<PAGE>
Dear Shareholders:
This past year was an eventful one for the Fund. Charles W. Steadman, Chairman
of the Board of Trustees and President, passed away and was succeeded by Paul F.
Wagner as Chairman and Principal Executive Officer and by the undersigned as
President. A merger of Steadman American Industry Fund, Steadman Investment Fund
and Steadman Technology and Growth Fund into Steadman Associated Fund, renamed
Steadman Security Trust, as the surviving Fund was not accomplished for lack of
a quorum necessary for this vote by the shareholders of all the Funds.
Thereupon, the Trustees determined to continue operating your Fund as a separate
entity.
The principal purpose for the proposed merger was to achieve cost savings by
operating one fund with a larger asset base rather than four smaller funds.
Although the merger was not effected, the changes enacted by the Fund's new
management and that of its advisor, Steadman Security Corporation, did result in
improved performance by reducing costs and strengthening portfolio management. I
refer you to the Financial Highlights page of this Annual Report for the
results of this year compared to previous years.
We hope that this year's results are indicative of future performance. We shall
endeavor to make your Fund consistently profitable so that it is an attractive
investment for you.
We appreciate your continued confidence.
Sincerely,
/s/ Max Katcher
Max Katcher
President
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF AMERICAN INDUSTRY FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Steadman American Industry Fund as of
June 30, 1998, the related statement of operations for the year then ended, the
statement of changes in net assets and the financial highlights for each of the
two 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. The financial highlights for the year ended June 30, 1996
and the period February 1, 1995 through June 30, 1995 and each of the two years
in the period ended January 31, 1995 were audited by other auditors whose
report, dated August 6, 1996, expressed an unqualified opinion on those
financial highlights.
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, 1998, 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
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, 1998, the results of its
operations, for the year then ended, the changes in its net assets, and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
Reznick Fedder & Silverman
Bethesda, Maryland
August 5, 1998
<PAGE>
STEADMAN AMERICAN INDUSTRY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ------------
<S> <C> <C>
COMMON STOCKS -- 100%
Air Transportation -- 11.3%
Alaska Air Group, Inc. (a)................................. 2,000 $ 109,125
----------
Total Air Transportation 109,125
----------
Computer Peripherals -- 14.3%
Cisco Systems (a).......................................... 1,500 138,094
----------
Total Computer Peripherals 138,094
----------
Consumer Finance -- 8.3%
Associates First Capital "A"................................ 1,048 80,565
----------
Total Consumer Finance 80,565
----------
Financial Services -- 18.8%
Travelers Group Inc......................................... 3,000 181,875
----------
Total Financial Services 181,875
----------
Motor Vehicles-- 24.4%
Ford Motor Co............................................... 4,000 236,000
----------
Total Motor Vehicles 236,000
----------
Telecom Mfg. -- 10.4%
Champion Technology Holdings LTD............................ 100,000 17,000
Lucent Technologies......................................... 1,000 83,187
----------
Total Telecom Mfg 100,187
----------
Telephone Services -- 12.5%
Worldcom, Inc. (a)........................................... 2,500 121,094
----------
Total Telephone Services 121,094
----------
----------
Total Portfolio of Investments(Cost $578,964)................ $ 966,940
==========
</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, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $578,964) (Note 1).................................. $ 966,940
Interest receivable............................................................ 189
Cash and cash equivalents (Note 1)............................................. 40,959
-----------
Total assets................................................................ 1,008,088
-----------
LIABILITIES:
Accounts payable and accrued expenses.......................................... 19,976
Investment advisory and service fees payable (Note 4).......................... 780
Other payable to affiliate (Note 4)............................................ 10,984
Payable for Trust shares redeemed.............................................. 48
-----------
Total liabilities........................................................... 31,788
-----------
NET ASSETS.......................................................................... $ 976,300
===========
Net assets consist of:
Accumulated net investment loss................................................ $(4,477,014)
Unrealized appreciation of investments......................................... 387,976
Accumulated net realized losses plus distributions from realized gains......... (594,683)
Capital paid in less distributions since inception............................. 5,660,021
-----------
$ 976,300
===========
NET ASSET VALUE, offering price and redemption price per share
($976,300 / 1,138,087 shares of no par value trust shares)..................... $ .86
===========
</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, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends....................................................... $ 9,013
Interest........................................................ 6,558
--------
Total income................................................ $ 15,571
---------
EXPENSES:
Shareholder servicing fee (Note 4).............................. 135,031
Salaries and employee benefits (Note 4)......................... 40,518
Professional fees............................................... 23,038
Proposed merger expense (Note 7)................................ 31,034
Reports to shareholders......................................... 12,598
Investment advisory fee (Note 4)................................ 9,515
Rent............................................................ 6,606
Trustees' fees and expenses (Note 4)............................ 2,343
Computer services............................................... 4,379
Custodian fees.................................................. 675
Miscellaneous................................................... 6,531
--------
Total expenses.............................................. 272,268
---------
Net investment loss......................................... (256,697)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3):
Net realized gain from investment transactions.................. 356,531
Change in unrealized appreciation of investments................ 68,162
---------
Net gain on investments......................................... 424,693
---------
Net increase in net assets resulting from operations............ $ 167,996
=========
</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 year For the year
ended June 30, ended June 30,
1998 1997
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss...................................................... $ (256,697) $ (301,308)
Net realized gain from investment transactions........................... 356,531 8,916
Change in unrealized appreciation of investments......................... 68,162 300,735
-------------- --------------
Net increase in net assets resulting
from operations........................................................ 167,996 8,343
Decrease in net assets from trust share transactions (Note 2)............. (167,793) (40,054)
-------------- --------------
Increase (Decrease) in net assets........................................ 203 (31,711)
Net assets at beginning of period......................................... 976,097 1,007,808
-------------- --------------
Net assets at end of period, including accumulated net
investment loss of $4,477,014 and $4,220,318............................. $ 976,300 $ 976,097
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN AMERICAN INDUSTRY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the period
For the years ended February 1, 1995 For the years ended
June 30 through June 30 January 31
--------------------------------------- --------------- -------------------
1998 1997 1996 1995\\*\\ 1995 1994
--------------------------------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period..................... $ .72 $ .72 $ .88 $ .96 $ 1.65 $ 1.50
----------- ----------- ----------- --------------- -------------------
Net investment loss..................... (.80) (.33) (.41) (.12) (.26) (.24)
Net realized and unrealized
gain (loss) on investments............ .94 .33 .25 .04 (.43) .39
----------- ----------- ----------- --------------- -------------------
Total from investment operations...... .14 -- (.16) (.08) (.69) .15
----------- ----------- ----------- --------------- -------------------
Net asset value, end of period.......... $ .86 $ .72 $ .72 $ .88 $ .96 $ 1.65
=========== =========== =========== =============== ===================
Ratios/Supplemental Data:
Total return............................ 18.36% .5% (18.48)% (20.01)%\\**\\ (41.82)% 10.00%
Ratio of expenses to average net
assets............................... 22.57% 31.07% 24.61% 24.62%\\**\\ 17.69% 12.66%
Ratio of net investment loss to average
net assets........................... (21.28)% (28.77)% (24.10)% (22.86)%\\**\\ (15.63)% (11.40)%
Portfolio turnover rate................. 57% 128% 339% 617%\\**\\ 289% 134%
Net assets, end of period
(in thousands)....................... $ 976 $ 976 $ 1,008 $ 1,341 $ 1,472 $ 2,627
</TABLE>
* The Fund's fiscal year-end was changed to June 30.
** Annualized
The accompanying notes are an integra l part of the financial statements.
<PAGE>
STEADMAN AMERICAN INDUSTRY FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Steadman Security Trust, formerly known as Steadman Associated Fund, (the
Fund) is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, 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
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
reporting period. Estimates are used when accounting for income taxes. 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
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 accural 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 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.
<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 year ended
ended June 30, 1998 June 30, 1997
------------------- ------------------
Shares Amount Shares Amount
------ ------- ------ ------
<S> <C> <C> <C> <C>
Shares sold --0-- $ --0-- --0-- $ --0--
Shares redeemed (208,727) (167,793) (51,675) (40,054)
--------- ---------- -------- ---------
Net decrease (208,727) $(167,793) (51,675) $(40,054)
========== =========
Shares outstanding:
Beginning of period 1,346,814 1,398,489
--------- ---------
End of period 1,138,087 1,346,814
========= =========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1998, purchases and proceeds from sales of
investment securities aggregated $484,366 and $833,828, respectively. Net
unrealized appreciation of investments aggregated $387,976 of which $667,847
related to gross unrealized appreciation where there is an excess of value over
tax cost and $279,871 related to gross unrealized depreciation where there is an
excess of tax cost over 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 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, 1998, 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, 1998, therefore no income tax provision is required.
A full valuation allowance was provided for deferred tax assets, totalling
approximately $1,935,000 at June 30, 1998, 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 $4,498,000 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 (2012) $316,000 and
(2013) $263,000. Capital loss carryforwards aggregating approximately
$595,000 are available to offset future capital gains, if any, which expire as
follows: (1999) $525,000, 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 12% 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 1998, management attempted a merger of Steadman American Industry
Fund, Steadman Investment Fund, and Steadman Technology and Growth Fund with and
into the Steadman Associated Fund, whose name changed to Steadman Security Trust
(SST). The costs associated with the attempted merger were allocated to all the
funds based on the respective net asset values of the funds. Although the
shareholders of both Steadman Investment Fund and Steadman Associated Fund did
approve the proposal, the shareholders of Steadman American Industry Fund and
Steadman Technology and Growth Fund did not vote on the proposal because a
quorum for purposes of this vote was not obtained. The Trustees determined to
continue operating the Fund as a separate entity.
8. REDUCTIONS OF EXPENSES
On May 5, 1998, in an effort to further reduce expenses, the Trustees of
Steadman American Industry Fund ("Fund") further concluded that it was
inefficient for the Fund to maintain accounts with less than $100. Accordingly,
the Trustees adopted a policy whereby the accounts of shareholder which had
balances that were less $100 would be closed and the net asset value would be
returned to the respective shareholder. These redemptions, which began in July
1998, will eliminate approximately 7,000 accounts and $500,000 in net assets.
<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 Ave., N.W.
Washington, D.C. 20005
INDEPENDENT AUDITORS
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, 1998
A Steadman NO-LOAD Mutual Fund
STEADMAN SECURITY
CORPORATION
Investment Adviser
