<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.
At the December 18, 1997 Special Meeting of Shareholders three new trustees were
elected. We welcome the election of Dr. William M. Crain, Richard O. Haase and
Paul F. Wagner, the new Chairman, to the Fund's Board of Trustees.
With the changes that have recently occurred, and those that are planned, we
look forward to the task of rebuilding your Fund as an attractive investment
opportunity.
Sincerely,
/s/ Max Katcher
Max Katcher
President
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This Page Intentionally Blank
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STEADMAN SECURITY TRUST
Portfolio of Investments
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ----------
<S> <C> <C>
COMMON STOCKS -- 100%
Aeronautical Systems -- 2.6%
Raytheon Co. CIA .................................................. 1,687 $ 83,190
----------
Total Aeronautical Systems 83,190
----------
Aircraft -- 4.5%
Boeing Co. (a). ................................................... 3,000 146,813
----------
Total Aircraft 146,813
----------
Biological Diagnostics -- 0.7%
Bioreliance Corp (a) .............................................. 1,000 23,000
----------
Total Biological Diagnostics 23,000
----------
Computer Equipment -- 7.7%
Hewlett Packard (a) ............................................... 4,000 250,000
----------
Total Computer Equipment 250,000
----------
Computer Software -- 15.3%
Microsoft Corp. (a) ............................................... 3,500 452,375
Oracle Corp. (a) .................................................. 2,000 44,625
----------
Total Computer Software 497,000
----------
Computer Systems Design -- 6.1%
Sun Microsystems (a) .............................................. 5,000 199,375
----------
Total Computer Systems Design 199,375
----------
Motor Vehicles -- 10.9%
Ford Motor Co. .................................................... 5,000 243,438
General Motors "H" ................................................ 3,000 110,812
----------
Total Motor Vehicles 354,250
----------
Petroleum Refining -- 6.0%
Unocal Corp. ...................................................... 5,000 194,063
----------
Total Petroleum Refining 194,063
----------
</TABLE>
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<PAGE>
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STEADMAN SECURITY TRUST
Portfolio of Investments
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ------------
<S> <C> <C>
Photographic Supplies -- 4.1%
Eastman Kodak Co ................................................ 2,200 133,787
---------
Total Photographic Supplies 133,787
---------
Residential Mortgages -- 6.1%
FNMA. ........................................................... 3,500 199,719
---------
Total Residential Mortgages 199,719
---------
Semiconductor -- 19.4%
Intel Corp. ..................................................... 9,000 632,250
---------
Total Semiconductor 632,250
---------
Telecom Mfg. -- 3.7%
Lucent Technologies ............................................. 1,500 119,812
---------
Total Telecom Mfg. 119,812
---------
Telecom Services -- 0.3%
Champion Tech Hldgs Ltd ......................................... 25,000 12,000
---------
Total Telecom Services 12,000
---------
Telephone Services -- 12.6%
Worldcom Inc. (a) ............................................... 13,500 408,375
---------
Total Telecom Mfg. 408,375
---------
Total Common Stocks (Cost $2,752,163) ........................... $ 3,253,634
============
</TABLE>
(a) Non-income producing security.
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN SECURITY TRUST
Statement of Assets and Liabilities
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets:
Investments at value (Cost $2,752,163) (Note 1) .............. $ 3,253,634
Cash and cash equivalents (Note 1) ........................... 333,951
Dividends receivable ......................................... 2,528
Interest receivable .......................................... 3,339
-----------
Total assets ............................................... 3,593,452
-----------
Liabilities:
Accounts payable and accrued expenses ........................ 84,650
Investment advisory and service fees payable (Note 4) ........ 5,362
Other payable to affiliate (Note 4) .......................... 10,917
Payable for Trust shares redeemed ............................ 2,467
Miscellaneous payable ........................................ 4,174
-----------
Total liabilities .......................................... 107,570
-----------
Net Assets ....................................................... $ 3,485,882
===========
Net assets consist of:
Undistributed net investment loss ............................ $ (274,550)
Unrealized appreciation of investments ....................... 501,471
Accumulated net realized gain from security transactions ..... 1,397,168
Paid-in capital .............................................. 1,861,793
-----------
$ 3,485,882
===========
Net asset value, offering price and redemption price per share
($3,485,882 / 4,725,832 shares of no par value trust shares) $ .74
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN SECURITY TRUST
Statements of Operations
for the six months ended
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends ..................................................... $ 12,188
Interest ...................................................... 9,766
------------
Total income ........................................... $ 21,954
------------
Expenses:
Salaries and employee benefits (Note 4) ....................... 81,932
Investment advisory fee (Note 4) .............................. 21,695
Professional fees ............................................. 25,365
Proposed merger expense (Note 6) .............................. 121,667
Shareholder servicing fee (Note 4) ............................ 14,900
Rent .......................................................... 15,834
Miscellaneous ................................................. 6,507
Blue Sky Registration Fees .................................... 50
Custodian fees ................................................ 1,600
Computer services ............................................. 3,567
Reports to shareholders ....................................... 3,388
------------
Total expenses ........................................... 296,504
------------
Net investment loss ........................................ (274,550)
------------
Realized and Unrealized Gain/(Loss) on Investments (Notes 1 and 3):
Net realized gain from investment transactions ................ 873,887
Change in unrealized appreciation (depreciation)
of investments .............................................. (661,356)
------------
Net gain on investments ....................................... 212,531
------------
Net decrease in net assets resulting from operations .......... $ (62,019)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN SECURITY TRUST
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the 6 months For the year For the year
ended ended June 30, ended
December 31, 1997/(1)/ 1997 June 30, 1996
-------------------- -------------- -------------
<S> <C> <C> <C>
Decrease in net assets from operations:
Net investment loss ........................................... $ (274,550) $ (534,287) $ (388,362)
Net realized gain (loss) from investment transactions ......... 873,887 306,022 517,110
Change in unrealized appreciation/depreciation ................ (661,356) 644,512 (352,459)
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations ................................... (62,019) 416,247 (223,711)
Decrease in net assets from trust share transactions (Note 2) ....... (849,083) (600,754) (929,919)
----------- ----------- -----------
Increase (decrease) in net assets ................. (911,102) (184,507) (1,153,630)
Net assets at beginning of period ................................... 4,396,984 4,581,491 5,735,121
----------- ----------- -----------
Net assets at end of period (including accumulated
net investment loss of $4,910,436, $4,635,886 and $4,247,524
respectively) ........................................... $ 3,485,882 $ 4,396,984 $ 4,581,491
=========== =========== ===========
</TABLE>
(1) Unaudited
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN SECURITY TRUST
Financial Highlights
<TABLE>
<CAPTION>
For the 6 months For the year For the year For the period
ended ended ended October 1, 1994 For the years ended
December 31/(1)/ June 30, June 30, through June 30, September 30,
---------------- ---------- --------- ---------------- ----------------------
1997 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 ................. (.05) (.11) (.17) (.03) (.08) (.05)
Net realized and unrealized
gain (loss) on investments .......... .03 .17 .14 .04 (.07) .28
--------- --------- --------- --------- --------- ---------
Total from investment operations .......... (.02) .06 (.03) .01 (.15) .23
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ............ $ 74 $ .76 $ .70 $ .73 $ .72 $ .87
========= ========= ========= ========= ========= =========
Ratios/Supplemental Data:
Total return .............................. (5.26)%** 8.89% (4.38)% 1.85%** (17.24)% 35.9%
Ratio of expenses to average net assets ... 14.05%** 12.42% 8.14% 8.17%** 7.76% 5.79%
Ratio of net investment income (loss)
to average net assets .................. (13.01)%** (11.82)% (7.48)% (7.23)%** (6.09)% (4.63)
Portfolio turnover rate ................... 92%** 193% 231% 505%** 241% 300%
Net assets, end of period (in thousands) .. $ 3,486 $ 4,397 $ 4,581 $ 5,735 $ 6,307 $ 8,844
</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 SECURITY TRUST
Notes to Financial Statements
1. Significant accounting policies
Steadman Security Trust (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. 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.
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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 6 months For the year For the year ended
ended December 31, 1997 ended June 30, 1997 June 30, 1996
------------------------- ----------------------- -----------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............. --0-- $ --0-- 609 $ 400 269 $ 200
Shares redeemed.......... (1,042,200) (849,084) (812,875) (601,154) (1,295,786) (930,119)
----------- --------- --------- ----------- ----------- ----------
Net decrease.......... (1,042,200) (849,084) (812,266) $ (600,754) (1,295,517) $(929,919)
========= =========== ==========
Shares outstanding:
Beginning of period. 5,768,032 6,580,298 7,875,815
--------- --------- ---------
End of period....... 4,725,832 5,768,032 6,580,298
========= ========= =========
</TABLE>
3. Purchases and sales of securities
During the six months ended December 31, 1997, purchases and proceeds from
sales of investment securities aggregated $1,674,655 and $2,888,795
respectively.
Unrealized appreciation of investments aggregated $501,471 of which
$618,594 related to gross unrealized appreciation where there is an excess of
value over tax cost and $117,123 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.
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<PAGE>
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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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<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 Accountants
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)
SEMI-ANNUAL
REPORT
December 31, 1997
A Steadman NO-LOAD Mutual Fund
[LOGO OF STEADMAND SECURITY APPEARS HERE]
