<Page>
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
SSH Securities, Inc.
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: (516) 390-5565
----------------------------
Date of fiscal year end: October 31, 2004
--------------------------
Date of reporting period: October 31, 2004
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
<Page>
Message to our Shareholders
December 2004
Dear Shareholder,
We are pleased to send you the annual report of the Spirit of America Real
Estate Fund and are very pleased with the total return paid to investors. Please
see the tables within the report.
If, as we believe, the economy and employment numbers continue their
improvement, funds from operations ("FFO") in our REIT investments should
increase. Potentially, dividends and REIT values might increase.
While we believe that REIT values should increase, you should be aware that
REITs are subject to the usual risks associated with owning real estate -
property values can fall due to environmental, civil unrest, economic or other
reasons, and changes in interest rates can negatively impact the performance of
real estate companies. Investor's shares, when redeemed, may be worth more or
less than their original cost In addition, please note that past performance is
no guarantee of future results
Thank you for your continued support of our fund's strategic investment
philosophy. We look forward to a profitable and successful year.
Sincerely
David Lerner, President Ronald W. Weiss, Portfolio Manager
Prospective investors should consider the investment objectives, risks and
charges and expenses of the fund carefully before investing. The maximum sales
charge on share purchases is 5.25% of the offering price. The fund's prospectus
contains this and other information about the fund and may be obtained through
your broker or by calling 1-800-452-4892. The prospectus should be read
carefully before investing.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND - MANAGEMENT DISCUSSION
The Real Estate fund is now virtually in a dead heat with our benchmark,
the RMS (Morgan Stanley Real Estate Index). During the quarter 8/2/04 to
10/29/04, SOAAX returned 11.02% and the RMS returned 11.87%. For the year ended
October 31, 2004, the Real Estate Class A shares returned 17.47% (sales load
adjusted) and Class B shares returned 16.05% (CDSC fee adjusted) versus 29.57%
for the RMS. We believe that SOAAX is now at an advantage over many other real
estate funds. Over the past year we have been investing in apartment REITs,
shopping center and healthcare REITs at bargain prices. For the past 12 months
apartment REITs produced a return of 18% and shopping centers returned 14%.
Large Mall developers have shown a 12 month 38% return, Industrial REITs a 29%
return and Hotels averaged a 29 % return. After the 10/29/04 quarter the sectors
we invest in have started to pick up steam.
<Page>
Spirit of America Real Estate Fund
Summary of Portfolio Holdings (Unaudited)
The SEC adopted a requirement that all Funds present their categories of
portfolio holdings in a table, chart or graph format in their annual and
semi-annual shareholder reports, whether or not a schedule of investments is
utilized. The following table, which presents portfolio holdings as a percentage
of total market value, is provided in compliance with such requirement.
<Table>
Sector Diversification (% of market value)
Apartments (REITS) 20.71% $ 39,096,453
Diversified (REITS) 8.56% 16,162,854
Healthcare (REITS) 13.44% 25,372,957
Industrial (REITS) 5.81% 10,972,255
Internet Content 0.00% -
Net Lease (REITS) 6.34% 11,961,863
Office Space (REITS) 14.11% 26,625,288
Regional Malls (REITS) 14.85% 28,026,258
Shopping Centers (REITS) 14.46% 27,299,028
Storage (REITS) 1.63% 3,081,235
Preferred Stocks 0.09% 173,410
---------------------------
Total Investments 100.00% $ 188,771,601
===========================
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND - CLASS A
ILLUSTRATION OF $10,000 INVESTMENT
(UNAUDITED)
The graph below compares the increase in value of a $10,000 investment in the
Spirit of America Real Estate Fund - Class A with the performance of the Morgan
Stanley REIT Index. The values and returns for the Spirit of America Real Estate
Fund - Class A include reinvested dividends, and the impact of the maximum sales
charge 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.
[CHART]
<Table>
<Caption>
SPIRIT OF
AMERICA
REAL MORGAN
ESTATE STANLEY
FUND - REIT
CLASS A* INDEX
-------------------------
01/09/98 9,479 10,000
04/30/98 9,109 9,735
10/31/98 8,362 8,468
04/30/99 8,552 8,819
10/31/99 7,828 7,938
04/30/00 8,032 8,833
10/31/00 8,480 9,382
04/30/01 10,145 10,411
10/31/01 10,718 10,626
04/30/02 12,567 12,575
10/31/02 11,604 11,336
04/30/03 12,853 12,595
10/31/03 15,094 15,186
04/30/04 15,312 15,606
10/31/04 18,719 19,663
</Table>
Average Annual Total Returns
Periods Ended October 31, 2004
<Table>
1 Year 17.47%
5 Year 17.79%
Since Inception 9.65%
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Fund commenced operations January 9, 1998.
The Morgan Stanley REIT Index is an unmanaged index and the performance of
an index assumes no transaction costs, taxes, management fees or other
expenses. A direct investment in an index is not possible.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND - CLASS B
ILLUSTRATION OF INVESTMENT
(UNAUDITED)
The graph below compares the increase in value of a $10,000 investment in the
Spirit of America Real Estate Fund - Class B with the performance of the Morgan
Stanley REIT Index. The values and returns for the Spirit of America Real Estate
Fund - Class B include reinvested dividends, and the impact of the contingent
deferred sales charge at redemption. The returns shown do not reflect taxes that
a shareholder would pay on fund distributions or on the redemption of fund
shares.
[CHART]
<Table>
<Caption>
SPIRIT OF
AMERICA
REAL MORGAN
ESTATE STANLEY
FUND - REIT
CLASS B* INDEX
-------------------------
03/06/98 10,000 10,000
04/30/98 9,405 9,950
10/31/98 8,592 8,655
04/30/99 8,761 9,013
10/31/99 7,983 8,113
04/30/00 8,174 9,028
10/31/00 8,599 9,589
04/30/01 10,259 10,641
10/31/01 10,797 10,860
04/30/02 12,616 12,852
10/31/02 11,616 11,586
04/30/03 12,819 12,873
10/31/03 14,997 15,521
04/30/04 15,163 15,950
10/31/04 18,466 20,097
</Table>
Average Annual Total Returns
Periods Ended October 31, 2004
<Table>
1 Year 16.05%
5 Year 16.87%
Since Inception 9.65%
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Effective March 6, 1998, the Fund began offering Class B shares.
The Morgan Stanley REIT Index is an unmanaged index and the performance of
an index assumes no transaction costs, taxes, management fees or other
expenses. A direct investment in an index is not possible.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD (MAY 01, 2004 TO OCTOBER 31, 2004)
We believe it is important for you to understand the impact of fees regarding
your investment. All mutual funds have operating expenses. As a shareholder of
the fund, you incur ongoing costs, which include costs for portfolio management,
administrative services, and shareholder reports (like this one), among others.
Operating expenses, which are deducted from a fund's gross income, directly
reduce the investment return of the portfolio. A fund's expenses are expressed
as a percentage of its average net assets. This figure is known as the expense
ratio. The following examples are intended to help you understand the ongoing
fees (in dollars) of investing in your fund and to compare these costs with
those of other mutual funds. The examples are based on an investment of $1,000
made at the beginning of the period shown and held for the entire period.
<Table>
<Caption>
EXPENSES
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSE RATIO PAID DURING
VALUE 05/01/04 VALUE 10/31/04 (1) PERIOD (2)
- -------------------------------------------------------------------------------------------------------
SPIRIT OF AMERICA REAL ESTATE FUND
ACTUAL FUND RETURN
Class A $ 1,000.00 $ 1,204.20 1.83% $ 10.17
Class B $ 1,000.00 $ 1,192.50 2.53% $ 13.98
HYPOTHETICAL 5% RETURN
Class A $ 1,000.00 $ 1,031.70 1.83% $ 9.37
Class B $ 1,000.00 $ 1,024.70 2.53% $ 12.91
</Table>
This table illustrates your fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses that
you paid over the period. The "Ending Account Value" shown is derived from the
fund's ACTUAL return, the third column shows the period's annualized expense
ratio, and the last column shows the dollar amount that would have been paid by
an investor who started with $1,000 in the fund at the beginning of the period.
You may use the information here, together with your account value, to estimate
the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your fund's
costs with those of other mutual funds. It assumes that the fund had a return of
5% before expenses during the period shown, but that the expense ratio is
unchanged. In this case, because the return used is NOT the fund's actual
return, the results do not apply to your investment. You can assess your fund's
costs by comparing this hypothetical example with the hypothetical examples that
appear in shareholder reports of other funds.
Please note that the expense shown in the table are meant to highlight your
ONGOING costs only and do not reflect any transactional costs such as sales
charges (loads) or redemption fees.
(1) Annualized, based on the Portfolio's most recent fiscal half-year expenses.
(2) Expenses are equal to the Fund's annualized expense ratio multiplied by the
average acount value over the period, multiplied by the number of days in
the most recent fiscal half-year, then divided by 366.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2004
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
COMMON STOCKS - 98.90%
APARTMENTS (REITS) - 20.50%
Amli Residential Properties Trust 127,000 $ 3,996,690
Apartment Investment & Management Co. 214,200 7,858,998
Associated Estates Realty Corp. 422,500 4,017,975
Cornerstone Realty Income Trust, Inc. 305,400 2,999,028
Gables Residential Trust 179,900 6,566,350
Mid-America Apartment Communities, Inc. 198,500 7,807,005
Post Properties, Inc. 138,300 4,438,047
United Dominion Realty Trust, Inc. 67,000 1,412,360
---------------
39,096,453
---------------
DIVERSIFIED (REITS) - 8.48%
BNP Residential Properties, Inc. 130,900 1,827,364
Colonial Properties Trust 49,900 1,945,102
Crescent Real Estate Equities Co. 336,500 5,387,365
Duke Realty Corp. 4,000 136,400
FrontLine Capital Group * 640 -
Hospitality Properties Trust 32,300 1,384,055
Host Marriott Corporation 20,000 291,000
PMC Commerical Trust 2,400 34,824
Sizeler Property Investors, Inc. 176,300 1,710,110
U.S. Restaurant Properties, Inc. 194,500 3,446,540
Vornado Operating, Inc.* 250 94
---------------
16,162,854
---------------
HEALTHCARE (REITS) - 13.30%
Five Star Quality Care, Inc. * 1,353 9,539
Health Care Property Investors, Inc. 196,000 5,454,680
Health Care REIT, Inc. 147,100 5,295,600
Healthcare Realty Trust, Inc. 102,500 4,135,875
National Health Investors, Inc. 76,200 2,180,082
Nationwide Health Properties, Inc. 313,100 7,066,667
National Health Realty, Inc. 53,600 1,078,432
OMEGA Healthcare Investors, Inc. 9,000 101,430
Senior Housing Properties Trust 2,700 50,652
---------------
25,372,957
---------------
INDUSTRIAL (REITS) - 5.75%
Bedford Property Investors, Inc. 13,000 373,750
Brandywine Realty Trust 16,000 470,720
First Industrial Realty Trust, Inc. 245,651 9,482,129
Prime Group Realty Trust * 101,200 645,656
---------------
10,972,255
---------------
INTERNET CONTENT - 0.00%
VelocityHSI, Inc.+ * 1,260 -
---------------
NET LEASE (REITS) - 6.27%
Commercial Net Lease Realty 282,116 5,425,091
Lexington Corporate Properties Trust 291,300 6,536,772
---------------
11,961,863
---------------
OFFICE SPACE (REITS) - 13.96%
Arden Reality, Inc. 107,100 3,649,968
CRT Properties, Inc. 40,000 886,400
Equity Office Properties Trust 17,000 478,040
Glenborough Realty Trust, Inc. 182,700 3,836,700
Highwoods Properties, Inc. 214,500 5,321,744
HRPT Properties Trust 734,100 8,214,579
Mack-Cali Realty Corp. 63,100 2,787,127
Reckson Associates Realty Corporation 47,800 1,450,730
---------------
26,625,288
---------------
</Table>
SEE ACCOMPANYING NOTES TO THE FNANCIAL STATEMENTS.
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
------ ----------------
REGIONAL MALLS (REITS) - 14.70%
Glimcher Realty Trust 347,050 8,960,831
The Macerich Company 82,200 4,911,450
The Mills Corporation 69,700 3,864,865
Pennsylvania Real Estate Investment Trust 243,694 9,881,792
Simon Property Group, Inc. 6,000 349,920
Taubman Centers, Inc. 2,000 57,400
---------------
28,026,258
---------------
SHOPPING CENTERS (REITS) - 14.32%
Burnham Pacific Properties, Inc. 11,000 1,348
Developers Diversified Realty Corp. 154,104 6,441,547
Equity One, Inc. 139,500 2,928,105
Federal Realty Investment Trust 77,600 3,682,120
Heritage Property Investment Trust 58,300 1,783,396
Kimco Realty Corporation 7,000 381,850
Malan Realty Investors, Inc. * 5,000 25,950
New Plan Excel Realty Trust 250,910 6,563,806
Price Legacy Corporation 550 10,346
Ramco-Gershenson Properties Trust 178,100 4,808,700
Realty Income Corporation 14,000 671,860
---------------
27,299,028
---------------
STORAGE (REITS) - 1.62%
Shurgard Storage Centers, Inc., Cl. A 4,000 158,800
Sovran Self Storage, Inc. 74,800 2,922,435
---------------
3,081,235
---------------
TOTAL COMMON STOCKS
(Cost $131,044,751) 188,598,191
---------------
PREFERRED STOCKS - 0.09%
NET LEASE (REITS) - 0.09%
Commercial Net Lease Realty 9% Series A
(Cost $152,677) 6,352 173,410
---------------
TOTAL INVESTMENTS - 98.99%
(Cost $131,197,428**) 188,771,601
CASH AND OTHER ASSETS NET OF LIABILITIES - 1.01% 1,924,630
---------------
NET ASSETS - 100.00% $ 190,696,231
===============
</Table>
+ Company filed for Chapter 7 bankruptcy on August 14, 2001
* Non-income producing security
** Cost for Federal income tax purposes is $131,197,428 and net
unrealized appreciation consists of:
<Table>
Gross unrealized appreciation $ 58,701,019
Gross unrealized depreciation (1,126,846)
---------------
Net unrealized appreciation $ 57,574,173
===============
</Table>
SEE ACCOMPANYING NOTES TO THE FNANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
<Table>
ASSETS
Investments in securities at value (cost $131,197,428) (Note 1) $ 188,771,601
Cash 1,444,043
Receivables:
Capital stock sold 1,251,376
Dividends and interest 982,386
Prepaid assets 23,806
---------------
TOTAL ASSETS 192,473,212
---------------
LIABILITIES
Payables:
Capital stock redeemed 510,762
Investment securities purchased 887,859
Advisory fees 153,102
Distribution expenses (Note 3) 54,683
Other accrued expenses 170,575
---------------
TOTAL LIABILITIES 1,776,981
---------------
NET ASSETS $ 190,696,231
===============
CLASS A SHARES
Net assets applicable to 13,809,649 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 178,103,766
===============
Net asset value and redemption price per Class A Share
($178,103,766 DIVIDED BY 13,809,649 shares) $ 12.90
===============
Offering price per share ($12.90 DIVIDED BY 0.9475) $ 13.61
===============
CLASS B SHARES
Net assets applicable to 960,446 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 12,592,465
===============
Net asset value and offering price per Class B Share
($12,592,465 DIVIDED BY 960,446 shares) $ 13.11
===============
Redemption price per share ($13.11 x 0.9425) $ 12.36
===============
SOURCE OF NET ASSETS
At October 31, 2004, net assets consisted of:
Paid-in capital $ 133,122,058
Net unrealized appreciation on investments 57,574,173
---------------
NET ASSETS $ 190,696,231
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2004
<Table>
INVESTMENT INCOME
Dividends $ 6,008,934
Interest 6,781
---------------
TOTAL INVESTMENT INCOME 6,015,715
---------------
EXPENSES
Investment advisory fees (Note 3) 1,655,939
Transfer agent fees 308,000
Administration fees 160,358
Distribution fees - Class A (Note 3) 475,151
Distribution fees - Class B (Note 3) 123,316
Accounting fees 83,690
Registration fees 16,947
Legal fees 83,302
Custodian fees 31,900
Printing expense 89,461
Auditing fees 15,000
Directors' fees 18,420
Insurance expense 40,322
Other proffesional fees 13,323
---------------
TOTAL EXPENSES 3,115,129
Recoupment of waived and reimbursed expenses (Note 3) 98,621
---------------
NET EXPENSES 3,213,750
---------------
NET INVESTMENT INCOME 2,801,965
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions and REITs 3,898,635
Net change in unrealized appreciation of investments 29,931,164
---------------
Net realized and unrealized gain on investments 33,829,799
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 36,631,764
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
------------------ ------------------
OPERATIONS
Net investment income $ 2,801,965 $ 3,558,868
Net realized gain from security transactions and REITs 3,898,635 1,098,567
Net change in unrealized appreciation of investments 29,931,164 28,223,895
------------------ ------------------
Net increase in net assets 36,631,764 32,881,330
------------------ ------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income:
Class A (2,677,345) (3,280,399)
Class B (124,620) (282,851)
------------------ ------------------
Total distributions from net investment income to shareholders (2,801,965) (3,563,250)
------------------ ------------------
Distributions from realized gains:
Class A (3,622,978) (1,007,189)
Class B (275,657) (91,378)
------------------ ------------------
Total distributions from realized gains to shareholders (3,898,635) (1,098,567)
------------------ ------------------
Return of capital:
Class A (1,778,504) (2,655,884)
Class B (135,334) (228,510)
------------------ ------------------
Total distributions from net return of capital to shareholders (1,913,838) (2,884,394)
------------------ ------------------
Total distributions to shareholders (8,614,438) (7,546,211)
------------------ ------------------
CAPITAL SHARE TRANSACTIONS (DOLLAR ACTIVITY)
Shares sold:
Class A 46,452,906 43,934,245
Class B 1,179,721 1,304,630
Shares issued as reinvestment of distributions:
Class A 5,958,372 4,949,904
Class B 409,003 458,177
Shares redeemed:
Class A (37,742,572) (20,373,141)
Class B (2,971,538) (1,713,839)
------------------ ------------------
Increase in net assets derived from capital share transactions (a) 13,285,892 28,559,976
------------------ ------------------
Total increase in net assets 41,303,218 53,895,095
NET ASSETS
Beginning of year 149,393,013 95,497,918
------------------ ------------------
End of year $ 190,696,231 $ 149,393,013
================== ==================
(a) Transactions in capital stock were:
Shares sold:
Class A 3,890,658 4,497,043
Class B 97,641 134,229
Shares issued as reinvestment of dividends:
Class A 494,187 508,805
Class B 33,399 46,596
Shares redeemed:
Class A (3,148,460) (2,016,435)
Class B (249,433) (154,195)
------------------ ------------------
Increase in shares outstanding 1,117,992 3,016,043
================== ==================
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest
outstanding throughout the periods presented.
<Table>
<Caption>
CLASS A CLASS A CLASS A CLASS A CLASS A
---------------- ---------------- ---------------- ---------------- ----------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2001 OCTOBER 31, 2000
---------------- ---------------- ---------------- ---------------- ----------------
NET ASSET VALUE, BEGINNING OF YEAR $ 10.93 $ 8.96 $ 8.84 $ 7.41 $ 7.48
---------------- ---------------- ---------------- ---------------- ----------------
Income from Investment Operations:
Net investment income 0.20 0.30 0.40 0.31 0.45
Net realized and unrealized gain/(loss)
on investments 2.37 2.30 0.36 1.63 0.15
---------------- ---------------- ---------------- ---------------- ----------------
Total from investment operations 2.57 2.60 0.76 1.94 0.60
---------------- ---------------- ---------------- ---------------- ----------------
Less Distributions:
Distributions from net investment
income (0.20) (0.30) (0.40) (0.31) (0.45)
Distributions from capital gains (0.27) (0.09) (0.12) - -
Distributions in excess of ordinary
income - - (0.01) - -
Distributions from return of capital (0.13) (0.24) (0.11) (0.20) (0.22)
---------------- ---------------- ---------------- ---------------- ----------------
Total distributions (0.60) (0.63) (0.64) (0.51) (0.67)
---------------- ---------------- ---------------- ---------------- ----------------
NET ASSET VALUE, END OF YEAR $ 12.90 $ 10.93 $ 8.96 $ 8.84 $ 7.41
================ ================ ================ ================ ================
TOTAL RETURN(1) 24.02% 30.07% 8.26% 26.40% 8.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $ 178,104 $ 137,410 $ 85,915 $ 48,016 $ 10,936
Ratio of expenses to average net assets:
Before expense reimbursement or
recapture 1.77% 1.80% 1.93% 2.29% 3.73%
After expense reimbursement or
recapture 1.83% 1.97% 1.97% 1.97% 1.97%
Ratio of net investment income to
average net assets:
Before expense reimbursement or
recapture 1.75% 3.18% 4.04% 4.12% 4.29%
After expense reimbursement or
recapture 1.69% 3.01% 4.00% 4.44% 6.05%
Portfolio turnover 4.17% 1.52% 1.25% 12.04% 21.55%
</Table>
(1) Calculation does not reflect sales load.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
The table below sets forth financial data for one share of beneficial interest
outstanding throughout the periods presented.
<Table>
<Caption>
CLASS B CLASS B CLASS B
---------------- ---------------- ---------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 200
---------------- ---------------- ---------------
NET ASSET VALUE, BEGINNING OF YEAR $ 11.11 $ 9.11 $ 8.98
---------------- ---------------- ---------------
Income from Investment Operations:
Net investment income 0.12 0.26 0.35
Net realized and unrealized gain/(loss) on investments 2.40 2.30 0.36
---------------- ---------------- ---------------
Total from investment operations 2.52 2.56 0.71
---------------- ---------------- ---------------
Less Distributions:
Distributions from net investment income (0.12) (0.26) (0.34)
Distributions from capital gains (0.27) (0.09) (0.12)
Distributions in excess of ordinary income - - (0.01)
Distributions from return of capital (0.13) (0.21) (0.11)
---------------- ---------------- ---------------
Total distributions (0.52) (0.56) (0.58)
---------------- ---------------- ---------------
NET ASSET VALUE, END OF YEAR $ 13.11 $ 11.11 $ 9.11
================ ================ ===============
TOTAL RETURN(1) 23.13% 28.43% 7.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $ 12,592 $ 11,983 $ 9,583
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 2.47% 2.50% 2.63%
After expense reimbursement or recapture 2.53% 2.67% 2.67%
Ratio of net investment income to average net assets:
Before expense reimbursement or recapture 1.05% 2.48% 3.34%
After expense reimbursement or recapture 0.99% 2.31% 3.30%
Portfolio turnover 4.17% 1.52% 1.25%
<Caption>
CLASS B CLASS B
---------------- ----------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2001 OCTOBER 31, 2000
---------------- ----------------
NET ASSET VALUE, BEGINNING OF YEAR $ 7.53 $ 7.51
---------------- ----------------
Income from Investment Operations:
Net investment income 0.28 0.40
Net realized and unrealized gain/(loss) on investments 1.63 0.16
---------------- ----------------
Total from investment operations 1.91 0.56
---------------- ----------------
Less Distributions:
Distributions from net investment income (0.28) (0.40)
Distributions from capital gains - -
Distributions in excess of ordinary income - -
Distributions from return of capital (0.18) (0.14)
---------------- ----------------
Total distributions (0.46) (0.54)
---------------- ----------------
NET ASSET VALUE, END OF YEAR $ 8.98 $ 7.53
================ ================
TOTAL RETURN(1) 25.56% 7.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $ 6,254 $ 2,560
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 2.99% 4.43%
After expense reimbursement or recapture 2.67% 2.67%
Ratio of net investment income to average net assets:
Before expense reimbursement or recapture 4.72% 3.59%
After expense reimbursement or recapture 5.04% 5.35%
Portfolio turnover 12.04% 21.55%
</Table>
(1) Calculation does not reflect CDSC charges.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Spirit of America Real Estate Fund (the "Fund"), a series of the Spirit of
America Investment Fund, Inc. (the "Company"), is an open-end diversified mutual
fund registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Company was incorporated under the laws of Maryland on May 15, 1997.
The Fund commenced operations on January 9, 1998. The authorized capital stock
of the Fund is one billion (1,000,000,000) shares, par value of $0.001 per
share.
The Fund seeks growth of capital and current income by investing in equity Real
Estate Investment Trusts and the equity securities of real estate industry
companies. The Fund offers two classes of shares (Class A and Class B). Each
class of shares has equal rights as to earnings and assets except that each
class bears different distribution expenses. Each class of shares has exclusive
voting rights with respect to matters that affect just that class. Income,
expenses (other than expenses attributable to a specific class), and realized
and unrealized gains and losses on investments are allocated to each class of
shares based on its relative net assets.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States of America for investment companies.
A. SECURITY VALUATION: The offering price and net asset value per share of each
class of the Fund are calculated as of the close of regular trading on the NYSE,
currently 4:00 p.m., Eastern Time. The Fund's securities are valued at the
official close or the last reported sales price on the principal exchange on
which the security trades, or if no sales price is reported, the mean of the
latest bid and asked prices is used. Securities traded over-the-counter are
priced at the mean of the latest bid and asked prices. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which the
Board of Directors believes represents fair value. Fund securities for which
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the
supervision of the Board of Directors. There were no securities, however, fair
valued during this fiscal year.
B. INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost basis
for both financial statement and federal income tax purposes. Dividend income
and distributions to shareholders are reported on the ex-dividend date. Interest
income and expenses are accrued daily.
C. FEDERAL INCOME TAXES: The Fund intends to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
D. NET ASSET VALUE PER SHARE: The methodology and procedures for determining net
asset value are identical for each class of shares, but due to the specific
distribution expenses and other costs allocable to each class of shares, the net
asset value of each class of shares will vary. Class A Shares are purchased at
the offering price per share (which includes a sales load), while Class B shares
are purchased at the net asset value per share.
<Page>
E. USE OF ESTIMATES: In preparing financial statements in conformity with
accounting principles generally accepted in the United States of America,
management makes estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
F. DISTRIBUTIONS TO SHAREHOLDERS: The Fund intends to distribute substantially
all of its net investment income and capital gains to shareholders each year.
Normally, income dividends will be paid quarterly. All such dividends and
distributions are taxable to the shareholders whether received in cash or
reinvested in shares. The Fund has made certain investments in real estate
investment trusts ("REITs") which pay dividends to their shareholders based upon
available funds from operations. It is quite common for these dividends to
exceed the REIT's taxable earnings and profits resulting in the excess portion
of such dividends being designated as a return of capital. The Fund intends to
include the gross dividends from such REITs in its distributions to its
shareholders, accordingly, a portion of the distributions paid to the Fund and
subsequently distributed to shareholders may be characterized as a return of
capital.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Investment transactions for the fiscal year ended October 31, 2004, excluding
short-term investments, were as follows:
<Table>
<Caption>
PROCEEDS
PURCHASES FROM SALES
--------------------------------------------------------------------
Real Estate Fund $ 20,653,763 $ 7,089,219
</Table>
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Spirit of America Management Corp. ("Spirit Management") has been retained to
act as the Company's manager and investment adviser pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). Spirit Management was
incorporated in 1997 and is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. Under the Advisory Agreement, the Fund pays
Spirit Management a monthly fee of 1/12 of 0.97% on the Fund's average daily net
assets. Investment advisory fees and other transactions with affiliates, for the
fiscal year ended October 31, 2004, were as follows:
<Table>
<Caption>
EXPENSES
RECAPTURED TOTAL RECEIVED REMAINING RECAPTURABLE
ADVISORY FEES BY THE ADVISOR BY ADVISOR EXPENSES AVAILABLE
------------------------------------------------------------------------------------
Real Estate Fund $ 1,655,939 $ 98,621 $ 1,754,560 $ 0
<Caption>
VOLUNTARY EXPENSE
LIMITATION
----------------------
Real Estate Fund Class A 1.97%
Real Estate Fund Class B 2.67%
</Table>
<Page>
The Fund has adopted distribution plans for Real Estate Fund Class A Shares and
Real Estate Fund Class B Shares pursuant to Rule 12b-1 (each a "Plan"). Each
Plan permits the Real Estate Fund to pay SSH Securities, Inc. (the
"Distributor"), a monthly fee from the assets of the respective class for the
Distributor's services and expenses in distributing shares of each class and
providing personal services and/or maintaining shareholder accounts.
<Table>
<Caption>
DISTRIBUTION DISTRIBUTION
FEE RATE FEES
-------------- ----------------------
Real Estate Fund Class A 0.30% $ 475,151
Real Estate Fund Class B 1.00% 123,316
</Table>
Real Estate Fund Class A Shares are subject to an initial sales charge imposed
at the time of purchase, in accordance with the Fund's current prospectus.
Certain redemptions of Real Estate Fund Class B shares made within six years of
purchase are subject to a contingent deferred sales charge ("CDSC"), in
accordance with the Fund's current prospectus. For the fiscal year ended October
31, 2004, sales charges and CDSC fees received by the Distributor were as
follows:
<Table>
<Caption>
SALES CHARGES CONTINGENT DEFERRED
RECEIVED BY SSH SALES CHARGES
-------------------- ------------------------
Real Estate Class A $ 2,469,967 $ -
Real Estate Class B - 78,290
</Table>
Certain officers and directors of the Company are "affiliated persons" of Spirit
Management or the Distributor, as that term is defined in the 1940 Act. There
are no directors' fees paid to affiliated directors of the Company. All officers
serve without direct compensation from the Company. In addition, David Lerner
Associates, Inc., a registered broker-dealer affiliated with Spirit Management
and the Distributor, received the following brokerage commissions for the fiscal
year ended October 31, 2004:
<Table>
<Caption>
BROKERAGE COMMISSIONS
---------------------------
Real Estate Fund $ 9,550
</Table>
NOTE 4 - FEDERAL INCOME TAXES
The tax character of distributions paid for the fiscal years ended October 31,
2003 and 2004 were as follows:
2004 TAXABLE DISTRIBUTIONS
<Table>
<Caption>
ORDINARY NET LONG TERM TOTAL TAXABLE RETURN TOTAL
INCOME CAPITAL GAINS DISTRIBUTIONS OF CAPITAL DISTRIBUTION
Real Estate Fund Class A $ 2,677,345 $ 3,622,978 $ 6,300,323 $ 1,778,504 $ 8,078,827
Real Estate Fund Class B 124,620 275,657 400,277 135,334 535,611
------------------------------------------------------------------------------------
Totals $ 2,801,965 $ 3,898,635 $ 6,700,600 $ 1,913,838 $ 8,614,438
====================================================================================
</Table>
<Page>
2003 TAXABLE DISTRIBUTIONS
<Table>
<Caption>
ORDINARY NET LONG TERM TOTAL TAXABLE RETURN TOTAL
INCOME CAPITAL GAINS DISTRIBUTIONS OF CAPITAL DISTRIBUTION
Real Estate Fund Class A $ 2,684,866 $ 1,064,387 $ 3,749,253 $ 3,194,219 $ 6,943,472
Real Estate Fund Class B 96,567 328,068 602,739 231,501 274,671
------------------------------------------------------------------------------------
Totals $ 2,916,367 $ 1,160,954 $ 4,077,321 $ 3,468,890 $ 7,546,211
====================================================================================
</Table>
As of October 31, 2004, the components of distributable earnings/(deficit) for
the Fund on a tax basis were as follows:
<Table>
Undistributed ordinary income $ -
Undistributed long term capital gains -
Unrealized appreciation 57,574,173
--------------
Total Distributable Earnings $ 57,574,173
==============
</Table>
- -------UNAUDITED--------
An estimate of qualified dividend income of $0.00 was received by the fund
through October 31, 2004 that qualifies for a reduced tax rate pursuant to The
Jobs and Growth Tax Relief Reconciliation Act of 2003.
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
SPIRIT OF AMERICA INVESTMENT FUND, INC.
SYOSSET, NEW YORK
We have audited the accompanying statements of assets and liabilities of Spirit
of America Real Estate Fund, a series of shares of beneficial interest in Spirit
of America Investment Fund, Inc., including the schedule of investments as of
October 31, 2004, and the related statements 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. 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 October 31, 2004 by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. 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 Fund as of October 31, 2004, the results of their
operations for the year then ended and changes in their 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
PHILADELPHIA, PENNSYLVANIA
DECEMBER 3, 2004
<Page>
Spirit of America Real Estate Fund
MANAGEMENT OF THE COMPANY
(Unaudited)
Information pertaining to the Directors and officers of the Company is set forth
below. The statement of additional information includes additional information
about the Directors and is available without charge, upon request, by calling
516-390-5565.
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY(1) SERVED FIVE YEARS DIRECTOR HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS*
David Lerner(3) (68) Since 1998 President and founder, David 2 Director of Spirit of America
477 Jericho Turnpike Lerner Associates, Inc., a Management Corp., the Company's
Syosset, New York 11791 registered broker-dealer; investment adviser; Director of
President, Spirit of America SSH Securities, Inc., the
Chairman of the Board of Directors Management Corp., the Company's Company's Distributor; Director
investment adviser; and Chief of David Lerner Associates,
Executive Officer and President of Inc., a registered broker dealer.
SSH Securities, Inc., the
Company's Distributor.
Daniel Lerner(3) (43) Since 1998 Senior Vice President, Investment 2 Director of David Lerner
477 Jericho Turnpike Counselor with David Lerner Associates, Inc., a registered
Syosset, New York 11791 Associates, Inc., a registered broker-dealer.
broker-dealer, since September
Director 2000. Previously: Broker with
Prudential Securities from
February 2000 to July 2000; Broker
with Bear Stearns from January
1999 to May 1999; Vice President
of SSH Securities, Inc., the
Company's Distributor and Senior
Vice President.
INDEPENDENT DIRECTORS
Allen Kaufman (68) Since 1998 President and Chief Executive 2 Director of K.G.K. Agency, Inc.,
Officer of K.G.K. Agency, Inc., a a property and casualty
Director property and casualty insurance insurance agency.
agency, since 1963.
</Table>
<Page>
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY(1) SERVED FIVE YEARS DIRECTOR HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas P. Reynolds (64) Since 1999 President of Thomas P. Reynolds 2 Chairman of the Board of
Securities, Ltd., a broker-dealer, Directors of Thomas P. Reynolds
Director since 1979. Securities, Ltd., a
broker-dealer.
Stanley S. Thune (68) Since 1998 President and Chief Executive 2 Director of Freight Management
Officer, Freight Management Systems, Inc.
Director Systems, Inc., a third party
logistics management company,
since 1994; private investor.
EXECUTIVE OFFICERS
David Lerner
(see biography above)
President
Alan P. Chodosh (50) Since 2003 Senior Vice President and Chief NA NA
477 Jericho Turnpike Financial Officer of David Lerner
Syosset, New York 11791 Associates, Inc. since June 1997
Treasurer
Daniel E. Chafetz (73) Since 2004 Chief Compliance Officer of David NA NA
477 Jericho Turnpike Lerner Associates, Inc. since
Syosset, New York 11791 March 1993; Chief Compliance
Officer of SSH Securities, Inc.
Chief Compliance Officer and Spirit of America Management
Corp. since their inception, May
1997.
</Table>
(1) If necessary, each Director may be contacted by writing to the Company, c/o
Spirit of America Investment Fund, Inc., 477 Jericho Turnpike, P.O. Box
9006, Syosset, New York 11791-9006.
(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 position 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.
<Page>
PROXY VOTING INFORMATION
The Fund's Statement of Additional Information ("SAI") containing a description
of the policies and procedures that the Spirit of America Value Fund uses to
determine how to vote proxies relating to portfolio securities, along with the
Fund's proxy voting record relating to portfolio securities held during the
12-month period ended June 30, 2004, are available (i) without charge, upon
request, by calling (516) 390-5565; and (ii) on the Securities and Exchange
Commissions website at http://www.sec.gov.
INFORMATION ON FORM N-Q
Beginning on Fiscal quarter ended July 31, 2004, the Trust will file its
complete schedule of portfolio holdings with the SEC for the first and third
quarters of each Fiscal year or Form N-Q within sixty days after the end of the
period. The Trust's Forms N-Q will be available on the SEC's website at
http://www.sec.gov, and may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the Public Reference
Room may be obtained by calling 1-800-SEC-0330.
<Page>
Message to our Shareholders
December 2004
Dear Shareholder,
We are very pleased to send you the annual report of the Spirit of America Value
Fund.
Our investment philosophy continues to be to seek out investments in large cap
securities which we believed to be undervalued.
We continue to believe that we have invested in securities which are undervalued
and have prospects for long term growth.
All investments are subject to risk, will fluctuate and be affected by economic
conditions, interest rates and civil unrest, which may impact the value of your
shares in the fund. Investor's shares, when redeemed, may be worth more or less
than their original cost. In addition, you should be aware that past performance
is no guarantee of future results.
Thank you for your continued support of our fund's strategic investment
philosophy. We look forward to a profitable and successful year.
Sincerely,
David Lerner, President Ronald W. Weiss, Portfolio Manager
Prospective investors should consider the investment objectives, risks and
charges and expenses of the fund carefully before investing. The maximum sales
charge on share purchases is 5.25% of the offering price. The fund's prospectus
contains this and other information about the fund and may be obtained through
your broker or by calling 1-800-452-4892. The prospectus should be read
carefully before investing.
<Page>
SPIRIT OF AMERICA VALUE FUND - MANAGEMENT DISCUSSION
Over the past quarter we have diversified the Value Fund into sectors and
companies which we feel have substantial value potential. These investments
include Motorola, Nokia, and Verizon. This technical based sector includes both
the maker of new tools to distribute information and provide portable and
affordable hardware. Verizon and its competitors are constantly pushing the
envelope, to generate new and better access to wireless and faster internet
connections. Competition within these sectors is very intense with new countries
entering the race every day. (i.e. China and Korea).
A comparison of the Value Fund to the Fund's benchmark, the RLV (Russell 1000
Value Index) for the quarter 8/2/04 to 10/29/04, shows that the RLV returned
3.55% compared to SOAVX's 1.44% return. For the year ended October 31, 2004, the
Value Fund returned 0.84% (sales load adjusted) versus 12.74% for the RLV. The
Value Fund still remains invested in the Pharmaceutical industry, with Merck and
Pfizer, bringing our total return down during this quarter. However, after the
October 29, 2004 quarter, along with the stock market, the return on the Value
Fund has improved and the gap between the return on the Fund and the RLV has
narrowed.
<Page>
Spirit of America Value Fund
Summary of Portfolio Holdings (Unaudited)
The SEC adopted a requirement that all Funds present their categories of
portfolio holdings in a table, chart or graph format in their annual and
semi-annual shareholder reports, whether or not a schedule of investments is
utilized. The following table, which presents portfolio holdings as a percentage
of total market value, is provided in compliance with such requirement.
Sector Diversification (% of market value)
<Table>
Aluminum 0.64% $ 228,092
Apartments (REITS) 1.01% 359,562
Banks 10.29% 3,670,274
Communications 4.21% 1,502,340
Computer Industry 9.19% 3,278,334
Consumer Products 7.67% 2,736,102
Diversified Financial Services 11.23% 4,008,870
Energy 3.38% 1,207,768
Food & Beverage 6.71% 2,394,586
Healthcare (REITS) 0.66% 233,775
Industrial (REITS) 0.75% 266,340
Insurance 3.05% 1,088,499
Manufacturer 3.88% 1,383,676
Multimedia 0.99% 354,368
Net Lease (REITS) 0.71% 253,572
Office Space (REITS) 0.73% 260,603
Pharmaceuticals 18.97% 6,768,949
Regional Malls (REITS) 0.53% 191,068
Restaurants 0.13% 46,718
Retail 8.15% 2,908,168
Shopping Centers (REITS) 2.44% 869,372
Telecommunication 3.46% 1,233,600
Transport Services 0.74% 265,756
Waste Management 0.48% 170,880
-------------------------
Total Investments 100.00% $ 35,681,272
=========================
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA VALUE FUND
ILLUSTRATION OF $10,000 INVESTMENT
(UNAUDITED)
The graph below compares the increase in value of a $10,000 investment in the
Spirit of America Value Fund with the performance of the Russell 1000 Value
Index. The values and returns for Spirit of America Value Fund include
reinvested dividends, and the impact of the maximum sales charges 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.
[CHART]
<Table>
<Caption>
SPIRIT OF
AMERICA RUSSELL
VALUE 1000 VALUE
FUND* INDEX
--------------------------
8/1/2002 9,475 10,000
10/31/2002 9,128 9,816
04/30/03 9,249 10,194
10/31/03 10,631 11,749
04/30/04 11,321 12,556
10/31/04 11,321 13,242
</Table>
Average Annual Total Returns
Periods Ended October 31, 2004
<Table>
1 Year 0.84%
Since Inception 5.67%
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Fund commenced operations August 1, 2002.
The Russell 1000 Value Index is an unmanaged index and the performance
of an index assumes no transaction costs, taxes, management fees or
other expenses. A direct investment in an index is not possible.
<Page>
SPIRIT OF AMERICA VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD (MAY 01, 2004 TO OCTOBER 31, 2004)
We believe it is important for you to understand the impact of fees regarding
your investment. All mutual funds have operating expenses. As a shareholder of
the fund, you incur ongoing costs, which include costs for portfolio management,
administrative services, and shareholder reports (like this one), among others.
Operating expenses, which are deducted from a fund's gross income, directly
reduce the investment return of the portfolio. A fund's expenses are expressed
as a percentage of its average net assets. This figure is known as the expense
ratio. The following examples are intended to help you understand the ongoing
fees (in dollars) of investing in your fund and to compare these costs with
those of other mutual funds. The examples are based on an investment of $1,000
made at the beginning of the period shown and held for the entire period.
<Table>
<Caption>
BEGINNING EXPENSES
ACCOUNT VALUE ENDING ACCOUNT EXPENSE RATIO PAID DURING
05/01/04 VALUE 10/31/04 (1) PERIOD (2)
- ---------------------------------------------------------------------------------------------------------------
SPIRIT OF AMERICA VALUE FUND
ACTUAL FUND RETURN
Value Fund $ 1,000.00 $ 980.30 1.97% $ 9.83
HYPOTHETICAL 5% RETURN
Value Fund $ 1,000.00 $ 1,030.30 1.97% $ 10.08
</Table>
This table illustrates your fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses that
you paid over the period. The "Ending Account Value" shown is derived from the
fund's ACTUAL return, the third column shows the period's annualized expense
ratio, and the last column shows the dollar amount that would have been paid by
an investor who started with $1,000 in the fund at the beginning of the period.
You may use the information here, together with your account value, to estimate
the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your fund's
costs with those of other mutual funds. It assumes that the fund had a return of
5% before expenses during the period shown, but that the expense ratio is
unchanged. In this case, because the return used is NOT the fund's actual
return, the results do not apply to your investment. You can assess your fund's
costs by comparing this hypothetical example with the hypothetical examples that
appear in shareholder reports of other funds.
Please note that the expense shown in the table are meant to highlight your
ONGOING costs only and do not reflect any transactional costs such as sales
charges (loads) or redemption fees.
(1) Annualized, based on the Portfolio's most recent fiscal half-year expenses.
(2) Expenses are equal to the Fund's annualized expense ratio multiplied by the
average acount value over the period, multiplied by the number of days in
the most recent fiscal half-year, then divided by 366.
<Page>
SPIRIT OF AMERICA VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2004
<Table>
<Caption>
SHARES MARKET VALUE
-------- --------------
COMMON STOCKS - 99.59%
ALUMINUM - 0.64%
Alcan, Inc. 3,100 $ 143,592
Alcoa, Inc. 2,600 84,500
--------------
228,092
--------------
APARTMENTS (REITS) - 1.00%
Apartment Investment & Management Co. 9,800 359,562
--------------
BANKS - 10.24%
Bank of America Corp. 22,818 1,022,018
JPMorgan Chase 13,464 519,710
KeyCorp 7,600 255,284
US Bankcorp 35,000 1,001,350
Wells Fargo & Co. 14,600 871,912
--------------
3,670,274
--------------
COMMUNICATIONS - 4.19%
Motorola Inc 44,000 759,440
Verizon Communications Inc. 19,000 742,900
--------------
1,502,340
--------------
COMPUTER INDUSTRY - 9.15%
Hewlett-Packard Co. 72,400 1,350,984
International Business Machines Corp. 9,000 807,750
Microsoft Corp 40,000 1,119,600
--------------
3,278,334
--------------
CONSUMER PRODUCTS - 7.64%
Altria Group, Inc. 25,000 1,211,500
Avon Products, Inc. 9,800 387,590
Colgate-Palmolive Co. 7,600 339,112
Gillette Co. 6,100 253,028
Kimberly-Clark Corp. 800 47,736
Maytag Corp. 22,100 384,540
Procter & Gamble Co. 2,200 112,596
--------------
2,736,102
--------------
DIVERSIFIED FINANCIAL SERVICES - 11.19%
American Express Co. 16,800 891,576
Capital One Financial Corp. 12,000 885,120
Citigroup Inc. 35,200 1,561,824
MBNA Corp. 25,800 661,254
Piper Jaffray Cos * 208 9,096
--------------
4,008,870
--------------
ENERGY - 3.37%
American Electric Power Company, Inc. 11,300 372,109
Consolidated Edison, Inc. 13,700 595,265
Duke Energy Corp. 9,800 240,394
--------------
1,207,768
--------------
FOOD & BEVERAGE - 6.69%
Archer-Daniels-Midland Co. 6,500 125,905
Cadbury Schweppes plc. 6,200 207,700
Coca-Cola Co. 9,900 402,534
Del Monte Foods Co. * 1,161 12,399
General Mills, Inc. 6,100 269,925
H.J. Heinz Co. 9,200 334,420
Kellog Co. 5,800 249,400
Kraft Foods, Inc. 1,300 43,303
Kroger Co. * 8,800 132,968
PepsiCo Inc. 3,600 178,488
Sara Lee Corp. 14,300 332,904
Wm. Wrigley Jr. Co. 1,600 104,640
--------------
2,394,586
--------------
</Table>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
-------- --------------
HEALTHCARE (REITS) - 0.65%
National Health Investors, Inc. 4,700 134,467
Nationwide Health Properties, Inc. 4,400 99,308
--------------
233,775
--------------
INDUSTRIAL (REITS) - 0.74%
First Industrial Realty Trust, Inc. 6,900 266,340
--------------
INSURANCE - 3.04%
Cigna Corp. 17,000 1,078,820
St. Paul Travelers Co., Inc. 285 9,679
--------------
1,088,499
--------------
MANUFACTURER - 3.86%
General Electric Co. 16,000 545,920
3M Company 10,800 837,756
--------------
1,383,676
--------------
MULTIMEDIA - 0.99%
Time Warner Inc. * 10,600 176,384
Viacom, Inc. CL A 1,400 51,884
Walt Disney Co. 5,000 126,100
--------------
354,368
--------------
NET LEASE (REITS) - 0.71%
Lexington Corp. Properties Trust 11,300 253,572
--------------
OFFICE SPACE (REITS) - 0.73%
Mack-Cali Realty Corp. 5,900 260,603
--------------
PHARMACEUTICALS - 18.89%
Abbott Laboratories 20,000 852,600
Bristol-Myers Squibb Co. 42,500 995,775
Eli Lilly and Co. 8,400 461,244
Hospira Inc.* 2,000 63,820
Medco Health Solutions, Inc. * 21,192 718,621
Merck and Co. Inc. 26,400 826,584
Pfizer Inc 33,800 978,510
Schering-Ploug Corp. 16,000 289,760
Wyeth 39,900 1,582,035
--------------
6,768,949
--------------
REGIONAL MALLS (REITS) - 0.53%
Glimcher Realty Trust 7,400 191,068
--------------
RESTAURANTS - 0.13%
Wendy's International, Inc. 1,400 46,718
--------------
RETAIL - 8.12%
J.C. Penney Co., Inc. 8,000 276,720
Target Corp. 17,100 855,342
TJX Companies Inc. 27,100 649,858
Walgreen Co. 12,000 430,680
Wal-Mart Stores Inc. 12,900 695,568
--------------
2,908,168
--------------
SHOPPING CENTERS (REITS) - 2.43%
Commercial Net Lease Realty 12,400 238,452
Federal Realty Investment Trust 5,000 237,250
New Plan Excel Realty Trust 9,900 258,984
Ramco-Gershenson Properties Trust 2,500 67,500
Realty Income Corp. 1,400 67,186
--------------
869,372
--------------
</Table>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
-------- --------------
TELECOMMUNICATION - 3.44%
Nokia Corp. 80,000 1,233,600
--------------
TRANSPORT SERVICES - 0.74%
FedEx Corp. 1,700 154,904
United Parcel Service, Inc. 1,400 110,852
--------------
265,756
--------------
WASTE MANAGEMENT - 0.48%
Waste Management, Inc. 6,000 170,880
--------------
TOTAL INVESTMENTS - 99.59%
(Cost $32,914,454**) 35,681,272
CASH AND OTHER ASSETS NET OF LIABILITIES - 0.41% 145,214
--------------
NET ASSETS - 100.00% $ 35,826,486
==============
* Non-income producing security
** Cost for Federal income tax purposes is $32,914,454 and net unrealized
appreciation consists of:
Gross unrealized appreciation $ 4,088,891
Gross unrealized depreciation (1,322,073)
--------------
Net unrealized appreciation $ 2,766,818
==============
</Table>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
<Table>
ASSETS
Investments in securities at value (cost $32,914,454) (Note 1) $ 35,681,272
Cash 275,101
Receivables:
Capital stock sold 69,165
Dividends and interest 63,026
Prepaid assets 4,860
---------------
TOTAL ASSETS 36,093,424
---------------
LIABILITIES
Payables:
Capital stock redeemed 182,941
Advisory fees 24,006
Distribution expense (Note 3) 8,996
Other accrued expenses 50,995
---------------
TOTAL LIABILITIES 266,938
---------------
NET ASSETS
Net assets applicable to 3,052,577 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 35,826,486
===============
Net asset value and redemption price per share
($35,826,486 DIVIDED BY 3,052,577 shares) $ 11.74
===============
Offering price per share ($11.74 DIVIDED BY 0.9475) $ 12.39
===============
SOURCE OF NET ASSETS
At October 31, 2004, net assets consisted of:
Paid-in capital $ 33,059,668
Net unrealized appreciation on investments 2,766,818
---------------
NET ASSETS $ 35,826,486
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2004
<Table>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $279) $ 694,168
Interest 5,635
---------------
TOTAL INVESTMENT INCOME 699,803
---------------
EXPENSES
Investment advisory fees (Note 3) 293,195
Transfer agent fees 77,000
Administration fees 45,339
Distribution fees (Note 3) 90,679
Accounting fees 36,915
Registration fees 12,406
Legal fees 13,445
Custodian fees 8,000
Printing expense 14,976
Auditing fees 13,200
Directors' fees 2,961
Insurance expense 5,298
Miscellaneous expense 1,577
---------------
TOTAL EXPENSES 614,991
Expenses waived and reimbursed by Advisor (Note 3) (19,534)
---------------
NET EXPENSES 595,457
---------------
NET INVESTMENT INCOME 104,346
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions 28,658
Net change in unrealized appreciation of investments 1,102,725
---------------
Net realized and unrealized gain on investments 1,131,383
---------------
NET INCREASE IN NET ASSETS RESULTING FROM operations $ 1,235,729
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
OPERATIONS
Net investment income $ 104,346 $ 70,966
Net realized gain from security transactions 28,658 12,985
Net change in unrealized appreciation of investments 1,102,725 1,691,734
---------------- ----------------
Net increase in net assets 1,235,729 1,775,685
---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income: (104,346) (73,081)
Distributions from realized gains: (28,658) -
Return of capital: (46,300) (36,922)
---------------- ----------------
Total distributions to shareholders (179,304) (110,003)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS (DOLLAR ACTIVITY)
Shares sold: 22,212,687 14,136,780
Shares issued as reinvestment of distributions: 167,342 99,340
Shares redeemed: (4,888,839) (1,050,253)
---------------- ----------------
Increase in net assets derived from capital share transactions (a) 17,491,190 13,185,867
---------------- ----------------
Total increase in net assets 18,547,615 14,851,549
---------------- ----------------
NET ASSETS
Beginning of year 17,278,871 2,427,322
---------------- ----------------
End of year $ 35,826,486 17,278,871
================ ================
(a) Transactions in capital stock were:
Shares sold: 1,898,862 1,448,983
Shares issued as reinvestment of dividends: 14,191 9,778
Shares redeemed: (418,099) (153,102)
---------------- ----------------
Increase in shares outstanding 1,494,954 1,305,659
================ ================
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA VALUE FUND
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of beneficial interest
outstanding throughout the periods presented.
<Table>
<Caption>
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2002*
----------------- ----------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.09 $ 9.63 $ 10.00
----------------- ----------------- -----------------
Income from Investment Operations:
Net investment income 0.04 0.07 0.01
Net realized and unrealized gain/(loss) on investments 0.68 1.51 (0.38)
----------------- ----------------- -----------------
Total from investment operations 0.72 1.58 (0.37)
----------------- ----------------- -----------------
Less Distributions:
Distributions from net investment income (0.04) (0.08) -
Distribution from captial gains: (0.01) - -
Distributions from return of captial (0.02) (0.04) -
----------------- ----------------- -----------------
Total distributions (0.07) (0.12) -
----------------- ----------------- -----------------
NET ASSET VALUE, END OF PERIOD $ 11.74 $ 11.09 $ 9.63
================= ================= =================
TOTAL RETURN(2) 6.48% 16.47% (3.70)%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 35,826 $ 17,279 $ 2,427
Ratio of expenses to average net assets:
Before expense reimbursement 2.03% 2.65% 7.38%(3)
After expense reimbursement 1.97% 1.97% 1.97%(3)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement 0.35% 0.12% (4.75)%(3)
After expense reimbursement 0.41% 0.80% 0.66%(3)
Portfolio turnover -% -% 21.59%(1)
</Table>
* The Fund commenced investment operations on August 1, 2002.
(1) Calculation is not annualized.
(2) Calculation does not reflect sales load.
(3) Calculation is annualized
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA VALUE FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Spirit of America Value Fund (the "Fund"), a series of Spirit of America
Investment Fund, Inc. (the "Company"), is an open-end diversified mutual fund
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Company was incorporated under the laws of Maryland on May 15, 1997.
The Fund commenced operations on August 1, 2002. The authorized capital stock of
the Fund is 500 million (500,000,000) shares, par value of $0.001 per share. The
Fund seeks capital appreciation with a secondary objective of current income by
investing in equity securities in the value segment of the market. The Fund
offers one class of shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States for America for investment companies.
A. SECURITY VALUATION: The offering price and net asset value per share for the
Fund are calculated as of the close of regular trading on the NYSE, currently
4:00 p.m., Eastern Time. The Fund's securities are valued at the official close
or the last reported sales price on the principal exchange on which the security
trades, or if no sales price is reported, the mean of the latest bid and asked
prices is used. Securities traded over-the-counter are priced at the mean of the
latest bid and asked prices. Short-term investments having a maturity of 60 days
or less are valued at amortized cost, which the Board of Directors believes
represents fair value. Fund securities for which market quotations are not
readily available are valued at fair value as determined in good faith under
procedures established by and under the supervision of the Board of Directors.
There were no securities, however, fair valued during this fiscal year.
B. INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost basis
for both financial statement and federal income tax purposes. Dividend income
and distributions to shareholders are reported on the ex-dividend date. Interest
income and expenses are accrued daily.
C. FEDERAL INCOME TAXES: The Fund intends to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
D. USE OF ESTIMATES: In preparing financial statements in conformity with
accounting principles generally accepted in the United States of America,
management makes estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
E. DISTRIBUTIONS TO SHAREHOLDERS: The Fund intends to distribute substantially
all of its net investment income and capital gains to shareholders each year.
Normally, income dividends will be paid quarterly. All such dividends and
distributions are taxable to the shareholders whether received in cash or
reinvested in shares. The Fund has made certain investments in real estate
investment trusts ("REITs") which pay dividends to their shareholders based upon
available funds from
<Page>
operations. It is quite common for these dividends to exceed the REIT's taxable
earnings and profits resulting in the excess portion of such dividends being
designated as a return of capital. The Fund intends to include the gross
dividends from such REITs in its distributions to its shareholders, accordingly,
a portion of the distributions paid to the Fund and subsequently distributed to
shareholders may be characterized as a return of capital.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Investment transactions for the fiscal year ended October 31, 2004, excluding
short-term investments, were as follows:
<Table>
<Caption>
PROCEEDS
PURCHASES FROM SALES
------------------------------------------------
$ 17,252,098 $ 62
</Table>
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Spirit of America Management Corp. ("Spirit Management") has been retained to
act as the Company's manager and investment adviser pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). Spirit Management was
incorporated in 1997 and is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. Under the Advisory Agreement, the Fund pays
Spirit Management a monthly fee of 1/12 of 0.97% on the Fund's average daily net
assets. Investment advisory fees and other transactions with affiliates, for the
fiscal year ended October 31, 2004, were as follows:
<Table>
<Caption>
INVESTMENT ADVISORY VOLUNTARY EXPENSE
FEE RATE LIMITATION ADVISOR FEES
----------------------------------------------------------------------------------
0.97% 1.97% $ 293,195
</Table>
Any waiver or reimbursement by the Advisor is subject to recovery from the fund
within the following three years, to the extent such recovery would not cause
total expenses to exceed the current expense limitation.
<Table>
<Caption>
ON OCTOBER 31, 2004, THE BALANCE OF
RECAPTURABLE EXPENSES WAS AS FOLLOWS.
---------------------------------------
Expires 2005 $ 17,337
Expires 2006 60,199
Expires 2007 19,534
---------
Total $ 97,070
=========
</Table>
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 (the "Plan).
The Plan permits the Fund to pay SSH Securities, Inc. (the "Distributor") a
monthly fee from the assets of the Fund for the Distributor's services and
expenses in distributing shares of the Fund and providing personal services
and/or maintaining shareholder accounts.
<Table>
<Caption>
DISTRIBUTION DISTRIBUTION
FEE RATE FEES
------------- ------------
0.30% $ 90,679
</Table>
<Page>
The Fund's shares are subject to an initial sales charge imposed at the time of
purchase, in accordance with the Fund's current prospectus. For the fiscal year
ended October 31, 2004, sales charges received by the Distributor were as
follows:
<Table>
<Caption>
SALES CHARGES
RECEIVED BY SSH
---------------
$ 1,127,085
</Table>
Certain officers and directors of the Company are "affiliated persons" of Spirit
Management or the Distributor, as that term is defined in the 1940 Act. There
are no directors' fees paid to affiliated directors of the Company. All officers
serve without direct compensation from the Company. In addition, David Lerner
Associates, Inc., a registered broker-dealer affiliated with Spirit Management
and the Distributor, received the following brokerage commissions for the fiscal
year ended October 31, 2004:
<Table>
<Caption>
BROKERAGE COMMISSIONS
---------------------
$ 6,285
</Table>
NOTE 4 - FEDERAL INCOME TAXES
The tax character of distributions paid for the fiscal years ended October 31,
2003 & 2004 were as follows:
2004 Taxable Distributions
<Table>
<Caption>
RETURN
ORDINARY NET LONG TERM TOTAL TAXABLE OF TOTAL
INCOME CAPITAL GAINS DISTRIBUTION CAPITAL DISTRIBUTIONS
-------- ------------- ------------- ------- -------------
$ 104,346 $ 28,658 $ 133,004 $ 46,300 $ 179,304
</Table>
2003 Taxable Distributions
<Table>
<Caption>
RETURN
ORDINARY NET LONG TERM TOTAL TAXABLE OF TOTAL
INCOME CAPITAL GAINS DISTRIBUTION CAPITAL DISTRIBUTIONS
-------- ------------- ------------- -------- -------------
$ 57,471 $ 7,940 $ 65,411 $ 44,592 $ 110,003
</Table>
As of October 31, 2004, the components of distributable earnings/(deficit) for
the Fund on a tax basis were as follows:
<Page>
<Table>
Undistributed ordinary income $ -
Capital loss carryforward -
Unrealized appreciation 2,766,818
--------------
Total Distributable Earnings $ 2,766,818
==============
</Table>
NOTE 5 - RECLASSIFICATIONS
Accounting principles generally accepted in the United States of America require
that certain components of net assets be reclassified between financial and tax
reporting. These reclassifications have no effect on net assets or net asset
values per share.
<Table>
As of October 31, 2004, the Decrease Paid-in Capital: $ 2,113
reclassifications were as follows: -----------------------------------------
Decrease Loss on Investment: $ 2,113
</Table>
- -------UNAUDITED-------
An estimate of qualified income of $81,631 was received by the Fund through
October 31, 2004 that qualifies for a reduced tax rate pursuant to The Jobs and
Growth Tax Relief Reconciliation Act of 2003.
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
SPIRIT OF AMERICA INVESTMENT FUND, INC.
SYOSSET, NEW YORK
We have audited the accompanying statements of assets and liabilities of Spirit
of America Value Fund, a series of shares of beneficial interest in Spirit of
America Investment Fund, Inc., including the schedule of investments as of
October 31, 2004, and the related statements of operations for the year then
ended, the statements of changes in net assets for the two years in the period
then ended and the financial highlights for the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on those
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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 October 31, 2004 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 Value Fund as of October 31, 2004, the results of their operations
for the year then ended, the changes in their net assets for the two years in
the period then ended and the financial highlights for the periods indicated
thereon, in conformity with accounting principles generally accepted in the
United States of America.
TAIT, WELLER & BAKER
PHILADELPHIA, PENNSYLVANIA
DECEMBER 3, 2004
<Page>
Spirit of America Value Fund
MANAGEMENT OF THE COMPANY
(Unaudited)
Information pertaining to the Directors and officers of the Company is set forth
below. The statement of additional information includes additional information
about the Directors and is available without charge, upon request, by calling
516-390-5565.
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST FIVE BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY(1) SERVED YEARS DIRECTOR HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS*
David Lerner(3) (68) Since 1998 President and founder, David Lerner 2 Director of Spirit of America
477 Jericho Turnpike Associates, Inc., a registered Management Corp., the
Syosset, New York 11791 broker-dealer; President, Spirit of Company's investment adviser;
America Management Corp., the Company's Director of SSH Securities,
Chairman of the Board of Directors investment adviser; and Chief Executive Inc., the Company's
Officer and President of SSH Securities, Distributor; Director of
Inc., the Company's Distributor. David Lerner Associates,
Inc., a registered broker
dealer.
Daniel Lerner(3) (43) Since 1998 Senior Vice President, Investment 2 Director of David Lerner
477 Jericho Turnpike Counselor with David Lerner Associates, Associates, Inc., a
Syosset, New York 11791 Inc., a registered broker-dealer, since registered broker-dealer.
September 2000. Previously: Broker with
Director Prudential Securities from February 2000
to July 2000; Broker with Bear Stearns
from January 1999 to May 1999; Vice
President of SSH Securities, Inc., the
Company's Distributor and Senior Vice
President.
INDEPENDENT DIRECTORS
Allen Kaufman (68) Since 1998 President and Chief Executive Officer of 2 Director of K.G.K. Agency,
K.G.K. Agency, Inc., a property and Inc., a property and casualty
Director casualty insurance agency, since 1963. insurance agency.
</Table>
<Page>
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS
OFFICE(2) IN FUND
AND COMPLEX
LENGTH OVERSEEN OTHER
NAME, ADDRESS AND (AGE) OF TIME PRINCIPAL OCCUPATION(S) DURING PAST FIVE BY DIRECTORSHIPS
POSITION(S) WITH THE COMPANY(1) SERVED YEARS DIRECTOR HELD BY DIRECTOR
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas P. Reynolds (64) Since 1999 President of Thomas P. Reynolds 2 Chairman of the Board of
Securities, Ltd., a broker-dealer, since Directors of
Director 1979. Thomas P. Reynolds
Securities, Ltd., a
broker-dealer.
Stanley S. Thune (68) Since 1998 President and Chief Executive Officer, 2 Director of Freight
Freight Management Systems, Inc., a Management Systems, Inc.
Director third party logistics management
company, since 1994; private investor.
EXECUTIVE OFFICERS
David Lerner
(see biography above)
President
Alan P. Chodosh (50) Since 2003 Senior Vice President and Chief Financial NA NA
477 Jericho Turnpike Officer of David Lerner Associates, Inc.
Syosset, New York 11791 since June 1997
Treasurer
Daniel E. Chafetz (73) Since 2004 Chief Compliance Officer of David Lerner NA NA
477 Jericho Turnpike Associates, Inc. since March 1993; Chief
Syosset, New York 11791 Compliance Officer of SSH Securities,
Inc. and Spirit of America Management
Chief Compliance Officer Corp. since their inception, May 1997.
</Table>
(1) If necessary, each Director may be contacted by writing to the Company,
c/o Spirit of America Investment Fund, Inc., 477 Jericho Turnpike, P.O. Box
9006, Syosset, New York 11791-9006.
(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 position 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.
<Page>
PROXY VOTING INFROMATION
The Fund's Statement of Additional Information ("SAI") containing a description
of the policies and procedures that the Spirit of America Value Fund uses to
determine how to vote proxies relating to portfolio securities, along with the
Fund's proxy voting record relating to portfolio securities held during the
12-month period ended June 30, 2004, are available (i) without charge, upon
request, by calling (516) 390-5565; and (ii) on the Securities and Exchange
Commissions website at http://www.sec.gov.
INFORMATION ON FORM N-Q
Beginning on Fiscal quarter ended July 31, 2004, the Trust will file its
complete schedule of portfolio holdings with the SEC for the first and third
quarters of each Fiscal year or Form N-Q within sixty days after the end of the
period. The Trust's Forms N-Q will be available on the SEC's website at
http://www.sec.gov, and may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the Public Reference
Room may be obtained by calling 1-800-SEC-0330.
<Page>
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code
of ethics description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set
forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Registrant's Board of Directors has determined that it does not have an "audit
committee financial expert" serving on its audit committee. While Registrant
believes that each of the members of its audit committee has sufficient
knowledge of accounting principles and financial statements to serve on the
audit committee, none has the requisite experience to qualify as an "audit
committee financial expert"; as such term is defined by the Securities and
Exchange Commission.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the audit
of the registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years are
$_49,200____.
<Page>
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $___None___.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $_None____.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are
$__None___.
(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 therefore. 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.
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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 less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for each of the last two fiscal years of the registrant was
$__None_____.
(h) The registrant's audit committee of the board of directors HAS considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
<Page>
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 yet applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required by
this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Spirit of America Investment Fund, Inc.
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By (Signature and Title)* /s/ David Lerner, Principal Executive Officer
-------------------------------------------------------
David Lerner, Principal Executive Officer
(principal executive officer)
Date January 6, 2005
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ David Lerner, Principal Executive Officer
-------------------------------------------------------
David Lerner, Principal Executive Officer
(principal executive officer)
Date January 6, 2005
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By (Signature and Title)* /s/ Alan Chodosh, Principal Financial Officer
-------------------------------------------------------
Alan Chodosh, Principal Financial Officer
(principal financial officer)
Date January 6, 2005
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* Print the name and title of each signing officer under his or her signature.