<PAGE>
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Fellow Shareholders:
After several years of strong performance the economy continues to exhibit
strength with a low level of inflation and stability of interest rates. Although
signs of slowing appeared in the second quarter corporate profits were better
than predicted and firms are pursuing growth with added investment. An index of
manufacturing strength rose to its highest level since 1994.
Technology has spurred the rise of stock market prices and your Fund's
portfolio has been structured to contain the companies that have been in the
forefront of technology.
I would now like to inform you of a very important development that
will affect the Fund and its shareholders. It is disclosed in footnote No. 7 of
this Annual report. In the near future you will receive a proxy statement and
prospectus that describe the purpose and reasons why management has decided to
embark upon this endeavor.
Sincerely,
/s/ Charles W. Steadman
Charles W. Steadman
Chairman of the Board of
Trustees and President
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<PAGE>
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INDEPENDENT AUDITORS' REPORT
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,
1997, and the related statements of operations, changes in net assets and the
financial highlights for the year then ended. 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 audit. The statement of changes in net assets
for the year ended June 30, 1996 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 three years in the period ended December 31, 1994 were audited by other
auditors whose report, dated August 6, 1996, expressed an unqualified opinion on
the statement of changes in net assets and those financial highlights.
We conducted our audit 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, 1997, 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
audit provides 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, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
Bethesda, Maryland Reznick Fedder & Silverman
July 25, 1997
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<PAGE>
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STEADMAN INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- ------------
<S> <C> <C>
COMMON STOCK -- 100%
Computer Peripherals -- 15.1%
Cisco Systems (a)............................... 3,500 $ 234,937
----------
Total Computer Peripherals 234,937
----------
Computer Software -- 8.1%
Oracle Corp. (a)................................ 2,500 125,937
----------
Total Computer Software 125,937
Computer Switching -- 10.9%
Xylan Corp. (a)................................. 10,000 170,000
----------
Total Computer Switching 170,000
----------
Computer Systems Design -- 16.8%
Sun Microsystems (a)............................ 7,000 260,530
----------
Total Computer Systems Design 260,530
----------
Motor Vechicles -- 8.6%
General Motors "H".............................. 2,300 132,825
----------
Total Motor Vechicles 132,825
----------
Telecom Mfg. -- 13.9%
Lucent Technologies............................. 3,000 216,185
----------
Total Telecom Mfg. 216,185
----------
Semiconductor -- 16.3%
Intel Corp. Warrants (a)........................ 2,500 253,750
----------
Total Semiconductor 253,750
----------
Telephone Services -- 10.3%
Worldcom Inc. (a)............................... 5,000 160,000
----------
Total Telephone Services 160,000
----------
Total Portfolio of Investments (Cost $1,191,522) $1,554,164
==========
</TABLE>
(a) Non-Income producing security
The accompanying notes are an integral part of the financial statements
================================================================================
<PAGE>
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STEADMAN INVESTMENT FUND
STATEMENT OF ASSETS AND lIABILITIES
June 30,1997
<TABLE>
<S> <C>
Assets:
Investments at value (Cost $1,191,522) (Note 1) ......................... $ 1,554,164
Cash and cash equivalents (Note 1)....................................... 139,235
Interest receivable ..................................................... 788
------------
Total assets........................................................ 1,694,187
------------
Liabilities:
Accounts payable and accrued expenses.................................... 34,903
Investment advisory and service fees payable (Note 4).................... 1,358
Other payable to affiliate (Note 4)...................................... 15,235
Payable for trust shares redeemed........................................ 8,801
------------
Total liabilities .................................................. 60,297
------------
Net Assets.................................................................... $ 1,633,890
============
Net assets consist of:
Accumulated net investment loss.......................................... $ (1,943,059)
Unrealized appreciation of investments................................... 362,642
Accumulated net realized losses.......................................... (574,661)
Capital paid in less distributions since inception....................... 3,788,968
------------
$ 1,633,890
============
Net asset value,offering price and redemption price per share
($1,633,890 / 1,928,494 shares of no par value trust shares).................. $ .85
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN INVESTMENT FUND
STATEMENT OF OPERATIONS
for the year ended June 30,1997
<TABLE>
<S> <C> <C>
Investment Income:
Dividends.................................................................... $ 5,670
Interest .................................................................... 6,659
---------
Total income ............................................................ $ 12,329
Expenses:
Salaries and employee benefits (Note 4)...................................... 87,965
Shareholder servicing fee (Note 4)........................................... 47,647
Professional fees............................................................ 33,357
Proposed merger expense (Note 7) ............................................ 54,392
Investment advisory fee (Note 4) ............................................ 17,117
Miscellaneous ............................................................... 9,759
Rent ........................................................................ 11,734
Computer services ........................................................... 3,992
Reports to shareholders ..................................................... 6,416
Trustees' fees and expenses (Note 4) ........................................ 5,619
Custodian fees .............................................................. 2,050
---------
Total expenses .......................................................... 280,048
--------------
Net investment loss ..................................................... (267,719)
--------------
Realized and Unrealized Gain (Loss) on Investments (Notes 1 and 3):
Net realized loss from investment transactions .............................. (185,331)
Change in unrealized appreciation/(depreciation) of investments ............. 418,153
--------------
Net gain on investments ..................................................... 232,822
--------------
Net decrease in net assets resulting from operations .................... $ (34,897)
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN INVESTMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year For the year
ended June 30, ended June 30,
1997 1996
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss............................................... $ (267,719) $ (111,105)
Net realized (loss) gain from investment transactions............. (185,331) 47,825
Change in unrealized appreciation/(depreciation) of investments... 418,153 (271,135)
-------------- -------------
Net decrease in net assets resulting
from operations.............................................. (34,897) (334,415)
Decrease in net assets from trust share transactions (Note 2).......... (94,680) (200,097)
-------------- -------------
Decrease in net assets................................................. (129,577) (534,512)
Net assets at beginning of period...................................... 1,763,467 2,297,979
-------------- -------------
Net assets at end of period (including accumulated net
investment loss of $1,947,718 and $1,679,999).......................... $ 1,633,890 $ 1,763,467
============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
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STEADMAN INVESTMENT FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the year For the year For the period
ended ended January 1, 1993
June 30, June 30, through June 30, For the years ended December 31,
------------ ------------ ---------------- ------------------------------------
1997 1996 1995* 1994 1993 1992
------------ ------------ ---------------- ------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value,beginning of period ......... $.86 $1.02 $.93 $1.42 $1.38 $1.49
------------ ------------ ---------------- ------------------------------------
Net investment loss ......................... (.03) (.13) (.02) (.08) (.06) (.09)
Net realized and unrealized
gain (loss) on investments ............... .02 (.03) .11 (.41) .10 (.02)
------------ ------------ ---------------- ------------------------------------
Total from investment operations ......... (.01) (.16) .09 (.49) .04 (.11)
------------ ------------ ---------------- ------------------------------------
Net asset value, end of period .............. $.85 $.86 $1.02 $ .93 $1.42 $1.38
============ ============ ================ ====================================
Ratios/Supplemental Data:
Total return ................................ (2.05)% (15.53)% 19.36 %** (34.51)% 2.89% (7.05)%
Ratios of expenses to average net
assets ................................... 16.47% 10.60% 10.54%** 8.90% 6.48% 7.78%
Ratio of net investment loss to average
net assets ............................... (15.75)% (5.23)% (4.24)%** (6.65)% (4.52)% (6.09)%
Portfolio turnover rate ..................... 138% 382% 226%** 282% 179% 263%
Net assets, end of period (in thousands) .... $1,634 $1,763 $2,298 $2,159 $3,550 $3,781
</TABLE>
*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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<PAGE>
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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.
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>
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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 year
ended June 30,1997 ended June 30,1996
------------------ ------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold................. -- 0 -- $ -- 0 -- -- 0 -- $ -- 0 --
Shares redeemed............. (110,234) (94,680) (205,360) (200,097)
--------- --------- --------- ---------
Net decrease............ (110,234) $ (94,680) (205,360) $(200,097)
========= =========
Shares outstanding:
Beginning of period..... 2,038,728 2,244,088
--------- ---------
End of Period........... 1,928,494 2,038,728
========= =========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1997, purchases and sales proceeds of
investment securities aggregated $2,176,772 and $2,455,118, respectively.
The net unrealized appreciation of investments aggregated $362,642 of which
$800,241 related to gross unrealized appreciation where there is an excess of
value over tax cost and $437,599 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), an 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
shareholder servicing 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 officers and employees who performed functions
other than investment advisory and shareholder service functions for the Fund.
================================================================================
<PAGE>
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STEADMAN INVESTMENT FUND
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 ended June 30, 1997, 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 year ended June 30, 1997, therefore no income tax provision is required.
A full valuation allowance has been provided for the deferred tax assets,
totalling approximately $958,000 at June 30, 1997, 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 $1,946,000
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) $40,000;
(2011) $112,000 and (2012) $270,000. Capital loss carryforwards aggregating
approximately $575,000 are available to offset future capital gains, if any,
expiring as follows:(1999) $147,000; (2000) $243,000 and (2003) $185,000.
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 16% 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 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 change to a close-end investment
company whose name will change to Steadman Security Trust (SST). In connection
with the merger, SST will amend its investment objective to primarily seek
current income and secondarily to maximize total return. Following the proposed
merger, fund shares no longer will be sold or redeemed by SST on a request
basis, but may be sold to other investors in market transactions. 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. A Registration Statement or Form N-14 is pending SEC
regulatory approval and the proposed merger requires the approval of the
Shareholders of all of the funds.
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<PAGE>
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THIS PAGE IS INTENTIONALLY BLANK
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<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
Reznick Fedder & Silverman P.C.
4520 East West Highway
Bethesda,
Maryland 20814
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
- --------------------------------------------------------------------------------
STEADMAN
INVESTMENT
FUND
ANNUAL
REPORT
June 30, 1997
A Steadman NO-LOAD Mutual Fund
[LOGO] STEADMAN SECURITY
CORPORATION
Investment Adviser
- --------------------------------------------------------------------------------
