===AST===
November 2004
---------------------------------------------------
ALLMERICA SECURITIES TRUST FACTS
At September 30, 2004
Market Value $9.36
Net Asset Value $10.598
Total Net Assets (000's) $91,061
Shares Outstanding (000's) 8,592
Net Investment Income Per Share* $0.38
Increase/Decrease in
Per Share Value Resulting
from Investment Operations* $0.37
TOTAL RETURNS AT 9/30/04
Allmerica Securities Trust**
Nine Months 3.48%
Twelve Months 4.06%
Lehman Brothers U.S. Credit Index
Nine Months 3.93%
Twelve Months 4.44%
* For nine months ended September 30, 2004
** Total Returns on Net Asset Value
---------------------------------------------------
The Allmerica Securities Trust returned 3.86% for the third quarter of 2004,
underperforming its benchmark, the Lehman Brothers U.S. Credit Index*, which
returned 4.21%.
The U.S. economy appeared to have hit a soft patch entering the period, as
economic growth slowed and the Federal Reserve Board continued its transition to
higher short-term interest rates. Surprisingly slower job creation, more mixed
economic data, a drop in industrial production and weaker retail sales raised
questions about the sustainability of the pace of economic growth. Steadily
rising crude oil prices took their toll on discretionary spending and consumer
sentiment, and the Federal Reserve Board resolutely continued along its
tightening cycle raising the federal funds rate twice during the quarter, in 25
basis point increments, to 1.75%. Uncertainty resulting from higher energy costs
and rather benign inflation data helped the 10-year Treasury note to fall from a
high of 4.58% at the start of the quarter to levels below the psychological
4.00% threshold, prior to quarter end. Sentiment changed again in the last few
days of September on positive economic commentary by the Federal Reserve Board
and stellar housing data. The 10-year Treasury note finally sold off from its
recent highs to close the quarter at a yield of 4.12%. Despite the volatility in
the Treasury market, overall spreads for other asset classes remained quite tame
and directional during the quarter. With the 10-year Treasury note once again
testing historically low territory, the higher yields offered by other asset
classes proved too enticing for many investors. All spread sectors outperformed
Treasury securities during the quarter.
Favorable fundamentals and low supply helped the corporate sector post the best
excess returns for the period. Although a few shareholder friendly transactions
were announced during the quarter, the overall assessment for holders of
corporate debt was still positive, as the deleveraging trend in corporate
balance sheets remained intact. Home Depot and JC Penney were added to the
portfolio during the quarter. Home Depot is currently a high quality, stable
name. JC Penney is a below investment grade security purchased to capture
incremental yield versus higher rated department store peers. The investment
manager believes the company may reach investment grade status in 2005. The
portfolio's underperformance to the benchmark during the period was largely
attributable to its duration position. In anticipation
------------------------------------------
U.S. Treasury Yield Curves
Bond Equivalent
Maturity Yield Percentage
12/31/2003 9/30/2004
------------------------------------------
3 Mo. 0.917 1.700
6 Mo. 1.012 1.986
2 Yr. 1.819 2.605
3 Yr. 2.302 2.852
5 Yr. 3.247 3.371
10 Yr. 4.246 4.119
30 Yr. 5.073 4.892
------------------------------------------
Continued on back page
Allmerica Securities Trust is a Massachusetts Business Trust under an Agreement
and Declaration of Trust dated February 26, 1986 as amended and on file with the
Secretary of the Commonwealth of Massachusetts. This document is prepared by the
Trustees or Officers as such and not individually, and no obligation of the
Trust shall be binding upon any of the Trustees, Officers or Shareholders, but
shall only bind the assets and property of the Trust.
-------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
-------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED)
MOODY'S
PAR VALUE RATINGS VALUE
--------- ------- -----
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS (h) - 0.3%
FREDDIE MAC - 0.3%
$ 101,814 5.00%, 05/15/21 NR $ 103,611
155,165 6.00%, 10/15/07 NR 160,049
------------
263,660
------------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED OBLIGATIONS 263,660
------------
(Cost $267,716)
U.S. GOVERNMENT OBLIGATIONS - 2.6%
U.S. TREASURY BOND - 2.5%
1,390,000 5.38%, 02/15/31 (a) NR 1,489,038
225,000 6.00%, 02/15/26 (a) NR 256,526
450,000 6.25%, 05/15/30 NR 534,094
------------
2,279,658
------------
U.S. TREASURY NOTE - 0.1%
110,000 2.25%, 02/15/07 NR 108,827
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 2,388,485
------------
(Cost $2,247,046)
CORPORATE NOTES AND BONDS - 76.1%
AUTO MANUFACTURERS - 1.3%
500,000 DaimlerChrysler North America Holding Corp.
8.50%, 01/18/31 A3 611,203
500,000 General Motors Corp. (a)
7.20%, 01/15/11 Baa1 529,534
------------
1,140,737
------------
AUTO PARTS & EQUIPMENT - 0.6%
460,000 Lear Corp.
8.11%, 05/15/09 Baa3 531,114
------------
BANKS - 10.8%
880,000 Bank of America Corp.
4.88%, 09/15/12 Aa2 897,593
500,000 Bank of America Corp.
5.25%, 12/01/15 Aa3 508,056
450,000 Bank of New York Co., Inc.
3.75%, 02/15/08 Aa3 454,805
1,000,000 Bank of New York Co., Inc.
6.38%, 04/01/12 A1 1,105,705
450,000 BB&T Corp. (b)
6.38%, 06/30/05 A2 462,290
655,000 Fifth Third Bank
4.50%, 06/01/18 Aa3 616,088
500,000 Firstar Corp.
7.13%, 12/01/09 Aa3 574,503
450,000 HSBC Bank USA, Inc.
4.63%, 04/01/14 A1 441,196
450,000 Marshall & Ilsley Corp.
4.38%, 08/01/09 A1 458,596
420,000 National City Bank of Indiana
4.88%, 07/20/07 Aa3 436,455
250,000 Northern Trust Co.
6.65%, 11/09/04 Aa3 251,117
350,000 PNC Funding Corp.
6.13%, 02/15/09 A3 379,037
200,000 Suntrust Banks, Inc.
6.38%, 04/01/11 Aa3 222,984
125,000 Suntrust Banks, Inc.
7.75%, 05/01/10 A1 146,676
500,000 U.S. Bancorp, MTN
5.10%, 07/15/07 Aa3 522,899
455,000 US Bank National Cincinnati
6.50%, 02/01/08 Aa3 496,507
475,000 Wachovia Bank N.A.
4.85%, 07/30/07 Aa2 494,914
450,000 Wachovia Corp.
4.95%, 11/01/06 Aa3 467,375
450,000 Wells Fargo & Co.
5.13%, 09/01/12 Aa2 462,520
440,000 Zions Bancorporation
5.65%, 05/15/14 Baa1 456,240
------------
9,855,556
------------
BEVERAGES - 1.1%
450,000 Anheuser-Busch Cos., Inc.
4.63%, 02/01/15 A1 445,786
500,000 Bottling Group LLC
4.63%, 11/15/12 Aa3 505,202
------------
950,988
------------
CHEMICALS - 0.8%
200,000 Du Pont (E.I.) De Nemours and Co.
8.25%, 09/15/06 Aa3 219,671
500,000 Praxair, Inc.
6.63%, 10/15/07 A3 546,143
------------
765,814
------------
COSMETICS & Personal Care - 2.3%
500,000 Kimberly-Clark Corp.
7.10%, 08/01/07 Aa2 554,618
300,000 Procter & Gamble Co.
4.75%, 06/15/07 Aa3 312,516
1,000,000 Procter & Gamble Co.
8.50%, 08/10/09 Aa3 1,200,450
------------
2,067,584
------------
DIVERSIFIED FINANCIAL SERVICES - 13.9%
500,000 American Express Co.
3.75%, 11/20/07 A1 505,135
580,000 Bear Stearns Cos., Inc.
4.00%, 01/31/08 A1 587,962
725,000 Capital One Bank
4.88%, 05/15/08 Baa2 750,908
920,000 Capital One Bank
5.75%, 09/15/10 Baa2 980,778
280,000 CIT Group, Inc., MTN
5.13%, 09/30/14 A2 279,666
500,000 Citifinancial
6.75%, 07/01/07 Aa1 543,842
460,000 Ford Motor Credit Co.
6.50%, 01/25/07 A3 487,223
400,000 Ford Motor Credit Co.
6.88%, 02/01/06 A3 418,569
825,000 Ford Motor Credit Co.
7.25%, 10/25/11 A3 892,763
10,000 Ford Motor Credit Co.
7.38%, 10/28/09 A3 10,953
500,000 General Electric Capital Corp.
8.75%, 05/21/07 Aaa 570,499
500,000 General Electric Capital Corp., MTN
4.25%, 01/15/08 Aaa 513,047
380,000 General Motors Acceptance Corp., MTN (b)
2.88%, 10/20/05 A3 382,986
450,000 Goldman Sachs Group, Inc.
5.70%, 09/01/12 Aa3 475,505
500,000 Household Finance Corp.
8.00%, 07/15/10 A1 590,990
425,000 J. Paul Getty Trust
5.88%, 10/01/33 Aaa 439,172
222,011 Jones (Edward D.) & Co., LP (c) (d)
7.95%, 04/15/06 NR 233,123
500,000 Lehman Brothers Holdings, Inc.
4.00%, 01/22/08 A1 507,891
605,000 MBNA Corp., MTN
4.63%, 08/03/09 Baa2 618,124
350,000 MBNA Corp., MTN
6.25%, 01/17/07 Baa2 370,695
85,000 MBNA Corp., MTN
7.50%, 03/15/12 Baa2 98,278
630,000 Morgan Stanley
4.75%, 04/01/14 A1 609,888
495,000 Morgan Stanley
6.60%, 04/01/12 Aa3 551,972
550,000 Pitney Bowes Credit Corp.
8.55%, 09/15/09 Aa3 654,314
500,000 Toyota Motor Credit Corp.
5.50%, 12/15/08 Aaa 534,960
------------
12,609,243
------------
ELECTRIC - 5.5%
550,000 AmerenEnergy Generating
7.75%, 11/01/05 A3 578,579
505,000 Centerpoint Energy, Inc.
5.88%, 06/01/08 Ba2 527,180
375,000 Consolidated Edison Co. of New York
4.70%, 06/15/09 A1 388,877
425,000 Detroit Edison Co.
6.13%, 10/01/10 A3 465,920
563,466 East Coast Power LLC
7.07%, 03/31/12 Baa3 577,457
250,000 Entergy Gulf States, Inc.
3.60%, 06/01/08 Baa3 247,138
-------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
-------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) CONTINUED
MOODY'S
PAR VALUE RATINGS VALUE
--------- ------- -----
$ 450,000 FirstEnergy Corp.
6.45%, 11/15/11 Baa3 $ 490,892
500,000 FirstEnergy Corp.
7.38%, 11/15/31 Baa3 561,546
225,000 Florida Power & Light
6.88%, 12/01/05 Aa3 235,957
450,000 Pacific Gas & Electric Co.
6.05%, 03/01/34 Baa2 458,011
450,000 TXU Energy Co.
7.00%, 03/15/13 Baa2 508,087
------------
5,039,644
------------
ENVIRONMENTAL CONTROL - 1.6%
450,000 Allied Waste North America (a) (e)
6.50%, 11/15/10 Ba3 445,500
500,000 Allied Waste North America
8.50%, 12/01/08 Ba3 542,500
490,000 Waste Management, Inc.
7.00%, 10/01/04 Baa3 490,000
------------
1,478,000
------------
FOOD - 4.4%
525,000 Conagra Foods, Inc.
7.50%, 09/15/05 Baa1 546,599
675,000 Delhaize America, Inc.
8.13%, 04/15/11 Ba1 770,866
460,000 General Mills, Inc.
6.00%, 02/15/12 Baa2 495,477
470,000 Kroger Co. (a)
5.50%, 02/01/13 Baa2 486,774
350,000 Kroger Co.
6.38%, 03/01/08 Baa3 379,470
450,000 Safeway, Inc.
6.50%, 03/01/11 Baa2 491,832
830,000 Unilever Capital Corp.
5.90%, 11/15/32 A1 860,072
------------
4,031,090
------------
FOREST PRODUCTS & PAPER - 1.9%
500,000 International Paper Co.
5.30%, 04/01/15 Baa2 497,217
500,000 International Paper Co.
5.50%, 01/15/14 Baa2 511,996
750,000 Rock-Tenn Co.
5.63%, 03/15/13 Baa3 760,280
------------
1,769,493
------------
HEALTH CARE-PRODUCTS - 0.2%
120,000 Johnson & Johnson
6.73%, 11/15/23 Aaa 140,294
------------
HEALTH CARE-SERVICES - 1.2%
550,000 HCA, Inc.
6.75%, 07/15/13 Ba1 584,705
450,000 UnitedHealth Group, Inc.
7.50%, 11/15/05 A3 473,888
------------
1,058,593
------------
HOME BUILDERS - 1.7%
920,000 D.R. Horton, Inc.
5.00%, 01/15/09 Ba1 936,100
500,000 Pulte Homes, Inc.
8.13%, 03/01/11 Baa3 586,815
------------
1,522,915
------------
INSURANCE - 0.5%
450,000 Marsh & McLennan Cos., Inc.
4.85%, 02/15/13 A2 449,055
------------
LODGING - 1.0%
500,000 Harrah's Operating Co., Inc.
7.13%, 06/01/07 Baa3 542,506
350,000 Park Place Entertainment Corp.
8.13%, 05/15/11 Ba2 404,250
------------
946,756
------------
MEDIA - 5.5%
550,000 AOL Time Warner, Inc.
6.88%, 05/01/12 Baa1 613,622
270,000 Belo Corp.
8.00%, 11/01/08 Baa3 308,676
450,000 Continental Cablevision, Inc.
8.30%, 05/15/06 Baa3 484,967
505,000 Cox Communications, Inc.
7.13%, 10/01/12 Baa2 547,967
225,000 Cox Enterprises, Inc. (e)
4.38%, 05/01/08 Baa1 219,699
700,000 Echostar DBS Corp.
5.75%, 10/01/08 Ba3 703,500
500,000 News America Holdings, Inc.
7.38%, 10/17/08 Baa3 556,427
300,000 Time Warner Cos., Inc.
7.57%, 02/01/24 Baa1 338,891
450,000 Time Warner Entertainment Co.
7.25%, 09/01/08 Baa1 499,454
180,000 Viacom, Inc.
5.50%, 05/15/33 A3 167,519
450,000 Viacom, Inc.
7.88%, 07/30/30 A3 549,739
------------
4,990,461
------------
METAL FABRICATE & HARDWARE - 1.1%
1,000,000 Precision Castparts Corp.
5.60%, 12/15/13 Baa3 1,023,718
------------
OFFICE & BUSINESS EQUIPMENT - 0.8%
750,000 Pitney Bowes, Inc.
4.75%, 05/15/18 Aa3 730,165
------------
OIL & GAS - 5.7%
375,000 Burlington Resources, Inc.
7.40%, 12/01/31 Baa1 453,558
580,000 Conoco Funding Co.
5.45%, 10/15/06 A3 608,076
500,000 Conoco Funding Co.
7.25%, 10/15/31 A3 599,109
450,000 Devon Financing Corp.
6.88%, 09/30/11 Baa2 507,720
450,000 Devon Financing Corp.
7.88%, 09/30/31 Baa2 552,287
230,000 Enterprise Products
7.50%, 02/01/11 Baa3 261,873
350,000 Enterprise Products
8.25%, 03/15/05 Baa3 357,767
690,000 Pioneer Natural Resources Co.
5.88%, 07/15/16 Baa3 720,059
600,000 Texaco Capital, Inc.
8.25%, 10/01/06 Aa3 662,820
400,000 XTO Energy, Inc.
7.50%, 04/15/12 Baa3 469,915
------------
5,193,184
------------
PACKAGING & CONTAINERS - 2.0%
750,000 Illinois Tool Works, Inc.
6.88%, 11/15/08 Aa3 839,701
970,000 Sealed Air Corp. (e)
5.63%, 07/15/13 Baa3 997,296
------------
1,836,997
------------
PHARMACEUTICALS - 3.1%
700,000 Bergen Brunswig Corp. (f)
7.25%, 06/01/05 BB 717,500
750,000 Lilly (Eli) & Co.
7.13%, 06/01/25 Aa3 905,923
710,000 Medco Health Solutions, Inc.
7.25%, 08/15/13 Ba1 791,414
330,000 Zeneca Wilmington
7.00%, 11/15/23 Aa2 391,993
------------
2,806,830
------------
PIPELINES - 0.6%
500,000 Duke Energy Field Services Corp.
7.50%, 08/16/05 Baa2 519,553
------------
RETAIL - 3.0%
595,000 Home Depot, Inc. (e)
3.75%, 09/15/09 Aa3 592,600
500,000 J.C. Penney Co., Inc.
7.38%, 08/15/08 Ba3 552,500
900,000 JC Penney Co., Inc.
7.95%, 04/01/17 Ba3 1,039,500
450,000 Wal-Mart Stores, Inc.
7.55%, 02/15/30 Aa2 571,658
------------
2,756,258
------------
SAVINGS & LOANS - 1.0%
455,000 Washington Mutual Bank FA
5.50%, 01/15/13 A3 471,478
450,000 Washington Mutual, Inc.
4.38%, 01/15/08 A3 460,638
------------
932,116
------------
-------------------------------------------------------------------------------
ALLMERICA SECURITIES TRUST
-------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS, SEPTEMBER 30, 2004 (UNAUDITED) CONTINUED
MOODY'S
PAR VALUE RATINGS VALUE
--------- ------- -----
TELECOMMUNICATIONS - 2.2%
$ 500,000 BellSouth Corp.
6.88%, 10/15/31 A1 $ 545,992
680,000 Sprint Capital Corp.
6.13%, 11/15/08 Baa3 733,977
120,000 Sprint Capital Corp.
6.88%, 11/15/28 Baa3 125,867
120,000 Sprint Capital Corp.
7.90%, 03/15/05 Baa3 122,936
450,000 Verizon Florida, Inc.
6.13%, 01/15/13 A1 480,194
------------
2,008,966
------------
TRANSPORTATION - 2.3%
900,000 CSX Corp.
6.30%, 03/15/12 Baa2 980,475
189,000 CSX Corp.
9.75%, 06/15/20 Baa2 258,228
261,000 Norfolk Southern Corp.
9.75%, 06/15/20 Baa2 358,232
255,000 Union Pacific Corp.
5.38%, 06/01/33 Baa2 232,973
250,000 Union Pacific Corp.
6.63%, 02/01/08 Baa2 272,112
------------
2,102,020
------------
TOTAL CORPORATE NOTES AND BONDS 69,257,144
------------
(Cost $66,966,885)
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (h) - 5.9%
1,000,000 American Airlines, Inc., Pass-Through Trust, Series 1991 - C2
9.73%, 09/29/14 Caa2 686,630
570,000 Bear Stearns Commercial Mortgage Securities, Inc.,
Series 2002-PBW1, Class A2
4.72%, 11/11/35 Aaa 576,694
250,000 Bear Stearns Mortgage Securities, Inc.,
Series 1999-WF2, Class A2, CMO
7.08%, 06/15/09 Aaa 280,553
300,000 Citibank Credit Card Issuance Trust, Series 2000-Cl, CMO
6.88%, 11/16/09 Aaa 331,160
500,000 General Electric Capital Commercial Mortgage Corp.,
Series 2002-1A, Class A3
6.27%, 12/10/35 Aaa 554,197
500,000 GS Mortgage Securities Corp. II, Series 1997-GL, Class A2D
6.94%, 07/13/30 Aaa 541,898
250,000 MBNA Master Credit Card Trust, Series 1995-C, Class A
6.45%, 02/15/08 Aaa 257,158
250,000 Morgan Stanley Dean Witter Capital I, Series 2002-TOP7,
Class B, CMO
6.08%, 01/15/39 Aa2 272,479
750,000 Morgan Stanley Dean Witter Capital I, Series 2003-T0P9,
Class A2, CMO (f)
4.74%, 11/13/36 AAA 759,152
57,585 Toyota Auto Receivables Owner Trust, Series 2002-B, Class A3
3.76%, 06/15/06 Aaa 57,796
1,000,000 Union Acceptance Corp., Series 2000-B, Class B
7.73%, 01/08/08 Aaa 1,006,716
------------
TOTAL ASSET-BACKED AND
MORTGAGE-BACKED SECURITIES 5,324,433
------------
(Cost $5,665,864)
FOREIGN GOVERNMENT OBLIGATIONS (i) - 2.8%
450,000 Province of British Columbia
5.38%, 10/29/08 Aa2 481,537
550,000 Province of Manitoba
4.25%, 11/20/06 Aa2 566,774
500,000 Province of Ontario
2.63%, 12/15/05 Aa2 499,920
500,000 Province of Quebec
6.13%, 01/22/11 A1 554,487
450,000 Province of Quebec
7.00%, 01/30/07 A1 489,813
------------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS 2,592,531
------------
(Cost $2,469,059)
FOREIGN BONDS (i) - 10.8%
500,000 Alberta Energy Co., Ltd.
7.38%, 11/01/31 Baa1 592,108
700,000 British Sky Broadcasting Group, Plc
7.30%, 10/15/06 Baa3 753,418
450,000 British Telecom, Plc (g)
8.38%, 12/15/10 Baa1 542,635
400,000 Calpine Canada Energy Finance (a)
8.50%, 05/01/08 Caa1 276,000
355,000 Canadian Pacific Ltd.
9.45%, 08/01/21 Baa2 498,198
450,000 Canadian Pacific Railroad
5.75%, 03/15/33 Baa2 444,334
450,000 Diageo Capital, Plc
3.50%, 11/19/07 A2 451,018
890,000 Domtar, Inc.
5.38%, 12/01/13 Baa3 882,075
100,000 KFW International Finance, Inc.
4.25%, 04/18/05 Aaa 101,092
450,000 Norske Skog Canada, Ltd. (e)
7.38%, 03/01/14 Ba3 470,250
790,000 Royal Bank of Scotland Group, Plc
4.70%, 07/03/18 Aa3 743,317
1,000,000 St. George Bank, Ltd., Yankee Debenture (e)
7.15%, 10/15/05 A3 1,038,566
435,000 Stora Enso Oyj
7.38%, 05/15/11 Baa1 502,656
500,000 Telus Corp.
7.50%, 06/01/07 Baa3 548,278
460,000 Tembec Industries, Inc.
8.50%, 02/01/11 Ba3 480,700
435,000 Tyco International Group S.A. (e)
6.00%, 11/15/13 Baa3 469,469
490,000 Tyco International Group S.A.
6.38%, 10/15/11 Baa3 541,901
500,000 Vodafone Group, Plc
6.25%, 11/30/32 A2 530,195
------------
TOTAL FOREIGN BONDS 9,866,210
------------
(Cost $9,522,712)
SHARES
------
INVESTMENT COMPANY - 0.0%
10,792 Marshall Money Market Fund NR 10,792
------------
TOTAL INVESTMENT COMPANY 10,792
------------
(Cost $10,792)
TOTAL INVESTMENTS - 98.5% 89,703,255
------------
(Cost $87,150,074)
NET OTHER ASSETS AND LIABILITIES - 1.5% 1,358,129
------------
TOTAL NET ASSETS - 100.0% $ 91,061,384
============
(a) All or a portion of this security is out on loan at September 30, 2004; the
value of the securities loaned amounted to $3,051,504. The value of
collateral amounted to $3,179,830 which consisted of cash equivalents.
(b) Variable rate security. The rate shown reflects rate in effect at period
end.
(c) Security is valued by management.
(d) Restricted Security - Represents ownership in a private placement
investment which has not been registered with the Securities and Exchange
Commission under the Securities Act of 1933. At September 30, 2004, these
securities amounted to $233,123 or 0.3% of net assets
(e) 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 September 30, 2004, these securities
amounted to $4,233,380 or 4.6% of net assets.
(f) Standard & Poor's (S&P) credit ratings are used in the absence of a rating
by Moody's Investors, Inc.
(g) Debt obligation initially issued in coupon form which converts to a higher
coupon form at a specified date and rate. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(h) Pass Through Certificates.
(i) U.S. currency denominated.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
NR Not Rated
-------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004 (UNAUDITED)
-------------------------------------------------------------------------------
ASSETS:
Investments:
Investments at cost ...................................... $ 87,150,074
Net unrealized appreciation .............................. 2,553,181
------------
Total investments at value + ........................... 89,703,255
Cash ....................................................... 1,716
Short-term investments held as collateral for
securities loaned ................................ 3,179,830
Interest receivable ........................................ 1,483,287
------------
Total Assets ........................................... 94,368,088
------------
LIABILITIES:
Collateral for securities loaned ........................... 3,179,830
Management fee payable ..................................... 34,373
Trustees' fees and expenses payable ........................ 4,853
Accrued expenses and other payables ........................ 87,648
------------
Total Liabilities ...................................... 3,306,704
------------
NET ASSETS ..................................................... $ 91,061,384
============
NET ASSETS CONSIST OF:
Par Value .................................................. $ 8,592,306
Paid-in capital ............................................ 88,089,385
Distribution in excess of net investment income ............ (961,373)
Accumulated net realized loss .............................. (7,212,115)
Net unrealized appreciation ................................ 2,553,181
------------
TOTAL NET ASSETS ............................................... $ 91,061,384
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING (10,000,000
AUTHORIZED SHARES WITH PAR VALUE OF $1.00) ................... 8,592,306
NET ASSET VALUE
Per share .................................................. $ 10.598
============
MARKET VALUE (CLOSING PRICE ON NEW YORK STOCK EXCHANGE)
PER SHARE .................................................... $ 9.36
============
+ Total value of securities on loan .................... $ 3,051,504
============
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
-------------------------------------------------------------------------------
INVESTMENT INCOME
Interest ................................................... $ 3,754,711
Securities lending income .................................. 4,264
------------
Total investment income .................................. 3,758,975
------------
EXPENSES
Management fees ............................................ 306,303
Custodian and Fund accounting fees ......................... 51,749
Transfer agent fees ........................................ 57,783
Legal fees ................................................. 5,085
Audit fees ................................................. 32,935
Trustees' fees and expenses ................................ 15,955
Reports to shareholders .................................... 34,211
New York Stock Exchange fees ............................... 16,735
Miscellaneous .............................................. 4,485
------------
Total expenses ........................................... 525,241
------------
NET INVESTMENT INCOME .......................................... 3,233,734
------------
NET REALIZED AND UNREALIZED GAIN/(Loss) ON INVESTMENTS:
Net realized loss on investments sold ...................... (98,918)
Net change in unrealized appreciation of investments ....... 34,150
------------
NET REALIZED LOSS ON INVESTMENTS ............................... (64,768)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 3,168,966
============
Continued from front page
of rising interest rates, the portfolio duration was positioned short of the
benchmark duration. However, interest rates declined during the last two months
of the quarter, resulting in the portfolio's underperformance. The investment
manager believes that interest rates will begin to rise over the coming months,
as the economy continues to grow at a moderate pace and inflation begins to
assert itself. While energy and terrorism remain wildcards, strong productivity
growth, an accommodative interest rate environment, tame inflation, an
improving job market and stable baseline demand growth bode well for steady
expansion. Unfortunately, a benign outlook for the economy often tends to be
unfavorable for bondholders. It is likely that the Federal Reserve Board will
continue its measured march towards neutral monetary policy and that any
faster-than-expected economic growth could result in higher interest rates and
the specter of inflation. The investment manager thinks that the heady bond
returns of the last few years will likely decline to the low single-digit
levels in 2004 and 2005.
------------------------------
Maturity Diversification
YEARS
-----
Under 3 19%
3-5 23%
6-10 34%
11-20 8%
21-Over 16%
------------------------------
* The Lehman Brothers U.S. Credit Index is an unmanaged index of all publicly
issued, fixed-rate, non-convertible investment grade corporate debt.
-------------------------------------------------------------------------------
MOODY'S QUALITY RATINGS*
Percentage of Trust's Total Investments
Aaa 8%
Aa 21%
A 22%
Baa 35%
Ba 10%
Caa 1%
Not Rated 3%
* Standard & Poor's (S&P) credit ratings are used in the absence
of a rating by Moody's.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SECURITY DIVERSIFICATION
Percentage of Trust's Total Investments
Corporate Notes and Bonds 77%
U.S. Government and Agency Obligations 3%
Asset-Backed and Mortgage-Backed Securities 6%
Foreign Bonds 11%
Foreign Government Obligations 3%
(Investments in both U.S. Government Agency Mortgage-Backed Obligations and
Investment Companies amounted to less than 0.5% of the Trust's total
investments.)
--------------------------------------------------------------------------------
Shareholder inquiries regarding account information may be directed to: The Bank of New York
Shareholder Relations Department - 11E
PO Box 11258
Church Street Station
New York, New York 10286
1-800-432-8224
[logo]
ALLMERICA
FINANCIAL(R)
THE ALLMERICA FINANCIAL COMPANIES
---------------------------------
The Hanover Insurance Company o Citizens Insurance Company of America o Citizens Management Inc.
Opus Investment Management, Inc. o AMGRO, Inc. o Financial Profiles, Inc. o VeraVest Investments, Inc.
Allmerica Financial Life Insurance and Annuity Company o First Allmerica Financial Life Insurance Company
440 Lincoln Street, Worcester, Massachusetts 01653
www.allmerica.com
12719 (11/04) 04-0110