<PAGE>
December 31, 1996
Allmerica
Securities
Trust
[LOGO OF ALLMERICA SECURITIES TRUST APPEARS HERE]
<PAGE>
TRUST INFORMATION
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
John F. O'Brien, Chairman
Russell E. Fuller
Gordon Holmes
John P. Kavanaugh
Bruce E. Langton
Attiat F. Ott
Paul D. Paganucci
Richard M. Reilly
Ranne P. Warner
OFFICERS
Richard M. Reilly, President
Thomas P. Cunningham, Treasurer
INVESTMENT ADVISER
Allmerica Asset Management, Inc.
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
Westborough, MA 01581
INDEPENDENT ACCOUNTANT
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
SHAREHOLDER INQUIRIES
MAY BE DIRECTED TO:
The Bank of New York
Shareholder Relations
Department - 11E
P.O. Box 11258
Church Street Station
New York, NY 10286
1-800-432-8224
- ----------------------------------
CONTENTS
- ----------------------------------
A Letter From the Chairman.......2
Bond and Money
Market Overview................4-5
Trust Overview...................6
Financials.....................F-1
Shareholder Information.....Inside
Back Cover
<PAGE>
- --------------------------------------------------------------------------------
A Letter From the Chairman
- --------------------------------------------------------------------------------
[PHOTO OF JOHN F. O'BRIEN, CHAIRMAN, ALLMERICA SECURITIES TRUST APPEARS HERE]
Dear Client:
During 1996, the bond market was characterized by volatility as investors'
expectations changed throughout the year. January's optimism that interest rates
would continue to decline and that the economy was weakening gave way to fears
of a stronger economy as economic data became available. This reversed
investors' expectations and raised fears that the Federal Reserve might raise
interest rates.
In anticipation, intermediate and long-term interest rates rose almost
three-quarters of a percentage point during the first quarter. Interest rates
fluctuated throughout the remainder of the year as investors' expectations
continued to alternate between moderate and fast economic growth. But despite
these fluctuations, rates ended up within roughly 0.10% of their second-quarter
starting point. The net result of all this sound and fury was that the Lehman
Aggregate Bond Index, a benchmark used by many bond investors, finished with a
modest 3.61% increase for the year. This was the third lowest return for the
index in the last ten years.
Against this backdrop, we are pleased with the performance of the Allmerica
Securities Trust, which reported a total return of 5.35% for the year. The Trust
concentrates on buying investments with solid yields while making only modest
use of U.S. Treasury instruments. So while almost all bond funds were negatively
affected by the overall rise in interest rates, those funds investing in higher
yielding assets tended to have a larger cushion to offset the negative effect of
rising interest rates. A year like 1996 helps support the philosophy of our
investment adviser, who invests based on the premise that yield wins over time.
While the outlook for 1997 is not clear, we believe the Trust continues to be
well-positioned to provide competitive returns to our shareholders.
I am pleased to announce that on February 11, 1997, the Allmerica Securities
Trust Board of Trustees declared a quarterly dividend of $0.21 per share,
payable March 31, 1997 to shareholders of record on February 28, 1997. For the
12-month period ending December 31, 1996, the Trust paid dividends of $0.86 per
share, producing a current yield of 8.3% based on the year-end closing price of
$10.25. By comparison, the 10-year Treasury note yield was 6.42% on
December 31, 1996.
All of us at Allmerica look forward to continually providing you with a broad
array of investment and retirement products managed by some of the leading money
managers in the world.
On behalf of the Board of Trustees,
/s/ John F. O'Brien
John F. O'Brien
Chairman
Allmerica Securities Trust
- --------------------------------------
A year like 1996 helps support the
philosophy of our investment adviser,
who invests based on the premise that
yield wins over time.
- --------------------------------------
2
<PAGE>
------------
overview
------------
[=AST= APPEARS HERE]
3
<PAGE>
BOND &
MONEY MARKET
OVERVIEW
1992: Government and corporate bonds outperformed the stock market.
1993: U.S. economy gains momentum. Consumer spending and installment debt
increase.
1994: Federal Reserve Board raises interest rates six times in an effort to
slow down the economy and keep inflation in check, sending bond prices sharply
lower.
1995: U.S. bond market enjoys its third best performance in 30 years, thanks to
strong total returns from 30-year U.S. Treasuries and corporate issues.
1996: Outlook for Federal Reserve policy affects U.S. bond market. Long-
predicted interest rate cuts, which would have fueled this market, never occur.
After experiencing the euphoria of double-digit returns in 1995, investors
entered 1996 with expectations of strong performance. Poised for positive
results, investors expected a series of short-term interest rate reductions.
Recessionary fears dominated the outlook for the economy and forced the Federal
Reserve to lower interest rates by one-fourth of a percentage point early in the
first quarter.
While most market experts predicted further interest rate reductions, those
cuts never materialized. In fact, economic data showed the economy was growing
at a much faster rate than expected, as evidenced by the February Employment
Report which showed a 705,000 increase in jobs.
From that point on, investors and analysts alike worried which way interest
rates would move, leaving the fixed income market extremely vulnerable to sudden
shifts. Just as one economic indicator would point toward a reviving economy,
another one would show signs of slowing growth.
By the end of June, several signs of moderating growth seemed to calm
investor concerns that the economy was overheated. Prices of most commodities as
well as consumer goods remained subdued. The consumer, hampered by existing high
debt burdens, showed little inclination to go on a spending spree. And the
manufacturing sector, outside of autos, exhibited only modest signs of
improvement.
In the fall, the market settled down as it became apparent President Clinton
would be re-elected and the Republicans would control the House and Senate.
Consequently, the bond market performed well, especially in October and
November, as yields on the 30-year Treasury bond fell to about 6.3%.
Unfortunately, year-end investor anxiety ultimately limited market gains.
[TIME LINE GRAPHIC STARTS HERE AND STOPS WITH THE END OF THE PAGE]
JAN 96 Investors worry all year about which way interest rates will move,
leaving the bond market vulnerable to sudden shifts.
[GRAPHIC DEPICTING A BIG QUESTION MARK ON A GRAPH APPEARS HERE]
APR 96 Economic data shows economy growing at a much faster rate than
expected, bad news for bond investors.
[GRAPHIC DEPICTING AN INCREASINGLY UPWARD JAGGED ARROW ON A GRAPH APPEARS HERE]
1996 JAN 96 FEB 96 MAR 96 APR 96 MAY 96 JUNE 96
- --------------------------------------------------------------------------------
FEB 96 Anticipating a recession, Federal Reserve lowers target rate for
Federal Funds by 0.25%.
[GRAPHIC DEPICTING A DOLLAR SIGN ON A DIAMOND TRAFFIC SIGN APPEARS HERE]
MAY 96 High yield bonds prove to be highest performing sector of fixed income
market.
4
<PAGE>
Overall, results were varied for different fixed income sectors. The effect of
the market's volatility was reflected in 30-year U.S. Treasury yields, as their
yield fluctuated from a low of 5.95% in January to a July high of 7.2%. The
Lehman Brothers Aggregate Bond Index, an industry benchmark, produced a total
return of 3.61% as of December 31, 1996, which was down from 1995's spectacular
18.47% results.
Investing in corporate bonds in 1996, on the other hand, proved to be a
particularly sound strategy, as this segment of the bond market was one of the
year's best performers. Strong credit fundamentals, ongoing demand and a
moderate level of supply all contributed to its success. Among the top-returning
corporate sectors were energy, driven by stabilizing oil prices and airlines,
benefiting from the first industry profits since 1979.
Another truly bright spot in the fixed income securities market was high-yield
bonds, which returned approximately 13.5% for the year. Their relatively strong
performance can be attributed to two key factors. First, high-yield bonds are
less sensitive to changes in interest rates than other types of bonds. Secondly,
the strong U.S. economy allayed investors'concerns about credit risk over the
near-term. So even though the supply of new high-yield issues increased during
the second quarter of 1996, heavy demand sustained prices, because investors
sought higher yields.
In addition, mortgage-backed securities performed admirably for the year. This
sector of the fixed income market outperformed comparable Treasuries by nearly
one percentage point.
In the money markets, yields on bank certificates of deposits ended the year
just slightly higher than where they began the year. A one-year certificate of
deposit, for example, yielded approximately 4.95% -almost 1995's year-end yield.
As a result, the total return for Money Market funds closely approximated their
end of the year yield. The average seven-day compound yield on a taxable money
fund hovered around 4.85% for most of the year, while the yield on tax-free
funds fell to 2.98 %.
For 1997, fixed income market analysts predict a sluggish global economy,
little inflation and robust employment and consumer confidence levels. These
factors seem to indicate that bond yields should remain fairly steady and total
returns for bond investors are likely to approximate their current yield.
[TIME LINE GRAPHIC STARTS HERE AND STOPS WITH THE END OF THE PAGE]
JULY 96 Corporate bonds outpace Treasury bonds, driven by improving outlook
and strong demand.
[GRAPHIC DEPICTING NEW YORK CITY SKYLINE APPEARS HERE]
NOV 96 Markets rebound as it becomes apparent President Clinton will win
upcoming election with few changes in the House and Senate.
[CIRCULAR GRAPHIC DEPICTING THE FEDERAL CAPITOL BUILDING SURROUNDED BY STARS]
JULY 96 AUG 96 SEPT 96 OCT 96 NOV 96 DEC 96
- --------------------------------------------------------------------------------
JULY 96 Market volatility affects U.S. Treasury bonds, as they fluctuate from
5.95% to a July high of 7.2%.
[GRAPHIC DEPICTING THE FRONT VIEW OF A LOVELY HOME APPEARS HERE]
OCT 96 Mortgage-backed securities outperform comparable Treasuries by nearly a
percentage point.
[GRAPHIC DEPICTING THE FRONT VIEW OF THE FEDERAL RESERVE BUILDING APPEARS HERE]
DEC 96 Fears persist that Federal Reserve may again raise rates to tighten
money supply.
5
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
INVESTMENT ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
Seeks to generate a high rate
of current income for
distribution to shareholders.
PORTFOLIO
COMPOSITION:
As of December 31, 1996, the sector
allocation of net assets was:
[PIE CHART APPEARS HERE]
Corporate Notes and Bonds 71.87%
U.S. Government Obligations 15.92%
Asset-Backed Securities 7.23%
Foreign Bonds 2.50%
Cash Equivalents and Other 2.48%
The Lehman Brothers Corporate Bond Index is an unmanaged index of all publically
issued, fixed-rate, non-convertible investment grade corporate debt. The Lipper
Corporate Debt BBB-Rated Fund Average is a non-weighted index of 98 funds within
the Corporate BBB Debt Fund category.
Challenged by the volatility of the year's bond market, Allmerica Securities
Trust delivered a very strong return of 5.35% as of December 31, 1996, compared
to the 3.28% return of its benchmark, the Lehman Brothers Corporate Bond Index.
The Trust's decision to invest heavily in corporate issues proved to be a
winning strategy, as this particular segment ended the year on a high note.
Strong credit fundamentals, ongoing demand, and a moderate level of supply all
contributed to its success.
In 1996, the Trust was well positioned to take advantage of several "hot"
sectors of the bond market. Specifically, the energy sector, driven by firming
oil prices, and the airlines sector, benefiting from high load factors and
excellent cash flow, produced good total return performance for investors.
Higher yielding assets also performed well as investors searching for product
bid up the price of many low-rated securities.
More than thirty percent of the Trust's assets were allocated to high yield
securities, one of the bond market's most rewarding segments. As strong demand
continued to outstrip supply, below investment grade securities outshone even
the investment grade market. Also positively affecting this sector was the fact
that many high yield issuers were involved in merger and acquisition activity
that led to an improvement in their credit.
One of the Trust's key holdings, Telecommunications, Inc. (TCI), was
negatively impacted by the cable/media sector's increased volatility in the
second part of the year. This volatility was primarily fueled by speculation
surrounding Standard & Poor's rating of this issuer. Despite sub-performance,
the Trust continues to hold TCI debt securities based on the management's
expectations of a favorable ratings outcome.
In the fourth quarter, the Fund added a new type of fixed income
security--the bank trust preferred. For the issuer, these securities combine
the tax treatment of bonds with the accounting treatment of stocks. While
believing the bulk of new preferred issues to be fully valued, the Trust did
purchase Zions Bancorp, taking advantage of a year-end yield widening, and Riggs
National Corporation, an issue which was attractively priced relative to its
credit fundamentals.
Looking ahead, the Fund's managers will continue to look for opportunities in
the bond market which show promise for strong returns.
HISTORICAL PERFORMANCE
- ------------------------------------------------------
Total Return Total Return
on Net Asset Value on Market Value
- ------------------------------------------------------
1992...................11.09%..............20.35%
1993...................12.65%...............6.87%
1994...................(2.41%)............(12.48%)
1995...................18.58%..............21.71%
1996....................5.35%...............6.06%
- ------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended December 31, 1996 1 year 5 year 10 year
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Allmerica Securities Trust 5.35% 8.81% 9.14%
Lehman Brothers Corporate Bond Index 3.28% 7.10% 8.50%
Lipper Corporate Debt
BBB-Rated Fund Average 3.19% 8.26% 8.48%
</TABLE>
6
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----------------
Financials
----------------
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . December 31, 1996
- --------------------------------------------------------------------------------
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE NOTES AND BONDS - 71.87%
Finance - 13.97%
$ 1,000,000 BCH Cayman Islands, Ltd.
Yankee Subordinated Notes,
Guaranteed
6.50%, 02/15/06 A $ 947,850
1,400,000 Capital One Financial Corp.
7.25%, 12/01/03 Ba 1,393,000
1,000,000 Cenfed Financial Corp.
11.17%, 12/15/01 (A) NR 1,077,500
1,000,000 First Tennessee National Corp.
Subordinated Notes
6.75%, 11/15/05 Baa 970,650
347,330 Jennifer Holding Corp.
12.25%, 12/30/98 (B) NR 362,595
781,524 Mack Trust, Inc.
10.91%, 04/01/99 (B) NR 814,958
1,000,000 Merita Bank, Ltd.
Yankee Subordinated Notes
6.50%, 01/15/06 A 952,690
720,496 Midland Funding Corp., Series C
10.33%, 07/23/02 Ba 765,527
1,000,000 National Auto Finance Trust
6.33%, 12/21/02 Aaa 992,700
1,000,000 Olympic Financial, Ltd.
Senior Notes
13.00%, 05/01/00 B 1,090,000
1,000,000 RHG Finance Corp.
8.88%, 10/01/05 Ba 1,057,120
1,000,000 Riggs Capital Trust
8.63%, 12/31/26 (A) Baa 984,210
1,000,000 St. George Bank, Ltd.
Subordinated Notes
7.15%, 10/15/05 (A) Baa 998,420
1,250,000 Zions Institutional Capital Trust
8.54%, 12/15/26 (A) A 1,300,000
-------------------
13,707,220
-------------------
Oil, Gas, and Petroleum - 13.58%
2,000,000 ANR Pipeline Co.
Debenture
9.63%, 11/01/21 Baa 2,424,320
1,000,000 Clark Oil & Refining Corp.
Senior Notes
9.50%, 09/15/04 Ba 1,022,500
1,000,000 Gulf Canada Resources, Ltd.
Senior Notes
8.35%, 08/01/06 Ba 1,042,500
1,450,000 Seagull Energy Corp.
Senior Notes
7.88%, 08/01/03 Ba 1,462,688
1,250,000 Snyder Oil Corp.
Subordinated Notes
7.00%, 05/15/01 B 1,256,250
1,250,000 Texas Eastern Transmission Corp.
10.00%, 08/15/01 Baa 1,392,738
600,000 Texas Utilities Electric Co.
First Mortgage
7.38%, 10/01/25 Baa 564,768
1,000,000 Tosco Corp.
7.00%, 07/15/00 Ba 1,009,300
2,000,000 USX-Marathon Group, Inc.
8.88%, 09/15/97 Baa 2,036,440
1,000,000 Valero Management Partnership, LP
First Mortgage Notes, Series J
10.02%, 03/15/07 (B) NR 1,119,900
-------------------
13,331,404
-------------------
Utilities - 5.83%
1,500,000 Connecticut Light & Power Co.
7.88%, 10/01/24 Baa 1,543,935
1,332,000 North Atlantic Energy Corp.
First Mortgage, Series A
9.05%, 06/01/02 Ba 1,329,922
1,270,000 Sithe/Independence Funding Corp.
Series A
9.00%, 12/30/13 Baa 1,291,069
1,500,000 Texas-New Mexico Power Co.
First Mortgage, Series U
9.25%, 09/15/00 Ba 1,562,640
-------------------
5,727,566
-------------------
Communications - 5.76%
875,000 C-Tec Cable Systems, Inc.
Senior Secured Notes
9.65%, 09/01/99 (B) NR 911,269
1,000,000 Continental Cablevision, Inc.
Senior Notes
8.50%, 09/15/01 Baa 1,065,470
750,000 Continental Cablevision, Inc.
Senior Notes
8.30%, 05/15/06 (A) Baa 798,953
555,000 GTE Corp.
8.75%, 11/01/21 A 643,800
400,000 Kerrville Telephone Co.
9.76%, 03/29/00 (B) NR 420,132
1,000,000 TCI Communications, Inc.
Debenture
7.88%, 02/15/26 Ba 894,460
1,000,000 Viacom, Inc.
Senior Debenture
7.63%, 01/15/16 Ba 918,750
-------------------
5,652,834
-------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
F-1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial - 4.75%
$ 950,000 Buckeye Cellulose Corp.
Senior Notes
9.25%, 09/15/08 Ba $ 988,000
1,000,000 Homeside, Inc.
Senior Notes
11.25%, 05/15/03 (A) NR 1,115,000
500,000 McDermott (J. Ray)
Senior Notes
9.38%, 07/15/06 Ba 525,000
1,000,000 RPM, Inc.
Senior Notes
7.00%, 06/15/05 Baa 982,990
1,000,000 Westinghouse Electric Corp.
8.88%, 06/01/01 Ba 1,047,860
-------------------
4,658,850
-------------------
Primary Metals - 4.22%
2,000,000 Bethlehem Steel Corp.
Senior Notes
10.38%, 09/01/03 B 2,115,000
2,000,000 Usinor Sacilor
Senior Notes, Series A
7.16%, 03/25/04 (B) NR 2,030,380
-------------------
4,145,380
-------------------
Transportation - 3.97%
1,000,000 AMR Corp.
Debenture
10.00%, 02/01/01 Baa 1,100,380
1,437,275 Delta Airlines , Inc.
9.23%, 07/02/02 (B) NR 1,490,138
659,000 USAir, Inc., Series D
10.30%, 01/15/00 B 650,525
661,000 USAir, Inc., Series F
10.30%, 01/15/00 B 652,500
-------------------
3,893,543
-------------------
Consumer Products - 3.76%
1,000,000 Chiquita Brands International, Inc.
Senior Notes
9.13%, 03/01/04 B 1,010,000
1,000,000 DiMon, Inc.
Senior Notes
8.88%, 06/01/06 Ba 1,037,500
1,600,000 Ralston Purina Co.
Debenture
7.75%, 10/01/15 Baa 1,640,736
-------------------
3,688,236
-------------------
Paper - 3.32%
$ 1,160,000 Boise Cascade Corp.
10.13%, 12/15/97 Baa $ 1,202,050
1,000,000 Fort Howard Corp.
8.25%, 02/01/02 B 1,002,500
1,000,000 Stone Container Corp.
Senior Notes
11.88%, 12/01/98 B 1,053,750
-------------------
3,258,300
-------------------
Merchandising and Retail - 3.25%
1,000,000 Federated Department Stores, Inc.
Senior Notes
10.00%, 02/15/01 Ba 1,085,207
1,000,000 Kroger Co.
10.00%, 05/01/99 Ba 1,060,000
1,000,000 USG Corp., Senior Notes
8.50%, 08/01/05 Ba 1,045,000
-------------------
3,190,207
-------------------
Securities Brokers, Dealers and Exchanges - 2.99%
1,000,000 Donaldson Lufkin & Jenrette, Inc.
6.88%, 11/01/05 Baa 974,340
1,000,000 Jones (Edward D.) & Co., LP
7.95%, 04/15/06 (B) NR 1,013,850
1,000,000 Legg Mason, Inc.
Senior Notes
6.50%, 02/15/06 Baa 943,410
-------------------
2,931,600
-------------------
Health Care - 2.40%
1,250,000 Allegiance Corp.
7.30%, 10/15/06 Baa 1,258,288
1,000,000 Tenet Healthcare Corp.
Senior Notes
9.63%, 09/01/02 Ba 1,095,000
-------------------
2,353,288
-------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
F-2
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- -------------------------------------------------------------------------------
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Printing and Publishing - 1.98%
$ 1,000,000 Time Warner, Inc.
Debenture
9.15%, 02/01/23 Ba $ 1,083,990
850,000 Time Warner Entertainment Co., LP
Senior Debenture
8.38%, 03/15/23 Baa 861,790
-------------------
1,945,780
-------------------
Manufacturing - 1.09%
1,000,000 Wyman-Gordon Co.
Senior Notes
10.75%, 03/15/03 B 1,065,000
-------------------
Pharmaceuticals - 1.00%
1,000,000 Georgia Gulf Corp.
7.63%, 11/15/05 Ba 984,300
-------------------
Total Corporate Notes and Bonds 70,533,508
-------------------
(Cost $68,868,041)
U.S. GOVERNMENT OBLIGATIONS - 15.92%
U.S. Treasury Bonds - 11.02%
6,150,000 7.25% 05/15/16 Aaa 6,494,031
4,142,000 7.13% 02/15/23 Aaa 4,324,492
-------------------
10,818,523
-------------------
U.S. Treasury Notes - 4.90%
1,455,000 5.75% 08/15/03 Aaa 1,411,350
2,000,000 7.75% 01/31/00 Aaa 2,092,820
1,250,000 7.00% 07/15/06 Aaa 1,298,638
-------------------
4,802,808
-------------------
Total U.S. Government Obligations 15,621,331
-------------------
(Cost $15,792,016)
ASSET-BACKED SECURITIES - 7.23%
$ 1,000,000 American Airlines, Inc., 1991-C2
Pass-Through Trust
9.73%, 09/29/14 A $ 1,166,280
420,911 Eaglemark Trust
Harley Davidson
6.80%, 12/15/01(A) Aaa 423,277
999,704 First Plus Home Loan Trust, Class A5
Series 1996-2
7.47%, 02/20/11 Aaa 1,018,136
694,611 Green Tree Financial Corp.
7.25%, 07/15/05 Baa 693,778
1,000,000 Premier Auto Trust, Class A4
Series 1995-4
6.00%, 05/06/00 Aaa 1,000,000
650,000 Resolution Trust Corp.
1995-C1, A4C
6.85%, 02/25/27 Aaa 646,547
1,380,457 United Air Lines, Inc., 1991-A
Pass-Through Trust
9.30%, 03/22/08 Baa 1,503,125
103,490 Western Financial 1994-2
Grantor Trust, Class A2
6.38%, 09/01/99 Aaa 104,331
547,367 Western Financial 1995-2
Grantor Trust, Class A2
7.10%, 07/01/00 Aaa 544,288
-------------------
Total Asset-Backed Securities 7,099,762
-------------------
(Cost $6,790,531)
FOREIGN BONDS (C) - 2.50%
950,000 Republic of Colombia, Series E, MTN
8.66%, 10/07/16 (A) Ba 991,563
1,500,000 United Mexican States
8.50%, 09/15/02 Ba 1,464,375
-------------------
Total Foreign Bonds 2,455,938
-------------------
(Cost $2,131,580)
</TABLE>
See Notes to Financial Statements.
- ---------------------------------------------------------
F-3
<PAGE>
<TABLE>
<CAPTION>
ALLMERICA SECURITIES TRUST
PORTFOLIO OF INVESTMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMERCIAL PAPER (D) - 0.41%
$ 400,000 New York Times
6.75%, 01/02/97 Aaa $ 399,925
-------------------
Total Commercial Paper 399,925
-------------------
(Cost $399,925)
Shares
- ------
INVESTMENT COMPANY - 0.19%
181,011 Goldman Sachs Financial Square
Prime Obligation Portfolio Fund 181,011
-------------------
Total Investment Company 181,011
-------------------
(Cost $181,011)
Total Investments - 98.12% 96,291,475
-------------------
(Cost $94,163,104)
Net Other Assets and Liabilities - 1.88% 1,843,996
-------------------
Net Assets - 100.00% $ 98,135,471
-------------------
-------------------
</TABLE>
- -----------------------------------
(A) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold, in transactions
exempt from registration, to qualified institutional buyers. At December
31, 1996, these securities amounted to $7,688,923 or 7.84% 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 addititonal
information concerning each restricted security, see Note 5.
(C) U.S currency denominated.
(D) Effective yield at time of purchase.
MTN Medium Term Note
Federal Income Tax Information (see Note 2)
At December 31, 1996, the aggregate cost of investment securities for tax
purposes was $94,163,104. Net unrealized appreciation (depreciation) aggregated
$2,128,371, of which $3,163,920 related to appreciated investment securities and
$(1,035,549) related to depreciated investment securities.
As of December 31, 1996, the Trust had capital loss carryforwards which expire
as follows: $909,828 in 1998 and $260,009 in 2002. During 1996, the fund
utilized $783,662 of its capital loss carryforwards.
During the fiscal year ended December 31, 1996, 13.45% of the income earned by
the Trust was from direct obligations of the U.S. Government. (Unaudited)
Other Information
For the year ended December 31, 1996, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $25,306,016
and $25,540,105 from non-governmental issuers , and $19,775,639 and $19,988,622
from U.S. Government and Agency issuers, respectively.
The composition of ratings of both long-term and short-term debt
holdings as a percentage of total value of investments in securities, is as
follows:
<TABLE>
<CAPTION>
Moody's Ratings (Unaudited)
<S> <C>
Aaa 21.59 %
A 5.21
Baa 26.25
Ba 25.87
B 10.30
NR (Not Rated) 10.78
------
100.00 %
------
------
</TABLE>
See Notes to Financial Statements.
---------------------------------------------------------
F-4
<PAGE>
ALLMERICA SECURITIES TRUST
STATEMENT OF ASSETS AND LIABILITIES . December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost..........................................$ 94,163,104
Net unrealized appreciation (depreciation)................... 2,128,371
-------------
Total investments at value............................... 96,291,475
Cash............................................................ 712
Short-term investments held as collateral for
securities loaned (Note 2)..................................... 12,695,794
Interest and dividend receivables............................... 1,973,692
-------------
Total Assets............................................. 110,961,673
-------------
LIABILITIES:
Advisory fee payable (Note 3).................................. 41,040
Accrued expenses and other payables............................ 89,368
Collateral for securities loaned (Note 2)...................... 12,695,794
-------------
Total Liabilities........................................ 12,826,202
-------------
NET ASSETS.........................................................$ 98,135,471
-------------
-------------
NET ASSETS consist of:
Par Value (Note 4).............................................$ 8,592,306
Paid-in capital................................................ 88,551,952
Undistributed (distribution in excess of)net investment income. 32,679
Accumulated (distribution in excess of) net realized gain
(loss) on investments sold.................................... (1,169,837)
Net unrealized appreciation (depreciation) of investments...... 2,128,371
-------------
TOTAL NET ASSETS...................................................$ 98,135,471
-------------
-------------
Shares of beneficial interest outstanding
(10,000,000 authorized shares with par value of $1.00)............ 8,592,306
NET ASSET VALUE
Per Share......................................................$ 11.421
-------------
-------------
</TABLE>
See Notes to Financial Statements.
- ---------------------------------------------------------
F-5
<PAGE>
ALLMERICA SECURITIES TRUST
STATEMENT OF OPERATIONS . For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest (Note 2).......................................................... $ 7,894,950
Dividends (Note 2)......................................................... 81,749
-------------
Total investment income................................................ 7,976,699
-------------
EXPENSES:
Investment advisory fees (Note 3).......................................... 491,847
Custodian fees............................................................. 3,834
Fund accounting fees (Note 3).............................................. 39,544
Transfer agent fees........................................................ 74,451
Legal fees................................................................. 3,942
Audit fees................................................................. 6,864
Trustees' fees and expenses (Note 3)....................................... 8,530
Reports to shareholders.................................................... 46,063
New York Stock Exchange fees............................................... 15,570
Miscellaneous.............................................................. 43,961
-------------
Total expenses......................................................... 734,606
-------------
NET INVESTMENT INCOME......................................................... 7,242,093
-------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold............................... 824,395
Net change in unrealized appreciation (depreciation) of investments........ (3,024,365)
-------------
NET GAIN (LOSS) ON INVESTMENTS................................................ (2,199,970)
-------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS........................................... $ 5,042,123
=============
</TABLE>
See Notes to Financial Statements.
-----------------------------------------------------
F-6
<PAGE>
ALLMERICA SECURITIES TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1996 1995
---------------------------------
<S> <C> <C>
NET ASSETS at beginning of year............................................... $ 100,483,120 $ 91,457,903
------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income...................................................... 7,242,093 7,392,646
Net realized gain (loss) on investments sold............................... 824,395 626,599
Net change in unrealized appreciation (depreciation) of investments........ (3,024,365) 8,395,355
------------- -------------
Net increase (decrease) in net assets resulting from operations............ 5,042,123 16,414,600
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...................................................... (7,389,772) (7,389,383)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Issued to shareholders in reinvestment of dividends........................ -- --
------------- -------------
Total increase (decrease) in net assets................................ (2,347,649) 9,025,217
------------- -------------
NET ASSETS at end of year (including line A).................................. $ 98,135,471 $ 100,483,120
------------- -------------
------------- -------------
(A) Undistributed net investment income....................................... $ 32,679 $ 139,625
------------- -------------
------------- -------------
OTHER INFORMATION:
Share Transactions:
Issued to shareholders in reinvestment of dividends........................ -- --
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
- -----------------------------------------------------------
F-7
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Year
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year............... $ 11.694 $ 10.644 $ 11.773 $ 11.302 $ 11.084
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net investment income........................ 0.843 0.860 0.843 0.909 0.954
Net realized and unrealized gain (loss)
on investments........................... (0.256) 1.050 (1.122) 0.472 0.234
--------- --------- --------- --------- ---------
Total from Investment Operations:..... 0.587 1.910 (0.279) 1.381 1.188
--------- --------- --------- --------- ---------
Less Distributions:
Dividends from net investment income......... (0.860) (0.860) (0.850) (0.910) (0.970)
--------- --------- --------- --------- ---------
Net increase (decrease) in net asset value....... (0.273) 1.050 (1.129) 0.471 0.218
--------- --------- --------- --------- ---------
Net Asset Value, end of year..................... $ 11.421 $ 11.694 $ 10.644 $ 11.773 $ 11.302
========= ========= ========= ========= =========
Market Value, end of year........................ $ 10.250 $ 10.500 $ 9.375 $ 11.625 $ 11.750
========= ========= ========= ========= =========
Total Return on Market Value, end of year........ 6.06% 21.71% (12.48)% 6.87% 20.35%
Ratios/Supplemental Data:
Net Assets, end of year(000's)................... $ 98,135 $ 100,483 $ 91,458 $ 101,161 $ 95,417
Ratios to average net assets:
Net investment income........................ 7.44% 7.64% 7.59% 7.72% 8.49%
Operating expenses........................... 0.75% 0.77% 0.78% 0.74% 0.76%
Portfolio Turnover Rate.......................... 47% 42% 42% 55% 55%
</TABLE>
See Notes to Financial Statements.
--------------------------------------------
F-8
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS . December 31, 1996
- --------------------------------------------------------------------------------
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.
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 reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles consistently followed
by the Trust in the preparation of its financial statements.
Security Valuation: 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, 1996, prices of securitites whose total value represented 9.30% 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,
discounts earned on zero coupon bonds, original issue discount bonds,
stepped-coupon bonds and payment in kind bonds are accreted. 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 (loss) have been adjusted in the Statement of Assets and
Liabilities for permanent book-tax differences for the year ended December 31,
1996.
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.
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.
- ----------------------------------------- F-9
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued . December 31, 1996
- --------------------------------------------------------------------------------
Securities Lending: The Trust loans securities to certain brokers who pay the
Trust 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,
1996, bonds with aggregate value of approximately $12,235,902 were on loan to
brokers. The loans were secured with cash collateral of $12,695,794, which was
subsequently invested in cash equivalents. The related income earned was $27,254
which is included in interest income for the year ended December 31, 1996.
Expenses: Most expenses of the Trust can be directly attributable to the Trust.
Expenses which can not be directly attributable to the Trust are allocated based
upon relative net assets among the Trust and two other investment companies
within First Allmerica Financial Life Insurance Company.
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"), 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
net assets plus (b) 2-1/2% of the amount of interest and dividend income.
To the extent that 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 any excess of such value over $30,000,000,
AAM will bear such excess expenses.
AAM has entered into an Administrative Services Agreement with First Data
Investor Services Group, Inc. ("FDISG"), a wholly-owned subsidiary of First Data
Corporation, whereby FDISG performs administrative services for the Trust 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 Trust 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 the 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. RESTRICTED SECURITIES
At December 31, 1996, the Trust owned the following restricted securities
constituting 8.32% 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
Issuer Acquisition Amount Acquisition Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
C-Tec Cable Systems, Inc. 07/06/89 $ 875,000 $ 875,000 $ 911,269
Delta Airlines, Inc. 12/12/91 1,437,275 1,454,231 1,490,138
Jennifer Holding Corp. 07/17/87 347,330 369,327 362,595
Jones (Edward D.) & Co., L.P. 05/06/94 1,000,000 1,000,000 1,013,850
Kerrville Telephone Co. 02/09/90 400,000 400,000 420,132
Mack Trust, Inc. 07/14/95 781,524 814,286 814,958
Usinor Sacilor 01/14/94 2,000,000 2,000,000 2,030,380
Valero Management Partnership, L.P. 03/04/87 1,000,000 1,000,000 1,119,900
----------------------------
Total $ 7,912,844 $ 8,163,222
============================
</TABLE>
F-10
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS: (Unaudited)
At the Annual Meeting of Shareholders, held on April 17, 1996, results of
shareholder voting for the election of Trustees were as follows:
<TABLE>
<CAPTION>
Shares For Name of Trustee % of Shares Voted Shares Withheld
- ---------- --------------- ----------------- ---------------
<S> <C> <C> <C>
6,672,194 John F. O'Brien 97.98 137,646
6,686,482 Russell E. Fuller 98.19 123,358
6,673,577 Gordon Holmes 98.00 136,263
6,679,888 Bruce E. Langton 98.09 129,952
6,689,702 John P. Kavanaugh 98.24 120,138
6,672,456 Attiat F. Ott 97.98 137,384
6,699,768 Paul D. Paganucci 98.38 110,072
6,696,912 Richard M. Reilly 98.34 112,928
6,670,139 Ranne P. Warner 97.95 139,701
6,691,544 Thomas S. Zocco 98.26 118,296
</TABLE>
By a vote of 6,647,527 shares in favor, representing 77.37% of shares
outstanding, with 162,313 shares withheld, shareholders ratified and approved
the appointment of Price Waterhouse LLP as independent accountants for the Trust
for the fiscal year ending December 31, 1996.
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
--------------- ------------------------- ------------------------
Total
Quarterly Investment Per Per Per
period Income Amount Share Amount Share Amount Share
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
1996
3/31/96 2,005,042 1,816,051 0.211 (3,493,629) (0.406) (1,677,578) (0.195)
6/30/96 1,997,565 1,859,532 0.217 (856,366) (0.100) 1,003,166 0.117
9/30/96 1,996,408 1,795,479 0.209 467,738 0.054 2,263,217 0.263
12/31/96 1,977,684 1,771,031 0.206 1,682,287 0.196 3,453,318 0.402
</TABLE>
- --------------------------------------- F-11
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities 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.
This report is not authorized for distribution to prospective purchasers of
Allmerica Securities Trust unless accompanied or preceded by an effective
prospectus for the Trust which includes information related to charges and
expenses.
F-12 ------------------------------------------
<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 (except for Moody's Ratings), and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Allmerica Securities Trust, (hereafter referred to as the "Trust") at December
31, 1996, 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, 1996 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 14, 1997
- ----------------------------------------
F-13
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[LOGO OF ALLMERICA FINANCIAL(R) APPEARS HERE]
[LETTERHEAD OF ALLMERICA FINANCIAL(R) APPEARS HERE]
