<PAGE> 1
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VALOR INVESTMENT
FUND, INC.
Financial Statements for the
Year Ended July 31, 1998, 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, 1998
To our Shareholders:
The financial statements of Valor Investment Fund, Inc. (the "Company") for the
fiscal year ended July 31, 1998, are included in this Annual Report. Net assets
at July 31, 1998 were $14,110,313, equal to $15.97 per share of common stock on
the 883,525 shares outstanding. Net asset value at July 31, 1997 was $15.92 per
share, based upon the same number of outstanding shares. The increase in net
asset value at July 31, 1998 from the net asset value at July 31, 1997 is
primarily due to an increase in unrealized appreciation of investments in
securities.
Your Company's net investment income for the year August 1, 1997 to July 31,
1998 was $751,033. Your Company has paid dividends of $.85 per share of common
stock from net investment income during fiscal 1998. The $.85 is further broken
down into $.44 and $.41 per share of common stock which were paid on November 3,
1997 and May 1, 1998, respectively. The Board of Directors intends to distribute
substantially all of the Company's net investment income earned during fiscal
1998.
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,
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, 1998, 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 Valor Investment Fund, Inc., as
of July 31, 1998, 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.
DELOITTE & TOUCHE LLP
September 21, 1998
Detroit, Michigan
<PAGE> 4
VALOR INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
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<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities - at market value (cost of $13,196,135) $13,926,725
Interest receivable 196,467
Prepaid expenses 5,121
-----------
Total assets 14,128,313
-----------
LIABILITIES - Accrued expenses 18,000
-----------
Total liabilities 18,000
-----------
NET ASSETS (equivalent to $15.97 per share based on 883,525 shares of
common stock outstanding at July 31, 1998) $14,110,313
===========
</TABLE>
See notes to financial statements.
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<PAGE> 5
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
--------- --------- ---------
<S> <C> <C> <C>
MONEY MARKET FUNDS -
Dreyfus Tax Exempt Money Market Fund $ 102,043 $ 102,043 $ 102,043
--------- --------- ---------
SHORT-TERM MUNICIPAL BONDS -
Lenawee Co. MI General Obligation, 6.050%, May 1,
1999 100,000 100,000 101,574
--------- --------- ---------
Total short-term municipal bonds 100,000 100,000 101,574
--------- --------- ----------
LONG-TERM MUNICIPAL BONDS:
Alaska State Hsg Fin Corp, 6.375%, December 1, 2012 275,000 272,796 303,047
Ann Arbor General Obl., 6.000%, September 1, 2009 100,000 98,261 106,470
Avondale School District, 5.800%, May 1, 2015 140,000 140,000 149,051
Bay County General Obl, 6.500%, May 1, 2004 500,000 500,000 513,070
Berkley City Sch Dist MI FGIC, 5.625%, Jan 1, 2015 270,000 262,528 281,874
Brandon School District, 5.600%, May 1, 2010 100,000 98,831 108,927
Brevard County Solid Waste Disposal, 5.700%, April 1,2009 100,000 100,000 104,936
Caledonia Comm. Schools MI, 6.625%, May 1, 2014 150,000 150,000 164,121
Carrollton Public School District, 6.400%, May 1, 2004 65,000 64,818 67,352
Carrollton Public School District, 6.400%, May 1, 2005 75,000 74,758 77,714
Carrollton Public School District, 6.400%, May 1, 2006 75,000 74,727 77,714
Carrollton Public School District, 6.400%, May 1, 2007 75,000 74,698 77,588
Cedar Springs Public School District, 5.875%, May 1, 2014 250,000 249,420 273,190
Central Michigan University Rev., 7.000%, October 1, 2000 210,000 221,177 227,064
Central Michigan University Rev., 5.500%, October 1, 2010 200,000 200,000 208,140
Central Michigan University Rev., 6.000%, October 1, 2013 100,000 100,897 107,217
Cheboygan General Obligation, 5.400%, November 1, 2015 100,000 98,939 104,055
Chicago Emer. Telephone Sys., 5.800%, January 1, 2013 100,000 100,000 106,727
Chicago, Illinois General Obl., 6.250%, January 1, 2012 200,000 206,675 215,920
Chicago O'Hare Arpt. Intl Rev., 6.75%, January 1, 2018 230,000 251,459 249,244
Clawson City School Dist., 4.900%, May 1, 2013 200,000 198,979 197,464
Clintondale Comm. Schools, 6.500%, May 1, 2010 100,000 99,636 110,852
Cook County General Obl., 5.400%, November 15, 2008 200,000 200,000 210,052
Essexville Hampton Public Schools, 5.500%, May 1, 2117 150,000 146,311 154,821
Eugene Trojan Nuclear Proj Rev OR, 5.900%, Sept 1,2009 145,000 145,590 145,201
Ferndale School District, 5.375%, May 1, 2116 100,000 98,122 101,606
Flat Rock Comm. School District, 5.25%, May 1, 2010 125,000 123,521 129,167
Florida State Board of Education, 6.000%, May 1, 2005 500,000 500,000 550,535
Florida State Board of Education, 5.200%, June 1, 2016 25,000 23,084 25,118
Grand Haven Area Pub. Schools, 6.050%, May 1, 2014 165,000 163,535 178,959
Grand Ledge Public Schools, 6.400%, May 1, 2008 50,000 53,724 55,725
Greenville Public Schools, 5.00%, May 1, 2014 300,000 299,035 298,038
Grosse Isle General Obligation, 5.200%, March 1, 2008 25,000 24,670 25,811
Hudsonville Public Schools, 6.000%, May 1, 2009 100,000 100,000 109,172
--------- --------- ---------
Total forward
5,500,000 5,516,191 5,815,942
(Continued)
</TABLE>
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<PAGE> 6
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $5,500,000 $5,516,191 $5,815,942
Huron Valley School District MI FGIC, 5.875%, May 1, 2016 100,000 99,010 106,899
Illinois State Sales Tax Revenue, 5.400%, June 15, 2013 150,000 146,322 155,095
Intermountain Power Agency, 6.000%, July 1, 2016 315,000 322,361 316,575
Kalamazoo Water Revenue MI FSA, 5.625%, Sept 1, 2011 100,000 98,529 106,087
Kentwood Public Schools, 6.400%, May 1, 2015 500,000 500,000 547,725
King County General Obligation, 6.200%, June 1, 2002 500,000 500,000 500,825
L'Anse Creuse Public Schools, 5.500%, May 1, 2014 180,000 179,499 186,025
Lenawee County, MI Gen. Obl., 6.100%, May 1, 2000 125,000 125,000 126,923
Lenawee County, MI Gen. Obl., 6.150%, May 1, 2001 125,000 125,000 126,938
Lincoln Consolidated School District, 5.800%, May 1, 2114 115,000 115,000 121,947
Macomb Water Sup. & Sew. Disp., 6.000%, January 1, 2012 200,000 200,000 209,710
Marysville Public School District, 5.750%, May 1, 2014 150,000 147,918 159,615
Michigan Higher Ed Stu Ln Rv, 6.000%, Sept 1, 2008 170,000 170,859 180,081
Michigan Municipal Bond Auth. Rev., 5.400%, Oct 1, 2014 100,000 96,593 102,680
Michigan Public Power Agency Revenue, 5.500%,
January 1, 2113 100,000 99,548 102,436
Michigan State Bldg. Auth. Rev., 6.250%, October 1, 2020 250,000 246,038 266,643
Michigan State Bldg. Auth. Rev., 5.30%, October 1, 2016 100,000 98,881 100,715
Michigan State Hospital Finance Authority, 5.375%,
October 15, 2013 95,000 95,986 96,322
Michigan State Housing Development Authority Revenue,
5.600%, December 1, 2009 155,000 155,000 160,671
Michigan State Trunk Line Rev., 6.000%, August 15, 2019 250,000 242,218 255,953
Millington Community School Dist., 5.700%, May 1, 2005 100,000 94,597 102,294
Monroe County General Obl., 5.250 %, November 1, 2002 65,000 62,682 65,801
Mount Pleasant Water Revenue, 6.000%, February 1, 2015 340,000 333,784 374,483
Novi Community School District, 6.1250%, May 1, 2013 250,000 250,490 275,355
Oakland County General Obl., 6.200%, May 1, 2003 500,000 492,348 512,895
Oakland County General Obl., 6.000%, November 1, 2011 115,000 114,148 123,193
Oakland County General Obl., 6.000%, November 1, 2013 145,000 142,623 155,330
Orange County Sales Tax Rev., 5.250%, January 1, 2016 150,000 148,194 151,293
Orlando Util Comm. Water & Elec., 6.300%, April 1, 2003 250,000 251,156 272,908
Rochester Comm. Sch. Dist., 5.625%, May 1, 2009 35,000 34,687 38,106
St. Lucie County School Board, 5.375%, July 1, 2013 150,000 150,000 154,131
San Antonio General Obligation, 5.750%, August 1, 2013 110,000 110,242 115,146
Santa Monica, Cal Univ Sch Dist, 5.400%, August 1, 2009 50,000 50,000 53,808
Tarrant Co. Water Control, TX, 5.750%, March 1, 2001 150,000 150,000 156,377
University of Michigan, Revenue, 5.750%, April 1, 2003 75,000 71,981 75,767
University of Michigan, Revenue, 5.800%, April 1, 2010 230,000 230,000 246,484
Utica Community Schools, MI, 4.250%, May 1, 2002 100,000 101,052 100,684
Utica Community Schools, MI, 7.100%, May 1, 2006 75,000 75,000 80,528
-------- -------- ------
Total forward
12,170,000 12,142,937 12,800,390
</TABLE>
(Continued)
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<PAGE> 7
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $12,170,000 $12,142,937 $12,800,390
Warren Consolidated Sch Dist MI MBIA, 5.50%, May 1, 2014 200,000 194,316 205,998
Washoe County General Obl., 6.200%, April 1, 2010 185,000 181,839 201,217
Yale Public Schools District, MI, 5.000%, May 1, 2005 125,000 125,000 128,889
Zeeland Public Schools, MI, 6.000%, May 1, 2010 100,000 100,000 110,461
Zeeland Public Schools, MI, 6.000%, May 1, 2014 250,000 250,000 276,153
----------- ----------- -----------
Total long-term municipal bonds 13,030,000 12,994,092 13,723,108
----------- ----------- -----------
TOTAL INVESTMENTS $13,232,043 $13,196,135 $13,926,725
=========== =========== ===========
</TABLE>
See notes to financial statements. (Concluded)
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<PAGE> 8
VALOR INVESTMENT FUND, INC.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
- -----------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest income $ 784,287
Gain on disposition 15,343
----------
Total investment income 799,630
EXPENSES:
Professional fees 29,833
Custodian fees 8,750
Other 10,014
----------
Total expenses 48,597
----------
NET INVESTMENT INCOME (equivalent to $.85 per share based on
883,525 shares of common stock outstanding at July 31, 1998) 751,033
UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of period 686,132
End of period 730,590
----------
INCREASE IN NET UNREALIZED APPRECIATION OF INVESTMENTS 44,458
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 795,491
==========
</TABLE>
See notes to financial statements.
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<PAGE> 9
VALOR INVESTMENT FUND, INC.
STATEMENT OF SHAREHOLDERS' INVESTMENT
YEAR ENDED JULY 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NET
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, 1997 883,525 $ 883,525 $180,944 $ 11,967,524 $ 348,825 $ 686,132 $14,066,950
Net increase in net assets resulting
from operations 751,033 44,458 795,491
Dividends to shareholders
($.85 per share) (752,128) (752,128)
------- --------- -------- ------------ ---------- --------- -----------
BALANCE AT JULY 31, 1998 883,525 $ 883,525 $180,944 $ 11,967,524 $ 347,730 $ 730,590 $14,110,313
======= ========= ======== ============ ========== ========= ===========
</TABLE>
See notes to financial statements.
- 7 -
<PAGE> 10
VALOR INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED JULY 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
OPERATIONS:
Net investment income $ 751,033 $ 769,433
Increase in unrealized appreciation 44,458 345,314
----------- -----------
Net increase in net assets resulting from operations 795,491 1,114,747
DIVIDENDS TO SHAREHOLDERS FROM INVESTMENT
INCOME 752,128 804,508
----------- -----------
INCREASE IN NET ASSETS 43,363 310,239
NET ASSETS:
Beginning of period 14,066,950 13,756,711
----------- -----------
End of period $14,110,313 $14,066,950
=========== ===========
</TABLE>
See notes to financial statements.
- 8 -
<PAGE> 11
VALOR INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JULY 31, 1998
- --------------------------------------------------------------------------------
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 - 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,
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.
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION - The preparation of
financial statements in conformity with generally accepted accounting
principles requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. The Company's financial statements include amounts that
are based on management's best estimates and judgments. Actual results
could differ from those estimates.
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<PAGE> 12
2. SECURITIES TRANSACTIONS
The following summarizes the changes in investments, at amortized cost, for
the year ended July 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Balance, August 1, 1997 $13,206,327
Plus:
Purchases 2,275,110
Discount accretion net of premium amortization (266)
Less:
Matured securities (500,000)
Redeemed securities (1,785,036)
-----------
Balance, July 31, 1998 $13,196,135
===========
</TABLE>
Approximately $1,046,576 in purchases and $1,043,406 in sales were bond
transactions. The remaining transactions were related to the money market
fund.
3. TRANSACTIONS WITH AFFILIATES
The Company had no transactions with affiliated persons in the year ended
July 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 July 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
original issue discount.
The aggregate cost of securities for federal income tax purposes was
$13,104,741 at July 31, 1998. The gross unrealized appreciation and
depreciation computed as the difference between market value and
<TABLE>
<S> <C>
Aggregate gross unrealized depreciation $(11,270)
Aggregate gross unrealized appreciation 833,254
--------
Net unrealized appreciation $821,984
========
</TABLE>
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<PAGE> 13
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
----------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Investment income $ 0.91 $ 0.93 $ 0.96 $ 0.95 $ 1.05
Expenses
(0.06) (0.06) (0.03) (0.04) (0.05)
------- ------- ------- ------- -------
Net investment income 0.85 0.87 0.93 0.91 1.00
Dividends from net investment income (0.85) (0.91) (0.91) (0.97) (0.9)
Increase (decrease) in unrealized
appreciation 0.05 0.39 0.14 (0.46)
------- ------- ------- ------- -------
Increase (decrease) in net asset value 0.05 0.35 0.02 0.08 (0.42)
Net asset value - beginning 15.92 15.57 15.55 15.47 15.89
------- ------- ------- ------- -------
Net asset value - ending $ 15.97 $ 15.92 $ 15.57 $ 15.55 $ 15.47
======= ======= ======= ======= =======
Weighted average shares outstanding
during the year 883,525 883,525 883,525 883,525 883,525
======= ======= ======= ======= =======
</TABLE>
7. INTEREST INCOME
The following details, by state, the interest income earned by the
Company during the year ended July 31, 1998:
<TABLE>
<S> <C>
Alaska $ 17,689
California 2,700
Florida 74,792
Illinois 44,824
Michigan * 528,933
Nevada 11,745
Oregon 36,690
Texas 14,934
Utah 18,480
Washington 33,500
---------
Total $ 784,287
=========
</TABLE>
* Included in the Michigan total is $5,179 interest earned on a tax-exempt
money market fund for the year ended July 31, 1998.
* * * * * *
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