<PAGE>
Fellow Shareholders:
The economy continues to exhibit remarkable growth with low inflation even
after several years of strong performance. With inflation last year at 3.3
percent and the fourth-quarter 1996 GDP running at an annual rate of 4.7
percent, and the prospects good for continuing stability, many analysts see
little cause for worry about the stock market.
The Dow Jones industrial average (DJIA) has surpassed the level of 7,000, or
about 6,000 points higher than the level of 1,000 in 1982, only 15 years ago.
When you consider that the DJIA level was approximately 1,000 in 1966, the
spectacular rise of this index in the past 15 years stands out in contrast with
the flatness of the prior period. This upward movement of stock prices is
strongly correlated to the extensive transformation of the national economy from
technological discovery and accompanying increased output that we have
experienced in recent years, a phenomenon which I disclosed to you a year ago.
Looking ahead, we believe that there will be growth in 1997, but not at the
level achieved in 1996. Some economists are predicting the following in 1997:
retail sales increasing by 5% or less; fewer new vehicles in 1997 than in 1996;
lower housing starts and building permits; slowing of inventory buildup; and
lower exports. Despite these expectations, performance in 1997 should be
reasonably good and the Fund will continue to participate in stocks of high
quality companies.
Sincerely,
/s/ Charles W. Steadman
Charles W. Steadman
Chairman of the Board of
Trustees and President
<PAGE>
STEADMAN ASSOCIATED FUND
Portfolio of Investments
December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
COMMON STOCKS -- 96.1%
<S> <C> <C>
Computer Software -- 20.8%
Microsoft Corp. (a)................ 9,000 $743,625
Computer Assoc. Int'l.............. 3,500 174,125
--------
Total Computer Software 917,750
--------
Semiconductors -- 16.7%
Intel Corp. Warrants (a)........... 8,000 738,000
--------
Total Semiconductors 738,000
--------
Computer System Design -- 14.8%
U.S. Robotics (a).................. 4,000 288,000
Sun Microsystems (a)............... 11,000 282,563
Oracle Corporation (a)............. 2,000 83,500
--------
Total Computer System Design 654,063
--------
Motor Vehicles -- 9.5%
General Motors Class H............. 7,500 421,875
--------
Total Motor Vehicles 421,875
--------
Computer Storage Equipment -- 8.9%
Seagate Technology (a)............. 10,000 395,000
--------
Total Computer Storage Equipment 395,000
--------
Telephone communications -- 7.0%
Worldcom Inc. (a).................. 11,800 307,538
--------
Total Telephone Communications 307,538
--------
Information Processing -- 6.4%
Imation Corporation (a)............ 10,000 281,250
--------
Total Information Processing 281,250
--------
Computer-Mail Order -- 4.8%
Gateway 2000 (a)................... 4,000 214,250
--------
Total Computer Mail Order 214,250
--------
</TABLE>
<PAGE>
STEADMAN ASSOCIATED FUND
Portfolio of Investments
December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ------------
<S> <C> <C>
Medical Instruments -- 4.1%
Boston Scientific (a)...................... 3,000 180,000
---------
Total Medical Instruments 180,000
Pharmaceuticals -- 3.8%
Regeneron Pharmaceuticals................. 10,300 166,087
---------
Total Pharmaceuticals 166,087
---------
Oil and Gas Drilling -- 3.2%
Unit Corporation (a)....................... 7,300 72,087
Parker Drilling Co. (a).................... 7,300 70,262
---------
Total Oil and Gas Drilling 142,349
---------
Total Common Stocks (Cost $3,307,100)...... 4,418,162
=========
CALL OPTIONS PURCHASED -- 3.9%
IBM, 4/18/97 at $145........................ 5,000 81,875
Seagate Technology, 3/21/97 at $30.......... 5,000 46,250
Seagate Technology, 6/20/97 at $37.50....... 8,000 46,000
LSI Logic, 1/17/97 at $25................... 2,500 6,563
---------
Total Call Options Purchased
(Cost $239,033) 180,688
---------
Total Portfolio of Investments
(Cost $3,846,132) $4,598,850
==========
</TABLE>
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN ASSOCIATED FUND
Statement of Assets and Liabilities
December 31, 1996
(Unaudited)
<TABLE>
<S> <C>
Assets:
Investments at value (Cost $3,846,132) (Note 1)............. $ 4,598,850
Cash and cash equivalents (Note 1).......................... 75,694
Dividends receivable........................................ 175
Interest receivable......................................... 339
Receivable for securities sold.............................. 35,763
-----------
Total assets............................................. 4,710,821
-----------
Liabilities:
Accounts payable and accrued expenses....................... 16,481
Investment advisory and service fees payable (Note 4)....... 7,143
Other payable to affiliate (Note 4)......................... 17,530
Payable for Trust shares redeemed........................... 62,996
-----------
Total liabilities........................................ 104,150
-----------
Net Assets.................................................... $ 4,606,671
===========
Net assets consist of:
Undistributed net investment loss........................... $14,867,979)
Unrealized appreciation of investments...................... 752,718
Accumulated net realized losses from security transactions.. (783,652)
Paid-in capital............................................. 9,505,584
-----------
$ 4,606,671
===========
Net asset value, offering price and redemption price per
share ($4,606,671 divided bY 6,120,340 shares of no par
value trust shares)......................................... $ .75
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN ASSOCIATED FUND
Statements of Operations
for the six months ended
December 31, 1996
(Unaudited)
<TABLE>
<S> <C> <C>
Investment Income:
Dividends.......................................... $ 6,886
Interest........................................... 9,752
---------
Total income..................................... $ 16,638
---------
Expenses:
Salaries and employee benefits (Note 4)............ 88,012
Investment advisory fee (Note 4)................... 22,256
Professional fees.................................. 74,641
Shareholder servicing fee (Note 4)................. 18,696
Rent............................................... 15,721
Blue Sky Registration Fees......................... 2,000
Custodian fees..................................... 3,911
Computer services.................................. 3,137
Reports to shareholders............................ 3,682
Miscellaneous...................................... 3,264
Trustees' fees and expenses (Note 4)............... 2,362
---------
Total expenses................................... 237,682
---------
Net investment loss.............................. (221,044)
---------
Realized and Unrealized Gain (Loss) on Investments
(Notes 1 and 3):
Net realized gain from investment transactions..... 343,405
Change in unrealized appreciation (depreciation)
of investments.................................. 234,404
---------
Net gain on investments............................ 577,809
---------
Net decrease in net assets resulting from
operations...................................... $ 356,765
=========
</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 6 For the period
months ended For the year October 1,
December 31, ended June 30, 1994 through
1996/(1)/ 1996 June 30, 1995*
------------ -------------- --------------
<S> <C> <C> <C>
Decrease in net assets from operations:
Net investment loss............................... $ (221,044) $ (388,362) $ (240,379)
Net realized gain (loss) from investment
transactions.................................... 343,405 517,110 (451,689)
Change in unrealized appreciation/depreciation.... 234,404 (352,459) 689,335
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations............................... 356,765 (223,711) (2,733)
Decrease in net assets from trust share transactions
(Note 2).......................................... (331,585) (929,919) (568,786)
----------- ----------- -----------
Increase (decrease) in net assets............... 25,180 (1,153,630) (571,519)
Net assets at beginning of period.................... 4,581,491 5,735,121 6,306,640
----------- ----------- -----------
Net assets at end of period (including accumulated
net investment loss of $4,867,979, $4,646,935
and $4,247,524 respectively).................... $4,606,671 $4,581,491 $5,735,121
=========== =========== ===========
</TABLE>
/(1)/ Unaudited
* 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 6 For the period
months ended For the year October 1,
December 31, ended June 30, 1994 through For the years ended September 30
1996/(1)/ 1996 June 30, 1995*
------------ -------------- -------------- -----------------------------------
1996 1996 1995* 1994 1993 1992
------------ -------------- -------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period...... $.70 $.73 $.72 $.87 $.64 $.67
------------ -------------- -------------- --------- -------- --------
Net investment loss................... (.04) (.17) (.03) (.08) (.05) (.03)
Net realized and unrealized
gain (loss) on investments......... .09 .14 .04 (.07) .28 --
------------ -------------- -------------- --------- -------- --------
Total from investment operations...... .05 (.03) .01 (.15) .23 (.03)
------------ -------------- -------------- --------- -------- --------
Net asset value, end of period............ $.75 $.70 $.73 $.72 $.87 $.64
============ ============== ============== ========= ======== ========
Ratios/Supplemental Data:
Total return.............................. 14.29%** (4.38)% 1.85%** (17.24)% 35.9% (4.5)%
Ratio of expenses to average net assets.... 10.66%** 8.14% 8.17%** 7.76% 5.79% 6.92%
Ratio of net investment income (loss)
to average net assets.................... (9.91)%** (7.48)% (7.23)%** (6.09)% (4.63)% (5.14)%
Portfolio turnover rate................... 319%** 231% 505%** 241% 300% 301%
Net assets, end of period (in thousands).. $4,607 $4,581 $5,735 $6,307 $8,844 $7,254
</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.
<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
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 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
option 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 year For the period October 1, 1994
ended June 30, 1996 ended June 30, 1996 through June 30, 1995
------------------------- ----------------------- ------------------------------
Shares Amount Shares Amount Shares Amount
-------- ------- -------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............. 609 $ 400 269 $ 200 581 $ 413
Shares redeemed.......... (460,567) (331,985) (1,295,786) (930,119) (845,933) (569,199)
---------- ---------- ----------- ---------- ---------- ----------
Net decrease........... (459,958) $(331,585) (1,295,517) $(929,919) (845,352) $(568,786)
========== ========== ==========
Shares outstanding:
Beginning of period.. 6,580,298 7,875,815 8,721,167
---------- ---------- ----------
End of period........ 6,120,340 6,580,298 7,875,815
========== ========== ==========
</TABLE>
3. Purchases and sales of securities
During the six months ended December 31, 1996, purchases and proceeds from
sales of investment securities aggregated $6,648,424 and $6,901,212
respectively.
Unrealized appreciation of investments aggregated $752,718 of which
$913,783 related to gross unrealized appreciation where there is an excess of
value over tax cost and $161,065 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) 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.
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 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 Ave., N.W.
Washington, D.C. 20005
Independent Accountants
Coopers & Lybrand L.L.P.
1900 K Street, N.W.
Washington D.C. 20006
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
SEMI-ANNUAL
REPORT
December 31, 1996
A Steadman NO-LOAD Mutual Fund
STEADMAN SECURITIES
CORPORATION
Investment Advisor
