<PAGE>
ANNUAL REPORT
December 31, 1997
Allmerica
Securities Trust
[LOGO OF AST
APPEARS HERE]
<PAGE>
TRUST INFORMATION
- ------------------------------------------------------
BOARD OF TRUSTEES
John F. O'Brien, Chairman
Cynthia A. Hargadon*
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
George M. Boyd, Secretary
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 Trustees
INDEPENDENT ACCOUNTANTS
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 & MONEY
MARKET OVERVIEW .....................................4
TRUST OVERVIEW ......................................6
FINANCIALS ........................................F-1
SHAREHOLDER TAX INFORMATION ......................F-11
SHAREHOLDER INFORMATION........................ INSIDE
BACK COVER
1
<PAGE>
- --------------------------------------------------------------------------------
A Letter From the Chairman
- --------------------------------------------------------------------------------
[PHOTOGRAPH OF JOHN F. O'BRIEN APPEARS HERE]
Dear Client:
The U.S. economy continued to achieve growth without inflation in 1997. Global
competition, technological enhancements and continued improvements in operating
efficiencies enabled U.S. corporations to report higher earnings while still
keeping a lid on price increases. This strong economic environment created ideal
conditions for financial markets.
This year a number of macro-economic factors combined to produce a year which
bond investors found quite favorable. The economy grew at a strong rate
throughout the year even though the Federal Reserve raised the Federal Funds
rate by 0.25% in March. Worries that rates might have to be pushed higher by the
Federal Reserve to slow economic growth, disappeared in the fourth quarter when
many Asian markets tumbled, creating uncertainty in global financial markets and
lower growth expectations for 1998.
Despite the strong U.S. economy in 1997, evidence of inflation did not
materialize and actually slowed by year-end. The strong economy and booming
financial markets also helped lower the expected annual Federal Budget deficit.
As a result, the U.S. government, a major issuer of bonds in recent years, is no
longer viewed as crowding out private sector borrowers. In fact, the possibility
of a budget surplus has raised comments about a potential scarcity of bonds for
investors.
All of these factors combined to drive bond prices higher and yields lower.
The 30-year Treasury bond ended the year at 5.92%, close to a 30-year low.
Declining interest rates and a strong economy enabled the broad bond market to
produce a strong 9.65% return for the year as measured by the Lehman Aggregate
Bond Index. Similarly, declining interest rates and improving financial strength
supported more highly levered corporations and enabled the Lehman High Yield
Index to end the year with a 12.76% return.
Against this backdrop, we are pleased with the performance of the Allmerica
Securities Trust which produced a total return of 11.34% for the year. The
investment manager employs a fundamental research approach which emphasizes
corporate credits with higher yields while minimizing investments in lower
yielding Treasuries.
We are also pleased to report that on February 10, 1998, the Allmerica
Securities Trust Board of Trustees declared a quarterly dividend of $0.21 per
share, payable on March 31, 1998 to shareholders of record on February 27, 1998.
For the twelve month period ended December 31, 1997, the Trust paid dividends of
$0.84 per share producing a current yield of 7.77% based on the year-end closing
price of $10.813. By comparison, the yield on the 10-year Treasury note as of
December 31, 1997 was 5.74%
As we look ahead to the new year, we are encouraged by the consensus outlook
for continued economic growth with low inflation. Despite this, we recognize
that potential problems exist such as slower corporate earnings and further
economic difficulties in Asia. The Trust's manager monitors these macro-economic
issues continually and believes that the Trust is now well-positioned to provide
competitive returns to our shareholders.
All of us at Allmerica look forward to continuing to provide 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 of the Board
Allmerica Securities Trust
- --------------------------------------------------------------------------------
"We are encouraged by the consensus outlook for continued economic growth with
low inflation.
- --------------------------------------------------------------------------------
2
<PAGE>
Overview
[LOGO OF AST
APPEARS HERE]
3
<PAGE>
Bond &
Money Market
Overview
1992: Government and corporate bonds
outperform 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.
1997: Low inflation and declining
interest rates fuel the bond market,
which enjoys its best returns since
1995.
1997 proved to be a very good year for bond investors. Falling inflation,
declining interest rates and a healthy economy were just some of the key factors
contributing to the positive market environment.
During 1997, fixed income markets enjoyed outstanding results. The year
began cautiously as economic indicators showed robust growth and favorable
employment continuing from 1996. This prompted the Federal Reserve Board to
increase the Federal Funds Rate by 25 basis points to 5.50% in a preemptive
strike against inflation. The move proved to be successful and rates were left
unchanged for the remainder of the year, as economic indices continued to
exhibit signs of a strong economy, with little evidence of inflation.
As economic growth continued at a strong pace, the budget deficit began to
evaporate. This decreased the need for Treasury financing in the bond market and
fostered lower yields. These factors led to a strong rally and as prices rose,
interest rates on the thirty-year bond, declined from 6.64% at the start of the
year to 5.92% by year-end.
Increased activity in the fixed income markets also surfaced in the third
quarter when the August consumer price index (CPI) indicated the lowest rate of
inflation since May 1966. The announcement sparked a strong rally in the bond
market. Later in the year, investor concerns about the financial crisis in Asia
- - and its possible effects on the domestic economy - also caused bonds to rally
as nervous investors once again retreated from the stock market in favor of
bonds.
In terms of performance, bond investors enjoyed their best gains since 1995
largely because of low inflation and decreasing interest rates. For instance,
the
[TIME LINE APPEARS HERE]
Convinced domestic growth will slow from 1996 levels, investors favor bonds at
the start of the year.
[GRAPHIC APPEARS HERE]
Signs of a strong economy raise fears over increasing interest rates and the
market softens.
To ward off inflation, the Federal Reserve raises interest rates .25%. In
response, the bond market declines.
[GRAPHIC APPEARS HERE]
The budget deficit significantly declines, decreasing the need for Treasury
financing. The bond market rallies.
[GRAPHIC APPEARS HERE]
Stable-to-declining interest rates bode well for corporate and high-yield bonds
as well as mortgage-backed securities.
4
<PAGE>
Lehman Brothers Aggregate Bond Index turned in an impressive 9.65% total
return for the year, up considerably from 1996's dismal showing of 3.61%. Longer
maturity bonds did quite well and 30-year U.S. Treasury bonds returned as much
as 15% this year. Investment-grade bonds and high-yield issues also rewarded
investors with gains of 9.7% and 13.2% respectively. Strong returns in both the
bond and stock markets caused some investors to review the asset mix of their
portfolios. Many large institutions tended to favor bonds later in the year to
rebalance their portfolios, take advantage of rising prices and avoid what they
judged to be an overvalued stock market.
Overall winners for the year were corporate, high-yield and emerging market
bonds. Amid the turmoil in world markets, high-grade U.S. bonds emerged as an
attractive investment later in the year.
Even the money market, which was generally characterized by stability
during 1997, produced solid returns. At year-end, the average yield on a one-
year Treasury Bill was 5.48%, essentially even with the 5.49% yield at the end
of 1996 but only 0.44% less than the yield on a 30-year Treasury bond. Banking
issues in Japan and currency problems in many Asian countries increased the
demand for domestic commercial paper and certificates of deposits as investors
felt more comfortable investing in high-quality issues.
Going forward, the fundamentals of the bond market remain intact. Inflation
is under control and the strong dollar encourages foreign investors to buy U.S.
bonds. And even though unemployment is at a 24-year low and wages are climbing,
productivity gains appear to be keeping a lid on prices.
Despite these strong underpinnings, industry experts point out that there
is limited capital appreciation potential for bonds due to falling interest
rates. Rates are not expected to move significantly lower unless real weakness
in the economy emerges and the prospect of interest rate cuts by the Federal
Reserve develops. The outlook for bond investors then, focuses on their yield
which continues to deliver strong real returns to investors in this low
inflation environment.
While the outlook for the bond and money markets remains generally
favorable, the European Monetary Union slated to take place in January 1999
could emerge as an important issue during the latter part of this year. At that
point, investors will have to consider the possibility that a strong union could
hurt the U.S. dollar and dollar-denominated bonds.
[TIME LINE APPEARS HERE]
[GRAPHIC APPEARS HERE]
CPI indicates the lowest rate of inflation since May 1966 which causes the bond
market to rally.
[GRAPHIC APPEARS HERE]
Institutional investors take advantage of rising bond prices, avoiding what they
consider to be an overvalued stock market.
[GRAPHIC APPEARS HERE]
Concerns grow over the crisis in Asian markets and its possible effect on the
U.S. economy. Investors flee to high-quality U.S. bonds.
Bond investors enjoy their best gains since 1995 largely due to low inflation
and stable to declining interest rates.
5
<PAGE>
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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, 1997, the sector
allocation of net assets was:
[PIE CHART APPEARS HERE]
Corporate Notes and Bonds 72%
U.S. Government Obligations 15%
Asset-Backed Securities 8%
Foreign Bonds 2%
Cash Equivalents and Other 3%
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 112 funds
within the Corporate BBB Debt Fund category.
For the one-year period ended December 31, 1997, the Allmerica Securities
Trust posted an 11.34% return compared to the 10.23% return of the Lehman
Brothers Corporate Bond Index for the same period.
A strong economy, declining inflation and unemployment, global turbulence
and the Asian currency crisis all set the stage for an active U.S. bond market
in 1997. Although the Federal Reserve Board raised the Federal Funds rate by
.25% in the first quarter, interest rates in general declined for the year.
As the economy strengthened, the budget deficit began to evaporate,
resulting in a decreased need for Treasury financing.
The third and fourth quarters of 1997 brought increased volatility, as the
August consumer price index (CPI) indicated the smallest increase in inflation
since May 1966 and as the Asian currency crisis emerged. Both activities forced
nervous investors to retreat from the stock market in favor of bonds.
1997's bond rally didn't favor all fixed income sectors equally. The entire
corporate bond market, for instance, was affected by the turmoil in Asia which
erased most of this sector's 1997 relative performance. While the Trust was
overweighted in corporates, it had no exposure to Southeast Asia.
Sectors such as cable and media, oil and gas, securities brokerage and
airlines performed well; high-quality Yankee bank issuers and bank Trust
preferred issuers detracted from performance.
The high-yield market was also affected by the financial crisis in Asia.
But this market continues to be driven by massive mutual fund inflows, a growing
investor base and improving credit quality. The strong economy helped companies
to improve their financial strength and upgrades outpaced downgrades for the
year. The Trust held 28% of its assets in high-yield securities with a heavy
concentration in the BB- sector which accounted for most of the credit
improvement.
Looking ahead, the Trust's manager expects weaker Asian markets to have a
slowing effect on U.S. economic growth. While they believe this could reduce
U.S. exports and slow GDP growth, they also project it is likely to curb
inflation and thereby provide further support for bonds.
HISTORICAL PERFORMANCE
- -----------------------------------------------------------------------------
Total Return Total Return
on Net Asset Value on Market Value
- -----------------------------------------------------------------------------
1993 .....................................12.65% ....................6.87%
1994 .....................................(2.41%)..................(12.48%)
1995 .....................................18.58%....................21.71%
1996 ......................................5.35%.....................6.06%
1997 .....................................11.34%....................14.07%
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
Years ended December 31, 1997 One year Five years Ten years
- -----------------------------------------------------------------------------
Allmerica Securities Trust 11.34% 8.84% 9.96%
Lehman Brothers Corporate Bond Index 10.23% 8.44% 9.93%
Lipper Corporate Debt
BBB-Rated Fund Average 10.08% 8.51% 9.34%
6
<PAGE>
Financials
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ALLMERICA SECURITIES TRUST
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PORTFOLIO OF INVESTMENTS - December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE NOTES AND BONDS - 72.02%
Finance - 18.06%
$ 500,000 AT&T Capital Corp., Series 4, MTN
6.26%, 02/18/99 Baa $ 499,532
1,150,000 BCH Cayman Islands
Yankee Subordinated Notes, Guaranteed
6.50%, 02/15/06 A 1,136,391
1,400,000 Capital One Financial Corp.
7.25%, 12/01/03 Ba 1,413,094
1,000,000 Cenfed Financial Corp., Senior Debenture
11.17%, 12/15/01(A) Bb 1,116,250
1,500,000 Colonial Capital II, Series A, Guaranteed
8.92%, 01/15/27(A) NR 1,604,874
975,000 Compass Trust I, Series A, Guaranteed
8.23%, 01/15/27 NR 1,058,667
800,000 Conseco Financing Trust III
8.80%, 04/01/27 Ba 898,143
1,000,000 First Tennessee National Corp.
Subordinated Notes
6.75%, 11/15/05 Baa 1,013,465
1,000,000 Homeside Lending, Inc., MTN
6.88%, 05/15/00 Baa 1,014,255
184,235 Jennifer Holding Corp.
12.25%, 12/30/98 (B) NR 189,631
539,209 Mack Trust, Inc.
10.91%, 04/01/99 (B) NR 562,088
550,000 MBNA Corp., MTN
6.96%, 09/12/02 Baa 550,688
1,000,000 Merita Bank, Ltd.
Yankee Subordinated Notes
6.50%, 01/15/06 A 991,373
627,895 Midland Funding Corp., Series C
Senior Secured Lease Obligation
10.33%, 07/23/02 Ba 675,311
1,000,000 The Money Store, Inc.
8.05%, 04/15/02 Ba 1,035,103
1,000,000 Providian Capital, Series A, Guaranteed
9.53%, 02/01/27 (A) Baa 1,123,952
1,000,000 Riggs Capital Trust
8.63%, 12/31/26 (A) Baa 1,061,090
1,000,000 St. George Bank, Ltd., Yankee Debenture
7.15%, 10/15/05 (A) Baa 1,022,280
1,250,000 Zions Institutional Capital Trust
Series A, Guaranteed
8.54%, 12/15/26 A 1,379,755
--------------
18,345,942
--------------
Industrial - 11.33%
2,000,000 Bethlehem Steel Corp., Senior Notes
10.38%, 09/01/03 B 2,140,000
950,000 Buckeye Cellulose Corp.
Senior Subordinated Notes
9.25%, 09/15/08 Ba 988,000
1,000,000 Georgia Gulf Corp.
7.63%, 11/15/05 Ba 1,004,759
649,000 Homeside, Inc., Senior Notes, Series B
11.25%, 05/15/03 (A) Ba $ 769,065
1,000,000 Interpool, Inc.
7.35%, 08/01/07 (A) Ba 1,000,436
1,000,000 LTV Corp., Senior Notes, Guaranteed
8.20%, 09/15/07 (A) Ba 965,000
500,000 McDermot (J. Ray) SA
Senior Subordinated Notes
9.38%, 07/15/06 B 535,625
950,000 Owens-Illinois, Inc., Senior Notes
7.85%, 05/15/04 Ba 997,445
1,000,000 RPM, Inc., Senior Notes
7.00%, 06/15/05 Baa 1,026,307
1,000,000 Stone Container Corp., Senior Notes
11.88%, 12/01/98 B 1,030,000
1,000,000 Westinghouse Electric Corp., Debenture
8.38%, 06/15/02 Ba 1,049,845
--------------
11,506,482
--------------
Oil, Gas and Petroleum - 10.55%
2,000,000 ANR Pipeline Co., Debenture
9.63%, 11/01/21 Baa 2,644,648
1,000,000 Clark Oil & Refining Corp., Senior Notes
9.50%, 09/15/04 Ba 1,032,500
1,000,000 Gulf Canada Resources, Ltd.
Yankee Senior Notes Ba
8.35%, 08/01/06 1,105,495
900,000 Oryx Energy Co., Debenture
10.00%, 06/15/99 Ba 942,293
1,450,000 Seagull Energy Corp., Senior Notes
7.88%, 08/01/03 Ba 1,468,125
1,250,000 Texas Eastern Transmission Corp., Debenture
10.00%, 08/15/01 A 1,396,228
1,000,000 Tosco Corp.
7.00%, 07/15/00 Baa 1,016,735
1,000,000 Valero Management Partnership, LP
First Mortgage, Series J-12
10.02%, 03/15/07 (B) NR 1,114,150
--------------
10,720,174
--------------
Communications - 7.80%
500,000 Clear Channel Communications, Inc.
Debenture
7.25%, 10/15/27 Baa 508,480
1,000,000 Comcast Cable Communications, Inc.
8.13%, 05/01/04 (A) Baa 1,079,578
1,000,000 Continental Cablevision, Inc.
8.50%, 09/15/01 Baa 1,065,237
750,000 Continental Cablevision, Inc.
8.30%, 05/15/06 Baa 819,518
555,000 GTE Corp., Debenture
8.75%, 11/01/21 Baa 672,914
300,000 Kerrville Telephone Co.
9.76%, 03/29/00 (B) NR 311,745
1,850,000 TCI Communications, Inc.
7.88%, 02/15/26 Ba 1,985,318
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-1
<PAGE>
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ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued - December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Communications (continued)
$ 1,000,000 Viacom, Inc., Senior Debenture, Guaranteed
7.63%, 01/15/16 Ba $ 994,703
450,000 WorldCom, Inc.
7.75%, 04/01/07 Ba 482,044
-----------
7,919,537
-----------
Utilities - 6.49%
1,550,000 Connecticut Light & Power Co.
First Mortgage, Series 94D
7.88%, 10/01/24 Ba 1,599,977
1,247,000 North Atlantic Energy Corp.
First Mortgage, Series A
9.05%, 06/01/02 B 1,276,145
1,270,000 Sithe/Independence Funding Corp.
Series A
9.00%, 12/30/13 Baa 1,520,342
1,500,000 Texas-New Mexico Power Co.
First Mortgage, Series U
9.25%, 09/15/00 Ba 1,585,734
600,000 Texas Utilities Electric Co.
First Mortgage
7.38%, 10/01/25 Baa 614,274
-----------
6,596,472
-----------
Consumer Products - 3.81%
1,000,000 Chiquita Brands International, Inc.
9.13%, 03/01/04 B 1,052,500
1,000,000 DiMon, Inc., Senior Notes, Series B
8.88%, 06/01/06 Ba 1,064,650
1,600,000 Ralston Purina Co., Debenture
7.75%, 10/01/15 Baa 1,747,078
-----------
3,864,228
-----------
Transportation - 3.60%
1,000,000 AMR Corp., Debenture
10.00%, 02/01/01 Baa 1,103,111
1,203,934 Delta Airlines, Inc.
9.23%, 07/02/02 (B) NR 1,222,173
659,000 U.S. Air, Inc., Equipment Trust, Series D
10.30%, 01/15/00 B 662,295
661,000 U.S. Air, Inc., Equipment Trust, Series F
10.30%, 01/15/00 B 664,305
-----------
3,651,884
-----------
Merchandising and Retail - 3.17%
1,000,000 Federated Department Stores, Inc.
Senior Notes
10.00%, 02/15/01 Baa 1,102,375
1,000,000 Kroger Co., Senior Subordinated Notes
10.00%, 05/01/99 Ba 1,040,225
1,000,000 USG Corp., Senior Notes
8.50%, 08/01/05 Ba 1,077,500
-----------
3,220,100
-----------
Securities Brokers, Dealers and Exchanges - 2.98%
1,000,000 Donaldson Lufkin & Jenrette, Inc.
Senior Notes
6.88%, 11/01/05 Baa 1,013,774
1,000,000 Jones (Edward D.) & Co., LP
7.95%, 04/15/06 (B) NR 1,027,270
1,000,000 Legg Mason, Inc., Senior Notes
6.50%, 02/15/06 Baa 988,549
-----------
3,029,593
-----------
Printing and Publishing - 2.17%
1,000,000 Time Warner, Inc., Debenture
9.15%, 02/01/23 Ba 1,229,236
850,000 Time Warner Entertainment Co., LP
Senior Debenture
8.38%, 03/15/23 Baa 969,684
-----------
2,198,920
-----------
Health Care - 2.06%
675,000 Allegiance Corp.
7.30%, 10/15/06 Baa 706,917
1,000,000 Tenet Healthcare Corp., Senior Notes
9.63%, 09/01/02 Ba 1,080,000
300,000 Tenet Healthcare Corp.
Senior Subordinate Notes
8.63%, 01/15/07 Ba 309,000
-----------
2,095,917
-----------
Total Corporate Notes and Bonds 73,149,249
(Cost $68,874,744) -----------
U.S. GOVERNMENT OBLIGATIONS - 15.35%
U.S. Treasury Notes - 8.46%
2,650,000 6.88%, 05/15/06 Aaa 2,836,329
4,665,000 7.00%, 07/15/06 Aaa 5,036,745
705,000 6.25%, 02/28/02 Aaa 718,219
-----------
8,591,293
-----------
U.S. Treasury Bonds - 6.89%
6,150,000 7.25% , 05/15/16 Aaa 7,001,394
-----------
Total U.S. Government Obligations 15,592,687
(Cost $14,974,015) -----------
ASSET-BACKED SECURITIES - 8.32%
1,000,000 American Airlines, Inc
Pass-Through Trust, Series 1991 - C2
9.73%, 09/29/14 A 1,244,670
1,000,000 BankBoston RV Asset Backed Trust,
Series 1997 - 1, Class A8
6.54% , 02/15/09 NR 1,010,480
375,000 Barnett Auto Trust
Series 1997-A, A3
6.03%, 11/15/01 NR 374,700
</TABLE>
See Notes to Financial Statements.
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F-2
<PAGE>
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ALLMERICA SECURITIES TRUST
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PORTFOLIO OF INVESTMENTS, Continued - December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset-Backed Securities (continued)
$ 227,477 Eaglemark Trust
Harley-Davidson, Series 1995 - 1
6.80%, 12/15/01 (A) Aaa $ 231,912
999,704 First Plus Home Loan Trust
Series 1996-2, Class A5
7.47%, 02/20/11 NR 1,025,266
871,968 Green Tree Recreational Equipment &
Consumer Trust
Series 1997-B, Class A-1
6.55%, 07/15/28 NR 877,690
589,832 Green Tree Financial Corp.
Series 1995-A,Class A
7.25%, 07/15/05 P 603,623
748,595 National Auto Finance
Series 1996-1, Class A
6.33%, 12/21/02 Aaa 751,425
650,000 Resolution Trust Corp.
Series 1995 - 1, Class A4C, CMO
6.85%, 02/25/27 Aaa 651,016
1,339,328 United Air Lines, Inc.
Pass Through Trust, Series 1991 - B1
9.30%, 03/22/08 Baa 1,348,851
48,967 Western Financial Grantor Trust
Series 1994-2, Class A2
6.38%, 09/01/99 Aaa 49,062
278,466 Western Financial Grantor Trust
Series 1995-2, Class A2
7.10%, 07/01/00 Aaa 280,287
-------------
Total Asset-Backed Securities 8,448,982
-------------
(Cost $8,121,981)
</TABLE>
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At December 31, 1997, the aggregate cost of investment securities for
tax purposes was $94,186,574. Net unrealized appreciation (depreciation)
aggregated $5,545,880, of which $5,739,159 related to appreciated
investment securities and $(193,279) related to depreciated investment
securities.
As of December 31, 1997, the Trust had capital loss carryforwards which
expire as follows: $909,828 in 1998, $260,009 in 2002 and $17,365 in
2005.
POST OCTOBER LOSSES
Under current tax law, certain capital and net foreign exchange losses
realized after October 31 may be deferred and treated as occurring on
the first day of the following fiscal year. For the fiscal year ended
December 31, 1997, the Portfolio has elected to defer capital losses
occuring between November 1, 1997 and December 31, 1997 in the amount of
$5,700.
<TABLE>
<CAPTION>
Moody's Ratings Value
Par Value (Unaudited) (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN BONDS (C) - 2.42%
$ 950,000 Republic of Colombia, Series E, MTN
8.66%, 10/07/16 (A) Ba $ 949,782
1,500,000 United Mexican States
Yankee Emerging Market Notes
8.50%, 09/15/02 Ba 1,507,500
-------------
Total Foreign Bonds 2,457,282
-------------
(Cost $2,131,580)
Shares
- ------------
INVESTMENT COMPANY - 0.08%
84,254 State Street Bank Temporary
Fund NR 84,254
-------------
Total Investment Company 84,254
-------------
(Cost $ 84,254)
Total Investments - 98.19% 99,732,454
-------------
(Cost $94,186,574)
Net Other Assets and Liabilities - 1.81% 1,839,698
-------------
Net Assets - 100.00% $ 101,572,152
=============
</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,
1997, these securities amounted to $10,924,219 or 10.76% of net assets.
(B) Restricted Securities - Represent ownership in private placement
investments which have not been registered with the Securities and
Exchange Commision under the Securities Act of 1933. For additional
information concerning each restricted security, see Note 5.
(C) U.S. currency denominated.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
OTHER INFORMATION
For the year ended December 31, 1997, the aggregated cost of purchases
and the proceeds of sales, other than from short-term investments,
included $17,917,017 and $16,833,839 from non-governmental issuers,
respectively, and $9,324,353 and $9,882,052 from U.S. Government and
Agency issuers, respectively.
The composition of ratings of both long-term and short-term debt
holdings as a percentage of total value of investments in securities is
as follows:
Moody's Ratings (Unaudited)
Aaa 17.60%
A 6.17
Baa 26.30
Ba 30.33
Bb 1.12
B 7.38
P .61
NR (Not Rated) 10.49
------
100.00%
======
See Notes to Financial Statements.
- --------------------------------------------------------
F-3
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost ............................................. $ 94,186,574
Net unrealized appreciation (depreciation) ...................... 5,545,880
-----------------
Total investments at value .............................. 99,732,454
Cash .................................................................... 728
Short-term investments held as collateral for securities loaned (Note 2). 13,984,613
Interest and dividend receivables........................................ 1,958,545
-----------------
Total Assets ............................................ 115,676,340
-----------------
LIABILITIES:
Advisory fee payable (Note 3) ........................................... 41,617
Accrued expenses and other payables ..................................... 77,958
Collateral for securities loaned (Note 2) ............................... 13,984,613
-----------------
Total Liabilities ....................................... 14,104,188
-----------------
NET ASSETS ...................................................................... $ 101,572,152
=================
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 ......... 74,916
Accumulated (distribution in excess of) net realized gain (loss)
on investments sold ................................................... (1,192,902)
Net unrealized appreciation (depreciation) of investments ............... 5,545,880
-----------------
TOTAL NET ASSETS ................................................................ $ 101,572,152
=================
Shares of beneficial interest outstanding
(10,000,000 authorized shares with par value of $1.00) ........................ 8,592,306
NET ASSET VALUE
Per Share ............................................................... $ 11.821
=================
MARKET VALUE
Per Share ............................................................... $ 10.813
=================
</TABLE>
See Notes to Financial Statements.
---------------------------------------------------------
F-4
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (Note 2) ..................................................................... $ 7,876,724
Dividends (Note 2) .................................................................... 32,953
---------------
Total investment income ....................................................... 7,909,677
---------------
EXPENSES:
Investment advisory fees (Note 3) ..................................................... 494,689
Fund accounting fees (Note 3) ......................................................... 34,561
Transfer agent fees ................................................................... 28,093
Legal fees ............................................................................ 7,024
Audit fees ............................................................................ 8,994
Trustees' fees and expenses (Note 3) .................................................. 12,912
Reports to shareholders ............................................................... 77,952
New York Stock Exchange fees .......................................................... 16,170
Miscellaneous ......................................................................... 34,356
---------------
Total expenses ................................................................ 714,751
---------------
NET INVESTMENT INCOME ......................................................................... 7,194,926
---------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold .......................................... 41,783
Net change in unrealized appreciation
(depreciation) of investments ....................................................... 3,417,509
---------------
NET GAIN (LOSS) ON INVESTMENTS ................................................................ 3,459,292
---------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS ...................................................... $ 10,654,218
===============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1997 1996
----------------------------------
<S> <C> <C>
NET ASSETS at beginning of year ............................................ $ 98,135,471 $ 100,483,120
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income .............................................. 7,194,926 7,242,093
Net realized gain (loss) on investments sold ....................... 41,783 824,395
Net change in unrealized appreciation (depreciation) of investments. 3,417,509 (3,024,365)
-------------- --------------
Net increase (decrease) in net assets resulting from operations..... 10,654,218 5,042,123
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................... (7,217,537) (7,389,772)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Issued to shareholders in reinvestment of dividends ................ -- --
-------------- --------------
Total increase (decrease) in net assets .................... 3,436,681 (2,347,649)
============== ==============
NET ASSETS at end of year (including line A) ............................... $ 101,572,152 $ 98,135,471
============== ==============
(A) Undistributed (distribution in excess of) net investment income ........ $ 74,916 $ 32,679
============== ==============
</TABLE>
See Notes to Financial Statements.
- ---------------------------------------------------------
F-5
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For A Share Outstanding Throughout Each Year
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year ................... $ 11.421 $ 11.694 $ 10.644 $ 11.773 $ 11.302
---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income ........................ 0.837 0.843 0.860 0.843 0.909
Net realized and unrealized gain (loss)
on investments ....................... 0.403 (0.256) 1.050 (1.122) 0.472
---------- ---------- ---------- ---------- ----------
Total from Investment Operations:. 1.240 0.587 1.910 (0.279) 1.381
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income ......... (0.840) (0.860) (0.860) (0.850) (0.910)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value ........... 0.400 (0.273) 1.050 (1.129) 0.471
---------- ---------- ---------- ---------- ----------
Net Asset Value, end of year ......................... $ 11.821 $ 11.421 $ 11.694 $ 10.644 $ 11.773
========== ========== ========== ========== ==========
Market Value, end of year ............................ $ 10.813 $ 10.250 $ 10.500 $ 9.375 $ 11.625
========== ========== ========== ========== ==========
Total Return on Market Value, end of year ............ 14.07% 6.06% 21.71% (12.48)% 6.87%
Ratios/Supplemental Data:
Net Assets, end of year (000's) ...................... $ 101,572 $ 98,135 $ 100,483 $ 91,458 $ 101,161
Ratios to average net assets:
Net investment income ........................ 7.27% 7.44% 7.64% 7.59% 7.72%
Operating expenses ........................... 0.72% 0.75% 0.77% 0.78% 0.74%
Management Fee ............................... 0.50% 0.50% 0.51% 0.50% 0.51%
Portfolio Turnover Rate ...................... 27% 47% 42% 42% 55%
</TABLE>
See Notes to Financial Statements.
---------------------------------------------------------
F-6
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
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, 1997, prices of securitites whose total value represented 5.04% 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 the securities
existed.
Security Transactions and Investment Income: Security 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, which 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,
1997.
Distributions 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-7
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
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,
1997, bonds with aggregate value of approximately $13,534,656 were on loan to
brokers. The loans were secured with collateral of $13,984,613 which was
subsequently invested in cash equivalents. The related income earned was $22,228
which is included in interest income for the year ended December 31, 1997.
Expenses: Most expenses of the Trust can be directly attributable to the Trust.
Expenses which cannot be directly attributable to the Trust are allocated based
upon relative net assets among the Trust and two other registered investment
companies (Allmerica Investment Trust and Allmerica Fund) within First Allmerica
Financial Life Insurance Company. Allmerica Fund ceased operations on October 1,
1997.
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 1.50% of the first $30,000,000 of the Trust's
average weekly net assets, plus 1% of the next $100,000,000 of net assets, AAM
will bear such excess expenses.
AAM has entered into an Administrative Services Agreement with First Data
Investor Services Group, Inc. ("Investor Services Group"), a wholly-owned
subsidiary of First Data Corporation, whereby Investor Services Group performs
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 Investor Services Group. In a
separate agreement, Investor Services Group 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 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, 1997, the Trust owned the following restricted securities
constituting 4.36% 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>
Delta Airlines, Inc. 12/12/91 $ 1,203,934 $ 1,218,137 $ 1,222,173
Jennifer Holding Corp. 07/17/87 184,235 195,785 189,631
Jones (Edward D.) & Co., L.P. 05/06/94 1,000,000 1,000,000 1,027,270
Kerrville Telephone Co. 02/09/90 300,000 300,000 311,745
Mack Trust, Inc. 07/14/95 539,209 560,026 562,088
Valero Management Partnership, L.P. 03/04/87 1,000,000 1,000,000 1,114,150
---------------------------
Total $ 4,273,948 $ 4,427,057
===========================
</TABLE>
------------------------------------
F-8
<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, 1997, 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 investments at December 31, 1997 by
correspondence with the custodian and the application of alternative auditing
procedures where investments purchased were not yet received by the custodian,
provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
February 9, 1998
- -------------------------------------
F-9
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
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>
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
1997
3/31/97 1,985,192 1,767,212 0.205 (1,936,148) (0.224) (168,936) (0.019)
6/30/97 1,990,451 1,828,065 0.213 1,985,637 0.231 3,813,702 0.444
9/30/97 1,968,825 1,792,484 0.209 2,067,555 0.241 3,860,039 0.450
12/31/97 1,965,209 1,807,165 0.210 1,342,248 0.155 3,149,413 0.365
</TABLE>
------------------------------------
F-10
<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 sold may be worth more or less than their original cost.
This report is authorized for distribution to existing shareholders of Allmerica
Securities Trust.
SHAREHOLDER TAX INFORMATION (Unaudited)
The portion of the Trust dividends that was derived from U.S. Government
obligations in 1997 and may be exempt from state income taxation is 10.92%. The
states of California, Connecticut, New York, and New Jersey have exclusionary
provisions, however, each of these states has a threshold requirement that must
be met before the exclusion applies. During 1997, the level of exempt income did
not meet these thresholds and the exclusion does not apply. All other states and
the District of Columbia do not tax dividends attributable to U.S. Government
obligations within the Trust.
Certain states also require, for intangible tax reporting purposes, the
reporting of the percentage of assets invested in either state specific or state
specific and federal obligations. The percentage applicable to the states of
Florida, Kansas, Kentucky, Michigan and North Carolina is 15.333%. The
percentage applicable to the state of West Virginia is 0%.
- -----------------------------------
F-11
<PAGE>
This page intentionally left blank.
<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
investments 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 share 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 OF ALLMERICA APPEARS HERE]
First Allmerica Financial Life Insurance Company . Allmerica Financial Life
Insurance and Annunity Company (licensed in all states except NY & HI)
Allmerica Trust Company, N.A. . Allmerica Investments, Inc. . Allmerica
Investment Management Company, Inc. . The Hanover Insurance Company . AMGRO,
Inc. . Allmerica Financial Alliance Insurance Company . Allmerica Asset
Management, Inc. . Allmerica Financial Benefit Insurance Company . Sterling
Risk Management Services, Inc. . Citizens Corporation . Citizens Insurance
Company of America . Citizens Management Inc.
440 Lincoln Street, Worcester, Massachusetts 01653
(12/97) [RECYCLE LOGO APPEARS HERE] Printed on Recycled Paper
