<PAGE> 1
VALOR INVESTMENT FUND, INC.
Financial Statements for the
Six Months Ended January 31, 1997, and
Independent Accountants' Review Report
<PAGE> 2
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Shareholders and
Board of Directors
Valor Investment Fund, Inc.
We have reviewed the accompanying statement of assets and liabilities and
statement of investments of Valor Investment Fund, Inc. (the "Company") as of
January 31, 1997, and the related statements of operations, shareholders'
investment, and the statement of changes in net assets for the six months then
ended. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
March 21, 1997
<PAGE> 3
VALOR INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
AS OF JANUARY 31, 1997
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities - at market value (cost of $13,165,317) (Note 2) $13,560,720
Interest receivable 205,431
Prepaid expenses 4,502
-----------
Total assets 13,770,653
LIABILITIES - Accrued expenses 18,000
-----------
NET ASSETS (equivalent to $15.56 per share based on 883,525 shares of
common stock outstanding at January 31, 1997) $13,752,653
===========
</TABLE>
See notes to financial statements and Independent Accountants' Review Report.
-2-
<PAGE> 4
VALOR INVESTMENT FUND, INC.
STATEMENT OF INVESTMENTS
JANUARY 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
MONEY MARKET FUNDS
Dreyfus Tax Exempt Money Market Fund $ 71,136 $ 71,136 $ 71,136
SHORT-TERM MUNICIPAL BONDS:
Detroit City School District, 5.050%, May 1, 1997 215,000 215,000 215,727
LONG-TERM MUNICIPAL BONDS
Alaska State Hsg Fin Corp, 6.375%, December 1, 2012 275,000 272,560 297,197
Ann Arbor General Obl, 6.000%, September 1, 2009 100,000 98,024 103,782
Avondale School District, 5.8%, May 1, 20015 140,000 140,000 141,277
Bay County General Obl, 6.500%, May 1, 2004 500,000 500,000 502,515
Berkley City Sch Dist MI FGIC, 5.6250%, January 1, 2015 261,827 261,827 268,628
Brandon School District, 5.600%, May 1, 2010 100,000 98,678 101,534
Brevard County Solid Waste, 5.700%, April 1, 2009 100,000 100,000 100,393
Caledonia Comm. Schools MI, 6.625%, May 1, 2014 150,000 150,000 162,998
Carrollton Public School District, 6.400%, May 1, 2004 65,000 64,769 67,152
Carrollton Public School District, 6.400%, May 1, 2005 75,000 74,702 77,468
Carrollton Public School District, 6.400%, May 1, 2006 75,000 74,673 77,450
Carrollton Public School District, 6.400%, May 1, 2007 75,000 74,646 77,434
Cedar Springs Pub School Dist, 5.875%, May 1, 2014 250,000 249,365 254,988
Central Michigan Univ. Rev., 7.000%, October 1, 2000 210,000 229,559 231,489
Central Michigan Univ. Rev., 5.500%, October 1, 2010 200,000 200,000 201,102
Central Michigan Univ. Rev., 6.000%, October 1, 2013 100,000 100,987 102,896
Chicago Emer. Telephone Sys., 5.800%, January 1, 2013 100,000 100,000 101,005
Chicago Ill. General Obl., 6.250%, January 1, 2012 200,000 207,446 208,990
Chippewa Valley Schools, 7.750%, May 1, 2005 50,000 47,119 51,999
Chippewa Valley Schools, 7.800%, May 1, 2008 555,000 553,537 577,250
Clintondale Comm. Schools, 6.500%, May 1, 2010 100,000 99,588 110,534
Cook County General Obl., 5.400%, November 15, 2008 200,000 200,000 201,710
Eugene Trojan Nuclear Proj Rev OR, 5.900%, September 1, 2009 145,000 145,671 145,013
Flat Rock Comm. School District, 5.25%, May 1, 2010 125,000 123,328 123,348
Flint, MI General Obligation, 6.250%, November 1, 2003 100,000 98,418 102,327
Flint, MI General Obligation, 6.250%, November 1, 2004 100,000 98,219 101,892
Florida General Obligation, 5.900%, October 1, 2008 250,000 244,731 253,980
Florida State Board of Educ., 6.000%, May 1, 2005 500,000 500,000 542,205
Florida State Board of Educ., 5.200%, June 1, 2006 25,000 22,920 23,770
Grand Haven Area Pub. Schools, 6.050%,May 1, 2014 165,000 163,391 169,967
Grand Ledge Public Schools, 6.40%, May 1, 2008 50,000 54,312 54,461
---------- ---------- -----------
Total forward 5,341,827 5,348,470 5,336,754
(Continued)
</TABLE>
-3-
<PAGE> 5
VALOR INVESTMENT FUND, INC.
STATEMENT OF INVESTMENTS
JANUARY 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $ 5,341,827 $ 5,348,470 $ 5,536,754
Grosse Isle General Obl., 5.200%, March 1, 2008 25,000 24,618 24,848
Huron Valley School Dist. MI FGIC, 5.875%, May 1, 2016 100,000 98,924 101,838
Hudsonville Public Schools, 6.000%, May 1, 2009 100,000 100,000 104,609
Illinois State Sales Tax Revenue, 5.400%, June 15, 2013 150,000 145,941 146,581
Intermountain Power Agency, 6.000%, July 1, 2016 315,000 322,992 315,079
Kalamazoo Water Revenue MI FSA, 5.625%, September 1, 2011 100,000 98,359 100,509
Kentwood Public Schools, 6.400%, May 1, 2015 500,000 500,000 522,605
King County General Obligation, 6.200 %, June 1, 2002 500,000 500,000 500,560
L'Anse Creuse Public Schools, 5.500%, May 1, 2014 80,000 80,000 77,822
Lenawee County, MI Gen. Obl., 6.050%, May 1, 1999 100,000 100,000 101,444
Lenawee County, MI Gen. Obl., 6.100%, May 1, 2000 125,000 125,000 126,744
Lenawee County, MI Gen. Obl., 6.150%, May 1, 2001 125,000 125,000 126,715
Macomb Water Sup. & Sew. Disp., 6.000%, January 1, 2012 200,000 200,000 205,158
Marysville Public School District, 5.750%, May 1, 2005 150,000 147,717 151,161
Michigan Higher Ed Stu Ln Rv, 6.000%, September 1, 2008 170,000 170,988 172,887
Michigan Municipal Bond Auth. Rev. 5.400%, October 1, 2014 100,000 96,274 96,786
Michigan State Bldg. Auth. Rev., 6.250%, October 1, 2020 250,000 245,768 257,515
Michigan State Trunk Line Rev., 6.000%, August 15, 2019 250,000 241,662 250,573
Millington Community School Dist., 5.700%, May 1, 2005 100,000 93,350 102,143
Monroe County General Obl., 5.250 %, November 1, 2002 65,000 61,813 66,359
Mount Pleasant Water Revenue, 6.000%, February 1, 2015 340,000 333,218 347,973
Novi Community School District, 6.1250%, May 1, 2013 250,000 250,580 260,815
Oakland County General Obl., 6.200%, May 1, 2003 500,000 489,796 511,665
Oakland County General Obl., 6.000%, November 1, 2011 115,000 114,049 118,977
Oakland County General Obl., 6.000%, November 1, 2013 145,000 142,386 149,291
Orange County Sales Tax Rev., 5.250%, January 1, 2016 150,000 148,035 140,754
Oregon General Obligation, 5.900%, July 15, 1998 500,000 500,000 514,365
Orlando Util Comm. Water & Elec., 6.300%, April 1, 2003 250,000 251,541 271,458
Rochester Comm. Sch. Dist., 5.625%, May 1, 2009 35,000 34,642 36,012
St. Lucie County School Board, 5.375%, July 1, 2013 150,000 150,000 147,347
San Antonio General Obligation, 5.750%, August 1, 2013 110,000 110,266 110,360
Santa Monica, Cal Univ Sch Dist, 5.400%, August 1, 2009 50,000 50,000 50,387
Tarrant Co. Water Control, TX, 5.750%, March 1, 2001 150,000 150,000 157,031
University of Michigan, Revenue, 5.750%, April 1, 2003 75,000 70,975 75,866
University of Michigan, Revenue, 5.800%, April 1, 2010 230,000 230,000 235,564
Utica Community Schools, MI, 7.100%, May 1, 2006 75,000 75,000 82,245
WA State Public Power Supp., 6.00%, July 1, 2012 100,000 101,623 99,102
Warren Consol. Sch Dist MI MBIA, 5.50%, May 1, 2014 200,000 193,767 195,840
----------- ----------- -----------
Total forward 12,271,827 12,222,754 12,593,742
(Continued)
</TABLE>
-4-
<PAGE> 6
VALOR INVESTMENT FUND, INC.
STATEMENT OF INVESTMENTS
JANUARY 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $12,271,827 $12,222,754 $12,593,742
Washoe County General Obl., 6.200%, April 1, 2010 185,000 181,427 193,863
Yale Public Schools District, MI, 5.000%, May 1, 2005 125,000 125,000 124,490
Zeeland Public Schools, MI, 6.000%, May 1, 2010 100,000 100,000 104,462
Zeeland Public Schools, MI, 6.000%, May 1, 2014 250,000 250,000 257,300
----------- ----------- -----------
Total long-term municipal bonds 12,931,827 12,879,181 13,273,857
----------- ----------- -----------
TOTAL INVESTMENTS $13,217,963 $13,165,317 $13,560,720
=========== =========== ============
</TABLE>
See note to financial statements and Independent Accountants' Review Report.
(Concluded)
-5-
<PAGE> 7
VALOR INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1997
<TABLE>
- ---------------------------------------------------------------------------------------
<S> <C>
REVENUE -
Interest income $400,272
--------
Total revenue 400,272
EXPENSES:
Professional fees 19,924
Custodian fees 3,500
Other 2,564
--------
Total expenses 25,988
--------
NET INVESTMENT INCOME (equivalent to $0.42 per share based on
883,525 shares of common stock outstanding at January 31, 1997) 374,284
--------
UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of period 340,818
End of period 395,403
--------
INCREASE IN UNREALIZED APPRECIATION OF INVESTMENTS 54,585
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $428,869
========
</TABLE>
See notes to financial statements and Independent Accountants' Review Report.
-6-
<PAGE> 8
VALOR INVESTMENT FUND, INC.
STATEMENT OF SHAREHOLDERS' INVESTMENT
SIX MONTHS ENDED JANUARY 31, 1997
<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 JULY 31, 1996 883,525 $883,525 $180,944 $11,967,524 $383,900 $340,818 $13,756,711
Net increase in net assets resulting
from operations 374,284 54,585 428,869
Distributions to shareholders ($0.49
per share) (432,927) (432,927)
-------- -------- -------- ----------- -------- -------- -----------
BALANCE AT JANUARY 31, 1997 $883,525 $883,525 $180,944 $11,967,524 $325,257 $395,403 $13,752,653
======== ======== ======== =========== ======== ======== ===========
</TABLE>
See notes to financial statements and Independent Accountants' Review Report.
-7-
<PAGE> 9
VALOR INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JANUARY 31,1997
<TABLE>
- ---------------------------------------------------------------------------------------------
<S> <C>
OPERATIONS:
Net investment income $ 374,284
Increase in unrealized appreciation 54,585
-----------
Net increase in net assets resulting from operations 428,869
DISTRIBUTIONS TO SHAREHOLDERS FROM INVESTMENT
INCOME 432,927
-----------
DECREASE IN NET ASSETS (4,058)
NET ASSETS:
Beginning of period 13,756,711
-----------
End of period $13,752,653
===========
</TABLE>
See notes to financial statements and Independent Accountants' Review Report.
-8-
<PAGE> 10
VALOR INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1997
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 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 six month period ended January
31, 1997.
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 six months ended January 31, 1997:
<TABLE>
<S> <C>
Balance, July 31 1996 $13,331,759
Plus purchases 871,392
Less:
Matured securities 60,000
Redeemed securities 977,414
Premium amortization net of discount accretion 420
-----------
Balance, January 31, 1997 $13,165,317
===========
</TABLE>
The cost of securities includes applicable accretion of discount and
amortization of premium. Approximately $0.1 million in purchases and $0.1
million in redeemed securities were bond transactions. The remaining
transactions were related to the money market fund.
-9-
<PAGE> 11
3. TRANSACTIONS WITH AFFILIATES
The Company had no transactions with affiliated persons in the six months
ended January 31, 1997, 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 January 31, 1997.
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 the
original issue discount.
The aggregate cost of securities for federal income tax purposes was
$13,061,390 at January 31, 1997. 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 $(23,345)
Aggregate gross unrealized appreciation 522,675
--------
Net unrealized appreciation $499,330
========
</TABLE>
6. PER SHARE DATA
The following are selected per share data based on the weighted average
shares outstanding during the six months ended January 31, 1997 and the year
ended July 31, 1996.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1997 1996
<S> <C> <C>
Revenues $ 0.45 $ 0.96
Expenses (0.03) (0.03)
-------- -------
Net investment income 0.42 0.93
Distributions from net investment income (0.49) (0.91)
Increase (decrease) in unrealized appreciation 0.06
-------- -------
Increase (decrease) in net asset value (0.01) 0.02
Net asset value - beginning 15.57 15.55
-------- -------
Net asset value - ending $ 15.56 $ 15.57
======== ========
Weighted average shares outstanding
during the period 883,525 883,525
======== ========
</TABLE>
-10-
<PAGE> 12
7. INTEREST INCOME
The following details by state, the interest income earned by the Company
during the six months ended January 31, 1997:
<TABLE>
<S> <C>
Alaska $ 8,844
California 1,350
Florida 41,927
Illinois 17,435
Michigan* 269,655
Nevada 6,907
Oregon 19,001
Texas 7,467
Utah 9,240
Washington 18,446
--------
Total $400,272
========
</TABLE>
*Included in the Michigan total is $1,853 interest earned on a tax-exempt
money market fund for the six months ended January 31, 1997.
******
See Independent Accountants' Review Report.
-11-
