<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. <Page> 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. -------------------------------------------------------------------- By (Signature and Title)* /s/ David Lerner, Principal Executive Officer ------------------------------------------------------- David Lerner, Principal Executive Officer (principal executive officer) Date January 6, 2005 ---------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ Alan Chodosh, Principal Financial Officer ------------------------------------------------------- Alan Chodosh, Principal Financial Officer (principal financial officer) Date January 6, 2005 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.