<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 11797-9006
--------------------------------------------------------
(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
-----------
Date of reporting period: October 31, 2005
-----------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. Section 3507.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
<Page>
[GRAPHIC]
[SPIRIT OF AMERICA LOGO]
ANNUAL REPORT
2005
SPIRIT OF AMERICA
REAL ESTATE FUND
<Page>
<Table>
Message To Our Shareholders 1
Management Discussion 2
Summary of Portfolio Holdings 2
Illustration of Investments 3
Disclosure of Fund Expenses 4
Schedule of Investments 5-6
Statement of Assets and Liabilities 7
Statement of Operations 8
Statement of Changes in Net Assets 9
Financial Highlights 10-11
Notes to Financial Statements 12-14
Report of Independent Certified Public Accountants 15
Management of the Company 16
</Table>
[PHOTO]
<Page>
Message to our Shareholders
December 2005
Dear Shareholder,
We are pleased to send you the annual report of the Spirit of America Real
Estate Fund.
Our objective continues to be investment in undervalued Real Estate Investment
Trusts. We believe that equity REITs should benefit from a growing, vigorous
economy. Occupancy rates, rents and cash flow in office, industrial and shopping
center REITs, may benefit under these conditions. Apartment REIT prices, may
benefit from slower single family home demand and higher interest rates.
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 may be adversely affected by civil unrest, economic,
environmental or other factors. Additionally, changes in interest rates may
negatively impact the value of investors' shares. An investor's shares, when
redeemed, may be worth more or less than their original cost. Please also 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 - OCTOBER 31, 2005
Comparing the Real Estate fund with our benchmark, the Morgan Stanley Real
Estate Index ("RMS"), showed that during the quarter 8/1/05 to 10/31/05, the
Class A shares, (SOAAX), returned -11.68 (adjusted for the maximum sales load)
and the RMS returned -5.60%. For the year ended October 31, 2005, the Class A
shares returned 3.88% (sales load adjusted) and Class B shares returned 2.57%
(CDSC fee adjusted) versus 17.53% for the RMS. The returns for the Class A and
Class B shares, excluding sales load or CDSC fee, would have been -6.82% and
- -6.99%, respectively, versus the RMS -5.60% for the quarter ended October 31,
2005, and 9.59% and 8.83%, respectively, versus the RMS 17.53% for the fiscal
year ended October 31, 2005.
Although REIT prices are affected in the short term by increases in
interest rates and fixed income yields, REIT Properties continue to show higher
occupancies and generate higher cash flow.
<Page>
Spirit of America Real Estate Fund
Summary of Portfolio Holdings (unaudited)
October 31, 2005
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>
Apartments (REITS) 16.41% $ 33,270,805
Diversified (REITS) 12.80% 25,959,102
Healthcare (REITS) 13.93% 28,248,959
Industrial (REITS) 5.28% 10,711,050
Net Lease (REITS) 7.16% 14,521,217
Office Space (REITS) 14.50% 29,396,478
Regional Malls (REITS) 13.25% 26,861,562
Shopping Centers (REITS) 14.84% 30,084,366
Storage (REITS) 1.83% 3,706,165
------------------------------
Total Investments 100.00% $ 202,759,704
==============================
</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 of 5.25% placed on purchases. The returns shown do not reflect taxes that
a shareholder would pay on fund distributions or on the redemption of fund
shares.
[CHART]
<Table>
<Caption>
SPIRIT OF
AMERICA
REAL MORGAN
ESTATE STANLEY
FUND - REIT
CLASS A* INDEX
------------------------
01/09/98 9,479 10,000
10/31/98 8,362 8,468
10/31/99 7,828 7,938
10/31/00 8,480 9,382
10/31/01 10,718 10,626
10/31/02 11,604 11,336
10/31/03 15,094 15,186
10/31/04 18,719 19,663
10/31/05 20,515 23,131
</Table>
**CLASS A
Average Annual Total Returns
Periods Ended October 31, 2005
<Table>
1 Year 3.88%
5 Year 18.03%
Since Inception 9.63%*
</Table>
*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.
INFORMATION FOR CHART
CALCULATION OF MORGAN STANLEY REIT INDEX DATA SET PLOT POINTS:
<Table>
<Caption>
MORGAN STANLEY REIT INDEX
RETURN DOLLAR VALUE
---------------------------------------
01/09/98 10,000
10/31/98 -15.324% (1,532) 8,468
10/31/99 -20.624% (2,062) 7,938
10/31/00 -6.180% (618) 9,382
10/31/01 6.255% 626 10,626
10/31/02 13.360% 1,336 11,336
10/31/03 51.857% 5,186 15,186
10/31/04 96.625% 9,663 19,663
10/31/05 131.305% 13,131 23,131
</Table>
<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
10/31/98 8,592 8,655
10/31/99 7,983 8,113
10/31/00 8,599 9,589
10/31/01 10,797 10,860
10/31/02 11,616 11,586
10/31/03 14,997 15,521
10/31/04 18,466 20,097
10/31/05 20,095 23,641
</Table>
Average Annual Total Returns
Periods Ended October 31, 2005
<Table>
1 Year 2.57%
5 Year 17.11%
Since Inception 9.54%*
</Table>
*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.
CHART INFORMATION
CALCULATION OF MORGAN STANLEY REIT INDEX DATA SET PLOT POINTS:
<Table>
<Caption>
MORGAN STANLEY REIT INDEX
RETURN DOLLAR VALUE
---------------------------------------
03/06/98 10,000
10/31/98 -13.455% (1,346) 8,655
10/31/99 -18.872% (1,887) 8,113
10/31/00 -4.109% (411) 9,589
10/31/01 8.601% 860 10,860
10/31/02 15.862% 1,586 11,586
10/31/03 55.208% 5,521 15,521
10/31/04 100.965% 10,097 20,097
10/31/05 136.411% 13,641 23,641
</Table>
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX MONTH PERIOD (MAY 1, 2005 TO OCTOBER 31, 2005)
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
05/01/05 VALUE 10/31/05 (1) PERIOD (2)
- ---------------------------------------------------------------------------------------------------------
SPIRIT OF AMERICA REAL ESTATE FUND
ACTUAL FUND RETURN
Class A $ 1,000.00 $ 1,062.70 1.70% $ 8.84
Class B $ 1,000.00 $ 1,059.10 2.40% $ 12.46
HYPOTHETICAL 5% RETURN
Class A $ 1,000.00 $ 1,016.64 1.70% $ 8.64
Class B $ 1,000.00 $ 1,013.11 2.40% $ 12.18
</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 an annual
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 365.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2005
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
COMMON STOCKS - 99.06%
APARTMENTS (REITS) - 16.27%
Amli Residential Properties Trust 127,000 $ 4,806,950
Apartment Investment & Management Company 214,200 8,225,280
Associated Estates Realty Corporation 422,500 3,853,200
Mid-America Apartment Communities, Inc. 198,500 9,260,025
Post Properties, Inc. 138,300 5,642,640
United Dominion Realty Trust, Inc. 67,000 1,482,710
-------------
33,270,805
-------------
DIVERSIFIED (REITS) - 12.7%
BNP Residential Properties, Inc. 130,900 1,907,213
Colonial Properties Trust 162,923 7,121,364
Crescent Real Estate Equities Company 374,500 7,471,275
Duke Realty Corporation 4,000 136,400
Equity Inns Inc. 21,000 273,840
FrontLine Capital Group ++* 640 -
Hospitality Properties Trust 91,200 3,620,640
Host Marriott Corporation 58,000 973,820
Liberty Property Trust 14,500 604,505
PMC Commerical Trust 2,400 30,480
Sunstone Hotel Investors Inc 12,500 280,000
Trustreet Properties, Inc. 235,500 3,539,565
-------------
25,959,102
-------------
HEALTHCARE (REITS) - 13.81%
Five Star Quality Care, Inc. * 1,353 9,119
Health Care Property Investors, Inc. 221,500 5,637,175
Health Care REIT, Inc. 178,600 6,293,864
Healthcare Realty Trust, Inc. 124,800 4,722,432
National Health Investors, Inc. 76,200 2,045,970
Nationwide Health Properties, Inc. 360,400 8,357,676
National Health Realty, Inc. 53,600 1,024,296
OMEGA Healthcare Investors, Inc. 9,000 110,610
Senior Housing Properties Trust 2,700 47,817
-------------
28,248,959
-------------
INDUSTRIAL (REITS) - 5.24%
Bedford Property Investors, Inc. 13,000 291,850
Brandywine Realty Trust 16,000 438,400
First Industrial Realty Trust, Inc. 245,651 9,980,800
-------------
10,711,050
-------------
INTERNET CONTENT - 0.00%
VelocityHSI, Inc. +* 1,260 -
-------------
NET LEASE (REITS) - 7.02%
Commercial Net Lease Realty 345,216 6,690,286
Lexington Corporate Properties Trust 351,900 7,664,382
-------------
14,354,668
-------------
OFFICE SPACE (REITS) - 14.37%
Arden Realty, Inc. 107,100 4,834,494
Equity Office Properties Trust 52,200 1,607,760
Glenborough Realty Trust, Inc. 217,100 4,153,123
Highwoods Properties, Inc. 221,500 6,248,515
HRPT Properties Trust 750,100 8,183,591
Mack-Cali Realty Corporation 63,100 2,691,215
Reckson Associates Realty Corporation 47,800 1,677,780
-------------
29,396,478
-------------
</Table>
SEE ACCOMPANYING NOTES TO THE FNANCIAL STATEMENTS.
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
------ ------------
REGIONAL MALLS (REITS) - 13.13%
Glimcher Realty Trust 347,050 7,971,739
The Macerich Company 82,200 5,282,994
The Mills Corporation 69,700 3,728,950
Pennsylvania Real Estate Investment Trust 243,694 9,382,219
Simon Property Group, Inc. 6,000 429,720
Taubman Centers, Inc. 2,000 65,940
-------------
26,861,562
-------------
SHOPPING CENTERS (REITS) - 14.71%
Burnham Pacific Properties, Inc. * 11,000 1,595
Developers Diversified Realty Corporation 154,104 6,731,263
Equity One, Inc. 139,500 3,271,275
Federal Realty Investment Trust 77,600 4,706,440
Heritage Property Investment Trust 76,300 2,487,380
Kimco Realty Corporation 24,000 710,880
Malan Realty Investors, Inc. * 5,000 15,950
New Plan Excel Realty Trust 261,910 6,021,311
Ramco-Gershenson Properties Trust 198,800 5,514,712
Realty Income Corporation 28,000 623,560
-------------
30,084,366
-------------
STORAGE (REITS) - 1.81%
Shurgard Storage Centers, Inc., Cl A 4,000 225,720
Sovran Self Storage, Inc. 74,800 3,480,445
-------------
3,706,165
-------------
TOTAL COMMON STOCKS
(Cost $135,628,702) 202,593,155
-------------
PREFERRED STOCKS - 0.08%
NET LEASE (REITS) - 0.08%
Commercial Net Lease Realty 9% Series A
(Cost $152,677) 6,352 166,549
-------------
TOTAL INVESTMENTS - 99.14%
(Cost $135,781,379**) 202,759,704
CASH AND OTHER ASSETS NET OF LIABILITIES - 0.86% 1,588,418
-------------
NET ASSETS - 100.00% $ 204,348,122
=============
</Table>
+ Company filed for Chapter 11 bankruptcy on August 14, 2001.
++ Company filed for Chapter 11 bankruptcy on June 12, 2002.
* Non-income producing security
** Cost for Federal income tax purposes is $135,781,379, and net unrealized
appreciation consists of:
<Table>
Gross unrealized appreciation $ 67,194,441
Gross unrealized depreciation (216,116)
-------------
Net unrealized appreciation $ 66,978,325
=============
</Table>
SEE ACCOMPANYING NOTES TO THE FNANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2005
<Table>
ASSETS
Investments in securities at value (cost $135,781,379) (Note 1) $ 202,759,704
Cash 1,378,418
Receivables:
Capital stock sold 392,408
Dividends and interest 928,044
Prepaid assets 33,621
--------------
TOTAL ASSETS 205,492,195
--------------
LIABILITIES
Payables:
Capital stock redeemed 769,406
Advisory fees 164,766
Distribution expenses (Note 3) 57,837
CCO salary 1,380
Other accrued expenses 150,684
--------------
TOTAL LIABILITIES 1,144,073
--------------
NET ASSETS $ 204,348,122
==============
CLASS A SHARES
Net assets applicable to 14,313,262 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 192,751,100
==============
Net asset value and redemption price per Class A Share
($192,751,100 DIVIDED BY 14,313,262 shares) $ 13.47
==============
Offering price per share ($13.47 DIVIDED BY 0.9475) $ 14.22
==============
CLASS B SHARES
Net assets applicable to 847,136 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 11,597,022
==============
Net asset value and offering price per Class B Share
($11,597,022 DIVIDED BY 847,136 shares) $ 13.69
==============
Redemption price per share ($13.69 x 0.9425) $ 12.90
==============
SOURCE OF NET ASSETS
At October 31, 2005, net assets consisted of:
Paid-in capital $ 137,369,797
Net unrealized appreciation on investments 66,978,325
--------------
NET ASSETS $ 204,348,122
==============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME
Dividends $ 6,732,216
Interest 21,725
------------
TOTAL INVESTMENT INCOME 6,753,941
------------
EXPENSES
Investment advisory fees (Note 3) 1,935,087
Transfer agent fees 357,000
Administration fees 174,747
Distribution fees - Class A (Note 3) 561,598
Distribution fees - Class B (Note 3) 122,941
Accounting fees 103,249
Registration fees 16,133
Legal fees 33,277
Custodian fees 34,000
Printing expense 41,632
Auditing fees 11,200
Directors' fees 18,068
Insurance expense 70,482
Chief Compliance Officer salary 20,141
Other professional fees 1,855
------------
TOTAL EXPENSES 3,501,410
------------
NET INVESTMENT INCOME 3,252,531
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions and REITs 5,229,335
Net change in unrealized appreciation of investments 9,404,152
------------
Net realized and unrealized gain on investments 14,633,487
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,886,018
============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA REAL ESTATE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004
---------------- ----------------
OPERATIONS
Net investment income $ 3,252,531 $ 2,801,965
Net realized gain from security transactions and REITs 5,229,335 3,898,635
Net change in unrealized appreciation of investments 9,404,152 29,931,164
---------------- ----------------
Net increase in net assets 17,886,018 36,631,764
---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income:
Class A (3,128,824) (2,677,345)
Class B (123,707) (124,620)
---------------- ----------------
Total distributions from net investment income to shareholders (3,252,531) (2,801,965)
---------------- ----------------
Distributions from realized gains:
Class A (4,913,780) (3,622,978)
Class B (315,555) (275,657)
---------------- ----------------
Total distributions from realized gains to shareholders (5,229,335) (3,898,635)
---------------- ----------------
Return of capital:
Class A (1,090,633) (1,778,504)
Class B (69,170) (135,334)
---------------- ----------------
Total distributions from net return of capital to shareholders (1,159,803) (1,913,838)
---------------- ----------------
Total distributions to shareholders (9,641,669) (8,614,438)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS (DOLLAR ACTIVITY)
Shares sold:
Class A 42,537,250 46,452,906
Class B 1,189,354 1,179,721
Shares issued as reinvestment of distributions:
Class A 7,045,854 5,958,372
Class B 403,591 409,003
Shares redeemed:
Class A (42,701,246) (37,742,572)
Class B (3,067,261) (2,971,538)
---------------- ----------------
Increase in net assets derived from capital share transactions (a) 5,407,542 13,285,892
---------------- ----------------
Total increase in net assets 13,651,891 41,303,218
NET ASSETS
Beginning of period 190,696,231 149,393,013
---------------- ----------------
End of period $ 204,348,122 $ 190,696,231
================ ================
(a) Transactions in capital stock were:
Shares sold:
Class A 3,174,063 3,890,658
Class B 86,208 97,641
Shares issued as reinvestment of dividends:
Class A 524,479 494,187
Class B 29,571 33,399
Shares redeemed:
Class A (3,194,930) (3,148,460)
Class B (229,089) (249,433)
---------------- ----------------
Increase in shares outstanding 390,302 1,117,992
================ ================
</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 years presented.
<Table>
<Caption>
CLASS A CLASS A CLASS A
---------------- ---------------- ----------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ---------------- ----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.90 $ 10.93 $ 8.96
---------------- ---------------- ----------------
Income from Investment Operations:
Net investment income 0.22 0.20 0.30
Net realized and unrealized gain on investments 1.00 2.37 2.30
---------------- ---------------- ----------------
Total from investment operations 1.22 2.57 2.60
---------------- ---------------- ----------------
Less Distributions:
Distributions from net investment income (0.22) (0.20) (0.30)
Distributions from capital gains (0.35) (0.27) (0.09)
Distributions in excess of ordinary income - - -
Distributions from return of capital (0.08) (0.13) (0.24)
---------------- ---------------- ----------------
Total distributions (0.65) (0.60) (0.63)
---------------- ---------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 13.47 $ 12.90 $ 10.93
================ ================ ================
TOTAL RETURN(1) 9.59% 24.02% 30.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 192,751 $ 178,104 $ 137,410
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 1.71% 1.77% 1.80%
After expense reimbursement or recapture 1.71% 1.83% 1.97%
Ratio of net investment income to average net assets:
Before expense reimbursement or recapture 1.67% 1.75% 3.18%
After expense reimbursement or recapture 1.67% 1.69% 3.01%
Portfolio Turnover 1.02% 4.17% 1.52%
<Caption>
CLASS A CLASS A
---------------- ----------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
---------------- ----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.84 $ 7.41
---------------- ----------------
Income from Investment Operations:
Net investment income 0.40 0.31
Net realized and unrealized gain on investments 0.36 1.63
---------------- ----------------
Total from investment operations 0.76 1.94
---------------- ----------------
Less Distributions:
Distributions from net investment income (0.40) (0.31)
Distributions from capital gains (0.12) -
Distributions in excess of ordinary income (0.01) -
Distributions from return of capital (0.11) (0.20)
---------------- ----------------
Total distributions (0.64) (0.51)
---------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 8.96 $ 8.84
================ ================
TOTAL RETURN(1) 8.26% 26.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 85,915 $ 48,016
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 1.93% 2.29%
After expense reimbursement or recapture 1.97% 1.97%
Ratio of net investment income to average net assets:
Before expense reimbursement or recapture 4.04% 4.12%
After expense reimbursement or recapture 4.00% 4.44%
Portfolio Turnover 1.25% 12.04%
</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 years presented.
<Table>
<Caption>
CLASS B CLASS B CLASS B
---------------- ---------------- ----------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ---------------- ----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.11 $ 11.11 $ 9.11
---------------- ---------------- ----------------
Income from Investment Operations:
Net investment income 0.15 0.12 0.26
Net realized and unrealized gain on investments 1.01 2.40 2.30
---------------- ---------------- ----------------
Total from investment operations 1.16 2.52 2.56
---------------- ---------------- ----------------
Less Distributions:
Distributions from net investment income (0.15) (0.12) (0.26)
Distributions from capital gains (0.35) (0.27) (0.09)
Distributions in excess of ordinary income - - -
Distributions from return of capital (0.08) (0.13) (0.21)
---------------- ---------------- ----------------
Total distributions (0.58) (0.52) (0.56)
---------------- ---------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 13.69 $ 13.11 $ 11.11
================ ================ ================
TOTAL RETURN(1) 8.83% 23.13% 28.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 11,597 $ 12,592 $ 11,983
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 2.41% 2.47% 2.50%
After expense reimbursement or recapture 2.41% 2.53% 2.67%
Ratio of net investment income to average net assets:
Before expense reimbursement or recapture 0.97% 1.05% 2.48%
After expense reimbursement or recapture 0.97% 0.99% 2.31%
Portfolio turnover 1.02% 4.17% 1.52%
<Caption>
CLASS B CLASS B
---------------- ----------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 2002 OCTOBER 31, 2001
---------------- ----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.98 $ 7.53
---------------- ----------------
Income from Investment Operations:
Net investment income 0.35 0.28
Net realized and unrealized gain on investments 0.36 1.63
---------------- ----------------
Total from investment operations 0.71 1.91
---------------- ----------------
Less Distributions:
Distributions from net investment income (0.34) (0.28)
Distributions from capital gains (0.12) -
Distributions in excess of ordinary income (0.01) -
Distributions from return of capital (0.11) (0.18)
---------------- ----------------
Total distributions (0.58) (0.46)
---------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 9.11 $ 8.98
================ ================
TOTAL RETURN(1) 7.59% 25.56%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 9,583 $ 6,254
Ratio of expenses to average net assets:
Before expense reimbursement or recapture 2.63% 2.99%
After expense reimbursement or recapture 2.67% 2.67%
Ratio of net investment income to average net assets:
Before expense reimbursement or recapture 3.34% 4.72%
After expense reimbursement or recapture 3.30% 5.04%
Portfolio turnover 1.25% 12.04%
</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, 2005
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 maturities of 60 days or less are valued at amortized cost, which the
Board of Directors believes represents fair value. Fund securities for which
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the
supervision of the Board of Directors. There were no securities, however, fair
valued during the fiscal year.
B. INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost basis
for both financial statement and federal income tax purposes. Dividend income
and distributions to shareholders are reported on the ex-dividend date. Interest
income and expenses are accrued daily.
C. FEDERAL INCOME TAXES: The Fund intends to comply with all requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
D. NET ASSET VALUE PER SHARE: The methodology and procedures for determining net
asset value are identical for each class of shares, but due to the specific
distribution expenses and other costs allocable to each class of shares, the net
asset value of each class of shares will vary. Class A Shares are purchased at
the offering price per share (which includes a sales load), while Class B shares
are purchased at the net asset value per share.
<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 year ended October 31, 2005, excluding
short-term investments, were as follows:
<Table>
<Caption>
PROCEEDS
PURCHASES FROM SALES
--------------------------------------------
Real Estate Fund $ 17,454,881 $ 2,037,144
</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
year ended October 31, 2005, were as follows:
<Table>
<Caption>
VOLUNTARY EXPENSE
LIMITATION ADVISORY FEES
--------------------- -----------------
Real Estate Fund Class A 1.97% $ 1,815,906
Real Estate Fund Class B 2.67% 119,181
</Table>
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.
<Page>
<Table>
<Caption>
DISTRIBUTION DISTRIBUTION
FEE RATE FEES
-------------- ----------------
Real Estate Fund Class A 0.30% $ 561,598
Real Estate Fund Class B 1.00% 122,941
</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 year ended October 31,
2005, 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 $ 2,240,483 -
Real Estate Class B $ - 99,597
</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. For the year
ended October 31, 2005, the Real Estate Fund was allocated $20,141 of the Chief
Compliance Officer fee. In addition, David Lerner Associates, Inc., a registered
broker-dealer affiliated with Spirit Management and the Distributor, received no
brokerage commissions for the year ended October 31, 2005.
NOTE 4 - FEDERAL INCOME TAXES
The tax character of distributions paid for the fiscal years ended October 31,
2005 and 2004 was as follows:
2005 TAXABLE DISTRIBUTIONS
<Table>
<Caption>
ORDINARY NET LONG TERM TOTAL TAXABLE RETURN TOTAL
INCOME CAPITAL GAINS DISTRIBUTIONS OF CAPITAL DISTRIBUTION
Real Estate Fund Class A $ 3,128,824 $ 4,913,780 $ 8,042,604 $ 1,090,633 $ 9,133,237
Real Estate Fund Class B 123,707 315,555 439,262 69,170 508,432
--------------------------------------------------------------------------
Totals $ 3,252,531 $ 5,229,335 $ 8,481,866 $ 1,159,803 $ 9,641,669
==========================================================================
</Table>
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>
As of October 31, 2005, the components of distributable earnings for the Fund on
a tax basis were as follows:
<Table>
Unrealized appreciation $ 66,978,325
-------------
Total Distributable Earnings $ 66,978,325
=============
</Table>
UNAUDITED
QUALIFIED DIVIDEND INCOME
Through October 31, 2005, 0% of the dividends paid by the Fund from ordinary
income qualifies for a reduced tax rate pursuant to The Jobs and Growth Tax
Relief Reconciliation Act of 2003.
LONG-TERM CAPITAL GAINS DIVIDEND
The Fund designates $5,229,335 as long-term capital gains dividends pursuant to
section 852(b)(3) of the Internal Revenue Code for the fiscal year ended October
31, 2005.
<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 statement 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, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on those financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit 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, 2005, the results of their
operations for the year then ended, the 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 LLP
PHILADELPHIA, PENNSYLVANIA
DECEMBER 2, 2005
<Page>
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) (69) Since President and founder, David Lerner 2 Director of Spirit
477 Jericho Turnpike 1998 Associates, Inc., a registered of America
Syosset, New York 11791 broker-dealer; President, Spirit of Management Corp.,
America Management Corp., the Company's the Company's
Chairman of the Board of Directors investment adviser; and Chief Executive investment adviser;
Officer and President of SSH Securities, Director of SSH
Inc., the Company's Distributor. Securities, Inc.,
the Company's
Distributor;
Director of David
Lerner Associates,
Inc., a registered
broker dealer.
Daniel Lerner(3) (44) Since Senior Vice President, Investment 2 Director of David
477 Jericho Turnpike 1998 Counselor with David Lerner Associates, Lerner Associates,
Syosset, New York 11791 Inc., a registered broker-dealer, since Inc., a registered
September 2000. Previously: Broker broker-dealer.
Director 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 (69) Since President and Chief Executive Officer 2 Director of K.G.K.
1998 of K.G.K. Agency, Inc., a property and Agency, Inc., a
Director casualty insurance agency, since 1963. property and
casualty insurance
agency.
Stanley S. Thune (69) Since President and Chief Executive Officer, 2 Director of Freight
1998 Freight Management Systems, Inc., a Management Systems,
Director third party logistics management Inc.
company, since 1994; private investor.
</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
- ------------------------------------------------------------------------------------------------------------------------------
Richard Weinberger (69) Since Of Counsel to Ballon Stoll Bader & 2 None.
2005 Nadler, P.C., a mid-sized law firm,
Director since January 2005; Shareholder, Ballon
Stoll Bader & Nadler, P.C., January
2000 to December 2004.
EXECUTIVE OFFICERS
David Lerner
(see biography above)
President
Alan P. Chodosh (51) Since Senior Vice President and Chief N/A N/A
477 Jericho Turnpike 2003 Financial Officer of David Lerner
Syosset, New York 11791 Associates, Inc. since June 1997
Treasurer
Daniel E. Chafetz (74) Since Chief Compliance Officer of David N/A N/A
477 Jericho Turnpike 2004 Lerner Associates, Inc. since March
Syosset, New York 11791 1993; Chief Compliance Officer of SSH
Securities, Inc. and Spirit of America
Chief Compliance Officer 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 Real Estate Fund uses
to determine how to vote proxies relating to portfolio securities, along wiht
the Fund's proxy voting record relating to portfolio securities held during the
12-month period ended June 30, 2005, are available (i) without charge, upon
request, by calling (516) 390-5565; and (ii) on the Securities and Exchange
Commission's website at http://www.sec.gov
INFORMATION ON FORM N-Q
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.
(C) Copyright 2006 Spirit of America
<Page>
[SPIRIT OF AMERICA LOGO]
INVESTMENT ADVISOR
Spirit of America Management, Inc.
P.O. Box 9006
Syosset, NY 11791-9006
DISTRIBUTOR
SSH Securities, Inc.
P.O. Box 9006
Syosset, NY 11791-9006
SHAREHOLDER SERVICES
PFPC Inc.
760 Moore Road
King of Prussia, PA 19406
CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard, 3rd Floor
Philadelphia, PA 19153
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
FOR ADDITIONAL INFORMATION ABOUT THE SPIRIT OF AMERICA REAL ESTATE FUND, CALL
(800) 452-4892 OR (610) 382-7819. THIS REPORT IS SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE FUND. IT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED
BY AN EFFECTIVE PROSPECTUS WHICH INCLUDES DETAILS REGARDING THE FUND'S
OBJECTIVES, POLICIES, EXPENSES, AND OTHER INFORMATION.
(C)Copyright 2006 Spirit of America SOAR-AR05
<Page>
[GRAPHIC]
[SPIRIT OF AMERICA LOGO]
ANNUAL REPORT
2005
SPIRIT OF AMERICA
VALUE FUND
<Page>
<Table>
Message To Our Shareholders 1
Management Discussion 2
Summary of Portfolio Holdings 3
Illustration of Investments 4
Expense Analysis 5
Schedule of Investments 6-7
Statement of Assets and Liabilities 8
Statement of Operations 9
Statement of Changes in Net Assets 10
Financial Highlights 11
Notes to Financial Statements 12-14
Report of Independent Certified Public Accountants 15
Management of the Company 16
</Table>
[PHOTO]
<Page>
Message to our Shareholders
December 2005
Dear Shareholder,
We are very pleased to send you a copy of the annual report for the Spirit of
America Value Fund
Our investment philosophy is to seek out investments in mid-to-large cap
companies, which we believe to be undervalued. Our analysis looks for major
long-term trends and then focuses on businesses that should benefit. These are
generally major companies, with a strong, competitive advantage, focused
management teams and the capacity to earn high returns on invested capital.
Our objective is long-term appreciation in value and capital preservation. There
may be short-term valuation swings, but we remain focused on steady longer-term
results.
Smaller cap stocks may show greater results during a specified period. However,
we believe that large cap stocks should show significant value increases, as
well as stability, over the coming year.
Any investment in securities is subject to risk and may fluctuate with economic
conditions, interest rates, civil unrest and other factors, which will affect
its market value. An investor's shares, when redeemed, may be worth more or less
than their original cost. Past performance is no guarantee of future results.
We look forward to your continued investment in the Value Fund.
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 - OCTOBER 31, 2005
A comparison of the Value Fund (SOAVX) with its benchmark, the S&P 500
Index, for the quarter 8/1/05 to 10/31/05, shows that the S&P 500 returned
- -1.77% versus the SOAVX -6.18% return (adjusted for the maximum sales load). For
the year ended October 31, 2005, the Value Fund returned 3.35% (sales load
adjusted) versus 8.71% for the S&P 500 Index. SOAVX's return for the quarter and
fiscal year ended October 31, 2005, unadjusted for sales load, was -1.02% and
9.07% respectively, versus the S & P 500 Index's -1.77% and 8.71%.
The Fund's investments in mega-cap stocks has worked against it in 2005, as did
its lower-than-average stakes in the year's two best performing sectors:
utilities and energy. Our returns were also weighed down because of its
positioning in the pharmaceutical sector. We have begun to re-allocate to other
areas within the Healthcare sector which have a more positive outlook such as
biotech, managed care and medical equipment. In addition, we took advantage of
the weakness in the markets during September and October to add to our positions
in the oil services industry. Going forward, we believe this area of the Energy
sector should continue to outperform.
<Page>
Spirit of America Value Fund
Summary of Portfolio Holdings (unaudited)
October 31, 2005
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>
Apartments (REITS) 0.95% $ 376,320
Banks 10.89% 4,291,535
Communications 9.73% 3,838,640
Computer Industry 10.41% 4,105,316
Consumer Products 9.14% 3,603,895
Diversified Financial Services 8.46% 3,333,017
Energy 6.89% 2,716,694
Food & Beverage 3.55% 1,397,761
Healthcare (REITS) 0.58% 228,231
Hotels 0.93% 365,395
Industrial (REITS) 0.71% 280,347
Insurance 5.00% 1,969,790
Manufacturer 4.40% 1,732,604
Net Lease (REITS) 0.62% 246,114
Office Space (REITS) 0.64% 251,635
Pharmaceuticals 17.03% 6,714,521
Regional Malls (REITS) 0.43% 169,978
Retail 7.35% 2,895,656
Shopping Centers (REITS) 2.29% 902,869
------------------------------
Total Investments 100.00% $ 39,420,318
==============================
</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 and the S&P 500 Index. The values and returns for Spirit of America Value
Fund include reinvested dividends and the impact of the maximum sales charges of
5.25% placed on purchases. The returns shown do not reflect taxes that a
shareholder would pay on fund distributions or on the redemption of fund shares.
[CHART]
<Table>
<Caption>
SPIRIT OF
AMERICA VALUE RUSSELL 1000
FUND* VALUE INDEX S&P 500 INDEX**
---------------------------------------------------
8/1/2002 9,475 10,000 10,000
10/31/2002 9,128 9,816 10,012
04/30/03 9,249 10,194 10,365
10/31/03 10,631 11,749 11,877
04/30/04 11,321 12,556 12,517
10/31/04 11,321 13,242 12,776
04/30/05 11,847 13,960 13,077
10/31/05 12,347 14,458 13,644
</Table>
Average Annual Total Returns
Periods Ended October 31, 2005
<Table>
1 Year 3.35%
Since Inception 6.70%*
</Table>
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Fund commenced operations August 1, 2002.
**The Board of Trustees has approved a change in the benchmark for the Spirit of
America Value Fund from the Russell 1000 Value Index to the S&P 500 Index.
The Russell 1000 Value Index and the S&P 500 Index are unmanaged indices.
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 1, 2005 TO OCTOBER 31, 2005)
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
SPIRIT OF AMERICA VALUE FUND VALUE 05/01/05 VALUE 10/31/05 (1) PERIOD (2)
- --------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN
Value Fund $ 1,000.00 $ 1,042.00 1.97% $ 10.14
HYPOTHETICAL 5% RETURN
Value Fund $ 1,000.00 $ 1,015.00 1.97% $ 10.01
</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 expenses shown in the table are meant to highlight your
ONGOING costs only and do not reflect any transactional costs such as sales
charges (loads) or redemption fees.
(1) Annualized, based on the 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 365.
<Page>
SPIRIT OF AMERICA VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2005
<Table>
<Caption>
SHARES MARKET VALUE
------ --------------
COMMON STOCKS - 97.70%
APARTMENTS (REITS) - 0.93%
Apartment Investment & Management Company 9,800 $ 376,320
--------------
BANKS - 10.64%
Bank of America Corporation 22,818 998,059
JPMorgan Chase & Co. 37,664 1,379,256
U.S. Bancorp 35,000 1,035,300
Wells Fargo & Company 14,600 878,920
--------------
4,291,535
--------------
COMMUNICATIONS - 9.52%
Motorola, Inc. 67,000 1,484,720
Nokia Oyj - ADR 80,000 1,345,600
Verizon Communications Inc. 32,000 1,008,320
--------------
3,838,640
--------------
COMPUTER INDUSTRY - 10.18%
EMC Corporation* 7,500 104,700
Hewlett-Packard Company 72,400 2,030,096
International Business Machines Corporation 9,000 736,920
Microsoft Corporation 48,000 1,233,600
--------------
4,105,316
--------------
CONSUMER PRODUCTS - 8.93%
Altria Group, Inc. 25,000 1,876,250
Colgate-Palmolive Company 7,600 402,496
Johnson & Johnson 7,800 488,436
Maytag Corporation 22,100 380,562
The Procter & Gamble Company 8,147 456,151
--------------
3,603,895
--------------
DIVERSIFIED FINANCIAL SERVICES - 8.26%
American Express Company 25,800 1,284,066
Capital One Financial Corporation 12,000 916,200
MBNA Corporation 44,300 1,132,751
--------------
3,333,017
--------------
ENERGY - 6.73%
American Electric Power Company, Inc. 11,300 428,948
BP plc - ADR 6,500 431,600
Consolidated Edison, Inc. 13,700 623,350
Duke Energy Corporation 9,800 259,504
Kerr-McGee Corporation 2,400 204,096
Noble Corporation 8,000 515,040
Schlumberger Limited 2,800 254,156
--------------
2,716,694
--------------
FOOD & BEVERAGE - 3.46%
The Coca-Cola Company 9,900 423,522
General Mills, Inc. 6,100 294,386
Kraft Foods Inc. 1,300 36,790
The Kroger Co.* 8,800 175,120
PepsiCo, Inc. 3,600 212,688
Sara Lee Corporation 14,300 255,255
--------------
1,397,761
--------------
HEALTHCARE (REITS) - 0.57%
National Health Investors, Inc. 4,700 126,195
Nationwide Health Properties, Inc. 4,400 102,036
--------------
228,231
--------------
HOTELS - 0.91%
Four Seasons Hotels Inc. 3,000 160,890
Starwood Hotels & Resorts Worldwide, Inc. 3,500 204,505
--------------
365,395
--------------
INDUSTRIAL (REITS) - 0.69%
First Industrial Realty Trust, Inc. 6,900 280,347
--------------
</Table>
<Page>
<Table>
<Caption>
SHARES MARKET VALUE
------ --------------
INSURANCE - 4.88%
CIGNA Corporation 17,000 1,969,790
--------------
MANUFACTURER - 4.29%
General Electric Company 16,000 542,560
3M Co. 10,800 820,584
Tyco International Ltd. 14,000 369,460
--------------
1,732,604
--------------
NET LEASE (REITS) - 0.61%
Lexington Corporate Properties Trust 11,300 246,114
--------------
OFFICE SPACE (REITS) - 0.62%
Mack-Cali Realty Corporation 5,900 251,635
--------------
PHARMACEUTICALS - 16.64%
Abbott Laboratories 20,000 861,000
Amgen Inc.* 6,600 500,016
Bristol-Myers Squibb Company 42,500 899,725
Eli Lilly and Company 8,400 418,236
Medco Health Solutions, Inc. * 21,192 1,197,348
Pfizer Inc. 33,800 734,812
Schering-Plough Corporation 16,000 325,440
Wyeth 39,900 1,777,944
--------------
6,714,521
--------------
REGIONAL MALLS (REITS) - 0.42%
Glimcher Realty Trust 7,400 169,978
--------------
RETAIL - 7.18%
Target Corporation 17,100 952,299
The TJX Companies, Inc. 27,100 583,463
Walgreen Co. 16,500 749,595
Wal-Mart Stores, Inc. 12,900 610,299
--------------
2,895,656
--------------
SHOPPING CENTERS (REITS) - 2.24%
Commercial Net Lease Realty 12,400 240,312
Federal Realty Investment Trust 5,000 303,250
New Plan Excel Realty Trust 9,900 227,601
Ramco-Gershenson Properties Trust 2,500 69,350
Realty Income Corporation 2,800 62,356
--------------
902,869
--------------
TOTAL INVESTMENTS - 97.70%
(Cost $34,094,543**) 39,420,318
CASH AND OTHER ASSETS NET OF LIABILITIES - 2.30% 926,976
--------------
NET ASSETS - 100.00% $ 40,347,294
==============
</Table>
ADR - American Depository Receipt
*Non-income producing security
**Cost for Federal income tax purposes is $34,094,543, and net unrealized
appreciation consists of:
<Table>
Gross unrealized appreciation $ 6,920,928
Gross unrealized depreciation (1,595,153)
--------------
Net unrealized appreciation $ 5,325,775
==============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
SPIRIT OF AMERICA VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2005
<Table>
ASSETS
Investments in securities at value (cost $34,094,543) (Note 1) $ 39,420,318
Cash 900,837
Receivables:
Capital stock sold 60,019
Dividends and interest 54,173
Investments sold 455,115
Prepaid assets 6,610
--------------
TOTAL ASSETS 40,897,072
--------------
LIABILITIES
Payables:
Capital stock redeemed 55,896
Investments purchased 410,144
Advisory fees 32,013
Distribution expense (Note 3) 10,178
Other accrued expenses 41,547
--------------
TOTAL LIABILITIES 549,778
--------------
NET ASSETS
Net assets applicable to 3,179,969 outstanding $0.001
par value shares (500,000,000 authorized shares) $ 40,347,294
==============
Net asset value and redemption price per share
($40,347,294 DIVIDED BY 3,179,969 shares) $ 12.69
==============
Offering price per share ($12.69 DIVIDED BY 0.9475) $ 13.39
==============
SOURCE OF NET ASSETS
At October 31, 2005, net assets consisted of:
Paid-in capital $ 34,676,664
Accumulated realized gain on investments 344,855
Net unrealized appreciation on investments 5,325,775
--------------
NET ASSETS $ 40,347,294
==============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $5,383) $ 1,064,260
Interest 11,408
--------------
TOTAL INVESTMENT INCOME 1,075,668
--------------
EXPENSES
Investment advisory fees (Note 3) 390,228
Transfer agent fees 103,000
Administration fees 60,345
Distribution fees (Note 3) 120,689
Accounting fees 47,791
Registration fees 11,633
Legal fees 6,715
Custodian fees 9,000
Printing expense 8,352
Auditing fees 11,000
Directors' fees 3,501
Insurance expense 13,420
Chief Compliance Officer salary 3,859
Other Professional fees 574
--------------
TOTAL EXPENSES 790,107
Recoupment of waived and reimbursed expenses (Note 3) 2,418
--------------
NET EXPENSES 792,525
--------------
NET INVESTMENT INCOME 283,143
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions 429,451
Net change in unrealized appreciation of investments 2,558,957
--------------
Net realized and unrealized gain on investments 2,988,408
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,271,551
==============
</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, 2005 OCTOBER 31, 2004
---------------- ----------------
OPERATIONS
Net investment income $ 283,143 $ 104,346
Net realized gain from security transactions 429,451 28,658
Net change in unrealized appreciation of investments 2,558,957 1,102,725
---------------- ----------------
Net increase in net assets 3,271,551 1,235,729
---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income: (283,143) (104,346)
Distributions from realized gains: (84,596) (28,658)
Return of capital: - (46,300)
---------------- ----------------
Total distributions to shareholders (367,739) (179,304)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS (DOLLAR ACTIVITY)
Shares sold: 10,179,621 22,212,687
Shares issued as reinvestment of distributions: 346,025 167,342
Shares redeemed: (8,908,650) (4,888,839)
---------------- ----------------
Increase in net assets derived from capital share transactions (a) 1,616,996 17,491,190
---------------- ----------------
Total increase in net assets 4,520,808 18,547,615
---------------- ----------------
NET ASSETS
Beginning of period 35,826,486 17,278,871
---------------- ----------------
End of period $ 40,347,294 $ 35,826,486
================ ================
(a) Transactions in capital stock were:
Shares sold: 812,597 1,898,862
Shares issued as reinvestment of dividends: 27,410 14,191
Shares redeemed: (712,615) (418,099)
---------------- ----------------
Increase in shares outstanding 127,392 1,494,954
================ ================
</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 FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2002*
---------------- ---------------- ---------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.74 $ 11.09 $ 9.63 $ 10.00
---------------- ---------------- ---------------- -----------------
Income from Investment Operations:
Net investment income 0.09 0.04 0.07 0.01
Net realized and unrealized gain/(loss)
on investments 0.98 0.68 1.51 (0.38)
---------------- ---------------- ---------------- -----------------
Total from investment operations 1.07 0.72 1.58 (0.37)
---------------- ---------------- ---------------- -----------------
Less Distributions:
Distributions from net investment income (0.09) (0.04) (0.08) -
Distributions from capital gains (0.03) (0.01) - -
Distributions from return of captial - (0.02) (0.04) -
---------------- ---------------- ---------------- -----------------
Total distributions (0.12) (0.07) (0.12) -
---------------- ---------------- ---------------- -----------------
NET ASSET VALUE, END OF PERIOD $ 12.69 $ 11.74 $ 11.09 $ 9.63
================ ================ ================ =================
TOTAL RETURN(2) 9.07% 6.48% 16.47% (3.70)%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 40,347 $ 35,826 $ 17,279 $ 2,427
Ratio of expenses to average net assets:
Before expense
reimbursement or recapture 1.96% 2.03% 2.65% 7.38%(3)
After expense
reimbursement or recapture 1.97% 1.97% 1.97% 1.97%(3)
Ratio of net investment income (loss) to
average net assets:
Before expense
reimbursement or recapture 0.71% 0.35% 0.12% (4.75)%(3)
After expense
reimbursement or recapture 0.70% 0.41% 0.80% 0.66%(3)
Portfolio turnover 15.37% -% -% 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, 2005
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 operations. It is quite
<Page>
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, 2005, excluding
short-term investments, were as follows:
<Table>
<Caption>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
$ 6,906,210 $ 6,058,248
</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, 2005, were as follows:
<Table>
<Caption>
INVESTMENT ADVISORY VOLUNTARY EXPENSE
FEE RATE LIMITATION ADVISOR FEES
--------------------- ------------------- --------------
0.97% 1.97% $ 390,228
</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. During the year ended
October 31, 2005, the Advisor recaptured $2,418 of reimbursed expenses and
$14,919 of reimbursed expenses was deemed unrecoverable.
<Table>
<Caption>
ON OCTOBER 31, 2005, THE BALANCE OF
RECAPTURABLE EXPENSES WAS AS FOLLOWS.
---------------------------------------
Expires 2006 $ 60,199
Expires 2007 19,534
------------
Total $ 79,733
============
</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% $ 120,689
</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, 2005, sales charges received by the Distributor were as
follows:
<Table>
<Caption>
SALES CHARGES
RECEIVED BY SSH
---------------
$ 583,692
</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. For the year
ended October 31, 2005, the Real Estate Fund was allocated $3,859 of the Chief
Compliance Officer fee. In addition, David Lerner Associates, Inc., a registered
broker-dealer affiliated with Spirit Management and the Distributor, received no
brokerage commissions for the year ended October 31, 2005.
NOTE 4 - FEDERAL INCOME TAXES
The tax character of distributions paid for the fiscal years ended October 31,
2004 & 2005 were as follows:
2005 Taxable Distributions
<Table>
<Caption>
RETURN
ORDINARY NET LONG TERM TOTAL TAXABLE OF TOTAL
INCOME CAPITAL GAINS DISTRIBUTION CAPITAL DISTRIBUTIONS
------ ------------- ------------ ------- -------------
$ 298,343 $ 69,396 $ 367,739 $ - $ 367,739
</Table>
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>
As of October 31, 2005, the components of distributable earnings for the Fund on
a tax basis were as follows:
<Table>
Accumulated net realized gain on investments $ 344,855
Unrealized appreciation 5,325,775
-----------
Total Distributable Earnings $ 5,670,630
===========
</Table>
<Page>
UNAUDITED
QUALIFIED DIVIDEND INCOME
Through October 31, 2005, 1000% of the dividends paid by the Fund from ordinary
income qualifies for a reduced tax rate pursuant to The Jobs and Growth Tax
Relief Reconciliation Act of 2003.
LONG-TERM CAPITAL GAINS DIVIDEND
The Fund designates $69,396 as long-term capital gains dividends pursuant to
section 852(b)(3) of the Internal Revenue Code for the fiscal year ended October
31, 2005.
<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 statement 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, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on those financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit 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, 2005, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for the periods indicated
thereon, in conformity with accounting principles generally accepted in the
United States of America.
TAIT, WELLER & BAKER LLP
PHILADELPHIA, PENNSYLVANIA
DECEMBER 2, 2005
<Page>
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) (69) Since President and founder, David Lerner 2 Director of Spirit of
477 Jericho Turnpike 1998 Associates, Inc., a registered America Management Corp.,
Syosset, New York 11791 broker-dealer; President, Spirit of the Company's investment
America Management Corp., the Company's adviser; Director of SSH
Chairman of the Board of Directors investment adviser; and Chief Executive Securities, Inc., the
Officer and President of SSH Company's Distributor;
Securities, Inc., the Company's Director of David Lerner
Distributor. Associates, Inc., a
registered broker dealer.
Daniel Lerner(3) (44) Since Senior Vice President, Investment 2 Director of David Lerner
477 Jericho Turnpike 1998 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
Director 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 (69) Since President and Chief Executive Officer 2 Director of K.G.K. Agency,
1998 of K.G.K. Agency, Inc., a property and Inc., a property and
Director casualty insurance agency, since 1963. casualty insurance agency.
Stanley S. Thune (69) Since President and Chief Executive Officer, 2 Director of Freight
1998 Freight Management Systems, Inc., a Management Systems, Inc.
Director third party logistics management
company, since 1994; private investor.
</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
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Weinberger (69) Since Of Counsel to Ballon Stoll Bader & 2 None.
2005 Nadler, P.C., a mid-sized law firm,
Director since January 2005; Shareholder, Ballon
Stoll Bader & Nadler, P.C., January
2000 to December 2004.
EXECUTIVE OFFICERS
David Lerner
(see biography above)
President
Alan P. Chodosh (51) Since Senior Vice President and Chief N/A N/A
477 Jericho Turnpike 2003 Financial Officer of David Lerner
Syosset, New York 11791 Associates, Inc. since June 1997
Treasurer
Daniel E. Chafetz (74) Since Chief Compliance Officer of David N/A N/A
477 Jericho Turnpike 2004 Lerner Associates, Inc. since March
Syosset, New York 11791 1993; Chief Compliance Officer of SSH
Securities, Inc. and Spirit of America
Chief Compliance Officer 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, 2005, are available (i) without charge, upon
request, by calling (516) 390-5565; and (ii) on the Securities and Exchange
Commission's website at http://www.sec.gov
INFORMATION ON FORM N-Q
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.
(C) Copyright 2006 Spirit of America
<Page>
[SPIRIT OF AMERICA LOGO]
INVESTMENT ADVISOR
Spirit of America Management, Inc.
P.O. Box 9006
Syosset, NY 11791-9006
DISTRIBUTOR
SSH Securities, Inc.
P.O. Box 9006
Syosset, NY 11791-9006
SHAREHOLDER SERVICES
PFPC Inc.
760 Moore Road
King of Prussia, PA 19406
CUSTODIAN
PFPC Trust Company
8800 Tinicum Boulevard, 3rd Floor
Philadelphia, PA 19153
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait Weller & Baker LLP
1818 Market Street, Suite 2400
Philadelphia, PA 19103
FOR ADDITIONAL INFORMATION ABOUT THE SPIRIT OF AMERICA VALUE FUND, CALL (800)
452-4892 OR (610) 382-7819. THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION
OF THE SHAREHOLDERS OF THE FUND. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS WHICH INCLUDES DETAILS REGARDING THE FUND'S OBJECTIVES, POLICIES,
EXPENSES, AND OTHER INFORMATION.
(C) Copyright 2006 Spirit of America SOAV-AR05
<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.
(b) Not applicable.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, and that relates to any element of the code of ethics
description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, that relates to one or more of the items set forth in
paragraph (b) of this item's instructions.
(e) Not applicable.
(f) The registrant's code of ethics is incorporated by reference to Exhibit
(a)(1) to the registrant's form N-CSR filed with the Securities and
Exchange Commission on January 7, 2005 (Accession No.
0001047469-05-000347).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Registrant's Board of Directors has determined that it does not have an "audit
committee financial expert" serving on its audit committee. While Registrant
believes that each of the members of its audit committee has sufficient
knowledge of accounting principles and financial
<Page>
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 $27,200 in
2005 and $25,200 in 2004.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this Item
are $0.00 in 2005 and $0.00 in 2004.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $0.00 in 2005 and $0.00 in
2004.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than the
services reported in paragraphs (a) through (c) of this Item are $0.00 in
2005 and $0.00 in 2004.
(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.
<Page>
PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES PROVIDED TO THE
COMPANY
PRE-APPROVAL REQUIREMENTS. The Committee shall pre-approve all auditing
services and permissible non-audit services (e.g., tax services) to be
provided to the Company by the Auditor, including the fees therefor. The
Committee may delegate to one or more of its members the authority to
grant pre-approvals. In connection with such delegation, the Committee
shall establish pre-approval policies and procedures, including the
requirement that the decisions of any member to whom authority is
delegated under this section (B) shall be presented to the full Committee
at each of its scheduled meetings.
DE MINIMIS EXCEPTION TO PRE-APPROVAL: Pre-approval for a permitted
non-audit service shall not be required if:
a. the aggregate amount of all such non-audit services is not more
than 5% of the total revenues paid by the Company to the Auditor in
the fiscal year in which the non-audit services are provided;
b. such services were not recognized by the Company at the time of the
engagement to be non-audit services; and
c. such services are promptly brought to the attention of the
Committee and approved prior to the completion of the audit by the
Committee or by one or more members of the Committee to whom
authority to grant such approvals has been delegated by the
Committee.
Additionally, the Committee shall pre-approve the Auditor's engagements
for non-audit services with the Adviser and any affiliate of the Adviser
that provides ongoing services to the Company in accordance with the
foregoing, if the engagement relates directly to the operations and
financial reporting of the Company, unless the aggregate amount of all
services provided constitutes no more than 5% of the total amount of
revenues paid to the Auditor by the Company, the Adviser and any affiliate
of the Adviser that provides ongoing services to the Company during the
fiscal year in which the services are provided that would have to be
pre-approved by the Committee pursuant to this paragraph (without regard
to this exception).
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) N/A
(c) N/A
(d) N/A
<Page>
(f) The percentage of hours expended on the principal accountant's engagement
to audit the registrant's financial statements for the most recent fiscal
year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for each of the last two fiscal years of the registrant was
$__0________.
(h) The registrant's audit committee of the board of directors HAS considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
<Page>
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) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
<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
---------------------------------------------------
David Lerner, Principal Executive Officer
(principal executive officer)
Date January 6, 2006
------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ David Lerner
---------------------------------------------------
David Lerner, Principal Executive Officer
(principal executive officer)
Date January 6, 2006
------------------------------------------------------------------------
By (Signature and Title)* /s/ Alan Chodosh
---------------------------------------------------
Alan Chodosh, Principal Financial Officer
(principal financial officer)
Date January 6, 2006
------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.