<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 STEADMAN SECURITY TRUST
We have audited the accompanying statement of assets and liabilities,including
the portfolio of investments of Steadman Security Trust (formerly Steadman
Associated Fund), as of June 30, 1998, the related statements 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 Trust'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 October 1, 1994
through June 30, 1995 and each of the two years in the period ended September
30, 1994 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 Security Trust 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 SECURITY TRUST
PORTFOLIO OF INVESTMENTS
June 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
-------- ---------
<S> <C> <C>
COMMON STOCKS -- 100%
Aeronautical Systems -- 2.5%
Raytheon Co. CL "A".................................. 1,687 $ 97,213
--------
Total Aeronautical Systems 97,213
--------
Aircraft -- 3.5%
Boeing Co............................................ 3,000 133,688
--------
Total Aircraft 133,688
--------
Computer Equipment -- 6.2%
Hewlett Packard...................................... 4,000 239,500
--------
Total Computer Equipment 239,500
--------
Computer Software-- 19.7%
Microsoft Corp. (a).................................. 7,000 758,625
--------
Total Computer Software 758,625
--------
Computer Systems Design -- 5.6%
Sun Microsystems (a)................................. 5,000 217,187
--------
Total Computer Systems Design 217,187
--------
Consumer Finance -- 2.6%
Associates First Capital "A"......................... 1,310 100,706
--------
Total Consumer Finance 100,706
--------
Electronics -- 3.7%
General Motors Class "H"............................. 3,000 141,375
--------
Total Electronics 141,375
--------
Motor Vehicles -- 7.6%
Ford Motor Co....................................... 5,000 295,000
--------
Total Motor Vehicles 295,000
--------
</TABLE>
(Continued)
<PAGE>
STEADMAN SECURITY TRUST
PORTFOLIO OF INVESTMENTS
June 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
---------- ----------
<S> <C> <C>
Photographic Supplies -- 4.2%
Eastman Kodak Co........................................ 2,200 160,738
-------
Total Photographic Supplies 160,738
-------
Residential Mortgages -- 5.5%
FNMA.................................................... 3,500 212,625
-------
Total Residential Mortgages 212,625
-------
Semiconductor --15.4%
Intel Corp.............................................. 8,000 593,000
-------
Total Semiconductor 593,000
-------
Telecom Mfg. --6.5%
Lucent Technologies..................................... 3,000 249,563
-------
Total Telecom Mfg. 249,563
-------
Telecom Services -- 0.1%
Champion Tech Hldgs Ltd................................. 25,000 4,250
-------
Total Telecom Services 4,250
-------
Telephone Services -- 16.9%
Worldcom Inc. (a)....................................... 13,500 653,906
-------
Total Telephone Services 653,906
-------
Total Portfolio of Investments (Cost $2,374,155).......... $ 3,857,376
============
</TABLE>
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN SECURITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
<TABLE>
ASSETS:
<S> <C>
Investments at value (Cost $2,374,155) (Note 1).............. $ 3,857,376
Cash and cash equivalents (Note 1)........................... 78,038
Dividends receivable......................................... 1,945
Interest receivable.......................................... 257
-----------
Total assets............................................... 3,937,616
-----------
LIABILITIES:
Accounts payable and accrued expenses........................ 27,428
Investment advisory and service fees payable (Note 4)........ 3,559
Other payable to affiliate (Note 4).......................... 2,196
Payable for trust shares redeemed............................ 1,136
-----------
Total liabilities........................................... 34,319
-----------
NET ASSETS..................................................... $ 3,903,297
===========
NET ASSETS CONSIST OF:
Accumulated net investment loss.............................. $(5,553,307)
Unrealized appreciation of investments....................... 1,483,221
Accumulated net realized gains from security transactions.... 99
Paid-in capital.............................................. 7,973,284
-----------
$ 3,903,297
===========
NET ASSET VALUE, offering price and redemption price per share
($3,903,297 / 4,217,136 shares of no par value trust shares).. $ .93
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN SECURITY TRUST
STATEMENT OF OPERATIONS
for the year ended June 30, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends........................................................ $ 24,024
Interest......................................................... 13,129
--------
Total income........................................... $ 37,153
----------
EXPENSES:
Salaries and employee benefits (Note 4).......................... 121,975
Investment advisory fee (Note 4)................................. 41,538
Professional fees................................................ 34,688
Proposed merger expense (Note 7)................................. 124,457
Shareholder servicing fee (Note 4)............................... 28,299
Rent............................................................. 28,097
Custodian fees................................................... 2,222
Computer services................................................ 7,960
Reports to shareholders.......................................... 6,893
Trustees' fees and expenses (Note 4)............................. 1,843
Miscellaneous.................................................... 11,266
--------
Total expenses................................................ 409,238
----------
Net investment loss........................................... (372,085)
----------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (NOTES 1 AND 3):
Net realized gain from investment transactions................... 821,134
Change in unrealized appreciation of investments................ 320,395
----------
Net gain on investments.......................................... 1,141,529
----------
Net increase in net assets resulting from operations............. $ 769,444
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN SECURITY TRUST
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.................................................... $ (372,085) $ (534,287)
Net realized gain from investment transactions......................... 821,134 306,022
Change in unrealized appreciation
of investments....................................................... 320,395 644,512
----------- -----------
Net increase in net assets resulting
from operations...................................................... 769,444 416,247
----------- -----------
Decrease in net assets from trust share transactions (Note 2)............ (1,263,131) (600,754)
Decrease in net assets................................................. (493,687) (184,507)
----------- -----------
Net assets at beginning of period........................................ 4,396,984 4,581,491
----------- -----------
Net assets at end of period, including accumulated
net investment loss of $5,553,307 and $5,181,222....................... $ 3,903,297 $ 4,396,984
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN SECURITY TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the period
For the years ended October 1, 1994 For the years ended
June 30 through June 30 September 30
----------------------------- --------------- -------------------------
1998 1997 1996 1995\\*\\ 1994 1993
--------- --------- --------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period..... $ .76 $ .70 $ .73 $ .72 $ .87 $ .64
------- -------- ------- ------- ------- -------
Net investment loss...................... (.09) (.11) (.17) (.03) (.08) (.05)
Net realized and unrealized
gain (loss) on investments............ .26 .17 .14 .04 (.07) .28
------- -------- ------- ------- ------- -------
Total from investment operations......... .17 .06 (.03) .01 (.15) .23
------- -------- ------- ------- ------- -------
Net asset value, end of period............ $ .93 $ .76 $ .70 $ .73 $ .72 $ .87
======= ======== ======= ======= ======= =======
Ratios/Supplemental Data:
Total return............................. 21.40% 8.89% (4.38)% 1.85%\\**\\ (17.24)% 35.9%
Ratio of expenses to average net assets.. 9.85% 12.42% 8.14% 8.17%\\**\\ 7.76% 5.79%
Ratio of net investment loss
to average net assets.................. (8.95)% (11.82)% (7.48)% (7.23)%\\**\\ (6.09)% (4.63)%
Portfolio turnover rate.................. 48% 193% 231% 505%\\**\\ 241% 300%
Net assets, end of period (in thousands). $ 3,903 $ 4,397 $ 4,581 $ 5,735 $ 6,307 $ 8,844
</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 SECURITY TRUST
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. 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.
<PAGE>
STEADMAN SECURITY TRUST
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-- 609 $ 400
Shares redeemed (1,550,896) (1,263,131) (812,875) (601,154)
--------- --------- -------- -------
Net decrease (1,550,896) $(1,263,131) (812,266) $(600,754)
========= =======
Shares outstanding:
Beginning of period 5,768,032 6,580,298
--------- ---------
End of period 4,217,136 5,768,032
========= =========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1998, purchases and proceeds from sales of
investment securities aggregated $1,811,755 and $3,119,704 respectively. Net
unrealized appreciation of investments aggregated $1,483,221 of which $2,492,152
related to gross unrealized appreciation where there is an excess of value over
tax cost and $1,008,931 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>
5. FEDERAL INCOME TAXES
In the fiscal year ended June 30, 1998, 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 year ended June 30, 1998, therefore no income tax
provision is required. A full valuation allowance has been provided for deferred
tax assets, totalling approximately $2,130,000 at June 30, 1998, 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 $5,581,000 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; (2011) $401,000; (2012) $543,000 and (2013) $389,000.
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 3% 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 cost 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.
<PAGE>
STEADMAN SECURITY TRUST
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 Security Trust,
account information or daily
Net Asset Values, call:
Shareholder Services
1-800-424-8570
202-223-1000 Washington, D.C. area
STEADMAN
SECURITY
TRUST
(FORMERLY STEADMAN
ASSOCIATED FUND)
ANNUAL
REPORT
June 30, 1998
A Steadman NO-LOAD Mutual Fund
[LOGO APPEARS HERE] STEADMAN SECURITY
CORPORATION
Investment Adviser
