<PAGE>
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Dear Shareholders:
On December 4, 1997 Charles W.Steadman, Chairman of the Board of Trustees and
President, passed away. Paul F. Wagner, Trustee of the Fund, was appointed
Chairman and Principal Executive Officer and Max Katcher, Executive Vice
President, was appointed President, positions formerly held by Mr. Steadman.
The Annual Report, dated June 30, 1997, disclosed that management proposed
your Fund would be merged with two other Steadman Funds into the Steadman
Associated Fund, which would change to a closed-end investment company whose
name would change to Steadman Security Trust. Subsequent to this disclosure, the
decision was made to have the recently named Steadman Security Trust operate as
an open-end investment company as disclosed in footnotes No. 6 of this
Semi-Annual Report. The proxy statement and prospectus you received describes
the purpose and reasons why management has undertaken this endeavor. It is
expected that the merger will be effected in the near future.
Sincerely,
/s/ Max Katcher
Max Katcher
President
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STEADMAN AMERICAN INDUSTRY FUND
Portfolio of Investments
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- -------------
COMMON STOCKS -- 100%
<S> <C> <C>
Air Transportation -- 11.2%
Alaska Air Group, Inc............................................... 2,000 $ 77,500
------------
Total Air Transportation 77,500
------------
Computer Peripherals -- 12.1%
Cisco Systems (a)................................................... 1,500 83,625
------------
Total Computer Peripherals 83,625
------------
Insurance Services -- 23.4%
Travelers Group Inc................................................... 3,000 161,625
------------
Total Insurance Services 161,625
------------
Motor Vehicles-- 28.2%
Ford Motor Co......................................................... 4,000 194,750
------------
Total Motor Vehicles 194,750
------------
Semiconductors -- 7.2%
Intel Corp. Warrants (a).............................................. 1,000 49,468
------------
Total Semiconductors 49,468
------------
Telecom Services -- 6.9%
Champion Technology Holdings LTD................................... 100,000 48,000
------------
Total Telecom Services 48,000
------------
Telephone Services -- 11.0%
Worldcom, Inc...................................................... 2,500 75,625
------------
Total Telephone Services 75,625
------------
------------
Total Portfolio of Investments (Cost $569,351)....................... $ 690,593
============
</TABLE>
(a) Non-income producing security
The accompanying notes are an integral part of the financial statements.
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STEADMAN AMERICAN INDUSTRY FUND
Statement of Assets and Liabilities
December 31, 1997
(Unaudited)
Assets:
Investments at value (Cost $569,351) (Note 1)............ $ 690,593
Receivable for securities sold........................... -0-
Interest receivable...................................... 1,103
Cash and cash equivalents (Note 1)....................... 176,839
---------------
Total assets.......................................... 868,535
---------------
Liabilities:
Accounts payable and accrued expenses.................... 15,665
Investment advisory and service fees payable (Note 4).... 11,834
Other payable to affiliate (Note 4)...................... 3,934
Payable for Trust shares redeemed........................ 2,814
---------------
Total liabilities..................................... 34,247
---------------
Net Assets..................................................... $ 834,288
===============
Net assets consist of:
Accumulated net investment loss.......................... $ (4,350,486)
Unrealized appreciation of investments................... 121,242
Accumulated net realized losses plus distributions
from realized gains................................... (626,467)
Capital paid in less distributions since inception....... 5,689,999
---------------
$ 834,288
===============
Net asset value, offering price and redemption price per share
($834,288/1,177,795 shares of no par value trust shares).. $ .71
===============
The accompanying notes are an integral part of the financial statements.
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STEADMAN AMERICAN INDUSTRY FUND
Statement of Operations
for the six months ended
December 31, 1997
(Unaudited)
<TABLE>
<S> <C> <C>
Investment Income:
Dividends................................................................. $ 4,500
Interest.................................................................. 3,814
----------
Total income....................................................... $ 8,314
----------
Expenses:
Shareholder servicing fee (Note 4)........................................ 68,850
Proposed merger expense (Note 6).......................................... 14,489
Salaries and employee benefits (Note 4)................................... 25,167
Professional fees......................................................... 8,265
Reports to shareholders................................................... 6,264
Investment advisory fee (Note 4).......................................... 4,994
Rent...................................................................... 3,662
Computer services......................................................... 2,653
Miscellaneous............................................................. 3,007
Custodian fees............................................................ 1,500
----------
Total expenses........................................................... 138,851
----------
Net investment loss....................................................... (130,537)
----------
Realized and Unrealized Gain (Loss) on Investments (Notes 1 and 3):
Net realized gain from investment transactions............................ 324,746
Change in unrealized appreciation/depreciation of investments............. (198,572)
----------
Net gain on investments................................................... 126,174
----------
Net decrease in net assets resulting from operations...................... $ (4,363)
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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STEADMAN AMERICAN INDUSTRY FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the 6 months
ended For the year For the year
December 31, ended June 30, ended June 30,
1997/(1)/ 1997 1996
---------------- -------------- --------------
<S> <C> <C> <C>
Decrease in net assets from operations:
Net investment loss......................................... $(130,537) $ (301,308) $ (294,205)
Net realized gain (loss) from investment transactions....... 324,746 8,916 73,821
Change in unrealized appreciation/depreciation.............. (198,572) 300,735 (10,496)
---------- ------------ -----------
Net Increase (decrease) in net assets resulting
from operations......................................... (4,363) 8,343 (230,880)
Decrease in net assets from trust share transactions (Note 2).. (137,446) (40,054) (102,199)
---------- ------------ -----------
Decrease in net assets.................................. (141,809) (31,711) (333,079)
Net assets at beginning of period.............................. 976,097 1,007,808 1,340,887
---------- ------------ -----------
Net assets at end of period, including accumulated net
investment loss of $4,350,486, $4,219,949
and $3,918,641 respectively............................. $834,288 $ 976,097 $1,007,808
========== ============ ============
</TABLE>
(1) Unaudited
The accompanying notes are an integral part of the financial statements.
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STEADMAN AMERICAN INDUSTRY FUND
Financial Highlights
<TABLE>
<CAPTION>
For the 6 months For the year For the year For the period
ended ended ended February 1, 1995
December 31/(1)/ June 30 June 30 through June 30
--------------- ------------ ------------ ----------------
1997 1997 1996 1995*
--------------- ------------ ------------ ----------------
Per Share Operating Performance:
Net asset value, beginning of period....... $.72 $.72 $.88 $.96
--------------- ------------ ------------ ----------------
Net investment loss........................ (.11) (.33) (.41) (.12)
Net realized and unrealized
gain (loss) on investments.............. .10 .33 .25 .04
--------------- ------------ ------------ ----------------
Total from investment operations........ (.01) -- (.16) (.08)
--------------- ------------ ------------ ----------------
Net asset value, end of period............. $.71 $.72 $.72 $.88
=============== ============ ============ ================
Ratios/Supplemental Data:
Total return............................... (2.78)%** .5% (18.48)% (20.01)%**
Ratio of expenses to average net assets.... 28.0%** 31.07% 24.61% 24.62%**
Ratio of net investment loss to average
net assets........................... (26.31)%** (28.77)% (24.10)% (22.86)%**
Portfolio turnover rate.................... 91.54%** 128% 339% 617%**
Net assets, end of period (in thousands)... $834 $976 $1,008 $1,341
<CAPTION>
For the years ended January 31
----------------------------------------------
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period....... $ 1.65 $ 1.50 $ 1.54
----------------------------------------------
Net investment loss........................ (.26) (.24) (.19)
Net realized and unrealized
gain (loss) on investments.............. (.43) .39 .15
----------------------------------------------
Total from investment operations........ (.69) .15 (.04)
----------------------------------------------
Net asset value, end of period............. $ .96 $ 1.65 $ 1.50
==============================================
Ratios/Supplemental Data:
Total return............................... (41.82)% 10.00% (2.60)%
Ratio of expenses to average net assets.... 17.69% 12.66% 14.83%
Ratio of net investment loss to average
net assets........................... (15.63)% (11.40)% (13.52)%
Portfolio turnover rate.................... 289% 134% 221%
Net assets, end of period (in thousands)... $1,472 $2,627 $2,496
</TABLE>
(1) Unaudited
*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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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 reporting 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 price.
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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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 6 months For the year For the year
ended December 31, 1997 ended June 30, 1996 ended June 30, 1996
----------------------- ------------------- -------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... --0-- $ --0-- --0-- $ --0-- --0-- $ --0--
Shares redeemed............... (169,019) (137,446) (51,675) (40,054) (117,686) (102,199)
---------- ----------- ---------- --------- ---------- ----------
Net decrease............. (169,019) (137,446) (51,675) $(40,054) (117,686) $(102,199)
=========== ========= ==========
Shares outstanding:
Beginning of period...... 1,346,814 1,398,489 1,516,175
--------- --------- ---------
End of period............ 1,177,795 1,346,814 1,398,489
========= ========= =========
</TABLE>
3. Purchases and sales of securities
During the six months ended December 31, 1997, purchases and proceeds from
sales of investment securities aggregated $308,225 and $771,181, respectively.
Unrealized appreciation of investments aggregated $121,242 of which $159,242
related to gross unrealized appreciation in which market value exceeded tax cost
and $38,000 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 service 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.
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STEADMAN AMERICAN INDUSTRY FUND
5. 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. In July
1997, the Fund agreed to remove this restriction and allow Shareholder States to
redeem shares upon request.
6. 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 operate as an open-end investment
company whose name has changed to Steadman Security Trust (SST). In connection
with the merger, SST has amended its investment objective to primarily seek
current income and secondarily to maximize total return. 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 and proxies are currently being solicited.
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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 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
SEMI-ANNUAL
REPORT
December 31, 1997
A Steadman NO-LOAD Mutual Fund
[LOGO OF STEADMAN STEADMAN SECURITY
SECURITY CORPORATION CORPORATION
APPEARS HERE]
Investment Adviser
