<PAGE>
================================================================================
Fellow Shareholders:
The forces most dominant in present market behavior have continued to be a
low level of inflation and behavior of interest rates.
The economy generally is moving at a pace that is slowing. Although
employment levels remain high, there are indications that some of this can be
accounted for by a fact of two jobs among wage earners in many households. This
of course casts a question about the dependability of recent employment reports.
It also may support indications of there being a lesser rather than greater
likelihood that there will be an incentive for the Federal Reserve to initiate
any near term move to tighten money and raise rates.
These conditions suggest that the interest rates are going to decline.
Looking to the 30 year Treasury Bond for guidance we are beginning to see a
pattern of declining yield, of course with the Bond rising in price. We expect
this trend of declining interest rates to continue and bear with it very
favorable market consequences for your Fund.
Thank you for your confidence and continued support.
Sincerely,
/s/ Charles W. Steadman
Charles W. Steadman
Chairman of the Board of
Trustees and President
================================================================================
<PAGE>
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Steadman American Industry Fund
We have audited the accompanying statement of assets and liabilities of
Steadman American Industry Fund, including the portfolio of investments, as of
June 30, 1996, and the related statement of operations for the year then ended,
the statements of changes in net assets for the year then ended and the periods
February 1, 1995 through June 30, 1995, and February 1, 1994 through January 31,
1995 and the financial highlights for the year then ended and for the period
February 1, 1995 through June 30, 1995 and each of the four years ended January
31, 1995. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of June 30, 1996, by correspondence
with the custodian and 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
Steadman American Industry Fund as of June 30, 1996, the results of its
operations, the changes in its net assets, and the financial highlights for each
of the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Washington, D.C.
July 29, 1996
================================================================================
<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ----------
<S> <C> <C>
COMMON STOCKS -- 100%
Communications Equipment -- 7.0%
Precision Systems (a) ..................................... 5,000 $ 58,750
----------
Total Communications Equipment 58,750
----------
Computer Peripherals -- 10.1%
Cisco Systems (a) ......................................... 1,500 84,938
----------
Total Computer Peripherals 84,938
----------
Computer Storage Equipment -- 21.4%
Seagate Technology (a) .................................... 4,000 180,000
----------
Total Computer Storage Equipment 180,000
----------
Pharmaceutical -- 14.2%
Elan Corp. Warrants (a) ................................... 5,000 119,375
----------
Total Pharmaceutical 119,375
----------
Radio & TV Equipment -- 8.2%
Geotek Communications (a) ................................. 5,000 68,437
----------
Total Radio & TV Equipment 68,437
----------
Semiconductor -- 32.4%
Intel Corp. Warrants (a) .................................. 7,500 271,875
----------
Total Semiconductor 271,875
----------
Telecom Services -- 6.7%
Champion Technology Holding Ltd. .......................... 100,000 56,500
----------
Total Telecom Services 56,500
----------
Total Portfolio of Investments (Cost $820,796). $ 839,875
==========
</TABLE>
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
Statement of Assets and Liabilities
June 30, 1996
<TABLE>
<S> <C>
Assets:
Investments at value (Cost $820,796) (Note 1)............... $ 839,875
Dividends receivable........................................ 120
Interest receivable......................................... 256
Cash and cash equivalents (Note 1).......................... 200,513
------------
Total assets............................................. 1,040,764
------------
Liabilities:
Accounts payable and accrued expenses....................... 14,013
Investment advisory and service fees payable (Note 4)....... 13,523
Other payable to affiliate (Note 4)......................... 4,956
Payable for Trust shares redeemed........................... 464
------------
Total liabilities........................................ 32,956
------------
Net Assets...................................................... $ 1,007,808
============
Net assets consist of:
Accumulated net investment loss............................. $ (3,919,011)
Unrealized appreciation of investments...................... 19,079
Accumulated net realized losses plus distributions from
realized gains............................................. (960,129)
Capital paid in less distributions since inception.......... 5,867,869
------------
$ 1,007,808
------------
Net asset value, offering price and redemption price per share
($1,007,808 / 1,398,489 shares of no par value trust
shares).................................................... $ .72
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
Statement of Operations
for the year ended June 30, 1996
<TABLE>
<S> <C> <C>
Investment Income:
Dividends................................... $ 1,270
Interest.................................... 4,979
--------
Total income............................. $ 6,249
----------
Expenses:
Shareholder servicing fee (Note 4).......... 160,315
Salaries and employee benefits (Note 4)..... 55,920
Professional fees........................... 26,297
Miscellaneous............................... 10,512
Investment advisory fee (Note 4)............ 12,209
Reports to shareholders..................... 10,841
Rent........................................ 7,548
Trustees' fees and expenses (Note 4)........ 6,998
Computer services........................... 6,589
Custodian fees.............................. 3,225
----------
Total expenses........................... 300,454
Net investment loss......................... (294,205)
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3):
Net realized gain from investment
transactions............................... 73,821
Change in unrealized appreciation/
(depreciation) of investments.............. (10,496)
Net gain on investments..................... 63,325
----------
Net decrease in net assets resulting from
operations................................... $ (230,880)
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period
For the year February 1, 1995 For the year
ended June 30, through June 30, ended January 31,
1996 1995* 1995
-------------- ---------------- -----------------
<S> <C> <C> <C>
Decrease in net assets from operations:
Net investment loss................................... $ (294,205) $ (131,469) $ (304,379)
Net realized gain (loss) from investment
transactions........................................ 73,821 (69,865) (84,960)
Change in unrealized appreciation/depreciation......... (10,496) 91,916 (700,806)
Net increase (decrease) in net assets resulting ------------ ------------ ------------
from operations...................................... (230,880) (109,418) (1,090,145)
Decrease in net assets from trust share
transactions (Note 2)................................... (102,199) (22,155) (64,452)
------------ ------------ ------------
Increase (decrease) in net assets....................... (333,079) (131,573) 1,154,597
Net assets at beginning of period....................... 1,340,887 1,472,460 2,627,057
------------ ------------ ------------
Net assets at end of period, including accumulated net
investment loss of $3,918,641, $3,624,436 and
$3,018,368 respectively................................. $ 1,007,808 $ 1,340,887 $ 1,472,460
============ ============ ============
</TABLE>
* The Fund's fiscal year-end was changed to June 30.
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
Financial Highlights
<TABLE>
<CAPTION>
For the year For the period
ended February 1, 1995
June 30, through June 30, For the years ended January 31,
----------- ----------------- ------------------------------------------------------
1996 1995* 1995 1994 1993 1992
----------- ----------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period....... $.88 $.96 $1.65 $1.50 $1.54 $1.59
----------- ----------------- ------------------------------------------------------
Net investment loss........................ (.41) (.12) (.26) (.24) (.19) (.20)
Net realized and unrealized
gain (loss) on investments.............. .25 .04 (.43) .39 .15 .15
----------- ----------------- ------------------------------------------------------
Total from investment operations........ (.16) (.08) (.69) .15 (.04) (.05)
----------- ----------------- ------------------------------------------------------
Net asset value, end of period............. $.72 $.88 $.96 $1.65 $1.50 $1.54
=========== ================= ======================================================
Ratios/Supplemental Data:
Total return............................... (18.48)% (20.01)%** (41.82)% 10.00% (2.60)% (3.14)%
Ratio of expenses to average net assets.... 24.61% 24.62%** 17.69% 12.66% 14.83% 15.13%
Ratio of net investment loss to average
net assets............................. (24.10)% (22.86)%** (15.63)% (11.40)% (13.52)% (13.13)%
Portfolio turnover rate.................... 339% 617%** 289% 134% 221% 460%
Net assets, end of period (in thousands)... $1,008 $1,341 $1,472 $2,627 $2,496 $2,648
</TABLE>
*The Fund's fiscal year-end was changed to June 30.
** Annualized
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
Notes to Financial Statements
1. Significant accounting policies
Steadman American Industry Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, open-end investment
company. During 1995, the Fund changed its fiscal year end from January 31 to
June 30.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates. 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. 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
valued 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
expenses 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
deferred tax assets and liabilities arise from the tax effect of temporary
differences between the financial 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.
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<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
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 period February 1, 1995 For the year
ended June 30, 1996 through June 30, 1995 ended January 31, 1995
------------------- ------------------------------- ----------------------
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Shares sold -- 0 -- $ -- 0 -- -- 0 -- $-- 0 -- -- 0-- $ -- 0--
Shares redeemed (117,686) (102,199) (24,096) (22,155) (51,912) (64,452)
-------- ---------- -------- -------- -------- ---------
Net decrease (117,686) $ (102,199) (24,096) $(22,155) (51,912) $ (64,452)
========== ========= ==========
Shares outstanding:
Beginning of period 1,516,175 1,540,271 1,592,183
--------- --------- ---------
End of period 1,398,489 1,516,175 1,540,271
--------- ========= =========
</TABLE>
3. Purchases and sales of securities
During the year ended June 30, 1996, purchases and proceeds from sales of
investment securities aggregated $3,929,931 and $4,387,838, respectively.
Unrealized appreciation of investment aggregated $19,079 of which $51,388
related to gross unrealized appreciation in which market value exceeded tax cost
and $32,309 related to gross unrealized depreciation in which tax cost exceeded
market value.
4. Investment advisory fee and transactions with affiliates
Steadman Security Corporation (SSC), the 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, SSC will continue to
provide the same services it provided 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, SSC 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 $1.35 per account. SSC 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.
Certain officers and trustees of the Fund are "affiliated persons" of the
Investment Adviser, as defined by the Investment Company Act of 1940.
================================================================================
<PAGE>
================================================================================
STEADMAN AMERICAN INDUSTRY FUND
5. Federal income taxes
In the fiscal year ended June 30, 1996, the Fund did not meet the asset
diversification 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
1996, therefore no income tax provision is required. A full valuation allowance
was provided for deferred tax assets, totalling approximately $1,854,000 at June
30, 1996, which arise principally from net operating loss carryforwards and
capital carryforwards available for income tax purposes.
For income tax purposes, the Fund has net operating loss carryforwards
approximating $3,919,000 which are available to offset future net operating
income in non-qualifying years, if any, which expire as follows: (1999) $74,000;
(2000) $239,000; (2001) $139,000; (2002) $353,000; (2003) $371,000; (2004)
$235,000; (2005) $384,000; (2006) $365,000; (2007) $360,000; (2008) $335,000;
(2009) $322,000; (2010) $447,000 and (2011) $295,000. Capital loss carryforwards
aggregating approximately $960,000 are available to offset future capital gains,
if any, which expire as follows: (1997) $119,000; (1999) $771,000, and (2000)
$70,000.
================================================================================
<PAGE>
STEADMAN AMERICAN
INDUSTRY FUND
1730 K Street, N.W.
Washington, D.C. 20006
1-800-424-8570
202-223-1000 Washington D.C. area
Transfer Agent
Steadman Security Corporation
1730 K Street, N.W.
Washington, D.C. 20006
Custodian
Crestar Bank, N.A.
1445 New York Avenue, N.W.
Washington, D.C. 20005
Independent Accountants
Coopers & Lybrand L.L.P.
1800 M Street N.W.
Washington D.C. 20036
For more information about
Steadman American Industry Fund,
account information or daily
Net Asset Values, call:
Shareholder Services
1-800-424-8570
202-223-1000 Washington, D.C. area
STEADMAN
AMERICAN
INDUSTRY
FUND
ANNUAL
REPORT
June 30, 1996
A Steadman NO-LOAD Mutual Fund
[LOGO OF STEADMAN SECURITY
STEADMAN CORPORATION
SECURITY
APPEARS
HERE] Investment Adviser
