<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1999
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 [ ]
Pre-Effective Amendment No. ____ [_]
Post-Effective Amendment No. 38 [X]
----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 39 [X]
----
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, 1999 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.
<PAGE>
Allmerica Investment Trust
- --------------------------------------------------------------------------------
Prospectus
May 1, 1999
This Prospectus describes the following investment Funds of the Trust which
serve as the underlying investments for insurance related accounts.
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
This Prospectus explains what you should know about each of the Funds. Please
read it carefully before you invest.
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.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
Allmerica
Investment
Trust
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Table of Contents
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FUND SUMMARIES ............................................................. 3
Objectives, Strategies and Risks....................................... 4
Select Emerging Markets Fund....................................... 4
Select Aggressive Growth Fund...................................... 5
Select Capital Appreciation Fund................................... 6
Select Value Opportunity Fund...................................... 7
Select International Equity Fund................................... 8
Select Growth Fund................................................. 9
Select Strategic Growth Fund....................................... 10
Select Growth and Income Fund...................................... 11
Select Income Fund................................................. 12
Money Market Fund.................................................. 13
EXPENSE SUMMARY............................................................. 14
DESCRIPTION OF PRINCIPAL INVESTMENT RISKS................................... 16
OTHER INVESTMENT STRATEGIES................................................. 18
MANAGEMENT OF THE FUNDS..................................................... 20
PRICING OF FUND SHARES...................................................... 28
PURCHASE AND REDEMPTION OF SHARES........................................... 28
DISTRIBUTIONS AND TAXES..................................................... 29
YEAR 2000................................................................... 29
FINANCIAL HIGHLIGHTS........................................................ 30
APPENDIX ................................................................... 34
LEGEND
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Performance [GRAPHIC APPEARS HERE]
Investment Objectives [GRAPHIC APPEARS HERE]
Financial Information [GRAPHIC APPEARS HERE]
Management of Fund [GRAPHIC APPEARS HERE]
Risk [GRAPHIC APPEARS HERE]
Investment Strategies [GRAPHIC APPEARS HERE]
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Allmerica Investment Trust 2
<PAGE>
Fund Summaries
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Allmerica Investment Trust provides a broad range of investment options through
10 separate investment portfolios, or Funds. Shares of the Funds are sold
exclusively to variable annuity and variable life insurance Separate Accounts
and qualified pension and retirement plans.
The investment manager of the Trust is Allmerica Financial Investment Management
Services, Inc. The Manager is responsible for managing the Trust's daily
business and has general responsibility for the management of the investments of
the Funds. The Manager, at its expense, has contracted with investment
Sub-Advisers to manage the investments of the Funds. Each Sub-Adviser has been
selected on the basis of various factors including management experience,
investment techniques and staffing. See "Management of the Funds" for more
information about the Manager and the Sub-Advisers.
The following summaries describe each Fund's investment objective and principal
investment strategies, identify the principal investment risks of investing in
the Fund and provide performance charts for the Fund. Note that any percentage
limitations listed under a Fund's principal investment strategies apply at the
time of investment. The principal risks are discussed in more detail under
"Description of Principal Investment Risks". The bar charts show how the
investment returns of the shares of a Fund have varied in the past ten years (or
for the life of the Fund if less than 10 years). The table following each bar
chart shows how the Fund's average annual return for the last one, five and ten
years (or for the life of the Fund, if shorter) compares to those of a
broad-based securities market index. Past performance does not necessarily
indicate how the Fund will perform in the future. The bar charts and tables give
some indication of the risks of investing in each Fund by showing changes in the
Fund's performance. The bar charts and tables do not reflect expenses associated
with the variable insurance product that you are purchasing. If those expenses
had been reflected, the performance shown would have been lower. A bar chart and
table are not included for two new Funds, the Select Emerging Markets Fund and
the Select Strategic Growth Fund, since as of December 31, 1998 they had not yet
had a full calendar year of investment returns.
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Allmerica Investment Trust 3
<PAGE>
Objectives, Strategies and Risks
Select Emerging Markets Fund
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE] Sub-Adviser: Schroder Capital Management International
Inc.
[GRAPHIC APPEARS HERE] Investment Objective: The Fund seeks long-term growth of
capital by investing in the world's emerging markets.
[GRAPHIC APPEARS HERE] Principal Investment Strategies: While its investments
are not limited to any specific region of the world, the
Fund normally invests at least 65% of its assets in
companies located or primarily operating in countries
with emerging markets. The Fund usually has investments
in at least five developing countries. Before the Fund
invests in a country, the Sub-Adviser considers various
factors such as that country's political stability and
economic prospects. In selecting securities for the
Fund, the Sub-Adviser focuses on the long-term growth
potential of the securities.
The Fund invests primarily in equities, including common
stock, preferred stock, securities convertible into
common stock, rights and warrants and similar
securities. The Fund also may invest up to 35% of its
assets in debt securities of issuers in emerging
markets, equity and debt securities of issuers in
developed countries, cash and cash equivalents. The Fund
may invest in lower rated bonds, commonly known as "junk
bonds", as further discussed in the "Description of
Principal Investment Risks."
[GRAPHIC APPEARS HERE] Principal Risks:
. Company Risk
. Credit Risk
. Currency Risk
. Derivatives Risk
. Emerging Markets Risk
. Foreign Investment Risk
. Investment Management Risk
. Liquidity Risk
. Market Risk
See "Description of Principal Investment Risks."
------------------------------
4 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Aggressive Growth Fund
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[GRAPHIC APPEARS HERE] Sub-Adviser: Nicholas-Applegate Capital Management, L.P.
[GRAPHIC APPEARS HERE] Investment Objective: The Fund seeks above-average
capital appreciation by investing primarily in common
stocks of companies which are believed to have
significant potential for capital appreciation.
[GRAPHIC APPEARS HERE] Principal Investment Strategies: To pursue this goal,
the Fund looks predominantly for stocks of small and
mid-size companies that show potential for rapid growth.
The Fund typically invests in companies that, because of
positive developments affecting the company, offer the
possibility of accelerating earnings. The Sub-Adviser
uses systematic, fundamental research in selecting
investments for the Fund.
Under normal circumstances, the Fund invests at least
65% of its assets in common stocks, securities
convertible into common stocks and warrants. The Fund
also may invest in debt securities and preferred stocks
and up to 25% of its assets in foreign securities (not
including its investments in American Depositary
Receipts or "ADRs").
[GRAPHIC APPEARS HERE] Principal Risks:
. Company Risk
. Derivatives Risk
. Investment Management Risk
. Liquidity Risk
. Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
19.51% -2.31% 32.28% 18.55% 18.71% 10.56%
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
During the period shown above the highest quarterly return was 23.18% for the
quarter ended 12/31/98 and the lowest was (22.81)% for the quarter ended
9/30/98.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 10.56% 14.99% 18.11%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 14.13% 16.27%
- --------------------------------------------------------------------------------
* The Russell 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks.
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Allmerica Investment Trust 5
<PAGE>
Objectives, Strategies and Risks
Select Capital Appreciation Fund
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[GRAPHIC APPEARS HERE] Sub-Adviser: T. Rowe Price Associates, Inc.
[GRAPHIC APPEARS HERE] Investment Objective: The Fund seeks long-term growth of
capital. Realization of income is not a significant
investment consideration and any income realized on the
Fund's investments will be incidental to its primary
objective.
[GRAPHIC APPEARS HERE] Principal Investment Strategies: The Fund's Sub-Adviser
looks for companies with proven business ideas and
earnings growth rates in excess of market averages. The
Fund normally invests at least 50% of its equity assets
in securities of companies with market capitalizations
that fall within the range of companies in the S&P Mid
Cap 400 Index (as of December 31, 1998, $240 million to
$11.6 billion market capitalization). The Fund may also
invest in larger firms and firms with a market
capitalization below $240 million.
While the Fund invests primarily in common stocks, it
also may invest in preferred stocks, warrants,
government securities, corporate bonds and other debt
securities. Up to 25% of its assets may be invested in
"junk bonds". The Fund may invest without limitation in
foreign securities.
[GRAPHIC APPEARS HERE] Principal Risks:
. Company Risk
. Credit Risk
. Currency Risk
. Derivatives Risk
. Foreign Investment Risk
. Investment Management Risk
. Liquidity Risk
. Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
8.80% 14.28% 13.88%
- --------------------------------------------------------------------------------
1996 1997 1998
During the period shown above the highest quarterly return was 27.90% for the
quarter ended 12/31/98 and the lowest was (18.54)% for the quarter ended
9/30/98.
T. Rowe Price Associates, Inc. became Sub-Adviser of the Fund on April 1, 1998.
Performance before that date is based on the performance of the Fund's previous
Sub-Adviser.
Performance Table
Average Annual Total Returns
(for the periods ending Past Since Inception
December 31, 1998) One Year (April 28, 1995)
- --------------------------------------------------------------------------------
Fund Shares 13.88% 20.37%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 17.50%
- --------------------------------------------------------------------------------
* The Russell 2500 Index is a unmanaged composite of 2,500 small-to-mid
capitalization stocks.
-----------------------------
6 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Value Opportunity Fund
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[GRAPHIC APPEARS HERE] Sub-Adviser: Cramer Rosenthal McGlynn, LLC
[GRAPHIC APPEARS HERE] Investment Objective: The 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.
[GRAPHIC APPEARS HERE] Principal Investment Strategies: The Fund's Sub-Adviser
attempts to find stocks that are attractively valued
relative to their future prospects and the market as a
whole. The most promising opportunities can be found in
companies that are temporarily out of favor or when most
analysts are confused about changes taking place at a
company. In these situations, the company's stock is
often undervalued.
The Fund invests primarily in companies with market
capitalization between $200 million and $5 billion. The
Fund normally invests at least 80% of the portfolio in
common stocks and may invest in other equity securities
and up to 25% of its assets in foreign securities (not
including its investments in ADRs).
[GRAPHIC APPEARS HERE] Principal Risks:
. Company Risk
. Currency Risk
. Derivatives Risk
. Foreign Investment Risk
. Investment Management Risk
. Liquidity Risk
. Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
-6.51% 17.60% 28.53% 24.85% 4.87%
- --------------------------------------------------------------------------------
1994 1995 1996 1997 1998
During the period shown above the highest quarterly return was 13.42% for the
quarter ended 12/31/98 and the lowest was (12.24)% for the quarter ended
9/30/98. Absent reimbursement of certain Fund expenses during these periods, the
Fund's total returns would have been lower.
Cramer Rosenthal McGlynn, LLC became Sub-Adviser of the Fund on January 1, 1997.
Performance before that date is based on the performance of the Fund's previous
Sub-Adviser.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (April 30, 1993)
- --------------------------------------------------------------------------------
Fund Shares 4.87% 13.09% 14.71%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 14.13% 15.09%
- --------------------------------------------------------------------------------
* The Russell 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks.
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Allmerica Investment Trust 7
<PAGE>
Objectives, Strategies and Risks
Select International Equity Fund
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE] Sub-Adviser: Bank of Ireland Asset Management (U.S.)
Limited
[GRAPHIC APPEARS HERE] Investment Objective: The Fund seeks maximum long-term
total return (capital appreciation and income) primarily
by investing in common stocks of established non-U.S.
companies.
[GRAPHIC APPEARS HERE] Principal Investment Strategies: Under normal market
conditions, at least 65% of the Fund's assets will be
invested in the securities of medium and large-size
companies located in at least five foreign countries,
not including the United States. To achieve its
objective, the Fund focuses on equity securities which
the Sub-Adviser believes are undervalued in relation to
the company's prospects for future earnings growth. The
Fund may also buy fixed-income debt securities,
primarily for defensive purposes.
[GRAPHIC APPEARS HERE] Principal Risks:
. Company Risk
. Currency Risk
. Derivatives Risk
. Foreign Investment Risk
. Investment Management Risk
. Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
19.63% 21.94% 4.65% 16.48%
- --------------------------------------------------------------------------------
1995 1996 1997 1998
During the period shown above the highest quarterly return was 19.49% for the
quarter ended 12/31/98 and the lowest was (17.69)% for the quarter ended
09/30/98.
Performance Table
Average Annual Total Returns
(for the periods ending Past Since Inception
December 31, 1998) One Year (May 2, 1994)
- --------------------------------------------------------------------------------
Fund Shares 16.48% 12.26%
- --------------------------------------------------------------------------------
Morgan Stanley Capital Intl.
EAFE Index* 20.33% 8.41%
- --------------------------------------------------------------------------------
* The Morgan Stanley Capital International EAFE (Europe, Australia, Far East)
Index, reflecting reinvestment of gross dividends, is an unmanaged
capitalization weighted index of foreign developed country common stocks.
-----------------------------
8 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Growth Fund
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[GRAPHIC APPEARS HERE] Sub-Adviser: Putnam Investment Management, Inc.
[GRAPHIC APPEARS HERE] Investment Objective: The 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.
[GRAPHIC APPEARS HERE] Principal Investment Strategies: To attain its
objective, the Fund looks for companies that appear to
have favorable long-term growth characteristics. The
Fund typically invests in stocks of large capitalization
companies, such as those included in the S&P 500 Index,
although it can also make investments in smaller growth
companies.
At least 65% of the Fund's assets normally will consist
of common stocks that the Sub-Adviser believes have
growth potential. The Fund also may purchase convertible
bonds and preferred stocks and warrants. The Fund
normally invests substantially all of its investments in
equity securities, although it may invest up to 35% in
debt securities including up to 15% in "junk bonds". The
Fund may invest up to 25% of its assets in foreign
securities (not including its investments in ADRs).
[GRAPHIC APPEARS HERE] Principal Risks:
. Company Risk
. Credit Risk
. Derivatives Risk
. Investment Management Risk
. Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
0.84% -1.49% 24.59% 22.02% 34.06% 35.44%
- --------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
During the period shown above the highest quarterly return was 25.02% for the
quarter ended 12/31/98 and the lowest was (11.84)% for the quarter ended
09/30/98.
Putnam Investment Management, Inc. became Sub-Adviser of the Fund on July 1,
1996. Performance before that date is based on the performance of the Fund's
previous Sub-Adviser.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 35.44% 22.15% 19.18%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.53%
- --------------------------------------------------------------------------------
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an unmanaged
index of 500 leading stocks. S&P 500(R) Index is a registered trademark of
Standard & Poor's Corporation.
- -----------------------------
Allmerica Investment Trust 9
<PAGE>
Objectives, Strategies and Risks
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Sub-Adviser: Cambiar Investors, Inc.
[GRAPHIC APPEARS HERE]
Investment Objective: The Fund seeks long-term growth of capital by investing
primarily in common stocks of established companies.
[GRAPHIC APPEARS HERE]
Principal Investment Strategies: The Sub-Adviser attempts to find stocks that
are currently trading at attractive values in relation to the market and have
potential for long-term earnings growth. These are often stocks of companies
which have been out of favor but have experienced positive recent developments
not yet recognized in the stock's price.
Under normal market conditions, the Fund invests at least 65% of its assets in
the common stocks of companies with a market capitalization of more than $1
billion. In addition, the Fund may purchase preferred stocks, debt securities
and securities convertible into or exchangeable for common stocks. The Fund may
invest up to 20% of its assets in foreign securities (not including its
investments in ADRs).
[GRAPHIC APPEARS HERE]
Principal Risks:
. Company Risk
. Derivatives Risk
. Investment Management Risk
. Market Risk
See "Description of Principal Investment Risks."
--------------------------
Allmerica Investment Trust
10
<PAGE>
Objectives, Strategies and Risks
Select Growth and Income Fund
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Sub-Adviser: J.P. Morgan Investment Management Inc.
[GRAPHIC APPEARS HERE]
Investment Objective: The 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.
[GRAPHIC APPEARS HERE]
Principal Investment Strategies: The Fund invests in a broadly diversified
portfolio of equity securities, primarily the common stock of companies included
in the S&P 500 Index. The Fund's industry diversification and other risk
characteristics will be similar to those of the index. The Fund may invest in a
wide range of equity securities, consisting of common stocks, preferred stocks,
securities convertible into common and preferred stocks and warrants. The Fund
may purchase individual stocks not presently paying dividends if the Sub-Adviser
believes the overall portfolio is positioned to achieve its income objective.
The Fund may invest up to 35% of its assets in fixed-income securities,
including up to 15% in "junk bonds". However, the Fund's normal strategy is to
be nearly fully invested in equity securities. The Fund may also invest up to
25% of its assets in foreign securities (not including its investments in ADRs).
[GRAPHIC APPEARS HERE]
Principal Risks:
. Company Risk
. Derivatives Risk
. Investment Management Risk
. Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns[GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
-------------------------------------------
10.37 0.73 30.32 21.26 22.51 16.43
During the period shown above the highest quarterly return was 19.41% for the
quarter ended 12/31/98 and the lowest was (12.66)% for the quarter ended
9/30/98.
J.P. Morgan Investment Management Inc. became Sub-Adviser of the Fund on April
1, 1999. Performance before that date is based on the performance of the Fund's
previous Sub-Advisers.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 16.43% 17.82% 15.53%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.53%
- --------------------------------------------------------------------------------
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an
unmanaged index of 500 leading stocks. S&P 500(R) Index is a registered
trademark of Standard & Poor's Corporation.
- --------------------------
Allmerica Investment Trust
11
<PAGE>
Objectives, Strategies and Risks
Select Income Fund
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Sub-Adviser: Standish, Ayer & Wood, Inc.
[GRAPHIC APPEARS HERE]
Investment Objective: The Fund seeks a high level of current income. The Fund
will invest primarily in investment grade, fixed-income securities.
[GRAPHIC APPEARS HERE]
Principal Investment Strategies: Examples of 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; commercial paper;
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and debt securities backed by various types of financial
assets. The Fund also may invest in mortgage-backed and asset-backed securities.
The Fund's investments in corporate debt securities are not limited to any
particular type of company or industry. The Fund may invest up to 25% of its
assets in foreign securities (not including its investments in ADRs), up to 35%
of its assets in money market instruments and up to 25% in debt obligations of
supranational entities.
The average maturity and the mix of portfolio securities will vary depending on
such factors as current market conditions and the comparative yields from
different instruments. The Fund invests primarily in investment grade securities
rated in the four highest grades by Moody's Investors Services or Standard &
Poor's Rating Services or similar rating organizations, and in unrated
securities. For more information about rating categories, see the Appendix to
the Statement of Additional Information ("SAI"). The Fund also may invest up to
25% of its assets in "junk bonds."
[GRAPHIC APPEARS HERE]
Principal Risks:
. Credit Risk
. Interest Rate Risk
. Investment Management Risk
. Liquidity Risk
. Market Risk
. Prepayment Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns[GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
--------------------------------------------
10.95 -4.82 16.96 3.32 9.17 6.83
During the period shown above the highest quarterly return was 5.64% for the
quarter ended 6/30/95 and the lowest was (3.87)% for the quarter ended
3/31/94.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 6.83% 6.05% 6.56%
- --------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index* 8.67% 7.27% 7.51%
- --------------------------------------------------------------------------------
* The Lehman Brothers Aggregate Bond Index(R) is an unmanaged index of fixed
rate debt issues with an investment grade or higher rating at least one
year to maturity and an outstanding par value of at least $25 million.
- --------------------------------------------------------------------------------
--------------------------
Allmerica Investment Trust
12
<PAGE>
Objectives, Strategies and Risks
Money Market Fund
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC APPEARS HERE]
Investment Objective: The Fund seeks to obtain maximum current income consistent
with preservation of capital and liquidity.
[GRAPHIC APPEARS HERE]
Principal Investment Strategies: The Fund seeks to achieve its objective by
investing in high quality money market instruments such as obligations issued or
guaranteed by the United States Government, its agencies, or instrumentalities;
commercial paper; obligations of banks or savings and loan associations
including bankers acceptances and certificates of deposit; repurchase agreements
and cash and cash equivalents. The Fund may invest up to 25% of its assets in
U.S. dollar denominated foreign debt securities and short-term instruments (not
including investments in ADRs).
Any security purchased for the Fund must receive the highest or second highest
quality rating by at least two recognized rating agencies or by one if only one
has rated the security. If the security is unrated the security must be seen by
the Sub-Adviser as having comparable quality. Portfolio securities will have a
remaining maturity of 397 days or less and the portfolio is managed to maintain
a dollar-weighted maturity of 90 days or less.
The Fund attempts to maintain a constant net asset value of $1.00 per share but
it may not be able to do so due to adverse market conditions or other factors
and it is possible for investors to lose money by investing in the Fund. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
[GRAPHIC APPEARS HERE]
Principal Risks:
. Credit Risk
. Interest Rate Risk
. Investment Management Risk
. Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns[GRAPHIC APPEARS HERE]
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------------
9.07 8.17 6.22 3.78 3.00 3.93 5.84 5.36 5.47 5.51
During the period shown above the highest quarterly return was 2.35% for the
quarter ended 06/30/89 and the lowest was 0.73% for the quarter ended
6/30/93.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- --------------------------------------------------------------------------------
Fund Shares 5.51% 5.22% 5.62%
- --------------------------------------------------------------------------------
IBC/Donoghue First Tier
Money Market Index* 4.96% 4.80% 5.22%
- --------------------------------------------------------------------------------
* IBC/Donoghue is an independent firm that tracks regulated money market funds
on a yield, shareholder, assets size and portfolio allocation basis.
The Fund's 7-day yield ending December 31, 1998 was 5.11%.
- ------------------------------
Allmerica Investment Trust
13
<PAGE>
Expense Summary
- --------------------------------------------------------------------------------
Expenses are one of several factors to consider when investing in a Fund.
Expenses shown are based on expenses incurred in respect of shares of the Funds
for the 1998 fiscal year. The Examples show the cumulative expenses attributable
to a hypothetical $10,000 investment in each Fund over specified periods.
Fees and Expenses of the Funds
This table describes the fees and expenses that you may pay if you invest in the
Funds. Please note that the expenses listed below do not include the expenses of
the applicable variable insurance product that you are purchasing. You should
refer to the variable insurance product prospectus for more information relating
to the fees and expenses of that product, which are in addition to the expenses
of the Funds.
<TABLE>
<CAPTION> Annual Fund Operating Expenses
Shareholder (expenses deducted from Fund assets) Total Annual
Fees Fund
(fees paid directly Management Distribution Other Operating
from your investment) Fees (12b-1) Fees Expenses Expenses
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Emerging Markets Fund @ None 1.35%* None 1.19% 2.54%(1),(2)*
Select Aggressive Growth Fund None 0.88% None 0.07% 0.95%(1),(2)
Select Capital Appreciation Fund None 0.94% None 0.10% 1.04%(1),(2)
Select Value Opportunity Fund None 0.91%(1)* None 0.08% 0.99%(1),(2)*
Select International Equity Fund None 0.90% None 0.12% 1.02%(1),(2)
Select Growth Fund None 0.81%** None 0.05% 0.86%(1),(2)**
Select Strategic Growth Fund @ None 0.85%* None 0.81% 1.66%(1),(2)*
Select Growth and Income Fund None 0.68% None 0.05% 0.73%(1),(2)
Select Income Fund None 0.54% None 0.10% 0.64%(1)
Money Market Fund None 0.26% None 0.06% 0.32%(1)
</TABLE>
@ The Select Emerging Markets Fund and Select Strategic Growth Fund commenced
operations on February 20, 1998. Expenses shown are annualized.
* Amount does not reflect a voluntary expense limitation currently in effect
for the Select Emerging Markets Fund, Select Value Opportunity Fund, and
Select Strategic Growth Fund. For the year ended December 31, 1998, the
Management Fees and Total Annual Fund Operating Expenses were 1.00% and
2.19%, respectively, for Select Emerging Markets Fund, 0.90% and 0.98%,
respectively, for Select Value Opportunity Fund, and 0.39% and 1.20%,
respectively, for the Select Strategic Growth Fund after the effect of the
voluntary expense limitations.
** Effective June 1, 1998, the management fee rate for the Select Growth Fund
was revised. The Management Fee and Total Annual Fund Operating Expense
ratios shown in the table above have been adjusted to assume that the
revised rates took effect on January 1, 1998.
(1) Until further notice, Allmerica Financial Investment Management Services,
Inc. (the "Manager") has declared a voluntary expense limitation of 1.35% of
average net assets for the Select Aggressive Growth Fund and Select Capital
Appreciation Fund, 1.25% for the Select Value Opportunity Fund, 1.50% for
the Select International Equity Fund, 1.20% for the Select Growth Fund,
1.10% for the Select Growth and Income Fund, 1.00% for the Select Income
Fund, and 0.60% for the Money Market Fund. The total operating expenses of
these Funds of the Trust were less than their respective expense limitations
throughout 1998.
--------------------------
Allmerica Investment Trust
14
<PAGE>
Until further notice, the Manager has declared a voluntary expense limitation of
1.20% of average daily net assets for the Select Strategic Growth Fund. In
addition, the Manager has agreed to voluntarily waive its management fee to the
extent that expenses of the Select Emerging Markets Fund exceed 2.00% of the
Fund's average daily net assets. The amount of such waiver shall not exceed the
net amount of management fees earned by the Manager from the Fund after
subtracting fees paid by the Manager to the Fund's Sub-Adviser.
Until further notice, the Select Value Opportunity Fund's management fee rate
has been voluntarily limited to an annual rate of 0.90% of average daily net
assets.
The declaration of a voluntary management fee or expense limitation in any year
does not bind the Manager to declare future expense limitations with respect to
these Funds. These limitations may be terminated at any time.
(2) These Funds have entered into agreements with brokers whereby brokers rebate
a portion of commissions. Had these amounts been treated as reductions of
expenses, the total annual fund operating expense ratios would have been
2.19% for Select Emerging Market Fund, 0.92% for the Select Aggressive
Growth Fund, 1.02% for the Select Capital Appreciation Fund, 0.94% for the
Select Value Opportunity Fund, 1.01% for the Select International Equity
Fund, 0.84% for the Select Growth Fund, 1.14% for the Select Strategic
Growth Fund, and 0.70% for the Select Growth and Income Fund.
Example
This Example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
Fund 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Select Emerging Markets Fund $254 $781 $1,334 $2,840
- --------------------------------------------------------------------------------
Select Aggressive Growth Fund $95 $297 $515 $1,143
- --------------------------------------------------------------------------------
Select Capital Appreciation Fund $104 $325 $563 $1,246
- --------------------------------------------------------------------------------
Select Value Opportunity Fund $99 $309 $536 $1,189
- --------------------------------------------------------------------------------
Select International Equity Fund $102 $318 $552 $1,223
- --------------------------------------------------------------------------------
Select Growth Fund $86 $269 $467 $1,039
- --------------------------------------------------------------------------------
Select Strategic Growth Fund $166 $515 $887 $1,933
- --------------------------------------------------------------------------------
Select Growth and Income Fund $73 $228 $398 $887
- --------------------------------------------------------------------------------
Select Income Fund $64 $200 $349 $781
- --------------------------------------------------------------------------------
Money Market Fund $32 $101 $176 $397
- --------------------------------------------------------------------------------
- --------------------------
Allmerica Investment Trust
15
<PAGE>
[GRAPHIC APPEARS HERE] Description of Principal Investment Risks
The following is a summary of the principal risks of investing in a Fund and the
factors likely to cause the value of your investment in the Fund to decline. The
principal risks applicable to each Fund are identified under "Fund Summaries".
There are also many factors that could cause the value of your investment in a
Fund to decline which are not described here. It is important to remember that
there is no guarantee that the Funds will achieve their investment objective,
and an investor in any of the Funds could lose money.
Company Risk
A Fund's equity and fixed income investments in a company often fluctuate based
on:
. the firm's actual and anticipated earnings,
. changes in management, product offerings and overall financial strength and
. the potential for takeovers and acquisitions.
This is due to the fact that prices of securities react to the fiscal and
business conditions of the company that issued the securities. Factors affecting
a company's particular industry, such as increased production costs, also may
affect the value of its securities.
Smaller companies with market capitalizations of less than $1 billion or so are
more likely than larger companies to have limited products lines or smaller
markets for their goods and services. Small company stocks may not trade very
actively, and their prices may fluctuate more than stocks of other companies as
a result of lower liquidity. They may depend on a small or inexperienced
management group. Stocks of smaller companies also may be more vulnerable to
negative changes than stocks of larger companies.
Credit Risk
Credit risk is the risk that the issuer of a fixed income security will not be
able to pay principal and interest when due. There are different levels of
credit risk. Funds that invest in lower-rated securities have higher levels of
credit risk. Lower-rated or unrated securities of equivalent quality, generally
known as "junk bonds", have very high levels of credit risk. "Junk bonds" are
considered to be speculative in their capacity to pay interest and repay
principal. The price of a fixed income security can be expected to fall if the
issuer defaults on its obligation to pay principal or interest, the rating
agencies downgrade the issuer's credit rating or there is negative news that
affects the market's perception of the issuer's credit risk.
Currency Risk
This is the risk that the value of a Fund's investments may decline due to
fluctuations in exchange rates between the U.S. dollar and foreign currencies.
Funds that invest in securities denominated in or are receiving revenues in
foreign currencies are subject to currency risk. There is often a greater risk
of currency fluctuations and devaluations in emerging markets countries.
Derivatives Risk
A Fund may use derivatives to hedge against an opposite position that the Fund
also holds. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. When a Fund uses derivatives to hedge, it takes the risk that
changes in the value of the derivative will not match those of the asset being
hedged. Incomplete correlation can result in unanticipated losses. A Fund may
also use derivatives as an investment vehicle to gain market exposure. Gains or
losses from derivative investments may be substantially greater than the
derivative's original cost. When a Fund uses derivatives, it is also subject to
the risk that the other party to the agreement will not be able to perform.
Additional risks associated with derivatives include mispricing and improper
valuation.
--------------------------
Allmerica Investment Trust
16
<PAGE>
Emerging Markets Risk
Investments in emerging markets securities involve all of the risks of
investments in foreign securities, and also have additional risks. The markets
of developing countries have been more volatile than the markets of developed
countries with more mature economies. Many emerging markets companies in the
early stages of development are dependent on a small number of products and lack
substantial capital reserves. In addition, emerging markets often have less
developed legal and financial systems. These markets often have provided
significantly higher or lower rates of return than developed markets and usually
carry higher risks to investors than securities of companies in developed
countries.
Foreign Investment Risk
Investing in foreign securities involves risks relating to political, social and
economic developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and interest,
limitations on the use or transfer of portfolio assets, and political or social
instability. In the event of nationalization, expropriation or other
confiscation, a Fund could lose its entire investment. Funds investing in
foreign securities may experience rapid changes in value. One reason for this
volatility is that the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. Enforcing legal rights may be difficult, costly and slow in
foreign countries. Also, foreign companies may not be subject to governmental
supervision or accounting standards comparable to those applicable to U.S.
companies, and there may be less public information about their operations.
The conversion of certain European currencies to the "euro" may present
additional risks to those Funds exposed to such currencies.
Interest Rate Risk
When interest rates rise, the prices of fixed income securities in a Fund's
portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Fund's portfolio will generally rise. Even
Funds that invest in the highest quality debt securities are subject to interest
rate risk. Interest rate risk usually will affect the price of a fixed income
security more if the security has a longer maturity because changes in interest
rates are increasingly difficult to predict over longer periods of time.
Fixed income securities with longer maturities will therefore be more volatile
than other fixed income securities with shorter maturities.
Investment Management Risk
Investment management risk is the risk that a Fund does not achieve its
investment objective, even though the Sub-Adviser uses various investment
strategies and techniques.
Liquidity Risk
This is the risk that a Fund will not be able to sell a security at a reasonable
price because there are too few people who actively buy and sell, or trade, that
security on a regular basis. Liquidity risk increases for Funds investing in
foreign investments (especially emerging markets securities), smaller companies,
lower credit quality bonds (also called "junk bonds"), restricted securities,
over-the-counter securities and derivatives.
Market Risk
This is the risk that the price of a security held by a Fund will fall due to
changing economic, political or market conditions or to factors affecting
investor psychology.
Prepayment Risk
While mortgage-backed securities may have a stated maturity, their expected
maturities may vary when interest rates rise or fall. When interest rates fall,
homeowners are more likely to prepay their mortgage loans which may result in an
unforeseen loss of future interest income to a Fund. Also, because prepayments
increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed income securities when interest rates
fall.
- --------------------------
Allmerica Investment Trust
17
<PAGE>
[GRAPHIC APPEARS HERE] Other Investment Strategies
- --------------------------------------------------------------------------------
The Fund Summaries starting on page 3 describe the investment objective and the
principal investment strategies and risks of each Fund. The Funds may at times
use the following investment strategies. Attached as an Appendix is a chart with
a listing of various investment techniques and strategies that the Sub-Advisers
of the Funds may utilize. A Fund may decide that it is in the best interests of
shareholders to make changes to its investment objective and strategies
described in this Prospectus. These investment objectives and strategies may be
changed with the approval of the Board of Trustees, but without shareholder
approval.
Derivative Investments. (applicable to each Fund except the Money Market Fund)
Instead of investing directly in the types of portfolio securities described in
the Summary, each Fund, except the Money Market Fund, may buy or sell a variety
of "derivative" investments to gain exposure to particular securities or
markets. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. A
Fund's Sub-Adviser will sometimes use derivatives as part of a strategy designed
to reduce other risks and sometimes will use derivatives to enhance returns,
which increases opportunities for gain but also involves greater risk.
Foreign Investments. (applicable to each Fund) Each Fund may invest all or a
substantial part of its portfolio in securities of companies that are located or
primarily doing business in a foreign country. A company is considered to be
located in a foreign 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 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
country or (ii) at least 50% of the company's assets are situated in the
country. A Fund may invest in foreign securities either directly or indirectly
through the use of depositary receipts, such as ADRs. Depositary receipts are
generally issued by banks or trust companies and evidence ownership of
underlying foreign securities. 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 Select Capital
Appreciation Fund and Select International Equity Fund may also purchase foreign
securities through European Depositary Receipts and Global Depositary Receipts.
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) The Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund, and Select
Income Fund may purchase corporate debt securities which are high yield
securities, or "junk bonds" (rated at the time of purchase BB or lower by
Moody's or S&P, or equivalently rated by another rating agency, or unrated but
believed by the Sub-Adviser to have similar quality.) These securities are
considered to be speculative in their capacity to pay interest and repay
principal.
--------------------------
Allmerica Investment Trust
18
<PAGE>
Lending of Securities. (applicable to all Funds) To realize additional income,
the Funds may lend portfolio securities to broker-dealer or financial
institutions in an amount up to 33-1/3% of a Fund's total assets. 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
possible delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral.
Restricted Securities. (applicable to all Funds) The Funds may purchase
securities that are not registered under Federal securities law ("restricted
securities"), but can be offered and sold to certain "qualified institutional
buyers". 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). These limits do not apply if the Board of Trustees determines that
the 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, retains
sufficient oversight and is ultimately responsible for the determinations. This
investment practice could increase the level of illiquidity in a Fund if buyers
lose interest in restricted securities. As a result, a Fund might not be able to
sell these securities when its Sub-Adviser wants to sell, or might have to sell
them at less than fair value. In addition, market quotations for these
securities are less readily available.
Temporary Defensive Strategies. At times a Sub-Adviser may determine that market
conditions make it desirable temporarily to suspend a Fund's normal investment
activities. This is when the Fund may temporarily invest in a variety of
lower-risk securities, such as U.S. Government and other high quality bonds and
short-term debt obligations. Such strategies attempt to reduce changes in the
value of the Fund's shares. The Fund may not achieve its investment objective
while these strategies are in effect.
Frequent Trading. Certain Funds from time to time may engage in active and
frequent trading to achieve their investment objective. Frequent trading
increases transaction costs, which could detract from the Fund's
performance.
- --------------------------
Allmerica Investment Trust 19
<PAGE>
[GRAPHIC APPEARS HERE] Management of the Funds
- --------------------------------------------------------------------------------
The Trust is governed by a Board of Trustees. Allmerica Financial Investment
Management Services, Inc. is the investment Manager of the Trust responsible for
managing the Trust's day-to-day business affairs. The Manager is located at 440
Lincoln Street, Worcester, MA 01653. The Manager and its predecessor, Allmerica
Investment Management Company, Inc., have been managing mutual funds since 1985.
The Manager currently serves as investment manager to one other mutual fund.
Sub-Advisers have been hired to manage the investments of the Funds. The Trust
and Manager have obtained an order of exemption from the SEC that permits the
Manager to enter into and materially amend sub-advisory agreements with non-
affiliated Sub-Advisers without obtaining shareholder approval. The Manager has
ultimate responsibility to oversee Sub-Advisers. The Manager has the ability,
subject to approval of the Trustees, to hire and terminate Sub-Advisers and to
change materially the terms of the Sub-Adviser Agreements, including the
compensation paid to the Sub-Advisers. The Sub-Advisers have been selected by
the Manager and Trustees with the help of BARRA RogersCasey, Inc., a pension
consulting firm. The fees earned by each Sub-Adviser and BARRA RogersCasey are
paid by the Manager. The performance by the Sub-Advisers is reviewed quarterly
by a committee of the Board of Trustees, with assistance from BARRA
RogersCasey.
The following table provides information about each Fund's Sub-Adviser:
<TABLE>
<CAPTION>
Fund Name,
Sub-Adviser Name and Address Experience
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Select Emerging Markets Fund Organized in 1980 and has $27.1 billion assets
Schroder Capital Management under management as of December 31, 1998.
International Inc. Provides global equity and fixed income
787 Seventh Avenue management services to mutual funds and
New York, NY 10019 other institutional investors.
-----------------------------------------------------------------------------------------------------------------
Select Aggressive Growth Fund Has over $31 billion assets under management as of January
Nicholas-Applegate Capital Management, L.P. 21, 1999. Founded in 1984. Clients include employee benefit
600 West Broadway, Suite 2900 and retirement plans, foundations, investment companies and
San Diego, CA 92101 individuals.
-----------------------------------------------------------------------------------------------------------------
Select Capital Appreciation Fund Manages with its affiliates assets totaling $148 billion as
T. Rowe Price Associates, Inc. of December 31, 1998 for seven million individual and
100 East Pratt Street institutional investor accounts.
Baltimore, MD 21202 Founded in 1937.
-----------------------------------------------------------------------------------------------------------------
Select Value Opportunity Fund Established in 1973. Over $4.3 billion assets under
Cramer Rosenthal McGlynn, LLC management as of December 31, 1998. Provides investment
707 Westchester Avenue advice to mutual funds, individuals, government agencies,
White Plains, NY 10604 pension plans and trusts.
-----------------------------------------------------------------------------------------------------------------
</TABLE>
----------------------------
20 Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
Fund Name,
Sub-Adviser Name and Address Experience
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
Select International Equity Fund Managed over $38 billion in global securities as of December
Bank of Ireland Asset Management (U.S.) Ltd. 31, 1998. Founded in 1966. Provides international investment
26 Fitzwilliam Place, Dublin 2, management services.
Ireland and 20 Horseneck Lane
Greenwich, CT 06830
-----------------------------------------------------------------------------------------------------------------------
Select Growth Fund As of December 31, 1998, $294 billion assets under
Putnam Investment Management, Inc. management, including affiliates. Investment manager of
One Post Office Square mutual funds and other clients since 1937.
Boston, MA 02109
-----------------------------------------------------------------------------------------------------------------------
Select Strategic Growth Fund Began operations in 1973. Manages portfolios
Cambiar Investors, Inc. for corporations, pension plans and financial
8400 East Prentice Avenue institutions. As of December 31, 1998, $2.3
Suite 460 billion assets under management.
Englewood, CO 80111
-----------------------------------------------------------------------------------------------------------------------
Select Growth and Income Fund Incorporated in 1984. With affiliates, over $300 billion
J.P. Morgan Investment Management Inc. assets under management as of December 31, 1998. Serves as
522 Fifth Avenue investment adviser for employee benefit plans and other
New York, NY 10036 institutional assets, as well as mutual funds and variable
annuities.
-----------------------------------------------------------------------------------------------------------------------
Select Income Fund Founded in 1933. Had $46 billion in assets under management
Standish, Ayer & Wood, Inc. as of December 31, 1998. Manages portfolios for pension
One Financial Center plans, financial institutions and endowment and foundation
Boston, MA 02111 funds.
-----------------------------------------------------------------------------------------------------------------------
Money Market Fund Incorporated in 1993. Had $13.2 billion assets under management
Allmerica Asset Management, Inc. as of December 31, 1998. Serves as investment adviser to
440 Lincoln Street investment companies and affiliated insurance company
Worcester, MA 01653 accounts.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
For a sample listing of certain of the Sub-Advisers' clients, see "Investment
Management and Other Services" in the SAI.
- ---------------------------
Allmerica Investment Trust 21
<PAGE>
The following individuals or groups of individuals are primarily responsible for
the day-to-day management of the Funds' portfolios:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Emerging Markets Fund John A. Troiano, Chief Executive 1981 - Present Joined SCMI as an investment
Schroder Capital Management and Chairman of Emerging analyst specializing in
International Inc. ("SCMI") Markets Committee engineering and technology;
in 1989 set up SCMI's Latin
American team.
Mark Bridgeman, 1990 - Present Joined SCMI in 1990 and is
First Vice President Fund Manager specializing in
African markets.
Heather F. Crighton, Director 1993 - Present Joined SCMI in 1993 as Fund
Manager specializing in
Asian emerging markets.
- ---------------------------------------------------------------------------------------------------------------------------
Select Aggressive Growth Fund Lawrence S. Speidell, Partner 1994 - Present Director of Global/Systematic
Nicholas-Applegate Capital Portfolio Management and
Management, L.P. ("NACM") Research at NACM. Prior
to joining NACM, he spent
ten years with Batterymarch
Financial Management.
John J. Kane, Partner 1994 - Present Senior Portfolio Manager for
the U.S. Systematic portfolios
at NACM. Prior to joining
NACM in 1994, he was
employed by ARCO Invest-
Management Company and General
Electric.
Mark W. Stuckelman, 1995 - Present Portfolio Manager for the
Portfolio Manager U.S. Systematic portfolios
at NACM. Prior to joining
NACM, he was employed for
five years with Wells Fargo
Bank, Fidelity Management
Trust Co., and BARRA, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
Select Capital Appreciation Fund Brian W.H. Berghuis, 1985 - Present He has fifteen years
T. Rowe Price Associates, Inc. Chartered Financial Analyst experience in equity research
("T. Rowe Price") and portfolio management.
He is chairman of the investment
team for the Fund.
John F. Wakeman, Research 1989 - Present He spent nine years with
Analyst & Portfolio Manager T. Rowe Price as a research
analyst and portfolio manager
and has eleven years' experi-
ence in equity research.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------------------
22 Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Capital Appreciation Fund Marc L. Baylin, Chartered 1993 - Present He has seven years of
continued Financial Analyst investment experience in
equity research and has been
with T. Rowe Price for the past
five years as a research analyst.
- ---------------------------------------------------------------------------------------------------------------------------------
Select Value Opportunity Fund Ronald H. McGlynn, CEO and 1973 - Present He joined Cramer Rosenthal
Cramer Rosenthal McGlynn, President of Cramer Rosenthal in 1973, has 29 years of
LLC ("Cramer Rosenthal") investment experience and
serves as Co-Chief Investment
Officer and Portfolio Manager.
Jay B. Abramson, Executive 1985 - Present He has been with Cramer
Vice President and Director Rosenthal since 1985 and his
of Research and Co-Chief overall responsibility is for
Investment Officer investment research.
- ---------------------------------------------------------------------------------------------------------------------------------
Select International Equity Fund Christopher Reilly, 1980 - Present Since 1985, he has had
Bank of Ireland Asset Management Chief Investment Officer overall responsibility for asset
(U.S.) Limited ("BIAM") management. He previously
worked in the United
Kingdom in stockbrokering
and investment management.
Denis Donovan, Director- 1985 - Present Prior to joining BIAM, he
Portfolio Manager spent more than 13 years in
the money market and foreign
exchange operations of the
Central Bank of Ireland. At
present, he has overall respon-
sibility for the portfolio
management function for all
of BIAM's client base.
Peter Wood, Senior 1985 - Present Prior to 1985, he spent five
Portfolio Manager years with another leading
investment management firm.
He is now responsible for
portfolio construction at BIAM.
Jane Neill, Senior Equity Analyst 1994 - Present Previously, she was Chief
Investment Officer with
another leading Irish invest-
ment management firm.
- ---------------------------------------------------------------------------------------------------------------------------------
Select Growth Fund C. Beth Cotner, CFA, 1995 - Present Prior to 1995, Ms. Cotner was
Putnam Investment Chief Investment Officer Executive Vice President at
Management, Inc. ("Putnam") Kemper Financial Services.
Manuel Weiss, CFA, 1987 - Present He has been an investment
Senior Vice President professional with Putnam
since 1987.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
Allmerica Investment Trust 23
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Strategic Growth Fund Michael S. Barish, 1973 - Present He founded Cambiar in 1973
Cambiar Investors, Inc. CFA and President and has 36 years of investment
("Cambiar") experience. He is a generalist
and is responsible for the
consumer goods and health-
care securities.
Kathleen M. McCarty, 1987 - Present Prior to 1987, Ms. McCarty
CFA, Senior Vice President was employed by Dain
Bosworth as Vice President
of Research. She is responsible
for financial services,
communication services and
utilities securities.
Michael J. Gardner, 1995 - Present Prior to 1995, Mr. Gardner was
CFA and Vice President employed by Simmons & Co.
He is responsible for energy
and capital goods securities.
Brian M. Barish, 1997 - Present Prior to joining Cambiar in
CFA and Vice President 1997, Mr. Barish was Vice
President at Lazard Freres &
Co. He is responsible for
technology-software, consumer
goods, transportation
and international securities.
- -----------------------------------------------------------------------------------------------------------------------------
Select Growth and Income Fund Bernard A. Kroll, Vice President 1996-Present Prior to joining J.P. Morgan
J.P. Morgan Investment in 1996, Mr. Kroll was an
Management Inc. ("J.P. Morgan") equity derivatives specialist
at Goldman Sachs & Co.,
founded his own software
development firm and options
broker-dealer, and managed
several derivatives businesses
at Kidder, Peabody & Co.
He is a portfolio manager in
the Structured Equity Group.
Timothy J. Devlin, Vice President 1996-Present Prior to joining J.P. Morgan
in 1996, Mr. Devlin was an
equity portfolio manager at
Mitchell Hutchins Asset
Management Inc. He is a
portfolio manager in the
Structured Equity Group.
James C. Wiess, Vice President 1992-Present He is a portfolio manager in
the Structured Equity Group
and has been at J.P. Morgan
since 1992.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-----------------------------
24 Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Income Fund Edward H. Ladd, 1962 - Present He is the firm's economist and
Standish, Ayer & Wood, Inc. ("SAW") Chairman and Managing Director also assists clients in establish-
ing investment strategies.
Mr. Ladd is a Director of
the Federal Reserve Bank of
Boston, New England Electric
System, Greylock Management
and Harvard Management
Corp. and a member of SAW's
Executive Committee.
George W. Noyes, President and 1970 - Present He directs bond policy
Managing Director 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, 1974 - Present She manages fixed-income
Managing Director 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 1984 - Present He 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 1976 - Present She is head of the tax-
and Director exempt area and manages
insurance and pension fund
accounts. Ms. Furman
currently serves on SAW's
Executive Committee.
- ----------------------------------------------------------------------------------------------------------------------------------
Money Market Fund John C. Donohue, Vice President 1995 - Present He was a portfolio manager
Allmerica Asset Management, Inc. at CS First Boston Investment
("AAM") Management prior to joining
AAM.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------
Allmerica Investment Trust 25
<PAGE>
For the fiscal year ended December 31, 1998, the Funds paid the Manager the fees
shown in the table below:
Fee (as a percentage of
Fund average net assets)
- ------------------------------------------------------------
Select Emerging Markets Fund* 1.35%
- ------------------------------------------------------------
Select Aggressive Growth Fund 0.88%
- ------------------------------------------------------------
Select Capital Appreciation Fund 0.94%
- ------------------------------------------------------------
Select Value Opportunity Fund* 0.91%
- ------------------------------------------------------------
Select International Equity Fund 0.90%
- ------------------------------------------------------------
Select Growth Fund 0.82%
- ------------------------------------------------------------
Select Strategic Growth Fund* 0.85%
- ------------------------------------------------------------
Select Growth and Income Fund 0.68%
- ------------------------------------------------------------
Select Income Fund 0.54%
- ------------------------------------------------------------
Money Market Fund 0.26%
- ------------------------------------------------------------
* Amount does not reflect a voluntary expense limitation currently in effect for
the Select Emerging Markets Fund, Select Value Opportunity Fund, and Select
Strategic Growth Fund.
For the fiscal year ended December 31, 1998, the Manager paid each Sub-Adviser
aggregate fees as set forth below:
<TABLE>
<CAPTION>
Fee (as a percentage of
Sub-Adviser average net assets)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Schroder Capital Management International Inc.(1) (Select Emerging Markets Fund) 1.00%
- -------------------------------------------------------------------------------------------------------
Nicholas-Applegate Capital Management, L.P. (Select Aggressive Growth Fund) 0.51%
- -------------------------------------------------------------------------------------------------------
T. Rowe Price Associates, Inc.* (Select Capital Appreciation Fund) 0.52%
- -------------------------------------------------------------------------------------------------------
Cramer Rosenthal McGlynn, LLC (Select Value Opportunity Fund) 0.54%
- -------------------------------------------------------------------------------------------------------
Bank of Ireland Asset Management (U.S.) Limited (Select International Equity Fund) 0.33%
- -------------------------------------------------------------------------------------------------------
Putnam Investment Management, Inc. (Select Growth Fund) 0.33%
- -------------------------------------------------------------------------------------------------------
Cambiar Investors, Inc.(2) (Select Strategic Growth Fund) 0.50%
- -------------------------------------------------------------------------------------------------------
John A. Levin & Co., Inc.** (Select Growth and Income Fund) 0.30%
- -------------------------------------------------------------------------------------------------------
Standish, Ayer & Wood, Inc. (Select Income Fund) 0.20%
- -------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Money Market Fund) 0.10%
- -------------------------------------------------------------------------------------------------------
</TABLE>
----------------------------
26 Allmerica Investment Trust
<PAGE>
(1) The Select Emerging Markets Fund began operations on February 20, 1998. For
its services, Schroder Capital Management International Inc. 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%
- -------------------------------------------------
(2) The Select Strategic Growth Fund began operations on February 20, 1998. For
its services, Cambiar Investors, Inc. will receive a fee computed daily at
an annual rate based on the average daily net assets of the Select Strategic
Growth Fund, 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%
- -------------------------------------------------
* T. Rowe Price Associates, Inc. assumed Sub-Adviser responsibilities from
Janus Capital Corporation on April 1, 1998. Janus Capital Corporation served
as Sub-Adviser of the Select Capital Appreciation Fund from April 28, 1995
to March 31, 1998. Janus Capital Corporation received a fee computed daily
at an annual rate based on the average daily net assets of the Select
Capital Appreciation Fund, based on 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%
- -------------------------------------------------
* T. Rowe Price Associates, Inc. receives a fee computed daily at an annual
rate of 0.50% based on the average daily net assets of the Select Capital
Appreciation Fund.
** J.P. Morgan Investment Management Inc. replaced John A. Levin & Co., Inc. as
Sub-Adviser of the Select Growth and Income Fund on April 1, 1999. John A.
Levin & Co., Inc. served as Sub-Adviser of the Select Growth and Income Fund
from September 1, 1994 to March 31, 1999. John A. Levin & Co., Inc. received
a fee computed daily at an annual rate based on the average daily net assets
of the Select Growth and Income Fund, based on the following schedule:
Assets Rate
- -------------------------------------------------
First $100 Million 0.40%
- -------------------------------------------------
Next $200 Million 0.25%
- -------------------------------------------------
Over $300 Million 0.30%
- -------------------------------------------------
J.P. Morgan Investment Management Inc. receives a fee computed daily at an
annual rate based on the average daily net assets of the Select Growth and
Income Fund, based on the following schedule:
Assets Rate
- -------------------------------------------------
First $500 Million 0.30%
- -------------------------------------------------
Next $500 Million 0.25%
- -------------------------------------------------
Over $1 Billion 0.20%
- -------------------------------------------------
- ---------------------------- 27
Allmerica Investment Trust
<PAGE>
Pricing of Fund Shares
- --------------------------------------------------------------------------------
The Funds sell and redeem their shares at a price equal to their net asset value
("NAV") without paying any sales or redemption charges. The NAV of a share is
computed by adding the current value of all the Fund's assets, subtracting its
liabilities and dividing by the number of its outstanding shares. NAV is
computed once daily at the close of regular trading on the New York Stock
Exchange each day the Exchange is open - normally 4:00 p.m. Eastern Time. Orders
for the purchase or redemption of shares are filled at the next NAV computed
after an order is received by the Fund. The Funds do not accept orders or
compute their NAV's on days when the Exchange is closed.
Equity securities are valued based on market value if market quotations are
readily available. In other cases, they are valued at their fair value following
procedures approved by the Trustees. Debt securities (other than short-term
obligations) normally are valued based on pricing service valuations. All
securities of the Money Market Fund are valued at amortized cost. Debt
obligations in the other Funds with a remaining maturity of 60 days or less are
valued at amortized cost when amortized cost is considered to represent fair
value. Values for short-term obligations of the other Funds having a remaining
maturity of more than 60 days are based upon readily available market
quotations.
Certain foreign markets may be open on days when the Funds do not accept orders
or price their shares. As a result, the NAV of a Fund's shares may change on
days when shareholders will not be able to buy or sell shares.
Purchase and Redemption of Shares
- --------------------------------------------------------------------------------
Shares of the Funds currently are purchased only by Separate Accounts which are
the funding mechanisms for variable annuity contracts and variable life
insurance policies. The Distributor, Allmerica Investments, Inc., at its
expense, may provide promotional incentives to dealers who sell variable annuity
contracts which invest in the Funds. The Trust has obtained an exemptive order
from the Securities and Exchange Commission to permit Fund shares to be sold to
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans. Material irreconcilable conflicts may arise among
various insurance policy owners and plan participants. The Trustees will monitor
events to identify any material conflicts and determine if any action should be
taken to resolve such conflict.
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. See the prospectuses for the variable
insurance products.
Normally, redemption payments will be made within seven days after the Trust
receives a written redemption request. Redemptions may be suspended when trading
on the New York Stock Exchange is restricted or when permitted by the Securities
and Exchange Commission.
--------------------------
Allmerica Investment Trust
28
<PAGE>
Distributions and Taxes
- --------------------------------------------------------------------------------
Distributions
Each Fund pays out substantially all of its net investment income and net
capital gains to shareholders each year. Net investment income is 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 Accounts.
Taxes
The Trust seeks 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. Under current tax law, dividend or capital gain
distributions from any Fund are not currently taxable when left to accumulate
within a variable annuity or variable life insurance contract. Withdrawals from
a contract generally are subject to ordinary income tax and, in many cases, to
an additional 10% penalty tax on withdrawals before age 591/2. Tax consequences
to investors in the Separate Accounts which are invested in the Trust are
described in more detail in the prospectuses for those accounts.
Year 2000
- --------------------------------------------------------------------------------
Some computer software cannot distinguish between dates in the year 2000 and
dates in the year 1900 because of the way that dates are encoded and calculated.
The services provided to the Trust by the Manager, Sub-Advisers, the Custodian
and other external service providers depend on the proper functioning of their
computer software. Failure to correct or replace any non-compliant software
could adversely affect, among other things, the handling of securities trades,
the payment of interest and dividends, the pricing of the Trust's securities and
of the Trust's shares, and account services. The Trust has requested information
from its service providers with respect to their plans to be Year 2000
compliant. The Trust has been advised by its service providers that they either
are Year 2000 compliant now or expect to be compliant prior to December 31,
1999. However, there can be no guarantee that the Trust's operations will not be
adversely affected by non-compliant systems of its service providers or of other
third parties which interact with such service providers. The Year 2000 problem
could also have an adverse effect on issuers, including foreign issuers, whose
securities are owned by the Funds, potentially decreasing the value of such
securities.
- --------------------------
Allmerica Investment Trust
[GRAPHIC APPEARS HERE] Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the tables represent the rate that an investor
would have earned or lost on an investment in a Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information or annual
report, which is available upon request.
29
<PAGE>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
<TABLE>
<CAPTION>
-------Income from Investment Operations----- --------------------Less Distributions--------------------
Net Realized Net
Net and Distributions Increase
Asset Net Unrealized Dividends from Net (Decrease)
Value Investment Gain (Loss) Total from from Net Realized Distributions in
Year Ended Beginning Income on Investment Investment Capital in Return of Total Net Asset
December 31, of Year (Loss)(2) Investments Operations Income Gains Excess Capital Distributions Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select Emerging
Markets Fund (1)
1998(D) $1.000 $0.006 $(0.221) $(0.215) $(0.001) $ - $ - $ - $(0.001) $(0.216)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Aggressive
Growth Fund
1998 2.225 (0.008) 0.243 0.235 - - - - - 0.235
1997 2.037 (0.009) 0.387 0.378 - (0.182) (0.008)(3) - (0.190) 0.188
1996 1.848 (0.009) 0.351 0.342 - (0.153) - - (0.153) 0.189
1995 1.397 (0.001) 0.452 0.451 - - - - - 0.451
1994 1.431 (0.002) (0.032) (0.034) - - - - - (0.034)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Capital
Appreciation Fund(1)
1998 1.698 (0.006) 0.241 0.235 - (0.293) - - (0.293) (0.058)
1997 1.485 (0.005) 0.218 0.213 - - - - - 0.213
1996 1.369 (0.003) 0.124 0.121 - (0.005) - - (0.005) 0.116
1995 1.000 (0.001) 0.397 0.396 - (0.027) - - (0.027) 0.369
- -----------------------------------------------------------------------------------------------------------------------------------
Select Value
Opportunity Fund(1)
1998 1.626 0.014 0.066 0.080 (0.014) (0.006) - - (0.020) 0.060
1997 1.511 0.010 0.364 0.374 (0.010) (0.249) - - (0.259) 0.115
1996 1.238 0.011 0.342 0.353 (0.011) (0.069) - - (0.080) 0.273
1995 1.089 0.009 0.183 0.192 (0.009) (0.033) (0.001)(3) - (0.043) 0.149
1994 1.170 0.005 (0.081) (0.076) (0.005) - - - (0.005) (0.081)
- -----------------------------------------------------------------------------------------------------------------------------------
Select International
Equity Fund(1)
1998 1.341 0.014 0.207 0.221 (0.020) - - - (0.020) 0.201
1997 1.356 0.015 0.049 0.064 (0.019) (0.046) (0.014)(4) - (0.079) (0.015)
1996 1.136 0.011 0.238 0.249 (0.012) (0.003) (0.014)(4) - (0.029) 0.220
1995 0.963 0.013 0.176 0.189 (0.011) (0.005) - - (0.016) 0.173
1994 1.000 0.003 (0.038) (0.035) (0.001) (0.001) - - (0.002) (0.037)
- -----------------------------------------------------------------------------------------------------------------------------------
</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 period ended December 31, 1998
(1) The Select Emerging Markets Fund commenced operations on February 20, 1998.
The Select Capital Appreciation Fund commenced operations on April 28, 1995
and changed sub-advisers on April 1, 1998. The Select Value Opportunity Fund
changed sub-advisers on January 1, 1997. The Select International Equity
Fund commenced operations on May 2, 1994.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.004 in 1998 for Select Emerging
Markets Fund; $(0.009) in 1998 and $(0.010) in 1997 for Select Aggressive
Growth Fund; $(0.006) in 1998, $(0.001) in 1995 for Select Capital
Appreciation Fund; $0.013 in 1998, $0.009 in 1997, $0.010 in 1996 and $0.005
in 1994 for Select Value Opportunity Fund; and $0.014 in 1998, $0.015 in
1997, $0.011 in 1996 and $0.002 in 1994 for Select International Equity
Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
--------------------------
Allmerica Investment Trust
30
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
---------------Ratios To Average Net Assets---------------
Net Asset Net Assets
Value End of Net
Year Ended End of Total Period Investment Operating Expenses
December 31, Period Return (000's) Income (Loss) (A) (B) (C)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Select Emerging
Markets Fund (1)
1998(D) $0.784 (21.46)%** $20,873 0.96%* 2.19%* 2.19%* 2.54%*
- -----------------------------------------------------------------------------------------------------------------
Select Aggressive
Growth Fund
1998 2.460 10.56% 752,741 (0.36)% 0.92% 0.95% 0.95%
1997 2.225 18.71% 604,123 (0.45)% 0.99% 1.04% 1.04%
1996 2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08%
1995 1.848 32.28% 254,872 (0.07)% 1.09% - 1.09%
1994 1.397 (2.31)% 136,573 (0.21)% 1.16% - 1.16%
- ------------------------------------------------------------------------------------------------------------------
Select Capital
Appreciation Fund
1998 1.640 13.88% 310,582 (0.47)% 1.02% 1.04% 1.04%
1997 1.698 14.28% 240,526 (0.38)% 1.13% 1.13% 1.13%
1996 1.485 8.80% 142,680 (0.32)% 1.13% 1.13% 1.13%
1995 1.369 39.56%** 41,376 (0.25)%* 1.35%* - 1.42%*
- -----------------------------------------------------------------------------------------------------------------
Select Value
Opportunity Fund(1)
1998 1.686 4.87% 268,405 0.95% 0.94% 0.98% 0.99%
1997 1.626 24.85% 202,139 0.73% 0.98% 1.04% 1.06%
1996 1.511 28.53% 113,969 0.91% 0.95% 0.97% 0.97%
1995 1.238 17.60% 64,575 0.86% 1.01% - 1.01%
1994 1.089 (6.51)% 41,342 0.64% 1.08% - 1.09%
- -----------------------------------------------------------------------------------------------------------------
Select International
Equity Fund(1)
1998 1.542 16.48% 505,553 0.99% 1.01% 1.02% 1.02%
1997 1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17%
1996 1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23%
1995 1.136 19.63% 104,312 1.68% 1.24% - 1.24%
1994 0.963 (3.49)%** 40,498 0.87%* 1.50%* - 1.78%*
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
Portfolio
Year Ended Management Fee Turnover
December 31, Gross Net Rate
- --------------------------------------------------------
<S> <C> <C> <C>
Select Emerging
Markets Fund (1)
1998(D) 1.35%* 1.00%* 62%
- --------------------------------------------------------
Select Aggressive
Growth Fund
1998 0.88% 0.88% 99%
1997 0.95% 0.95% 95%
1996 1.00% 1.00% 113%
1995 1.00% 1.00% 104%
1994 1.00% 1.00% 100%
- --------------------------------------------------------
Select Capital
Appreciation Fund
1998 0.94% 0.94% 141%
1997 0.98% 0.98% 133%
1996 1.00% 1.00% 98%
1995 1.00%* 0.93%* 95%
- --------------------------------------------------------
Select Value
Opportunity Fund(1)
1998 0.91% 0.90% 73%
1997 0.92% 0.90% 110%
1996 0.85% 0.85% 20%
1995 0.85% 0.85% 17%
1994 0.85% 0.84% 4%
- --------------------------------------------------------
Select International
Equity Fund(1)
1998 0.90% 0.90% 27%
1997 0.97% 0.97% 20%
1996 1.00% 1.00% 18%
1995 1.00% 1.00% 24%
1994 1.00%* 0.72%* 19%
- --------------------------------------------------------
</TABLE>
- ---------------------------
Allmerica Investment Trust
31
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- ------------ Income from Investment Operations --------------------- -----------------Less Distributions----------------
Net Realized Net
Net and Distributions Increase
Asset Net Unrealized Dividends from Net (Decrease)
Value Investment Gain (Loss) Total from from Net Realized Distributions in
Year Ended Beginning Income on Investment Investment Capital in Return of Total Net Asset
December 31, of Year (Loss)(2) Investments Operations Income Gains Excess Capital Distributions Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select Growth Fund(1)
1998 $1.811 $0.002 $0.638 $0.640 $ - (3) $(0.023) $ - $ - $(0.023) $0.617
1997 1.430 0.006 0.480 0.486 (0.006) (0.099) - - (0.105) 0.381
1996 1.369 0.005 0.297 0.302 (0.005) (0.236) - - (0.241) 0.061
1995 1.099 - 0.270 0.270 - - - - - 0.270
1994 1.119 0.003 (0.020) (0.017) (0.003) - - - (0.003) (0.020)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Strategic
Growth Fund(1)
1998(D) 1.000 0.002 (0.027) (0.025) (0.002) - - - (0.002) (0.027)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Growth and
Income Fund(1)
1998 1.552 0.020 0.233 0.253 (0.020) (0.006) - - (0.026) 0.227
1997 1.405 0.020 0.293 0.313 (0.020) (0.146) - - (0.166) 0.147
1996 1.268 0.020 0.246 0.266 (0.020) (0.109) - - (0.129) 0.137
1995 1.027 0.019 0.290 0.309 (0.019) (0.049) - - (0.068) 0.241
1994 1.069 0.025 (0.018) 0.007 (0.025) (0.017) (0.007)(4) - (0.049) (0.042)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Income Fund
1998 1.022 0.059 0.010 0.069 (0.059) - - - (0.059) 0.010
1997 0.995 0.060 0.028 0.088 (0.061) - - - (0.061) 0.027
1996 1.024 0.061 (0.029) 0.032 (0.061) - - - (0.061) (0.029)
1995 0.930 0.060 0.095 0.155 (0.060) - (0.001)(5) - (0.061) 0.094
1994 1.035 0.055 (0.105) (0.050) (0.055) - - - (0.055) (0.105)
- -----------------------------------------------------------------------------------------------------------------------------------
Money Market
Fund
1998 1.000 0.054 - 0.054 (0.054) - - - (0.054) -
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) -
- -----------------------------------------------------------------------------------------------------------------------------------
</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 period ended December 31,
1998
(1) The Select Growth Fund changed sub-advisers on July 1, 1996. The Select
Strategic Growth Fund commenced operations on February 20, 1998. The Select
Growth and Income Fund changed sub-advisers on April 1, 1999.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.001 in 1998, $0.006 in 1997 and
$0.005 in 1996 for Select Growth Fund; $(0.001) in 1998 for Select Strategic
Growth Fund; $0.019 in 1998, $0.019 in 1997 and $0.019 in 1996 for Select
Growth and Income Fund; and $0.060 in 1995 and $0.055 in 1994 for Select
Income Fund.
(3) Dividends from net investment income are less than $0.0005.
(4) Distributions in excess of net realized capital gains.
(5) Distributions in excess of net investment income.
------------------------------
Allmerica Investment Trust
32
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
----------------Ratios To Average Net Assets-------------
Net Asset Net Assets
Value End of Net
Year Ended End of Total Year Investment Operating Expenses
December 31, Year Return (000's) Income (Loss) (A) (B) (C)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Select Growth Fund(1)
1998 $2.428 35.44% $815,390 0.08% 0.85% 0.87% 0.87%
1997 1.811 34.06% 470,356 0.42% 0.91% 0.93% 0.93%
1996 1.430 22.02% 228,551 0.38% 0.92% 0.93% 0.93%
1995 1.369 24.59% 143,125 0.02% 0.97% - 0.97%
1994 1.099 (1.49)% 88,263 0.37% 1.03% - 1.03%
- --------------------------------------------------------------------------------------------------------------
Select Strategic
Growth Fund(1)
1998(D) 0.973 (2.47)%** 14,839 0.41%* 1.14%* 1.20%* 1.66%*
- --------------------------------------------------------------------------------------------------------------
Select Growth and
Income Fund
1998 1.779 16.43% 646,086 1.26% 0.70% 0.73% 0.73%
1997 1.552 22.51% 473,552 1.34% 0.77% 0.80% 0.80%
1996 1.405 21.26% 295,638 1.44% 0.80% 0.83% 0.83%
1995 1.268 30.32% 191,610 1.69% 0.85% - 0.85%
1994 1.027 0.73% 110,213 2.51% 0.91% - 0.91%
- --------------------------------------------------------------------------------------------------------------
Select Income Fund
1998 1.032 6.83% 160,450 5.92% 0.64% 0.64% 0.64%
1997 1.022 9.17% 104,253 6.12% 0.72% 0.72% 0.72%
1996 0.995 3.32% 77,498 6.29% 0.74% 0.74% 0.74%
1995 1.024 16.96% 60,368 6.24% 0.79% - 0.80%
1994 0.930 (4.82)% 40,784 6.07% 0.83% - 0.85%
- --------------------------------------------------------------------------------------------------------------
Money Market
Fund
1998 1.000 5.51% 336,253 5.36% 0.32% 0.32% 0.32%
1997 1.000 5.47% 260,620 5.33% 0.35% 0.35% 0.35%
1996 1.000 5.36% 217,256 5.22% 0.34% 0.34% 0.34%
1995 1.000 5.84% 155,211 5.68% 0.36% - 0.36%
1994 1.000 3.93% 95,991 3.94% 0.45% - 0.45%
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
- ----------------Ratios To Average Net Assets---------
Portfolio
Year Ended Management Fee Turnover
December 31, Gross Net Rate
- ----------------------------------------------------
<S> <C> <C> <C>
Select Growth Fund(1)
1998 0.82% 0.82% 86%
1997 0.85% 0.85% 75%
1996 0.85% 0.85% 159%
1995 0.85% 0.85% 51%
1994 0.85% 0.85% 55%
- ----------------------------------------------------
Select Strategic
Growth Fund(1)
1998(D) 0.85%* 0.39%* 24%
- ----------------------------------------------------
Select Growth and
Income Fund
1998 0.68% 0.68% 112%
1997 0.73% 0.73% 71%
1996 0.75% 0.75% 78%
1995 0.75% 0.75% 112%
1994 0.75% 0.75% 107%
- ----------------------------------------------------
Select Income Fund
1998 0.54% 0.54% 130%
1997 0.59% 0.59% 79%
1996 0.60% 0.60% 108%
1995 0.60% 0.59% 131%
1994 0.60% 0.58% 105%
- ----------------------------------------------------
Money Market
Fund
1998 0.26% 0.26% N/A
1997 0.27% 0.27% N/A
1996 0.28% 0.28% N/A
1995 0.29% 0.29% N/A
1994 0.31% 0.31% N/A
- ----------------------------------------------------
</TABLE>
- -----------------------------
Allmerica Investment Trust
33
<PAGE>
Appendix
[GRAPHIC]
Investment Techniques and Strategies
In managing its portfolios of investments, the Trust may make use of the
following investment techniques and strategies:
Symbols
o Permitted
-- Not Permitted
<TABLE>
<CAPTION>
Select Select Select Select Select
Emerging Aggressive Capital Value International Select
Markets Growth Appreciation Opportunity Equity Growth
Investment Technique/Strategy Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset-Backed Securities -- -- -- -- -- --
Financial Futures Contracts
and Related Options o o o o o o
Foreign Securities o o o o o o
Forward Commitments -- -- o -- -- --
Forward Contracts on Foreign Currencies o -- o -- o o
High Yield Securities o -- o -- -- o
Investments in Money Market Securities o o o o o o
Mortgage-Backed Securities -- -- -- -- -- --
Purchasing Options o o o o o o
Repurchase Agreements o o o o o o
Restricted Securities o o o o o o
Reverse Repurchase Agreements -- -- o -- -- --
Securities Lending o o o o o o
Stand-By Commitments -- -- -- -- -- --
Stripped Mortgage-Backed Securities -- -- -- -- -- --
Swap and Swap-Related Products -- -- o -- -- --
When-Issued Securities o o o o o o
Writing Covered Options o o o o o o
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Select Select
Strategic Growth Select Money
Growth and Income Income Market
Investment Technique/Strategy Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset-Backed Securities -- o o o
Financial Futures Contracts
and Related Options o o o --
Foreign Securities o o o o
Forward Commitments -- -- o o
Forward Contracts on Foreign Currencies -- -- o --
High Yield Securities -- o o --
Investments in Money Market Securities o o o o
Mortgage-Backed Securities -- -- o --
Purchasing Options o o o --
Repurchase Agreements o o o o
Restricted Securities o o o o
Reverse Repurchase Agreements -- -- -- --
Securities Lending o o o o
Stand-By Commitments -- -- o o
Stripped Mortgage-Backed Securities -- -- o --
Swap and Swap-Related Products -- -- -- --
When-Issued Securities o o o o
Writing Covered Options o o o --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-------------------------------
Allmerica Investment Trust
34
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
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
The Trust's Statement of Additional Information ("SAI") includes additional
information about the Funds. The Trust's annual and semi-annual reports to
shareholders include information about the investments of the Funds. The SAI and
the financial statements included in the Fund's most recent annual report to
shareholders are incorporated by reference into this prospectus, which means
they are part of this prospectus for legal purposes. The Trust's annual report
discusses the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year. You may get free
copies of these materials, request other information about a Fund or make
shareholder inquiries by calling 1-800-828-0540.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the Public Reference Room. You may also access reports and other
information about the Trust on the Commission's Internet site at
http://www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-4138.
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street, Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Allmerica Investment Trust
- --------------------------------------------------------------------------------
PROSPECTUS
May 1, 1999
This Prospectus describes the following seven
investment Funds of the Trust which serve as the
underlying investments for insurance related accounts.
Select Aggressive Growth Fund
Select International Equity Fund
Growth Fund
Equity Index Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
This Prospectus explains what you should know about
each of the Funds. Please read it carefully before you
invest.
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.
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved
of these securities or determined that this Prospectus
is adequate or complete. Any representation to the
contrary is a criminal offense.
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Table of Contents
- -------------------------------------------------------------------------------
FUND SUMMARIES................................... 3
Objectives, Strategies and Risks............... 4
Select Aggressive Growth Fund............... 4
Select International Equity Fund............ 5
Growth Fund................................. 6
Equity Index Fund........................... 7
Investment Grade Income Fund................ 8
Government Bond Fund........................ 9
Money Market Fund...........................10
EXPENSE SUMMARY..................................11
DESCRIPTION OF PRINCIPAL INVESTMENT RISKS........13 LEGEND
----------
OTHER INVESTMENT STRATEGIES......................15
Performance
MANAGEMENT OF THE FUNDS..........................17
Investment
PRICING OF FUND SHARES...........................22 Objectives
PURCHASE AND REDEMPTION OF SHARES................22 Financial
Information
DISTRIBUTIONS AND TAXES..........................23
Management
YEAR 2000........................................23 of Fund
FINANCIAL HIGHLIGHTS.............................25 Risk
APPENDIX.........................................30 Investment
Strategies
- -----------------------------
2 Allmerica Investment Trust
<PAGE>
Fund Summaries
- --------------------------------------------------------------------------------
Allmerica Investment Trust provides a broad range of investment options through
separate investment portfolios, or Funds. Shares of the Funds are sold
exclusively to variable annuity and variable life insurance Separate Accounts
and qualified pension and retirement plans.
The investment manager of the Trust is Allmerica Financial Investment Management
Services, Inc. The Manager is responsible for managing the Trust's daily
business and has general responsibility for the management of the investments of
the Funds. The Manager, at its expense, has contracted with investment
Sub-Advisers to manage the investments of the Funds. Each Sub-Adviser has been
selected on the basis of various factors including management experience,
investment techniques and staffing. See "Management of the Funds" for more
information about the Manager and the Sub-Advisers.
The following summaries describe each Fund's investment objective and principal
investment strategies, identify the principal investment risks of investing in
the Fund and provide performance charts for the Fund. Note that any percentage
limitations listed under a Fund's principal investment strategies apply at the
time of investment. The principal risks are discussed in more detail under
"Description of Principal Investment Risks". The bar charts show how the
investment returns of the shares of a Fund have varied in the past 10 years (or
for the life of the Fund if less than 10 years). The table following each bar
chart shows how the Fund's average annual return for the last one, five and ten
years (or for the life of the Fund, if shorter) compare to those of a
broad-based securities market index. Past performance does not necessarily
indicate how the Fund will perform in the future. The bar charts and tables give
some indication of the risks of investing in each Fund by showing changes in the
Fund's performance. The bar charts and tables do not reflect expenses associated
with the variable insurance product that you are purchasing. If those expenses
had been reflected, the performance shown would have been lower.
Allmerica Investment Trust 3
<PAGE>
Objectives, Strategies and Risks
Select Aggressive Growth Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Nicholas-Applegate Capital Management, L.P.
[GRAPHIC] Investment Objective: The Fund seeks above-average capital
appreciation by investing primarily in common stocks of companies
which are believed to have significant potential for capital
appreciation.
[GRAPHIC] Principal Investment Strategies: To pursue this goal, the Fund looks
predominantly for stocks of small and mid-size companies that show
potential for rapid growth. The Fund typically invests in companies
that, because of positive developments affecting the company, offer
the possibility of accelerating earnings. The Sub-Adviser uses
systematic, fundamental research in selecting investments for the
Fund.
Under normal circumstances, the Fund invests at least 65% of its
assets in common stocks, securities convertible into common stocks
and warrants. The Fund also may invest in debt securities and
preferred stocks and up to 25% of its assets in foreign securities
(not including its investments in American Depositary Receipts or
"ADRs").
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1993 .......... 19.51%
1994 .......... -2.31%
1995 .......... 32.28%
1996 .......... 18.55%
1997 .......... 18.71%
1998 .......... 10.56%
During the period shown above the highest quarterly return was 23.18%
for the
quarter ended 12/31/98 and the lowest was (22.81)% for the quarter ended
9/30/98.
<TABLE>
<CAPTION>
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 10.56% 14.99% 18.11%
- -----------------------------------------------------------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 14.13% 16.27%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Russell 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks.
4 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select International Equity Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Bank of Ireland Asset Management (U.S.) Limited
[GRAPHIC] Investment Objective: The Fund seeks maximum long-term total return
(capital appreciation and income) primarily by investing in common
stocks of established non-U.S. companies.
[GRAPHIC] Principal Investment Strategies: Under normal market conditions, at
least 65% of the Fund's assets will be invested in the securities of
medium and large-size companies located in at least five foreign
countries, not including the United States. To achieve its
objective, the Fund focuses on equity securities which the Sub-
Adviser believes are undervalued in relation to the company's
prospects for future earnings growth. The Fund may also buy fixed-
income debt securities, primarily for defensive purposes.
[GRAPHIC] Principal Risks:
o Company Risk
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1995 .......... 19.63%
1996 .......... 21.94%
1997 .......... 4.65%
1998 .......... 16.48%
During the period shown above the highest quarterly return was 19.49% for the
quarter ended 12/31/98 and the lowest was (17.69)% for the quarter ended
09/30/98.
<TABLE>
<CAPTION>
Performance Table
Average Annual Total Returns
(for the periods ending Past Since Inception
December 31, 1998) One Year (May 2, 1994)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fund Shares 16.48% 12.26%
- --------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Intl.
EAFE Index* 20.33% 8.41%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Morgan Stanley Capital International EAFE (Europe, Australia, Far
East) Index, reflecting reinvestment of gross dividends, is an unmanaged
capitalization weighted index of foreign developed country common stocks.
Allmerica Investment Trust 5
<PAGE>
Objectives, Strategies and Risks
Growth Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Miller Anderson & Sherrerd, LLP
[GRAPHIC] Investment Objective: The 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. Realization of current income, if any, is incidental to this
objective.
[GRAPHIC] Principal Investment Strategies: To pursue its goal, the Fund
invests in securities that are diversified with regard to issuers
and industries. In selecting securities, the Fund is not limited to
any particular style of investing and may invest in stocks
considered to be "growth" stocks as well as stocks considered to be
"value" stocks. The Fund may invest in well-established or
developing companies, both large and small.
The Fund normally will invest substantially all of its assets in
equity-type securities, including common stocks, warrants, preferred
stocks and debt securities convertible into common stock and
eligible real estate securities. The Fund may invest up to 25% of
its assets in foreign securities (not including its investments in
ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1989 .......... 25.64%
1990 .......... -0.30%
1991 .......... 40.44%
1992 .......... 7.11%
1993 .......... 6.66%
1994 .......... 0.16%
1995 .......... 32.80%
1996 .......... 20.19%
1997 .......... 25.14%
1998 .......... 19.32%
During the period shown above the highest quarterly return was 21.48% for the
quarter ended 12/31/98 and the lowest was (14.61)% for the quarter ended
9/30/90.
<TABLE>
<CAPTION>
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 19.32% 19.01% 16.98%
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.20%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an
unmanaged index of 500 leading stocks. S&P 500(R) Index is a registered
trademark of Standard & Poor's Corporation.
6 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Equity Index Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: The Fund tries to achieve its
objective by attempting to replicate the aggregate price and yield
performance of the S&P 500 Index. Because of its policy of tracking
the S&P 500 Index, the Fund does not follow traditional methods of
active investment management, which involve buying and selling
securities based upon analysis of economic and market factors. 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. Under normal circumstances, the Fund will hold
approximately 500 different stocks included in the S&P 500 Index.
The Fund will incur expenses that are not reflected in the
performance results of the S&P 500 Index. Therefore, the return of
the Fund may be lower than the return of the S&P 500 Index. 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 Index.
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1991 .......... 29.16%
1992 .......... 7.25%
1993 .......... 9.53%
1994 .......... 1.06%
1995 .......... 36.18%
1996 .......... 22.30%
1997 .......... 32.41%
1998 .......... 28.33%
During the period shown above the highest quarterly return was 21.41% for the
quarter ended 12/31/98 and the lowest was (9.96)% for the quarter ended 9/30/98.
<TABLE>
<CAPTION>
Performance Table
<S> <C> <C> <C>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (September 28, 1990)
- ----------------------------------------------------------------------------
Fund Shares 28.33% 23.39% 20.69%
- ----------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.37%
- ----------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an
unmanaged index of 500 leading stocks. S&P 500(R) Index is a registered
trademark of Standard & Poor's Corporation.
Allmerica Investment Trust 7
<PAGE>
Objectives, Strategies and Risks
Investment Grade Income Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The Fund seeks as high a level of total
return, which includes capital appreciation as well as income, as is
consistent with prudent investment management.
[GRAPHIC] Principal Investment Strategies: To achieve its goal, the Fund
invests in investment grade debt securities and money market
instruments such as bonds and other corporate debt obligations;
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or money market instruments,
including commercial paper, bankers acceptances and negotiable
certificates of deposit. The Fund also may invest in mortgage-backed
and asset-backed securities. The Fund may invest up to 25% of its
assets in foreign securities (not including its investments in ADRs)
and up to 25% of its assets in debt obligations of supranational
entities.
Investment grade securities are rated in the four highest grades by
Moody's Investors Services or Standard & Poor's Rating Services or
unrated but determined by the Sub-Adviser to be of comparable
quality. For more information about rating categories, see the
Appendix to the Statement of Additional Information ("SAI"). The
Fund may invest in securities with relatively long maturities as
well as securities with shorter maturities.
The Sub-Adviser actively manages the portfolio with a view to
producing a high level of total return for the Fund while avoiding
undue risks to capital. The Sub-Adviser attempts to anticipate
events leading to price or ratings changes through using in-depth
fundamental credit research.
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
o Prepayment Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1989 .......... 13.52%
1990 .......... 8.02%
1991 .......... 16.75%
1992 .......... 8.33%
1993 .......... 10.80%
1994 .......... -2.96%
1995 .......... 17.84%
1996 .......... 3.56%
1997 .......... 9.45%
1998 .......... 7.97%
During the period shown above the highest quarterly return was 7.67% for the
quarter ended 6/30/89 and the lowest was (2.61)% for the quarter ended 3/31/94.
<TABLE>
<CAPTION>
Performance Table
<S> <C> <C> <C>
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- ------------------------------------------------------------------
Fund Shares 7.97% 6.95% 9.17%
- ------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index* 8.67% 7.27% 9.26%
- ------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Aggregate Bond Index(R) is an unmanaged index of fixed
rate debt issues with an investment grade or higher rating at least one
year to maturity and an outstanding par value of at least $25 million.
8 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Government Bond Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: To pursue its objective, the Fund
invests in U.S. Government securities, such as Treasury bills,
notes, and bonds, which may differ only in their interest rates,
maturities and times of issuance. The Fund also may invest in
mortgage-backed government securities, other instruments secured by
U.S. Government securities, asset-backed securities and separately-
traded principal and interest components of U.S. Treasury
securities. The Fund may invest up to 25% of its assets in debt
obligations of supranational entities.
The Sub-Adviser selects securities for the portfolio with a view to
producing a high level of current income while avoiding undue risks
to capital. The Fund may invest in securities with relatively long
maturities as well as securities with shorter maturities.
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Market Risk
o Prepayment Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1992 .......... 6.59%
1993 .......... 7.51%
1994 .......... -0.88%
1995 .......... 13.06%
1996 .......... 3.51%
1997 .......... 7.08%
1998 .......... 7.67%
During the period shown above the highest quarterly return was 5.17% for the
quarter ended 12/31/91 and the lowest was (1.49)% for the quarter ended 3/31/92.
<TABLE>
<CAPTION>
Performance Table
<S> <C> <C> <C>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 26, 1991)
- -------------------------------------------------------------------------
Fund Shares 7.67% 5.99% 7.00%
- -------------------------------------------------------------------------
Lehman Brothers
Intermediate Government
Bond Index* 8.49% 6.45% 7.38%
- -------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Intermediate Government Bond Index(R) is an unmanaged
index of U.S. Government and Agency bonds with remaining maturities of one
to ten years.
Allmerica Investment Trust 9
<PAGE>
Objectives, Strategies and Risks
Money Market Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The Fund seeks to obtain maximum current
income consistent with preservation of capital and liquidity.
[GRAPHIC] Principal Investment Strategies: The Fund seeks to achieve its
objective by investing in high quality money market instruments such
as obligations issued or guaranteed by the United States Government,
its agencies, or instrumentalities; commercial paper; obligations of
banks or savings and loan associations including bankers acceptances
and certificates of deposit; repurchase agreements and cash and cash
equivalents. The Fund may invest up to 25% of its assets in U.S.
dollar denominated foreign debt securities and short-term
instruments (not including investments in ADRs).
Any security purchased for the Fund must receive the highest or
second highest quality rating by at least two recognized rating
agencies or by one if only one has rated the security. If the
security is unrated the security must be seen by the Sub-Adviser as
having comparable quality. Portfolio securities will have a
remaining maturity of 397 days or less and the portfolio is managed
to maintain a dollar-weighted maturity of 90 days or less.
The Fund attempts to maintain a constant net asset value of $1.00
per share but it may not be able to do so due to adverse market
conditions or other factors and it is possible for investors to lose
money by investing in the Fund. An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1989 .......... 9.07%
1990 .......... 8.17%
1991 .......... 6.22%
1992 .......... 3.78%
1993 .......... 3.00%
1994 .......... 3.93%
1995 .......... 5.84%
1996 .......... 5.36%
1997 .......... 5.47%
1998 .......... 5.51%
During the period shown above the highest quarterly return was 2.35% for the
quarter ended 06/30/89 and the lowest was 0.73% for the quarter ended 6/30/93.
<TABLE>
<CAPTION>
Performance Table
<S> <C> <C> <C>
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- ------------------------------------------------------------------
Fund Shares 5.51% 5.22% 5.62%
- ------------------------------------------------------------------
IBC/Donoghue First Tier
Money Market Index* 4.96% 4.80% 5.22%
- ------------------------------------------------------------------
</TABLE>
* IBC/Donoghue is an independent firm that tracks regulated money market
funds on a yield, shareholder, assets size and portfolio allocation basis.
The Fund's 7-day yield ending December 31, 1998 was 5.11%.
10 Allmerica Investment Trust
<PAGE>
Expense Summary
- --------------------------------------------------------------------------------
Expenses are one of several factors to consider when investing in a Fund.
Expenses shown are based on expenses incurred in respect of shares of the Funds
for the 1998 fiscal year. The Examples show the cumulative expenses attributable
to a hypothetical $10,000 investment in each Fund over specified periods.
Fees and Expenses of the Funds
This table describes the fees and expenses that you may pay if you invest in the
Funds. Please note that the expenses listed below do not include the expenses of
the applicable variable insurance product that you are purchasing. You should
refer to the variable insurance product prospectus for more information relating
to the fees and expenses of that product, which are in addition to the expenses
of the Funds.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
Shareholder (expenses deducted from Fund assets) Total Annual
Fees Fund
(fees paid directly Management Distribution Other Operating
from your investment) Fees (12b-1) Fees Expenses Expenses
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Aggressive Growth Fund None 0.88% None 0.07% 0.95%(1),(2)
- --------------------------------------------------------------------------------------------------------------------------------
Select International Equity Fund None 0.90% None 0.12% 1.02%(1),(2)
- --------------------------------------------------------------------------------------------------------------------------------
Growth Fund None 0.44% None 0.05% 0.49%(1),(2)
- --------------------------------------------------------------------------------------------------------------------------------
Equity Index Fund None 0.29% None 0.07% 0.36%(1)
- --------------------------------------------------------------------------------------------------------------------------------
Investment Grade Income Fund None 0.43% None 0.09% 0.52%(1)
- --------------------------------------------------------------------------------------------------------------------------------
Government Bond Fund None 0.50% None 0.14% 0.64%(1)
- --------------------------------------------------------------------------------------------------------------------------------
Money Market Fund None 0.26% None 0.06% 0.32%(1)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Until further notice, Allmerica Financial Investment Management Services,
Inc. (the "Manager") has declared a voluntary expense limitation of 1.35% of
average net assets for the Select Aggressive Growth Fund , 1.50% for the
Select International Equity Fund, 1.20% for the Growth Fund, 1.10% for the
Investment Grade Income Fund and Government Bond Fund, and 0.60% for the
Equity Index Fund and Money Market Fund. The total operating expenses of
these Funds of the Trust were less than their respective expense limitations
throughout 1998.
The declaration of a voluntary management fee or expense limitation in any
year does not bind the Manager to declare future expense limitations with
respect to these Funds. These limitations may be terminated at any time.
(2) These Funds have entered into agreements with brokers whereby brokers rebate
a portion of commissions. Had these amounts been treated as reductions of
expenses, the total annual fund operating expense ratios would have been
0.92% for the Select Aggressive Growth Fund, 1.01% for the Select
International Equity Fund, and 0.46% for the Growth Fund.
Allmerica Investment Trust 11
<PAGE>
Example
This Example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Select Aggressive Growth Fund $ 95 $297 $515 $1,143
- -----------------------------------------------------------------------------
Select International Equity Fund $102 $318 $552 $1,223
- -----------------------------------------------------------------------------
Growth Fund $ 49 $154 $268 $ 602
- -----------------------------------------------------------------------------
Equity Index Fund $ 36 $113 $197 $ 445
- -----------------------------------------------------------------------------
Investment Grade Income Fund $ 52 $163 $284 $ 638
- -----------------------------------------------------------------------------
Government Bond Fund $ 64 $200 $349 $ 781
- -----------------------------------------------------------------------------
Money Market Fund $ 32 $101 $176 $ 397
- -----------------------------------------------------------------------------
</TABLE>
12 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Description of Principal Investment Risks
- --------------------------------------------------------------------------------
The following is a summary of the principal risks of investing in a Fund and the
factors likely to cause the value of your investment in the Fund to decline. The
principal risks applicable to each Fund are identified under "Fund Summaries".
There are also many factors that could cause the value of your investment in a
Fund to decline which are not described here. It is important to remember that
there is no guarantee that the Funds will achieve their investment objective,
and an investor in any of the Funds could lose money.
Company Risk
A Fund's equity and fixed income investments in a company often fluctuate based
on:
o the firm's actual and anticipated earnings,
o changes in management, product offerings and overall financial strength
and
o the potential for takeovers and acquisitions.
This is due to the fact that prices of securities react to the fiscal and
business conditions of the company that issued the securities. Factors affecting
a company's particular industry, such as increased production costs, also may
affect the value of its securities.
Smaller companies with market capitalizations of less than $1 billion or so are
more likely than larger companies to have limited products lines or smaller
markets for their goods and services. Small company stocks may not trade very
actively, and their prices may fluctuate more than stocks of other companies as
a result of lower liquidity. They may depend on a small or inexperienced
management group. Stocks of smaller companies also may be more vulnerable to
negative changes than stocks of larger companies.
Credit Risk
Credit risk is the risk that the issuer of a fixed income security will not be
able to pay principal and interest when due. There are different levels of
credit risk. Funds that invest in lower-rated securities have higher levels of
credit risk. The price of a fixed income security can be expected to fall if the
issuer defaults on its obligation to pay principal or interest, the rating
agencies downgrade the issuer's credit rating or there is negative news that
affects the market's perception of the issuer's credit risk.
Currency Risk
This is the risk that the value of a Fund's investments may decline due to
fluctuations in exchange rates between the U.S. dollar and foreign currencies.
Funds that invest in securities denominated in or are receiving revenues in
foreign currencies are subject to currency risk. There is often a greater risk
of currency fluctuations and devaluations in emerging markets countries.
Derivatives Risk
A Fund may use derivatives to hedge against an opposite position that the Fund
also holds. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. When a Fund uses derivatives to hedge, it takes the risk that
changes in the value of the derivative will not match those of the asset being
hedged. Incomplete correlation can result in unanticipated losses. A Fund may
also use derivatives as an investment vehicle to gain market exposure. Gains or
losses from derivative investments may be substantially greater than the
derivative's original cost. When a Fund uses derivatives, it is also subject to
the risk that the other party to the agreement will not be able to perform.
Additional risks associated with derivatives include mispricing and improper
valuation.
Allmerica Investment Trust 13
<PAGE>
Foreign Investment Risk
Investing in foreign securities involves risks relating to political, social and
economic developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and interest,
limitations on the use or transfer of portfolio assets, and political or social
instability. In the event of nationalization, expropriation or other
confiscation, a Fund could lose its entire investment. Funds investing in
foreign securities may experience rapid changes in value. One reason for this
volatility is that the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. Enforcing legal rights may be difficult, costly and slow in
foreign countries. Also, foreign companies may not be subject to governmental
supervision or accounting standards comparable to those applicable to U.S.
companies, and there may be less public information about their operations. The
conversion of certain European currencies to the "euro" may present additional
risks to those Funds exposed to such currencies.
Interest Rate Risk
When interest rates rise, the prices of fixed income securities in a Fund's
portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Fund's portfolio will generally rise. Even
Funds that invest in the highest quality debt securities are subject to interest
rate risk. Interest rate risk usually will affect the price of a fixed income
security more if the security has a longer maturity because changes in interest
rates are increasingly difficult to predict over longer periods of time. Fixed
income securities with longer maturities will therefore be more volatile than
other fixed income securities with shorter maturities.
Investment Management Risk
Investment management risk is the risk that a Fund does not achieve its
investment objective, even though the Sub-Adviser uses various investment
strategies and techniques.
Liquidity Risk
This is the risk that a Fund will not be able to sell a security at a reasonable
price because there are too few people who actively buy and sell, or trade, that
security on a regular basis. Liquidity risk increases for Funds investing in
foreign investments (especially emerging markets securities), smaller companies,
lower credit quality bonds (also called "junk bonds"), restricted securities,
over-the-counter securities and derivatives.
Market Risk
This is the risk that the price of a security held by a Fund will fall due to
changing economic, political or market conditions or to factors affecting
investor psychology.
Prepayment Risk
While mortgage-backed securities may have a stated maturity, their expected
maturities may vary when interest rates rise or fall. When interest rates fall,
homeowners are more likely to prepay their mortgage loans which may result in an
unforeseen loss of future interest income to a Fund. Also, because prepayments
increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed income securities when interest rates fall.
14 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Other Investment Strategies
- --------------------------------------------------------------------------------
The Fund Summaries starting on page 3 describe the investment objective and the
principal investment strategies and risks of each Fund. The Funds may at times
use the following investment strategies. Attached as an Appendix is a chart with
a listing of various investment techniques and strategies that the Sub-Advisers
of the Funds may utilize. A Fund may decide that it is in the best interests of
shareholders to make changes to its investment objective and strategies
described in this Prospectus. These investment objectives and strategies may be
changed with the approval of the Board of Trustees, but without shareholder
approval.
Derivative Investments. (applicable to each Fund except the Money Market Fund)
Instead of investing directly in the types of portfolio securities described in
the Summary, each Fund, except the Money Market Fund, may buy or sell a variety
of "derivative" investments to gain exposure to particular securities or
markets. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. A
Fund's Sub-Adviser will sometimes use derivatives as part of a strategy designed
to reduce other risks and sometimes will use derivatives to enhance returns,
which increases opportunities for gain but also involves greater risk.
Foreign Investments. (applicable to each Fund except the Government Bond Fund)
Each Fund, except the Government Bond Fund, may invest all or a substantial part
of its portfolio in securities of companies that are located or primarily doing
business in a foreign country. A company is considered to be located in a
foreign 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
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 country or (ii) at least
50% of the company's assets are situated in the country. A Fund may invest in
foreign securities either directly or indirectly through the use of depositary
receipts, such as ADRs. Depositary receipts are generally issued by banks or
trust companies and evidence ownership of underlying foreign securities. 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 Select International Equity Fund may also purchase foreign
securities through European Depositary Receipts and Global Depositary Receipts.
Lending of Securities. (applicable to all Funds) To realize additional income,
the Funds may lend portfolio securities to broker-dealer or financial
institutions in an amount up to 331 1/43% of a Fund's total assets. 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
possible delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral.
Allmerica Investment Trust 15
<PAGE>
Restricted Securities. (applicable to all Funds) The Funds may purchase
securities that are not registered under Federal securities law ("restricted
securities"), but can be offered and sold to certain "qualified institutional
buyers". 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). These limits do not apply if the Board of Trustees determines that
the 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, retains
sufficient oversight and is ultimately responsible for the determinations. This
investment practice could increase the level of illiquidity in a Fund if buyers
lose interest in restricted securities. As a result, a Fund might not be able to
sell these securities when its Sub-Adviser wants to sell, or might have to sell
them at less than fair value. In addition, market quotations for these
securities are less readily available.
Temporary Defensive Strategies. At times a Sub-Adviser may determine that market
conditions make it desirable temporarily to suspend a Fund's normal investment
activities. This is when the Fund may temporarily invest in a variety of
lower-risk securities, such as U.S. Government and other high quality bonds and
short-term debt obligations. Such strategies attempt to reduce changes in the
value of the Fund's shares. The Fund may not achieve its investment objective
while these strategies are in effect.
Frequent Trading. Certain Funds from time to time may engage in active and
frequent trading to achieve their investment objective. Frequent trading
increases transaction costs, which could detract from the Fund's performance.
16 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Management of the Funds
- --------------------------------------------------------------------------------
The Trust is governed by a Board of Trustees. Allmerica Financial Investment
Management Services, Inc. is the investment Manager of the Trust responsible for
managing the Trust's day-to-day business affairs. The Manager is located at 440
Lincoln Street, Worcester, MA 01653. The Manager and its predecessor, Allmerica
Investment Management Company, Inc., have been managing mutual funds since 1985.
The Manager currently serves as investment manager to one other mutual fund.
Sub-Advisers have been hired to manage the investments of the Funds. The Trust
and Manager have obtained an order of exemption from the SEC that permits the
Manager to enter into and materially amend sub-advisory agreements with
non-affiliated Sub-Advisers without obtaining shareholder approval. The Manager
has ultimate responsibility to oversee Sub-Advisers. The Manager has the
ability, subject to approval of the Trustees, to hire and terminate Sub-Advisers
and to change materially the terms of the Sub-Adviser Agreements, including the
compensation paid to the Sub-Advisers. The Sub-Advisers have been selected by
the Manager and Trustees with the help of BARRA RogersCasey, Inc., a pension
consulting firm. The fees earned by each Sub-Adviser and BARRA RogersCasey are
paid by the Manager. The performance by the Sub-Advisers is reviewed quarterly
by a committee of the Board of Trustees, with assistance from BARRA RogersCasey.
The following table provides information about each Fund's Sub-Adviser:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Fund Name,
Sub-Adviser Name and Address Experience
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Select Aggressive Growth Fund Has over $31 billion assets under management as of
Nicholas-Applegate Capital Management, L.P. January 21, 1999. Founded in 1984. Clients include
600 West Broadway, Suite 2900 employee benefit and retirement plans, foundations,
San Diego, CA 92101 investment companies and individuals.
- -----------------------------------------------------------------------------------------------------------
Select International Equity Fund Managed over $38 billion in global securities as of
Bank of Ireland Asset Management (U.S.) Ltd. December 31, 1998. Founded in 1966. Provides
26 Fitzwilliam Place, Dublin 2, international investment manage- ment services.
Ireland and 20 Horseneck Lane
Greenwich, CT 06830
- -----------------------------------------------------------------------------------------------------------
Growth Fund Organized in 1969. Provides investment advisory
Miller Anderson & Sherrerd, LLP services to employee benefit plans, endowment funds,
One Tower Bridge foundations and other institutional investors. Had $69
West Conshohocken, PA 19428 billion assets under management as of December 31, 1998.
- --------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 17
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Fund Name,
Sub-Adviser Name and Address Experience
- -----------------------------------------------------------------------------------------------
<S> <C>
Equity Index Fund Incorporated in 1993. Had $13.2 billion assets under
Allmerica Asset Management, Inc. management as of December 31, 1998. Serves as investment
440 Lincoln Street adviser to investment companies and affiliated insurance
Worcester, MA 01653 company accounts.
- -----------------------------------------------------------------------------------------------
Investment Grade Income Fund See Equity Index Fund above
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
- -----------------------------------------------------------------------------------------------
Government Bond Fund See Equity Index Fund above
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
- --------------------------------------------------------------------------------
Money Market Fund See Equity Index Fund above
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
- --------------------------------------------------------------------------------
</TABLE>
For a sample listing of certain of the Sub-Advisers' clients, see "Investment
Management and Other Services" in the SAI.
18 Allmerica Investment Trust
<PAGE>
The following individuals or groups of individuals are primarily responsible for
the day-to-day management of the Funds' portfolios:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Aggressive Growth Fund Lawrence S. Speidell, Partner 1994 - Present Director of Global/Systematic
Nicholas-Applegate Capital Portfolio Management and
Management, L.P. ("NACM") Research at NACM. Prior
to joining NACM, he spent
ten years with Batterymarch
Financial Management.
John J. Kane, Partner 1994 - Present Senior Portfolio Manager for the
U.S. Systematic portfolios at NACM.
Prior to joining NACM in 1994, he
was employed by ARCO Invest-
Management Company and General
Electric.
Mark W. Stuckelman, 1995 - Present Portfolio Manager for the
Portfolio Manager U.S. Systematic portfolios at NACM.
Prior to joining NACM, he was
employed for five years with Wells
Fargo Bank, Fidelity Management
Trust Co., and BARRA, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Select International Equity Fund Christopher Reilly, 1980 - Present Since 1985, he has had
Bank of Ireland Asset Management Chief Investment Officer overall responsibility for asset
(U.S.) Limited ("BIAM") management. He previously worked in
the United Kingdom in
stockbrokering and investment
management.
Denis Donovan, Director- 1985 - Present Prior to joining BIAM, he
Portfolio Manager spent more than 13 years in the
money market and foreign exchange
operations of the Central Bank of
Ireland. At present, he has overall
responsibility for the portfolio
management function for all of
BIAM's client base.
Peter Wood, Senior 1985 - Present Prior to 1985, he spent five
Portfolio Manager years with another leading
investment management firm.
He is now responsible for
portfolio construction at BIAM.
Jane Neill, Senior Equity Analyst 1994 - Present Previously, she was Chief
Investment Officer with another
leading Irish invest-ment
management firm.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 19
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund Gary G. Schlarbaum, 1987 - Present He has served on a committee
Miller Anderson & Sherrerd, LLP CFA and Managing Director of fund managers since 1993.
("MAS") Prior to 1987, Mr. Schlarbaum was
employed by First Chicago
Investment Advisors from 1984 -
1987.
Nicholas Kovich, 1988 - Present He has served on the fund
CFA and Managing Director managers committee since 1988.
Prior to MAS, Mr. Kovich was
employed by Waddell & Reed Asset
Management Company from 1982 -
1988.
Robert J. Marcin, 1988 - Present Prior to joining MAS in 1988,
CFA and Managing Director Mr. Marcin was an Account
Executive at Smith Barney Harris
Upham and Company, Inc.
Brian Kramp, 1997 - Present Mr. Kramp was employed
CFA and Vice President as an analyst and portfolio
manager by Meridian Investment
Company from 1985 - 1997.
James J. Jolinger, Principal 1994 - Present He has served on the fund
managers committee since 1997.
Prior to 1994, Mr. Jolinger was
employed by Oppenheimer Capital as
an Equity Analyst from 1987 to
1994.
Arden C. Armstrong, 1986 - Present Prior to joining MAS,
CFA and Managing Director Ms. Armstrong was employed
by Evans Economics, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Investment Grade Income Fund Lisa M. Coleman, 1994 - Present She was a Deputy Manager/
Allmerica Asset Management, Inc. CFA and Vice President Portfolio Manager in the
("AAM") global fixed income area for Brown
Brothers Harriman & Company in New
York prior to joining AAM.
- -------------------------------------------------------------------------------------------------------------------------------
Government Bond Fund Richard J. Litchfield, 1995 - Present He was a mortgage-backed
Allmerica Asset Management, Inc. CFA and Vice President securities analyst and trader
("AAM") at Keystone Investments, Inc.
prior to joining AAM.
- -------------------------------------------------------------------------------------------------------------------------------
Equity Index Fund and John C. Donohue, Vice President 1995 - Present He was a portfolio manager
Money Market Fund at CS First Boston Investment
Allmerica Asset Management, Inc. Management prior to joining
("AAM") AAM.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20 Allmerica Investment Trust
<PAGE>
For the fiscal year ended December 31, 1998, the Funds paid the Manager the fees
shown in the table below:
Fee (as a percentage of
Fund average net assets)
- --------------------------------------------------------------------------------
Select Aggressive Growth Fund 0.88%
- --------------------------------------------------------------------------------
Select International Equity Fund 0.90%
- --------------------------------------------------------------------------------
Growth Fund 0.44%
- --------------------------------------------------------------------------------
Equity Index Fund 0.29%
- --------------------------------------------------------------------------------
Investment Grade Income Fund 0.43%
- --------------------------------------------------------------------------------
Government Bond Fund 0.50%
- --------------------------------------------------------------------------------
Money Market Fund 0.26%
- --------------------------------------------------------------------------------
For the fiscal year ended December 31, 1998, the Manager paid each Sub-Adviser
aggregate fees as set forth below:
<TABLE>
<CAPTION>
Fee (as a percentage of
Sub-Adviser average net assets)
- -------------------------------------------------------------------------------------------------------
<S> <C>
Nicholas-Applegate Capital Management, L.P. (Select Aggressive Growth Fund) 0.51%
- -------------------------------------------------------------------------------------------------------
Bank of Ireland Asset Management (U.S.) Limited (Select International Equity Fund) 0.33%
- -------------------------------------------------------------------------------------------------------
Miller Anderson & Sherrerd, LLP (Growth Fund) 0.21%
- -------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Equity Index Fund) 0.10%
- -------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Investment Grade Income Fund) 0.20%
- -------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Government Bond Fund) 0.20%
- -------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Money Market Fund) 0.10%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 21
<PAGE>
Pricing of Fund Shares
- --------------------------------------------------------------------------------
The Funds sell and redeem their shares at a price equal to their net asset value
("NAV") without paying any sales or redemption charges. The NAV of a share is
computed by adding the current value of all the Fund's assets, subtracting its
liabilities and dividing by the number of its outstanding shares. NAV is
computed once daily at the close of regular trading on the New York Stock
Exchange each day the Exchange is open - normally 4:00 p.m. Eastern Time. Orders
for the purchase or redemption of shares are filled at the next NAV computed
after an order is received by the Fund. The Funds do not accept orders or
compute their NAV's on days when the Exchange is closed.
Equity securities are valued based on market value if market quotations are
readily available. In other cases, they are valued at their fair value following
procedures approved by the Trustees. Debt securities (other than short-term
obligations) normally are valued based on pricing service valuations. All
securities of the Money Market Fund are valued at amortized cost. Debt
obligations in the other Funds with a remaining maturity of 60 days or less are
valued at amortized cost when amortized cost is considered to represent fair
value. Values for short-term obligations of the other Funds having a remaining
maturity of more than 60 days are based upon readily available market
quotations.
Certain foreign markets may be open on days when the Funds do not accept orders
or price their shares. As a result, the NAV of a Fund's shares may change on
days when shareholders will not be able to buy or sell shares.
Purchase and Redemption of Shares
- --------------------------------------------------------------------------------
Shares of the Funds currently are purchased only by Separate Accounts which are
the funding mechanisms for variable annuity contracts and variable life
insurance policies. The Distributor, Allmerica Investments, Inc., at its
expense, may provide promotional incentives to dealers who sell variable annuity
contracts which invest in the Funds. The Trust has obtained an exemptive order
from the Securities and Exchange Commission to permit Fund shares to be sold to
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans. Material irreconcilable conflicts may arise among
various insurance policy owners and plan participants. The Trustees will monitor
events to identify any material conflicts and determine if any action should be
taken to resolve such conflict.
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. See the prospectuses for the variable
insurance products.
Normally, redemption payments will be made within seven days after the Trust
receives a written redemption request. Redemptions may be suspended when trading
on the New York Stock Exchange is restricted or when permitted by the Securities
and Exchange Commission.
22 Allmerica Investment Trust
<PAGE>
Distributions and Taxes
- --------------------------------------------------------------------------------
Distributions
Each Fund pays out substantially all of its net investment income and net
capital gains to shareholders each year. Net investment income is 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.
Taxes
The Trust seeks 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. Under current tax law, dividend or capital gain
distributions from any Fund are not currently taxable when left to accumulate
within a variable annuity or variable life insurance contract. Withdrawals from
a contract generally are subject to ordinary income tax and, in many cases, to
an additional 10% penalty tax on withdrawals before age 591 1/42. Tax
consequences to investors in the Separate Accounts which are invested in the
Trust are described in more detail in the prospectuses for those accounts.
Year 2000
- --------------------------------------------------------------------------------
Some computer software cannot distinguish between dates in the year 2000 and
dates in the year 1900 because of the way that dates are encoded and calculated.
The services provided to the Trust by the Manager, Sub-Advisers, the Custodian
and other external service providers depend on the proper functioning of their
computer software. Failure to correct or replace any non-compliant software
could adversely affect, among other things, the handling of securities trades,
the payment of interest and dividends, the pricing of the Trust's securities and
of the Trust's shares, and account services. The Trust has requested information
from its service providers with respect to their plans to be Year 2000
compliant. The Trust has been advised by its service providers that they either
are Year 2000 compliant now or expect to be compliant prior to December 31,
1999. However, there can be no guarantee that the Trust's operations will not be
adversely affected by non-compliant systems of its service providers or of other
third parties which interact with such service providers. The Year 2000 problem
could also have an adverse effect on issuers, including foreign issuers, whose
securities are owned by the Funds, potentially decreasing the value of such
securities.
Allmerica Investment Trust 23
<PAGE>
This page left blank intentionally.
24 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the tables represent the rate that an investor
would have earned or lost on an investment in a Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information or annual
report, which is available upon request.
Allmerica Investment Trust 25
<PAGE>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
------- Income from Investment Operations --------
Net Realized
Net and
Asset Net Unrealized
Value Investment Gain (Loss) Total from
Year Ended Beginning Income on Investment
December 31, of Year (Loss)(2) Investments Operations
- -----------------------------------------------------------------------------
Select Aggressive
Growth Fund
1998 $2.225 $(0.008) $0.243 $0.235
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)
- -----------------------------------------------------------------------------
Select International
Equity Fund(1)
1998 1.341 0.014 0.207 0.221
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
1998 2.416 0.028 0.436 0.464
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
- -----------------------------------------------------------------------------
Equity Index Fund
1998 2.753 0.035 0.741 0.776
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
- -----------------------------------------------------------------------------
<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 Aggressive
Growth Fund
1998 $ - $ - $ - $ - $ - $0.235
1997 - (0.182) (0.008) (3) - (0.190) 0.188
1996 - (0.153) - - (0.153) 0.189
1995 - - - - - 0.451
1994 - - - - - (0.034)
- -----------------------------------------------------------------------------------------------------------
Select International
Equity Fund(1)
1998 (0.020) - - - (0.020) 0.201
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
1998 (0.028) (0.027) - - (0.055) 0.409
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)
- -----------------------------------------------------------------------------------------------------------
Equity Index Fund
1998 (0.034) (0.087) - - (0.121) 0.655
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)
- -----------------------------------------------------------------------------------------------------------
</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.
(1) The Select International Equity Fund commenced operations on May 2, 1994.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $(0.009) in 1998 and $(0.010) in
1997 for Select Aggressive Growth Fund; $0.014 in 1998, $0.015 in 1997,
$0.011 in 1996 and $0.002 in 1994 for Select International Equity Fund;
and $0.027 in 1998, $0.038 in 1997 and $0.046 in 1996 for Growth Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
26 Allmerica Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
-------------------------------------------------------------
<TABLE>
<CAPTION>
--------------- Ratios To Average Net Assets -------------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Period Investment Operating Expenses Management Fee Turnover
Period Return (000's) Income (Loss) (A) (B) (C) Gross Net Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.460 10.56% $752,741 (0.36)% 0.92% 0.95% 0.95% 0.88% 0.88% 99%
2.225 18.71% 604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95%
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113%
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%
- --------------------------------------------------------------------------------------------------------------------------------
1.542 16.48% 505,553 0.99% 1.01% 1.02% 1.02% 0.90% 0.90% 27%
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20%
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18%
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%
- --------------------------------------------------------------------------------------------------------------------------------
2.825 19.32% 860,333 1.08% 0.46% 0.49% 0.49% 0.44% 0.44% 100%
2.416 25.14% 728,679 1.48% 0.47% 0.49% 0.49% 0.43% 0.43% 79%
2.333 20.19% 556,751 2.04% 0.48% 0.51% 0.51% 0.44% 0.44% 72%
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%
- --------------------------------------------------------------------------------------------------------------------------------
3.408 28.33% 481,877 1.17% 0.36% 0.36% 0.36% 0.29% 0.29% 6%
2.753 32.41% 297,191 1.38% 0.44% 0.44% 0.44% 0.31% 0.31% 9%
2.165 22.30% 151,130 1.79% 0.46% 0.46% 0.46% 0.32% 0.32% 12%
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%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 27
<PAGE>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
--------- 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 Investments Operations
- ------------------------------------------------------------------------------
Investment Grade
Income Fund
1998 $1.112 $0.067 $0.020 $0.087
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)
- ------------------------------------------------------------------------------
Government
Bond Fund
1998 1.047 0.058 0.021 0.079
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)
- ------------------------------------------------------------------------------
Money Market
Fund
1998 1.000 0.054 - 0.054
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
- ------------------------------------------------------------------------------
<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>
Investment Grade
Income Fund
1998 $(0.067) $ - $ - $ - $(0.067) $0.020
1997 (0.071) - - - (0.071) 0.028
1996 (0.070) - - - (0.070) (0.033)
1995 (0.071) - (0.001)(1) - (0.072) 0.105
1994 (0.066) - - - (0.066) (0.099)
- -----------------------------------------------------------------------------------------------------
Government
Bond Fund
1998 (0.058) - - - (0.058) 0.021
1997 (0.061) - - - (0.061) 0.011
1996 (0.062) - - - (0.062) (0.026)
1995 (0.062) - (0.001)(1) - (0.063) 0.065
1994 (0.063) - - - (0.063) (0.073)
- -----------------------------------------------------------------------------------------------------
Money Market
Fund
1998 (0.054) - - - (0.054) -
1997 (0.053) - - - (0.053) -
1996 (0.052) - - - (0.052) -
1995 (0.057) - - - (0.057) -
1994 (0.039) - - - (0.039) -
- -----------------------------------------------------------------------------------------------------
</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.
(1) Distributions in excess of net investment income.
28 Allmerica Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
-------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------ Ratios To Average Net Assets ---------------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Year Investment Operating Expenses Management Fee Turnover
Year Return (000's) Income (A) (B) (C) Gross Net Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1.132 7.97% $230,623 6.01% 0.52% 0.52% 0.52% 0.43% 0.43% 158%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.068 7.67% 81,018 5.63% 0.64% 0.64% 0.64% 0.50% 0.50% 61%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.000 5.51% 336,253 5.36% 0.32% 0.32% 0.32% 0.26% 0.26% N/A
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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 29
<PAGE>
[GRAPHIC] APPENDIX
Investment Techniques and Strategies
In managing its portfolios of investments, the Trust may make use of the
following investment techniques and strategies:
Symbols
o Permitted
-- Not Permitted
<TABLE>
<CAPTION>
Select Select Investment
Aggressive International Equity Grade Government Money
Growth Equity Growth Index Income Bond Market
Fund Fund Fund Fund Fund Fund Fund
INVESTMENT TECHNIQUE/STRATEGY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset-Backed Securities -- -- o -- o o o
Financial Futures Contracts
and Related Options o o o o o o --
Foreign Securities o o o o o -- o
Forward Commitments -- -- -- -- o o o
Forward Contracts on Foreign Currencies -- o -- -- -- -- --
High Yield Securities -- -- -- -- -- -- --
Investments in Money Market Securities o o o o o o o
Mortgage-Backed Securities -- -- -- -- o o --
Purchasing Options o o o o o o --
Repurchase Agreements o o o o o o o
Restricted Securities o o o o o o o
Reverse Repurchase Agreements -- -- -- -- -- -- --
Securities Lending o o o o o o o
Stand-By Commitments -- -- -- -- o o o
Stripped Mortgage-Backed Securities -- -- -- -- o o --
Swap and Swap-Related Products -- -- -- -- -- -- --
When-Issued Securities o o o o o o o
Writing Covered Options o o o o o o --
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
30 Allmerica Investment Trust
<PAGE>
This page left blank intentionally.
Allmerica Investment Trust 31
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
Select Aggressive Growth Fund
Select International Equity Fund
Growth Fund
Equity Index Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
The Trust's Statement of Additional Information ("SAI") includes additional
information about the Funds. The Trust's annual and semi-annual reports to
shareholders include information about the investments of the Funds. The SAI and
the financial statements included in the Fund's most recent annual report to
shareholders are incorporated by reference into this prospectus, which means
they are part of this prospectus for legal purposes. The Trust's annual report
discusses the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year. You may get free
copies of these materials, request other information about a Fund or make
shareholder inquiries by calling 1-800-828-0540.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the Public Reference Room. You may also access reports and other
information about the Trust on the Commission's Internet site at
http://www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-4138.
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street, Worcester, Massachusetts 01653
1-800-828-0540
AF10983(5/99)
<PAGE>
Allmerica Investment Trust
- --------------------------------------------------------------------------------
PROSPECTUS
May 1, 1999
This Prospectus describes the following nine investment Funds of the Trust which
serve as the underlying investments for insurance related accounts.
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
This Prospectus explains what you should know about each of the Funds. Please
read it carefully before you invest.
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.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
FUND SUMMARIES...................................... 3
Objectives, Strategies and Risks................. 4
Select Emerging Markets Fund.................. 4
Select Aggressive Growth Fund................. 5
Select Capital Appreciation Fund.............. 6
Select Value Opportunity Fund................. 7
Select International Equity Fund.............. 8
Select Growth Fund............................ 9
Select Strategic Growth Fund.................. 10
Select Growth and Income Fund................. 11
Select Income Fund............................ 12
EXPENSE SUMMARY..................................... 13
DESCRIPTION OF PRINCIPAL INVESTMENT RISKS........... 15
OTHER INVESTMENT STRATEGIES......................... 17
MANAGEMENT OF THE FUNDS............................. 19
PRICING OF FUND SHARES.............................. 27
PURCHASE AND REDEMPTION OF SHARES................... 27
DISTRIBUTIONS AND TAXES............................. 28
YEAR 2000........................................... 28
FINANCIAL HIGHLIGHTS................................ 29
APPENDIX............................................ 34
LEGEND
-----------------------------
Performance [GRAPHIC]
Investment [GRAPHIC]
Objectives
Financial [GRAPHIC]
Information
Management [GRAPHIC]
of Fund
Risk [GRAPHIC]
Investment [GRAPHIC]
Strategies
2 Allmerica Investment Trust
<PAGE>
Fund Summaries
- --------------------------------------------------------------------------------
Allmerica Investment Trust provides a broad range of investment options through
separate investment portfolios, or Funds. Shares of the Funds are sold
exclusively to variable annuity and variable life insurance Separate Accounts
and qualified pension and retirement plans.
The investment manager of the Trust is Allmerica Financial Investment Management
Services, Inc. The Manager is responsible for managing the Trust's daily
business and has general responsibility for the management of the investments of
the Funds. The Manager, at its expense, has contracted with investment
Sub-Advisers to manage the investments of the Funds. Each Sub-Adviser has been
selected on the basis of various factors including management experience,
investment techniques and staffing. See "Management of the Funds" for more
information about the Manager and the Sub-Advisers.
The following summaries describe each Fund's investment objective and principal
investment strategies, identify the principal investment risks of investing in
the Fund and provide performance charts for the Fund. Note that any percentage
limitations listed under a Fund's principal investment strategies apply at the
time of investment. The principal risks are discussed in more detail under
"Description of Principal Investment Risks". The bar charts show how the
investment returns of the shares of a Fund have varied in the past 10 years (or
for the life of the Fund if less than 10 years). The table following each bar
chart shows how the Fund's average annual return for the last one, five and ten
years (or for the life of the Fund, if shorter) compares to those of a
broad-based securities market index. Past performance does not necessarily
indicate how the Fund will perform in the future. The bar charts and tables give
some indication of the risks of investing in each Fund by showing changes in the
Fund's performance. The bar charts and tables do not reflect expenses associated
with the variable insurance product that you are purchasing. If those expenses
had been reflected, the performance shown would have been lower. A bar chart and
table are not included for two new Funds, the Select Emerging Markets Fund and
the Select Strategic Growth Fund, since as of December 31, 1998 they had not yet
had a full calendar year of investment returns.
Allmerica Investment Trust 3
<PAGE>
Objectives, Strategies and Risks
Select Emerging Markets Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Schroder Capital Management International Inc.
[GRAPHIC] Investment Objective: The Fund seeks long-term growth of capital by
investing in the world's emerging markets.
[GRAPHIC] Principal Investment Strategies: While its investments are not
limited to any specific region of the world, the Fund normally
invests at least 65% of its assets in companies located or primarily
operating in countries with emerging markets. The Fund usually has
investments in at least five developing countries. Before the Fund
invests in a country, the Sub-Adviser considers various factors such
as that country's political stability and economic prospects. In
selecting securities for the Fund, the Sub-Adviser focuses on the
long-term growth potential of the securities.
The Fund invests primarily in equities, including common stock,
preferred stock, securities convertible into common stock, rights
and warrants and similar securities. The Fund also may invest up to
35% of its assets in debt securities of issuers in emerging markets,
equity and debt securities of issuers in developed countries, cash
and cash equivalents. The Fund may invest in lower rated bonds,
commonly known as "junk bonds", as further discussed in the
"Description of Principal Investment Risks."
[GRAPHIC] Principal Risks:
o Company Risk
o Credit Risk
o Currency Risk
o Derivatives Risk
o Emerging Markets Risk
o Foreign Investment Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
4 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Aggressive Growth Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Nicholas-Applegate Capital Management, L.P.
[GRAPHIC] Investment Objective: The Fund seeks above-average capital
appreciation by investing primarily in common stocks of companies
which are believed to have significant potential for capital
appreciation.
[GRAPHIC] Principal Investment Strategies: To pursue this goal, the Fund looks
predominantly for stocks of small and mid-size companies that show
potential for rapid growth. The Fund typically invests in companies
that, because of positive developments affecting the company, offer
the possibility of accelerating earnings. The Sub-Adviser uses
systematic, fundamental research in selecting investments for the
Fund.
Under normal circumstances, the Fund invests at least 65% of its
assets in common stocks, securities convertible into common stocks
and warrants. The Fund also may invest in debt securities and
preferred stocks and up to 25% of its assets in foreign securities
(not including its investments in American Depositary Receipts or
"ADRs").
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1993 .................. 19.51%
1994 .................. -2.31%
1995 .................. 32.28%
1996 .................. 18.55%
1997 .................. 18.71%
1998 .................. 10.56%
During the period shown above the highest quarterly return was 23.18% for the
quarter ended 12/31/98 and the lowest was (22.81)% for the quarter ended
9/30/98.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 10.56% 14.99% 18.11%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 14.13% 16.27%
- --------------------------------------------------------------------------------
* The Russell 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks.
Allmerica Investment Trust 5
<PAGE>
Objectives, Strategies and Risks
Select Capital Appreciation Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: T. Rowe Price Associates, Inc.
[GRAPHIC] Investment Objective: The Fund seeks long-term growth of capital.
Realization of income is not a significant investment consideration
and any income realized on the Fund's investments will be incidental
to its primary objective.
[GRAPHIC] Principal Investment Strategies: The Fund's Sub-Adviser looks for
companies with proven business ideas and earnings growth rates in
excess of market averages. The Fund normally invests at least 50% of
its equity assets in securities of companies with market
capitalizations that fall within the range of companies in the S&P
Mid Cap 400 Index (as of December 31, 1998, $240 million to $11.6
billion market capitalization). The Fund may also invest in larger
firms and firms with a market capitalization below $240 million.
While the Fund invests primarily in common stocks, it also may
invest in preferred stocks, warrants, government securities,
corporate bonds and other debt securities. Up to 25% of its assets
may be invested in "junk bonds". The Fund may invest without
limitation in foreign securities.
[GRAPHIC] Principal Risks:
o Company Risk
o Credit Risk
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1996 .................. 8.80%
1997 .................. 14.28%
1998 .................. 13.88%
During the period shown above the highest quarterly return was 27.90% for the
quarter ended 12/31/98 and the lowest was (18.54)% for the quarter ended
9/30/98.
T. Rowe Price Associates, Inc. became Sub-Adviser of the Fund on April 1, 1998.
Performance before that date is based on the performance of the Fund's previous
Sub-Adviser.
Performance Table
Average Annual Total Returns
(for the periods ending Past Since Inception
December 31, 1998) One Year (April 28, 1995)
- --------------------------------------------------------------------------------
Fund Shares 13.88% 20.37%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 17.50%
- --------------------------------------------------------------------------------
* The Russell 2500 Index is a unmanaged composite of 2,500 small-to-mid
capitalization stocks.
6 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Value Opportunity Fund
[GRAPHIC] Sub-Adviser: Cramer Rosenthal McGlynn, LLC
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: The Fund's Sub-Adviser attempts to
find stocks that are attractively valued relative to their future
prospects and the market as a whole. The most promising
opportunities can be found in companies that are temporarily out of
favor or when most analysts are confused about changes taking place
at a company. In these situations, the company's stock is often
undervalued.
The Fund invests primarily in companies with market capitalization
between $200 million and $5 billion. The Fund normally invests at
least 80% of the portfolio in common stocks and may invest in other
equity securities and up to 25% of its assets in foreign securities
(not including its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1994 .................. -6.51%
1995 .................. 17.60%
1996 .................. 28.53%
1997 .................. 24.85%
1998 .................. 4.87%
During the period shown above the highest quarterly return was 13.42% for the
quarter ended 12/31/98 and the lowest was (12.24)% for the quarter ended
9/30/98. Absent reimbursement of certain Fund expenses during these periods, the
Fund's total returns would have been lower.
Cramer Rosenthal McGlynn, LLC became Sub-Adviser of the Fund on January 1, 1997.
Performance before that date is based on the performance of the Fund's previous
Sub-Adviser.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (April 30, 1993)
- --------------------------------------------------------------------------------
Fund Shares 4.87% 13.09% 14.71%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 14.13% 15.09%
- --------------------------------------------------------------------------------
* The Russell 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks.
Allmerica Investment Trust 7
<PAGE>
Objectives, Strategies and Risks
Select International Equity Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Bank of Ireland Asset Management (U.S.) Limited
[GRAPHIC] Investment Objective: The Fund seeks maximum long-term total return
(capital appreciation and income) primarily by investing in common
stocks of established non-U.S. companies.
[GRAPHIC] Principal Investment Strategies: Under normal market conditions, at
least 65% of the Fund's assets will be invested in the securities of
medium and large-size companies located in at least five foreign
countries, not including the United States. To achieve its
objective, the Fund focuses on equity securities which the
Sub-Adviser believes are undervalued in relation to the company's
prospects for future earnings growth. The Fund may also buy
fixed-income debt securities, primarily for defensive purposes.
[GRAPHIC] Principal Risks:
o Company Risk
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1995 .................. 19.63%
1996 .................. 21.94%
1997 .................. 4.65%
1998 .................. 16.48%
During the period shown above the highest quarterly return was 19.49% for the
quarter ended 12/31/98 and the lowest was (17.69)% for the quarter ended
09/30/98.
Performance Table
Average Annual Total Returns
(for the periods ending Past Since Inception
December 31, 1998) One Year (May 2, 1994)
- --------------------------------------------------------------------------------
Fund Shares 16.48% 12.26%
- --------------------------------------------------------------------------------
Morgan Stanley Capital Intl.
EAFE Index* 20.33% 8.41%
- --------------------------------------------------------------------------------
* The Morgan Stanley Capital International EAFE (Europe, Australia, Far East)
Index, reflecting reinvestment of gross dividends, is an unmanaged
capitalization weighted index of foreign developed country common stocks.
8 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Growth Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Putnam Investment Management, Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: To attain its objective, the Fund
looks for companies that appear to have favorable long-term growth
characteristics. The Fund typically invests in stocks of large
capitalization companies, such as those included in the S&P 500
Index, although it can also make investments in smaller growth
companies.
At least 65% of the Fund's assets normally will consist of common
stocks that the Sub-Adviser believes have growth potential. The Fund
also may purchase convertible bonds and preferred stocks and
warrants. The Fund normally invests substantially all of its
investments in equity securities, although it may invest up to 35%
in debt securities including up to 15% in "junk bonds". The Fund may
invest up to 25% of its assets in foreign securities (not including
its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Credit Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1993 .................. 0.84%
1994 .................. -1.49%
1995 .................. 24.59%
1996 .................. 22.02%
1997 .................. 34.06%
1998 .................. 35.44%
During the period shown above the highest quarterly return was 25.02% for the
quarter ended 12/31/98 and the lowest was (11.84)% for the quarter ended
09/30/98.
Putnam Investment Management, Inc. became Sub-Adviser of the Fund on July 1,
1996. Performance before that date is based on the performance of the Fund's
previous Sub-Adviser.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 35.44% 22.15% 19.18%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.53%
- --------------------------------------------------------------------------------
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an unmanaged
index of 500 leading stocks. S&P 500(R) Index is a registered trademark of
Standard & Poor's Corporation.
Allmerica Investment Trust 9
<PAGE>
Objectives, Strategies and Risks
Select Strategic Growth Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Cambiar Investors, Inc.
[GRAPHIC] Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in common stocks of established companies.
[GRAPHIC] Principal Investment Strategies: The Sub-Adviser attempts to find
stocks that are currently trading at attractive values in relation
to the market and have potential for long-term earnings growth.
These are often stocks of companies which have been out of favor but
have experienced positive recent developments not yet recognized in
the stock's price.
Under normal market conditions, the Fund invests at least 65% of its
assets in the common stocks of companies with a market
capitalization of more than $1 billion. In addition, the Fund may
purchase preferred stocks, debt securities and securities
convertible into or exchangeable for common stocks. The Fund may
invest up to 20% of its assets in foreign securities (not including
its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
10 Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Growth and Income Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: J.P. Morgan Investment Management Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: The Fund invests in a broadly
diversified portfolio of equity securities, primarily the common
stock of companies included in the S&P 500 Index. The Fund's
industry diversification and other risk characteristics will be
similar to those of the index. The Fund may invest in a wide range
of equity securities, consisting of common stocks, preferred stocks,
securities convertible into common and preferred stocks and
warrants. The Fund may purchase individual stocks not presently
paying dividends if the Sub-Adviser believes the overall portfolio
is positioned to achieve its income objective.
The Fund may invest up to 35% of its assets in fixed-income
securities, including up to 15% in "junk bonds". However, the Fund's
normal strategy is to be nearly fully invested in equity securities.
The Fund may also invest up to 25% of its assets in foreign
securities (not including its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1993 .................. 10.37%
1994 .................. 0.73%
1995 .................. 30.32%
1996 .................. 21.26%
1997 .................. 22.51%
1998 .................. 16.43%
During the period shown above the highest quarterly return was 19.41% for the
quarter ended 12/31/98 and the lowest was (12.66)% for the quarter ended
9/30/98.
J.P. Morgan Investment Management Inc. became Sub-Adviser of the Fund on April
1, 1999. Performance before that date is based on the performance of the Fund's
previous Sub-Advisers.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 16.43% 17.82% 15.53%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.53%
- --------------------------------------------------------------------------------
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an unmanaged
index of 500 leading stocks. S&P 500(R) Index is a registered trademark of
Standard & Poor's Corporation.
Allmerica Investment Trust 11
<PAGE>
Objectives, Strategies and Risks
Select Income Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Standish, Ayer & Wood, Inc.
[GRAPHIC] Investment Objective: The Fund seeks a high level of current income.
The Fund will invest primarily in investment grade, fixed-income
securities.
[GRAPHIC] Principal Investment Strategies: Examples of 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; commercial paper; obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities; and debt
securities backed by various types of financial assets. The Fund
also may invest in mortgage-backed and asset-backed securities. The
Fund's investments in corporate debt securities are not limited to
any particular type of company or industry. The Fund may invest up
to 25% of its assets in foreign securities (not including its
investments in ADRs), up to 35% of its assets in money market
instruments and up to 25% in debt obligations of supranational
entities.
The average maturity and the mix of portfolio securities will vary
depending on such factors as current market conditions and the
comparative yields from different instruments. The Fund invests
primarily in investment grade securities rated in the four highest
grades by Moody's Investors Services or Standard & Poor's Rating
Services or similar rating organizations, and in unrated securities.
For more information about rating categories, see the Appendix to
the Statement of Additional Information ("SAI"). The Fund also may
invest up to 25% of its assets in "junk bonds."
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
o Prepayment Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1993 .................. 10.95%
1994 .................. -4.82%
1995 .................. 16.96%
1996 .................. 3.32%
1997 .................. 9.17%
1998 .................. 6.83%
During the period shown above the highest quarterly return was 5.64% for the
quarter ended 6/30/95 and the lowest was (3.87)% for the quarter ended 3/31/94.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
Fund Shares 6.83% 6.05% 6.56%
- --------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index* 8.67% 7.27% 7.51%
- --------------------------------------------------------------------------------
* The Lehman Brothers Aggregate Bond Index(R) is an unmanaged index of fixed
rate debt issues with an investment grade or higher rating at least one year
to maturity and an outstanding par value of at least $25 million.
12 Allmerica Investment Trust
<PAGE>
Expense Summary
- --------------------------------------------------------------------------------
Expenses are one of several factors to consider when investing in a Fund.
Expenses shown are based on expenses incurred in respect of shares of the Funds
for the 1998 fiscal year. The Examples show the cumulative expenses attributable
to a hypothetical $10,000 investment in each Fund over specified periods.
Fees and Expenses of the Funds
This table describes the fees and expenses that you may pay if you invest in the
Funds. Please note that the expenses listed below do not include the expenses of
the applicable variable insurance product that you are purchasing. You should
refer to the variable insurance product prospectus for more information relating
to the fees and expenses of that product, which are in addition to the expenses
of the Funds.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
Shareholder (expenses deducted from Fund assets) Total Annual
Fees Fund
(fees paid directly Management Distribution Other Operating
from your investment) Fees (12b-1) Fees Expenses Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Emerging Markets Fund @ None 1.35%* None 1.19% 2.54%(1),(2)*
- -----------------------------------------------------------------------------------------------------------------------------------
Select Aggressive Growth Fund None 0.88% None 0.07% 0.95%(1),(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Capital Appreciation Fund None 0.94% None 0.10% 1.04%(1),(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Value Opportunity Fund None 0.91%(1)* None 0.08% 0.99%(1),(2)*
- -----------------------------------------------------------------------------------------------------------------------------------
Select International Equity Fund None 0.90% None 0.12% 1.02%(1),(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Growth Fund None 0.81%** None 0.05% 0.86%(1),(2)**
- -----------------------------------------------------------------------------------------------------------------------------------
Select Strategic Growth Fund @ None 0.85%* None 0.81% 1.66%(1),(2)*
- -----------------------------------------------------------------------------------------------------------------------------------
Select Growth and Income Fund None 0.68% None 0.05% 0.73%(1),(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Select Income Fund None 0.54% None 0.10% 0.64%(1)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
@ The Select Emerging Markets Fund and Select Strategic Growth Fund
commenced operations on February 20, 1998. Expenses shown are annualized.
* Amount does not reflect a voluntary expense limitation currently in effect
for the Select Emerging Markets Fund, Select Value Opportunity Fund, and
Select Strategic Growth Fund. For the year ended December 31, 1998, the
Management Fees and Total Annual Fund Operating Expenses were 1.00% and
2.19%, respectively, for Select Emerging Markets Fund, 0.90% and 0.98%,
respectively, for Select Value Opportunity Fund, and 0.39% and 1.20%,
respectively, for the Select Strategic Growth Fund after the effect of the
voluntary expense limitations.
** Effective June 1, 1998, the management fee rate for the Select Growth Fund
was revised. The Management Fee and Total Annual Fund Operating Expense
ratios shown in the table above have been adjusted to assume that the
revised rates took effect on January 1, 1998.
(1) Until further notice, Allmerica Financial Investment Management Services,
Inc. (the "Manager") has declared a voluntary expense limitation of 1.35%
of average net assets for the Select Aggressive Growth Fund and Select
Capital Appreciation Fund, 1.25% for the Select Value Opportunity Fund,
1.50% for the Select International Equity Fund, 1.20% for the Select
Growth Fund, 1.10% for the Select Growth and Income Fund, and 1.00% for
the Select Income Fund. The total operating expenses of these Funds of the
Trust were less than their respective expense limitations throughout 1998.
Allmerica Investment Trust 13
<PAGE>
Until further notice, the Manager has declared a voluntary expense limitation of
1.20% of average daily net assets for the Select Strategic Growth Fund. In
addition, the Manager has agreed to voluntarily waive its management fee to the
extent that expenses of the Select Emerging Markets Fund exceed 2.00% of the
Fund's average daily net assets. The amount of such waiver shall not exceed the
net amount of management fees earned by the Manager from the Fund after
subtracting fees paid by the Manager to the Fund's Sub-Adviser.
Until further notice, the Select Value Opportunity Fund's management fee rate
has been voluntarily limited to an annual rate of 0.90% of average daily net
assets.
The declaration of a voluntary management fee or expense limitation in any year
does not bind the Manager to declare future expense limitations with respect to
these Funds. These limitations may be terminated at any time.
(2) These Funds have entered into agreements with brokers whereby brokers
rebate a portion of commissions. Had these amounts been treated as
reductions of expenses, the total annual fund operating expense ratios
would have been 2.19% for Select Emerging Market Fund, 0.92% for the
Select Aggressive Growth Fund, 1.02% for the Select Capital Appreciation
Fund, 0.94% for the Select Value Opportunity Fund, 1.01% for the Select
International Equity Fund, 0.84% for the Select Growth Fund, 1.14% for the
Select Strategic Growth Fund, and 0.70% for the Select Growth and Income
Fund.
Example
This Example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Select Emerging Markets Fund $254 $781 $1,334 $2,840
- ---------------------------------------------------------------------------------------
Select Aggressive Growth Fund $95 $297 $515 $1,143
- ---------------------------------------------------------------------------------------
Select Capital Appreciation Fund $104 $325 $563 $1,246
- ---------------------------------------------------------------------------------------
Select Value Opportunity Fund $99 $309 $536 $1,189
- ---------------------------------------------------------------------------------------
Select International Equity Fund $102 $318 $552 $1,223
- ---------------------------------------------------------------------------------------
Select Growth Fund $86 $269 $467 $1,039
- ---------------------------------------------------------------------------------------
Select Strategic Growth Fund $166 $515 $887 $1,933
- ---------------------------------------------------------------------------------------
Select Growth and Income Fund $73 $228 $398 $887
- ---------------------------------------------------------------------------------------
Select Income Fund $64 $200 $349 $781
- ---------------------------------------------------------------------------------------
</TABLE>
14 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Description of Principal Investment Risks
- --------------------------------------------------------------------------------
The following is a summary of the principal risks of investing in a Fund and the
factors likely to cause the value of your investment in the Fund to decline. The
principal risks applicable to each Fund are identified under "Fund Summaries".
There are also many factors that could cause the value of your investment in a
Fund to decline which are not described here. It is important to remember that
there is no guarantee that the Funds will achieve their investment objective,
and an investor in any of the Funds could lose money.
Company Risk
A Fund's equity and fixed income investments in a company often fluctuate based
on:
o the firm's actual and anticipated earnings,
o changes in management, product offerings and overall financial strength
and
o the potential for takeovers and acquisitions.
This is due to the fact that prices of securities react to the fiscal and
business conditions of the company that issued the securities. Factors affecting
a company's particular industry, such as increased production costs, also may
affect the value of its securities.
Smaller companies with market capitalizations of less than $1 billion or so are
more likely than larger companies to have limited products lines or smaller
markets for their goods and services. Small company stocks may not trade very
actively, and their prices may fluctuate more than stocks of other companies as
a result of lower liquidity. They may depend on a small or inexperienced
management group. Stocks of smaller companies also may be more vulnerable to
negative changes than stocks of larger companies.
Credit Risk
Credit risk is the risk that the issuer of a fixed income security will not be
able to pay principal and interest when due. There are different levels of
credit risk. Funds that invest in lower-rated securities have higher levels of
credit risk. Lower-rated or unrated securities of equivalent quality, generally
known as "junk bonds", have very high levels of credit risk. "Junk bonds" are
considered to be speculative in their capacity to pay interest and repay
principal. The price of a fixed income security can be expected to fall if the
issuer defaults on its obligation to pay principal or interest, the rating
agencies downgrade the issuer's credit rating or there is negative news that
affects the market's perception of the issuer's credit risk.
Currency Risk
This is the risk that the value of a Fund's investments may decline due to
fluctuations in exchange rates between the U.S. dollar and foreign currencies.
Funds that invest in securities denominated in or are receiving revenues in
foreign currencies are subject to currency risk. There is often a greater risk
of currency fluctuations and devaluations in emerging markets countries.
Derivatives Risk
A Fund may use derivatives to hedge against an opposite position that the Fund
also holds. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. When a Fund uses derivatives to hedge, it takes the risk that
changes in the value of the derivative will not match those of the asset being
hedged. Incomplete correlation can result in unanticipated losses. A Fund may
also use derivatives as an investment vehicle to gain market exposure. Gains or
losses from derivative investments may be substantially greater than the
derivative's original cost. When a Fund uses derivatives, it is also subject to
the risk that the other party to the agreement will not be able to perform.
Additional risks associated with derivatives include mispricing and improper
valuation.
Allmerica Investment Trust 15
<PAGE>
Emerging Markets Risk
Investments in emerging markets securities involve all of the risks of
investments in foreign securities, and also have additional risks. The markets
of developing countries have been more volatile than the markets of developed
countries with more mature economies. Many emerging markets companies in the
early stages of development are dependent on a small number of products and lack
substantial capital reserves. In addition, emerging markets often have less
developed legal and financial systems. These markets often have provided
significantly higher or lower rates of return than developed markets and usually
carry higher risks to investors than securities of companies in developed
countries.
Foreign Investment Risk
Investing in foreign securities involves risks relating to political, social and
economic developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and interest,
limitations on the use or transfer of portfolio assets, and political or social
instability. In the event of nationalization, expropriation or other
confiscation, a Fund could lose its entire investment. Funds investing in
foreign securities may experience rapid changes in value. One reason for this
volatility is that the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. Enforcing legal rights may be difficult, costly and slow in
foreign countries. Also, foreign companies may not be subject to governmental
supervision or accounting standards comparable to those applicable to U.S.
companies, and there may be less public information about their operations. The
conversion of certain European currencies to the "euro" may present additional
risks to those Funds exposed to such currencies.
Interest Rate Risk
When interest rates rise, the prices of fixed income securities in a Fund's
portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Fund's portfolio will generally rise. Even
Funds that invest in the highest quality debt securities are subject to interest
rate risk. Interest rate risk usually will affect the price of a fixed income
security more if the security has a longer maturity because changes in interest
rates are increasingly difficult to predict over longer periods of time. Fixed
income securities with longer maturities will therefore be more volatile than
other fixed income securities with shorter maturities.
Investment Management Risk
Investment management risk is the risk that a Fund does not achieve its
investment objective, even though the Sub-Adviser uses various investment
strategies and techniques.
Liquidity Risk
This is the risk that a Fund will not be able to sell a security at a reasonable
price because there are too few people who actively buy and sell, or trade, that
security on a regular basis. Liquidity risk increases for Funds investing in
foreign investments (especially emerging markets securities), smaller companies,
lower credit quality bonds (also called "junk bonds"), restricted securities,
over-the-counter securities and derivatives.
Market Risk
This is the risk that the price of a security held by a Fund will fall due to
changing economic, political or market conditions or to factors affecting
investor psychology.
Prepayment Risk
While mortgage-backed securities may have a stated maturity, their expected
maturities may vary when interest rates rise or fall. When interest rates fall,
homeowners are more likely to prepay their mortgage loans which may result in an
unforeseen loss of future interest income to a Fund. Also, because prepayments
increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed income securities when interest rates
fall.
16 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Other Investment Strategies
- --------------------------------------------------------------------------------
The Fund Summaries starting on page 3 describe the investment objective and the
principal investment strategies and risks of each Fund. The Funds may at times
use the following investment strategies. Attached as an Appendix is a chart with
a listing of various investment techniques and strategies that the Sub-Advisers
of the Funds may utilize. A Fund may decide that it is in the best interests of
shareholders to make changes to its investment objective and strategies
described in this Prospectus. These investment objectives and strategies may be
changed with the approval of the Board of Trustees, but without shareholder
approval.
Derivative Investments. (applicable to each Fund) Instead of investing directly
in the types of portfolio securities described in the Summary, each Fund may buy
or sell a variety of "derivative" investments to gain exposure to particular
securities or markets. Derivatives are financial contracts whose value depends
on, or is derived from, the value of an underlying asset, reference rate or
index. A Fund's Sub-Adviser will sometimes use derivatives as part of a strategy
designed to reduce other risks and sometimes will use derivatives to enhance
returns, which increases opportunities for gain but also involves greater risk.
Foreign Investments. (applicable to each Fund) Each Fund may invest all or a
substantial part of its portfolio in securities of companies that are located or
primarily doing business in a foreign country. A company is considered to be
located in a foreign 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 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
country or (ii) at least 50% of the company's assets are situated in the
country. A Fund may invest in foreign securities either directly or indirectly
through the use of depositary receipts, such as ADRs. Depositary receipts are
generally issued by banks or trust companies and evidence ownership of
underlying foreign securities. 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 Select Capital
Appreciation Fund and Select International Equity Fund may also purchase foreign
securities through European Depositary Receipts and Global Depositary Receipts.
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) The Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund, and Select
Income Fund may purchase corporate debt securities which are high yield
securities, or "junk bonds" (rated at the time of purchase BB or lower by
Moody's or S&P, or equivalently rated by another rating agency, or unrated but
believed by the Sub-Adviser to have similar quality.) These securities are
considered to be speculative in their capacity to pay interest and repay
principal.
Allmerica Investment Trust 17
<PAGE>
Lending of Securities. (applicable to all Funds) To realize additional income,
the Funds may lend portfolio securities to broker-dealer or financial
institutions in an amount up to 33-1/3% of a Fund's total assets. 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
possible delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral.
Restricted Securities. (applicable to all Funds) The Funds may purchase
securities that are not registered under Federal securities law ("restricted
securities"), but can be offered and sold to certain "qualified institutional
buyers". 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). These limits do not apply if the Board of Trustees determines that
the 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, retains
sufficient oversight and is ultimately responsible for the determinations. This
investment practice could increase the level of illiquidity in a Fund if buyers
lose interest in restricted securities. As a result, a Fund might not be able to
sell these securities when its Sub-Adviser wants to sell, or might have to sell
them at less than fair value. In addition, market quotations for these
securities are less readily available.
Temporary Defensive Strategies. At times a Sub-Adviser may determine that market
conditions make it desirable temporarily to suspend a Fund's normal investment
activities. This is when the Fund may temporarily invest in a variety of
lower-risk securities, such as U.S. Government and other high quality bonds and
short-term debt obligations. Such strategies attempt to reduce changes in the
value of the Fund's shares. The Fund may not achieve its investment objective
while these strategies are in effect.
Frequent Trading. Certain Funds from time to time may engage in active and
frequent trading to achieve their investment objective. Frequent trading
increases transaction costs, which could detract from the Fund's performance.
18 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Management of the Funds
- --------------------------------------------------------------------------------
The Trust is governed by a Board of Trustees. Allmerica Financial Investment
Management Services, Inc. is the investment Manager of the Trust responsible for
managing the Trust's day-to-day business affairs. The Manager is located at 440
Lincoln Street, Worcester, MA 01653. The Manager and its predecessor, Allmerica
Investment Management Company, Inc., have been managing mutual funds since 1985.
The Manager currently serves as investment manager to one other mutual fund.
Sub-Advisers have been hired to manage the investments of the Funds. The Trust
and Manager have obtained an order of exemption from the SEC that permits the
Manager to enter into and materially amend sub-advisory agreements with
non-affiliated Sub-Advisers without obtaining shareholder approval. The Manager
has ultimate responsibility to oversee Sub-Advisers. The Manager has the
ability, subject to approval of the Trustees, to hire and terminate Sub-Advisers
and to change materially the terms of the Sub-Adviser Agreements, including the
compensation paid to the Sub-Advisers. The Sub-Advisers have been selected by
the Manager and Trustees with the help of BARRA RogersCasey, Inc., a pension
consulting firm. The fees earned by each Sub-Adviser and BARRA RogersCasey are
paid by the Manager. The performance by the Sub-Advisers is reviewed quarterly
by a committee of the Board of Trustees, with assistance from BARRA RogersCasey.
The following table provides information about each Fund's Sub-Adviser:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Fund Name,
Sub-Adviser Name and Address Experience
- -----------------------------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------------------------
Select Emerging Markets Fund Organized in 1980 and has $27.1 billion assets under
Schroder Capital Management management as of December 31, 1998. Provides global
International Inc. equity and fixed income management services to mutual
787 Seventh Avenue funds and other institutional investors.
New York, NY 10019
- -----------------------------------------------------------------------------------------------------------
Select Aggressive Growth Fund Has over $31 billion assets under management as of
Nicholas-Applegate Capital Management, L.P. January 21, 1999. Founded in 1984. Clients include
600 West Broadway, Suite 2900 employee benefit and retirement plans, foundations,
San Diego, CA 92101 investment companies and individuals.
- -----------------------------------------------------------------------------------------------------------
Select Capital Appreciation Fund Manages with its affiliates assets totaling $148 billion
T. Rowe Price Associates, Inc. as of December 31, 1998 for seven million individual and
100 East Pratt Street institutional investor accounts. Founded in 1937.
Baltimore, MD 21202
- -----------------------------------------------------------------------------------------------------------
Select Value Opportunity Fund Established in 1973. Over $4.3 billion assets under
Cramer Rosenthal McGlynn, LLC management as of December 31, 1998. Provides investment
707 Westchester Avenue advice to mutual funds, individuals, government
White Plains, NY 10604 agencies, pension plans and trusts.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 19
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Fund Name,
Sub-Adviser Name and Address Experience
- -----------------------------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------------------------
Select International Equity Fund Managed over $38 billion in global securities as of
Bank of Ireland Asset Management (U.S.) Ltd. December 31, 1998. Founded in 1966. Provides
26 Fitzwilliam Place, Dublin 2, international investment management services.
Ireland and 20 Horseneck Lane
Greenwich, CT 06830
- -----------------------------------------------------------------------------------------------------------
Select Growth Fund As of December 31, 1998, $294 billion assets under
Putnam Investment Management, Inc. management, including affiliates. Investment manager of
One Post Office Square mutual funds and other clients since 1937.
Boston, MA 02109
- -----------------------------------------------------------------------------------------------------------
Select Strategic Growth Fund Began operations in 1973. Manages portfolios for
Cambiar Investors, Inc. corporations, pension plans and financial institutions.
8400 East Prentice Avenue As of December 31, 1998, $2.3 billion assets under
Suite 460 management.
Englewood, CO 80111
- -----------------------------------------------------------------------------------------------------------
Select Growth and Income Fund Incorporated in 1984. With affiliates, over $300 billion
J.P. Morgan Investment Management Inc. assets under management as of December 31, 1998. Serves
522 Fifth Avenue as investment adviser for employee benefit plans and
New York, NY 10036 other institutional assets, as well as mutual funds and
variable annuities.
- -----------------------------------------------------------------------------------------------------------
Select Income Fund Founded in 1933. Had $46 billion in assets under
Standish, Ayer & Wood, Inc. management as of December 31, 1998. Manages portfolios
One Financial Center for pension plans, financial institutions and endowment
Boston, MA 02111 and foundation funds.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
For a sample listing of certain of the Sub-Advisers' clients, see "Investment
Management and Other Services" in the SAI.
20 Allmerica Investment Trust
<PAGE>
The following individuals or groups of individuals are primarily responsible for
the day-to-day management of the Funds' portfolios:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Emerging Markets Fund John A. Troiano, Chief Executive 1981 - Present Joined SCMI as an investment
Schroder Capital Management and Chairman of Emerging analyst specializing in
International Inc. ("SCMI") Markets Committee engineering and technology;
in 1989 set up SCMI's Latin
American team.
Mark Bridgeman, 1990 - Present Joined SCMI in 1990 and is
First Vice President Fund Manager specializing
in African markets.
Heather F. Crighton, Director 1993 - Present Joined SCMI in 1993 as
Fund Manager specializing
in Asian emerging markets.
- -------------------------------------------------------------------------------------------------------------------------------
Select Aggressive Growth Fund Lawrence S. Speidell, Partner 1994 - Present Director of Global/Systematic
Nicholas-Applegate Capital Portfolio Management and
Management, L.P. ("NACM") Research at NACM. Prior
to joining NACM, he spent
ten years with Batterymarch
Financial Management.
John J. Kane, Partner 1994 - Present Senior Portfolio Manager for
the U.S. Systematic portfolios
at NACM. Prior to joining
NACM in 1994, he was
employed by ARCO Invest-
Management Company
and General Electric.
Mark W. Stuckelman, 1995 - Present Portfolio Manager for the
Portfolio Manager U.S. Systematic portfolios
at NACM. Prior to joining
NACM, he was employed for
five years with Wells Fargo
Bank, Fidelity Management
Trust Co., and BARRA, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Select Capital Appreciation Fund Brian W.H. Berghuis, 1985 - Present He has fifteen years
T. Rowe Price Associates, Inc. Chartered Financial Analyst experience in equity research
("T. Rowe Price") and portfolio management.
He is Chairman of the
investment team for the
Fund.
John F. Wakeman, Research 1989 - Present He spent nine years with
Analyst & Portfolio Manager T. Rowe Price as a research
analyst and portfolio manager
and has eleven years' experi-
ence in equity research.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 21
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Capital Appreciation Fund Marc L. Baylin, Chartered 1993 - Present He has seven years of
continued Financial Analyst investment experience in
equity research and has been
with T. Rowe Price for the past
five years as a research analyst.
- -------------------------------------------------------------------------------------------------------------------------------
Select Value Opportunity Fund Ronald H. McGlynn, CEO and 1973 - Present He joined Cramer Rosenthal
Cramer Rosenthal McGlynn, President of Cramer Rosenthal in 1973, has 29 years of
LLC ("Cramer Rosenthal") investment experience and
serves as Co-Chief Investment
Officer and Portfolio Manager.
Jay B. Abramson, Executive 1985 - Present He has been with Cramer
Vice President and Director Rosenthal since 1985 and his
of Research and Co-Chief overall responsibility is for
Investment Officer investment research.
- -------------------------------------------------------------------------------------------------------------------------------
Select International Equity Fund Christopher Reilly, 1980 - Present Since 1985, he has had
Bank of Ireland Asset Management Chief Investment Officer overall responsibility for asset
(U.S.) Limited ("BIAM") management. He previously
worked in the United
Kingdom in stockbrokering
and investment management.
Denis Donovan, Director- 1985 - Present Prior to joining BIAM, he
Portfolio Manager spent more than 13 years in
the money market and foreign
exchange operations of the
Central Bank of Ireland. At
present, he has overall respon-
sibility for the portfolio
management function for all
of BIAM's client base.
Peter Wood, Senior 1985 - Present Prior to 1985, he spent five
Portfolio Manager years with another leading
investment management firm.
He is now responsible for
portfolio construction at BIAM.
Jane Neill, Senior Equity Analyst 1994 - Present Previously, she was Chief
Investment Officer with
another leading Irish invest-
ment management firm.
- -------------------------------------------------------------------------------------------------------------------------------
Select Growth Fund C. Beth Cotner, CFA, 1995 - Present Prior to 1995, Ms. Cotner was
Putnam Investment Chief Investment Officer Executive Vice President at
Management, Inc. ("Putnam") Kemper Financial Services.
Manuel Weiss, CFA, 1987 - Present He has been an investment
Senior Vice President professional with Putnam
since 1987.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22 Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Strategic Growth Fund Michael S. Barish, 1973 - Present He founded Cambiar in 1973
Cambiar Investors, Inc. CFA and President and has 36 years of investment
("Cambiar") experience. He is a generalist
and is responsible for the
consumer goods and health-
care securities.
Kathleen M. McCarty, 1987 - Present Prior to 1987, Ms. McCarty
CFA, Senior Vice President was employed by Dain
Bosworth as Vice President
of Research. She is responsible
for financial services,
communication services and
utilities securities.
Michael J. Gardner, 1995 - Present Prior to 1995, Mr. Gardner was
CFA and Vice President employed by Simmons & Co.
He is responsible for energy
and capital goods securities.
Brian M. Barish, 1997 - Present Prior to joining Cambiar in
CFA and Vice President 1997, Mr. Barish was Vice
President at Lazard Freres &
Co. He is responsible for
technology-software, con-
sumer goods, transportation
and international securities.
- -------------------------------------------------------------------------------------------------------------------------------
Select Growth and Income Fund Bernard A. Kroll, Vice President 1996-Present Prior to joining J.P. Morgan
J.P. Morgan Investment in 1996, Mr. Kroll was an
Management Inc. ("J.P. Morgan") equity derivatives specialist
at Goldman Sachs & Co.,
founded his own software
development firm and options
broker-dealer, and managed
several derivatives businesses
at Kidder, Peabody & Co.
He is a portfolio manager in
the Structured Equity Group.
Timothy J. Devlin, Vice President 1996-Present Prior to joining J.P. Morgan
in 1996, Mr. Devlin was an
equity portfolio manager at
Mitchell Hutchins Asset
Management Inc. He is a
portfolio manager in the
Structured Equity Group.
James C. Wiess, Vice President 1992-Present He is a portfolio manager in
the Structured Equity Group
and has been at J.P. Morgan
since 1992.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 23
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Income Fund Edward H. Ladd, 1962 - Present He is the firm's economist and
Standish, Ayer & Wood, Inc. Chairman and Managing Director also assists clients in establish-
("SAW") ing investment strategies.
Mr. Ladd is a Director of
the Federal Reserve Bank of
Boston, New England Electric
System, Greylock Management
and Harvard Management
Corp. and a member of SAW's
Executive Committee.
George W. Noyes, President and 1970 - Present He directs bond policy
Managing Director 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, 1974 - Present She manages fixed-income
Managing Director 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 1984 - Present He 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 1976 - Present She is head of the tax-
and Director exempt area and manages
insurance and pension fund
accounts. Ms. Furman
currently serves on SAW's
Executive Committee.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24 Allmerica Investment Trust
<PAGE>
For the fiscal year ended December 31, 1998, the Funds paid the Manager the fees
shown in the table below:
Fee (as a percentage of
Fund average net assets)
- --------------------------------------------------------------------------------
Select Emerging Markets Fund* 1.35%
- --------------------------------------------------------------------------------
Select Aggressive Growth Fund 0.88%
- --------------------------------------------------------------------------------
Select Capital Appreciation Fund 0.94%
- --------------------------------------------------------------------------------
Select Value Opportunity Fund* 0.91%
- --------------------------------------------------------------------------------
Select International Equity Fund 0.90%
- --------------------------------------------------------------------------------
Select Growth Fund 0.82%
- --------------------------------------------------------------------------------
Select Strategic Growth Fund* 0.85%*
- --------------------------------------------------------------------------------
Select Growth and Income Fund 0.68%
- --------------------------------------------------------------------------------
Select Income Fund 0.54%
- --------------------------------------------------------------------------------
* Amount does not reflect a voluntary expense limitation currently in effect
for the Select Emerging Markets Fund, Select Value Opportunity Fund, and
Select Strategic Growth Fund.
For the fiscal year ended December 31, 1998, the Manager paid each Sub-
Adviser aggregate fees as set forth below:
<TABLE>
<CAPTION>
Fee (as a percentage of
Sub-Adviser average net assets)
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Schroder Capital Management International Inc.(1) (Select Emerging Markets Fund) 1.00%
- --------------------------------------------------------------------------------------------------------------
Nicholas-Applegate Capital Management, L.P. (Select Aggressive Growth Fund) 0.51%
- --------------------------------------------------------------------------------------------------------------
T. Rowe Price Associates, Inc.* (Select Capital Appreciation Fund) 0.52%
- --------------------------------------------------------------------------------------------------------------
Cramer Rosenthal McGlynn, LLC (Select Value Opportunity Fund) 0.54%
- --------------------------------------------------------------------------------------------------------------
Bank of Ireland Asset Management (U.S.) Limited (Select International Equity Fund) 0.33%
- --------------------------------------------------------------------------------------------------------------
Putnam Investment Management, Inc. (Select Growth Fund) 0.33%
- --------------------------------------------------------------------------------------------------------------
Cambiar Investors, Inc.(2) (Select Strategic Growth Fund) 0.50%
- --------------------------------------------------------------------------------------------------------------
John A. Levin & Co., Inc.** (Select Growth and Income Fund) 0.30%
- --------------------------------------------------------------------------------------------------------------
Standish, Ayer & Wood, Inc. (Select Income Fund) 0.20%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 25
<PAGE>
(1) The Select Emerging Markets Fund began operations on February 20, 1998.
For its services, Schroder Capital Management International Inc. 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%
- --------------------------------------------------------------------------------
(2) The Select Strategic Growth Fund began operations on February 20, 1998.
For its services, Cambiar Investors, Inc. will receive a fee computed
daily at an annual rate based on the average daily net assets of the
Select Strategic Growth Fund, 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%
- --------------------------------------------------------------------------------
* T. Rowe Price Associates, Inc. assumed Sub-Adviser responsibilities from
Janus Capital Corporation on April 1, 1998. Janus Capital Corporation
served as Sub-Adviser of the Select Capital Appreciation Fund from April
28, 1995 to March 31, 1998. Janus Capital Corporation received a fee
computed daily at an annual rate based on the average daily net assets of
the Select Capital Appreciation Fund, based on 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%
- --------------------------------------------------------------------------------
T. Rowe Price Associates, Inc. receives a fee computed daily at an annual rate
of 0.50% based on the average daily net assets of the Select Capital
Appreciation Fund.
** J.P. Morgan Investment Management Inc. replaced John A. Levin & Co., Inc.
as Sub-Adviser of the Select Growth and Income Fund on April 1, 1999. John
A. Levin & Co., Inc. served as Sub-Adviser of the Select Growth and Income
Fund from September 1, 1994 to March 31, 1999. John A. Levin & Co., Inc.
received a fee computed daily at an annual rate based on the average daily
net assets of the Select Growth and Income Fund, based on the following
schedule:
Assets Rate
- --------------------------------------------------------------------------------
First $100 Million 0.40%
- --------------------------------------------------------------------------------
Next $200 Million 0.25%
- --------------------------------------------------------------------------------
Over $300 Million 0.30%
- --------------------------------------------------------------------------------
J.P. Morgan Investment Management Inc. receives a fee computed daily at an
annual rate based on the average daily net assets of the Select Growth and
Income Fund, based on the following schedule:
Assets Rate
- --------------------------------------------------------------------------------
First $500 Million 0.30%
- --------------------------------------------------------------------------------
Next $500 Million 0.25%
- --------------------------------------------------------------------------------
Over $1 Billion 0.20%
- --------------------------------------------------------------------------------
26 Allmerica Investment Trust
<PAGE>
Pricing of Fund Shares
- --------------------------------------------------------------------------------
The Funds sell and redeem their shares at a price equal to their net asset value
("NAV") without paying any sales or redemption charges. The NAV of a share is
computed by adding the current value of all the Fund's assets, subtracting its
liabilities and dividing by the number of its outstanding shares. NAV is
computed once daily at the close of regular trading on the New York Stock
Exchange each day the Exchange is open - normally 4:00 p.m. Eastern Time. Orders
for the purchase or redemption of shares are filled at the next NAV computed
after an order is received by the Fund. The Funds do not accept orders or
compute their NAV's on days when the Exchange is closed.
Equity securities are valued based on market value if market quotations are
readily available. In other cases, they are valued at their fair value following
procedures approved by the Trustees. Debt securities (other than short-term
obligations) normally are valued based on pricing service valuations. Debt
obligations with a remaining maturity of 60 days or less are valued at amortized
cost when amortized cost is considered to represent fair value. Values for
short-term obligations having a remaining maturity of more than 60 days are
based upon readily available market quotations.
Certain foreign markets may be open on days when the Funds do not accept orders
or price their shares. As a result, the NAV of a Fund's shares may change on
days when shareholders will not be able to buy or sell shares.
Purchase and Redemption of Shares
- --------------------------------------------------------------------------------
Shares of the Funds currently are purchased only by Separate Accounts which are
the funding mechanisms for variable annuity contracts and variable life
insurance policies. The Distributor, Allmerica Investments, Inc., at its
expense, may provide promotional incentives to dealers who sell variable annuity
contracts which invest in the Funds. The Trust has obtained an exemptive order
from the Securities and Exchange Commission to permit Fund shares to be sold to
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans. Material irreconcilable conflicts may arise among
various insurance policy owners and plan participants. The Trustees will monitor
events to identify any material conflicts and determine if any action should be
taken to resolve such conflict.
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. See the prospectuses for the variable
insurance products.
Normally, redemption payments will be made within seven days after the Trust
receives a written redemption request. Redemptions may be suspended when trading
on the New York Stock Exchange is restricted or when permitted by the Securities
and Exchange Commission.
Allmerica Investment Trust 27
<PAGE>
Distributions and Taxes
- --------------------------------------------------------------------------------
Distributions
Each Fund pays out substantially all of its net investment income and net
capital gains to shareholders each year. Net investment income is paid quarterly
in the case of the Select Growth and Income Fund and 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.
Taxes
The Trust seeks 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. Under current tax law, dividend or capital gain
distributions from any Fund are not currently taxable when left to accumulate
within a variable annuity or variable life insurance contract. Withdrawals from
a contract generally are subject to ordinary income tax and, in many cases, to
an additional 10% penalty tax on withdrawals before age 591/2. Tax consequences
to investors in the Separate Accounts which are invested in the Trust are
described in more detail in the prospectuses for those accounts.
Year 2000
- --------------------------------------------------------------------------------
Some computer software cannot distinguish between dates in the year 2000 and
dates in the year 1900 because of the way that dates are encoded and calculated.
The services provided to the Trust by the Manager, Sub-Advisers, the Custodian
and other external service providers depend on the proper functioning of their
computer software. Failure to correct or replace any non-compliant software
could adversely affect, among other things, the handling of securities trades,
the payment of interest and dividends, the pricing of the Trust's securities and
of the Trust's shares, and account services. The Trust has requested information
from its service providers with respect to their plans to be Year 2000
compliant. The Trust has been advised by its service providers that they either
are Year 2000 compliant now or expect to be compliant prior to December 31,
1999. However, there can be no guarantee that the Trust's operations will not be
adversely affected by non-compliant systems of its service providers or of other
third parties which interact with such service providers. The Year 2000 problem
could also have an adverse effect on issuers, including foreign issuers, whose
securities are owned by the Funds, potentially decreasing the value of such
securities.
28 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the tables represent the rate that an investor
would have earned or lost on an investment in a Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information or annual
report, which is available upon request.
Allmerica Investment Trust 29
<PAGE>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
------------ Income from Investment Operations ------------
Net Realized
Net and
Asset Net Unrealized
Value Investment Gain (Loss) Total from
Year Ended Beginning Income on Investment
December 31, of Year (Loss)(2) Investments Operations
- -------------------------------------------------------------------------------
Select Emerging
Markets Fund(1)
1998(D) $1.000 $0.006 $(0.221) $(0.215)
- -------------------------------------------------------------------------------
Select Aggressive
Growth Fund
1998 2.225 (0.008) 0.243 0.235
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)
- -------------------------------------------------------------------------------
Select Capital
Appreciation Fund(1)
1998 1.698 (0.006) 0.241 0.235
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)
1998 1.626 0.014 0.066 0.080
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)
- -------------------------------------------------------------------------------
Select International
Equity Fund(1)
1998 1.341 0.014 0.207 0.221
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)
- -------------------------------------------------------------------------------
<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 Emerging
Markets Fund(1)
1998(D) $(0.001) $ - $ - $ - $(0.001) $(0.216)
- ---------------------------------------------------------------------------------------------------------------------
Select Aggressive
Growth Fund
1998 - - - - - 0.235
1997 - (0.182) (0.008)(3) - (0.190) 0.188
1996 - (0.153) - - (0.153) 0.189
1995 - - - - - 0.451
1994 - - - - - (0.034)
- ---------------------------------------------------------------------------------------------------------------------
Select Capital
Appreciation Fund(1)
1998 - (0.293) - - (0.293) (0.058)
1997 - - - - - 0.213
1996 - (0.005) - - (0.005) 0.116
1995 - (0.027) - - (0.027) 0.369
- ---------------------------------------------------------------------------------------------------------------------
Select Value
Opportunity Fund(1)
1998 (0.014) (0.006) - - (0.020) 0.060
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)
- ---------------------------------------------------------------------------------------------------------------------
Select International
Equity Fund(1)
1998 (0.020) - - - (0.020) 0.201
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)
- ---------------------------------------------------------------------------------------------------------------------
</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 period ended December 31,
1998
(1) The Select Emerging Markets Fund commenced operations on February 20,
1998. The Select Capital Appreciation Fund commenced operations on April
28, 1995 and changed sub-advisers on April 1, 1998. The Select Value
Opportunity Fund changed sub-advisers on January 1, 1997. The Select
International Equity Fund commenced operations on May 2, 1994.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.004 in 1998 for Select Emerging
Markets Fund; $(0.009) in 1998 and $(0.010) in 1997 for Select Aggressive
Growth Fund; $(0.006) in 1998, $(0.001) in 1995 for Select Capital
Appreciation Fund; $0.013 in 1998, $0.009 in 1997, $0.010 in 1996 and
$0.005 in 1994 for Select Value Opportunity Fund; and $0.014 in 1998,
$0.015 in 1997, $0.011 in 1996 and $0.002 in 1994 for Select International
Equity Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
30 Allmerica Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------- Ratios To Average Net Assets ----------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Period Investment Operating Expenses Management Fee Turnover
Period Return (000's) Income (Loss) (A) (B) (C) Gross Net Rate
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.784 (21.46)%** $20,873 0.96%* 2.19%* 2.19%* 2.54%* 1.35%* 1.00%* 62%
- -----------------------------------------------------------------------------------------------------------------------
2.460 10.56% 752,741 (0.36)% 0.92% 0.95% 0.95% 0.88% 0.88% 99%
2.225 18.71% 604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95%
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113%
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%
- -----------------------------------------------------------------------------------------------------------------------
1.640 13.88% 310,582 (0.47)% 1.02% 1.04% 1.04% 0.94% 0.94% 141%
1.698 14.28% 240,526 (0.38)% 1.13% 1.13% 1.13% 0.98% 0.98% 133%
1.485 8.80% 142,680 (0.32)% 1.13% 1.13% 1.13% 1.00% 1.00% 98%
1.369 39.56%** 41,376 (0.25)%* 1.35%* - 1.42%* 1.00%* 0.93%* 95%
- -----------------------------------------------------------------------------------------------------------------------
1.686 4.87% 268,405 0.95% 0.94% 0.98% 0.99% 0.91% 0.90% 73%
1.626 24.85% 202,139 0.73% 0.98% 1.04% 1.06% 0.92% 0.90% 110%
1.511 28.53% 113,969 0.91% 0.95% 0.97% 0.97% 0.85% 0.85% 20%
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%
- -----------------------------------------------------------------------------------------------------------------------
1.542 16.48% 505,553 0.99% 1.01% 1.02% 1.02% 0.90% 0.90% 27%
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20%
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18%
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%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 31
<PAGE>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
----------- Income from Investment Operations ----------
Net Realized
Net and
Asset Net Unrealized
Value Investment Gain (Loss) Total from
Year Ended Beginning Income on Investment
December 31, of Year (Loss)(2) Investments Operations
- --------------------------------------------------------------------------------
Select Growth Fund(1)
1998 $1.811 $0.002 $0.638 $0.640
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)
- --------------------------------------------------------------------------------
Select Strategic
Growth Fund(1)
1998(D) 1.000 0.002 (0.027) (0.025)
- --------------------------------------------------------------------------------
Select Growth and
Income Fund(1)
1998 1.552 0.020 0.233 0.253
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
- --------------------------------------------------------------------------------
Select Income Fund
1998 1.022 0.059 0.010 0.069
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)
- --------------------------------------------------------------------------------
<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 Fund(1)
1998 $ - (3) $(0.023) $ - $ - $(0.023) $0.617
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)
- ------------------------------------------------------------------------------------------------------------------------
Select Strategic
Growth Fund(1)
1998(D) (0.002) - - - (0.002) (0.027)
- ------------------------------------------------------------------------------------------------------------------------
Select Growth and
Income Fund(1)
1998 (0.020) (0.006) - - (0.026) 0.227
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)(4) - (0.049) (0.042)
- ------------------------------------------------------------------------------------------------------------------------
Select Income Fund
1998 (0.059) - - - (0.059) 0.010
1997 (0.061) - - - (0.061) 0.027
1996 (0.061) - - - (0.061) (0.029)
1995 (0.060) - (0.001)(5) - (0.061) 0.094
1994 (0.055) - - - (0.055) (0.105)
- ------------------------------------------------------------------------------------------------------------------------
</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 period ended December 31, 1998
(1) The Select Growth Fund changed sub-advisers on July 1, 1996. The Select
Strategic Growth Fund commenced operations on February 20, 1998. The
Select Growth and Income Fund changed sub-advisers on April 1, 1999.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.001 in 1998, $0.006 in 1997 and
$0.005 in 1996 for Select Growth Fund; $(0.001) in 1998 for Select
Strategic Growth Fund; $0.019 in 1998, $0.019 in 1997 and $0.019 in 1996
for Select Growth and Income Fund; and $0.060 in 1995 and $0.055 in 1994
for Select Income Fund.
(3) Dividends from net investment income are less than $0.0005.
(4) Distributions in excess of net realized capital gains.
(5) Distributions in excess of net investment income.
32 Allmerica Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------- Ratios To Average Net Assets --------------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Year Investment Operating Expenses Management Fee Turnover
Year Return (000's) Income (Loss) (A) (B) (C) Gross Net Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.428 35.44% $815,390 0.08% 0.85% 0.87% 0.87% 0.82% 0.82% 86%
1.811 34.06% 470,356 0.42% 0.91% 0.93% 0.93% 0.85% 0.85% 75%
1.430 22.02% 228,551 0.38% 0.92% 0.93% 0.93% 0.85% 0.85% 159%
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%
- -------------------------------------------------------------------------------------------------------------------------------
0.973 (2.47)%** 14,839 0.41%* 1.14%* 1.20%* 1.66%* 0.85%* 0.39%* 24%
- -------------------------------------------------------------------------------------------------------------------------------
1.779 16.43% 646,086 1.26% 0.70% 0.73% 0.73% 0.68% 0.68% 112%
1.552 22.51% 473,552 1.34% 0.77% 0.80% 0.80% 0.73% 0.73% 71%
1.405 21.26% 295,638 1.44% 0.80% 0.83% 0.83% 0.75% 0.75% 78%
1.268 30.32% 191,610 1.69% 0.85% - 0.85% 0.75% 0.75% 112%
1.027 0.73% 110,213 2.51% 0.91% - 0.91% 0.75% 0.75% 107%
- -------------------------------------------------------------------------------------------------------------------------------
1.032 6.83% 160,450 5.92% 0.64% 0.64% 0.64% 0.54% 0.54% 130%
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%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 33
<PAGE>
[GRAPHIC] APPENDIX
Investment Techniques and Strategies
In managing its portfolios of investments, the Trust may make use of the
following investment techniques and strategies:
Symbols
o Permitted
-- Not Permitted
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
INVESTMENT TECHNIQUE/STRATEGY
Asset-Backed Securities -- -- -- -- -- -- -- o o
Financial Futures Contracts
and Related Options o o o o o o o o o
Foreign Securities o o o o o o o o o
Forward Commitments -- -- o -- -- -- -- -- o
Forward Contracts on Foreign Currencies o -- o -- o o -- -- o
High Yield Securities o -- o -- -- o -- o o
Investments in Money Market Securities o o o o o o o o o
Mortgage-Backed Securities -- -- -- -- -- -- -- -- o
Purchasing Options o o o o o o o o o
Repurchase Agreements o o o o o o o o o
Restricted Securities o o o o o o o o o
Reverse Repurchase Agreements -- -- o -- -- -- -- -- --
Securities Lending o o o o o o o o o
Stand-By Commitments -- -- -- -- -- -- -- -- o
Stripped Mortgage-Backed Securities -- -- -- -- -- -- -- -- o
Swap and Swap-Related Products -- -- o -- -- -- -- -- --
When-Issued Securities o o o o o o o o o
Writing Covered Options o o o o o o o o o
34 Allmerica Investment Trust
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY.
Allmerica Investment Trust 35
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
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
The Trust's Statement of Additional Information ("SAI") includes additional
information about the Funds. The Trust's annual and semi-annual reports to
shareholders include information about the investments of the Funds. The SAI and
the financial statements included in the Fund's most recent annual report to
shareholders are incorporated by reference into this prospectus, which means
they are part of this prospectus for legal purposes. The Trust's annual report
discusses the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year. You may get free
copies of these materials, request other information about a Fund or make
shareholder inquiries by calling 1-800-828-0540.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the Public Reference Room. You may also access reports and other
information about the Trust on the Commission's Internet site at
http://www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-4138.
ALLMERICA INVESTMENT TRUST
440 Lincoln Street, Worcester, Massachusetts 01653
1-800-828-0540
AF10984 (5/99)
<PAGE>
Allmerica Investment Trust
- --------------------------------------------------------------------------------
The Money Market Fund is a separate portfolio of the Trust which serves as the
underlying investment for an insurance related account.
This Prospectus explains what you should know about the Fund. Please read it
carefully before you invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
PROSPECTUS
May 1, 1999
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
FUND SUMMARY............................................................ 3
Objectives, Strategies and Risks................................... 4
Money Market Fund.................................................. 4
EXPENSE SUMMARY......................................................... 5
DESCRIPTION OF PRINCIPAL INVESTMENT RISKS............................... 6
OTHER INVESTMENT STRATEGIES............................................. 7
MANAGEMENT OF THE FUND.................................................. 8
PRICING OF FUND SHARES.................................................. 9
PURCHASE AND REDEMPTION OF SHARES....................................... 9
DISTRIBUTIONS AND TAXES.................................................10
YEAR 2000...............................................................10
FINANCIAL HIGHLIGHTS....................................................11
APPENDIX ...............................................................14
LEGEND
Performance [GRAPHIC]
Investment
Objectives [GRAPHIC]
Financial
Information [GRAPHIC]
Management
of Fund [GRAPHIC]
Risk [GRAPHIC]
Investment
Strategies [GRAPHIC]
2 Allmerica Investment Trust
<PAGE>
Fund Summary
- --------------------------------------------------------------------------------
This Prospectus describes the Money Market Fund of Allmerica Investment Trust,
which provides a broad range of investment options through 14 different Funds,
each a separate investment Portfolio. The other Funds are described in separate
prospectuses. Shares of the Funds are sold exclusively to variable annuity and
variable life insurance Separate Accounts and qualified pension and retirement
plans.
The investment manager of the Trust is Allmerica Financial Investment Management
Services, Inc. The Manager is responsible for managing the Trust's daily
business and has general responsibility for the management of the investments of
the Funds. The Manager, at its expense, has contracted with Allmerica Asset
Management, Inc. ("AAM") as Sub-Adviser to manage the investments of the Money
Market Fund. AAM has been selected on the basis of various factors including
management experience, investment techniques and staffing. See "Management of
the Funds" for more information about the Manager and the Sub-Adviser.
The following summary describes the Money Market Fund's investment objective and
principal investment strategies, identifies the principal investment risks of
investing in the Fund and provides a performance chart for the Fund. Note that
any percentage limitations listed under the Fund's principal investment
strategies apply at the time of investment. The principal risks are discussed in
more detail under "Description of Principal Investment Risks". The bar chart
shows how the investment returns of the shares of the Fund have varied in the
past ten years . The table following the bar chart shows how the Fund's average
annual returns for the last one, five and ten years compare to those of a
broad-based securities market index. Past performance does not necessarily
indicate how the Fund will perform in the future. The bar chart and table give
some indication of the risks of investing in the Fund by showing changes in the
Fund's performance. The bar chart and table do not reflect expenses associated
with the variable insurance product that you are purchasing. If those expenses
had been reflected, the performance shown would have been lower.
Allmerica Investment Trust 3
<PAGE>
Objectives, Strategies and Risks
Money Market Fund
- --------------------------------------------------------------------------------
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The Fund seeks to obtain maximum current
income consistent with preservation of capital and liquidity.
[GRAPHIC] Principal Investment Strategies: The Fund seeks to achieve its
objective by investing in high quality money market instruments such
as obligations issued or guaranteed by the United States Government,
its agencies, or instrumentalities; commercial paper; obligations of
banks or savings and loan associations including bankers acceptances
and certificates of deposit; repurchase agreements and cash and cash
equivalents. The Fund may invest up to 25% of its assets in U.S.
dollar denominated foreign debt securities and short-term
instruments (not including investments in American Depositary
Receipts or "ADRs").
Any security purchased for the Fund must receive the highest or
second highest quality rating by at least two recognized rating
agencies or by one if only one has rated the security. If the
security is unrated the security must be seen by the Sub-Adviser as
having comparable quality. Portfolio securities will have a
remaining maturity of 397 days or less and the portfolio is managed
to maintain a dollar-weighted maturity of 90 days or less.
The Fund attempts to maintain a constant net asset value of $1.00
per share but it may not be able to do so due to adverse market
conditions or other factors and it is possible for investors to lose
money by investing in the Fund. An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
Calendar Year Annual Total Returns [GRAPHIC]
1989 .......... 9.07%
1990 .......... 8.17%
1991 .......... 6.22%
1992 .......... 3.78%
1993 .......... 3.00%
1994 .......... 3.93%
1995 .......... 5.84%
1996 .......... 5.36%
1997 .......... 5.47%
1998 .......... 5.51%
During the period shown above the highest quarterly return was 2.35% for the
quarter ended 06/30/89 and the lowest was 0.73% for the quarter ended 6/30/93.
Performance Table
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- --------------------------------------------------------------------------------
Fund Shares 5.51% 5.22% 5.62%
- --------------------------------------------------------------------------------
IBC/Donoghue First Tier
Money Market Index* 4.96% 4.80% 5.22%
- --------------------------------------------------------------------------------
* IBC/Donoghue is an independent firm that tracks regulated money market
funds on a yield, shareholder, assets size and portfolio allocation basis.
The Fund's 7-day yield ending December 31, 1998 was 5.11%.
4 Allmerica Investment Trust
<PAGE>
Expense Summary
- --------------------------------------------------------------------------------
Expenses are one of several factors to consider when investing in the Money
Market Fund. Expenses shown are based on expenses incurred in respect of shares
of the Fund for the 1998 fiscal year. The Example shows the cumulative expenses
attributable to a hypothetical $10,000 investment in the Fund over specified
periods.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you invest in the
Fund. Please note that the expenses listed below do not include the expenses of
the applicable variable insurance product that you are purchasing. You should
refer to the variable insurance product prospectus for more information relating
to the fees and expenses of that product, which are in addition to the expenses
of the Fund.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
Shareholder (expenses deducted from Fund assets) Total Annual
Fees Fund
(fees paid directly Management Distribution Other Operating
from your investment) Fees (12b-1) Fees Expenses Expenses
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
None 0.26% None 0.06% 0.32%(1)
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Until further notice, the Manager has declared a voluntary expense
limitation of 0.60% for the Money Market Fund. The total operating
expenses of the Fund were less than its expense limitation throughout
1998.
The declaration of a voluntary management fee or expense limitation in any
year does not bind the Manager to declare future expense limitations with
respect to the Fund. These limitations may be terminated at any time.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$32 $101 $176 $397
- --------------------------------------------------------------------------------
Allmerica Investment Trust 5
<PAGE>
[GRAPHIC] Description of Principal Investment Risks
- --------------------------------------------------------------------------------
The following is a summary of the principal risks of investing in the Money
Market Fund and the factors likely to cause the value of your investment in the
Fund to decline. The principal risks applicable to the Fund are identified under
"Fund Summary". There are also many factors that could cause the value of your
investment in the Fund to decline which are not described here. It is important
to remember that there is no guarantee that the Fund will achieve its investment
objective, and an investor in the Fund could lose money.
Credit Risk
Credit risk is the risk that the issuer of a fixed income security will not be
able to pay principal and interest when due. There are different levels of
credit risk. Funds that invest in lower-rated securities have higher levels of
credit risk. The price of a fixed income security can be expected to fall if the
issuer defaults on its obligation to pay principal or interest, the rating
agencies downgrade the issuer's credit rating or there is negative news that
affects the market's perception of the issuer's credit risk.
Interest Rate Risk
When interest rates rise, the prices of fixed income securities in the Fund's
portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Fund's portfolio will generally rise. Even a
Fund that invests in the highest quality debt securities is subject to interest
rate risk. Interest rate risk usually will affect the price of a fixed income
security more if the security has a longer maturity because changes in interest
rates are increasingly difficult to predict over longer periods of time. Fixed
income securities with longer maturities will therefore be more volatile than
other fixed income securities with shorter maturities.
Investment Management Risk
Investment management risk is the risk that a Fund does not achieve its
investment objective, even though the Sub-Adviser uses various investment
strategies and techniques.
Market Risk
This is the risk that the price of a security held by the Fund will fall due to
changing economic, political or market conditions or to factors affecting
investor psychology.
6 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Other Investment Strategies
- --------------------------------------------------------------------------------
The Fund Summary on page 3 describes the investment objective and the principal
investment strategies and risks of the Fund. The Fund may at times use the
following investment strategies. Attached as an Appendix is a chart with a
listing of various investment techniques and strategies that the Sub-Adviser of
the Fund may utilize. The Fund may decide that it is in the best interests of
shareholders to make changes to its investment objective and strategies
described in this Prospectus. The investment objective and strategies may be
changed with the approval of the Board of Trustees, but without shareholder
approval.
Foreign Investments. The Fund may invest all or a substantial part of its
portfolio in U.S. dollar denominated securities of companies that are located or
primarily doing business in a foreign country. A company is considered to be
located in a foreign 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 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
country or (ii) at least 50% of the company's assets are situated in the
country. Funds may invest in foreign securities either directly or indirectly
through the use of depositary receipts, such as ADRs. Depositary receipts are
generally issued by banks or trust companies and evidence ownership of
underlying foreign securities. The conversion of certain European currencies to
the "euro" may present additional risks to those Funds exposed to such
currencies.
Lending of Securities. To realize additional income, the Fund may lend portfolio
securities to broker-dealer or financial institutions in an amount up to 33-1/3%
of the Fund's total assets. 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 possible delays in receiving additional
collateral or in the recovery of the securities or possible loss of rights in
the collateral.
Restricted Securities. The Fund may purchase securities that are not registered
under Federal securities law ("restricted securities"), but can be offered and
sold to certain "qualified institutional buyers". The Fund will not invest more
than 10% of its net assets in restricted securities (and securities deemed to be
illiquid). These limits do not apply if the Board of Trustees determines that
the 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, retains
sufficient oversight and is ultimately responsible for the determinations. This
investment practice could increase the level of illiquidity in the Fund if
buyers lose interest in restricted securities. As a result, the Fund might not
be able to sell these securities when its Sub-Adviser wants to sell, or might
have to sell them at less than fair value. In addition, market quotations for
these securities are less readily available.
Temporary Defensive Strategies. At times a Sub-Adviser may determine that market
conditions make it desirable temporarily to suspend the Fund's normal investment
activities. The Fund may not achieve its investment objective while these
strategies are in effect.
Allmerica Investment Trust 7
<PAGE>
[GRAPHIC] Management of the Fund
- --------------------------------------------------------------------------------
The Trust is governed by a Board of Trustees. Allmerica Financial Investment
Management Services, Inc. is the investment Manager of the Trust responsible for
managing the Trust's day-to-day business affairs. The Manager is located at 440
Lincoln Street, Worcester, MA 01653. The Manager and its predecessor, Allmerica
Investment Management Company, Inc., have been managing mutual funds since 1985.
The Manager currently serves as investment manager to one other mutual fund.
Allmerica Asset Management, Inc., located at 440 Lincoln Street, Worcester,
Massachusetts, serves as the Fund's Sub-Adviser. AAM was incorporated in 1993
and as of December 31, 1998 had $13.2 billion in assets under management. AAM
serves as investment adviser to investment companies and affiliated insurance
company accounts. John C. Donohue, Vice President of AAM, is primarily
responsible for the day-to-day management of the Fund. Mr. Donohue has been with
AAM since 1995. He was a portfolio manager at CS First Boston Investment
Management prior to joining AAM.
The Sub-Adviser has been selected by the Manager and Trustees with the help of
BARRA RogersCasey, Inc., a pension consulting firm. The fees earned by the
Sub-Adviser and BARRA RogersCasey are paid by the Manager. The performance of
the Sub-Adviser is reviewed quarterly by a committee of the Board of Trustees,
with assistance from BARRA RogersCasey.
For the fiscal year ended December 31, 1998, the Fund paid the Manager a fee of
0.26% of the Fund's average net assets, and the Manager paid AAM an aggregate
fee of 0.10% of the Fund's average net assets.
8 Allmerica Investment Trust
<PAGE>
Pricing of Fund Shares
- --------------------------------------------------------------------------------
The Money Market Fund sells and redeems its shares at a price equal to its net
asset value ("NAV") without paying any sales or redemption charges. The NAV of a
share is computed by adding the current value of all the Fund's assets,
subtracting its liabilities and dividing by the number of its outstanding
shares. NAV is computed once daily at the close of regular trading on the New
York Stock Exchange each day the Exchange is open - normally 4:00 p.m. Eastern
Time. Orders for the purchase or redemption of shares are filled at the next NAV
computed after an order is received by the Fund. The Fund does not accept orders
or compute its NAV on days when the Exchange is closed. All securities of the
Fund are valued at amortized cost.
Purchase and Redemption of Shares
- --------------------------------------------------------------------------------
Shares of the Fund currently are purchased only by a separate account which is
the funding mechanism for a variable annuity contract. The Distributor,
Allmerica Investments, Inc., at its expense, may provide promotional incentives
to dealers who sell variable annuity contracts which invest in the Fund. The
Trust has obtained an exemptive order from the Securities and Exchange
Commission to permit Fund shares to be sold to variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies and certain qualified pension and retirement plans. Material
irreconcilable conflicts may arise among various insurance policy owners and
plan participants. The Trustees will monitor events to identify any material
conflicts and determine if any action should be taken to resolve such conflict.
No fee is charged by the Trust on redemption. The variable contracts funded
through the Separate Account are sold subject to certain fees and charges which
may include sales and redemption charges. See the prospectuses for the variable
insurance product.
Normally, redemption payments will be made within seven days after the Trust
receives a written redemption request. Redemptions may be suspended when trading
on the New York Stock Exchange is restricted or when permitted by the Securities
and Exchange Commission.
Allmerica Investment Trust 9
<PAGE>
Distributions and Taxes
- --------------------------------------------------------------------------------
Distributions
The Fund pays out substantially all of its net investment income and net capital
gains to shareholders each year. Net investment income is paid 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 Account and any distributions are
reinvested automatically by the Separate Account.
Taxes
The Trust seeks 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. Under current tax law, dividend or capital gain
distributions from the Fund are not currently taxable when left to accumulate
within a variable annuity or variable life insurance contract. Withdrawals from
a contract generally are subject to ordinary income tax and, in many cases, to
an additional 10% penalty tax on withdrawals before age 591 1/42. Tax
consequences to investors in the Separate Accounts which are invested in the
Trust are described in more detail in the prospectuses for those accounts.
Year 2000
- --------------------------------------------------------------------------------
Some computer software cannot distinguish between dates in the year 2000 and
dates in the year 1900 because of the way that dates are encoded and calculated.
The services provided to the Trust by the Manager, Sub-Advisers, the Custodian
and other external service providers depend on the proper functioning of their
computer software. Failure to correct or replace any non-compliant software
could adversely affect, among other things, the handling of securities trades,
the payment of interest and dividends, the pricing of the Trust's securities and
of the Trust's shares, and account services. The Trust has requested information
from its service providers with respect to their plans to be Year 2000
compliant. The Trust has been advised by its service providers that they either
are Year 2000 compliant now or expect to be compliant prior to December 31,
1999. However, there can be no guarantee that the Trust's operations will not be
adversely affected by non-compliant systems of its service providers or of other
third parties which interact with such service providers. The Year 2000 problem
could also have an adverse effect on issuers, including foreign issuers, whose
securities are owned by the Fund, potentially decreasing the value of such
securities.
10 Allmerica Investment Trust
<PAGE>
[GRAPHIC] Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the tables
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the Statement of
Additional Information or annual report, which is available upon request.
Allmerica Investment Trust 11
<PAGE>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
--------- Income from Investment Operations -------
Net Realized
Net and
Asset Net Unrealized
Value Investment Gain Total from
Year Ended Beginning Income on Investment
December 31, of Year (Loss) Investments Operations
- -------------------------------------------------------------------------
Money Market
Fund
1998 $1.000 $0.054 $ - $0.054
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
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------- Less Distributions -------------------------
Distributions Net
Dividends from Net Increase
from Net Realized Distributions in
Year Ended Investment Capital in Return of Total Net Asset
December 31, Income Gains Excess Capital Distributions Value
- -----------------------------------------------------------------------------------------------------------
Money Market
Fund
<S> <C> <C> <C> <C> <C> <C>
1998 $(0.054) $ - $ - $ - $(0.054) $ -
1997 (0.053) - - - (0.053) -
1996 (0.052) - - - (0.052) -
1995 (0.057) - - - (0.057) -
1994 (0.039) - - - (0.039) -
- -----------------------------------------------------------------------------------------------------------
</TABLE>
12 Allmerica Investment Trust
<PAGE>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
--------------- Ratios To Average Net Assets ---------------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Year Investment Management Fee Turnover
Year Return (000's) Income Operating Expenses Gross Net Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.000 5.51% $ 336,253 5.36% 0.32% 0.26% 0.26% N/A
1.000 5.47% 260,620 5.33% 0.35% 0.27% 0.27% N/A
1.000 5.36% 217,256 5.22% 0.34% 0.28% 0.28% N/A
1.000 5.84% 155,211 5.68% 0.36% 0.29% 0.29% N/A
1.000 3.93% 95,991 3.94% 0.45% 0.31% 0.31% N/A
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Allmerica Investment Trust 13
<PAGE>
[GRAPHIC] APPENDIX
Investment Techniques and Strategies
In managing its portfolio of investments, the Fund may make use of the following
investment techniques and strategies:
Symbols
o Permitted
-- Not Permitted
INVESTMENT TECHNIQUE/STRATEGY
-------------------------------------------------------
Asset-Backed Securities o
Financial Futures Contracts
and Related Options --
Foreign Securities o
Forward Commitments o
Forward Contracts on Foreign Currencies --
High Yield Securities --
Investments in Money Market Securities o
Mortgage-Backed Securities --
Purchasing Options --
Repurchase Agreements o
Restricted Securities o
Reverse Repurchase Agreements --
Securities Lending o
Stand-By Commitments o
Stripped Mortgage-Backed Securities --
Swap and Swap-Related Products --
When-Issued Securities o
Writing Covered Options --
-------------------------------------------------------
14 Allmerica Investment Trust
<PAGE>
This page left blank intentionally.
Allmerica Investment Trust 15
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
Money Market Fund
The Trust's Statement of Additional Information ("SAI") includes additional
information about the Fund. The Trust's annual and semi-annual reports to
shareholders include information about the investments of the Fund. The SAI and
the financial statements included in the Fund's most recent annual report to
shareholders are incorporated by reference into this prospectus, which means
they are part of this prospectus for legal purposes. The Trust's annual report
discusses the market conditions and investment strategies that significantly
affected a Fund's performance during its last fiscal year. You may get free
copies of these materials, request other information about a Fund or make
shareholder inquiries by calling 1-800-828-0540.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the Public Reference Room. You may also access reports and other
information about the Trust on the Commission's Internet site at
http://www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-4138.
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street, Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Allmerica Investment Trust
================================================================================
Prospectus
May 1, 1999
This Prospectus describes the following 14 investment Funds of the Trust which
serve as the underlying investments for insurance related accounts.
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
This Prospectus explains what you should know about each of the Funds. Please
read it carefully before you invest.
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.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
Allmerica Investment Trust
440 Lincoln Street
Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
Table of Contents
================================================================================
FUND SUMMARIES ............................................................ 3
Objectives, Strategies and Risks ..................................... 4
Select Emerging Markets Fund ..................................... 4
Select Aggressive Growth Fund .................................... 5
Select Capital Appreciation Fund ................................. 6
Select Value Opportunity Fund .................................... 7
Select International Equity Fund ................................. 8
Select Growth Fund ............................................... 9
Select Strategic Growth Fund ..................................... 10
Growth Fund ...................................................... 11
Equity Index Fund ................................................ 12
Select Growth and Income Fund .................................... 13
Select Income Fund ............................................... 14
Investment Grade Income Fund ..................................... 15
Government Bond Fund ............................................. 16
Money Market Fund ................................................ 17
EXPENSE SUMMARY ........................................................... 18
DESCRIPTION OF PRINCIPAL INVESTMENT RISKS ................................. 20
OTHER INVESTMENT STRATEGIES ............................................... 22
MANAGEMENT OF THE FUNDS ................................................... 24
PRICING OF FUND SHARES .................................................... 33
PURCHASE AND REDEMPTION OF SHARES ......................................... 33
DISTRIBUTIONS AND TAXES ................................................... 34
YEAR 2000 ................................................................. 34
FINANCIAL HIGHLIGHTS ...................................................... 35
APPENDIX .................................................................. 43
LEGEND
============================
Performance [GRAPHIC]
Investment [GRAPHIC]
Objectives
Financial [GRAPHIC]
Information
Management [GRAPHIC]
of Fund
Risk [GRAPHIC]
Investment [GRAPHIC]
Strategies
2
- --------------------------
Allmerica Investment Trust
<PAGE>
Fund Summaries
================================================================================
Allmerica Investment Trust provides a broad range of investment options through
14 separate investment portfolios, or Funds. Shares of the Funds are sold
exclusively to variable annuity and variable life insurance Separate Accounts
and qualified pension and retirement plans.
The investment manager of the Trust is Allmerica Financial Investment Management
Services, Inc. The Manager is responsible for managing the Trust's daily
business and has general responsibility for the management of the investments of
the Funds. The Manager, at its expense, has contracted with investment
Sub-Advisers to manage the investments of the Funds. Each Sub-Adviser has been
selected on the basis of various factors including management experience,
investment techniques and staffing. See "Management of the Funds" for more
information about the Manager and the Sub-Advisers.
The following summaries describe each Fund's investment objective and principal
investment strategies, identify the principal investment risks of investing in
the Fund and provide performance charts for the Fund. Note that any percentage
limitations listed under a Fund's principal investment strategies apply at the
time of investment. The principal risks are discussed in more detail under
"Description of Principal Investment Risks". The bar charts show how the
investment returns of the shares of a Fund have varied in the past ten years (or
for the life of the Fund if less than 10 years). The table following each bar
chart shows how the Fund's average annual return for the last one, five and ten
years (or for the life of the Fund, if shorter) compare to those of a
broad-based securities market index. Past performance does not necessarily
indicate how the Fund will perform in the future. The bar charts and tables give
some indication of the risks of investing in each Fund by showing changes in the
Fund's performance. The bar charts and tables do not reflect expenses associated
with the variable insurance product that you are purchasing. If those expenses
had been reflected, the performance shown would have been lower. A bar chart and
table are not included for two new Funds, the Select Emerging Markets Fund and
the Select Strategic Growth Fund, since as of December 31, 1998 they had not yet
had a full calendar year of investment returns.
3
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Emerging Markets Fund
================================================================================
[GRAPHIC] Sub-Adviser: Schroder Capital Management International Inc.
[GRAPHIC] Investment Objective: The Fund seeks long-term growth of capital by
investing in the world's emerging markets.
[GRAPHIC] Principal Investment Strategies: While its investments are not limited
to any specific region of the world, the Fund normally invests at
least 65% of its assets in companies located or primarily operating in
countries with emerging markets. The Fund usually has investments in
at least five developing countries. Before the Fund invests in a
country, the Sub-Adviser considers various factors such as that
country's political stability and economic prospects. In selecting
securities for the Fund, the Sub-Adviser focuses on the long-term
growth potential of the securities.
The Fund invests primarily in equities, including common stock,
preferred stock, securities convertible into common stock, rights and
warrants and similar securities. The Fund also may invest up to 35% of
its assets in debt securities of issuers in emerging markets, equity
and debt securities of issuers in developed countries, cash and cash
equivalents. The Fund may invest in lower rated bonds, commonly known
as "junk bonds", as further discussed in the "Description of Principal
Investment Risks."
[GRAPHIC] Principal Risks:
o Company Risk
o Credit Risk
o Currency Risk
o Derivatives Risk
o Emerging Markets Risk
o Foreign Investment Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
4
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Aggressive Growth Fund
================================================================================
[GRAPHIC] Sub-Adviser: Nicholas-Applegate Capital Management, L.P.
[GRAPHIC] Investment Objective: The Fund seeks above-average capital
appreciation by investing primarily in common stocks of companies
which are believed to have significant potential for capital
appreciation.
[GRAPHIC] Principal Investment Strategies: To pursue this goal, the Fund looks
predominantly for stocks of small and mid-size companies that show
potential for rapid growth. The Fund typically invests in companies
that, because of positive developments affecting the company, offer
the possibility of accelerating earnings. The Sub-Adviser uses
systematic, fundamental research in selecting investments for the
Fund.
Under normal circumstances, the Fund invests at least 65% of its
assets in common stocks, securities convertible into common stocks and
warrants. The Fund also may invest in debt securities and preferred
stocks and up to 25% of its assets in foreign securities (not
including its investments in American Depositary Receipts or "ADRs").
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1993 19.51%
1994 (2.31%)
1995 32.28%
1996 18.55%
1997 18.71%
1998 10.56%
During the period shown above the highest quarterly return was 23.18% for the
quarter ended 12/31/98 and the lowest was (22.81)% for the quarter ended
9/30/98.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 10.56% 14.99% 18.11%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 14.13% 16.27%
- --------------------------------------------------------------------------------
</TABLE>
* The Russell 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks.
5
- --------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Capital Appreciation Fund
================================================================================
[GRAPHIC] Sub-Adviser: T. Rowe Price Associates, Inc.
[GRAPHIC] Investment Objective: The Fund seeks long-term growth of capital.
Realization of income is not a significant investment consideration
and any income realized on the Fund's investments will be incidental
to its primary objective.
[GRAPHIC] Principal Investment Strategies: The Fund's Sub-Adviser looks for
companies with proven business ideas and earnings growth rates in
excess of market averages. The Fund normally invests at least 50% of
its equity assets in securities of companies with market
capitalizations that fall within the range of companies in the S&P Mid
Cap 400 Index (as of December 31, 1998, $240 million to $11.6 billion
market capitalization). The Fund may also invest in larger firms and
firms with a market capitalization below $240 million.
While the Fund invests primarily in common stocks, it also may invest
in preferred stocks, warrants, government securities, corporate bonds
and other debt securities. Up to 25% of its assets may be invested in
"junk bonds". The Fund may invest without limitation in foreign
securities.
[GRAPHIC] Principal Risks:
o Company Risk
o Credit Risk
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1996 8.80%
1997 14.28%
1998 13.88%
During the period shown above the highest quarterly return was 27.90% for the
quarter ended 12/31/98 and the lowest was (18.54)% for the quarter ended
9/30/98.
T. Rowe Price Associates, Inc. became Sub-Adviser of the Fund on April 1, 1998.
Performance before that date is based on the performance of the Fund's previous
Sub-Adviser.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Since Inception
December 31, 1998) One Year (April 28, 1995)
- --------------------------------------------------------------------------------
<S> <C> <C>
Fund Shares 13.88% 20.37%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 17.50%
- --------------------------------------------------------------------------------
</TABLE>
* The Russell 2500 Index is a unmanaged composite of 2,500 small-to-mid
capitalization stocks.
6
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Value Opportunity Fund
================================================================================
[GRAPHIC] Sub-Adviser: Cramer Rosenthal McGlynn, LLC
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: The Fund's Sub-Adviser attempts to
find stocks that are attractively valued relative to their future
prospects and the market as a whole. The most promising opportunities
can be found in companies that are temporarily out of favor or when
most analysts are confused about changes taking place at a company. In
these situations, the company's stock is often undervalued.
The Fund invests primarily in companies with market capitalization
between $200 million and $5 billion. The Fund normally invests at
least 80% of the portfolio in common stocks and may invest in other
equity securities and up to 25% of its assets in foreign securities
(not including its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1994 (6.51%)
1995 17.60%
1996 28.53%
1997 24.85%
1998 4.87%
During the period shown above the highest quarterly return was 13.42% for the
quarter ended 12/31/98 and the lowest was (12.24)% for the quarter ended
9/30/98. Absent reimbursement of certain Fund expenses during these periods, the
Fund's total returns would have been lower.
Cramer Rosenthal McGlynn, LLC became Sub-Adviser of the Fund on January 1, 1997.
Performance before that date is based on the performance of the Fund's previous
Sub-Adviser.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (April 30, 1993)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 4.87% 13.09% 14.71%
- --------------------------------------------------------------------------------
Russell 2500 Index* 0.38% 14.13% 15.09%
- --------------------------------------------------------------------------------
</TABLE>
* The Russell 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks.
7
- --------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select International Equity Fund
================================================================================
[GRAPHIC] Sub-Adviser: Bank of Ireland Asset Management (U.S.) Limited
[GRAPHIC] Investment Objective: The Fund seeks maximum long-term total return
(capital appreciation and income) primarily by investing in common
stocks of established non-U.S. companies.
[GRAPHIC] Principal Investment Strategies: Under normal market conditions, at
least 65% of the Fund's assets will be invested in the securities of
medium and large-size companies located in at least five foreign
countries, not including the United States. To achieve its objective,
the Fund focuses on equity securities which the Sub-Adviser believes
are undervalued in relation to the company's prospects for future
earnings growth. The Fund may also buy fixed-income debt securities,
primarily for defensive purposes.
[GRAPHIC] Principal Risks:
o Company Risk
o Currency Risk
o Derivatives Risk
o Foreign Investment Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1995 19.63%
1996 21.94%
1997 4.65%
1998 16.48%
During the period shown above the highest quarterly return was 19.49% for the
quarter ended 12/31/98 and the lowest was (17.69)% for the quarter ended
09/30/98.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Since Inception
December 31, 1998) One Year (May 2, 1994)
- --------------------------------------------------------------------------------
<S> <C> <C>
Fund Shares 16.48% 12.26%
- --------------------------------------------------------------------------------
Morgan Stanley Capital Intl.
EAFE Index* 20.33% 8.41%
- --------------------------------------------------------------------------------
</TABLE>
* The Morgan Stanley Capital International EAFE (Europe, Australia, Far East)
Index, reflecting reinvestment of gross dividends, is an unmanaged
capitalization weighted index of foreign developed country common stocks.
8
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Growth Fund
================================================================================
[GRAPHIC] Sub-Adviser: Putnam Investment Management, Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: To attain its objective, the Fund
looks for companies that appear to have favorable long-term growth
characteristics. The Fund typically invests in stocks of large
capitalization companies, such as those included in the S&P 500 Index,
although it can also make investments in smaller growth
companies.
At least 65% of the Fund's assets normally will consist of common
stocks that the Sub-Adviser believes have growth potential. The Fund
also may purchase convertible bonds and preferred stocks and warrants.
The Fund normally invests substantially all of its investments in
equity securities, although it may invest up to 35% in debt securities
including up to 15% in "junk bonds". The Fund may invest up to 25% of
its assets in foreign securities (not including its investments in
ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Credit Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1993 0.84%
1994 (1.49%)
1995 24.59%
1996 22.02%
1997 34.06%
1998 35.44%
During the period shown above the highest quarterly return was 25.02% for the
quarter ended 12/31/98 and the lowest was (11.84)% for the quarter ended
09/30/98.
Putnam Investment Management, Inc. became Sub-Adviser of the Fund on July 1,
1996. Performance before that date is based on the performance of the Fund's
previous Sub-Adviser.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 35.44% 22.15% 19.18%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.53%
- --------------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an unmanaged
index of 500 leading stocks. S&P 500(R) Index is a registered trademark of
Standard & Poor's Corporation.
9
- --------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Strategic Growth Fund
================================================================================
[GRAPHIC] Sub-Adviser: Cambiar Investors, Inc.
[GRAPHIC] Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in common stocks of established companies.
[GRAPHIC] Principal Investment Strategies: The Sub-Adviser attempts to find
stocks that are currently trading at attractive values in relation to
the market and have potential for long-term earnings growth. These are
often stocks of companies which have been out of favor but have
experienced positive recent developments not yet recognized in the
stock's price.
Under normal market conditions, the Fund invests at least 65% of its
assets in the common stocks of companies with a market capitalization
of more than $1 billion. In addition, the Fund may purchase preferred
stocks, debt securities and securities convertible into or
exchangeable for common stocks. The Fund may invest up to 20% of its
assets in foreign securities (not including its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
10
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Growth Fund
================================================================================
[GRAPHIC] Sub-Adviser: Miller Anderson & Sherrerd, LLP
[GRAPHIC] Investment Objective: The 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.
Realization of current income, if any, is incidental to this
objective.
[GRAPHIC] Principal Investment Strategies: To pursue its goal, the Fund invests
in securities that are diversified with regard to issuers and
industries. In selecting securities, the Fund is not limited to any
particular style of investing and may invest in stocks considered to
be "growth" stocks as well as stocks considered to be "value" stocks.
The Fund may invest in well-established or developing companies, both
large and small.
[GRAPHIC] The Fund normally will invest substantially all of its assets in
equity-type securities, including common stocks, warrants, preferred
stocks and debt securities convertible into common stock and eligible
real estate securities. The Fund may invest up to 25% of its assets in
foreign securities (not including its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1989 25.64%
1990 (0.30%)
1991 40.44%
1992 7.11%
1993 6.66%
1994 0.16%
1995 32.80%
1996 20.19%
1997 25.14%
1998 19.32%
During the period shown above the highest quarterly return was 21.48% for the
quarter ended 12/31/98 and the lowest was (14.61)% for the quarter ended
9/30/90.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 19.32% 19.01% 16.98%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.20%
- --------------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an unmanaged
index of 500 leading stocks. S&P 500(R) Index is a registered trademark of
Standard & Poor's Corporation.
11
- --------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Equity Index Fund
================================================================================
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: The Fund tries to achieve its
objective by attempting to replicate the aggregate price and yield
performance of the S&P 500 Index. Because of its policy of tracking
the S&P 500 Index, the Fund does not follow traditional methods of
active investment management, which involve buying and selling
securities based upon analysis of economic and market factors. 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. Under normal circumstances, the Fund will hold
approximately 500 different stocks included in the S&P 500 Index. The
Fund will incur expenses that are not reflected in the performance
results of the S&P 500 Index. Therefore, the return of the Fund may be
lower than the return of the S&P 500 Index. 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 Index.
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1991 29.16%
1992 7.25%
1993 9.53%
1994 1.06%
1995 36.18%
1996 22.30%
1997 32.41%
1998 28.33%
During the period shown above the highest quarterly return was 21.41% for the
quarter ended 12/31/98 and the lowest was (9.96)% for the quarter ended
9/30/98.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (September 28, 1990)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 28.33% 23.39% 20.69%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.37%
- --------------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an unmanaged
index of 500 leading stocks. S&P 500(R) Index is a registered trademark of
Standard & Poor's Corporation.
12
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Growth and Income Fund
================================================================================
[GRAPHIC] Sub-Adviser: J.P. Morgan Investment Management Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: The Fund invests in a broadly
diversified portfolio of equity securities, primarily the common stock
of companies included in the S&P 500 Index. The Fund's industry
diversification and other risk characteristics will be similar to
those of the index. The Fund may invest in a wide range of equity
securities, consisting of common stocks, preferred stocks, securities
convertible into common and preferred stocks and warrants. The Fund
may purchase individual stocks not presently paying dividends if the
Sub-Adviser believes the overall portfolio is positioned to achieve
its income objective.
The Fund may invest up to 35% of its assets in fixed-income
securities, including up to 15% in "junk bonds". However, the Fund's
normal strategy is to be nearly fully invested in equity securities.
The Fund may also invest up to 25% of its assets in foreign securities
(not including its investments in ADRs).
[GRAPHIC] Principal Risks:
o Company Risk
o Derivatives Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1993 10.37%
1994 0.73%
1995 30.32%
1996 21.26%
1997 22.51%
1998 16.43%
During the period shown above the highest quarterly return was 19.41% for the
quarter ended 12/31/98 and the lowest was (12.66)% for the quarter ended
9/30/98.
J.P. Morgan Investment Management Inc. became Sub-Adviser of the Fund on April
1, 1999. Performance before that date is based on the performance of the Fund's
previous Sub-Advisers.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 16.43% 17.82% 15.53%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 21.53%
- --------------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index(R), reflecting reinvestment of dividends, is an unmanaged
index of 500 leading stocks. S&P 500(R) Index is a registered trademark of
Standard & Poor's Corporation.
13
- --------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Select Income Fund
================================================================================
[GRAPHIC] Sub-Adviser: Standish, Ayer & Wood, Inc.
[GRAPHIC] Investment Objective: The Fund seeks a high level of current income.
The Fund will invest primarily in investment grade, fixed-income
securities.
[GRAPHIC] Principal Investment Strategies: Examples of 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; commercial paper; obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; and debt securities
backed by various types of financial assets. The Fund also may invest
in mortgage-backed and asset-backed securities. The Fund's investments
in corporate debt securities are not limited to any particular type of
company or industry. The Fund may invest up to 25% of its assets in
foreign securities (not including its investments in ADRs), up to 35%
of its assets in money market instruments and up to 25% in debt
obligations of supranational entities.
The average maturity and the mix of portfolio securities will vary
depending on such factors as current market conditions and the
comparative yields from different instruments. The Fund invests
primarily in investment grade securities rated in the four highest
grades by Moody's Investors Services or Standard & Poor's Rating
Services or similar rating organizations, and in unrated securities.
For more information about rating categories, see the Appendix to the
Statement of Additional Information ("SAI"). The Fund also may invest
up to 25% of its assets in "junk bonds."
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
o Prepayment Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1993 10.95%
1994 (4.82%)
1995 16.96%
1996 3.32%
1997 9.17%
1998 6.83%
During the period shown above the highest quarterly return was 5.64% for the
quarter ended 6/30/95 and the lowest was (3.87)% for the quarter ended
3/31/94.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 21, 1992)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 6.83% 6.05% 6.56%
- --------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index* 8.67% 7.27% 7.51%
- --------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Aggregate Bond Index(R) is an unmanaged index of fixed
rate debt issues with an investment grade or higher rating at least one
year to maturity and an outstanding par value of at least $25 million.
14
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Investment Grade Income Fund
================================================================================
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The Fund seeks as high a level of total return,
which includes capital appreciation as well as income, as is
consistent with prudent investment management.
[GRAPHIC] Principal Investment Strategies: To achieve its goal, the Fund invests
in investment grade debt securities and money market instruments such
as bonds and other corporate debt obligations; obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
or money market instruments, including commercial paper, bankers
acceptances and negotiable certificates of deposit. The Fund also may
invest in mortgage-backed and asset-backed securities. The Fund may
invest up to 25% of its assets in foreign securities (not including
its investments in ADRs) and up to 25% of its assets in debt
obligations of supranational entities.
[GRAPHIC] Investment grade securities are rated in the four highest grades by
Moody's or Standard & Poor's or unrated but determined by the
Sub-Adviser to be of comparable quality. For more information about
rating categories, see the Appendix to the SAI. The Fund may invest in
securities with relatively long maturities as well as securities with
shorter maturities.
The Sub-Adviser actively manages the portfolio with a view to
producing a high level of total return for the Fund while avoiding
undue risks to capital. The Sub-Adviser attempts to anticipate events
leading to price or ratings changes through using in-depth fundamental
credit research.
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Liquidity Risk
o Market Risk
o Prepayment Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1989 13.52%
1990 8.02%
1991 16.75%
1992 8.33%
1993 10.80%
1994 (2.96%)
1995 17.84%
1996 3.56%
1997 9.45%
1998 7.97%
During the period shown above the highest quarterly return was 7.67% for the
quarter ended 6/30/89 and the lowest was (2.61)% for the quarter ended
3/31/94.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 7.97% 6.95% 9.17%
- --------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index* 8.67% 7.27% 9.26%
- --------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Aggregate Bond Index(R)is an unmanaged index of fixed
rate debt issues with an investment grade or higher rating at least one
year to maturity and an outstanding par value of at least $25 million.
15
- --------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Government Bond Fund
================================================================================
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The 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.
[GRAPHIC] Principal Investment Strategies: To pursue its objective, the Fund
invests in U.S. Government securities, such as Treasury bills, notes,
and bonds, which may differ only in their interest rates, maturities
and times of issuance. The Fund also may invest in mortgage-backed
government securities, other instruments secured by U.S. Government
securities, asset-backed securities and separately-traded principal
and interest components of U.S. Treasury securities. The Fund may
invest up to 25% of its assets in debt obligations of supranational
entities.
The Sub-Adviser selects securities for the portfolio with a view to
producing a high level of current income while avoiding undue risks to
capital. The Fund may invest in securities with relatively long
maturities as well as securities with shorter maturities.
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Market Risk
o Prepayment Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1992 6.59%
1993 7.51%
1994 (0.88%)
1995 13.06%
1996 3.51%
1997 7.08%
1998 7.67%
During the period shown above the highest quarterly return was 5.17% for the
quarter ended 12/31/91 and the lowest was (1.49)% for the quarter ended
3/31/92.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Since Inception
December 31, 1998) One Year Five Years (August 26, 1991)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 7.67% 5.99% 7.00%
- --------------------------------------------------------------------------------
Lehman Brothers
Intermediate Government
Bond Index* 8.49% 6.45% 7.38%
- --------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Intermediate Government Bond Index(R) is an unmanaged
index of U.S. Government and Agency bonds with remaining maturities of one
to ten years.
16
--------------------------
Allmerica Investment Trust
<PAGE>
Objectives, Strategies and Risks
Money Market Fund
================================================================================
[GRAPHIC] Sub-Adviser: Allmerica Asset Management, Inc.
[GRAPHIC] Investment Objective: The Fund seeks to obtain maximum current income
consistent with preservation of capital and liquidity.
[GRAPHIC] Principal Investment Strategies: The Fund seeks to achieve its
objective by investing in high quality money market instruments such
as obligations issued or guaranteed by the United States Government,
its agencies, or instrumentalities; commercial paper; obligations of
banks or savings and loan associations including bankers acceptances
and certificates of deposit; repurchase agreements and cash and cash
equivalents. The Fund may invest up to 25% of its assets in U.S.
dollar denominated foreign debt securities and short-term instruments
(not including investments in ADRs).
Any security purchased for the Fund must receive the highest or second
highest quality rating by at least two recognized rating agencies or
by one if only one has rated the security. If the security is unrated
the security must be seen by the Sub-Adviser as having comparable
quality. Portfolio securities will have a remaining maturity of 397
days or less and the portfolio is managed to maintain a
dollar-weighted maturity of 90 days or less.
The Fund attempts to maintain a constant net asset value of $1.00 per
share but it may not be able to do so due to adverse market conditions
or other factors and it is possible for investors to lose money by
investing in the Fund. An investment in the Fund is not a bank deposit
and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
[GRAPHIC] Principal Risks:
o Credit Risk
o Interest Rate Risk
o Investment Management Risk
o Market Risk
See "Description of Principal Investment Risks."
The bar chart and table below do not reflect expenses at the insurance product
level, and if they did, the performance shown would have been lower.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Calendar Year Annual Total Returns [GRAPHIC]
1989 9.07%
1990 8.17%
1991 6.22%
1992 3.78%
1993 3.00%
1994 3.93%
1995 5.84%
1996 5.36%
1997 5.47%
1998 5.51%
During the period shown above the highest quarterly return was 2.35% for the
quarter ended 06/30/89 and the lowest was 0.73% for the quarter ended
6/30/93.
Performance Table
<TABLE>
<CAPTION>
Average Annual Total Returns
(for the periods ending Past Past Past
December 31, 1998) One Year Five Years Ten Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund Shares 5.51% 5.22% 5.62%
- --------------------------------------------------------------------------------
IBC/Donoghue First Tier
Money Market Index* 4.96% 4.80% 5.22%
</TABLE>
* IBC/Donoghue is an independent firm that tracks regulated money market
funds on a yield, shareholder, assets size and portfolio allocation basis.
The Fund's 7-day yield ending December 31, 1998 was 5.11%.
17
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Allmerica Investment Trust
<PAGE>
Expense Summary
================================================================================
Expenses are one of several factors to consider when investing in a Fund.
Expenses shown are based on expenses incurred in respect of shares of the Funds
for the 1998 fiscal year. The Examples show the cumulative expenses attributable
to a hypothetical $10,000 investment in each Fund over specified periods.
Fees and Expenses of the Funds
This table describes the fees and expenses that you may pay if you invest in the
Funds. Please note that the expenses listed below do not include the expenses of
the applicable variable insurance product that you are purchasing. You should
refer to the variable insurance product prospectus for more information relating
to the fees and expenses of that product, which are in addition to the expenses
of the Funds.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
Shareholder (expenses deducted from Fund assets) Total Annual
Fees Fund
(fees paid directly Management Distribution Other Operating
from your investment) Fees (12b-1) Fees Expenses Expenses@
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Emerging Markets Fund @ None 1.35%* None 1.19% 2.54%(1),(2)*
- ---------------------------------------------------------------------------------------------------------------------------
Select Aggressive Growth Fund None 0.88% None 0.07% 0.95%(1),(2)
- ---------------------------------------------------------------------------------------------------------------------------
Select Capital Appreciation Fund None 0.94% None 0.10% 1.04%(1),(2)
- ---------------------------------------------------------------------------------------------------------------------------
Select Value Opportunity Fund None 0.91%(1)* None 0.08% 0.99%(1),(2)*
- ---------------------------------------------------------------------------------------------------------------------------
Select International Equity Fund None 0.90% None 0.12% 1.02%(1),(2)
- ---------------------------------------------------------------------------------------------------------------------------
Select Growth Fund None 0.81%** None 0.05% 0.86%(1),(2)**
- ---------------------------------------------------------------------------------------------------------------------------
Select Strategic Growth Fund @ None 0.85%* None 0.81% 1.66%(1),(2)*
- ---------------------------------------------------------------------------------------------------------------------------
Growth Fund None 0.44% None 0.05% 0.49%(1),(2)
- ---------------------------------------------------------------------------------------------------------------------------
Equity Index Fund None 0.29% None 0.07% 0.36%(1)
- ---------------------------------------------------------------------------------------------------------------------------
Select Growth and Income Fund None 0.68% None 0.05% 0.73%(1),(2)
- ---------------------------------------------------------------------------------------------------------------------------
Select Income Fund None 0.54% None 0.10% 0.64%(1)
- ---------------------------------------------------------------------------------------------------------------------------
Investment Grade Income Fund None 0.43% None 0.09% 0.52%(1)
- ---------------------------------------------------------------------------------------------------------------------------
Government Bond Fund None 0.50% None 0.14% 0.64%(1)
- ---------------------------------------------------------------------------------------------------------------------------
Money Market Fund None 0.26% None 0.06% 0.32%(1)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
@ The Select Emerging Markets Fund and Select Strategic Growth Fund commenced
operations on February 20, 1998. Expenses shown are annualized.
* Amount does not reflect a voluntary expense limitation currently in effect
for the Select Emerging Markets Fund, Select Value Opportunity Fund, and
Select Strategic Growth Fund. For the year ended December 31, 1998, the
Management Fees and Total Annual Fund Operating Expenses were 1.00% and
2.19%, respectively, for Select Emerging Markets Fund, 0.90% and 0.98%,
respectively, for Select Value Opportunity Fund, and 0.39% and 1.20%,
respectively, for the Select Strategic Growth Fund after the effect of the
voluntary expense limitations.
** Effective June 1, 1998, the management fee rate for the Select Growth Fund
was revised. The Management Fee and Total Annual Fund Operating Expense
ratios shown in the table above have been adjusted to assume that the
revised rates took effect on January 1, 1998.
(1) Until further notice, Allmerica Financial Investment Management Services,
Inc. (the "Manager") has declared a voluntary expense limitation of 1.35%
of average net assets for the Select Aggressive Growth Fund and Select
Capital Appreciation Fund, 1.25% for the Select Value Opportunity Fund,
1.50% for the Select International Equity Fund, 1.20% for the Select Growth
Fund and Growth Fund, 1.10% for the Select Growth and Income Fund, 1.00%
for the Select Income Fund, Investment Grade Income Fund and Government
Bond Fund, and 0.60% for the Equity Index Fund and Money Market Fund. The
total operating expenses of these Funds of the Trust were less than their
respective expense limitations throughout 1998.
18
--------------------------
Allmerica Investment Trust
<PAGE>
Until further notice, the Manager has declared a voluntary expense limitation of
1.20% of average daily net assets for the Select Strategic Growth Fund. In
addition, the Manager has agreed to voluntarily waive its management fee to the
extent that expenses of the Select Emerging Markets Fund exceed 2.00% of the
Fund's average daily net assets. The amount of such waiver shall not exceed the
net amount of management fees earned by the Manager from the Fund after
subtracting fees paid by the Manager to the Fund's Sub-Adviser.
Until further notice, the Select Value Opportunity Fund's management fee rate
has been voluntarily limited to an annual rate of 0.90% of average daily net
assets.
The declaration of a voluntary management fee or expense limitation in any year
does not bind the Manager to declare future expense limitations with respect to
these Funds. These limitations may be terminated at any time.
(2) These Funds have entered into agreements with brokers whereby brokers
rebate a portion of commissions. Had these amounts been treated as
reductions of expenses, the total annual fund operating expense ratios
would have been 2.19% for Select Emerging Market Fund, 0.92% for the Select
Aggressive Growth Fund, 1.02% for the Select Capital Appreciation Fund,
0.94% for the Select Value Opportunity Fund, 1.01% for the Select
International Equity Fund, 0.84% for the Select Growth Fund, 1.14% for the
Select Strategic Growth Fund, 0.46% for the Growth Fund, and 0.70% for the
Select Growth and Income Fund.
Example
This Example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Select Emerging Markets Fund $254 $781 $1,334 $2,840
- ----------------------------------------------------------------------------------------
Select Aggressive Growth Fund $95 $297 $515 $1,143
- ----------------------------------------------------------------------------------------
Select Capital Appreciation Fund $104 $325 $563 $1,246
- ----------------------------------------------------------------------------------------
Select Value Opportunity Fund $99 $309 $536 $1,189
- ----------------------------------------------------------------------------------------
Select International Equity Fund $102 $318 $552 $1,223
- ----------------------------------------------------------------------------------------
Select Growth Fund $86 $269 $467 $1,039
- ----------------------------------------------------------------------------------------
Select Strategic Growth Fund $166 $515 $887 $1,933
- ----------------------------------------------------------------------------------------
Growth Fund $49 $154 $268 $602
- ----------------------------------------------------------------------------------------
Equity Index Fund $36 $113 $197 $445
- ----------------------------------------------------------------------------------------
Select Growth and Income Fund $73 $228 $398 $887
- ----------------------------------------------------------------------------------------
Select Income Fund $64 $200 $349 $781
- ----------------------------------------------------------------------------------------
Investment Grade Income Fund $52 $163 $284 $638
- ----------------------------------------------------------------------------------------
Government Bond Fund $64 $200 $349 $781
- ----------------------------------------------------------------------------------------
Money Market Fund $32 $101 $176 $397
- ----------------------------------------------------------------------------------------
</TABLE>
19
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Allmerica Investment Trust
<PAGE>
[GRAPHIC] Description of Principal Investment Risks
================================================================================
The following is a summary of the principal risks of investing in a Fund and the
factors likely to cause the value of your investment in the Fund to decline. The
principal risks applicable to each Fund are identified under "Fund Summaries".
There are also many factors that could cause the value of your investment in a
Fund to decline which are not described here. It is important to remember that
there is no guarantee that the Funds will achieve their investment objective,
and an investor in any of the Funds could lose money.
Company Risk
A Fund's equity and fixed income investments in a company often fluctuate based
on:
o the firm's actual and anticipated earnings,
o changes in management, product offerings and overall financial strength and
o the potential for takeovers and acquisitions.
This is due to the fact that prices of securities react to the fiscal and
business conditions of the company that issued the securities. Factors affecting
a company's particular industry, such as increased production costs, also may
affect the value of its securities.
Smaller companies with market capitalizations of less than $1 billion or so are
more likely than larger companies to have limited products lines or smaller
markets for their goods and services. Small company stocks may not trade very
actively, and their prices may fluctuate more than stocks of other companies as
a result of lower liquidity. They may depend on a small or inexperienced
management group. Stocks of smaller companies also may be more vulnerable to
negative changes than stocks of larger companies.
Credit Risk
Credit risk is the risk that the issuer of a fixed income security will not be
able to pay principal and interest when due. There are different levels of
credit risk. Funds that invest in lower-rated securities have higher levels of
credit risk. Lower-rated or unrated securities of equivalent quality, generally
known as "junk bonds", have very high levels of credit risk. "Junk bonds" are
considered to be speculative in their capacity to pay interest and repay
principal. The price of a fixed income security can be expected to fall if the
issuer defaults on its obligation to pay principal or interest, the rating
agencies downgrade the issuer's credit rating or there is negative news that
affects the market's perception of the issuer's credit risk.
Currency Risk
This is the risk that the value of a Fund's investments may decline due to
fluctuations in exchange rates between the U.S. dollar and foreign currencies.
Funds that invest in securities denominated in or are receiving revenues in
foreign currencies are subject to currency risk. There is often a greater risk
of currency fluctuations and devaluations in emerging markets countries.
Derivatives Risk
A Fund may use derivatives to hedge against an opposite position that the Fund
also holds. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. When a Fund uses derivatives to hedge, it takes the risk that
changes in the value of the derivative will not match those of the asset being
hedged. Incomplete correlation can result in unanticipated losses. A Fund may
also use derivatives as an investment vehicle to gain market exposure. Gains or
losses from derivative investments may be substantially greater than the
derivative's original cost. When a Fund uses derivatives, it is also subject to
the risk that the other party to the agreement will not be able to perform.
Additional risks associated with derivatives include mispricing and improper
valuation.
20
--------------------------
Allmerica Investment Trust
<PAGE>
Emerging Markets Risk
Investments in emerging markets securities involve all of the risks of
investments in foreign securities, and also have additional risks. The markets
of developing countries have been more volatile than the markets of developed
countries with more mature economies. Many emerging markets companies in the
early stages of development are dependent on a small number of products and lack
substantial capital reserves. In addition, emerging markets often have less
developed legal and financial systems. These markets often have provided
significantly higher or lower rates of return than developed markets and usually
carry higher risks to investors than securities of companies in developed
countries.
Foreign Investment Risk
Investing in foreign securities involves risks relating to political, social and
economic developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. These risks may include the seizure by the government of company
assets, excessive taxation, withholding taxes on dividends and interest,
limitations on the use or transfer of portfolio assets, and political or social
instability. In the event of nationalization, expropriation or other
confiscation, a Fund could lose its entire investment. Funds investing in
foreign securities may experience rapid changes in value. One reason for this
volatility is that the securities markets of many foreign countries are
relatively small, with a limited number of companies representing a small number
of industries. Enforcing legal rights may be difficult, costly and slow in
foreign countries. Also, foreign companies may not be subject to governmental
supervision or accounting standards comparable to those applicable to U.S.
companies, and there may be less public information about their operations. The
conversion of certain European currencies to the "euro" may present additional
risks to those Funds exposed to such currenices.
Interest Rate Risk
When interest rates rise, the prices of fixed income securities in a Fund's
portfolio will generally fall. Conversely, when interest rates fall, the prices
of fixed income securities in the Fund's portfolio will generally rise. Even
Funds that invest in the highest quality debt securities are subject to interest
rate risk. Interest rate risk usually will affect the price of a fixed income
security more if the security has a longer maturity because changes in interest
rates are increasingly difficult to predict over longer periods of time. Fixed
income securities with longer maturities will therefore be more volatile than
other fixed income securities with shorter maturities.
Investment Management Risk
Investment management risk is the risk that a Fund does not achieve its
investment objective, even though the Sub-Adviser uses various investment
strategies and techniques.
Liquidity Risk
This is the risk that a Fund will not be able to sell a security at a reasonable
price because there are too few people who actively buy and sell, or trade, that
security on a regular basis. Liquidity risk increases for Funds investing in
foreign investments (especially emerging markets securities), smaller companies,
lower credit quality bonds (also called "junk bonds"), restricted securities,
over-the-counter securities and derivatives.
Market Risk
This is the risk that the price of a security held by a Fund will fall due to
changing economic, political or market conditions or to factors affecting
investor psychology.
Prepayment Risk
While mortgage-backed securities may have a stated maturity, their expected
maturities may vary when interest rates rise or fall. When interest rates fall,
homeowners are more likely to prepay their mortgage loans which may result in an
unforeseen loss of future interest income to a Fund. Also, because prepayments
increase when interest rates fall, the prices of mortgage-backed securities do
not increase as much as other fixed income securities when interest rates
fall.
21
- --------------------------
Allmerica Investment Trust
<PAGE>
[GRAPHIC] Other Investment Strategies
================================================================================
The Fund Summaries starting on page 3 describe the investment objective and the
principal investment strategies and risks of each Fund. The Funds may at times
use the following investment strategies. Attached as an Appendix is a chart with
a listing of various investment techniques and strategies that the Sub-Advisers
of the Funds may utilize. A Fund may decide that it is in the best interests of
shareholders to make changes to its investment objective and strategies
described in this Prospectus. These investment objectives and strategies may be
changed with the approval of the Board of Trustees, but without shareholder
approval.
Derivative Investments. (applicable to each Fund except the Money Market Fund)
Instead of investing directly in the types of portfolio securities described in
the Summary, each Fund, except the Money Market Fund, may buy or sell a variety
of "derivative" investments to gain exposure to particular securities or
markets. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. A
Fund's Sub-Adviser will sometimes use derivatives as part of a strategy designed
to reduce other risks and sometimes will use derivatives to enhance returns,
which increases opportunities for gain but also involves greater risk.
Foreign Investments. (applicable to each Fund except the Government Bond Fund)
Each Fund, except the Government Bond Fund, may invest all or a substantial part
of its portfolio in securities of companies that are located or primarily doing
business in a foreign country. A company is considered to be located in a
foreign 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
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 country or (ii) at least
50% of the company's assets are situated in the country. A Fund may invest in
foreign securities either directly or indirectly through the use of depositary
receipts, such as ADRs. Depositary receipts are generally issued by banks or
trust companies and evidence ownership of underlying foreign securities. 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 Select Capital Appreciation Fund and Select International Equity
Fund may also purchase foreign securities through European Depositary Receipts
and Global Depositary Receipts.
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) The Select Emerging Markets Fund, Select Capital
Appreciation Fund, Select Growth Fund, Select Growth and Income Fund, and Select
Income Fund may purchase corporate debt securities which are high yield
securities, or "junk bonds" (rated at the time of purchase BB or lower by
Moody's or S&P, or equivalently rated by another rating agency, or unrated but
believed by the Sub-Adviser to have similar quality.) These securities are
considered to be speculative in their capacity to pay interest and repay
principal.
22
--------------------------
Allmerica Investment Trust
<PAGE>
Lending of Securities. (applicable to all Funds) To realize additional income,
the Funds may lend portfolio securities to broker-dealer or financial
institutions in an amount up to 33-1/3% of a Fund's total assets. 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
possible delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral.
Restricted Securities. (applicable to all Funds) The Funds may purchase
securities that are not registered under Federal securities law ("restricted
securities"), but can be offered and sold to certain "qualified institutional
buyers". 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). These limits do not apply if the Board of Trustees determines that
the 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, retains
sufficient oversight and is ultimately responsible for the determinations. This
investment practice could increase the level of illiquidity in a Fund if buyers
lose interest in restricted securities. As a result, a Fund might not be able to
sell these securities when its Sub-Adviser wants to sell, or might have to sell
them at less than fair value. In addition, market quotations for these
securities are less readily available.
Temporary Defensive Strategies. At times a Sub-Adviser may determine that market
conditions make it desirable temporarily to suspend a Fund's normal investment
activities. This is when the Fund may temporarily invest in a variety of
lower-risk securities, such as U.S. Government and other high quality bonds and
short-term debt obligations. Such strategies attempt to reduce changes in the
value of the Fund's shares. The Fund may not achieve its investment objective
while these strategies are in effect.
Frequent Trading. Certain Funds from time to time may engage in active and
frequent trading to achieve their investment objective. Frequent trading
increases transaction costs, which could detract from the Fund's
performance.
23
- --------------------------
Allmerica Investment Trust
<PAGE>
[GRAPHIC] Management of the Funds
================================================================================
The Trust is governed by a Board of Trustees. Allmerica Financial Investment
Management Services, Inc. is the investment Manager of the Trust responsible for
managing the Trust's day-to-day business affairs. The Manager is located at 440
Lincoln Street, Worcester, MA 01653. The Manager and its predecessor, Allmerica
Investment Management Company, Inc., have been managing mutual funds since 1985.
The Manager currently serves as investment manager to one other mutual fund.
Sub-Advisers have been hired to manage the investments of the Funds. The Trust
and Manager have obtained an order of exemption from the SEC that permits the
Manager to enter into and materially amend sub-advisory agreements with
non-affiliated Sub-Advisers without obtaining shareholder approval. The Manager
has ultimate responsibility to oversee Sub-Advisers. The Manager has the
ability, subject to approval of the Trustees, to hire and terminate Sub-Advisers
and to change materially the terms of the Sub-Adviser Agreements, including the
compensation paid to the Sub-Advisers. The Sub-Advisers have been selected by
the Manager and Trustees with the help of BARRA RogersCasey, Inc., a pension
consulting firm. The fees earned by each Sub-Adviser and BARRA RogersCasey are
paid by the Manager. The performance by the Sub-Advisers is reviewed quarterly
by a committee of the Board of Trustees, with assistance from BARRA
RogersCasey.
The following table provides information about each Fund's Sub-Adviser:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fund Name,
Sub-Adviser Name and Address Experience
- --------------------------------------------------------------------------------
<S> <C>
Select Emerging Markets Fund Organized in 1980 and has $27.1
Schroder Capital Management billion assets under management as
International Inc. of December 31, 1998. Provides
787 Seventh Avenue global equity and fixed income
New York, NY 10019 management services to mutual funds
and other institutional investors.
- --------------------------------------------------------------------------------
Select Aggressive Growth Fund Has over $31 billion assets under
Nicholas-Applegate Capital Management, L.P. management as of January 21, 1999.
600 West Broadway, Suite 2900 Founded in 1984. Clients include
San Diego, CA 92101 employee benefit and retirement
plans, foundations, investment
companies and individuals.
- --------------------------------------------------------------------------------
Select Capital Appreciation Fund Manages with its affiliates assets
T. Rowe Price Associates, Inc. totaling $148 billion as of
100 East Pratt Street December 31, 1998 for seven million
Baltimore, MD 21202 individual and institutional
investor accounts. Founded in 1937.
- --------------------------------------------------------------------------------
Select Value Opportunity Fund Established in 1973. Over $4.3
Cramer Rosenthal McGlynn, LLC billion assets under management as
707 Westchester Avenue of December 31, 1998. Provides
White Plains, NY 10604 investment advice to mutual funds,
individuals, government agencies,
pension plans and trusts.
- --------------------------------------------------------------------------------
</TABLE>
24
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fund Name,
Sub-Adviser Name and Address Experience
- --------------------------------------------------------------------------------
<S> <C>
Select International Equity Fund Managed over $38 billion in global
Bank of Ireland Asset Management (U.S.) Ltd. securities as of December 31, 1998.
26 Fitzwilliam Place, Dublin 2, Founded in 1966. Provides
Ireland and 20 Horseneck Lane international investment management
Greenwich, CT 06830 services.
- --------------------------------------------------------------------------------
Select Growth Fund As of December 31, 1998, $294
Putnam Investment Management, Inc. billion assets under management,
One Post Office Square including affiliates. Investment
Boston, MA 02109 manager of mutual funds and other
clients since 1937.
- --------------------------------------------------------------------------------
Select Strategic Growth Fund Began operations in 1973. Manages
Cambiar Investors, Inc. portfolios for corporations,
8400 East Prentice Avenue pension plans and financial
Suite 460 institutions. As of December 31,
Englewood, CO 80111 1998, $2.3 billion assets under
management.
- --------------------------------------------------------------------------------
Growth Fund Organized in 1969. Provides
Miller Anderson & Sherrerd, LLP investment advisory services to
One Tower Bridge employee benefit plans, endowment
West Conshohocken, PA 19428 funds, foundations and other
institutional investors. Had $69
billion assets under management as
of December 31, 1998.
- --------------------------------------------------------------------------------
Equity Index Fund Incorporated in 1993. Had $13.2
Allmerica Asset Management, Inc. billion assets under management as
440 Lincoln Street of December 31, 1998. Serves as
Worcester, MA 01653 investment adviser to investment
companies and affiliated insurance
company accounts.
- --------------------------------------------------------------------------------
Select Growth and Income Fund Incorporated in 1984. With
J.P. Morgan Investment Management Inc. affiliates, over $300 billion
522 Fifth Avenue assets under management as of
New York, NY 10036 December 31, 1998. Serves as
investment adviser for employee
benefit plans and other
institutional assets, as well as
mutual funds and variable
annuities.
- --------------------------------------------------------------------------------
Select Income Fund Founded in 1933. Had $46 billion in
Standish, Ayer & Wood, Inc. assets under management as of
One Financial Center December 31, 1998. Manages
Boston, MA 02111 portfolios for pension plans,
financial institutions and
endowment and foundation funds.
- --------------------------------------------------------------------------------
Investment Grade Income Fund See Equity Index Fund above
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
- --------------------------------------------------------------------------------
Government Bond Fund See Equity Index Fund above
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
- --------------------------------------------------------------------------------
Money Market Fund See Equity Index Fund above
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
- --------------------------------------------------------------------------------
</TABLE>
25
- --------------------------
Allmerica Investment Trust
<PAGE>
For a sample listing of certain of the Sub-Advisers' clients, see "Investment
Management and Other Services" in the SAI.
The following individuals or groups of individuals are primarily responsible for
the day-to-day management of the Funds' portfolios:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Emerging Markets Fund John A. Troiano, Chief Executive 1981 - Present Joined SCMI as an investment
Schroder Capital Management and Chairman of Emerging analyst specializing in
International Inc. ("SCMI") Markets Committee engineering and technology;
in 1989 set up SCMI's Latin
American team.
Mark Bridgeman, 1990 - Present Joined SCMI in 1990 and is
First Vice President Fund Manager specializing
in African markets.
Heather F. Crighton, Director 1993 - Present Joined SCMI in 1993 as Fund
Manager specializing in
Asian emerging markets.
- ----------------------------------------------------------------------------------------------------------------------
Select Aggressive Growth Fund Lawrence S. Speidell, Partner 1994 - Present Director of
Nicholas-Applegate Capital Global/Systematic
Management, L.P. ("NACM") Portfolio Management and
Research at NACM. Prior
to joining NACM, he spent
ten years with Batterymarch
Financial Management.
John J. Kane, Partner 1994 - Present Senior Portfolio Manager for
the U.S. Systematic
portfolios
at NACM. Prior to joining
NACM in 1994, he was
employed by ARCO Invest-
Management Company
and General Electric.
Mark W. Stuckelman, 1995 - Present Portfolio Manager for the
Portfolio Manager U.S. Systematic portfolios
at NACM. Prior to joining
NACM, he was employed for
five years with Wells Fargo
Bank, Fidelity Management
Trust Co., and BARRA, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Select Capital Appreciation Fund Brian W.H. Berghuis, 1985 - Present He has fifteen years
T. Rowe Price Associates, Inc. Chartered Financial Analyst experience in equity
("T. Rowe Price") research and portfolio
management. He is Chairman
of the investment team for
the Fund.
John F. Wakeman, Research 1989 - Present He spent nine years with
Analyst & Portfolio Manager T. Rowe Price as a research
analyst and portfolio
manager and has eleven
years' experience in
equity research.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
26
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Capital Appreciation Fund Marc L. Baylin, Chartered 1993 - Present He has seven years of
continued Financial Analyst investment experience in
equity research and has been
with T. Rowe Price for the
past five years as a research
analyst.
- ----------------------------------------------------------------------------------------------------------------------
Select Value Opportunity Fund Ronald H. McGlynn, CEO and 1973 - Present He joined Cramer Rosenthal
Cramer Rosenthal McGlynn, President of Cramer Rosenthal in 1973, has 29 years of
LLC ("Cramer Rosenthal") investment experience and
serves as Co-Chief Investment
Officer and Portfolio
Manager.
Jay B. Abramson, Executive 1985 - Present He has been with Cramer
Vice President and Director Rosenthal since 1985 and his
of Research and Co-Chief overall responsibility is for
Investment Officer investment research.
- ----------------------------------------------------------------------------------------------------------------------
Select International Equity Fund Christopher Reilly, 1980 - Present Since 1985, he has had
Bank of Ireland Asset Management Chief Investment Officer overall responsibility for
(U.S.) Limited ("BIAM") asset management. He
previously worked in the
United Kingdom in
stockbrokering and
investment management.
Denis Donovan, Director- 1985 - Present Prior to joining BIAM, he
Portfolio Manager spent more than 13 years in
the money market and foreign
exchange operations of the
Central Bank of Ireland. At
present, he has overall
responsibility for the
portfolio management
function for all of BIAM's
client base.
Peter Wood, Senior 1985 - Present Prior to 1985, he spent five
Portfolio Manager years with another leading
investment management firm.
He is now responsible for
portfolio construction at
BIAM.
Jane Neill, Senior Equity Analyst 1994 - Present Previously, she was Chief
Investment Officer with
another leading Irish invest-
ment management firm.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
27
- --------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Growth Fund C. Beth Cotner, CFA, 1995 - Present Prior to 1995, Ms. Cotner
Putnam Investment Chief Investment Officer was Executive Vice President
Management, Inc. ("Putnam") at Kemper Financial Services.
Manuel Weiss, CFA, 1987 - Present He has been an investment
Senior Vice President professional with Putnam
since 1987.
- ----------------------------------------------------------------------------------------------------------------------
Select Strategic Growth Fund Michael S. Barish, 1973 - Present He founded Cambiar in 1973
Cambiar Investors, Inc. CFA and President and has 36 years of
("Cambiar") investment experience. He is
a generalist and is
responsible for the consumer
goods and health-care
securities.
Kathleen M. McCarty, 1987 - Present Prior to 1987, Ms. McCarty
CFA, Senior Vice President was employed by Dain
Bosworth as Vice President
of Research. She is
responsible for financial
services, communication
services and utilities
securities.
Michael J. Gardner, 1995 - Present Prior to 1995, Mr. Gardner was
CFA and Vice President employed by Simmons & Co.
He is responsible for energy
and capital goods securities.
Brian M. Barish, 1997 - Present Prior to joining Cambiar in
CFA and Vice President 1997, Mr. Barish was Vice
President at Lazard Freres &
Co. He is responsible for
technology-software, con-
sumer goods, transportation
and international securities.
- ----------------------------------------------------------------------------------------------------------------------
Growth Fund Gary G. Schlarbaum, 1987 - Present He has served on a committee
Miller Anderson & Sherrerd, LLP CFA and Managing Director of fund managers since 1993.
("MAS") Prior to 1987, Mr. Schlarbaum
was employed by First Chicago
Investment Advisors from 1984
- 1987.
Nicholas Kovich, 1988 - Present He has served on the fund
CFA and Managing Director managers committee since
1988. Prior to MAS, Mr.
Kovich was employed by
Waddell & Reed Asset
Management Company from 1982
- 1988.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
28
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund continued Robert J. Marcin, 1988 - Present Prior to joining MAS in 1988,
CFA and Managing Director Mr. Marcin was an Account
Executive at Smith
Barney Harris Upham
and Company, Inc.
Brian Kramp, 1997 - Present Mr. Kramp was employed
CFA and Vice President as an analyst and portfolio
manager by Meridian
Investment Company from
1985 - 1997.
James J. Jolinger, Principal 1994 - Present He has served on the fund
managers committee since
1997. Prior to 1994, Mr.
Jolinger was employed by
Oppenheimer Capital as
an Equity Analyst from
1987 to 1994.
Arden C. Armstrong, 1986 - Present Prior to joining MAS,
CFA and Managing Director Ms. Armstrong was employed
by Evans Economics, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Select Growth and Income Fund Bernard A. Kroll, Vice President 1996 - Present Prior to joining J.P. Morgan
J.P. Morgan Investment in 1996, Mr. Kroll was an
Management Inc. ("J.P. Morgan") equity derivatives
specialist at Goldman Sachs
& Co., founded his own
software development firm
and options broker-dealer,
and managed several
derivatives businesses at
Kidder, Peabody & Co. He is
a portfolio manager in the
Structured Equity Group.
Timothy J. Devlin, Vice President 1996 - Present Prior to joining J.P. Morgan
in 1996, Mr. Devlin was an
equity portfolio manager at
Mitchell Hutchins Asset
Management Inc. He is a
portfolio manager in the
Structured Equity Group.
James C. Wiess, Vice President 1992 - Present He is a portfolio manager in
the Structured Equity Group
and has been at J.P. Morgan
since 1992.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
29
- --------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fund Name and Name and Title of Service with Business Experience
Sub-Adviser Name Portfolio Manager(s) Sub-Adviser for Past Five Years
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Income Fund Edward H. Ladd, 1962 - Present He is the firm's economist
Standish, Ayer & Wood, Inc. Chairman and Managing Director and also assists clients in
("SAW") establishing investment
strategies. Mr. Ladd is a
Director of the Federal
Reserve Bank of Boston, New
England Electric System,
Greylock Management and
Harvard Management Corp. and
a member of SAW's Executive
Committee.
George W. Noyes, President and 1970 - Present He directs bond policy
Managing Director 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, 1974 - Present She manages fixed-income
Managing Director 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 1984 - Present He 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 1976 - Present She is head of the tax-
and Director exempt area and manages
insurance and pension fund
accounts. Ms. Furman
currently serves on SAW's
Executive Committee.
- ----------------------------------------------------------------------------------------------------------------------
Investment Grade Income Fund Lisa M. Coleman, 1994 - Present She was a Deputy Manager/
Allmerica Asset Management, Inc. CFA and Vice President Portfolio Manager in the
("AAM") global fixed income area for
Brown Brothers Harriman &
Company in New York prior to
joining AAM.
- ----------------------------------------------------------------------------------------------------------------------
Government Bond Fund Richard J. Litchfield, 1995 - Present He was a mortgage-backed
Allmerica Asset Management, Inc. CFA and Vice President securities analyst and
("AAM") trader at Keystone
Investments, Inc. prior to
joining AAM.
- ----------------------------------------------------------------------------------------------------------------------
Equity Index Fund and John C. Donohue, Vice President 1995 - Present He was a portfolio manager
Money Market Fund at CS First Boston Investment
Allmerica Asset Management, Inc. Management prior to
("AAM") joining AAM.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
30
--------------------------
Allmerica Investment Trust
<PAGE>
For the fiscal year ended December 31, 1998, the Funds paid the Manager the fees
shown in the table below:
<TABLE>
<CAPTION>
Fee (as a percentage of
Fund average net assets)
---------------------------------------------------------------------------
<S> <C>
Select Emerging Markets Fund* 1.35%
---------------------------------------------------------------------------
Select Aggressive Growth Fund 0.88%
---------------------------------------------------------------------------
Select Capital Appreciation Fund 0.94%
---------------------------------------------------------------------------
Select Value Opportunity Fund* 0.91%
---------------------------------------------------------------------------
Select International Equity Fund 0.90%
---------------------------------------------------------------------------
Select Growth Fund 0.82%
---------------------------------------------------------------------------
Select Strategic Growth Fund* 0.85%
---------------------------------------------------------------------------
Growth Fund 0.44%
---------------------------------------------------------------------------
Equity Index Fund 0.29%
---------------------------------------------------------------------------
Select Growth and Income Fund 0.68%
---------------------------------------------------------------------------
Select Income Fund 0.54%
---------------------------------------------------------------------------
Investment Grade Income Fund 0.43%
---------------------------------------------------------------------------
Government Bond Fund 0.50%
---------------------------------------------------------------------------
Money Market Fund 0.26%
---------------------------------------------------------------------------
</TABLE>
*Amount does not reflect a voluntary expense limitation currently in effect
for the Select Emerging Markets Fund, Select Value Opportunity Fund, and
Select Strategic Growth Fund.
For the fiscal year ended December 31, 1998, the Manager paid each Sub-Adviser
aggregate fees as set forth below:
<TABLE>
<CAPTION>
Fee (as a percentage of
Sub-Adviser average net assets)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Schroder Capital Management International Inc.(1) (Select Emerging Markets Fund) 1.00%
- -------------------------------------------------------------------------------------------------------------------------
Nicholas-Applegate Capital Management, L.P. (Select Aggressive Growth Fund) 0.51%
- -------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Associates, Inc.* (Select Capital Appreciation Fund) 0.52%
- -------------------------------------------------------------------------------------------------------------------------
Cramer Rosenthal McGlynn, LLC (Select Value Opportunity Fund) 0.54%
- -------------------------------------------------------------------------------------------------------------------------
Bank of Ireland Asset Management (U.S.) Limited (Select International Equity Fund) 0.33%
- -------------------------------------------------------------------------------------------------------------------------
Putnam Investment Management, Inc. (Select Growth Fund) 0.33%
- -------------------------------------------------------------------------------------------------------------------------
Cambiar Investors, Inc.(2) (Select Strategic Growth Fund) 0.50%
- -------------------------------------------------------------------------------------------------------------------------
Miller Anderson & Sherrerd, LLP (Growth Fund) 0.21%
- -------------------------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Equity Index Fund) 0.10%
- -------------------------------------------------------------------------------------------------------------------------
John A. Levin & Co., Inc.** (Select Growth and Income Fund) 0.30%
- -------------------------------------------------------------------------------------------------------------------------
Standish, Ayer & Wood, Inc. (Select Income Fund) 0.20%
- -------------------------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Investment Grade Income Fund) 0.20%
- -------------------------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Government Bond Fund) 0.20%
- -------------------------------------------------------------------------------------------------------------------------
Allmerica Asset Management, Inc. (Money Market Fund) 0.10%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
- --------------------------
Allmerica Investment Trust
<PAGE>
(1) The Select Emerging Markets Fund began operations on February 20, 1998. For
its services, Schroder Capital Management International Inc. 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>
(2) The Select Strategic Growth Fund began operations on February 20, 1998. For
its services, Cambiar Investors, Inc. will receive a fee computed daily at
an annual rate based on the average daily net assets of the Select
Strategic Growth Fund, 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>
* T. Rowe Price Associates, Inc. assumed Sub-Adviser responsibilities from
Janus Capital Corporation on April 1, 1998. Janus Capital Corporation
served as Sub-Adviser of the Select Capital Appreciation Fund from April
28, 1995 to March 31, 1998. Janus Capital Corporation received a fee
computed daily at an annual rate based on the average daily net assets of
the Select Capital Appreciation Fund, based on 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>
T. Rowe Price Associates, Inc. receives a fee computed daily at an annual rate
of 0.50% based on the average daily net assets of the Select Capital
Appreciation Fund.
** J.P. Morgan Investment Management Inc. replaced John A. Levin & Co., Inc.
as Sub-Adviser of the Select Growth and Income Fund on April 1, 1999. John
A. Levin & Co., Inc. served as Sub-Adviser of the Select Growth and Income
Fund from September 1, 1994 to March 31, 1999. John A. Levin & Co., Inc.
received a fee computed daily at an annual rate based on the average daily
net assets of the Select Growth and Income Fund, based on 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>
J.P. Morgan Investment Management Inc. receives a fee computed daily at an
annual rate based on the average daily net assets of the Select Growth and
Income Fund, based on the following schedule:
<TABLE>
<CAPTION>
Assets Rate
--------------------------------------------
<S> <C>
First $500 Million 0.30%
--------------------------------------------
Next $500 Million 0.25%
--------------------------------------------
Over $1 Billion 0.20%
--------------------------------------------
</TABLE>
32
--------------------------
Allmerica Investment Trust
<PAGE>
Pricing of Fund Shares
================================================================================
The Funds sell and redeem their shares at a price equal to their net asset value
("NAV") without paying any sales or redemption charges. The NAV of a share is
computed by adding the current value of all the Fund's assets, subtracting its
liabilities and dividing by the number of its outstanding shares. NAV is
computed once daily at the close of regular trading on the New York Stock
Exchange each day the Exchange is open - normally 4:00 p.m. Eastern Time. Orders
for the purchase or redemption of shares are filled at the next NAV computed
after an order is received by the Fund. The Funds do not accept orders or
compute their NAV's on days when the Exchange is closed.
Equity securities are valued based on market value if market quotations are
readily available. In other cases, they are valued at their fair value following
procedures approved by the Trustees. Debt securities (other than short-term
obligations) normally are valued based on pricing service valuations. All
securities of the Money Market Fund are valued at amortized cost. Debt
obligations in the other Funds with a remaining maturity of 60 days or less are
valued at amortized cost when amortized cost is considered to represent fair
value. Values for short-term obligations of the other Funds having a remaining
maturity of more than 60 days are based upon readily available market
quotations.
Certain foreign markets may be open on days when the Funds do not accept orders
or price their shares. As a result, the NAV of a Fund's shares may change on
days when shareholders will not be able to buy or sell shares.
Purchase and Redemption of Shares
================================================================================
Shares of the Funds currently are purchased only by Separate Accounts which are
the funding mechanisms for variable annuity contracts and variable life
insurance policies. The Distributor, Allmerica Investments, Inc., at its
expense, may provide promotional incentives to dealers who sell variable annuity
contracts which invest in the Funds. The Trust has obtained an exemptive order
from the Securities and Exchange Commission to permit Fund shares to be sold to
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans. Material irreconcilable conflicts may arise among
various insurance policy owners and plan participants. The Trustees will monitor
events to identify any material conflicts and determine if any action should be
taken to resolve such conflict.
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. See the prospectuses for the variable
insurance products.
Normally, redemption payments will be made within seven days after the Trust
receives a written redemption request. Redemptions may be suspended when trading
on the New York Stock Exchange is restricted or when permitted by the Securities
and Exchange Commission.
33
- --------------------------
Allmerica Investment Trust
<PAGE>
Distributions and Taxes
================================================================================
Distributions
Each Fund pays out substantially all of its net investment income and net
capital gains to shareholders each year. Net investment income is 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.
Taxes
The Trust seeks 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. Under current tax law, dividend or capital gain
distributions from any Fund are not currently taxable when left to accumulate
within a variable annuity or variable life insurance contract. Withdrawals from
a contract generally are subject to ordinary income tax and, in many cases, to
an additional 10% penalty tax on withdrawals before age 59 1/2. Tax consequences
to investors in the Separate Accounts which are invested in the Trust are
described in more detail in the prospectuses for those accounts.
Year 2000
================================================================================
Some computer software cannot distinguish between dates in the year 2000 and
dates in the year 1900 because of the way that dates are encoded and calculated.
The services provided to the Trust by the Manager, Sub-Advisers, the Custodian
and other external service providers depend on the proper functioning of their
computer software. Failure to correct or replace any non-compliant software
could adversely affect, among other things, the handling of securities trades,
the payment of interest and dividends, the pricing of the Trust's securities and
of the Trust's shares, and account services. The Trust has requested information
from its service providers with respect to their plans to be Year 2000
compliant. The Trust has been advised by its service providers that they either
are Year 2000 compliant now or expect to be compliant prior to December 31,
1999. However, there can be no guarantee that the Trust's operations will not be
adversely affected by non-compliant systems of its service providers or of other
third parties which interact with such service providers. The Year 2000 problem
could also have an adverse effect on issuers, including foreign issuers, whose
securities are owned by the Funds, potentially decreasing the value of such
securities.
34
--------------------------
Allmerica Investment Trust
<PAGE>
[GRAPHIC] Financial Highlights
================================================================================
The financial highlights tables are intended to help you understand each Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the tables represent the rate that an investor
would have earned or lost on an investment in a Fund (assuming reinvestment of
all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Fund's financial
statements, are included in the Statement of Additional Information or annual
report, which is available upon request.
35
- --------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
-----Income from Investment Operations------- --------------------Less Distributions---------------------
Net
Realized Distri- Net
Net and butions Increase
Asset Net Unrealized Dividends from Net Distri- (Decrease)
Value Investment Gain (Loss) Total from from Net Realized butions in
Year Ended Beginning Income on Investment Investment Capital in Return of Total Net Asset
December 31, of Year (Loss)(2) Investments Operations Income Gains Excess Capital Distributions Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select Emerging
Markets Fund(1)
1998(D) $1.000 $0.006 $(0.221) $(0.215) $(0.001) $ -- $ -- $ -- $(0.001) $(0.216)
- ------------------------------------------------------------------------------------------------------------------------------------
Select
Aggressive
Growth Fund
1998 2.225 (0.008) 0.243 0.235 -- -- -- -- -- 0.235
1997 2.037 (0.009) 0.387 0.378 -- (0.182) (0.008)(3) -- (0.190) 0.188
1996 1.848 (0.009) 0.351 0.342 -- (0.153) -- -- (0.153) 0.189
1995 1.397 (0.001) 0.452 0.451 -- -- -- -- -- 0.451
1994 1.431 (0.002) (0.032) (0.034) -- -- -- -- -- (0.034)
- ------------------------------------------------------------------------------------------------------------------------------------
Select Capital
Appreciation
Fund(1)
1998 1.698 (0.006) 0.241 0.235 -- (0.293) -- -- (0.293) (0.058)
1997 1.485 (0.005) 0.218 0.213 -- -- -- -- -- 0.213
1996 1.369 (0.003) 0.124 0.121 -- (0.005) -- -- (0.005) 0.116
1995 1.000 (0.001) 0.397 0.396 -- (0.027) -- -- (0.027) 0.369
- ------------------------------------------------------------------------------------------------------------------------------------
Select Value
Opportunity
Fund(1)
1998 1.626 0.014 0.066 0.080 (0.014) (0.006) -- -- (0.020) 0.060
1997 1.511 0.010 0.364 0.374 (0.010) (0.249) -- -- (0.259) 0.115
1996 1.238 0.011 0.342 0.353 (0.011) (0.069) -- -- (0.080) 0.273
1995 1.089 0.009 0.183 0.192 (0.009) (0.033) (0.001)(3) -- (0.043) 0.149
1994 1.170 0.005 (0.081) (0.076) (0.005) -- -- -- (0.005) (0.081)
- ------------------------------------------------------------------------------------------------------------------------------------
Select
International
Equity Fund(1)
1998 1.341 0.014 0.207 0.221 (0.020) -- -- -- (0.020) 0.201
1997 1.356 0.015 0.049 0.064 (0.019) (0.046) (0.014)(4) -- (0.079) (0.015)
1996 1.136 0.011 0.238 0.249 (0.012) (0.003) (0.014)(4) -- (0.029) 0.220
1995 0.963 0.013 0.176 0.189 (0.011) (0.005) -- -- (0.016) 0.173
1994 1.000 0.003 (0.038) (0.035) (0.001) (0.001) -- -- (0.002) (0.037)
- ------------------------------------------------------------------------------------------------------------------------------------
</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 period ended December 31, 1998
(1) The Select Emerging Markets Fund commenced operations on February 20, 1998.
The Select Capital Appreciation Fund commenced operations on April 28, 1995
and changed sub-advisers on April 1, 1998. The Select Value Opportunity
Fund changed sub-advisers on January 1, 1997. The Select International
Equity Fund commenced operations on May 2, 1994.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.004 in 1998 for Select Emerging
Markets Fund; $(0.009) in 1998 and $(0.010) in 1997 for Select Aggressive
Growth Fund; $(0.006) in 1998, $(0.001) in 1995 for Select Capital
Appreciation Fund; $0.013 in 1998, $0.009 in 1997, $0.010 in 1996 and
$0.005 in 1994 for Select Value Opportunity Fund; and $0.014 in 1998,
$0.015 in 1997, $0.011 in 1996 and $0.002 in 1994 for Select International
Equity Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
36
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
--------------Ratios To Average Net Assets---------------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Period Investment Operating Expenses Management Fee Turnover
Period Return (000's) Income (Loss) (A) (B) (C) Gross Net Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.784 (21.46)%** $ 20,873 0.96%* 2.19%* 2.19%* 2.54%* 1.35%* 1.00%* 62%
- ------------------------------------------------------------------------------------------------------------------------------------
2.460 10.56% 752,741 (0.36)% 0.92% 0.95% 0.95% 0.88% 0.88% 99%
2.225 18.71% 604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95%
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.640 13.88% 310,582 (0.47)% 1.02% 1.04% 1.04% 0.94% 0.94% 141%
1.698 14.28% 240,526 (0.38)% 1.13% 1.13% 1.13% 0.98% 0.98% 133%
1.485 8.80% 142,680 (0.32)% 1.13% 1.13% 1.13% 1.00% 1.00% 98%
1.369 39.56%** 41,376 (0.25)%* 1.35%* -- 1.42%* 1.00%* 0.93%* 95%
- ------------------------------------------------------------------------------------------------------------------------------------
1.686 4.87% 268,405 0.95% 0.94% 0.98% 0.99% 0.91% 0.90% 73%
1.626 24.85% 202,139 0.73% 0.98% 1.04% 1.06% 0.92% 0.90% 110%
1.511 28.53% 113,969 0.91% 0.95% 0.97% 0.97% 0.85% 0.85% 20%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.542 16.48% 505,553 0.99% 1.01% 1.02% 1.02% 0.90% 0.90% 27%
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20%
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
- --------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
-----Income from Investment Operations------- --------------------Less Distributions---------------------
Net
Realized Distri- Net
Net and butions Increase
Asset Net Unrealized Dividends from Net Distri- (Decrease)
Value Investment Gain (Loss) Total from from Net Realized butions in
Year Ended Beginning Income on Investment Investment Capital in Return of Total Net Asset
December 31, of Year (Loss)(2) Investments Operations Income Gains Excess Capital Distributions Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select Growth
Fund(1)
1998 $1.811 $0.002 $0.638 $0.640 $ --(3) $(0.023) $ -- $ -- $(0.023) $0.617
1997 1.430 0.006 0.480 0.486 (0.006) (0.099) -- -- (0.105) 0.381
1996 1.369 0.005 0.297 0.302 (0.005) (0.236) -- -- (0.241) 0.061
1995 1.099 -- 0.270 0.270 -- -- -- -- -- 0.270
1994 1.119 0.003 (0.020) (0.017) (0.003) -- -- -- (0.003) (0.020)
- ------------------------------------------------------------------------------------------------------------------------------------
Select Strategic
Growth Fund(1)
1998(D) 1.000 0.002 (0.027) (0.025) (0.002) -- -- -- (0.002) (0.027)
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund
1998 2.416 0.028 0.436 0.464 (0.028) (0.027) -- -- (0.055) 0.409
1997 2.333 0.039 0.540 0.579 (0.038) (0.458) -- -- (0.496) 0.083
1996 2.176 0.047 0.386 0.433 (0.048) (0.228) -- -- (0.276) 0.157
1995 1.814 0.049 0.539 0.588 (0.049) (0.177) -- -- (0.226) 0.362
1994 1.939 0.043 (0.041) 0.002 (0.043) (0.084) -- -- (0.127) (0.125)
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Index
Fund
1998 2.753 0.035 0.741 0.776 (0.034) (0.087) -- -- (0.121) 0.655
1997 2.165 0.034 0.664 0.698 (0.033) (0.077) -- -- (0.110) 0.588
1996 1.827 0.035 0.370 0.405 (0.035) (0.032) -- -- (0.067) 0.338
1995 1.468 0.035 0.474 0.509 (0.035) (0.047) (0.002)(4) (0.066) (0.150) 0.359
1994 1.505 0.033 (0.018) 0.015 (0.033) (0.019) -- -- (0.052) (0.037)
- ------------------------------------------------------------------------------------------------------------------------------------
Select Growth
and
Income Fund(1)
1998 1.552 0.020 0.233 0.253 (0.020) (0.006) -- -- (0.026) 0.227
1997 1.405 0.020 0.293 0.313 (0.020) (0.146) -- -- (0.166) 0.147
1996 1.268 0.020 0.246 0.266 (0.020) (0.109) -- -- (0.129) 0.137
1995 1.027 0.019 0.290 0.309 (0.019) (0.049) -- -- (0.068) 0.241
1994 1.069 0.025 (0.018) 0.007 (0.025) (0.017) (0.007)(4) -- (0.049) (0.042)
- ------------------------------------------------------------------------------------------------------------------------------------
</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 period ended December 31, 1998
(1) The Select Growth Fund changed sub-advisers on July 1, 1996. The Select
Strategic Growth Fund commenced operations on February 20, 1998. The
Select Growth and Income Fund changed sub-advisers on April 1, 1999.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.001 in 1998, $0.006 in 1997 and
$0.005 in 1996 for Select Growth Fund; $(0.001) in 1998 for Select
Strategic Growth Fund; $0.027 in 1998, $0.038 in 1997 and $0.046 in 1996
for Growth Fund; and $0.019 in 1998, $0.019 in 1997 and $0.019 in 1996 for
Select Growth and Income Fund.
(3) Dividends from net investment income are less than $0.0005.
(4) Distributions in excess of net realized capital gains.
38
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
--------------Ratios To Average Net Assets---------------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Year Investment Operating Expenses Management Fee Turnover
Year Return (000's) Income (Loss) (A) (B) (C) Gross Net Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2.428 35.44% $815,390 0.08% 0.85% 0.87% 0.87% 0.82% 0.82% 86%
1.811 34.06% 470,356 0.42% 0.91% 0.93% 0.93% 0.85% 0.85% 75%
1.430 22.02% 228,551 0.38% 0.92% 0.93% 0.93% 0.85% 0.85% 159%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
0.973 (2.47)%** 14,839 0.41%* 1.14%* 1.20%* 1.66%* 0.85%* 0.39%* 24%
- ------------------------------------------------------------------------------------------------------------------------------------
2.825 19.32% 860,333 1.08% 0.46% 0.49% 0.49% 0.44% 0.44% 100%
2.416 25.14% 728,679 1.48% 0.47% 0.49% 0.49% 0.43% 0.43% 79%
2.333 20.19% 556,751 2.04% 0.48% 0.51% 0.51% 0.44% 0.44% 72%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
3.408 28.33% 481,877 1.17% 0.36% 0.36% 0.36% 0.29% 0.29% 6%
2.753 32.41% 297,191 1.38% 0.44% 0.44% 0.44% 0.31% 0.31% 9%
2.165 22.30% 151,130 1.79% 0.46% 0.46% 0.46% 0.32% 0.32% 12%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.779 16.43% 646,086 1.26% 0.70% 0.73% 0.73% 0.68% 0.68% 112%
1.552 22.51% 473,552 1.34% 0.77% 0.80% 0.80% 0.73% 0.73% 71%
1.405 21.26% 295,638 1.44% 0.80% 0.83% 0.83% 0.75% 0.75% 78%
1.268 30.32% 191,610 1.69% 0.85% -- 0.85% 0.75% 0.75% 112%
1.027 0.73% 110,213 2.51% 0.91% -- 0.91% 0.75% 0.75% 107%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
- --------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
-----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 in
Year Ended Beginning Investment on Investment Investment Capital in Return 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>
Select Income Fund
1998 $1.022 $0.059 $0.010 $0.069 $(0.059) $ -- $ -- $ -- $ (0.059) $0.010
1997 0.995 0.060 0.028 0.088 (0.061) -- -- -- (0.061) 0.027
1996 1.024 0.061 (0.029) 0.032 (0.061) -- -- -- (0.061) (0.029)
1995 0.930 0.060 0.095 0.155 (0.060) -- (0.001)(2) -- (0.061) 0.094
1994 1.035 0.055 (0.105) (0.050) (0.055) -- -- -- (0.055) (0.105)
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Grade
Income Fund
1998 1.112 0.067 0.020 0.087 (0.067) -- -- -- (0.067) 0.020
1997 1.084 0.071 0.028 0.099 (0.071) -- -- -- (0.071) 0.028
1996 1.117 0.070 (0.033) 0.037 (0.070) -- -- -- (0.070) (0.033)
1995 1.012 0.071 0.106 0.177 (0.071) -- (0.001)(2) -- (0.072) 0.105
1994 1.111 0.066 (0.099) (0.033) (0.066) -- -- -- (0.066) (0.099)
- ------------------------------------------------------------------------------------------------------------------------------------
Government
Bond Fund
1998 1.047 0.058 0.021 0.079 (0.058) -- -- -- (0.058) 0.021
1997 1.036 0.061 0.011 0.072 (0.061) -- -- -- (0.061) 0.011
1996 1.062 0.062 (0.026) 0.036 (0.062) -- -- -- (0.062) (0.026)
1995 0.997 0.062 0.066 0.128 (0.062) -- (0.001)(2) -- (0.063) 0.065
1994 1.070 0.063 (0.073) (0.010) (0.063) -- -- -- (0.063) (0.073)
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market
Fund
1998 1.000 0.054 - 0.054 (0.054) -- -- -- (0.054) --
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) --
- ------------------------------------------------------------------------------------------------------------------------------------
</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.
(1) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $0.060 in 1995 and $0.055 in 1994 for
Select Income Fund.
(2) Distributions in excess of net investment income.
40
--------------------------
Allmerica Investment Trust
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA INVESTMENT TRUST
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
--------------Ratios To Average Net Assets---------------
Net Asset Net Assets
Value End of Net Portfolio
End of Total Year Investment Operating Expenses Management Fee Turnover
Year Return (000's) Income (Loss) (A) (B) (C) Gross Net Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1.032 6.83% $160,450 5.92% 0.64% 0.64% 0.64% 0.54% 0.54% 130%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.132 7.97% 230,623 6.01% 0.52% 0.52% 0.52% 0.43% 0.43% 158%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.068 7.67% 81,018 5.63% 0.64% 0.64% 0.64% 0.50% 0.50% 61%
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%
- ------------------------------------------------------------------------------------------------------------------------------------
1.000 5.51% 336,253 5.36% 0.32% 0.32% 0.32% 0.26% 0.26% N/A
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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
- --------------------------
Allmerica Investment Trust
<PAGE>
[GRAPHIC] Appendix
Investment Techniques and Strategies
In managing its portfolios of investments, the Trust may make use of the
following investment techniques and strategies:
Symbols
o Permitted
-- Not Permitted
<TABLE>
<CAPTION>
Select Select Select Select Select Select
Emerging Aggressive Capital Value International Select Strategic
Markets Growth Appreciation Opportunity Equity Growth Growth
Investment Technique/Strategy Fund Fund Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset-Backed Securities -- -- -- -- -- -- --
Financial Futures Contracts
and Related Options o o o o o o o
Foreign Securities o o o o o o o
Forward Commitments -- -- o -- -- -- --
Forward Contracts on Foreign
Currencies o -- o -- o o --
High Yield Securities o -- o -- -- o --
Investments in Money Market
Securities o o o o o o o
Mortgage-Backed Securities -- -- -- -- -- -- --
Purchasing Options o o o o o o o
Repurchase Agreements o o o o o o o
Restricted Securities o o o o o o o
Reverse Repurchase Agreements -- -- o -- -- -- --
Securities Lending o o o -- o o o
Stand-By Commitments -- -- -- -- -- -- --
Stripped Mortgage-Backed
Securities -- -- -- -- -- -- --
Swap and Swap-Related Products -- -- o -- -- -- --
When-Issued Securities o o o o o o o
Writing Covered Options o o o o o o o
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Select
Growth Investment
Equity and Select Grade Government Money
Growth Index Income Income Income Bond Market
Investment Technique/Strategy Fund Fund Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset-Backed Securities o -- o o o o o
Financial Futures Contracts
and Related Options o o o o o o --
Foreign Securities o o o o o -- o
Forward Commitments -- -- -- o o o o
Forward Contracts on Foreign
Currencies -- -- -- -- -- -- --
High Yield Securities -- -- o o -- -- --
Investments in Money Market
Securities o o o o o o o
Mortgage-Backed Securities -- -- -- o o o --
Purchasing Options o o o o o o --
Repurchase Agreements o o o o o o o
Restricted Securities o o o o o o o
Reverse Repurchase Agreements -- -- -- -- -- -- --
Securities Lending o o o o o o o
Stand-By Commitments -- -- -- o o o o
Stripped Mortgage-Backed
Securities -- -- -- o o o --
Swap and Swap-Related Products -- -- -- -- -- -- --
When-Issued Securities o o o o o o o
Writing Covered Options o o o o o o --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
--------------------------
Allmerica Investment Trust
<PAGE>
================================================================================
Allmerica Investment Trust
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
The Trust's Statement of Additional Information ("SAI") includes additional
information about the Funds. The Trust's annual and semi-annual reports to
shareholders include information about the investments of the Funds. The SAI and
the financial statements included in the Fund's most recent annual report to
shareholders are incorporated by reference into this prospectus, which means
they are part of this prospectus for legal purposes. The Trust's annual report
discusses the market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year. You may get free
copies of these materials, request other information about a Fund or make
shareholder inquiries by calling 1-800-828-0540.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the Public Reference Room. You may also access reports and other
information about the Trust on the Commission's Internet site at
http://www.sec.gov. You may get copies of this information, with payment of a
duplication fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-4138.
ALLMERICA
INVESTMENT
TRUST
440 Lincoln Street, Worcester, Massachusetts 01653
1-800-828-0540
<PAGE>
ALLMERICA INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
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
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, 1999. A FREE COPY OF THE APPLICABLE PROSPECTUS MAY
BE OBTAINED FROM ALLMERICA INVESTMENT TRUST (THE "TRUST"), 440 LINCOLN STREET,
WORCESTER, MASSACHUSETTS 01653, (508) 855-1000.
The Trust's Financial Statements and related notes and the report of the
independent accountants for the fiscal year ended December 31, 1998 are
incorporated by reference into this SAI and are included in the Trust's Annual
Report to Shareholders. The Annual Report to Shareholders is available, without
charge, upon request, by calling the following toll free number:
1-800-828-0540.
DATED: MAY 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
TRUST HISTORY......................................................... 3
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS.............. 3
INVESTMENT RESTRICTIONS AND POLICIES................................ 10
INVESTMENT STRATEGIES AND TECHNIQUES................................ 11
PORTFOLIO TURNOVER.................................................. 25
MANAGEMENT OF THE TRUST............................................... 25
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................... 28
INVESTMENT MANAGEMENT AND OTHER SERVICES.............................. 28
BROKERAGE ALLOCATION AND OTHER PRACTICES.............................. 39
CAPITAL STOCK AND OTHER SECURITIES.................................... 41
PURCHASE, REDEMPTION AND PRICING OF SHARES............................ 42
TAXATION OF THE FUNDS OF THE TRUST.................................... 43
UNDERWRITERS.......................................................... 43
CALCULATION OF PERFORMANCE DATA....................................... 44
FINANCIAL STATEMENTS.................................................. 47
</TABLE>
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TRUST HISTORY
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"). Not all of the Funds
are offered to each Separate Account.
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, 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"). The
Trustees may create additional funds in the future.
DESCRIPTION OF THE FUNDS
AND THEIR INVESTMENTS AND RISKS
ADDITIONAL INFORMATION ABOUT THE FUNDS
For a description of the Funds' principal investment strategies and risks,
types of investments each Fund may acquire and certain investment techniques it
may utilize, see "Principal Investment Strategies and Risks" and "Other
Investment Strategies and Risks" in the appropriate Prospectus for the
underlying Funds of the applicable Separate Account. Following are descriptions
of additional Fund strategies, policies and restrictions. Note that any
percentage limitations listed under each Fund below apply at the time of
investment.
SELECT EMERGING MARKETS FUND
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. 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 are situated in the developing country.
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 investment 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.
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.
SELECT AGGRESSIVE GROWTH FUND
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.
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
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<PAGE>
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.
Because 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, 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 the Sub-Adviser of the Fund 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.
SELECT CAPITAL APPRECIATION FUND
Up to 15% of the Fund's net assets may be invested in securities which are
illiquid. When the Sub-Adviser of the Fund 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.
SELECT VALUE OPPORTUNITY FUND
The Fund may invest temporarily in preferred stocks, bonds and other
defensive issues. 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 15% of its net assets in securities which are
illiquid.
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.
SELECT INTERNATIONAL EQUITY FUND
The Fund may invest up to 15% of its net assets in securities which are
illiquid. When the Sub-Adviser of the Fund 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.
SELECT GROWTH FUND
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.
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.
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.
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<PAGE>
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.
SELECT STRATEGIC GROWTH FUND
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 Fund may invest up to 15% of its net assets in securities which are
illiquid.
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.
GROWTH FUND
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.
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 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 15% of its net assets in securities which are
illiquid.
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 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 Standard & Poor's Ratings Service,
a division of McGraw-Hill Companies, Inc. ("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 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. 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.
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
5
<PAGE>
months ended December 31, 1998, the S&P 500 gained 28.58% versus a gain of
28.33% for the Equity Index Fund producing a tracking error of 0.25% 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.
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.
The Equity Index Fund 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.
The Equity Index Fund may invest up to 25% of its assets in foreign
securities (not including its investments in American Depositary Receipts
("ADRs")). The Equity Index 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.
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.
6
<PAGE>
SELECT GROWTH AND INCOME FUND
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. These may include
securities of large well-known companies as well as smaller growth companies.
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 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. In certain
circumstances, fixed-income securities may be purchased by the Fund for long-
term growth potential.
The Fund may invest up to 15% of its net assets in securities which are
illiquid.
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. 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.
SELECT INCOME FUND
Investment grade corporate debt securities in which the Fund invests are:
(a) assigned a rating within the four highest grades (Baa/BBB or higher) by
either Moody's Investor Service, Inc. ("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 SAI. The
types of securities in which the Fund invests include but are not limited to
U.S. dollar obligations of supranational entities such as the World Bank,
European Investment Bank and African Development Bank.
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. 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.
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.
INVESTMENT GRADE INCOME FUND
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. 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.
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<PAGE>
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.
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. Some U.S. Government securities are
backed 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 the U.S. Government sponsored
instrumentalities if it is not obligated to do so by law. 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
8
<PAGE>
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.
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 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.
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.
MONEY MARKET FUND
The Fund may invest in dollar-denominated obligations of foreign branches
of U.S. banks ("Euro dollars") 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.
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 Allmerica Asset Management, Inc.
("AAM"), as Sub-Adviser to the Fund, 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.
INVESTMENT RESTRICTIONS AND POLICIES
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 9 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 without shareholder approval. 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 ("1940 Act").
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?% 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.
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<PAGE>
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. 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.
*9. 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.
10. The Fund does not intend to invest in companies for the purpose of
exercising control or management.
11. The Fund may invest in the securities of one or more other investment
companies, subject to the provisions of the 1940 Act, as amended, any other
applicable laws or regulations and any applicable exemptive orders issued by the
Securities and Exchange Commission.
12. 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.
13. 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.
* 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.
INVESTMENT STRATEGIES AND TECHNIQUES
In managing its portfolios of investments, the Trust may make use of the
following investment strategies and 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 102%
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of 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 1/3% 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 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. 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. 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. 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 "Financial Futures Contracts and Related Options" and "Forward
Contracts on Foreign Currencies."
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
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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 European Depositary Receipts,
which are designed for use in European securities markets, and also may invest
in Global Depositary Receipts.
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.
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 or delayed delivery 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. 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. 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
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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
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. 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. 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
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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.
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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth 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
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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, Select Growth 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, Select Growth Fund and Select Income Fund also may 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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth 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."
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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 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.
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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 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
17
<PAGE>
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, Select Growth 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 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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth 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
18
<PAGE>
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, Select
Growth 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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth 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, Select Growth Fund and Select Income Fund 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
19
<PAGE>
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 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.
20
<PAGE>
RESTRICTED SECURITIES
Each Fund may invest up to 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 that such restricted securities are liquid.
The Board of Trustees has adopted guidelines and delegated to Allmerica
Financial Investment Management Services, Inc. (the "Manager" or "AFIMS") 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. Because market quotations
are less readily available, judgment at times may play a greater role in valuing
these securities than in the case of unrestricted securities.
INVESTMENTS IN MONEY MARKET SECURITIES
Each 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
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.
21
<PAGE>
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.
ASSET-BACKED SECURITIES
The Growth Fund, Select Growth and Income Fund, Select Income Fund,
Investment Grade Income Fund, Government Bond Fund and Money Market 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. A Fund will not invest more than 20% of its total assets in asset-
backed securities.
MORTGAGE-BACKED SECURITIES
The Select Income Fund, Investment Grade Income Fund and Government Bond
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 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.
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<PAGE>
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
The Select Income Fund, Investment Grade Income Fund and Government Bond
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 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
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
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<PAGE>
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
The Select Income Fund, Investment Grade Income Fund, Government Bond Fund
and Money Market Fund may enter into 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.
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.
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.
Following are explanations of any significant variations in the Funds' portfolio
turnover rates over the two most recently completed fiscal years or any
anticipated variation in the portfolio turnover rate.
<TABLE>
<CAPTION>
FUND DECEMBER 31, 1997 DECEMBER 31, 1998
- ---- ----------------- -----------------
<S> <C> <C>
Select Emerging Markets Fund N/A 62%
Select Aggressive Growth Fund 95% 99%
Select Capital Appreciation Fund 133% 141%
Select Value Opportunity Fund 110% 73%
Select International Equity Fund 20% 27%
Select Growth Fund 75% 86%
Select Strategic Growth Fund N/A 24%
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
FUND DECEMBER 31, 1997 DECEMBER 31, 1998
- ---- ----------------- -----------------
<S> <C> <C>
Growth Fund 79% 100%
Equity Index Fund 9% 6%
Select Growth and Income Fund 71% 112%
Select Income Fund 79% 130%
Investment Grade Income Fund* 48% 158%
Government Bond Fund 56% 61%
Money Market Fund N/A N/A
</TABLE>
* The portfolio turnover rate was greater in fiscal year 1998 due to the larger
number of mortgage rolls held by the Fund during that period.
MANAGEMENT OF THE TRUST
The Trust is managed by a Board of Trustees. The Trustees have overall
responsibility for implementation of the investment policies and operations of
the Funds of the Trust. The Board of Trustees of the Trust holds regular
quarterly meetings and at other times on an as needed basis. The affairs of the
Trust are conducted in accordance with the Bylaws adopted by the Trustees and
the applicable laws of the Commonwealth of Massachusetts, the state in which the
Trust is organized.
<TABLE>
<CAPTION>
POSITIONS HELD PRESENT POSITION AND PRINCIPAL
NAME, ADDRESS AND AGE WITH THE TRUST/(1)/ OCCUPATIONS DURING THE PAST 5 YEARS
- --------------------- ------------------ -----------------------------------
<S> <C> <C>
P. Kevin Condron (53) Trustee President and Chief Executive Officer,
The Granite Group The Granite Group (plumbing supplies), 1998
12 E. Worcester Street - present; President, Central Supply Co., 1983 -
Worcester, Massachusetts 1997; Director, Peoples Heritage Financial Group;
Director, Family Bank
**Cynthia A. Hargadon (44) Trustee Director of Investments, National Automobile
1880 Virginia Avenue Dealers Association (retirement trust), 1998 -
McLean, Virginia present; President, Stable Value Investment Association (investment
trade group), and Senior Consultant, Johnson Custom
Strategies (investment services firm), 1996 - 1998;
Senior Vice President and Chief Investment Officer,
ICMA Retirement Corporation (investment adviser),
1987 - 1996
Gordon Holmes (61) Trustee Lecturer at Bentley College, 1998 - present;
75 Clarendon Street Lecturer and Executive in Residence, Boston
Boston, Massachusetts University, 1997 - 1998; Certified Public
Accountant; Retired Partner, Tofias, Fleishman,
Shapiro & Co., P.C. (Accountants) 1976-1996
*John P. Kavanaugh (44) Trustee and President, Allmerica Asset Management,
440 Lincoln Street Vice President, Inc. since 1995; Vice President, Director, Chief
Worcester, Massachusetts Investment Officer, First Allmerica and
Allmerica Financial Life Insurance and Annuity
Company ("Allmerica Financial Life")
**Bruce E. Langton (67) Trustee Trustee, Bankers Trust institutional mutual funds;
99 Jordan Lane Member, Investment Committee, TWA Pilots Trust
Stamford, Connecticut Annuity Plan; Member, Investment Committee,
Unilever United States -Pension & Thrift plans
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
POSITIONS HELD PRESENT POSITION AND PRINCIPAL
NAME, ADDRESS AND AGE WITH THE TRUST/(1)/ OCCUPATIONS DURING THE PAST 5 YEARS
- --------------------- ------------------ -----------------------------------
<S> <C> <C>
*John F. O'Brien (56) Trustee and President, Chief Executive Officer and Director, First
440 Lincoln Street Chairman of the Board, Allmerica; Director and Chairman of the Board,
Allmerica Financial Life; Director, Allemerica
Investments, Inc.; Director, ABIOMED, Inc.
(medical devices); Director, Cabot Corporation
(special chemicals), Director, TJX Corporation,
Inc. (retail)
Attiat F. Ott (63) Trustee Professor of Economics and Director of the
262 Salisbury Street Institute for Economic Studies, Clark University
Worcester, Massachusetts
**Richard M. Reilly (60) Trustee President, Allmerica Financial Life since
440 Lincoln Street and Vice President 1995; Vice President, First Allmerica; President,
Worcester, Massachusetts AFIMS; Director, Allmerica Investments, Inc.
**Ranne P. Warner (54) Trustee President, Centros Properties, USA (real estate);
Centros Properties USA, Inc. Owner, Ranne P. Warner and Company;
176 Federal Street, 6/th/ Floor Director, Wainwright Bank & Trust Co.
Boston, Massachusetts 02110 (commercial bank); Trustee, Ericksen Trust
(real estate)
David J. Mueller (46) Vice President and Treasurer Vice President, First Allmerica since 1996;
440 Lincoln Street Assistant Vice President, First Allmerica, 1995 -
Worcester, Massachusetts 1996; Business Analyst, First Allmerica, 1993 -
1995; Manager, Coopers & Lybrand, 1987 - 1993.
George Boyd (54) Secretary Counsel, First Allmerica since January 1997;
440 Lincoln Street Director, Mutual Fund Administration - Legal
Worcester, Massachusetts and Regulatory, Investors Bank & Trust Company,
1995 - 1996; Vice President and Counsel, 440
Financial Group and First Data Investor Services
Group, 1992 - 1995.
</TABLE>
(1) The individuals listed hold the same position with Allmerica Securities
Trust, a closed-end management investment company which is a part of the
Trust complex that includes the Trust.
* Indicates the Trustees who are "interested persons" of the Trust as defined
in the 1940 Act.
** Indicates members of the Trust's Investment Operations Committee, which
reviews the performance of each Fund and recommends to the Board of
Trustees the selection and retention of Sub-Advisers.
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, 1998.
The Fund currently does not provide any pension or retirement benefits for its
Trustees or officers.
26
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST COMPLEX
*NAME OF PERSON AND POSITION FROM TRUST PAID TO TRUSTEES*
---------------------------------------------------------------------
<S> <C> <C>
P. Kevin Condron** $12,155.69 $12,423.00
Cynthia Hargadon $20,516.09 $21,000.00
Gordon Holmes $21,500.74 $26,500.00
Bruce E. Langton $23,447.39 $24,000.00
Attiat F. Ott $21,503.68 $22,000.00
Ranne P. Warner $24,424.25 $25,000.00
John P. Kavanaugh 0 0
John F. O'Brien 0 0
Richard M. Reilly 0 0
</TABLE>
* Includes two other investment companies.
** Mr. Condron was appointed Trustee on May 12, 1998.
CONTROL PERSON AND PRINCIPAL HOLDERS 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
(the "Trust Declaration"). 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 for the purpose of funding
variable annuity contracts and variable life insurance policies. The Trust has
obtained an exemptive order from the Securities and Exchange Commission to
permit Fund shares to be sold to variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
and certain qualified pension and retirement plans. The Separate Accounts of
First Allmerica or its affiliates are the shareholders of the Trust. As of
February 15, 1999, 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 February 15, 1999, 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. AFIMS also serves as investment
manager of The Fulcrum Trust, another open-end investment management company.
INVESTMENT MANAGEMENT AND OTHER SERVICES
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.
AFIMS serves as investment manager of the Trust pursuant to a management
agreement between the Trust and the Manager (the "Management Agreement"). 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 has entered into sub-adviser agreements with different
investment advisory firms (the "Sub-Advisers") to manage each of the Funds, at
its expense, subject to the requirements of the 1940 Act, as amended. 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.
27
<PAGE>
The Sub-Advisers have been selected by the Manager and Trustees in
consultation with BARRA RogersCasey, Inc. ("BARRA RogersCasey"), a pension
consulting firm. BARRA RogersCasey is wholly controlled by BARRA, Inc. The cost
of such consultation is borne by the Manager.
BARRA RogersCasey provides consulting services to pension plans representing
hundreds of billions of dollars in total assets and, in its consulting capacity,
monitors the investment performance of over 1,000 investment advisers. As a
consultant, BARRA RogersCasey has no decision-making authority with respect to
the Funds, and is not responsible for advice provided by the Manager or the Sub-
Advisers. From time to time, specific clients of BARRA RogersCasey and the Sub-
Advisers will be named in sales materials.
The following is information relating to control and affiliations of the
Manager and certain Sub-Advisers of the Trust.
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. First Allmerica and Allmerica Financial Life have
established Separate Accounts for the purpose of funding variable annuity
contracts and variable life insurance policies. The shares of each of the
Funds of the Trust may be purchased only through these Separate Accounts.
Schroder Capital Management International Inc. ("SCMI"), Sub-Adviser to the
Select Emerging Markets Fund, is a wholly-owned U.S. subsidiary of Schroders
U.S. Holdings, Inc., the indirect wholly-owned U.S. subsidiary of Schroders plc,
a publicly owned holding company organized under the laws of England. Schroders
plc and its affiliates engage in international merchant banking and investment
management business, and as of December 31, 1998, had assets under management of
approximately $27.1 billion.
Nicholas-Applegate Capital Management, L.P. ("NACM") was founded in 1984 and
serves as Sub-Adviser to the Select Aggressive Growth Fund.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as Sub-Adviser to the
Select Capital Appreciation Fund. 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.
Cramer Rosenthal McGlynn, LLC ("CRM"), Sub-Adviser to the Select Value
Opportunity Fund, is owned by its active investment professionals, Cramer
Rosenthal McGlynn, Inc., ("Cramer Rosenthal") and WT Investments, Inc. ("WTI")
an indirect, wholly-owned subsidiary of Wilmington Trust Corporation ("WTC").
Founded in 1973, Cramer Rosenthal provides investment advice to individuals,
state and local government agencies, pension and profit sharing plans, trusts,
estates, endowments and other organizations. WTC is a bank and holding company
and has operations in Delaware, Pennsylvania, Florida, Maryland and New York.
Through its subsidiaries, WTC engages in residential, commercial and
construction lending, deposit taking, insurance, travel, investment advisory and
broker-dealer services and mutual fund administration. As of December 31, 1998,
WTC, together with its subsidiaries, had $6 billion in assets. Wilmington Trust
Company, the largest subsidiary of WTC, is among the nation's largest personal
trust companies and holds approximately $116 billion in fiduciary capacity. On
January 2, 1998, WTI acquired an 18.72% fully diluted interest in CRM.
Bank of Ireland Asset Management (U.S.) Limited ("BIAM"), Sub-Adviser to the
Select International Equity Fund, is a wholly-owned subsidiary of Bank of
Ireland. Bank of Ireland provides investment management services through a
network of affiliated companies, including BIAM which represents North American
clients.
Putnam Investment Management, Inc., ("Putnam") Sub-Adviser to the Select
Growth Fund, 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.
28
<PAGE>
Cambiar Investors, Inc. ("Cambiar"), Sub-Adviser to the Select Strategic
Growth Fund, is a registered investment adviser that began operations in 1973
and became a wholly-owned subsidiary of United Asset Management Corporation in
1990 which provides diverse investment management services to institutions and
high net worth individuals and retail investors.
Miller Anderson & Sherrerd, LLP ("MAS"), Sub-Adviser to the Growth Fund, is
wholly-owned by indirect subsidiaries of Morgan Stanley Dean Witter & Co.
("MSDW"), and is a division of Morgan Stanley Dean Witter Investment Management.
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. MSDW is a preeminent global financial services firm that
maintains leading market positions in each of its three primary businesses -
securities, asset management and credit services.
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 is an indirect, wholly-owned subsidiary of AFC. 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. AFC is a publicly-traded Delaware holding company for a group of
affiliated companies.
J.P. Morgan Investment Management Inc. ("J.P. Morgan"), Sub-Adviser to the
Select Growth and Income Fund, is a wholly-owned asset management subsidiary of
J.P. Morgan & Co. Incorporated, which was founded in 1861, and serves as an
investment adviser for employee benefit plans and other institutional assets, as
well as mutual funds and variable annuities. J.P. Morgan & Co. Incorporated is
a bank holding company and a global financial services firm, providing
specialized advice and services for governments, business and individuals.
Standish, Ayer & Wood, Inc. ("SAW"), Sub-Adviser to the Select Income Fund,
also serves as investment adviser to an institutional account sponsored by an
AFC affiliate. 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.
The following is a list of persons who are affiliated persons of the Trust and
affiliated persons of the Manager and/or any Sub-Adviser and the capacities in
which the person is affiliated.
<TABLE>
<CAPTION>
POSITION(S) HELD POSITION(S) HELD WITH THE MANAGER
NAME WITH THE TRUST OR SUB-ADVISER OF THE TRUST
---- -------------- ---------------------------
<S> <C> <C>
Stephen W. Bright Vice President Vice President, AAM; Vice President,
AFIMS
Lisa M. Coleman Vice President Vice President, AAM
David J. Mueller Vice President and Treasurer Vice President, AFIMS
(Principal Accounting Officer)
John C. Donohue Vice President Vice President, AAM
John P. Kavanaugh Vice President President, AAM; Vice President,
AFIMS
Richard J. Litchfield Vice President Vice President, AAM
John F. O'Brien Chairman of the Board Chairman and Director, AFIMS;
Director, AAM
Richard M. Reilly President Director and President, AFIMS
</TABLE>
29
<PAGE>
First Allmerica, Allmerica Financial Life, AFIMS and AAM are direct or
indirect, wholly-owned subsidiaries of AFC. The Trust serves as an investment
vehicle for the Separate Accounts established by First Allmerica and Allmerica
Financial Life.
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 provided 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) (2)
</TABLE>
<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)
</TABLE>
<TABLE>
<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>
30
<PAGE>
(2) The Manager's fees for the Select Value Opportunity Fund and Select 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 VALUE
OPPORTUNITY SELECT GROWTH
ASSETS FUND FUND
------ ---- ----
<S> <C> <C>
First $100 Million............... 1.00% 0.85%
Next $150 Million................ 0.85% 0.85%
Next $250 Million................ 0.80% 0.80%
Next $250 Million................ 0.75% 0.75%
Over $750 Million................ 0.70% 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>
(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
------------- ----------- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Sub-Adviser Fee (5) (6) 0.50% (7) (8) (9)
</TABLE>
<TABLE>
<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%
</TABLE>
31
<PAGE>
<TABLE>
<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>
(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>
32
<PAGE>
(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, J.P. Morgan 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 $500 Million......................... 0.30%
Next $500 Million.......................... 0.25%
Over $1 Billion............................ 0.20%
</TABLE>
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,
1998 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR 1998 FISCAL YEAR 1997 FISCAL YEAR 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Select Emerging Markets Fund* $ 225,711 N/A N/A
Select Aggressive Growth Fund $5,977,909 $4,850,649 $3,302,349
Select Capital Appreciation Fund $2,417,031 $1,813,444 $ 902,600
Select Value Opportunity Fund $2,138,839 $1,433,016 $ 726,992
Select International Equity Fund $4,117,316 $3,258,876 $1,701,942
Select Growth Fund $5,112,118 $2,959,723 $1,508,861
Select Strategic Growth Fund* $ 68,645 N/A N/A
Growth Fund $3,519,665 $2,840,683 $2,163,374
Equity Index Fund $1,087,069 $ 705,708 $ 375,619
Select Growth and Income Fund $3,790,917 $2,807,177 $1,778,832
Select Income Fund $ 721,336 $ 524,021 $ 398,522
Investment Grade Income Fund $ 933,311 $ 710,821 $ 596,308
Government Bond Fund $ 338,796 $ 244,355 $ 235,359
Money Market Fund $ 731,259 $ 647,964 $ 510,258
</TABLE>
* The Select Emerging Markets Fund and Select Strategic Growth Fund began
operations on February 20, 1998.
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,
1998 were as follows:
<TABLE>
<CAPTION>
PAYMENTS MADE AS OF DECEMBER 31,
----------------------------------------------------
FUND/SUB-ADVISER FISCAL YEAR 1998 FISCAL YEAR 1997 FISCAL YEAR 1996
- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Select Emerging Markets Fund*
Schroder Capital Management International Inc. $ 167,193 N/A N/A
("SCMI")
Select Aggressive Growth Fund
Nicholas-Applegate Capital Management, L.P. $3,470,632 $2,885,239 $1,986,838
Select Capital Appreciation Fund**
T. Rowe Price Associates, Inc. ("T. Rowe") $1,332,970 $1,070,021 $ 538,873
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
PAYMENTS MADE AS OF DECEMBER 31,
----------------------------------------------------
FUND/SUB-ADVISER FISCAL YEAR 1998 FISCAL YEAR 1997 FISCAL YEAR 1996
- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Select Value Opportunity Fund
Cramer Rosenthal McGlynn, LLC ("CRM")*** $1,269,130 $ 851,815 $ 428,814
Select International Equity Fund
Bank of Ireland Asset Management (U.S.) Limited $1,498,759 $1,137,825 $ 665,639
Select Growth Fund
Putnam Investment Management, Inc. ("Putnam")**** $2,030,082 $1,328,717 $ 804,820
Select Strategic Growth Fund*
(Cambiar Investors, Inc.) $ 40,380 N/A N/A
Growth Fund
Miller Anderson & Sherrerd ("MAS")***** $2,979,910 $2,669,867 $2,330,558
Select Growth and Income Fund
John A. Levin & Co., Inc. ("JAL") $1,668,885 $1,159,260 $ 684,181
Select Income Fund
Standish, Ayer & Wood Inc. $ 265,038 $ 177,505 $ 133,205
Allmerica Asset Management, Inc.
Equity Index Fund, Investment Grade Income Fund,
Government Bond Fund and Money Market Fund $1,218,085 $ 911,548 $ 694,940
</TABLE>
* The Select Emerging Markets Fund and Select Strategic Growth Fund began
operations on February 20, 1998.
** The Select Capital Appreciation Fund began business operations on April
28, 1995. JCC was replaced by T. Rowe as Sub-Adviser for the Select
Capital Appreciation Fund on April 1, 1998. The total dollar amount paid
to JCC for the period January 1, 1998 through March 31, 1998 was
$345,171. The total dollar amount paid to T. Rowe for the period April
1, 1998 through December 31, 1998 was $987,799.
*** 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
Provident for the period January 1, 1996 through June 30, 1996 was
$372,442. 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.
****** JAL was replaced by J.P. Morgan Investment Management Inc. as Sub-
Adviser of the Select Growth and Income Fund on April 1, 1999.
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, 1998 for each Fund:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY ASSETS
----------------------------------
VOLUNTARY EXPENSE OPERATING
FUND LIMITATIONS EXPENSES+
---- ----------- ---------
<S> <C> <C>
Select Emerging Markets Fund ** 2.19%*
Select Aggressive Growth Fund 1.35% 0.92%
Select Capital Appreciation Fund 1.35% 1.02%
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C>
Select Value Opportunity Fund 1.25% 0.94%
Select International Equity Fund 1.50% 1.01%
Select Growth Fund 1.20% 0.85%
Select Strategic Growth Fund 1.20% 1.14%*
Growth Fund 1.20% 0.46%
Equity Index Fund 0.60% 0.36%
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY ASSETS
----------------------------------
VOLUNTARY EXPENSE OPERATING
FUND LIMITATIONS EXPENSES+
---- ----------- --------
<S> <C> <C>
Select Growth and Income Fund 1.10% 0.70%
Select Income Fund 1.00% 0.64%
Investment Grade Income Fund 1.00% 0.52%
Government Bond Fund 1.00% 0.64%
Money Market Fund 0.60% 0.32%
</TABLE>
- ------------------------------------------------------------------------------
+Including reductions such as directed brokerage credits. See "Brokerage
Allocation - Directed Brokerage Program" in the SAI.
* Annualized
* * 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.
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 Trust and Manager have obtained an order of exemption from the SEC
that would permit the Manager to enter into and materially amend sub-advisory
agreements with non-affiliated Sub-Advisers without obtaining shareholder
approval. 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 - 1998, following is a
listing of Schroder Capital Management International Inc.'s current
representative clients in emerging markets investments:
35
<PAGE>
- Georgia-Pacific - New York City Retirement Systems
- Idaho P.E.R.S. - NYS Teachers' Retirement Systems
- Intermountain Health Care - Orange County Retirement System
- ISPAT Inland Inc. - Utah State Retirement System
- L.A. City Employees Retirement - Virginia Retirement Systems
- Louisiana State E.R.S. - Washington State Investment Board
- Merck & Co.
A listing of Nicholas-Applegate Capital Management, L.P.'s current
representative clients is as follows:
- 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
A listing of T. Rowe Price Associates, Inc.'s current representative clients
is as follows:
- Allegheny Power System - New England Electric System
- Aloha Airlines - New York Power Authority
- Baltimore Gas & Electric - The Pittston Company
Company (BGE)
- The Black & Decker Corporation - Rochester Gas and Electric Corporation
- Blue Cross/Blue Shield of - Sanyo North American Corporation
Maryland
- Crown Central Petroleum - Shoprite Supermarkets, Inc.
Corporation
- Continental Airlines - The Standard Register Company
- Crawford & Company - State of Florida
- Data General Corporation - State of Illinois
- Electro Scientific Industries - State of Oklahoma
- Federal Deposit Insurance - Tri-City Medical Center
Corporation
- Hyatt Corporation - United States Fire Insurance Company
- Loews Corporation - Warner-Lambert Company
- Milliken & Company - Winn-Dixie Stores
A listing of Cramer Rosenthal McGlynn, LLC's current representative clients is
as follows:
- The Carnegie Institute - National Basketball Association
Players Pension Plan
- Central States Teamsters - New Mexico State Investment Council
- The UCLA Foundation - Niagara Mohawk Power Corp.
- College of Holy Cross - University of Cincinnati
- Indiana University Foundation - University of Illinois Foundation
- Maine State Retirement
A listing of Bank of Ireland Asset Management (U.S.) Limited's current
representative clients is as follows:
- 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
36
<PAGE>
A listing of Putnam Advisory Company, Inc.'s ("PAC")* current representative
clients is as follows:
- Betz Dearborn Inc. - New York Philharmonic Orchestra
- California Public Employees' - Parker-Hannifin Corporation
Retirement System - The Nemours Foundation
- Kemper Insurance - The Robert Wood Johnson Foundation
- Los Angeles County Employees' - United Furniture Workers, AFL-CIO
Retirement Association - U.S. Chamber of Commerce
- Matsushita Electric Corporation
of America
*(PAC is the institutional affiliate of Putnam Investment Management, Inc.)
A listing of Cambiar Investors, Inc.'s current representative clients is as
follows:
- American Hospital Association - Regent University
- AvMed Health Plan - Schurz Communication Retirement Plan
- Boeing Company - Sheet Metal Workers Local #20
- City Public Service of San - Taos Ski Valley Inc.
Antonio
- El Paso Community Foundation - Turlock Irrigation District Retirement
Plan
- Frank Russell Trust Company - United Airlines
- Hunter Douglas Retirement Plan - Viking Insurance Company
- Metropolitan Life - Waco Employees Profit Sharing Plan
- Nationwide Insurance
- New Mexico/West Texas Multicraft
A listing of Miller Anderson & Sherrerd LLP's current representative clients
is as follows:
- AT&T - New York Philharmonic Society
- Boeing Company - Philip Morris, Inc.
- Federal Reserve - Smithsonian Institution
- J. Paul Getty Trust - United Technologies Corporation
- University of Notre Dame
A listing of J.P. Morgan Investment Management Inc. representative clients is
as follows:
- Commonwealth Edison Co. - The World Bank
- Northeast Utilities - Xerox Corporation
- Novartis Corporation
A listing of Standish, Ayer & Wood's current representative clients is as
follows:
- Archdiocese of Boston - City of Houston
- AT&T - New York Public Library
- BankAmerica - Northeastern University
- Harcourt General - Reinsurance Association
- General Cinema
A listing of AAM's current representative clients is as follows:
- First Allmerica - Hannibal Regional Hospital
- Citizens Insurance - Massachusetts Education and
- Hanover Insurance Government Association Workers
- City of Worcester Retirement Compensation Trust
System
37
<PAGE>
- Worcester County Contributory - Farm Credit System Association
Retirement System Captive Insurance Company
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 AGREEMENTS
UNDERWRITER
Allmerica Investments, Inc. ("AII"), located at 440 Lincoln Street, Worcester,
Massachusetts 01653, (508) 855-1000, serves as the Trust's distributor pursuant
to a Distribution Agreement. The following is a list of persons who are
affiliated with both the Trust and AII.
<TABLE>
<CAPTION>
POSITION(S) HELD POSITION(S) HELD
NAME WITH THE TRUST WITH AII
---- ---------------- ----------------
<S> <C> <C>
David J. Mueller Vice President and Treasurer Vice President and
(Principal Accounting Officer) Controller
John F. O'Brien Chairman of the Board Director
Richard M. Reilly President Director
</TABLE>
FUND RECORDKEEPING SERVICES AGENT
Investors Bank & Trust Company ("IBT") replaced First Data Investor Services
Group, Inc. ("Investor Services Group") as the Trust's fund record keeping
services agent on April 1, 1999. IBT is located at 200 Clarendon Street, 16/th/
Floor, Boston, MA 02116. Under the terms of a Fund Accounting Services
Agreement, IBT 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. IBT is entitled to receive an annual fund recordkeeping
fee based on Fund assets and certain out-of-pocket expenses. The Manager is
responsible for the payment of the fund record keeping fee to IBT. 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 Fund Accounting Services Agreement
(the "Agreement") with IBT is similar to the Agreement previously in effect with
Investor Services Group and provides for compensation on an annual
basis. The compensation paid to Investor Services Group is similar to the
compensation which will be paid to IBT in terms of total dollar amount paid. The
total fund recordkeeping fees paid to Investor Services Group for the following
periods were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
$883,909 $748,941 $544,206
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, 16/th/ Floor,
Boston, MA 02116 replaced Bankers Trust Company as Custodian of the cash and
investment securities of the Trust on April 1, 1999. As such, IBT holds in
custody the Trust's portfolio securities and receives and delivers them upon
purchases and sales. The Custodian Agreement with IBT is similar to the
Agreement previously in effect with Bankers Trust Company including the total
dollar amount of compensation paid thereunder. The total fees paid to Bankers
Trust Company for custodial services for the following periods were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- ----------------- -----------------
$850,873 $743,606 $535,277
38
<PAGE>
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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
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,
39
<PAGE>
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 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Select Emerging Markets Fund* $ 105,823 N/A N/A
Select Aggressive Growth Fund $1,812,711 $1,238,116 $929,338
Select Capital Appreciation Fund** $ 683,523 $ 474,666 $240,295
Select Value Opportunity Fund** $ 742,439 $ 649,306 $101,743
Select International Equity Fund $ 369,191 $ 453,544 $360,263
Select Growth Fund** $ 724,915 $ 459,136 $450,238
Select Strategic Growth Fund* $ 32,898 N/A N/A
Growth Fund** $1,522,185 $ 969,754 $838,998
Equity Index Fund $ 106,104 $ 100,012 $ 63,013
Select Growth and Income Fund** $1,032,489 $ 962,045 $561,049
Government Bond Fund $ 0 $ 0 $ 0
</TABLE>
* The Select Emerging Markets Fund and Select Strategic Growth Fund began
operations on February 20, 1998.
** The following are the reasons for the differences in the amounts of brokerage
commissions paid for the most recent fiscal year compared to either of the
two prior fiscal years:
(1) The differences in the amounts of brokerage commissions paid during the
last three fiscal years for the Select Capital Appreciation Fund are
due to a change in Sub-Advisers on April 1, 1998 and the ensuing
portfolio turnover.
(2) The differences in the amounts of brokerage commissions paid during the
last three fiscal years for the Growth Fund are due to portfolio
repositioning and normal portfolio activity trading.
(3) The differences in the amounts of brokerage commissions paid during the
last three fiscal years for the Select Value Opportunity Fund, Select
Growth Fund and Select Growth and Income Fund are attributable to
growth in the assets of each Fund.
The Select Income Fund, Investment Grade Income Fund, Government Bond 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, 1997 and 1998 under such agreements
were as follows:
<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Select Emerging Markets Fund* $ 561 N/A N/A
Select Aggressive Growth Fund $229,479 $221,364 N/A
Select Capital Appreciation Fund $ 41,567 N/A N/A
Select Value Opportunity Fund $ 96,620 $ 84,389 $ 19,715
Select International Equity Fund $ 24,678 $ 70,636 $ 52,998
Select Growth Fund $151,581 $ 90,962 $ 10,405
Select Strategic Growth Fund $ 5,373 N/A N/A
</TABLE>
40
<PAGE>
<TABLE>
<S> <C> <C> <C>
Growth Fund $208,457 $152,829 $124,205
Select Growth and Income Fund $175,705 $102,293 $ 77,523
</TABLE>
The 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 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.
CAPITAL STOCK AND OTHER SECURITIES
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.
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.
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.
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 or conversion
rights.
The 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 of obligations of the
41
<PAGE>
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 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.
PURCHASE, REDEMPTION, AND PRICING OF SECURITIES BEING OFFERED
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. 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"). Shares of the Trust may also be issued to Separate Accounts of
unaffiliated life insurance companies and qualified pension and retirement plans
outside of the separate account context ("shared funding"). The Trust 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. 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.
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 without the addition of any selling commission or "sales load."
The redemption price may be more or less than the shareholder's cost. 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.
Unlike the Money Market Fund which attempts to maintain a stable net asset
value, the net asset value of the other Funds will fluctuate.
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.
42
<PAGE>
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 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.
TAXATION OF THE FUNDS OF THE TRUST
The Trust qualifies under Subchapter M of the Internal Revenue Code 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
43
<PAGE>
distributed to shareholders. See the prospectuses for the Separate Accounts for
tax consequences to investors.
To comply with regulations under Section 817(h) of the Code which contains
certain diversification requirements, each Fund of the Trust will be required to
diversify its investments so that on the last day of each quarter of a calendar
year, no more than 55% of the value of its assets is represented by any one
investment, no more than 70% is represented by any two investments, no more
than 80% is represented by any three investments, and no more than 90% is
represented by any four investments. Generally, securities of a single issuer
are treated as one investment and obligations of each U.S. Government agency and
instrumentality (such as the Government National Mortgage Association) are
treated for purposes of Section 817(h) as issued by separate issuers. In
addition, any security issued, guaranteed or insured (to the extent so
guaranteed or insured) by the United States or an instrumentality of the U.S.
will be treated as a security issued by the U.S. Government or its
instrumentality, whichever is applicable.
UNDERWRITERS
Under a Distribution Agreement, AII has a nonexclusive right to use its
best efforts to obtain from investors unconditional orders for the continuous
offering of shares authorized for issuance by the Trust. AII does not receive
direct compensation for its services as distributor of the Trust. AII, at its
expense, may provide promotional incentives to dealers that sell variable
annuity contracts for which the Funds serve as investment vehicles.
CALCULATION OF PERFORMANCE DATA
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 (net of reimbursements);
c = the average daily number of shares outstanding during the
period entitled to receive dividends; and
d = the 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
44
<PAGE>
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 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.
45
<PAGE>
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.
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.
All performance information is based on historical results and is not
intended to indicate future performance. 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, 1998
Set forth below is average annual total return information for the 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 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, 1998, yields for the Select Income Fund, Investment
Grade Income Fund and Government Bond Fund for the 30-day period ended December
31, 1998 and yield and effective yield information for the Money Market Fund for
the seven-day period ended December 31, 1998.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1 Year Period 5 Year Period 10 Year Period Since Inception
-------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Select Emerging Markets Fund N/A N/A N/A (21.46)%*
Select Aggressive Growth Fund 10.56% 14.99% N/A 18.11 %
Select Capital Appreciation Fund 13.88% N/A N/A 20.37 %
Select Value Opportunity Fund 4.87% 13.09% N/A 14.71 %
Select International Equity Fund 16.48% N/A N/A 12.26 %
Select Growth Fund 35.44% 22.15% N/A 19.18 %
Select Strategic Growth Fund N/A N/A N/A (2.47)%*
Growth Fund 19.32% 19.01% 16.98% 16.64 %
Equity Index Fund 28.33% 23.39% N/A 20.69 %
</TABLE>
46
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Select Growth and Income Fund 16.43% 17.82% N/A 15.53%
Select Income Fund 6.83% 6.05% N/A 6.56%
Investment Grade Income Fund 7.97% 6.95% 9.17% 8.97%
Government Bond Fund 7.67% 5.99% N/A 7.00%
Money Market Fund 5.51% 5.22% 5.62% 6.27%
</TABLE>
* Not Annualized
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. The Select
Emerging Markets Fund and Select Strategic Growth Fund began operations on
February 20, 1998.
YIELDS FOR 30-DAY PERIODS
ENDED DECEMBER 31, 1998
-----------------------
(Unaudited)
Select Income Fund 5.050%
Investment Grade Income Fund 5.080%
Government Bond Fund 4.400%
<TABLE>
<CAPTION>
YIELD FOR SEVEN DAY PERIOD EFFECTIVE YIELD FOR SEVEN DAY PERIOD
ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998
----------------------- -----------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Money Market Fund 5.11% 6.03%
</TABLE>
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, 1998 are incorporated by reference into this Statement
of Additional Information.
47
<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 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.
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<PAGE>
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.
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.
49
<PAGE>
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.
50
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
--------
Exhibit 1 Agreement and Declaration of Trust, dated October 11, 1984, as
amended May 12, 1992 was filed previously in Post-effective
Amendment No. 36 on April 15, 1998 and is incorporated herein by
reference.
Exhibit 2 Bylaws as amended May 12, 1992 were filed previously in Post-
effective Amendment No. 36 on April 15, 1998 and are incorporated
herein by reference.
Exhibit 3 None
Exhibit 4(a) Management Agreement (the "Management Agreement") between
Registrant and Allmerica Financial Investment Management
Services, Inc. (the "Manager") dated April 16, 1998 was filed
previously in Post-effective Amendment No. 37 on February 25,
1999 and is incorporated herein by reference.
Exhibit 4(b) Sub-Adviser Agreement between the Manager and Schroder Capital
Management International Inc. with respect to the Select Emerging
Markets Fund dated April 16, 1998 was filed previously in Post-
effective Amendment No. 37 on February 25, 1999 and is
incorporated herein by reference.
Exhibit 4(c) Sub-Adviser Agreement between the Manager and Nicholas-Applegate
Capital Management, L.P. with respect to the Select Aggressive
Growth Fund dated April 16, 1998 was filed previously in Post-
effective Amendment No. 37 on February 25, 1999 and is
incorporated herein by reference.
Exhibit 4(d) Sub-Adviser Agreement between the Manager and T. Rowe Price
Associates, Inc. with respect to the Select Capital Appreciation
Fund dated April 16, 1998 was filed previously in Post-effective
Amendment No. 37 on February 25, 1999 and is incorporated herein
by reference.
Exhibit 4(e) Sub-Adviser Agreement between the Manager and Cramer Rosenthal
McGlynn, LLC dated April 16, 1998 with respect to the Select
Value Opportunity Fund was filed previously in Post-effective
Amendment No. 37 on February 25, 1999 and is incorporated herein
by reference.
Exhibit 4(f) Sub-Adviser Agreement between the Manager and Bank of Ireland
Asset Management (U.S.) Limited with respect to the Select
International Equity Fund dated April 16, 1998 was filed
previously in Post-effective Amendment No. 37 on February 25,
1999 and is incorporated herein by reference.
Exhibit 4(g) Sub-Adviser Agreement between the Manager and Putnam Investment
Management, Inc. with respect to the Select Growth Fund dated
April 16, 1998 was filed previously in Post-effective Amendment
No. 37 on February 25, 1999 and is incorporated herein by
reference.
Exhibit 4(h) Sub-Adviser Agreement between the Manager and Cambiar Investors,
Inc. with respect to the Select Strategic Growth Fund dated April
16, 1998 was filed previously in Post-effective Amendment No. 37
on February 25, 1999 and is incorporated herein by
reference.
Exhibit 4(i) Sub-Adviser Agreement between the Manager and Miller Anderson &
Sherrerd, LLP with respect to the Growth Fund dated April 16,
1998 was filed previously in Post-effective Amendment No. 37 on
February 25, 1999 and is incorporated herein by reference.
Exhibit 4(j) Sub-Adviser Agreement between the Manager and J. P.
Morgan Investment Management Inc. with respect to the Select
Growth and Income Fund dated April 1, 1999 is filed herein.
Exhibit 4(k) Sub-Adviser Agreement between the Manager and Standish, Ayer &
Wood, Inc. with respect to the Select Income Fund dated April 16,
1998 was filed previously in Post-effective Amendment No. 37 on
February 25, 1999 and is incorporated herein by reference.
1
<PAGE>
Exhibit 4(l) 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 April 16, 1998 was filed previously in Post-
effective Amendment No. 37 on February 25, 1999 and is
incorporated herein by reference.
Exhibit 5 Distribution Agreement with Allmerica Investments, Inc. dated
February 25, 1998 was filed previously in Post-effective
Amendment No. 36 on April 15, 1998 and is incorporated herein by
reference.
Exhibit 6 None
Exhibit 7 Custodian Agreement with Investors Bank & Trust Company to be
filed by amendment.
Exhibit 8 Administration Services Agreement between Manager and Investors
Bank & Trust Company to be filed by amendment.
Exhibit 8(a) Securities Lending Agency Agreement with Investors Bank & Trust
Company to be filed by amendment.
Exhibit 9 Opinion and consent of counsel is filed herein.
Exhibit 10 Consent of Independent Accountants is filed herein.
2
<PAGE>
Exhibit 11 None
Exhibit 12 Participation Agreement among Registrant, Allmerica Financial
Investment Management Services, Inc. and First Allmerica
Financial Life Insurance Company dated February 16, 1999 was
filed previously in Post-effective Amendment No. 27 on February
25, 1999 and is incorporated herein by reference.
Exhibit 12(a) Participation Agreement among Registrant, Allmerica Financial
Investment Management Services, Inc. and Allmerica Financial Life
Insurance and Annuity Company dated February 16, 1999 was filed
previously in Post-effective Amendment No. 27 on February 25,
1999 and is incorporated herein by reference.
Exhibit 13 None
Exhibit 14 None
Exhibit 15 None
Exhibit 16 Power of Attorney dated February 16, 1999 was filed
previously in Post-effective Amendment No. 27 on February 25,
1999 and is incorporated herein by reference.
Exhibit 27 Finanical Data Schedules
Item 24. 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 Financial 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 25. Indemnification
---------------
Article VIII of Registrant's Agreement and Declaration Trust, entitled
"Indemnification," was filed previously in Post-effective Amendment No. 36 on
April 15, 1998 and is incorporated herein by reference.
Article III, Section 12 of the Bylaws of First Allmerica was filed previously in
Post-effective Amendment No. 36 on April 15, 1998 and is incorporated herein by
reference.
Item 26. Business and Other Connections of Investment Manager and Sub-
-------------------------------------------------------------
Advisers
--------
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. 801-55463; Miller, Anderson & Sherrerd, LLP, File No.
801-10437; Bank of Ireland Asset Management (U.S.) Limited, File No. 801-29606;
J.P. Morgan Investment Management Inc., File No. 801-21011; 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.
3
<PAGE>
Item 27. 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:
<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
- -------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address Distributor Registrant
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Philip J. Coffey Vice President N/A
Allmerica Financial
440 Lincoln Street
Worcester, MA 01653
- ---------------------------------------------------------------------------------------------------------
David J. Mueller Financial Operations Principal Vice President
Allmerica Financial Vice President 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
- ---------------------------------------------------------------------------------------------------------
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 28. Location of Accounts and Records
--------------------------------
Each account, book, or other document required to be maintained by Registrant
pursuant to Section 31(a) of
5
<PAGE>
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 Investors Bank & Trust
Company, 200 Clarendon Street, 16th Floor, Boston, MA 02116.
Item 29. Management Services
-------------------
Not applicable
Item 30. Undertakings
------------
Not applicable
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, Allmerica Investment Trust certifies that it meets all of the requirements
for effectiveness of this Registration Statement under Rule 485(b) under the
Securities Act and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Worcester and
Commonwealth of Massachusetts on the 29th day of April, 1999.
ALLMERICA INVESTMENT TRUST
----------------------------
By: /s/ Richard M. Reilly
--------------------------------------
Richard M. Reilly, President
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the
date(s) indicated.
Signature Title Date
- --------- ----- ----
/s/ Richard M. Reilly President, Chief Executive Officer April 29, 1999
- --------------------------- and Trustee
Richard M. Reilly
John F. O'Brien Chairman of the Board and Trustee April 29, 1999
David J. Mueller Treasurer (Principal Accounting April 29, 1999
Officer)
P. Kevin Condron Trustee April 29, 1999
Cynthia A. Hargadon Trustee April 29, 1999
Gordon Holmes Trustee April 29, 1999
John P. Kavanaugh Trustee April 29, 1999
Bruce E. Langton Trustee April 29, 1999
Attiat F. Ott Trustee April 29, 1999
Ranne P. Warner Trustee April 29, 1999
Richard M. Reilly, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named Trustees and officers of Allmerica Investment
Trust pursuant to the Power of Attorney dated February 16, 1999 duly executed by
such persons.
/s/ Richard M. Reilly
- --------------------------------------
Richard M. Reilly, Attorney-In-Fact
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
Exhibit 4(j) Sub-Adviser Agreement between the Manager and J.P. Morgan
Investment Management Inc. with respect to the Select Growth and
Income Fund
Exhibit 9 Opinion and consent of counsel
Exhibit 10 Consent of Independent Accountants is filed herein.
1
<PAGE>
Exhibit 27 Financial Data Schedules
2
<PAGE>
EXHIBIT 4(j)
SUB-ADVISER AGREEMENT
SUB-ADVISER AGREEMENT executed as of April 1, 1999 between Allmerica Financial
Investment Management Services, Inc. (the "Manager") and J.P. Morgan 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, at
its expense, will furnish continuously an investment program for the
following series of shares of the Trust: the Select Growth and Income
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 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 the 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 all investment, management
and administrative facilities, including, but not limited to, salaries of
personnel, necessary for it to perform the duties set forth in this
Agreement (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
<PAGE>
continuing basis. 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 May 30, 1999 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 "J.P. Morgan Investment Management Inc." or "J.P. Morgan"
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.
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. Nothing herein shall in any way constitute
a waiver or limitation of any right of any person under applicable federal or
state securities laws of the United States.
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. DISCLOSURE
Neither the Trust nor the Manager shall, without the prior written consent
of the Sub-Adviser, make representations regarding or reference to the Sub-
Adviser or any of its affiliates in any disclosure document, advertisement,
sales literature or other promotional materials. Notwithstanding the
foregoing, prior written consent of the Sub-Adviser is not required when:
(i) previously approved documents or materials are re-issued with minor
modifications;
(ii) previously approved routine type promotional materials, such as Fund
fact sheets, are re-issued; or
(iii) the Manager and Sub-Adviser identify documents or advertisements which
they jointly determine do not require Sub-Adviser approval.
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 J.P. Morgan 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: /s/ David J. Mueller
-------------------------
Title: Vice President - Finance
-------------------------
J.P. Morgan Investment Management Inc.
By: /s/ Diane J. Minardi
-------------------------
Title: Vice President
-------------------------
Accepted and Agreed to as of the day and year first above written:
ALLMERICA INVESTMENT TRUST
By: /s/ John P. Kavanaugh
-------------------------
Title: Vice President
-------------------------
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 NET ASSETS FEE RATE
---- ---------- --------
Select Growth and Income Fund First $500 Million 0.30%
Next $500 Million 0.25%
Over $1 Billion 0.20%
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 9
April 29, 1999
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. 39 to its
Registration Statement on Form N-1A under the Investment Company Act of 1940 and
Post-effective Amendment No. 38 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 10
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. 38 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated February 23, 1999, relating to the
financial statements and financial highlights appearing in the December 31, 1998
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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 27, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> SELECT EMERGING MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 22,471,494
<INVESTMENTS-AT-VALUE> 20,449,177
<RECEIVABLES> 346,661
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 396,953
<TOTAL-ASSETS> 21,192,791
<PAYABLE-FOR-SECURITIES> 125,670
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 194,386
<TOTAL-LIABILITIES> 320,056
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,562,583
<SHARES-COMMON-STOCK> 26,619,932
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 192,735
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,782,905
<ACCUM-APPREC-OR-DEPREC> (2,099,678)
<NET-ASSETS> 20,872,735
<DIVIDEND-INCOME> 459,656
<INTEREST-INCOME> 67,589
<OTHER-INCOME> 0
<EXPENSES-NET> 366,295
<NET-INVESTMENT-INCOME> 160,950
<REALIZED-GAINS-CURRENT> (2,713,953)
<APPREC-INCREASE-CURRENT> (2,099,678)
<NET-CHANGE-FROM-OPS> (4,652,681)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37,167
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,831,165
<NUMBER-OF-SHARES-REDEEMED> 258,640
<SHARES-REINVESTED> 47,407
<NET-CHANGE-IN-ASSETS> 20,872,725
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 225,711
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 425,374
<AVERAGE-NET-ASSETS> 19,434,908
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.006
<PER-SHARE-GAIN-APPREC> (0.221)
<PER-SHARE-DIVIDEND> (0.001)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.784
<EXPENSE-RATIO> 2.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> SELECT AGGRESSIVE GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 558,819,426
<INVESTMENTS-AT-VALUE> 758,089,139
<RECEIVABLES> 285,040
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 124,869,958
<TOTAL-ASSETS> 883,244,137
<PAYABLE-FOR-SECURITIES> 2,542,188
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 127,961,028
<TOTAL-LIABILITIES> 130,503,216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 555,762,068
<SHARES-COMMON-STOCK> 305,982,367
<SHARES-COMMON-PRIOR> 271,561,208
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,290,860
<ACCUM-APPREC-OR-DEPREC> 199,269,713
<NET-ASSETS> 752,740,921
<DIVIDEND-INCOME> 2,774,280
<INTEREST-INCOME> 606,904
<OTHER-INCOME> 399,307
<EXPENSES-NET> 6,208,601
<NET-INVESTMENT-INCOME> (2,428,110)
<REALIZED-GAINS-CURRENT> (366,594)
<APPREC-INCREASE-CURRENT> 71,944,445
<NET-CHANGE-FROM-OPS> 69,149,741
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46,519,216
<NUMBER-OF-SHARES-REDEEMED> 12,098,057
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 148,617,760
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,924,266
<GROSS-ADVISORY-FEES> 5,977,909
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,438,080
<AVERAGE-NET-ASSETS> 676,812,786
<PER-SHARE-NAV-BEGIN> 2.225
<PER-SHARE-NII> (0.008)
<PER-SHARE-GAIN-APPREC> 0.243
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 2.460
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> SELECT CAPITAL APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 281,411,496
<INVESTMENTS-AT-VALUE> 311,268,815
<RECEIVABLES> 3,734,003
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,686
<TOTAL-ASSETS> 315,004,504
<PAYABLE-FOR-SECURITIES> 4,006,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 416,789
<TOTAL-LIABILITIES> 4,422,914
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 281,225,457
<SHARES-COMMON-STOCK> 189,353,507
<SHARES-COMMON-PRIOR> 141,678,833
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 264,518
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 236,668
<ACCUM-APPREC-OR-DEPREC> 29,857,319
<NET-ASSETS> 310,581,590
<DIVIDEND-INCOME> 664,749
<INTEREST-INCOME> 753,737
<OTHER-INCOME> 0
<EXPENSES-NET> 2,633,854
<NET-INVESTMENT-INCOME> (1,215,368)
<REALIZED-GAINS-CURRENT> 49,583,717
<APPREC-INCREASE-CURRENT> (11,428,887)
<NET-CHANGE-FROM-OPS> 36,939,462
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 47,014,462
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,711,450
<NUMBER-OF-SHARES-REDEEMED> 12,704,131
<SHARES-REINVESTED> 28,667,355
<NET-CHANGE-IN-ASSETS> 70,056,040
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 10,735
<OVERDIST-NET-GAINS-PRIOR> 1,844,338
<GROSS-ADVISORY-FEES> 2,417,031
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,675,421
<AVERAGE-NET-ASSETS> 258,156,941
<PER-SHARE-NAV-BEGIN> 1.698
<PER-SHARE-NII> (0.006)
<PER-SHARE-GAIN-APPREC> 0.241
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (0.293)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.640
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> SELECT VALUE OPPORTUNITY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 257,900,026
<INVESTMENTS-AT-VALUE> 276,781,553
<RECEIVABLES> 417,461
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 277,199,014
<PAYABLE-FOR-SECURITIES> 8,477,396
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 316,972
<TOTAL-LIABILITIES> 8,794,368
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 232,957,426
<SHARES-COMMON-STOCK> 159,227,286
<SHARES-COMMON-PRIOR> 124,351,330
<ACCUMULATED-NII-CURRENT> 1,666
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,564,027
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18,881,527
<NET-ASSETS> 268,404,646
<DIVIDEND-INCOME> 3,435,144
<INTEREST-INCOME> 997,255
<OTHER-INCOME> 0
<EXPENSES-NET> 2,201,001
<NET-INVESTMENT-INCOME> 2,231,398
<REALIZED-GAINS-CURRENT> 16,620,234
<APPREC-INCREASE-CURRENT> (8,160,080)
<NET-CHANGE-FROM-OPS> 10,691,552
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,255,211
<DISTRIBUTIONS-OF-GAINS> 835,801
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35,634,267
<NUMBER-OF-SHARES-REDEEMED> 2,586,130
<SHARES-REINVESTED> 1,827,819
<NET-CHANGE-IN-ASSETS> 66,265,530
<ACCUMULATED-NII-PRIOR> 25,871
<ACCUMULATED-GAINS-PRIOR> 779,202
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,138,839
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,330,103
<AVERAGE-NET-ASSETS> 234,039,672
<PER-SHARE-NAV-BEGIN> 1.63
<PER-SHARE-NII> 0.014
<PER-SHARE-GAIN-APPREC> 0.066
<PER-SHARE-DIVIDEND> 0.014
<PER-SHARE-DISTRIBUTIONS> 0.006
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.69
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> SELECT INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 402,032,747
<INVESTMENTS-AT-VALUE> 506,081,726
<RECEIVABLES> 1,878,299
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 653,677
<TOTAL-ASSETS> 508,613,702
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,061,102
<TOTAL-LIABILITIES> 3,061,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 414,054,690
<SHARES-COMMON-STOCK> 327,958,990
<SHARES-COMMON-PRIOR> 296,715,707
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,522,029
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 8,491,927
<ACCUM-APPREC-OR-DEPREC> 102,511,866
<NET-ASSETS> 505,552,600
<DIVIDEND-INCOME> 7,997,928
<INTEREST-INCOME> 1,047,252
<OTHER-INCOME> 143,693
<EXPENSES-NET> 4,638,392
<NET-INVESTMENT-INCOME> 4,550,481
<REALIZED-GAINS-CURRENT> 7,626,526
<APPREC-INCREASE-CURRENT> 70,082,636
<NET-CHANGE-FROM-OPS> 67,006,591
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,429,938
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 94,467,032
<NUMBER-OF-SHARES-REDEEMED> 67,343,267
<SHARES-REINVESTED> 4,119,518
<NET-CHANGE-IN-ASSETS> 107,637,285
<ACCUMULATED-NII-PRIOR> 2,055,754
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 3,563,727
<GROSS-ADVISORY-FEES> 4,117,316
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,663,070
<AVERAGE-NET-ASSETS> 457,919,531
<PER-SHARE-NAV-BEGIN> 1.341
<PER-SHARE-NII> 0.014
<PER-SHARE-GAIN-APPREC> 0.207
<PER-SHARE-DIVIDEND> (0.020)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.542
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> SELECT GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 560,635,550
<INVESTMENTS-AT-VALUE> 813,318,008
<RECEIVABLES> 3,616,267
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,000
<TOTAL-ASSETS> 816,936,275
<PAYABLE-FOR-SECURITIES> 937,438
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 608,908
<TOTAL-LIABILITIES> 1,546,346
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 530,571,510
<SHARES-COMMON-STOCK> 335,794,040
<SHARES-COMMON-PRIOR> 259,691,378
<ACCUMULATED-NII-CURRENT> 504,158
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 31,631,803
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 252,682,458
<NET-ASSETS> 815,389,929
<DIVIDEND-INCOME> 4,780,775
<INTEREST-INCOME> 994,260
<OTHER-INCOME> 0
<EXPENSES-NET> 5,270,877
<NET-INVESTMENT-INCOME> 504,158
<REALIZED-GAINS-CURRENT> 32,635,324
<APPREC-INCREASE-CURRENT> 159,491,292
<NET-CHANGE-FROM-OPS> 192,630,774
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 93,565
<DISTRIBUTIONS-OF-GAINS> 6,734,903
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 80,682,126
<NUMBER-OF-SHARES-REDEEMED> 7,660,823
<SHARES-REINVESTED> 3,081,359
<NET-CHANGE-IN-ASSETS> 345,033,956
<ACCUMULATED-NII-PRIOR> 100,512
<ACCUMULATED-GAINS-PRIOR> 6,121,124
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,112,118
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,422,458
<AVERAGE-NET-ASSETS> 622,032,805
<PER-SHARE-NAV-BEGIN> 1.811
<PER-SHARE-NII> 0.002
<PER-SHARE-GAIN-APPREC> 0.638
<PER-SHARE-DIVIDEND> (0.000)
<PER-SHARE-DISTRIBUTIONS> (0.023)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 2.428
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> SELECT STRATEGIC GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 14,758,736
<INVESTMENTS-AT-VALUE> 15,183,612
<RECEIVABLES> 56,483
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 91,830
<TOTAL-ASSETS> 15,331,925
<PAYABLE-FOR-SECURITIES> 466,482
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,353
<TOTAL-LIABILITIES> 492,835
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,870,024
<SHARES-COMMON-STOCK> 15,247,817
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 455,810
<ACCUM-APPREC-OR-DEPREC> 424,876
<NET-ASSETS> 14,839,090
<DIVIDEND-INCOME> 82,524
<INTEREST-INCOME> 42,702
<OTHER-INCOME> 0
<EXPENSES-NET> 91,720
<NET-INVESTMENT-INCOME> 33,506
<REALIZED-GAINS-CURRENT> (455,810)
<APPREC-INCREASE-CURRENT> 424,876
<NET-CHANGE-FROM-OPS> 2,572
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 34,881
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,407,533
<NUMBER-OF-SHARES-REDEEMED> 1,195,565
<SHARES-REINVESTED> 35,849
<NET-CHANGE-IN-ASSETS> 9,839,090
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 68,645
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 134,071
<AVERAGE-NET-ASSETS> 9,357,828
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.002
<PER-SHARE-GAIN-APPREC> (0.027)
<PER-SHARE-DIVIDEND> (0.002)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.973
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 692,335,172
<INVESTMENTS-AT-VALUE> 864,915,367
<RECEIVABLES> 6,278,450
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 51,247
<TOTAL-ASSETS> 871,245,064
<PAYABLE-FOR-SECURITIES> 10,267,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 644,918
<TOTAL-LIABILITIES> 10,911,918
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 602,556,786
<SHARES-COMMON-STOCK> 304,510,637
<SHARES-COMMON-PRIOR> 301,559,983
<ACCUMULATED-NII-CURRENT> 139,766
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 85,056,399
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 172,580,195
<NET-ASSETS> 860,333,146
<DIVIDEND-INCOME> 10,047,658
<INTEREST-INCOME> 2,153,179
<OTHER-INCOME> 0
<EXPENSES-NET> 3,679,222
<NET-INVESTMENT-INCOME> 8,521,615
<REALIZED-GAINS-CURRENT> 86,002,903
<APPREC-INCREASE-CURRENT> 45,168,910
<NET-CHANGE-FROM-OPS> 139,693,428
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,516,486
<DISTRIBUTIONS-OF-GAINS> 8,112,608
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,373,499
<NUMBER-OF-SHARES-REDEEMED> 14,496,219
<SHARES-REINVESTED> 6,073,374
<NET-CHANGE-IN-ASSETS> 131,654,324
<ACCUMULATED-NII-PRIOR> 135,198
<ACCUMULATED-GAINS-PRIOR> 7,165,543
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,519,665
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,887,679
<AVERAGE-NET-ASSETS> 791,332,995
<PER-SHARE-NAV-BEGIN> 2.42
<PER-SHARE-NII> 0.028
<PER-SHARE-GAIN-APPREC> 0.436
<PER-SHARE-DIVIDEND> (0.028)
<PER-SHARE-DISTRIBUTIONS> (0.027)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 2.83
<EXPENSE-RATIO> 0.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> EQUITY INDEX FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 311,533,753
<INVESTMENTS-AT-VALUE> 481,690,805
<RECEIVABLES> 531,962
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 13,272
<TOTAL-ASSETS> 482,236,039
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 358,915
<TOTAL-LIABILITIES> 358,915
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 311,393,623
<SHARES-COMMON-STOCK> 141,391,011
<SHARES-COMMON-PRIOR> 107,949,028
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 256,744
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 170,226,757
<NET-ASSETS> 481,877,124
<DIVIDEND-INCOME> 5,683,519
<INTEREST-INCOME> 46,144
<OTHER-INCOME> 0
<EXPENSES-NET> 1,353,721
<NET-INVESTMENT-INCOME> 4,375,942
<REALIZED-GAINS-CURRENT> 11,411,377
<APPREC-INCREASE-CURRENT> 80,292,477
<NET-CHANGE-FROM-OPS> 96,079,796
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,471,191
<DISTRIBUTIONS-OF-GAINS> 11,584,141
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39,162,101
<NUMBER-OF-SHARES-REDEEMED> 10,552,507
<SHARES-REINVESTED> 4,832,389
<NET-CHANGE-IN-ASSETS> 184,686,520
<ACCUMULATED-NII-PRIOR> 94,775
<ACCUMULATED-GAINS-PRIOR> 429,982
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,087,069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,353,721
<AVERAGE-NET-ASSETS> 374,827,506
<PER-SHARE-NAV-BEGIN> 2.75
<PER-SHARE-NII> 0.035
<PER-SHARE-GAIN-APPREC> 0.741
<PER-SHARE-DIVIDEND> (0.034)
<PER-SHARE-DISTRIBUTIONS> (0.087)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 3.41
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SELECT GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 545,906,276
<INVESTMENTS-AT-VALUE> 645,261,659
<RECEIVABLES> 1,180,765
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 72,904
<TOTAL-ASSETS> 646,515,328
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 429,651
<TOTAL-LIABILITIES> 429,651
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 492,383,618
<SHARES-COMMON-STOCK> 363,138,327
<SHARES-COMMON-PRIOR> 305,179,193
<ACCUMULATED-NII-CURRENT> 58,283
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 54,288,393
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 99,355,383
<NET-ASSETS> 646,085,677
<DIVIDEND-INCOME> 8,498,303
<INTEREST-INCOME> 2,381,702
<OTHER-INCOME> 0
<EXPENSES-NET> 3,893,990
<NET-INVESTMENT-INCOME> 6,986,015
<REALIZED-GAINS-CURRENT> 54,948,363
<APPREC-INCREASE-CURRENT> 21,672,788
<NET-CHANGE-FROM-OPS> 83,607,166
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,004,729
<DISTRIBUTIONS-OF-GAINS> 2,016,957
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,638,036
<NUMBER-OF-SHARES-REDEEMED> 8,018,149
<SHARES-REINVESTED> 5,339,247
<NET-CHANGE-IN-ASSETS> 172,533,183
<ACCUMULATED-NII-PRIOR> 66,666
<ACCUMULATED-GAINS-PRIOR> 1,367,318
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,790,917
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,069,695
<AVERAGE-NET-ASSETS> 556,294,978
<PER-SHARE-NAV-BEGIN> 1.552
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 0.233
<PER-SHARE-DIVIDEND> (0.020)
<PER-SHARE-DISTRIBUTIONS> (0.006)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.779
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> SELECT INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 157,701,195
<INVESTMENTS-AT-VALUE> 158,702,133
<RECEIVABLES> 10,959,449
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 169,661,582
<PAYABLE-FOR-SECURITIES> 9,122,391
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89,196
<TOTAL-LIABILITIES> 9,211,587
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 158,012,579
<SHARES-COMMON-STOCK> 155,548,261
<SHARES-COMMON-PRIOR> 101,975,296
<ACCUMULATED-NII-CURRENT> 98,672
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,337,806
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,000,938
<NET-ASSETS> 160,449,995
<DIVIDEND-INCOME> 175,456
<INTEREST-INCOME> 8,516,306
<OTHER-INCOME> 0
<EXPENSES-NET> 842,937
<NET-INVESTMENT-INCOME> 7,848,825
<REALIZED-GAINS-CURRENT> 2,477,878
<APPREC-INCREASE-CURRENT> (1,811,684)
<NET-CHANGE-FROM-OPS> 8,515,019
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,820,642
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55,529,086
<NUMBER-OF-SHARES-REDEEMED> 9,521,017
<SHARES-REINVESTED> 7,564,896
<NET-CHANGE-IN-ASSETS> 56,196,624
<ACCUMULATED-NII-PRIOR> 912
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,070,495)
<GROSS-ADVISORY-FEES> 721,336
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 842,937
<AVERAGE-NET-ASSETS> 132,519,202
<PER-SHARE-NAV-BEGIN> 1.02
<PER-SHARE-NII> 0.059
<PER-SHARE-GAIN-APPREC> 0.010
<PER-SHARE-DIVIDEND> (0.059)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.03
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> INVESTMENT GRADE INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 225,840,616
<INVESTMENTS-AT-VALUE> 232,610,716
<RECEIVABLES> 2,788,356
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 389,452
<TOTAL-ASSETS> 235,788,524
<PAYABLE-FOR-SECURITIES> 5,038,273
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 126,798
<TOTAL-LIABILITIES> 5,165,071
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 223,428,446
<SHARES-COMMON-STOCK> 203,784,052
<SHARES-COMMON-PRIOR> 170,391,530
<ACCUMULATED-NII-CURRENT> 223,670
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 201,237
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,770,100
<NET-ASSETS> 230,623,453
<DIVIDEND-INCOME> 248,610
<INTEREST-INCOME> 13,758,591
<OTHER-INCOME> 0
<EXPENSES-NET> 1,113,264
<NET-INVESTMENT-INCOME> 12,893,937
<REALIZED-GAINS-CURRENT> 1,767,518
<APPREC-INCREASE-CURRENT> 1,626,441
<NET-CHANGE-FROM-OPS> 16,287,896
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,839,890
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,442,502
<NUMBER-OF-SHARES-REDEEMED> 12,431,176
<SHARES-REINVESTED> 11,381,196
<NET-CHANGE-IN-ASSETS> 41,120,793
<ACCUMULATED-NII-PRIOR> 17,671
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1,414,329)
<GROSS-ADVISORY-FEES> 933,311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,113,264
<AVERAGE-NET-ASSETS> 214,577,817
<PER-SHARE-NAV-BEGIN> 1.11
<PER-SHARE-NII> 0.067
<PER-SHARE-GAIN-APPREC> 0.020
<PER-SHARE-DIVIDEND> (0.067)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.13
<EXPENSE-RATIO> 0.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> GOVERNMENT BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 78,544,465
<INVESTMENTS-AT-VALUE> 79,844,761
<RECEIVABLES> 1,219,202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6,157
<TOTAL-ASSETS> 81,070,120
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,682
<TOTAL-LIABILITIES> 51,682
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,904,907
<SHARES-COMMON-STOCK> 75,884,473
<SHARES-COMMON-PRIOR> 53,041,341
<ACCUMULATED-NII-CURRENT> 82,608
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,269,373
<ACCUM-APPREC-OR-DEPREC> 1,300,296
<NET-ASSETS> 81,018,438
<DIVIDEND-INCOME> 46,626
<INTEREST-INCOME> 4,201,634
<OTHER-INCOME> 0
<EXPENSES-NET> 435,593
<NET-INVESTMENT-INCOME> 3,812,667
<REALIZED-GAINS-CURRENT> 433,399
<APPREC-INCREASE-CURRENT> 654,407
<NET-CHANGE-FROM-OPS> 4,900,473
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,785,182
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,717,585
<NUMBER-OF-SHARES-REDEEMED> 8,436,189
<SHARES-REINVESTED> 3,561,736
<NET-CHANGE-IN-ASSETS> 25,504,963
<ACCUMULATED-NII-PRIOR> 3,851
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,651,500
<GROSS-ADVISORY-FEES> 338,796
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 435,593
<AVERAGE-NET-ASSETS> 67,759,229
<PER-SHARE-NAV-BEGIN> 1.05
<PER-SHARE-NII> 0.058
<PER-SHARE-GAIN-APPREC> 0.021
<PER-SHARE-DIVIDEND> (0.058)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.07
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 333,668,302
<INVESTMENTS-AT-VALUE> 333,668,302
<RECEIVABLES> 4,420,517
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 9,952
<TOTAL-ASSETS> 338,098,771
<PAYABLE-FOR-SECURITIES> 1,748,820
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96,604
<TOTAL-LIABILITIES> 1,845,424
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 336,350,307
<SHARES-COMMON-STOCK> 336,352,124
<SHARES-COMMON-PRIOR> 260,664,450
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 96,960
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 336,253,347
<DIVIDEND-INCOME> 264,136
<INTEREST-INCOME> 15,543,700
<OTHER-INCOME> 0
<EXPENSES-NET> 887,756
<NET-INVESTMENT-INCOME> 14,920,080
<REALIZED-GAINS-CURRENT> (52,017)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14,868,063
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,921,897
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 327,727,943
<NUMBER-OF-SHARES-REDEEMED> 266,962,166
<SHARES-REINVESTED> 14,921,897
<NET-CHANGE-IN-ASSETS> 75,633,840
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 44,943
<GROSS-ADVISORY-FEES> 731,259
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 887,756
<AVERAGE-NET-ASSETS> 278,583,393
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.054
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> (0.054)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
