<PAGE>
SEMI-ANNUAL REPORT
June 30, 1996
Allmerica
Securities
Trust
= A S T =
<PAGE>
Trust Information
- -------------------------------------
Board of Trustees
John F. O'Brien, Chairman
Russell E. Fuller
Gordon Holmes
John Kavanaugh
Bruce E. Langton
Attiat F. Ott
Paul D. Paganucci
Richard M. Reilly
Ranne P. Warner
Thomas S. Zocco
Officers
Richard M. Reilly, President
Thomas P. Cunningham, Treasurer
Investment Adviser
Allmerica Asset Management, Inc.
440 Lincoln Street
Worcester, MA 01653
Registrar and Transfer, Dividend Disbursing and Reinvestment Agent
The Bank of New York
P.O. Box 11258, Church Street Station
New York, NY 10286
Custodian
Bankers Trust Company
16 Wall Street
New York, NY 10005
Administrator
First Data Investor Services Group
4400 Computer Drive
P.O. Box 5108
Westboro, MA 01581
Independent Accountant
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110
Shareholder inquiries
may be directed to:
The Bank of New York
Shareholder Relations
Department - IIE
P.O. Box 11258
Church Street Station
New York, NY 10286
1-800-432-8224
- -------------------------------------
CONTENTS
- -------------------------------------
<TABLE>
<CAPTION>
<S> <C>
A Letter From the Chairman.........2
Bond Market Overview.............4-5
Trust Overview.....................6
Financials.........................7
Shareholder Information.......Inside
</TABLE>
Back Cover
1
<PAGE>
- -------------------------------------------------------------------------------
A Letter From the Chairman
- -------------------------------------------------------------------------------
[PHOTOGRAPH APPEARS HERE]
Dear Client:
Entering 1996, many analysts were forecasting that the economy would grow
modestly, inflation would remain level, interest rates would decline slightly
and the bond and stock markets would return to more "normal" annual returns.
However, the first six months have produced quite different results. Following
a stream of economic reports showing that the economy was far stronger than had
been anticipated, investors became concerned early in the year about the
potential for rising inflation. In response, interest rates rose significantly.
The bond market declined -1.21% as measured by the Lehman Brothers Aggregate
Bond Index. And the 30-year U.S. Treasury bonds declined an even greater -9.35%.
In contrast, stock market investors ignored the concerns of the bond market and
focused instead on strong corporate earnings. That drove the stock market up
10.10% for the period, as measured by the Standard and Poor's 500 Stock Index.
In fact, this six-month return matched the market's average 12-month rate of
return for the past two decades.
Both the stock market and the bond market returns for early 1996 reinforce just
how unpredictable the markets can be. Consequently Allmerica remains focused on
providing you with quality products and investment options that can help you
reach your long-term financial goals - regardless of what happens in the short
term.
As part of that commitment, Allmerica continues to offer you access to a broad
array of money managers with complementary investment strategies. Our Manager
Evaluation Committee, in conjunction with a leading pension consultant, has
carefully selected some of the best money managers available in a spectrum of
investment categories. This Committee meets quarterly to monitor each managers'
performance and recommend any changes which may be appropriate. Such was the
case recently. We are pleased to announce that effective July 1, 1996 Putnam
Investment Management, Inc. will assume sub-advisory responsibility of the
Select Growth Fund.
This change reflects our commitment to carefully selecting each of our money
managers, ensuring they continue to earn their place on Allmerica's elite
roster.
On behalf of the Board of Directors,
/s/ John F. O'Brien
John F. O'Brien
Chairman
Allmerica Financial Life Insurance and Annuity Company
- ---------------------------------------------
...Allmerica remains focused on
providing you with quality products
and investment options that can help
you reach your long-term financial
goals - regardless of what happens in
the short term.
- ---------------------------------------------
2
<PAGE>
--------
Overview
--------
= A S T =
3
<PAGE>
Bond Market
Overview
1992: Government and corporate bonds outperformed the stock market.
1993: U.S. economy gains momentum. Consumer spending and installment debt
increase.
1994: Federal Reserve Board raises interest rates six times in an effort to slow
down the economy and keep inflation in check, sending bond prices sharply lower.
1995: U.S. bond market enjoys its third best performance in 30 years, thanks to
strong total returns from 30-year U.S. Treasuries and corporate issues.
The first six months of this year have proven to be particularly trying for
bond investors. After experiencing the euphoria of double-digit returns in 1995,
investors entered 1996 with expectations of a strong performance or at least
positive results. However, as of June 30, 1996, the fixed income market posted a
negative return of -1.21%, as measured by the Lehman Brothers Aggregate Bond
Index.
Entering the year, many analysts anticipated that a balanced budget agreement,
additional rate cuts by the Federal Reserve, and restrained economic growth
would sustain the performance of the bond market. Some economists were even
predicting the economy would slip into recession. While preliminary economic
data did prompt the Federal Reserve to cut interest rates by 0.25% in late
January, this trend did not last long.
Beginning in February, a stream of positive economic reports revealed a much
healthier economy than had been expected. Such good news usually means bad news
for bond investors - and 1996 has been no exception. As interest rates climbed
rapidly from February to June, bond prices fell. In response, investors sold
fixed income securities across the maturity spectrum.
During the second quarter of the year, continued signs of economic strength
further depressed bond prices. The yield curve steepened as yields of
intermediate and long-term maturities rose more than short-term maturities.
Ironically, the poorest performance to date has been from those bonds many
believe to be the least "risky." As of June 30, 1996, 30-Year Treasury bonds
have lost about 9.35% since the first of the year.
The only truly bright spot in the fixed income securities markets this year has
been high yield bonds. In fact, the high yield sector, up over 3%, was virtually
the only sector of the fixed income market to post positive returns during the
first half of 1996.
Investors lose [PICTURE [PICTURE Economic date
the debate over HERE] HERE] growing at a
the federal much faster rate
budget deficit than expected,
will be resolved. bad news for
bond investors.
- -------------------------------------------------------------------------------
1996 JAN 96 FEB 96
- --------------------------------------------------------------------------------
Federal Reserve [PICTURE
cuts target rate APPEARS
for Federal HERE]
Funds another
0.25%.
4
<PAGE>
The relatively strong performance of high yield bonds can be attributed to two
key factors. High yield bonds are less sensitive to changes in interest rates
than other types of bonds, and the strong U.S. economy has reduced investors'
concerns about credit risk over the near term. Even though the supply of new
high yield issues increased during the second quarter of 1996, heavy demand
sustained their prices. This demand was fueled by large cash inflows from
investors now comfortable with assuming higher risk in hopes of higher yields.
To date, corporate bonds have also benefited from the positive economic news.
On a duration-adjusted basis, corporate bonds outpaced U.S. Treasury bonds. An
improving economic outlook, solid credit fundamentals, limited new issues, and
strong investor demand all combined to boost the performance of most sectors of
the industrial market.
Changes in interest rates had a somewhat positive effect on mortgage-backed
securities. As interest rates stabilized around 7% in the second quarter,
investors began to believe that their fears of refinancings were no longer
founded. Given that homeowners were shying away from any remortgaging activity,
mortgage yield spreads tightened and mortgage-backed securities outperformed the
bond market in general.
By the end of June, several key signs of moderating growth began to calm
investor concerns that the economy was overheated. Prices of most commodities as
well as consumer goods have remained subdued. The consumer, hampered by existing
high debt burdens, has shown little inclination to go on a spending spree. And
the manufacturing sector outside of autos is exhibiting only modest signs of
improvement.
Despite these trends, fears linger that the Federal Reserve will move to slow
growth by increasing interest rates and tightening the money supply. These fears
were reflected in the increasing yield differential between three-month U.S.
Treasury bills and two-year U.S. Treasury notes. In January, the yield for two-
year Treasuries exceeded three-month Treasuries by only one-tenth of one point.
By June, this differential had increased to almost a full percentage point.
Going forward, many fixed income managers expect the U.S. economy to weaken in
the second half of 1996. If so, and the Federal Reserve refrains from raising
rates, bonds may recover in the second half of the year. If the Federal Reserve
does raise rates, bond prices could fall further. Either way, fixed income
securities may be headed for continued volatility, as analysts struggle to
predict the short-term direction of interest rates.
Riding interest
Corporate bonds rates relieve fears
outspace Treasury of refinancing
bonds, driven by activity, boosting
improving outlook mortgage-backed
and strong demand. issues.
MAR 96 APR 96 MAY 96 JUNE 96
Interest High yield bonds Yields of inter- Fears persist that
begin to rise, a prove to be high- mediate maturi- Federal Reserve
trend that contin- est performing ties rise more may again raise
ued through sector of fixed than either rates to tighten
remainder of income market. short- or long- money supply.
period. term securities.
5
<PAGE>
- -------------------------------------------------------------------------------
Allmerica Securities Trust
- -------------------------------------------------------------------------------
INVESTMENT SUB-ADVISER:
Allmerica Asset Management, Inc.
ABOUT THE FUND:
Seeks to generate a high rate of current income for distribution to
shareholders.
PERFORMANCE:
Net total return for the six-month period ending June 30, 1996:
Allmerica Securities Trust -0.60%
The Lehman Brothers
Corporate Bond Index -2.14%
Lipper Closed-End General
Bond Fund Average 1.30%
Lipper Corporate Debt
BBB-Rated Fund Average -2.30%
PORTFOLIO COMPOSITION:
As of June 30, 1996, the sector
allocation of net assets was:
Corporate Notes and Bonds 72.65%
U.S. Government Obligations 14.05%
Asset-Backed Securities 7.76%
Brady Bonds 2.32% [Pie Chart Art Appears Here]
Cash Equivalents and Other 3.22%
During the unsettled bond market of early 1996, the Allmerica Securities Trust
returned a -0.60%, outperforming its benchmark by more than one percentage
point. Much of this outperformance is attributable to the Trust's emphasis on
high yield securities - one of the only bright spots in this year's fixed income
market. Investors realized a much lower 1.30% return on their investment as the
market sold off closed-end bond funds in general.
Optimistic about the corporate bond market's prospects, management invested
heavily in BBB/Baa and below investment grade securities, which accounted for
32% and 35% of the Trust's respectively. Among the top performing corporate
sectors were airlines, driven by strong cashflow and forecasts for the first
industry profits since 1979, and cable/media, spurred by consolidation and the
increasing potential for resolution of credit-related issues for several
industry leaders. Twelve percent of the Trust was invested in these two sectors
at the close of the first quarter.
During the second quarter, the Trust's management made two modifications to
its sizable cable/media holdings. First, it increased the Trust's overall
weighting by purchasing a 30-year Telecommunication, Inc. (TCI) Bond. Second,
the Fund extended the maturity of its Viacom holdings, replacing its 10-year
paper with 20-year paper.
Exposure to the finance sector was also increased early in the year with the
purchase of two Yankee Bank issues, Merita Bank (Finland) and Banco Central-
Hispanoamericano (Spain), in addition to Legg Mason (brokerage) and Olympic
Financial (non-prime automobile financing). Also, two new below investment grade
names were added in the second quarter: DiMon, Inc., a strong Ba-rated tobacco
grower, and Homeside, a new mortgage-servicing company.
During the period there were two standout performers in the cable and finance
areas: Continental Cablevision and Center Financial Corp. Both issues benefited
from acquisition activity. Continental Cablevision was acquired by U.S. West
Communications, an A-rated company. And First Union, another A-rated company,
announced it would acquire Center Financial Corp., a small Connecticut based
institution.
Throughout most of this year, the Trust's management maintained a modestly
greater exposure to interest rate risk than its benchmark, although that
exposure was reduced in June as economic data indicated continued strong growth.
Allmerica Securities Trust
Historical Performance
<TABLE>
<CAPTION>
- ----------------------------------------------------
NAV Total Return
Total Return % on Market Value
- ----------------------------------------------------
<S> <C> <C>
1991..................... 20.33% ........... 20.97%
1992..................... 11.09% ........... 20.35%
1993..................... 12.65% ........... 6.87%
1994..................... (2.41%)...........(12.48%)
1995..................... 18.58% ........... 21.71%
Through 6/30/96.......... (0.60%)........... (4.54%)
</TABLE>
The Lipper Closed-End General Bond Fund Average is an unmanaged index of 15
funds within the closed-end general bond category. The Lehman Brothers Corporate
Bond Index is an unmanaged index of all publically issued, fixed-rate, non-
convertible investment grade corporate debt. The Lipper Corporate Debt BBB-Rated
Fund Average is a non-weighted index of 98 funds within the Corporate BBB Debt
Fund category.
6
<PAGE>
----------
Financials
----------
= A S T =
7
<PAGE>
This page left blank intentionally.
<PAGE>
Allmerica Securities Trust
PORTFOLIO OF INVESTMENTS . June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Moody's Value
Par Value Ratings (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 72.65%
Oil, Gas and Petroleum - 19.59%
$2,000,000 ANR Pipeline Co.
Debenture
9.63%, 11/01/21 Baa2 $ 2,385,660
500,000 Buckeye Pipeline
First Mortgage, Series I
9.72%, 12/15/96 (B) -- 507,625
1,500,000 Cinergy Corp.
First Mortgage
7.20%, 10/01/23 A3 1,366,335
1,000,000 Clark Refining &
Marketing, Inc.
Senior Notes
9.50%, 09/15/04 Ba2 1,020,000
2,100,000 Noram Energy Corp.
Debenture
8.90%, 12/15/06 Ba2 2,286,039
1,000,000 Parker & Parsley Petroleum Co.
Senior Notes
8.88%, 04/15/05 Ba2 1,075,920
1,450,000 Seagull Energy Corp.
Senior Notes
7.88%, 08/01/03 Ba3 1,395,625
1,250,000 Snyder Oil Corp.
Subordinated Notes
7.00%, 05/15/01 B1 1,143,750
1,500,000 Southwest Gas Corp.
Debenture
9.38%, 02/01/17 Baa3 1,574,745
1,250,000 Texas Eastern Transmission Corp.
Debenture
10.00%, 08/15/01 Baa1 1,389,838
600,000 Texas Utilities Electric Co.
First Mortgage
7.38%, 10/01/25 Baa2 552,876
1,000,000 Tosco Corp.
7.00%, 07/15/00 Baa3 989,950
2,000,000 USX-Marathon Group, Inc.
Debenture
8.88%, 09/15/97 Baa3 2,053,520
1,000,000 Valero Management Partnership, LP
First Mortgage Notes, Series J
10.02%, 03/15/07 (B) -- 1,102,890
------------
18,844,773
------------
Finance - 8.57%
1,000,000 BCH Cayman Islands, Ltd.
Yankee Subordinated Notes,
Guaranteed
6.50%, 02/15/06 A3 922,080
1,000,000 Cenfed Financial Corp.
11.17%, 12/15/01 (A) Bb 1,073,750
1,000,000 Center Financial Corp.
Subordinated Notes
8.38%, 10/01/02 -- 1,057,500
1,000,000 First Tennessee National Corp.
Subordinated Notes
6.75%, 11/15/05 A2 950,190
433,680 Jennifer Holding Corp.
12.25%, 12/30/98 (B) -- 452,324
781,524 Mack Trust, Inc.
10.91%, 04/01/99 (B) -- 792,739
1,000,000 Merita Bank, Ltd.
Yankee Subordinated Notes
6.50%, 01/15/06 A3 929,640
1,000,000 Olympic Financial, Ltd.
Senior Notes
13.00%, 05/01/00 B2 1,095,000
1,000,000 St. George Bank
Subordinated Notes
7.15%, 10/15/05 (A) Baa2 967,160
------------
8,240,383
------------
Communications - 5.91%
1,000,000 C-Tec Cable Systems, Inc.
Senior Secured Notes
9.65%, 09/01/99 (B) -- 1,038,080
1,000,000 Continental Cablevision, Inc.
Senior Notes
8.50%, 09/15/01 Ba2 1,046,960
750,000 Continental Cablevision, Inc.
Senior Notes
8.30%, 05/15/06 (A) Ba2 775,470
555,000 GTE Corp.
Debenture
8.75%, 11/01/21 A3 613,419
400,000 Kerrville Telephone Co.
9.76%, 03/29/00 (B) -- 420,532
1,000,000 TCI Communications, Inc.
Debenture
7.88%, 02/15/26 Ba1 880,740
1,000,000 Viacom, Inc.
Senior Debenture
7.63%, 01/15/16 B1 908,800
------------
5,684,001
------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
F-1
<PAGE>
Allmerica Securities Trust
PORTFOLIO OF INVESTMENTS, Continued . June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Value
Par Value Ratings (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Utilities - 5.09%
$ 771,509 Midland Funding Corp.
Debenture, Series C-91
10.33%, 07/23/02 Ba3 $ 812,978
1,332,000 North Atlantic Energy Corp.
First Mortgage, Series A
9.05%, 06/01/02 Ba1 1,318,147
1,270,000 Sithe/Independence Funding Corp.
Series A
9.00%, 12/30/13 Baa3 1,226,020
1,500,000 Texas-New Mexico Power Co.
First Mortgage, Series U
9.25%, 09/15/00 Ba3 1,536,285
------------
4,893,430
------------
Industrial - 4.48%
1,000,000 Homeside, Inc.
Senior Notes
11.25%, 05/15/03 (A) -- 1,030,000
1,000,000 RPM, Inc.
Senior Notes
7.00%, 06/15/05 Baa2 963,500
1,300,000 Unisys Corp.
8.88%, 07/15/97 B1 1,300,000
1,000,000 Westinghouse Electric Corp.
Debenture
8.88%, 06/01/01 Ba1 1,020,030
------------
4,313,530
------------
Primary Metals - 4.27%
2,000,000 Bethlehem Steel Corp.
Senior Notes
10.38%, 09/01/03 B1 2,120,000
2,000,000 Usinor Sacilor
Senior Notes, Series A
7.16%, 03/25/04 (B) -- 1,990,860
------------
4,110,860
------------
Transportation - 4.25%
1,000,000 AMR Corp.
Debenture
10.00%, 02/01/01 Baa3 1,100,960
1,592,194 Delta Airlines, Inc.
9.23%, 07/02/02 (B) -- 1,651,281
659,000 USAir, Inc., Series D
Equipment Trust
10.30%, 01/15/00 B1 669,017
661,000 USAir, Inc., Series F
Equipment Trust
10.30%, 01/15/00 B1 671,047
------------
4,092,305
------------
Consumer Products - 3.69%
1,000,000 Chiquita Brands International, Inc.
Senior Notes
9.13%, 03/01/04 B1 970,000
1,000,000 DiMon, Inc.
Senior Notes
8.88%, 06/01/06 Ba1 995,000
1,600,000 Ralston Purina Co.
Debenture
7.75%, 10/01/15 Baa1 1,581,456
------------
3,546,456
------------
Paper - 3.34%
1,160,000 Boise Cascade Corp.
10.13%, 12/15/97 Baa3 1,217,084
1,000,000 Fort Howard Corp.
Senior Notes
8.25%, 02/01/02 B2 960,000
1,000,000 Stone Container Corp.
Senior Notes
11.88%, 12/01/98 B1 1,040,000
------------
3,217,084
------------
Merchandising and Retail - 3.21%
1,000,000 Federated Department Stores, Inc.
Senior Notes
10.00%, 02/15/01 Ba1 1,052,500
1,000,000 Kroger Co.
Senior Subordinated Notes
10.00%, 05/01/99 Ba1 1,065,000
1,000,000 USG Corp., Senior Notes
8.50%, 08/01/05 Ba2 967,500
------------
3,085,000
------------
Printing and Publishing - 3.06%
1,000,000 News America Holdings, Inc.
Senior Notes
12.00%, 12/15/01 Baa3 1,084,740
850,000 Time Warner Entertainment Co., LP
Senior Debenture
8.38%, 03/15/23 Baa3 827,577
1,000,000 Time Warner, Inc.
Debenture
9.15%, 02/01/23 Ba1 1,033,940
------------
2,946,257
------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
F-2
<PAGE>
Allmerica Securities Trust
PORTFOLIO OF INVESTMENTS, Continued . June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Value
Par Value Ratings (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Securities Brokers, Dealers and
Exchanges - 2.98%
$1,000,000 Donaldson Lufkin & Jenrette, Inc.
Senior Notes
6.88%, 11/01/05 Baa1 $ 947,700
1,000,000 Jones (Edward D.) & Co., LP
7.95%, 04/15/06 (B) -- 992,700
1,000,000 Legg Mason, Inc.
Senior Notes
6.50%, 02/15/06 Baa2 922,080
------------
2,862,480
------------
Health Care - 2.13%
1,000,000 Tenet Healthcare Corp.
Senior Notes
9.63%, 09/01/02 Ba1 1,062,500
975,000 Tenet Healthcare Corp.
Senior Notes
8.63%, 12/01/03 Ba1 988,406
------------
2,050,906
------------
Manufacturing - 1.08%
1,000,000 Wyman-Gordon Co.
Senior Notes
10.75%, 03/15/03 B1 1,040,000
Pharmaceuticals - 1.00%
1,000,000 Georgia Gulf Corp.
7.63%, 11/15/05 Ba1 965,000
------------
Total Corporate Notes and Bonds 69,892,465
------------
(Cost $69,202,777)
U.S. GOVERNMENT OBLIGATIONS - 14.05%
U.S. Treasury Bonds - 12.51%
4,950,000 7.25%, 05/15/16 Aaa 5,066,028
6,892,000 7.13%, 02/15/23 Aaa 6,966,295
------------
12,032,323
------------
U.S. Treasury Note - 1.54%
1,500,000 6.50%, 05/15/05 Aaa 1,480,305
------------
Total U.S. Government Obligations 13,512,628
------------
(Cost $14,031,472)
ASSET-BACKED SECURITIES - 7.76%
1,000,000 American Airlines, 1991-C2
Pass-Through Trust
9.73%, 09/29/14 A2 $1,125,880
560,492 Eaglemark Trust, 1995-1
Harley Davidson
6.80%, 12/15/01 (A) Aaa 562,768
1,000,000 First Plus Home Loan Trust, Class A5,
Series 1996-2
7.47%, 02/20/11 -- 1,010,625
787,927 Green Tree Financial Corp., 1995-A
7.25%, 07/15/05 P1 786,367
1,000,000 Premier Auto Trust, Class A4
Series 1995-4
6.00%, 05/06/00 Aaa 994,060
650,000 Resolution Trust Corp.
1995-C1, A4c
6.85%, 02/25/27 Aaa 630,500
1,380,457 United Air Lines, 1991-B1
Pass-Through Trust
9.30%, 03/22/08 Baa1 1,475,391
147,195 Western Financial 1994-2
Grantor Trust, Class A2
6.38%, 09/01/99 Aaa 147,792
725,589 Western Financial 1995-2
Grantor Trust, Class A2
7.10%, 07/01/00 Aaa 736,700
------------
Total Asset-Backed Securities 7,470,083
------------
(Cost $7,244,909)
BRADY BONDS (C) - 2.32%
950,000 Republic of Colombia
7.25%, 02/23/04 Baa3 864,500
1,500,000 United Mexican States
8.50%, 09/15/02 Ba2 1,365,000
------------
Total Brady Bonds 2,229,500
------------
(Cost $2,109,474)
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-3
<PAGE>
Allmerica Securities Trust
PORTFOLIO OF INVESTMENTS, Continued . June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Value
Shares Ratings (Note 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANY - 1.21%
1,164,532 Goldman Sachs Financial Square
Prime Obligation
Portfolio Fund Aaa $ 1,164,532
------------
Total Investment Company 1,164,532
------------
(Cost $1,164,532)
Total Investments - 97.99% 94,269,208
------------
(Cost $93,753,164)
Net Other Assets and Liabilities - 2.01% 1,930,343
------------
Net Assets - 100.00% $ 96,199,551
============
</TABLE>
(A) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold, in
transactions exempt from registration, to qualified institutions
buyers. At June 30, 1996, these securities amounted to
$4,409,148 or 4.58% of Net Assets.
(B) Restricted Securities - Represent ownership in private placement
investments which have not been registered with the Securities and
Exchange Commission under the Securities Act of 1933. For
additional information concerning each restricted security, see
Note 7.
(C) U.S. currency denominated.
Other Information
The composition of both long-term and short-term debt holdings
as a percentage of total value of investment in securities,
is as follows:
Moody's Rating
Aaa 18.83%
A 6.27%
Baa 23.47%
Ba 24.04%
Bb 1.14%
B 12.64%
P-1 0.83%
Unrated 12.78%
See Notes to Financial Statements.
- ----------------------------------
F-4
<PAGE>
Allmerica Securities Trust
STATEMENT OF ASSETS AND LIABILITIES . June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost........................................... $ 93,753,164
Net unrealized appreciation (depreciation).................... 516,044
------------
Total investments at value.................................. 94,269,208
Cash............................................................ 86,958
Short-term investments held as collateral for securities loaned
(Note 2)....................................................... 8,405,069
Interest and dividend receivables............................... 1,965,716
------------
Total Assets................................................ 104,726,951
------------
LIABILITIES:
Advisory fee payable (Note 3)................................... 40,420
Accrued expenses and other payables............................. 81,911
Collateral for securities loaned (Note 2)....................... 8,405,069
------------
Total Liabilities........................................... 8,527,400
------------
NET ASSETS....................................................... $ 96,199,551
============
NET ASSETS consist of:
Par Value (Note 4).............................................. $ 8,592,306
Paid-in capital................................................. 88,551,952
Undistributed net investment income............................. 206,051
Accumulated (distribution in excess of) net realized gain
(loss) on investments sold..................................... (1,666,802)
Net unrealized appreciation (depreciation) of investments....... 516,044
------------
TOTAL NET ASSETS................................................. $ 96,199,551
============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Shares of beneficial interest outstanding (10,000,000
authorized shares with par value of $1.00)....................... 8,592,306
NET ASSET VALUE
Per Share....................................................... $ 11.196
============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------
F-5
<PAGE>
Allmerica Securities Trust
STATEMENT OF OPERATIONS . For the Six Months Ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest (Note 2)............................................... $ 3,978,809
Dividends (Note 2).............................................. 23,798
------------
Total investment income....................................... 4,002,607
------------
EXPENSES:
Investment advisory fees (Note 3)............................... 246,677
Custodian fees.................................................. 1,999
Fund accounting fees (Note 3)................................... 19,000
Transfer agent fees............................................. 24,523
Legal fees...................................................... 2,000
Audit fees...................................................... 4,000
Trustees' fees and expenses (Note 3)............................ 6,000
Reports to shareholders......................................... 8,622
New York Stock Exchange fees.................................... 8,000
Miscellaneous................................................... 6,203
------------
Total expenses................................................ 327,024
------------
NET INVESTMENT INCOME............................................ 3,675,583
------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold.................... 286,697
Net change in unrealized appreciation (depreciation)
of investments.................................................. (4,636,692)
------------
NET GAIN (LOSS) ON INVESTMENTS................................... (4,349,995)
------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS................................ $ (674,412)
============
</TABLE>
See Notes to Financial Statements.
F-6 ----------------------------------------------------------
<PAGE>
Allmerica Securities Trust
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended,
June 30, Year Ended
1996 December 31,
(Unaudited) 1995
_________________________________
NET ASSETS at beginning of period...................... $ 100,483,120 $ 91,457,903
--------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income................................. 3,675,583 7,392,646
Net realized gain (loss) on investments sold.......... 286,697 626,599
Net change in unrealized appreciation (depreciation)
of investments....................................... (4,636,692) 8,395,355
--------------- --------------
Net increase (decrease) in net assets resulting from
operations........................................... (674,412) 16,414,600
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................. (3,609,157) (7,389,383)
--------------- --------------
CAPITAL SHARE TRANSACTIONS:
Issued to shareholders in reinvestment of dividends... -- --
--------------- --------------
Total increase (decrease) in net assets............. (4,283,569) 9,025,217
--------------- --------------
NET ASSETS at end of period (including line A)......... $ 96,199,551 $ 100,483,120
=============== ==============
(A) Undistributed net investment income................ $ 206,051 $ 139,625
=============== ==============
OTHER INFORMATION:
Share Transactions:
Issued to shareholders in reinvestment of dividends... -- --
=============== ==============
See Notes to Financial Statements.
- ----------------------------------------------------------------------------------
F-7
</TABLE>
<PAGE>
Allmerica Securities Trust
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
1996 ------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period...... $ 11.694 $ 10.644 $ 11.773 $ 11.302 $ 11.084 $ 10.110
---------- ---------- ---------- ---------- ---------- ----------
Income from Investment Operations:
Net investment income.................... 0.428 0.860 0.843 0.909 0.954 0.980
Net realized and unrealized gain (loss)
on investments......................... (0.506) 1.050 (1.122) 0.472 0.234 0.964
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations:.... (0.078) 1.910 (0.279) 1.381 1.188 1.944
---------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income..... (0.420) (0.860) (0.850) (0.910) (0.970) (0.970)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value (0.498) 1.050 (1.129) 0.471 0.218 0.974
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, end of period.......... $ 11.196 $ 11.694 $ 10.644 $ 11.773 $ 11.302 $ 11.084
========== ========== ========== ========== ========== ==========
Market Value, end of period.............. $ 9.625 $ 10.500 $ 9.375 $ 11.625 $ 11.750 $ 10.625
========== ========== ========== ========== ========== ==========
<CAPTION>
Total Return on Market Value, end of period.. (4.54)%** 21.71% (12.48)% 6.87% 20.35% 20.97%
Ratios/Supplemental Data:
Net Assets, end of period (000's)............ $ 96,200 $ 100,483 $ 91,458 $ 101,161 $ 95,417 $ 93,571
Ratios to average net assets:
Net investment income....................... 7.59%* 7.64% 7.59% 7.72% 8.49% 9.29%
Operating expenses.......................... 0.68%* 0.77% 0.78% 0.74% 0.76% 0.77%
Portfolio Turnover Rate...................... 0.23% 42% 42% 55% 55% 43%
- -------------------------------
</TABLE>
* Annualized
** Not Annualized
See Notes to Financial Statements.
F-8 ----------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS . June 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
1. ORGANIZATION
Allmerica Securities Trust (the "Trust") was organized as a Massachusetts
business trust on June 30, 1986 and is registered under the Investment Company
Act of 1940, as amended, as a diversified, closed-end management investment
company. The primary investment objective is to provide a high rate of current
income with capital appreciation as a secondary objective.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles consistently followed
by the Trust in the preparation of its financial statements.
Security Valuation
Corporate debt securities and debt securities of the U.S. government and its
agencies (other than short-term investments) are valued by an independent
pricing service approved by the Board of Trustees which utilizes market
quotations and transactions, quotations from dealers and various relationships
among securities in determining value. If not valued by a pricing service, such
securities are valued at prices obtained from independent brokers. Investments
with prices that cannot be readily obtained are carried at fair value as
determined in good faith under consistently applied procedures established by
and under the supervision of the Board of Trustees. Short-term investments that
mature in 60 days or less are valued at amortized cost.
Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Net realized gains and
losses on investments sold are recorded on the basis of identified cost.
Interest income is recorded on the accrual basis and consists of interest
accrued and, if applicable, discount earned. Dividend income is recorded on the
ex-dividend date.
Federal Taxes
The Trust intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended. By so
qualifying, the Trust will not be subject to Federal income taxes to the extent
that it distributes all of its taxable income and net realized gains, if any,
for its tax year ending December 31. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, the Trust will not be subject to Federal excise
tax. Therefore, no Federal income tax provision is required.
Paid-in capital, undistributed net investment income and accumulated net
realized gain (loss) have been adjusted in the Statement of Assets and
Liabilities for permanent book-tax differences for the year ended December 31,
1995.
F-9
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued . June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
Distribution to Shareholders
Dividends to shareholders from net investment income are recorded on the ex-
dividend date and paid quarterly. Net realized capital gains, if any, are
distributed at least annually. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatment for paydown gains/losses on certain securities, market
discounts and losses deferred due to wash sales. Any taxable income or gain
remaining at fiscal year end will be distributed in the following year.
Current year permanent book-tax differences, if any, are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the Financial Highlights.
Securities Lending
The Trust loans securities to certain brokers who pay the Trust negotiated
lenders' fees. Collateral must be maintained at a value at least equal to the
value at all times of the securities lent. At June 30, 1996, bonds with
aggregate value of approximately $8,405,069 were on loan to brokers. The loans
were secured with cash collateral of $8,405,069, which was subsequently invested
in cash equivalents. The related income earned was $10,438 which is included in
interest income for the six months ended June 30, 1996.
3. INVESTMENT ADVISORY FEES AND
OTHER RELATED PARTY TRANSACTIONS
Allmerica Asset Management, Inc. ("AAM"), a wholly-owned subsidiary of First
Allmerica Financial Life Insurance Company ("First Allmerica"), serves as
Investment Adviser to the Trust. For these services, the Trust pays AAM
aggregate monthly compensation at an annual rate of (a) 3/10 of 1% of average
total net assets plus (b) 2-1/2% of the amount of interest and dividend income.
To the extent that normal operating expenses of the Trust, excluding taxes,
interest, brokerage commissions and extraordinary expenses, but including the
investment advisory fee, exceed 1.5% of the first $30,000,000 of the Trust's
average weekly net assets and 1% of the Trust's average total net assets in
excess of $30,000,000 for any fiscal year, AAM will bear such excess expenses.
AAM has entered into an Administrative Services Agreement with First Data
Investors Services Group, Inc. ("FDISG"), formerly The Shareholder Services
Group, Inc., a wholly-owned subsidiary of First Data Corporation, whereby FDISG
performs administrative services for the Trust and is entitled to receive an
administrative fee and certain out-of-pocket expenses. AAM is solely responsible
for the payment of the administration fee to FDISG. In a separate agreement,
FDISG receives fees from the Trust for certain fund accounting services provided
in its capacity as pricing and bookkeeping agent.
The Trust pays no salaries or compensation to any of its officers. Trustees who
are not directors, officers, or employees of the Trust or the Investment Adviser
are reimbursed for their travel expenses in attending meetings of the Trustees
and receive quarterly meeting and retainer fees for their services. Such amounts
are paid by the Trust.
F-10 --------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued . June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
4. SHARES OF BENEFICIAL INTEREST
There are 10,000,000 shares of $1.00 par value common stock authorized.
5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, for the six months ended June 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
Government Other Government Other
- -------------------------------------------------------------------------------
<C> <C> <C> <C>
$10,561,211 $11,373,744 $12,440,777 $10,398,071
</TABLE>
At June 30, 1996 aggregate gross unrealized appreciation for all securities in
which there was an excess of value over tax cost and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost over
value were as follows:
<TABLE>
<CAPTION>
Tax Basis
Net Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation) Cost
- --------------------------------------------------------------------------------
<C> <C> <C> <C>
$2,563,153 $2,047,109 $516,044 $93,753,164
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
As of December 31, 1995, the Trust had available for Federal tax purposes unused
capital loss carryforwards of $234,835, $1,458,655 and $260,009 expiring in
1997, 1998 and 2002, respectively. For the year ended December 31, 1995, the
Trust utilized $466,047 of capital loss carryforwards.
F-11
<PAGE>
- -------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued . June 30, 1996 (Unaudited)
- -------------------------------------------------------------------------------
7. RESTRICTED SECURITIES
At June 30, 1996, the Trust owned the following restricted securities
constituting 9.30% of net assets which may not be publicly sold without
registration under the Securities Act of 1933. The Trust would bear the
registration costs in connection with the disposition of restricted securities
held in the portfolio. The Trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees. Additional information on
restricted securities is as follows:
<TABLE>
<CAPTION>
Date of Par Cost at
Issuer Acquisition Amount Acquisition Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Buckeye Pipeline Co., L.P. 12/23/86 $ 500,000 $ 500,000 $ 507,625
C-Tec Cable Systems, Inc. 07/06/89 1,000,000 1,000,000 1,038,080
Delta Airlines, Inc. 12/12/91 1,592,194 1,610,978 1,651,281
Jennifer Holding Corp. 07/17/87 433,680 461,334 452,324
Jones, Edward D. & Co., L.P. 05/06/94 1,000,000 1,000,000 992,700
Kerrville Telephone Co. 02/09/90 400,000 400,000 420,532
Mack Trust, Inc. 07/14/95 781,524 814,286 792,739
Usinor Sacilor 01/14/94 2,000,000 2,000,000 1,990,860
Valero Management Partnership, L.P. 03/04/87 1,000,000 1,000,000 1,102,890
------------------------
Total $8,786,598 $8,949,031
========================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
OTHER INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS (Unaudited):
At the Annual Meeting of Shareholders, held on April 17, 1996, results of
shareholder voting for the election of Trustees were as follows:
<TABLE>
<CAPTION>
Shares For Name of Trustee % of Shares Voted Shares Withheld
---------- --------------- ----------------- ---------------
<S> <C> <C> <C>
6,672,194 John F. O'Brien 97.98 137,646
6,686,482 Russell E. Fuller 98.19 123,358
6,673,577 Gordon Holmes 98.00 136,263
6,679,888 Bruce E. Langton 98.09 129,952
6,689,702 John P. Kavanaugh 98.24 120,138
6,672,456 Attiat F. Ott 97.98 137,384
6,699,768 Paul D. Paganucci 98.38 110,072
6,696,912 Richard M. Reilly 98.34 112,928
6,670,139 Ranne P. Warner 97.95 139,701
6,691,544 Thomas S. Zocco 98.26 118,296
</TABLE>
By a vote of 6,647,527 shares in favor, representing 77.37% of shares
outstanding, with 162,313 shares withheld, shareholders ratified and approved
the appointment of Price Waterhouse LLP as independent accountants for the Trust
for the fiscal year ending December 31, 1996.
<TABLE>
<CAPTION>
QUARTERLY DATA (Unaudited):
Net realized and Net increase (decrease)
Net investment unrealized gains (losses) in net assets resulting
income on investments from operations
---------------- -------------------------- -------------------------
Total
Quarterly Investment Per Per Per
period Income Amount Share Amount Share Amount Share
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
3/31/94 $2,051,933 $1,866,933 $ 0.22 $(4,283,505) $ (0.50) $(2,416,572) $ (0.28)
6/30/94 1,946,889 1,756,990 0.20 (3,048,006) (0.36) (1,291,016) (0.15)
9/30/94 2,007,141 1,818,461 0.21 (541,387) (0.06) 1,277,074 0.15
12/31/94 1,980,461 1,800,418 0.21 (1,769,635) (0.21) 30,783 0.00
1995
3/31/95 2,011,795 1,831,470 0.21 2,300,857 0.27 4,132,327 0.48
6/30/95 2,005,417 1,822,485 0.21 4,093,980 0.48 5,916,465 0.69
9/30/95 2,075,239 1,896,060 0.22 432,024 0.05 2,328,084 0.27
12/31/95 2,042,117 1,842,631 0.22 2,195,093 0.25 4,037,724 0.47
1996
3/31/96 2,005,042 1,816,051 0.211 (3,493,629) (0.406) (1,677,578) (0.195)
6/30/96 1,997,565 1,859,532 0.217 (856,366) (0.100) 1,003,166 0.117
</TABLE>
- -------------------------------------------- F-13
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
REGULATORY DISCLOSURES
- --------------------------------------------------------------------------------
The performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
This report is not authorized for distribution to prospective purchasers of
Allmerica Securities Trust unless accompanied or preceded by an effective
prospectus for the Trust which includes information related to charges and
expenses.
F-14 -----------------------------------------
<PAGE>
To be preceded or accompanied by the current prospectus. Read carefully before
investing.
[GRAPHIC APPEARS HERE]
First Allmerica Financial Life Insurance Company . Allmerica Financial Life
Insurance and Annuity Company (licensed in all states except NY & HI)
Allmerica Trust Company, N.A. . Allmerica Investments, Inc. . Allmerica
Investment Management Company, Inc. . Allerica Asset Management,
Inc. . Allmerica
Property & Casualty Companies, Inc. . The Hanover Insurance Company . Sterling
Risk Management Serivces, Inc. . Citizens Corporation . Citizens Insurance
Company of America . AMGRO, Inc.
440 Lincoln Street, Worcester, Massachusetts 01653
[LOGO OF RECYCLED PAPER APPEARS HERE]
