UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-08231 | ||||||||
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Spirit of America Investment Fund, Inc. | |||||||||
(Exact name of registrant as specified in charter) | |||||||||
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477 Jericho Turnpike |
| 11791-9006 | |||||||
(Address of principal executive offices) |
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Mr. David Lerner | |||||||||
(Name and address of agent for service) | |||||||||
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Registrant’s telephone number, including area code: | (516) 390-5555 |
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Date of fiscal year end: | October 31 |
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Date of reporting period: | October 31, 2006 |
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Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
Message To Our Shareholders |
| 1 |
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Management Discussion |
| 2 |
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Summary of Portfolio Holdings |
| 3 |
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Illustration of Investments |
| 4 |
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Expense Analysis |
| 5 |
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Schedule of Investments |
| 6-7 |
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Statement of Assets and Liabilities |
| 8 |
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Statement of Operations |
| 9 |
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Statement of Changes in Net Assets |
| 10 |
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Financial Highlights |
| 11 |
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Notes to Financial Statements |
| 12-14 |
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Report of Independent Registered Public Accounting Firm |
| 15 |
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Management of the Company |
| 16 |
MESSAGE TO OUR SHAREHOLDERS
December 2006
Dear Shareholder,
We are very pleased to send you a copy of the annual report for the Spirit of America Large Cap Value Fund.
Our investment philosophy typically seeks out investments in mid-to-large cap companies, frequently referred to as “blue chip” stocks. We seek stocks of:
· Large, nationally recognized companies
· with a long history of growth in profits and dividends
· a reputation for quality management, products, and services, and
· with leadership positions in their industries
We believe that sound financial investing has nothing to do with speculation and our philosophy seeks to avoid the latest “trends” and focuses instead on the longer-term.
Any investment in securities is subject to risk and may fluctuate with economic conditions, interest rates, civil unrest and other factors, which will affect its market value. An investor’s shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results.
We look forward to your continued investment in the Large Cap Value Fund.
Sincerely, |
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David Lerner | Ronald W. Weiss |
President | Portfolio Manager |
Prospective investors should consider the investment objectives, risks and charges and expenses of the fund carefully before investing. The maximum sales charge on share purchases is 5.25% of the offering price. The fund’s prospectus contains this and other information about the fund and may be obtained through your broker or by calling 1-800-452-4892. The prospectus should be read carefully before investing.
1
SPIRIT OF AMERICA LARGE CAP VALUE FUND
MANAGEMENT DISCUSSION
OCTOBER 31, 2006
The Spirit of America Large Cap Value Fund, SOAVX, had a sales load adjusted total return of 7.59% for the year ended 10/31/06, compared with the Fund’s benchmark, the S&P 500 Index, which returned 16.34% for the same period. The Fund’s return, unadjusted for sales load, was 13.52%.
The stock market rallied into the end of October as a number of positive fundamentals caused an increase in positive sentiment among investors. Some of these catalysts included: a decline in crude oil prices and an end to the Federal Reserve Board’s quarter-point pace of interest rate hikes. In addition, another quarter of positive earnings reports from the majority of companies within the S&P 500 aided in giving stocks their tailwind.
The tide has finally turned for the large cap sector of the market, as the rally was led by mega cap firms. For the past few years, the small and mid-cap sector returns have outperformed those of the largest companies, until most recently.
The greatest contributor to performance during the year was the financial sector, which the Fund currently has an overweighting. Many large financial services companies experienced better than expected earnings throughout the year, announced dividend increases and benefited from positive sentiment once the Fed stopped raising interest rates. We will continue to evaluate this sector to determine if these companies remain attractively valued and can provide favorable returns over the next year. In the meantime, we will continue to maintain our weighting in the sector.
The Fund continues to have an overweight in the healthcare sector due to the attractive valuations and favorable demographic trends, which are excellent for demand as the population ages. The sectors’ mixed returns for the year served as the biggest detractor from overall Fund returns; however, we have made changes to specific company weightings. These changes were made in order to diversify the Fund among various sub-sectors within the healthcare industry, such as biotech, managed care, pharmaceuticals and medical equipment. We have reduced our pharmaceutical holdings from six to three, added to a healthcare REIT, (which has had excellent performance), and added to our positions in both Schering-Plough and Johnson & Johnson.
As a whole, the Information & Technology sector of the S&P 500 returned 5.84%. Stock selection within the sector aided performance. Benefiting the portfolio was an overweight position in Hewlett Packard which returned over 39%, in addition to Nokia, up 20% and Accenture, up 26%. We added to our position in Microsoft during the year, which has rebounded nicely, and reduced our position in Motorola which has underperformed. We believe this sector has the potential to outperform over the next year, as earnings have improved and cash flows remain strong. The Fund maintains an equal weighting to the sector versus the S&P 500.
2
SPIRIT OF AMERICA LARGE CAP VALUE FUND
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
OCTOBER 31, 2006
The SEC adopted a requirement that all Funds present their categories of portfolio holdings in a table, chart or graph format in their annual and semi-annual shareholder reports, whether or not a schedule of investments is utilized. The following table, which presents portfolio holdings as a percentage of total market value, is provided in compliance with such requirement.
Sector Diversification (% of market value)
Consumer Discretionary |
| 4.15 | % | $ | 1,617,468 |
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Consumer Staples |
| 13.72 | % | 5,343,492 |
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Energy |
| 5.07 | % | 1,975,348 |
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Financials |
| 23.09 | % | 8,995,878 |
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Health Care |
| 22.01 | % | 8,574,959 |
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Industrials |
| 6.57 | % | 2,559,830 |
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Information Technology |
| 18.63 | % | 7,254,720 |
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Materials |
| 0.02 | % | 6,318 |
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Telecommunication Services |
| 3.04 | % | 1,184,000 |
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Utilities |
| 3.70 | % | 1,440,626 |
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Total Investments |
| 100.00 | % | $ | 38,952,639 |
|
See accompanying notes to financial statements.
3
SPIRIT OF AMERICA LARGE CAP VALUE FUND
ILLUSTRATION OF INVESTMENT
(UNAUDITED)
The graph below compares the increase in value of a $10,000 investment in the Spirit of America Large Cap Value Fund with the performance of the S&P 500 Index. The values and returns for the Spirit of America Large Cap Value Fund include reinvested dividends and the impact of the maximum sales charge of 5.25% placed on purchases. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
Past performance is not indicative of future results.
* Fund commenced operations August 1, 2002.
The S&P 500 Index is an unmanaged index. The performance of an index assumes no transaction costs,
taxes, management fees or other expenses. A direct investment in an index is not possible.
4
SPIRIT OF AMERICA LARGE CAP VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD (MAY 1, 2006 TO OCTOBER 31, 2006)
We believe it is important for you to understand the impact of fees regarding your investment. All mutual funds have operating expenses. As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the portfolio. A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing fees (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
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| Expenses |
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| Account Value |
| Ending Account |
| Expense Ratio |
| Paid During |
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Spirit of America Large Cap Value Fund |
| 05/01/06 |
| Value 10/31/06 |
| (1) |
| Period (2) |
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Actual Fund Return |
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Large Cap Value Fund |
| $ | 1,000.00 |
| $ | 1,064.00 |
| 1.97 | % | $ | 10.25 |
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Hypothetical 5% Return |
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Large Cap Value Fund |
| $ | 1,000.00 |
| $ | 1,015.27 |
| 1.97 | % | $ | 10.01 |
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This table illustrates your fund’s costs in two ways:
Actual Fund Return: This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, the third column shows the period’s annualized expense ratio, and the last column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund at the beginning of the period. You may use the information here, together with your account value, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period.”
Hypothetical 5% Return: This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the fund’s actual return, the results do not apply to your investment. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Please note that the expense shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), or the redemption fees.
(1) Annualized, based on the Fund’s most recent fiscal half-year expenses.
(2) Expenses are equal to the Fund’s annualized expense ratio multiplied by the average acount value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.
5
SPIRIT OF AMERICA LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2006
|
| Shares |
| Market Value |
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COMMON STOCKS - 84.33% |
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Consumer Discretionary - 3.50% |
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Coach, Inc.* |
| 10,000 |
| $ | 396,400 |
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Starwood Hotels & Resorts Worldwide, Inc. |
| 3,500 |
| 209,090 |
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Target Corp. |
| 17,100 |
| 1,011,978 |
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| 1,617,468 |
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Consumer Staples - 11.57% |
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Altria Group, Inc. |
| 25,000 |
| 2,033,250 |
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Colgate-Palmolive Co. |
| 7,600 |
| 486,172 |
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PepsiCo, Inc. |
| 7,000 |
| 444,080 |
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Procter & Gamble Co. (The) |
| 16,147 |
| 1,023,558 |
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Walgreen Co. |
| 16,500 |
| 720,720 |
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Wal-Mart Stores, Inc. |
| 12,900 |
| 635,712 |
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| 5,343,492 |
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Energy - 4.28% |
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ConocoPhillips |
| 15,000 |
| 903,600 |
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Noble Corp. |
| 8,000 |
| 560,800 |
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Schlumberger, Ltd. |
| 8,100 |
| 510,948 |
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| 1,975,348 |
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Financials - 19.48% |
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American Express Co. |
| 25,800 |
| 1,491,498 |
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Bank of America Corp. |
| 45,007 |
| 2,424,527 |
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Capital One Financial Corp. |
| 12,000 |
| 951,960 |
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First Industrial Realty Trust, Inc. |
| 10,000 |
| 459,700 |
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Host Hotels & Resorts, Inc. |
| 2,142 |
| 49,395 |
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JPMorgan Chase & Co. |
| 37,664 |
| 1,786,780 |
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Lexington Corporate Properties Trust |
| 9,300 |
| 198,090 |
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National Retail Properties, Inc. |
| 10,000 |
| 224,700 |
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Nationwide Health Properties, Inc. |
| 10,000 |
| 287,400 |
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optionsXpress Holdings, Inc. |
| 2,000 |
| 62,160 |
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Wells Fargo & Co. |
| 29,200 |
| 1,059,668 |
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| 8,995,878 |
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Health Care - 18.56% |
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Abbott Laboratories |
| 20,000 |
| 950,200 |
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Amgen, Inc.* |
| 10,000 |
| 759,100 |
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CIGNA Corp. |
| 13,000 |
| 1,520,740 |
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Johnson & Johnson |
| 7,800 |
| 525,720 |
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Medco Health Solutions, Inc.* |
| 21,192 |
| 1,133,772 |
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Pfizer, Inc. |
| 17,000 |
| 453,050 |
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Schering-Plough Corp. |
| 32,000 |
| 708,480 |
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UnitedHealth Group, Inc. |
| 10,000 |
| 487,800 |
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Wyeth |
| 39,900 |
| 2,036,097 |
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| 8,574,959 |
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Industrials - 5.54% |
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General Electric Co. |
| 23,000 |
| 807,530 |
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3M Co. |
| 17,000 |
| 1,340,280 |
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Tyco International, Ltd. |
| 14,000 |
| 412,020 |
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| 2,559,830 |
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See accompanying notes to financial statements.
6
|
| Shares |
| Market Value |
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Information Technology - 15.71% |
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Accenture Ltd., Class A |
| 15,000 |
| $ | 493,650 |
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EMC Corp.* |
| 30,000 |
| 367,500 |
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Hewlett-Packard Co. |
| 40,000 |
| 1,549,600 |
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International Business Machines Corp. |
| 9,000 |
| 830,970 |
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Microsoft Corp. |
| 58,000 |
| 1,665,180 |
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Motorola Inc. |
| 37,000 |
| 853,220 |
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Nokia Oyj, ADR |
| 60,000 |
| 1,192,800 |
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Texas Instruments, Inc. |
| 10,000 |
| 301,800 |
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| 7,254,720 |
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Materials - 0.01% |
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Tronox, Inc., Class B |
| 483 |
| 6,318 |
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Telecommunications Services - 2.56% |
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Verizon Communications, Inc. |
| 32,000 |
| 1,184,000 |
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Utilities - 3.12% |
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American Electric Power Co., Inc. |
| 11,300 |
| 468,159 |
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Consolidated Edison, Inc. |
| 13,700 |
| 662,395 |
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Duke Energy Corp. |
| 9,800 |
| 310,072 |
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| 1,440,626 |
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Total Investments - 84.33% |
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| 38,952,639 |
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Cash and Other Assets Net of Liabilities - 15.67% |
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| 7,236,570 |
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NET ASSETS - 100.00% |
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| $ | 46,189,209 |
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ADR - American Depository Receipt |
* Non-income-producing security. |
** Cost for Federal income tax purposes is $30,362,309, and net unrealized appreciation consists of: |
| Gross unrealized appreciation |
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| $ | 9,019,869 |
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| Gross unrealized depreciation |
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| (429,539 | ) | |
| Net unrealized appreciation |
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| $ | 8,590,330 |
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See accompanying notes to financial statements.
7
SPIRIT OF AMERICA LARGE CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2006
ASSETS |
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Investments in securities at value (cost $30,362,309) (Note 1) |
| $ | 38,952,639 |
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Cash |
| 6,940,193 |
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Receivables: |
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Capital stock sold |
| 337,147 |
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Dividends and interest |
| 71,144 |
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Prepaid assets |
| 7,360 |
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TOTAL ASSETS |
| 46,308,483 |
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LIABILITIES |
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Payables: |
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Capital stock redeemed |
| 43,232 |
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Advisory fees |
| 24,682 |
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Distribution expense (Note 3) |
| 11,382 |
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Other accrued expenses |
| 39,978 |
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TOTAL LIABILITIES |
| 119,274 |
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NET ASSETS |
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Net assets applicable to 3,245,070 outstanding $0.001 |
| $ | 46,189,209 |
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Net asset value and redemption price per share |
| $ | 14.23 |
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Offering price per share ($14.23 ÷ 0.9475) |
| $ | 15.02 |
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SOURCE OF NET ASSETS |
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At October 31, 2006, net assets consisted of: |
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Paid-in capital |
| $ | 35,762,105 |
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Accumulated net realized gain on investments |
| 1,836,774 |
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Net unrealized appreciation on investments |
| 8,590,330 |
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NET ASSETS |
| $ | 46,189,209 |
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See accompanying notes to financial statements.
8
SPIRIT OF AMERICA LARGE CAP VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2006
INVESTMENT INCOME |
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Dividends (net of foreign taxes withheld of $5,729) |
| $ | 794,877 |
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Interest |
| 116,491 |
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TOTAL INVESTMENT INCOME |
| 911,368 |
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EXPENSES |
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Investment advisory fees (Note 3) |
| 396,269 |
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Distribution fees (Note 3) |
| 122,557 |
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Transfer Agent fees |
| 117,000 |
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Administration fees |
| 60,753 |
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Accounting fees |
| 46,986 |
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Printing expense |
| 33,250 |
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Insurance expense |
| 15,242 |
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Auditing fees |
| 13,500 |
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Registration fees |
| 10,500 |
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Custodian fees |
| 10,500 |
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Legal fees |
| 6,949 |
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Directors’ fees |
| 4,964 |
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Chief Compliance Officer salary |
| 3,850 |
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Other expenses |
| 2,666 |
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TOTAL EXPENSES |
| 844,986 |
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Expenses waived and reimbursed by Advisor (Note 3) |
| (40,192 | ) | |
NET EXPENSES |
| 804,794 |
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NET INVESTMENT INCOME |
| 106,574 |
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS |
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Net realized gain from security transactions |
| 1,853,845 |
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Net change in unrealized appreciation of investments |
| 3,264,555 |
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Net realized and unrealized gain on investments |
| 5,118,400 |
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Net increase in net assets resulting from operations |
| $ | 5,224,974 |
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See accompanying notes to financial statements.
9
SPIRIT OF AMERICA LARGE CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
|
| For the Year |
| For the Year |
| |||
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| Ended |
| Ended |
| |||
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| October 31, 2006 |
| October 31, 2005 |
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OPERATIONS |
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Net investment income |
| $ | 106,574 |
| $ | 283,143 |
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Net realized gain from security transactions |
| 1,853,845 |
| 429,451 |
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Net change in unrealized appreciation of investments |
| 3,264,555 |
| 2,558,957 |
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Net increase in net assets |
| 5,224,974 |
| 3,271,551 |
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DIVIDENDS & DISTRIBUTIONS TO SHAREHOLDERS |
|
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Distributions from net investment income |
| (106,574 | ) | (283,143 | ) | |||
Distributions from realized gains |
| (386,302 | ) | (84,596 | ) | |||
Total distributions to shareholders |
| (492,876 | ) | (367,739 | ) | |||
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CAPITAL SHARE TRANSACTIONS (Dollar Activity) |
|
|
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Shares sold |
| 11,344,469 |
| 10,179,621 |
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Shares issued as reinvestment of distributions |
| 468,423 |
| 346,025 |
| |||
Shares redeemed |
| (10,703,075 | ) | (8,908,650 | ) | |||
Increase in net assets derived from capital share transactions (a) |
| 1,109,817 |
| 1,616,996 |
| |||
Total increase in net assets |
| 5,841,915 |
| 4,520,808 |
| |||
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NET ASSETS |
|
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|
|
| |||
Beginning of year |
| 40,347,294 |
| 35,826,486 |
| |||
End of year |
| $ | 46,189,209 |
| $ | 40,347,294 |
| |
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(a) | Transactions in capital stock were: |
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| ||
| Shares sold |
| 842,925 |
| 812,597 |
| ||
| Shares issued as reinvestment of dividends |
| 35,788 |
| 27,410 |
| ||
| Shares redeemed |
| (813,612 | ) | (712,615 | ) | ||
| Increase in shares outstanding |
| 65,101 |
| 127,392 |
|
See accompanying notes to financial statements.
10
SPIRIT OF AMERICA LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest outstanding throughout the periods presented.
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| For the |
| For the |
| For the |
| For the |
| For the |
| |||||
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| Year Ended |
| Year Ended |
| Year Ended |
| Year Ended |
| Period Ended |
| |||||
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| October 31, 2006 |
| October 31, 2005 |
| October 31, 2004 |
| October 31, 2003 |
| October 31, 2002* |
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Net Asset Value, Beginning of Period |
| $ | 12.69 |
| $ | 11.74 |
| $ | 11.09 |
| $ | 9.63 |
| $ | 10.00 |
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Income from Investment Operations: |
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Net investment income |
| 0.04 |
| 0.09 |
| 0.04 |
| 0.07 |
| 0.01 |
| |||||
Net realized and unrealized gain/(loss) on investments |
| 1.67 |
| 0.98 |
| 0.68 |
| 1.51 |
| (0.38 | ) | |||||
Total from investment operations |
| 1.71 |
| 1.07 |
| 0.72 |
| 1.58 |
| (0.37 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
| |||||
Distributions from net investment income |
| (0.04 | ) | (0.09 | ) | (0.04 | ) | (0.08 | ) | — |
| |||||
Distributions from capital gains |
| (0.13 | ) | (0.03 | ) | (0.01 | ) | — |
| — |
| |||||
Distributions from return of capital |
| — |
| — |
| (0.02 | ) | (0.04 | ) | — |
| |||||
Total distributions |
| (0.17 | ) | (0.12 | ) | (0.07 | ) | (0.12 | ) | — |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Asset Value, End of Period |
| $ | 14.23 |
| $ | 12.69 |
| $ | 11.74 |
| $ | 11.09 |
| $ | 9.63 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Return(2) |
| 13.52 | % | 9.07 | % | 6.48 | % | 16.47 | % | (3.70 | )%(1) | |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
| |||||
Net assets, end of period (000) |
| $ | 46,189 |
| $ | 40,347 |
| $ | 35,826 |
| $ | 17,279 |
| $ | 2,427 |
|
Ratio of expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Before expense reimbursement or recapture |
| 2.07 | % | 1.96 | % | 2.03 | % | 2.65 | % | 7.38 | %(3) | |||||
After expense reimbursement or recapture |
| 1.97 | % | 1.97 | % | 1.97 | % | 1.97 | % | 1.97 | %(3) | |||||
Ratio of net investment income (loss) to average net assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Before expense reimbursement or recapture |
| 0.16 | % | 0.71 | % | 0.35 | % | 0.12 | % | (4.75 | )%(3) | |||||
After expense reimbursement or recapture |
| 0.26 | % | 0.70 | % | 0.41 | % | 0.80 | % | 0.66 | %(3) | |||||
Portfolio turnover |
| 14.37 | % | 15.37 | % | — |
| — |
| 21.59 | %(1) |
* | The Fund commenced investment operations on August 1, 2002. |
(1) | Calculation is not annualized. |
(2) | Calculation does not reflect sales load. |
(3) | Calculation is annualized. |
See accompanying notes to financial statements.
11
SPIRIT OF AMERICA LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2006
Note 1 - Significant Accounting Policies
Spirit of America Large Cap Value Fund (formerly Spirit of America Value Fund) (the “Fund”), a series of Spirit of America Investment Fund, Inc. (the “Company”), is an open-end diversified mutual fund registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company was incorporated under the laws of Maryland on May 15, 1997. The Fund commenced operations on August 1, 2002. The authorized capital stock of the Fund is 500 million (500,000,000) shares, par value of $0.001 per share. The Fund seeks capital appreciation with a secondary objective of current income by investing in equity securities in the value segment of the market. The Fund offers one class of shares.
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America for investment companies.
A. Security Valuation: The offering price and net asset value per share for the Fund are calculated as of the close of regular trading on the NYSE, currently 4:00 p.m., Eastern Time. The Fund’s securities are valued at the official close or the last reported sales price on the principal exchange on which the security trades, or if no sales price is reported, the mean of the latest bid and asked prices is used. Securities traded over-the-counter are priced at the mean of the latest bid and asked prices. Short-term investments having a maturity of 60 days or less are valued at amortized cost, which the Board of Directors believes represents fair value. Fund securities for which market quotations are not readily available are valued at fair value as determined in good faith under procedures established by and under the supervision of the Board of Directors. There were no securities, however, fair valued during this fiscal year.
B. Investment Income and Securities Transactions: Security transactions are accounted for on the date the securities are purchased or sold (trade date). Cost is determined and gains and losses are based on the identified cost basis for both financial statement and federal income tax purposes. Dividend income and distributions to shareholders are reported on the ex-dividend date. Interest income and expenses are accrued daily.
C. Federal Income Taxes: The Fund intends to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.
D. Use of Estimates: In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
E. Distributions to Shareholders: The Fund intends to distribute substantially all of its net investment income and capital gains to shareholders each year. Normally, income dividends will be paid quarterly. All such dividends and distributions are taxable to the shareholders whether received in cash or reinvested in shares. The Fund has made certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon available funds from operations. Each REIT reports annually the tax character of its distributions. It is quite common for these dividends to exceed the REIT’s taxable earnings and profits resulting in the excess portion of such dividends being designated as a return of capital or long-term capital gain. The Fund intends to include the gross dividends from such REITs in its distributions to its shareholders, accordingly, a portion of the distributions paid to the Fund and subsequently distributed to shareholders may be characterized as a return of capital or long-term capital gain.
F. New Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No.48, “Accounting for Uncertainty in Income Taxes and Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation establishes for all entities, including pass-through entities such as the Fund or long-term capital gain, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. Management has recently begun to evaluate the application of the Interpretation to the Fund, and is not in a position at this time to estimate the significance of its impact, if any, on the Funds’ financial statements.
In addition, in September 2006, the FASB issued Statement on Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal
12
years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of October 31, 2006, the Fund does not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported on the statement of changes in net assets for a fiscal period.
Note 2 - Purchases and Sales of Securities
Investment transactions for the fiscal year ended October 31, 2006, excluding short-term investments, were as follows:
| Proceeds |
| |
Purchases |
| From Sales |
|
$ 5,483,622 |
| $ 10,507,219 |
|
Note 3 - Investment Management Fee and Other Transactions with Affiliates
Spirit of America Management Corp. (“Spirit Management”) has been retained to act as the Company’s manager and investment adviser pursuant to an Investment Advisory Agreement (the “Advisory Agreement”). Spirit Management was incorporated in 1997 and is a registered investment adviser under the Investment Advisers Act of 1940, as amended. Under the Advisory Agreement, the Fund pays Spirit Management a monthly fee of 1/12 of 0.97% on the Fund’s average daily net assets. Investment advisory fees and other transactions with affiliates, for the fiscal year ended October 31, 2006, were as follows:
Investment Advisory |
| Voluntary Expense |
|
|
|
0.97% |
| 1.97% |
| $ 396,269 |
|
Any waiver or reimbursement by the Advisor is subject to recovery from the fund within the following three years, to the extent such recovery would not cause total expenses to exceed the current expense limitation. During the year added October 31, 2006, $60,198 of reimbursed expenses was deemed unrecoverable.
On October 31, 2006, the balance of
recapturable expenses was as follows:
Expires 2007 |
| $ | 19,534 |
|
Expires 2009 |
| 40,192 |
| |
Total |
| $ | 59,726 |
|
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 (the “Plan). The Plan permits the Fund to pay SSH Securities, Inc. (the “Distributor”) a monthly fee from the assets of the Fund for the Distributor’s services and expenses in distributing shares of the Fund and providing personal services and/or maintaining shareholder accounts.
Distribution |
|
| Distribution |
| |
0.30% |
|
| $ | 122,557 |
|
The Fund’s shares are subject to an initial sales charge imposed at the time of purchase, in accordance with the Fund’s current prospectus. For the fiscal year ended October 31, 2006, sales charges received by the Distributor were as follows:
Sales Charges Received by SSH
$ 567,902 |
|
Certain officers and directors of the Company are “affiliated persons” of Spirit Management or the Distributor, as that term is defined in the 1940 Act. There are no directors’ fees paid to affiliated directors of the Company. For the year ended October 31, 2006, the Value Fund was allocated $3,850 of the Chief Compliance Officer fee. In addition, David Lerner Associates, Inc., a registered broker-dealer affiliated with Spirit Management and the Distributor, received no brokerage commissions for the fiscal year ended October 31, 2006.
13
Note 4 – Federal Income Taxes
The tax character of distributions paid for the fiscal years ended October 31, 2006 & 2005 were as follows:
2006 Taxable Distributions
Ordinary |
| Net Long-Term |
| Total Taxable |
| Return |
| Total |
|
$ 106,574 |
| $ 386,302 |
| $ 492,876 |
| $ — |
| $ 492,876 |
|
2005 Taxable Distributions
Ordinary |
| Net Long-Term |
| Total Taxable |
| Return |
| Total |
|
$ 298,343 |
| $ 69,396 |
| $ 367,739 |
| $ — |
| $ 367,739 |
|
Differences in distributions classification may result from the treatment of short-term capital gains as ordinary income for tax purposes.
As of October 31, 2006, the components of distributable earnings for the Fund on a tax basis were as follows:
Accumulated net realized gain on investments |
| $ | 1,836,774 |
|
Unrealized appreciation |
| 8,590,330 |
| |
Total Distributable Earnings |
| $ | 10,427,104 |
|
Note 5 – Reclassifications
Accounting principals generally accepted in the United States require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended October 31, 2006, permanent differences in book and tax accounting have been reclassified to paid-in-capital, undistributed net investment income and accumulated realized gain as follows:
Increase net realized gains |
| $ 24,376 |
|
Decrease paid-in-capital |
| (24,376 | ) |
The reclassifications are primarily attributable to reclassification of prior year REIT adjustments.
Unaudited
Qualified Dividend Income
For the fiscal year ended October 31, 2006, 100% of the dividends paid by the Fund from ordinary income qualifies for a
reduced tax rate pursuant to The Jobs and Growth Tax Relief Reconciliation Act of 2003.
Dividends Received Deduction
For the fiscal year ended October 31, 2006, 100% of the ordinary income distribution qualifies for the dividends received
deduction available to corporations.
Long-Term Capital Gain Dividends
The Fund designates $386,302 as long-term capital gains dividends pursuant to section 852(b)(3) of the Internal Revenue
Code for the fiscal year ended October 31, 2006.
14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Spirit of America Investment Fund, Inc.
Syosset, New York
We have audited the accompanying statement of assets and liabilities of Spirit of America Large Cap Value Fund, (formerly Spirit of America Value Fund), a series of shares of beneficial interest in Spirit of America Investment Fund, Inc., including the schedule of investments as of October 31, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated thereon. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on those financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engagedto perform, an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Spirit of America Large Cap Value Fund as of October 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for the periods indicated thereon, in conformity with accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP | |
|
|
|
|
|
|
Philadelphia, Pennsylvania | |
December 5, 2006 |
15
SPIRIT OF AMERICA LARGE CAP VALUE FUND
MANAGEMENT OF THE COMPANY
(UNAUDITED)
Information pertaining to the Directors and Officers of the Company is set forth below. The statement of additional information includes additional information about the Directors and is available without charge, upon request, by calling 516-390-5565.
Name, Address and (Age) |
| Term of Office(1) |
| Principal Occupation(s) |
| Number of Portfolios |
| Other Directorships |
|
|
|
|
|
|
|
|
|
INTERESTED DIRECTORS* |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
David Lerner(2) (70) |
| Since 1998 |
| President and founder, David Lerner Associates, Inc., a registered broker-dealer; President, Spirit of America Management Corp., the Company’s investment advisor; and Chief Executive Officer and President of SSH Securities, Inc., the Company’s Distributor. |
| 2 |
| Director of Spirit of America Management Corp., the Company’s investment advisor; Director of SSH Securities, Inc., the Company’s Distributor; Director of David Lerner Associates, Inc., a registered broker-dealer. |
|
|
|
|
|
|
|
|
|
Daniel Lerner(2) (45) |
| Since 1998 |
| Senior Vice President, Investment Counselor with David Lerner Associates, Inc., a registered broker-dealer, since September 2000. Previously: Broker with Prudential Securities from February 2000 to July 2000; Broker with Bear Stearns from January 1999 to May 1999; Vice President of SSH Securities, Inc., the Company’s Distributor and Senior Vice President. |
| 2 |
| Director of David Lerner Associates, Inc., a registered broker-dealer. |
|
|
|
|
|
|
|
|
|
INDEPENDENT DIRECTORS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Allen Kaufman (70) |
| Since 1998 |
| President and Chief Executive Officer of K.G.K. Agency, Inc., a property and casualty insurance agency, since 1963. KGK Agency, Inc. had earned insurance brokerage commissions in excess of $60,000 during the two calendar years ending December 31, 2005, in connection with insurance coverage provided to the Funds, the Adviser, the Underwriter, and their affiliates. Mr. Kaufman is President, Chief Executive Officer and a director of KGK Agency, Inc.(3) |
| 2 |
| Director of K.G.K. Agency, Inc., a property and casualty insurance agency. |
|
|
|
|
|
|
|
|
|
Stanley S. Thune (70) |
| Since 1998 |
| President and Chief Executive Officer, Freight Management Systems, Inc., a third party logistics management company, since 1994; private investor. |
| 2 |
| Director of Freight Management Systems, Inc. |
|
|
|
|
|
|
|
|
|
Richard Weinberger (70) |
| Since 2005 |
| Of Counsel to Ballon Stoll Bader & Nadler, P.C., a mid-sized law firm, since January 2005; Shareholder, Ballon Stoll Bader & Nadler, P.C., January 2000 to December 2004. |
| 2 |
| None. |
|
|
|
|
|
|
|
|
|
EXECUTIVE OFFICERS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
David Lerner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan P. Chodosh (52) |
| Since 2003 |
| Senior Vice President and Chief Financial Officer of David Lerner Associates, Inc. since June 1997 |
| N/A |
| N/A |
|
|
|
|
|
|
|
|
|
Secretary |
| Since 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel E. Chafetz (75) |
| Since 2004 |
| Chief Compliance Officer of David Lerner Associates, Inc. since March 1993; Chief Compliance Officer of SSH Securities, Inc. and Spirit of America Management Corp. since their inception, May 1997. |
| N/A |
| N/A |
(1) |
| Each Director serves for an indefinite term, until his successor is elected. |
(2) |
| David Lerner is an “interested” Director, as defined in the 1940 Act, by reason of his position with the Advisor and Daniel Lerner is an “interested” Director by reason of his position with the Distributor. Daniel Lerner is the son of David Lerner. |
(3) |
| KGK Agency, Inc. has earned insurance brokerage commissions in excess of $60,000 during the two calendar years ending December 31, 2005, in connection with insurance coverage provided to the Funds, the Advisor, the Underwriter, and their affiliates. Mr. Kaufman is President, Chief Executive Officer and a director of KGK Agency, Inc. |
16
Proxy Voting Information
The Fund’s Statement of Additional Information (“SAI”) containing a description of the policies and procedures that the Spirit of America Large Cap Value Fund uses to determine how to vote proxies relating to portfolio securities, along with the Fund’s proxy voting record relating to portfolio securities held during the 12-month period ended June 30, 2006, are available (i) without charge, upon request, by calling (516) 390-5565; and (ii) on the Securities and Exchange Commission’s website at http://www.sec.gov
Information on Form N-Q
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each Fiscal year or Form N-Q within sixty days after the end of the period. The Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
©Copyright 2007 Spirit of America
Investment Advisor
Spirit of America Management Corp.
P.O. Box 9006
Syosset, NY 11791-9006
Distributor
SSH Securities, Inc.
P.O. Box 9006
Syosset, NY 11791-9006
Shareholder Services
PFPC Inc.
760 Moore Road
King of Prussia, PA 19406
Custodian
PFPC Trust Company
8800 Tinicum Boulevard, 4th Floor
Philadelphia, PA 19153
Independent Registered Public Accounting Firm
Tait Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
For Additional Information about the Spirit of America Large Cap Value Fund, call (800) 452-4892 or (610) 382-7819. This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund’s objectives, policies, expenses, and other information.
©Copyright 2007 Spirit of America |
| SOAV-AR06 |
Message To Our Shareholders |
| 1 |
|
|
|
Management Discussion |
| 2 |
|
|
|
Summary of Portfolio Holdings |
| 2 |
|
|
|
Illustration of Investments |
| 3 |
|
|
|
Disclosure of Fund Expenses |
| 4 |
|
|
|
Schedule of Investments |
| 5-6 |
|
|
|
Statement of Assets and Liabilities |
| 7 |
|
|
|
Statement of Operations |
| 8 |
|
|
|
Statement of Changes in Net Assets |
| 9 |
|
|
|
Financial Highlights |
| 10-11 |
|
|
|
Notes to Financial Statements |
| 12-14 |
|
|
|
Report of Independent Registered Public Accounting Firm |
| 15 |
|
|
|
Management of the Company |
| 16 |
MESSAGE TO OUR SHAREHOLDERS
December 2006
Dear Shareholder,
We are pleased to present you with the annual report of the Spirit of America Real Estate Income & Growth Fund.
We believe that many REIT sectors should show continued increases in value over the next 12-24 months. Our predictions are based upon the belief that the office sector, in particular, will remain strong and that the demand for office space will increase as the U.S. economy expands.
In addition, REIT values have been trending higher because private buy-out firms are bidding up the price of REITs, as they value them higher than the public market price of REIT shares.
Wall Street analysts are continuing to project earnings growth in all REIT sectors for 2007 and 2008.
Although all real estate investments contain some risk, and REITs are subject to these risks, we believe that REITs are a prudent investment over the long term. Changes in interest rates may affect property values and economic, environmental, civil unrest or other factors may also impact REIT share prices. An investor’s shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results.
We are grateful for your support, and look forward to your future investment.
Sincerely, |
|
|
|
David Lerner, President | Ronald W. Weiss, Portfolio Manager |
Prospective investors should consider the investment objectives, risks and charges and expenses of the fund carefully before investing. The maximum sales charge on share purchases is 5.25% of the offering price. The fund’s prospectus contains this and other information about the fund and may be obtained through your broker or by calling 1-800-452-4892. The prospectus should be read carefully before investing.
1
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
MANAGEMENT DISCUSSION
OCTOBER 31, 2006
Comparing the Real Estate Income & Growth Fund with our benchmark, the Morgan Stanley Real Estate Index (RMS), showed that during the fiscal year ended October 31,2006, the Class A shares returned 19.22% (sales load adjusted) and Class B shares returned 17.83% (CDSC fee adjusted) versus 37.77% for the RMS (Source: Bloomberg). The returns for the Class A and Class B shares, excluding sales load or CDSC fee, would have been 25.86% and 25.02%, respectively versus the RMS.(Source:PFPC Inc.) During the quarter 8/01/06 to 10/31/06, the Class A shares returned 6.76% (sales load adjusted) and Class B shares returned 6.06% (CDSC fee adjusted) versus 12.91% for the RMS. The returns for the Class A and Class B shares, excluding sales load or CDSC fee, would have been 12.72% and 12.54%, respectively.
Although REIT prices are affected in the short term by increases in interest rates and fixed income yields, REIT properties continue to show higher occupancies and generate higher cash flow.
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The SEC adopted a requirement that all Funds present their categories of portfolio holdings in a table, chart or graph format in their annual and semi-annual shareholder reports, whether or not a schedule of investments is utilized. The following table, which presents portfolio holdings as a percentage of total market value, is provided in compliance with such requirement.
Sector Diversification (% of market value)
Apartments (REITS) |
| 17.55 | % | $ | 42,915,939 |
|
|
|
|
|
|
| |
Diversified (REITS) |
| 15.09 | % | 36,900,596 |
| |
|
|
|
|
|
| |
Healthcare (REITS) |
| 17.14 | % | 41,915,345 |
| |
|
|
|
|
|
| |
Industrial (REITS) |
| 4.62 | % | 11,292,576 |
| |
|
|
|
|
|
| |
Net Lease (REITS) |
| 6.20 | % | 15,162,086 |
| |
|
|
|
|
|
| |
Office Space (REITS) |
| 13.58 | % | 33,218,548 |
| |
|
|
|
|
|
| |
Regional Malls (REITS) |
| 11.54 | % | 28,217,048 |
| |
|
|
|
|
|
| |
Shopping Centers (REITS) |
| 12.48 | % | 30,533,200 |
| |
|
|
|
|
|
| |
Storage (REITS) |
| 1.80 | % | 4,411,704 |
| |
|
|
|
|
|
| |
Total Investments |
| 100.00 | % | $ | 244,567,042 |
|
See accompanying notes to financial statements.
2
ILLUSTRATION OF INVESTMENT
(UNAUDITED)
Spirit of America Real Estate Income & Growth Fund – Class A
The graph below compares the increase in value of a $10,000 investment in the Spirit of America Real Estate Income & Growth Fund - Class A with the performance of the Morgan Stanley REIT Index. The values and returns for the Spirit of America Real Estate Income & Growth Fund - Class A include reinvested dividends, and the impact of the maximum sales charge of 5.25% placed on purchases. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
The graph below compares the increase in value of a $10,000 investment in the Spirit of America Real Estate Income & Growth Fund — Class B with the performance of the Morgan Stanley REIT Index. The values and returns for the Spirit of America Real Estate Income & Growth Fund — Class B include reinvested dividends, and the impact of the contingent deferred sales charge at redemption. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
Past performance is not indicative of future results. |
*Fund commenced operations January 9, 1998 and effective March 6, 1998, the Fund began offering Class B Shares.
The Morgan Stanley REIT Index is an unmanaged index. and the performance of an index assumes no transaction costs, taxes, management fees or other expenses. A direct investment in an index is not possible.
3
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD (MAY 1, 2006 TO OCTOBER 31, 2006)
We believe it is important for you to understand the impact of fees regarding your investment. All mutual funds have operating expenses. As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the portfolio. A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing fees (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
|
| Beginning |
| Ending Account |
| Expense Ratio |
| Expenses |
| |||
Spirit of America Real Estate Income & Growth Fund |
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| |||
Actual Fund Return |
|
|
|
|
|
|
|
|
| |||
Class A |
| $ | 1,000.00 |
| $ | 1,165.40 |
| 1.75 | % | $ | 9.55 |
|
Class B |
| $ | 1,000.00 |
| $ | 1,161.10 |
| 2.45 | % | $ | 13.35 |
|
|
|
|
|
|
|
|
|
|
| |||
Hypothetical 5% Return |
|
|
|
|
|
|
|
|
| |||
Class A |
| $ | 1,000.00 |
| $ | 1,016.38 |
| 1.75 | % | $ | 8.89 |
|
Class B |
| $ | 1,000.00 |
| $ | 1,012.85 |
| 2.45 | % | $ | 12.43 |
|
This table illustrates your fund’s costs in two ways:
Actual Fund Return: This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from the fund’s actual return, the third column shows the period’s annualized expense ratio, and the last column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund at the beginning of the period. You may use the information here, together with your account value, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period.”
Hypothetical 5% Return: This section is intended to help you compare your fund’s costs with those of other mutual funds. It assumes that the fund had a return of 5% before expenses during the period shown, but that the expense ratio is unchanged. In this case, because the return used is not the fund’s actual return, the results do not apply to your investment. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
Please note that the expense shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), or redemption fees.
(1) Annualized, based on the Fund’s most recent fiscal half-year expenses.
(2) Expenses are equal to the Fund’s annualized expense ratio multiplied by the average acount value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365.
4
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2006
|
| Shares |
| Market Value |
| |
COMMON STOCKS - 97.82% |
|
|
|
|
| |
|
|
|
|
|
| |
Apartments (REITS) - 17.18% |
|
|
|
|
| |
Apartment Investment & Management Co., Class A |
| 214,200 |
| $ | 12,277,944 |
|
Associated Estates Realty Corp. |
| 422,500 |
| 6,950,125 |
| |
BNP Residential Properties, Inc. |
| 110,900 |
| 2,649,401 |
| |
Mid-America Apartment Communities, Inc. |
| 198,500 |
| 12,634,525 |
| |
Post Properties, Inc. |
| 127,300 |
| 6,235,154 |
| |
United Dominion Realty Trust, Inc. |
| 67,000 |
| 2,168,790 |
| |
|
|
|
| 42,915,939 |
| |
Diversified (REITS) - 14.77% |
|
|
|
|
| |
Ashford Hospitality Trust, Inc. |
| 129,000 |
| 1,661,520 |
| |
Colonial Properties Trust |
| 171,923 |
| 8,663,200 |
| |
Crescent Real Estate Equities Co. |
| 362,100 |
| 7,893,780 |
| |
Equity Inns Inc. |
| 73,000 |
| 1,224,940 |
| |
FrontLine Capital Group +* |
| 640 |
| — |
| |
Hospitality Properties Trust |
| 171,100 |
| 8,291,506 |
| |
Lexington Corporate Properties Trust |
| 395,900 |
| 8,432,670 |
| |
Liberty Property Trust |
| 14,500 |
| 698,900 |
| |
PMC Commerical Trust |
| 2,400 |
| 34,080 |
| |
|
|
|
| 36,900,596 |
| |
Healthcare (REITS) - 16.78% |
|
|
|
|
| |
Health Care Property Investors, Inc. |
| 247,800 |
| 7,780,920 |
| |
Health Care REIT, Inc. |
| 226,000 |
| 9,329,280 |
| |
Healthcare Realty Trust, Inc. |
| 198,700 |
| 8,047,350 |
| |
National Health Investors, Inc. |
| 104,200 |
| 3,348,988 |
| |
National Health Realty, Inc. |
| 53,600 |
| 1,104,160 |
| |
Nationwide Health Properties, Inc. |
| 382,400 |
| 10,990,176 |
| |
OMEGA Healthcare Investors, Inc. |
| 9,000 |
| 151,920 |
| |
Senior Housing Properties Trust |
| 50,700 |
| 1,162,551 |
| |
|
|
|
| 41,915,345 |
| |
Industrial (REITS) - 4.52% |
|
|
|
|
| |
First Industrial Realty Trust, Inc. |
| 245,651 |
| 11,292,576 |
| |
|
|
|
|
|
| |
Internet Content - 0.00%# |
|
|
|
|
| |
VelocityHSI, Inc.++ * |
| 1,260 |
| — |
| |
|
|
|
|
|
| |
Net Lease (REITS) - 6.00% |
|
|
|
|
| |
National Retail Properties, Inc. |
| 387,216 |
| 8,700,744 |
| |
Realty Income Corp. |
| 69,000 |
| 1,821,600 |
| |
Trustreet Properties, Inc. |
| 263,800 |
| 4,476,686 |
| |
|
|
|
| 14,999,030 |
| |
Office Space (REITS) - 13.29% |
|
|
|
|
| |
Brandywine Realty Trust |
| 16,000 |
| 533,760 |
| |
Equity Office Properties Trust |
| 68,200 |
| 2,898,500 |
| |
Glenborough Realty Trust, Inc. |
| 231,400 |
| 6,011,772 |
| |
Highwoods Properties, Inc. |
| 221,500 |
| 8,461,300 |
| |
HRPT Properties Trust |
| 829,100 |
| 9,866,290 |
| |
Mack-Cali Realty Corp. |
| 63,100 |
| 3,337,990 |
| |
Reckson Associates Realty Corp. |
| 47,800 |
| 2,108,936 |
| |
|
|
|
| 33,218,548 |
| |
See accompanying notes to financial statements.
5
|
| Shares |
| Market Value |
| ||
Regional Malls (REITS) - 11.29% |
|
|
|
|
| ||
Glimcher Realty Trust |
| 347,050 |
| $ | 8,940,008 |
| |
Macerich Co. (The) |
| 82,200 |
| 6,604,770 |
| ||
Mills Corp. (The) |
| 81,700 |
| 1,492,659 |
| ||
Pennsylvania Real Estate Investment Trust |
| 243,694 |
| 10,503,211 |
| ||
Simon Property Group, Inc. |
| 6,000 |
| 582,600 |
| ||
Taubman Centers, Inc. |
| 2,000 |
| 93,800 |
| ||
|
|
|
| 28,217,048 |
| ||
Shopping Centers (REITS) - 12.22% |
|
|
|
|
| ||
Developers Diversified Realty Corp. |
| 154,104 |
| 9,384,934 |
| ||
Equity One, Inc. |
| 139,500 |
| 3,504,240 |
| ||
Federal Realty Investment Trust |
| 44,600 |
| 3,574,690 |
| ||
Malan Realty Investors, Inc. * |
| 5,000 |
| 3,700 |
| ||
New Plan Excel Realty Trust |
| 261,910 |
| 7,543,008 |
| ||
Ramco-Gershenson Properties Trust |
| 198,800 |
| 6,522,628 |
| ||
|
|
|
| 30,533,200 |
| ||
Storage (REITS) - 1.77% |
|
|
|
|
| ||
Sovran Self Storage, Inc. |
| 74,800 |
| 4,411,704 |
| ||
|
|
|
|
|
| ||
Total Common Stocks |
|
|
| 244,403,986 |
| ||
|
|
|
|
|
| ||
PREFERRED STOCKS - 0.06% |
|
|
|
|
| ||
Net Lease (REITS) - 0.06% |
|
|
|
|
| ||
National Retail Properties, Inc. 9% Series A |
| 6,352 |
| 163,056 |
| ||
|
|
|
|
|
| ||
Total Preferred Stocks |
|
|
| 163,056 |
| ||
|
|
|
|
|
| ||
Total Investments - 97.88% |
|
|
| 244,567,042 |
| ||
Cash and Other Assets Net of Liabilities - 2.12% |
|
|
| 5,292,835 |
| ||
NET ASSETS - 100.00% |
|
|
| $ | 249,859,877 |
| |
|
|
|
|
| |
REITS - Real Estate Investment Trusts |
|
|
|
|
|
+ Company filed for Chapter 11 bankruptcy on June 12, 2002. ++ Company filed for Chapter 11 bankruptcy on August 14, 2001. * Non-income producing security. # Amount represents less than 0.01% of total net assets. ** Cost for Federal income tax purposes is $142,007,574 and net unrealized appreciation consists of: |
|
|
| Gross unrealized appreciation |
|
|
| $ | 102,684,787 |
|
| Gross unrealized depreciation |
|
|
| (125,319 | ) | |
| Net unrealized appreciation |
|
|
| $ | 102,559,468 |
|
See accompanying notes to financial statements.
6
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2006
ASSETS |
|
|
| |
Investments in securities at value (cost $142,007,574) (Note 1) |
| $ | 244,567,042 |
|
Cash |
| 4,192,397 |
| |
Receivables: |
|
|
| |
Capital stock sold |
| 1,255,186 |
| |
Dividends and interest |
| 900,339 |
| |
Prepaid assets |
| 38,876 |
| |
TOTAL ASSETS |
| 250,953,840 |
| |
|
|
|
| |
LIABILITIES |
|
|
| |
Payables: |
|
|
| |
Capital stock redeemed |
| 727,816 |
| |
Advisory fees |
| 200,697 |
| |
Distribution expenses (Note 3) |
| 69,220 |
| |
Other accrued expenses |
| 96,230 |
| |
TOTAL LIABILITIES |
| 1,093,963 |
| |
|
|
|
| |
NET ASSETS |
| $ | 249,859,877 |
|
|
|
|
| |
Class A Shares |
|
|
| |
Net assets applicable to 14,651,852 outstanding $0.001 |
| $ | 237,611,704 |
|
Net asset value and redemption price per Class A Share |
| $ | 16.22 |
|
Offering price per share ($16.22 ÷ 0.9475) |
| $ | 17.12 |
|
|
|
|
| |
Class B Shares |
|
|
| |
Net assets applicable to 742,965 outstanding $0.001 par value shares (500,000,000 authorized shares) |
| $ | 12,248,173 |
|
Net asset value and offering price per Class B Share ($12,248,173 ÷ 742,965 shares) |
| $ | 16.49 |
|
Redemption price per share ($16.49 x 0.9475) |
| $ | 15.62 |
|
|
|
|
| |
SOURCE OF NET ASSETS |
|
|
| |
At October 31, 2006, net assets consisted of: |
|
|
| |
Paid-in capital |
| $ | 142,362,066 |
|
Accumulated net realized gain on investments |
| 4,938,343 |
| |
Net unrealized appreciation on investments |
| 102,559,468 |
| |
NET ASSETS |
| $ | 249,859,877 |
|
See accompanying notes to financial statements.
7
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2006
INVESTMENT INCOME |
|
|
| |
Dividends |
| $ | 6,681,957 |
|
Interest |
| 25,509 |
| |
TOTAL INVESTMENT INCOME |
| 6,707,466 |
| |
|
|
|
| |
EXPENSES |
|
|
| |
Investment advisory fees (Note 3) |
| 2,083,536 |
| |
Distribution fees - Class A (Note 3) |
| 610,047 |
| |
Transfer agent fees |
| 420,000 |
| |
Administration fees |
| 182,399 |
| |
Distribution fees - Class B (Note 3) |
| 114,486 |
| |
Accounting fees |
| 93,280 |
| |
Insurance expense |
| 77,110 |
| |
Printing expense |
| 45,000 |
| |
Legal fees |
| 36,364 |
| |
Custodian fees |
| 36,300 |
| |
Directors’ fees |
| 25,352 |
| |
Chief Compliance Officer salary |
| 20,150 |
| |
Auditing fees |
| 15,600 |
| |
Registration fees |
| 15,036 |
| |
Other expenses |
| 8,550 |
| |
TOTAL EXPENSES |
| 3,783,210 |
| |
NET INVESTMENT INCOME |
| 2,924,256 |
| |
|
|
|
| |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS |
|
|
| |
Net realized gain from security transactions and REITs |
| 11,052,522 |
| |
Net change in unrealized appreciation of investments |
| 35,581,143 |
| |
Net realized and unrealized gain on investments |
| 46,633,665 |
| |
|
|
|
| |
Net increase in net assets resulting from operations |
| $ | 49,557,921 |
|
See accompanying notes to financial statements.
8
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
|
| For the Year |
| For the Year |
| ||
|
| Ended |
| Ended |
| ||
|
| October 31, 2006 |
| October 31, 2005 |
| ||
|
|
|
|
|
| ||
OPERATIONS |
|
|
|
|
| ||
Net investment income |
| $ | 2,924,256 |
| $ | 3,252,531 |
|
Net realized gain from security transactions and REITs |
| 11,052,522 |
| 5,229,335 |
| ||
Net change in unrealized appreciation of investments |
| 35,581,143 |
| 9,404,152 |
| ||
Net increase in net assets |
| 49,557,921 |
| 17,886,018 |
| ||
|
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
|
| ||
Distributions from net investment income: |
|
|
|
|
| ||
Class A |
| (3,166,795 | ) | (3,128,824 | ) | ||
Class B |
| (103,283 | ) | (123,707 | ) | ||
Total distributions from net investment income to shareholders |
| (3,270,078 | ) | (3,252,531 | ) | ||
Distributions from realized gains: |
|
|
|
|
| ||
Class A |
| (5,796,341 | ) | (4,913,780 | ) | ||
Class B |
| (317,838 | ) | (315,555 | ) | ||
Total distributions from realized gains to shareholders |
| (6,114,179 | ) | (5,229,335 | ) | ||
Return of capital: |
|
|
|
|
| ||
Class A |
| — |
| (1,090,633 | ) | ||
Class B |
| — |
| (69,170 | ) | ||
Total distributions from return of capital to shareholders |
| — |
| (1,159,803 | ) | ||
Total distributions to shareholders |
| (9,384,257 | ) | (9,641,669 | ) | ||
|
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS (Dollar Activity) |
|
|
|
|
| ||
Shares sold: |
|
|
|
|
| ||
Class A |
| 43,058,314 |
| 42,537,250 |
| ||
Class B |
| 803,234 |
| 1,189,354 |
| ||
Shares issued as reinvestment of distributions: |
|
|
|
|
| ||
Class A |
| 7,036,297 |
| 7,045,854 |
| ||
Class B |
| 334,553 |
| 403,591 |
| ||
Shares redeemed: |
|
|
|
|
| ||
Class A |
| (43,366,629 | ) | (42,701,246 | ) | ||
Class B |
| (2,527,678 | ) | (3,067,261 | ) | ||
Increase in net assets derived from capital share transactions (a) |
| 5,338,091 |
| 5,407,542 |
| ||
Total increase in net assets |
| 45,511,755 |
| 13,651,891 |
| ||
|
|
|
|
|
| ||
NET ASSETS |
|
|
|
|
| ||
Beginning of year |
| 204,348,122 |
| 190,696,231 |
| ||
End of year |
| $ | 249,859,877 |
| $ | 204,348,122 |
|
|
|
|
|
|
| ||
(a)Transactions in capital stock were: |
|
|
|
|
| ||
Shares sold: |
|
|
|
|
| ||
Class A |
| 2,952,168 |
| 3,174,063 |
| ||
Class B |
| 53,396 |
| 86,208 |
| ||
Shares issued as reinvestment of dividends: |
|
|
|
|
| ||
Class A |
| 491,563 |
| 524,479 |
| ||
Class B |
| 23,061 |
| 29,571 |
| ||
Shares redeemed: |
|
|
|
|
| ||
Class A |
| (3,105,141 | ) | (3,194,930 | ) | ||
Class B |
| (180,627 | ) | (229,089 | ) | ||
Increase in shares outstanding |
| 234,420 |
| 390,302 |
|
See accompanying notes to financial statements.
9
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest |
|
|
|
|
|
|
|
|
|
|
|
| Class A |
| Class A |
| ||
|
| For the Year Ended |
| For the Year Ended |
| ||
|
| October 31, 2006 |
| October 31, 2005 |
| ||
|
|
|
|
|
| ||
Net Asset Value, Beginning of Year |
| $ | 13.47 |
| $ | 12.90 |
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
| ||
Net investment income |
| 0.23 |
| 0.22 |
| ||
Net realized and unrealized gain on investments |
| 3.16 |
| 1.00 |
| ||
Total from investment operations |
| 3.39 |
| 1.22 |
| ||
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
| ||
Distributions from net investment income |
| (0.23 | ) | (0.22 | ) | ||
Distributions from capital gains |
| (0.41 | ) | (0.35 | ) | ||
Distributions in excess of ordinary income |
| — |
| — |
| ||
Distributions from return of capital |
| — |
| (0.08 | ) | ||
Total distributions |
| (0.64 | ) | (0.65 | ) | ||
|
|
|
|
|
| ||
Net Asset Value, End of Year |
| $ | 16.22 |
| $ | 13.47 |
|
|
|
|
|
|
| ||
Total Return(1) |
| 25.86 | % | 9.59 | % | ||
|
|
|
|
|
| ||
Ratios/Supplemental Data |
|
|
|
|
| ||
Net assets, end of year (000) |
| $ | 237,612 |
| $ | 192,751 |
|
Ratio of expenses to average net assets: |
|
|
|
|
| ||
Before expense reimbursement or recapture |
| 1.71 | % | 1.71 | % | ||
After expense reimbursement or recapture |
| 1.71 | % | 1.71 | % | ||
Ratio of net investment income to average net assets: |
|
|
|
|
| ||
Before expense reimbursement or recapture |
| 1.40 | % | 1.67 | % | ||
After expense reimbursement or recapture |
| 1.40 | % | 1.67 | % | ||
Portfolio turnover |
| 3.10 | % | 1.02 | % |
(1) Calculation does not reflect sales load. |
|
|
|
|
|
The table below sets forth financial data for one share of beneficial interest |
|
|
|
|
|
|
|
|
|
|
|
| Class B |
| Class B |
| ||
|
| For the Year Ended |
| For the Year Ended |
| ||
|
| October 31, 2006 |
| October 31, 2005 |
| ||
|
|
|
|
|
| ||
Net Asset Value, Beginning of Year |
| $ | 13.69 |
| $ | 13.11 |
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
| ||
Net investment income |
| 0.13 |
| 0.15 |
| ||
Net realized and unrealized gain on investments |
| 3.21 |
| 1.01 |
| ||
Total from investment operations |
| 3.34 |
| 1.16 |
| ||
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
| ||
Distributions from net investment income |
| (0.13 | ) | (0.15 | ) | ||
Distributions from capital gains |
| (0.41 | ) | (0.35 | ) | ||
Distributions in excess of ordinary income |
| — |
| — |
| ||
Distributions from return of capital |
| — |
| (0.08 | ) | ||
Total distributions |
| (0.54 | ) | (0.58 | ) | ||
|
|
|
|
|
| ||
Net Asset Value, End of Year |
| $ | 16.49 |
| $ | 13.69 |
|
|
|
|
|
|
| ||
Total Return(1) |
| 25.02 | % | 8.83 | % | ||
|
|
|
|
|
| ||
Ratios/Supplemental Data |
|
|
|
|
| ||
Net assets, end of year (000) |
| $ | 12,248 |
| $ | 11,597 |
|
Ratio of expenses to average net assets: |
|
|
|
|
| ||
Before expense reimbursement or recapture |
| 2.41 | % | 2.41 | % | ||
After expense reimbursement or recapture |
| 2.41 | % | 2.41 | % | ||
Ratio of net investment income to average net assets: |
|
|
|
|
| ||
Before expense reimbursement or recapture |
| 0.70 | % | 0.97 | % | ||
After expense reimbursement or recapture |
| 0.70 | % | 0.97 | % | ||
Portfolio turnover |
| 3.10 | % | 1.02 | % |
(1) Calculation does not reflect CDSC charges. |
|
|
|
|
|
See accompanying notes to financial statements.
10
|
| Class A |
| Class A |
| Class A |
| |||
|
| For the Year Ended |
| For the Year Ended |
| For the Year Ended |
| |||
|
| October 31, 2004 |
| October 31, 2003 |
| October 31, 2002 |
| |||
|
|
|
|
|
|
|
| |||
Net Asset Value, Beginning of Year |
| $ | 10.93 |
| $ | 8.96 |
| $ | 8.84 |
|
|
|
|
|
|
|
|
| |||
Income from Investment Operations: |
|
|
|
|
|
|
| |||
Net investment income |
| 0.20 |
| 0.30 |
| 0.40 |
| |||
Net realized and unrealized gain on investments |
| 2.37 |
| 2.30 |
| 0.36 |
| |||
Total from investment operations |
| 2.57 |
| 2.60 |
| 0.76 |
| |||
|
|
|
|
|
|
|
| |||
Less Distributions: |
|
|
|
|
|
|
| |||
Distributions from net investment income |
| (0.20 | ) | (0.30 | ) | (0.40 | ) | |||
Distributions from capital gains |
| (0.27 | ) | (0.09 | ) | (0.12 | ) | |||
Distributions in excess of ordinary income |
| — |
| — |
| (0.01 | ) | |||
Distributions from return of capital |
| (0.13 | ) | (0.24 | ) | (0.11 | ) | |||
Total distributions |
| (0.60 | ) | (0.63 | ) | (0.64 | ) | |||
|
|
|
|
|
|
|
| |||
Net Asset Value, End of Year |
| $ | 12.90 |
| $ | 10.93 |
| $ | 8.96 |
|
|
|
|
|
|
|
|
| |||
Total Return(1) |
| 24.02 | % | 30.07 | % | 8.26 | % | |||
|
|
|
|
|
|
|
| |||
Ratios/Supplemental Data |
|
|
|
|
|
|
| |||
Net assets, end of year (000) |
| $ | 178,104 |
| $ | 137,410 |
| $ | 85,915 |
|
Ratio of expenses to average net assets: |
|
|
|
|
|
|
| |||
Before expense reimbursement or recapture |
| 1.77 | % | 1.80 | % | 1.93 | % | |||
After expense reimbursement or recapture |
| 1.83 | % | 1.97 | % | 1.97 | % | |||
Ratio of net investment income to average net assets: |
|
|
|
|
|
|
| |||
Before expense reimbursement or recapture |
| 1.75 | % | 3.18 | % | 4.04 | % | |||
After expense reimbursement or recapture |
| 1.69 | % | 3.01 | % | 4.00 | % | |||
Portfolio turnover |
| 4.17 | % | 1.52 | % | 1.25 | % |
|
| Class B |
| Class B |
| Class B |
| |||
|
| For the Year Ended |
| For the Year Ended |
| For the Year Ended |
| |||
|
| October 31, 2004 |
| October 31, 2003 |
| October 31, 2002 |
| |||
|
|
|
|
|
|
|
| |||
Net Asset Value, Beginning of Year |
| $ | 11.11 |
| $ | 9.11 |
| $ | 8.98 |
|
|
|
|
|
|
|
|
| |||
Income from Investment Operations: |
|
|
|
|
|
|
| |||
Net investment income |
| 0.12 |
| 0.26 |
| 0.35 |
| |||
Net realized and unrealized gain on investments |
| 2.40 |
| 2.30 |
| 0.36 |
| |||
Total from investment operations |
| 2.52 |
| 2.56 |
| 0.71 |
| |||
|
|
|
|
|
|
|
| |||
Less Distributions: |
|
|
|
|
|
|
| |||
Distributions from net investment income |
| (0.12 | ) | (0.26 | ) | (0.34 | ) | |||
Distributions from capital gains |
| (0.27 | ) | (0.09 | ) | (0.12 | ) | |||
Distributions in excess of ordinary income |
| — |
| — |
| (0.01 | ) | |||
Distributions from return of capital |
| (0.13 | ) | (0.21 | ) | (0.11 | ) | |||
Total distributions |
| (0.52 | ) | (0.56 | ) | (0.58 | ) | |||
|
|
|
|
|
|
|
| |||
Net Asset Value, End of Year |
| $ | 13.11 |
| $ | 11.11 |
| $ | 9.11 |
|
|
|
|
|
|
|
|
| |||
Total Return(1) |
| 23.13 | % | 28.43 | % | 7.59 | % | |||
|
|
|
|
|
|
|
| |||
Ratios/Supplemental Data |
|
|
|
|
|
|
| |||
Net assets, end of year (000) |
| $ | 12,592 |
| $ | 11,983 |
| $ | 9,583 |
|
Ratio of expenses to average net assets: |
|
|
|
|
|
|
| |||
Before expense reimbursement or recapture |
| 2.47 | % | 2.50 | % | 2.63 | % | |||
After expense reimbursement or recapture |
| 2.53 | % | 2.67 | % | 2.67 | % | |||
Ratio of net investment income to average net assets: |
|
|
|
|
|
|
| |||
Before expense reimbursement or recapture |
| 1.05 | % | 2.48 | % | 3.34 | % | |||
After expense reimbursement or recapture |
| 0.99 | % | 2.31 | % | 3.30 | % | |||
Portfolio turnover |
| 4.17 | % | 1.52 | % | 1.25 | % |
See accompanying notes to financial statements.
11
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2006
Note 1 - Significant Accounting Policies
Spirit of America Real Estate Income & Growth Fund (formerly Spirit of America Real Estate Fund) (the “Fund”), a series of the Spirit of America Investment Fund, Inc.(the “Company”), is an open-end diversified mutual fund registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company was incorporated under the laws of Maryland on May 15, 1997. The Fund commenced operations on January 9, 1998. The authorized capital stock of the Fund is one billion (1,000,000,000) shares, par value of $0.001 per share.
The Fund seeks growth of capital and current income by investing in equity Real Estate Investment Trusts (“REITs”) and the equity securities of real estate industry companies. The Fund offers two classes of shares (Class A and Class B). Each class of shares has equal rights as to earnings and assets except that each class bears different distribution expenses. Each class of shares has exclusive voting rights with respect to matters that affect just that class. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains and losses on investments are allocated to each class of shares based on its relative net assets.
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America for investment companies.
A. Security Valuation: The offering price and net asset value per share of each class of the Fund are calculated as of the close of regular trading on the NYSE, currently 4:00 p.m., Eastern Time. The Fund’s securities are valued at the official close or the last reported sales price on the principal exchange on which the security trades, or if no sales price is reported, the mean of the latest bid and asked prices is used. Securities traded over-the-counter are priced at the mean of the latest bid and asked prices. Short-term investments having maturities of 60 days or less are valued at amortized cost, which the Board of Directors believes represents fair value. Fund securities for which market quotations are not readily available are valued at fair value as determined in good faith under procedures established by and under the supervision of the Board of Directors. There were no securities, however, fair valued during the fiscal year.
B. Investment Income and Securities Transactions: Security transactions are accounted for on the date the securities are purchased or sold (trade date). Cost is determined and gains and losses are based on the identified cost basis for both financial statement and federal income tax purposes. Dividend income and distributions to shareholders are reported on the ex-dividend date. Interest income and expenses are accrued daily.
C. Federal Income Taxes: The Fund intends to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.
D. Net Asset Value Per Share: The methodology and procedures for determining net asset value are identical for each class of shares, but due to the specific distribution expenses and other costs allocable to each class of shares, the net asset value of each class of shares will vary. Class A Shares are purchased at the offering price per share (which includes a sales load), while Class B shares are purchased at the net asset value per share.
E. Use of Estimates: In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F. Distributions to Shareholders: The Fund intends to distribute substantially all of its net investment income and capital gains to shareholders each year. Normally, income dividends will be paid quarterly. All such dividends and distributions are taxable to the shareholders whether received in cash or reinvested in shares. The Fund has made certain investments in REITs which pay dividends to their shareholders based upon available funds from operations. Each REIT reports annually the tax character of its distributions. It is quite common for these dividends to exceed the REIT’s taxable earnings and profits resulting in the excess portion of such dividends being designated as a return of capital or long-term capital gain. The Fund intends to include the gross dividends from such REITs in its distributions to its shareholders, accordingly, a portion of the distributions paid to the Fund and subsequently distributed to shareholders may be characterized as a return of capital or long-term capital gain.
G. New Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No.48, “Accounting for Uncertainty in Income Taxes and Interpretation of FASB Statement No.109” (the “Interpretation”). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is effective for fiscal
12
years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. Management has recently begun to evaluate the application of the Interpretation to the Fund, and is not in a position at this time to estimate the significance of its impact, if any, on the Funds’ financial statements.
In addition, in September 2006, the FASB issued Statement on Financial Accounting Standards (SFAS) No.157, “Fair Value Measurements.” This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of October 31, 2006, the Fund does not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported on the statement of changes in net assets for a fiscal period.
Note 2 - Purchases and Sales of Securities
Investment transactions for the fiscal year ended October 31, 2006, excluding short-term investments, were as follows:
|
|
|
| Proceeds |
|
|
| Purchases |
| From Sales |
|
Real Estate Income & Growth Fund |
| $ 20,330,421 |
| $ 6,679,106 |
|
Note 3 - Investment Management Fee and Other Transactions with Affiliates
Spirit of America Management Corp. (“Spirit Management”) has been retained to act as the Company’s manager and investment adviser pursuant to an Investment Advisory Agreement (the “Advisory Agreement”). Spirit Management was incorporated in 1997 and is a registered investment adviser under the Investment Advisers Act of 1940, as amended. Under the Advisory Agreement, the Fund pays Spirit Management a monthly fee of 1/12 of 0.97% on the Fund’s average daily net assets. Investment advisory fees and other transactions with affiliates, for the year ended October 31, 2006, were as follows:
|
| Voluntary Expense |
| Advisory |
|
|
| Limitation |
| Fees |
|
Real Estate Income & Growth Fund Class A |
| 1.97% |
| $ 1,972,544 |
|
Real Estate Income & Growth Fund Class B |
| 2.67% |
| 110,992 |
|
The Fund has adopted distribution plans for Real Estate Income & Growth Fund Class A Shares and Real Estate Income & Growth Fund Class B Shares pursuant to Rule 12b-1 (each a “Plan”). Each Plan permits the Real Estate Income & Growth Fund to pay SSH Securities, Inc. (the “Distributor”), a monthly fee from the assets of the respective class for the Distributor’s services and expenses in distributing shares of each class and providing personal services and/or maintaining shareholder accounts.
|
| Distribution |
| Distribution |
|
|
| Fee Rate |
| Fees |
|
Real Estate Income & Growth Fund Class A |
| 0.30% |
| $ 610,047 |
|
Real Estate Income & Growth Fund Class B |
| 1.00% |
| 114,486 |
|
Real Estate Income & Growth Fund Class A Shares are subject to an initial sales charge imposed at the time of purchase, in accordance with the Fund’s current prospectus. Certain redemptions of Real Estate Income & Growth Fund Class B shares made within six years of purchase are subject to a contingent deferred sales charge (“CDSC”), in accordance with the Fund’s current prospectus. For the fiscal year ended October 31, 2006, sales charges and CDSC fees received by the Distributor were as follows:
|
| Sales Charges |
| Contingent Deferred |
|
Real Estate Income & Growth Fund Class A |
| $ 2,297,753 |
| $ — |
|
Real Estate Income & Growth Fund Class B |
| — |
| 35,040 |
|
Certain officers and directors of the Company are “affiliated persons” of Spirit Management or the Distributor, as that term is defined in the 1940 Act. There are no directors’ fees paid to affiliated directors of the Company. For the year ended October 31, 2006, the Real Estate Income & Growth Fund was allocated $20,150 of the Chief Compliance Officer fee. In addition, David Lerner Associates, Inc., a registered broker-dealer affiliated with Spirit Management and the Distributor, received no brokerage commissions for the year ended October 31, 2006.
13
Note 4 – Federal Income Taxes
The tax character of distributions paid for the fiscal years ended October 31, 2006 and 2005 were as follows:
2006 Taxable Distributions
|
| Ordinary |
| Net Long-Term |
| Total Taxable |
| Return |
| Total |
| |||||
Real Estate Income & Growth Fund Class A |
| $ | 3,254,551 |
| $ | 5,708,585 |
| $ | 8,963,136 |
| $ | — |
| $ | 8,963,136 |
|
Real Estate Income & Growth Fund Class B |
| 108,095 |
| 313,026 |
| 421,121 |
| — |
| 421,121 |
| |||||
|
| $ | 3,362,646 |
| $ | 6,021,611 |
| $ | 9,384,257 |
| $ | — |
| $ | 9,384,257 |
|
2005 Taxable Distributions
|
| Ordinary |
| Net Long-Term |
| Total Taxable |
| Return |
| Total |
| |||||
Real Estate Income & Growth Fund Class A |
| $ | 3,128,824 |
| $ | 4,913,780 |
| $ | 8,042,604 |
| $ | 1,090,633 |
| $ | 9,133,237 |
|
Real Estate Income & Growth Fund Class B |
| 123,707 |
| 315,555 |
| 439,262 |
| 69,170 |
| 508,432 |
| |||||
|
| $ | 3,252,531 |
| $ | 5,229,335 |
| $ | 8,481,866 |
| $ | 1,159,803 |
| $ | 9,641,669 |
|
Differences in distributions classification may result from the treatment of short-term capital gains as ordinary income for tax purposes.
As of October 31, 2006, the components of distribution earnings for the Fund on a tax basis were as follows:
Accumulated net realized gain on investments |
| $ | 4,938,343 |
|
Unrealized appreciation |
| 102,559,468 |
| |
Total Distributable Earnings |
| $ | 107,497,811 |
|
Note 5 – Reclassifications
Accounting principals generally accepted in the United States require that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended October 31, 2006, permanent differences in book and tax accounting have been reclassified to paid-in-capital and undistributed net investment income as follows:
Increase net investment income |
| $ | 345,822 |
|
Decrease paid-in-capital |
| (345,822 | ) |
The reclassifications are primarily attributable to reclassification of prior year REIT adjustments.
Unaudited
Qualified Dividend Income
For the fiscal year ended October 31, 2006, 23.86% of the dividends paid by the Fund from ordinary income qualifies for a reduced tax rate pursuant to The Jobs and Growth Tax Relief Reconciliation Act of 2003.
Dividends Received Deduction
For the fiscal year ended October 31, 2006, 100% of the ordinary income distribution qualifies for the dividends received deduction available to corporations.
Long-Term Capital Gains Dividend
The Fund designates $6,021,611 as long-term capital gains dividends pursuant to section 852(b)(3) of the Internal Revenue Code for the fiscal year ended October 31, 2006.
14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Spirit of America Investment Fund, Inc.
Syosset, New York
We have audited the accompanying statement of assets and liabilities of Spirit of America Real Estate Income & Growth Fund (formerly Spirit of America Real Estate Fund), a series of shares of beneficial interest in Spirit of America Investment Fund, Inc., including the schedule of investments as of October 31, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on those financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s of internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Spirit of America Real Estate Income & Growth Fund as of October 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
December 5, 2006
15
SPIRIT OF AMERICA REAL ESTATE INCOME & GROWTH FUND
MANAGEMENT OF THE COMPANY
(UNAUDITED)
Information pertaining to the Directors and Officers of the Company is set forth below. The statement of additional information includes additional information about the Directors and is available without charge, upon request, by calling 516-390-5565.
|
| Term of Office(1) |
|
|
| Number of Portfolios |
|
|
Name, Address and (Age) |
| and Length |
| Principal Occupation(s) |
| in Fund Complex |
| Other Directorships |
Position(s) with the Company |
| of Time Served |
| During Past Five Years |
| Overseen by Director |
| Held by Director |
|
|
|
|
|
|
|
|
|
INTERESTED DIRECTORS* |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
David Lerner(2) (70) |
| Since 1998 |
| President and founder, David Lerner Associates, Inc., a registered broker-dealer; President, Spirit of America Management Corp., the Company’s investment advisor; and Chief Executive Officer and President of SSH Securities, Inc., the Company’s Distributor. |
| 2 |
| Director of Spirit of America Management Corp., the Company’s investment advisor; Director of SSH Securities, Inc., the Company’s Distributor; Director of David Lerner Associates, Inc., a registered |
|
|
|
|
|
|
|
|
|
Daniel Lerner(2) (45) |
| Since 1998 |
| Senior Vice President, Investment Counselor with David Lerner Associates, Inc., a registered broker-dealer, since September 2000. Previously: Broker with Prudential Securities from February 2000 to July 2000; Broker with Bear Stearns from January 1999 to May 1999; Vice President of SSH Securities, Inc., the Company’s Distributor and Senior Vice President. |
| 2 |
| Director of David Lerner Associates, Inc., a registered broker-dealer. |
|
|
|
|
|
|
|
|
|
INDEPENDENT DIRECTORS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Allen Kaufman (70) |
| Since 1998 |
| President and Chief Executive Officer of K.G.K. Agency, Inc., a property and casualty insurance agency, since 1963. KGK Agency, Inc. had earned insurance brokerage commissions in excess of $60,000 during the two calendar years ending December 31, 2005, in connection with insurance coverage provided to the Funds, the Adviser, the Underwriter, and their affiliates. Mr. Kaufman is President, Chief Executive Officer and a director of KGK Agency, Inc.(3) |
| 2 |
| Director of K.G.K. Agency, Inc., a property and casualty insurance agency. |
|
|
|
|
|
|
|
|
|
Stanley S. Thune (70) |
| Since 1998 |
| President and Chief Executive Officer, Freight Management Systems, Inc., a third party logistics management company, since 1994; private investor. |
| 2 |
| Director of Freight Management Systems, Inc. |
|
|
|
|
|
|
|
|
|
Richard Weinberger (70) |
| Since 2005 |
| Of Counsel to Ballon Stoll Bader & Nadler, P.C., a mid-sized law firm, since January 2005; Shareholder, Ballon Stoll Bader & Nadler, P.C., January 2000 to December 2004. |
| 2 |
| None. |
|
|
|
|
|
|
|
|
|
EXECUTIVE OFFICERS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
David Lerner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan P. Chodosh (52) |
| Since 2003 |
| Senior Vice President and Chief Financial Officer of David Lerner Associates, Inc. since June 1997 |
| N/A |
| N/A |
|
|
|
|
|
|
|
|
|
Secretary |
| Since 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel E. Chafetz (75) |
| Since 2004 |
| Chief Compliance Officer of David Lerner Associates, Inc. since March 1993; Chief Compliance Officer of SSH Securities, Inc. and Spirit of America Management Corp. since their inception, May 1997. |
| N/A |
| N/A |
(1) Each Director serves for an indefinite term, until his successor is elected.
(2) David Lerner is an “interested” Director, as defined in the 1940 Act, by reason of his position with the Advisor and Daniel Lerner is an “interested” Director by reason of his position with the Distributor. Daniel Lerner is the son of David Lerner.
(3) KGK Agency, Inc. has earned insurance brokerage commissions in excess of $60,000 during the two calendar years ending December 31, 2005, in connection with insurance coverage provided to the Funds, the Advisor, the Underwriter, and their affiliates. Mr. Kaufman is President, Chief Executive Officer and a director of KGK Agency, Inc.
16
Proxy Voting Information
The Fund’s Statement of Additional Information (“SAI”) containing a description of the policies and procedures that the Spirit of America Real Estate Income & Growth Fund uses to determine how to vote proxies relating to portfolio securities, along with the Fund’s proxy voting record relating to portfolio securities held during the 12-month period ended June 30, 2006, are available (i) without charge, upon request, by calling (516) 390-5565; and (ii) on the Securities and Exchange Commission’s website at http://www.sec.gov
Information on Form N-Q
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each Fiscal year or Form N-Q within sixty days after the end of the period. The Trust’s Forms N-Q will be available on the SEC’s website at http://www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
©Copyright 2007 Spirit of America
Investment Advisor |
|
Spirit of America Management Corp. |
P.O. Box 9006 |
Syosset, NY 11791-9006 |
|
Distributor |
|
SSH Securities, Inc. |
P.O. Box 9006 |
Syosset, NY 11791-9006 |
|
Shareholder Services |
|
PFPC Inc. |
760 Moore Road |
King of Prussia, PA 19406 |
|
Custodian |
|
PFPC Trust Company |
8800 Tinicum Boulevard, 4th Floor |
Philadelphia, PA 19153 |
|
Independent Registered Public Accounting Firm |
|
Tait Weller & Baker LLP |
1818 Market Street, Suite 2400 |
Philadelphia, PA 19103 |
For Additional Information about the Spirit of America Real Estate Income & Growth Fund, call (800) 452-4892 or (610) 382-7819. This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund’s objectives, policies, expenses, and other information.
©Copyright 2007 Spirit of America | SOAR-AR06 |
Item 2. Code of Ethics.
(a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(b) Not applicable.
(c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions.
(e) Not applicable.
(f) The registrant’s code of ethics is incorporated by reference to Exhibit (a)(1) to the registrant’s form N-CSR filed with the Securities and Exchange Commission on January 7, 2005 (Accession No. 0001047469-05-000347).
Item 3. Audit Committee Financial Expert.
Registrant’s Board of Directors has determined that it does not have an “audit committee financial expert” serving on its audit committee. While Registrant believes that each of the members of its audit committee has sufficient knowledge of accounting principles and financial statements to serve on the audit committee, none has the requisite experience to qualify as an “audit committee financial expert”; as such term is defined by the Securities and Exchange Commission.
Item 4. Principal Accountant Fees and Services.
Audit Fees
(a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $29,200 for 2006 and $27,200 for 2005.
Audit-Related Fees
(b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item are $0 for 2006 and $0 for 2005.
Tax Fees
(c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $0 for 2006 and $0 for 2005.
All Other Fees
(d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2006 and $0 for 2005.
(e)(1) Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pre-Approval of Audit and Permitted Non-Audit Services Provided to the Company
Pre-Approval Requirements. The Committee shall pre-approve all auditing services and permissible non-audit services (e.g., tax services) to be provided to the Company by the Auditor, including the fees therefor. The Committee may delegate to one or more of its members the authority to grant pre-approvals. In connection with such delegation, the Committee shall establish pre-approval policies and procedures, including the requirement that the decisions of any member to whom authority is delegated under this section (B) shall be presented to the full Committee at each of its scheduled meetings.
De Minimis Exception to Pre-Approval: Pre-approval for a permitted non-audit service shall not be required if:
a. the aggregate amount of all such non-audit services is not more than 5% of the total revenues paid by the Company to the Auditor in the fiscal year in which the non-audit services are provided;
b. such services were not recognized by the Company at the time of the engagement to be non-audit services; and
c. such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by one or more
members of the Committee to whom authority to grant such approvals has been delegated by the Committee.
Additionally, the Committee shall pre-approve the Auditor’s engagements for non-audit services with the Adviser and any affiliate of the Adviser that provides ongoing services to the Company in accordance with the foregoing, if the engagement relates directly to the operations and financial reporting of the Company, unless the aggregate amount of all services provided constitutes no more than 5% of the total amount of revenues paid to the Auditor by the Company, the Adviser and any affiliate of the Adviser that provides ongoing services to the Company during the fiscal year in which the services are provided that would have to be pre-approved by the Committee pursuant to this paragraph (without regard to this exception).
(e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) N/A
(c) N/A
(d) N/A
(f) The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $0 for 2006 and $0 for 2005.
(h) The registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed registrants.
Not applicable.
Item 6. Schedule of Investments.
Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s
second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) |
| Spirit of America Investment Fund, Inc. |
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By (Signature and Title)* |
| /s/ David Lerner |
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| David Lerner, Principal Executive Officer |
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| (principal executive officer) |
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Date | 1/5/07 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* |
| /s/ David Lerner |
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| David Lerner, Principal Executive Officer |
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| (principal executive officer) |
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Date | 1/5/07 |
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By (Signature and Title)* |
| /s/ Alan Chodosh |
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| Alan Chodosh, Principal Financial Officer |
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| (principal financial officer) |
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Date | 1/5/07 |
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* Print the name and title of each signing officer under his or her signature.