<PAGE> 1
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VALOR INVESTMENT FUND, INC.
Financial Statements for the
Six Months Ended January 31, 1999, and
Independent Accountants' Review Report
<PAGE> 2
INDEPENDENT ACCOUNTANTS' REVIEW 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, 1999, 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.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of changes in net assets for the year ended July 31,
1998 and in our report dated September 21, 1998, we expressed an unqualified
opinion on such statement of changes in net assets.
/s/ Deloitte & Touche LLP
Detroit, Michigan
March 25, 1999
<PAGE> 3
VALOR INVESTMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 1999
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<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities - at market value (cost of $13,151,429) $14,041,013
Interest receivable 202,327
Prepaid expenses 6,970
-----------
Total assets 14,250,310
LIABILITIES - Accrued expenses 11,500
-----------
NET ASSETS (equivalent to $16.12 per share based on 883,525 shares of
common stock outstanding at January 31, 1999) $14,238,810
===========
</TABLE>
See notes to financial statements and Independent Accountants Review Report.
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VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (UNAUDITED)
JANUARY 31, 1999
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<TABLE>
<CAPTION>
COST
OR
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
MONEY MARKET FUNDS -
Dreyfus Tax Exempt Money Market Fund $ 65,705 $ 65,705 $ 65,705
SHORT-TERM MUNICIPAL BONDS -
Lenawee Co Mich General Obligation, 6.05%, May 1, 1998 100,000 100,000 100,789
LONG-TERM MUNICIPAL BONDS:
Alaska State Hsg Fin Corp, 6.375%, December 1, 2012 275,000 272,875 306,702
Ann Arbor General Obl, 6.000%, September 1, 2009 100,000 98,344 107,477
Avondale School District, 5.800%, May 1, 2015 140,000 140,000 152,666
Bay County General Obl, 6.500%, May 1, 2004 500,000 500,000 514,065
Berkley City Sch Dist MI FGIC, 5.6250%, January 1, 2015 270,000 262,761 287,267
Brandon School District, 5.600%, May 1, 2010 100,000 98,881 111,604
Brevard County Solid Waste Disposal, 5.700%,
April 1, 2009 100,000 100,000 106,805
Caledonia Comm. Schools MI, 6.625%, May 1, 2014 150,000 150,000 165,163
Carrollton Public School District, 6.400%, May 1, 2004 65,000 64,835 67,483
Carrollton Public School District, 6.400%, May 1, 2005 75,000 74,777 77,865
Carrollton Public School District, 6.400%, May 1, 2006 75,000 74,746 77,865
Carrollton Public School District, 6.400%, May 1, 2007 75,000 74,716 77,875
Cedar Springs Public School Distrct, 5.875%, May 1, 2014 250,000 249,439 278,450
Central Michigan University Rev., 7.000%, October 1, 2000 210,000 218,382 226,970
Central Michigan University Rev., 5.500%, October 1, 2010 200,000 200,000 211,902
Central Michigan University Rev., 6.000%, October 1, 2013 100,000 100,867 108,598
Cheboygan General Obl., AMBAC, 5.400%,
November 1, 2015 100,000 98,971 107,447
Chicago Emer. Telephone Sys., 5.800%, January 1, 2013 100,000 100,000 108,213
Chicago, Ill. General Obl., 6.250%, January 1, 2012 200,000 206,419 217,474
Chicago O'Hare Airport, Intl Rev., 6.750%, January 1, 2018 230,000 250,894 250,900
Clawson City School District, 4.90%, May 1, 2010 200,000 199,014 204,588
Clintondale Comm. Schools, 6.500%, May 1, 2010 100,000 99,652 112,123
Cook County General Obl., 5.400%, November 15, 2008 200,000 200,000 214,856
Desoto Independent School District, 4.900%,
August 15, 2014 75,000 75,000 75,039
Essexville Hampton Public Schools, MI FGIC, 5.500%,
May 1, 2117 150,000 146,410 166,456
Eugene Trojan Nuclear Proj Rev OR, 5.900% 145,000 145,563 149,336
September 1, 2009
Ferndale Sch Dist FGIC, 5.375%, May 1, 2116 100,000 98,176 103,915
Flat Rock Comm. School District, 5.250%, May 1, 2010 125,000 123,585 131,946
---------- ---------- ----------
Total forward 4,410,000 4,424,307 4,721,050
</TABLE>
(Continued)
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<PAGE> 5
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (UNAUDITED)
JANUARY 31, 1999
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<TABLE>
<CAPTION>
COST
OR
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total Forward $4,410,000 $4,424,307 $4,721,050
Flat Rock Comm. School District, 5.250%, May 1, 2010 125,000 123,585 131,946
Florida State Board of Education, 6.000%, May 1, 2005 500,000 500,000 513,655
Florida State Board of Education, 5.200%, June 1, 2006 25,000 23,139 25,568
Grand Haven Area Public Schools, 6.050%, May 1, 2014 165,000 163,581 181,028
Grand Ledge Public Schools, May 1, 2008 50,000 53,528 56,701
Greenville Public Schools, 5.000%, May 1, 2004 300,000 299,066 307,575
Grosse Isle General Obl., 5.200%, March 1, 2008 25,000 24,688 25,988
Huron Valley School District MI FGIC, 5.875%, May 1, 2016 100,000 99,038 113,593
Hudsonville Public Schools, 6.000%, May 1, 2009 100,000 100,000 112,383
Illinois State Sales Tax Rev., 5.400%, June 15, 2013 150,000 146,449 160,909
Kalamazoo Water Rev., MI FSA, 5.625%
September 1, 2011 100,000 98,585 109,427
Kentwood Public Schools, 6.400%, May 1, 2015 500,000 500,000 552,660
King County General Obl., 6.200%, June 1, 2002 500,000 500,000 501,265
L'Anse Creuse Public Schools, 5.500%, May 1, 2014 180,000 179,516 191,745
Lenawee County, MI Gen. Obl., 6.100%, May 1, 2000 125,000 125,000 127,166
Lenawee County, MI Gen. Obl., 6.150%, May 1, 2001 125,000 125,000 127,182
Lincoln Consolidated Sch Dist MI FGIC, 5.80%, May 1, 2114 115,000 115,000 128,091
Macomb Water Sup. & Sew. Disposal, 6.000%,
January 1, 2012 200,000 200,000 210,622
Marysville Public Sch Dist, 5.750%, May 1, 2014 150,000 147,986 165,944
Michigan Higher Ed Stu Ln Rv, 6.000%, September 1, 2008 170,000 170,814 181,429
Michigan Municipal Bond Auth. Rev. 5.400%,
October 1, 2014 100,000 96,699 105,131
Michigan Public Power Agency Rev. 5.500%
January 1, 2113 100,000 99,565 104,668
Michigan State Bldg. Auth. Rev., 6.250%, October 1, 2020 250,000 246,128 268,205
Michigan State Bldg. Auth. Rev., AMBAC, 5.300%,
October 1, 2016 100,000 98,912 102,784
Michigan State Hospital Finan Auth, 5.375%,
October 15, 2013 95,000 95,953 97,328
Michigan State Hospital Finan Auth, 5.25%,
November 1, 2015 180,000 186,434 184,171
Michigan State Hsg. Dev. Auth. Rev., AMBAC, 5.600%,
December 1, 2009 155,000 155,000 163,013
Michigan State Trunk Line Rev., 6.000%, August 15, 2019 250,000 242,403 254,173
---------- ---------- ----------
Total forward 9,345,000 9,340,376 9,925,400
</TABLE>
(Continued)
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<PAGE> 6
VALOR INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS IN SECURITIES (UNAUDITED)
JANUARY 31, 1999
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<TABLE>
<CAPTION>
COST
OR
PRINCIPAL AMORTIZED
AMOUNT COST MARKET
<S> <C> <C> <C>
Total Forward $ 9,345,000 $ 9,340,376 $ 9,925,400
Millington Community School District, 5.700%, May 1, 2005 100,000 95,013 102,440
Monroe County General Obl., 5.250 %, November 1, 2002 65,000 62,972 65,905
Mount Pleasant Water Rev., 6.000%, February 1, 2015 340,000 333,978 381,426
Novi Community School District, 6.125%, May 1, 2013 250,000 250,435 279,190
Oakland County General Obl., 6.200%, May 1, 2003 500,000 493,197 508,925
Oakland County General Obl., 6.000%, November 1, 2011 115,000 114,180 124,683
Oakland County General Obl., 6.000%, November 1, 2013 145,000 142,703 157,209
Orange County Sales Tax Rev., 5.250%, January 1, 2016 150,000 148,247 154,139
Orlando Util Comm. Water & Elec., 6.300%, April 1, 2003 250,000 251,156 276,530
Petoskey Public School Dist, 4.750%, May 1, 2016 125,000 124,739 124,554
Rochester Comm. School District, 5.625%, May 1, 2009 35,000 34,702 39,305
St. Lucie County School Board, 5.375%, July 1, 2013 150,000 150,000 160,291
San Antonio General Obl, 5.750%, August 1, 2013 110,000 110,233 116,904
Santa Monica, CA Univ Sch Dist, 5.400%, August 1, 2009 50,000 50,000 54,805
Tarrant Co. Water Control, TX, 5.750%, March 1, 2001 150,000 150,000 157,346
University of Michigan, Revenue, 5.800%, April 1, 2010 230,000 230,000 250,670
Utica Community Schools, MI, 7.100%, May 1, 2006 75,000 75,000 80,175
Utica Community Schools, MI, 4.250%, May 1, 2002 100,000 100,901 102,253
Warren Consol. Sch Dist MI MBIA, 5.500%, May 1, 2014 200,000 194,500 214,510
Washoe County General Obl., 6.200%, April 1, 2010 185,000 181,976 203,757
Yale Public Schools District, MI, 5.000%, May 1, 2005 125,000 125,000 131,811
Zeeland Public Schools, MI, 6.000%, May 1, 2010 100,000 100,000 112,639
Zeeland Public Schools, MI, 6.000%, May 1, 2014 250,000 250,000 281,598
---------- ----------- -----------
Total long-term municipal bonds 13,145,000 13,109,308 14,006,465
---------- ----------- -----------
TOTAL INVESTMENTS 13,185,705 $13,151,429 $14,041,013
========== =========== ===========
</TABLE>
See notes to financial statements and Independent Accountants' Review
Report.(Concluded)
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<PAGE> 7
VALOR INVESTMENT FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TOTAL INVESTMENT INCOME $ 386,448
EXPENSES:
Professional fees 18,911
Custodian fees 5,500
Other 3,831
---------
Total expenses 28,242
---------
NET INVESTMENT INCOME (equivalent to $0.41 per share based on
883,525 shares of common stock outstanding at January 31, 1999) 358,206
---------
UNREALIZED APPRECIATION OF INVESTMENTS:
Beginning of period 730,590
End of period 889,584
---------
INCREASE IN UNREALIZED APPRECIATION OF INVESTMENTS 158,994
---------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 517,200
=========
</TABLE>
See notes to financial statements and Independent Accountants Review Report.
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<PAGE> 8
VALOR INVESTMENT FUND, INC.
STATEMENT OF SHAREHOLDERS' INVESTMENT (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1999
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<TABLE>
<CAPTION>
COMMON STOCK UNDISTRIBUTED
------------------------ NET
PAID-IN RETAINED INVESTMENT
SHARES PAR VALUE SURPLUS EARNINGS INCOME
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 31, 1998 883,525 $ 883,525 $ 180,944 $11,967,524 $ 347,730
Net increase in net assets resulting
from operations 358,206
Dividends to shareholders ($0.44
per share) (388,703)
------- ----------- ----------- ----------- -----------
BALANCE AT JANUARY 31, 1999 883,525 $ 883,525 $ 180,944 $11,967,524 $ 317,233
======= =========== =========== =========== ===========
<CAPTION>
UNREALIZED
APPRECIATION
OF
INVESTMENTS TOTAL
<S> <C> <C>
BALANCE AT JULY 31, 1998 $ 730,590 $14,110,313
Net increase in net assets resulting
from operations 158,994 517,200
Dividends to shareholders ($0.44
per share) (388,703)
----------- -----------
BALANCE AT JANUARY 31, 1999 $ 889,584 $14,238,810
=========== ===========
</TABLE>
See notes to financial statements and Independent Accountants' Review Report.
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<PAGE> 9
VALOR INVESTMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JANUARY 31,1999 (UNAUDITED) AND YEAR ENDED
JULY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1999 1998
<S> <C> <C>
OPERATIONS:
Net investment income $ 358,206 $ 751,033
Increase in unrealized appreciation 158,994 44,458
----------- -----------
Net increase in net assets resulting from operations 517,200 795,491
DIVIDENDS TO SHAREHOLDERS FROM INVESTMENT INCOME 388,703 752,128
----------- -----------
INCREASE IN NET ASSETS 128,497 43,363
NET ASSETS:
Beginning of period 14,110,313 14,066,950
----------- -----------
End of period $14,238,810 $14,110,313
=========== ===========
</TABLE>
See notes to financial statements and Independent Accountants' Review Report.
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<PAGE> 10
VALOR INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JANUARY 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 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, 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 judgements. Actual results
could differ from those estimates.
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<PAGE> 11
2. SECURITIES TRANSACTIONS
The following summarizes the changes in investments, at amortized cost,
for the six months ended January 31, 1999:
<TABLE>
<S> <C>
Balance, July 31, 1998 $ 13,196,135
Plus purchases 1,426,877
Less:
Redeemed securities (1,471,197)
Premium amortization net of discount accretion (386)
------------
Balance, January 31, 1999 $ 13,151,429
============
</TABLE>
Approximately $386,361 in purchases and $394,342 in redeemed securities
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 six months
ended January 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 January 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
the original issue discount.
The aggregate cost of securities for federal income tax purposes was
$13,068,435 at January 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 $ (2,441)
Aggregate gross unrealized appreciation 975,020
---------
Net unrealized appreciation $ 972,579
=========
</TABLE>
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<PAGE> 12
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, 1999 and the
year ended July 31, 1998.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JANUARY 31, JULY 31,
1999 1998
<S> <C> <C>
Investment income $ 0.44 $ 0.91
Expenses (0.03) (0.06)
Net investment income 0.41 0.85
Dividends from net investment income (0.44) (0.85)
Increase in unrealized appreciation 0.18 0.05
Increase in net asset value 0.15 0.05
Net asset value - beginning 15.97 15.92
Net asset value - ending $ 16.12 $ 15.97
Weighted average shares outstanding during the period 883,525 883,525
</TABLE>
7. INVESTMENT INCOME
The following details by state, the investment income earned by the
Company during the six months ended January 31, 1999:
<TABLE>
<S> <C>
Alaska $ 8,844
California 1,350
Florida 34,452
Illinois 25,668
Michigan* 275,507
Nevada 137
Oregon 4,249
Texas 10,386
Utah 4,620
Washington 21,235
--------
Total $386,448
========
</TABLE>
*Included in the Michigan total is $2,444 interest earned on a tax-exempt money
market fund for the six months ended January 31, 1999.
* * * * * *
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