<PAGE> 1
[DELOITTE & TOUCHE LETTERHEAD]
VALOR INVESTMENT
FUND, INC.
Financial Statements for the
Year Ended July 31, 1999, and
Independent Auditors' Report
- -----------------------
DELOITTE TOUCHE
TOHMATSU
- -----------------------
<PAGE> 2
VALOR INVESTMENT FUND, INC.
2290 FIRST NATIONAL BUILDING, DETROIT, MICHIGAN 48226
ANNUAL REPORT FOR THE YEAR ENDED JULY 31, 1999
To our Shareholders:
The financial statements of Valor Investment Fund, Inc. (the "Company") for the
fiscal year ended July 31, 1999, are included in this Annual Report. Net assets
at July 31, 1999 were $13,871,598, equal to $15.70 per share of common stock on
the 883,525 shares outstanding. Net asset value at July 31, 1998 was $15.97 per
share, based upon the same number of outstanding shares. The decrease in net
asset value at July 31, 1999 from the net asset value at July 31, 1998 is
primarily due to an decrease in unrealized appreciation of investments in
securities.
Your Company's net investment income for the year August 1, 1998 to July
31, 1999 was $726,009. Your Company has paid dividends of $.84 per share of
common stock from net investment income during fiscal 1999. The $.84 is further
broken down into $.44 and $.40 per share of common stock which were paid on
November 2, 1998 and May 3, 1999, respectively. The Board of Directors intends
to distribute substantially all of the Company's net investment income earned
during fiscal 1999.
Your Company's policy continues to be one of investment in tax-free municipal
bonds and project notes.
We wish to express our appreciation of your continued participation in the
Company.
Respectfully submitted,
/s/ William B. Klinsky, President
William B. Klinsky,
President
<PAGE> 3
[DELOITTE & TOUCHE LOGO]
[DELOITTE & TOUCHE LETTERHEAD]
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, 1999, 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 Company, as of July 31,
1999, 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.
/s/ Deloitte & Touche LLP
September 17, 1999
<PAGE> 4
VALOR INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities - at market value (cost of $13,166,448) $ 13,675,171
Interest receivable 200,208
Prepaid expenses 5,719
------------
Total assets 13,881,098
------------
LIABILITIES - Accrued expenses 9,500
------------
Total liabilities 9,500
------------
NET ASSETS (equivalent to $15.70 per share based on 883,525 shares of
common stock outstanding at July 31, 1999) $ 13,871,598
============
</TABLE>
See notes to financial statements.
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<PAGE> 5
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
MONEY MARKET FUNDS -
Dreyfus Tax Exempt Money Market Fund $ 83,150 $ 83,150 $ 83,150
--------- -------- --------
SHORT-TERM MUNICIPAL BONDS -
Lenawee Co. MI General Obligation, 6.100%, May 1, 2000 125,000 125,000 126,983
--------- -------- --------
LONG-TERM MUNICIPAL BONDS:
Alaska State Hsg Fin Corp, 6.375%, December 1, 2012 275,000 272,954 297,596
Ann Arbor General Obl., 6.000%, September 1, 2009 100,000 98,427 104,793
Avondale School District, 5.800%, May 1, 2015 140,000 140,000 150,368
Bay County General Obl, 6.500%, May 1, 2004 500,000 500,000 513,315
Berkley City Sch Dist MI FGIC, 5.625%, Jan 1, 2015 270,000 262,995 287,245
Brandon School District, 5.600%, May 1, 2010 100,000 98,932 106,776
Brevard County Solid Waste Disposal, 5.700%, April 1, 2009 100,000 100,000 102,588
Caledonia Comm. Schools MI, 6.625%, May 1, 2014 150,000 150,000 160,889
Carrollton Public School District, 6.400%, May 1, 2004 65,000 64,851 67,385
Carrollton Public School District, 6.400%, May 1, 2005 75,000 74,795 77,752
Carrollton Public School District, 6.400%, May 1, 2006 75,000 74,764 77,752
Carrollton Public School District, 6.400%, May 1, 2007 75,000 74,734 77,762
Cedar Springs Public School District, 5.875%, May 1, 2014 250,000 249,458 268,799
Central Michigan University Rev., 7.000%, October 1, 2010 210,000 215,589 221,804
Central Michigan University Rev., 5.500%, October 1, 2010 200,000 200,000 204,400
Central Michigan University Rev., 6.000%, October 1, 2013 100,000 100,837 105,718
Cheboygan General Obligation, 5.400%, November 1, 2015 100,000 99,002 102,101
Chicago Emer. Telephone Sys., 5.800%, January 1, 2013 100,000 100,000 106,646
Chicago, Illinois General Obl., 6.250%, January 1, 2012 200,000 206,162 212,328
Chicago O'Hare Arpt. Intl Rev., 6.75%, January 1, 2018 230,000 250,329 244,873
Clawson City School Dist., 4.900%, May 1, 2013 200,000 199,050 192,392
Clintondale Comm. Schools, 6.500%, May 1, 2010 100,000 99,668 108,530
Cook County General Obl., 5.400%, November 15, 2008 200,000 200,000 212,262
Coopersville Area Mich Pub Schools, 5.00%, May 1, 2024 100,000 98,215 93,146
Desoto Independent School Dist, 4.90%, August 15, 2014 75,000 75,000 70,507
Essexville Hampton Public Schools, 5.500%, May 1, 2017 150,000 146,510 158,208
Eugene Trojan Nuclear Proj Rev OR, 5.900%, Sept 1, 2009 145,000 145,534 148,190
Ferndale School District, 5.375%, May 1, 2116 100,000 98,230 100,356
Flat Rock Comm. School District, 5.25%, May 1, 2010 125,000 123,649 126,834
Florida State Board of Education, 6.000%, May 1, 2005 500,000 500,000 505,419
Florida State Board of Education, 5.200%, June 1, 2016 25,000 23,194 24,744
Grand Haven Area Pub. Schools, 6.050%, May 1, 2014 165,000 163,630 177,765
Grand Ledge Public Schools, 6.400%, May 1, 2008 50,000 53,332 55,169
Greenville Public Schools, 5.00%, May 1, 2014 300,000 299,097 291,741
--------- --------- ---------
Total forward 5,550,000 5,558,938 5,756,153
</TABLE>
(Continued)
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<PAGE> 6
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $ 5,550,000 $ 5,558,938 $ 5,756,153
Grosse Isle General Obligation, 5.200%, March 1, 2008 25,000 24,706 25,485
Hudsonville Public Schools, 6.000%, May 1, 2009 100,000 100,000 108,458
Huron Valley School District MI FGIC, 5.875%, May 1, 2016 100,000 99,066 107,889
Illinois State Sales Tax Revenue, 5.400%, June 15, 2013 150,000 146,575 151,832
Kalamazoo Water Revenue MI FSA, 5.625%, Sept 1, 2011 100,000 98,642 103,371
Kentwood Public Schools, 6.400%, May 1, 2015 500,000 500,000 537,599
King County General Obligation, 6.200%, June 1, 2002 500,000 500,000 501,064
L'Anse Creuse Public Schools, 5.500%, May 1, 2014 180,000 179,532 182,194
Lenawee County, MI Gen. Obl., 6.150%, May 1, 2001 125,000 125,000 126,999
Lincoln Consolidated School District, 5.800%, May 1, 2114 115,000 115,000 123,363
Macomb Water Sup. & Sew. Disp., 6.000%, January 1, 2012 200,000 200,000 207,490
Marysville Public School District, 5.750%, May 1, 2014 150,000 148,053 160,140
Michigan Higher Ed Stu Ln Rv, 6.000%, Sept 1, 2008 170,000 170,769 174,019
Michigan Municipal Bond Auth. Rev., 5.400%, Oct 1, 2014 100,000 96,806 101,036
Michigan Public Power Agency Revenue, 5.500%,
January 1, 2113 100,000 99,581 101,161
Michigan State Bldg. Auth. Rev., 6.250%, October 1, 2020 250,000 246,218 262,670
Michigan State Bldg. Auth. Rev., 5.30%, October 1, 2016 100,000 98,943 98,618
Michigan State Hospital Finance Authority, 5.375%,
October 15, 2013 95,000 95,920 93,647
Michigan State Hospital Finance Authority, 5.25%,
November 1, 2015 180,000 186,239 174,251
Michigan State Housing Development Authority Revenue,
5.600%, December 1, 2009 155,000 155,000 158,708
Michigan State Trunk Line Rev., 6.000%, August 15, 2019 250,000 242,588 250,258
Millington Community School Dist., 5.700%, May 1, 2005 100,000 95,428 102,259
Monroe County General Obl., 5.250%, November 1, 2002 65,000 63,262 65,798
Mount Pleasant Water Revenue, 6.000%, February 1, 2015 340,000 334,172 368,318
Novi Community School District, 6.1250%, May 1, 2013 250,000 250,381 270,353
Oakland County General Obl., 6.200%, May 1, 2003 500,000 494,048 508,185
Oakland County General Obl., 6.000%, November 1, 2011 115,000 114,213 121,258
Oakland County General Obl., 6.000%, November 1, 2013 145,000 142,782 152,846
Orange County Sales Tax Rev., 5.250%, January 1, 2016 150,000 148,300 149,015
Orlando Util Comm. Water & Elec., 6.300%, April 1, 2003 250,000 250,899 267,488
Petoskey Public School Dist, 4.750%, May 1, 2016 125,000 124,747 115,199
Rochester Comm. Sch. Dist., 5.625%, May 1, 2009 35,000 34,717 36,974
St. Lucie County School Board, 5.375%, July 1, 2013 150,000 150,000 151,697
San Antonio General Obligation, 5.750%, August 1, 2013 110,000 110,225 113,434
Santa Monica, Cal Univ Sch Dist, 5.400%, August 1, 2009 50,000 50,000 53,266
Tarrant Co. Water Control, TX, 5.750%, March 1, 2001 150,000 150,000 154,029
University of Michigan, Revenue, 5.800%, April 1, 2010 230,000 230,000 241,026
---------- ---------- ----------
Total forward 11,960,000 11,930,750 12,377,550
</TABLE>
(Continued)
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<PAGE> 7
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES
JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total forward $ 11,960,000 $ 11,930,750 $ 12,377,550
Utica Community Schools, MI, 4.250%, May 1, 2002 100,000 100,751 100,175
Utica Community Schools, MI, 7.100%, May 1, 2006 75,000 75,000 78,489
Warren Consolidated Sch Dist MI MBIA, 5.50%, May 1, 2014 200,000 194,683 203,430
Washoe County General Obl., 6.200%, April 1, 2010 185,000 182,114 197,795
Yale Public Schools District, MI, 5.000%, May 1, 2005 125,000 125,000 127,366
Zeeland Public Schools, MI, 6.000%, May 1, 2010 100,000 100,000 108,638
Zeeland Public Schools, MI, 6.000%, May 1, 2014 250,000 250,000 271,595
------------ ------------ ------------
Total long-term municipal bonds 12,995,000 12,958,298 13,465,038
------------ ------------ ------------
TOTAL INVESTMENTS $ 13,203,150 $ 13,166,448 $ 13,675,171
============ ============ ============
</TABLE>
See notes to financial statements. (Concluded)
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<PAGE> 8
VALOR INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest income $ 775,557
Loss on disposition (3,593)
---------
Total investment income 771,964
EXPENSES:
Professional fees 25,441
Custodian fees 9,459
Other 11,055
---------
Total expenses 45,955
---------
NET INVESTMENT INCOME (equivalent to $.82 per share based on
883,525 shares of common stock outstanding at July 31, 1999) 726,009
UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of period 730,590
End of period 508,482
---------
DECREASE IN NET UNREALIZED APPRECIATION OF INVESTMENTS (222,108)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 503,901
=========
</TABLE>
See notes to financial statements.
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<PAGE> 9
VALOR INVESTMENT FUND, INC.
STATEMENT OF SHAREHOLDERS' INVESTMENT
YEAR ENDED JULY 31, 1999
- --------------------------------------------------------------------------------
<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, 1998 883,525 $883,525 $180,944 $11,967,524 $ 347,730 $ 730,590 $14,110,313
Net increase in net assets
resulting from operations 726,009 (222,108) 503,901
Dividends to shareholders
($.84 per share) (742,616) (742,616)
-------- -------- -------- ----------- --------- --------- -----------
BALANCE AT JULY 31, 1999 883,525 $883,525 $180,944 $11,967,524 $ 331,123 $ 508,482 $13,871,598
======== ======== ======== =========== ========= ========= ===========
</TABLE>
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<PAGE> 10
VALOR INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED JULY 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
OPERATIONS:
<S> <C> <C>
Net investment income $ 726,009 $ 751,033
(Decrease) Increase in unrealized appreciation (222,108) 44,458
----------- -----------
Net increase in net assets resulting from operations 503,901 795,491
DIVIDENDS TO SHAREHOLDERS FROM INVESTMENT
INCOME 742,616 752,128
----------- -----------
(DECREASE) INCREASE IN NET ASSETS (238,715) 43,363
NET ASSETS:
Beginning of period 14,110,313 14,066,950
----------- -----------
End of period $13,871,598 $14,110,313
=========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 11
VALOR INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JULY 31, 1999
- --------------------------------------------------------------------------------
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,
1999.
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, 1999:
<TABLE>
<S> <C>
Balance, August 1, 1998 $ 13,196,135
Plus:
Purchases 2,014,294
Discount accretion net of premium amortization (992)
Less:
Matured securities (100,000)
Redeemed securities (1,942,989)
------------
Balance, July 31, 1999 $ 13,166,448
============
</TABLE>
Approximately $484,540 in purchases and $394,342 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, 1999, 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, 1999.
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
$13,079,483 at July 31, 1999. 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 $ (53,434)
Aggregate gross unrealized appreciation 649,159
---------
Net unrealized appreciation $ 595,725
=========
</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
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Investment income $ 0.87 $ 0.91 $ 0.93 $ 0.96 $ 0.95
Expenses (0.05) (0.06) (0.06) (0.03) (0.04)
--------- --------- --------- --------- ---------
Net investment income 0.82 0.85 0.87 0.93 0.91
Dividends from net investment income (0.84) (0.85) (0.91) (0.91) (0.97)
Decrease (increase) in unrealized
appreciation (0.25) 0.05 0.39 0.14
--------- --------- --------- --------- ---------
Decrease (increase) in net asset value (0.27) 0.05 0.35 0.02 0.08
Net asset value - beginning 15.97 15.92 15.57 15.55 15.47
--------- --------- --------- --------- ---------
Net asset value - ending $ 15.70 $ 15.97 $ 15.92 $ 15.57 $ 15.55
========= ========= ========= ========= =========
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, 1999:
<TABLE>
<S> <C>
Alaska $ 17,689
California 2,700
Florida 68,646
Illinois 51,336
Michigan * 561,468
Nevada 11,745
Oregon 8,501
Texas 17,852
Utah 4,620
Washington 31,000
--------
Total $775,557
========
</TABLE>
* Included in the Michigan total is $3,608 interest earned on a tax-exempt
money market fund for the year ended July 31, 1999.
******
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