<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>
================================================================================
STEADMAN ASSOCIATED FUND
Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
COMMON STOCKS -- 96.6%
Communications Equipment -- 11.3%
Electronic Data Systems.................................... 2,000 $ 107,500
Motorola................................................... 2,500 157,188
Precision Systems (a)...................................... 19,000 223,250
----------
Total Communications Equipment 487,938
----------
Computer Equipment -- 9.2%
Hewlett Packard............................................ 4,000 398,500
----------
Total Computer Equipment 398,500
----------
Computer Storage Equipment -- 12.0%
Iomega Corp. (a)........................................... 4,000 116,000
Seagate Technology (a)..................................... 9,000 405,000
----------
Total Computer Storage Equipment 521,000
----------
Computer Systems -- 32.3%
Microsoft Corp. (a)........................................ 7,500 900,937
Sun Microsystems (a)....................................... 8,500 500,437
----------
Total Computer Systems 1,410,374
----------
Medical Instruments -- 1.9%
Boston Scientific (a)...................................... 1,800 81,000
----------
Total Medical Instruments 81,000
----------
Motor Vehicles -- 10.4%
General Motors "H"......................................... 7,500 450,938
----------
Total Motor Vehicles 450,938
----------
Oil & Gas Drilling -- 1.6%
Global Marine (a).......................................... 5,000 69,375
----------
Total Oil & Gas Drilling 69,375
----------
</TABLE>
================================================================================
<PAGE>
================================================================================
STEADMAN ASSOCIATED FUND
Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ----------
<S> <C> <C>
Pharmaceutical -- 4.4%
Elan Corp. Warrants (a)............................ 2,500 59,687
Regeneron Pharmaceuticals (a)...................... 7,500 130,313
----------
Total Pharmaceutical 190,000
----------
Radio & TV Equipment -- 6.0%
Geotek Communications, Inc. (a).................... 7,500 102,656
Qualcomm Inc. (a).................................. 3,000 159,375
----------
Total Radio & TV Equipment 262,031
----------
Semiconductor -- 7.5%
Intel Corp. Warrants (a)............................ 9,000 326,250
----------
Total Semiconductor 326,250
----------
Total Common Stocks (Cost $3,630,405)............... 4,188,406
----------
CALL OPTIONS PURCHASED -- 3.4%
Applied Materials, 1/17/97 at $30................... 2,500 13,750
Applied Materials, 10/18/96 at $30.................. 1,500 6,000
American Tel. and Tel., 7/19/96 at $70.............. 20,000 1,250
IBM, 7/19/96 at $90................................. 5,000 50,000
Iomega Corp., 11/15/96 at $30....................... 2,500 19,688
LAM Research, 12/20/96 at $25....................... 2,500 12,813
LSI Logic, 1/17/97 at $25........................... 2,500 13,750
Seagate Technology, 12/20/96 at $45................. 2,500 14,687
Sun Microsystems, 10/18/96 at $60................... 2,500 15,625
----------
Total Call Options Purchased (Cost $187,250) 147,563
----------
Total Portfolio of Investments (Cost $3,817,655) $4,335,969
==========
</TABLE>
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Steadman Associated Fund
We have audited the accompanying statement of assets and liabilities of
Steadman Associated Fund, including the portfolio of investments, as of June 30,
1996, and the related statement of operations for the year ended, the statements
of changes in net assets for the year then ended and the periods October 1, 1994
through June 30, 1995, and October 1, 1993 through September 30, 1994, and the
financial highlights for the year ended June 30, 1996 and the period October 1,
1994 through June 30, 1995, and each of the four years ended September 30, 1994.
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 Associated 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.
August 6, 1996
================================================================================
<PAGE>
================================================================================
Statement of Assets and Liabilities
June 30, 1996
<TABLE>
<S> <C>
Assets:
Investments at value (Cost $3,817,655) (Note 1).................. $ 4,335,969
Cash and cash equivalents (Note 1).............................. 314,978
Dividends receivable............................................. 1,860
Interest receivable.............................................. 449
Receivable for trust shares subscribed........................... 100
-----------
Total assets................................................... 4,653,356
-----------
Liabilities:
Payable for investments purchased................................ 32,325
Accounts payable and accrued expenses............................ 12,804
Investment advisory and service fees payable (Note 4)............ 7,271
Other payable to affiliate (Note 4).............................. 17,711
Payable for Trust shares redeemed................................ 1,754
-----------
Total liabilities.............................................. 71,865
-----------
Net Assets......................................................... $ 4,581,491
-----------
Net assets consist of:
Undistributed net investment loss................................ $(4,646,935)
Unrealized appreciation of Investments........................... 518,314
Accumulated net realized losses from security transactions....... (1,127,057)
Paid-in capital.................................................. 9,837,169
-----------
$ 4,581,491
===========
Net asset value, offering price and redemption price per share
($4,581,491 / 6,580,298 shares of no par value trust shares)...... $ .70
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN ASSOCIATED FUND
Statement of Operations
for the year ended June 30, 1996
<TABLE>
<S> <C> <C>
Investment Income:
Dividends........................................................ $ 23,904
Interest......................................................... 10,242
---------
Total income................................................. $ 34,146
Expenses:
Salaries and employee benefits (Note 4).......................... 184,729
Investment advisory fee (Note 4)................................. 51,706
Professional fees................................................ 56,679
Shareholder servicing fee (Note 4)............................... 41,214
Rent............................................................. 32,281
Miscellaneous.................................................... 12,469
Blue Sky Registration Fees....................................... 11,820
Custodian fees................................................... 11,186
Computer services................................................ 8,713
Reports to shareholders.......................................... 6,383
Trustees' fees and expenses (Note 4)............................. 5,328
---------
Total expenses................................................. 422,508
---------
Net investment loss............................................ (388,362)
---------
Realized and Unrealized Gain/(Loss) on Investments (Notes 1 and 3):
Net realized gain from investment transactions................... 517,110
Change in unrealized appreciation/(depreciation) of investments.. (352,459)
---------
Net gain on investments.......................................... 164,651
---------
Net decrease in net assets resulting from operations............. $(223,711)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN ASSOCIATED FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the year For the period For the
ended June 30, October 1, 1994 through year ended
1996 June 30, 1995* November 30, 1994
----------- --------------------- -----------------
<S> <C> <C> <C>
Decrease in net assets from operations:
Net investment loss........................................ $ (388,362) $ (240,379) $ (450,758)
Net realized gain (loss) from investment transactions...... 517,110 (451,689) (1,192,478)
Change in unrealized appreciation/depreciation............. (352,459) 689,335 232,086
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. (223,711) (2,733) (1,411,150)
----------- ----------- -----------
Decrease in net assets from trust share transactions (Note 2)... (929,919) (568,786) (1,125,963)
----------- ----------- -----------
Increase (decrease) in net assets.......................... (1,153,630) (571,519) (2,537,113)
----------- ----------- -----------
Net assets at beginning of period............................... 5,735,121 6,306,640 8,843,753
----------- ----------- -----------
Net assets at end of period (including accumulated
net investment loss of $4,635,886, $4,247,524 and
- - $0.., respectively............................................ $4,581,491 $ 5,735,121 $ 6,306,640
=========== ============ ============
</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 ASSOCIATED FUND
Financial Highlights
<TABLE>
<CAPTION>
For the year For the period
ended October 1, 1994 For the years ended September 30,
June 30, through June 30,
----------------------------------------------------------------------------------
1996 1995* 1994 1993 1992 1991
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period...... $.73 $.72 $.87 $.64 $.67 $.57
----------------------------------------------------------------------------------
Net investment loss.................... (.17) (.03) (.08) (.05) (.03) (.02)
Net realized and unrealized
gain (loss) on investments............ .14 .04 (.07) .28 - .12
----------------------------------------------------------------------------------
Total from investment operations....... (.03) .01 (.15) .23 (.03) .10
----------------------------------------------------------------------------------
Net asset value, end of period............ $.70 $.73 $.72 $.87 $.64 $.67
==================================================================================
Ratios/Supplemental Data:
Total return.............................. (4.38) 1.85%** (17.24)% 35.9% (4.5)% 17.5%
Ratio of expenses to average net assets... 8.14% 8.17%** 7.76% 5.79% 6.92% 7.16%
Ratio of net investment income (loss)
to average net assets.................. (7.48)% (7.23)%** (6.09)% (4.63)% (5.14)% (3.29)%
Portfolio turnover rate................... 231% 505%** 241% 300% 301% 267%
Net assets, end of period (in thousands).. $4,581 $5,735 $6,307 $8,844 $7,254 $8,539
</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 ASSOCIATED FUND
Notes to Financial Statements
1. Significant accounting policies
Steadman Associated 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 September 30 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.
Call options give the holder the right to purchase a security at a specified
price on a certain date. Risks arise from possible illiquidity of the options
market and from movements in security values. Options are reflected in the
accompanying Statement of Assets and Liabilities at market value.
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 taxes 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 ASSOCIATED 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 October 1, 1994 For the year
ended June 30, 1996 through June 30, 1995 ended September 30, 1994
------------------- ------------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................ 269 $ 200 581 $ 413 -- 0 -- $ -- 0--
Shares redeemed............ (1,295,786) (930,119) (845,933) (569,199) (1,426,814) (1,125,963)
--------- --------- ------- --------- --------- -----------
Net decrease............ (1,295,517) $(929,919) (845,352) $(568,786) (1,426,814) $(1,125,963)
========= ========= ===========
Shares outstanding:
Beginning of period... 7,875,815 8,721,167 10,147,981
--------- --------- ----------
End of period......... 6,580,298 7,875,815 8,721,167
========= ========= ==========
</TABLE>
3. Purchases and sales of securities
During the year ended June 30, 1996, purchases and proceeds from sales of
investment securities aggregated $11,790,716 and $12,530,500, respectively.
Unrealized appreciation of investments aggregated $501,026 of which $648,718
related to gross unrealized appreciation where there is an excess of value over
tax cost and $147,692 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), 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 accounts. 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.
================================================================================
<PAGE>
================================================================================
STEADMAN ASSOCIATED FUND
Certain officers and trustees of the Fund are "affiliated persons" of the
Investment Advisor, as defined by the Investment Company Act of 1940.
5. Federal income taxes
In the fiscal period ended June 30, 1996, the Fund did not meet asset
diversification requirements applicable to regulated investments 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 for the fiscal period ended June 30, 1996, therefore no income
tax provision is required. A full valuation allowance has been provided for
deferred tax assets, totalling approximately $2,194,000 at June 30, 1996, which
arise principally from net operating loss carryforwards and capital loss
carryforwards available for income tax purposes.
For income tax purposes, the Fund has net operating loss carryforwards
approximating $4,647,000 which are available to offset future net operating
income in non-qualifying years, if any, which expire as follows: (2000)
$443,000; (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 and (2011) $401,000. Capital loss carryforwards aggregating
approximately $1,110,000 are available to offset future capital gains, if any
which expire as follows: (2001) $658,000 and (2000) $452,000.
================================================================================
<PAGE>
STEADMAN ASSOCIATED 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 Associated Fund.
account information or daily
Net Asset Values, call:
Shareholder Services
1-800-424-8570
202-223-1000 Washington, D.C. area
STEADMAN
Associated
Fund
ANNUAL
REPORT
June 30, 1996
A Steadman NO-LOAD Mutual Fund
[LOGO OF STEADMAN SECURITY CORPORATION APPEARS HERE]
STEADMAN SECURITY
CORPORATION
Investment Adviser
