<PAGE>
Allmerica Financial Services Annual Report
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December 31, 1998
Allmerica IRA
[LOGO APPEARS HERE] 1998
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Table of Contents 1
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General Information.............................. 2
A Letter from the President...................... 3
Performance Disclosure........................... 4
Domestic & International Equity Market Overview.. 6
Select Aggressive Growth Fund.................... 8
Select International Equity Fund................. 9
Growth Fund...................................... 10
Equity Index Fund................................ 11
Bond & Money Market Overview..................... 12
Investment Grade Income Fund..................... 14
Government Bond Fund............................. 15
Money Market Fund................................ 16
Financials.......................................F-1
See Client Notices on page F-42.
A particular Fund may not be available under the group
variable annuity which you have chosen. The Prospectus
of the group annuity product you have chosen will
indicate which Funds are available. Inclusion in this
annual report of a Fund which is not available under
your policy is not to be considered a solicitation.
<PAGE>
General Information 2
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Officers of First Allmerica
Financial Life Insurance Company
John F. O'Brien, President, CEO
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 016531
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 Condron1
Cynthia A. Hargadon1
Gordon Holmes1
John P. Kavanaugh
Bruce E. Langton1
Attiat F. Ott1
Richard M. Reilly
Ranne P. Warner /1/
/1/ Independent Trustees
Investment Sub-Advisers
Allmerica Asset Management, Inc.
440 Lincoln Street, Worcester, MA 01653
Equity Index Fund
Investment Grade Income Fund
Government Bond Fund
Money Market Fund
Bank of Ireland Asset Management (U.S.) Limited
U.S. Offices: 20 Horseneck Lane, Greenwich, CT 06830
Main Offices: 26 Fitzwilliam Place, Dublin 2, Ireland
Select International Equity Fund
Miller Anderson & Sherrerd, LLP
One Tower Bridge, West Conshohocken, PA 19428
Growth Fund
Nicholas-Applegate Capital Management, L.P.
600 West Broadway - Suite 2900, San Diego, CA 92101
Select Aggressive Growth Fund
<PAGE>
A Letter From The President 3
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Dear Client:
1998 marked an unprecedented fourth straight year of returns greater than 20%
as measured by the S&P 500/R/ Index.
The final year-end numbers though, mask the high drama investors experienced
during the course of the year. The S&P 500/R/ Index had one of its most
volatile years, rising over 20% through June, plummeting 19% during the next two
months, and rallying to record the strongest fourth quarter return since 1926.
Even while the S&P 500/R/ Index increased 28.6% for the year, it was driven by a
narrow group of stocks. Fifteen stocks represented half of the gain of the
entire index, while the average stock in the S&P 500/R/ increased only 13.9%.
Stocks of smaller companies fared even worse, declining 2.6% as measured by the
Russell 2000 Index.
Overseas markets struggled with their own issues. The European community
prepared to introduce a common currency on January 1, 1999. Russia devalued the
ruble causing a broad decline in many emerging markets, and Japan continued to
struggle with a stubborn recession.
The bond market offered few places to hide. Russia's devaluation spurred fixed
income investors to sell otherwise solid credits and fly to the safety of U.S.
Treasuries. It was only after the Federal Reserve lowered interest rates three
times that investors began buying again and both the U.S. stock and bond markets
rallied.
Some investors wonder why they needed "professional" advise in 1998 when they
could have bought an index fund or a few internet stocks. We feel very strongly
that times change, fads change and ultimately investment returns are driven by
company and industry fundamentals. Our investment managers employ disciplined
investment strategies that have been proven over time. They structure their
portfolios to capture today's opportunities while worrying about tomorrow's
potential decline.
Our manager of managers program is structured to provide formal oversight of
each manager's organization and investment performance. This structure is costly
but we believe it provides a higher level of service to our clients. Results
have been strong and we are proud to report that almost three-quarters of our
investment managers outperformed their peer groups during both 1998 and the
trailing three-year period as measured by Lipper, Inc.
In addition, we continue to look for ways to improve our investment program. In
February, we introduced two new funds to broaden your investment options: Select
Emerging Markets Fund and Select Strategic Growth Fund. In February, the board
voted to hire T. Rowe Price Associates as the new sub-adviser for the Select
Capital Appreciation Fund. For more information on these and all of the funds,
we urge you to read the market overviews and managers' commentaries found later
in this report.
Once again, we urge you to work closely with your financial advisor to build a
diversified portfolio, not only to succeed in good times, but to protect the
value of your assets in bad times.
On behalf of the Board of Trustees,
/s/ John F. O'Brien
John F. O'Brien
President, CEO
First Allmerica Financial Life Insurance Company
<PAGE>
Performance Disclosure 4
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Allmerica IRA
Average Annual Total Returns as of 12/31/98
Total returns for the fund options shown in this report do not reflect fees
charged on the separate account level. Refer to the disclosure of the specific
product for such fee information.
For more information about the performance of
the underlying funds, see the Performance Reviews beginning on page 8.
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 than
their original cost.
<PAGE>
Overview
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<PAGE>
Domestic & International Equity Market Overview 6
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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 [GRAPHIC OF Encouraged by the [MAP OF EUROPE
Asian crisis, stocks GRAPH] upcoming monetary GRAPHIC]
benefit from low union, Europe leads
interest rates and global performance.
a steady economy.
1998
<TABLE>
<CAPTION>
JAN FEB MAR APR MAY JUN
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<S> <C> <C> <C> <C> <C>
[COMPUTER Technology, led by Massive economic
GRAPHIC] Internet-related stocks, problems in Russia,
is the best-performing send shock waves
industry sector for through the world's
the year. financial markets.
</TABLE>
<PAGE>
Domestic & International Equity Market Overview 7
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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.
[SKYLINE/BRIDGE As a result of [OIL DRILL- Sharply declining oil
GRAPHIC APPEARS worldwide economic ING MACHIN- prices cause the
HERE] unrest, investors ERY GRAPHIC] emerging markets of
favor the safety Latin America to suffer.
of large-company
stocks, which drive
performance for
the year.
<TABLE>
<CAPTION>
JUL AUG SEP OCT NOV DEC
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Uncertainty exists
throughout the world's
stock markets as
[COURTHOUSE The Federal Reserve investors predict a
GRAPHIC] cuts interest rates slower year for
three times prompting corporate earnings --
investors to favor a and more normal
small group of results from the
large-company stocks. stock market.
</TABLE>
<PAGE>
Select Aggressive Growth Fund 8
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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.
- ----------------------------
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% [GRAPH APPEARS HERE]
Health Services 7%
Finance 7%
Chemicals and Drugs 6%
Retail 6%
Consumer Services 4%
Other 16%
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 00.38% 14.13% 16.27%
Lipper Capital Appreciation Funds Average 19.99% 14.97% 15.87%
Growth of a $10,000 Investment Since 1992
[GRAPH APPEARS HERE]
Select Aggressive
Growth Fund Russell 2500 Index
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.
<PAGE>
Select International Equity Fund 9
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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, Tech-nological
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% 08.41%
Lipper International Funds Average 13.05% 7.69% 07.57%
Growth of a $10,000 Investment Since 1994
[GRAPH APPEARS HERE]
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% [GRAPH APPEARS HERE]
Germany 9%
France 8%
Australia 4%
Italy 3%
Cash Equivalents 4%
Other 6%
<PAGE>
Growth Fund 10
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With a total return of 19.32% for the one-year period ended December 31, 1998,
the Growth Fund trailed the 28.58% return of the S&P 500/R/ Index for the same
period.
During the past year, the stock market confounded many experts by acting
contrary to long-held investment principles. It favored mega-sized companies,
overvalued growth stocks, and high-priced consumer staple stocks over
defensively priced cyclicals, and issues with high, instead of low, P/E ratios.
In addition to these factors, sector selection accounted for some missed results
as the Fund was underweighted in retail, one of the strongest performing
sectors, yet overweighted in basic resources and consumer durables, two poorly
performing sectors.
To better position the Fund, the managers gradually shifted the portfolio
balance from more value-oriented stocks to more growth-oriented. This shift was
achieved by steadily reducing positions in economically sensitive sector stocks
and reallocating resources into other sectors.
Financials, utilities and health care were increased. Technology holdings were
also increased to a large sector weighting in the portfolio. As a result, the
portfolio outperformed the S&P 500/R/ Index during the fourth quarter -- the
strongest fourth calendar quarter since 1926.
Looking ahead, the Fund's managers see mixed signals for domestic equities but
believe their broadly diversified portfolio is well-positioned for investors.
Investment Sub-Adviser
Miller Anderson & Sherrerd, LLP
About the Fund
Seeks long-term growth of capital by investing in stocks that are believed to
represent significant underlying value.
Portfolio Composition
As of December 31, 1998, the sector
allocation of net assets was:
Durable Goods 18%
Finance 18%
Technology 15%
Chemicals and Drugs 10% [GRAPH APPEARS HERE]
Utilities 8%
Consumer Products 7%
Consumer Staples 5%
Retail 5%
Broadcasting 4%
Other 10%
Average Annual Total Returns
Years ended December 31, 1998 1 Year 5 Years 10 Years
Growth Fund 19.32% 19.01% 16.98%
S&P 500/R/ Index 28.58% 24.06% 19.20%
Lipper Growth and Income Funds Average 15.61% 18.35% 15.53%
Growth of a $10,000 Investment Since 1988
[GRAPH APPEARS HERE]
Growth Fund S&P 500 Index
12/88 $10,000 $10,000
12/98 $47,973 $57,864
The 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 and Income Funds Average is a non-weighted average of 879 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>
Equity Index Fund 11
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For the one-year period ended December 31, 1998, the Equity Index Fund reported
a total return of 28.33% essentially matching the 28.58% return of the S&P
500/R/ Index for the same period.
During 1998, the S&P 500/R/ Index enjoyed a stellar year of performance. More
significantly, it posted a greater than 20% return -- for the fourth year in a
row. This was in spite of a volatile third quarter marked by a global financial
crisis, particularly in Russia, and the Long Term Capital debacle which erased
many of the year-to-date gains at the time, temporarily.
Fueled by several credit-easing moves taken by the Federal Reserve later in the
year, the market rebounded. Led by companies associated with the Internet,
particularly E-commerce companies, the market was further catapulted by the
prospect of more shoppers migrating to virtual stores.
In addition, specific company performance added to overall market gains. During
the year, Microsoft and General Electric proved to be the largest contributors
while traditional cyclical stocks such as Dupont and Caterpillar finished 1998
among the market's laggards.
Other companies detracting from results were Schlumberger, an oil field service
company which suffered from declining oil prices, and Citigroup, the result of
this year's merger between Travelers and Citibank.
In keeping with the Fund's investment objective, the managers will continue to
seek to mirror the returns of the S&P 500/R/ Index and adjust the portfolio's
holdings accordingly.
Average Annual Total Returns
Years ended December 31, 1998 1 Year 5 Years Life of Fund
Equity Index Fund 28.33% 23.39% 20.69%
S&P 500/R/ Index 28.58% 24.06% 21.37%
Lipper S&P 500/R/ Index Funds Average 28.05% 23.56% 20.93%
Growth of a $10,000 Investment Since 1990
[GRAPH APPEARS HERE]
Equity Index Fund S&P 500 Index
9/90 $10,000 $10,000
12/98 $47,253 $49,430
The Equity Index 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
S&P 500/R/ Funds Average is a non-weighted average of 107 funds within the S&P
500/R/ Index investment objective. Performance numbers are net of all fund
operating expenses, but do not include insurance charges. If performance
information included the effect of these additional charges, it would have been
lower.
Investment Sub-Adviser
Allmerica Asset Management, Inc.
About the Fund
Seeks to replicate the returns of the S&P 500/R/ Index.
Portfolio Composition
As of December 31, 1998, the sector allocation of net assets was:
Durable Goods 16%
Finance 16%
Chemicals and Drugs 14%
Technology 13%
Consumer Products 8% [GRAPH APPEARS HERE]
Utilities 8%
Energy 6%
Retail 6%
Consumer Staples 6%
Other 7%
<PAGE>
Bond & Money Market Overview 12
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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
1998
JAN FEB MAR APR MAY JUN
Given low [LOGO Stable-to-low
interest rates, APPEARS interest rates
investors seek HERE] cause record
more attractive refinancing --
yields by and mortgage-
investing in backed
all types securities
of bonds. to suffer.
[LOGO Uncertain about [LOGO Worldwide
APPEARS the effects of APPEARS economic unrest
HERE] the Asian crisis, HERE] causes investors
the Federal to flee foreign
Reserve adopts a investments for
"wait and see" super-safe U.S.
approach to Treasuries,
changing which deliver
interest rates. their best
performance
in years.
<PAGE>
Bond & Money Market Overview 13
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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.
JUL AUG SEP OCT NOV DEC
Liquidity The Federal
concerns Reserve cuts
stunt the [LOGO interest rates [LOGO
performance APPEARS three times, APPEARS
of both HERE] sparking a HERE]
corporate year-end
and high- bond rally.
yield bonds.
A currency [LOGO Uncertainty --
crisis in APPEARS and volatility --
Russian spurs HERE] remain on the
a flight to horizon for
quality by the U.S.
investors. bond market.
<PAGE>
Investment Grade Income Fund 14
- --------------------------------------------------------------------------------
For the one-year period ended December 31,1998, the Investment Grade Income Fund
posted a total return of 7.97% compared to the 8.67% return of the Lehman
Brothers Aggregate Bond Index for the same period.
1998 proved to be a disappointing year for both corporate bond and mortgage-
backed securities (MBS) performance. Much of the deterioration occurred between
late-August and mid-October as a global financial crisis developed and investors
fled to safety and liquidity in the form of super-safe U.S. Treasuries.
Unfortunately, this Fund had a significant portion of its assets allocated to
the corporate sector -- and to lower-quality credits.
However, two factors mitigated some of the underperformance. The Fund maintained
a heavy weighting in the Media and Telecommunications sector, a top-performing
sector of the Investment Grade corporate bond market for the year. And it also
held such blue-chip names as IBM and Worldcom, which were two investor favorites
throughout the year.
As with the corporate bond market, liquidity concerns caused mortgage-backed
securities to suffer during the second half of the year. The Fund's managers,
however, maintained their position in these securities as Treasury yields
started to rise and the threat of massive prepayments subsided.
Moving into the new year, the Fund's managers expect to retain their current
positions in corporate bonds and mortgage-backed securities and have noted that
trading and pricing in the bond market has returned to more normal levels.
Investment Sub-Adviser
Allmerica Asset Management, Inc.
About the Fund
The Fund's objective is to generate a high level of total return by investing in
highly diversified, investment grade, fixed-income securities.
Portfolio Composition
As of December 31, 1998, the sector
allocation of net assets was:
U.S. Government and
Agency Obligations 48%
Corporate Notes
and Bonds 35% [GRAPH APPEARS HERE]
Asset-Backed and
Mortgage-Backed Securities 13%
Commercial Paper 4%
Average Annual Total Returns
Years ended December 31, 1998 1 Year 5 Years 10 Years
Investment Grade Income Fund 7.97% 6.95% 9.17%
Lehman Brothers Aggregate Bond Index 8.67% 7.27% 9.26%
Lipper Intermediate Investment
Grade Funds Average 7.25% 6.35% 8.28%
Growth of a $10,000 Investment Since 1988
[GRAPH APPEARS HERE]
Investment Grade Lehman Brothers
Income Fund Aggregate Bond Index
12/88 $10,000 $10,000
12/98 $24,048 $24,240
The Investment Grade 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.
<PAGE>
Government Bond Fund 15
- --------------------------------------------------------------------------------
For the one-year period ended December 31, 1998, the Government Bond Fund turned
in a 7.67% total return, less than the 8.49% return of the Lehman Intermediate
Government Bond Index for the same period.
During 1998, turmoil in worldwide markets caused investors to retreat from
riskier investments to super-safe U.S. Treasury bonds. As further economic
crises surfaced late in the year, particularly in Latin America and Russia, the
Federal Reserve cut interest rates to ease the possibility of a domestic credit
crunch. Investors then sold off their Treasuries in favor of the higher yields
they could gain from riskier investment alternatives.
In response to these changing market conditions, the Fund's managers adjusted
the Fund's holdings throughout the year. First, they substantially trimmed the
portfolio's exposure to mortgage-backed securities to protect against prepayment
risk. And to take advantage of lower prices, the Fund's managers doubled the
Fund's exposure to agency securities as spreads became increasingly more
attractive. They also reduced holdings in asset backed securities from 12% to
8%, which they plan to add to if spreads grow wider.
Looking ahead, the Fund's managers believe interest rates will remain at or near
current levels. Given this outlook, they feel the Fund is well-positioned for
favorable results.
Average Annual Total Returns
Years ended December 31, 1998 1 Year 5 Years Life of Fund
Government Bond Fund 7.67% 5.99% 7.00%
Lehman Intermediate Government Bond Index 8.49% 6.45% 7.38%
Lipper Short-Intermediate
U.S. Government Funds Average 6.58% 5.34% 6.48%
Growth of a $10,000 Investment Since 1991
[GRAPH APPEARS HERE]
Lehman Intermediate
Government Bond Fund Government Bond Index
8/91 $10,000 $10,000
12/98 $16,441 $16,856
The Government Bond 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 Intermediate Government Bond Index is an unmanaged index of U.S.
Government and Agency bonds with remaining maturities of one to ten years. The
Lipper Short-Intermediate U.S. Government Funds Average is the non-weighted
average performance of 129 funds investing in short- to intermediate government
securities. Performance numbers are net of all fund operating expenses, but do
not include insurance charges. If performance information included the effect of
these additional charges, it would have been lower.
Investment Sub-Adviser
Allmerica Asset Management, Inc.
About the Fund
Generates high income while seeking to preserve capital and maintain liquidity
by investing primarily in debt instruments issued or guaranteed by the U.S.
Government or its agencies.
Portfolio Composition
As of December 31, 1998, the sector
allocation of net assets was:
U.S. Government and
Agency Obligations 87%
Asset-Backed and
Mortgage-Backed Securities 8% [GRAPH APPEARS HERE]
Cash Equivalents 2%
Other 3%
<PAGE>
Money Market Fund 16
- --------------------------------------------------------------------------------
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 [GRAPH APPEARS HERE]
Agency Obligations 4%
Cash Equivalents 7%
Other 8%
Average Annual Total Returns
Years ended December 31, 1998 1 Year 5 Years 10 Years
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%
Average Yields as of December 31, 1998
7-day 5.11% 30-day 5.11%
Growth of a $10,000 Investment Since 1988
[GRAPH APPEARS HERE]
Money Market Fund IBC/Donoghue First Tier
Money Market Index
12/88 $10,000 $10,000
12/98 $17,275 $16,625
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>
SELECT AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------
<C> <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
Durable Goods (continued)
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-1
<PAGE>
SELECT AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------
<C> <S> <C>
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
============
</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 $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-2
<PAGE>
SELECT INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------
<C> <S> <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-3
<PAGE>
SELECT INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------
<C> <S> <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)
</TABLE>
<TABLE>
<S> <C>
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.
Industry Concentration of Common Stocks
as Percentage of Net Assets:
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%
======
See Notes to Financial Statements.
--------------------------------------------------------
F-4
<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>
Unrealized
Currency Contracts To Settlement Contracts At In Exchange Appreciation
Value Deliver Dates Value for U.S. $ (Depreciation)
------------ ---------- ------------- --------------- --------------- --------------------
<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 carryforward 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-5
<PAGE>
GROWTH FUND
PORTFOLIO OF INVESTMENTS . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS - 98.97%
<C> <S> <C>
Durable Goods - 18.48%
5,400 ADC Telecommunications, Inc.* $ 187,650
152,800 Ameritech Corp. 9,683,700
12,600 Arrow Electronics, Inc.* 336,262
2,600 At Home Corp., Class A* 193,050
4,000 AvNet, Inc. 239,500
1,500 Broadcom Corp., Class A* 181,125
512,200 Case Corp. 11,172,362
228,700 Cummins Engine Co., Inc. 8,118,850
146,800 Dana Corp. 6,000,450
1,800 Danaher Corp. 97,763
3,300 Eaton Corp. 233,269
1,900 Flextronics International, Ltd.* 162,687
242,100 Ford Motor Co. 14,208,244
178,100 General Instrument Corp.* 6,044,269
201,200 General Motors Corp. 14,398,375
8,736 Globalstar Telecommunication* 175,812
106,100 Goodyear Tire & Rubber Co. 5,351,419
157,200 Hewlett-Packard Co. 10,738,725
114,000 Intel Corp. 13,516,125
6,600 Kennametal, Inc. 140,250
350,000 LucasVarity Plc, ADR 11,725,000
4,600 Mapics, Inc.* 75,900
4,500 NEXTLINK Communications, Class A* 127,688
122,000 Northern Telecom, Ltd. 6,115,250
3,200 Orange Plc, ADR* 184,800
239,450 Parker-Hannifin Corp. 7,841,987
2,700 Qualcomm, Inc.* 139,894
4,461 Qwest Communications International, Inc.* 223,050
3,900 RSL Communications Ltd., Clas A* 115,050
222,400 SBC Communications 11,926,200
114,500 Sprint Corp. 9,632,313
62,850 Sprint PCS Group* 1,453,406
7,500 Standard Register Co. 232,031
7,100 Tecumseh Products Co., Class A 331,038
14,150 Tektronix, Inc. 425,384
100,900 Tellabs, Inc.* 6,917,956
7,500 United Video Satellite Group I* 177,188
6,100 Western Wireless Corp., CIass A* 134,200
-------------
158,958,222
-------------
Finance - 17.61%
474,500 ACE, Ltd. 16,340,594
118,200 Aetna, Inc. 9,293,475
3,700 AFLAC, Inc. 162,800
197,380 Allstate Corp. 7,623,802
157,900 AMBAC, Inc. 9,503,606
8,800 American General Corp. 686,400
238,200 Bank One Corp. 12,163,088
3,800 BankAmerica Corp. 228,475
191,400 Chase Manhattan Corp. 13,027,162
3,100 Chubb Corp. 201,113
11,900 CIGNA Corp. 920,019
3,300 CIT Group, Inc., Class A 104,981
281,350 Citigroup, Inc. 13,926,825
428,181 Conseco, Inc. 13,086,282
77,800 Countrywide Credit Industries, Inc. 3,904,587
194,200 Everest Reinsurance Holdings, Inc. 7,355,325
90,300 Exel, Ltd., Class A 6,772,500
10,720 First Union Corp. 651,910
75,500 Hartford Financial Services Group, Inc. 4,143,063
378,000 Household International, Inc. 14,978,250
15,950 Old Republic International Corp. 358,875
8,700 PNC Bank Corp. 470,887
1,700 Providian Financial Corp. 127,500
9,800 Reliastar Financial Corp. 452,025
8,000 Republic New York Corp. 364,500
5,300 TransAtlantic Holdings, Inc. 400,481
437,100 Travelers Property and
Casualty Group, Class A 13,550,100
14,600 Washington Mutual, Inc. 557,538
2,300 Zions Bancorporation 143,462
-------------
151,499,625
-------------
Technology - 14.89%
109,300 Airtouch Communications, Inc.* 7,883,263
3,600 Apple Computer, Inc.* 147,375
138,300 BMC Software, Inc.* 6,162,994
135,300 3Com Corp.* 6,063,131
177,875 Cisco Systems, Inc.* 16,509,023
282,200 Compaq Computer Corp. 11,834,762
12,400 Harnischfeger Industries, Inc. 126,325
1,000 Inktomi Corp.* 129,375
49,200 International Business Machines Corp. 9,089,700
1,800 Linear Technology Corp. 161,213
84,500 Lucent Technologies, Inc. 9,295,000
9,400 Maxtor Corp.* 131,600
4,900 Micron Electronics, Inc.* 84,831
85,700 Micron Technology, Inc.* 4,333,206
298,300 Microsoft Corp.* 41,370,481
166,800 Motorola, Inc. 10,185,225
3,200 Netscape Communication* 194,400
10,800 Novell, Inc.* 195,750
1,700 Pixar, Inc.* 59,500
8,300 Rational Software* 219,950
115,300 Seagate Technology, Inc.* 3,487,825
2,000 Uniphase Corp.* 138,750
2,400 VERITAS Software Corp.* 143,850
3,500 Vitesse Semiconductor Corp.* 159,687
-------------
128,107,216
-------------
Chemicals and Drugs - 10.08%
142,800 Abbott Laboratories 6,997,200
190,600 Air Products & Chemicals, Inc. 7,624,000
209,200 Baxter International, Inc. 13,454,175
6,000 Beckman Coulter, Inc. 325,500
4,900 Bergen Brunswig Corp. 170,888
59,180 Bristol-Myers Squibb Co. 7,919,024
142,100 Engelhard Corp. 2,770,950
113,200 FMC Corp.* 6,339,200
389,400 Grace (W.R.) & Co.* 6,108,712
8,100 Lubrizol Corp. 208,069
14,600 Mallinckrodt, Inc. 449,863
60,400 Merck & Co, Inc. 8,920,325
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------
F-6
<PAGE>
GROWTH FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Chemicals and Drugs (continued)
121,800 Morton International, Inc. $ 2,984,100
107,900 Mylan Laboratories 3,398,850
2,200 Octel Corp.* 30,525
62,400 Pfizer, Inc. 7,827,300
233,500 Rohm & Haas Co. 7,034,187
185,000 Solutia, Inc. 4,139,375
-------------
86,702,243
-------------
Utilities - 7.83%
294,060 Allied Waste Industries, Inc.* 6,947,167
10,200 Bell Atlantic Corp. 579,488
102,200 Carolina Power & Light Co. 4,809,788
4,459 Duke Energy Corp. 285,664
56,400 Energy East Corp. 3,186,600
9,600 Entergy Corp. 298,800
4,300 Global Crossing, Ltd.* 194,037
13,000 GPU, Inc. 574,438
446,086 MCI WorldCom, Inc.* 32,006,677
192,400 Southern Co. 5,591,625
276,145 Waste Management, Inc. 12,875,261
-------------
67,349,545
-------------
Consumer Products - 6.55%
63,000 American Online, Inc.* 9,119,250
168,400 Anheuser- Busch Cos., Inc. 11,051,250
104,200 Applied Materials, Inc.* 4,448,038
2,700 Beringer Wine Estates, Class B* 120,656
91,100 Best Buy Co., Inc.* 5,591,263
4,000 Cablevision Systems Corp., Class A* 200,750
300 Cintas Corp. 21,131
140,800 Clear Channel Communications, Inc.* 7,673,600
92,800 Dial Corp. 2,679,600
13,700 Dillards, Inc., Class A 388,737
5,100 Imax Corp.* 161,288
12,200 IMC Global, Inc. 260,775
3,700 Jones Intercable, Inc., Class A* 131,812
1,800 Lauder (Estee) Co., Inc. 153,900
76,200 Time Warner, Inc. 4,729,163
6,400 TRW, Inc. 359,600
225,600 York International Corp. 9,207,300
-------------
56,298,113
-------------
Consumer Staples - 4.81%
90,400 General Mills, Inc. 7,028,600
13,900 IBP, Inc. 404,837
162,900 PepsiCo, Inc. 6,668,719
299,600 Philip Morris Cos., Inc. 16,028,600
352,300 RJR Nabisco Holdings Corp. 10,458,906
5,700 Springs Industries, Inc. 236,194
12,300 VF Corp. 576,563
-------------
41,402,419
-------------
Retail - 4.69%
2,300 AnnTaylor Stores Corp.* 90,706
4,800 Borders Group, Inc.* 119,700
13,300 Claiborne (Liz), Inc. 419,781
182,600 CVS Corp. 10,043,000
162,300 Dayton-Hudson Corp. 8,804,775
5,600 Micro Warehouse, Inc.* 189,350
129,700 Rite Aid Corp. 6,428,256
14,300 Sears Roebuck & Co. 607,750
4,500 Ticketmaster Online City, Class B* 256,500
19,000 Toys 'R' Us, Inc.* 320,625
25,900 Venator Group, Inc.* 166,731
158,300 Wal-Mart Stores, Inc. 12,891,556
-------------
40,338,730
-------------
Broadcasting - 4.10%
4,900 American Tower Corp., Class A* 144,856
7,100 EchoStar Communications Corp., Class A* 343,462
3,300 Heftel Broadcasting Corp., Class A* 162,525
258,300 Infinity Broadcasting Corp., Class A* 7,070,963
273,262 Tele-Communication, Inc., Class A* 15,114,804
154,748 Tele-Communications, Inc., TCI Group* 3,646,250
190,827 Tele-Com Liberty Media Group, Series A* 8,789,969
-------------
35,272,829
-------------
Health Services - 3.00%
41,100 Columbia /HCA Healthcare Corp. 1,017,225
21,550 Foundation Health Systems* 257,253
278,595 Health Management Associates, Inc.* 6,024,617
297,600 HEALTHSOUTH Corp.* 4,594,200
201,500 Lincare Holding, Inc.* 8,173,344
2,500 MedQuist, Inc.* 98,750
5,000 Orthodontic Centers of America* 97,187
182,200 Tenet Healthcare Corp.* 4,782,750
16,800 United Healthcare Corp. 723,450
-------------
25,768,776
-------------
Energy - 2.55%
2,300 Anadarko Petroleum Co. 71,013
272,700 Coastal Corp. 9,527,456
62,950 Columbia Energy Group 3,635,362
3,900 Cooper Cameron Corp.* 95,550
12,700 Nabors Industries, Inc.* 172,244
9,900 Phillips Petroleum Co. 421,988
158,300 Royal Dutch Petroleum, ADR 7,578,612
4,200 Smith International, Inc.* 105,788
12,300 Ultramar Diamond Shamrock Corp. 298,275
-------------
21,906,288
-------------
Building and Construction - 1.98%
168,800 Aeroquip-Vickers, Inc. 5,053,450
2,200 Dycom Industries, Inc.* 125,675
335,900 Owens Corning 11,903,456
-------------
17,082,581
-------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-7
<PAGE>
GROWTH FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Consumer Services - 0.91%
198,200 Service Corp. International $ 7,543,987
8,700 United Rentals, Inc.* 288,188
-------------
7,832,175
-------------
Entertainment - 0.79%
7,600 Cinar Corp.* 192,850
253,800 Fox Entertainment Group, Class A* 6,392,588
4,500 Premier Parks, Inc.* 136,125
1,600 SFX Entertainment, Inc., Class A* 87,800
-------------
6,809,363
-------------
Aerospace-Airlines - 0.48%
59,800 AMR Corp.* 3,550,625
11,700 Delta Air Lines, Inc. 608,400
-------------
4,159,025
-------------
Business Services - 0.12%
3,350 Concord EFS, Inc.* 141,956
8,700 First Data Corp. 275,681
5,875 FiServ, Inc.* 302,195
25,800 Olsten Corp. 190,275
7,300 Stewart Enterprises, Inc., Class A 162,425
-------------
1,072,532
-------------
Advertising - 0.03%
6,812 Outdoor Systems, Inc. 204,360
3,000 Young & Rubicam, Inc.* 97,125
-------------
301,485
-------------
Food Service - 0.03%
3,700 Earthgrains Co. 114,469
2,600 Suiza Foods Corp.* 132,438
-------------
246,907
-------------
Metals and Mining - 0.03%
14,200 Inland Steel Industries, Inc. 239,625
-------------
Real Estate - 0.01%
4,599 Prologis Trust, REIT 95,429
-------------
Total Common Stocks 851,443,128
-------------
(Cost $678,641,686)
<CAPTION>
PREFERRED STOCKS - 1.45%
<C> <S> <C>
297,900 Loral Space & Communication* 5,306,344
289,100 News Corp., Ltd., Sponsored ADR 7,137,156
1 Sealed Air Corp.* 51
-------------
Total Preferred Stocks 12,443,551
-------------
(Cost $12,669,401)
<CAPTION>
ASSET-BACKED SECURITY - 0.09%
<C> <S> <C>
802,438 WFS Financial Owner Trust, Series 1998-B,
Class A1 5.66%, 07/20/99 803,393
-------------
Total Asset-Backed Security 803,393
-------------
(Cost $802,438)
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS - 0.01%
<C> <S> <C>
U.S. Treasury Notes - 0.01%
60,000 5.88%, 08/31/99 60,469
75,000 5.75%, 08/15/03 78,281
-------------
Total U.S. Government Obligations 138,750
-------------
(Cost $135,102)
<CAPTION>
Shares
INVESTMENT COMPANY - 0.01%
<C> <S> <C>
86,545 SSgA Prime Money Market Fund 86,545
-------------
Total Investment Company 86,545
-------------
(Cost $86,545)
</TABLE>
<TABLE>
<S> <C>
Total Investments - 100.53% 864,915,367
-------------
(Cost $692,335,172)
Net Other Assets and Liabilities - (0.53)% (4,582,221)
-------------
Net Assets - 100.00% $ 860,333,146
=============
</TABLE>
- ------------------
* Non income producing security.
ADR American Depositary Receipt. Shares of a foreign based corporation held
in U.S. banks entitling the shareholder to all dividends and capital
gains.
REIT Real Estate Investment Trust
See Notes to Financial Statements.
--------------------------------------------------------
F-8
<PAGE>
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 $694,206,096. Net unrealized appreciation (depreciation) aggregated
$170,709,271, of which $212,603,255 related to appreciated investment securities
and ($41,893,984) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended
December 31, 1998 were $5,888,705. (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 $853,687,227
and $803,393,813 of non-governmental issuers, respectively, and $8,580,750 and
$21,628,450 of U.S. Government and Agency issuers, respectively.
See Notes to Financial Statements.
- --------------------------------------------------------
F-9
<PAGE>
EQUITY INDEX FUND
PORTFOLIO OF INVESTMENTS . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 98.92%
Durable Goods - 16.24%
3,200 Adobe Systems, Inc. $ 149,600
27,000 AlliedSignal, Inc. 1,196,438
13,200 Alltel Corp. 789,525
52,900 Ameritech Corp. 3,352,537
10,400 AMP, Inc. 541,450
2,000 Armstrong World Industries, Inc. 120,625
5,700 Avery-Dennison Corp. 256,856
15,180 Baker Hughes, Inc. 268,496
48,438 Boeing Co. 1,580,290
3,500 Case Corp. 76,344
17,600 Caterpillar, Inc. 809,600
34,300 CBS Corp. 1,123,325
5,500 Cooper Industries, Inc. 262,281
3,600 Cooper Tire & Rubber Co. 73,575
3,150 Crane Co. 95,091
1,900 Cummins Engine Co., Inc. 67,450
7,909 Dana Corp. 323,280
6,400 Dahaner Corp. 347,600
11,600 Deere & Co. 384,250
60,800 Dell Computer Corp.* 4,449,800
9,350 Dominion Resources, Inc. 437,113
3,400 Eaton Corp. 240,337
2,100 EG & G, Inc. 58,406
21,200 Emerson Electric Co. 1,326,325
1,600 Fleetwood Enterprises, Inc. 55,600
58,200 Ford Motor Co. 3,415,613
8,100 Frontier Corp. 275,400
7,430 Gateway 2000* 380,323
156,200 General Electric Co. 15,942,162
7,100 General Instrument Corp.* 240,956
31,400 General Motors Corp. 2,247,063
8,450 Genuine Parts Co. 282,547
3,400 Goodrich (B.F.) Co. 121,975
7,600 Goodyear Tire & Rubber Co. 383,325
4,600 Grainger (W.W.), Inc. 191,475
3,800 Harris Corp. 139,175
2,400 Helmerich & Payne, Inc. 46,500
50,000 Hewlett-Packard Co. 3,415,625
12,000 Illinois Tool Works, Inc. 757,500
8,000 Ingersoll-Rand Co. 375,500
80,600 Intel Corp. 9,556,137
4,000 Johnson Controls, Inc. 236,000
4,200 Kla-Tencor Corp.* 182,175
9,441 Lockheed Martin Corp. 800,125
2,800 McDermott International, Inc. 69,125
85,177 MCI Worldcom, Inc.* 6,111,450
1,700 Milacron, Inc. 32,725
2,100 Millipore Corp. 59,719
4,100 Moore Corp., Ltd. 45,100
28,800 Motorola, Inc. 1,758,600
1,900 National Service Industries, Inc. 72,200
31,340 Northern Telecom, Ltd. 1,570,918
3,300 Northrop Grumman Corp. 241,312
3,780 PACCAR, Inc. 155,453
5,800 Pall Corp. 146,812
5,175 Parker-Hannifin Corp. 169,481
3,000 Pep Boys-Manny, Moe & Jack 47,063
2,500 Perkin-Elmer Corp. 243,906
11,500 Pioneer Hi-Bred International, Inc. 310,500
4,000 Raychem Corp. 129,250
16,300 Raytheon Co., Class B 867,975
9,100 Rockwell International Corp. 441,919
3,900 Rowan Cos., Inc.* 39,000
3,500 Ryder System, Inc. 91,000
3,400 Scientific-Atlanta, Inc. 77,562
20,600 Sprint Corp. 1,732,975
20,000 Sprint PCS Group * 462,500
4,800 Tandy Corp. 197,700
2,150 Tektronix, Inc. 64,634
9,400 Tellabs, Inc.* 644,488
18,800 Texas Instruments, Inc. 1,608,575
7,900 Textron, Inc. 599,906
7,800 Thermo Electron Corp.* 132,112
2,800 Thomas & Betts Corp. 121,275
11,900 Union Pacific Corp. 536,244
4,600 US Airways Group, Inc.* 239,200
15,800 Xerox Corp. 1,864,400
-------------
78,260,849
-------------
Finance - 15.70%
6,985 Aetna, Inc. 549,196
39,738 Allstate Corp. 1,534,880
22,000 American Express Co. 2,249,500
12,117 American General Corp. 945,126
50,400 American International Group, Inc. 4,869,900
8,100 AON Corp. 448,537
33,388 Associates First Capital Corp. 1,414,817
56,275 Bank One Corp. 2,873,542
35,800 Bank of New York Co., Inc. 1,440,950
83,459 BankAmerica Corp. 5,017,972
14,000 BankBoston Corp. 545,125
4,700 Bankers Trust New York Corp. 401,556
13,800 BB&T Corp. 556,312
5,481 Bear Stearns Cos., Inc. 204,852
3,179 Capital One Financial Corp. 365,585
41,152 Chase Manhattan Corp. 2,800,908
8,000 Chubb Corp. 519,000
10,300 CIGNA Corp. 796,319
8,000 Cincinnati Financial Corp. 293,000
109,760 Citigroup, Inc. 5,433,120
7,450 Comerica, Inc. 507,997
14,907 Conseco, Inc. 455,595
5,300 Countrywide Credit Industries, Inc. 265,994
32,600 Federal Home Loan Mortgage Corp. 2,100,663
49,800 Federal National Mortgage Association 3,685,200
12,875 Fifth Third Bancorp 918,148
46,496 First Union Corp. 2,827,538
27,310 Fleet Financial Group, Inc. 1,220,416
12,030 Franklin Resources Inc. 384,960
3,700 General Re Corp. 906,500
2,900 Golden West Financial Corp. 265,894
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------
F-10
<PAGE>
EQUITY INDEX FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Finance (continued)
11,200 Hartford Financial Services Group, Inc. $ 614,600
23,659 Household International, Inc. 937,488
8,000 Humana, Inc.* 142,500
10,130 Huntington Bancshares, Inc. 304,533
5,100 Jefferson-Pilot Corp. 382,500
21,000 KeyCorp 672,000
5,600 Lehman Brothers Holdings Inc. 246,750
4,800 Lincoln National Corp. 392,700
12,350 Marsh & McLennan Cos., Inc. 721,703
4,800 MBIA, Inc. 314,700
35,918 MBNA Corp. 895,705
12,500 Mellon Bank Corp. 859,375
7,200 Mercantile Bancorp Inc. 332,100
16,800 Merrill Lynch & Co., Inc. 1,121,400
5,500 MGIC Investment Corp. 218,969
28,217 Morgan Stanley, Dean Witter, Discover 2,003,407
8,500 Morgan (J.P.) & Co., Inc. 893,031
15,800 National City Corp. 1,145,500
2,200 NICOR, Inc. 92,950
5,300 Northern Trust Corp. 462,756
7,800 Paychex, Inc. 401,212
14,500 PNC Bank Corp. 784,813
3,500 Progressive Corp. 592,812
6,400 Provident Cos., Inc. 265,600
7,050 Providian Financial Corp. 528,750
10,200 Regions Financial Corp. 411,188
5,200 Republic New York Corp. 236,925
6,800 SAFECO Corp. 291,975
19,350 Schwab (Charles) Corp. 1,087,228
7,957 SLM Holding Corp. 381,936
7,700 State Street Corp. 535,631
11,200 St. Paul Cos., Inc. 389,200
8,300 Summit Bankcorp 362,606
10,050 SunAmerica, Inc. 815,306
10,000 SunTrust Banks, Inc. 765,000
12,500 Synovus Financial Corp. 304,687
6,700 Torchmark Corp. 236,594
3,000 TransAmerica Corp. 346,500
6,000 Union Planters Corp. 271,875
6,700 UNUM Corp. 391,113
8,900 UST, Inc. 310,387
35,650 U.S. Bancorp 1,265,575
10,000 Wachovia Corp. 874,375
28,483 Washington Mutual, Inc. 1,087,695
79,430 Wells Fargo & Co. 3,172,236
-------------
75,664,988
-------------
Chemicals and Drugs - 13.58%
74,000 Abbott Laboratories 3,626,000
11,000 Air Products & Chemicals, Inc. 440,000
2,500 Alberto-Culver Co., Class B 66,719
3,200 Allergan, Inc. 207,200
4,200 ALZA Corp.* 219,450
63,200 American Home Products Corp. 3,558,950
12,300 AMGEN, Inc.* 1,286,119
12,600 Avon Products, Inc. 557,550
2,700 Bausch & Lomb, Inc. 162,000
13,800 Baxter International, Inc. 887,513
11,800 Becton Dickinson & Co. 503,712
18,600 Boston Scientific Corp.* 498,713
47,800 Bristol-Myers Squibb Co. 6,396,237
9,600 Cardinal Health, Inc. 728,400
14,200 Colgate Palmolive Co. 1,318,825
10,800 Dow Chemical Co. 982,125
54,400 duPont (E.I.) deNemours & Co. 2,886,600
3,800 Eastman Chemical Co. 170,050
6,850 Engelhard Corp. 133,575
1,600 FMC Corp.* 89,600
3,600 Grace (W.R.) & Co.* 56,475
2,800 Great Lakes Chemical Corp. 112,000
7,200 Guidant Corp. 793,800
4,500 Hercules, Inc. 123,188
5,200 International Flavors & Fragrances, Inc. 229,775
64,600 Johnson & Johnson Co. 5,418,325
52,900 Lilly (Eli) & Co. 4,701,487
3,400 Mallinckrodt, Inc. 104,763
22,500 Medtronic, Inc. 1,670,625
57,200 Merck & Co., Inc. 8,447,725
28,800 Monsanto Co. 1,368,000
6,100 Morton International, Inc. 149,450
3,200 Nalco Chemical Co. 99,200
62,800 Pfizer, Inc. 7,877,475
24,380 Pharmacia & Upjohn, Inc. 1,380,517
7,500 Praxair, Inc. 264,375
8,500 Rohm & Haas Co. 256,063
70,400 Schering-Plough Corp. 3,889,600
1,200 Shared Medical Systems Corp. 59,850
8,300 Sherwin-Williams Co. 243,812
4,700 Sigma Aldrich Corp. 138,063
4,000 St. Jude Medical, Inc.* 110,750
6,400 Union Carbide Corp. 272,000
39,500 Warner-Lambert Co. 2,969,906
-------------
65,456,562
-------------
Technology - 12.63%
17,200 3Com Corp.* 770,775
6,900 Advanced Micro Devices, Inc.* 199,669
27,500 Airtouch Communications, Inc.* 1,983,437
6,400 Apple Computer, Inc.* 262,000
10,400 Ascend Communications, Inc.* 683,800
2,200 Autodesk, Inc. 93,913
14,500 Automatic Data Processing, Inc. 1,162,719
9,800 BMC Software, Inc. * 436,712
7,800 Cabletron Systems, Inc.* 65,325
3,500 Ceridian Corp.* 244,344
74,750 Cisco Systems, Inc.* 6,937,734
80,157 Compaq Computer Corp. 3,361,584
26,850 Computer Associates International, Inc. 1,144,481
7,600 Computer Sciences Corp. 489,725
2,200 Data General Corp.* 36,163
23,600 Electronic Data Systems Corp. 1,185,900
24,000 EMC Corp.* 2,040,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-11
<PAGE>
EQUITY INDEX FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Technology (continued)
2,200 Harnischfeger Industries, Inc. $ 22,412
6,000 Honeywell, Inc. 451,875
8,000 IMS Health, Inc. 603,500
44,800 International Business Machines Corp. 8,276,800
5,700 ITT Industries, Inc. 226,575
6,700 LSI Logic Corp.* 108,038
63,196 Lucent Technologies, Inc. 6,951,560
10,200 Micron Technology, Inc.* 515,737
118,400 Microsoft Corp.* 16,420,600
7,700 National Semiconductor Corp.* 103,950
16,800 Novell, Inc.* 304,500
46,587 Oracle Corp.* 2,009,064
13,000 Parametric Technology Corp.* 212,875
11,000 PeopleSoft, Inc. * 208,313
13,200 Pitney Bowes, Inc. 872,025
11,600 Seagate Technology, Inc.* 350,900
8,900 Silicon Graphics, Inc.* 114,587
18,300 Sun Microsystems, Inc.* 1,566,938
12,200 Unisys Corp.* 420,137
-------------
60,838,667
-------------
Consumer Products - 8.12%
3,300 American Greetings Corp., Class A 135,506
1,702 America OnLine, Inc.* 246,365
4,000 Andrew Corp.* 66,000
23,200 Anheuser-Busch Cos., Inc. 1,522,500
17,600 Applied Materials, Inc.* 751,300
28,590 Archer-Daniels-Midland Co. 491,391
1,400 Ball Corp. 64,050
2,600 Bemis Co., Inc. 98,638
2,600 Boise Cascade Corp. 80,600
3,300 Brown-Forman Corp., Class B 249,769
21,500 Campbell Soup Co. 1,182,500
12,000 Clear Channel Communications, Inc.* 654,000
23,400 ConAgra, Inc. 737,100
11,100 Corning, Inc. 499,500
5,900 Crown Cork & Seal Co., Inc. 181,794
3,900 Deluxe Corp. 142,594
5,200 Dillard's, Inc., Class A 147,550
98,229 Disney (Walt) Co. 2,946,870
6,700 Donnelley (R.R.) & Sons Co. 293,544
4,400 Dow Jones & Co., Inc. 211,750
8,100 Dun & Bradstreet Corp. 255,656
15,500 Eastman Kodak Co. 1,116,000
10,600 Fort James Corp. 424,000
13,600 Gannett Co., Inc. 900,150
4,500 Georgia-Pacific Corp. 263,531
21,000 Halliburton Co. 622,125
6,300 Hasbro, Inc. 227,587
17,300 Heinz (H.J.) Co. 979,613
6,800 Hershey Foods Corp. 422,875
6,400 Ikon Office Solutions, Inc. 54,800
14,800 International Paper Co. 663,225
19,500 Kellogg Co. 665,437
26,240 Kimberly-Clark Corp. 1,430,080
3,400 King World Productions, Inc.* 100,088
3,800 Knight-Ridder, Inc. 194,275
3,200 Liz Claiborne, Inc. 101,000
1,900 Longs Drug Stores Corp. 71,250
14,012 Mattel, Inc. 319,649
4,300 Maytag Corp. 267,675
4,900 McGraw-Hill Cos., Inc. 499,187
5,000 Mead Corp. 146,563
2,600 Meredith Corp. 98,475
9,000 New York Times Co., Class A 312,187
13,700 Nike, Inc., Class B 555,706
7,400 Owens-Illinois, Inc.* 226,625
2,100 Polaroid Corp. 39,244
1,400 Potlatch Corp. 51,625
64,400 Procter & Gamble Co. 5,880,525
6,500 Quaker Oats Co. 386,750
2,700 Reebok International, Ltd.* 40,163
7,200 Rubbermaid, Inc. 226,350
1,600 Russell Corp. 32,500
45,000 Sara Lee Corp. 1,268,437
16,600 Seagram Co., Ltd. 630,800
2,800 Snap-On, Inc. 97,475
4,200 Stanley Works 116,550
16,200 Sysco Corp. 444,488
2,700 Temple-Inland, Inc. 160,144
8,100 Tenneco, Inc. 275,906
57,760 Time Warner, Inc. 3,584,730
4,200 Times Mirror Co., Class A 235,200
15,200 TJX Cos., Inc. 440,800
5,900 Tribune Co. 389,400
5,800 TRW, Inc. 325,887
2,700 Tupperware Corp. 44,381
3,300 Union Camp Corp. 222,750
17,163 Viacom, Inc., Class B* 1,270,062
4,750 Westvaco Corp. 127,359
9,600 Weyerhaeuser Co. 487,800
3,700 Whirlpool Corp. 204,888
5,700 Wrigley (Wm.) Jr. Co. 510,506
-------------
39,115,800
-------------
Utilities - 8.06%
8,400 AES Corp.* 397,950
6,600 Ameren Corp. 281,737
9,100 American Electric Power, Inc. 428,269
86,767 American Telephone & Telegraph Corp. 6,529,217
7,150 Baltimore Gas & Electric Co. 220,756
74,546 Bell Atlantic Corp. 4,235,145
94,400 BellSouth Corp. 4,708,200
8,300 Browning-Ferris Industries, Inc. 236,031
7,200 Carolina Power & Light Co. 338,850
10,100 Central & South West Corp. 277,119
7,643 CINergy Corp. 262,728
4,000 Columbia Energy Group. 231,000
11,300 Consolidated Edison Co. of New York 597,488
4,600 Consolidated Natural Gas Co. 248,400
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------
F-12
<PAGE>
EQUITY INDEX FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Utilities (continued)
7,000 DTE Energy Co. $ 300,125
17,417 Duke Energy Corp. 1,115,777
16,900 Edison International 471,087
11,800 Entergy Corp. 367,275
11,300 FirstEnergy Corp. 367,956
8,700 FPL Group, Inc. 536,138
6,200 GPU, Inc. 273,962
46,200 GTE Corp. 3,115,613
14,198 Houston Industries, Inc. 456,111
5,400 New Century Energies, Inc. 263,250
13,600 NEXTEL Communications, Inc.* 321,300
8,800 Niagara Mohawk Power Corp.* 141,900
7,200 Northern States Power Co. 199,800
14,200 Pacificorp 299,087
10,700 PECO Energy Co. 445,388
1,600 Peoples Energy Corp. 63,800
18,200 PG&E Corp. 573,300
7,100 PP & L Resources, Inc. 197,912
11,200 Public Service Enterprise Group, Inc. 448,000
93,908 SBC Communications, Inc. 5,035,817
33,500 Southern Co. 973,594
13,440 Texas Utilities Co. 627,480
10,300 Unicom Corp. 397,194
24,104 US West, Inc. 1,557,721
27,335 Waste Management, Inc. 1,274,494
-------------
38,816,971
-------------
Energy - 6.45%
4,300 Amerada Hess Corp. 213,925
45,800 Amoco Corp. 2,765,175
5,600 Anadarko Petroleum Corp. 172,900
4,700 Apache Corp. 118,969
1,800 ASARCO, Inc. 27,112
3,700 Ashland, Inc. 178,988
15,500 Atlantic Richfield Co. 1,011,375
8,382 Burlington Resources, Inc. 300,180
31,500 Chevron Corp. 2,612,531
10,200 Coastal Corp. 356,362
1,100 Eastern Enterprises 48,125
15,900 Enron Corp. 907,294
117,000 Exxon Corp. 8,555,625
11,300 Homestake Mining Co. 103,819
2,200 Kerr-McGee Corp. 84,150
5,200 Louisiana-Pacific Corp. 95,225
37,500 Mobil Corp. 3,267,188
16,800 Occidental Petroleum Corp. 283,500
1,500 Oneok, Inc. 54,187
4,900 Oryx Energy Co.* 65,844
2,200 Pennzenergy Co. 35,888
2,200 Pennzoil Co.* 32,587
12,300 Phillips Petroleum Co. 524,288
103,000 Royal Dutch Petroleum Co. 4,931,125
26,100 Schlumberger, Ltd. 1,203,862
11,413 Sempra Energy 289,605
5,100 Sonat, Inc. 138,019
4,400 Sunoco, Inc. 158,675
25,800 Texaco, Inc. 1,364,175
11,981 Union Pacific Resources Co. 108,578
11,600 Unocal Corp. 338,575
4,220 USX-U.S. Steel Group, Inc. 97,060
20,400 Williams Cos., Inc. 636,225
-------------
31,081,136
-------------
Retail - 6.15%
11,800 Albertson's, Inc. 751,512
13,200 American Stores Co. 487,575
7,200 AutoZone, Inc.* 237,150
4,700 Circuit City Stores, Inc. 234,706
5,200 Consolidated Stores* 104,975
10,456 Costco Cos., Inc.* 754,793
18,600 CVS Corp. 1,023,000
21,000 Dayton-Hudson Corp. 1,139,250
8,800 Dollar General Corp. 207,900
10,000 Federated Department Stores, Inc.* 435,625
28,300 Gap, Inc. 1,591,875
1,700 Great Atl antic & Pacific Tea Co., Inc. 50,362
3,400 Hartcourt General, Inc. 180,838
70,498 Home Depot, Inc. 4,313,596
23,600 Kmart Group.* 361,375
7,600 Kohl's Corp. * 466,925
12,400 Kroger Co.** 750,200
10,900 Limited Inc. 317,462
11,000 May Depar tment Stores Co. 664,125
7,400 Meyer (Fred), Inc. * 445,850
7,000 Nordstrom, Inc. 242,813
12,100 Penny (J.C.) Co., Inc. 567,187
12,400 Rite Aid Corp. 614,575
23,400 Safeway, Inc. * 1,425,938
18,900 Sears Roebuck & Co. 803,250
13,800 Stables, Inc. * 602,887
5,800 Supervalue, Inc. 162,400
12,400 Toys 'R' Us, Inc.* 209,250
23,900 Walgreen Co. 1,399,644
107,300 Wal-Mart Stores, Inc. 8,738,244
7,200 Winn-Dixie Stores, Inc. 323,100
-------------
29,608,382
-------------
Consumer Staples - 5.97%
13,800 Best Foods 734,850
4,500 Black & Decker Corp. 252,281
5,100 Clorox Co. 595,744
118,300 Coca-Cola Co. 7,911,312
19,400 Coca-Cola Enterprises, Inc. 693,550
1,800 Coors (Adolph) Co., Class B 101,588
8,300 Fortune Brands, Inc. 262,487
3,300 Fruit of the Loom, Inc., Class A* 45,581
7,400 General Mills, Inc. 575,350
53,800 Gillette Co. 2,599,213
19,500 Minnesota Mining & Manufacturing Co. 1,386,937
7,700 Newell Co. 317,625
70,700 PepsiCo, Inc. 2,894,281
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-13
<PAGE>
EQUITY INDEX FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Consumer Staples (continued)
116,700 Philip Morris Cos., Inc. $ 6,243,450
14,900 Ralston Purina Co. 482,388
15,600 RJR Nabisco Holdings Corp. 463,125
900 Springs Industries, Inc., Class A 37,294
7,410 Tricon Global Restaurants, Inc.* 371,426
30,700 Unilever NV 2,546,181
5,800 VF Corp. 271,875
-------------
28,786,538
-------------
Building and Construction - 1.26%
1,300 Aeroquip-Vickers, Inc. 38,919
1,200 Briggs & Stratton Corp. 59,850
2,800 Centex Corp. 126,175
4,600 Champion International Corp. 186,300
10,600 Dover Corp. 388,225
3,800 Fluor Corp. 161,738
1,900 Kaufman & Broad Home Corp. 54,625
5,600 Loews Corp. 550,200
16,800 Lowe's Cos., Inc. 859,950
16,200 Masco Corp. 465,750
2,600 Owens-Corning 92,137
8,600 PPG Industries, Inc. 500,950
2,000 Pulte Corp. 55,625
30,986 Tyco International, Ltd. 2,337,506
5,200 Willamette Industries, Inc. 174,200
-------------
6,052,150
-------------
Broadcasting - 0.79%
17,800 Comcast Corp. Special, Class A 1,044,638
29,200 MediaOne Group* 1,372,400
25,000 Tele-Communications, Inc., TCI Group,
Class A* 1,382,812
-------------
3,799,850
-------------
Metals and Mining - 0.71%
10,800 Alcan Aluminum, Ltd. 292,275
9,302 Allegheny Teledyne, Inc. 190,110
9,000 Aluminum Co. of America 671,063
17,800 Barrick Gold Corp. 347,100
10,900 Battle Mountain Gold Co. 44,962
6,100 Bethlehem Steel Corp.* 51,088
5,300 Biomet, Inc. 213,325
4,300 Cyprus Amax Minerals Co. 43,000
8,500 Freeport-McMoRan Copper & Gold, Inc.,
Class B 88,719
7,800 Inco, Ltd., Class A 82,387
1,700 Jostens, Inc. 44,519
8,011 Newmont Mining Corp. 144,699
4,300 Nucor Corp. 185,975
2,900 Phelps Dodge Corp. 147,538
11,900 Placer Dome, Inc., ADR 136,850
3,400 Reynolds Metals Co. 179,137
2,900 Timken Co. 54,738
14,700 USX-Marathon Group 442,837
4,600 Worthington Industries, Inc. 57,500
-------------
3,417,822
-------------
Business Services - 0.65%
41,033 Cendant Corp.* 782,192
6,200 Ecolab, Inc. 224,362
7,000 Equifax, Inc. 239,313
21,300 First Data Corp. 674,944
6,650 Interpublic Group of Companies, Inc. 530,337
8,200 Omnicom Group, Inc. 475,600
4,008 Sealed Air Corp.* 204,658
-------------
3,131,406
-------------
Aerospace-Airlines - 0.58%
8,800 AMR Corp.* 522,500
7,200 Delta Air Lines, Inc. 374,400
6,000 General Dynamics Corp. 351,750
16,075 Southwest Airlines Co. 360,683
11,000 United Technologies Corp. 1,196,250
-------------
2,805,583
-------------
Food Services - 0.57%
6,500 Darden Restaurants, Inc. 117,000
32,800 McDonald's Corp. 2,513,300
6,000 Wendy's International, Inc. 130,875
-------------
2,761,175
-------------
Health Services - 0.57%
2,700 Bard (C.R.), Inc. 133,650
30,800 Columbia/HCA Healthcare Corp. 762,300
20,600 HBO & Co. 590,963
20,200 HEALTHSOUTH Corp.* 311,838
5,100 Manor Care, Inc. * 149,812
14,800 Tenet Healthcare Corp.* 388,500
9,400 United Healthcare Corp. 404,788
-------------
2,741,851
-------------
Transportation - 0.54%
22,752 Burlington Northern Santa Fe Corp. 767,880
10,500 CSX Corp. 435,750
7,200 FDX Corp.* 640,800
15,700 Laidlaw, Inc. 157,981
18,200 Norfolk Southern Corp. 576,713
-------------
2,579,124
-------------
Hotels-Leisure - 0.16%
4,800 Harrah's Entertainment, Inc.* 75,300
12,400 Hilton Hotels Corp. 237,150
11,900 Marriott International, Inc. 345,100
8,500 Mirage Resorts, Inc.* 126,969
-------------
784,519
-------------
Consumer Services - 0.14%
4,900 Block (H & R), Inc. 220,500
12,400 Service Corp. International 471,975
-------------
692,475
-------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-14
<PAGE>
EQUITY INDEX FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C>
Capital Goods - 0.03%
1,800 Foster Wheeler Corp. $ 23,737
500 Nacco Industries, Inc., Class A 46,000
3,200 Navistar International Corp.* 91,200
-------------
160,937
-------------
Leisure and Entertainment - 0.02%
4,700 Brunswick Corp. 116,325
-------------
Total Common Stocks 476,673,110
-------------
(Cost $306,518,919)
PREFERRED STOCKS - 0.00%
261 Aetna, Inc., Class C 19,852
2,400 Fresenius National Medical Care, Inc.,
Class D* 72
-------------
Total Preferred Stocks 19,924
-------------
(Cost $17,063)
Par Value
- ---------
U.S. GOVERNMENT OBLIGATION (A) - 0.07%
$ 350,000 U.S. Treasury Bill
4.47%, 06/24/99 (1) 342,709
-------------
Total U.S. Government Obligation 342,709
-------------
(Cost $342,709)
INVESTMENT COMPANY - 0.97%
4,655,062 SSgA Prime Money Market Fund 4,655,062
-------------
Total Investment Company 4,655,062
-------------
(Cost $4,655,062)
Total Investments - 99.96% 481,690,805
-------------
(Cost $311,533,753)
Net Other Assets and Liabilities - 0.04% 186,319
-------------
Net Assets - 100.00% 481,877,124
-------------
</TABLE>
- ----------------------------------------------
* Non income producing security.
(A) Effective yield at time of purchase.
(1) Security has been deposited as intitial margin on open futures
contracts. At December 31, 1998, the Portfolio's open futures contracts
were as follows:
<TABLE>
<CAPTION>
Number of Current
Contracts Contract Expiration Opening Market Value at
Purchased Type Date Position December 31, 1998
- --------- ---- ---- -------- -----------------
<S> <C> <C> <C> <C>
13 S & P 500 Mar-99 $3,978,170 $4,047,875
========== ==========
</TABLE>
Federal Income Tax Information (see Note 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $312,087,971. Net unrealized appreciation (depreciation) aggregated
$169,602,834, of which $181,959,941 related to appreciated investment securities
and $(12,357,107) related to depreciated investment securities.
Distributions from long-term capital gains for the year ended December 31, 1998
were $11,505,521. (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 $116,924,995
and $24,839,600 of non-governmental issuers, respectively.
See Notes to Financial Statements.
---------------------------------------------------------
F-15
<PAGE>
INVESTMENT GRADE INCOME FUND
PORTFOLIO OF INVESTMENTS . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Moody's
Ratings Value
Par Value (unaudited) (Note 2)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 47.84%
<C> <S> <C> <C>
Federal National
Mortgage Association (A) - 16.81%
$ 195,871 6.00%, 05/01/01, Pool # 190806 Aaa $ 196,537
1,179,388 7.37%, 08/17/03, REMIC Aaa 1,196,241
635,879 6.50%, 05/01/08, Pool # 50730 Aaa 645,074
484,065 8.50%, 07/01/08, Pool # 100001 Aaa 505,998
144,333 8.00%, 04/01/09, Pool # 111253 Aaa 147,910
454,344 9.00%, 02/01/10, Pool # 303165 Aaa 477,475
1,411,582 6.50%, 09/01/10, Pool # 327824 Aaa 1,431,895
155,506 7.00%, 05/01/17, Pool # 68635 Aaa 158,143
955,055 8.00%, 04/01/22, Pool # 124267 Aaa 991,710
53,406 7.00%, 08/01/22, Pool # 174666 Aaa 54,551
1,162,007 8.00%, 01/01/23, Pool # 125178 Aaa 1,206,605
550,665 8.00%, 04/01/23, Pool # 124834 Aaa 571,800
301,764 7.00%, 09/01/23, Pool # 231026 Aaa 308,140
420,492 7.00%, 10/01/23, Pool # 234686 Aaa 429,377
37,675 7.00%, 11/01/23, Pool # 249703 Aaa 38,471
1,784,966 7.00%, 11/01/23, Pool # 50930 Aaa 1,822,682
2,887,598 6.50%, 01/01/24, Pool # 50965 Aaa 2,908,186
2,416,170 7.00%, 02/01/24, Pool # 50993 Aaa 2,466,643
411,476 7.00%, 03/01/24, Pool # 368092 Aaa 420,302
414,181 7.00%, 05/01/24, Pool # 279408 Aaa 422,833
166,098 7.00%, 05/01/24, Pool # 284226 Aaa 169,567
370,826 7.00%, 05/01/24, Pool # 285340 Aaa 378,573
242,272 7.00%, 06/01/24, Pool # 284716 Aaa 247,333
114,024 7.00%, 07/01/24, Pool # 250083 Aaa 116,406
19,758 7.00%, 11/01/24, Pool # 303223 Aaa 20,175
377,118 7.00%, 12/01/24, Pool # 303302 Aaa 385,087
6,283,841 7.50%, 12/01/24, Pool # 323047 Aaa 6,459,286
19,776 7.00%, 07/01/25, Pool # 307012 Aaa 20,186
1,290,173 7.50%, 10/01/25, Pool # 321152 Aaa 1,325,252
564,326 7.00%, 11/01/25, Pool # 328591 Aaa 576,052
146,179 7.50%, 10/01/26, Pool # 359890 Aaa 150,153
461,680 7.50%, 12/01/26, Pool # 362034 Aaa 474,136
215,386 7.50%, 12/01/26, Pool # 366778 Aaa 221,197
360,932 7.00%, 08/01/27, Pool # 395339 Aaa 368,284
409,453 7.00%, 09/01/27, Pool # 397607 Aaa 417,794
33,715 7.00%, 01/01/28, Pool # 313947 Aaa 34,402
920,999 7.50%, 01/01/28, Pool # 251410 Aaa 945,866
562,607 7.00%, 03/01/28, Pool # 419346 Aaa 574,039
648,877 7.00%, 04/01/28, Pool # 418771 Aaa 662,063
65,187 7.50%, 05/01/28, Pool # 431800 Aaa 66,959
341,310 7.00%, 08/01/28, Pool # 434238 Aaa 348,246
155,743 7.00%, 09/01/28, Pool # 323347 Aaa 158,908
2,004,756 6.50%, 10/01/28, Pool # 440657 Aaa 2,018,549
375,380 7.00%, 10/01/28, Pool # 442359 Aaa 383,007
224,885 7.00%, 10/01/28, Pool # 443367 Aaa 229,455
175,854 7.00%, 10/01/28, Pool # 449408 Aaa 179,436
211,200 7.50%, 10/01/28, Pool # 443609 Aaa 216,898
430,787 7.00%, 11/01/28, Pool # 451175 Aaa 439,540
588,099 7.00%, 11/01/28, Pool # 451878 Aaa 600,049
648,049 7.00%, 12/01/28, Pool # 449069 Aaa 661,218
220,181 7.00%, 12/01/28, Pool # 449967 Aaa 224,655
538,548 7.00%, 12/01/28, Pool # 453749 Aaa 549,491
462,225 7.00%, 01/01/29, Pool # 252244 Aaa 472,773
$ 2,300,000 6.00%, 02/01/29 (B) Aaa 2,282,050
-------------
$ 38,777,658
-------------
U.S. Treasury Notes - 13.09%
$ 90,000 7.75%, 01/31/00 Aaa $ 92,869
5,175,000 5.63%, 02/28/01 Aaa 5,280,119
5,115,000 6.63%, 03/31/02 (C) Aaa 5,405,916
4,140,000 5.75%, 08/15/03 (H) Aaa 4,321,125
250,000 6.50%, 08/15/05 Aaa 274,687
8,245,000 6.88%, 05/15/06 Aaa 9,319,430
5,000,000 6.25%, 02/15/07 Aaa 5,484,375
-------------
30,178,521
-------------
U.S. Treasury Bonds - 8.79%
4,565,000 7.25%, 05/15/16 (D) Aaa 5,537,916
1,500,000 7.50%, 11/15/16 (E) Aaa 1,865,157
650,000 7.63%, 11/15/22 (F) Aaa 843,781
9,740,000 7.13%, 02/15/23 (G) Aaa 12,016,725
-------------
20,263,579
-------------
Government National
Mortgage Association (A) - 5.10%
886,475 9.50%, 02/15/06, Pool # 780238 Aaa 940,222
199,933 6.50%, 09/15/08, Pool # 357124 Aaa 203,958
103,235 9.00%, 08/15/16, Pool # 165233 Aaa 111,177
117,196 9.00%, 08/15/16, Pool # 173341 Aaa 126,211
175,823 8.00%, 08/15/22, Pool # 323199 Aaa 183,068
829,270 7.00%, 05/15/23, Pool # 352154 Aaa 848,899
767,078 7.00%, 06/15/23, Pool # 349678 Aaa 785,235
3,098,655 6.50%, 01/15/24, Pool # 370999 Aaa 3,130,137
223,683 8.00%, 09/15/26, Pool # 421495 Aaa 232,201
65,102 8.00%, 09/15/26, Pool # 431341 Aaa 67,581
731,993 8.00%, 09/15/26, Pool # 436476 Aaa 759,867
2,320,000 6.50%, 01/01/28 (B) Aaa 2,343,220
1,945,518 6.50%, 10/15/28, Pool # 167426 Aaa 1,964,993
73,870 6.50%, 11/15/28, Pool # 490919 Aaa 74,610
-------------
11,771,379
-------------
Federal Home Loan
Mortgage Corporation (A) - 4.05%
174,407 9.50%, 03/01/01, Pool # 200029 Aaa 180,054
64,405 6.50%, 06/01/04, Pool # 548801 Aaa 64,727
119,356 6.50%, 08/01/04, Pool # 181863 Aaa 120,484
960,432 7.50%, 01/01/07, Pool # E00071 Aaa 987,968
247,232 8.00%, 04/01/07, Pool # 170014 Aaa 255,584
286,725 8.00%, 09/01/08, Pool # 530125 Aaa 294,888
167,189 8.00%, 04/01/09, Pool # 534627 Aaa 170,511
112,055 8.00%, 06/01/09, Pool # 184989 Aaa 115,566
236,133 8.00%, 08/01/09, Pool # 546108 Aaa 243,531
2,576,953 7.00%, 08/01/10, Pool # E20187 Aaa 2,635,449
26,333 7.00%, 09/01/11, Pool # E65257 Aaa 26,935
347,524 7.00%, 11/01/11, Pool # E65777 Aaa 355,468
877,459 7.00%, 12/01/11, Pool # E20276 Aaa 897,517
1,263,889 7.90%, 07/01/16, Pool # W30001 Aaa 1,357,100
</TABLE>
See Notes to Financial Statements
- ---------------------------------------------------------
F-16
<PAGE>
INVESTMENT GRADE INCOME FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Moody's
Ratings Value
Par Value (unaudited) (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
Federal Home Loan
Mortgage Corporation (continued)
$ 349,689 8.75%, 05/01/17, Pool # A00870 Aaa $ 372,020
302,203 7.50%, 10/01/18, Pool # 304313 Aaa 307,954
451,597 9.50%, 08/01/19, Pool # 555229 Aaa 480,811
15,198 9.50%, 08/01/20, Pool # A00742 Aaa 16,353
19,119 10.00%, 10/01/20, Pool # D13442 Aaa 20,691
197,453 10.00%, 12/01/20, Pool # D06613 Aaa 213,788
210,339 9.50%, 02/01/21, Pool # D06612 Aaa 226,204
-------------
9,343,603
-------------
Total U.S. Government
and Agency Obligations 110,334,740
-------------
(Cost $107,124,129)
CORPORATE NOTES AND BONDS - 35.17%
Finance - 10.78%
1,000,000 AON Capital Trust, Series A
8.21%, 01/01/27 A 1,140,245
1,500,000 AT&T Capital Corp., MTN
6.25%, 05/15/01 Baa 1,480,114
1,925,000 BankBoston, MTN
6.38%, 04/15/08 A 1,922,563
1,450,000 BCH Cayman Islands
Yankee Subordinated Note, Guaranteed
6.50%, 02/15/06 A 1,467,116
2,000,000 Chase Manhattan Corp.
6.38%, 02/15/08 A 2,067,760
1,000,000 Compass Trust I
8.23%, 01/15/27 A 1,062,913
1,500,000 Conseco Financing Trust III
8.80%, 04/01/27 Ba 1,434,616
1,075,000 First Empire Capital Trust I
8.23%, 02/01/27 A 1,162,784
1,300,000 Ford Motor Credit Co.
6.25%, 12/08/05 A 1,335,877
1,805,000 General Motors Acceptance Corp.
Senior Note
5.88%, 01/22/03 A 1,818,922
1,750,000 Homeside Lending, Inc., MTN
6.88%, 05/15/00 A 1,772,870
1,750,000 MBNA Corp., MTN
6.96%, 09/12/02 Baa 1,782,685
2,000,000 Star Banc Corp., Series A, MTN
6.97%, 05/01/00 A 2,035,178
1,700,000 The Money Store, Inc.
8.05%, 04/15/02 A 1,815,734
1,000,000 Travelers Group, Inc.
7.25%, 05/01/01 Aa 1,034,033
1,500,000 U.S. West Capital Funding
6.13%, 07/15/02 A 1,533,976
-------------
24,867,386
-------------
Industrial - 5.53%
1,900,000 Abitibi-Consolidated, Inc.
Yankee Note
7.40%, 04/01/18 Baa 1,785,185
$ 1,225,000 Chesapeake Corp.
7.20%, 03/15/05 Baa 1,299,600
2,450,000 Dillards, Inc.
6.13%, 11/01/03 Baa 2,444,909
1,350,000 Georgia Gulf Corp.
7.63%, 11/15/05 Ba 1,430,573
2,000,000 International Business Machines Corp.
6.50%, 01/15/28 A 2,112,340
2,000,000 News America Holdings, Inc.
7.38%, 10/17/08 Baa 2,169,234
1,500,000 Tyco International Group SA
Yankee Subordinated Note
6.25%, 06/15/13 Baa 1,515,525
-------------
12,757,366
-------------
Utilities - 3.65%
2,195,000 Connecticut Light & Power Co.
First Mortgage, Series 94D
7.88%, 10/01/24 Ba 2,297,124
1,000,000 Empresa Electrica Pehuenche SA
Yankee Note
7.30%, 05/01/03 Baa 933,995
2,000,000 K.N. Energy, Inc., Senior Note
6.45%, 03/01/03 Baa 2,011,262
1,250,000 Philadelphia Electric Co.
First Mortgage , Series 1992
7.50%, 01/15/99 Baa 1,250,645
1,100,000 Sithe/Independence Funding Corp.
Guaranteed, Series A
9.00%, 12/30/13 Baa 1,301,410
580,000 Texas Utilities Electric Co.
7.38%, 10/01/25 A 611,900
-------------
8,406,336
-------------
Communications - 3.61%
1,225,000 LCI International, Inc., Senior Note
7.25%, 06/15/07 A 1,257,856
2,000,000 MCI WorldCom, Inc., Note
7.75%, 04/01/07 Baa 2,256,172
1,800,000 Sprint Capital Corp.
5.70%, 11/15/03 Baa 1,799,705
2,550,000 TCI Communications, Inc., Senior
Debenture
7.88%, 02/15/26 Baa 3,018,236
-------------
8,331,969
-------------
Securities Brokers and Dealers
- 2.32%
2,045,000 Donaldson Lufkin & Jennrette, Inc.
Senior Note
6.88%, 11/01/05 A 2,106,409
1,500,000 Legg Mason, Inc., Senior Note
6.50%, 02/15/06 Baa 1,551,580
1,700,000 Paine Webber Group, Inc., Senior
Note
6.55%, 04/15/08 Baa 1,693,856
-------------
5,351,845
-------------
</TABLE>
See Notes to Financial Statements
---------------------------------------------------------
F-17
<PAGE>
INVESTMENT GRADE INCOME FUND
PORTFOLIO OF INVESTMENTS . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Moody's
Ratings Value
Par Value (unaudited) (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
Transportation - 2.17%
$ 1,300,000 AMR Corp.
9.50%, 05/15/01 Baa $ 1,391,282
900,000 Consolidated Freightways, Inc.
9.13%, 08/15/99 Baa 910,424
2,003,000 United Air Lines, Inc.
9.00%, 12/15/03 Baa 2,210,234
431,458 United Air Lines, Inc.
9.30%, 03/22/08 Baa 486,659
-------------
4,998,599
-------------
Oil, Gas, and Petroleum - 2.04%
700,000 Southwest Gas Corp.
Debenture, Series F
9.75%, 06/15/02 Baa 780,745
1,500,000 Tennessee Gas Pipeline Co.
7.50%, 04/01/17 Baa 1,597,099
800,000 Union Pacific Resources, Co.
6.50%, 05/15/05 Baa 777,610
1,500,000 Valero Energy Corp., MTN
7.50%, 05/31/01 (I) BBB 1,554,747
-------------
4,710,201
-------------
Publishing - 1.41%
1,230,000 Time Warner, Inc., Debenture
8.05%, 01/15/16 Baa 1,437,864
750,000 Time Warner, Inc., Debenture
9.15%, 02/01/23 Baa 986,110
675,000 Time Warner Entertainment Co., LP
Senior Debenture
8.38%, 03/15/23 Baa 825,592
-------------
3,249,566
-------------
Electronics - 0.74%
1,700,000 Clear Channel Communications, Inc.
7.25%, 10/15/27 Baa 1,713,017
-------------
Processed Foods - 0.73%
1,500,000 Ralston Purina Co.
7.75%, 10/01/15 Baa 1,674,511
-------------
Pharmaceuticals - 0.67%
1,500,000 Watson Pharmaceuticals, Inc.
7.13%, 05/15/08 Ba 1,554,457
-------------
Consumer Staples - 0.66%
1,500,000 Black & Decker Corp.
6.63%, 11/15/00 Baa 1,524,988
-------------
Media - 0.49%
1,125,000 Hearst-Argyle Television, Inc.
Senior Note
7.00%, 01/15/18 Baa 1,118,724
-------------
Engineering and Construction - 0.37%
$ 850,000 Pulte Corp., Senior Note
7.00%, 12/15/03 Baa $ 846,115
-------------
Total Corporate Notes and Bonds 81,105,080
-------------
(Cost $77,846,606)
<CAPTION>
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (A) - 12.96%
<C> <S> <C> <C>
980,584 Associates Manufactured Housing
6.70%, 03/15/27 Aaa 985,153
2,350,000 BankBoston RV Asset Backed Trust
1997-1, Series A8
6.54%, 02/15/09 Aaa 2,424,712
2,000,000 Barnett Auto Trust, 1997-A, A3
6.03%, 11/15/01 Aaa 2,013,440
1,452,545 Bear Stearns Mortgage Securities,
Inc.
1995-1, Series 1A, CMO
6.48%, 05/25/10 Aaa 1,461,841
1,250,000 Bear Stearns Mortgage Securities,
Inc.
1996-1, Series A10, CMO
7.75%, 06/25/27 Aaa 1,286,903
750,000 Carco Auto Loan Master Trust
1997-1, Series A
6.69%, 08/15/04 Aaa 753,210
3,000,000 Chase Manhattan Auto Owner Trust
1998-A, Series A3
5.70%, 09/17/01 Aaa 3,013,740
1,075,000 Comcast Cable Communications, Inc.
8.13%, 05/01/04 Baa 1,186,546
1,250,000 Donaldson Lufkin & Jennrette
Commercial
Mortgage Corp., Series 1998-CF2,
Class A1A
5.88%, 11/12/31 Aaa 1,257,787
1,677,497 Financial Asset Securitization, Inc.
1997-NAMC, Series FXA2, CMO
7.75%, 05/25/27 (I) AAA 1,726,686
1,599,526 First Plus Home Loan Owner Trust
1996-2, Series A5
7.47%, 02/20/11 Aaa 1,613,378
1,299,303 General Motors Acceptance Corp.
1996-C1, Series A2A, CMO
6.79%, 09/15/03 A 1,340,738
233,746 Green Tree Financial Corp., 1992-1
Series A3
6.70%, 10/15/17 Aaa 234,751
1,416,759 Green Tree Financial Corp., 1994-1
Series A3
6.90%, 04/15/19 Aa 1,427,441
282,526 Green Tree Recreation
Equipment & Consumer Trust
1997-B, Series A1
5.55%, 02/15/18 Aaa 282,955
899,187 Green Tree Recreation
Equipment & Consumer Trust
6.55%, 07/15/28 (I) AAA 923,024
117,601 NationsBank Auto Grantor Trust
1995-A, Series B
6.00%, 06/15/02 A 118,094
</TABLE>
See Notes to Financial Statements.
- ---------------------------------------------------------
F-18
<PAGE>
INVESTMENT GRADE INCOME FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Moody's
Ratings Value
Par Value (unaudited) (Note 2)
- --------------------------------------------------------------------------------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (continued)
<C> <S> <C> <C>
$ 1,312,143 Olympic Automobile Receivables
Trust Series 1996-A, Class A-4
5.85%, 07/15/01 Aaa $ 1,317,221
1,000,000 PSB Lending Home Loan Owner Trust
1997-3, Series A2
6.57%, 02/20/13 Aaa 1,006,420
1,279,442 Residential Asset Securitization
Trust Series 1996-A10, Class A-3
7.50%, 11/25/11 Aaa 1,283,408
1,750,000 Resolution Trust Corp.
1995-C1, Series A4C, CMO
6.85%, 02/25/27 Aaa 1,759,730
768,860 Vendee Mortgage Trust, 1997-1
Series 2B, CMO
7.50%, 03/15/13 NR 774,704
111,855 Western Financial Grantor Trust
1995-2, Series A2
7.10%, 07/01/00 Aaa 112,511
1,575,000 WFS Financial Owner Trust, 1998-B
6.05%, 04/20/03 Aaa 1,595,672
-------------
Total Asset-Backed and
Mortgage-Backed Securities 29,900,065
-------------
(Cost $29,599,050)
<CAPTION>
COMMERCIAL PAPER (J) - 4.33%
<C> <S> <C> <C>
4,000,000 Enterprise Funding
5.55%, 01/08/99 A 3,995,707
2,000,000 Equilon Enterprises
5.30%, 02/11/99 A 1,987,996
4,000,000 Republic Industries Funding
5.63%, 01/13/99 A 3,992,533
-------------
Total Commercial Paper 9,976,236
-------------
(Cost $9,976,236)
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT COMPANY - 0.56%
1,294,595 SSgA Prime Money Market Fund $ 1,294,595
-------------
Total Investment Company 1,294,595
-------------
(Cost $1,294,595)
Total Investments - 100.86% $ 232,610,716
-------------
(Cost $225,840,616)
Net Assets and Other Liabilities - (0.86)% (1,987,263)
-------------
Net Assets - 100.00% $ 230,623,453
=============
</TABLE>
- ---------------------------------------
(A) Pass Through Certificates
(B) Forward Commitments
(C) Designated as collateral on Forward Commitment, par value of $5,115,000.
(D) Designated as collateral on Forward Commitment, par value of $4,565,000.
(E) Designated as collateral on Forward Commitment, par value of $1,200,000.
(F) Designated as collateral on Forward Commitment, par value of $650,000.
(G) Designated as collateral on Forward Commitment, par value of $5,370,000.
(H) Designated as collateral on Forward Commitment, par value of $65,000.
(I) Standard & Poor's (S&P) credit ratings are used in the absence of a
rating by Moody's Investors, Inc.
(J) Effective yield at time of purchase.
CMO Collateralized Mortgage Obligations
MTN Medium Term Note
REMIC Real Estate Mortgage Conduit
Federal Income Tax Information (see Note 2)
At December 31, 1998, the aggregate cost of investment securities for tax
purposes was $225,841,417. Net unrealized appreciation (depreciation) aggregated
$6,769,299, of which $7,385,489 related to appreciated investment securities and
$(616,190) related to depreciated investment securities.
At December 31, 1998, the Portfolio had no capital loss carryforward. During
1998, the Portfolio utilized $1,388,318 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 $95,407,379
and $87,761,346 of non-governmental issuers, respectively, and $264,424,232 and
$237,485,265 of U.S. Government and Agency issuers, respectively.
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
<TABLE>
<CAPTION>
Moody's Ratings (unaudited) S&P Ratings (unaudited)
<S> <C>
Aaa 57.06% AAA 1.14%
Aa 1.06 BBB 0.67
A 15.76
Baa 20.53
Ba 2.89
NR (Not Rated) 0.89
----- ----
98.19% 1.81%
===== ====
</TABLE>
See Notes to Financial Statements.
---------------------------------------------------------
F-19
<PAGE>
GOVERNMENT BOND FUND
PORTFOLIO OF INVESTMENTS . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 87.12%
<C> <S> <C>
U.S. Treasury Notes - 43.57%
$ 3,700,000 7.13%, 02/29/00 $ $ 3,800,595
700,000 5.50%, 05/31/00 708,094
2,700,000 5.63%, 05/15/01 2,764,125
3,000,000 6.50%, 08/31/01 3,135,939
5,775,000 6.38%, 09/30/01 6,025,854
3,750,000 6.25%, 02/28/02 3,918,750
3,000,000 6.00%, 07/31/02 3,126,564
1,475,000 5.75%, 11/30/02 1,529,391
750,000 5.25%, 08/15/03 768,750
2,525,000 5.75%, 08/15/03 2,635,469
750,000 7.25%, 05/15/04 840,469
5,350,000 6.88%, 05/15/06 6,047,174
-------------
35,301,174
-------------
Federal National
Mortgage Association - 17.96%
550,000 5.84%, 03/15/01, MTN 559,531
1,425,000 6.18%, 03/15/01, MTN 1,459,643
1,850,000 6.45%, 04/23/01, MTN 1,907,494
350,000 5.73%, 01/06/03, MTN 356,750
710,475 7.38%, 08/17/03, REMIC, (A) 720,627
1,900,000 5.80%, 12/10/03, Note 1,948,079
1,350,000 6.82%, 08/23/05, MTN 1,471,120
275,000 6.14%, 11/25/05, MTN 289,789
941,479 7.50%, 03/01/07, Pool # 50545 (A) 968,443
1,250,000 6.57%, 08/22/07, MTN 1,360,787
953,819 6.50%, 05/01/08, Pool # 50730, (A) 967,611
1,300,000 8.40%, 02/25/09, Class A3,
Series 1996-W2, CMO, (A) 1,372,475
86,600 8.00%, 04/01/09, Pool # 111253, (A) 88,746
411,481 7.00%, 01/01/10, Pool # 303194 (A) 420,640
46,202 6.40%, 11/25/10, Class A2,
Series 1995-T2, REMIC 46,038
57,414 7.00%, 05/01/17, Pool # 68635, (A) 58,387
534,724 8.00%, 09/01/21, Pool # 70941, (A) 555,295
-------------
14,551,455
-------------
Federal Home Loan
Mortgage Corporation - 10.28%
181,852 9.50%, 03/01/01, Pool # 200029 (A) 187,740
1,000,000 6.87%, 03/03/03 1,061,013
700,000 5.75%, 07/15/03 719,460
45,942 6.50%, 06/01/04, Pool # 548801, (A) 46,172
104,168 6.50%, 08/01/04, Pool # 181863, (A) 105,152
360,665 7.50%, 02/01/07, Pool # E00075, (A) 371,006
286,725 8.00%, 09/01/08, Pool # 530125, (A) 294,888
2,500,000 5.13%, 10/15/08 2,451,690
979,608 6.50%, 02/01/09, Pool # E00279, (A) 995,791
189,764 8.00%, 04/01/09, Pool # 534627, (A) 193,535
70,040 8.00%, 06/01/09, Pool # 184989, (A) 72,234
236,134 8.00%, 08/01/09, Pool # 546108, (A) 243,532
114,415 8.00%, 09/01/09, Pool # 273699, (A) 116,688
332,602 7.90%, 07/01/16, Pool # W30001, (A) 357,132
211,892 8.00%, 06/01/19, Pool # 544250, (A) 220,130
199,199 10.00%, 03/01/21, Pool # A00969, (A) 215,577
672,267 6.50%, 06/01/23, Pool # N30118, (A) 677,201
-------------
8,328,941
-------------
Federal Farm Credit Bank - 5.84%
2,000,000 6.71%, 04/25/01, MTN 2,073,470
1,000,000 5.72%, 02/04/03, MTN 1,018,953
1,550,000 6.65%, 08/08/03, MTN 1,637,721
-------------
4,730,144
-------------
Federal Home Loan Bank - 4.37%
1,500,000 5.61%, 01/23/03, Series LV03 1,521,501
550,000 6.55%, 03/07/05, Note, Series FX05 588,293
1,350,000 6.19%, 05/06/08, Series EB08 1,430,250
-------------
3,540,044
-------------
Government National
Mortgage Association (A) - 3.29%
264,137 9.50%, 02/15/06, Pool # 780238 280,151
65,946 8.00%, 12/15/06, Pool # 014758 69,078
81,376 6.50%, 06/15/09, Pool # 376548 82,978
1,621,448 7.00%, 06/15/09, Pool # 374332 1,668,860
548,864 7.00%, 06/15/12, Pool # 411797 564,408
-------------
2,665,475
-------------
U.S. Treasury Bond - 1.81%
1,100,000 10.75%, 08/15/05 1,466,438
-------------
Total U.S. Government and
Agency Obligations 70,583,671
-------------
(Cost $69,367,585)
<CAPTION>
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 8.31%
<C> <S> <C>
1,500,000 American Express Master Trust, 1998-1,
Series A
5.90%, 04/15/04 1,528,785
658,392 Associates Manufactured Housing, 1996-1,
Series A2
6.70%, 03/15/27 661,460
1,550,000 Chase Credit Card Master Trust, 1997-2,
Series A
6.30%, 04/15/03 1,575,591
1,500,000 Discover Card Master Trust, 1998-2,
Series A
5.80%, 09/16/03 1,506,495
45,204 Green Tree Recreation Equipment &
Consumer Trust Class A1, Series 1996-A
5.55%, 02/15/18 45,273
1,400,000 Premier Auto Trust, 1996-4, Series A4
6.40%, 10/06/01 1,414,826
-------------
Total Asset-Backed and
Mortgage-Backed Securities 6,732,430
-------------
(Cost $6,664,459)
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-20
<PAGE>
GOVERNMENT BOND FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
MUNICIPAL BOND - 1.38%
<C> <S> <C>
Tennessee - 1.38%
$ 1,100,000 Tennessee Valley Authority, Series D
6.00%, 11/01/00 $ 1,120,536
-------------
Total Municipal Bond 1,120,536
-------------
(Cost $1,104,297)
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
INVESTMENT COMPANY - 1.74%
<C> <S> <C>
1,408,124 SSgA Prime Money Market Fund $ 1,408,124
-------------
Total Investment Company 1,408,124
-------------
(Cost $1,408,124)
</TABLE>
<TABLE>
<S> <C>
Total Investments - 98.55% 79,844,761
-------------
(Cost $78,544,465)
Net Other Assets and Liabilities - 1.45% 1,173,677
-------------
Net Assets - 100.00% $ 81,018,438
-------------
</TABLE>
- ----------------------------------------
(A) Pass Through Certificates
CMO Collateralized Mortgage Obligations
MTN Medium Term Note
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 $78,596,160. Net unrealized appreciation (depreciation) aggregated
$1,248,601, of which $1,413,511 related to appreciated investment securities and
$(164,910) related to depreciated investment securities.
At December 31, 1998, the Portfolio had capital loss carryforwards which expire
as follows: $1,176,161 in 2002, $515,322 in 2003, $461,593 in 2004; and $64,602
in 2005. During 1998, the Portfolio utilized $368,633 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 $10,628,738
and $9,259,976 of non-governmental issuers, respectively, and $52,487,801 and
$30,811,986 of U.S. Government and Agency issuers, respectively.
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
<TABLE>
<CAPTION>
Moody's Ratings (unaudited)
<S> <C>
Aaa 98.24%
NR (Not Rated) 1.76
------
100.00%
======
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------
F-21
<PAGE>
MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
CORPORATE NOTES AND BONDS - 34.00%
<C> <S> <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
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-22
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
MUNICIPAL BOND - 2.08%
<C> <S> <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-23
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Par Value (Note 2)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.32%
<C> <S> <C>
$ 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)
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Value
Shares (Note 2)
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES - 0.95%
<S> <C>
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
=============
</TABLE>
- ----------------------------------------
* 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-24
<PAGE>
This page left blank intentionally.
<PAGE>
ALLMERICA INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES (In 000'S) . December 31, 1998
<TABLE>
<CAPTION>
Investment
Select Select Equity Grade Government Money
Aggressive International Growth Index Income Bond Market
Growth Fund Equity Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost................ $558,819 $402,033 $692,335 $ 311,534 $225,841 $ 78.545 $ 312,427
Repurchase agreements at cost...... - - - - - - 21,241
Net unrealized appreciation
(depreciation)..................... 199,270 104,049 172,580 170,157 6,770 1,300 -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total investments at value..... 758,089 506,082 864,915 481,691 232,611 79,845 333,668
Cash and foreign currency
(Notes 2 and 7)*................... 2 653 51 13 389 6 10
Short-term investments held as
collateral for securities
loaned (Note 2).................... 124,868 - - - - - -
Receivable for investments sold....... - - 5,292 - 44 34 -
Receivable for shares sold............ - - 30 - 3 81 2,480
Receivable for variation margin....... - - - 11 - - -
Interest and dividend receivables..... 285 1,486 957 521 2,741 1,104 1,941
Dividend tax reclaim receivables...... - 393 - - - - -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets................... 883,244 508,614 871,245 482,236 235,788 81,070 338,099
----------- ----------- ----------- ----------- ----------- ----------- -----------
Liabilities:
Payable for investments purchased..... 2,542 - 10,267 - 5,038 - 1,749
Payable for shares repurchased........ 2,476 988 250 190 - - -
Collateral for securities loaned...... 124,868 - - - - - 2
Net unrealized depreciation on
forward currency contracts
(Notes 2 and 8).................... - 1,600 - - - - -
Advisory fee payable (Note 3)......... 525 374 310 111 84 34 70
Trustees' fees and expenses payable.. 3 2 4 2 1 1 1
Accrued expenses and other payables.. 89 97 81 56 42 17 24
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities............. 130,503 3,061 10,912 359 5,165 52 1,846
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Assets........................... $752,741 $505,553 $860,333 $ 481,877 $ 230,623 $ 81,018 $ 336,253
=========== =========== =========== ========== =========== =========== ===========
Net Assets consist of
Paid-in capital (Note 6)............. $555,762 $414,055 $602,557 $ 311,394 $ 223,428 $ 81,905 $ 336,350
Undistributed (distribution
in excess of)
net investment income (loss)...... - (2,522) 140 - 224 82 -
Accumulated (distribution in excess
of) net realized gain (loss) on
investments sold, foreign currency
transactions and futures contracts.. (2,291) (8,492) 85,056 256 201 (2,269) (97)
Net unrealized appreciation
(depreciation) of investments,
assets and liabilities in foreign
currency and futures contracts.... 199,270 102,512 172,580 170,227 6,770 1,300 -
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Net Assets.................... $752,741 $505,553 $860,333 $ 481,877 230,623 $ 81,018 $ 336,253
Shares of beneficial interest =========== =========== =========== ========== =========== =========== ===========
outstanding (unlimited
authorization, no par value)
(in 000's)....................... 305,982 327,959 304,511 141,391 203,784 75,884 336,352
Net Asset Value, Offering and
redemption price per share
(Net Assets/Shares Outstanding)... $ 2.460 $ 1.542 $ 2.825 $ 3.408 $ 1.132 $ 1.068 $ 1.000
=========== =========== =========== ========== =========== =========== ===========
</TABLE>
- ----------------------------------------
* Cost $627 for Select International Equity.
See Notes to Financial Statements
---------------------------------------------------------
F-26
<PAGE>
ALLMERICA INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES (In 000's)
. For the year ended December 31, 1998
<TABLE>
<CAPTION>
Investment Govern-
Select Select Equity Grade ment Money
Aggressive International Growth Index Income Bond Market
Growth Fund Equity Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest (Note 2).................. $ 607 $ 1,047 $ 2,153 $ 46 $ 13,758 $ 4,201 $ 15,544
Dividends (Note 2)................. 2,775 9,065 10,048 5,684 249 47 264
Securities lending income (Note 2). 399 144 - - - - -
Less net foreign taxes withheld.... - (1,067) - - - - -
--------- --------- --------- --------- --------- -------- --------
Total investment income......... 3,781 9,189 12,201 5,730 14,007 4,248 15,808
--------- --------- --------- --------- --------- -------- --------
EXPENSES
Investment advisory fees
(Notes 3 and 4)................... 5,978 4,117 3,520 1,087 933 339 731
Custodian and securities
lending fees (Note 3)............. 132 305 48 51 25 12 26
Fund accounting fees
(Note 3).......................... 90 65 99 75 66 41 52
Legal fees......................... 13 9 15 7 4 1 6
Audit fees......................... 25 25 25 20 20 19 18
Trustees' fees and expenses
(Note 3).......................... 22 14 25 12 7 2 9
Reports to shareholders............ 164 121 144 87 56 15 33
Insurance.......................... 1 1 2 1 - - 6
Miscellaneous...................... 13 7 10 14 2 7 7
--------- --------- --------- --------- --------- -------- --------
Total expenses before reductions
and waiver...................... 6,438 4,664 3,888 1,354 1,113 436 888
Less reductions (Note 5).......... (229) (25) (208) - - - -
--------- --------- --------- --------- --------- -------- --------
Total expenses net of reductions
and waiver...................... 6,209 4,639 3,680 1,354 1,113 436 888
--------- --------- --------- --------- --------- -------- --------
NET INVESTMENT INCOME (LOSS)........ (2,428) 4,550 8,521 4,376 12,894 3,812 14,920
--------- --------- --------- --------- --------- -------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Net realized gain (loss) on
investments sold.................. (367) (4,928) 86,003 11,382 1,767 434 (52)
Net realized gain on futures
contracts......................... - - - 29 - - -
Net realized gain (loss) on foreign
currency transactions............. - (2,698) - - - - -
Net change in unrealized appreciation
(depreciation) of assets and
liabilities in foreign currency... - (2,694) - - - - -
Net change in unrealized appreciation
(depreciation) of investments and
futures contracts................. 71,945 72,777 45,169 80,293 1,626 654 -
--------- --------- --------- --------- --------- -------- --------
NET GAIN (LOSS) ON INVESTMENTS...... 71,578 62,457 131,172 91,704 3,393 1,088 (52)
--------- --------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS... $ 69,150 $ 67,007 $ 139,693 $ 96,080 $ 16,287 $ 4,900 $ 14,868
========= ========= ========= ========= ========= ======== ========
</TABLE>
See Notes to Financial Statements
- ---------------------------------------------------------
F-27
<PAGE>
Allmerica Investment Trust
Statements of Changes in Net Assets (in 000's)
<TABLE>
<CAPTION>
Select Aggressive Select International
Growth Fund Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, Years Ended December 31,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of year.................................... $ 604,123 $ 407,442 $ 397,915 $ 246,877
--------- --------- --------- ---------
Increase (decrease) in net assets
resulting from operations:
Net investment income (loss)................................... (2,428) (2,312) 4,550 3,941
Net realized gain (loss) on investments sold and
foreign currency transactions............................... (367) 38,455 (7,626) 14,653
Net change in unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currency.. 71,945 49,159 70,083 (6,505)
--------- --------- --------- ---------
Net increase (decrease) in net assets resulting from operations 69,150 85,302 67,007 12,089
--------- --------- --------- ---------
Distributions to shareholders from:
Net investment income.......................................... - - (6,430) (5,222)
Distribution in excess of net investment income................ - - - (3,846)
Net realized gain on investments............................... - (45,242) - (12,588)
Distribution in excess of net realized gain on investments..... - (1,941) - -
--------- --------- --------- ---------
Total distributions....................................... - (47,183) (6,430) (21,656)
--------- --------- --------- ---------
Capital share transactions:
Net proceeds from sales of shares............................... 102,931 125,270 141,035 156,121
Issued to shareholders in reinvestment of distributions......... - 47,183 6,430 21,656
Cost of shares repurchased...................................... (23,463) (13,891) (100,404) (17,172)
--------- --------- --------- ---------
Net increase from capital share transactions....... 79,468 158,562 47,061 160,605
--------- --------- --------- ---------
Total increase (decrease) in net assets............ 148,618 196,681 107,638 151,038
--------- --------- --------- ---------
NET ASSETS at end of year (including line A)....................... $ 752,741 $ 604,123 $ 505,553 $ 397,915
========= ========= ========= =========
(A) Undistributed (distribution in excess of)
net investment income (loss)................................ $ - $ - $ (2,522) $ 2,056
========= ========= ========= =========
OTHER INFORMATION:
Share transactions:
Sold........................................................... 46,519 56,853 94,467 110,808
Issued to shareholders in reinvestment of distributions........ - 21,321 4,119 15,986
Repurchased.................................................... (12,098) (6,666) (67,343) (12,167)
--------- --------- --------- ---------
Net increase in shares outstanding.......................... 34,421 71,508 31,243 114,627
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
---------------------------------------------------------
F-28
<PAGE>
Allmerica Investment Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity Index Investment Grade Government Money Market
Growth Fund Fund Income Fund Bond Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, Years Ended December 31, Years Ended December 31, Years Ended December 31, Years Ended December 31,
1998 1997 1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 728,679 $ 556,751 $ 297,191 $ 151,130 $ 189,503 $ 157,327 $ 55,513 $ 46,396 $ 260,619 $ 217,256
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
8,521 9,740 4,376 3,154 12,894 11,198 3,812 2,893 14,920 12,775
86,003 108,102 11,411 8,124 1,767 207 434 (70) (52) (8)
45,169 24,922 80,293 49,226 1,626 4,490 654 570 - -
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
139,693 142,764 96,080 60,504 16,287 15,895 4,900 3,393 14,868 12,767
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
(8,516) (9,604) (4,471) (3,062) (12,840) (11,253) (3,785) (2,898) (14,920) (12,775)
- - - - - (9) - - (2) -
(8,113) (117,671) (11,585) (7,995) - - - - - -
- - - - - - - - - -
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
(16,629) (127,275) (16,056) (11,057) (12,840) (11,262) (3,785) (2,898) (14,922) (12,775)
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
28,087 45,743 115,271 89,175 39,047 27,270 29,432 13,847 327,728 198,110
16,629 127,275 16,056 11,057 12,840 11,262 3,785 2,898 14,922 12,775
(36,126) (16,579) (26,665) (3,618) (14,214) (10,989) (8,827) (8,123) (266,962) (167,514)
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
8,590 156,439 104,662 96,614 37,673 27,543 24,390 8,622 75,688 43,371
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
131,654 171,928 184,686 146,061 41,120 32,176 25,505 9,117 75,634 43,363
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
$ 860,333 $ 728,679 $ 481,877 $ 297,191 $ 230,623 $ 189,503 $ 81,018 $ 55,513 $ 336,253 $ 260,619
========= ========= ========= ========= ========= ========= ======== ========= ========= =========
$ 140 $ 135 $ - $ 95 $ 224 $ 18 $ 82 $ 4 $ - $ -
========= ========= ========= ========= ========= ========= ======== ========= ========= =========
11,374 17,277 39,162 35,527 34,443 24,928 27,717 13,258 327,728 198,110
6,073 51,826 4,832 4,100 11,381 10,340 3,562 2,801 14,922 12,775
(14,496) (6,222) (10,552) (1,473) (12,431) (10,070) (8,436) (7,820) (266,962) (167,514)
--------- --------- --------- --------- --------- --------- -------- --------- --------- ---------
2,951 62,881 33,442 38,154 33,393 25,198 22,843 8,239 75,688 43,371
========= ========= ========= ========= ========= ========= ======== ========= ========= =========
</TABLE>
See Notes to Finanical Statements
- --------------------------------------------------------
F-29
<PAGE>
Allmerica Investment Trust
FINANCIAL HIGHLIGHTS --For a Share Outstanding Throughout Each Year
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
----------------------------------------------- ----------------------------------------------------------------
Net Realized Divi- Distribu- Net
Net Net and dends tions Increase
Asset Investment Unrealized from Net from Net (Decrease)
Value Income Gain (Loss) Total from Invest- Realized Distribu- Return Total in
Year Ended Beginning (Loss) on Investment ment Capital tions in of Distri- Net Asset
December 31, of Year (2) Investments Operations Income Gains Excess Capital butions Value
- -------------- --------- ---------- ------------ ---------- -------- --------- ---------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Select
Aggressive
Growth Fund
1998 $2.225 $(0.008) $0.243 $0.235 $ - $ - $ - $ - $ - $ 0.235
1997 2.037 (0.009) 0.387 0.378 - (0.182) (0.008)(3) - (0.190) 0.188
1996 1.848 (0.009) 0.351 0.342 - (0.153) - - (0.153) 0.189
1995 1.397 (0.001) 0.452 0.451 - - - - - 0.451
1994 1.431 (0.002) (0.032) (0.034) - - - - - (0.034)
Select
International
Equity Fund(1)
1998 1.341 0.014 0.207 0.221 (0.020) - - - (0.020) 0.201
1997 1.356 0.015 0.049 0.064 (0.019) (0.046) (0.014)(4) - (0.079) (0.015)
1996 1.136 0.011 0.238 0.249 (0.012) (0.003) (0.014)(4) - (0.029) 0.220
1995 0.963 0.013 0.176 0.189 (0.011) (0.005) - - (0.016) 0.173
1994 1.000 0.003 (0.038) (0.035) (0.001) (0.001) - - (0.002) (0.037)
Growth Fund
1998 2.416 0.028 0.436 0.464 (0.028) (0.027) - - (0.055) 0.409
1997 2.333 0.039 0.540 0.579 (0.038) (0.458) - - (0.496) 0.083
1996 2.176 0.047 0.386 0.433 (0.048) (0.228) - - (0.276) 0.157
1995 1.814 0.049 0.539 0.588 (0.049) (0.177) - - (0.226) 0.362
1994 1.939 0.043 (0.041) 0.002 (0.043) (0.084) - - (0.127) (0.125)
Equity
Index Fund
1998 2.753 0.035 0.741 0.776 (0.034) (0.087) - - (0.121) 0.655
1997 2.165 0.034 0.664 0.698 (0.033) (0.077) - - (0.110) 0.588
1996 1.827 0.035 0.370 0.405 (0.035) (0.032) - - (0.067) 0.338
1995 1.468 0.035 0.474 0.509 (0.035) (0.047) (0.002)(4) (0.066) (0.150) 0.359
1994 1.505 0.033 (0.018) 0.015 (0.033) (0.019) - - (0.052) (0.037)
</TABLE>
- -------------------------------------------------------------------------------
* Annualized
** Not Annualized
(A) Including reimbursements, waivers, and reductions.
(B) Excluding reductions. Certain Portfolios have entered into varying
arrangements with brokers who reduced a portion of the Portfolio's
expenses.
(C) Excluding reimbursements and reductions.
(1) The Select International Equity Fund commenced operations on May 2,
1994.
(2) Net investment income (loss) per share before reimbursement of fees by
the investment adviser or reductions were $(0.009) in 1998 and $(0.010)
in 1997 for Select Aggressive Growth Fund; $0.014 in 1998, $0.015 in
1997, $0.011 in 1996 and $0.002 in 1994 for Select International Equity
Fund; and $0.027 in 1998, $0.038 in 1997 and $0.046 in 1996 for Growth
Fund.
(3) Distributions in excess of net realized capital gains.
(4) Distributions in excess of net investment income.
See Notes to Financial Statements
---------------------------------------------------------
F-30
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------
Ratios To Average Net Assets
- ---------------------------------------------------------------------------------------------------
Net Asset Net Assets Net
Value End of Invest- Portfolio
End of Total Period ment Income Operating Expenses Management Fee Turnover
Period Return (000's) (Loss) (A) (B) (C) Gross Net Rate
- --------- ------- ---------- ----------- ----- ----- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2.460 10.56% $752,741 (0.36)% 0.92% 0.95% 0.95% 0.88% 0.88% 99%
2.225 18.71% 604,123 (0.45)% 0.99% 1.04% 1.04% 0.95% 0.95% 95%
2.037 18.55% 407,442 (0.53)% 1.08% 1.08% 1.08% 1.00% 1.00% 113%
1.848 32.28% 254,872 (0.07)% 1.09% - 1.09% 1.00% 1.00% 104%
1.397 (2.31)% 136,573 (0.21)% 1.16% - 1.16% 1.00% 1.00% 100%
1.542 16.48% 505,553 0.99% 1.01% 1.02% 1.02% 0.90% 0.90% 27%
1.341 4.65% 397,915 1.17% 1.15% 1.17% 1.17% 0.97% 0.97% 20%
1.356 21.94% 246,877 1.22% 1.20% 1.23% 1.23% 1.00% 1.00% 18%
1.136 19.63% 104,312 1.68% 1.24% - 1.24% 1.00% 1.00% 24%
0.963 (3.49)%** 40,498 0.87%* 1.50%* - 1.78%* 1.00%* 0.72%* 19%
2.825 19.32% 860,333 1.08% 0.46% 0.49% 0.49% 0.44% 0.44% 100%
2.416 25.14% 728,679 1.48% 0.47% 0.49% 0.49% 0.43% 0.43% 79%
2.333 20.19% 556,751 2.04% 0.48% 0.51% 0.51% 0.44% 0.44% 72%
2.176 32.80% 444,871 2.34% 0.54% - 0.54% 0.46% 0.46% 64%
1.814 0.16% 335,714 2.25% 0.56% - 0.56% 0.48% 0.48% 46%
3.408 28.33% 481,877 1.17% 0.36% 0.36% 0.36% 0.29% 0.29% 6%
2.753 32.41% 297,191 1.38% 0.44% 0.44% 0.44% 0.31% 0.31% 9%
2.165 22.30% 151,130 1.79% 0.46% 0.46% 0.46% 0.32% 0.32% 12%
1.827 36.18% 90,889 1.96% 0.55% - 0.55% 0.34% 0.34% 8%
1.468 1.06% 52,246 2.25% 0.57% - 0.57% 0.35% 0.35% 7%
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------
F-31
<PAGE>
Allmerica Investment Trust
FINANCIAL HIGHLIGHTS -- For a Share Outstanding Throughout Each Year
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Investment Operations Less Distributions
----------------------------------------------- ----------------------------------------------------------------
Net Realized Divi- Distribu- Net
Net and dends tions Increase
Asset Unrealized from Net from Net (Decrease)
Value Net Gain (Loss) Total from Invest- Realized Distribu- Return Total in
Year Ended Beginning Investment on Investment ment Capital tions in of Distri- Net Asset
December 31, of Year Income Investments Operations Income Gains Excess Capital butions Value
- -------------- --------- ---------- ------------ ---------- -------- --------- ---------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Grade
Income Fund
1998 $1.112 $0.067 $ 0.020 $ 0.087 $(0.067) $ - $ - $ - $(0.067) $ 0.020
1997 1.084 0.071 0.028 0.099 (0.071) - - - (0.071) 0.028
1996 1.117 0.070 (0.033) 0.037 (0.070) - - - (0.070) (0.033)
1995 1.012 0.071 0.106 0.177 (0.071) - (0.001)(1) - (0.072) 0.105
1994 1.111 0.066 (0.099) (0.033) (0.066) - - - (0.066) (0.099)
Government
Bond Fund
1998 1.047 0.058 0.021 0.079 (0.058) - - - (0.058) 0.021
1997 1.036 0.061 0.011 0.072 (0.061) - - - (0.061) 0.011
1996 1.062 0.062 (0.026) 0.036 (0.062) - - - (0.062) (0.026)
1995 0.997 0.062 0.066 0.128 (0.062) - (0.001)(1) - (0.063) 0.065
1994 1.070 0.063 (0.073) (0.010) (0.063) - - - (0.063) (0.073)
Money
Market Fund
1998 1.000 0.054 - 0.054 (0.054) - - - (0.054) -
1997 1.000 0.053 - 0.053 (0.053) - - - (0.053) -
1996 1.000 0.052 - 0.052 (0.052) - - - (0.052) -
1995 1.000 0.057 - 0.057 (0.057) - - - (0.057) -
1994 1.000 0.039 - 0.039 (0.039) - - - (0.039) -
</TABLE>
- -------------------------------------------------------------------------------
(A) Including reimbursements and reductions.
(B) Excluding reductions. Certain Portfolios have entered into varying
arrangements with brokers who reduced a portion of the Portfolio's
expenses.
(C) Excluding reimbursements and reductions.
(1) Distributions in excess of net investment income.
See Notes to Financial Statements
--------------------------------------------------------
F-32
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------
Ratios To Average Net Assets
- ---------------------------------------------------------------------------------------------------
Net Asset Net Assets Net
Value End of Invest- Portfolio
End of Total Year ment Operating Expenses Management Fee Turnover
Year Return (000's) Income (A) (B) (C) Gross Net Rate
- --------- ------- ---------- ----------- ----- ----- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.132 7.97% $230,623 6.01% 0.52% 0.52% 0.52% 0.43% 0.43% 158%
1.112 9.45% 189,503 6.48% 0.51% 0.51% 0.51% 0.41% 0.41% 48%
1.084 3.56% 157,327 6.50% 0.52% 0.52% 0.52% 0.40% 0.40% 108%
1.117 17.84% 141,625 6.66% 0.53% - 0.53% 0.41% 0.41% 126%
1.012 (2.96)% 109,972 6.25% 0.58% - 0.58% 0.42% 0.42% 129%
1.068 7.67% 81,018 5.63% 0.64% 0.64% 0.64% 0.50% 0.50% 61%
1.047 7.08% 55,513 5.92% 0.67% 0.67% 0.67% 0.50% 0.50% 56%
1.036 3.51% 46,396 5.90% 0.66% 0.66% 0.66% 0.50% 0.50% 112%
1.062 13.06% 45,778 5.91% 0.69% - 0.69% 0.50% 0.50% 180%
0.997 (0.88)% 42,078 5.60% 0.70% - 0.70% 0.50% 0.50% 106%
1.000 5.51% 336,253 5.36% 0.32% 0.32% 0.32% 0.26% 0.26% N/A
1.000 5.47% 260,620 5.33% 0.35% 0.35% 0.35% 0.27% 0.27% N/A
1.000 5.36% 217,256 5.22% 0.34% 0.34% 0.34% 0.28% 0.28% N/A
1.000 5.84% 155,211 5.68% 0.36% - 0.36% 0.29% 0.29% N/A
1.000 3.93% 95,991 3.94% 0.45% - 0.45% 0.31% 0.31% N/A
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------
F-33
<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 Aggressive Growth, Select
International Equity, Growth, Equity Index, Investment Grade Income, Government
Bond 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 International Equity Fund may
enter into forward foreign currency contracts whereby the Portfolio agrees 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 Portfolio, 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 Portfolio could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts.
F-34
<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 Growth, Equity Index, Investment Grade Income and Government
Bond Funds, and annually for the Select Aggressive Growth and Select
International Equity 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.
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 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.
F-35
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, Continued
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 Investment Grade Income Fund, Government Bond Fund and
Money Market Fund may enter into contracts to purchase securities for a fixed
price at a specified future date beyond customary settlement time ("forward
commitments"). If the 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 Aggressive Growth 1.00% 0.90% 0.85% 0.85% 0.85%
Select International Equity 1.00% 0.90% 0.85% 0.85% 0.85%
Growth 0.60% 0.60% 0.40% 0.35% 0.35%
</TABLE>
<TABLE>
<CAPTION>
First Next Over
Portfolio $50,000,000 $200,000,000 $250,000,000
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Index 0.35% 0.30% 0.25%
Government Bond 0.50% 0.50% 0.50%
Money Market 0.35% 0.25% 0.20%
</TABLE>
F-36
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, Continued
<TABLE>
<CAPTION>
First Next Over
Portfolio $50,000,000 $50,000,000 $100,000,000
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Grade Income 0.50% 0.45% 0.40%
</TABLE>
The Manager has entered into Sub-Adviser Agreements for the management of the
investments of each of the Portfolios. The Manager is solely responsible for the
payment of all fees to the Sub-Advisers. The Sub-Advisers for each of the
Portfolios are as follows:
Select Aggressive Growth Nicholas-Applegate Capital Management, L.P.
Select International Equity Bank of Ireland Asset Management (U.S.) Limited
Growth Miller Anderson & Sherrerd, LLP
Equity Index Allmerica Asset Management, Inc.
Investment Grade Income Allmerica Asset Management, Inc.
Government Bond Allmerica Asset Management, Inc.
Money Market Allmerica Asset Management, Inc.
Miller Anderson & Sherrerd, LLP also manages certain assets for First Allmerica
and its affiliates.
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.
4. REIMBURSEMENT OF EXPENSES AND WAIVER OF FEES
In the event normal operating expenses of each Portfolio, excluding taxes,
interest, broker commissions and extraordinary expenses, but including the
advisory fee, exceed certain voluntary expense limitations by a percentage of
average net assets (Select Aggressive Growth Fund - 1.35%, Select International
Equity Fund - 1.50%, Growth Fund - 1.20%, Equity Index Fund - 0.60%, Investment
Grade Income Fund - 1.00%, Government Bond 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.
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.
F-37
<PAGE>
Allmerica Investment Trust
NOTES TO FINANCIAL STATEMENTS, Continued
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. During the year ended December 31, 1998, First Allmerica redeemed
5,231,487 shares of Select International Equity, and 6,353,213 shares of Equity
Index.
7. FOREIGN SECURITIES AND EMERGING MARKETS
All Portfolios, except the Government Bond Fund, 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.
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 International Equity Fund may enter into these forward
contracts primarily to protect the Portfolio from adverse currency movement.
F-38
<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 Aggressive Growth Fund, Select International Equity Fund, Growth
Fund, Equity Index Fund, Investment Grade Income Fund, Government Bond Fund and
Money Market Fund, (seven 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-39
<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 annual report includes financial statements for Allmerica Investment Trust.
It does not include financial statements for the separate accounts that
correspond to the Allmerica IRA contracts. Separate account financial statements
are not provided.
F-40
<PAGE>
Allmerica IRA
Allmerica Financial is a diversified group of insurance and financial services
companies. Established in 1844, First Allmerica Financial is the fifth oldest,
and one of the most respected, life insurance companies in the nation. Our
financial expertise, combined with a range of insurance and investment products,
allows us to help you create sound financial solutions to meet your individual
needs.
To be preceded or accompanied by the current prospectus. Read it carefully
before investing.
The Allmerica IRA contract is issued by
First Allmerica Financial Life Insurance Company and distributed by
Allmerica Investments, Inc.
[LOGO APPEARS HERE]
First Allmerica Financial Life Insurance Company . Allmerica Financial
Life Insurance and Annuity Company (licensed in all states except NY) .
Allmerica Trust Company, N.A. . Allmerica Investments, Inc. .
Allmerica Investment Management Company, Inc. . The Hanover Insurance Company .
AMGRO, Inc. . Allmerica Financial Alliance Insurance Company .
Allmerica Asset Management, Inc. . Allmerica Financial Benefit Insurance
Company . Sterling Risk Management Services, Inc. . Citizens Corporation .
Citizens Insurance Company of America . Citizens Management Inc.
440 Lincoln Street, Worcester, Massachusetts 01653
[LOGO APPEARS HERE]
10070 (12/98)
