<PAGE>
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Fellow Shareholders:
After several years of strong performance the economy continues to exhibit
strength with a low level of inflation and stability of interest rates. Although
signs of slowing appeared in the second quarter corporate profits were better
than predicted and firms are pursuing growth with added investment. An index of
manufacturing strength rose to its highest level since 1994.
Technology has spurred the rise of stock market prices and your Fund's
portfolio has been structured to contain the companies that have been in the
forefront of technology.
I would now like to inform you of a very important development that will
affect the Fund and its shareholders. It is disclosed in footnote No. 7 of this
Annual report. In the near future you will receive a proxy statement and
prospectus that describe the purpose and reasons why management has decided to
embark upon this endeavor.
Sincerely,
/s/ Charles W. Steadman
Charles W. Steadman
Chairman of the Board of
Trustees and President
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<PAGE>
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INDEPENDENT AUDITORS' REPORT
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, 1997, and the related statements of operations, changes in net assets
and the financial highlights for the year 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 audit. The statement of changes in net assets
for the year ended June 30, 1996 and the financial highlights for the year ended
June 30, 1996 and the period February 1, 1995 through June 30, 1995 and each of
the three years in the period ended January 31, 1995 were audited by other
auditors whose report, dated August 6, 1996, expressed an unqualified opinion on
the statement of changes in net assets and those financial highlights.
We conducted our audit 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, 1997, by correspondence 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
audit provides 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, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
Bethesda, Maryland Reznick Fedder & Silverman
July 25,1997
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<PAGE>
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STEADMAN AMERICAN INDUSTRY FUND
PORTFOLIO OF INVESTMENTS
June 30,1997
<TABLE>
<CAPTION>
Value
Shares (Note 1)
----------- -----------
<S> <C> <C>
COMMON STOCKS -- 100%
Computer Peripherals -- 7.0%
Cisco Systems (a) ........................................ 1,000 $ 67,125
-----------
Total Computer Peripherals 67,125
-----------
Computer Software -- 10.5%
Oracle Corp. (a) ......................................... 2,000 100,750
-----------
Total Computer Software 100,750
-----------
Motor Vehicles -- 19.8%
Ford Motors .............................................. 5,000 188,750
-----------
Total Motor Vehicles 188,750
-----------
Semiconductor -- 47.8%
Intel Corp. Warrants (a).................................. 4,500 456,750
-----------
Total Semiconductor 456,750
-----------
Telecom Services -- 6.5%
Champion Technology Holding Ltd. ......................... 100,000 62,000
-----------
Total Telecom Services 62,000
-----------
Telephone Services-- 8.4%
Worldcom Inc. (a) ........................................ 2,500 80,000
-----------
Total Telephone Services 80,000
-----------
Total Portfolio of Investments (Cost $635,561). $ 955,375
===========
</TABLE>
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN AMERICAN INDUSTRY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30,1997
<TABLE>
<S> <C>
Assets:
Investments at value (Cost $635,561) (Note 1)...................................................... $ 955,375
Dividends receivable............................................................................... 769
Interest receivable................................................................................ 330
Cash and cash equivalents (Note 1)................................................................ 70,678
Due from affiliate................................................................................. 3,896
------------
Total assets..................................................................................... 1,031,048
------------
Liabilities:
Accounts payable and accrued expenses.............................................................. 54,660
Payable for Trust shares redeemed.................................................................. 291
------------
Total liabilities................................................................................ 54,951
------------
Net Assets.............................................................................................. $ 976,097
============
Net assets consist of:
Accumulated net investment loss.................................................................... $ (4,220,318)
Unrealized appreciation of investments............................................................. 319,814
Accumulated net realized losses plus distributions from realized gains............................. (951,213)
Capital paid in less distributions since inception................................................. 5,827,814
------------
$ 976,097
============
Net asset value,offering price and redemption price per share
($976,097 / 1,346,814 shares of no par value trust shares)........................................ $ .72
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN AMERICAN INDUSTRY FUND
STATEMENT OF OPERATIONS
for the year ended June 30,1997
<TABLE>
<S> <C> <C>
Investment Income:
Dividends......................................................... $ 20,973
Interest.......................................................... 3,117
---------
Total income................................................. $ 24,090
---------
Expenses:
Shareholder servicing fee (Note 4)................................ 149,345
Salaries and employee benefits (Note 4)........................... 49,285
Professional fees................................................. 42,448
Proposed merger expense (Note 7).................................. 34,493
Miscellaneous..................................................... 8,482
Investment advisory fee (Note 4).................................. 10,521
Reports to shareholders........................................... 12,026
Rent.............................................................. 7,244
Trustees' fees and expenses (Note 4).............................. 5,944
Computer services................................................. 3,655
Custodian fees.................................................... 1,955
---------
Total expenses............................................... 325,398
---------
Net investment loss............................................... (301,308)
---------
Realized and Unrealized Gain (Loss) on Investments (Notes 1 and 3):
Net realized gain from investment transactions.................... 8,916
Change in unrealized appreciation/(depreciation) of investments... 300,735
---------
Net gain on investments........................................... 309,651
---------
Net increase in net assets resulting from operations.............. $ 8,343
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN AMERICAN INDUSTRY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year For the year
ended June 30, ended June 30,
1997 1996
--------------- ---------------
<S> <C> <C>
Increase/(decrease) in net assets from operations:
Net investment loss..................................................................... $ (301,308) $ (294,205)
Net realized gain from investment transactions.......................................... 8,916 73,821
Change in unrealized appreciation/(depreciation) of
investments........................................................................... 300,735 (10,496)
------------ ------------
Net increase (decrease) in net assets resulting
from operations....................................................................... 8,343 (230,880)
Decrease in net assets from trust share transactions (Note 2)............................. (40,054) (102,199)
------------ ------------
Decrease in net assets.................................................................... (31,711) (333,079)
Net assets at beginning of period......................................................... 1,007,808 1,340,887
------------ ------------
Net assets at end of period,(including accumulated net
investment loss of $4,219,949 and $3,918,641.............................................. $ 976,097 $ 1,007,808
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN AMERICAN INDUSTRY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the year For the year For the period
ended ended February 1, 1995 For the years ended January 31,
June 30, June 30, through June 30,
--------- -------- --------------- -------------------------------
1997 1996 1995* 1995 1994 1993
--------- -------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............ $.72 $.88 $.96 $1.65 $1.50 $1.54
----- ----- ----- ----- ----- -----
Net investment loss............................. (.33) (.41) (.12) (.26) (.24) (.19)
Net realized and unrealized
gain (loss) on investments...................... .33 .25 .04 (.43) .39 .15
----- ----- ----- ----- ----- -----
Total from investment operations............. -- (.16) (.08) (.69) .15 (.04)
----- ----- ------ ----- ----- -----
Net asset value, end of period.................. $.72 $.72 $.88 $.96 $1.65 $1.50
===== ===== ====== ===== ===== =====
Ratios/Supplemental Data:
Total return.................................... .56% (18.48)% (20.01)%** (41.82)% 10.00% (2.60)%
Ratio of expenses to average net.
assets...................................... 31.07% 24.61% 24.62%** 17.69% 12.66% 14.83%
Ratio of net investment loss to average
net assets.................................. (28.77)% (24.10)% (22.86)%** (15.63)% (11.40)% (13.52)%
Portfolio turnover rate......................... 128% 339% 617%** 289% 134% 221%
Net assets, end of period (in thousands)....... $976 $1,008 $1,341 $1,472 $2,627 $2,496
</TABLE>
*The 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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<PAGE>
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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.
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 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
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>
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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 year
ended June 30,1997 ended June 30,1996
------------------ ------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold................... -- 0 -- $ -- 0 -- -- 0 -- $ -- 0 --
Shares redeemed............... (51,675) (40,054) (117,686) (102,199)
-------- ---------- --------- ----------
Net decrease.................. (51,675) $ (40,054) (117,686) $ (102,199)
========== ==========
Shares outstanding:
Beginning of period...... 1,398,489 1,516,175
---------- ----------
End of period............ 1,346,814 1,398,489
========== ==========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1997, purchases and proceeds from sales of
investment securities aggregated $1,271,367 and $1,466,133, respectively.
Unrealized appreciation of investment aggregated $319,814 of which $645,239
related to gross unrealized appreciation in which market value exceeded tax cost
and $325,425 related to gross unrealized depreciation in which tax cost exceeded
market value.
4. INVESTMENT ADVISORY FEE AND TRANSACTIONS WITH AFFILIATES
Steadman Security Corporation (SSC), 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, 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 shareholder servicing 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
officers and employees who performed 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.
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<PAGE>
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STEADMAN AMERICAN INDUSTRY FUND
5. FEDERAL INCOME TAXES
In the fiscal year ended June 30, 1997, 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
year ended June 30, 1997, therefore no income tax provision is required. A full
valuation allowance was provided for deferred tax assets, totalling
approximately $1,971,000 at June 30, 1997, which arise principally from net
operating loss carry-forwards and capital carryforwards available for income tax
purposes.
For income tax purposes, the Fund has net operating loss carryforwards
approximating $4,235,000 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; (2011) $295,000 and (2012) $316,000. Capital
loss carryforwards aggregating approximately $951,000 are available to offset
future capital gains, if any, which expire as follows:(1997) $110,000; (1999)
$771,000,and (2000) $70,000.
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 provides among other things, that the Shareholder States
will not request redemption of their shares until February 14, 1998. The
Shareholder States currently own 22% of shares in the Fund. In July 1997, the
Fund agreed to remove this restriction and allow Shareholder States to redeem
shares upon request.
7. PROPOSED MERGER
During 1997, management proposed a merger of Steadman American Industry
Fund, Steadman Investment Fund, and Steadman Technology and Growth Fund with and
into the Steadman Associated Fund, which will change to a close-end investment
company whose name will change to Steadman Security Trust (SST). In connection
with the merger, SST will amend its investment objective to primarily seek
current income and secondarily to maximize total return. Following the proposed
merger, fund shares no longer will be sold or redeemed by SST on a request
basis, but may be sold to other investors in market transactions. The costs
associated with the proposed merger are allocated to all the funds based on the
respective net asset values of the funds. The proposed merger requires approval
by the shareholders. A Registration Statement or Form N-14 is pending SEC
regulatory approval and the proposed merger requires the approval of the
Shareholders of all of the funds.
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<PAGE>
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This Page is Intentionally Blank
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<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
Reznick Fedder & Silverman P.C.
4520 East West Highway
Bethesda, Maryland 20814
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, 1997
A Steadman NO-LOAD Mutual Fund
[LOGO] STEADMAN SECURITY
CORPORATION
Investment Adviser
- --------------------------------------------------------------------------------
