<PAGE> 1
----------------------------------------
VALOR INVESTMENT FUND, INC.
Financial Statements for the
Six Months Ended January 31, 1998, and
Independent Accountants' Report
<PAGE> 2
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholders and
Board of Directors
Valor Investment Fund, Inc.
We have reviewed the accompanying statement of assets and liabilities and
schedule of investments in securities of Valor Investment Fund, Inc. (the
"Company") as of January 31, 1998, and the related statements of operations,
shareholders' investment, and 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 such financial statements for them to be in conformity with generally
accepted accounting principles.
March 25, 1998
<PAGE> 3
VALOR INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities - at market value (cost of $13,186,797) $13,975,721
Interest receivable 191,090
Prepaid expenses
4,296
----------
Total assets 14,171,107
LIABILITIES - Accrued expenses
12,300
----------
NET ASSETS (equivalent to $16.03 per share based on 883,525 shares of
common stock outstanding at January 31, 1998) $14,158,807
===========
</TABLE>
See notes to financial statements and Independent Accountants' Report.
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<PAGE> 4
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (UNAUDITED)
JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
MONEY MARKET FUNDS -
Dreyfus Tax Exempt Money Market Fund $ 287,665 $ 287,665 $ 287,665
SHORT-TERM MUNICIPAL BONDS -
Oregon General Obligation, 5.900%, July 15, 1998 500,000 500,000 505,165
LONG-TERM MUNICIPAL BONDS:
Alaska State Hsg Fin Corp, 6.375%, December 1, 2012 275,000 272,718 306,309
Ann Arbor General Obl, 6.000%, September 1, 2009 100,000 98,182 107,084
Avondale School District, 5.800%, May 1, 2015 140,000 140,000 150,328
Bay County General Obl, 6.500%, May 1, 2004 500,000 500,000 512,940
Berkley City Sch Dist MI FGIC, 5.6250%, January 1, 2015 270,000 262,295 283,778
Brandon School District, 5.600%, May 1, 2010 100,000 98,780 107,350
Brevard County Solid Waste Disposal, 5.700%, April 1, 2009 100,000 100,000 105,646
Caledonia Comm. Schools MI, 6.625%, May 1, 2014 150,000 150,000 165,666
Carrollton Public School District, 6.400%, May 1, 2004 65,000 64,802 67,335
Carrollton Public School District, 6.400%, May 1, 2005 75,000 74,740 77,695
Carrollton Public School District, 6.400%, May 1, 2006 75,000 74,709 77,695
Carrollton Public School District, 6.400%, May 1, 2007 75,000 74,681 77,576
Cedar Springs Public School Distrct, 5.875%, May 1, 2014 250,000 249,402 267,838
Central Michigan University Rev., 7.000%, October 1, 2000 210,000 223,971 229,956
Central Michigan University Rev., 5.500%, October 1, 2010 200,000 200,000 209,406
Central Michigan University Rev., 6.000%, October 1, 2013 100,000 100,927 108,136
Cheboygan General Obl., AMBAC, 5.400%, November 1, 2015 100,000 98,905 105,222
Chicago Emer. Telephone Sys., 5.800%, January 1, 2013 100,000 100,000 107,200
Chicago, Ill. General Obl., 6.250%, January 1, 2012 200,000 206,932 216,626
Chicago O'Hare Airport, Int'l Rev., 6.750%, January 1, 2018 230,000 252,023 251,475
Clintondale Comm. Schools, 6.500%, May 1, 2010 100,000 99,620 112,039
Cook County General Obl., 5.400%, November 15, 2008 200,000 200,000 211,976
Essexville Hampton Public Schools, MI FGIC, 5.500%,
May 1, 2117 150,000 146,211 155,376
Eugene Trojan Nuclear Proj Rev OR, 5.900%, September 1, 2009 145,000 145,617 145,194
Ferndale Sch Dist FGIC, 5.375%, May 1, 2116 100,000 98,069 102,028
Flat Rock Comm. School District, 5.250%, May 1, 2010 125,000 123,456 129,958
Florida State Board of Education, 6.000%, May 1, 2005 500,000 500,000 555,070
Florida State Board of Education, 5.200%, June 1, 2006 25,000 23,030 25,243
Grand Haven Area Public Schools, 6.050%, May 1, 2014 165,000 163,486 180,502
Grand Ledge Public Schools, 6.400%, May 1, 2008 50,000 53,920 56,172
---------- ---------- ----------
Total forward 4,875,000 4,896,476 5,208,819
</TABLE>
(Continued)
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<PAGE> 5
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (UNAUDITED)
JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $ 4,875,000 $ 4,896,479 $ 5,208,819
Grosse Isle General Obl., 5.200%, March 1, 2008 25,000 24,652 25,912
Huron Valley School District MI FGIC, 5.875%, May 1, 2016 100,000 98,981 107,947
Hudsonville Public Schools, 6.000%, May 1, 2009 100,000 100,000 109,717
Illinois State Sales Tax Rev., 5.400%, June 15, 2013 150,000 146,195 156,288
Intermountain Power Agency, 6.000%, July 1, 2016 315,000 322,572 316,811
Kalamazoo Water Rev., MI FSA, 5.625%, September 1, 2011 100,000 98,473 107,068
Kentwood Public Schools, 6.400%, May 1, 2015 500,000 500,000 553,255
King County General Obl., 6.200 %, June 1, 2002 500,000 500,000 500,795
L'Anse Creuse Public Schools, 5.500%, May 1, 2014 180,000 179,483 187,627
Lenawee County, MI Gen. Obl., 6.050%, May 1, 1999 100,000 100,000 101,547
Lenawee County, MI Gen. Obl., 6.100%, May 1, 2000 125,000 125,000 126,890
Lenawee County, MI Gen. Obl., 6.150%, May 1, 2001 125,000 125,000 126,906
Lincoln Consolidated Sch Dist MI FGIC, 5.80%, May 1, 2114 115,000 115,000 124,029
Macomb Water Sup. & Sew. Disposal, 6.000%,
January 1, 2012 200,000 200,000 211,332
Marysville Public Sch Dist, 5.750%, May 1, 2014 150,000 147,851 160,482
Michigan Higher Ed Stu Ln Rv, 6.000%, September 1, 2008 170,000 170,902 181,181
Michigan Municipal Bond Auth. Rev. 5.400%,
October 1, 2014 100,000 96,486 102,387
Michigan Public Power Agency Rev. 5.500%, January 1, 2113 100,000 99,532 102,186
Michigan State Bldg. Auth. Rev., 6.250%, October 1, 2020 250,000 245,948 268,083
Michigan State Bldg. Auth. Rev., AMBAC, 5.300%,
October 1, 2016 100,000 98,850 101,059
Michigan State Hsg. Dev. Auth. Rev., AMBAC, 5.600%,
December 1, 2009 155,000 155,000 160,732
Michigan State Trunk Line Rev., 6.000%, August 15, 2019 250,000 242,032 254,253
Millington Community School District, 5.700%, May 1, 2005 100,000 94,182 102,308
Monroe County General Obl., 5.250 %, November 1, 2002 65,000 62,393 65,818
Mount Pleasant Water Rev., 6.000%, February 1, 2015 340,000 333,595 365,990
Novi Community School District, 6.125%, May 1, 2013 250,000 250,544 278,168
Oakland County General Obl., 6.200%, May 1, 2003 500,000 491,497 512,765
Oakland County General Obl., 6.000%, November 1, 2011 115,000 114,115 124,305
Oakland County General Obl., 6.000%, November 1, 2013 145,000 142,544 155,118
Orange County Sales Tax Rev., 5.250%, January 1, 2016 150,000 148,141 152,165
Orlando Util Comm. Water & Elec., 6.300%, April 1, 2003 250,000 251,285 275,738
Rochester Comm. School District, 5.625%, May 1, 2009 35,000 34,672 38,607
St. Lucie County School Board, 5.375%, July 1, 2013 150,000 150,000 155,135
San Antonio General Obl, 5.750%, August 1, 2013 110,000 110,250 115,457
Santa Monica, CA Univ Sch Dist, 5.400%, August 1, 2009 50,000 50,000 52,969
----------- ----------- -----------
Total forward 11,045,000 11,021,654 11,689,849
</TABLE>
(Continued)
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<PAGE> 6
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (UNAUDITED)
JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $11,045,000 $11,021,654 $11,689,849
Tarrant Co. Water Control, TX, 5.750%, March 1, 2001 150,000 150,000 157,588
University of Michigan, Revenue, 5.750%, April 1, 2003 75,000 71,645 75,945
University of Michigan, Revenue, 5.800%, April 1, 2010 230,000 230,000 247,645
Utica Community Schools, MI, 7.100%, May 1, 2006 75,000 75,000 81,616
Warren Consol. Sch Dist MI MBIA, 5.500%, May 1, 2014 200,000 194,132 207,605
Washoe County General Obl., 6.200%, April 1, 2010 185,000 181,701 203,288
Yale Public Schools District, MI, 5.000%, May 1, 2005 125,000 125,000 129,448
Zeeland Public Schools, MI, 6.000%, May 1, 2010 100,000 100,000 111,402
Zeeland Public Schools, MI, 6.000%, May 1, 2014 250,000 250,000 278,505
----------- ----------- -----------
Total long-term municipal bonds 12,435,000 12,399,132 13,182,891
----------- ----------- -----------
TOTAL INVESTMENTS $13,222,665 $13,186,797 $13,975,721
=========== =========== ===========
</TABLE>
See notes to financial statements and Independent Accountants' Report.
(Concluded)
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<PAGE> 7
VALOR INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest income $392,576
Gain on disposition 15,344
--------
Total investment income 407,920
EXPENSES:
Professional fees 22,433
Custodian fees 4,000
Other 3,000
--------
Total expenses 29,433
--------
NET INVESTMENT INCOME (equivalent to $0.43 per share based on
883,525 shares of common stock outstanding at January 31, 1998) 378,487
--------
UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of period 686,132
End of period 788,924
--------
INCREASE IN UNREALIZED APPRECIATION OF INVESTMENTS 102,792
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $481,279
========
</TABLE>
See notes to financial statements and Independent Accountants' Report.
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<PAGE> 8
VALOR INVESTMENT FUND, INC.
STATEMENT OF SHAREHOLDERS' INVESTMENT (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDISTRIBUTED UNREALIZED
COMMON STOCK NET APPRECIATION
---------------------- PAID-IN RETAINED INVESTMENT OF
SHARES PAR VALUE SURPLUS EARNINGS INCOME INVESTMENTS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 31, 1997 883,525 $883,525 $180,944 $11,967,524 $ 348,825 $686,132 $ 14,066,950
Net increase in net assets resulting
from operations 378,487 102,792 481,279
Dividends to shareholders ($0.44
per share) (389,422) (389,422)
--------- -------- -------- ----------- --------- -------- ------------
BALANCE AT JANUARY 31, 1998 883,525 $883,525 $180,944 $11,967,524 $ 337,890 $788,924 $ 14,158,807
========= ======== ======== =========== ========= ======== ============
</TABLE>
See notes to financial statements and Independent Accountants' Report.
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<PAGE> 9
VALOR INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED JANUARY 31,1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $ 378,487
Increase in unrealized appreciation 102,792
-----------
Net increase in net assets resulting from operations 481,279
DIVIDENDS TO SHAREHOLDERS FROM INVESTMENT INCOME 389,422
-----------
INCREASE IN NET ASSETS 91,857
NET ASSETS:
Beginning of period 14,066,950
-----------
End of period $14,158,807
===========
</TABLE>
See notes to financial statements and Independent Accountants' Report.
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<PAGE> 10
VALOR INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1998
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valor Investment Fund, Inc. (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, 1998.
MANAGEMENT AND SERVICE FEES - No management fees have been paid or accrued
to outside organizations. A total of $1,000 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, 1998:
<TABLE>
<S> <C>
Balance, July 31, 1997 $ 13,206,327
Plus purchases 1,100,910
Less:
Redeemed securities (1,120,384)
Premium amortization net of discount accretion (56)
------------
Balance, January 31, 1998 $ 13,186,797
============
</TABLE>
Approximately $351,400 in purchases and $543,400 in redeemed securities
were bond transactions. The remaining transactions were related to the
money market fund.
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<PAGE> 11
3. TRANSACTIONS WITH AFFILIATES
The Company had no transactions with affiliated persons in the six months
ended January 31, 1998, 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, 1998.
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
$13,099,623 at January 31, 1998. 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 $ (6,731)
Aggregate gross unrealized appreciation 882,829
---------
Net unrealized appreciation $ 876,098
=========
</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, 1998 and the
year ended July 31, 1997.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1998 1997
<S> <C> <C>
Investment income $ 0.46 $ 0.93
Expenses (0.03) (0.06)
---------- ----------
Net investment income 0.43 0.87
Dividends from net investment income (0.44) (0.91)
Increase in unrealized appreciation 0.12 0.39
---------- ----------
Increase in net asset value 0.11 0.35
Net asset value - beginning 15.92 15.57
---------- ----------
Net asset value - ending $ 16.03 $ 15.92
========== ==========
Weighted average shares outstanding during the period 883,525 883,525
========== ==========
</TABLE>
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<PAGE> 12
7. INTEREST INCOME
The following details by state, the interest income earned by the Company
during the six months ended January 31, 1998:
<TABLE>
<S> <C>
Alaska $ 8,844
California 1,350
Florida 40,469
Illinois 19,156
Michigan* 263,177
Nevada 5,872
Oregon 19,001
Texas 7,467
Utah 9,240
Washington 18,000
---------
Total $ 392,576
=========
</TABLE>
*Included in the Michigan total is $2,945 interest earned on a tax-exempt money
market fund for the six months ended January 31, 1998.
* * * * * *
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