<PAGE>
Dear Shareholders:
This past year was an eventful one for the Fund. Charles W. Steadman, Chairman
of the Board of Trustees and President, passed away and was succeeded by Paul F.
Wagner as Chairman and Principal Executive Officer and by the undersigned as
President. A merger of Steadman American Industry Fund, Steadman Investment Fund
and Steadman Technology and Growth Fund into Steadman Associated Fund, renamed
Steadman Security Trust, as the surviving Fund was not accomplished for lack of
a quorum necessary for this vote by the shareholders of all the Funds.
Thereupon, the Trustees determined to continue operating your Fund as a separate
entity.
The principal purpose for the proposed merger was to achieve cost savings by
operating one fund with a larger asset base rather than four smaller funds.
Although the merger was not effected, the changes enacted by the Fund's new
management and that of its advisor, Steadman Security Corporation, did result in
improved performance by reducing costs and strengthening portfolio management. I
refer you to the Financial Highlights page of this Annual Report for the
results of this year compared to previous years.
We hope that this year's results are indicative of future performance. We shall
endeavor to make your Fund consistently profitable so that it is an attractive
investment for you.
We appreciate your continued confidence.
Sincerely,
/s/ Max Katcher
Max Katcher
President
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF STEADMAN INVESTMENT FUND
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Steadman Investment Fund as of June
30, 1998, the related statements of operations for the year then ended, the
statement of changes in net assets and the financial highlights for each of the
two years in the period that 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 audits. The financial highlights for the year ended June 30, 1996
and the period January 1, 1995 through June 30, 1995 and each of the two years
in the period ended December 31, 1994 were audited by other auditors whose
report, dated August 6, 1996, expressed an unqualified opinion on those
financial highlights.
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, 1998, 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
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, 1998, the results of its operations, for
the year then ended, the changes in its net assets, and the financial highlights
for each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
Reznick Fedder & Silverman
Bethesda, Maryland
August 5, 1998
<PAGE>
STEADMAN INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-------- --------
<S> <C> <C>
COMMON STOCKS -- 100%
Aeronautical Systems--2.8%
Raytheon Co................................................... 843 $ 48,578
------
Total Aeronautical Systems 48,578
------
Air Transportation--3.1%
Alaska Air Group, Inc. (a)..................................... 3,000 54,563
------
Total Air Transportation 54,563
Computer Peripherals--16.0% ------
Cisco Systems (a) 3,000 276,187
-------
Total Computer Peripherals 276,187
Computer Software--0.7% -------
Oracle Corporation (a)......................................... 500 12,281
-------
Total Computer Software 12,281
Computer System Design--6.3% -------
Sun Microsystems (a)........................................... 2,500 108,594
-------
Total Computer Systems Design 108,594
Electronics--4.1% -------
General Motors Class "H"....................................... 1,500 70,687
-------
Total Electronics 70,687
Oil and Gas Drilling--6.5% -------
Global Marine Inc (a).......................................... 6,000 112,125
-------
Total Oil and Gas Drilling 112,125
Plastic & Rubber Mfg--7.8% -------
Dupont E I De Nemours & Co..................................... 1,800 134,325
-------
Total Plastic & Rubber Mfg 134,325
-------
</TABLE>
(a) Non-income producing security
(Continued)
<PAGE>
STEADMAN INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
<TABLE>
<CAPTION>
Value
Shares (Note 1)
<S> <C> <C>
Telecom Mfg--28.8%
Lucent Technology.................................. 6,000 499,125
----------
Total Telecom Mfg 499,125
----------
Telephone Services--23.9%
Worldcom Inc (a)................................... 5,000 242,188
AT&T............................................... 3,000 171,375
----------
Total Telephone Services 413,563
----------
Total Portfolio of Investments (Cost $1,028,736) $1,730,028
==========
</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
June 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at value (Cost $1,028,736) (Note 1)...................................... $ 1,730,028
Cash and cash equivalents (Note 1)................................................... 176,268
Interest receivable.................................................................. 587
Dividends receivable................................................................. 1,159
-----------
Total assets....................................................................... 1,908,042
-----------
LIABILITIES:
Accounts payable and accrued expenses
Investment advisory and service fees payable (Note 4)................................ 22,443
Other payable to affiliate (Note 4).................................................. 1,504
Payable for trust shares redeemed.................................................... 3,517
766
-----------
Total liabilities..................................................................... 28,230
-----------
NET ASSETS................................................................................ $ 1,879,812
===========
Net assets consist of:
Accumulated net investment loss...................................................... $(2,177,738)
Unrealized appreciation of investments............................................... 701,292
Accumulated net realized losses...................................................... (187,007)
Capital paid in less distributions since inception................................... 3,543,265
-----------
$ 1,879,812
===========
NET ASSET VALUE, offering price and redemption price per share
($1,879,812 / 1,674,915 shares of no par value trust shares)......................... $ 1.12
===========
</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, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends....................................................... $ 7,105
Interest........................................................ 10,483
--------
Total income................................................... $ 17,588
EXPENSES:
Salaries and employee benefits (Note 4).......................... 61,017
Shareholder servicing fee (Note 4)............................... 43,359
Professional fees................................................ 28,922
Proposed merger expense (Note 7)................................. 63,765
Investment advisory fee (Note 4)................................. 18,120
Rent............................................................. 12,172
Computer services................................................ 5,648
Reports to shareholders.......................................... 7,524
Trustees'fees and expenses (Note 4).............................. 1,843
Custodian fees................................................... 1,126
Miscellaneous.................................................... 8,771
--------
Total expenses................................................ 252,267
---------
Net investment loss............................................ (234,679)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3):
Net realized gain from investment transactions................... 387,654
Change in unrealized appreciation of investments................. 338,651
---------
Net gain on investments.......................................... 726,305
---------
Net increase in net assets resulting from operations............. $ 491,626
=========
</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 year For the year
ended June 30, ending June 30,
1998 1997
------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment loss....................................................................... $ (234,679) $ (267,719)
Net realized (loss) gain from investment transactions..................................... 387,654 (185,331)
Change in unrealized appreciation of investments.......................................... 338,651 418,153
---------- ----------
Net increase (decrease) in net assets resulting
from operations........................................................................ 491,626 (34,897)
Decrease in net assets from trust share transactions (Note 2)................................ (245,704) (94,680)
---------- ----------
Increase (decrease) in net assets......................................................... 245,922 (129,577)
Net assets at beginning of period............................................................ 1,633,890 1,763,467
---------- ----------
Net assets at end of period, including accumulated net
investment loss of $2,177,738 and $1,943,059........................................... $1,879,812 $1,633,890
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STEADMAN INVESTMENT FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the period
For the years ended January 1, 1995 For the years
June 30 through June 30 ended December 31
---------------------------- --------------- ---------------------
1998 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................................. (.29) (.03) (.13) (.02) (.08) (.06)
Net realized and unrealized
gain (loss) on investments........................ .56 .02 (.03) .11 (.41) .10
------- ------- ------- ------- ------- -------
Total from investment operations.............. .27 (.01) (.16) .09 (.49) .04
------- ------- ------- ------- ------- -------
Net asset value, end of period...................... 1.12 $ .85 $ .86 $ 1.02 $ .93 $ 1.42
======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Total return........................................ 32.46% (2.05)% (15.53)% 19.36%** (34.51)% 2.89%
Ratio of expenses to average net
assets............................................ 14.54% 16.47% 10.60% 10.54%** 8.90% 6.48%
Ratio of net investment loss to average
net assets........................................ (13.52)% (15.75)% (5.23)% (4.24)%** (6.65)% (4.52)%
Portfolio turnover rate............................. 34% 138% 382% 226%** 282% 179%
Net assets, end of period (in thousands)............ $ 1,879 $ 1,634 $ 1,763 $ 2,298 $ 2,159 $ 3,550
</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. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Steadman Security Trust, formerly known as Steadman Associated Fund, (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. Estimates are used when accounting for income taxes. Actual
results could differ from those estimates and significant changes to estimates
could occur in the near term. 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>
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, 1998 ended June 30, 1997
----------------------- -----------------------
Shares Amount Shares Amount
------ ------ ----- ------
<S> <C> <C> <C> <C>
Shares sold................................ -- 0 -- $ -- 0 -- -- 0 -- $ -- 0--
Shares redeemed............................ (253,579) (245,704) (110,234) (94,680)
--------- ---------- -------- ---------
Net decrease............................ (253,579) $ (245,704) (110,234) $ (94,680)
========== =========
Shares outstanding:
Beginning of period..................... 1,928,494 2,038,728
--------- ---------
End of Period........................... 1,674,915 1,928,494
========= =========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1998, purchases and proceeds from sales of
investment securities aggregated $526,726 and $1,024,310 respectively. Net
unrealized appreciation of investments aggregated $701,292, of which $1,137,096
relates to gross unrealized appreciation where there is an excess of value over
tax cost and $435,804 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. FEDERAL INCOME TAXES
In the fiscal year ended June 30, 1998, 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, 1998, therefore no income tax provision is required.
A full valuation allowance has been provided for the deferred tax assets,
totalling approximately $903,000 at June 30, 1998, 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 $2,185,000
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; (2012) $270,000 and (2013) $239,000 Capital loss carryfowards
aggregating approximately $187,000 are available to offset future capital gains,
if any expiring as follows: (2000) $2,000 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 13% 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 1998, management attempted a merger of Steadman American Industry
Fund, Steadman Investment Fund, and Steadman Technology and Growth Fund with and
into the Steadman Associated Fund,whose name changed to Steadman Security Trust
(SST). The costs associated with the attempted merger were allocated to all the
funds based on the respective net asset values of the funds. Although the
shareholders of both Steadman Investment Fund and Steadman Associated Fund did
approve the proposal, the shareholders of Steadman American Industry Fund and
Steadman Technology and Growth Fund did not vote on the proposal because a
quorum for purposes of this vote was not obtained. The Trustees determined to
continue operating the Fund as a separate entity.
<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 AUDITORS
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, 1998
A Steadman NO-LOAD Mutual Fund
STEADMAN SECURITY
CORPORATION
Investment Adviser
