<PAGE> 1
VALOR INVESTMENT FUND, INC.
Financial Statements for the
Year Ended July 31, 1996, and
Independent Auditors' Report
<PAGE> 2
VALOR INVESTMENT FUND, INC.
2290 First National Building, Detroit, Michigan 48226
Annual Report for the Year Ended July 31, 1996
To our Shareholders:
The financial statements of your Company for the fiscal year ended July 31,
1996, are included in this Annual Report. Net assets at July 31, 1996 were
$13,756,711, equal to $15.57 per share of common stock on the 883,525 shares
outstanding. Net asset value at July 31, 1995 was $15.55 per share, based upon
the same number of outstanding shares. The increase in net asset value at July
31, 1996 from the net asset value at July 31, 1995 reflects an increase in net
investment income during 1996 compared to 1995.
Your Company's net investment income for the period August 1, 1995 to July 31,
1996 was $819,857. Your Company has paid dividends of $.91 per share of common
stock from net investment income earned during fiscal 1996. The $.91 is
further broken down into $.47 and $.44 per share of common stock which were
paid on November 1, 1995 and May 1, 1996, respectively. In November 1996, your
Company intends to pay a final dividend from net investment income earned
during fiscal 1996. The Board of Directors intends to distribute substantially
all of the Company's net investment income earned during fiscal 1996.
Your Company's policy continues to be one of investment in tax-free municipal
bonds and project notes.
We wish to express our appreciation for your continued participation in the
Fund.
Respectfully submitted,
William B. Klinsky
- -------------------------
William B. Klinsky,
President
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Directors
Valor Investment Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Valor
Investment Fund, Inc. (the "Company") including the schedule of investments in
securities as of July 31, 1996, and the related statements of operations and
shareholders' investment for the year then ended, and the statement of changes
in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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. 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 referred to above present fairly, in
all material respects, the financial position of the Valor Investment Fund,
Inc., as of July 31, 1996, and the results of its operations for the year then
ended and the changes in its net assets for each of the two years in the period
then ended, in conformity with generally accepted accounting principles.
Detroit, Michigan
September 18, 1996
<PAGE> 4
VALOR INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
<TABLE>
- --------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities - at market value (cost of $13,331,759) $13,672,577
Interest receivable 199,310
Prepaid expenses 3,750
-----------
Total assets 13,875,637
-----------
LIABILITIES:
Investment securities purchased 98,896
Accrued expenses 20,030
-----------
Total liabilities 118,926
-----------
NET ASSETS (equivalent to $15.57 per share based on 883,525 shares of
common stock outstanding at July 31, 1996) $13,756,711
===========
</TABLE>
See notes to financial statements.
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<PAGE> 5
VALOR INVESTMENT FUND, INC.
INVESTMENTS IN SECURITIES
JULY 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
MONEY MARKET FUNDS -
Dreyfus Tax Exempt Money Market Fund $ 281,938 $ 281,938 $ 281,938
---------- ---------- ----------
SHORT-TERM MUNICIPAL BONDS:
Detroit City School District, 5.050%, May 1, 1997 250,000 251,569 252,188
Michigan State Hospital Fin. Auth., 7.100%, Aug. 15, 1996 60,000 60,000 60,081
---------- ---------- ----------
Total short-term municipal bonds 310,000 311,569 312,269
---------- ---------- ----------
LONG-TERM MUNICIPAL BONDS:
Alaska State Hsg Fin Corp, 6.375%, December 1, 2012 275,000 272,482 291,126
Ann Arbor General Obl, 6.000%, September 1, 2009 100,000 97,945 102,894
Bay County General Obl, 6.500%, May 1, 2004 500,000 500,000 510,000
Berkley City Sch Dist MI FGIC, 5.625%, Jan 1, 2015 270,000 261,594 265,580
Brandon School District, 5.600%, May 1, 2010 100,000 98,627 100,359
Brevard County Solid Waste Disposal, 5.700%,
April 1, 2009 100,000 100,000 98,767
Caledonia Comm. Schools MI, 6.625%, May 1, 2014 150,000 150,000 161,790
Carrollton Public School District, 6.400%, May 1, 2004 65,000 64,752 67,495
Carrollton Public School District, 6.400%, May 1, 2005 75,000 74,684 77,817
Carrollton Public School District, 6.400%, May 1, 2006 75,000 74,655 77,755
Carrollton Public School District, 6.400%, May 1, 2007 75,000 74,628 77,715
Cedar Springs Public School District, 5.875%, May 1, 2014 250,000 249,346 252,555
Central Michigan University Rev., 7.000%, October 1, 2000 210,000 232,353 232,285
Central Michigan University Rev., 5.500%, October 1, 2010 200,000 200,000 199,594
Central Michigan University Rev., 6.000%, October 1, 2013 100,000 101,017 102,387
Chicago Emer. Telephone Sys., 5.800%, January 1, 2013 100,000 100,000 100,034
Chicago, Illinois General Obl., 6.250%, January 1, 2012 200,000 207,703 207,914
Chippewa Valley Schools, 7.750%, May 1, 2005 50,000 46,939 52,936
Chippewa Valley Schools, 7.800%, May 1, 2008 555,000 553,471 587,789
Clintondale Comm. Schools, 6.500%, May 1, 2010 100,000 99,572 110,417
Cook County General Obl., 5.400%, November 15, 2008 200,000 200,000 198,882
Eugene Trojan Nuclear Proj Rev OR, 5.900%, Sept 1, 2009 145,000 145,698 145,010
Flat Rock Comm. School District, 5.25%, May 1, 2010 125,000 123,264 121,533
Flint, Michigan General Obl., 6.250%, November 1, 2003 100,000 98,296 98,787
Flint, Michigan General Obl., 6.250%, November 1, 2004 100,000 98,101 98,036
Florida General Obligation, 5.900%, October 1, 2008 250,000 244,501 255,163
Florida State Board of Education, 6.000%, May 1, 2005 500,000 500,000 537,975
Florida State Board of Education, 5.200%, June 1, 2016 25,000 22,865 23,222
Grand Haven Area Pub. Schools, 6.050%, May 1, 2014 165,000 163,344 167,668
Grand Ledge Public Schools, 6.400%, May 1, 2008 50,000 54,508 54,087
Grosse Isle General Obligation, 5.200%, March 1, 2008 25,000 24,600 24,467
Hudsonville Public Schools, 6.000%, May 1, 2009 100,000 100,000 103,191
---------- ---------- ----------
Total forward 5,335,000 5,334,945 5,505,230
(Continued)
</TABLE>
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<PAGE> 6
VALOR INVESTMENT FUND, INC.
INVESTMENTS IN SECURITIES
JULY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $ 5,335,000 $ 5,334,945 $ 5,505,230
Huron Valley School District MI FGIC, 5.875%,
May 1, 2016 100,000 98,896 100,657
Illinois State Sales Tax Revenue, 5.400%, June 15, 2013 150,000 145,815 145,217
Intermountain Power Agency, 6.000%, July 1, 2016 315,000 323,203 315,091
Kalamazoo Water Revenue MI FSA, 5.625%, Sept 1, 2011 100,000 98,303 99,492
Kentwood Public Schools, 6.400%, May 1, 2015 500,000 500,000 518,145
King County General Obligation, 6.200%, June 1, 2002 500,000 500,000 500,555
L'Anse Creuse Public Schools, 5.500%, May 1, 2014 80,000 80,000 77,182
Lenawee County, MI Gen. Obl., 6.050%, May 1, 1999 100,000 100,000 101,363
Lenawee County, MI Gen. Obl., 6.100%, May 1, 2000 125,000 125,000 126,661
Lenawee County, MI Gen. Obl., 6.150%, May 1, 2001 125,000 125,000 126,645
Macomb Water Sup. & Sew. Disp., 6.000%, January 1, 2012 200,000 200,000 204,412
Marysville Public School District, 5.750%, May 1, 2014 150,000 147,650 149,820
Michigan Higher Ed Stu Ln Rv, 6.000%, Sept 1, 2008 170,000 171,031 171,178
Michigan Municipal Bond Auth. Rev., 5.400%, Oct 1, 2014 100,000 96,161 94,677
Michigan State Bldg. Auth. Rev., 6.250%, October 1, 2020 250,000 245,678 252,270
Michigan State Trunk Line Rev., 6.000%, August 15, 2019 250,000 241,476 250,060
Millington Community School Dist., 5.700%, May 1, 2005 100,000 92,935 102,092
Monroe County General Obl., 5.250 %, November 1, 2002 65,000 61,523 66,277
Mount Pleasant Water Revenue, 6.000%, February 1, 2015 340,000 333,030 344,508
Novi Community School District, 6.1250%, May 1, 2013 250,000 250,598 258,258
Oakland County General Obl., 6.200%, May 1, 2003 500,000 488,946 516,315
Oakland County General Obl., 6.000%, November 1, 2011 115,000 114,016 118,322
Oakland County General Obl., 6.000%, November 1, 2013 145,000 142,306 148,419
Orange County Sales Tax Rev., 5.250%, January 1, 2016 150,000 147,982 141,623
Oregon General Obligation, 5.900%, July 15, 1998 500,000 500,000 516,830
Orlando Util Comm. Water & Elec., 6.300%, April 1, 2003 250,000 251,669 271,455
Rochester Comm. Sch. Dist., 5.625%, May 1, 2009 35,000 34,627 35,426
St. Lucie County School Board, 5.375%, July 1, 2013 150,000 150,000 144,981
San Antonio General Obligation, 5.750%, August 1, 2013 110,000 110,273 110,387
Santa Monica, Cal Univ Sch Dist, 5.400%, August 1, 2009 50,000 50,000 49,668
Tarrant Co. Water Control, TX, 5.750%, March 1, 2001 150,000 150,000 156,923
University of Michigan, Revenue, 5.750%, April 1, 2003 75,000 70,640 75,836
University of Michigan, Revenue, 5.800%, April 1, 2010 230,000 230,000 233,830
Utica Community Schools, MI, 7.100%, May 1, 2006 75,000 75,000 82,620
WA State Public Power Supp., 6.00%, July 1, 2012 100,000 101,677 99,588
Warren Consolidated Sch Dist MI MBIA, 5.50%,
May 1, 2014 200,000 193,583 192,528
----------- ----------- -----------
Total forward 12,140,000 12,081,963 12,404,541
(Continued)
</TABLE>
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<PAGE> 7
VALOR INVESTMENT FUND, INC.
INVESTMENTS IN SECURITIES
JULY 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $12,140,000 $12,081,963 $12,404,541
Washoe County General Obl., 6.200%, April 1, 2010 185,000 181,289 193,397
Yale Public Schools District, MI, 5.000%, May 1, 2005 125,000 125,000 122,906
Zeeland Public Schools, MI, 6.000%, May 1, 2010 100,000 100,000 103,496
Zeeland Public Schools, MI, 6.000%, May 1, 2014 250,000 250,000 254,030
----------- ----------- -----------
Total long-term municipal bonds 12,800,000 12,738,252 13,078,370
----------- ----------- -----------
TOTAL INVESTMENTS $13,391,938 $13,331,759 $13,672,577
=========== =========== ===========
</TABLE>
See notes to financial statements. (Concluded)
- 5 -
<PAGE> 8
VALOR INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1996
<TABLE>
- ------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest income $811,040
Gain on disposition 37,612
Miscellaneous income 2,465
--------
Total investment income 851,117
EXPENSES:
Professional fees 18,943
Custodian fees 10,000
Other 2,317
--------
Total expenses 31,260
--------
NET INVESTMENT INCOME (equivalent to $.93 per share based on
883,525 shares of common stock outstanding at July 31, 1996) 819,857
UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of period 342,577
End of period 340,818
--------
DECREASE IN UNREALIZED APPRECIATION OF INVESTMENTS (1,759)
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $818,098
========
</TABLE>
See notes to financial statements.
- 6 -
<PAGE> 9
VALOR INVESTMENT FUND, INC.
STATEMENT OF SHAREHOLDERS' INVESTMENT
YEAR ENDED JULY 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK UNDISTRIBUTED UNREALIZED
--------------------- NET APPRECIATION
SHARES PAID-IN RETAINED INVESTMENT OF
(NOTE 4) PAR VALUE SURPLUS EARNINGS INCOME INVESTMENTS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 1, 1995 883,525 $883,525 $180,944 $11,967,524 $ 368,051 $342,577 $13,742,621
Net increase in net assets resulting
from operations 819,857 (1,759) 818,098
Distributions to shareholders ($.91
per share) (804,008) (804,008)
------ -------- -------- ----------- --------- -------- -----------
BALANCE AT JULY 31, 1996 883,525 $883,525 $180,944 $11,967,524 $ 383,900 $340,818 $13,756,711
======= ======== ======== =========== ========= ======== ===========
</TABLE>
See notes to financial statements.
- 7 -
<PAGE> 10
VALOR INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 819,857 $ 804,417
Increase (decrease) in unrealized appreciation (1,759) 124,120
----------- -----------
Net increase in net assets resulting from operations 818,098 928,537
DIVIDENDS TO SHAREHOLDERS FROM INVESTMENT
INCOME 804,008 857,019
----------- -----------
INCREASE IN NET ASSETS 14,090 71,518
NET ASSETS:
Beginning of period 13,742,621 13,671,103
----------- -----------
End of period $13,756,711 $13,742,621
=========== ===========
</TABLE>
See notes to financial statements.
- 8 -
<PAGE> 11
VALOR INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JULY 31, 1996
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is registered under the Investment Company Act of 1940, as
amended, as a closed-end, diversified management investment company. The
following is a summary of significant accounting policies followed by the
Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
INVESTMENT SECURITIES - Investments are reported at market value determined
principally by obtaining quotations from nationally recognized valuation
services or market value estimates from registered brokers/dealers.
SECURITIES TRANSACTIONS are recorded on a trade-date basis. Cost of
securities sold is determined using the identified cost.
INTEREST INCOME, adjusted for amortization of premium or accretion of
discounts on investments in municipal bonds, is recorded on the accrual
basis.
INCOME TAXES - It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to make distributions of income and realized capital gains
sufficient to relieve it from all or substantially all federal income
taxes. No provision for federal income taxes is required for the year
ended July 31, 1996.
MANAGEMENT AND SERVICE FEES - No management fees have been paid or accrued
to outside organizations. A total of $800 in fees has been paid to
directors. The only service fees paid or accrued were legal, accounting,
custodian, and recordkeeping fees to unaffiliated persons.
2. SECURITIES TRANSACTIONS
The following summarizes the changes in investments, at amortized cost,
for the year ended July 31, 1996:
<TABLE>
<S> <C>
Balance, August 1, 1995 $13,233,544
Plus purchases 5,570,653
Less:
Redeemed securities (5,468,657)
Premium amortization net of discount accretion (3,781)
-----------
Balance, July 31, 1996 $13,331,759
===========
</TABLE>
Approximately $2.2 million in purchases and $2.2 million in sales were
bond transactions. The remaining transactions were related to the money
market fund.
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<PAGE> 12
3. TRANSACTIONS WITH AFFILIATES
The Company had no transactions with affiliated persons in the year ended
July 31, 1996, except as described in Note 1.
4. COMMON STOCK
There are 2,000,000 authorized shares of common stock, of which 883,525
shares were outstanding at July 31, 1996.
5. UNREALIZED DEPRECIATION AND APPRECIATION
The cost of securities for federal income tax purposes differs from the cost
for financial statement purposes because the cost for tax purposes is
adjusted by the amount of discount amortization only if the discount is
original issue discount.
The aggregate cost of securities for federal income tax purposes was
$13,134,280 at July 31, 1996. The gross unrealized appreciation and
depreciation computed as the difference between market value and cost for
tax purposes is as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized depreciation $(34,336)
Aggregate gross unrealized appreciation 572,633
--------
Net unrealized appreciation $538,297
========
</TABLE>
6. PER SHARE DATA
The following are selected per share data based on the weighted average
shares outstanding during the year.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Investment income $ 0.96 $ 0.95 $ 1.05 $ 1.00 $ 0.98
Expenses (0.03) (0.04) (0.05) (0.04) (0.04)
-------- -------- -------- -------- --------
Net investment income 0.93 0.91 1.00 0.96 0.94
Distributions from net investment income (0.91) (0.97) (0.96) (0.94) (0.94)
Increase (decrease) in unrealized
appreciation 0.14 (0.46) 0.98
-------- -------- -------- -------- --------
Increase (decrease) in net asset value 0.02 0.08 (0.42) 0.02 0.98
Net asset value - beginning 15.55 15.47 15.89 15.87 14.89
-------- -------- -------- -------- --------
Net asset value - ending $ 15.57 $ 15.55 $ 15.47 $ 15.89 $ 15.87
======== ======== ======== ======== ========
Weighted average shares outstanding
during the year 883,525 883,525 883,525 883,525 883,525
======== ======== ======== ======== ========
</TABLE>
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<PAGE> 13
7. INTEREST INCOME
The following details, by state, the interest income earned by the Company
during the year ended July 31, 1996.
<TABLE>
<S> <C>
Alaska $ 17,689
California 2,700
District of Columbia 7,522
Florida 83,273
Illinois 49,360
Michigan * 537,286
Nevada 11,745
Oregon 31,160
Texas 14,934
Utah 18,479
Washington 36,892
--------
Total $811,040
========
</TABLE>
* Included in the Michigan total is $5,724 interest earned on a tax-exempt
money market fund for the year ended July 31, 1996.
******
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