<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 INVESTMENT FUND
Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- --------
COMMON STOCK -- 100%
<S> <C> <C>
Communications Equipment -- 18.3%
Electronic Data Systems............... 2,000 $107,500
Motorola, Inc......................... 2,000 125,750
Precision Systems (a)................. 5,000 58,750
--------
Total Communications Equipment 292,000
--------
Computer Equipment -- 6.2%
Hewlett-Packard...................... 1,000 99,625
--------
Total Computer Equipment 99,625
--------
Computer Peripherals -- 10.6%
Cisco Systems (a).................... 3,000 169,875
--------
Total Computer Peripherals 169,875
--------
Computer Storage Equipment -- 13.3%
Iomega Corp. (a)..................... 5,000 145,000
Seagate Technology (a)............... 1,500 67,500
--------
Total Computer Storage Equipment 212,500
--------
Computer Systems Design -- 7.4%
Sun Microsystems (a)................. 2,000 117,750
--------
Total Computer Systems Design 117,750
--------
Medical Instruments -- 5.6%
Boston Scientific (a)................ 2,000 90,000
--------
Total Medical Instruments 90,000
--------
</TABLE>
================================================================================
<PAGE>
================================================================================
STEADMAN INVESTMENT FUND
Portfolio of Investments
June 30, 1996
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- --------
<S> <C> <C>
Motor Vehicles -- 9.4%
General Motors Class "H"........................... 2,500 150,313
--------
Total Motor Vehicles 150,313
--------
Oil & Gas Drilling -- 8.7%
Global Marine (a).................................. 10,000 138,750
--------
Total Oil & Gas Drilling 138,750
--------
Pharmaceutical -- 8.1%
Regeneron Pharmaceutical (a)....................... 7,500 130,312
--------
Total Pharmaceutical 130,312
--------
Radio and TV Equipment -- 4.3%
Geotek Communications, Inc. (a).................... 5,000 68,438
--------
Total Radio and TV Equipment 68,438
--------
Semiconductor -- 3.4%
Intel Corp. Warrants (a)........................... 1,500 54,375
--------
Total Semiconductor 54,375
--------
Telephone Communications --4.7%
Lucent Technology.................................. 2,000 75,750
--------
Total Telephone Communications 75,750
--------
Total Portfolio of Investments (Cost $1,655,198) $1,599,688
==========
</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 Investment Fund
We have audited the accompanying statement of assets and liabilities of
Steadman Investment Fund, including the portfolio of investments, as of June 30,
1996, and the related statement of operations for the year ended June 30, 1996,
the statements of changes in net assets for the year then ended and the periods
January 1, 1995 through June 30, 1995, and January 1, 1994 through December 31,
1994 and the financial highlights for the year ended June 30, 1996 and the
period January 1, 1995 through June 30, 1995, and each of the four years ended
December 31, 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 Investment 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.
July 29, 1996
================================================================================
<PAGE>
================================================================================
STEADMAN INVESTMENT FUND
Statement of Assets and Liabilities
June 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments at value (Cost $1,655,198) (Note 1)......... $ 1,599,688
Cash and cash equivalents (Note 1)...................... 261,004
Interest receivable..................................... 567
Dividends receivable.................................... 630
-----------
Total assets.......................................... 1,861,889
-----------
Liabilities:
Accounts payable and accrued expenses................... 14,858
Investment advisory and service fees payable (Note 4)... 5,571
Other payable to affiliate (Note 4)..................... 7,593
Payable for securities purchased........................ 70,400
-----------
Total liabilities..................................... 98,422
-----------
Net Assets....................................................... $ 1,763,467
===========
Net assets consist of:
Accumulated net investment loss......................... $(1,675,340)
Unrealized depreciation of investments.................. (55,510)
Accumulated net realized losses......................... (389,330)
Capital paid in less distributions since inception...... 3,883,647
-----------
$ 1,763,467
===========
Net asset value, offering price and redemption price per share
($1,763,467 / 2,038,728 shares of no par value trust shares)..... $ .86
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN INVESTMENT FUND
Statement of Operations
for the year ended June 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends....................................... $ 1,530
Interest........................................ 112,558
---------
Total income.......................... $ 114,088
Expenses:
Salaries and employee benefits (Note 4)......... 84,139
Shareholder servicing fee (Note 4).............. 50,666
Professional fees............................... 30,275
Investment advisory fee (Note 4)................ 21,259
Miscellaneous................................... 8,671
Rent............................................ 13,163
Computer services............................... 7,943
Reports to shareholders......................... 5,149
Trustees' fees and expenses (Note 4)............ 3,528
Custodian fees.................................. 400
---------
Total expenses................................ 225,193
---------
Net investment loss........................... (111,105)
---------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3): Net realized
gain from investment transactions............... 47,825
Change in unrealized appreciation/
(depreciation) of investments................... (271,135)
---------
Net loss on investments....................... (223,310)
---------
Net decrease in net assets resulting
from operations............................... $(334,415)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN INVESTMENT FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the period For the
For the year January 1, 1995 year ended
ended June 30, through June December 31,
1996 30, 1995* 1994
-------------- --------------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss............................................... $ (111,105) $ (46,958) $ (46,458)
Net realized gain (loss) from investment transactions............. 47,825 (242,568) (194,587)
Change in unrealized depreciation/appreciation.................... (271,135) 491,165 (779,305)
---------- ---------- -----------
Net increase (decrease) in net assets resulting
from operations................................................. (334,415) 202,139 (1,160,720)
Decrease in net assets from trust share transactions (Note 2)...... (200,097) (63,007) (230,035)
---------- ---------- -----------
Increase (decrease) in net assets.................................. (534,512) 139,132 (1,390,755)
Net assets at beginning of period.................................. 2,297,979 2,158,847 3,549,602
---------- ---------- -----------
Net assets at end of period (including accumulated net
investment loss of $1,679,999, $1,568,894
and $204,464 respectively)......................................... $1,763,467 $2,297,979 $ 2,158,847
========== ========== ===========
</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 INVESTMENT FUND
Financial Highlights
<TABLE>
<CAPTION>
For the year For the period
ended January 1, 1995
June 30, through June 30, For the years ended December 31,
--------- ---------------- --------- -------- -------- --------
1996 1995* 1994 1993 1992 1991
--------- ---------------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period......... $ 1.02 $ .93 $ 1.42 $ 1.38 $ 1.49 $ 1.12
Net investment loss.......................... (.13) (.02) (.08) (.06) (.09) (.06)
Net realized and unrealized
gain (loss) on investments................. (.03) 11 .(.41) .10 .(.02) .43
-------- ---------- -------- ------- ------- -------
Total from investment operations........... (.16) .09 (.49) .04 (.11) .37
-------- ---------- -------- ------- ------- -------
Net asset value, end of period............... $ .86 $ 1.02 $ .93 $ 1.42 $ 1.38 $ 1.49
======== ========== ======== ======= ======= =======
Ratios/Supplemental Data:
Total return................................. (15.53)% 19.36%** (34.51)% 2.89% (7.05)% 32.95%
Ratio of expenses to average net assets..... 10.60% 10.54%** 8.90% 6.48% 7.78% 7.88%
Ratio of net investment loss to average
net assets................................. (5.23)% (4.24)%** (6.65)% (4.52)% (6.09)% (5.08)%
Portfolio turnover rate..................... 382% 226%** 282% 179% 263% 245%
Net assets, end of period (in thousands).... $ 1,763 $ 2,298 $ 2,159 $ 3,550 $ 3,781 $ 4,277
</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 INVESTMENT FUND
Notes to Financial Statements
1. Significant accounting policies
Steadman Investment 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 December 31 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.
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 INVESTMENT 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 January 1 For the year
ended June 30, 1996 1995 through June 30, 1995 ended December 31, 1994
------------------- -------------------------- ------------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... -- 0 -- $ -- 0 -- -- 0 -- $-- 0 -- -- 0 -- $ -- 0--
Shares redeemed............... (205,360) (200,097) (65,380) (63,007) (183,957) (230,035)
------- ------- ------ ------ ------- -------
Net decrease............... (205,360) $(200,097) (65,380) $(63,007) (183,957) $(230,035)
========= ========
Shares outstanding:
Beginning of period...... 2,244,088 2,309,468 2,493,425
--------- --------- ---------
End of Period............ 2,038,728 2,244,088 2,309,468
========= ========= =========
</TABLE>
3. Purchases and sales of securities
During the year ended June 30, 1996, purchases and sales proceeds of
investment securities aggregated $7,862,972 and $8,232,376, respectively.
The net unrealized depreciation of investments aggregated $55,510 of which
$75,670 related to gross unrealized appreciation where there is an excess of
value over tax cost and $131,180 related to gross unrealized depreciation of
investments where there is an excess of tax cost over value.
4. Investment advisory fee and transactions with affiliates
Steadman Security Corporation (SSC), the affilate, has provided investment
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 provides 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.
================================================================================
<PAGE>
================================================================================
Certain officers and trustees of the Fund are "affiliated persons" of the
Investment Adviser, as defined by the Investment Company Act of 1940.
5. Federal income taxes
In the fiscal year June 30, 1996, the Fund did not meet the asset
diversification requirements applicable to regulated investment 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 in the
fiscal period ended June 30, 1996, therefore no income tax provision is
required. A full valuation allowance has been provided for the deferred tax
assets, totalling approximately $784,000 at June 30, 1996, which arise
principally from net operating loss carryforwards and capital loss carryforwards
available for income tax purposes.
The Fund has net operating loss carryforwards approximating $1,675,000 which
are available to offset future net operating income in non-qualifying years, if
any, which expire as follows: (2004) $299,000; (2005) $304,000; (2006)
$222,000; (2007) $278,000; (2008) $217,000; (2009) $204,000; (2010) $46,000 and
(2011) 112,000. Capital loss carryforwards aggregating approximately $389,000
are available to offset future capital gains, if any, expiring as follows:
(1999) $147,000 and (2000) $243,000.
================================================================================
<PAGE>
STEADMAN INVESTMENT 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. 20005
For more information about
Steadman Investment Fund.
account information or daily
Net Asset Values, call:
Shareholder Services
1-800-424-8570
202-223-1000 Washington, D.C. area
Fellow Shareholders:
STEADMAN
Investment
Fund
ANNUAL
REPORT
June 30, 1996
A Steadman NO-LOAD Mutual Fund
STEADMAN SECURITY
[LOGO OF STEADMAN APPEARS HERE] CORPORATION
Investment Adviser
