N-CSR 1 dncsr.htm ALLMERICA SECURITIES TRUST Allmerica Securities Trust

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

 

Investment Company Act file number                                          811-02338                                                             

 

 

Allmerica Securities Trust

                                                                                                                                                                                                                                                                       

(Name of Registrant)

 

 

440 Lincoln Street

Worcester, Massachusetts 01653

                                                                                                                                                                                                                                                                       

(Address of principal executive offices) (Zip code)

 

 

George M. Boyd, Secretary

Allmerica Financial

440 Lincoln Street

Worcester, MA 01653

                                                                                                                                                                                                                                                                       

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code:  (508) 855-1000                                             

 

 

Date of fiscal year end: December 31                                                     

 

 

Date of reporting period: December 31, 2003                                        

 

Item 1. Reports to Stockholders

 

The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:

 

Allmerica Securities Trust

Annual Report

December 31, 2003

 

 

Allmerica Financial

 

December 31, 2003

 

[GRAPHIC]

 

Annual Report

 

·    Allmerica Securities Trust

 

[GRAPHIC]

 

[GRAPHIC]

 

 

Table of Contents

 

 

Trust Information

   2

A Letter from the Chairman

   3

Trust Overview

  4

Financials

   F-1

Regulatory Disclosures and
Shareholder Information

  F-15

 

Trust Information

 

 

Board of Trustees

John P. Kavanaugh, Chairman

P. Kevin Condron*

Jocelyn S. Davis*

Cynthia A. Hargadon*

T. Britton Harris, IV*

Gordon Holmes*

Mark A. Hug

Attiat F. Ott*

Ranne P. Warner*

 

Officers

John P. Kavanaugh, President

Richard J. Litchfield, Vice President

Ann K. Tripp, Vice President

Donald P. Wayman, 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 LLP

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

 

Dear Client:

 

We will remember 2003 as a year of broad-based economic recovery and above average investment returns across nearly all asset classes. Outside the United States, economic growth was tempered by growing worries over the decline in value of the U.S. dollar and concern that this could constrain the emerging global recovery. Still, stock markets around the world generally performed well. Japan’s Nikkei Average finished the period up 24.45%, Hong Kong’s Hang Seng Index was higher by 34.92%, Germany’s DAX Index rose 37.08%, England’s FTSE Index gained 13.62% and France’s CAC 40 Index was up 16.12%.

 

The United States economy displayed impressive strength in 2003. Early in the year, growth was hindered by major fighting in Iraq, a sluggish manufacturing sector and a lack of capital spending by businesses. The Federal Reserve Board cut the target federal funds rate to 1.00% and Congress passed a large tax cut, setting the stage for a rebound in economic activity. During the second half of the year, GDP rose sharply, productivity increased, corporate profits jumped, manufacturing gained strength and unemployment edged down. The consumer remained the primary source of spending, and business investment finally emerged. A full year of solid GDP growth provided the most compelling evidence yet that the growth engine of the world was back on track. U.S. securities markets reacted enthusiastically to the strong economic news. For the year, the S&P 500® Index gained 28.69% and the Nasdaq Composite Index rose 50.01%. Bonds also generated positive returns for the year, evidenced by the Lehman Brothers Aggregate Bond Index, which increased 4.11%.

 

During this period of historically low interest rates, the Allmerica Securities Trust portfolio generated income supporting aggregate dividends of 56.5 cents per share in 2003. This translated to an annualized dividend yield of 5.79%, based on Allmerica Securities Trust’s December 31, 2003 closing price of $9.75 per share.

 

On behalf of the Board of Trustees,

LOGO

John P. Kavanaugh

 

Chairman of the Board

 

Allmerica Securities Trust

 

3

 

Allmerica Securities Trust

 

The Allmerica Securities Trust returned 6.15% for 2003, underperforming its benchmark, the Lehman Brothers U.S. Credit Index, which returned 7.70%.

 

The Trust’s investment focus was turned toward providing stable income despite a historically low interest rate and spread environment. Throughout the year, as the economy and credit fundamentals continued to improve, the investment manager added more exposure to the “Baa” and “Ba” sectors, in order to add yield. The Trust remained overweight in the more conservative sectors, such as consumer non-cyclical, banking and finance, although more consumer cyclical names were introduced as the year progressed. The Trust’s underperformance was a result of the portfolio generally being positioned higher in quality relative to the benchmark, as a defensive posture. The underweight in the riskier names hurt performance. The lower quality sectors, in particular “Baa”, significantly outperformed the higher quality sectors.

 

The investment manager feels that economic growth will start strongly in 2004, as both the corporate sector and consumers appear ready to spend. The Federal Reserve Board has conveyed its inclination to keep interest rates steady, as long as inflation remains contained and slack remains in the labor and manufacturing segments. The investment manager believes that the Federal Reserve Board may raise interest rates in the mid to latter half of 2004 and that interest rates may be pressured up modestly as economic growth accelerates and the risk of inflation increases.

 

The investment manager thinks that geopolitical risk, terrorism risk, and dollar risk could alter this outlook. Should the dollar begin to free-fall, U.S. interest rates may be forced up dramatically, causing stock prices to drop, eroding consumer confidence and squashing capital spending.

 

 

Average Annual Total Returns

 

     1 Year     5 Year     10 Year  

Allmerica Securities Trust

    6.15 %   4.29 %   6.15 %

Lehman Brothers U.S. Credit Index

    7.70 %   7.11 %   7.42 %

Lipper Corporate Debt Funds BBB-Rated Average

    8.23 %   6.11 %   6.49 %

 

Historical Performance

 

     Total Return
on Net Asset Value		     

Total Return

on Market Value

1999

    (1.42)%      (13.75)%

2000

    6.76%      23.76%

2001

    4.41%      6.00%

2002

    5.54%      2.11%

2003

    6.15%      9.38%

 

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, 2003, the sector allocation of net assets was:

 

LOGO

 

 

 

 

 

 

4

 

 

Financials

 

 

 

[THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

ALLMERICA SECURITIES TRUST

 

PORTFOLIO OF INVESTMENTS • December 31, 2003

 

Par Value

        

Moody’s Ratings

(Unaudited)

   

Value

(Note 2)

U.S. GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS (h) - 0.4%

     Freddie Mac - 0.4%            
$   154,899   

5.00%, 05/15/21

    NR    $ 159,648
189,393   

6.00%, 10/15/07

    NR      198,724
              
                 358,372
              
    

Total U.S. Government Agency

            
    

Mortgage-Backed Obligations

           358,372
              
    

(Cost $ 357,828)

            

U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 2.8%

    

Fannie Mae - 1.2%

            
275,000   

3.70%, 11/01/07

    Aaa      279,512
850,000   

4.63%, 05/01/13

    Aa2      827,232
              
                 1,106,744
              
    

Federal Home Loan Bank - 0.6%

            
550,000   

2.25%, 05/15/06

    Aaa      550,124
              
    

U.S. Treasury Bond - 1.0%

            
120,000   

5.25%, 02/15/29

    NR      121,059
225,000   

6.00%, 02/15/26

    NR      249,513
450,000   

6.25%, 05/15/30

    NR      519,293
              
                 889,865
              
    

Total U.S. Government and

            
    

Agency Obligations

           2,546,733
              
    

(Cost $ 2,590,464)

            

CORPORATE NOTES AND BONDS - 76.3%

    

Aerospace & Defense - 1.1%

            
450,000   

Northrop Grumman Corp.

            
    

7.13%, 02/15/11

    Baa3      520,464
450,000    Raytheon Co.            
    

5.38%, 04/01/13

    Baa3      450,772
              
                 971,236
              
    

Automotive - 2.4%

            
460,000   

DaimlerChrysler North America

            
    

Holding Corp.

            
    

6.90%, 09/01/04

    A3      474,523
500,000   

DaimlerChrysler North America

            
    

Holding Corp.

            
    

8.50%, 01/18/31

    A3      597,392
500,000   

General Motors Corp. (a)

            
    

7.20%, 01/15/11

    Baa1      549,743
460,000   

Lear Corp.

            
    

8.11%, 05/15/09

    Ba1      541,075
              
                 2,162,733
              
    

Banking - 12.9%

            
880,000   

Bank of America Corp.

            
    

4.88%, 09/15/12

    Aa2      884,506
450,000   

Bank of New York Co., Inc.

            
    

3.75%, 02/15/08

    Aa3      455,267
$1,000,000   

Bank of New York Co., Inc.

            
    

6.38%, 04/01/12

    A1    $ 1,108,522
450,000   

BB&T Corp. (b)

            
    

6.38%, 06/30/05

    A2      478,897
725,000   

Capital One Bank

            
    

4.88%, 05/15/08

    Baa2      746,136
470,000   

Capital One Bank

            
    

5.75%, 09/15/10

    Baa2      497,180
500,000   

Citifinancial

            
    

6.75%, 07/01/07

    Aa1      559,348
655,000   

Fifth Third Bank

            
    

4.50%, 06/01/18

    Aa3      608,076
500,000   

Firstar Corp.

            
    

7.13%, 12/01/09

    Aa3      576,215
350,000   

MBNA Corp., MTN

            
    

6.25%, 01/17/07

    Baa2      381,042
85,000   

MBNA Corp., MTN

            
    

7.50%, 03/15/12

    Baa2      98,756
420,000   

National City Bank of Indiana

            
    

4.88%, 07/20/07

    Aa3      442,136
250,000   

Northern Trust Co.

            
    

6.65%, 11/09/04

    Aa3      260,522
450,000   

Regions Bank

            
    

2.90%, 12/15/06

    Aa3      456,717
200,000   

Suntrust Banks, Inc.

            
    

6.38%, 04/01/11

    Aa3      223,908
125,000   

Suntrust Banks, Inc.

            
    

7.75%, 05/01/10

    A1      149,705
500,000   

U.S. Bancorp, MTN

            
    

5.10%, 07/15/07

    Aa3      533,122
455,000   

US Bank National Cincinnati

            
    

6.50%, 02/01/08

    Aa3      506,428
475,000   

Wachovia Bank N.A.

            
    

4.85%, 07/30/07

    Aa2      512,123
450,000   

Wachovia Corp.

            
    

4.95%, 11/01/06

    Aa3      477,774
455,000   

Washington Mutual Bank FA

            
    

5.50%, 01/15/13

    A3      469,355
450,000   

Washington Mutual, Inc.

            
    

4.38%, 01/15/08

    A3      462,615
450,000   

Wells Fargo & Co.

            
    

5.13%, 02/15/07

    Aa1      480,086
450,000   

Wells Fargo & Co.

            
    

5.13%, 09/01/12

    Aa2      459,795
              
                 11,828,231
              
    

Beverages, Food &

            
    

Tobacco - 4.1%

            
450,000   

Anheuser-Busch Cos., Inc.

            
    

4.63%, 02/01/15

    A1      439,133
500,000   

Bottling Group LLC

            
    

4.63%, 11/15/12

    A3      497,281
460,000   

Cadbury Schweppes US Finance LLC (c)

            
    

3.88%, 10/01/08

    Baa2      457,911
525,000   

Conagra Foods, Inc.

            
    

7.50%, 09/15/05

    Baa1      570,389

 

See Notes to Financial Statements.

 

 

F-1

ALLMERICA SECURITIES TRUST

 

PORTFOLIO OF INVESTMENTS, Continued • December 31, 2003

 

Par Value

        

Moody’s Ratings

(Unaudited)

   

Value

(Note 2)

     Beverages, Food & Tobacco (continued)            
$   450,000   

Diageo Capital, Plc

            
    

3.50%, 11/19/07

    A2    $ 453,879
460,000   

General Mills, Inc.

            
    

6.00%, 02/15/12

    Baa2      491,909
830,000   

Unilever Capital Corp.

            
    

5.90%, 11/15/32

    A1      831,991
              
                 3,742,493
              
    

Chemicals - 1.1%

            
200,000   

Du Pont (E.I.) De Nemours and Co.

            
    

8.25%, 09/15/06

    Aa3      229,718
500,000   

Praxair, Inc.

            
    

6.63%, 10/15/07

    A3      556,549
210,000   

Sealed Air Corp. (a) (c)

            
    

5.63%, 07/15/13

    Baa3      214,891
              
                 1,001,158
              
    

Commercial Services - 2.5%

            
450,000   

Allied Waste North America (c)

            
    

6.50%, 11/15/10

    Ba3      461,250
500,000   

Allied Waste North America

            
    

8.50%, 12/01/08

    Ba3      556,250
750,000   

Pitney Bowes, Inc.

            
    

4.75%, 05/15/18

    Aa3      715,376
490,000   

Waste Management, Inc.

            
    

7.00%, 10/01/04

    Baa3      507,089
              
                 2,239,965
              
    

Cosmetics & Personal Care - 1.7%

            
300,000   

Procter & Gamble Co.

            
    

4.75%, 06/15/07

    Aa3      317,578
1,000,000   

Procter & Gamble Co.

            
    

8.50%, 08/10/09

    Aa3      1,234,326
              
                 1,551,904
              
    

Electric Utilities - 7.6%

            
550,000   

AmerenEnergy Generating

            
    

7.75%, 11/01/05

    A3      603,087
500,000   

Baltimore Gas & Electric Co.

            
    

5.20%, 06/15/33

    A2      454,302
505,000   

CenterPoint Energy, Inc. (a) (c)

            
    

5.88%, 06/01/08

    Ba1      526,085
600,000   

Dayton Power & Light Co. (c)

            
    

5.13%, 10/01/13

    Baa1      598,812
425,000   

Detroit Edison Co.

            
    

6.13%, 10/01/10

    A3      466,253
580,000   

Dominion Resources, Inc.

            
    

5.25%, 08/01/33

    Baa1      574,380
500,000   

Duke Energy Corp.

            
    

7.50%, 08/16/05

    Baa2      537,231
563,466   

East Coast Power LLC

            
    

7.07%, 03/31/12

    Baa3      569,101
250,000   

Entergy Gulf States, Inc. (c)

            
    

3.60%, 06/01/08

    Baa3      240,979
$   450,000   

FirstEnergy Corp.

            
    

6.45%, 11/15/11

    Baa2    $ 466,402
225,000   

Florida Power & Light

            
    

6.88%, 12/01/05

    Aa3      244,781
600,000   

Gulf States Utilities (d)

            
    

8.25%, 04/01/04

    BBB-      609,422
500,000   

Pinnacle Partners (c)

            
    

8.83%, 08/15/04

    Ba2      518,125
450,000   

TXU Energy Co.

            
    

7.00%, 03/15/13

    Baa2      497,698
              
                 6,906,658
              
    

Entertainment & Leisure - 1.9%

            
450,000   

AOL Time Warner, Inc.

            
    

6.15%, 05/01/07

    Baa1      489,616
500,000   

Harrah’s Operating Co., Inc.

            
    

7.13%, 06/01/07

    Baa3      556,795
350,000   

Park Place Entertainment Corp. (a)

            
    

8.13%, 05/15/11

    Ba2      392,437
300,000   

Time Warner Cos., Inc.

            
    

7.57%, 02/01/24

    Baa1      339,259
              
                 1,778,107
              
    

Financial Services - 8.3%

            
500,000   

American Express Co.

            
    

3.75%, 11/20/07

    A1      509,322
525,000   

American Express Credit Corp.

            
    

3.00%, 05/16/08

    Aa3      513,803
460,000   

Ford Motor Credit Co. (a)

            
    

6.50%, 01/25/07

    A3      490,003
400,000   

Ford Motor Credit Co.

            
    

6.88%, 02/01/06

    A3      426,923
825,000   

Ford Motor Credit Co.

            
    

7.25%, 10/25/11

    A3      894,765
500,000   

General Electric Capital Corp.

            
    

8.75%, 05/21/07

    Aaa      592,711
500,000   

General Electric Capital Corp., MTN

            
    

4.25%, 01/15/08

    Aaa      517,091
380,000   

General Motors

            
    

Acceptance Corp., MTN (b)

            
    

2.41%, 10/20/05

    A3      382,853
500,000   

Household Finance Corp.

            
    

8.00%, 07/15/10

    A1      598,791
450,000   

International Lease Finance Corp.

            
    

4.35%, 09/15/08

    A1      459,236
425,000   

J. Paul Getty Trust

            
    

5.88%, 10/01/33

    Aaa      420,681
100,000   

KFW International Finance, Inc.

            
    

4.25%, 04/18/05

    Aaa      103,435
500,000   

Mellon Funding Corp.

            
    

5.00%, 12/01/14

    A2      501,261
550,000   

Pitney Bowes Credit Corp.

            
    

8.55%, 09/15/09

    Aa3      670,916
500,000   

Toyota Motor Credit Corp.

            
    

5.50%, 12/15/08

    Aaa      547,175
              
                 7,628,966
              

 

See Notes to Financial Statements.

 

F-2

ALLMERICA SECURITIES TRUST

 

PORTFOLIO OF INVESTMENTS, Continued • December 31, 2003

 

Par Value

         Moody’s
Ratings
(Unaudited)
   

Value

(Note 2)

    

Food Retailers - 2.5%

            
$   675,000   

Delhaize America, Inc.

            
    

8.13%, 04/15/11

    Ba1    $ 776,250
470,000   

Kroger Co.

            
    

5.50%, 02/01/13

    Baa3      478,034
450,000   

Safeway, Inc.

            
    

6.50%, 03/01/11

    Baa2      491,231
500,000   

Safeway, Inc.

            
    

9.65%, 01/15/04

    Baa3      500,793
              
                 2,246,308
              
    

Forest Products & Paper - 3.5%

            
500,000   

International Paper Co.

            
    

5.30%, 04/01/15

    Baa2      488,791
350,000   

International Paper Co.

            
    

7.50%, 05/15/04

    Baa2      356,990
500,000   

Kimberly-Clark Corp.

            
    

7.10%, 08/01/07

    Aa2      570,635
750,000   

Rock-Tenn Co.

            
    

5.63%, 03/15/13

    Baa3      754,475
450,000   

Weyerhaeuser Co.

            
    

5.25%, 12/15/09

    Baa2      467,326
500,000   

Weyerhaeuser Co.

            
    

6.75%, 03/15/12

    Baa2      545,470
              
                 3,183,687
              
    

Health Care Providers - 0.6%

            
550,000   

HCA, Inc.

            
    

6.75%, 07/15/13

    Ba1      583,274
              
    

Home Construction,

            
    

Furnishings & Appliances - 0.6%

            
500,000   

Pulte Corp.

            
    

8.13%, 03/01/11

    Baa3      593,698
              
    

Industrial - Diversified - 0.9%

            
750,000   

Illinois Tool Works, Inc.

            
    

6.88%, 11/15/08

    Aa3      859,621
              
    

Insurance - 1.9%

            
450,000   

Marsh & McLennan Cos., Inc.

            
    

4.85%, 02/15/13

    A2      443,065
710,000   

Medco Health Solutions, Inc.

            
    

7.25%, 08/15/13

    Ba1      774,575
450,000   

UnitedHealth Group, Inc.

            
    

7.50%, 11/15/05

    A3      494,019
              
                 1,711,659
              
    

Media - Broadcasting &

            
    

Publishing - 4.0%

            
270,000   

Belo Corp.

            
    

8.00%, 11/01/08

    Baa3      315,089
450,000   

Continental Cablevision, Inc., Senior Notes

            
    

8.30%, 05/15/06

    Baa3      504,531
505,000   

Cox Communications, Inc.

            
    

7.13%, 10/01/12

    Baa2      582,474
$   225,000   

Cox Enterprises, Inc. (c)

            
    

4.38%, 05/01/08

    Baa1    $ 228,573
700,000   

Echostar DBS Corp. (c)

            
    

5.75%, 10/01/08

    Ba3      707,875
500,000   

News America Holdings, Inc.

            
    

7.38%, 10/17/08

    Baa3      570,462
180,000   

Viacom, Inc.

            
    

5.50%, 05/15/33

    A3      167,630
450,000   

Viacom, Inc.

            
    

7.88%, 07/30/30

    A3      559,769
              
                 3,636,403
              
    

Oil & Gas - 7.6%

            
500,000   

ANR Pipeline Co., Debenture

            
    

9.63%, 11/01/21

    B1      594,375
375,000   

Burlington Resources, Inc.

            
    

7.40%, 12/01/31

    Baa1      443,930
580,000   

Conoco Funding Co.

            
    

5.45%, 10/15/06

    A3      622,280
500,000   

Conoco Funding Co.

            
    

7.25%, 10/15/31

    A3      590,045
230,000   

Enterprise Products

            
    

7.50%, 02/01/11

    Baa2      257,028
350,000   

Enterprise Products

            
    

8.25%, 03/15/05

    Baa2      373,937
300,000   

Marathon Oil Corp.

            
    

6.13%, 03/15/12

    Baa1      324,434
110,000   

Occidental Petroleum Corp.

            
    

5.88%, 01/15/07

    Baa1      119,336
500,000   

Occidental Petroleum Corp.

            
    

6.50%, 04/01/05

    Baa1      528,482
625,000   

Phillips Petroleum

            
    

8.50%, 05/25/05

    A3      681,326
690,000   

Pioneer Natural Resource Co.

            
    

7.50%, 04/15/12

    Ba1      793,042
600,000   

Texaco Capital, Inc.

            
    

8.25%, 10/01/06

    Aa3      695,657
435,000   

Valero Energy Corp.

            
    

6.13%, 04/15/07

    Baa3      472,259
400,000   

XTO Energy, Inc.

            
    

7.50%, 04/15/12

    Ba2      452,000
              
                 6,948,131
              
    

Pharmaceuticals - 2.3%

            
700,000   

Bergen Brunswig Corp. (d)

            
    

7.25%, 06/01/05

    BB      731,500
120,000   

Johnson & Johnson

            
    

6.73%, 11/15/23

    Aaa      136,743
750,000   

Lilly (Eli) & Co.

            
    

7.13%, 06/01/25

    Aa3      886,586
330,000   

Zeneca Wilmington

            
    

7.00%, 11/15/23

    Aa2      382,305
              
                 2,137,134
              

 

See Notes to Financial Statements.

 

F-3

ALLMERICA SECURITIES TRUST

 

PORTFOLIO OF INVESTMENTS, Continued • December 31, 2003

 

Par Value

        

Moody’s
Ratings
(Unaudited)

    Value (Note 2)
    

Retailers - 2.8%

            
$   500,000   

J.C. Penney Co., Inc.

            
    

7.38%, 08/15/08

    Ba3    $ 555,625
500,000   

Kohls Corp.

            
    

6.00%, 01/15/33

    A3      501,360
890,000   

Target Corp.

            
    

6.35%, 11/01/32

    A2      934,892
450,000   

Wal-Mart Stores, Inc.

            
    

7.55%, 02/15/30

    Aa2      553,809
              
                 2,545,686
              
    

Securities Broker - 2.7%

            
580,000   

Bear Stearns Cos., Inc.

            
    

4.00%, 01/31/08

    A1      590,749
450,000   

Goldman Sachs Group, Inc.

            
    

5.70%, 09/01/12

    Aa3      472,928
333,153   

Jones (Edward D.) & Co., LP (e) (f)

            
    

7.95%, 04/15/06

    NR      355,683
500,000   

Lehman Brothers Holdings, Inc.

            
    

4.00%, 01/22/08

    A1      509,972
495,000   

Morgan Stanley Dean Witter & Co.

            
    

6.60%, 04/01/12

    Aa3      552,835
              
                 2,482,167
              
    

Telephone Systems - 2.1%

            
500,000   

BellSouth Corp.

            
    

6.88%, 10/15/31

    A1      547,069
680,000   

Sprint Capital Corp.

            
    

6.13%, 11/15/08

    Baa3      724,796
120,000   

Sprint Capital Corp.

            
    

7.90%, 03/15/05

    Baa3      127,832
450,000   

Verizon Florida, Inc.

            
    

6.13%, 01/15/13

    A1      481,580
              
                 1,881,277
              
    

Transportation - 1.2%

            
450,000   

Consolidated Rail Corp.

            
    

9.75%, 06/15/20

    Baa2      620,017
255,000   

Union Pacific Corp.

            
    

5.38%, 06/01/33

    Baa2      232,439
250,000   

Union Pacific Corp.

            
    

6.63%, 02/01/08

    Baa2      277,509
              
                 1,129,965
              
    

Total Corporate Notes and Bonds

           69,750,461
              
    

(Cost $67,312,087)

            

ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (h) - 6.3%

1,000,000   

American Airlines, Inc.,

            
    

Pass-Through Trust,

            
    

Series 1991 - C2

            
    

9.73%, 09/29/14

    Caa2      725,450
570,000   

Bear Stearns Commercial Mortgage

            
    

Securities, Inc., Series 2002-PBW1,

            
    

Class A2

            
    

4.72%, 11/11/35

    Aaa      573,475
$   250,000   

Bear Stearns Mortgage

            
    

Securities, Inc., Series 1999-WF2,

            
    

Class A2, CMO

            
    

7.08%, 06/15/09

    Aaa    $ 284,324
300,000   

Citibank Credit Card Issuance

            
    

Trust, Series 2000-Cl, CMO

            
    

6.88%, 11/16/09

    Aaa      341,611
500,000   

General Electric Capital

            
    

Commercial Mortgage Corp.,

            
    

Series 2002-1A, Class A3

            
    

6.27%, 12/10/35

    Aaa      553,198
70,246   

Green Tree Recreation

            
    

Equipment & Consumer Trust,

            
    

Series 1997-B, Class A1, CMO (d)

            
    

6.55%, 07/15/28

    AAA      70,347
500,000   

GS Mortgage Securities Corp II,

            
    

Series 1997-GL, Class A2D

            
    

6.94%, 07/13/30

    Aaa      558,178
250,000   

MBNA Master Credit Card Trust,

            
    

Series 1995-C, Class A

            
    

6.45%, 02/15/08

    Aaa      266,531
250,000   

Morgan Stanley Dean Witter Capital I,

            
    

Series 2002-TOP7, Class B, CMO

            
    

6.08%, 01/15/39

    Aa2      272,741
750,000   

Morgan Stanley Dean Witter Capital I,

            
    

Series 2003-T0P9, Class A2, CMO (d)

            
    

4.74%, 11/13/36

    AAA      751,353
184,769   

Toyota Auto Receivables Owner Trust,

            
    

Series 2002-B, Class A3

            
    

3.76%, 06/15/06

    Aaa      187,126
1,000,000   

Union Acceptance Corp.,

            
    

Series 2000-B, Class B

            
    

7.73%, 01/08/08

    Aaa      1,043,977
189,892   

USAA Auto Owner Trust,

            
    

Series 2000-1, Class A4

            
    

6.98%, 06/15/05

    Aaa      191,800
              
    

Total Asset-Backed and

            
    

Mortgage-Backed Securities

           5,820,111
              
    

(Cost $6,065,722)

            

FOREIGN GOVERNMENT OBLIGATIONS (i) - 2.9%

450,000   

Province of British Columbia

            
    

5.38%, 10/29/08

    Aa2      486,540
550,000   

Province of Manitoba

            
    

4.25%, 11/20/06

    Aa2      572,542
500,000   

Province of Ontario

            
    

2.63%, 12/15/05

    Aa2      503,435
500,000   

Province of Quebec

            
    

6.13%, 01/22/11

    A1      557,351
450,000   

Province of Quebec

            
    

7.00%, 01/30/07

    A1      505,089
              
    

Total Foreign Government Obligations

           2,624,957
              
     (Cost $2,472,866)            

 

See Notes to Financial Statements.

 

F-4

ALLMERICA SECURITIES TRUST

 

PORTFOLIO OF INVESTMENTS, Continued • December 31, 2003

 

Par Value

        

Moody’s
Ratings

(Unaudited)

    Value
(Note 2)

FOREIGN BONDS (i) - 8.8%

            
$   500,000   

Alberta Energy Co., Ltd.

            
    

7.38%, 11/01/31

    Baa1    $ 593,779
700,000   

British Sky Broadcasting Group, Plc

            
    

7.30%, 10/15/06

    Baa3      779,428
450,000   

British Telecom, Plc (g)

            
    

8.13%, 12/15/10

    Baa1      547,594
500,000   

Calpine Canada Energy Finance

            
    

8.50%, 05/01/08

    Caa1      398,750
355,000   

Canadian Pacific, Ltd.

            
    

9.45%, 08/01/21

    Baa2      483,893
450,000   

Canadian Pacific Railroad

            
    

5.75%, 03/15/33

    Baa2      435,626
790,000   

Royal Bank of Scotland Group, Plc

            
    

4.70%, 07/03/18

    Aa3      728,888
450,000   

Sappi Papier Holding AG (c)

            
    

6.75%, 06/15/12

    Baa2      491,912
1,000,000   

St. George Bank, Ltd., Yankee Debenture (c)

            
    

7.15%, 10/15/05

    A3      1,084,355
435,000   

Stora Enso Oyj

            
    

7.38%, 05/15/11

    Baa1      503,336
500,000   

Telus Corp.

            
    

7.50%, 06/01/07

    Ba1      559,572
490,000   

Tyco International Group S.A.

            
    

6.38%, 10/15/11

    Ba2      523,688
450,000   

Vodafone Group, Plc

            
    

5.38%, 01/30/15

    A2      454,169
500,000   

Vodafone Group, Plc

            
    

6.25%, 11/30/32

    A2      509,955
              
    

Total Foreign Bonds

           8,094,945
              
    

(Cost $7,829,340)

            

MUNICIPAL OBLIGATIONS - 0.8%

            
750,000   

Illinois State General Obligation

            
    

3.85%, 06/01/13

    Aa3      700,342
              
    

Total Municipal Obligations

           700,342
              
    

(Cost $748,583)

            

Shares

               

INVESTMENT COMPANY - 1.0%

            
929,365   

Marshall Money Market Fund

    NR      929,365
              
    

Total Investment Company

           929,365
              
    

(Cost $929,365)

            

Total Investments - 99.3%

           90,825,286
              

(Cost $88,306,255)

            

Net Other Assets and Liabilities - 0.7%

           632,939
              

Total Net Assets - 100.0%

         $ 91,458,225
              

 

(a) All or a portion of this security is out on loan at December 31, 2003; the value of the securities loaned amounted to $1,891,692 The value of collateral amounted to $1,939,350 which consisted of cash equivalents.

 

(b) Variable rate security. The rate shown reflects rate in effect at period end.

 

(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, 2003 these securities amounted to $5,530,768 or 6.0% of net assets.

 

(d) Standard & Poor’s (S&P) credit ratings are used in the absence of a rating by Moody’s Investors, Inc.

 

(e) Security is valued by management (Note 2).

 

(f) 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, 2003, these securities amounted to $355,683 or 0.4% of net assets.

 

(g) Debt obligation initially issued in coupon form which converts to a higher coupon form at a specified date and rate. The rate shown is the rate at period end. The maturity date shown is the ultimate maturity.

 

(h) Pass Through Certificates.

 

(i) U.S. currency denominated.

 

CMO Collateralized Mortgage Obligation.

 

MTN Medium Term Note.

 

NR Not Rated.

 

FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)

 

At December 31, 2003, the aggregate cost of investment securities for tax purposes was $88,935,555. Net unrealized appreciation (depreciation) aggregated $1,889,731, of which $3,069,973 related to appreciated investment securities and $(1,180,242) related to depreciated investment securities.

 

As of December 31, 2003, the components of distributable earnings (excluding unrealized appreciation disclosed above) on a tax basis consisted of $6,241,075 of capital loss carryforwards.

 

For the year ended December 31, 2003, the Portfolio has elected to defer $872,122 of capital losses attributable to Post-October losses.

 

During the year ended December 31, 2003, the tax character of distributions paid for ordinary income was $4,854,653.

 

At December 31, 2003, the Portfolio had capital loss carryforwards which expire as follows: $1,365,128 in 2008; $2,362,884 in 2009; $2,513,063 in 2010.

 

See Notes to Financial Statements.

 

F-5

ALLMERICA SECURITIES TRUST

 

PORTFOLIO OF INVESTMENTS, Continued • December 31, 2003

 

OTHER INFORMATION

 

For the year ended December 31, 2003, the aggregate cost of purchases and the proceeds of sales, other than from short-term investments, included $50,749,143 and $30,059,726 of non-governmental issuers, respectively, and $39,431,542 and $57,748,767 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 Rating

(Unaudited)

 

Aaa

    7.9 %

Aa

    22.5 %

A

    24.8 %

Baa

    28.1 %

Ba

    9.6 %

B

    0.7 %

Caa

    1.2 %

NR (Not Rated)

    2.8 %
    
     97.6 %
    

 

S&P Ratings

(Unaudited)

 

AAA

    0.9 %

BBB

    0.7 %

BB

    0.8 %
    
     2.4 %
    

 

See Notes to Financial Statements.

 

F-6

ALLMERICA SECURITIES TRUST

 

STATEMENT OF ASSETS AND LIABILITIES • December 31, 2003

 

ASSETS:

         

Investments:

         

Investments at cost

    $ 88,306,255  

Net unrealized appreciation

      2,519,031  
    

Total investments at value†

      90,825,286  

Cash

      12,094  

Short-term investments held as collateral for securities loaned

      1,939,350  

Interest receivable

      1,278,150  
    

Total Assets

      94,054,880  
    

LIABILITIES:

         

Payable for investments purchased

      523,002  

Collateral for securities loaned

      1,939,350  

Management fee payable

      36,691  

Trustees’ fees and expenses payable

      5,177  

Accrued expenses and other payables

      92,435  
    

Total Liabilities

      2,596,655  
    

NET ASSETS

    $ 91,458,225  
    

NET ASSETS consist of:

         

Par Value

    $ 8,592,306  

Paid-in capital

      88,089,385  

Distribution in excess of net investment income

      (629,300 )

Accumulated net realized loss

      (7,113,197 )

Net unrealized appreciation

      2,519,031  
    

TOTAL NET ASSETS

    $ 91,458,225  
    

Shares of beneficial interest outstanding (10,000,000 authorized shares with par value of $1.00)

      8,592,306  

NET ASSET VALUE

         

Per share

    $ 10.644  
    

MARKET VALUE (closing price on New York Stock Exchange)

         

Per share

    $ 9.75  
    

†Total value of securities on loan

    $ 1,891,692  
    

 

See Notes to Financial Statements.

 

F-7

ALLMERICA SECURITIES TRUST

 

STATEMENT OF OPERATIONS • For the Year Ended December 31, 2003

 

INVESTMENT INCOME

       

Interest

    $ 4,795,582

Securities lending income

      6,248
    

Total investment income

      4,801,830
    

EXPENSES

       

Management fees

      407,059

Custodian and Fund accounting fees

      64,348

Transfer agent fees

      63,191

Legal fees

      2,726

Audit fees

      21,887

Trustees’ fees and expenses

      14,772

Reports to shareholders

      16,868

New York Stock Exchange fees

      22,874

Miscellaneous

      8,730
    

Total expenses

      622,455
    

NET INVESTMENT INCOME

      4,179,375
    

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

       

Net realized gain on investments sold

      863,113

Net change in unrealized appreciation (depreciation) of investments

      436,219
    

NET GAIN ON INVESTMENTS

      1,299,332
    

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 5,478,707
    

 

STATEMENTS OF CHANGES IN NET ASSETS

 

     Years Ended
December 31,
  
     2003
     2002
  

NET ASSETS at beginning of year

    $ 90,834,171     $ 90,773,702  
    
 

INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:

                 

Net investment income

      4,179,375       4,857,694  

Net realized gain (loss) on investments sold

      863,113       (2,344,097 )

Net change in unrealized appreciation (depreciation) of investments

      436,219       2,573,374  
    
 

Net increase in net assets resulting from operations

      5,478,707       5,086,971  
    
 

Distributions To Shareholders From Net Investment Income

      (4,854,653 )     (5,026,502 )
    
 

Total increase in net assets

      624,054       60,469  
    
 

NET ASSETS at end of year

    $ 91,458,225     $ 90,834,171  
    
 

Distribution in excess of net investment income

    $ (629,300 )   $ (376,040 )
    
 

 

See Notes to Financial Statements.

 

F-8

ALLMERICA SECURITIES TRUST

 

FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Year

 

     Year ended December 31,
  
     2003
     2002
     2001(1)
     2000
     1999
  

Net Asset Value, beginning of year

    $ 10.572     $ 10.565     $ 10.866     $ 10.958     $ 11.961  
    
 
 
 
 

Income from Investment Operations:

                                         

Net investment income

      0.486       0.565       0.673 (2)     0.802       0.802  

Net realized and unrealized gain (loss) on investments

      0.151       0.027       (0.209 )     (0.084 )     (0.965 )
    
 
 
 
 

Total from investment operations

      0.637       0.592       0.464       0.718       (0.163 )
    
 
 
 
 

Less Distributions:

                                         

Dividends from net investment income

      (0.565 )     (0.585 )     (0.729 )     (0.800 )     (0.800 )

Distributions from net realized capital gains

      —         —         —         (0.010 )     (0.040 )

Return of capital

      —         —         (0.036 )     —         —    
    
 
 
 
 

Total distributions

      (0.565 )     (0.585 )     (0.765 )     (0.810 )     (10.840 )
    
 
 
 
 

Net increase (decrease) in net asset value

      0.072       0.007       (0.301 )     (0.092 )     (1.003 )
    
 
 
 
 

Net Asset Value, end of year

    $ 10.644     $ 10.572     $ 10.565     $ 10.866     $ 10.958  
    
 
 
 
 

Market Value, end of year

    $ 9.75     $ 9.45     $ 9.83     $ 10.00     $ 8.81  
    
 
 
 
 

Total Return on Market Value, end of year

      9.38 %     2.11 %     6.00 %     23.76 %     (13.75 )%

Ratios/Supplemental Data

                                         

Net assets, end of year (000’s)

    $ 91,458     $ 90,834     $ 90,774     $ 93,362     $ 94,157  

Ratios to average net assets:

                                         

Net investment income

      4.56 %     5.38 %     6.23 %     7.38 %     7.00 %

Operating expenses

      0.68 %     0.86 %     0.79 %     0.74 %     0.77 %

Management fee

      0.44 %     0.45 %     0.50 %     0.50 %     0.49 %

Portfolio turnover rate

      98 %     79 %     128 %     58 %     24 %
(1) Effective January 1, 2001, the Trust 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.

 

See Notes to Financial Statements.

 

F-9

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, 2003, one security with a value of $355,683 or 0.4% 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 maintained at not less than 102% of the market value of the loaned securities during the period of the loan. Collateral received is generally

 

F-10

ALLMERICA SECURITIES TRUST

 

NOTES TO FINANCIAL STATEMENTS (Continued)

 

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 nine 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. 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 management 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, 2003, 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 121,553 shares of beneficial interest.

 

5. RESTRICTED SECURITIES

 

At December 31, 2003, the Trust owned the following restricted security constituting 0.4% 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:

 

Issuer

    Date of
Acquisition
    Par
Amount
    Cost at
Acquisition
    Value

Jones (Edward D.) & Co., LP

    05/06/94    $ 333,153    $ 333,153    $ 355,683
                
  

 

F-11

ALLMERICA SECURITIES TRUST

 

REPORT OF INDEPENDENT AUDITORS

 

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, 2003, 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, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

PricewaterhouseCoopers LLP

Boston, Massachusetts

February 2, 2004

 

F-12

ALLMERICA SECURITIES TRUST

 

BOARD OF TRUSTEES (Unaudited)

 

Name, Address and Age(1)

   

Position(s) Held with Trust

   

Term of
Office and
Length of
Time
Served

   

Principal Occupation(s) During
Past 5 Years(2)

    Number of
Portfolios
in Fund
Complex
Overseen
by Trustee
   

Other Directorships Held
by Trustee

P. Kevin Condron (58)    Trustee, Member of the Audit Committee and Fund Operations Committee   

1 Year Term

 

Served Since 1998

    President and Chief Executive Officer, The Granite Group (wholesale plumbing and heating), 1997-present.    10    Director, Banknorth Group.
Jocelyn S. Davis (50)    Trustee, Member of the Audit Committee and Fund Operations Committee   

1 Year Term

 

Served Since 2001

   

President, Nelson Hart, LLC (consulting), 2002-present; Beers & Cutler

(professional services), 2001-2002; Chief Financial Officer, AARP (non-profit), 1996-2001.

    10    None
Cynthia A. Hargadon (49)    Trustee, Member of the Fund Operations Committee, Investment Operations Committee and Governance Committee   

1 Year Term

 

Served Since 1997

    President and Chief Investment Officer, PlanTools, LLC (consulting), 2003-present; Managing Director, McHenry Group, 2003-present; President, Hargadon Associates (asset management consulting), 2002-2003; President, Potomac Asset Management, Inc., 2000-2002; Director of Investments, National Automobile Dealers Association, 1999-2000; President, Stable Value Investment Association (investment trade group), 1996-1999.    10    Director, Wilshire Target Funds, 2001-present.
T. Britton Harris, IV (45)    Trustee, Member of the Investment Operations Committee, Governance Committee and Fund Operations Committee   

1 Year Term

 

Served Since 2001

    President, Verizon Investment Management Corporation, 1990-present.    10    None
Gordon Holmes (65)    Trustee, Chairman of the Audit Committee and Member of the Fund Operations Committee   

1 Year Term

 

Served Since 1991

    Instructor at Bentley College, 1998-present; Certified Public Accountant; Retired Partner, Tofias, Fleishman, Shapiro & Co., P.C. (Accountants).    10    None
Attiat F. Ott (68)    Trustee, Chairman of the Fund Operations Committee and Member of the Audit Committee   

1 Year Term

 

Served Since 1982

    Professor of Economics and Director of the Institute for Economic Studies, Clark University, 940 Main Street, Worcester, MA.    10    None
Ranne P. Warner (59)    Trustee, Chairman of the Governance Committee, Member of the Fund Operations Committee and Investment Operations Committee   

1 Year Term

 

Served Since 1991

    President, Centros Properties, USA; Owner, Ranne P. Warner and Company; Blackstone Exchange LLC (real estate) 2001-present.    10    Director, Wainwright Bank & Trust Co. (commercial bank).
*Mark A. Hug (46)    Trustee, Member of the Investment Operations Committee   

1 Year Term

 

Served Since 2003

    President and CEO, First Allmerica Financial Life Insurance Company (“First Allmerica”) and Allmerica Financial Life Insurance and Annuity Company (“Allmerica Financial Life”), 2000-present; Senior Vice President, Equitable Life (product and marketing) prior to 1999.    10    None

 

F-13

ALLMERICA SECURITIES TRUST

 

BOARD OF TRUSTEES (Unaudited) (Continued)

 

Name, Address and Age(1)

   

Position(s) Held with Trust

   

Term of
Office and
Length of
Time
Served

   

Principal Occupation(s) During
Past 5 Years(2)

    Number of
Portfolios
in Fund
Complex
Overseen
by Trustee
   

Other Directorships Held
by Trustee

*John P. Kavanaugh (49)    Chairman, Trustee and President, Chairman of the Investment Operations Committee   

1 Year Term

 

Served Since 1995

    President, Opus Investment Management, Inc.; Vice President, Director, Chief Investment Officer, First Allmerica and Allmerica Financial Life.    10    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-14

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 2003 and may be exempt from state income taxation is 10.65%. 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 2003, the level of exempt income did not meet these thresholds and the exclusions 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 3.09%. 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: Opus Investment Management, Inc.

 

Portfolio Management: All investment decisions for the Trust will be made by an investment management team.

 

Investment Objectives: The Trust’s primary investment objective is to provide a high rate of current income, with capital appreciation as a secondary objective.

 

(There is no guarantee that the Trust will achieve its investment objectives and an investor in the Trust could lose money.)

 

F-15

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.

 

Securities issued by some U.S. Government-sponsored entities, such as the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), are not backed by the full faith and credit of the U.S. Government. No assurances can be given that the U.S. Government would provide financial support to a U.S. Government-sponsored instrumentality if not obligated to do so.

 

Principal Risks of investing in the Trust:

 

  • Company Risk means that investments in a company often fluctuate based on factors such as earnings, changes in management or products or potential for takeovers or acquisition.

 

  • Credit Risk is the risk that a fixed income security will not be able to pay interest and principal. “Junk bonds,” for example, have a high level of credit risk.

 

  • Foreign Investment Risk involves risks relating to political, social and economic developments abroad.

 

  • Interest Rate Risk means that, when interest rates rise, the prices of fixed income securities will generally fall and, when interest rates fall, the prices of fixed income securities will generally rise.

 

  • Investment Management Risk is the risk that a fund does not achieve its investment objective despite the investment strategies used by the investment managers.

 

  • Liquidity Risk is the risk that a fund will not be able to sell a security at a reasonable price because the security is not traded on a regular basis.

 

  • Market Risk is the risk that the price of a security will fall due to changes in economic, political or market conditions.

 

  • Prepayment Risk means that a fund may lose future interest income when a decline in interest rates causes homeowners to prepay their mortgage loans.

 

F-16

 

[GRAPHIC]

 

THE ALLMERICA FINANCIAL COMPANIES

The Hanover Insurance Company    Citizens Insurance Company of America    Citizens Management Inc.

Opus Investment Management, Inc.    AMGRO, Inc.    Financial Profiles, Inc.

First Allmerica Financial Life Insurance Company    Allmerica Financial Life Insurance and Annuity Company (all states except NY)

 

440 Lincoln Street, Worcester, Massachusetts 01653

 

10605 NS (12/03)   04-003

 

Item 2. Code of Ethics

 

As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial/principal accounting officer.

 

Item 3. Audit Committee Financial Expert

 

The registrant’s Board of Trustees has determined that Gordon Holmes, who is an “independent” Trustee, qualifies as an “audit committee financial expert” (as such term has been defined by SEC regulations).

 

The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee and the Board of Trustees in the absence of such designation or identification.

 

Item 4. Principal Accountant Fees and Services

 

    

Audit Fees

   

Types of Services

   

Percentage of Services Approved

by the Audit Committee under
Pre-approval Policies and Procedures

2003

    $25,850         100%

2002

    $23,620         100%
    

Audit-Related Fees

          

2003

    $0                   

2002

    $0                   
    

Tax Fees

          
     $3,300     Tax return review     

2003

    $3,200          100%

2002

              100%
    

All Other Fees

          
                

2003

    $0                   

2002

    $0                   

 

All fees disclosed above under the captions “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” represent fees billed for services that were required to be pre-approved, and which were so pre-approved, by the registrant’s Audit Committee in accordance with the Audit Committee’s Policy for Pre-Approval of Services Provided by Independent Auditors.

 

        % of the hours expended on the independent accountants’ engagement on behalf of the registrant for the fiscal year ended December 31, 2003, were attributable to work performed by persons other than the independent accountants’ full-time, permanent employees. Not applicable

 

For the last two fiscal years of the registrant, the independent accountants billed aggregate non-audit fees in the following amounts to the registrant and Opus Investment Management, Inc. (“Opus”), the Trust’s investment adviser:

 

2002    $0
2003    $0

 

The registrant’s Audit Committee has determined that the provision by the registrant’s independent accountants of non-audit services that were rendered to Opus and that were not pre-approved by the Audit Committee were compatible with maintaining the independence of such accountants.

The Audit Committee has adopted certain policies and procedures for pre-approval of services provided by the independent accountants. On an annual basis, certain types of recurring audit, audit-related and other services are pre-approved by the Committee, including, among other things, the list of required audits and projects presented by the independent accountants; consultation and advisory services related to accounting/reporting and risk management/control matters provided in the normal course of business; and assistance with SEC and other regulatory filings and tax services incurred in the normal course of business. This pre-approval will occur concurrently with the approval of the annual audit fees and will apply to all individual projects meeting the criteria discussed above and which are expected to result in total fees less than $400,000. For individual projects outside the scope of the fiscal year audits and tax return filings expected to be $25,000 or greater, specific pre-approval will be necessary.

 

Pre-approvals for all other services will occur if and when the need for any such services arises. This pre-approval will be initiated by AFIMS and will be requested from the Chairman or, in the event the Chairman is unavailable, any other member of the Audit Committee. Any services approved by the Chairman, or other Audit Committee member, at any time other than during an Audit Committee meeting will be reported to the full Audit Committee at the next regularly scheduled meeting. Expenses permitted under Rule 2-01(c)(7)(i)(C) of Regulation S-X (the “De Minimis Exception”) will not require pre-approval.

 

The percentages of expenses that were approved by the Audit Committee in accordance with the De Minimis Exception were as follows: Not applicable

 

     2003
    2002

Audit-Related Fees

          

Tax Fees

          

All Other Fees

          

 

Item 5. Audit Committee of Listed Registrants

 

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The members of the Audit Committee are Gordon Holmes (Chairman), P. Kevin Condron, Jocelyn S. Davis and Attiat F. Ott.

 

Item 6. Reserved.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not Applicable. (The registrant invests exclusively in non-voting securities.)

 

Item 8. Reserved.

 

Item 9. Controls and Procedures

 

  (a) The registrant’s principal executive and principal financial officers have concluded that, based on their evaluation of the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of the date within 90 days of the filing date of this report on Form N-CSR, such disclosure controls and procedures provide reasonable assurances that material information relating to the registrant is made known to them by the appropriate persons.

 

  (b) Changes to internal control over financial reporting: Not Applicable

Item 10. Exhibits

 

  (a) Code of ethics that applies to the registrant’s principal executive officer and principal financial/principal accounting officer is attached as Exhibit 99.CODE.

 

  (b)(1) Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and as required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached hereto as Exhibit 99.CERT.

 

  (2) A certification by the registrant’s principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and as required by Rule 30a-2(b) under the Investment Company Act of 1940 is attached hereto as Exhibit 99.906CERT.

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Allmerica Securities Trust
By:   /s/    John P. Kavanaugh        
   
   

John P. Kavanaugh

President and Chairman

 

Date: February 23, 2004

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:   /s/    John P. Kavanaugh        
   
   

John P. Kavanaugh

President and Chairman

 

Date: February 23, 2004

 

By:   /s/    Paul T. Kane        
   
   

Paul T. Kane

Assistant Vice President and Treasurer

(Principal Accounting Officer and

Principal Financial Officer)

 

Date: February 23, 2004