<PAGE>
ALLMERICA FINANCIAL SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
JUNE 30, 1998
ALLMERICA SECURITIES TRUST
AST 1998
[ALLMERICA FINANCIAL LOGO APPEARS HERE]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Trust Information........................ 2
A Letter from the Chairman............... 3
Bond & Money Market Overview............. 4
Trust Overview........................... 6
Financials............................... F-1
Shareholder Information.................. F-11
</TABLE>
<PAGE>
TRUST INFORMATION
Board of Trustees
John F. O'Brien, Chairman
P. Kevin Condron/*/
Cynthia A. Hargadon/*/
Gordon Holmes/*/
John P. Kavanaugh
Bruce E. Langton/*/
Attiat F. Ott/*/
Paul D. Paganucci/*/
Richard M. Reilly
Ranne P. Warner/*/
Officers
Richard M. Reilly, President
Thomas P. Cunningham, Treasurer
George M. Boyd, Secretary
Investment Adviser
Allmerica Asset Management, Inc.
440 Lincoln Street, Worcester, MA 01653
Registrar and Transfer, Dividend Disbursing
and Reinvestment Agent
The Bank of New York
P.O. Box 11258, Church Street Station, New York, NY 10286
Custodian
Bankers Trust Company
16 Wall Street, New York, NY 10005
Administrator
First Data Investor Services Group
4400 Computer Drive, Westborough, MA 01581
/*/Independent Trustees
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street, Boston, MA 02110
Legal Counsel
Ropes & Gray
One International Place, Boston, MA02110
Shareholders Inquires May Be Directed To:
The Bank of New York Shareholder Relations
Department 11E P.O. Box 11258 Church Street
Station, New York, NY 10286
1-800-432-8224
2
<PAGE>
A LETTER FROM THE CHAIRMAN
[PICTURE APPEARS HERE]
Dear Client:
The U.S. economy is now in its eighth year of expansion and continues to show
surprising strength. First quarter gross domestic (GDP) rose at a strong rate
of 5.4% although economic growth clearly slowed during the second quarter. The
Federal Reserve Board continues to watch for signs of inflation but the evidence
is contradictory.
Unemployment is low and labor shortages have developed in certain areas and
industries, driving up wages. At the same time, commodity prices are declining,
particularly for oil and certain foods. The turmoil in Asia is also resulting in
decreased demand for U.S. exports and an increase in supply of lower priced
imports. These competing forces have led to a kind of stalemate and the Federal
Reserve has not been forced to raise or lower interest rates.
With no change in Federal Reserve policy during the last six months, interest
rates have been driven by investors' concerns and expectations. After a strong
start in January, investors became concerned about the strong economy and drove
interest rates higher in February and March. Then as monetary and economic
issues continued to worsen in the Far East, investors sought high-quality U.S.
Treasury instruments and drove bond prices higher and interest rates lower.
These fluctuations were challenging for many fixed income portfolio managers on
a day-to-day basis. But long-term investors can look back on a relatively stable
economic period. Inflation continues to be modest, economic growth is solid and
interest rates are roughly 0.25% lower than they were at the start of the year.
Corporate credit-quality remains sound and default ratios are near their
historical lows. As a result, the broad bond market produced a solid return of
3.92% as measured by the Lehman Brothers Aggregate Bond Index while your fund
had a total return of 5.03%.
We are pleased to report that on August 11, 1998, the Allmerica Securities Trust
Board of Trustees declared a quarterly dividend of $0.21 per share, payable on
September 30, 1998 to shareholders of record on August 31, 1998. For the 12-
month period ended June 30, 1998, the Trust paid dividends of $0.84 per share
producing a current yield of 7.81% based on the period-end closing price of
$10.75. By comparison, the yield on the 10-year Treasury note as of June 30,
1998 was 5.45%.
While expecting little change during the latter half of this year, the Trust's
manager will continue to monitor macro economic issues while utilizing strong
credit skills to identify good investments one bond at a time.
All of us at Allmerica look forward to continuing to provide you with a broad
array of high-quality investment and retirement products.
On behalf of the Board of Trustees,
/s/ John F. O'Brien
John F. O'Brien
Chairman of the Board
Allmerica Securities Trust
3
<PAGE>
BOND & MONEY MARKET OVERVIEW
In much the same fashion as the equity market, the performance of the U.S. bond
market was significantly affected by the turmoil in Asia during the first half
of 1998. Given this backdrop, some sectors of the market fared well, while
others struggled.
Starting off on a positive note, the U.S. economy appeared strong with Gross
Domestic Product (GDP) rising nearly 5.4% in the first quarter. Low inflation,
favorable credit conditions and higher equity valuations all drove this strong
economic growth and price stability. As growth continued, fixed income investors
grew nervous and anticipated that the Federal Reserve would raise interest rates
to ward off inflation.
But, as Asia's markets grew weaker, growth in the U.S. slowed. So, the Federal
Reserve adopted a "wait and see" approach regarding any moves toward tightening
or relaxing monetary policy.
Bond investors, on the other hand, quickly reacted to these developments.
Initially content, they worried that the economy was growing too fast only to
gain comfort from the slowing effect of the Asian crisis. Their concerns drove
interest rates which rose during the first quarter only to fall to new lows
during the second quarter.
Corporate credit issues also went on a roller coaster ride. The volatility in
foreign exchanges and global markets, caused a flight to quality preference for
U.S. Treasuries. Coupled with concerns about future growth of the U.S. economy
and the expected level of corporate profits, corporate bond spreads widened
causing investment grade corporates to lag comparable duration Treasuries by 24
basis points for the first six months of the year. Although spreads initially
narrowed from their levels in January, they reversed course again in June,
1993: U.S. economy gains momentum. Consumer spending and installment debt
increase.
1994: Federal Reserve Board
raises interest rates six times in an effort to slow down the economy and keep
inflation in check, sending bond prices sharply lower.
1995: U.S. bond market enjoys its third best performance in 30 years, thanks to
strong total returns from 30-year U.S. Treasuries and corporate issues.
1996: Outlook for Federal Reserve policy affects U.S. bond market. Long-
predicted interest rate cuts, which would have fueled this market, never occur.
1997: Low inflation and declining interest rates fuel the bond market, which
enjoys its best returns since 1995.
1998: Performance of the
U.S. bond market is significantly affected by the turmoil in Asia
for the first half of 1998.
Ongoing financial crisis in Asia causes a flight to quality for both stock and
bond investors.
Long-term U.S. Treasuries deliver their best performance in years as investors
favor their inherent safety.
1998 JAN FEB MAR
[PICTURE APPEARS HERE]
Uncertain about the potential effects of the Asian crisis on the U.S., the
Federal Reserve adopts a wait and see approach to changing interest rates.
4
<PAGE>
BOND & MONEY MARKET OVERVIEW
widening to levels not seen in six years. Surprisingly, the actual credit
quality of U.S. issuers remained at its best level in years, as ratings upgrades
outpaced downgrades in the market, unlike previous periods of under-performance
in this sector.
The yield on the 30-year bond fell to 5.62%, its lowest level in decades. But it
fell only modestly for shorter term issues. Overall, Treasuries outperformed
selected fixed income instruments and contributed to the overall 3.93% gain in
the market as measured by the Lehman Aggregate Bond Index.
Despite a poor showing in the second quarter, the high yield market remained
the best-performing fixed income sector for the first half of 1998. As with
investment grade corporate bonds, high yield issues suffered during the second
quarter in part from the renewed uncertainty surrounding emerging markets as
well as from the diminished flows of cash into high yield bond funds.
The significant declines in long-term interest rates had a major impact on the
mortgage market. With some of the lowest rates in years, homeowners refinanced
in record numbers, causing prepayments on mortgage-backed securities to
increase, adversely affecting their returns.
Entering the second half of 1998, solid fundamentals remain firmly in place for
the U.S. bond market. As investors continue to watch for signs of recovery in
Asia, the Federal Reserve is likely to maintain its neutral monetary policy.
Given this scenario, the outlook for Treasuries and highly rated corporates
should remain particularly favorable.
[PICTURE APPEARS HERE]
Mortgage-backed securities lose ground amid record mortgage refinancing.
[PICTURE APPEARS HERE]
Investors continue to watch for signs of recovery in Asia, causing the outlook
for U.S. Treasuries to remain favorable.
APR MAY JUN
[PICTURE APPEARS HERE]
Investors flight to quality benefits highly rated corporate bonds.
High-yield issues suffer due to renewed uncertainty in the emerging markets.
5
<PAGE>
Allmerica Securities Trust
For the six-month period ended June 30, 1998, the Allmerica Securities Trust
posted a 5.03% return outpacing the 4.15% of the Lehman Corporate Bond Index for
the same period.
During the first half of 1998, the bond market posted solid returns as U.S.
Treasuries performed strongly while other sectors produced mixed results.
Specifically, investment grade corporates lagged comparable duration Treasuries,
although selected issues contributed results.
Throughout the year, media was the largest sector represented in the portfolio.
Although corporate spreads in general widened, selected media issues benefited
from positive credit developments. For example, the record-breaking merger
between TCI and AT&T prompted yield spreads to narrow for TCI paper on the
expectations that a ratings upgrade from BBB to A would result.
Exposure in the Finance sector was adjusted to capitalize on industry
consolidation. During the period, the managers broadened holdings to include
larger domestic banks and insurance companies. Specifically, issues of Merita
Bank, a Scandinavian financial institution, were sold to purchase Chase
Manhattan Bank issues to benefit from large bank mergers.
The high yield market was the best-performing fixed income sector for the year,
despite a poor showing in the second quarter. The market was hurt by renewed
uncertainty about emerging markets and less flows of cash from high yield mutual
funds. Looking ahead, management expects renewed support for this sector from
Collateralized Bond Obligation (CBO) transactions.
AVERAGE ANNUAL TOTAL RETURNS
Investment Adviser
Allmerica Asset Management, Inc.
About The Fund
Seeks to generate a high rate of current income for distribution to
shareholders.
<TABLE>
<CAPTION>
Years ended June 30, 1998 1 Year 5 Years 10 Years
<S> <C> <C> <C>
Allmerica Securities Trust 12.65% 8.04% 9.93%
Lehman Brothers Corporate Bond Index 11.38% 7.10% 9.18%
Lipper Corporate Debt
BBB-Rated Fund Average 10.50% 07.59% 09.35%
</TABLE>
PORTFOLIO COMPOSITION
As of June 30, 1998, the sector allocation of net assets was:
HISTORICAL PERFORMANCE
<TABLE>
<CAPTION>
Total Return Total Return
on Net Asset Value on Market Value
<S> <C> <C>
1993 12.65% 6.87%
1994 (2.41%) (12.48%)
1995 18.58% 21.71%
1996 5.35% 6.06%
1997 11.34% 14.07%
1998 (as of June 30, 1998) 5.03% 3.41%
</TABLE>
Corporate Notes and Bonds 74%
U.S. Government
Obligations 14%
Asset-Backed Securities 8%
Foreign Bonds 2%
Cash Equivalents and Other 2%
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 107 funds
within the Corporate BBB Debt Fund category.
6
<PAGE>
Financials
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS . JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE MOODY'S RATINGS (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 73.94%
FINANCE - 17.23%
$1,150,000 BCH Cayman Islands
Yankee Subordinated Notes, Guaranteed
6.50%, 02/15/06 A $ 1,160,182
1,400,000 Capital One Financial Corp.
7.25%, 12/01/03 Ba 1,432,536
1,000,000 Cenfed Financial Corp., Senior Debenture
11.17%, 12/15/01(A) Bb 1,106,600
1,000,000 Chase Manhattan Corp.
6.38%, 02/15/08 A 1,000,830
1,500,000 Colonial Capital II, Series A, Guaranteed
8.92%, 01/15/27(A) (D) BB 1,677,933
975,000 Compass Trust I, Series A, Guaranteed
8.23%, 01/15/27 A 1,068,080
800,000 Conseco Financing Trust III
8.80%, 04/01/27 Ba 908,905
1,000,000 First Tennessee National Corp.
Subordinated Notes
6.75%, 11/15/05 Baa 1,032,792
1,000,000 Homeside Lending, Inc., MTN
6.88%, 05/15/00 A 1,013,559
124,019 Jennifer Holding Corp.
12.25%, 12/30/98 (B) NR 125,986
270,458 Mack Trust, Inc.
10.91%, 04/01/99 (B) NR 285,211
550,000 MBNA Corp., MTN
6.96%, 09/12/02 Baa 561,744
569,250 Midland Funding Corp., Series C
Senior Secured Lease Obligation
10.33%, 07/23/02 Ba 615,925
1,000,000 The Money Store, Inc.
8.05%, 04/15/02 Ba 1,062,635
1,000,000 Providian Capital, Series A, Guaranteed
9.53%, 02/01/27 (A) Ba 1,148,902
1,000,000 Riggs Capital Trust
8.63%, 12/31/26 (A) Baa 1,103,649
1,000,000 St. George Bank, Ltd., Yankee Debenture
7.15%, 10/15/05 (A) Baa 1,036,510
1,250,000 Zions Institutional Capital Trust
Series A, Guaranteed
8.54%, 12/15/26 A 1,402,902
--------------
17,744,881
--------------
INDUSTRIAL - 12.25%
2,000,000 Bethlehem Steel Corp., Senior Notes
10.38%, 09/01/03 Ba 2,160,000
950,000 Buckeye Cellulose Corp.
Senior Subordinated Notes
9.25%, 09/15/08 Ba 999,875
1,000,000 CSC Holdings, Inc., Debenture
7.88%, 02/15/18 Ba 1,052,500
1,000,000 Georgia Gulf Corp.
7.63%, 11/15/05 Ba 1,030,713
649,000 Homeside, Inc., Senior Notes, Series B
11.25%, 05/15/03 (A) Ba 769,876
$1,000,000 Interpool, Inc.
7.35%, 08/01/07 (A) Ba $ 1,007,732
1,000,000 LTV Corp., Senior Notes, Guaranteed
8.20%, 09/15/07 (A) Ba 965,000
500,000 McDermott (J. Ray) SA
Senior Subordinated Notes
9.38%, 07/15/06 B 537,500
950,000 Owens-Illinois, Inc., Senior Notes
7.85%, 05/15/04 Ba 994,599
1,000,000 RPM, Inc., Senior Notes
7.00%, 06/15/05 Baa 1,036,435
1,000,000 Stone Container Corp., Senior Notes
11.88%, 12/01/98 B 1,007,500
1,000,000 Westinghouse Electric Corp., Debenture
8.38%, 06/15/02 Ba 1,054,265
--------------
12,615,995
--------------
OIL, GAS AND PETROLEUM - 9.42%
2,000,000 ANR Pipeline Co., Debenture
9.63%, 11/01/21 Baa 2,726,068
1,000,000 Clark Oil & Refining Corp., Senior Notes
9.50%, 09/15/04 Ba 1,026,250
1,000,000 Oryx Energy Co., Debenture
10.00%, 06/15/99 Ba 1,076,987
1,450,000 Seagull Energy Corp., Senior Notes
7.88%, 08/01/03 Ba 1,460,875
1,250,000 Texas Eastern Transmission Corp., Debenture
10.00%, 08/15/01 A 1,385,322
1,000,000 Tosco Corp.
7.00%, 07/15/00 Baa 1,015,028
900,000 Valero Management Partnership, LP
First Mortgage, Series J-12
10.02%, 03/15/07 (B) NR 1,011,636
--------------
9,702,166
--------------
COMMUNICATIONS - 9.23%
500,000 Clear Channel Communications, Inc.
Debenture
7.25%, 10/15/27 Baa 515,130
1,000,000 Comcast Cable Communications, Inc.
8.13%, 05/01/04 (A) Baa 1,087,350
1,000,000 Continental Cablevision, Inc.
8.50%, 09/15/01 Baa 1,066,350
750,000 Continental Cablevision, Inc.
8.30%, 05/15/06 Baa 830,243
700,000 Hearst-Argyle Television, Senior Notes
7.00%, 01/15/18 Baa 710,514
300,000 Kerrville Telephone Co.
9.76%, 03/29/00 (B) NR 312,255
1,850,000 TCI Communications, Inc.
7.88%, 02/15/26 Baa 2,077,498
500,000 Viacom, Inc., Senior Notes
7.75%, 06/01/05 Ba 534,902
1,000,000 Viacom, Inc., Senior Debenture, Guaranteed
7.63%, 01/15/16 Ba 1,096,230
1,175,000 WorldCom, Inc.
7.75%, 04/01/07 Baa 1,269,300
--------------
9,499,772
--------------
</TABLE>
See Notes to Financial Statements.
F-1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, CONTINUED . JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE MOODY'S RATINGS (NOTE 2)
- --------------------------------------------------------------------------------
<S> <C> <C>
UTILITIES - 6.39%
$1,550,000 Connecticut Light & Power Co.
First Mortgage, Series 94D
7.88%, 10/01/24 Ba $ 1,660,814
1,162,000 North Atlantic Energy Corp.
First Mortgage, Series A
9.05%, 06/01/02 B 1,196,206
1,270,000 Sithe/Independence Funding Corp.
Series A
9.00%, 12/30/13 Baa 1,515,846
1,500,000 Texas-New Mexico Power Co.
First Mortgage, Series U
9.25%, 09/15/00 Ba 1,584,316
600,000 Texas Utilities Electric Co.
First Mortgage
7.38%, 10/01/25 Baa 620,970
------------
6,578,152
------------
MERCHANDISING AND RETAIL - 4.07%
1,000,000 Federated Department Stores, Inc.
Senior Notes
10.00%, 02/15/01 Baa 1,091,683
950,000 Meyer (Fred), Inc.
7.38%, 03/01/05 Ba 957,397
1,000,000 Kroger Co., Senior Subordinated
Notes 10.00%, 05/01/99 Ba 1,026,598
1,000,000 USG Corp., Senior Notes
8.50%, 08/01/05 Baa 1,111,800
------------
4,187,478
------------
CONSUMER PRODUCTS - 3.77%
1,000,000 Chiquita Brands International,
Inc. 9.13%, 03/01/04 B 1,027,500
1,000,000 DiMon, Inc., Senior Notes, Series
B 8.88%, 06/01/06 Ba 1,066,587
1,600,000 Ralston Purina Co., Debenture
7.75%, 10/01/15 Baa 1,791,800
------------
3,885,887
------------
TRANSPORTATION - 3.56%
1,000,000 AMR Corp., Debenture
10.00%, 02/01/01 Baa 1,092,010
1,203,934 Delta Airlines, Inc.
9.23%, 07/02/02 (B) NR 1,204,259
659,000 U.S. Air, Inc., Equipment Trust,
Series D 10.30%, 01/15/00 Ba 684,046
661,000 U.S. Air, Inc., Equipment Trust,
Series F 10.30%, 01/15/00 Ba 686,122
------------
3,666,437
------------
SECURITIES BROKERS, DEALERS AND EXCHANGES - 2.88%
1,000,000 Donaldson Lufkin & Jenrette, Inc.
Senior Notes
6.88%, 11/01/05 A 1,032,923
888,859 Jones (Edward D.) & Co., LP
7.95%, 04/15/06 (B) NR 922,902
SECURITIES BROKERS, DEALERS
AND EXCHANGES (CONTINUED)
$1,000,000 Legg Mason, Inc., Senior Notes
6.50%, 02/15/06 Baa $ 1,008,463
2,964,288
PRINTING AND PUBLISHING - 2.20%
1,000,000 Time Warner, Inc., Debenture
9.15%, 02/01/23 Baa 1,268,951
850,000 Time Warner Entertainment Co., LP
Senior Debenture
8.38%, 03/15/23 Baa 995,141
2,264,092
HEALTH CARE - 1.97%
675,000 Allegiance Corp.
7.30%, 10/15/06 Baa 718,038
300,000 Tenet Healthcare Corp.
Senior Subordinate Notes
8.63%, 01/15/07 Ba 309,375
1,000,000 Tenet Healthcare Corp.
Senior Notes
7.63%, 06/01/08 (A) Ba 1,004,364
------------
2,031,777
------------
TECHNOLOGY - 0.97%
1,000,000 Computer Associates, International
6.25%, 04/15/03 (A) Baa 1,000,412
TOTAL CORPORATE NOTES AND BONDS 76,141,337
(Cost $71,411,163)
U.S. GOVERNMENT OBLIGATIONS - 14.11%
U.S. TREASURY BONDS - 8.19%
5,150,000 7.25%, 05/15/16 Aaa 6,035,156
2,025,000 7.13%, 02/15/23 Aaa 2,395,196
------------
8,430,352
------------
U.S. TREASURY NOTES - 5.92%
930,000 6.88%, 05/15/06 Aaa 1,007,306
------------
4,665,000 7.00%, 07/15/06 Aaa 5,096,513
------------
6,103,819
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 14,534,171
------------
(Cost $13,712,919)
ASSET-BACKED SECURITIES - 7.83%
1,000,000 American Airlines, Inc
Pass-Through Trust , Series 1991 -
C2 9.73%, 09/29/14 A 1,273,700
1,000,000 BankBoston RV Asset Backed Trust,
Series 1997 - 1, Class A8
6.54% , 02/15/09 Aaa 1,014,440
375,000 Barnett Auto Trust
Series 1997-A, A3
6.03%, 11/15/01 Aaa 375,844
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
- --------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, Continued . June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
VALUE
PAR VALUE MOODY'S RATINGS (NOTE 2)
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (CONTINUED)
$ 162,520 Eaglemark Trust
Harley-Davidson, Series 1995 - 1
6.80%, 12/15/01 (A) Aaa $ 166,871
999,704 First Plus Home Loan Trust
Series 1996-2, Class A5
7.47%, 02/20/11 Aaa 1,022,617
732,559 Green Tree Recreational Equipment &
Consumer Trust
Series 1997-B, Class A-1
6.55%, 07/15/28 NR 744,939
551,905 Green Tree Financial Corp.
Series 1995-A,Class A
7.25%, 07/15/05 Baa 560,813
561,809 National Auto Finance
Series 1996-1, Class A
6.33%, 12/21/02 Aaa 565,158
650,000 Resolution Trust Corp.
Series 1995 - 1, Class A4C, CMO
6.85%, 02/25/27 Aaa 653,399
1,294,374 United Air Lines, Inc.
Pass Through Trust, Series 1991 - B1
9.30%, 03/22/08 Baa 1,484,634
13,035 Western Financial Grantor Trust
Series 1994-2, Class A2
6.38%, 09/01/99 Aaa 13,051
187,132 Western Financial Grantor Trust
Series 1995-2, Class A2
7.10%, 07/01/00 Aaa 188,264
---------
TOTAL ASSET-BACKED SECURITIES 8,063,730
---------
(Cost $7,230,950)
FOREIGN BONDS (C) - 2.36%
$ 950,000 Republic of Colombia, Series E, MTN
8.66%, 10/07/16 (A) Baa $ 937,241
1,500,000 United Mexican States
Yankee Emerging Market Notes
8.50%, 09/15/02 Ba 1,488,750
-------------
TOTAL FOREIGN BONDS 2,425,991
-------------
(Cost $2,131,580)
SHARES
- ------
INVESTMENT COMPANY - 0.11%
112,652 SSgA Prime Money Market Fund NR 112,652
-------------
TOTAL INVESTMENT COMPANY 112,652
-------------
(Cost $112,652)
TOTAL INVESTMENTS - 98.35% 101,277,881
-------------
(Cost $94,599,264)
NET OTHER ASSETS AND LIABILITIES - 1.65% 1,704,005
-------------
Net Assets - 100.00% $ 102,981,886
=============
- ------------------------------
(A) 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 June 30, 1998, these
securities amounted to $13,012,440 or 12.64% of net assets.
(B) 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. For additional information
concerning each restricted security, see Note 5.
(C) U.S. currency denominated.
(D) Standard & Poor's ("S&P") credit ratings are used in the absence of a
rating by Moody's Investors, Inc.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
OTHER INFORMATION
For the six months ended June 30, 1998, the aggregated cost of purchases and the
proceeds of sales, other than from short-term investments, included $12,349,728
and $10,950,518 from non-governmental issuers, respectively, and $4,232,815 and
$5,621,114 from U.S. Government and Agency issuers, respectively.
At June 30, 1998, the value of the securities loaned and the value of collateral
amounted to $1,341,360 and $1,414,000, respectively
The composition of ratings of both long-term and short-term debt holdings as a
percentage of total value of investments in securities is as follows:
Moody's Ratings S&P Ratings
Aaa 18.30% BB 1.63%
A 9.22
Baa 30.87
Ba 30.48
Bb 1.09
B 3.72
NR (Not Rated) 4.69
-------- -------
98.37% 1.63%
======== =======
FEDERAL INCOME TAX INFORMATION (SEE NOTE 2)
At June 30, 1998, the aggregate cost of investment securities for tax purposes
was $94,599,264. Net unrealized appreciation (depreciation) aggregated
$6,678,617, of which $6,841,798 related to appreciated investment securities and
$(163,181) related to depreciated investment securities.
As of December 31, 1997, the Trust had capital loss carryforwards which expire
as follows: $909,828 in 1998, $260,009 in 2002 and $17,365 in 2005.
See Notes to Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- -------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES . June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost......................................................................... $ 94,599,264
Net unrealized appreciation (depreciation).................................................. 6,678,617
-------------
Total investments at value............................................................... 101,277,881
Cash........................................................................................... --
Short-term investments held as collateral for securities loaned (Note 2)....................... 1,414,000
Interest and dividend receivables.............................................................. 1,989,667
-------------
Total Assets............................................................................. 104,681,548
-------------
LIABILITIES:
Advisory fee payable (Note 3).................................................................. 41,275
Trustees' fees and expenses payable............................................................ 5,537
Payable to Custodian........................................................................... 184,576
Accrued expenses and other payables ........................................................... 54,274
Collateral for securities loaned (Note 2)...................................................... 1,414,000
-------------
Total Liabilities ....................................................................... 1,699,662
-------------
NET ASSETS........................................................................................ $ 102,981,886
=============
NET ASSETS consist of:
Par Value (Note 4)............................................................................. $ 8,592,306
Paid-in capital ............................................................................... 88,551,952
Undistributed (distribution in excess of)net investment income ................................ (33,238)
Accumulated (distribution in excess of) net realized gain (loss) on investments sold .......... (807,751)
Net unrealized appreciation (depreciation) of investments ..................................... 6,678,617
-------------
TOTAL NET ASSETS.................................................................................. $ 102,981,886
=============
SHARES OF BENEFICIAL INTEREST OUTSTANDING (10,000,000 AUTHORIZED SHARES WITH PAR VALUE OF $1.00).. 8,592,306
NET ASSET VALUE
Per Share...................................................................................... $ 11,985
=============
MARKET VALUE (CLOSING PRICE ON NEW YORK STOCK EXCHANGE)
Per Share...................................................................................... $ 10,750
=============
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
- -------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS . For the Six Months Ended June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest (including income on securities loaned of $5,723)(Note 2) ........................... $ 3,854,712
Dividends (Note 2) ........................................................................... 15,795
------------
Total investment income ................................................................... 3,870,507
------------
EXPENSES:
Investment advisory fees (Note 3) ............................................................ 249,825
Fund accounting fees (Note 3) ................................................................ 18,759
Custodian and securities lending fees (Note 2)................................................ 3,063
Transfer agent fees........................................................................... 46,448
Legal fees ................................................................................... 1,434
Audit fees ................................................................................... 5,442
Trustees' fees and expenses (Note 3) ......................................................... 8,751
Reports to shareholders ...................................................................... 25,395
New York Stock Exchange fees ................................................................. 8,107
Miscellaneous ................................................................................ 2,669
------------
Total expenses ............................................................................ 369,893
------------
NET INVESTMENT INCOME ........................................................................... 3,500,614
------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold ................................................. 385,151
Net change in unrealized appreciation (depreciation) of investments........................... 1,132,737
------------
NET GAIN (LOSS) ON INVESTMENTS .................................................................. 1,517,888
------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS ............................................................. $ 5,018,502
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
----------------------------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD $ 101,572,152 $ 98,135,471
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................................. 3,500,614 7,194,926
Net realized gain (loss) on investments sold...................... 385,150 41,783
Net change in unrealized appreciation (depreciation) of investments 1,132,738 3,417,509
-------------- --------------
Net increase (decrease) in net assets resulting from operations .. 5,018,502 10,654,218
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................ (3,608,768) (7,217,537)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Issued to shareholders in reinvestment of dividends .............. -- --
-------------- --------------
Total increase (decrease) in net assets ....................... 1,409,734 3,436,681
-------------- --------------
NET ASSETS at end of period (including line A) ...................... $ 102,981,886 $ 101,572,152
============== ==============
(A) Undistributed (distribution in excess of) net investment income . $ (33,238) $ 74,916
============== ==============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - For a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
JUNE 30, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period............... $ 11.821 $ 11.421 $ 11.694 $ 10.644 $ 11.773 $ 11.302
--------- --------- --------- --------- --------- --------
Income from Investment Operations:
Net investment income........................... 0.407 0.837 0.843 0.860 0.843 0.909
Net realized and unrealized gain (loss)
on investments............................... 0.177 0.403 (0.256) 1.050 (1.122) 0.472
--------- --------- --------- --------- --------- --------
Total from Investment Operations:......... 0.584 1.240 0.587 1.910 (0.279) 1.381
--------- --------- --------- --------- --------- --------
Less Distributions:
Dividends from net investment income............ (0.420) (0.840) (0.860) (0.860) (0.850) (0.910)
--------- --------- --------- --------- --------- --------
Net increase (decrease) in net asset value......... 0.164 0.400 (0.273) 1.050 (1.129) 0.471
--------- --------- --------- --------- --------- --------
Net Asset Value, end of period..................... $ 11.985 $ 11.821 $ 11.421 $ 11.694 $ 10.644 $ 11.773
========= ========= ========= ========= ========= ========
Market Value, end of period........................ $ 10.750 $ 10.813 $ 10.250 $ 10.500 $ 9.375 $ 11.625
========= ========= ========= ========= ========= ========
Total Return on Market Value, end of period........ 3.41%** 14.07% 6.06% 21.71% (12.48)% 6.87%
Ratios/Supplemental Data
Net Assets, end of period (000's).................. $ 102,982 $ 101,572 $ 98,135 $ 100,483 $ 91,458 $101,161
Ratios to average net assets:
Net investment income .......................... 6.90%* 7.27% 7.44% 7.64% 7.59% 7.72%
Operating expenses ............................. 0.73%* 0.72% 0.75% 0.77% 0.78% 0.74%
Management Fee.................................. 0.49%* 0.50% 0.50% 0.51% 0.50% 0.51%
Portfolio Turnover Rate ........................ 16% 27% 47% 42% 42% 55%
</TABLE>
- -------------------------
* Annualized
** Not Annualized
See Notes to Financial Statements.
F-6
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS . June 30, 1998 (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.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies which are in
conformity with generally accepted accounting principles consistently followed
by the Trust in the preparation of its financial statements.
SECURITY VALUATION: Corporate debt securities and debt securities of the U.S.
government and its agencies (other than short-term investments) are valued by an
independent pricing service approved by the Board of Trustees which utilizes
market quotations and transactions, quotations from dealers and various
relationships among securities in determining value. If not valued by a pricing
service, such securities are valued at prices obtained from independent brokers.
Investments with prices that cannot be readily obtained are carried at fair
value as determined in good faith under consistently applied procedures
established by and under the supervision of the Board of Trustees. Short-term
investments that mature in 60 days or less are valued at amortized cost. At June
30, 1998, prices of securities whose total value represented 5.33% of net
assets were available only from a principal market maker. These prices may
differ from what would have been used had a broader market for the securities
existed.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on trade date. Net realized gains and losses on investments sold are
recorded on the basis of identified cost. Interest income is recorded on an
accrual basis and consists of interest accrued and, if applicable, discounts
earned on zero coupon bonds, original issue discount bonds, stepped-coupon bonds
and payment in kind bonds are accreted. Dividend income is recorded on
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.
DISTRIBUTION TO SHAREHOLDERS: Dividends to shareholders resulting from net
investment income are recorded on ex-dividend date and paid quarterly. Net
realized capital gains, if any, are distributed at least annually. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatment for paydown
gains/losses on certain securities, market discounts and losses deferred due to
wash sales. Any taxable income or gain remaining at fiscal year end will be
distributed in the following year.
Permanent book-tax differences, if any, are not included in ending undistributed
net investment income for the purpose of calculating net investment income per
share in the Financial Highlights.
F-7
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued . June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
SECURITIES LENDING: The Trust, using Bankers Trust Company ("Bankers Trust") as
its agent, loaned securities to brokers who paid the Trust negotiated lenders'
fees. These fees are included in interest income on the Statement of Operations.
The Trust receives obligations of the U. S. government and its agencies, cash
and/or cash equivalents as collateral against the loaned securities, in an
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
100% of the market value of the loaned securities during the period of the loan.
Information regarding the value of the securities loaned and the value of
collateral at period end is included under the caption "Other Information" at
the end of the Trust's Schedule of Investments.
The Trust pays Bankers Trust fees for their services equal to 25% of net income
from the securities lending program. For the period ended June 30,1998, the
Trust paid Bankers Trust $1,431.
EXPENSES: Most expenses of the Trust can be directly attributable to the Trust.
Expenses which can not be directly attributable to the Trust are allocated based
upon relative net assets among the Trust and one other affiliated registered
investment company.
3. INVESTMENT ADVISORY FEES AND OTHER RELATED PARTY TRANSACTIONS
Allmerica Asset Management, Inc. ("AAM"), a wholly-owned subsidiary of First
Allmerica Financial Life Insurance Company ("First Allmerica"), serves as
Investment Adviser to the Trust. For these services, the Trust pays AAM
aggregate monthly compensation at an annual rate of (a) 3/10 of 1% of average
net assets plus (b) 2-1/2% of the amount of interest and dividend income.
To the extent that normal operating expenses of the Trust, excluding taxes,
interest, brokerage commissions and extraordinary expenses, but including the
investment advisory fee, exceed 1.50% of the first $30,000,000 of the Trust's
average weekly net assets, and 1% of any excess of such value over $100,000,000,
AAM will bear such excess expenses.
AAM has entered into an Administrative Services Agreement with First Data
Investor Services Group, Inc. ("Investor Services Group"), a wholly-owned
subsidiary of First Data Corporation, whereby Investor Services Group performs
administrative services for the Trust and is entitled to receive an
administrative fee and certain out-of-pocket expenses. AAM is solely responsible
for the payment of the administration fee to Investor Services Group. In a
separate agreement, Investor Services Group receives fees from the Trust for
certain fund accounting services provided in its capacity as pricing and
bookkeeping agent.
The Trust pays no salaries or compensation to any of its officers. Trustees who
are not directors, officers, or employees of the Trust or the Investment Adviser
are reimbursed for their travel expenses in attending meetings of the Trustees
and receive fees for their services. Such amounts are paid by the Trust.
4. SHARES OF BENEFICIAL INTEREST
There are 10,000,000 shares of $1.00 par value common stock authorized. At June
30, 1998, First Allmerica and the Trustees of the Trust owned in the aggregate
94,118 shares of beneficial interest.
F-8
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, Continued . June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
5. RESTRICTED SECURITIES
At June 30, 1998, the Trust owned the following restricted securities
constituting 3.75% of net assets which may not be publicly sold without
registration under the Securities Act of 1933. The Trust would bear the
registration costs in connection with the disposition of restricted securities
held in the portfolio. The Trust does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees. Additional information on
restricted securities is as follows:
<TABLE>
<CAPTION>
DATE OF PAR COST AT
ISSUER ACQUISITION AMOUNT ACQUISITION VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delta Airlines, Inc. 12/12/91 $ 1,203,934 $ 1,218,137 $ 1,204,259
Jennifer Holding Corp. 07/17/87 124,019 131,793 125,986
Jones (Edward D.) & Co., L.P. 05/06/94 888,859 888,859 922,902
Kerrville Telephone Co. 02/09/90 300,000 300,000 312,255
Mack Trust, Inc. 07/14/95 270,458 280,899 285,211
Valero Management Partnership, L.P. 03/04/87 900,000 900,000 1,011,636
------------------------------
Total $ 3,719,688 $ 3,862,249
==============================
</TABLE>
F-9
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
QUARTERLY DATA (Unaudited):
<TABLE>
<CAPTION>
NET REALIZED AND NET INCREASE (DECREASE)
NET INVESTMENT UNREALIZED GAINS (LOSSES) IN NET ASSETS RESULTING
INCOME ON INVESTMENTS FROM OPERATIONS
-------------- ------------------------- -----------------------
TOTAL
QUARTERLY INVESTMENT PER PER PER
PERIOD INCOME AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996
3/31/96 2,005,042 1,816,051 0.211 (3,493,629) (0.406) (1,677,578) (0.195)
6/30/96 1,997,565 1,859,532 0.217 (856,366) (0.100) 1,003,166 0.117
9/30/96 1,996,408 1,795,479 0.209 467,738 0.054 2,263,217 0.263
12/31/96 1,977,684 1,771,031 0.206 1,682,287 0.196 3,453,318 0.402
1997
3/31/97 1,985,192 1,767,212 0.205 (1,936,148) (0.224) (168,936) (0.019)
6/30/97 1,990,451 1,828,065 0.213 1,985,637 0.231 3,813,702 0.444
9/30/97 1,968,825 1,792,484 0.209 2,067,555 0.241 3,860,039 0.450
12/31/97 1,965,209 1,807,165 0.210 1,342,248 0.155 3,149,413 0.365
1998
3/31/98 1,925,568 1,767,120 0.205 440,123 0.051 2,207,243 0.256
6/30/98 1,944,939 1,733,494 0.202 1,077,765 0.126 2,811,259 0.328
</TABLE>
F-10
<PAGE>
- --------------------------------------------------------------------------------
Allmerica Securities Trust
- --------------------------------------------------------------------------------
REGULATORY DISCLOSURES
The performance data quoted represents past performance and the investment
return and principal value of an investment will fluctuate so that an investor's
shares, when sold may be worth more or less than their original cost.
This report is authorized for distribution to existing shareholders of Allmerica
Securities Trust.
SHAREHOLDER TAX INFORMATION
The portion of the Trust dividends that was derived from U.S. Government
obligations in 1997 and may be exempt from state income taxation is 10.92%. The
states of California, Connecticut, New York, and New Jersey have exclusionary
provisions, however, each of these states has a threshold requirement that must
be met before the exclusion applies. During 1997, the level of exempt income did
not meet these thresholds and the exclusion does not apply. All other states and
the District of Columbia do not tax dividends attributable to U.S. Government
obligations within the Trust.
Certain states also require, for intangible tax reporting purposes, the
reporting of the percentage of assets invested in either state specific or state
specific and federal obligations. The percentage applicable to the states of
Florida, Kansas, Kentucky, Michigan and North Carolina is 15.333%. The
percentage applicable to the state of West Virginia is 0%.
SHAREHOLDER INFORMATION
AUTOMATIC DIVIDEND INVESTMENT PLAN: As a shareholder, you may participate in the
Trust's Automatic Dividend Investment Plan. Under the plan, dividends and other
distributions are automatically invested in additional full and fractional
shares of the Trust to be held on deposit in your account. Such dividends and
other distributions are invested at the net asset value if lower than market
price plus brokerage commission or, if higher, at the market price plus
brokerage commission. You will receive a statement after each payment date for a
dividend or other distribution that will show the details of the transaction and
the status of your account. You may terminate or rejoin the plan at any time.
CASH INVESTMENT PLAN: The cash investment plan provides a systematic, convenient
and inexpensive means to increase your investment in the Trust by putting your
cash to work. The plan permits you to invest amounts ranging from $25 to $1,000
in any one month to purchase additional shares of the Trust. Regular monthy
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.
F-11
<PAGE>
[ALLMERICA FINANCIAL LOGO 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.
The Hanover Insurance Company . AMGRO, Inc. . Allmerica Financial Alliance
Insurance Company
Allmerica Asset Management, Inc. . Allmerica Financial Benefit Insurance Company
. Sterling Risk Management Services, Inc.
Citizens Corporation . Citizens Insurance Company of America . Citizens
Management Inc.
440 Lincoln Street, Worcester, Massachusetts 01653
(6/98)
