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 811-00018
Ameritor Security Trust
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(Exact name of registrant as specified in charter)
4400 MacArthur Blvd, Suite 301, Washington, DC 20007
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(Address of principal executive offices) (Zip code)
Ameritor Financial Corporation
4400 MacArthur Blvd, 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
Date of fiscal year end: 6/30/2008
Date of reporting period: 6/30/2008
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, 2008
An Ameritor NO-LOAD Mutual Fund
[LOGO] Ameritor
Financial
Corporation
Investment Advisor
August 20, 2008
Dear Shareholder:
As of the 12 month period ended June 30, 2008, the Fund had 2,547,753
shares outstanding and each share had an audited Net Asset Value ("NAV") of
$.28. This NAV compares with a NAV of $.33 at December 30, 2007 and an audited
NAV of $.37 at June 30, 2007.
During the period ended June 30, 2008, Ameritor Financial Corporation, the
Fund's Advisor, was responsible for management of the Fund's portfolio. The
Fund's portfolio manager, Carole Kinney, has continued her program of
fundamental investing purchasing quality securities she believes are undervalued
and which have the potential for capital appreciation. She believes that this
fundamental approach, combined with a well diversified portfolio having
investments in over 25 market sectors is a prudent approach as the market
continues it's volatility. At the same time she continues to maintain a position
in cash in order to take advantage of buying opportunities during market
corrections.
At the end of the reporting period, June 30, 2008, the portfolio of
investments had an $11,928 unrealized gain. However, taking into account the
Fund's expenses and redemptions, which we must, the Fund was down 24.32 % for
the year. This compares to a decrease of 16.19% for the Russell 2000 Index and a
decrease of 12.83% for the S&P 500 Index.
Our portfolio gains are attributable primarily to our exposure in
aerospace, machinery, computer technology, oil, gas, metals and minerals, all of
which were up. We had neutral performance in the medical and drug industry,
retail and manufacturing sectors. And, our portfolio weakness resulted from our
positions in banking and finance, airlines and e-commerce sectors, all of which
were down. We hope to be able to adjust the portfolio during the fiscal year to
focus on sectors having the potential for the most overall gain.
After a positive start to the second quarter aided no doubt by the
stimulus package and what appeared to be a stabilizing credit market stocks
declined sharply in June. The S&P 500 ended the quarter on a bear market, down
18% from it's October 2007 high. The chief culprits continue to be oil and
housing helped along nicely by the financials. Nonetheless, we continue to
believe that the economy retains a solid foundation but will require a
combination of carefully crafted monetary and fiscal policy to begin us on the
road to expansion and growth. For this to occur Congress must be able to enact a
short-term economic growth package and successfully address the challenges in
the housing and credit markets as well the need to directly address the Nation's
energy concerns. On top of this the Federal Reserve must carefully balance the
dilemma between growth and inflation. All of this said and knowing that we
cannot predict the future we remain confident that the free market ultimately
will prevail and that we will start a new bull market. We hope to be able to
take advantage of the opportunities presented by this market while at the same
time protecting our capital through our diversification.
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 oversight
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 continue to
explore 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 principle 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, 2008 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, 2008, 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, 2008, 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 22, 2008
AMERITOR SECURITY FUND
ALLOCATION OF PORTFOLIO ASSETS
(Calculated as a percentage of Net Assets)
June 30, 2008
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Sector Breakdown
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AEROSPACE 2.56%
AIRLINES 0.26%
APPAREL 0.57%
BANKS 6.38%
BEVERAGES 1.75%
BUILDING PRODUCTS 1.83%
CABLE TV 1.04%
CELLULAR TELCOM 0.83%
COAL 1.54%
COMMUNICATIONS 0.68%
COMPUTERS 9.71%
E-COMMERCE 2.84%
FINANCE 1.71%
FOOD 3.22%
LODGING 1.09%
MACHINERY 1.88%
MANUFACTURING 5.62%
MEDICAL 10.68%
METALS 6.19%
MINERALS 2.22%
OFFICE AUTOMATION 2.47%
OFFICE SUPPLIES 0.66%
OIL 19.43%
OIL & GAS 3.86%
PUBLISHING 1.11%
RECREATIONAL VEHICLES 2.51%
REHAB CENTERS 2.09%
RETAIL 3.00%
SAVINGS & LOAN 0.31%
SEMICONDUCTORS 2.67%
SHOES 0.33%
CASH EQUIVALENTS 1.97%
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Total Investments 103.01%
Liabilities in excess of other assets -3.01%
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Total Net Assets 100.00%
AMERITOR SECURITY TRUST FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 2008
Number Market
of Shares Description Value
- ------------- ------------------ ---------------
COMMON STOCKS: 101.04%
AEROSPACE 2.56%
300 United Technologies, Corp. 18,510
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AIRLINES 0.26%
500 Jetblue Airways, Corp. * 1,865
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APPAREL 0.57%
300 Carters, Inc. * 4,146
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BANKS 6.38%
409 HSBC Holdings PLC - ADR 31,399
350 Bank of America, Corp. 8,355
200 Citigroup, Inc. 3,352
200 Wachovia, Corp. 3,106
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46,212
BEVERAGES 1.75%
200 Pepsico, Inc. 12,718
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BUILDING PRODUCTS 1.83%
300 Home Depot, Inc. 7,026
300 Lowes Companies, Inc. 6,225
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13,251
CABLE TV 1.04%
400 Comcast, Corp. 7,588
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CELLULAR TELCOM 0.83%
1,000 Alcatel Lucent Adr * 6,040
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COAL 1.54%
200 Alliance Resource, LP. 11,136
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COMMUNICATIONS 0.68%
200 Cisco Systems, Inc. * 4,652
29 Nortel Networks, Corp. * 239
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4,891
COMPUTERS 9.71%
200 Apple, Inc. * 33,488
200 International Business Machines,
Corp. 23,706
600 Dell, Inc. * 13,128
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70,322
E-COMMERCE 2.84%
300 Ebay, Inc. * 8,199
300 Shanda Interactive Entertainment,
Ltd. * 8,145
300 Nutrisystem, Inc. 4,242
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20,586
FINANCE 1.71%
500 Western Union, Co. 12,360
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FOOD 3.22%
300 Wrigley/William/Jr, Co. 23,334
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LODGING 1.09%
300 Marriott International, Inc. 7,872
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MACHINERY 1.88%
100 Flowserve, Corp. 13,670
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MANUFACTURING 5.62%
400 Ingersoll Rand, Co. Ltd. CL-A 14,972
300 Honeywell International, Inc. 15,084
400 General Electric, Co. 10,676
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40,732
MEDICAL 10.68%
300 Johnson & Johnson 19,302
300 Novartis AG - ADR 16,512
300 Medtronic, Inc. 15,525
300 Wellpoint, Inc. * 14,298
250 Amgen, Inc. * 11,790
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77,427
METALS 6.19%
200 Freeport McMoran Copper 23,438
600 Alcoa, Inc. 21,372
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44,810
MINERALS 2.22%
2,000 Northern Dynasty Minerals * 16,060
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OFFICE AUTOMATION 2.47%
350 Cannon, Inc. - ADR 17,923
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OFFICE SUPPLIES 0.66%
200 Staples, Inc. 4,750
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OIL 9.43%
350 Canadian Natural Resources 35,088
300 Schlumberger, Ltd. 32,229
300 Occidental Petroleum, Corp. 26,958
600 CNX Gas, Corp. * 25,224
400 Halliburton, Co. 21,228
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140,727
OIL & GAS 3.86%
300 Nabors Industries, Ltd. * 14,769
200 Chesapeake Energy, Corp. 13,192
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27,961
PUBLISHING 1.11%
200 Mcgraw Hill, Cos., Inc. 8,024
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RECREATIONAL VEHICLES 2.51%
450 Polaris Industries, Inc. 18,171
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REHAB CENTERS 2.09%
400 Psychiatric Solutions, Inc. * 15,136
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RETAIL 3.00%
300 Walmart Stores, Inc. 16,860
150 Walgreen, Co. 4,876
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21,736
SAVINGS & LOAN 0.31%
450 Washington Mutual, Inc. 2,218
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SEMICONDUCTORS 2.67%
900 Intel, Corp. 19,332
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SHOES 0.33%
300 Crocs, Inc. * 2,403
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Total Common Stock (Cost $719,983) 731,911
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Par SHORT TERM INVESTMENTS 1.97%
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14,292 Evergreen Institutional Money
Market Fund (Cost $14,292) 14,292
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TOTAL INVESTMENTS:
(Cost: $734,275)** 103.01% 746,203
Liabilities in excess of other
assets (3.01%) (21,803)
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NET ASSETS 100.00% $ 724,400
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* Non-income producing
** Cost for Federal income tax purposes is $734,281 and net unrealized
appreciation consists of:
Gross unrealized appreciation $ 143,577
Gross unrealized depreciation (131,655)
-------------------------
Net unrealized appreciation $ 11,922
==========================
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008
ASSETS
Investments at value (identified cost of $734,275) (Notes 1 & 4) $ 746,203
Receivables:
Interest 33
Dividends 752
Prepaid assets 543
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TOTAL ASSETS 747,531
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ACCRUED LIABILITIES
Accrued administration fees 10,000
Accrued transfer agent fees 1,936
Accrued advisory fees 626
Accrued expenses 10,569
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TOTAL LIABILITIES 23,131
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NET ASSETS $ 724,400
=================
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($724,400/2,547,753 shares outstanding) $ 0.28
=================
At June 30, 2008, 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 $ 3,354,445
Accumulated realized losses on investments (2,641,973)
Net unrealized appreciation of investments 11,928
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Net Assets $ 724,400
=================
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2008
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INVESTMENT INCOME
Dividends (Net of foreign taxes withheld of $37) $ 11,585
Interest 2,726
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14,311
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EXPENSES
Administrative services (Note 2) $ 60,000
Legal and audit fees 21,649
Transfer agent fees (Note 2) 19,543
Accounting fees 16,053
Investment advisory fees (Note 2) 6,825
Custody fees 2,929
Directors 3,583
Miscellaneous 15,178
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Total expenses 145,760
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Net Investment Loss (131,449)
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NET REALIZED AND UNREALIZED GAINS/LOSSES ON
INVESTMENTS:
Net realized gain on investments 8,850
Net increase in unrealized appreciation
on investments (96,124)
-------------
Net gain on investments (87,274)
-------------
Net decrease in net assets resulting from
operations $ (218,723)
-------------
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
STATEMENT OF CHANGES IN NET ASSETS
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Year ended Year ended
June 30, 2008 June 30, 2007
------------------------ ---------------------
OPERATIONS
Net investment loss $ (131,449) $ (126,221)
Net realized gain (loss) on investments 8,850 (33,812)
Change in unrealized appreciation (depreciation) of investments (96,124) 41,314
------------------------ ---------------------
Net decrease in net assets resulting from operations (218,723) (118,719)
CAPITAL SHARE TRANSACTIONS (NOTE 3)
Net decrease in net assets resulting from capital share
transactions (17,574) (45,658)
------------------------ ---------------------
Net decrease in net assets (236,297) (164,377)
Net assets at beginning of the year 960,697 1,125,074
------------------------ ---------------------
NET ASSETS at the end of the year $ 724,400 $ 960,697
======================== =====================
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
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Year ended Year ended Year ended Year ended Year ended
June 30 2008 June 30 2007 June 30 2006 June 30 2005 June 30 2004
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net asset value, beginning of year $ 0.37 $ 0.41 $ 0.37 $ 0.45 $ 0.45
------------- ------------- ------------- ------------- -------------
Income from investment operations-
Net investment (loss) (0.05) (0.05) (0.05) (0.05) (0.05)
Net realized and unrealized gain (loss) on investments (0.04) 0.01 0.09 (0.03) 0.05
------------- ------------- ------------- ------------- -------------
Total from investment operations (0.09) (0.04) 0.04 (0.08) -
------------- ------------- ------------- ------------- -------------
Net asset value, end of year $ 0.28 $ 0.37 $ 0.41 $ 0.37 $ 0.45
============= ============= ============= ============= =============
Total Return (24.32%) (9.76%) 10.81% (17.78%) 0.00%
============= ============= ============= ============= =============
Ratios/Supplemental Data
Net assets, end of year (000's) $ 724 $ 961 $ 1,125 $ 1,071 $ 1,318
Ratio to average net assets
Expense ratio - net 17.10% 16.36% 12.84% 12.85% 12.56%
Net (loss) (15.42%) (12.85%) (11.51%) (11.70%) (11.81%)
Portfolio turnover rate 15% 140% 286% 606% 182%
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2008
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(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Ameritor Security Trust 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 - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on a
national market system are valued at the last sales price as of 4:00
p.m. New York time on the day of valuation. Other securities traded
in over-the-counter market and listed securities for which no sale
was reported on that date are valued at the most recent bid price.
Securities for which market quotations are not readily available, if
any, are valued by using an independent pricing service or by
following procedures approved by the Board of Trustees. Short-term
investments are valued at cost which approximates value.
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. At June 30,
2008, for Federal income tax purposes, the Fund had a capital loss
carryforward of $2,641,967 of which $1,707,509 expires in fiscal
year 2009, and $843,827 expires in fiscal year 2010, and $56,819
expires in fiscal year 2012 and $33,812 expires in fiscal year 2015
to offset future realized gains.
Effective December 31, 2007, The Fund adopted Financial Accounting
Standards Board (FASB) Interpretation No. 48 (FIN 48), "Accounting
for uncertainty in Income Taxes". FIN 48 requires the evaluation of
tax positions taken on previously filed tax returns or expected to
be taken on future returns. These positions must meet a
"more-likely-than-not" standard that, based on the technical merits,
have a more than fifty percent likelihood of being sustained upon
examination. In evaluating whether a tax position will be examined
by the appropriate taxing authority that has full knowledge of all
relevant information. Tax positions not deemed to meet the
"more-likely-than-not" threshold are recorded as a tax expense in
the current year.
FIN 48 requires the Fund to analyze all open tax years, as defined
by the Statute of Limitations, for all major jurisdictions. Open tax
years are those that are open for exam by taxing authorities. As of
June 30, 2008, open Federal tax years include the tax years ended
June 30, 2005 through June 30, 2007. The Fund has no examination in
progress.
The Fund has reviewed all open tax years and major jurisdictions and
concluded that the adoptions of FIN 48 resulted in no effect to the
Fund's financial position or results of operation. There is no tax
liability resulting from unrecognized tax benefits relating to
uncertain income tax positions taken or expected to be taken for the
fiscal year ended June 30, 2008. The Fund is also not aware of any
tax positions for which it is reasonably possible that the total
amount of unrecognized tax benefits will significantly change in the
next twelve months.
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1
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2008
- --------------------------------------------------------------------------------
C. New Accounting Pronouncements - 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.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities". The provisions are
effective for fiscal years beginning after November 15, 2008. SFAS
161 is intended to improve financial reporting for derivative
instruments by requiring enhanced disclosure that enables investors
to understand how and why an entity uses derivatives, how
derivatives are accounted for, and how derivative instruments affect
an entity's results of operations and financial position. Management
is currently evaluating the implications of SFAS 161. The impact on
the Fund's financial statement disclosures, if any, is currently
being assessed.
D. Distributions to Shareholders - No distributions were paid in fiscal
years 2007 or 2008. As of June 30, 2008, the components of
distributable earnings (accumulated loss) on a tax basis of the Fund
were as follows:
Capital loss carryforward $(2,641,967)
Unrealized appreciation 11,922
------
$(2,630,045)
============
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, 2008 the Fund decreased paid
in capital by $131,449 and decreased accumulated net investment loss
by $131,449
(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.
- --------------------------------------------------------------------------------
2
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2008
- --------------------------------------------------------------------------------
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, accounting and recordkeeping 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.
(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, 2008 June 30, 2007
------------- ------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares redeemed (53,729) $ (17,574) (124,121) $ (45,658)
---------- ----------- ---------- -----------
Net decrease (53,729) $ (17,574) (124,121) $ (45,658)
========== =========== ========== ===========
Shares outstanding
Beginning of year 2,601,482 2,725,603
--------- ---------
End of year 2,547,753 2,601,482
========= =========
(4) PURCHASE AND SALE OF SECURITIES
During the year ended June 30, 2008, purchases and proceeds from sales of
investment securities were $123,554 and $180,515, respectively. Cost of
securities for income tax purposes was $734,281 at June 30, 2008. Net
unrealized appreciation of investments aggregated $11,922, which relates
to gross unrealized appreciation of $143,577 and gross unrealized
depreciation of $131,655. The difference between book-basis and tax-basis
unrealized appreciation is attributable to wash sales.
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, 2008 is available on or through the SEC's
website at www.sec.gov.
- --------------------------------------------------------------------------------
3
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.gov. . The
Fund's Forms N-Q may be reviewed and copied 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.
(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 Group
1410 Coventry Lane Trustee Served Chief Executive Homes;
Alexandria, VA 22304 Term is Officer of Boat
Age 76 For Life Intervest America
Financial Corp.
-------------------------------------------------------------------------------------------------------------
James I. Schwartz
14801 Pennfield Circle Non- 5 Year Retired President 1 None
#307 Interested Served Capital City
Silver Spring, MD Trustee Term is Savings & Loan
20906 For Life And
Age 80 Schwartz & Co.
-------------------------------------------------------------------------------------------------------------
Interested Trustee And Officers
-------------------------------------------------------------------------------------------------------------
Carole S. Kinney Trustee, 8 Years Chairman of the 1 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
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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
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4
AMERITOR SECURITY TRUST FUND
EXPENSE EXAMPLES (UNAUDITED)
June 30, 2008
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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, 2008 to June 30, 2008.
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
1/1/08 6/30/08 1/1/08 - 6/30/08*
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Actual $1,000.00 $848.48 $81.28
Hypothetical (5% return before expenses) $1,000.00 $1,050.00 $80.10
* Expenses are equal to the Fund's annual expense ratio of 17.10% multiplied
by the average account value over the period multiplied by 182/365 (to
reflect the one-half year period).
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5
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and
Shareholders of Ameritor Securities Trust Fund
Washington, D.C.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Ameritor Security Trust Fund as of June 30, 2008
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, 2008, 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, 2008, 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.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
August 22, 2008
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6
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, 1999 to June 30, 2008.
Total Return vs S&P 500 Index
[The following table was depicted as a line chart in the printed material.]
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEAR 10 YEAR
(24.3)% (9.0)% (10.6)%
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Fund Index
06/30/98 $10,000 $10,000
06/30/99 $14,674 $12,277
06/30/00 $18,588 $13,166
06/30/01 $8,160 $11,083
06/30/02 $5,712 $8,960
06/30/03 $5,246 $8,945
06/30/04 $5,246 $10,653
06/30/05 $4,313 $11,326
06/30/06 $4,779 $12,304
06/30/07 $4,313 $14,837
06/30/08 $3,264 $12,890
* 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, 2008 and 2007, 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, 2008 and 2007,
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, 2008 and 2007, 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, 2008 and 2007, 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
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By (Signature and Title)* /s/ Jerome Kinney,
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President and Treasurer
Date August 28, 2008
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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,
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President and Treasurer
Date August 28, 2008
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