<PAGE>
================================================================================
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.
Sincerely,
/s/ Max Katcher
Max Katcher
President
================================================================================
<PAGE>
================================================================================
This Page Intentionally Blank
================================================================================
<PAGE>
================================================================================
STEADMAN INVESTMENT FUND
Portfolio of Investments
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- --------
<S> <C> <C>
COMMON STOCKS -- 100%
Aeronautical Systems--3.3%
Raytheon Co ........................................................ 843 $ 41,570
----------
Total Aeronautical Systems 41,570
----------
Computer Peripherals--13.3%
Cisco Systems (a) .................................................. 3,000 167,250
----------
Total Computer Peripherals 167,250
----------
Computer Software--0.9%
Oracle Corporation (a) ............................................. 500 11,156
----------
Total Computer Software 11,156
----------
Computer System Design--7.9%
Sun Microsystems (a) ............................................... 2,500 99,688
----------
Total Computer Systems Design 99,688
----------
Motor Vehicles--4.4%
General Motors Class H ............................................. 1,500 55,406
----------
Total Motor Vehicles 55,406
----------
Oil and Gas Drilling--11.8%
Global Marine Inc (a) .............................................. 6,000 147,000
----------
Total Oil and Gas Drilling 147,000
----------
Plastic & Rubber Mfg--8.6%
Dupont E I De Nemours & Co (a) ..................................... 1,800 108,113
----------
Total Plastic & Rubber Mfg 108,113
----------
</TABLE>
(a) Non-income producing security
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN INVESTMENT FUND
Portfolio of Investments
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- --------
<S> <C> <C>
Semi Conductors--4.0%
Intel Corp. Warrants (a) ........................................... 1,000 49,468
----------
Total Semiconductors 49,468
----------
Telecom Mfg--19.1%
Lucent Technology (a) .............................................. 3,000 239,625
----------
Total Telecom Mfg 239,625
----------
Telephone Services--26.7%
Worldcom Inc (a) ................................................... 5,000 151,250
At&T ............................................................... 3,000 183,750
----------
Total Telephone Services 335,000
----------
Total Portfolio of Investments (Cost $1,009,148) $1,254,276
==========
</TABLE>
(a) Non-income producing security
The accompanying notes are an integral part of the financial statements.
================================================================================
<PAGE>
================================================================================
STEADMAN INVESTMENT FUND
Statement of Assets and Liabilities
December 31, 1997
(Unaudited)
Assets:
Investments at value (Cost $1,009,148) (Note 1) ............ $ 1,254,276
Cash and cash equivalents (Note 1) ......................... 342,093
Interest receivable ........................................ 3,428
-----------
Total assets ............................................. 1,599,797
-----------
Liabilities:
Accounts payable and accrued expenses ...................... 24,064
Investment advisory and service fees payable (Note 4) ...... 4,872
Other payable to affiliate (Note 4) ........................ 5,951
Payable for trust shares redeemed .......................... 2,616
-----------
Total liabilities ........................................ 37,503
-----------
Net Assets ...................................................... $ 1,562,294
===========
Net assets consist of:
Accumulated net investment loss ............................ $(1,809,263)
Unrealized appreciation of investments ..................... 245,128
Accumulated net realized losses ............................ (224,654)
Capital paid in less distributions since inception ......... 3,351,083
-----------
$ 1,562,294
===========
Net asset value, offering price and redemption price per share
($1,562,294 / 1,754,374 shares of no par value trust shares) $ .89
===========
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, 1997
(Unaudited)
<TABLE>
<S> <C> <C>
Investment Income:
Dividends ..................................................... $ 3,126
Interest ...................................................... 4,785
----------
Total income ........................................... $ 7,910
Expenses:
Salaries and employee benefits (Note 4) ....................... 38,156
Shareholder servicing fee (Note 4) ............................ 22,141
Professional fees ............................................. 19,638
Proposed Merger expense ....................................... 40,672
Investment advisory fee (Note 4) .............................. 8,834
Miscellaneous ................................................. 2,766
Rent .......................................................... 6,488
Computer services ............................................. 2,894
Reports to shareholders ....................................... 3,276
Custodian fees ................................................ 1,500
----------
Total expenses ............................................ 146,365
-----------
Net investment loss ........................................ (138,455)
-----------
Realized and Unrealized Gain (Loss) on Investments (Notes 1 and 3):
Net realized gain from investment transactions ................ 350,007
Change in unrealized appreciation/(depreciation) of investments (117,514)
-----------
Net gain on investments ..................................... 232,493
-----------
Net increase in net assets resulting from operations ........ $ 94,038
===========
</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 year
ended ended June 30, ending June 30,
December 31, 1997/(1)/ 1997 1996
---------------------- -------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss ................................................ $ (138,455) $ (267,719) $ (111,105)
Net realized gain (loss) from investment transactions .............. 350,007 (185,331) 47,825
Change in unrealized depreciation/appreciation ..................... (117,514) 418,153 (271,135)
----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations ............................................ 94,038 (34,897) (334,415)
Decrease in net assets from trust share transactions (Note 2) ......... (165,634) (94,680) (200,097)
----------- ----------- -----------
Decrease in net assets ................................................ (71,596) (129,577) (534,512)
Net assets at beginning of period ..................................... 1,633,890 1,763,467 2,297,979
----------- ----------- -----------
Net assets at end of period (including accumulated net
investment loss of $1,809,263, $1,947,718
and $1,679,999 respectively) .......................................... $ 1,562,294 $ 1,633,890 $ 1,763,467
=========== =========== ===========
</TABLE>
(1) Unaudited
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 year For the period
ended ended ended January 1, 1995 For the years
December 31/(1)/ June 30 June 30 through June 30 ended December 31
----------- ------------ ------------ --------------- -------------------
1997 1997 1996 1995* 1994 1993
----------- ------------ ------------ --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period .... $ .85 $ .86 $1.02 $.93 $1.42 $1.38
----------- ------------ ------------ --------------- -------------------
Net investment loss .................. (.08) (.03) (.13) (.02) (.08) (.06)
Net realized and unrealized
gain (loss) on investments ........... .12 .02 (.03) .11 (.41) .10
----------- ------------ ------------ --------------- -------------------
Total from investment operations ..... .04 (.01) (.16) .09 (.49) .04
Net asset value, end of period .......... $ .89 $ .85 $.86 $1.02 $.93 $1.42
=========== ============ ============ =============== ===================
Ratios/Supplemental Data:
Total return ............................ 9.41% (2.05)% (15.53)% 19.36%** (34.51)% 2.89%
Ratio of expenses to average net
assets ............................... 17.05%** 16.47% 10.60% 10.54%** 8.90% 6.48%
Ratio of net investment loss to average
net assets ........................... (16.13)%** (15.75)% (5.23)% (4.24)%** (6.65)% (4.52)%
Portfolio turnover rate ................. 64%** 138% 382% 226%** 282% 179%
Net assets, end of period (in thousands). $1,562 $1,634 $1,763 $2,298 $2,159 $3,550
</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.
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, 1997 ended June 30, 1997 1995 through June 30, 1996
---------------------- ------------------------ --------------------------
Shares Amount Shares Amount Shares Amount
--------- ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................... -- 0 -- $ -- 0 -- -- 0 -- $ -- 0 -- -- 0 -- $ -- 0 --
Shares redeemed................ (174,120) (165,634) (110,234) (94,680) (205,360) (200,097)
-------- --------- -------- --------- -------- ---------
Net decrease............ (174,120) (165,634) (110,234) $ (94,680) (205,360) $(200,097)
========= ========= =========
Shares outstanding:
Beginning of period..... 1,928,494 2,038,728 2,244,088
--------- --------- ---------
End of Period........... 1,754,374 1,928,494 2,038,728
========= ========= =========
</TABLE>
3. Purchases and sales of securities
During the six months ended December 31, 1997, purchases and sales of
investment securities aggregated $482,139 and $961,662 respectively.
The net unrealized appreciation of investments aggregated $245,128, of
which $292,802 relates to gross unrealized appreciation where there is an excess
of value over tax cost and $47,674 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>
================================================================================
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.
================================================================================
<PAGE>
STEADMAN
Investment
Fund
SEMI-ANNUAL
REPORT
December 31, 1997
A Steadman NO-LOAD Mutual Fund
STEADMAN SECURITY
CORPORATION
[LOGO OF STEADMAN SECURITIES CORPORATION APPEARS HERE]
Investment Adviser
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
Resnick 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
