-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RyRCBAfvcPcp8SmmjxUAVoT1ms8xyvmAp0MGQCmlypoU3bpe8Y669WNWGA0h2xGg ohJ8kE3J9BBCsNIp97tgSg== 0000950109-03-000867.txt : 20030227 0000950109-03-000867.hdr.sgml : 20030227 20030227142927 ACCESSION NUMBER: 0000950109-03-000867 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030227 EFFECTIVENESS DATE: 20030227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLMERICA SECURITIES TRUST CENTRAL INDEX KEY: 0000093730 IRS NUMBER: 042508688 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02338 FILM NUMBER: 03583032 BUSINESS ADDRESS: STREET 1: 440 LINCON ST CITY: WORCHESTER STATE: MA ZIP: 01653-1959 BUSINESS PHONE: 5088551000 FORMER COMPANY: FORMER CONFORMED NAME: STATE MUTUAL SECURITIES INC DATE OF NAME CHANGE: 19861019 FORMER COMPANY: FORMER CONFORMED NAME: STATE MUTUAL SECURITIES TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 dn30d.txt ALLMERICA AST Allmerica Financial Annual Report - ------------------------------------------------ DECEMBER 31, 2002 . Allmerica Securities Trust AST 2002 [LOGO] ALLMERICA FINANCIAL(R) TABLE OF CONTENTS Trust Information......... 2 A Letter from the Chairman 3 Trust Overview............ 4 Financials................ F-1 Regulatory Disclosures and Shareholder Information. F-13
TRUST INFORMATION BOARD OF TRUSTEES John P. Kavanaugh, Chairman P. Kevin Condron* Jocelyn S. Davis* Cynthia A. Hargadon* T. Britton Harris IV* Gordon Holmes* Attiat F. Ott* Ranne P. Warner* OFFICERS John P. Kavanaugh, President Kristin L. Bushard, Vice President Richard J. Litchfield, Vice President Ann K. Tripp, Vice President Paul T. Kane, Treasurer George M. Boyd, Secretary INVESTMENT MANAGER Opus Investment 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 ADMINISTRATOR AND CUSTODIAN Investors Bank & Trust Company 200 Clarendon Street, Boston, MA 02116/ / *Independent Trustees INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers 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 Dept. - 11E P.O. Box 11258 Church Street Station, New York, NY 10286 1-800-432-8224 2 A LETTER FROM THE CHAIRMAN Economies around the world struggled during 2002. Several European countries saw the demand for goods and services decline, while Japan's financial woes set the tone for much of Asia. Some emerging markets featured sound economic growth, but a pullback in demand from the United States impacted several emerging market countries. The United States economy displayed exceptional resilience in 2002. Potential war with Iraq, weak corporate earnings, numerous accounting scandals, recurring layoff announcements and a lack of capital investment by businesses all failed to halt the world's largest economy. U.S. GDP showed positive growth in each quarter thanks in large part to strong consumer spending. After leaving interest rates unchanged for most of the year, the Federal Reserve Board's Open Market Committee lowered the target federal funds rate by 0.50% in November, bringing the rate to 1.25%. In its statement, the Committee also hinted that it may keep the federal funds rate stable for the near future. The Institute for Supply Management's PMI rose to 54.7% in December, signaling an expansion in the manufacturing sector. The reading was welcomed by investors since an acceleration in manufacturing is widely viewed as necessary for sustained economic growth. The unemployment rate reached 6.0% in November, as workers in the airline, technology and other high profile industries lost jobs during the year. Worldwide financial markets responded predictably to the year's economic events. Most major European stock markets lost value, as London's FTSE Index lost 21.96% and Germany's DAX Index ended down 43.77%. Reflecting the downward trend that was evident throughout many Asian markets, Japan's Nikkei Index was lower by 17.91%. Several South American markets also performed poorly in 2002, led by large losses in Argentina and Brazil. U.S. stocks continued their multi-year decline during the first three quarters, but began to rally toward year's end. The S&P 500(R) Index lost 22.10% for the entire period, but rose 8.43% in the fourth quarter. The Nasdaq Composite Index lost 31.26% for 2002, but also rebounded strongly late in the year. The U.S. bond market delivered mainly positive returns during the period, providing a refuge for investors seeking shelter from stock market gyrations. The Lehman Brothers Aggregate Bond Index gained 10.27% and the Lehman Brothers Intermediate Government Bond Index rose 9.63%, as bonds handily outperformed stocks for the year. As interest rates moved lower throughout the period, bond prices generally moved higher. During this period of declining interest rates, Allmerica Securities Trust was able to maintain a competitive dividend yield compared with other income-oriented investments such as Treasury securities and certificates of deposit. The Trust produced a total return of 5.54% for 2002, underperforming its benchmark, the Lehman Brothers U.S. Credit Index, but providing investors with positive results. On behalf of the Board of Trustees, /s/ John P. Kavanaugh John P. Kavanaugh Chairman of the Board Allmerica Securities Trust 3 ALLMERICA SECURITIES TRUST The Allmerica Securities Trust returned 5.54% for 2002, underperforming its benchmark, the Lehman Brothers U.S. Credit Index, which returned 10.52%. Corporate scandals, massive bankruptcies and negative stock market news dominated the business headlines during 2002, but a sustained bond market rally produced sound returns for the period. Cautious optimism led many investors to believe that the Federal Reserve Board's easing cycle was over, as it shifted from an easing bias to a neutral stance. By mid-year, however, much of the incoming economic data turned softer, and the equity markets were roiled by lower profit reports and new scandals. In November, the Federal Reserve Board reduced the target federal funds rate to a low 1.25%. The underperformance of the trust to its benchmark was driven primarily by holdings in the high yield bond sector, which generated negative returns. The trust's positions in the poor performing utility sector also hurt results. Going forward, the Investment Sub-Adviser intends to add exposure in select areas of the market that may enjoy stable ratings and improving fundamentals. The Investment Sub-Adviser believes that interest rates will not go much lower and that the Federal Reserve Board's recent actions may produce positive results. The Investment Sub-Adviser believes that there may be reasons to shorten durations in the fund, but that with the potential for war looming large in 2003, geopolitical risk remains in the forefront of investors' concerns. Consequently, the Investment Sub-Adviser intends to keep the duration of the fund just below the benchmark duration. Average Annual Total Returns
1 Year 5 Year 10 Year Allmerica Securities Trust 5.54% 4.74% 6.77% Lehman Brothers U.S. Credit Index 10.52% 7.28% 7.86% Lipper Corporate Debt Funds BBB-Rated Average 7.35% 5.33% 7.05%
Historical Performance
Total Return Total Return on Net Asset Value on Market Value 1998 8.47% 11.13% 1999 (1.42)% (13.75)% 2000 6.76% 23.76% 2001 4.41% 6.00% 2002 5.54% 2.11%
The Lehman Brothers U.S. Credit Index is an unmanaged index of all publicly issued, fixed-rate, non-convertible investment grade corporate debt. The Lipper Corporate Debt Funds BBB-Rated Average is a non-weighted index of funds within the Corporate Debt Funds BBB-Rated category. Portfolio composition is subject to change. Investment Manager Opus Investment Management, Inc. About the Trust Seeks to generate a high rate of current income for distribution to shareholders. Portfolio Composition As of December 31, 2002, the sector allocation of net assets was: [CHART] Corporate Notes & Bonds 57% U.S. Government & Agency Obligations 21% Asset-Backed & Mortgage-Backed Securities 8% Foreign Bonds 5% Investment Company 4% Other 5% - -------------------------------------------------------------------------------- 4 Financials Intentionally Left Blank ALLMERICA SECURITIES TRUST PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2002 - -------------------------------------------------------------------------------- Moody's Ratings Value Par Value (Unaudited) (Note 2) - -------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS (g) - 1.7% Freddie Mac - 1.7% $ 249,569 5.00%, 05/15/21 NR $ 257,446 1,232,705 6.00%, 10/15/07 - 05/15/29 NR 1,292,165 -------------- 1,549,611 -------------- Total U.S. Government Agency Mortgage-Backed Obligations 1,549,611 -------------- (Cost $1,501,610) U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 21.2% Fannie Mae - 5.0% 500,000 3.00%, 11/01/05 Aaa 506,480 275,000 3.70%, 11/01/07 Aaa 280,953 350,000 5.15%, 05/03/07 Aaa 375,156 750,000 6.25%, 02/01/11, Subordinated Aa2 839,318 750,000 6.25%, 07/19/11 Aaa 792,829 1,500,000 6.63%, 09/15/09 Aaa 1,759,888 -------------- 4,554,624 -------------- Federal Home Loan Bank - 3.1% 250,000 4.51%, 11/07/06 Aaa 266,328 500,000 4.96%, 06/18/07 Aaa 524,670 1,625,000 7.63%, 05/14/10 Aaa 2,010,382 -------------- 2,801,380 -------------- Freddie Mac - 1.5% 500,000 4.50%, 07/23/07 Aaa 520,354 250,000 5.75%, 03/15/09 Aaa 280,731 225,000 6.25%, 03/05/12 Aa2 246,979 250,000 7.80%, 09/12/16 NR 290,483 -------------- 1,338,547 -------------- U.S. Treasury Bond - 7.9% 2,835,000 5.38%, 02/15/31 Aaa 3,090,592 1,750,000 7.25%, 05/15/16 - 08/15/22 Aaa 2,267,041 1,325,000 7.63%, 11/15/22 Aaa 1,791,441 -------------- 7,149,074 -------------- U.S. Treasury Note - 3.7% 1,835,000 4.88%, 02/15/12 (a) NR 1,992,623 1,175,000 6.50%, 02/15/10 (a) Aaa 1,404,492 -------------- 3,397,115 -------------- Total U.S. Government and Agency Obligations 19,240,740 -------------- (Cost $18,031,167) CORPORATE NOTES AND BONDS - 56.6% Automotive - 4.3% 500,000 DaimlerChrysler North America Holding Corp. 8.50%, 01/18/31 A3 615,358 825,000 Ford Motor Co. 7.45%, 07/16/31 Baa1 717,642 Automotive (continued) 675,000 Ford Motor Credit Corp. 6.50%, 01/25/07 A3 666,710 400,000 Ford Motor Credit Corp. 6.88%, 02/01/06 A3 400,701 1,000,000 Ford Motor Credit Corp. 7.88%, 06/15/10 A3 1,006,264 500,000 General Motors Corp. (a) 7.20%, 01/15/11 A3 502,096 -------------- 3,908,771 -------------- Banking - 11.1% 450,000 Bank of America Corp. 4.88%, 09/15/12 Aa2 454,855 500,000 Bank of New York Co., Inc. 3.75%, 02/15/08 Aa3 505,074 1,000,000 Bank of New York Co., Inc. 6.38%, 04/01/12 A1 1,124,238 550,000 BB&T Corp. (b) 6.38%, 06/30/05 A2 594,086 1,400,000 Capital One Financial Corp. 7.25%, 12/01/03 Baa3 1,359,970 600,000 Citifinancial 6.75%, 07/01/07 Aa1 671,327 500,000 Firstar Corp. 7.13%, 12/01/09 Aa3 590,938 500,000 Inter-American Development Bank 4.38%, 09/20/12 Aaa 508,115 250,000 MBNA Corp., MTN 6.25%, 01/17/07 Baa2 260,976 85,000 MBNA Corp. 7.50%, 03/15/12 Baa2 91,382 500,000 National City Bank of Indiana 4.88%, 07/20/07 Aa3 529,762 250,000 Northern Trust Co. 6.65%, 11/09/04 Aa3 270,364 500,000 Sovereign Bancorp, Inc. 8.63%, 03/15/04 Ba2 524,309 200,000 Suntrust Banks, Inc. 6.38%, 04/01/11 Aa3 223,041 300,000 Suntrust Banks, Inc. 7.75%, 05/01/10 A1 360,632 500,000 U.S. Bancorp 5.10%, 07/15/07 Aa3 535,216 600,000 Wachovia Bank N.A. 4.85%, 07/30/07 Aa2 638,796 275,000 Washington Mutual Bank FA 5.50%, 01/15/13 A3 280,363 500,000 Wells Fargo & Co. 5.13%, 09/01/12 Aa3 517,077 -------------- 10,040,521 -------------- Beverages, Food & Tobacco - 2.6% 445,000 Bottling Group, LLC. (c) 4.63%, 11/15/12 A3 444,802 500,000 Conagra Foods, Inc. 7.50%, 09/15/05 Baa1 560,425 See Notes to Financial Statements. - -------------------------------------------------------------------------- F-1 ALLMERICA SECURITIES TRUST PORTFOLIO OF INVESTMENTS, CONTINUED - DECEMBER 31, 2002 - -------------------------------------------------------------------------------- Moody's Ratings Value Par Value (Unaudited) (Note 2) - -------------------------------------------------------------------------------- Beverages, Food & Tobacco (continued) $ 450,000 Diageo Capital, Plc 3.50%, 11/19/07 A1 $ 452,293 425,000 Kellogg Co. 7.45%, 04/01/31 Baa2 517,684 400,000 Unilever Capital Corp. 5.90%, 11/15/32 A1 409,174 -------------- 2,384,378 -------------- Chemicals - 1.7% 250,000 Du Pont (E.I.) De Nemours and Co. (a) 3.38%, 11/15/07 Aa3 252,733 200,000 Du Pont (E.I.) De Nemours and Co. 8.25%, 09/15/06 Aa3 237,134 1,000,000 RPM, Inc., Senior Notes 7.00%, 06/15/05 Baa3 1,056,827 -------------- 1,546,694 -------------- Commercial Services - 1.9% 500,000 Allied Waste North America 8.50%, 12/01/08 Ba3 502,500 550,000 Pitney Bowes Credit Corp. 8.55%, 09/15/09 Aa3 671,161 490,000 USA Waste Services, Inc. 7.00%, 10/01/04 Ba1 512,989 -------------- 1,686,650 -------------- Communications - 0.6% 500,000 AOL Time Warner, Inc. 6.15%, 05/01/07 Baa1 519,413 -------------- Cosmetics & Personal Care - 1.8% 300,000 Procter & Gamble Co. (a) 4.75%, 06/15/07 Aa3 321,663 1,000,000 Procter & Gamble Co. 8.50%, 08/10/09 Aa3 1,268,386 -------------- 1,590,049 -------------- Electric Utilities - 7.3% 550,000 Amerenenergy Generating 7.75%, 11/01/05 A3 603,643 500,000 Detroit Edison Co. 6.13%, 10/01/10 A3 550,727 535,000 Dominion Resources, Inc. 7.60%, 07/15/03 Baa1 547,448 1,000,000 Duke Energy Corp. 5.63%, 11/30/12 A3 997,612 500,000 Duke Energy Corp. 7.50%, 08/16/05 Baa2 527,065 780,000 East Coast Power LLC 7.07%, 03/31/12 Baa3 632,674 225,000 Florida Power & Light 6.88%, 12/01/05 Aa3 250,889 600,000 Gulf States Utilities 8.25%, 04/01/04 Baa3 636,123 250,000 Oncor Electric Delivery Co. (c) 7.00%, 05/01/32 Baa1 249,965 500,000 Pinnacle Partners (c) 8.83%, 08/15/04 Ba2 471,712 1,270,000 Sithe/Independence Funding Corp., Series A 9.00%, 12/30/13 Baa2 1,130,160 -------------- 6,598,018 -------------- Entertainment & Leisure - 1.3% 500,000 Harrah's Operating Co., Inc. 7.13%, 06/01/07 Baa3 551,236 350,000 Park Place Entertainment Corp. (a) 8.13%, 05/15/11 Ba2 363,125 300,000 Time Warner Cos., Inc. 7.57%, 02/01/24 Baa1 300,980 -------------- 1,215,341 -------------- Financial Services - 4.8% 500,000 American Express Co. 3.75%, 11/20/07 A1 506,092 500,000 Countrywide Home Loans, Inc. 7.26%, 05/10/04 A3 532,301 500,000 General Electric Capital Corp., MTN 6.00%, 06/15/12 Aaa 539,838 500,000 General Electric Capital Corp. 8.75%, 05/21/07 Aaa 602,022 575,000 Household Finance Corp. 8.00%, 07/15/10 A2 649,570 1,000,000 KFW International Finance, Inc. 4.25%, 04/18/05 Aaa 1,051,841 500,000 Mellon Funding Corp. 5.00%, 12/01/14 A2 508,198 -------------- 4,389,862 -------------- Food Retailers - 1.5% 500,000 Kroger Co. 6.75%, 04/15/12 Baa3 553,303 275,000 Safeway, Inc. 7.25%, 02/01/31 Baa2 311,161 500,000 Safeway, Inc. 9.65%, 01/15/04 Baa3 535,947 -------------- 1,400,411 -------------- Forest Products & Paper - 1.1% 350,000 International Paper Co. 7.50%, 05/15/04 Baa2 373,654 500,000 Kimberly-Clark Corp. 7.10%, 08/01/07 Aa2 582,732 -------------- 956,386 -------------- See Notes to Financial Statements. -------------------------------------------------------------------------- F-2 ALLMERICA SECURITIES TRUST PORTFOLIO OF INVESTMENTS, CONTINUED - DECEMBER 31, 2002 - -------------------------------------------------------------------------------- Moody's Ratings Value Par Value (Unaudited) (Note 2) - -------------------------------------------------------------------------------- Home Construction, Furnishings & Appliances - 0.6% $ 500,000 Pulte Corp. 8.13%, 03/01/11 Baa3 $ 559,735 -------------- Media - Broadcasting & Publishing - 2.5% 270,000 Belo Corp. 8.00%, 11/01/08 Baa3 309,123 425,000 Charter Communications Holdings LLC 8.63%, 04/01/09 B3 189,125 400,000 Continental Cablevision, Inc., Senior Notes 8.30%, 05/15/06 Baa3 433,315 500,000 News America Holdings, Inc. 7.38%, 10/17/08 Baa3 550,323 200,000 News America Holdings, Inc. 8.50%, 02/15/05 Baa3 216,258 450,000 Viacom, Inc. 7.88%, 07/30/30 A3 560,174 -------------- 2,258,318 -------------- Oil & Gas - 6.2% 500,000 ANR Pipeline Co., Debenture 9.63%, 11/01/21 Ba1 500,000 375,000 Burlington Resources, Inc. 7.40%, 12/01/31 Baa1 439,664 500,000 Conoco Funding Co. 5.45%, 10/15/06 A3 539,683 500,000 Enterprise Products 8.25%, 03/15/05 Baa2 543,315 500,000 Occidental Petroleum Corp. 6.50%, 04/01/05 Baa2 540,196 500,000 Oryx Energy Co. 8.00%, 10/15/03 Baa2 520,099 250,000 Oryx Energy Co. 8.13%, 10/15/05 Baa2 282,752 175,000 Parker & Parsley Petroleum Co. 8.88%, 04/15/05 Ba1 187,707 625,000 Phillips Petroleum 8.50%, 05/25/05 A3 710,699 195,000 Seagull Energy, Inc. 7.88%, 08/01/03 Baa3 199,144 600,000 Texaco Capital, Inc. 8.25%, 10/01/06 Aa3 716,818 400,000 XTO Energy, Inc. 7.50%, 04/15/12 Ba2 425,000 -------------- 5,605,077 -------------- Pharmaceuticals - 1.2% 500,000 Cardinal Health, Inc. 6.75%, 02/15/11 A2 570,951 120,000 Johnson & Johnson 6.73%, 11/15/23 Aaa 137,520 330,000 Zeneca Wilmington 7.00%, 11/15/23 Aa2 380,156 -------------- 1,088,627 -------------- Retailers - 1.2% 500,000 Kohls Corp. 6.00%, 01/15/33 A3 502,655 500,000 Wal-Mart Stores, Inc. 7.55%, 02/15/30 Aa2 631,791 -------------- 1,134,446 -------------- Securities Broker - 2.3% 540,000 Bear Stearns Cos., Inc. 7.80%, 08/15/07 A2 632,000 450,000 Goldman Sachs Group, Inc. 5.70%, 09/01/12 Aa3 468,020 444,294 Jones (Edward D.) & Co., LP (d) (i) 7.95%, 04/15/06 NR 470,143 475,000 Morgan Stanley Dean Witter & Co. (a) 6.60%, 04/01/12 Aa3 526,451 -------------- 2,096,614 -------------- Telephone Systems - 1.3% 200,000 AT&T Wireless Services, Inc. 8.13%, 05/01/12 Baa2 201,000 300,000 TCI Communications, Inc. 9.80%, 02/01/12 Baa3 360,607 500,000 Verizon Florida, Inc. 6.13%, 01/15/13 A1 535,932 125,000 Verizon Wireless Capital (b) 1.81%, 12/17/03 A3 124,117 -------------- 1,221,656 -------------- Transportation - 1.3% 500,000 Consolidated Rail Corp. 9.75%, 06/15/20 Baa2 667,018 200,000 Union Pacific Corp. (a) 6.50%, 04/15/12 Baa3 224,714 250,000 Union Pacific Corp. 6.63%, 02/01/08 Baa3 282,440 -------------- 1,174,172 -------------- Total Corporate Notes and Bonds 51,375,139 -------------- (Cost $49,743,622) ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (g) - 8.2% 1,000,000 American Airlines, Inc., Pass- Through Trust, Series 1991 - C2 9.73%, 09/29/14 Ba3 473,640 570,000 Bear Stearns Commercial Mortgage Securities, Inc., Series 2002-PBW1, Class A2 4.72%, 11/11/35 Aaa 574,477 See Notes to Financial Statements. - -------------------------------------------------------------------------- F-3 ALLMERICA SECURITIES TRUST PORTFOLIO OF INVESTMENTS, CONTINUED - DECEMBER 31, 2002 - -------------------------------------------------------------------------------- Moody's Ratings Value Par Value (Unaudited) (Note 2) - -------------------------------------------------------------------------------- ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (g) (continued) $ 250,000 Bear Stearns Mortgage Securities, Inc., Series 1999-WF2, Class A2, CMO 7.08%, 06/15/09 Aaa $ 289,183 500,000 Chase Manhattan Auto Owner Trust, Series 2002-A, Class A4 4.24%, 09/15/08 Aaa 523,947 300,000 Citibank Credit Card Issuance Trust, Series 2000-Cl, CMO 6.88%, 11/16/09 Aaa 341,548 250,000 DaimlerChrysler Auto Trust, Series 2002-B, Class A3 2.93%, 06/06/06 Aaa 254,358 500,000 General Electric Capital Commercial Mortgage Corp., Series 2002-1A, Class C, CMO 6.47%, 12/10/35 A1 556,170 109,650 Green Tree Recreation Equipment & Consumer Trust, Series 1997-B, Class A1, CMO (e) 6.55%, 07/15/28 AAA 111,078 500,000 GS Mortgage Securities Corp. II, Series 1997-GL, Class A2D 6.94%, 07/13/30 Aaa 563,466 250,000 MBNA Master Credit Card Trust, Series 1995-C, Class A 6.45%, 02/15/08 Aaa 274,164 250,000 Morgan Stanley Dean Witter Capital I, Series 2002-HQ, Class C 6.75%, 04/15/34 A2 281,248 500,000 Morgan Stanley Dean Witter Capital I, Series 2002-IQ2, Class C, CMO (e) 6.12%, 12/15/35 A 531,965 250,000 Morgan Stanley Dean Witter Capital I, Series 2002-TOP7, Class B, CMO 6.08%, 01/15/39 Aa2 274,260 420,000 Toyota Auto Receivables Owner Trust, Series 2002-B, Class A3 3.76%, 06/15/06 Aaa 431,720 1,000,000 Union Acceptance Corp., Series 2000-B, Class B 7.73%, 01/08/08 Aaa 1,088,912 1,013,838 United Air Lines, Inc., Pass- Through Certificate (f) 9.30%, 03/22/08 Caa2 209,256 650,000 USAA Auto Owner Trust, Series 2000-1, Class A4 6.98%, 06/15/05 Aaa 673,244 -------------- Total Asset-Backed and Mortgage-Backed Securities 7,452,636 -------------- (Cost $8,515,740) FOREIGN GOVERNMENT OBLIGATIONS (h) - 3.0% 475,000 Province of British Columbia 5.38%, 10/29/08 Aa2 522,929 550,000 Province of Manitoba 4.25%, 11/20/06 Aa3 579,386 500,000 Province of Ontario 2.63%, 12/15/05 Aa2 503,625 500,000 Province of Quebec 6.13%, 01/22/11 A1 555,174 500,000 Province of Quebec 7.00%, 01/30/07 A1 571,200 -------------- Total Foreign Government Obligations 2,732,314 -------------- (Cost $2,554,785) FOREIGN BONDS (h) - 4.8% 595,000 Alberta Energy Co., Ltd. 7.38%, 11/01/31 Baa1 698,371 500,000 Calpine Canada Energy Finance 8.50%, 05/01/08 B1 217,500 400,000 Canadian Natural Resources 7.20%, 01/15/32 Baa1 448,386 355,000 Canadian Pacific, Ltd. 9.45%, 08/01/21 Baa2 493,096 450,000 Canadian Pacific Railroad 6.25%, 10/15/11 Baa2 495,700 1,000,000 St. George Bank, Ltd., Yankee Debenture (c) 7.15%, 10/15/05 A3 1,096,647 435,000 Stora Enso Oyj 7.38%, 05/15/11 Baa1 504,001 450,000 Vodafone Group, Plc 3.95%, 01/30/08 A2 452,786 -------------- Total Foreign Bonds 4,406,487 -------------- (Cost $4,327,191) Shares ------ INVESTMENT COMPANY - 3.6% 3,265,735 Marshall Money Market Fund NR 3,265,735 -------------- Total Investment Company 3,265,735 -------------- (Cost $3,265,735) Total Investments - 99.1% 90,022,662 -------------- (Cost $87,939,850) Net Other Assets and Liabilities - 0.9% 811,509 -------------- Total Net Assets - 100.0% $ 90,834,171 -------------- -------------- - ---------------------------------- (a) All or a portion of this security is out on loan at December 31, 2002; the value of the securities loaned amounted to $5,417,914. The value of collateral amounted to $5,538,175 which consisted of cash equivalents. (b) Variable rate security. The rate shown reflects rate in effect at period end. See Notes to Financial Statements. -------------------------------------------------------------------------- F-4 ALLMERICA SECURITIES TRUST PORTFOLIO OF INVESTMENTS, CONTINUED - DECEMBER 31, 2002 - -------------------------------------------------------------------------------- (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, to qualified institutional buyers. At December 31, 2002, these securities amounted to $2,263,126 or 2.5% of net assets. (d) Restricted Security - Represents ownership in a private placement investment which has not been registered with the Securities and Exchange Commission under the Securities Act of 1933. At December 31, 2002, these securities amounted to $470,143 or 0.5% of net assets. (e) Standard & Poor's (S&P) credit ratings are used in the absence of a rating by Moody's Investors, Inc. (f) Issuer filed for bankruptcy. (g) Pass Through Certificates. (h) U.S. currency denominated. (i) Security is valued by management (Note 2). CMO Collateralized Mortgage Obligation MTN Medium Term Note NR Not Rated FEDERAL INCOME TAX INFORMATION (SEE NOTE 2) At December 31, 2002, the aggregate cost of investment securities for tax purposes was $88,361,533. Net unrealized appreciation (depreciation) aggregated $1,661,129, of which $4,061,533 related to appreciated investment securities and $(2,400,404) related to depreciated investment securities. As of December 31, 2002, the components of distributable earnings (excluding unrealized appreciation disclosed above) on a tax basis consisted of $42,136 and $7,602,354 of undistributed ordinary income and capital loss carryforwards, respectively. At December 31, 2002, the Portfolio had capital loss carryforwards which expire as follows: $2,726,407 in 2008; $2,362,884 in 2009; $2,513,063 in 2010. OTHER INFORMATION For the year ended December 31, 2002, the aggregate cost of purchases and the proceeds of sales, other than from short-term investments, included $40,226,532 and $41,921,422 of non-governmental issuers, respectively, and $30,861,281 and $31,392,192 of U.S. Government and Agency issuers, respectively. The composition of ratings of both long-term and short-term debt holdings as a percentage of total value of investments in securities is as follows: Moody's Ratings S&P Ratings (Unaudited) (Unaudited) Aaa 26.4% AAA 0.1% Aa 15.8% A 0.6% --- A 21.0% 0.7% === Baa 22.7% Ba 4.4% B 0.4% Caa 0.2% NR (Not Rated) 8.4% ---- 99.3% ==== See Notes to Financial Statements. - -------------------------------------------------------------------------------- F-5 ALLMERICA SECURITIES TRUST STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2002 - -------------------------------------------------------------------------------- ASSETS: Investments: Investments at cost ............................................. $87,939,850 Net unrealized appreciation ..................................... 2,082,812 ---------- Total investments at value+ ................................... 90,022,662 Cash .............................................................. 3,662 Short-term investments held as collateral for securities loaned ... 5,538,175 Receivable for investments sold ................................... 1,613,318 Interest receivable ............................................... 1,302,764 ---------- Total Assets .................................................. 98,480,581 ---------- LIABILITIES: Payable for investments purchased ................................. 1,905,446 Collateral for securities loaned .................................. 5,538,175 Management fee payable ............................................ 39,121 Trustees' fees and expenses payable ............................... 8,810 Accrued expenses and other payables ............................... 154,858 ---------- Total Liabilities ............................................. 7,646,410 ---------- NET ASSETS ........................................................ $90,834,171 ========== NET ASSETS consist of: Par Value ....................................................... $8,592,306 Paid-in capital ................................................. 88,140,954 Distribution in excess of net investment income ................. (376,040) Accumulated net realized loss ................................... (7,605,861) Net unrealized appreciation ....................................... 2,082,812 ---------- TOTAL NET ASSETS .................................................. $90,834,171 ========== Shares of beneficial interest outstanding (10,000,000 authorized shares with par value of $1.00) .................................. 8,592,306 NET ASSET VALUE Per share ......................................... $ 10.572 ========== MARKET VALUE (closing price on New York Stock Exchange) Per share ............................................... $ 9.45 ========== +Total value of securities on loan .............................. $5,417,914 ========== See Notes to Financial Statements. -------------------------------------------------------------------------- F-6 ALLMERICA SECURITIES TRUST STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME Interest ........................................................ $5,625,089 Securities lending income ....................................... 13,476 ---------- Total investment income ....................................... 5,638,565 ---------- EXPENSES Management fees ................................................. 410,722 Custodian and Fund accounting fees .............................. 76,599 Transfer agent fees ............................................. 73,865 Legal fees ...................................................... 21,285 Audit fees ...................................................... 38,474 Trustees' fees and expenses ..................................... 27,968 Reports to shareholders ......................................... 104,853 New York Stock Exchange fees .................................... 24,627 Miscellaneous ................................................... 2,478 ---------- Total expenses ................................................ 780,871 ---------- NET INVESTMENT INCOME ............................................. 4,857,694 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments sold ........................... (2,344,097) Net change in unrealized appreciation (depreciation) of investments .................................. 2,573,374 ---------- NET GAIN ON INVESTMENTS ........................................... 229,277 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................................................ $5,086,971 ========== STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- Years Ended December 31, -------------------- 2002 2001 - ------------------------------------------------------------------------------- NET ASSETS at beginning of year .................... $90,773,702 $93,362,029 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS: Net investment income .......................... 4,857,694 5,778,470 Net realized loss on investments sold ........................................... (2,344,097) (1,936,035) Net change in unrealized appreciation (depreciation) of investments .................................... 2,573,374 142,355 ----------- ----------- Net increase in net assets resulting from operations ................................ 5,086,971 3,984,790 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .......................... (5,026,502) (6,265,040) Return of capital .............................. -- (308,077) ----------- ----------- Total distributions .......................... (5,026,502) (6,573,117) ----------- ----------- Total increase (decrease) in net assets ........................................ 60,469 (2,588,327) ----------- ----------- NET ASSETS at end of year .......................... $90,834,171 $90,773,702 =========== =========== Distribution in excess of net investment income ............................................. $ (376,040) $ (363,258) =========== =========== See Notes to Financial Statements. - ------------------------------------------------------------------------------- F-7 ALLMERICA SECURITIES TRUST FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR - -------------------------------------------------------------------------------- Year ended December 31, -------------------------------------------------- 2002 2001(1) 2000 1999 1998 ------- ------- ------- ------- -------- Net Asset Value, beginning of year ......... $10.565 $10.866 $10.958 $11.961 $ 11.821 ------- ------- ------- ------- -------- Income from Investment Operations: Net investment income .................. 0.565 0.673(2) 0.802 0.802 0.810 Net realized and unrealized gain (loss) on investments .......... 0.027 (0.209) (0.084) (0.965) 0.160 ------- ------- ------- ------- -------- Total from investment operations ............ 0.592 0.464 0.718 (0.163) 0.970 ------- ------- ------- ------- -------- Less Distributions(3): Dividends from net investment income ....... (0.585) (0.729) (0.800) (0.800) (0.830) Distributions from net realized capital gains ................... -- -- (0.010) (0.040) -- Return of capital ....... -- (0.036) -- -- -- ------- ------- ------- ------- -------- Total distributions ......... (0.585) (0.765) (0.810) (0.840) (0.830) ------- ------- ------- ------- -------- Net increase (decrease) in net asset value ........ 0.007 (0.301) (0.092) (1.003) 0.140 ------- ------- ------- ------- -------- Net Asset Value, end of year ...................... $10.572 $10.565 $10.866 $10.958 $ 11.961 ======= ======= ======= ======= ======== Market Value, end of year ...................... $ 9.45 $ 9.83 $ 10.00 $ 8.81 $ 11.13 ======= ======= ======= ======= ======== Total Return on Market Value, end of year ........ $ 2.11% 6.00% 23.76% (13.75)% 11.13% Ratios/Supplemental Data Net assets, end of year (000's) ................... $90,834 $90,774 $93,362 $94,157 $102,770 Ratios to average net assets: Net investment income .................. 5.38% 6.23% 7.38% 7.00% 6.78% Operating expenses ...... 0.86% 0.79% 0.74% 0.77% 0.73% Management fee .......... 0.45% 0.50% 0.50% 0.49% 0.49% Portfolio turnover rate .................... 79% 128% 58% 24% 25% - -------------------------------------------------------------------------------- (1) Effective January 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and is amortizing premium and market discount on debt securities using the daily effective yield method. The effect of this change for the year ended December 31, 2001 was a decrease in net investment income per share of $0.022, an increase in net realized and unrealized gains and losses per share of $0.022 and a decrease in the ratio of net investment income to average net assets from 6.36% to 6.23%. Per share data and ratio/supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (2) Computed using average shares throughout the period. (3) Certain prior year amounts have been reclassified to conform to the current year presentation. See Notes to Financial Statements. -------------------------------------------------------------------------- F-8 ALLMERICA SECURITIES TRUST NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies 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 using 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. This method involves valuing a portfolio security initially at its cost and thereafter assumes a constant amortization to maturity of any discount or premium. At December 31, 2002, one security with a value of $470,143 or 0.5% of net assets was valued by management under the direction of the Board of Trustees. SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are recorded as of the trade date. Realized gains and losses from security transactions are determined on the basis of identified cost. Interest income, including amortization of premium and accretion of discount on securities, is accrued daily. Income distributions earned by the Trust from investments in certain investment companies are recorded as interest income in the accompanying financial statements. 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 it distributes all of its taxable income and net realized gains, if any, for its fiscal year. 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. DISTRIBUTIONS TO SHAREHOLDERS: Dividends to shareholders resulting 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 gains distributions are determined in accordance with income tax regulations. Differences between book basis and tax basis amounts are primarily due to differing book and tax treatments in both the timing of the recognition of losses deferred due to wash sales and differing treatments for the amortization of premium and market discount. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Permanent book-tax differences, if any, are not included in ending undistributed net investment income for the purpose of calculating net investment income per share in the Financial Highlights. SECURITIES LENDING: The Trust, using Investors Bank & Trust Company ("IBT") as its lending agent, may loan securities to brokers and dealers in exchange for negotiated lenders' fees. These fees are disclosed as "Securities lending income" in the Statement of Operations. The Trust receives collateral against the loaned securities, which must be - -------------------------------------------------------------------------- F-9 ALLMERICA SECURITIES TRUST NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- maintained at not less than 102% of the market value of the loaned securities during the period of the loan. Collateral received is generally cash, and is invested in short term investments. Lending portfolio securities involves possible delays in receiving additional collateral or in the recovery of the securities or possible loss of rights in the collateral. Information regarding the value of the securities loaned and the value of the collateral at period end is included in a footnote at the end of the Trust's Portfolio of Investments. 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 one other affiliated registered investment company, Allmerica Investment Trust (comprised of fourteen separate portfolios). 3. INVESTMENT MANAGEMENT AND OTHER RELATED PARTY TRANSACTIONS Opus Investment Management, Inc., a direct, wholly-owned subsidiary of Allmerica Financial Corporation ("Allmerica Financial"), serves as Investment Manager to the Trust. Effective February 1, 2003, the name of Allmerica Asset Management, Inc. was changed to Opus Investment Management, Inc. ("Opus"). For these services, the Trust pays Opus an aggregate monthly compensation at the annual rate of (a) 3/10 of 1% of average net assets plus (b) 2 1/2% of the amount of interest 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, and 1.00% of any excess of such value over $30,000,000, Opus will bear such excess expenses. IBT performs fund administration, custodian and fund accounting services for the Trust. IBT is entitled to receive a fee for these services, in addition to certain out-of-pocket expenses. Opus is solely responsible for the payment of the administration fee and the Trust pays the fees for the fund accounting and custodian services to IBT. 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 Manager 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. At December 31, 2002, First Allmerica Financial Life Insurance Company, an indirect, wholly-owned subsidiary of Allmerica Financial, the Trustees and the officers of the Trust owned in the aggregate 116,775 shares of beneficial interest. 5. RESTRICTED SECURITIES At December 31, 2002, the Trust owned the following restricted security constituting 0.5% 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 restricted 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 Board of Trustees. Additional information on the restricted security is as follows: Date of Par Cost at Issuer Acquisition Amount Acquisition Value - ----------------------------------------------------------------------------- Jones (Edward D.) & Co., LP 05/06/94 $444,294 $444,294 $470,143 ======== ======== - ----------------------------------------------------------------------------- F-10 ALLMERICA SECURITIES TRUST REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of 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 and S&P Ratings), and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Allmerica Securities Trust (hereafter referred to as the "Trust") at December 31, 2002, the results of its operations, the changes in its net assets, and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America, 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, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 3, 2003 - -------------------------------------------------------------------------------- F-11 ALLMERICA SECURITIES TRUST BOARD OF TRUSTEES (UNAUDITED) - --------------------------------------------------------------------------------
Number of Portfolios in Fund Term of Office Complex Position(s) Held and Length of Principal Occupation(s) Overseen by Name, Address and Age(1) with Trust Time Served During Past 5 Years(2) Trustee - --------------------------------------------------------------------------------------------------------------- P. Kevin Condron (57) Trustee, Member of the 1 Year Term President and Chief 15 Audit Committee and Fund Executive Officer, The Operations Committee Served Since Granite Group (wholesale 1998 plumbing and heating), 1997-present. Jocelyn S. Davis (49) Trustee, Member of the 1 Year Term President, Nelson Hart, 15 Audit Committee and Fund LLC (consulting), Operations Committee Served Since 2002-present; Beers & 2001 Cutler (professional services), 2001-2002; Chief Financial Officer, AARP (non-profit), 1996-2001. Cynthia A. Hargadon (48) Trustee, Member of the 1 Year Term President, Hargadon 15 Fund Operations Associates (asset Committee, Investment Served Since management consulting), Operations Committee and 1997 2002-present; President, Governance Committee Potomac Asset Mgt. Inc., 2000-2002; Director of Investments, National Automobile Dealers Association, 1999-2000; President, Stable Value Investment Association (investment trade group), 1996-1999. T. Britton Harris, IV (44) Trustee, Member of the 1 Year Term President, Verizon 15 Investment Operations Investment Management Committee and Governance Served Since Corporation, Committee 2001 1990-present. Gordon Holmes (64) Trustee, Chairman of the 1 Year Term Instructor at Bentley 15 Audit Committee and College, 1998-present; Member of the Fund Served Since Instructor at Boston Operations Committee 1991 University, 1997-1998; Certified Public Accountant; Retired Partner, Tofias, Fleishman, Shapiro & Co., P.C. (Accountants). Attiat F. Ott (67) Trustee, Chairman of the 1 Year Term Professor of Economics 15 Fund Operations and Director of the Committee and Member of Served Since Institute for Economic the Audit Committee 1982 Studies, Clark University. Ranne P. Warner (58) Trustee, Chairman of the 1 Year Term President, Centros 15 Governance Committee, Properties, USA; Owner, Member of the Fund Served Since Ranne P. Warner and Operations Committee and 1991 Company; Blackstone Investment Operations Exchange LLC (real Committee estate), 2001-present. - --------------------------------------------------------------------------------------------------------------- *Mark A. Hug (45) Trustee, Member of the 1 Year Term President and CEO, First 15 Investment Operations Allmerica Financial Life Committee Served Since Insurance Company ("First 2003 Allmerica") and Allmerica Financial Life Insurance and Annuity Company ("Allmerica Financial Life"); Senior Vice President, Equitable Life (product and marketing) to 1999. *John P. Kavanaugh (48) Chairman, Trustee and 1 Year Term President, Opus 15 President, Chairman of Investment the Investment Served Since Management, Inc.; Vice Operations Committee 1995 President, Director, Chief Investment Officer, First Allmerica and Allmerica Financial Life.
Other Directorships Name, Address and Age(1) Held by Trustee - --------------------------- ------------------------- P. Kevin Condron (57) Director, Banknorth Group. Jocelyn S. Davis (49) None Cynthia A. Hargadon (48) Director, Wilshire Target Funds, 2001-present. T. Britton Harris, IV (44) None Gordon Holmes (64) None Attiat F. Ott (67) None Ranne P. Warner (58) Director, Wainwright Bank & Trust Co. (commercial bank). - -------------------------------------------------------------------------------- *Mark A. Hug (45) None *John P. Kavanaugh (48) None - ------------------------ * Messrs. Hug and Kavanaugh are "interested persons", as defined in the Investment Company Act of 1940 as amended, of the Trust and of Allmerica Financial Corporation ("AFC") because of their affiliations with AFC. (1) The business address of each person is 440 Lincoln Street, Worcester, Massachusetts 01653. (2) Except as otherwise noted, each individual has held the office indicated or other offices in the same organization for the last five years. -------------------------------------------------------------------------- F-12 ALLMERICA SECURITIES TRUST REGULATORY DISCLOSURES (UNAUDITED) - -------------------------------------------------------------------------------- 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 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 2002 and may be exempt from state income taxation is 17.73%. 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 2002, the level of exempt income did not meet these thresholds and the exclusion did 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 and Kansas is 20.13%. The percentage applicable to the state of West Virginia, which is only for amounts invested in West Virginia obligations, is 0%. SHAREHOLDER INFORMATION (UNAUDITED) - -------------------------------------------------------------------------------- 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 or rejoin at any time. CASH INVESTMENT PLAN: The cash investment plan provides a systematic, convenient and inexpensive means to increase your investment in the Trust by putting your cash to work. The plan permits you to invest amounts ranging from $25 to $1,000 in any one month to purchase additional shares of the Trust. Regular monthly investment is not required. Your funds are consolidated with funds of other participants to purchase shares. Shares are purchased in bulk and you realize the commission savings. You pay only a service charge of $1.00 per transaction and your proportionate share of the brokerage commission. Your account will be credited with full and fractional shares purchased. Following each investment, you will receive a statement showing the details of the transaction and the current status of the account. The plan is voluntary and you may terminate at any time. INVESTMENT MANAGER: Effective February 1, 2003, the name of Allmerica Asset Management, Inc. was changed to Opus Investment Management, Inc. ("Opus"). PORTFOLIO MANAGER: Ann K. Tripp Ms. Tripp replaced Richard J. Litchfield as portfolio manager for the Trust in the fourth quarter of 2002. She is a Vice President at Opus and has been with Opus since 1987. Ms. Tripp has oversight responsibility for all insurance client portfolios managed by Opus and also oversees all fixed income trading operations. INVESTMENT OBJECTIVES: The Trust's primary investment objective is to provide a high rate of current income, with capital appreciation as a secondary objective. - -------------------------------------------------------------------------- F-13 ALLMERICA SECURITIES TRUST SHAREHOLDER INFORMATION (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- PRINCIPAL INVESTMENT POLICIES: The Trust seeks to achieve its objectives by investing in various types of fixed income securities with an emphasis on corporate debt obligations. Examples of the types of securities in which the Trust invests are corporate bonds, notes and debentures; mortgage-backed and asset-backed securities; obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities; and money market instruments. The Trust may invest up to 30% of its assets in high yield securities or "junk bonds" rated below investment grade but at least B- or higher by Moody's Investors Services or Standard & Poor's Rating Services or similar rating organizations, and in unrated securities determined by the Investment Manager to be of comparable quality. The Trust may invest up to 25% of its assets in U.S. dollar denominated foreign debt securities. The Trust may invest in securities with relatively long maturities as well as securities with shorter maturities. PRINCIPAL RISKS: - - Company Risk - - Credit Risk - - Foreign Investment Risk - - Interest Rate Risk - - Investment Management Risk - - Liquidity Risk - - Market Risk - - Prepayment Risk -------------------------------------------------------------------------- F-14 ALLMERICA FINANCIAL(R) THE ALLMERICA FINANCIAL COMPANIES --------------------------------- The Hanover Insurance Company . Allmerica Financial Alliance Insurance Company . Allmerica Financial Benefit Insurance Company Citizens Insurance Company of America . Citizens Management Inc. . AMGRO, Inc. . Financial Profiles, Inc. VeraVest Investments, Inc. . VeraVest Investment Advisors, Inc. . Opus Investment Management, Inc. . Allmerica Trust Company, N.A. First Allmerica Financial Life Insurance Company . Allmerica Financial Life Insurance and Annuity Company (all states except NY) 440 Lincoln Street, Worcester, Massachusetts 01653 10605NS (12/02) 03-0113 -----END PRIVACY-ENHANCED MESSAGE-----