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
SPIRIT OF AMERICA INVESTMENT FUND, Inc.
(Exact name of registrant as specified in charter)
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
(Address of principal executive offices) (Zip code)
Mr. David Lerner
David Lerner Associates
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
(Name and address of agent for service)
Registrant’s telephone number, including area code: 1-516-390-5565
Date of fiscal year end: December 31
Date of reporting period: December 31, 2012
Item 1. Reports to Stockholders.
ANNUAL REPORT
DECEMBER 31, 2012
MESSAGE TO OUR SHAREHOLDERS
Dear Shareholder,
We are happy to have this opportunity to share with you, our shareholders, the Annual Report for the Spirit of America Real Estate Income and Growth Fund. This includes a review of our performance for 2012, and our thoughts on the economy, and the securities markets.
At Spirit of America Investment Funds, our team takes a comprehensive approach to investing. We analyze economic trends, and evaluate industries that could benefit from those trends. Based upon this analysis, we select investments we believe are positioned to provide the best potential returns. Our portfolio managers utilize their extensive backgrounds in their respective fields to carefully scrutinize each security in the portfolio on an ongoing basis.
Despite the economic challenges our country is facing, we see indications that the economy continued to grow throughout 2012. As the economy recovered, we found opportunities to accumulate stocks at what we believe were attractive valuations.
The Spirit of America Real Estate Income and Growth Fund’s investment philosophy continues to be to seek enduring value in the bricks and mortar of America by investing in real estate companies which own office buildings, shopping malls, hotels, apartments, and other income producing assets. Our goal is to maximize total return to shareholders by benefitting from the income generated through the rental of these properties, while also participating in potential long term appreciation of asset values.
We appreciate your continued support, and look forward to your future investment in the Spirit of America Real Estate Income and Growth Fund.
Sincerely,
![]() | ![]() | ![]() | ||||
David Lerner | Raymond Mathis | |||||
President | Portfolio Manager |
REAL ESTATE INCOME AND GROWTH FUND | 1 |
MANAGEMENT DISCUSSION
Economic Summary
Economic growth slowed in mid-2012, as financial markets were roiled by the European debt crisis, and economic data from Asia was weaker than expected. Nonetheless, growth in the U.S. remained positive for the year, with nominal GDP improving 3.3%. While this certainly cannot be characterized as robust growth, we believe the slowdown may be related to transitory issues such as uncertainty surrounding national elections, and resolution of the “fiscal cliff.” Although unemployment remained unacceptably high, ending the year at 7.8%, we note that the trend is steadily lower. First time jobless claims remain well below levels seen in the prior three years, and private sector nonfarm payrolls have maintained continuous growth for over two years. These are both very positive signs for future economic expansion.
We believe that the economy will continue to expand as we head into 2013, and perhaps accelerate as the year progresses. Leading economic indicators rose sharply in December driven by improvements in employment, credit, and a return to positive growth in housing. As such, we will continually reposition our investment portfolio to best take advantage of the opportunities we see in the constantly changing economic environment.
Market Summary
For the full year 2012, the S&P 500 provided a total return of 16%. Shares of companies in the Financial Sector have generally been more volatile than the broader market following the passage of Dodd-Frank financial overhaul legislation, and leading up to expiration of the Bush era tax cuts. As members of the financial sector, and beneficiaries of preferential tax treatment, REITs were not immune from
these concerns. For the first half of year the MSCI US REIT Index provided a total return of 17.77%, once again outperforming the S&P 500.
We believe real estate companies have continued to benefit from improving financial conditions, positive underlying fundamentals, and stronger balance sheets. Unlike private property owners, publicly traded REITs have been able to access the public capital markets to issue bonds and raise equity. This means they have been able to meet debt maturities and shore up their financial stability more quickly than their private peers. As a result, we believe publicly traded REITs, with their lower cost of capital, will continue to outperform the private real estate markets over the near term.
Fund Summary
The Spirit of America Real Estate Income and Growth Fund, SOAAX (the “Fund”), remained diversified across several property types, and many geographic areas.
Entering into 2012, the fund increased its exposure to more economically sensitive companies. While this may have been a contrarian view, in light of the slowdown in economic growth and the European debt crisis, we remained committed to our macroeconomic view, and our belief that the aforementioned events were buying opportunities.
Relative to our benchmark index, the Fund was most underweight Healthcare and Self Storage REITs. Given the sharp decline in home ownership and an increased propensity to rent, the fund was on average most overweight Apartment REITs and certain Diversified REITs. The fund’s overweight position in hotel shares was predicated on a rebound in business travel given rising corporate profits.
2 | SPIRIT OF AMERICA |
MANAGEMENT DISCUSSION (CONT.)
Return Summary
The Spirit of America Real Estate Income and Growth Fund, SOAAX (the “Fund”), had a total return of 17.15% (no load, gross of fees) for the twelve months ending December 31, 2012 (Source: Huntington Asset Services). This compares to the 17.77% returned by its benchmark, the MSCI US REIT Index, for the same period. That result does not take the maximum front end sales charge of 5.25% or the expense ratio of 1.75% for Class A shares into account.
The Fund’s underperformance relative to its benchmark was primarily due to allocation to, and stock selection within, Diversified REITs. Certain stocks which own property serving the technology underperformed the broader universe of real estate stocks. Also hurting performance of the Fund was its overweight allocation in Apartment REIT stocks. Helping the Fund’s performance was stock selection within the Storage REIT and Hotel REIT property types.
As of December 31, 2012, SOAAX’s standardized returns
1 year- | 9.08 | % | ||
5 year- | (.08 | )% | ||
10 year- | 5.75 | % |
Includes the maximum front end sales charge and the expense ratio of 1.75% for SOAAX
(Source: Huntington Asset Services).
REAL ESTATE INCOME AND GROWTH FUND | 3 |
MANAGEMENT DISCUSSION (CONT.)
Summary of Portfolio Holdings (Unaudited)
The Securities and Exchange Commission (“SEC”) has 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.
Spirit of America
Real Estate Income and Growth Fund
December 31, 2012
Apartments (REITs) | 20.05 | % | $ | 27,142,401 | ||||
Regional Malls (REITs) | 17.37 | 23,508,424 | ||||||
Diversified (REITs) | 13.16 | 17,804,624 | ||||||
Hotels (REITs) | 10.03 | 13,576,937 | ||||||
Health Care (REITs) | 9.76 | 13,215,653 | ||||||
Office Space (REITs) | 9.51 | 12,876,234 | ||||||
Shopping Centers (REITs) | 7.24 | 9,793,400 | ||||||
Energy | 3.69 | 4,990,120 | ||||||
Storage (REITs) | 3.53 | 4,783,577 | ||||||
Industrial (REITs) | 3.01 | 4,071,400 | ||||||
Manufactured Homes (REITs) | 1.33 | 1,795,050 | ||||||
Net Lease (REITs) | 0.58 | 780,000 | ||||||
Cash Equivalents | 0.37 | 509,314 | ||||||
Utilities | 0.37 | 497,000 | ||||||
Total Investments | 100.00 | % | $ | 135,344,134 |
4 | SPIRIT OF AMERICA |
ILLUSTRATION OF INVESTMENT (UNAUDITED)
The graphs shown compare the increase in value of a $10,000 investment in the Spirit of America Real Estate Income and Growth Fund – Class A and Class B with the performance of the MSCI US REIT Index. The values and returns for the Spirit of America Real Estate Income and Growth Fund – Class A include reinvested distributions, and the impact of the maximum sales charge of 5.25% placed on purchases. The values and returns for the Spirit of America Real Estate Income and Growth Fund – Class B include reinvested distributions, 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.
Average Annual Total Returns
For the Year Ended December 31, 2012
Class A Shares | Class B Shares | |||||||
1 Year (with sales charge) | 9.08% | a | 8.62% | b | ||||
1 Year (without sales charge) | 15.10% | 14.37% | ||||||
5 Years (with sales charge) | (0.08% | )a | (0.05% | )b | ||||
5 Years (without sales charge) | 1.01% | 0.30% | ||||||
10 Years (with sales charge) | 5.75% | a | 5.59% | b | ||||
10 Years (without sales charge) | 6.33% | 5.59% |
Past performance is not indicative of future results.
a | Reflects a 5.25% front-end sales charge. |
b | Reflects a contingent deferred sales charge of 5.75%. |
Class A Shares
Growth of $10,000
(includes one-time 5.25% maximum sales charge and reinvestment of all distributions)
* | The fund commenced operations on January 9, 1998. |
REAL ESTATE INCOME AND GROWTH FUND | 5 |
ILLUSTRATION OF INVESTMENT (UNAUDITED) (CONT.)
Class B Shares
Growth of $10,000
(includes a contingent deferred sales charge at the time of redemption of 5.75%)
** | The fund commenced operations on March 6, 1998. |
The Morgan Stanley Capital International (“MSCI”) US REIT Index is an unmanaged index. The MSCI US REIT Index is a free float-adjusted market capitalization weighted index that is comprised of equity Real Estate Investment Trusts (“REITs”) that are included in the MSCI US Investable Market 2500 Index, with the exception of specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The index represents approximately 85% of the US REIT universe. The performance of an index assumes no transaction costs, taxes, management fees or other expenses. A direct investment in an index is not possible.
6 | SPIRIT OF AMERICA |
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD JULY 1, 2012 TO DECEMBER 31, 2012
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 the Fund’s gross income, directly reduce the investment return of the Fund.
The 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.
Spirit of America Real Estate Income and Growth Fund
Beginning Account Value 7/1/12 | Ending Account Value 12/31/12 | Expense Ratio(1) | Expenses Paid During Period(2) | |||||||||||||
Actual Fund Return | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,008.60 | 1.70 | % | $ | 8.60 | ||||||||
Class B | $ | 1,000.00 | $ | 1,005.60 | 2.40 | % | $ | 12.11 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,016.57 | 1.70 | % | $ | 8.64 | ||||||||
Class B | $ | 1,000.00 | $ | 1,013.06 | 2.40 | % | $ | 12.15 |
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 expenses 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 half-year expenses. |
(2) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period (184), multiplied by the number of days in the period, then divided by 366. |
REAL ESTATE INCOME AND GROWTH FUND | 7 |
SCHEDULE OF INVESTMENTS | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Common Stocks 93.85% | ||||||||
Apartments (REITs) 20.02% | ||||||||
Apartment Investment & Management Co., Class A | $ | 75,000 | $ | 2,029,500 | ||||
Associated Estates Realty Corp. | 225,372 | 3,632,997 | ||||||
BRE Properties, Inc. | 40,000 | 2,033,200 | ||||||
Camden Property Trust | 40,000 | 2,728,400 | ||||||
Equity Residential | 125,000 | 7,083,750 | ||||||
Essex Property Trust, Inc. | 10,000 | 1,466,500 | ||||||
Home Properties, Inc. | 41,000 | 2,513,710 | ||||||
Mid-America Apartment Communities, Inc. | 30,000 | 1,942,500 | ||||||
UDR, Inc. | 156,091 | 3,711,844 | ||||||
27,142,401 | ||||||||
Diversified (REITs) 12.86% | ||||||||
Coresite Realty Corp. | 25,000 | 691,500 | ||||||
Covidien International Finance SA | 90,000 | 940,500 | ||||||
Digital Realty Trust, Inc. | 80,000 | 5,431,200 | ||||||
DuPont Fabros Technology, Inc. | 179,700 | 4,341,552 | ||||||
National Health Investors, Inc. | 50,200 | 2,837,806 | ||||||
Vornado Realty Trust | 40,000 | 3,203,200 | ||||||
17,445,758 | ||||||||
Energy 3.68% | ||||||||
Atlas Resource Partners L.P. | 50,000 | 1,123,500 | ||||||
MarkWest Energy Partners L.P. | 22,000 | 1,122,220 | ||||||
Spectra Energy Partners L.P. | 40,000 | 1,249,200 | ||||||
Targa Resources Partners L.P. | 40,000 | 1,495,200 | ||||||
4,990,120 | ||||||||
Health Care (REITs) 9.75% | ||||||||
HCP, Inc. | 165,000 | 7,454,700 | ||||||
Health Care REIT, Inc. | 34,300 | 2,102,247 | ||||||
Healthcare Realty Trust, Inc. | 84,994 | 2,040,706 | ||||||
Ventas, Inc. | 25,000 | 1,618,000 | ||||||
13,215,653 | ||||||||
Hotels (REITs) 7.46% | ||||||||
Ashford Hospitality Trust, Inc. | 75,000 | 788,250 | ||||||
Chesapeake Lodging Trust | 24,300 | 507,384 | ||||||
DiamondRock Hospitality Co. | 95,103 | 855,927 | ||||||
FelCor Lodging Trust, Inc. * | 577,015 | 2,694,660 | ||||||
Hersha Hospitality Trust | 79,980 | 399,900 | ||||||
Host Hotels & Resorts, Inc. | 204,150 | 3,199,030 | ||||||
LaSalle Hotel Properties | 25,000 | 634,750 |
See accompanying notes to financial statements.
8 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Hotels (REITs) (cont.) | ||||||||
Pebblebrook Hotel Trust | $ | 10,000 | $ | 231,000 | ||||
Sunstone Hotel Investors, Inc. * | 75,000 | 803,250 | ||||||
10,114,151 | ||||||||
Industrial (REITs) 3.00% | ||||||||
First Industrial Realty Trust, Inc. * | 30,000 | 422,400 | ||||||
ProLogis, Inc. | 100,000 | 3,649,000 | ||||||
4,071,400 | ||||||||
Manufactured Homes (REITs) 1.32% | ||||||||
Sun Communities, Inc. | 45,000 | 1,795,050 | ||||||
Net Lease (REITs) 0.57% | ||||||||
National Retail Properties, Inc. | 25,000 | 780,000 | ||||||
Office Space (REITs) 9.24% | ||||||||
BioMed Realty Trust, Inc. | 110,000 | 2,126,300 | ||||||
Boston Properties, Inc. | 65,000 | 6,877,650 | ||||||
Douglas Emmett, Inc. | 20,000 | 466,000 | ||||||
Hudson Pacific Properties, Inc. | 25,000 | 526,500 | ||||||
Kilroy Realty Corp. | 10,000 | 473,700 | ||||||
Mack-Cali Realty Corp. | 20,000 | 522,200 | ||||||
SL Green Realty Corp. | 20,000 | 1,533,000 | ||||||
12,525,350 | ||||||||
Regional Malls (REITs) 16.51% | ||||||||
CBL & Associates Properties, Inc. | 100,000 | 2,121,000 | ||||||
Glimcher Realty Trust | 50,000 | 554,500 | ||||||
Macerich Co. (The) | 40,000 | 2,332,000 | ||||||
Simon Property Group, Inc. | 90,000 | 14,228,100 | ||||||
Tanger Factory Outlet Centers, Inc. | 50,858 | 1,739,344 | ||||||
Taubman Centers, Inc. | 18,000 | 1,416,960 | ||||||
22,391,904 | ||||||||
Shopping Centers (REITs) 6.67% | ||||||||
DDR Corp. | 75,000 | 1,174,500 | ||||||
Equity One, Inc. | 30,000 | 630,300 | ||||||
Federal Realty Investment Trust | 25,000 | 2,600,500 | ||||||
Kimco Realty Corp. | 150,000 | 2,898,000 | ||||||
Regency Centers Corp. | 20,000 | 942,400 | ||||||
Weingarten Realty Investors | 30,000 | 803,100 | ||||||
9,048,800 |
REAL ESTATE INCOME AND GROWTH FUND | 9 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Storage (REITs) 2.77% | ||||||||
CubeSmart | $ | 40,000 | $ | 582,800 | ||||
Sovran Self Storage, Inc. | 51,027 | 3,168,777 | ||||||
3,751,577 | ||||||||
Total Common Stocks | 127,272,164 | |||||||
Preferred Stocks 5.58% | ||||||||
Diversified (REITs) 0.27% | ||||||||
DuPont Fabros Technology, Inc. Series B 7.63% | 7,800 | 208,026 | ||||||
Vornado Realty Trust Series G 6.63% | 6,000 | 150,840 | ||||||
358,866 | ||||||||
Hotels (REITs) 2.55% | ||||||||
Ashford Hospitality Trust, Inc. Series E 9.00% | 20,000 | 536,000 | ||||||
Chesapeake Lodging Trust Series A 7.75% | 10,000 | 264,800 | ||||||
FelCor Lodging Trust, Inc. Series C 8.00% | 30,000 | 732,300 | ||||||
Hersha Hospitality Trust Series B 8.00% | 3,000 | 75,450 | ||||||
Pebblebrook Hotel Trust Series B, 8.00% | 40,000 | 1,039,600 | ||||||
Sunstone Hotel Investors, Inc. Series D 8.00% | 31,934 | 814,636 | ||||||
3,462,786 | ||||||||
Office Space (REITs) 0.26% | ||||||||
Kilroy Realty Corp. Series H 6.38% | 13,985 | 350,884 | ||||||
Regional Malls (REITs) 0.82% | ||||||||
CBL & Associates Properties, Inc. Series E 6.63% | 20,000 | 499,200 | ||||||
Pennsylvania Real Estate Investment Trust Series A 8.25% | 4,000 | 105,120 | ||||||
Taubman Centers, Inc. Series J 6.50% | 20,000 | 512,200 | ||||||
1,116,520 | ||||||||
Shopping Centers (REITs) 0.55% | ||||||||
Kimco Realty Corp. Series K 5.63% | 30,000 | 744,600 | ||||||
Storage (REITs) 0.76% | ||||||||
Public Storage, Inc. Series V 5.38% | 40,000 | 1,032,000 | ||||||
Utilities 0.37% | ||||||||
Entergy Arkansas, Inc. 4.90% | 20,000 | 497,000 | ||||||
Total Preferred Stocks | 7,562,656 |
10 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Money Market 0.38% | ||||||||
Fidelity Institutional Money Market Funds – Prime Money Market Portfolio, 0.14% | $ | 509,314 | $ | 509,314 | ||||
Total Money Market | 509,314 | |||||||
Total Investments – 99.81% | 135,344,134 | |||||||
Other Assets in Excess of Liabilities– 0.19% | 262,967 | |||||||
|
| |||||||
NET ASSETS – 100.00% | $ | 135,607,101 |
LP — Limited Partnership
REIT—Real Estate Investment Trust
* | Non-income producing security. |
**Aggregate | cost for federal income tax purposes is $92,018,315, and net unrealized appreciation consists of: |
Gross unrealized appreciation | $ | 47,133,374 | ||
Gross unrealized depreciation | (3,807,555 | ) | ||
Net unrealized appreciation | $ | 43,325,819 |
REAL ESTATE INCOME AND GROWTH FUND | 11 |
STATEMENT OF ASSETS AND LIABILITIES | DECEMBER 31, 2012 |
ASSETS | ||||
Investments in securities at value (cost $90,916,694) (Note 1) | $ | 135,344,134 | ||
Receivable for Fund shares sold | 190,715 | |||
Dividends and interest receivable | 588,016 | |||
Prepaid expenses | 24,515 | |||
TOTAL ASSETS | 136,147,380 | |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 307,050 | |||
Payable for investment advisory fees | 109,815 | |||
Payable for accounting and administration fees | 8,257 | |||
Payable for distribution fees (Note 3) | 34,735 | |||
Payable to custodian | 3,024 | |||
Payable for audit fees | 21,500 | |||
Payable for transfer agent fees | 29,201 | |||
Payable for printing fees | 21,781 | |||
Other accrued expenses | 4,916 | |||
TOTAL LIABILITIES | 540,279 | |||
NET ASSETS | $ | 135,607,101 | ||
Class A Shares | ||||
Net assets applicable to 13,351,673 shares outstanding, $0.001 par value (500,000,000 authorized shares) | $ | 134,353,063 | ||
Net asset value and redemption price per share | $ | 10.06 | ||
Maximum offering price per share ($10.06÷ 0.9475) | $ | 10.62 | ||
Class B Shares | ||||
Net assets applicable to 121,877 shares outstanding, $0.001 par value (500,000,000 authorized shares) | $ | 1,254,038 | ||
Net asset value and redemption price per share | $ | 10.29 | ||
SOURCE OF NET ASSETS | ||||
As of December 31 2012, net assets consisted of: | ||||
Paid-in capital | $ | 123,576,634 | ||
Accumulated undistributed net investment income | — | |||
Accumulated net realized loss on investments | (32,396,973 | ) | ||
Net unrealized appreciation appreciation on investments | 44,427,440 | |||
NET ASSETS | $ | 135,607,101 |
(a) Redemption price varies based on length of time held.
See accompanying notes which are an integral part of the financial statements.
12 | SPIRIT OF AMERICA |
STATEMENT OF OPERATIONS
For the Year Ended | ||||
INVESTMENT INCOME | ||||
Dividends (net of foreign taxes withheld of $1,987) | $ | 3,625,558 | ||
Interest | 786 | |||
TOTAL INVESTMENT INCOME | 3,626,344 | |||
EXPENSES | ||||
Investment Advisory fees (Note 3) | 1,360,092 | |||
Distribution fees — Class A (Note 3) | 416,279 | |||
Distribution fees — Class B (Note 3) | 14,562 | |||
Administration and Accounting fees | 131,900 | |||
Auditing fees | 21,500 | |||
Chief Compliance Officer salary (Note 3) | 6,688 | |||
Custodian fees | 21,220 | |||
Directors’ fees | 13,632 | |||
Insurance expense | 42,629 | |||
Legal fees | 19,168 | |||
Printing expense | 49,062 | |||
Registration fees | 18,322 | |||
Transfer Agent fees | 337,590 | |||
Pricing fees | 6,000 | |||
Other expenses | 273 | |||
NET EXPENSES | 2,458,917 | |||
NET INVESTMENT INCOME | 1,167,427 | |||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||||
Net realized gain from investment transactions and REITs | 10,676,169 | |||
Net change in unrealized appreciation/depreciation of investments | 8,091,853 | |||
Net realized and unrealized gain on investments | 18,768,022 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 19,935,449 |
See accompanying notes which are an integral part of the financial statements.
REAL ESTATE INCOME AND GROWTH FUND | 13 |
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended | For the Year Ended | |||||||
OPERATIONS | ||||||||
Net investment income | $ | 1,167,427 | $ | 634,726 | ||||
Net realized gain (loss) on investment transactions and REITs | 10,676,169 | (23,489,957 | ) | |||||
Net change in unrealized appreciation/depreciation of investments | 8,091,853 | 25,060,422 | ||||||
Net increase in net assets resulting from operations | 19,935,449 | 2,205,191 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
Distributions from net investments income: | ||||||||
Class A | (2,129,533 | ) | (634,726 | ) | ||||
Class B | (7,511 | ) | — | |||||
Total distributions from net investment income | (2,137,044 | ) | (634,726 | ) | ||||
Return of capital: | ||||||||
Class A | — | (2,114,298 | ) | |||||
Class B | — | (15,613 | ) | |||||
Total distributions from return of capital to shareholders | — | (2,129,911 | ) | |||||
Total distributions to shareholders | (2,137,044 | ) | (2,764,637 | ) | ||||
CAPITAL SHARE TRANSACTIONS (Dollar Activity) | ||||||||
Shares Sold: | ||||||||
Class A | 14,802,451 | 17,425,857 | ||||||
Class B | 74,451 | 26,425 | ||||||
Shares issued from reinvestment of distributions: | ||||||||
Class A | 1,842,535 | 2,333,825 | ||||||
Class B | 5,957 | 12,204 | ||||||
Shares redeemed: | ||||||||
Class A | (38,929,195 | ) | (63,630,023 | ) | ||||
Class B | (542,578 | ) | (820,207 | ) | ||||
Decrease in net assets derived from capital share transactions | (22,746,379 | ) | (44,651,919 | ) | ||||
Total decrease in net assets | (4,947,974 | ) | (45,211,365 | ) | ||||
NET ASSETS | ||||||||
Beginning of period | 140,555,075 | 185,766,440 | ||||||
End of period | $ | 135,607,101 | $ | 140,555,075 | ||||
Transactions in capital stock were: | ||||||||
Shares Sold: | ||||||||
Class A | 1,503,812 | 1,907,243 | ||||||
Class B | 7,172 | 2,871 | ||||||
Shares issued from reinvestment of distributions: | ||||||||
Class A | 184,708 | 260,191 | ||||||
Class B | 585 | 1,333 | ||||||
Shares redeemed: | ||||||||
Class A | (3,992,111 | ) | (7,035,731 | ) | ||||
Class B | (54,623 | ) | (90,268 | ) | ||||
Decrease in shares outstanding | (2,350,457 | ) | (4,954,361 | ) |
See accompanying notes which are an integral part of the financial statements.
14 | SPIRIT OF AMERICA |
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period presented.
Class A For the Year ended December 31, 2012 | Class A For the Year ended December 31, 2011 | Class A For the Year ended December 31, 2010 | Class A For the Year ended December 31, 2009 | Class A For the Period ended December 31, 2008 | ||||||||||||||||
Net asset value, beginning of period | $ | 8.88 | $ | 8.94 | $ | 6.87 | $ | 5.38 | $ | 11.31 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.08 | 1 | 0.03 ¹ | 0.04 ¹ | 0.12 ¹ | 0.32 ¹ | ||||||||||||||
Net realized and unrealized gain on investments | 1.26 | 0.08 | 2.18 | 1.58 | (5.77 | ) | ||||||||||||||
Total income (loss) from investment operations | 1.34 | 0.11 | 2.22 | 1.70 | (5.45 | ) | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.16 | ) | (0.04 | ) | (0.04 | ) | (0.12 | ) | (0.31 | ) | ||||||||||
Distributions from capital gains | — | — | (0.11 | ) | — | (0.09 | ) | |||||||||||||
Distributions from return of capital | — | (0.13 | ) | — | (0.09 | ) | (0.08 | ) | ||||||||||||
Total distributions | (0.16 | ) | (0.17 | ) | (0.15 | ) | (0.21 | ) | (0.48 | ) | ||||||||||
Net asset value, end of period | $ | 10.06 | $ | 8.88 | $ | 8.94 | $ | 6.87 | $ | 5.38 | ||||||||||
Total Return ² | 15.10 | % | 1.24 | % | 32.41 | % | 32.20 | % | (48.46 | )% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $ | 134,353 | $ | 139,027 | $ | 183,450 | $ | 157,212 | $ | 111,160 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense reimbursement or recapture | 1.75 | % | 1.74 | % | 1.75 | % | 1.99 | % | 1.85 | % | ||||||||||
After expense reimbursement or recapture | 1.75 | % | 1.74 | % | 1.77 | % | 1.97 | % | 1.85 | % | ||||||||||
Ratio of net investment income to average net assets | 0.84 | % | 0.38 | % | 0.47 | % | 2.25 | % | 3.26 | % | ||||||||||
Portfolio turnover | 10.31 | % | 6.71 | % | 12.68 | % | 17.74 | % | 80.23 | % |
1 Calculated based on the average number of shares outstanding during the period.
2 Calculation does not reflect sales load.
See accompanying notes which are an integral part of the financial statements.
REAL ESTATE INCOME AND GROWTH FUND | 15 |
FINANCIAL HIGHLIGHTS (CONT.)
Class B For the Year ended December 31, 2012 | Class B For the Year ended December 31, 2011 | Class B For the Year ended December 31, 2010 | Class B For the Year ended December 31, 2009 | Class B For the Period ended December 31, 2008 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.05 | $ | 9.09 | $ | 6.97 | $ | 5.48 | $ | 11.54 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.06 | 1 | (0.02 | )¹ | (0.01 | )¹ | 0.11¹ | 0.25¹ | ||||||||||||
Net realized and unrealized gain on investments | 1.24 | 0.07 | 2.21 | 1.56 | (5.84 | ) | ||||||||||||||
Total income (loss) from investment operations | 1.30 | 0.05 | 2.20 | 1.67 | (5.59 | ) | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.06 | ) | — | — | (0.09 | ) | (0.29 | ) | ||||||||||||
Distributions from capital gains | — | — | (0.08 | ) | — | (0.10 | ) | |||||||||||||
Distributions from return of capital | — | (0.09 | ) | — | (0.09 | ) | (0.08 | ) | ||||||||||||
Total distributions | (0.06 | ) | (0.09 | ) | (0.08 | ) | (0.18 | ) | (0.47 | ) | ||||||||||
Net asset value, end of period | $ | 10.29 | $ | 9.05 | $ | 9.09 | $ | 6.97 | $ | 5.48 | ||||||||||
Total Return 2 | 14.37 | % | 0.54 | % | 31.63 | % | 31.01 | % | (48.80 | )% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $ | 1,254 | $ | 1,528 | $ | 2,317 | $ | 2,662 | $ | 2,991 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense reimbursement or recapture | 2.45 | % | 2.44 | % | 2.45 | % | 2.70 | % | 2.54 | % | ||||||||||
After expense reimbursement or recapture | 2.45 | % | 2.44 | % | 2.47 | % | 2.67 | % | 2.54 | % | ||||||||||
Ratio of net investment income to average net assets | 0.57 | % | (0.26 | )% | (0.09 | )% | 2.09 | % | 2.46 | % | ||||||||||
Portfolio turnover | 10.31 | % | 6.71 | % | 12.68 | % | 17.74 | % | 80.23 | % |
1 Calculated based on the average number of shares outstanding during the period.
2 Calculation does not reflect CDSC charges.
See accompanying notes which are an integral part of the financial statements.
16 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS | DECEMBER 31, 2012 |
Note 1 – Significant Accounting Policies
Spirit of America Real Estate Income and Growth 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 Fund seeks current income and growth of capital 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 Shares and Class B Shares). 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 (“NAV”) per share of each class of the Fund are calculated as of the close of regular trading on the New York Stock Exchange (“NYSE”), currently 4:00 p.m., Eastern Time on each day the NYSE is open for trading. 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 (the “Board”) 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.
B. Fair Value Measurements: Various inputs are used in determining the fair value of investments which are as follows:
• Level 1 – | Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access at the measurement date. | |
• Level 2 – | Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. | |
• Level 3 – | Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions in determining the fair value of investments). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
REAL ESTATE INCOME AND GROWTH FUND | 17 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
The summary of inputs used to value the Fund’s net assets as of December 31, 2012 is as follows:
Real Estate Income and Growth Fund
Valuation Inputs | ||||
Level 1 – Quoted Prices * | $ | 135,344,134 | ||
Level 2 – Other Significant Observable Inputs | — | |||
Level 3 – Significant Unobservable Inputs | — | |||
|
| |||
Total Market Value of Investments | $ | 135,344,134 | ||
|
| |||
* Industries as defined in the Schedule of Investments |
During the year ended December 31, 2012, the Fund recognized no transfers to/from Level 1 or Level 2.
In December 2011, FASB issued ASU No. 2011-11 related to disclosures about offsetting assets and liabilities. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Management is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.
C. 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.
D. Option Contracts: The Fund may purchase and write call options to increase or decrease its exposure to underlying securities equity risk. An option contract gives the buyer
the right, but not the obligation, to buy (call) or sell (put) an underlying item at a fixed exercise price on a certain date or during a specified period. The cost of securities acquired through the exercise of a call option is increased by the premiums paid. The proceeds from securities sold through the exercise of a purchased put option are decreased by the premiums paid. Investments in options contracts require the Fund to fair value or mark-to market the options on a daily basis, which reflects the change in the market value of the contracts at the close of each day’s trading. The cost of purchased options that expire unexercised are treated by the Fund, on expiration date, as realized losses on investments.
When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund, on the expiration date, as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The
18 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. In purchasing and writing options, the Fund bears the market risk of an unfavorable change in the price of the underlying security or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Fund purchasing a security at a price different from the current market value. The Fund may execute transactions in both listed and over-the-counter options. Listed options involve minimal counterparty risk since listed options are guaranteed against default by the exchange on which they trade. Transactions in certain over-the-counter options may expose the Fund to the risk of default by the counterparty to the transaction. In the event of default by the counterparty to the over-the-counter option transaction, the Fund’s maximum amount of loss is the premium paid (as purchaser) or the unrealized loss of the contract (as writer).
E. 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.
F. Net Asset Value Per Share: The methodology and procedures for determining NAV are identical for each class of shares, but due to the specific distribution expenses and other costs allocable to each class of shares, the NAV 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.
G. 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.
H. Distributions to Shareholders: The Fund intends to distribute substantially all of its net investment income and capital gains to shareholders each year. Normally, income distributions will be paid quarterly. Capital gains, if any, will be distributed annually in December, but may be distributed more frequently if deemed advisable by the Board. All such distributions are taxable to the shareholders whether received in cash or reinvested in shares. The Fund has made certain investments in REITs which pay distributions 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 distributions to exceed the REIT’s taxable earnings and profits resulting in the excess portion of such distributions being designated as a return of capital or long-term capital gain. The Fund intends to include the gross distributions 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 re-characterized. The final determination of the amount of the Fund’s return of capital distribution for the period will be made after the end of each calendar year.
Note 2 – Purchases and Sales of Securities
Purchases and proceeds from the sales of securities for the year ended December 31, 2012, excluding short-term investments, were $14,430,939 and $37,810,637, respectively.
Note 3 – Investment Management Fee and Other Transactions with Affiliates
Spirit of America Management Corp. (the “Adviser”) has been retained to act as the Company’s investment adviser pursuant to an
REAL ESTATE INCOME AND GROWTH FUND | 19 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Investment Advisory Agreement (the “Advisory Agreement”). The Adviser 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 the Adviser a monthly fee of 1/12 of 0.97% of the Fund’s average daily net assets. Investment advisory fees for the year ended December 31, 2012, were $1,360,092.
The Adviser has contractually agreed to waive advisory fees and/or reimburse expenses so that the total operating expenses for Class A Shares and Class B Shares will not exceed 1.97%, and 2.67%, respectively, of the average daily net assets of each class through April 30, 2013. For the year ended December 31, 2012, there were no advisory fees reimbursed to the Fund.
Any amounts waived or reimbursed by the Adviser are subject to reimbursement by the Fund within the following three years, provided the Fund is able to make such reimbursement and remain in compliance with the expense limitation as stated above. For the year ended December 31, 2012, the Fund did not reimburse the Adviser. There is no balance of recoverable expenses to the Adviser at December 31, 2012.
The Fund has adopted distribution plans for Class A Shares and Class B Shares pursuant to Rule 12b-1 (each a “Plan”). Each Plan permits the Fund to pay David Lerner Associates, Inc. (the “Distributor”), a monthly fee of 1/12 of 0.30% and 1/12 of 1.00% from the average daily net assets of Class A Shares and Class B Shares, respectively, for the Distributor’s services and expenses in distributing shares of each class and providing personal services and/or maintaining shareholder accounts. For the year ended December 31, 2012, fees paid to the Distributor under the Plan were $416,278 for Class A Shares and $14,562 for Class B Shares.
The Fund’s Class A Shares are subject to an initial sales charge imposed at the time of
purchase, in accordance with the Fund’s current prospectus. For the year ended December 31, 2012, sales charges on Class A Shares paid to the Distributor were $727,097. A contingent deferred sales charge (“CDSC”) of 1.00% may be imposed on redemptions of $1 million or more made within one year of purchase on Class A Shares. Certain redemptions of the Fund’s Class B Shares made within seven years of purchase are subject to a CDSC, in accordance with the Fund’s current prospectus. For the year ended December 31, 2012, CDSC fees on Class B Shares paid to the Distributor were $2,667.
Certain Officers and Directors of the Company are “affiliated persons”, as that term is defined in the 1940 Act, of the Adviser or the Distributor. Each Director of the Company, who is not an affiliated person of the Adviser or Distributor, receives a quarterly retainer of $3,500, $1,000 for each Board meeting attended, and $500 for each committee meeting attended plus reimbursement for certain travel and other out-of-pocket expenses incurred in connection with attending Board meetings. The Company does not compensate the Officers for the services they provide. There are no Directors’ fees paid to affiliated Directors of the Company. For the year ended December 31, 2012, the Fund was allocated $6,688 of the Chief Compliance Officer’s salary.
Note 4 – Concentration Risk
The Fund invests primarily in real estate related securities. A fund that concentrates its investments is subject to greater risk of loss than a fund that has a more diversified portfolio of investments. Investments in real estate and real estate-related equity securities involve risks different from, and in certain cases greater than, the risks presented by equity securities generally. The main risks are those presented by direct ownership of real estate or real estate industry securities, including possible declines in the value of real estate, environmental problems and changes in interest rates. To the extent that assets
20 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
underlying the Fund’s investments are concentrated geographically, by property type or in certain other respects, the Fund may be subject to these risks to a greater extent. The stocks purchased by the Fund may not appreciate in value as the Adviser anticipates.
In addition, if the Fund receives rental income or income from the disposition of real property acquired as a result of a default on securities the Fund owns, its ability to retain its tax status as a regulated investment company may be adversely affected.
Note 5 – Federal Income Taxes
The tax character of distributions paid for the years ended December 31, 2012 and 2011 were as follows:
Taxable Distributions
Ordinary Income | Net Long- Capital | Total Taxable Distributions | Return of Capital | Total Distribution | ||||||||||||||||
12/31/2012 | ||||||||||||||||||||
Class A | $ | 2,129,533 | $ | 0 | $ | 0 | $ | 0 | $ | 2,129,533 | ||||||||||
Class B | 7,511 | 0 | 0 | 0 | 7,511 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 2,137,044 | $ | 0 | $ | 0 | $ | 0 | $ | 2,137,044 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
12/31/2011 | ||||||||||||||||||||
Class A | $ | 634,726 | $ | 0 | $ | 634,726 | $ | 2,114,298 | $ | 2,749,024 | ||||||||||
Class B | 0 | 0 | 0 | 15,613 | 15,613 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
$ | 634,726 | $ | 0 | $ | 634,726 | $ | 2,129,911 | $ | 2,764,637 | |||||||||||
|
|
|
|
|
|
|
|
|
|
Distribution classifications may differ from the Statements of Changes in Net Assets as a result of the treatment of short-term capital gains as ordinary income for tax purposes.
As of December 31, 2012, the components of accumulated distributable earnings for the Fund on a tax basis were as follows:
Capital Loss Carryforward | $ | (31,295,352 | ) | |
Unrealized appreciation | 43,325,819 | |||
|
| |||
Total Distributable Earnings | $ | 12,030,467 | ||
|
|
The difference between book and tax unrealized depreciation is attributable to wash sales.
As of December 31, 2012, the Fund had net capital loss carryforwards for federal income tax purposes of $18,344,602, which are
available to reduce future required distributions of net capital gains to shareholders through 2017.
As of December 31, 2012, the Fund had a long-term capital loss carryforward of $12,950,750 available to offset future realized capital gains. These capital loss carryforwards are not subject to expiration and must first be utilized to offset future realized gains of the same character. Total loss carryovers are $31,295,352.
For the year ended December 31, 2012, the Fund had no Deferred Post-October Losses.
Management has analyzed the Fund’s tax positions taken on federal income tax returns for the four year period ended December 31, 2012, and has concluded that no provision for federal income tax is required in the Fund’s
REAL ESTATE INCOME AND GROWTH FUND | 21 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6 – Reclassification
Permanent differences, incurred during the year ended December 31, 2012, resulting from differences in book and tax accounting have been reclassified at year end to undistributed net investment income, accumulated realized gain (loss) and paid-in-capital as follows:
Increase (Decrease) | ||||
Paid-In-Capital | $ | (969,617 | ) | |
Accumulated Net Investment Income | 969,617 |
Note 7 – Other Matters
On May 27, 2011, the Financial Industry Regulatory Authority (“FINRA”) filed a complaint against David Lerner Associates, Inc. (“DLA”), the Funds’ principal underwriter and distributor, related to its sales practices in connection with its role as managing dealer of an unaffiliated Real Estate Investment Trust offering, Apple REIT Ten, Inc. (“Apple REIT”). In June 2011, several class action complaints were filed against DLA, Apple REIT entities and certain individuals, also in connection with the sale of various Apple REIT securities. In January 2012, FINRA amended its complaint to include allegations of false and misleading communications with the public in connection with certain correspondence with customers and investment seminars; and added David Lerner as an individual respondent. Neither the Company nor any of the Funds are a party to any of the above listed investigations or actions.
On May 7, 2010, each of William Mason, the Portfolio Manager for the Income Fund and DLA, the Funds’ principal underwriter and distributor, received a Notice of Complaint
from the Department of Enforcement of FINRA dated May 7, 2010, relating to Mr. Mason’s activities as head of the fixed income trading department of DLA and DLA’s activities as a municipal securities and collateralized mortgage obligations dealer. The Complaint alleges that each of Mr. Mason and DLA had violated certain NASD and Municipal Securities Rule Making Board fair pricing rules relating to the period January 1, 2005 through January 31, 2007. On April 4, 2012, a FINRA hearing panel issued a decision in this matter and assessed monetary fines and other sanctions against DLA and Mr. Mason, including a suspension of Mr. Mason from association with a FINRA member firm for six (6) months. Both DLA and Mr. Mason appealed the decision.
On October 22, 2012, DLA, Mr. Lerner and Mr. Mason settled all of the above listed FINRA investigations and actions involving Apple REIT securities and municipal bond and collateralized mortgage obligation pricing. In connection with the settlement, DLA, Mr. Lerner and Mr. Mason each agreed, among other things, to pay a fine; and, Mr. Lerner and Mr. Mason each agreed to temporary suspensions from affiliation with DLA. The fines and suspension do not involve the Company, any of the Funds, or the adviser to the Funds. While there can be no assurance that the fines and/or suspensions will not: a) materially and adversely impact DLA’s ability to act as the Fund’s principal underwriter and distributor; and/or b) materially and adversely affect Mr. Mason’s ability to act as the Portfolio Manager for the Income Fund, it is not considered likely at this time that such material and adverse effects would occur.
Note 8 – Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund and has determined that there were no events that require recognition or disclosure in the financial statements.
22 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Tax Information (Unaudited)
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
Qualified Dividend Income
For the year ended December 31, 2012, 29.93% of the distributions 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.
Qualified Interest Income
For the year ended December 31, 2012, 0.00% of the distributions paid by the Fund from ordinary income are designated as qualified interest income pursuant to The American Jobs Creation Act of 2004.
REAL ESTATE INCOME AND GROWTH FUND | 23 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Spirit of America Real Estate Income and Growth Fund 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 and Growth Fund (the “Fund”), a series of shares of beneficial interest in Spirit of America Investment Fund, Inc., including the schedule of investments as of December 31, 2012, 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 its 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Spirit of America Real Estate Income and Growth Fund as of December 31, 2012, 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 periods then ended, in conformity with accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 26, 2013
24 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT | DECEMBER 31, 2012 |
Approval of the Investment Advisory Agreement (Unaudited)
The Investment Company Act of 1940, as amended (the “1940 Act”), requires that the continuance of a registered management investment company’s investment advisory agreement be approved annually by both the board of directors and also by a majority of its directors who are not parties to the investment advisory agreement or “interested persons” (as defined by the 1940 Act) of any such party (the “Independent Directors”). At a meeting held on November 28, 2012, the Board of Directors (the “Board” or “Directors”) of Spirit of America Investment Fund, Inc. (the “Company”) met in person (the “Meeting”) to, among other things, review and consider the approval of the Investment Advisory Agreement (the “Advisory Agreement”) by and between Spirit of America Management Corp. (the “Adviser”) and the Company, on behalf of Spirit of America Real Estate Income and Growth Fund, Spirit of America Large Cap Value Fund, Spirit of America High Yield Tax Free Bond Fund and Spirit of America Income Fund (collectively, the “Funds”). At the Meeting, the Board, including the Independent Directors, voting separately, approved the Advisory Agreement after determining that the Adviser’s compensation, pursuant to the terms of the Advisory Agreement, would be fair and reasonable and concluded that the approval of the Advisory Agreement would be in the best interest of the Funds’ shareholders. The Board’s approval was based on consideration and evaluation of the information and material provided to the Board and a variety of specific factors discussed at the Meeting and at prior meetings of the Board, including the factors described below.
As part of the approval process and oversight of the advisory relationship, counsel to the Independent Directors (“Independent Counsel”) sent an information request letter to the Adviser seeking certain relevant information and the Directors received, for
their review in advance of the Meeting, the Adviser’s responses. In addition, the Directors were provided with the opportunity to request any additional materials. In advance of the Meeting, the Board, including the Independent Directors, requested and received materials provided by the Adviser and Independent Counsel, including, among other things, the following: (i) Independent Counsel’s 15(c) questionnaire and the responses provided by the Adviser; (ii) information on the investment performance of the Funds and relevant indices over various time periods; (iii) sales and redemption data with respect to the Funds; (iv) the general investment outlook in the markets in which the Funds invest; (v) arrangements with respect to the distribution of the Funds’ shares; (vi) the procedures employed to determine the value of each Fund’s assets; (vii) the allocation of the Funds’ brokerage, the record of compliance with the Funds’ investment policies and restrictions and with the Funds’ Code of Ethics and the structure and responsibilities of the Adviser’s compliance departments; (viii) the profitability of the Funds’ investment advisory business to the Adviser taking into account both advisory fees and any other potential direct or indirect benefits; (ix) information comparing the overall fees and specifically the fees under the Advisory Agreement with the fees paid by other similar mutual funds; (x) the Form ADV of the Adviser; and (xi) information comparing the performance of the Funds with the performance of other similar mutual funds; and (xii) a memorandum from Independent Counsel regarding the responsibilities of the Independent Directors related to the approval of the Investment Advisory Agreement.
In evaluating the Advisory Agreement, the Board, including the Independent Directors, requested, reviewed and considered materials
REAL ESTATE INCOME AND GROWTH FUND | 25 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
furnished by the Adviser and questioned personnel of the Adviser, including the Funds’ portfolio managers, regarding, among other things, the personnel, each Fund’s performance, and operations and financial condition of the Adviser. Among other information, the Board, including the Independent Directors, requested and was provided information regarding:.
• | The investment performance of each Fund over various time periods both by itself and in relation to relevant indices; |
• | The fees charged by the Adviser for investment advisory services, as well as the compensation received by the Adviser and its affiliates; |
• | The waivers of fees and reimbursements of expenses at times by the Adviser under the Operating Expenses Agreement;. |
• | The investment performance, fees and total expenses of mutual funds with similar objectives and strategies managed by other investment advisers; |
• | The investment management staffing and the experience of the investment advisory, administrative and other personnel providing services to the Funds and the historical quality of the services provided by the Adviser; and |
• | The profitability to the Adviser of managing and its affiliate distributing the Funds and the methodology in allocating expenses to the management of the Funds. |
At the Meeting, Independent Counsel also referred the Board to the “Gartenberg Memorandum” which had been distributed to each Director in advance of the Meeting, outlining the legal standards applicable to the Independent Directors under the 1940 Act with respect to the approval of the continuation of the investment advisory
agreements on behalf of each of the Funds. In addition, the Independent Directors met at length with Independent Counsel in executive session during the reconvening of the Meeting, outside the presence of Company management, to discuss the materials provided by the Adviser and to consider any additional questions they had of the Adviser.
The following is a summary of the Board’s discussion and views regarding the factors it considered in evaluating the continuation of the Advisory Agreement:
1. Nature, Extent, and Quality of Services.
The Board, including the Independent Directors, considered the nature, quality and extent of advisory, administrative and shareholder services performed by the Adviser, including: regulatory filings and disclosure to shareholders, general oversight of the service providers, coordination of Fund marketing initiatives, review of Fund legal issues, assisting the Board, including the Independent Directors, in their capacity as directors and other services. The Board, including the Independent Directors, noted the increased responsibilities of the Adviser in response to an increasingly regulated industry. The Board, including the Independent Directors, concluded that the services are extensive in nature, that the Adviser delivered a high level of service to each Fund and that the Adviser is positioned to continue providing such quality of service in the future.
2. Investment Performance of the Funds and the Adviser.
The Board, including the Independent Directors, considered short-term and long-term investment performance for the Funds over various periods of time as compared to both relevant indices and the performance of such Funds’ peer groups, and concluded that each Fund was delivering reasonable
26 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
performance results, especially over the long-term, consistent with the investment strategies that the Funds pursue.
3. Costs of Services and Profits Realized by the Adviser.
a. The Board, including the Independent Directors, considered the information provided by Lipper Inc. regarding each Fund’s management fee rate and overall expense ratio relative to industry averages for the Fund’s peer group category and the advisory fees charged by the Adviser to other accounts. The Board viewed favorably the current and historic willingness of the Adviser to limit the overall expense ratios of the Funds. Recognizing that the fees paid by the Funds were higher than the medians in their peer groups, the Board nonetheless noted that the fees were still close to the median and that several peer funds had higher fees.
b. Profitability and Costs of Services to the Adviser. The Board, including the Independent Directors, considered estimates of the Adviser’s profitability and costs attributable to the Funds. The Board recognized that increased fixed costs, particularly legal and audit fees in response to increasing regulations, have a greater impact on smaller fund families, such as the Funds, than on larger fund complexes. Given this, the Board recognized that the Funds’ overall expenses compare unfavorably to some funds identified as peers. The Board also considered whether the amount of the Adviser’s profit is a fair profit for the management of the Funds and noted that the Adviser has devoted a large amount of its resources into the Funds over the years. The Board, including the Independent Directors, concluded that the Adviser’s profitability was at a fair and acceptable level, particularly in light of the quality of the services being
provided to the Funds, and bore a reasonable relationship to the services rendered.
4. Extent of Economies of Scale as the Funds Grow.
The Board, including the Independent Directors, considered whether there have been economies of scale with respect to the management of the Funds and whether the Funds have appropriately benefited from any economies of scale. Given the size of each Fund, the Board did not believe that significant (if any) economies of scale have been achieved at this time.
5. Whether Fee Levels Reflect Economies of Scale.
The Board took into consideration that the Adviser does not currently offer breakpoints in its fees that would otherwise allow investors to benefit directly from economies of scale in the form of lower fees as fund assets grow. However, the Board, including the Independent Directors, did consider enhancements in personnel and services provided to the Funds by the Adviser, without an increase in fees. The Board also noted that few of the Funds’ peers offered breakpoints despite having significantly more assets under management.
6. Other Relevant Considerations.
a. Personnel and Methods. The Board, including the Independent Directors, reviewed the Adviser’s Form ADV and questioned the Adviser regarding the size, education and experience of the staff of the Adviser, its fundamental research capabilities, approach to recruiting, training and retaining portfolio managers and other research and management personnel, and concluded that these enable them to provide a high level of service to the Funds. The Board also considered the history, reputation, qualifications and background of the Adviser as well as the qualifications of its personnel.
REAL ESTATE INCOME AND GROWTH FUND | 27 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
b. The Board, including the Independent Directors, also considered the character and amount of other direct and incidental benefits received by the Adviser and its affiliates from their association with the Funds, including the benefits received by the affiliated distributor. The Board concluded that potential “fall-out” benefits that the Adviser and its affiliates may receive, such as greater name recognition or increased ability to obtain research services (although the Board noted that the Adviser currently does not use soft dollars to obtain research services), appear to be reasonable, and may in some cases benefit the Funds.
Conclusions. The Board, including the Independent Directors, did not identify any factor as all-important or all-controlling and
instead considered the above listed and other factors collectively in light of the Funds’ surrounding circumstances. Each Independent Director gave the weight to each factor that he deemed appropriate in his own judgment. The Independent Directors considered the renewal of the Advisory Agreement on a Fund-by-Fund basis and determined that the renewal of the Advisory Agreement was in the best interests of the shareholders of each Fund. The Independent Directors also determined that the fees charged to each Fund for the services provided were reasonable. Therefore, the Board, including the Independent Directors, determined that continuance of the Advisory Agreement was in the best interests of each Fund.
28 | SPIRIT OF AMERICA |
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, (Age) and Address1 Position(s) with the Company | Term of Office2 and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director | ||||
INTERESTED DIRECTORS | ||||||||
David Lerner3 (76) Director, Chairman of the Board, President | Since 1998 | President and founder, David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor; and President, Spirit of America Management Corp., the Company’s investment adviser. | 4 | Director of Spirit of America Management Corp., the Company’s investment adviser; Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
Daniel Lerner3 (51) Director | Since 1998 | Senior Vice President, Investment Counselor with David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor, since September 2000. | 4 | Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
INDEPENDENT DIRECTORS | ||||||||
Allen Kaufman (76) Director | Since 1998 | President and Chief Executive Officer of K.G.K. Agency, Inc., a property and casualty insurance agency, since 1963.4 | 4 | Director of K.G.K. Agency, Inc., a property and casualty insurance agency. | ||||
Stanley S. Thune (76) Lead Director | Since 1998 | President and Chief Executive Officer, Freight Management Systems, Inc., a third party logistics management company, since 1994; private investor. | 4 | Director of Freight Management Systems, Inc. | ||||
Richard Weinberger (76) Director | Since 2005 | Of Counsel to Ballon Stoll Bader & Nadler, P.C., a mid-sized law firm, since January 2005 to March 2011; Shareholder, Ballon Stoll Bader & Nadler, P.C., January 2000 to December 2004. | 4 | None. | ||||
OFFICERS | ||||||||
David Lerner President (see biography above) | ||||||||
Alan P. Chodosh (59) Treasurer and Secretary | Since 2003 (Treasurer) (Secretary) | Executive Vice President and Chief Financial Officer of David Lerner Associates, Inc. since June 1999. | N/A | N/A | ||||
Joseph Pickard (52) Chief Compliance Officer | Since 2007 | Chief Compliance Officer of Spirit of America Investment Fund, Inc. and Spirit of America Management Corp. since July 2007; Counsel to the Interested Directors of Spirit of America Investment Fund, Inc. since July 2002; General Counsel of David Lerner Associates, Inc. since July 2002. | N/A | N/A |
1 | All addresses are in c/o Spirit of America Investment Fund, Inc., 477 Jericho Turnpike, Syosset, New York 11791. |
2 | Each Director serves for an indefinite term, until his successor is elected. |
3 | David Lerner is an “interested” Director, as defined in the 1940 Act, by reason of his positions with the Adviser, and Daniel Lerner is an “interested” Director by reason of his position with the Distributor. Daniel Lerner is the son of David Lerner. |
4 | K.G.K. Agency, Inc. provides insurance to David Lerner Associates, Inc. and affiliated entities. However, the Board has determined that Mr. Kaufman is not an “interested” Director because the insurance services are less than $120,000 in value. |
REAL ESTATE INCOME AND GROWTH FUND | 29 |
Proxy Voting Information
The Company’s Statement of Additional Information (“SAI”) containing a description of the policies and procedures that the Spirit of America Real Estate Income and Growth Fund uses to determine how to vote proxies relating to portfolio securities, along with the Company’s proxy voting record relating to portfolio securities held during the 12-month period ended December 31, 2012, are available (i) without charge, upon request, by calling (516) 390-5565; and (ii) on the SEC’s website at http://www.sec.gov.
Information on Form N-Q
The Company will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Company’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-0030.
Investment Adviser
Spirit of America Management Corp.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Distributor
David Lerner Associates, Inc.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Shareholder Services
BNY Mellon Investment Servicing (U.S.) Inc.
760 Moore Road
King of Prussia, PA 19406
Custodian
Huntington National Bank
41 South High Street
Columbus, OH 43215
Independent Registered Public Accounting Firm
Tait Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
Counsel
Blank Rome LLP
405 Lexington Avenue
New York, NY 10174
For additional information about the Spirit of America Real Estae Income and 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, risks, policies, expenses, and other information.
©Copyright 2011 Spirit of America SOARE-AR11
ANNUAL REPORT
DECEMBER 31, 2012
MESSAGE TO OUR SHAREHOLDERS
Dear Shareholder,
As the New Year begins, we welcome this opportunity to share with you, our investors, the Annual Report for the Spirit of America Large Cap Value Fund along with our thoughts on the market and recent events.
At Spirit of America, we take a comprehensive approach to investing. Our portfolio managers use their extensive backgrounds in their respective fields to carefully scrutinize each security in the portfolio on an ongoing basis. We evaluate economic trends, we analyze sectors that could benefit from those trends, and finally, invest in companies that we believe possess strong fundamentals qualities.
Despite challenges that the financial industry as a whole faces in the current market environment, we see an opportunity emerging to accumulate what we believe are quality stocks at historically low valuations. We believe that investing in sound companies with reasonable share prices will help enhance the long-term returns of the Fund. We are committed to our investment philosophy
We appreciate your continued support and look forward to your future investment in the Spirit of America Value Fund.
Sincerely,
![]() | ![]() | ![]() | ![]() | |||
David Lerner | Alpana Sen | |||||
President | Portfolio Manager |
LARGE CAP VALUE FUND | 1 |
MANAGEMENT DISCUSSION
Economic Summary
2012 was the year of economic recovery. The housing sector slowly improved throughout the year. Values of homes increased for the first time since 2006. Inventories remained at historical low levels suggesting prices would continue to rise. In some regions, buying was cheaper than renting, which supported the housing recovery.
Employment also recovered during the year. Job growth seemed to be in line with 2011 and close to 2004 and 2006. Despite weakness in the second quarter, job growth recovered in the third and fourth quarters. Unemployment rate dropped from 8.5% at the beginning of the year to 7.7% closer to year end — a better than expected improvement.
Consumer spending improved as housing & employment recovered. Consumer savings rates fell but remained at reasonable levels, and consumer debt and debt service levels declined to multiyear lows, suggesting that demand would be sustainable.
Market Commentary
The markets in 2012 were influenced by the governments and central banks. The European Central Bank injected capital into weak European banks during the first quarter and then agreed to buy sovereign debt of distressed neighboring nations. The U.S. Federal Reserve (Fed) announced QE3 at the end August. It would be buying $40 billion in mortgage backed securities. It also extended its “Operation Twist” program, in which it would be selling short-term bonds for longer-term bonds to keep mortgage rates low.
Fund Summary
The Spirit of America Value Fund’s, (SOAVX) (the “Fund”) primary objective is to seek capital appreciation. The emphasis of the Fund is focused on investing in a diversified portfolio. We are invested in all 10 sectors on the S&P 500 Index.
The Fund does not make decisions based on complicated algorithms. We are not a hedge fund. At Spirit of America, technology works for us; we do not work for technology. We do not receive buy signals from a computer generated model. We invest the old fashioned way — utilizing hard work, intensive research, and intuitive decisions. Our decisions are based on experience.
Return Summary
The Spirit of America Large Cap Value Fund, SOAVX (the “Fund”), had a total return of 11.63% for the year of 2012. The five year return ending December 31, 2012 was 2.29%, beating the Benchmark, which returned 1.66%. The ten year return ending December 31, 2012 was 7.63%, beating the Benchmark (S&P 500 Index), which returned 7.10%. These results do not take the fund’s maximum front end sales charge of 5.25% and expense ratio of 1.86% into account.
Past performance is not indicative of future results.
The standardized total returns including sales charge and expenses as 12/31/2012:
1 Year was 5.75%.
5 Year was (0.76) %.
10 Year was 4.97%
2 | SPIRIT OF AMERICA |
MANAGEMENT DISCUSSION
Summary of Portfolio Holdings (Unaudited)
The Securities and Exchange Commission (“SEC”) has 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.
Spirit of America Large Cap Value Fund
December 31, 2012
Information Technology | 17.26 | % | $ | 9,384,007 | ||||
Consumer Staples | 11.94 | 6,489,983 | ||||||
Financials | 11.81 | 6,419,777 | ||||||
Health Care | 11.70 | 6,364,787 | ||||||
Consumer Discretionary | 9.92 | 5,395,765 | ||||||
Industrials | 9.68 | 5,265,981 | ||||||
Energy | 7.55 | 4,104,141 | ||||||
Real Estate Investment Trusts | 6.08 | 3,308,193 | ||||||
Telecommunication Services | 4.65 | 2,529,909 | ||||||
Materials | 3.47 | 1,884,362 | ||||||
Cash Equivalents | 3.15 | 1,715,219 | ||||||
Utilities | 2.79 | 1,515,378 | ||||||
Total Investments | 100.00 | % | $ | 54,377,502 |
LARGE CAP VALUE FUND | 3 |
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 distributions, 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.
Average Annual Total Returns
For the Periods Ended December 31, 2012
Shares | ||||
1 Year (with sales charge) | 5.75% | a | ||
1 Year (without sales charge) | 11.63% | |||
5 Years (with sales charge) | (0.76% | )a | ||
5 Years (without sales charge) | 0.31% | |||
10 Years (with sales charge)b | 4.97% | a | ||
10 Years (without sales charge)b | 5.54% |
Past performance is not indicative of future results.
a | Reflects a 5.25% front-end sales charge. |
b | Inception date: August 1, 2002. |
Growth of $10,000
(includes one-time 5.25% maximum sales charge and reinvestment of all distributions)
* | Fund commenced operations August 1, 2002. |
** | The S&P 500 Index benchmark is based on a start date of July 31, 2002. |
The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 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 |
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD JULY 1, 2012 TO DECEMBER 31, 2012
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 the Fund’s gross income, directly reduce the investment return of the Fund.
The 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.
Spirit of America Large Cap Value Fund
Beginning Account Value 7/1/12 | Ending Account Value 12/31/12 | Expense Ratio(1) | Expenses Paid During Period(2) | |||||||||||||
Actual Fund Return | $ | 1,000.00 | $ | 1,022.60 | 1.81 | % | $ | 9.18 | ||||||||
Hypothetical 5% Return | $ | 1,000.00 | $ | 1,016.06 | 1.81 | % | $ | 9.15 |
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 expenses 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 half-year expenses. |
(2) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the period (184), then divided by 366. |
LARGE CAP VALUE FUND | 5 |
SCHEDULE OF INVESTMENTS | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Common Stocks 92.37% | ||||||||
Consumer Discretionary 9.79% | ||||||||
Bed Bath & Beyond, Inc.* | 7,000 | $ | 391,370 | |||||
Ford Motor Co. | 2,500 | 32,375 | ||||||
Home Depot, Inc. (The) | 20,000 | 1,237,000 | ||||||
McDonald’s Corp. | 9,380 | 827,410 | ||||||
Target Corp. | 8,000 | 473,360 | ||||||
Time Warner, Inc. | 12,200 | 583,526 | ||||||
Walt Disney Co. (The) | 24,100 | 1,199,939 | ||||||
Wyndham Worldwide Corp. | 11,000 | 585,310 | ||||||
5,330,290 | ||||||||
Consumer Staples 11.92% | ||||||||
Altria Group, Inc. | 31,200 | 980,304 | ||||||
Coca-Cola Co.(The) | 15,200 | 551,000 | ||||||
Estee Lauder Cos., Inc.(The), Class A | 7,900 | 472,894 | ||||||
Hershey Co.(The) | 3,500 | 252,770 | ||||||
Kimberly-Clark Corp. | 3,200 | 270,176 | ||||||
Kraft Foods Group Inc | 5,499 | 250,040 | ||||||
Mondelez International Inc., Class A | 16,500 | 420,255 | ||||||
PepsiCo, Inc. | 13,250 | 906,697 | ||||||
Philip Morris International, Inc. | 15,249 | 1,275,426 | ||||||
Procter & Gamble Co. | 9,900 | 672,111 | ||||||
Wal-Mart Stores, Inc. | 6,424 | 438,310 | ||||||
6,489,983 | ||||||||
Energy 7.54% | ||||||||
Chevron Corp. | 3,000 | 324,420 | ||||||
ConocoPhillips | 15,100 | 875,649 | ||||||
Devon Energy Corp. | 5,100 | 265,404 | ||||||
Exxon Mobil Corp. | 16,050 | 1,389,127 | ||||||
Halliburton Co. | 7,100 | 246,299 | ||||||
Schlumberger Ltd. | 12,575 | 871,322 | ||||||
Suncor Energy, Inc. | 4,000 | 131,920 | ||||||
4,104,141 | ||||||||
Financials 10.09% | ||||||||
American Express Co. | 10,000 | 574,800 | ||||||
Bank of America Corp. | 39,100 | 453,560 | ||||||
Citigroup, Inc. | 14,500 | 573,620 | ||||||
Goldman Sachs Group, Inc.(The) | 4,615 | 588,689 | ||||||
Hartford Financial Services Group, Inc.(The) | 7,500 | 168,300 |
6 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Financials (cont.) | ||||||||
JPMorgan Chase & Co. | 22,927 | $ | 1,008,100 | |||||
MetLife, Inc. | 6,875 | 226,463 | ||||||
Royal Bank of Canada | 4,200 | 253,260 | ||||||
Travelers Cos., Inc.(The) | 4,500 | 323,190 | ||||||
U.S. Bancorp | 9,700 | 309,818 | ||||||
Wells Fargo & Co. | 29,686 | 1,014,667 | ||||||
5,494,467 | ||||||||
Health Care 11.69% | ||||||||
Abbott Laboratories | 7,300 | 478,150 | ||||||
Bristol-Myers Squibb Co. | 5,000 | 162,950 | ||||||
C.R. Bard, Inc. | 3,000 | 293,220 | ||||||
Covidien PLC | 9,500 | 548,530 | ||||||
Eli Lilly & Co. | 5,000 | 246,600 | ||||||
Express Scripts Holding Co.* | 4,668 | 252,072 | ||||||
Johnson & Johnson | 10,510 | 736,751 | ||||||
McKesson Corp. | 6,000 | 581,760 | ||||||
Merck & Co., Inc. | 17,600 | 720,544 | ||||||
Pfizer, Inc. | 28,300 | 709,764 | ||||||
UnitedHealth Group, Inc. | 15,800 | 856,992 | ||||||
Watson Pharmaceutical, Inc.* | 6,150 | 528,900 | ||||||
WellPoint, Inc. | 4,080 | 248,554 | ||||||
6,364,787 | ||||||||
Industrials 9.67% | ||||||||
3M Co. | 9,350 | 868,147 | ||||||
ADT Corp. (The) | 3,850 | 178,987 | ||||||
Boeing Co.(The) | 9,630 | 725,717 | ||||||
Caterpillar, Inc. | 6,000 | 537,480 | ||||||
CSX Corp. | 42,750 | 843,457 | ||||||
General Electric Co. | 60,381 | 1,267,397 | ||||||
Pentair, Inc. | 1,847 | 90,780 | ||||||
Tyco International Ltd. | 7,700 | 225,225 | ||||||
United Parcel Service, Inc., Class B | 5,726 | 422,178 | ||||||
United Technologies Corp. | 1,300 | 106,613 | ||||||
5,265,981 | ||||||||
Information Technology 17.24% | ||||||||
Adobe Systems, Inc.* | 4,200 | 158,256 | ||||||
Apple, Inc. | 5,000 | 2,665,150 | ||||||
Cisco Systems, Inc. | 18,500 | 363,525 | ||||||
EMC Corp.* | 28,300 | 715,990 |
LARGE CAP VALUE FUND | 7 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Information Technology (cont.) | ||||||||
Intel Corp. | 26,400 | $ | 544,632 | |||||
International Business Machines Corp. | 9,358 | 1,792,525 | ||||||
Microsoft Corp. | 25,550 | 682,951 | ||||||
Oracle Corp. | 30,800 | 1,026,256 | ||||||
QUALCOMM, Inc. | 7,500 | 465,150 | ||||||
Texas Instruments, Inc. | 14,925 | 461,779 | ||||||
Visa, Inc., Class A | 3,350 | 507,793 | ||||||
9,384,007 | ||||||||
Materials 3.46% | ||||||||
Alcoa, Inc. | 5,000 | 43,400 | ||||||
Dow Chemical Co.(The) | 8,650 | 279,568 | ||||||
Du Pont (E.I.) de Nemours & Co. | 13,500 | 607,095 | ||||||
Eastman Chemical Co. | 1,000 | 68,050 | ||||||
Newmont Mining Corp. | 8,000 | 371,520 | ||||||
Packaging Corp. of America | 13,380 | 514,729 | ||||||
1,884,362 | ||||||||
Real Estate Investment Trusts 4.76% | ||||||||
American Tower Corp. | 4,050 | 312,944 | ||||||
Equity Residential | 8,400 | 476,028 | ||||||
Kimco Realty Corp. | 11,890 | 229,715 | ||||||
ProLogis, Inc. | 7,588 | 276,886 | ||||||
Simon Property Group, Inc. | 6,509 | 1,029,008 | ||||||
Starwood Property Trust Inc | 11,700 | 268,632 | ||||||
2,593,213 | ||||||||
Telecommunication Services 3.92% | ||||||||
AT&T, Inc. | 31,350 | 1,056,808 | ||||||
Verizon Communications, Inc. | 24,940 | 1,079,154 | ||||||
2,135,962 | ||||||||
Utilities 2.27% | ||||||||
Consolidated Edison, Inc. | 11,200 | 622,048 | ||||||
Wisconsin Energy Corp. | 16,600 | 611,710 | ||||||
1,233,758 | ||||||||
Total Common Stocks | ||||||||
(Cost $37,384,617) | 50,280,951 |
8 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Preferred Stocks 4.37% | ||||||||
Consumer Discretionary 0.12% | ||||||||
Comcast Corp., 5.00% | 2,500 | $ | 65,475 | |||||
Financials 1.70% | ||||||||
Aegon NV, 6.38% | 5,000 | 125,800 | ||||||
Aegon NV, 8.00% | 3,000 | 83,940 | ||||||
American Financial Group, Inc., 6.38% | 5,000 | 130,950 | ||||||
BGC Partners, Inc., 8.13% | 5,000 | 129,950 | ||||||
General Electric Capital Corp., 4.88% | 5,000 | 127,450 | ||||||
Goldman Sachs Group, Inc.(The), 5.95% | 3,000 | 74,940 | ||||||
Goldman Sachs Group, Inc.(The), 6.13% | 2,000 | 52,240 | ||||||
Wells Fargo & Co., 5.20% | 3,000 | 75,540 | ||||||
Wells Fargo & Co., Series O, 5.13% | 5,000 | 124,500 | ||||||
925,310 | ||||||||
Real Estate Investment Trusts 1.31% | ||||||||
Kimco Realty Corp., Series J, 5.50% | 5,000 | 124,250 | ||||||
Kimco Realty Corp., Series K, 5.63% | 2,000 | 49,640 | ||||||
Public Storage, Inc., Series R, 6.35% | 2,000 | 53,560 | ||||||
Public Storage, Inc., Series T, 5.75% | 2,500 | 64,925 | ||||||
Senior Housing Properties Trust, 5.63% | 5,000 | 123,050 | ||||||
Taubman Centers, Inc., Series J, 6.50% | 2,500 | 64,025 | ||||||
Vornado Realty Trust, Series J, 6.88% | 4,000 | 107,880 | ||||||
Vornado Realty Trust, Series K, 5.70% | 5,000 | 127,650 | ||||||
714,980 | ||||||||
Telecommunication Services 0.72% | ||||||||
Qwest Corp., 7.00% | 5,000 | 129,950 | ||||||
Telephone & Data Systems, Inc., 7.00% | 4,000 | 105,920 | ||||||
United States Cellular Corp., 6.95% | 5,742 | 158,077 | ||||||
393,947 | ||||||||
Utilities 0.52% | ||||||||
NextEra Energy Capital Holdings, Inc., Series G, 5.70% | 1,000 | 26,070 | ||||||
NextEra Energy Capital Holdings, Inc., Series H, 5.63% | 5,000 | 130,100 | ||||||
NextEra Energy Capital Holdings, Inc., Series I, 5.13% | 5,000 | 125,450 | ||||||
281,620 | ||||||||
Total Preferred Stocks | ||||||||
(Cost $2,282,261) | 2,381,332 |
LARGE CAP VALUE FUND | 9 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Money Market 3.15% | ||||||||
Fidelity Institutional Money Market Funds — Prime Money Market Portfolio, 0.14% | 1,715,219 | $ | 1,715,219 | |||||
Total Money Market | ||||||||
(Cost $1,715,219) | 1,715,219 | |||||||
Total Investments — 99.89% | ||||||||
(Cost $41,382,097**) | 54,377,502 | |||||||
Other Assets in Excess of Liabilities — 0.11% | 58,294 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 54,435,796 |
* | Non-income producing security. |
** | Aggregate cost for federal income tax purposes is $41,587,655 and net unrealized appreciation consists of: |
Gross unrealized appreciation | $ | 13,692,416 | ||
Gross unrealized depreciation | (902,569 | ) | ||
Net unrealized appreciation | $ | 12,789,847 |
10 | SPIRIT OF AMERICA |
STATEMENT OF ASSETS AND LIABILITIES | DECEMBER 31, 2012 |
ASSETS | ||||
Investments in securities at value (cost $41,382,097) (Note 1) | $ | 54,377,502 | ||
Receivable for Fund shares sold | 106,909 | |||
Dividends and interest receivable | 90,095 | |||
Tax reclaims receivable | 81 | |||
Prepaid expenses | 11,820 | |||
TOTAL ASSETS | 54,586,407 | |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 36,379 | |||
Payable for investment advisory fees | 44,603 | |||
Payable for accounting and administration fees | 4,218 | |||
Payable for distribution fees (Note 3) | 13,795 | |||
Payable to custodian | 1,507 | |||
Payable for audit fees | 17,100 | |||
Payable for transfer agent fees | 11,553 | |||
Payable for printing fees | 18,496 | |||
Other accrued expenses | 2,960 | |||
TOTAL LIABILITIES | 150,611 | |||
NET ASSETS | $ | 54,435,796 | ||
Net assets applicable to 3,838,617 shares outstanding, $0.001 par value (500,000,000 authorized shares) | $ | 54,435,796 | ||
Net asset value and redemption price per share | $ | 14.18 | ||
Maximum offering price per share ($14.18 ÷ 0.9525) | $ | 14.89 | ||
SOURCE OF NET ASSETS | ||||
As of December 31 2012, net assets consisted of: | ||||
Paid-in capital | $ | 46,214,109 | ||
Accumulated undistributed net investment loss | (900 | ) | ||
Accumulated net realized loss on investments | (4,772,818 | ) | ||
Net unrealized appreciation on investments | 12,995,405 | |||
NET ASSETS | $ | 54,435,796 |
See accompanying notes to financial statements.
LARGE CAP VALUE FUND | 11 |
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2012 | ||||
INVESTMENT INCOME | ||||
Dividends (net of foreign tax withheld of $1,568) | $ | 1,330,333 | ||
Interest | 1,406 | |||
TOTAL INVESTMENT INCOME | 1,331,739 | |||
EXPENSES | ||||
Investment Advisory fees (Note 3) | 523,397 | |||
Distribution fees (Note 3) | 161,875 | |||
Accounting and Administration fees | 76,383 | |||
Auditing fees | 17,100 | |||
Chief Compliance Officer salary (Note 3) | 2,597 | |||
Custodian fees | 14,222 | |||
Directors’ fees | 5,200 | |||
Insurance expense | 15,757 | |||
Legal fees | 7,341 | |||
Printing expense | 37,842 | |||
Registration fees | 10,760 | |||
Transfer Agent fees | 133,825 | |||
TOTAL EXPENSES | 1,006,299 | |||
NET EXPENSES | 1,006,299 | |||
NET INVESTMENT INCOME | 325,440 | |||
REALIZED AND UNREALIZED GAIN ON | ||||
Net realized gain from investment transactions | 1,816,770 | |||
Net realized loss on foreign currency transactions | — | |||
Net change in unrealized appreciation/depreciation of investments | 3,621,127 | |||
Net realized and unrealized gain on investments | 5,437,897 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 5,763,337 |
See accompanying notes to financial statements.
12 | SPIRIT OF AMERICA |
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 2012 | For the Year Ended December 31, 2011 | |||||||
OPERATIONS |
| |||||||
Net investment income | $ | 325,440 | $ | 146,290 | ||||
Net realized gain on investment transactions | 1,816,770 | 186,059 | ||||||
Net change in unrealized appreciation/depreciation of investments | 3,621,127 | (673,550 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 5,763,337 | (341,201 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS |
| |||||||
Distributions from net investments income | (333,127 | ) | (183,200 | ) | ||||
Total distributions to shareholders | (333,127 | ) | (183,200 | ) | ||||
CAPITAL SHARE TRANSACTIONS (Dollar Activity) |
| |||||||
Shares sold | 10,622,882 | 10,670,855 | ||||||
Shares issued from reinvestment of distributions | 321,128 | 176,385 | ||||||
Shares redeemed | (11,614,521 | ) | (19,007,600 | ) | ||||
Decrease in net assets derived from capital share transactions | (670,511 | ) | (8,160,360 | ) | ||||
Total increase (decrease) in net assets | 4,759,699 | (8,684,761 | ) | |||||
NET ASSETS |
| |||||||
Beginning of period | 49,676,097 | 58,360,858 | ||||||
End of period | $ | 54,435,796 | $ | 49,676,097 | ||||
Accumulated undistributed net investment income (loss) | $ | (900 | ) | $ | (1,156 | ) | ||
Transactions in capital stock were: |
| |||||||
Shares Sold | 760,214 | 820,602 | ||||||
Shares issued from reinvestment of distributions | 22,435 | 13,727 | ||||||
Shares redeemed | (832,327 | ) | (1,498,044 | ) | ||||
Decrease in shares outstanding | (49,678 | ) | (663,715 | ) |
See accompanying notes to financial statements.
LARGE CAP VALUE FUND | 13 |
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period presented.
Year Ended December 31, 2012 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | Year Ended December 31, 2009 | Year Ended December 31, 2008 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.78 | $ | 12.82 | $ | 11.55 | $ | 9.83 | $ | 14.29 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.09 | 0.03 | 0.00 | 2 | 0.07 | 0.07 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.40 | (0.02 | ) | 1.28 | 1.72 | (4.46 | ) | |||||||||||||
Total income (loss) from investment operations | 1.49 | 0.01 | 1.28 | 1.79 | (4.39 | ) | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.09 | ) | (0.05 | ) | (0.01 | ) | (0.07 | ) | (0.07 | ) | ||||||||||
Distributions from capital gains | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | )² | ||||||||||
Total distributions | (0.09 | ) | (0.05 | ) | (0.01 | ) | (0.07 | ) | (0.07 | ) | ||||||||||
Net asset value, end of period | $ | 14.18 | $ | 12.78 | $ | 12.82 | $ | 11.55 | $ | 9.83 | ||||||||||
Total Return³ | 11.63 | % | 0.05 | % | 11.09 | % | 18.32 | % | (30.81 | )% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $ | 54,436 | $ | 49,676 | $ | 58,361 | $ | 55,377 | $ | 44,416 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense reimbursement or recapture | 1.86 | % | 1.89 | % | 1.91 | % | 2.06 | % | 2.03 | % | ||||||||||
After expense reimbursement or recapture | 1.86 | % | 1.96 | % | 1.97 | % | 1.97 | % | 1.97 | % | ||||||||||
Ratio of net investment income to average net assets | 0.60 | % | 0.26 | % | (0.03 | )% | 0.70 | % | 0.56 | % | ||||||||||
Portfolio turnover | 11.94 | % | 19.04 | % | 44.50 | % | 50.57 | % | 44.76 | % |
1 Calculated based on the average number of shares outstanding during the period.
2 Amount represents less than $0.01 per share.
3 Calculation does not reflect sales load.
See accompanying notes which are an integral part of the financial statements.
14 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS | DECEMBER 31, 2012 |
Note 1 – Significant Accounting Policies
Spirit of America Large Cap 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 Fund seeks capital appreciation with a secondary objective of current income by investing in equity securities in the large cap value segment of the U.S. equity 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 (“NAV”) per share for the Fund are calculated as of the close of regular trading on the New York Stock Exchange (“NYSE”), currently 4:00 p.m., Eastern Time on each day the NYSE is open for trading. 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 (the “Board”) 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.
B. Fair Value Measurements: Various inputs are used in determining the fair value of investments which are as follows:
• Level 1 – | Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access at the measurement date | |
• Level 2 – | Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data | |
• Level 3 – | Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
LARGE CAP VALUE FUND | 15 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
The summary of inputs used to value the Fund’s net assets as of December 31, 2012 is as follows:
Large Cap Value Fund
Valuation Inputs | ||||
Level 1 – Quoted Prices * | $ | 54,377,502 | ||
Level 2 – Other Significant Observable Inputs | — | |||
Level 3 – Significant Unobservable Inputs | — | |||
|
| |||
Total Market Value of Investments | $ | 54,377,502 | ||
|
|
* Industries as defined in the Schedule of Investments
During the year ended December 31, 2012, the Fund recognized no transfers to/from Level 1 or Level 2.
In December 2011, FASB issued ASU No. 2011-11 related to disclosures about offsetting assets and liabilities. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Management is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.
C. 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.
D. Option Contracts: The Fund may purchase and write call options to increase or decrease its exposure to underlying securities
equity risk. An option contract gives the buyer the right, but not the obligation, to buy (call) or sell (put) an underlying item at a fixed exercise price on a certain date or during a specified period. The cost of securities acquired through the exercise of a call option is increased by the premiums paid. The proceeds from securities sold through the exercise of a purchased put option are decreased by the premiums paid. Investments in options contracts requires the Fund to fair value or mark-to market the options on a daily basis, which reflects the change in the market value of the contracts at the close of each day’s trading. The cost of purchased options that expire unexercised are treated by the Fund, on expiration date, as realized losses on investments.
When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund, on the expiration date, as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has
16 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. In purchasing and writing options, the Fund bears the market risk of an unfavorable change in the price of the underlying security or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Fund purchasing a security at a price different from the current market value. The Fund may execute transactions in both listed and over-the-counter options. Listed options involve minimal counterparty risk since listed options are guaranteed against default by the exchange on which they trade. Transactions in certain over-the-counter options may expose the Fund to the risk of default by the counterparty to the transaction. In the event of default by the counterparty to the over-the-counter option transaction, the Fund’s maximum amount of loss is the premium paid (as purchaser) or the unrealized loss of the contract (as writer).
E. 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.
F. 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.
G. Distributions to Shareholders: The Fund intends to distribute substantially all of its net investment income and capital gains to shareholders each year. Normally, income distributions will be paid quarterly. Capital gains, if any, will be distributed annually in December, but may be distributed more frequently if deemed advisable by the Board. All such distributions are taxable to the shareholders whether received in cash or reinvested in shares. A portion of the distributions paid to the Fund and subsequently distributed to shareholders may be characterized as a return of capital, long-term capital gain or short-term capital gain. The Fund has made certain investments in real estate investment trusts (“REITs”) which pay distributions to their shareholders based upon available funds from operations. It is quite common for these distributions to exceed the REIT’s taxable earnings and profits resulting in the excess portion of such distributions being designated as a return of capital or long-term capital gain. The Fund intends to include the gross distributions 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 re-characterized. The final determination of the amount of the Fund’s return of capital distribution for the period will be made after the end of each calendar year.
Note 2 – Purchases and Sales of Securities
Purchases and proceeds from the sales of securities for the year ended December 31, 2012, excluding short-term investments, were $6,274,099 and $8,732,303, respectively.
Note 3 – Investment Management Fee and Other Transactions with Affiliates
Spirit of America Management Corp. (the “Adviser”) has been retained to act as the Company’s investment adviser pursuant to an Investment Advisory Agreement (the “Advisory Agreement”). The Adviser was
LARGE CAP VALUE FUND | 17 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
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 the Adviser a monthly fee of 1/12 of 0.97% of the Fund’s average daily net assets. Investment advisory fees for the year ended December 31, 2012 were $523,397.
The Adviser has contractually agreed to waive advisory fees and/or reimburse expenses so that the total operating expenses will not exceed 1.97% of the average daily net assets of the Fund through April 30, 2013. For the year ended December 31, 2012, there were no advisory fees reimbursed to the Fund.
Any amounts waived or reimbursed by the Adviser are subject to reimbursement by the Fund within the following three years, provided the Fund is able to make such reimbursement and remain in compliance with the expense limitation as stated above. For the year ended December 31, 2012, the Fund did not reimburse the Adviser. There is no balance of recoverable expenses to the adviser at December 31, 2012.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 (the “Plan”). The Plan permits the Fund to pay David Lerner Associates, Inc. (the “Distributor”) a monthly fee of 1/12 of 0.30% of the Funds average daily net assets for the Distributor��s services
and expenses in distributing shares of the Fund and providing personal services and/or maintaining shareholder accounts. For the year ended December 31, 2012, fees paid to the Distributor under the Plan were $161,875.
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 year ended December 31, 2012, sales charges received by the Distributor were $598,973. A contingent deferred sales charge (“CDSC”) of 1.00% may be imposed on redemptions of $1 million or more made within one year of purchase.
Certain Officers and Directors of the Company are “affiliated persons”, as that term is defined in the 1940 Act, of the Adviser or the Distributor. Each Director of the Company, who is not an affiliated person of the Adviser or Distributor, receives a quarterly retainer of $3,500, $1,000 for each Board meeting attended, and $500 for each committee meeting attended plus reimbursement for certain travel and other out-of-pocket expenses incurred in connection with attending Board meetings. The Company does not compensate the Officers for the services they provide. There are no Directors’ fees paid to affiliated Directors of the Company. For the year ended December 31, 2012, the Fund was allocated $2,597 of the Chief Compliance Officer’s salary.
Note 4 – Federal Income Taxes
The tax character of distributions paid for the years ended December 31, 2012 and 2011 were as follows:
Taxable Distributions
Ordinary Income | Net Long-Term Capital Gains | Total Taxable Distributions | ||||||||||
12/31/2012 | $ | 333,127 | $ | 0 | $ | 333,127 | ||||||
12/31/2011 | $ | 183,200 | $ | 0 | $ | 183,200 | ||||||
18 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Distribution classifications may differ from the Statements of Changes in Net Assets as a result of the treatment of short-term capital gains as ordinary income for tax purposes.
At December 31, 2012, the components of accumulated distributable earnings for the Fund on a tax basis were as follows:
Capital Loss Carryforward | $ | (4,568,160 | ) | |
Unrealized appreciation | 12,789,847 | |||
|
| |||
Total Distributable Earnings | $ | 8,221,687 | ||
|
| |||
At December 31, 2012, the Fund had net capital loss carryforwards for federal income tax purposes of $4,568,160, which $654,518, $3,065,485 and $848,157 are available to reduce future required distributions of net capital gains to shareholders through 2016, 2017, and 2018, respectively.
For the year ended December 31, 2012, the Fund utilized capital loss carryforwards of $1,809,811.
At December 31, 2012, the Fund had no Deferred Post-October Losses.
Management has analyzed the Fund’s tax positions taken on federal income tax returns for the four year period ended December 31, 2012, and has concluded that no provision for federal income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 5 – Other Matters
On May 27, 2011, the Financial Industry Regulatory Authority (“FINRA”) filed a complaint against David Lerner Associates, Inc. (“DLA”), the Funds’ principal underwriter and distributor, related to its sales
practices in connection with its role as managing dealer of an unaffiliated Real Estate Investment Trust offering, Apple REIT Ten, Inc. (“Apple REIT”). In June 2011, several class action complaints were filed against DLA, Apple REIT entities and certain individuals, also in connection with the sale of various Apple REIT securities. In January 2012, FINRA amended its complaint to include allegations of false and misleading communications with the public in connection with certain correspondence with customers and investment seminars; and added David Lerner as an individual respondent. Neither the Company nor any of the Funds are a party to any of the above listed investigations or actions.
On May 7, 2010, each of William Mason, the Portfolio Manager for the Income Fund and DLA, the Funds’ principal underwriter and distributor, received a Notice of Complaint from the Department of Enforcement of FINRA dated May 7, 2010, relating to Mr. Mason’s activities as head of the fixed income trading department of DLA and DLA’s activities as a municipal securities and collateralized mortgage obligations dealer. The Complaint alleges that each of Mr. Mason and DLA had violated certain NASD and Municipal Securities Rule Making Board fair pricing rules relating to the period January 1, 2005 through January 31, 2007. On April 4, 2012, a FINRA hearing panel issued a decision in this matter and assessed monetary fines and other sanctions against DLA and Mr. Mason, including a suspension of Mr. Mason from association with a FINRA member firm for six (6) months. Both DLA and Mr. Mason appealed the decision.
On October 22, 2012, DLA, Mr. Lerner and Mr. Mason settled all of the above listed FINRA investigations and actions involving Apple REIT securities and municipal bond and collateralized mortgage obligation pricing. In connection with the settlement, DLA, Mr. Lerner and Mr. Mason each agreed,
LARGE CAP VALUE FUND | 19 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
among other things, to pay a fine; and, Mr. Lerner and Mr. Mason each agreed to temporary suspensions from affiliation with DLA. The fines and suspension do not involve the Company, any of the Funds, or the adviser to the Funds. While there can be no assurance that the fines and/or suspensions will not: a) materially and adversely impact DLA’s ability to act as the Fund’s principal underwriter and distributor; and/or b) materially and adversely affect Mr. Mason’s ability to act as the Portfolio Manager for the Income Fund, it is not considered likely at this time that such material and adverse effects would occur.
Note 6 – Reclassification
Permanent differences, incurred during the year ended December 31, 2012, resulting from differences in book and tax accounting have been reclassified at year end to undistributed net investment income, accumulated realized gain (loss) and paid-in-capital as follows:
Increase (Decrease) | ||||
Paid-In-Capital | $ | (7,945 | ) | |
Undistributed Net Investment Income | 7,943 | |||
Undistributed Realized Gains | 2 | |||
Note 7 – Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund and has determined that there were no events that require recognition or disclosure in the financial statements.
Tax Information (Unaudited)
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
Qualified Dividend Income
For the year ended December 31, 2012, 100% of the distributions 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 year ended December 31, 2012, 43.87% of the ordinary income distribution qualifies for the Dividends Received Deduction available to corporations.
Qualified Interest Income
For the year ended December 31, 2012, 1.43% of the distributions paid by the Fund from ordinary income are designated as qualified interest income pursuant to The American Jobs Creation Act of 2004.
20 | SPIRIT OF AMERICA |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Spirit of America Large Cap Value Fund 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 (the “Fund”), a series of shares of beneficial interest in Spirit of America Investment Fund, Inc., including the schedule of investments as of December 31, 2012, 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 its 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements 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 December 31, 2012, 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
February 26, 2013
LARGE CAP VALUE FUND | 21 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT | DECEMBER 31, 2012 |
Approval of the Investment Advisory Agreement (Unaudited)
The Investment Company Act of 1940, as amended (the “1940 Act”), requires that the continuance of a registered management investment company’s investment advisory agreement be approved annually by both the board of directors and also by a majority of its directors who are not parties to the investment advisory agreement or “interested persons” (as defined by the 1940 Act) of any such party (the “Independent Directors”). At a meeting held on November 28, 2012, the Board of Directors (the “Board” or “Directors”) of Spirit of America Investment Fund, Inc. (the “Company”) met in person (the “Meeting”) to, among other things, review and consider the approval of the Investment Advisory Agreement (the “Advisory Agreement”) by and between Spirit of America Management Corp. (the “Adviser”) and the Company, on behalf of Spirit of America Real Estate Income and Growth Fund, Spirit of America Large Cap Value Fund, Spirit of America High Yield Tax Free Bond Fund and Spirit of America Income Fund (collectively, the “Funds”). At the Meeting, the Board, including the Independent Directors, voting separately, approved the Advisory Agreement after determining that the Adviser’s compensation, pursuant to the terms of the Advisory Agreement, would be fair and reasonable and concluded that the approval of the Advisory Agreement would be in the best interest of the Funds’ shareholders. The Board’s approval was based on consideration and evaluation of the information and material provided to the Board and a variety of specific factors discussed at the Meeting and at prior meetings of the Board, including the factors described below.
As part of the approval process and oversight of the advisory relationship, counsel to the Independent Directors (“Independent Counsel”) sent an information request letter to the Adviser seeking certain relevant information and the Directors received, for
their review in advance of the Meeting, the Adviser’s responses. In addition, the Directors were provided with the opportunity to request any additional materials. In advance of the Meeting, the Board, including the Independent Directors, requested and received materials provided by the Adviser and Independent Counsel, including, among other things, the following: (i) Independent Counsel’s 15(c) questionnaire and the responses provided by the Adviser; (ii) information on the investment performance of the Funds and relevant indices over various time periods; (iii) sales and redemption data with respect to the Funds; (iv) the general investment outlook in the markets in which the Funds invest; (v) arrangements with respect to the distribution of the Funds’ shares; (vi) the procedures employed to determine the value of each Fund’s assets; (vii) the allocation of the Funds’ brokerage, the record of compliance with the Funds’ investment policies and restrictions and with the Funds’ Code of Ethics and the structure and responsibilities of the Adviser’s compliance departments; (viii) the profitability of the Funds’ investment advisory business to the Adviser taking into account both advisory fees and any other potential direct or indirect benefits; (ix) information comparing the overall fees and specifically the fees under the Advisory Agreement with the fees paid by other similar mutual funds; (x) the Form ADV of the Adviser; and (xi) information comparing the performance of the Funds with the performance of other similar mutual funds; and (xii) a memorandum from Independent Counsel regarding the responsibilities of the Independent Directors related to the approval of the Investment Advisory Agreement.
In evaluating the Advisory Agreement, the Board, including the Independent Directors, requested, reviewed and considered materials
22 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
furnished by the Adviser and questioned personnel of the Adviser, including the Funds’ portfolio managers, regarding, among other things, the personnel, each Fund’s performance, and operations and financial condition of the Adviser. Among other information, the Board, including the Independent Directors, requested and was provided information regarding:.
• | The investment performance of each Fund over various time periods both by itself and in relation to relevant indices; |
• | The fees charged by the Adviser for investment advisory services, as well as the compensation received by the Adviser and its affiliates; |
• | The waivers of fees and reimbursements of expenses at times by the Adviser under the Operating Expenses Agreement;. |
• | The investment performance, fees and total expenses of mutual funds with similar objectives and strategies managed by other investment advisers; |
• | The investment management staffing and the experience of the investment advisory, administrative and other personnel providing services to the Funds and the historical quality of the services provided by the Adviser; and |
• | The profitability to the Adviser of managing and its affiliate distributing the Funds and the methodology in allocating expenses to the management of the Funds. |
At the Meeting, Independent Counsel also referred the Board to the “Gartenberg Memorandum” which had been distributed to each Director in advance of the Meeting, outlining the legal standards applicable to the Independent Directors under the 1940 Act with respect to the approval of the continuation of the investment advisory
agreements on behalf of each of the Funds. In addition, the Independent Directors met at length with Independent Counsel in executive session during the reconvening of the Meeting, outside the presence of Company management, to discuss the materials provided by the Adviser and to consider any additional questions they had of the Adviser.
The following is a summary of the Board’s discussion and views regarding the factors it considered in evaluating the continuation of the Advisory Agreement:
1. Nature, Extent, and Quality of Services.
The Board, including the Independent Directors, considered the nature, quality and extent of advisory, administrative and shareholder services performed by the Adviser, including: regulatory filings and disclosure to shareholders, general oversight of the service providers, coordination of Fund marketing initiatives, review of Fund legal issues, assisting the Board, including the Independent Directors, in their capacity as directors and other services. The Board, including the Independent Directors, noted the increased responsibilities of the Adviser in response to an increasingly regulated industry. The Board, including the Independent Directors, concluded that the services are extensive in nature, that the Adviser delivered a high level of service to each Fund and that the Adviser is positioned to continue providing such quality of service in the future.
2. Investment Performance of the Funds and the Adviser.
The Board, including the Independent Directors, considered short-term and long-term investment performance for the Funds over various periods of time as compared to both relevant indices and the performance of such Funds’ peer groups, and concluded that each Fund was delivering reasonable
LARGE CAP VALUE FUND | 23 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
performance results, especially over the long-term, consistent with the investment strategies that the Funds pursue.
3. Costs of Services and Profits Realized by the Adviser.
a. The Board, including the Independent Directors, considered the information provided by Lipper Inc. regarding each Fund’s management fee rate and overall expense ratio relative to industry averages for the Fund’s peer group category and the advisory fees charged by the Adviser to other accounts. The Board viewed favorably the current and historic willingness of the Adviser to limit the overall expense ratios of the Funds. Recognizing that the fees paid by the Funds were higher than the medians in their peer groups, the Board nonetheless noted that the fees were still close to the median and that several peer funds had higher fees.
b. Profitability and Costs of Services to the Adviser. The Board, including the Independent Directors, considered estimates of the Adviser’s profitability and costs attributable to the Funds. The Board recognized that increased fixed costs, particularly legal and audit fees in response to increasing regulations, have a greater impact on smaller fund families, such as the Funds, than on larger fund complexes. Given this, the Board recognized that the Funds’ overall expenses compare unfavorably to some funds identified as peers. The Board also considered whether the amount of the Adviser’s profit is a fair profit for the management of the Funds and noted that the Adviser has devoted a large amount of its resources into the Funds over the years. The Board, including the Independent Directors, concluded that the Adviser’s profitability was at a fair and acceptable level, particularly in light of the quality of the services being provided to the Funds, and bore a reasonable relationship to the services rendered.
4. Extent of Economies of Scale as the Funds Grow.
The Board, including the Independent Directors, considered whether there have been economies of scale with respect to the management of the Funds and whether the Funds have appropriately benefited from any economies of scale. Given the size of each Fund, the Board did not believe that significant (if any) economies of scale have been achieved at this time.
5. Whether Fee Levels Reflect Economies of Scale.
The Board took into consideration that the Adviser does not currently offer breakpoints in its fees that would otherwise allow investors to benefit directly from economies of scale in the form of lower fees as fund assets grow. However, the Board, including the Independent Directors, did consider enhancements in personnel and services provided to the Funds by the Adviser, without an increase in fees. The Board also noted that few of the Funds’ peers offered breakpoints despite having significantly more assets under management.
6. Other Relevant Considerations.
a. Personnel and Methods. The Board, including the Independent Directors, reviewed the Adviser’s Form ADV and questioned the Adviser regarding the size, education and experience of the staff of the Adviser, its fundamental research capabilities, approach to recruiting, training and retaining portfolio managers and other research and management personnel, and concluded that these enable them to provide a high level of service to the Funds. The Board also considered the history, reputation, qualifications and background of the Adviser as well as the qualifications of its personnel.
24 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
b. The Board, including the Independent Directors, also considered the character and amount of other direct and incidental benefits received by the Adviser and its affiliates from their association with the Funds, including the benefits received by the affiliated distributor. The Board concluded that potential “fall-out” benefits that the Adviser and its affiliates may receive, such as greater name recognition or increased ability to obtain research services (although the Board noted that the Adviser currently does not use soft dollars to obtain research services), appear to be reasonable, and may in some cases benefit the Funds.
Conclusions. The Board, including the Independent Directors, did not identify any factor as all-important or all-controlling and
instead considered the above listed and other factors collectively in light of the Funds’ surrounding circumstances. Each Independent Director gave the weight to each factor that he deemed appropriate in his own judgment. The Independent Directors considered the renewal of the Advisory Agreement on a Fund-by-Fund basis and determined that the renewal of the Advisory Agreement was in the best interests of the shareholders of each Fund. The Independent Directors also determined that the fees charged to each Fund for the services provided were reasonable. Therefore, the Board, including the Independent Directors, determined that continuance of the Advisory Agreement was in the best interests of each Fund.
LARGE CAP VALUE FUND | 25 |
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, (Age) and Address1 Position(s) with the Company | Term of Office2 and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director | ||||
INTERESTED DIRECTORS | ||||||||
David Lerner3 (76) Director, Chairman of the Board, President | Since 1998 | President and founder, David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor; and President, Spirit of America Management Corp., the Company’s investment adviser. | 4 | Director of Spirit of America Management Corp., the Company’s investment adviser; Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
Daniel Lerner3 (51) Director | Since 1998 | Senior Vice President, Investment Counselor with David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor, since September 2000. | 4 | Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
INDEPENDENT DIRECTORS | ||||||||
Allen Kaufman (76) Director | Since 1998 | President and Chief Executive Officer of K.G.K. Agency, Inc., a property and casualty insurance agency, since 1963.4 | 4 | Director of K.G.K. Agency, Inc., a property and casualty insurance agency. | ||||
Stanley S. Thune (76) Lead Director | Since 1998 | President and Chief Executive Officer, Freight Management Systems, Inc., a third party logistics management company, since 1994; private investor. | 4 | Director of Freight Management Systems, Inc. | ||||
Richard Weinberger (76) Director | Since 2005 | Of Counsel to Ballon Stoll Bader & Nadler, P.C., a mid-sized law firm, since January 2005 to March 2011; Shareholder, Ballon Stoll Bader & Nadler, P.C., January 2000 to December 2004. | 4 | None. | ||||
OFFICERS | ||||||||
David Lerner President (see biography above) | ||||||||
Alan P. Chodosh (59) Treasurer and Secretary | Since 2003 (Treasurer) Since 2005 (Secretary) | Executive Vice President and Chief Financial Officer of David Lerner Associates, Inc. since June 1999. | N/A | N/A | ||||
Joseph Pickard (52) Chief Compliance Officer | Since 2007 | Chief Compliance Officer of Spirit of America Investment Fund, Inc. and Spirit of America Management Corp. since July 2007; Counsel to the Interested Directors of Spirit of America Investment Fund, Inc. since July 2002; General Counsel of David Lerner Associates, Inc. since July 2002. | N/A | N/A |
1 | All addresses are in c/o Spirit of America Investment Fund, Inc., 477 Jericho Turnpike, Syosset, New York 11791. |
2 | Each Director serves for an indefinite term, until his successor is elected. |
3 | David Lerner is an “interested” Director, as defined in the 1940 Act, by reason of his positions with the Adviser, and Daniel Lerner is an “interested” Director by reason of his position with the Distributor. Daniel Lerner is the son of David Lerner. |
4 | K.G.K. Agency, Inc. provides insurance to David Lerner Associates, Inc. and affiliated entities. However, the Board has determined that Mr. Kaufman is not an “interested” Director because the insurance services are less than $120,000 in value. |
26 | SPIRIT OF AMERICA |
Proxy Voting Information
The Company’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 Company’s proxy voting record relating to portfolio securities held during the 12-month period ended December 31, 2012, are available (i) without charge, upon request, by calling (516) 390-5565; and (ii) on the SEC’s website at http://www.sec.gov.
Information on Form N-Q
The Company will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Company’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-0030.
Investment Adviser
Spirit of America Management Corp.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Distributor
David Lerner Associates, Inc.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Shareholder Services
BNY Mellon Investment Servicing (U.S.) Inc.
760 Moore Road
King of Prussia, PA 19406
Custodian
Huntington National Bank
41 South High Street
Columbus, OH 43215
Independent Registered Public Accounting Firm
Tait Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
Counsel
Blank Rome LLP
405 Lexington Avenue
New York, NY 10174
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, risks, policies, expenses, and other information.
©Copyright 2012 Spirit of America SOALC-AR12
ANNUAL REPORT
DECEMBER 31, 2012
MESSAGE TO OUR SHAREHOLDERS
Dear Shareholder,
We are very pleased to provide the 2012 Annual report for The Spirit of America High Yield Tax Free Bond Fund, (“the Fund”). We look forward to the continued inflows and further development of the Fund.
Our many years of experience in the municipal bond market have helped us to pursue a balance between yield and risk. Our goal is to continue seeking high current income that is exempt from federal income tax, while employing a relatively conservative approach to investing in the high yield sector of the municipal market. Although the mandate of the Fund allows it to invest in lower rated securities, at this time, the focus will continue to be investing in bonds which are investment grade.
We have been proud to watch the number of investors grow. We appreciate your support of our fund and look forward to your future investment in the Spirit of America High Yield Tax Free Bond Fund.
Thank you for being a part of the Spirit of America Family of Funds.
Sincerely,
![]() | ![]() | ![]() | ![]() | |||
David Lerner | Douglas Revello | |||||
President | Portfolio Manager |
HIGH YIELD TAX FREE BOND FUND | 1 |
MANAGEMENT DISCUSSION
Economic Summary
Chronic financial woes continued to plague the European Union. The European Central Bank (“ECB”) forecasted economic weakness extending into 2013. Clearly, there has been no short term fix to the economic problems in the eurozone.
In the United States, the Federal Reserve announced in September, that it would begin buying $40 billion in agency mortgage-backed securities. It also extended its so-called “Operation Twist” program to the end of the year, whereby it sells its short-term bonds for longer-term bonds in an effort to drive down interest rates and stimulate the economy.
In addition, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
The economic recovery, particularly job creation, was in limbo as a result of the political gridlock in Washington and the uncertainty of fiscal policies. Private sector investors and corporations held out on making any employment or investment decisions to see how Congress will solve their budgetary issues and differences and what it will mean for them going forward. The large US deficit is now over $16 trillion, and many question whether last minute tax and spending policies will do anything to correct the problem. Washington is faced with difficult decisions about costly entitlement programs such as Medicare and Social Security.
Market Commentary
High yield municipal bonds are typically issued by government entities to finance economic or industrial development
projects, as well as, housing, healthcare and environmental projects. Other high yield municipal bonds are issued to finance such things as airport terminals, charter schools, and projects related to utilities. In addition, a large number of bonds have been issued by local governments in anticipation of revenues owed by the tobacco industry. The interest payments are usually covered by a special tax or revenue from the project, and the bonds are often backed by hard assets or mortgage income associated with the project. High yield municipals may also be issued to finance private projects that benefit the community, such as waste remediation or public utilities. In those cases the debt is usually backed and paid for by a corporation. As with the broader municipal market, high yield municipal bonds provide income that is exempt from federal, and sometimes state, income taxes.
The economic health of 27 U.S. states showed signs of improvement as a four-year high in industrial production led to gains in the Rust Belt region, where manufacturing accounts for a larger share of jobs. Michigan, Ohio, Indiana and Illinois posted four of the eight biggest gains for the three months ending in September, compared to the previous quarter, according to the Bloomberg Economic Evaluation of States (BEES) Index.
Additionally, a recent report from the National Conference of State Legislatures (NCSL) indicated that most states are reporting they expect stable fiscal situations through the first few months of fiscal 2013 (beginning July 1, 2012). The NCSL, a bipartisan organization serving state legislators, released the “State Budget Updates: Fall 2012” based on a survey of state legislative officers from all 50 states and the District of Columbia.
2 | SPIRIT OF AMERICA |
MANAGEMENT DISCUSSION (CONT.)
The majority of states reported either on-target or above-target tax collections of the three major taxes, personal income, sales and corporate income. Looking ahead, 33 states and Washington, D.C. all have stable outlooks for revenue collections for the remainder of fiscal 2013, meaning they expect to meet budget projections and 6 states have optimistic outlooks about future revenues, meaning they believe collections may exceed projections.
Municipal bonds performed very well in 2012. The 30-Year “AAA” Municipal Market Data (MMD) yield rallied from 3.57% to 2.83% due to strong demand. The expected 2013 tax increase led to strong investor demand for municipal bonds in 2012. According to the Bond Buyer, The Municipal Bond Index dropped from a 4.60% average yield to par call on 1/3/2012 to a 3.87% on 12/31/2012.
Demand for municipal securities should remain strong as higher taxes on income, capital gains and dividends for households making more than $450,000 will take effect in 2013.
The question remains; will 2013 be a year of healing for the global economy? Spirit of America will be carefully monitoring the economy for clarification on the answer to this question.
Fund Summary
The Spirit of America High Yield Tax Free Bond Fund’s (SOAMX), (“the Fund”), objective is to maintain current income that is exempt from federal income tax, including the alternative minimum tax (“AMT”). The emphasis of the Fund is in the High Yield section of the municipal market.
As a High Yield Bond Fund, the mandate allows the Fund to invest in lower rated
securities; however, we have kept our focus on investing in bonds in the “Baa3”/“BBB-” range and higher. Our plan is to continue with this relatively conservative approach to investing in the high yield municipal market.
In keeping with this philosophy, the Fund has been able to maintain attractive yields without venturing into the speculative, below investment grade, segment of the high yield municipal market. Currently, as of December 31, 2012, 98.73% of the portfolio is above investment grade, with 81.18% rated “A” or better. The average rating of holdings in the Fund is A1/A+.
One of the Fund’s goals has been to diversify with respect to geographic location and sector. As of December 31, 2012, the Fund consists of 445 different issues varied across 48 states, 2 territories and the District of Columbia. The holdings range throughout various sectors, including areas such as: general obligations, healthcare, education, industrial development and public improvement. Also, while it certainly has not been a primary goal of the Fund, we have been able to maintain a percentage of bonds in states and territories which have a state tax exemption in New York, New Jersey and Connecticut, where a majority of our clients reside.
Return Summary
The Fund continues to grow at a steady and healthy pace. The Fund’s Net Asset Value (NAV) went from $9.64 to $10.08 during 2012. The inflows for the Fund were almost $67 million for 2012. Since inception in March of 2008, the Fund has grown to over $156 million in net assets with 5,505 shareholder accounts. We expect continued growth in assets under management in the future.
HIGH YIELD TAX FREE BOND FUND | 3 |
MANAGEMENT DISCUSSION (CONT.)
It is clear that municipal bonds will continue to play an integral role for both issuers and investors alike. We feel there is tremendous value in the municipal bond market; however, it is important to know the municipal market. Here at Spirit of America each and every credit goes through vigorous credit analysis.
Municipal bonds have historically been relatively conservative, enduring investments. After all, much of this country’s infrastructure was built with Municipal Bonds.
We remain cautious in our approach to the municipal market in that each position is carefully analyzed. We now more than ever stand by our philosophy of buying high quality credits in municipalities with strong fundamentals.
Our plan is to proceed with the same strategy that we have utilized since the Fund’s inception. We will continue to seek out municipal bonds that provide a balance between credit risk and the potential to offer high current income and consistently attractive yields.
Ratings are provided by Moody’s Investor Services and Standard & Poor’s. The Moody’s ratings in the following ratings explanations are in parenthesis.
AAA (Aaa) - The highest rating assigned by Moody’s and S&P. Capacity to pay interest and repay principal is extremely strong.
AA (Aa) - Debt has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
A - Debt rated “A” has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.
BBB (Baa) - Debt is regarded as having an adequate capacity to pay interest and repay principal. These ratings by Moody’s and S&P are the “cut-off” for a bond to be considered investment grade. Whereas debt normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal in this category than in higher-rated categories.
BB (Bb), B, CCC (Ccc), CC (Cc), C - Debt rated in these categories is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. “BB” indicates the least degree of speculation and “C” the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or market exposure to adverse conditions and are not considered to be investment grade.
D - Debt rated “D” is in payment default. This rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period.
Ratings are subject to change.
Ratings apply to the bonds in the portfolio. They do not remove market risk associated with the fund.
Ratings are based on Moody’s and S&P, as applicable. Credit ratings are based largely on the rating agency’s investment analysis at the time of rating and the rating assigned to any particular security is not necessarily a reflection of the issuer’s current financial condition. The rating assigned to a security by a rating agency does not necessarily reflect its assessment of the volatility of a security’s market value or of the liquidity of an investment in the security. If securities are rated differently by the rating agencies, the higher of the two rating is applied thus improving the overall evaluation of the portfolio.
4 | SPIRIT OF AMERICA |
MANAGEMENT DISCUSSION (CONT.)
Summary of Portfolio Holdings
(Unaudited)
The Securities and Exchange Commission (“SEC”) has 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.
Spirit of America High Yield Tax Free Bond Fund
December 31, 2012
New York | 25.60 | % | $ | 39,695,015 | ||||
Puerto Rico | 12.40 | 19,231,690 | ||||||
New Jersey | 6.97 | 10,812,675 | ||||||
Connecticut | 5.92 | 9,178,642 | ||||||
Texas | 5.10 | 7,913,468 | ||||||
Florida | 4.91 | 7,607,586 | ||||||
California | 4.70 | 7,283,336 | ||||||
Illinois | 4.47 | 6,923,814 | ||||||
Michigan | 3.21 | 4,981,151 | ||||||
Pennsylvania | 2.49 | 3,857,170 | ||||||
Maryland | 2.17 | 3,358,431 | ||||||
Indiana | 2.00 | 3,106,522 | ||||||
Massachusetts | 1.58 | 2,453,077 | ||||||
Georgia | 1.35 | 2,089,482 | ||||||
Rhode Island | 1.30 | 2,010,625 | ||||||
New Mexico | 1.28 | 1,981,665 | ||||||
Wisconsin | 1.27 | 1,970,996 | ||||||
Ohio | 1.00 | 1,546,474 | ||||||
West Virginia | 0.99 | 1,534,687 | ||||||
Washington | 0.88 | 1,365,610 | ||||||
Louisiana | 0.87 | 1,355,980 | ||||||
Colorado | 0.79 | 1,227,248 | ||||||
Oregon | 0.77 | 1,199,172 | ||||||
Kansas | 0.61 | 950,071 | ||||||
Arizona | 0.60 | 927,551 |
District of Columbia | 0.56 | 869,771 | ||||||
Alabama | 0.53 | 815,333 | ||||||
Maine | 0.46 | 720,825 | ||||||
South Dakota | 0.44 | 683,113 | ||||||
Alaska | 0.42 | 650,651 | ||||||
North Carolina | 0.40 | 619,211 | ||||||
Iowa | 0.39 | 599,997 | ||||||
Missouri | 0.36 | 551,081 | ||||||
Wyoming | 0.33 | 510,405 | ||||||
New Hampshire | 0.24 | 377,093 | ||||||
South Carolina | 0.21 | 318,799 | ||||||
Nebraska | 0.19 | 302,287 | ||||||
Kentucky | 0.19 | 288,970 | ||||||
Montana | 0.18 | 278,820 | ||||||
Mississippi | 0.18 | 272,395 | ||||||
Idaho | 0.17 | 260,785 | ||||||
Oklahoma | 0.17 | 256,153 | ||||||
Vermont | 0.16 | 246,038 | ||||||
Tennessee | 0.15 | 228,388 | ||||||
Virginia | 0.14 | 220,601 | ||||||
Utah | 0.14 | 214,769 | ||||||
Minnesota | 0.14 | 212,618 | ||||||
Nevada | 0.10 | 159,264 | ||||||
Virgin Islands | 0.07 | 109,942 | ||||||
North Dakota | 0.05 | 80,254 | ||||||
Hawaii | 0.03 | 44,712 | ||||||
Money Market | 0.38 | 596,940 | ||||||
Total Investments | 100.00 | % | $ | 155,051,353 |
HIGH YIELD TAX FREE BOND FUND | 5 |
ILLUSTRATION OF INVESTMENT (UNAUDITED)
The graph below compares the increase in value of a $10,000 investment in the Fund with the performance of the Barclays Capital Municipal Bond Index. The values and returns for the Fund include reinvested distributions, and the impact of the maximum sales charge of 4.75% 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.
Average Annual Total Returns
For the Periods Ended December 31, 2012
Shares | ||||
1 Year (with sales charge) | 3.74 | %a | ||
1 Year (without sales charge) | 8.91 | % | ||
Since Inception (with sales charge)b | 4.68 | %a | ||
Since Inception (without sales charge)b | 5.74 | % |
Past performance is not indicative of future results.
a | Reflects a 4.75% front-end sales charge. |
b | Inception date: February 29, 2008. |
Growth of $10,000
(includes one-time 4.75% maximum sales charge and reinvestment of all distributions)
* | Fund commenced operations February 29, 2008. |
** | The Barclays Capital Municpal Bond Index benchmark is based on a start date of February 29, 2008. |
The Barclays Capital Municipal Bond 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.
6 | SPIRIT OF AMERICA |
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE PERIOD JULY 1, 2012 TO DECEMBER 31, 2012
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 the Fund’s gross income, directly reduce the investment return of the Fund.
The 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.
Spirit of America High Yield Tax Free Bond Fund
Beginning 7/1/12 | Ending Account Value 12/31/12 | Expense Ratio(1) | Expenses Paid During Period(2) | |||||||||||||
Actual Fund Return | $ | 1,000.00 | $ | 1,032.30 | 0.90 | % | $ | 4.58 | ||||||||
Hypothetical 5% Return | $ | 1,000.00 | $ | 1,020.63 | 0.90 | % | $ | 4.56 |
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 expenses 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 half-year expenses. |
(2) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the period (184), then divided by 366. |
HIGH YIELD TAX FREE BOND FUND | 7 |
SCHEDULE OF INVESTMENTS | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Municipal Bonds 98.51% | ||||||||
Alabama 0.52% | ||||||||
Cullman County Health Care Authority, Refunding Revenue Bonds, Series A, Callable 02/01/19 @ 100, (OID), 6.75%, 02/01/29 | $ | 100,000 | $ | 108,848 | ||||
University of Alabama, University & College Improvements, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, (OID), 3.50%, 07/01/42 | 750,000 | 706,485 | ||||||
815,333 | ||||||||
Alaska 0.42% | ||||||||
Alaska Housing Finance Corp., Revenue Bonds, Series A, Callable 06/01/21 @ 100, (OID), 4.13%, 12/01/37 | 100,000 | 101,812 | ||||||
Alaska Housing Finance Corp., Revenue Bonds, Series A, Callable 06/01/21 @ 100, (OID), 4.25%, 12/01/40 | 100,000 | 102,054 | ||||||
Northern TOB Securitization Corp., Refunding Revenue Bonds, Series A, Callable 06/01/14 @ 100, (OID), 5.00%, 06/01/32 | 500,000 | 446,785 | ||||||
650,651 | ||||||||
Arizona 0.59% | ||||||||
Arizona Health Facilities Authority, Refunding Revenue Bonds, Series D, Callable 07/01/19 @ 100, (OID), 5.00%, 07/01/28 | 100,000 | 109,799 | ||||||
Pima County Industrial Development Authority, Refunding Revenue Bonds, Series O, Callable 07/01/16 @ 100, 5.00%, 07/01/26 | 745,000 | 703,734 | ||||||
State of Arizona, Public Improvements Revenue Bonds, Series A, Callable 01/01/20 @ 100, (AGM), 5.00%, 07/01/28 | 100,000 | 114,018 | ||||||
927,551 | ||||||||
California 4.65% | ||||||||
Bay Area Toll Authority, Highway Improvements Revenue Bonds, Callable 10/01/20 @ 100, 5.00%, 10/01/27 | 250,000 | 289,162 | ||||||
California Educational Facilities Authority, University & College Improvements Revenue Bonds, Callable 10/01/21 @ 100, (OID), 6.13%, 10/01/30 | 250,000 | 309,667 | ||||||
California State Public Works Board, University & College Improvements Revenue Bonds, Series H, Callable 04/01/22 @ 100, (OID), 4.00%, 04/01/37 | 250,000 | 251,140 | ||||||
City of Los Angeles, Wastewater System Revenue, Refunding Revenue Bonds, Subseries B, Callable 06/01/22 @ 100, (OID), 3.38%, 06/01/29 | 100,000 | 104,725 |
See accompanying notes to financial statements.
8 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
California (cont.) | ||||||||
County of San Bernardino, Refunding Bonds, Certificate Participation, Series A, Callable 08/01/19 @ 100, (OID), 5.25%, 08/01/26 | $ | 50,000 | $ | 54,212 | ||||
County of San Bernardino, Refunding Bonds, Certificate Participation, Series A, Callable 08/01/19 @ 100, (OID), 5.50%, 08/01/22 | 250,000 | 283,210 | ||||||
Golden State Tobacco Securitization Corp., Refunding Revenue Bonds, Series A-1, Callable 06/01/17 @ 100, 5.75%, 06/01/47 | 30,000 | 28,453 | ||||||
Huntington Beach Public Financing Authority, Public Improvements Revenue Bonds, Callable 09/01/21 @ 100, (OID), 4.50%, 09/01/31 | 250,000 | 272,620 | ||||||
State of California, Refunding Bonds, General Obligation Unlimited, Callable 02/01/22 @ 100, 4.00%, 02/01/32 | 500,000 | 525,640 | ||||||
State of California, Refunding Bonds, General Obligation Unlimited, Callable 09/01/22 @ 100, 4.00%, 09/01/37 | 1,200,000 | 1,253,772 | ||||||
State of California, Refunding Bonds, General Obligation Unlimited, Callable 02/01/22 @ 100, 4.38%, 02/01/38 | 500,000 | 535,765 | ||||||
State of California, Port, Airport & Marina Improvements, General Obligation Unlimited, Callable 11/01/20 @ 100, 5.00%, 11/01/25 | 250,000 | 292,032 | ||||||
State of California, Refunding Bonds, General Obligation Unlimited, Callable 10/01/19 @ 100, 5.00%, 10/01/29 | 250,000 | 283,895 | ||||||
State of California, Refunding Bonds, General Obligation Unlimited, Callable 06/01/17 @ 100, 5.00%, 06/01/32 | 500,000 | 551,860 | ||||||
State of California, Refunding Bonds, General Obligation Unlimited, Callable 08/01/18 @ 100, (OID), 5.00%, 08/01/34 | 500,000 | 562,725 | ||||||
State of California, Port, Airport & Marina Improvements, General Obligation Unlimited, Callable 11/01/20 @ 100, (OID), 5.25%, 11/01/30 | 250,000 | 291,235 | ||||||
State of California, Public Improvements, General Obligation Unlimited, Callable 04/01/19 @ 100, 6.00%, 04/01/35 | 500,000 | 600,210 | ||||||
State of California, Public Improvements, General Obligation Unlimited, Callable 04/01/19 @ 100, (OID), 6.00%, 04/01/38 | 100,000 | 119,850 | ||||||
University of California, University & College Improvements, Revenue Bonds, Series A, Callable 05/15/15 @ 101, (BHAC-CR) (MBIA) (OID), 4.50%, 05/15/47 | 475,000 | 491,140 | ||||||
Washington Township Health Care District, Hospital Improvements, General Obligation Unlimited, Series A, Callable 08/01/19 @ 100, (OID), 5.00%, 08/01/20 | 20,000 | 23,357 |
HIGH YIELD TAX FREE BOND FUND | 9 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
California (cont.) | ||||||||
Washington Township Health Care District, Hospital Improvements, General Obligation Unlimited, Series A, Callable 08/01/19 @ 100, (OID), 5.25%, 08/01/28 | $ | 140,000 | $ | 158,666 | ||||
7,283,336 | ||||||||
Colorado 0.78% | ||||||||
Colorado Educational & Cultural Facilities Authority, School Improvements Revenue Bonds, Callable 12/01/18 @ 102, (Moral Obligation) (OID), 7.25%, 12/01/28 | 250,000 | 298,517 | ||||||
Colorado Educational & Cultural Facilities Authority, School Improvements Revenue Bonds, Callable 12/01/18 @ 102, (Moral Obligation) (OID), 7.63%, 12/01/40 | 250,000 | 291,977 | ||||||
Colorado Health Facilities Authority, Refunding Revenue Bonds, Series B, Callable 01/01/20 @ 100, 5.25%, 01/01/30 | 100,000 | 114,299 | ||||||
Montrose Memorial Hospital, Hospital Improvements, Revenue Bonds, Callable 12/01/13 @ 102, (OID), 6.00%, 12/01/33 | 500,000 | 522,455 | ||||||
1,227,248 | ||||||||
Connecticut 5.85% | ||||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Series B-2, Callable 05/15/21 @ 100, (GO OF AUTH), 4.90%, 11/15/36 | 450,000 | 481,833 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Series B-2, Callable 05/15/21 @ 100, (GO OF AUTH), 5.00%, 11/15/41 | 130,000 | 138,776 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Series E-2, Callable 05/15/21 @ 100, (GO OF AUTH) (OID), 4.63%, 11/15/41 | 250,000 | 262,820 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Series F-1, Callable 11/15/21 @ 100, (OID), 3.30%, 11/15/37 | 250,000 | 240,930 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Series G, Callable 05/15/22 @ 100, 3.05%, 05/15/31 | 250,000 | 248,948 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Subseries B-1, Callable 05/15/21 @ 100, (GO OF AUTH), 3.35%, 05/15/28 | 250,000 | 254,938 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Subseries C-1, Callable 05/15/21 @ 100, 3.25%, 11/15/27 | 150,000 | 152,819 |
10 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Connecticut (cont.) | ||||||||
Connecticut Housing Finance Authority, State Single-Family Revenue Bonds, Subseries C-1, Callable 05/15/21 @ 100, 3.50%, 05/15/31 | $ | 250,000 | $ | 255,090 | ||||
Connecticut Housing Finance Authority, State Single-Family Revenue Bonds, Subseries C-1, Callable 05/15/21 @ 100, 3.75%, 11/15/35 | 500,000 | 506,115 | ||||||
Connecticut Housing Finance Authority, State Single-Family Revenue Bonds, Subseries C-1, Callable 05/15/21 @ 100, 3.88%, 11/15/38 | 750,000 | 760,095 | ||||||
Connecticut Housing Finance Authority, State Single-Family Revenue Bonds, Subseries D-1, Callable 05/15/21 @ 100, 4.00%, 11/15/34 | 250,000 | 255,345 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Subseries D-1, Callable 05/15/20 @ 100, (GO OF AUTH), 4.38%, 11/15/31 | 100,000 | 103,464 | ||||||
Connecticut Housing Finance Authority, State Single-Family Revenue Bonds, Subseries D-2, Callable 05/15/21 @ 100, 4.15%, 05/15/42 | 500,000 | 509,505 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Subseries E-1, Callable 05/15/20 @ 100, (GO OF AUTH), 4.88%, 11/15/46 | 100,000 | 107,043 | ||||||
Connecticut Housing Finance Authority, Multi-Family Housing Revenue Bonds, Subseries F-1, Callable 05/15/21 @ 100, (GO OF AUTH), 4.63%, 11/15/41 | 215,000 | 227,915 | ||||||
Connecticut Housing Finance Authority, Refunding Revenue Bonds, Subseries G-1, Callable 11/15/21 @ 100, (OID), 3.75%, 11/15/55 | 250,000 | 241,708 | ||||||
Connecticut State Health & Educational Facility Authority, University & College Improvements Revenue Bonds, Callable 07/01/18 @ 100, (BHAC-CR) (NATL-RE) (OID), 5.00%, 07/01/37 | 250,000 | 276,877 | ||||||
Connecticut State Health & Educational Facility Authority, Hospital Improvements Revenue Bonds, Series A, Callable 07/01/21 @ 100, 5.00%, 07/01/32 | 385,000 | 425,914 | ||||||
Connecticut State Health & Educational Facility Authority, Revenue Bonds, Series B, Callable 07/01/21 @ 100, (AGM) (OID), 4.00%, 07/01/37 | 250,000 | 259,673 | ||||||
Connecticut State Health & Educational Facility Authority, Private Primary Schools, Revenue Bonds, Series C, Callable 07/01/22 @ 100, 4.00%, 07/01/33 | 100,000 | 104,419 |
HIGH YIELD TAX FREE BOND FUND | 11 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Connecticut (cont.) | ||||||||
Connecticut State Health & Educational Facility Authority, Hospital Improvements Revenue Bonds, Series J, Callable 07/01/22 @ 100, (OID), 4.25%, 07/01/31 | $ | 500,000 | $ | 515,375 | ||||
Connecticut State Health & Educational Facility Authority, Hospital Improvements Revenue Bonds, Series J, Callable 07/01/22 @ 100, (OID), 4.50%, 07/01/38 | 500,000 | 517,185 | ||||||
Connecticut State Health & Educational Facility Authority, Hospital Improvements Revenue Bonds, Series J, Callable 07/01/22 @ 100, 5.00%, 07/01/42 | 500,000 | 546,600 | ||||||
Connecticut State Health & Educational Facility Authority, University & College Improvements Revenue Bonds, Series O, Callable 07/01/20 @ 100, (OID), 4.75%, 07/01/30 | 100,000 | 110,322 | ||||||
Connecticut State Health & Educational Facility Authority, University & College Improvements Revenue Bonds, Series O, Callable 07/01/20 @ 100, (OID), 5.00%, 07/01/40 | 125,000 | 136,316 | ||||||
Connecticut State Health & Educational Facility Authority, Revenue Bonds, Series P, Callable 07/01/20 @ 100, 5.00%, 07/01/28 | 100,000 | 113,043 | ||||||
State of Connecticut, Public Improvements, General Obligation Unlimited, Series B, Callable 04/15/22 @ 100, 4.00%, 04/15/32 | 250,000 | 272,652 | ||||||
State of Connecticut Special Tax Revenue, Public Improvements Revenue Bonds, Callable 01/01/23 @ 100, 3.00%, 01/01/33 | 1,000,000 | 970,630 | ||||||
State of Connecticut Special Tax Revenue, Revenue Bonds, Callable 11/01/20 @ 100, 5.00%, 11/01/22 | 100,000 | 121,951 | ||||||
University of Connecticut, University & College Improvements Revenue Bonds, Series A, Callable 02/15/20 @ 100, (GO OF UNIVERSITY), 5.00%, 02/15/28 | 50,000 | 60,341 | ||||||
9,178,642 | ||||||||
District of Columbia 0.55% |
| |||||||
District of Columbia, Hospital Improvements Revenue Bonds, Subseries 2, Callable 07/15/18 @ 101, (FSA), 5.45%, 07/15/35 | 525,000 | 575,127 | ||||||
District of Columbia Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Callable 12/01/21 @ 100, (Fanni Mae), 4.90%, 06/01/40 | 280,000 | 294,644 | ||||||
869,771 |
12 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Florida 4.85% |
| |||||||
Citizens Property Insurance Corp., Miscellaneous Purposes Revenue Bonds, Series A-1, 4.75%, 06/01/20 | $ | 150,000 | $ | 174,899 | ||||
City of Jacksonville Public Improvements Revenue Bonds, Series A, Callable 10/01/19 @ 100, (OID), 4.75%, 10/01/34 | 200,000 | 228,954 | ||||||
City of Miami Parking Facility Improvements Revenue Bonds, Series A, Callable 07/01/20 @ 100, (AGM) (OID), 5.25%, 07/01/35 | 105,000 | 116,288 | ||||||
City of Miami Parking Facility Improvements Revenue Bonds, Series A, Callable 07/01/20 @ 100, (AGM) (OID), 5.25%, 07/01/39 | 125,000 | 136,720 | ||||||
City of Miami Parking System Revenue, Refunding Revenue Bonds, Callable 10/01/19 @ 100, (OID), 5.35%, 10/01/39 | 500,000 | 551,620 | ||||||
County of Miami-Dade Hospital Improvements Revenue Bonds, Callable 06/01/19 @ 100, (OID), 5.75%, 06/01/39 | 110,000 | 119,746 | ||||||
County of Miami-Dade Public Improvements, General Obligation Unlimited, Series B-1, Callable 07/01/18 @ 100, (OID), 5.63%, 07/01/38 | 250,000 | 292,655 | ||||||
County of Miami-Dade Recreational Facility Improvements Revenue Bonds, Series C, Callable 10/01/19 @ 100, (OID), 5.38%, 10/01/28 | 250,000 | 283,375 | ||||||
County of Miami-Dade Refunding Revenue Bonds, Subseries B, Callable 10/01/22 @ 100, (OID), 4.00%, 10/01/37 | 250,000 | 251,393 | ||||||
County of Miami-Dade Refunding Revenue Bonds, Subseries B, Callable 10/01/22 @ 100, (AGM), 4.00%, 10/01/37 | 250,000 | 254,028 | ||||||
County of Miami-Dade Aviation Revenue, Port, Airport & Marina Improvements Revenue Bonds, Series A, Callable 10/01/20 @ 100, (OID), 5.25%, 10/01/30 | 150,000 | 172,038 | ||||||
Escambia County Health Facilities Authority, Hospital Improvements Revenue Bonds, 5.00%, 08/15/14 | 100,000 | 106,054 | ||||||
Escambia County Health Facilities Authority, Hospital Improvements Revenue Bonds, Callable 08/15/20 @ 100, (OID), 5.50%, 08/15/24 | 250,000 | 290,775 | ||||||
Escambia County Health Facilities Authority, Hospital Improvements Revenue Bonds, Callable 08/15/20 @ 100, (OID), 5.75%, 08/15/29 | 125,000 | 144,464 | ||||||
Florida Gulf Coast University Financing Corp., University & College Improvements Revenue Bonds, Series A, Callable 02/01/21 @ 100, 5.00%, 02/01/28 | 100,000 | 111,213 |
HIGH YIELD TAX FREE BOND FUND | 13 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Florida (cont.) |
| |||||||
Florida Higher Educational Facilities Financial Authority, University & College Improvements, Refunding Revenue Bonds, Callable 04/01/21 @ 100, (OID), 6.00%, 04/01/26 | $ | 130,000 | $ | 151,467 | ||||
Florida Housing Finance Corp., State Single-Family Housing Revenue Bonds, Series 2, Callable 07/01/19 @ 100, (Freddie Mac) (Fannie Mae) (Ginnie Mae), 5.00%, 07/01/39 | 100,000 | 105,685 | ||||||
Florida Municipal Loan Council, Water Utility Improvements, Revenue Bonds, Series D, Callable 10/01/21 @ 100, (AGM) (OID), 5.25%, 10/01/33 | 100,000 | 114,616 | ||||||
Florida Municipal Loan Council, Water Utility Improvements Revenue Bonds, Series D, Callable 10/01/21 @ 100, (AGM) (OID), 5.50%, 10/01/41 | 100,000 | 115,433 | ||||||
FSU Financial Assistance, Inc., Refunding Revenue Bonds, Series A, Callable 10/01/22 @ 100, 5.00%, 10/01/30 | 500,000 | 565,845 | ||||||
Greater Orlando Aviation Authority, Port, Airport & Marina Improvements Revenue Bonds, Series A, Callable 10/01/20 @ 100, 5.00%, 10/01/25 | 200,000 | 238,088 | ||||||
Hillsborough County Industrial Development Authority, School Improvements Revenue Bonds, Callable 05/15/17 @ 100, 5.13%, 05/15/37 | 250,000 | 242,705 | ||||||
JEA Electric System Revenue, Revenue Bonds, Series THREE-B, Callable 10/01/17 @ 100, (OID), 3.75%, 10/01/39 | 500,000 | 502,790 | ||||||
JEA Water & Sewer System Revenue, Revenue Bonds, Series B, Callable 10/01/17 @ 100, (OID), 4.00%, 10/01/41 | 515,000 | 522,086 | ||||||
JEA Water & Sewer System Revenue, Revenue Bonds, Subseries B, Callable 10/01/17 @ 100, (OID), 3.88%, 10/01/37 | 250,000 | 251,120 | ||||||
Miami-Dade County Educational Facilities Authority, University & College Improvements Revenue Bonds, Series B, (AMBAC), 5.25%, 04/01/31 | 260,000 | 322,954 | ||||||
North Sumter County Utility Dependent District, Water & Utility Improvements Revenue Bonds, Callable 10/01/20 @ 100, (AGM) (OID), 5.38%, 10/01/40 | 400,000 | 441,040 | ||||||
Orange County Health Facilities Authority, Hospital Improvements Revenue Bonds, 5.25%, 10/01/19 | 160,000 | 185,950 | ||||||
Palm Beach County School District, Refunding Bonds, Certificate Participation, Series A, Callable 08/01/21 @ 100, 5.00%, 08/01/24 | 45,000 | 53,443 | ||||||
State of Florida School Improvements Revenue Bonds, Series A, Callable 07/01/18 @ 101, (OID), 5.25%, 07/01/24 | 380,000 | 448,202 |
14 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Florida (cont.) |
| |||||||
Tampa-Hillsborough County Expressway Authority, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, 5.00%, 07/01/37 | $ | 100,000 | $ | 111,940 | ||||
7,607,586 | ||||||||
Georgia 1.33% |
| |||||||
Albany-Dougherty Inner City Authority, University & College Improvements Revenue Bonds, Callable 07/01/20 @ 100, 5.00%, 07/01/35 | 250,000 | 275,562 | ||||||
Albany-Dougherty Payroll Development Authority, University & College Improvements Revenue Bonds, Callable 06/15/20 @ 100, (AGM) (OID), 5.50%, 06/15/36 | 325,000 | 374,410 | ||||||
City of Atlanta Refunding Revenue Bonds, Series B, Callable 11/01/19 @ 100, (AGM) (OID), 5.38%, 11/01/39 | 250,000 | 285,725 | ||||||
Fulton County Development Authority, Refunding Revenue Bonds, Callable 10/01/22 @ 100, (OID), 4.25%, 10/01/37 | 100,000 | 104,793 | ||||||
Fulton County Development Authority, Refunding Revenue Bonds, 5.00%, 10/01/22 | 150,000 | 181,374 | ||||||
Fulton County Development Authority, University & College Improvements Revenue Bonds, Callable 04/01/21 @ 100, (OID), 5.75%, 10/01/31 | 50,000 | 60,053 | ||||||
Fulton County Development Authority, University & College Improvements Revenue Bonds, Callable 04/01/21 @ 100, (OID), 5.75%, 10/01/41 | 250,000 | 297,045 | ||||||
Georgia Housing & Finance Authority, State Single-Family Housing Revenue Bonds, Series A-1, Callable 12/01/21 @ 100, 4.00%, 12/01/37 | 500,000 | 510,520 | ||||||
2,089,482 | ||||||||
Hawaii 0.03% |
| |||||||
Hawaii Pacific Health, Hospital Improvements Revenue Bonds, Series B, Callable 07/01/20 @ 100, (OID), 5.75%, 07/01/40 | 40,000 | 44,712 | ||||||
Idaho 0.17% |
| |||||||
Idaho State Building Authority, Refunding Revenue Bonds, Callable 09/01/22 @ 100, (OID), 4.00%, 09/01/37 | 250,000 | 260,785 |
HIGH YIELD TAX FREE BOND FUND | 15 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Illinois 4.42% |
| |||||||
Chicago Board of Education, School Improvements, General Obligation Unlimited, Series A, Callable 12/01/22 @ 100, 5.00%, 12/01/42 | $ | 2,500,000 | $ | 2,752,200 | ||||
City of Chicago, Refunding Bonds, General Obligation Unlimited, Series C, Callable 01/01/22 @ 100, 4.00%, 01/01/30 | 500,000 | 515,635 | ||||||
City of Chicago, Refunding Bonds, General Obligation Unlimited, Series C, Callable 01/01/22 @ 100, 4.00%, 01/01/31 | 500,000 | 509,465 | ||||||
City of Chicago, Refunding Bonds, General Obligation Unlimited, Series C, Callable 01/01/22 @ 100, 4.00%, 01/01/32 | 500,000 | 507,175 | ||||||
City of Chicago, Local Multi-Family Housing, Revenue Bonds, Callable 08/01/20 @ 100, (Freddie Mac), 4.75%, 02/01/31 | 250,000 | 265,667 | ||||||
City of Chicago, Waterworks Revenue, Refunding Revenue Bonds, Callable 11/01/22 @ 100, 4.00%, 11/01/37 | 500,000 | 513,070 | ||||||
Illinois Finance Authority, University & College Improvements Revenue Bonds, Series A, Callable 10/01/21 @ 100, 4.00%, 10/01/33 | 300,000 | 317,460 | ||||||
Illinois Finance Authority, Hospital Improvements Revenue Bonds, Series A, Callable 08/15/18 @ 100, (OID), 5.25%, 08/15/47 | 250,000 | 268,030 | ||||||
Illinois Finance Authority, Refunding Revenue Bonds, Series A, Callable 02/15/20 @ 100, (OID), 5.50%, 08/15/24 | 215,000 | 243,890 | ||||||
Illinois Finance Authority, Hospital Improvements Revenue Bonds, Series A, Callable 08/15/21 @ 100, (OID), 5.88%, 08/15/34 | 100,000 | 117,608 | ||||||
Illinois Finance Authority, Refunding Revenue Bonds, Series A, Callable 02/15/20 @ 100, (OID), 6.00%, 08/15/38 | 175,000 | 197,631 | ||||||
Railsplitter Tobacco Settlement Authority, Public Improvements Revenue Bonds, (OID), 5.13%, 06/01/19 | 250,000 | 295,117 | ||||||
Railsplitter Tobacco Settlement Authority, Public Improvements Revenue Bonds, Callable 06/01/21 @ 100, (OID), 6.00%, 06/01/28 | 250,000 | 303,295 | ||||||
University of Illinois, University & College Improvements Revenue Bonds, Series A, Callable 04/01/21 @ 100, 5.50%, 04/01/31 | 100,000 | 117,571 | ||||||
6,923,814 |
16 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Indiana 1.98% |
| |||||||
Indiana Finance Authority, Hospital Improvements Revenue Bonds, Callable 11/01/19 @ 100, (OID), 5.25%, 11/01/39 | $ | 250,000 | $ | 275,070 | ||||
Indiana Finance Authority, Refunding Revenue Bonds, Series A, Callable 12/01/19 @ 100, (OID), 5.25%, 12/01/38 | 265,000 | 293,575 | ||||||
Indiana Finance Authority, Refunding Revenue Bonds, Series A, Callable 05/01/19 @ 100, (OID), 5.75%, 05/01/31 | 100,000 | 115,172 | ||||||
Indiana Finance Authority, Water & Sewer Improvements Revenue Bonds, Series C, Callable 02/01/23 @ 100, 4.00%, 02/01/32 | 250,000 | 276,405 | ||||||
Town of Munster Public Improvements Tax Allocation Bonds, Callable 07/15/21 @ 100, (OID), 5.13%, 01/15/31 | 2,000,000 | 2,146,300 | ||||||
3,106,522 | ||||||||
Iowa 0.38% |
| |||||||
Iowa Finance Authority, Hospital Improvements Revenue Bonds, Callable 08/01/22 @ 100, 4.75%, 08/01/42 | 250,000 | 252,483 | ||||||
Iowa State Finance Authority, Revenue Bonds, Series A, Callable 08/15/19 @ 100, (OID), 5.38%, 08/15/29 | 300,000 | 347,514 | ||||||
599,997 | ||||||||
Kansas 0.61% |
| |||||||
Kansas Development Finance Authority, Refunding Revenue Bonds, Callable 05/15/22 @ 100, 4.00%, 11/15/37 | 675,000 | 676,019 | ||||||
Kansas Development Finance Authority, Refunding Revenue Bonds, Series A, Callable 01/01/20 @ 100, 5.00%, 01/01/35 | 250,000 | 274,052 | ||||||
950,071 | ||||||||
Kentucky 0.18% |
| |||||||
Kentucky Municipal Power Agency, Electric Lights & Power Improvements, Revenue Bonds, Series A, Callable 09/01/20 @ 100, (AGM), 5.00%, 09/01/23 | 250,000 | 288,970 | ||||||
Louisiana 0.86% |
| |||||||
Louisiana Public Facilities Authority, Refunding Revenue Bonds, Series A, Callable 07/01/19 @ 100, (OID), 6.00%, 07/01/29 | 250,000 | 290,580 | ||||||
Parish of St. John Baptist Industrial Improvements Revenue Bonds, Series A, Callable 06/01/17 @ 100, 5.13%, 06/01/37 | 1,000,000 | 1,065,400 | ||||||
1,355,980 |
HIGH YIELD TAX FREE BOND FUND | 17 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Maine 0.46% |
| |||||||
Maine Health & Higher Educational Facilities Authority, Refunding Revenue Bonds, Callable 07/01/22 @ 100, (OID), 3.63%, 07/01/41 | $ | 500,000 | $ | 508,245 | ||||
Maine State Housing Authority, State Single-Family Housing Revenue Bonds, Series A, Callable 01/15/20 @ 100, 4.25%, 11/15/27 | 100,000 | 104,828 | ||||||
Maine State Housing Authority, Local Single-Family Housing Revenue Bonds, Series C, Callable 01/15/19 @ 100, 5.00%, 11/15/29 | 100,000 | 107,752 | ||||||
720,825 | ||||||||
Maryland 2.14% |
| |||||||
Maryland Community Development Administration, State Single-Family Housing Revenue Bonds, Series B, Callable 09/01/18 @ 100, 4.75%, 09/01/39 | 250,000 | 259,783 | ||||||
Maryland Community Development Administration, Refunding Revenue Bonds, Series B, Callable 03/01/20 @ 100, 5.13%, 09/01/30 | 350,000 | 376,988 | ||||||
Maryland Community Development Administration, State Single-Family Housing Revenue Bonds, Series C, Callable 09/01/18 @ 100, 4.55%, 09/01/39 | 500,000 | 515,565 | ||||||
Maryland Economic Development Corp., Port, Airport & Marina Improvements Revenue Bonds, Series B, Callable 06/01/20 @ 100, (OID), 5.38%, 06/01/25 | 500,000 | 574,405 | ||||||
Maryland Economic Development Corp., Port, Airport & Marina Improvements Revenue Bonds, Series B, Callable 06/01/20 @ 100, (OID), 5.75%, 06/01/35 | 445,000 | 506,406 | ||||||
Maryland Health & Higher Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 05/15/20 @ 100, (OID), 4.63%, 05/15/35 | 60,000 | 65,857 | ||||||
Maryland Health & Higher Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 05/15/16 @ 100, 5.25%, 05/15/46 | 165,000 | 172,692 | ||||||
Montgomery County Housing Opportunities Commission, Revenue Bonds, Series B, Callable 01/01/22 @ 100, (Freddie Mac) (Fannie Mae) (Ginnie Mae), 3.63%, 07/01/33 | 600,000 | 608,520 | ||||||
Montgomery County Housing Opportunities Commission, Local Multi-Family Housing Revenue Bonds, Series B-1, Callable 07/01/20 @ 100, 5.00%, 07/01/31 | 250,000 | 278,215 | ||||||
3,358,431 |
18 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Massachusetts 1.56% |
| |||||||
Massachusetts Educational Financing Authority, Refunding Revenue Bonds, Series A, Callable 01/01/20 @ 100, (OID), 5.20%, 01/01/27 | $ | 215,000 | $ | 237,775 | ||||
Massachusetts Educational Financing Authority, Refunding Revenue Bonds, Series A, Callable 01/01/20 @ 100, (OID), 5.25%, 01/01/29 | 90,000 | 99,283 | ||||||
Massachusetts Health & Educational Facilities Authority, Refunding Revenue Bonds, Series C, 4.25%, 07/01/18 | 150,000 | 164,765 | ||||||
Massachusetts Health & Educational Facilities Authority, Refunding Revenue Bonds, Series C, Callable 07/01/20 @ 100, (OID), 5.00%, 07/01/30 | 100,000 | 107,154 | ||||||
Massachusetts Housing Finance Agency, State Single-Family Housing Revenue Bonds, Series 159, Callable 12/01/21 @ 100, 4.05%, 12/01/32 | 250,000 | 259,275 | ||||||
Massachusetts Housing Finance Agency, State Single-Family Housing Revenue Bonds, Series 162, Callable 06/01/22 @ 100, (Freddie Mac) (Fannie Mae), 3.50%, 12/01/42 | 100,000 | 98,536 | ||||||
Massachusetts Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series A, Callable 06/01/20 @ 100, (FHA), 5.25%, 12/01/35 | 175,000 | 187,971 | ||||||
Massachusetts Housing Finance Agency, Revenue Bonds, Series B, Callable 12/01/22 @ 100, 3.50%, 12/01/31 | 300,000 | 303,762 | ||||||
Massachusetts Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series C, Callable 06/01/19 @ 100, 4.85%, 12/01/29 | 100,000 | 108,409 | ||||||
Massachusetts Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series C, Callable 06/01/19 @ 100, 5.13%, 12/01/39 | 100,000 | 106,440 | ||||||
Massachusetts State College Building Authority, Refunding Revenue Bonds, Series B, Callable 05/01/22 @ 100, 4.00%, 05/01/43 | 500,000 | 518,920 | ||||||
Massachusetts Water Pollution Abatement Trust, Refunding Revenue Bonds, Subseries 16B, Callable 08/01/20 @ 100, 4.00%, 08/01/42 | 250,000 | 260,787 | ||||||
2,453,077 | ||||||||
Michigan 3.18% |
| |||||||
Cesar Chavez Academy, Inc., School Improvements, Certificate of Participation, Callable 02/01/13 @ 102, 6.50%, 02/01/33 | 185,000 | 189,564 |
HIGH YIELD TAX FREE BOND FUND | 19 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Michigan (cont.) |
| |||||||
Michigan Public Educational Facilities Authority, School Improvements, Refunding Revenue Bonds, Series A, Callable 12/01/15 @ 100, 6.00%, 12/01/35 | $ | 500,000 | $ | 503,935 | ||||
Michigan State Building Authority, Refunding Revenue Bonds, Series I-A, Callable 10/15/21 @ 100, (OID), 5.20%, 10/15/31 | 750,000 | 865,860 | ||||||
Michigan State Building Authority, Refunding Revenue Bonds, Series I-A, Callable 10/15/21 @ 100, (OID), 5.38%, 10/15/36 | 100,000 | 115,042 | ||||||
Michigan State Hospital Finance Authority, Refunding Revenue Bonds, Callable 11/15/19 @ 100, (OID), 5.63%, 11/15/29 | 100,000 | 114,833 | ||||||
Michigan State Hospital Finance Authority, Refunding Revenue Bonds, Callable 11/15/19 @ 100, (OID), 5.75%, 11/15/39 | 250,000 | 284,372 | ||||||
Michigan State Housing Development Authority, State Multi-Family Housing Revenue Bonds, Series A, Callable 06/01/21 @ 100, (GO OF AUTH), 4.60%, 12/01/26 | 205,000 | 219,139 | ||||||
Michigan State Housing Development Authority, State Multi-Family Housing Revenue Bonds, Series A2, Callable 04/01/22 @ 100, (GO OF AUTH), 4.50%, 10/01/36 | 710,000 | 733,835 | ||||||
Michigan Tobacco Settlement Finance Authority, Miscellaneous Purposes Revenue Bonds, Series A, Callable 06/01/17 @ 100, (OID), 6.00%, 06/01/48 | 595,000 | 549,334 | ||||||
Michigan Tobacco Settlement Finance Authority, Refunding Revenue Bonds, Series A, Callable 06/01/18 @ 100, (OID), 6.88%, 06/01/42 | 250,000 | 259,258 | ||||||
Royal Oak Hospital Finance Authority, Refunding Revenue Bonds, Series W, Callable 08/01/14 @ 100, 6.00%, 08/01/29 | 250,000 | 261,762 | ||||||
Royal Oak Hospital Finance Authority, Refunding Revenue Bonds, Series W, Callable 08/01/19 @ 100, 6.38%, 08/01/29 | 250,000 | 291,082 | ||||||
Western Michigan University, University & College Improvements Revenue Bonds, Callable 11/15/21 @ 100, 5.00%, 11/15/26 | 500,000 | 593,135 | ||||||
4,981,151 | ||||||||
Minnesota 0.14% |
| |||||||
City of St. Cloud, Refunding Revenue Bonds, Series A, Callable 05/01/15 @ 100, (OID), 5.00%, 05/01/25 | 200,000 | 212,618 | ||||||
Mississippi 0.17% |
| |||||||
Mississippi Hospital Equipment & Facilities Authority, Refunding Revenue Bonds, Callable 01/01/20 @ 100, 5.25%, 01/01/30 | 250,000 | 272,395 |
20 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Missouri 0.35% |
| |||||||
Hanley Road Corridor Transportation Development District, Refunding Revenue Bonds, Series A, Callable 10/01/19 @ 100, (OID), 5.88%, 10/01/36 | $ | 250,000 | $ | 280,137 | ||||
Missouri Housing Development Commission, State Single-Family Housing Revenue Bonds, Series D, Callable 09/01/19 @ 100, (Fannie Mae) (Ginnie Mae), 4.70%, 03/01/35 | 170,000 | 178,306 | ||||||
Missouri State Health & Educational Facilities Authority, Health, Hospital & Nursing Home Improvements Revenue Bonds, Callable 11/15/22 @ 100, (OID), 3.75%, 11/15/39 | 100,000 | 92,638 | ||||||
551,081 | ||||||||
Montana 0.18% |
| |||||||
Montana Facility Finance Authority, Refunding Revenue Bonds, Series A, Callable 01/01/20 @ 100, 5.00%, 01/01/35 | 250,000 | 278,820 | ||||||
Nebraska 0.19% |
| |||||||
Nebraska Public Power District, Electric Lights & Power Improvements Revenue Bonds, Series A, Callable 01/01/22 @ 100, 5.00%, 01/01/25 | 250,000 | 302,287 | ||||||
Nevada 0.10% |
| |||||||
City of Reno, Hospital Improvements Revenue Bonds, Callable 06/01/18 @ 100, (AMBAC) (OID), 5.50%, 06/01/28 | 50,000 | 55,328 | ||||||
Nevada Housing Division, State Single-Family Housing Revenue Bonds, Series I, Callable 04/01/20 @ 100, (Freddie Mac) (Fannie Mae) (Ginnie Mae), 4.40%, 04/01/27 | 100,000 | 103,936 | ||||||
159,264 | ||||||||
New Hampshire 0.24% |
| |||||||
New Hampshire Health & Education Facilities Authority Revenue, Refunding Revenue Bonds, Callable 01/01/15 @ 100, (ACA), 5.00%, 01/01/36 | 250,000 | 256,378 | ||||||
New Hampshire Health & Education Facilities Authority Revenue, Refunding Revenue Bonds, Callable 10/01/19 @ 100, (FHA), 6.25%, 04/01/26 | 100,000 | 120,715 | ||||||
377,093 | ||||||||
New Jersey 6.90% |
| |||||||
Essex County Improvement Authority, Public Improvements Revenue Bonds, Series B, Callable 11/01/20 @ 100, (AGM) (OID), 5.75%, 11/01/30 | 250,000 | 292,487 |
HIGH YIELD TAX FREE BOND FUND | 21 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New Jersey (cont.) |
| |||||||
Hudson County Improvement Authority, Refunding Revenue Bonds, (AGM), 5.40%, 10/01/25 | $ | 150,000 | $ | 185,901 | ||||
New Jersey Economic Development Authority, Economic Improvements Revenue Bonds, Callable 06/15/14 @ 100, (OID), 5.75%, 06/15/29 | 450,000 | 485,527 | ||||||
New Jersey Economic Development Authority, School Improvements Revenue Bonds, Series CC-2, Callable 06/15/20 @ 100, 5.00%, 12/15/32 | 100,000 | 112,194 | ||||||
New Jersey Economic Development Authority, Refunding Revenue Bonds, Series GG, Callable 03/01/21 @ 100, (State Appropriation) (OID), 5.25%, 09/01/26 | 850,000 | 1,007,046 | ||||||
New Jersey Educational Facilities Authority, Revenue Bonds, Series B, Callable 07/01/22 @ 100, 4.00%, 07/01/32 | 500,000 | 520,450 | ||||||
New Jersey Health Care Facilities Financing Authority, Hospital Improvements Revenue Bonds, Callable 01/01/14 @ 100, (Assured Guaranty) (OID), 5.38%, 07/01/29 | 500,000 | 515,485 | ||||||
New Jersey Health Care Facilities Financing Authority, Hospital Improvements Revenue Bonds, Callable 10/01/19 @ 100, (State Appropriation) (OID), 5.75%, 10/01/31 | 520,000 | 608,052 | ||||||
New Jersey Health Care Facilities Financing Authority, Refunding Revenue Bonds, Callable 07/01/21 @ 100, (OID), 6.00%, 07/01/37 | 200,000 | 246,878 | ||||||
New Jersey Health Care Facilities Financing Authority, Refunding Revenue Bonds, Series A, Callable 07/01/18 @ 100, (OID), 5.00%, 07/01/27 | 275,000 | 297,157 | ||||||
New Jersey Higher Education Student Assistance Authority, Refunding Revenue Bonds, Series 1A, Callable 12/01/19 @ 100, 5.25%, 12/01/28 | 250,000 | 274,222 | ||||||
New Jersey Higher Education Student Assistance Authority, Refunding Revenue Bonds, Series 1A, Callable 12/01/19 @ 100, 5.25%, 12/01/32 | 100,000 | 108,734 | ||||||
New Jersey Higher Education Student Assistance Authority, Revenue Bonds, Series 2, Callable 12/01/20 @ 100, (OID), 5.00%, 12/01/36 | 65,000 | 69,458 | ||||||
New Jersey Housing & Mortgage Finance Agency, State Single-Family Housing Revenue Bonds, Series CC, Callable 04/01/19 @ 100, 5.00%, 10/01/34 | 140,000 | 149,650 |
22 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New Jersey (cont.) |
| |||||||
New Jersey Transportation Trust Fund Authority, Transit Improvements Revenue Bonds, Series A, Callable 06/15/21 @ 100, (State Appropriation), 5.00%, 06/15/22 | $ | 100,000 | $ | 119,181 | ||||
New Jersey Transportation Trust Fund Authority, Transit Improvements Revenue Bonds, Series A, Callable 06/15/21 @ 100, (State Appropriation) (OID), 5.00%, 06/15/26 | 750,000 | 878,887 | ||||||
New Jersey Transportation Trust Fund Authority, Transit Improvements Revenue Bonds, Series A, Callable 06/15/22 @ 100, 5.00%, 06/15/42 | 500,000 | 558,600 | ||||||
New Jersey Transportation Trust Fund Authority, Transit Improvements Revenue Bonds, Series A, Callable 06/15/21 @ 100, (State Appropriation) (OID), 5.25%, 06/15/31 | 170,000 | 200,855 | ||||||
New Jersey Transportation Trust Fund Authority, Transit Improvements Revenue Bonds, Series AA, Callable 06/15/22 @ 100, 3.00%, 06/15/29 | 250,000 | 240,845 | ||||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds, Series AA, Callable 06/15/22 @ 100, (OID), 3.25%, 06/15/38 | 350,000 | 325,815 | ||||||
New Jersey Transportation Trust Fund Authority, Transit Improvements Revenue Bonds, Series AA, Callable 06/15/22 @ 100, 5.00%, 06/15/38 | 855,000 | 960,319 | ||||||
New Jersey Transportation Trust Fund Authority, Transit Improvements Revenue Bonds, Series B, Callable 06/15/21 @ 100, (OID), 5.00%, 06/15/42 | 200,000 | 222,544 | ||||||
Newark Housing Authority, Public Improvements Revenue Bonds, Callable 12/01/19 @ 100, 6.75%, 12/01/38 | 750,000 | 939,165 | ||||||
Tenafly School District, Refunding Bonds, General Obligation Unlimited, Callable 07/15/22 @ 100, (OID), 3.00%, 07/15/28 | 500,000 | 498,765 | ||||||
Tenafly School District, Refunding Bonds, General Obligation Unlimited, Callable 07/15/22 @ 100, (OID), 3.00%, 07/15/29 | 250,000 | 247,743 | ||||||
Tenafly School District, Refunding Bonds, General Obligation Unlimited, Callable 07/15/22 @ 100, (OID), 3.00%, 07/15/30 | 250,000 | 246,303 | ||||||
Tobacco Settlement Financing Corp., Refunding Revenue Bonds, Series 1A, Callable 06/01/17 @ 100, (OID), 5.00%, 06/01/41 | 550,000 | 500,412 | ||||||
10,812,675 | ||||||||
New Mexico 1.26% |
| |||||||
New Mexico Hospital Equipment Loan Council, Hospital Improvements Revenue Bonds, (OID), Callable 08/01/22 @ 100, 4.00%, 08/01/42 | 500,000 | 503,950 |
HIGH YIELD TAX FREE BOND FUND | 23 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New Mexico (cont.) |
| |||||||
New Mexico Hospital Equipment Loan Council, Hospital Improvements Revenue Bonds, Callable 08/01/19 @ 100, (OID), 5.00%, 08/01/39 | $ | 225,000 | $ | 243,153 | ||||
New Mexico Hospital Equipment Loan Council, Hospital Improvements Revenue Bonds, Callable 08/01/19 @ 100, 5.13%, 08/01/35 | 445,000 | 494,582 | ||||||
New Mexico Mortgage Finance Authority, Revenue Bonds, Callable 03/01/22 @ 100, (FHA) (Fannie Mae) (Ginnie Mae) (GTD) (INS), 3.25%, 09/01/27 | 145,000 | 147,414 | ||||||
New Mexico Mortgage Finance Authority, Revenue Bonds, Callable 03/01/22 @ 100, (Freddie Mac) (Fannie Mae) (Ginnie Mae), 3.50%, 09/01/27 | 250,000 | 256,105 | ||||||
New Mexico Mortgage Finance Authority, Revenue Bonds, Callable 03/01/22 @ 100, (FHA) (Fannie Mae) (Ginnie Mae) (GTD) (INS), 3.55%, 09/01/32 | 250,000 | 257,033 | ||||||
Village of Los Ranchos de Albuquerque Refunding Revenue Bonds, Callable 09/01/20 @ 100, (OID), 4.50%, 09/01/40 | 75,000 | 79,428 | ||||||
1,981,665 | ||||||||
New York 25.32% |
| |||||||
City of New York, Public Improvements, General Obligation Unlimited, Series A-1, Callable 08/01/21 @ 100, (OID), 4.50%, 08/01/35 | 500,000 | 550,760 | ||||||
City of New York, Refunding Bonds, General Obligation Unlimited, Series C, Callable 08/01/22 @ 100, (OID), 3.13%, 08/01/33 | 100,000 | 98,874 | ||||||
City of New York, Refunding Bonds, General Obligation Unlimited, Series E, Callable 02/01/23 @ 100, 3.00%, 08/01/33 | 250,000 | 242,503 | ||||||
City of New York, Refunding Bonds, General Obligation Unlimited, Series E, Callable 02/01/23 @ 100, 4.00%, 08/01/32 | 250,000 | 272,047 | ||||||
Hudson Yards Infrastructure Corp., Transit Improvements Revenue Bonds, Series A, Callable 02/15/17 @ 100, 5.00%, 02/15/47 | 60,000 | 63,583 | ||||||
Hudson Yards Infrastructure Corp., Public Improvements Revenue Bonds, Series A, Callable 02/15/21 @ 100, 5.25%, 02/15/47 | 200,000 | 227,862 |
24 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) |
| |||||||
Hudson Yards Infrastructure Corp., Public Improvements Revenue Bonds, Series A, Callable 02/15/21 @ 100, 5.75%, 02/15/47 | $ | 250,000 | $ | 296,605 | ||||
Long Island Power Authority, Electric Lights & Power Improvements, Revenue Bonds, Series A, Callable 05/01/21 @ 100, (AGM), 5.00%, 05/01/36 | 125,000 | 141,715 | ||||||
Long Island Power Authority, Electric Lights & Power Improvements Revenue Bonds, Series A, Callable 04/01/19 @ 100, (OID), 5.75%, 04/01/39 | 250,000 | 296,675 | ||||||
Metropolitan Transportation Authority, Refunding Revenue Bonds, Series A, Callable 11/15/22 @ 100, 4.00%, 11/15/31 | 250,000 | 272,092 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series A, Callable 11/15/21 @ 100, (OID), 5.00%, 11/15/37 | 250,000 | 279,975 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series A, Callable 11/15/21 @ 100, (OID), 5.00%, 11/15/46 | 350,000 | 387,450 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series C, Callable 11/15/22 @ 100, (OID), 4.25%, 11/15/42 | 485,000 | 505,637 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series D, Callable 11/15/22 @ 100, 4.00%, 11/15/30 | 500,000 | 535,780 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series D, Callable 11/15/21 @ 100, (OID), 4.75%, 11/15/36 | 250,000 | 273,430 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series D, Callable 11/15/21 @ 100, (OID), 4.88%, 11/15/46 | 100,000 | 107,787 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series D, Callable 11/15/21 @ 100, 5.00%, 11/15/36 | 250,000 | 280,177 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series D, Callable 11/15/20 @ 100, (OID), 5.25%, 11/15/34 | 500,000 | 571,865 | ||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series D-1, Callable 11/01/22 @ 100, (OID), 3.75%, 11/01/29 | 500,000 | 521,295 |
HIGH YIELD TAX FREE BOND FUND | 25 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) |
| |||||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series E, Callable 11/15/22 @ 100, (OID), 4.00%, 11/15/38 | $ | 1,675,000 | $ | 1,717,545 | ||||
Metropolitan Transportation Authority, Transit Improvements Revenue Bonds, Series H, Callable 11/15/22 @ 100, 3.63%, 11/15/37 | 300,000 | 301,353 | ||||||
Monroe County Industrial Development Corp., Hospital Improvements Revenue Bonds, Callable 02/15/21 @ 100, (FHA), 5.75%, 08/15/35 | 250,000 | 300,775 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series A, Callable 09/15/19 @ 100, (Fannie Mae), 4.50%, 09/15/25 | 200,000 | 211,962 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series C, Callable 11/01/19 @ 100, 4.95%, 05/01/47 | 500,000 | 524,445 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series D-1-A, Callable 05/01/20 @ 100, 4.85%, 11/01/35 | 250,000 | 264,502 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series F, Callable 11/01/21 @ 100, 3.80%, 11/01/37 | 500,000 | 501,845 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series F, Callable 05/01/19 @ 100, 4.60%, 11/01/29 | 100,000 | 106,422 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series F, Callable 05/01/19 @ 100, 4.85%, 05/01/41 | 250,000 | 259,070 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series G, Callable 11/01/21 @ 100, 3.80%, 11/01/37 | 500,000 | 501,845 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series G, Callable 11/01/20 @ 100, 4.75%, 05/01/41 | 250,000 | 267,155 | ||||||
New York City Housing Development Corp., Refunding Revenue Bonds, Series J, Callable 05/01/19 @ 100, 4.80%, 05/01/36 | 250,000 | 261,777 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series J-1, 5.00%, 05/01/20 | 150,000 | 177,599 |
26 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) |
| |||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series K, Callable 05/01/19 @ 100, 4.75%, 11/01/29 | $ | 100,000 | $ | 108,390 | ||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series L-1, Callable 03/16/20 @ 100, 4.90%, 11/01/40 | 250,000 | 262,822 | ||||||
New York City Housing Development Corp., Local Multi-Family Housing Revenue Bonds, Series L-1, Callable 03/16/20 @ 100, 4.95%, 11/01/43 | 250,000 | 261,530 | ||||||
New York City Industrial Development Agency, Recreational Facility Improvements Revenue Bonds, Callable 09/01/16 @ 100, (FGIC) (OID), 4.50%, 03/01/39 | 100,000 | 102,262 | ||||||
New York City Industrial Development Agency, Recreational Facility Improvements Revenue Bonds, Callable 09/01/16 @ 100, (FGIC), 5.00%, 03/01/31 | 145,000 | 154,092 | ||||||
New York City Industrial Development Agency, Recreational Facility Improvements Revenue Bonds, Callable 09/01/16 @ 100, (NATL-RE), 5.00%, 03/01/36 | 200,000 | 210,700 | ||||||
New York City Industrial Development Agency, Recreational Facility Improvements Revenue Bonds, Callable 09/01/16 @ 100, (FGIC), 5.00%, 03/01/46 | 4,105,000 | 4,251,672 | ||||||
New York City Industrial Development Agency, Recreational Facility Improvements, Revenue Bonds, Callable 01/01/19 @ 100, (OID), 6.50%, 01/01/46 | 650,000 | 757,250 | ||||||
New York City Municipal Water Finance Authority, Revenue Bonds, Series BB, Callable 12/15/22 @ 100, (OID), 3.25%, 06/15/47 | 250,000 | 236,108 | ||||||
New York City Municipal Water Finance Authority, Revenue Bonds, Series BB, Callable 12/15/22 @ 100, 5.00%, 06/15/47 | 500,000 | 572,480 | ||||||
New York City Municipal Water Finance Authority, Refunding Revenue Bonds, Series CC, Callable 12/15/21 @ 100, 5.00%, 06/15/45 | 250,000 | 283,105 | ||||||
New York City Municipal Water Finance Authority, Refunding Revenue Bonds, Series EE, Callable 06/15/22 @ 100, (OID), 3.38%, 06/15/34 | 100,000 | 102,484 | ||||||
New York City Municipal Water Finance Authority, Refunding Revenue Bonds, Series EE, Callable 06/15/22 @ 100, (OID), 4.00%, 06/15/39 | 1,000,000 | 1,052,250 |
HIGH YIELD TAX FREE BOND FUND | 27 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) |
| |||||||
New York City Municipal Water Finance Authority, Refunding Revenue Bonds, Series FF, Callable 06/15/22 @ 100, (OID), 4.00%, 06/15/45 | $ | 500,000 | $ | 520,775 | ||||
New York City Transitional Finance Authority Building Aid Revenue, Revenue Bonds, Series S-1, Callable 07/15/22 @ 100, (State Aid Withholding), 4.00%, 07/15/42 | 250,000 | 259,438 | ||||||
New York City Transitional Finance Authority Building Aid Revenue, Revenue Bonds, Series S-3, Callable 01/15/19 @ 100, (State Aid Withholding) (OID), 5.38%, 01/15/34 | 250,000 | 284,597 | ||||||
New York City Transitional Finance Authority Future Tax Secured Revenue, Public Improvements, Revenue Bonds, Series C, Callable 11/01/20 @ 100, (OID), 5.00%, 11/01/33 | 500,000 | 590,270 | ||||||
New York City Trust for Cultural Resources, Refunding Revenue Bonds, Series A, Callable 12/01/19 @ 100, 5.00%, 12/01/39 | 100,000 | 110,098 | ||||||
New York Convention Center Development Corp., Recreational Facility Improvements Revenue Bonds, Callable 11/15/15 @ 100, (AMBAC), 5.00%, 11/15/44 | 250,000 | 270,550 | ||||||
New York Liberty Development Corp., Refunding Revenue Bonds, Callable 01/15/20 @ 100, 5.63%, 07/15/47 | 250,000 | 287,387 | ||||||
New York Mortgage Agency, State Single-Family Housing Revenue Bonds, 5.00%, 04/01/18 | 50,000 | 56,234 | ||||||
New York Mortgage Agency, State Single-Family Housing Revenue Bonds, Series 168, Callable 10/01/21 @ 100, 3.75%, 10/01/32 | 1,000,000 | 1,032,360 | ||||||
New York Mortgage Agency, State Single-Family Housing Revenue Bonds, Series 168, Callable 10/01/21 @ 100, 4.00%, 10/01/36 | 895,000 | 926,361 | ||||||
New York Mortgage Agency, State Single-Family Housing Revenue Bonds, Series 168, Callable 10/01/21 @ 100, 4.13%, 10/01/40 | 1,000,000 | 1,035,990 | ||||||
New York Mortgage Agency, Refunding Revenue Bonds, Series 176, Callable 04/01/22 @ 100, 3.65%, 10/01/37 | 250,000 | 250,185 | ||||||
New York State Dormitory Authority, Revenue Bonds, 5.00%, 05/15/20 | 100,000 | 122,904 | ||||||
New York State Dormitory Authority, Revenue Bonds, 5.00%, 08/15/21 | 100,000 | 121,685 | ||||||
New York State Dormitory Authority, Hospital Improvements Revenue Bonds, Series A, Callable 05/01/17 @ 100, 5.00%, 05/01/22 | 660,000 | 731,795 |
28 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) |
| |||||||
New York State Dormitory Authority, Revenue Bonds, 5.00%, 05/15/22 | $ | 165,000 | $ | 205,163 | ||||
New York State Dormitory Authority, Revenue Bonds, Callable 05/15/22 @ 100, 5.00%, 05/15/27 | 400,000 | 482,272 | ||||||
New York State Dormitory Authority, Revenue Bonds, Callable 11/01/16 @ 100, 5.00%, 11/01/34 | 700,000 | 744,996 | ||||||
New York State Dormitory Authority, University & College Improvements, Revenue Bonds, Callable 07/01/19 @ 100, (INS) (OID), 5.13%, 07/01/39 | 250,000 | 272,045 | ||||||
New York State Dormitory Authority, University & College Improvements, Revenue Bonds, Callable 07/01/19 @ 100, (INS) (OID), 5.25%, 07/01/33 | 200,000 | 222,006 | ||||||
New York State Dormitory Authority, Hospital Improvements, Revenue Bonds, Callable 05/01/19 @ 100, 5.50%, 05/01/30 | 500,000 | 572,125 | ||||||
New York State Dormitory Authority, Hospital Improvements, Revenue Bonds, Callable 05/01/19 @ 100, (OID), 5.50%, 05/01/37 | 350,000 | 397,250 | ||||||
New York State Dormitory Authority, Revenue Bonds, Series A, Callable 12/15/22 @ 100, 4.00%, 12/15/33 | 500,000 | 538,260 | ||||||
New York State Dormitory Authority, School Improvements, Revenue Bonds, Series A, Callable 10/01/22 @ 100, (AGM) (OID), 4.00%, 10/01/38 | 500,000 | 510,510 | ||||||
New York State Dormitory Authority, Revenue Bonds, Series A, Callable 07/01/20 @ 100, 5.00%, 07/01/26 | 300,000 | 342,801 | ||||||
New York State Dormitory Authority, Revenue Bonds, Series A, Callable 05/01/21 @ 100, (OID), 5.00%, 05/01/32 | 500,000 | 562,575 | ||||||
New York State Dormitory Authority, Revenue Bonds, Series A, Callable 05/01/21 @ 100, (OID), 5.00%, 05/01/41 | 500,000 | 551,455 | ||||||
New York State Dormitory Authority, University & College Improvements, Revenue Bonds, Series A, Callable 07/01/21 @ 100, (OID), 5.25%, 07/01/30 | 50,000 | 57,972 | ||||||
New York State Dormitory Authority, University & College Improvements, Revenue Bonds, Series A, Callable 07/01/21 @ 100, (OID), 5.25%, 07/01/31 | 40,000 | 46,998 | ||||||
New York State Dormitory Authority, University & College Improvements, Revenue Bonds, Series A, Callable 07/01/18 @ 100, 5.25%, 07/01/48 | 750,000 | 856,050 |
HIGH YIELD TAX FREE BOND FUND | 29 | �� |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) |
| |||||||
New York State Dormitory Authority, University & College Improvements Revenue Bonds, Series B, Callable 07/01/22 @ 100, 4.00%, 07/01/31 | $ | 125,000 | $ | 135,151 | ||||
New York State Dormitory Authority, Revenue Bonds, Series B, Callable 07/01/22 @ 100, (OID), 4.00%, 07/01/32 | 250,000 | 251,375 | ||||||
New York State Dormitory Authority, Revenue Bonds, Series B, Callable 07/01/22 @ 100, (OID), 4.13%, 07/01/42 | 500,000 | 499,575 | ||||||
New York State Dormitory Authority, School Improvements Revenue Bonds, Series B, Callable 10/01/20 @ 100, (AGM), 4.75%, 10/01/40 | 165,000 | 177,598 | ||||||
New York State Dormitory Authority, School Improvements Revenue Bonds, Series D, Callable 10/01/22 @ 100, (AGM) (OID), 3.50%, 10/01/32 | 270,000 | 270,432 | ||||||
New York State Dormitory Authority, Refunding Revenue Bonds, Series D, Callable 10/01/22 @ 100, (AGM) (OID), 4.00%, 10/01/37 | 175,000 | 178,966 | ||||||
New York State Dormitory Authority, Revenue Bonds, Series F, Callable 10/01/22 @ 100, (AGM) (OID), 3.10%, 10/01/29 | 200,000 | 198,958 | ||||||
New York State Dormitory Authority, Refunding Revenue Bonds, Series H, Callable 10/01/22 @ 100, (State Aid Withholding), 3.25%, 04/01/31 | 280,000 | 281,154 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series A, Callable 05/01/20 @ 100, 4.85%, 11/01/36 | 100,000 | 104,899 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series B, Callable 05/01/20 @ 100, (SONYMA), 4.75%, 05/01/31 | 200,000 | 213,356 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series B, Callable 05/01/19 @ 100, 4.80%, 11/01/34 | 250,000 | 269,167 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series B, Callable 05/01/19 @ 100, 4.85%, 11/01/41 | 205,000 | 219,969 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series B, Callable 05/01/19 @ 100, 5.00%, 11/01/45 | 150,000 | 159,422 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series B, Callable 05/01/20 @ 100, (SONYMA), 5.20%, 05/01/42 | 500,000 | 532,515 |
30 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) |
| |||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series C, Callable 05/01/22 @ 100, 3.75%, 11/01/37 | $ | 250,000 | $ | 252,148 | ||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series D, Callable 05/01/22 @ 100, 3.50%, 11/01/42 | 200,000 | 194,568 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series D, Callable 05/01/22 @ 100, 3.60%, 05/01/45 | 200,000 | 194,400 | ||||||
New York State Housing Finance Agency, State Multi-Family Housing Revenue Bonds, Series E, Callable 05/01/22 @ 100, (SONYMA), 3.50%, 11/01/42 | 100,000 | 98,537 | ||||||
New York State Thruway Authority, Revenue Bonds, Series I, Callable 01/01/22 @ 100, (OID), 4.13%, 01/01/42 | 500,000 | 522,750 | ||||||
New York State Urban Development Corp., Public Improvements Revenue Bonds, Series A, 5.00%, 03/15/20 | 100,000 | 123,715 | ||||||
Orange County Funding Corp., University & College Improvements, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, (OID), 3.25%, 07/01/32 | 500,000 | 466,965 | ||||||
Orange County Funding Corp., University & College Improvements, Refunding Revenue Bonds, Series B, Callable 07/01/22 @ 100, (OID), 3.25%, 07/01/32 | 500,000 | 470,275 | ||||||
Port Authority of New York & New Jersey, Port, Airport & Marina Improvements, Refunding Revenue Bonds, Callable 12/01/22 @ 100, 3.00%, 12/01/32 | 250,000 | 243,395 | ||||||
Port Authority of New York & New Jersey, Port, Airport & Marina Improvements, Refunding Revenue Bonds, Callable 12/01/22 @ 100, (OID), 3.25%, 12/01/38 | 250,000 | 241,893 | ||||||
Port Authority of New York & New Jersey, Port, Airport & Marina Improvements, Refunding Revenue Bonds, Callable 12/01/22 @ 100, (OID), 3.25%, 12/01/42 | 250,000 | 234,925 | ||||||
Tobacco Settlement Financing Corp., Housing Revenue Bonds, Callable 06/01/13 @ 100, 5.50%, 06/01/19 | 250,000 | 255,133 | ||||||
Triborough Bridge & Tunnel Authority, Public Improvements Revenue Bonds, Series A, Callable 11/15/22 @ 100, 4.00%, 11/15/37 | 250,000 | 263,115 | ||||||
39,695,015 |
HIGH YIELD TAX FREE BOND FUND | 31 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
North Carolina 0.39% |
| |||||||
Charlotte-Mecklenburg Hospital Authority, Refunding Revenue Bonds, Callable 01/15/19 @ 100, (OID), 5.25%, 01/15/34 | $ | 100,000 | $ | 110,756 | ||||
North Carolina Eastern Municipal Power Agency, Refunding Revenue Bonds, Series B, Callable 01/01/19 @ 100, (OID), 4.50%, 01/01/22 | 250,000 | 281,665 | ||||||
North Carolina Turnpike Authority, Highway Improvements, Revenue Bonds, Series A, Callable 01/01/19 @ 100, (OID), 5.75%, 01/01/39 | 200,000 | 226,790 | ||||||
619,211 | ||||||||
North Dakota 0.05% |
| |||||||
North Dakota Housing Finance Agency, State Single-Family Housing Revenue Bonds, Series B, Callable 01/01/21 @ 100, 4.45%, 01/01/25 | 75,000 | 80,254 | ||||||
Ohio 0.99% |
| |||||||
Buckeye Tobacco Settlement Financing Authority, Miscellaneous Purposes Revenue Bonds, Series A-2, Callable 06/01/17 @ 100, (OID), 6.00%, 06/01/42 | 420,000 | 388,975 | ||||||
Buckeye Tobacco Settlement Financing Authority, Miscellaneous Purposes Revenue Bonds, Series A-2, Callable 06/01/17 @ 100, 6.50%, 06/01/47 | 80,000 | 78,062 | ||||||
Kent State University, Public Improvements Revenue Bonds, Series A, Callable 05/01/22 @ 100, (OID), 4.00%, 05/01/32 | 500,000 | 526,645 | ||||||
Ohio Higher Educational Facilities Revenue, Refunding Revenue Bonds, Callable 07/01/20 @ 100, (OID), 5.00%, 07/01/44 | 250,000 | 269,567 | ||||||
Ohio Higher Educational Facilities Revenue, Hospital Improvements Revenue Bonds, Callable 01/15/15 @ 100, 7.00%, 01/15/39 | 250,000 | 283,225 | ||||||
1,546,474 | ||||||||
Oklahoma 0.16% |
| |||||||
Oklahoma Water Resources Board, Water Utility Improvements Revenue Bonds, Series A, Callable 04/01/22 @ 100, (OID), 3.50%, 04/01/36 | 250,000 | 256,153 | ||||||
Oregon 0.76% |
| |||||||
Medford Hospital Facilities Authority, Refunding Revenue Bonds, Callable 08/15/20 @ 100, (AGM), 5.00%, 08/15/21 | 100,000 | 115,136 |
32 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Oregon (cont.) |
| |||||||
Medford Hospital Facilities Authority, Refunding Revenue Bonds, Callable 08/15/20 @ 100, (AGM) (OID), 5.13%, 08/15/40 | $ | 250,000 | $ | 271,540 | ||||
Medford Hospital Facilities Authority, Refunding Revenue Bonds, Callable 08/15/20 @ 100, (AGM), 5.50%, 08/15/28 | 250,000 | 288,937 | ||||||
Oregon Health & Science University, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, (OID), 3.88%, 07/01/28 | 250,000 | 264,140 | ||||||
Oregon Health & Science University, Refunding Revenue Bonds, Series E, Callable 07/01/22 @ 100, 5.00%, 07/01/32 | 35,000 | 40,339 | ||||||
Oregon State Facilities Authority, Refunding Revenue Bonds, Series A, Callable 11/01/19 @ 100, 5.00%, 11/01/39 | 200,000 | 219,080 | ||||||
1,199,172 | ||||||||
Pennsylvania 2.46% |
| |||||||
City of Philadelphia, Refunding Bonds, General Obligation Unlimited, Callable 08/01/20 @ 100, (AGM) (OID), 5.25%, 08/01/26 | 135,000 | 153,872 | ||||||
City of Philadelphia, Refunding Bonds, General Obligation Unlimited, Callable 08/01/16 @ 100, (OID), 5.88%, 08/01/31 | 220,000 | 240,816 | ||||||
City of Philadelphia, Public Improvements Refunding Bonds, General Obligation Limited, Series B, Callable 07/15/16 @ 100, (OID), 7.13%, 07/15/38 | 750,000 | 863,767 | ||||||
Montgomery County Industrial Development Authority, Hospital Improvements Revenue Bonds, Callable 08/01/20 @ 100, (FHA), 5.38%, 08/01/38 | 500,000 | 576,990 | ||||||
Pennsylvania Higher Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 11/01/22 @ 100, (OID), 4.00%, 05/01/32 | 100,000 | 103,954 | ||||||
Pennsylvania Higher Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 11/01/22 @ 100, 5.00%, 05/01/37 | 100,000 | 111,846 | ||||||
Pennsylvania Higher Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 11/01/22 @ 100, 5.00%, 05/01/42 | 100,000 | 111,494 | ||||||
Pennsylvania Higher Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 08/15/21 @ 100, (OID), 5.25%, 08/15/26 | 240,000 | 285,125 | ||||||
Pennsylvania Higher Educational Facilities Authority, University & College Improvements Revenue Bonds, Callable 05/01/13 @ 100, (OID), 5.50%, 05/01/34 | 100,000 | 101,701 |
HIGH YIELD TAX FREE BOND FUND | 33 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Pennsylvania (cont.) |
| |||||||
Pennsylvania Housing Finance Agency, State Single-Family Housing Revenue, Series 114C, Callable 10/01/21 @ 100, 3.65%, 10/01/37 | $ | 250,000 | $ | 244,010 | ||||
Pennsylvania Turnpike Commission, Revenue Bonds, Series A, Callable 12/01/22 @ 100, 4.00%, 12/01/32 | 250,000 | 264,032 | ||||||
Philadelphia Municipal Authority, Public Improvements Revenue Bonds, Callable 04/01/19 @ 100, (OID), 6.38%, 04/01/29 | 250,000 | 290,732 | ||||||
Philadelphia Municipal Authority, Public Improvements Revenue Bonds, Callable 04/01/19 @ 100, (OID), 6.50%, 04/01/39 | 100,000 | 111,807 | ||||||
Sports & Exhibition Authority of Pittsburgh and Allegheny County, Recreational Facilities Improvements Revenue Bonds, Callable 08/01/22 @ 100, (AGM) (OID), 4.00%, 02/01/28 | 375,000 | 397,024 | ||||||
3,857,170 | ||||||||
Puerto Rico 12.27% |
| |||||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Callable 07/01/16 @ 100, 5.00%, 07/01/18 | 250,000 | 256,840 | ||||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Series A, Callable 07/01/18 @ 100, (OID), 5.00%, 07/01/22 | 250,000 | 251,548 | ||||||
Commonwealth of Puerto Rico, Public Improvements, General Obligation Unlimited, Series A, Callable 07/01/14 @ 100, 5.00%, 07/01/24 | 500,000 | 500,565 | ||||||
Commonwealth of Puerto Rico, Public Improvements, General Obligation Unlimited, Series A, Callable 07/01/14 @ 100, (CIFG-TCRS), 5.00%, 07/01/29 | 200,000 | 200,596 | ||||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Series A, Callable 07/01/22 @ 100, (OID), 5.13%, 07/01/37 | 225,000 | 213,140 | ||||||
Commonwealth of Puerto Rico, Public Improvements, General Obligation Unlimited, Series A, Callable 07/01/14 @ 100, 5.25%, 07/01/20 | 350,000 | 353,594 | ||||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Series A, Callable 07/01/22 @ 100, 5.25%, 07/01/24 | 300,000 | 304,026 | ||||||
Commonwealth of Puerto Rico, Public Improvements, General Obligation Unlimited, Series A, Callable 07/01/16 @ 100, 5.25%, 07/01/26 | 250,000 | 250,315 | ||||||
Commonwealth of Puerto Rico, Refunding Bonds, General Obligation Unlimited, Series A, Callable 07/01/21 @ 100, (AGM) (OID), 5.38%, 07/01/25 | 375,000 | 396,859 |
34 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Puerto Rico (cont.) |
| |||||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Series A, Callable 07/01/18 @ 100, (OID), 5.38%, 07/01/33 | $ | 250,000 | $ | 250,293 | ||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Series A, (NATL-RE), 5.50%, 07/01/19 | 500,000 | 533,380 | ||||||
Commonwealth of Puerto Rico, Refunding Bonds, General Obligation Unlimited, Series A, Callable 07/01/16 @ 100, (AGM), 6.00%, 07/01/33 | 350,000 | 365,064 | ||||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Series A, Callable 07/01/16 @ 100, (OID), 6.13%, 07/01/33 | 100,000 | 102,438 | ||||||
Commonwealth of Puerto Rico, Refunding Bonds, General Obligation Unlimited, Series A-4, Callable 01/01/20 @ 101, (AGM), 5.00%, 07/01/31 | 200,000 | 201,178 | ||||||
Commonwealth of Puerto Rico, Refunding Bonds, General Obligation Unlimited, Series B, Callable 07/01/14 @ 100, 5.88%, 07/01/36 | 100,000 | 100,728 | ||||||
Commonwealth of Puerto Rico, General Obligation Unlimited, Series C, Callable 07/01/21 @ 100, (AGM) (OID), 5.25%, 07/01/26 | 100,000 | 104,455 | ||||||
Commonwealth of Puerto Rico, Refunding Bonds, General Obligation Unlimited, Series C, Callable 07/01/16 @ 100, (AGM), 6.00%, 07/01/36 | 500,000 | 520,540 | ||||||
Commonwealth of Puerto Rico, Refunding Bonds, General Obligation Unlimited, Series C, Callable 07/01/19 @ 100, (OID), 6.00%, 07/01/39 | 1,385,000 | 1,418,572 | ||||||
Commonwealth of Puerto Rico, Public Improvements, General Obligation Unlimited, Series E, Callable 07/01/16 @ 100, (OID), 5.63%, 07/01/32 | 625,000 | 630,800 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding Revenue Bonds, Series A, 5.00%, 07/01/22 | 250,000 | 246,843 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, 5.00%, 07/01/30 | 250,000 | 233,408 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, (OID), 5.00%, 07/01/33 | 200,000 | 180,960 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, 5.25%, 07/01/29 | 250,000 | 240,918 |
HIGH YIELD TAX FREE BOND FUND | 35 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Puerto Rico (cont.) |
| |||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, (OID), 5.25%, 07/01/42 | $ | 530,000 | $ | 486,953 | ||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding Revenue Bonds, Series A, Callable 07/01/22 @ 100, 5.75%, 07/01/37 | 500,000 | 489,080 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Water & Utility Improvements, Revenue Bonds, Series A, Callable 07/01/18 @ 100, (OID), 6.00%, 07/01/38 | 500,000 | 501,385 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Water & Utility Improvements, Revenue Bonds, Series A, Callable 07/01/18 @ 100, (OID), 6.00%, 07/01/44 | 355,000 | 355,327 | ||||||
Puerto Rico Electric Power Authority, Electric Lights & Power Improvements, Revenue Bonds, Series CCC, Callable 07/01/20 @ 100, 5.00%, 07/01/28 | 250,000 | 247,873 | ||||||
Puerto Rico Electric Power Authority, Electric Lights & Power Improvements, Revenue Bonds, Series RR, Callable 07/01/15 @ 100, (AGM), 5.00%, 07/01/20 | 500,000 | 516,175 | ||||||
Puerto Rico Electric Power Authority, Electric Lights & Power Improvements, Revenue Bonds, Series XX, Callable 07/01/15 @ 100, (OID), 5.25%, 07/01/35 | 250,000 | 248,693 | ||||||
Puerto Rico Highway & Transportation Authority, Refunding Revenue Bonds, Series AA-1, Callable 07/01/20 @ 100, (AGM), 4.95%, 07/01/26 | 95,000 | 98,549 | ||||||
Puerto Rico Highway & Transportation Authority, Highway Improvements Revenue Bonds, Series D, Callable 02/11/13 @ 100, (AGM) (OID), 5.00%, 07/01/32 | 220,000 | 220,002 | ||||||
Puerto Rico Highway & Transportation Authority, Revenue Bonds, Series H, Callable 07/01/20 @ 100, 5.45%, 07/01/35 | 20,000 | 20,073 | ||||||
Puerto Rico Public Buildings Authority, Public Improvements, Revenue Bonds, Callable 07/01/14 @ 100, (Commonwealth Guaranteed) (GTD) (OID), 5.25%, 07/01/33 | 645,000 | 640,995 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series M, (Commonwealth Guaranteed) (GTD), 6.00%, 07/01/20 | 50,000 | 54,625 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series M, (Commonwealth Guaranteed) (GTD), 6.25%, 07/01/31 | 945,000 | 1,048,808 |
36 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Puerto Rico (cont.) |
| |||||||
Puerto Rico Public Buildings Authority, Economic Improvements Revenue Bonds, Series N, Callable 07/01/17 @ 100, (Commonwealth Guaranteed) (GTD), 5.50%, 07/01/20 | $ | 235,000 | $ | 244,170 | ||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series P, Callable 07/01/19 @ 100, (Commonwealth Guaranteed) (GTD) (OID), 6.25%, 07/01/26 | 460,000 | 486,064 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series P, Callable 07/01/19 @ 100, (Commonwealth Guaranteed) (GTD) (OID), 6.75%, 07/01/36 | 240,000 | 256,730 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series P, Callable 06/01/14 @ 100, (Commonwealth Guaranteed) (GTD), 7.00%, 07/01/25 | 250,000 | 257,080 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series Q, Callable 07/01/14 @ 100, (Commonwealth Guaranteed) (GTD), 6.00%, 07/01/38 | 100,000 | 100,791 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series U, (Commonwealth Guaranteed) (GTD), 5.00%, 07/01/21 | 180,000 | 183,366 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series U, (Commonwealth Guaranteed) (GTD), 5.00%, 07/01/22 | 185,000 | 186,809 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series U, Callable 07/01/22 @ 100, (Commonwealth Guaranteed) (GTD), 5.25%, 07/01/23 | 100,000 | 101,871 | ||||||
Puerto Rico Public Buildings Authority, Refunding Revenue Bonds, Series U, Callable 07/01/22 @ 100, (Commonwealth Guaranteed) (GTD) (OID), 5.25%, 07/01/42 | 925,000 | 874,698 | ||||||
Puerto Rico Sales Tax Financing Corp, Public Improvements Revenue Bonds, Subseries A, Callable 02/01/20 @ 100, 4.38%, 08/01/20 | 175,000 | 188,153 | ||||||
Puerto Rico Sales Tax Financing Corp, Public Improvements, Revenue Bonds, Subseries A, Callable 02/01/20 @ 100, 4.88%, 08/01/24 | 250,000 | 262,257 | ||||||
Puerto Rico Sales Tax Financing Corp, Public Improvements, Revenue Bonds, Subseries A, Callable 02/01/20 @ 100, (AGM) (OID), 5.00%, 08/01/40 | 250,000 | 264,317 | ||||||
Puerto Rico Sales Tax Financing Corp, Public Improvements Revenue Bonds, Subseries A, Callable 02/01/20 @ 100, (OID), 5.25%, 08/01/30 | 100,000 | 104,498 |
HIGH YIELD TAX FREE BOND FUND | 37 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Puerto Rico (cont.) |
| |||||||
Puerto Rico Sales Tax Financing Corp, Public Improvements Revenue Bonds, Subseries A, Callable 08/01/19 @ 100, (OID), 5.75%, 08/01/37 | $ | 420,000 | $ | 444,192 | ||||
Puerto Rico Sales Tax Financing Corp, Public Improvements Revenue Bonds, Subseries C, Callable 08/01/20 @ 100, (OID), 5.38%, 08/01/36 | 850,000 | 882,886 | ||||||
Puerto Rico Sales Tax Financing Corp, Public Improvements Revenue Bonds, Subseries C, Callable 08/01/20 @ 100, 6.00%, 08/01/39 | 1,500,000 | 1,608,210 | ||||||
19,231,690 | ||||||||
Rhode Island 1.28% |
| |||||||
Rhode Island Housing & Mortgage Finance Corp., Refunding Revenue Bonds, Callable 04/01/21 @ 100, 3.45%, 04/01/26 | 500,000 | 508,975 | ||||||
Rhode Island Housing & Mortgage Finance Corp., Refunding Revenue Bonds, Callable 04/01/21 @ 100, 4.10%, 10/01/37 | 155,000 | 157,488 | ||||||
Rhode Island Housing & Mortgage Finance Corp., Refunding Revenue Bonds, Series 1, Callable 04/01/20 @ 100, 5.38%, 10/01/35 | 215,000 | 226,773 | ||||||
Rhode Island Housing & Mortgage Finance Corp., Refunding Revenue Bonds, Series 1, Callable 04/01/20 @ 100, 5.88%, 10/01/51 | 250,000 | 271,345 | ||||||
Rhode Island Housing & Mortgage Finance Corp., Refunding Bonds, State Single-Family Housing Revenue Bonds, Series 5, Callable 04/01/22 @ 100, 3.45%, 04/01/35 | 250,000 | 244,285 | ||||||
Rhode Island Student Loan Authority, Refunding Revenue Bonds, Series A, Callable 12/01/19 @ 100, 6.35%, 12/01/30 | 500,000 | 563,540 | ||||||
Rhode Island Turnpike & Bridge Authority, Highway Improvements Revenue Bonds, Series A, Callable 12/01/20 @ 100, (OID), 5.00%, 12/01/39 | 35,000 | 38,219 | ||||||
2,010,625 | ||||||||
South Carolina 0.20% |
| |||||||
South Carolina Jobs-Economic Development Authority, Refunding Revenue Bonds, Callable 08/01/14 @ 100, (OID), 5.75%, 08/01/36 | 250,000 | 262,150 | ||||||
South Carolina Jobs-Economic Development Authority, Refunding Revenue Bonds, Callable 08/01/19 @ 100, (OID), 5.75%, 08/01/39 | 50,000 | 56,649 | ||||||
318,799 |
38 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
South Dakota 0.44% |
| |||||||
City of Sioux Falls Sales Tax Revenue, Public Improvements Revenue Bonds, Series A, Callable 11/15/22 @ 100, (OID), 3.25%, 11/15/30 | $ | 575,000 | $ | 577,403 | ||||
South Dakota Housing Development Authority, State Single-Family Housing Revenue Bonds, Series B, Callable 05/01/19 @ 100, 4.70%, 05/01/27 | 100,000 | 105,710 | ||||||
683,113 | ||||||||
Tennessee 0.15% |
| |||||||
Metropolitan Government of Nashville & Davidson County Convention Center Authority, Public Improvements Revenue Bonds, Series A-1, Callable 07/01/20 @ 100, 5.00%, 07/01/26 | 200,000 | 228,388 | ||||||
Texas 5.05% |
| |||||||
City of Corpus Christi Utility System Revenue, Water & Utility Improvements, Refunding Revenue Bonds, Callable 07/15/22 @ 100, 5.00%, 07/15/42 | 250,000 | 279,735 | ||||||
City of Houston Refunding Revenue Bonds, Series A, Callable 09/01/21 @ 100, 5.25%, 09/01/29 | 500,000 | 559,300 | ||||||
Fort Bend Grand Parkway Toll Road Authority, Refunding Revenue Bonds, Callable 03/01/22 @ 100, 4.00%, 03/01/46 | 250,000 | 256,750 | ||||||
Harris County Cultural Education Facilities Finance Corp., Refunding Revenue Bonds, Callable 10/01/19 @ 100, (OID), 4.75%, 10/01/25 | 175,000 | 197,776 | ||||||
Harris County Cultural Education Facilities Finance Corp., Refunding Revenue Bonds, 5.00%, 10/01/19 | 100,000 | 120,650 | ||||||
Harris County Cultural Education Facilities Finance Corp., Refunding Revenue Bonds, Callable 11/15/22 @ 100, 5.00%, 11/15/37 | 1,500,000 | 1,690,260 | ||||||
North Texas Tollway Authority, Refunding Revenue Bonds, Callable 01/01/21 @ 100, (OID), 6.00%, 01/01/38 | 100,000 | 117,755 | ||||||
North Texas Tollway Authority, Refunding Revenue Bonds, Series F, Callable 01/01/16 @ 100, 6.13%, 01/01/31 | 1,250,000 | 1,344,275 | ||||||
Red River Education Financing Corp, University & College Improvements Revenue Bonds, Callable 03/15/20 @ 100, (OID), 4.38%, 03/15/41 | 500,000 | 528,905 | ||||||
San Antonio Public Facilities Corp., Public Improvements, Refunding Revenue Bonds, Callable 09/15/22 @ 100, (OID), 4.00%, 09/15/42 | 250,000 | 252,798 |
HIGH YIELD TAX FREE BOND FUND | 39 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Texas (cont.) |
| |||||||
Schertz-Seguin Local Government Corp., Water Utility Improvements Revenue Bonds, Callable 02/01/19 @ 100, (AGM) (OID), 4.75%, 02/01/38 | $ | 100,000 | $ | 105,775 | ||||
Tarrant County Cultural Education Facilities Finance Corp., Hospital Improvements Revenue Bonds, Series B, (OID), 4.50%, 09/01/19 | 100,000 | 111,804 | ||||||
Tarrant County Cultural Education Facilities Finance Corp., Hospital Improvements Revenue Bonds, Series B, Callable 09/01/19 @ 100, (OID), 5.13%, 09/01/25 | 100,000 | 112,928 | ||||||
Tarrant County Cultural Education Facilities Finance Corp., Hospital Improvements Revenue Bonds, Series B, Callable 09/01/14 @ 100, (OID), 5.38%, 09/01/30 | 1,000,000 | 1,037,610 | ||||||
Tarrant County Health Facilities Development Corp., Hospital Improvements Revenue Bonds, 5.00%, 12/01/16 | 50,000 | 56,884 | ||||||
Tarrant County Health Facilities Development Corp., Hospital Improvements Revenue Bonds, Callable 12/01/19 @ 100, 5.00%, 12/01/23 | 100,000 | 113,059 | ||||||
Texas A&M University, Refunding Revenue Bonds, Series B, Callable 05/15/20 @ 100, 5.00%, 05/15/39 | 100,000 | 113,902 | ||||||
Texas State Public Finance Authority Charter School Finance Corp., Refunding Revenue Bonds, Series A, Callable 02/15/14 @ 100, (ACA), 5.00%, 02/15/36 | 900,000 | 913,302 | ||||||
7,913,468 | ||||||||
Utah 0.14% |
| |||||||
Utah Housing Corp., State Single-Family Housing Revenue, Series A1 , Callable 01/01/21 @ 100, 5.25%, 01/01/25 | 95,000 | 104,624 | ||||||
Utah Housing Corp., State Single-Family Housing Revenue, Series A1 , Callable 01/01/21 @ 100, 5.75%, 01/01/33 | 100,000 | 110,145 | ||||||
214,769 | ||||||||
Vermont 0.16% |
| |||||||
Vermont Housing Finance Agency, Refunding Bonds, State Multi-Family Housing Revenue Bonds, Series B, Callable 08/15/22 @ 100, 3.75%, 08/15/37 | 250,000 | 246,038 | ||||||
Virgin Islands 0.07% |
| |||||||
Virgin Islands Public Finance Authority, Refunding Revenue Bonds, Callable 10/01/19 @ 100, 5.00%, 10/01/25 | 100,000 | 109,942 |
40 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Virginia 0.14% |
| |||||||
Virginia Housing Development Authority, State Single-Family Housing Revenue, Series E, Callable 04/01/20 @ 100, (GO OF AUTH), 4.50%, 10/01/45 | $ | 215,000 | $ | 220,601 | ||||
Washington 0.87% |
| |||||||
Washington Health Care Facilities Authority, Revenue Bonds, Callable 11/01/19 @ 100, 5.00%, 11/01/28 | 250,000 | 271,315 | ||||||
Washington Health Care Facilities Authority, Hospital Improvements Revenue Bonds, Callable 10/01/19 @ 100, (OID), 5.63%, 10/01/38 | 500,000 | 572,975 | ||||||
Washington State Housing Finance Commission, State Single-Family Housing Revenue, Series 2N, Callable 06/01/19 @ 100, (Freddie Mac) (Fannie Mae) (Ginnie Mae), 4.70%, 06/01/36 | 500,000 | 521,320 | ||||||
1,365,610 | ||||||||
West Virginia 0.98% |
| |||||||
West Virginia Hospital Finance Authority, Hospital Improvements Revenue Bonds, 5.00%, 09/01/19 | 250,000 | 273,955 | ||||||
West Virginia Hospital Finance Authority, Hospital Improvements Revenue Bonds, Callable 09/01/19 @ 100, (OID), 5.63%, 09/01/32 | 200,000 | 219,802 | ||||||
West Virginia Water Development Authority, Refunding Revenue Bonds, Callable 10/01/22 @ 100, 4.00%, 10/01/39 | 1,000,000 | 1,040,930 | ||||||
1,534,687 | ||||||||
Wisconsin 1.26% |
| |||||||
Wisconsin Health & Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 08/15/16 @ 100, 5.25%, 08/15/18 | 400,000 | 455,292 | ||||||
Wisconsin Health & Educational Facilities Authority, Hospital Improvements Revenue Bonds, Callable 08/15/16 @ 100, 5.25%, 08/15/31 | 100,000 | 106,940 | ||||||
Wisconsin Housing & Economic Development Authority, State Multi-Family Housing Revenue Bonds, Series A, Callable 05/01/20 @ 100, (GO OF AUTH) (OID), 5.63%, 11/01/35 | 100,000 | 112,726 | ||||||
Wisconsin State Health & Educational Facilities Authority Revenue, Hospital Improvements Revenue Bonds, Callable 04/15/15 @ 100, (OID), 5.63%, 04/15/33 | 100,000 | 106,766 |
HIGH YIELD TAX FREE BOND FUND | 41 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Wisconsin (cont.) |
| |||||||
Wisconsin State Health & Educational Facilities Authority Revenue, Refunding Revenue Bonds, Series A, Callable 07/15/21 @ 100, (AGM), 5.00%, 07/15/27 | $ | 1,050,000 | $ | 1,189,272 | ||||
1,970,996 | ||||||||
Wyoming 0.33% |
| |||||||
Wyoming Community Development Authority, Refunding Revenue Bonds, Series 2, Callable 12/01/21 @ 100, 4.25%, 12/01/37 | 500,000 | 510,405 | ||||||
Total Municipal Bonds |
| |||||||
(Cost $144,695,828) | 154,454,413 | |||||||
Money Market 0.38% |
| |||||||
Federated Municipal Obligations Fund, 0.05% | 596,940 | 596,940 | ||||||
Total Money Market |
| |||||||
(Cost $596,940) | 596,940 | |||||||
Total Investments – 98.89% | ||||||||
(Cost $145,292,768*) | 155,051,353 | |||||||
Other Assets in Excess of Liabilities – 1.11% | 1,741,618 | |||||||
|
| |||||||
NET ASSETS – 100.00% | $ | 156,792,971 |
ACA - Insured by ACA Financial Guaranty Corp.
AGM - Assured Guaranty Municipal Corp.
AMBAC - American Municipal Bond Assurance Corp.
BHAC-CR - Berkshire Hathaway Assurance Corp. Custodial Receipts
CIFG - Capitalized Interest Financial Guaranty
FGIC - Financial Guaranty Insurance Co.
FHA - Insured by Federal Housing Administration.
FSA - Financial Security Assurance.
GO - General Obligation
GTD - Guaranteed
INS - Insured
MBIA - Municipal Bond Insurance Association
NATL-RE - Insured by National Public Finance Guarantee Corp.
OID - Original Issue Discount
TCRS - Transferable Custodial Receipts
* | Aggregate cost for federal income tax purpose is $145,295,328, and net unrealized appreciation consists of: |
Gross unrealized appreciation | $ | 10,311,672 | ||
Gross unrealized depreciation | (555,647 | ) | ||
Net unrealized appreciation | $ | 9,756,025 |
42 | SPIRIT OF AMERICA |
STATEMENT OF ASSETS AND LIABILITIES | DECEMBER 31, 2012 |
ASSETS | ||||
Investments in securities at value (cost $145,292,768) (Note 1) | $ | 155,051,353 | ||
Receivable for Fund shares sold | 502,805 | |||
Dividends and interest receivable | 2,072,708 | |||
Prepaid expenses | 32,221 | |||
TOTAL ASSETS | 157,659,087 | |||
LIABILITIES | ||||
Payable for investments purchased | 526,178 | |||
Payable for Fund shares redeemed | 120,134 | |||
Payable for investment advisory fees | 42,562 | |||
Payable for accounting and administration fees | 8,193 | |||
Payable for distributions to shareholders | 68,077 | |||
Payable for distribution fees (Note 3) | 19,845 | |||
Payable to custodian | 4,000 | |||
Payable for audit fees | 17,100 | |||
Payable for transfer agent fees | 11,562 | |||
Payable for printing fees | 25,817 | |||
Other accrued expenses | 22,648 | |||
TOTAL LIABILITIES | 866,116 | |||
NET ASSETS | $ | 156,792,971 | ||
Net assets applicable to 15,549,095 shares outstanding, $0.001 par value (500,000,000 authorized shares) | $ | 156,792,971 | ||
Net asset value and redemption price per share ($156,792,971 ÷ 15,549,095 shares) | $ | 10.08 | ||
Maximum offering price per share ($10.08÷ 0.9525) | $ | 10.58 | ||
SOURCE OF NET ASSETS | ||||
As of December 31 2012, net assets consisted of: | ||||
Paid-in capital | $ | 147,559,767 | ||
Accumulated net realized loss on investments | (525,381 | ) | ||
Net unrealized appreciation on investments | 9,758,585 | |||
NET ASSETS | $ | 156,792,971 |
see accompanying notes to financial statements.
HIGH YIELD TAX FREE BOND FUND | 43 |
STATEMENT OF OPERATIONS |
For the Year Ended | ||||
INVESTMENT INCOME | ||||
Interest | $ | 6,419,689 | ||
TOTAL INVESTMENT INCOME | 6,419,689 | |||
EXPENSES | ||||
Investment Advisory fees (Note 3) | 782,592 | |||
Distribution fees (Note 3) | 195,649 | |||
Accounting and Administration fees | 190,814 | |||
Auditing fees | 17,100 | |||
Chief Compliance Officer salary (Note 3) | 6,177 | |||
Custodian fees | 38,136 | |||
Directors’ fees | 12,338 | |||
Insurance expense | 31,758 | |||
Legal fees | 14,013 | |||
Printing expense | 54,683 | |||
Registration fees | 9,818 | |||
Transfer Agent fees | 136,832 | |||
Other expenses | 6,141 | |||
TOTAL EXPENSES | 1,496,051 | |||
Fees waived and reimbursed by Adviser (Note 3) | (320,358 | ) | ||
NET EXPENSES | 1,175,693 | |||
NET INVESTMENT INCOME | 5,243,996 | |||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||||
Net realized gain from investment transactions | 956,102 | |||
Net change in unrealized appreciation/depreciation of investments | 4,024,487 | |||
Net realized and unrealized gain on investments | 4,980,589 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 10,224,585 |
See accompanying notes to financial statements.
44 | SPIRIT OF AMERICA |
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended | For the Year Ended | |||||||
OPERATIONS |
| |||||||
Net investment income | $ | 5,243,996 | $ | 5,034,060 | ||||
Net realized gain (loss) on investment transactions | 956,102 | (682,303 | ) | |||||
Net change in unrealized appreciation/depreciation of investments | 4,024,487 | 6,974,854 | ||||||
Net increase in net assets resulting from operations | 10,224,585 | 11,326,611 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS |
| |||||||
Distributions from net investments income | (5,243,996 | ) | (5,034,061 | ) | ||||
Total distributions to shareholders | (5,243,996 | ) | (5,034,061 | ) | ||||
CAPITAL SHARE TRANSACTIONS (Dollar Activity) |
| |||||||
Shares Sold | 63,907,954 | 33,309,253 | ||||||
Shares issued from reinvestment of distributions | 3,378,564 | 3,266,808 | ||||||
Shares redeemed | (17,951,481 | ) | (30,645,335 | ) | ||||
Increase in net assets derived from capital share transactions | 49,335,037 | 5,930,726 | ||||||
Total Increase in net assets | 54,315,626 | 12,223,276 | ||||||
NET ASSETS |
| |||||||
Beginning of period | 102,477,345 | 90,254,069 | ||||||
End of period | $ | 156,792,971 | $ | 102,477,345 | ||||
Transactions in capital stock were: |
| |||||||
Shares sold | 6,370,398 | 3,588,339 | ||||||
Shares issued from reinvestment of distributions | 336,946 | 354,418 | ||||||
Shares redeemed | (1,792,140 | ) | (3,296,904 | ) | ||||
Increase in shares outstanding | 4,915,204 | 645,853 |
See accompanying notes to financial statements.
HIGH YIELD TAX FREE BOND FUND | 45 |
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period presented.
For the Year Ended | For the Year Ended December 31, 2011 | For the Year Ended December 31, 2010 | For the Year Ended December 31, 2009 | For the Period Ended December 31, 2008 * | ||||||||||||||||
Net asset value, beginning of period | $ | 9.64 | $ | 9.04 | $ | 9.31 | $ | 7.59 | $ | 10.00 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.41 | 0.49¹ | 0.51¹ | 0.55¹ | 0.47¹ | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.44 | 0.60 | (0.27 | ) | 1.73 | (2.41 | ) | |||||||||||||
Total income (loss) from investment operations | 0.85 | 1.09 | 0.24 | 2.28 | (1.94 | ) | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Distributions from net investment income | (0.41 | ) | (0.49 | ) | (0.51 | ) | (0.56 | ) | (0.47 | ) | ||||||||||
Total distributions | (0.41 | ) | (0.49 | ) | (0.51 | ) | (0.56 | ) | (0.47 | ) | ||||||||||
Net asset value, end of period | $ | 10.08 | $ | 9.64 | $ | 9.04 | $ | 9.31 | $ | 7.59 | ||||||||||
Total Return ² | 8.91 | % | 12.41 | % | 2.44 | % | 30.78 | % | (20.05 | )%4 | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000) | $ | 156,793 | $ | 102,477 | $ | 90,254 | $ | 67,929 | $ | 22,974 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense reimbursement or recapture | 1.15 | % | 1.20 | % | 1.22 | % | 1.41 | % | 1.84 | %³ | ||||||||||
After expense reimbursement or recapture | 0.90 | % | 0.90 | % | 0.90 | % | 0.90 | % | 0.30 | %³ | ||||||||||
Ratio of net investment income to average net assets | 4.01 | % | 5.28 | % | 5.32 | % | 6.22 | % | 6.42 | %³ | ||||||||||
Portfolio turnover | 12.92 | % | 23.10 | % | 8.66 | % | 5.87 | % | 6.63 | %4 |
1 Calculated based on the average number of shares outstanding during the period.
2 Calculation does not reflect sales load.
3 Calculation is annualized.
4 Calculation is not annualized.
* The Fund commenced operations on February 29, 2008.
See accompanying notes which are an integral part of the financial statements.
46 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS | DECEMBER 31, 2012 |
Note 1 – Significant Accounting Policies
Spirit of America High Yield Tax Free Bond Fund (the “Fund”), a series of Spirit of America Investment Fund, Inc. (the “Company”), is an open-end non-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 February 29, 2008. The Fund seeks high current income that is exempt from federal income tax, investing at least 80% of its assets in municipal bonds. 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 (“NAV”) per share for the Fund are calculated as of the close of regular trading on the New York Stock Exchange (“NYSE”), currently 4:00 p.m., Eastern Time on each day the NYSE is open for trading. 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 (the “Board”) 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.
B. Fair Value Measurements: Various inputs are used in determining the fair value of investments which are as follows:
• Level 1 – | Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access at the measurement date. | |
• Level 2 – | Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. | |
• Level 3 – | Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
HIGH YIELD TAX FREE BOND FUND | 47 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
The summary of inputs used to value the Fund’s net assets as of December 31, 2012 is as follows:
High Yield Tax Free Bond Fund
Valuation Inputs | ||||
Level 1—Quoted Prices | $ | 596,940 | ||
Level 2—Other Significant Observable Inputs * | 154,454,413 | |||
Level 3—Significant Unobservable Inputs | — | |||
|
| |||
Total Market Value of Investments | $ | 155,051,353 | ||
|
| |||
* Security Types as defined in the Schedule of Investments |
During the year ended December 31, 2012, the Fund recognized no transfers to/from Level 1 or Level 2.
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2011-11 related to disclosures about offsetting assets and liabilities. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Management is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.
C. 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. Discounts and premiums on securities purchased are accreted and amortized over the lives of the respective securities using the effective yield method. Dividend income and distributions to shareholders are reported on the ex-dividend date. Interest income and expenses are accrued daily.
D. 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.
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 distributions will be declared daily and paid monthly. Capital gains, if any, will be distributed annually in December, but may be distributed more frequently if deemed advisable by the Board. All such distributions are taxable to the shareholders whether received in cash or reinvested in shares.
Note 2 – Purchases and Sales of Securities
Purchases and proceeds from the sales of securities for the year ended December 31, 2012, excluding short-term investments, were $65,656,190 and $16,614,255, respectively.
48 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Note 3 – Investment Management Fee and Other Transactions with Affiliates
Spirit of America Management Corp. (the “Adviser”) has been retained to act as the Company’s investment adviser pursuant to an Investment Advisory Agreement (the “Advisory Agreement”). The Adviser 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 the Adviser a monthly fee of 1/12 of 0.60% of the Fund’s average daily net assets. Investment advisory fees for the year ended December 31, 2012 were $782,592.
The Adviser has contractually agreed to waive advisory fees and/or reimburse expenses so that the total operating expenses will not exceed 0.90% of the average daily net assets of the Fund through April 30, 2013. For the year ended December 31, 2012, the Adviser reimbursed the Fund $320,358.
Any amounts waived or reimbursed by the Adviser are subject to reimbursement by the Fund within the following three years, provided the Fund is able to make such reimbursement and remain in compliance with the expense limitation as stated above. The balance of recoverable expenses to the Adviser as of December 31, 2012 was $878,522. Of this balance, $267,931 will expire in 2013, $290,233 will expire in 2014, and $320,358 will expire in 2015.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 (the “Plan”). The Plan permits the Fund to pay David Lerner Associates, Inc. (the “Distributor”) a monthly fee of 1/12 of 0.15% of the Funds average daily net assets for the Distributor’s services and expenses in distributing shares of the Fund and providing personal services and/or maintaining shareholder accounts. For the year ended December 31, 2012, fees paid to the Distributor under the Plan were $195,649.
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 year ended December 31, 2012, sales charges received by the Distributor were $3,108,537. A contingent deferred sales charge (“CDSC”) of 1.00% may be imposed on redemptions of $1 million or more made within one year of purchase. Certain redemptions made within seven years of purchase are subject to a CDSC, in accordance with the Fund’s current prospectus.
Certain Officers and Directors of the Company are “affiliated persons,” as that term is defined in the 1940 Act, of the Adviser or the Distributor. Each Director of the Company, who is not an affiliated person of the Adviser or Distributor, receives a quarterly retainer of $3,500, $1,000 for each Board meeting attended, and $500 for each committee meeting attended plus reimbursement for certain travel and other out-of-pocket expenses incurred in connection with attending Board meetings. The Company does not compensate the Officers for the services they provide. There are no Directors’ fees paid to affiliated Directors of the Company. For the year ended December 31, 2012, the Fund was allocated $6,177 of the Chief Compliance Officer’s salary.
Note 4 – Concentration and Other Risks
The Fund is non-diversified such that the Fund may invest a larger percentage of its assets in a given security than a diversified fund.
The Fund’s performance could be adversely affected by interest rate risk, which is the possibility that overall bond prices will decline because of rising interest rates. Interest rate risk is expected to be
HIGH YIELD TAX FREE BOND FUND | 49 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
high for the Fund because it invests mainly in long-term bonds, whose prices are much more sensitive to interest fluctuations than are the prices of short-term bonds.
The Fund may be affected by credit risk, which is the possibility that the issuer of a bond will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. This risk may be greater to the extent that the Fund may invest in junk bonds.
The Fund may be affected by credit risk of lower grade securities, which is the possibility that municipal securities rated below investment grade, or unrated of similar quality, (frequently called “junk bonds”), may be subject to greater price fluctuations and risks of loss of income and principal than investment-grade municipal
securities. Securities that are (or that have fallen) below investment-grade have a greater risk that the issuers may not meet their debt obligations. These types of securities are generally considered speculative in relation to the issuer’s ongoing ability to make principal and interest payments. During periods of rising interest rates or economic downturn, the trading market for these securities may not be active and may reduce the Fund’s ability to sell these securities at an acceptable price. If the issuer of securities is in default in payment of interest or principal, the Fund may lose its entire investment in those securities.
Other risks include income risk, liquidity risk, municipal project specific risk, municipal lease obligation risk, zero coupon securities risk, market risk, manager risk, taxability risk, state-specific risk and exchange traded funds risk.
Note 5 – Federal Income Taxes
The tax character of distributions paid during the years ended December 31, 2012 and 2011 were as follows:
Tax Basis Distributions
Ordinary Income | Tax Exempt Income | Net Capital Gains | Total Distributions | |||||||||||||
12/31/2012 | $ | 293,885 | $ | 4,950,111 | $ | 0 | $ | 5,243,996 | ||||||||
12/31/2011 | $ | 576,209 | $ | 4,457,852 | $ | 0 | $ | 5,034,061 |
Distribution classifications may differ from the Statement of Changes in Net Assets as a result of the treatment of short-term capital gains as ordinary income for tax purposes.
At December 31, 2012, the components of accumulated distributable earnings for the Fund on a tax basis were as follows:
Capital Loss Carryforward | $ | (522,821 | ) | |
Deferred Post-October Losses | ||||
Unrealized depreciation | 9,756,025 | |||
|
| |||
Total Distributable Earnings | $ | 9,233,204 | ||
|
|
50 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
At December 31, 2012, the Fund had net capital loss carryforwards for federal income tax purposes of $522,821, of which all are available to reduce future required distributions of net capital gains to shareholders through 2017.
Management has analyzed the Fund’s tax positions taken on open federal income tax returns for the four year period ended December 31, 2012, and has concluded that no provision for federal income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6 – Other Matters
On May 27, 2011, the Financial Industry Regulatory Authority (“FINRA”) filed a complaint against David Lerner Associates, Inc. (“DLA”), the Funds’ principal underwriter and distributor, related to its sales practices in connection with its role as managing dealer of an unaffiliated Real Estate Investment Trust offering, Apple REIT Ten, Inc. (“Apple REIT”). In June 2011, several class action complaints were filed against DLA, Apple REIT entities and certain individuals, also in connection with the sale of various Apple REIT securities. In January 2012, FINRA amended its complaint to include allegations of false and misleading communications with the public in connection with certain correspondence with customers and investment seminars; and added David Lerner as an individual respondent. Neither the Company nor any of the Funds are a party to any of the above listed investigations or actions.
On May 7, 2010, each of William Mason, the Portfolio Manager for the Income Fund and DLA, the Funds’ principal underwriter and distributor, received a Notice of Complaint
from the Department of Enforcement of FINRA dated May 7, 2010, relating to Mr. Mason’s activities as head of the fixed income trading department of DLA and DLA’s activities as a municipal securities and collateralized mortgage obligations dealer. The Complaint alleges that each of Mr. Mason and DLA had violated certain NASD and Municipal Securities Rule Making Board fair pricing rules relating to the period January 1, 2005 through January 31, 2007. On April 4, 2012, a FINRA hearing panel issued a decision in this matter and assessed monetary fines and other sanctions against DLA and Mr. Mason, including a suspension of Mr. Mason from association with a FINRA member firm for six (6) months. Both DLA and Mr. Mason appealed the decision.
On October 22, 2012, DLA, Mr. Lerner and Mr. Mason settled all of the above listed FINRA investigations and actions involving Apple REIT securities and municipal bond and collateralized mortgage obligation pricing. In connection with the settlement, DLA, Mr. Lerner and Mr. Mason each agreed, among other things, to pay a fine; and, Mr. Lerner and Mr. Mason each agreed to temporary suspensions from affiliation with DLA. The fines and suspension do not involve the Company, any of the Funds, or the adviser to the Funds. While there can be no assurance that the fines and/or suspensions will not: a) materially and adversely impact DLA’s ability to act as the Fund’s principal underwriter and distributor; and/or b) materially and adversely affect Mr. Mason’s ability to act as the Portfolio Manager for the Income Fund, it is not considered likely at this time that such material and adverse effects would occur.
Note 7 – Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund and has determined that there were no events that require recognition or disclosure in the financial statements.
HIGH YIELD TAX FREE BOND FUND | 51 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Tax Information (Unaudited)
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
Exempt Interest Dividends
For the period ended December 31, 2012, in accordance with the Internal Revenue Code 852 (b)(5), the Fund qualifies to designate $4,950,110 as exempt-interest dividends. Shareholders may treat these distributions as excludable from gross income per Internal Revenue Code 103(a).
Qualified Interest Income
For the year ended December 31, 2012, 100% of the distributions paid by the Fund from ordinary income are designated as qualified interest income pursuant to The American Jobs Creation Act of 2004.
52 | SPIRIT OF AMERICA |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Spirit of America High Yield Tax Free Bond Fund 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 High Yield Tax Free Bond Fund (the “Fund”), a series of shares of beneficial interest in Spirit of America Investment Fund, Inc., including the schedule of investments as of December 31, 2012, 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 four years in the period then ended and the period February 29, 2008 (commencement of operations) to December 31, 2008. 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 its 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Spirit of America High Yield Tax Free Bond Fund as of December 31, 2012, 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 four years in the period then ended and the period February 29, 2008 to December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 26, 2013
HIGH YIELD TAX FREE BOND FUND | 53 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT | DECEMBER 31, 2012 |
Approval of the Investment Advisory Agreement (Unaudited)
The Investment Company Act of 1940, as amended (the “1940 Act”), requires that the continuance of a registered management investment company’s investment advisory agreement be approved annually by both the board of directors and also by a majority of its directors who are not parties to the investment advisory agreement or “interested persons” (as defined by the 1940 Act) of any such party (the “Independent Directors”). At a meeting held on November 28, 2012, the Board of Directors (the “Board” or “Directors”) of Spirit of America Investment Fund, Inc. (the “Company”) met in person (the “Meeting”) to, among other things, review and consider the approval of the Investment Advisory Agreement (the “Advisory Agreement”) by and between Spirit of America Management Corp. (the “Adviser”) and the Company, on behalf of Spirit of America Real Estate Income and Growth Fund, Spirit of America Large Cap Value Fund, Spirit of America High Yield Tax Free Bond Fund and Spirit of America Income Fund (collectively, the “Funds”). At the Meeting, the Board, including the Independent Directors, voting separately, approved the Advisory Agreement after determining that the Adviser’s compensation, pursuant to the terms of the Advisory Agreement, would be fair and reasonable and concluded that the approval of the Advisory Agreement would be in the best interest of the Funds’ shareholders. The Board’s approval was based on consideration and evaluation of the information and material provided to the Board and a variety of specific factors discussed at the Meeting and at prior
meetings of the Board, including the factors described below.
As part of the approval process and oversight of the advisory relationship, counsel to the Independent Directors (“Independent Counsel”) sent an information request letter to the Adviser seeking certain relevant information and the Directors received, for their review in advance of the Meeting, the Adviser’s responses. In addition, the Directors were provided with the opportunity to request any additional materials. In advance of the Meeting, the Board, including the Independent Directors, requested and received materials provided by the Adviser and Independent Counsel, including, among other things, the following: (i) Independent Counsel’s 15(c) questionnaire and the responses provided by the Adviser; (ii) information on the investment performance of the Funds and relevant indices over various time periods; (iii) sales and redemption data with respect to the Funds; (iv) the general investment outlook in the markets in which the Funds invest; (v) arrangements with respect to the distribution of the Funds’ shares; (vi) the procedures employed to determine the value of each Fund’s assets; (vii) the allocation of the Funds’ brokerage, the record of compliance with the Funds’ investment policies and restrictions and with the Funds’ Code of Ethics and the structure and responsibilities of the Adviser’s compliance departments; (viii) the profitability of the Funds’ investment advisory business to the Adviser taking into account both advisory fees and any other potential direct or
54 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
indirect benefits; (ix) information comparing the overall fees and specifically the fees under the Advisory Agreement with the fees paid by other similar mutual funds; (x) the Form ADV of the Adviser; and (xi) information comparing the performance of the Funds with the performance of other similar mutual funds; and (xii) a memorandum from Independent Counsel regarding the responsibilities of the Independent Directors related to the approval of the Investment Advisory Agreement.
In evaluating the Advisory Agreement, the Board, including the Independent Directors, requested, reviewed and considered materials furnished by the Adviser and questioned personnel of the Adviser, including the Funds’ portfolio managers, regarding, among other things, the personnel, each Fund’s performance, and operations and financial condition of the Adviser. Among other information, the Board, including the Independent Directors, requested and was provided information regarding:.
• | The investment performance of each Fund over various time periods both by itself and in relation to relevant indices; |
• | The fees charged by the Adviser for investment advisory services, as well as the compensation received by the Adviser and its affiliates; |
• | The waivers of fees and reimbursements of expenses at times by the Adviser under the Operating Expenses Agreement;. |
• | The investment performance, fees and total expenses of mutual funds with similar objectives and strategies managed by other investment advisers; |
• | The investment management staffing and the experience of the investment advisory, administrative and other personnel providing services to the Funds and the historical quality of the services provided by the Adviser; and |
• | The profitability to the Adviser of managing and its affiliate distributing the Funds and the methodology in allocating expenses to the management of the Funds. |
At the Meeting, Independent Counsel also referred the Board to the “Gartenberg Memorandum” which had been distributed to each Director in advance of the Meeting, outlining the legal standards applicable to the Independent Directors under the 1940 Act with respect to the approval of the continuation of the investment advisory agreements on behalf of each of the Funds. In addition, the Independent Directors met at length with Independent Counsel in executive session during the reconvening of the Meeting, outside the presence of Company management, to discuss the materials provided by the Adviser and to consider any additional questions they had of the Adviser.
The following is a summary of the Board’s discussion and views regarding the factors it considered in evaluating the continuation of the Advisory Agreement:
1. Nature, Extent, and Quality of Services.
The Board, including the Independent Directors, considered the nature, quality and extent of advisory, administrative and shareholder services performed by the Adviser, including: regulatory filings and disclosure to shareholders, general oversight of the service providers,
HIGH YIELD TAX FREE BOND FUND | 55 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
coordination of Fund marketing initiatives, review of Fund legal issues, assisting the Board, including the Independent Directors, in their capacity as directors and other services. The Board, including the Independent Directors, noted the increased responsibilities of the Adviser in response to an increasingly regulated industry. The Board, including the Independent Directors, concluded that the services are extensive in nature, that the Adviser delivered a high level of service to each Fund and that the Adviser is positioned to continue providing such quality of service in the future.
2. Investment Performance of the Funds and the Adviser.
The Board, including the Independent Directors, considered short-term and long-term investment performance for the Funds over various periods of time as compared to both relevant indices and the performance of such Funds’ peer groups, and concluded that each Fund was delivering reasonable performance results, especially over the long-term, consistent with the investment strategies that the Funds pursue.
3. Costs of Services and Profits Realized by the Adviser.
a. The Board, including the Independent Directors, considered the information provided by Lipper Inc. regarding each Fund’s management fee rate and overall expense ratio relative to industry averages for the Fund’s peer group category and the advisory fees charged by the Adviser to other accounts. The Board viewed favorably the current and historic
willingness of the Adviser to limit the overall expense ratios of the Funds. Recognizing that the fees paid by the Funds were higher than the medians in their peer groups, the Board nonetheless noted that the fees were still close to the median and that several peer funds had higher fees.
b. Profitability and Costs of Services to the Adviser. The Board, including the Independent Directors, considered estimates of the Adviser’s profitability and costs attributable to the Funds. The Board recognized that increased fixed costs, particularly legal and audit fees in response to increasing regulations, have a greater impact on smaller fund families, such as the Funds, than on larger fund complexes. Given this, the Board recognized that the Funds’ overall expenses compare unfavorably to some funds identified as peers. The Board also considered whether the amount of the Adviser’s profit is a fair profit for the management of the Funds and noted that the Adviser has devoted a large amount of its resources into the Funds over the years. The Board, including the Independent Directors, concluded that the Adviser’s profitability was at a fair and acceptable level, particularly in light of the quality of the services being provided to the Funds, and bore a reasonable relationship to the services rendered.
4. Extent of Economies of Scale as the Funds Grow.
The Board, including the Independent Directors, considered whether there have been economies of scale with respect to the management of the Funds and whether the Funds have appropriately benefited from any economies of scale. Given the size of
56 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
each Fund, the Board did not believe that significant (if any) economies of scale have been achieved at this time.
5. Whether Fee Levels Reflect Economies of Scale.
The Board took into consideration that the Adviser does not currently offer breakpoints in its fees that would otherwise allow investors to benefit directly from economies of scale in the form of lower fees as fund assets grow. However, the Board, including the Independent Directors, did consider enhancements in personnel and services provided to the Funds by the Adviser, without an increase in fees. The Board also noted that few of the Funds’ peers offered breakpoints despite having significantly more assets under management.
6. Other Relevant Considerations.
a. Personnel and Methods. The Board, including the Independent Directors, reviewed the Adviser’s Form ADV and questioned the Adviser regarding the size, education and experience of the staff of the Adviser, its fundamental research capabilities, approach to recruiting, training and retaining portfolio managers and other research and management personnel, and concluded that these enable them to provide a high level of service to the Funds. The Board also considered the history, reputation, qualifications and background of the Adviser as well as the qualifications of its personnel.
b. The Board, including the Independent Directors, also considered the character and amount of other direct and incidental benefits received by the Adviser and its affiliates from their association with the Funds, including the benefits received by the affiliated distributor. The Board concluded that potential “fall-out” benefits that the Adviser and its affiliates may receive, such as greater name recognition or increased ability to obtain research services (although the Board noted that the Adviser currently does not use soft dollars to obtain research services), appear to be reasonable, and may in some cases benefit the Funds.
Conclusions. The Board, including the Independent Directors, did not identify any factor as all-important or all-controlling and instead considered the above listed and other factors collectively in light of the Funds’ surrounding circumstances. Each Independent Director gave the weight to each factor that he deemed appropriate in his own judgment. The Independent Directors considered the renewal of the Advisory Agreement on a Fund-by-Fund basis and determined that the renewal of the Advisory Agreement was in the best interests of the shareholders of each Fund. The Independent Directors also determined that the fees charged to each Fund for the services provided were reasonable. Therefore, the Board, including the Independent Directors, determined that continuance of the Advisory Agreement was in the best interests of each Fund.
HIGH YIELD TAX FREE BOND FUND | 57 |
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, (Age) and Address1 Position(s) with the Company | Term of Office2 and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director | ||||
INTERESTED DIRECTORS | ||||||||
David Lerner3 (76) Director, Chairman of the Board, President | Since 1998 | President and founder, David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor; and President, Spirit of America Management Corp., the Company’s investment adviser. | 4 | Director of Spirit of America Management Corp., the Company’s investment adviser; Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
Daniel Lerner3 (51) Director | Since 1998 | Senior Vice President, Investment Counselor with David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor, since September 2000. | 4 | Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
INDEPENDENT DIRECTORS | ||||||||
Allen Kaufman (76) Director | Since 1998 | President and Chief Executive Officer of K.G.K. Agency, Inc., a property and casualty insurance agency, since 1963.4 | 4 | Director of K.G.K. Agency, Inc., a property and casualty insurance agency. | ||||
Stanley S. Thune (76) Lead Director | Since 1998 | President and Chief Executive Officer, Freight Management Systems, Inc., a third party logistics management company, since 1994; private investor. | 4 | Director of Freight Management Systems, Inc. | ||||
Richard Weinberger (76) Director | Since 2005 | Of Counsel to Ballon Stoll Bader & Nadler, P.C., a mid-sized law firm, since January 2005 to March 2011; Shareholder, Ballon Stoll Bader & Nadler, P.C., January 2000 to December 2004. | 4 | None. | ||||
OFFICERS | ||||||||
David Lerner President (see biography above) | ||||||||
Alan P. Chodosh (59) Treasurer and Secretary | Since 2003 (Treasurer) Since 2005 (Secretary) | Executive Vice President and Chief Financial Officer of David Lerner Associates, Inc. since June 1999. | N/A | N/A | ||||
Joseph Pickard (52) Chief Compliance Officer | Since 2007 | Chief Compliance Officer of Spirit of America Investment Fund, Inc. and Spirit of America Management Corp. since July 2007; Counsel to the Interested Directors of Spirit of America Investment Fund, Inc. since July 2002; General Counsel of David Lerner Associates, Inc. since July 2002. | N/A | N/A |
1 | All addresses are in c/o Spirit of America Investment Fund, Inc., 477 Jericho Turnpike, Syosset, New York 11791. |
2 | Each Director serves for an indefinite term, until his successor is elected. |
3 | David Lerner is an “interested” Director, as defined in the 1940 Act, by reason of his positions with the Adviser, and Daniel Lerner is an “interested” Director by reason of his position with the Distributor. Daniel Lerner is the son of David Lerner. |
4 | K.G.K. Agency, Inc. provides insurance to David Lerner Associates, Inc. and affiliated entities. However, the Board has determined that Mr. Kaufman is not an “interested” Director because the insurance services are less than $120,000 in value. |
58 | SPIRIT OF AMERICA |
Proxy Voting Information
The Company’s Statement of Additional Information (“SAI”) containing a description of the policies and procedures that the Spirit of America High Yield Tax Free Bond Fund uses to determine how to vote proxies relating to portfolio securities, along with the Company’s proxy voting record relating to portfolio securities held during the 12-month period ended December 31, 2012, are available (i) without charge, upon request, by calling (516) 390-5565; and (ii) on the SEC’s website at http://www.sec.gov.
Information on Form N-Q
The Company will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Company’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-0030.
Investment Adviser
Spirit of America Management Corp.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Distributor
David Lerner Associates, Inc.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Shareholder Services
BNY Mellon Investment Servicing (U.S.) Inc.
760 Moore Road
King of Prussia, PA 19406
Custodian
Huntington National Bank
41 South High Street
Columbus, OH 43215
Independent Registered Public Accounting Firm
Tait Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
Counsel
Blank Rome LLP
405 Lexington Avenue
New York, NY 10174
For additional information about the Spirit of America High Yield Tax Free Bond 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, risks, policies, expenses, and other information.
©Copyright 2012 Spirit of America SOAHY-AR12
ANNUAL REPORT
DECEMBER 31, 2012
MESSAGE TO OUR SHAREHOLDERS
Dear Shareholder,
We are pleased to send you the 2012 Annual Report for The Spirit of America Income Fund, (the “Fund”). The Fund began operations on December 31, 2008. It is our flagship fund; the largest fund in the Spirit of America Family.
As 2012 closes, we couldn’t be more proud and excited about the progress of this fund that is now 4 years old. Although past performance is no guarantee of future results, the Spirit of America Income Fund has met and exceeded our goals and continues to deliver attractive returns to our investors. This year has shown strong and steady growth for the Fund and we look forward to continued inflows and further development in structure and diversification going forward.
We firmly maintain our philosophy that striving for the optimal balance between yield and risk will position us to achieve long term success. Our dedication to providing our investors with a fund that will merit their long term commitment and satisfaction has never been stronger. Now is an excellent time to team up with your Investment Counselor to evaluate your portfolio and make sure you are properly positioned to achieve your investment goals for the upcoming year.
We are proud of the increasing number of investors in the Fund since its inception. Your support is sincerely appreciated and we look forward to your continued investment in The Spirit of America Income Fund.
Sincerely,
![]() | ![]() | ![]() | ![]() | |||
David Lerner | William Mason | |||||
President | Portfolio Manager |
INCOME FUND | 1 |
MANAGEMENT DISCUSSION
Economic Summary
Chronic financial woes continued to plague the European Union. The European Central Bank (“ECB”) forecasted economic weakness extending into 2013. Clearly, there has been no short term fix to the economic problems in the eurozone.
In the United States, the Federal Reserve announced in September, that it would begin buying $40 billion in agency mortgage-backed securities. It also extended its so-called “Operation Twist” program to the end of the year, whereby it sells its short-term bonds for longer-term bonds in an effort to drive down interest rates and stimulate the economy.
In addition, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
The economic recovery, particularly job creation, was in limbo as a result of the political gridlock in Washington and the uncertainty of fiscal policies. Private sector investors and corporations held out on making any employment or investment decisions to see how Congress will solve their budgetary issues and differences and what it will mean for them going forward. The large US deficit is now over $16 trillion, and many question whether last minute tax and spending policies will do anything to correct the problem. Washington is faced with difficult decisions about costly entitlement programs such as Medicare and Social Security.
Market Commentary
The economic health of 27 U.S. states showed signs of improvement as a four-year high in industrial production led to gains in
the Rust Belt region, where manufacturing accounts for a larger share of jobs. Michigan, Ohio, Indiana and Illinois posted four of the eight biggest gains for the three months ending in September, compared to the previous quarter, according to the Bloomberg Economic Evaluation of States (BEES) Index.*
Additionally, a recent report from the National Conference of State Legislatures (NCSL) indicated that most states are reporting they expect stable fiscal situations through the first few months of fiscal 2013 (beginning July 1, 2012). The NCSL, a bipartisan organization serving state legislators, released the “State Budget Updates: Fall 2012” based on a survey of state legislative officers from all 50 states and the District of Columbia.
The majority of states reported either on-target or above-target tax collections of the three major taxes, personal income, sales and corporate income. Looking ahead, 33 states and Washington, D.C. all have stable outlooks for revenue collections for the remainder of fiscal 2013, meaning they expect to meet budget projections and 6 states have optimistic outlooks about future revenues, meaning they believe collections may exceed projections.
In addition, California voters on Election Day approved Proposition 30, a measure that temporarily increases the state’s sales tax by one-quarter of a cent and raises taxes on income starting at $250,000.
After the passage, S&P said that the additional revenue materially benefits the state’s projected fiscal position and is consistent with their positive outlook on the state’s general obligation bonds. Moody’s said that the passage of Proposition 30 is a credit positive for the state’s K-12 school
2 | SPIRIT OF AMERICA |
MANAGEMENT DISCUSSION (CONT.)
districts, community college districts and university systems because it averts cuts to education funding.
These actions validate the Fund’s decisions to invest 7.80% of its assets in California bonds.
The Spirit of America Income Fund continued to reap the benefits of its decision to invest in taxable municipal bonds, particularly the Build America Bond Program (BAB’s) which are now less available in the marketplace since the program ended in 2010. Additionally, the taxable municipal market rallied in 2012. Bond prices rose as yields on the 30-year Taxable AAA MMD scale fell from 3.94% on the first business day in January, to 3.69% at the end of December.
The question remains; will 2013 be a year of healing for the global economy? Spirit of America will be carefully monitoring the economy and world events for clarification on the answer to this question.
Fund Summary
The Spirit of America Income Fund, (SOAIX) (the “Fund”) is the newest of the Spirit of America Family of Funds and is now the largest fund in assets under management. The Fund’s objective is to seek high current income. The emphasis of the Fund is focused on investing in a diversified portfolio of taxable municipal bonds, income producing convertible securities, high yield U.S. corporate bonds, preferred stocks, and collateralized mortgage obligations.
The Fund does not make decisions based on complicated algorithms. We are not a hedge fund. At Spirit of America, technology works for us; we do not work for technology. We do not receive buy signals from a computer generated model.
We invest the old fashioned way — utilizing hard work, intensive research, and intuitive decisions. Our decisions are based on experience. When we began the Fund, we felt the environment was favorable to start an income fund and while past performance is no guarantee of future results; our results have validated that belief.
At the end 2012, the Fund had over 68% of its assets in taxable municipal bonds. We remain diligent in our approach to the market. Here at Spirit of America each and every credit goes through vigorous credit analysis.
Return Summary
The Fund continues to grow at a steady and healthy pace. In fact, at the end of the year the Fund reached over a quarter of a billion dollars in assets under management thanks to the continued growing number of investors and share price appreciation. The Net Asset Value rose from $11.69 per share to $12.24 and the number of shareholder accounts more than doubled from last year. Our expectations are for continued growth in assets under management.
We plan to proceed with the same game plan we have employed since the Fund began: pursuing a balance between yield and risk. We now more than ever stand by our philosophy of buying high quality credits in municipalities with strong fundamentals.
As of December 31, 2012, approximately 94% of the Spirit of America Income Fund was investment grade. Municipal bonds have historically been relatively conservative, enduring investments. After all, much of this country’s infrastructure was built with municipal bonds.
INCOME FUND | 3 |
MANAGEMENT DISCUSSION (CONT.)
Ratings are provided by Moody’s Investor Services and Standard & Poor’s.
The Moody’s ratings in the following ratings explanations are in parenthesis.
AAA (Aaa) - The highest rating assigned by Moody’s and S&P. Capacity to pay interest and repay principal is extremely strong.
AA (Aa) - Debt has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
A - Debt rated “A” has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse affects of changes in circumstances and economic conditions than debt in higher-rated categories.
BBB (Baa) - Debt is regarded as having an adequate capacity to pay interest and repay principal. These ratings by Moody’s and S&P are the “cut-off” for a bond to be considered investment grade. Whereas debt normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal in this category than in higher-rated categories.
BB (Bb), B, CCC (Ccc), CC (Cc), C - Debt rated in these categories is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. “BB” indicates the least degree of speculation and “C” the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or market exposure to adverse conditions and are not considered to be investment grade.
D - Debt rated “D” is in payment default. This rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period.
Ratings are subject to change.
Ratings apply to the bonds in the portfolio. They do not remove market risk associated with the fund.
Ratings are based on Moody’s and S&P, as applicable. Credit ratings are based largely on the rating agency’s investment analysis at the time of rating and the rating assigned to any particular security is not necessarily a reflection of the issuer’s current financial condition. The rating assigned to a security by a rating agency does not necessarily reflect its assessment of the volatility of a security’s market value or of the liquidity of an investment in the security. If securities are rated differently by the rating agencies, the higher of the two rating is applied thus improving the overall evaluation of the portfolio.
4 | SPIRIT OF AMERICA |
MANAGEMENT DISCUSSION
Summary of Portfolio Holdings
The Securities and Exchange Commission (“SEC”) has 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.
Spirit of America Income Fund
December 31, 2012
Municipal Bonds | 69.27 | % | $ | 171,895,003 | ||||
Preferred Stocks | 16.90 | 41,931,887 | ||||||
Corporate Bonds | 12.81 | 31,796,446 | ||||||
Money Market | 0.65 | 1,619,984 | ||||||
Collateralized Mortgage Obligations | 0.37 | 920,443 | ||||||
Total Investments | 100.00 | % | $ | 248,163,763 |
INCOME FUND | 5 |
ILLUSTRATION OF INVESTMENT (UNAUDITED)
The graph below compares the increase in value of a $10,000 investment in the Fund with the performance of the Barclays Capital U.S. Aggregate Index. The values and returns for the Fund include reinvested distributions, and the impact of the maximum sales charge of 4.75% 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.
Average Annual Total Returns
For the Periods Ended December 31, 2012
Shares | ||||
1 Year (with sales charge) | 5.29% | a | ||
1 Year (without sales charge) | 10.51% | |||
Since Inception (with sales charge)b | 11.54% | a | ||
Since Inception (without sales charge)b | 12.91% |
Past performance is not indicative of future results.
a | Reflects a 4.75% front-end sales charge. |
b | Inception date: December 31, 2008. |
Growth of $10,000
(includes one-time 4.75% maximum sales charge and reinvestment of all distributions)
* | Fund commenced operations December 31, 2008. |
** | The Barclays Capital U.S. Aggregate Index benchmark is based on a start date of December 31, 2008. |
The Barclays Capital U.S. Aggregate 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.
6 | SPIRIT OF AMERICA |
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE PERIOD JULY 1, 2012 TO DECEMBER 31, 2012
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 the Fund’s gross income, directly reduce the investment return of the Fund.
The 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.
Spirit of America Income Fund
Beginning Account Value 7/1/12 | Ending Account Value 12/31/12 | Expense Ratio(1) | Expenses Paid During Period(2) | |||||||||||||
Actual Fund Return | $ | 1,000.00 | $ | 1,043.10 | 1.10 | % | $ | 5.64 | ||||||||
Hypothetical 5% Return | $ | 1,000.00 | $ | 1,019.62 | 1.10 | % | $ | 5.57 |
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 expenses 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 half-year expenses. |
(2) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the period (184), then divided by 366. |
INCOME FUND | 7 |
SCHEDULE OF INVESTMENTS | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Collateralized Mortgage Obligations 0.36% | ||||||||
Banc of America Mortgage Securities, Inc., 5.50%, 08/25/33 | $ | 38,212 | $ | 38,148 | ||||
Citicorp Mortgage Securities, Inc., 5.00%, 02/25/35 | 329,000 | 337,224 | ||||||
Citicorp Mortgage Securities, Inc., 6.00%, 04/25/36 | 100,000 | 101,078 | ||||||
CountryWide Home Loan Mortgage Pass Through Trust, A27, 5.50%, 10/25/35 | 111,000 | 102,445 | ||||||
CountryWide Home Loan Mortgage Pass Through Trust, A7, 5.50%, 10/25/35 | 120,000 | 110,752 | ||||||
Mastr Asset Securitization Trust, 2A2, 5.50%, 10/25/33 | 102,908 | 104,496 | ||||||
WaMu Mortgage Pass Through Certificates, A11, 5.50%, 11/25/33 | 80,206 | 82,004 | ||||||
WaMu Mortgage Pass Through Certificates, A2, 5.50%, 11/25/33 | 44,062 | 44,296 | ||||||
Total Collateralized Mortgage Obligations | 920,443 | |||||||
Municipal Bonds 68.21% | ||||||||
Alabama 0.77% |
| |||||||
City of Montgomery, Public Improvements Build America Bonds, General Obligation Unlimited, Callable 02/01/20 @ 100, 5.70%, 02/01/40 | 500,000 | 573,115 | ||||||
University of Alabama, University & College Improvements, Build America Revenue Bonds, Callable 06/01/20 @ 100, (OID), 6.13%, 06/01/39 | 715,000 | 798,448 | ||||||
University of Alabama(The), University & College Improvements, Build America Revenue Bonds, Callable 06/01/20 @ 100, (OID), 6.13%, 06/01/42 | 500,000 | 556,005 | ||||||
1,927,568 | ||||||||
Arizona 1.31% |
| |||||||
Arizona School Facilities Board, School Improvements, Certificate Participation, 6.00%, 09/01/27 | 250,000 | 283,563 | ||||||
Glendale Municipal Property Corp., Revenue Bonds, Series B, Callable 07/01/13 @ 102, (AMBAC), 5.58%, 07/01/32 | 200,000 | 204,960 | ||||||
Northern Arizona University, University & College Improvements, Build America Revenue Bonds, Callable 08/01/20 @ 100, 5.92%, 08/01/22 | 1,365,000 | 1,554,844 | ||||||
University of Arizona, University & College Improvements, Build America Revenue Bonds, Callable 08/01/20 @ 100, 6.64%, 08/01/44 | 1,085,000 | 1,268,452 | ||||||
3,311,819 |
See accompanying notes to financial statements.
8 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
California 7.60% |
| |||||||
Alhambra Unified School District, University & College Improvements, General Obligation Unlimited, 6.70%, 02/01/26 | $ | 465,000 | $ | 560,641 | ||||
Bay Area Toll Authority, Highway Improvements, Build America Revenue Bonds, Series S1, 6.92%, 04/01/40 | 250,000 | 344,987 | ||||||
City of Fresno, Water Utility Improvements, Build America Revenue Bonds, (OID), 6.75%, 06/01/40 | 1,250,000 | 1,405,625 | ||||||
City of Tulare Sewer Revenue, Sewer Improvements, Build America Revenue Bonds, Callable 11/15/19 @ 100, (AGM) (OID), 8.75%, 11/15/44 | 1,000,000 | 1,220,070 | ||||||
Colton Joint Unified School District, School Improvements, General Obligation Unltd, Series C, 6.01%, 08/01/26 | 1,000,000 | 1,133,360 | ||||||
County of San Bernardino, Refunding Revenue Bonds, (AGM), 6.02%, 08/01/23 | 190,000 | 200,043 | ||||||
Los Angeles Department of Water & Power, Electric Light & Power Improvements, Build America Revenue Bonds, Callable 07/01/21 @ 100, 7.00%, 07/01/41 | 500,000 | 602,300 | ||||||
Napa Valley Unified School District, School Improvements Build America Bonds, General Obligation Unlimited, 6.51%, 08/01/43 | 500,000 | 660,870 | ||||||
Northern California Power Agency, Build America Revenue Bonds, 7.31%, 06/01/40 | 1,500,000 | 1,918,080 | ||||||
Oakland Redevelopment Agency, Economic Improvements, Tax Allocation, Series T, (OID), 8.50%, 09/01/20 | 500,000 | 572,660 | ||||||
Peralta Community College District, Refunding Revenue Bonds, 6.42%, 11/01/15 | 200,000 | 225,228 | ||||||
Peralta Community College District, Refunding Revenue Bonds, 6.91%, 08/01/25 | 500,000 | 570,660 | ||||||
Peralta Community College District, Refunding Revenue Bonds, 7.31%, 08/01/31 | 1,310,000 | 1,510,312 | ||||||
San Bernardino City Unified School District, School Improvements, Certificate Participation, (AGM) (OID), 8.05%, 02/01/23 | 1,000,000 | 1,156,760 | ||||||
San Bernardino City Unified School District, School Improvements, Certificate Participation, (AGM) (OID), 8.25%, 02/01/26 | 500,000 | 587,550 | ||||||
State of California, Recreational Facility Improvements Build America Bonds, General Obligation Unlimited, Callable 11/01/20 @ 100, 7.70%, 11/01/30 | 2,600,000 | 3,224,884 |
INCOME FUND | 9 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
California (cont.) | ||||||||
State of California, School Improvements Build America Bonds, General Obligation Unlimited, Callable 03/01/20 @ 100, 7.95%, 03/01/36 | $ | 1,500,000 | $ | 1,865,535 | ||||
West Contra Costa Unified School District, School Improvements, General Obligation Unlimited, Series A-1, 6.25%, 08/01/30 | 1,250,000 | 1,383,125 | ||||||
19,142,690 | ||||||||
Colorado 0.86% | ||||||||
Adams State College, University & College Improvements, Build America Revenue Bonds, Callable 05/15/19 @ 100, (State Higher Education Intercept Program) (OID), 6.47%, 05/15/38 | 250,000 | 268,958 | ||||||
City of Brighton , Public Improvements Build America Bonds, Certificate Participation, Callable 12/01/20 @ 100, (AGM) (OID), 6.75%, 12/01/35 | 250,000 | 288,508 | ||||||
Colorado Mesa University, University & College Improvements, Revenue Bonds, Series B, (State Higher Education Intercept Program), 6.75%, 05/15/42 | 1,000,000 | 1,320,160 | ||||||
County of Gunnison , Public Improvements Build America Bonds, Certificate Participation, Series B, Callable 07/15/20 @ 100, 5.95%, 07/15/30 | 250,000 | 284,910 | ||||||
2,162,536 | ||||||||
Connecticut 0.69% | ||||||||
City of Bridgeport , School Improvements Build America Bonds, General Obligation Unlimited, Callable 08/15/20 @ 100, (AGM), 6.57%, 08/15/28 | 1,000,000 | 1,177,320 | ||||||
City of Waterbury , Public Improvements, General Obligation Unlimited, Callable 09/01/20 @ 100, (AGM), 6.10%, 09/01/30 | 500,000 | 568,580 | ||||||
1,745,900 | ||||||||
District of Columbia 0.23% | ||||||||
Washington Metropolitan Area Transit Authority, Transit Improvements, Build America Revenue Bonds, Callable 07/01/19 @ 100, (OID), 7.00%, 07/01/34 | 500,000 | 583,460 | ||||||
Florida 5.79% | ||||||||
City of Lake City Utility System Revenue, Water Utility Improvements, Build America Revenue Bonds, Callable 07/01/20 @ 100, (AGM), 6.03%, 07/01/30 | 100,000 | 108,483 |
10 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Florida (cont.) | ||||||||
City of Lake City Utility System Revenue, Water Utility Improvements, Build America Revenue Bonds, Callable 07/01/20 @ 100, (AGM), 6.28%, 07/01/40 | $ | 200,000 | $ | 218,116 | ||||
City of Miami , Refunding Revenue Bonds, (OID), 6.75%, 12/01/18 | 1,000,000 | 1,134,070 | ||||||
City of Miami , Refunding Revenue Bonds, Callable 12/01/19 @ 100, 7.55%, 12/01/25 | 465,000 | 528,286 | ||||||
City of Miami Gardens , Public Improvements Build America Bonds, Certificate Participation, 7.17%, 06/01/26 | 1,250,000 | 1,445,725 | ||||||
City of Oakland Park Water & Sewer Revenue, Sewer Improvements, Build America Revenue Bonds, Callable 09/01/20 @ 100, (AGM), 6.14%, 09/01/35 | 300,000 | 335,319 | ||||||
City of Orlando , Recreational Facilities Improvements, Build America Revenue Bonds, Callable 10/01/19 @ 100, 6.85%, 10/01/29 | 250,000 | 283,040 | ||||||
City of Orlando , Recreational Facilities Improvements, Build America Revenue Bonds, Callable 10/01/19 @ 100, 7.10%, 10/01/39 | 415,000 | 460,559 | ||||||
County of Miami-Dade , Transit Improvements, Revenue Bonds, Callable 07/01/19 @ 100, 6.91%, 07/01/39 | 1,000,000 | 1,160,590 | ||||||
County of Miami-Dade , Public Improvements, Revenue Bonds, Callable 04/01/19 @ 100, 6.97%, 04/01/39 | 750,000 | 824,512 | ||||||
County of Miami-Dade , Port, Airport & Marina Improvements, Build America Revenue Bonds, (AGM) (OID), 7.50%, 04/01/40 | 1,000,000 | 1,288,200 | ||||||
County of Miami-Dade , Transit Improvements, Build America Revenue Bonds, Series B, 5.53%, 07/01/32 | 500,000 | 555,260 | ||||||
County of Miami-Dade , Transit Improvements, Build America Revenue Bonds, Series B, 5.62%, 07/01/40 | 400,000 | 453,812 | ||||||
County of Miami-Dade , Public Improvements, Build America Revenue Bonds, Series B, Callable 04/01/20 @ 100, 6.54%, 04/01/30 | 500,000 | 569,780 | ||||||
County of Miami-Dade , Recreational Facility Improvements, Revenue Bonds, Series D, (AGM), 7.08%, 10/01/29 | 250,000 | 297,493 | ||||||
Florida Atlantic University Finance Corp., University & College Improvements, Build America Revenue Bonds, Callable 07/01/20 @ 100, 7.64%, 07/01/40 | 165,000 | 188,169 | ||||||
Florida Governmental Utility Authority, Build America Revenue Bonds, Series B, Callable 10/01/20 @ 100, 6.55%, 10/01/40 | 1,000,000 | 1,126,280 |
INCOME FUND | 11 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Florida (cont.) | ||||||||
Florida State Board of Governors, University & College Improvements, Build America Revenue Bonds, Callable 11/01/20 @ 100, 7.50%, 11/01/35 | $ | 250,000 | $ | 275,740 | ||||
Florida State Department Environmental Protection Preservation, Public Improvements, Build America Revenue Bonds, Callable 07/01/19 @ 100, 7.05%, 07/01/29 | 1,500,000 | 1,757,835 | ||||||
Osceola County School Board, School Improvements, Certificate Participation, Callable 03/01/13 @ 100, 6.66%, 04/01/27 | 1,000,000 | 1,105,960 | ||||||
Town of Davie Water & Sewer Revenue, Water Utility Improvements, Build America Revenue Bonds, Series B, Callable 10/01/20 @ 100, (AGM), 6.85%, 10/01/40 | 250,000 | 298,653 | ||||||
Town of Miami Lakes , Public Improvements, Build America Revenue Bonds, 7.59%, 12/01/30 | 150,000 | 179,415 | ||||||
14,595,297 | ||||||||
Georgia 1.56% | ||||||||
Municipal Electric Authority of Georgia, Electric Lights & Power Improvements, Build America Revenue Bonds, 7.06%, 04/01/57 | 2,500,000 | 2,831,900 | ||||||
Municipal Electric Authority of Georgia, Refunding Revenue Bonds, Series A, 4.98%, 01/01/28 | 1,000,000 | 1,109,690 | ||||||
3,941,590 | ||||||||
Idaho 0.37% | ||||||||
Idaho Water Resource Board, Water Utility Iprovements Revenue Bonds, Callable 09/01/22 @ 100, (OID), 5.25%, 09/01/24 | 900,000 | 938,727 | ||||||
Illinois 8.04% | ||||||||
Chicago Board of Education, School Improvements, General Obligation Unlimited, 6.32%, 11/01/29 | 250,000 | 289,688 | ||||||
Chicago Transit Authority, Pension Funding, Revenue Bonds, Series A, 6.90%, 12/01/40 | 350,000 | 425,131 | ||||||
Chicago Transit Authority, Transit Improvements, Build America Revenue Bonds, Series B, 6.20%, 12/01/40 | 100,000 | 113,177 | ||||||
City of Chicago, Public Improvements Build America Bonds, General Obligation Unlimited, 7.52%, 01/01/40 | 1,065,000 | 1,366,789 | ||||||
City of Chicago, Public Improvements, General Obligation Unlimited, 7.78%, 01/01/35 | 500,000 | 651,875 | ||||||
City of Chicago, Public Improvements, General Obligation Unlimited, Series B, 5.43%, 01/01/42 | 1,500,000 | 1,539,960 |
12 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Illinois (cont.) | ||||||||
City of Chicago, Public Improvements, General Obligation Unlimited, Series B, 6.03%, 01/01/42 | $ | 500,000 | $ | 548,520 | ||||
City of Chicago , Refunding Revenue Bonds, Series B, 5.50%, 01/01/35 | 1,465,000 | 1,653,560 | ||||||
City of Chicago Heights , Refunding Bonds, General Obligation Unlimited, Callable 01/15/21 @ 100, (AGM) (OID), 5.50%, 01/15/24 | 500,000 | 551,435 | ||||||
City of Chicago Heights , Refunding Bonds, General Obligation Unlimited, Callable 01/15/21 @ 100, (AGM) (OID), 6.00%, 01/15/28 | 150,000 | 166,730 | ||||||
City of Chicago Waterworks Revenue, Water Utility Improvements, Build America Revenue Bonds, 6.74%, 11/01/40 | 250,000 | 342,790 | ||||||
City of Markham , Public Improvements Build America Bonds, General Obligation Unlimited, Callable 12/01/20 @ 100, (AGM), 7.40%, 12/01/25 | 1,195,000 | 1,376,293 | ||||||
County of Cook , General Obligation Unlimited, 6.23%, 11/15/34 | 500,000 | 572,405 | ||||||
Henry Hospital District, Hospital Improvements Build America Bonds, General Obligation Unlimited, Callable 12/01/19 @ 100, (AGM), 6.65%, 12/01/29 | 840,000 | 935,626 | ||||||
Lake County Community Unit School District No. 187 North Chicago, School Improvements, General Obligation Unlimited, Series B, Callable 01/01/20 @ 100, (AGM) (OID), 7.13%, 01/01/35 | 1,000,000 | 1,107,930 | ||||||
Lake County School District No. 56 Gurnee, School Improvements Build America Bonds, General Obligation Unlimited, Callable 01/01/21 @ 100, 5.90%, 01/01/25 | 535,000 | 631,600 | ||||||
Northern Illinois University, University & College Improvements, Build America Revenue Bonds, Callable 04/01/20 @ 100, (AGM), 7.75%, 04/01/30 | 250,000 | 299,670 | ||||||
Northern Illinois University, University & College Improvements, Build America Revenue Bonds, Callable 04/01/20 @ 100, (AGM), 8.15%, 04/01/41 | 250,000 | 303,377 | ||||||
State of Illinois, Pension Funding, General Obligation Unlimited, Callable 03/01/22 @ 100, 5.10%, 06/01/33 | 2,000,000 | 1,980,320 | ||||||
State of Illinois, Public Improvements, General Obligation Unlimited, Callable 02/01/23 @ 100, 6.63%, 02/01/35 | 1,960,000 | 2,223,581 | ||||||
State of Illinois, Public Improvements Build America Bonds, General Obligation Unlimited, Series B, (OID), 5.75%, 01/01/37 | 250,000 | 260,315 |
INCOME FUND | 13 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Illinois (cont.) | ||||||||
Village of Glenwood , Public Improvements Build America Bonds, General Obligation Unlimited, (AGM), 7.03%, 12/01/28 | $ | 1,500,000 | $ | 1,889,685 | ||||
Village of Rosemont , Public Improvements, General Obligation Unlimited, Series B, (AGM) (OID), 6.13%, 12/01/30 | 500,000 | 578,310 | ||||||
Will County Forest Preservation District, Public Improvements Build America Bonds, General Obligation Ltd, 5.71%, 12/15/30 | 400,000 | 463,560 | ||||||
20,272,327 | ||||||||
Indiana 1.36% | ||||||||
Evansville Redevelopment Authority, Recreational Facility Improvements, Build America Refunding Revenue Bonds, Series B, Callable 08/01/20 @ 100, 7.21%, 02/01/39 | 800,000 | 899,048 | ||||||
Mount Vernon of Hancock County Multi-School Building Corp., (OID), Callable 7/15/22 @ 100, 5.35%, 01/15/33 | 2,445,000 | 2,527,934 | ||||||
3,426,982 | ||||||||
Kansas 0.18% | ||||||||
Kansas Development Finance Authority, Public Improvements, Build America Revenue Bonds, Callable 11/01/19 @ 100, 6.26%, 11/01/28 | 390,000 | 450,980 | ||||||
Kentucky 1.07% | ||||||||
Kentucky Municipal Power Agency, Electric Lights & Power Improvements, Build America Revenue Bonds, Callable 09/01/20 @ 100, (AGM), 6.49%, 09/01/37 | 250,000 | 277,298 | ||||||
Paducah Independent School District Finance Corp., School Improvements, Revenue Bonds, Callable 12/01/21 @ 100, (SEEK), 5.00%, 12/01/30 | 1,000,000 | 1,070,420 | ||||||
Perry County School District Finance Corp., School Improvements, Revenue Bonds, Callable 12/01/21 @ 100, (SEEK), 5.00%, 12/01/30 | 1,000,000 | 1,063,490 | ||||||
Princeton Electric Plant Board, Electric Lights & Power Improvements, Build America Revenue Bonds, Callable 11/01/19 @ 100, (OID), 7.00%, 11/01/42 | 250,000 | 274,350 | ||||||
2,685,558 | ||||||||
Louisiana 0.88% | ||||||||
City of New Orleans , Swap Termination Refunding Bonds, General Obligation Ltd, Callable 09/01/22 @ 100, 4.59%, 09/01/27 | 500,000 | 510,915 |
14 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Louisiana (cont.) | ||||||||
Tangipahoa Parish Hospital Service District No. 1, Hospital Improvements, Build America Revenue Bonds, Callable 02/01/20 @ 100, 7.20%, 02/01/42 | $ | 1,540,000 | $ | 1,717,408 | ||||
2,228,323 | ||||||||
Massachusetts 0.60% | ||||||||
City of Worcester, Pension Funding, General Obligation Ltd, (AGM) (OID), 6.25%, 01/01/28 | 240,000 | 273,600 | ||||||
Massachusetts Health & Educational Facilities Authority, Refunding Revenue Bonds, 6.43%, 10/01/35 | 750,000 | 939,397 | ||||||
Massachusetts Housing Finance Agency, Revenue Bonds, Series C, Callable 12/01/22 @ 100, 4.03%, 12/01/27 | 100,000 | 100,885 | ||||||
University of Massachusetts Building Authority, University & College Improvements, Build America Revenue Bonds, Callable 05/01/19 @ 100, 6.57%, 05/01/39 | 165,000 | 189,003 | ||||||
1,502,885 | ||||||||
Michigan 3.16% | ||||||||
Avondale School District, School Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/20 @ 100, (AGM), 5.75%, 05/01/32 | 500,000 | 547,080 | ||||||
Chippewa Valley Schools, School Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/20 @ 100, 6.60%, 05/01/30 | 150,000 | 166,302 | ||||||
Chippewa Valley Schools, School Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/20 @ 100, 6.85%, 05/01/35 | 100,000 | 110,576 | ||||||
City of Oak Park , Public Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/20 @ 100, 7.00%, 05/01/36 | 250,000 | 281,800 | ||||||
Comstock Park Public Schools, School Improvements, General Obligation Unlimited, Callable 05/01/21 @ 100, 6.20%, 05/01/24 | 200,000 | 223,966 | ||||||
County of Oakland , Pension Funding, Certificate Participation, Callable 04/01/14 @ 100, (OID), 6.25%, 04/01/26 | 1,000,000 | 1,052,710 | ||||||
Eastern Michigan University, University & College Improvements, Build America Revenue Bonds, Callable 02/15/19 @ 100, 7.21%, 02/15/38 | 250,000 | 281,438 |
INCOME FUND | 15 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Michigan (cont.) | ||||||||
L’Anse Creuse Public Schools, School Improvements Build America Bonds, General Obligation Unlimited, Series B, Callable 05/01/20 @ 100, 6.59%, 05/01/40 | $ | 200,000 | $ | 219,324 | ||||
Lincoln Consolidated School District, School Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/20 @ 100, (AGM), 6.83%, 05/01/40 | 250,000 | 283,983 | ||||||
Michigan Finance Authority, School Improvements, Revenue Bonds, Callable 11/01/20 @ 100, 6.38%, 11/01/25 | 500,000 | 566,510 | ||||||
Michigan Finance Authority, School Improvements, Revenue Bonds, Series C, Callable 05/01/21 @ 100, 6.20%, 05/01/22 | 500,000 | 561,760 | ||||||
Michigan Tobacco Settlement Finance Authority, Miscellaneous Purposes Revenue Bonds, Series A, Callable 02/01/23 @ 100, (OID), 7.31%, 06/01/34 | 2,855,000 | 2,397,343 | ||||||
Milan Area Schools, School Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/19 @ 100, (OID), 7.10%, 05/01/34 | 485,000 | 547,444 | ||||||
Onsted Community Schools, School Improvements, General Obligation Unlimited, Callable 05/01/20 @ 100, 5.90%, 05/01/27 | 150,000 | 164,145 | ||||||
St. Johns Public Schools, School Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/20 @ 100, 6.65%, 05/01/40 | 250,000 | 283,705 | ||||||
St. Joseph School District, School Improvements Build America Bonds, General Obligation Unlimited, Callable 05/01/20 @ 100, (AGM), 6.66%, 05/01/35 | 250,000 | 273,248 | ||||||
7,961,334 | ||||||||
Mississippi 0.25% | ||||||||
Mississippi Development Bank, Highway Improvements, Build America Revenue Bonds, 6.59%, 01/01/35 | 500,000 | 620,210 | ||||||
Missouri 2.44% | ||||||||
City of Kansas City , Public Improvements, Revenue Bonds, Callable 03/01/22 @ 100, (OID), 5.25%, 03/01/32 | 500,000 | 526,710 | ||||||
City of Kansas City , Revenue Bonds, Series D , 7.83%, 04/01/40 | 2,500,000 | 2,981,275 | ||||||
City of Sedalia , Sewer Improvements Build America Bonds, Certificate Participation, Callable 06/01/20 @ 100, (AGM), 6.50%, 06/01/24 | 250,000 | 289,373 |
16 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Missouri (cont.) | ||||||||
City of St. Charles , Water Utility Improvements Build America Bonds, Certificate Participation, Callable 08/01/20 @ 100, 5.65%, 02/01/30 | $ | 250,000 | $ | 269,603 | ||||
Missouri Joint Municipal Electric Utility Commission, Electric Lights & Power Improvements, Build America Revenue Bonds, 7.73%, 01/01/39 | 475,000 | 631,802 | ||||||
Missouri Joint Municipal Electric Utility Commission, Electric Lights & Power Improvements, Build America Revenue Bonds, 7.90%, 01/01/42 | 1,000,000 | 1,447,120 | ||||||
6,145,883 | ||||||||
Nebraska 0.09% | ||||||||
Nebraska Public Power District, Electric Lights & Power Improvements, Build America Revenue Bonds, 5.32%, 01/01/30 | 200,000 | 226,238 | ||||||
Nevada 2.22% | ||||||||
City of Las Vegas , Public Improvements Build America Bonds, Certificate Participation, Callable 09/01/19 @ 100, (OID), 7.75%, 09/01/29 | 1,100,000 | 1,300,156 | ||||||
County of Clark , Transit Improvements Build America Bonds, General Obligation Ltd, Callable 07/01/20 @ 100, (OID), 7.00%, 07/01/38 | 1,000,000 | 1,161,640 | ||||||
County of Clark , Public Improvements Build America Bonds, General Obligation Ltd, Series B, Callable 11/01/19 @ 100, 7.25%, 11/01/38 | 1,385,000 | 1,668,496 | ||||||
County of Washoe , Public Improvements, Build America Revenue Bonds, 7.88%, 02/01/40 | 250,000 | 313,532 | ||||||
Las Vegas Valley Water District, Water Utility Improvements Build America Bonds, General Obligation Ltd, Callable 06/01/19 @ 100, 7.10%, 06/01/39 | 800,000 | 921,848 | ||||||
Pershing County School District, School Improvements Build America Bonds, General Obligation Ltd, Callable 04/01/20 @ 100, (GTD), 6.25%, 04/01/30 | 220,000 | 239,580 | ||||||
5,605,252 | ||||||||
New Jersey 2.84% | ||||||||
Essex County Improvement Authority, Refunding Revenue Bonds, Series B, Callable 10/01/15 @ 100, (AMBAC) (GTD) (OID), 5.00%, 10/01/24 | 500,000 | 529,495 | ||||||
New Jersey Economic Development Authority, Housing Revenue Bonds, Series A2, 6.31%, 07/01/26 | 750,000 | 833,880 |
INCOME FUND | 17 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New Jersey (cont.) | ||||||||
New Jersey Economic Development Authority, School Improvements, Build America Revenue Bonds, Series CC-1, Callable 06/15/20 @ 100, 6.43%, 12/15/35 | $ | 500,000 | $ | 559,315 | ||||
New Jersey Educational Facilities Authority, University & College Improvements, Build America Revenue Bonds, Callable 07/01/20 @ 100, 6.19%, 07/01/40 | 500,000 | 535,510 | ||||||
New Jersey Educational Facilities Authority, University & College Improvements, Build America Revenue Bonds, Callable 07/01/19 @ 100, 7.40%, 07/01/40 | 1,000,000 | 1,118,460 | ||||||
New Jersey State Turnpike Authority, Highway Improvements, Build America Revenue Bonds, 7.10%, 01/01/41 | 250,000 | 360,582 | ||||||
New Jersey Transportation Trust Fund Authority, Transit Improvements, Build America Revenue Bonds, Series C, Callable 12/15/20 @ 100, 6.10%, 12/15/28 | 2,295,000 | 2,622,588 | ||||||
South Jersey Transportation Authority, Highway Improvements, Build America Revenue Bonds, (OID), 7.00%, 11/01/38 | 500,000 | 589,430 | ||||||
7,149,260 | ||||||||
New York 7.69% | ||||||||
Battery Park City Authority, Build America Revenue Bonds, Callable 11/01/19 @ 100, 6.38%, 11/01/39 | 250,000 | 285,943 | ||||||
City of New York , Public Improvements Build America Bonds, General Obligation Unlimited, Callable 10/01/20 @ 100, 5.82%, 10/01/31 | 250,000 | 291,365 | ||||||
City of New York , Public Improvements Build America Bonds, General Obligation Unlimited, Callable 03/01/20 @ 100, 6.27%, 03/01/31 | 500,000 | 584,870 | ||||||
City of New York , Public Improvements Build America Bonds, General Obligation Unlimited, Callable 12/01/19 @ 100, 6.39%, 12/01/29 | 500,000 | 599,080 | ||||||
County of Nassau , Public Improvements Build America Bonds, General Obligation Unlimited, Callable 10/01/20 @ 100, 7.40%, 10/01/35 | 500,000 | 583,180 | ||||||
County of Nassau , Public Improvements Build America Bonds, General Obligation Unlimited, Series G, 5.38%, 10/01/24 | 500,000 | 570,945 | ||||||
Long Island Power Authority , Revenue Bonds, (OID), 5.85%, 05/01/41 | 195,000 | 219,629 | ||||||
Metropolitan Transportation Authority, Transit Improvements, Build America Revenue Bonds, 5.99%, 11/15/30 | 125,000 | 155,154 |
18 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) | ||||||||
Metropolitan Transportation Authority, Transit Improvements, Build America Revenue Bonds, 6.20%, 11/15/26 | $ | 875,000 | $ | 1,060,535 | ||||
Metropolitan Transportation Authority, Transit Improvements, Build America Revenue Bonds, 6.67%, 11/15/39 | 1,000,000 | 1,304,050 | ||||||
Metropolitan Transportation Authority, Transit Improvements, Build America Revenue Bonds, 6.69%, 11/15/40 | 1,500,000 | 1,937,880 | ||||||
Metropolitan Transportation Authority, Transit Improvements, Build America Revenue Bonds, Callable 11/15/20 @ 100, 7.13%, 11/15/30 | 500,000 | 593,665 | ||||||
New York City Housing Development Corp., Revenue Bonds, Series E, Callable 11/01/21 @ 100, 4.40%, 11/01/32 | 500,000 | 507,285 | ||||||
New York City Housing Development Corp., Multi-Family Housing Revenue Bonds, Series I, Callable 05/01/19 @ 100, 6.42%, 11/01/39 | 2,500,000 | 2,818,600 | ||||||
New York City Industrial Development Agency, Recreational Facilities Improvements Revenue Bonds, (NATL-RE), 5.90%, 03/01/46 | 550,000 | 525,211 | ||||||
New York City Municipal Water Finance Authority, Build America Refunding Revenue Bonds, Callable 06/15/20 @ 100, 6.12%, 06/15/42 | 250,000 | 292,853 | ||||||
New York City Municipal Water Finance Authority, Build America Refunding Revenue Bonds, Callable 06/15/20 @ 100, 6.49%, 06/15/42 | 200,000 | 239,058 | ||||||
New York City Transitional Finance Authority Building Aid Revenue, School Improvements, Build America Revenue Bonds, (State Aid Withholding), 6.83%, 07/15/40 | 500,000 | 663,895 | ||||||
New York City Transitional Finance Authority Building Aid Revenue, School Improvements, Build America Revenue Bonds, Callable 07/15/20 @ 100, (State Aid Withholding), 7.13%, 07/15/30 | 500,000 | 599,025 | ||||||
New York City Transitional Finance Authority Future Tax Secured Revenue, Public Improvements, Build America Revenue Bonds, Callable 05/01/20 @ 100, 5.72%, 05/01/30 | 1,000,000 | 1,144,880 | ||||||
New York City Transitional Finance Authority Future Tax Secured Revenue, Public Improvements, Build America Revenue Bonds, Callable 08/01/20 @ 100, 5.81%, 08/01/30 | 500,000 | 576,550 | ||||||
New York Mortgage Agency, Revenue Bonds, Series 172, Callable 10/01/21 @ 100, 4.20%, 10/01/27 | 2,500,000 | 2,596,850 |
INCOME FUND | 19 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
New York (cont.) | ||||||||
New York Municipal Bond Bank Agency, Build America Refunding Revenue Bonds, Callable 12/15/19 @ 100, 6.88%, 12/15/34 | $ | 500,000 | $ | 556,575 | ||||
Port Authority of New York & New Jersey, Revenue Bonds, 4.46%, 10/01/62 | 500,000 | 494,020 | ||||||
Western Nassau County Water Authority, Build America Revenue Bonds, 6.70%, 04/01/40 | 150,000 | 190,515 | ||||||
19,391,613 | ||||||||
North Carolina 0.11% | ||||||||
County of Cabarrus , School Improvements, Revenue Bonds, Callable 04/01/21 @ 100, 5.50%, 04/01/26 | 235,000 | 268,384 | ||||||
North Dakota 0.42% | ||||||||
North Dakota State Board of Higher Education, University & College Improvements, Build America Revenue Bonds, Callable 01/01/20 @ 100, 7.25%, 01/01/41 | 1,000,000 | 1,050,170 | ||||||
Ohio 2.62% | ||||||||
American Municipal Power, Inc., Build America Refunding Revenue Bonds, Callable 02/15/20 @ 100, 5.96%, 02/15/24 | 500,000 | 557,960 | ||||||
American Municipal Power, Inc., Electric Lights & Power Improvements, Build America Revenue Bonds, 7.50%, 02/15/50 | 1,350,000 | 1,835,379 | ||||||
American Municipal Power, Inc., Electric Lights & Power Improvements, Build America Revenue Bonds, 7.83%, 02/15/41 | 230,000 | 322,306 | ||||||
County of Franklin , Refunding Build America Bonds, General Obligation Ltd, Series A, Callable 06/01/20 @ 100, 5.83%, 12/01/31 | 250,000 | 296,130 | ||||||
County of Franklin , Refunding Build America Bonds, General Obligation Ltd, Series A, Callable 06/01/20 @ 100, 5.86%, 12/01/33 | 250,000 | 293,365 | ||||||
Cuyahoga County, Hospital Improvements, Build America Revenue Bonds, 8.22%, 02/15/40 | 1,000,000 | 1,242,040 | ||||||
Franklin County Convention Facilities Authority, Economic Improvements, Build America Revenue Bonds, 6.64%, 12/01/42 | 500,000 | 607,635 |
20 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Ohio (cont.) | ||||||||
Madison Local School District Lake County, School Improvements, General Obligation Unlimited, Callable 10/01/20 @ 100, (School District Credit Program), 5.70%, 04/01/35 | $ | 250,000 | $ | 274,220 | ||||
Mariemont City School District, General Obligation Unlimited, Callable 12/01/20 @ 100, 5.90%, 12/01/30 | 115,000 | 126,411 | ||||||
Springfield Local School District Summit County, School Improvements Build America Bonds, General Obligation Unlimited, Callable 09/01/19 @ 100, (School District Credit Program), 5.65%, 09/01/31 | 200,000 | 224,954 | ||||||
State of Ohio, Public Improvements, Build America Revenue Bonds, Callable 10/01/19 @ 100, 6.52%, 10/01/28 | 250,000 | 299,120 | ||||||
Three Rivers Local School District, School Improvements Build America Bonds, General Obligation Unlimited, Callable 12/01/20 @ 100, (AGM), 6.37%, 12/01/47 | 500,000 | 535,630 | ||||||
6,615,150 | ||||||||
Oklahoma 0.22% | ||||||||
Bryan County Independent School District No. 72 Durant, School Improvements Build America Bonds, Certificate Participation, Callable 12/01/19 @ 102, (OID), 6.80%, 12/01/33 | 500,000 | 551,495 | ||||||
Oregon 0.11% | ||||||||
Oregon State Department of Administrative Services, Hospital Improvements Build America Bonds, Certificate Participation, Series B, Callable 05/01/20 @ 100, 6.18%, 05/01/35 | 250,000 | 273,010 | ||||||
Pennsylvania 1.58% | ||||||||
Mount Union Area School District, School Improvements Build America Bonds, General Obligation Ltd, Callable 08/01/19 @ 100, (State Aid Withholding) (OID), 6.88%, 02/01/36 | 1,000,000 | 1,087,580 | ||||||
Philadelphia Authority for Industrial Development, Pension Funding, Revenue Bonds, Series A, (AGM) (OID), 6.35%, 04/15/28 | 630,000 | 693,485 | ||||||
Philadelphia Municipal Authority, Public Improvements, Revenue Bonds, 5.09%, 03/15/28 | 500,000 | 508,740 | ||||||
Pittsburgh Water & Sewer Authority, Refunding Revenue Bonds, Series A, (AGM), 6.61%, 09/01/24 | 300,000 | 353,904 |
INCOME FUND | 21 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Pennsylvania (cont.) | ||||||||
Sports & Exhibition Authority of Pittsburgh and Allegheny County, Recreational Facilities Improvements, Revenue Bonds, 7.04%, 11/01/39 | $ | 1,000,000 | $ | 1,174,360 | ||||
Township of Bristol , Pension Funding, General Obligation Unlimited, Callable 09/15/18 @ 100, (AGM), 7.15%, 09/15/38 | 150,000 | 168,647 | ||||||
3,986,716 | ||||||||
Puerto Rico 2.08% | ||||||||
Government Development Bank for Puerto Rico, Cash Flow Management, Revenue Bonds, Series A, (OID), 3.88%, 02/01/17 | 2,500,000 | 2,466,575 | ||||||
Government Development Bank for Puerto Rico, Economic Improvements, Revenue Bonds, Series B, 4.70%, 05/01/16 | 2,250,000 | 2,279,835 | ||||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority, Refunding Revenue Bonds, Series B, Callable 07/01/15 @ 100, 5.00%, 07/01/23 | 500,000 | 498,385 | ||||||
5,244,795 | ||||||||
South Carolina 0.11% | ||||||||
Moncks Corner Regional Recreation Corp., Recreational Facility Improvements, Build America Revenue Bonds, Callable 12/01/20 @ 100, 6.55%, 12/01/39 | 250,000 | 267,943 | ||||||
South Dakota 0.18% | ||||||||
South Dakota State Building Authority, University & College Improvements, Build America Revenue Bonds, Callable 06/01/21 @ 100, 6.15%, 06/01/31 | 400,000 | 462,424 | ||||||
Tennessee 1.67% | ||||||||
Coffee County Public Building Authority, Public Improvements, Build America Revenue Bonds, Callable 06/01/19 @ 100, (GTD), 7.20%, 06/01/44 | 1,500,000 | 1,725,015 | ||||||
Metropolitan Government of Nashville & Davidson County Convention Center Authority, Public Improvements, Build America Revenue Bonds, 7.43%, 07/01/43 | 2,000,000 | 2,494,680 | ||||||
4,219,695 |
22 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Texas 3.78% | ||||||||
Austin Community College District, University & College Improvements, Revenue Bonds, Series A, Callable 02/01/19 @ 100, 5.00%, 02/01/26 | $ | 985,000 | $ | 1,052,807 | ||||
City of Lancaster , Public Improvements Build America Bonds, General Obligation Ltd, Callable 02/15/20 @ 100, 6.53%, 02/15/40 | 750,000 | 864,337 | ||||||
City of Laredo Sports Venue Sales Tax Revenue, Recreational Facility Improvements, Revenue Bonds, Callable 03/15/18 @ 100, (AGM) (OID), 5.45%, 03/15/31 | 500,000 | 522,700 | ||||||
City of San Antonio , Public Improvements Build America Bonds, General Obligation Ltd, Callable 08/01/20 @ 100, 6.04%, 08/01/40 | 250,000 | 286,698 | ||||||
County of Bexar , Public Improvements Build America Bonds, General Obligation Ltd, Callable 06/15/19 @ 100, 5.76%, 06/15/40 | 500,000 | 553,610 | ||||||
County of Bexar , Public Improvements Build America Bonds, General Obligation Ltd, Callable 06/15/19 @ 100, 6.63%, 06/15/39 | 500,000 | 591,455 | ||||||
Dallas Convention Center Hotel Development Corp., Public Improvements, Build America Revenue Bonds, 7.09%, 01/01/42 | 1,500,000 | 1,818,780 | ||||||
Ector County Hospital District, Hospital Improvements, Build America Revenue Bonds, Callable 09/15/20 @ 100, 7.18%, 09/15/35 | 250,000 | 270,120 | ||||||
North Texas Tollway Authority, Highway Improvements, Build America Revenue Bonds, Callable 02/01/20 @ 100, 8.91%, 02/01/30 | 2,000,000 | 2,352,820 | ||||||
Orchard Cultural Education Facilities Finance Corp., Recreational Facility Improvements, Revenue Bonds, Callable 11/15/20 @ 100, 6.48%, 11/15/34 | 860,000 | 994,986 | ||||||
Riesel Independent School District, School Improvements Build America Bonds, General Obligation Unlimited, Callable 08/15/19 @ 100, (GTD), 5.54%, 08/15/40 | 200,000 | 212,832 | ||||||
9,521,145 | ||||||||
Utah 0.23% | ||||||||
Central Weber Sewer Improvement District, Sewer Improvements, Build America Revenue Bonds, Callable 03/01/19 @ 100, (OID), 6.38%, 03/01/34 | 500,000 | 567,725 |
INCOME FUND | 23 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Virgin Islands 0.85% | ||||||||
Virgin Islands Water & Power Authority, Electric Lights & Power Improvements, Build America Revenue Bonds, (AGM), 6.65%, 07/01/28 | $ | 840,000 | $ | 959,885 | ||||
Virgin Islands Water & Power Authority, Electric Lights & Power Improvements, Build America Revenue Bonds, (AGM), 6.85%, 07/01/35 | 1,000,000 | 1,181,790 | ||||||
2,141,675 | ||||||||
Virginia 1.80% | ||||||||
Tobacco Settlement Financing Corp., Refunding Revenue Bonds, Series A-1, Callable 01/28/13 @ 100, (OID), 6.71%, 06/01/46 | 6,365,000 | 4,543,273 | ||||||
Washington 1.21% | ||||||||
City of Seattle Municipal Light & Power Revenue, Electric Lights & Power Improvements, Build America Revenue Bonds, (OID), 5.57%, 02/01/40 | 250,000 | 308,005 | ||||||
City of Tacoma , Parking Facility Improvements, General Obligation Ltd, 5.14%, 12/01/25 | 340,000 | 383,496 | ||||||
County of King , Public Improvements, General Obligation Ltd, Series D , 5.43%, 12/01/25 | 500,000 | 611,195 | ||||||
Cowlitz County Public Utility District No. 1, Electric Lights & Power Improvements, Build America Revenue Bonds, 6.88%, 09/01/32 | 500,000 | 638,150 | ||||||
Douglas County Public Utility District No. 1, Electric Lights & Power Improvements, Revenue Bonds, Series A, 5.35%, 09/01/30 | 250,000 | 283,350 | ||||||
Klickitat County Public Utility District No. 1, Refunding Revenue Bonds, Callable 12/01/21 @ 100, 5.25%, 12/01/29 | 500,000 | 525,755 | ||||||
Snohomish County Public Utility District No. 1, Electric Lights & Power Improvements, Build America Revenue Bonds, (OID), 5.68%, 12/01/40 | 250,000 | 298,857 | ||||||
3,048,808 | ||||||||
West Virginia 0.76% | ||||||||
Tobacco Settlement Finance Authority, Miscellaneous Purposes Revenue Bonds, Series A, 7.47%, 06/01/47 | 2,385,000 | 1,911,053 |
24 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Wisconsin 0.48% | ||||||||
Glendale Community Development Authority, Economic Improvements Tax Allocation Bonds, Callable 10/01/17 @ 100, 6.97%, 10/01/29 | $ | 1,000,000 | $ | 1,205,110 | ||||
Total Municipal Bonds | 171,895,003 | |||||||
Corporate Bonds 12.62% | ||||||||
Alcoa, Inc., 5.55%, 02/01/17 | 250,000 | 270,883 | ||||||
Alcoa, Inc., 5.90%, 02/01/27 | 1,000,000 | 1,031,756 | ||||||
Alcoa, Inc., 6.75%, 07/15/18 | 500,000 | 571,877 | ||||||
Allstate Corp.(The), 6.50%, 05/15/57 | 250,000 | 267,188 | ||||||
Altria Group, Inc., 9.25%, 08/06/19 | 250,000 | 348,244 | ||||||
Bank of America Corp., Series MTN, 5.00%, 05/13/21 | 1,000,000 | 1,143,634 | ||||||
Baylor College of Medicine, 5.26%, 11/15/46 | 2,000,000 | 2,139,200 | ||||||
BellSouth Corp., 6.00%, 11/15/34 | 875,000 | 984,353 | ||||||
Boston University, 5.20%, 10/01/45 | 385,000 | 464,279 | ||||||
Choice Hotels International, Inc., 5.70%, 08/28/20 | 200,000 | 218,000 | ||||||
Citigroup, Inc., 5.88%, 02/22/33 | 110,000 | 116,931 | ||||||
Con-way, Inc., 6.70%, 05/01/34 | 1,000,000 | 1,067,342 | ||||||
DDR Corp., Series MTN, 7.50%, 07/15/18 | 500,000 | 615,622 | ||||||
Digital Realty Trust L.P., 5.88%, 02/01/20 | 1,000,000 | 1,144,288 | ||||||
Duke Realty L.P., 4.38%, 06/15/22 | 250,000 | 262,644 | ||||||
Energy Transfer Partners L.P., 4.65%, 06/01/21 | 115,000 | 126,576 | ||||||
Energy Transfer Partners L.P., 6.50%, 02/01/42 | 500,000 | 614,371 | ||||||
Exelon Generation Co. LLC, Series 144A, 5.60%, 06/15/42 | 400,000 | 430,368 | ||||||
Fifth Third Bancorp, 8.25%, 03/01/38 | 250,000 | 358,637 | ||||||
Ford Motor Co., 9.98%, 02/15/47 | 1,000,000 | 1,407,500 | ||||||
General Electric Capital Corp., Series GMTN, 6.88%, 01/10/39 | 1,000,000 | 1,364,064 | ||||||
General Electric Capital Corp., Series A, 7.13%, 12/15/49 | 1,000,000 | 1,134,762 | ||||||
Goldman Sachs Group, Inc.(The), 6.00%, 06/15/20 | 500,000 | 595,020 | ||||||
Goldman Sachs Group, Inc.(The), 6.75%, 10/01/37 | 500,000 | 568,469 | ||||||
Goldman Sachs Group, Inc(The), 6.45%, 05/01/36 | 500,000 | 550,135 | ||||||
Hewlett-Packard Co., 6.00%, 09/15/41 | 500,000 | 496,628 | ||||||
Kilroy Realty L.P., 4.80%, 07/15/18 | 100,000 | 111,534 | ||||||
Kinder Morgan Energy Partners L.P., 5.00%, 08/15/42 | 250,000 | 265,985 | ||||||
Kinder Morgan Energy Partners L.P., 6.50%, 02/01/37 | 250,000 | 306,212 | ||||||
Liberty Property L.P., 6.63%, 10/01/17 | 355,000 | 424,099 | ||||||
MetLife, Inc., 10.75%, 08/01/39 | 1,000,000 | 1,517,500 | ||||||
Morgan Stanley, 5.75%, 01/25/21 | 1,000,000 | 1,143,909 | ||||||
National Retail Properties, Inc., 5.50%, 07/15/21 | 350,000 | 399,402 | ||||||
Noble Holding International Ltd., 6.05%, 03/01/41 | 1,000,000 | 1,174,744 | ||||||
PECO Energy Capital Trust IV, 5.75%, 06/15/33 | 1,000,000 | 987,091 | ||||||
Pitney Bowes, Inc., 5.60%, 03/15/18 | 500,000 | 530,180 | ||||||
Prologis , 6.88%, 03/15/20 | 415,000 | 501,349 |
INCOME FUND | 25 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Principal Amount | Market Value | |||||||
Qwest Corp., 7.13%, 11/15/43 | $ | 1,000,000 | $ | 1,039,872 | ||||
Simon Property Group L.P. REIT, 10.35%, 04/01/19 | 150,000 | 214,764 | ||||||
SL Green Realty Corp., 7.75%, 03/15/20 | 1,000,000 | 1,245,194 | ||||||
Tupperware Brands Corp., 4.75%, 06/01/21 | 500,000 | 535,931 | ||||||
UDR, Inc., 5.25%, 01/15/15 | 110,000 | 118,285 | ||||||
United States Cellular Corp., 6.70%, 12/15/33 | 2,000,000 | 2,104,482 | ||||||
Valero Energy Corp., 8.75%, 06/15/30 | 224,000 | 306,892 | ||||||
Wells Fargo & Co., Series K, 7.98%, 03/29/49 | 500,000 | 576,250 | ||||||
Total Corporate Bonds | 31,796,446 | |||||||
Shares | Market Value | |||||||
Preferred Stocks 16.64% | ||||||||
Financials 3.42% | ||||||||
Aegon NV, 8.00% | 20,000 | $ | 559,600 | |||||
Aflac, Inc., 5.50% | 20,000 | 509,000 | ||||||
American Financial Group, Inc., 5.75% | 20,000 | 506,400 | ||||||
American Financial Group, Inc., 6.38% | 10,000 | 261,900 | ||||||
Aviva PLC, 8.25% | 20,100 | 558,780 | ||||||
Bank of New York Mellon Corp.(The) 5.20% | 20,000 | 502,600 | ||||||
City National Corp./CA, Series C, 5.50% | 20,000 | 486,000 | ||||||
Fifth Street Finance Corp., 5.88% | 24,700 | 595,270 | ||||||
General Electric Capital Corp., 4.88% | 10,000 | 254,900 | ||||||
KKR Financial Holdings LLC, 7.50% | 10,000 | 267,500 | ||||||
KKR Financial Holdings LLC, 8.38% | 30,000 | 834,900 | ||||||
PNC Financial Services Group, Inc., Series Q, 5.38% | 10,000 | 249,500 | ||||||
PNC Financial Services Group, Inc., Series P, 6.13% | 9,500 | 263,245 | ||||||
Protective Life Corp., 6.25% | 20,000 | 521,400 | ||||||
State Street Corp., Series C, 5.25% | 30,000 | 762,300 | ||||||
U.S. Bancorp, Series G, 6.00% | 6,500 | 180,310 | ||||||
U.S. Bancorp, Series F, 6.50% | 10,000 | 286,400 | ||||||
Wells Fargo & Co., 5.20% | 40,000 | 1,007,200 | ||||||
8,607,205 | ||||||||
Industrials 0.41% | ||||||||
Stanley Black & Decker, Inc., 5.75% | 40,000 | 1,038,000 | ||||||
Real Estate Investment Trusts 11.11% | ||||||||
Alexandria Real Estate Equities, Inc., Series E, 6.45% | 40,000 | 1,054,000 | ||||||
CBL & Associates Properties, Inc., Series E, 6.63% | 36,696 | 915,932 | ||||||
CommonWealth REIT, 5.75% | 10,000 | 233,900 | ||||||
CommonWealth REIT, 7.50% | 80,565 | 1,716,840 | ||||||
Digital Realty Trust, Inc., Series F, 6.63% | 20,000 | 521,800 | ||||||
Digital Realty Trust, Inc., Series E, 7.00% | 40,000 | 1,066,800 |
26 | SPIRIT OF AMERICA |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Real Estate Investment Trusts (cont.) | ||||||||
Health Care REIT, Inc., Series J, 6.50% | 40,000 | $ | 1,076,000 | |||||
Kimco Realty Corp., Series J, 5.50% | 78,200 | 1,943,270 | ||||||
Kimco Realty Corp., Series K, 5.63% | 50,000 | 1,241,000 | ||||||
Kimco Realty Corp., Series I, 6.00% | 40,000 | 1,024,400 | ||||||
Kimco Realty Corp., Series H, 6.90% | 10,000 | 266,300 | ||||||
National Retail Properties, Inc., Series D, 6.63% | 20,000 | 531,000 | ||||||
PS Business Parks, Inc., Series U, 5.75% | 10,000 | 250,000 | ||||||
PS Business Parks, Inc., Series T, 6.00% | 54,900 | 1,415,871 | ||||||
PS Business Parks, Inc., Series S, 6.45% | 20,000 | 527,400 | ||||||
Public Storage, Inc., Series V, 5.38% | 10,000 | 258,000 | ||||||
Public Storage, Inc., Series U, 5.63% | 30,000 | 779,400 | ||||||
Public Storage, Inc., Series S, 5.90% | 22,000 | 575,300 | ||||||
Public Storage, Inc., Series R, 6.35% | 60,000 | 1,606,800 | ||||||
Public Storage, Inc., Series Q, 6.50% | 20,000 | 542,800 | ||||||
Regency Centers Corp., Series 7, 6.00% | 44,275 | 1,114,402 | ||||||
Regency Centers Corp., Series 6, 6.63% | 52,000 | 1,381,640 | ||||||
Senior Housing Properties Trust, 5.63% | 40,000 | 984,400 | ||||||
Taubman Centers, Inc., Series J, 6.50% | 20,462 | 524,032 | ||||||
Vornado Realty L.P., 7.88% | 41,159 | 1,114,586 | ||||||
Vornado Realty Trust, Series K, 5.70% | 60,000 | 1,531,800 | ||||||
Vornado Realty Trust, Series I, 6.63% | �� | 16,000 | 400,960 | |||||
Vornado Realty Trust, Series G, 6.63% | 80,775 | 2,030,683 | ||||||
Vornado Realty Trust, Series H, 6.75% | 12,400 | 312,232 | ||||||
Vornado Realty Trust, Series F, 6.75% | 20,800 | 523,744 | ||||||
Vornado Realty Trust, Series J, 6.88% | 20,000 | 539,400 | ||||||
28,004,692 | ||||||||
Telecommunication Services 0.53% | ||||||||
Qwest Corp., 7.38% | 20,450 | 548,264 | ||||||
Telephone & Data Systems, Inc., 5.88% | 10,000 | 245,600 | ||||||
United States Cellular Corp., 6.95% | 19,200 | 528,576 | ||||||
1,322,440 | ||||||||
Utilities 1.17% | ||||||||
DTE Energy Co., 5.25% | 10,000 | 252,000 | ||||||
Entergy Louisiana LLC, 5.25% | 20,000 | 524,400 | ||||||
Entergy New Orleans, Inc., 5.00% | 20,000 | 500,400 | ||||||
NextEra Energy Capital Holdings, Inc., Series H, 5.63% | 20,000 | 520,400 | ||||||
NextEra Energy Capital Holdings, Inc., Series G, 5.70% | 5,000 | 130,350 | ||||||
SCE Trust I, 5.63% | 40,000 | 1,032,000 | ||||||
2,959,550 | ||||||||
Total Preferred Stocks | ||||||||
(Cost $39,467,098) | 41,931,887 |
INCOME FUND | 27 |
SCHEDULE OF INVESTMENTS (CONT.) | DECEMBER 31, 2012 |
Shares | Market Value | |||||||
Money Market 0.64% | ||||||||
Fidelity Institutional Money Market Funds—Prime Money Market Portfolio, 0.14% | 1,619,984 | $ | 1,619,984 | |||||
Total Money Market | 1,619,984 | |||||||
Total Investments – 98.47% | 248,163,763 | |||||||
Other Assets in Excess of Liabilities – 1.53% | 3,861,686 | |||||||
|
| |||||||
NET ASSETS — 100.00% | $ | 252,025,449 |
AGM - Assured Guaranty Municipal Corp.
AMBAC - American Municipal Bond Assurance Corp.
GTD - Guaranteed
NATL-RE - Insured by National Public Finance Guarantee Corp.
OID - Original Issue Discount
REIT - Real Estate Investment Trust
SEEK - Support Education Excellence in Kentucky
* | Aggregate cost for federal income tax purpose is $229,023,986 and net unrealized appreciation consists of: |
Gross unrealized appreciation | $ | 21,341,534 | ||
Gross unrealized depreciation | (2,201,757 | ) | ||
Net unrealized appreciation | $ | 19,139,777 |
28 | SPIRIT OF AMERICA |
STATEMENT OF ASSETS AND LIABILITIES | DECEMBER 31, 2012 |
ASSETS | ||||
Investments in securities at value (cost $229,023,986) (Note 1) | $ | 248,163,763 | ||
Receivable for Fund shares sold | 1,097,940 | |||
Dividends and interest receivable | 3,406,415 | |||
Prepaid expenses | 30,401 | |||
TOTAL ASSETS | 252,698,519 | |||
LIABILITIES | ||||
Payable for Fund shares redeemed | 181,847 | |||
Payable for investment advisory fees | 84,775 | |||
Payable for distributions to shareholder | 249,904 | |||
Payable for distribution fees (Note 3) | 52,979 | |||
Cash overdraft | 2,335 | |||
Other accrued expenses | 101,230 | |||
TOTAL LIABILITIES | 673,070 | |||
NET ASSETS | $ | 252,025,449 | ||
Net assets applicable to 20,596,792 shares outstanding, $0.001 par value (500,000,000 authorized shares) | $ | 252,025,449 | ||
Net asset value and redemption price per share | $ | 12.24 | ||
Maximum offering price per share | $ | 12.85 | ||
SOURCE OF NET ASSETS | ||||
As of December 31 2012, net assets consisted of: | ||||
Paid-in capital | $ | 233,283,734 | ||
Accumulated undistributed net (loss) | (267,610 | ) | ||
Accumulated net realized loss on investments | (130,452 | ) | ||
Net unrealized appreciation on investments | 19,139,777 | |||
NET ASSETS | $ | 252,025,449 |
See accompanying notes which are an integral part of the financial statements.
INCOME FUND | 29 |
STATEMENT OF OPERATIONS |
For the Year Ended December 31, 2012 | ||||
INVESTMENT INCOME | ||||
Dividends | $ | 1,316,352 | ||
Interest | 10,716,439 | |||
TOTAL INVESTMENT INCOME | 12,032,791 | |||
EXPENSES | ||||
Investment Advisory fees (Note 3) | 1,257,906 | |||
Distribution fees (Note 3) | 524,128 | |||
Accounting and Administration fees | 224,785 | |||
Auditing fees | 17,100 | |||
Chief Compliance Officer salary (Note 3) | 9,670 | |||
Custodian fees | 43,012 | |||
Directors’ fees | 19,802 | |||
Insurance expense | 46,827 | |||
Legal fees | 28,140 | |||
Printing expense | 73,537 | |||
Registration fees | 16,253 | |||
Transfer Agent fees | 287,503 | |||
Other expenses | 13,709 | |||
TOTAL EXPENSES | 2,562,372 | |||
Fees waived and reimbursed by Adviser (Note 3) | (251,374 | ) | ||
NET EXPENSES | 2,310,998 | |||
NET INVESTMENT INCOME | 9,721,793 | |||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||||
Net realized gain from investment transactions | 712,664 | |||
Net change in unrealized appreciation/depreciation of investments | 9,617,983 | |||
Net realized and unrealized gain on investments | 10,330,647 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 20,052,440 |
See accompanying notes which are an integral part of the financial statements.
30 | SPIRIT OF AMERICA |
STATEMENT OF CHANGES IN NET ASSETS |
For the Year Ended December 31, 2012 | For the Year Ended December 31, 2011 | |||||||
OPERATIONS |
| |||||||
Net investment income | $ | 9,721,793 | $ | 7,035,282 | ||||
Net realized gain on investment transactions | 712,664 | 431,948 | ||||||
Net change in unrealized appreciation/depreciation of investments | 9,617,983 | 9,300,947 | ||||||
Net increase in net assets resulting from operations | 20,052,440 | 16,768,177 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS |
| |||||||
Distributions from net investments income | (10,330,479 | ) | (7,080,684 | ) | ||||
Distributions from realized gains | (1,094,092 | ) | (157,461 | ) | ||||
Total distributions to shareholders | (11,424,571 | ) | (7,238,145 | ) | ||||
CAPITAL SHARE TRANSACTIONS (Dollar Activity) |
| |||||||
Shares Sold | 118,286,476 | 77,152,281 | ||||||
Shares issued from reinvestment of distributions | 7,867,455 | 4,753,713 | ||||||
Shares redeemed | (33,228,053 | ) | (30,002,794 | ) | ||||
Increase in net assets derived from capital share transactions | 92,925,878 | 51,903,200 | ||||||
Total Increase in net assets | 101,553,747 | 61,433,232 | ||||||
NET ASSETS |
| |||||||
Beginning of period | 150,471,702 | 89,038,470 | ||||||
End of period | $ | 252,025,449 | $ | 150,471,702 | ||||
Undistributed net investment income/(loss) | $ | (267,610 | ) | $ | 28,567 | |||
Transactions in capital stock were: |
| |||||||
Shares sold | 9,813,988 | 6,798,807 | ||||||
Shares issued from reinvestment of distributions | 648,768 | 421,277 | ||||||
Shares redeemed | (2,740,834 | ) | (2,645,402 | ) | ||||
Increase in shares outstanding | 7,721,922 | 4,574,682 |
See accompanying notes which are an integral part of the financial statements.
INCOME FUND | 31 |
FINANCIAL HIGHLIGHTS |
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period presented.
For the Year ended December 31, 2012 | For the Year ended December 31, 2011 | For the Year ended December 31, 2010 | For the Year ended December 31, 2009 * | |||||||||||||
Net asset value, beginning of period | $ | 11.69 | $ | 10.73 | $ | 10.65 | $ | 10.00 | ||||||||
Income from Investment | ||||||||||||||||
Net investment income | 0.59 | 1 | 0.70 | ¹ | 0.73 | ¹ | 0.81 | ¹ | ||||||||
Net realized and unrealized gain on investments | 0.61 | 0.98 | 0.14 | 0.80 | ||||||||||||
Total income from investment operations | 1.20 | 1.68 | 0.87 | 1.61 | ||||||||||||
Less distributions: | ||||||||||||||||
Distributions from net investment income | (0.60 | ) | (0.71 | ) | (0.73 | ) | (0.88 | ) | ||||||||
Distributions from capital gains | (0.05 | ) | (0.01 | ) | (0.06 | ) | (0.08 | ) | ||||||||
Total distributions | (0.65 | ) | (0.72 | ) | (0.79 | ) | (0.96 | ) | ||||||||
Net Asset Value, End of Period | $ | 12.24 | $ | 11.69 | $ | 10.73 | $ | 10.65 | ||||||||
Total Return² | 10.51 | % | 16.12 | % | 8.23 | % | 17.10 | % | ||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $ | 252,025 | $ | 150,472 | $ | 89,038 | $ | 40,242 | ||||||||
Ratio of expenses to average net assets: | ||||||||||||||||
Before expense reimbursement or recapture | 1.22 | % | 1.30 | % | 1.35 | % | 1.82 | % | ||||||||
After expense reimbursement or recapture | 1.10 | % | 1.10 | % | 1.10 | % | 1.01 | % | ||||||||
Ratio of net investment income to average net assets | 4.85 | % | 6.19 | % | 6.64 | % | 7.69 | % | ||||||||
Portfolio turnover | 3.22 | % | 3.12 | % | 16.79 | % | 29.21 | % |
1 Calculated based on the average number of shares outstanding during the period.
2 Calculation does not reflect sales load.
* The Fund commenced operations on December 31, 2008.
See accompanying notes which are an integral part of the financial statements.
32 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS | DECEMBER 31, 2012 |
Note 1 - Significant Accounting Policies
Spirit of America Income Fund (the “Fund”), a series of Spirit of America Investment Fund, Inc. (the “Company”), is an open-end non-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 December 31, 2008. The Fund seeks high current income, investing at least 80% of its assets in a portfolio of taxable municipal bonds, income producing convertible securities, preferred stocks, high yield U.S. corporate bonds (frequently called “junk” bonds), and collateralized mortgage obligations (“CMOs”). 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 (“NAV”) per share for the Fund are calculated as of the close of regular trading on the New York Stock Exchange (“NYSE”), currently 4:00 p.m., Eastern Time on each day the NYSE is open for trading. 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. Unlisted securities traded in the over-the-counter market are valued using an evaluated quote provided by the independent pricing service, or, if an evaluated quote is unavailable, such securities are valued using prices received from dealers, provided that if the dealer supplies both bid and ask prices, the price to be used is the mean of the bid and asked prices. The independent
pricing service derives an evaluated quote by obtaining dealer quotes, analyzing the listed markets, reviewing trade execution data and employing sensitivity analysis. Evaluated quotes may also reflect appropriate factors such as individual characteristics of the issue, communications with broker-dealers, and other market data. Short-term investments having a maturity of 60 days or less are valued at amortized cost, which the Board of Directors (the “Board”) 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.
B. Fair Value Measurements: Various inputs are used in determining the fair value of investments which are as follows:
• Level 1 – | Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access at the measurement date. | |
• Level 2 – | Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. | |
• Level 3 – | Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments). |
INCOME FUND | 33 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
The summary of inputs used to value the Fund’s net assets as of December 31, 2012 is as follows:
Income Fund
Valuation Inputs | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments in Securities: | ||||||||||||||||
Preferred Stock | $ | 41,931,887 | $ | — | $ | — | $ | 41,931,887 | ||||||||
Corporate debt securities | — | 31,796,446 | — | 31,796,446 | ||||||||||||
Debt securities issued by States of the United States and political subdivisions of states | — | 171,895,003 | — | 171,895,003 | ||||||||||||
Collateralized debt obligations | — | 920,443 | — | 920,443 | ||||||||||||
Money Market | 1,619,984 | — | — | 1,619,984 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 43,551,871 | $ | 204,611,892 | $ | — | $ | 248,163,763 | ||||||||
|
| |||||||||||||||
During the year ended December 31, 2012, the Fund recognized no transfers to/from Level 1 or Level 2.
In December 2011, FASB issued ASU No. 2011-11 related to disclosures about offsetting assets and liabilities. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Management is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.
C. 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.
Discounts and premiums on securities purchased are accreted and amortized over the lives of the respective securities. Dividend income and distributions to shareholders are
reported on the ex-dividend date. Interest income and expenses are accrued daily.
D. 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.
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 distributions will be declared daily and paid monthly. Capital gains, if any, will be distributed annually in December, but may be distributed more frequently if deemed advisable by the Board. All such distributions are taxable to the shareholders whether received in cash or reinvested in shares.
34 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Note 2 - Purchases and Sales of Securities
Purchases and proceeds from the sales of securities for the year ended December 31, 2012, excluding short-term investments, were $98,158,738 and $6,587,421, respectively.
Note 3 - Investment Management Fee and Other Transactions with Affiliates
Spirit of America Management Corp. (the “Adviser”) has been retained to act as the Company’s investment adviser pursuant to an Investment Advisory Agreement (the “Advisory Agreement”). The Adviser 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 the Adviser a monthly fee of 1/12 of 0.60% of the Fund’s average daily net assets. Investment advisory fees for the year ended December 31, 2012 were $1,257,906.
The Adviser has contractually agreed to waive advisory fees and/or reimburse expenses so that the total operating expenses will not exceed 1.10% of the average daily net assets of the Fund through April 30, 2013. For the year ended December 31, 2012, the Adviser reimbursed the Fund $251,374.
Any amounts waived or reimbursed by the Adviser are subject to reimbursement by the Fund within the following three years, provided the Fund is able to make such reimbursement and remain in compliance with the expense limitation as stated above. The balance of recoverable expenses to the Adviser as of December 31, 2012 was $647,279. Of this balance, $168,630 will expire in 2013, $227,275 will expire in 2014 and $251,374 will expire in 2015.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 (the “Plan”). The Plan permits the Fund to pay David Lerner Associates, Inc. (the “Distributor”) a monthly fee of 1/12 of 0.25% of the Funds average daily net assets for the Distributor’s services and expenses in distributing shares of the Fund
and providing personal services and/or maintaining shareholder accounts. For the year ended December 31, 2012, fees paid to the Distributor under the Plan were $524,128.
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 year ended December 31, 2012, sales charges received by the Distributor were $5,876,805. A contingent deferred sales charge of 1.00% may be imposed on redemptions of $1 million or more made within one year of purchase.
Certain Officers and Directors of the Company are “affiliated persons”, as that term is defined in the 1940 Act, of the Adviser or the Distributor. Each Director of the Company, who is not an affiliated person of the Adviser or Distributor, receives a quarterly retainer of $3,500, $1,000 for each Board meeting attended, and $500 for each committee meeting attended plus reimbursement for certain travel and other out-of-pocket expenses incurred in connection with attending Board meetings. The Company does not compensate the Officers for the services they provide. There are no Directors’ fees paid to affiliated Directors of the Company. For the year ended December 31, 2012, the Fund was allocated $9,670 of the Chief Compliance Officer’s salary.
Note 4 - Concentration and Other Risks
The Fund is non-diversified such that the Fund may invest a larger percentage of its assets in a given security than a diversified fund.
The Fund’s performance could be adversely affected by interest rate risk, which is the possibility that overall bond prices will decline because of rising interest rates. Interest rate risk is expected to be high for the Fund because it invests mainly in long-term bonds, whose prices are much more sensitive to interest fluctuations than are the prices of short-term bonds.
INCOME FUND | 35 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
The Fund may be affected by credit risk, which is the possibility that the issuer of a bond will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. This risk may be greater to the extent that the Fund may invest in junk bonds.
The Fund may be affected by credit risk of lower grade securities, which is the possibility that municipal securities rated below investment grade, or unrated of similar quality, (frequently called “junk bonds”), may be subject to greater price fluctuations and risks of loss of income and principal than investment-grade municipal securities. Securities that are (or that have fallen) below investment-grade have a greater risk that the issuers may not meet their debt obligations. These types of
securities are generally considered speculative in relation to the issuer’s ongoing ability to make principal and interest payments. During periods of rising interest rates or economic downturn, the trading market for these securities may not be active and may reduce the Fund’s ability to sell these securities at an acceptable price. If the issuer of securities is in default in payment of interest or principal, the Fund may lose its entire investment in those securities.
Other risks include income risk, liquidity risk, prepayment risk on collateralized mortgage obligations, municipal project specific risk, municipal lease obligation risk, zero coupon securities risk, market risk, manager risk, taxability risk, state-specific risk and exchange traded funds risk.
Note 5 - Federal Income Taxes
The tax character of distributions paid during the years ended December 31, 2012 and 2011 were as follows:
Tax Basis Distributions
Ordinary Income | Tax Exempt Income | Net Long-Term | Total Distributions | |||||||||||||
12/31/2012 | $ | 10,571,079 | $ | 0 | $ | 853,492 | $ | 11,424,571 | ||||||||
12/31/2011 | $ | 7,112,532 | $ | 0 | $ | 125,613 | $ | 7,238,145 | ||||||||
Distribution classifications may differ from the Statement of Changes in Net Assets as a result of the treatment of short-term capital gains as ordinary income for tax purposes.
As of December 31, 2012, the components of accumulated distributable earnings for the Fund on a tax basis were as follows:
Unrealized appreciation | $ | 19,139,777 | ||
Other accumulated losses | (398,062 | ) | ||
|
| |||
Total Distributable Earnings | $ | 18,741,715 | ||
|
| |||
Other accumulated losses consist of distribution payable of $267,610 not deducted for tax purposes and post-October losses.
At December 31, 2012, the Fund had no capital loss carryforwards and Deferred Post-October Losses, of $130,452. The difference between appreciation for book purposes and tax purposes is due to wash sales.
Management has analyzed the Fund’s tax positions taken on federal income tax returns for the four year period ended December 31, 2012, and has concluded that no provision for federal income tax is required in the Fund’s
36 | SPIRIT OF AMERICA |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6 - Reclassification
Permanent differences, incurred during the year ended December 31, 2012, resulting from differences in book and tax accounting have been reclassified at year end to undistributed net investment income, accumulated realized gain (loss) and paid-in-capital as follows:
Undistributed Net Investment Income | $ | 312,509 | ||
Accumulated Net Realized Losses | (83,093 | ) | ||
Paid in Capital | (229,416 | ) | ||
Note 7 - Other Matters
On May 27, 2011, the Financial Industry Regulatory Authority (“FINRA”) filed a complaint against David Lerner Associates, Inc. (“DLA”), the Funds’ principal underwriter and distributor, related to its sales practices in connection with its role as managing dealer of an unaffiliated Real Estate Investment Trust offering, Apple REIT Ten, Inc. (“Apple REIT”). In June 2011, several class action complaints were filed against DLA, Apple REIT entities and certain individuals, also in connection with the sale of various Apple REIT securities. In January 2012, FINRA amended its complaint to include allegations of false and misleading communications with the public in connection with certain correspondence with customers and investment seminars; and added David Lerner as an individual respondent. Neither the Company nor any of the Funds are a party to any of the above listed investigations or actions.
On May 7, 2010, each of William Mason, the Portfolio Manager for the Income Fund and DLA, the Funds’ principal underwriter and
distributor, received a Notice of Complaint from the Department of Enforcement of FINRA dated May 7, 2010, relating to Mr. Mason’s activities as head of the fixed income trading department of DLA and DLA’s activities as a municipal securities and collateralized mortgage obligations dealer. The Complaint alleges that each of Mr. Mason and DLA had violated certain NASD and Municipal Securities Rule Making Board fair pricing rules relating to the period January 1, 2005 through January 31, 2007. On April 4, 2012, a FINRA hearing panel issued a decision in this matter and assessed monetary fines and other sanctions against DLA and Mr. Mason, including a suspension of Mr. Mason from association with a FINRA member firm for six (6) months. Both DLA and Mr. Mason appealed the decision.
On October 22, 2012, DLA, Mr. Lerner and Mr. Mason settled all of the above listed FINRA investigations and actions involving Apple REIT securities and municipal bond and collateralized mortgage obligation pricing. In connection with the settlement, DLA, Mr. Lerner and Mr. Mason each agreed, among other things, to pay a fine; and, Mr. Lerner and Mr. Mason each agreed to temporary suspensions from affiliation with DLA. The fines and suspension do not involve the Company, any of the Funds, or the adviser to the Funds. While there can be no assurance that the fines and/or suspensions will not: a) materially and adversely impact DLA’s ability to act as the Fund’s principal underwriter and distributor; and/or b) materially and adversely affect Mr. Mason’s ability to act as the Portfolio Manager for the Income Fund, it is not considered likely at this time that such material and adverse effects would occur.
Note 8 – Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund and has determined that there were no events that require recognition or disclosure in the financial statements.
INCOME FUND | 37 |
NOTES TO FINANCIAL STATEMENTS (CONT.) | DECEMBER 31, 2012 |
Tax Information (Unaudited)
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
Qualified Dividend Income
For the year ended December 31, 2012, 5.46% of the distributions 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.
Qualified Interest Income
For the year ended December 31, 2012, 83.68% of the distributions paid by the Fund
from ordinary income are designated as qualified interest income pursuant to The American Jobs Creation Act of 2004.
Qualified Short-Term Capital Gain Dividends
The Fund designates $320,780 as short-term capital gain distributions pursuant to section 871(k)(2) of the Internal Revenue Code for the year ended December 31, 2012.
Long-Term Capital Gain Dividends
The Fund designates $827,010 as long-term capital gain distributions pursuant to section 852(b)(3) of the Internal Revenue Code for the year ended December 31, 2012.
38 | SPIRIT OF AMERICA |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Spirit of America Income Fund 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 Income Fund (the “Fund”), a series of shares of beneficial interest in Spirit of America Investment Fund, Inc., including the schedule of investments as of December 31, 2012, 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 four 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 its 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Spirit of America Income Fund as of December 31, 2012, 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 four 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
February 26, 2013
INCOME FUND | 39 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT | DECEMBER 31, 2012 |
Approval of the Investment Advisory Agreement (Unaudited)
The Investment Company Act of 1940, as amended (the “1940 Act”), requires that the continuance of a registered management investment company’s investment advisory agreement be approved annually by both the board of directors and also by a majority of its directors who are not parties to the investment advisory agreement or “interested persons” (as defined by the 1940 Act) of any such party (the “Independent Directors”). At a meeting held on November 28, 2012, the Board of Directors (the “Board” or “Directors”) of Spirit of America Investment Fund, Inc. (the “Company”) met in person (the “Meeting”) to, among other things, review and consider the approval of the Investment Advisory Agreement (the “Advisory Agreement”) by and between Spirit of America Management Corp. (the “Adviser”) and the Company, on behalf of Spirit of America Real Estate Income and Growth Fund, Spirit of America Large Cap Value Fund, Spirit of America High Yield Tax Free Bond Fund and Spirit of America Income Fund (collectively, the “Funds”). At the Meeting, the Board, including the Independent Directors, voting separately, approved the Advisory Agreement after determining that the Adviser’s compensation, pursuant to the terms of the Advisory Agreement, would be fair and reasonable and concluded that the approval of the Advisory Agreement would be in the best interest of the Funds’ shareholders. The Board’s approval was based on consideration and evaluation of the information and material provided to the Board and a variety of specific factors discussed at the Meeting and at prior meetings of the Board, including the factors described below.
As part of the approval process and oversight of the advisory relationship, counsel to the Independent Directors (“Independent Counsel”) sent an information request letter to the Adviser seeking certain relevant information and the Directors received, for
their review in advance of the Meeting, the Adviser’s responses. In addition, the Directors were provided with the opportunity to request any additional materials. In advance of the Meeting, the Board, including the Independent Directors, requested and received materials provided by the Adviser and Independent Counsel, including, among other things, the following: (i) Independent Counsel’s 15(c) questionnaire and the responses provided by the Adviser; (ii) information on the investment performance of the Funds and relevant indices over various time periods; (iii) sales and redemption data with respect to the Funds; (iv) the general investment outlook in the markets in which the Funds invest; (v) arrangements with respect to the distribution of the Funds’ shares; (vi) the procedures employed to determine the value of each Fund’s assets; (vii) the allocation of the Funds’ brokerage, the record of compliance with the Funds’ investment policies and restrictions and with the Funds’ Code of Ethics and the structure and responsibilities of the Adviser’s compliance departments; (viii) the profitability of the Funds’ investment advisory business to the Adviser taking into account both advisory fees and any other potential direct or indirect benefits; (ix) information comparing the overall fees and specifically the fees under the Advisory Agreement with the fees paid by other similar mutual funds; (x) the Form ADV of the Adviser; and (xi) information comparing the performance of the Funds with the performance of other similar mutual funds; and (xii) a memorandum from Independent Counsel regarding the responsibilities of the Independent Directors related to the approval of the Investment Advisory Agreement.
In evaluating the Advisory Agreement, the Board, including the Independent Directors, requested, reviewed and considered materials
40 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
furnished by the Adviser and questioned personnel of the Adviser, including the Funds’ portfolio managers, regarding, among other things, the personnel, each Fund’s performance, and operations and financial condition of the Adviser. Among other information, the Board, including the Independent Directors, requested and was provided information regarding:.
• | The investment performance of each Fund over various time periods both by itself and in relation to relevant indices; |
• | The fees charged by the Adviser for investment advisory services, as well as the compensation received by the Adviser and its affiliates; |
• | The waivers of fees and reimbursements of expenses at times by the Adviser under the Operating Expenses Agreement;. |
• | The investment performance, fees and total expenses of mutual funds with similar objectives and strategies managed by other investment advisers; |
• | The investment management staffing and the experience of the investment advisory, administrative and other personnel providing services to the Funds and the historical quality of the services provided by the Adviser; and |
• | The profitability to the Adviser of managing and its affiliate distributing the Funds and the methodology in allocating expenses to the management of the Funds. |
At the Meeting, Independent Counsel also referred the Board to the “Gartenberg Memorandum” which had been distributed to each Director in advance of the Meeting, outlining the legal standards applicable to the Independent Directors under the 1940 Act with respect to the approval of the continuation of the investment advisory
agreements on behalf of each of the Funds. In addition, the Independent Directors met at length with Independent Counsel in executive session during the reconvening of the Meeting, outside the presence of Company management, to discuss the materials provided by the Adviser and to consider any additional questions they had of the Adviser.
The following is a summary of the Board’s discussion and views regarding the factors it considered in evaluating the continuation of the Advisory Agreement:
1. Nature, Extent, and Quality of Services.
The Board, including the Independent Directors, considered the nature, quality and extent of advisory, administrative and shareholder services performed by the Adviser, including: regulatory filings and disclosure to shareholders, general oversight of the service providers, coordination of Fund marketing initiatives, review of Fund legal issues, assisting the Board, including the Independent Directors, in their capacity as directors and other services. The Board, including the Independent Directors, noted the increased responsibilities of the Adviser in response to an increasingly regulated industry. The Board, including the Independent Directors, concluded that the services are extensive in nature, that the Adviser delivered a high level of service to each Fund and that the Adviser is positioned to continue providing such quality of service in the future.
2. Investment Performance of the Funds and the Adviser.
The Board, including the Independent Directors, considered short-term and long-term investment performance for the Funds over various periods of time as compared to both relevant indices and the performance of such Funds’ peer groups, and concluded that each Fund was delivering reasonable performance results, especially over the
INCOME FUND | 41 |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
long-term, consistent with the investment strategies that the Funds pursue.
3. Costs of Services and Profits Realized by the Adviser.
a. The Board, including the Independent Directors, considered the information provided by Lipper Inc. regarding each Fund’s management fee rate and overall expense ratio relative to industry averages for the Fund’s peer group category and the advisory fees charged by the Adviser to other accounts. The Board viewed favorably the current and historic willingness of the Adviser to limit the overall expense ratios of the Funds. Recognizing that the fees paid by the Funds were higher than the medians in their peer groups, the Board nonetheless noted that the fees were still close to the median and that several peer funds had higher fees.
b. Profitability and Costs of Services to the Adviser. The Board, including the Independent Directors, considered estimates of the Adviser’s profitability and costs attributable to the Funds. The Board recognized that increased fixed costs, particularly legal and audit fees in response to increasing regulations, have a greater impact on smaller fund families, such as the Funds, than on larger fund complexes. Given this, the Board recognized that the Funds’ overall expenses compare unfavorably to some funds identified as peers. The Board also considered whether the amount of the Adviser’s profit is a fair profit for the management of the Funds and noted that the Adviser has devoted a large amount of its resources into the Funds over the years. The Board, including the Independent Directors, concluded that the Adviser’s profitability was at a fair and acceptable level, particularly in light of the quality of the services being provided to the Funds, and bore a reasonable relationship to the services rendered.
4. Extent of Economies of Scale as the Funds Grow.
The Board, including the Independent Directors, considered whether there have been economies of scale with respect to the management of the Funds and whether the Funds have appropriately benefited from any economies of scale. Given the size of each Fund, the Board did not believe that significant (if any) economies of scale have been achieved at this time.
5. Whether Fee Levels Reflect Economies of Scale.
The Board took into consideration that the Adviser does not currently offer breakpoints in its fees that would otherwise allow investors to benefit directly from economies of scale in the form of lower fees as fund assets grow. However, the Board, including the Independent Directors, did consider enhancements in personnel and services provided to the Funds by the Adviser, without an increase in fees. The Board also noted that few of the Funds’ peers offered breakpoints despite having significantly more assets under management.
6. Other Relevant Considerations.
a. Personnel and Methods. The Board, including the Independent Directors, reviewed the Adviser’s Form ADV and questioned the Adviser regarding the size, education and experience of the staff of the Adviser, its fundamental research capabilities, approach to recruiting, training and retaining portfolio managers and other research and management personnel, and concluded that these enable them to provide a high level of service to the Funds. The Board also considered the history, reputation, qualifications and background of the Adviser as well as the qualifications of its personnel.
42 | SPIRIT OF AMERICA |
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT (CONT.) | DECEMBER 31, 2012 |
b. The Board, including the Independent Directors, also considered the character and amount of other direct and incidental benefits received by the Adviser and its affiliates from their association with the Funds, including the benefits received by the affiliated distributor. The Board concluded that potential “fall-out” benefits that the Adviser and its affiliates may receive, such as greater name recognition or increased ability to obtain research services (although the Board noted that the Adviser currently does not use soft dollars to obtain research services), appear to be reasonable, and may in some cases benefit the Funds.
Conclusions. The Board, including the Independent Directors, did not identify any factor as all-important or all-controlling and
instead considered the above listed and other factors collectively in light of the Funds’ surrounding circumstances. Each Independent Director gave the weight to each factor that he deemed appropriate in his own judgment. The Independent Directors considered the renewal of the Advisory Agreement on a Fund-by-Fund basis and determined that the renewal of the Advisory Agreement was in the best interests of the shareholders of each Fund. The Independent Directors also determined that the fees charged to each Fund for the services provided were reasonable. Therefore, the Board, including the Independent Directors, determined that continuance of the Advisory Agreement was in the best interests of each Fund.
INCOME FUND | 43 |
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, (Age) and Address1 Position(s) with the Company | Term of Office2 and Length of Time Served | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director | ||||
INTERESTED DIRECTORS | ||||||||
David Lerner3 (76) Director, Chairman of the Board, President | Since 1998 | President and founder, David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor; and President, Spirit of America Management Corp., the Company’s investment adviser. | 4 | Director of Spirit of America Management Corp., the Company’s investment adviser; Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
Daniel Lerner3 (51) Director | Since 1998 | Senior Vice President, Investment Counselor with David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor, since September 2000. | 4 | Director of David Lerner Associates, Inc., a registered broker-dealer and the Company’s Distributor. | ||||
INDEPENDENT DIRECTORS | ||||||||
Allen Kaufman (76) Director | Since 1998 | President and Chief Executive Officer of K.G.K. Agency, Inc., a property and casualty insurance agency, since 1963.4 | 4 | Director of K.G.K. Agency, Inc., a property and casualty insurance agency. | ||||
Stanley S. Thune (76) Lead Director | Since 1998 | President and Chief Executive Officer, Freight Management Systems, Inc., a third party logistics management company, since 1994; private investor. | 4 | Director of Freight Management Systems, Inc. | ||||
Richard Weinberger (76) Director | Since 2005 | Of Counsel to Ballon Stoll Bader & Nadler, P.C., a mid-sized law firm, since January 2005 to March 2011; Shareholder, Ballon Stoll Bader & Nadler, P.C., January 2000 to December 2004. | 4 | None. | ||||
OFFICERS | ||||||||
David Lerner President (see biography above) | ||||||||
Alan P. Chodosh (59) Treasurer and Secretary | Since 2003 (Treasurer) Since 2005 (Secretary) | Executive Vice President and Chief Financial Officer of David Lerner Associates, Inc. since June 1999. | N/A | N/A | ||||
Joseph Pickard (52) Chief Compliance Officer | Since 2007 | Chief Compliance Officer of Spirit of America Investment Fund, Inc. and Spirit of America Management Corp. since July 2007; Counsel to the Interested Directors of Spirit of America Investment Fund, Inc. since July 2002; General Counsel of David Lerner Associates, Inc. since July 2002. | N/A | N/A |
1 | All addresses are in c/o Spirit of America Investment Fund, Inc., 477 Jericho Turnpike, Syosset, New York 11791. |
2 | Each Director serves for an indefinite term, until his successor is elected. |
3 | David Lerner is an “interested” Director, as defined in the 1940 Act, by reason of his positions with the Adviser, and Daniel Lerner is an “interested” Director by reason of his position with the Distributor. Daniel Lerner is the son of David Lerner. |
4 | K.G.K. Agency, Inc. provides insurance to David Lerner Associates, Inc. and affiliated entities. However, the Board has determined that Mr. Kaufman is not an “interested” Director because the insurance services are less than $120,000 in value. |
44 | SPIRIT OF AMERICA |
Proxy Voting Information
The Company’s Statement of Additional Information (“SAI”) containing a description of the policies and procedures that the Spirit of America Income Fund uses to determine how to vote proxies relating to portfolio securities, along with the Company’s proxy voting record relating to portfolio securities held during the 12-month period ended December 31, 2012, are available (i) without charge, upon request, by calling (516) 390-5565; and (ii) on the SEC’s website at http://www.sec.gov.
Information on Form N-Q
The Company will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Company’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-0030.
Investment Adviser
Spirit of America Management Corp.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Distributor
David Lerner Associates, Inc.
477 Jericho Turnpike
P.O. Box 9006
Syosset, NY 11791-9006
Shareholder Services
BNY Mellon Investment Servicing (U.S.) Inc.
760 Moore Road
King of Prussia, PA 19406
Custodian
Huntington National Bank
41 South High Street
Columbus, OH 43215
Independent Registered Public Accounting Firm
Tait Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
Counsel
Blank Rome LLP
405 Lexington Avenue
New York, NY 10174
For additional information about the Spirit of America Income 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, risks, policies, expenses, and other information.
©Copyright 2012 Spirit of America SOAIN-AR12
Item 2. Code of Ethics.
(a) As of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant’s Principal Executive Officer and Principal Financial Officer.
(b) Not applicable.
(c) During the period covered by the report, with respect to the registrant’s code of ethics that applies to its Principal Executive Officer and Principal Financial Officer: there have been no amendments to a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2.
(d) During the period covered by the report, with respect to the registrant’s code of ethics that applies to its Principal Executive Officer and Principal Financial Officer: there have been no waivers granted from a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2.
(e) Not applicable.
(f) The registrant has included a copy of the code of ethics that applies to the registrant’s Principal Executive Officer and Principal Financial Officer. This code of ethics is included as an Exhibit on this Form N-CSR.
Item 3. Audit Committee Financial Expert.
3(a)(1) The registrant’s Board of Trustees has determined that the registrant has at least one audit committee financial expert serving on its audit committee.
3(a)(2) The audit committee financial expert is William H. Zimmer III, who is “independent” for purposes of this Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees billed to the registrant by its principal accountants for the two most recent fiscal years:
Fiscal year ended 2012: $72,800
Fiscal year ended 2011: $72,800
(b) Audit-Related Fees billed to the registrant by its principal accountants for the two most recent fiscal years:
Fiscal year ended 2012: $0
Fiscal year ended 2011: $0
Fees for 2012 and 2011 related to the agreed-upon review of items within the Management’s Discussion of Fund Performance sections of the Funds’ Form N-CSR filing. 2011 fees also include the review of Form N-1A for 2011. Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(c) Tax Fees billed to the registrant by its principal accountants for the two most recent fiscal years:
Fiscal year ended 2012: $0
Fiscal year ended 2011: $0
Fees for 2012 and 2011 related to the review of the registrant’s tax returns. Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(d) All other fees billed to the registrant by its principal accountants for the two most recent fiscal years:
Fiscal year ended 2012: $0
Fiscal year ended 2011: $0
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(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) 0%
(c) 0 %
(d) 0%
(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 0%.
(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 fiscal years ended December 31, 2011 and December 31, 2012 are $0 and $0, respectively
(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.
(a) Not applicable.
(b) Not applicable.
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.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s Principal Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-2 under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.
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) The Spirit of America Funds
By (Signature and Title)* /s/ David Lerner
David Lerner, Principal Executive Officer
Date 3-11-13
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
David Lerner, Principal Executive Officer
Date 3-11-13
By (Signature and Title)* /s/ Alan P. Chodosh
Alan P. Chodosh, Principal Financial Officer
Date 3-11-13