<PAGE>
ALLMERICA SELECT
A Higher Standard
[LOGO]
Annual Report
December 31, 1998
. Allmerica Select Resource
. Allmerica Select Resource II
. Allmerica Select Life
. Allmerica Select Inheiritage
1998
[LOGO OF ALLMERICA]
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Allmerica Select gives you access to some of the
world's leading money managers, selected and monitored
by independent industry experts.
It offers you an array of advantages typically reserved for the
nation's largest and most sophisticated investors including:
Access to a range of highly respected money managers.
The comprehensive research capabilities of a nationally recognized
pension consulting firm, to help identify the most qualified and best suited
money managers representing a range of investment approaches.
The opportunity to diversify across investment categories and investment
styles - to better meet your investment needs.
Objective monitoring of the money managers' performance by
Allmerica Select's Manager Evaluation Committee, made up of
highly experienced industry professionals.
Personalized performance reports and timely market updates
to help keep you on target.
Significant tax advantages, including tax-deferred growth and
tax-free transfers between investment options.
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<TABLE>
Table of Contents 1
<S> <C>
GENERAL INFORMATION....................................................................................... 2
A LETTER FROM THE CHAIRMAN................................................................................ 3
FUND PERFORMANCE SUMMARY.................................................................................. 4
PRODUCT PERFORMANCE SUMMARIES............................................................................. 5
Allmerica Select Resource/Resource II
Variable Annuity (FAFLIC).............................................................................. 6
Allmerica Select Resource/Resource II
Variable Annuity (AFLIAC).............................................................................. 7
Allmerica Select Life Variable Universal Life............................................................. 8
Allmerica Select Inheiritage (FAFLIC)
Variable Universal Survivorship Life................................................................... 9
Allmerica Select Inheiritage (AFLIAC)
Variable Universal Survivorship Life................................................................... 10
DOMESTIC & INTERNATIONAL EQUITY MARKET OVERVIEW........................................................... 12
Select Emerging Markets Fund.............................................................................. 14
Select International Equity Fund.......................................................................... 15
T. Rowe Price International Stock Portfolio............................................................... 16
Select Aggressive Growth Fund............................................................................. 17
Select Capital Appreciation Fund.......................................................................... 18
Select Value Opportunity Fund............................................................................. 19
Select Growth Fund........................................................................................ 20
Select Strategic Growth Fund.............................................................................. 21
Fidelity VIP/1/ Growth Portfolio.......................................................................... 22
Select Growth and Income Fund............................................................................. 23
Fidelity VIP/1/ Equity-Income Portfolio................................................................... 24
BOND & MONEY MARKET OVERVIEW.............................................................................. 26
Fidelity VIP/1/ High Income Portfolio..................................................................... 28
Select Income Fund........................................................................................ 29
Money Market Fund......................................................................................... 30
FINANCIALS................................................................................................ F-1
</TABLE>
For further information, see the accompanying annual reports.
See Client Notices on Page F-47.
/1/VIP refers to Variable Insurance Products Fund.
<PAGE>
2 General Information
OFFICERS OF FIRST ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY (FAFLIC) AND ALLMERICA FINANCIAL LIFE
INSURANCE AND ANNUITY COMPANY (AFLIAC)
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 Financial Investment Management Services, Inc.
440 Lincoln Street, Worcester, MA 01653
GENERAL DISTRIBUTOR
Allmerica Investments, Inc.
440 Lincoln Street, Worcester, MA 01653
Independent Accountants
PricewaterhouseCoopers 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
George M. Boyd, Secretary
Board of Trustees of AIT
John F. O'Brien, Chairman
P. Kevin Condron/1/
Cynthia A. Hargadon/1/
Gordon Holmes/1/
John P. Kavanaugh
Bruce E. Langton/1/
Attiat F. Ott/1/
Richard M. Reilly
Ranne P. Warner/1/
INVESTMENT SUB-ADVISERS
Allmerica Asset Management, Inc.
440 Lincoln Street, Worcester, MA 01653
Money Market Fund
Bank of Ireland Asset Management (U.S.) Limited
U.S. Offices: 20 Horseneck Lane, Greenwich, CT 06830
Main Offices: 26 Fitzwilliam Place, Dublin 2, Ireland
Select International Equity Fund
Cambiar Investors, Inc.
8400 East Prentice Avenue, Suite 460, Englewood, CO 80111
Select Strategic Growth Fund
Cramer Rosenthal McGlynn, LLC
707 Westchester Avenue, White Plains, NY 10604
Select Value Opportunity Fund
John A. Levin & Co., Inc.
One Rockefeller Plaza, 25th Floor, New York, NY 10020
Select Growth and Income Fund
Nicholas-Applegate Capital Management, L.P.
600 West Broadway - Suite 2900, San Diego, CA 92101
Select Aggressive Growth Fund
Putnam Investment Management, Inc.
One Post Office Square, Boston, MA 02109
Select Growth Fund
Schroder Capital Management International Inc.
787 Seventh Avenue, New York, NY 10019
Select Emerging Markets Fund
Standish, Ayer & Wood, Inc.
One Financial Center, Boston, MA 02111
Select Income Fund
T. Rowe Price Associates, Inc.
100 East Pratt Street, Baltimore, MD 21202
Select Capital Appreciation Fund
INVESTMENT ADVISERS
Fidelity Management & Research Company
82 Devonshire Street, Boston, MA 02108
Fidelity VIP/2/ Equity-Income Portfolio
Fidelity VIP/2/ Growth Portfolio
Fidelity VIP/2/ High Income Portfolio
Rowe Price-Fleming International, Inc.
100 East Pratt Street, Baltimore, MD 21202
T. Rowe Price International Stock Portfolio
/1/Independent Trustees
/2/VIP refers to Variable Insurance Products Fund.
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A Letter from the Chairman
[PHOTO APPEARS HERE]
Dear Client:
Looking back, it is hard to believe all that has happened during the last year.
In the U.S., we experienced a strong economy and the lowest levels of inflation
and unemployment in decades. At the same time the country was confronted with
political scandal in Washington, bombing raids in Africa, Iraq and Afghanistan
and concerns that a global slowdown might even lead to deflation.
The international scene added to our worries. It was marked by devaluation of
the Russian ruble which caused further turmoil in the emerging markets,
continuing recession in Japan and a bold experiment as eleven European countries
prepared for a common currency, the Euro.
These events caused extreme volatility in the financial markets. We saw how both
the stock and bond markets can be driven by emotions rather than by broad
economic or corporate financial strength. The current excitement over Internet
stocks is proof of that. And yet through it all, patient investors were rewarded
with above-average returns in the U.S. and developed international stock and
bond markets.
Throughout the turmoil, our investment managers turned in strong performance as
a group. In fact, almost three-quarters of our investment managers outperformed
their peer group during both 1998 and the trailing three-year period as measured
by Lipper Analytical.
While our "manager of managers" approach to investing has been successful, we
continue to look for ways to improve and enhance the program. In February, we
broadened your investment options by introducing three new funds - Select
Emerging Markets Fund, Select Strategic Growth Fund and Select Value Opportunity
Fund. With the help of BARRA RogersCasey, we also introduced the Manager
Allocation Program (MAP) to help you allocate funds between managers within a
particular investment category.
In addition, the Board hired the mid-cap growth team of T. Rowe Price Associates
as the new sub-adviser of the Select Capital Appreciation Fund.
As we head into a new year, industry experts are predicting more "normal"
returns from the stock market. However, the equity market offers no guarantees.
So we encourage you to continue to work with your financial advisor to set
realistic goals and develop and monitor a disciplined investment program.
In closing, we continue to work hard to offer you a diversified array of strong
investment opportunities within our insurance products. We are proud of our
program and will continue to work hard to earn your trust and your business.
On behalf of the Board of Trustees,
/s/ John F. O'Brien
John F. O'Brien
Chairman of the Board
Allmerica Financial Life Insurance and Annuity Company
3
<PAGE>
4 FUND PERFORMANCE SUMMARY
Average Annual Total Returns as of 12/31/98
For easy reference, the total returns for the Funds are summarized below.
Keep in mind that these returns reflect all Fund charges but do not include any
insurance product fees or expenses. For returns that reflect the deduction of
product charges, please refer to the Product Performance Summaries on the
following pages beginning on page 6.
<TABLE>
<CAPTION>
10 YEARS
FUND OR LIFE
INCEPTION 1 5 OF FUND
FUNDS DATE YEAR YEARS (IF LESS)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allmerica Investment Trust
Select Emerging Markets Fund 2/20/98 N/A N/A -21.46%
Select International Equity Fund 5/2/94 16.48% N/A 12.26%
Select Aggressive Growth Fund 8/21/92 10.56% 14.99% 18.11%
Select Capital Appreciation Fund 4/28/95 13.88% N/A 20.37%
Select Value Opportunity Fund 4/30/93 4.87% 13.09% 14.71%
Select Growth Fund 8/21/92 35.44% 22.15% 19.18%
Select Strategic Growth Fund 2/20/98 N/A N/A -2.47%
Select Growth and Income Fund 8/21/92 16.43% 17.82% 15.53%
Select Income Fund 8/21/92 6.83% 6.05% 6.56%
Money Market Fund 4/29/85 5.51% 5.22% 5.62%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio 3/31/94 15.86% N/A 9.66%
Fidelity Variable Insurance Products
Fund (Vip)
Fidelity VIP Growth Portfolio 10/9/86 39.49% 21.74% 19.41%
Fidelity VIP Equity-Income Portfolio 10/9/86 11.63% 18.77% 15.62%
Fidelity VIP High Income Portfolio 9/19/85 -4.33% 8.80% 11.08%
</TABLE>
Fund performance returns given above reflect an investment in the underlying
funds listed on the date of inception of each Fund.
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.
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Performance
<PAGE>
6 Product Performance Summary
Allmerica Select Resource/Resource II Variable Annuity (FAFLIC)
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Average Annual Total Returns as of 12/31/98
For easy reference, the total returns for the Allmerica Select Resource/Resource
II sub-accounts 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
and Contract Fee and Contract Fee
10 Years 10 Years
Sub- 10 Years or Life of 10 Years or Life of
Account or Life Sub- or Life Sub-
Inception 1 5 of Fund Account 1 5 of Fund Account
Sub-Accounts Date Year Years (if less) (if less) Year Years (if less) (if less)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Emerging Markets Fund 2/20/98 N/A N/A -22.40% -22.40% N/A N/A -26.96% -26.96%
Select International Equity Fund 5/3/94 14.87% N/A 10.72% 10.72% 8.02% N/A 9.93% 9.94%
Select Aggressive Growth Fund 4/21/94 9.03% 13.41% 16.46% 15.25% 2.31% 12.71% 16.12% 14.54%
Select Capital Appreciation Fund 4/30/95 12.35% N/A 18.69% 18.72% 5.61% N/A 17.84% 17.84%
Select Value Opportunity Fund 2/20/98 3.40% 11.53% 13.13% -1.12% -2.67% 11.13% 12.92% -6.93%
Select Growth Fund 4/21/94 33.57% 20.46% 17.52% 23.52% 26.68% 19.85% 17.12% 22.91%
Select Strategic Growth Fund 2/20/98 N/A N/A -3.63% -3.63% N/A N/A -9.29% -9.29%
Select Growth and Income Fund 4/21/94 14.82% 16.20% 13.92% 18.23% 7.92% 15.53% 13.49% 17.56%
Select Income Fund 4/20/94 5.35% 4.58% 5.08% 6.17% -1.08% 3.78% 4.66% 5.35%
Money Market Fund 4/7/94 4.04% 3.76% 4.16% 3.88% -2.18% 3.05% 3.99% 3.14%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock
Portfolio 5/1/95 14.25% N/A 8.13% 9.55% 7.61% N/A 7.52% 8.55%
Fidelity Variable Insurance Products
Fund (VIP and VIP II)
Fidelity VIP Growth Portfolio 5/1/95 37.56% 20.06% 17.76% 26.08% 30.87% 19.60% 17.63% 25.34%
Fidelity VIP Equity-Income Portfolio 5/1/95 10.08% 17.13% 14.12% 18.55% 3.43% 16.66% 13.99% 17.67%
Fidelity VIP High Income Portfolio 5/1/95 -5.65% 7.29% 9.54% 8.52% -11.40% 6.64% 9.39% 7.42%
</TABLE>
Performance returns given above are for the Allmerica Select Resource/Resource
II Variable Annuity Sub-Accounts of FAFLIC, and except in the columns designated
as "Life of Sub-Account", assume an investment in the underlying funds listed
above on the date of inception of each Fund. Performance returns designated as
"Life of Sub-Account" assume an investment in the funds listed on the date of
inception of each Sub-Account. 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 6.5%. Please refer to the product prospectus
for the assumptions used to calculate performance.
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.
<PAGE>
Product Performance Summary 7
Allmerica Select Resource/Resource II Variable Annuity (AFLIAC)
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Average Annual Total Returns as of 12/31/98
For easy reference, the total returns for the Allmerica Select Resource/Resource
II sub-accounts 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
and Contract Fee and Contract Fee
10 Years 10 Years
Sub- 10 Years or Life of 10 Years or Life of
Account or Life Sub- or Life Sub-
Inception 1 5 of Fund Account 1 5 of Fund Account
Sub-Accounts Date Year Years (if less) (if less) Year Years (if less) (if less)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Emerging Markets Fund 2/20/98 N/A N/A -22.40% -22.40% N/A N/A -26.95% -26.95%
Select International Equity Fund 5/3/94 14.87% N/A 10.72% 10.73% 8.02% N/A 9.93% 9.94%
Select Aggressive Growth Fund 9/8/92 9.03% 13.41% 16.45% 16.61% 2.27% 12.67% 16.02% 16.23%
Select Capital Appreciation Fund 4/30/95 12.30% N/A 18.69% 18.72% 5.59% N/A 17.82% 17.85%
Select Value Opportunity Fund 2/20/98 3.42% 11.53% 13.13% -1.12% -2.65% 11.14% 12.93% -6.92%
Select Growth Fund 9/8/92 33.57% 20.46% 17.51% 17.67% 26.66% 19.83% 17.11% 17.25%
Select Strategic Growth Fund 2/20/98 N/A N/A -3.63% -3.63% N/A N/A -9.28% -9.28%
Select Growth and Income Fund 9/8/92 14.82% 16.20% 14.03% 14.04% 7.93% 15.54% 13.61% 13.62%
Select Income Fund 9/8/92 5.35% 4.58% 5.06% 5.12% -1.03% 3.82% 4.94% 4.74%
Money Market Fund 10/8/92 4.05% 3.76% 4.16% 3.33% -2.16% 3.09% 4.03% 3.04%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock
Portfolio 5/1/95 14.25% N/A 8.13% 9.56% 7.59% N/A 7.52% 8.54%
Fidelity Variable Insurance Products
Fund (VIP and VIP II)
Fidelity VIP Growth Portfolio 5/1/95 37.56% 20.06% 17.76% 26.08% 30.84% 19.60% 17.64% 25.31%
Fidelity VIP Equity-Income Portfolio 5/1/95 10.08% 17.13% 14.12% 18.55% 3.42% 16.65% 13.98% 17.66%
Fidelity VIP High Income Portfolio 5/1/95 -5.65% 7.29% 9.54% 8.52% -11.36% 6.67% 9.41% 7.45%
</TABLE>
Performance returns given above are for the Allmerica Select Resource/Resource
II Variable Annuity Sub-Accounts of AFLIAC, and except in the columns designated
as "Life of Sub-Account", assume an investment in the underlying funds listed
above on the date of inception of each Fund. Performance returns designated as
"Life of Sub-Account" assume an investment in the funds listed on the date of
inception of each Sub-Account. 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 6.5%. Please refer to the product prospectus
for the assumptions used to calculate performance.
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.
<PAGE>
8 Product Performance Summary
ALLMERICA SELECT LIFE VARIABLE UNIVERSAL LIFE (AFLIAC)
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98
For easy reference, the total returns for the Allmerica Select Life sub-accounts
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 and With Surrender and
Monthly Policy Charges Monthly Policy Charges
10 Years 10 Years
Sub- 10 Years or Life of 10 Years or Life of
Account or Life Sub- or Life Sub-
Inception 1 5 of Fund Account 1 5 of Fund Account
Sub-Accounts Date Year Years (if less) (if less) Year Years (if less) (if less)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Emerging Markets Fund 2/20/98 N/A N/A -22.00% -22.00% N/A N/A -100.00% -100.00%
Select International Equity Fund 5/1/95 15.55% N/A 11.38% 14.29% -100.00% N/A -1.01% -4.12%
Select Aggressive Growth Fund 5/1/95 9.68% 14.08% 17.16% 18.83% -100.00% 3.59% 10.12% 1.09%
Select Capital Appreciation Fund 5/1/95 12.97% N/A 19.40% 19.38% -100.00% N/A 1.81% 1.71%
Select Value Opportunity Fund 2/20/98 3.99% 12.19% 13.80% -0.64% -100.00% 1.49% 5.06% -100.00%
Select Growth Fund 5/1/95 34.36% 21.18% 18.22% 28.90% -83.40% 11.35% 11.24% 12.36%
Select Strategic Growth Fund 2/20/98 N/A N/A -3.14% -3.14% N/A N/A -100.00% -100.00%
Select Growth and Income Fund 5/1/95 15.50% 16.89% 14.60% 21.25% -100.00% 6.68% 7.38% 3.83%
Select Income Fund 5/1/95 5.98% 5.21% 5.71% 7.26% -100.00% -6.38% -2.31% -12.37%
Money Market Fund 5/1/95 4.67% 4.37% 4.77% 4.65% -100.00% -7.35% 0.41% -15.51%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock
Portfolio 8/23/95 14.93% N/A 8.60% 9.86% -100.00% N/A -3.73% -12.42%
Fidelity Variable Insurance Products
Fund (VIP and VIP II)
Fidelity VIP Growth Portfolio 5/1/95 38.38% 20.78% 18.46% 26.83% -79.81% 10.91% 14.78% 10.07%
Fidelity VIP Equity-Income
Portfolio 5/1/95 10.74% 17.83% 14.80% 19.26% -100.00% 7.71% 10.98% 1.58%
Fidelity VIP High Income Portfolio 5/1/95 -5.09% 7.93% 10.20% 9.16% -100.00% -3.29% 6.16% -10.12%
</TABLE>
Performance returns given above are for the Allmerica Select Life sub-accounts
of AFLIAC and are net of all product charges (including surrender charges) for a
representative policy. The returns, except in the columns designated as "Life of
Sub-Account" assume an investment in the underlying funds listed above on the
date of inception of each Fund. Performance returns designated as "Life of Sub-
Account" assume an investment in the funds listed on the date of inception of
each Sub-Account. All full surrenders or withdrawals in excess of the free
amount may be subject to a declining surrender charge. Please refer to the
prospectus for the assumptions used to calculate performance.
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.
<PAGE>
Product Performance Summary 9
ALLMERICA SELECT INHEIRITAGE (FAFLIC) VARIABLE UNIVERSAL SURVIVORSHIP LIFE
- ---------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98
For easy reference, the total returns for the Allmerica Select Inheiritage
sub-accounts 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 and With Surrender and
Monthly Policy Charges Monthly Policy Charges
10 Years 10 Years
Sub- 10 Years or Life 10 Years or Life of
Account or Life of Sub- or Life Sub-
Inception 1 5 of Fund Account 1 5 of Fund Account
Sub-Accounts Date Year Years (if less) (if less) Year Years (if less) (if less)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLMERICA INVESTMENT TRUST
Select Emerging Markets Fund 2/20/98 N/A N/A -22.23% -22.23% N/A N/A -100.00% -100.00%
Select International Equity Fund 5/3/94 15.16% N/A 11.00% 11.01% -85.99% N/A 1.06% 1.06%
Select Aggressive Growth Fund 8/28/95 9.31% 13.68% 16.75% 14.23% -91.61% 5.94% 12.53% -5.41%
Select Capital Appreciation Fund 4/30/95 12.59% N/A 19.00% 19.02% -88.46% N/A 4.00% 3.97%
Select Value Opportunity Fund 9/17/95 3.68% 11.81% 13.41% 16.20% -97.01% 3.75% 7.42% -3.49%
Select Growth Fund 8/28/95 33.90% 20.76% 17.81% 25.49% -67.99% 14.04% 13.70% 8.51%
Select Strategic Growth Fund 2/20/98 N/A N/A -3.39% -3.39% N/A N/A -100.00% -100.00%
Select Growth and Income Fund 9/10/95 15.10% 16.48% 14.20% 18.42% -86.05% 9.17% 9.72% -0.51%
Select Income Fund 9/11/98 5.62% 4.91% 5.33% 0.55% -95.15% -4.53% -0.28% -100.00%
Money Market Fund 11/20/95 4.31% 4.02% 4.42% 4.25% -96.41% -5.62% 2.20% -21.16%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock
Portfolio 8/28/95 14.54% N/A 8.42% 9.75% -86.58% N/A -1.59% -11.19%
Fidelity Variable Insurance Products
Fund (VIP and VIP II)
Fidelity VIP Growth Portfolio 8/28/95 37.91% 20.36% 18.05% 21.01% -64.14% 13.59% 16.61% 3.06%
Fidelity VIP Equity-Income
Portfolio 8/28/95 10.36% 17.43% 14.40% 17.88% -90.60% 10.26% 12.81% -0.81%
Fidelity VIP High Income Portfolio 12/4/95 -5.42% 7.56% 9.82% 7.55% -100.00% -1.31% 7.99% -17.08%
</TABLE>
Performance returns given above are for the Allmerica Select Inheiritage
sub-accounts of FAFLIC and are net of all product charges (including surrender
charges) for a representative policy. The returns, except in the columns
designated as "Life of Sub-Account" assume an investment in the underlying funds
listed above on the date of inception of each Fund. Performance returns
designated as "Life of Sub-Account" assume an investment in the funds listed on
the date of inception of each Sub-Account. All full surrenders or withdrawals in
excess of the free amount may be subject to a declining surrender charge.
Please refer to the prospectus for the assumptions used to calculate
performance.
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.
<PAGE>
Product Performance Summary 10
Allmerica Select Inheiritage (AFLIAC) Variable Universal Survivorship Life
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98
For easy reference, the total returns for the Allmerica Select Inheiritage
sub-accounts 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
and Contract Fee and Contract Fee
10 Years 10 Years
Sub- 10 Years or Life of 10 Years or Life of
Account or Life Sub- or Life Sub-
Inception 1 5 of Fund Account 1 5 of Fund Account
Sub-Accounts Date Year Years (if less) (if less) Year Years (if less) (if less)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allmerica Investment Trust
Select Emerging Markets Fund 2/20/98 N/A N/A -22.25% -22.25% N/A N/A -100.00% -100.00%
Select International Equity Fund 5/3/94 15.16% N/A 11.00% 11.01% -87.67% N/A 0.28% 0.28%
Select Aggressive Growth Fund 4/25/94 9.31% 13.68% 16.75% 14.82% -93.22% 5.26% 12.07% 4.95%
Select Capital Appreciation Fund 4/30/95 12.58% N/A 18.99% 19.02% -90.12% N/A 2.92% 2.90%
Select Value Opportunity Fund 6/1/94 3.68% 11.81% 13.42% 14.27% -98.55% 3.07% 6.86% 3.76%
Select Growth Fund 5/19/94 33.90% 20.77% 17.81% 23.67% -69.91% 13.41% 13.23% 14.87%
Select Strategic Growth Fund 2/20/98 N/A N/A -3.41% -3.41% N/A N/A -100.00% -100.00%
Select Growth and Income Fund 5/1/94 15.10% 16.49% 14.21% 18.33% -87.73% 8.53% 9.25% 8.97%
Select Income Fund 1/21/97 5.62% 4.91% 5.39% 7.19% -96.71% -5.26% -0.79% -36.22%
Money Market Fund 5/26/94 4.31% 4.02% 4.42% 4.20% -97.95% -6.36% 1.92% -8.51%
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock
Portfolio 6/30/95 14.54% N/A 8.39% 10.23% -88.26% N/A -2.40% -10.01%
Fidelity Variable Insurance Products
Fund (VIP and VIP II)
Fidelity VIP Growth Portfolio 5/11/94 37.91% 20.36% 18.06% 23.96% -66.10% 12.95% 16.37% 15.30%
Fidelity VIP Equity-Income Portfolio 4/29/94 10.36% 17.42% 14.40% 18.64% -92.22% 9.60% 12.56% 9.36%
Fidelity VIP High Income Portfolio 5/12/94 -5.42% 7.56% 9.82% 8.57% -100.00% -2.02% 7.73% -2.83%
</TABLE>
Performance returns given above are for the Allmerica Select Inheiritage sub-
accounts of AFLIAC and are net of all product charges (including surrender
charges) for a representative policy. The returns, except in the columns
designated as "Life of Sub-Account", assume an investment in the underlying
funds listed above on the date of inception of each Fund. Performance returns
designated as "Life of Sub-Account" assume an investment in the funds listed on
the date of inception of each Sub-Account. All full surrenders or withdrawals in
excess of the free amount may be subject to a declining surrender charge. Please
refer to the prospectus for the assumptions used to calculate performance.
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.
<PAGE>
- --------------------------------------------------------------------------------
Overview
- --------------------------------------------------------------------------------
<PAGE>
12 DOMESTIC & INTERNATIONAL EQUITY MARKET OVERVIEW
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 large 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.
1997: Robust economic growth, declining interest rates and low unemployment
produce a third consecutive year of unprecedented gains for the U.S. stock
market.
1998: Worldwide economic problems cause considerable volatility for stocks.
Yet, the market posts its fourth consecutive year of double-digit gains.
1998 proved to be one of the most volatile years for the stock market since the
crash of 1987. Widely expected by many investors to be a cooling off period for
stocks, the past year brought a series of ups and downs - and double-digit gains
- - to the market. In fact, it proved to be the fourth straight year of plus-20%
returns for the S&P 500(R) Index.
The roller coaster ride for stocks began mid-year as economic turmoil in Asia,
Russia and Latin America resulted in increased investor concern. This turmoil
produced a third quarter of market extremes. In July, the market posted an all-
time high. But August brought a severe correction as investors feared lower
worldwide demand for goods and services would lead to slower earnings growth for
U.S. corporations.
But slower earnings growth proved not to deter investors altogether. While they
fled investments exposed to international market risk, they favored the safety
and predictability of large-company U.S. stocks - regardless of how vastly
overpriced they seemed.
Once the Federal Reserve cut interest rates for the third time in November,
investors returned to the market in full force. They poured money into a small
group of large-company stocks, sending broad market indexes soaring to another
year of strong performance. In fact, S&P 500(R) performance was dominated
throughout the year by only a few high-powered names such as Microsoft Corp.,
Dell Computer Corp., Intel Corp.
While large-cap gains outpaced both small- and mid-cap stocks and drove overall
market performance, technology led sector performance for the year. Internet-
related stocks, in particular, drove results even higher. Specifically,
companies such as Amazon.com, an on-line book seller and eBay.com, an on-line
auction service, saw their market values explode. Although these Internet stocks
are not included in the S&P 500(R) Index, they helped bolster the entire
technology sector. Investors seemed to feel that any company involved in
computers would benefit from an Internet-driven surge in demand.
Despite the ongoing Encouraged by the
Asian crisis, stocks upcoming monetary
benefit from low union, Europe leads
interest rates and [PICTURE] global performance. [PICTURE]
a steady economy.
<TABLE>
<CAPTION>
1998 JAN FEB MAR APR MAY JUN
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[PICTURE] Technology, led by Massive economic
Internet-related problems in Russia,
stocks, is the best- send shock waves
performing industry through the world's
sector for the year. financial markets.
</TABLE>
<PAGE>
DOMESTIC & INTERNATIONAL EQUITY MARKET OVERVIEW 13
Other top-performing industry groups in 1998 were telecommunications which
benefited from merger and acquisition activity, and retailers, which fared well
as a result of strong consumer spending. On the other hand, market laggards were
dominated by oil services, which felt the painful effects of sharply declining
crude oil prices.
On the international front, Europe performed well in 1998, encouraged by the
anticipated monetary union. In fact, Greece's stock market, led all global
performers with a smashing 86% return. Countries such as Italy and Belgium also
performed particularly well in this region.
However, results from emerging market countries weren't as rosy. Currency
concerns plagued Asia for much of 1998. While Japan's stock market went through
a series of ups and downs, countries like Thailand and Korea started taking
serious measures to turn their economies around - and it definitely made a
difference. South Korea proved to be one of the top-performing countries during
1998.
Russia, however, wasn't so favored. By mid-year, massive economic problems and a
large devaluation in the ruble caused investors to flee Russian stocks and
bonds, sending shock waves throughout the world's financial markets.
As a result of Russia's economic collapse, investors grew more concerned about
what the impact would be on other emerging markets. These worries particularly
affected Brazil, which unlike Russia, managed to keep currency devaluation at
bay thanks to support from the U.S., promises of reform and higher interest
rates. Unfortunately, the higher cost of borrowing stunted economic growth and
sent Brazil's economy into a recession.
Economic problems weren't confined to just Brazil, however. Slumping prices for
crude oil and other commodities curbed economic growth in other parts of Latin
America as well. Because oil prices make up about 70% of the government's
revenue, Venezuela was particularly hard hit. Political concerns also were a
factor here and combined to produce one of the worst-performing markets for the
year.
Currently, uncertainty exists throughout the world's stock markets. In the U.S.,
stable interest rates and low inflation bode well for the stock market, but
slower corporate earnings growth continues to be a concern. In Europe, the
introduction of the Euro, the new single currency for Europe, should benefit the
region. However, slower earnings growth remains a concern. And although Japan
and most of Asia appear to be on the road to economic recovery, great
uncertainty still exists in these markets.
Given the unsettled nature of the global economy, it will be difficult for the
U.S. stock market to continue its four-year string of outstanding returns.
[PICTURE] As a result of worldwide [PICTURE] Sharply declining oil
economic unrest, invest- prices cause the emerg-
ors favor the safety of ing markets of Latin
large-company stocks, America to suffer.
which drive performance
for the year.
JUL AUG SEP OCT NOV DEC
- --------------------------------------------------------------------------------
[PICTURE] The Federal Reserve Uncertainty exists
cuts interest rates throughout the world's
three times prompt- stock markets as
ing investors to investors predict a
favor a small group slower year for corpo-
of large-company rate earnings -- and
stocks. more normal results
from the stock market.
<PAGE>
14 SELECT EMERGING MARKETS FUND
Since inception on February 20, 1998, the Select Emerging Markets Fund returned
- -21.46% versus the -26.36% return of the MSCI Emerging Markets Free Index for
the comparable period.
During the past year, the turmoil in emerging markets continued, spreading to
Russia and Latin America. As problems in these countries grew, investors became
increasingly risk averse and retreated to the safer havens of developed
countries.
Given this backdrop, the Fund's managers maintained a defensive investment
strategy for much of the period. They maintained a modest exposure to the Fund's
holdings in those countries most severely affected by the global financial
crisis, notably Russia and Latin America and raised their level of cash. The
fund benefited from its overweighted position in Korea and emerging Europe.
Although the Fund's assets remained concentrated in high-quality companies with
solid long-term prospects for growth, liquidity concerns drove many markets, as
investors ignored sound stock fundamentals. Holdings as of year-end included
Samsung Electronics, Hellenic Telecom, Telefonos De Mexico, Telecom de Sao
Paulo, and ITC Ltd.
Currently, the fund's largest position is in Korea, which along with Thailand,
are taking the necessary steps to turn their economies around.
While the outlook for many emerging markets has improved, there remain a number
of concerns that management believes warrant a fairly defensive stance. Yet, in
the absence of a global recession the manager believes emerging markets could
return to favor.
Investment Sub-Adviser
Schroder Capital Management International Inc.
About the Fund
Seeks long-term growth by investing in the world's emerging markets.
PORTFOLIO COMPOSITION
As of December 31, 1998, the country allocation of net assets was:
[PICTURE]
South Korea 12%
Mexico 9%
South Africa 7%
India 7%
Taiwan 5%
Greece 5%
Brazil 9%
Israel 4%
U.S. Government and
Agency Obligations 11%
Other 31%
AVERAGE ANNUAL TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1998 LIFE OF FUND
Select Emerging Markets Fund -21.46%
MSCI Emerging Markets Free Index -26.36%
Lipper Emerging Markets Funds Average -27.73%
Fund Inception Date
February 20, 1998
(No growth of $10,000 chart is provided)
The Select Emerging Markets Fund is a portfolio of the Allmerica Investment
Trust.
Portfolio composition will vary over time.
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 MSCI Emerging Markets Free Index is an unmanaged index of 26 emerging
markets. The Lipper Emerging Markets Funds Average is a non-weighted average of
191 funds within the emerging markets 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.
<PAGE>
Select International Equity Fund 15
For the one-year period ended December 31, 1998, the Select International Equity
Fund returned 16.48% versus the 20.33% return of the Morgan Stanley EAFE Index.
During 1998, the Growth in Telecommunications theme outperformed all other
themes for the Fund. Both the growth in the mobile phone market and the
privatization of Europe's telecommunications companies contributed to its
strength. New partnerships also fueled the market as companies such as
Mannesmann of Germany and Olivetti of Italy teamed up to provide international
phone service.
Holdings in Vodaphone also benefited from announced links with Lucent
Technologies to market wireless technology.
The Healthcare Needs theme also added results. In response to the market
turbulence in the third quarter, investors sought the stable earnings of
pharmaceutical stocks. As a result, holdings such as Glaxo Wellcome and Hoechst
made particularly strong contributions to the portfolio.
British American Tobacco was a top performer in the Leading Consumer Franchise
theme. These shares were bolstered by news of the successful spin-off of Allied
Zurich, its financial services business, and favorable news about U.S.
litigation.
On the downside, stocks in the Infrastructural Development, Technological
Innovation and Expanding Financial Services in Developing Markets themes were
the poorest performers due to their significant exposure to the Far East.
Looking ahead, the Fund's managers plan to concentrate on European stocks that
they believe will prosper in the new single currency environment as well as
selected companies in Japan.
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS LIFE OF FUND
Select International Equity Fund 16.48% N/A 12.26%
Morgan Stanley EAFE Index 20.33% 9.50% 8.41%
Lipper International Funds Average 13.05% 7.69% 7.57%
GROWTH OF A $10,000 INVESTMENT SINCE 1994
Select International Morgan Stanley
Equity Fund EAFE Index
5/94 $10,000 $10,000
12/98 $17,161 $14,582
The Select International Equity Fund is a portfolio of the Allmerica Investment
Trust.
Portfolio composition will vary over time.
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 Funds Average is a non-weighted
average of 596 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.
Investment Sub-Adviser
Bank of Ireland Asset Management (U.S.) Limited
About the Fund
Seeks maximum long-term total return by investing in established non-U.S.
companies based on fundamental value and strong opportunities.
PORTFOLIO COMPOSITION
As of December 31, 1998, the country allocation of net assets was:
United Kingdom 30%
Japan 14%
Switzerland 13%
Netherlands 9%
Germany 9%
France 8%
Australia 4%
Italy 3%
Cash Equivalents 4%
Other 6%
<PAGE>
16 T. Rowe Price Internations Stock Portfolio
For the one-year period ended December 31, 1998, the T. Rowe Price International
Stock Portfolio posted a 15.86% total return, somewhat behind the 20.33% return
of the Morgan Stanley EAFE Index for the same period.
During 1998, country allocation slightly detracted from performance. Although a
modest exposure to Japan and Asia added value, these gains were offset by the
Portfolio's position in Latin America. This area suffered as currencies weakened
from "Asian Contagion" -- and proved to be the weakest performing international
region for the year. The Portfolio's overweighting in Norway, which was
particularly sensitive to declining oil prices late in the year, also lowered
returns.
On a positive note, the Portfolio captured results from good stock selection. In
Europe which was the best-performing region, holdings in the Netherlands,
Belgium and France were successful. Japanese holdings also contributed returns
as investor confidence returned to this area of the world.
Looking ahead, the Portfolio's managers are enthusiastic about prospects for
Europe and remain cautious about investing in the Pacific Rim and Japan. They
plan to continue to seek businesses that have the management, products and sound
finances to support sustainable growth. They also feel Latin America still
offers opportunity - as long as Brazil's currency problems are carefully
managed.
More importantly, the Portfolio's management feels investor confidence has
returned to global markets. They feel that this renewed confidence, healthy
economic growth in Europe and improving prospects in Asia, are positive signs
for international equity markets in 1999.
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, 1998, the country allocation of net assets was:
United Kingdom 19%
Japan 16%
Netherlands 10%
France 10%
Switzerland 7%
Germany 7%
Italy 6%
Sweden 3%
Spain 3%
Australia 2%
Other 17%
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS LIFE OF FUND
T. Rowe Price International Stock Portfolio 15.86% N/A 9.66%
Morgan Stanley EAFE Index 20.33% 9.50% 9.22%
Lipper International Funds Average 13.05% 7.69% 8.05%
GROWTH OF A $10,000 INVESTMENT SINCE 1994
T. Rowe Price International Morgan Stanley
Stock Portfolio EAFE Index
3/94 $10,000 $10,000
12/98 $15,508 $15,180
Portfolio composition will vary over time.
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 Funds Average is a non-weighted
average of 596 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.
<PAGE>
SELECT AGGRESSIVE GROWTH FUND 17
With a total return of 10.56% for the one-year period ended December 31, 1998,
the Select Aggressive Growth Fund outpaced the 0.38% return of the Russell 2500
Index for the same period.
Although large-cap stocks drove market performance overall, both small- and mid-
cap holdings performed well for the Fund in 1998.
Several reasons accounted for the Fund's favorable results. First, superior
stock selection in the technology, consumer services and retail trade sectors
boosted performance. Not only did Fund holdings such as Dell Computer Corp., EMC
Corp., and Best Buy, Inc. all deliver triple-digit returns, but the sharp price
appreciation in internet-related stocks, such as Yahoo, Inc. also enhanced
returns.
During the past year, the Fund's managers also held fewer investments relative
to the benchmark in out-of-favor market sectors. While the Russell 2500 Index
held an average weighting of 18% and 14% in financial services and
producer/manufacturing, respectively, the Fund's managers chose to hold an
average weighting of just 5% and 9% in these sectors. As a result, the Fund
garnered additional results.
Entering 1999, the Fund's managers have a positive outlook on many sectors,
including commercial/industrial, consumer durables, consumer non-durables,
health care services, retail trade and technology.
Despite concerns about deflation and earnings growth, the managers are
optimistic about the small- and mid-cap markets. They also caution that given
the slowdown in worldwide growth, investors should anticipate more moderate
returns in the future.
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS LIFE OF FUND
Select Aggressive Growth Fund 10.56% 14.99% 18.11%
Russell 2500 Index 0.38% 14.13% 16.27%
Lipper Capital Appreciation Funds Average 19.99% 14.97% 15.87%
GROWTH OF A $10,000 INVESTMENT SINCE 1992
Select Aggressive Russell 2500 Index
Growth Fund
8/92 $10,000 $10,000
12/98 $28,801 $26,072
The Select Aggressive Growth Fund is a portfolio of the Allmerica Investment
Trust.
Portfolio composition will vary over time.
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 2500 Index is an unmanaged composite of 2,500 small-to-mid
capitalization stocks. The Lipper Capital Appreciation Funds Average is a non-
weighted average of 280 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.
Investment Sub-Adviser
Nicholas-Applegate Capital
Management, L.P.
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, 1998, the sector allocation of net assets was:
Technology 22%
Computers and Software 12%
Consumer Products 10%
Durable Goods 10%
Health Services 7%
Finance 7%
Chemicals and Drugs 6%
Retail 6%
Consumer Services 4%
Other 16%
<PAGE>
18 Select Capital Appreciation Fund
The Select Capital Appreciation Fund returned 13.88% for the one-year period
ended December 31, 1998, surpassing the 0.38% total return of the Russell 2500
Index for the same period.
During 1998, strong sector performance accounted for positive returns for the
Fund. Some of the best performers were in the health care and technology
sectors. In health care, top contributors included Gilead Sciences, a leading
developer of anti-viral products, and Biogen, which experienced strong sales of
Avonex, its multiple sclerosis treatment drug.
Leading performers in technology included Netscape Communications Corporation,
a leading internet company and America Online, which benefited from "Internet
mania" as it announced plans to merge with Netscape.
Detracting from performance was Corporate Express, a distributor of office-
related products, which suffered from various operational issues.
While portfolio construction remained fairly consistent throughout the year, the
Fund's managers added positions in the consumer sector and modestly increased
holdings in technology, which were slightly underweighted.
Small- and mid-cap stocks are trading at historically low levels even though
many of them are expected to have faster growing earnings than some of the
large, blue-chip companies.
Heading into 1999, the managers feel the Fund is well-positioned for the long-
term. They will continue to build a diversified portfolio of mid-cap growth
stocks, which should fare well when this market segment returns to favor.
Investment Sub-Adviser
T. Rowe Price Associates, Inc.*
About the Fund
The Fund seeks to construct a diversified portfolio of mid-cap growth stocks
selling at a reasonable price.
*T. Rowe Price Associates, Inc. replaced Janus Capital Corporation as Investment
Sub-Adviser, effective April 1, 1998.
PORTFOLIO COMPOSITION
As of December 31, 1998, the sector allocation of net assets was:
Retail 13%
Business Services 12%
Technology 12%
Durable Goods 11%
Finance 10%
Health Services 8%
Broadcasting 7%
Food Services 6%
Chemicals and Drugs 6%
Other 15%
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS LIFE OF FUND
Select Capital Appreciation Fund 13.88% N/A 20.37%
Russell 2500 Index 0.38% 14.13% 17.50%
Lipper Capital Appreciation Funds Average 19.99% 14.97% 19.47%
GROWTH OF A $10,000 INVESTMENT SINCE 1995
Select Capital
Appreciation Fund Russell 2500 Index
4/95 $10,000 $10,000
12/98 $19,760 $18,091
The Select Capital Appreciation Fund is a portfolio of the Allmerica Investment
Trust.
Portfolio composition will vary over time.
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 2500 Index is an unmanaged composite of 2500 small-to-mid
capitalization stocks. The Lipper Capital Appreciation Funds Average is a non-
weighted average of 280 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.
<PAGE>
SELECT VALUE OPPORTUNITY FUND 19
With a total return of 4.87% for the one-year period ended December 31, 1998,
the Select Value Opportunity Fund outpaced the 0.38% return of the Russell 2500
Index for the same period.
During 1998, not only did the disparity between large-cap and small-cap
performance grow larger, growth stocks continued to outperform value stocks
despite ever expanding P/E ratios.
Unfortunately, these were not ideal conditions for this Fund, which primarily
focuses on small-and mid-cap value stocks.
From a sector standpoint, the Fund missed out on several opportunities. Up
18.85% for the year, the technology sector proved to be the market's top
performer. Unfortunately, the Fund had a modest exposure to this sector relative
to the benchmark, 3% versus 13.78%, which restrained performance.
The most disappointing performance for the year was posted by the energy sector.
Negatively affected by plunging oil prices, which dropped to 12-year lows,
energy was off almost 50% for the year. Being overweighted in this small sector
did not help results.
On a brighter note, the Fund captured positive performance from several of its
key holdings, most notably Cincinnati Bell, Fred Meyer, Wellpoint Health
Networks and Raychem Corp.
Looking forward, the Fund's manager remains optimistic with regard to small- and
mid-cap value investing. The manager recently added positions in Dole, HCR Manor
Care, CIT Group and Healthsouth and continues to seek solid companies selling at
attractive prices.
AVERAGE ANNUAL TOTAL RETURNS
Years ended December 31, 1998 1 Year 5 Years Life of Fund
Select Value Opportunity Fund 4.87% 13.09% 14.71%
Russell 2500 Index 0.38% 14.13% 15.09%
Lipper Small Company Growth Funds Average -0.32% 12.87% 14.41%
GROWTH OF A $10,000 INVESTMENT SINCE 1993
Select Value
Opportunity Fund Russell 2500 Index
4/93 $10,000 $10,000
12/98 $21,783 $22,177
The Select Value Opportunity Fund is a portfolio of the Allmerica Investment
Trust.
Portfolio composition will vary over time.
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 2500 Index is an unmanaged composite of 2,500 small- to mid-
capitalization stocks. The Lipper Small Company Growth Funds Average is a non-
weighted average of 727 small company 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.
Investment Sub-Adviser
Cramer Rosenthal McGlynn, LLC
About the Fund
Invests in attractively valued small-to mid-sized companies believed to have
above-average potential for capital appreciation.
PORTFOLIO COMPOSITION
As of December 31, 1998, the sector allocation of net assets was:
Durable Goods 17%
Energy 13%
Utilities 11%
Finance 11%
Health Care 10%
Retail 7%
Consumer Staples 5%
Consumer Products 5%
Cash Equivalents 5%
Other 16%
<PAGE>
20 Select Growth Fund
The Select Growth Fund posted a total return of 35.44% for the one-year period
ended December 31, 1998, significantly outpacing the 28.58% of the S&P 500(R)
Index for the same period.
Although holdings in the finance sector dragged down returns in the third
quarter, the portfolio rebounded later in the year. This came as a result of its
relatively large exposure to the surging technology area where the Fund's
managers focused on software and PC companies. As a result, the Fund handily
outperformed the index.
For most of 1998, the Fund fared well and benefited from strong performance in
large-cap technology growth stocks. Positive results also came from
overweighting health care and consumer cyclicals, the year's other top-
performing sectors. In health care, the managers emphasized major pharmaceutical
companies. In consumer cyclicals, they held significant positions in major
retailers, which proved to be particularly robust in the fourth quarter.
Currently, the Fund remains overweighted in consumer cyclicals, health care and
technology, and underweighted in sectors where earnings growth is less evident,
such as energy, utilities and basic industry.
Going forward, the Fund's managers believe that the market will remain highly
volatile given the unsettled nature of the global economy. To cushion the
portfolio from the effects of this potential volatility, they plan to maintain
their disciplined approach to stock selection.
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, 1998, the sector allocation of net assets was:
Technology 18%
Durable Goods 16%
Retail 15%
Finance 14%
Chemicals and Drugs 11%
Consumer Products 9%
Health Services 3%
Energy 3%
Broadcasting 2%
Other 9%
AVERAGE ANNUAL TOTAL RETURNS
Years ended December 31, 1998 1 Year 5 Years Life of Fund
Select Growth Fund 35.44% 22.15% 19.18%
S&P 500(R) Index 28.58% 24.06% 21.53%
Lipper Growth Funds Average 22.91% 18.66% 18.16%
GROWTH OF A $10,000 INVESTMENT SINCE 1992
Select Growth Fund S&P 500 Index
8/92 $10,000 $10,000
12/98 $30,503 $34,356
The Select Growth Fund is a portfolio of the Allmerica Investment Trust.
Portfolio composition will vary over time.
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 Funds Average is a non-weighted average of 1131 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.
<PAGE>
Select Strategic Growth Fund 21
Since inception on February 20, 1998, the Select Strategic Growth Fund posted a
return of -2.47%, significantly underperforming the 20.39% return of the S&P
500(R) Index for the comparable period.
The disappointing results occurred between April and August and stemmed from a
variety of factors. First, the Fund was hindered by its heavy exposure to mid-
cap stocks.
Although the investment philosophy of the Fund doesn't stress one particular
capitalization group over another, mid-cap stocks overall seemed to meet the
investment criteria of the Fund and thus offer greater value. Unfortunately, the
market continued to favor large-cap stocks, or more specifically "mega-cap"
stocks, as it has for the past few years.
The Fund's concentration in more value-oriented issues also stymied performance.
This was primarily because the market preferred pure growth stocks--despite
their typically high valuations.
Also negatively impacting performance was the portfolio's exposure to energy.
Although the Fund's managers only held a 7.5% position in these stocks,
weakening oil prices late in the year hindered overall performance. In addition,
higher than normal cash positions in the Fund also caused a drag on performance
as the managers adopted a "wait and see" approach rather than pay high prices
for stocks that had rapidly appreciated.
The Fund's managers were encouraged by the recent broadening of performance
across all market capitalization ranges and believe that as the market returns
to a more disciplined view of stock valuations, it will bode well for both
small- and mid-cap stocks--as well as the Fund.
AVERAGE ANNUAL TOTAL RETURNS
PERIOD ENDED DECEMBER 31, 1998 LIFE OF FUND
Select Strategic Growth Fund -2.47%
S&P 500(R)Index 20.39%
Lipper Growth Funds Average 13.09%
FUND INCEPTION DATE
FEBRUARY 20, 1998
(NO GROWTH OF $10,000 CHART IS PROVIDED)
The Select Strategic Growth Fund is a portfolio of the Allmerica Investment
Trust.
Portfolio composition will vary over time.
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 Funds Average is a non-weighted average of 1131 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.
Investment Sub-Adviser
Cambiar Investors, Inc.
About the Fund
Seeks long-term growth of capital by investing primarily in common stocks of
established companies.
PORTFOLIO COMPOSITION
As of December 31, 1998, the sector allocation of net assets was:
Technology 14%
Durable Goods 14%
Business Services 13%
Consumer Products 11%
Finance 10%
Retail 8%
Energy 5%
Chemicals and Drugs 4%
U.S. Government and
Agency Obligations 11%
Other 10%
<PAGE>
22 Fidelity VIP* Growth Portfolio
For the one-year period ended December 31, 1998, the Fidelity VIP* Growth
Portfolio posted a 39.49% total return, significantly outpacing the 28.58%
return of the S&P 500(R) Index for the same period.
During 1998, astute stock selection and solid sector allocation contributed to
the Portfolio's stellar returns.
Stock selection in general focused on large-cap companies with better-than-
average earnings growth potential and discounted valuations relative to the
stock market.
Throughout the year, the managers particularly favored companies in the strong-
performing technology, retail, finance, media and leisure and utility sectors.
Most notably benefiting performance for the Portfolio were holdings of
Microsoft, Intel and Cisco Systems.
Good sector allocation also contributed to the Portfolio's gains as the managers
chose to overweight technology, retail and drug stocks which were among the
year's market leaders, and underweighted weak-performing financial and cyclical
stocks.
In contrast, the Portfolio's holdings in energy and oil service companies, which
were affected by declining crude oil prices, reduced performance for the year.
Currently, the Portfolio's assets remain almost fully invested with a small cash
position. The managers continue to overweight the technology, retail and media,
and leisure sectors. They also continue to emphasize multi-national
pharmaceutical stocks due to their strong fundamentals.
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 December 31, 1998, the sector allocation of net assets was:
Technology 30%
Health 18%
Media & Leisure 8%
Retail & Wholesale 8%
Finance 7%
Non-Durables 6%
Utilities 5%
Energy 5%
Basic Industries 3%
Industrial Mach. and Equip. 2%
Other 8%
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS 10 YEARS
Fidelity VIP* Growth Portfolio 39.49% 21.74% 19.41%
S&P 500(R) Index 28.58% 24.06% 19.20%
Lipper Growth Funds Average 22.91% 18.66% 16.72%
GROWTH OF A $10,000 INVESTMENT SINCE 1988
Fidelity VIP*
Growth Portfolio S&P 500 Index
12/88 $10,000 $10,000
12/98 $58,948 $57,846
*VIP refers to Variable Insurance Products Fund.
Portfolio composition will vary over time.
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) is
a registered trademark of the Standard & Poor's Corporation.The Lipper Growth
Funds Average is a non-weighted average of 1131 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.
<PAGE>
Select Growth and Income Fund 23
For the one-year period ended December 31, 1998, the Select Growth and Income
Fund posted a 16.43% total return, trailing the 28.58% return of the S&P 500(R)
Index for the same period.
During 1998, the Fund lagged the market primarily due to its focus on value
stocks. The Russell 1000 Value Index, for example, returned only 15.63% for the
year. Of some frustration was the fact that the Fund underperformed despite
extended periods of strong performance. And it underperformed during weak
periods in the market, which had traditionally provided the Fund with its best
returns.
During 1998, the market continued to be driven by a narrow group of high-priced
growth stocks. For example, 100 stocks accounted for 85% of the S&P 500(R) Index
returns. Given this activity, the Fund's managers found it challenging to
outperform while emphasizing value-oriented investing, capital preservation and
risk control in the portfolio.
Nonetheless, the Fund managed to garner positive results, particularly in the
fourth quarter. A number of holdings helped the Fund keep pace with the market's
advance, including Texas Instruments, Bank of New York, IBM, Chancellor Media,
United Technologies and First Data Corp.
Moving into 1999, the Fund's managers plan to continue emphasizing strong-
performing companies, which are currently out of favor but exhibit excellent
values. They further believe that over time these types of issues should lead to
outperformance relative to the risk.
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS LIFE OF FUND
Select Growth and Income Fund 16.43% 17.82% 15.53%
S&P 500(R) Index 28.58% 24.06% 21.53%
Lipper Growth & Income Funds Average 15.61% 18.35% 15.87%
GROWTH OF A $10,000 INVESTMENT SINCE 1992
Select Growth and Income Fund S&P 500 Index
8/92 $10,000 $10,000
12/98 $25,032 $34,356
The Select Growth and Income Fund is a portfolio of the Allmerica Investment
Trust.
Portfolio composition will vary over time.
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 Funds Average is a non-weighted average of 879 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.
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, 1998, the sector allocation of net assets was:
Finance 15%
Energy 14%
Consumer Products 12%
Technology 11%
Broadcasting 9%
Chemicals and Drugs 7%
Aerospace/Airlines 6%
Consumer Staples 3%
Corporate Notes and Bonds 5%
Other 18%
<PAGE>
24 Fidelity VIP Equity-Income Portfolio
The Fidelity VIP* Equity-Income Portfolio posted an 11.63% total return for the
one-year period ended December 31, 1998, underperforming the 28.58% return of
the S&P 500(R) Index for the same period.
Throughout 1998, sector allocation decisions contributed to the Portfolio's
underperformance. It was overweighted in the Finance sector, which suffered as
investors grew concerned about the potential impact of the market's third
quarter sell-off on financial service companies' earnings. Nonetheless, the
Portfolio managed to garner positive returns from several holdings, including
America Express, Bank of New York and Fannie Mae.
Portfolio performance was also held back by its less-than-market weight in the
technology sector, the best performing sector of the U.S. equity market in 1998.
It was also negatively impacted by its overweighted position in energy, one of
the year's worst performers.
An underweighted position in the health sector also restrained Portfolio
performance. As investors favored companies whose earnings would be less
dependent on a vibrant economy, health stocks fared well. And although the
Portfolio benefited from its position in American Home Products, the
underweighted position in this sector hindered results.
Entering the first quarter of 1999, the Portfolio's managers continue to seek
reasonable income by investing in income-producing equity securities. Given this
objective, they maintain an emphasis on finance and utility stocks and also
favor the technology, energy and non-durable sectors.
Investment Adviser
Fidelity Management & Research Company
About the Fund
Seeks reasonable income by investing primarily in income-producing equity
securities.
PORTFOLIO COMPOSITION
As of December 31, 1998, the sector allocation of net assets was:
Finance 24%
Utilities 12%
Energy 11%
Industrial Machinery and Equipment 9%
Basic Industries 6%
Non-Durables 6%
Health 6%
Technology 5%
Media and Leisure 5%
Aerospace and Defense 4%
Other 12%
AVERAGE ANNUAL TOTAL RETURNS
Years ended December 31, 1998 1 Year 5 Years 10 Years
Fidelity VIP* Equity-Income Portfolio 11.63% 18.77% 15.62%
S&P 500(R) Index 28.58% 24.06% 19.20%
Lipper Equity Income Funds Average 10.89% 16.60% 14.47%
GROWTH OF A $10,000 INVESTMENT SINCE 1988
Fidelity VIP* S&P 500 Index
Equity-Income Portfolio
12/88 $10,000 $10,000
12/98 $42,711 $57,864
*VIP refers to Variable Insurance Products Fund.
Portfolio composition will vary over time.
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 Funds Average is a non-weighted average of 242 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.
<PAGE>
Overview
<PAGE>
26 BOND & MONEY MARKET OVERVIEW
1994: Federal Reserve Board raises interest rates six times in an effort to
slow down the economy and keep inflation in check, sending bond prices sharply
lower.
1995: U.S. bond market enjoys its third best performance in 30 years, thanks to
strong total returns from 30-year U.S. Treasuries and corporate issues.
1996: Outlook for Federal Reserve policy affects U.S. bond market. Long-
predicted interest rate cuts, which would have fueled this market, never occur.
1997: Low inflation and declining interest rates fuel the bond market, which
enjoys its best returns since 1995.
1998: During 1998, bond investments produced widely divergent results as a
series of dramatic swings either left them highly in favor or badly battered.
During 1998, bond investments produced widely divergent results as they
experienced a series of dramatic swings that left them either highly in favor or
badly battered.
Starting off 1998, investors sought more attractive yields by investing in all
types of riskier bonds. But as global markets experienced continued volatility -
most notably in Russia, Latin America and Asia - investors fled these riskier
investments and, by late summer, favored U.S. Treasury bonds.
But what was a boon for Treasuries was not at all good for non-government
issues. The Russian currency crisis, President Clinton's problems, and concerns
about Japan's economy all caused non-government issues to deteriorate by August.
Further aggravated by the collapse of the highly leveraged Long-Term Capital
Management, this segment, particularly corporate and high-yield bonds, suffered.
Because investors stayed away from these types of securities, the corporate new
issues market dried up. In fact, fewer investment grade and high-yield bonds
were sold in August and September combined than in the month of July.
However, a year-end rally was sparked by a series of three 0.25% interest rate
cuts by the Federal Reserve. These moves not only pushed the Federal Funds Rates
down to 4.75%, they spurred bond investors to leave the safety of U.S.
Treasuries and return to those securities which had the potential to offer them
higher yields.
Given this environment, safer credits generally fared much better for the year
than those bonds which had more risk attached to them.
Finishing the year on top, U.S. Treasuries significantly outpaced all other
sectors of the bond market for the first time in almost a decade - with the 30-
year bond posting a total return of 17.10% for the year. By comparison, the
Lehman
Given low interest rates, investors seek more attractive yields by investing in
all types of bonds.
[PICTURE OF HOUSE]
Stable-to-low interest rates cause record refinancing - and mortgage-backed
securities to suffer.
1998 JAN FEB MAR APR MAY JUN
- --------------------------------------------------------------------------------
[GRAPHIC APPEARS HERE]
Uncertain about the effects of the Asian crisis, the Federal Reserve adopts a
"wait and see" approach to changing interest rates.
[50]
Worldwide economic unrest causes investors to flee foreign investments for
super-safe U.S. Treasuries, which deliver their best performance in years.
<PAGE>
BOND & MONEY MARKET OVERVIEW 27
Brothers Aggregate Bond Index, a benchmark commonly used for all types of bonds,
returned only 8.67%.
In contrast, 1998 will also be remembered as the worst year for corporate bonds.
Investment grade corporates trailed comparable duration Treasuries by 2.27% for
the year. Much of the underperformance occurred from late August to mid October
as liquidity, rather than credit, concerns drove the unprecedented spread
widening. However, a two-tiered market still exists for corporate credits.
Benchmark names such as IBM, Ford and Worldcom trade with little or no liquidity
concession, while second-tier names command a much larger liquidity premium.
While it was a year of turmoil for investment grade corporate bonds, it proved
to be disastrous for high-yield corporates, which lagged BBB or higher rated
bonds by nearly five percentage points. Suffering the most from the year's
volatility, lower-rated high-yield issues finished last for 1998 with a meager
3.66% total return, as measured by the Merrill Lynch High Yield Master Index.
Reflecting the market in general, mortgage-backed securities also had a
tumultuous year. Early in the year, this sector struggled with fears of
prepayments as interest rates dipped to historic lows. Even so, these securities
managed to modestly outperform Treasuries for the first half of the year. Then,
the same liquidity concerns that troubled corporate bonds later in the year also
severely affected mortgage-backeds. As a result, this sector posted a total
return of 7.20% for the year.
Results in the money market also mirrored the overall turbulence occurring in
the bond market. While yields hovered around 5.00% before the interest rate cuts
taken by the Federal Reserve, yields on the average one-year CD fell from 4.87%
to 4.16% by year-end.
Diminishing returns, however, did not seem to sway investors. Money funds in
general posted record inflows of cash as investors sought shelter from market
volatility and parked their assets in the relative safety of money market funds.
Moving into 1999, volatility remains on the horizon for the U.S. bond market.
However, given low inflation and low interest rates, government and high-grade
corporates could appeal to investors looking for safe havens from riskier
alternatives. In addition, slower corporate earnings could restrain the stock
market in the coming year, helping to narrow the performance gap between
equities and fixed income investments.
Liquidity concerns stunt the performance of both corporate and high-yield bonds.
[PICTURE]
The Federal Reserve cuts interest rates three times, sparking a year-end bond
rally.
[PICTURE]
JUL AUG SEP OCT NOV DEC
- ------------------------------------------------------
A currency crisis in Russian spurs a flight to quality by investors.
[PICTURE]
Uncertainty - and volatility - remain on the horizon for the U.S. bond market.
<PAGE>
28 FIDELITY VIP* HIGH INCOME PORTFOLIO
The Fidelity VIP* High Income Portfolio returned -4.33% for the one-year period
ended December 31, 1998 trailing the 3.66% total return of the Merrill Lynch
High Yield Master for the same period.
Throughout 1998, the high yield market experienced a great degree of volatility.
In addition, a large supply of new issues in the telecommunications sector
caused prices to fall for all securities in this sector. Despite solid long-term
fundamentals of individual issues, the Portfolio's substantial position in
selected competitive local exchange carriers (CLECs), cellular and long-
distance companies was negatively impacted by this influx of new issues.
In the second half of 1998, the high yield market experienced its worst sell-off
since 1990 as investors fled all types of spread fixed income investments in
favor of U.S. Treasuries. This dramatic sell-off not only dragged down the
telecommunications sector, it also pummeled the B-rated holdings in the
portfolio. Non-cash pay securities and preferred and common equity holdings were
also negatively impacted by the volatility.
On the brighter side, the Portfolio benefited from its lack of cyclical,
commodity and gaming industries as companies in these sectors were hampered by
the significant economic slowdown in both Asian and emerging markets.
Given the recent volatility, the manager is actively looking to add higher
quality issues to the 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 December 31, 1998, the sector allocation of net assets was:
Telecommunications 31%
Cable TV 11%
Broadcasting 4%
Diversified Financial Svcs. 4%
Specialty Retailing 4%
Energy 3%
Publishing/Printing 3%
Technology 3%
Capital Goods 3%
Metals/Mining 3%
Other 31%
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS 10 YEARS
Fidelity VIP* High Income Portfolio -4.33% 8.80% 11.08%
Salomon Brothers High-Yield Index 3.60% 9.06% 10.94%
Lipper High Current Yield Funds Average -0.44% 7.37% 9.34%
Merrill Lynch High Yield Master 3.66% 9.01% 11.08%
GROWTH OF A $10,000 INVESTMENT SINCE 1988
Fidelity VIP* Salmon Brothers Merrill Lynch
High Income Portfolio High-Yield Index High Yield Master
12/88 $ 10,000 $ 10,000 $ 10,000
12/98 $ 28,604 $ 28,258 $ 28,609
* VIP refers to Variable Insurance Products Fund.
Portfolio composition will vary over time.
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 Funds
Average is a non-weighted average of 301 funds that seek high current yield from
fixed income securities. The Merrill Lynch High Yield Master is a market
capitalization weighted index of all domestic and Yankee high-yield bonds.
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.
<PAGE>
Select Income Fund 29
The Select Income Fund returned 6.83% for the one-year period ended December 31,
1998, lagging the 8.67% total return of the Lehman Brothers Aggregate Bond Index
for the same period.
Entering 1998, the Fund's portfolio seemed to be poised for favorable results.
The managers held a greater than usual amount of U.S. Treasuries, which proved
to be the best-performing bonds for the year. They also sold off any corporate
bonds from the portfolio that seemed too vulnerable to international market
risk. And they held fewer government/agency mortgages.
Despite these moves, several factors prevented the Fund from keeping up with its
benchmark. The managers underestimated the flight to quality, spurred by
financial troubles in Russia and Japan, and the stifling effect the Long-Term
Capital Management collapse had on domestic non-Treasuries.
As a result, the Fund's holdings in corporates offset the positive gains
generated by its Treasury and mortgage holdings. Despite strong credit quality,
the Fund's positions in the Financial sector, specifically REITs, non-bank
financial and allied companies, combined to drag down performance.
In looking ahead, the Fund's managers maintain a cautious outlook regarding the
U.S. economy and international markets. To garner results, they've recently
added more corporate bonds and mortgages to the portfolio as they believe these
sectors are fundamentally sound and attractively priced despite lingering fears
and uncertainty in the bond market.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS LIFE OF FUND
<S> <C> <C> <C>
Select Income Fund 6.83% 6.05% 6.56%
Lehman Brothers Aggregate Bond Index 8.67% 7.27% 7.51%
Lipper Intermediate Investment
Grade Funds Average 7.25% 6.35% 6.84%
</TABLE>
GROWTH OF A $10,000 INVESTMENT SINCE 1992
<TABLE>
<CAPTION>
Lehman Brothers
Select Income Fund Aggregate Bond Index
<S> <C> <C>
8/92 $10,000 $10,000
12/98 $14,975 $15,817
</TABLE>
The Select Income Fund is a portfolio of the Allmerica Investment Trust.
Portfolio composition will vary over time.
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 all fixed rate
debt issues with an investment grade rating at least one year to maturity and an
outstanding par value of at least $25 million. The Lipper Intermediate
Investment Grade Funds Average tracks the performance of 269 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.
Investment Sub-Adviser Standish, Ayer & Wood, Inc.
ABOUT THE FUND
The Fund seeks above-average income from corporate bonds, mortgages and
securities issued by the U.S. Government.
Portfolio Composition
As of December 31, 1998, the sector allocation of net assets was:
Corporate Notes and Bonds 41%
U.S. Government and Agency Obligations 38%
Asset-Backed and Mortgage-Backed Securities 16%
Other 5%
<PAGE>
30 Money Market Fund
The Money Market Fund reported a 5.51% total return for the one-year period
ended December 31, 1998, outpacing the 4.96% return of the IBC/Donoghue First
Tier Money Market Index for the same period.
During 1998, the U.S. economy showed surprising strength in the face of extreme
volatility in world financial markets. The Asian currency crisis spread to Latin
America and Russia, spurring a worldwide sell-off of riskier assets and forcing
highly leveraged trading firms, like Long Term Capital Management, to liquidate
positions as the value of their holdings fell.
To alleviate a potential credit crunch, the Federal Reserve cut the Federal
Funds rate three separate times, and yields on money market funds plummeted
causing securities prices to rise. This helped the Fund's performance as the
portfolio was well-positioned with longer maturing money market securities
averaging 77 days.
After the Fed's moves, the Fund's managers lowered the Fund's average weighted
maturity to 62 days to better position the Fund to garner returns when interest
rates start back up.
The Fund's managers also maintained core long-term holdings of (5-7 month)
commercial paper and certificates of deposits and kept a combination of floating
rate notes. In addition, they laddered maturity dates and short-term repurchase
agreements to provide maximum liquidity without sacrificing yield.
Entering a new year, the Fund's managers believe the Federal Reserve will
maintain a neutral monetary policy in the near future.
Investment Sub-Adviser
Allmerica Asset Management, Inc.
About the Fund
Strives to maximize current income for investors while preserving capital and
liquidity.
PORTFOLIO COMPOSITION
As of December 31, 1998, the sector allocation of net assets was:
Commercial Paper 47%
Corporate Notes and Bonds 34%
U.S. Government and Agency Obligations 4%
Cash Equivalents 7%
Other 8%
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
Money Market Fund 05.51% 5.22% 5.62%
IBC/Donoghue First Tier Money Market Index 04.96% 4.80% 5.22%
Lipper Money Market Funds Average 04.84% 4.77% 5.20%
</TABLE>
AVERAGE YIELDS AS OF DECEMBER 31, 1998
7-day 5.11% 30-day 5.11%
GROWTH OF A $10,000 INVESTMENT SINCE 1988
<TABLE>
<CAPTION>
IBC/Donoghue First Tier
Money Market Fund Money Market Index
<S> <C> <C>
12/88 $10,000 $10,000
12/98 $17,275 $16,625
</TABLE>
The Money Market Fund is a portfolio of the Allmerica Investment Trust.
Portfolio composition will vary over time. The Fund is neither insured nor
guaranteed by the U.S. government. There can be no assurance that the Fund will
be able to maintain its net asset value of $1.00 per share. Past performance is
no guarantee of future results. Investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. IBC/Donoghue is an independent firm
that tracks 2a-7 regulated money market funds on a yield, shareholder, asset
size and portfolio allocation basis. The Lipper Money Market Funds Average is
the average investment performance of 330 funds within the Money Market
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.
<PAGE>
- --------------------------------------------------------------------------------
Financials
- --------------------------------------------------------------------------------
<PAGE>
SELECT EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------------------------------------------------------------------------
COMMON STOCKS - 82.89%
<S> <C>
ARGENTINA - 2.94%
1,800 Banco Rio de la Plata S.A., Sponsored ADR $ 23,400
17,800 Gas Natural Ban S.A. 31,179
18,000 Perez Companc S.A., Class B 76,211
12,300 Telecom Argentina Stet - France Telecom S.A., Class B 69,560
6,600 Telefonos de Argentina, Sponsored ADR 184,388
8,200 YPF S.A., Sponsored ADR 229,088
-------------
613,826
-------------
BOTSWANA - 0.26%
47,000 Sechaba Breweries, Ltd. 54,340
-------------
BRAZIL - 4.51%
900 Aracruz Celulose S.A., Sponsored ADR 7,200
4,772 CEMIG S.A., Sponsored ADR 89,475
23,200 Centrais Electricas Brasileiras, Sponsored ADR 217,500
14,000 Cia Paranaense Enernergia-Copel, Sponsored ADR 99,750
705,000 Cia Paulista de Forca E Luz* 50,763
15,400 Compania Vale Do Rio Doce, Sponsored ADR 192,500
4,400 Embratel Participacoes S.A., Sponsored ADR* 61,325
16,100 Petroleo Brasileiro S.A., Sponsored ADR 182,553
1,800 Telesp Participacoes S.A., ADR* 39,825
-------------
940,891
-------------
CHILE - 2.89%
4,500 Banco Santander Chile, Sponsored ADR 65,812
7,200 Chilectra S.A., ADR 159,442
4,500 Cia Telecom Chile, Sponsored ADR 93,094
2,400 Compania Cerveceri AS Unibas S.A., ADR 46,200
6,500 Distribucion Y Servicio, ADR 74,750
3,100 Embotelladora Andina S.A., Class B, Sponsored ADR 40,300
1,000 Enersis S.A., Sponsored ADR 25,812
6,000 Quinenco S.A., ADR 48,000
1,500 Sociedad Quimica Y Minera de Chile S.A.,
Sponsored ADR 50,531
-------------
603,941
-------------
CHINA - 0.35%
5,000 Huaneng Power International, Sponsored ADR* 72,500
-------------
CROATIA - 0.45%
5,650 Pliva D.D., GDR 93,790
-------------
CZECH REPUBLIC - 1.01%
13,770 SPT Telecom As* 210,099
-------------
EGYPT - 0.40%
2,000 EFG-Hermes Holding, S.A.E., GDR* 19,000
2,900 Oriental Weavers Co. 64,642
-------------
83,642
-------------
GREECE - 5.24%
2,415 Alpha Credit Bank $ 252,131
2,640 Delta Informatics S.A. 57,067
6,260 Hellenic Bottling Co. 193,360
12,438 Hellenic Telecommunication Organization 331,082
1,006 National Bank of Greece S.A.* 226,447
1,290 Panafon Hellenic Telecom S.A.* 34,568
-------------
1,094,655
-------------
HONG KONG - 1.90%
242,000 Beijing Datang Power Generation Co. 72,622
31,000 Cheung Kong Infrastructure Holdings 69,221
147,000 China Resources Beijing Land 36,619
37,000 China Resources Enterprise, Ltd. 57,786
38,000 China Telecom, Ltd.* 65,724
70,000 Cosco Pacific, Ltd. 29,138
32,000 Ng Fung Hong, Ltd. 28,706
89,000 Qingling Motors Co. 15,623
102,000 Zhehuang Expressway Co., Ltd. 20,670
-------------
396,109
-------------
HUNGARY - 2.81%
310 Gedeon Richter, GDR 13,222
7,400 Matav Rt., Sponsored ADR 220,613
7,480 MOL Magyar Olaj, GDR 206,635
2,960 OTP Bank Rt., GDR 146,372
-------------
586,842
-------------
INDIA - 7.28%
3,100 Bajaj Auto, Ltd., Sponsored GDR 48,438
3,500 BSES, Ltd., GDR 44,625
15,000 Grasim Industries, Ltd., Sponsored GDR 65,250
14,300 ITC Limited, Sponsored GDR 318,533
16,000 Larsen & Toubro, Ltd., GDR 122,800
18,400 Mahanagar Telephone Nigam, Ltd., GDR 224,480
15,500 Mahindra & Mahindra, Ltd., GDR 59,675
18,000 Ranbaxy Laboratories, Ltd., GDR* 164,700
29,000 Reliance Industries, Ltd., GDR 162,400
23,000 State Bank of India, GDR 191,475
200 Tata Electric Co., Sponsored GDR 42,675
6,000 Videsh Sanchar Nigam, Ltd., GDR* 73,500
-------------
1,518,551
-------------
INDONESIA - 1.02%
4,800 Gulf Indonesia Resources, Ltd.* 31,200
47,000 PT Gudang Garam 68,444
19,000 PT Hanjaya Mandala Sampoerna Tbk* 12,528
95,000 PT Indofood Sukses Makmur Tbk* 48,094
32,500 PT Indosat 42,352
26,000 PT Telekomunikasi 9,788
-------------
212,406
-------------
</TABLE>
See Notes to Financial Statements.
F-1
<PAGE>
SELECT EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C>
ISRAEL - 4.06%
33,690 Bank Hapoalim $ 60,938
92,000 Bank Leumi Le-Israel 129,945
35,030 Bezeq Israeli Telecommunication Corp., Ltd.* 109,222
13,000 Blue Square-Israel, Ltd., ADR 134,875
3,500 ECI Telecommunications, Ltd., ADR 124,687
22,000 Supersol, Ltd. 54,590
5,750 Teva Pharmaceutical Industries, ADR 233,953
--------------
848,210
--------------
LUXEMBOURG - 0.29%
6,600 Quilmes Industrial, ADR 61,463
--------------
MALAYSIA - 0.67%
45,000 IOI Corp. Berhad 25,816
20,000 Petronas Gas Berhad 45,263
9,000 Resorts World Berhad 10,374
15,000 Tanjong Plc 21,316
18,000 Tenaga Nasional Berhad 36,947
--------------
139,716
--------------
MAURITIUS - 0.29%
85,000 State Bank of Mauritius, Ltd. 61,524
--------------
MEXICO - 9.14%
64,100 Cemex S.A. CPO 138,166
133,700 Cifra S.A. De C.V., Series C* 163,059
79,400 Controladora Comercial Mexicana S.A. 55,953
7,000 Corporacion Geo S.A.* 19,435
87,000 Fomento Economico Mexicano S.A. 235,835
28,500 Grupo Carso S.A., Series A1 96,678
31,900 Grupo Financiero Banamex, Series B* 41,803
71,000 Grupo Industrial Bimbo, Series A 124,868
39,600 Grupo Industrial Saltillo, Class B 98,750
2,300 Grupo Televisa S.A., Sponsored GDR* 56,781
14,500 Industrias Penoles S.A. 43,917
55,100 Kimberley-Clark De Mexico, Series A 174,952
12,600 Telefonos de Mexico, Sponsored ADR 613,463
6,900 Tubos de Acero de Mexico S.A. 44,584
--------------
1,908,244
--------------
PERU - 1.29%
75,000 Banco Continental 40,386
4,700 Compania de Minas Buenaventura S.A., Sponsored ADR 61,100
13,200 Telefonica de Peru, Sponsored ADR 167,475
--------------
268,961
--------------
PHILIPPINES - 2.03%
165,000 Ayala Corp. 58,323
283,600 Ayala Land, Inc. 80,195
96,000 La Tondena Distillers, Inc.* 76,504
38,050 Manila Electric Co., Class B 122,269
3,000 Metropolitan Bank & Trust Co. 21,594
2,500 Philippine Long Distance Telephone Co. 64,267
--------------
423,152
--------------
POLAND - 1.97%
9,420 Bank Handlowy W Warszawie, GDR $ 122,460
7,000 Elektrim Spolka Akcyjna S.A. 75,783
9,200 Exbud S.A., GDR* 84,180
25,210 Telekomunikacja Polska S.A., GDR* 128,571
-------------
410,994
-------------
PORTUGAL - 2.92%
4,068 Banco Espirito Santo 126,315
4,110 Jeronimo Martins 224,942
1,380 Mundial Confianca* 43,910
4,670 Portugal Telecom S.A. 214,214
-------------
609,381
-------------
RUSSIA - 0.56%
3,450 LUKoil Holding, Sponsored ADR 54,338
14,810 Surgutneftegaz, Sponsored ADR 47,392
4,750 Unified Energy Systems, GDR 14,844
-------------
116,574
-------------
SOUTH AFRICA - 7.46%
20,900 ABSA Group, Ltd. 98,996
5,400 Anglo America Corporation of South Africa 152,000
3,900 Anglo American Industrial Corp., Ltd. 59,259
38,650 Barlow, Ltd. 148,294
14,200 Ellerine Holdings, Ltd. 30,617
9,000 Fedsure Holdings, Ltd. 70,668
148,500 FirstRand, Ltd. 161,856
52,000 Illovo Sugar, Ltd. 55,176
20,208 LA Retail Stores, Ltd. 24,015
136,500 Malbak, Ltd. 60,252
126,400 Metro Cash and Carry, Ltd. 83,691
27,000 Nampak, Ltd. 41,025
20,700 Rembrandt Group, Ltd. 126,514
63,000 Sanlam, Ltd.* 62,569
22,000 Sappi, Ltd. 84,971
27,000 Sasol, Ltd. 101,991
8,140 South African Breweries, Ltd. 137,089
11,900 South African Druggists, Ltd. 59,194
-------------
1,558,177
-------------
SOUTH KOREA - 12.32%
14,875 Kookmin Bank* 121,300
20,007 Kookmin Bank, Sponsored GDR (A) 161,557
13,000 Korea Electric Power Corp. 322,028
10,000 LG Chemical, Ltd. 108,894
28,319 LG Electronics 343,689
1,426 LG Information & Communication 38,287
1,810 Pohang Iron & Steel Co. 97,045
2,000 Pohang Iron & Steel Co., Sponsored ADR 33,750
3,227 Samsung Display Devices Co. 159,070
11,674 Samsung Electronics Co. 783,118
27,830 Samsung Heavy Industries* 158,235
13,200 Shinhan Bank* 100,948
3,200 SK Corp. 43,890
180 SK Telecom Co., Ltd. 100,698
-------------
2,572,509
-------------
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
Select Emerging Markets Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C>
TAIWAN - 5.46%
18,000 Acer, Inc., GDR* $ 103,050
10,300 Asustek Computer, Inc., GDR* 95,532
14,000 China Steel Corp., Sponsored GDR 170,800
9,300 Fubon Insurance Co., GDR* 102,068
27,600 R.O.C Taiwan Fund 170,775
10,189 Siliconware Precision Industries Co., GDR* 106,985
4,000 Synnex Technology International Corp., GDR* 71,000
7,000 Taiwan Fund, Inc. 87,500
14,112 Taiwan Semiconductor Manufacturing Co., ADR* 200,214
3,674 Teco Electric & Machinery, GDR 30,953
---------------
1,138,877
---------------
THAILAND - 1.48%
14,500 Advanced Info Service Public Co., Ltd. 86,162
33,000 Electricity Generating Public Co., Ltd.* 89,422
11,000 PTT Exploration & Production Public Co., Ltd.* 77,469
1,000 Siam Cement Public Co., Ltd.* 22,668
60,000 TelecomAsia Corp., Public Co., Ltd.* 25,997
4,000 Thai Farmers Bank Public Co.* 7,043
---------------
308,761
---------------
TURKEY - 1.77%
892,242 Akbank Non Tradable Receipts* 18,102
1,735,918 Akbank T.A.S. 35,218
3,361,005 Haci Omer Sabanci Holding A.S. 51,673
132,160 Migros Turk T.A.S. 131,967
484,848 Netas Northern Electric Telekomunikasyon A.S.* 8,914
358,940 Vestel Elektronik Sanayi ve Ticaret A.S.* 29,584
6,507,820 Yapi Ve Kredi Bankasi 75,298
1,561,876 Yapi Ve Kredi Bankasi Non Tradable Receipts* 18,072
---------------
368,828
---------------
ZIMBABWE - 0.12%
65,000 NMBZ Holdings, Ltd.* 24,375
---------------
TOTAL COMMON STOCKS 17,301,338
---------------
(Cost $19,132,407)
PREFERRED STOCKS - 4.34%
BRAZIL - 4.34%
10,190,000 Banco Bradesco S.A. 56,506
422,365 Banco Bradesco, Rights* 245
90,000 Banco Itau S.A. 43,947
300,000 Cia Cimento Portland Itav 34,140
220,000 Cia Cervejaria Brahma 96,139
970,000 Eletropaula Metropolitana - Elecricidade
de Sao Paulo S.A. 44,958
16,150,000 Tele Centro Sul Participacoes S.A.* 140,214
2,405,000 Telec De Sao Paulo S.A. 327,832
522,000 Telepar 92,882
665,000 Telesp Celular S.A., Series B* 29,225
17,800 Usinas Sider Minas Gerais 39,335
---------------
TOTAL PREFERRED STOCKS 905,423
---------------
(Cost $1,096,974)
VALUE
PAR VALUE (NOTE 2)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (B) - 10.74%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.79%
$ 1,000,000 5.18%, 01/05/99 $ 999,432
---------------
U.S. TREASURY BILL - 3.80%
800,000 4.41%, 03/04/99 794,310
---------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 2.15%
450,000 5.12%, 01/22/99 448,674
---------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 2,242,416
---------------
(Cost $2,242,113)
TOTAL INVESTMENTS - 97.97% 20,449,177
---------------
(Cost $22,471,494)
NET OTHER ASSETS AND LIABILITIES - 2.03% 423,558
---------------
NET ASSETS - 100.00% $ 20,872,735
===============
</TABLE>
_______________
* Non income producing security.
(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, 1998,
this security amounted to $161,557 or 0.77% of net assets.
(B) Effective yield at time of purchase.
ADR American Depositary Receipt. Shares of a foreign based corporation
held in U.S. banks entitling the shareholder to all dividends and
capital gains.
GDR Global Depositary Receipt. A negotiable certificate held in the bank
of one country representing a specific number of shares of a stock
traded on an exchange of another country.
See Notes to Financial Statements.
F-3
<PAGE>
Select Emerging Markets Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
INDUSTRY CONCENTRATION OF COMMON AND PREFERRED STOCKS
AS PERCENTAGE OF NET ASSETS:
<S> <C>
Utilities 15.75%
Finance 14.25
Basic Materials 11.16
Telecommunications 9.80
Food and Beverage 8.48
Diversified Operations 5.10
Energy 4.68
Retail 3.91
Chemicals and Drugs 3.16
Electronics 2.36
Building and Construction 2.26
Tobacco 1.91
Business Services 1.69
Computers and Technology 1.57
Closed End Funds 0.82
Transportation 0.33
------
Total 87.23%
======
</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>
303,150 BRL 02/05/99 $ 235,000 $ 250,900 $ (15,900)
190,932 BRL 06/16/99 140,000 158,024 (18,024)
182,000 BRL 06/22/99 130,000 150,631 (20,631)
1,900,000 HKD 02/22/99 236,908 245,145 (8,237)
-------------- ------------- ----------------
$ 741,908 $ 804,700 $ (62,792)
============== ============= ================
</TABLE>
_______________
BRL Brazilian Cruzeiros
HKD Hong Kong Dollars
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $22,667,288. Net unrealized appreciation (depreciation) aggregated
$(2,218,111) of which $2,295,486 related to appreciated investment securities
and $(4,513,597) related to depreciated investment securities.
At December 31, 1998, the Portfolio had a capital loss carryforward of
$2,100,730 which expires 2006.
For the period ended December 31, 1998, the Portfolio has elected to defer
$486,381 of capital losses attributable to Post-October Losses.
OTHER INFORMATION
For the period ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $32,713,648
and $9,700,739 of non-governmental issuers, respectively.
See Notes to Financial Statements.
F-4
<PAGE>
Select Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 99.36%
TECHNOLOGY - 21.98%
638,200 Acclaim Entertainment* $ 7,817,950
102,700 Applied Power, Inc. 3,876,925
162,100 Compuware Corp. 12,664,062
142,800 Comverse Technology, Inc.* 10,138,800
164,400 EMC Corp.* 13,974,000
129,400 Echostar Communications Corp., Class A* 6,259,725
241,800 IMRglobal Corp.* 7,117,988
132,700 Jack Henry & Associates, Inc. 6,601,825
68,000 Microsoft Corp.* 9,430,750
124,436 Network Associates, Inc.* 8,243,885
263,000 Rational Software Corp.* 6,969,500
341,100 Skytel Communications, Inc.* 7,546,838
340,500 Tekelec* 5,639,531
351,200 Unisys Corp.* 12,094,450
130,900 VISX, Inc.* 11,445,569
93,700 Waters Corp.* 8,175,325
271,000 Xircom* 9,214,000
77,500 Yahoo!, Inc.* 18,217,344
--------------
165,428,467
--------------
COMPUTERS AND SOFTWARE - 12.09%
267,900 Apple Computer, Inc.* 10,967,156
154,800 BMC Software, Inc.* 6,898,275
561,800 CHS Electronics, Inc.* 9,515,487
113,800 Citrix Systems, Inc.* 11,045,712
178,900 Computer Task Group 4,852,662
191,800 Dell Computer Corp.* 14,037,362
189,200 Keane, Inc.* 7,556,175
205,100 Paychex, Inc. 10,549,831
290,478 Siebel Systems, Inc.* 9,858,097
114,000 Transaction Systems Architecture, Class A* 5,700,000
--------------
90,980,757
--------------
CONSUMER PRODUCTS - 10.16%
199,350 American Eagle Outfitters* 13,281,694
305,300 Best Buy Co., Inc.* 18,737,787
247,600 IBP, Inc. 7,211,350
256,300 Intimate Brands, Inc. 7,656,963
163,200 Maytag Corp. 10,159,200
75,400 McGraw-Hill Cos., Inc. 7,681,375
219,900 Nautica Enterprises, Inc.* 3,298,500
350,000 Safeskin Corp.* 8,443,750
--------------
76,470,619
--------------
DURABLE GOODS - 10.14%
140,300 Arvin Industries, Inc. 5,848,756
127,200 Briggs & Stratton Corp. 6,344,100
282,000 CIBER, Inc.* 7,878,375
94,900 Cree Research, Inc. 4,543,337
152,700 Ingersoll-Rand Co. 7,167,356
72,300 Ladd Furniture, Inc. 1,170,356
264,100 Miller (Herman), Inc. 7,097,688
128,200 Sanmina Corp.* $ 8,012,500
123,700 Tellabs, Inc.* 8,481,181
288,000 Vitesse Semiconductor Corp.* 13,140,000
163,400 York International Corp. 6,668,763
--------------
76,352,412
--------------
HEALTH SERVICES - 7.03%
300,400 Allegiance Corp. 14,006,150
136,000 CareMatrix Corp.* 4,165,000
319,000 HBO & Co. 9,151,312
128,000 Laser Vision Centers* 2,836,000
83,500 PacifiCare Health Systems, Inc., Class B* 6,638,250
128,300 Pediatrix Medical Group, Inc.* 7,689,981
225,500 Trigon Healthcare, Inc.* 8,413,969
--------------
52,900,662
--------------
FINANCE - 6.80%
457,200 AmeriCredit Corp. 6,315,075
135,100 Capital One Financial Corp. 15,536,500
241,230 Fidelity National Financial, Inc. 7,357,515
245,700 First American Financial Corp.* 7,893,112
205,444 Metris Cos., Inc. 10,336,401
37,700 SEI Investment Co. 3,746,438
--------------
51,185,041
--------------
CHEMICALS AND DRUGS - 6.24%
96,600 Allergan, Inc. 6,254,850
212,700 Alpharma, Inc., Class A 7,510,969
80,200 Biogen, Inc.* 6,656,600
180,100 Medicis Pharmaceutical Corp., Class A* 10,738,463
171,200 Quintiles Transnational Corp.* 9,137,800
88,300 Warner-Lambert Co. 6,639,056
--------------
46,937,738
--------------
RETAIL - 5.59%
160,900 Houghton Mifflin Co. 7,602,525
248,200 Jones Apparel Group, Inc.* 5,475,913
262,000 Ross Stores, Inc. 10,316,250
400,800 TJX Cos., Inc. 11,623,200
118,000 Tommy Hilfiger Corp.* 7,080,000
--------------
42,097,888
--------------
CONSUMER SERVICES - 3.88%
268,500 ACNielsen Corp.* 7,585,125
192,000 Harte-Hanks, Inc. 5,472,000
197,800 Labor Ready, Inc.* 3,894,188
241,200 Ogden Corp. 6,045,075
26,100 Robert Half International, Inc.* 1,166,344
226,000 Romac International, Inc.* 5,028,500
--------------
29,191,232
--------------
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
Select Aggressive Growth Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
AEROSPACE-AIRLINES - 3.66%
161,300 Alaska Air Group, Inc.* $ 7,137,525
83,900 Atlantic Coast Airlines Holdings* 2,097,500
176,200 Gulfstream Aerospace Corp.* 9,382,650
82,000 United Technologies Corp. 8,917,500
--------------
27,535,175
--------------
CAPITAL GOODS - 2.57%
183,700 Fleetwood Enterprises 6,383,575
2,500 Manitowoc, Inc. 110,938
197,200 Navistar International Corp.* 5,620,200
163,900 Precision Castparts, Inc. 7,252,575
--------------
19,367,288
--------------
REAL ESTATE - 2.09%
319,300 Lennar Corp. 8,062,325
276,000 Pulte Corp. 7,676,250
--------------
15,738,575
--------------
CONSUMER STAPLES - 2.03%
209,800 Danaher Corp.* 11,394,763
212,500 Ralcorp Holdings, Inc.* 3,878,125
--------------
15,272,888
--------------
TRANSPORTATION SERVICES - 1.92%
298,500 Avis Rent A Car, Inc.* 7,219,969
159,300 Hertz Corp., Class A 7,268,062
--------------
14,488,031
--------------
FOOD SERVICES - 1.42%
260,900 Brinker International, Inc. 7,533,487
264,500 Buffets, Inc. 3,157,469
--------------
10,690,956
--------------
BUILDING AND CONSTRUCTION - 0.82%
174,600 Owens-Corning 6,187,388
--------------
METALS AND MINING - 0.70%
124,700 Fluor Corp. $ 5,307,544
--------------
RECREATIONAL EQUIPMENT - 0.24%
31,900 Anchor Gaming* 1,798,362
--------------
TOTAL COMMON STOCKS 747,931,023
--------------
(Cost $548,661,310)
PAR VALUE
- ---------
COMMERCIAL PAPER (A) - 1.19%
$ 8,984,000 Northern States Power Co.
5.05%, 01/04/99 8,980,220
--------------
TOTAL COMMERCIAL PAPER 8,980,220
--------------
Cost ($8,980,220)
SHARES
- ------
INVESTMENT COMPANIES - 0.16%
3,953 ILA Prime Obligation Money Market Fund 3,953
1,173,943 ILA Prime Obligation Portfolio Fund, Class B 1,173,943
--------------
TOTAL INVESTMENT COMPANIES 1,177,896
--------------
(Cost $1,177,896)
TOTAL INVESTMENTS - 100.71% 758,089,139
--------------
(COST $558,819,426)
NET OTHER ASSETS AND LIABILITIES - (0.71)% (5,348,218)
--------------
NET ASSETS - 100.00% $ 752,740,921
==============
__________________
* Non income producing security.
(A) Effective yield at time of purchase.
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $558,893,963. Net unrealized appreciation (depreciation) aggregated
$199,195,176 of which $224,125,951 related to appreciated investment securities
and $(24,930,775) related to depreciated investment securities.
At December 31, 1998, the Portfolio had a capital loss carryforward of
$2,216,323 which expires in 2006.
OTHER INFORMATION
For the year ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $738,512,181
and $659,371,941 of non-governmental issuers, respectively.
At December 31, 1998, the value of the securities loaned amounted to
$123,496,996. The value of collateral amounted to $125,785,418, of which
$124,867,818 and $917,600 consisted of cash and letters of credit, respectively.
(Note 2)
See Notes to Financial Statements.
F-6
<PAGE>
Select Capital Appreciation Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- ---------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 97.04%
RETAIL - 13.06%
113,000 AutoZone, Inc.* $ 3,721,937
85,000 BJ's Wholesale Club, Inc.* 3,936,562
75,600 Borders Group, Inc.* 1,885,275
108,000 Circuit City Stores, Inc. 5,393,250
50,000 Costco Cos., Inc.* 3,609,375
157,000 Family Dollar Stores, Inc. 3,454,000
125,000 General Nutrition Cos., Inc.* 2,031,250
165,800 Jones Apparel Group, Inc.* 3,657,962
67,000 Meyer (Fred), Inc.* 4,036,750
114,000 MSC Industrial Co., Class A* 2,579,250
104,000 Saks, Inc.* 3,282,500
89,000 Shopko Stores, Inc.* 2,959,250
------------
40,547,361
------------
BUSINESS SERVICES - 12.03%
91,000 Acxiom Corp.* 2,821,000
44,800 Catalina Marketing Corp.* 3,063,200
93,000 Checkfree Holdings Corp.* 2,173,875
165,000 Gartner Group, Inc., Class A* 3,506,250
138,400 Iterim Services Co.* 3,235,100
78,600 National Data Corp. 3,826,838
109,900 NOVA Corp.* 3,812,156
170,000 Outdoor Systems, Inc.* 5,100,000
186,000 Romac International, Inc.* 4,138,500
81,000 Sterling Commerce Corp.* 3,645,000
67,500 Viad Corp. 2,050,313
------------
37,372,232
------------
TECHNOLOGY - 11.81%
145,000 Affiliated Computer Services Corp., Class A* 6,525,000
37,200 BMC Software, Inc.* 1,657,725
10,900 CIBER, Inc. * 304,519
68,000 DST Systems, Inc.* 3,880,250
28,000 Intuit, Inc.* 2,030,000
128,000 Learning Co., Inc.* 3,320,000
39,000 Netscape Communications Corp.* 2,369,250
67,000 Networks Associates, Inc.* 4,438,750
196,000 Parametric Technology Corp.* 3,209,500
108,400 Renaissance Worldwide, Inc.* 663,950
235,000 Saville Systems, Plc, Sponsored ADR* 4,465,000
96,000 SunGard Data Systems, Inc.* 3,810,000
------------
36,673,944
------------
DURABLE GOODS - 10.55%
160,000 Analog Devices, Inc.* 5,020,000
73,000 Anixter International, Inc.* 1,482,812
135,000 BE Aerospace, Inc.* 2,835,000
65,000 KLA-Tencor Corp.* 2,819,375
85,500 Maxim Integrated Products, Inc.* 3,735,281
57,000 PMC Sierra, Inc.* 3,598,125
10,500 Sanmina Corp.* 656,250
79,000 Synopsys, Inc.* $ 4,285,750
80,000 Teleflex, Inc. 3,650,000
72,000 Xilinx, Inc.* 4,689,000
------------
32,771,593
------------
FINANCE - 10.46%
77,000 ACE, Ltd. 2,651,688
37,000 Capital One Financial Corp. 4,255,000
125,000 CIT Group, Inc., Class A 3,976,562
28,000 E*TRADE Group, Inc.* 1,309,875
73,000 Finova Group, Inc. 3,937,437
53,500 Franklin Resources, Inc. 1,712,000
142,000 North Fork Bancorporation, Inc. 3,399,125
69,000 PartnerRe, Ltd. 3,156,750
83,000 Protective Life Corp. 3,304,438
143,900 Waddell & Reed Financial, Inc., Class A 3,408,631
58,600 Waddell & Reed Financial, Inc., Class B * 1,362,450
------------
32,473,956
------------
HEALTH SERVICES - 7.53%
50,400 Biogen, Inc.* 4,183,200
132,000 Gilead Sciences, Inc.* 5,420,250
58,000 Omnicare, Inc. 2,015,500
93,000 Quorum Health Group, Inc.* 1,203,188
83,000 Schein (Henry), Inc.* 3,714,250
146,000 Sybron International Corp.* 3,969,375
98,000 Total Renal Care Holdings, Inc.* 2,897,125
------------
23,402,888
------------
BROADCASTING - 6.92%
72,000 Comcast Corp., Class A 4,225,500
51,000 Cox Communications Corp., Class A* 3,525,375
47,000 Jacor Communications, Inc., Class A* 3,025,625
127,800 Omnipoint Corp.* 1,190,138
103,400 Paging Network, Inc.* 484,688
132,000 Univision Communications, Inc.* 4,776,750
194,000 Western Wireless Corp., Class A* 4,268,000
------------
21,496,076
------------
FOOD SERVICES - 6.33%
94,000 Outback Steakhouse, Inc.* 3,748,250
118,000 Suiza Foods Corp.* 6,010,625
117,000 U.S. Foodservice, Inc.* 5,733,000
86,000 Whole Foods Market, Inc.* 4,160,250
------------
19,652,125
------------
CHEMICALS AND DRUGS - 5.83%
40,000 Agouron Pharmaceuticals, Inc.* 2,350,000
44,000 ALZA Corp.* 2,299,000
47,900 BioChem Pharma, Inc.* 1,371,137
156,000 Covance, Inc.* 4,543,500
54,000 Great Lakes Chemical Corp. 2,160,000
19,000 Medimmune, Inc.* 1,889,313
86,000 Teva Pharmaceutical Industries, Inc., ADR 3,499,125
------------
18,112,075
------------
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
Select Capital Appreciation Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- ---------------------------------------------------------------------------
<S> <C>
HOTELS - LEISURE - 4.55%
129,800 Galileo International, Inc. $ 5,646,300
145,000 Premier Parks, Inc.* 4,386,250
111,000 Royal Caribbean Cruises, Ltd. 4,107,000
------------
14,139,550
------------
CONSUMER STAPLES - 3.27%
90,600 Danaher Corp. 4,920,712
207,000 Warnaco Group, Inc., Class A 5,226,750
------------
10,147,462
------------
ENERGY - 2.25%
182,000 BJ Services Co.* 2,843,750
117,400 Ocean Energy, Inc.* 741,088
135,400 Smith International, Inc.* 3,410,388
------------
6,995,226
------------
UTILITIES - 2.15%
180,700 Allied Waste Industries, Inc.* 4,269,037
51,800 Waste Management, Inc. 2,415,175
------------
6,684,212
------------
METALS AND MINING - 0.30%
223,000 Battle Mountain Gold Co. 919,875
------------
TOTAL COMMON STOCKS 301,388,575
------------
(Cost $271,584,101)
FOREIGN COMMON STOCKS - 0.85%
CANADA - 0.85%
6,200 Fairfax Financial Holdings, Ltd.* 2,185,664
1,400 Fairfax Financial Holdings, Ltd., Rights* (A) 468,860
-----------
TOTAL FOREIGN COMMON STOCKS 2,654,524
-----------
(Cost $2,601,679)
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
VALUE
PAR VALUE (NOTE 2)
- ---------------------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (B) - 2.33%
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 2.05%
$6,356,000 5.15%, 01/15/99 $ 6,343,443
------------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION - 0.25%
783,000 5.23%, 01/15/99 781,429
------------
FEDERAL FARM CREDIT BANK - 0.03%
101,000 5.12%, 01/12/99 100,844
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 7,225,716
------------
(Cost $7,225,716)
TOTAL INVESTMENTS - 100.22% 311,268,815
------------
(Cost $281,411,496)
NET OTHER ASSETS AND LIABILITIES - (0.22)% (687,225)
------------
NET ASSETS - 100.00% $310,581,590
============
</TABLE>
- ---------------------
* Non income producing security.
(A) Security exempt from registration under rule 144A of the Securities Act of
1933. This security may only be resold, in transactions exempt from
registration, to qualified insitutional buyers. At December 31, 1998, this
security amounted to $468,860 or 0.15% of net assets.
(B) Effective yield at time of purchase.
ADR American Depositary Receipt. Shares of a foreign based corporation held in
U.S. banks entitling the shareholder to all dividends and capital gains.
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $281,678,642. Net unrealized appreciation (depreciation) aggregated
$29,590,173 of which $53,042,604 related to appreciated investment securities
and $(23,452,431) related to depreciated investment securities.
At December 31, 1998, the Portfolio had no capital loss carryforward. During
1998, the Portfolio utilized $1,543,496 of its capital loss carryforward.
Distributions from long-term capital gains for the year ended December 31, 1998
were $18,197,052. (unaudited)
For the year ended December 31, 1998, the Portfolio has elected to defer
$480,159 of capital losses attributable to Post-October Losses.
OTHER INFORMATION
For the year ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $396,190,328
and $361,766,517 of non-governmental issuers, respectively.
See Notes to Financial Statements.
F-8
<PAGE>
Select Value Opportunity Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 92.70%
DURABLE GOODS - 16.83%
265,333 CommScope, Inc.* $ 4,460,911
150,100 GTECH Holdings Corp.* 3,846,313
150,500 Hussmann International, Inc. 2,915,937
60,000 Kaydon Corp. 2,403,750
325,900 MascoTech, Inc. 5,581,038
192,100 Raychem Corp. 6,207,231
157,000 Rockwell International Corp. 7,624,313
156,800 Ryder System, Inc. 4,076,800
150,100 Thomas & Betts Corp. 6,501,206
79,200 Unifi, Inc. 1,549,350
-------------
45,166,849
-------------
ENERGY - 13.08%
105,000 Amerada Hess Corp. 5,223,750
116,000 Coastal Corp. 4,052,750
136,800 Columbia Energy Group 7,900,200
106,266 EEX Corp.* 743,862
162,000 KeySpan Energy 5,022,000
340,100 Niagara Mohawk Power Corp.* 5,484,113
246,906 Ocean Energy, Inc.* 1,558,594
202,215 Sempra Energy 5,131,206
-------------
35,116,475
-------------
UTILITIES - 11.25%
329,800 Cincinnati Bell, Inc. 12,470,562
239,200 ComSat Corp. 8,611,200
160,900 Montana Power Co. 9,100,906
-------------
30,182,668
-------------
FINANCE - 11.23%
207,900 CIT Group, Inc. - Class A 6,613,819
25,000 First American Corp. 1,094,170
239,500 Golden State Bancorp, Inc.* 3,981,688
161,300 Golden State Bancorp, Inc., Warrants* 735,931
298,180 Sovereign Bancorp, Inc. 4,249,065
192,000 Torchmark Corp. 6,780,000
260,800 TrizecHahn Corp. 5,346,400
10,924 Waddell & Reed Financial, Inc. - Class A 258,762
47,020 Waddell & Reed Financial, Inc. - Class B* 1,093,215
-------------
30,153,050
-------------
HEALTH CARE - 9.56%
366,000 HEALTHSOUTH Corp.* 5,650,125
143,600 Humana, Inc.* 2,557,875
207,900 Manor Care, Inc.* 6,107,062
276,400 Quorum Health Group, Inc.* 3,575,925
89,300 Wellpoint Health Networks, Inc., Class A* 7,769,100
-------------
25,660,087
-------------
RETAIL - 7.09%
513,400 Kmart Corp.* $ 7,861,438
126,700 Meyer (Fred), Inc.* 7,633,675
106,100 Shopko Stores, Inc.* 3,527,825
-------------
19,022,938
-------------
CONSUMER STAPLES - 5.47%
170,400 Dole Food Co., Inc. 5,112,000
126,500 Fortune Brands, Inc. 4,000,562
220,000 Whitman Corp. 5,582,500
-------------
14,695,062
-------------
CONSUMER PRODUCTS - 5.19%
190,600 Owens-Illinois, Inc.* 5,837,125
112,300 Snap-On, Inc. 3,909,444
137,100 World Color Press, Inc.* 4,172,981
-------------
13,919,550
-------------
BUILDING AND CONSTRUCTION - 4.65%
179,900 Applied Power, Inc. 6,791,225
121,100 Ingersoll-Rand, Co. 5,684,131
-------------
12,475,356
-------------
CONSUMER SERVICES - 3.75%
101,600 Convergys Corp.* 2,273,300
287,100 Modis Professional Services, Inc.* 4,162,950
256,075 Safety-Kleen Corp.* 3,617,059
-------------
10,053,309
-------------
TECHNOLOGY - 2.01%
277,300 Coltec Industries, Inc.* 5,407,350
-------------
CHEMICALS AND DRUGS - 1.84%
160,700 Mallinckrodt, Inc. 4,951,569
-------------
CAPITAL GOODS - 0.75%
55,800 Goodrich (B.F.) Co. 2,001,825
-------------
TOTAL COMMON STOCKS 248,806,088
-------------
(Cost $230,749,223)
Par Value
- ---------
COMMERCIAL PAPER (A) - 3.72%
$2,000,000 AIG Funding, Inc.
4.90%, 01/04/99 1,999,183
1,000,000 Ford Motor Credit Corp.
5.18%, 01/04/99 999,571
500,000 GE Capital Corp.
6.00%, 01/05/99 499,667
</TABLE>
See Notes to Financial Statements.
F-9
<PAGE>
Select Value Opportunity Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER (CONTINUED)
$1,500,000 GMAC Corp.
6.08%, 01/04/99 $ 1,499,241
500,000 Grainger (W.W.), Inc.
5.00%, 01/07/99 499,583
500,000 Merrill Lynch & Co., Inc.
4.98%, 01/04/99 499,771
1,000,000 Montauk Corp.
5.52%, 01/05/99 999,389
1,500,000 Petrofina, Inc.
4.98%, 01/04/99 1,499,378
1,500,000 World Omni Corp.
6.03%, 01/04/99 1,499,248
--------------
TOTAL COMMERCIAL PAPER 9,995,031
--------------
(Cost $9,995,031)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (A) - 1.30%
U.S. TREASURY BILL - 0.74%
2,000,000 4.32%, 01/21/99 1,995,200
--------------
FEDERAL HOME LOAN
MORTGAGE CORPORATION - 0.56%
1,500,000 5.03%, 01/04/99 1,499,371
--------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 3,494,571
--------------
(Cost $3,494,571)
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT COMPANIES - 5.40%
2,401,144 ILA Prime Obligation Money Market Fund $ 2,401,144
2,401,094 ILA Prime Obligation Portfolio Fund, Class B 2,401,094
721,200 John Hancock Bank and Thrift Opportunity Fund 7,707,825
213,600 Pilgrim Prime Rate Trust 1,975,800
--------------
TOTAL INVESTMENT COMPANIES 14,485,863
--------------
(Cost $13,661,201)
TOTAL INVESTMENTS - 103.12% 276,781,553
--------------
(Cost $257,900,026)
NET OTHER ASSETS AND LIABILITIES - (3.12)% (8,376,907)
--------------
NET ASSETS - 100.00% $ 268,404,646
==============
</TABLE>
__________________________________________
* Non income producing security.
(A) Effective yield at time of purchase.
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $257,973,637. Net unrealized appreciation (depreciation) aggregated
$18,807,916 of which $34,598,775 related to appreciated investment securities
and $(15,790,859) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31, 1998
were $605,684. (unaudited)
OTHER INFORMATION
For the year ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $237,960,179
and $156,000,039 of non-governmental issuers, respectively.
See Notes to Financial Statements.
F-10
<PAGE>
Select International Equity Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 96.46%
AUSTRALIA - 4.26%
549,620 National Australia Bank, Ltd. $ 8,285,454
1,254,745 News Corp., Ltd. 8,288,824
1,062,800 Telstra Corp.* 4,969,295
-------------
21,543,573
=============
CANADA - 0.21%
20,825 Royal Bank of Canada 1,040,706
-------------
DENMARK - 0.63%
23,770 Tele Danmark 3,208,301
-------------
FRANCE - 8.13%
44,417 Alcatel Alsthom 5,433,952
80,290 Axa 11,632,069
80,960 Michelin, Class B 3,236,373
76,170 Total SA, Class B 7,711,003
50,460 Vivendi 13,086,568
-------------
41,099,965
=============
GERMANY - 9.16%
6,333 Bayerische Motoren Werke (BMW) AG* 4,971,083
838 Bayerische Motoren Werke (BMW) AG (New)* 642,701
134,095 Hoechst AG 5,544,541
66,160 HypoVereinsbank 5,232,927
181,140 Mannesmann AG 20,952,822
99,220 Veba AG 5,876,925
5,193 Viag AG 3,069,646
-------------
46,290,645
=============
ITALY - 2.57%
365,835 ENI 2,389,560
1,245,370 Telecom Italia 10,620,047
-------------
13,009,607
=============
JAPAN - 14.48%
468,000 Canon, Inc. 10,001,504
155,000 Dai Nippon Printing Co., Ltd. 2,471,661
108,000 Fuji Photo Film 4,013,982
137,000 Honda Motor Co., Ltd. 4,497,766
281,000 Kao Corp. 6,340,870
22,700 Keyence Corp. 2,792,177
107,000 Murata Manufacturing Co., Ltd. 4,440,777
140 NTT Mobile Communication Network, Inc. 5,760,807
40,000 Rohm Co., Ltd. 3,642,317
244,000 Shiseido Co., Ltd. 3,135,153
146,200 Sony Corp. 10,647,547
402,000 Takeda Chemical Industries, Ltd. 15,474,537
-------------
73,219,098
=============
MALAYSIA - 0.06%
349,000 Hume Industries, Berhad 303,079
-------------
MEXICO - 0.12%
467,730 Grupo Financiero Banamex, Series B* $ 612,936
-------------
NETHERLANDS - 9.48%
196,412 ABN-Amro Holdings 4,129,597
210,445 Elsevier, NV 2,946,028
304,782 ING Groep, NV 18,575,365
152,745 Kloninklijke Ahold, NV 5,642,467
147,885 Kloninklijke KPN, NV 7,399,367
101,700 Royal Dutch Petroleum 5,061,452
129,160 TNT Post Group, NV* 4,159,355
-------------
47,913,631
=============
PHILIPPINES - 0.13%
342,130 San Miguel, Class B 659,634
-------------
PORTUGAL - 0.33%
75,317 Electricidade De Portugal 1,659,000
-------------
SINGAPORE - 1.89%
660,900 Development Bank of Singapore 5,964,512
330,509 Singapore Press Holdings, Ltd.* 3,583,227
-------------
9,547,739
-------------
SPAIN - 1.90%
295,657 Banco De Santander 5,866,541
82,365 Telefonica 3,656,932
82,365 Telefonica, Rights* 73,023
-------------
9,596,496
=============
SWITZERLAND - 12.99%
4,225 Alusuisse Lonza Holdings, REGD* 4,921,733
6,739 Nestle SA 14,670,266
6,726 Novartis AG 13,221,842
828 Roche Holdings AG 10,103,589
5,425 Schweiz Ruckverisch, REGD 14,144,103
27,999 UBS AG, REGD 8,602,532
-------------
65,664,065
=============
THAILAND - 0.41%
1,015,000 Bangkok Bank Public Co., Ltd.* 2,094,224
-------------
UNITED KINGDOM - 29.71%
695,925 Allied Zurich, Plc 10,373,228
484,950 Barclays Bank, Plc 10,449,684
692,575 B.A.T. Industries, Plc 6,085,734
571,000 Cable & Wireless, Plc 7,015,873
384,980 Cadbury Schweppes, Plc 6,560,897
746,290 Diageo, Plc 8,487,209
411,675 Glaxo Wellcome, Plc 14,154,881
602,410 Granada Group, Plc 10,641,977
462,950 Kingfisher, Plc 5,007,058
821,650 Ladbroke Group, Plc 3,299,174
768,950 Lloyds TSB Group, Plc 10,931,139
212,685 National Westminster, Plc 4,098,467
</TABLE>
See Notes to Financial Statements.
F-11
<PAGE>
Select International Equity Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
753,900 Prudential Corp., Plc $ 11,375,266
645,500 Safeway, Plc 3,241,189
1,128,550 Shell Transportation & Trading, Plc 6,928,552
1,518,800 Siebe, Plc 5,984,807
545,750 TI Group, Plc 2,937,682
834,150 Vodafone Group, Plc 13,536,150
209,150 Zeneca Group Ord 9,100,448
=============
150,209,415
-------------
TOTAL COMMON STOCKS 487,672,114
=============
(Cost $383,623,135)
INVESTMENT COMPANIES - 3.64%
6,773,171 Federated Investors $ 6,773,171
5,947,592 ILA Prime Obligation Portfolio Fund, Class B 5,947,592
5,688,849 SSgA Prime Money Market Fund 5,688,849
-------------
TOTAL INVESTMENT COMPANIES 18,409,612
=============
(Cost $18,409,612)
TOTAL INVESTMENTS - 100.10% 506,081,726
-------------
(Cost $402,032,747)
NET OTHER ASSETS AND LIABILITIES - (0.10)% (529,126)
-------------
NET ASSETS - 100.00% $ 505,552,600
=============
</TABLE>
______________________________________
* Non income producing security.
<TABLE>
INDUSTRY CONCENTRATION OF COMMON STOCKS
AS PERCENTAGE OF NET ASSETS:
<S> <C>
Chemicals and Drugs 16.27%
Finance 14.96
Telecommunications 11.96
Durable Goods 10.32
Banking 9.13
Consumer Goods and Services 5.62
Food and Beverage 4.87
Business Services 4.69
Energy 4.37
Electronics 4.26
Agriculture 2.30
Utilities 2.21
Publishing 1.78
Tobacco 1.20
Retail 0.99
Transportation 0.82
Leisure and Entertainment 0.65
Basic Materials 0.06
-----
Total 96.46%
=====
</TABLE>
See Notes to Financial Statements.
F-12
<PAGE>
Select International Equity Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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>
(13,658,000) CHF 01/14/99 $ 10,226,116 $ 9,958,119 $ 267,997
(5,512,000) DEM 01/26/99 3,385,541 3,312,063 73,478
(633,798,000) JPY 01/19/99 4,902,901 5,622,654 (719,753)
(708,814,000) JPY 01/22/99 6,261,608 6,290,925 (29,317)
(697,045,000) JPY 02/18/99 5,796,632 6,209,476 (412,844)
(533,647,000) JPY 02/26/99 4,444,466 4,758,949 (314,483)
(607,134,000) JPY 03/09/99 5,180,324 5,422,218 (241,894)
(1,190,187,000) JPY 03/15/99 10,266,428 10,637,852 (371,424)
------------ ------------ --------------
$ 50,464,016 $ 52,212,256 $ (1,748,240)
============ ============ ==============
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS PURCHASED:
<TABLE>
<CAPTION>
CURRENCY CONTRACTS TO SETTLEMENT CONTRACTS AT IN EXCHANGE UNREALIZED
VALUE DELIVER DATES VALUE FOR U.S. $ APPRECIATION
-------------- ------------ ---------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
634,303,000 JPY 01/20/99 $ 5,479,466 $ 5,627,962 $ 148,496
============ ============ ==============
</TABLE>
_____________________________________
CHF Swiss Francs
DEM Deutsche Marks
JPY Japanese Yen
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $400,474,447. Net unrealized appreciation (depreciation) aggregated
$105,607,279, of which $128,587,190 related to appreciated investment securities
and $(22,979,911) related to depreciated investment securities.
At December 31, 1998, the Portfolio had a capital loss carryforard of $3,060,445
which expires in 2006.
For the period ended December 31, 1998, the Portfolio has elected to defer
$5,390,037 of capital losses attributable to Post-October Losses.
OTHER INFORMATION
For the year ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $135,815,844
and $106,675,781 of non-governmental issuers, respectively.
At December 31, 1998, the value of the securities loaned amounted to
$10,173,062. The value of collateral amounted to $10,905,190 which consisted of
letters of credit. (Note 2)
See Notes to Financial Statements.
F-13
<PAGE>
Select Growth Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.53%
TECHNOLOGY - 17.80%
70,000 3Com Corp.* $ 3,136,875
81,600 Airtouch Communications, Inc.* 5,885,400
30,100 America Online, Inc.* 4,356,975
112,200 Ascend Communications, Inc.* 7,377,150
92,400 Cisco Systems* 8,575,875
107,900 Computer Sciences Corp.* 6,952,806
89,600 Compuware Corp.* 7,000,000
152,400 EMC Corp.* 12,954,000
111,300 International Business Machines Corp. 20,562,675
223,500 Lucent Technologies, Inc. 24,585,000
77,500 Micron Technology, Inc.* 3,918,594
200,700 Microsoft Corp.* 27,834,581
103,000 Pitney Bowes, Inc. 6,804,437
60,400 Sun Microsystems, Inc.* 5,171,750
------------
145,116,118
------------
DURABLE GOODS - 16.36%
178,660 BMC Software, Inc.* 7,961,536
85,800 Centocor, Inc.* 3,871,725
95,500 Dell Computer Corp.* 6,989,406
198,900 General Electric Co. 20,300,231
98,500 General Instrument Corp.* 3,342,844
148,500 Intel Corp. 17,606,531
287,700 MCI WorldCom, Inc.* 20,642,475
244,900 SBC Communications, Inc. 13,132,762
159,900 Sprint Corp. 13,451,588
345,800 Tyco International, Ltd. 26,086,288
------------
133,385,386
------------
RETAIL - 14.76%
215,200 Costco Cos., Inc.* 15,534,750
391,400 CVS Corp. 21,527,000
77,100 Gap, Inc. 4,336,875
246,700 Home Depot, Inc. 15,094,956
234,200 Safeway, Inc. * 14,271,563
380,900 TJX Cos., Inc. 11,046,100
224,500 Walgreen Co. 13,147,281
311,800 Wal-Mart Stores, Inc. 25,392,213
------------
120,350,738
------------
FINANCE - 13.51%
49,600 American Express Co. 5,071,600
66,200 American General Corp. 5,163,600
125,550 American International Group, Inc. 12,131,269
90,400 Associates First Capital Corp., Class A 3,830,700
39,000 Charter One Financial, Inc. 1,082,250
112,100 Comerica, Inc. 7,643,819
280,900 Federal Home Loan Mortgage Corp. 18,100,494
86,200 Fifth Third Bancorp 6,147,137
110,968 Firstar Corp. 10,347,766
396,150 MBNA Corp. 9,878,991
54,700 Merrill Lynch & Co., Inc. 3,651,225
77,055 Providian Financial Corp. 5,779,125
93,600 SunAmerica, Inc. 7,593,300
344,900 Wells Fargo Co. 13,774,444
------------
110,195,720
------------
CHEMICALS AND DRUGS - 10.99%
128,800 Bristol-Myers Squibb Co. 17,235,050
153,500 Lilly (Eli) & Co. 13,642,312
129,900 Pfizer, Inc. 16,294,331
72,300 Quintiles Transnational Corp.* 3,859,012
356,000 Schering-Plough Corp. 19,669,000
251,200 Warner-Lambert Co. 18,887,100
------------
89,586,805
------------
CONSUMER PRODUCTS - 8.88%
93,100 Colgate-Palmolive Co. 8,646,662
61,700 Kroger Co.* 3,732,850
85,300 Lauder (Estee) Cos., Inc., Class A 7,293,150
42,300 McKesson Corp. 3,344,344
125,600 Philip Morris Cos., Inc. 6,719,600
76,200 Quaker Oats Co. 4,533,900
186,000 Sara Lee Corp. 5,242,875
341,400 Time Warner, Inc. 21,188,138
158,700 Viacom, Inc., Class B* 11,743,800
------------
72,445,319
------------
HEALTH SERVICES - 2.90%
94,650 Cardinal Health, Inc. 7,181,569
346,800 HBO & Co. 9,948,825
86,400 IMS Health, Inc. 6,517,800
------------
23,648,194
------------
ENERGY - 2.59%
193,000 Exxon Corp. 14,113,125
168,500 PECO Energy Co. 7,013,812
------------
21,126,937
------------
BROADCASTING - 2.33%
202,400 Tele-Communications, Inc., Class A, Liberty Media* 11,195,250
330,100 Tele-Communications, Inc., TCI Venture* 7,777,981
------------
18,973,231
------------
BUSINESS SERVICES - 1.38%
141,500 Interpublic Group of Companies, Inc. 11,284,625
------------
HOTELS-LEISURE - 1.35%
228,900 Carnival Corp., Class A 10,987,200
------------
See Notes to Financial Statements.
F-14
<PAGE>
Select Growth Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
CONSUMER STAPLES - 1.20%
41,900 Clorox Co. $ 4,894,444
96,900 Tricon Global Restaurants, Inc.* 4,857,113
--------------
9,751,557
--------------
UTILITIES - 1.04%
181,800 Waste Management, Inc. 8,476,425
--------------
AEROSPACE/AIRLINES - 0.94%
70,700 United Technologies Corp. 7,688,625
--------------
BUILDING AND CONSTRUCTION - 0.50%
142,400 Masco Corp. 4,094,000
--------------
TOTAL COMMON STOCKS 787,110,880
--------------
Cost ($534,430,674)
PAR VALUE
- ---------
COMMERCIAL PAPER (A) - 1.40%
$ 2,500,000 Atlantis One Funding Corp.
5.37%, 03/31/99 2,469,063
2,000,000 Cooperative Association Tractor Dealers
5.46%, 01/15/99 1,995,823
1,000,000 Donaldson, Lufkin & Jenrette
5.83%, 01/12/99 998,243
3,458,000 Pacific Mutual Life Insurance Co.
5.10%, 01/04/99 3,456,530
2,500,000 Paine Webber Group, Inc.
5.25%, 02/12/99 2,484,688
--------------
TOTAL COMMERICAL PAPER 11,404,347
--------------
(Cost $11,402,095)
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------------------------------------
<S> <C>
CERTIFICATE OF DEPOSIT - 1.60%
$ 13,000,000 Swiss Bank Corp.
5.69%, 01/07/99 $ 13,000,361
--------------
TOTAL CERTIFICATE OF DEPOSIT 13,000,361
--------------
(Cost $13,000,361)
SHARES
- ------
INVESTMENT COMPANIES - 0.22%
4,235 ILA Prime Obligation Portfolio Fund, Class B 4,235
1,798,185 SSgA Prime Money Market Fund 1,798,185
--------------
TOTAL INVESTMENT COMPANIES 1,802,420
--------------
Cost ($1,802,420)
TOTAL INVESTMENTS - 99.75% 813,318,008
--------------
COST ($560,635,550)
NET ASSETS AND OTHER LIABILITIES - 0.25% 2,071,921
--------------
NET ASSETS - 100.00% $ 815,389,929
==============
</TABLE>
__________________
* Non income producing security.
(A) Effective yield at time of purchase.
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $561,042,286. Net unrealized appreciation (depreciation) aggregated
$252,275,722 of which $254,240,371 related to appreciated investment securities
and $(1,964,649) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31, 1998
were $5,885,274. (unaudited)
OTHER INFORMATION
For the year ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $578,600,008
and $441,720,328 of non-governmental issuers, respectively.
See Notes to Financial Statements
F-15
<PAGE>
Select Strategic Growth Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS - 91.54%
TECHNOLOGY - 14.11%
14,000 Communications Satellite Corp. $ 504,000
10,000 Computer Associates International, Inc. 426,250
29,800 Novell, Inc.* 540,125
5,200 Sun Microsystems, Inc.* 445,250
12,290 Vishay International, Inc.* 178,205
-------------
2,093,830
-------------
DURABLE GOODS - 13.80%
6,300 Cooper Industries, Inc. 300,431
11,900 Cordant Technologies, Inc. 446,250
11,400 Lear Corp.* 438,900
4,700 Millipore Corp. 133,656
13,000 Raychem Corp. 420,063
8,000 Trinity Industries, Inc. 308,000
-------------
2,047,300
-------------
BUSINESS SERVICES - 12.60%
9,600 Electronic Data Systems Co. 482,400
12,800 Equifax, Inc. 437,600
16,400 First Data Corp. 519,675
6,300 Sabre Group Holding, Inc.* 280,350
5,700 Wallace Computer Services, Inc. 150,338
-------------
1,870,363
-------------
CONSUMER PRODUCTS - 11.47%
9,000 Crown Cork & Seal, Inc. 277,312
11,800 Office Depot, Inc.* 435,862
10,000 Philip Morris Cos., Inc. 535,000
18,000 Warnaco Group, Class A 454,500
-------------
1,702,674
-------------
FINANCE - 10.36%
9,500 Bank One Corp. 485,094
11,800 Everest Reinsurance Holdings, Inc. 446,925
10,400 HCC Insurance Holdings, Inc. 183,300
17,300 Pacific Century Financial Corp. 421,688
-------------
1,537,007
-------------
RETAIL - 7.60%
12,500 Eagle Hardware & Garden, Inc.* 406,250
16,200 Limited, Inc. 471,825
10,000 Neiman Marcus Group* 249,375
-------------
1,127,450
-------------
ENERGY - 5.27%
15,700 R & B Falcon Corp.* 119,713
4,956 Schlumberger, Ltd. 228,596
16,200 Transocean Offshore, Inc. 434,363
-------------
782,672
-------------
CHEMICALS AND DRUGS - 3.55%
9,300 Mallinckrodt, Inc. $ 286,556
8,700 St. Jude Medical, Inc.* 240,881
-------------
527,437
-------------
HEALTHCARE - 2.98%
3,200 Elan Corp. Plc, Sponsored ADR* 222,600
4,400 Genzyme Corp.* 218,900
-------------
441,500
-------------
INDUSTRIAL SERVICES - 2.92%
6,400 Philips Electronics N.V. 433,200
-------------
FOOD SERVICES - 2.67%
22,000 Darden Restaurants, Inc. 396,000
-------------
BUILDING AND CONSTRUCTION - 2.24%
9,400 Owens Corning 333,113
-------------
METAL AND MINING - 1.97%
22,900 De Beers Consolidated Mines, ADR 291,975
-------------
TOTAL COMMON STOCKS 13,584,521
-------------
(Cost $13,159,645)
PAR VALUE
- ---------
U.S. GOVERNMENT AGENCY OBLIGATION (A) - 10.78%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.78%
$ 1,600,000 5.18%, 01/05/99 1,599,091
-------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATION 1,599,091
-------------
(Cost $1,599,091)
TOTAL INVESTMENTS - 102.32% 15,183,612
-------------
(Cost $14,758,736)
NET OTHER ASSETS AND LIABILITIES - (2.32)% (344,522)
-------------
NET ASSETS - 100.00% $ 14,839,090
=============
</TABLE>
___________________________________________
* Non income producing security.
(A) Effective yield at time of purchase.
ADR American Depositary Receipt. Shares of a foreign based corporation held
in U.S. banks entitling the shareholder to all dividends and capital
gains.
See Notes to Financial Statements
F-16
<PAGE>
Select Strategic Growth Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $14,758,736. Net unrealized appreciation (depreciation) aggregated
$424,876 of which $1,807,604 related to appreciated investment securities and
$(1,382,728) related to depreciated investment securities.
At December 31, 1998, the Portfolio had a capital loss carryforward of $455,810
which expires in 2006.
OTHER INFORMATION
For the period ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $15,637,874
and $2,022,427 of non-governmental issuers, respectively.
See Notes to Financial Statements.
F-17
<PAGE>
Select Growth and Income Fund
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
COMMON STOCKS - 89.94%
<S> <C>
FINANCE - 15.12%
371,700 ACE, Ltd. $ 12,800,419
254,200 Aetna, Inc. 19,986,475
540,500 Bank of New York Co., Inc. 21,755,125
151,800 EXEL, Ltd., Class A 11,385,000
98,500 Mellon Bank Corp. 6,771,875
119,300 Northern Trust Corp. 10,416,381
213,300 PartnerRE, Ltd. 9,758,475
79,600 Tokio Marine & Fire
Insurance Co., Sponsored ADR 4,835,700
--------------
97,709,450
--------------
ENERGY - 13.62%
141,600 Amerada Hess Corp. 7,044,600
80,800 Chevron Corp. 6,701,350
429,100 Conoco, Inc., Class A* 8,957,463
641,248 KeySpan Energy 19,878,688
476,909 Sempra Energy 12,101,566
510,500 Unocal Corp. 14,900,219
591,100 Williams Cos., Inc. 18,434,931
--------------
88,018,817
--------------
CONSUMER PRODUCTS - 11.95%
98,100 Anheuser-Busch Cos., Inc. 6,437,813
1 Meritor Automotive 21
185,100 Nabisco Holdings Corp., Class A 7,681,650
556,100 Owens-Illinois, Inc.* 17,030,563
142,700 Seagram Co., Ltd. 5,422,600
262,100 TRW, Inc. 14,726,744
392,500 Tribune Co. 25,905,000
--------------
77,204,391
--------------
TECHNOLOGY - 10.81%
268,438 Globalstar Telecommunications, Ltd.* 5,402,315
115,600 International Business Machines Corp. 21,357,100
271,200 Loral Space & Communications, Ltd. 4,830,750
265,900 Philips Electronics 17,998,106
236,800 Texas Instruments, Inc. 20,261,200
--------------
69,849,471
--------------
BROADCASTING - 8.88%
265,200 Chancellor Media Corp. * 12,696,450
105,800 Fox Entertainment Group, Inc., Class A * 2,664,838
109,000 MediaOne Group ATI PIES 7,248,500
520,800 MediaOne Group, Inc.* 24,477,600
415,400 News Corp., Ltd., Sponsored ADR 10,255,188
--------------
57,342,576
--------------
CHEMICALS AND DRUGS - 7.19%
119,200 duPont (E.I.) deNemours & Co. $ 6,325,050
111,400 Genentech, Inc.* 8,877,188
9,800 Johnson & Johnson Co. 821,974
75,455 Lilly (Eli) & Co. 6,706,063
334,100 Monsanto Co. 15,869,750
62,300 Pfizer, Inc. 7,814,756
--------------
46,414,781
--------------
AEROSPACE-AIRLINES - 6.15%
116,400 AMR Corp.* 6,911,250
97,300 Lockheed Martin Corp. 8,246,175
246,900 Sundstrand Corp. 12,807,938
108,300 United Technologies Corp. 11,777,625
--------------
39,742,988
--------------
CONSUMER STAPLES - 3.34%
201,700 Black & Decker Corp. 11,307,805
40,300 PepsiCo, Inc. 1,649,781
266,100 Ralston Purina Co. 8,614,988
--------------
21,572,574
--------------
BUSINESS SERVICES - 3.32%
677,500 First Data Corp. 21,468,281
--------------
UTILITIES - 3.13%
191,360 Bell Atlantic Corp. 10,871,640
354,800 Potomac Electric Power 9,335,675
--------------
20,207,315
--------------
DURABLE GOODS - 2.97%
167,900 AlliedSignal, Inc. 7,440,069
115,200 General Electric Co. 11,757,600
--------------
19,197,669
--------------
RETAIL - 2.11%
174,800 Penney (J.C.) Co., Inc. 8,193,750
66,500 Wal-Mart Stores, Inc. 5,415,594
--------------
13,609,344
--------------
PAPER AND FOREST - 0.77%
497,700 MacMillan Bloedel, Ltd. 4,977,000
--------------
METALS AND MINING - 0.58%
138,300 Getchell Gold Corp.* 3,768,674
--------------
TOTAL COMMON STOCKS 581,083,331
--------------
(Cost $484,263,875)
</TABLE>
See Notes to Financial Statements.
F-18
<PAGE>
Select Growth and Income Fund
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C>
CORPORATE NOTES AND BONDS - 5.20%
$ 1,000,000 Ford Motor Credit Corp., MTN
7.47%, 07/29/99 $ 1,011,666
10,700,000 Hewlett-Packard Co., Convertible
2.30%, 10/14/17 (A) (B) 5,885,000
30,000,000 Hewlett-Packard Co., Convertible
2.37%, 10/14/17 (B) 16,500,000
3,000,000 Liberty Lighthouse U.S. Capital Co., MTN
5.23%, 9/15/99 (A) (C) 2,998,347
2,292,000 National Semiconductor Corp.
6.50%, 10/01/02 (A) 2,011,230
6,650,000 Security CAP U.S. Realty, Convertible
2.00%, 05/22/03 (A) 5,187,000
--------------
TOTAL CORPORATE NOTES AND BONDS 33,593,243
--------------
(Cost $34,284,649)
SHARES
- ------
PREFERRED STOCKS - 1.95%
30,100 AirTouch Communications, Inc., Class B* 1,790,950
57,300 Owens-Illinois, Inc.* 2,435,250
161,522 Sealed Air Corp. 8,378,954
--------------
TOTAL PREFERRED STOCKS 12,605,154
--------------
(Cost $9,382,405)
PAR VALUE
- ---------
CERTIFICATES OF DEPOSIT (D) - 1.24%
$ 7,000,000 Swiss Bank Corp.
5.69%, 01/07/99 7,000,194
1,000,000 National Bank of Canada
5.73%, 06/07/99 1,002,700
--------------
TOTAL CERTIFICATES OF DEPOSIT 8,002,894
--------------
(Cost $7,999,617)
COMMERCIAL PAPER (D) - 1.07%
4,000,000 Bankers Trust Co.
5.56%, 02/17/99 3,970,964
2,000,000 Pacific Life Insurance Co.
5.10%, 01/04/99 1,999,150
1,000,000 UniBanco, Grand Cayman
5.54%, 04/15/99 985,563
--------------
TOTAL COMMERCIAL PAPER 6,955,677
--------------
(Cost $6,954,370)
<CAPTION>
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT COMPANY - 0.47%
3,021,360 SSgA Prime Money Market Fund $ 3,021,360
--------------
Total Investment Company 3,021,360
--------------
(Cost $3,021,360)
TOTAL INVESTMENTS - 99.87% 645,261,659
--------------
(Cost $545,906,276)
NET OTHER ASSETS AND LIABILITIES - 0.13% 824,018
--------------
NET ASSETS - 100.00% $ 646,085,677
==============
</TABLE>
____________________
* Non income producing security.
(A) Security 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, 1998,
these securities amounted to $16,081,577 or 2.49% of net assets.
(B) Zero coupon bond. Rate shown reflects effective yield to maturity.
(C) Variable rate security. The rate shown reflects rate in effect at
December 31, 1998.
(D) Effective yield at time of purchase.
ADR American Depositary Receipt. Shares of a foreign based corporation held
in U.S. banks entitling the shareholder to all dividends and capital
gains.
MTN Medium Term Note
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $545,998,336. Net unrealized appreciation (depreciation) aggregated
$99,263,323, of which $117,966,259 related to appreciated investment securities
and $(18,702,936) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31, 1998
were $1,176,558. (unaudited)
OTHER INFORMATION
For the year ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $666,134,308
and $585,212,615 of non-governmental issuers, respectively, and $15,100,547 and
$14,090,234 of U.S. Government and Agency issuers, respectively.
See Notes to Financial Statements.
F-19
<PAGE>
Select Income Fund
PORTFOLIO OF INVESTMENTS . December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Moody's Ratings Value
Par Value (unaudited) (Note 2)
- ------------------------------------------------------------------------------------------------
CORPORATE NOTES AND BONDS - 41.00%
<S> <C> <C> <C>
INDUSTRIAL - 10.33%
$ 425,000 Abitibi-Consolidated,Yankee Debenture
7.40%, 04/01/18 Baa $ 399,318
1,275,000 Abitibi-Consolidated,Yankee Debenture
7.50%, 04/01/28 Baa 1,191,133
1,350,000 Aramark Services, Inc.
6.75%, 08/01/04 Baa 1,356,590
1,250,000 Blount, Inc.
7.00%, 06/15/05 Ba 1,239,113
1,500,000 Brascan Corp.
7.38%, 10/01/02 Baa 1,566,901
1,250,000 Cominco, Ltd.
6.88%, 02/15/06 Baa 1,121,615
475,000 Homeside, Inc., Senior Note, Series B
11.25%, 05/15/03 A 555,750
1,075,000 Idex Corp., Senior Note
6.88%, 02/15/08 Ba 1,037,966
1,200,000 IMC Global, Inc.
7.63%, 11/01/05 Baa 1,227,986
375,000 News America Holdings, Inc.
7.70%, 10/30/25 Baa 402,873
375,000 News America Holdings, Inc.
7.75%, 12/01/45 Baa 398,271
775,000 News America Holdings, Inc.
7.13%, 04/08/28 Baa 779,162
325,000 Panamsat Corp.
6.00%, 01/15/03 Baa 322,447
1,225,000 Panamsat Corp.
6.13%, 01/15/05 Baa 1,211,576
500,000 Ryder System, Inc.
6.60%, 11/15/05 Baa 507,615
500,000 Texaco Capital, Inc.
9.75%, 03/15/20 A 693,190
1,525,000 Time Warner, Inc.
6.63%, 05/15/29 Baa 1,550,031
550,000 USA Waste Services, Inc.
6.13%, 07/15/01 Baa 556,314
450,000 USA Waste Services, Inc.
7.00%, 07/15/28 Baa 459,210
------------
16,577,061
============
FINANCE - 10.18%
300,000 Abbey National Plc
7.57%, (6.70% until 2008) 06/29/49 Aa 293,840
400,000 American Annuity Group
6.88%, 06/01/08 Baa 393,073
1,000,000 AMVESCAP, Plc
Yankee Bond
6.60%, 05/15/05 A 1,001,813
400,000 Franchise Finance Corp. of America
7.00%, 11/30/00 Baa 397,733
600,000 General Electric Capital Corp.
6.66%, 05/01/18 Aaa 610,514
725,000 Green Tree Financial Corp.
7.54%, 06/15/28 Aa 748,405
Finance (continued)
$ 1,625,000 Green Tree Financial Corp.
7.53%, 07/15/28 Aa $ 1,708,339
650,000 Green Tree Financial Corp.
7.24%, 11/15/28 (H) AA- 673,902
850,000 Green Tree Financial Corp.
7.22%, 02/15/29 Aa 898,762
850,000 Green Tree Financial Corp.
6.95%, 05/15/29 Aa 868,709
125,000 Greyhound Financial Corp.
8.50%, 02/15/99 Baa 125,371
875,000 Homeside Lending, Inc., MTN
6.88%, 06/30/02 A 897,961
500,000 Integra Financial Corp.
6.50%, 04/15/00 A 506,482
800,000 Keystone Financial Mid-Atlantic Funding
Senior Note
7.30%, 05/15/04 Baa 850,186
775,000 Norwest Corp., MTN
6.75%, 06/15/07 Aa 824,631
700,000 Provident Cos., Inc.
7.00%, 07/15/18 A 714,599
750,000 Reliastar Financial Corp.
6.50%, 11/15/08 A 760,732
625,000 Sears Roebuck Acceptance Corp.
Series II, MTN
6.69%, 04/30/01 A 639,342
675,000 Simon Property Group, Inc.
6.88%, 11/15/06 Baa 664,917
750,000 Star Banc Corp.
5.88%, 11/01/03 A 753,927
900,000 Susa Partnership, LP
8.20%, 06/01/17 Baa 888,054
450,000 TIG Holdings, Inc.
8.13%, 04/15/05 Baa 491,948
750,000 Wharf International Finance, Ltd.
7.63%, 03/13/07 Baa 617,940
------------
16,331,180
============
REAL ESTATE - 4.42%
275,000 Avalon Properties, Inc.
Senior Note
7.38%, 09/15/02 Baa 279,549
300,000 Colonial Realty, LP, MTN
7.16%, 01/17/03 Baa 294,238
750,000 Colonial Realty, LP, MTN
6.96%, 07/26/04 Baa 721,627
400,000 ERP Operating, LP
8.50%, 05/15/99 (A) A 402,241
750,000 IRT Property Co., REIT
7.25%, 08/15/07 Baa 711,762
900,000 JDN Realty Corp.
6.80%, 08/01/04 Baa 863,105
500,000 La Quinta Inns, Inc., MTN
7.11%, 10/17/01 Ba 479,180
650,000 Meditrust, REIT
7.82%, 09/10/26 Ba 617,795
</TABLE>
See Notes to Financial Statements.
F-20
<PAGE>
SELECT INCOME FUND
PORTFOLIO OF INVESTMENTS, CONTINUED . December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Moody's Ratings Value
Par Value (unaudited) (Note 2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REAL ESTATE (CONTINUED)
$ 450,000 Security Capital Industrial Trust
7.63%, 07/01/17 Baa $ 435,105
500,000 Shopping Center Associates
6.75%, 01/15/04 (A) A 500,250
450,000 Spieker Properties, LP
6.65%, 12/15/00 Baa 450,424
750,000 Summit Properties, Inc.
7.20%, 08/15/07 Baa 700,343
625,000 Trinet Corporate Realty Trust, Inc.
7.30%, 05/15/01 Baa 630,101
------------
7,085,720
============
BANKING - 4.31%
700,000 BB&T CORP.
7.25%, 06/15/07 A 759,367
400,000 First USA Bank, MTN
7.00%, 08/20/01 Aa 414,338
575,000 Key Bank, MTN
6.50%, 10/15/27 Baa 581,138
1,965,000 National Westminster Bank
7.48%, 04/29/49 Aa 2,094,587
400,000 St. George Bank, Ltd.
6.88%, 04/01/99 (A) A 401,332
1,125,000 Union Planters
6.50%, 03/15/18 Baa 1,144,308
1,400,000 Wells Fargo Co.
7.13%, 08/15/06 A 1,521,987
------------
6,917,057
============
SECURITY BROKER AND DEALERS - 2.19%
190,000 Bear Stearns Cos., Inc., Senior Note
6.75%, 08/15/00 A 193,082
1,150,000 Goldman Sachs Group, LP
7.20%, 03/01/07 (A) A 1,217,323
575,000 Merrill Lynch & Co., Inc.
6.00%, 01/15/01 Aa 579,024
50,000 Salomon, Inc., MTN
5.58%, 04/05/99 Aa 49,947
100,000 Salomon, Inc.
7.13%, 08/01/99 Aa 100,930
250,000 Salomon, Inc., MTN
6.62%, 11/30/00 Aa 254,081
175,000 Salomon, Inc., Series D, MTN
6.82%, 07/26/99 Aa 176,191
350,000 Salomon Smith Barney Holdings, Inc.
7.88%, 10/01/99 Aa 356,099
575,000 Salomon Smith Barney Holdings, Inc.
6.25%, 06/15/05 Aa 581,100
------------
3,507,777
============
COMMUNICATIONS - 2.05%
$ 450,000 Clear Channel Communications, Inc.
7.25%, 10/15/27 Baa $ 453,446
730,000 MCI Communications Corp., MTN
6.13%, 04/15/12 Baa 742,338
1,075,000 MCI Worldcom, Inc.
6.95%, 08/15/28 Baa 1,155,904
200,000 TCI Communications, Inc.
7.88%, 02/15/26 Baa 236,724
650,000 Tele-Communications, Inc.
7.13%, 02/15/28 Baa 708,894
------------
3,297,306
============
BUSINESS SERVICES - 1.58%
1,350,000 EOP Operating, LP
6.63%, 02/15/05 Baa 1,328,689
1,400,000 Olsten Corp.
4.75%, 10/01/00 Ba 1,204,000
------------
2,532,689
============
INSURANCE - 1.35%
1,000,000 Conseco, Inc.
6.80%, 06/15/05 Ba 917,373
800,000 Markel Corp.
7.25%, 11/01/03 Baa 828,638
400,000 USF&G Corp., Senior Note
8.38%, 06/15/01 A 425,071
------------
2,171,082
============
TRANSPORTATION - 1.12%
750,000 CSX Corp.
6.25%, 10/15/08 Baa 761,926
1,000,000 Wisconsin Central Transportation
6.63%, 04/15/08 Baa 1,035,853
------------
1,797,779
============
ENERGY - 0.90%
925,000 Canadian Occidental Petroleum
Yankee Bond
7.40%, 05/01/28 Baa 848,884
575,000 Coastal Corp.
7.42%, 02/15/37 Baa 596,626
------------
1,445,510
============
ENTERTAINMENT/LEISURE - 0.81%
1,325,000 Royal Caribbean Cruises, Ltd.
7.50%, 10/15/27 Baa 1,295,764
------------
MANUFACTURING - 0.80%
775,000 Georgia-Pacific Corp.
9.95%, 06/15/02 Baa 855,560
425,000 Noranda Forest, Inc., Debenture
8.87%, 10/15/99 Baa 430,933
------------
1,286,493
============
</TABLE>
See Notes to Financial Statements.
F-21
<PAGE>
- --------------------------------------------------------------------------------
Select Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS,CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S RATINGS VALUE
PAR VALUE (UNAUDITED) (NOTE 2)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES - 0.50%
$ 100,000 System Energy Resources, Inc.
7.63%, 04/01/99 Baa $ 100,430
700,000 Telephone & Data Systems, Inc.
7.00%, 08/01/06 Baa 700,176
-----------
800,606
-----------
EQUIPMENT - 0.46%
850,000 Toro Co.
7.80%, 06/15/27 Baa 744,034
-----------
TOTAL CORPORATE NOTES AND BONDS 65,790,058
-----------
(Cost $65,449,740)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 38.15%
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION (B) - 16.26%
841,031 8.00%, 07/15/17, Pool # 780495 Aaa 882,074
82,563 8.00%, 11/15/17, Pool # 780263 Aaa 86,566
2,102,540 9.00%, 12/15/17, Pool # 780047 Aaa 2,263,537
669,504 7.00%, 07/15/23, Pool # 326534 Aaa 685,351
270,246 7.00%, 11/15/23, Pool # 370890 Aaa 276,643
16,949 7.00%, 01/15/24, Pool # 375983 Aaa 17,349
280,651 7.00%, 02/15/24, Pool # 376403 Aaa 287,271
290,436 7.00%, 07/15/24, Pool # 352919 Aaa 297,287
184,830 8.00%, 08/15/25, Pool # 410081 Aaa 191,889
227,574 8.00%, 11/15/25, Pool # 419283 Aaa 236,265
57,889 7.00%, 02/15/26, Pool # 373553 Aaa 59,258
97,256 7.50%, 02/15/26, Pool # 420512 Aaa 100,218
424,698 7.00%, 04/15/26, Pool # 416211 Aaa 434,742
402,902 7.00%, 04/15/26, Pool # 422651 Aaa 412,431
315,221 8.00%, 04/15/26, Pool # 417339 Aaa 327,225
229,292 8.00%, 05/15/26, Pool # 421245 Aaa 238,023
501,509 7.00%, 06/15/26, Pool # 424817 Aaa 513,369
103,803 8.00%, 07/15/26, Pool # 421752 Aaa 107,755
34,753 8.00%, 07/15/26, Pool # 424750 Aaa 36,077
491,344 8.00%, 07/15/26, Pool # 430374 Aaa 510,055
177,924 8.00%, 07/15/26, Pool # 436313 Aaa 184,699
201,542 8.00%, 08/15/26, Pool # 432017 Aaa 209,217
251,215 8.00%, 08/15/26, Pool # 436445 Aaa 260,781
400,264 8.00%, 08/15/26, Pool # 438243 Aaa 415,506
462,349 8.00%, 09/15/26, Pool # 423929 Aaa 479,955
123,950 8.00%, 10/15/26, Pool # 431477 Aaa 128,670
495,774 8.00%, 10/15/26, Pool # 436719 Aaa 514,653
769,835 8.00%, 10/15/26, Pool # 440988 Aaa 799,150
326,776 8.00%, 10/15/26, Pool # 442071 Aaa 339,220
378,265 8.00%, 11/15/26, Pool # 398971 Aaa 392,669
15,827 8.00%, 11/15/26, Pool # 433310 Aaa 16,430
33,590 8.00%, 11/15/26, Pool # 436524 Aaa 34,869
698,041 8.00%, 12/15/26, Pool # 440512 Aaa 724,622
883,930 8.00%, 12/15/26, Pool # 440827 Aaa 917,590
17,994 8.00%, 01/15/27, Pool # 410376 Aaa 18,694
270,633 8.00%, 01/15/27, Pool # 437152 Aaa 281,161
496,218 8.00%, 01/15/27, Pool # 445049 Aaa 515,521
458,117 8.00%, 02/15/27, Pool # 433479 Aaa 475,938
524,741 8.00%, 04/15/27, Pool # 445735 Aaa 545,153
614,959 8.00%, 04/15/27, Pool # 447532 Aaa 638,881
473,079 8.00%, 06/15/27, Pool # 438381 Aaa 491,481
22,861 8.00%, 06/15/27, Pool # 435866 Aaa 23,750
77,745 7.50%, 06/15/27, Pool # 447298 Aaa 80,155
222,499 8.00%, 07/15/27, Pool # 353734 Aaa 231,154
14,194 8.00%, 07/15/27, Pool # 435894 Aaa 14,747
72,730 8.00%, 07/15/27, Pool # 440680 Aaa 75,559
1,524,901 8.00%, 07/15/27, Pool # 447790 Aaa 1,584,219
423,319 8.00%, 07/15/27, Pool # 450223 Aaa 439,786
15,965 8.00%, 07/15/27, Pool # 452714 Aaa 16,586
447,159 8.00%, 08/15/27, Pool # 435416 Aaa 464,553
459,813 8.00%, 08/15/27, Pool # 451384 Aaa 477,700
464,429 8.00%, 09/15/27, Pool # 448981 Aaa 482,495
214,957 8.00%, 09/15/27, Pool # 449475 Aaa 223,319
91,274 8.00%, 09/15/27, Pool # 451932 Aaa 94,825
323,922 8.00%, 09/15/27, Pool # 457422 Aaa 336,523
811,835 7.00%, 10/15/27, Pool # 398372 Aaa 830,548
760,856 7.50%, 10/15/27, Pool # 430267 Aaa 784,442
85,281 7.50%, 10/15/27, Pool # 460921 Aaa 87,925
326,475 8.00%, 10/15/27, Pool # 430270 Aaa 339,174
584,480 8.00%, 10/15/27, Pool # 430274. Aaa 607,216
121,903 7.00%, 11/15/27, Pool # 462268 Aaa 124,713
951,027 7.00%, 11/15/27, Pool # 462363 Aaa 972,948
763,769 7.50%, 11/15/27, Pool # 448876 Aaa 787,445
633,550 8.00%, 11/15/27, Pool # 446865 Aaa 658,195
-----------
26,086,222
-----------
FEDERAL NATIONAL
MORTGAGE ASSOCIATION (B) - 7.88%
155,163 6.00%, 03/01/03, Pool # 303790 Aaa 156,395
950,000 6.00%, 05/15/08, Series N Aaa 1,002,413
2,850,000 7.00%, 01/01/21 (D) Aaa 2,907,914
6,100,000 7.00%, 01/01/21 (D) Aaa 6,241,116
2,228,971 8.50%, 10/01/26, Pool # 313181 Aaa 2,335,181
-----------
12,643,019
-----------
U.S. TREASURY BOND - 7.08%
4,400,000 8.13%, 08/15/19 (E) Aaa 5,883,627
4,625,000 6.63%, 02/15/27 (F) Aaa 5,470,510
-----------
11,354,137
-----------
FEDERAL HOME LOAN
MORTGAGE CORPORATION (B) - 5.43%
725,000 5.75%, 07/15/03 Aaa 745,155
2,790,778 7.50%, 05/01/28, Pool # G00986 Aaa 2,865,208
719,057 8.50%, 07/01/28, Pool # G00985 Aaa 752,867
4,239,683 7.50%, 11/01/28, Pool # G00996 Aaa 4,352,755
-----------
8,715,985
-----------
U.S. TREASURY INFLATION INDEX - 0.85%
1,375,000 3.63%, 07/15/02 Aaa 1,365,547
U.S. TREASURY NOTES - 0.35%
275,000 6.63%, 05/15/07 Aaa 309,289
250,000 5.63%, 12/31/99 (G) Aaa 252,422
-----------
561,711
-----------
</TABLE>
See Notes to Financial Statements.
F-22
<PAGE>
Select Income Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MOODY'S RATINGS VALUE
PAR VALUE (UNAUDITED) (NOTE 2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY STRIP (C) - 0.30%
$ 1,575,000 5.64%, 08/15/20 Aaa $ 475,349
--------------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 61,201,970
(Cost $60,701,700) --------------------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 15.80%
240,313 Advanta Mortgage Loan Trust, Series 93-4
5.50%, 02/25/09 Aaa 236,240
1,200,000 AMRESCO Residential Mortgage Securities
5.84%, 03/25/27 Baa 1,210,560
1,576,833 Bear Stearns Mortgage Securities
Series 1998-2, Class D
6.75%, 05/02/30 Aa 1,600,036
999,819 Chase Commercial Mortgage Securities
Series 1996-1, Class E
7.60%, 06/18/06 (H) BBB 949,809
700,000 Chase Commercial Mortgage Securities
Series 1997-1, Class D
7.37%, 05/19/07 (H) BBB 707,273
1,112,918 Citicorp Mortgage Securities, Inc., REMIC
7.50%, 11/25/25 Baa 1,116,535
1,200,000 Contimortgage Home Equity Loan Trust
Series 1996-4, Class A-9
6.88%, 01/15/28 Aaa 1,234,836
1,525,000 Discover Card Master Trust I
Series 1996-4, Class A-9
5.60%, 05/16/06 Aaa 1,527,318
925,000 EQCC Home Equity Loan Trust
Series 1996-4
6.89%, 01/15/28 Aaa 944,259
1,525,000 Ford Credit Auto Owner Trust
Series 1998-C, Class A-5
5.86%, 10/15/02 Aaa 1,543,742
69,559 Fund America Investors Corp. II
Series 1993-F, Class A-1
5.50%, 09/25/09 Aaa 68,894
900,000 GMAC Commercial Mortgage
Securities, Inc.
Series 1997, Class E
7.09%, 07/15/29 Baa 886,500
350,000 Green Tree Financial Corp., Series 1998-8
7.69%, 09/01/30 Baa 336,431
586,013 Housing Securities, Inc., Series 1994-2
6.50%, 07/25/09 (H) AAA 590,479
1,150,000 J.C. Penney Master Credit Card Trust
Series E, Class A
5.50%, 06/15/07 Aaa 1,150,000
1,000,000 Merrill Lynch Mortgage Investors, Inc.
6.96%, 11/21/28 Aa 885,310
825,000 Merrill Lynch Mortgage Investors, Inc.
Series 1997-C1
7.12%, 06/18/29 Aa 818,557
$ 1,500,000 Morgan Stanley Capital I,
Series 1998-HF1
6.52%, 03/15/30 Aaa $ 1,564,785
575,000 Mortgage Capital Funding, Inc.,
Series 1996
7.90%, 02/15/06 (H) AAA 634,564
1,011,967 Norwest Asset Securities Corp.,
Series 1998-3
6.75%, 02/25/13 Aaa 1,032,468
1,000,000 Oakwood Mortgage Investors, Inc.,
Series 1997-D
7.33%, 02/15/28 Baa 963,090
700,000 Preferred Credit Corp.,
Series 1997-1, Class A-6
7.59%, 07/25/26 Aaa 737,450
2,038,637 Residential Funding
Mortgage Securities I, Inc.
6.50%, 02/25/13 (H) AAA 2,062,697
114,481 Resolution Trust Corp.
8.00%, 04/25/25 Baa 117,551
625,000 Resolution Trust Corp.
8.00%, 06/25/26 (H) A 628,125
201,161 Resolution Trust Corp.
7.45%, 05/25/29 Baa 202,782
1,550,000 The Money Store Home Equity Trust
Series 1996-D, Class A-9
7.00%, 04/15/28 Aaa 1,597,191
----------------
TOTAL ASSET-BACKED AND
MORTGAGE-BACKED SECURITIES 25,347,482
(Cost $25,143,098) ----------------
MUNICIPAL BONDS - 0.92%
GEORGIA - 0.46%
700,000 Georgia State, Series D
5.25%, 10/01/15 Aaa 744,246
----------------
TEXAS - 0.46%
700,000 Austin Texas Revenue
5.25%, 05/15/20 Aaa 738,882
---------------
TOTAL MUNICIPAL BONDS 1,483,128
(Cost $1,527,162) ---------------
COMMERCIAL PAPER (C) - 0.93%
1,500,000 Motorola, Inc.
5.33%, 01/28/99 (H) A 1,494,218
---------------
TOTAL COMMERCIAL PAPER 1,494,218
(Cost $1,494,218) ---------------
</TABLE>
See Notes to Financial Statements.
F-23
<PAGE>
Select Income Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT COMPANY - 2.11%
3,385,277 ILA Prime Obligation
Portfolio Fund Class B $ 3,385,277
-------------------
TOTAL INVESTMENT COMPANY 3,385,277
(Cost $3,385,277) -------------------
TOTAL INVESTMENTS - 98.91% 158,702,133
(Cost $157,701,195) -------------------
NET OTHER ASSETS AND LIABILITIES - 1.09% 1,747,862
-------------------
NET ASSETS - 100.00% $ 160,449,995
===================
</TABLE>
- --------------------------------------
(A) Security exempt from registration under rule 144A of the Securities
Act of 1933. This security may be resold, in transactions exempt form
registration, to qualified institutional buyers. At December 31, 1998,
these securities amounted to $2,521,146 or 1.57% of net assets.
(B) Pass Through Certificates
(C) Effective yield at time of purchase.
(D) Forward Commitment
(E) Designated as Collateral on Forward Commitment, par value of
$4,400,000.
(F) Designated as Collateral on Forward Commitment, par value of
$4,625,000.
(G) Designated as Collateral on Forward Commitment, par value of $107,000.
(H) Standard & Poor's (S&P) credit ratings are used in the absence of a
rating by Moody's Investors, Inc.
MTN Medium Term Note
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $157,709,257. Net unrealized appreciation (depreciation) aggregated
$992,876, of which $2,222,584 related to appreciated investment securities and
$(1,229,708) related to depreciated investment securities.
At December 31, 1998, the Portfolio had no capital loss carryforwards. During
1998, the Portfolio utilized $1,070,495 of its capital loss carryforward.
OTHER INFORMATION
For the year ended December 31, 1998, the aggregate cost of purchases and the
proceeds of sales, other than from short-term investments, included $63,931,668
and $25,853,035 from non-governmental issuers, respectively, and $152,910,133
and $130,678,414 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:
Moody's Ratings (unaudited) S&P Ratings (unaudited)
Aaa 49.35% AAA 2.07%
Aa 8.35 AA 0.42
A 7.53 A 1.34
Baa 26.43 BBB 1.04
Ba 3.47
--------- ---------
95.13% 4.87%
========= =========
See Notes to Financial Statements
F-24
<PAGE>
Money Market Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------------------------
CORPORATE NOTES AND BONDS - 34.00%
<S> <C> <C>
FINANCE - 13.32%
$ 2,150,000 Associates Corp.of North America, MTN
5.75%, 02/12/99 $ 2,150,099
1,000,000 Associates Corp.of North America, MTN
6.75%, 06/28/99 1,003,742
1,530,000 Chrysler Financial Corp., MTN
5.28%, 02/16/99 1,529,768
3,500,000 CIT Group Holdings, Inc., Senior MTN
5.07%, 01/27/99 * 3,499,879
1,000,000 CIT Group Holdings, Inc., Senior MTN
6.20%, 06/17/99 1,001,974
232,443 Compass Auto Receivables Trust
5.66%, 07/15/99 232,443
2,050,615 Copelco Capital Funding Corp., Series 1998-A
5.68%, 08/16/99 2,050,615
1,250,000 Ford Motor Credit Co.
5.63%, 01/15/99 1,250,059
700,000 Ford Motor Credit Co., MTN
8.21%, 03/16/99 703,362
3,650,000 General Motors Acceptance Corp., MTN
5.70%, 02/09/99 3,649,555
4,000,000 General Motors Acceptance Corp.
8.00%, 10/01/99 4,077,732
715,000 General Motors Acceptance Corp., MTN
5.24%, 12/09/99 * 714,189
1,500,000 Household Financial Corp., Ltd., Yankee Note
7.13%, 04/30/99 1,506,016
1,000,000 International Lease Finance Corp., MTN
6.05%, 04/30/99 1,000,765
6,000,000 Liberty Lighthouse US Capital
5.02%, 08/16/99 * (B) 6,000,000
6,000,000 Liberty Lighthouse US Capital
5.23%, 09/15/99 * (B) 6,000,000
1,000,000 PACCAR Financial Corp., MTN
6.46%, 05/19/99 1,002,427
5,050,000 Sears Roebuck Acceptance Corp., MTN
6.54%, 05/06/99 5,062,495
2,325,000 SunAmerica, Inc.
6.20%, 10/31/99 2,345,051
--------------
44,780,171
==============
SECURITY BROKERS AND DEALERS - 11.72%
3,000,000 Bear Stearns Cos., Inc., Series B, MTN
5.52%, 01/12/99 * 2,999,808
6,000,000 Bear Stearns Cos., Inc., Series B, MTN
5.19%, 08/25/99 * 6,000,000
7,000,000 Donaldson Lufkin & Jenrette, Inc., MTN
5.56%, 10/05/99 * 7,000,000
2,500,000 Lehman Brothers Holdings, Inc., MTN
5.47%, 02/12/99 * 2,500,125
5,050,000 Lehman Brothers Holdings, Inc.
7.63%, 07/15/99 5,096,769
4,150,000 Merrill Lynch & Co., Inc.
6.38%, 03/30/99 4,157,744
5,000,000 Paine Webber Group, Inc., MTN
5.29%, 03/10/99 * 5,000,000
SECURITY BROKERS AND DEALERS
$ 5,500,000 Paine Webber Group, Inc., MTN
6.05%, 10/21/99 * $ 5,500,000
1,164,000 Salomon-Smith Barney Holdings
5.50%, 01/15/99 1,163,857
--------------
39,418,303
==============
COMMERCIAL BANKS - 7.62%
3,000,000 Bankers Trust Corp.
4.96%, 08/09/99* (B) 2,984,978
1,691,000 Chase Manhattan Corp.
7.75%, 11/01/99 1,725,158
2,500,000 Chemical Banking Corp., MTN
5.58%, 10/26/99 * 2,505,786
2,345,000 Citicorp
9.00%, 04/15/99 2,369,100
2,000,000 First Chicago Corp.
9.00%, 06/15/99 2,027,709
1,000,000 First Interstate Bancorp, Senior Subordinated Note
8.63%, 04/01/99 1,006,673
3,500,000 First Union National Bank, MTN
4.98%, 04/30/99 * 3,500,000
3,500,000 Fleet Credit Card, MTN
5.89%, 04/15/99 * 3,502,483
3,000,000 Key Bank N.A., MTN
4.87%, 01/14/99 * 2,999,971
3,000,000 Rabobank Nederland, MTN
6.45%, 08/16/99 3,014,216
--------------
25,636,074
==============
COMMUNICATION - 0.59%
2,000,000 MCI Communications Corp.
5.41%, 03/16/99 * 2,000,555
==============
INDUSTRIAL - 0.45%
1,000,000 Sears Roebuck & Co., MTN
5.86%, 01/22/99 999,993
500,000 Sears Roebuck & Co., Debenture
8.20%, 04/15/99 * 503,202
--------------
1,503,195
==============
Utilities - 0.30%
1,000,000 Virginia Electric & Power Co., MTN, Series C
9.30%, 06/09/99 1,015,036
--------------
TOTAL CORPORATE NOTES AND BONDS 114,353,334
==============
(Cost $114,353,334)
U.S. GOVERNMENT AGENCY OBLIGATION (A) - 4.46%
Federal Home Loan Bank - 4.46%
15,000,000 4.60%, 11/03/99 15,000,000
--------------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATION 15,000,000
--------------
(Cost $15,000,000)
</TABLE>
See Notes to Financial Statements.
F-25
<PAGE>
Money Market Fund
PORTFOLIO OF INVESTMENTS . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------------------------
MUNICIPAL BOND - 2.08%
<S> <C> <C>
CONNECTICUT - 2.08%
$ 7,000,000 Connecticut State Housing Finance Authority
6.00%, 11/15/16 * $ 7,000,000
--------------
TOTAL MUNICIPAL BOND 7,000,000
==============
(Cost $7,000,000)
COMMERCIAL PAPER (A) - 46.66%
FINANCE - 28.17%
1,000,000 American Honda Finance Corp.
5.47%, 01/15/99 997,912
1,989,000 Barton Capital Corp.
5.46%, 01/12/99 (C) 1,985,742
3,000,000 Barton Capital Corp.
5.45%, 02/02/99 (C) 2,985,760
2,500,000 Bayerische Vereinsbank, AG
5.87%, 02/02/99 2,498,781
8,000,000 Block Financial Corp.
5.35%, 02/26/99 7,934,418
4,000,000 Credit Suisse First Boston, Inc.
5.27%, 02/24/99 (C) 3,968,800
5,000,000 Equilon Enterprises
5.35%, 02/25/99 4,959,743
7,000,000 Frontier Corp.
5.63%, 01/04/99 (C) 6,996,733
3,742,000 Frontier Corp.
5.57%, 01/06/99 (C) 3,739,115
4,000,000 Frontier Corp.
5.16%, 03/29/99 (C) 3,950,700
2,500,000 Holland Ltd Securitization, Inc.
5.34%, 03/24/99 (C) 2,469,990
10,000,000 Iowa Student Loan
5.63%, 01/20/99 9,970,445
2,871,000 Mont Blanc Capital Corp.
5.69%, 01/26/99 (C) 2,859,735
5,000,000 National Rural Utilities Cooperative Finance Corp.
5.08%, 02/08/99 4,973,611
1,500,000 Pegasus Three, Ltd.
5.49%, 02/26/99 (C) 1,487,353
5,000,000 Republic Industrial Funding Corp.
5.58%, 01/13/99 4,990,750
10,000,000 Trident Capital Finance, Inc.
5.95%, 01/04/99 (C) 9,995,042
8,000,000 Vattenfall Treasury, Inc.
5.98%, 01/05/99 7,994,693
2,000,000 Westways Funding I, Ltd.
5.40%, 01/29/99 (C) 1,991,725
8,000,000 Westways Funding II, Ltd.
5.48%, 01/27/99 (C) 7,968,627
--------------
94,719,675
==============
INDUSTRY - 10.02%
$ 9,000,000 Cooperative Association Tractor Dealers
5.46%, 01/15/99 $ 8,980,925
2,300,000 Dakota
5.55%, 01/08/99 2,297,540
7,000,000 Dakota
5.32%, 01/13/99 6,987,750
10,000,000 GTE Corp.
5.65%, 01/22/99 (C) 9,967,217
500,000 Lexington Parker Capital Co.
5.67%, 01/19/99 (C) 498,600
5,000,000 Lexington Parker Capital Co.
5.61%, 01/27/99 (C) 4,979,958
--------------
33,711,990
==============
SECURITIES BROKERS AND DEALERS - 6.22%
4,000,000 Donaldson Lufkin & Jenrette, Inc.
5.83%, 01/12/99 3,992,972
8,000,000 Goldman Sachs Group
5.37%, 02/26/99 7,934,791
7,000,000 Morgan Stanley, Dean Witter Discover & Co.
5.45%, 01/22/99 6,978,154
2,000,000 Paine Webber Group, Inc.
5.76%, 01/25/99 1,992,507
--------------
20,898,424
==============
BANKING - 1.46%
5,000,000 UniBanco - Grand Cayman
5.54%, 04/15/99 4,921,451
--------------
UTILITIES - 0.79%
2,707,000 Songs Fuel Co.
5.15%, 06/21/99 2,642,452
--------------
TOTAL COMMERCIAL PAPER 156,893,992
==============
(Cost $156,893,992)
CERTIFICATES OF DEPOSIT - 4.76%
5,000,000 National Bank of Canada
5.21%, 02/17/99 5,000,065
4,500,000 National Bank of Canada
5.73%, 06/07/99 4,498,888
6,500,000 Sanwa Bank, Ltd., New York
5.66%, 04/05/99 6,500,165
--------------
TOTAL CERTIFICATES OF DEPOSIT 15,999,118
==============
(Cost $15,999,118)
</TABLE>
See Notes to Financial Statements.
F-26
<PAGE>
Money Market Fund
PORTFOLIO OF INVESTMENTS, CONTINUED . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.32%
$ 21,241,626 Lehman Brothers Holdings, Inc.
Repurchase Agreement
4.95%, 01/07/99, Dated 12/03/98
Repurchase Price $21,318,156
(Collateralized by Government Agencies
7.00% - 7.50%, Due 08/01/10 thru 10/01/25,
Total Par $21,306,437,
Market Value $21,944,998) $ 21,241,626
------------
TOTAL REPURCHASE AGREEMENT 21,241,626
------------
(Cost $21,241,626)
VALUE
SHARES (NOTE 2)
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES - 0.95%
783,415 SSgA Prime Money Market Fund $ 783,415
2,396,817 Scudder Institutional Money Market Fund 2,396,817
------------
TOTAL INVESTMENT COMPANIES 3,180,232
------------
(Cost $3,180,232)
TOTAL INVESTMENTS - 99.23% 333,668,302
------------
(Cost $333,668,302)
NET OTHER ASSETS AND LIABILITIES - 0.77% 2,585,045
------------
NET ASSETS - 100.00% $336,253,347
============
______________________
* Variable rate security. The rate shown reflects rate in effect at December
31, 1998.
(A) Effective yield at time of purchase
(B) 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, 1998,
these securities amounted to $14,984,978 or 4.46% of net assets.
(C) Security exempt from registration under section 4(2) of the Securities Act
of 1933, as amended. This security may be resold to qualified institutional
buyers. At December 31, 1998, these securities amounted to $65,845,097 or
19.58% of net assets.
MTN Medium Term Note
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $333,668,302.
As of December 31, 1998, the Portfolio had capital loss carryforwards which
expire as follows: $347 in 2002, $144 in 2003, $35,977 in 2004, $8,154 in 2005;
and $52,338 in 2006.
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 92.68%
NR (Not Rated) 7.32
-------
100.00%
=======
See Notes to Financial Statements
F-27
<PAGE>
Allmerica Investment Trust
STATEMENTS OF ASSETS AND LIABILITIES (in 000's) . DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
EMERGING AGGRESSIVE CAPITAL VALUE OPPORTUNITY INTERNATIONAL
MARKETS FUND GROWTH FUND APPRECIATION FUND EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost............................. $ 22,471 $ 558,819 $ 281,412 $ 257,900 $ 402,033
Repurchase agreements at cost................... - - - - -
Net unrealized appreciation (depreciation)...... (2,022) 199,270 29,857 18,882 104,049
------------ ----------- ------------ --------------- -------------
Total investments at value................... 20,449 758,089 311,269 276,782 506,082
Cash and foreign currency (Notes 2 and 7)*.......... 397 2 - - 653
Short-term investments held as collateral
for securities loaned (Note 2)................... - 124,868 - - -
Receivable for investments sold..................... 112 - 3,572 184 -
Receivable for shares sold.......................... 19 - 24 22 -
Receivable for foreign currency sold................ 172 - - - -
Receivable for variation margin..................... - - - - -
Interest and dividend receivables................... 44 285 127 211 1,486
Deferred organizational expense (Note 2)............ - - 2 - -
Dividend tax reclaim receivables.................... - - 11 - 393
------------ ----------- ------------ --------------- -------------
Total Assets................................. 21,193 883,244 315,005 277,199 508,614
------------ ----------- ------------ --------------- -------------
LIABILITIES:
Payable for investments purchased................... 125 2,542 4,007 8,477 -
Payable for foreign currency purchased.............. 56 - - - -
Payable for shares repurchased...................... - 2,476 101 71 988
Payable to custodian................................ - - 22 8 -
Collateral for securities loaned.................... - 124,868 - - -
Net unrealized depreciation on
forward currency contracts (Notes 2 and 8)....... 63 - - - 1,600
Advisory fee payable (Note 3)....................... 17 525 225 195 374
Trustees' fees and expenses payable................. - 3 1 1 2
Accrued expenses and other payables................. 59 89 67 42 97
------------ ----------- ------------ --------------- -------------
Total Liabilities............................ 320 130,503 4,423 8,794 3,061
------------ ----------- ------------ --------------- -------------
NET ASSETS.......................................... $ 20,873 $ 752,741 $ 310,582 $ 268,405 $ 505,553
============ =========== ============ =============== =============
NET ASSETS CONSIST OF
Paid-in capital (Note 6)............................ $ 25,563 $ 555,762 $ 281,226 $ 232,957 $ 414,055
Undistributed (distribution in excess of)
net investment income (loss)..................... 193 - (264) 2 (2,522)
Accumulated (distribution in excess of) net realized
gain (loss) on investments sold, foreign
currency transactions and futures contracts...... (2,783) (2,291) (237) 16,564 (8,492)
Net unrealized appreciation (depreciation) of
investments, assets and liabilities in foreign
currency and futures contracts................... (2,100) 199,270 29,857 18,882 102,512
------------ ----------- ------------ --------------- -------------
TOTAL NET ASSETS.................................... $ 20,873 $ 752,741 $ 310,582 $ 268,405 $ 505,553
============ =========== ============ =============== =============
SHARES OF BENEFICIAL INTEREST OUTSTANDING
(UNLIMITED AUTHORIZATION, NO PAR VALUE) (IN 000'S).. 26,620 305,982 189,354 159,227 327,959
NET ASSET VALUE,
Offering and redemption price per share
(Net Assets/Shares Outstanding)..................... $ 0.784 $ 2.460 $ 1.640 $ 1.686 $ 1.542
============ =========== ============ =============== =============
</TABLE>
_________________________________
* Cost $412 and $627, for Select Emerging Markets and Select International
Equity, respectively.
See Notes to Financial Statements
F-28
<PAGE>
ALLMERICA INVESTMENT TRUST
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SELECT SELECT SELECT GROWTH SELECT MONEY
GROWTH STRATEGIC AND INCOME INCOME MARKET
FUND GROWTH FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 560,636 $ 14,759 $ 545,906 $ 157,701 $ 312,427
- - - - 21,241
252,682 425 99,356 1,001 -
----------- --------- ----------- ----------- -----------
813,318 15,184 645,262 158,702 333,668
2 92 73 - 10
- - - - -
2,360 - - 9,219 -
109 45 202 27 2,480
- - - - -
- - - - -
1,147 11 979 1,714 1,941
- - - - -
- - - - -
----------- --------- ----------- ------------ -----------
816,936 15,332 646,516 169,662 338,099
----------- --------- ----------- ------------ -----------
938 467 - 9,122 1,749
- - - - -
17 - - - 2
- - - - -
- - - - -
- - - - -
517 7 356 71 70
3 - 3 1 1
71 19 71 18 24
----------- --------- ----------- ------------ -----------
1,546 493 430 9,212 1,846
----------- --------- ----------- ------------ -----------
$ 815,390 $ 14,839 $ 646,086 $ 160,450 $ 336,253
=========== ========= =========== ============ ===========
$ 530,572 $ 14,870 $ 492,384 $ 158,012 $ 336,350
504 - 58 99 -
31,632 (456) 54,288 1,338 (97)
252,682 425 99,356 1,001 -
----------- --------- ----------- ------------ -----------
$ 815,390 $ 14,839 $ 646,086 $ 160,450 $ 336,253
=========== ========= =========== ============ ===========
335,794 15,248 363,138 155,548 336,352
$ 2.428 $ 0.973 $ 1.779 $ 1.032 $ 1.000
=========== ========= =========== ============ ===========
</TABLE>
F-29
<PAGE>
ALLMERICA INVESTMENT TRUST
STATEMENTS OF OPERATIONS (IN 000's) . FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECT SELECT SELECT SELECT SELECT
EMERGING AGGRESSIVE CAPITAL VALUE OPPORTUNITY INTERNATIONAL
MARKETS FUND* GROWTH FUND APPRECIATION FUND FUND EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C> <C> <C>
Interest (Note 2)..................... $ 68 $ 607 $ 754 $ 997 $ 1,047
Dividends (Note 2).................... 469 2,775 676 3,435 9,065
Securities lending income (Note 2).... - 399 - - 144
Less net foreign taxes withheld....... (10) - (11) - (1,067)
------- -------- -------- -------- -----------
Total investment income...... 527 3,781 1,419 4,432 9,189
------- -------- -------- -------- -----------
EXPENSES
Investment advisory fees
(Notes 3 and 4)....................... 226 5,978 2,417 2,139 4,117
Custodian and securities lending fees
(Note 3).............................. 96 132 33 28 305
Fund accounting fees (Note 3)......... 38 90 55 52 65
Legal fees............................ - 13 8 5 9
Audit fees............................ 47 25 20 19 25
Trustees' fees and expenses (Note 3).. 1 22 8 7 14
Reports to shareholders............... 8 164 130 76 121
Amortization of organization costs
(Note 2).............................. - - 1 - -
Insurance............................. - 1 - - 1
Miscellaneous......................... 10 13 3 4 7
------- -------- -------- -------- -----------
Total expenses before reductions
and waiver.......................... 426 6,438 2,675 2,330 4,664
Less reductions (Note 5)............ (1) (229) (41) (97) (25)
Less reimbursement/waiver
(Notes 3 and 4)..................... (59) - - (32) -
-------- -------- -------- -------- -----------
Total expenses net of reductions
and waiver.......................... 366 6,209 2,634 2,201 4,639
-------- -------- -------- -------- -----------
NET INVESTMENT INCOME (LOSS)................ 161 (2,428) (1,215) 2,231 4,550
-------- -------- -------- -------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Net Realized Gain (loss) on
Investments sold.................... (2,784) (367) 49,639 16,620 (4,928)
Net realized gain on futures
contracts........................... - - 336 - -
Net realized gain (loss) on
foreign currency transactions....... 70 - (392) - (2,698)
Net change in unrealized
appreciation (depreciation) of
assets and liabilities in
foreign currency................ (78) - - - (2,694)
Net change in unrealized
appreciation (depreciation)
of investments and futures
contracts....................... (2,022) 71,945 (11,429) (8,160) 72,777
-------- -------- -------- -------- -----------
NET GAIN (LOSS) ON INVESTMENTS.............. (4,814) 71,578 38,154 8,460 62,457
-------- -------- -------- -------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS.... $(4,653) $ 69,150 $ 36,939 $ 10,691 $ 67,007
======== ======== ======== ======== ===========
</TABLE>
- --------------------------------------------------------
* The Select Emerging Markets Fund and Select Strategic Growth Fund commenced
operations on February 20, 1998.
See Notes to Financial Statements
F-30
<PAGE>
Allmerica Investment Trust
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
SELECT SELECT SELECT GROWTH SELECT MONEY
GROWTH STRATEGIC AND INCOME INCOME MARKET
FUND GROWTH FUND* FUND FUND FUND
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 995 $ 43 $ 2,382 $ 8,517 $ 15,544
4,780 82 8,498 175 264
- - - - -
- - - - -
--------- --------- ---------- --------- ---------
5,775 125 10,880 8,692 15,808
--------- --------- ---------- --------- ---------
5,112 69 3,791 721 731
39 6 31 20 26
87 23 87 54 52
11 - 10 3 6
21 22 21 19 18
19 1 18 4 9
130 10 99 17 33
- - - - -
1 - 1 - 6
2 3 12 5 7
--------- --------- ---------- --------- ---------
5,422 134 4,070 843 888
(151) (6) (176) - -
- (37) - - -
--------- --------- ---------- --------- ---------
5,271 91 3,894 843 888
--------- --------- ---------- --------- ---------
504 34 6,986 7,849 14,920
--------- --------- ---------- --------- ---------
32,636 (456) 54,948 2,478 (52)
- - - - -
- - - - -
- - - - -
159,491 425 21,673 (1,811) -
--------- --------- ---------- --------- ---------
192,127 (31) 76,621 667 (52)
--------- --------- ---------- --------- ---------
$ 192,631 $ 3 $ 83,607 $ 8,516 $ 14,868
========= ========= ========== ========= =========
</TABLE>
F-31
<PAGE>
ALLMERICA INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS (IN 000'S)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SELECT EMERGING SELECT AGGRESSIVE SELECT CAPITAL
MARKETS FUND* GROWTH FUND APPRECIATION FUND
- ---------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED
DECEMBER 31, YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
1998 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD............................ $ 20,000(B) $ 604,123 $ 407,442 $ 240,526 $ 142,680
-------- --------- --------- --------- ----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income (loss)............................ 161 (2,428) (2,312) (1,215) (704)
Net realized gain (loss) on investments sold and foreign
currency transactions.............................. (2,714) (367) 38,455 49,583 243
Net change in unrealized appreciation (depreciation)
of investments and assets and liabilities in
foreign currency................................... (2,100) 71,945 49,159 (11,429) 30,340
-------- --------- --------- --------- ----------
Net increase (decrease) in net assets resulting
from operations.................................... (4,653) 69,150 85,302 36,939 29,879
-------- --------- --------- --------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................... (37) - - - -
Distribution in excess of net investment income......... - - - - -
Net realized gain on investments........................ - - (45,242) (47,014) -
Distribution in excess of net realized gain on
investments........................................ - - (1,941) - -
-------- --------- --------- --------- ----------
Total distributions................................ (37) - (47,183) (47,014) -
-------- --------- --------- --------- ----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares....................... 5,729 102,931 125,270 52,851 72,527
Issued to shareholders in reinvestment of
distributions...................................... 37 - 47,183 47,014 -
Cost of shares repurchased.............................. (203) (23,463) (13,891) (19,734) (4,560)
-------- --------- --------- --------- ----------
Net increase from capital share transactions....... 5,563 79,468 158,562 80,131 67,967
-------- --------- --------- --------- ----------
Total increase (decrease) in net assets............ 873 148,618 196,681 70,056 97,846
-------- --------- --------- --------- ----------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)............... $ 20,873 $ 752,741 $ 604,123 $ 310,582 $ 240,526
======== ========= ========= ========= ==========
(A) Undistributed (distribution in excess of)
net investment income (loss)....................... $ 193 $ - $ - $ (264) $ (11)
======== ========= ========= ========= ==========
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold.................................................... 6,831 46,519 56,853 31,712 48,567
Issued to shareholders in reinvestment of
distributions...................................... 48 - 21,321 28,667 -
Repurchased............................................. (259) (12,098) (6,666) (12,704) (2,995)
-------- --------- --------- --------- ----------
Net increase in shares outstanding................. 6,620 34,421 71,508 47,675 45,572
======== ========= ========= ========= ==========
</TABLE>
________________________________________________
* The Select Emerging Markets Fund and the Select Strategic Growth Fund
commenced operations on February 20, 1998.
(B) Represents initial seed money and shares. Original shares were priced at
$1.00.
See Notes to Financial Statements.
F-32
<PAGE>
Allmerica Investment Trust
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SELECT VALUE SELECT INTERNATIONAL SELECT GROWTH SELECT STRATEGIC SELECT GROWTH AND
OPPORTUNITY FUND EQUITY FUND FUND GROWTH FUND* INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31, DECEMBER 31, YEARS ENDED DECEMBER 31,
1998 1997 1998 1997 1998 1997 1998 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 202,139 $ 113,969 $ 397,915 $ 246,877 $ 470,356 $ 228,551 $ 5,000(B) $ 473,553 $ 295,638
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
2,231 1,135 4,550 3,941 504 1,457 34 6,986 5,190
16,620 26,736 (7,626) 14,653 32,636 27,996 (456) 54,948 37,150
(8,160) 6,770 70,083 (6,505) 159,491 68,271 425 21,673 33,412
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
10,691 34,641 67,007 12,089 192,631 97,724 3 83,607 75,752
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
(2,255) (1,109) (6,430) (5,222) (94) (1,356) (34) (7,005) (5,132)
-- -- -- (3,846) -- -- (1) -- --
(835) (26,701) -- (12,588) (6,735) (23,994) -- (2,017) (40,366)
-- -- -- -- -- -- -- -- --
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
(3,090) (27,810) (6,430) (21,656) (6,829) (25,350) (35) (9,022) (45,498)
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
59,689 54,787 141,035 156,121 167,762 148,448 10,823 101,277 106,418
3,090 27,810 6,430 21,656 6,829 25,350 35 9,022 45,498
(4,114) (1,258) (100,404) (17,172) (15,359) (4,367) (987) (12,351) (4,255)
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
58,665 81,339 47,061 160,605 159,232 169,431 9,871 97,948 147,661
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
66,266 88,170 107,638 151,038 345,034 241,805 9,839 172,533 177,915
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
$ 268,405 $ 202,139 $ 505,553 $ 397,915 $ 815,390 $ 470,356 $14,839 $ 646,086 $ 473,553
========= ========== ========= ========= ========== ========== ======= ========== ==========
$ 2 $ 26 $ (2,522) $ 2,056 $ 504 $ 101 $ -- $ 58 $ 66
========= ========== ========= ========= ========== ========== ======= ========== ==========
35,634 32,573 94,467 110,808 80,682 88,503 11,408 60,638 68,177
1,828 17,084 4,119 15,986 3,082 14,089 36 5,339 29,288
(2,586) (754) (67,343) (12,167) (7,661) (2,711) (1,196) (8,018) (2,757)
--------- ---------- --------- --------- ---------- ---------- ------- ---------- ----------
34,876 48,903 31,243 114,627 76,103 99,881 10,248 57,959 94,708
========= ========== ========= ========= ========== ========== ======= ========== ==========
</TABLE>
F-33
<PAGE>
ALLMERICA INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS (IN 000'S) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SELECT MONEY MARKET
INCOME FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD........................ $ 104,253 $ 77,498 $ 260,619 $ 217,256
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income.................................. 7,849 5,435 14,920 12,775
Net realized gain (loss) on investments sold
and futures contracts............................... 2,478 418 (52) (8)
Net change in unrealized appreciation
(depreciation) of investments and futures
contracts.......................................... (1,811) 2,198 -- --
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations..................................... 8,516 8,051 14,868 12,767
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (7,821) (5,484) (14,920) (12,775)
Distribution in excess of net investment income........ -- (43) (2) --
Net realized gain on investments....................... -- -- -- --
----------- ----------- ----------- -----------
Total distributions................................. (7,821) (5,527) (14,922) (12,775)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares...................... 57,084 23,120 327,728 198,110
Issued to shareholders in reinvestment
of distributions...................................... 7,821 5,527 14,922 12,775
Cost of shares repurchased............................. (9,403) (4,416) (266,962) (167,514)
----------- ----------- ----------- -----------
Net increase from
capital share transactions......................... 55,502 24,231 75,688 43,371
----------- ----------- ----------- -----------
Total increase in net assets........................ 56,197 26,755 75,634 43,363
----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)........... $ 160,450 $ 104,253 $ 336,253 $ 260,619
=========== =========== =========== ===========
(A) Undistributed (distributions in excess of)
net investment income (loss)........................ $ 99 $ 1 $ -- $ --
=========== =========== =========== ===========
OTHER INFORMATION:
SHARE TRANSACTIONS:
Sold................................................... 55,529 22,957 327,728 198,110
Issued to shareholders in reinvestment
of distributions...................................... 7,565 5,531 14,922 12,775
Repurchased............................................ (9,521) (4,382) (266,962) (167,514)
----------- ----------- ----------- -----------
Net increase in shares outstanding.................. 53,573 24,106 75,688 43,371
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-34
<PAGE>
This page left blank intentionally.
<PAGE>
ALLMERICA INVESTMENT TRUST
FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------------ --------------------------------------------------------
NET REALIZED
NET AND DISTRIBUTIONS
ASSET NET UNREALIZED DIVIDENDS FROM NET
VALUE INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET REALIZED DISTRIBUTIONS
YEAR ENDED BEGINNING INCOME ON INVESTMENT INVESTMENT CAPITAL IN RETURN OF
DECEMBER 31, OF YEAR (LOSS)(2) INVESTMENTS OPERATIONS INCOME GAINS EXCESS CAPITAL
------------ --------- ---------- ----------- ---------- ---------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SELECT EMERGING
MARKETS FUND(1)
1998/(D)/ $ 1.000 $ 0.006 $ (0.221) $ (0.215) $ (0.001) $ - $ - $ -
SELECT AGGRESSIVE
GROWTH FUND
1998 2.225 (0.008) 0.243 0.235 - - - -
1997 2.037 (0.009) 0.387 0.378 - (0.182) (0.008)/(3)/ -
1996 1.848 (0.009) 0.351 0.342 - (0.153) - -
1995 1.397 (0.001) 0.452 0.451 - - - -
1994 1.431 (0.002) (0.032) (0.034) - - - -
SELECT CAPITAL
APPRECIATION FUND(1)
1998 1.698 (0.006) 0.241 0.235 - (0.293) - -
1997 1.485 (0.005) 0.218 0.213 - - - -
1996 1.369 (0.003) 0.124 0.121 - (0.005) - -
1995 1.000 (0.001) 0.397 0.396 - (0.027) - -
SELECT VALUE
OPPORTUNITY FUND(1)
1998 1.626 0.014 0.066 0.080 (0.014) (0.006) - -
1997 1.511 0.010 0.364 0.374 (0.010) (0.249) - -
1996 1.238 0.011 0.342 0.353 (0.011) (0.069) - -
1995 1.089 0.009 0.183 0.192 (0.009) (0.033) (0.001)/(3)/ -
1994 1.170 0.005 (0.081) (0.076) (0.005) - - -
SELECT INTERNATIONAL
EQUITY FUND(1)
1998 1.341 0.014 0.207 0.221 (0.020) - - -
1997 1.356 0.015 0.049 0.064 (0.019) (0.046) (0.014)/(4)/ -
1996 1.136 0.011 0.238 0.249 (0.012) (0.003) (0.014)/(4)/ -
1995 0.963 0.013 0.176 0.189 (0.011) (0.005) - -
1994 1.000 0.003 (0.038) (0.035) (0.001) (0.001) - -
<CAPTION>
NET
INCREASE
(DECREASE)
IN
YEAR ENDED TOTAL NET ASSET
DECEMBER 31, DISTRIBUTIONS VALUE
---------- ------------- ----------
<S> <C> <C>
SELECT EMERGING
MARKETS FUND(1)
1998(D) $ (0.001) $ (0.216)
SELECT AGGRESSIVE
GROWTH FUND
1998 - 0.235
1997 (0.190) 0.188
1996 (0.153) 0.189
1995 - 0.451
1994 - (0.034)
SELECT CAPITAL
APPRECIATION FUND(1)
1998 (0.293) (0.058)
1997 - 0.213
1996 (0.005) 0.116
1995 (0.027) 0.369
SELECT VALUE
OPPORTUNITY FUND(1)
1998 (0.020) 0.060
1997 (0.259) 0.115
1996 (0.080) 0.273
1995 (0.043) 0.149
1994 (0.005) (0.081)
SELECT INTERNATIONAL
EQUITY FUND(1)
1998 (0.020) 0.201
1997 (0.079) (0.015)
1996 (0.029) 0.220
1995 (0.016) 0.173
1994 (0.002) (0.037)
</TABLE>
________________________________
* Annualized
** Not Annualized
(A) Including reimbursements, waivers, and reductions.
(B) Excluding reductions. Certain Portfolios have entered into varying
arrangements with brokers who reduced a portion of the Portfolio's expenses.
(C) Excluding reimbursements and reductions.
(D) For period ended December 31, 1998
(1) The Select Emerging Markets Fund commenced operations on February 20, 1998.
The Select Capital Appreciation Fund commenced operations on April 28, 1995
and changed sub-advisers on April 1, 1998. The Select Value Opportunity Fund
changed sub-advisers on January 1, 1997. The Select International Equity
Fund commenced operations on May 2, 1994.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.004 in 1998 for Select Emerging
Markets Fund; $(0.009) in 1998 and $(0.010) in 1997 for Select Aggressive
Growth Fund; $(0.006) in 1998, $(0.001) in 1995 for Select Capital
Appreciation Fund; $0.013 in 1998, $0.009 in 1997, $0.010 in 1996 and $0.005
in 1994 for Select Value Opportunity Fund; and $0.014 in 1998, $0.015 in
1997, $0.011 in 1996 and $0.002 in 1994 for Select International Equity
Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
See Notes to Financial Statements
F-36
<PAGE>
Allmerica Investment Trust
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO
END OF TOTAL PERIOD INVESTMENT OPERATING EXPENSES MANAGEMENT FEE TURNOVER
PERIOD RETURN (000'S) INCOME (LOSS) (A) (B) (C) GROSS NET RATE
- --------- --------- ------- ------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.784 (21.46)%** $ 20,873 0.96%* 2.19%* 2.19%* 2.54%* 1.35%* 1.00%* 62%
2.460 10.56% 752,741 (0.36)% 0.92% 0.95% 0.95% 0.88% 0.88% 99%
2.225 18.71% 604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95%
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113%
1.848 32.28% 254,872 (0.07)% 1.09% - 1.09% 1.00% 1.00% 104%
1.397 (2.31)% 136,573 (0.21)% 1.16% - 1.16% 1.00% 1.00% 100%
1.640 13.88% 310,582 (0.47)% 1.02% 1.04% 1.04% 0.94% 0.94% 141%
1.698 14.28% 240,526 (0.38)% 1.13% 1.13% 1.13% 0.98% 0.98% 133%
1.485 8.80% 142,680 (0.32)% 1.13% 1.13% 1.13% 1.00% 1.00% 98%
1.369 39.56%** 41,376 (0.25)%* 1.35%* - 1.42%* 1.00%* 0.93%* 95%
1.686 4.87% 268,405 0.95% 0.94% 0.98% 0.99% 0.91% 0.90% 73%
1.626 24.85% 202,139 0.73% 0.98% 1.04% 1.06% 0.92% 0.90% 110%
1.511 28.53% 113,969 0.91% 0.95% 0.97% 0.97% 0.85% 0.85% 20%
1.238 17.60% 64,575 0.86% 1.01% - 1.01% 0.85% 0.85% 17%
1.089 (6.51)% 41,342 0.64% 1.08% - 1.09% 0.85% 0.84% 4%
1.542 16.48% 505,553 0.99% 1.01% 1.02% 1.02% 0.90% 0.90% 27%
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20%
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18%
1.136 19.63% 104,312 1.68% 1.24% - 1.24% 1.00% 1.00% 24%
0.963 (3.49)%** 40,498 0.87%* 1.50%* - 1.78%* 1.00%* 0.72%* 19%
</TABLE>
F-37
<PAGE>
Allamerica Investment Trust
FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------------------- ----------------------------------------------------------------
NET REALIZED
NET AND DISTRIBUTIONS
ASSET NET UNREALIZED DIVIDENDS FROM NET
VALUE INVESTMENT GAIN (LOSS) TOTAL FROM FROM NET REALIZED DISTRIBUTIONS
YEAR ENDED BEGINNING INCOME ON INVESTMENT INVESTMENT CAPITAL IN RETURN OF TOTAL
DECEMBER 31, OF YEAR (LOSS)(2) INVESTMENTS OPERATIONS INCOME GAINS EXCESS CAPITAL DISTRIBUTIONS
- ------------ --------- ---------- ----------- ---------- ---------- ------------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECT GROWTH
FUND(1)
1998 $ 1.811 $ 0.002 $ 0.638 $ 0.640 $ -(3) $ (0.023) $ - $ - $ (0.023)
1997 1.430 0.006 0.480 0.486 (0.006) (0.099) - - (0.105)
1996 1.369 0.005 0.297 0.302 (0.005) (0.236) - - (0.241)
1995 1.099 - 0.270 0.270 - - - - -
1994 1.119 0.003 (0.020) (0.017) (0.003) - - - (0.003)
SELECT STRATEGIC
GROWTH FUND(1)
1998(D) 1.000 0.002 (0.027) (0.025) (0.002) - - - (0.002)
SELECT GROWTH
AND
INCOME FUND
1998 1.552 0.020 0.233 0.253 (0.020) (0.006) - - (0.026)
1997 1.405 0.020 0.293 0.313 (0.020) (0.146) - - (0.166)
1996 1.268 0.020 0.246 0.266 (0.020) (0.109) - - (0.129)
1995 1.027 0.019 0.290 0.309 (0.019) (0.049) - - (0.068)
1994 1.069 0.025 (0.018) 0.007 (0.025) (0.017) (0.007)(4) - (0.049)
SELECT INCOME
FUND
1998 1.022 0.059 0.010 0.069 (0.059) - - - (0.059)
1997 0.995 0.060 0.028 0.088 (0.061) - - - (0.061)
1996 1.024 0.061 (0.029) 0.032 (0.061) - - - (0.061)
1995 0.930 0.060 0.095 0.155 (0.060) - (0.001)(5) - (0.061)
1994 1.035 0.055 (0.105) (0.050) (0.055) - - - (0.055)
MONEY MARKET
FUND
1998 1.000 0.054 - 0.054 (0.054) - - - (0.054)
1997 1.000 0.053 - 0.053 (0.053) - - - (0.053)
1996 1.000 0.052 - 0.052 (0.052) - - - (0.052)
1995 1.000 0.057 - 0.057 (0.057) - - - (0.057)
1994 1.000 0.039 - 0.039 (0.039) - - - (0.039)
<CAPTION>
NET
INCREASE
(DECREASE)
IN
YEAR ENDED NET ASSET
DECEMBER 31, VALUE
- ------------ ----------
<S> <C>
SELECT GROWTH
FUND(1)
1998 $0.617
1997 0.381
1996 0.061
1995 0.270
1994 (0.020)
SELECT STRATEGIC
GROWTH FUND(1)
1998(D) (0.027)
SELECT GROWTH
AND
INCOME FUND
1998 0.227
1997 0.147
1996 0.137
1995 0.241
1994 (0.042)
SELECT INCOME
FUND
1998 0.010
1997 0.027
1996 (0.029)
1995 0.094
1994 (0.105)
MONEY MARKET
FUND
1998 -
1997 -
1996 -
1995 -
1994 -
</TABLE>
* Annualized
** Not Annualized
(A) Including reimbursements and reductions.
(B) Excluding reductions. Certain Portfolios have entered into varying
arrangements with brokers who reduced a portion of the Portfolio's expenses.
(C) Excluding reimbursements and reductions.
(D) For period ended December 31, 1998
(1) The Select Growth Fund changed sub-advisers on July 1, 1996. The Select
Strategic Growth Fund commenced operations on February 20, 1998.
(2) Net investment income (loss) per share before reimbursement of fees by the
investment adviser or reductions were $0.001 in 1998, $0.006 in 1997 and
$0.005 in 1996 for Select Growth Fund; $(0.001) in 1998 for Select Strategic
Growth Fund; $0.019 in 1998, $0.019 in 1997 and $0.019 in 1996 for Select
Growth and Income Fund; and $0.060 in 1995 and $0.055 in 1994 for Select
Income Fund.
(3) Dividends from net investment income are less than $0.0005.
(4) Distributions in excess of net realized capital gains.
(5) Distributions in excess of net investment income.
See Notes to Financial Statements.
F-38
<PAGE>
Allmerica Investment Trust
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------
<TABLE>
<CAPTION>
NET ASSET NET ASSETS
VALUE END OF NET PORTFOLIO
END OF TOTAL YEAR INVESTMENT OPERATING EXPENSES MANAGEMENT FEE TURNOVER
YEAR RETURN (000'S) INCOME (LOSS) (A) (B) (C) GROSS NET RATE
- --------- ------ --------- ------------- ----- ----- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2.428 35.44% $ 815,390 0.08% 0.85% 0.87% 0.87% 0.82% 0.82% 86%
1.811 34.06% 470,356 0.42% 0.91% 0.93% 0.93% 0.85% 0.85% 75%
1.430 22.02% 228,551 0.38% 0.92% 0.93% 0.93% 0.85% 0.85% 159%
1.369 24.59% 143,125 0.02% 0.97% - 0.97% 0.85% 0.85% 51%
1.099 (1.49)% 88,263 0.37% 1.03% - 1.03% 0.85% 0.85% 55%
0.973 (2.47)%** 14,839 0.41%* 1.14%* 1.20%* 1.66%* 0.85%* 0.39%* 24%
1.779 16.43% 646,086 1.26% 0.70% 0.73% 0.73% 0.68% 0.68% 112%
1.552 22.51% 473,552 1.34% 0.77% 0.80% 0.80% 0.73% 0.73% 71%
1.405 21.26% 295,638 1.44% 0.80% 0.83% 0.83% 0.75% 0.75% 78%
1.268 30.32% 191,610 1.69% 0.85% - 0.85% 0.75% 0.75% 112%
1.027 0.73% 110,213 2.51% 0.91% - 0.91% 0.75% 0.75% 107%
1.032 6.83% 160,450 5.92% 0.64% 0.64% 0.64% 0.54% 0.54% 130%
1.022 9.17% 104,253 6.12% 0.72% 0.72% 0.72% 0.59% 0.59% 79%
0.995 3.32% 77,498 6.29% 0.74% 0.74% 0.74% 0.60% 0.60% 108%
1.024 16.96% 60,368 6.24% 0.79% - 0.80% 0.60% 0.59% 131%
0.930 (4.82)% 40,784 6.07% 0.83% - 0.85% 0.60% 0.58% 105%
1.000 5.51% 336,253 5.36% 0.32% 0.32% 0.32% 0.26% 0.26% N/A
1.000 5.47% 260,620 5.33% 0.35% 0.35% 0.35% 0.27% 0.27% N/A
1.000 5.36% 217,256 5.22% 0.34% 0.34% 0.34% 0.28% 0.28% N/A
1.000 5.84% 155,211 5.68% 0.36% - 0.36% 0.29% 0.29% N/A
1.000 3.93% 95,991 3.94% 0.45% - 0.45% 0.31% 0.31% N/A
</TABLE>
F-39
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Allmerica Investment Trust (the "Trust") is registered under the Investment
Company Act of 1940 (the "1940 Act"), 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 ("Allmerica Financial"), 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 fourteen
managed investment portfolios. The accompanying financial statements and
financial highlights are those of the Select Emerging Markets, Select Aggressive
Growth, Select Capital Appreciation, Select Value Opportunity, Select
International Equity, Select Growth, Select Strategic Growth, Select Growth and
Income, Select Income, and Money Market Funds (individually, a "Portfolio,"
collectively, the "Portfolios").
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies which are in conformity with generally accepted accounting
principles and consistently followed by the Trust in the preparation of its
financial statements.
SECURITY VALUATION: Securities 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 1940 Act. 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 Emerging Markets, Select Capital
Appreciation, Select International Equity, and Select Income Funds may enter
into forward foreign currency contracts whereby the Portfolios agree to exchange
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. Receivables and payables of forward foreign currency
contracts are presented on a net basis in the Statements 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 the settlement date.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Portfolios, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts used for hedging purposes limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Portfolios
could be exposed to risks if the counterparties to the contracts are unable to
meet the terms of their contracts.
F-40
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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, including
amortization of premium and accretion of discount on securities, is accrued
daily. Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities are recorded as soon as the Portfolios are
informed of 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 qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended. By so qualifying, each Portfolio will not be subject to Federal income
taxes to the extent it distributes all of its taxable income and net realized
gains for the tax year ending December 31. In addition, by distributing during
each calendar year substantially all of its net investment income, capital gains
and certain other amounts, if any, each Portfolio will not be subject to Federal
excise tax. Therefore, no Federal income tax provision is required. Withholding
taxes on foreign dividend income and gains have been paid or provided for in
accordance with the applicable country's tax rules and rates.
DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income are declared
and reinvested daily for the Money Market Fund, declared and distributed
quarterly for the Select Growth and Income, and Select Income Funds, and
annually for the Select Emerging Markets, Select Aggressive Growth, Select
Capital Appreciation, Select Value Opportunity, Select International Equity,
Select Growth, and Select Strategic 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.
Paid-in capital, undistributed net investment income and accumulated net
realized gain (loss) have been adjusted in the Statements of Assets and
Liabilities for permanent book-tax differences for all Portfolios for the year
ended December 31, 1998.
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, except the Money Market Fund, 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 Portfolio 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: For the Select Capital Appreciation Fund, costs incurred in
connection with its organization, including the fees and expenses of registering
and qualifying its shares for distribution under applicable securities
regulations were capitalized and are being amortized using the straight-line
method over a period of five years beginning with the commencement of the
Portfolio's operation.
SECURITIES LENDING: Each Portfolio, using Bankers Trust Company ("Bankers
Trust") as their agent, may loan securities to brokers who pay the Portfolio
negotiated lenders' fees. These fees are disclosed as "securities lending
income" on the Statements of Operations. Each applicable Portfolio receives
obligations of the U.S. government and its agencies, cash and /or
F-41
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
cash equivalents and/or letters of credit as collateral against the loaned
securities, in an amount at least equal to 102% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 102% of the market value of the loaned securities
during the period of the loan. Information regarding the value of the securities
loaned and the value of collateral at period end is included under the caption
"Other Information" at the end of each applicable Portfolio's schedule of
investments.
Each Portfolio pays Bankers Trust fees for its services from the securities
lending program. For the year ended December 31, 1998, the Select Aggressive
Growth Fund and Select International Equity Fund paid Bankers Trust $99,827 and
$35,923, respectively.
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: The Select Capital Appreciation Fund, Select Income Fund
and Money Market Fund may enter into contracts to purchase securities for a
fixed price at a specified future date beyond customary settlement time
("forward commitments"). If the Portfolios do so, they will maintain cash or
other liquid obligations having a value in an amount at all times sufficient to
meet the purchase price. Forward commitments involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date. Although
the Portfolios generally will enter into forward commitments with the intention
of acquiring the securities for their portfolio, they may dispose of a
commitment prior to settlement if their Sub-Adviser deems it appropriate to do
so.
REPURCHASE AGREEMENTS: Each Portfolio may engage in repurchase agreement
transactions with institutions that the Sub-Adviser has determined are
creditworthy pursuant to guidelines established by the Trust's Board of
Trustees. Each repurchase agreement transaction is recorded at cost. Each
Portfolio requires that the securities purchased in a repurchase agreement
transaction be transferred to the Trust's Custodian in a manner that is intended
to enable the Portfolio to obtain those securities in the event of a
counterparty default. The Investment Adviser monitors the value of the
securities, including accrued interest, daily to ensure that the value of the
collateral equals or exceeds amounts due under the repurchase agreement.
Repurchase agreement transactions involve certain risks in the event of default
or insolvency of the counterparty, including possible delays or restrictions
upon the Portfolio's ability to dispose of the underlying securities, and a
possible decline in the value of the underlying securities during the period
while the Portfolio seeks to assert its rights.
3. INVESTMENT ADVISORY, ADMINISTRATION
AND OTHER RELATED PARTY TRANSACTIONS
Allmerica Financial Investment Management Services, Inc. (the "Manager"), a
wholly-owned subsidiary of First Allmerica, serves as Investment Adviser and
Administrator to the Trust. The Manager succeeded Allmerica Investment
Management Company, Inc. as manager of the Trust on April 16, 1998. 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 schedules:
PERCENTAGE OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
FIRST NEXT NEXT NEXT OVER
PORTFOLIO $100,000,000 $150,000,000 $250,000,000 $250,000,000 $750,000,000
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Emerging Markets 1.35% 1.35% 1.35% 1.35% 1.35%
Select Aggressive Growth 1.00% 0.90% 0.85% 0.85% 0.85%
Select Capital Appreciation 1.00% 0.90% 0.85% 0.85% 0.85%
Select Value Opportunity 1.00% 0.85% 0.80% 0.75% 0.70%
Select International Equity 1.00% 0.90% 0.85% 0.85% 0.85%
Select Growth * 0.85% 0.85% 0.80% 0.75% 0.70%
Select Strategic Growth 0.85% 0.85% 0.85% 0.85% 0.85%
Select Growth and Income 0.75% 0.70% 0.65% 0.65% 0.65%
</TABLE>
F-42
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
FIRST NEXT OVER
PORTFOLIO $50,000,000 $200,000,000 $250,000,000
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market 0.35% 0.25% 0.20%
</TABLE>
<TABLE>
<CAPTION>
FIRST NEXT OVER
PORTFOLIO $50,000,000 $50,000,000 $100,000,000
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Select Income 0.60% 0.55% 0.45%
</TABLE>
* Prior to June 1, 1998, the Select Growth Fund paid a management fee,
calculated daily and payable monthly, at an annual rate of 0.85%.
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:
<TABLE>
<S> <C>
Select Emerging Markets Schroder Capital Management International Inc. ("SCMI")
Select Aggressive Growth Nicholas-Applegate Capital Management, L.P.
Select Capital Appreciation T. Rowe Price Associates, Inc.
Select Value Opportunity Cramer Rosenthal McGlynn, LLC
Select International Equity Bank of Ireland Asset Management (U.S.) Limited
Select Growth Putnam Investment Management, Inc.
Select Strategic Growth Cambiar Investors, Inc.
Select Growth and Income John A. Levin & Co., Inc.
Select Income Standish, Ayer & Wood, Inc.
Money Market Allmerica Asset Management, Inc.
</TABLE>
Effective January 2, 1998, Cramer Rosenthal McGlynn, LLC assumed sub-adviser
responsibilities from CRM Advisors, LLC for the Select Value Opportunity Fund.
Effective April 1, 1998, T. Rowe Price Associates, Inc. assumed sub-adviser
responsibilities from Janus Capital Corporation for the Select Capital
Appreciation Fund. The Sub-Adviser Agreement with T. Rowe Price Associates, Inc.
was approved by shareholders at a meeting held on June 3, 1998. T. Rowe Price
International Series, Inc., an investment company managed by an affiliate of T.
Rowe Price Associates, Inc., is currently used as an investment vehicle for
certain insurance products sponsored by Allmerica Financial and First Allmerica.
In addition, the same affiliate currently serves as investment adviser to a
corporate investment account of Allmerica Financial Corporation ("AFC").
Standish, Ayer & Wood, Inc. also currently serves as investment adviser to an
institutional account sponsored by First Allmerica.
The Manager has entered into an Administrative Services Agreement with First
Data Investor Services Group, Inc. ("Investor Services Group"), a wholly-owned
subsidiary of First Data Corporation, whereby Investor Services Group performs
certain administrative services for the Portfolios and is entitled to receive an
administrative fee and certain out-of-pocket expenses. The Manager is solely
responsible for the payment of the administration fee to Investor Services
Group. In a separate agreement, Investor Services Group receives separate fees
from the Portfolios for certain fund accounting services provided in its
capacity as pricing and bookkeeping agent.
The Trust pays no salaries or compensation to any of its officers. Trustees who
are not directors, officers, or employees of the Trust or any investment adviser
are reimbursed for their travel expenses in attending meetings of the Trustees,
and receive quarterly meeting and retainer fees for their services. Such amounts
are paid by the Trust.
F-43
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. REIMBURSEMENT OF EXPENSES AND WAIVER OF FEES
In the event normal operating expenses of each Portfolio, except for the Select
Emerging Markets Fund, excluding taxes, interest, broker commissions and
extraordinary expenses, but including the advisory fee, exceed certain voluntary
expense limitations by a percentage of average net assets (Select Aggressive
Growth Fund - 1.35%, Select Capital Appreciation Fund - 1.35%, Select Value
Opportunity Fund - 1.25%, Select International Equity Fund - 1.50%, Select
Growth Fund - 1.20%, Select Strategic Growth Fund - 1.20%, Select Growth and
Income Fund - 1.10%, Select Income Fund - 1.00% and Money Market Fund - 0.60%),
the Manager will voluntarily reimburse fees and any expenses in excess of the
expense limitations. Expense limitations may be removed or revised at any time
after a Portfolio's first fiscal year of operations without prior notice to
existing shareholders. For the year ended December 31, 1998, the operating
expenses of the Select Strategic Growth Fund exceeded the amount of its expense
limitations by $36,978.
The Manager voluntarily has agreed until further notice to waive its management
fee in the event that expenses of the Select Emerging Markets Fund exceed 2.00%
of the Fund's average daily net assets. The amount of such waiver will be
limited to the net amount of management fees earned by the Manager from the Fund
after subtracting the fees paid by the Manager to SCMI for sub-advisory
services. The Manager has also voluntarily agreed to limit its management fee
from the Select Value Oppportunity Fund to an annual rate of 0.90% of average
daily net assets. For the year ended December 31, 1998, management fees waived
with respect to the Select Emerging Markets and the Select Value Opportunity
Funds amounted to $58,518 and $32,482, respectively.
5. REDUCTION OF EXPENSES
Certain Portfolios have entered into agreements with brokers whereby the brokers
will rebate a portion of brokerage 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. At December 31, 1998, First Allmerica owned 20,035,734 shares of Select
Emerging Markets and 5,011,839 of Select Strategic Growth. During the year ended
December 31, 1998, First Allmerica redeemed 5,112,597 shares of Select Capital
Appreciation and 5,231,487 shares of Select International Equity.
7. FOREIGN SECURITIES AND EMERGING MARKETS
All Portfolios may purchase securities of foreign issuers. The Money Market Fund
may invest in only U.S. dollar denominated foreign securities. Investing in
foreign 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.
Investing in emerging markets may involve special risks and considerations not
typically associated with investing in the developed markets. These risks
include revaluation of currencies, high rates of inflation, repatriation
restrictions on income and capital, and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liquid,
subject to government ownership controls, subject to delayed settlements, and
their prices more volatile than those of comparable securities in the United
States.
F-44
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. FINANCIAL INSTRUMENTS
Investing in certain financial instruments including futures and options
transactions, and forward foreign currency contracts involves risk other than
that reflected in the Statements 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
contracts, and changes in the value of foreign currency relative to the U.S.
dollar. The Select Emerging Markets Fund, the Select International Equity Fund,
the Select Income Fund and the Select Capital Appreciation Fund may enter into
these forward contracts primarily to protect the Portfolio from adverse currency
movement.
F-45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders
of Allmerica Investment Trust
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments (except for Moody's and S&P 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 Emerging Markets Fund, Select Aggressive Growth Fund, Select Capital
Appreciation Fund, Select Value Opportunity Fund, Select International Equity
Fund, Select Growth Fund, Select Strategic Growth Fund, Select Growth and Income
Fund, Select Income Fund, and Money Market Fund, (ten of the funds constituting
the Allmerica Investment Trust, hereafter referred to as the "Trust") at
December 31, 1998, 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 investments at
December 31, 1998 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.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 1999
F-46
<PAGE>
Allmerica Investment Trust
REGULATORY DISCLOSURES
The performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
An investment in the Money Market Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Portfolio seeks to preserve the value of your investment at a stable net
asset value of $1.00 per share, it is possible to lose money by investing in the
Portfolio.
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Portfolios and are not authorized
for distribution to prospective investors in the flexible premium variable life
insurance or annuity products of Allmerica Financial Life Insurance and Annuity
Company or First Allmerica Financial Life Insurance Company unless accompanied
or preceded by effective prospectuses for the flexible premium variable life
insurance or annuity products of Allmerica Financial Life Insurance and Annuity
Company or First Allmerica Financial Life Insurance Company, Allmerica
Investment Trust, Variable Insurance Products Fund, Variable Insurance Products
Fund II, Delaware Group Premium Fund International Equity Series, and T. Rowe
Price International Stock Portfolio, which include important information related
to charges and expenses.
CLIENT NOTICES
- --------------------------------------------------------------------------------
YEAR 2000 (UNAUDITED): Some computer software cannot distinguish between dates
in the year 2000 and dates in the year 1900 because of the way that dates are
encoded and calculated. The services provided to the Trust by the Manager, Sub-
Advisers, Custodian and other external service providers depend on the proper
functioning of their computer software. Failure to correct or replace any non-
compliant software could adversely affect, among other things, the handling of
securities trades, the payment of interest and dividends, the pricing of the
Trust's securities and of the Trust's shares, and account services. The Trust
has requested information from its service providers with respect to their plans
to be Year 2000 compliant. The Trust has been advised by its service providers
that they either are Year 2000 compliant now or expect to be compliant prior to
December 31, 1999. However, there can be no guarantee that the Trust's
operations will not be adversely affected by non-compliant computer systems of
its service providers or other third parties which interact with such service
providers.
* * * * * *
This report includes financial statements for Allmerica Investment Trust. It
does not include financial statements for the separate accounts that correspond
to the insurance and/or annuity products included in this report.
If you would like to request additional copies of this report, please contact
either your Allmerica Select Financial representative or call 1-800-366-1492.
F-47
<PAGE>
ALLMERICA SELECT
Allmerica Select products are offered through Allmerica Financial Life Insurance
and Annuity Company. Our parent company, First Allmerica Financial, is the
nation's fifth oldest life insurance company. Founded in 1844, First Allmerica
Financial has been serving the financial needs of its policyholders for more
than 150 years.
Allmerica Select brings together the experience and financial strength of
Allmerica Financial Life with the talent of some of the world's leading money
managers. It's a powerful combination that can help achieve your financial
goals.
Allmerica Select Variable Products are issued by First Allmerica Financial Life
Insurance Company and Allmerica Financial Life Insurance and Annuity Company and
are distributed by Allmerica Investments, Inc. Allmerica Select is a division of
the issuing companies. To be preceded or accompanied by the current Allmerica
Select Product prospectus. Read it carefully before investing.
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ALLMERICA INVESTMENTS, INC.
440 Lincoln Street, Worcester, Massachusetts 01653
