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AMERITOR
SECURITY
TRUST
(Formerly Steadman Security Trust)
ANNUAL
REPORT
June 30, 1999
An Ameritor NO_LOAD Mutual Fund
AMERITOR FINANCIAL CORPORATION
(Formerly Steadman Security Corporation)
Ameritor
Financial
Corporation
Investment Advisor
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Dear Shareholder:
I am pleased to report that your Fund's return for this fiscal year more than
doubled the 21.40% return of the previous year. The gain was over 46% this
year, an achievement placing the Fund as number one in its class of funds over
the past twelve months.
The fine performance of your Fund was accomplished by maintaining a portfolio
of investments that enjoyed significant appreciation and continued efforts to
reduce operating expenses. You will note that the portfolio turnover rate,
which is shown on the Financial Highlights page of the Annual Report, has
dropped dramatically in the past two years. This reflects a basic change in
managing the Fund's portfolio and has benefited performance.
Your Fund has been closed to new investment for the past five years because of
mediocre returns on investment, which precluded registering the shares for
sale. Although the record of the Fund's new management is not quite two years
old, the improved performance over this period confirms that the Fund is going
in the right direction. This has encouraged management to register the shares
for sale once again, and you may be able to add to your account in the near
future. Also, the Fund will be open to new accounts.
We shall endeavor to keep your Fund an attractive investment and appreciate
your continued confidence.
Sincerely,
/s/ Max Katcher
Max Katcher
President
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INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
Ameritor Security Trust
We have audited the accompanying statement of assets and liabilities, in-
cluding the portfolio of investments, of Ameritor Security Trust (formerly
Steadman Associated Fund), as of June 30, 1999, the related statement of oper-
ations 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 three years in the period then ended. These financial state-
ments and financial highlights are the responsibility of the Fund's manage-
ment. Our responsibility is to express an opinion on these financial state-
ments and financial highlights based on our audits. The financial highlights
for the year ended June 30, 1996 and the period October 1, 1994 through June
30, 1995 and each of the six years in the period ended September 30, 1994 were
audited by other auditors whose report, dated August 6, 1996, expressed an un-
qualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. Our proce-
dures included confirmation of securities owned as of June 30, 1999, by corre-
spondence with the custodian and/or broker. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. 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 as of June 30, 1999, 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 three
years in the period then ended, in conformity with generally accepted account-
ing principles.
Bethesda, Maryland
August 6, 1999
Reznick Fedder & Silverman P.C.
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AMERITOR SECURITY TRUST
Portfolio of Investments
June 30, 1999
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ----------
<S> <C> <C>
COMMON STOCKS -- 100 %
Computer Equipment -- 5.8%
Hewlett Packard............................................ 3,000 $ 301,500
----------
Total Computer Equipment 301,500
----------
Computer Software -- 22.7%
Microsoft Corporation (a).................................. 13,000 1,172,438
----------
Total Computer Software 1,172,438
----------
Computer Systems Design -- 13.4%
Sun Microsystems (a)....................................... 10,000 688,750
----------
Total Computer Systems Design 688,750
----------
Consumer Finance -- 2.3%
Associates First Capital Corporation....................... 2,620 116,098
----------
Total Consumer Finance 116,098
----------
Motor Vehicles -- 4.9%
Ford Motor Company......................................... 4,500 253,969
----------
Total Motor Vehicles 253,969
----------
Residential Mortgages -- 4.0%
FNMA....................................................... 3,000 205,125
----------
Total Residential Mortgages 205,125
----------
Semiconductor -- 17.3%
Intel Corporation.......................................... 15,000 892,500
----------
Total Semiconductor 892,500
----------
Telecom Mfg. -- 7.9%
Lucent Technologies Inc.................................... 6,000 404,625
----------
Total Telecom Mfg 404,625
----------
Telephone Services -- 21.7%
MCI Worldcom Inc (a)....................................... 13,000 1,118,813
----------
Total Telephone Services 1,118,813
----------
Total Portfolio of Investments (Cost $1,735,659)........... $5,153,818
==========
</TABLE>
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements
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AMERITOR SECURITY TRUST
Statement of Assets and Liabilities
June 30, 1999
<TABLE>
<S> <C>
Assets:
Investments at value (Cost $1,735,659) (Note 1)................. $ 5,153,818
Cash and cash equivalents (Note 1).............................. 39,649
Due from affiliate (Note 4)..................................... 15,860
Dividends receivable............................................ 480
Interest receivable............................................. 213
-----------
Total Assets................................................... 5,210,020
-----------
Liabilities:
Accounts payable and accrued expenses........................... 32,845
Investment advisory and service fees payable (Note 4)........... 4,112
Other payable to affiliate (Note 4)............................. 2,073
Payable for trust shares redeemed............................... 1,851
-----------
Total Liabilities.............................................. 40,881
-----------
Net Assets........................................................ $ 5,169,139
===========
Net assets consist of:
Accumulated net investment loss................................. $(5,862,773)
Unrealized appreciation of investments.......................... 3,418,159
Accumulated net realized gains from security transactions....... 109,669
Paid-in capital................................................. 7,504,084
-----------
$ 5,169,139
===========
Net asset value, offering price and redemption price per share
($5,169,139 divided by 3,816,744 shares of no par value trust
shares)...................................................... $ 1.35
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
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AMERITOR SECURITY TRUST
Statement of Operations
For the year ended June 30, 1999
<TABLE>
<S> <C> <C>
Investment Income:
Dividends................................................ $20,279
Interest................................................. 1,806
-------
Total Income............................................ $ 22,085
----------
Expenses:
Salaries and employee benefits (Note 4).................. 88,177
Investment advisory fee (Note 4)......................... 44,520
Professional fees........................................ 77,080
Shareholder servicing fee (Note 4)....................... 25,664
Rent (Note 4)............................................ 30,696
Custodian fees........................................... 2,551
Computer services (Note 4)............................... 34,409
Reports to shareholders.................................. 8,993
Trustees' fees and expenses (Note 4)..................... 1,323
Pricing and subscriptions................................ 10,778
Miscellaneous............................................ 7,359
-------
Total expenses.......................................... 331,550
----------
Net investment loss..................................... (309,465)
----------
Realized and Unrealized Gain/(Loss) on Investments (Notes 1
and 3):
Net realized gain from investment transactions........... 109,570
Change in unrealized appreciation of investments......... 1,934,937
----------
Net gain on investments.................................. 2,044,507
----------
Net increase in net assets resulting from operations..... $1,735,042
==========
</TABLE>
The accompanying notes are an integral part of the financial statements
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Ameritor Security Trust
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the year For the year
ended June 30, ended June 30,
1999 1998
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment loss............................. $ (309,465) $ (372,085)
Net realized gain from investment transactions.. 109,570 821,134
Change in unrealized appreciation of
investments................................... 1,934,937 320,395
---------- -----------
Net increase in net assets resulting from
operations.................................... 1,735,042 769,444
Decrease in net assets from trust share
transactions (Note 2).......................... (469,200) (1,263,131)
---------- -----------
Decrease in net assets.......................... 1,265,842 (493,687)
Net assets at beginning of period................ 3,903,297 4,396,984
---------- -----------
Net assets at end of period, including
accumulated net investment loss of $5,862,773
and $5,553,307................................. $5,169,139 $ 3,903,297
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
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Ameritor Security Trust
Financial Highlights
<TABLE>
<CAPTION>
For the years ended For the period
June 30 October 1, 1994
--------------------------------- through June 30
1999 1998 1997 1996 1995*
------ ------ ------ ------ ---------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning
of period............... $ .93 $ .76 $ .70 $ .73 $ .72
------ ------ ------ ------ ------
Net investment income
(loss).................. (.22) (.09) (.11) (.17) (.03)
Net realized and
unrealized gain (loss)
on investments.......... .64 .26 .17 .14 .04
------ ------ ------ ------ ------
Total from Investment
operations............. .42 .17 .06 (.03) .01
Dividends and distributions
paid:
From realized gains....... -- -- -- -- --
From net investment
income.................. -- -- -- -- --
From capital.............. -- -- -- -- --
------ ------ ------ ------ ------
Total distributions...... -- -- -- -- --
------ ------ ------ ------ ------
Net asset value, end of
period.................. $ 1.35 $ .93 $ .76 $ .70 $ .73
====== ====== ====== ====== ======
Ratio/Supplemental Data:
Total Return.............. 46.33% 21.40% 8.89% (4.38)% 1.85%**
Ratio of expenses to avg.
net assets.............. 7.24% 9.85% 12.42% 8.14% 8.17%**
Ratio of net investment
income (loss) to average
net assets.............. (6.76)% (8.95)% (11.82)% (7.48)% (7.23)%**
Portfolio turnover........ 0% 48% 193% 231% 505%**
Net Assets, end of period
(000's)................. $5,169 $3,903 $4,397 $4,581 $5,735
</TABLE>
* Fund's fiscal year-end was changed to June 30.
** Annualized
The accompanying notes are an integral part of the financial statements.
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Ameritor Security Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
For the years ended
September 30
----------------------------------------------------
1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of period.. $ .87 $ .64 $ .67 $ .57 $ .84 $ .60
------ ------ ------ ------ ------ -------
Net investment income
(loss)............... (.08) (.05) (.05) (.02) (.03)
Net realized and
unrealized gain
(loss) on
investments.......... (.07) .28 -- .12 (.24) .27
------ ------ ------ ------ ------ -------
Total from Investment
operations.......... (.15) .23 (.03) .10 (.27) .27
Dividends and
distributions paid:
From realized gains.... -- -- -- -- --
From net investment
income............... -- -- -- -- -- (.03)
From capital........... -- -- -- -- --
------ ------ ------ ------ ------ -------
Total distributions... -- -- -- -- -- --
------ ------ ------ ------ ------ -------
Net asset value, end of
period................ $ .72 $ .87 $ .64 $ .67 $ .57 $ .84
====== ====== ====== ====== ====== =======
Ratio/Supplemental Data:
Total Return........... (17.24)% 35.94% (4.47)% 17.51% (32.27)% 47.50%
Ratio of expenses to
avg. net assets...... 7.76% 5.79% 6.92% 7.16% 6.08% 6.65%
Ratio of net investment
income (loss) to
average net assets... (6.09)% (4.63)% (5.14)% (3.29)% (4.54)% (.24)%
Portfolio turnover..... 241% 300% 301% 267% 87% 208%
Net Assets, end of
period (000's)....... $6,307 $8,844 $7,254 $8,539 $8,392 $16,035
</TABLE>
* Fund's fiscal year-end was changed to June 30.
** Annualized
The accompanying notes are an integral part of the financial statements.
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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 October 1, 1989 to September 30, 1994, the nine month
period ended June 30, 1995, and the fiscal years from July 1, 1995 to June 30,
1999.
[GRAPH APPEARS HERE]
Ameritor Security S & P 500 Index*
Date Trust** & ***
---- ------- -----
10/1/88 10,000 10,000
9/30/89 14,750 13,297
9/30/90 9,990 12,070
9/30/91 11,739 15,832
9/30/92 11,214 17,582
9/30/93 15,237 19,867
9/30/94 12,611 20,598
9/30/95 12,786 24,757
6/30/96 12,226 31,194
6/30/97 13,313 42,015
6/30/98 16,162 54,687
6/30/99 23,461 67,134
* Past Performance is not predictive of future performance.
** Not annualized. The Fund's fiscal year was changed to June 30 in 1995.
*** S & P 500 Index is adjusted to reflect the reinvestment of dividends.
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AMERITOR SECURITY TRUST
Notes to Financial Statements
1.Organization and significant accounting policies
Ameritor Security Trust, formerly Steadman Security Trust, (the Fund) is
registered under the Investment Company act of 1940, as amended, as a non-di-
versified, open-end investment company. The Fund has not been accepting new
subscriptions for shares since November 1996.
The preparation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and assump-
tions that affect the reported amounts of assets and liabilities and disclo-
sure of contingent assets and liabilities at the date of the financial state-
ments and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates and significant
changes to estimates could occur in the near term. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Cash and cash equivalents
Management defines cash equivalents as investments that mature in three
months or less when acquired. All cash and cash equivalents are invested in a
single money market fund maintained by the investment custodian.
Security valuation
Investments in securities traded on a national securities exchange are val-
ued at the last reported sales price on the last business day of the period.
Investments for which no sale was reported on that date are valued at the mean
between the latest bid and asked prices.
Security transactions and investment income
Security transactions are recorded on the trade date. Realized gains and
losses from security transactions are reported on an identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income and ex-
penses are recorded on the accrual basis.
Income taxes
The Fund is subject to income taxes in years when it does not qualify as a
regulated investment company under subchapter M of the Internal Revenue Code.
The Fund accounts for income taxes using the liability method, whereby de-
ferred tax assets and
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AMERITOR SECURITY TRUST
liabilities arise from the tax effect of temporary differences between the fi-
nancial statement and tax bases of assets and liabilities, measured using
presently enacted tax rates. If it is more likely than not that some portion
or all of a deferred tax asset will not be realized, a valuation allowance is
recognized.
2.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:
<TABLE>
<CAPTION>
For the year For the year
ended June 30, 1999 ended June 30, 1998
-------------------- -----------------------
Shares Amount Shares Amount
--------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold...................... --0-- $ --0-- --0-- $ --0--
Shares redeemed.................. (400,392) (469,200) (1,550,896) (1,263,131)
--------- --------- ---------- -----------
Net decrease................... (400,392) (469,200 (1,550,896) (1,263,131)
========= ========= ========== ===========
Shares outstanding:
Beginning of period............ 4,217,136 5,768,032
--------- ----------
End of period.................. 3,816,744 4,217,136
========= ==========
</TABLE>
3.Purchase and sales of securities
During this year ended June 30, 1999, purchases and proceeds from sales of
investment securities aggregated $748,000. Net unrealized appreciation of in-
vestments aggregated $3,418,159, all of which relates to gross unrealized ap-
preciation where there is an excess of value over tax cost.
4.Investment advisory and transactions with affiliates
Ameritor Financial Corporation (AFC), formerly Steadman Security Corpora-
tion, an affiliate, has provided advisory services under an agreement which
first became effective in 1972. On February 28, 1984, at the Annual Meeting of
the shareholders, a new Investment Advisory Agreement was approved. Under the
new advisory agreement AFC will continue to provide the same services it pro-
vided under the same terms and conditions of the previous agreement. The
agreement will continue in effect subject to the annual approval by the Board
of Trustees or by a majority of the outstanding voting securities of the Fund.
The fee for investment advisory services is 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
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AMERITOR SECURITY TRUST
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 $1.35 per account.
AFC also received reimbursements from the Fund for the salaries and benefits
of its employees who perform functions other than investment advisory and
shareholder service functions for the Fund, for rent and for computer program-
ming services. As of June 30, 1999, the Fund had reimbursed AFC $15,860 in ex-
cess of amounts owed.
Certain officers and trustees of the Fund are "affiliated persons" of the
Investment Adviser, as defined by the Investment Company Act of 1940.
5.Federal income taxes
In the fiscal year ended June 30, 1999, the Fund did not meet the asset di-
versification requirements applicable to regulated investment companies. Thus,
the Fund did not qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code. However, the Fund had a net investment loss in
fiscal year ended June 30, 1999; therefore, no income tax provision is re-
quired. A full valuation allowance was provided for net deferred tax assets,
totaling approximately $591,000 at June 30, 1999, which arise principally from
net operating loss carryforwards and capital carryforwards available for in-
come tax purposes.
For income tax purposes, the fund has net operating loss carryforwards ap-
proximating $4,974,000 which are available to offset future net operating in-
come in non-qualifying years, if any, which expire as follows: (2000) $11,000;
(2001) $499,000; (2003) $328,000; (2004) $476,000; (2005) $534,000; (2006)
$324,000; (2007) $381,000; (2008) $539,000; (2009) $437,000; (2010) $287,000;
(2011) $401,000; (2012) $543,000; (2013) $0; and (2014) $214,000.
6.Expiration of Shareholder States redemption restriction
In 1993 the Fund entered into a Settlement Agreement with approximately 47
states ("the Shareholder States") with respect to the recovery of shares and
distributions owned by persons who had allegedly abandoned these properties.
The Settlement Agreement provided, among other things, that the Shareholder
States not request redemption of their shares until February 14, 1998. The
Shareholder States currently own 3% of shares in the Fund. In July 1998, the
Fund agreed to remove this restriction and allow Shareholder States to redeem
shares upon request. During 1999, approximately 11,000 shares were redeemed by
various states.
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AMERITOR SECURITY TRUST
7.Year 2000 (Unaudited)
The year 2000 (Y2K) issue involves the fact that many computers use two di-
gits to identify the year when processing date-sensitive information. Unless
corrected, this could cause widespread problems for entities when processing
information with dates of 2000 or later. Systems that use only two digits
could process data incorrectly or stop functioning altogether. Computer sys-
tems readiness for the Y2K is a major challenge for most businesses. The Fund,
in meeting this challenge, has allocated the resources necessary to ensure
that the computer systems utilized by the Fund are Y2K compliant. All of the
necessary upgrades of the systems, and the testing thereof, were completed in
August 1999. Total costs incurred for the project through June 30, 1999 ap-
proximated $18,500. Management believes the Fund's systems are Y2K compliant
and no additional costs are expected to be incurred. While management of the
Fund believes that its systems are Y2K complaint, there is no guarantee that
all of the Fund's vendors or other entities affecting the Fund's operations
will be Y2K compliant and, therefore, the Fund, as any other industry remains
susceptible to the consequences of the Y2K issue.
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AMERITOR SECURITY TRUST
1730 K. Street, N.W. #904
Washington, D.C. 20006
1-800-424-8570
202-223-1000 Washington, D.C. area
Transfer Agent
Ameritor Financial Corporation
1730 K Street, N.W. #904
Washington, D.C. 20006
Custodian
Crestar Bank, N.A.
1445 New York Ave., N.W.
Washington, D.C. 20005
Independent Accountants
Reznick Fedder & Silverman P.C.
4520 East West Highway
Bethesda, Maryland 20814
For more information about
Ameritor Security Trust,
account information or daily
Net Assets Values, call:
Shareholders Services
1-800-424-8570
202-223-1000 Washington, D.C. area
