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
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
4400 MacArthur Blvd, Suite 301, Washington, DC 20007
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ameritor Financial Corporation
4400 MacArthur Blvd, Suite 301, Washington, DC 20007
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 202-625-6000
Date of fiscal year end: 6/30/2009
Date of reporting period: 6/30/2009
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, 2009
An Ameritor NO-LOAD Mutual Fund
[LOGO] Ameritor
Financial
Corporation
Investment Advisor
August 14, 2009
Dear Shareholder:
As of the 12 month period ended June 30, 2009, the Fund had 2,435622
shares outstanding and each share had an audited Net Asset Value ("NAV") of
$.15. This NAV compares with a NAV of $.15 at December 31, 2008 and an audited
NAV of $.28 at June 30, 2008.
During the period ended June 30, 2009, 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 monitor the market
in order to take advantage of buying opportunities during market corrections.
At the end of the reporting period, June 30, 2009, the portfolio of
investments had a $159,559 unrealized loss. However, taking into account the
Fund's expenses and redemptions, which we must, the Fund was down 49.03 % for
the year. This compares to an increase of 00.48% for the Russell 2000 Index and
a decrease of 1.34% for the S&P 500 Index. On a positive note the Fund was up
13.8% for the second quarter compared with the S&P 500 which was up 13.4%
Our portfolio remained predominantly unchanged over the last period and
we are now taking advantage of the recent market gains and thereby recovering a
significant portion of the unrealized losses incurred during the severe downturn
commencing in the Fall of 2008. We did, however, sell positions or partial
positions in areas of weakness. We also realized some gains in
retail/manufacturing, oil, metals and e-commerce. We bought several high
yielding utility stocks with potential for growth. We continue to maintain some
positions in oil, banking, manufacturing and health care where we have
experienced recent gains in the current market upturn. In the last 3 months we
have seen positive gains in our portfolio assets and will continue to focus on
sectors having what we perceive as potential for more growth.
The markets ended higher for the fourth consecutive week after the fist
week in August. This was supported by better economic data and further
stabilization from corporate earnings. Better manufacturing, pending home sales,
personal spending and stronger factory orders all indicated an improving
economy. More important was the August 7 jobs report which pushed the markets
even higher. At the same time, nonfarm payrolls declined to the lowest level
since last August and the unemployment rate fell for the first time since last
April. The economy is gradually recovering and this leads our portfolio manager
to look toward adding to the economically sensitive sectors like financials,
technology, materials and industrials. At the same time she believes that
caution requires balance and therefore she will continue positions in the
defensive sectors like staples and healthcare. Lastly, we perceive an
opportunity in the mobile internet area and will look to add to or initiate new
positions in these types of stocks during market dips. 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, 2009 and the related statement of operations for the year then ended,
the statements 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, 2009, 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, 2009, 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 28, 2009
AMERITOR SECURITY FUND
ALLOCATION OF PORTFOLIO ASSETS
(CALCULATED AS A PERCENTAGE OF NET ASSETS)
JUNE 30, 2009
- --------------------------------------------------------------------------------
SECTOR BREAKDOWN
- --------------------------------------------------------------------------------
AEROSPACE 2.90%
AIRLINES 0.60%
BANKS 6.25%
BEVERAGES 3.06%
BUILDING PRODUCTS 2.40%
CABLE TV 1.21%
CELLULAR TELCOM 3.26%
COAL 1.81%
COMMUNICATIONS 1.04%
COMPUTERS 15.29%
E-COMMERCE 3.72%
ELECTRIC/POWER 5.55%
FINANCE 1.60%
LODGING 1.23%
MACHINERY 1.95%
MANUFACTURING 4.81%
MEDICAL 14.72%
METALS 3.51%
MINERALS 2.95%
OFFICE SUPPLIES 1.12%
OIL 13.74%
OIL & GAS 2.42%
PUBLISHING 1.68%
REHAB CENTERS 1.27%
RETAIL 4.60%
SAVINGS & LOAN 0.01%
SEMICONDUCTORS 1.85%
SHOES 0.27%
CASH EQUIVALENTS 1.04%
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS 105.86%
LIABILITIES IN EXCESS OF OTHER ASSETS (5.86%)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS 100.00%
AMERITOR SECURITY TRUST FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2009
NUMBER MARKET
OF SHARES DESCRIPTION VALUE
- ---------- ----------- ------------
COMMON STOCKS: 104.82%
AEROSPACE 2.56%
200 United Technologies, Corp. 10,392
------------
AIRLINES 0.60%
500 Jetblue Airways, Corp.* 2,135
------------
BANKS 6.25%
405 HSBC Holdings PLC - ADR 16,917
300 Bank of America, Corp. 3,960
39 Wells Fargo & Co. 946
200 Citigroup, Inc. 594
------------
22,417
BEVERAGES 3.06%
200 Pepsico, Inc. 10,992
------------
BUILDING PRODUCTS 2.40%
200 Home Depot, Inc. 4,726
200 Lowes Companies, Inc. 3,882
------------
8,608
CABLE TV 1.21%
300 Comcast, Corp. 4,347
------------
CELLULAR TELCOM 3.26%
300 Verizon Communications 9,219
1,000 Alcatel Lucent ADR * 2,480
------------
11,699
COAL 1.81%
200 Alliance Resource, LP. 6,500
------------
COMMUNICATIONS 1.04%
200 Cisco Systems, Inc. * 3,728
29 Nortel Networks, Corp. * 1
------------
3,729
NUMBER MARKET
OF SHARES DESCRIPTION VALUE
- ---------- ----------- ------------
COMPUTERS 15.29%
200 Apple, Inc. * 28,486
200 International Business Machines, Corp. 20,884
400 Dell, Inc. * 5,492
------------
54,862
E-COMMERCE 3.72%
200 Shanda Interactive Entertainment, Ltd. * 10,458
200 Nutrisystem, Inc. 2,900
------------
13,358
ELECTRIC/POWER 5.55%
300 Consolidated Edison, Inc. 11,226
300 American Electric, Inc. 8,667
------------
19,893
FINANCE 1.60%
350 Western Union, Co. 5,740
------------
LODGING 1.23%
201 Marriott International, Inc. 4,430
------------
MACHINERY 1.95%
100 Flowserve, Corp. 6,981
------------
MANUFACTURING 4.81%
200 Honeywell International, Inc. 6,280
300 Ingersoll Rand, Co. Ltd. CL-A 6,270
400 General Electric, Co. 4,688
------------
17,238
MEDICAL 14.72%
200 Johnson & Johnson 11,360
200 Amgen, Inc. * 10,588
300 Medtronic, Inc. 10,467
250 Novartis AG - ADR 10,198*
200 Wellpoint, Inc. * 10,178
------------
52,791
METALS 3.51%
200 Freeport McMoran Copper 10,022
250 Alcoa, Inc. 2,583*
------------
12,605
NUMBER MARKET
OF SHARES DESCRIPTION VALUE
- ---------- ----------- ------------
MINERALS 2.95%
1,500 Northern Dynasty Minerals * 10,575
------------
OFFICE SUPPLIES 1.12%
200 Staples, Inc. 4,034
------------
OIL 13.74%
300 Schlumberger, Ltd. 16,233
200 Occidental Petroleum, Corp. 13,162
200 Canadian Natural Resources 10,498
200 CNX Gas, Corp. * 5,254
200 Halliburton, Co. 4,140
------------
49,287
OIL & GAS 2.42%
300 Nabors Industries, Ltd. * 4,674
200 Chesapeake Energy, Corp. 3,966
------------
8,640
PUBLISHING 1.68%
200 Mcgraw Hill, Cos., Inc. 6,022
------------
REHAB CENTERS 1.27%
200 Psychiatric Solutions, Inc. * 4,548
------------
RETAIL 4.60%
250 Walmart Stores, Inc. 12,110
150 Walgreen, Co. 4,410
------------
16,520
SAVINGS & LOAN 0.01%
450 Washington Mutual, Inc. 45
------------
SEMICONDUCTORS 1.85%
400 Intel, Corp. 6,620
------------
SHOES 0.27%
300 Crocs, Inc. * 1,020
------------
Total Common Stock (Cost $535,587) 376,028
------------
NUMBER MARKET
OF SHARES DESCRIPTION VALUE
- ---------- ----------- ------------
PAR SHORT TERM INVESTMENTS 1.04%
- ----------
3,728 Evergreen Institutional Money Market Fund
(Cost $3,728) 3,728
------------
TOTAL INVESTMENTS:
(Cost: $539,315)** 105.86% 379,756
Liabilities in excess of other assets (5.86%) (21,015)
------- ------------
NET ASSETS 100.00% $ 358,741
======= ============
* Non-income producing
** Cost for Federal income tax purposes is $539,318 and net unrealized
depreciation consists of:
Gross unrealized appreciation $ 27,767
Gross unrealized depreciation (187,329)
------------
NET UNREALIZED DEPRECIATION $ (159,562)
============
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2009
ASSETS
Investments at value (identified cost of $539,315)
(Notes 1 & 4) $ 379,756
Receivables:
Interest 1
Dividends 408
Prepaid Insurance 543
------------
TOTAL ASSETS 380,708
------------
ACCRUED LIABILITIES
Accrued administration fees 5,000
Accrued transfer agent fees 1,717
Accrued advisory fees 406
Accrued expenses 14,844
------------
TOTAL LIABILITIES 21,967
------------
NET ASSETS $ 358,741
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($358,741/2,435,622 shares outstanding) $ 0.15
============
COMPONENTS OF NET ASSETS
At June 30, 2009, 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 $ 1,501,405
Accumulated net realized losses on investments (983,105)
Net unrealized depreciation of investments (159,559)
------------
Net Assets $ 358,741
============
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2009
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $107) $ 8,745
Interest 150
------------
8,895
------------
EXPENSES
Administrative services (Note 2) $ 55,000
Legal and audit fees 12,885
Transfer agent fees (Note 2) 20,473
Accounting fees 20,113
Investment advisory fees (Note 2) 4,398
Custody fees 2,912
Directors 7,557
Miscellaneous 12,304
------------
Total expenses 135,642
------------
Net Investment Loss (126,747)
------------
NET REALIZED AND UNREALIZED GAINS/LOSSES ON
INVESTMENTS:
Net realized loss on investments (44,381)
Net decrease in unrealized appreciation on investments (171,487)
------------
Net loss on investments (215,868)
------------
Net decrease in net assets resulting from operations $ (342,615)
------------
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 2009 JUNE 30, 2008
------------ ------------
OPERATIONS
Net investment loss $ (126,747) $ (131,449)
Net realized gain(loss) on investments (44,381) 8,850
Change in unrealized appreciation of investments (171,487) (96,124)
------------ ------------
Net increase/(decrease) in net assets resulting from operations (342,615) (218,723)
CAPITAL SHARE TRANSACTIONS (NOTE 3)
Net decrease in net assets resulting from capital share
transactions (23,044) (17,574)
------------ ------------
Net (decrease) in net assets (365,659) (236,297)
Net assets at beginning of year 724,400 960,697
------------ ------------
NET ASSETS at the end of the year $ 358,741 $ 724,400
============ ============
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30 2009 JUNE 30 2008 JUNE 30 2007 JUNE 30 2006 JUNE 30 2005
------------ ------------ ------------ ------------ ------------
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF YEAR $ 0.28 $ 0.37 $ 0.41 $ 0.37 $ 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 (0.08) (0.04) 0.01 0.09 (0.03)
------------ ------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS (0.13) (0.09) (0.04) 0.04 (0.08)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 0.15 $ 0.28 $ 0.37 $ 0.41 $ 0.37
============ ============ ============ ============ ============
Total Return (46.43%) (24.32%) (9.76%) 10.81% (17.78%)
============ ============ ============ ============ ============
Ratios/Supplemental Data
Net assets, end of year (000's) $ 358 $ 724 $ 961 $ 1,125 $ 1,071
Ratio to average net assets
Expense ratio - net 30.77% 17.10% 16.36% 12.84% 12.85%
Net (loss) (28.75%) (15.42%) (12.85%) (11.51%) (11.70%)
Portfolio turnover rate 7% 15% 140% 286% 606%
See Notes to Financial Statements
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2009
- --------------------------------------------------------------------------------
(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.
The Fund Adopted Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards No. 157, "Fair Value
Measurement" ("FAS 157"), on July 1, 2008. FAS 157 defines fair
value as the price that the Fund would receive to sell an asset or
pay to transfer a liability in an orderly transaction between market
participants at the measurement date. FAS 157 establishes a
framework for measuring fair value and a three level hierarchy for
fair value measurements based on the transparency of inputs to the
valuation of an asset or liability. Inputs may be observable or
unobservable and refer broadly to the assumptions that market
participants would use in pricing the asset or liability based on
market data obtained from sources independent of the Fund.
Unobservable inputs reflect the Fund's own assumptions about the
assumptions that market participants would use in pricing the asset
or liability developed based on the best information available under
the circumstances. The Fund's investment in its entirety is assigned
a level based upon the inputs which are significant to the overall
valuation. The hierarchy of inputs is summarized below.
Level 1 - quoted prices in active markets for identical investments.
Level 2 - other significant observable inputs (Including quoted
prices for similar investments, interest rates, prepayment
speeds, credit risk, etc.).
Level 3 - significant unobservable inputs (Including the Fund's own
assumptions in determining fair value of investments).
A financial instrument's level within the fair value hierarchy is
based on the lowest level of any input that is significant to the
fair value measurement. In determining fair value, the Fund
separates its financial instruments into two categories: Exchange
traded and Money Market Securities. The following summarizes the
valuation of the Fund's assets and liabilities by the SFAS 157 fair
value hierarchy as of June 30, 2009:
June 30, Balance
2009 Level 1 Level 2 Level 3
Exchange traded common stocks $376,028 $376,028 $ 0 $ 0
Money Market Securities $ 3,728 $ 3,728 $ 0 $ 0
-------- -------- -------- --------
Total Asset Measured at Fair Value $379,756 $379,756 $ 0 $ 0
======== ======== ======== ========
The Industry classifications of Level 1 Investments are included in
the Schedule of Portfolio Investments.
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 2009
- --------------------------------------------------------------------------------
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,
2009, for Federal income tax purposes, the Fund had a capital loss
carryforward of $934,458 of which $843,827 expires in fiscal year
2010, $56,819 expires in fiscal year 2012 and $33,812 expires in
fiscal year 2015 to offset future realized gains.
The Fund recognizes the tax benefits of uncertain tax positions only
where the position is "more likely than not" to be sustained
assuming examination by tax authorities. Management has analyzed the
Fund's tax positions, and has concluded that no tax liability for
unrecognized tax benefits should be recorded related to uncertain
tax positions taken on returns filed for open tax years (2005-2008),
or expected to be taken in the Fund's 2009 tax returns. The Fund
identifies its major tax jurisdictions as U.S. Federal, and District
of Columbia where the Fund makes significant investments; however
the Fund is not aware of any tax positions for which it is
reasonably possible that the total amounts of unrecognized tax
benefits will change materially in the next twelve months.
C. NEW ACCOUNTING PRONOUNCEMENTS - 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 2008 or 2009. As of June 30, 2009, the components of
distributable earnings (accumulated loss) on a tax basis of the Fund
were as follows:
Other accumulated losses $ (48.644)
Capital loss carryforward $ (934,458)
Unrealized depreciation (154,562)
------------
$ (1,142,664)
============
The difference between the book basis and tax basis net unrealized
depreciation and cost is attributable to wash sales.
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 2009
- --------------------------------------------------------------------------------
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, 2009 the Fund decreased paid
in capital by $1,829,996, decreased accumulated net investment loss
by $126,747 and decreased accumulated realized losses on investments
by $1,703,249.
(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, 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, 2009 JUNE 30, 2008
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
Shares redeemed (112,131) $ (23,044) (53,729) $ (17,574)
------------ ------------ ------------ ------------
Net decrease (112,131) $ (23,044) (53,729) $ (17,574)
============ ============ ============ ============
Shares outstanding
Beginning of year 2,547,753 2,601,482
------------ ------------
End of year 2,435,622 2,547,753
============ ============
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 2009
- --------------------------------------------------------------------------------
(4) PURCHASE AND SALE OF SECURITIES
During the year ended June 30, 2009, purchases and proceeds from sales of
investment securities were $30,785 and $168,980, respectively. Cost of
securities for income tax purposes was $539,318 at June 30, 2009. Net
unrealized appreciation of investments aggregated $159,562, which relates
to gross unrealized appreciation of $27,767 and gross unrealized
depreciation of $187,329. The difference between book-basis and tax-basis
unrealized appreciation is attributable to wash sales.
(5) SUBSEQUENT EVENTS
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (SFAS No.
165). The Fund adopted SFAS No. 165 which requires an entity to recognize
in the financial statements the effects of all subsequent events that
provide additional evidence about conditions that existed at the date of
the balance sheet. For non-recognized subsequent events that must be
disclosed to keep financial statements from being misleading, an entity
will be required to disclose the nature of the events as well as an
estimate of its financial effect, or a statement that such an estimate
cannot be made. In addition, SFAS No. 165 requires an entity to disclose
the date through which subsequent events have been evaluated. The Fund has
evaluated subsequent events through the issuance of the financial
statements on August 28, 2009.
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 2009
- --------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION (UNAUDITED)
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.
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.
AMERITOR SECURITY TRUST FUND
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
JUNE 30, 2009
- --------------------------------------------------------------------------------
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 9 Years President and 1 Potomac Group
1410 Coventry Lane Trustee Served Chief Executive Homes;
Alexandria, VA 22304 Term is Officer of Boat
Age 78 For Life Intervest America
Financial Corp.
-------------------------------------------------------------------------------------------------------------
James I. Schwartz Non- 6 Year Retired President 1 None
14801 Pennfield Circle Interested Served Capital City
#307 Trustee Term is Savings & Loan
Silver Spring, MD For Life And
20906 Schwartz & Co.
Age 82
-------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE AND OFFICERS
-------------------------------------------------------------------------------------------------------------
Carole S. Kinney Trustee, 9 Years Chairman of the 1 None
8020 Thornley Court Secretary, served Board of
Bethesda, MD 20817 and Term is Ameritor
Age 63 Chairman For life Financial
of the Corporation
Fund Since 1998
-------------------------------------------------------------------------------------------------------------
Jerome Kinney President 9 Years Founder and 1 None
8020 Thornley Court served President,
Bethesda, MD 20817 Term=1 Jerome F. Kinney
Age 79 year Company
(builder);
President and
CEO,
Ameritor
Financial
Corporation
-------------------------------------------------------------------------------------------------------------
AMERITOR SECURITY TRUST FUND
EXPENSE EXAMPLES (UNAUDITED)
JUNE 30, 2009
- --------------------------------------------------------------------------------
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, 2009 to June 30, 2009.
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
1/1/09 6/30/09 1/1/09 - 6/30/09*
------ ------- -----------------
Actual $ 1,000.00 $ 1,000.00 $ 59.30
Hypothetical (5% return before expenses) $ 1,000.00 $ 1.050.00 $ 62.30
* Expenses are equal to the Fund's annual expense ratio of 29.41% multiplied
by the average account value over the period multiplied by 181/365 (to
reflect the one-half year period).
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, 2009.
Total Return vs S&P 500 Index
[LINE GRAPH OMITTED]
Fund Index
06/30/99 $10,000 $10,000
06/30/00 $12,667 $10,724
06/30/01 $5,561 $9,027
06/30/02 $3,893 $7,298
06/30/03 $3,575 $7,286
06/30/04 $3,575 $8,677
06/30/05 $2,939 $9,225
06/30/06 $3,257 $10,022
06/30/07 $2,939 $12,085
06/30/08 $2,224 $10,499
06/30/09 $1,192 $7,541
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEAR 10 YEAR
(46.4)% (19.7)% (19.2)%
- --------------------------------------------------------------------------------
* 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.
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 2009, 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 2009, 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 2009, 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 2009, 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,
2008 and June 30, 2009 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, 2009
----------------------
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, 2009
----------------------