common stocks of established companies.
Sub-Adviser: Cambiar Investors, Inc. ("Cambiar"), 8400 East Prentice Avenue,
Suite 460, Englewood, Colorado 80111, serves as Sub-Adviser to the Select
Strategic Growth Fund. Cambiar is a registered investment adviser that began
operations in 1973 and became a wholly-owned subsidiary of United Asset
Management Corporation in 1990. Cambiar manages portfolios for major corporate
clients, pension plans and financial institutions. As of December 31, 1997,
Cambiar had approximately $1.9 billion in assets under management.
Investment Policies: Under normal market conditions, the Fund invests at least
65% of its total assets in the common stocks of companies with a market
capitalization of more than $1 billion at the time of investment. In seeking to
achieve its objective, the Fund emphasizes investments in common stocks of well-
known companies that the Sub-Adviser believes have the potential for earnings
growth and capital appreciation.
In selecting stocks for the Fund, the Sub-Adviser seeks quality companies
selling at low relative valuation levels, experiencing unrecognized positive
developments and exhibiting high appreciation potential. Many of the stocks in
the Fund's portfolio are expected to pay regular dividends. However, in the
evaluation of a company, greater consideration normally is given to growth
potential than to dividend income. The Sub-Adviser believes that it is more
important to evaluate a company's probable future earnings, dividends,
competitive position and financial strength than simply to seek current dividend
income. While emphasis is placed on a company's prospects for future growth,
the Fund seeks stocks which are attractively priced relative to their
anticipated long-term value.
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In addition to common stocks, the Fund may purchase preferred stocks, debt
securities and securities convertible into or exchangeable for common stocks if
the Sub-Adviser believes they would help achieve the Fund's objective. The Fund
may invest up to 20% of its assets in foreign securities (not including its
investments in ADRs) and up to 15% of its net assets in securities which are
illiquid. The Fund also may engage in options and futures strategies. See
"Certain Investment Strategies and Policies."
The Fund at any time may hold a portion of its assets in cash or money market
instruments. When a defensive position is deemed advisable, the Fund may
temporarily invest without limit in high-grade debt securities, securities of
the U.S. Government and its agencies and money market instruments, or retain
cash.
The Fund is not restricted as to portfolio turnover and will make changes in
its portfolio from time to time based on market prices, economic conditions and
other factors. The Fund generally attempts to avoid speculative securities.
The companies in which the Fund invests typically have a large number of
publicly held shares and a high trading volume, resulting in a high degree of
liquidity. The value of the Fund's investments fluctuates in response to many
factors, including activities of individual companies and general market and
economic conditions. The Sub-Adviser attempts to reduce risk through
diversification of the Fund's portfolio and thorough research. However, there
are risks inherent in the investment in any security, including shares of the
Fund, and there is no guarantee that the Fund's investment strategies will be
successful.
GROWTH FUND
Investment Objective: The Growth Fund seeks to achieve long-term growth of
capital through investments primarily in common stocks and securities
convertible into common stocks that are believed to represent significant
underlying value in relation to current market prices and which are experiencing
positive earnings revisions. Realization of current income, if any, is
incidental to this objective.
Sub-Adviser: Miller Anderson & Sherrerd, LLP ("MAS") serves as Sub-Adviser for
the Growth Fund. MAS, which is a wholly owned indirect subsidiary of Morgan
Stanley, Dean Witter, Discover & Co., was organized in 1969 and is located at
One Tower Bridge, West Conshohocken, Pennsylvania 19428. MAS provides investment
counseling services to employee benefit plans, endowment funds, foundations and
other institutional investors and had over $60 billion in assets under
management as of December 31, 1997. MAS is the adviser of the MAS Funds, a
registered investment company offering investment alternatives to institutional
clients with a minimum initial investment of $1 million. MAS also manages
certain assets for First Allmerica and its affiliates.
Investment Policies: The Growth Fund is not limited to investments in any
particular type of company and may invest in any company which, in the opinion
of management, is likely to further its investment objective. The Growth Fund
will pursue its investment objective by maintaining a flexible position
regarding the type of companies, as well as the types of securities, in which it
will invest. Investments may include, but are not limited to, developing or
well-established companies, whether small or large. It is anticipated that there
will be a mix of assets in the Growth Fund. For example, portions of the Growth
Fund may be invested in equity securities of good quality or in well-established
companies considered to represent good value, based on factors including
historical investment standards (such as price/book value ratios and
price/earnings ratios) or in smaller emerging growth companies which are in the
development stage and are expected to achieve above-average earnings growth
because of special factors (such as changes in the economy, the relative
attractiveness of the various securities markets or changes in consumer demand).
The Growth Fund proposes to keep its assets fully invested, but may maintain
reasonable amounts in cash or in high-grade, short-term debt securities to meet
current expenses and anticipated redemptions, and during temporary periods
pending investment in accordance with its policies. The term "high-grade, short-
term debt securities" means the money market instruments described under the
Investment Grade Income Fund's Investment Policies.
The Growth Fund normally will invest substantially all of its assets in
equity-type securities, including common stocks, warrants (which are options to
purchase common stock at specified prices during a specified time period with
the investment risk that the market value of the underlying common stock may not
be high enough in relation to the warrant exercise price to justify purchase
pursuant to the terms of the warrant), preferred stocks and debt securities
convertible into or carrying rights to purchase common stock or to participate
in earnings, and real estate securities to the extent permitted by paragraph
four under "Investment Restrictions" in the SAI. In periods considered by
management to warrant a more defensive position, the Growth Fund may place a
larger proportion of its portfolio in high-grade preferred stocks, bonds or
other fixed-income securities, including U.S. Government securities, whether or
not convertible into stock or with rights attached, or retain cash. The Fund may
engage in the options and futures strategies described under "Certain Investment
Strategies and Policies."
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The Growth Fund may invest in both listed and unlisted securities. The Growth
Fund also may invest in foreign as well as domestic securities. The Fund may
invest up to 25% of its assets in foreign securities (not including its
investments in ADRs). The Growth Fund will not concentrate its foreign
investments in any particular foreign country, or limit its investments to
issuers listed on particular exchanges or traded in particular money market
centers. Investments in foreign securities carry additional risks not present in
domestic securities. See "Certain Investment Strategies and Policies." The Sub-
Adviser will consider these and other factors before investing and will not
cause the Growth Fund to invest in foreign securities unless, in its opinion,
such investments will meet the standards and objectives of the Growth Fund.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 79%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
EQUITY INDEX FUND
Investment Objective: The Equity Index Fund seeks to achieve investment results
that correspond to the aggregate price and yield performance of a representative
selection of common stocks that are publicly traded in the United States.
Sub-Adviser: Allmerica Asset Management, Inc. ("AAM") serves as Sub-Adviser to
the Equity Index Fund as well as the Investment Grade Income Fund, Government
Bond Fund and Money Market Fund, other series of the Trust. AAM, an indirect,
wholly-owned subsidiary of AFC, was incorporated in 1993 and is located at 440
Lincoln Street, Worcester, Massachusetts 01653. As of December 31, 1997, AAM had
approximately $11 billion in assets under management. AAM serves as investment
adviser to First Allmerica's General Account and to a number of affiliated
insurance companies and other affiliated accounts, and as Adviser to Allmerica
Securities Trust, a diversified, closed-end management investment company.
Investment Policies: The Equity Index Fund will seek to achieve its objective by
attempting to replicate the aggregate price and yield performance of the
Standard & Poor's Composite Index of 500 Stocks ("S&P 500"). The Fund uses the
S&P 500 as the performance standard because it represents over 70 percent of the
total market value of all publicly-traded common stocks in the U.S., is well-
known to investors and, in the opinion of the Sub-Adviser, is representative of
the performance of common stocks publicly-traded in the United States. Many, but
not all, of the stocks in the S&P 500 are issued by companies that are among the
500 largest as measured by the aggregate market value of their outstanding stock
(market price per share multiplied by number of shares outstanding). Inclusion
of a stock in the S&P 500 does not imply that S&P has endorsed it as an
investment. With respect to investing in common stocks, there can be no
assurance of capital appreciation and there is a substantial risk of market
decline.
The method used to select investments for the Fund involves investing in
common stocks in approximately the order of their weightings in the S&P 500
Index. In addition, the Fund purchases stocks with smaller weightings in order
to represent other sectors of the S&P 500 for diversification purposes.
The Equity Index Fund will invest only in those stocks, and in such amounts,
as its Sub-Adviser determines to be necessary or appropriate for the Fund to
approximate the performance of the S&P 500. Under normal circumstances, it is
expected that the Fund will hold approximately 500 different stocks included in
the S&P 500. The Fund may compensate for the omission of a stock that is
included in the S&P 500, or for purchasing stocks in other than the same
proportions that they are represented in the S&P 500, by purchasing stocks that
are believed to have characteristics that correspond to those of the omitted
stocks. The Fund may invest in short-term debt securities to maintain liquidity
or pending investment in stocks. The Fund may engage in the options and futures
strategies described under "Certain Investment Strategies and Policies." The
Fund also may invest up to 25% of its assets in foreign securities (not
including its investments in ADRs). The Fund may invest up to 15% of its net
assets in securities which are illiquid.
Because of its policy of tracking the S&P 500, the Equity Index Fund is not
managed according to traditional methods of active investment management, which
involve the buying and selling of securities based upon investment analysis of
economic, financial and market factors. Consequently, the projected adverse
financial performance of a company normally would not result in the sale of the
company's stock and projected superior financial performance by a company
normally would not lead to an increase in the holdings of the company. From time
to time, the Sub-Adviser may make adjustments in the portfolio because of cash
flows, mergers, changes in the composition of the S&P 500 and other similar
reasons. Portfolio turnover is expected to be lower than that of most investment
funds investing in common stock. For the fiscal year ended December 31, 1997,
the portfolio turnover rate for the Fund was 9%.
The Equity Index Fund's ability to duplicate the performance of the S&P 500
will be influenced by the size and timing of cash flows into or out of the Fund,
the liquidity of the securities included in the S&P 500, transaction and
operating expenses and other
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factors. In addition, the Fund will incur expenses (including advisory and
administrative fees) that are not reflected in the performance results of the
S&P 500. These factors, among others, may result in "tracking error," which is a
measure of the degree to which the Fund's results differ from the results of the
S&P 500. Due to such factors, the return of the Fund may be lower than the
return of the S&P 500.
Tracking error is measured by the difference between total return for the S&P
500 with dividends reinvested and total return for the Fund with dividends
reinvested after deductions of transaction and operating expenses. For the 12
months ended December 31, 1997, the S&P 500 gained 33.36% versus a gain of
32.41% for the Equity Index Fund producing a tracking error of 0.95% before
advisory and administrative fees. Tracking error is monitored by the Sub-Adviser
on a regular basis. All tracking error deviations are reviewed to determine the
effectiveness of investment policies and techniques. If the tracking error
deviation exceeds industry standards for the Fund's asset size, the Sub-Adviser
will bring the deviation to the attention of the Trustees.
While the Board of Trustees of the Trust has selected the S&P 500 as the index
the Fund will attempt to replicate, the Trustees reserve the right to select
another index at any time without seeking shareholder approval if they believe
that the S&P 500 no longer represents a broad spectrum of common stocks that are
publicly traded in the United States or if there are legal, economic or other
factors limiting the use of any particular index. If the Trustees change the
index which the Equity Index Fund attempts to replicate, the Equity Index Fund
may incur significant transaction costs in switching from one index to another.
S&P is not in any way affiliated with the Equity Index Fund or the Trust.
"Standard & Poor's," "Standard & Poor's 500," and "500" are trademarks of S&P.
SELECT GROWTH AND INCOME FUND
Investment Objective: The Select Growth and Income Fund seeks a combination of
long-term growth of capital and current income. The Fund will invest primarily
in dividend-paying common stocks and securities convertible into common stocks.
Sub-Adviser: John A. Levin & Co., Inc. ("JAL"), One Rockefeller Plaza, 25th
Floor, New York, New York 10020, serves as Sub-Adviser to the Select Growth and
Income Fund. JAL was founded as a Delaware corporation in 1982 and is wholly
owned by Baker, Fentress & Company, a non-diversified closed-end management
investment company registered under the 1940 Act. JAL had approximately $7.4
billion in assets under management as of December 31, 1997. JAL's clients
include U.S. and foreign individuals and their related trusts and charitable
organizations, private investment partnerships, college and university
endowments, foundations and public and private pension and profit sharing
plans.
Investment Policies: To achieve its objective of long-term growth of capital and
current income, the Select Growth and Income Fund will invest primarily in
dividend-paying common stocks and securities convertible into common stocks. It
may invest in a wide range of equity securities, consisting of both dividend-
paying and non-dividend-paying common stocks, preferred stocks, securities
convertible into common and preferred stocks and warrants. These may include
securities of large well-known companies as well as smaller growth companies.
The securities of smaller growth companies involve certain risks as described
above under the "Select Growth Fund." The Fund may hold securities traded on one
or more of the national exchanges as well as in the over-the-counter markets.
The Fund's portfolio investments are not limited to any particular type of
company or industry. The Fund may purchase individual stocks not presently
paying dividends which offer opportunities for capital growth or future income,
provided that the Sub-Adviser believes the overall portfolio is appropriately
positioned to achieve its income objective. To achieve current income, the Fund
may invest up to 35% of its assets in both higher-rated and lower-rated fixed-
income securities, including not more than 15% in lower-rated securities,
commonly known as "junk bonds." In certain circumstances, fixed-income
securities may be purchased by the Fund for long-term growth potential.
(However, the Fund expects to have substantially less than 35% of its assets
invested in fixed-income securities in most circumstances.) Lower-rated, fixed-
income securities involve risks discussed under "Certain Investment Strategies
and Policies-High Yield Securities." For more information concerning the rating
categories of corporate debt securities, see the Appendix to the Prospectus. The
dollar average weighted maturity of the Fund's fixed-income securities will vary
depending on, among other things, current market conditions. Purchases and sales
of portfolio securities are made at such times and in such amounts as deemed
advisable in light of market, economic and other conditions.
The Fund may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
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When the Sub-Adviser determines that market conditions warrant a temporary,
defensive position, the Fund may invest without limitation in high-grade, fixed-
income or U.S. Government securities, or hold assets in cash or cash
equivalents. To the extent the Fund is so invested, it is not achieving its
objective to the same degree as under normal conditions. For hedging purposes,
the Fund may engage in the options and futures strategies described under
"Certain Investment Strategies and Policies." There can be no assurance of
growth of capital, of course, and because the Fund invests a substantial portion
of its assets in common stocks and other securities which fluctuate in value,
there is substantial risk of market decline. The Fund's Sub-Adviser seeks to
minimize this risk through detailed analyses of financial markets and issuers of
equity securities and through investment in a diversified portfolio of such
securities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 71%. The portfolio turnover rate for the Fund may vary greatly from
year to year.
SELECT INCOME FUND
Investment Objective: The Select Income Fund seeks a high level of current
income. The Fund will invest primarily in investment grade, fixed-income
securities.
Sub-Adviser: Standish, Ayer & Wood, Inc. ("SAW") serves as Sub-Adviser to the
Select Income Fund. SAW was founded in 1933 to provide investment management
services to high net worth individuals and institutions. As of December 31,
1997, total client assets exceeded $39 billion. SAW manages fixed-income
portfolios for major corporate and governmental pension plans, financial
institutions and endowment and foundation funds. Through its affiliate, Standish
International Investment Management Company, L.P., SAW offers international
investment services. SAW is an independent investment counseling firm owned by
its twenty-four directors who are active with the firm. SAW is located at One
Financial Center, Boston, Massachusetts 02111.
Investment Policies: Under normal circumstances, at least 65% of the Select
Income Fund's assets, at the time of investment, will be invested in investment
grade corporate debt securities and securities issued or guaranteed as to
principal or interest by the U.S. Government or its agencies or
instrumentalities. Investment grade corporate debt securities are: (a) assigned
a rating within the four highest grades (Baa/BBB or higher) by either Moody's or
S&P, (b) equivalently rated by another nationally recognized statistical rating
organization ("NRSRO") or (c) unrated securities but determined by the Sub-
Adviser to be of comparable quality. Securities rated in the fourth highest
grade (rated Baa and BBB by Moody's and S&P, respectively) are considered to
have some speculative characteristics. For more information concerning the
rating categories of corporate debt securities and commercial paper, see the
Appendix to the Prospectus. The types of securities in which the Fund invests
are corporate debt obligations such as bonds, notes and debentures, and
obligations convertible into common stock; "money market" instruments, such as
bankers acceptances, or negotiable certificates of deposit issued by the 25
largest U.S. banks (in terms of deposits); commercial paper rated Prime-1 by
Moody's or A-1 by S&P; obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; asset-backed securities; mortgage-backed
securities and stripped mortgage-backed securities. The Fund also may invest in
U.S. dollar obligations of, or guaranteed by, the government of Canada or a
province of Canada or any instrumentality or political subdivision thereof, and
U.S. dollar obligations of supranational entities such as the World Bank,
European Investment Bank and African Development Bank. For more information
about asset-backed securities and mortgage-backed securities and stripped
mortgage-backed securities, see "Certain Investment Strategies and Policies."
The Fund's investments in corporate debt securities are not limited to any
particular type of company or industry.
The Fund's dollar average weighted maturity and the mix of permitted portfolio
securities as described above will vary from time to time depending, among other
things, on current market and economic conditions and the comparative yields on
instruments in different sectors, such as corporate and Treasuries, and with
different maturities. The dollar average weighted maturity of the portfolio,
excluding money market instruments, is expected to range between 5 and 20 years
under normal market conditions. The Fund may invest up to 35% of its assets in
money market instruments under normal conditions. Although the Fund does not
invest for short-term trading purposes, portfolio securities may be sold from
time to time without regard to the length of time they have been held. The value
of the Fund's portfolio securities generally will vary inversely with changes in
prevailing interest rates, declining as interest rates rise and increasing as
rates decline. The value will also be affected by other market and economic
factors. There is the risk with corporate debt securities that the issuers may
not be able to meet their obligations on interest and principal payments.
The Fund may invest up to 15% of its net assets in securities which are
illiquid. The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
The Fund may invest up to 25% of its assets in lower-rated securities,
commonly known as "junk bonds," which involve risks discussed under "Certain
Investment Strategies and Policies-High Yield Securities." For more information
concerning the rating
20
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Allmerica Investment Trust
<PAGE>
categories of corporate debt securities, see the Appendix to the Prospectus.
Obligations in which the Select Income Fund may invest include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Obligations of supranational
entities may be supported by appropriated but unpaid commitments of their member
countries, and there is no assurance that these commitments will be undertaken
or met in the future. The Fund may not invest more than 25% of its assets in
debt obligations of supranational entities.
For hedging purposes, the Fund may engage in the options and futures
strategies described under "Certain Investment Strategies and Policies."
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 79%. The portfolio turnover rate for the Fund may vary from year to
year. A high portfolio turnover rate may result in greater brokerage costs to
the Fund.
INVESTMENT GRADE INCOME FUND
Investment Objective: The Investment Grade Income Fund seeks as high a level of
total return, which includes capital appreciation as well as income, as is
consistent with prudent investment management.
Sub-Adviser: AAM serves as Sub-Adviser to the Investment Grade Income Fund.
See "Equity Index Fund" for more information about AAM.
Investment Policies: The Fund will invest its assets in the following debt
securities and money market instruments.
Debt Securities:
(a) Obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities;
(b) Debt securities which are rated Aaa, Aa, A, or Baa by Moody's; AAA, AA, A,
or BBB by S&P; or unrated but determined by the Sub-Adviser to be of
comparable quality;
(c) Obligations (payable in U.S. dollars) of, or guaranteed by, the
Government of Canada or of a Province of Canada or any instrumentality or
political subdivision thereof.
Money market instruments include obligations issued or guaranteed by the
United States Government, its agencies, or instrumentalities; commercial paper
rated Prime-1 by Moody's, or A-1 by S&P; or unrated, but determined by the Sub-
Adviser to be of comparable quality; bankers acceptances or negotiable
certificates of deposit issued by the 25 largest U.S. banks (in terms of
deposits); and cash and cash equivalents.
The Fund may engage in the options and futures strategies described under
"Certain Investment Strategies and Policies."
The debt securities in which the Fund may invest are considered "investment
grade" in that they generally are suitable for purchase by prudent investors.
However, the lowest category of investment grade securities (rated Baa by
Moody's or BBB by S&P) may have speculative characteristics, such that changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case of
debt securities with higher ratings. The portfolio of the Fund is managed
actively by AAM, as Sub-Adviser, in order to anticipate events leading to price
or ratings changes. If the rating of a security falls below investment grade, or
an unrated security is deemed to have fallen below investment grade, AAM
analyzes relevant economic and market data in making a determination of whether
to retain or dispose of the investment. The performance of the securities in the
portfolio is monitored continuously, and they are purchased and sold as
conditions warrant and permit.
The Fund may invest up to 25% of its assets in foreign securities (not
including its investments in ADRs) including those listed in (c) above. The Fund
may invest up to 15% of its net assets in securities which are illiquid.
Obligations in which the Fund may invest include debt obligations of
supranational entities. Supranational entities include international
organizations designed or supported by governmental entities to promote economic
reconstruction or development and
21
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Allmerica Investment Trust
<PAGE>
international banking institutions and related government agencies. Obligations
of supranational entities may be supported by appropriated but unpaid
commitments of their member countries, and there is no assurance that these
commitments will be undertaken or met in the future. The Fund may not invest
more than 25% of its assets in debt obligations of supranational entities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for
the Fund was 48%. The portfolio turnover rate for the Fund may vary greatly from
year to year. A high portfolio turnover rate may result in greater brokerage
costs to the Fund.
See the Appendix to the Prospectus for an explanation of the ratings of
Moody's and S&P.
GOVERNMENT BOND FUND
Investment Objective: The Government Bond Fund seeks high income, preservation
of capital, and maintenance of liquidity primarily through investments in debt
instruments issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government securities") and in related options,
futures, and repurchase agreements. Under normal conditions, at least 80% of the
Fund's assets will be invested in U.S. Government securities.
Sub-Adviser: AAM serves as Sub-Adviser to the Government Bond Fund. See "Equity
Index Fund" for more information about AAM.
Investment Policies: Some U.S. Government securities, such as Treasury bills,
notes, and bonds, which differ only in their interest rates, maturities, and
times of issuance, are supported by the full faith and credit of the United
States. Other U.S. Government securities are supported by (i) the right of the
issuer to borrow from the U.S. Treasury, (ii) discretionary authority of the
U.S. Government to purchase the obligations of the agency or instrumentality, or
(iii) only the credit of the instrumentality itself. No assurances can be given
that the U.S. Government would provide financial support to U.S. Government
sponsored instrumentalities if it is not obligated to do so by law. The Fund may
invest in mortgage-backed government securities, including pass-through
securities and participation certificates of the Government National Mortgage
Association ("Ginnie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie
Mac") and the Federal National Mortgage Association ("Fannie Mae").
The Government Bond Fund may invest in any other security or agreement
collateralized or otherwise secured by U.S. Government securities. The Fund also
may invest in separately-traded principal and interest components of securities
guaranteed or issued by the U.S. Treasury if such components are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities Program. The Fund may enter into repurchase agreements and, from time
to time, may have temporary investments in short-term debt obligations
(including certificates of deposit, bankers acceptances and commercial paper)
pending the making of other investments or for liquidity purposes.
The Government Bond Fund may engage in several active management strategies,
including the lending of portfolio securities, forward commitment purchases of
securities, writing covered call and covered put options on U.S. Government
securities, purchasing such call and put options and entering into closing
purchase and sale transactions. The Fund may engage in the options and futures
strategies described under "Certain Investment Strategies and Policies." The
Fund may invest up to 15% of its net assets in securities which are illiquid.
Obligations in which the Fund may invest include debt obligations of
supranational entities. Supranational entities include international
organizations designed or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and related
government agencies. Obligations of supranational entities may be supported by
appropriated but unpaid commitments of their member countries, and there is no
assurance that these commitments will be undertaken or met in the future. The
Fund may not invest more than 25% of its assets in debt obligations of
supranational entities.
U.S. Government securities may be purchased or sold without regard to the
length of time they have been held to attempt to take advantage of short-term
differentials in yields, with the objective of seeking income while conserving
capital. While short-term trading increases portfolio turnover, the Government
Bond Fund incurs little or no brokerage costs for U.S. Government securities.
For the fiscal year ended December 31, 1997, the portfolio turnover rate for the
Fund was 56%.
MONEY MARKET FUND
Investment Objective: The Money Market Fund seeks to obtain maximum current
income consistent with preservation of capital and liquidity.
Sub-Adviser: AAM serves as Sub-Adviser to the Money Market Fund. See "Equity
Index Fund" for more information about AAM.
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Allmerica Investment Trust
<PAGE>
Investment Policies: The Fund seeks to achieve its objective by investing in the
following high quality money market instruments:
(a) Obligations issued or guaranteed by the United States Government, its
agencies, or instrumentalities;
(b) Commercial paper which meets the ratings requirements as set forth in the
paragraph below;
(c) Obligations of banks or savings and loan associations (such as bankers
acceptances and certificates of deposit, including dollar-denominated
obligations of foreign branches of U.S. banks ("Eurodollars") and U.S.
branches of foreign banks if such U.S. branches are subject to state
banking requirements and Federal Reserve reporting requirements) which at
the date of the investment have deposits of at least $1 billion as of
their most recently published financial statements;
(d) Repurchase agreements with respect to obligations described under (a)
above (such obligations subject to repurchase agreement may bear
maturities of more than one year). For more information concerning
repurchase agreements, see "Certain Investment Strategies and Policies");
and
(e) Cash and cash equivalents.
The Money Market Fund will not purchase any security unless (i) the security
has received the highest or second highest quality rating by at least two NRSROs
or by one NRSRO if only one has rated the security, or (ii) the security is
unrated and in the opinion of AAM, as Sub-Adviser, in accordance with guidelines
adopted by the Trustees, is of a quality comparable to one of the two highest
ratings of an NRSRO. These standards must be satisfied at the time an investment
is made. If the quality of the investment later declines, the Fund may continue
to hold the investment, but the Trustees will evaluate whether the security
continues to present minimal credit risks. See the Appendix for an explanation
of NRSRO ratings.
The Fund will limit its portfolio investments to securities with a remaining
maturity of 397 days or less as of the time of purchase, in accordance with the
Trustees' guidelines. The portfolio will be managed so as to maintain a dollar-
weighted maturity of 90 days or less. In order to maximize the yield on its
assets, the Fund intends to be as fully invested at all times as is reasonably
practicable. There is always the risk that the issuer of an instrument may be
unable to make payment upon maturity.
The Fund may invest up to 25% of its assets in U.S. dollar denominated foreign
securities (not including its investments in ADRs). The Fund may invest up to
10% of its net assets in securities which are illiquid.
MANAGEMENT FEES AND EXPENSES
Under its Management Agreement with the Trust, the Manager is obligated to
perform certain administrative and management services for the Trust; furnishes
to the Trust all necessary office space, facilities, and equipment; and pays the
compensation, if any, of officers and Trustees who are affiliated with the
Manager. Other than the expenses specifically assumed by the Manager under the
Management Agreement, all expenses incurred in the operation of the Trust are
borne by the Trust, including fees and expenses associated with the registration
and qualification of the Trust's shares under the Securities Act of 1933 (the
"1933 Act"); other fees payable to the SEC; independent accountant, legal and
custodian fees; association membership dues; taxes; interest; insurance
premiums; brokerage commissions; fees and expenses of the Trustees who are not
affiliated with the Manager; expenses for proxies, prospectuses and reports to
shareholders; Fund recordkeeping expenses and other expenses.
For the services to the Funds, the Manager receives fees computed daily at an
annual rate based on the average daily net asset value of each Fund as set forth
below.
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE SELECT SELECT
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY INTERNATIONAL GROWTH
MARKETS FUND GROWTH FUND FUND FUND EQUITY FUND FUND
------------ ----------- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Manager Fee 1.35%* (1) (1) (2) (1) 0.85%
</TABLE>
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Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
SELECT
STRATEGIC EQUITY SELECT GROWTH SELECT INVESTMENT
GROWTH GROWTH INDEX AND INCOME INCOME GRADE
FUND FUND FUND FUND FUND INCOME FUND
---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Manager Fee 0.85% (1) (3) (1) (4) (4)
<CAPTION>
GOVERNMENT MONEY
BOND MARKET
FUND FUND
---- ----
<S> <C> <C>
Manager Fee 0.50% (3)
</TABLE>
- -----------------------------------------------------------
*The Manager voluntarily has agreed until further notice to waive its management
fee in the event that expenses of the Select Emerging Markets Fund exceed 2.00%
of the Fund's average daily net assets. The amount of such waiver will be
limited to the net amount of management fees earned by the Manager from the
Fund after subtracting the fees paid by the Manager to SCMI for sub-advisory
services.
(1) The Manager's fees for the Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Growth Fund and Select
Growth and Income Fund, computed daily at an annual rate based on the
average daily net assets of each Fund, are based on the following schedule:
<TABLE>
<CAPTION>
SELECT SELECT GROWTH
SELECT AGGRESSIVE SELECT CAPITAL INTERNATIONAL AND INCOME
ASSETS GROWTH FUND APPRECIATION FUND EQUITY FUND GROWTH FUND FUND
------ ----------- ----------------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
First $100 Million...... 1.00% 1.00% 1.00% 0.60% 0.75%
Next $150 Million....... 0.90% 0.90% 0.90% 0.60% 0.70%
Next $250 Million....... 0.85% 0.85% 0.85% 0.40% 0.65%
Over $500 Million....... 0.85% 0.85% 0.85% 0.35% 0.65%
</TABLE>
(2) The Manager's fee for the Select Value Opportunity Fund, computed daily at
an annual rate based on the average daily net assets of the Fund, is based
on the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million............................ 1.00%
Next $150 Million............................. 0.85%
Next $250 Million............................. 0.80%
Next $250 Million............................. 0.75%
Over $750 Million............................. 0.70%
</TABLE>
The Manager voluntarily has agreed to limit its management fees to an annual
rate of 0.90% of average daily net assets of the Select Value Opportunity
Fund until further notice.
(3) The Manager's fees for the Equity Index Fund and Money Market Fund, computed
daily at an annual rate based on the average daily net assets of each Fund,
are based on the following schedule:
<TABLE>
<CAPTION>
EQUITY MONEY
INDEX MARKET
ASSETS FUND FUND
------ ---- ----
<S> <C> <C>
First $50 Million............................. 0.35% 0.35%
Next $200 Million............................. 0.30% 0.25%
Over $250 Million............................. 0.25% 0.20%
</TABLE>
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Allmerica Investment Trust
<PAGE>
(4) The Manager's fees for the Select Income Fund and Investment Grade Income
Fund, computed daily at an annual rate based on the average daily net assets
of each Fund, are based on the following schedule:
<TABLE>
<CAPTION>
SELECT INVESTMENT
INCOME GRADE
ASSETS FUND INCOME FUND
------ ---- -----------
<S> <C> <C>
First $50 Million................... 0.60% 0.50%
Next $50 Million.................... 0.55% 0.45%
Over $100 Million................... 0.45% 0.40%
</TABLE>
The Manager is responsible for the payment of all fees to the Sub-Advisers.
The Manager pays each Sub-Adviser fees computed daily at an annual rate based on
the average daily net asset value of each Fund as set forth below. In certain
Funds, Sub-Adviser fees vary according to the level of assets in such Funds,
which will reduce the fees paid by the Manager as Fund assets grow but will not
reduce the operating expenses of such Funds.
<TABLE>
<CAPTION>
SELECT SELECT SELECT CAPITAL SELECT VALUE SELECT SELECT
EMERGING AGGRESSIVE APPRECIATION OPPORTUNITY INTERNATIONAL GROWTH
MARKETS FUND GROWTH FUND FUND FUND EQUITY FUND FUND
------------ ----------- ---- ---- ----------- ----
Sub-Adviser Fee (5) (6) 0.50% (7) (8) (9)
<CAPTION>
SELECT
STRATEGIC EQUITY SELECT GROWTH SELECT INVESTMENT
GROWTH GROWTH INDEX AND INCOME INCOME GRADE INCOME
FUND FUND FUND FUND FUND FUND
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sub-Adviser Fee (9) (10) 0.10% (11) 0.20% 0.20%
<CAPTION>
GOVERNMENT MONEY
BOND MARKET
FUND FUND
---- ----
<S> <C> <C>
Sub-Adviser Fee 0.20% 0.10%
</TABLE>
(5) For its services, SCMI will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Emerging Markets Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million................... 1.00%
Next $50 Million.................... 0.85%
Next $150 Million................... 0.75%
Over $250 Million................... 0.60%
</TABLE>
(6) For its services, NACM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Aggressive Growth Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million.................. 0.60%
Next $150 Million................... 0.55%
Next $250 Million................... 0.50%
Over $500 Million................... 0.45%
</TABLE>
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Allmerica Investment Trust
<PAGE>
(7) For its services, CRM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Value Opportunity Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million................. 0.60%
Next $150 Million.................. 0.50%
Next $250 Million.................. 0.40%
Next $250 Million.................. 0.375%
Over $750 Million.................. 0.35%
</TABLE>
(8) For its services, BIAM will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select International Equity
Fund, under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million.................. 0.45%
Next $50 Million................... 0.40%
Over $100 Million.................. 0.30%
</TABLE>
(9) For their services, Putnam and Cambiar will receive a fee computed daily at
an annual rate based on the average daily net assets of the Select Growth
Fund and Select Strategic Growth Fund, respectively, under the following
schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million.................. 0.50%
Next $100 Million.................. 0.45%
Next $100 Million.................. 0.35%
Next $100 Million.................. 0.30%
Over $350 Million.................. 0.25%
</TABLE>
(10) For its services, MAS will receive a fee based on the aggregate assets of
the Growth Fund and certain other accounts of the Manager and its
affiliates which are managed by MAS, under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $50 Million.................. 0.50%
Next $50 Million................... 0.375%
Next $400 Million.................. 0.25%
Next $350 Million.................. 0.20%
Over $850 Million.................. 0.15%
</TABLE>
(11) For its services, JAL will receive a fee computed daily at an annual rate
based on the average daily net assets of the Select Growth and Income Fund,
under the following schedule:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
First $100 Million................. 0.40%
Next $200 Million.................. 0.25%
Over $300 Million.................. 0.30%
</TABLE>
For the fiscal year ended December 31, 1997, each Fund (except the Select
Emerging Markets Fund and Select Strategic Growth Fund which had not commenced
operations) paid the Manager gross fees before reimbursement at the following
effective rates based on the Fund's average daily net assets:
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Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
FUND RATE
---- ----
<S> <C>
Select Aggressive Growth Fund........................ 0.95%
Select Capital Appreciation Fund..................... 0.98%
Select Value Opportunity Fund....................... 0.92%
Select International Equity Fund..................... 0.97%
Select Growth Fund................................... 0.85%
Growth Fund.......................................... 0.43%
Equity Index Fund.................................... 0.31%
Select Growth and Income Fund........................ 0.73%
Select Income Fund................................... 0.59%
Investment Grade Income Fund......................... 0.41%
Government Bond Fund................................. 0.50%
Money Market Fund.................................... 0.27%
</TABLE>
The following table shows voluntary expense limitations which the Manager has
declared for each Fund and the operating expenses incurred for the fiscal year
ended December 31, 1997 for each Fund (except the Select Emerging Markets Fund
and the Select Strategic Growth Fund which had not commenced operations):
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY ASSETS
----------------------------------
VOLUNTARY EXPENSE OPERATING
FUND LIMITATIONS EXPENSES+
---- ----------- ---------
<S> <C> <C>
Select Emerging Markets Fund * N/A
Select Aggressive Growth Fund 1.35% 0.99%
Select Capital Appreciation Fund 1.35% 1.13%
Select Value Opportunity Fund 1.25% 0.98%
Select International Equity Fund 1.50% 1.15%
Select Growth Fund 1.20% 0.91%
Select Strategic Growth Fund 1.20% N/A
Growth Fund 1.20% 0.47%
Equity Index Fund 0.60% 0.44%
Select Growth and Income Fund 1.10% 0.77%
Select Income Fund 1.00% 0.72%
Investment Grade Income Fund 1.00% 0.51%
Government Bond Fund 1.00% 0.67%
Money Market Fund 0.60% 0.35%
</TABLE>
- --------------------------------------------------------------------------------
+Including reductions such as directed brokerage credits. See "Brokerage
Allocation - Directed Brokerage Program" in the SAI.
*The Manager has agreed until further notice to waive voluntarily its
management fee in the event that expenses of the Select Emerging Markets Fund
exceed 2.00% of the Fund's average daily net assets. The amount of such waiver
will be limited to the net amount of management fees earned by the Manager from
the Fund after subtracting fees paid by the Manager to SCMI for sub-advisory
services.
The Manager will voluntarily reimburse its fees and any expenses above the
expense limitations. The expense limitations are voluntary and may be removed at
any time after a Fund's first fiscal year of operations with notice to existing
shareholders. The Manager reserves the right to recover from a Fund any fees,
within a current fiscal year period, which were reimbursed in that same year to
the extent that total annual expenses did not exceed the applicable expense
limitation. The expenses which are subject to the voluntary expense limitations
include management fees, independent accountant, legal and custodian fees;
recordkeeping expenses; fees and expenses of Trustees who are not affiliated
with the Manager; association membership dues, insurance; expenses for proxies,
prospectuses and reports to shareholders and fees associated with the
registration of Fund shares. Non-recurring and extraordinary expenses generally
are excluded in the determination of expense ratios of the Funds for purposes of
determining any applicable expense waiver or reimbursement. Quotations of yield
or total return for any period when an expense limitation is in effect will be
greater than if the limitation had not been in effect.
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Allmerica Investment Trust
<PAGE>
FUND MANAGER INFORMATION
The following individuals are primarily responsible for the day-to-day
management of the particular Funds as indicated below:
The following portfolio managers are involved in the investment process
utilized for the SELECT EMERGING MARKETS FUND:
John A. Troiano, Chief Executive and Chairman of Emerging Markets Committee,
joined SCMI in 1981 as an investment analyst specializing in engineering and
technology. In 1989, he set up SCMI's Latin American team.
Mark Bridgeman, First Vice President, joined SCMI in 1990 and is a Fund Manager
specializing in the African markets.
Heather F. Crighton, Director, joined SCMI in 1993 as a Fund Manager
specializing in the Asian emerging markets.
The following individuals have served as members of a committee of fund
managers for the SELECT AGGRESSIVE GROWTH FUND since March 1994:
Lawrence S. Speidell is a Partner and Director of Global/Systematic Portfolio
Management and Research at NACM. Prior to joining NACM in 1994, Mr. Speidell
spent ten years with Batterymarch Financial Management. He was also Senior Vice
President and Portfolio Manager at Putnam Management Company from 1971 to 1983.
John J. Kane is a Partner and Senior Portfolio Manager for the U.S. Systematic
portfolios at NACM. He has 28 years of economic/investment experience. Prior
to joining NACM in 1994, Mr. Kane was employed by ARCO Investment Management
Company and General Electric Company.
Mark W. Stuckelman, Portfolio Manager, U.S. Systematic, joined NACM in 1995.
Prior to joining NACM, he was employed for five years with Wells Fargo Bank's
Investment Management Group, Fidelity Management Trust Co., and BARRA, Inc.
The following portfolio managers are involved in the investment process
utilized for the SELECT CAPITAL APPRECIATION FUND:
Brian W.H. Berghuis is a Chartered Financial Analyst who has been with T. Rowe
Price for 13 years. He has 15 years' experience in equity research and
portfolio management. He is head of the investment team for the Fund.
John F. Wakeman has been with T. Rowe Price for 9 years as a research analyst
and portfolio manager. He has 11 years' experience in equity research. He is
part of the investment team for the Fund.
Marc L. Baylin is a Chartered Financial Analyst who has 7 years of investment
experience in equity research. He has been with T. Rowe Price for 5 years as a
Research Analyst and is part of the investment team for the Fund.
The following individuals have served as fund managers for the SELECT VALUE
OPPORTUNITY FUND since January 1, 1997:
Ronald H. McGlynn, Chief Executive Officer and President of Cramer Rosenthal,
has been with Cramer Rosenthal since 1973 and CRM since its founding in 1995.
He has 29 years of investment experience and serves as Co-Chief Investment
Officer and Portfolio Manager.
Jay B. Abramson, who is an Executive Vice President, Director of Research and
Co-Chief Investment Officer, has been with Cramer Rosenthal since 1985 and CRM
since its founding in 1995 and has overall responsibility for investment
research.
Eileen M. Fitzsimons, Vice President and portfolio manager, joined Cramer
Rosenthal in 1996. Previously she was a Managing Director with Dreman Value
Advisors, Inc.
The following portfolio managers are involved in the investment process
utilized for the SELECT INTERNATIONAL EQUITY FUND:
Christopher Reilly, Chief Investment Officer, joined BIAM in 1980 and has had
overall responsibility for asset management since 1985. Previously, he worked
in the United Kingdom in stockbrokering and investment management.
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Denis Donovan, Director-Portfolio Management, received an MBA from University
College Dublin. Prior to joining BIAM in 1985, he spent more than 13 years in
the money market and foreign exchange operations of the Central Bank of
Ireland, the Irish equivalent of the U.S. Federal Reserve. He has overall
responsibility for the portfolio management function for all of BIAM's client
base.
Peter Wood joined BIAM in 1985 after spending five years with another leading
investment management firm. He is responsible for portfolio construction.
Jane Neill, Senior Equity Analyst, joined BIAM in 1994. Previously, she was
Chief Investment Officer with another leading Irish investment management firm.
The following individuals have served as members of a committee of fund
managers for the SELECT GROWTH FUND since July 1, 1996:
Carol C. McMullen, Chief Investment Officer, Global Growth Equities, has been
an investment professional with Putnam since 1995. Prior to 1995, Ms. McMullen
was Senior Vice President of Baring Asset Management.
C. Beth Cotner, CFA and Chief Investment Officer, Large Cap Growth Equity, has
been with Putnam since 1995. Prior to 1995, Ms. Cotner was Executive Vice
President at Kemper Financial Services.
Manual Weiss, CFA and Senior Vice President, has been an investment
professional with Putnam since 1987.
The following portfolio managers are involved in the investment process
utilized for the SELECT STRATEGIC GROWTH FUND:
Michael S. Barish, CFA and President, founded Cambiar in 1973 and has 36 years
of investment experience. He is a generalist and is responsible for the
consumer goods and healthcare securities.
Darrel J. Hershey, Senior Vice President, joined Cambiar in 1985 and has 22
years of investment experience. Prior to 1985, Mr. Hershey was employed by
Financial Programs for 10 years as a portfolio manager. He is responsible for
the technology-hardware securities, consumer services and transportation
securities.
Kathleen M. McCarty, CFA, Senior Vice President, joined Cambiar in 1987. Prior
to 1987, Ms. McCarty was employed by Dain Bosworth as the Vice President of
Research. She is responsible for financial services, communication services
and utilities securities.
Michael J. Gardner, CFA and Vice President, joined Cambiar in 1995. Prior to
1995, Mr. Gardner was employed by Simmons & Co. He is responsible for energy
and capital goods securities.
Brian M. Barish, CFA and Vice President, was a Vice President at Lazard Freres
& Co. prior to joining Cambiar in 1997. He is responsible for technology-
software, consumer goods, transportation and international securities.
The following individuals serve as members of a committee of fund managers
for the GROWTH FUND:
Gary G. Schlarbaum, CFA and Managing Director, joined MAS in 1987 and has
served on the committee since 1993. Prior to 1987, Mr. Schlarbaum was employed
by First Chicago Investment Advisors from 1984 to 1987. Prior to First Chicago,
Mr. Schlarbaum held teaching positions at Purdue University and the University
of Pennsylvania.
Arden C. Armstrong, CFA and Managing Director, joined the firm in 1986. Prior
to joining MAS, Ms. Armstrong was employed by Evans Economics, Inc.
Nicholas Kovich, CFA and Managing Director, joined MAS in 1988 and has served
on the committee since the Fund's inception in April 1988. Prior to MAS, Mr.
Kovich was employed by Waddell & Reed Asset Management Company from 1982 to
1988 as an Investment Research Analyst and as Assistant Vice President and
Portfolio Manager.
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Robert J. Marcin, CFA and Managing Director, joined MAS in 1988. Prior to
joining MAS in 1988, Mr. Marcin was an Account Executive at Smith Barney Harris
Upham and Company, Inc.
Brian Kramp, CFA and Vice President, joined MAS in 1997. Mr. Kramp was
employed as an analyst and portfolio manager by Meridian Investment Company
from 1985 to 1997.
James J. Jolinger, Principal, joined MAS in 1994 and has served on the
committee since 1997. Prior to 1994, Mr. Jolinger was employed by Oppenheimer
Capital as an Equity Analyst from 1987 to 1994.
The following individuals have served as members of a committee of fund
managers for the SELECT GROWTH AND INCOME FUND since September 1994:
John A. Levin, Chairman and Chief Investment Officer, has over 33 years
experience in the investment industry and has been with JAL since 1982. Prior
to 1982, Mr. Levin was a Partner at Steinhardt Partners and a Partner and
Director of Research at Loeb, Rhoades & Co.
Jeffrey A. Kigner, Co-Chairman and Chief Investment Officer, has over 14 years
of investment industry experience and has been with JAL since 1984. Prior to
1984, Mr. Kigner was employed by Cralin & Co.
The following individuals have served as members of a committee of fund
managers for the SELECT INCOME FUND since the Fund's inception in August 1992:
Edward H. Ladd, Chairman and Managing Director, joined SAW in 1962 and is the
firm's economist. He also assists clients in establishing investment
strategies. Mr. Ladd is a Director of the Federal Reserve Bank of Boston, New
England Electric System, Greylock Management and Harvard Management Corporation
and a member of SAW's Executive Committee.
George W. Noyes, President and Managing Director, joined SAW in 1970 and
directs bond policy formulation and manages institutional bond portfolios at
SAW. Mr. Noyes is Vice Chairman of the ICFA Research Foundation and serves on
SAW's Executive Committee.
Dolores S. Driscoll, Managing Director, joined SAW in 1974 and manages fixed-
income portfolios with specific emphasis on mortgage pass-throughs and original
issue discount bonds. Ms. Driscoll also serves on SAW's Executive Committee.
Richard C. Doll, Manager, joined SAW in 1984 and is a portfolio manager with
research responsibilities in convertible bonds. Prior to joining SAW, Mr. Doll
was a Vice President with the Bank of New England.
Maria D. Furman, Vice President and Director, joined SAW in 1976. She is head
of the tax-exempt area and manages insurance and pension fund accounts. Ms.
Furman currently serves on SAW's Executive Committee.
The following individual has served as fund manager for the INVESTMENT GRADE
INCOME FUND since May 1994:
Lisa M. Coleman, CFA and Vice President of AAM, was a Deputy Manager/Portfolio
Manager in the global fixed income area for Brown Brothers Harriman & Company
in New York prior to joining AAM in May 1994.
The following individual has served as fund manager for the GOVERNMENT BOND
FUND since May 1995:
Richard J. Litchfield, CFA and Vice President of AAM, was a mortgage-backed
securities analyst and trader at Keystone Investments, Inc. prior to joining
AAM in May 1995.
The following individual has served as fund manager for the EQUITY INDEX FUND
and MONEY MARKET FUND since March 1995:
John C. Donohue, Assistant Vice President of AAM, was a portfolio manager at CS
First Boston Investment Management prior to joining AAM in 1995.
HOW ARE SHARES VALUED?
The net asset value of the shares of each Fund is determined once daily as of
the close of regular trading on the New York Stock Exchange (the "Exchange") on
each day on which the Exchange is open for trading.
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Equity securities are valued on the basis of their market value if market
quotations are readily available from the primary market on which the security
is traded. In other cases, they are valued at their fair value as determined in
good faith by the Trustees, although the actual calculations may be performed by
persons acting pursuant to the direction of the Trustees. Debt securities (other
than short-term obligations) normally are valued on the basis of valuations
formulated by a pricing service which utilizes data processing methods to
determine valuations for normal, institutional-size trading units of such
securities. Such methods include the use of market transactions for comparable
securities and various relationships between securities which generally are
recognized by institutional traders. All securities of the Money Market Fund are
valued at amortized cost. Debt obligations in the other Funds having a remaining
maturity of 60 days or less are valued at amortized cost when it is determined
that amortized cost approximates fair value. Short-term obligations of the other
Funds having a remaining maturity of more than 60 days are marked to market
based upon readily available market quotations for such obligations or similar
securities.
Unlike the Money Market Fund which attempts to maintain a stable net asset
value, the net asset value of the other Funds will fluctuate.
TAXES AND DISTRIBUTIONS TO SHAREHOLDERS
It is the policy of the Trust to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies so that the Trust will
not be subject to federal income tax on any net income and any capital gains to
the extent they are distributed or are deemed to have been distributed to
shareholders. Dividends out of net investment income will be declared and paid
quarterly in the case of the Growth Fund, Equity Index Fund, Select Growth and
Income Fund, Select Income Fund, Investment Grade Income Fund, and Government
Bond Fund; annually in the case of the Select Emerging Markets Fund, Select
Aggressive Growth Fund, Select Capital Appreciation Fund, Select Value
Opportunity Fund, Select International Equity Fund, Select Growth Fund and
Select Strategic Growth Fund; and daily in the case of the Money Market Fund.
Distributions of net capital gains for the year, if any, are made annually. All
dividends and capital gain distributions are applied to purchase additional Fund
shares at net asset value as of the payment date. Fund shares are held by the
Separate Accounts and any distributions are reinvested automatically by the
Separate Accounts. Tax consequences to investors in the Separate Accounts which
are invested in the Trust are described in the prospectuses for such Accounts.
SALE AND REDEMPTION OF SHARES
Shares of the Funds are sold in a continuous offering and currently may be
purchased only by Separate Accounts of First Allmerica or its subsidiaries. The
Separate Accounts are the funding mechanisms for variable annuity contracts and
variable life insurance policies. The Separate Accounts invest in shares of one
or more of the Funds. Shares of each Fund are sold at their net asset value as
next computed after receipt of the purchase order without the addition of any
selling commission or "sales load." The Distributor, Allmerica Investments,
Inc., at its expense, may provide promotional incentives to dealers that sell
variable annuity contracts for which the Funds serve as investment vehicles.
Shares of the Trust are also currently being issued under separate
prospectuses to Separate Accounts of Allmerica Financial Life, First Allmerica
and subsidiaries of First Allmerica which issue variable or group annuity
policies or variable premium life insurance policies ("mixed funding"). Although
neither Allmerica Financial Life nor the Trust currently foresees any
disadvantage, it is conceivable that in the future such mixed funding may be
disadvantageous for variable or group annuity policyowners or variable premium
life insurance policyowners ("Policyowners"). The Trustees of the Trust intend
to monitor events in order to identify any conflicts that may arise between such
Policyowners and to determine what action, if any, should be taken in response
thereto. If the Trustees were to conclude that separate funds should be
established for variable annuity and variable premium life separate accounts,
Allmerica Financial Life would pay the attendant expenses. The Trust has filed
an application with the SEC for an exemptive order to permit Fund shares to be
sold to variable annuity and life insurance separate accounts of both affiliated
and unaffiliated life insurance companies and qualified pension and retirement
plans outside of the separate account context. If the requested order is
granted, any Fund may serve as a funding vehicle for all types of variable
annuity contracts and variable life insurance contracts offered by various
participating insurance companies and for qualified plans; material
irreconcilable conflicts may possibly arise among various contract owners and
plan participants and the Board of Trustees will monitor events in order to
identify the existence of any material irreconcilable conflict and determine
what action, if any, should be taken in response to such conflict.
The Trust redeems shares of each Fund at its net asset value as next computed
after receipt of the request for redemption. The redemption price may be more or
less than the shareholder's cost. No fee is charged by the Trust on redemption.
The variable
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contracts funded through the Separate Accounts are sold subject to certain fees
and charges which may include sales and redemption charges as described in the
Prospectuses for such Separate Accounts.
Redemption payments will be paid within seven days after receipt of the
written request therefor by the Trust, except that the right of redemption may
be suspended or payments postponed whenever permitted by applicable law and
regulations.
HOW IS PERFORMANCE DETERMINED?
A Fund's performance may be quoted in advertising. A Fund's performance may be
compared with the performance of other investments or relevant indices. All
performance information is based on historical results and is not intended to
indicate future performance.
For Funds other than the Money Market Fund, "yield" is calculated by dividing
a Fund's annualized net investment income per share during a recent 30-day
period by the net asset value per share on the last day of that period. For the
Money Market Fund, "yield" represents an annualization of the change in value of
an investment (excluding any capital changes) in the Fund for a specific seven-
day period; "effective yield" compounds that yield for a year and is, for that
reason, greater than the Fund's yield.
Total returns are based on the overall dollar or percentage change in value of
a hypothetical investment in a Fund assuming all dividends and capital gain
distributions are reinvested. Cumulative total return reflects the Fund's
performance over a stated period of time. Average annual total return reflects
the hypothetical, annually-compounded return that would have produced the same
cumulative return if the Fund's performance had been constant over the entire
period. Because average annual returns tend to smooth out variations in the
Fund's return, they are not the same as actual year-by-year results.
YIELDS AND TOTAL RETURNS QUOTED FOR THE FUNDS INCLUDE THE EFFECT OF DEDUCTING
THE FUNDS' EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO A
PARTICULAR INSURANCE PRODUCT. SINCE SHARES OF THE FUNDS CAN BE PURCHASED ONLY
THROUGH A VARIABLE ANNUITY CONTRACT OR VARIABLE LIFE CONTRACT, YOU SHOULD REVIEW
CAREFULLY THE PROSPECTUS FOR THE SEPARATE ACCOUNTS FOR INFORMATION ON RELEVANT
CHARGES AND EXPENSES. INCLUDING THESE CHARGES IN THE QUOTATIONS OF THE FUNDS'
YIELDS AND TOTAL RETURNS WOULD HAVE THE EFFECT OF DECREASING PERFORMANCE.
PERFORMANCE INFORMATION FOR THE FUNDS MUST ALWAYS BE ACCOMPANIED BY, AND BE
REVIEWED WITH, PERFORMANCE INFORMATION FOR THE SEPARATE ACCOUNTS WHICH INVEST IN
THE FUNDS.
ORGANIZATION AND CAPITALIZATION OF THE TRUST
The Trust was established as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated October 11, 1984
(the "Trust Declaration"). A copy of the Trust Declaration is on file with the
Secretary of the Commonwealth of Massachusetts.
The Trust has an unlimited authorized number of shares of beneficial interest
which may be divided into an unlimited number of series of such shares, and
which are divided presently into 14 series of shares, one series underlying each
Fund. The Trust's shares are entitled to one vote per share (with proportional
voting for fractional shares). The rights accompanying Fund shares are vested
legally in the Separate Accounts. As a matter of policy, however, holders of
variable premium life insurance or variable annuity contracts funded through the
Separate Accounts have the right to instruct the Separate Accounts as to voting
Fund shares on all matters to be voted on by Fund shareholders. Voting rights
of the participants in the Separate Accounts are set forth more fully in the
prospectuses or offering circular relating to those Accounts. See "Organization
of the Trust" in the SAI for the definition of a "majority vote" of
shareholders.
The Trust is not required to hold annual meetings of shareholders. The
Trustees or shareholders holding at least 10% of the outstanding shares may call
special meetings of shareholders.
FUND RECORDKEEPING AGENT
Investor Services Group calculates net asset value per share and maintains
general accounting records for each Fund. Investor Services Group is entitled
to receive an annual Fund recordkeeping fee based on Fund assets and certain
out-of-pocket expenses.
CUSTODIAN
Bankers Trust Company, 130 Liberty Street, New York, New York 10006, is the
Custodian of the investment securities and other assets of the Trust.
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INVESTMENT RESTRICTIONS
The following is a description of certain investment restrictions which are
fundamental and may not be changed with respect to a Fund without shareholder
approval. For a description of certain other investment restrictions, reference
should be made to the SAI.
1. No Fund will concentrate its investments in particular industries, including
debt obligations of supranational entities and foreign governments, but a Fund
may invest up to 25% of the value of its total assets in a particular industry.
The restriction does not apply to investments in obligations issued or
guaranteed by the United States of America, its agencies or instrumentalities,
or to investments by the Money Market Fund in securities issued or guaranteed by
domestic branches of U.S. banks.
2. As to 75% of the value of its total assets (100% for the Money Market Fund),
no Fund will invest more than 5% of the value of its total assets in the
securities of any one issuer (other than securities issued by or guaranteed as
to principal or interest by the United States Government or any agency or
instrumentality thereof) or acquire more than 10% of the voting securities of
any issuer. The remaining 25% of assets (other than for the Money Market Fund)
may be invested in the securities of one or more issuers without regard to such
limitations.
These limitations apply as of the time of purchase. If through market action
the percentage limitations are exceeded, the Fund will not be required to reduce
the amount of its holdings in such investments.
CERTAIN INVESTMENT STRATEGIES AND POLICIES
REPURCHASE AGREEMENTS (APPLICABLE TO ALL FUNDS) AND REVERSE REPURCHASE
AGREEMENTS (APPLICABLE TO THE SELECT CAPITAL APPRECIATION FUND)
Each Fund may invest in repurchase agreements, under which the Fund acquires
ownership of a security (ordinarily U.S. Government securities) but the seller
agrees at the time of sale to purchase the security at a mutually agreed upon
time and price. Should any seller of a repurchase agreement fail to repurchase
the underlying security, or should any seller become insolvent or involved in a
bankruptcy proceeding, a Fund could incur disposition costs and losses.
Repurchase agreements maturing in more than seven days are subject to the 15%
limit (10% for the Money Market Fund) on illiquid securities.
When the Select Capital Appreciation Fund invests in a reverse repurchase
agreement, it sells a security to another party such as a banker or broker-
dealer in return for cash and agrees to buy the security back at a future date
and price. Reverse repurchase agreement transactions can be considered a form of
borrowing by the Fund. Reverse repurchase agreements may be used to provide cash
to satisfy unusually heavy redemption requests or for other temporary or
emergency purposes without the necessity of selling portfolio securities or to
earn additional income on portfolio securities, such as treasury bills and
notes.
"WHEN-ISSUED" SECURITIES (APPLICABLE TO ALL FUNDS)
Each Fund may purchase securities on a when-issued or delayed delivery basis.
Delivery and payment normally take place 15 to 45 days after the commitment to
purchase. No income accrues on when-issued securities prior to delivery.
Purchase of when-issued securities involves the risk that yields available in
the market when delivery occurs may be higher than those available when the
when-issued order is placed resulting in a decline in the market value of the
security. There is also the risk that under some circumstances the purchase of
when-issued securities may act to leverage the Fund.
LENDING OF SECURITIES (APPLICABLE TO ALL FUNDS)
For the purpose of realizing additional income, the Funds may lend portfolio
securities to broker-dealers or financial institutions amounting to not more
than 33% of their respective total assets taken at current value. While any such
loan is outstanding, a Fund will continue to receive amounts equal to the
interest or dividends paid by the issuer on the securities, as well as interest
(less any rebates to be paid to the borrower) on the investment of the
collateral or a fee from the borrower. Each Fund will have the right to call
each loan and obtain the securities. Lending portfolio securities involves
certain risks, including possible delays in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made in accordance with
guidelines established by the Board of Trustees.
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FOREIGN SECURITIES (APPLICABLE TO EACH FUND EXCEPT THE GOVERNMENT BOND FUND)
Investments in foreign markets involve substantial risks typically not
associated with investing in the U.S. which should be considered carefully by
the investor. Such risks may include political and economic instability,
differing accounting and financial reporting standards, higher commission rates
on foreign portfolio transactions, less readily available public information
regarding issuers, potentially adverse changes in tax and exchange control
regulations, and the potential for restrictions on the flow of international
capital. Foreign securities also involve currency risks. Accordingly, the
relative strength of the U.S. dollar may be an important factor in the
performance of the Fund, depending on the extent of the Fund's foreign
investments. The Money Market Fund may invest only in U.S. dollar denominated
foreign securities. Some foreign securities exchanges may not be as developed or
efficient as those in the United States and securities traded on foreign
securities exchanges generally are subject to greater price volatility. There is
also the possibility of adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation and limitations on the
removal of funds or other assets.
Investments in emerging countries involve exposure to economic structures that
are generally less diverse and mature than in the United States, and to
political systems which may be less stable. In addition, securities of issuers
located in emerging countries may have limited marketability and may be subject
to more abrupt or erratic price fluctuations. The risk also exists that an
emergency situation may arise in one or more emerging markets as a result of
which trading of securities may cease or may be substantially curtailed and
prices for a Fund's portfolio securities in such markets may not be readily
available. Many emerging market countries have experienced high rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have negative effects on the economies and
securities markets of certain countries with emerging markets. Emerging markets
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be affected adversely by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed by the countries with which they trade. In
certain markets there have been times when settlements of securities
transactions have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions.
The Funds may buy or sell foreign currencies, options on foreign currencies
and foreign currency futures contracts and options thereon and, in addition, the
Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund may invest in foreign currency
forward contracts. Although such instruments may reduce the risk of loss due to
a decline in the value of the currency that is sold, they also limit any
possible gain which might result should the value of the currency increase. Such
instruments will be used primarily to protect a Fund from adverse currency
movements; however, they also involve the risk that anticipated currency
movements will not be accurately predicted, thus adversely affecting a Fund's
total return. See "Options and Futures Transactions."
The Funds' investments may include ADRs. For many foreign securities, there
are U.S. dollar-denominated ADRs which are traded in the United States on
exchanges or over the counter. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank. An ADR may
be sponsored by the issuer of the underlying foreign security, or it may be
issued in unsponsored form. The holder of a sponsored ADR is likely to receive
more frequent and extensive financial disclosure concerning the foreign issuer
than the holder of an unsponsored ADR and generally will bear lower transaction
charges. Each Fund may invest in both sponsored and unsponsored ADRs. The Select
International Equity Fund and the Select Capital Appreciation Fund also may
utilize EDRs, which are designed for use in European securities markets, and
also may invest in GDRs.
Obligations in which the Select Income Fund, Investment Grade Income Fund and
Government Bond Fund may invest include debt obligations of supranational
entities. Supranational entities include international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Obligations of supranational entities may be supported by appropriated
but unpaid commitments of their member countries, and there is no assurance that
these commitments will be undertaken or met in the future. A Fund may not invest
more than 25% of its assets in debt obligations of supranational entities.
Certain state insurance regulations may impose additional restrictions on a
Fund's holdings of foreign securities.
OPTIONS AND FUTURES TRANSACTIONS (APPLICABLE TO EACH FUND EXCEPT THE MONEY
MARKET FUND), FORWARD CONTRACTS (APPLICABLE TO THE SELECT EMERGING MARKETS FUND,
SELECT CAPITAL APPRECIATION FUND, SELECT INTERNATIONAL EQUITY FUND AND SELECT
INCOME FUND) AND SWAPS (APPLICABLE TO THE SELECT CAPITAL APPRECIATION FUND)
Through the writing and purchase of put and call options on its securities,
financial indices and foreign currencies, and the purchase and sale of futures
contracts and related options with respect to securities, financial indices and
(in the case of the Select Emerging Markets Fund, Select Capital Appreciation
Fund, Select International Equity Fund and Select Income Fund) foreign
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currencies in which it may invest, each Fund except the Money Market Fund may at
times seek to hedge against fluctuations in net asset value, or to a limited
extent, to engage in non-hedging strategies. A Fund may not purchase or sell a
futures contract for non-hedging purposes if immmediately thereafter the sum of
the amount of margin deposits and amount of variation margins paid from time to
time on a Fund's existing futures and related options positions and premiums
paid for related options would exceed 5% of the market value of the Fund's total
assets. The Select Emerging Markets Fund, Select Capital Appreciation Fund,
Select International Equity Fund and Select Income Fund may invest without
limitation in foreign currency options. Each Fund's ability to engage in options
and futures strategies will depend on the availability of liquid markets in such
instruments. It is impossible to predict the amount of trading interest that may
exist in various types of options or futures contracts. Therefore, there is no
assurance that a Fund will be able to utilize these instruments effectively for
the purposes stated above.
Additionally, the Select Emerging Markets Fund, Select Capital Appreciation
Fund, Select International Equity Fund and Select Income Fund may invest in
forward currency contracts with the stated contract value of up to the value of
the Fund's assets and the Select Capital Appreciation Fund in swaps which may
expose these Funds to additional risks and transaction costs.
Risks inherent in the use of futures, options, forward contracts and swaps
("derivative instruments") include (1) the risk that movements in interest
rates, securities prices and currency markets will not be accurately anticipated
and a Fund's total return could be adversely affected as a result; (2) imperfect
correlation, or even no correlation, between the price of derivative instruments
and movements in the prices of the securities, interest rates or currencies
being hedged; (3) the fact that skills and techniques needed to use these
strategies are different from those needed to select portfolio securities; (4)
the lack of assurance that a liquid secondary market will exist for any
particular instrument at any time and, as a result, contractual positions cannot
be closed out easily; (5) the possible loss of principal under certain
conditions; (6) the possible inability of a Fund to purchase or sell a portfolio
security at a time when it would otherwise be favorable to do so due to the need
for the Fund to maintain "cover" or set aside securities in connection with
hedging techniques; and (7) the risk of a loss if the counterparty to the
transaction does not perform as promised. These techniques may increase
volatility of a Fund and may involve a small investment of cash relative to the
magnitude of the risk assumed.
The Funds will purchase futures and options only on exchanges or boards of
trade when there appears to be an active secondary market, but there can be no
assurance that a liquid secondary market will exist for any future or option at
any particular time.
In connection with transactions in futures and related options, the Funds will
be required to deposit as "initial margin" an amount of cash and/or securities.
Thereafter, subsequent payments are made to and from the broker to reflect
changes in the value of the futures contract.
A more detailed explanation of futures, options and other derivative
instruments, and the risks associated with them, is included in the SAI.
RESTRICTED SECURITIES (APPLICABLE TO ALL FUNDS)
The Funds also may purchase fixed-income securities that are not registered
under the 1933 Act ("restricted securities"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act. However, each
Fund will not invest more than 15% (10% for the Money Market Fund) of its net
assets in restricted securities (and securities deemed to be illiquid) unless
the Board of Trustees determines, based upon a continuing review of the trading
markets for the specific restricted security, that such restricted securities
are liquid. The Board of Trustees has adopted guidelines and delegated to the
Manager the daily function of determining and monitoring liquidity of restricted
securities. The Board, however, will retain sufficient oversight and be
responsible ultimately for the determinations. Since it is not possible to
predict with assurance exactly how this market for restricted securities sold
and offered under Rule 144A will develop, the Board will monitor carefully a
Fund's investments in securities, focusing on such important factors, among
others, as valuation, liquidity and availability of information. This
investment practice could have the effect of increasing the level of illiquidity
in a Fund to the extent that qualified institutional buyers become for a time
uninterested in purchasing these restricted securities. As a result, a Fund
might not be able to sell these securities when its Sub-Adviser wishes to do so,
or might have to sell them at less than fair value. In addition, market
quotations are less readily available. Therefore, judgment at times may play a
greater role in valuing these securities than in the case of unrestricted
securities.
INVESTMENTS IN MONEY MARKET SECURITIES (APPLICABLE TO ALL FUNDS)
Any Fund may hold at least a portion of its assets in cash equivalents or
money market instruments. There is always the risk that the issuer of a money
market instrument may be unable to make payment upon maturity.
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The Money Market Fund may hold uninvested cash reserves pending investment
during temporary, defensive periods or if, in the opinion of the Sub-Adviser,
suitable securities are not available for investment. Securities in which the
Money Market Fund may invest may not earn as high a level of current income as
long-term, lower quality securities which, however, generally have less
liquidity, greater market risk and more fluctuation in market value.
HIGH YIELD SECURITIES (APPLICABLE TO THE SELECT EMERGING MARKETS FUND, SELECT
CAPITAL APPRECIATION FUND, SELECT GROWTH FUND, SELECT GROWTH AND INCOME FUND AND
SELECT INCOME FUND)
Corporate debt securities purchased by the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select Growth Fund, Select Growth and Income
Fund and Select Income Fund will be rated at the time of purchase B or better by
Moody's or S&P, or equivalently rated by another NRSRO, or unrated but believed
by the Sub-Adviser to be of comparable quality under the guidelines established
for the Funds. The Select Growth Fund and the Select Growth and Income Fund may
not invest more than 15% of their assets, the Select Income Fund may not invest
more than 25% of its assets and the Select Emerging Markets Fund and Select
Capital Appreciation Fund may not invest more than 35% of their assets at the
time of investment in securities rated below Baa by Moody's or BBB by S&P, or
equivalently rated by another NRSRO, or unrated but believed by the Sub-Adviser
to be of comparable quality. Securities rated B by Moody's or S&P (or
equivalently by another NRSRO) are below investment grade and are considered, on
balance, to be predominantly speculative with respect to capacity to pay
interest and repay principal and will generally involve more credit risk than
securities in the higher rating categories.
Periods of economic uncertainty and changes can be expected to result in
increased volatility of market prices of lower-rated securities, commonly known
as "high yield" securities or "junk bonds," and of the asset value of the Select
Emerging Markets Fund, Select Capital Appreciation Fund, Select Growth Fund,
Select Growth and Income Fund and Select Income Fund. Many issuers of high yield
corporate debt securities are leveraged substantially at times, which may impair
their ability to meet debt service obligations. Also, during an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress.
The lack of a liquid secondary market in certain lower-rated securities may
have an adverse impact on their market price and the ability of a Fund to
dispose of particular issues when necessary to meet its liquidity needs or in
response to a specific economic event such as a deterioration in the credit-
worthiness of the issuer. In addition, a less liquid market may interfere with
the ability of a Fund to value accurately high yield securities and,
consequently, value a Fund's assets. Furthermore, adverse publicity and
investor perceptions may decrease the value and liquidity of high yield
securities. It is reasonable to expect any recession to disrupt severely the
market for high yield fixed-income securities, have an adverse impact on the
value of such securities and adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon. The market prices of
lower-rated securities are generally less sensitive to interest rate changes
than higher-rated investments, but more sensitive to adverse economic or
political changes or individual developments specific to the issuer. Periods of
economic or political uncertainty and change can be expected to result in
volatility of prices of these securities.
The Funds also may invest in unrated debt securities of foreign and domestic
issuers. Unrated debt, while not necessarily of lower quality than rated
securities, may not have as broad a market. Sovereign debt of foreign
governments generally is rated by country. Because these ratings do not take
into account individual factors relevant to each issue and may not be updated
regularly, the Sub-Adviser may treat such securities as unrated debt. Unrated
debt securities and securities with different ratings from more than one agency
will be included in the 15%, 25% and 35% limits of the Funds as stated above,
unless such Fund's Sub-Adviser deems such securities to be the equivalent of
investment grade securities. See the Appendix for a description of the bond
ratings.
ASSET-BACKED SECURITIES (APPLICABLE TO GROWTH FUND, SELECT GROWTH AND INCOME
FUND, SELECT INCOME FUND, INVESTMENT GRADE INCOME FUND, GOVERNMENT BOND FUND AND
MONEY MARKET FUND)
The Funds may purchase asset-backed securities, which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, frequently a pool of assets similar to one
another. Assets generating such payments include instruments such as motor
vehicle installment purchase obligations, credit card receivables and home
equity loans. Payment of principal and interest may be guaranteed for certain
amounts and time periods by a letter of credit issued by a financial institution
unaffiliated with the issuer of the securities. The estimated life of an asset-
backed security varies with the prepayment experience of the underlying debt
instruments. The rate of such prepayments, and hence the life of the asset-
backed security, will be primarily a function of current market rates, although
other economic and demographic factors will be involved. Under certain interest
rate and prepayment rate scenarios, the Funds may fail to recoup fully their
investment in asset-backed securities. A Fund will not invest more than 20% of
its total assets in asset-backed securities.
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MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE SELECT INCOME FUND, INVESTMENT
GRADE INCOME FUND AND GOVERNMENT BOND FUND)
The Funds may invest in mortgage-backed securities which are debt obligations
secured by real estate loans and pools of loans on single family homes, multi-
family homes, mobile homes and, in some cases, commercial properties. The Funds
may acquire securities representing an interest in a pool of mortgage loans that
are issued or guaranteed by a U.S. government agency such as Ginnie Mae, Fannie
Mae and Freddie Mac.
Mortgage-backed securities are in most cases "pass-through" instruments
through which the holder receives a share of all interest and principal payments
from the mortgages underlying the certificate. Because the prepayment
characteristics of the underlying mortgages vary, it is not possible to predict
accurately the average life or realized yields of a particular issue of pass-
through certificates. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Funds reinvest the prepaid
amounts in securities, the yield of which reflects interest rates prevailing at
the time. Moreover, prepayment of mortgages that underlie securities purchased
at a premium could result in losses.
The Funds also may invest in multiple class securities issued by U.S.
government agencies and instrumentalities such as Fannie Mae, Freddie Mac and
Ginnie Mae, including guaranteed collateralized mortgage obligations ("CMOs")
and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or
participation certificates, when consistent with the Funds' investment
objective, policies and limitations. A CMO is a type of bond secured by an
underlying pool of mortgages or mortgage pass-through certificates that are
structured to direct payment on underlying collateral to different series or
classes of obligations. A REMIC is a CMO that qualifies for special tax
treatment under the Internal Revenue Code and invests in certain mortgages
principally secured by interests in real property and other permitted
investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple pass-
through securities. Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests or "residual" interests. The Funds currently do
not intend to purchase residual interests in REMICs. The REMIC Certificates
represent beneficial ownership interests in a REMIC trust, generally consisting
of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed mortgage
pass-through certificates. The obligations of Fannie Mae or Freddie Mac under
their respective guaranty of the REMIC Certificates are obligations solely of
Fannie Mae or Freddie Mac, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are available otherwise.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment
of interest and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("PCs"). PCs represent undivided interests in specified residential mortgages or
participations therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCs referred to as "Gold PCs."
Ginnie Mae REMIC Certificates guarantee the full and timely payment of
interest and principal on each class of securities (in accordance with the terms
of those classes). This Ginnie Mae guarantee is backed by the full faith and
credit of the United States.
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are
treated as U.S. government securities for purposes of investment policies. There
can be no assurance that the U.S. Government will continue to provide financial
support to Fannie Mae, Freddie Mac or Ginnie Mae in the future.
STRIPPED MORTGAGE-BACKED SECURITIES (APPLICABLE TO THE SELECT INCOME FUND,
INVESTMENT GRADE INCOME FUND AND GOVERNMENT BOND FUND)
The Funds may invest in stripped mortgage-backed securities ("SMBS"). SMBS are
derivative multiclass mortgage securities. SMBS may be issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose entities of the
foregoing.
SMBS usually are structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. One type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage
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assets, while the other class will receive most of the interest and the
remainder of the principal. In some cases, one class will receive all of the
interest (the interest-only or "IO" class) while the other class will receive
all of the principal (the principal-only or "PO" class). The yield to maturity
on a IO class is extremely sensitive to the rate of principal payments
(including prepayment on the related underlying mortgage assets), and a rapid
rate of principal payments may have a material, adverse effect on a portfolio
yield to maturity from these securities. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, the Funds may fail
to recoup fully their initial investment in these securities even if the
security is in one of the highest rating categories. Certain SMBS may be deemed
"illiquid" and subject to the Funds' limitations on investment in illiquid
securities. The market value of the PO class generally is unusually volatile in
response to changes in interest rates. The yields on a class of SMBS that
receives all or most of the interest from mortgage assets generally are higher
than prevailing market yields in other mortgage-backed securities because their
cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be recouped fully. The Sub-Adviser will seek to
manage these risks (and potential benefits) by investing in a variety of such
securities and by using certain hedging techniques.
HEDGING TECHNIQUES AND INVESTMENT PRACTICES (APPLICABLE TO THE SELECT EMERGING
MARKETS FUND, SELECT CAPITAL APPRECIATION FUND AND SELECT INTERNATIONAL EQUITY
FUND)
The Select Emerging Markets Fund, Select Capital Appreciation Fund and Select
International Equity Fund may employ certain strategies in order to manage
exchange rate risks. For example, the Funds may hedge some or all of their
investments denominated in a foreign currency against a decline in the value of
that currency. The Funds may enter into contracts to sell that foreign currency
for U.S. dollars (not exceeding the value of a Fund's assets denominated in or
exposed to that currency) or by participating in options on futures contracts
with respect to such currency ("position hedge"). The Funds also could hedge
that position by selling a second currency that is expected to perform similarly
to the currency in which portfolio investments are denominated for U.S. dollars
("proxy hedge"). The Funds also may enter into a forward contract to sell the
currency in which the security is denominated for a second currency that is
expected to perform better relative to the U.S. dollar if their Sub-Adviser
believes there is a reasonable degree of correlation between movements in the
two currencies ("cross-hedge"). As an operational policy, the Funds will not
commit more than 10% of their assets to the consummation of cross-hedge
contracts and either will cover currency hedging transactions with liquid
portfolio securities denominated in or whose value is tied to the applicable
currency or segregate liquid assets in the amount of such commitments. In
addition, when the Funds anticipate repurchasing securities denominated in a
particular currency, the Funds may enter into a forward contract to purchase
such currency in exchange for the dollar or another currency ("anticipatory
hedge").
These strategies minimize the effect of currency appreciation as well as
depreciation, but do not protect against a decline in the underlying value of
the hedged security. In addition, such strategies may reduce or eliminate the
opportunity to profit from increases in the value of the original currency and
may have an adverse impact on a Fund's performance if its Sub-Adviser's
projection of future exchange rates is inaccurate.
STAND-BY COMMITMENTS (APPLICABLE TO SELECT INCOME FUND, INVESTMENT GRADE INCOME
FUND, GOVERNMENT BOND FUND AND MONEY MARKET FUND)
Under a stand-by commitment, a dealer agrees to purchase from the Fund, at the
Fund's option, specified securities at a specified price. Stand-by commitments
are exercisable by the Fund at any time before the maturity of the underlying
security, and may be sold, transferred or assigned by the Fund only with respect
to the underlying instruments.
Although stand-by commitments are often available without the payment of any
direct or indirect consideration, if necessary or advisable, the Fund may pay
for a stand-by commitment either separately in cash or by paying a higher price
for securities which are acquired subject to the commitment.
Where the Fund pays any consideration directly or indirectly for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held by the Fund.
The Fund will enter into stand-by commitments only with banks and broker-
dealers which present minimal credit risks. In evaluating the creditworthiness
of the issuer of a stand-by commitment, the Sub-Adviser will review periodically
the issuer's assets, liabilities, contingent claims and other relevant financial
information.
The Fund will acquire stand-by commitments solely to facilitate liquidity and
does not intend to exercise its rights thereunder for trading purposes. Stand-
by commitments will be valued at zero in determining the Fund's net asset value.
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APPENDIX
Descriptions of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Service, a division of McGraw-Hill Companies, Inc. ("S&P")
commercial paper and bond ratings:
COMMERCIAL PAPER RATINGS
MOODY'S EMPLOYS THREE DESIGNATIONS, ALL JUDGED TO BE INVESTMENT GRADE, TO
INDICATE THE RELATIVE REPAYMENT CAPACITY OF RATED ISSUERS. THE TWO HIGHEST
DESIGNATIONS ARE AS FOLLOWS:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity normally will be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This normally
will be evidenced by many of the characteristics cited above, but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be subject more
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
S&P COMMERCIAL PAPER RATINGS ARE GRADED INTO SEVERAL CATEGORIES, RANGING FROM
"A-1" FOR THE HIGHEST QUALITY OBLIGATIONS TO "D" FOR THE LOWEST. THE TWO
HIGHEST RATING CATEGORIES ARE DESCRIBED AS FOLLOWS:
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MUNICIPAL OBLIGATIONS
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in the short-term borrowing, while various factors of the first
importance in long-term borrowing risk are of lesser importance in the long run.
Symbols used will be as follows:
MIG-1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG-2 - This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
A short-term rating also may be assigned on an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event that demand is not met.
VMIG-1 and VMIG-2 ratings carry the same definitions as MIG-1 and MIG-2,
respectively.
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DESCRIPTION OF MOODY'S BOND RATINGS
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to as
"gilt edge". Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are known generally
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present that suggest a susceptibility to impairment some time in the
future.
Baa - Bonds that are rated Baa are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Those bonds within the Aa, A, Baa, Ba, and B categories that Moody's believes
possess the strongest credit attributes within those categories are designated
by the symbols Aa1, A1, Baa1, Ba1, and B1.
DESCRIPTION OF S&P'S DEBT RATINGS
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rates categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC, or C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation
and C the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
Plus (+) or (-): The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
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PART B:
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6
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ALLMERICA INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS. IT
SHOULD BE READ IN CONJUNCTION WITH THE APPLICABLE PROSPECTUS OF ALLMERICA
INVESTMENT TRUST DATED MAY 1, 1998. THE APPLICABLE PROSPECTUS MAY BE OBTAINED
FROM ALLMERICA INVESTMENT TRUST, 440 LINCOLN STREET, WORCESTER, MASSACHUSETTS
01653, (508) 855-1000.
DATED: MAY 1, 1998
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TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION............................................................................... 3
INVESTMENT OBJECTIVES AND POLICIES .............................................................. 3
INVESTMENT RESTRICTIONS........................................................................... 5
INVESTMENT TECHNIQUES............................................................................. 6
PORTFOLIO TURNOVER ............................................................................... 15
PERFORMANCE....................................................................................... 16
MANAGEMENT OF ALLMERICA INVESTMENT TRUST ......................................................... 19
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES ................................................ 21
INVESTMENT MANAGEMENT AND OTHER SERVICES ......................................................... 21
BROKERAGE ALLOCATION.............................................................................. 25
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED ..................................... 27
ORGANIZATION OF THE TRUST ....................................................................... 28
FINANCIAL STATEMENTS.............................................................................. 29
</TABLE>
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GENERAL INFORMATION
Allmerica Investment Trust (the "Trust") is an open-end, diversified series
investment company designed to provide the underlying investment vehicle for
various separate investment accounts established by First Allmerica Financial
Life Insurance Company ("First Allmerica") or Allmerica Financial Life Insurance
and Annuity Company ("Allmerica Financial Life"), an indirect, wholly-owned
subsidiary of First Allmerica. Shares of the Trust are not offered to the
general public but solely to such separate investment accounts ("Separate
Accounts").
The Trust is a Massachusetts business trust established on October 11,
1984. It currently is comprised of fourteen different portfolios: Select
Emerging Markets Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Value Opportunity Fund (formerly known as Small-Mid
Cap Value Fund), Select International Equity Fund, Select Growth Fund, Select
Strategic Growth Fund, Growth Fund, Equity Index Fund, Select Growth and Income
Fund, Select Income Fund, Investment Grade Income Fund, Government Bond Fund and
Money Market Fund (each, a "Fund"). Not all of the Funds are offered to each
Separate Account. The Trustees may create additional funds in the future.
INVESTMENT OBJECTIVES AND POLICIES
SELECT EMERGING MARKETS FUND seeks long-term growth of capital by investing in
the world's emerging markets.
SELECT AGGRESSIVE GROWTH FUND seeks above-average capital appreciation by
investing primarily in common stocks of companies which are believed to have
significant potential for capital appreciation.
SELECT CAPITAL APPRECIATION FUND seeks long-term growth of capital in a manner
consistent with the preservation of capital. Realization of income is not a
significant investment consideration and any income realized on the Fund's
investments will be incidental to its primary objective.
SELECT VALUE OPPORTUNITY FUND seeks long-term growth of capital by investing
primarily in a diversified portfolio of common stocks of small and mid-size
companies, whose securities at the time of purchase are considered by the
Sub-Adviser to be undervalued.
SELECT INTERNATIONAL EQUITY FUND seeks maximum long-term total return (capital
appreciation and income) primarily by investing in common stocks of established
non-U.S.companies.
SELECT GROWTH FUND seeks to achieve long-term growth of capital by investing in
a diversified portfolio consisting primarily of common stocks selected on the
basis of their long-term growth potential.
SELECT STRATEGIC GROWTH FUND seeks long-term growth of capital by investing
primarily in common stocks of established companies.
GROWTH FUND seeks to achieve long-term growth of capital through investments
primarily in common stocks and securities convertible into common stocks that
are believed to represent significant underlying value in relation to current
market prices and which are experiencing positive earnings revisions.
Realization of current income, if any, is incidental to this objective.
EQUITY INDEX FUND seeks to achieve investment results that correspond to the
aggregate price and yield performance of a representative selection of common
stocks that are publicly traded in the United States.
SELECT GROWTH AND INCOME FUND seeks a combination of long-term growth of capital
and current income. The Fund will invest primarily in dividend-paying common
stocks and securities convertible into common stocks.
SELECT INCOME FUND seeks a high level of current income. The Fund will invest
primarily in investment grade, fixed-income securities.
INVESTMENT GRADE INCOME FUND seeks as high a level of total return, which
includes capital appreciation as well as income, as is consistent with prudent
investment management.
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GOVERNMENT BOND FUND seeks high income, preservation of capital and maintenance
of liquidity primarily through investments in debt instruments issued or
guaranteed by the U.S. Government or its agencies or instrumentalities ("U.S.
Government securities") and in related options, futures and repurchase
agreements. Under normal conditions, at least 80% of the Fund's assets will be
invested in U.S. Government securities.
MONEY MARKET FUND seeks to obtain maximum current income consistent with
preservation of capital and liquidity.
A Fund's investment objective and its policies as listed above are not
fundamental and may be changed without the approval of a majority in interest of
the shareholders of that Fund. There is no assurance that a Fund's investment
objective will be realized.
For a description of the types of investments each Fund may acquire and
certain investment techniques it may utilize, see "Investment Objectives and
Policies" in the appropriate Prospectus for the underlying Funds of the
applicable Separate Account.
MORE INFORMATION ABOUT THE EQUITY INDEX FUND
The Equity Index Fund will attempt to replicate the investment results of
the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") while
minimizing transactional costs and other expenses. Stocks in the S&P 500 are
ranked in accordance with their statistical weighting from highest to lowest.
The method used to select investments for the Equity Index Fund involves
investing in common stocks in approximately the order of their weighting in the
S&P 500, beginning with those having the highest weighting.
The Equity Index Fund will invest only in those stocks, and in such
amounts, as its investment adviser determines to be necessary or appropriate for
the Equity Index Fund to approximate the S&P 500. As the size of the Equity
Index Fund increases, the Equity Index Fund may purchase a larger number of
stocks included in the S&P 500, and the percentage of its assets invested in
most stocks included in the S&P 500 will approach the percentage that each such
stock represents in the S&P 500. However, there is no minimum or maximum number
of stocks included in the S&P 500 which the Equity Index Fund will hold. Under
normal circumstances, it is expected that the Equity Index Fund will hold
approximately 500 different stocks included in the S&P 500. The Equity Index
Fund may compensate for the omission of a stock that is included in the S&P 500,
or for purchasing stocks in other than the same proportions that they are
represented in the S&P 500, by purchasing stocks which are believed to have
characteristics which correspond to those of the omitted stocks.
The Equity Index Fund may invest in short-term debt securities to maintain
liquidity or pending investment in stocks. Such investments will not be made for
defensive purposes or in anticipation of a general decline in the market price
of stocks in which the Equity Index Fund invests; investors in the Equity Index
Fund bear the risk of general declines in the stock markets. The Equity Index
Fund also may take advantage of tender offers, resulting in higher returns than
are reflected in the performance of the S&P 500. In addition, the Equity Index
Fund may hold warrants, preferred stocks and debt securities, whether or not
convertible into common stock or with rights attached, if acquired as a result
of in-kind dividend distributions, mergers, acquisitions or other corporate
activity involving the common stocks held by the Equity Index Fund. Such
investment transactions and securities holdings may result in positive or
negative tracking error.
Although it does not intend presently to do so, the Equity Index Fund at
some time in the future may purchase or sell futures contracts on stocks indexes
for hedging purposes and in order to achieve a fully invested position while
maintaining sufficient liquidity to meet possible net redemptions. The
effectiveness of a strategy of investing in stock index futures contracts will
depend upon the continued availability of futures contracts based on the S&P 500
or which tend to move together with stocks included in the S&P 500. The Equity
Index Fund would not enter into futures contacts on stock indexes for
speculative purposes.
Standard & Poor's Corporation is not in any way affiliated with the Equity
Index Fund or the Trust. "Standard & Poor's," "Standard & Poor's 500," and "500"
are trademarks of Standard & Poor's Corporation.
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MORE INFORMATION ABOUT THE GOVERNMENT BOND FUND
The Government Bond Fund will invest in obligations issued or guaranteed by
the U.S. Government, its agencies and instrumentalities, and options and futures
thereon, as described in the Prospectus. The securities in which the Government
Bond Fund may invest include, but are not limited to, U.S. Treasury bills, notes
and bonds and obligations of the following: Banks for Cooperatives, the
Commodity Credit Corporation, the Federal Deposit Insurance Corporation, Federal
Farm Credit Banks, the Federal Financing Bank, Federal National Mortgage
Association, the General Insurance Fund, Government National Mortgage
Association, Government Services Administration (GSA Public Building Trust
Participation Certificates), the Production Credit Association, the Student Loan
Marketing Association, the Tennessee Valley Authority and the U.S. Postal
Service.
The Government Bond Fund may invest in mortgage-backed securities
(including pass-through securities) and participation certificates) of the
Government National Mortgage Association ("Ginnie Mae"), the Federal Home Loan
Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage
Association ("Fannie Mae").
Ginnie Mae certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans. The mortgage loans are issued by lenders
such as mortgage bankers, commercial banks and savings and loan associations,
and are either insured by the Federal Housing Administration or guaranteed by
the Veterans Administration. After approval of the pool by Ginnie Mae,
certificates in the pool are offered to investors by securities dealers. Once
the pool has been approved by Ginnie Mae, the timely payment of interest and
principal on the certificates is guaranteed by the full faith and credit of the
U.S. Government. The certificates are "pass through" securities because a pro
rata share of regular interest and principal payments, as well as unscheduled
early prepayments, on the underlying mortgage pool is passed through monthly to
the Fund.
Freddie Mac, a corporate instrumentality of the U.S. Government created by
Congress to increase the availability of mortgage credit for residential
housing, issues participation certificates representing undivided interests in
Freddie Mac's mortgage portfolio. While Freddie Mac guarantees the timely
payment of interest and ultimate collection of the principal of its
participation certificates, the participation certificates are not backed by the
full faith and credit of the U.S. Government. The "pass-through" characteristics
of Freddie Mac participation certificates are similar to Ginnie Mae
certificates, but Freddie Mac certificates differ from Ginnie Mae certificates
in that Freddie Mac mortgages are primarily conventional residential mortgages
rather than mortgages issued or guaranteed by a federal agency or
instrumentality.
Fannie Mae is a federally chartered corporation owned by private
stockholders. Fannie Mae purchases both conventional and federally insured or
guaranteed residential mortgages form various entities, and packages pools of
such mortgages in the form of pass-through certificates. Fannie Mae guarantees
the timely payment of principal and interest. Fannie Mae is authorized to borrow
from the U.S. Treasury to meet its obligations, but the certificates are not
backed by the full faith and credit of the U.S. Government.
The effective maturity of a mortgage-backed security may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages, which may affect their effective yield. When the Government Bond Fund
receives the monthly "pass-through" payments (which may include unscheduled
prepayments of principal) it may be able to invest the payments only at a lower
rate of interest. During periods of declining interest rates, such securities
therefore may be less effective as a means of "locking in" attractive long-term
interest rates and may have less potential for appreciation than conventional
bonds with comparable stated maturities.
INVESTMENT RESTRICTIONS
The following is a description of certain restrictions on investments of
the Funds (in addition to those described in the Prospectus). The investment
restrictions numbered 1 through 7 are fundamental and may not be changed without
the approval of a majority in interest of the shareholders of that Fund. The
other investment restrictions are not deemed fundamental and may be changed by
the Trustees. The following investment restrictions apply to each Fund, except
as noted:
1. The Fund will not issue "senior securities" as defined in Section 18(g)
of the Investment Company Act of 1940.
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2. The Fund will not borrow money, except in accordance with the
provisions of the 1940 Act and 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 borrowing is made. In general, a borrowing shall be regarded as being
for temporary purposes if it is repaid within 60 days and is not extended or
renewed.
3. The Fund will not act as an underwriter except to the extent that, in
connection with the disposition of portfolio securities, it may be deemed to be
an underwriter under certain federal securities laws.
4. The Fund will not buy or sell real estate or interest in real estate,
although it may purchase and sell (a) securities which are secured by real
estate and (b) securities of companies which invest or deal in real estate.
5. The Fund will not engage in the purchase and sale of physical
commodities or contracts relating to physical commodities.
6. The Fund may make loans to other persons only through repurchase
agreements and securities lending. For purposes of this paragraph, the purchase
of an issue of publicly distributed bonds, debentures, or other debt securities,
whether or not the purchase was made upon the original issue of the securities,
is not to be considered the making of a loan by the Fund.
7. The Fund will not purchase securities on margin but may obtain such
short-term credits as are necessary for clearance transactions, and (except for
the Money Market Fund) may make margin payments in connection with financial
futures (including securities index futures) contracts, and options on such
future contracts and in the case of the Select Capital Appreciation Fund,
futures contracts on foreign currencies and related options. The Fund will not
participate on a joint or joint and several basis in any trading account in
securities or effect a short sale of securities.
8. The Fund does not intend to invest in companies for the purpose of
exercising control or management.
9. The Fund may invest in the securities of one or more other investment
companies. No such investment shall be made if as a result thereof the Fund
would own more than 3% of the total outstanding voting stock of any one
investment company, or more than 5% of the Fund's assets would be invested in
any one investment company, or more than a total of 10% of the Fund's assets
would be invested in investment company securities. Purchase of such securities
will be made only in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission or as part of a merger, consolidation, or plan of reorganization.
10. The Fund intends to purchase securities for investment and not to
purchase and sell them for trading purposes, except that the Select Capital
Appreciation Fund and the Government Bond Fund may engage in short term trading
of U.S. Government securities.
11. The Fund (except the Money Market Fund) may engage in transactions in
financial futures contracts and related options. The Money Market Fund will not
engage in transactions in financial futures or related options.
INVESTMENT TECHNIQUES
In managing its portfolios of investments, the Trust may make use of the
following investment techniques:
SECURITIES LENDING
Each Fund may loan its portfolio securities to broker-dealers pursuant to
agreements requiring that the loans be continuously secured by cash, cash
equivalents or securities issued or guaranteed by the United States government
or its agencies, or any combination of cash, cash equivalents and such
securities as collateral equal at all times to at least the market value of the
securities loaned. Such loans are not made if, as a result, the aggregate of all
outstanding loans would exceed 33% of the value of the Fund's total assets
taken at current value. The Fund continues to receive interest or dividends on
the securities loaned, and simultaneously earns interest on the investment of
the loan collateral in U.S. Treasury securities, certificates of deposit or
other high-grade, short-term obligations or interest-bearing cash equivalents or
receives a fee from the borrower. Although voting rights, or rights to consent,
attendant to securities lent pass to the borrower, such loans may be called at
any time and may be called so that the securities may be voted by the Fund if a
material event affecting the investment is to occur. There may be risks of delay
in recovery of the securities
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or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to firms deemed by the Fund's
Sub-Adviser to be of good standing, and when, in the judgment of the Fund's Sub-
Adviser, the consideration which can be earned currently from such securities
loans justifies the attendant risk.
FOREIGN SECURITIES
Each Fund except the Government Bond Fund may purchase foreign securities.
The Money Market Fund may invest only in U.S. dollar denominated foreign
securities. Securities of foreign issuers, particularly non-governmental
issuers, involve risks which are not associated ordinarily with investing in
domestic issuers. These risks include changes in currency exchange rates and
currency exchange control regulations. In addition, investments in foreign
countries could be affected by other factors generally not thought to be present
in the United States, including the unavailability of financial information or
the difficulty of interpreting financial information prepared under foreign
accounting standards, less liquidity and more volatility in foreign markets, the
possibility of expropriation, the possibility of heavy taxation, the impact of
political, social or diplomatic developments, limitations on the removal of
funds or other assets of a Fund, difficulties in evoking legal process abroad
and enforcing contractual obligations, and the difficulty of assessing economic
trends in foreign countries.
FORWARD COMMITMENTS
The Select Capital Appreciation Fund, Select Income Fund, Investment Grade
Income Fund, Government Bond Fund and Money Market Fund may enter into contracts
to purchase securities for a fixed price at a specified future date beyond
customary settlement time ("forward commitments"). If the Funds do so, they will
maintain cash or other liquid obligations having a value in an amount at all
times sufficient to meet the purchase price. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. Although the Funds generally will enter into forward
commitments with the intention of acquiring securities for their portfolio, they
may dispose of a commitment prior to settlement if their Sub-Adviser deems it
appropriate to do so. The Funds may realize short-term gains or losses upon the
sale of forward commitments. The Sub-Adviser will monitor the creditworthiness
of the parties to such forward commitments.
WHEN-ISSUED SECURITIES
Each Fund from time to time may purchase securities on a "when-issued"
basis. Debt securities and municipal obligations often are issued on this basis.
The yield of such securities is fixed at the time a commitment to purchase is
made, with actual payment and delivery of the security generally taking place 15
to 45 days later. During the period between purchase and settlement, typically
no payment is made by a Fund and no interest accrues to the Fund. The market
value of when-issued securities may be more or less than the purchase price
payable at settlement date. The Fund will establish a segregated account with
the Custodian in which it will maintain cash or liquid securities at least equal
to commitments for when-issued securities.
REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements. Under a repurchase
agreement, a Fund may purchase an obligation of or guaranteed by the United
States Government, its agents or instrumentalities, with an agreement that the
seller will repurchase the obligation at an agreed upon price and date. The
repurchase price reflects an agreed-upon interest rate which is unrelated to the
coupon rate on the purchased obligation. Repurchase agreements usually are for
short periods, such as under one week, but may be as long as thirty days. No
repurchase agreement will be effected if, as a result, more than 30% of a Fund's
total assets taken at current value will be invested in repurchase agreements.
No more than 15% (10% for the Money Market Fund) of a Fund's total assets taken
at current value will be invested in repurchase agreements extending for more
than seven days and in other securities which are not readily marketable.
If a seller defaults upon the obligation to repurchase, the Funds may incur
a loss if the value of the purchased obligation (collateral) declines, and may
incur disposition costs in liquidating the collateral. If bankruptcy proceedings
are commenced with respect to a seller, realization upon the collateral by the
Funds may be delayed or limited.
Prior to entering into a repurchase agreement, the Fund's Sub-Adviser
evaluates the creditworthiness of entities with which the Fund proposes to enter
into the repurchase agreement. The Trustees have established guidelines and
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standards of review for the evaluation of creditworthiness by the Funds'
Sub-Advisers and monitor such Sub-Advisers' actions with respect to repurchase
transactions.
The Select Capital Appreciation Fund also may enter into reverse repurchase
agreements. In a reverse repurchase agreement, a fund sells a portfolio security
to another party, such as a bank or broker-dealer, in return for cash and agrees
to repurchase the instrument at a particular price and at a future date. While a
reverse repurchase agreement is outstanding, the Fund will maintain cash and
appropriate liquid assets in a segregated custodial account to cover its
obligation under the reverse repurchase agreement. The Select Capital
Appreciation Fund will enter into reverse repurchase agreements only with
parties that its Sub-Adviser deems creditworthy.
WRITING COVERED OPTIONS
Each Fund other than the Money Market Fund may write call options and put
options on securities which the Fund owns as its Sub-Adviser shall determine to
be appropriate and to the extent permitted by applicable law. A call option
gives the purchaser of the option the right to buy and a writer the obligation
to sell the underlying security at the exercise price at any time prior to the
expiration of the option, regardless of the market price of the security during
the option period. A premium is paid to the writer as the consideration for
undertaking the obligations under the option contract. The writer forgoes the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price except insofar as the premium represents such
a profit.
As the writer of a call option, a Fund receives a premium for undertaking
the obligation to sell the underlying security at a fixed price during the
option period if the option is exercised. So long as the Fund remains obligated
as the writer of a call, it forgoes the opportunity to profit from increases in
the market price of the underlying security above the exercise price of the
option, except insofar as the premium represents such a profit, and retains the
risk of loss should the value of the security decline. The Fund also may enter
into "closing purchase transactions" in order to terminate its obligation as the
writer of a call option prior to the expiration of the option. There is no
assurance that a Fund will be able to effect such transactions at any particular
time or at any acceptable price.
The writer of a put option is obligated to purchase specified securities
from the option holder at a specified price at any time before the expiration
date of the option. The purpose of writing such options is to generate
additional income for the Fund, but the Fund accepts the risk that it will be
required to purchase the underlying securities at a price in excess of the
securities' market value at the time of purchase.
Option transactions may increase a Fund's transaction costs and may
increase the portfolio turnover rate, depending on how many options written by
the Fund are exercised in a particular year.
PURCHASING OPTIONS
Each Fund other than the Money Market Fund may purchase put and call
options to the extent permitted by applicable law. A Fund will not purchase put
or call options if after such purchase more than 5% of its net assets, as
measured by the aggregate of the premiums paid for all such options held by the
Fund, would be so invested. A Fund would also be able to enter into closing sale
transactions in order to realize gains or minimize losses on exchange traded
options purchased by the Fund.
A Fund normally would purchase call options in anticipation of an increase
in the market value of securities. The purchase of a call option entitles the
Fund, in return for the premium paid, to purchase specified securities at a
specified price during the option period. If the value of such securities
exceeded the sum of the exercise price, the premium paid and transaction costs
during the option period, the Fund would ordinarily realize a gain, if not, the
Fund would realize a loss.
A Fund normally would purchase put options in anticipation of a decline in
the market value of securities in its portfolio ("protective puts") or
securities of the type in which it may invest. The purchase of a put option
would entitle the Fund, in exchange for the premium paid, to sell specified
securities at a specified price during the option period. Gains or losses on the
purchase of put options would tend to be offset by countervailing changes in the
value of underlying portfolio securities. A Fund ordinarily would realize a gain
if, during the option period, the value of the underlying securities decreased
below the exercise price sufficiently to cover the premium and transaction
costs; otherwise, the Fund would realize a loss on the purchase of the put
option.
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There is no assurance that a liquid secondary market on an options exchange
will exist for a particular option or at a particular time. The hours of trading
for options on options exchanges may not conform to the hours during which the
underlying securities are traded. To the extent that the option markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying securities markets that cannot be
reflected in the option markets. In addition, the purchase of options is a
highly specialized activity which depends in part on the Sub-Adviser's ability
to predict future price fluctuations and the degree of correlation between the
options and securities markets. A Fund pays brokerage commission or spread in
connection with its options transactions as well as for purchases and sales of
the underlying securities.
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS
Each Fund (other than the Money Market Fund) may invest in transactions in
financial futures contracts and related options for hedging purposes. In
addition, the Select Emerging Markets Fund, Select Capital Appreciation Fund,
Select International Equity Fund and Select Income Fund may utilize futures
contracts on foreign currencies and related options. Through certain hedging
activities involving such futures contracts and related options, it is possible
to reduce the effects of fluctuations in interest rates and the market prices of
securities which may be quite volatile. Hedging is a means of transferring a
risk which an investor does not desire to assume during an uncertain interest
rate or securities market environment to another investor who is willing to
assume that risk.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund may buy and write options on
foreign currencies in a manner similar to that in which futures or forward
contracts on foreign currencies will be utilized. For example, a decline in the
U.S. dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Select Emerging Markets
Fund, Select Capital Appreciation Fund, Select International Equity Fund and
Select Income Fund may buy put options on the foreign currency. If the value of
the currency declines, the Funds will have the right to sell such currency for a
fixed amount in U.S. dollars and will offset, in whole or in part, the adverse
effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select International Equity Fund and Select Income Fund may
buy call options thereon. The purchase of such options could offset, at least
partially, the effects of the adverse movements in exchange rates. As in the
case of other types of options, however, the benefit to the Funds from purchases
of foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, if currency exchange rates do not move
in the direction or to the extent desired, the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select International Equity Fund and Select
Income Fund could sustain losses on transactions in foreign currency options
that would require such Funds to forgo a portion or all of the benefits of
advantageous changes in those rates.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund also may write options on
foreign currencies. For example, to hedge against a potential decline in the
U.S. dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates, the Funds could write a call option on the
relevant currency instead of purchasing a put option. If the expected decline
occurs, the option will most likely not be exercised and the diminution in value
of portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, the Select
Emerging Markets Fund, Select Capital Appreciation Fund, Select International
Equity Fund and Select Income Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will expire unexercised
and allow the Funds to hedge the increased cost up to the amount of the premium.
As in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium. If exchange rates do not move in the expected direction, the option may
be exercised and the Funds would be required to buy or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select International Equity Fund and Select
Income Fund also may
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lose all or a portion of the benefits which might otherwise have been obtained
from favorable movements in exchange rates.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund may write covered call options
on foreign currencies. A call option written on a foreign currency by the Funds
is "covered" if the Funds own the underlying foreign currency covered by the
call or have an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by the Fund's custodian) upon conversion or exchange of
other foreign currency held in their portfolios. A call option also is covered
if the Funds have a call on the same foreign currency and in the same principal
amount as the call written if the exercise price of the call held (i) is equal
to or less than the exercise price of the call written or (ii) is greater than
the exercise price of the call written, if the difference is maintained by the
Funds in cash or other liquid assets in a segregated account with the Funds'
custodian.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund also may write call options on
foreign currencies for cross-hedging purposes that would not be deemed to be
covered. A call option on a foreign currency is for cross-hedging purposes if it
is not covered but is designed to provide a hedge against a decline due to an
adverse change in the exchange rate in the U.S. dollar value of a security that
the Funds own or have the right to acquire and that is denominated in the
currency underlying the option. In such circumstances, the Select Emerging
Markets Fund, Select Capital Appreciation Fund, Select International Equity Fund
and Select Income Fund collateralize the option by segregating cash or other
liquid assets in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily. The Select Emerging Markets
Fund, Select Capital Appreciation Fund, Select International Equity Fund and
Select Income Fund may invest without limitation in foreign currency options.
GENERAL INFORMATION
A futures contract on a security is a standardized agreement under which
each party is entitled and obligated either to make or to accept delivery, at a
particular time, of securities having a specified face value and rate of return
on foreign currencies. Currently, futures contracts are available on debt and
equity securities and on certain foreign currencies.
Futures contracts are traded on exchanges that are licensed and regulated
by the Commodity Futures Trading Commission ("CFTC"). A futures contract on an
individual security may be deemed to be a commodities contract. A Fund engaging
in a futures transaction initially will be required to deposit and maintain with
its Custodian, in the name of its brokers, an amount of cash or U.S. Treasury
bills equal to a small percentage (generally less than 5%) of the contract
amount to guarantee performance of its obligations. This amount is known as
"initial margin." Margin in a futures transaction is different from margin in a
securities transaction, in that financial futures initial margin does not
involve the borrowing of funds to finance the transactions. Unlike securities
margin, initial margin in a futures transaction is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
fund upon termination of the financial future, assuming all contractual
obligations have been satisfied. As the price of the underlying security
fluctuates, making the position in the financial futures more or less valuable,
subsequent payments called "maintenance margin" or "variation margin" are made
to and from the broker on a daily basis. This process is called "marking to
market."
The purchase and sale of financial futures is for the purpose of hedging
against changes in securities prices or interest rates. Hedging transaction
serve as a substitute for transactions in the underlying securities and can
effectively reduce investment risk. When prices are expected to rise, a fund,
through the purchase of futures contracts, can attempt to secure better prices
than might be later available in the stock market when it anticipates effecting
purchases.
Similarly, when interest rates are expected to increase, a fund can seek to
offset a decline in the value of its debt securities through the sale of futures
contracts.
OPTIONS ON FINANCIAL FUTURES
The Funds other than the Money Market Fund may use options on futures
contracts in connection with hedging strategies. The purchase of put options on
futures contracts is a means of hedging the Fund's portfolio against the risk of
declining prices. The purchase of a call option on a futures contract represents
a means of hedging against a market
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advance when a Fund is not invested fully. Depending on the pricing of the
option compared with either the futures contract upon which it is based or upon
the price of the underlying securities, the option may or may not be less risky
than ownership of the futures contract or underlying securities.
The writing of a call option on a futures contract may constitute a partial
hedge against declining prices of the securities or currencies which are
deliverable upon exercise of the futures contract. If the futures price at
expiration is below the exercise price, a Fund will retain the full amount of
the option premium, which provides a partial hedge against any decline that may
have occurred in the Fund's holding of securities or currencies.
The writing of a put option on a futures contract is analogous to the
purchase of a futures contract. If the option is exercised, the net cost to the
Fund of the securities or currencies acquired by it will be reduced by the
amount of the option premium received. If, however, market prices have declined,
the Fund's purchase price upon exercise may be greater than the price at which
the securities or currencies might be purchased in the cash market.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND RELATED OPTIONS
A Fund generally will engage in transactions in futures contracts or
related options only as a hedge against changes in the values of securities or
currencies held in a Fund's portfolio or which it intends to purchase, or to a
limited extent to engage in non-hedging strategies. A Fund may not purchase or
sell a futures contract for non-hedging purposes if immediately thereafter the
sum of the amount of margin deposits and amount of variation margins paid from
time to time on the Fund's existing futures and related options positions and
premiums paid for related options would exceed 5% of the market value of the
Fund's total assets. The reasons a Fund may engage in non-hedging strategies
include: to seek to enhance return and to adjust efficiently the Fund's overall
exposure to certain markets. In instances involving the purchase of futures
contracts or call options thereon or the writing of put options thereon by a
Fund, an amount of cash and cash equivalents, equal to the market value of the
futures contracts and related options (less any related margin deposits), will
be deposited in a segregated account with its custodian in the name of the
broker to collateralize the position, and thereby insure that the use of such
futures contracts and options is unleveraged.
In implementing a Fund's overall risk management strategy, it is possible
that its Sub-Adviser will choose not to engage in any futures transactions or
that appropriate futures contracts or related options may not be available. A
Fund will engage in futures transactions only for appropriate hedging, risk
management or non-hedging purposes. A Fund will not enter into any particular
futures transaction unless its Sub-Adviser determines that the particular
transaction demonstrates an appropriate correlation with the Fund's investment
objectives and portfolio securities.
RISK OF TRANSACTIONS IN FUTURES
The sale and purchase of futures contracts is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. There are several risks in
connection with the use of financial futures by a Fund as a hedging device.
Successful use of financial futures by a Fund is subject to its
Sub-Adviser's ability to predict movements in the direction of interest rates or
securities prices and to assess other factors affecting markets for securities.
For example, a Fund may hedge against the possibility of an increase in interest
rates which would affect adversely the prices of debt securities held in its
portfolio. If prices of the debt securities increase instead, the Fund may lose
part or all of the benefit of the increased value of the hedged debt securities
because it may have offsetting losses in the futures positions. In addition, in
this situation, if the Fund has insufficient cash, it may have to sell
securities to meet the daily maintenance margin requirements. These sales may
be, but will not necessarily be, at increased prices to reflect the rising
market. The Fund may have to sell securities at a time when it may be
disadvantageous to do so.
Another risk arises because of the imperfect correlation between movements
in the price of the financial future and movements in the price of the
securities or currencies which are the subject of the hedge. First of all, the
hours of trading for futures contracts may not conform to the hours during which
the underlying assets are traded. To the extent that the futures markets close
before the markets for the underlying assets, significant price and rate
movements can take place in the underlying asset's market that cannot be
reflected in the futures markets. But even during identical trading hours, the
price of the future may move more than or less than the price of the assets
being hedged. While a hedge will not be fully effective if the price of the
future moves less that the price of the hedged assets, if the price of the
hedged assets has moved in an unfavorable direction, the Fund would be in a
better position than if it had not
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hedged at all. On the other hand, if the price of the hedged assets has moved in
a favorable direction, this advantage may be offset partially by the price
movement of the futures contract. If the price of the futures moves more than
the price of the asset, the Fund will experience either a loss or a gain on the
futures contract which will not be completely offset by movements in the prices
of the assets which are the subject of the hedge.
In addition to the possibility that there may be an imperfect correlation
at all, between movements in the futures and the portion of the portfolio being
hedged, the market prices of the futures may be affected by certain other
factors. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures through offsetting
transaction, which could distort the normal relationship between securities or
currencies and futures markets. Secondly, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price or currency
distortions. Due to the possibility of price distortion in the futures market
and because of the imperfect correlation between movements in the prices of
securities or currencies and movements in the prices of futures, a correct
forecast of interest rate trends or market price movements by the Sub-Adviser
still may not result in a successful hedging transaction over a short time
frame.
Positions in futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Funds intend to purchase or sell futures only on exchanges or boards of trade
where there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange or board of trade will exist for any
particular contract or at any particular time. Thus, it may not be possible to
close a futures position, and, in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of maintenance margin.
However, in the event futures have been used to hedge portfolio positions, such
underlying assets will not be sold until the futures can be terminated. In such
circumstances, an increase in the price of the underlying assets, if any, may
offset partially or completely losses on the future.
RISKS OF TRANSACTIONS IN OPTIONS ON FUTURES
There are several special risks relating to options on futures. First, the
ability to establish and close out positions in options is subject to the
maintenance of a liquid secondary market. A Fund will not purchase options on
futures on any exchange or board of trade unless, in the opinion of its
Sub-Adviser, the market for such options is developed sufficiently so that the
risks in connection with options on futures transactions are not greater than
the risks in connection with futures transactions. Compared with the purchase or
sale of futures, the purchase of call or put options on futures involves less
potential risk to the Fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on futures would result
in a loss to the Fund when the purchase or sale of a future would not, such as
when there is no movement in the price of the underlying securities. The writing
of an option on a futures contract involves risks similar to those risks
relating to the sale of futures contracts, as described above under "Risks of
Transactions in Futures."
An option position may be closed out only on an exchange or board of trade
which provides a secondary market for an option of the same series. Although a
Fund generally will purchase only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market
will exist for any particular option or at any particular time. It might not be
possible to effect closing transactions in particular options, with the result
that the Fund would have to exercise its options in order to realize any profit
and would incur transaction costs upon the sale of financial futures pursuant to
the exercise of put options.
Because of the risks and the transaction costs associated with hedging
activities, there can be no assurance that a Fund's portfolio will perform as
well as or better than a comparable fund that does not invest in futures
contracts or related options.
FORWARD CONTRACTS ON FOREIGN CURRENCIES
A forward contract is an agreement between two parties in which one party
is obligated to deliver a stated amount of a stated asset at a specified time in
the future and the other party is obligated to pay a specified invoice amount
for the assets at the time of delivery. The Select Emerging Markets Fund, Select
Capital Appreciation Fund, Select International Equity Fund and Select Income
Fund may enter into forward contracts to purchase and sell government
securities, foreign currencies or other financial instruments. Forward contracts
generally are traded in an interbank
12
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Allmerica Investment Trust
<PAGE>
market conducted directly between traders (usually large commercial banks) and
their customers. Unlike futures contracts which are standardized contracts,
forward contracts can be drawn specifically to meet the needs of the parties
that enter into them. The parties to a forward contract may agree to offset or
terminate the contract before its maturity, or may hold the contract to maturity
and complete the contemplated exchange. The following discussion summarizes the
Select Emerging Markets Fund's, Select Capital Appreciation Fund's, Select
International Equity Fund's and Select Income Fund's principal uses of forward
currency exchange contracts ("forward currency contracts"). The Funds may enter
into a forward currency contract with the stated contract value of up to the
value of the Funds' assets. A forward currency contract is an obligation to buy
or sell an amount of a specified currency for an agreed price (which may be in
U.S. dollars or a foreign currency). The Select Emerging Markets Fund, Select
Capital Appreciation Fund, Select International Equity Fund and Select Income
Fund will exchange foreign currencies for U.S. dollars and for other foreign
currencies in the normal course of business and may buy and sell currencies
through forward currency contracts in order to fix a price for securities they
have agreed to buy or sell ("transaction hedge"). The Select Emerging Markets
Fund, Select Capital Appreciation Fund, Select International Equity Fund and
Select Income Fund also may hedge some or all of their investments denominated
in foreign currency against a decline in the value of that currency relative to
the U.S. dollar by entering into forward currency contracts to sell an amount of
that currency (or a proxy currency whose performance is expected to replicate or
exceed the performance of that currency relative to the U.S. dollar)
approximating the value of some or all of their portfolio securities denominated
in that currency ("position hedge") or by participating in options or futures
contracts with respect to the currency. The Funds also may enter into a forward
currency contract with respect to a currency where the Funds are considering the
purchase or sale of investments denominated in that currency but have not yet
selected the specific investments ("anticipatory hedge").
In any of these circumstances, the Select Emerging Markets Fund, Select
Capital Appreciation Fund, Select International Equity Fund and Select Income
Fund may enter alternatively into a forward currency contract to purchase or
sell one foreign currency for a second currency that is expected to perform more
favorably relative to the U.S. dollar if their Sub-Advisers believe there is a
reasonable degree of correlation between movements in the two currencies
("cross-hedge").
These types of hedges minimize the effect of currency appreciation as well
as depreciation, but do not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the proceeds of or rates of return on such Funds' foreign
currency denominated portfolio securities. The matching of the increase in value
of a forward contract and the decline in the U.S. dollar equivalent value of the
foreign currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting the Funds' currency exposure from one foreign
currency to another removes the Funds' opportunity to profit from increases in
the value of the original currency and involves a risk of increased losses to
the Funds if their Sub-Advisers' projections of future exchange rates is
inaccurate. Proxy hedges and cross-hedges may result in losses if the currency
used to hedge does not perform similarly to the currency in which hedged
securities are denominated. Unforeseen changes in currency prices may result in
poorer overall performance for the Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select International Equity Fund and Select Income Fund than
if they had not entered into such contracts.
The Select Emerging Markets Fund, Select Capital Appreciation Fund, Select
International Equity Fund and Select Income Fund will cover outstanding forward
currency contracts by maintaining liquid portfolio securities denominated in or
whose value is tied to the currency underlying the forward contract or the
currency being hedged. To the extent that the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select International Equity Fund and Select
Income Fund are not able to cover their forward currency positions with
underlying portfolio securities, the Funds' custodian will segregate cash or
liquid assets having a value equal to the aggregate amount of its commitments
under forward contracts entered into with respect to position hedges,
cross-hedges and anticipatory hedges. If the value of the securities used to
cover a position or the value of segregated assets declines, the Select Emerging
Markets Fund, Select Capital Appreciation Fund, Select International Equity Fund
and Select Income Fund will find alternative cover or segregate additional cash
or liquid assets on a daily basis so that the value of the covered segregated
assets will be equal to the amount of the Funds' commitments with respect to
such contracts. As an alternative to segregating assets, the Select Emerging
Markets Fund, Select Capital Appreciation Fund, Select International Equity Fund
and Select Income Fund may buy call options permitting it to buy the amount of
foreign currency being hedged by a forward sale contract or the Funds may buy
put options permitting them to sell the amount of foreign currency subject to a
forward buy contract.
While forward contracts currently are not regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such event,
the Select Emerging Markets Fund's, Select Capital Appreciation Fund's, Select
International Equity Fund's and Select Income Fund's ability to utilize forward
contracts may be restricted. In addition, the Select Emerging Markets Fund,
Select Capital Appreciation Fund, Select International Equity Fund and Select
Income Fund
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<PAGE>
may not always be able to enter into forward contracts at attractive prices and
may be limited in their ability to use these contracts to hedge portfolio
assets.
SWAP AND SWAP-RELATED PRODUCTS
The Select Capital Appreciation Fund may enter into interest rate swaps,
caps, and floors on either an asset-based or liability-based basis, depending
upon whether it is hedging its assets or its liabilities, and will usually enter
into interest rate swaps on a net basis (i.e., the two payment streams are
netted out with the Fund receiving or paying, as the case may be, only the net
amount of the two payments). Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest; for example, an exchange of floating rate payments for fixed rate
payments with respect to a notional amount of principal. A currency swap is an
agreement to exchange cash flows on a notional amount of two or more currencies
based on the relative value differential among them. An index swap is an
agreement to swap cash flows on a notional amount based on changes in the values
of the reference indices. The purchase of a cap entitles the purchaser to
receive payments on a notional principal amount from the party selling such cap
to the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount.
The net amount of the excess, if any, of the Fund's obligations over its
entitlement with respect to each interest rate swap will be calculated on a
daily basis and an amount of cash or other liquid assets having an aggregate net
asset value at least equal to the accrued excess will be maintained in a
segregated account by the Fund's custodian. If the Fund enters into an interest
rate swap on other than a net basis, it will maintain a segregated account in
the full amount accrued on a daily basis of its obligations with respect to the
swap. The Fund will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is rated in one of the three highest rating categories of at
least one nationally recognized statistical rating organization at the time of
entering into such transaction. The Sub-Adviser will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, the Fund will have contractual
remedies pursuant to the agreement related to the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet been developed and, accordingly, they are
less liquid than swaps. To the extent the Fund sells (i.e., writes) caps and
floors, it will segregate cash or high-grade liquid assets having an aggregate
net asset value at least equal to the full amount on a daily basis of its
obligations with respect to any caps or floors.
There is no limit on the amount of interest rate swap transactions that may
be entered into by the Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets to the Fund or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rates swaps is limited to the net amount of the payments that the Fund
is obligated contractually to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would risk the loss of the net
amount of the payments that it contractually is entitled to receive. The Fund
may buy and sell (i.e., write) caps and floors without limitation, subject to
the segregation requirement described above.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD CONTRACTS AND FOREIGN
INSTRUMENTS
Unlike transactions entered into by the Funds in futures contracts, options
on foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) by the SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign currency
options also are traded on certain exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC regulation.
Similarly, options on currencies may be traded over-the-counter. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements therefore could continue
to an unlimited extent over a period of time. Although the buyer of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, an option writer and a buyer or
seller of futures or forward contracts could lose amounts substantially in
14
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<PAGE>
excess of any premium received or initial margin or collateral posted due to the
potential additional margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on exchanges are within the
jurisdiction of the SEC, as other securities traded on such exchanges. As a
result, many of the protections provided to traders on organized exchanges will
be available with respect to such transactions. In particular, all foreign
currency option positions entered into on an exchange are cleared and guaranteed
by the Office of the Comptroller of the Currency ("OCC"), thereby reducing the
risk of counterparty default. Further, a liquid secondary market in options
traded on an exchange may be more readily available than in the over-the-counter
market, potentially permitting a Fund to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of adverse
market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC, if it determines that
foreign government restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises or would result in undue burdens on the OCC or
its clearing member, may impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery, the fixing of dollar
settlement prices or prohibitions on exercise.
In addition, options on U.S. Government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in a
Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements from those
in the United States and (v) low trading volume.
PORTFOLIO TURNOVER
The portfolio turnover rate for a Fund is calculated by dividing the lesser
of purchases or sales of portfolio securities by the Fund for a given year by
the monthly average of the value of the Fund's portfolios securities for that
year. The purchase or sale of all securities whose maturities or expiration
dates at the time of acquisition are less than 12 months and of money market
funds of amounts too small to invest in short-term obligations are not included
in the portfolio turnover rate.
While the rate of portfolio turnover is not a limiting factor when changes
in the portfolio are deemed appropriate, it is anticipated that under normal
circumstances the annual portfolio turnover rate would not exceed 200% with
respect to the Select Capital Appreciation Fund. In any particular year,
however, conditions could result in portfolio activities at a greater rate than
anticipated. In any case, a higher turnover rate does not in and of itself
indicate a variation from the stated investment policy. To a limited extent, the
Select Capital Appreciation Fund may engage in short-term trading. A higher
portfolio turnover rate may involve corresponding greater brokerage commissions
and other transaction costs, which would be borne directly by the Fund, as well
as additional realized gains and/or losses to shareholders. The turnover rates
for the following Funds for the two most recent fiscal years were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Select Aggressive Growth Fund 113% 95%
Select Capital Appreciation Fund 98% 133%
Select Value Opportunity Fund 20% 110%
Select International Equity Fund 18% 20%
Select Growth Fund 159% 75%
Growth Fund 72% 79%
Equity Index Fund 12% 9%
Select Growth and Income Fund 78% 71%
Select Income Fund 108% 79%
</TABLE>
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Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Investment Grade Income Fund 108% 48%
Government Bond Fund 112% 56%
(for explanation, see the Prospectus)
</TABLE>
PERFORMANCE
The Trust may advertise performance information for the Funds and may
compare performance of the Funds with other investment or relevant indices. The
Funds may also advertise "yield", "total return" and other non-standardized
total return data. For the non-money market funds, "yield," is calculated
differently than for the Money Market Fund. The Money Market Fund may advertise
"yield" or "effective yield," ALL PERFORMANCE FIGURES ARE BASED ON HISTORICAL
EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. A Fund's share
price, yield and total return may fluctuate in response to market conditions and
other factors, and the value of Fund shares when redeemed may be more or less
than their original cost.
YIELDS AND TOTAL RETURNS QUOTED FOR THE FUNDS INCLUDE THE EFFECT OF
DEDUCTING THE FUNDS' EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES
ATTRIBUTABLE TO A PARTICULAR INSURANCE PRODUCT. SINCE SHARES OF THE FUNDS CAN BE
PURCHASED ONLY THROUGH A VARIABLE ANNUITY OR VARIABLE LIFE CONTRACT, YOU SHOULD
REVIEW CAREFULLY THE PROSPECTUS OF THE INSURANCE PRODUCT YOU HAVE CHOSEN FOR
INFORMATION ON RELEVANT CHARGES AND EXPENSES. INCLUDING THESE CHARGES IN THE
QUOTATIONS OF THE FUNDS' YIELDS AND TOTAL RETURNS WOULD HAVE THE EFFECT OF
DECREASING PERFORMANCE. PERFORMANCE INFORMATION FOR THE INSURANCE PRODUCT MUST
ALWAYS ACCOMPANY, AND BE REVIEWED WITH, ANY PERFORMANCE INFORMATION QUOTED FOR
THE FUNDS.
YIELDS OF THE FUNDS OTHER THAN THE MONEY MARKET FUND
The 30-day (or one month) standard yields of the Funds other than the Money
Market Fund are calculated as follows:
YIELD = 2[(a - b + 1)/6/ - 1 )]
-----
cd
Where: a = dividends and interest earned by a Fund during the period;
b = expenses accrued for the period (not of reimbursements);
c = average daily number of shares outstanding during the period
entitled to receive dividends; and
d = maximum offering price per share on the last day
of the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Except as noted below,
interest earned on debt obligations held by a Fund is calculated by computing
the yield to maturity of each obligation based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by the Fund. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market value of such debt
obligations. Expenses accrued for the period (variable "b" in the formula)
include all recurring fees charged by a Fund to all shareholder accounts in
proportion to the length of the base period and the Fund's mean (or median)
account size. Undeclared earned income will be subtracted from the offering
price per share (variable "d" in the formula).
MONEY MARKET FUND - YIELD AND EFFECTIVE YIELD
The yield of the Money Market Fund refers to the net income generated by an
investment in the Fund over a stated seven-day period, expressed as an annual
percentage rate. Yield is computed by determining the net change (exclusive
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Allmerica Investment Trust
<PAGE>
of capital changes) in the value of a hypothetical pre-existing account having a
balance of 1 (one) share at the beginning of a seven-day calendar period,
dividing the net change in account value by the value of the account at the
beginning of the period, and multiplying the return over the seven-day period by
365/7. Thus the income is "annualized:" the amount of income generated by the
investment during the seven-day period is assumed to be generated each week over
a 52-week period and is shown as a percentage of the investment. For purposes of
the calculation, net change in account value reflects the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any additional shares, but does not reflect
realized gains or losses or unrealized appreciation or depreciation.
The effective yield is calculated similarly, but the income earned by an
investment in the Money Market Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of this compounding
effect.
TOTAL RETURN
The Funds may advertise total return. The total return shows what an
investment in each Fund would have earned over a specific period of time (one,
five, or ten years since commencement of operations, if less) assuming that all
distributions and dividends by the Fund were reinvested, and less all recurring
fees.
From time to time, the Fund may state its total return in advertisements
and investor communications. Total return may be stated for any relevant period
as specified in the advertisement or communication. Any statement of total
return or other performance data on the Fund will be accompanied by information
on the Fund's average annual total return over the most recent four calendar
quarters and the period from the Fund's inception of operations. The Fund also
may advertise aggregate annual total return information over different periods
of time.
A Fund's average annual total return is determined by reference to a
hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
P(1+T)n = ERV
Where: P = A hypothetical initial purchase of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of the hypothetical purchase at
the end of the period
Total return quoted in advertising reflects all aspects of the Fund's
return, including the effect of reinvesting dividends and capital gains
distributions, and any change in the Fund's net asset value per share over the
period.
AVERAGE ANNUAL RETURNS are calculated by determining the change in value of
a hypothetical investment in the Fund over a stated period, and calculating the
annually compounded percentage rate that would have produced the same result if
the rate of growth or decline in value has been constant over the period.
Average annual returns covering periods of less than one year are calculated by
determining the Fund's total return for the period, extrapolating that return
for a full year, and stating the result as an annual return. Because this method
assumes that performance will remain constant for the entire year when in fact
it is unlikely that performance will remain constant, average annual returns for
a partial year must be viewed as strictly theoretical information.
INVESTORS ALSO SHOULD BE AWARE THAT A FUND'S PERFORMANCE IS NOT CONSTANT
OVER TIME, BUT VARIES FROM YEAR TO YEAR. AVERAGE ANNUAL RETURN REPRESENTS
AVERAGED FIGURES AS OPPOSED TO THE ACTUAL PERFORMANCE OF THE FUND.
A Fund also may quote cumulative total returns which reflect the simple
change in value of an investment over a stated period. Average annual total
returns and cumulative total returns may be quoted as a percentage or as a
dollar amount. They may be calculated for a single investment, for a series of
investments or for a series of redemptions over any time period. Total returns
may be broken down into their components of income and capital in order to show
their respective contributions to total return. Performance information may be
quoted numerically or in a table, graph or similar illustration.
17
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Allmerica Investment Trust
<PAGE>
OTHER PERFORMANCE INFORMATION
Performance information for a Fund may be compared with: (1) the S&P 500,
Dow Jones Industrial Average, Lehman Aggregate Bond Index, Russell 2000, Russell
3000, Beta Adjusted Russell 3000, Lehman Government corporate and 90 day
Treasury Bills, Solomon High Yield Bond Index, Bank Rate Monitor, NASDAQ Index
or other unmanaged indices so that investors may compare a Fund's results with
those of a group of unmanaged securities widely regarded by investors as
representative of the securities markets in general; (2) other registered
investment companies or other investment products tracked (a) by Lipper
Analytical Services; Morningstar, Inc. and IBC/Donoghue, Inc., all widely used
independent research firms which rank mutual funds and other investment
companies by overall performance, investment objectives and assets, or (b) by
other services, companies, publications or persons who rank such investment
companies on overall performance or other criteria; (3) or the Consumer Price
Index (a measure for inflation) to assess the real rate of return from an
investment in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs and expenses.
Performance information reflects only the performance of a hypothetical
investment during the particular time period on which the calculations are
based. Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the Fund and the market
conditions during the given time period. Yield and total return information may
be useful for reviewing the performance of the Fund and for providing a basis
for comparison with other investment alternatives. However, unlike bank deposits
or other investments which pay a fixed yield for a stated period of time, the
yield and total return do fluctuate.
PERFORMANCE INFORMATION FOR PERIOD ENDED DECEMBER 31, 1997
Set forth below is average annual total return information for the Select
Aggressive Growth Fund, Select Capital Appreciation Fund, Select Value
Opportunity Fund, Select International Equity Fund, Select Growth Fund, Growth
Fund, Equity Index Fund, Select Growth and Income Fund, Select Income Fund,
Investment Grade Income Fund, Government Bond Fund and Money Market Fund for the
1 year, 5 year, 10 year and/or since inception (the Trust began operations on
April 29, 1985) periods ended December 31, 1997, yields for the Select Income
Fund, Investment Grade Income Fund and Government Bond Fund for the 30-day
period ended December 31, 1997 and yield and effective yield information for the
Money Market Fund for the seven-day period ended December 31, 1997.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1 YEAR PERIOD 5 YEAR PERIOD 10 YEAR PERIOD SINCE INCEPTION
------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Select Aggressive Growth Fund 18.71% 16.80% N/A 19.57%
Select Capital Appreciation Fund 14.28% N/A N/A 22.89%
Select Value Opportunity Fund 24.85% N/A N/A 16.93%
Select International Equity Fund 4.65% N/A N/A 11.14%
Select Growth Fund 34.06% 15.15% N/A 16.37%
Growth Fund 25.14% 16.37% 17.12% 16.44%
Equity Index Fund 32.41% 19.54% N/A 19.68%
Select Growth and Income Fund 22.51% 16.57% N/A 15.36%
Select Income Fund 9.17% 6.86% N/A 6.51%
Investment Grade Income Fund 9.45% 7.51% 9.19% 9.05%
Government Bond Fund 7.08% 5.96% N/A 6.89%
Money Market Fund 5.47% 4.71% 5.80% 5.91%
</TABLE>
The Growth Fund, Investment Grade Income Fund and the Money Market Fund all
began business operations on April 29, 1985. The Equity Index Fund began
operations on September 28, 1990. The Government Bond Fund began operations on
August 26, 1991. The Select Aggressive Growth Fund, Select Growth Fund, Select
Growth and Income Fund and Select Income Fund began operations on August 21,
1992. The Select Value Opportunity Fund began operations on April 30, 1993. The
Select International Equity Fund began operations on May 2, 1994. The Select
Capital Appreciation Fund began operations on April 28, 1995.
18
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<PAGE>
<TABLE>
<CAPTION>
YIELDS FOR 30-DAY PERIODS
ENDED DECEMBER 31, 1997
-----------------------
(UNAUDITED)
<S> <C>
Select Income Fund 5.87%
Investment Grade Income Fund 6.22%
Government Bond Fund 5.69%
<CAPTION>
YIELD FOR SEVEN DAY PERIOD EFFECTIVE YIELD FOR SEVEN DAY PERIOD
ENDED DECEMBER 31, 1997 ENDED DECEMBER 31, 1997
----------------------- -----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Money Market Fund 5.58% 5.68%
</TABLE>
MANAGEMENT OF ALLMERICA INVESTMENT TRUST
The Trust is managed by a Board of Trustees. The affairs of the Trust are
conducted in accordance with the Bylaws adopted by the Trustees.
<TABLE>
<CAPTION>
POSITION AND OFFICES PRESENT POSITION AND PRINCIPAL
NAME ADDRESS AND AGE WITH THE TRUST OCCUPATIONS DURING THE PAST 5 YEARS
- -------------------- -------------------- -----------------------------------
<S> <C> <C>
Cynthia A. Hargadon (43) Trustee President, Stable Value Investment Association
1880 Virginia Avenue (investment trade group), and Senior
Consultant, McLean, Virginia Johnson Custom Strategies (investment service firm),
1996-Present; Senior Vice President and Chief
Investment Officer, ICMA Retirement Corporation
(investment adviser), 1987-1996
Gordon Holmes (59) Trustee Lecturer and Executive in Residence, Boston
75 Clarendon Street University, 1997 to Present; Certified Public
Boston, Massachusetts Accountant; Retired Partner, Tofias, Fleishman
Shapiro & Co., P.C. (Accountants) 1976-1996
*John P. Kavanaugh (43) Trustee and President, Allmerica Asset Management,
440 Lincoln Street Vice President Inc. since 1995, Vice President, First Allmerica and
Worcester, Massachusetts Allmerica Financial Life
Bruce E. Langton (66) Trustee Director, Competitive Technologies Inc.
99 Jordan Lane (technology transfer); Trustee, Bankers Trust
Stamford, Connecticut institutional mutual funds; Member, Investment
Committee, TWA Pilots Trust Annuity Plan;
Member, Investment Committee, Unilever United
States - Pension & Thrift plans
*John F. O'Brien (54) Trustee and President, Chief Executive Officer and Director, First
440 Lincoln Street Chairman of the Board Allmerica; Director and Chairman of the Board,
Worcester, Massachusetts Allmerica Financial Life; Director, ABIOMED, Inc.
(medical devices); Director, Cabot Corporation
(specialty chemicals); Director, TJX Corporation,
Inc. (retail)
</TABLE>
19
-----------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
POSITION AND OFFICES PRESENT POSITION AND PRINCIPAL
NAME ADDRESS AND AGE WITH THE TRUST OCCUPATIONS DURING THE PAST 5 YEARS
- -------------------- -------------------- -----------------------------------
<S> <C> <C>
Attiat F. Ott (62) Trustee Professor of Economics and Director of
262 Salisbury Street the Institute for Economic Studies, Clark
Worcester, Massachusetts University
*Richard M. Reilly (59) Trustee President, Allmerica Financial Life since
440 Lincoln Street and President 995; Vice President, First Allmerica and
Worcester, Massachusetts President, Allmerica Investment Manage-
ment Company, Inc.
Ranne P. Warner (53) Trustee President, Centros Properties, USA;
Centros Properties USA, Inc. Owner, Ranne P. Warner and Company;
176 Federal Street, 6th Floor Director, Wainwright Bank & Trust Co.
Boston, MA 02110 (commercial bank); Trustee, Ericksen Trust
Thomas P. Cunningham (52) Vice President and Assistant Vice President, First
440 Lincoln Street Treasurer Allmerica since March 1996; Vice
Worcester, Massachusetts President, First Data Investor Services
Group, Inc., 1995-1996; Vice President,
Fidelity Investments, 1992-1994
George Boyd (53) Secretary Counsel, First Allmerica since
440 Lincoln Street January 1997; Director, Mutual
Worcester, Massachusetts Fund Administration - Legal and
Regulatory, Investors Bank &
Trust Company, 1995-1996; Vice
President and Counsel, 440
Financial Group and First Data
Investor Services Group,
1992-1995.
</TABLE>
* Asterisks indicate the Trustees who are "interested persons" of the Trust as
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
The 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 Trust.
Listed below is the compensation paid to each Trustee by the Trust and by
all fourteen funds in the complex for the fiscal year ended December 31, 1997.
The Fund currently does not provide any pension or retirement benefits for its
Trustee or officers.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
FROM TRUST COMPLEX
AGGREGATE (INCLUDES 2 OTHER
COMPENSATION INVESTMENT COMPANIES)
NAME OF PERSON AND POSITION FROM TRUST PAID TO TRUSTEES
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Russell E. Fuller* $5,789.98 $6,000.00
Gordon Holmes $12,552.31 $13,375.00
Bruce E. Langton $13,039.43 $13,875.00
Attiat F. Ott $13,770.20 $14,625.00
Ranne P. Warner $14,257.35 $15,125.00
Cynthia Hargadon** 7,858.50 $8,500.00
John P. Kavanaugh 0 0
John F. O'Brien 0 0
Richard M. Reilly 0 0
</TABLE>
20
- ---------------------------
Allmerica Investment Trust
<PAGE>
* Mr. Fuller resigned as Trustee effective August 15, 1997.
** Ms. Hargadon was appointed Trustee on August 15, 1997.
The Trust Declaration provides that the Trust will indemnify its Trustees
and officers liabilities and expenses incurred in connection with litigation in
which they may be involved because of their offices with the Trust, except if it
is determined in the manner specified in the Trust Declaration that they have
not acted in good faith in the reasonable belief that their actions were in the
best interests of the Trust or that such indemnification would relieve any
officer or Trustee of any liability to the Trust or its shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of his
or her duties.
CONTROL PERSON AND PRINCIPAL HOLDER OF SECURITIES
The Trust was established as a Massachusetts business trust under the laws
of Massachusetts by an Agreement and Declaration of Trust dated October 11,
1984. Allmerica Financial Investment Management Services, Inc. ("AFIMS") is the
Manager of the Trust. The shares of each of the Funds of the Trust may be
purchased only by Separate Accounts established by First Allmerica or Allmerica
Financial Life. The Separate Accounts of First Allmerica or its affiliates are
the shareholders of the Trust. As of March 20, 1998, Allmerica Financial Life,
owned both of record and beneficially in excess of 99% of the shares of the
Select Emerging Markets Fund and in excess of 99% of the shares of the Select
Strategic Growth Fund. A shareholder that owns more than 25% of the shares of a
Fund is deemed to be a controlling person of such Fund. As of March 20, 1998,
the Trustees and officers of the Trust, as a group, owned less than 1% of the
outstanding shares of any Fund. AFIMS, First Allmerica and Allmerica Financial
Life are indirect wholly-owned subsidiaries of Allmerica Financial Corporation
("AFC"), a publicly-traded Delaware holding company for a group of affiliated
companies, the largest of which is First Allmerica. The address of AFIMS, First
Allmerica, Allmerica Financial Life and AFC is 440 Lincoln Street, Worcester, MA
01653. AFIMS and First Allmerica were organized in Massachusetts and Allmerica
Financial Life was organized in Delaware.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Allmerica Financial Investment Management Services, Inc. (the "Manager")
serves as investment manager of the Trust pursuant to a management agreement
between the Trust and the Manager (the "Management Agreement"). The Manager has
entered into sub-adviser agreements with different investment advisory firms
(the "Sub-Advisers") to manage each of the Funds.
The methods of computing the advisory and sub-advisory fees are set forth
in the Prospectuses under "Management Fees and Expenses."
The total gross fees (before reimbursement) paid to the Manager under the
Management Agreement for each of the last three fiscal years ended December 31,
1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR 1997 FISCAL YEAR 1996 FISCAL YEAR 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Aggressive Growth Fund $4,850,649 $3,302,349 $1,943,953
Select Capital Appreciation Fund $1,813,444 $902,600 $133,723
Select Value Opportunity Fund $1,433,016 $726,992 $453,215
Select International Equity Fund $3,258,876 $1,701,942 $672,770
Select Growth Fund $2,959,723 $1,508,861 $1,017,303
Growth Fund $2,840,683 $2,163,374 $1,796,677
Equity Index Fund $705,708 $375,619 $234,207
Select Growth and Income Fund $2,807,177 $1,778,832 $1,124,323
Select Income Fund $524,021 $398,522 $297,434
Investment Grade Income Fund $710,821 $596,308 $511,997
Government Bond Fund $244,355 $235,359 $206,197
Money Market Fund $647,964 $510,258 $389,542
</TABLE>
21
-----------------------------
Allmerica Investment Trust
<PAGE>
The total gross fees paid to each Sub-Adviser under the respective
Sub-Adviser Agreement for each of the last three fiscal years ended December 31,
1997 were as follows:
<TABLE>
<CAPTION>
PAYMENTS MADE AS OF DECEMBER 31,
--------------------------------
FUND/SUB-ADVISER FISCAL YEAR 1997 FISCAL YEAR 1996 FISCAL YEAR 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Select Aggressive Growth Fund
Nicholas-Applegate Capital Management, L.P. $2,885,239 $1,986,838 $1,166,372
Select Capital Appreciation Fund*
Janus Capital Corporation ("JCC") $1,070,021 $538,873 $79,987
Select Value Opportunity Fund
(formerly Small-Mid Cap Value Fund)
Cramer Rosenthal McGlynn, LLC ("CRM")** $851,815 $428,814 $266,597
Select International Equity Fund
Bank of Ireland Asset Management (U.S.) Limited $1,137,825 $665,639 $293,389
Select Growth Fund
Putnam Investment Management, Inc. ("Putnam")*** $1,328,717 $372,442 $563,572
Growth Fund
Miller Anderson & Sherrerd ("MAS")**** $1,493,997 $2,330,558 $2,307,461
Select Growth and Income Fund
John A. Levin & Co., Inc. ("JAL") $1,159,260 $684,181 $524,774
Select Income Fund
Standish, Ayer & Wood Inc. $177,505 $133,205 $99,145
Allmerica Asset Management, Inc.
Equity Index Fund, Investment Grade Income Fund,
Government Bond Fund and Money Market Fund $911,548 $694,940 $537,745
</TABLE>
* The Select Capital Appreciation Fund began business operations on April
28, 1995. JCC was replaced by T. Rowe Price Associates, Inc. as Sub-
Adviser for the Select Capital Appreciation Fund on April 1, 1998.
** David L. Babson & Co., Inc. was replaced by Cramer Rosenthal McGlynn, LLC
as Sub-Adviser for the Select Value Opportunity Fund on January 1, 1997.
*** Provident Investment Counsel was replaced by Putnam as Sub-Adviser for
the Select Growth Fund on July 1, 1996. The total dollar amount paid to
Putnam for the period July 1, 1996 through December 31, 1996 was
$432,378.
**** Includes payments to MAS for advisory services provided to certain other
accounts of First Allmerica.
Each of the Management Agreement and sub-advisory agreements provides that
it may be terminated as to any Fund at any time by a vote of a majority in
interest of the shareholders of such Fund, by the Trustees or by the investment
adviser to such Fund without payment of any penalty on not more than 60 days'
written notice; provided, however, that the agreement will terminate
automatically in the event of its assignment. Each of the agreements will
continue in effect as to any Fund for a period of no more than two years from
the date of its executor only so long as such continuance is approved
specifically at least annually by the Trustees or by vote of a majority in
interest of the shareholders of such Fund. In either event, such continuance
also must be approved by vote of a majority of the Trustees who are not parties
to the agreement or interested persons of the Trust, the Manager or any
sub-adviser, cast in person at a meeting called for the purpose of voting such
approval. The terms of each agreement cannot be changed as to any Fund without
the approval of a majority in interest of the shareholders of that Fund. The
Trust and Manager have filed an application with the SEC for an order of
exemption that would permit the Manager to enter into and materially amend
sub-advisory agreements with non-affiliated Sub-Advisers without obtaining
shareholder approval. If the requested relief is granted by the SEC, the Manager
will have the ability, subject to approval of the Trustees, to hire
22
- ---------------------------
Allmerica Investment Trust
<PAGE>
and terminate Sub-Advisers to the Funds and to change materially the terms of
the Sub-Advisory Agreements, including the compensation paid to the Sub-
Advisers, without the approval of the shareholders of the Funds. Under such
agreements, any liability of either the Manager or a sub-adviser is limited to
situations involving its willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties.
As printed in Nelson's Directory of Plan Sponsors - 1997, following is
a listing of Schroder Capital Management International Inc.'s current
representative clients in emerging markets investments:
<TABLE>
<S> <C>
-Evangelical Lutheran -Louisiana State E.R.S.
Church Pension -Merck & Co.
-Georgia-Pacific -New York City Retirement Systems
-Idaho P.E.R.S. -NYC Teachers' Retirement Systems
-Inland Steel Industries -Orange County Retirement System
-Intermountain Health Care -Utah State Retirement System
-L.A. City Employees Retirement -Washington State Investment Board
</TABLE>
A listing of Nicholas-Applegate Capital Management, L.P.'s current
representative clients is as follows:
<TABLE>
<S> <C>
- Champion International Corp. - Southwestern Bell Corporation
- Eastman Kodak - San Francisco City and County
- Johnson & Johnson - Unisys Corporation
- Screen Actors Guild-Producers - University of Notre Dame
- Pension and Health Plan - University of Southern California
</TABLE>
A listing of T. Rowe Price Associates, Inc.'s current representative
clients is as follows:
<TABLE>
<S> <C>
- Alyeska Pipeline Service Company - Kaiser Permanente
- Atlantic Electric Company - Marriott International, Inc.
- Avondale Mills, Inc. - City of New York
- Baltimore Gas and Electric Company - Northwest Airlines, Inc.
- The Black & Decker Company - Reynolds Metals Company
- Colonial Pipeline Company - Rochester Gas & Electric Corporation
- Cooper Cameron Corporation - Signet Trust Company
- Cooper Industries, Inc. - Solvay America, Inc.
- Entergy Corporation - State of Alaska
- GenCorp, Inc. - State of Nebraska
- General Signal Corporation - State of New York
- ICI Americas, Inc. - T. Rowe Price Trust Company
- International Brotherhood of Electrical - Warner-Lambert Company
Workers - Winn-Dixie Stores, Inc.
- J.C. Penney Company, Inc.
</TABLE>
A listing of Cramer Rosenthal McGlynn, LLC's current representative clients
is as follows:
<TABLE>
<S> <C>
- Amherst College Endowment - Indiana University Foundation
- The Carnegie Institute - Maine State Retirement
- Central States Teamsters - National Basketball Association Players Pension Plan
- The UCLA Foundation - Niagara Mohawk Power Corp.
- College of Holy Cross - University of Illinois Foundation
</TABLE>
23
-----------------------------
Allmerica Investment Trust
<PAGE>
A listing of Bank of Ireland Asset Management (U.S.) Limited's current
representative clients is as follows:
<TABLE>
<S> <C>
- CALSTRS - Pfizer Retirement Annuity Plan
- City of Dallas Employees' - Maryland State Retirement System
Retirement Fund
- Loyola Marymount University - Screen Actors Guild - Producers
Endowment Fund Pension Plan
- LTV Steel Corporation Pension Fund - Tuft's University Endowment Fund
- Major League Baseball Players - Worcester County Retirement System
Benefit Plan
</TABLE>
A listing of Putnam Advisory Company, Inc.'s ("PAC")* current
representative clients is as follows:
<TABLE>
<S> <C>
- Ameritech Corporation - New York Philharmonic Orchestra
- Bacardi Corporation - Parker-Hannifin Corporation
- Betz Dearborn Inc. - Textron, Inc.
- Los Angeles County Employees' - The Robert Wood Johnson Foundation
Retirement Association - Johns Manville Corporation
- Matsushita Electric Corporation of - United Steelworkers of America
America
</TABLE>
*(PAC is the institutional affiliate of Putnam Investment Management, Inc.)
A listing of Cambiar Investors, Inc.'s current representative clients is as
follows:
<TABLE>
<S> <C>
-American Hospital Association -Nationwide Insurance
-AvMed Health Plan -New Mexico/West Texas Multicraft
-Boeing Company -Regent University
-City Public Service of San Antonio -Schurz Communication Retirement Plan
-El Paso Community Foundation -Sheet Metal Workers Local #20
-Frank Russell Trust Company -Taos Ski Valley Inc.
-Guaranty National Insurance -Turlock Irrigation District Retirement Plan
Corporation -United Airlines
-Health First Corporation -Viking Insurance Company
-Hunter Douglas Retirement Plan -Waco Employees Profit Sharing Plan
-Metropolitan Life
</TABLE>
A listing of Miller Anderson & Sherrerd LLP's current representative
clients is as follows:
<TABLE>
<S> <C>
- AT&T - International Paper
- Boeing Company - Montgomery Ward
- Federal Reserve - Philip Morris, Inc.
- J. Paul Getty Trust - Smithsonian Institution
- Girl Scouts of the United States of - United Technologies Corporation
America
</TABLE>
A listing of John A. Levin & Co., Inc.'s representative clients is as
follows:
<TABLE>
<S> <C>
- Allied Signal, Inc. - New York City Teachers Retirement Fund
- Johns Hopkins University - New York Philharmonic Society
- Joseph E. Seagram & Sons, Inc. - Thiokol, Inc.
- Morton International - Yale University
</TABLE>
24
- --------------------------
Allmerica Investment Trust
<PAGE>
A listing of Standish, Ayer & Wood's current representative clients is as
follows:
<TABLE>
<S> <C>
- Archdiocese of Boston - City of Houston
- AT&T - New York Public Library
- BankAmerica - Northeastern University
- Harcourt General - Reinsurance Association
- General Cinema
</TABLE>
A listing of AAM's current representative clients is as follows:
<TABLE>
<S> <C>
- First Allmerica - City of Worcester Retirement System
- Citizens Insurance - Worcester County Contributory
- Hanover Insurance Retirement System
- Hannibal Regional Hospital
- Massachusetts Education and
Government Association Workers
Compensation Trust
- Farm Credit System Association
Captive Insurance Company
</TABLE>
Under the terms of the Management Agreement, the Trust recognizes the
Manager's control of the name "Allmerica Investment Trust." The Trust agrees
that its right to use that name is non-exclusive and can be terminated by the
Manager at any time.
SERVICES AGREEMENT
Under the terms of a Fund Accounting Services Agreement, First Data
Investors Services Group, Inc. ("Investor Services Group"), a wholly-owned
subsidiary of First Data Corporation located at 4400 Computer Drive, Westboro,
MA 01581, serves as the Trust's fund recordkeeping services agent. Investor
Services Group provides certain services, including determination of the net
asset value per share of each of the Funds and maintenance of the accounting
records of the Trust. Investor Services Group is entitled to receive an annual
fund recordkeeping fee based on Fund assets and certain out-of-pocket expenses.
The Fund Accounting Services Agreement may be renewed or amended by the Trustees
without a shareholder vote. The Fund Accounting Services Agreement is terminable
by either party on 90 days' written notice. The total fund recordkeeping fees
paid to Investor Services Group for the following periods were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996 APRIL 1, 1995 THROUGH DECEMBER 31, 1995
----------------- ----------------- ---------------------------------------
<S> <C> <C>
$748,941 $544,206 $319,658
</TABLE>
Prior to March 31, 1995, fund accounting services were provided by 440
Financial Group of Worcester, Inc. ("440 Financial"), a wholly-owned subsidiary
of State Mutual Life Assurance Company of America (now named First Allmerica).
The total fund recordkeeping fee paid to 440 Financial for the following period
was as follows:
JANUARY 1, 1995 THROUGH MARCH 31, 1995*
--------------------------------------
$168,565
* 440 Financial received fees for fund accounting and other services.
CUSTODIAN
Bankers Trust Company acts as custodian of the cash and investment
securities of the Trust. As such, it holds in custody the Trust's portfolio
securities and receives and delivers them upon purchases and sales.
BROKERAGE ALLOCATION
In accordance with the Management Agreement and sub-advisory agreements,
the respective Sub-Adviser has the responsibility for the selection of brokers
for the execution of purchases and sales of the securities in a given Fund's
25
-----------------------------
Allmerica Investment Trust
<PAGE>
portfolio subject to the direction of the Trustees. The Sub-Advisers place the
Funds' portfolio transactions with brokers and, if applicable, negotiate
commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions
of the Funds. The Sub-Advisers also may place portfolio transactions with such
broker-dealers acting as principal, in which case no brokerage commissions are
payable but other transaction costs are incurred. The Funds have not dealt nor
do they intend to deal exclusively with any particular broker-dealer or group of
broker-dealers. It is each Fund's policy always to seek best execution. This
means that each Fund's portfolio transactions will be placed where the Fund can
obtain the most favorable combination of price and execution services in
particular transactions or as provided on a continuing basis by a broker-dealer,
and that the Fund will deal directly with a principal market maker in connection
with over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. In evaluating the execution services of a
broker-dealer, including the overall reasonableness of its brokerage commissions
paid, consideration is given to the firm's general execution and operational
capabilities and to its reliability, integrity and financial condition. Subject
to the practice of always seeking best execution, the Funds' securities
transactions may be executed by broker-dealers who also provide research
services (as defined below) to the Funds, the Sub-Advisers and the other clients
advised by the Sub-Advisers. Examples of such research services include reports
on specific companies or industries, economic and financial data, performance
measurement services, computer databases and pricing and appraisal services. The
sub-advisers may use all, some or none of such research services in providing
investment advisory services to each of its investment companies and other
clients, including the Funds. To the extent that such services are used, they
tend to reduce the expenses of the Sub-Advisers. In the opinion of the
Sub-Advisers it is impossible to assign an exact dollar value to such services.
BROKERAGE AND RESEARCH SERVICES
The agreements provide that, subject to such policies as the Trustees may
determine, the Sub-Advisers may cause a given Fund to pay a broker-dealer which
provides brokerage and research services an amount of commission for effecting a
securities transaction for that Fund in excess of the amount of commission which
another broker-dealer would have charged for effecting that transaction. As
provided in Section 28(e) of the Securities Exchange Act of 1934, "brokerage and
research services" include advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the availability
of securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends;
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The Sub-Advisers must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of that
particular transaction or the overall responsibilities of the Sub-Advisers to
its respective Funds and all other clients. The Sub-Advisers also may consider
sales by broker-dealers of variable and group annuity contracts and variable
life insurance policies that contemplate the Funds as an investment option as a
factor in the selection of broker-dealers to execute portfolio transactions.
The other investment companies and clients advised by the Sub-Advisers
sometimes invest in securities in which the Funds also invest. A Sub-Adviser
also may invest for its own account in the securities in which the Funds invest.
If the Funds, such other investment companies and other clients of the
Sub-Advisers desire to buy or sell the same portfolio security at about the same
time, the purchases and sales normally are made as nearly as practicable on a
pro rata basis in proportion to the amounts desired to be purchased or sold by
each. It is recognized that in some cases this practice could have a detrimental
effect on the price or volume of the security as far as the Funds are concerned.
In other cases, however, it is believed that this practice may produce better
executions. It is the opinion of the Trustees that the desirability of retaining
the Sub-Advisers as investment advisers to their respective Funds outweighs the
disadvantages, if any, which might result from this practice.
Brokerage commissions for each of the last three years were as follows:
<TABLE>
<CAPTION>
FUND 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
Select Aggressive Growth Fund $1,238,116 $929,338 $685,971
Select Capital Appreciation Fund $474,666 $240,295 $94,679
Select Value Opportunity Fund
(formerly Small-Mid Cap Value Fund) $649,306 $101,743 $54,538
Select International Equity Fund $453,544 $360,263 $212,481
</TABLE>
26
- ---------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
FUND 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
Select Growth Fund $459,136 $450,238 $147,728
Growth Fund $969,754 $838,998 $577,791
Equity Index Fund $100,012 $63,013 $28,468
Select Growth and Income Fund $962,045 $561,049 $458,046
Government Bond Fund $0 $0 $16,759
</TABLE>
The Select Income Fund, Investment Grade Income Fund and Money Market Fund
did not incur brokerage commissions in any of these years.
DIRECTED BROKERAGE PROGRAM
Certain Funds managed by the Manager participate in a directed brokerage program
whereby the Funds receive credit for brokerage activity and apply those credits
toward the payment of Fund expenses. Such Funds have entered into an agreement
with certain brokers which rebate a portion of commissions as credits toward
Fund expenses. In addition, this program gives Fund management the ability to
direct brokerage by firms which sell insurance products sponsored by First
Allmerica Financial and its affiliates. This second aspect of the program, which
would be limited to 15% of total commissions, has not been implemented. Such
amounts earned by the Funds in 1996 and 1997 under such agreements were as
follows:
<TABLE>
<CAPTION>
Fund 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
Select Aggressive Growth Fund $221,364 N/A N/A
Select Value Opportunity Fund $84,389 $19,715 N/A
Select International Equity Fund $70,636 $52,998 N/A
Select Growth Fund $90,962 $10,405 N/A
Growth Fund $152,829 $124,205 N/A
Select Growth and Income Fund $102,293 $77,523 N/A
</TABLE>
PURCHASE, REDEMPTION, AND PRICING OF SECURITIES BEING OFFERED
As described in the Prospectus, shares of each Fund are sold and redeemed
at their net asset value as next computed after receipt of the purchase or
redemption order. Each purchase is confirmed to the Separate Account in a
written statement of the number of shares purchased and the aggregate number of
shares currently held.
The net asset value per share of each Fund is the total net asset value of
that Fund divided by the number of shares outstanding. The total net asset value
of each Fund is determined by computing the value of the total assets of that
Fund and deducting total liabilities, including accrued liabilities. The net
asset value of the shares of each Fund is determined once daily as of the close
of the New York Stock Exchange on each day on which the Exchange is open for
trading, and no less frequently than once daily on each other day (other than a
day during which no shares of the Fund were tendered for redemption and no order
to purchase or sell such shares was received by the Fund) in which there was a
sufficient degree in trading in the Fund's portfolio securities that the current
net asset value of the Fund's shares might be affected materially by changes in
the value of such portfolio securities.
Debt securities for which market quotations are not readily available are
valued at fair value by using valuation procedures approved in good faith by the
Trustees. As authorized by the Trustees, debt securities (other than short-term
obligations) of the Funds other than the Money Market Fund are valued on the
basis of valuations furnished by a pricing service which utilizes data
processing methods to determine valuations for normal, institutional-size
trading units of such securities. Such methods include the use of market
transactions for comparable securities and various relationships between
securities which generally are recognized by institutional traders. Short-term
obligations having remaining maturities of sixty (60) days or less are valued at
amortized cost.
Short-term debt securities of the Funds other than the Money Market Fund
having a remaining maturity of more than sixty (60) days will be valued using a
"market-to-market" method based upon either the readily available market price
or, if reliable market quotations are not available, upon quotations by dealers
or issuers for securities of a similar
27
-----------------------------
Allmerica Investment Trust
<PAGE>
type, quality and maturity. "Marking-to-market" takes into account unrealized
appreciation or depreciation due to changes in interest rates or other factors
which would influence the current fair value of such securities.
All portfolio securities of the Money Market Fund will be valued by the
amortized cost method. The purpose of this method of calculation is to attempt
to maintain a constant net asset value per share of $1.00. No assurance can be
given that this goal can be attained. Amortized cost is an approximation of
market value determined by increasing systematically the carrying value of a
security acquired at a discount or reducing systematically the carrying value of
a security acquired at a premium, so that the carrying value is equal to
maturity value on the maturity date. It does not take into consideration
unrealized gains or losses. While the amortized cost method provides certainty
and consistency in portfolio valuation, it may result in valuations of portfolio
securities which are higher or lower than the prices at which the securities
could be sold. During such periods, the yield to investors in a Fund may differ
somewhat from that obtained if the Fund were to use mark-to-market value for its
portfolio securities. For example, if the use of amortized cost resulted in a
lower (higher) aggregate portfolio value on a particular day, a prospective
investor in the Fund would obtain a somewhat higher (lower) yield than would
result from marked-to-market valuation, and existing investors would receive
less (more) investment income.
The use of the amortized cost method of valuation by the Money Market Fund
is subject to rules of the Securities and Exchange Commission. Under the rules,
the Fund is required to maintain a dollar weighted average portfolio maturity of
90 days or less and to limit its investments to instruments which (1) its
Sub-Adviser, subject to the guidelines established by the Trustees, determines
present minimal credit risks; (2) have high quality ratings or are deemed
comparable, such that they are "eligible securities" as defined below; and (3)
have remaining maturity of thirteen months (397 days) or less at the time of
purchase, or are subject to a demand feature which reduces the remaining
maturity to thirteen months or less.
The Money Market Fund may purchase only "First or Second Tier eligible
securities" which are defined to include (1) securities which have received the
highest or second highest rating by at least two nationally recognized
statistical rating organizations ("NRSRO") or by only one NRSRO if only one has
rated the security and (2) securities which are unrated, but, in the
Sub-Adviser's opinion, are of comparable quality. The Money Market Fund may
purchase securities which were long-term at issuance but have a remaining
maturity of thirteen months or less at the time of purchase if (a) the issuer
has comparable short-term debt securities outstanding which are eligible
securities or (b) the issuer has no short-term rating and the securities have
either no long-term rating or a long-term rating in one of the two highest
categories by an NRSRO.
The above standards must be satisfied at the time an investment is made. If
the quality of the investment later declines, the Fund (a) may dispose of the
security within five business days of the Sub-Adviser becoming aware of the new
rating, or (b) may continue to hold the investment, but the Trustees will
evaluate whether the security continues to present minimal credit risks.
As a part of the overall duty of care they owe to the Fund's shareholders,
the Trustees have established procedures reasonably designed to stabilize the
net asset value per share of the Money Market Fund as computed for the purpose
of distribution and redemption at $1.00 per share taking into account current
market conditions and the Fund's investment objective. At such reasonable
intervals as they deem appropriate in light of current market conditions, the
Trustees will compare the results of calculating the net asset value per share
based on amortized cost with the results based on available indications of
market value. If a difference of more than 1/2 of 1% occurs between the two
methods of valuation, the Trustees will consider taking whatever steps they deem
necessary to minimize any material dilution or other unfair results, such as
shortening the average portfolio maturity or realizing gains or losses.
ORGANIZATION OF THE TRUST
The Agreement and Declaration of the Trust ("Trust Declaration") provides
that all persons extending credit to, contracting with, or having any claims
against the Trust or a particular Fund shall look only to the assets of the
Trust or particular Fund for payment under such credit, contract or claim, and
neither the shareholders, Trustees, nor any of the Trust's officers, employees
or agents shall be personally liable thereof. Under Massachusetts law,
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust. The Trust Declaration, however, disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Trust Declaration provides for
indemnification out of a Fund's property for all loss and expense of any
shareholder of that Fund held
28
- ---------------------------
Allmerica Investment Trust
<PAGE>
liable on account of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund of which he or she was a shareholder
would be unable to meet its obligations.
Pursuant to the Trust Declaration, a Trustee is liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, but is not liable for
errors of judgment, mistakes of fact or law any act or omission in accordance
with the advice of counsel or other experts with respect to the meaning of the
Trust Declaration, or for failing to follow such advice.
The Trust Declaration provides that, on any matter submitted to a vote of
the shareholders, all shares shall be voted by individual series, except (1)
when required by the 1940 Act, shares shall be voted in the aggregate and not by
individual series, and (2) when the Trustees have determined that the matter
affects only the interests of one or more series, then only the shareholders of
such series shall be entitled to vote thereon. Shares are freely transferable,
are entitled to dividends as declared by the Trustees and, on liquidation of the
Trust, shareholders are entitled to receive their pro rata portion of the net
assets of the Fund of which they hold shares, but not of any other Fund.
Shareholders have no preemptive rights.
In the event that at any time less than a majority of the Trustees then in
office were elected by the shareholders, the Trustees must call a meeting of
shareholders promptly for the purpose of electing Trustees. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Trustee as if Section 16(c) of the 1940 Act applied to the Trust.
Matters subject to a vote by the shareholders include changes in the
fundamental policies of the Trust as described in the Prospectus and the SAI,
the election or removal of Trustees and the approval of agreements with
investment advisers. A majority, for the purposes of voting by shareholders
pursuant to the 1940 Act, is 67% or more of the voting securities of an
investment company present at an annual or special meeting of shareholders if
50% of the outstanding voting securities of such company are present or
represented by proxy or more than 50% of the outstanding voting securities of
such company, whichever is less.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as the Fund's independent accountants providing audit and accounting
services including (i) examination of the annual financial statements, (ii)
assistance and consultation with respect to the preparation of filings with the
Securities and Exchange Commission, and (iii) review of annual income tax
returns.
FINANCIAL STATEMENTS
The Trust's Financial Statements and related notes and the report of the
independent accountants contained in the Trust's annual report for the fiscal
year ended December 31, 1997 are incorporated by reference into this Statement
of Additional Information.
29
-----------------------------
Allmerica Investment Trust
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
<TABLE>
<S> <C>
(a) Financial Statements
Part A Financial Highlights Tables
Part B Reference is made to the Allmerica Investment Trust Financial
Statements contained in Allmerica Financial Asset Management
Annual Report for the year ended December 31, 1997, as listed
below.
Portfolio of Investments December 31, 1997
Statements of Assets and Liabilities December 31, 1997
Statements of Operations for Year Ended December 31, 1997
Statements of Changes in Net Assets for Years Ended
December 31, 1997 and December 31, 1996
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Other Information
Regulatory Disclosures
Client Notices
b) Exhibits
</TABLE>
Exhibit 1 Agreement and Declaration of Trust, dated October 11, 1984, as
amended May 12, 1992 is filed herein.
Exhibit 2 Bylaws as amended May 12, 1992 are filed herein.
Exhibit 3 None
Exhibit 4 None
Exhibit 5(a) Form of Management Agreement (the "Management Agreement")
between Registrant and Allmerica Financial Investment
Management Services, Inc. (the "Manager") dated _________,
1998 is filed herein.
Exhibit 5(b) Form of Sub-Adviser Agreement between the Manager and Schroder
Capital Management International Inc. with respect to the
Select Emerging Markets Fund dated ___________, 1998 is filed
herein.
Exhibit 5(c) Form of Sub-Adviser Agreement between the Manager and
Nicholas-Applegate Capital Management, L.P. with respect to
the Select Aggressive Growth Fund dated __________, 1998 is
filed herein.
Exhibit 5(d) Form of Sub-Adviser Agreement between the Manager and T. Rowe
Price Associates, Inc. with respect to the Select Capital
Appreciation Fund dated __________, 1998 is filed herein.
7
<PAGE>
Exhibit 5(e) Form of Sub-Adviser Agreement between the Manager and Cramer
Rosenthal McGlynn, LLC dated ____________, 1998 with respect
to the Select Value Opportunity Fund is filed herein.
Exhibit 5(f) Form of Sub-Adviser Agreement between the Manager and Bank of
Ireland Asset Management (U.S.) Limited with respect to the
Select International Equity Fund dated _________, 1998 is
filed herein.
Exhibit 5(g) Form of Sub-Adviser Agreement between the Manager and Putnam
Investment Management, Inc. with respect to the Select Growth
Fund dated __________, 1998 is filed herein.
Exhibit 5(h) Form of Sub-Adviser Agreement between the Manager and Cambiar
Investors, Inc. with respect to the Select Strategic Growth
Fund dated ___________, 1998 is filed herein.
Exhibit 5(i) Form of Sub-Adviser Agreement between the Manager and Miller
Anderson & Sherrerd, LLP with respect to the Growth Fund dated
___________, 1998 is filed herein.
Exhibit 5(j) Form of Sub-Adviser Agreement between the Manager and John A.
Levin & Co., Inc. with respect to the Select Growth and Income
Fund dated __________, 1998 is filed herein.
Exhibit 5(k) Form of Sub-Adviser Agreement between the Manager and
Standish, Ayer & Wood, Inc. with respect to the Select Income
Fund dated _________, 1998 is filed herein.
Exhibit 5(l) Form of Sub-Adviser Agreement between the Manager and
Allmerica Asset Management, Inc. with respect to the Equity
Index Fund, Investment Grade Income Fund, Government Bond Fund
and Money Market Fund dated __________, 1998 is filed herein.
Exhibit 6 Distribution Agreement with Allmerica Investments, Inc. dated
February 25, 1998 is filed herein.
Exhibit 7 None
Exhibit 8 Custodian Agreement with Bankers Trust Company dated October
25, 1995 was filed previously in Post-effective Amendment No.
31 on February 27, 1996 and is incorporated herein by
reference.
Exhibit 8(a) Amended Exhibit A to the Custodian Agreement between Bankers
Trust Company and Allmerica Investment Trust dated January 9,
1998 is filed herein.
Exhibit 8(b) Delegation Agreement with Bankers Trust Company dated March
10, 1998 is filed herein.
Exhibit 8(c) Supplemental Delegation Agreement between the Manager and
Registrant dated March 10, 1998 is filed herein.
Exhibit 9 Form of Fund Accounting Services Agreement with First Data
Investor Services Group, Inc. dated _______________, as
amended on February ____, 1998 is filed herein.
8
<PAGE>
Exhibit 9(a) Form of Administration Agreement with First Data Investor
Services Group, Inc. dated _________, 1998 is filed herein.
Exhibit 10 Opinion and consent of counsel is filed herein.
Exhibit 11 Consent of Independent Accountants is filed herein.
Exhibit 12 None
Exhibit 13 Participation Agreement among Registrant, Allmerica Financial
Investment Management Services, Inc. and First Allmerica
Financial Life Insurance Company dated as of February 25, 1998
is filed herein.
Exhibit 13(a) Participation Agreement among Registrant, Allmerica Financial
Investment Management Services, Inc. and Allmerica Financial
Life Insurance and Annuity Company dated as of February 25,
1998 is filed herein.
Exhibit 14 None
Exhibit 15 None
Exhibit 16 Schedule for Computation of Performance Quotations is filed
herein.
Exhibit 18 None
Exhibit 19 Power of Attorney dated February 25, 1998 is filed herein.
Exhibit 27 Financial Data Schedules are filed herein.
Item 25. Persons Under Common Control with Registrant
--------------------------------------------
Registrant was organized by State Mutual Life Assurance Company of America, now
known as First Allmerica Financial Life Insurance Company ("First Allmerica"),
primarily for the purpose of providing a vehicle for the investment of assets
received by various separate investment accounts ("Separate Accounts")
established by First Allmerica and life insurance company subsidiaries of First
Allmerica including Allmerica Life Insurance and Annuity Company ("Allmerica
Financial Life"). The assets in such Separate Accounts are, under state law,
assets of the life insurance companies which have established such accounts.
Thus at any time First Allmerica and its life insurance company subsidiaries
will own such of Registrant's outstanding shares as are purchased with Separate
Account assets; however, where required to do so, First Allmerica and its life
insurance company subsidiaries will vote such shares only in accordance with
instructions received from owners of the contracts pursuant to which sums are
placed in such Separate Accounts.
Item 26. Number of Holders of Securities
-------------------------------
As of March 4, 1998, the Registrant had one hundred seventy-three (173)
shareholders. Seventy-six (76) shareholder accounts of First Allmerica
separate accounts own shares in the respective Funds and ninety-seven (97)
shareholder accounts of Allmerica Financial Life separate accounts own shares
in the respective Funds.
9
<PAGE>
Item 27. Indemnification
---------------
Article VIII of Registrant's Agreement and Declaration of Trust, entitled
"Indemnification," is filed herein as Exhibit 1 of this Registration Statement.
Article III, Section 12 of the Bylaws of First Allmerica is filed herein as
Exhibit 2 of this Registration Statement.
Undertaking Pursuant to Rule 484
- --------------------------------
Article VIII of Registrant's Agreement and Declaration of Trust provides that
each of its Trustees and each Officer ( and his heirs, executors, and
administrators) may be indemnified against all liabilities and expenses arising
out of the defense or disposition of any action, suit, or other proceeding in
which such person may be or may have been involved by reason of being or having
been such a Trustee or Officer, except with respect to any matter as to which
such person shall have been finally adjudicated not to have acted in good faith
in the reasonable belief that such action was in the best interests of
Registrant, and except that no person shall be indemnified against any liability
to Registrant or to its shareholders to which such person otherwise would be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's
office.
Insofar as indemnification for liability arising under the 1933 Act may be
permitted to Trustees, Officers and Controlling Persons of Registrant pursuant
to the foregoing provisions, or otherwise, Registrant has been advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or paid
by a Trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, Officer
or Controlling Person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Manager and Sub-Advisors
---------------------------------------------------------------------
The following Schedule Ds of Form ADV are incorporated by reference:
Nicholas-Applegate Capital Management, L.P., File No. 801-21442; Allmerica Asset
Management, Inc., File No. 801-44189; Allmerica Financial Investment Management
Services, Inc., File No. _________; Miller, Anderson & Sherrerd, LLP, File No.
801-10437; Bank of Ireland Asset Management (U.S.) Limited, File No. 801-29606;
John A. Levin & Co., Inc., File No. 801-18010; T. Rowe Price Associates, Inc.,
File No. 801-856; Putnam Investment Management, Inc., File No. 801-7974; Cramer
Rosenthal McGlynn, LLC, File No. 801-55244; Standish, Ayer & Wood, Inc., File
No. 801-584; Schroder Capital Management International Inc., File No. 801-15834;
and Cambiar Investors, Inc., File No. 801-9538.
Item 29. Principal Underwriters
----------------------
(a) Allmerica Investments, Inc., the Distributor, does not act as principal
underwriter, depositor or investment adviser for any other investment
company.
(b) The following information is provided with respect to the directors and
officers of Allmerica Investments, Inc., the Distributor:
10
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address Distributor Registrant
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John F. Kelly Director N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
John F. O'Brien Director Trustee
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Stephen Parker Director N/A
Allmerica Financial Chief Executive Officer
440 Lincoln Street President
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Richard M. Reilly Director Trustee, President
Allmerica Financial Life
Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Eric A. Simonsen Director N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Emil J. Aberizk Jr. Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Abigail M. Armstrong Counsel N/A
Allmerica Financial Secretary/Clerk
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Edward T. Berger Chief Compliance Officer N/A
Allmerica Financial Vice President
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Richard F. Betzler Jr. Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
John W. Bosselman III Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Philip J. Coffey Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address Distributor Registrant
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas P. Cunningham Chief Financial Officer Vice President
Allmerica Financial Controller Treasurer
440 Lincoln Street Principal Accounting Officer
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Paul L. Foster Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Cecile T. Harrington Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Robert G. Juneau Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Joseph W. MacDougall Jr. Assistant Secretary Assistant Secretary
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
William F. Monroe Jr. Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
David J. Mueller Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Edward A. Ostrout Assistant Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Edward J. Parry III Treasurer N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
Mark G. Steinberg Senior Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(c) Not Applicable.
Item 30. Location of Accounts and Records
--------------------------------
Each account, book, or other document required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940, as amended and
Rules 31a-1 to 31a-3 thereunder are maintained by Registrant at 440 Lincoln
Street, Worcester, Massachusetts 01653 or on behalf of the Registrant by First
Data Investor Services Group, Inc., 4400 Computer Drive, Westboro, Massachusetts
01581.
12
<PAGE>
Item 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
------------
(a) The Registrant undertakes to furnish, upon request
and without charge, a copy of the Registrant's
latest Annual Report to Shareholders to each person
to whom a Prospectus is delivered.
(b) Registrant hereby undertakes to call a meeting of
its shareholders for the purpose of voting upon the
question of removal of a trustee or trustees of
Registrant when requested in writing to do so by
the holders of at least 10% of Registrant's
outstanding shares. Registrant undertakes further,
in connection with the meeting, to comply with the
provisions of Section 16(c) of the Investment
Company Act of 1940, as amended, relating to
communications with the shareholders of certain
common-law trusts.
(c) Registrant hereby undertakes to file a
post-effective amendment, using financial
statements which need not be certified, within four
to six months from the commencement of operations
of the Select Emerging Markets Fund and the Select
Strategic Growth Fund.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that this
Post-effective Amendment to the Registration Statement meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933, as amended, and has duly caused this
Post-effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Worcester and
Commonwealth of Massachusetts on the 14th day of April, 1998.
ALLMERICA INVESTMENT TRUST
--------------------------
Registrant
By: /s/ Richard M. Reilly
---------------------------
Richard M. Reilly, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Richard M. Reilly President, Chief Executive Officer April 14, 1998
- --------------------- and Trustee
Richard M. Reilly
John F. O'Brien Chairman of the Board and Trustee April 14, 1998
Thomas P. Cunningham Treasurer (Principal Accounting April 14, 1998
Officer
Cynthia A. Hargadon Trustee April 14, 1998
Gordon Holmes Trustee April 14, 1998
John P. Kavanaugh Trustee April 14, 1998
Bruce E. Langton Trustee April 14, 1998
Attiat F. Ott Trustee April 14, 1998
Ranne P. Warner Trustee April 14, 1998
Richard M. Reilly, by signing his name hereto, does hereby sign this document of
behalf of each of the above-named Trustees and officers of Allmerica Investment
Trust pursuant to the Power of Attorney dated February 25, 1998 duly executed by
such persons.
/s/ Richard M. Reilly
- -----------------------------------
Richard M. Reilly, Attorney-In-Fact
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
<S> <C>
EXHIBIT 1..............Agreement and Declaration of Trust
EXHIBIT 2..............Bylaws of Allmerica Investment Trust
EXHIBIT 5(a)...........Form of Management Agreement between Registrant and
Allmerica Financial Investment Management
Services, Inc. (the "Manager")
EXHIBIT 5(b)...........Form of Sub-Adviser Agreement between the Manager
and Schroder Capital Management International, Inc.
EXHIBIT 5(c)...........Form of Sub-Adviser Agreement between the Manager
and Nicholas Applegate Capital Management, L.P.
EXHIBIT 5(d)...........Form of Sub-Adviser Agreement between the Manager
and T. Rowe Price Associates, Inc.
EXHIBIT 5(e)...........Form of Sub-Adviser Agreement between the Manager
and Cramer Rosenthal McGlynn, LLC
EXHIBIT 5(f)...........Form of Sub-Adviser Agreement between the Manager
and Bank or Ireland Asset Management (U.S.) Limited
EXHIBIT 5(g)...........Form of Sub-Adviser Agreement between the Manager
and Putnam Investment Management, Inc.
EXHIBIT 5(h)...........Form of Sub-Adviser Agreement between the Manager
and Cambiar Investors, Inc.
EXHIBIT 5(i)...........Form of Sub-Adviser Agreement between the Manager
and Miller Anderson Sherrerd, LLP
EXHIBIT 5(j)...........Form of Sub-Adviser Agreement between the Manager
and John A. Levin & Co.
EXHIBIT 5(k)...........Form of Sub-Adviser Agreement between the Manager
and Standish, Ayer & Wood, Inc.
EXHIBIT 5(l)...........Form of Sub-Adviser Agreement between the Manager
and Allmerica Asset Management, Inc.
EXHIBIT 6..............Distribution Agreement
EXHIBIT 8(a)...........Amended Exhibit A to the Custodian Agreement
EXHIBIT 8(b)...........Delegation Agreement
EXHIBIT 8(c)...........Supplemental Delegation Agreement
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
Exhibit 9............... Form of Fund Accounting Services Agreement
Exhibit 9(a)............ Form of Administration Agreement
Exhibit 10.............. Opinion and Consent of Counsel
Exhibit 11.............. Consent of Independent Accountants
Exhibit 13.............. First Allmerica Financial Life Insurance Company
Participation Agreement
Exhibit 13(a)........... Allmerica Financial Life Insurance and Annuity
Company Participation Agreement
Exhibit 16.............. Schedule for Computation of Performance
Quotations
Exhibit 19.............. 2 - Powers of Attorney dated 2/25/98
Exhibit 27.............. Financial Data Schedules
2
<PAGE>
EXHIBIT 1
ALLMERICA INVESTMENT TRUST
(formerly SMA Investment Trust)
AMENDED AGREEMENT AND DECLARATION OF TRUST
(as amended by action of the Board of Trustees
dated May 7, 1992, to change the name of the Trust from
SMA Investment Trust to Allmerica Investment Trust)
<PAGE>
ALLMERICA INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
(As Amended)
AGREEMENT AND DECLARATION OF TRUST made at Worcester, Massachusetts, the 11th
day of October, 1984, by the Trustees hereunder, as amended.
WITNESSETH that
WHEREAS, the Trustees have agreed to manage all property coming into their hands
as Trustees of a Massachusetts voluntary association with transferable shares in
accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the holders from time
to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name
- ----
Section 1. This Trust shall be known as "Allmerica Investment Trust", and the
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine.
Definitions
- -----------
Section 2. Whenever used herein, unless otherwise required by the context or
specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or elected
in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest in the Trust shall be divided from time to
time or, if more than one series of
1
<PAGE>
Shares is authorized by the Trustees, the equal proportionate transferable units
into which each series of Shares shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Principal Underwriter" and "Majority Shareholder Vote" (the 67% or 50%
requirement of the third sentence of Section 2(a)(42) of the 1940 Act, whichever
may be applicable) shall have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from time to
time.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment primarily
in securities and debt instruments.
ARTICLE III
Shares
Division of Beneficial Interest
- -------------------------------
Section 1. The Shares of the Trust shall be issued in one or more series as
the Trustees may, without shareholder approval, authorize. Each series shall be
preferred over all other series in respect of the assets allocated to that
series. The beneficial interest in each series shall at all times be divided
into Shares, without par value, each of which shall represent an equal
proportionate interest in the series with each other Share of the same series,
none having priority or preference over another. The number of Shares
authorized shall be unlimited. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series.
2
<PAGE>
Ownership of Shares
- -------------------
Section 2. The ownership of Shares shall be recorded on the books of the
Trust or a transfer or similar agent. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders of
each series and as to the number of Shares of each series held from time to time
by each Shareholder.
Investment in the Trust
- -----------------------
Section 3. The Trustees shall accept investments in the Trust from such
persons and on such terms and for such consideration, which may consist of cash
or tangible or intangible property or a combination thereof, as they from time
to time authorize.
All consideration received by the Trust for the issue or sale of Shares of
each series, together with all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to the Series of Shares
with respect to which the same were received by the Trust, for all purposes,
subject only to the rights of creditors, and shall be so handled upon the books
of account of the Trust and are herein referred to as "assets" of such series.
No Preemptive Rights
- --------------------
Section 4. Shareholders shall have no preemptive or other right to subscribe
to any additional Shares or other securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
- -----------------------------------------------------
Section 5. Shares shall be deemed to be personal property giving only the
rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the same nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or Trustees, but only to
the rights of said decedent under this Trust. Ownership of Shares shall not
entitle the Shareholder to any title in or right to any part of the Trust
property, or to call for a partition or division of the same, or to call for an
accounting; nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind personally any Shareholder, nor
except as specifically provided herein to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
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ARTICLE IV
The Trustees
Election
- --------
Section 1. The initial Trustees, each of whom shall serve until the first
meeting of Shareholders at which Trustees are elected and until his or her
successor is elected and qualified, or is removed, shall be Frederick Fedeli and
John M. Quinlan and such other persons as the Trustees then in office shall,
prior to any sale of Shares pursuant to public offering, appoint.
The number of Trustees shall be fixed by the Trustees, except that, subsequent
to any sale of Shares pursuant to a public offering, there shall be not less
than three nor more than fifteen Trustees. Any vacancies occurring in the Board
of Trustees may be filled by Trustees if, immediately after filling any such
vacancy, at least two-thirds of the Trustees then holding office shall have been
elected to such office by the Shareholders. In the event that at any time less
than a majority of the Trustees then holding office were elected to such office
by the Shareholders, the Trustees shall call a meeting of Shareholders for the
purpose of electing Trustees. Each Trustee elected by the Shareholders or by
the Trustees shall serve until the next meeting of Shareholders held for the
purpose of electing Trustees and until the elections and qualification of his or
her successor, or until he or she sooner dies, resigns, or is removed. At any
meeting called for such purpose, a Trustee may be removed, with or without
cause, by vote of a majority of the outstanding shares. By vote of a majority
of the Trustees then in office, the Trustees may remove a Trustee with or
without cause. A Trustee's incumbency shall be subject to termination by the
retirement policy adopted from time to time by the Board of Trustees.
Effect of Death, Resignation, etc., of a Trustee
- ------------------------------------------------
Section 2. The death, declination, resignation, retirement, removal or
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
Powers
- ------
Section 3. Subject to the provisions of this Declaration of Trust, the
business shall be managed by the Trustees, and they shall have all powers
necessary or convenient to carry out that responsibility. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business of the Trust and may amend
and repeal them to the extent that such Bylaws do not reserve that right to the
Shareholders; they may fill vacancies in or add to their number and may elect
and remove such officers and appoint and terminate such agents as they consider
appropriate; they may appoint from their own number, and terminate, any one or
more committees including an executive committee which may, when the Trustees
are not in session, exercise some or all of the power and authority of the
Trustees as the Trustees may determine; they may employ one or more custodians
of the assets of the Trust and may authorize such custodians to employ sub-
custodians and to
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deposit all or any part of such assets in a system or systems for the central
handling of securities, retain a transfer agent or a Shareholder servicing
agent, or both, provide for the distribution of Shares by the Trust, through one
or more principal underwriters or otherwise, set record dates for the
determination of Shareholders with respect to various matters, and in general
delegate such authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of the Trust or to
any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options on
and lease any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership or securities;
(e) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the name of the
Trustees or of the Trust or in the name of a custodian, sub-custodian or other
depositary or a nominee or nominees or otherwise;
(f) To allocate assets, liabilities and expenses of the Trust to a
particular series of Shares or to apportion the same among two or more series,
provided that any liabilities or expenses incurred by a particular series of
Shares shall be payable solely out of the assets of that series.
(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of which is
or was held in the Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustee shall deem
proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
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(j) To enter into joint ventures, general or limited partnerships and any
other combinations or association;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or other obligations of
any person; to make contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the Trust property or
any part thereof to secure any of or all such obligations;
(m) To purchase and pay for entirely out of Trust property such insurance as
they may deem necessary or appropriate for the conduct of the business,
including without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio investments,
and insurance policies insuring any Shareholders, Trustees, officers, employees,
agents, investment advisers or managers, principal underwriters, or independent
contractors of the Trust individually against all claims and liabilities of
every nature arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken or omitted by
any such person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
such liability; and
(n) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.
The Trustees shall not in any way be bound or limited by any present or future
law or custom in regard to investments by Trustees. Except as otherwise
provided herein or from time to time by the Bylaws, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), within or without Massachusetts, including
any meeting held by means of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time, and participation by such means shall constitute
presence in person at a meeting, or by written consents of a majority of the
Trustees then in office.
Payment of Expenses by Trust
- ----------------------------
Section 4. The Trustees are authorized to pay or to cause to be paid out of
the principal or income of the Trust, or partly out of principal and partly out
of income, as they deem fair, or to arrange for the Shareholders to pay, in
whole or in part, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including but not limited to, the Trustees' compensation and such
expenses and charges
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for the services of the Trust's officers, employees, investment adviser or
manager, principal underwriter, auditor, counsel, custodian, transfer agent,
Shareholder servicing agent, and such other agents or independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur; provided, however, that all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with a particular series of Shares
shall be payable solely out of the assets or by the Shareholders of that series.
Ownership of Assets of the Trust
- --------------------------------
Section 5. Title to all of the assets of each series of Shares and of the
Trust shall at all times be considered as vested in the Trustees.
Advisory, Management and Distribution
- -------------------------------------
Section 6. Subject to a favorable Majority Shareholder Vote, the Trustees
may, at any time and from time to time, contract for exclusive or non exclusive
advisory and/or management services with any corporation, trust, association or
other organization (the "Manager"), every such contract to comply with such
requirements and restrictions as may be set forth in the Bylaws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested, and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to time, contract
with the Manager or any other corporation, trust association or other
organization, appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with such requirements
and restrictions as may be set forth in the Bylaws; and any such contract may
contain such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(a) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or for any corporation,
trust, association, or other organization, or of or for any parent or
affiliate of any organization, with which an advisory or management contract,
or principal underwriter's or distributor's contract, or transfer, Shareholder
servicing or other agency contract may have been or may hereafter be made, or
that any such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(b) any corporation, trust, association or other organization with which
an advisory or management contract or principal underwriter's or distributor's
contract, or transfer, Shareholder servicing or other agency contract may have
been or may hereafter be made also has an advisory or management contract, or
principal underwriter's or distributor's contract, or transfer, Shareholder
servicing or other agency contract with one or more other corporations,
trusts, associations, or other organizations, or has other business or
interests
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shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same nor create any liability or accountability to the Trust or its
Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meeting
Voting Powers
- -------------
Section 1. The Shareholders shall have power to vote only (a) for the
election of Trustees as provided in Article IV, Section 1, (b) with respect to
any Manager as provided in Article IV, Section 6, (c) with respect to any
termination of this Trust to the extent and as provided in Article IX, Section
4, (d) with respect to any amendment of this Declaration of Trust to the extent
and as provided in Article IX, Section 7, (e) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders,
and (f) with respect to such additional matters relating to the Trust as may be
required by this Declaration of Trust, the Bylaws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote. On any
matter submitted to a vote of Shareholders, all Shares of the Trust then
entitled to vote shall be voted by individual series, except (a) when required
by the 1940 Act, Shares shall be voted in the aggregate and not by individual
series, and (b) when the Trustees have determined that the matter affects only
the interests of one or more series, then only Shareholders of such series shall
be entitled to vote thereon. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws, to be taken by
Shareholders.
Voting Power and Meetings
- -------------------------
Section 2. Meetings of Shareholders of the Trust or of any series may be
called by the Trustees or such other person or persons as may be specified in
the Bylaws, and held from time to time for the purpose of taking action upon any
matter requiring the vote or the authority of the Shareholders of the Trust or
of any series as herein provided or upon any other matter deemed by the Trustees
to be necessary or desirable. Meetings of Shareholders of the Trust or of any
series shall be called by the Trustees or such other person or persons as may be
specified in the Bylaws
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upon written application by Shareholders holding at least 10% of the outstanding
Shares of the Trust, if Shareholders of all series are required hereunder to
vote in the aggregate and not by individual series at such meeting, or of any
series, if Shareholders of such series are entitled hereunder to vote by
individual series at such meeting, requesting that a meeting be called for a
purpose requiring action by the Shareholders as provided herein or in the
Bylaws. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least twenty days before
such meeting, postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder at the Shareholder's address as it appears on the
records of the Trust.
Quorum and Required Vote
- ------------------------
Section 3. Thirty percent (30%) of the Shares entitled to vote shall be a
quorum for the transaction of business at a Shareholders' meeting, except that
where any provision of law or of this Declaration of Trust permits or requires
that holders of any series shall vote as a series, then 30% of the aggregate
number of Shares of that series entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that series. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the Bylaws, a majority
of the Shares voted shall decide any questions, and a plurality shall elect a
Trustee; provided that where any provision of law or of this Declaration of
Trust permits or requires that the holders of any series shall vote as a series,
then a majority of the Shares of that series voted on the matter shall decide
that matter insofar as that series is concerned.
Action by Written Consent
- -------------------------
Section 4. Any action taken by Shareholders may be taken without a meeting if
a majority of Shareholders entitled to vote on the matter (or such larger
proportion thereof as shall be required by any express provision of this
Declaration of Trust or the Bylaws) consent to the action in writing and such
written consents are filed with the records of the meetings of Shareholders.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
- ---------------------
Section 5. The Bylaws may include further provisions for Shareholders' votes
and meetings and related matters.
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ARTICLE VI
Distributions, Redemptions and Repurchases
Distributions
- -------------
Sections 1. The Trustees may each year, or more frequently if they so
determine, distribute to the Shareholders of each series such income and capital
gains, accrued or realized, as the Trustees may determine, after providing for
actual and accrued expenses and liabilities (including such reserves as the
Trustees may establish) determined in accordance with good accounting practices.
The Trustees shall have full discretion to determine which items shall be
treated as income and which items as capital and their determination shall be
binding upon the Shareholders. Distributions of each year's income of each
series shall be distributed pro rata to Shareholders in proportion to the number
of Shares of each series held by each of them. At any time and from time to
time in their discretion, the Trustees may distribute to the Shareholders of any
one or more series all or any part of the principal of such series. Such
distributions shall be made in cash or Shares or a combination thereof as
determined by the Trustees. Any such distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance with the Bylaws.
Redemptions and Repurchases
- ---------------------------
Section 2. The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of any certificate for the
Shares to be purchased, a proper instrument of transfer and a request directed
to the Trust or a person designated by the Trust that the Trust purchase such
Shares, or in accordance with such other procedures for redemption as the
Trustees may from time to time authorize; and the Trust will pay therefor the
net asset value thereof, as next determined in accordance with the Bylaws.
Payment for said Shares shall be made by the Trust to the Shareholder within
seven days after the date on which the request is made. The obligation set
forth in this Section 2 is subject to the provision that in the event that any
time the New York Stock Exchange is closed for other than customary weekends or
holidays, or, if permitted by rules of the Commission, during periods when
trading on the Exchange is restricted or during any emergency which makes it
impractical for the Trust to dispose of its investments or to determine fairly
the value of its net assets, or during any other period permitted by order of
the Commission for the protection of investors, such obligation may be suspended
or postponed by the Trustees. The Trust also may purchase or repurchase Shares
at a price not exceeding the net asset value of such Shares in effect when the
purchase or repurchase or any contract to purchase or repurchase is made.
Redemption at the Option of the Trust
- -------------------------------------
Section 3. The Trustee shall have the right at its option and at any time
to redeem Shares of any Shareholder at the net asset value thereof as determined
in accordance with the Bylaws: (a) if at such time Shareholder owns fewer Shares
than an amount determined from time to time by the Trustees; or (b) to the
extent that such Shareholder owns Shares of a particular series of
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Shares equal to or in excess of a percentage of the Shares determined from time
to time by the Trustees; or (c) to the extent that such Shareholder owns Shares
of the Trust representing a percentage equal to or in excess of such percentage
of the aggregate number of outstanding Shares of the Trust or the aggregate net
asset value of the Trust determined from time to time by the Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
- ------------
Section 1. The Trustees as such shall be entitled to reasonable compensation
from the Trust; they may fix the amount of their compensation. Nothing herein
shall in any way prevent the employment of any Trustee in connection with
advisory, management, legal, accounting, investment banking or other services,
and payment for the same by the Trust.
Limitation of Liability
- -----------------------
Section 2. The Trustees shall not be responsible or liable in any event for
any neglect or wrongdoing of any officer, agent, employee, manager or principal
underwriter of the Trust, nor shall any Trustee be responsible for the act or
omission of any other Trustee, but nothing herein contained shall protect any
Trustee against any liability to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and every
other act or thing whatsoever executed or done by or on behalf of the Trust or
the Trustees or any of them in connection with the Trust shall be conclusively
deemed to have been executed or done only in or with respect to their or his or
her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
- ------------------------
Section 1. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise, hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit
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or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such Covered Person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Covered Person except with respect to any matter as
to which such Covered Person shall have been finally adjudicated in any such
action, suit or other proceeding (a) not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the best interests of
the Trust, or (b) to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust shall be insured against losses arising from any such advance
payments, or (c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
full trial type inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Article.
Compromise Payment
- ------------------
Section 2. As to any matter disposed of (whether by a compromise payment,
pursuant to a consent decree or otherwise) without an adjudication by a court,
or by any other body before which the proceeding was brought, that such Covered
Person either (a) did not act in good faith in the reasonable belief that his or
her action was in the best interests of the Trust, or (b) is liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office, indemnification shall be provided if (a) approved as in the best
interests of the Trust, after notice that it involves such indemnification, by
at least a majority of the disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in office act on the matter)
upon a determination, based upon a review of readily available facts (as opposed
to a full trial type inquiry) that such Covered Person acted in good faith in
the reasonable belief that his or her action was in the best interests of the
Trust and is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry) to the effect that
such Covered Person appears to have acted in good faith in the reasonable belief
that his or her action was in the best interests of the Trust and that such
indemnification would not protect such Covered Person against any liability to
the Trust to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Any approval pursuant to this
Section shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in
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accordance with this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
Indemnification Not Exclusive
- -----------------------------
Section 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall include
such person's heirs, executors and administrators, and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust, (or who has been
exempted from being an interested person by any rule, regulation or order of the
Commission) and against whom none of such actions, suits or other proceedings or
another action, suit or other proceeding on the same or similar grounds is then
or has been pending. Nothing contained in this Article shall affect any rights
to indemnification to which personnel of the Trust, other than Trustees or
officers, and other persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
Shareholders
- ------------
Section 4. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her agreements, acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all loss and expense
arising from such liability, but only out of the assets of the particular series
of Shares of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc., Not Personally Liable: Notice
- -----------------------------------------------------------
Section 1. All persons extending credit to, contracting with or having any
claim against the Trust or a particular series of Shares shall look only to the
assets of the Trust or the assets of that particular series of Shares for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Declaration Trust shall protect any Trustee against any liability to which such
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee.
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Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officer and officers shall give notice that
this Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts, and shall recite that the same was executed or made by or on
behalf of the Trust or by them as Trustee or Trustees or as officer or officers
and not individually, and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, and may contain such further recital
as he or she or they may deem appropriate, but the omission thereof shall not
operate to bind any Trustee or Trustees or officer or officers or Shareholder or
Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
- -------------------------------------------------------------
Section 2. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
- ------------------------------------------------
Section 3. No person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Duration and Termination of Trust
- ---------------------------------
Section 4. Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any time by vote of
Shareholders holding a majority of the Shares entitled to vote or by the
Trustees by written notice to the Shareholders. Any series of Shares may be
terminated at any time by vote of Shareholders holding a majority of the Shares
of such series entitled to vote or by the Trustees by written notice to the
Shareholders of such series.
Upon termination of the Trust or of any one or more series of Shares, after
paying or otherwise providing for all charges, taxes, expenses and liabilities,
whether due or accrued or anticipated of the Trust or of the particular series
as may be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash or Shares or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the series involved,
ratably according to the number of Shares of such series held by the several
Shareholders of such series on the date of termination.
14
<PAGE>
Filing of Copies, References, Headings
- --------------------------------------
Section 5. The original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of the Commonwealth of Massachusetts and
with the Worcester City Clerk, as well as any other governmental office where
such filing may from time to time be required. Anyone dealing with the Trust
may rely on a certificate by an officer of the Trust as to whether or not any
such amendments have been made and as to any matters in connection with the
Trust hereunder and, with the same effect as if it were the original, may rely
on a copy certified by an officer of the Trust to be a copy of this instrument
or of any such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions such as "herein", "hereof"
and "hereunder" shall be deemed to refer to this instrument as amended or
affected by any such amendments. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Applicable Law
- --------------
Section 6. This Declaration of Trust is made in the Commonwealth of
Massachusetts, and it is created under and is to be governed by and construed
and administered according to the laws of said Commonwealth. The Trust shall be
of the type commonly called a Massachusetts business trust, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Amendments
- ----------
Section 7. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when authorized
to do so by vote of Shareholders holding a majority of the Shares entitled to
vote, except that an amendment which shall affect the holders of one or more
series of Shares but not the holders of all outstanding series shall be
authorized by vote of the Shareholders holding a majority of the Shares entitled
to vote of each series affected and no vote of Shareholders of a series not
affected shall be required. Amendments having the purpose of changing the name
of the Trust or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision contained
here shall not require authorization by Shareholder vote.
15
<PAGE>
IN WITNESS WHEREOF, the undersigned having hereunto set their hands and
seals to this Amendment of the Agreement and Declaration of Trust of Allmerica
Investment Trust in the City of Worcester, MA for themselves and their assigns,
on this 7th day of May, 1992.
/s/ John F. O'Brien /s/ James R. McAuliffe
- ------------------------------ -------------------------------
John F. O'Brien, Trustee James R. McAuliffe, Trustee
66 Homestead Street 14 Reverend Thomas Hooker Road
Newton, MA 02168 Westboro, MA 01581
/s/ Richard M. Reilly /s/ Dr. Attiat F. Ott
- ------------------------------ -------------------------------
Richard M. Reilly, Trustee Dr. Attiat F. Ott, Trustee
15 Whittier Road 262 Salisbury Street
Needham, MA 02192 Worcester, MA 01609
/s/ Russell E. Fuller /s/ Ranne P. Warner
- ------------------------------ -------------------------------
Russell E. Fuller, Trustee Ranne P. Warner, Trustee
55 Central Street 87 Myrtle Street
Boylston, MA 01505 Boston, MA 02114
/s/ Gordon Holmes, Jr. /s/ Thomas S. Zocco
- ------------------------------ -------------------------------
Gordon Holmes, Jr., Trustee Thomas S. Zocco, Trustee
160 Beacon Street 17 Old Colony Drive
Boston, MA 02116 Shrewsbury, MA 01545
/s/ John D. Hunt
- ------------------------------
John D. Hunt, Trustee
12 Paul Revere Road
Worcester, MA 01609
THE COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. May 7, 1992
Then personally appeared each of the above named John F. O'Brien, Richard
M. Reilly, Russell E. Fuller, Gordon Holmes, Jr., John D. Hunt, James R.
McAuliffe, Dr. Attiat F. Ott, Ranne P. Warner and Thomas S. Zocco, and
acknowledged the foregoing instrument to be their free act and deed, before me,
/s/ Sheila B. St. Hilaire
------------------------------------
Notary Public
My commission expires March 18, 1994
16
<PAGE>
BYLAWS EXHIBIT 2
OF
ALLMERICA INVESTMENT TRUST
(AS AMENDED MAY 12, 1992)
ARTICLE I
AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 Agreement and Declaration of Trust. These Bylaws shall be subject to the
----------------------------------
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Allmerica Investment Trust, the Massachusetts
business trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall be
-----------------------------
located in Worcester, Massachusetts.
ARTICLE II
MEETINGS OF TRUSTEES
2.1 Regular Meetings. Regular meetings of the Trustees may be held without
----------------
call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A
regular meeting of the Trustees may be held without call or notice
immediately after and at the same place as the annual meeting of the
shareholders.
2.2 Special Meetings. Special meetings of the Trustees may be held at any time
----------------
and at any place designated in the call of the meeting when called by the
Chairman of the Board or the Treasurer or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the Secretary or
an Assistant Secretary or by the officer or the Trustees calling the
meeting.
2.3 Notice. It shall be sufficient notice to the Trustee of a special meeting
------
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement the lack of
notice to him or her. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees a majority of the Trustees then in
------
office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Action by Written Consent. Except where otherwise required under the
-------------------------
Investment Company Act of 1940, as amended, and under any other State or
Federal law or regulation applicable to the Trust, any action required or
permitted to be taken at any meeting of the Board of Trustees or any
committee thereof may be taken without a meeting if written consent thereto
is signed by a majority of the members of the Board of Trustees of
committee (as the case may be) and such written consent if filed
<PAGE>
with the minutes of the proceedings of the Board of Trustees or committee;
such consents shall be treated for all purposes as a vote at a meeting.
2.6 Remuneration. The Trustees shall determine the amount of any retainer to
------------
be paid to the Trustees annually and the amount of any expense
reimbursement or remuneration to be paid to Trustees for attendance at
meetings.
ARTICLE III
OFFICERS
3.1 Enumeration: Qualification. The officers of the Trust shall be a
---------------------------
Chairman of the Board, a President, a Treasurer, a Controller, a Secretary,
and such other officers, if any, as the Trustees from time to time may be
in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. Any officer
may, but need not, be a Trustee. Any two or more offices may be held by
the same person. A Trustee of officer may, but need not, be a shareholder.
3.2 Election. The Chairman of the Board, the President, the Treasurer, the
--------
Controller and the Secretary shall be elected annually by the Trustees.
3.3 Tenure. The Chairman of the Board, the President, the Treasurer, the
------
Controller and the Secretary shall hold office until their respective
successors are chosen and qualified, in each case until he or she sooner
dies, resigns, is removed or becomes disqualified.
3.4 Powers. Subject to the other provisions of these Bylaws, each officer
------
shall have, in addition to the duties and powers herein and in the
Declaration of trust set forth, such duties and powers as are commonly
incident to the office occupied by him or her as if the Trust were
organized as a Massachusetts business corporation and such other duties and
powers as the Trustees may from time to time designate.
3.5 Chairman of the Board. The Chairman of the Board shall be the chief
---------------------
executive officer of the Trust unless the Trustee designate another officer
of the Trust as its chief executive officer.
The chief executive officer shall, subject to the control of the Trustees,
direct and manage the affairs of the Trust. The Chairman of the Board
shall preside at all meetings of the shareholders and regular or special
meetings of the Trustees.
If the chief executive officer should be absent or unable to discharge the
duties of his office, and officer designated by the chief executive officer
shall act.
3.6 President. In the absence of the Chairman of the Board, the President
---------
shall preside at all meetings of the shareholders and of the Trustees.
3.7 Treasurer; Controller. The Treasurer shall be the chief financial officer
---------------------
of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian,
investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers of the Trust and shall
have such other duties and powers as may be designated from time to time by
the Trustees or by the Chairman of the Board.
-2-
<PAGE>
The Controller shall be the chief accounting officer of the Trust and shall
be in charge of its books of account and accounting records. The
Controller shall be responsible for preparation of financial statements of
the Trust, and shall have such other duties and powers as may be designated
from time to time by the Trustees or by the Chairman of the Board.
3.8 Secretary. The Secretary shall record all proceedings of the shareholders
---------
and the Trustees in books to be kept therefor, which books or a copy
thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an
Assistant Secretary, or if there be none or if he or she is absent, a
temporary Secretary chosen at such meeting shall record the proceedings
thereof in the aforesaid books.
3.9 Resignations and Removals. Any Trustee or officer may resign at any time
-------------------------
by written instrument signed by him or her and delivered to the Chairman of
the Board of the Secretary or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be
effective at some other time. The Trustees may remove any officer elected
by them with or without cause. Except to the extent expressly provided in
a written agreement with the Trust, no Trustee or officer resigning and no
officer removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on
account of such removal.
ARTICLE IV
COMMITTEES
4.1 General. The Trustees may elect, by majority vote, two or more Trustees to
-------
constitute an Executive Committee, which committee shall have and may
exercise when the Trustees are not in session any or all powers of the
Trustees in the management of the business and affairs of the Trust to the
extent granted by the Trustees and permitted under applicable law.
The Trustees likewise may appoint from their number other committees from
time to time, the number (not less than two) composing such committees, and
the functions to be performed by the same to be determined by the majority
vote of the Trustees. The term of any member of any committee shall be
fixed by the Trustees.
The Trustees may appoint an advisory board to consist of not more than five
members. The members of the advisory board shall be compensated in such
manner as the Trustees may determine and shall confer with and advise the
Trustees regarding the investments and other affairs of the Trust. Each
member of the advisory board shall hold office until the first meeting of
the Trustees following the next meeting of the shareholders and until his
or her successor is elected and qualified, or until he or she sooner dies,
resigns, is removed or becomes disqualified, or until the advisory board is
sooner abolished by the Trustees.
4.2 Quorum; Voting. A majority of the members of any committee of the Trustees
--------------
shall constitute a quorum for the transaction of business, and any action
of such a committee may be taken at a meeting by a vote of a majority of
the members present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a committee may participate
in a meeting of such committee by means of conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and
-3-
<PAGE>
participation by such means shall constitute presence in person at a
meeting.
ARTICLE V
REPORTS
5.1 General. The Trustees and officers shall render reports at the time and in
-------
the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may
deem desirable or as may from time to time required by the Trustees.
ARTICLE VI
FISCAL YEAR
6.1 General. Except a from time to time otherwise provided by the Trustees,
-------
the initial fiscal year of the Trust shall end on such date as is
determined in advance or in arrears by the Treasurer, and subsequent fiscal
years shall end on such date in subsequent years.
ARTICLE VII
SEAL
7.1 General. The seal of the Trust shall consist of a flat-faced die with the
-------
word "Massachusetts", together with the name of the Trust and the year of
its organization cut or engraved thereon but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its
absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE VIII
EXECUTION OF PAPERS
8.1 General. Except as the Trustees may generally or in particular cases
-------
authorize the execution thereof in some other manner, all deeds, lease,
contracts, notes and other obligations made by the Trustees shall be signed
by the Chairman of the Board, the President or by the Treasurer and need
not bear the seal of the Trust.
ARTICLE IX
ISSUANCE OF SHARES AND SHARE CERTIFICATES
9.1 Sale of Shares. Except as otherwise determined by the Trustees, the Trust
--------------
will issue and sell for cash or securities from time to time, full and
fractional shares of its shares of beneficial interest, such shares to be
issued and sold at a price of not less than net asset value per share as
from time to time determined in accordance with the Declaration of Trust
and these Bylaws and, in the case of fractional shares, at a proportionate
reduction in such price. In the case of shares sold for securities, such
securities shall be valued in accordance with the provisions for
determining value of assets of officers of the Trust and severally
authorized to take all such actions as may be necessary or desirable to
carry out this Section 9.1.
-4-
<PAGE>
9.2 Share Certificates. In lieu of issuing certificates for share, the
------------------
Trustees or the transfer agent may either issue receipts therefor or may
keep accounts upon the books of the Trust for the record holders of such
shares, who shall in either case be deemed, for all purposes hereunder, to
be the holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms thereof.
The Trustees may at any time authorize the issuance of share certificates.
In that event, each shareholder shall be entitled to a certificate stating
the number of shares owned by him or her, in such form as shall be
prescribed from time to time by the Trustees. Such certificates shall be
signed by the Chairman of the Board, the President or any Vice President
and by the Treasurer or any Assistant Treasurer. Such signatures may be
facsimile if the certificate is signed by a transfer agent, or by a
registrar, other than a Trustee, officer or employee of the Trust. In case
any officer who has signed or whose facsimile signature has been placed on
such certificate shall cease to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he were
such officer at the time of its issue.
9.3 Loss of Certificates. In the case of the alleged loss, destruction or
--------------------
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees may prescribe.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any time
------------------------------------------
discontinue the issuance of share certificates and may, be written notice
of each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE X
PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S BUSINESS
10.1 Determination of Net Asset Value Per Share. Net asset value per share of
------------------------------------------
each series of shares of the Trust shall mean: (i) the value of all assets
of such series; (ii) less total liabilities of such series; (iii) divided
by the number of shares of such series outstanding, in each case at the
time of each determination. The net asset value per share of each series
shall be determined as of the normal close of trading on the New York Stock
Exchange on each day on which such Exchange is open or at such other time
and on such other days as the Trustees may determine. As of any time other
than the normal close of trading on such Exchange, the Trustees may cause
the net asset value per share last determined to be determined again in a
similar manner or adjusted to reflect changes in market values of
securities in the portfolio, such adjustment to be made on the basis of
changes in selected security prices determined by the Trustees to be
relevant to the portfolio of such series or in averages or in other
standard and readily ascertainable market data, and the Trustees may fix
the time when such redetermined or adjusted net asset value per share of
each series shall become effective.
In valuing the portfolio investments of any series for determination of net
asset value per share of such series, securities for which market
quotations are readily available shall be valued at prices which, in the
opinion of the Trustees or the person designated by the Trustees to make
the determination, most nearly represent the market value of such
securities, and other securities and assets shall be valued at their fair
value as determined by or pursuant to the direction of the Trustees, which
in the case of short-term debt obligations, commercial paper and repurchase
agreements may, but need not, be on the basis of quoted yields for
securities of comparable maturity, quality and type,
-5-
<PAGE>
or on the basis of amortized cost. Expenses and liabilities of the Trust
shall be accrued each day. Liabilities may include such reserves for taxes,
estimated accrued expenses and contingencies as the Trustee of their
designates may in their sole discretion deem fair and reasonable under the
circumstances. No accruals shall be made in respect of taxes on unrealized
appreciation of securities owned unless the Trustees shall otherwise
determine. Dividends payable by the Trust shall be deducted as at the time
of but immediately prior to the determination of net asset value per share
on the record date therefor.
ARTICLE XI
SHAREHOLDERS
11.1 Shareholders Meetings. A meeting of the shareholders of the Trust or of
---------------------
any one or more series of shares may be called at any time by the Trustees,
by the President or, if the Trustees and the President shall fail to call
any meeting of shareholders for a period of 30 days after written
application of one or more shareholders who hold at least 10% of all
outstanding shares of the Trust, if shareholders of all series are required
under the Declaration of Trust to vote in aggregate and not by individual
series at such meeting, of any series, if shareholders of such series are
entitled under the Declaration of Trust to vote by individual series at
such meeting, then such shareholders may call such meeting. If the meeting
is a meeting of the shareholders of one or more series of shares, but not a
meeting of all shareholders of such one or more series shall be entitled to
notice of and to vote at the meeting. Each call of a meeting shall state
the place, date, hour and purposes of the meeting.
11.2 Record Dates. For the purpose of determining the shareholders who are
------------
entitled to vote or act at any meeting or an adjournment thereof, or who
are entitled to receive payment of any dividend or of any other
distribution, the Trustees may from time to time fix a time, which shall be
not more than 90 days before the date of any meeting of shareholders or the
date for the payment of any dividend or of any other distribution, as the
record date for determining the shareholders having the right to notice of
and to vote at such meeting and any adjournment thereof or the right to
receive such dividend or distribution, and in such case only shareholders
of record on such record date shall have such right notwithstanding any
transfer of shares on the books of the Trust after the record date; or
without fixing such record date the Trustees may for any of such purposes
close the register or transfer books for all or any part of such period.
ARTICLE XII
AMENDMENTS TO THE BYLAWS
12.1 General. These Bylaws may be amended or repealed, in whole or in part, by
-------
a majority of the Trustees then in office at any meeting of the Trustees,
or by one or more writings signed by such a majority.
-6-
<PAGE>
EXHIBIT 5(a)
FORM OF
MANAGEMENT AGREEMENT
Allmerica Financial Investment Management Services, Inc. (the "Adviser") and
Allmerica Investment Trust ("Trust") hereby confirm their Agreement covering
services as hereinafter set forth. The terms and provisions of this Agreement
shall take effect on ______________, 1998.
1. The Trust hereby retains the Adviser as investment adviser for the series
of shares of the Trust as listed on Schedule A attached hereto and for such
other series of shares as the Trust and the Adviser may from time to time
agree on, each such series of shares being hereinafter referred to as a
"Fund." The Adviser shall also manage, supervise and conduct the other
affairs and business of the Trust and matters incidental thereto, subject
always to the provisions of the Trust's Agreement and Declaration of Trust,
Bylaws and of the provisions of the Investment Company Act of 1940, as
amended ("1940 Act"). In providing and performing such services, the
Adviser will function in cooperation with and subject always to the
direction and control of the Trustees of the Trust and in cooperation with
the Trust's authorized officers and representatives.
2. Investment Advisory Services. The Adviser agrees to act as the investment
----------------------------
adviser for, and to manage the investment of assets of, each Fund and to
make purchases and sales of securities for each Fund's account. The Adviser
shall assume responsibility for the management of the portfolio securities
of each Fund and the making and execution of all investment decisions for
each Fund.
A. Investment of each Fund's assets shall be in accordance with the
objectives and policies of each Fund as set forth in the current
Registration Statement of the Trust filed with the Securities and
Exchange Commission (the "SEC"), and any applicable federal and state
laws.
B. The Adviser shall report to the Trustees of the Trust (the "Trustees")
at such times and in such detail as the Trustees may from time to time
determine to be appropriate in order to permit the Trustees to
determine the adherence by the Adviser to the investment policies and
legal requirements of each Fund.
C. The Adviser shall place all orders for the purchase and sale of
portfolio investments for the account of the Funds with issuers,
brokers or dealers selected by the Adviser which may include brokers
or dealers affiliated with the Adviser. In the selection of such
brokers or dealers and the placing of such orders, the Adviser shall
always seek best execution (except to the extent permitted by the next
sentence hereof), which is to place portfolio transactions where the
Trust can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuous basis
by a broker or dealer, and to deal directly with a principal market
maker in connection with over-the-counter transactions, except when it
is believed that best execution is obtainable elsewhere. Subject to
such policies as the Trustees may determine, the Adviser shall not be
<PAGE>
deemed to have acted unlawfully or to have breached any duty created
by this Agreement or otherwise solely by reason of its having caused
the Trust to pay a broker or dealer that provides brokerage and
research services an amount of commission for effecting a portfolio
investment transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith that such excess
amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of the Adviser and its affiliates with respect to the
Trust and to other clients as to which the Adviser or any affiliate of
the Adviser exercises investment discretion.
D. Subject to the provisions of the Trust's Agreement and Declaration of
Trust and the 1940 Act, the Adviser, at its expense, may select and
contract with one or more investment advisers (the "Sub-Advisers") to
provide to the Adviser such investment advice relating to the assets
of a Fund and related services as the Adviser may from time to time
deem appropriate, or delegate any or all of its functions hereunder to
one or more Sub-Advisers, provided that the Trustees shall approve any
such contract with a Sub-Adviser. So long as any Sub-Adviser serves as
investment adviser to any Fund pursuant to a Sub-Adviser Agreement in
substantially the form attached hereto as Exhibit A (the "Sub-Adviser
Agreement"), the obligation of the Adviser under this Agreement with
respect to managing the investment portfolio of such Fund shall be,
subject in any event to the control of the Trustees, to determine and
review with such Sub-Adviser the investment objectives, policies and
restrictions and placing of all orders for the purchase and sale of
portfolio securities for such Fund, all as further described in the
Sub-Adviser Agreement. The Adviser will compensate any Sub-Adviser of
any Fund for its services to such Fund. The Adviser may terminate the
services of any Sub-Adviser at any time, subject to the approval of
the Trustees, and shall at such time assume the responsibilities of
such Sub-Adviser unless and until a successor Sub-Adviser is selected.
3. Management Services. The Adviser will perform (or arrange for the
-------------------
performance by its affiliates) the management and administrative
services necessary for the operation of the Trust.
A. Subject to the supervision of the Trustees, and unless otherwise
provided herein the Adviser shall be responsible for the day to
day business activities of the Trust and shall perform all
services appropriate thereto, including: (i) providing for
members of its organization to serve without salaries as
Trustees, officers, or agents of the Trust; (ii) furnishing at
its expense such office space as may be necessary for the
suitable conduct of the Trust's business (other than pricing and
bookkeeping) and all necessary light, heat, telephone service,
office equipment stationery, and stenographic, clerical,
2
<PAGE>
mailing and messenger service in connection with such office;
(iii) on behalf of the Funds of the Trust, supervising relations
with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants,
attorneys, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable; (iv)
preparing all general shareholder communications, including
shareholder reports; (v) conducting shareholder relations; (vi)
maintaining the Trust's existence and its records; (vii) during
such times as shares are publicly offered, maintaining the
registration and qualification of the Trust's shares under
federal and state law; and (viii) investigating the development
of management and shareholder services (and, if appropriate,
assisting in the development and implementation of such services)
designed to enhance the value or convenience of the Funds of the
Trust as investment vehicles.
B. The Adviser shall also furnish such reports, evaluations,
information or analyses to the Trust as the Trustees may request
from time to time or as the Adviser may deem to be desirable. The
Adviser shall make recommendations to the Trustees with respect
to Fund policies, and shall carry out such policies as are
adopted by the Trustees. The Adviser shall, subject to review by
the Trustees, furnish such other services as the Adviser shall
from time to time determine to be necessary or useful to perform
its obligations under this Agreement. Should the Trust have
occasion to call upon the Adviser for services not herein
contemplated or through the Adviser to arrange for the services
of others, the Adviser will act for the Trust upon request to the
best of its ability, the compensation for its services to be
agreed upon with respect to each such occasion as it arises.
C. The Adviser will not furnish the Trust the following services
under this Agreement:
(i) determinations of the Trust's net assets and the net asset
value per share of its shares ("pricing");
(ii) maintenance of accounts, books and records as required by
Section 31(a) of the 1940 Act and the rules thereunder
("bookkeeping"); and
(iii) provision of custodian services, transfer agent services,
dividend disbursement and reinvestment services,
shareholder services, or shareholder recordkeeping
services.
4. Expenses of the Trust. It is understood that the Trust will pay all
---------------------
its expenses other than those expressly stated to be payable by the
Adviser hereunder. The expenses
3
<PAGE>
payable by the Trust shall include, without limitation; (i) interest
and taxes; (ii) brokerage commissions and other costs in connection
with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses associated with pricing and
bookkeeping;. (iv) fees and expenses of its Trustees other than those
who are "interested persons" of the Trust or the Adviser; (v) legal
and audit expenses; (vi) custodian, registrar and transfer agent fees
and expenses; (vii) fees and expenses related to the registration and
qualification of the Trust and the Fund's shares for distribution
under state and federal securities laws; (viii) expenses of printing
and mailing reports and notices and proxy material to shareholders of
the Funds; (ix) all other expenses incidental to holding meetings of
the Trust's shareholders, including proxy solicitations therefor; (x)
insurance premiums for fidelity and other coverage; (xi) its
proportionate share of association membership dues; (xii) expenses of
typesetting for printing Prospectuses and Statements of Additional
Information and supplements thereto; (xiii) expenses of printing and
mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders: and (ix) such non-
recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Trust is a
party and the legal obligation which the Trust may have to indemnify
the Trust's Trustees and officers with respect thereto.
5. Compensation. As full compensation for the services furnished and
------------
expenses borne by the Adviser herein, the Trust will pay a monthly fee
to the Adviser, computed and paid monthly at an annual rate of the
average daily net assets of each Fund, as described in Schedule B
which is attached hereto.
The fee computed with respect to the net assets of each Fund shall
be paid from the assets of such Fund. The average daily net assets of
each Fund shall be determined by taking an average of all of the
determinations of net asset value during each month at the close of
business on each business day during such month while this Agreement
is in effect. The fee for each month shall be payable within five (5)
business days after the end of the month.
In the event that expenses of any Fund for any fiscal year should
exceed the expense limitation on investment company expenses imposed
by any statute or regulatory authority of any jurisdiction in which
shares of the Fund are then qualified for offer and sale, the
compensation due the Adviser such period shall be reduced by the
amount of such excess by a reduction or refund thereof, subject to
readjustment during the Fund's fiscal year. In the event that the
expenses with respect to any Fund should exceed any expense limitation
which the Adviser may, by written notice to the Trust, voluntarily
declare to be effective, subject to such terms and conditions as the
Adviser may prescribe in the notice, the compensation due the Adviser
shall be reduced, and, if necessary, the Adviser shall bear expenses
with respect to the Fund, to the extent required by the expense
limitation.
4
<PAGE>
If the Adviser shall serve for any period less than a full month,
the foregoing compensation shall be prorated according to the
proportion which such period bears to a full month.
In addition to the foregoing, the Trust will reimburse the Adviser
for the traveling and incidental expenses (other than the regular
Worcester office expenses described above) which may be incurred in
connection with special work performed at its request.
6. Limitation of Liability. The Adviser shall be under no liability to
-----------------------
the Trust or its Shareholders or creditors for any matter or thing in
connection with the performance of any of the Adviser's services
hereunder or for any losses sustained or that may be sustained in the
purchase, sale or retention of any investment for the Funds of the
Trust made by it in good faith; provided, however, that nothing herein
contained shall be construed to protect the Adviser against any
liability to the Trust by reason of the Adviser's own willful
misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties hereunder.
7. Amendment. This Agreement may be amended at any time by mutual consent
---------
of the parties, provided that such amendment shall have been approved
(i) by vote of a majority of the outstanding voting securities of each
Fund affected by such amendment, and (ii) by vote of a majority of the
Trustees of the Trust who are not interested persons of the Adviser or
any Sub-Adviser or of the Trust, cast in person at a meeting called
for the purpose of voting on such approval.
8. Termination. This Agreement shall be effective as of the date
-----------
executed, and shall remain in full force and effect as to each Fund
continuously thereafter, until terminated as provided below.
A. Unless terminated as herein provided, this Agreement shall remain
in full force and effect through ______________________, and
shall continue in full force and effect for successive periods of
one year thereafter, but only so long as each such continuance is
approved (i) by the Trustees or by the affirmative vote of a
majority of the outstanding voting securities of a Fund, and (ii)
by a vote of a majority of the Trustees who are not interested
persons of the Trust or of the Adviser or of any Sub-Adviser, by
vote cast in person at a meeting called for the purpose of voting
on such approval; provided, however, that if the continuance of
this Agreement is submitted to the shareholders of a Fund for
their approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, the Adviser may
continue to serve hereunder in a manner consistent with the 1940
Act and the rules and regulations thereunder.
5
<PAGE>
B. This Agreement may be terminated as to any Fund without the
payment of any penalty by vote of the Trustees or by vote of a
majority of the outstanding voting securities of such Fund at any
annual or special meeting or by the Adviser on sixty days'
written notice.
C. This Agreement shall automatically terminate in the event of its
assignment.
9. Agreement and Declaration of Trust. A copy of the Trust's Agreement
----------------------------------
and Declaration is on file with the Secretary of State of the
Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed by the Trustees as Trustees and not
individually, and that the obligations of this instrument are not
binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the
Trust.
10. Other Agreements, etc. It is understood that any of the shareholders,
---------------------
Trustees, officers and employees of the Trust may be a shareholder,
partner, director, officer or employee of, or be otherwise interested
in, the Adviser, and in any person controlled by or under common
control with the Adviser, and that the Adviser and any person
controlled by or under common control with the Adviser may have an
interest in the Trust. It is also understood that the Adviser and
persons controlled by or under common control with the Adviser have
and may have advisory, management service or other contracts with
other organizations and persons, and may have other interests and
businesses.
11. Miscellaneous. The Adviser, its directors, officers, and its employees
-------------
retain the right to engage in other business, and to render portfolio
management, investment advisory, or other services of any kind to any
other corporation, firm, individual, or association. Neither the
Adviser nor any officer, director, or shareholder of the Adviser shall
act as principal or receive any compensation in connection with the
purchase or sale of securities by or on behalf of the Trust other than
the compensation provided in this Agreement.
The Adviser is an independent contractor and not an agent of the
Trust.
The Trust recognizes the Adviser's control of the names "SMA
Investment Trust" and "Allmerica Investment Trust" and agrees that its
right to use such names is non-exclusive and can be terminated by the
Adviser at any time. The use of such names will be terminated
automatically if at any time the Adviser or affiliate of the Adviser
ceases to be investment adviser for the Trust.
For the purposes of this Agreement, majority of the outstanding voting
securities of a Fund at any annual or special meeting shall mean a
concurring vote of (i) 67% or more of the shares of the Fund
represented at such meeting, if more than 50%
6
<PAGE>
of the outstanding shares of the Fund are represented in person or by
proxy, or (ii) 50% of the outstanding shares of the Fund, whichever is
less.
For the purposes of this Agreement, the terms "interested person" and
"assignment" shall have their respective meanings defined in the 1940
Act, subject, however, to such exemptions as may be granted by the SEC
under said Act; the term "specifically approve at least annually"
shall be construed in a manner consistent with the 1940 Act and the
rules and regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange Act
of 1934 and the rules and regulations thereunder.
Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and State insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
further agrees to furnish the California Insurance Commissioner, or
the Insurance Commissioner of any other state, with any information or
reports in connection with services provided under this Agreement
which such Commissioner may reasonably request in order to ascertain
whether the variable contracts operations of the Company are being
conducted in a manner consistent with the state's regulations
concerning variable contracts and any other applicable law or
regulations.
This Agreement shall be effective on the date executed. Executed this
_____ day of __________, 1998.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
/s/ By:
- ------------------------- ---------------------------
Witness
ALLMERICA INVESTMENT TRUST
/s/ By:
- ------------------------- ---------------------------
Witness
7
<PAGE>
SCHEDULE A
SERIES OF SHARES OF THE TRUST
AS OF EFFECTIVE _____, 1998
Select Emerging Markets Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select International Equity Fund
Select Growth Fund
Select Strategic Growth Fund
Growth Fund
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
8
<PAGE>
SCHEDULE B
COMPENSATION
EFFECTIVE AS OF _________, 1998
As full compensation for the services furnished and expenses borne by the
Adviser herein, the Trust will pay a monthly fee to the Adviser, computed and
paid monthly at an annual rate of the average daily net assets of each Fund, as
described below:
<TABLE>
<CAPTION>
Select Select Select Capital Select Value Select Select
Emerging Aggressive Appreciation Opportunity International Growth
Markets Fund Growth Fund Fund Fund Equity Fund Fund
------------ ----------- -------------- ------------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Manager Fee 1.35% (1) (1) (2) (1) 0.85%
<CAPTION>
Select
Strategic Equity Select Growth Select Investment
Growth Growth Index and Income Income Grade Income
Fund Fund Fund Fund Fund Fund
--------- ------ ------ ------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Manager Fee 0.85% (1) (3) (1) (4) (4)
<CAPTION>
Government Money
Bond Market
Fund Fund
---------- ------
<S> <C> <C>
Manager Fee 0.50% (3)
</TABLE>
- --------------------------------------------------------------------------------
(1) The Manager's fees for the Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select International Equity Fund, Growth Fund and Select
Growth and Income Fund, computed daily at an annual rate based on the
average daily net assets of each Fund, are based on the following schedule:
<TABLE>
<CAPTION>
Select Select Growth
Select Aggressive Select Capital International and Income
Assets Growth Fund Appreciation Fund Equity Fund Growth Fund Fund
- ---------------------------------------- ----------------- ----------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
First $100 Million................... 1.00% 1.00% 1.00% 0.60% 0.75%
$100 to $250 Million................. 0.90% 0.90% 0.90% 0.60% 0.70%
$250 to $500 Million................. 0.85% 0.85% 0.85% 0.40% 0.65%
Over $500 Million.................... 0.85% 0.85% 0.85% 0.35% 0.65%
</TABLE>
9
<PAGE>
(2) The Manager's fee for the Select Value Opportunity Fund, computed daily at
an annual rate based on the average daily net assets of the Fund, is based
on the following schedule:
<TABLE>
<CAPTION>
Assets Rate
------ ----
<S> <C>
First $100 Million.......... 1.00%
Next $150 Million........... 0.85%
Next $250 Million........... 0.80%
Next $250 Million........... 0.75%
Over $750 Million........... 0.70%
</TABLE>
(3) The Manager's fees for the Equity Index Fund and Money Market Fund, computed
daily at an annual rate based on the average daily net assets of each Fund,
are based on the following schedule:
<TABLE>
<CAPTION>
Equity Money
Index Market
Assets Fund Fund
------ ------ ------
<S> <C> <C>
First $50 Million...... 0.35% 0.35%
Next $200 Million...... 0.30% 0.25%
Over $250 Million...... 0.25% 0.20%
</TABLE>
(4) The Manager's fees for the Select Income Fund and Investment Grade Income
Fund, computed daily at an annual rate based on the average daily net assets
of each Fund, are based on the following schedule:
<TABLE>
<CAPTION>
Select Investment
Income Grade
Assets Fund Income Fund
------ ------ -----------
<S> <C> <C>
First $50 Million........ 0.60% 0.50%
Next $50 Million......... 0.55% 0.45%
Over $100 Million........ 0.45% 0.40%
</TABLE>
10
<PAGE>
EXHIBIT 5(b)
FORM OF
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of ___________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager") and SCHRODER
CAPITAL MANAGEMENT INTERNATIONAL INC. (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser,
at its expense, will furnish continuously an investment program for the
following series of shares of the Trust: the SELECT EMERGING MARKETS
FUND (the "Fund") and such other series of shares as the Trust, the
Manager and the Sub-Adviser may from time to time agree on (together,
the "Funds"). The Sub-Adviser will make investment decisions on behalf
of the Funds and place all orders for the purchase and sale of
portfolio securities. In the performance of its duties, the Sub-Adviser
will comply with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the objectives and policies of the
Fund, as set forth in the current Registration Statement of the Trust
filed with the Securities and Exchange Commission ("SEC") and any
applicable federal and state laws, and will comply with other policies
which the Trustees of the Trust (the "Trustees") or the Manager, as the
case may be, may from time to time determine and which are furnished to
the Sub-Adviser. The Sub-Adviser shall make its officers and employees
available to the Manager from time to time at reasonable times to
review investment policies of the Fund and to consult with the Manager
regarding the investment affairs of the Fund. In the performance of its
duties hereunder, the Sub-Adviser is and shall be an independent
contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way or
otherwise be deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all investment and
management facilities, including salaries of personnel necessary for it
to perform the duties set forth in this Agreement, and (ii)
administrative facilities, including clerical personnel and equipment
necessary for the conduct of the investment affairs of the Fund
(excluding brokerage expenses and pricing and bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for the Fund with issuers, brokers or dealers
selected by the Sub-Adviser which may include brokers or dealers
affiliated with the Sub-Adviser. In the selection of such brokers or
dealers and the placing of such orders, the Sub-Adviser always shall
seek best execution (except to the extent permitted by the next
sentence hereof), which
1
<PAGE>
is to place portfolio transactions where the Fund can obtain the most
favorable combination of price and execution services in particular
transactions or provided on a continuing basis by a broker or dealer,
and to deal directly with a principal market maker in connection with
over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Sub-Adviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of its having caused the Trust to pay a
broker or dealer that provides brokerage and research services an
amount of commission for effecting a portfolio investment transaction
in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Sub-Adviser
determines in good faith that such excess amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Sub-
Adviser and its affiliates with respect to the Trust and to other
clients of the Sub-Adviser as to which Sub-Adviser or any affiliate of
the Sub-Adviser exercises investment discretion.
(d) In addition to being registered as an investment adviser in the United
States, the Sub-Adviser is regulated in the conduct of its investment
business in the United Kingdom by the Investment Management Regulatory
Organization Limited ("IMRO"). The Sub-Adviser confirms that the Trust
is a Non-private Customer as defined by IMRO.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any
person controlled by or under common control with the Sub-Adviser, and that
the Sub-Adviser and any person controlled by or under common control with
the Sub-Adviser may have an interest in the Trust. It is also understood
that the Sub-Adviser and persons controlled by or under common control with
the Sub-Adviser have and may have advisory, management service or other
contracts with other organizations and persons, and may have other
interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered a fee, determined as described in Schedule A
which is attached hereto and made a part hereof. Such fee shall be paid by
the Manager and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A attached hereto) shall not be amended
as to any Fund unless such amendment is approved at a meeting by the
affirmative vote of a majority of the
2
<PAGE>
outstanding voting securities of the Fund, if such approval is required
under the Investment Company Act of 1940, as amended ("1940 Act"), and by
the vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the Trustees who are not interested persons
of the Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below:
(a) Unless terminated as herein provided, this Agreement shall remain in
full force and effect through January 9, 2000, and shall continue in
full force and effect for successive periods of one year thereafter,
but only so long as such continuance is specifically approved at least
annually (i) by the Trustees or by the affirmative vote of a majority
of the outstanding voting securities of the Fund, and (ii) by a vote of
a majority of the Trustees who are not interested persons of the Trust
or of the Manager or of any Sub-Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval; provided,
however, that if the continuance of this Agreement is submitted to the
shareholders of the Fund for their approval and such shareholders fail
to approve such continuance of this Agreement as provided herein, the
Sub-Adviser may continue to serve hereunder in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by
vote of the Trustees, or by vote of a majority of the outstanding
voting securities of such Fund at any annual or special meeting or by
the Sub-Adviser, in each case on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the
Management Agreement with the Manager shall have terminated for any
reason.
(d) In the event of termination of this Agreement, the Fund will no longer
use the name "Schroder", "Schroder Capital Management International" or
"Schroder Capital Management International Inc." in materials relating
to the Fund except as may be required by the 1940 Act and the rules and
regulations thereunder.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more
of the shares of the Fund present (in person
3
<PAGE>
or by proxy) and entitled to vote at such meeting, if the holders of more
than 50% of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders of more
than 50% of the outstanding shares of the Fund entitled to vote at such
meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in
the 1940 Act and rules and regulations thereunder, subject, however, to
such exemptions as may be granted by the SEC under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules and regulations thereunder; and
the term "brokerage and research services" shall have the meaning given in
the Securities Exchange Act of 1934 and the rules and regulations
thereunder.
7. NON-LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager or
the Trust's Shareholders or creditors for any matter or thing in connection
with the performance of any of the Sub-Adviser's services hereunder or for
any losses sustained or that may be sustained in the purchase, sale or
retention of any investment for the Funds of the Trust made by it in good
faith; provided, however, that nothing herein contained shall be construed
to protect the Sub-Adviser against any liability to the Trust by reason of
the Sub-Adviser's own willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the appropriate Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: ______________________________________
Title: ______________________________________
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC.
By: ______________________________________
Title: ______________________________________
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: ______________________________________
Title: ______________________________________
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as full compensation for the Sub-
Adviser's services rendered, a fee computed daily and paid quarterly at an
annual rate of the average daily net assets of the Fund as described below:
NET ASSETS FEE RATE
---------- --------
First $50 Million 1.00%
Next $50 Million 0.85%
Next $150 Million 0.75%
Over $250 Million 0.60%
The average daily net assets of the Fund shall be determined by taking an
average of all of the determinations of net asset value during each month at the
close of business on each business day during such month while this Agreement is
in effect.
The fee for each quarter shall be payable within ten (10) business days after
the end of the quarter.
If the Sub-Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which such
period bears to a full month.
6
<PAGE>
FORM OF
SUB-ADVISER AGREEMENT
EXHIBIT 5(c)
SUB-ADVISER AGREEMENT executed as of ___________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager"), and NICHOLAS-
APPLEGATE CAPITAL MANAGEMENT (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for each of the
following series of shares of the Trust: Select Aggressive Growth Fund and such
other series of shares as the Trust, the Manager and the Sub-Adviser may from
time to time agree on (together, the "Funds"). The Sub-Adviser will make
investment decisions on behalf of each of the Funds and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties,
the Sub-Adviser will comply with the provisions of the Agreement and Declaration
of Trust and Bylaws of the Trust and the objectives and policies of each of the
Funds, as set forth in the current Registration Statement of the Trust filed
with the Securities and Exchange Commission and any applicable federal and state
laws, and will comply with other policies which the Trustees of the Trust (the
"Trustees") or the Manager, as the case may be, may from time to time determine
in writing. The Sub-Adviser shall make its officers and employees available to
the Manager from time to time at reasonable times to review investment policies
of the Funds and to consult with the Manager regarding the investment affairs of
the Funds.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary investment
and management facilities, including salaries of personnel required for it to
execute its duties faithfully, and (ii) administrative facilities, including
clerical personnel and equipment necessary for the efficient conduct of the
investment affairs of each of the Funds (excluding pricing and bookkeeping
services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for each Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers or dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution, (except to the extent
permitted by the next sentence hereof) which is to place portfolio transactions
where each Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when it is believed that
best execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay a broker or dealer that
provides brokerage and research services an amount of commission for effecting a
portfolio
<PAGE>
investment transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the Sub-Adviser
determines in good faith that such excess amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Sub-Adviser and its affiliates with respect to
the Trust and to other clients of the Sub-Adviser as to which Sub-Adviser or any
affiliate of the Sub-Adviser exercises investment discretion.
(d) The Sub-Adviser shall not be obligated to pay any expenses of or for a
Fund not expressly assumed by the Sub-Adviser pursuant to this Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. It is also understood that the Sub-
Adviser and persons controlled by or under common control with the Sub-Adviser
have and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered and for the expenses borne by the Sub-Adviser pursuant to
Section 1, a fee, determined as described in Schedule A which is attached hereto
and made a part hereof. Such fee shall be paid by the Manager and not by the
Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as to any
Fund unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding voting securities of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain in
full force and effect as to each Fund continuously thereafter, until terminated
as provided below.
A. Unless terminated as herein provided, this Agreement shall remain in full
force and effect through May 30, 1998, and shall continue in full force and
effect for successive periods of
2
<PAGE>
one year thereafter, but only so long as each such continuance is approved
annually (i) by the Trustees or by the affirmative vote of a majority of
the outstanding voting securities of a Fund, and (ii) by a vote of a
majority of the Trustees who are not interested persons of the Trust or of
the Manager or of any Sub-Adviser, by vote cast in person at a meeting
called for the purpose of voting on such approval; provided, however, that
if the continuance of this Agreement is submitted to the shareholders of a
Fund for their approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, the Sub-Adviser may
continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940, as amended ("1940 Act") and the rules and regulations
thereunder.
B. This Agreement may be terminated as to any Fund without the payment of any
penalty by the Manager, subject to the approval of the Trustees, by vote of
the Trustees, or by vote of a majority of the outstanding voting securities
of such Fund at any annual or special meeting or by the Sub-Adviser on
sixty days' written notice.
C. This Agreement shall terminate automatically, without the payment of any
penalty, in the event of its assignment or in the event that the Management
Agreement shall have terminated for any reason.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of the
outstanding voting securities" means the affirmative vote, at a duly called and
held meeting of shareholders, (a) of the holders of 67% or more of the shares of
a Fund present (in person or by proxy) and entitled to vote at such meeting, if
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting are present in person or by proxy, or (b) of the holders of
more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested person"
and "assignment" shall have their respective meanings defined in the 1940 Act
and the Rules and Regulations thereunder, subject, however, to such exemptions
as may be granted by the Securities and Exchange Commission under said Act; the
term "specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the Rules and Regulations thereunder; and the
term "brokerage and research services" shall have the meaning given in the
Securities and Exchange Act of 1934 and the Rules and Regulations thereunder.
7. NONLIABILITY OF SUB-ADVISER
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser, or reckless disregard of its obligations and duties
hereunder, the Sub-Adviser shall not be subject to any liability to the Trust,
to any shareholder of the Trust or to the Manager, for any act or omission in
the course of, or connected with, rendering services hereunder.
3
<PAGE>
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed by the Trustees as Trustees and not individually and
that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the appropriate Fund.
9. MISCELLANEOUS
A. The Sub-Adviser shall be responsible for voting the securities of the
Funds.
B. Any notices from the Sub-Adviser to the Manager shall be mailed to the
following address:
Allmerica Financial Investment Management Services, Inc.
440 Lincoln Street
Worcester MA 01653
Attn: Counsel
Any notices from the Manager to the Sub-Adviser shall be mailed to the
following address:
Nicholas-Applegate Capital Management
501 West Broadway, Suite 2000
San Diego CA 92101
Attn: Antonio C. Cabral, Jr.
Vice President
C. It is understood that this Agreement shall be governed by and
construed under and in accordance with the laws of the Commonwealth of
Massachusetts laws except when Federal securities laws or other
Federal laws are applicable.
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT
4
<PAGE>
SERVICES, INC. has caused this instrument to be signed in duplicate on its
behalf by its duly authorized representative and NICHOLAS-APPLEGATE CAPITAL
MANAGEMENT has caused this instrument to be signed in duplicate on its behalf by
its duly authorized representative, all as of the day and year first above
written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By:
-------------------------------
Title:
----------------------------
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
By:
-------------------------------
Title:
----------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By:
-------------------------------
Title:
----------------------------
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered and for the expenses borne by the Sub-Adviser pursuant to
Section 1, a fee, computed daily at an annual rate based on the average daily
net assets of each Fund (valued in accordance with the current Registration
Statement of the Fund), as set forth below:
<TABLE>
<CAPTION>
Fund Net Assets Fee Rate
---- ---------- --------
<S> <C> <C>
Select Aggressive Growth Fund First $100 Million 0.60%
Next $150 Million 0.55%
Next $250 Million 0.50%
Over $500 Million 0.45%
</TABLE>
Such fee will be paid to the Sub-Adviser after the end of each calendar
quarter.
6
<PAGE>
FORM OF EXHIBIT 5(d)
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of __________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC., a corporation organized and
existing under the laws of the Commonwealth of Massachusetts, (the "Manager")
and T. ROWE PRICE ASSOCIATES, INC. (the "Sub-Adviser"), a corporation organized
and existing under the laws of the state of Maryland.
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica
Investment Trust (the "Trust"), a Massachusetts business
trust, the Sub-Adviser, at its expense, will furnish
continuously an investment program for the following series of
shares of the Trust: the Select Capital Appreciation Fund (the
"Fund") and such other series of shares as the Trust, the
Manager and the Sub-Adviser may from time to time agree on
(together, the "Funds"). The Sub-Adviser will make investment
decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities. In the performance
of its duties, the Sub-Adviser will comply with the provisions
of the Agreement and Declaration of Trust and Bylaws of the
Trust and the objectives and policies of the Fund, as set
forth in the current Registration Statement of the Trust filed
with the Securities and Exchange Commission ("SEC") and any
applicable federal and state laws, and will comply with other
policies which the Trustees of the Trust (the "Trustees") or
the Manager, as the case may be, may from time to time
determine and which are furnished by notice in writing to the
Sub-Adviser. The Sub-Adviser shall make its officers and
employees available to the Manager from time to time at
reasonable times to review investment policies of the Fund and
to consult with the Manager regarding the investment affairs
of the Fund. In the performance of its duties hereunder, the
Sub-Adviser is and shall be an independent contractor and,
unless otherwise expressly provided or authorized, shall have
no authority to act for or represent the Trust in any way or
otherwise be deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all
investment and management facilities, including salaries of
personnel necessary for it to perform the duties set forth in
this Agreement, and (ii) administrative facilities, including
clerical personnel and equipment necessary for the conduct of
the investment affairs of the Fund (excluding brokerage
expenses and pricing and bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and
sale of portfolio investments for the Fund with issuers,
brokers or dealers selected by the Sub-
<PAGE>
Adviser which may include brokers or dealers affiliated with
the Sub-Adviser. In the selection of such brokers or dealers
and the placing of such orders, the Sub-Adviser always shall
seek best execution (except to the extent permitted by the
next sentence hereof), which is to place portfolio
transactions where the Fund can obtain the most favorable
combination of price and execution services in particular
transactions or provided on a continuing basis by a broker or
dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when it
is believed that best execution is obtainable elsewhere.
Subject to such policies as the Trustees may require, and
consistent with the requirements of Section 28(e) of the
Securities and Exchange Act of 1934, as amended, the
Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay a
broker or dealer that provides brokerage and research services
an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that
such excess amount of commission was reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the
Sub-Adviser and its affiliates with respect to the Trust and
to other clients of the Sub-Adviser as to which Sub-Adviser or
any affiliate of the Sub-Adviser exercises investment
discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees,
officers and employees of the Trust may be a shareholder, partner,
director, officer or employee of, or be otherwise interested in, the
Sub-Adviser, and in any person controlled by or under common control
with the Sub-Adviser, and that the Sub-Adviser and any person
controlled by or under common control with the Sub-Adviser may have an
interest in the Trust. It is also understood that the Sub-Adviser and
persons controlled by or under common control with the Sub-Adviser have
and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
Nothing contained in this Agreement shall limit or restrict the freedom
of the Sub-Adviser, or any affiliated person thereof, to render
investment management and corporate administrative services to other
investment counsel or to other persons, firms, or corporations, or to
engage in any other business activities.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for
the Sub-Adviser's services rendered a fee, determined as described in
Schedule A which is attached hereto and made a part hereof. Such fee
shall be paid by the Manager and not by the Trust.
2
<PAGE>
4. MATERIAL TO BE FURNISHED TO SUB-ADVISER
During the term of this Agreement, the Manager shall furnish
the Sub-Adviser with any further documents, materials or information that the
Sub-Adviser may reasonably request to enable it to perform its duties pursuant
to this Agreement. The Manager shall furnish to the Sub-Adviser at its principal
office all prospectuses, proxy statements, reports to shareholders, advertising
and sales literature, or other material prepared for distribution to
shareholders of the Fund or the public, which refer to the Sub-Adviser or its
clients in any way, prior to the use thereof, and the Manager shall not use any
such material if the Sub-Adviser reasonably objects in writing seven business
days (or such other time as may be mutually agreed) after receipt thereof. The
Manager shall take reasonable steps to see that material prepared by employees
or agents of the Manager or its affiliates that refer to the Sub-Adviser or its
clients in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the preceding sentence.
5. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A attached hereto) shall
not be amended as to any Fund unless such amendment is approved at a
meeting by the affirmative vote of a majority of the outstanding voting
securities of the Fund, if such approval is required under the
Investment Company Act of 1940, as amended ("1940 Act"), and by the
vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the Trustees who are not interested in
persons of the Trust or of the Manager or of the Sub-Adviser.
6. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and
shall remain in full force and effect as to each Fund continuously
thereafter, until terminated as provided below:
(a) Unless terminated as herein provided or pursuant to any
applicable requirements of the 1940 Act or regulations
promulgated thereunder, this Agreement shall remain in full
force and effect for a period of two years from the date
hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as
such continuance is specifically approved at least annually
(i) by the Trustees or by the affirmative vote of a majority
of the outstanding voting securities of the Fund, and (ii) by
a vote of a majority of the Trustees who are not interested
persons of the Trust or of the Manager or of any Sub-Adviser,
by vote cast in person at a meeting called for the purpose of
voting on such approval; provided, however, that if the
continuance of this Agreement is submitted to the shareholders
of the Fund for their approval and such shareholders fail to
approve such continuance of this Agreement as provided herein,
the Sub-Adviser may continue to serve hereunder in a manner
consistent with the 1940 Act and the rules and regulations
thereunder.
3
<PAGE>
(b) This Agreement may be terminated as to any Fund without the
payment of any penalty by the Manager, subject to the approval
of the Trustees, by vote of the Trustees, or by vote of a
majority of the outstanding voting securities of such Fund at
any annual or special meeting or by the Sub-Adviser, in each
case on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the
payment of any penalty, in the event of its assignment or in
the event that the Management Agreement with the Manager shall
have terminated for any reason.
(d) In the event of termination of this Agreement, the Fund will
no longer use the name "T. Rowe Price" or "T. Rowe Price
Associates, Inc." in materials relating to the Fund except as
may be required by the 1940 Act and the rules and regulations
thereunder.
7. CERTAIN DEFINITIONS
For the purpose of this Agreement the "affirmative vote of a majority
of the outstanding voting securities" means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to the vote
at such meeting, if the holders of more than 50% of the outstanding shares of
the Fund entitled to vote at such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
1940 Act and rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the SEC under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the rules and regulations thereunder.
8. NON-LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager
or the Trust's Shareholders or creditors for any matter or thing in connection
with the performance of any of the Sub-Adviser's services hereunder or for any
losses sustained or that may be sustained in the purchase, sale or retention of
any investment for the Funds of the Trust made by it in good faith; provided,
however, that nothing herein contained shall be construed to protect the
Sub-Adviser against any liability the Trust by reason of the Sub-Adviser's own
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
4
<PAGE>
9. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the appropriate Fund.
IN WITNESS WHEREOF, Allmerica Financial Investment Management Services, Inc. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and T. Rowe Price Associates, Inc. has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By:
-----------------------------------------
Title:
-----------------------------------------
T. ROWE PRICE ASSOCIATES, INC.
By:
-----------------------------------------
Title:
-----------------------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By:
-----------------------------------------
Title:
-----------------------------------------
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as full compensation for the
Sub-Adviser's services rendered, a fee computed daily and paid quarterly at an
annual rate based on the average daily net assets of the Fund as described
below:
FUND FEE RATE
Select Capital Appreciation Fund 0.50%
The average daily net assets of the Fund shall be determined by taking
an average of all of the determinations of net assets during each month at the
close of business on each business day during such month while this Agreement is
in effect.
The fee for each quarter shall be payable within ten (10) business days
after the end of the quarter.
If the Sub-Adviser shall serve for any period less than a full month,
the foregoing compensation shall be prorated according to the proportion which
such period bears to a full month.
6
<PAGE>
EXHIBIT 5(e)
FORM OF
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of __________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager") and CRAMER
ROSENTHAL MCGLYNN, LLC (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for the following
series of shares of the Trust: the SMALL-MID CAP VALUE FUND (the "Fund") and
such other series of shares as the Trust, the Manager and the Sub-Adviser may
from time to time agree on (together, the "Funds"). The Sub-Adviser will make
investment decisions on behalf of the Funds and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties, the
Sub-Adviser will comply with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the objectives and policies of the Fund, as
set forth in the current Registration Statement of the Trust filed with the
Securities and Exchange Commission ("SEC") and any applicable federal and state
laws, and will comply with other policies which the Trustees of the Trust (the
"Trustees") or the Manager, as the case may be, may from time to time determine
and which are furnished to the Sub-Adviser. The Sub-Adviser shall make its
officers and employees available to the Manager from time to time at reasonable
times to review investment policies of the Fund and to consult with the Manager
regarding the investment affairs of the Funds. In the performance of its duties
hereunder, the Sub-Adviser is and shall be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to act for
or represent the Trust in any way or otherwise be deemed to be an agent of the
Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all investment and
management facilities, including salaries of personnel necessary to perform for
it the duties set forth in this Agreement, and (ii) administrative facilities,
including clerical personnel and equipment necessary for the conduct of the
investment affairs of the Fund (excluding brokerage expenses and pricing and
bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for the Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers or dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution (except to the extent
permitted by the next sentence hereof), which is to place portfolio transactions
where the Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly
<PAGE>
with a principal market maker in connection with over-the-counter transactions,
except when it is believed that best execution is obtainable elsewhere. Subject
to such policies as the Trustees may determine, the Sub-Adviser shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Trust to pay a
broker or dealer that provides brokerage and research services an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such excess
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall responsibilities of the Sub-
Adviser and its affiliates with respect to the Trust and to other clients of the
Sub-Adviser as to which Sub-Adviser or any affiliate of the Sub-Adviser
exercises investment discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. It is also understood that the Sub-
Adviser and persons controlled by or under common control with the Sub-Adviser
have and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered a fee, determined as described in Schedule A which
is attached hereto and made a part hereof. Such fee shall be paid by the Manager
and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A attached hereto) shall not be amended
as to any Fund unless such amendment is approved at a meeting by the affirmative
vote of a majority of the outstanding voting securities of the Fund, if such
approval is required under the Investment Company Act of 1940, as amended ("1940
Act"), and by the vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the Trustees who are not interested
persons of the Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below:
2
<PAGE>
(a) Unless terminated as herein provided, this Agreement shall remain in
full force and effect through January 2, 2000, and shall continue in full force
and effect for successive periods of one year thereafter, but only so long as
such continuance is specifically approved at least annually (i) by the Trustees
or by the affirmative vote of a majority of the outstanding voting securities of
the Fund, and (ii) by a vote of a majority of the Trustees who are not
interested persons of the Trust or of the Manager or of any Sub-Adviser, by vote
cast in person at a meeting called for the purpose of voting on such approval;
provided, however, that if the continuance of this Agreement is submitted to the
shareholders of the Fund for their approval and such shareholders fail to
approve such continuance of this Agreement as provided herein, the Sub-Adviser
may continue to serve hereunder in a manner consistent with the 1940 Act and the
rules and regulations thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by vote of
the Trustees, or by vote of a majority of the outstanding voting securities of
such Fund at any annual or special meeting or by the Sub-Adviser, in each case
on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Agreement with the Manager shall have terminated for any reason.
(d) In the event of termination of this agreement, the Fund will no longer
use the name "Cramer Rosenthal McGlynn, Inc." or "Cramer Rosenthal McGlynn, LLC"
in materials relating to the Fund except as may be required by the 1940 Act and
the rules and regulations thereunder.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of a Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
1940 Act and rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the SEC under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the rules and regulations thereunder.
3
<PAGE>
7. NON-LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager or
the Trust's Shareholders or creditors for any matter or thing in connection with
the performance of any of the Sub-Adviser's services hereunder or for any losses
sustained or that may be sustained in the purchase, sale or retention of any
investment for the Funds of the Trust made by it in good faith; provided,
however, that nothing herein contained shall be construed to protect the Sub-
Adviser against any liability to the Trust by reason of the Sub-Adviser's own
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the appropriate Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and CRAMER ROSENTHAL MCGLYNN, LLC has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: _______________________________
Title: -------------------------------
CRAMER ROSENTHAL MCGLYNN, LLC
By: -------------------------------
Title: ------------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: _________________________________
Title: ________________________________
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as full compensation for the Sub-
Adviser's services rendered, a fee computed daily and paid quarterly at an
annual rate of the average daily net assets of the Fund as described below:
NET ASSETS FEE RATE
---------- --------
First $100 million 0.60%
Next $150 million 0.50%
Next $250 million 0.40%
Next $250 million 0.375%
Over $750 million 0.35%
The average daily net assets of the Fund shall be determined by taking an
average of all of the determinations of net asset value during each month at the
close of business on each business day during such month while this Agreement is
in effect.
The fee for each quarter shall be payable within ten (10) business days after
the end of the quarter.
If the Sub-Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which such
period bears to a full month.
6
<PAGE>
EXHIBIT 5(f)
FORM OF
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of __________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC., 440 Lincoln Street, Worcester
Massachusetts 01653 (the "Manager") and BANK OF IRELAND ASSET MANAGEMENT
LIMITED, with a principal place of business at 26 Fitzwilliam Place, Dublin 2,
Ireland, (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for the following
series of shares of the Trust: SELECT INTERNATIONAL EQUITY FUND and such other
series of shares as the Trust, the Manager and the Sub-Adviser may from time to
time agree on (the "Fund"). The Sub-Adviser will make investment decisions on
behalf of the Fund and place all orders for the purchase and sale of portfolio
securities. In the performance of its duties, the Sub-Adviser will comply with
the provisions of the Agreement and Declaration of Trust and Bylaws of the Trust
and the objectives and policies of the Funds, as set forth in the current
Registration Statement of the Trust filed with the Securities and Exchange
Commission ("SEC") and any applicable federal and state laws, and will comply
with other policies which the Trustees of the Trust (the "Trustees") or the
Manager, as the case may be, may from time to time determine. The Sub-Adviser
shall make its officers and employees available to the Manager from time to time
at reasonable times to review investment policies of the Fund and to consult
with the Manager regarding the investment affairs of the Fund. In the
performance of its duties hereunder, the Sub-Adviser is and shall be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way or
otherwise be deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel required
for it to execute its duties faithfully, and (ii) administrative facilities,
including clerical personnel and equipment necessary for the efficient conduct
of the investment affairs of the fund (excluding pricing and bookkeeping
services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for the Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers or dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution (except to the extent
permitted by the next sentence hereof), which is to place portfolio transactions
where the Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly
<PAGE>
with a principal market maker in connection with over-the-counter transactions,
except when it is believed that best execution is obtainable elsewhere. Subject
to such policies as the Trustees may determine, the Sub-Adviser shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Trust to pay a
broker or dealer that provides brokerage and research services an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such excess
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall responsibilities of the Sub-
Adviser and its affiliates with respect to the Trust and to other clients of the
Sub-Adviser as to which the Sub-Adviser or any affiliate of the Sub-Adviser
exercises investment discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. It is also understood that the Sub-
Adviser and persons controlled by or under common control with the Sub-Adviser
have and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered, a fee, determined as described in Schedule A which
is attached hereto and made a part hereof. Such fee shall be paid by the
Manager and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as to any
Fund unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding voting securities of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below.
(a) Unless terminated as herein provided, this Agreement shall remain in
full force and effect through May 30, 1998, and shall continue in full force and
effect for successive periods of
2
<PAGE>
one year thereafter, but only so long as each such continuance is specifically
approved at least annually (i) by the Trustees or by the affirmative vote of a
majority of the outstanding voting securities of a Fund, and (ii) by a vote of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of any Sub-Adviser, by vote cast in person at a meeting called for
the purpose of voting on such approval; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of a Fund for
their approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Sub-Adviser may continue to serve hereunder in
a manner consistent with the Investment Company Act of 1940, as amended ("1940
Act") and the rules and regulations thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, by vote of the Trustees, or by vote of a majority of
the outstanding voting securities of such Fund at any annual or special meeting
or by the Sub-Adviser on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Agreement shall have terminated for any reason.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of a Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
1940 Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the SEC under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the Securities and Exchange
Act of 1934 and the rules and regulations thereunder.
7. NONLIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager or
the Trust's Shareholders or creditors for any matter or thing in connection with
the performance of any of the Sub-Adviser's services hereunder or for any losses
sustained or that may be sustained in the purchase, sale or retention of any
investment for the Funds of the Trust made by it in good faith; provided,
however, that nothing herein contained shall be construed to protect the Sub-
Adviser against any liability to the Trust by reason of the Sub-Adviser's own
willful misfeasance, bad faith,
3
<PAGE>
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and BANK OF IRELAND ASSET MANAGEMENT LIMITED has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: __________________________
Title: __________________________
BANK OF IRELAND ASSET MANAGEMENT
LIMITED
By: __________________________
Title: __________________________
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: ________________________
Title: ________________________
5
<PAGE>
SCHEDULE A
-----------
The Manager will pay to the Sub-Adviser as full compensation for the Sub-
Adviser's services rendered, a fee, computed monthly and paid quarterly based on
the average daily net assets of the Fund as set forth below:
Assets Rate
------ ----
First $50 Million 0.45%
Next $50 Million 0.40%
Over $100 Million 0.30%
The average daily net assets of the Fund shall be determined by taking an
average of all of the determinations of net asset value during each month at the
close of business each business day during such month while this Agreement is in
effect.
The fee for each quarter shall be payable within ten (10) business days after
the end of the quarter. If the Sub-Adviser shall serve for any period less than
a full month, the foregoing compensation shall be prorated according to the
proportion which such period bears to a full month.
6
<PAGE>
EXHBIT 5(g)
FORM OF
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of _________, 1998 between ALLMERICA FINANCIAL
INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager"), and PUTNAM INVESTMENT
MANAGEMENT, INC. (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser will
furnish continuously an investment program for the following series of shares of
the Trust: SELECT GROWTH FUND and such other series of shares as the Trust, the
Manager and the Sub-Adviser may from time to time agree on (together, the
"Funds"). The Sub-Adviser will make investment decisions on behalf of each of
the Funds and place all orders for the purchase and sale of portfolio
securities. In the performance of its duties, the Sub-Adviser will comply with
the objective and policies of each of the Funds, as set forth in the current
Registration Statement of the Trust filed with the Securities and Exchange
Commission ("SEC"), as from time to time amended, as long as notice of such
amendments is delivered to the Sub-Adviser, and any applicable federal and state
laws, and will comply with other policies which the Trustees of the Trust (the
"Trustees") or the Manager, as the case may be, may from time to time determine
by written notice to the Sub-Adviser. The Sub-Adviser shall make its officers
and employees involved in portfolio management of the Funds available to the
Manager from time to time at reasonable times to review investment policies of
the Funds and to consult with the Manager regarding the investment affairs of
the Funds. In the performance of its duties hereunder, the Sub-Adviser is and
shall be an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Trust in any way
or otherwise be deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment management facilities, including salaries of personnel required for
it to execute its duties faithfully, and (ii) administrative facilities directly
related to investment management, including clerical personnel and equipment
necessary for conduct of the investment affairs of each of the Funds. Except as
set forth in the immediately preceding sentence, the Sub-Adviser shall have no
responsibility for administration of the Funds, including but not limited to
pricing and bookkeeping services.
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for each Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers or dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution (except to the extent
permitted by the next sentence hereof), which is to place portfolio transactions
where each Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when it is
<PAGE>
believed that best execution is obtainable elsewhere. Subject to such policies
as the Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay a broker or dealer that
provides brokerage and research services an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the Sub-
Adviser determines in good faith that such excess amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Sub-Adviser and its
affiliates with respect to the Trust and to other clients of the Sub-Adviser as
to which the Sub-Adviser or any affiliate of the Sub-Adviser exercises
investment discretion.
(d) The Sub-Adviser shall not be obligated to pay any expenses of or for a
Fund not expressly assumed by the Sub-Adviser pursuant to this Section 1.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. The Manager understands that the
Sub-Adviser and its affiliates now act, will continue to act and may act in the
future as investment manager or advisers to fiduciary and other managed
accounts, and as investment manager or adviser to other investment companies,
including offshore entities or accounts, and the Manager has no objection to the
Sub-Adviser's so acting, provided that whenever a Fund and one or more other
investment companies or accounts managed or advised by the Sub-Adviser or
affiliates have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each company and account. The terms and provisions of such
formula shall be communicated in writing to the Trust. The Manager recognizes
that in some cases this procedure may adversely affect the size of the position
obtainable for a Fund. In addition, the Manager understands that the persons
employed by the Sub-Adviser to assist in the performance of the Sub-Adviser's
duties under this Agreement will not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of the Sub-Adviser or any affiliate of the Sub-Adviser to engage in and
devote time and attention to other businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered and for the expenses borne by the Sub-Adviser pursuant to
Section 1, a fee, determined as described in Schedule A which is attached hereto
and made a part hereof. Such fee shall be paid by the Manager and not by the
Trust.
2
<PAGE>
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as to any
Fund unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding voting securities of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below.
(a) Unless terminated as herein provided, this Agreement shall remain in full
force and effect through May 30, 1998, and shall continue in full force and
effect for successive periods of one year thereafter, but only so long as each
such continuance is specifically approved annually (i) by the Trustees or by the
affirmative vote of a majority of the outstanding voting securities of the Fund,
and (ii) by a vote of a majority of the Trustees who are not interested persons
of the Trust or of the Manager or of any Sub-Adviser, by vote cast in person at
a meeting called for the purpose of voting on such approval; provided, however,
that if the continuance of this Agreement is submitted to the shareholders of a
Fund for their approval and such shareholders fail to approve such continuance
of this Agreement as provided herein, the Sub-Adviser may continue to serve
hereunder in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by vote of
the Trustees, or by vote of a majority of the outstanding voting securities of
such Fund at any annual or special meeting or by the Sub-Adviser, in each case
on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of any
penalty, in the event of its assignment or in the event that the Management
Agreement between the Manager and the Trust dated July 1, 1992 shall have
terminated for any reason.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of a Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested person"
and "assignment" shall have their respective meanings defined in the 1940 Act
and the rules and
3
<PAGE>
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the Securities and Exchange
Act of 1934 and the rules and regulations thereunder.
7. NONLIABILITY OF SUB-ADVISER
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser, or reckless disregard of its obligations and duties
hereunder, the Sub-Adviser shall not be subject to any liability to the Trust,
to any shareholder of the Trust, or to the Manager, for any act or omission in
the course of, or connected with, rendering services hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed by the Trustees as Trustees and not individually and
that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the appropriate Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and PUTNAM INVESTMENT MANAGEMENT, INC. has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: ___________________________________
Title: ___________________________________
PUTNAM INVESTMENT MANAGEMENT, INC.
By: ___________________________________
Title: ___________________________________
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: _________________________
Title: _________________________
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered and for the expenses borne by the Sub-Adviser pursuant to
Section l, a fee, computed daily at an annual rate based on the average daily
net assets of each Fund under the following fee schedule. Such fee will be paid
to the Sub-Adviser after the end of each calendar quarter.
Assets Rate
------ ----
First $50 Million 0.50%
Next $100 Million 0.45%
Next $100 Million 0.35%
Next $100 Million 0.30%
Over $350 Million 0.25%
6
<PAGE>
EXHIBIT 5(h)
FORM OF
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of __________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager") and CAMBIAR
INVESTORS, INC. (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser,
at its expense, will furnish continuously an investment program for the
following series of shares of the Trust: the SELECT STRATEGIC GROWTH
FUND (the "Fund") and such other series of shares as the Trust, the
Manager and the Sub-Adviser may from time to time agree on (together,
the "Funds"). The Sub-Adviser will make investment decisions on behalf
of the Funds and place all orders for the purchase and sale of
portfolio securities. In the performance of its duties, the Sub-Adviser
will comply with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the objectives and policies of the
Fund, as set forth in the current Registration Statement of the Trust
filed with the Securities and Exchange Commission ("SEC") and any
applicable federal and state laws, and will comply with other policies
which the Trustees of the Trust (the "Trustees") or the Manager, as the
case may be, may from time to time determine and which are furnished to
the Sub-Adviser. The Sub-Adviser shall make its officers and employees
available to the Manager from time to time at reasonable times to
review investment policies of the Fund and to consult with the Manager
regarding the investment affairs of the Fund. In the performance of its
duties hereunder, the Sub-Adviser is and shall be an independent
contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way or
otherwise be deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all investment and
management facilities, including salaries of personnel necessary for it
to perform the duties set forth in this Agreement, and (ii)
administrative facilities, including clerical personnel and equipment
necessary for the conduct of the investment affairs of the Fund
(excluding brokerage expenses and pricing and bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for the Fund with issuers, brokers or dealers
selected by the Sub-Adviser which may include brokers or dealers
affiliated with the Sub-Adviser. In the selection of such brokers or
dealers and the placing of such orders, the Sub-Adviser always shall
seek best execution (except to the extent permitted by the next
sentence hereof), which is to place
<PAGE>
portfolio transactions where the Fund can obtain the most favorable
combination of price and execution services in particular transactions
or provided on a continuing basis by a broker or dealer, and to deal
directly with a principal market maker in connection with over-the-
counter transactions, except when it is believed that best execution is
obtainable elsewhere. Subject to such policies as the Trustees may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay a broker or
dealer that provides brokerage and research services an amount of
commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Sub-Adviser determines in good
faith that such excess amount of commission was reasonable in relation
to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction
or the overall responsibilities of the Sub-Adviser and its affiliates
with respect to the Trust and to other clients of the Sub-Adviser as to
which Sub-Adviser or any affiliate of the Sub-Adviser exercises
investment discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any
person controlled by or under common control with the Sub-Adviser, and that
the Sub-Adviser and any person controlled by or under common control with
the Sub-Adviser may have an interest in the Trust. It is also understood
that the Sub-Adviser and persons controlled by or under common control with
the Sub-Adviser have and may have advisory, management service or other
contracts with other organizations and persons, and may have other interests
and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered, a fee, determined as described in Schedule A
which is attached hereto and made a part hereof. Such fee shall be paid by
the Manager and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A attached hereto) shall not be amended
as to any Fund unless such amendment is approved at a meeting by the
affirmative vote of a majority of the outstanding voting securities of the
Fund, if such approval is required under the Investment Company Act of 1940,
as amended ("1940 Act"), and by the vote, cast in person at a meeting called
for the purpose of voting on such approval, of a majority of the Trustees
who are not interested persons of the Trust or of the Manager or of the Sub-
Adviser.
2
<PAGE>
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below:
(a) Unless terminated as herein provided, this Agreement shall remain in
full force and effect through January 9, 2000, and shall continue in
full force and effect for successive periods of one year thereafter,
but only so long as such continuance is specifically approved at least
annually (i) by the Trustees or by the affirmative vote of a majority
of the outstanding voting securities of the Fund, and (ii) by a vote of
a majority of the Trustees who are not interested persons of the Trust
or of the Manager or of any Sub-Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval; provided,
however, that if the continuance of this Agreement is submitted to the
shareholders of the Fund for their approval and such shareholders fail
to approve such continuance of this Agreement as provided herein, the
Sub-Adviser may continue to serve hereunder in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
(b) This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by
vote of the Trustees, or by vote of a majority of the outstanding
voting securities of such Fund at any annual or special meeting or by
the Sub-Adviser, in each case on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the
Management Agreement with the Manager shall have terminated for any
reason.
(d) In the event of termination of this Agreement, the Fund will no longer
use the name "Cambiar Investors, Inc." in materials relating to the
Fund except as may be required by the 1940 Act and the rules and
regulations thereunder.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more
of the shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Fund entitled to vote at such meeting are present in person or
by proxy, or (b) of the holders of more than 50% of the outstanding shares
of the Fund entitled to vote at such meeting, whichever is less.
3
<PAGE>
For the purposes of this Agreement, the terms "control", "interested person"
and "assignment" shall have their respective meanings defined in the 1940
Act and rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the SEC under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the rules and regulations thereunder; and
the term "brokerage and research services" shall have the meaning given in
the Securities Exchange Act of 1934 and the rules and regulations
thereunder.
7. NON-LIABILITY OF SUB-ADVISER
The Sub-Adviser shall be under no liability to the Trust, the Manager or the
Trust's Shareholders or creditors for any matter or thing in connection with
the performance of any of the Sub-Adviser's services hereunder or for any
losses sustained or that may be sustained in the purchase, sale or retention
of any investment for the Funds of the Trust made by it in good faith;
provided, however, that nothing herein contained shall be construed to
protect the Sub-Adviser against any liability to the Trust by reason of the
Sub-Adviser's own willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the appropriate Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and CAMBIAR INVESTORS, INC. has caused this instrument
to be signed in duplicate on its behalf by its duly authorized representative,
all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: ______________________________________
Title: ______________________________________
CAMBIAR INVESTORS, INC.
By: ______________________________________
Title: ______________________________________
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: ______________________________________
Title: ______________________________________
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as full compensation for the Sub-
Adviser's services rendered, a fee computed daily and paid quarterly at an
annual rate of the average daily net assets of the Fund as described below:
NET ASSETS FEE RATE
---------- --------
First $50 Million 0.50%
Next $100 Million 0.45%
Next $100 Million 0.35%
Next $100 Million 0.30%
Over $350 Million 0.25%
The average daily net assets of the Fund shall be determined by taking an
average of all of the determinations of net asset value during each month at the
close of business on each business day during such month while this Agreement is
in effect.
The fee for each quarter shall be payable within ten (10) business days after
the end of the quarter.
If the Sub-Adviser shall serve for any period less than a full month, the
foregoing compensation shall be prorated according to the proportion which such
period bears to a full month.
6
<PAGE>
FORM OF
SUB-ADVISER AGREEMENT EXHIBIT 5(i)
SUB-ADVISER AGREEMENT executed as of __________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager"), and MILLER,
ANDERSON & SHERRERD, LLP (or any successor-in-interest (by merger or otherwise)
thereto or transferee thereof that does not involve an "assignment" within the
meaning of the Investment Company Act of 1940 and that is a limited liability
partnership or other entity wholly-owned, directly or indirectly, by Morgan
Stanley Asset Management Holdings, Inc. and/or its affiliates; Miller Anderson &
Sherrerd, LLP or such successor-in-interest or transferee being referred to
herein as the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for each of the
following series of shares of the Trust: the Growth Fund and such other series
of shares as the Trust, the Manager and the Sub-Adviser may from time to time
agree on (together, the "Funds"). The Sub-Adviser will make investment
decisions on behalf of each of the Funds and place all orders for the purchase
and sale of portfolio securities. In the performance of its duties, the Sub-
Adviser will comply with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the objectives and policies of each of the
Funds, as set forth in the current Registration Statement of the Trust filed
with the Securities and Exchange Commission and any applicable federal and state
laws, and will comply with other policies which the Trustees of the Trust (the
"Trustees") or the Manager, as the case may be, may from time to time determine
in writing. The Sub-Adviser shall make its officers and employees available to
the Manager from time to time at reasonable times to review investment policies
of the Funds and to consult with the Manager regarding the investment affairs of
the Funds.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel required
for it to execute its duties faithfully, and (ii) administrative facilities,
including clerical personnel and equipment necessary for the efficient conduct
of the investment affairs of each of the Funds (excluding pricing and
bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for each Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers or dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution, (except to the extent
permitted by the next sentence hereof) which is to place portfolio transactions
where each Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly with a
<PAGE>
principal market maker in connection with over-the-counter transactions, except
when it is believed that best execution is obtainable elsewhere. Subject to such
policies as the Trustees may determine, the Sub-Adviser shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Trust to pay a broker or
dealer that provides brokerage and research services an amount of commission
greater than that which another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determines in good faith that
such excess amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
the Sub-Adviser and its affiliates with respect to the Trust and to other
clients of the Sub-Adviser as to which the Sub-Adviser or any affiliate of the
Sub-Adviser exercises investment discretion.
(d) The Sub-Adviser shall not be obligated to pay any expenses of or for a
Fund not expressly assumed by the Sub-Adviser pursuant to this Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlling, controlled by or under common control with the Sub-Adviser, and
that the Sub-Adviser and any person controlling, controlled by or under common
control with the Sub-Adviser may have an interest in the Trust. It is also
understood that that the Sub-Adviser and any person controlling, controlled by
or under common control with the Sub-Adviser have and may have advisory,
management service or other contracts with other organizations and persons, and
may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, determined as described in Schedule A which is
attached hereto and made a part hereof. Such fee shall be paid by the Manager
and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as to any
Fund unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding voting securities of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below.
2
<PAGE>
A. Unless terminated as herein provided, this Agreement shall remain in
full force and effect through May 30, 1998, and shall continue in full
force and effect for successive periods of one year thereafter, but
only so long as each such continuance is approved annually (i) by the
Trustees or by the affirmative vote of a majority of the outstanding
voting securities of a Fund, and (ii) by a vote of a majority of the
Trustees who are not interested persons of the Trust or of the Manager
or of any Sub-Adviser, by vote cast in person at a meeting called for
the purpose of voting on such approval; provided, however, that if the
continuance of this Agreement is submitted to the shareholders of a
Fund for their approval and such shareholders fail to approve such
continuance of this Agreement as provided herein, the Sub-Adviser may
continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940, as amended ("1940 Act") and the rules and
regulations thereunder.
B. This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by
vote of the Trustees, or by vote of a majority of the outstanding
voting securities of such Fund at any annual or special meeting or by
the Sub-Adviser on sixty days' written notice.
C. This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the
Management Agreement shall have terminated for any reason.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of a Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
1940 Act and the Rules and Regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act; the term "specifically approve at least annually" shall be construed
in a manner consistent with the 1940 Act and the Rules and Regulations
thereunder; and the term "brokerage and research services" shall have the
meaning given in the Securities and Exchange Act of 1934 and the Rules and
Regulations thereunder.
3
<PAGE>
7. NONLIABILITY OF SUB-ADVISER
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser, or reckless disregard of its obligations and duties
hereunder, the Sub-Adviser shall not be subject to any liability to the Trust,
or to any shareholder of the Trust, for any act or omission in the course of, or
connected with, rendering services hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the appropriate Fund.
9. MISCELLANEOUS
Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the NASD and State insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to provide the California Insurance Commissioner, or the Insurance
Commissioner of any other state, with any information or reports in connection
with services provided under this Agreement which such Commissioner may
reasonably request in order to ascertain whether the variable contracts
operations of the Company are being conducted in a manner consistent with the
state's regulations concerning variable contracts and any other applicable law
or regulations.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and MILLER, ANDERSON & SHERRERD, LLP has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By: _______________________________
Title: _______________________________
MILLER, ANDERSON & SHERRERD, LLP
By: _______________________________
Title: _______________________________
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: _________________________________
Title: ______________________________
5
<PAGE>
SCHEDULE A
----------
Annexed to Agreements by and between Miller, Anderson & Sherrerd, LLP (the
"Adviser") and the Affiliated Clients.
1. The Affiliated Clients shall mean, as used in Schedule A, The Hanover
Insurance Company, Citizens Insurance Company of America, First Allmerica
Financial Life Insurance Company and Allmerica Financial Investment
Management Services, Inc. (as Manager) with respect to Allmerica Investment
Trust, which companies have each entered into a separate advisory Agreement
with the Adviser.
2. For purposes of calculating fees earned by the Adviser, and at the times of
such calculation, the assets in the Affiliated Clients' separate accounts
managed by the Adviser shall be valued at market value and, taken
collectively, are referred to hereinafter as the Aggregate Account.
3. Adviser shall be entitled to receive annual fees on the Aggregate Account as
follows:
ANNUAL FEES
-----------
.500% per annum on first $50 million of the Aggregate Account
.375% per annum on next $50 million of the Aggregate Account
.250% per annum on next $400 million of the Aggregate Account
.200% per annum on next $250 million of the Aggregate Account
.150% per annum on amount over $850 million of the Aggregate Account
4. The fee shall be paid quarterly in arrears at the end of each calendar
quarter for services rendered during such quarter based on the average value
of the assets of the Funds of Allmerica Investment Trust during the quarter
and the market value of assets of The Hanover Insurance Company, Citizens
Insurance Company of America, and First Allmerica Financial Life Insurance
Company as of the beginning of such quarter. The first billing for the
accounts of The Hanover Insurance Company, Citizens Insurance Company of
America, and First Allmerica Financial Life Insurance Company will be
calculated on the market value of the assets at the close of business on the
business day prior to the effective date of management. Should the time span
be less than a calendar quarter for any Affiliated Client, the fee will be
prorated based on actual days.
5. The quarterly fee for the Aggregate Account, as calculated, will be prorated
among the Affiliated Clients based on their proportionate shares of the
Aggregate Account and billed to the Affiliated Clients; payments are due
within twenty (20) days of receipt of bills. Billings should be directed by
the Adviser to the Client's representative.
6
<PAGE>
FORM OF
SUB-ADVISER AGREEMENT
EXHIBIT 5(j)
SUB-ADVISER AGREEMENT executed as of ___________, 1998, between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager"), and JOHN A.
LEVIN & CO., INC. (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for the following
series of shares of the Trust: SELECT GROWTH AND INCOME FUND and such other
series of shares as the Trust, the Manager and the Sub-Adviser may from time to
time agree on (the "Fund"). The Sub-Adviser will make investment decisions on
behalf of the Fund and place all orders for the purchase and sale of portfolio
securities. In the performance of its duties, the Sub-Adviser will comply with
the provisions of the Agreement and Declaration of Trust and Bylaws of the Trust
and the objective and policies of the Fund, as set forth in the current
Registration Statement of the Trust filed with the Securities and Exchange
Commission ("SEC") and any applicable federal and state laws, and will comply
with other policies which the Trustees of the Trust (the "Trustees") or the
Manager, as the case may be, may from time to time determine. The Sub-Adviser
shall make its officers and employees available to the Manager from time to time
at reasonable times to review investment policies of the Fund and to consult
with the Manager regarding the investment affairs of the Fund. In the
performance of its duties hereunder, the Sub-Adviser is and shall be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way or
otherwise be deemed to be an agent of the Trust.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel required
for it to execute its duties faithfully, and (ii) administrative facilities,
including clerical personnel and equipment necessary for the efficient conduct
of the investment affairs of the Fund (excluding pricing and bookkeeping
services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investment for the Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers or dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution (except to the extent
permitted by the next sentence hereof), which is to place portfolio transactions
where the Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when it is believed that
best execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay a broker or dealer that
provides brokerage and research services an amount of commission for
<PAGE>
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such excess amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Sub-Adviser
and its affiliates with respect to the Trust and to other clients of the Sub-
Adviser as to which the Sub-Adviser or any affiliate of the Sub-Adviser
exercises investment discretion.
2. OTHER AGREEMENTS
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. It is also understood that the Sub-
Adviser and persons controlled by or under common control with the Sub-Adviser
have and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-Adviser's
services rendered, a fee, determined as described in Schedule A which is
attached hereto and made a part hereof. Such fee shall be paid by the Manager
and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as to any
Fund unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding voting securities of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to the Fund continuously thereafter, until
terminated as provided below.
(a) Unless terminated as herein provided, this Agreement shall remain in full
force and effect through May 30, 1998, and shall continue in full force and
effect for successive periods of one year thereafter, but only so long as each
such continuance is specifically approved at least annually (i) by the Trustees
or by the affirmative vote of a majority of the outstanding voting securities of
the Fund, and (ii) by a vote of majority of the Trustees who are not interested
persons of the Trust or of the Manager or of any Sub-Adviser, by vote cast in
person at a meeting called for the purpose of voting on such approval; provided,
however, that if the continuance of this Agreement is submitted to the
shareholders of a Fund for their approval and such
2
<PAGE>
shareholders fail to approve such continuance of this Agreement as provided
herein, the Sub-Adviser may continue to serve hereunder in a manner consistent
with the Investment Company Act of 1940, as amended ("1940 Act") and the rules
and regulations thereunder.
(b) This Agreement may be terminated as to the Fund without the payment of
any penalty by the Manager, by vote of the Trustees, or by vote of a majority of
the outstanding voting securities of the Fund at any annual or special meeting
or by the Sub-Adviser on sixty days' written notice.
(c) This Agreement shall terminate automatically, without the payment of any
penalty, in the event of its assignment or in the event that the Management
Agreement between the Manager and the Trust shall have terminated for any
reason.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of the Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", interested person"
and "assignment" shall have their respective meanings defined in the 1940 Act
and the Rules and Regulations thereunder, subject, however, to such exemptions
as may be granted by the Securities and Exchange Commission under said Act; the
term "specifically approve at least annually" shall be construed in a manner
consistent with the 1940 Act and the Rules and Regulations thereunder, and the
term "brokerage and research services" shall have the meaning given in the
Securities and Exchange Act of 1934 and the rules and regulations thereunder.
7. NONLIABILITY OF SUB-ADVISER
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser, or reckless disregard of its obligations and duties
hereunder, the Sub-Adviser shall not be subject to any liability to the Trust or
Fund, or to any shareholder of the Fund, for any act or omission in the course
of, or connected with, rendering services hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed by the Trustees as Trustees and not individually and
that the obligations of this instrument are binding only upon the assets and
property of the Fund.
3
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and JOHN A. LEVIN & CO., INC. has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By:
----------------------------
Its:
----------------------------
JOHN A. LEVIN & CO., INC.
By:
----------------------------
Its:
----------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By:
---------------------------
Its:
---------------------------
4
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser, as full compensation for the Sub-
Adviser's services rendered, a quarterly fee, computed at an annual rate
based on the average daily net assets of the Fund, as set forth below:
<TABLE>
<CAPTION>
Assets Rate
------ ----
<S> <C>
First $100 Million 0.40%
Next $200 Million 0.25%
Over $300 Million 0.30%
</TABLE>
5
<PAGE>
FORM OF
SUB-ADVISER AGREEMENT EXHIBIT 5(k)
SUB-ADVISER AGREEMENT executed as of ___________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager"), and STANDISH,
AYER & WOOD, INC. (the "Sub-Adviser").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for each of the
following series of shares of the Trust: Select Income Fund and such other
series of shares as the Trust, the Manager and the Sub-Adviser may from time to
time agree on (together, the "Funds"). The Sub-Adviser will make investment
decisions on behalf of each of the Funds and place all orders for the purchase
and sale of portfolio securities. In the performance of its duties, the Sub-
Adviser will comply with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the objectives and policies of each of the
Funds, as set forth in the current Registration Statement of the Trust filed
with the Securities and Exchange Commission and any applicable federal and state
laws, and will comply with other policies which the Trustees of the Trust (the
"Trustees") or the Manager, as the case may be, may from time to time determine
in writing. The Sub-Adviser shall make its officers and employees available to
the Manager from time to time at reasonable times to review investment policies
of the Funds and to consult with the Manager regarding the investment affairs of
the Funds.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel required
for it to execute its duties faithfully, and (ii) administrative facilities,
including clerical personnel and equipment necessary for the efficient conduct
of the investment affairs of each of the Funds (excluding pricing and
bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for each Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers or dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution, (except to the extent
permitted by the next sentence hereof) which is to place portfolio transactions
where each Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when it is believed that
best execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay a broker or dealer that
provides brokerage and research services an amount of commission for
<PAGE>
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such excess amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the Sub-Adviser
and its affiliates with respect to the Trust and to other clients of the Sub-
Adviser as to which Sub-Adviser or any affiliate of the Sub-Adviser exercises
investment discretion.
(d) The Sub-Adviser shall not be obligated to pay any expenses of or for a
Fund not expressly assumed by the Sub-Adviser pursuant to this Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. It is also understood that the Sub-
Adviser and persons controlled by or under common control with the Sub-Adviser
have and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, determined as described in Schedule A which is
attached hereto and made a part hereof. Such fee shall be paid by the Manager
and not by the Trust.
4. AMENDMENTS TO THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as to any
Fund unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding voting securities of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below.
A. Unless terminated as herein provided, this Agreement shall remain in
full force and effect through May 30, 1998, and shall continue in full
force and effect for successive periods of one year thereafter, but
only so long as each such continuance
2
<PAGE>
is approved annually (i) by the Trustees or by the affirmative vote of
a majority of the outstanding voting securities of a Fund, and (ii) by
a vote of a majority of the Trustees who are not interested persons of
the Trust or of the Manager or of any Sub-Adviser, by vote cast in
person at a meeting called for the purpose of voting on such approval;
provided, however, that if the continuance of this Agreement is
submitted to the shareholders of a Fund for their approval and such
shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder in a
manner consistent with the Investment Company Act of 1940, as amended
("1940 Act") and the rules and regulations thereunder.
B. This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by
vote of the Trustees, or by vote of a majority of the outstanding
voting securities of such Fund at any annual or special meeting or by
the Sub-Adviser on sixty days' written notice.
C. This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the
Management Agreement shall have terminated for any reason.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding voting securities" means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of a Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of more than 50% of the outstanding shares of the fund
entitled to vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in the
Investment Company Act of 1940 and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission under said Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the Investment Company
Act of 1940 and the Rules and Regulations thereunder; and the term "brokerage
and research services" shall have the meaning given in the Securities and
Exchange Act of 1934 and the Rules and Regulations thereunder.
7. NONLIABILITY OF SUB-ADVISER
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser, or reckless disregard of its obligations and duties
hereunder, the Sub-Adviser shall not be subject to any liability to the Trust,
to any shareholder of the Trust or to the Manager, for any act or omission in
the course of, or connected with, rendering services hereunder.
3
<PAGE>
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Trust's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed by the Trustees as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the appropriate Fund.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC.
has caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and STANDISH, AYER & WOOD, INC. has caused this
instrument to be signed in duplicate on its behalf by its duly authorized
representative, all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By:
---------------------------------
Title:
---------------------------------
STANDISH, AYER & WOOD, INC.
By:
---------------------------------
Title:
---------------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By:
-------------------------------
Title:
-------------------------------
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, computed daily at an annual rate of .20% based on
the average daily net assets of each Fund. Such fee will be paid to the Sub-
Adviser after the end of each calendar quarter.
6
<PAGE>
FORM OF
SUB-ADVISER AGREEMENT EXHIBIT 5(l)
SUB-ADVISER AGREEMENT executed as of ____________, 1998 between ALLMERICA
FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. (the "Manager"), and ALLMERICA
ASSET MANAGEMENT, INC. ("AAM").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of Allmerica Investment
Trust (the "Trust"), a Massachusetts business trust, the Sub-Adviser, at its
expense, will furnish continuously an investment program for each of the
following series of shares of the Trust: the Investment Grade Income Fund, the
Money Market Fund, the Equity Index Fund, the Government Bond Fund and such
other series of shares as the Trust, the Manager and the Sub-Adviser may from
time to time agree on (together, the "Funds"). The Sub-Adviser will make
investment decisions on behalf of each of the Funds and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties,
the Sub-Adviser will comply with the provisions of the Agreement and Declaration
of Trust and Bylaws of the Trust and the objectives and policies of each of the
Funds, as set forth in the current Registration Statement of the Trust filed
with the Securities and Exchange Commission and any applicable federal and state
laws, and to comply with other policies which the Trustees of the Trust (the
"Trustees") or the Manager, as the case may be, may from time to time determine.
The Sub-Adviser shall make its officers and employees available to the Manager
from time to time at reasonable times to review investment policies of the Funds
and to consult with the Manager regarding the investment affairs of the Funds.
(b) The Sub-Adviser, at its expense, will furnish (i) all necessary
investment and management facilities, including salaries of personnel required
for it to execute its duties faithfully, and (ii) administrative facilities,
including clerical personnel and equipment necessary for the efficient conduct
of the investment affairs of each of the Funds (excluding pricing and
bookkeeping services).
(c) The Sub-Adviser shall place all orders for the purchase and sale of
portfolio investments for each Fund with issuers, brokers or dealers selected by
the Sub-Adviser which may include brokers and dealers affiliated with the Sub-
Adviser. In the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser always shall seek best execution, (except to the extent
permitted by the next sentence hereof) which is to place portfolio transactions
where each Fund can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker or dealer, and to deal directly with a principal market maker in
connection with over-the-counter transactions, except when it is believed that
best execution is obtainable elsewhere. Subject to such policies as the
Trustees may determine, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Trust to pay
<PAGE>
a broker or dealer that provides brokerage and research services an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such excess
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall responsibilities of the Sub-
Adviser and its affiliates with respect to the Trust and to other clients of the
Sub-Adviser as to which Sub-Adviser or any affiliate of the Sub-Adviser
exercises investment discretion.
(d) The Sub-Adviser shall not be obligated to pay any expenses of or for a
Fund not expressly assumed by the Sub-Adviser pursuant to this Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Sub-Adviser, and in any person
controlled by or under common control with the Sub-Adviser, and that the Sub-
Adviser and any person controlled by or under common control with the Sub-
Adviser may have an interest in the Trust. It is also understood that the Sub-
Adviser and persons controlled by or under common control with the Sub-Adviser
have and may have advisory, management service or other contracts with other
organizations and persons, and may have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, determined as described in Schedule A which is
attached hereto and made a part hereof. Such fee shall be paid by the Manager
and not by the Trust.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement (including Schedule A hereto) shall not be amended as to any
Fund unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding voting securities of the Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees who are not interested persons of the Trust or of the
Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall be effective as of the date executed, and shall remain
in full force and effect as to each Fund continuously thereafter, until
terminated as provided below.
A. Unless terminated as herein provided, this Agreement shall remain in
full force and effect through May 30, 1998, and shall continue in full
force and effect for
2
<PAGE>
successive periods of one year thereafter, but only so long as each
such continuance is approved (i) by the Trustees or by the affirmative
vote of a majority of the outstanding voting securities of a Fund, and
(ii) by a vote of a majority of the Trustees who are not interested
persons of the Trust or of the Manager or of any Sub-Adviser, by vote
cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that if the continuance of this Agreement
is submitted to the shareholders of a Fund for their approval and such
shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder in a
manner consistent with the Investment Company Act of 1940, as amended
("1940 Act") and the rules and regulations thereunder.
B. This Agreement may be terminated as to any Fund without the payment of
any penalty by the Manager, subject to the approval of the Trustees, by
vote of the Trustees, or by vote of a majority of the outstanding
voting securities of such Fund at any annual or special meeting or by
the Sub-Adviser on sixty days' written notice.
C. This Agreement shall terminate automatically, without the payment of
any penalty, in the event of its assignment or in the event that the
Management Agreement shall have terminated for any reason.
6. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding voting securities" means the affirmative vote,
at a duly called and held meeting of shareholders, (a) of the holders of
67% or more of the shares of a Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting are present
in person or by proxy, or (b) of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting, whichever
is less.
For the purposes of this Agreement, the terms "control", "interested
person" and "assignment" shall have their respective meanings defined in
the Investment Company Act of 1940 and the Rules and Regulations
thereunder, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with
the Investment Company Act of 1940 and the Rules and Regulations
thereunder; and the term "brokerage and research services" shall have the
meaning given in the Securities and Exchange Act of 1934 and the Rules and
Regulations thereunder.
7. NONLIABILITY OF SUB-ADVISER
In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Sub-Adviser, or reckless disregard of its obligations
and duties hereunder, the Sub-
3
<PAGE>
Adviser shall not be subject to any liability to the Trust, or to any
shareholder of the Trust, for any act or omission in the course of, or
connected with, rendering services hereunder.
8. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Trust's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed by the Trustees as Trustees
and not individually and that the obligations of this instrument are not
binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property of the appropriate Fund.
9. MISCELLANEOUS
Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and State insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
further agrees to furnish the California Insurance Commissioner, or the
Insurance Commissioner of any other state, with any information or reports
in connection with services provided under this Agreement which such
Commissioner may reasonably request in order to ascertain whether the
variable contracts operations of the Company are being conducted in a
manner consistent with the state's regulations concerning variable
contracts and any other applicable law or regulations.
4
<PAGE>
IN WITNESS WHEREOF, ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC. has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative and ALLMERICA ASSET MANAGEMENT, INC. ("AAM") has
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative, all as of this day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By:
---------------------------------
Title:
---------------------------------
ALLMERICA ASSET MANAGEMENT, INC.
By:
---------------------------------
Title:
---------------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By:
---------------------------------
Title:
---------------------------------
5
<PAGE>
SCHEDULE A
----------
The Manager will pay to the Sub-Adviser as compensation for the Sub-
Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, computed daily at an annual rate based on the
average daily net assets of each Fund, as set forth below:
ANNUAL FEES
-----------
Equity Index Fund: .10% of the average daily net assets
Investment Grade Income Fund: .20% of the average daily net assets
Government Bond Fund: .20% of the average daily net assets
Money Market Fund: .10% of the average daily net assets
6
<PAGE>
EXHIBIT 6
DISTRIBUTION AGREEMENT
BETWEEN
ALLMERICA INVESTMENT TRUST
AND
ALLMERICA INVESTMENTS, INC.
THIS DISTRIBUTION AGREEMENT, made as of the 25th day of February, 1998, by and
between Allmerica Investment Trust, a business trust organized and existing
under the laws of the Commonwealth of Massachusetts (hereinafter called the
"Trust") and Allmerica Investments, Inc., a corporation organized and existing
under the laws of the Commonwealth of Massachusetts (hereinafter called the
"Distributor").
WITNESSETH:
WHEREAS, the Trust engages in business as an open-end management investment
company and is registered as such under the federal Investment Company Act of
1940, as amended ("ICA-40"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in separate series, with each such series representing the interests
in a separate portfolio of securities and other assets; and
WHEREAS, the Trust currently offers Shares in the series listed on attached
Exhibit A, (each "Fund"), such series together with any other series which may
be established later and served by the Distributor hereunder, being herein
referred to collectively as the "Funds" and individually referred to as a
"Fund"; and
WHEREAS, the Distributor is engaged in the business of distributing securities,
including shares of investment companies, and is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, ("SEA-34") and is a
member of the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, the Trust desires the Distributor to act as the distributor in the
public offering of the Shares of the Funds; and
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
<PAGE>
1. Delivery of Trust Documents. The Trust has furnished Distributor with
copies, properly certified or authenticated, of each of the following:
(a) Agreement and Declaration of Trust October 11, 1984, as amended
May 7, 1992 ("Declaration of Trust").
(b) By-Laws of the Trust as in effect on the date hereof.
(c) Resolutions of the Board of Trustees of the Trust selecting
Distributor as principal underwriter for the Funds and approving
this form of agreement.
The Trust shall furnish the Distributor from time to time with copies,
properly certified or authenticated, of all the amendments of, or
supplements to, the foregoing, if any.
The Trust shall furnish Distributor promptly with properly certified or
authenticated copies of any registration statements filed by it on behalf
of the Funds with the Securities and Exchange Commission under the
Securities Act of 1933, as amended ("SA-33") or ICA-40, together with any
financial statements and exhibits included therein, and all amendments or
supplements thereto hereafter filed.
2. Sale of Shares. Subject to the provisions of Paragraphs 3, 4, and 6
hereof, and to such minimum purchase requirements as may from time to
time be currently indicated in the Trust's prospectus, on behalf of the
Funds, the Distributor is authorized to sell, as agent for the Trust, on
behalf of the Funds, Shares authorized for issuance and registered under
SA-33. Distributor may also purchase as principal such Shares for resale
to the public. Such sale will be made by Distributor on behalf of the
Funds by accepting unconditional orders to purchase the Shares placed
with Distributor by investors and such purchases will be made by
Distributor only after acceptance by Distributor of such orders. The
sales price to the public of such Shares shall be the public offering
price as defined in Paragraph 5 hereof.
3. Sale of Shares by the Trust. The rights granted to the Distributor shall
be nonexclusive in that the Trust, on behalf of the Funds, reserves the
right to sell Shares of the Funds to investors pursuant to applications
received and accepted by the Trust or its transfer agent, if any.
Further, the Trust reserves the right to issue Shares in connection with
the merger or consolidation of any other investment company, trust or
personal holding company with the Trust or the Trust's acquisition by the
purchase or otherwise, of all or substantially all of the assets of an
investment company, trust or personal holding company. Any right granted
to Distributor to accept orders for Shares, or to make sales on behalf of
the Funds or to purchase Shares for resale, will not apply to Shares
issued in connection with the merger or consolidation of any other
investment company with the Trust or its acquisition by purchase or
otherwise, of all or substantially all of the assets of any investment
company, trust or personal holding company, or substantially all of the
outstanding shares or interests of any such entity, and such right shall
not apply to Shares that may be offered by the Trust to shareholders by
virtue of their being shareholders of the Funds.
2
<PAGE>
4. Shares Covered by this Agreement. This Agreement relates to the issuance
and sale of Shares that are duly authorized, registered, and available
for sale by the Trust, on behalf of the Funds, including redeemed or
repurchased Shares if and to the extent that they may be legally sold and
if, but only if, the Trust authorizes the Distributor to sell them.
5. Public Offering Price. All Shares sold by the Distributor pursuant to
this Agreement shall be sold at the public offering price. The public
offering price for all accepted subscriptions will be the net asset value
per share, as determined in the manner provided in the Trust's
Declaration of Trust, with respect to the Funds, as now in effect, or as
it may be amended (and as reflected in the then current prospectus of the
Trust, with respect to the Funds), next determined after the order is
accepted by the Distributor. The Distributor will process orders
submitted by brokers for the sale of Shares at the public offering price
exclusive of any commission charged by such broker to his customer.
6. Suspension of Sales. If and whenever the determination of net asset value
is suspended and until such suspension is terminated, no further orders
for Shares shall be accepted by the Distributor except such unconditional
orders placed with the Distributor before it had knowledge of the
suspension. In addition, the Trust reserves the right to suspend sales
and Distributor's authority to accept orders for Shares on behalf of a
Fund if, in the judgment of the Board of Trustees of the Trust, it is in
the best interests of the Trust or Fund to do so, such suspension to
continue for such period as may be determined by the Board of Trustees;
and in that event, no orders to purchase Shares shall be processed or
accepted by the Distributor on behalf of the Funds while such suspension
remains in effect except for Shares necessary to cover unconditional
orders accepted by Distributor before it had knowledge of the suspension,
unless otherwise directed by the Board of Trustees.
7. Solicitation of Orders. In consideration of the rights granted to the
Distributor under this Agreement, Distributor will use its best efforts
(but only in states in which Distributor may lawfully do so) to obtain
from investors unconditional orders for Shares authorized for issuance by
the Trust, on behalf of the Funds, and registered under SA-33, provided
that Distributor may in its discretion reject any order to purchase
Shares. This does not obligate the Distributor to register or maintain
its registration as a broker or dealer under the state securities laws of
any jurisdiction if, in the discretion of the Distributor, such
registration is not practical or feasible. The Funds shall make available
to the Distributor at the expense of the Distributor such number of
copies of the Funds' currently effective prospectus as the Distributor
may reasonably request. The Funds shall furnish to the Distributor copies
of all information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Shares.
8. Authorized Representations. The Trust is not authorized by the
Distributor to give, on behalf of the Distributor, any information or to
make any representations other than the information and representations
contained in a registration statement or prospectus filed with the SEC
under SA-33 and/or ICA-40, covering Shares, as such registration
statement and prospectus may be amended or supplemented from time to
time.
3
<PAGE>
Distributor is not authorized by the Trust to give on behalf of the Funds
any information or to make any representations in connection with the
sale of Shares other than the information and representations contained
in a registration statement or prospectus filed with the Securities and
Exchange Commission ("SEC") under SA-33 and/or ICA-40, covering Shares,
as such registration statement and prospectus may be amended or
supplemented from time to time, or contained in shareholder reports or
other material that may be prepared by or on behalf of the Fund for the
Distributor's use. This shall not be construed to prevent the Distributor
from preparing and distributing tombstone ads and sales literature or
other material as it may deem appropriate. No person other than
Distributor is authorized to act as principal underwriter (as such term
is defined in ICA-40, as amended) for the Trust.
9. Registration and Sale of Additional Shares. The Trust, on behalf of the
Funds will, from time to time, use its best efforts to register under
SA-33, such Shares of the Funds as Distributor may reasonably be expected
to sell on behalf of the Funds. In connection therewith, the Trust, on
behalf of the Funds, hereby agrees to register an indefinite number of
Shares under SA-33 and ICA-40. The Trust, on behalf of the Funds will, in
cooperation with the Distributor, take such action as may be necessary
from time to time to qualify such Shares in any state mutually agreeable
to the Distributor and the Funds, and to maintain such qualification.
10. Expenses. The Distributor shall pay, or will enter arrangements providing
that persons other than Distributor shall pay, all fees and expenses:
a. incurred in connection with its registration as a broker or dealer or
the registration or qualification of its officers, directors or
representations under federal and state laws; and
b. incurred in connection with the sale and offering for sale of Shares
which may have been specifically allocated to the Distributor.
Other than the expenses specifically assumed by the Distributor or
the investment manager of the Trust, under the Management Agreement
between the investment manager and the Trust, all expenses incurred
in the operation of the Trust are borne by the Trust.
11. Conformity with Law. Distributor agrees that in selling Shares it shall
duly conform in all respects with the laws of the United States and any
state in which such Shares may be offered for sale by Distributor
pursuant to this Agreement and to the rules and regulations of the NASD.
12. Independent Contractor. Distributor shall be an independent contractor
and neither Distributor, nor any of its officers, directors, employees,
or representatives is or shall be an employee of the Trust in the
performance of Distributor's duties hereunder. Distributor shall be
responsible for its own conduct and the employment, control and conduct
of its agents and employees and for injury to such agents or employees or
to others through its agents or employees. Distributor assumes full
responsibility for its
4
<PAGE>
agents and employees under applicable statutes and agrees to pay all
employee taxes thereunder.
13. Indemnification. Distributor agrees to indemnify and hold harmless the
Trust or Funds, as appropriate, and each of the Trust's Trustees,
officers, employees, representatives and each person, if any, who
controls the Trust or Funds within the meaning of Section 15 of SA-33
against any and all losses, liabilities, damages, claims or expenses
(including the reasonable costs of investigating or defending any alleged
loss, liability, damage, claim or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Trust or Funds or
such of the Trust's Trustees, officers, employees, representatives or
controlling person may become subject under SA-33, under any other
statute, at common law, or otherwise, arising out of the acquisition of
any Shares by any person which (i) may be based upon any wrongful act by
Distributor or any of Distributor's directors, officers, employees or
representatives, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement, prospectus, shareholder report or other information covering
Shares filed or made public by the Trust, on behalf of the Funds, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading unless such
statement or omission was made in reliance upon information furnished to
the Distributor by the Trust. In no case (i) is Distributor's indemnity
in favor of the Trust or Funds, as appropriate, or any person indemnified
to be deemed to protect the Trust or Funds, as appropriate, or such
indemnified person against any liability to which the Trust or Funds, as
appropriate, or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of
his duties or by reason of his reckless disregard of his obligations and
duties under this Agreement or (ii) is Distributor to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim
made against the Trust or Funds, as appropriate, or any person
indemnified unless the Trust or Funds, as appropriate, or such person, as
the case may be, shall have notified Distributor in writing of the claim
within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have
been served upon the Trust or Funds, as appropriate, or upon such person
(or after the Trust or Fund or such person shall have received notice of
such service on any designated agent). However, failure to notify
Distributor of any such claim shall not relieve Distributor from any
liability which Distributor may have to the Trust or Fund or any person
against whom such action is brought otherwise than on account of
Distributor's indemnity agreement contained in this Paragraph.
Distributor shall be entitled to participate, at its own expense, in the
defense, or, if Distributor so elects, to assume the defense of any suit
brought to enforce any such claim, but, if Distributor elects to assume
the defense, such defense shall be conducted by legal counsel chosen by
Distributor and satisfactory to the Trust, on behalf of the Funds, to its
Trustees, officers, employees or representatives, or to any controlling
person or persons, defendant or defendants, in the suit. In the event
that Distributor elects to assume the defense of any such suit and retain
such legal counsel, the Trust, its Trustees, officers, employees,
representatives or controlling person or persons, defendant or defendants
in the suit, shall bear the fees and expenses of any additional legal
counsel retained by them. If
5
<PAGE>
Distributor does not elect to assume the defense of any such suit,
Distributor will reimburse the Trust, on behalf of the Funds, such
Trustees, officers, employees, representatives or controlling person or
persons, defendant or defendants in such suit for the reasonable fees and
expenses of any legal counsel retained by them. Distributor agrees to
promptly notify the Trust of the commencement of any litigation or
proceedings against it or any of its directors, officers, employees or
representatives in connection with the issue or sale of any Shares.
The Trust, on behalf of the Funds, agrees to indemnify and hold harmless
Distributor and each of its directors, officers, employees,
representatives and each person, if any, who controls Distributor within
the meaning of Section 15 of SA-33 against any and all losses,
liabilities, damages, claims or expenses (including the reasonable costs
of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable legal counsel fees incurred in connection
therewith) to which Distributor or such of its directors, officers,
employees, representatives or controlling person may become subject under
SA-33, under any other statute, at common law, or otherwise, arising out
of the acquisition of any Shares by any person which (i) may be based
upon any wrongful act by the Trust or any of the Trust's Trustees,
officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained
in a registration statement, prospectus, shareholder report or other
information covering Shares filed or made public by the Trust, on behalf
of the Funds, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading unless such statement or omission was made in reliance upon
information furnished to the Trust by the Distributor. In no case (i) is
the Trust's indemnity in favor of the Distributor, or any person
indemnified to be deemed to protect the Distributor or such indemnified
person against any liability to which the Distributor or such person
would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of his duties or by reason of his
reckless disregard of his obligations and duties under this Agreement, or
(ii) is the Trust, on behalf of the Funds, to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim
made against Distributor, or person indemnified unless Distributor, or
such person, as the case may be, shall have notified the Trust in writing
of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall
have been served upon Distributor or upon such person (or after
Distributor or such person shall have received notice of such service on
any designated agent). However, failure to notify the Trust of any such
claim shall not relieve the Trust from any liability which the Trust may
have to Distributor or any person against whom such action is brought
otherwise than on account of the Trust's indemnity agreement contained in
this Paragraph.
The Trust, on behalf of the Funds, shall be entitled to participate, at
its own expense, in the defense, or, if the Trust, on behalf of the
Funds, so elects, to assume the defense of any suit brought to enforce
any such claim, but, if the Trust, on behalf of the Funds, elects to
assume the defense, such defense shall be conducted by legal counsel
chosen by the Trust, on behalf of the Funds, and satisfactory to
Distributor, to its directors, officers, employees or representatives, or
to any controlling person or persons, defendant or defendants, in the
suit. In the event that the Trust, on behalf of the Funds, elects to
assume the defense of any such suit and retain such legal counsel,
Distributor, its directors, officers, employees, representatives or
controlling person or persons, defendant or defendants in the
6
<PAGE>
suit, shall bear the fees and expenses of any additional legal counsel
retained by them. If the Trust, on behalf of the Funds, does not elect to
assume the defense of any such suit, the Trust, on behalf of the Funds,
will reimburse Distributor, such directors, officers, employees,
representatives or controlling person or persons, defendant or defendants
in such suit for the reasonable fees and expenses of any legal counsel
retained by them. The Trust, on behalf of the Funds, agrees to promptly
notify Distributor of the commencement of any litigation or proceedings
against it or any of its Trustees, officers, employees, or
representatives in connection with the issue or sale of any Shares.
14. Limitation on Liability. A copy of Trust's Declaration of Trust is on
file with the Secretary of State of the Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed by the
Trustees as Trustees or any officer or officers as officers and not
individually, and that the obligations of this instrument are not binding
upon any of the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Trust.
15. Duration and Termination of this Agreement. This Agreement shall become
effective upon its execution ("effective date") and, unless terminated as
provided, shall remain in effect through May 30, 1998 and from year to
year thereafter, but only so long as such continuance is specifically
approved at least annually by the vote of a majority of the Trustees of
the Trust who are not interested persons of Distributor or of the Trust,
cast in person at a meeting called for the purpose of voting on such
approval, and by vote of the Trustees of the Trust or of a majority of
the outstanding voting securities of the Trust. This Agreement may, on 60
days' written notice, be terminated at any time, without the payment of
any penalty, by the vote of a majority of the Trustees of the Trust who
are not interested persons of Distributor or the Trust, by a vote of a
majority of the outstanding voting securities of the Trust, or by
Distributor. This Agreement will automatically terminate in the event of
its assignment. In interpreting the provisions of this Paragraph 15, the
definitions contained in Section 2(a) of ICA-40 (particularly the
definitions of "interested person," "assignment," and "majority of the
outstanding securities") shall be applied.
16. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. If the Trust
should at any time deem it necessary or advisable in the best interests
of the Trust that any amendment of this Agreement be made in order to
comply with the recommendations or requirements of the SEC or other
governmental authority or to obtain any advantage under state or federal
tax laws and notifies Distributor of the form of such amendment, and the
reasons therefor, and if Distributor should decline to assent to such
amendment, the Trust may terminate this Agreement forthwith. If
Distributor should at any time request that a change be made in the
Trust's Declaration of Trust or By-Laws or in its methods of doing
business, in order to comply with any requirements of federal law or
regulations of the SEC, or of a national securities association of which
Distributor is or may
7
<PAGE>
be a member relating to the sale of Shares, and the Trust, on behalf of
the Funds, should not make such necessary change within a reasonable
time, Distributor may terminate this Agreement forthwith.
17. Additional Funds. In the event that the Trust establishes one or more
series of Shares in addition to the Funds with respect to which it
desires to have Distributor render services as distributor under the
terms hereof, it shall so notify Distributor in writing, and if
Distributor agrees in writing to provide such services, such series of
Shares shall become a Fund hereunder.
18. Miscellaneous. The captions in this Agreement are included to convenience
of reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement
may be executed simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
19. Notice. Any notice required or permitted to be given by either party to
the other shall be deemed sufficient if hand-delivered, or if sent by
registered or certified mail, postage prepaid, addressed by the party
giving notice to the other party at the last address furnished by the
other party to the party giving notice: if to the Trust, 440 Lincoln
Street, Worcester, MA 01653 and if to the Distributor, 440 Lincoln
Street, Worcester, MA 01653.
Allmerica Investment Trust
By: /s/ Thomas P. Cunningham
-----------------------------------
Thomas P. Cunningham, Vice President &
---------------------------------------
Treasurer
---------------------------------------
Name, Title
Allmerica Investments, Inc.
By: /s/ Thomas P. Cunningham
------------------------------------
Thomas P. Cunningham, Vice President
---------------------------------------
Name, Title
Date: February 25, 1998
8
<PAGE>
EXHIBIT 8(a)
AMENDED EXHIBIT A
To Custodian Agreement dated as of October 25, 1995 between Banker's
Trust Company and Allmerica Investment Trust.
LIST OF PORTFOLIOS
------------------
The following is a list of Portfolios referred to in the first WHEREAS
clause of the above-referred to Custodian Agreement. Terms used herein as
defined terms unless otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Select Emerging Markets Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select International Equity Fund
Select Growth Fund
Select Strategic Growth Fund
Growth Fund
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
Dated as of: January 9, 1998
ALLMERICA INVESTMENT TRUST
By: /s/ Thomas P. Cunningham
----------------------------
Name: Thomas P. Cunningham
----------------------------
Title: Vice President & Treasurer
----------------------------
BANKERS TRUST COMPANY
By: /s/ Charles I. May
----------------------------
Name: Charles I. May
----------------------------
Title: Vice President 2/9/98
----------------------------
<PAGE>
EXHIBIT 8(b)
March 10, 1998
Thomas Cunningham
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Re: Delegation of Responsibilities as a Foreign Custody Manager
---------------------------------------------------------------
Dear Sirs:
The purpose of this letter is to amend the Custodian Agreement dated
October 25, 1995 between Allmerica Investment Trust (the "Trust") and Bankers
Trust Company as that Agreement relates to those registered investment companies
listed in Appendix B (each a "Fund"). Except as modified hereby, that Agreement
is confirmed in all respects.
Pursuant to the provisions of Rule 17f-5(b) under the Investment
Company Act of 1940, as amended ( the "1940 Act"), and subject to the terms and
conditions set forth herein, the Trust, by resolution adopted by the Board of
Trustees (the "Board") on behalf of each Fund hereby delegates, and Bankers
Trust Company, a New York banking corporation (the "Delegate"), hereby agrees to
accept and assume, subject to section (b) of Rule 17f-5 of the 1940 Act, the
delegation to perform as each Fund's Foreign Custody Manager as defined in Rule
17f-5 of the 1940 Act, and to assume the responsibilities identified herein
concerning custody of (1) each Fund's investments (including foreign currencies)
for which the primary market is outside of the United States and (2) such cash
and cash equivalents as are reasonably necessary to effect each Fund's
transactions in such investments (such investments and cash shall hereinafter be
referred to collectively as "Assets"). For purposes of this letter,
responsibilities of the Delegate are (i) selecting Eligible Foreign Custodians
(as that term is defined in Rule 17f-5(a)(1) of the 1940 Act, and as the same
may be amended from time to time, or that have otherwise been made exempt
pursuant to an SEC exemptive order); (ii) entering into written contracts with
such Eligible Foreign Custodians; and (iii) monitoring the appropriateness of
maintaining Assets of the Fund with such Eligible Foreign Custodians and such
written contracts.
1. Representations of the Parties
The Delegate represents and warrants that it is a US Bank within the
meaning of Rule 17f-5(a)(7) under the 1940 Act and has the power and authority
to execute, deliver and perform this Agreement.
<PAGE>
The Trust represents and warrants that the Board has determined that it
is reasonable to rely on the Delegate to perform the responsibilities delegated
by this Agreement and has duly authorized the execution and delivery of this
Agreement on behalf of each Fund.
2. Jurisdictions Covered
The authority delegated by this Agreement currently applies with
respect to Assets held in the jurisdictions covered by the Delegate's
subcustodial network which are listed in Appendix A. Jurisdictions may be added
by means of an announcement from the Delegate over its proprietary, on-line
global custody communications network (i.e., a "Flash Notice"). The Delegate's
responsibility and authority with respect to jurisdictions so added shall
commence on the date of, or set forth in, the Flash Notice.
3. Authority to Place and Maintain Fund Assets
(a) Subject to the provisions of this Agreement and the requirements of
applicable law, including Rule 17f-5 under the 1940 Act, the Delegate is
authorized to place and maintain Assets in the care of any Eligible Foreign
Custodian or Custodians (within the meaning of Rule 17f-5(a)(1) of the 1940 Act)
selected by the Delegate and with Compulsory Depositories, as such term is
defined in Section 5(a) of this Agreement.
(b) The authority granted in (a) of this paragraph 3 shall include,
subject to the same limitations set forth therein, the authority to withdraw
Assets from an Eligible Foreign Custodian in any jurisdiction in which this
Agreement applies and either (1) place and maintain Assets with another Eligible
Foreign Custodian in the same jurisdiction, or (2) (subject to receipt of proper
instructions as described in the Custodian Agreement) place and maintain the
Assets so withdrawn in the care of another Eligible Foreign Custodian or
Compulsory Depository in another jurisdiction and in either case to enter into
appropriate written contracts governing the Fund's foreign custody arrangements
with such Eligible Foreign Custodian.
(c) The authority granted in (a) and (b) of this Section 3 shall not
limit the authority of the Delegate to place and maintain assets with, and
withdraw any assets so placed and maintained from, any other person permitted
under Section 17f of the 1940 Act to hold assets of registered investment
companies outside of the United States.
4. Monitoring of Eligible Foreign Custodians and Contracts
In each case in which the Delegate has exercised the authority
delegated under this Agreement under Section 3(a) to place Assets with an
Eligible Foreign Custodian, the Delegate shall have established a system to
monitor the appropriateness of maintaining the Fund's Assets with such Eligible
Foreign Custodian based on the standards set forth herein and the contract with
such Eligible Foreign Custodian based on the standards set forth in Rule
17f-5(c)(2), as it may be amended from time to time. The Delegate's monitoring
responsibility under this Section 4 shall not extend to a Compulsory Depository.
2
<PAGE>
5. Guidelines and Procedures for the Exercise of Delegated
Authority
a. Role of Delegate in Determining Country Risk.
Nothing contained herein shall require Delegate, on each Fund's behalf,
to make any selection regarding countries in which such Fund invests or to
accept any country risk in connection therewith, including, without limitation,
the risk of holding assets in Compulsory Depositories, or to engage in any
monitoring of the decision of the Fund's investment adviser to invest in any
particular country in which Delegate selects, contracts and monitors Eligible
Foreign Custodians, as the Fund's Foreign Custody Manager pursuant to this
Agreement. For purposes of this Agreement, "Compulsory Depository" shall mean a
securities depository (as defined in Rule 17f-5(a)(6)) or clearing agency the
use of which is compulsory because: (1) its use is required by law or regulation
of the particular country or (2) maintaining securities outside the depository
is not consistent with prevailing custodial practices in the country which the
depository serves. Compulsory Depositories in the jurisdictions covered by this
Delegation Agreement as of the date of this Agreement are set forth in Appendix
C. Appendix C may be amended upon written notice to the Funds from time to time.
In that connection, Delegate shall notify the Funds promptly of pending changes
to Appendix C. Delegate shall provide the Trust such information as is specified
in Appendix D. It is understood by the parties hereto that in furnishing the
information specified by Appendix D, the Delegate is not rendering to the Funds
legal, tax, accounting, investment management or other professional services.
The opinions of local counsel so furnished are solely those of such counsel and
not of the Delegate and the other information so furnished has been derived from
sources believed by the Delegate to be reliable. The Delegate does not guarantee
the accuracy or timeliness of the opinions or information so furnished. Any
notice to be furnished to the Funds in accordance with this Section 5(a) shall
be furnished to the Trust.
b. Selection of Eligible Foreign Custodians.
In exercising the authority delegated under this Agreement to place
Assets with an Eligible Foreign Custodian, the Delegate shall first determine
that Assets to be held by such Eligible Foreign Custodian shall be subject to
reasonable care based on the standards applicable to custodians in the market in
which the Assets will be held after considering all factors relevant to the
safekeeping of such Assets, including, without limitation, those set forth in
Rule 17f-5(c)(1) of the 1940 Act.
c. Evaluation of Written Contracts.
In exercising the authority delegated under this Agreement to enter
into written contracts governing the Fund's foreign custody arrangements with an
Eligible Foreign Custodian, the Delegate shall determine that such contracts
(or, in the case of a securities depository other than a Compulsory Depository,
such contract, the rules or established practices and procedures of such
depository, or any combination of the foregoing) provide reasonable care for
Assets based on the standards applicable to Eligible Foreign Custodians in the
relevant market. In making this determination, the Delegate shall determine that
such contract either contains the terms described in Rule 17f-5(c)(2)(i) or, in
lieu of any or all of such terms, contains other provisions which
3
<PAGE>
Delegate determines will provide in their entirety, the same or a greater level
of care and protection for the Fund's assets as the provisions of Rule
17f-5(c)(2)(i) in their entirety. In addition, with respect to Eligible Foreign
Custodians that are Non-Compulsory Depositories, Delegate may make such
determination based on the contract, the rules or established practices and
procedures of such depository, or any combination thereof.
6. Standard of Care
In exercising the authority delegated under this Agreement in
accordance with Rule 17f-5(b), the Delegate will exercise reasonable care,
prudence and diligence such as a person having responsibility for the
safekeeping of Assets would exercise.
7. Notification of Custodial Placement
The Delegate agrees to provide written reports notifying the Board of
the placement of Assets with a particular Eligible Foreign Custodian or
Compulsory Depository, and of any Material Change (as hereinafter defined) in
the Fund's foreign custody arrangements. Such reports shall be provided to the
Board at such times as the Board deems reasonable and appropriate based on the
circumstances for the Fund's foreign custody arrangements (and until further
notice from the Fund, such reports shall be provided within 15 days after
Delegate becomes aware of any such Material Change). For purposes of the
foregoing, a Material Change shall include, but shall not be limited to
Delegate's decision to remove the Fund's assets from a particular Eligible
Foreign Custodian, an event that has a material adverse effect on an Eligible
Foreign Custodian's financial or operational strength, any noncompliance by an
Eligible Foreign Custodian with a Material Term (as defined below) of Delegate's
agreement with such Eligible Foreign Custodian or any failure by an Eligible
Foreign Custodian to meet the status required under the 1940 Act. A Material
Term shall mean a term which provides that (a) the Fund will be adequately
indemnified or its assets adequately insured, or an adequate combination
thereof, in the event of loss; (b) the assets of the Fund will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of an
Eligible Foreign Custodian or such Eligible Foreign Custodian's creditors,
except a claim of payment for their safe custody or administration, or in the
case of cash deposits, liens or rights in favor of creditors of the Eligible
Foreign Custodian arising under bankruptcy, insolvency or similar laws; (c)
beneficial ownership for the assets of the Fund will be freely transferable
without the payment of money or value other than for safe custody or
administration of the assets of the Fund; (d) adequate records will be
maintained identifying the assets as belonging to the Fund or as being held by a
third party for the benefit of the Fund; (e) the independent auditors for the
Fund will be given access to those records or confirmation of the contents of
those records; and (f) the Fund will receive periodic reports with respect to
the safekeeping of its assets, including, but not necessarily limited to,
notification of any transfer to or from the Fund's account or a third-party
account containing assets held for the benefit of the Fund. In addition, in the
event that a contract with an Eligible Foreign Custodian does not include any or
all of the terms described in (a) through (f), a term which, in Delegate's
judgment, if not complied with, would cause the contract not to provide the same
or greater level of care and protection for Fund's assets than if the contract
contained the provisions described in (a) through (f), such omission shall also
be deemed a Material Term.
4
<PAGE>
8. Effectiveness and Termination
The Board's delegation to the Delegate, as Foreign Custody Manager of
each Fund, to perform the services under this Agreement shall become effective
as of the date set forth above upon the execution and delivery of this Agreement
or a counterpart thereof by each party thereto to the other party. Such
delegation may be terminated at any time, without penalty, by either party
hereto, by written notice from the terminating party to the non-terminating
party. Such termination shall become effective 30 days after receipt by the
non-terminating party of such notice. This Agreement shall also terminate upon
the effectiveness of termination of the employment of the Delegate as custodian
of Assets in accordance with Section 20 of the Custodian Agreement.
9. Incorporation by Reference
Provisions relating to Notices, Governing Law, and Successors and
Assigns are hereby incorporated by reference from the Custodian Agreement as if
fully set forth herein.
10. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
11. A copy of the Trust's Agreement and Declaration of Trust, as
amended, is on file with the Secretary of the Commonwealth of Massachusetts.
This letter was executed on behalf of the Trust by the Trustees as Trustees or
by any officer or officers as officer or officers and not individually, and that
the obligations of such letter are not binding upon any of them or the
shareholders individually but are binding only upon the assets and property of
the Trust.
If the foregoing correctly sets forth our understanding, please execute
in the space provided below and return to the undersigned the enclosed copy of
this Agreement.
Very truly yours,
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
------------------------------
Name: Richard M. Quintal
Title: Managing Director
AGREED AS SET FORTH ABOVE:
ALLMERICA INVESTMENT TRUST
By: /s/ Thomas P. Cunningham
-------------------------------
Name: Thomas P. Cunningham
Title: Vice President & Treasurer
5
<PAGE>
APPENDIX A
The following are the jurisdictions covered by the Delegate's subcustodial
network, as referenced in Paragraph 2:
Argentina Poland
Australia Portugal
Austria Russia
Bangladesh Singapore
Belgium Slovak Republic
Botswana South Africa
Brazil South Korea
Canada Spain
Chile Sri Lanka
People's Republic of China-Shanghai Sweden
People's Republic of China-Shenzhen Switzerland
Colombia Taiwan
Czech Republic Thailand
Denmark Turkey
Ecuador United Kingdom
Egypt Venezuela
Finland Zambia
France Zimbabwe
Germany
Ghana
Greece
Hong Kong
Hungary
India
Indonesia
Ireland
Israel
Italy
Japan
Jordan
Kenya
Luxembourg
Malaysia
Mauritius
Mexico
Morocco
Netherlands
New Zealand
Norway
Pakistan
Peru
6
<PAGE>
APPENDIX B
To Delegation Agreement dated February 18, 1998, between Bankers Trust
Company and Allmerica Investment Trust.
LIST OF PORTFOLIOS
------------------
Select Emerging Markets Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select International Equity Fund
Select Growth Fund
Select Strategic Growth Fund
Growth Fund
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
Dated as of February 18, 1998
7
<PAGE>
APPENDIX C
The following are the Compulsory Depositories in the jurisdictions covered by
this Delegation Agreement as referenced in Paragraph 5(a):
Caja de Valores, S.A. (Argentina)
The Reserve Bank Information and Transfer System (Australia)
Austraclear, Ltd. (Australia)
Wertpapiersammelbank bei der Oesterreichische Kontrollbank AG (Austria)
Caisse Interprofessionnelle de Depots et de Virements de Titres S.A. (Belgium)
Banque Nationale de Belgique (Belgium)
CALISPA, S.A. (Brazil)
Systema Especial de Liquidacao e Custodia (SELIC) (Brazil)
Shanghai Securities Central Clearing and Registration Corporation (SSCCRC)
(People's Republic of China-Shanghai)
Shenzhen Securities Central Clearing Co., Ltd.
(People's Republic of China-Shenzhen)
Deposito Central de Valores (Columbia)
Stredisko Cennych Papiru (Czech Republic)
Czech National Bank (Czech Republic)
Vaerdipapircentralen- The Danish Securities Center (Denmark)
The Misr for Clearing Settlement and Depository (Egypt)
Finnish Central Securities Depository (Finland)
Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres
(France)
Banque de France (France)
Deutscher Kassenverein AG (Germany)
Central Securites Depository (Apothetirion Titlon A.E.) (Greece)
Bank of Greece (Greece)
Central Clearing and Settlement System (Hong Kong)
The Central Depository and Clearing House (Budepest) Ltd. (Hungary)
Clearing House of the Tel Aviv Stock Exchange (Israel)
Bank of Israel (Israel)
Banca d'Italia (Italy)
The Bank of Japan (Japan)
Malaysian Central Depository Sdn. Bhd. (Malaysia)
Bank Negara Malaysia (Malaysia)
Central Depository and Settlement Co. Ltd. (Mauritius)
S.D. Indeval, S.A. de C.V. (Mexico)
Bank de Mexico (Mexico)
Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (Netherlands)
De Nederlandsche Bank (Netherlands)
New Zealand Central Securities Depository Limited (New Zealand)
Central Depository Company of Pakistan, Ltd. (Pakistan)
Caja de Valores y Liquidaciones, S.A. (Peru)
The Philippines Central Depository Inc. (Philippines)
8
<PAGE>
The Book-Entry-System of the Central Bank (Philippines)
The Registry of Scripless Securities (Philippines)
The National Depository of Securities (Poland)
The National Bank of Poland (Poland)
Central de Valores Mobiliarios (Portugal)
Vneshtorgbank (Russia)
The Central Depository (Pte) Limited (Singapore)
Stredisko Cennych Papierov (Slovak Republic)
National Bank of the Slovak Republic (Slovak Republic)
The Central Depository (Pte) Ltd. (South Africa)
The Korean Securities Depository (South Korea)
Servicio de Compensacion y Liquidacion de Valores, S.A. (Spain)
Banco de Espana (Spain)
The Central Depository System (Pvt) Limited (Sri Lanka)
Vardepapperscentralen, The Swedish Securities Register Center (Sweden)
Schweizerische Effekten Giro AG (Switzerland)
The Taiwan Securities Central Depository Company, Ltd. (Taiwan)
The Thailand Securities Depository Company Limited (Thailand)
Takas ve Saklama Bankasi A.S. (Turkey)
Central Bank of Turkey (Turkey)
Lusaka Central Depository (Zambia)
9
<PAGE>
APPENDIX D
Information Regarding Country Risk Report
-----------------------------------------
1. To aid the Fund's Board in its determinations regarding Country
Risk, Delegate shall furnish Board annually the following information:
A. Opinions of local counsel concerning:
i. Whether applicable foreign law would restrict the access afforded the
Fund's independent public accountants to books and records kept by an Eligible
Foreign Custodian located in that country.
ii. Whether applicable foreign law would restrict the Fund's ability to
recover its assets in the event of the bankruptcy of an Eligible Foreign
Custodian located in that country.
iii. Whether applicable foreign law would restrict the Fund's ability to
recover assets that are lost while under the control of an Eligible Foreign
Custodian located in that country.
iv. Whether difficulties in converting the Fund's cash and cash equivalents
to U.S. dollars are reasonably foreseeable due to any current legal or
regulatory restrictions.
B. A market report in such form as determined by the Delegate with respect
to the following topics: (i) securities regulatory environment, (ii) foreign
ownership restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories (to the extent that
the Delegate may have obtained information which can be made available to the
Board).
2. To aid the Fund's Board in monitoring Country Risk, Delegate shall
furnish Board the following additional information: any changes with respect to
any information included in market reports.
10
<PAGE>
EXHIBIT 8(c)
March 10, 1998
Allmerica Investment Trust (the "Trust")
440 Lincoln Street
Worcester, MA 01453
Dear Sirs:
Re: Delegation of Responsibilities as a Foreign Custody Manager with
respect to Foreign Securities Depositories
Dear Sirs:
The purpose of this letter is to confirm the Trust's delegation to Allmerica
Investment Management Company, Inc. ("AIMCO") of responsibilities as a Foreign
Custody Manager with respect to Foreign Securities Depositories in accordance
with the terms set forth herein and Rule 17f-5 of the Investment Company Act of
1940.
Delegation.
- -----------
a. Delegation to AIMCO as Foreign Custody Manager. The Trust, by
----------------------------------------------
resolution adopted by the Board of Trustees, hereby delegates to AIMCO,
subject to paragraph (b) of the Rule, the responsibilities set forth in
this letter as Foreign Custody Manager with respect to Foreign
Securities Depositories.
b. Acceptance of Delegation. AIMCO hereby accepts such delegation as
------------------------
Foreign Custody Manager with respect to the Trust. AIMCO shall have no
Foreign Custody Manager responsibilities with respect to the Trust
except those specified in this letter.
c. Withdrawal of Acceptance of Delegated Responsibilities. AIMCO may
------------------------------------------------------
withdraw its acceptance of delegated responsibilities with respect to a
Foreign Securities Depository upon written notice to the Trust. Thirty
days (or such longer period as to which the parties agree in writing)
after receipt of any such notice by the Trust, AIMCO shall have no
further responsibility as Foreign Custody Manager with respect to the
Foreign Securities Depository as to which AIMCO's acceptance of
delegation is withdrawn.
d. Use of Foreign Securities Depositories. In connection with the
--------------------------------------
responsibilities delegated under this letter, AIMCO shall determine
that assets of the Funds of the Trust to be held
<PAGE>
by Foreign Securities Depositories shall be subject to reasonable care
based on the standards applicable to Foreign Securities Depositories in
the market in which the assets will be held after considering all
factors relevant to the safekeeping of such assets, including, without
limitation, the following:
(i) The Foreign Securities Depository's practices,
procedures, and internal controls, including, but not limited
to, the physical protections available for certificated
securities (if applicable), the method of keeping custodial
records, and the security and data protection practices;
(ii) Whether the Foreign Security Depository has the requisite
financial strength to provide reasonable care for Fund assets;
(iii) The Foreign Securities Depository's general reputation,
standing, operating history and number of participants; and
(iv) Whether the Fund will have jurisdiction over and be able
to enforce judgments against the Foreign Securities Depository,
such as by virtue of the existence of any offices of the Foreign
Securities Depository in the United States or the Foreign
Securities Depository's consent to service of process in the
United States.
e. Evaluation of Contracts, Procedures. Whereas Rule 17f-5 provides that
-----------------------------------
the Funds' arrangements with Foreign Securities Depositories must be
governed (1) by a written contract or (2) by such contracts, by the
rules or established practices and procedures of the depository, or any
combination of the foregoing ("procedures"), AIMCO shall determine that
such contracts or procedures provide reasonable care for assets based
on the standards applicable to Foreign Securities Depositories in the
relevant market. In making this determination, AIMCO shall determine
that such contracts or procedures include provisions that provide:
(i) For indemnification or insurance arrangements (or any
combination of the foregoing) such that the Fund will be
adequately protected against the risk of loss of assets held in
accordance with such contract or procedures;
(ii) That the Fund's assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of
the custodian/depository or its creditors except a claim of
payment for their safe custody or administration or, in the case
of cash deposits, liens or rights in favor of creditors of the
custodian/depository arising under bankruptcy, insolvency, or
similar laws;
(iii) That beneficial ownership for the Fund's assets will be
freely transferable without the payment of money or value other
than for safe custody or administration;
(iv) That adequate records will be maintained identifying the
assets as belonging to the Fund or as being held by a third
party for the benefit of the Fund;
<PAGE>
(v) That the Fund's independent public accountants will be
given access to those records or confirmation of the contents of
those records; and
(vi) That the Fund will receive periodic reports with respect
to the safekeeping of the Fund's assets, including, but not
limited to, notification of any transfer to or from the Fund's
account or a third party account containing assets held for the
benefit of the Fund.
In lieu of any or all such terms, a contract or procedures may contain
other provisions which AIMCO determines will provide in their entirety,
the same or a greater level of care and protection for the Funds'
assets as the provisions specified above, in their entirety.
f. Monitoring Foreign Securities Depositories and Contracts. AIMCO shall
--------------------------------------------------------
establish a system to monitor the appropriateness of maintaining the
Funds' assets with specified Foreign Securities Depositories under the
standards set forth in paragraph d above and pursuant to contracts or
procedures based on the standards set forth in paragraph e above.
As used herein, the term, "Foreign Securities Depository" shall mean a
securities depository (as defined in subparagraph (a)(6) of Rule 17f-5) or
clearing agency used in connection with foreign assets and with respect to which
the Trust's custodian bank has not accepted the role of Foreign Custody Manager.
A copy of the Trust's Agreement and Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed by the Trustees as Trustees or officer(s)
as officers and not individually and that the obligations of this instrument are
not binding upon any of the Trustees, officers or shareholders individually but
are binding only upon the assets and property of the Trust.
Very truly yours,
Allmerica Investment Management
Company, Inc.
By: /s/ Richard F. Betzler, Jr.
----------------------------------------
Richard F. Betzler, Jr., Vice President
----------------------------------------
Name, Title
<PAGE>
Agreed as set forth above
Allmerica Investment Trust
By: /s/ Thomas P. Cunningham
-------------------------------------------------
Thomas P. Cunningham, Vice President & Treasurer
-------------------------------------------------
Name, Title
<PAGE>
EXHIBIT 9
FORM OF
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT made as of February ____, 1998, between ALLMERICA INVESTMENT
TRUST, 440 Lincoln Street, Worcester, Massachusetts 01653 (the "Trust") and
FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor Services Group") 4400
Computer Drive, Westborough, Massachusetts 01581.
WHEREAS, the Trust has need for certain accounting and pricing services for each
series of shares of the Trust (the "Funds"), as listed on Exhibit A attached
hereto, which Investor Services Group is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Trust and
Investor Services Group agree as follows:
SECTION 1. DUTIES OF Investor Services Group - GENERAL
- ---------- -------------------------------------------
Investor Services Group is authorized to act under the terms of this Agreement
as the Trust's agent for each Fund, and as such Investor Services Group will:
a. Maintain and preserve accounts, books, records and other documents on
behalf of the Fund required under Section 31 of the Investment Company Act
of 1940 and Rules 31a-1 and 31a-2 thereunder;
b. Record the current day's trading activity and such other proper bookkeeping
entries as are necessary for determining that day's net asset value;
c. Render such statements or copies of records as are listed in Exhibit B
hereto as from time to time are reasonably requested by the Fund; and such
other information as the Fund may reasonably request and that Investor
Services Group is in a position to reasonably provide;
d. Facilitate audits of accounts by the Fund's auditors or by any other
auditors employed or engaged by the Fund or by any regulatory body with
jurisdiction over the Fund;
e. Compute the Fund's net asset value per share on each day prescribed by the
Fund's Registration Statement and, if applicable, its public offering price
and/or its rates and yields, and notify the Fund and such other persons as
the Fund may reasonably request, of the net asset value per share, the
public offering price and/or the yield. Investor Services Group
acknowledges that additional series of the Trust may be established and
that such series, including any of the Funds, may be terminated from time
to time by action of the Board of Trustees of the Trust. To the extent
<PAGE>
the Trust shall add new Funds, such other Funds also shall be subject to
this Agreement.
SECTION 2. VALUATION OF SECURITIES
- ---------- ------------------------
Securities will be valued in accordance with the specific provisions of the
Trust's Registration Statement, as amended from time to time (the "Trust's
Registration Statement", such term also to include, if applicable each separate
Fund's registration statement). In general, consistent with the Trust's
Registration Statement, securities listed on an exchange will be valued on the
basis of the last sale prior to the time the valuation is made.
Quotations will be taken from the exchange where the security is primarily
traded. Over-the-counter securities for which market quotations are readily
available will be valued at the closing bid price. Securities for which market
quotations are not readily available will be valued at fair market value as
determined by the Fund which will immediately notify Investor Services Group of
such value. Investor Services Group will use one or more external pricing
services as selected and authorized by the Fund on the Pricing Authorization
Form attached hereto as Exhibit C. Investor Services Group shall not be liable
for any loss, cost, damage, claim or other matter incurred by or assessed
against the Fund, regardless of how characterized, based on or resulting from
the inaccuracy or other deficiency in any information or data provided to
Investor Services Group by such vendor and used by Investor Services Group in
the performance of its services hereunder.
SECTION 3. COMPUTATION OF NET ASSET VALUE, PUBLIC OFFERING PRICE
- ---------- ------------------------------------------------------
AND PERFORMANCE INFORMATION
---------------------------
Investor Services Group will compute each Fund's net asset value in a manner
consistent with the specific provisions of the Trust's Registration Statement.
In general, such computation will be made by dividing the value of the Fund's
portfolio securities, cash and any other assets, less its liabilities, by the
number of shares of the Fund outstanding. Such computation will be made as of
the close of business on the New York Stock Exchange each day, Monday through
Friday, exclusive of national business holidays and other days on which the New
York Stock Exchange is not open for business. If applicable, Investor Services
Group will also compute the public offering price by dividing the net asset
value per share by the appropriate factor as provided by the Fund. Investor
Services Group will compute the Fund's dividend rate and yield, if applicable,
in accordance with the specific provisions of the Trust's Registration
Statement.
SECTION 4. INVESTOR SERVICES GROUP'S RELIANCE ON INSTRUCTIONS AND ADVICE
- ---------- -------------------------------------------------------------
In maintaining each Fund's books of account and making the necessary
computations, Investor Services Group shall be entitled to receive, and may rely
upon, information furnished it by any person certified to FDISG as being
authorized by the Board of Trustees of the Fund relating to:
2
<PAGE>
a. The manner and amount of accrual of expenses other than management fees to
be recorded on the books of the Fund;
b. The source of quotations to be used for such securities as may not be
available through Investor Services Group's normal pricing services;
c. The value to be assigned to any asset for which no price quotations are
readily available;
d. If applicable, the manner of computation of the public offering price and
such other computations as may be necessary; and
e. Notification of transactions in portfolio securities.
Investor Services Group shall be entitled to rely upon any electronically
transmitted data, certificate, letter or other instrument or telephone call
reasonably believed by Investor Services Group to be genuine and to have been
properly sent, made or signed by an officer or other authorized agent of the
Trust or the Fund, and shall be entitled to receive as conclusive proof of any
fact or matter required to be ascertained by it hereunder a certificate signed
by an officer of the Trust or the Fund or any other person authorized by the
Trust's or the Fund's Board of Trustees.
Investor Services Group shall be entitled to receive and act upon advice of
counsel (which may be counsel for the Trust or the Fund) and shall be without
liability for any action taken or thing done in good faith in reliance upon such
advice.
The Trust agrees promptly to furnish Investor Services Group with a copy of the
Trust's Registration Statement in effect from time to time. Investor Services
Group may conclusively rely on the most recently delivered Trust's Registration
Statement (including relevant amendments) for all purposes under this Agreement
and shall not be liable to the Trust in acting in reliance thereon.
SECTION 5. INDEMNIFICATION
- ---------- ---------------
The Trust and each Fund agrees to jointly and severally indemnify and hold
harmless Investor Services Group and its employees, personnel, agents and
nominees from all taxes, charges, expenses, assessments, claims and liabilities
(including attorney's fees) incurred or assessed against them in connection with
the performance of this Agreement, except such as may arise from their own
negligent action, negligent failure to act, bad faith or willful misconduct. The
foregoing notwithstanding, Investor Services Group will in no event be liable
for any loss resulting from the acts, omissions, lack of financial
responsibility, or failure to perform the obligations of any person or
organization designated by the Trust or the Fund to be the authorized agent of
the Trust or the Fund as a party to any transaction.
Investor Services Group shall at all times use reasonable care and act in good
faith in performing its duties hereunder, but Investor Services Group shall be
excused from failing to act or delay in acting if such failure or delay is
caused by legal constraint, interruption of transmission or communcation
3
<PAGE>
facilities, equipment failure, war, emergency conditions or other circumstances
beyond its control. Investor Services Group's responsibility for damage or loss
arising from such causes shall be limited to the use of its reasonable efforts
to recover the Fund's records determined to be lost, missing or destroyed.
SECTION 6. COMPENSATION AND INVESTOR SERVICES GROUP'S EXPENSES
- ---------- ---------------------------------------------------
Investor Services Group shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon in
writing between Investor Services Group and the Trust. See Exhibit D attached
hereto for the Fund Accounting and Reporting Fee Schedule. Investor Services
Group shall be entitled to recover its telephone, delivery and all other out-of-
pocket expenses as incurred, including without limitation, reasonable attorney's
fees.
SECTION 7. TERMINATION
- ---------- -----------
Either Investor Services Group or the Trust may terminate this Agreement by
giving ninety days' written notice in advance to the other. Upon termination
Investor Services Group will turn over to the Trust and cease to retain in
Investor Services Group's files, records of the calculations of net asset value
and all other records pertaining to its services hereunder, provided, however,
Investor Services Group in its discretion may make and retain copies of any and
all such records and documents which it determines appropriate or for its
protection.
SECTION 8. MISCELLANEOUS
- ---------- -------------
This Agreement may not be assigned by Investor Services Group without the
consent of the Trust as authorized or approved by resolution of its Board of
Directors.
In connection with the operation of this Agreement, the Trust and Investor
Services Group may agree from time to time on such provisions interpretive of or
in addition to the provisions of this Agreement as in their joint opinions may
be consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions are to be signed by both parties and annexed hereto.
Nothing in this Agreement shall give or be construed to give any shareholder of
any Fund any rights against Investor Services Group.
A copy of the Agreement and Declaration of Trust of the Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and it is hereby agreed that
this instrument is executed on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers or shareholders of the Trust individually but
are binding only upon the assets and property of the Trust.
Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the
4
<PAGE>
NASD and State insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner, or the Insurance
Commissioner of any other state, with any information or reports in connection
with services provided under this Agreement which such Commissioner may
reasonably request in order to ascertain whether the variable contracts
operations of the Company are being conducted in a manner consistent with the
state's regulations concerning variable contracts and any other applicable law
or regulations.
This Agreement shall be governed and construed in accordance with the laws of
the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
written above.
Executed in several counterparts, each of which is an original.
FIRST DATA INVESTOR ALLMERICA INVESTMENT TRUST
SERVICES GROUP, INC.
By:________________________ By:_______________________
Title: Title:
5
<PAGE>
EXHIBIT A
Allmerica Investment Trust is comprised of the following series of shares:
Select Emerging Markets Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select International Equity Fund
Select Growth Fund
Select Strategic Growth Fund
Growth Fund
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
Dated: February ___, 1998
6
<PAGE>
EXHIBIT B
to
FUND ACCOUNTING SERVICES AGREEMENT
STANDARD REPORTS AND AVAILABILITY
- ---------------------------------
The following reports will be provided to the Fund on a regular basis with
availability as indicated:
A. Daily
1. Printed Trial Balance
2. Net Asset Value Worksheet
3. Schedule of Investments
4. Rate/Yield Computation, if applicable
B. Weekly
1. Tax Lot Ledgers
2. Schedule of Investments for Money Market Funds
(Mark to Market)
C. Monthly
1. Tax Lot Ledgers as of month-end
2. Working Appraisal as of month-end
3. Purchase and Sale Journal for the month
4. Summary of Gains and Losses on Securities for the month
5. Dividend Ledger for the month (receivable as of month-end and earned)
6. Interest Income Analysis for the month (receivable as of month-end and
earned)
7. Trial Balance as of month-end
8. Net Asset Value Worksheet as of month-end
9. Open Trades (payables and receivables for unsettled securities
transactions)
D. Annually
1. Purchase and Sale Journal for the year
2. Summary of Gains and Losses on Securities for the year
3. Broker Allocation Report for the year
4. Tax Returns
7
<PAGE>
E. Availability of Reports
1. Daily reports should be available for data transmission, if desired, by
9:00 a.m. Worcester time.
2. Monthly and annual reports, except for Interest Income Analysis, should
be available by the tenth business day of the following month. The
Interest Income Analysis should be available by the fifteenth business
day of the following month.
8
<PAGE>
EXHIBIT C
PRICING AUTHORIZATION FORM
ALLMERICA INVESTMENT TRUST ("Trust") hereby requests and authorizes FIRST DATA
INVESTOR SERVICES GROUP, INC. ("Investor Services Group") to use the following
price sources, market indices and tolerance ranges for performing fund pricing
and evaluating the reasonability of security prices for series of the Trust.
<TABLE>
<CAPTION>
Security Source/ Tolerance Back-Up for General
Type Type of Quote Level Tolerance Fails Back-Up
---- ------------- ----- --------------- -------
<S> <C> <C> <C> <C>
Bond Merrill Lynch/
Bid 0.1% Portfolio Mgmt. Portfolio Mgmt.
Equity Muller Data/
Last sale-if no
last sale mean 5.0% Quotron Portfolio Mgmt.
Money Muller Data/
Market Market Price 0.5% N/A Portfolio Mgmt.
</TABLE>
Under Rule 2a-7, the Trust adopted amortized cost.
Mark-to-market prices are obtained, as described above, on a weekly basis.
We understand that Investor Services Group does not assume responsibility for
and shall not be liable for the accuracy of or any other matter relating to the
quotations provided by any of the sources noted above [so long as Investor
Services Group uses reasonable efforts to assess their accuracy by performing
reasonability tests using the tolerance ranges and indices noted above].
FIRST DATA INVESTOR ALLMERICA INVESTMENT TRUST
SERVICES GROUP, INC.
By:_____________________ By:_______________________
Title: Title:
Date: Date:
9
<PAGE>
EXHIBIT D
FUND ACCOUNTING
AND
REPORTING FEE SCHEDULE
Pursuant to Section 6 "Compensation and Investor Services Group's Expenses" and
Section 8 "Miscellaneous" of the Agreement, the Trust and Investor Services
Group agree that Investor Services Group shall be paid according to the
following per portfolio fund accounting and reporting fee schedule:
Fund Net Assets Annual Per Fund Fee
--------------- -------------------
Under $50 million $ 25,000
$50 million to $200 million $ 35,000
$200 million to $500 million $ 50,000
$500 million to $1 billion $ 85,000
Greater than $1 billion $125,000
Out-of-pocket charges for price quotes will be charged at actual cost. This is
expected to be $.50 for bond and money market quotes, $.20 for equity quotes and
$.50 for international quotes.
FIRST DATA INVESTOR ALLMERICA INVESTMENT TRUST
SERVICES GROUP, INC.
By:_______________________ By:_______________________
Title: Title:
Date: Date:
10
<PAGE>
FORM OF EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this ______ day of March, 1998, by and between
Allmerica Financial Investment Management Services, Inc., a Massachusetts
corporation (the "Company"), and First Data Investor Services Group, Inc., a
Massachusetts corporation, having its principal place of business at 440
Computer Drive, Westborough, Massachusetts (the "Administrator").
WHEREAS, the Company is an Investment Adviser registered under the Investment
Advisers Act of 1940, as amended, and is currently a party of a Management
Agreement with Allmerica Investment Trust (the "Trust") pursuant to which
agreement the Company has agreed to provide, among other things, administration
services to the Trust; and
WHEREAS, the Company is authorized to enter into this Agreement pursuant to its
Management Agreement with the Trusts; and
WHEREAS, the Trust is registered as an investment company under the Investment
Company Act of 1940, as amended, (the "1940 Act") and currently continues to
offer units of beneficial interest (such units, of all series and classes, are
hereinafter called the "Shares"), representing interests in investment
portfolios of the Trust (individually, a "Fund" and collectively, the "Funds"),
which are registered with the Securities and Exchange Commission ("SEC"),
pursuant to the Trust's Registration Statement on Form N-1A ("Registration
Statement"); and
WHEREAS, the Company desires that the Administrator perform certain
administrative and supervisory services as to the operations of each investment
Fund of the Trust (identified on Schedule A hereto), and additional Funds that
----------
may be added by the Trust from time to time, on behalf of the Company; and
WHEREAS, the Administrator is prepared to perform such services, commencing on
the date hereof on the terms and conditions set forth in this Agreement,
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and covenants herein set
forth, and intending to be legally bound hereby the parties agree as follows:
1. Services as Administrator.
-------------------------
Subject to the direction and control of the Company (which, in
turn, is subject to the direction and control of the Boards of Trustees of the
Trust), the Administrator will assist in supervising all aspects of the
operations of the Funds except those performed by the fund manager and
sub-advisers under the Management Agreement and Sub-Adviser Agreements,
respectively, the Fund accounting agent under its Fund Accounting Services
Agreement, the custodian for the Trust under its Custodian Agreement, the
transfer agent for the Trust, if any, under its Transfer Agency Agreement, and
the distributor for the Trust under its Distribution Agreement.
The Administrator will maintain office facilities (in such
location as the Administrator shall reasonably determine); furnish statistical
and research data, clerical services and office supplies, prepare the periodic
reports to the SEC on Form N-SAR or any replacement forms therefor, compile data
for, prepare for execution by the Trust and file all of the Trust's federal and
state tax returns and required tax filings other than those required to be made
by the Trust's custodian and transfer agent; prepare any required compliance
filings pursuant to state securities laws with the advice of the Company's and
Trust's counsel; assist to the extent requested by the Company on behalf of the
Trust with the Trust's preparation of Annual, Semi-Annual and Quarterly Reports
to Shareholders; prepare and report to the Company, daily if requested by the
Company, the compliance of the Trust with the SEC diversification and IRS tax
qualifications requirements; prepare, as needed, the required calculation of
distribution of income and capital gains to the shareholders and its makeup
including any government exclusions or pass throughs; prepare and report to the
Company the monthly performance calculations of the Trust; compile data and
produce a monthly analysis of the operating expenses of the Trust for the
Company to be reviewed by the Company and the Administrator for the purpose of
expense accruals related to the Trust; and generally to assist in all aspects of
the operations of the Trust.
2
<PAGE>
In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Administrator hereby agrees that all records which it maintains
for the Trust are the property of the Company and/or the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Company's
and/or the Trust's request. However, the Administrator has the right to make
copies of such records, in its discretion. The Administrator further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act. The Administrator
may delegate some or all of its responsibilities under this Agreement with the
consent of the Company and/or the Trust, which will not be unreasonably
withheld.
2. Compensation.
------------
The Administrator will provide the compliance, tax and fund
reporting services described in section 1 hereof for an annual fee equal to
$17,300 per Fund, which fee shall be payable in monthly installments on the
first business day of each month, or at such time(s) as the Administrator shall
request and the parties hereto shall agree, plus reasonable out-of-pocket
expenses incurred by the Administrator for the items described on Exhibit 2A.
Upon any termination of this Agreement before the end of any month, the fee for
such part of a month shall be prorated according to the proportion which such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
The Administrator will from time to time employ or associate
with such person or persons as the Administrator may believe to be particularly
fitted to assist it in the performance of this Agreement. Such person or persons
may be officers or employees who are employed by both the Administrator and the
Trust. The compensation of such person or persons shall be paid by the
Administrator and no obligation may be incurred on behalf of the Company and/or
Trusts in such respect. Other expenses to be incurred in the operation of the
Funds including taxes, interest, brokerage fees and commission, if any, fees of
Trustees who are not officers, directors, shareholders or employees of the
Administrator or the Company or distributor for the Trusts, SEC fees and state
Blue Sky qualification fees, advisory and administration fees, custodian,
sub-custodian, fund accounting, 12b-1 fees, transfer and dividend disbursing
agents' fees, certain
3
<PAGE>
insurance premiums, outside auditing and legal expenses, costs of maintenance of
corporate existence, typesetting and printing prospectuses for regulatory
purposes and for distribution to current Shareholders of the Funds, costs of
Shareholders' reports, mailings and meetings and any extraordinary expenses will
be borne by the Trust provided, however, that unless allowed under the
regulations under the 1940 Act, the Trust will not bear, directly or indirectly,
the cost of any activity which is primarily intended to result in the
distribution of Shares of the Funds.
3. Confidentiality.
---------------
The Administrator agrees on behalf of itself and its employees
to treat confidentiality and as the proprietary information of the Trust, all
records and other information relative to the Company and/or the Trust and
prior, present, or potential Shareholders, and not to use such records and
information for any purpose other than performance of their responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company and/or the Trust, which approval shall not be unreasonably withheld
and may not be withheld where the Administrator may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Company and/or the Trust.
4. Indemnification.
---------------
The Administrator agrees to indemnify and hold the Company and
its employees, personnel, agents and representatives harmless from and against
any and all losses, damages, liabilities, claims, costs and expenses, including
reasonable attorneys' fees and expenses, resulting from any claim, demand,
action or suit related to the Administrator's performance of, or failure to
perform, this Agreement. Notwithstanding the foregoing, the Administrator shall
not be liable for any loss suffered by the Company or the Trust in connection
with the performance of the Administrator's obligations and duties under this
Agreement, except a loss resulting from the Administrator's willful misfeasance,
bad faith or gross negligence in the performance of such obligations and duties.
4
<PAGE>
The Company will indemnify and hold the Administrator and its
employees, personnel, agents and representatives harmless from and against any
and all losses, claims, damages, liabilities or expenses (including reasonable
attorneys' fees and expenses) resulting from any claim, demand, action or suit
related to the Company's performance of, or failure to perform, its obligations
under this Agreement and not resulting from the willful misfeasance, bad faith
or gross negligence of the Administrator.
5. Term; Termination.
-----------------
This Agreement shall become effective on the date hereof and,
unless sooner terminated as provided herein, shall continue for an initial term
ending March 31, 1999 and thereafter will renew automatically for additional one
(1) year terms unless notice is given 90 days prior to expiration of any such
extended term. In addition to, and notwithstanding the forgoing, this Agreement
is terminable as to the Trust by the Company upon the happening of any of the
following events: (i) the Company's Management Agreement with the Trust is
terminated for any reason; (ii) the Company decides to "internalize" the
administration services provided by the Administrator hereunder provided that
the Company provides the Administrator with 180 days' prior notice thereof;
(iii) at any time during the term of this Agreement the employees of the
Administrator who are primarily responsible for providing the services to the
Company are not reasonably satisfactory to the Company and the Administrator
does not replace any such employee(s) within 45 days from receipt of Notice from
the Company requesting replacement; or (iv) failure of the Administrator to
perform its obligations hereunder which failure (a) has a material adverse
effect on the Company and/or the Trust and (b) is not cured (such cure shall
include the payment of losses and expenses, if any, incurred by the Company) by
the Administrator within thirty (30) days following its receipt of Notice
thereof from the Company.
In the event of any termination of this Agreement other than
following a breach of this Agreement by the Administrator, the Company shall
reimburse the Administrator for its reasonable costs and expenses relative to
the movement of files and conversion of records to the Company or any agent
designated thereby. Notwithstanding the foregoing, if this Agreement is
5
<PAGE>
terminated by the Company due to the Administrator's failure to perform its
obligations hereunder, the Administrator shall pay and be responsible for all
costs of converting records and files to the Company or any agent designated
thereby.
7. Notices.
-------
All notices and other communications (collectively referred to
as a "Notice" or "Notices" in this paragraph) hereunder shall be in writing or
by telegram, cable, telex or facsimile sending device. Notices shall be
addressed (a) if to the Administrator, at their address, 440 Computer Drive,
Westborough, Massachusetts; (b) if to the Company, at its principal place of
business or (c) if to neither of the foregoing, at such other address as to
which the sender shall have been notified by any such Notice or other
communication. The Notice may be sent by first-class mail, in which case it
shall be deemed to have been given three days after it is sent, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately.
8. Further Actions.
---------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
9. Assignment.
----------
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party which, in the case of assignment to an affiliate,
shall not be unreasonably denied.
6
<PAGE>
10. Amendments.
----------
This Agreement or any part hereof may be changed or waived only
by an instrument in writing signed by the party against which enforcement of
such change or waiver is sought.
11. Governing State Law.
-------------------
This Agreement shall be governed by and its provisions shall be
construed in accordance with the laws of the Commonwealth of Massachusetts.
12. Miscellaneous.
-------------
This Agreement embodies the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
limit any of the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall inure
to the benefit of the parties hereto and their respective successors.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed all as of the day and year first above written.
ALLMERICA FINANCIAL INVESTMENT
MANAGEMENT SERVICES, INC.
By:
----------------------------
Title:
----------------------------
FIRST DATA INVESTOR SERVICES, INC.
By:
----------------------------
Title:
----------------------------
Acknowledged:
ALLMERICA INVESTMENT TRUST
By:
----------------------------
Title:
----------------------------
8
<PAGE>
SCHEDULE A
----------
to the Administration Agreement
between Allmerica Financial Investment Management Services, Inc.
and First Data Investor Services Group, Inc.
Name of Trust/Fund(s)
- ---------------------
1. Allmerica Investment Trust (1)
ALLMERICA FINANCIAL INVESTMENT FIRST DATA INVESTOR SERVICES
MANAGEMENT SERVICES, INC. GROUP, INC.
By: By:
-------------------------- ------------------------
Title: Title:
-------------------------- ------------------------
(1) Select Emerging Markets Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select International Equity Fund
Select Growth Fund
Select Strategic Growth Fund
Growth Fund
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
ALLMERICA INVESTMENT TRUST
By:
--------------------------
Title:
--------------------------
9
<PAGE>
EXHIBIT 2A
----------
OUT OF POCKET REIMBURSABLE EXPENSES:
- ------------------------------------
1. Federal Express/Express Mail/Courier Services
2. External photocopying services
3. Necessary on-line computer legal research charges
10
<PAGE>
EXHIBIT 10
[Letterhead]
April 14, 1998
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Ladies and Gentlemen:
In my capacity as Secretary of and Counsel to Allmerica Investment Trust (the
"Trust"), I have participated in the preparation of Amendment No. 37 to its
Registration Statement on Form N-1A under the Investment Company Act of 1940 and
Post-effective Amendment No. 36 under the Securities Act of 1933 with respect to
the issuance of its shares. I am of the opinion that, when sold in accordance
with the terms of the Prospectuses and Statement of Additional Information in
effect at the time of sale, the shares of each Fund of the Trust will be legally
issued, fully paid and non-assessable by the Trust.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate. I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-1A.
Sincerely,
/s/ George M. Boyd
- ------------------------
George M. Boyd
Secretary and Counsel
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each of the Prospectuses
and the Statement of Additional Information constituting parts of this
Post-effective Amendment No. 36 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated February 11, 1998, relating to the
financial statements and financial highlights appearing in the December 31, 1997
Annual Report to Shareholders of the Allmerica Investment Trust, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in each of the
Prospectuses and under the headings "Independent Accountants" and "Financial
Statements" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
April 14, 1998
<PAGE>
EXHIBIT 13
PARTICIPATION AGREEMENT
Among
ALLMERICA INVESTMENT TRUST
ALLMERICA INVESTMENT MANAGEMENT COMPANY, INC.
and
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
DATED AS OF
FEBRUARY 25, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Purchase of Fund Shares 4
ARTICLE II Representations and Warranties 5
ARTICLE III Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI Diversification 9
ARTICLE VII Potential Conflicts 10
ARTICLE VIII Indemnification 11
ARTICLE IX. Applicable Law 15
ARTICLE X Termination 15
ARTICLE XI Notices 16
ARTICLE XII Miscellaneous 17
SCHEDULE A Separate Accounts and Variable Products A -1
SCHEDULE B Portfolios of Allmerica Investment Trust B -1
SCHEDULE C Proxy Voting Procedures C -1
</TABLE>
2
<PAGE>
THIS AGREEMENT, made and entered into as of the 25th day of February, 1998 by
and among: FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Massachusetts corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto, as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); ALLMERICA INVESTMENT TRUST, an unincorporated Massachusetts business
trust (hereinafter the "Fund"), and ALLMERICA INVESTMENT MANAGEMENT COMPANY,
INC. (hereinafter the "Adviser"), a Massachusetts corporation
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Products") and (ii) the investment vehicle for certain qualified
pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Products enter into participation
agreements with the Fund and the Adviser (the "Participating Insurance
Companies");
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets (each such series hereinafter referred to as a "Portfolio"),
any one or more of which may be made available under this Agreement, as may be
amended from time to time by mutual agreement of the parties hereto; and
WHEREAS, the Fund has applied for an order from the Securities and
Exchange Commission, granting Participating Insurance Companies and Variable
Insurance Product separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws and manages each of the certain portfolios of the Fund and
retains Sub-Advisers for the daily investment and reinvestment of the assets of
each portfolio; and
WHEREAS, Allmerica Investments, Inc. (the "Distributor") is registered
as a broker/dealer under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act"), is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, the Company has registered or will register certain Variable
Products under the 1933 Act; and
3
<PAGE>
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid Variable Products, and the Company has registered or will register
each Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Fund is authorized
to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereto agree as follows:
ARTICLE I. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company
shares of the Fund and shall execute orders placed for each Account on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of such order. For purposes of this Section 1.1, the Company shall be
the designee of the Fund for receipt of such orders from each Account and
receipt by such designee of an order prior to the close of regular trading on
the New York Stock Exchange ("NYSE") shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Eastern time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the Securities and Exchange
Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make
its shares available indefinitely for purchase at the applicable net asset value
per share by the Company and its Accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the Securities and Exchange
Commission and the Fund shall use reasonable efforts to calculate such net asset
value on each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee of a
request prior to the close of regular trading on the NYSE shall constitute
receipt by the Fund, provided that the Fund receives notice of such request for
redemption on the next following Business Day.
4
<PAGE>
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus.
1.6. The Company shall pay for Fund shares no later than the next
Business Day after an order to purchase Fund shares is made in accordance with
the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Variable Products
are or will be registered under the 1933 Act; that the Variable Products will be
issued and sold in compliance in all material respects with all applicable
federal and state laws, and that the sale of the Variable Products shall comply
in all material respects with state insurance suitability requirements. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law, that it has legally and
validly established each Account as a segregated asset account under Section
2932 of the Delaware Insurance Code, and that it has registered or, prior to
any issuance or sale of the Variable Products, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Variable Products.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws, and that the
Fund is and shall make every effort to remain registered under the 1940 Act.
The Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company promptly upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
5
<PAGE>
2.4. The Company represents that the Variable Products are currently
treated as life insurance policies or annuity contracts under applicable
provisions of the Code, that it will make every effort to maintain such
treatment, and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Variable Products have ceased to be so treated or
that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have its board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.8. The Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.9. The Fund represents and warrants that its Trustees, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less $5 million. The aforesaid,
which includes coverage for larceny and embezzlement, shall be issued by a
reputable bonding company. The Company agrees to make all reasonable efforts to
see that this bond or another bond containing these provisions is always in
effect, and agrees to notify the Fund and the Distributor promptly in writing in
the event that such coverage no longer applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies, the Fund shall provide camera-ready film or
computer diskettes containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have
6
<PAGE>
the prospectus for the Variable Products and the Fund's prospectus printed
together in one document, and to have the statement of additional information
for the Fund and the statement of additional information for the Variable
Products printed together in one document. Alternatively, the Company may print
the Fund's prospectus and/or its statement of additional information in
combination with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of
printing and distributing Fund prospectuses and statements of additional
information shall be the expense of the Company. For any prospectuses and
statements of additional information provided by the Company to the existing
owners of Variable Products who currently own shares of one or more of the
Fund's Portfolios, in order to update disclosure as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the
Company chooses to receive camera-ready film or computer diskettes in lieu of
receiving printed copies of the Fund's prospectus, the Fund will reimburse the
Company in an amount equal to the product of x and y where x is the number of
such prospectuses distributed to owners of the Variable Products who currently
own shares of one or more of the Fund's Portfolios, and y is the Fund's per unit
cost of typesetting and printing the Fund's prospectus. The same procedures
shall be followed with respect to the Fund's statement of additional
information. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or statements of
additional information other than those actually distributed to existing owners
of the Variable Products.
3.3. The Fund's statement of additional information shall be
obtainable from the Fund, the Company or such other person as the Fund may
designate, as agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and statements of additional information, which are
covered in section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distribution to contract owners. The Fund or its
designee shall bear the cost of printing, duplicating, and mailing of these
documents to current contract owners, and the Company shall bear the cost for
such documents used for purposes other than distribution to current contract
owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract owners;
(ii) vote the Fund shares in accordance with instructions
received from contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the procedures, and
shall have the corresponding responsibilities, for the handling of proxy and
voting instruction solicitations, as set forth in Schedule C attached hereto and
incorporated herein by reference. Participating Insurance Companies shall be
responsible for ensuring that each of their separate accounts participating in
the Fund calculates voting privileges in a manner consistent
7
<PAGE>
with the standards set forth on Schedule C, which standards will also be
provided to the other Participating Insurance Companies, if any.
3.6. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, including Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the Securities
and Exchange Commission's interpretation of the requirements of Section 16(a)
with respect to periodic elections of trustees and with whatever rules the
Commission may promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund
prospectuses, reports to shareholders, proxy materials and other Fund
communications (or camera-ready equivalents) to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete, at
reasonable cost, the printing, assembling and/or distribution of the
communications in accordance with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Variable Products other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least fifteen Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Variable Products, other than the information or representations
contained in a registration statement or prospectus for the Variable Products,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for each Account which are in the
public domain or approved by the Company for distribution to contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, which are
relevant to the Company or the Variable Products.
8
<PAGE>
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in the Fund under the Variable Products.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
----
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Distributor may make payments to the Company or to the distributor for the
Variable Products if and in amounts agreed to by the Distributor in writing.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, other than expenses assumed by the Adviser
under the Management Agreement between the Fund and the Adviser or by another
party. The Fund shall see to it that all its shares are registered and
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, proxy materials and reports,
setting the prospectus in type, setting in type and printing the proxy materials
and reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all taxes on the issuance or transfer
of the Fund's shares.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Variable
Products in such a manner as to ensure that the Variable Products will be
treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund will at all
times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts and any amendments or other modifications to such
Section or Regulations. In the event of a breach of this Article VI by the
Fund, it will take all reasonable steps (a) to notify Company of such breach and
(b) to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Regulation 1.817-5.
9
<PAGE>
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by Variable Insurance Product owners; or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. Each of the Company and the Adviser will report any potential or
existing conflicts of which it is aware to the Board. Each of the Company and
the Adviser will assist the Board in carrying out its responsibilities under SEC
rules and regulations. The Adviser, and the participating insurance companies
and participating qualified plans will at least annually submit to the Board
such reports, materials, or data as the Board may reasonably request so that the
Board may fully carry out the obligations imposed upon by the conditions
contained in the Shared Funding Exemptive Order, and said reports, materials,
and data will be submitted more frequently if deemed appropriate by the Board.
7.3. If it is determined by a majority of the Board, or a majority of
its members, who are not "interested persons" of the Fund, the Adviser or the
Company as that term is defined in the 1940 Act (hereinafter "disinterested
members"), that a material irreconcilable conflict exists, the Company and other
Participating Insurance Companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
directors), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance policy owners,
----
or variable contract owners of one or more Participating Insurance Companies)
that votes in favor of such segregation, or offering to the affected contract
owners the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to
10
<PAGE>
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Distributor and Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Variable Products. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Variable Products if an offer to do so
has been declined by vote of a majority of contract owners materially adversely
affected by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding, or if the Fund obtains a Shared Exemptive Order which requires
provisions that are materially different from the provisions of this Agreement,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, or to the terms of the Shared Exemptive
Order, to the extent applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
------------------------------
8.1(a) The Company agrees to indemnify and hold harmless the Fund
and the Adviser, each of their respective officers, employees, and Trustees or
Directors, and each person, if any, who controls the Fund or the Adviser within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Variable Products and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Variable Products or contained in the
Variable Products or sales literature for the Variable Products (or
any amendment or supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Company by or on behalf of the Fund for use in the registration
statement or prospectus for the Variable Products or in the Variable
Products or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable Products
or Fund shares; or
11
<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the Fund not
supplied by the Company, or persons under its control and other than
statements or representations authorized by the Fund or an Adviser) or
unlawful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Variable Products or Fund
shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by or on behalf of
the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Products or the
operation of the Fund.
12
<PAGE>
8.2. Indemnification by the Adviser
------------------------------
8.2(a). The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company, each of its directors,
officers, and employees, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of shares of the
Portfolio that it manages or the Variable Products and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Fund by or on behalf of the Company for use in the registration
statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Variable Products or Portfolio shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Variable Products not supplied by the Fund or persons under its
control and other than statements or representations authorized by the
Company) or unlawful conduct of the Fund, Adviser(s) or Distributor or
persons under their control, with respect to the sale or distribution
of the Variable Products or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Variable
Products, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Adviser; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
13
<PAGE>
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Products or
the operation of each Account.
8.3. Indemnification by the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), litigation or settlements result from
the gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement;
or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund, as limited and in accordance with the
provisions of Sections 8.3(b) and 8.3(a);
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's gross negligence, bad faith, or willful misconduct the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
14
<PAGE>
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Variable Products, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
10.1(a) termination by any party for any reason by at least sixty
(60) days advance written notice delivered to the other parties; or
10.1(b) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Products; or
10.1(c) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Variable Products issued or to be issued by
the Company; or
10.1(d) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under
15
<PAGE>
Subchapter M of the Code or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to so qualify; or
10.1(e) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio in the event that such Portfolio fails
to meet the diversification requirements specified in Article VI hereof; or
10.1(f) termination by the Fund by written notice to the Company if
the Fund shall determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity, or
10.1(g) termination by the Company by written notice to the Fund and
the Adviser, if the Company shall determine, in its sole judgment exercised in
good faith, that either the Fund or the Adviser has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
10.2. Notwithstanding any termination of this Agreement, the Fund
shall, at the option of the Company, continue to make available additional
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Variable Products in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Variable Products").
Specifically, without limitation, the owners of the Existing Variable Products
shall be permitted to direct reallocation of investments in the Portfolios of
the Fund, redemption of investments in the Portfolios of the Fund and/or
investment in the Portfolios of the Fund upon the making of additional purchase
payments under the Existing Variable Products. The parties agree that this
Section 10.2 shall not apply to any termination under Article VII and the effect
of such Article VII termination shall be governed by Article VII of this
Agreement.
10.3. The provisions of Article VIII Indemnification shall survive
any termination of this Agreement pursuant to this Article X Termination.
10.4. The Company shall not redeem Fund shares attributable to the
Variable Products (as distinct from Fund shares attributable to the Company's
assets held in the Account) except (i) as necessary to implement contract owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Variable Products, the Company
shall not prevent contract owners from allocating payments to a Portfolio that
was otherwise available under the Variable Products without first giving the
Fund 90 days prior written notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when hand delivered or sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
16
<PAGE>
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to Adviser:
Allmerica Investment Management Company, Inc.
440 Lincoln Street
Worcester, MA 01653
Attention: Abigail M. Armstrong, Esq.
If to the Company:
First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Richard M. Reilly, President
ARTICLE XII. Miscellaneous
12.1. A copy of the Fund's Agreement and Declaration of Trust, as
may be amended from time to time, is on file with the Secretary of the
Commonwealth of Massachusetts. Notice is hereby given that this instrument is
executed by the Fund's Trustees as Trustees and not individually, and the Fund's
obligations under this Agreement are not binding upon any of the Trustees or
Shareholders of the Fund, but are binding only upon the assets and property of
the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Variable Products and all information reasonably identified
as confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
17
<PAGE>
further agrees to furnish the California Insurance Commissioner with any
information or reports in connection with services provided under this Agreement
which such Commissioner may request in order to ascertain whether the insurance
operations of the Company are being conducted in a manner consistent with the
California Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Adviser may assign this Agreement or
any rights or obligations hereunder to any affiliate of or company controlled by
or under common control with the Adviser, if such assignee is duly licensed and
registered to perform the obligations of the Adviser under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ Joseph W. MacDougall, Jr.
--------------------------------
Name: Joseph W. MacDougall, Jr.
Title: Vice President
ALLMERICA INVESTMENT TRUST
By: /s/ Thomas P. Cunningham
--------------------------------
Name: Thomas P. Cunningham
Title: Vice President & Treasurer
ALLMERICA INVESTMENT MANAGEMENT COMPANY, INC.
By: /s/ Richard F. Betzler, Jr.
--------------------------------
Name: Richard F. Betzler, Jr.
Title: Vice President
18
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
----------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Variable Life Products
Separate Account Product Name 1933 Act # 1940 Act #
- ---------------- ------------ ---------- ----------
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VEL II VEL ('93) 33-71056 811-8130
- -----------------------------------------------------------------------------------------------
Inheiritage Inheiritage 33-74184 811-8304
Select Inheiritage
- -----------------------------------------------------------------------------------------------
Group VEL Group VEL 33-06383 811-7663
- -----------------------------------------------------------------------------------------------
Variable Annuity Products
- -----------------------------------------------------------------------------------------------
<CAPTION>
Separate Account Product Name 1933 Act # 1940 Act #
- ---------------- ------------ ---------- ----------
- -----------------------------------------------------------------------------------------------
VA-K ExecAnnuity Plus 93 33-71052 811-8814
Allmerica Advantage
- -----------------------------------------------------------------------------------------------
Allmerica Select Separate Allmerica Select Resource I 33-71058 811-8116
Account Allmerica Select Resource II
- -----------------------------------------------------------------------------------------------
Separate Account I Variable Annuities 33-47858 811-6666
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
Portfolios of
-------------
Allmerica Investment Trust
--------------------------
Select Emerging Markets Fund
Select International Equity Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Strategic Growth Fund
Select Growth Fund
Growth Fund
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
-----------------------
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Variable Products and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described above. The Company will use its best efforts to call in the
number of Customers to the Fund , as soon as possible, but no later than
two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting instruction
solicitation material. The Fund will provide the last Annual Report to the
Company pursuant to the terms of Section 3.43 of the Agreement to which
this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
. During this time, the Fund will develop, produce and pay for the
Notice of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly as
possible and that their vote is important. One copy will be supplied
by the Fund.)
. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including,) the
---
meeting, counting backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory letter
and a new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
--- --------
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their vote;
an estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
<PAGE>
. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of shares.) The
------
Fund must review and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the
Fund on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required to
calculate the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes, the Fund
will be permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
<PAGE>
EXHIBIT 13(a)
PARTICIPATION AGREEMENT
Among
ALLMERICA INVESTMENT TRUST
ALLMERICA INVESTMENT MANAGEMENT COMPANY, INC.
and
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
DATED AS OF
FEBRUARY 25, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Purchase of Fund Shares 4
ARTICLE II Representations and Warranties 5
ARTICLE III Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI Diversification 9
ARTICLE VII Potential Conflicts 10
ARTICLE VIII Indemnification 11
ARTICLE IX Applicable Law 15
ARTICLE X Termination 15
ARTICLE XI Notices 16
ARTICLE XII Miscellaneous 17
SCHEDULE A Separate Accounts and Variable Products A -1
SCHEDULE B Portfolios of Allmerica Investment Trust B -1
SCHEDULE C Proxy Voting Procedures C -1
</TABLE>
2
<PAGE>
THIS AGREEMENT, made and entered into as of the 25th day of February, 1998 by
and among: ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (hereinafter
the "Company"), a Delaware corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto, as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); Allmerica Investment Trust, an unincorporated Massachusetts business
trust (hereinafter the "Fund"), and Allmerica Investment Management Company,
Inc. (hereinafter the "Adviser"), a Massachusetts corporation
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or pay-
out provisions (hereinafter referred to individually and/or collectively as
"Variable Products") and (ii) the investment vehicle for certain qualified
pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Products enter into participation agreements with
the Fund and the Adviser (the "Participating Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets (each such series hereinafter referred to as a "Portfolio"), any
one or more of which may be made available under this Agreement, as may be
amended from time to time by mutual agreement of the parties hereto; and
WHEREAS, the Fund has applied for an order from the Securities and Exchange
Commission, granting Participating Insurance Companies and Variable Insurance
Product separate accounts exemptions from the provisions of Sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws and manages each of the certain portfolios of the Fund and retains Sub-
Advisers for the daily investment and reinvestment of the assets of each
portfolio; and
WHEREAS, Allmerica Investments, Inc. (the "Distributor") is registered as a
broker/dealer under the Securities Exchange Act of 1934, as amended (hereinafter
the "1934 Act"), is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, the Company has registered or will register certain Variable
Products under the 1933 Act; and
3
<PAGE>
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid Variable Products, and the Company has registered or will register
each Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Fund is authorized
to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereto agree as follows:
ARTICLE I. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company shares
of the Fund and shall execute orders placed for each Account on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
such order. For purposes of this Section 1.1, the Company shall be the designee
of the Fund for receipt of such orders from each Account and receipt by such
designee of an order prior to the close of regular trading on the New York Stock
Exchange ("NYSE") shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make its
shares available indefinitely for purchase at the applicable net asset value per
share by the Company and its Accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the Securities and Exchange Commission
and the Fund shall use reasonable efforts to calculate such net asset value on
each day which the New York Stock Exchange is open for trading. Notwithstanding
the foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee of a
request prior to the close of regular trading on the NYSE shall constitute
receipt by the Fund, provided that the Fund receives notice of such request for
redemption on the next following Business Day.
4
<PAGE>
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus.
1.6. The Company shall pay for Fund shares no later than the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Variable Products are or
will be registered under the 1933 Act; that the Variable Products will be issued
and sold in compliance in all material respects with all applicable federal and
state laws, and that the sale of the Variable Products shall comply in all
material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law, that it has legally and validly
established each Account as a segregated asset account under Section 2932 of the
Delaware Insurance Code, and that it has registered or, prior to any issuance
or sale of the Variable Products, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Variable Products.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws, and that the
Fund is and shall make every effort to remain registered under the 1940 Act.
The Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company promptly upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
5
<PAGE>
2.4. The Company represents that the Variable Products are currently
treated as life insurance policies or annuity contracts under
applicable provisions of the Code, that it will make every effort to
maintain such treatment, and that it will notify the Fund immediately
upon having a reasonable basis for believing that the Variable
Products have ceased to be so treated or that they might not be so
treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the
Fund undertakes to have its board of Trustees, a majority of whom are
not interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations
of the various states.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act.
2.8. The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and
state securities laws and that it will perform its obligations for
the Fund in compliance in all material respects with the laws of its
state of domicile and any applicable state and federal securities
laws.
2.9. The Fund represents and warrants that its Trustees, officers,
employees, and other individuals/entities dealing with the money
and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimal coverage
as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid
blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the
Fund are covered by a blanket fidelity bond or similar coverage, in
an amount not less $5 million. The aforesaid, which includes coverage
for larceny and embezzlement, shall be issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see
that this bond or another bond containing these provisions is always
in effect, and agrees to notify the Fund and the Distributor promptly
in writing in the event that such coverage no longer applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of
additional information as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies, the
Fund shall provide camera-ready film or computer diskettes containing
the Fund's prospectus and statement of additional information, and
such other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during
the year) to
have
6
<PAGE>
the prospectus for the Variable Products and the Fund's prospectus printed
together in one document, and to have the statement of additional information
for the Fund and the statement of additional information for the Variable
Products printed together in one document. Alternatively, the Company may print
the Fund's prospectus and/or its statement of additional information in
combination with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of printing and
distributing Fund prospectuses and statements of additional information shall be
the expense of the Company. For any prospectuses and statements of additional
information provided by the Company to the existing owners of Variable Products
who currently own shares of one or more of the Fund's Portfolios, in order to
update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of
printing shall be borne by the Fund. If the Company chooses to receive camera-
ready film or computer diskettes in lieu of receiving printed copies of the
Fund's prospectus, the Fund will reimburse the Company in an amount equal to the
product of x and y where x is the number of such prospectuses distributed to
owners of the Variable Products who currently own shares of one or more of the
Fund's Portfolios, and y is the Fund's per unit cost of typesetting and printing
the Fund's prospectus. The same procedures shall be followed with respect to
the Fund's statement of additional information. The Company agrees to provide
the Fund or its designee with such information as may be reasonably requested by
the Fund to assure that the Fund's expenses do not include the cost of printing
any prospectuses or statements of additional information other than those
actually distributed to existing owners of the Variable Products.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distribution to contract owners. The Fund or its designee shall
bear the cost of printing, duplicating, and mailing of these documents to
current contract owners, and the Company shall bear the cost for such documents
used for purposes other than distribution to current contract owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract owners;
(ii) vote the Fund shares in accordance with instructions
received from contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent
7
<PAGE>
with the standards set forth on Schedule C, which standards will also be
provided to the other Participating Insurance Companies, if any.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, including Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of Section 16(a) with
respect to periodic elections of trustees and with whatever rules the Commission
may promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund prospectuses,
reports to shareholders, proxy materials and other Fund communications (or
camera-ready equivalents) to the Company sufficiently in advance of the
Company's mailing dates to enable the Company to complete, at reasonable cost,
the printing, assembling and/or distribution of the communications in accordance
with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Variable Products other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least fifteen Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Variable Products, other than the information or representations
contained in a registration statement or prospectus for the Variable Products,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for each Account which are in the
public domain or approved by the Company for distribution to contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Variable Products.
8
<PAGE>
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in the Fund under the Variable Products.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
----
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Distributor may make payments to the Company or to the distributor for the
Variable Products if and in amounts agreed to by the Distributor in writing.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, other than expenses assumed by the Adviser under the
Management Agreement between the Fund and the Adviser or by another party. The
Fund shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws prior to
their sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Variable Products in
such a manner as to ensure that the Variable Products will be treated as
variable contracts under the Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
9
<PAGE>
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by Variable Insurance Product owners; or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. Each of the Company and the Adviser will report any potential or
existing conflicts of which it is aware to the Board. Each of the Company and
the Adviser will assist the Board in carrying out its responsibilities under SEC
rules and regulations. The Adviser, and the participating insurance companies
and participating qualified plans will at least annually submit to the Board
such reports, materials, or data as the Board may reasonably request so that the
Board may fully carry out the obligations imposed upon by the conditions
contained in the Shared Funding Exemptive Order, and said reports, materials,
and data will be submitted more frequently if deemed appropriate by the Board.
7.3. If it is determined by a majority of the Board, or a majority of its
members who are not "interested persons" of the Fund, the Adviser or the Company
as that term is defined in the 1940 Act (hereinafter "disinterested members"),
that a material irreconcilable conflict exists, the Company and other
Participating Insurance Companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
directors), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance policy owners,
or variable contract owners of one or more Participating Insurance Companies)
that votes in favor of such segregation, or offering to the affected contract
owners the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to
10
<PAGE>
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Distributor and Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Variable Products. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Variable Products if an offer to do so
has been declined by vote of a majority of contract owners materially adversely
affected by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding,
or if the Fund obtains a Shared Exemptive Order which requires provisions that
are materially different from the provisions of this Agreement, then (a) the
Fund and/or the Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, or to the terms of the Shared Exemptive
Order, to the extent applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
--------------- -- --- -------
8.1(a) The Company agrees to indemnify and hold harmless the Fund and the
Adviser, each of their respective officers, employees, and Trustees or
Directors, and each person, if any, who controls the Fund or the Adviser within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Variable Products and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus for the Variable Products or contained in the Variable Products
or sales literature for the Variable Products (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for use in
the registration statement or prospectus for the Variable Products or in
the Variable Products or sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Variable Products
or Fund shares; or
11
<PAGE>
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company, or
persons under its control and other than statements or representations
authorized by the Fund or an Adviser) or unlawful conduct of the Company or
persons under its control, with respect to the sale or distribution of the
Variable Products or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made
in reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company, as
limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Products or the
operation of the Fund.
12
<PAGE>
8.2. Indemnification by the Adviser
------------------------------
8.2(a). The Adviser agrees, with respect to each Portfolio that it manages,
to indemnify and hold harmless the Company, each of its directors, officers, and
employees, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and
individually, "Indemnified Party," for purposes of this Section 8.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of shares of the Portfolio
that it manages or the Variable Products and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Variable Products or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Products not
supplied by the Fund or persons under its control and other than
statements or representations authorized by the Company) or unlawful
conduct of the Fund, Adviser(s) or Distributor or persons under their
control, with respect to the sale or distribution of the Variable Products
or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Products, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Adviser in this Agreement or arise out of or
result from any other material breach of this Agreement by the Adviser; as
limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
13
<PAGE>
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Products or
the operation of each Account.
8.3. Indemnification by the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), litigation or settlements result from
the gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement; or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund, as
limited and in accordance with the provisions of Sections 8.3(b) and
8.3(a);
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as may arise from such Indemnified
Party's gross negligence, bad faith, or willful misconduct the performance of
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
14
<PAGE>
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the commencement
of any litigation or proceedings against it or any of its respective officers or
directors in connection with this Agreement, the issuance or sale of the
Variable Products, with respect to the operation of either Account, or the sale
or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
10.1(a) termination by any party for any reason by at least sixty (60)
days advance written notice delivered to the other parties; or
10.1(b) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Products; or
10.1(c) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event any of the Portfolio's shares
are not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Variable Products issued or to be issued by the Company;
or
10.1(d) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under
15
<PAGE>
Subchapter M of the Code or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to so qualify; or
10.1(e) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio fails to
meet the diversification requirements specified in Article VI hereof; or
10.1(f) termination by the Fund by written notice to the Company if the
Fund shall determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity, or
10.1(g) termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgment exercised in good
faith, that either the Fund or the Adviser has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
10.2. Notwithstanding any termination of this Agreement, the Fund shall,
at the option of the Company, continue to make available additional shares of
the Fund pursuant to the terms and conditions of this Agreement, for all
Variable Products in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Variable Products").
Specifically, without limitation, the owners of the Existing Variable Products
shall be permitted to direct reallocation of investments in the Portfolios of
the Fund, redemption of investments in the Portfolios of the Fund and/or
investment in the Portfolios of the Fund upon the making of additional purchase
payments under the Existing Variable Products. The parties agree that this
Section 10.2 shall not apply to any termination under Article VII and the effect
of such Article VII termination shall be governed by Article VII of this
Agreement.
10.3. The provisions of Article VIII Indemnification shall survive any
termination of this Agreement pursuant to this Article X Termination.
10.4. The Company shall not redeem Fund shares attributable to the
Variable Products (as distinct from Fund shares attributable to the Company's
assets held in the Account) except (i) as necessary to implement contract owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Variable Products, the Company
shall not prevent contract owners from allocating payments to a Portfolio that
was otherwise available under the Variable Products without first giving the
Fund 90 days prior written notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when hand delivered or sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
16
<PAGE>
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to Adviser:
Allmerica Investment Management Company, Inc.
440 Lincoln Street
Worcester, MA 01653
Attention: Abigail M. Armstrong, Esq.
If to the Company:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Richard M. Reilly, President
ARTICLE XII. Miscellaneous
12.1. A copy of the Fund's Agreement and Declaration of Trust, as may be
amended from time to time, is on file with the Secretary of the Commonwealth of
Massachusetts. Notice is hereby given that this instrument is executed by the
Fund's Trustees as Trustees and not individually, and the Fund's obligations
under this Agreement are not binding upon any of the Trustees or Shareholders of
the Fund, but are binding only upon the assets and property of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Variable Products and all information reasonably identified
as confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
17
<PAGE>
further agrees to furnish the California Insurance Commissioner with any
information or reports in connection with services provided under this Agreement
which such Commissioner may request in order to ascertain whether the insurance
operations of the Company are being conducted in a manner consistent with the
California Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company controlled by or
under common control with the Adviser, if such assignee is duly licensed and
registered to perform the obligations of the Adviser under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Joseph W. MacDougall, Jr.
--------------------------------
Name: Joseph W. MacDougall, Jr.
Title: Vice President
ALLMERICA INVESTMENT TRUST
By: /s/ Thomas P. Cunningham
---------------------------------
Name: Thomas P. Cunningham
Title: Vice President & Treasurer
ALLMERICA INVESTMENT MANAGEMENT COMPANY, INC.
By: /s/ Richard F. Betzler, Jr.
---------------------------------
Name: Richard F. Betzler, Jr.
Title: Vice President
18
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
- -------------------------------------------------------------------------------------------------------------
VARIABLE LIFE PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- ---------------- ------------ ----------- ----------
<S> <C> <C> <C>
VEL VEL (>87) 33-14672 811-5183
VEL VEL (>91) 33-90320 811-5183
VEL II VEL (>93) 33-57792 811-7466
VEL VEL (Plus) 33-42687 811-5183
Inheiritage Inheiritage 33-70948 811-8120
Select Inheiritage
Allmerica Select Separate Account II Select Life 33-83604 811-8746
Group VEL Group VEL 33-82658 811-08704
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Variable Annuity Products
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- ---------------- ------------ ---------- ----------
<S> <C> <C> <C>
VA-K ExecAnnuity Plus 91 33-39702 811-6293
ExecAnnuity Plus 93
Allmerica Advantage
Allmerica Select Separate Account Allmerica Select Resource I 33-47216 811-6632
Allmerica Select Resource II
Separate Accounts VA-A, VA-B, VA-C,
VA-G, VA-H
Variable Annuities (discontinued)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
Portfolios of
-------------
Allmerica Investment Trust
--------------------------
Select Emerging Markets Fund
Select International Equity Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Strategic Growth Fund
Select Growth Fund
Growth Fund
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
-----------------------
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Variable Products and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run," or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described above. The Company will use its best efforts to call in the
number of Customers to the Fund, as soon as possible, but no later than
two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting instruction
solicitation material. The Fund will provide the last Annual Report to the
Company pursuant to the terms of Section 3.43 of the Agreement to which
this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
. cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including,) the
---
meeting, counting backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
--- --------
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
<PAGE>
. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) The Fund must review
------
and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The
Fund may request an earlier deadline if reasonable and if required to
calculate the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
<PAGE>
Performance Returns @ 12/31/97 Exhibit 16
----------
T = (P/H) [to the power of (1/N-1)] Where: T = Total Return
P = Present Value
H = Historical Value
N = Number of Days
<TABLE>
<CAPTION>
Select Growth and Income Fund
- -----------------------------
<S> <C> <C>
1 Year Return 01/01/97 - 12/31/97 (2.150053/1.755023) [to the power of (1/( 365/365)-1) = 22.51%
5 Year Return 01/01/93 - 12/31/97 (2.150053/0.998891) [to the power of (1/(1826/365)-1) = 16.57%
Since Inception 08/24/92 - 12/31/97 (2.150053/1.000000) [to the power of (1/(1955/365)-1) = 15.36%
Select Growth Fund
- ------------------
1 Year Return 01/01/97 - 12/31/97 (2.252190/1.679942) [to the power of (1/( 365/365)-1) = 34.06%
5 Year Return 01/01/93 - 12/31/97 (2.252190/1.112513) [to the power of (1/(1826/365)-1) = 15.15%
Since Inception 08/24/92 - 12/31/97 (2.252190/1.000000) [to the power of (1/(1955/365)-1) = 16.37%
Select Aggressive Growth Fund
- -----------------------------
1 Year Return 01/01/97 - 12/31/97 (2.604948/2.194412) [to the power of (1/( 365/365)-1) = 18.71%
5 Year Return 01/01/93 - 12/31/97 (2.604948/1.150149) [to the power of (1/(1826/365)-1) = 16.80%
Since Inception 08/24/92 - 12/31/97 (2.604948/1.000000) [to the power of (1/(1955/365)-1) = 19.57%
Select International Fund
- -------------------------
1 Year Return 01/01/97 - 12/31/97 (1.473251/1.407837) [to the power of (1/( 365/365)-1) = 4.65%
Since Inception 05/02/94 - 12/31/97 (1.473251/1.000000) [to the power of (1/(1339/365)-1) = 11.14%
</TABLE>
<PAGE>
Performance Returns @ 12/31/97
T = (P/H) [to the power of (1/N-1)] Where: T = Total Return
P = Present Value
H = Historical Value
N = Number of Days
<TABLE>
<CAPTION>
Select Capital Appreciation Fund
- --------------------------------
<S> <C> <C>
1 Year Return 01/01/97 - 12/31/97 (1.735215/1.518441) [to the power of (1/( 365/365)-1) = 14.28%
Since Inception 04/28/94 - 12/31/97 (1.735215/1.000000) [to the power of (1/( 978/365)-1) = 22.89%
Growth Fund
- -----------
1 Year Return 01/01/97 - 12/31/97 (6.887964/5.504274) [to the power of (1/( 365/365)-1) = 25.14%
5 Year Return 01/01/93 - 12/31/97 (6.887964/3.228066) [to the power of (1/(1826/365)-1) = 16.37%
10 Year Return 01/01/88 - 12/31/97 (6.887964/3.228066) [to the power of (1/(3653/365)-1) = 17.12%
Since Inception 04/29/85 - 12/31/97 (6.887964/1.000000) [to the power of (1/(4629/365)-1) = 16.44%
Equity Index Fund
- -----------------
1 Year Return 01/01/97 - 12/31/97 (3.682251/2.780878) [to the power of (1/( 365/365)-1) = 32.41%
5 Year Return 01/01/93 - 12/31/97 (3.682251/1.508454) [to the power of (1/(1826/365)-1) = 19.54%
Since Inception 09/30/90 - 12/31/97 (3.682251/1.000000) [to the power of (1/(2649/365)-1) = 19.68%
</TABLE>
<PAGE>
Performance Returns @ 12/31/97
T = (P/H) [to the power of (1/N-1)] Where: T = Total Return
P = Present Value
H = Historical Value
N = Number of Days
<TABLE>
<CAPTION>
Select Value Opportunity Fund
- -----------------------------
<S> <C> <C>
1 Year Return 01/01/97 - 12/31/97 (1.473251/1.663738) [to the power of (1/( 365/365)-1) = 24.85%
Since Inception 04/30/93 - 12/31/97 (1.473251/1.000000) [to the power of (1/(1706/365)-1) = 16.93%
Select Income Fund
- ------------------
1 Year Return 01/01/97 - 12/31/97 (1.401772/1.284023) [to the power of (1/( 365/365)-1) = 9.17%
5 Year Return 01/01/93 - 12/31/97 (1.401772/1.006181) [to the power of (1/(1826/365)-1) = 6.86%
Since Inception 08/24/92 - 12/31/97 (1.401772/1.000000) [to the power of (1/(1955/365)-1) = 6.51%
Investment Grade Income Fund
- ----------------------------
1 Year Return 01/01/97 - 12/31/97 (2.998944/2.740012) [to the power of (1/( 365/365)-1) = 9.45%
5 Year Return 01/01/93 - 12/31/97 (2.998944/2.088176) [to the power of (1/(1826/365)-1) = 7.51%
10 Year Return 01/01/88 - 12/31/97 (2.998944/3.228066) [to the power of (1/(3653/365)-1) = 9.19%
Since Inception 04/29/85 - 12/31/97 (2.998944/1.000000) [to the power of (1/(4629/365)-1) = 9.05%
Government Bond Fund
- --------------------
1 Year Return 01/01/97 - 12/31/97 (1.526930/1.425921) [to the power of (1/( 365/365)-1) = 7.08%
5 Year Return 01/01/93 - 12/31/97 (1.526930/1.143352) [to the power of (1/(1826/365)-1) = 5.96%
Since Inception 08/26/91 - 12/31/97 (1.526930/1.000000) [to the power of (1/(2319/365)-1) = 6.89%
</TABLE>
<PAGE>
Performance Returns @ 12/31/97
T = (P/H) [to the power of (1/N-1)] Where: T = Total Return
P = Present Value
H = Historical Value
N = Number of Days
<TABLE>
<CAPTION>
Money Market Fund
- -----------------
<S> <C> <C>
1 Year Return 01/01/97 - 12/31/97 (2.06090848/1.95410250) [to the power of (1/( 365/365)-1) = 5.47%
5 Year Return 01/01/93 - 12/31/97 (2.06090848/1.63703956) [to the power of (1/(1826/365)-1) = 4.71%
10 Year Return 01/01/88 - 12/31/97 (2.06090848/3.228066) [to the power of (1/(3653/365)-1) = 5.80%
Since Inception 04/29/85 - 12/31/97 (2.06090848/1.000000) [to the power of (1/(4629/365)-1) = 5.91%
</TABLE>
<TABLE>
<CAPTION>
SELECT INCOME FUND - 30 DAY YIELD
- ---------------------------------
<S> <C> <C> <C>
Account ooooooooooooooo9 Class of Shares
Period End Date 12/31/97 Traded/Setteled Units (T/S) S
Undeclared Income $0.00 Security Income DTL RPT (Y/N) N
Maximum Yield Income Adjust 340,012.65
</TABLE>
FROM DATE USED 12/1/97
TOTAL INCOME 548,592.38
TOTAL EXPENSES -58,171.71
AVERAGE SHARES 99,439,167.40
MAXIMUM OFFERING PRICE 1.02
SEC ADVERTISING YIELD 5.872782
INVESTMENT GRADE INCOME FUND - 30 DAY YIELD
- -------------------------------------------
T = (P/H) [to the power of (1/N-1)] Where: T = Total Return
P = Present Value
H = Historical Value
N = Number of Days
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Account oooooooooooooo15 Class of Shares
Period End Date 12/31/97 Traded/Setteled Units (T/S) S
Undeclared Income $0.00 Security Income DTL RPT (Y/N) N
Maximum Yield Income Adjust 710,622.86
</TABLE>
FROM DATE USED 12/1/97
TOTAL INCOME 1,026,106,17
TOTAL EXPENSES -80,029.77
MAXIMUM OFFERING PRICE 1.11
SEC ADVERTISING YIELD 6.214602
<PAGE>
Performance Returns @ 12/31/97
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND - 30 DAY YIELD
- -----------------------------------
<S> <C> <C> <C>
Account oooooooooooooo21 Class of Shares
Period End Date 12/31/97 Traded/Setteled Units (T/S) S
Undeclared Income $0.00 Security Income DTL RPT (Y/N) N
Maximum Yield Income Adjust 78,553.67
</TABLE>
FROM DATE USED 12/1/97
TOTAL INCOME 277,623.42
TOTAL EXPENSES -25,888.70
MAXIMUM OFFERING PRICE 1.05
SEC ADVERTISING YIELD 5.694144
T = (P/H) [to the power of (1/N-1)] Where: T = Total Return
P = Present Value
H = Historical Value
N = Number of Days
MONEY MARKET FUND - YIELD AND EFFECTIVE YIELD
- ---------------------------------------------
Account oooooooooooooo16
From 12/24/97 TO 12/31/1997
Yield Option (1,2) 2
AVG DAILY COST $257,866,659.54
AVG DAILY EARNED INCOME $42,058.37
ANNUAL EARNED INCOME $15,351,305.05
YIELD TODAY 5.6849
7 DAY YIELD 5.5819
PERIOD YIELD 5.5819
GROSS YIELD 5.8985
<PAGE>
EXHIBIT 19
POWER OF ATTORNEY
We, the undersigned, hereby severally constitute and appoint Richard M. Reilly,
Joseph W. MacDougall, Jr., George M. Boyd and Gregory D. Sheehan, and each of
them singly, our true and lawful attorneys, with full power to them and each of
them, to sign for us, and in our names and in any and all capacities, any and
all amendments, including post-effective amendments, to the Registration
Statement on Form N-1A of Allmerica Investment Trust and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and each of
them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys or any of them may lawfully do or cause
to be done by virtue hereof. Witness our hands on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John F. O'Brien Chairman of the Board of Trustee 2/25/98
- ----------------------------- -------
John F. O'Brien
/s/ Richard M. Reilly President, Chief Executive Officer 2/25/98
_____________________________ and Trustee -------
Richard M. Reilly
/s/ Thomas P. Cunningham Treasurer (Principal Accounting 2/25/98
- ----------------------------- Officer) -------
Thomas P. Cunningham
/s/ Cynthia A. Hargadon Trustee 2/25/98
- ----------------------------- -------
Cynthia A. Hargadon
/s/ Gordon Holmes Trustee 2/25/98
- ----------------------------- -------
Gordon Holmes
/s/ John P. Kavanaugh Trustee 2/25/98
- ----------------------------- -------
John P. Kavanaugh
/s/ Bruce E. Langton Trustee 2/25/98
- ----------------------------- -------
Bruce E. Langton
/s/ Attiat F. Ott Trustee 2/25/98
- ----------------------------- -------
Attiat F. Ott
Trustee
- ----------------------------- -------
Ranne P. Warner
</TABLE>
<PAGE>
POWER OF ATTORNEY
We, the undersigned, hereby severally constitute and appoint Richard M. Reilly,
Joseph W. MacDougall, Jr., George M. Boyd and Gregory D. Sheehan, and each of
them singly, our true and lawful attorneys, with full power to them and each of
them, to sign for us, and in our names and in any and all capacities, any and
all amendments, including post-effective amendments, to the Registration
Statement on Form N-1A of Allmerica Investment Trust and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and each of
them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys or any of them may lawfully do or cause
to be done by virtue hereof. Witness our hands on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
- -------------------------- Chairman of the Board and Trustee ---------
John F. O'Brien
- -------------------------- President, Chief Executive Officer ---------
Richard M. Reilly and Trustee
- -------------------------- Treasurer (Principal Accounting Officer) ---------
Thomas P. Cunningham
- -------------------------- Trustee ---------
Cynthia A. Hargadon
- -------------------------- Trustee ---------
Gordon Holmes
- -------------------------- Trustee ---------
John P. Kavanaugh
- -------------------------- Trustee ---------
Bruce E. Langton
- -------------------------- Trustee ---------
Artiat F. Ott
/s/ Ranne P. Warner 2/25/98
- -------------------------- Trustee ---------
Ranne P. Warner
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> SELECT AGRESSIVE GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 475,614,635
<INVESTMENTS-AT-VALUE> 602,939,903
<RECEIVABLES> 3,927,972
<ASSETS-OTHER> 43,606,602
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 650,474,477
<PAYABLE-FOR-SECURITIES> 2,301,571
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,049,745
<TOTAL-LIABILITIES> 46,351,316
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 478,722,159
<SHARES-COMMON-STOCK> 271,561,208
<SHARES-COMMON-PRIOR> 200,053,471
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,924,266)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 127,325,268
<NET-ASSETS> 604,123,161
<DIVIDEND-INCOME> 2,163,467
<INTEREST-INCOME> 562,840
<OTHER-INCOME> 0
<EXPENSES-NET> 5,037,926
<NET-INVESTMENT-INCOME> (2,311,619)
<REALIZED-GAINS-CURRENT> 38,455,043
<APPREC-INCREASE-CURRENT> 49,158,982
<NET-CHANGE-FROM-OPS> 85,302,406
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 47,182,652
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 125,269,733
<NUMBER-OF-SHARES-REDEEMED> 13,891,011
<SHARES-REINVESTED> 47,182,652
<NET-CHANGE-IN-ASSETS> 196,681,128
<ACCUMULATED-NII-PRIOR> (1,746,724)
<ACCUMULATED-GAINS-PRIOR> 30,022,198
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,850,649
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,259,290
<AVERAGE-NET-ASSETS> 508,064,695
<PER-SHARE-NAV-BEGIN> 2,037
<PER-SHARE-NII> (0.009)
<PER-SHARE-GAIN-APPREC> 0.387
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.190)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 2.225
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> SELECT CAPITAL APPRECIATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 199,853,488
<INVESTMENTS-AT-VALUE> 241,129,672
<RECEIVABLES> 5,308,901
<ASSETS-OTHER> 151,226
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 246,589,799
<PAYABLE-FOR-SECURITIES> 5,396,351
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 667,898
<TOTAL-LIABILITIES> 6,064,249
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 201,094,417
<SHARES-COMMON-STOCK> 141,678,833
<SHARES-COMMON-PRIOR> 96,106,648
<ACCUMULATED-NII-CURRENT> (10,735)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,844,338)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 41,286,206
<NET-ASSETS> 240,525,550
<DIVIDEND-INCOME> 577,558
<INTEREST-INCOME> 808,189
<OTHER-INCOME> 0
<EXPENSES-NET> 2,089,866
<NET-INVESTMENT-INCOME> (704,119)
<REALIZED-GAINS-CURRENT> 243,532
<APPREC-INCREASE-CURRENT> 30,338,726
<NET-CHANGE-FROM-OPS> 29,878,139
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 72,527,425
<NUMBER-OF-SHARES-REDEEMED> 4,560,254
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 97,845,310
<ACCUMULATED-NII-PRIOR> 67,349
<ACCUMULATED-GAINS-PRIOR> (2,739,890)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,813,444
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,089,866
<AVERAGE-NET-ASSETS> 185,458,334
<PER-SHARE-NAV-BEGIN> 1.485
<PER-SHARE-NII> (0.005)
<PER-SHARE-GAIN-APPREC> 0.218
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.698
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> ALLMERICA SELECT VALUE OPPORTUNITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 174,710,704
<INVESTMENTS-AT-VALUE> 201,752,311
<RECEIVABLES> 1,330,543
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 195,797
<TOTAL-ASSETS> 203,278,651
<PAYABLE-FOR-SECURITIES> 970,884
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 168,651
<TOTAL-LIABILITIES> 1,139,535
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,292,436
<SHARES-COMMON-STOCK> 124,351,330
<SHARES-COMMON-PRIOR> 75,448,638
<ACCUMULATED-NII-CURRENT> 25,871
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 779,202
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,041,607
<NET-ASSETS> 202,139,116
<DIVIDEND-INCOME> 1,778,101
<INTEREST-INCOME> 885,586
<OTHER-INCOME> 0
<EXPENSES-NET> 1,529,021
<NET-INVESTMENT-INCOME> 1,134,666
<REALIZED-GAINS-CURRENT> 26,736,121
<APPREC-INCREASE-CURRENT> 6,770,577
<NET-CHANGE-FROM-OPS> 34,641,364
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,108,795
<DISTRIBUTIONS-OF-GAINS> 26,701,347
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54,786,863
<NUMBER-OF-SHARES-REDEEMED> 1,257,688
<SHARES-REINVESTED> 27,810,142
<NET-CHANGE-IN-ASSETS> 88,170,539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 744,428
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,433,016
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,642,170
<AVERAGE-NET-ASSETS> 155,294,412
<PER-SHARE-NAV-BEGIN> 1.51
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.36
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> (0.25)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.63
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> SELECT INTERNATIONAL
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 363,178,910
<INVESTMENTS-AT-VALUE> 394,451,049
<RECEIVABLES> 988,182
<ASSETS-OTHER> 3,044,011
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 398,483,242
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 567,927
<TOTAL-LIABILITIES> 567,927
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 366,994,058
<SHARES-COMMON-STOCK> 296,715,707
<SHARES-COMMON-PRIOR> 182,088,352
<ACCUMULATED-NII-CURRENT> 2,055,754
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,563,727)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 32,429,230
<NET-ASSETS> 397,915,315
<DIVIDEND-INCOME> 7,710,677
<INTEREST-INCOME> 99,405
<OTHER-INCOME> 0
<EXPENSES-NET> 3,869,300
<NET-INVESTMENT-INCOME> 3,940,782
<REALIZED-GAINS-CURRENT> 14,653,395
<APPREC-INCREASE-CURRENT> (6,505,160)
<NET-CHANGE-FROM-OPS> 12,089,017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,068,170
<DISTRIBUTIONS-OF-GAINS> 12,587,981
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 156,120,845
<NUMBER-OF-SHARES-REDEEMED> 17,171,483
<SHARES-REINVESTED> 21,656,151
<NET-CHANGE-IN-ASSETS> 151,038,379
<ACCUMULATED-NII-PRIOR> 1,519,238
<ACCUMULATED-GAINS-PRIOR> 7,093,747
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,258,876
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,939,936
<AVERAGE-NET-ASSETS> 337,606,891
<PER-SHARE-NAV-BEGIN> 1.356
<PER-SHARE-NII> 0.015
<PER-SHARE-GAIN-APPREC> 0.049
<PER-SHARE-DIVIDEND> (0.033)
<PER-SHARE-DISTRIBUTIONS> (0.046)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.341
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> SELECT GROWTH
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 384,683,313
<INVESTMENTS-AT-VALUE> 477,874,479
<RECEIVABLES> 3,576,443
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 481,450,922
<PAYABLE-FOR-SECURITIES> 10,693,088
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 401,861
<TOTAL-LIABILITIES> 11,094,949
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 370,943,171
<SHARES-COMMON-STOCK> 259,691,378
<SHARES-COMMON-PRIOR> 159,809,982
<ACCUMULATED-NII-CURRENT> 100,512
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,121,124
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,191,166
<NET-ASSETS> 470,355,973
<DIVIDEND-INCOME> 3,876,793
<INTEREST-INCOME> 744,197
<OTHER-INCOME> 0
<EXPENSES-NET> 3,164,260
<NET-INVESTMENT-INCOME> 1,456,730
<REALIZED-GAINS-CURRENT> 27,996,165
<APPREC-INCREASE-CURRENT> 68,270,952
<NET-CHANGE-FROM-OPS> 97,723,847
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,356,218
<DISTRIBUTIONS-OF-GAINS> 23,994,275
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 148,447,611
<NUMBER-OF-SHARES-REDEEMED> 4,366,736
<SHARES-REINVESTED> 25,350,493
<NET-CHANGE-IN-ASSETS> 241,804,722
<ACCUMULATED-NII-PRIOR> 809,637
<ACCUMULATED-GAINS-PRIOR> 12,474,749
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,959,723
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,255,222
<AVERAGE-NET-ASSETS> 348,202,744
<PER-SHARE-NAV-BEGIN> 1,430
<PER-SHARE-NII> 0.006
<PER-SHARE-GAIN-APPREC> 0.480
<PER-SHARE-DIVIDEND> (0.006)
<PER-SHARE-DISTRIBUTIONS> (0.099)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.811
<EXPENSE-RATIO> .91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> ALLMERICA GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 610,340,287
<INVESTMENTS-AT-VALUE> 737,751,572
<RECEIVABLES> 2,020,781
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 113,541
<TOTAL-ASSETS> 739,885,894
<PAYABLE-FOR-SECURITIES> 10,660,234
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 546,838
<TOTAL-LIABILITIES> 11,207,072
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 593,957,242
<SHARES-COMMON-STOCK> 301,559,983
<SHARES-COMMON-PRIOR> 238,679,339
<ACCUMULATED-NII-CURRENT> 135,198
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,165,543
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 127,411,285
<NET-ASSETS> 728,678,822
<DIVIDEND-INCOME> 9,759,640
<INTEREST-INCOME> 3,068,389
<OTHER-INCOME> 0
<EXPENSES-NET> 3,088,389
<NET-INVESTMENT-INCOME> 9,739,640
<REALIZED-GAINS-CURRENT> 108,102,209
<APPREC-INCREASE-CURRENT> 24,921,710
<NET-CHANGE-FROM-OPS> 142,763,559
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,604,442
<DISTRIBUTIONS-OF-GAINS> 117,671,041
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45,743,350
<NUMBER-OF-SHARES-REDEEMED> 16,578,692
<SHARES-REINVESTED> 127,275,483
<NET-CHANGE-IN-ASSETS> 171,928,217
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 16,743,929
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,840,683
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,241,218
<AVERAGE-NET-ASSETS> 659,157,934
<PER-SHARE-NAV-BEGIN> 2.33
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.54
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (0.46)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.42
<EXPENSE-RATIO> 0.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> ALLMERICA EQUITY INDEX FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 206,787,708
<INVESTMENTS-AT-VALUE> 296,713,594
<RECEIVABLES> 601,408
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 819
<TOTAL-ASSETS> 297,315,821
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 125,217
<TOTAL-LIABILITIES> 125,217
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 206,731,567
<SHARES-COMMON-STOCK> 107,949,028
<SHARES-COMMON-PRIOR> 69,794,201
<ACCUMULATED-NII-CURRENT> 94,775
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 429,982
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 89,934,280
<NET-ASSETS> 297,190,604
<DIVIDEND-INCOME> 4,132,107
<INTEREST-INCOME> 28,577
<OTHER-INCOME> 0
<EXPENSES-NET> 1,006,247
<NET-INVESTMENT-INCOME> 3,154,437
<REALIZED-GAINS-CURRENT> 8,123,704
<APPREC-INCREASE-CURRENT> 49,226,053
<NET-CHANGE-FROM-OPS> 60,504,194
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,062,476
<DISTRIBUTIONS-OF-GAINS> 7,995,243
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 89,175,027
<NUMBER-OF-SHARES-REDEEMED> 3,618,278
<SHARES-REINVESTED> 11,057,719
<NET-CHANGE-IN-ASSETS> 146,060,943
<ACCUMULATED-NII-PRIOR> 2,814
<ACCUMULATED-GAINS-PRIOR> 301,521
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 705,708
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,006,247
<AVERAGE-NET-ASSETS> 228,374,239
<PER-SHARE-NAV-BEGIN> 2.17
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (0.08)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.75
<EXPENSE-RATIO> .44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SELECT GROWTH AND INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 413,374,799
<INVESTMENTS-AT-VALUE> 491,057,394
<RECEIVABLES> 2,277,263
<ASSETS-OTHER> 541
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 493,335,198
<PAYABLE-FOR-SECURITIES> 19,455,976
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 326,728
<TOTAL-LIABILITIES> 19,782,704
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 394,435,915
<SHARES-COMMON-STOCK> 305,179,193
<SHARES-COMMON-PRIOR> 210,471,303
<ACCUMULATED-NII-CURRENT> 66,666
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,367,318
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 77,682,595
<NET-ASSETS> 473,552,494
<DIVIDEND-INCOME> 6,379,645
<INTEREST-INCOME> 1,783,707
<OTHER-INCOME> 0
<EXPENSES-NET> 2,973,748
<NET-INVESTMENT-INCOME> 5,189,604
<REALIZED-GAINS-CURRENT> 37,150,110
<APPREC-INCREASE-CURRENT> 33,411,977
<NET-CHANGE-FROM-OPS> 75,751,691
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,132,576
<DISTRIBUTIONS-OF-GAINS> 40,365,847
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 106,417,562
<NUMBER-OF-SHARES-REDEEMED> 4,254,746
<SHARES-REINVESTED> 45,498,423
<NET-CHANGE-IN-ASSETS> 177,914,507
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,583,055
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,807,177
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,076,041
<AVERAGE-NET-ASSETS> 386,405,471
<PER-SHARE-NAV-BEGIN> 1,405
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 0.293
<PER-SHARE-DIVIDEND> (0.020)
<PER-SHARE-DISTRIBUTIONS> (0.146)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.552
<EXPENSE-RATIO> .77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> SELECT INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 101,168,989
<INVESTMENTS-AT-VALUE> 103,981,611
<RECEIVABLES> 2,409,915
<ASSETS-OTHER> 147
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 106,391,673
<PAYABLE-FOR-SECURITIES> 2,067,820
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70,482
<TOTAL-LIABILITIES> 2,138,302
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102,510,332
<SHARES-COMMON-STOCK> 101,975,296
<SHARES-COMMON-PRIOR> 77,869,624
<ACCUMULATED-NII-CURRENT> 912
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,070,495)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,812,622
<NET-ASSETS> 104,253,371
<DIVIDEND-INCOME> 102,821
<INTEREST-INCOME> 5,973,833
<OTHER-INCOME> 0
<EXPENSES-NET> 641,980
<NET-INVESTMENT-INCOME> 5,434,674
<REALIZED-GAINS-CURRENT> 418,192
<APPREC-INCREASE-CURRENT> 2,198,452
<NET-CHANGE-FROM-OPS> 8,051,318
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,527,725
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,119,346
<NUMBER-OF-SHARES-REDEEMED> 4,415,636
<SHARES-REINVESTED> 5,527,725
<NET-CHANGE-IN-ASSETS> 26,755,028
<ACCUMULATED-NII-PRIOR> 50,180
<ACCUMULATED-GAINS-PRIOR> (1,444,405)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 524,041
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 641,980
<AVERAGE-NET-ASSETS> 88,752,282
<PER-SHARE-NAV-BEGIN> 0.995
<PER-SHARE-NII> 0.060
<PER-SHARE-GAIN-APPREC> 0.028
<PER-SHARE-DIVIDEND> (0.061)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.022
<EXPENSE-RATIO> .72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> ALLMERICA INVESTMENT GRADE INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 185,001,701
<INVESTMENTS-AT-VALUE> 190,145,360
<RECEIVABLES> 2,426,720
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,481
<TOTAL-ASSETS> 192,574,561
<PAYABLE-FOR-SECURITIES> 2,954,637
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117,264
<TOTAL-LIABILITIES> 3,071,901
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 185,767,281
<SHARES-COMMON-STOCK> 170,391,530
<SHARES-COMMON-PRIOR> 145,193,179
<ACCUMULATED-NII-CURRENT> 17,671
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,414,329
<ACCUM-APPREC-OR-DEPREC> 5,143,659
<NET-ASSETS> 189,502,660
<DIVIDEND-INCOME> 275,574
<INTEREST-INCOME> 11,811,728
<OTHER-INCOME> 0
<EXPENSES-NET> 889,827
<NET-INVESTMENT-INCOME> 11,197,475
<REALIZED-GAINS-CURRENT> 207,211
<APPREC-INCREASE-CURRENT> 4,489,947
<NET-CHANGE-FROM-OPS> 15,894,633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,253,260
<DISTRIBUTIONS-OF-GAINS> 8,726
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,269,591
<NUMBER-OF-SHARES-REDEEMED> 10,988,794
<SHARES-REINVESTED> 11,261,986
<NET-CHANGE-IN-ASSETS> 32,175,430
<ACCUMULATED-NII-PRIOR> 44,163
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,595,143
<GROSS-ADVISORY-FEES> 710,821
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 889,827
<AVERAGE-NET-ASSETS> 172,932,009
<PER-SHARE-NAV-BEGIN> 1.08
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.11
<EXPENSE-RATIO> 0.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> ALLMERICA GOVERNMENT BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 54,469,323
<INVESTMENTS-AT-VALUE> 55,115,212
<RECEIVABLES> 1,999,288
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 822
<TOTAL-ASSETS> 57,115,322
<PAYABLE-FOR-SECURITIES> 1,566,965
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,882
<TOTAL-LIABILITIES> 1,601,847
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,515,128
<SHARES-COMMON-STOCK> 53,041,341
<SHARES-COMMON-PRIOR> 44,802,426
<ACCUMULATED-NII-CURRENT> 3,851
<OVERDISTRIBUTION-NII> 0,851
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,651,500
<ACCUM-APPREC-OR-DEPREC> 645,889
<NET-ASSETS> 55,513,475
<DIVIDEND-INCOME> 51,042
<INTEREST-INCOME> 3,169,269
<OTHER-INCOME> 0,169,269
<EXPENSES-NET> 327,081
<NET-INVESTMENT-INCOME> 2,893,230
<REALIZED-GAINS-CURRENT> (70,250)
<APPREC-INCREASE-CURRENT> 570,630
<NET-CHANGE-FROM-OPS> 3,393,610
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,898,327
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,847,253
<NUMBER-OF-SHARES-REDEEMED> 8,123,319
<SHARES-REINVESTED> 2,898,327
<NET-CHANGE-IN-ASSETS> 9,117,544
<ACCUMULATED-NII-PRIOR> 5,998
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,578,193
<GROSS-ADVISORY-FEES> 244,355
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 327,081
<AVERAGE-NET-ASSETS> 48,871,094
<PER-SHARE-NAV-BEGIN> 1.04
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.05
<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> ALLMERICA MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 232,754,578
<INVESTMENTS-AT-VALUE> 258,654,578
<RECEIVABLES> 2,012,576
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 37,065
<TOTAL-ASSETS> 260,704,219
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84,712
<TOTAL-LIABILITIES> 84,712
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 260,664,450
<SHARES-COMMON-STOCK> 260,664,450
<SHARES-COMMON-PRIOR> 217,292,369
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 44,943
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 260,619,507
<DIVIDEND-INCOME> 293,092
<INTEREST-INCOME> 13,319,005
<OTHER-INCOME> 0
<EXPENSES-NET> 836,740
<NET-INVESTMENT-INCOME> 12,775,357
<REALIZED-GAINS-CURRENT> (8,306)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 12,767,051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,775,357
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 198,110,523
<NUMBER-OF-SHARES-REDEEMED> 167,513,799
<SHARES-REINVESTED> 12,775,357
<NET-CHANGE-IN-ASSETS> 43,363,775
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 36,637
<GROSS-ADVISORY-FEES> 647,964
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 836,740
<AVERAGE-NET-ASSETS> 239,567,827
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
