<PAGE>
--------------------
ANNUAL REPORT
--------------------
December 31, 1995
ALLMERICA
SECURITIES
TRUST
--------------------
== A S T ==
<PAGE>
<TABLE>
<CAPTION>
------------------------------------
TRUST INFORMATION CONTENTS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BOARD OF TRUSTEES INDEPENDENT ACCOUNTANT A LETTER FROM THE CHAIRMAN....... 2
John F. O'Brien, Chairman Price Waterhouse LLP
Russell E. Fuller 160 Federal Street BOND MARKET OVERVIEW............. 4
Gordon Holmes Boston, MA 02110
John D. Hunt TRUST OVERVIEW................... 6
John Kavanaugh LEGAL COUNSEL
Attiat F. Ott Ropes & Gray FINANCIALS....................... 7
Paul D. Paganucci One International Place
Richard M. Reilly Boston, MA 02110 SHAREHOLDER INFORMATION..... INSIDE
Ranne P. Warner BACK COVER
Thomas S. Zocco SHAREHOLDER INQUIRIES
MAY BE DIRECTED TO:
OFFICERS The Bank of New York
Richard M. Reilly, President Shareholder Relations
Robert T. Stemple, Vice President, Treasurer Department - IIE
and Principal Accounting Officer P.O. Box 11258
Church Street Station
INVESTMENT ADVISOR New York, NY 10286
Allmerica Asset Management, Inc. 1-800-432-8224
440 Lincoln Street
Worcester, MA 01653
REGISTRAR AND TRANSFER,
DIVIDEND DISBURSING AND
REINVESTMENT AGENT
The Bank of New York
P.O. Box 11258, Church Street Station
New York, NY 10286
CUSTODIAN
Bankers Trust Company
16 Wall Street
New York, NY 10005
ADMINISTRATOR
First Data Investor Services Group
4400 Computer Drive
P.O. Box 5108
Westboro, MA 01581-5108
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
A LETTER FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED:
Photo of
John F. O'Brien]
Dear Client:
It's remarkable how much can change in a year. After disappointing returns in
all sectors of the market for 1994, 1995 brought historic gains in both the
stock and bond markets.
One look at several of the leading indices quickly shows just how phenomenal
these gains were. Fueled primarily by tremendous advances in the technology and
financial sectors, the Standard & Poor's 500(R), an unmanaged index of the 500
leading stocks, capped the year with a total return of 37.5%. Nearly matching
the stock market's record returns, 30-year U.S. Treasury bonds provided a total
return of 34.15%. Investment grade corporate bonds also turned in an
exceptionally strong performance - with a total return of 21.2% for the year, as
measured by the Merrill Lynch Fixed Income Index.
What nurtured this growth in both the equity and fixed income markets was a
somewhat unusual combination of events. While interest rates declined, corporate
earnings soared. And while inflation remained modest, the dollar strengthened.
This year, I was particularly pleased with the ability of our money managers
to capitalize on these favorable conditions. However, as welcome as 1995's
rebound has been, it also underscores the cyclical nature of the financial
markets. To cushion yourself against this inevitable volatility, I encourage you
to remain focused on long-term results. By maintaining a long-term perspective,
you won't be easily tempted to overreact to short-term performance. Think for a
moment about those investors who responded to 1994's disappointing results by
abandoning their investments early in 1995. Because they sold at market lows,
these investors not only lost money early in the year - they also lost out on
tremendous earnings potential throughout the year.
Of course, no one can predict what's ahead for 1996. However, given 1995's
record gains, it would be unrealistic to expect a repeat in 1996. It's important
to keep in mind, though, that it is this very volatility that presents
opportunities.
I also wanted to let you know that, on February 6, 1996, the Allmerica
Securities Trust Board of Trustees declared a quarterly dividend of $.21 per
share, payable March 29, 1996, to shareholders of record on February 29, 1996.
For the 12 months ended December 31, 1995, the Trust paid dividends of $.86 per
share, producing a current yield of 8.19%, based on the year-end closing price
of $10.50. By comparison, the 10-year Treasury note yield was 5.75% on December
31, 1995.
At Allmerica, we look forward to continuing to provide you with a broad array
of products offering investment options managed by some of the world's leading
investment advisers. Not only are we committed to carefully selecting each
manager, we're also focused on continually monitoring their performance -
ensuring they continue to earn their place on Allmerica's elite roster.
On behalf of the Board of Directors,
/s/ JOHN F. O'BRIEN
John F. O'Brien
Chairman
Allmerica Financial Life Insurance and Annuity Company
- -------------------------------------------------------------------------------
"AS WELCOME AS 1995'S REBOUND HAS BEEN, IT ALSO UNDERSCORES THE CYCLICAL NATURE
OF THE FINANCIAL MARKETS. TO CUSHION YOURSELF AGAINST THIS INEVITABLE
VOLATILITY, I URGE YOU TO REMAIN FOCUSED ON LONG-TERM RESULTS."
- -------------------------------------------------------------------------------
<PAGE>
--------------------
OVERVIEW
--------------------
== A S T ==
<PAGE>
BOND MARKET OVERVIEW
1992: Government and corporate bonds outperformed the stock market.
1993: U.S. economy gains momentum. Consumer spending and installment debt
increase.
1994: Federal Reserve Board raises interest rates six times in an effort to slow
down the economy and keep inflation in check.
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.
For the U.S. fixed income market, 1995 was indeed a very favorable year. In
fact, 1995's bond market turned in its third best performance in the past 30
years.
By February 1995, investors became more confident that the Federal Reserve
had successfully piloted its "soft landing" strategy - slowing growth while
controlling inflation. This growing confidence quickly transformed the bond
market's initial negative outlook into expectations for double-digit returns.
Overall, the year's dramatic decline in interest rates rewarded bonds with
longer durations. Thirty-year U.S. Treasury bonds provided a total return
(principal appreciation and interest return) of 34.15% - approaching the
historic return of the U.S. stock market. Conversely, the short-end of the yield
curve turned in a 14.41% total return for the year (as measured by the Lehman
Intermediate Government Index, an unmanaged index of average yield U.S.
intermediate fixed-income bonds).
Corporate bonds were among the market's top-performing issues for 1995. After
advancing only 3.4% in 1994, investment grade corporate bonds achieved a 1995
total return of 21.2% (as measured by the Merrill Lynch Fixed Income Index).
Strong earnings trends, coupled with strong demand and limited new supply,
served to accentuate gains in the corporate sector throughout the year --
particularly in the industrial and finance categories. Not only did corporate
issues offer excellent yield enhancement for many portfolios, they also served
to narrow yield spreads relative to U.S. Treasuries.
After a slow start, high yield bonds also saw increased investor interest in
the second half of 1995. As the stream of positive economic news continued,
concerns about moving up to "quality issues" dissipated. Now willing to accept
potentially higher risks in exchange for the promise of higher returns, more
investors began seeking re-turn opportunities in the high yield market.
Despite a heavy schedule of new issues in the third quarter, the high yield
market delivered solid results. In the fourth quarter, the high yield market
again produced positive performance - but failed to keep pace with both U.S.
Treasuries and investment grade corporate bonds. This underperformance can be
attributed to a variety of factors - including some disappointing third quarter
corporate earnings, increased supply of new issues, and investor concern with
some highly-publicized defaults in the sector.
Mortgage-backed securities proved to be the biggest disappointment in the
1995 fixed income market. These issues, backed by mortgage obligations, were
negatively affected by declining interest rates throughout the year. As
homeowners saw interest rates fall, many decided to refinance their mortgages at
lower rates. This increase in refinancing activity lowered the expected rate of
return on mortgage securities - as loans backing these securities were paid off
earlier than expected.
Even after a small rally in December, mortgage-backed issues still seemed
attractively priced relative to their valuations. However, it remains unclear as
to whether this value will be realized sooner or later.
Going forward, prospects for the overall bond market remain generally
positive - as long as inflation remains in check and economic growth doesn't
resurge. But enthusiasm for fixed income securities could be dampened by a
number of other possible events in 1996 - such as a failure to re-elect the
Federal Reserve Chairman or an inability to resolve the budget impasse in
Washington. Such events could shake investor confidence and precipitate a return
to single-digit returns.
Regardless of specific events, however, it's unlikely that 1996 returns will
be able to match 1995's historic levels, unless there were to be an unexpected
collapse in interest rates.
- --------------------------------------------------------------------
[GRAPHIC OMITTED: two-page time-line spread]
1995
JAN 95
Bond funds rally for the first time in more than a year, up 3.85%.
FEB 95
Confidence builds that the Federal Reserve has succeeded in
engineering a "soft landing."
MAR 95 [GRAPHIC OMITTED: feather]
APR 95
Strong earnings and low volatility make corporate bonds one of the
biggest success stories throughout the year.
MAY 95 [GRAPHIC OMITTED: bridge]
JUNE 95 [GRAPHIC OMITTED: dollar sign]
JULY 95
Federal Reserve lowers target rate for federal funds to 5.75%, easing
money supply.
AUG 95
Low interest rates motivate more refinancing, negatively impacting
mortgage-backed securities.
SEPT 95 [GRAPHIC OMITTED: house]
OCT 95 [GRAPHIC OMITTED: dome]
Budget resolutions in Washington promise progress on federal deficit
reduction.
NOV 95
Federal Reserve lowers federal funds target rate for second time this
year to 5.50%.
Thirty-year U.S. Treasury bonds posted a 34.15% total return,
approaching the return of the U.S. stock market.
DEC 95 [GRAPHIC OMITTED: dollar sign]
Lehman Brothers Government and Corporate Bond Index ends year up
18.43%, the third strongest performance in the last 30 years.
- --------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
Seeks to generate a high rate of current income for distribution to
shareholders.
PERFORMANCE:
Net total return for the one-year period ending December 31, 1995:
Allmerica Securities Trust 18.58%
The Lehman Brothers Aggregate Bond Index 22.25%
Lipper Closed-End General Bond Index 16.90%
PORTFOLIO COMPOSITION:
As of December 31, 1995, the sector allocation of net assets was:
[GRAPHIC OMITTED: pie chart]
Corporate Notes and Bonds 72.09%
U.S. Government and Agency Obligations 17.11%
Asset-Backed Securities 6.48%
Cash Equivalents and Other 4.32%
Allmerica Securities Trust successfully capitalized on the bond market's strong
rally in 1995, posting a total return of 18.58% for the year.
Through the first six months, the Trust significantly outperformed its
benchmark. Corporate bond issues proved particularly rewarding, as strong demand
and limited new supply were complemented by positive earnings trends. The Trust
also benefited from its emphasis on split-rate securities, particularly its
split-rate industrials. These securities, which are rated investment grade by
one nationally-recognized rating agency and below investment grade by another,
even outpaced the corporate sector.
When results for the full year are analyzed, excess returns from the first
half of the year were somewhat offset by two key factors. In general, the
Trust's 40% position in below investment grade securities weakened overall
performance. Two specific corporate security selections also took an unexpected
turn for the worse. National discount retailer K-Mart, in which the Trust owned
a 1% position before selling, suffered from liquidity concerns and bankruptcy
rumors. Sithe Independence Funding Corporation, a New York independent power
producer in which the Trust also owned a 1% position, became vulnerable to
contract renegotiations.
Another challenge for the year was staying ahead of interest rate movements,
given the year's shifting market sentiment and mixed economic messages. During
the first half of the year, the Trust's management changed its interest rate
exposure strategy from a defensive posture to a more positive stance. In the
third quarter, when an economic strengthening seemed likely to push interest
rates up, the Trust's management reduced its interest rate exposure.
For 1996, Allmerica Asset Management remains bullish on corporate bonds. The
Trust's management sees considerable upside potential in several key sectors
which are currently undervalued, including cable, television, media and oil and
gas. With the forecasts for prolonged cold weather, the management also expects
enhanced oil and gas bond prices. Thus, the Trust is fully exposed to these
sectors. The Trust's management also expects improvements in the ratings of the
corporate debt of the three major airlines in 1996. In general, Allmerica Asset
Management remains optimistic about the bond market's prospects.
ALLMERICA SECURITIES TRUST
HISTORICAL PERFORMANCE
- --------------------------------------------------------------------
NAV Total Return
Total Return % on Market Value
- --------------------------------------------------------------------
1991 .................................. 20.33% ............. 20.97%
1992 .................................. 11.09% ............. 20.35%
1993 .................................. 12.65% ............. 6.87%
1994 .................................. (2.41%)............ (12.48%)
1995 .................................. 18.58% ............. 21.71%
- --------------------------------------------------------------------
The Lipper Closed-End General Bond Index is an unmanaged index of the top 30
funds within the closed-end general bond category. The Lehman Corporate Bond
Index is an unmanaged index of all publically issued, fixed-rate,
non-convertible investment grade corporate debt. Past performance is not
indicative of future results.
<PAGE>
--------------------
FINANCIALS
--------------------
== A S T ==
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
PORTFOLIO OF INVESTMENTS O DECEMBER 31, 1995
- --------------------------------------------------------------------------------
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
CORPORATE NOTES AND BONDS - 72.09%
OIL, GAS, AND PETROLEUM - 21.38%
$2,000,000 ANR Pipeline Co.
9.63%, 11/01/21 $ 2,579,740
2,100,000 Arkla, Inc., Debenture
8.90%, 12/15/06 2,346,036
500,000 Buckeye Pipeline LP
First Mortgage, Series I
9.72%, 12/15/96 (B) 516,140
1,500,000 Cincinnati Gas & Electric Co.
7.20%, 10/01/23 1,510,590
1,000,000 Clark Oil & Refining Corp., Senior Notes
9.50%, 09/15/04 1,032,500
1,000,000 Parker & Parsley Petroleum Co., Senior Notes
8.88%, 04/15/05 1,128,090
1,450,000 Seagull Energy Corp.
7.88%, 08/01/03 1,442,750
1,250,000 Snyder Oil Corp., Subordinated Notes
7.00%, 05/15/01 1,159,375
1,500,000 Southwest Gas Corp., Debenture
9.38%, 02/01/17 1,579,080
1,500,000 Texas Eastern Transmission Corp.
10.00%, 08/15/01 1,761,195
600,000 Texas Utilities Electric Co.
First Mortgage
7.38%, 10/01/25 603,954
1,000,000 Tosco Corp.
7.00%, 07/15/00 1,013,750
1,500,000 Transcontinental Gas Pipe Line Corp.
9.00%, 11/15/96 1,539,735
2,000,000 USX-Marathon Group, Inc.
8.88%, 09/15/97 2,095,380
1,000,000 Valero Management Partnership, LP
First Mortgage Notes, Series J
10.02%, 03/15/07 (B) 1,169,820
------------
21,478,135
------------
FINANCIAL - 5.76%
1,000,000 Cenfed Financial Corp.
11.17%, 12/15/01 (A) 1,111,250
1,000,000 Center Financial Corp.
8.38%, 10/01/02 1,033,750
1,000,000 First Tennessee National Corp.
Subordinated Notes
6.75%, 11/15/05 1,020,460
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
$ 502,964 Jennifer Holding Corp.
12.25%, 12/30/98 (B) $ 523,249
1,000,000 Mack Trust, Inc.
10.91%, 04/01/99 (B) 1,065,480
1,000,000 St. George Bank
Subordinated Notes
7.15%, 10/15/05 (A) 1,035,060
------------
5,789,249
------------
UTILITIES - 5.20%
804,091 Midland Cogeneration Venture, Series C-91
10.33%, 07/23/02 836,255
1,416,000 North Atlantic Energy Corp.
First Mortgage, Series A
9.05%, 06/01/02 1,449,956
1,270,000 Sithe/Independence Funding Corp., Series A
9.00%, 12/30/13 1,335,075
1,500,000 Texas-New Mexico Power Co.
First Mortgage, Series U
9.25%, 09/15/00 1,606,755
------------
5,228,041
------------
COMMUNICATIONS - 5.09%
1,000,000 C-Tec Cable Systems, Inc.
Senior Securitized Notes
9.65%, 09/01/99 (B) 1,066,960
1,000,000 Continental Cablevision, Inc., Senior Notes
8.50%, 09/15/01 1,037,500
750,000 Continental Cablevision, Inc., Senior Notes
8.30%, 05/15/06 (A) 752,813
555,000 GTE Corp.
8.75%, 11/01/21 659,063
500,000 Kerrville Telephone Co.
9.76%, 03/29/00 (B) 535,500
1,000,000 Viacom, Inc.
7.75%, 06/01/05 1,061,970
------------
5,113,806
------------
PRIMARY METALS - 4.75%
2,000,000 Bethlehem Steel Corp., Senior Notes
10.38%, 09/01/03 2,110,000
500,000 Cyprus Amax Minerals Co.
9.88%, 06/13/01 583,810
2,000,000 Usinor Sacilor, Senior Notes, Series A
7.26%, 03/25/04 (B) 2,081,680
------------
4,775,490
------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
PORTFOLIO OF INVESTMENTS, CONTINUED O DECEMBER 31, 1995
- --------------------------------------------------------------------------------
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
SECURITIES BROKERS, DEALERS AND EXCHANGES - 4.28%
$1,000,000 Donaldson Lufkin & Jenrette, Inc.
6.88%, 11/01/05 $ 1,025,010
1,000,000 Jones, Edward D. & Co., LP
7.95%, 04/15/06 (B) 1,044,720
2,000,000 Lehman Brothers, Inc.
Senior Subordinated Notes
10.00%, 05/15/99 2,232,980
------------
4,302,710
------------
INDUSTRIAL - 4.24%
1,000,000 RPM, Inc., Senior Notes
7.00%, 06/15/05 996,130
1,300,000 Unisys Corp.
8.88%, 07/15/97 1,150,500
2,000,000 Westinghouse Electric Corp.
8.88%, 06/01/01 2,116,400
------------
4,263,030
------------
TRANSPORTATION - 4.16%
1,000,000 AMR Corp.
10.00%, 02/01/01 1,148,800
1,592,194 Delta Airlines, Inc.
9.23%, 07/02/02 (B) 1,693,028
659,000 US Air, Inc., Series D
10.30%, 01/15/00 665,544
661,000 US Air, Inc., Series F
10.30%, 01/15/00 667,564
------------
4,174,936
------------
PAPER - 3.61%
1,500,000 Boise Cascade Corp.
10.13%, 12/15/97 1,612,785
1,000,000 Fort Howard Corp.
8.25%, 02/01/02 975,000
1,000,000 Stone Container Corp., Senior Notes
11.88%, 12/01/98 1,042,500
------------
3,630,285
------------
MERCHANDISING AND RETAIL - 3.19%
1,000,000 Federated Department Stores Inc.,
Senior Notes
10.00%, 02/15/01 1,080,000
1,000,000 Kroger Co.
10.00%, 05/01/99 1,090,000
1,000,000 USG Corp., Senior Notes
8.50%, 08/01/05 1,035,000
------------
3,205,000
------------
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
PRINTING AND PUBLISHING - 3.15%
$1,000,000 News America Holdings Inc., Senior Notes
12.00%, 12/15/01 $ 1,112,930
850,000 Time Warner Entertainment Co., LP
8.38%, 03/15/23 915,034
1,000,000 Time Warner, Inc.
9.15%, 02/01/23 1,134,040
------------
3,162,004
------------
CONSUMER PRODUCTS - 3.02%
1,000,000 Chiquita Brands International, Inc.
Senior Notes
9.13%, 03/01/04 990,000
1,900,000 Ralston Purina Co.
7.75%, 10/01/15 2,040,752
------------
3,030,752
------------
MANUFACTURING INDUSTRIES - 2.16%
1,000,000 Inland Steel Industries, Inc.
12.75%, 12/15/02 1,125,000
1,000,000 Wyman-Gordon Co., Senior Notes
10.75%, 03/15/03 1,045,000
------------
2,170,000
------------
HEALTH CARE - 1.09%
1,000,000 Tenet Healthcare Corp., Senior Notes
9.63%, 09/01/02 1,100,000
------------
PHARMACEUTICALS - 1.01%
1,000,000 Georgia Gulf Corp.
7.63%, 11/15/05 1,011,250
------------
TOTAL CORPORATE NOTES AND BONDS 72,434,688
(Cost $69,048,590) ------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 17.11%
U.S. TREASURY BONDS - 13.41%
3,300,000 7.25%, 05/15/16 3,768,171
8,492,000 7.13%, 02/15/23 9,710,089
------------
13,478,260
------------
See Notes to Financial Statements.
<PAGE>
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ALLMERICA SECURITIES TRUST
PORTFOLIO OF INVESTMENTS, CONTINUED O DECEMBER 31, 1995
- --------------------------------------------------------------------------------
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES - 3.12%
$1,400,000 7.75%, 01/31/00 $ 1,520,750
1,600,000 5.75%, 08/15/03 1,619,248
------------
3,139,998
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (C) - 0.58%
374,215 9.00%, 06/15/16 398,759
170,712 9.00%, 07/15/16 181,909
------------
580,668
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 17,198,926
(Cost $15,889,629) ------------
ASSET-BACKED SECURITIES - 6.48%
1,000,000 American Airlines 1991-C2
Pass Through Trusts
9.73%, 09/29/14 1,118,750
732,885 Eaglemark Trust 1995-1
Harley-Davidson
6.80%, 12/15/01 (A) 740,214
888,859 Green Tree Financial Corp. 1995-A
7.25%, 07/15/05 901,359
1,000,000 Premier Auto Trust, Class A-4, Series 1995-4
6.00%, 05/06/00 1,010,310
1,418,087 United Air Lines 1991-A
Pass Through Trusts
9.30%, 03/22/08 1,590,285
199,002 Western Financial 1994-2 Grantor Trust,
Class A2 6.38%, 09/01/99 200,277
931,222 Western Financial 1995-2 Grantor
Trust, Class A2 7.10%, 07/01/00 947,664
------------
TOTAL ASSET-BACKED SECURITIES 6,508,859
(Cost $6,158,322) ------------
VALUE
PAR VALUE (NOTE 2)
- --------------------------------------------------------------------------------
BRADY BONDS (D) - 2.21%
$ 950,000 Columbia, Republic of
7.25%, 02/23/04 $ 911,278
1,500,000 United Mexican States
8.50%, 09/15/02 1,305,000
------------
TOTAL BRADY BONDS 2,216,278
(Cost $2,109,474) ------------
SHARES
- ------
INVESTMENT COMPANIES - 0.25%
674 Goldman Sachs Financial Square Prime
Obligation Portfolio Fund 674
250,972 Lehman Brothers Prime Fund, Class A 250,972
------------
TOTAL INVESTMENT COMPANIES 251,646
(Cost $251,646) ------------
TOTAL INVESTMENTS - 98.14% 98,610,397
(Cost $93,457,661) ------------
NET OTHER ASSETS AND LIABILITIES - 1.86% 1,872,723
------------
NET ASSETS - 100.00% $100,483,120
============
- --------------------
(A) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold, in transactions exempt from
registration, to qualified institutional buyers. At December 31, 1995,
these securities amounted to $3,639,337 or 3.62% of net assets.
(B) Restricted Securities - represent ownership in private placement
investments which have not been registered with the Securities and Exchange
Commission under the Securities Act of 1933. For information concerning
each restricted security, see Note 7.
(C) Pass Through Certificates
(D) U.S. Currency Denominated
See Notes to Financial Statements.
<PAGE>
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ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES o DECEMBER 31, 1995
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost........................................................................ $ 93,457,661
Net unrealized appreciation (depreciation)................................................. 5,152,736
-------------
Total investments at value.............................................................. 98,610,397
Cash ........................................................................................ 529
Short term investments held as collateral for securities loaned (Note 2)...................... 5,160,540
Interest and dividend receivables............................................................. 2,013,424
-------------
Total Assets............................................................................ 105,784,890
-------------
LIABILITIES:
Advisory fee payable (Note 3)................................................................. 41,950
Accrued expenses and other payables........................................................... 99,280
Collateral for securities loaned (Note 2)..................................................... 5,160,540
-------------
Total Liabilities....................................................................... 5,301,770
-------------
NET ASSETS....................................................................................... $ 100,483,120
=============
NET ASSETS CONSIST OF:
Par Value (Note 4)............................................................................ $ 8,592,306
Paid-in capital............................................................................... 88,551,952
Undistributed net investment income........................................................... 139,625
Accumulated (distribution in excess of) net realized gain (loss) on investments sold.......... (1,953,499)
Net unrealized appreciation (depreciation) of investments..................................... 5,152,736
-------------
TOTAL NET ASSETS................................................................................. $ 100,483,120
=============
SHARES OF BENEFICIAL INTEREST OUTSTANDING ($10,000,000 AUTHORIZED SHARES WITH PAR VALUE OF $1.00) 8,592,306
NET ASSET VALUE
Offering and redemption price per share (Net Assets / Shares Outstanding)..................... $ 11.69
=============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS o FOR THE YEAR ENDED DECEMBER 31, 1995
<S> <C>
INVESTMENT INCOME:
Interest (Note 2)............................................................................. $ 7,959,711
Dividends (Note 2)............................................................................ 174,857
-------------
Total investment income.................................................................... 8,134,568
-------------
EXPENSES:
Investment advisory fees (Note 3)............................................................. 491,155
Custodian fees................................................................................ 4,000
Fund accounting fees (Note 3)................................................................. 38,000
Transfer agent fees........................................................................... 90,000
Legal fees.................................................................................... 5,000
Audit fees.................................................................................... 10,000
Trustees' fees and expenses (Note 3).......................................................... 11,182
Reports to shareholders....................................................................... 54,759
New York Stock Exchange fees.................................................................. 17,000
Miscellaneous................................................................................. 20,826
-------------
Total expenses............................................................................. 741,922
-------------
NET INVESTMENT INCOME............................................................................ 7,392,646
-------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Net realized gain (loss) on investments sold.................................................. 626,599
Net change in unrealized appreciation (depreciation) of investments........................... 8,395,355
-------------
NET GAIN (LOSS) ON INVESTMENTS................................................................... 9,021,954
-------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS.............................................................. $ 16,414,600
=============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
1995 1994
---------------------------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF YEAR...................................... $ 91,457,903 $ 101,161,467
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................................. 7,392,646 7,242,802
Net realized gain (loss) on investments sold...................... 626,599 (364,763)
Net change in unrealized appreciation (depreciation) of investments 8,395,355 (9,277,770)
-------------- --------------
Net increase (decrease) in net assets resulting from operations... 16,414,600 (2,399,731)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. (7,389,383) (7,303,833)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Issued to shareholders in reinvestment of dividends............... -- --
-------------- --------------
Total increase (decrease) in net assets........................ 9,025,217 (9,703,564)
-------------- --------------
NET ASSETS AT END OF YEAR (INCLUDING LINE A)......................... $ 100,483,120 $ 91,457,903
============== ==============
(A) Undistributed net investment income............................. $ 139,625 $ 80,564
============== ==============
OTHER INFORMATION:
SHARE TRANSACTIONS:
Issued to shareholders in reinvestment of dividends............... -- --
============== ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year........... $ 10.644 $ 11.773 $ 11.302 $ 11.084 $ 10.110
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income..................... 0.860 0.843 0.909 0.954 0.980
Net realized and unrealized gain (loss)
on investments......................... 1.050 (1.122) 0.472 0.234 0.964
--------- -------- -------- -------- --------
Total from Investment Operations:... 1.910 (0.279) 1.381 1.188 1.944
--------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income...... (0.860) (0.850) (0.910) (0.970) (0.970)
--------- -------- -------- -------- --------
Net increase (decrease) in net asset value... 1.050 (1.129) 0.471 0.218 0.974
--------- -------- -------- -------- --------
Net Asset Value, end of year ................ $ 11.694 $ 10.644 $ 11.773 $ 11.302 $ 11.084
========= ======== ======== ======== ========
Market Value, end of year.................... $ 10.500 $ 9.375 $ 11.625 $ 11.750 $ 10.625
========= ======== ======== ======== ========
Total Return on Market Value................. 21.71% (12.48)% 6.87% 20.35% 20.97%
Ratios/Supplemental Data:
Net Assets, end of year (000's).............. $ 100,483 $ 91,458 $101,161 $ 95,417 $ 93,571
Ratios to average net assets:
Net investment income..................... 7.64% 7.59% 7.72% 8.49% 9.29%
Operating expenses........................ 0.77% 0.78% 0.74% 0.76% 0.77%
Portfolio Turnover Rate...................... 42% 42% 55% 55% 43%
</TABLE>
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS o DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Allmerica Securities Trust (the "Trust"), was organized as a Massachusetts
business trust on June 30, 1986 and is registered under the Investment Company
Act of 1940, as amended, as a diversified, closed-end management investment
company. The primary investment objective is to provide a high rate of current
income with capital appreciation as a secondary objective.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make 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 period. Actual results
could differ from those estimates.
The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles consistently followed
by the Trust in the preparation of its financial statements.
SECURITY VALUATION
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. Short-term investments that
mature in 60 days or less are valued at amortized cost. At December 31, 1995,
prices of securities whose total value represented 7.9% of net assets were
available only from a principal market maker. These prices may differ from what
would have been used had a broader market for securities existed.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Net realized gains and
losses on investments sold are recorded on the basis of identified cost.
Interest income is recorded on the accrual basis and consists of interest
accrued and, if applicable, discount earned. Dividend income is recorded on the
ex-dividend date.
FEDERAL TAXES
The Trust intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended. By so
qualifying, the Trust will not be subject to Federal income taxes to the extent
that it distributes all of its taxable income and net realized gains, if any,
for its 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, the Trust will not be subject to Federal excise
tax. Therefore, no Federal income tax provision is required.
Paid-in capital, undistributed net investment income and accumulated net
realized gain have been adjusted for permanent book-tax differences.
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS
Dividends to shareholders from net investment income are recorded on the
ex-dividend date and paid quarterly. Net realized capital gains, if any, are
distributed at least annually. 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 treatment for paydown gains/losses on certain securities, market
discounts and losses deferred due to wash sales. Any taxable income or gain
remaining at fiscal year end will be distributed in the following year.
Current year permanent book-tax differences, if any, are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the Financial Highlights.
SECURITIES LENDING
The Trust loans securities to certain brokers who pay the Trust's negotiated
lenders' fees. Collateral must be maintained at a value at least equal to the
value at all times of the securities lent. At December 31, 1995, bonds with
aggregate value of approximately $4,975,090 were on loan to brokers. The loans
were secured with cash collateral of $5,160,540, which was subsequently invested
in cash equivalents. The related income earned was $35,890 which is included in
interest income for the year ended December 31, 1995.
3. INVESTMENT ADVISORY FEES AND
OTHER RELATED PARTY TRANSACTIONS
Allmerica Asset Management, Inc. ("AAM"), a wholly-owned subsidiary of First
Allmerica Financial Life Insurance Company ("First Allmerica", effective October
16, 1995), formerly State Mutual Life Assurance Company of America, serves as
Investment Adviser to the Trust. For these services, the Trust pays AAM
aggregate monthly compensation at an annual rate of (a) 3/10 of 1% of average
total net assets plus (b) 2-1/2% of the amount of interest and dividend income.
In the event normal operating expenses of the Trust, excluding taxes,
interest, brokerage commissions and extraordinary expenses, but including the
investment advisory fee, exceed 1.5% of the first $30,000,000 of the Trust's
average weekly net assets and 1% of the Trust's average total net assets in
excess of $30,000,000 for any fiscal year, AAM will bear such expenses.
AAM has entered into an Administrative Services Agreement with First Data
Investors Services Group, Inc. ("FDISG"), formerly The Shareholder Services
Group, Inc., a wholly-owned subsidiary of First Data Corporation, whereby FDISG
performs administrative services for the Portfolio and is entitled to receive an
administrative fee and certain out-of-pocket expenses. AAM is solely responsible
for the payment of the administration fee to FDISG. In a separate agreement,
FDISG receives fees from the Portfolio for certain fund accounting services
provided in its capacity as pricing and bookkeeping agent. Prior to March 31,
1995, the fund accounting services were provided by 440 Financial Group of
Worcester, Inc., a wholly-owned subsidiary of State Mutual Life Assurance
Company of America, under the same fee structure. On that date, FDISG acquired
substantially all of the assets of 440 Financial Group of Worcester, Inc.. 440
Financial, an affiliate of First Allmerica, received fees of $9,283 for fund
accounting expense for the period January 1 through March 31, 1995.
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. SHARES OF BENEFICIAL INTEREST
There are 10,000,000 shares of $1.00 par value common stock authorized.
5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, for the year ended December 31, 1995 were as
follows:
PURCHASES SALES
GOVERNMENT OTHER GOVERNMENT OTHER
- --------------------------------------------------------------------------------
$29,222,508 $23,651,721 $19,427,931 $16,617,165
At December 31, 1995 aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost and aggregate gross
unrealized depreciation for all securities in which there was an excess of tax
cost over value were as follows:
TAX BASIS
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION) COST
- --------------------------------------------------------------------------------
$5,638,017 $485,281 $5,152,736 $93,457,661
6. CAPITAL LOSS CARRYFORWARD
As of December 31, 1995, the Trust had available for Federal tax purposes unused
capital loss carryforwards of $234,835, $1,458,655 and $260,009 expiring in
1997, 1998 and 2002, respectively. For the year ended December 31, 1995, the
Trust utilized $466,047 of capital loss carryforwards.
7. RESTRICTED SECURITIES
At December 31, 1995, the Trust owned the following restricted securities
constituting 9.65% of net assets which may not be publicly sold without
registration under the Securities Act of 1933. The Trust would bear the
registration costs in connection with the disposition of restricted securities
held in the portfolio. The Trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees. Additional information on
restricted securities is as follows:
<TABLE>
<CAPTION>
DATE OF PAR COST AT
DESCRIPTION ACQUISITION AMOUNT ACQUISITION VALUE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Buckeye Pipeline Co., L.P. 12/23/86 $ 500,000 $ 500,000 $ 516,140
C-Tec Cable Systems, Inc. 07/06/89 1,000,000 1,000,000 1,066,960
Delta Airlines, Inc. 12/12/91 1,592,194 1,610,978 1,693,028
Jennifer Holding Corp. 07/17/87 502,964 535,157 523,249
Jones, Edward D. & Co., L.P. 05/06/94 1,000,000 1,000,000 1,044,720
Kerrville Telephone Co. 02/09/90 500,000 500,000 535,500
Mack Trust, Inc. 07/14/95 1,000,000 1,041,920 1,065,480
Usinor Sacilor 01/14/94 2,000,000 2,000,000 2,081,680
Valero Management Partnership, L.P. 03/04/87 1,000,000 1,000,000 1,169,820
-----------------------------------
Total $ 9,188,055 $ 9,696,577
===================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders
of Allmerica Securities Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, 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 Allmerica Securities Trust,
(hereafter referred to as the "Trust") at December 31, 1995, and the results of
its operations, the changes in its net assets, and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 8, 1996
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
OTHER INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS (Unaudited):
At the Annual Meeting of Shareholders, held on April 19, 1995, results of
shareholder voting for the election of Trustees were as follows:
SHARES FOR NAME OF TRUSTEE % OF SHS VOTED SHS WITHHELD
---------- --------------- -------------- ------------
6,293,247 John F. O'Brien 97.1 184,864
6,335,307 Russell E. Fuller 97.8 142,804
6,289,400 Gordon Holmes 97.1 188,711
6,331,066 John D. Hunt 97.7 147,045
6,291,963 John P. Kavanaugh 97.1 186,148
6,291,170 Attiat F. Ott 97.1 186,941
6,335,603 Paul D. Paganucci 97.8 142,508
6,336,822 Richard M. Reilly 97.8 141,289
6,286,015 Ranne P. Warner 97.0 192,096
6,333,984 Thomas S. Zocco 97.8 144,127
By a vote of 6,315,562 shares in favor, representing 73.50% of shares
outstanding, shareholders ratified and approved the appointment of Price
Waterhouse LLP as independent accountants for the Trust.
QUARTERLY DATA (Unaudited):
<TABLE>
<CAPTION>
NET REALIZED AND NET INCREASE (DECREASE)
NET INVESTMENT UNREALIZED GAINS (LOSSES) IN NET ASSETS RESULTING
INCOME ON INVESTMENTS FROM OPERATIONS
QUARTERLY TOTAL PER PER PER
PERIOD INCOME AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1993
3/31/93 $ 2,140,083 $ 1,958,737 $ 0.23 $ 3,306,578 $ 0.39 $ 5,265,315 $ 0.62
6/30/93 2,114,011 1,927,053 0.23 1,307,837 0.15 3,234,890 0.38
9/30/93 2,131,502 1,940,230 0.23 589,036 0.07 2,529,266 0.30
12/31/93 2,099,968 1,918,425 0.22 (1,203,773) (0.14) 714,652 0.08
1994
3/31/94 2,051,933 1,866,933 0.22 (4,283,505) (0.50) (2,416,572) (0.28)
6/30/94 1,946,889 1,756,990 0.20 (3,048,006) (0.36) (1,291,016) (0.15)
9/30/94 2,007,141 1,818,461 0.21 (541,387) (0.06) 1,277,074 0.15
12/31/94 1,980,461 1,800,418 0.21 (1,769,635) (0.21) 30,783 0.00
1995
3/31/95 2,011,795 1,831,470 0.21 2,300,857 0.27 4,132,327 0.48
6/30/95 2,005,417 1,822,485 0.21 4,093,980 0.48 5,916,465 0.69
9/30/95 2,075,239 1,896,060 0.22 432,024 0.05 2,328,084 0.27
12/31/95 2,042,117 1,842,631 0.22 2,195,093 0.25 4,037,724 0.47
</TABLE>
<PAGE>
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
AUTOMATIC DIVIDEND
INVESTMENT PLAN
As a shareholder, you may participate in the Trust's Automatic Dividend
Investment Plan. Under the plan, dividends and other distributions are
automatically invested in additional full and fractional shares of the Trust to
be held on deposit in your account. Such dividends and other distributions are
invested at the net asset value if lower than market price plus brokerage
commission or, if higher, at the market price plus brokerage commission. You
will receive a statement after each payment date for a dividend or other
distribution that will show the details of the transaction and the status of
your account. You may terminate participation in or rejoin the plan at any time.
CASH INVESTMENT PLAN
The cash investment plan provides a systematic, convenient and inexpensive
means to increase your investment in the Trust by putting your cash to work. The
plan permits you to invest amounts ranging from $25 to $1,000 in any one month
to purchase additional shares of the Trust. Regular monthly investment is not
required.
Your funds are consolidated with funds of other participants to purchase
shares. Shares are purchased in bulk and you realize the commission savings. You
pay only a service charge of $1.00 per transaction and your proportionate share
of the brokerage commission.
Your account will be credited with full and fractional shares purchased.
Following each investment, you will receive a statement showing the details of
the transaction and the current status of the account. The plan is voluntary and
you may terminate at any time.
<PAGE>
[LOGO]
ALLMERICA
FINANCIAL(R)
First Allmerica Financial Life Insurance Company
Allmerica Financial Life Insurance and Annuity Company
(licensed in all states except NY and HI)
Allmerica Trust Company, N.A. o Allmerica Investments, Inc.
Allmerica Investment Management Company, Inc.
Allmerica Asset Management, Inc. o Allmerica Property & Casualty Companies, Inc.
The Hanover Insurance Company o Sterling Risk Management Services, Inc.
Citizens Corporation o Citizens Insurance Company of America o AMGRO, Inc.
440 Lincoln Street, Worcester, Massachusetts 01653
08112 (12/95) [LOGO] Printed on Recycled Paper
