UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-55408
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Ameritor Security Trust
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(Exact name of registrant as specified in charter)
4400 MacArthur Blvd NW, Suite 301, Washington, DC 20007
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(Address of principal executive offices) (Zip code)
Ameritor Financial Corporation
4400 MacArthur Blvd NW, Suite 301, Washington, DC 20007
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(Name and address of agent for service)
Registrant's telephone number, including area code: 202-625-6000
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Date of fiscal year end: 06/30/2007
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Date of reporting period: 06/30/2007
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
AMERITOR
SECURITY
TRUST
ANNUAL REPORT
June 30, 2007
[LOGO] Ameritor
Financial
Corporation
Investment Advisor
Dear Shareholder:
As of the fiscal year ended June 30, 2007 there were 2,601,482 shares
outstanding of the sole class of the Fund and each share had a net asset value
("NAV") of $.37. This NAV compares with an NAV of $.41 at June 30, 2006,and an
unaudited NAV of $.36 per share at December 31, 2006.
During the fiscal year ended June 30, 2007 Ameritor Financial Corp. ("the
Advisor") was responsible for management of the Fund's portfolio. However, in
October of 2006 the Fund's former portfolio manager/consultant was replaced by
Mrs. Carole Kinney, an officer of the Fund and Advisor. At that time, for both
defensive purposes and to realign the portfolio, the majority of the Fund's
portfolio securities were liquidated and the Fund's assets were held in cash in
anticipation of a buy opportunity after a market correction that had recently
occurred. In January of 2007 Ms. Kinney initiated a program of purchasing
quality securities she believed were undervalued and held the potential for
capital appreciation. As the market becomes more volatile we plan to continue
this program, holding the quality securities in the portfolio and, at the same
time, maintaining some cash in order to take advantage of buying opportunities
during market corrections.
Were it not for the Fund's expense ratio the Ameritor Security Trust would
have had a relatively good fiscal year in that its portfolio of securities had
an unrealized gain of 9.44%(without taking into account Fund expenses). However,
taking into account those expenses, which we must, the Fund was down 9.76%. This
compares to an increase of 16.43% for the Russell 2000 Index and an increase of
20.59% for the S&P 500 Index. Our portfolio strengths and gains are attributable
to our exposure in metals, minerals, oils and computers, which outperformed the
market in 2007. We had neutral performance in the banking and medical sectors.
And, our portfolio weakness resulted from our positions in the building products
and retail sectors, which underperformed the market.
We are generally pleased with the Fund's portfolio performance for the
fiscal year. However, we have studied the negative characteristics associated
with the Fund's poorer performing securities and we have endeavored to adjust
the portfolio accordingly at the appropriate times. Over the past few weeks the
market has undergone a sharp and emotional pull back that was the result
primarily of sub-prime mortgage concerns and the spillover impact they might
have on larger credit issues. While the pullback has been broad based we believe
that it nonetheless presents buying opportunities and we intend to be very
proactive during this period in looking for and reacting to such opportunities.
As you no doubt are aware, Congress and the regulatory agencies, primarily
as the result of the Sarbanes/Oxley Act, have put extra expense burdens on all
mutual funds. These expenses are unimportant to larger institutions from a
percentage standpoint, but we smaller funds are subject to the same over sight
rules while operating with a much smaller asset base. These expenses impact
heavily on the Fund's performance. We are making every effort to reduce our
expenses and we will continue to do so in all respects. We also are exploring
avenues which may be available to increase the Fund's assets which in turn would
operate to reduce the overall expense ratio and increase the Fund's performance.
The performance data quoted represents past performance and 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 the original cost. Please
remember that past performance does not guarantee future results and current
performance may be higher or lower than the performance data quoted.
Our thanks to our Board and our many shareholders for their support during
our many years of operation.
Very truly yours,
/s/ Jerome Kinney
-----------------
Jerome Kinney
PRESIDENT
TAIT, WELLER & BAKER LLP
Certified Public Accountants
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and
Shareholders of Ameritor Security Trust Fund
Washington, D.C.
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of Ameritor Security Trust Fund as of
June 30, 2007 and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. Our procedures included
confirmation of securities owned as of June 30, 2007, by correspondence with the
custodian. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Ameritor Security Trust Fund as of June 30, 2007, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended in conformity with auditing standards generally
accepted in the United States of America.
/s/ Tait, Weller & Baker LLP
----------------------------
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
August 13, 2007
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1
AMERITOR SECURITY TRUST FUND
ALLOCATION OF PORTFOLIO ASSETS
(Calculated as a percentage of Net Assets)
June 30, 2007
================================================================================
Sector Breakdown
- --------------------------------------------------------------------------------
Aerospace 2.22%
Apparel 2.96%
Banks 7.10%
Building Products 3.65%
Cable TV 1.17%
Cellular Telcom 2.46%
Computers 7.11%
E-Commerce 2.18%
Finance 1.08%
Food 3.83%
Machinery 1.49%
Manufacturing 7.08%
Medical 9.22%
Metals 5.54%
Minerals 3.67%
Newspapers 1.06%
Office Automation 2.14%
Office Supplies 1.48%
Oil 11.51%
Oil & Gas 2.09%
Recreational Vehicles 2.54%
Rehab Centers 1.89%
Retail 3.54%
Savings & Loan 2.00%
Semiconductors 2.23%
Cash Equivalents 11.03%
- --------------------------------------------------------------------------------
Total Investments 102.27%
Liabilities in excess of other assets -2.27%
- --------------------------------------------------------------------------------
Total Net Assets 100.00%
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See notes to financial statements. 2
AMERITOR SECURITY TRUST FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 2007
- --------------------------------------------------------------------------------
Number of Market
Shares Description Value
- --------- ----------- -----------
COMMON STOCKS: 91.24%
AEROSPACE 2.22%
300 United Technologies, Corp. $ 21,279
----------
APPAREL 2.96%
300 Children's Place * 15,492
500 Carters, Inc. * 12,970
----------
28,462
BANKS 7.10%
250 HSBC Holdings PLC - ADR 22,943
350 Wachovia, Corp. 17,938
350 Bank of America, Corp. 17,111
200 Citigroup, Inc. 10,258
----------
68,250
BUILDING PRODUCTS 3.65%
500 Home Depot, Inc. 19,675
500 Lowes Companies, Inc. 15,345
----------
35,020
CABLE TV 1.17%
400 Comcast, Corp. * 11,248
----------
CELLULAR TELCOM 2.46%
350 Alltell, Corp. 23,642
----------
COMPUTERS 7.11%
200 Apple, Inc. * 24,408
800 Dell, Inc. * 22,840
200 International Business Machines, Corp. 21,050
----------
68,298
E-COMMERCE 2.18%
300 Nutrisystem, Inc. * 20,952
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See notes to financial statements. 3
AMERITOR SECURITY TRUST FUND
SCHEDULE OF PORTFOLIO INVESTMENTS - (Continued)
June 30, 2007
- --------------------------------------------------------------------------------
Number of Market
Shares Description Value
- --------- ----------- -----------
FINANCE 1.08%
500 Western Union, Co. * 10,415
----------
FOOD 3.83%
400 Hershey, Co. 20,248
300 Wrigley/William/Jr, Co. 16,593
----------
36,841
MACHINERY 1.49%
200 Flowserve, Corp. 14,320
----------
MANUFACTURING 7.08%
550 Ingersoll Rand, Co. Ltd. CL-A 30,151
550 General Electric, Co. 21,054
300 Honeywell International, Inc. 16,884
----------
68,089
MEDICAL 9.22%
300 Wellpoint, Inc. * 23,949
300 Johnson & Johnson 18,486
300 Novartis AG - ADR 16,821
300 Medtronic, Inc. 15,558
250 Amgen, Inc. * 13,822
----------
88,636
METALS 5.54%
700 Alcoa, Inc. 28,371
300 Freeport McMoran Copper 24,846
----------
53,217
MINERALS 3.67%
3,000 Northern Dynasty Minerals * 35,280
----------
NEWSPAPERS 1.06%
400 The New York Times, Co. CL-A 10,160
----------
OFFICE AUTOMATION 2.14%
350 Cannon, Inc. - ADR 20,524
----------
OFFICE SUPPLIES 1.48%
600 Staples, Inc. 14,238
----------
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See notes to financial statements. 4
AMERITOR SECURITY TRUST FUND
SCHEDULE OF PORTFOLIO INVESTMENTS - (Continued)
June 30, 2007
- --------------------------------------------------------------------------------
Number of Market
Shares Description Value
- --------- ----------- -----------
OIL 11.51%
300 Schlumberger, Ltd. 25,482
350 Canadian Natural Resources 23,223
400 Occidental Petroleum, Corp. 23,152
700 CNX Gas, Corp. * 21,420
500 Halliburton, Co. 17,250
----------
110,527
OIL & GAS 2.09%
600 Nabors Industries, Ltd. * 20,028
RECREATIONAL VEHICLES 2.54%
450 Polaris Industries, Inc. 24,372
REHAB CENTERS 1.89%
500 Psychiatric Solutions, Inc. * 18,130
RETAIL 3.54%
450 Walgreen, Co. 19,593
300 Walmart Stores, Inc. 14,433
----------
34,026
SAVINGS & LOAN 2.00%
450 Washington Mutual, Inc. 19,188
SEMICONDUCTORS 2.23%
900 Intel, Corp. 21,384
----------
Total Common Stock (Cost $768,474) 876,526
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Par SHORT TERM INVESTMENTS 11.03%
- ---------
105,941 Evergreen Institutional Money Market Fund
(Cost $105,941) 105,941
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TOTAL INVESTMENTS:
(Cost: $874,415)** 102.27% 982,467
Liabilities in excess of other assets (2.27%) (21,770)
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NET ASSETS 100.00% $ 960,697
======= ==========
* Non-income producing
** Cost for Federal income tax purposes is $874,415 and net unrealized
appreciation consists of:
Gross unrealized appreciation $ 120,536
Gross unrealized depreciation (12,484)
----------
Net unrealized appreciation $ 108,052
==========
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See notes to financial statements. 5
AMERITOR SECURITY TRUST FUND
SCHEDULE OF ASSETS AND LIABILITIES
June 30, 2007
- --------------------------------------------------------------------------------
ASSETS
Investments at value (identified cost of $874,415) (Notes 1 & 4) $ 982,467
Receivables:
Interest 503
Dividends 744
Prepaid Insurance 2,119
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TOTAL ASSETS 985,833
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ACCRUED LIABILITIES
Accrued administration fees 5,000
Accrued transfer agent fees 1,772
Accrued advisory fees 1,624
Accrued expenses 16,740
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TOTAL LIABILITIES 25,136
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NET ASSETS $ 960,697
=============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($960,697/2,601,482 shares outstanding) $ 0.37
=============
At June 30, 2007, there was an unlimited amount of no par value shares of
beneficial interest and the components of net assets are (Note 1):
Paid in capital $ 3,503,468
Accumulated realized losses on investments (2,650,823)
Net unrealized appreciation of investments 108,052
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Net Assets $ 960,697
=============
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See notes to financial statements. 6
AMERITOR SECURITY TRUST FUND
SCHEDULE OF OPERATIONS
Year ended June 30, 2007
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend income $ 5,637
Interest income 28,887
-----------
34,524
-----------
EXPENSES
Administrative services (Note 2) $ 60,000
Legal and audit fees 29,047
Transfer agent fees (Note 2) 21,250
Accounting fees 15,162
Investment advisory fees (Note 2) 9,825
Custody fees 2,930
Directors 4,248
Miscellaneous 18,283
---------
Total expenses 160,745
-----------
Net Investment Loss (126,221)
-----------
NET REALIZED AND UNREALIZED GAINS/LOSSES ON INVESTMENTS:
Net realized loss on investments (33,812)
Net increase in unrealized appreciation on investments 41,314
-----------
Net gain on investments 7,502
-----------
Net decrease in net assets resulting from operations $ (118,719)
===========
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See notes to financial statements. 7
AMERITOR SECURITY TRUST FUND
STATEMENT OF CHANGES IN NET ASSETS
Years ended June 30, 2007 and 2006
- --------------------------------------------------------------------------------
Year ended Year ended
June 30, 2007 June 30, 2006
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OPERATIONS
Net investment loss $ (126,221) $ (133,544)
Net realized gain (loss) on investments (33,812) 195,980
Change in unrealized appreciation of investments 41,314 47,055
------------- -------------
Net increase/(decrease) in net assets resulting from operations (118,719) 109,491
CAPITAL SHARE TRANSACTIONS (Note 3)
Net decrease in net assets resulting from capital share transactions (45,658) (55,876)
------------- -------------
Net increase (decrease) in net assets (164,377) 53,615
Net assets at beginning of year 1,125,074 1,071,459
------------- -------------
NET ASSETS at the end of the year $ 960,697 $ 1,125,074
============= =============
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See notes to financial statements. 8
AMERITOR SECURITY TRUST FUND
FINANCIAL HIGHLIGHTS
For A Share Outstanding Throughout The Year
- --------------------------------------------------------------------------------
Years Ended June 30,
---------------------------------------------------------------------
2007 2006 2005 2004 2003
--------- --------- --------- --------- ---------
Per Share Operating Performance
Net asset value, beginning of year $ 0.41 $ 0.37 $ 0.45 $ 0.45 $ 0.49
--------- --------- --------- --------- ---------
Income from investment operations -
Net investment (loss) (0.05) (0.05) (0.05) (0.05) (0.06)
Net realized and unrealized gain
(loss) on investments 0.01 0.09 (0.03) 0.05 0.02
--------- --------- --------- --------- ---------
Total from investment operations (0.04) 0.04 (0.08) (.00) (0.04)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 0.37 $ 0.41 $ 0.37 $ 0.45 $ 0.45
========= ========= ========= ========= =========
Total Return (9.76)% 10.81% (17.78)% 0.00% (8.16)%
========= ========= ========= ========= =========
Ratio/Supplemental Data
Net assets, end of period (000's) $ 961 $ 1,125 $ 1,071 $ 1,318 $ 1,340
Ratio to average net assets
Expense ratio - net 16.36% 12.84% 12.85% 12.56% 14.78%
Net (loss) (12.85)% (11.51)% (11.70)% (11.81)% (14.14)%
Portfolio turnover rate 140% 286% 606% 182% 214%
- --------------------------------------------------------------------------------
See notes to financial statements. 9
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Ameritor Security Fund, (the "Fund"), is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, open-end investment
company. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
A. Security Valuation - Portfolio securities traded on a national
exchange on the valuation date are valued at the last quoted sale
price. Exchange traded securities for which there have been no
reported sales on the valuation date and securities traded primarily
in the over-the-counter market are valued at the last quoted bid
prices. Securities listed on NASDAQ are valued using the NASDAQ
Official Closing Price. Securities or other assets for which market
quotations are not readily available or may be unreliable are valued
at their fair value as determined in good faith under procedures
established and monitored by the Fund's board of directors. These
procedures may include the use of an independent pricing service
which calculates prices based upon yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to
value from dealers; and general market conditions. Debt obligations
with maturities of 60 days or less are value at amortized cost.
B. Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated
investment company and to make the requisite distributions of income
and capital gains to its shareholders sufficient to relieve it from
all or substantially all federal income taxes. Therefore, no federal
income tax provision is required. Accounting principles generally
accepted in the United States of America require that permanent
differences between financial reporting and tax reporting be
reclassified between various components of net assets.
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in
Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain
tax positions should be recognized, measured, presented and
disclosed in the financial statements. FIN 48 requires the
evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the
tax positions are "more-likely-than-not" of being sustained by the
applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or
expense in the current year. Adoption of FIN 48 is required as of
the date of the last Net Asset Value ("NAV") calculation in the
first required statement reporting period for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years
as of the effective date. Management believes that the adoption of
FIN 48 will have no impact on the financial statements.
The Fund intends to utilize provisions of the federal income tax
laws which allow it to carry a realized capital loss forward for
eight years following the year of loss and offset such losses
against any future realized capital gains. At June 30, 2007 the Fund
had accumulated capital loss carryforwards for tax purposes of
$2,650,823. Of this amount, $1,716,365 expires June 30, 2009,
$843,827 expires June 30, 2010, $56,819 expires June 30, 2012 and
$33,812 expires June 30, 2015.
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10
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2007
- --------------------------------------------------------------------------------
C. New Accounting Pronouncement - In September 2006, FASB issued FASB
Statement No. 157, "Fair Value Measurement" ("SFAS 157"), which
defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. SFAS
157 is effective for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The Fund believes the
adoption of SFAS 157 will have no material impact on its financial
statements.
D. Distributions to Shareholders - No distributions were paid in fiscal
years 2006 or 2007. At June 30, 2007, the components of
distributable earnings (accumulated loss) on a tax basis of the Fund
were as follows:
Capital loss carryforward $ (2,650,823)
Unrealized appreciation 108,052
-------------
$ (2,542,771)
=============
E. Investment Transactions - Investment transactions are recorded on
the trade date. Realized gains and losses are determined by using
the specific identification cost method. Interest income is recorded
daily on the accrual basis. Dividend income is recorded on the
ex-dividend date.
F. Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the amount of assets, liabilities, expenses
and revenues reported in the financial statements. Actual results
could differ from those estimates.
G. Reclassification of Capital Accounts - Accounting Principles
generally accepted in the United States of America require that
certain components of net assets relating to permanent differences
be reclassified between financial and tax reporting. These
reclassifications have no effect on net assets or net asset value
per share. For the year ended June 30, 2007 the Fund decreased paid
in capital by $126,221 and decreased accumulated net investment loss
by $126,221.
(2) INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
The investment advisory agreement with Ameritor Financial Corporation
("AFC"), an affiliate, provides for a fee based on 1% of the first
$35,000,000 of the average daily net assets of the Fund, 7/8 of 1% on the
next $35,000,000 and 3/4 of 1% on all sums in excess thereof. In addition
to the investment advisory fee, AFC received fees from the Fund for the
performance of delegated services, (dividend disbursing agent and transfer
agent) as defined in the Trust Indenture, as amended. The fee for such
services was computed on the basis of the number of shareholder accounts
calculated as of the last business day of each month at an annual rate of
$20.00 per account.
The administrative agreement with AFC provides administrative services to
and is generally responsible for the overall management and day-to-day
operations of the Fund. As compensation for these services, AFC receives a
fee at the annual rate of 0.20% of the Fund's average daily net assets.
The contract also provides that the aggregate fees for the aforementioned
administration services shall not be less than $5,000 per month.
Certain officers and trustees of the Fund are "affiliated persons" of the
Investment Adviser, as defined by the Investment Company Act of 1940.
- --------------------------------------------------------------------------------
11
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2007
- --------------------------------------------------------------------------------
(3) TRUST SHARES
The Trust Indenture does not specify a limit to the number of shares which
may be issued. Transactions in trust shares were as follows:
Year Ended Year Ended
-------------------------- --------------------------
June 30, 2007 June 30,2006
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
Shares redeemed (124,121) $ (45,658) (131,629) $ (55,876)
----------- ----------- ----------- -----------
Net decrease (124,121) $ (45,658) (131,629) $ (55,876)
=========== =========== =========== ===========
Shares outstanding
Beginning of year 2,725,603 2,857,232
----------- -----------
End of year 2,601,482 2,725,603
=========== ===========
(4) PURCHASE AND SALE OF SECURITIES
During the year ended June 30, 2007, purchases and proceeds from sales of
investment securities were $1,072,440 and $724,448, respectively. Cost of
securities for income tax purposes was $874,415 at June 30, 2007. Net
unrealized appreciation of investments aggregated $108,052, which relates
to gross unrealized appreciation of $120,536 and gross unrealized
depreciation of $12,484.
SUPPLEMENTAL INFORMATION
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to securities held in the
Fund's portfolio is available, without charge and upon request, by
calling 1-202-625-2112 or on the SEC's website at www.sec.gov.
Information regarding how the Fund voted proxies relating to
portfolio securities during the year ended June 30, 2007 is
available on or through the SEC's website at www.sec.gove.
QUARTERLY PORTFOLIO HOLDINGS
The Fund files with the SEC a complete schedule of its portfolio
holdings, as of the close of the first and third quarters of its
fiscal year, on "Form N-Q". These filings are available, without
charge and upon request, by calling 1-202-625-2112 or on the SEC's
website at www.sec.gove. The Fund's Forms N-Q may be reviewed and
copies at the SEC's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
- --------------------------------------------------------------------------------
12
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2007
- --------------------------------------------------------------------------------
(5) TRUSTEES AND OFFICERS (UNAUDITED)
The following table sets forth certain information concerning the Trustees
and officers of the Fund.
- ---------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
- ---------------------------------------------------------------------------------------------------------------------
Name Position(s) Term of Principal Number of Other
Address and Held with Office and Occupation(s) Portfolios in Directorships
Age Fund Length of During Past Fund Complex Held by
Time Served 5 Years Overseen by Trustee
Trustee
- ---------------------------------------------------------------------------------------------------------------------
Non-Interested Trustee
- ---------------------------------------------------------------------------------------------------------------------
Richard P. Ellison Non-Interested 8 Years President and 1 Potomac
1410 Coventry Lane Trustee Served Chief Executive Group
Alexandria, VA 22304 Term is Officer of Homes;
Age 76 For Life Intervest Boat
Financial Corp. America
- ---------------------------------------------------------------------------------------------------------------------
James I. Schwartz Non- 5 Year Retired President 1 None
14801Pennfield Circle Interested Served Capital City
#307 Trustee Term is Savings & Loan
Silver Spring, MD For Life And
20906 Schwartz & Co.
Age 80
- ---------------------------------------------------------------------------------------------------------------------
Interested Trustee And Officers
- ---------------------------------------------------------------------------------------------------------------------
Carole S. Kinney Trustee, 8 Years Chairman of the 2 None
8020 Thornley Court Secretary, served Board of
Bethesda, MD 20817 and Term is Ameritor
Age 61 Chairman For life Financial
of the Corporation
Fund Since 1998
- ---------------------------------------------------------------------------------------------------------------------
Jerome Kinney President 8 Years Founder and 1 None
8020 Thornley Court served President,
Bethesda, MD 20817 Term=1 Jerome F. Kinney
Age 77 year Company
(builder);
President and
CEO,
Ameritor
Financial
Corporation
- ---------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
AMERITOR SECURITY TRUST FUND
SUPPLEMENTAL INFORMATION (UNAUDITED)
June 30, 2007
- --------------------------------------------------------------------------------
Expense Examples (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, Security Trust and (2) ongoing costs, including management fees and other
fund expenses. These examples are intended to help you understand your ongoing
costs (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds. Each example is based on an
investment of $1,000 invested at the beginning of the period and held for the
entire period January 1, 2007 to June 30, 2007.
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Period"
to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in a Fund and other funds. To do so, compare these 5% hypothetical
examples with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
second line in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have been
higher.
Beginning Ending Expenses Paid
Account Value Account Value During Period
1/1/07 6/30/07 1/1/07 - 6/30/07*
------------- ------------- -----------------
Actual $1,000.00 $1,027.78 $ 82.25
Hypothetical (5% return before expenses) $1,000.00 $1,024.80 $ 82.13
* Expenses are equal to the Fund's annual expense ratio of 16.36% multiplied
by the average account value over the period multiplied by 181/365 (to
reflect the one-half year period).
SUPPLEMENTAL INFORMATION (UNAUDITED)
RENEWAL OF INVESTMENT ADVISORY AGREEMENT
After an in-depth discussion and review of the Investment Advisory Agreement,
and upon Motion duly made, seconded and unanimously carried, it was
RESOLVED, that the Investment Advisory Agreement between the Ameritor Funds and
Ameritor Financial Corporation, be and it hereby is renewed for one (1) year
from July 1, 2007 to and including June 30, 2008.
- --------------------------------------------------------------------------------
14
In considering approval of the investment advisory agreement the Trustees
requested and received, and the Advisor furnished, certain materials about (a)
the quality of the Advisor's investment management; (b) the Advisor's investment
management personnel; (c) the Advisor's operations and financial condition; (d)
the Advisor's brokerage practices and investment strategies; (e) the Funds'
overall fees and operating expenses compared with similar mutual funds; (f) the
level of the Advisor's profitability from its Fund-related operations; (g) the
Advisor's compliance systems; (h) the Advisor's policies on and compliance
procedures for personal securities transactions; (i) the Advisor's reputation,
expertise and resources; (j) the Funds' performance compared with similar mutual
funds; and (k) the extent to which economies of scale would be realized as the
Funds grow and whether fee levels reflect those economies of scale.
At the meeting additional oral and written information was presented to the
Board, including Memoranda prepared by counsel specifying the Trustees
responsibilities with respect to consideration of Advisory Agreements, to help
the Board evaluate the Advisor's fee and other aspects of the investment
management Board did not identify any single piece of information that was
all-important or controlling.
In considering the nature, extent and quality of services provided by Ameritor
Financial Corporation, the Board of Trustees reviewed the portfolio management,
supervision and regulatory compliance services provided by Ameritor Financial
Corporation to the Funds. The Board concluded that Ameritor Financial
Corporation was providing essential services to the Funds.
The Trustees compared the performance of the Funds to benchmark indices over
various periods of time and also examined the Funds' investment objective. Based
upon this the Board concluded that the recent performance of the Funds under the
guidance of Ms. Kinney warranted the continuation of the advisory agreement.
In concluding that the advisory fees payable by the Funds were reasonable, the
Trustees reviewed a report of the costs of services provided by and the profits
realized by Ameritor Financial Corporation from its relationship with the Funds
and concluded that such expenses with no profits were reasonable and not
excessive. The Trustees also reviewed reports comparing the expense ratio and
advisory fee paid by the Funds to those paid by other comparable mutual funds
and concluded that the advisory fee paid by the Funds, although high, was not
excessive considering all the factors, particularly the small size of the Funds.
They noted that this fee also is adjusted downward if economies of scale were
realized during the current contract period as the Funds grew, but did not
consider that factor to be significant in light of the other factors considered.
The Trustees found significant the fact that Mr. Kinney had been able to reduce
the fees that AFC charged the Ameritor Investment Fund as the result of fee
waivers and several cost saving procedures that were implemented during the last
year including, but not limited to, undertaking to prepare and file SEC reports
that previously had generated outside provider expenses. They also recognized
his efforts in negotiating the best possible audit fees.
- --------------------------------------------------------------------------------
15
Performance Graph
The following graph provides a comparison of the change in the value of a
$10,000 investment in the Fund and same investment in the S&P 500 Index for each
fiscal year from June 30, 1998 to June 30, 2007.
Total Return vs S&P 500 Index
[The following table was depicted as a line chart in the printed material.]
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEAR 10 YEAR
(9.8)% (5.5)% (6.4)%
- --------------------------------------------------------------------------------
Ameritor Security Trust S&P 500 Index* & **
----------------------- -------------------
06/30/96 $10,000 $10,000
06/30/97 $11,948 $13,013
06/30/98 $17,532 $15,976
06/30/99 $22,208 $17,133
06/30/00 $9,749 $14,422
06/30/01 $6,825 $11,659
06/30/02 $6,268 $11,640
06/30/03 $6,268 $13,863
06/30/04 $5,153 $14,739
06/30/05 $5,710 $16,011
06/30/06 $5,153 $19,307
* Past performance is not predictive of future performance.
** S&P 500 Index is adjusted to reflect the reinvestment of dividends.
Returns reflect reinvestment of dividends and capital gains distributions. The
performance data and graph do not reflect the deduction of taxes that a
shareholder may pay on dividends, capital gains distributions, or redemption of
Fund shares. Indices do not incur expenses and are not available for investment.
Ameritor Financial Corporation
Ameritor Security Trust
Privacy Policy
At Ameritor, we recognize the importance of protecting the personal and
financial information of Fund shareholders. We consider each shareholder's
personal information to be private and confidential. The following describes the
practices followed by Ameritor to protect Fund shareholders' privacy.
Ameritor may obtain nonpublic personal information about you from the following
sources:
o Information we receive from you on applications, forms, and other
information you provide to us in writing, by telephone,
electronically or by any other means; and
o Information about your transactions with us or others.
Ameritor will collect and use Fund shareholder personal information only to
service shareholder accounts. This information may be used by Ameritor in
connection with providing services or financial products requested by Fund
shareholders. We will not disclose any nonpublic personal information about you
to anyone, except as permitted by law.
Ameritor restricts access to your personal and account information to those
employees who need to know that information to provide products or services to
you. We maintain physical, electronic, and procedural safeguards to guard your
nonpublic personal information.
Even if you are no longer a Fund shareholder, Ameritor's Privacy Policy will
continue to apply to you.
AMERITOR SECURITY TRUST
4400 MacArthur Blvd, #301
Washington, D.C. 20007-2521
1-800-424-8570
202-625-6000 Washington, D.C. area
Transfer Agent
Ameritor Financial Corporation
4400 MacArthur Blvd, #301
Washington, D.C. 20007-2521
Custodian
USBank
Two Liberty Place,
Suite 2000
Philadelphia, PA 19102
Independent Accountants
Tait,
Weller & Baker Suite
800
8 Penn Center Plaza
Philadelphia, PA 19103-2108
For more information about
Ameritor Security Trust,
account information or
daily Net Asset Values, call:
Shareholder Services
1-800-424-8570
202-625-6000 Washington, D.C. area
ITEM 2. CODE OF ETHICS.
(a) The registrant has, as of the end of the period covered by this
report, adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party.
(b) During the period covered by this report, there were no amendments to
any provision of the code of ethics.
(c) During the period covered by this report, there were no waivers or
implicit waivers of a provision of the code of ethics.
(d) The registrant's code of ethics is filed herewith.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that Richard Ellison, a member
of the registrant's Board of Trustees and Audit Committee, qualifies as an audit
committee financial expert. Mr. Ellison is "independent" as that term is defined
in paragraph (a)(2) of this item's instructions.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. The aggregate fees billed for each of the last two fiscal
years for professional services rendered by the registrant's principal
accountant for the audit of the registrant's annual financial statements
or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal
years were $9,000 and $9,000 for fiscal years ended June 30, 2007 and
2006, respectively.
(b) Audit Related Fees. The aggregate fees billed in each of the last two
fiscal years for assurance and related services by the registrant's
principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and not reported under
paragraph (a) of this item were $0 and $0 for the fiscal years ended June
30, 2007 and 2006, respectively.
(c) Tax Fees. The aggregate fees billed in each of the last two fiscal years
for professional services rendered by the principal accountant for tax
compliance were $1,500 and $1,500 for the fiscal years ended June 30,
2007 and 2006, respectively.
(d) All Other Fees. The aggregate fees billed in each of the last two fiscal
years for products and services provided by the registrant's principal
accountant, other than the services reported in paragraphs (a) through
(c) of this Item were $0 and $0 for the fiscal years ended June 30, 2007
and 2006, respectively.
(e)(1) The audit committee does not have pre-approved policies and procedures.
Instead, the audit committee or sub-audit committee approves on a
case-by-case basis each audit or non-audit service before the accountant
is engaged by the registrant.
(e)(2) There were no services described in each of paragraphs (b) through (d) of
this item that were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) Rule 2-01 of Regulation S-X.
(f) Not applicable. The percentage of hours expended on the principal
accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees was zero percent (0%).
(g) All non-audit fees billed by the registrant's accountant for services
rendered to the Fund for the fiscal years ended June 30, 2007 and June
30, 2006 are disclosed in (b)-(d) above. There were no audit or non-audit
services performed by the registrant's account for the registrant's
adviser.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Included in Annual Report to Shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors, where those changes
were implemented after the registrant last provided disclosure in response to
the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101).
ITEM 11. CONTROLS AND PROCEDURES.
AMERITOR FUNDS
Disclosure Controls and Procedures
Adopted Pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of
1934 and Rule 30a-3 Under the Investment Company Act of 1940
I. Introduction
Ameritor Security Trust and Ameritor Investment Fund (the "Funds"), hereby
establish these disclosure controls and procedures ("Disclosure Procedures")
pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934
("Exchange Act") and Rule 30a-3 under the Investment Company Act of 1940 (the
"1940 Act"). The Disclosure Procedures are designed to ensure that all
information that the Funds are required to disclose in their shareholder reports
(the "Reports") filed with the Securities and Exchange Commission ("SEC")
pursuant to Section 13(a) or Section 15(d) of the Exchange Act is recorded,
processed, summarized and reported within the time period specified in
applicable SEC rules and forms. The Disclosure Procedures also support the
certifications that the Funds' principal officers must sign and submit with each
Report filed with the SEC, and the required disclosures in the Reports about the
Funds' internal controls.
The overriding goals of these Disclosure Procedures are:
o To promote the timely accumulation and communication of information
the Funds are required to disclose in their Reports; and
o To promote reliable and accurate disclosure in the Reports.
II. Roles and Expectations of Fund Service Providers
The Funds rely on their service providers to perform substantially all
tasks related to the Funds' ongoing business operations, including preparing and
filing the Reports and preparing the information included in the Reports. The
Funds' strongest control for promoting timely and accurate disclosures,
therefore, is appropriate and reasonable oversight of their service providers.
Accordingly, the Funds encourage each service provider involved in the process
of preparing or filing a Report or preparing the information included in a
Report ("Service Provider") to adopt its own internal controls and procedures
governing, as applicable, the preparation and filing of Reports and the
recording, processing, generation and translation of information that it
provides to the Funds for inclusion in any Report ("Service Provider
Procedures").
In particular, the Funds expect each Service Provider to:
Provide Procedures - provide to the Funds' President a copy of its Service
Provider Procedures, if any;
Provide Amendments to Procedures - promptly provide to the Funds'
President a copy of any substantive changes or amendments to the Service
Provider Procedures;
Report Violations - promptly report to the Funds' President any material
violations of the Service Provider Procedures (and any corrective actions
taken);
Report Important Matters - promptly report to the Funds' President any
material misstatements or omissions or unfair presentations in any Report; any
suspected fraud relating to a Report; and any complaints about, or suspected or
perceived weaknesses, problems or breakdowns in, the Disclosure Procedures, the
Service Provider Procedures or any other internal controls related to the Funds,
a Report or Fund disclosure matters;
Create Due Diligence Files - create and maintain a due diligence file, and
other appropriate documentation and records for each Report; and
Submit Requested Information - submit on a timely basis information,
certifications or other documents related to a Report or Fund disclosure matters
as the Funds, through their President, may reasonably request.
III. Monitoring of Disclosure Controls
Roles and Responsibilities. The President is primarily responsible for the
proper functioning of the Disclosure Procedures and for evaluating the
Disclosure Procedures under Section V below. To discharge these broad
responsibilities, the President will communicate with and generally oversee the
Service Providers regarding Fund disclosure matters and matters relating to the
preparation and filing of Reports.
Oversight of and Coordination with Service Providers. The President will
coordinate with the Service Providers on an ongoing basis regarding the Funds'
disclosure obligations, the Disclosure Procedures and the Service Provider
Procedures.
Review of Service Provider Procedures. The President will ask each Service
Provider to provide a copy of its Service Provider Procedures, and any
substantive changes or amendments to the Procedures as they are adopted. The
President will initially and periodically thereafter review the Service Provider
Procedures and any substantive changes or amendments thereto.
IV. Material Misstatements/Omissions; Unfair Presentations; Fraud
If the President discovers or is informed about a suspected material
misstatement or omission, or an unfair presentation, in a Report, or suspected
fraud in relation to a Report, the President or his delegate will investigate
(or cause an appropriate Service Provider to investigate) the matter, focusing
on the effectiveness of applicable controls and procedures and consulting with
Service Providers or others as appropriate regarding corrective actions.
The President will prepare a report about any such investigations (and the
related findings and conclusions). The President will consider appropriate next
steps, such as investigating further or reporting the matter to the Audit
Committee.
V. Evaluating the Disclosure Procedures
Conducting the Evaluation. The President will evaluate, with the
participation of and input from, as applicable, the Service Providers, the Audit
Committee, and the Funds' independent auditor ("Outside Auditors"), the
effectiveness of the design and operation of these Disclosure Procedures and the
Service Provider Procedures. This evaluation must be completed within 90 days
before any Report is filed with the SEC.
Feedback on Controls. The Funds' President, in performing the functions of
a Chief Financial Officer, will ask the Audit Committee to alert the President
about any weaknesses, problems or complaints regarding financial internal
controls that it receives. The President will ask each Service Provider to give
notification of any weaknesses, problems or complaints regarding financial
internal controls that it receives.
Resolving Any Deficiencies in Controls. The President will promptly
investigate and resolve any suspected or perceived weaknesses, problems or
complaints in the design and operation of the financial internal controls, or
any suspected fraud in relation to a Report on internal controls. Appropriate
records will be created and maintained regarding the investigation and
resolution of any such matters.
The President will consider any deficiencies in the Disclosure Procedures,
and will determine the appropriate actions to take in order to resolve such
deficiencies. In making this determination, the President should consider
discussing these matters further with the Audit Committee, outside legal
counsel, and/or the Outside Auditors. At a minimum, however, the President will
disclose to the Audit Committee and the Outside Auditors:
Significant Deficiencies - any significant deficiencies in the design or
operation of the Disclosure Procedures (or those of Service Providers),
including any financial internal controls that adversely affect the Funds'
ability to record, process, summarize and report financial data, and identify
any material weakness in financial internal controls; and
Fraud - any fraud, whether or not material, that involves management, a
Service Provider or a Service Provider's employees who have a significant role
in the Funds' financial internal controls, as well as any material weakness
identified in the Funds' financial internal controls.
VI. Miscellaneous
Recordkeeping. The President will maintain appropriate records supporting
compliance with these Disclosure Procedures and records generated or received
pursuant to these Disclosure Procedures. Specifically, all substantive
determinations, judgments or actions taken in relation to these Disclosure
Procedures will be documented. All substantive documents created, distributed or
received in relation to these Disclosure Procedures will be maintained by the
President for the Funds' records.
Amendments. The President may amend these Disclosure Procedures from time
to time as appropriate. The President will report to the Board regarding any
substantive amendments to these Disclosure Procedures.
Use of Experts. The President may consult with outside legal counsel or
any other external experts as necessary or appropriate in furtherance of the
goals of the Disclosure Procedures.
Delegation. When these Disclosure Procedures require a particular person
to perform a task (other than actually signing the certification), it is
understood that the person may reasonably delegate that task to another
appropriate party.
Adopted: September 2003
ITEM 12. EXHIBITS
(a)(1) Code of Ethics required to be disclosed under item 2 is attached
hereto.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 are attached hereto.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 is attached hereto.
SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Ameritor Security Trust
- --------------------------------------------------------------------------------
By (Signature and Title)* /s/ Jerome Kinney,
--------------------------------------------
President and Treasurer
Date August 28, 2007
----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Jerome Kinney,
--------------------------------------------
President and Treasurer
Date August 28, 2007
----------------------