<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 INVESTMENT FUND
Portfolio of Investments
December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- --------
COMMON STOCKS--100%
<S> <C> <C>
Semiconductors--23.6%..............................
Intel Corp. Warrants (a)................... 4,500 415,125
-------
Total Semiconductors 415,125
-------
Computer Peripherals--12.7%
Cisco Systems (a).......................... 3,500 222,688
-------
Total Computer Peripherals 222,688
-------
Computer Systems Design--15.8%
Oracle Corporation (a)..................... 4,200 175,350
-------
Sun Microsystems (a)....................... 4,000 102,750
-------
Total Computer Systems Design 278,210
-------
Pharmaceutical--9.4%
Regeneron Pharmaceuticals (a).............. 10,200 164,475
-------
Total Pharmaceuticals 164,475
-------
Motor Vehicles--8.0%
General Motors Class H..................... 2,500 140,625
-------
Total Motor Vehicles 140,625
-------
Telephone Communications--7.9%
Lucent Technology.......................... 3,000 138,750
-------
Total Telephone Communications 138,750
-------
</TABLE>
<PAGE>
STEADMAN INVESTMENT FUND
Portfolio of Investments
December 31, 1996
(Unaudited)
Value
Shares (Note 1)
-------- --------
<TABLE>
<CAPTION>
<S> <C> <C>
Medical Instruments--6.8%
Boston Scientific (a)..................... 2,000 120,000
----------
Total Medical Instruments 120,000
----------
Computer Storage Equipment--6.7%
Seagate Technology (a).................... 3,000 118,500
----------
Total Computer Storage Equipment 118,500
----------
Oil & Gas Drilling--5.1%
Unit Corporation (a)...................... 9,000 88,875
----------
Total Oil & Gas Drilling 88,875
----------
Information Processing--4.0%
Imation Corporation (a)................... 2,500 70,312
----------
Total Information Processing 70,312
----------
Total Portfolio of Investments (Cost $1,480,195) $1,757,450
==========
(a) Non-income producing security
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN INVESTMENT FUND
Statement of Assets and Liabilities
December 31, 1996
(Unaudited)
<TABLE>
<S> <C>
Assets:
Investments at value (Cost $1,480,195) (Note 1)......... $ 1,757,450
Cash and cash equivalents (Note 1)...................... 20,837
Interest receivable..................................... 33
Receivable for securities sold.......................... 4,140
-----------
Total assets........................................... 1,782,460
-----------
Liabilities:
Accounts payable and accrued expenses................... 9,263
Investment advisory and service fees payable (Note 4)... 5,517
Other payable to affiliate (Note 4)..................... 7,424
-----------
Total liabilities...................................... 22,204
-----------
Net Assets....................................................... $ 1,760,256
===========
Net assets consist of:
Accumulated net investment loss......................... $(1,790,955)
Unrealized appreciation of investments.................. 277,255
Accumulated net realized losses......................... (571,627)
Capital paid in less distributions since inception...... 3,845,583
-----------
$ 1,760,256
===========
Net asset value, offering price and redemption price per share
($1,760,256 divided by 1,994,864 shares of no par value
trust shares)........................................... $ .88
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN INVESTMENT FUND
Statements of Operations for the six months ended
December 31, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income:
Dividends........................................................ $ 4,070
Interest......................................................... 4,095
----------
Total income................................................... $ 8,165
Expenses:
Salaries and employee benefits (Note 4).......................... 39,116
Shareholder servicing fee (Note 4)............................... 23,961
Professional fees................................................ 34,101
Investment advisory fee (Note 4)................................. 8,628
Rent............................................................. 6,063
Computer services................................................ 2,088
Reports to shareholders.......................................... 3,638
Trustees' fees and expenses (Note 4)............................. 3,262
Custodian fees................................................... 1,523
Miscellaneous.................................................... 1,421
----------
Total expenses................................................. 123,801
----------
Net investment loss............................................ (115,636)
----------
Realized and Unrealized Gain (Loss) on Investments (Notes 1 and 3):
Net realized loss from investment transactions................... (182,297)
Change in unrealized appreciation/(depreciation) of investments.. 332,765
----------
Net gain on investments........................................ 150,468
----------
Net increase in net assets resulting from operations........... $ 34,832
==========
</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 6 months For the year For the period
ended ended June 30, January 1, 1995
December 31, 1996/(1)/ 1996 through June 30, 1995*
---------------------- -------------- ----------------------
<S> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss......................................... $ (115,636) $ (111,105) $ (46,458)
Net realized gain (loss) from investment transactions....... (182,297) 47,825 (242,568)
Change in unrealized depreciation/appreciation.............. 332,765 (271,135) 491,165
------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations................................................. 34,832 (334,415) 202,139
Decrease in net assets from trust share transactions
(Note 2)...................................................... (38,043) (200,097) (63,007)
------------ ----------- -----------
Increase (decrease) in net assets.............................. (3,211) (534,512) 139,132
Net assets at beginning of period.............................. 1,763,467 2,297,979 2,158,847
------------ ----------- -----------
Net assets at end of period (including accumulated net
investment loss of $1,790,955, $1,679,999 and
$1,568,894 respectively)...................................... $ 1,760,256 $1,763,467 $2,297,979
============ =========== ===========
</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 INVESTMENT FUND
Financial Highlights
<TABLE>
<CAPTION>
For the 6 months For the year For the period
ended ended January 1, 1995
December 31, 1996/(1)/ June 30 through June 30 For the years ended December 31
---------- ---------- ----------- --------------------------------
1996 1996 1995* 1994 1993 1992
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <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........... (.05) (.13) (.02) (.08) (.06) (.09)
Net realized and unrealized
gain (loss) on investments.... .07 (.03) .11 (.41) .10 (.02)
---------- ---------- ----------- ---------- ---------- ----------
Total from investment
operations.................... .02 (.16) .09 (.49) .04 (.11)
---------- ---------- ----------- ---------- ---------- ----------
Net asset value, end of period.. $.88 $.86 $ 1.02 $.93 $1.42 $1.38
========== ========== =========== ========== ========== ==========
Ratios/Supplemental Data:
Total return.................... 4.65%** (15.53)% 19.36%** (34.51)% 2.89% (7.05)%
Ratio of expenses to average
net assets...................... 14.40%** 10.60% 10.54%** 8.90% 6.48% 7.78%
Ratio of net investment loss to
average net assets.............. (13.45)%** (5.23)% (4.24)%** (6.65)% (4.52)% (6.09)%
Portfolio turnover rate......... 211%** 382% 226%** 282% 179% 263%
Net assets, end of period
(in thousands).................. $1,760 $1,763 $2,298 $2,159 $3,550 $3,781
</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 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 6 months ended For the year For the period January 1
December 31, 1996 ended June 30, 1995 1995 through June 30, 1995
-------------------------- ----------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Shares sold............... -- 0 -- $ -- 0 -- -- 0 -- $ -- 0 -- -- 0 -- $ -- 0--
Shares redeemed........... (43,864) (38,043) (205,360) (200,097) (65,380) (63,007)
---------- ---------- ---------- ---------- ---------- ----------
Net decrease........... (43,864) $ (38,043) (205,360) $(200,097) (65,380) $ (63,007)
========== ========== ==========
Shares outstanding:
Beginning of period.. 2,038,728 2,244,088 2,309,468
---------- ---------- ----------
End of Period........ 1,994,864 2,038,728 2,244,088
========== ========== ==========
</TABLE>
3. Purchases and sales of securities
During the six months ended December 31, 1996, purchases and sales of
investment securities aggregated $1,668,297 and $1,677,098, respectively.
The net unrealized appreciation of investments aggregated $277,255, of which
$348,475 relates to gross unrealized appreciation where there is an excess of
value over tax cost and $71,220 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) 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.
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 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 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 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
SEMI-ANNUAL
REPORT
December 31, 1996
A Steadman NO-LOAD Mutual Fund
STEADMAN SECURITY
CORPORATION
Investment Adviser
