<PAGE>
Annual Report
------------------------------
December 31,1996
Allmerica
Financial
Retail Services
------------------------------
. Variable Annuity
. Allmerica Advantage
Variable Annuity/
ExecAnnuity Plus
. Vari-Exceptional Life
. Variable Inheiritage
[LOGO OF ALLMERICA FINANCIAL APPEARS HERE]
<PAGE>
General Information
- --------------------------------------------------------------------------------
Officers of First Allmerica
Financial Life Insurance Company
and Allmerica Financial Life
Insurance and Annuity Company
John F. O'Brien, President, CEO (FAFLIC) and
Chairman of the Board (AFLIAC)
Richard M. Reilly, President and CEO (AFLIAC)
Edward J. Parry, III, Vice President,
CFO and Treasurer
Abigail M. Armstrong, Secretary and Counsel
Investment Manager
Allmerica Investment
Management Company, Inc.
440 Lincoln Street, Worcester, MA 01653
General Distributor
Allmerica Investments, Inc.
440 Lincoln Street, Worcester, MA 01653
Independent Accountant
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
Custodian
Bankers Trust Company
16 Wall Street, New York, NY 10005
Legal Counsel
Ropes & Gray
One International Place, Boston, MA 02110
Administrator
First Data Investor Services Group
4400 Computer Drive, Westborough, MA 01581
Officers of Allmerica
Investment Trust (AIT)
Richard M. Reilly, President
Thomas P. Cunningham, Treasurer
Board of Trustees of AIT
John F. O'Brien, Chairman
Russell E. Fuller
Gordon Holmes
John P. Kavanaugh
Bruce E. Langton
Attiat F. Ott
Richard M. Reilly
Ranne P. Warner
Investment Sub-Advisers
Allmerica Asset Management, Inc.
440 Lincoln Street,
Worcester, MA 01653
Equity Index Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
Bank of Ireland Asset Management
2 Greenwich Plaza,
Greenwich, CT 06830
Select International Equity Fund
CRM Advisors, LLC**
520 Madison Avenue, New York, NY 10020
Small Cap Value Fund
Janus Capital Corporation
100 Fillimore Street - Suite 300
Denver, CO 80206
Select Capital Appreciation Fund
John A. Levin & Co., Inc.
One Rockefeller Plaza, New York, NY 10020
Select Growth and Income Fund
Miller, Anderson & Sherrerd, LLP
One Tower Bridge, West Conshohocken, PA 19248
Growth Fund
Nicholas-Applegate Capital Management
501 West Broadway - Suite 2000
San Diego, CA 92101
Select Aggressive Growth Fund
Putnam Investment Management, Inc.
One Post Office Square, Boston, MA 02109
Select Growth Fund
Standish, Ayer & Wood, Inc.
One Financial Center, Boston, MA 02111
Select Income Fund
Investment Advisers
Delaware International Advisers Ltd.
1818 Market Street, Philadelphia, PA 19103
Delaware International Equity Series
Fidelity Management & Research Company
82 Devonshire Street, Boston, MA 02108
Fidelity VIP* II Asset Manager Portfolio
Fidelity VIP* Equity-Income Portfolio
Fidelity VIP* Growth Portfolio
Fidelity VIP* High Income Portfolio
Fidelity VIP* Overseas Portfolio
Rowe Price-Fleming International, Inc.
100 E. Pratt Street, Baltimore, MD 21202
T. Rowe Price International Stock Portfolio
* VIP refers to Variable Insurance Products Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONTENTS
- -------------------------------------------------------------------------------
<S> <C>
A Letter From the Chairman...................................................2
Product Performance Summaries................................................3
Variable Annuity.............................................................3
Allmerica Advantage Variable Annuity/
ExecAnnuity Plus...........................................................4
Vari-Exceptional Life '87....................................................5
Vari-Exceptional Life '91....................................................6
Vari-Exceptional Life '93 (FAFLIC)...........................................7
Vari-Exceptional Life '93 (AFLIAC)...........................................8
Variable Inheiritage (FAFLIC)................................................9
Variable Inheiritage (AFLIAC)...............................................10
Fund Performance Summary....................................................11
Domestic & International Equity
Market Overview..........................................................12-13
Select Aggressive Growth Fund...............................................14
Select Capital Appreciation Fund ...........................................15
Small Cap Value Fund........................................................16
T. Rowe Price International Stock Portfolio.................................17
Fidelity VIP* Overseas Portfolio............................................18
Select International Equity Fund............................................19
Delaware International Equity Series........................................20
Fidelity VIP* Growth Portfolio..............................................21
Select Growth Fund..........................................................22
Growth Fund.................................................................23
Equity Index Fund...........................................................24
Fidelity VIP* Equity-Income Portfolio.......................................25
Select Growth and Income Fund...............................................26
Fidelity VIP II* Asset Manager Portfolio....................................27
Bond & Money
Market Overview..........................................................28-29
Fidelity VIP* High Income Portfolio.........................................30
Select Income Fund..........................................................31
Investment Grade Income Fund................................................32
Government Bond Fund........................................................33
Money Market Fund...........................................................34
Financials.................................................................F-1
</TABLE>
For further information, see the accompanying annual reports.
**As of January 1, 1997 CRM Advisors, LLC, an affiliate of Cramer Rosenthal
McGlynn, Inc., assumed sub-advisory responsibilities of the Small Cap
Value Fund.
For information on ordering additional copies of this report or a copy of the
separate account annual report, see Client Notices on page F-57.
1
<PAGE>
- --------------------------------------------------------------------------------
A Letter From the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF JOHN F. O'BRIEN APPEARS HERE]
Dear Client:
The U.S. stock market turned in yet another outstanding year. This marked the
sixth straight year of positive returns for the Dow Jones Industrial Average--
a record. For the year, the Dow rose 28% on top of 1995's 37% increase. The
combined return for the two-year period was 75%, the strongest in 40 years!
In contrast, the bond market was characterized by volatility as investors'
expectations changed throughout the year. January's optimism gave way to fears
of a strong economy and potential interest rate increases by the Federal
Reserve. These increases never occurred and the economy cooled off by itself
during the second half of the year. The net effect of these swings was to
produce a mediocre year in the bond market with the Lehman Aggregate Bond Index,
a benchmark used by many bond investors, up a modest 3.61%. In the end, even
conservative money market accounts did better, returning approximately 5.0%.
International stock markets were generally quite positive. Sweden, Finland,
Ireland, Spain, Portugal and Hong Kong all had returns greater than 30% in 1996.
But these returns paled in comparison to many emerging markets like Poland's 87%
return. However, not everything was rosy overseas. Japan, for example, declined
15.4%, as measured by Morgan Stanley's Country Index.
Where will the best returns come from in 1997? Obviously, we don't know.
What we do know, however, is that helping each individual to plan and strive to
meet her or his saving and retirement goals is a business we take quite
seriously. That's why we work so hard on what we can control building a
comprehensive investment program, hiring disciplined investment managers and
constantly evaluating their performance. At Allmerica, we offer distinct
investment choices across a wide variety of asset classes, investment strategies
and styles. We also encourage our clients to implement disciplined investment
programs which include building diversified portfolios, making ongoing
contributions whenever possible and appropriate.
Our Manager Evaluation Committee continuously seeks to refine our
investment program and rigorously monitors our sub-advisers. Based on their
work, we made two significant changes during 1996. On July 1, 1996, Putnam
Investment Management, Inc. assumed sub-advisory responsibility for the Select
Growth Fund as announced in the semi-annual report. With this report, we are
pleased to announce that CRM Advisors, LLC, an affiliate of Cramer Rosenthal
McGlynn, Inc. assumed sub-advisory responsibility for the Small Cap Value Fund
effective January 1, 1997. This is part of a larger change in which we are
seeking to broaden the investment mandate of the Small Cap Value Fund to
incorporate both small- and mid-cap value stocks. These changes reflect our
ongoing commitment to bring you a diversified array of complementary investment
choices and outstanding money managers.
We encourage our clients to develop and implement a disciplined investment
program that includes diversification, ongoing contributions in both up and down
markets, and utilization of tax deferred savings vehicles whenever possible and
appropriate. We also encourage you to periodically review your financial goals
and risk tolerance, to insure that your investments are right for you.
On behalf of the Board of Trustees,
/s/ John F. O'Brien
John F. O'Brien
Chairman of the Board
- ----------------------------------------------------------------------------
Helping each individual to plan and strive to meet her or his saving and
retirement goals is a business we take quite seriously.
- ----------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
VARIABLE ANNUITY . Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Variable Annuity subaccounts of
AFLIAC are summarized below. Keep in mind that these returns are net of all
product charges except for the annual policy fee. For returns that do not
reflect the deduction of product charges, please refer to the individual
Portfolio Reviews beginning on page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE
------------------------
One Five Ten
Subaccounts Year Years Years
- -------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund - Single/Elective Payment
Tax Qualified Account 18.71% 11.43% 13.55%
Non Tax Qualified Account 18.71% 11.43% 13.55%
Investment Grade Income Fund -
Single/Elective Payment
Tax Qualified Account 2.27% 5.97% 7.13%
Non Tax Qualified Account 2.27% 5.96% 7.16%
Money Market Fund -
Single/Elective Payment
Tax Qualified Account 4.05% 3.08% 4.71%
Non Tax Qualified Account 4.05% 3.08% 4.71%
</TABLE>
<TABLE>
<CAPTION>
WITH SURRENDER CHARGE
---------------------
One Five Ten
Subaccounts Year Years Years
- -------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund - Elective Payment
Tax Qualified Account 10.40% 10.40% 13.55%
Non Tax Qualified Account 10.40% 10.40% 13.55%
Investment Grade Income Fund - Elective Payment
Tax Qualified Account -4.89% 5.00% 7.13%
Non Tax Qualified Account -4.89% 4.99% 7.16%
Money Market Fund - Elective Payment
Tax Qualified Account -3.23% 2.14% 4.71%
Non Tax Qualified Account -3.23% 2.14% 4.71%
Growth Fund - Single Payment
Tax Qualified Account 13.37% 10.82% 13.55%
Non Tax Qualified Account 13.37% 10.82% 13.55%
Investment Grade Income Fund - Single Payment
Tax Qualified Account -2.33% 5.39% 7.13%
Non Tax Qualified Account -2.33% 5.39% 7.16%
Money Market Fund - Single Payment
Tax Qualified Account -0.63% 2.52% 4.71%
Non Tax Qualified Account -0.63% 2.52% 4.71%
</TABLE>
For more information about the performance of the underlying funds, see the
Performance Reviews beginning on page 14.
Performance returns shown above are for the Variable Annuity subaccounts of
AFLIAC, and assume an investment in the underlying funds on the date of
inception of each Fund (April 29, 1985). All full surrenders or withdrawals may
be subject to a declining sales charge. The maximum contingent deferred sales
charge is 7.0%.
Performance returns in this report are historical and are not indicators of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
ALLMERICA ADVANTAGE VARIABLE ANNUITY/EXECANNUITY PLUS . Average Annual Total
Returns as of 12/31/96
For easy reference, the total returns for Allmerica Advantage Variable
Annuity/ExecAnnuity Plus subaccounts of FAFLIC and AFLIAC are summarized below.
Keep in mind, however, that these returns are net of all product charges except
for the annual policy fee. For returns that do not reflect the deduction of
product charges, please refer to the individual Portfolio Reviews beginning on
page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
------------------------ -------------------------
Ten Years Ten Years
One Five or Life One Five or Life
Subaccounts Year Years of Fund Year Years of Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund/4/ 16.84% N/A 18.03% 8.84% N/A 17.37%
Select Capital Appreciation Fund/7/ 7.23% N/A 26.48% -0.49% N/A 22.37%
Small Cap Value Fund/5/ 26.69% N/A 13.19% 18.69% N/A 12.00%
Select International Equity Fund/6/ 20.19% N/A 12.03% 12.19% N/A 9.82%
Select Growth Fund/4/ 20.26% N/A 11.01% 12.26% N/A 10.20%
Growth Fund/1/ 18.46% 11.25% 13.12% 10.46% 10.59% 13.12%
Equity Index Fund/2/ 20.54% 12.98% 16.05% 12.54% 12.36% 15.83%
Select Growth and Income Fund/4/ 19.52% N/A 12.13% 11.52% N/A 11.34%
Investment Grade Income/1/ 2.05% 5.74% 6.74% -5.29% 4.93% 6.74%
Government Bond Fund/3/ 2.01% 4.04% 5.36% -5.33% 3.17% 4.75%
Money Market Fund/1/ 3.83% 2.89% 4.33% -3.65% 1.98% 4.33%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series/8/ 18.30% N/A 10.82% 10.30% N/A 9.94%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock
Portfolio/9/ 13.02% N/A 8.34% 5.02% N/A 6.09%
Fidelity Variable Insurance
Products Fund (VIPF and VIPF II)
Fidelity VIP Overseas Portfolio/13/ 11.58% 7.58% 6.31% 3.58% 6.83% 6.31%
Fidelity VIP Growth Portfolio/11/ 13.05% 13.54% 13.48% 5.05% 12.93% 13.48%
Fidelity VIP Equity-Income Portfolio/11/ 12.63% 16.31% 12.09% 4.63% 15.75% 12.09%
Fidelity VIP II Asset Manager Portfolio/12/ 12.95% 9.64% 10.07% 4.95% 8.66% 9.92%
Fidelity VIP High Income Portfolio/10/ 12.39% 13.33% 9.50% 4.39% 12.72% 9.50%
</TABLE>
Performance returns shown above are for the Allmerica Advantage Variable
Annuity/ExecAnnuity Plus subaccounts of FAFLIC and AFLIAC, and assume an
investment in the underlying funds on the date of inception of each Fund. All
full surrenders or withdrawals in excess of the free amount may be subject to a
declining sales charge. The maximum contingent deferred sales charge is 8.0%.
/1/ Inception April 29, 1985
/2/ Inception September 28, 1990
/3/ Inception August 26, 1991
/4/ Inception August 21, 1992
/5/ Inception April 30, 1993
/6/ Inception May 1, 1994
/7/ Inception April 28, 1995
/8/ Inception October 29, 1992
/9/ Inception March 31, 1994
/10/ Inception September 19, 1985
/11/ Inception October 9, 1986
/12/ Inception September 6, 1989
/13/ Inception January 28, 1987
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
VARI-EXCEPTIONAL LIFE ('87) . Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Vari-Exceptional Life ('87)
subaccounts of AFLIAC are summarized below. Keep in mind that these returns are
net of all product charges. For returns that do not reflect the deduction of
product charges, please refer to the individual Portfolio Reviews beginning on
page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
------------------------ ---------------------
Ten Years Ten Years
One Five or Life One Five or Life
Subaccounts Year Years of Fund Year Years of Fund
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund/4/ 17.49% N/A 18.69% -73.51% N/A 5.09%
Select Capital Appreciation Fund/7/ 7.82% N/A 27.18% -81.72% N/A -29.61%
Small Cap Value Fund/5/ 27.39% N/A 13.82% -65.07% N/A -4.37%
Select International Equity Fund/6/ 20.86% N/A 12.65% -70.64% N/A -16.44%
Select Growth Fund/4/ 20.92% N/A 11.63% -70.59% N/A -2.63%
Growth Fund/1/ 19.11% 11.77% 13.75% -72.13% 0.39% 9.24%
Equity Index Fund/2/ 21.20% 13.58% 16.70% -70.35% 2.36% 8.69%
Select Growth and Income Fund/4/ 20.17% N/A 12.75% -71.23% N/A -1.39%
Investment Grade Income Fund/1/ 2.62% 6.32% 7.33% -86.12% -5.62% 2.40%
Government Bond Fund/3/ 2.58% 4.60% 5.95% -86.16% -7.54 -5.09%
Money Market Fund/1/ 4.41% 3.44% 4.91% -84.61% -8.85% -0.22%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series/8/ 18.95% N/A 11.44% -72.27% N/A -3.69%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio/9/ 13.65% N/A 8.95% -76.77% N/A -21.99%
Fidelity Variable Insurance
Products Fund (VIPF and VIPFII)
Fidelity VIP Overseas Portfolio/13/ 12.20% 8.15% 6.91% -78.01% -3.59% 1.90%
Fidelity VIP Growth Portfolio/11/ 13.68% 14.14% 14.11% -76.75% 2.97% 9.62%
Fidelity VIP Equity-Income Portfolio/11/ 13.26% 16.92% 12.71% -77.11% 5.97% 8.14%
Fidelity VIP II Asset Manager Portfolio/12/ 13.57% 10.26% 10.68% -76.84% -1.26% 3.86%
Fidelity VIP High Income Portfolio/10/ 13.01% 13.93% 10.12% -77.32% 2.74% 5.39%
Fidelity VIP Money Market Portfolio/14/ 4.41% 3.59% 5.00% -84.61% -8.68% -0.12%
</TABLE>
Performance returns given above are for the Vari-Exceptional Life ('87)
subaccounts of AFLIAC and are net of all product charges (including surrender
charges) for a representative policy. In addition, the returns assume an
investment in the underlying funds listed above on the date of inception of each
Fund. All full surrenders or withdrawals in excess of the free amount may be
subject to a declining surrender charge.
/1/ Inception April 29, 1985
/2/ Inception September 28, 1990
/3/ Inception August 26, 1991
/4/ Inception August 21, 1992
/5/ Inception April 30, 1993
/6/ Inception May 1, 1994
/7/ Inception April 28, 1995
/8/ Inception October 29, 1992
/9/ Inception March 31, 1994
/10/ Inception September 19, 1985
/11/ Inception October 9, 1986
/12/ Inception September 6, 1989
/13/ Inception January 28, 1987
/14/ Inception April 1, 1982
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
5
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
Vari-Exceptional Life ('91) . Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Vari-Exceptional Life ('91)
subaccounts of AFLIAC are summarized below. Keep in mind that these returns are
net of all product charges. For returns that do not reflect the deduction of
product charges, please refer to the individual Portfolio Reviews beginning on
page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
------------------------ ---------------------
Ten Years Ten Years
One Five or Life One Five or Life
SUBACCOUNTS Year Years of Fund Year Years of Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund/4/ 17.49% N/A 18.69% -100.00% N/A 2.33%
Select Capital Appreciation Fund/7/ 7.82% N/A 27.18% -100.00% N/A -50.38%
Small Cap Value Fund/5/ 27.39% N/A 13.82% -100.00% N/A -9.28%
Select International Equity Fund/6/ 20.86% N/A 12.65% -100.00% N/A -26.66%
Select Growth Fund/4/ 20.92% N/A 11.63% -100.00% N/A -5.90%
Growth Fund/1/ 19.11% 11.77% 13.75% -100.00% -1.68% 9.22%
Equity Index Fund/2/ 21.20% 13.58% 16.70% -100.00% 0.40% 7.83%
Select Growth and Income Fund/4/ 20.17% N/A 12.75% -100.00% N/A -4.57%
Investment Grade Income Fund/1/ 2.62% 6.32% 7.33% -100.00% -8.07% 2.38%
Government Bond Fund/3/ 2.58% 4.60% 5.95% -100.00% -10.13% -7.21%
Money Market Fund/1/ 4.41% 3.44% 4.91% -100.00% -11.53% -0.24%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series/8/ 18.95% N/A 11.44% -100.00% N/A -7.33%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio/9/ 13.65% N/A 8.95% -100.00% N/A -33.48%
Fidelity Variable Insurance
Products Fund (VIPF and VIPFII)
Fidelity VIP Overseas Portfolio/13/ 12.20% 8.15% 6.91% -100.00% -5.90% 1.87%
Fidelity VIP Growth Portfolio/11/ 13.68% 14.14% 14.11% -100.00% 1.04% 9.60%
Fidelity VIP Equity-Income Portfolio/11/ 13.26% 16.92% 12.71% -100.00% 4.19% 8.13%
Fidelity VIP II Asset Manager Portfolio/12/ 13.57% 10.26% 10.68% -100.00% -3.43% 3.26%
Fidelity VIP High Income Portfolio/10/ 13.01% 13.93% 10.12% -100.00% 0.80% 5.37%
Fidelity VIP Money Market Portfolio/14/ 4.41% 3.59% 5.00% -100.00% -11.35% -0.15%
</TABLE>
Performance returns given above are for the Vari-Exceptional Life ('91)
subaccounts of AFLIAC and are net of all product charges (including surrender
charges) for a representative policy. In addition, the returns assume an
investment in the underlying funds listed above on the date of inception of each
Fund. All full surrenders or withdrawals in excess of the free amount may be
subject to a declining surrender charge.
/1/ Inception April 29, 1985
/2/ Inception September 28, 1990
/3/ Inception August 26, 1991
/4/ Inception August 21, 1992
/5/ Inception April 30, 1993
/6/ Inception May 1, 1994
/7/ Inception April 28, 1995
/8/ Inception October 29, 1992
/9/ Inception March 31, 1994
/10/ Inception September 19, 1985
/11/ Inception October 9, 1986
/12/ Inception September 6, 1989
/13/ Inception January 28, 1987
/14/ Inception April 1, 1982
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
Vari-Exceptional Life ('93) . Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Vari-Exceptional Life ('93)
subaccounts of FAFLIC are summarized below. Keep in mind that these returns are
net of all product charges. For returns that do not reflect the deduction of
product charges, please refer to the individual Portfolio Reviews beginning on
page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
-------------------------- ----------------------------
Ten Years Ten Years
One Five or Life One Five or Life
Subaccounts Year Years of Fund Year Years of Fund
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund/4/ 17.52% N/A 18.39% -97.86% N/A 0.99%
Select Capital Appreciation Fund/7/ 7.85% N/A 26.86% -100.00% N/A -44.47%
Small Cap Value Fund/5/ 27.42% N/A 13.54% -88.86% N/A -12.58%
Select International Equity Fund/6/ 20.89% N/A 12.37% -94.80% N/A -29.55%
Select Growth Fund/4/ 20.96% N/A 11.35% -94.74% N/A -8.03%
Growth Fund/1/ 19.14% 11.50% 13.47% -96.39% -3.13% 9.11%
Equity Index Fund/2/ 21.24% 13.29% 16.40% -94.48% -0.88% 7.36%
Select Growth and Income Fund/4/ 20.21% N/A 12.47% -95.42% N/A -6.56%
Investment Grade Income Fund/1/ 2.65% 6.05% 7.06% -100.00% -10.18% 1.94%
Government Bond Fund/3/ 2.60% 4.64% 5.68% -100.00% -12.07% -9.15%
Money Market Fund/1/ 4.43% 3.18% 4.65% -100.00% -14.06% -0.85%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series/8/ 18.98% N/A 11.15% 96.54% N/A -9.69%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio/9/ 13.67% N/A 8.67% -100.00% N/A -36.19%
Fidelity Variable Insurance
Products Fund (VIPF and VIPFII)
Fidelity VIP Overseas Portfolio/13/ 12.23% 7.89% 6.64% -100.00% -7.76% 1.38%
Fidelity VIP Growth Portfolio/11/ 13.71% 13.83% 13.82% -100.00% -0.21% 9.49%
Fidelity VIP Equity-Income Portfolio/11/ 13.29% 16.62% 12.43% -100.00% 3.22% 7.96%
Fidelity VIP II Asset Manager Portfolio/12/ 13.61% 9.98% 10.40% -100.00% -5.06% 2.64%
Fidelity VIP High Income Portfolio/10/ 13.04% 13.63% 9.84% -100.00% -0.46% 5.08%
</TABLE>
Performance returns given above are for the Vari-Exceptional Life ('93)
subaccounts of FAFLIC and are net of all product charges (including surrender
charges) for a representative policy. In addition, the returns assume an
investment in the underlying funds listed above on the date of inception of each
Fund. All full surrenders or withdrawals in excess of the free amount may be
subject to a declining surrender charge.
/1/ Inception April 29,1985
/2/ Inception September 28, 1990
/3/ Inception August 26, 1991
/4/ Inception August 21, 1992
/5/ Inception April 30, 1993
/6/ Inception May 1, 1994
/7/ Inception April 28, 1995
/8/ Inception October 29, 1992
/9/ Inception March 31, 1994
/10/ Inception September 19, 1985
/11/ Inception October 9, 1986
/12/ Inception September 6, 1989
/13/ Inception January 28, 1987
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
VARI-EXCEPTIONAL LIFE ('93) . Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Vari-Exceptional Life ('93)
subaccounts of AFLIAC are summarized below. Keep in mind that these returns are
net of all product charges. For returns that do not reflect the deduction of
product charges, please refer to the individual Portfolio Reviews beginning on
page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
------------------------ -------------------------
Ten Years Ten Years
One Five or Life One Five or Life
Subaccounts Year Years of Fund Year Years of Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund /4/ 17.52% N/A 18.39% -99.34% N/A 0.25%
Select Capital Appreciation Fund /7/ 7.85% N/A 26.86% -100.00% N/A -45.94%
Small Cap Value Fund /5/ 27.42% N/A 13.54% -90.46% N/A -13.51%
Select International Equity Fund /6/ 20.89% N/A 12.37% -96.32% N/A -30.76%
Select Growth Fund /4/ 20.96% N/A 11.35% -96.25% N/A -8.80%
Growth Fund /1/ 19.14% 11.50% 13.47% -97.88% -3.77% 8.82%
Equity Index Fund /2/ 21.24% 13.29% 16.40% -96.00% -1.52% 6.87%
Select Growth and Income Fund /4/ 20.21% N/A 12.47% -96.92% N/A -7.32%
Investment Grade Income Fund /1/ 2.65% 6.05% 7.06% -100.00% -10.85% 1.63%
Government Bond Fund /3/ 2.60% 4.64% 5.68% -100.00% -12.75% -9.77%
Money Market Fund /1/ 4.43% 3.18% 4.65% -100.00% -14.74% -1.16%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series /8/ 18.98% N/A 11.15% 98.03% N/A -10.50%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio /9/ 13.67% N/A 8.67% -100.00% N/A -37.43%
Fidelity Variable Insurance
Products Fund (VIPF and VIPFII)
Fidelity VIP Overseas Portfolio /13/ 12.23% 7.89% 6.64% -100.00% -8.42% 1.08%
Fidelity VIP Growth Portfolio /11/ 13.71% 13.83% 13.82% -100.00% -0.84% 9.21%
Fidelity VIP Equity-Income Portfolio /11/ 13.29% 16.62% 12.43% -100.00% 2.59% 7.67%
Fidelity VIP II Asset Manager Portfolio /12/ 13.61% 9.98% 10.40% -100.00% -5.71% 2.22%
Fidelity VIP High Income Portfolio /10/ 13.04% 13.63% 9.84% -100.00% -1.09% 4.79%
</TABLE>
Performance returns given above are for the Vari-Exceptional Life ('93)
subaccounts of AFLIAC and are net of all product charges (including surrender
charges) for a representative policy. In addition, the returns assume an
investment in the underlying funds listed above on the date of inception of each
Fund. All full surrenders or withdrawals in excess of the free amount may be
subject to a declining surrender charge.
<TABLE>
<S> <C> <C>
/1/ Inception April 29, 1985 /6/ Inception May 1, 1994 /10/ Inception September 19, 1985
/2/ Inception September 28, 1990 /7/ Inception April 28, 1995 /11/ Inception October 9, 1986
/3/ Inception August 26, 1991 /8/ Inception October 29, 1992 /12/ Inception September 6, 1989
/4/ Inception August 21, 1992 /9/ Inception March 31, 1994 /13/ Inception January 28, 1987
/5/ Inception April 30, 1993
</TABLE>
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
VARIABLE INHEIRITAGE . Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Variable Inheiritage
subaccounts of FAFLIC are summarized below. Keep in mind that these returns are
net of all product charges. For returns that do not reflect the deduction of
product charges, please refer to the individual Portfolio Reviews beginning on
page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
------------------------ --------------------------
Ten Years Ten Years
One Five or Life One Five or Life
Subaccounts Year Years of Fund Year Years of Fund
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund /4/ 17.19% N/A 18.39% -86.16% N/A 8.12%
Select Capital Appreciation Fund /7/ 7.55% N/A 26.86% -95.42% N/A -30.82%
Small Cap Value Fund /5/ 27.06% N/A 13.54% -76.68% N/A -3.13%
Select International Equity Fund /6/ 20.55% N/A 12.37% -82.93% N/A -16.54%
Select Growth Fund /4/ 20.62% N/A 11.35% -82.87% N/A -0.33%
Growth Fund /1/ 18.81% 11.50% 13.47% -84.60% 3.25% 11.83%
Equity Index Fund /2/ 20.90% 13.29% 16.40% -82.60% 5.36% 11.94%
Select Growth and Income Fund /4/ 19.87% N/A 12.47% -83.59% N/A 1.03%
Select Income Fund /4/ 2.13% N/A 4.69% -100.00% N/A -8.66%
Investment Grade Income Fund /1/ 2.36% 6.05% 7.06% -100.00% -3.30% 5.04%
Government Bond Fund /3/ 2.32% 4.64% 5.68% -100.00% -5.03% -2.68%
Money Market Fund /1/ 4.14% 3.18% 4.65% -98.69% -6.84% 2.44%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series /8/ 18.65% N/A 11.15% -84.76% N/A -1.59%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio /9/ 13.23% N/A 8.67% -89.96% N/A -22.54%
Fidelity Variable Insurance
Products Fund (VIPF and VIPFII)
Fidelity VIP Overseas Portfolio /13/ 11.92% 7.89% 6.64% -91.22% -1.06% 4.55%
Fidelity VIP Growth Portfolio /11/ 13.39% 13.83% 13.82% -89.81% 5.99 12.20%
Fidelity VIP Equity-Income Portfolio /11/ 12.97% 16.62% 12.43% -90.21% 9.22% 10.74%
Fidelity VIP II Asset Manager Portfolio /12/ 13.29% 9.98% 10.40% -89.91% 1.45% 6.77%
Fidelity VIP High Income Portfolio /10/ 12.72% 13.63% 9.84% -90.45% 5.75% 8.00%
</TABLE>
Performance returns given above are for the Variable Inheiritage subaccounts of
FAFLIC and are net of all product charges (including surrender charges) for a
representative policy. In addition, the returns assume an investment in the
underlying funds listed above on the date of inception of each Fund. All full
surrenders or withdrawals in excess of the free amount may be subject to a
declining surrender charge.
<TABLE>
<S> <C> <C>
/1/ Inception April 29, 1985 /6/ Inception May 1, 1994 /10/ Inception September 19, 1985
/2/ Inception September 28, 1990 /7/ Inception April 28, 1995 /11/ Inception October 9, 1986
/3/ Inception August 26, 1991 /8/ Inception October 29, 1992 /12/ Inception September 6, 1989
/4/ Inception August 21, 1992 /9/ Inception March 31, 1994 /13/ Inception January 28, 1987
/5/ Inception April 30, 1993
</TABLE>
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Product Performance Summary
- --------------------------------------------------------------------------------
VARIABLE INHEIRITAGE . Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Variable Inheiritage subaccounts
of AFLIAC are summarized below. Keep in mind that these returns are net of all
product charges. For returns that do not reflect the deduction of product
charges, please refer to the individual Portfolio Reviews beginning on page 14.
<TABLE>
<CAPTION>
WITHOUT SURRENDER CHARGE WITH SURRENDER CHARGE
------------------------ -------------------------
Ten Years Ten Years
One Five or Life One Five or Life
Subaccounts Year Years of Fund Year Years of Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund /4/ 17.19% N/A 18.39% -87.82% N/A 7.48%
Select Capital Appreciation Fund /7/ 7.55% N/A 26.86% -96.76% N/A -32.21%
Small Cap Value Fund /5/ 27.06% N/A 13.54% -78.27% N/A -3.91%
Select International Equity Fund /6/ 20.55% N/A 12.37% -84.44% N/A -17.57%
Select Growth Fund /4/ 20.62% N/A 11.35% -84.37% N/A -0.97%
Growth Fund /1/ 18.81% 11.50% 13.47% -86.09% 2.71% 11.59%
Equity Index Fund /2/ 20.90% 13.29% 16.40% -84.11% 4.82% 11.52%
Select Growth and Income Fund /4/ 19.87% N/A 12.47% -85.08% N/A 0.40%
Select Income Fund /4/ 2.13% N/A 4.69% -100.00% N/A -9.31%
Investment Grade Income Fund /1/ 2.36% 6.05% 7.06% -100.00% -3.85% 4.79%
Government Bond Fund /3/ 2.32% 4.64% 5.68% -100.00% -5.58% -3.20%
Money Market Fund /1/ 4.14% 3.18% 4.65% -99.99% -7.40% 2.18%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series /8/ 18.65% N/A 11.15% -86.24% N/A -2.25%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio /9/ 13.23% N/A 8.67% -91.38% N/A -23.59%
Fidelity Variable Insurance
Products Fund (VIPF and VIPFII)
Fidelity VIP Overseas Portfolio /13/ 11.92% 7.89% 6.64% -92.62% -1.61% 4.29%
Fidelity VIP Growth Portfolio /11/ 13.39% 13.83% 13.82% -91.23% 5.45 11.96%
Fidelity VIP Equity-Income Portfolio /11/ 12.97% 16.62% 12.43% -91.62% 8.68% 10.50%
Fidelity VIP II Asset Manager Portfolio /12/ 13.29% 9.98% 10.40% -91.32% 0.90% 6.41%
Fidelity VIP High Income Portfolio /10/ 12.72% 13.63% 9.84% -91.86% 5.21% 7.76%
</TABLE>
Performance returns given above are for the Variable Inheiritage subaccounts of
AFLIAC and are net of all product charges (including surrender charges) for a
representative policy. In addition, the returns assume an investment in the
underlying funds listed above on the date of inception of each Fund. All full
surrenders or withdrawals in excess of the free amount may be subject to a
declining surrender charge.
<TABLE>
<S> <C> <C>
/1/ Inception April 29, 1985 /6/ Inception May 1, 1994 /10/ Inception September 19, 1985
/2/ Inception September 28, 1990 /7/ Inception April 28, 1995 /11/ Inception October 9, 1986
/3/ Inception August 26, 1991 /8/ Inception October 29, 1992 /12/ Inception September 6, 1989
/4/ Inception August 21, 1992 /9/ Inception March 31, 1994 /13/ Inception January 28, 1987
/5/ Inception April 30, 1993
</TABLE>
Performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Fund Performance Summary
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/96
For easy reference, the total returns for the Funds are summarized below. Keep
in mind that these returns are net of all Fund charges. For returns that do
reflect the deduction of product charges, please refer to the Product
Performance Summaries beginning on page 14.
<TABLE>
<CAPTION>
Ten Years
One Five or Life
Funds Year Years of Fund
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Allmerica Investment Trust
Select Aggressive Growth Fund /4/ 18.55% N/A 19.77%
Select Capital Appreciation Fund /7/ 8.80% N/A 28.34%
Small Cap Value Fund /5/ 28.53% N/A 14.86%
Select International Equity Fund /6/ 21.94% N/A 13.68%
Select Growth Fund /4/ 22.02% N/A 12.65%
Growth Fund /1/ 20.19% 12.80% 14.79%
Equity Index Fund /2/ 22.30% 14.61% 17.76%
Select Growth and Income Fund /4/ 21.26% N/A 13.78%
Select Income Fund /4/ 3.32% N/A 5.91%
Investment Grade Income Fund /1/ 3.56% 7.29% 8.31%
Government Bond Fund /3/ 3.51% 5.86% 6.91%
Money Market Fund /1/ 5.36% 4.38% 5.87%
Delaware Group Premium Fund, Inc.
Delaware International Equity Series /8/ 20.03% N/A 12.45%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio /9/ 14.70% N/A 9.94%
Fidelity Variable Insurance
Products Fund (VIPF and VIPFII)
Fidelity VIP Overseas Portfolio /13/ 13.15% 9.15% 7.88%
Fidelity VIP Growth Portfolio /11/ 14.71% 15.16% 15.15%
Fidelity VIP Equity-Income Portfolio /11/ 14.28% 17.98% 13.74%
Fidelity VIP II Asset Manager Portfolio /12/ 14.60% 11.26% 11.69%
Fidelity VIP High Income Portfolio /10/ 14.03% 14.96% 11.12%
</TABLE>
Fund performance returns given above reflect an investment in the underlying
funds listed on the date of inception of each Fund.
<TABLE>
<S> <C> <C>
/1/ Inception April 29, 1985 /6/ Inception May 1, 1994 /10/ Inception September 19, 1985
/2/ Inception September 28, 1990 /7/ Inception April 28, 1995 /11/ Inception October 9, 1986
/3/ Inception August 26, 1991 /8/ Inception October 29, 1992 /12/ Inception September 6, 1989
/4/ Inception August 21, 1992 /9/ Inception March 31, 1994 /13/ Inception January 28, 1987
/5/ Inception April 30, 1993
</TABLE>
Fund performance returns in this report are historical and are not indicative of
future results. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
11
<PAGE>
Domestic & International Equity Market Overview
1990-1991: Economic recession in the United States. A deep depression affects
much of the former Soviet bloc countries.
1992: U.S. economy continues its slow recovery. Larger companies downsize while
smaller firms thrive.
1993: A year of low interest rates and strong growth in the emerging markets.
1994: Federal Reserve Board raises interest rates six times stalling equity
markets even while corporate earnings continued to grow.
1995: Favorable economic conditions result in tremendous gains for the U.S.
equity markets. Europe turns in strongest performance of international equity
markets.
1996: Despite a volatile marketplace, the U.S. stock market performs well.
Internationally, European countries post the most impressive gains.
Sustained growth and increasing volatility characterized the domestic
equity market for 1996.
Strong company fundamentals and corporate profits propelled the stock
market upward throughout the year. Further support came from an increased demand
for equities, driven by corporate share repurchase programs, merger and
acquisition activity and huge cash flows into equity mutual funds. As a result,
the Dow turned in its sixth consecutive year of positive returns and stocks of
companies of all sizes delivered solid returns.
Little seemed to disrupt this year's stock market for long. Even a 7%
plunge during a two-week period in July, which was attributed to corporate
earnings disappointments and fears that a stronger economy might lead to higher
interest rates, was reversed within months. By early October, the Dow Jones
Industrial Average had climbed above the 6000 mark and set a string of new
records throughout November, culminating in the year's high of 6547.79.
Overall, the Dow gained 28% in 1996. While this lagged the remarkable 37%
return posted in 1995, it still exceeded most analysts' expectations of a 10%
return for stocks in 1996. Trading volume soared. The average number of shares
changing hands daily on the New York Stock Exchange alone hit a record 412
million shares, compared with the previous record of 346.1 million in 1995.
While demand remained steady, individual stocks and industries went in and
out of favor as investors struggled to predict which way interest rates would
move--and consequently which market segments would benefit from that shift. As
of the end of 1996, the chief beneficiaries continued to be large-capitalization
and blue-chip stocks. Energy, banks and semiconductors, three of 1995's best
performing sectors,
[TIME LINE APPEARS HERE]
A cold winter and rising oil prices stimulate energy stocks.
[GRAPHIC APPEARS HERE]
Economic data shows economy growing at a much faster rate than anticipated.
[GRAPHIC APPEARS HERE]
After a disappointing 1995, retail stocks recover, most notably in the footwear
industry, along with consumer confidence.
[GRAPHIC APPEARS HERE]
The strongest returns for international equity investors come from Europe and
selected parts of Asia.
[GRAPHIC APPEARS HERE]
12
<PAGE>
again turned in shining performances in 1996 as the fundamentals of each of
these industries continued to improve. Footwear companies and securities brokers
were also winning sectors. Oil drilling, which was the single-best performing
sector of the stock market, more than doubled its return over 1995.
Strong investment returns also fueled new issue offerings. The two largest
markets in the United States, the New York Stock Exchange (NYSE) and the
National Association of Securities Dealers Automated Quotations (NASDAQ), had a
bumper crop of new companies listing with them for the first time. The roaring
bull market also enticed scores of foreign companies to U.S. markets.
On the global front, U.S. investors in international equities experienced
the most attractive results from European markets. On average, European stocks
rose 20% last year, below the performance of U.S. stocks, but far better than
Japanese stocks. Based on Morgan Stanley's country indices, returns ranged as
high as 41% in Spain and 27% in the United Kingdom to 18% in Australia. German
stocks also delivered solid returns for the year.
In general, the best-performing sectors internationally included chemicals,
metals, oils, telecommunications and some consumer stocks, such as home
furnishings and retailers.
In the Far East, significant increases were found in several key markets.
In China, the stock market was favorably impacted from an easing of monetary
policy along with lower inflation. Hong Kong and Taiwan, China's neighbors, both
had stellar-performing stock markets in which each soared by over 30%. But in
Japan, stock market returns were disappointing, as its economic recovery
sputtered and never really regained speed.
In Australia, equities were affected by low economic growth, yet benefited
from a strengthening Australian dollar. As a result, the market produced modest
returns in 1996 and is expected to do better during the coming year. Closer to
home, the Canadian equity market accelerated, responding to a series of interest
rate cuts which were instituted to stimulate the economy and respond to lower
rates in the U.S.
Looking ahead, modest inflation, lower corporate earnings and much smaller
gains in stock prices are predicted for 1997. A slower growth in profits,
combined with disappointing corporate earnings, have typically deflated not just
the stock of the reporting company, but that of companies in the same industry.
In the case of a bellwether stock, its disappointing returns can depress the
market as a whole. These predictions could combine to increase volatility in the
market this year, as investors continue to worry about valuation levels and the
economy.
[TIME LINE APPEARS HERE]
Stock market plunges 7% in response to investor fears that a strong economy
might lead to higher interest rates.
[GRAPHIC APPEARS HERE]
Market rebounds as it becomes apparent President Clinton will win the upcoming
election, with few changes in the House and Senate.
[GRAPHIC APPEARS HERE]
The Dow Jones Industrial Average climbs to a record-breaking 6547.
[GRAPHIC APPEARS HERE]
The Dow gained 28% in 1996, fueled by blue-chip and large-cap performance. The
best-performing sectors were energy, banks and technology.
[GRAPHIC APPEARS HERE]
13
<PAGE>
- --------------------------------------------------------------------------------
Select Aggressive Growth Fund
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Nicholas-Applegate Capital Management
ABOUT THE FUND:
Invests in companies whose potential for rapidly growing earnings is not fully
reflected in their stock price.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
Durable Goods 22.39%
Technology 12.38%
Finance 10.46%
Energy 9.64%
Consumer Products 8.94%
Electronics 8.68%
Retail 6.20%
Chemicals and Drugs 5.53%
Health Services 4.60%
Cash Equivalents 2.95%
Other 8.23%
The Select Aggressive Growth Fund is a portfolio of the Allmerica Investment
Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Lipper Capital Appreciation Fund Average is a non-weighted index of 193
capital appreciation mutual funds. The Russell 2500 and 2000 Indices are
unmanaged composites of 2,500 and 2,000 small capitalization stocks. Performance
numbers are net of all fund operating expenses, but do not include insurance
charges. If performance information included the effect of these additional
charges, it would have been lower.
For the one-year period ending Dec-ember 31, 1996, the Select Aggressive
Growth Fund posted a return of 18.55%, only narrowly underperforming its
benchmark--the Russell 2500 Index.
In general, returns for smaller capitalization stocks were mixed in 1996.
For the first half of the year, small company stocks with high growth rates were
among the equity market's best performers, benefiting from stronger-than-
expected economic growth. However, during the second half of the year, small
caps stumbled. Earnings disappointments, coupled with a much anticipated market
correction in July, increased volatility and renewed inflationary fears. As a
result, investors sought a greater degree of safety and liquidity from large-cap
stocks. This "flight to liquidity" left both small- and mid-cap stocks behind in
the fourth quarter.
Despite this shift in market sentiment, the Fund produced respectable
overall returns for the year. Specifically, sound stock selections within the
retail trade, technology and energy sectors significantly enhanced the Fund's
performance. Among the Fund's top- performing holdings were:
. Ross Stores, Inc. which operates a discounted-price, brand-name apparel chain;
. McAffe Associates, Inc., a designer of computer software; and
. Reading & Bates Corp., a worldwide provider of off-shore drilling services.
Because of the considerable appreciation in the price of many large-cap
stocks, the most attractive relative values today appear to be in small- and
mid-cap stocks. Management also believes that other factors are converging to
create an appealing environment for smaller cap growth investors, including
lackluster profit growth for large companies, favorable interest rates, and
continued cash flows into mutual funds.
As the Fund's management looks forward to 1997, its outlook for small-cap
technology stocks is particularly bright. Less than 10% of these companies have
had major earnings estimate decreases over the past month. In fact, the average
estimate change has been positive. Management, therefore, believes that this
group has the potential to surprise investors on the upside during the coming
year.
Growth of a $10,000 Investment since 1992
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/92 12/96
<S> <C> <C>
Selective Aggressive Growth Fund $ 10,000 $ 21,944
Russell 2000 Index $ 10,000 $ 20,457
Russell 2500 Index $ 10,000 $ 20,886
Lipper Capital Appreciation Fund Average $ 10,000 $ 19,119
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Aggressive Growth Fund 18.55% N/A 19.77%
Russell 2000 Index 16.49% 15.65% 18.07%
Russell 2500 Index 19.03% 16.00% 18.53%
Lipper Capital Appreciation Fund Average 16.31% 13.02% 15.90%
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
Select Capital Appreciation Fund
- --------------------------------------------------------------------------------
For the year ended December 31, 1996, the Select Capital Appreciation Fund
returned 8.80%, well below the Russell 2500 Index return of 19.03%.
Although the Fund turned in impressive results at the mid-year point, its
disappointing year-end results stemmed from two late developments: the general
market's move to large capitalization stocks and disappointing returns from
several top holdings.
In general, small- to mid-cap stocks, where the Fund's holdings are
concentrated, lagged their larger counterparts, especially after July's market
decline. After this slide, investors sought safety and tended to flock toward
larger, highly liquid, well-established stocks because of their perceived
earnings predictability.
Pricing pressure also depressed returns, particularly as it affected several
of the Fund's leading positions. For example, HFS, a hotel franchiser, was off
from its recent peaks as the market grew concerned about the general pace of its
acquisitions.
Another top holding, Fastenal, literally a nuts and bolts manufacturer,
experienced pricing pressure after missing earnings estimates. Fortunately, this
stock has rebounded from its lows and remains a top performer. Paging Network,
another one of the Fund's major holdings, generated disappointing results
throughout most of the year. However, management is optimistic about the stock's
potential, given the company's plans to roll out a new portable voice messaging
system.
On the positive side, the Fund had a number of very strong performers. Among
them were Rentokil (a pest control and offices services company), J.D.
Wetherspoon (a pub operator), and PizzaExpress - all British-based companies
which offer significant advantages over competitors in their respective
industries.
In looking ahead, Janus remains positive about the earnings potential for
the Fund's current holdings. They will continue to seek low-risk companies with
dominant market positions, specifically those that are under followed by the
market and believed to offer exceptional pros-pects for growth.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Growth of a $10,000 Investment since 1995
4/95 12/96
------- -------
<S> <C> <C>
Select Capital Appreciation Fund $10,000 $15,184
S&P 500(R)Index 10,000 14,974
S&P Mid Cap 400(R)Index 10,000 14,111
Russell 2000 Index 10,000 13,993
Russell 2500 Index 10,000 14,343
Lipper Capital Appreciation Fund Average 10,000 14,272
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
Years ended December 31, 1996 1 year 5 year Life of Fund
<S> <C> <C> <C>
Select Capital Appreciation Fund 8.80% N/A 28.34%
S&P 500(R)Index 22.96% 15.22% 27.39%
S&P Mid Cap 400(R)Index 19.20% 13.92% 23.12%
Russell 2000 Index 16.49% 15.65% 22.33%
Russell 2500 Index 19.03% 16.00% 24.16%
Lipper Capital Appreciation Fund Average 16.31% 13.02% 23.32%
</TABLE>
INVESTMENT SUB-ADVISER:
Janus Capital Corporation
ABOUT THE FUND:
The Fund seeks to construct a concentrated portfolio of rapidly growing
reasonably valued stocks.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
Retail 20.95%
Business Services 12.17%
Food Services 4.64%
Finance 8.95%
Health Services 4.43%
Communications 5.95%
Consumer Services 5.89%
Building & Construction 3.82%
Cash Equivalents and U.S. Government and Agency Obligations 14.76%
Other 18.44%
The Select Capital Appreciation Fund is a portfolio of the Allmerica Investment
Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks.The S&P Mid Cap
400(R) Index is an unmanaged index consisting of 400 domestic stocks chosen for
market size, liquidity and industry group representation. S&P 500(R) Index and
the S&P Mid Cap 400(R) Index are registered trademarks of the Standard & Poor's
Corporation.
The Russell 2500 and 2000 Indices are unmanaged composites of 2,500 and 2,000
small capitalization stocks. The Lipper Capital Appreciation Fund Average is a
non-weighted index of 193 funds within the capital appreciation investment
objective. Performance numbers are net of all fund operating expenses, but do
not include insurance charges. If performance information included the effect of
these additional charges, it would have been lower.
15
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Value Fund
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
David L. Babson & Co. Inc.*
ABOUT THE FUND:
Invests in attractively valued small companies believed to have above-average
potential for capital appreciation.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
Durable Goods 24.55%
Consumer Products 16.54%
Finance 7.71%
Retail 7.44%
Energy 8.43%
Metals Mining 3.94%
Building & Construction 3.78%
Cash Equivalents 9.32%
Other 18.29%
The Small Cap Value Fund is a portfolio of the Allmerica Investment Trust.
*As of January 1, 1997 CRM Advisors, LLC, an affiliate of Cramer Rosenthal
McGlynn, Inc., assumed sub-advisory responsibilities of the Small Cap Value
Fund.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Russell 2000 Index is an unmanaged composite of 2,000 small capitalization
stocks. The Lipper Small Company Growth Fund Average is a non-weighted index of
393 small company growth funds. Performance numbers are net of all fund
operating expenses, but do not include insurance charges. If performance
information included the effect of these additional charges, it would have been
lower.
For 1996, the Small Cap Value Fund delivered an outstanding total return of
28.53%, significantly outperforming the Russell 2000 Index of 16.50% as well as
the Lipper Small Company Growth Fund Average of 20.16%.
Sustained economic growth coupled with low inflation provided the foundation
for strong stock performance last year. And although the strengthening U.S.
economy caught some by surprise, this Fund was well-poised to capitalize on the
equity market's growth.
Overall, the Fund's outperformance relative to the benchmark can be
attributed to several key factors, namely favorable industry concentrations as
well as successful stock selections and portfolio weightings.
The Fund was heavily overweighted in two of the strongest performing
industries within the small-cap market: energy and consumer discretionary
stocks. Just as significantly, the Fund had no holdings in health care or
utilities. Not only were these the weakest performing industries for the year,
they actually finished the year with negative returns.
Stock selection also played a key role in the Fund's success. In keeping
with its investment objective, the Fund's management sought value-oriented,
small-cap stocks which they believed to have above-average potential for capital
appreciation.
Moving into 1997, the economically sensitive stocks in which the Fund is
overweighted continue to represent compelling values relative to the rest of the
small-cap market.
Management does not foresee any threats to the sustained economic growth and
low inflation, which the economy is currently experiencing. These factors
provide an excellent macroeconomic backdrop for positive portfolio performance.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Growth of a $10,000 Investment since 1993
4/93 12/96
------- -------
<S> <C> <C>
Small Cap Value Fund $10,000 $16,637
Russell 2000 Index 10,000 17,039
Lipper Small Company Growth Fund Average 10,000 17,805
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
Years ended December 31, 1996 1 year 5 year Life of Fund
<S> <C> <C> <C>
Small Cap Value Fund 28.53% N/A 14.86%
Russell 2000 Index 16.49% 15.65% 15.98%
Lipper Small Company Growth Fund Average 20.16% 15.10% 17.35%
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio
- --------------------------------------------------------------------------------
For the one-year period ended December 31, 1996, the T. Rowe Price
International Stock Portfolio posted a healthy return of 14.70%, more than
doubling the return for its benchmark, the Morgan Stanley EAFE Index.
The Portfolio's strong performance throughout the year can be attributed
equally to strategic country allocations and sound stock selections, both of
which outpaced the indices.
Regarding country allocation, the portfolio remained biased toward the fast-
growing economies of the Pacific and Latin America. But the single largest
source of value was the Portfolio's limited exposure in Japan, versus the EAFE
Index, where the anticipated economic recovery sputtered but never really gained
speed.
Solid returns from the Portfolio's European holdings also contributed to its
outperformance of the benchmark. The Portfolio was overweighted in several top-
performing European countries, including the Netherlands, France and Norway.
Success in these regions more than offset the negative impact of the Portfolio's
limited exposure in the United Kingdom, which enjoyed a particularly strong
fourth quarter.
Successful stock selections, especially among the Portfolio's Pacific Rim
issues in Malaysia, Hong Kong and Singapore, also added significant value. Even
though the Portfolio was underweighted in Japan, its limited stock selections in
this area still proved astute. Management avoided Japan's fragile banking sector
and focused instead on Japanese manufacturers that export their products
overseas, since these companies benefited from the yen's weakness. Specific
issues from Latin America and Europe also positively influenced the year's
returns.
In 1997, the Portfolio's management expects that steady growth in the
international markets will finally outpace the aging U.S. bull market. If
corporate earnings remain strong, management believes a number of equity markets
worldwide may experience positive earnings surprises. In general, Rowe
Price-Fleming International will continue to target selected investment
opportunities in both Europe and Japan as well as in the smaller markets of Asia
and Latin America.
Growth of a $10,000 Investment since 1994
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
3/94 12/96
<S> <C> <C>
T. Rowe Price International Stock Portfolio $10,000 $12,982
Morgan Stanley EAFE Index 10,000 12,381
Lipper International Fund Average 10,000 11,617
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
T. Rowe Price International Stock Portfolio 14.70% N/A 9.94%
Morgan Stanley EAFE Index 6.36% 8.49% 7.76%
Lipper International Fund Average 11.75% 10.09% 7.66%
</TABLE>
INVESTMENT ADVISER:
Rowe Price-Fleming International, Inc.
ABOUT THE FUND:
The Portfolio seeks long-term growth through a highly diversified portfolio of
foreign stocks.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the geographic distribution of net assets was:
[PIE CHART APPEARS HERE]
Japan 20.1%
United Kingdom 16.2%
Netherlands 9.9%
France 8.5%
Hong Kong 4.6%
Switzerland 4.2%
Germany 3.6%
Brazil 3.1%
Malaysia 3.0%
Sweden 2.6%
Other 24.2%
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Morgan Stanley EAFE Index is an unmanaged index of European, Australian &
Far East stocks. The Lipper International Fund Average is a non-weighted index
of 336 funds within the International Fund category. Performance numbers are net
of all fund operating expenses, but do not include insurance charges. If
performance information included the effect of these additional charges, it
would have been lower.
17
<PAGE>
- --------------------------------------------------------------------------------
Fidelity VIP* Overseas Portfolio
- --------------------------------------------------------------------------------
INVESTMENT ADVISER:
Fidelity Management & Research Company
ABOUT THE FUND:
Seeks long-term capital appreciation, invests primarily in foreign securities
whose principal business activities are outside the U.S.
PORTFOLIO COMPOSITION:
As of November 30, 1996, the geographic allocation of net assets was:
[PIE CHART APPEARS HERE]
Japan 23.2%
UK 12.2%
France 9.9%
Germany 6.6%
Sweden 6.1%
Netherlands 5.4%
Spain 3.4%
Switzerland 2.9%
Canada 2.6%
Italy 2.4%
Other 25.3%
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Morgan Stanley EAFE Index is an unmanaged index of European, Australian &
Far East stocks. The Lipper International Fund Average is a non-weighted index
of 336 funds within the International Fund category. Performance numbers are net
of all fund operating expenses, but do not include insurance charges. If
performance information included the effect of these additional charges, it
would have been lower.
The Fidelity VIP* Overseas Portfolio returned 13.15% during 1996, outpacing
the Morgan Stanley EAFE Index of 6.36%.
This superior performance can largely be attributed to the Portfolio's year-
long underweighting in Japan. Because an improving economic picture was expected
together with an increasing trend toward maximizing shareholder value, the
Portfolio's management viewed Japan favorably at the beginning of 1996. However,
Japanese markets suffered as concerns mounted about rising real estate values, a
slower-growing economy and the financial state of various banks. Given this
general economic picture, the Portfolio's management focused its Japanese
holdings on export companies which would benefit the most from a weakening yen
and an improving Japanese economy. This proved beneficial as companies like
Toyota and Honda performed well, particularly in the latter half of the year.
The Portfolio's European holdings generally performed well throughout the
year as economic recovery in the region boosted markets overall. The Portfolio
benefited from its exposure to Swiss pharmaceuticals, good stock selection in
both Germany and France and its strong-performing financial services companies
in Scandinavia. However, it lost some ground because it was underweighted in the
United Kingdom when the currency there strengthened. The Portfolio also saw
favorable results from its limited exposure in the emerging markets of Southeast
Asia and Brazil.
For 1997, the Portfolio's management continues to focus on those companies
that can maximize shareholder value and seemed poised to benefit from both a
local economic recovery and a strong U.S. dollar in the Japanese and European
markets. The Portfolio's management also views energy favorably - as the
dynamics of supply and demand seem to be attractive in that sector as well.
Growth of a $10,000 Investment since 1987
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1/87 12/96
<S> <C> <C>
Fidelity VIP* Overseas Portfolio $10,000 $21,253
Morgan Stanley EAFE Index 10,000 24,504
Lipper International Fund Average 10,000 24,319
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP* Overseas Portfolio 13.15% 9.15% 7.88%
Morgan Stanley EAFE Index 6.36% 8.49% 13.73%
Lipper International Fund Average 11.75% 10.09% 13.91%
</TABLE>
*VIP refers to Variable Insurance Products Fund.
18
<PAGE>
- --------------------------------------------------------------------------------
Select International Equity Fund
- --------------------------------------------------------------------------------
For 1996, the Select International Equity Fund delivered an impressive
return of 21.94%, significantly outperforming the Morgan Stanley EAFE Index
return of 6.36 %.
The Fund's outstanding performance can be attributed to the success of
several key portfolio themes as well as to individual stock selections within
those themes. For the year, the "positive banking environment" proved to be the
best-performing theme, as strong corporate cashflows increased dividend yields
and funded further acquisitions. In particular, Spain's Banco De Santander,
which announced its acquisition of a Latin American bank, added significant
value.
Other contributors to the Fund's strong performance were within the
"telecommunications" theme. The shining star here was STET, as it announced
plans to merge into Telecom Italia and to sell SEAT, the Italian yellow pages.
The "restructuring opportunities" theme also uncovered impressive
opportunities. One such find was Royal Dutch Petroleum, which announced a joint
venture with Texaco covering their respective U.S. refining operations. Given
the increased market share and cost-savings this venture promises, these
holdings should continue to deliver solid returns.
The "leisure activities" theme contributed to the Fund's overall
performance. For example, Ladbrooke Group continued to deliver strong returns,
following its acquisition of Hilton's international operations.
From a geographic perspective, equities based in Australia produced only
modest returns as they suffered from low growth in the economy but benefitted
from a strengthening Australian dollar. Even more disappointing were the Fund's
holdings in Indonesia and Thailand, both victims of some political difficulties.
In looking ahead, the Fund's management will continue a fully invested
posture, concentrating its holdings in the United Kingdom, the core continental
European markets and the Pacific Basin, except Japan.
Growth of a $10,000 Investment since 1994
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
05/94 12/96
<S> <C> <C>
Select International Equity Fund $10,000 $14,078
Morgan Stanley EAFE Index 10,000 11,782
Lipper International Fund Average 10,000 12,108
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Select International Equity Fund 21.94% N/A 13.68%
Morgan Stanley EAFE Index 6.36% 8.49% 6.34%
Lipper International Fund Average 11.75% 10.09% 6.75%
</TABLE>
INVESTMENT SUB-ADVISER:
Bank of Ireland Asset Management
ABOUT THE FUND:
Seeks maximum long-term total return by investing in established non-US
companies based on fundamental value and strong opportunities for growth.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the geographic distribution of net assets was:
[PIE CHART APPEARS HERE]
United Kingdom 30.90%
Switzerland 8.55%
Australia 7.23%
Netherlands 10.51%
Singapore 7.25%
Malaysia 4.58%
Germany 5.58%
Indonesia 4.37%
Cash Equivalents 4.45%
Other 16.58%
The Select International Equity Fund is a portfolio of the Allmerica Investment
Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Morgan Stanley EAFE Index is an unmanaged index of European, Australian &
Far East stocks. The Lipper International Fund Average is a non-weighted index
of 336 funds within the International Fund category. Performance numbers are net
of all fund operating expenses, but do not include insurance charges. If
performance information included the effect of these additional charges, it
would have been lower.
19
<PAGE>
- --------------------------------------------------------------------------------
Delaware International Equity Series
- --------------------------------------------------------------------------------
INVESTMENT ADVISER:
Delaware International Advisers Ltd.
ABOUT THE FUND:
A value-oriented equity portfolio which seeks capital appreciation and income by
investing in companies domiciled outside the United States.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the geographic allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
United Kingdom 26.18%
Japan 12.35%
Australia 10.80%
France 7.53%
Germany 6.67%
Netherlands 6.36%
Spain 6.39%
New Zealand 3.45%
Hong Kong 2.87%
Singapore/Malaysia 3.98%
Belgium 2.74%
Cash 5.80%
Other 4.88%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Morgan Stanley EAFE Index is an unmanaged index of European, Australian &
Far East stocks. The Lipper International Fund Average is a non-weighted index
of 336 funds within the International Fund category. Performance numbers are net
of all fund operating expenses, but do not include insurance charges. If
performance information included the effect of these additional charges, it
would have been lower.
With a total return of 20.03% for 1996, the Delaware International Equity
Series' performance more than tripled the Morgan Stanley EAFE Index return of
6.36%.
One of the key reasons the Series so dramatically outperformed its
benchmark was its underweighted position in Japan relative to the EAFE Index.
Still grappling with the effects of its early 1990s recession, Japan's economy
did not rebound as expected in 1996.
Prudent stock selection and favorable currency exposure also served the
Series well in 1996. In choosing stocks around the world, the Series' management
favored banking, industrial, utility and natural resource companies that met the
Series' dividend-oriented investment guidelines.
Overall, more than half of the portfolio was invested in Western Europe, a
region the Series' management believes offers superior value. During 1996,
holdings were also added in France and Spain, where government reform and
interest rate cuts show promise of fostering economic growth. Also contributing
to the Series' strong performance was its above-average concentration of stocks
in companies based in the United Kingdom, Australia and New Zealand--all of
which use dollar-based currencies.
To protect the dollar value of its holdings, the Series also purchased
currency contracts in several countries, including Japan and Germany. So when
the U.S. dollar rose in value against the yen and deutsche-mark, the increase in
the value of these contracts more than offset the loss of value in converting
those Japanese or German stock holdings back into dollars.
In looking ahead, the Series' management will continue to select stocks by
evaluating both the company's long-term capital appreciation and income
potential as well as the country's currency fluctuations, economy, and political
situation.
Growth of a $10,000 Investment since 1992
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
10/92 12/96
<S> <C> <C>
Delaware International Equity Series $10,000 $16,258
Morgan Stanley EAFE Index $10,000 $17,301
Lipper International Fund Average $10,000 $15,083
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Delaware International Equity Series 20.03% N/A 12.45%
Morgan Stanley EAFE Index 6.36% 8.49% 13.73%
Lipper International Fund Average 11.75% 10.09% 13.91%
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
Fidelity VIP* Growth Portfolio
- --------------------------------------------------------------------------------
For the year ended December 31, 1996, the Fidelity VIP* Growth Portfolio
returned 14.71%, trailing both the S&P 500 Index of 22.96% and the Lipper
Capital Appreciation Fund Average of 16.31%.
Concern over slowing corporate earnings growth led to a relatively high
cash position, averaging 15% throughout 1996, more than double that of the
average U.S. equity fund level of approximately 6%. In an environment of
advancing equity prices, this high cash position negatively impacted results as
the Portfolio was not positioned to fully participate in market gains.
On the positive side, the Portfolio benefited from its position in
technology stocks. Sector positioning was concentrated in computer service,
systems, networking and semiconductor stocks--due to perceived strength in
earnings growth. Strong stock selection in the health care sector, i.e. drug
stocks, added value as investors anticipated potentially strong future earnings
from promising products. The Portfolio's media and leisure stocks, mostly gaming
companies, spurred results in the first half of the year, as strong consumer
spending boosted earnings. This same position, however, hurt performance during
the second half of 1996, as consumer spending slowed and investors feared too
many casinos were being opened.
Throughout 1996, a significant position in retail and wholesale stocks
produced mixed results for the Portfolio. For the first half of the year,
healthy consumer spending and benefits from cost-cutting produced above-average
returns for this sector. Unfortunately, a slowdown in consumer activity produced
below-market returns for the entire year.
Entering 1997, the Portfolio's management increased its commitment to
finance and energy stocks, believing earnings prospects for these sectors are
improving. The Portfolio remains overweighted in technology, media and leisure
stocks, forecasting potentially strong earnings growth. However, concerns over
weak holiday sales prompted management to reduce the Portfolio's position in
retail stocks. Management will continue to search for quality companies with
solid earnings growth prospects.
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment Since 1986
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/86 12/96
<S> <C> <C>
Fidelity VIP* Growth Portfolio $10,000 $40,998
S&P 500* Index $10,000 $41,492
Lipper Capital Appreciation Fund Average $10,000 $35,362
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP* Growth Portfolio 14.71% 15.16% 15.15%
S&P 500(R)Index 22.96% 15.22% 15.29%
Lipper Capital Appreciation Fund Average 16.31% 13.02% 12.48%
</TABLE>
*VIP refers to Variable Insurance Products Fund.
INVESTMENT ADVISER:
Fidelity Management & Research Company
ABOUT THE FUND:
The Portfolio seeks long-term capital appreciation by investing principally in
common stocks with above-average growth prospects.
PORTFOLIO COMPOSITION:
As of November 30 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Technology 26.83%
Health Care 10.18%
Retail and Wholesale 9.56%
Utilities 4.98%
Media & Leisure 6.65%
Durables 4.12%
Finance 7.37%
Energy 5.20%
Industrial Machinery and Equipment 3.92%
Non-Durables 3.26%
Other 17.93%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks. S&P 500(R)
Index is a registered trademark of the Standard & Poor's Corporation. The Lipper
Capital Appreciation Fund Average is a non-weighted index of 193 capital
appreciation mutual funds. Performance numbers are net of all fund operating
expenses, but do not include insurance charges. If performance information
included the effect of these additional charges, it would have been lower.
21
<PAGE>
- --------------------------------------------------------------------------------
Select Growth Fund
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Putnam Investment Management, Inc.*
ABOUT THE FUND:
Seeks long-term growth of capital by investing in stocks of companies believed
to have significant potential for capital appreciation.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Chemicals and Drugs 15.74%
Technology 12.04%
Retail 7.70%
Durable Goods 9.30%
Finance 13.48%
Health Services 6.90%
Consumer Products 7.62%
Energy 7.08%
Aerospace-Aircraft 4.70%
Cash Equivalents 8.27%
Other 7.17%
</TABLE>
The Select Growth Fund is a portfolio of the Allmerica Investment Trust.
*As of July 1, 1996, Putnam Investment Management, Inc. assumed sub-advisory
responsibilities for the Select Growth Fund.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks. S&P 500(R)
Index is a registered trademark of the Standard & Poor's Corporation. The Lipper
Growth Fund Average is a non-weighted index of 677 funds within the growth
investment objective. Performance numbers are net of all fund operating
expenses, but do not include insurance charges. If performance information
included the effect of these additional charges, it would have been lower.
For the year ended December 31, 1996, the Select Growth Fund returned
22.02%, nearly mirroring the S&P 500(R) Index return of 22.96% and outpacing the
19.22% return of the Lipper Growth Fund Average.
In the first half of the year, success in targeting the right sectors--as
well as the right stocks within those sectors--was largely responsible for the
Fund's success. It was strategically underweighted in several underperforming
sectors, including the telephone services and utilities industries.
In the second quarter, the Fund's management increased the portfolio's
exposure to energy stocks. The move was based on a belief that this particular
sector was attractively valued as it entered its seasonally strongest
performance period.
In the second half of the year, overweighted positions in retail and energy
detracted from results, particularly in the third quarter. In the fourth
quarter, the Fund limited its exposure in the finance and energy sectors, which
detracted from relative performance as these were two strong-performing
industries. Year-end profit-taking also impacted some of the Fund's leading
stocks.
On the brighter side, the Fund's allocation in technology added significant
value to the portfolio. Bolstered by its strong stock selection, including
holdings in Intel and Microsoft, the Fund now remains overweighted in software,
networking and systems outsourcing segments. Stock selection also played a major
role in other market sectors. Specifically, individual financial services and
health care holdings, such as Merck & Co., boosted overall returns.
While the Fund's management continues to be optimistic about the equity
market in general, they expect slow to moderate economic growth combined with
low inflation in 1997. If, however, a softer economy develops, large-cap growth
companies could benefit from the resulting profit growth and increased earnings
disappointments.
In looking ahead, the Fund's management is bullish on growth companies that
show strong potential for increasing profits and revenues.
Growth of a $10,000 Investment since 1992
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/92 12/96
<S> <C> <C>
Select Growth Fund $10,000 $16,799
S&P 500* Index $10,000 $20,051
Lipper Growth Fund Average $10,000 $18,520
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Growth Fund 22.02% N/A 12.65%
S&P 500(R) Index 22.96% 15.22% 17.39%
Lipper Growth Fund Average 19.22% 13.03% 15.64%
</TABLE>
22
<PAGE>
- -------------------------------------------------------------------------------
Growth Fund
- -------------------------------------------------------------------------------
After matching its benchmark at mid-year, the Growth Fund finished 1996
with a 20.19% total return, falling slightly short of the S&P 500's 22.96%
return.
The Fund's underperformance relative to its benchmark can be attributed to
two factors. First, the portfolio remained underweighted in the technology
sector - one of 1996's strongest performing economic sectors. Secondly, even the
Fund's specific selections within this sector restrained returns. Not owning
such stellar performers as IBM and Compaq for the entire year, both of which
outperformed the market, detracted from overall performance.
This shortfall, however, was largely confined to the third quarter.
Beginning in the fourth quarter, the Fund's management reorganized its core
equity management process. Following this reorganization, the Fund exceeded the
S&P 500's strong fourth quarter results, largely due to holdings in tobacco,
transportation and aerospace stocks.
Recent changes in individual stock holdings are also noteworthy. In the
tobacco area, the Fund's management took advantage of recent share price drops
to add to its positions in RJR Nabisco and Philip Morris. While litigation is a
continuing risk for these companies, management believes these regulatory
concerns are already reflected in current stock prices.
The Fund's management also added new positions in Wells Fargo and Mellon
Bank - two bank holding companies it believes are well positioned to thrive in
the evolving financial services industry. A new position in the machinery
industry, Ingersoll-Rand, has also been added. To fund these acquisitions, the
management eliminated positions which had appreciated significantly and were no
longer as attractive as other candidates, e.g. specifically Johnson & Johnson
and Warner Lambert.
In looking ahead, the Fund's management believes that the forces which have
propelled recent record stock market performances, namely massive cash flows
into mutual funds and the large amount of merger and acquisition activity, will
not last forever. Given the management's contrarian approach to investing, it is
turning toward more economically sensitive holdings, such as financial services,
technology and consumer service stocks - especially those trading at low
valuations compared to the market.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Growth of a $10,000 Investment since 1986
12/86 12/96
<S> <C> <C>
Growth Fund $10,000 $39,714
S&P 500(R) Index $10,000 $41,492
Lipper Growth Fund Average $10,000 $37,592
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
Years ended December 31, 1996 1 year 5 year 10 years
<S> <C> <C> <C>
Growth Fund 20.19% 12.80% 14.79%
S&P 500(R) Index 22.96% 15.22% 15.29%
Lipper Growth Fund Average 19.22% 13.03% 13.47%
</TABLE>
INVESTMENT SUB-ADVISER:
Miller, Anderson & Sherrerd, LLP
ABOUT THE FUND:
Seeks long-term growth of capital by investing in stocks that are believed to
represent significant underlying value.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
Durable Goods 20.17%
Finance 15.99%
Chemicals and Drugs 9.61%
Consumer Staples 6.40%
Energy 6.82%
Technology 7.29%
Consumer Products 10.09%
Utilities 3.75%
Cash Equivalents 2.67.%
Other 17.21%
The Growth Fund is a portfolio of the Allmerica Investment Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks. S&P 500(R)
Index is a registered trademark of the Standard & Poor's Corporation. The Lipper
Growth Fund Average is a non-weighted index of 677 funds within the growth
investment objective. Performance numbers are net of all fund operating
expenses, but do not include insurance charges. If performance information
included the effect of these additional charges, it would have been lower.
23
<PAGE>
- --------------------------------------------------------------------------------
Equity Index Fund
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
Aims to replicate the returns of the S&P 500(R) Index.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Durable Goods 16.77%
Finance 14.93%
Chemicals and Drugs 12.47%
Consumer Products 10.77%
Energy 9.40%
Technology 8.01%
Utilities 7.90%
Consumer Staples 6.68%
Cash Equivalents & U.S. Treasury Bills 1.69%
Other 11.38%
</TABLE>
The Equity Index Fund is a portfolio of the Allmerica Investment Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks. S&P 500(R)
Index is a registered trademark of the Standard & Poor's Corporation. The Lipper
S&P 500(R) Index Fund Average is a non-weighted index of 60 funds within the S&P
500(R) Index investment objective. Performance numbers are net of all fund
operating expenses, but do not include insurance charges. If performance
information included the effect of these additional charges, it would have been
lower.
For the year ended December 31, 1996, the Equity Index Fund delivered a
22.30% total return. As is its objective, the Fund closely tracked the S&P
500(R) Index return of 22.96%.
Strong company fundamentals and corporate profits propelled the stock
market upward throughout the year. In fact, stocks of companies of all sizes
delivered solid returns, although blue chip stocks outpaced small-capitalization
stocks by more than 10%.
Several reasons account for this tremendous growth. The demand for equities
continued, driven by corporate share repurchase programs and huge cash flows
into equity mutual funds. The buoyant stock market encouraged another swell of
Initial Public Offerings and propelled the U.S. merger and acquisition activity
to another record level.
Little seemed to rattle this year's stock market. Even a 7% plunge during
July, attributed to corporate earnings disappointments and fears of higher
interest rates, was reversed within months. By October, the Dow Jones Industrial
Average had reached the 6000 mark, setting off a string of new records. In
November, it reached 6547, its high for the year.
While the equity market's 1996 returns lagged those of 1995, it still
performed well beyond most analysts' initial forecasts. Overall, demand remained
steady, even though individual stocks and industries went in and out of favor as
investors struggled to predict which way interest rates would move--and
consequently which market segments would benefit from that shift.
Both the S&P 500 and the Dow were led by significant gains in Woolworth,
IBM and Coca-Cola. Intel provided the largest return in the S&P 500 with a 130%
return for the year. Also participating in these gains were the footwear, oil
drilling and securities brokers sectors.
For 1997, double digit returns for equities are still possible but few
investors expect returns similar to those of the last two years. It's also
likely that increased volatility will permeate the market this year as investors
continue to worry about valuation levels and the health of the economy.
Growth of a $10,000 Investment since 1990
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/90 12/96
<S> <C> <C>
Equity Index Fund $10,000 $27,809
S&P 500* Index $10,000 $28,866
Lipper S&P 500* Index Fund Average $10,000 $28,033
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Index Fund 22.30% 14.61% 17.76%
S&P 500(R) Index 22.96% 15.22% 18.46%
Lipper S&P 500(R) Index Fund Average 22.44% 14.77% 18.00%
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
Fidelity VIP* Equity-Income Portfolio
- --------------------------------------------------------------------------------
For 1996, the Fidelity VIP* Equity-Income Portfolio generated a total
return of 14.28%, versus 22.96% for the S&P 500 and 18.88% for the Lipper Equity
Income Fund Average.
The Portfolio emphasized the finance sector throughout the year, which
outperformed the S&P 500 for 1996. Within this sector, the Portfolio's
management concentrated on companies with large, fee-based revenue streams and
companies involved in cost-cutting and restructuring. Holdings ranged from non-
interest sensitive financials such as American Express and insurance companies
like Aetna to money center banks like Chase Manhattan.
The energy sector was another area of emphasis for the Portfolio during
1996. Management held a significant position in British Petroleum throughout the
year and added to its position in Royal Dutch Petroleum as the year progressed.
Because each of these stocks outperformed the S&P 500 for the year, the
Portfolio benefited from an emphasis on this group.
Certain technology issues also aided the Portfolio's performance,
especially IBM. Given the Portfolio's objective, it is not surprising that it
had a limited exposure to the technology sector. But since this area turned out
to be one of the best-performing groups of the year, the limited position
restrained performance.
Three other sector weightings also adversely affected performance. The
Portfolio's media and leisure stocks did not perform as expected, especially
Viacom Class B shares which was one of the Portfolio's larger holdings
throughout much of the year. Retail holdings also underperformed as a group and
the basic industry sector turned in disappointing results.
As of January 1997, the Portfolio will have a new manager. The new manager
is a veteran in the equity-income discipline and has built an excellent track
record. The Portfolio is likely to take on more of a value-oriented approach to
stock selection--looking for stocks that are out of favor and buying them when
the manager believes the stocks are attractively priced. In addition, stocks
offering above-market yields will be an important part of this new criteria of
stock selection.
Growth of a $10,000 Investment since 1986
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/86 12/96
----- -----
<S> <C> <C>
Fidelity VIP* Equity-Income Portfolio $10,000 $36,228
S&P 500(R) Index 10,000 41,492
Lipper Equity Income Fund Average 10,000 31,537
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP* Equity-Income Portfolio 14.28% 17.98% 13.74%
S&P 500(R) Index 22.96% 15.22% 15.29%
Lipper Equity Income Fund Average 18.88% 13.56% 11.63%
</TABLE>
*VIP refers to Variable Insurance Products Fund.
INVESTMENT ADVISER:
Fidelity Management & Research Company
ABOUT THE FUND:
Seeks reasonable income by investing primarily in income-producing equity
securities.
PORTFOLIO COMPOSITION:
As of November 30, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Industrial Machinery & Equipment 4.76%
Finance 18.36%
Health Care 13.89%
Media & Leisure 4.98%
Retail & Wholesale 5.51%
Non-Durables 8.01%
Basic Industries 3.42%
Energy 14.09%
Technology 7.73%
Aerospace or Defense 4.38%
Other 14.87%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks. S&P 500(R)
Index is a registered trademark of the Standard & Poor's Corporation. The Lipper
Equity Income Fund Average is a non-weighted average of 164 funds seeking high
current income and growth of income by investing more than 60% of its portfolio
in equities. Performance numbers are net of all fund operating expenses, but do
not include insurance charges. If performance information included the effect of
these additional charges, it would have been lower.
25
<PAGE>
- --------------------------------------------------------------------------------
Select Growth and Income Fund
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
John A. Levin & Co., Inc.
ABOUT THE FUND:
Seeks a combination of long-term growth of capital and current income by
investing primarily in dividend-paying stocks and convertible securities.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Finance 11.17%
Durable Goods 12.71%
Aerospace-Aircraft 6.20%
Technology 7.33%
Energy 7.31%
Printing and Publishing 6.29%
Chemicals and Drugs 11.33%
Consumer Products 9.64%
Cash Equivalents 4.75%
Other 23.27%
</TABLE>
The Select Growth and Income Fund is a portfolio of the Allmerica Investment
Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks. S&P 500(R)
Index is a registered trademark of the Standard & Poor's Corporation. The Lipper
Growth & Income Fund Average is a non-weighted index of 527 funds within the
growth and income investment objective. Performance numbers are net of all fund
operating expenses, but do not include insurance charges. If performance
information included the effect of these additional charges, it would have been
lower.
For the year ended December 31, 1996, the Select Growth and Income Fund
posted a solid net total return of 21.26%, slightly underperforming its
benchmark, the S&P 500(R) return of 22.96%.
Throughout the year, many of the Fund's holdings benefited from the
increasing global demand for American goods and services. In particular, its
positions in such multinational companies as Tupperware, General Electric,
Eastman Kodak and Avon bolstered overall performance.
Strong earnings from financial services stocks also added to the Fund's
value. A combination of favorable interest rates and ongoing consolidations
buoyed prices in several key holdings, including Chase Manhattan, Citicorp,
American Express and TIG Holdings. While high personal debt adversely affected
consumer spending, as demonstrated by lackluster Christmas sales, the Fund
benefited by avoiding stocks that are highly dependent on consumer sales.
Relative to the S&P 500, the Fund remained underweighted in technology
issues. This position reflects management's cautious view of the sector's
potential in light of its rising stock prices, intensifying competition, and
lengthy growth cycle. While this lack of exposure restrained overall
performance, fourth quarter results were enhanced by the Fund's position in IBM,
whose stock price rose in response to robust mainframe sales, internal
reorganizations, and its share repurchase program.
Also faring well were holdings in several companies such as Aetna, Lockheed
Martin, Allegheny Teledyne and Crown Cork & Seal that are aggressively reducing
expenses following large mergers. The Fund's management has also identified
several companies it believes will benefit from spinning off valuable divisions
or divesting underperforming operations. Such finds include W.R. Grace, Baxter,
Corning and Westinghouse.
Management has built a diversified portfolio of stocks emphasizing special
factors, and avoiding industry and sector overweighting. This portfolio has
strong defensive characteristics which management believes will allow the Fund
to progress in a more challenging environment.
Growth of a $10,000 Investment since 1992
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/92 12/96
---- -----
<S> <C> <C>
Select Growth and Income Fund $10,000 $17,550
S&P 500(R) Index 10,000 20,051
Lipper Growth & Income Fund Average 10,000 18,426
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Growth and Income Fund 21.26% N/A 13.78%
S&P 500(R) Index 22.96% 15.22% 17.39%
Lipper Growth & Income Fund Average 20.77% 13.84% 15.73%
</TABLE>
26
<PAGE>
- --------------------------------------------------------------------------------
Fidelity VIP II* Asset Manager Portfolio
- --------------------------------------------------------------------------------
The Fidelity VIP II* Asset Manager Portfolio delivered a total return of
14.60% for the year ended December 31, 1996, outperforming the Lipper Flexible
Fund Average by one percentage point.
Overweighting the Portfolio in equities proved a sound strategy, as stocks
in general significantly outperformed bonds in 1996. The Portfolio began the
year with an allocation of approximately 57% in equities, 27% in bonds, and 16%
in cash and short-term securities. In comparison, the Portfolio's benchmark or
neutral asset allocation mix was 40% stocks, 40% bonds and 20% cash. In the
second half of the year, management reallocated some of the Portfolio's assets
to bonds and cash when valuations in selected stocks reached record highs and
warranted profit taking.
Domestically, strategic sector and stock selections boosted results -
particularly within the finance and technology sectors. Also energizing
performance were several non-durable stocks, including Philip Morris and health
care stocks, such as Columbia/HCA.
Internationally, results were mixed. Equity positions within emerging
markets helped the Portfolio's performance early in the year, although these
positions were substantially reduced from 1995. Investments in developed
countries, particularly the United Kingdom and Norway, also boosted performance.
But exposure to Japanese markets hurt performance as the economy there continued
to contract.
Several other sectors also limited the Portfolio's returns. The retail
sector hurt performance, as holdings in Wal-Mart and Home Depot suffered from
lower-than- expected sales results. The underweighting of the Portfolio in
energy, a strong-performing sector in 1996, further restrained performance.
The Portfolio's fixed income holdings benefited from the bond market's
rally in the second half of the year, when its mortgage-backed securities
performed particularly well.
Beginning December 1, 1996, the neutral mix of the Portfolio was changed
slightly to 50% stocks, 40% bonds and 10% money market instruments. In the
future, management will continue to adjust the Portfolio's holdings to reduce
volatility.
Growth of a $10,000 Investment since 1989
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
9/89 12/96
---- -----
<S> <C> <C>
Fidelity VIP II* Asset Manager Portfolio $10,000 $22,447
S&P 500(R) Index 10,000 26,931
Lipper Flexible Portfolio Fund Average 10,000 21,334
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP II* Asset Manager Portfolio 14.60% 11.26% 11.69%
S&P 500(R) Index 22.96% 15.22% 13.95%
Lipper Flexible Portfolio Fund Average 13.61% 10.82% 10.65%
</TABLE>
*VIP II refers to Variable Insurance Products Fund II.
INVESTMENT ADVISER:
Fidelity Management & Research Company
ABOUT THE FUND:
Seeks high long-term return with reduced risk by allocating assets among a
broadly diversified mix of stocks, bonds and money market investments.
PORTFOLIO COMPOSITION:
As of November 30, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Finance 10.40%
Consumer Non-Durables 4.68%
Durables 3.16%
Technology 8.46%
Retail & Wholesale 2.79%
Basic Industries 2.48%
Utilities 2.32%
Health Care 2.05%
Energy 1.87%
Industrial Machinery and Equipment 1.02%
Bonds, Cash and other stocks 60.77%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The S&P 500(R) Index is an unmanaged index of 500 leading stocks. S&P 500(R)
Index is a registered trademark of the Standard & Poor's Corporation. The Lipper
Flexible Portfolio Fund Average is a non-weighted index of 190 funds within the
flexible portfolio fund category. Performance numbers are net of all fund
operating expenses, but do not include insurance charges. If performance
information included the effect of these additional charges, it would have been
lower.
27
<PAGE>
Bond &
Money Market
Overview
1992: Government and corporate bonds outperformed the stock market.
1993: U.S. economy gains momentum. Consumer spending and installment debt
increase.
1994: Federal Reserve Board raises interest rates six times in an effort to slow
down the economy and keep inflation in check, sending bond prices sharply lower.
1995: U.S. bond market enjoys its third best performance in 30 years, thanks to
strong total returns from 30-year U.S. Treasuries and corporate issues.
1996: Outlook for Federal Reserve policy affects U.S. bond market. Long-
predicted interest rate cuts, which would have fueled this market, never occur.
After experiencing the euphoria of double-digit returns in 1995, investors
entered 1996 with expectations of strong performance. Poised for positive
results, investors expected a series of short-term interest rate reductions.
Recessionary fears dominated the outlook for the economy and forced the Federal
Reserve to lower interest rates by one-fourth of a percentage point early in the
first quarter.
While most market experts predicted further interest rate reductions, those
cuts never materialized. In fact, economic data showed the economy was growing
at a much faster rate than expected, as evidenced by the February Employment
Report which showed a 705,000 increase in jobs.
From that point on, investors and analysts alike worried which way interest
rates would move, leaving the fixed income market extremely vulnerable to sudden
shifts. Just as one economic indicator would point toward a reviving economy,
another one would show signs of slowing growth.
By the end of June, several signs of moderating growth seemed to calm
investor concerns that the economy was overheated. Prices of most commodities as
well as consumer goods remained subdued. The consumer, hampered by existing high
debt burdens, showed little inclination to go on a spending spree. And the
manufacturing sector, outside of autos, exhibited only modest signs of
improvement.
In the fall, the market settled down as it became apparent President
Clinton would be re-elected and the Republicans would control the House and
Senate.
Consequently, the bond market performed well, especially in October and
November, as yields on the 30-year Treasury bond fell to about 6.3%.
Unfortunately, year-end investor anxiety ultimately limited market gains.
[TIME LINE APPEARS HERE]
Investors worry all year about which way interest rates will move, leaving the
bond market vulnerable to sudden shifts.
[GRAPHIC APPEARS HERE]
Anticipating a recession, Federal Reserve lowers target rate for Federal Funds
by 0.25%
[GRAPHIC APPEARS HERE]
Economic data shows economy growing at a much faster rate than expected, bad
news for bond investors.
[GRAPHIC APPEARS HERE]
High yield bonds prove to be highest performing sector of fixed income market.
28
<PAGE>
Overall, results were varied for different fixed income sectors. The effect
of the market's volatility was reflected in 30-year U.S. Treasury yields, as
their yield fluctuated from a low of 5.95% in January to a July high of 7.2%.
The Lehman Brothers Aggregate Bond Index, an industry benchmark, produced a
total return of 3.61% as of December 31, 1996, which was down from 1995's
spectacular 18.47% results.
Investing in corporate bonds in 1996, on the other hand, proved to be a
particularly sound strategy, as this segment of the bond market was one of the
year's best performers. Strong credit fundamentals, ongoing demand and a
moderate level of supply all contributed to its success. Among the top-returning
corporate sectors were energy, driven by stabilizing oil prices and airlines,
benefiting from the first industry profits since 1979.
Another truly bright spot in the fixed income securities market was high-
yield bonds, which returned approximately 13.5% for the year. Their relatively
strong performance can be attributed to two key factors. First, high-yield bonds
are less sensitive to changes in interest rates than other types of bonds.
Secondly, the strong U.S. economy allayed investors' concerns about credit risk
over the near-term. So even though the supply of new high-yield issues increased
during the second quarter of 1996, heavy demand sustained prices, because
investors sought higher yields.
In addition, mortgage-backed securities performed admirably for the year.
This sector of the fixed income market outperformed comparable Treasuries by
nearly one percentage point.
In the money markets, yields on bank certificates of deposits ended the
year just slightly higher than where they began the year. A one-year certificate
of deposit, for example, yielded approximately 4.95%--almost 1995's year-end
yield. As a result, the total return for Money Market funds closely approximated
their end of the year yield. The average seven-day compound yield on a taxable
money fund hovered around 4.85% for most of the year, while the yield on tax-
free funds fell to 2.98%.
For 1997, fixed income market analysts predict a sluggish global economy,
little inflation and robust employment and consumer confidence levels. These
factors seem to indicate that bond yields should remain fairly steady and total
returns for bond investors are likely to approximate their current yield.
[TIME LINE APPEARS HERE]
Corporate bonds outpace Treasury bonds, driven by improving outlook and strong
demand.
[GRAPHIC APPEARS HERE]
Markets rebound as it becomes apparent President Clinton will win upcoming
election with few changes in the House and Senate.
[GRAPHIC APPEARS HERE]
Market volatility affects U.S. Treasury bonds, as they fluc-tuate from 5.95% to
a July high of 7.2%.
[GRAPHIC APPEARS HERE]
Mortgage-backed securities outperform comparable Treasuries by nearly a
percentage point.
[GRAPHIC APPEARS HERE]
Fears persist that Federal Reserve may again raise rates to tighten money
supply.
29
<PAGE>
- --------------------------------------------------------------------------------
Fidelity VIP* High Income Portfolio
- --------------------------------------------------------------------------------
INVESTMENT ADVISER:
Fidelity Management & Research Company
ABOUT THE FUND:
Seeks high income and growth of capital by investing primarily in high-yielding,
lower-rated, fixed-income securities.
PORTFOLIO COMPOSITION:
As of November 30, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Media 14.1%
Communications 16.7%
Leisure & Lodging 11.0%
Energy/Oil Gas 4.9%
Government Securities 3.6%
Retail Sales/Merchandise 2.9%
Foods 3.2%
Finance/Banking 3.1%
Paper and Related 2.9%
Other 37.6%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Salomon Brothers High-Yield Index tracks the performance of high yield
securities trades in the U.S. Bond Market. The Lipper High Current Yield Fund
Average is a non-weighted average of 148 funds that seek high current yield from
fixed income securities. Performance numbers are net of all fund operating
expenses, but do not include insurance charges. If performance information
included the effect of these additional charges, it would have been lower.
During 1996, the Fidelity VIP* High Income Portfolio returned 14.03%,
outperforming the Lipper High Current Yield Fund Average which delivered 13.67%.
By far, the most positive influence on the Portfolio's performance was its
investment in the direct broadcast satellite company, Panamsat. Because Panamsat
provides an alternative to traditional wire-based cable services and offers
viewers in remote areas the opportunity to receive television programming, it
represented strong revenue and earnings growth. Panamsat bonds were further
boosted late in the year when the company received a takeover offer from GM
Hughes.
Several other holdings performed exceptionally well. Apparel Retailers Inc.
and energy companies, Flores & Rucks and Harcor Energy, enhanced portfolio
results as they successfully completed equity offerings and used the proceeds to
retire outstanding debt. The Portfolio's Time Warner holdings also appreciated
after the FCC approved its merger with Turner Broadcasting. On the other hand,
the Portfolio's cash position held back performance as the high yield market
continued to rally, fueled by strong inflows from mutual and pension funds. The
Portfolio's wireless cable company holdings also declined in value, primarily
because transitioning to newer digital technology is taking longer than
expected. Investors were also disappointed that the alliances between regional
bell companies and the cable companies failed to materialize. Credit
deterioration in holdings of Marvel Entertainment and Grand Casinos also hurt
results.
Overall, the high yield sector produced impressive returns this year. Given
the strong rally in the high yield bond market, the manager has positioned the
portfolio defensively for 1997. Over 11% of the Portfolio's assets are currently
in cash and nearly 4% are invested in government/ agency bonds. The Portfolio's
management plans to remain focused on shorter maturity securities, concentrating
on companies with improving balance sheets. It will also continue to look for
opportunities in telecommunication and cable companies as well as hotel and
gaming.
Growth of a $10,000 Investment since 1986
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/86 12/96
----- -----
<S> <C> <C>
Fidelity VIP* High Income Portfolio $10,000 $28,610
Salomon Brothers High-Yield Index 10,000 29,130
Lipper High Current Yield Fund Average 10,000 25,072
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP* High Income Portfolio 14.03% 14.96% 11.12%
Salomon Brothers High-Yield Index 11.29% 12.72% 11.24%
Lipper High Current Yield Fund Average 13.67% 12.10% 9.38%
</TABLE>
*VIP refers to Variable Insurance Products Fund.
30
<PAGE>
- --------------------------------------------------------------------------------
Select Income Fund
- --------------------------------------------------------------------------------
The Select Income Fund wrapped up 1996 with a total return of 3.32%,
slightly underperforming its benchmark, the Lehman Brothers Aggregate Bond Index
return of 3.61%.
A surprisingly strong economy, rising interest rates and inflationary fears
all combined to depress this year's bond market as a whole. In this environment,
the Select Income Fund benefited from identifying attractive sectors and
selecting solid-performing issues--particularly in the areas of mortgage-backed
securities and corporate bonds.
Slightly reducing this advantage was the Fund's management of bond
durations. As is characteristic, the Fund's holdings remained concentrated in 3-
12 year maturities--slightly longer than its benchmark's position. While longer
duration bonds tend to fare better in declining interest rate markets, this
position detracted somewhat from overall results as interest rates unexpectedly
rose.
The Fund's management was particularly well rewarded in 1996 for assuming
some additional credit risk. While investing only in investment-grade issues,
they took advantage of the higher rates earned on lower rated issues within the
category. Value came mainly from the industrial and finance sectors--the prime
beneficiaries of the current economic recovery.
In the area of mortgage-backed securities, holdings were concentrated in
current coupon GNMA and FNMA securities, both of which enhanced the Fund's
returns throughout the year. In selecting specific issues of mortgage-backed
securities and corporate bonds, the Fund's management sought the most attractive
total return candidates, and successfully avoided any downgrades and defaults.
Looking ahead, Standish, Ayer & Wood anticipates sustainable, non-
inflationary levels of growth. Predicting that the Federal Reserve Board will
not rush to adjust rates in either direction, they expect the bond market to
trade in a relatively narrow range over the coming year. As a result, the Fund's
management believes the most attractive returns will come from the corporate and
mortgage categories. Thus it plans to seek attractive yield spreads primarily
from non-Treasury purchases, especially in the cyclical sectors.
Growth of a $10,000 Investment since 1992
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/92 12/96
---- -----
<S> <C> <C>
Select Income Fund $10,000 $13,294
Lehman Brothers Aggregate Bond Index 10,000 13,270
Lipper Intermediate Investment Grade
Fund Average 10,000 12,703
</TABLE>
Average Annual Total Returns
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Income Fund 3.32% N/A 5.91%
Lehman Brothers Aggregate Bond Index 3.61% 7.03% 6.75%
Lipper Intermediate Investment Grade
Fund Average 3.12% 6.51% 5.98%
</TABLE>
INVESTMENT SUB-ADVISER:
Standish, Ayer & Wood, Inc.
ABOUT THE FUND:
The Fund seeks above-average income from corporate bonds, mortgages and bonds
issued by the U.S. Government.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
U.S. Government and Agency Obligations 46.09%
Corporate Notes & Bonds 41.04%
Asset-Backed Securities 8.11%
Cash Equivalents and Other 4.76%
</TABLE>
The Select Income Fund is a portfolio of the Allmerica Investment Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Lehman Brothers Aggregate Bond Index is an unmanaged index of average yield
U.S. investment grade bonds. Lipper Intermediate Investment Grade Fund Average
tracks the performance of 139 funds investing in intermediate-term corporate and
government debt securities. Performance numbers are net of all fund operating
expenses, but do not include insurance charges. If performance information
included the effect of these additional charges, it would have been lower.
31
<PAGE>
- --------------------------------------------------------------------------------
Investment Grade Income Fund
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
The Fund's objective is to generate a high level of total return, as is
consistent with prudent investment management.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
U.S. Government & Agency Obligations 44.59%
Corporate Notes & Bonds 34.93%
Asset-Backed Securities 16.40%
Cash Equivalents & Other 4.08%
The Investment Grade Income Fund is a portfolio of the Allmerica Investment
Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Lehman Brothers Aggregate Bond Index is an unmanaged index of average yield
U.S. investment grade bonds. The Lipper Intermediate Investment Grade Fund
Average is a non-weighted Index of 139 funds investing in intermediate-term
corporate and government securities. Performance numbers are net of all fund
operating expenses, but do not include insurance charges. If performance
information included the effect of these additional charges, it would have been
lower.
Reflecting the general mood of the 1996 bond market, the Investment Grade
Income Fund turned in a 3.56% total return, essentially matching its benchmark,
the Lehman Brothers Aggregate Bond Index.
The Fund's total return was negatively impacted by its sensitivity to
interest rate risk, as was the entire bond market. However, the Fund's
management was able to stymie further losses by continuing to emphasize certain
niches of the fixed income market. Specifically, management favored corporate,
mortgage-backed and asset-backed securities, increasing total exposure in these
sectors from 64% to 80% throughout the year.
The decision to overweight the Fund in corporate issues proved to be a
particularly sound strategy, as this segment of the bond market was one of
1996's few stellar performers. Among the top-returning corporate sectors were
Energy, driven by stabilizing oil prices, and Airlines, benefiting from the
first industry profits since 1979. The Fund was heavily invested in both of
these sectors.
The Fund moved from an underweighted to an overweighted position in
mortgage-backed securities in the first half of the year. This sector of the
market outperformed comparable Treasury securities by nearly one percentage
point and careful selection of seasoned discount passthrough securities allowed
the Fund to capture some of these incremental returns. The Fund also added to
its holdings in asset-backed issues, which served as higher yielding, triple
A-rated alternatives to shorter maturity corporate bonds.
In the fourth quarter, the Fund added a new type of corporate fixed income
security to its holdings - the bank trust preferred. These securities combine
the tax treatment of debt securities with the accounting treatment of equities.
While believing most of these new issues to be fully valued, the management did
purchase one bank trust preferred from Zions Bancorp.
As the Investment Grade Income Fund moves into 1997, the Fund's managers
will continue to seek opportunities for high total return while minimizing risk.
Growth of a $10,000 Investment Since 1986
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/86 12/96
------ ------
<S> <C> <C>
Investment Grade Income Fund $10,000 $22,227
Lehman Brothers Aggregate Bond Index $10,000 $22,547
Lipper Intermediate Investment Grade Fund Average $10,000 $20,680
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Grade Income Fund 3.56% 7.29% 8.31%
Lehman Brothers Aggregate Bond Index 3.61% 7.03% 8.47%
Lipper Intermediate Investment Grade
Fund Average 3.12% 6.51% 7.67%
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
Although 1996 was a challenging year for the bond market, the Government Bond
Fund's 3.51% total return essentially matched its peer group, the Lipper
Short-Intermediate U.S. Government Fund average, which returned 3.52%. The
Fund's gross return of 4.17% beat the Lehman Brothers Intermediate Government
Bond Index return of 4.06%.
In a year when interest rates continually rose and fell, the Fund was much
less volatile than the market itself - thanks to its focus on the three- to
six-month horizon rather than day-to-day market moves.
Also accounting for the Fund's relatively strong performance was its
successful allocation to three key segments: mortgage-backed securities,
asset-backed securities and agency obligations. In each of these segments,
careful selection of individual bonds helped offset losses caused by strong
volatility in interest rates.
In the area of mortgage-backed securities, the portfolio consisted of high
coupon, seasoned securities which were less sensitive to prepayment activity
than the overall market. In addition, the Fund owned 15-year mortgage-backed
securities, which were also less prepayment sensitive due to their faster
amortization. Management increased the Fund's exposure to these issues
throughout the year. In fact, by year end, mortgage-backed securities had
climbed from 16% to 26% of the Fund's total holdings.
While the Fund's allocation in asset-backed securities remained unchanged,
an auto loan issue was replaced with a manufactured housing issue. And in the
area of government obligations, management sold off its Small Business
Association issues during the year, as performance had largely met expectations
and their valuations likely had little or no room for improvement.
The Fund's management will continue to seek opportunities in the same
targeted areas of the fixed income market, as the relatively stable interest
rate outlook should bode well for these particular debt securities in 1997.
INVESTMENT SUB-ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
The Fund's objective is to generate high income for investors while seeking to
preserve capital and maintain liquidity.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
U.S. Government & Agency Obligations 89.76%
Asset-Backed Securities 8.08%
Cash Equivalents and Other 2.16%
The Government Bond Fund is a portfolio of the Allmerica Investment Trust.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The Lehman Brothers Intermediate Government Bond Index is an unmanaged index of
average yield U.S. Intermediate fixed-income bonds. The Lipper
Short-Intermediate U.S. Government Fund Average is a non-weighted index of 97
funds investing in short- to intermediate government securities. Performance
numbers are net of all fund operating expenses, but do not include insurance
charges. If performance information included the effect of these additional
charges, it would have been lower.
Growth of a $10,000 Investment Since 1991
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
08/91 12/96
------- -------
<S> <C> <C>
Government Bond Fund $10,000 $14,259
Lehman Brothers Intermediate Government Bond Index $10,000 $14,497
Lipper Short-Intermediate U.S. Government Fund average $10,000 $13,334
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Bond Fund 3.51% 5.86% 6.91%
Lehman Brothers Intermediate
Government Bond Index 4.06% 6.23% 7.11%
Lipper Short-Intermediate
U.S. Government Fund Average 3.52% 5.42% 6.27%
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
Strives to maximize current income for investors with preservation of capital
and liquidity.
PORTFOLIO COMPOSITION:
As of December 31, 1996, the sector allocation of net assets was:
[PIE CHART APPEARS HERE]
Commercial Paper 62.50%
U.S. Government and Agency Obligations 16.33%
Corporate Notes and Bonds 13.41%
Other Short-Term Investments 5.52%
Other 2.24%
The Money Market Fund is a portfolio of the Allmerica Investment Trust.
The Fund is neither insured nor guaranteed by the U.S. government. There can be
no assurance that the Fund will be able to maintain its net asset value of $1.00
per share.
Past performance is no guarantee of future results. Investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
IBC/Donoghue is an independent firm that tracks 2a-7 regulated money market
funds on a yield, shareholder, asset size and portfolio allocation basis. The
Lipper Money Market Fund Average is an unmanaged index of 290 funds within the
Money Market category.
While short-term interest rates and yields were both lackluster for the year,
the Money Market Fund delivered an impressive 5.36% return in 1996,
outperforming its benchmark, the IBC/Donoghue First Tier Money Market Index.
Throughout the year, investors and analysts alike worried which way
interest rates would move, leaving the fixed income market extremely vulnerable
to sudden shifts. Just as one economic indicator would point toward a reviving
economy, another one would show signs of slowing growth. The effect of all this
activity on the 30-year U.S. Treasury bond was evident, as its yield fluctuated
from a low of 5.95% on January 1 to its July high of 7.19%.
Despite these fluctuations, short-term interest rates remained relatively
stable and the Money Market Fund was able to deliver a surprisingly strong
performance relative to its benchmark. Not only was it able to preserve capital
and maintain liquidity, it generated attractive current income--largely because
it maintained a modestly longer average weighted maturity than the benchmark. As
a result, the Fund was rated one of the top-performing First Tier Taxable Funds
in IBC/Donoghue's Money Fund Report.
Against the backdrop of continually fluctuating economic growth, the Fund's
management focused on securities which tend to appreciate quickly during a
rising interest rate environment. Over the year, its holdings remained
concentrated in top-tier commercial paper and government agency discount notes.
Going forward, the Fund's management expects that inflation will remain in
check, under the watchful eye of the Federal Reserve and deterred by the ongoing
sluggishness of worldwide economies. Therefore, management plans to maintain a
longer average weighted maturity than its index, believing that this strategy
will help maximize income while minimizing risk.
Growth of a $10,000 Investment Since 1986
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/86 12/96
<S> <C> <C>
Money Market Fund $10,000 $18,475
IBC/Donoghue First Tier Money Market Index $10,000 $17,147
Lipper Money Market Fund Average $10,000 $17,113
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 5.36% 4.38% 5.87%
IBC/Donoghue First Tier Money Market Index 4.88% 3.99% 5.54%
Lipper Money Market Fund Average 4.80% 3.96% 5.52%
</TABLE>
34
<PAGE>
------------------
Financials
------------------
[ARTWORK APPEARS HERE]
<PAGE>
This page intentionally left blank.
<PAGE>
- --------------------------------------------------------------------------------
Select Aggressive Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
COMMON STOCKS - 98.16%
<S> <C> <C>
Durable Goods - 22.39%
97,100 Apogee Enterprises, Inc. $ 3,859,725
23,200 Aspect Telecommunications Corp.* 1,473,200
104,300 Black Box Corp.* 4,302,375
122,400 BMC Software, Inc.* 5,064,300
121,800 Chrysler Corp. 4,019,400
99,100 CIBER, Inc.* 2,973,000
208,900 CompUSA, Inc.* 4,308,563
93,300 Compuware Corp.* 4,676,663
103,100 Comverse Technology, Inc.* 3,898,469
94,600 Dell Computer Corp.* 5,025,625
147,200 DSP Communications, Inc.* 2,852,000
88,200 Dynatech Corp.* 3,902,850
128,500 ENCAD, Inc.* 5,300,625
111,700 Fleetwood Enterprises, Inc. 3,071,750
92,800 Jabil Circuit, Inc.* 3,712,000
182,700 JLG Industries, Inc. 2,923,200
83,800 PeopleSoft, Inc.* 4,017,163
193,400 Rowan Cos., Inc.* 4,375,675
11,000 SPX Corp. 426,250
93,300 Storage Technology Corp.* 4,443,413
98,600 Tellabs, Inc.* 3,709,825
191,500 Varco International, Inc.* 4,428,438
99,400 Wind River Systems, Inc.* 4,709,075
103,700 Zoltek Cos., Inc.* 3,772,088
-------------
91,245,672
-------------
Technology - 12.38%
61,400 Aspen Technologies, Inc.* 4,927,350
76,400 Cisco Systems, Inc.* 4,860,950
54,600 Compaq Computer Corp.* 4,054,050
94,950 Computer Associates International, Inc. 4,723,763
66,500 Gartner Group, Inc., Class A* 2,589,344
81,600 Gateway 2000, Inc.* 4,370,700
31,700 Henry (Jack) & Associates, Inc. 1,133,275
85,312 McAfee Associates, Inc.* 3,753,728
71,700 Neurogen Corp.* 1,380,225
83,800 Ortel Corp.* 2,011,200
126,200 PairGain Technologies, Inc.* 3,841,213
81,100 Parametric Technology Corp.* 4,166,513
104,600 Sun Microsystems, Inc.* 2,686,913
119,600 Veritas Software Corp.* 5,950,100
-------------
50,449,324
-------------
Finance - 10.46%
106,500 Aames Financial Corp. 3,820,688
87,305 Bear Stearns Cos., Inc. 2,433,627
143,400 Countrywide Credit Industries, Inc. 4,104,825
92,800 Green Tree Financial Corp. 3,584,400
99,900 Greenpoint Financial Corp. 4,720,275
42,700 HCC Insurance Holdings, Inc. 1,024,800
154,600 Imperial Credit Industries, Inc.* 3,246,600
102,700 MBNA Corp. 4,262,050
39,300 Money Store, Inc. 1,085,663
22,000 Morgan Stanley Group, Inc. 1,256,750
80,700 Providian Corp. 4,145,963
72,400 Standard Federal Bancorp. 4,117,750
7,800 TCF Financial Corp. 339,300
99,066 Travelers Group, Inc. 4,495,120
-------------
42,637,811
-------------
Energy - 9.64%
96,450 Chesapeake Energy Corp.* 5,365,031
156,800 Global Industries, Ltd.* 2,920,400
238,200 Global Marine, Inc.* 4,912,875
244,700 Marine Drilling Cos., Inc.* 4,817,531
224,100 Noble Drilling Corp.* 4,453,988
74,000 Nuevo Energy Co.* 3,848,000
87,800 Parker & Parsley Petroleum Co. 3,226,650
196,000 Reading & Bates Corp.* 5,194,000
88,000 United Meridian Corp.* 4,554,000
-------------
39,292,475
-------------
Consumer Products - 8.94%
105,500 Ascend Communications, Inc.* 6,554,188
97,800 Blyth Industries, Inc.* 4,462,125
131,900 Harland (John H.) Co. 4,352,700
118,900 Jones Apparel Group, Inc.* 4,443,888
94,600 Liz Claiborne, Inc. 3,653,925
74,600 Meredith Corp. 3,935,150
87,500 Safeskin Corp.* 4,265,625
100,200 TJX Cos., Inc. 4,746,975
-------------
36,414,576
-------------
Electronics - 8.68%
184,900 Ancor Communications, Inc.* 2,588,600
69,400 Cascade Communications Corp.* 3,825,675
197,500 Digital Microwave Corp.* 5,505,313
10,500 Dionex Corp.* 367,500
52,200 Electronics for Imaging, Inc.* 4,293,450
160,000 GenRad, Inc.* 3,720,000
35,900 Intel Corp. 4,700,656
167,900 PMT Services, Inc.* 2,938,250
130,400 Western Digital Corp.* 7,416,500
-------------
35,355,944
-------------
Retail - 6.20%
28,800 Bed Bath & Beyond, Inc.* 698,400
247,500 Claire's Stores, Inc. 3,217,500
69,900 Gap, Inc. 2,105,738
102,300 Proffitts, Inc.* 3,772,313
131,000 Ross Stores, Inc. 6,550,000
89,500 Vons Cos., Inc.* 5,358,813
162,500 Woolworth Corp.* 3,554,688
-------------
25,257,452
-------------
Chemicals and Drugs - 5.53%
93,200 Dura Pharmaceuticals, Inc.* 4,450,300
117,450 Jones Medical Industries, Inc. 4,301,606
152,400 Medeva Plc, ADR 2,571,750
92,600 Medicis Pharmaceutical Corp., Class A* 4,074,400
165,000 Premark International, Inc. 3,671,250
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------
F-1
<PAGE>
- --------------------------------------------------------------------------------
Select Aggressive Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
Chemicals and Drugs (continued)
52,200 Quintiles Transnational Corp.* $ 3,458,250
-------------
22,527,556
-------------
Health Services - 4.60%
83,800 Guidant Corp. 4,776,600
74,400 HBO & Co. 4,417,500
33,500 Health Management Associates, Inc., Class A* 753,750
78,000 Medic Computer Systems, Inc.* 3,144,375
96,600 Oxford Health Plans, Inc.* 5,657,138
-------------
18,749,363
-------------
Recreational Equipment - 1.46%
57,300 Anchor Gaming* 2,306,325
63,000 Fila Holding Spa, ADR 3,661,875
-------------
5,968,200
-------------
Building and Construction - 1.44%
47,400 Loews Corp. 4,467,450
59,100 Shaw Group, Inc.* 1,381,463
-------------
5,848,913
-------------
Consumer Staples - 1.15%
72,300 Interstate Bakeries Corp. 3,551,725
10,000 Philip Morris Cos., Inc. 1,126,250
-------------
4,677,975
-------------
Metals and Mining - 1.05%
24,200 Mueller Industries, Inc.* 931,700
103,300 Oregon Metallurgical Corp.* 3,331,425
-------------
4,263,125
-------------
Pollution Control - 0.99%
127,400 U.S. Filter Corp.* 4,044,950
-------------
Business Services - 0.96%
65,500 HFS, Inc.* 3,913,625
-------------
Paper and Forest - 0.95%
139,500 Fort Howard Corp.* 3,862,406
-------------
Hotels-Leisure - 0.90%
140,300 Hilton Hotels Corp. 3,665,338
-------------
Broadcasting - 0.29%
36,300 Emmis Broadcasting Corp., Class A* 1,188,825
-------------
Consumer Service - 0.15%
17,400 Robert Half International, Inc.* 598,125
-------------
Total Common Stocks 399,961,655
(Cost $321,795,369) -------------
Par Value
- ---------
COMMERCIAL PAPER (A) - 2.92%
$11,910,000 Merrill Lynch & Co., Inc.
6.50% 01/02/97 11,907,850
-------------
Total Commercial Paper 11,907,850
-------------
(Cost $11,907,850)
Shares
------
INVESTMENT COMPANIES - 0.03%
3,707 ILA Prime Obligation Money Market Fund 3,707
90,491 ILA Prime Obligation Portfolio Fund, Class B 90,491
-------------
Total Investment Companies 94,198
(Cost $94,198) -------------
Total Investments - 101.11% 411,963,703
(Cost $333,797,417) -------------
Net Other Assets and Liabilities - (1.11)% (4,521,670)
-------------
Net Assets - 100.00% $ 407,442,033
=============
</TABLE>
- ------------
* Non income producing security.
(A) Effective yield at time of purchase.
ADR American Depositary Receipt
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $333,797,417. Net unrealized appreciation (depreciation) aggregated
$78,166,286, of which $88,115,042 related to appreciated investment securities
and $(9,948,756) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31,1996
were $27,969,046. (Unaudited)
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $462,960,615
and $366,911,676 from non-governmental issuers, respectively.
See Notes to Financial Statements.
-------------------------------------------------------
F-2
<PAGE>
- --------------------------------------------------------------------------------
Select Capital Appreciation Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS. December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
COMMON STOCKS - 79.50%
<C> <S> <C>
Retail - 20.95%
104,100 Family Golf Centers, Inc.* $ 3,136,012
218,250 Fastenal Co. 9,984,937
154,425 Global Directmail Corp.* 6,736,790
27,975 MSC Industrial Direct Co., Class A* 1,035,075
31,825 O'Reilly Automotive, Inc.* 1,018,400
153,550 Petco Animal Supplies, Inc.* 3,186,163
159,775 Pet Food Warehouse, Inc.* 669,058
154,700 Viking Office Products, Inc.* 4,128,556
-------------
29,894,991
-------------
Business Services - 12.17%
114,025 HFS, Inc.* 6,812,994
429,175 Paging Network, Inc.* 6,544,919
24,600 Paychex Inc. 1,265,362
44,925 Profit Recovery Group International, Inc.* 718,800
77,700 Teletech Holdings, Inc.* 2,020,200
-------------
17,362,275
-------------
Finance - 8.95%
35,800 Associates First Capital Corp., Class A 1,579,675
250 First Empire State 72,000
10,600 Fifth Third Bancorp 665,812
35,500 First USA Payment, Inc.* 1,202,562
240,575 Insignia Financial Group, Inc., Class A* 5,412,937
4,500 Medallion Financial Corp. 68,625
53,525 Protective Life Corp. 2,134,309
50,925 Schwab (Charles) Corp. 1,629,600
-------------
12,765,520
-------------
Communications - 5.95%
63,750 CommNet Cellular, Inc.* 1,777,031
47,450 Millicom International Cellular SA* 1,524,331
118,525 Omnipoint Corp.* 2,281,606
152,357 PriCellular Corp., Class A* 1,752,106
31,075 Univision Communications, Inc., Class A* 1,149,775
-------------
8,484,849
-------------
Consumer Services - 5.89%
8,975 Apollo Group, Inc., Class A* 300,101
189,375 Coinmach Laundry Corp.* 3,408,750
152,075 CUC International, Inc.* 3,611,781
31,600 Robert Half International* 1,086,250
-------------
8,406,882
-------------
Food Services - 4.64%
45,400 JP Foodservice, Inc.* 1,265,525
138,818 Papa John's International, Inc.* 4,685,108
33,975 Planet Hollywood, Inc., Class A* 671,006
-------------
6,621,639
-------------
Health Services - 4.43%
23,825 Boston Scientific Corp.* 1,429,500
38,250 Fresenius Medical Care, ADR* 1,075,781
82,100 Karrington Health, Inc.* 1,026,250
42,675 Omnicare Inc. 1,370,934
28,350 Teva Pharmaceutical 1,424,588
-------------
6,327,053
-------------
Building and Construction - 3.82%
35,550 Barnett, Inc.* 968,738
41,025 Dayton Superior Corp., Class A* 538,453
19,800 Littelfuse, Inc.* 960,300
5,025 Littelfuse, Inc., (Warrants), exp. 12/27/01* 198,488
66,950 Sealed Air Corp.* 2,786,794
-------------
5,452,773
-------------
Transportation - 3.67%
132,025 Wisconsin Central Transport Corp.* 5,231,491
-------------
Chemical and Drugs - 3.29%
79,825 Culligan Water Technologies, Inc.* 3,232,913
45,125 Depotech Corp.* 738,922
22,200 Forest Laboratories, Inc.* 727,050
-------------
4,698,885
-------------
Hotels -1.99%
83,825 Choice Hotels International* 1,477,416
30,400 Doubletree Corp.* 1,368,000
-------------
2,845,416
-------------
Computers - 1.49%
36,300 Concord EFS, Inc.* 1,025,475
34,275 Safeguard Scientific, Inc.* 1,088,231
1,513 Sanchez Computer Associates, Inc.* 11,915
-------------
2,125,621
-------------
Energy - 0.92%
45,725 Trigen Energy Corp. 1,314,594
-------------
Utilities - 0.52%
11,950 Cincinnati Bell, Inc. 736,419
-------------
Automotive Parts - 0.49%
44,925 APS Holding Corp.* 696,338
-------------
Minerals and Mining - 0.33%
11,325 Minerals Technologies, Inc. 464,325
-------------
Total Common Stocks 113,429,071
(Cost $107,425,973) -------------
</TABLE>
See Notes to Financial Statements.
- ------------------------------------------------------
F-3
<PAGE>
- --------------------------------------------------------------------------------
Select Capital Appreciation Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
FOREIGN COMMON STOCKS - 13.51%
<C> <S> <C>
United Kingdom - 12.83%
556,706 Pizzaexpress, Plc $ 5,025,446
103,617 Pizzaexpress, Restricted Shares* 935,362
713,614 Rentokil Group, Plc 5,361,102
349,088 Wetherspoon (J.D.), Plc 6,989,514
-------------
18,311,424
-------------
France - 0.68%
5,954 Grand Optical 963,179
-------------
Total Foreign Common Stocks 19,274,603
(Cost $14,008,276) -------------
Par Value
- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 8.73%
Federal Home Loan Mortgage Corporation - 8.38%
$ 5,000,000 5.42%, 01/22/97 $ 4,984,192
5,000,000 5.18%, 01/24/97 4,983,453
2,000,000 5.24%, 02/06/97 1,989,520
-------------
11,957,165
-------------
U.S. Treasury Bill - 0.35%
500,000 5.19%, 01/09/97 499,423
-------------
Total U.S. Government and
Agency Obligations 12,456,588
(Cost $12,456,588) -------------
COMMERCIAL PAPER (A) - 6.03%
3,600,000 American Express Credit Corp.
6.55%, 01/02/97 3,599,345
5,000,000 General Electric Capital Corp.
5.90%, 01/02/97 4,999,181
-------------
Total Commercial Paper 8,598,526
-------------
(Cost $8,598,526)
Total Investments - 107.77% 153,758,788
-------------
(Cost $142,489,363)
Net Other Assets and Liabilities - (7.77)% (11,078,548)
-------------
Net Assets - 100.00% $ 142,680,240
=============
</TABLE>
- ------------
* Non income producing security.
ADR American Depositary Receipt
(A) Effective yield at time of purchase.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY CONTRACTS SOLD:
Unrealized
Currency Contracts To Settlement Contracts At In Exchange Appreciation
Value Deliver Dates Value For U.S. $ (Depreciation)
- --------- ------------ ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
850,000 GBP 01/16/97 $1,452,556 $1,326,000 $ (126,556)
1,000,000 GBP 01/24/97 1,708,890 1,550,300 (158,590)
1,050,000 GBP 05/27/97 1,794,334 1,763,790 (30,544)
5,000 GBP 06/04/97 8,545 8,352 (193)
----------- ---------- -------------
$4,964,325 $4,648,442 $ (315,883)
=========== ========== =============
</TABLE>
- -----------------------------
GBP British Pound
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $142,573,388. Net unrealized appreciation (depreciation) aggregated
$11,185,400, of which $18,060,303 related to appreciated investment securities
and $(6,874,903) related to depreciated investment securities.
As of December 31, 1996, the portfolio had capital loss carryforwards of
$2,360,458 which expires in 2004.
For the year ended December 31, 1996, the Portfolio has elected to defer
$295,407 of capital losses and $248,534 in currency losses attributable to Post-
October Losses.
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $173,016,119
and $82,286,672 from non-governmental issuers, respectively.
See Notes to Financial Statements.
-------------------------------------------------------
F-4
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Value Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
COMMON STOCKS - 90.04%
<C> <S> <C>
Durable Goods - 24.55%
41,500 Apogee Enterprises, Inc. $ 1,649,625
50,820 Baldor Electric Co. 1,251,443
86,000 BW/IP, Inc. 1,419,000
43,500 Carlisle Cos., Inc. 2,631,750
61,000 First Brands Corp. 1,730,875
42,500 Fluke Corp. 1,896,563
100,550 Hanna (M.A.) Co. 2,199,531
84,500 Huffy Corp. 1,214,688
173,000 Intermet Corp. 2,789,625
63,500 Juno Lighting, Inc. 1,016,000
64,000 Miller (Herman), Inc. 3,624,000
27,000 National Presto Industries, Inc. 1,009,125
89,600 Octel Communications Corp. * 1,568,000
14,300 SPX Corp. 554,125
68,100 Standard Products Co. 1,736,550
30,000 Tennant Co. 825,000
18,400 Toro Co. 671,600
10,300 Walbro Corp. 187,975
-------------
27,975,475
-------------
Consumer Products - 16.54%
186,000 Cash America International, Inc. 1,581,000
52,000 Central Newspapers, Inc., Class A 2,288,000
99,700 DiMon, Inc. 2,305,563
74,000 Duty Free International, Inc. 1,073,000
66,900 Fingerhut Cos., Inc. 819,525
33,000 King World Productions, Inc. * 1,216,875
32,500 La-Z-Boy, Inc. 958,750
67,000 Lee Enterprises, Inc. 1,557,750
148,600 MagneTek, Inc. 1,913,225
50,946 Mosinee Paper Corp. 1,808,583
48,500 Paragon Trade Brands, Inc. * 1,455,000
88,000 Scitex Corp., Ltd. 836,000
103,200 Stride Rite Corp. 1,032,000
-------------
18,845,271
-------------
Energy - 8.43%
31,000 Cabot Oil & Gas Corp., Class A 530,875
89,500 Calenergy, Inc. * 3,009,438
59,400 Devon Energy Corp. 2,064,150
159,000 Nabors Industries, Inc. * 3,060,750
67,000 Quaker State Corp. 946,375
-------------
9,611,588
-------------
Finance - 7.71%
59,400 Commerce Bancorp, Inc. 1,960,200
43,164 First Commercial Corp. 1,602,464
50,000 Gallagher (Arthur J.) & Co. 1,550,000
95,000 Glendale Federal Bank * 2,208,750
12,400 NYMAGIC, Inc. 223,200
50,000 Primark Corp. * 1,237,500
-------------
8,782,114
-------------
Retail - 7.44%
256,500 Charming Shoppes, Inc. * 1,298,531
68,125 Consolidated Stores Corp. * 2,188,516
34,000 Hannaford Brothers Co. 1,156,000
77,050 Rykoff-Sexton, Inc. 1,223,169
100,500 Waban, Inc. * 2,613,000
-------------
8,479,216
-------------
Metals and Mining - 3.94%
55,300 Brush Wellman, Inc. 905,538
89,000 Global Industrial Technologies, Inc. * 1,969,125
68,000 Trimas Corp. 1,623,500
-------------
4,498,163
-------------
Building and Construction - 3.78%
94,000 Calmat Co. 1,762,500
82,000 Southdown, Inc. 2,552,250
-------------
4,314,750
-------------
Chemicals and Drugs - 2.92%
46,000 Alberto-Culver Co., Class A 1,897,500
58,300 Brady (W.H.) Co., Class A 1,435,638
-------------
3,333,138
-------------
Business Services - 2.92%
71,600 New England Business Service, Inc. 1,539,400
81,800 True North Communications, Inc. 1,789,375
-------------
3,328,775
-------------
Technology - 2.59%
121,600 Gerber Scientific, Inc. 1,808,800
100,300 Viewlogic Systems, Inc. * 1,140,913
-------------
2,949,713
-------------
Transportation Services - 2.26%
54,800 Harper Group, Inc. 1,301,500
77,300 Sea Containers, Ltd., Class A 1,207,813
4,100 Sea Containers, Ltd., Class B 64,063
-------------
2,573,376
-------------
Transportation - 1.85%
56,100 Trinity Industries, Inc. 2,103,750
-------------
Consumer Staples - 1.81%
31,500 Stanhome, Inc. 834,750
72,900 U.S. Can Corp. * 1,230,182
-------------
2,064,932
-------------
Recreational Equipment - 1.68%
99,000 Sturm Ruger & Co., Inc. 1,918,125
-------------
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------
F-5
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Value Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
Basic Materials - 0.90%
98,000 Sealright Co., Inc. $ 1,029,000
-------------
Communications - 0.72%
55,000 California Microwave, Inc. * 818,125
-------------
Total Common Stocks 102,625,511
(Cost $82,354,481) -------------
INVESTMENT COMPANIES - 9.32%
5,240,681 ILA Prime Obligation Money Market Fund 5,240,681
5,377,972 ILA Prime Obligation Portfolio Fund, Class B 5,377,972
-------------
Total Investment Companies 10,618,653
(Cost $10,618,653) -------------
Total Investments - 99.36% 113,244,164
(Cost $92,973,134) -------------
Net Other Assets and Liabilities - 0.64% 724,413
-------------
Net Assets - 100.00% $ 113,968,577
=============
</TABLE>
- ------------
* Non income producing security.
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $92,973,134. Net realized appreciation (depreciation) aggregated
$20,271,030 of which $23,725,397 related to appreciated investment securities
and $(3,454,367) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31,1996
were $4,329,295. (Unaudited)
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $39,591,866
and $16,311,924 from non-governmental issuers, respectively.
See Notes to Financial Statements.
----------------------------------------------------------
F-6
<PAGE>
- --------------------------------------------------------------------------------
Select International Equity Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 93.05%
Australia - 7.23%
270,340 Broken Hill Proprietary Co., Ltd. $ 3,847,762
656,720 National Australia Bank, Ltd. 7,719,723
711,270 News Corp Ltd. 3,751,132
402,900 WMC Ltd. 2,537,641
---------------
17,856,258
---------------
Finland - 0.71%
83,300 UPM-Kymmene* 1,744,073
---------------
France - 1.35%
31,000 Michelin, Class B 1,670,233
18,330 Elf Aquitaine 1,665,262
---------------
3,335,495
---------------
Germany - 5.58%
95,970 Hoechst AG 4,440,089
10,395 Mannesmann AG 4,466,633
44,060 Siemens AG 2,041,884
49,100 Veba AG 2,819,625
---------------
13,768,231
---------------
Hong Kong - 1.15%
132,600 HSBC Holdings 2,837,144
---------------
Indonesia - 4.37%
735,000 Gudang Garam 3,173,333
800,000 PT Hanjaya Mandala Sampoerna 4,266,666
263,000 Hero Supermarkets 194,815
767,000 Mayora Indah 357,122
716,000 PT Indocement Tunggal Prakarsa 1,091,047
986,000 Telekomunikasi Indonesia 1,700,719
---------------
10,783,702
---------------
Ireland - 1.54%
162,000 Allied Irish Banks 1,074,814
923,350 Smurfit (Jefferson) Group 2,719,243
---------------
3,794,057
---------------
Italy - 1.12%
608,010 STET Societa Finanziaria Telefonica 2,759,138
---------------
Japan - 2.09%
234,000 Canon, Inc. 5,161,023
---------------
Malaysia - 4.58%
483,000 Development &
Commercial Bank Holdings, Berhad 1,654,302
349,000 Hume Industries, Berhad 2,197,223
955,200 Sime-Darby, Berhad 3,763,301
409,000 United Engineers, Berhad 3,692,409
---------------
11,307,235
---------------
Mexico - 0.59%
691,700 Grupo Financiero Banamex, Series B 1,460,368
---------------
Netherlands - 10.51%
80,588 ABN-Amro Holdings 5,236,687
16,010 Dutch State Mines 1,577,179
320,250 Elsevier, NV 5,406,198
126,693 ING Groep, NV 4,555,782
25,931 Nutricia Ver Bedrijven 3,935,215
13,270 Royal Dutch Petroleum 2,323,754
76,655 Royal PTT Nederland, ADR 2,920,423
---------------
25,955,238
---------------
Philippines - 0.82%
460,300 San Miguel, Class B 2,030,221
---------------
Singapore - 7.25%
500,000 City Developments, Ltd. 4,503,799
361,000 Development Bank of Singapore 4,877,615
335,600 Fraser and Neave, Ltd., Ord 3,454,800
256,800 Singapore Press 5,066,903
---------------
17,903,117
---------------
Spain - 1.80%
29,465 Banco De Santander 1,882,407
154,300 Iberdrola SA 2,182,679
10,000 Repsol 382,856
---------------
4,447,942
---------------
Sweden - 0.92%
43,100 Pharmacia & Upjohn, Inc. 1,764,266
37,700 Stora Kopparbergs Bergslags Aktiebolag,
Series A 519,008
---------------
2,283,274
---------------
Switzerland - 8.55%
5,024 Alusuisse Lonza Holdings, REGD 3,992,347
7,877 Novartis AG* 8,993,638
447 Roche Holdings AG 3,467,217
4,371 Schweiz Ruckverisch, REGD 4,651,867
---------------
21,105,069
---------------
Thailand - 1.99%
314,800 Bangkok Bank Public Co., Ltd. 3,044,863
297,800 Thai Farmers Bank Public Co., Ltd. 1,858,344
26,100 Thai Farmers Bank Public Co., Ltd.
(Warrants), exp. 09/15/02* 0
---------------
4,903,207
---------------
United Kingdom - 30.90%
271,350 Barclays Bank, Plc 4,645,933
749,750 B.A.T. Industries, Plc 6,216,364
553,577 BTR, Plc 2,690,436
196,000 Cable & Wireless, Plc 1,628,439
381,530 Cadbury Schweppes, Plc 3,215,593
187,350 Chubb Security, Plc 1,046,799
171,630 EMI Group, Plc 4,053,204
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-7
<PAGE>
- --------------------------------------------------------------------------------
Select International Equity Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
United Kingdom (continued)
24,000 General Accident, Plc $ 314,811
333,700 General Electric Co., Plc 2,181,453
185,300 Glaxo Wellcome, Plc 3,006,145
293,100 Granada Group, Plc 4,322,533
263,409 Grand Metropolitan, Plc 2,069,043
499,800 Ladbroke Group, Plc 1,975,761
594,550 Lloyds TSB Group, Plc 4,380,138
245,000 Medeva, Plc 1,071,231
279,100 Premier Farnell, Plc 3,586,955
503,750 Prudential Corp., Plc 4,237,062
400,300 Safeway, Plc 2,767,535
406,280 Scottish Power, Plc 2,447,340
191,000 Shell Transportation & Trading, Plc 3,306,172
308,600 Siebe Plc 5,714,120
472,850 TI Group, Plc 4,709,476
433,300 Vodafone Group, Plc 1,827,813
172,550 Zeneca Group, Plc 4,864,818
----------------
76,279,174
----------------
Total Common Stocks 229,713,966
----------------
(Cost $191,950,213)
PREFERRED STOCK - 0.28%
153,835 News Corp., Ltd. (Australia) 684,231
----------------
Total Preferred Stock 684,231
----------------
(Cost $632,568)
INVESMENT COMPANIES - 4.45%
5,049,038 ILA Prime Obligation Portfolio Fund, Class B 5,049,038
5,942,252 Lehman Brothers Prime Fund, Class A 5,942,252
----------------
Total Investment Companies 10,991,290
----------------
(Cost $10,991,290)
Total Investments - 97.78% 241,389,487
----------------
(Cost $203,574,071)
Net Other Assets and Liabilities - 2.22% 5,487,449
----------------
Net Assets - 100.00% $ 246,876,936
================
</TABLE>
- --------------------------------------------------------------------------------
* Non income producing security.
ADR American Depositary Receipt
<TABLE>
<CAPTION>
Industry Concentration of Common and Preferred Stocks as Percentage of Total
- ----------------------------------------------------------------------------
Value of Investments:
- --------------------
<S> <C>
Finance 24.00%
Chemicals and Drugs 11.82
Telecommunications 7.58
Durable Goods 7.33
Consumer Goods and Services 6.75
Electronics 6.52
Tobacco 5.53
Food and Beverage 4.94
Utilities 4.52
Energy 3.99
Building and Construction 3.32
Basic Materials 3.18
Paper 2.02
Metals and Mining 1.03
Leisure and Entertainment 0.80
------
Total 93.33%
======
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS SOLD:
<TABLE>
<CAPTION>
Unrealized
Currency Contracts To Settlement Contracts At In Exchange Appreciation
Value Deliver Dates Value for U.S. $ (Depreciation)
- ---------- ------------ ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
7,519,000 CHF 01/17/97 $ 5,617,697 $ 6,004,392 $ 386,695
13,552,000 CHF 02/19/97 10,169,256 10,754,702 585,446
10,523,000 DEM 02/27/97 6,861,226 6,989,380 128,154
5,331,000 DEM 02/03/97 3,470,733 3,485,680 14,947
9,875,000 NLG 01/16/97 5,727,161 5,790,091 62,930
8,553,000 NLG 03/05/97 4,971,049 4,902,135 (68,914)
10,670,000 NLG 03/17/97 6,206,731 6,202,226 (4,505)
------------ ------------ ------------
$ 43,023,853 $ 44,128,606 $ 1,104,753
============ ============ ============
</TABLE>
- -------------------------------
CHF Swiss Francs
DEM Deutsche Marks
NLG Dutch Guilders
See Notes to Financial Statements.
----------------------------------------------------------
F-8
<PAGE>
- --------------------------------------------------------------------------------
Select International Equity Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $203,574,128. Net unrealized appreciation (depreciation) aggregated
$37,815,359, of which $45,043,514 related to appreciated investment securities
and $(7,228,155) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31,1996
were $93,489. (Unaudited)
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $128,393,104
and $30,071,184 from non-governmental issuers, respectively.
See Notes to Financial Statements.
- --------------------------------------------------------
F-9
<PAGE>
- --------------------------------------------------------------------------------
Select Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 96.57%
Chemicals and Drugs - 15.74%
79,500 Abbott Laboratories $ 4,034,625
23,500 Clorox Co. 2,358,812
43,000 duPont (E.I.) deNemours & Co. 4,058,125
31,600 Lilly (Eli) & Co. 2,306,800
63,100 Merck & Co., Inc. 5,000,675
106,500 Monsanto Co. 4,140,187
58,100 Pfizer, Inc. 4,815,037
75,100 Praxair, Inc. 3,463,987
32,900 Sherwin-Williams Co. 1,842,400
52,800 Warner-Lambert Co. 3,960,000
---------------
35,980,648
---------------
Finance - 13.48%
44,300 American Express Co. 2,502,950
38,500 Bank of Boston Corp. 2,473,625
42,100 BankAmerica Corp. 4,199,475
66,200 Barnett Banks, Inc. 2,722,475
25,700 Chase Manhattan Corp. 2,293,725
46,200 Citicorp 4,758,600
58,400 Federal National Mortgage Association 2,175,400
27,600 Franklin Resources, Inc. 1,887,150
20,200 Household International, Inc. 1,863,450
64,975 MBNA Corp. 2,696,462
71,166 Travelers Group, Inc. 3,229,157
---------------
30,802,469
---------------
Technology - 12.04%
62,100 Cisco Systems, Inc.* 3,951,113
32,600 Compaq Computer Corp.* 2,420,550
74,725 Computer Associates International, Inc 3,717,569
28,100 Computer Sciences Corp.* 2,307,713
63,400 EMC Corp.* 2,100,125
66,200 Honeywell, Inc. 4,352,650
64,000 Microsoft Corp.* 5,288,000
31,000 Parametric Technology Corp.* 1,592,625
24,300 3Com Corp.* 1,783,013
---------------
27,513,358
---------------
Durable Goods - 9.30%
27,900 Cascade Communications Corp.* 1,537,987
34,300 Case Corp. 1,869,350
53,300 CompUSA, Inc.* 1,099,313
59,600 General Electric Co. 5,892,950
37,300 Intel Corp. 4,883,969
44,000 PeopleSoft, Inc.* 2,109,250
38,000 Tellabs, Inc.* 1,429,750
38,100 Texas Instruments, Inc. 2,428,875
---------------
21,251,444
---------------
Retail - 7.70%
58,600 CVS Corp. 2,424,575
64,700 Dayton-Hudson Corp. 2,539,475
55,800 Federated Department Stores, Inc.* 1,904,175
44,400 Harcourt General, Inc. 2,047,950
44,600 Safeway, Inc.* 1,906,650
102,600 Sears Roebuck & Co. 4,732,425
51,200 Walgreen Co. 2,048,000
---------------
17,603,250
---------------
Consumer Products - 7.62%
47,800 Avon Products, Inc. 2,730,575
57,300 Eastman Kodak Co. 4,598,325
46,600 Liz Claiborne, Inc. 1,799,925
61,300 Nike, Inc., Class B 3,662,675
74,400 RJR Nabisco Holdings Corp. 2,529,600
44,200 TJX Cos., Inc. 2,093,975
---------------
17,415,075
---------------
Energy - 7.08%
57,500 Baker Hughes, Inc. 1,983,750
23,300 British Petroleum Co. Plc, ADR 3,294,038
56,600 Enron Corp. 2,440,875
41,000 Halliburton Co. 2,470,250
28,800 Schlumberger, Ltd. 2,876,400
60,400 Sonat, Inc. 3,110,600
---------------
16,175,913
---------------
Health Services - 6.90%
44,200 Cardinal Health, Inc. 2,574,650
43,800 HBO & Co. 2,600,625
49,800 HEALTHSOUTH Corp.* 1,923,525
55,500 Johnson & Johnson 2,761,125
31,200 Medtronic, Inc. 2,121,600
27,900 Oxford Health Plans, Inc.* 1,633,894
54,900 United States Surgical Corp. 2,161,687
---------------
15,777,106
---------------
Aerospace-Aircraft - 4.70%
43,100 Boeing Co. 4,584,763
29,700 Textron, Inc. 2,799,225
50,900 United Technologies Corp. 3,359,400
---------------
10,743,388
---------------
Consumer Staples - 2.61%
76,600 Gillette Co. 5,955,650
Printing and Publishing - 1.99%
31,400 Gannett Co., Inc. 2,351,075
27,700 Tribune Co. 2,184,838
---------------
4,535,913
---------------
</TABLE>
See Notes to Financial Statements.
----------------------------------------------------------
F-10
<PAGE>
- --------------------------------------------------------------------------------
Select Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Communications - 1.68%
15,800 Cincinnati Bell, Inc. $ 973,675
72,100 Sprint Corp. 2,874,988
---------------
3,848,663
---------------
Business Services - 1.63%
60,354 First Data Corp. 2,202,921
25,400 HFS, Inc.* 1,517,650
---------------
3,720,571
---------------
Hotels-Leisure - 1.11%
45,900 Marriott International, Inc. 2,535,975
---------------
Food and Beverage - 1.09%
31,100 Campbell Soup Co. 2,495,775
---------------
Building and Construction - 1.01%
19,900 Armstrong World Industries, Inc. 1,383,050
26,000 Lowe's Cos., Inc. 923,000
---------------
2,306,050
---------------
Consumer Service - 0.89%
72,900 Service Corp. International 2,041,200
-------------
Total Common Stocks 220,702,448
-------------
(Cost $195,782,234)
<CAPTION>
Value
Par value (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
CERTIFICATE OF DEPOSIT - 1.31%
3,000,000 Bayerische Vereinsbank AG
6.30%, 11/25/98 3,000,000
-------------
Total Certificate of Deposit 3,000,000
-------------
(Cost $3,000,000)
COMMERCIAL PAPER (A) - 6.96%
2,500,000 Federal Home Loan Bank
5.61%, 06/12/97 2,441,162
3,000,000 Federal National Mortgage Association
5.34%, 03/17/97 2,966,625
10,500,000 Rohm & Haas Co.
6.75%, 01/02/97 10,498,031
-------------
Total Commercial Paper 15,905,818
-------------
Cost ($15,905,818)
Shares
INVESTMENT COMPANY - 0.00%
3,821 lLA Prime Obligation Portfolio Fund,
Class B 3,821
-------------
Total Investment Company 3,821
-------------
(Cost $3,821)
Total Investments - 104.84% 239,612,087
-------------
(Cost $214,691,873)
Net Other Assets and Liabilities - (4.84)% (11,060,836)
-------------
Net Assets -100.00% $ 228,551,251
=============
</TABLE>
- ------------
* Non income producing security.
(A) Effective yield at time of purchase.
ADR American Depositary Receipt
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $214,739,419. Net unrealized appreciation (depreciation) aggregated
$24,872,668, of which $28,302,023 related to appreciated investment securities
and $(3,429,355) related to depreciated investment securities.
As of December 31, 1996, the portfolio had no capital loss carryforwards. During
1996, the fund utilized $2,730,483 of its capital loss carryforwards.
Distributions from long-term capital gains for the year ended December 31,1996
were $32,238,283. (Unaudited)
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $325,085,392
and $265,819,880 from non-governmental issuers, respectively.
See Notes to Financial Statements.
---------------------------------------------------------
F-11
<PAGE>
- -----------------------------------------------------------------------------
Growth Fund
- -----------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.81%
<C> <S> <C>
Durable Goods - 20.17%
57,100 AlliedSignal, Inc. $ 3,825,700
18,600 Beckman Instruments, Inc. 713,775
99,300 BMC Software, Inc. * 4,108,538
88,400 Case Corp. 4,817,800
4,800 Caterpillar, Inc. 361,200
202,000 Chrysler Corp. 6,666,000
143,100 Cummins Engine Co., Inc. 6,582,600
15,600 Deere & Co. 633,750
51,600 Eaton Corp. 3,599,100
7,200 Electronic Arts, Inc. * 215,550
59,000 Ford Motor Co. 1,880,625
7,700 Fore Systems, Inc. * 253,138
34,300 General Electric Co. 3,391,413
249,900 General Motors Corp. 13,931,925
11,700 Globalstar Telecommunications, Ltd. * 737,100
102,900 Goodyear Tire & Rubber Co. 5,286,488
86,600 Gtech Holdings Corp. * 2,771,200
12,300 IBIS Technology Corp. * 86,100
62,300 Ingersoll-Rand Co. 2,772,350
73,500 Intel Corp. 9,623,906
14,400 International Cabletel, Inc. * 363,600
8,600 Kennametal, Inc. 334,325
40,400 McDonnell Douglas Corp. 2,585,600
18,300 MCI Communications Corp. 598,181
95,233 MFS Communications Co., Inc. 5,190,199
7,050 Miller Industries, Inc. * 141,000
8,800 Millicom International Cellular SA * 282,700
8,000 PanAmSat Corp. * 224,000
9,100 Parker-Hannifin Corp. 352,625
10,400 PeopleSoft, Inc. * 498,550
90,300 Pep Boys-Manny, Moe & Jack 2,776,725
5,800 Sapient Corp. * 244,325
3,800 Scopus Technology, Inc. * 176,700
5,200 Seachange International, Inc. * 132,600
218,600 Sprint Corp. 8,716,675
9,900 Standard Register Co. 321,750
16,500 Stratus Computer, Inc. * 449,625
9,300 Tecumseh Products Co., Class A 533,588
8,100 Tellabs, Inc. * 304,763
38,400 Textron, Inc. 3,619,200
93,500 Union Pacific Corp. 5,621,688
5,200 Uniphase Corp. * 273,000
83,700 U.S. Robotics Corp. 6,026,400
5,200 Visio Corp. * 257,400
-------------
112,283,477
-------------
Finance - 15.99%
77,900 ACE, Ltd. 4,683,738
101,600 Aetna, Inc. 8,128,000
108,990 Allstate Corp. 6,307,796
22,300 American Express Co. 1,259,950
11,500 American General Corp. 470,063
13,000 Bank of New York Co., Inc. 438,750
64,200 Bear Stearns Cos., Inc. 1,789,575
14,000 Capital One Financial Corp. 504,000
36,200 Chase Manhattan Corp. 3,230,850
7,200 Chubb Corp. 387,000
53,600 Cigna Corp. 7,323,100
31,400 Citicorp 3,234,200
6,600 Crestar Financial Corp. 490,875
7,900 Dean Witter Discover & Co. 523,375
102,200 EXEL, Ltd. 3,870,825
4,500 Federal Home Loan Mortgage Corp. 495,563
14,700 Federal National Mortgage Association 547,575
97,548 First Chicago NBD Corp. 5,243,205
85,180 First Union Corp. 6,303,320
12,700 Great Western Financial Corp. 368,300
6,100 Healthcare COMPARE Corp. * 258,488
136,400 ITT Hartford Group, Inc. 9,207,000
58,700 Lehman Brothers Holdings, Inc. 1,841,713
45,600 Mellon Bank Corp. 3,237,600
15,500 Money Store, Inc. 428,188
47,548 NationsBank Corp. 4,647,817
14,000 Old Republic International Corp. 374,500
4,600 Post Properties, Inc. 185,150
13,500 Providian Corp. 693,563
6,400 Reliastar Financial Corp. 369,600
5,300 Republic New York Corp. 432,613
5,000 Salomon, Inc. 235,625
8,341 Security Capital Industrial Trust 178,289
11,500 Security Capital Pacific Trust 263,063
6,900 Signet Banking Corp. 212,175
14,500 Sirrom Capital Corp. 532,875
10,500 St. Paul Cos., Inc. 615,563
58,296 TransAmerica Corp. 4,605,384
4,600 Transatlantic Holdings, Inc. 370,300
17,500 Wells Fargo & Co. 4,720,625
-------------
89,010,191
-------------
</TABLE>
See Notes to Financial Statements.
---------------------------------------
F-12
<PAGE>
- -----------------------------------------------------------------------
Growth Fund
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -----------------------------------------------------------------------
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
Consumer Products - 10.09%
8,700 Abercrombie & Fitch Co., Class A* $ 143,550
25,231 Archer-Daniels-Midland Co. 555,082
62,900 Bowater, Inc. 2,366,613
116,600 Campbell Soup Co. 9,357,150
110,200 Carnival Corp., Class A 3,636,600
10,700 Cinar Films, Inc., Class B* 278,200
8,500 Cintas Corp. 499,375
103,700 Clear Channel Communications, Inc. * 3,746,163
48,200 ConAgra, Inc. 2,397,950
20,000 DSP Communications, Inc. * 387,500
12,300 Eagle Hardware & Garden, Inc. * 255,225
25,500 Eastman Kodak Co. 2,046,375
32,200 Gannett Co., Inc. 2,410,975
58,000 Gucci Group NV 3,704,750
5,300 Hollywood Entertainment Corp. * 98,050
7,700 Imax Corp. * 238,700
67,690 Kimberly-Clark Corp. 6,447,473
18,000 The North Face, Inc. * 346,500
42,100 Procter & Gamble Co. 4,525,750
272,400 RJR Nabisco Holdings Corp. 9,261,600
7,400 Saks Holdings, Inc. * 199,800
22,670 TCI Satellite Entertainment, Inc., Class A * 223,866
42,500 Tenneco, Inc. * 1,917,813
8,800 Ticketmaster Group, Inc. * 106,700
8,400 TRW, Inc. 415,800
11,300 Tupperware Corp. 605,963
-------------
56,173,523
-------------
Chemicals and Drugs - 9.61%
38,200 Abbott Laboratories 1,938,650
16,100 Airgas, Inc. * 354,200
75,500 American Home Products Corp. 4,426,188
111,200 Becton Dickinson & Co. 4,823,300
18,400 Bergen Brunswig Corp., Class A 524,400
51,040 Bristol-Myers Squibb Co. 5,550,600
8,300 Cabot Corp. 208,538
4,100 Dow Chemical Co. 321,338
138,000 Du Pont (E.I.) de Nemours & Co. 13,023,750
61,600 FMC Corp. * 4,319,700
15,800 Foundation Health Corp. * 501,650
18,300 Great Lakes Chemical Corp. 855,525
6,300 Jones Medical Industries, Inc. 230,738
12,100 Lauder (Estee) Cos., Inc., Class A 615,588
13,700 Lincare Holdings, Inc. * 561,700
84,400 Mallinckrodt, Inc. 3,724,150
51,700 Merck & Co., Inc. 4,097,225
11,300 Premark International, Inc. 251,425
5,300 Rexall Sundown, Inc. * 144,094
13,552 Rhone-Poulenc SA, ADR 459,074
9,200 Rohm & Haas Co. 750,950
40,400 Schering-Plough Corp. 2,615,900
40,900 Smithkline Beecham Plc, ADR 2,781,200
11,300 Total Renal Care Holdings, Inc. * 409,625
-------------
53,489,508
-------------
Technology - 7.29%
4,900 Ceridian Corp. * 198,450
128,100 Cisco Systems, Inc. * 8,150,363
51,700 Compaq Computer Corp. * 3,838,725
16,300 Harnischfeger Industries, Inc. 784,438
13,500 International Business Machines Corp. 2,038,500
204,500 International Game Technology 3,732,125
22,300 Loral Space & Communications * 409,763
60,312 Lucent Technologies, Inc. 2,789,430
12,712 McAfee Associates, Inc. * 559,328
126,400 Microsoft Corp. * 10,443,800
97,550 Oracle Corp. * 4,072,713
87,000 Seagate Technology, Inc. * 3,436,500
3,500 Transaction Systems Architects, Inc., Class A * 116,375
-------------
40,570,510
-------------
Energy - 6.82%
4,800 Amoco Corp. 386,400
3,300 Atlantic Richfield Co. 437,250
72,800 British Petroleum Co. Plc, ADR 10,292,100
89,700 Coastal Corp. 4,384,088
11,800 El Paso Natural Gas Co. 595,900
19,400 MAPCO, Inc. 659,600
21,700 Mobil Corp. 2,652,825
7,900 PanEnergy Corp. 355,500
132,300 Phillips Petroleum Co. 5,854,275
88,100 Repsol S.A., ADR 3,358,813
19,800 Royal Dutch Petroleum Co. 3,380,850
31,500 Texaco, Inc. 3,090,938
16,100 Ultramar Diamond Shamrock Corp. 509,163
57,289 Union Pacific Resources Co. 1,675,703
12,500 YPF Sociedad Anonima, Class D, ADR 315,625
-------------
37,949,030
-------------
Consumer Staples - 6.40%
8,200 CKE Restaurants, Inc. 295,200
10,700 Danaher Corp. 498,888
18,200 IBP, Inc. 441,326
9,500 Mondavi (Robert) Corp., Class A * 346,750
258,000 Philip Morris Cos., Inc. 29,057,250
7,600 Springs Industries, Inc., Class A 326,800
7,500 Swisher International Group, Inc., Class A * 119,063
22,800 Unilever N.V. 3,995,700
8,000 VF Corp. 540,000
-------------
35,620,977
-------------
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------
F-13
<PAGE>
- -----------------------------------------------------------------------
Growth Fund
- -----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
Utilities - 3.75%
21,600 Central Maine Power Co. $ 251,100
12,500 Entergy Corp. 346,875
92,400 GPU, Inc. 3,106,950
108,400 GTE Corp. 4,932,200
130,700 PECO Energy Co. 3,300,175
6,400 Republic Industries, Inc. * 199,600
98,600 SBC Communications, Inc. 5,102,550
118,500 Unicom Corp. 3,214,313
13,400 USA Waste Services, Inc. * 427,125
-------------
20,880,888
-------------
Aerospace-Airlines - 2.85%
79,300 AMR Corp. * 6,988,313
37,300 Delta Air Lines, Inc. 2,643,638
10,200 Raytheon Co. 490,875
86,800 United Technologies Corp. 5,728,800
-------------
15,851,626
-------------
Building and Construction - 2.41%
58,900 Champion International Corp. 2,547,425
96,466 Home Depot, Inc. 4,835,358
64,100 Loews Corp. 6,041,425
-------------
13,424,208
-------------
Health Services - 2.40%
68,100 Baxter International, Inc. 2,792,100
21,900 Cardinal Health, Inc. 1,275,675
100,668 Columbia/HCA Healthcare Corp. 4,102,221
6,900 HBO & Co. 409,688
172,920 Health Management Associates, Inc., Class A * 3,890,700
15,200 Maxicare Health Plans, Inc. * 338,200
3,000 Pediatrix Medical Group, Inc. * 110,625
20,400 Tenet Healthcare Corp. * 446,250
-------------
13,365,459
-------------
Business Services - 2.18%
10,700 Accustaff, Inc. * 226,038
9,450 Fiserv, Inc. * 347,288
179,200 HFS, Inc. * 10,707,200
8,500 Mail Boxes, Etc. * 191,250
15,500 Olsten Corp. 234,438
14,300 Paging Network, Inc. * 218,075
4,275 Paychex, Inc. 219,895
-------------
12,144,184
-------------
Metals and Mining - 1.52%
19,800 Cyprus Amax Minerals Co. 462,825
40,400 Phelps Dodge Corp. 2,727,000
2,400 Potash Corp. of Saskatchewan, Inc. 204,000
139,200 TRINOVA Corp. 5,063,400
-------------
8,457,225
-------------
Broadcasting - 1.25%
19,450 Comcast Corp. Special, Class A 346,453
15,200 Metro Networks, Inc. * 383,800
16,500 Tele-Communications International, Inc. ,
Series A* 218,625
96,879 Tele-Communications, Inc.,
Liberty Media Group, Series A * 2,767,106
226,701 Tele-Communications, Inc., TCI Group, Class A * 2,961,282
7,500 Univision Communications, Inc., Class A * 277,500
-------------
6,954,766
-------------
Retail - 1.11%
11,000 Borders Group, Inc. * 394,625
74,600 CVS Corp. 3,086,575
10,800 Dillard Department Stores, Inc., Class A 333,450
47,400 Harcourt General, Inc. 2,186,325
3,800 Tommy Hilfiger Corp. * 182,400
-------------
6,183,375
-------------
Consumer Service - 0.66%
12,300 Ascent Entertainment Group, Inc. * 198,338
124,000 Service Corp. International 3,472,000
-------------
3,670,338
-------------
Food Services - 0.46%
72,000 Boston Chicken, Inc. * 2,583,001
-------------
Consumer Cyclical - 0.32%
65,000 Sabre Group Holdings, Inc., Class A * 1,811,875
-------------
Transportation - 0.18%
6,500 Burlington Northern Santa Fe Corp. 561,438
10,400 CSX Corp. 439,400
-------------
1,000,838
-------------
Electronics - 0.11%
12,300 Tektronix, Inc. 630,375
-------------
Transportation Services - 0.08%
7,400 UAL Corp. * 462,500
-------------
Advertising - 0.08%
16,000 Ha-Lo Industries, Inc. * 440,000
-------------
Pollution Control - 0.04%
7,700 U.S. Filter Corp. * 244,475
-------------
Recreational Equipment - 0.04%
3,700 Fila Holding SPA, ADR 215,063
-------------
Total Common Stocks 533,417,412
-------------
(Cost $430,927,425)
</TABLE>
See Notes to Financial Statements.
-------------------------------------------------
F-14
<PAGE>
- --------------------------------------------------------------------------------
Growth Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS - 0.96%
Federal Home Loan Bank - 0.54%
$ 1,000,000 8.45%, 01/24/97 $ 1,005,906
2,000,000 5.57%, 01/23/98 1,995,620
-------------
3,001,526
-------------
Federal Farm Credit Bank (A) - 0.42%
2,500,000 5.28%, 12/18/97 2,371,422
-------------
Total U.S. Government Agency Obligations 5,372,948
-------------
(Cost $5,373,113)
CORPORATE NOTES AND BONDS - 0.53%
1,900,000 Ford Motor Credit Co.
5.63%, 03/03/97 1,901,096
25,000 General Motors Acceptance Corp., MTN
6.30%, 03/31/97 25,039
1,000,000 NationsBank, MTN
5.20%, 07/15/97 1,000,188
-------------
Total Corporate Notes and Bonds 2,926,323
-------------
(Cost $2,926,570)
COMMERCIAL PAPER (A) - 2.62%
3,000,000 CXS, Inc.
5.55%, 02/19/97 2,977,338
2,500,000 Holland Limited Securitization, Inc.
5.53%, 01/08/97 2,497,312
4,619,000 Receivables Capital Corp.
5.57%, 01/28/97 4,599,704
4,500,000 Rohm & Haas Co.
6.75%, 01/02/97 4,499,156
-------------
Total Commercial Paper 14,573,510
-------------
(Cost $14,573,510)
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
INVESTMENT COMPANY - 0.05%
<C> <S> <C>
271,308 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund $ 271,308
-------------
Total Investment Company 271,308
-------------
(Cost $271,308)
Total Investments - 99.97% 556,561,501
-------------
(Cost $454,071,926)
Net Other Assets and Liabilities - 0.03% 189,104
-------------
Net Assets - 100.00% $ 556,750,605
=============
</TABLE>
- ------------
* Non income producing security.
(A) Effective yield at time of purchase.
ADR American Depositary Receipt.
MTN Medium Term Note
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $454,510,938. Net realized appreciation (depreciation) aggregated
$102,050,563, of which $110,503,037 related to appreciated investment securities
and $(8,452,474) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31,1996
were $48,435,144. (Unaudited)
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $376,502,620
and $339,503,843 from non-governmental issuers, respectively, and $3,026,250 and
$0 from U.S. Government Agency issuers, respectively.
See Notes to Financial Statements.
- -------------------------------------------------------
F-15
<PAGE>
- -----------------------------------------------------------------------
Equity Index Fund
- -----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 98.34%
Durable Goods - 16.77%
7,500 AlliedSignal, Inc. $ 502,500
5,000 Alltel Corp. 156,875
14,600 Ameritech Corp. 885,125
5,800 AMP, Inc. 222,575
1,100 Armstrong World Industries, Inc. 76,450
2,800 Avery-Dennison Corp. 99,050
3,800 Baker Hughes, Inc. 131,100
5,100 Bay Networks, Inc. * 106,463
9,539 Boeing Co. 1,014,711
800 Briggs & Stratton Corp. 35,200
1,000 Caliber System, Inc. 19,250
1,900 Case Corp. 103,550
5,100 Caterpillar, Inc. 383,775
19,300 Chrysler Corp. 636,900
2,100 Conrail, Inc. 209,213
2,900 Cooper Industries, Inc. 122,163
2,200 Cooper Tire & Rubber Co. 43,450
1,600 Crane Co. 46,400
1,000 Cummins Engine Co., Inc. 46,000
2,700 Dana Corp. 88,088
6,800 Deere & Co. 276,250
4,800 Dell Computer Corp. * 255,000
4,750 Dominion Resources, Inc. 182,875
3,100 DSC Communications Corp. * 55,413
2,000 Eaton Corp. 139,500
1,600 Echlin, Inc. 50,600
1,300 EG & G, Inc. 26,163
5,900 Emerson Electric Co. 570,825
900 Fleetwood Enterprises, Inc. 24,750
31,400 Ford Motor Co. 1,000,875
43,600 General Electric Co. 4,310,950
20,000 General Motors Corp. 1,115,000
1,300 General Signal Corp. 55,575
3,200 Genuine Parts Co. 142,400
1,400 Goodrich (B.F.) Co. 56,700
4,100 Goodyear Tire & Rubber Co. 210,638
1,400 Grainger (W.W.), Inc. 112,350
1,000 Harris Corp. 68,625
700 Helmerich & Payne, Inc. 36,488
26,900 Hewlett-Packard Co. 1,351,725
3,300 Illinois Tool Works, Inc. 263,588
2,900 Ingersoll-Rand Co. 129,050
21,700 Intel Corp. 2,841,280
1,100 Johnson Controls, Inc. 91,163
5,141 Lockheed Martin Corp. 470,402
1,242 LucasVarity Plc, ADR * 47,196
1,500 McDermott International, Inc. 24,938
5,600 McDonnell Douglas Corp. 358,400
18,100 MCI Communications Corp. 591,644
1,100 Millipore Corp. 45,513
2,600 Moore Corp., Ltd. 52,975
15,700 Motorola, Inc. 963,588
1,300 National Service Industries, Inc. 48,588
6,800 Northern Telecom, Ltd. 420,750
1,500 Northrop Grumman Corp. 124,125
990 PACCAR, Inc. 67,320
3,000 Pall Corp. 76,500
1,950 Parker-Hannifin Corp. 75,563
1,700 Pep Boys-Manny, Moe & Jack 52,275
1,100 Perkin-Elmer Corp. 64,763
2,200 Pioneer Hi-Bred International, Inc. 154,000
1,200 Raychem Corp. 96,150
5,800 Rockwell International Corp. * 353,075
2,300 Rowan Cos., Inc.* 52,038
2,200 Ryder System, Inc. 61,875
2,000 Scientific-Atlanta, Inc. 30,000
11,400 Sprint Corp. 454,575
1,500 Tandy Corp. 66,000
4,700 Tellabs, Inc. * 176,838
5,000 Texas Instruments, Inc. 318,750
2,200 Textron, Inc. 207,350
4,100 Tyco International, Ltd. 216,788
6,500 Union Pacific Corp. 390,813
16,500 U.S. West, Inc., Media Group * 305,250
11,200 Westinghouse Electric Corp. 222,600
8,600 Xerox Corp. 452,575
-------------
25,339,838
-------------
Finance - 14.93%
1,285 Aetna, Inc. 102,800
2,800 Ahmanson (H.F.) & Co. 91,000
1,200 Alexander & Alexander Services, Inc. 20,850
11,769 Allstate Corp. 681,131
12,600 American Express Co. 711,900
5,400 American General Corp. 220,725
12,400 American International Group, Inc. 1,342,300
2,900 AON Corp. 180,163
11,340 Banc One Corp. 487,620
4,100 Bank of Boston Corp. 263,425
10,400 Bank of New York Co., Inc. 351,000
9,552 Bankamerica Corp. 952,812
2,200 Bankers Trust New York Corp. 189,750
5,200 Barnett Banks, Inc. 213,850
1,400 Beneficial Corp. 88,725
4,100 Boatmen's Bancshares, Inc. 264,450
11,576 Chase Manhattan Corp. 1,033,158
4,600 Chubb Corp. 247,250
2,000 Cigna Corp. 273,250
12,500 Citicorp 1,287,500
2,800 Comerica, Inc. 146,650
5,900 Corestates Financial Corp. 306,063
4,266 Dean Witter Discover & Co. 282,623
4,700 Federal Home Loan Mortgage Corp. 517,588
28,900 Federal National Mortgage Association 1,076,525
2,800 Fifth Third Bancorp 175,875
3,600 First Bank System, Inc. 245,700
8,458 First Chicago NBD Corp. 454,618
7,525 First Union Corp. 556,850
6,955 Fleet Financial Group, Inc. 346,881
2,200 General Re Corp. 347,050
1,500 Golden West Financial Corp. 94,688
3,600 Great Western Financial Corp. 104,400
3,600 Green Tree Financial Corp. 139,050
2,600 Household International, Inc. 239,850
</TABLE>
See Notes to Financial Statements
------------------------------------------------
F-16
<PAGE>
- -----------------------------------------------------------------------
Equity Index Fund
- -----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
Finance (continued)
4,300 Humana, Inc. * $ 82,238
3,100 ITT Hartford Group, Inc. 209,250
1,900 Jefferson-Pilot Corp. 107,588
6,000 KeyCorp 303,000
2,800 Lincoln National Corp. 147,000
1,900 Marsh & Mclennan Cos., Inc. 197,600
1,100 MBIA, Inc. 111,375
5,850 MBNA Corp. 242,775
3,450 Mellon Bank Corp. 244,950
4,400 Merrill Lynch & Co., Inc. 358,600
1,600 MGIC Investment Corp. 121,600
4,000 Morgan Stanley Group, Inc. 228,500
4,900 Morgan (J.P.) & Co., Inc. 478,363
5,900 National City Corp. 264,763
7,620 NationsBank Corp. 744,855
1,300 Nicor, Inc. 46,475
9,800 Norwest Corp. 426,300
9,000 PNC Bank Corp. 338,625
2,500 Providian Corp. 128,438
1,500 Republic New York Corp. 122,438
3,300 SAFECO Corp. 130,144
2,900 Salomon, Inc. 136,663
2,200 St. Paul Cos., Inc. 128,975
1,900 Sun Co., Inc. 46,313
5,900 SunTrust Banks, Inc. 290,575
1,900 Torchmark Corp. 95,950
1,800 TransAmerica Corp. 142,200
16,961 Travelers Group, Inc. 769,605
1,900 UNUM Corp. 137,275
3,100 USF & G Corp. 64,713
900 USLIFE Corp. 29,925
4,900 UST, Inc. 158,638
4,000 U.S. Bancorp 179,750
12,700 U.S. West, Inc., Communications Group 409,575
4,400 Wachovia Corp. 248,600
2,433 Wells Fargo & Co. 656,302
-------------
22,568,006
-------------
Chemicals and Drugs - 12.47%
20,600 Abbott Laboratories 1,045,450
3,000 Air Products & Chemicals, Inc. 207,375
700 Alberto-Culver Co., Class B 33,600
1,300 Allegiance Corp. 35,913
1,700 Allergan, Inc. 60,563
2,200 ALZA Corp. * 56,925
16,900 American Home Products Corp. 990,763
7,000 AMGEN, Inc. * 380,625
3,500 Avon Products, Inc. 199,938
1,500 Bausch & Lomb, Inc. 52,500
7,200 Baxter International, Inc. 295,200
3,300 Becton Dickinson & Co. 143,138
2,600 Beverly Enterprises, Inc. * 33,150
4,700 Boston Scientific Corp. * 282,000
13,300 Bristol-Myers Squibb Co. 1,446,375
3,900 Colgate Palmolive Co. 359,775
6,400 Dow Chemical Co. 501,600
14,900 Du Pont (E.I.) de Nemours & Co. 1,406,188
2,100 Eastman Chemical Co. 116,025
3,850 Engelhard Corp. 73,631
1,000 FMC Corp. * 70,125
2,400 Grace (W.R.) & Co. 124,200
1,700 Great Lakes Chemical Corp. 79,475
2,000 Guidant Corp. 114,000
2,700 Hercules, Inc. 116,775
2,900 International Flavors & Fragrances, Inc. 130,500
35,300 Johnson & Johnson 1,756,175
14,600 Lilly (Eli) & Co. 1,065,800
200 Mallinckrodt, Inc. 8,825
1,700 Manor Care, Inc. 45,900
6,300 Medtronic, Inc. 428,400
31,900 Merck & Co., Inc. 2,528,075
15,600 Monsanto Co. 606,450
3,800 Morton International, Inc. 154,850
1,800 Nalco Chemical Co. 65,025
17,100 Pfizer, Inc. 1,417,163
13,480 Pharmacia & Upjohn, Inc. 534,145
4,100 Praxair, Inc. 189,113
1,700 Rohm & Haas Co. 138,763
9,800 Schering-Plough Corp. 634,550
600 Shared Medical Systems Corp. 29,550
2,300 Sherwin-Williams Co. 128,800
100 Sigma Aldrich Corp. 6,244
3,400 Union Carbide Corp. 138,975
1,700 United States Surgical Corp. 66,938
7,200 Warner-Lambert Co. 540,000
-------------
18,839,550
-------------
Consumer Products - 10.77%
3,500 ALCO Standard Corp. 180,688
2,000 American Greetings Corp., Class A 56,750
1,600 Andrew Corp. * 84,900
13,200 Anheuser-Busch Cos., Inc. 528,000
4,800 Applied Materials, Inc. * 172,500
14,422 Archer-Daniels-Midland Co. 317,284
800 Ball Corp. 20,800
1,400 Bemis Co., Inc. 51,625
1,300 Boise Cascade Corp. 41,275
1,800 Brown-Forman Corp., Class B 82,350
6,200 Campbell Soup Co. 497,550
6,400 Conagra, Inc. 318,400
6,100 Corning, Inc. 282,125
3,400 Crown Cork & Seal Co., Inc. 184,875
2,200 Deluxe Corp. 72,050
17,943 Disney (Walt) Co. 1,249,281
4,000 Donnelley (R.R.) & Sons Co. 125,500
2,600 Dow Jones & Co., Inc. 88,075
4,500 Dun & Bradstreet Corp. 106,875
8,800 Eastman Kodak Co. 706,200
748 Footstar, Inc. * 18,607
3,700 Gannett Co., Inc. 277,038
3,600 General Instrument Corp. * 77,850
2,400 Georgia-Pacific Corp. 172,800
11,800 Gillette Co. 917,450
3,300 Halliburton Co. 198,825
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------
F-17
<PAGE>
- -----------------------------------------------------------------------
Equity Index Fund
- -----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<C> <S> <C>
Consumer Products (continued)
800 Harland (John H.) Co. $ 26,400
2,300 Hasbro, Inc. 89,413
9,700 Heinz (H.J.) Co. 346,775
4,100 Hershey Foods Corp. 179,375
8,000 International Paper Co. 323,000
2,300 James River Corp. of Virginia 76,188
1,000 Jostens, Inc. 21,125
5,600 Kellogg Co. 367,500
7,520 Kimberly-Clark Corp. 716,280
1,000 King World Productions, Inc. * 36,875
2,500 Knight-Ridder, Inc. 95,625
1,900 Liz Claiborne, Inc. 73,388
500 Longs Drug Stores Corp. 24,563
7,212 Mattel, Inc. 200,133
2,700 Maytag Corp. 53,325
2,600 McGraw-Hill Cos., Inc. 119,925
1,400 Mead Corp. 81,375
700 Meredith Corp. 36,925
2,600 New York Times Co., Class A 98,800
7,600 Nike, Inc., Class B 454,100
1,200 Polaroid Corp. 52,200
800 Potlatch Corp. 34,400
18,100 Procter & Gamble Co. 1,945,750
3,600 Quaker Oats Co. 137,250
1,500 Reebok International, Ltd. 63,000
4,000 Rubbermaid, Inc. 91,000
1,000 Russell Corp. 29,750
12,800 Sara Lee Corp. 476,800
9,900 Seagram Co., Ltd. 383,625
1,600 Snap-On, Inc. 57,000
2,400 Stanley Works 64,800
2,610 Stone Container Corp. 38,824
1,300 Stride Rite Corp. 13,000
4,700 Sysco Corp. 153,338
1,710 TCI Satellite Entertainment, Inc., Class A * 16,886
1,500 Temple-Inland, Inc. 81,188
4,500 Tenneco, Inc. * 203,063
15,080 Time Warner, Inc. 565,500
2,600 Times Mirror Co., Class A 129,350
2,100 TJX Cos., Inc. 99,488
1,600 Tribune Co. 126,200
3,400 TRW, Inc. 168,300
1,600 Tupperware Corp. 85,800
1,800 Union Camp Corp. 85,950
9,363 Viacom, Inc., Class B* 326,535
2,650 Westvaco Corp. 76,188
5,300 Weyerhaeuser Co. 251,088
2,000 Whirlpool Corp. 93,250
3,100 Wrigley (Wm.) Jr. Co. 174,375
-------------
16,274,661
-------------
Energy - 9.40%
2,500 Amerada Hess Corp. 144,688
13,200 Amoco Corp. 1,062,600
1,100 Asarco, Inc. 27,363
1,700 Ashland, Inc. 74,588
4,300 Atlantic Richfield Co. 569,750
3,300 Burlington Resources, Inc. 166,238
17,300 Chevron Corp. 1,124,500
2,800 Coastal Corp. 136,850
4,700 Dresser Industries, Inc. 145,700
500 Eastern Enterprises 17,688
418 El Paso Natural Gas Co. 21,109
6,700 Enron Corp. 288,938
32,900 Exxon Corp. 3,224,200
3,900 Homestake Mining Co. 55,575
1,300 Kerr-McGee Corp. 93,600
900 Louisiana Land & Exploration Co. 48,263
2,900 Louisiana-Pacific Corp. 61,263
10,400 Mobil Corp. 1,271,400
8,700 Occidental Petroleum Corp. 203,363
700 Oneok, Inc. 21,000
2,800 Oryx Energy Co. * 69,300
2,300 Pacific Enterprises 69,863
1,000 Panenergy Corp. 45,000
1,200 Pennzoil Co. 67,800
7,000 Phillips Petroleum Co. 309,750
14,200 Royal Dutch Petroleum Co. 2,424,650
2,400 Santa Fe Energy Resources, Inc. * 33,300
6,500 Schlumberger, Ltd. 649,188
2,300 Sonat, Inc. 118,450
7,000 Texaco, Inc. 686,875
6,581 Union Pacific Resources Co. 192,494
6,600 Unocal Corp. 268,125
7,600 USX-Marathon Group 181,450
2,220 USX-U.S. Steel Group, Inc. 69,653
1,400 Western Atlas, Inc. * 99,225
4,200 Williams Cos., Inc. 157,500
-------------
14,201,299
-------------
Technology - 8.01%
3,600 Advanced Micro Devices, Inc. * 92,700
13,300 Airtouch Communications, Inc. * 335,825
3,200 Amdahl Corp. * 38,800
3,300 Apple Computer, Inc. * 68,888
1,200 Autodesk, Inc. 33,600
7,700 Automatic Data Processing, Inc. 330,138
4,100 Cabletron Systems, Inc. * 136,325
1,800 Ceridian Corp. * 72,900
17,200 Cisco Systems, Inc. * 1,094,350
7,200 Compaq Computer Corp. * 534,600
9,700 Computer Associates International, Inc 482,575
2,000 Computer Sciences Corp. * 164,250
1,000 Data General Corp. * 14,500
4,100 Digital Equipment Corp. * 149,138
6,200 EMC Corp. * 205,375
1,300 Harnischfeger Industries, Inc. 62,563
3,400 Honeywell, Inc. 223,550
1,300 Intergraph Corp. * 13,325
13,700 International Business Machines Corp. 2,068,700
3,100 ITT Corp. * 134,463
3,100 ITT Industries, Inc. 75,950
3,400 LSI Logic Corp. * 90,950
16,898 Lucent Technologies, Inc. 781,533
</TABLE>
See Notes to Financial Statements
------------------------------------------------
F-18
<PAGE>
- -----------------------------------------------------------------------
Equity Index Fund
- -----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<S> <C>
Technology (continued)
5,500 Micron Technology, Inc. $ 160,188
31,700 Microsoft Corp. * 2,619,213
3,700 National Semiconductor Corp. * 90,188
9,100 Novell, Inc. * 86,166
17,425 Oracle Corp. * 727,494
3,900 Pitney Bowes, Inc. 212,550
5,700 Seagate Technology, Inc. * 225,150
4,600 Silicon Graphics, Inc. * 117,300
9,700 Sun Microsystems, Inc. * 249,169
3,100 Tandem Computers, Inc. * 42,625
4,600 3Com Corp. * 337,525
4,600 Unisys Corp. * 31,050
-------------
12,103,616
-------------
Utilities - 7.90%
5,000 American Electric Power, Inc. 205,625
42,967 American Telephone & Telegraph Corp. 1,869,065
3,950 Baltimore Gas & Electric Co. 105,663
11,600 Bell Atlantic Corp. 751,100
26,300 BellSouth Corp. 1,061,863
5,600 Browning-Ferris Industries, Inc. 147,000
4,000 Carolina Power & Light Co. 146,000
5,600 Central & South West Corp. 143,500
4,143 CINergy Corp. 138,273
1,500 Columbia Gas System, Inc. 95,438
6,200 Consolidated Edison Co. of New York 181,350
2,500 Consolidated Natural Gas Co. 138,125
3,800 DTE Energy Co. 123,025
5,300 Duke Power Co. 245,125
11,500 Edison International 228,563
1,800 ENSERCH Corp. 41,400
6,100 Entergy Corp. 169,275
4,800 FPL Group, Inc. 220,800
400 GPU, Inc. 13,450
25,500 GTE Corp. 1,160,250
6,200 Houston Industries, Inc. 140,275
8,300 Laidlaw, Inc., Class B 95,450
3,800 Niagara Mohawk Power Corp. * 37,525
3,600 Noram Energy Corp. 55,350
1,800 Northern States Power Co. 82,575
11,700 NYNEX Corp. 563,063
4,000 Ohio Edison Co. 91,000
10,900 Pacific Gas & Electric Co. 228,900
11,300 Pacific Telesis Group 415,275
7,800 Pacificorp 159,900
5,900 PECO Energy Co. 148,975
900 Peoples Energy Corp. 30,488
4,300 PP & L Resources, Inc. 98,900
6,300 Public Service Enterprise Group, Inc. 171,675
16,000 SBC Communications, Inc. 828,000
17,800 Southern Co. 402,725
5,900 Texas Utilities Co. 240,425
5,700 Unicom Corp. 154,613
2,700 Union Electric Co. 103,950
12,800 WMX Technologies, Inc. 417,600
10,800 Worldcom, Inc. * 281,475
-------------
11,933,029
-------------
Consumer Staples - 6.68%
4,500 American Brands, Inc. 223,313
2,300 Black & Decker Corp. 69,288
1,400 Clorox Co. 140,525
65,900 Coca-Cola Co. 3,467,988
1,000 Coors (Adolph) Co., Class B 19,000
2,000 Fruit of the Loom, Inc., Class A * 75,750
4,200 General Mills, Inc. 266,175
11,100 Minnesota Mining & Manufacturing Co. 919,913
4,200 Newell Co. 132,300
41,200 PepsiCo, Inc. 1,205,100
21,600 Philip Morris Cos., Inc. 2,432,700
2,800 Ralston Purina Co. 205,450
500 Springs Industries, Inc., Class A 21,500
4,200 Unilever NV 736,050
1,700 VF Corp. 114,750
2,700 Whitman Corp. 61,763
-------------
10,091,565
-------------
Retail - 3.81%
6,700 Albertson's, Inc. 238,688
3,900 American Stores Co. 159,413
3,800 CPC International, Inc. 294,500
100 CVS Corp. 4,138
2,800 Charming Shoppes, Inc. * 14,175
2,600 Circuit City Stores, Inc. 78,325
5,700 Dayton-Hudson Corp. 223,725
3,000 Dillard Department Stores, Inc., Class A 92,625
5,500 Federated Department Stores, Inc. * 187,688
1,000 Fleming Cos., Inc. 17,250
7,500 Gap, Inc. 225,938
1,600 Giant Food, Inc., Class A 55,200
1,000 Great Atlantic & Pacific Tea Co., Inc. 31,875
1,900 Harcourt General, Inc. 87,638
12,800 Kmart Corp. * 132,800
3,300 Kroger Co. * 153,450
7,200 Limited, Inc. 132,300
6,700 May Department Stores Co. 313,225
1,000 Mercantile Stores Co., Inc. 49,375
2,100 Nordstrom, Inc. 74,419
640 Payless Shoesource * 24,000
6,100 Penney (J.C.) Co., Inc. 297,375
5,256 Price Enterprises, Inc. * 132,057
3,200 Rite Aid Corp. 127,200
10,400 Sears Roebuck & Co. 479,700
1,800 Supervalu, Inc. 51,075
7,300 Toys `R' Us, Inc. * 219,000
60,800 Wal-Mart Stores, Inc. 1,390,800
6,500 Walgreen Co. 260,000
4,000 Winn-Dixie Stores, Inc. 126,500
3,500 Woolworth Corp. * 76,563
-------------
5,751,017
-------------
Metals and Mining - 1.45%
6,000 Alcan Aluminum, Ltd. 201,750
4,602 Allegheny Teledyne, Inc. 105,846
4,600 Aluminum Co. of America 293,250
9,500 Barrick Gold Corp. 273,125
5,900 Battle Mountain Gold Co. 40,563
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------
F-19
<PAGE>
- -----------------------------------------------------------------------
Equity Index Fund
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -----------------------------------------------------------------------
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<S> <C>
Metals and Mining (continued)
3,000 Bethlehem Steel Corp. * $ 27,000
3,100 Biomet, Inc. 46,888
2,500 Cyprus Amax Minerals Co. 58,438
3,700 Echo Bay Mines, Ltd. 24,513
5,100 Freeport-Mcmoran Copper & Gold, Inc., Class B 152,363
1,346 Getchell Gold Corp. * 51,653
4,500 Inco, Ltd., Class A 143,438
1,300 Inland Steel Industries, Inc. 26,000
2,648 Newmont Mining Corp. 118,498
2,300 Nucor Corp. 117,300
1,700 Phelps Dodge Corp. 114,750
6,300 Placer Dome, Inc. 137,025
1,700 Reynolds Metals Co. 95,838
3,501 Santa Fe Pacific Gold Corp. 53,828
800 Timken Co. 36,700
700 TRINOVA Corp. 25,463
2,400 Worthington Industries, Inc. 43,500
-------------
2,187,729
-------------
Building and Construction - 1.43%
2,800 Armco, Inc. * 11,550
800 Centex Corp. 30,100
2,500 Champion International Corp. 108,125
3,000 Dover Corp. 150,750
2,200 Fluor Corp. 138,050
12,733 Home Depot, Inc. 638,242
1,000 Kaufman & Broad Home Corp. 12,875
3,000 Loews Corp. 282,750
4,600 Lowe's Cos., Inc. 163,300
4,200 Masco Corp. 151,200
900 Newport News Shipbuilding, Inc. * 13,500
1,400 Owens-Corning Fiberglass Corp. 59,675
4,900 PPG Industries, Inc. 275,013
600 Pulte Corp. 18,450
1,500 Willamette Industries, Inc. 104,438
-------------
2,158,018
-------------
Aerospace-Airlines - 0.87%
2,400 AMR Corp. * 211,500
2,000 Delta Air Lines, Inc. 141,750
1,700 General Dynamics Corp. 119,850
6,300 Raytheon Co. 303,188
3,800 Southwest Airlines Co. 84,075
6,400 United Technologies Corp. 422,400
1,700 USAir Group, Inc. * 39,738
-------------
1,322,501
-------------
Health Services - 0.84%
1,500 Bard (C.R.), Inc. 42,000
17,800 Columbia/HCA Healthcare Corp. 725,350
2,517 Fresenius Medical Care, ADR * 70,791
2,100 St. Jude Medical, Inc. * 89,513
5,700 Tenet Healthcare Corp. * 124,688
4,900 United Healthcare Corp. 220,500
-------------
1,272,842
-------------
Transportation - 0.68%
4,084 Burlington Northern Santa Fe Corp. $ 352,756
600 Consolidated Freightways Corp. * 5,325
5,700 CSX Corp. 240,825
3,000 Federal Express Corp. * 133,500
3,300 Norfolk Southern Corp. 288,750
-------------
1,021,156
-------------
Business Services - 0.66%
1,433 ACNielson Corp. 21,674
4,500 Cognizant Corp. 148,500
1,700 Ecolab, Inc. 63,962
11,900 First Data Corp. 434,350
3,400 HFS, Inc. 203,150
2,100 Interpublic Group of Companies, Inc. 99,750
1,500 Safety Kleen Corp. 24,563
-------------
995,949
-------------
Food Services - 0.62%
700 Darden Restaurants, Inc. 6,125
600 Luby's Cafeterias, Inc. 11,925
18,500 McDonald's Corp. 837,125
1,300 Ryan's Family Steak Houses, Inc. * 8,938
1,300 Shoney's, Inc. * 9,100
3,400 Wendy's International, Inc. 69,700
-------------
942,913
-------------
Consumer Service - 0.33%
2,800 Block (H & R), Inc. 81,200
10,475 CUC International, Inc. * 248,781
6,200 Service Corp. International 173,600
-------------
503,581
-------------
Hotels-Leisure - 0.29%
1,600 Choice Hotels International, Inc. * 28,200
2,700 Harrah's Entertainment, Inc. * 53,663
6,500 Hilton Hotels Corp. 169,813
3,400 Marriott International, Inc. 187,850
-------------
439,526
-------------
Broadcasting - 0.25%
8,600 Comcast Corp. Special, Class A 153,188
17,600 Tele-Communications, Inc., TCI Group, Class A 229,900
-------------
383,088
-------------
Electronics - 0.07%
900 Tektronix, Inc. 46,125
1,400 Thomas & Betts Corp. 62,125
-------------
108,250
-------------
Capital Goods - 0.07%
1,100 Cincinnati Milacron, Inc. 24,063
1,100 Foster Wheeler Corp. 40,838
900 Giddings & Lewis, Inc. 11,588
200 Nacco Industries, Inc., Class A 10,700
2,000 Navistar International Corp. * 18,250
-------------
105,439
-------------
</TABLE>
See Notes to Financial Statements.
-------------------------------------------------------
F-20
<PAGE>
- -----------------------------------------------------------------------
Equity Index Fund
- -----------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<S> <C>
Leisure and Entertainment - 0.04%
2,600 Brunswick Corp. $ 62,400
-------------
Total Common Stocks 148,605,973
(Cost $107,843,565) -------------
PREFERRED STOCKS - 0.01%
261 Aetna, Inc., Class C 20,717
2,400 Fresenius National Medical Care, Inc.,
Class D * 264
-------------
Total Preferred Stocks 20,981
(Cost $17,063) -------------
Par Value
- ---------
U.S. GOVERNMENT OBLIGATION (A) - 0.22%
U.S. Treasury Bill - 0.22%
$ 350,000 5.20%,11/13/97 (1) $ 334,012
-------------
Total U.S. Government Obligation 334,012
(Cost $334,301) -------------
COMMERCIAL PAPER (A) - 1.32%
2,000,000 Rohm & Haas Co.
6.75%, 01/02/97 1,999,625
-------------
Total Commercial Paper 1,999,625
(Cost $1,999,625) -------------
INVESTMENT COMPANY - 0.15%
223,554 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund $ 223,554
Total Investment Company 223,554
(Cost $223,554) -------------
Total Investments - 100.04% 151,184,145
-------------
(Cost $110,418,108)
Net Other Assets and Liabilities - (0.04)% (54,484)
-------------
Net Assets - 100.00% $ 151,129,661
=============
</TABLE>
- ---------------------------------
* Non income producting security.
(A) Effective yield at time of purchase.
ADR American Depositary Receipt
(1) Security has been deposited as initial margin on open futures contracts. At
December 31, 1996, the Portfolio's open future contracts were as follows:
<TABLE>
<CAPTION>
Number of Contract Expiration Current Opening Market Value
Contracts Purchased Type Date Position at December 31, 1996
- ------------------- --------- ---------- --------------- --------------------
<S> <C> <C> <C> <C>
6 S & P 500 03/97 $2,291,310 $2,233,500
</TABLE>
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $110,464,861. Net realized appreciation (depreciation) aggregated
$40,719,284, of which $42,911,029 related to appreciated investment securities
and $(2,191,745) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31,1996
were $2,120,444. (Unaudited)
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $50,178,615
and $13,496,471 from non-governmental issuers, respectively.
See Notes to Financial Statements.
- -------------------------------------------------------
F-21
<PAGE>
- -----------------------------------------------------------------------
Select Growth and Income Fund
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS . December 31, 1996
- -----------------------------------------------------------------------
Value
Shares (Note 2)
- -----------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 88.93%
Durable Goods - 12.71%
154,600 Corning, Inc. $ 7,150,250
106,200 Crown Cork & Seal Co., Inc. 5,774,625
64,000 General Electric Co. 6,328,000
314,500 Hanson Plc, ADR 2,122,875
92,500 McDermott International, Inc. 1,537,813
20,600 Rockwell International Corp.* 1,254,025
58,300 Texas Instruments, Inc. 3,716,625
313,000 Westinghouse Electric Corp. 6,220,875
65,700 Xerox Corp. 3,457,463
-------------
37,562,551
-------------
Chemicals and Drugs - 11.33%
87,800 Air Products & Chemicals, Inc. 6,069,175
82,800 Allegiance Corp. 2,287,350
63,000 duPont (E.I.) deNemours & Co. 5,945,625
104,200 Grace (W.R.) & Co. 5,392,350
36,400 Merck & Co., Inc. 2,884,700
92,000 Monsanto Co. 3,576,500
131,300 Pharmacia & Upjohn, Inc. 5,202,763
28,600 Warner-Lambert Co. 2,145,000
-------------
33,503,463
-------------
Finance - 11.17%
89,000 Aetna Life & Casualty Co. 7,120,000
58,900 Ahmanson (H.F.) & Co. 1,914,250
43,500 American Express Co. 2,457,750
70,000 Chase Manhattan Corp. 6,247,500
38,700 Citicorp 3,986,100
106,800 Northern Trust Corp. 3,871,500
219,000 TIG Holdings, Inc. 7,418,625
-------------
33,015,725
-------------
Consumer Products - 9.64%
123,700 Anheuser-Busch Cos., Inc. 4,948,000
51,100 Avon Products, Inc. 2,919,088
50,200 Eastman Kodak Co. 4,028,550
19,000 Kellogg Co. 1,246,875
77,500 Nabisco Holdings Corp., Class A 3,012,813
34,200 RJR Nabisco Holdings Corp. 1,162,800
30,100 Seagram Co., Ltd. 1,166,375
120,500 Tupperware Corp. 6,461,813
70,300 Varian Associates, Inc. 3,576,513
-------------
28,522,827
-------------
Technology - 7.33%
186,500 AirTouch Communications, Inc.* 4,709,125
116,400 Electronic Data Systems Corp. 5,034,300
61,100 Honeywell, Inc. 4,017,325
36,600 International Business Machines Corp. 5,526,600
54,700 ITT Corp.* 2,372,613
-------------
21,659,963
-------------
Energy - 7.31%
100,000 Amerada Hess Corp. $ 5,787,500
36,500 Amoco Corp. 2,938,250
43,400 Chevron Corp. 2,821,000
87,877 IMC Global, Inc. 3,438,188
86,400 Oryx Energy Co.* 2,138,400
60,000 Tenneco, Inc. 2,707,500
60,387 Union Pacific Resources Co. 1,766,320
-------------
21,597,158
-------------
Printing and Publishing - 6.29%
68,400 Reader's Digest Association, Inc., Class A 2,753,100
123,800 Time Warner, Inc. 4,642,500
92,400 Tribune Co. 7,288,050
211,100 U.S. West, Inc., Media Group* 3,905,350
-------------
18,589,000
-------------
Aerospace-Aircraft - 6.20%
44,500 AMR Corp. 3,921,563
19,546 Boeing Co. 2,079,206
60,000 Lockheed Martin Corp. 5,490,000
33,700 Northrop Grumman Corp. 2,788,675
95,200 Sundstrand Corp. 4,046,000
-------------
18,325,444
-------------
Metals and Mining - 2.88%
198,100 Allegheny Teledyne, Inc. 4,556,300
14,800 Molten Metal Technology, Inc.* 173,900
56,000 Phelps Dodge Corp. 3,780,000
-------------
8,510,200
-------------
Utilities - 2.74%
53,400 NYNEX Corp. 2,569,875
170,000 WMX Technologies, Inc. 5,546,250
-------------
8,116,125
-------------
Consumer Staples - 2.40%
105,300 Black & Decker Corp. 3,172,163
68,000 Litton Industries, Inc.* 3,238,492
6,100 Philip Morris Cos., Inc. 687,013
-------------
7,097,668
-------------
Health Services - 2.38%
160,000 Baxter International, Inc. 6,560,000
9,800 Johnson & Johnson 487,550
-------------
7,047,550
-------------
Retail - 2.12%
144,800 Wal-Mart Stores, Inc. 3,312,300
135,500 Woolworth Corp.* 2,964,064
-------------
6,276,364
-------------
Automotive - 1.92%
110,000 Ford Motor Co. 3,506,250
38,500 General Motors Corp., Class H 2,165,625
-------------
5,671,875
-------------
</TABLE>
See Notes to Financial Statements.
-------------------------------------------------------
F-22
<PAGE>
- --------------------------------------------------------------------------------
Select Growth and Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<S> <C>
Manufacturing - 1.18%
152,800 Owens-Illinois, Inc.* $ 3,476,200
-------------
Hotels-Leisure - 1.33%
246,000 Host Marriott Corp.* 3,936,000
-------------
Total Common Stocks 262,908,113
(Cost $219,239,811) -------------
PREFERRED STOCKS - 3.23%
30,100 AirTouch Communications, Inc., Class B 820,225
93,600 Globalstar Telecommunications, Ltd. 4,960,800
42,700 Microsoft Corp., Series A* 3,762,938
-------------
Total Preferred Stocks 9,543,963
(Cost $8,768,793) -------------
Par Value
- ---------
CORPORATE NOTES AND BONDS - 1.46%
$ 1,000,000 Ford Motor Credit Co., MTN
7.75%, 04/29/97 1,006,450
465,000 General Motors Acceptance Corp., MTN
7.85%, 11/17/97 472,928
1,490,000 Molten Metal Technology, Inc.
5.50%, 05/01/06 (A) 1,005,750
1,500,000 Platinum Technology, Inc.
6.75%, 11/15/01 1,826,250
-------------
Total Corporate Notes and Bonds 4,311,378
(Cost $4,484,232) -------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 3.17%
Federal National Mortgage Association - 2.34%
7,000,000 5.34%, 03/17/97 6,922,125
-------------
Federal Home Loan Bank - 0.83%
2,500,000 5.61%, 06/12/97 2,441,163
-------------
Total U.S. Government Agency Obligations 9,363,288
(Cost $9,363,288) -------------
CERTIFICATE OF DEPOSIT - 0.67%
$ 2,000,000 Bayerische Vereinsbank AG
6.30%, 11/25/98 2,000,000
-------------
Total Certificate of Deposit 2,000,000
(Cost $2,000,000) -------------
COMMERCIAL PAPER (B) - 4.05%
1,000,000 Cofco Capital Corp.
5.55%, 02/19/97 992,446
4,000,000 Receivables Capital Corp.
5.57%, 01/28/97 3,983,290
7,000,000 Rohm & Haas Co.
6.75%, 01/02/97 6,998,688
-------------
Total Commercial Paper 11,974,424
(Cost $11,974,424) -------------
Shares
------
INVESTMENT COMPANY - 0.03%
98,994 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund 98,994
-------------
Total Investment Company 98,994
(Cost $98,994) -------------
Total Investments - 101.54% 300,200,160
-------------
(Cost $255,929,542)
Net Other Assets and Liabilities - (1.54)% (4,562,173)
-------------
Net Assets - 100.00% $ 295,637,987
=============
</TABLE>
- ---------------------------------------
* Non income producing security.
MTN Medium Term Note
ADR American Depositary Receipt
(A) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold, in transactions exempt from registration,
to qualified institutional buyers. At December 31, 1996, this security
amounted to $1,005,750 or 0.34% of net assets.
(B) Effective yield at time of purchase.
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $255,929,724. Net unrealized appreciation (depreciation) aggregated
$44,270,436, of which $49,153,318 related to appreciated investment securities
and $(4,882,882) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31,1996
were $9,132,496. (Unaudited)
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $209,852,284
and $152,654,285 from non-governmental issuers, and $20,096,631 and $20,107,344
from U.S. Government and Agency issuers, respectively.
See Notes to Financial Statements.
- -------------------------------------------------------
F-23
<PAGE>
- ------------------------------------------------------------------------------
Select Income Fund
- ------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- ------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 46.09%
<S> <C> <C>
Federal National Mortgage Association (B) - 14.60%
$ 265,694 7.00%, 07/01/23, Pool # 050765 Aaa $ 261,295
1,250,000 8.00%, 07/25/23, REMIC Aaa 1,326,563
272,433 7.00%, 12/01/23, Pool # 240476 Aaa 267,494
268,064 7.00%, 01/01/24, Pool # 261764 Aaa 263,204
42,536 7.00%, 05/01/24, Pool # 265289 Aaa 41,765
391,073 7.00%, 06/01/24, Pool # 283173 Aaa 383,983
877,601 7.00%, 06/01/24, Pool # 284717 Aaa 861,690
355,112 7.00%, 07/01/25, Pool # 307012 Aaa 347,453
304,344 7.00%, 07/01/25, Pool # 315035 Aaa 297,779
195,361 7.00%, 07/01/25, Pool # 317579 Aaa 191,147
906,184 7.00%, 08/01/25, Pool # 250345 Aaa 886,638
215,510 7.00%, 08/01/25, Pool # 318107 Aaa 210,861
151,829 7.00%, 08/01/25, Pool # 318348 Aaa 148,554
780,949 7.00%, 08/01/25, Pool # 318863 Aaa 764,104
425,405 7.00%, 08/01/25, Pool # 319485 Aaa 416,229
450,101 7.00%, 08/01/25, Pool # 320333 Aaa 440,392
298,775 7.00%, 09/01/25, Pool # 303555 Aaa 292,330
350,381 7.00%, 09/01/25, Pool # 317782 Aaa 342,824
376,104 6.50%, 01/01/26, Pool # 335089 Aaa 359,180
243,703 6.50%, 03/01/26, Pool # 340878 Aaa 232,432
292,435 7.00%, 04/01/26, Pool # 303841 Aaa 286,303
626,602 6.50%, 04/01/26, Pool # 344046 Aaa 598,060
774,785 6.50%, 05/01/26, Pool # 338413 Aaa 738,951
1,384,660 7.00%, 09/01/26, Pool # 345859 Aaa 1,355,180
------------
11,314,411
------------
Government National Mortgage Association (B) - 7.83%
139,408 9.00%, 05/15/16, Pool # 160578 Aaa 149,476
219,363 9.00%, 07/15/16, Pool # 162910 Aaa 235,332
538,553 9.00%, 10/15/16, Pool # 188832 Aaa 577,760
202,885 9.00%, 08/15/17, Pool # 231937 Aaa 217,233
400,726 9.00%, 12/15/17, Pool # 780201 Aaa 431,903
48,879 9.00%, 07/15/18, Pool # 257346 Aaa 52,336
16,135 9.00%, 11/15/19, Pool # 281963 Aaa 17,209
34,417 7.50%, 03/15/23, Pool # 342553 Aaa 34,578
845,688 7.00%, 07/15/23, Pool # 326534 Aaa 831,683
356,208 7.00%, 11/15/23, Pool # 370890 Aaa 349,974
395,881 7.00%, 02/15/24, Pool # 376403 Aaa 388,953
387,066 7.00%, 07/15/24, Pool # 352919 Aaa 380,292
139,027 9.00%, 08/15/24, Pool # 352129 Aaa 146,846
844,228 9.00%, 08/15/24, Pool # 403934 Aaa 891,708
235,057 9.00%, 11/15/24, Pool # 780029 Aaa 251,729
204,577 9.00%, 01/15/25, Pool # 403688 Aaa 215,637
288,494 7.00%, 07/15/25, Pool # 780204 Aaa 283,446
75,528 9.00%, 10/15/25, Pool # 380235 Aaa 79,775
503,885 9.00%, 08/15/26, Pool # 431960 Aaa 530,948
------------
6,066,818
------------
U.S. Treasury Bond - 8.38%
4,000,000 8.13%, 08/15/19 Aaa 4,626,880
1,650,000 7.88%, 02/15/21 Aaa 1,865,000
------------
6,491,880
------------
U.S. Treasury Notes - 7.12%
$ 1,000,000 6.75%, 05/31/97 Aaa $ 1,005,160
375,000 5.13%, 02/28/98 Aaa 372,596
300,000 5.38%, 05/31/98 Aaa 298,452
450,000 6.25%, 07/31/98 Aaa 452,885
2,000,000 5.13%, 11/30/98 Aaa 1,973,440
300,000 6.88%, 07/31/99 Aaa 306,093
225,000 7.13%, 02/29/00 Aaa 231,644
675,000 6.13%, 07/31/00 Aaa 675,000
200,000 6.38%, 08/15/02 Aaa 201,312
------------
5,516,582
------------
Federal Home Loan Mortgages - 6.30%
369,771 6.50%, 03/01/26, Pool # D69086 Aaa 353,941
550,166 6.50%, 04/01/26, Pool # D69873 Aaa 526,140
987,517 7.50%, 05/01/26, Pool # D71610 Aaa 989,018
492,985 7.50%, 07/01/26, Pool # D72669 Aaa 493,734
663,472 7.50%, 08/01/26, Pool # C00473 Aaa 664,481
195,281 7.50%, 08/01/26, Pool # D73511 Aaa 195,578
197,332 7.50%, 08/01/26, Pool # D73883 Aaa 197,632
493,987 7.50%, 09/01/26, Pool # D74184 Aaa 494,738
966,567 7.50%, 09/01/26, Pool # D74568 Aaa 968,036
------------
4,883,298
------------
U.S. Treasury Bond, Interest Strip - 1.46%
1,300,000 4.30%, 08/15/08* Aaa 607,880
825,000 3.44%, 05/15/18* Aaa 192,027
1,525,000 3.35%, 02/15/19* Aaa 335,759
------------
1,135,666
------------
U.S. Agency Bond - 0.40%
304,807 Federal Deposit Insurance Corp.
Series 1994-C1, REMIC
7.85%, 09/25/25 Aaa 308,712
------------
Total U.S. Government
and Agency Obligations 35,717,367
------------
(Cost $35,409,385)
CORPORATE NOTES AND BONDS - 41.04%
Finance - 14.18%
600,000 Advanta Corp., Series B, MTN
7.00%, 05/01/01 Baa 601,272
550,000 BHP Finance USA, Ltd.
6.42%, 03/01/26 A 544,451
618,421 Chase Commercial Mortgage Securities
7.60%, 12/18/05 NR 637,555
500,000 Duke Realty, LP
7.25%, 09/22/02 Baa 496,945
450,000 Finova Capital Corp.
6.45%, 06/01/00 Baa 448,430
275,000 Ford Motor Credit Co.
6.85%, 08/15/00 A 277,527
325,000 Ford Motor Credit Co.
5.75%, 01/25/01 A 314,620
</TABLE>
See Notes to Financial Statements
-------------------------------------------------------
F-24
<PAGE>
- --------------------------------------------------------------------------------
Select Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
Finance (continued)
$ 400,000 Franchise Finance Corp. of America
7.00%, 11/30/00 Baa $ 400,116
600,000 General Electric Capital Corp.
6.66%, 05/01/18 Aaa 603,756
550,000 General Motors Acceptance Corp., MTN
6.70%, 04/30/01 A 551,535
650,000 Green Tree Financial Corp.
7.24%, 11/15/28 NR 638,014
125,000 Greyhound Financial Corp.
8.50%, 02/15/99 Baa 130,196
1,100,000 Highwoods/Forsyth, LP
6.75%, 12/01/03 Baa 1,079,177
500,000 Integra Financial Corp.
Subordinate Note
6.50%, 04/15/00 A 497,275
1,000,000 Merrill Lynch Mortgage Investors, Inc.
6.96%, 12/21/28 NR 929,380
625,000 Sears Roebuck Acceptance Corp., MTN
6.69%, 04/30/01 A 626,725
600,000 Security Connecticut Corp., MTN
7.13%, 03/01/03 Baa 588,408
450,000 TIG Holdings, Inc.
8.13%, 04/15/05 Baa 475,187
1,150,000 United Companies Financial Corp.
7.70%, 01/15/04 Ba 1,150,000
------------
10,990,569
------------
Banking - 5.67%
275,000 Capital One Bank, MTN
8.13%, 03/01/00 Baa 285,791
325,000 Capital One Bank, MTN
5.95%, 02/15/01 Baa 313,957
550,000 Chase Manhattan Corp.
9.38%, 07/01/01 A 606,617
1,050,000 First Union Corp.
Subordinated Notes
6.55%, 10/15/35 A 1,021,797
450,000 First USA Bank, MTN
5.75%, 01/15/99 Baa 443,970
900,000 First USA Bank, MTN
7.00%, 08/20/01 Baa 900,252
400,000 St. George Bank, Ltd.
6.88%, 04/01/99 (A) Baa 400,632
425,000 St. George Bank, Ltd.
Subordinated Notes
7.15%, 10/15/05 (A) Baa 424,329
------------
4,397,345
------------
Securities Brokers and Dealers - 5.31%
190,000 Bear Stearns Cos., Inc.
Senior Note
6.75%, 08/15/00 A 191,138
150,000 Goldman Sachs Group, LP
6.88%, 09/15/99 (A) A 151,869
575,000 Goldman Sachs Group, LP
6.38%, 06/15/00 (A) A 571,332
400,000 Goldman Sachs Group, LP
6.20%, 12/15/00 A 391,352
575,000 Merrill Lynch & Co., Inc.
6.00%, 01/15/01 AA 563,937
400,000 Morgan Stanley Group, Inc.
8.10%, 06/24/02 A 422,076
50,000 Salomon, Inc., MTN
6.40%, 04/05/99 Baa 49,699
325,000 Salomon, Inc.
7.00%, 05/15/99 Baa 327,568
175,000 Salomon, Inc., MTN
6.82%, 07/26/99 Baa 176,155
100,000 Salomon, Inc.
7.13%, 08/01/99 Baa 101,122
250,000 Salomon, Inc., MTN
6.63%, 11/30/00 Baa 247,818
550,000 Salomon, Inc.
7.25%, 05/01/01 Baa 555,203
350,000 Smith Barney Holdings, Inc.
7.88%, 10/01/99 A 362,530
------------
4,111,799
------------
Real Estate - 4.33%
500,000 Avalon Properties, Inc.
Senior Note, REIT
7.38%, 09/15/02 Baa 504,425
400,000 ERP Operating, LP
8.50%, 05/15/99 (A) Baa 414,236
200,000 ERP Operating, LP
7.95%, 04/15/02 Baa 207,418
650,000 Meditrust, REIT
7.82%, 09/10/26 Baa 668,889
500,000 Shopping Center Associates
6.75%, 01/15/04 (A) A 486,025
450,000 Spieker Properties, LP
6.65%, 12/15/00 Baa 443,922
625,000 Trinet Corporate Realty Trust, Inc.
7.30%, 05/15/01 Baa 631,625
------------
3,356,540
------------
Industrial - 3.37%
1,200,000 Comdisco, Inc.
5.75%, 02/15/01 Baa 1,161,588
1,250,000 Cominco, Ltd.
6.88%, 02/15/06 Baa 1,193,263
250,000 Falconbridge, Ltd.
7.35%, 11/01/06 Baa 252,533
------------
2,607,384
------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-25
<PAGE>
- --------------------------------------------------------------------------------
Select Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Print and Publishing - 2.49%
$ 275,000 News America Holdings, Inc.
9.50%, 07/15/24 Baa $ 312,048
200,000 News America Holdings, Inc.
7.70%, 10/30/25 Baa 189,328
575,000 Time Warner, Inc.
9.13%, 01/15/13 Ba 627,728
220,000 Time Warner, Inc.
9.15%, 02/01/23 Ba 238,478
575,000 Time Warner, Inc.
6.85%, 01/15/26 Ba 560,642
------------
1,928,224
------------
Insurance - 2.31%
575,000 Equitable Life Assurance Society
7.70%, 12/01/15 (A) A 574,759
800,000 Markel Corp.
7.25%, 11/01/03 Ba 792,408
400,000 USF & G Corp.
Senior Note
8.38%, 06/15/01 Baa 424,833
------------
1,792,000
------------
Oil, Gas, and Petroleum - 2.31%
1,350,000 Methanex Corp.
7.75%, 08/15/05 Baa 1,387,125
300,000 System Energy Resources, Inc.
6.00%, 04/01/98 Baa 298,050
100,000 System Energy Resources, Inc.
7.63%, 04/01/99 Baa 101,869
------------
1,787,044
------------
Manufacturing - 1.07%
425,000 Noranda Forest, Inc., Debenture
8.88%, 10/15/99 Baa 446,603
400,000 Scherer (R.P.) Corp.
Senior Note
6.75%, 02/01/04 Ba 385,124
------------
831,727
------------
Total Corporate Notes and Bonds 31,802,632
(Cost $31,563,064) ------------
ASSET-BACKED SECURITIES - 8.11%
441,720 Advanta Mortgage Loan Trust,
Series 93-4 5.50%, 03/25/10 Aaa 422,063
1,200,000 Contimortgage Home Equity Loan Trust,
Class A 6.88%, 01/15/28 Aaa 1,183,500
325,000 EQCC Home Equity Loan Trust,
Series 1996-1 6.19%, 12/15/10 Aaa 314,454
925,000 EQCC Home Equity Loan Trust,
Series 1996-4 6.89%, 10/15/11 Aaa 923,270
159,856 Fund America Investors Corp. II,
1993-F 5.40%, 09/25/09 Aaa 153,462
550,000 The Money Store Home Equity Trust,
1996-D 7.00%, 01/15/14 Aaa 547,080
625,000 The Money Store Home Equity Trust,
1996-B 7.18%, 02/15/15 Aaa 632,425
575,000 Mortgage Capital Funding, Inc.,
Series 96-MC-1 7.90%, 02/15/06 NR 609,500
118,419 Resolution Trust Corp.
8.00%, 04/25/25 Baa 120,750
275,000 Resolution Trust Corp.
6.90%, 06/01/25 A 270,188
285,312 Resolution Trust Corp.
7.45%, 09/15/25 Baa 284,242
625,000 Resolution Trust Corp.
8.00%, 06/25/26 NR 640,431
181,622 UCFC Home Equity Loan Trust, 1994-B2
7.10%, 03/10/23 Aaa 182,871
------------
Total Asset-Backed Securities 6,284,236
Cost ($6,217,616) ------------
COMMERCIAL PAPER (C) - 2.19%
1,700,000 Federal National Mortgage Association
5.52%, 01/16/97 Aaa 1,696,276
------------
Total Commercial Paper 1,696,276
(Cost $1,696,276) ------------
<CAPTION>
Shares
------
<S> <C>
INVESTMENT COMPANY - 1.44%
1,118,722 ILA Prime Obligation Portfolio Fund,
Class B 1,118,722
------------
Total Investment Company 1,118,722
(Cost $1,118,722) ------------
Total Investments - 98.87% 76,619,233
(Cost $76,005,063) ------------
Net Other Assets and Liabilities - 1.13% 879,110
------------
Net Assets - 100.00% $ 77,498,343
============
</TABLE>
- ------------------------------
* Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of
payment representing interest only or principal only.
(A) Securities exempt from registration under rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualified institutional buyers. At December 31, 1996,
these securities amounted to $3,023,182 or 3.90% of net assets.
(B) Pass Through Certificates
(C) Effective yield at time of purchase.
MTN Medium Term Note
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
See Notes to Financial Statements.
--------------------------------------------------------
F-26
<PAGE>
- --------------------------------------------------------------------------------
Select Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $76,015,026. Net unrealized appreciation (depreciation) aggregated
$604,207, of which $1,047,795 related to appreciated investment securities and
$(443,588) related to depreciated investment securities.
As of December 31, 1996, the portfolio had capital loss carryforwards which
expire as follows: $934,165 in 2002; and $500,277 in 2004.
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $29,126,201
and $16,858,910 from non-governmental issuers, respectively, and $59,448,370 and
$53,460,429 from U.S. Government and Agency issuers, respectively.
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
<TABLE>
<CAPTION>
Moody's Ratings (Unaudited)
<S> <C>
Aaa 56.13%
Aa 0.75
A 10.41
Baa 23.16
Ba 4.97
NR (Not Rated) 4.58
------
100.00%
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-27
<PAGE>
- --------------------------------------------------------------------------------
Investment Grade Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 44.59%
Federal National
Mortgage Association - 14.43%
$ 948,829 6.50%, 05/01/08, Pool # 050730 (C) Aaa $ 938,003
727,582 8.50%, 07/01/08, Pool # 010001 (C) Aaa 759,384
286,965 8.00%, 04/01/09, Pool # 111253 (C) Aaa 294,761
917,612 9.00%, 02/01/10, Pool # 303165 (C) Aaa 960,602
1,793,300 6.50%, 09/01/10, Pool # 327824 (C) Aaa 1,763,082
358,349 7.00%, 05/01/17, Pool # 068635 (C) Aaa 360,037
1,669,533 8.00%, 04/01/22, Pool # 124267 (C) Aaa 1,712,173
1,987,856 8.00%, 01/01/23, Pool # 125178 (C) Aaa 2,036,300
956,825 8.00%, 04/01/23, Pool # 124834 (C) Aaa 980,143
2,379,051 7.00%, 11/01/23, Pool # 050930 (C) Aaa 2,335,919
55,197 7.00%, 11/01/23, Pool # 249703 (C) Aaa 54,196
3,599,502 6.50%, 01/01/24, Pool # 050965 (C) Aaa 3,452,138
657,472 7.00%, 02/01/24, Pool # 050993 (C) Aaa 645,552
2,098,589 7.50%, 10/01/25, Pool # 321152 (C) Aaa 2,100,184
418,211 7.50%, 10/01/26, Pool # 359890 (C) Aaa 418,408
652,789 7.50%, 12/01/26, Pool # 362034 (C) Aaa 652,378
404,000 7.50%, 12/01/26, Pool # 366778 (C) Aaa 403,745
2,841,481 7.50%, 12/01/26 (D) Aaa 2,839,691
------------
22,706,696
------------
Federal Home Loan
Mortgage Corporation (C) - 9.12%
466,841 9.50%, 03/01/01, Pool # 200029 Aaa 487,121
274,986 6.50%, 06/01/04, Pool # 548801 Aaa 273,292
344,972 6.50%, 08/01/04, Pool # 181863 Aaa 343,361
1,672,268 7.50%, 01/01/07, Pool # E00071 Aaa 1,701,951
419,198 8.00%, 04/01/07, Pool # 170014 Aaa 431,150
408,923 8.00%, 09/01/08, Pool # 530125 Aaa 419,853
271,625 8.00%, 04/01/09, Pool # 534627 Aaa 277,481
183,545 8.00%, 06/01/09, Pool # 184989 Aaa 188,653
346,215 8.00%, 08/01/09, Pool # 546108 Aaa 355,850
3,903,063 7.00%, 08/01/10, Pool # E20187 Aaa 3,906,303
40,537 7.00%, 09/01/11, Pool # E65257 Aaa 40,511
486,682 7.00%, 11/01/11, Pool # E65777 Aaa 486,376
1,260,000 7.00%, 12/01/11, Pool # E20276 Aaa 1,259,206
1,269,964 7.90%, 07/01/16, Pool # W30001 Aaa 1,330,684
634,983 8.75%, 05/01/17, Pool # A00870 Aaa 666,846
517,238 7.50%, 10/01/18, Pool # 304313 Aaa 523,155
740,485 9.50%, 08/01/19, Pool # 555229 Aaa 796,481
26,276 9.50%, 08/01/20, Pool # A00742 Aaa 28,433
25,331 10.00%, 10/01/20, Pool # D13442 Aaa 27,715
244,576 10.00%, 12/01/20, Pool # D06613 Aaa 267,696
489,830 9.50%, 02/01/21, Pool # D06612 Aaa 530,540
------------
14,342,658
------------
U.S. Treasury Notes - 8.41%
1,300,000 5.13%, 02/28/98 Aaa 1,291,667
750,000 5.13%, 04/30/98 Aaa 744,255
4,070,000 5.88%, 03/31/99 Aaa 4,066,174
1,500,000 7.75%, 01/31/00 Aaa 1,569,615
5,730,000 5.75%, 08/15/03 Aaa 5,558,100
------------
13,229,811
------------
U.S. Treasury Bonds - 7.79%
4,565,000 7.25%, 05/15/16 Aaa 4,820,366
1,500,000 7.50%, 11/15/16 Aaa 1,623,746
2,750,000 7.63%, 11/15/22 Aaa 3,035,753
2,662,000 7.13%, 02/15/23 Aaa 2,779,288
------------
12,259,153
------------
Government National
Mortgage Association - 4.19%
1,719,995 9.50%, 02/15/06, Pool # 780238 Aaa 1,830,367
323,750 6.50%, 09/15/08, Pool # 357124 (C) Aaa 320,661
170,617 9.00%, 08/15/16, Pool # 165233 (C) Aaa 183,079
237,198 9.00%, 08/15/16, Pool # 173341 (C) Aaa 254,522
289,281 8.00%, 08/15/22, Pool # 323199 (C) Aaa 297,236
1,056,308 7.00%, 06/15/23, Pool # 349678 (C) Aaa 1,038,815
440,116 8.00%, 08/15/26, Pool # 431243 Aaa 448,918
418,138 8.00%, 09/15/26, Pool # 421495 Aaa 426,501
496,513 8.00%, 09/15/26, Pool # 431341 Aaa 506,443
1,257,477 8.00%, 09/15/26, Pool # 436476 Aaa 1,282,627
------------
6,589,169
------------
Federal Home Loan Bank - 0.65%
1,000,000 7.89%, 12/23/97 Aaa 1,019,840
------------
Total U.S. Government
and Agency Obligations 70,147,327
(Cost $69,889,085) ------------
CORPORTATE NOTES AND BONDS - 34.93%
Finance - 8.14%
1,450,000 BCH Cayman Islands, Ltd.
Yankee Subordinated Note, Guaranteed
6.50%, 02/15/06 A 1,374,383
1,000,000 Capital One Bank, MTN
5.95%, 02/15/01 Baa 966,022
500,000 Coles Myer Finance USA, Ltd., MTN,
Guaranteed 5.45%, 07/16/98 A 495,310
1,300,000 Ford Motor Credit Co.
6.25%, 12/08/05 A 1,231,724
1,500,000 General Motors Acceptance Corp.
7.00%, 03/01/00 A 1,518,840
800,000 Heller Financial, Inc.
7.75%, 05/15/97 A 805,104
1,500,000 Merita Bank, Ltd., Yankee Subordinated
Note 6.50%, 01/15/06 A 1,429,035
1,500,000 RHG Finance Corp., Guaranteed
8.88%, 10/01/05 Ba 1,585,680
1,300,000 Santander Financial Issuances, Ltd.
Yankee Subordinated Note, Guaranteed
7.75%, 05/15/05 A 1,353,066
1,975,000 Zions Institutional Capital Trust
Series A 8.54%, 12/15/26 (B) A 2,054,000
------------
12,813,164
------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------
F-28
<PAGE>
- --------------------------------------------------------------------------------
Investment Grade Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Oil, Gas, and Petroleum - 4.15%
$ 1,350,000 Coastal Corp., Senior Debenture
9.75%, 08/01/03 Baa $ 1,534,356
1,000,000 Parker & Parsley Petroleum Co., Senior Note
8.88%, 04/15/05 Baa 1,106,690
700,000 Southwest Gas Corp., Debenture, Series F
9.75%, 06/15/02 Baa 789,488
580,000 Texas Utilities Electric Co., First Mortgage
7.38%, 10/01/25 Baa 545,942
1,000,000 Tosco Corp., First Mortgage, Series A
9.00%, 03/15/97 Baa 1,015,000
1,500,000 Valero Energy Corp., MTN
7.50%, 05/31/01 Ba 1,543,590
------------
6,535,066
------------
Utilities - 3.55%
2,170,000 Connecticut Light & Power Co.
First Mortgage, Series 94D
7.88%, 10/01/24 Baa 2,233,559
1,000,000 Empresa Electrica Pehuenche S.A.
Yankee Note
7.30%, 05/01/03 Baa 1,010,910
1,250,000 PECO Energy Co.
First Mortgage, Series 1992
7.50%, 01/15/99 Baa 1,277,325
1,050,000 Sithe/Independence Funding Corp.
Guaranteed, Series A
9.00%, 12/30/13 Baa 1,067,420
------------
5,589,214
------------
Securities Brokers, Dealers and Exchanges - 3.39%
1,300,000 Donaldson Lufkin & Jenrette, Inc.
Senior Note
6.88%, 11/01/05 Baa 1,266,642
1,500,000 Legg Mason, Inc., Senior Note
6.50%, 02/15/06 Baa 1,415,115
1,500,000 Paine Webber Group, Inc., Debenture
9.25%, 12/15/01 Baa 1,644,120
1,000,000 Salomon, Inc., Senior Note
7.25%, 05/01/01 Baa 1,009,460
------------
5,335,337
------------
Transportation - 2.89%
1,300,000 AMR Corp., Debenture
9.50%, 05/15/01 Baa 1,424,202
900,000 Consolidated Freightways, Inc.
9.13%, 08/15/99 Baa 946,080
2,003,000 United Air Lines, Inc.
9.00%, 12/15/03 Baa 2,179,264
------------
4,549,546
------------
Manufacturing - 2.12%
1,500,000 Black & Decker Corp.
6.63%, 11/15/00 Baa 1,498,125
1,200,000 Boise Cascade Corp., Debenture
10.13%, 12/15/97 Baa 1,243,500
600,000 Chesapeake Corp., Debenture
7.20%, 03/15/05 Baa 590,040
------------
3,331,665
------------
Telephone and Telecommunications - 1.91%
1,000,000 GTE Corp., Debenture
8.85%, 03/01/98 A 1,031,020
500,000 GTE Corp., Debenture
8.75%, 11/01/21 A 580,000
1,550,000 TCI Communications, Inc., Senior Debenture
7.88%, 02/15/26 Ba 1,386,413
------------
2,997,433
------------
Printing and Publishing - 1.78%
1,050,000 News America Holdings, Inc.
Senior Note, Guaranteed
9.13%, 10/15/99 Baa 1,120,392
550,000 Time Warner, Inc., Debenure
9.15%, 02/01/23 Ba 596,195
1,080,000 Time Warner, Inc., Debenure
8.05%, 01/15/16 Ba 1,076,512
------------
2,793,099
------------
Processed Foods - 1.67%
1,000,000 Ralcorp Holdings, Inc.
8.75%, 09/15/04 Ba 1,092,750
1,500,000 Ralston Purina Co., Debenture
7.75%, 10/01/15 Baa 1,538,190
------------
2,630,940
------------
Industrial - 1.57%
1,250,000 Amax, Inc., Debenture
9.88%, 06/13/01 Baa 1,394,488
1,050,000 USX-Marathon Group, Inc., Debenture
8.88%, 09/15/97 Baa 1,069,131
------------
2,463,619
------------
Health Products - 1.28%
2,000,000 Allegiance Corp.
7.30%, 10/15/06 Baa 2,013,260
------------
Pharmaceuticals - 0.85%
1,350,000 Georgia Gulf Corp.
7.63%, 11/15/05 Ba 1,328,805
------------
Foreign - 0.66%
1,000,000 Republic of Colombia, Series E, MTN
8.66%, 10/07/16 (B) Ba 1,043,750
------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-29
<PAGE>
- --------------------------------------------------------------------------------
Investment Grade Income Fund
- --------------------------------------------------------------------------------
Portfolio of investments, Continued . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
Engineering and Construction - 0.53%
$ 850,000 Pulte Corp., Senior Note
7.00%, 12/15/03 Baa $ 838,202
------------
Consumer Products - 0.44%
675,000 Time Warner Entertainment Co., LP
Senior Debenture
8.38%, 03/15/23 Baa 684,362
------------
Total Corporate Notes and Bonds 54,947,462
(Cost $54,667,777) ------------
ASSET-BACKED SECURITIES (C) - 16.40%
1,750,000 Associates Manufactured Housing
Class A2, Series 1996-1
6.70%, 03/15/27 Aaa 1,766,680
2,045,690 Bear Stearns Mortgage Securities, Inc.
Class 1A, Series 1995-1, CMO
6.48%, 05/25/10 Aaa 2,007,333
446,171 Contimortgage Home Equity Loan Trust
Class A1, Series 1994-3
7.63%, 05/15/09 Aaa 447,705
1,962,033 Federal National Mortgage Association
Class A, Series 1996-M6,
7.37%, 08/17/03,
CMO, REMIC (C) Aaa 2,016,602
1,599,526 First Plus Home Loan Trust
Class A5, Series 1996-2
7.47%, 02/20/11 Aaa 1,629,017
775,000 First Plus Home Loan Trust
Class A3, Series 1996-3
7.05%, 11/20/08 Aaa 781,781
1,497,671 General Motors Acceptance Corp.
Commercial Mortgage Securities, Inc.
Class A2A, Series 1996-C1, CMO
6.79%, 09/15/03 Aaa 1,493,459
1,700,000 Green Tree Financial Corp.
Class A3, Series 1994-1
6.90%, 04/15/19 Aa 1,719,391
500,000 Green Tree Financial Corp.
Class A2, Series 1994-2
7.35%, 05/15/19 Aa 506,405
850,000 Green Tree Financial Corp.
Class A3, Series 1994-8
8.25%, 04/15/20 Aa 877,163
853,462 Green Tree Recreational Equipment &
Consumer Trust
Class A1, Series 1996-A
5.55%, 02/15/18 Aaa 830,794
556,969 Nationsbank Auto Grantor Trust
Class B, Series 1995-A
6.00%, 06/15/02 A 555,749
1,950,000 Olympic Automobile Receivables Trust
Class A4, Series 1996-A
5.85%, 07/15/01 Aaa 1,934,766
1,350,000 Premier Auto Trust
Class A4, Series 1995-4
6.00%, 05/06/00 Aaa 1,350,000
1,000,000 Premier Auto Trust
Class A3, Series 1996-2
6.35%, 01/06/00 Aaa 1,004,680
1,500,000 Residential Asset Securitization Trust
Class A3, Series 1996-A10, CMO
7.50%, 11/25/11 Aaa 1,513,125
1,250,000 Residential Asset Securitization Trust
Class A5, Series 1996-A5, CMO
7.75%, 09/25/26 Aaa 1,273,047
1,750,000 Resolution Trust Corp.
Class A4C, Series 1995-C1, CMO
6.85%, 02/25/27 Aaa 1,740,703
1,150,508 Structured Asset Securities Corp.
Class A1B, Series 1996-CFL, CMO
5.75%, 02/25/28 NR 1,146,194
460,152 United Air Lines, Inc., Series 1991-B1
9.30%, 03/22/08 Baa 501,042
182,629 Western Financial Grantor Trust
Class A2, Series 1994-2
6.38%, 09/01/99 Aaa 184,113
535,720 Western Financial Grantor Trust
Class A2, Series 1995-2
7.10%, 07/01/00 Aaa 532,707
------------
Total Asset-Backed Securities 25,812,456
(Cost $25,696,671) ------------
<CAPTION>
Shares
------
<S> <C> <C>
COMMERCIAL PAPER (A) - 4.75%
2,000,000 Receivables Capital Corp.
5.57%, 01/28/97 Aaa 1,991,645
2,500,000 Rohm & Haas Co.
6.75%, 01/02/97 Aaa 2,499,531
3,000,000 Federal National Mortgage Association
5.45%, 01/14/97 Aaa 2,994,096
------------
Total Commercial Paper 7,485,272
(Cost $7,485,272) ------------
</TABLE>
See Notes to Financial Statements
---------------------------------------------------------
F-30
<PAGE>
- --------------------------------------------------------------------------------
Investment Grade Income Fund
- --------------------------------------------------------------------------------
Portfolio of investments, Continued . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- ------------------------------------------------------------------------------
<S> <C>
INVESTMENT COMPANY - 0.16%
247,638 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund $ 247,638
------------
Total Investment Company 247,638
(Cost $247,638) ------------
Total Investments - 100.83% 158,640,155
(Cost $157,986,443) ------------
Net Other Assets and Liabilities - (0.83)% (1,312,925)
------------
Net Assets - 100.00% $157,327,230
============
- ---------------------------------------------
</TABLE>
(A) Effective yield at time of purchase.
(B) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualified institutions buyers. At December 31, 1996,
these securities amounted to $3,097,750 or 1.97% of net assets.
(C) Pass Through Certificates
(D) Forward Commitment
CMO Collateralized Mortgage Obligations
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $158,065,791. Net realized appreciation (depreciation) aggregated
$574,364, of which $2,030,265 related to appreciated investment securities and
$(1,455,901) related to depreciated investment securities.
As of December 31, 1996, the portfolio had capital loss carryforwards which
expire as follows: $1,515,795 in 2002. During 1996, the fund utilized
$216,143 of its capital loss carryforwards.
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $46,574,081
and $18,839,391 from non-governmental issuers, respectively, and $128,371,398
and $136,071,521 from U.S. Government and Agency issuers, respectively.
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
<TABLE>
<CAPTION>
Moody's Ratings (Unaudited)
<S> <C>
Aaa 61.96%
Aa 1.96
A 7.85
Baa 21.42
Ba 6.09
NR (Not Rated) 0.72
-------
100.00%
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-31
<PAGE>
- --------------------------------------------------------------------------------
Government Bond Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- ------------------------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 89.76%
U.S. Treasury Notes - 42.92%
$ 1,750,000 6.13%, 03/31/98 $ 1,758,470
2,050,000 8.25%, 07/15/98 2,123,021
1,200,000 6.88%, 08/31/99 1,225,128
6,400,000 7.13%, 02/29/00 6,588,992
2,250,000 6.25%, 10/31/01 2,252,115
5,475,000 5.75%, 08/15/03 5,310,750
650,000 6.50%, 08/15/05 654,167
-----------
19,912,643
-----------
Federal National Mortgage Association - 17.71%
1,175,000 6.16%, 03/29/01, MTN 1,166,740
1,226,271 7.37%, 08/17/03, Class A
Series 1996-M6, CMO (A) 1,260,376
1,423,244 6.50%, 05/01/08, Pool # 50730 (A) 1,407,004
1,300,000 8.40%, 02/25/09, Class B
Series 1994-M5,CMO (A) 1,383,688
172,179 8.00%, 04/01/09, Pool # 111253 (A) 176,857
1,660,596 7.50%, 12/01/09, Pool # 356808 (A) 1,688,095
1,000,000 6.40%, 11/25/10, Class A2
Series 1995-T2, REMIC (A) 1,001,094
132,305 7.00%, 05/01/17, Pool # 68635 (A) 132,928
-----------
8,216,782
-----------
Federal Home Loan Mortgage Corporation - 11.84%
895,000 7.19%, 09/15/99, Series A 902,831
486,770 9.50%, 03/01/01, Pool # 200029 (A) 507,915
1,000,000 5.99%, 03/06/01, Series 1 981,250
183,324 6.50%, 06/01/04, Pool # 548801 (A) 182,195
284,977 6.50%, 08/01/04, Pool # 181863 (A) 283,646
408,923 8.00%, 09/01/08, Pool # 530125 (A) 419,853
308,304 8.00%, 04/01/09, Pool # 534627 (A) 314,950
114,725 8.00%, 06/01/09, Pool # 184989 (A) 117,918
346,215 8.00%, 08/01/09, Pool # 546108 (A) 355,850
220,882 8.00%, 09/01/09, Pool # 273699 (A) 226,086
347,256 7.90%, 07/01/16, Pool # W30001 (A) 363,859
410,724 8.00%, 06/01/19, Pool # 544250 422,335
380,933 10.00%, 03/01/21, Pool # A00969 416,467
-----------
5,495,155
-----------
U.S. Government Backed Bonds - 6.73%
1,500,000 State of Israel, Class 1-B
5.25%, 03/15/98 1,490,565
1,100,000 Tennessee Valley Authority, Series D
6.00%, 11/01/00 1,088,483
550,000 Tennessee Valley Authority, Series A
6.38%, 06/15/05 541,321
-----------
3,120,369
-----------
Government National Mortgage Association - 6.42%
512,495 9.50%, 02/15/06, Pool # 780238 545,382
111,120 8.00%, 12/15/06, Pool # 014758 (A) 115,322
107,510 6.50%, 06/15/09, Pool # 376548 (A) 106,468
2,195,956 7.00%, 06/15/09, Pool # 374332 (A) 2,211,042
-----------
2,978,214
-----------
U.S. Treasury Bond - 3.04%
1,100,000 10.75%, 08/15/05 1,411,266
-----------
Federal Home Loan Bank - 1.10%
500,000 7.89%, 12/23/97 509,920
-----------
Total U.S. Government and Agency Obligations 41,644,349
(Cost $41,553,449) -----------
ASSET-BACKED SECURITIES (A) - 8.08%
509,411 Advanta Mortgage Loan Trust
Class A2, Series 1995-2
6.60%, 02/25/10 510,603
1,175,000 Associates Manufactured Housing
Class A2, Series 1996-1
6.70%, 03/15/27 1,186,199
700,000 Green Tree Financial Corp.
Class A3, Series 1994-7
8.00%, 03/15/20 720,230
136,554 Green Tree Recreational Equipment & Consumer Trust
Class A1, Series 1996-A
5.55%, 02/15/18 132,927
1,200,000 Premier Auto Trust, Class A4, Series 1995-4
6.00%, 05/06/00 1,200,000
-----------
Total Asset-Backed Securities 3,749,959
(Cost $3,765,600) -----------
<CAPTION>
Shares
------
<S> <C> <C>
INVESTMENT COMPANY - 0.80%
369,023 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund 369,023
-----------
Total Investment Company 369,023
(Cost $369,023) -----------
Total Investments - 98.64% 45,763,331
(Cost $45,688,072) -----------
Net Other Assets and Liabilities - 1.36% 632,600
-----------
Net Assets - 100.00% $46,395,931
===========
- -----------------------------------------------
</TABLE>
(A) Pass Through Certificates
CMO Collateralized Mortgage Obligations
MTN Medium Term Note
REMIC Real Estate Mortgage Investment Conduit
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
<TABLE>
<CAPTION>
Moody's Ratings (Unaudited)
<S> <C>
Aaa 100.00%
</TABLE>
See Notes to Financial Statements.
----------------------------------------------------------
F-32
<PAGE>
- --------------------------------------------------------------------------------
Government Bond Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $45,744,515. Net realized appreciation (depreciation) aggregated
$18,816 of which $221,227 related to appreciated investment securities and
$(202,411) related to depreciated investment securities.
As of December 31, 1996, the portfolio had capital loss carryforwards which
expire as follows: $1,544,794 in 2002; $515,322 in 2003; and $461,593 in 2004.
OTHER INFORMATION
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $2,238,611
and $2,022,221 from non-governmental issuers, respectively, and $52,284,952 and
$48,718,854 from U.S. Government and Agency issuers, respectively.
See Notes to Financial Statements.
- -------------------------------------------------------
F-33
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 13.41%
Automotive - 4.97%
$ 3,000,000 American Honda Finance Corp., MTN
5.62%, 08/15/97* (B) $ 3,000,000
1,000,000 Ford Motor Credit Co., MTN
5.49%, 05/05/97* 999,851
200,000 General Motors Acceptance Corp., MTN
7.00%, 05/19/97 200,863
2,500,000 General Motors Acceptance Corp., MTN
5.46%, 06/04/97* 2,498,382
1,100,000 General Motors Acceptance Corp., MTN
6.50%, 07/25/97 1,104,943
3,000,000 General Motors Acceptance Corp., MTN
5.72%, 08/01/97* 3,002,449
-----------
10,806,488
-----------
Security Brokers, Dealers and Exchanges - 3.46%
3,000,000 Bear Stearns Cos., Inc., MTN
5.60%, 10/08/97* 3,000,000
2,500,000 Morgan Stanley Group, Inc., MTN
5.79%, 02/14/97* 2,500,527
2,000,000 Paine Webber Group, Inc., MTN
Senior Note
8.63%, 03/03/97 2,010,047
-----------
7,510,574
-----------
Finance - 2.30%
1,000,000 Associates Corp. of North America
Senior Note
6.88%, 01/15/97 1,000,410
1,000,000 NBD Bank of North America, MTN
4.60%, 02/03/97 998,956
500,000 NBD Bank of North America, MTN
6.50%, 05/27/97 501,127
2,500,000 PNC Bank, MTN
5.32%, 03/24/97* 2,499,512
-----------
5,000,005
-----------
Food and Beverage - 1.15%
2,500,000 PepsiCo, Inc.
6.13%, 01/15/98 2,509,191
-----------
Utilities - 0.93%
1,000,000 Potomac Electric Power Co., MTN
6.70%, 05/28/97 1,002,687
1,000,000 Southwestern Bell Capital Corp., MTN
7.75%, 10/30/97 1,014,477
-----------
2,017,164
-----------
Retail - 0.60%
1,300,000 Sears Roebuck & Co., MTN
5.22%, 02/24/97 $ 1,298,322
-----------
Total Corporate Notes and Bonds 29,141,744
-----------
(Cost $29,141,744)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 16.33%
Federal Home Loan Bank (A) - 6.90%
770,000 5.24%, 02/19/97 764,508
3,000,000 5.22%, 03/07/97 2,971,725
7,000,000 5.25%, 05/02/97 6,876,479
1,500,000 5.17%, 06/23/97 1,462,733
1,500,000 5.61%, 07/07/97 1,456,289
1,500,000 5.22%, 08/15/97 1,450,845
-----------
14,982,579
-----------
Federal Farm Credit Bank (A) - 5.53%
5,000,000 5.19%, 05/28/97 4,894,038
335,000 5.19%, 05/29/97 327,852
1,000,000 5.27%, 06/18/97 975,407
2,625,000 5.25%, 10/31/97 2,509,833
3,500,000 5.28%, 12/18/97 3,319,991
-----------
12,027,121
-----------
U.S. Treasury Notes - 2.30%
2,000,000 5.50%, 07/31/97 1,996,406
3,000,000 6.00%, 08/31/97 3,005,118
-----------
5,001,524
-----------
Federal National Mortgage Association(A) - 1.60%
3,500,000 5.47%, 02/27/97 3,469,521
Total U.S. Government -----------
and Agency Obligations 35,480,745
(Cost $ 35,480,745) -----------
MUNICIPAL BOND - 1.15%
2,500,000 De Kalb County, Georgia
Development Authority Revenue
5.55%, 02/04/97 2,500,000
-----------
Total Municipal Bond 2,500,000
(Cost $2,500,000) -----------
</TABLE>
See Notes to Financial Statements.
------------------------------------------------------------
F-34
<PAGE>
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (A) - 62.50%
Finance - 22.41%
$ 3,520,000 Asset Backed Capital Finance, Inc.
5.51%, 03/17/97* $ 3,480,267
1,000,000 Asset Backed Capital Finance, Inc.
5.45%, 05/12/97 980,168
5,000,000 Asset Backed Capital Finance, Inc.
5.53%, 11/14/97* 4,999,160
5,000,000 Clipper Receivables Corp.
5.45%, 01/16/97 4,988,646
2,000,000 Cofco Capital Corp.
5.40%, 02/14/97 1,986,800
2,000,000 Cofco Capital Corp.
5.55%, 02/19/97 1,984,892
2,400,000 Finance One Funding Corp.
5.45%, 02/13/97 2,384,377
3,000,000 Galacia Funding Corp.
5.67%, 03/05/97 2,970,233
2,000,000 Pegasus Two, Ltd.
5.55%, 02/21/97 1,984,275
3,000,000 Pegasus Two, Ltd.
5.42%, 03/10/97 2,969,287
4,000,000 Receivables Capital Corp.
5.48%, 01/17/97 3,990,258
5,493,000 Receivables Capital Corp.
5.30%, 02/07/97 5,462,740
5,000,000 Standard Credit Card Master Trust I
5.52%, 01/14/97 4,990,033
1,200,000 Toshiba International Finance
5.55%, 01/24/97 1,195,745
2,400,000 Toshiba International Finance
5.35%, 04/15/97 2,362,907
2,000,000 Toshiba International Finance
5.42%, 06/09/97 1,952,123
-----------
48,681,911
-----------
Consumer Goods - 6.47%
5,000,000 Den Danske Corp.
5.37%, 01/09/97 4,994,033
3,000,000 Den Danske Corp.
5.34%, 02/10/97 2,982,200
1,000,000 Duracell Inc.
6.00%, 01/02/97 999,833
2,500,000 Penney (J.C.) Funding Corp.
5.39%, 03/19/97 2,471,178
630,000 Sharp Electronics Corp.
5.34%, 02/14/97 625,888
2,000,000 Sharp Electronics Corp.
5.33%, 02/21/97 1,984,898
-----------
14,058,030
-----------
Other- 5.49%
4,000,000 Massachusetts Educational Finance Authority
6.10%, 01/02/97 3,999,322
8,000,000 Nebhelp Capital Services, Inc.
5.34%, 02/24/97 7,935,920
-----------
11,935,242
-----------
Banking - 5.41%
5,000,000 Banco Bradesco SA Grand Cayman
5.30%, 04/28/97 4,913,875
3,000,000 Banco De Credito Nacional SA
5.65%, 06/06/97 2,926,550
4,000,000 Unifunding, Inc.
5.32%, 05/12/97 3,922,564
-----------
11,762,989
-----------
Security Brokers, Dealers and Exchanges - 5.23%
3,000,000 CS First Boston, Inc.,
5.29%, 04/02/97 2,959,884
2,500,000 Merrill Lynch & Co., Inc.
5.36%, 04/23/97 2,458,311
3,000,000 Paine Webber Group, Inc.
5.55%, 01/10/97 2,995,838
3,000,000 Paine Webber Group, Inc.
5.35%, 05/12/97 2,941,596
-----------
11,355,629
-----------
Automotive Financing- 4.32%
2,500,000 General Motors Acceptance Corp.
5.72%, 02/14/97 2,482,522
925,000 General Motors Acceptance Corp.
5.37%, 05/01/97 908,443
6,000,000 Mitsubishi Motors Credit Of America
5.97%, 01/15/97 5,987,330
-------------
9,378,295
-------------
Utilities - 3.55%
1,200,000 Electricite De France
6.00%, 01/02/97 1,199,800
800,000 Laclede Gas Co.
5.65%, 01/21/97 797,489
3,000,000 Northern Indiana Public Service Co.
5.40%, 02/03/97 2,985,150
2,750,000 Northern Indiana Public Service Co.
5.41%, 02/07/97 2,734,709
-----------
7,717,148
-----------
</TABLE>
See Notes to Financial Statements.
- ------------------------------------------------------------
F-35
<PAGE>
- --------------------------------------------------------------------------------
Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
- ------------------------------------------------------------------------------
<S> <C> <C>
Industrial - 3.45%
$ 5,000,000 Cargill
5.90%, 01/06/97 $ 4,995,904
2,500,000 Corporate Receivables Corp.
5.42%, 01/13/97 2,495,483
-----------
7,491,387
-----------
Transportation - 3.44%
2,500,000 Cooperative Association of Tractor Dealers
5.60%, 01/21/97 2,492,222
1,000,000 Cooperative Association of Tractor Dealers
5.33%, 02/03/97 995,114
2,500,000 Cooperative Association of Tractor Dealers
5.40%, 02/04/97 2,487,250
1,500,000 Daimler-Benz North America Corp.
5.40%, 02/12/97 1,490,550
-----------
7,465,136
-----------
Paper - 2.73%
6,000,000 Jefferson Smurfit Finance Corp.
5.40%, 03/18/97 5,931,600
-----------
Total Commercial Paper 135,777,367
(Cost $135,777,367) -----------
BANKERS' ACCEPTANCE - 4.07%
1,157,242 Bank of Boston
5.50%, 02/24/97 1,147,695
1,900,000 Chase Manhattan Bank
5.45%, 03/04/97 1,882,166
2,000,000 Corestates Capital Corp.
5.43%, 01/23/97 1,993,363
1,419,450 European Investment Bank
5.50%, 03/24/97 1,401,667
1,308,708 European Investment Bank
5.35%, 04/28/97 1,285,953
1,150,000 Republic National Bank of New York
5.45%, 03/14/97 1,137,465
-----------
Total Bankers' Acceptance 8,848,309
(Cost $8,848,309) -----------
</TABLE>
See Notes to Financial Statements.
------------------------------------------------------------
F-36
<PAGE>
- ------------------------------------------------------------------------------
Money Market Fund
- ------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 2)
- ------------------------------------------------------------------------------
<S> <C>
INVESTMENT COMPANY - 0.30%
642,025 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund $ 642,025
------------
Total Investment Company 642,025
(Cost $642,025) ------------
Total Investments - 97.76% 212,390,190
(Cost $212,390,190) ------------
Net Other Assets and Liabilities - 2.24% 4,865,542
------------
Net Assets - 100.00% $217,255,732
============
</TABLE>
- ------------
* Interest is reset at various time intervals. The rate shown is that in
effect at December 31, 1996.
(A) Effective yield at time of purchase.
(B) Securities exempt from registration under rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualified institutional buyers. As of December 31, 1996,
these securities amounted to $3,000,000 or 1.38% of net assets.
MTN Medium Term Note
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $212,390,359.
As of December 31, 1996, the portfolio had capital loss carryforwards which
expire as follows: $347 in 2002; $144 in 2003; and $35,977 in 2004.
OTHER INFORMATION
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
Moody's Ratings (Unaudited)
Aaa 100.00%
See Notes to Financial Statements.
- ------------------------------------------------------------
F-37
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES . December 31, 1996
================================================================================
<TABLE>
<CAPTION>
Select Select Small Cap Select
Aggressive Capital Value International
Growth Fund Appreciation Fund Fund Equity Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost.................... $ 333,797,417 $ 142,489,363 $ 92,973,134 $ 203,574,071
Net unrealized appreciation
(depreciation)...................... 78,166,286 11,269,425 20,271,030 37,815,416
------------- ------------- ------------- -------------
Total investments at value.......... 411,963,703 153,758,788 113,244,164 241,389,487
Cash...................................... 4,298 279,617 -- 529,722
Foreign currency
(Cost $840,658 and $3,984,676,
respectively)(Notes 2 and 7).......... -- 848,168 -- 3,984,446
Receivable for investments sold........... -- 558,307 1,087,587 --
Receivable for shares sold................ 129,681 11,880 -- --
Receivable for foreign currency sold...... -- 40,847 -- --
Interest and dividend receivables......... 128,368 1,557 168,731 531,820
Deferred organizational expense
(Note 2)............................... -- 4,255 -- --
Dividend tax reclaim receivables.......... -- 11,627 -- 132,914
Net unrealized appreciation on
forward currency contracts (Notes
2 and 8)............................... -- -- -- 1,104,753
------------- ------------- ------------- -------------
Total Assets........................ 412,226,050 155,515,046 114,500,482 247,673,142
------------- ------------- ------------- -------------
LIABILITIES:
Net unrealized depreciation on
forward foreign currency contracts
(Notes 2 and 8)........................ -- 315,883 -- --
Payable for investments purchased......... 3,870,522 11,473,685 -- --
Payable for foreign currency purchased -- 875,457 -- --
Payable for shares repurchased............ 516,901 51,027 428,579 570,617
Payable for variation margin.............. -- -- -- --
Advisory fee payable (Note 3)............. 342,467 115,732 78,966 199,888
Accrued expenses and other payables....... 54,127 3,022 24,360 25,701
------------- ------------- ------------- -------------
Total Liabilities................... 4,784,017 12,834,806 531,905 796,206
------------- ------------- ------------- -------------
NET ASSETS................................... $ 407,442,033 $ 142,680,240 $ 113,968,577 $ 246,876,936
============= ============= ============= =============
NET ASSETS consist of
Paid-in capital (Note 6).................. $ 322,489,225 $ 134,405,301 $ 92,953,119 $ 206,373,860
Undistributed (distribution in
excess of) net investment
income (loss).......................... -- 67,349 -- 180,441
Accumulated (distribution in excess of)
net realized gain (loss) on
investments sold, foreign currency
transactions and futures contracts..... 6,786,522 (2,739,890) 744,428 1,388,245
Net unrealized appreciation
(depreciation) of investments,
assets and liabilities in
foreign currency and futures
contracts............................. 78,166,286 10,947,480 20,271,030 38,934,390
------------- ------------- ------------- -------------
TOTAL NET ASSETS............................. $ 407,442,033 $ 142,680,240 $ 113,968,577 $ 246,876,936
============= ============= ============= =============
Shares of beneficial interest outstanding
(unlimited authorization, no par value)... 200,053,471 96,106,648 75,448,638 182,088,352
NET ASSET VALUE,
Offering and redemption price per share
(Net Assets/Shares Outstanding)........... $ 2.037 $ 1.485 $ 1.511 $ 1.356
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
-------------------------------------------------
F-38
<PAGE>
- -------------------------------------------------------------------------------
Allmerica Investment Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Select Equity Select Growth
Growth Growth Index and Income
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost.................... $ 214,691,873 $ 454,071,926 $ 110,418,108 $ 255,929,542
Net unrealized appreciation
(depreciation)...................... 24,920,214 102,489,575 40,766,037 44,270,618
------------- ------------- ------------- -------------
Total investments at value.......... 239,612,087 556,561,501 151,184,145 300,200,160
Cash...................................... 8,960 1,626 2,301 1,605
Foreign currency
(Cost $840,658 and $3,984,676,
respectively)(Notes 2 and 7).......... -- -- -- --
Receivable for investments sold........... -- 3,476,371 -- 2,014,713
Receivable for shares sold................ 3,378 -- -- --
Receivable for foreign currency sold...... -- -- -- --
Interest and dividend receivables......... 276,248 1,399,776 265,242 445,853
Deferred organizational expense
(Note 2)............................... -- -- -- --
Dividend tax reclaim receivables.......... -- -- -- --
Net unrealized appreciation on
forward currency contracts (Notes
2 and 8)............................... -- -- -- --
------------- ------------- ------------- -------------
Total Assets........................ 239,900,673 561,439,274 151,451,688 302,662,331
------------- ------------- ------------- -------------
Liabilities:
Net unrealized depreciation on
forward foreign currency contracts
(Notes 2 and 8)........................ -- -- -- --
Payable for investments purchased......... 11,016,153 2,881,451 -- 6,608,923
Payable for foreign currency purchased -- -- -- --
Payable for shares repurchased............ 141,040 1,481,458 215,669 194,237
Payable for variation margin.............. -- -- 43,800 --
Advisory fee payable (Note 3)............. 161,597 201,136 40,142 183,314
Accrued expenses and other payables....... 30,632 124,624 22,416 37,870
------------- ------------- ------------- -------------
Total Liabilities................... 11,349,422 4,688,669 322,027 7,024,344
------------- ------------- ------------- -------------
Net Assets................................... $ 228,551,251 $ 556,750,605 $ 151,129,661 $ 295,637,987
============= ============= ============= =============
Net Assets consist of
Paid-in capital (Note 6).................. $ 201,511,803 $ 437,517,101 $ 110,117,099 $ 246,784,314
Undistributed (distribution in
excess of) net investment
income (loss).......................... -- -- 2,814 --
Accumulated (distribution in excess of)
net realized gain (loss) on
investments sold, foreign currency
transactions and futures contracts. 2,119,234 16,743,929 301,521 4,583,055
Net unrealized appreciation
(depreciation) of investments,
assets and liabilities in
foreign currency and futures
contracts............................. 24,920,214 102,489,575 40,708,227 44,270,618
------------- ------------- ------------- -------------
Total Net Assets............................. $ 228,551,251 $ 556,750,605 $ 151,129,661 $ 295,637,987
============= ============= ============= =============
Shares of beneficial interest outstanding
(unlimited authorization, no par value) 159,809,982 238,679,339 69,794,201 210,471,303
Net Asset Value,
Offering and redemption price per share
(Net Assets/Shares Outstanding)........... $ 1.430 $ 2.333 $ 2.165 $ 1.405
============= ============= ============= =============
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Select Investment Grade Government Money
Income Income Bond Market
Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost.................... $ 76,005,063 $ 157,986,443 $ 45,688,072 $ 212,390,190
Net unrealized appreciation
(depreciation)...................... 614,170 653,712 75,259 --
------------- ------------- ------------- -------------
Total investments at value.......... 76,619,233 158,640,155 45,763,331 212,390,190
Cash...................................... 4,592 23,235 1,146 104,813
Foreign currency
(Cost $840,658 and $3,984,676,
respectively)(Notes 2 and 7)......... -- -- -- --
Receivable for investments sold.......... -- 2,245,744 87,797 --
Receivable for shares sold............... -- -- 1,121 4,222,021
Receivable for foreign currency sold..... -- -- -- --
Interest and dividend receivables........ 972,869 1,829,305 712,864 603,717
Deferred organizational expense
(Note 2).............................. -- -- -- --
Dividend tax reclaim receivables......... -- -- -- --
Net unrealized appreciation on
forward currency contracts (Notes
2 and 8).............................. -- -- -- --
------------- ------------- ------------- -------------
Total Assets....................... 77,596,694 162,738,439 46,566,259 217,320,741
------------- ------------- ------------- -------------
Liabilities:
Net unrealized depreciation on
forward foreign currency contracts
(Notes 2 and 8)....................... -- -- -- --
Payable for investments purchased........ -- 4,996,431 -- --
Payable for foreign currency purchased -- -- -- --
Payable for shares repurchased........... 37,600 290,729 131,242 --
Payable for variation margin............. -- -- -- --
Advisory fee payable (Note 3)............ 38,946 53,180 19,918 49,517
Accrued expenses and other payables...... 21,805 70,869 19,168 15,492
------------- ------------- ------------- -------------
Total Liabilities.................. 98,351 5,411,209 170,328 65,009
------------- ------------- ------------- -------------
Net Assets.................................. $ 77,498,343 $ 157,327,230 $ 46,395,931 $ 217,255,732
============= ============= ============= =============
Net Assets consist of
Paid-in capital (Note 6)................. $ 78,278,398 $ 158,224,498 $ 48,892,867 $ 217,292,369
Undistributed (distribution in
excess of) net investment
income (loss)......................... 50,180 44,163 5,998 --
Accumulated (distribution in excess of)
net realized gain (loss) on
investments sold, foreign currency
transactions and futures contracts.... (1,444,405) (1,595,143) (2,578,193) (36,637)
Net unrealized appreciation
(depreciation) of investments,
assets and liabilities in
foreign currency and futures
contracts............................ 614,170 653,712 75,259 --
------------- ------------- ------------- -------------
Total Net Assets............................ $ 77,498,343 $ 157,327,230 $ 46,395,931 $ 217,255,732
============= ============= ============= =============
Shares of beneficial interest outstanding
(unlimited authorization, no par value)... 77,869,624 145,193,179 44,802,426 217,292,369
Net Asset Value,
Offering and redemption price per share
(Net Assets/Shares Outstanding).......... $ 0.995 $ 1.084 $ 1.036 $ 1.000
============= ============= ============= =============
</TABLE>
- -------------------------------------------------
F-39
<PAGE>
- -------------------------------------------------------------------------------
Allmerica Investment Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS Of OPERATIONS . For Year Ended December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Select
Select Capital Small Cap Select
Aggressive Appreciation Value International
Growth Fund Fund Fund Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest (Note 2) ....................................... $ 459,478 $ 445,106 $ 326,175 $ 87,896
Dividends (Note 2) ...................................... 1,370,432 315,593 1,265,487 4,831,333
Less net foreign taxes withheld ......................... -- (30,298) -- (810,066)
------------ ------------ ------------ ------------
Total investment income .............................. 1,829,910 730,401 1,591,662 4,109,163
------------ ------------ ------------ ------------
EXPENSES
Investment advisory fees (Note 3 and 4) ................. 3,302,349 902,600 726,992 1,701,942
Custodian fees (Note 3) ................................. 21,136 54,261 5,242 285,944
Fund accounting fees (Note 3) ........................... 57,435 29,338 41,788 55,391
Legal fees .............................................. 1,575 1,576 1,575 2,997
Audit fees .............................................. 7,843 7,843 7,512 7,502
Trustees' fees and expenses (Note 3) .................... 12,799 1,215 1,552 1,464
Reports to shareholders ................................. 164,543 17,093 41,560 40,019
Amortization of organization costs (Note 2) ............. -- 1,285 -- --
Insurance ............................................... 1,376 245 359 243
Miscellaneous ........................................... 7,578 57 2,492 2,523
------------ ------------ ------------ ------------
Total expenses before reductions ..................... 3,576,634 1,015,513 829,072 2,098,025
Less reductions (Note 5) ............................. -- -- (19,715) (52,998)
------------ ------------ ------------ ------------
Total expenses net of reductions ..................... 3,576,634 1,015,513 809,357 2,045,027
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................... (1,746,724) (285,112) 782,305 2,064,136
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ............ 30,022,198 (2,715,466) 5,770,562 2,126,179
Net realized gain (loss) on futures contracts ........... -- 4,956 -- --
Net realized gain (loss) on foreign currency transactions -- (230,817) -- 2,593,779
Net change in unrealized appreciation (depreciation)
of assets and liabilities in foreign currency ........... -- (305,181) -- 973,685
Net change in unrealized appreciation (depreciation)
of investments and futures contracts .................... 24,617,401 6,605,759 14,617,015 28,636,644
------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS ............................. 54,639,599 3,359,251 20,387,577 34,330,287
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 52,892,875 $ 3,074,139 $ 21,169,882 $ 36,394,423
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
----------------------------------------------------------
F-40
<PAGE>
- -------------------------------------------------------------------------------
Allmerica Investment Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Select Equity Select Growth
Growth Growth Index and Income
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest (Note 2) ....................................... $ 533,857 $ 1,430,072 $ 77,176 $ 1,187,447
Dividends (Note 2) ...................................... 1,770,392 11,120,758 2,553,104 4,118,306
Less net foreign taxes withheld ......................... -- -- -- --
------------ ------------ ------------ ------------
Total investment income .............................. 2,304,249 12,550,830 2,630,280 5,305,753
------------ ------------ ------------ ------------
EXPENSES
Investment advisory fees (Note 3 and 4) ................. 1,508,861 2,163,374 375,619 1,778,832
Custodian fees (Note 3) ................................. 12,029 25,018 42,179 19,183
Fund accounting fees (Note 3) ........................... 37,918 60,965 59,244 40,585
Legal fees .............................................. 858 1,575 1,575 1,575
Audit fees .............................................. 7,843 8,526 8,665 7,568
Trustees' fees and expenses (Note 3) .................... 3,906 13,207 2,738 4,747
Reports to shareholders ................................. 69,766 226,351 41,136 82,238
Amortization of organization costs (Note 2) ............. -- -- -- --
Insurance ............................................... 1,009 4,203 736 1,222
Miscellaneous ........................................... 4,200 20,825 2,914 31,836
------------ ------------ ------------ ------------
Total expenses before reductions ..................... 1,646,390 2,524,044 534,806 1,967,786
Less reductions (Note 5) ............................. (10,405) (124,205) -- (77,523)
------------ ------------ ------------ ------------
Total expenses net of reductions ..................... 1,635,985 2,399,839 534,806 1,890,263
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................... 668,264 10,150,991 2,095,474 3,415,490
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ............ 38,302,869 60,695,723 2,577,398 22,150,624
Net realized gain (loss) on futures contracts ........... -- -- (17,605) --
Net realized gain (loss) on foreign currency transactions -- -- -- --
Net change in unrealized appreciation (depreciation)
of assets and liabilities in foreign currency ........... -- -- -- --
Net change in unrealized appreciation (depreciation)
of investments and futures contracts .................... (4,304,728) 21,064,610 19,381,336 20,168,372
------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS ............................. 33,998,141 81,760,333 21,941,129 42,318,996
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS......................... $ 34,666,405 $ 91,911,324 $ 24,036,603 $ 45,734,486
============ ============ ============ ============
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Select Investment Grade Government Money
Income Income Bond Market
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest (Note 2) ....................................... $ 4,595,732 $ 10,308,324 $ 3,029,472 $ 10,087,550
Dividends (Note 2) ...................................... 72,869 151,676 59,201 156,281
Less net foreign taxes withheld ......................... -- -- -- --
------------ ------------ ------------ ------------
Total investment income .............................. 4,668,601 10,460,000 3,088,673 10,243,831
------------ ------------ ------------ ------------
EXPENSES
Investment advisory fees (Note 3 and 4) ................. 398,522 596,308 235,359 510,258
Custodian fees (Note 3) ................................. 20,407 17,822 11,426 20,630
Fund accounting fees (Note 3) ........................... 48,337 45,588 30,838 36,779
Legal fees .............................................. 974 1,587 1,575 1,349
Audit fees .............................................. 8,260 8,054 7,779 7,800
Trustees' fees and expenses (Note 3) .................... 1,608 4,147 2,641 5,109
Reports to shareholders ................................. 12,919 88,289 16,544 40,748
Amortization of organization costs (Note 2) ............. -- -- -- --
Insurance ............................................... 480 1,746 890 1,311
Miscellaneous ........................................... 2,118 7,886 2,173 6,012
------------ ------------ ------------ ------------
Total expenses before reductions ..................... 493,625 771,427 309,225 629,996
Less reductions (Note 5) ............................. -- -- -- --
------------ ------------ ------------ ------------
Total expenses net of reductions ..................... 493,625 771,427 309,225 629,996
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................... 4,174,976 9,688,573 2,779,448 9,613,835
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ............ (403,808) 432,085 (507,714) (35,900)
Net realized gain (loss) on futures contracts ........... -- -- -- --
Net realized gain (loss) on foreign currency transactions -- -- -- --
Net change in unrealized appreciation (depreciation)
of assets and liabilities in foreign currency ........... -- -- -- --
Net change in unrealized appreciation (depreciation)
of investments and futures contracts .................... (1,278,063) (4,620,200) (764,938) --
------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS ............................. (1,681,871) (4,188,115) (1,272,652) (35,900)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS......................... $ 2,493,105 $ 5,500,458 $ 1,506,796 $ 9,577,935
============ ============ ============ ============
</TABLE>
- -------------------------------------------------
F-41
<PAGE>
- -------------------------------------------------------------------------------
Allmerica Investment Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
====================================================================================================================================
Select Aggressive Select Capital
Growth Fund Appreciation Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, Year Ended Period Ended
1996 1995 December 31,1996 December 31, 1995*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of year ........................... $ 254,871,723 $ 136,573,109 $ 41,376,035 $ --
------------- ------------- ------------- -------------
Increase (Decrease) in net assets
resulting from operations:
Net investment income (loss) ........................... (1,746,724) (142,866) (285,112) (33,955)
Net realized gain (loss) on investments sold, foreign
currency transactions and futures contracts ........ 30,022,198 16,028,765 (2,941,327) 1,068,237
Net change in unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currency ................................... 24,617,401 37,467,083 6,300,578 4,646,902
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations .................................... 52,892,875 53,352,982 3,074,139 5,681,184
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income .................................. -- -- -- --
Disbritution in excess of net investment income ........ -- -- -- --
Net realized gain on investments ....................... (27,969,046) -- (283,116) (783,850)
Distribution in excess of net realized capital gains ... -- -- -- --
Return of capital ...................................... -- -- (1,211) --
------------- ------------- ------------- -------------
Total Distributions ................................ (27,969,046) -- (284,327) (783,850)
------------- ------------- ------------- -------------
Capital share transactions:
Net proceeds from sales of shares ...................... 118,694,806 74,888,511 99,864,671 36,016,174
Issued to shareholders in reinvestment of distributions 27,969,046 -- 284,327 783,850
Cost of shares repurchased ............................. (19,017,371) (9,942,879) (1,634,605) (321,323)
------------- ------------- ------------- -------------
Net increase (decrease) from
capital share transactions ....................... 127,646,481 64,945,632 98,514,393 36,478,701
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ............. 152,570,310 118,298,614 101,304,205 41,376,035
------------- ------------- ------------- -------------
NET ASSETS at end of year (including line A) .............. $ 407,442,033 $ 254,871,723 $ 142,680,240 $ 41,376,035
============= ============= ============= =============
(A) Undistributed (distribution in excess of)
net investment income (loss) ....................... $ -- $ -- $ 67,349 $ (3,304)
============= ============= ============= =============
OTHER INFORMATION:
Share transactions:
Sold ................................................... 58,055,566 46,078,409 66,830,275 29,899,903
Issued to shareholders in reinvestment of distributions 13,670,395 -- 183,318 572,571
Repurchased ............................................ (9,614,883) (5,889,973) (1,127,407) (252,012)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding ...... 62,111,078 40,188,436 65,886,186 30,220,462
============= ============= ============= =============
</TABLE>
- ----------------------------------------------------------
* The Fund commenced operations on April 28, 1995.
See Notes to Financial Statements.
----------------------------------------------------------
F-42
<PAGE>
- -------------------------------------------------------------------------------
Allmerica Investment Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Small Cap Select International
Value Fund Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, Years Ended December 31,
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of year ........................... $ 64,574,553 $ 41,341,503 $ 104,312,134 $ 40,497,806
------------- ------------- ------------- -------------
Increase (Decrease) in net assets
resulting from operations:
Net investment income (loss) ........................... 782,305 457,238 2,064,136 1,129,933
Net realized gain (loss) on investments sold, foreign
currency transactions and futures contracts ........ 5,770,562 1,693,710 4,719,958 60,433
Net change in unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currency ................................... 14,617,015 6,588,253 29,610,329 10,767,415
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations .................................... 21,169,882 8,739,201 36,394,423 11,957,781
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income .................................. (783,366) (456,177) (2,205,116) (996,037)
Disbritution in excess of net investment income ........ -- -- (2,413,338) --
Net realized gain on investments ....................... (4,985,294) (1,656,824) (540,596) (396,021)
Distribution in excess of net realized capital gains ... -- (40,840) -- --
Return of capital ...................................... -- -- -- --
------------- ------------- ------------- -------------
Total Distributions ................................ (5,768,660) (2,153,841) (5,159,050) (1,392,058)
------------- ------------- ------------- -------------
Capital share transactions:
Net proceeds from sales of shares ...................... 31,326,184 18,929,818 111,783,820 58,476,233
Issued to shareholders in reinvestment of distributions 5,768,660 2,153,841 5,159,050 1,392,058
Cost of shares repurchased ............................. (3,102,042) (4,435,969) (5,613,441) (6,619,686)
------------- ------------- ------------- -------------
Net increase (decrease) from
capital share transactions ....................... 33,992,802 16,647,690 111,329,429 53,248,605
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ............. 49,394,024 23,233,050 142,564,802 63,814,328
------------- ------------- ------------- -------------
NET ASSETS at end of year (including line A) .............. $ 113,968,577 $ 64,574,553 $ 246,876,936 $ 104,312,134
============= ============= ============= =============
(A) Undistributed (distribution in excess of)
net investment income (loss) ....................... $ -- $ 1,601 $ 180,441 $ 140,980
============= ============= ============= =============
OTHER INFORMATION:
Share transactions:
Sold ................................................... 21,714,353 16,206,081 91,002,428 54,922,638
Issued to shareholders in reinvestment of distributions 3,817,804 1,739,775 3,819,374 1,229,509
Repurchased ............................................ (2,237,893) (3,757,744) (4,536,939) (6,387,844)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding ...... 23,294,264 14,188,112 90,284,863 49,764,303
============= ============= ============= =============
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Select Growth
Fund Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, Years Ended December 31,
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of year ........................... $ 143,124,686 $ 88,263,274 $ 444,870,953 $ 335,713,593
------------- ------------- ------------- -------------
Increase (Decrease) in net assets
resulting from operations:
Net investment income (loss) ........................... 668,264 24,039 10,150,991 9,171,079
Net realized gain (loss) on investments sold, foreign
currency transactions and futures contracts ........ 38,302,869 (240,313) 60,695,723 34,330,359
Net change in unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currency ................................... (4,304,728) 24,384,776 21,064,610 66,369,242
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations .................................... 34,666,405 24,168,502 91,911,324 109,870,680
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income .................................. (671,407) (20,896) (10,182,273) (9,094,592)
Disbritution in excess of net investment income ........ -- -- -- --
Net realized gain on investments ....................... (32,240,794) -- (49,801,860) (33,688,107)
Distribution in excess of net realized capital gains ... -- -- -- --
Return of capital ...................................... -- -- -- --
------------- ------------- ------------- -------------
Total Distributions ................................ (32,912,201) (20,896) (59,984,133) (42,782,699)
------------- ------------- ------------- -------------
Capital share transactions:
Net proceeds from sales of shares ...................... 59,903,208 36,197,767 37,725,612 37,306,107
Issued to shareholders in reinvestment of distributions 32,912,201 20,896 59,984,133 42,782,699
Cost of shares repurchased ............................. (9,143,048) (5,504,857) (17,757,284) (38,019,427)
------------- ------------- ------------- -------------
Net increase (decrease) from
capital share transactions ....................... 83,672,361 30,713,806 79,952,461 42,069,379
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ............. 85,426,565 54,861,412 111,879,652 109,157,360
------------- ------------- ------------- -------------
NET ASSETS at end of year (including line A) .............. $ 228,551,251 $ 143,124,686 $ 556,750,605 $ 444,870,953
============= ============= ============= =============
(A) Undistributed (distribution in excess of)
net investment income (loss) ....................... $ -- $ 3,143 $ -- $ 45,614
============= ============= ============= =============
OTHER INFORMATION:
Share transactions:
Sold ................................................... 38,406,099 28,453,081 16,203,094 17,727,581
Issued to shareholders in reinvestment of distributions 23,015,341 15,263 25,711,571 19,780,330
Repurchased ............................................ (6,129,428) (4,239,678) (7,659,186) (18,183,452)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding ...... 55,292,012 24,228,666 34,255,479 19,324,459
============= ============= ============= =============
</TABLE>
- ---------------------------------------------------------------
F-43
<PAGE>
- -------------------------------------------------------------------------------
Allmerica Investment Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Equity Index Select Growth and
Fund Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, Years Ended December 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of year............................. $ 90,888,716 $ 52,245,669 $ 191,610,000 $ 110,212,501
------------- ------------- ------------- -------------
Increase (Decrease) in net assets
resulting from operations:
Net investment income (loss).............................. 2,095,474 1,369,327 3,415,490 2,532,194
Net realized gain (loss) on investments sold
and futures contracts.................................. 2,559,793 1,875,586 22,150,624 11,310,318
Net change in unrealized appreciation
(depreciation) of investments and futures contracts.... 19,381,336 17,718,754 20,168,372 25,861,731
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations........................................ 24,036,603 20,963,667 45,734,486 39,704,243
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income ..................................... (2,092,660) (1,369,327) (3,430,862) (2,516,822)
Distribution in excess of net investment income............ -- -- -- --
Net realized gain on investments .......................... (2,189,067) (1,848,982) (21,071,408) (7,157,977)
Distribution in excess of net realized capital gains....... -- (69,205) -- --
Return of capital.......................................... -- (2,614,356) -- --
------------- ------------- ------------- -------------
Total distributions ................................... (4,281,727) (5,901,870) (24,502,270) (9,674,799)
------------- ------------- ------------- -------------
Capital share transactions:
Net proceeds from sales of shares ......................... 49,502,418 19,845,741 64,430,859 48,458,874
Issued to shareholders in reinvestment of distributions ... 4,281,727 5,901,870 24,502,270 9,674,799
Cost of shares repurchased ................................ (13,298,076) (2,166,361) (6,137,358) (6,765,618)
------------- ------------- ------------- -------------
Net increase (decrease) from
capital share transactions.......................... 40,486,069 23,581,250 82,795,771 51,368,055
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ............... 60,240,945 38,643,047 104,027,987 81,397,499
------------- ------------- ------------- -------------
NET ASSETS at the end of year (including line A) ............ $ 151,129,661 $ 90,888,716 $ 295,637,987 $ 191,610,000
============= ============= ============= =============
(A) Undistributed (distributions in excess of)
net investment income (loss) .......................... $ 2,814 $ -- $ -- $ 15,372
============= ============= ============= =============
OTHER INFORMATION:
Share transactions:
Sold ...................................................... 24,895,979 11,793,073 46,390,568 41,704,782
Issued to shareholders in reinvestment of distributions ... 2,041,373 3,680,017 17,558,493 7,745,463
Repurchased ............................................... (6,883,771) (1,326,802) (4,557,725) (5,657,491)
------------- ------------- ------------- -------------
Net increase (decrease) in shares outstanding .......... 20,053,581 14,146,288 59,391,336 43,792,754
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
----------------------------------------------------------
F-44
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Select Investment Grade Government Money Market
Income Fund Income Fund Bond Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, Years Ended December 31, Years Ended December 31, Years Ended December 31,
1996 1995 1996 1995 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 60,368,094 $40,784,092 $141,625,380 $109,971,914 $ 45,778,124 $ 42,078,279 $ 155,211,174 $ 95,991,332
------------ ----------- ------------ ------------ ------------ ------------ ------------- -------------
4,174,976 3,091,908 9,688,573 8,314,663 2,779,448 2,436,231 9,613,835 7,715,400
(403,808) 296,997 432,085 1,260,297 (507,714) (120,017) (35,900) (390)
(1,278,063) 4,278,014 (4,620,200) 10,604,245 (764,938) 2,762,902 -- --
------------ ----------- ------------ ------------ ------------ ------------ ------------- -------------
2,493,105 7,666,919 5,500,458 20,179,205 1,506,796 5,079,116 9,577,935 7,715,010
------------ ----------- ------------ ------------ ------------ ------------ ------------- -------------
(4,174,976) (3,091,908) (9,688,573) (8,314,663) (2,778,718) (2,436,231) (9,613,835) (7,715,400)
(12,684) (34,237) (34,833) (60,477) -- (30,980) -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
------------- ----------- ------------ ------------ ------------ ------------ ------------- -------------
(4,187,660) (3,126,145) (9,723,406) (8,375,140) (2,778,718) (2,467,211) (9,613,835) (7,715,400)
------------ ----------- ------------ ------------ ------------ ------------ ------------- -------------
18,835,110 19,199,494 19,642,102 22,835,470 12,572,808 10,666,760 189,973,951 178,261,897
4,187,660 3,126,145 9,723,406 8,375,140 2,778,718 2,467,211 9,613,835 7,715,400
(4,197,966) (7,282,411) (9,440,710) (11,361,209) (13,461,797) (12,046,031) (137,507,328) (126,757,065)
------------- ----------- ------------ ------------ ------------ ------------ ------------- -------------
18,824,804 15,043,228 19,924,798 19,849,401 1,889,729 1,087,940 62,080,458 59,220,232
------------ ----------- ------------ ------------ ------------ ------------ ------------- -------------
17,130,249 19,584,002 15,701,850 31,653,466 617,807 3,699,845 62,044,558 59,219,842
------------ ----------- ------------ ------------ ------------ ------------ ------------- -------------
$ 77,498,343 $ 60,368,094 $157,327,230 $141,625,380 $ 46,395,931 $ 45,778,124 $ 217,255,732 $ 155,211,174
============ ============ ============ ============ ============ ============ ============= =============
$ 50,180 $ -- $ 44,163 $ -- $ 5,998 $ -- $ -- $ --
============ ============ ============ ============ ============ ============ ============= =============
18,891,416 19,366,727 18,013,400 21,051,754 11,938,486 10,156,583 189,973,951 178,261,897
4,249,588 3,138,951 9,040,646 7,702,823 2,690,564 2,365,698 9,613,835 7,715,400
(4,232,440) (7,409,278) (8,682,856) (10,574,133) (12,948,203) (11,623,145) (137,507,328) (126,757,065)
------------ ----------- ------------ ------------ ------------ ------------ ------------- -------------
18,908,564 15,096,400 18,371,190 18,180,444 1,680,847 899,136 62,080,458 59,220,232
============ ============ ============ ============ ============ ============ ============= =============
</TABLE>
- --------------------------------------------------------------------------------
F-45
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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/(2)/ Investments Operations
- --------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1996 $ 1.848 $ (0.009) $ 0.351 $ 0.342
1995 1.397 (0.001) 0.452 0.451
1994 1.431 (0.002) (0.032) (0.034)
1993 1.197 0.001 0.234 0.235
1992 1.000 0.001 0.197 0.198
Select Capital
Appreciation Fund/(1)/
1996 1.369 (0.003) 0.124 0.121
1995 1.000 (0.001) 0.397 0.396
Small Cap
Value Fund/(1)/
1996 1.238 0.011 0.342 0.353
1995 1.089 0.009 0.183 0.192
1994 1.170 0.005 (0.081) (0.076)
1993 1.000 0.002 0.176 0.178
Select International
Equity Fund/(1)/
1996 1.136 0.011 0.238 0.249
1995 0.963 0.013 0.176 0.189
1994 1.000 0.003 (0.038) (0.035)
Select Growth Fund/(1)/
1996 1.369 0.005 0.297 0.302
1995 1.099 -- 0.270 0.270
1994 1.119 0.003 (0.020) (0.017)
1993 1.111 0.001 0.008 0.009
1992 1.000 0.001 0.111 0.112
<CAPTION>
Less Distributions
-------------------------------------------------------
Net
Distributions Increase
Dividends from Net (Decrease)
from Net Realized Distribtutions in
Year Ended Investment Capital in Return of Total Net Asset
December 31, Income Gains Excess Capital Distributions Value
- ------------------- ---------- ------------- -------------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1996 $ -- $(0.153) $ -- $ -- $(0.153) $ 0.189
1995 -- -- -- -- -- 0.451
1994 -- -- -- -- -- (0.034)
1993 (0.001) -- -- -- (0.001) 0.234
1992 (0.001) -- -- -- (0.001) 0.197
Select Capital
Appreciation Fund/(1)/
1996 -- (0.005) -- -- (0.005) 0.116
1995 -- (0.027) -- -- (0.027) 0.369
Small Cap
Value Fund/(1)/
1996 (0.011) (0.069) -- -- (0.080) 0.273
1995 (0.009) (0.033) (0.001)/(3)/ -- (0.043) 0.149
1994 (0.005) -- -- -- (0.005) (0.081)
1993 (0.002) (0.006) -- -- (0.008) 0.170
Select International
Equity Fund/(1)/
1996 (0.012) (0.003) (0.014)/(4)/ -- (0.029) 0.220
1995 (0.011) (0.005) -- -- (0.016) 0.173
1994 (0.001) (0.001) -- -- (0.002) (0.037)
Select Growth Fund/(1)/
1996 (0.005) (0.236) -- -- (0.241) 0.061
1995 -- -- -- -- -- 0.270
1994 (0.003) -- -- -- (0.003) (0.020)
1993 (0.001) -- -- -- (0.001) 0.008
1992 (0.001) -- -- -- (0.001) 0.111
</TABLE>
See Notes to Financial Statements.
-------------------------------------------------------
F-46
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Ratios To Average Net Assets
-------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Net Assets
Value End of Net
Year Ended End of Total Year Investment Operating Expenses
December 31, Year Return (000's) Income (A) (B) (C)
- --------------------- --------- -------- ---------- ---------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
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%
1993 1.431 19.51% 66,251 0.10% 1.19% -- 1.23%
1992 1.197 19.85%** 9,270 0.34%* 1.35%* -- 1.88%*
Select Capital
Appreciation Fund/(1)/
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%*
Small Cap
Value Fund/(1)/
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%
1993 1.170 17.74%** 12,731 0.52%* 1.22%* -- 2.03%
Select International
Equity Fund/(1)/
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%*
Select Growth Fund/(1)/
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%
1993 1.119 0.84% 53,854 0.15% 1.05% -- 1.08%
1992 1.111 11.25%** 9,308 0.40%* 1.20%* -- 1.72%*
<CAPTION>
Portfolio Average
Year Ended Management Fee Turnover Commissions
December 31, Gross Net Rate Rate(D)
- --------------------- ------ ------ -------- -----------
<S> <C> <C> <C> <C>
Select Aggressive
Growth Fund/(1)/
1996 1.00% 1.00% 113% $ 0.0597
1995 1.00% 1.00% 104% --
1994 1.00% 1.00% 100% --
1993 1.00% 0.96% 76% --
1992 N/A N/A 33% --
Select Capital
Appreciation Fund/(1)/
1996 1.00% 1.00% 98% 0.0414
1995 1.00%* 0.93%* 95% --
Small Cap
Value Fund/(1)/
1996 0.85% 0.85% 20% 0.0497
1995 0.85% 0.85% 17% --
1994 0.85% 0.84% 4% --
1993 0.85%* 0.04%* 8% --
Select International
Equity Fund/(1)/
1996 1.00% 1.00% 18% 0.0248
1995 1.00% 1.00% 24% --
1994 1.00%* 0.72%* 19% --
Select Growth Fund/(1)/
1996 0.85% 0.85% 159% 0.0457
1995 0.85% 0.85% 51% --
1994 0.85% 0.85% 55% --
1993 0.85% 0.82% 65% --
1992 N/A N/A 3% --
</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
(see Note 5 of Notes to Financial Statements).
(C) Excluding reimbursements and reductions.
(D) For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for trades for
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
(1) The Select Aggressive Growth Fund commenced operations on August 21, 1992.
The Select Capital Appreciation Fund commenced operations on April 28, 1995
The Small Cap Value Fund commenced operations on April 30, 1993. The Select
International Fund commenced operations on May 2, 1994. The Select Growth
Fund commenced operations on August 21,1992. See Note 3 for information on
change in Investment Sub-Adviser.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $0.000 in 1993 and $(0.001) in 1992
for Select Aggressive Growth Fund; $(0.001) in 1995 for Select Capital
Appreciation Fund; $0.010 in 1996, $0.005 and $(0.001) in 1993 for Small
Cap Value Fund; $0.011 in 1996 and $0.002 in 1994 for Select International
Equity Fund; and $0.005 in 1996, $0.001 in 1993 and $0.000 in 1992 for
Select Growth Fund.
(3) Distributions in Excess of Net Realized Capital Gains.
(4) Distributions in Excess of Net Investment Income.
- --------------------------------------------------------------------------------
F-47
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Investment Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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/(2)/ Investments Operations
- ------------ --------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Growth
Fund
1996 $ 2.176 $ 0.047 $ 0.386 $ 0.433
1995 1.814 0.049 0.539 0.588
1994 1.939 0.043 (0.041) 0.002
1993 2.034 0.039 0.095 0.134
1992 1.976 0.034 0.105 0.139
Equity Index
Fund
1996 1.827 0.035 0.370 0.405
1995 1.468 0.035 0.474 0.509
1994 1.505 0.033 (0.018) 0.015
1993 1.409 0.032 0.102 0.134
1992 1.354 0.030 0.066 0.096
Select Growth and
Income Fund/(1)/
1996 1.268 0.020 0.246 0.266
1995 1.027 0.019 0.290 0.309
1994 1.069 0.025 (0.018) 0.007
1993 0.990 0.023 0.079 0.102
1992 1.000 0.008 (0.009) (0.001)
Select
Income Fund/(1)/
1996 1.024 0.061 (0.029) 0.032
1995 0.930 0.060 0.095 0.155
1994 1.035 0.055 (0.105) (0.050)
1993 0.988 0.052 0.055 0.107
1992 1.000 0.018 (0.012) 0.006
</TABLE>
<TABLE>
<CAPTION>
Less Distributions
-----------------------------------------------
Net
Distributions Increase
Dividends from Net (Decrease)
from Net Realized Distributions in
Year Ended Investment Capital in Return of Total Net Asset
December 31, Income Gains Excess Capital Distributions Value
- ------------ --------- ---------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Growth
Fund
1996 $ (0.048) $ (0.228) $ -- $ -- $ (0.276) $ 0.157
1995 (0.049) (0.177) -- -- (0.226) 0.362
1994 (0.043) (0.084) -- -- (0.127) (0.125)
1993 (0.039) (0.180) -- (0.010) (0.229) (0.095)
1992 (0.034) (0.047) -- -- (0.081) 0.058
Equity Index
Fund
1996 (0.035) (0.032) -- -- (0.067) 0.338
1995 (0.035) (0.047) (0.002)/(3)/ (0.066) (0.150) 0.359
1994 (0.033) (0.019) -- -- (0.052) (0.037)
1993 (0.031) (0.007) -- -- (0.038) 0.096
1992 (0.031) (0.010) -- -- (0.041) 0.055
Select Growth and
Income Fund/(1)/
1996 (0.020) (0.109) -- -- (0.129) 0.137
1995 (0.019) (0.049) -- -- (0.068) 0.241
1994 (0.025) (0.017) (0.007)/(3)/ -- (0.049) (0.042)
1993 (0.023) -- -- -- (0.023) 0.079
1992 (0.008) (0.001) -- -- (0.009) (0.010)
Select
Income Fund/(1)/
1996 (0.061) -- -- -- (0.061) (0.029)
1995 (0.060) -- (0.001)/(4)/ -- (0.061) 0.094
1994 (0.055) -- -- -- (0.055) (0.105)
1993 (0.052) (0.008) -- -- (0.060) 0.047
1992 (0.018) -- -- -- (0.018) (0.012)
</TABLE>
See Notes to Financial Statements.
-------------------------------------------------------
F-48
<PAGE>
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Allmerica Investment Trust
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<TABLE>
<CAPTION>
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 (A) (B) (C)
- ------------ --------- ------ ---------- ---------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Growth
Fund
1996 $ 2.333 20.19% $556,751 2.04% 0.48% 0.51% 0.51%
1995 2.176 32.80% 444,871 2.34% 0.54% -- 0.54%
1994 1.814 0.16% 335,714 2.25% 0.56% -- 0.56%
1993 1.939 6.66% 338,545 1.92% 0.54% -- 0.55%
1992 2.034 7.11% 270,828 1.85% 0.58% -- 0.58%
Equity Index
Fund
1996 2.165 22.30% 151,130 1.79% 0.46% 0.46% 0.46%
1995 1.827 36.18% 90,889 1.96% 0.55% -- 0.55%
1994 1.468 1.06% 52,246 2.25% 0.57% -- 0.57%
1993 1.505 9.53% 42,842 2.28% 0.57% -- 0.63%
1992 1.409 7.25% 22,393 2.47% 0.57% -- 0.75%
Select Growth and
Income Fund/(1)/
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%
1993 1.069 10.37% 60,518 2.73% 0.99% -- 1.03%
1992 0.990 (0.11)%** 7,302 3.20%* 1.10%* -- 2.37%*
Select
Income Fund/(1)/
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%
1993 1.035 10.95% 25,302 5.91% 0.91% -- 1.08%
1992 0.988 0.62%** 5,380 5.38%* 1.00%* -- 1.67*
<CAPTION>
Portfolio Average
Year Ended Management Fee Turnover Commissions
December 31, Gross Net Rate Rate/(D)/
- ------------ ------ ------ --------- -----------
<S> <C> <C> <C> <C>
Growth
Fund
1996 0.44% 0.44% 72% $ 0.0576
1995 0.46% 0.46% 64% --
1994 0.48% 0.48% 46% --
1993 0.49% 0.48% 42% --
1992 N/A N/A 19% --
Equity Index
Fund
1996 0.32% 0.32% 12% 0.0395
1995 0.34% 0.34% 8% --
1994 0.35% 0.35% 7% --
1993 0.35% 0.29% 4% --
1992 N/A N/A 6% --
Select Growth and
Income Fund/(1)/
1996 0.75% 0.75% 78% 0.0563
1995 0.75% 0.75% 112% --
1994 0.75% 0.75% 107% --
1993 0.75% 0.71% 25% --
1992 N/A N/A 4% --
Select
Income Fund/(1)/
1996 0.60% 0.60% 108% --
1995 0.60% 0.59% 131% --
1994 0.60% 0.58% 105% --
1993 0.60% 0.43% 171% --
1992 N/A N/A 119% --
</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 (see Note 5 of Notes to Financial Statements).
(C) Excluding reimbursements and reductions.
(D) For fiscal years beginning on or after September 1, 1995, a Portfolio is
required to disclose its average commission rate per share for trades
for which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
(1) The Select Growth and Income Fund and Select Income Fund commenced
operations on August 21, 1992.
(2) Net investment income per share before reimbursement of fees by the
investment adviser or reductions were $0.046 in 1996 and $0.038 in 1993
for Growth Fund; $0.031 in 1993, and $0.028 in 1992 for Equity Index
Fund; $0.019 in 1996, $0.023 in 1993 and $0.005 in 1992 for Select Growth
and Income Fund; and $0.060 in 1995, $0.055 in 1994, $0.050 in 1993,
and $0.015 in 1992 for Select Income Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
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F-49
<PAGE>
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Allmerica Investment Trust
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FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Investment Operations
----------------------------------------------
Net Realized
Net and
Asset Unrealized
Value Net Gain (Loss) Total from
Year Ended Beginning Investment on Investment
December 31, of Year Income(2) Investments Operations
------------ --------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Investment Grade
Income Fund
1996 $ 1.117 $ 0.070 $ (0.033) $ 0.037
1995 1.012 0.071 0.106 0.177
1994 1.111 0.066 (0.099) (0.033)
1993 1.074 0.065 0.049 0.114
1992 1.085 0.075 0.013 0.088
Government
Bond Fund
1996 1.062 0.062 (0.026) 0.036
1995 0.997 0.062 0.066 0.128
1994 1.070 0.063 (0.073) (0.010)
1993 1.051 0.055 0.024 0.079
1992 1.047 0.057 0.009 0.066
Money Market
Fund
1996 1.000 0.052 -- 0.052
1995 1.000 0.057 -- 0.057
1994 1.000 0.039 -- 0.039
1993 1.000 0.030 -- 0.030
1992 1.000 0.037 -- 0.037
</TABLE>
<TABLE>
<CAPTION>
Less Distributions
-----------------------------------------------
Net
Distributions Increase
Dividends from Net (Decrease)
from Net Realized Distributions in
Year Ended Investment Capital in Return of Total Net Asset
December 31, Income Gains Excess Capital Distributions Value
------------ --------- ---------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade
Income Fund
1996 $ (0.070) $ -- $ -- $ -- $ (0.070) $(0.033)
1995 0.071 -- (0.001) -- (0.072) 0.105
1994 (0.066) -- -- -- (0.066) (0.099)
1993 (0.065) (0.012) -- -- (0.077) 0.037
1992 (0.075) (0.024) -- -- (0.099) (0.011)
Government
Bond Fund
1996 (0.062) -- -- -- (0.062) (0.026)
1995 (0.062) -- (0.001) -- (0.063) 0.065
1994 (0.063) -- -- -- (0.063) (0.073)
1993 (0.055) (0.003) -- (0.002) (0.060) 0.019
1992 (0.057) (0.005) -- -- (0.062) 0.004
Money Market
Fund
1996 (0.052) -- -- -- (0.052) --
1995 (0.057) -- -- -- (0.057) --
1994 (0.039) -- -- -- (0.039) --
1993 (0.030) -- -- -- (0.030) --
1992 (0.037) -- -- -- (0.037) --
</TABLE>
See Notes to Financial Statements.
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F-50
<PAGE>
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Allmerica Investment Trust
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Ratios/Supplemental Data
- --------------------------------------------------------------------------------
Ratios To Average Net Assets
-------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Net Assets
Value End of Net
Year Ended End of Total Year Investment Operating Expenses
December 31, Year Return (000's) Income (A) (B) (C)
------------ --------- ------ ---------- ---------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Grade
Income Fund
1996 $ 1.084 3.56% $157,327 6.50% 0.52% 0.52% 0.52%
1995 1.117 17.84% 141,625 6.66% 0.53% -- 0.53%
1994 1.012 (2.96)% 109,972 6.25% 0.58% -- 0.58%
1993 1.111 10.80% 107,124 6.16% 0.54% -- 0.55%
1992 1.074 8.33% 52,874 7.25% 0.59% -- 0.59%
Government
Bond Fund
1996 1.036 3.51% 46,396 5.90% 0.66% 0.66% 0.66%
1995 1.062 13.06% 45,778 5.91% 0.69% -- 0.69%
1994 0.997 (0.88)% 42,078 5.60% 0.70% -- 0.70%
1993 1.070 7.51% 77,105 5.51% 0.61% -- 0.62%
1992 1.051 6.59% 33,689 6.13% 0.68% -- 0.69%
Money Market
Fund
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%
1993 1.000 3.00% 71,052 2.95% 0.42% -- 0.43%
1992 1.000 3.78% 64,506 3.65% 0.44% -- 0.44%
<CAPTION>
Portfolio Average
Year Ended Management Fee Turnover Commissions
December 31, Gross Net Rate Rate/(D)/
------------ ------ ------ --------- -----------
<S> <C> <C> <C> <C>
Investment Grade
Income Fund
1996 0.40% 0.40% 108% --
1995 0.41% 0.41% 126% --
1994 0.42% 0.42% 129% --
1993 0.45% 0.44% 55% --
1992 N/A N/A 71% --
Government
Bond Fund
1996 0.50% 0.50% 112% --
1995 0.50% 0.50% 180% --
1994 0.50% 0.50% 106% --
1993 0.50% 0.49% 35% --
1992 N/A N/A 67% --
Money Market
Fund
1996 0.28% 0.28% N/A --
1995 0.29% 0.29% N/A --
1994 0.31% 0.31% N/A --
1993 0.32% 0.31% N/A --
1992 N/A N/A N/A --
</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 (See Note 5 of Notes to Financial Statements).
(C) Excluding reimbursements and reductions.
(D) For fiscal years beginning on or after September 1, 1995, a
Portfolio is required to disclose its average commission rate
per share for trades for which commissions are charged. This
rate generally does not reflect mark-ups, mark-downs, or
spreads on shares traded on a principal basis.
(1) Net investment income per share before reimbursement of fees by the
investment adviser were $0.065 in 1993 for Investment Grade
Income Fund; $0.055 in 1993 and $0.056 in 1992 for Government Bond
Fund; and $0.030 in 1993 for Money Market Fund.
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F-51
<PAGE>
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Allmerica Investment Trust
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NOTES TO FINANCIAL STATEMENTS
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1. ORGANIZATION
Allmerica Investment Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company established as a Massachusetts business trust for the purpose
of providing a vehicle for the investment of assets of various separate accounts
established by Allmerica Financial Life Insurance and Annuity Company, a
wholly-owned subsidiary of First Allmerica Financial Life Insurance Company
("First Allmerica") or other affiliated insurance companies. As of the date of
this report, the Trust offered twelve managed investment portfolios. The
accompanying financial statements and financial highlights are those of the
Select Aggressive Growth, Select Capital Appreciation, Small Cap Value, Select
International Equity, Select Growth, Growth, Equity Index, Select Growth and
Income, Select Income, Investment Grade Income, Government Bond and Money Market
Funds (individually, a "Portfolio," collectively, the "Portfolios") only.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies which are in conformity with generally accepted accounting
principles consistently followed by the Trust in the preparation of its
financial statements.
Security Valuation: Securities which are traded on a recognized exchange
(including securities traded through the National Market System) are valued at
the last sale price on the securities exchange on which such securities are
primarily traded or, if there were no sales that day, at the mean of the closing
bid and asked price. Over-the-counter securities that are not traded through the
National Market System are valued on the basis of the bid price at the close of
business each day. Short-term investments that mature in 60 days or less are
valued at amortized cost. Corporate debt securities and debt securities of the
U.S. Government and its agencies (other than short-term investments) are valued
by an independent pricing service approved by the Board of Trustees which
utilizes market quotations and transactions, quotations from dealers and various
relationships among securities in determining value. If not valued by a pricing
service, such securities are valued at prices obtained from independent brokers.
Investments with prices that cannot be readily obtained are carried at fair
value as determined in good faith under consistently applied procedures
established by and under the supervision of the Board of Trustees. The
investments of the Money Market Fund are valued utilizing the amortized cost
valuation method permitted in accordance with Rule 2a-7 under the Investment
Company Act of 1940. This method involves valuing a portfolio security initially
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium.
Forward Foreign Currency Contracts: The Select International Equity and Select
Capital Appreciation Funds may enter into forward foreign currency contracts
whereby the Portfolios agree to sell a specific currency at a specific price at
a future date in an attempt to hedge against fluctuations in the value of the
underlying currency of certain portfolio instruments. Forward foreign currency
contracts are valued at the daily exchange rate of the underlying currency with
any fluctuations recorded as unrealized gains or losses. Purchases and sales of
forward foreign currency contracts are offset and presented on a net basis in
the Statement of Assets and Liabilities. Gains or losses on the purchase or sale
of forward foreign currency contracts having the same settlement date and broker
are recognized on the date of offset, otherwise gains and losses are recognized
on settlement date.
Foreign Currency Translation: Investment valuations, other assets and
liabilities denominated in foreign currencies are converted each business day
into U.S. dollars based upon current exchange rates. Purchases and sales of
foreign investments and income and expenses are converted into U.S. dollars
based upon exchange rates prevailing on the respective dates of such
transactions. That portion of unrealized gains or losses on investments due to
fluctuations in foreign currency exchange rates is not separately disclosed.
Security Transactions and Investment Income: Security transactions are recorded
on the trade date. Net realized gains and losses from security transactions are
recorded on the basis of identified cost. Interest income is recorded on the
accrual basis and consists of interest accrued and, if applicable, discounts
earned on original issue discount bonds, zero coup-
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F-52
<PAGE>
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Allmerica Investment Trust
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NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
ton bonds, stepped-coupon bonds and payment in kind bonds, are accreted.
Dividend income is recorded on the ex-dividend date.
Federal Income Taxes: The Trust treats each Portfolio as a separate entity for
Federal income tax purposes. Each Portfolio intends to continue to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, each Portfolio will not be subject to
Federal income taxes to the extent it distributes all of its taxable income and
net realized gains for the tax year ending December 31. In addition, by
distributing during each calendar year substantially all of its net investment
income, capital gains and certain other amounts, if any, each Portfolio will not
be subject to Federal excise tax. Therefore, no Federal income tax provision is
required. Withholding taxes on foreign dividend income and gains have been paid
or provided for in accordance with the applicable country's tax rules and rates.
Paid-in capital, undistributed net investment income and accumulated net
realized gain (loss) have been adjusted in the Statement of Assets and
Liabilities for permanent book-tax differences for all Portfolios with the
exception of the Money Market Portfolio for the year ended December 31, 1996.
Distributions to Shareholders: Dividends from net investment income are declared
and reinvested daily for the Money Market Fund, declared and distributed
quarterly for the Growth, Select Growth and Income, Equity Index, Investment
Grade Income, Select Income and Government Bond Funds, and annually for the
Select International Equity, Select Aggressive Growth, Select Capital
Appreciation, Small Cap Value and Select Growth Funds. All Portfolios declare
and distribute all net realized capital gains, if any, at least annually. The
distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses and forwards, including "Post October Losses" and
permanent differences due to differing treatments for paydown gains/losses on
certain securities, foreign currency transactions, market discount, non-taxable
dividends and losses deferred due to wash sales. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
Permanent book-tax differences, if any, are not included in ending undistributed
net investment income for the purpose of calculating net investment income per
share in the Financial Highlights.
Futures Contracts: All Portfolios may enter into futures contracts for the
delayed delivery of securities at a fixed price at some future date or the
change in value of a specified financial index over a predetermined time period.
Cash or securities are deposited with brokers in order to establish and maintain
a position. Subsequent payments made or received by the Fund based on the daily
change in the market value of the position are recorded as unrealized gain or
loss until the contract is closed out, at which time the gain or loss is
realized.
Organization Costs: Each Portfolio bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
shares for distribution under Federal and state securities regulations. All such
costs are being amortized using the straight-line method over a period of five
years beginning with the commencement of the Portfolio's operation. The
Investment Adviser incurred all start up costs of the Portfolios except for
Select Capital Appreciation.
Expenses: The Trust accounts separately for assets, liabilities and operations
of each Portfolio. Expenses directly attributed to a Portfolio are charged to
the Portfolio, while expenses which are attributable to more than one Portfolio
of the Trust are allocated among the respective Portfolios.
Forward Commitments: Each Portfolio except the Small Cap Value and the Money
Market Funds may from time to time purchase securities on a forward commitment
basis. Debt securities are often 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 Portfolio and no interest accrues to the Portfolio. The market value of
forward commitments may be more or less than the purchase price payable at
settlement date.
- ------------------------------------------------
F-53
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Allmerica Investment Trust
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NOTES TO FINANCIAL STATEMENTS, Continued
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3. INVESTMENT ADVISORY, ADMINISTRATION
AND OTHER RELATED PARTY TRANSACTIONS
Allmerica Investment Management Company, Inc. (the "Manager"), a wholly-owned
subsidiary of First Allmerica, serves as Investment Adviser and Administrator to
the Trust. Under the terms of the management agreement, the Portfolios pay a
management fee, calculated daily and payable monthly, at an annual rate based
upon the following fee schedule:
<TABLE>
<CAPTION>
Percentage of Average Daily Net Asset Value
First Next On the
Portfolio $50,000,000 $200,000,000 Remainder
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Select Aggressive Growth 1.00% 1.00% 1.00%
Select Capital Appreciation 1.00% 1.00% 1.00%
Small Cap Value 0.85% 0.85% 0.85%
Select International Equity 1.00% 1.00% 1.00%
Select Growth 0.85% 0.85% 0.85%
Growth 0.60% 0.50% 0.35%
Equity Index 0.35% 0.30% 0.25%
Select Growth and Income 0.75% 0.75% 0.75%
Select Income 0.60% 0.60% 0.60%
Investment Grade Income 0.50% 0.35% 0.25%
Government Bond 0.50% 0.50% 0.50%
Money Market 0.35% 0.25% 0.20%
</TABLE>
The Manager has entered into Sub-Adviser Agreements for the management of the
investments of each of the Portfolios. The Manager is solely responsible for the
payment of all fees to the Sub-Advisers. The Sub-Advisers for each of the
Portfolios are as follows:
Select Aggressive Growth Nicholas-Applegate Capital Management
Select Capital Appreciation Janus Capital Corporation
Small Cap Value CRM Advisors, LLC
Select International Equity Bank of Ireland Asset Management
Select Growth Putnam Investment Management, Inc.
Growth Miller Anderson & Sherrerd, LLP
Equity Index Allmerica Asset Management, Inc.
Select Growth and Income John A. Levin & Co., Inc.
Select Income Standish, Ayer & Wood, Inc.
Investment Grade Income Allmerica Asset Management, Inc.
Government Bond Allmerica Asset Management, Inc.
Money Market Allmerica Asset Management, Inc.
Effective July 1, 1996, Putnam Investment Management, Inc. replaced Provident
Investment Counsel as Sub-Adviser for the Select Growth Fund. Also, effective
January 1, 1997,CRM Advisors, LLC, an affliate of Cramer Rosenthal McGlynn,
Inc., replaced David L. Babson & Co., Inc. as Sub-Adviser for the Small Cap
Value Fund, which was approved by the Trustees of the Trust at a meeting held on
December 11, 1996.
The Manager has entered into an Administrative Services Agreement with First
Data Investor Services Group, Inc. ("FDISG"), a wholly-owned subsidiary of First
Data Corporation, whereby FDISG performs administrative services for the
Portfolios and is entitled to receive an administrative fee and certain
out-of-pocket expenses. The Manager is solely responsible for the payment of the
administration fee to FDISG. In a separate agreement, FDISG receives separate
fees from the Portfolios for certain fund accounting services provided in its
capacity as pricing and bookkeeping agent.
--------------------------------------
F-54
<PAGE>
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Allmerica Investment Trust
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NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
The Trust pays no salaries or compensation to any of its officers. Trustees who
are not directors, officers, or employees of the Trust or any investment adviser
are reimbursed for their travel expenses in attending meetings of the Trustees,
and receive quarterly meeting and retainer fees for their services. Such amounts
are paid by the Trust.
4. REIMBURSEMENT OF EXPENSES
In the event normal operating expenses of each Portfolio, excluding taxes,
interest, broker commissions and extraordinary expenses, but including the
advisory fee, exceed certain voluntary expense limitations (Select International
Equity Fund - 1.50%, Select Aggressive Growth Fund - 1.35%, Select Capital
Appreciation Fund - 1.35%, Small Cap Value Fund - 1.25%, Growth Fund - 1.20%,
Select Growth Fund - 1.20%, Equity Index Fund - 0.60%, Select Growth and Income
Fund - 1.10%, Investment Grade Income Fund - 1.00%, Select Income Fund - 1.00%,
Government Bond Fund - 1.00% and Money Market Fund - 0.60%), the Manager will
bear such expenses directly or reduce its compensation from the Portfolios by
the excess of the stated expense limitations. Expense limitations may be removed
or revised without prior notice to existing shareholders. The Manager will
voluntarily reimburse its fees and any expenses in excess of the expense
limitations.
5. REDUCTION OF EXPENSES
Certain Portfolios have entered into agreements with brokers whereby the brokers
will rebate a portion of commissions. Such amounts earned by the Portfolios,
under such agreements, are presented as a reduction of expenses in the
Statements of Operations.
6. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest for the Portfolios, each without a par
value.
7. FOREIGN SECURITIES
Each Portfolio, except Small Cap Value Fund, Government Bond Fund, Investment
Grade Income Fund and Money Market Fund, may purchase securities of foreign
issuers. Investing in such securities involves special risks not typically
associated with investing in securities of U.S. issuers. The risks include
revaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign issuers and their markets may
be less liquid and their prices more volatile than those of securities of
comparable U.S. issuers. The Investment Grade Income Fund may not invest in
foreign securities other than obligations issued by the government of Canada and
its political subdivisions.
8. FINANCIAL INSTRUMENTS
Investing in certain financial instruments including forward foreign currency
and futures contracts involves risk other than that reflected in the Statement
of Assets and Liabilities. Risks associated with these instruments include the
potential for an imperfect correlation between the movements in the price of the
instruments and the price of the underlying securities and interest rates, an
illiquid secondary market for the instruments or inability of counterparties to
perform under the terms of the contract, and changes in the value of foreign
currency relative to the U.S. dollar.
- -----------------------------------------------
F-55
<PAGE>
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Allmerica Investment Trust
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OTHER INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS: (unaudited)
At the Meeting of Shareholders of the Select Growth and Income Fund, held on
April 2, 1996, shareholders approved the new Sub-Adviser agreement between the
Manager and John A. Levin and Co., Inc. with respect to the Portfolio. The
results were as follows:
<TABLE>
<CAPTION>
Shares For Shares Against Shares Abstaining % of Shares Voted
----------- -------------- ----------------- -----------------
<S> <C> <C> <C>
147,754,887 2,650,753 3,350,343 100.00%
</TABLE>
At the Meeting of Shareholders of the Select Growth Fund, held on September 18,
1996, shareholders approved the new Sub-Adviser agreement between the Manager
and Putnam Investment Management, Inc. with respect to the Portfolio. The
results were as follows:
<TABLE>
<CAPTION>
Shares For Shares Against Shares Abstaining % of Shares Voted
----------- -------------- ----------------- -----------------
<S> <C> <C> <C>
108,701,037 1,469,598 4,284,038 100.00%
</TABLE>
------------------------------------------------
F-56
<PAGE>
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Allmerica Investment Trust
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REGULATORY DISCLOSURES
- --------------------------------------------------------------------------------
The performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
An investment in the Money Market Fund is neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Funds and is not authorized for
distribution to prospective investors in the flexible premium variable life
insurance or annuity products of Allmerica Financial Life Insurance and Annuity
Company or First Allmerica Financial Life Insurance Company unless accompanied
or preceded by effective prospectuses for the flexible premium variable life
insurance or annuity products of Allmerica Financial Life Insurance and Annuity
Company or First Allmerica Financial Life Insurance Company, Allmerica
Investment Trust, Variable Insurance Products Fund, Delaware Group Premium Fund
International Equity Series, and T. Rowe Price International Stock Portfolio,
which include important information related to charges and expenses.
CLIENT NOTICES
- --------------------------------------------------------------------------------
This annual report includes financial statements for Allmerica Investment Trust.
It does not include financial statements for the separate accounts that
correspond to the Variable Annuity, Allmerica Advantage Variable
Annuity/ExecAnnuity Plus, Vari-Exceptional Life and/or Variable Inheiritage
contracts. Separate account financial statements will no longer be provided in
the annual report. If you would like to receive separate account financial
statements as of December 31, 1996, they may be obtained from Allmerica
Investments, Inc., 440 Lincoln Street, Worcester, MA 01653, 1-800-828-0540,
extension 201.
In the past, we have produced Annual and Semi-Annual Reports for each of our
annuity and life insurance products, which were sent to the owner of record for
each contract. As a result, a household that owned several contracts received
multiple copies of reports that contained virtually identical information. In an
effort to lessen waste and to reduce expenses for postage and printing, we have
combined the reports into one Allmerica Financial Retail Services Annual Report.
We will now mail only one copy of the combined report to households that own a
combination of Variable Annuity, Allmerica Advantage Variable
Annuity/ExecAnnuity Plus, Vari-Exceptional Life and/or Variable Inheiritage
contracts. This report will be addressed to the first contract owner listed
alphabetically in our file.
If you would like to request an exemption from this mailing policy and continue
to receive a copy of the report for each contract, please contact our Client
Services Area at 1-800-533-7881. If you would like to request additional copies
of this report, please contact either your Allmerica Financial representative or
call 1-800-828-0540, extension 200. Proxy material and tax information will
continue to be sent to each contract owner.
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Trustees and Shareholders
of the Allmerica Investment Trust
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments (except for Moody's Ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Select Aggressive Growth Fund, Select Capital Appreciation Fund, Small Cap
Value Fund, Select International Equity Fund, Select Growth Fund, Growth Fund,
Equity Index Fund, Select Growth and Income Fund, Select Income Fund, Investment
Grade Income Fund, Government Bond Fund, and Money Market Fund (each a portfolio
series of the Allmerica Investment Trust, hereafter referred to as the "Trust")
at December 31, 1996, and the results of each of their operations, the changes
in each of their net assets, and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 14, 1997
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Variable Annuity . Allmerica Advantage Variable Annuity/ExecAnnuity Plus .
Vari-Exceptional Life ('87, '91 & '93) . Variable Inheiritage Products are
issued by Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in NY and HI) and are distributed by
Allmerica Investments, Inc. To be preceded or accompanied by the current
prospectus. Read it carefully before investing.
[LOGO OF ALLMERICA FINANCIAL APPEARS HERE]
First Allmerica Financial Life Insurance Company . Allmerica Financial Life
Insurance and Annuity Company (licensed in all states except NY & HI)
Allmerica Trust Company, N.A. . Allmerica Investments, Inc. . The Hanover
Insurance Company
Sterling Risk Management Services, Inc. . Citizens Corporation . Citizens
Insurance Company of America . AMCRO, Inc.
440 Lincoln Street, Worcester, Massachusetts 01653
AFSANNRPT 12/96 Printed on Recycled Paper
