<PAGE>
As filed with the Securities and Exchange Commission on July 10, 1998
Securities Act Registration No. 333-_____
Investment Company Act Registration No. 811-07665
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FBR FAMILY OF FUNDS
(Exact Name of Registrant as Specified in Charter)
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
(Address of Principal Executive Officer)
(800) 239-3334
(Area Code and Telephone Number)
Robert S. Smith, Esq.
Friedman, Billings, Ramsey & Co., Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
Copies to:
Paul F. Roye, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
Pursuant to Rule 488(a) under the Securities Act of 1933, this registration
statement will become effective on the thirtieth day after the date upon which
it is filed.
No filing fee is due because an indefinite number of shares have been
deemed to be registered in reliance on Section 24(f) under the Investment
Company Act of 1940, as amended.
<PAGE>
FBR FAMILY OF FUNDS
FORM N-14
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
Item No. Location in Combined Proxy
Statement and Prospectus
- --------------------------------------------------------------------------------
Part A
1. Cover Page Cover Page; Notice of Special Meeting
of Shareholders
2. Beginning and Outside Back Cover Table of Contents
Page
3. Synopsis and Risk Factors Summary; Comparison of Investment
Objectives and Policies
4. Information About the Transaction Summary; Information About the
Reorganization
5. Information About the Registrant Summary; Information About the
Reorganization; Comparison of
Investment Objectives and Polices;
Comparative Information on
Shareholder Rights; Information About
Management of FBR Realty Fund and the
Funds; Additional Information About
FBR Realty Fund and the Funds
6. Information About the Company Summary; Information About the
Being Acquired Reorganization; Comparison of
Investment Objectives and Polices;
Comparative Information on
Shareholder Rights; Information About
Management of FBR Realty Fund and the
Funds; Additional Information About
FBR Realty Fund and the Funds
7. Voting Information Summary; Voting Information
8. Interest of Certain Persons and Voting Information
Experts
9. Additional Information Required Not Applicable.
for Reoffering by Persons Deemed
to be
<PAGE>
Underwriters
Part B
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. Additional Information About the Incorporation of Documents by
Registrant Reference in Statement of Additional
Information
13. Additional Information About the Incorporation of Documents by
Company Being Acquired Reference in Statement of Additional
Information
14. Financial Statements Incorporation of Documents by
Reference in Statement of Additional
Information
Part C
15-17 Information required to be included
in Part C is set forth under the
appropriate Item, so numbered, in
Part C of this Registration Statement
<PAGE>
GRANDVIEW-SM- REALTY GROWTH FUND
GRANDVIEW-SM- S&P-REGISTERED TRADEMARK- REIT INDEX FUND
August __, 1998
Dear Shareholder:
The Board of Trustees of the GrandView Investment Trust has recently
reviewed and unanimously endorsed a proposal for the reorganization of the
GrandView Realty Growth Fund and the GrandView S&P REIT Index Fund (the
"Fund"), which they judge to be in the best interests of the Funds'
shareholders. This proposal calls for the acquisition of the assets and
certain liabilities of the Funds by the FBR Realty Growth Fund ("FBR Realty
Fund"), which is a newly formed series of the FBR Family of Funds (the "FBR
Trust"), an open-end management investment company. The FBR Realty Fund will
adopt investment objectives, policies and restrictions substantially
identical to those of the GrandView Realty Growth Fund.
We have therefore called a Special Meeting of Shareholders to be held at
____________________________ on September __, 1998 to consider this transaction.
WE STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND
RETURN YOUR PROXY AS SOON AS POSSIBLE.
As a result of this transaction, the Funds would be reorganized into the
FBR Realty Fund and you would become a shareholder of the FBR Realty Fund,
receiving shares of the FBR Realty Fund having an aggregate net asset value
equal to the aggregate net asset value of your investment in the Funds. No
sales charge will be imposed in the transaction and the closing of the
transaction will be conditioned upon receiving an opinion of counsel to the
effect that the proposed transaction will qualify as a tax-free reorganization
for federal income tax purposes.
The FBR Realty Fund will have investment objectives, policies and
restrictions that are substantially identical to the GrandView Realty Growth
Fund. The GrandView Realty Growth Fund seeks long-term growth of capital
with current income as a secondary objective. Although FBR Realty Fund will
have a different investment adviser (FBR Fund Advisers, Inc.) than the Funds'
current investment adviser (GrandView Advisers, Inc.), Winsor Aylesworth and
Lucille Carlson, the portfolio managers for the Funds, are expected to become
employed by FBR Fund Advisers, Inc. and thus the FBR Realty Fund is expected
to have the same portfolio managers as the Funds currently have.
Detailed information about the proposed transaction and the reasons for it
are contained in the enclosed materials. Please exercise your right to vote by
completing, dating and signing the enclosed proxy card. A self-addressed,
postage-paid envelope has been enclosed for your
<PAGE>
convenience. IT IS VERY IMPORTANT THAT YOU VOTE AND THAT YOUR VOTING
INSTRUCTIONS BE RECEIVED NO LATER THAN SEPTEMBER __, 1998.
NOTE: You may receive more than one proxy package if you hold Fund shares
in more than one account. You must return separate proxy cards for separate
holdings. We have provided postage-paid return envelopes for each, which
require no postage if mailed in the United States.
Sincerely,
Winsor H. Aylesworth
President, GrandView Investment Trust
<PAGE>
GRANDVIEW-SM- INVESTMENT TRUST
GRANDVIEW-SM- REALITY GROWTH FUND
GRANDVIEW-SM- S&P-REGISTERED TRADEMARK- REIT INDEX FUND
107 NORTH WASHINGTON STREET
ROCKY MOUNT, NORTH CAROLINA 27803
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER __, 1998
To the shareholders of
GrandView Realty Growth Fund and
GrandView S&P REIT Index Fund, series
of GrandView Investment Trust:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
GrandView Realty Growth Fund and GrandView S&P REIT Index Fund (collectively,
the "Funds"), series of GrandView Investment Trust will be held at ______ on
September _____, 1998, for the following purposes:
1. To consider and vote on approval of an Agreement and Plan of
Reorganization providing for the acquisition of all or substantially all of the
assets of the Funds by the FBR Realty Growth Fund ("FBR Realty Fund"), a series
of the FBR Family of Funds, in exchange for shares of FBR Realty Fund and
assumption of certain identified liabilities of the Funds by FBR Realty Fund,
and for the distribution of such shares to shareholders of the Funds in
liquidation of the Funds; and
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Trustees has fixed the close of business on August __, 1998,
as the Record Date for determination of shareholders entitled to notice of, and
to vote at, the meeting.
EACH SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IN PERSON IS
REQUESTED TO DATE, FILL IN, SIGN AND RETURN PROMPTLY THE ENCLOSED FORM OF PROXY
IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Trustees
C. Frank Watson III
Secretary
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED AUGUST __, 1998
ACQUISITION OF THE ASSETS OF
GRANDVIEW-SM- REALTY GROWTH FUND
AND
GRANDVIEW-SM- S&P-REGISTERED TRADEMARK- REIT INDEX FUND
107 NORTH WASHINGTON STREET
ROCKY MOUNT, NORTH CAROLINA 27803
(800) 773-3863
BY AND IN EXCHANGE FOR
SHARES OF
FBR REALTY GROWTH FUND
1001 NINETEENTH STREET NORTH
ARLINGTON, VIRGINIA 22209
(800) 239-3334
This Prospectus/Proxy Statement is being furnished to shareholders of
the GrandView Realty Growth Fund (the "GrandView Realty Fund") and the
GrandView S&P REIT Index Fund (the "GrandView Index Fund", and collectively,
the "Funds"), each a series of GrandView Investment Trust (the "GrandView
Trust"), in connection with a proposed Agreement and Plan of Reorganization
(the "Plan"), which includes the liquidation and termination of the Funds
following the transfer of all or substantially all of the assets of the
Funds. The Plan is being submitted to shareholders of the Funds for
consideration at a Special Meeting of Shareholders to be held at
________________________________ on September __, 1998 (the "Meeting"). The
Plan provides for the acquisition of all or substantially all of the assets
of the Funds by the FBR Realty Growth Fund ("FBR Realty Fund"), a series of
the FBR Family of Funds, (the "FBR Trust") in exchange for shares of FBR
Realty Fund and the assumption by FBR Realty Fund of certain identified
liabilities of the Funds. Following this acquisition, the Funds will be
liquidated, all remaining liabilities of the Funds will be satisfied (whether
by payment or the establishment of reasonable reserves for payment) and
shares of FBR Realty Fund will be distributed to shareholders of each of the
Funds in liquidation of the Funds (these transactions collectively referred to
as the "Reorganization").
As a result of the proposed Reorganization, each shareholder of the Funds
will receive that number of shares of FBR Realty Fund having an aggregate net
asset value equal to the aggregate net asset value of such shareholder's shares
of each Fund. Shareholders in the Funds will receive Class A shares of FBR
Realty Fund, and no sales charge will be imposed on the Class A shares of FBR
Realty Fund received by Fund shareholders.
<PAGE>
This transaction is being structured as a tax-free reorganization. See
"Information About the Reorganization - Federal Income Tax Consequences."
Shareholders should consult their tax advisers to determine the actual impact of
the Reorganization in light of their individual tax circumstances.
FBR Realty Fund is a newly-formed series of the FBR Trust, a registered
open-end management investment company. FBR Realty Fund currently has no
assets or shareholders. Prior to the reorganization, FBR Realty Fund will
adopt investment objectives, policies and restrictions substantially
identical to those of the GrandView Realty Fund. Therefore, the proposed
Reorganization will not result in any change of investment objectives or
policies for the GrandView Realty Fund. The GrandView Realty Fund's primary
investment objective is long-term growth of capital. Current income is a
secondary objective. The GrandView Realty Fund seeks to achieve its
objectives by investing primarily in equity securities of real estate
companies. While the investment objectives and policies of the GrandView
Index Fund and the FBR Realty Fund are generally similar, there are certain
differences in investment policies, which are described under "Comparison of
Investment Objectives and Policies" in this Prospectus/Proxy Statement.
GrandView Advisers, Inc. serves as investment adviser for the Funds. FBR
Fund Advisers, Inc. ("FBR Advisers") is the investment adviser to FBR Realty
Fund and will remain the investment adviser following the proposed
Reorganization. However, the portfolio management personnel of GrandView
Advisers, Inc. currently responsible for the management of the Funds will manage
FBR Realty Fund as employees of FBR Advisers. GrandView Advisers, Inc. and FBR
Advisers are described in more detail under "Information About Management of FBR
Realty Fund and the Funds."
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about FBR Realty Fund that a
prospective investor should know before investing. A Statement of Additional
Information dated August __, 1998, relating to this Prospectus/Proxy Statement
and the proposed Reorganization, has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus/Proxy
Statement. A copy of the Statement of Additional Information is available upon
request and without charge by calling or writing to the Funds at the telephone
number or address listed for the Funds on the cover page of this
Prospectus/Proxy Statement. In addition, the Prospectus for the Funds dated
January 1, 1998. has been filed with the SEC and is incorporated herein by
reference. The SEC also maintains an Internet Web site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated
by reference, and other information regarding FBR Realty Fund and the Funds.
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a copy of
the Agreement and Plan of Reorganization pertaining to the transaction.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-2-
<PAGE>
TABLE OF CONTENTS
Page
----
Common Questions and Answers About the Proposed
Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . .
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reasons for the Reorganization . . . . . . . . . . . . . . . . . . . .
Information About the Reorganization . . . . . . . . . . . . . . . . .
Comparison of Investment Objectives and Policies . . . . . . . . . . .
Comparative Information on Shareholders' Rights. . . . . . . . . . . .
Information About Management of the FBR
Growth Fund and the Funds . . . . . . . . . . . . . . . . . . . .
Additional Information About the FBR Growth
Fund and the Funds. . . . . . . . . . . . . . . . . . . . . . . .
Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting Information . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Experts . . . . . . . . . . . . . . . . . . .
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit A: Agreement and Plan of Reorganization . . . . . . . . . . .
-3-
<PAGE>
COMMON QUESTIONS AND ANSWERS
ABOUT THE PROPOSED REORGANIZATION
Q. HOW WILL THE REORGANIZATION AFFECT ME?
A. The assets of the Funds will be transferred to FBR Realty Fund and you will
become a shareholder of FBR Realty Fund. You will receive Class A shares
of FBR Realty Fund equal in value at the time of issuance to the shares of
each Fund that you hold immediately prior to the Reorganization.
Q. WHY IS THE REORGANIZATION BEING RECOMMENDED?
A. The primary purposes of the proposed Reorganization is to form a strategic
alliance with FBR Advisers and the FBR Family of Funds and to seek
to achieve future economies of scale. This alliance would allow the
combined Funds to tap into and take advantage of FBR's distribution
network, which is expected to increase asset levels of the combined Funds.
Combining the assets of the Funds is intended to provide various benefits
to shareholders of the Funds who become shareholders of FBR Realty Fund (as
well as to future investors in FBR Realty Fund). For example, higher asset
levels should enable FBR Realty Fund to spread fixed and relatively fixed
costs, such as accounting, legal, and printing expenses, over a larger
asset base, thereby reducing per-share expense levels. (See also next
question regarding operating expenses of the Funds.) Higher asset levels
also should benefit portfolio management by permitting larger individual
portfolio investments that may result in reduced transaction costs and/or
more favorable pricing and by providing the opportunity for greater
portfolio diversity.
Q. WHY IS THE GRANDVIEW INDEX FUND BEING MERGED INTO THE GRANDVIEW REALTY
FUND AND ULTIMATELY THE FBR REALTY FUND?
A. The primary reason is economics. The GrandView Index Fund was started at
the same time as the GrandView Realty Fund. The GrandView organization
believed that the real estate securities market would lend itself to a
passive management concept (i.e. indexing) which would result in
performance that exceeded that obtained by most active real estate fund
managers. While meeting the Index Fund's objective of tracking its
benchmark index with a high degree of correlation, the Fund's returns were
exceeded by most active fund managers. The reasons for the failure of
indexing to provide consistently superior returns are complex but the end
result was that the Fund never grew to a sufficient size so that its
expense ratio could be competitive with other real estate index products.
For investors, the GrandView Realty Fund, even with a higher expense ratio
and using its active management philosophy, has been historically a better
investment. If this Plan of Reorganization were not adopted, then
GrandView Advisers would have to consider other alternatives with regard to
the GrandView Index Fund, including possibly liquidating the Fund.
-4-
<PAGE>
Q. HOW WILL THE FEES PAID BY FBR REALTY FUND COMPARE TO THOSE PAYABLE BY THE
FUNDS?
A. The total per share operating expenses of FBR Realty Fund (after waivers
and/or reimbursements) are expected to be equal to those of the
GrandView Realty Fund and, initially, will be higher than those of the
GrandView Index Fund. FBR Advisers has agreed to waive its fees and/or
reimburse FBR Realty Fund for expenses until at least _______ so that
the expense ratio of FBR Realty Fund will not exceed that of the
GrandView Realty Fund as of its most recent fiscal year ended March 31,
1998. In addition, FBR Advisers anticipates that the aggregate fees and
expenses of FBR Realty Fund will, over time, be reduced further due to
increased economies of scale resulting from the larger aggregate net
asset base of the combined entity. However, there can be no assurance
that these economies will be achieved.
Q. WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER TRANSACTION FEE IN
CONNECTION WITH THE REORGANIZATION?
A. No. The full value of your shares of the Funds will be exchanged for Class
A shares of the FBR Realty Fund without any sales load, commission or other
transaction fee being imposed. In addition, if you are currently
eligible to purchase GrandView Fund shares on a no-load basis, you will
be able to make subsequent purchases of FBR Realty Fund without any sales
load.
Q. WHO WILL SERVE AS INVESTMENT ADVISER AND PROVIDE OTHER SERVICES TO FBR
REALTY FUND?
A. The investment adviser for the Funds is GrandView Advisers, Inc. The
investment adviser for FBR Realty Fund will be FBR Advisers; however,
the Funds' current co-portfolio managers, Winsor Aylesworth and Lucille
Carlson, will continue to be the portfolio managers for FBR Realty Fund
as employees of FBR Advisers. The Nottingham Company and Capital
Investment Group, Inc. are the administrator and distributor,
respectively, for the Funds. For the FBR Realty Fund, the administrator
will be Bear Stearns Funds Management Inc. and the Distributors will be
Friedman, Billings, Ramsey & Co., Inc. and FBR Investment Services, Inc.
Q. WILL I HAVE TO PAY ANY FEDERAL INCOME TAXES AS A RESULT OF THE
REORGANIZATION?
A. The transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes. Assuming qualification for such treatment,
shareholders would not recognize taxable gain or loss pursuant to the
Reorganization. As a condition to the closing of the Reorganization, the
Funds will receive an opinion of counsel to the effect that the
Reorganization will qualify as a tax-free reorganization for federal income
tax purposes. You should separately consider any state, local and other
tax consequences in consultation with your tax adviser. Opinions of
counsel are not binding on the IRS or the courts.
SUMMARY
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement, the
Prospectus of the Funds dated January 1, 1998, the Statement of Additional
Information of the Funds dated July 25, 1997 and
-5-
<PAGE>
supplemented January 1, 1998 and the Agreement and Plan of Reorganization, a
copy of which is attached to this Prospectus/Proxy Statement as Exhibit A.
PROPOSED REORGANIZATION
The Plan provides for the transfer of all or substantially all of the
assets of the Funds in exchange for shares of FBR Realty Fund and the
assumption by FBR Realty Fund of certain identified liabilities of the Funds
(as reflected on the respective statements of assets and liabilities of the
Funds prior to the Closing Date). The Plan also calls for the liquidation of
the Funds and the distribution of shares of FBR Realty Fund to shareholders
of the Funds in liquidation. (This proposed transaction is referred to in
this Prospectus/Proxy Statement as the "Reorganization.") As a result of the
Reorganization, each shareholder of the Funds will become the owner of that
number of full and fractional Class A shares of FBR Realty Fund having an
aggregate net asset value equal to the aggregate net asset value of the
shareholder's shares of each Fund as of the close of business on the date
that the Funds' assets are exchanged for Class A shares of FBR Realty Fund.
See "Information About the Reorganization."
For the reasons set forth below under "Reasons for the Reorganization," the
Trustees of the GrandView Trust, including all of the Trustees who are not
"interested persons", as that term is defined in the Investment Company Act of
1940, as amended (the "1940 Act"), have concluded that the Reorganization would
be in the best interests of the shareholders of the Funds and that the interests
of the Funds' existing shareholders would not be diluted as a result of the
Reorganization, and therefore have submitted the Plan for approval to the Funds'
shareholders. The Trustees of the GrandView Trust recommend approval of the
Plan effecting the Reorganization. The Board of Trustees of the FBR Trust has
also approved the Reorganization on behalf of FBR Realty Fund.
Approval of the Reorganization will require a "Majority Shareholder Vote,"
as defined in the GrandView Trust's Declaration of Trust. See "Voting
Information."
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The FBR Realty Fund, currently a newly-formed series of the FBR Trust,
will adopt investment objectives, policies and restrictions substantially
identical to those of the GrandView Realty Fund. The GrandView Realty Fund
and the GrandView Index Fund have generally similar investment objectives,
policies and restrictions. The primary investment objective of the GrandView
Realty Fund is long-term growth of capital. Current income is a secondary
objective. The GrandView Realty Fund seeks to achieve these objectives by
investing primarily in equity securities of issuers in the real estate
industry which it believes exhibit above average growth prospects. The
investment objective of the GrandView Index Fund is to provide its investors
with investment results corresponding to the performance of the S&P REIT
Index by investing in the stocks included in the Index. This involves a
passive investment approach, as compared to the active portfolio management
employed for the GrandView Realty Fund.
Both the GrandView Realty Fund and the GrandView Index Fund seek capital
growth. Although the respective investment policies of the GrandView Realty
Fund and the GrandView Index Fund are generally similar, shareholders of the
Funds should
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<PAGE>
consider certain differences in the investment policies and restrictions of, and
portfolio securities held by, each Fund. See "Comparison of Investment
Objectives and Policies."
SUMMARY COMPARISON OF FEES AND EXPENSES
The following tables compare the fees and expenses of FBR Realty Fund,
the GrandView Realty Fund and the GrandView Index Fund and show the estimated
fees and expenses on a pro forma basis, giving effect to the proposed
Reorganization. Additional information regarding the performance of the Funds
is contained in the Annual Report to shareholders of the GrandView Index Fund
and the GrandView Realty Fund for the fiscal year ended March 31, 1998
(previously provided to Fund Shareholders), which is incorporated by
reference into this Prospectus/Proxy Statement.
<TABLE>
<CAPTION>
FBR
REALTY
FUND
GRANDVIEW GRANDVIEW (CLASS
REALTY INDEX A
FUND FUND SHARES)
---- ---- -------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Initial Sales Charge (as a
percentage of offering price). . . . . . . 4.50% 3.00% 5.50%
Maximum contingent deferred sales charge (as a
percentage of redemption proceeds) . . . . None None None(1)
Redemption fee. . . . . . . . . . . . . . . . . None 1.00%(2) None
Exchange Fee . . . . . . . . .. . . . . . . . . None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory fee (after waiver)(3) . . . . . . 0.00% 0.00% 0.00%
12b-1 fees . . . . . . . . . . . . . . . . 0.25% 0.25% 0.25%
Other expenses (after expense
reimbursement)(3). . . . . . . . . . . . . 1.75% 0.80% 1.75%
----- ----- -----
Total Fund Operating Expenses (after
expense reimbursement)(3). . . . . . . . . 2.00% 1.05% 2.00%
</TABLE>
_______________
(1) Investments of $1 million or more in Class A shares of FBR Realty Fund are
not subject to an initial sales charge; however, a CDSC of 1% is imposed in
the event of certain redemption transactions within one year following such
investments. A CDSC will not be imposed on Class A shares of FBR Realty
Fund acquired in the Reorganization by shareholders of the Funds.
(2) The maximum redemption fee applies to redemptions in the first six months
after purchase. These fees are subsequently reduced and after one year are
eliminated.
(3) The "Total Fund Operating Expenses" shown above are based on actual
operating expenses incurred by each Fund for the fiscal year ended March
31, 1998. Absent waivers and reimbursements, the percentages for "Advisory
Fee" and "Total Fund Operating Expenses" would have been 0.35% and 4.84%,
respectively, for the GrandView Index Fund and 1.00% and 5.68%,
respectively, for the GrandView Realty Fund.
EXAMPLE: You would pay the following expenses on a hypothetical $1,000
investment (including the maximum sales charge) assuming a 5% annual return:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
GrandView Realty Fund $64 $105 $148 $267
GrandView Index Fund $40 $ 62 $ 86 $154
FBR Realty Fund Class A shares $74 $114 $157 $275
</TABLE>
-7-
<PAGE>
PURCHASE AND REDEMPTION PROCEDURES
The following discussion describes differences in the minimum investment
requirements, charges, and waivers of charges applicable to shares of the Funds
and Class A shares of FBR Realty Fund. For details on how to purchase or redeem
shares of the Funds, see the Prospectus. The Funds, but not the FBR Realty
Fund, reserve the right to involuntarily redeem an investor's Class A shares if
the net asset value of such shares is less than $1,000 by reason of redemption.
The minimum initial investment for Class A shares of FBR Realty Fund and
shares of the Funds is $1,000 (or $500 and $250 for FBR Growth and the Funds,
respectively, if the investment is for IRAs, or pension, profit-sharing or other
employee benefit plans) and subsequent investments must be at least $50.
Additionally, for the Funds, but not FBR Realty Fund, the minimum initial
investment is $50 for shares purchased through GrandView Trust's Automatic
Investment Plan.
Class A shares of FBR Realty Fund are sold to investors at net asset value
plus an initial sales charge at a maximum rate of 5.5% of the offering price.
Shares of the GrandView Realty Fund and GrandView Index Fund are sold to
investors at net asset value plus an initial sales charge at a maximum rate of
4.5% and 3.0%, respectively. No initial sales charge will be imposed on the
Class A shares of FBR Realty Fund received by holders of the Funds' shares in
the Reorganization. With regard to subsequent purchases, shareholders of the
Funds who are currently eligible to purchase shares of the Funds without a sales
charge will be "grandfathered" to buy FBR Realty Fund shares without a sales
charge.
The following tables show the initial sales charge schedule for Class A
shares of FBR Realty Fund and shares of the Funds.
FBR Realty Fund
<TABLE>
<CAPTION>
Sales Charge as a Percentage of
-------------------------------
Discount to Selected
Offering Net Amount Invested Dealers as a Percentage
Amount of Purchase Price (Net Asset Value) of Offering Price***
- ------------------ ----- ----------------- --------------------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None* None* (see below)**
_________________
</TABLE>
* No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions made within 12 months of purchase. This charge
will not apply to shares acquired in the Reorganization.
-8-
<PAGE>
** The FBR Trust pays a one-time commission to authorized dealers (as
defined below) who initiate or are responsible for purchases of $1 million
or more of shares of FBR Realty Fund equal to 1.00% of the amount under
$3 million, 0.50% of the next $2 million, and 0.25% thereafter. The FBR
Trust may also pay, with respect to all or a portion of the amount
purchased, a commission in accordance with the foregoing schedule to
authorized dealers who initiate or are responsible for purchases of
$500,000 or more by plans or $1 million or more by "wrap" accounts
satisfying the criteria set forth in (h) or (j) below. Purchases by such
plans will be made at net asset value with no initial sales charge. In
addition, authorized dealers shall remit to the FBR Trust such payments
received in connection with "wrap" accounts in the event that shares are
redeemed within 12 months after the end of the calendar month in which the
purchase was made.
*** During special promotions, the entire sales charge may be reallowed to
Authorized Dealers. Authorized Dealers to whom substantially the entire
sales charge is reallowed may be deemed to be "underwriters" under the
Securities Act of 1933.
<TABLE>
<CAPTION>
GrandView Index Fund
--------------------
Sales Charge
As % of Net Dealer Allowance
Offering Sales Charge As % of As % of Public
Amount of Purchase Price* Amount Invested Offering Price
------------------ ------ --------------- --------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.50%
$100,000 but less than $250,000 2.25% 2.30% 1.75%
$250,000 but less than $500,000 1.50% 1.52% 1.00%
$500,000 but less than $1,000,000 0.75% 0.76% 0.25%
$1,000,000 or more 0.35% 0.35% 0.35%
</TABLE>
<TABLE>
<CAPTION>
GrandView Index Fund
--------------------
Sales Charge
As % of Net Dealer Allowance
Offering Sales Charge As % of As % of Public
Amount of Purchase Price Amount Invested Offering Price
------------------ ------ --------------- --------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.50%
$1,000,000 or more 0.75% 0.76% 0.75%
</TABLE>
* A redemption fee of 1.00% is imposed in the event of a redemption of shares
of the GrandView Index Fund within six months after purchase, and of 0.50%
in the event of a redemption of shares of the GrandView Index Fund after
six months but within twelve months of purchase.
-9-
<PAGE>
Purchases of Class A shares of any other funds of the FBR Trust will be
aggregated in determining the initial sales charge for the FBR Realty Fund,
which may result in a reduced initial sales charge.
The initial sales charge on Class A shares of FBR Realty Fund and shares of
the Funds are currently waived on shares that are acquired through the exchange
of Class A shares of another fund of the FBR Trust or shares of another fund of
the GrandView Trust, respectively.
For the FBR Realty Fund, the initial sales charge is also waived on
sales of Class A shares to the following types of purchasers: (a) Friedman,
Billings, Ramsey & Co., Inc. ("FBR"), FBR Investment Services, Inc. ("FBR
Services"), their affiliates or their respective officers, partners,
directors or employees (including retired employees and former partners), any
partnership of which FBR or FBR Services is a general partner, any Trustee or
officer of the FBR Trust and designated family members of any of the above
individuals; (b) qualified retirement plans of FBR or FBR Services; (c)
trustees or directors of investment companies for which FBR or FBR Services
or an affiliate acts as sponsor; (d) any employee or registered
representative of any authorized dealer or their respective spouses and
children; (e) banks, trust companies or other types of depository
institutions investing for their own account or investing for customer
accounts; (f) any institutional investment clients including corporate
sponsored pension and profit-sharing plans, other benefit plans and insurance
companies; (g) any pension funds, state and municipal governments or funds,
Taft-Hartley plans and qualified non-profit organizations, foundations and
endowments; (h) "wrap" accounts for the benefit of clients of broker-dealers,
financial institutions or financial planners, provided that they have entered
into an agreement with the Distributor specifying aggregate minimums and
certain operating policies and standards; (i) registered investment advisers
and financial planners, investing for themselves or for accounts for which
they receive asset-based fees; (j) accounts over which FBR Advisers or its
advisory affiliates have investment discretion; (k) shareholders receiving
distributions from a qualified retirement plan invested in the FBR Family of
Funds and reinvesting such proceeds in an IRA for which FBR or FBR Services,
or an affiliate thereof, serves as custodian or trustee ("FBR IRA"); and (l)
accounts established in the Reorganization that were eligible to purchase
GrandView Fund shares on a no-load basis.
For the Funds, the initial sales charge is waived on investments by
certain group plans and on sales of shares of the following types of
purchasers: (a) current or former Trustees and officers of the GrandView
Trust; (b) current or former directors, officers, employees or sales
representatives of GrandView Advisers, Inc. or the Funds' administrator,
transfer agent or distributor or their respective subsidiaries or affiliates;
(c) current or former officers, partners, employees or registered
representatives of broker-dealers which have entered into sales agreements
with the Funds' distributor; (d) members of the immediate families of any of
the foregoing persons; (e) any trust, custodian, pension, profit-sharing or
other benefit plan for any of the foregoing persons; (f) investment advisory
clients of GrandView Advisers, Inc. or of any of its affiliates; (g) clients
of fee-based financial planners; (h) clients of a bank or registered
investment adviser as to which the bank or adviser exercises exclusive
discretionary investment authority or accounts held by a bank in a fiduciary
agency, custodial or similar capacity; (i) governmental agencies and
authorities; (j) employee benefit plans qualified under Section 401 or 403 of
the Internal Revenue Code, including salary
-10-
<PAGE>
reduction plans qualified under Section 401(k) of the Code, subject to minimum
requirements with respect to number of participants or plan assets established
by the GrandView Trust; (k) tax-exempt organizations under Section 501(c)(3-13)
of the Code; and (l) those investors who purchase shares without the services of
a commissioned broker or agent.
The sales charges on Class A shares of FBR Realty Fund and shares of the
Funds may be reduced through a letter of intent, quantity discounts and the
right of accumulation.
Both shares of the Funds and Class A shares of FBR Realty Fund may be
redeemed without the imposition of a contingent deferred sales charge ("CDSC"),
except that a CDSC of 1% applies to certain redemptions of Class A shares of FBR
Realty Fund that were purchased without a sales charge by reason of a purchase
of $1 million or more, if such redemptions are made within the first year after
investing. Neither the Funds nor FBR Realty Fund charge redemption fees, except
that a redemption fee of 1.00% is imposed in the event of a redemption of shares
of the GrandView Index Fund within six months after purchase, and of 0.50% in
the event of a redemption of shares of the GrandView Index Fund after six
months, but within 1 year of purchase. No CDSC or redemption fee will apply to
shares of FBR Realty Fund acquired by shareholders of the Funds in the
Reorganization.
EXCHANGE PRIVILEGES
Class A shareholders of FBR Realty Fund may exchange shares for Class A
shares of the other funds of the FBR Trust. No exchange fee will be imposed.
Any exchange will be a taxable event for which a shareholder may have to
recognize a gain or loss under Federal income tax provisions.
DIVIDENDS
FBR Realty Fund, like the Funds, intends to declare and pay dividends from
net investment income, if any, quarterly, and distribute net realized capital
gains, if any, at least annually. All dividends and distributions will be
reinvested automatically in additional shares of FBR Realty Fund at net asset
value, without a sales charge or CDSC, unless the shareholder elects to be paid
in cash or to receive shares of the same class of any other fund advised by FBR
Fund Advisers, or the FBR Money Market Portfolio of The RBB Fund, Inc. Fund
shareholders that have elected to receive distributions in cash will continue to
receive distributions in such manner from FBR Realty Fund.
Distributions from each of the Funds are currently paid in additional
shares of the applicable Fund, without a sales charge, unless a shareholder
requests to be paid in cash.
TAX CONSEQUENCES
Prior to completion of the Reorganization, the Funds will have received
from counsel an opinion to the effect that the Reorganization will qualify as a
tax-free reorganization for Federal income tax purposes. See "Information about
the Reorganization - Federal Income Tax Consequences."
-11-
<PAGE>
SHAREHOLDER VOTING RIGHTS
Neither FBR Realty Fund, a series of a Delaware business trust, nor the
Funds, each a series of a Massachusetts business trust, holds annual shareholder
meetings. The 1940 Act requires that a shareholder meeting be called for the
purpose of electing Trustees at such time as fewer than a majority of Trustees
holding office have been elected by shareholders. The FBR Trust will hold a
shareholder meeting upon the written request of shareholders holding at least
10% of the Trust's outstanding shares. See "Comparative Information on
Shareholders' Rights - Voting Rights."
APPRAISAL RIGHTS
[Under the laws of the State of Delaware, shareholders of FBR Realty Fund
do not have appraisal rights in connection with a combination or acquisition of
the assets of another fund. Under the laws of the Commonwealth of Massachusetts
and the GrandView Trust's Declaration of Trust, shareholders of the Funds do not
have appraisal rights in connection with a combination or acquisition of the
assets of the Funds by another entity.]
RISK FACTORS
Because FBR Realty Fund and the Funds have generally similar investment
objectives and investment policies, they are subject to similar investment
risks. These risks include those that are generally associated with investing
in equity securities. See "Comparison of Investment Objectives and Policies"
herein and "Risk Factors" in the Funds' Prospectus.
REASONS FOR THE REORGANIZATION
Currently, the Funds are investment portfolios of the GrandView Trust.
Although the Funds have substantially similar investment objectives, policies
and restrictions, each must separately bear the costs of its operations.
Consolidating their separate operations should generally benefit the
shareholders of the Funds by promoting more efficient operations on a more
cost-effective basis. Additionally, by reorganizing as a part of the FBR
organization, the Funds will be able to take advantage of FBR's distribution
network, which is expected to attract new investors in the combined entity,
resulting in economies of scale. However, there can be no assurance that the
combination of the Funds will produce more efficient operations on a
cost-effective basis. Because of the similarities between the Funds, the
considerations and risks involved with an investment in FBR Realty Fund are
expected to be comparable to those associated with an investment in the Funds.
The Reorganization, therefore, is expected to permit the GrandView Realty
Fund's shareholders to pursue substantially the same investment goals in a
larger fund, and to permit the GrandView Index Fund's shareholders to pursue
similar investment goals in a larger fund. A larger fund should enhance the
ability of FBR Fund Advisers to effect portfolio transactions on more favorable
terms and give greater investment flexibility and the ability to select a larger
number of portfolio securities with the attendant benefits of increased
diversification. A larger fund should not be as significantly affected by high
levels of shareholder redemptions. In addition, the larger aggregate net assets
should enable the combined entity to obtain the benefits
-12-
<PAGE>
of economies of scale, permitting the reduction of certain costs and expenses
which may result in lower overall expense ratios through the spreading of
fixed costs of operations over a larger asset base. As a general rule,
economies of scale can be expected to be realized with respect to fixed
expenses, such as costs of printing and fees for professional services,
although expenses that are based on the value of assets or the number of
shareholder accounts, such as custody fees, would not necessarily be reduced
by the Reorganization. In addition, because the investment advisory fee and
certain other expenses of the GrandView Realty Fund (and correspondingly of
FBR Realty Fund) are higher than those of the GrandView Index Fund, the
expense ratio of FBR Realty Fund after the reorganization, net of fee waivers
and expense reimbursements, is expected to be higher than that of the
GrandView Index Fund. It is noted in this regard that GrandView Advisers,
Inc. currently limits total expenses of the GrandView Index Fund and the
GrandView Realty Fund to an annual rate of 1.05% and 2.00%, respectively, of
average daily net assets. FBR Advisers has agreed to limit FBR Realty Fund's
expenses to an annual rate of 2.00% of the Fund's average daily net assets
until ________. Moreover, there can be no assurance that economies of scale
can be realized as to either Fund as a result of the Reorganization.
In considering the fact that the expense ratio of FBR Realty Fund will be
higher than that of the GrandView Index Fund, the Trustees noted that index
funds do not require the same degree of active portfolio management as other
equity funds, and that a higher advisory fee rate for the GrandView Realty Fund
(and correspondingly for the FBR Realty Fund) was therefore appropriate.] In
light of the foregoing considerations, the Trustees of the GrandView Trust
unanimously concluded that the Reorganization is in the best interests of the
Funds and their shareholders and that the Reorganization would not result in a
dilution of shareholders' interests.
Upon consideration of the factors described above, the Board of Trustees of
the FBR Trust also approved the Reorganization and determined that it is in the
best interests of FBR Realty Fund to acquire the assets of the Funds.
INFORMATION ABOUT THE REORGANIZATION
PLAN OF REORGANIZATION
The following summary of the Plan is qualified in its entirety by
reference to the Plan which is attached as Exhibit A hereto. The Plan
provides that (1) FBR Realty Fund will acquire all or substantially all of
the assets of the Funds in exchange for Class A shares of FBR Realty Fund,
(2) FBR Realty Fund will assume certain identified liabilities of the Funds
on September __, 1998 or such later date as may be agreed upon by the parties
(the "Closing Date"), (3) the Funds will be liquidated in accordance with the
terms of the Declaration of Trust of the GrandView Trust, (4) all remaining
liabilities of the Funds will be satisfied whether by payment or the making
of reasonable provision for payment thereof, and (5) FBR Realty Fund Class A
shares will be distributed to shareholders of the Funds in liquidation.
Prior to the Closing Date, the Funds will endeavor to discharge all of their
known liabilities and obligations. FBR Realty Fund will not assume any
liabilities or obligations of the Funds other than (i) those reflected in an
unaudited statement of assets and liabilities of the Funds prepared as of the
close of regular trading on the New York Stock Exchange, Inc. (the "NYSE") on
the Closing Date and (ii) certain indemnification obligations of the Funds
with respect to the GrandView Trust trustees. The
-13-
<PAGE>
number of full and fractional Class A shares of FBR Realty Fund to be issued to
shareholders of each Fund will be determined on the basis of the relative net
asset values of Class A shares of FBR Realty Fund and shares of each Fund,
computed as of the close of regular trading on the NYSE on the Closing Date.
The Funds and FBR Realty Fund will utilize PFPC Inc. as agent to
determine the value of their respective portfolio securities. The method of
valuation employed will be as set forth in the Funds' Prospectus which is
consistent with Rule 22c-1 under the 1940 Act and with the interpretations of
such rule by the SEC's Division of Investment Management.
As soon after the Closing Date as conveniently practicable, each Fund will
liquidate and will distribute pro rata to shareholders of record as of the close
of business on the Closing Date the full and fractional Class A shares of FBR
Realty Fund received by the Fund. Such distribution will be accomplished by the
establishment of accounts in the names of the Funds' shareholders on the share
records of FBR Realty Fund's transfer agent. Each account will represent the
respective pro rata number of full and fractional Class A shares of FBR Realty
Fund due to the Funds' respective shareholders. After such distribution and the
winding up of its affairs, the GrandView Trust will be terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan. Notwithstanding approval of the Funds' shareholders, the
Plan may be terminated at any time at or prior to the Closing Date by (1) mutual
agreement of the GrandView Trust and FBR Trust or (2) either the GrandView Trust
or FBR Trust upon a material breach by the other party of any representation,
warranty or agreement contained therein or the failure to meet closing
conditions.
The Funds and FBR Realty Fund shall each be liable for its respective
expenses incurred in connection with entering into and carrying out the Plan,
whether or not the Reorganization is consummated, subject to applicable expense
limitation arrangements with GrandView Advisers, Inc. and FBR Advisers.
Approval of the Plan with respect to each Fund will require a "Majority
Shareholder Vote" of the Fund as defined in the GrandView Trust's Declaration
of Trust, with shareholders of each Fund voting separately. If the
Reorganization is not approved by shareholders of either Fund, the
Reorganization may nonetheless proceed with respect to the other Fund, and
GrandView Advisers, Inc. may recommend to the Trustees of the GrandView Trust
other possible courses of action for their consideration.
DESCRIPTION OF FBR REALTY FUND'S SHARES
Full and fractional Class A shares of beneficial interest of FBR Realty
Fund will be issued to the Funds' shareholders in accordance with the procedures
detailed in the Plan. Generally, FBR Realty Fund does not issue share
certificates to shareholders unless a specific request is submitted to FBR
Realty Fund's transfer agent. The Class A shares of FBR Realty Fund to be
issued to Fund shareholders and registered on the shareholder records of the
transfer agent will have no pre-exemptive or conversion rights. See
"Comparative Information on Shareholders' Rights" for additional information
with respect to the shares of FBR Realty Fund.
-14-
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify for federal income tax purposes
as a tax-free reorganization described in Section 368(a) of the Internal Revenue
Code of 1986, as amended ("Code"), with no gain or loss recognized as a
consequence of the Reorganization by FBR Realty Fund, the Funds, or the
shareholders of the Funds. As a condition to the closing of the Reorganization,
FBR Realty Fund and the Funds will receive an opinion from the law firm of
Dechert Price & Rhoads to that effect. That opinion will be based upon certain
assumptions and representations made by the FBR Trust, the GrandView Trust,
the Funds and FBR Realty Fund.
Shareholders of the Funds should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, shareholders of the Funds should
also consult their tax advisers as to state and other local tax consequences, if
any, of the Reorganization.
CAPITALIZATION
The following table shows the capitalization of the Funds as of March 31,
1998, and on a pro forma basis as of that date, giving effect to the proposed
acquisition of assets at net asset value.
<TABLE>
<CAPTION>
FBR REALTY FUND
THE GRANDVIEW THE GRANDVIEW (CLASS A SHARES)
GROWTH REIT PRO FORMA FOR
FUND FUND REORGANIZATION
---- ---- --------------
<S> <C> <C> <C>
Net Assets $2,376,221 $955,067 $3,316,714
Net asset value per share $14.51 $11.06 $14.51
Shares outstanding 163,820 86,343 $228,637
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies and
restrictions of the Funds is based upon and qualified in its entirety by the
investment objectives, policies and restrictions section of the Prospectus of
the Funds.
INVESTMENT OBJECTIVES
FBR Realty Fund is a newly-formed series of the FBR Trust. FBR Realty
Fund will adopt investment objectives, policies and restrictions identical to
those of the GrandView Realty Fund. The primary investment objective of the
GrandView Realty Fund is to provide long-term growth of capital; current
income is a secondary objective. The investment objective of the GrandView
-15-
<PAGE>
Index Fund is investment results corresponding to the performance of the S&P
REIT Index by investing in stocks included in the Index. The Funds differ in
the degree to which they emphasize active or passive account management and
employ different policies to achieve their objectives. The Funds' investment
objectives may be changed by the GrandView Trust's Board of Trustees without
shareholder approval; however, shareholders will be given written
notification of any such change at least 30 days in advance.
PRIMARY INVESTMENTS
Under normal circumstances, the assets of the GrandView Index Fund are
invested primarily in equity securities of REITs included in the S&P REIT Index,
which is made up of approximately 100 stocks constituting a representative
sample of all publicly-traded REITs. The GrandView Index Fund tries to be as
fully invested at all times as is reasonably practicable and attempts to
approximate the weightings of the stocks held in its portfolio to the weightings
of the stocks in the S&P REIT Index. The proportion of the GrandView Index
Fund's assets invested in each stock held in the Fund's portfolio will generally
be substantially similar to the proportion of the S&P REIT Index represented by
the stock. The GrandView Index Fund seeks to maintain a correlation of at least
95% between the composition of the S&P REIT Index and its portfolio.
-16-
<PAGE>
Under normal circumstances, at least 65% of the GrandView Realty Fund's
total assets are invested in equity securities of REITs and other real estate
industry companies. The GrandView Realty Fund may also invest up to 35% of
its total assets in securities of issuers which are, or are affiliated with,
companies whose products or services are related to the real estate industry
like building supplies, mortgage servicing or the provision of the utility or
transportation services. In addition, the GrandView Realty Fund may, from
time to time, invest in the securities of companies unrelated to the real
estate industry whose real estate assets are substantial relative to the
price of the companies' securities or whose securities GrandView Advisers,
Inc. believes to be undervalued or to provide income or the opportunity for
capital appreciation.
For purposes of the GrandView Realty Fund's investments, "a real estate
industry company" is a company that derives at least 50% of its gross revenues
or net profits from the ownership, development, construction, financing,
management or sale of commercial, industrial or residential real estate. In
addition to REITs, real estate industry companies include brokers or real estate
developers, as well as companies with substantial real estate holdings (I.E., at
least 50% of their total assets), such as paper and lumber producers and hotel
and entertainment companies. The equity securities of real estate industry
companies in which the GrandView Realty Fund invests include common stock,
shares of beneficial interest and securities with common stock characteristics,
such as preferred stock, warrants and debt securities convertible into common
stock. The debt securities of real estate industry companies in which the
GrandView Realty Fund may invest include bonds, notes and other short-term debt
obligations. The mortgage-backed securities in which the GrandView Realty Fund
may invest include mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs"). As a fundamental policy, each Fund invests at least 25%
of its assets in the real estate industry.
PORTFOLIO INSTRUMENTS AND PRACTICES
In pursuit of its objectives, either Fund may employ various management
techniques, certain of which may be used in an attempt to hedge risks associated
with the Funds' investments.
DEBT SECURITIES OF REAL ESTATE INDUSTRY COMPANIES. The GrandView Realty
Fund may invest in debt securities of real estate industry companies, but the
Fund may not invest more than 25% of its assets in debt securities rated lower
than Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard &
Poor's Ratings Service ("Standard & Poor's") or Fitch Investors Service, Inc.
("Fitch") or securities not rated by Moody's, Standard & Poor's or Fitch which
GrandView Advisers, Inc. deems to be of equivalent quality. The GrandView
Realty Fund will not invest in debt securities rated lower than Caa by Moody's
or CCC by Standard & Poor's or Fitch or equivalent unrated securities. Debt
securities rated Caa by Moody's or CCC by Standard & Poor's or Fitch, and
equivalent unrated securities, are speculative and may be in default.
-17-
<PAGE>
MORTGAGE-BACKED SECURITIES. The GrandView Realty Fund may invest in
securities that directly or indirectly represent participations in, or are
collaterized by and payable from, mortgage loans secured by real property
("Mortgage-Backed Securities").
SHORT-TERM INVESTMENTS. Each Fund may invest in short-term investments
consisting of corporate commercial paper and other short-term commercial
obligations, in each case rated or issued by companies with similar securities
outstanding that are rated Prime-1, Aa or better by Moody's or A-1, AA or better
by Standard & Poor's; obligations (including certificates of deposit, time
deposits, demand deposits and bankers' acceptances) of banks with securities
outstanding that are rated Prime-1, Aa or better by Standard & Poor's;
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities with remaining maturities not exceeding 18 months; securities
of registered investment companies, to the extent permitted by the 1940 Act; and
repurchase agreements.
BORROWING. Under certain circumstances, each Fund may borrow money in an
amount up to 5% of the value of its total assets for temporary purposes and in
an amount equal to one-third of its assets to meet redemptions. This is a
fundamental policy which can only be changed by shareholders. Whenever
borrowings exceed 5% of either Fund's total assets, that Fund will not make any
additional investments.
LENDING. Each Fund may lend securities in its portfolio representing up to
30% of net assets, taken at market value, to securities firms and financial
institutions, provided that each loan is secured continuously by collateral in
the form of cash or liquid securities with market value at least equal (on a
daily mark-to-market basis) to the current market value of the securities
loaned.
FOREIGN SECURITIES. GrandView Realty Fund may invest in the equity
securities of non-U.S. real estate companies. GrandView Realty Fund may also
purchase foreign securities that are represented by American Depository Receipts
("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts
("GDRs") and other forms of depositary receipts for securities of non-U.S.
issuers.
FUTURES CONTRACTS AND OPTIONS. Each Fund may purchase and sell futures
contracts on securities, and other financial instruments and indices. Neither
Fund will commit more than 5% of its total assets to initial margin deposits on
futures contracts. No Fund may purchase or sell non-hedging futures contracts
or purchase or sell related non-hedging options, except for closing purchase or
sale transactions, if immediately thereafter the sum of the amount of initial
margin deposits on the Fund's existing non-hedging futures and related
non-hedging options positions and the amount of premiums paid for existing
non-hedging options on futures (net of the amount the positions are "in the
money") would exceed 5% of the market value of the Fund's total assets.
REPURCHASE AGREEMENTS, REVERSE REPURCHASE AGREEMENT, AND WHEN-ISSUED
TRANSACTIONS. Each Fund may enter into repurchase agreements collaralized by
securities in which that Fund may otherwise invest. Each Fund considers
repurchase agreements that mature in more than seven days to be illiquid.
Neither Fund may invest more than 15% of its net assets in illiquid securities.
-18-
<PAGE>
Each Fund may also engage in reverse repurchase agreements, i.e., selling
portfolio securities to financial institutions such as banks and broker/dealers
and agreeing to repurchase them at a mutually specified date and price. In
addition, in order to secure prices deemed advantageous at the time, each Fund
may purchase securities on a when-issued or a delayed-delivery basis. The Funds
do not intend to enter into when-issued or delayed-delivery transactions for
speculative purposes.
RESTRICTED SECURITIES. Each Fund may invest in restricted securities.
Restricted securities are securities subject to legal or contractual
restrictions on their resale. The Funds limit their investment in restricted
securities to no more than 15% of either Fund's net assets, excluding restricted
securities that are eligible for resale under Rule 144A under the Securities Act
of 1933.
PORTFOLIO TURNOVER RATE. It is anticipated that FBR Realty Fund's annual
portfolio turnover rate, like that of the GrandView Realty Fund, normally will
not exceed 200%. The GrandView Realty Fund's portfolio turnover rate for the
fiscal year ended March 31, 1998 was 170.19%. GrandView Index Fund's portfolio
turnover rate for the same period was 63.15%.
INVESTMENT RESTRICTIONS. In addition to the restrictions described above,
each Fund has adopted certain fundamental investment restrictions that may be
changed only with the approval of a majority of the outstanding securities (as
defined in the 1940 Act) of that Fund. These restrictions are set forth in the
Statement of Additional Information for the Funds. With the exception of the
following, the investment restrictions for the Funds are identical: (1) the
GrandView Index Fund may not, with respect to 75% of its total assets, purchase
securities of any issuer if such purchase at the time thereof would cause more
than 5% of the Fund's assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States government or any agency or instrumentality
thereof); provided that, for purposes of this restriction the issuer of an
option or futures contract shall not be deemed to be the issuer of the security
or securities underlying such contract; and (2) the GrandView Index Fund may
not, with respect to 75% of its total assets, purchase securities of any issuer
if such purchase at the time thereof would cause more than 10% of the voting
securities of such issuer to be held by the Fund.
In addition, each of the Funds has adopted certain non-fundamental
investment restrictions that may be changed without the approval of its
shareholders. These non-fundamental investment restrictions are identical for
each Fund. After the proposed Reorganization, FBR Realty Fund will have the
same fundamental and non-fundamental investment restriction as those of the
GrandView Realty Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
GENERAL
FBR Realty Fund is a non-diversified series of the FBR Trust, a management
investment company registered under the 1940 Act, which continuously offers
shares of its series. The FBR Trust is a Delaware business trust and is
governed by its Declaration of Trust, By-laws and Board of Trustees.
-19-
<PAGE>
The GrandView Realty Fund is a non-diversified series, and the GrandView
Index Fund is a diversified series, of the GrandView Trust, an open-end
management investment company registered under the 1940 Act, which continuously
offers shares of its series. The GrandView Trust is a Massachusetts business
trust and is governed by its Declaration of Trust, By-Laws and Board of
Trustees. The Funds and FBR Realty Fund are also governed by applicable state
and Federal law. Certain differences and similarities between shareholder
rights associated with Delaware business trusts and Massachusetts business
trusts are summarized below.
SHAREHOLDER LIABILITY
The FBR Realty Fund is organized as a series of a Delaware business trust,
and its shareholders generally have no personal liability for its acts or
obligations.
The Funds are organized as a series of a Massachusetts business trust.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the
obligations of the trust. However, the GrandView Trust's Declaration of
Trust states that shareholders shall not be subject to any personal liability
in connection with the assets of the GrandView Trust for the acts or
obligations of the GrandView Trust. The Declaration of Trust provides for
indemnification out of the assets belonging to the series of the GrandView
Trust with respect to which such shareholder's shares are issued, for all
losses and expenses of any shareholder held personally liable for the
obligations of the GrandView Trust solely by reason of his or her being or
having been a shareholder. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since
it is limited to circumstances in which a disclaimer is not made or is
ineffective and the Funds themselves would be unable to meet their
obligations.
VOTING RIGHTS
Neither the Funds nor FBR Realty Fund holds annual meetings of
shareholders, although each may hold special meetings for purposes of voting on
certain matters as required under the 1940 Act. Special meetings of
shareholders of either of the Funds or FBR Realty Fund may be called upon the
written request of holders of not less than 10% of that fund's then outstanding
voting securities. On each matter submitted to a vote of the shareholders of
FBR Realty Fund or the Funds, each shareholder is entitled to one vote for each
whole share owned and a proportionate fractional vote for any fractional share
outstanding in the shareholder's name on the fund's books. Shareholders of all
classes of the FBR Realty Fund vote together as a fund, and not by class, except
as otherwise required by applicable law or by the FBR Trust's charter documents,
or when the matter affects only the interests of a particular class.
LIQUIDATION OR DISSOLUTION
In the event of the liquidation or dissolution of either the Funds or FBR
Realty Fund, the shareholders of that fund are entitled to receive, when and as
declared by the Trustees, the excess of the assets over the liabilities
belonging to the fund. The assets so distributed to shareholders of a fund
would be distributed among the shareholders in proportion to the number of
shares of that fund held by them and recorded on the books of the fund.
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LIABILITY OF TRUSTEES
The By-laws of the FBR Trust provide that the FBR Trust will indemnify
Trustees and officers of the FBR Trust to the fullest extent permitted by
Delaware law and the 1940 Act. The Declaration of Trust of the GrandView Trust
provides for similar indemnification of Trustees and officers of the GrandView
Trust. However, neither the Declaration of Trust of the GrandView Trust nor the
By-laws of the FBR Trust purport to protect or indemnify a trustee or officer
against any liability to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.
RIGHTS OF INSPECTION
Except as required by Delaware law, shareholders of the FBR Realty Fund
have only such right to inspect the records, documents, accounts and books of
FBR Realty Fund as may be granted by the Trustees of the FBR Trust.
Shareholders of the Funds generally have the same rights to inspect the
records, accounts and books of the GrandView Trust as are permitted shareholders
of a Massachusetts corporation under Massachusetts corporation law. Currently,
each shareholder of a Massachusetts corporation is permitted to inspect the
records, accounts and books of a corporation for any legitimate business purpose
relative to the affairs of the corporation.
The foregoing is only a summary of certain characteristics of the
operations of FBR Realty Fund and the Funds, the Declaration of Trust and
By-laws of the FBR Trust, the Declaration of Trust and By-laws of the GrandView
Trust, and Delaware and Massachusetts law. The foregoing is not a complete
description of the documents cited. Shareholders should refer to the provisions
of such documents and state laws governing each fund for a more thorough
description.
INFORMATION ABOUT MANAGEMENT OF FBR
GROWTH FUND AND THE FUNDS
Overall responsibility for management of the FBR Trust and the GrandView
Trust rests with their respective Boards of Trustees.
INVESTMENT ADVISERS
The investment adviser of the Funds is GrandView Advisers, Inc.
GrandView Advisers, Inc. is a Connecticut corporation with principal offices
at 127 Grandview Drive, Glastonbury, Connecticut 06033. Subject to policies
set by the GrandView Trust's Board of Trustees, GrandView Advisers makes the
investment decisions for the Funds. GrandView Advisers is also responsible
for the selection of broker-dealers through which the Funds execute portfolio
transactions, subject to brokerage policies established by the Board of
Trustees, and provides certain executive personnel to the Funds.
Winsor H. Aylesworth and Lucille C. Carlson serve as co-portfolio mangers
for the Funds. They have served in such capacity for the Funds since
commencement of operations of the Funds on July 3, 1995. They collectively have
over 40 years experience in the commercial real estate finance and management
and securities businesses.
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For its services, GrandView Advisers receives the following investment
advisory fees, which are accrued daily and paid monthly, expressed as a
percentage of the applicable Fund's average daily net assets on an annualized
basis for its then-current fiscal year:
GrandView Index Fund 0.35%
GrandView Realty Fund 1.00%
GrandView Advisers has voluntarily agreed to waive the investment advisory
fees payable by the Funds and reimburse other operating expenses to the extent
needed to limit each Fund's expenses to the percentage of its average net assets
shown below:
GrandView Index Fund 1.05%
GrandView Realty Fund 2.00%
GrandView Advisers has voluntarily waived its fee and reimbursed a portion
of each Fund's operating expenses for the fiscal year ended March 31, 1998. The
total fees waived amounted to $5,370 and $16,842, respectively, and expenses
reimbursed amounted to $49,107 and $42,126, respectively, for the GrandView
Index Fund and the GrandView Realty Fund, respectively.
The investment adviser for FBR Realty Fund will be FBR Fund Advisers, Inc.
("FBR Advisers"). FBR Advisers was organized as a Delaware corporation on
September 30, 1996 and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. It is an affiliate of Friedman,
Billings, Ramsey Investment Management, Inc. and FBR Offshore Management, Inc.
FBR Advisers and its affiliates manage in excess of $700 million for numerous
clients including individuals, banks and thrift institutions, investment
companies, pension and profit sharing plans and trusts, estates and charitable
organizations. FBR Advisers is a new company and therefore has a short
operating history as an investment manager of mutual funds. However, the
current portfolio managers of the Funds, whose experience is discussed below,
will manage the FBR Realty Fund as employees of FBR Advisers. FBR Advisers will
be paid for its services a fee accrued daily and paid monthly, equal to 1.00% of
FBR Realty Fund's average daily net assets on an annualized basis. This is
identical to the fee currently payable by the GrandView Realty Fund. In
addition, FBR Advisers has agreed to voluntarily waive the investment advisory
fee payable by FBR Realty Fund and reimburse other operating expenses to the
extent needed to limit FBR Realty Fund's expenses to 2.00% of its average net
assets until ________.
PORTFOLIO MANAGERS
Winsor H. Aylesworth, President, Treasurer, Director, and the controlling
shareholder of GrandView Advisers, Inc. has had over ten years of experience
with Bank of Boston Corporation and Bank of Boston Connecticut. At Bank of
Boston, Mr. Aylesworth's responsibilities included forming and managing workout
and OREO groups and overseeing the disposition of real estate properties and
other assets by the OREO groups. Mr. Aylesworth was also responsible for
managing Bank of Boston Corporation's Florida Loan Production Office and for
overseeing the granting of construction loans on investment grade real estate.
Lucille C. Carlson, Executive
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Vice President and a Director of GrandView Advisers, Inc. has managed cases on
non-performing assets, including loan restructuring and OREO management and
disposition, for Bank of Boston Connecticut. Ms. Carlson has served as a real
estate asset management officer, managing an institutional grade real estate
portfolio comprised of commercial property and other portfolios consisting of
real estate property and mortgages for John Hancock Properties Inc. and Cigna
Investments Inc., and has served as a securities and equity analyst.
ADMINISTRATOR
The Nottingham Company ("Nottingham") currently serves as the
administrator and fund accounting agent for the Funds. For these services,
Nottingham receives Fund administration fees accrued daily and paid monthly
of 0.225% of the average daily net assets of the GrandView Index Fund, and
0.300% of the average daily net assets of the GrandView Realty Fund.
Nottingham receives, in addition, for its shareholder recordkeeping,
securities pricing and blue sky administration services, a fee from each Fund
equal to $9.00 per shareholder per year, $0.15 per equity holding per pricing
day (with slightly higher fees per debt and asset or mortgage-backed
securities) (waived for the GrandView Index Fund) and $150 per year for each
state in which the Trust's shares are registered or qualified. Nottingham
also charges a minimum fund accounting fee of $1,500 per Fund per month.
The Administrator for FBR Realty Fund will be Bear Stearns Funds
Management Inc. ("BSFM"), a wholly-owned subsidiary of The Bear Stearns
Companies Inc. Under the terms of the Administration Agreement, BSFM will be
paid a monthly fee at the annual rate of 0.075% on the first $250 million of
FBR Realty Fund's average daily net assets and 0.050% of net assets in excess
of $250 million, subject to a minimum annual fee of $75,000, payable monthly
by the Fund. From time to time, BSFM may waive receipt of its fees, which
would have the effect of lowering the Fund's expense ratio and increasing
yield to investors at the time such amounts are waived or assumed, as the
case may be. The FBR Realty Fund will not pay BSFM at a later time for any
amounts it may waive.
Under the terms of an Administration and Accounting Services Agreement with
the FBR Trust on behalf of FBR Realty Fund, PFPC Inc. will provide certain
administration and accounting services to FBR Realty Fund.
CUSTODIAN AND TRANSFER AGENT
First Union National Bank of North Carolina serves as the Funds' custodian.
NC Shareholder Services, LLC serves as dividend disbursing and transfer agent
for the Funds.
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns
Companies Inc. and an affiliate of BSFM, will service as FBR Realty Fund's
custodian. PFPC Inc. (the "Transfer Agent") will serve as FBR Realty Fund's
transfer agent, dividend disbursing agent and registrar.
DISTRIBUTION AND SERVICE PLAN
The GrandView Trust has adopted a Distribution Plan (the "Distribution
Plan") in accordance with Rule 12b-1 under the 1940 Act. Under the Distribution
Plan, the Trustees may
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authorize the periodic payment of up to 0.25% annually of each Fund's average
daily net asset value for each year elapsed subsequent to adoption of the
Plan. Such expenditures paid as service fees to any person who sells shares
of the Funds may not exceed 0.25% of the shares' average annual net asset
value. Payments under the Distribution Plan finance activities primarily
intended to result in the sale of shares of the Funds and/or the servicing of
shareholder accounts. The Distribution Plan may not be amended to increase
materially the amount that may be paid pursuant to the Distribution Plan from
the assets of a particular Fund without the approval of the shareholders of
that Fund. The continuation of the Distribution Plan must be considered by
the Board of Trustees annually. For the fiscal year ended March 31, 1997,
the Funds expended no amounts under the Distribution Plan. For the fiscal
year ended March 31, 1998, the GrandView Realty Fund paid $4,211 and the
GrandView Index Fund paid $1,912 under the Plan.
FBR Realty Fund has adopted a Rule 12b-1 Distribution Plan with respect to
its Class A shares (the "Plan"). Under the Plan, FBR Realty Fund uses its
assets to finance activities relating to the distribution of its shares to
investors and the provision of certain shareholder services. FBR Services is
paid a distribution fee at an annual rate of up to 0.25% of the value of average
daily net assets of FBR Realty Fund's Class A shares for which it is the
distributor of record. Distribution fees may be used by FBR Services for: (a)
costs of printing and distributing FBR Realty Fund's prospectus, statement of
additional information and reports to prospective investors in the Fund; (b)
costs involved in preparation, printing and distributing sales literature
pertaining to FBR Realty Fund; (c) an allocation of overhead and other branch
office distribution-related expenses of FBR Services; (d) payments to persons
who provide support services in connection with the distribution of FBR Realty
Fund's shares, including but not limited to, office space and equipment,
telephone facilities, answering routine inquiries regarding FBR Realty Fund,
processing shareholder services not otherwise provided by a FBR Realty Fund's
transfer agent; (e) accruals for interest on the amount of the foregoing
expenses that exceed the distribution fee; and (f) any other expense primarily
intended to result in the sale of FBR Realty Fund's shares, including, without
limitation, payments to salesmen and selling dealers who have entered into
selected dealer agreements with the Distributors, at the time of the sale of
shares, if applicable, and continuing fees to selling dealers.
ADDITIONAL INFORMATION ABOUT
FBR REALTY FUND AND THE FUNDS
Information about the Funds is included in the current Prospectus for the
Funds dated January 1, 1998 and Statement of Additional Information dated July
25, 1997 and supplemented on January 1, 1998, each of which is available upon
request, and which have been filed with the SEC and are incorporated herein by
reference. Copies of the Prospectus and the Statement of Additional Information
are available upon request and without charge by writing or calling the Funds at
the address or toll-free number listed on the cover page of this
Prospectus/Proxy Statement.
Both the Funds and FBR Realty Fund are subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance therewith
file reports and other information including proxy material, reports and charter
documents with the SEC. These reports and other information can be inspected
and copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 2054 9. Copies of such material can also be
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obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549 at prescribed rates. In
addition, such information is available by accessing the SEC's web site at
http://www.sec.gov.
BROKERAGE ALLOCATION
Subject to the supervision of the Trustees of the FBR Trust, FBR
Advisers is authorized to allocate brokerage to affiliated broker-dealers on
an agency basis to effect portfolio transactions for FBR Realty Fund. The
Trustees have adopted procedures incorporating the standards of Rule 17e-1
under the 1940 Act, which require that the commission paid to affiliated
broker-dealers must be reasonable and fair compared to the commission, fee or
other remuneration received, or to be received, by other brokers in
connection with comparable transactions involving similar securities during a
comparable period of time. It is expected that brokerage will be allocated to
FBR and FBR Services (collectively, the "Distributors"), both of which are
affiliates of FBR Advisers.
SUBSEQUENT PURCHASES OF FBR REALTY FUND
Subsequent investments in FBR Realty Fund ordinarily must be at least $50.
The FBR Trust reserves the right to reject any purchase order. The FBR Trust
reserves the right to vary the initial and subsequent investment minimum
requirements at any time. FBR Realty Fund, at its own discretion, reserves the
right to suspend purchases of its shares. Purchases of FBR Realty Fund shares
may be made through a brokerage account maintained with the Distributor or
through certain investment dealers who are members of the National Association
of Securities Dealers, Inc. and who have sales agreements with the
Distributors (an "Authorized Dealer"). Purchases of FBR Realty Fund shares also
may be made directly through the Transfer Agent.
Purchases are effected at a Fund's net asset value, subject to any
applicable sales charge, next determined after a purchase order is received
by the Distributors, another Authorized Dealer or the Transfer Agent (the
"trade date"). Shareholders of the Funds who are currently eligible to
purchase shares of the Funds without a sales charge will be "grandfathered"
to buy FBR Realty Fund shares without a sales charge. Payment for Fund
shares generally is due to the Distributors or another Authorized Dealer on
the third business day (the "settlement date") after the trade date.
Shares of FBR Realty Fund may be purchased on any Business Day. A "Business
Day" is any day that the New York Stock Exchange (the "NYSE") is open for
business. Currently, the NYSE is closed on weekends and New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day (observed), Labor Day, Thanksgiving Day and Christmas Day (observed). Such
shares are offered at the next determined net asset value per share, subject to
any applicable sales charge. In those cases where an investor pays for shares by
check, the purchase will be effected at the net asset value next determined
after the Transfer Agent receives payment in good order. Shareholders may not
purchase shares of FBR Realty Fund with a check issued by a third party and
endorsed over to FBR Realty Fund.
NET ASSET VALUE IS COMPUTED DAILY AS OF THE CLOSE OF REGULAR TRADING ON THE
NEW YORK STOCK EXCHANGE (NORMALLY 4:00 P.M., NEW YORK TIME) ON EACH BUSINESS
DAY. Shares of FBR Realty Fund are sold on a continuous basis. The net asset
value per share of FBR Realty Fund is
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computed by dividing the value of FBR Realty Fund's net assets (i.e., the value
of its assets less liabilities) by the total number of shares outstanding. FBR
Realty Fund's investments are valued based on market value or, where market
quotations are not readily available, based on fair value as determined in good
faith by, or in accordance with procedures established by, the Trustees of the
FBR Trust.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
A shareholder may elect to cross-reinvest dividends and capital gain
distributions paid by FBR Realty Fund in shares of the same class of any other
of the funds advised by FBR Advisers and the FBR Money Market Portfolio of The
RBB Fund, Inc. Shares acquired through cross-reinvestment of dividends will be
purchased at net asset value and will not be subject to any initial or
contingent deferred sales charge as a result of the cross-reinvestment.
Cross-reinvestments are subject to the following conditions: (i) the value of
the shareholder's account(s) in the fund which is paying the dividend must equal
or exceed $5,000 and (ii) the value of the account in the acquired fund must
equal or exceed the acquired fund's minimum initial investment requirement or
the shareholder must elect to continue cross-reinvestment until the value of
acquired fund shares in the shareholder's account equals or exceeds the acquired
fund's minimum initial investment requirement. A fund shareholder may elect
cross-reinvestment into an identical account or an account registered in a
different name or with a different address, social security or other taxpayer
identification number, provided that the account in the acquired fund has been
established, appropriate signatures have been obtained and the minimum initial
investment requirement has been satisfied.
TAX-SHELTERED RETIREMENT PLANS
FBR Realty Fund offers its shares for purchase by retirement plans,
including IRA plans for individuals and their non-employed spouses, IRA plans
for employees in connection with employer sponsored SEP, SAR-SEP and SIMPLE IRA
plans, 403(b) plans and defined contribution plans such as 401(k) Salary
Reduction Plans. Detailed information concerning these plans may be obtained
from the Transfer Agent. This information should be read carefully, and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan.
EXCHANGE PRIVILEGE
The exchange privilege is available to shareholders residing in any state
in which the shares being acquired may be legally sold. Shares of FBR Realty
Fund may be exchanged at net asset value without the imposition of a sales
charge at the time of exchange for shares of the same class of any other fund
advised by FBR Advisers and the FBR Money Market Portfolio of The RBB Fund, Inc.
A shareholder needs to obtain and read the prospectus of the fund into which the
exchange is made. The shares of these other funds acquired by an exchange may
later be exchanged for shares of the same class of FBR Realty Fund at the next
determined net asset value without the imposition of an initial or contingent
deferred sales charge if the dollar amount in the Fund resulting from such
exchanges is below the shareholder's all-time highest dollar
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amount on which it has previously paid the applicable sales charge. Shares
of these other funds purchased through dividends and/or capital gains
reinvestment may be exchanged for shares of FBR Realty Fund without a sales
charge. The exchange privilege may be modified or withdrawn at any time upon
sixty (60) days' notice to shareholders and is subject to certain
limitations. In addition, FBR Realty Fund reserves the right to impose an
administrative fee for each exchange.
A shareholder wishing to make an exchange may do so by sending a written
request to the Transfer Agent. To add a telephone exchange feature to an
account established in the Reorganization, a Telephone Exchange Authorization
Form must be filed with the Transfer Agent. This form is available from the
Transfer Agent. Once this election has been made, the shareholder may simply
contact the Transfer Agent by telephone to request the exchange by calling
1-800-821-3460. The FBR Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if the FBR Trust does
not employ such procedures, it may be liable for any losses due to unauthorized
or fraudulent telephone instructions. Neither the FBR Trust nor the Transfer
Agent will be liable for any loss, liability, cost or expense for following the
Trust's telephone transaction procedures described below or for following
instructions communicated by telephone that it reasonably believes to be
genuine.
The Trust's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of Fund, all of which must match the FBR Trust's
records; (3) requiring the FBR Trust's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) permitting exchanges only if the two account registrations are
identical; (5) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (6) sending a written confirmation for
each telephone transaction to the owners of record within five (5) business days
of the call; and (7) maintaining tapes of telephone transactions for six months,
if the FBR Trust elects to record shareholder telephone transactions.
For accounts held of record by investment professionals, additional
documentation or information regarding the scope of a caller's authority is
required. Finally, for telephone transactions in accounts held jointly,
additional information regarding other account holders is required.
If the exchanging shareholder does not currently own shares of the fund
whose shares are being acquired, a new account will be established with the same
registration, dividend and capital gain options as the account from which shares
are exchanged, unless otherwise specified in writing by the shareholder with all
signatures guaranteed by an Eligible Guarantor Institution, as defined by rules
issued by the Securities and Exchange Commission (the "SEC"), including banks,
brokers, dealers, credit unions, national securities exchanges and savings
associations. The exchange privilege may be modified or terminated at any time,
or from time to time, by the FBR Trust, upon 60 days written notice to
shareholders.
For federal income tax purposes, an exchange is treated as a redemption of
the shares surrendered in the exchange, on which an investor may be subject to
tax, followed by a purchase
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of shares received in the exchange. If such redemption occurs within ninety
(90) days after the purchase of such shares, to the extent a sales charge that
would otherwise apply to the shares received in the exchange is not imposed, the
sales charge paid on such purchase of Class A shares cannot be taken into
account by the exchanging shareholder for purposes of determining gain or loss,
if any, realized on such redemption for federal income tax purposes, but instead
will be added to the tax basis for the shares received in the exchange.
Shareholders should consult their own tax advisers concerning the tax
consequences of an exchange.
REDEMPTION OF FBR REALTY FUND SHARES
Investors may request redemption of FBR Realty Fund shares at any time.
Redemption requests may be made as described below. When a request is received
in proper form, FBR Realty Fund will redeem the shares at the next determined
net asset value, subject to any applicable contingent deferred sales charge
("CDSC"). Shares acquired in the Reorganization will not be subject to a CDSC.
FBR Realty Fund ordinarily will make payment for all shares redeemed within
three days after receipt by the Transfer Agent of a redemption request in proper
form, except as provided by the rules of the SEC. However, if an investor has
purchased Fund shares by check and subsequently submits a redemption request by
mail, the redemption proceeds will not be transmitted until the check used for
investment has cleared, which may take up to 15 days. The FBR Trust will reject
requests to redeem shares by telephone or wire for a period of 15 days after
receipt by the Transfer Agent of the purchase check against which such
redemption is requested. This procedure does not apply to shares purchased by
wire payment.
REDEMPTION THROUGH THE DISTRIBUTORS AND OTHER AUTHORIZED DEALERS
Clients with a brokerage account may submit redemption requests to their
account executives or Authorized Dealers in person or by telephone, mail or
wire. As the FBR Trust's agent, the Distributor or another Authorized Dealer may
honor a redemption request by repurchasing shares from a redeeming shareholder
at the shares' net asset value next computed after receipt of the request by the
Authorized Dealer, subject to any applicable CDSC. Under normal circumstances,
redemption proceeds will be paid within three days by check or credited to the
shareholder's brokerage account at the election of the shareholder. Distributor
account executives or other Authorized Dealers are responsible for promptly
forwarding redemption requests to the Transfer Agent.
REDEMPTION THROUGH THE TRANSFER AGENT
REDEMPTION IN WRITING. Shareholders who are not clients with a brokerage
account and who wish to redeem shares must redeem their shares through the
Transfer Agent by mail; other shareholders also may redeem FBR Realty Fund
shares through the Transfer Agent. To do so, a written request in proper form
must be sent directly to: FBR Family of Funds c/o PFPC Inc., P.O. Box 8994,
Wilmington, Delaware 19899-8994. Shareholders may also place redemption requests
through an Investment Professional, but such Investment Professional might
charge a fee for this service.
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A request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption would exceed $10,000, or if the
proceeds are not to be paid to the record owner at the address of record, or if
the shareholder is a corporation, partnership, trust or fiduciary, signatures
must be guaranteed by an Eligible Guarantor Institution. (See "Additional
Information About Redemptions.") If a redemption is effected within 30 days of a
change in the shareholder's address of record, a signature guarantee will be
required. A signature guarantee verifies your signature. You may call the
Transfer Agent at 1-800-821-3460 to determine whether the entity that will
guarantee the signature is an Eligible Guarantor Institution.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. Additional documentary evidence of authority
is also required in the event redemption is requested by a corporation,
partnership, trust, fiduciary, executor or administrator.
REDEMPTION BY TELEPHONE. Investors may redeem shares without charge by
telephone if they have filed a Telephone Authorization with the Transfer Agent.
An investor may obtain a Telephone Authorization from the Transfer Agent by
calling 1-800-821-3460. The FBR Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and if the FBR
Trust does not employ such procedures, it may be liable for any losses due to
unauthorized or fraudulent telephone instructions. The proceeds will be mailed
by check to an investor's registered address unless he has designated in his
Application or Telephone Authorization that such proceeds are to be sent by wire
transfer to a specified checking or savings account. If proceeds are to be sent
by wire transfer, a telephone redemption request received prior to the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., New York
time), will result in redemption proceeds being wired to the investor's bank
account on the next day that a wire transfer can be effected. The minimum
redemption for proceeds sent by wire transfer is $10,000. There is no maximum
for proceeds sent by wire transfer. FBR Realty Fund may modify this redemption
service at any time. A transaction fee of $15.00 will be charged for payments by
wire. The Distributor and the Transfer Agent reserve the right to refuse a
telephone redemption if they deem it advisable to do so. Neither the FBR Trust,
the Transfer Agent nor the Distributor will be liable for any loss, liability,
cost or expense for following these procedures or for following instructions
communicated by telephone that it reasonably believes to be genuine. These
procedures are set forth under "Shareholder Services -- Exchange Privilege"
above.
If an investor authorizes telephone redemption, the Transfer Agent may act
on telephone instructions from any person representing himself or herself to be
a representative of the Distributor or an Authorized Dealer and reasonably
believed by the Transfer Agent to be genuine. The FBR Trust will require the
Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine and, if it
does not follow such procedures, the Transfer Agent or the Trust may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the FBR
Trust nor the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
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OTHER INFORMATION ON REDEMPTIONS. FBR Realty Fund is not responsible for
the efficiency of the Federal Wire System or a shareholder's investment adviser,
broker-dealer or bank. The shareholder is responsible for any charges imposed by
the shareholder's bank. To change the name of the single designated bank account
to receive redemptions, it is necessary to send a written request (with a
signature guaranteed by an Eligible Guarantor Institution) to The FBR Family of
Funds, c/o PFPC Inc., P.O. Box 8994, Wilmington, Delaware 19899-8994.
Payment of Redemption Proceeds. In all cases, the redemption price is the
net asset value per share next determined after the request for redemption is
received in proper form by the Transfer Agent, subject to any applicable CDSC.
Shares acquired in the Reorganization will not be subject to a CDSC. Payment
for shares redeemed is made by check mailed within three days after acceptance
by the Transfer Agent of the request and any other necessary documents in proper
order. Such payment may be postponed or the right of redemption suspended as
provided by the rules of the SEC. If the shares to be redeemed have been
recently purchased by check, the Transfer Agent may delay mailing a redemption
check, which may be a period of up to 15 days, pending a determination that the
check has cleared.
REDEMPTION IN-KIND. The Funds reserve the right, if conditions exist which
make cash payments undesirable, to honor any request for redemption of FBR
Realty Fund's shares by making payment in whole or in part in securities chosen
by the Fund and valued in the same way as they would be valued for purposes of
computing the Fund's net asset value. If payment is made in securities, a
shareholder may incur transaction costs in converting these securities into cash
after they have redeemed their shares. FBR Realty Fund has elected, however, to
be governed by Rule 18f-1 under the 1940 Act, so that the Fund is obligated to
redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net
asset value during any 90 day period for any one shareholder of the Fund.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. A shareholder may have redemption
proceeds of $10,000 or more wired to the shareholder's brokerage account or a
commercial bank account designated by the shareholder. A transaction fee of $15
will be charged for payments by wire. Questions about this option, or redemption
requirements generally, should be referred to the shareholder's Distributor
account executive, to another Authorized Dealer, or to the Transfer Agent if the
shares are not held in a brokerage account.
Written redemption instructions must be received by the Transfer Agent in
proper form and must be signed exactly as the shares are registered. If the
proceeds of the redemption would exceed $10,000, if the proceeds are not to be
paid to the record owner at the record address, if the record address has
changed within the past 30 days, or if the shareholder is a corporation,
partnership, trust or fiduciary, signatures must be guaranteed by an Eligible
Guarantor Institution. Eligible Guarantor Institutions are domestic banks,
brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations
participating in a medallion program. The three recognized medallion programs
are Securities Transfer Agent Medallion Program (STAMP), Stock Exchanges
Medallion Program (SEMP), and New York Stock Exchange, Inc. Medallion Signature
Program (MSP). Signature guarantees received from institutions not participating
will not be accepted.
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During times of drastic economic or market conditions, investors may
experience difficulty in contacting the Distributor or Authorized Dealers by
telephone to request a redemption of Fund shares. In such cases, investors
should consider using the other redemption procedures described herein. Use of
these other redemption procedures may result in the redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, FBR Realty Fund's net asset value may fluctuate.
FEDERAL TAXES.
FBR Realty Fund intends to qualify as a regulated investment company by
satisfying the requirements under Subchapter M of the Internal Revenue Code of
1986, as amended (the "IRS Code"). FBR Realty Fund contemplates the
distribution of all of its net investment income and capital gains, if any, in
accordance with the timing requirements imposed by the IRS Code, so that the
Fund will not be subject to U.S. federal income taxes or the 4% U.S. federal
excise tax on undistributed income.
Distributions by FBR Realty Fund of its net investment income and the
excess, if any, of its net realized short-term capital gain over its net
realized long-term capital loss are taxable to shareholders as ordinary income.
These distributions are treated as dividends for federal income tax purposes,
but only a portion thereof may qualify for the 70% dividends-received deduction
for corporate shareholders (which portion may not exceed the aggregate amount of
qualifying dividends from domestic corporations received by FBR Realty Fund and
must be designated by the Fund as so qualifying). Distributions by FBR Realty
Fund of the excess, if any, of its net realized long-term capital gain over its
net realized short-term capital loss are designated as capital gain
distributions and are taxable to shareholders as long-term capital gain,
regardless of the length of time shareholders have held their shares. Such
distributions are not eligible for the dividends-received deduction. If a
shareholder disposes of shares in FBR Realty Fund at a loss before holding such
shares for more than six months, the loss will be treated as a long-term capital
loss to the extent that the shareholder has received a capital gain distribution
on those shares.
Distributions to shareholders of FBR Realty Fund will be treated in the
same manner for U.S. federal income tax purposes whether received in cash or in
additional shares. Distributions received by shareholders of FBR Realty Fund in
January of a given year will be treated as received on December 31 of the
preceding year provided that they were declared to shareholders of record on a
date in October, November, or December of such preceding year. Each Fund sends
tax statements to its shareholders (with copies to the IRS) by January 31
showing the amounts and tax status of distributions made (or deemed made) during
the preceding calendar year.
Income from securities of foreign issuers may be subject to foreign
withholding taxes. Credit for such foreign taxes, if any, will not pass through
to the shareholders.
OTHER BUSINESS
The Trustees of the GrandView Trust do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
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<PAGE>
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Trustees of the GrandView Trust to be used at the
Meeting. This Prospectus/Proxy Statement, along with a Notice of the Meeting
and a proxy card, is first being mailed to shareholders of the Funds on or about
August __, 1998. Only shareholders of record as of the close of business on the
Record Date, August __, 1998, will be entitled to notice of, and to vote at, the
Meeting. The holders of a majority of the shares of each of the Funds
outstanding at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting. Approval of the
Plan will require a "Majority Shareholder Vote" of each Fund as defined in the
GrandView Trust's Declaration of Trust, which means the affirmative vote of the
holders of the lesser of either (i) 67% or more of a Fund's shares present at
the meeting if the holders of more than 50% of the outstanding shares of that
Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. Shareholders of the Funds are entitled to one
vote for each share. Fractional shares are entitled to proportional voting
rights.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted FOR the proposed Reorganization and FOR any other
matters deemed appropriate. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions and broker
"non-votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated as shares
that are present but which have not been voted. A proxy may be revoked at any
time on or before the Meeting by written notice to the Secretary of the
GrandView Trust or by attending and voting at the Meeting. Unless revoked, all
valid proxies will be voted in accordance with the specifications thereon or, in
the absence of such specifications, for approval of the Plan and the
Reorganization contemplated thereby.
The chart below lists the number of shares of each Fund that were
outstanding as of the close of business on the Record Date:
SHARES OUTSTANDING
------------------
GrandView Realty Fund
GrandView Index Fund
As of the Record Date, there were no shares of the FBR Realty Fund
outstanding.
As of the Record, Date, the Trustees and officers of the GrandView Trust as
a group owned beneficially (i.e. had voting and/or investment power) __% and
___%, respectively, of the then outstanding shares of the GrandView Index Fund
and the GrandView Realty Fund, respectively. On the same date the following
shareholders owned of record more than 5% of the
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outstanding shares of beneficial interest of the Funds. Except as provided
below, no person is known by the GrandView Trust to be the beneficial owner of
more than 5% of the outstanding shares of the Funds as of the Record Date.
Proxies are solicited by mail. Additional solicitations may be made by
telephone or personal contact by officers or employees of GrandView Advisers and
its affiliates or by proxy soliciting firms retained by GrandView Advisers.
[GrandView Advisers has retained ___________________________ to provide proxy
solicitation services in connection with the Meeting at an estimated cost of
$________.] The cost of the solicitation will be borne by the Funds and FBR
Realty Funds, subject to applicable expense limitation arrangements with
GrandView Advisers, Inc. and FBR Advisers, respectively.
In the event that sufficient votes to approve the Reorganization are not
received by ____ a.m. on August __, 1998, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. In determining whether to adjourn the Meeting, the following
factors may be considered: the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any such adjournment will require an
affirmative vote by the holders of a majority of the shares present in person or
by proxy and entitled to vote at the Meeting. The persons named as proxies will
vote upon such adjournment after consideration of the best interests of all
shareholders of the Funds.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Funds as of March 31, 1998 have
been incorporated by reference into this Prospectus/Proxy Statement in reliance
on the reports of Deloitte & Touche LLP, independent auditors and independent
accountants for the Funds and given on the authority of such firm as expert in
accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of FBR Realty Fund
will be passed upon by Dechert Price & Rhoads, 1775 Eye Street, N.W.,
Washington, D.C. 20006.
THE TRUSTEES OF THE GRANDVIEW TRUST, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND APPROVAL OF THE PLAN INCLUDING THE SALE OF ALL OR SUBSTANTIALLY ALL
OF THE ASSETS OF THE FUNDS TO FBR REALTY FUND, THE TERMINATION OF THE FUND
AND THE DISTRIBUTION OF SHARES OF FBR REALTY FUND TO SHAREHOLDERS OF THE
FUND AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE
VOTED IN FAVOR OF APPROVAL OF THE PLAN.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ____ day of _____, 1998, by and between the FBR Family of Funds (the
"Company"), a Delaware business trust, on behalf of the FBR Realty Growth Fund
(the "Acquiring Fund"), a separate investment series of the Company, and
GrandView Investment Trust (the "Trust"), a Massachusetts business trust, on
behalf of the GrandView Realty Growth Fund (the "Realty Growth Fund") and the
GrandView S&P REIT Index Fund (the "Index Fund")(collectively, the "Acquired
Funds"), which are separate investment series of the Trust.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all or substantially all of
the assets of each Acquired Fund in exchange solely for Class A shares of
beneficial interest (the "Shares") of the Acquiring Fund, the assumption by the
Acquiring Fund of certain identified liabilities of the Acquired Funds, and the
distribution of the Acquiring Fund Shares to the shareholders of the Acquired
Funds in liquidation of the Acquired Funds as provided herein, all upon the
terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Company and the Trust are registered investment companies of
the management type and the Acquired Funds own securities that generally are
assets of the character in which the Acquiring Fund is permitted to invest; and
WHEREAS, the Company is authorized to issue its shares of beneficial
interest in separate series, including the Acquiring Fund, each of which
maintains a separate and distinct portfolio of assets; and
WHEREAS, the Trust is authorized to issue its shares of beneficial interest
in separate series, including each of the Acquired Funds, each of which
maintains a separate and distinct portfolio of assets; and
WHEREAS, the Board of Trustees of the Trust on behalf of the Acquired Funds
has determined that the exchange of all or substantially all of the assets of
the Acquired Funds for Acquiring Fund Shares and the assumption of certain
identified liabilities of the Acquired Funds by the Acquiring Fund is in the
best interests of each Acquired Fund and its shareholders and that the interests
of the existing shareholders of the Acquired Fund would not be diluted as a
result of this transaction; and
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
<PAGE>
1. TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE ACQUIRED FUNDS IN
EXCHANGE FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF CERTAIN IDENTIFIED
ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUNDS
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, each Acquired Fund
agrees to transfer all or substantially all of its assets as set forth in
paragraph 1.2 to the Acquiring Fund, and the Acquiring Fund agrees in exchange
therefor, to deliver to each Acquired Fund the number of Class A Acquiring Fund
Shares, including fractional Class A Acquiring Fund Shares, determined by
dividing the value of the Acquired Fund's net assets, computed in the manner and
as of the time and date set forth in paragraph 2.1, by the net asset value of
one Acquiring Fund Class A Share computed in the manner and as of the time and
date set forth in paragraph 2.2. Such transactions shall take place at the
closing provided for in paragraph 3.1 (the "Closing").
1.2 (a) The assets of each Acquired Fund to be acquired by the Acquiring
Fund shall consist of all or substantially all of the property including,
without limitation, such cash, securities, and dividend or interest receivables
which are owned by the Acquired Fund and any deferred or prepaid expenses shown
as an asset on the books of the Acquired Fund on the closing date provided in
paragraph 3.1 (the "Closing Date").
(b) The Trust has provided the Company with a list of each
Acquired Fund's assets as of the date of execution of this Agreement. The
Acquired Funds reserve the right to sell any of these securities as a part of
the ordinary course of their investment activity (but not in contemplation of
this Agreement) but will not, without the prior approval of the Acquiring
Fund, acquire any additional securities other than securities of the type in
which they are permitted to invest.
1.3 Each Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
assume all liabilities, expenses, costs, charges and reserves reflected on an
unaudited statement of assets and liabilities of the Acquired Fund prepared by
Bear Stearns Funds Management, Inc. ("Bear Stearns"), as administrator of the
Acquiring Fund, as of the Valuation Date (as defined in paragraph 2.1), in
accordance with generally accepted accounting principles consistently applied
from the prior audited period. The Acquiring Fund shall assume only those
liabilities of the Acquired Funds
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<PAGE>
reflected in those unaudited statements of assets and liabilities and, except as
provided in paragraph 5.8, shall not assume any other liabilities not reflected
thereon.
1.4 As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), each Acquired Fund will
liquidate and distribute pro rata to its shareholders of record determined as of
the close of business on the Closing Date (the "Acquired Fund Shareholders") the
Acquiring Fund Shares it receives pursuant to paragraph 1.1. Such liquidation
and distribution will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of each Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the name of the Acquired Fund's shareholders and representing the respective pro
rata number of the Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of each Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund. The Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares in connection with such exchange.
1.5 Any reporting responsibility of the Acquired Funds is and shall remain
the responsibility of the Acquired Funds up to and including the Closing Date
and such later dates on which the Acquired Funds are terminated.
2. VALUATION
2.1 The value of the Acquired Funds' assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of regular trading on the New York Stock Exchange, Inc. (the "NYSE") on
the Closing Date (such time and date being hereinafter called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's then
current prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of the close of regular trading on the NYSE on the
Valuation Date, using the valuation procedures set forth in the Acquiring Fund's
then current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for each Acquired Fund's net assets shall
be determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value per share of an Acquiring Fund share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made by Bear Stearns in accordance
with its regular practice as pricing agents for the Acquiring Fund.
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<PAGE>
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be August _, 1998, or such later date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m., at
the offices of FBR Fund Advisers, Inc., 1001 Nineteenth Street North, Arlington,
Virginia 22209, or at such other time and/or place as the parties may agree.
3.2 Custodial Trust Company, as custodian for the Acquiring Fund (the
"Custodian"), shall deliver at the Closing a certificate of an authorized
officer stating that the Acquired Funds' portfolio securities, cash and any
other assets shall have been delivered in proper form to the Acquiring Fund
within two business days prior to or on the Closing Date.
3.3 In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of either Acquired Fund shall be
closed to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of either Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
3.4 The Trust shall deliver at the Closing a list of the names and
addresses of each Acquired Fund's shareholders and the number and percentage
ownership of outstanding Shares owned by each such shareholder immediately prior
to the Closing, certified on behalf of the Trust by its President. The
Acquiring Fund shall issue and deliver a confirmation evidencing the Acquiring
Fund Shares to be credited on the Closing Date to the Secretary of the Trust or
provide evidence satisfactory to the Trust that such Acquiring Fund Shares have
been credited to each Acquired Fund's account on the books of the Acquiring
Funds. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Trust and the Acquired Funds represent and warrant to the Company
and the Acquiring Fund as follows:
(a) The Trust is a Massachusetts business trust, duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts;
(b) The Trust is a registered investment company classified as a
management company of the open-end type and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940 (the "1940 Act") is in
full force and effect;
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<PAGE>
(c) The Trust is not, and the execution, delivery and performance of
this Agreement will not result, in a material violation of its Declaration
of Trust or Bylaws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Trust or either Acquired Fund is a
party or by which it is bound;
(d) The Trust and the Acquired Funds have no material contracts or
other commitments (other than this Agreement) which will be terminated with
liability prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and accepted by the
Company and the Acquiring Fund, no litigation or administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Trust, either Acquired
Fund or any of their properties or assets (other than that previously
disclosed to the other party to the Agreement) which, if adversely
determined, would materially and adversely affect their financial condition
or the conduct of their business. The Trust and the Acquired Funds know of
no facts which might form the basis for the institution of such proceedings
and are not parties to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and adversely
affects their business or their ability to consummate the transactions
herein contemplated;
(f) The statements of assets and liabilities of the Acquired Funds
for the period ended March 31, 1996 and for the fiscal year ended March 31,
1997 have been audited by KPMG Peat Marwick LLP and for the fiscal year
ended March 31, 1998, have been audited by Deloitte & Touche LLP, certified
public accountants, and are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Funds as of such dates, and there are
no known contingent liabilities of either Acquired Fund as of such dates
not disclosed therein;
(g) Since March 31, 1998, there has not been any material adverse
change in the financial condition, assets, liabilities or business of
either Acquired Fund other than changes occurring in the ordinary course of
business, or any incurrence by either Acquired Fund of indebtedness
maturing more than one year from the date that such indebtedness was
incurred, except as otherwise disclosed to and accepted by the Acquiring
Fund. For the purposes of this subparagraph (g), a decline in net asset
value per share of an Acquired Fund Share shall not constitute a material
adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports (including information returns) of the Acquired Funds required by
law to have been filed by such date shall have been filed, and all federal
and other taxes shall have been paid so far as due, or provision shall have
been made for the payment thereof and, to the best of the Trust's
knowledge, no such return or report is currently under audit and no
assessment has been asserted with respect to such returns or reports;
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<PAGE>
(i) For each taxable year of its operation (including the taxable
year that ends on the Closing Date), each Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company and has elected to be treated as such
and will have distributed all of its investment company taxable income
and net realized capital gains that have accrued through the Closing Date;
(j) All issued and outstanding Shares of the Acquired Funds are, and
at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding Shares of the
Acquired Funds will, at the time of Closing, be held of record by the
persons and in the amounts set forth in the records of the transfer agent
as provided in paragraph 3.4. Neither Acquired Fund has outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquired Fund's Shares, nor is there outstanding any security convertible
into shares of either Acquired Fund;
(k) At the Closing Date, each Acquired Fund will have good and
marketable title to its assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the Securities
Act of 1933, as amended (the "1933 Act"), other than as disclosed to the
Acquiring Fund;
(l) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary actions on the part of the Trust's
Board of Trustees, and subject to the approval of each Acquired Fund's
shareholders, this Agreement will constitute a valid and binding obligation
of the Trust and each Acquired Fund, enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(m) The information to be furnished by the Trust and the Acquired
Funds for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto;
(n) The proxy statement of the Acquired Funds (the "Proxy Statement")
to be included in the registration statement (the "Registration Statement")
referred to in paragraph 5.7 (only insofar as it relates to the Acquired
Funds) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
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<PAGE>
4.2 The Company and the Acquiring Fund represent and warrant to the Trust
and the Acquired Funds as follows:
(a) The Company is a Delaware business trust, duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Company is registered as an open-end management investment
company and its registration with the Commission as an investment company
under the 1940 Act is in full force and effect;
(c) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) The Company is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of its
Declaration of Trust or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Company or the Acquiring
Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or threatened against the Company or the Acquiring Fund or any of
its properties or assets, except as previously disclosed in writing to the
Trust. The Company and the Acquiring Fund know of no facts which might
form the basis for the institution of such proceedings and neither is a
party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein;
(f) All federal and other tax returns and reports (including
information returns) of the Acquiring Fund required by law to have been
filed by such date shall have been filed, and all federal and other
taxes shall have been paid so far as due, or provision shall have been
made for the payment thereof and, to the best of the Acquiring Fund's
knowledge, no such return or report is currently under audit and no
assessment has been asserted with respect to such returns or reports;
(g) The Acquiring Fund intends to meet the requirements of Subchapter
M of the Code for qualification and treatment as a regulated investment
company;
(h) At the date hereof, all issued and outstanding Acquiring Fund
Shares are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
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<PAGE>
purchase any Acquiring Fund Shares, nor is there outstanding any security
other than Class B shares, convertible into any Acquiring Fund Shares. On
the Closing Date the Acquiring Fund will have only nominal assets and will
not have commenced investment operations;
(i) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
actions, if any, on the part of the Company's Board of Trustees, and this
Agreement will constitute a valid and binding obligation of the Company and
the Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(j) The Acquiring Fund Shares to be issued and delivered to the
Acquired Funds, for the account of the Acquired Funds' shareholders,
pursuant to the terms of this Agreement, will at the Closing Date have been
duly authorized and, when so issued and delivered, will be duly and validly
issued Acquiring Fund Shares, and will be fully paid and non-assessable
with no personal liability attaching to the ownership thereof;
(k) The information to be furnished by the Acquiring Fund for use in
no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations applicable thereto;
(l) The Company's registration statement on Form N-14 with regard to
the Reorganization, and the Proxy Statement to be included therein (only
insofar as it relates to the Acquiring Fund) will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not materially
misleading.
5. COVENANTS OF THE ACQUIRING FUND, THE COMPANY, THE ACQUIRED FUNDS AND THE
TRUST
5.1 The Acquiring Fund and the Acquired Funds each will operate its
business in the ordinary course between the date hereof and the Closing Date.
It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions.
5.2 The Trust will call a meeting of the Acquired Funds' shareholders to
consider and act upon this Agreement and any other matters necessary or
appropriate in connection with the transactions contemplated herein.
5.3 Each of the Acquired Funds covenants that the Acquiring Fund Shares to
be issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
-8-
<PAGE>
5.4 The Trust and the Acquired Funds will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the record ownership of the Acquired Funds' Shares.
5.5 Subject to the provisions of this Agreement, the Company, the
Acquiring Fund, the Trust and the Acquired Funds each will take, or cause to be
taken, all action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.6 As promptly as practicable, but in any case within sixty days after
the Closing Date, each Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for federal income tax purposes which
will be carried over to the Acquiring Fund as a result of Section 381 of the
Code, and which will be certified by the Trust's President or Vice President and
its Treasurer.
5.7 Each Acquired Fund will provide the Acquiring Fund with information
about the Acquired Fund reasonably necessary for the preparation of a prospectus
(the "Prospectus") which will include the Proxy Statement referred to in
paragraph 4.l(n), all to be included in a registration statement on Form N-14 of
the Acquiring Fund (the "Registration Statement"), in compliance with the 1933
Act, the Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act in
connection with the meeting of the Acquired Funds' shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 The Acquiring Fund will, with respect to any claims arising within
three years from the Closing Date, indemnify the Trustees and officers of the
Trust, to the same extent, and subject to the same limitations, as such Trustees
and officers are indemnified under the Trust's Declaration of Trust as of the
date hereof.
5.9 Each of the Acquiring Fund, the Acquired Funds, the Company and the
Trust agrees to make such representations and warranties as may be necessary to
assure that the transaction described in this Agreement shall constitute a
tax-free reorganization.
5.10 The Acquiring Fund agrees that it has no plan or intention to sell or
otherwise dispose of the assets of the Acquired Funds to be acquired in the
Reorganization, except for sales and dispositions made in the ordinary course of
business.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE ACQUIRED FUNDS
The obligations of the Trust and the Acquired Funds to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by the Company and the Acquiring Fund of all of the obligations to
be performed by them hereunder on or before the Closing Date and, in addition
thereto, the following further conditions:
6.1 All representations and warranties of the Company and the Acquiring
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
6.2 The Company shall have delivered to the Trust a certificate executed
in its name by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to the Trust and dated as of the
Closing Date, to the effect that the representations and warranties of the
Company and the Acquiring Fund made in this Agreement are true and correct at
-9-
<PAGE>
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement and as to such other matters as the Acquired Fund
shall reasonably request; and
6.3 The Trust shall have received on the Closing Date a favorable opinion
from Dechert Price & Rhoads, counsel to the Company and the Acquiring Fund,
dated as of the Closing Date, covering the following points:
That (a) the Acquiring Fund is a series of the Company which is a business
trust duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to own all of its
properties and assets and to carry on its business as presently conducted;
(b) the Agreement has been duly authorized, executed and delivered by the
Company on behalf of the Acquiring Fund and, assuming that the Prospectus,
Registration Statement and Proxy Statement comply with the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder and,
assuming due authorization, execution and delivery of the Agreement by the
Trust on behalf of the Acquired Funds, is a valid and binding obligation of
the Company enforceable against the Company and the Acquiring Fund in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles; (c)
the Acquiring Fund Shares to be issued to the Acquired Funds' shareholders
as provided by this Agreement are duly authorized and upon such delivery
will be validly issued and outstanding and are fully paid and
non-assessable, and no shareholder of the Acquiring Fund has any preemptive
rights to subscription or purchase in respect thereof; (d) the execution
and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a material violation
of the Company's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel) to which the Company or the Acquiring
Fund is a party or by which it is bound or, to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of
any penalty, under any agreement, judgment or decree to which the Acquiring
Fund is a party or by which it is bound; (e) to the knowledge of such
counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or the State of Delaware is
required for the consummation by the Company and the Acquiring Fund of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required
under state securities law; (f) only insofar as they relate to the
Acquiring Fund, the descriptions in the Proxy Statement of statutes, legal
and governmental proceedings and contracts and other documents, if any, are
accurate and fairly present the information required to be shown; (g) such
counsel does not know of any legal or governmental proceedings, only
insofar as they relate to the Acquiring Fund, existing on or before the
effective date of the Registration Statement or the Closing Date required
to be described in the Registration Statement or to be filed as exhibits to
the Registration Statement which are not described or filed as required;
(h) the Company is registered as an investment company under the 1940 Act
and its registration with the Commission as an investment company under the
1940 Act is in full force and effect; and (i) to the best knowledge of such
counsel, no litigation or administrative proceeding or
-10-
<PAGE>
investigation of or before any court or governmental body is presently
pending or threatened as to the Company or the Acquiring Fund or any of
their properties or assets and neither the Company nor the Acquiring Fund
is a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body, which materially and adversely affects
its business, other than as previously disclosed in the Registration
Statement. In addition, such counsel also shall state that they have
participated in conferences with officers of the Company at which the
contents of the Proxy Statement and related matters were discussed and,
although they are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Proxy Statement (except to the extent indicated in paragraph (f) of their
above opinion), on the basis of the foregoing (relying as to materiality to
a large extent upon the opinions of officers and other representatives of
the Company and the Acquiring Fund), no facts have come to their attention
that lead them to believe that the Proxy Statement as of its date, as of
the date of the Acquired Fund shareholders' meeting and as of the Closing
Date, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein regarding the Acquiring Fund
or necessary to make the statements therein regarding the Acquiring Fund,
in light of the circumstances under which they were made, not misleading.
Such opinion may state that such counsel does not express any opinion or
belief as to the financial statements or other financial data, or as to the
information relating to the Trust and the Acquired Fund, contained in the
Proxy Statement or Registration Statement, and that such opinion is solely
for the benefit of the Trust, its Trustees and its officers and the
Acquired Funds. (Such counsel may rely as to matters governed by the laws
of the State of Delaware on an opinion of Delaware counsel.) Such opinion
also shall include such other matters incident to the transaction
contemplated hereby as the Acquired Funds may reasonably request.
In this paragraph 6.3, references to the Proxy Statement include and relate
only to the text of such Proxy Statement and not to any exhibits or attachments
thereto or to any documents incorporated by reference therein.
6.4 Prior to the Closing Date, the Acquired Funds shall have declared
and paid a dividend which, together with previous dividends, shall have the
effect of distributing all of their investment company taxable income and net
capital gains accruing through and including the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE ACQUIRING FUND
The obligations of the Company and the Acquiring Fund to complete the
transactions provided for herein shall be subject, at their election, to the
performance by the Trust and the Acquired Funds of all the obligations to be
performed by them hereunder on or before the Closing Date and, in addition
thereto, the following conditions:
7.1 All representations and warranties of the Trust and the Acquired Funds
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Trust shall have delivered to the Acquiring Fund a statement of
each Acquired Fund's assets and liabilities, together with a list of each
Acquired Fund's portfolio securities
-11-
<PAGE>
showing the tax costs of such securities by lot and the holding periods of such
securities, as of the Closing Date, certified by the Treasurer or Assistant
Treasurer of the Trust;
7.3 The Trust shall have delivered to the Acquiring Fund on the Closing
Date a certificate executed in its name and on behalf of the Acquired Funds by
its President or Executive Vice President and its Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Company and the Acquiring
Fund and dated as of the Closing Date, to the effect that the representations
and warranties of the Trust and the Acquired Funds made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Acquiring Fund shall reasonably request; and
7.4 The Company shall have received on the Closing Date a favorable
opinion of Bingham Dana LLP, counsel to the Acquired Funds, covering the
following points:
That (a) each Acquired Fund is a series of the Trust which is a
Massachusetts business trust, legally existing under the laws of the
Commonwealth of Massachusetts and has the power under the Trust's
Declaration of Trust to own its properties and assets and to carry on its
business as presently conducted as such properties, assets and business are
described in its most recent prospectus and statement of additional
information; (b) the Agreement has been duly authorized, executed and
delivered by the Trust on behalf of the Acquired Funds and, assuming that
the Prospectus, the Registration Statement and the Proxy Statement comply
with the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder and, assuming due authorization, execution and
delivery of the Agreement by the Company on behalf of the Acquiring Fund,
is a valid and binding obligation of the Trust and the Acquired Funds
enforceable against the Trust and the Acquired Funds in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws relating to or affecting
creditors' rights generally and to general equity principles, and such
counsel shall express no opinion with respect to provisions of this
Agreement intended to limit liability for particular matters to an Acquired
Fund and its assets; (c) the execution and delivery of the Agreement did
not, and the consummation of the transactions contemplated hereby will not,
result in a material violation of the Trust's Declaration of Trust or
Bylaws or any provision of any agreement (known to such counsel) to which
the Trust or the Acquired Funds is a party or by which it is bound or, to
the knowledge of such counsel, result in the acceleration of any obligation
or the imposition of any penalty, under any agreement, judgment or decree
to which the Trust or either Acquired Fund is a party or by which it is
bound; (d) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the Commonwealth of Massachusetts is required for the
consummation by the Trust and the Acquired Funds of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act, and such as may be required under state
securities laws; (e) only insofar as they relate to the Trust and the
Acquired Funds, the descriptions in the Proxy Statement of statutes, legal
and governmental proceedings and contracts and other documents, if any, are
accurate
-12-
<PAGE>
in all material respects and fairly present in all material respects the
information required to be shown; (f) such counsel does not know of any
legal or governmental proceedings, only insofar as they relate to the Trust
and the Acquired Funds existing on or before the effective date of the
Registration Statement or the Closing Date, required to be described in the
Proxy Statement which are not described as required; (g) the Trust is
registered as an investment company under the 1940 Act and its registration
with the Commission as an investment company under the 1940 Act is in full
force and effect; and (h) to the best knowledge of such counsel, no
litigation or administrative proceeding or investigation of or before any
court or governmental body is presently pending or threatened as to the
Trust or either Acquired Fund or any of their respective properties or
assets and neither the Trust nor either Acquired Fund is a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business
other than as previously disclosed in the Proxy Statement. Such counsel
also shall state that they have participated in conferences with officers
of the Trust at which the contents of the Proxy Statement and related
matters were discussed and, although they are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Proxy Statement (except to the extent indicated
in paragraph (e) of their above opinion), on the basis of the foregoing
(relying as to materiality to a large extent upon the opinions of officers
and other representatives of the Trust and the Acquired Fund), no facts
have come to their attention that cause them to believe that the Proxy
Statement as of its date, as of the date of the Acquired Funds' shareholder
meeting, and as of the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein regarding the Trust or the Acquired Funds or necessary in the light
of the circumstances under which they were made, to make the statements
therein regarding the Trust or the Acquired Funds not misleading. Such
opinion may state that such counsel does not express any opinion or belief
as to the financial statements or other financial data, or as to the
information relating to the Acquiring Fund, contained in the Proxy
Statement or Registration Statement, and that such opinion is solely for
the benefit of the Company, its Trustees and its officers. Such opinion
also shall include such other matters incident to the transaction
contemplated hereby as the Company or the Acquiring Fund may reasonably
request.
In this paragraph 7.4, references to the Proxy Statement include and relate
to only the text of such Proxy Statement and not to any exhibits or attachments
thereto or to any documents incorporated by reference therein.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY, THE ACQUIRING
FUND, THE TRUST AND THE ACQUIRED FUNDS
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Funds or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
-13-
<PAGE>
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding Shares of each
Acquired Fund in accordance with the provisions of the Trust's Declaration of
Trust and Bylaws and certified copies of the votes evidencing such approval
shall have been delivered to the Company and the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor
the Acquired Funds may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or the Acquired Funds to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Acquired Funds,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;
8.5 Each Acquired Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Acquired Fund's shareholders all of the Fund's investment company taxable
income for all taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carryforward);
8.6 The parties shall have received an opinion of Dechert Price & Rhoads,
addressed to the Company and the Trust, substantially to the effect that the
transaction contemplated by this Agreement constitutes a tax-free reorganization
for federal income tax purposes. The delivery of such opinion is conditioned
upon receipt by Dechert Price & Rhoads of representations it shall request of
the Company and the Trust. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the conditions set
forth in this paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Acquired Fund each represents and warrants
to the other that there are no brokers or finders entitled to receive any
payments in connection with the transactions provided for herein.
-14-
<PAGE>
9.2 (a) Except as may be otherwise provided herein, and subject to any
expense limitation arrangements applicable to the Acquired Funds or the
Acquiring Fund and the provisions of the Asset Purchase Agreement dated June __,
1998 by and between FBR Fund Advisers, Inc. and GrandView Advisers, Inc. with
respect thereto, the Acquired Fund and the Acquiring Fund shall each be liable
for its expenses incurred in connection with entering into and carrying out the
provisions of this Agreement, whether or not the transactions contemplated
hereby are consummated. The expenses payable by the Acquired Funds hereunder
shall include the expenses of: (i) its counsel and independent accountants
associated with the Reorganization; (ii) printing and mailing the
Prospectus/Proxy Statement and soliciting proxies in connection with the meeting
of shareholders of the Acquired Funds referred to in paragraph 5.2 hereof; (iii)
all fees and expenses related to the liquidation of the Acquired Funds; (iv)
fees and expenses of the Acquired Funds' custodian and transfer agent incurred
in connection with the Reorganization; and (v) any special pricing fees
associated with the valuation of an Acquired Fund's portfolio on the Closing
Date. The expenses payable by the Acquiring Fund hereunder shall include: (i)
fees and expenses of its counsel and independent accountants associated with the
Reorganization; (ii) expenses associated with preparing this Agreement and
preparing and filing the Registration Statement under the 1933 Act covering the
Acquiring Fund Shares to be issued in the Reorganization; (iii) registration or
qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection with the Reorganization; and (iv) any fees and
expenses of the Acquiring Fund's custodian and transfer agent incurred in
connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the Acquired Funds,
prior to the Closing, shall pay for or include in the unaudited statement of
assets and liabilities prepared pursuant to paragraph 1.3 all of its known and
reasonably estimated expenses associated with the transactions contemplated by
this Agreement.
10. ENTIRE AGREEMENT, SURVIVAL OF WARRANTIES
10.1 The Company, the Acquiring Fund, the Trust and the Acquired Fund agree
that no party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement between the
parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated at any time at or prior to the
Closing Date: (1) by mutual agreement of the Trust and the Company; (2) by the
Trust in the event the Acquiring Fund or the Company shall, or by the Company in
the event an Acquired Fund or the Trust shall, materially breach any
representation, warranty or agreement contained herein to be performed at or
prior to the Closing Date; or (3) if a condition herein expressed to be
precedent to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
-15-
<PAGE>
11.2 In the event of any such termination, there shall be no liability for
damages on the part of either the Trust or the Company, or their respective
Trustees, or officers, or to the other party, but each shall bear the expenses
incurred by it incidental to the preparation and carrying out of this Agreement
as provided in paragraph 9.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Company
and the Trust; provided, however, that following the meeting of the Acquired
Fund's shareholders called by the Trust pursuant to paragraph 5.2 of this
Agreement, no such amendment may have the effect of changing the provisions for
determining the number of the Acquiring Fund Shares to be issued to the Acquired
Funds' shareholders under this Agreement to the detriment of such shareholders
without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by or
certified mail addressed to the Company, 1001 Nineteenth Street North,
Arlington, Virginia 22209, attention Eric C. Brugel; or to the Trust, P.O. Box
164, East Glastonbury, Connecticut 06025-0164, attention Winsor Aylesworth.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW, ASSIGNMENT, LIMITATION OF LIABILITY
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.5 It is understood and expressly stipulated that neither the holders of
shares of the Acquired Funds nor any trustee, officer, agent, or employee of the
Trust shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or
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<PAGE>
obligation hereunder, but each of the Acquired Funds only shall be liable for
its respective liabilities hereunder.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President as of the date written above.
THE FBR FAMILY OF FUNDS
on behalf of FBR Realty Growth Fund
By:
----------------------------------------
C. Eric Brugel
President
GRANDVIEW INVESTMENT TRUST
on behalf of GrandView Realty Growth Fund and
GrandView S&P REIT Index Fund
By:
-----------------------------------------
Winsor H. Aylesworth
President
-18-
<PAGE>
FBR FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION
August __, 1998
1998 Special Meeting of Shareholders of the
Grandview-SM- Realty Growth Fund and the GrandView-SM-
S&P-REGISTERED TRADEMARK- REIT Index Fund
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement and Prospectus, dated
August __, 1998, for the Special Meeting of Shareholders of the GrandView
Realty Growth Fund (the "GrandView Realty Fund") and the GrandView S&P REIT
Index Fund (the "GrandView Index Fund") (collectively, the "Funds") to be
held on September __, 1998. Copies of the Combined Proxy Statement and
Prospectus may be obtained at no charge by writing the GrandView Investment
Trust at 107 North Washington Street, Rocky Mountain, North Carolina 27803
or by calling (800) 773-3863.
This Statement of Additional Information incorporates by reference the
following documents, each of which accompanies this Statement of Additional
Information:
1. The Funds' prospectus dated January 1, 1998;
2. The Funds' Statement of Additional Information dated July 25,
1998 and supplemented January 1, 1998;
3. Annual Report of GrandView Realty Growth Fund for the fiscal year
ended March 31, 1998;
4. Annual Report of GrandView S&P REIT Index Fund for the fiscal
year ended March 31, 1998;
5. Pro forma financial statements of the GrandView Realty Growth
Fund and the GrandView S&P REIT Index Fund giving effect to the
proposed Reorganization described in the Combined Proxy Statement
and Prospectus as of March 31, 1998.
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<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION
AS OF MARCH 31, 1998
The following unaudited pro forma combined financial information relates to
the acquisition of the assets and liabilities of the GrandView Realty Growth
Fund and GrandView S&P-Registered Trademark- REIT Index Fund (each a "GrandView
Fund" and collectively, the "GrandView Funds") by the FBR Realty Growth Fund
(the "Fund"). The information gives effect to the Transaction as if it had
occurred as of March 31, 1998 and includes any related activities for the year
ended March 31, 1998, and consists of a Pro Forma Portfolio of Investments, a
Pro Forma Statement of Asset and Liabilities, a Pro Forma Statement of
Operations and a Pro Forma Statement of Changes in Net Assets. The pro forma
combined results of operations are not indicative of future operations or actual
results of the GrandView Funds had the combination been consummated as of March
31, 1998.
<PAGE>
FBR REALTY GROWTH FUND
PRO FORMA PORTFOLIO OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 97.43%
AGRICULTURE - 1.19%
Cadiz Land Company, Inc. (a). . . . . . . . . . . . . . . . . . . 3,300 $39,393
-----------
ENGINEERING & CONSTRUCTION - 1.36%
Dames & Moore Group . . . . . . . . . . . . . . . . . . . . . . . 3,400 45,263
-----------
FINANCIAL - BANKS, SAVINGS/LOANS/THRIFTS - 4.09%
Capital Trust (a) . . . . . . . . . . . . . . . . . . . . . . . . 13,900 135,525
-----------
REAL ESTATE - 1.79%
Catellus Development Corporation (a). . . . . . . . . . . . . . . 3,200 59,200
-----------
REAL ESTATE INVESTMENT TRUSTS - 86.53%
Alexandria Real Estate Equities, Inc. . . . . . . . . . . . . . . 800 25,350
American Health Properties, Inc . . . . . . . . . . . . . . . . . 273 7,234
American Industrial Properties REIT (a) . . . . . . . . . . . . . 5,700 79,087
Apartment Investment & Management Company . . . . . . . . . . . . 357 13,611
Arden Realty, Inc. . . . . . . . . . . . . . . . . . . . . . . . 423 12,056
Avalon Properties, Inc. . . . . . . . . . . . . . . . . . . . . . 305 8,769
Banyan Hotel Investment Fund (a) . . . . . . . . . . . . . . . . 25,000 37,500
Bay Apartment Communities, Inc. . . . . . . . . . . . . . . . . . 197 7,314
Bedford Property Investors, Inc. . . . . . . . . . . . . . . . . 1,000 19,313
Boston Properties, Inc. . . . . . . . . . . . . . . . . . . . . . 1,480 52,077
Bradley Real Estate, Inc. . . . . . . . . . . . . . . . . . . . . 265 5,515
BRT Realty Trust (a). . . . . . . . . . . . . . . . . . . . . . . 5,300 40,743
Burnham Pacific Properties, Inc. . . . . . . . . . . . . . . . . 2,000 29,250
CBL & Associates Properties, Inc. . . . . . . . . . . . . . . . . 279 6,853
CCA Prison Realty Trust . . . . . . . . . . . . . . . . . . . . . 153 6,340
CRIIMI MAE, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 465 7,178
Camden Property Trust . . . . . . . . . . . . . . . . . . . . . . 235 6,962
Capstead Mortgage Corporation . . . . . . . . . . . . . . . . . . 432 8,532
Capstone Capital Corporation. . . . . . . . . . . . . . . . . . . 250 6,078
CarrAmerica Realty Corporation. . . . . . . . . . . . . . . . . . 475 14,250
CenterPoint Properties Corporation . . . . . . . . . . . . . . . 228 7,909
Charles E. Smith Residential Realty, Inc. . . . . . . . . . . . . 172 5,719
Chateau Communities, Inc. . . . . . . . . . . . . . . . . . . . . 186 5,533
Chelsea GCA Realty, Inc. . . . . . . . . . . . . . . . . . . . . 132 4,884
Colonial Properties Trust . . . . . . . . . . . . . . . . . . . . 245 7,794
Commercial Net Lease Realty . . . . . . . . . . . . . . . . . . . 313 5,458
Cornerstone Properties, Inc. . . . . . . . . . . . . . . . . . . 771 13,974
Cousins Properties, Inc. . . . . . . . . . . . . . . . . . . . . 233 7,194
Crescent Real Estate Equities Company . . . . . . . . . . . . . . 2,050 73,800
Developers Diversified Realty Corporation . . . . . . . . . . . . 209 8,543
Duke Realty Investments, Inc. . . . . . . . . . . . . . . . . . . 1,404 34,223
Dynex Capital, Inc. . . . . . . . . . . . . . . . . . . . . . . . 1,006 12,072
EQK Realty Investors I (a). . . . . . . . . . . . . . . . . . . . 46,800 55,575
EastGroup Properties, Inc. . . . . . . . . . . . . . . . . . . . 2,950 60,844
Entertainment Properties Trust. . . . . . . . . . . . . . . . . . 900 17,663
Equity Inns Inc. . . . . . . . . . . . . . . . . . . . . . . . . 402 6,206
Equity Office Properties Trust. . . . . . . . . . . . . . . . . . 3,353 102,686
</TABLE>
<PAGE>
FBR REALTY GROWTH FUND
PRO FORMA PORTFOLIO OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)(CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Equity Residential Properties Trust . . . . . . . . . . . . . . . 1,232 $61,908
Essex Property Trust, Inc. . . . . . . . . . . . . . . . . . . . 194 6,657
Excel Realty Trust, Inc. . . . . . . . . . . . . . . . . . . . . 155 5,522
FAC Realty Trust Inc. (a) . . . . . . . . . . . . . . . . . . . . 7,500 73,594
Federal Realty Investment Trust . . . . . . . . . . . . . . . . . 290 7,123
FelCor Suite Hotels, Inc. . . . . . . . . . . . . . . . . . . . . 1,094 40,546
First Industrial Realty Trust, Inc. . . . . . . . . . . . . . . . 279 10,044
First Union Real Estate Investments . . . . . . . . . . . . . . . 5,700 66,619
Gables Residential Trust. . . . . . . . . . . . . . . . . . . . . 257 6,987
General Growth Properties . . . . . . . . . . . . . . . . . . . . 287 10,476
Glenborough Realty Trust, Inc. . . . . . . . . . . . . . . . . . 234 6,801
Glimcher Realty Trust . . . . . . . . . . . . . . . . . . . . . . 277 6,059
Health Care Property Investors, Inc. . . . . . . . . . . . . . . 1,430 52,821
Health and Retirement Property Trust. . . . . . . . . . . . . . . 1,805 36,551
Healthcare Realty Trust, Inc. . . . . . . . . . . . . . . . . . . 225 6,356
Highwoods Properties, Inc. . . . . . . . . . . . . . . . . . . . 388 13,677
Horizon Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . 386 4,753
Hospitality Properties Trust. . . . . . . . . . . . . . . . . . . 1,613 57,161
Humphrey Hospitality Trust, Inc. . . . . . . . . . . . . . . . . 5,400 62,100
INMC Mortgage Holdings, Inc. . . . . . . . . . . . . . . . . . . 500 12,500
Irvine Apartment Communities, Inc. . . . . . . . . . . . . . . . 232 7,308
JDN Realty Corporation. . . . . . . . . . . . . . . . . . . . . . 215 7,350
JP Realty, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 1,002 25,426
Kilroy Realty Corporation . . . . . . . . . . . . . . . . . . . . 179 5,113
Kimco Realty Corporation. . . . . . . . . . . . . . . . . . . . . 310 10,966
LTC Properties, Inc. . . . . . . . . . . . . . . . . . . . . . . 1,388 26,806
Liberte Investors, Inc. (a) . . . . . . . . . . . . . . . . . . . 16,800 67,200
Liberty Property Trust. . . . . . . . . . . . . . . . . . . . . . 379 10,186
Mack-Cali Realty Corporation. . . . . . . . . . . . . . . . . . . 413 16,133
Manufactured Home Communities, Inc. . . . . . . . . . . . . . . . 287 7,426
Meditrust Companies . . . . . . . . . . . . . . . . . . . . . . . 2,901 89,206
Meridian Point Realty Trust '83 (a) . . . . . . . . . . . . . . . 26,742 40,113
Merry Land & Investment Company, Inc. . . . . . . . . . . . . . . 305 6,824
Mid-America Apartment Communities, Inc. . . . . . . . . . . . . . 198 5,581
Mills Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 7,044
National Health Investors, Inc. . . . . . . . . . . . . . . . . . 187 7,457
National Income Realty Trust. . . . . . . . . . . . . . . . . . . 3,760 66,270
Nationwide Health Properties, Inc. . . . . . . . . . . . . . . . 332 8,217
New Plan Realty Trust . . . . . . . . . . . . . . . . . . . . . . 509 12,789
OMEGA Healthcare Investors, Inc. . . . . . . . . . . . . . . . . 142 5,538
Pacific Gulf Properties, Inc. . . . . . . . . . . . . . . . . . . 218 5,000
Patriot American Hospitality, Inc. . . . . . . . . . . . . . . . 3,090 83,430
Post Properties, Inc. . . . . . . . . . . . . . . . . . . . . . . 254 10,144
Prentiss Properties Trust . . . . . . . . . . . . . . . . . . . . 279 7,289
Price REIT, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 137 6,139
Public Storage, Inc. . . . . . . . . . . . . . . . . . . . . . . 658 20,316
RFS Hotel Investors, Inc. . . . . . . . . . . . . . . . . . . . . 1,985 36,350
Realty Income Corporation . . . . . . . . . . . . . . . . . . . . 301 8,183
Realty Refund Trust . . . . . . . . . . . . . . . . . . . . . . . 25,200 108,675
Redwood Trust, Inc. . . . . . . . . . . . . . . . . . . . . . . . 4,000 94,000
</TABLE>
<PAGE>
FBR REALTY GROWTH FUND
PRO FORMA PORTFOLIO OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)(CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Reckson Associates Realty Corporation . . . . . . . . . . . . . . 277 $7,306
Resort Income Investors, Inc. (a) . . . . . . . . . . . . . . . . 70,000 15,400
Security Capital Group - WT . . . . . . . . . . . . . . . . . . . 279 924
Security Capital Pacific Trust . . . . . . . . . . . . . . . . . 2,003 48,197
Security Capital Atlantic Incorporated . . . . . . . . . . . . . 356 7,476
Security Capital Industrial Trust . . . . . . . . . . . . . . . . 1,557 39,898
Semele Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . 4,651 4,070
Shurgard Storage Centers, Inc. . . . . . . . . . . . . . . . . . 210 5,906
Simon DeBartolo Group, Inc. . . . . . . . . . . . . . . . . . . . 1,286 44,126
Sovran Self Storage, Inc. . . . . . . . . . . . . . . . . . . . . 800 23,750
Spieker Properties, Inc. . . . . . . . . . . . . . . . . . . . . 1,574 64,928
Starwood Financial Trust (a) . . . . . . . . . . . . . . . . . . 27,800 128,575
Starwood Hotels & Resorts . . . . . . . . . . . . . . . . . . . . 1,885 100,729
Storage USA, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 210 8,059
Summit Properties, Inc. . . . . . . . . . . . . . . . . . . . . . 274 5,514
Sun Communities, Inc. . . . . . . . . . . . . . . . . . . . . . . 187 6,498
Tarragon Realty Investors Inc. . . . . . . . . . . . . . . . . . 8,600 84,925
Taubman Centers, Inc. . . . . . . . . . . . . . . . . . . . . . . 604 7,852
The Macerich Company. . . . . . . . . . . . . . . . . . . . . . . 192 5,712
TIS Mortgage Investment Company (a) . . . . . . . . . . . . . . . 8,400 17,325
TriNet Corporate Realty Trust, Inc. . . . . . . . . . . . . . . . 50 1,916
United Dominion Realty Trust. . . . . . . . . . . . . . . . . . . 679 9,845
Urban Shopping Centers, Inc. . . . . . . . . . . . . . . . . . . 203 6,699
Vornado Realty Trust. . . . . . . . . . . . . . . . . . . . . . . 416 18,122
Walden Residential Properties, Inc. . . . . . . . . . . . . . . . 206 5,201
Washington Real Estate Investment Trust . . . . . . . . . . . . . 416 7,150
Weingarten Realty Investors . . . . . . . . . . . . . . . . . . . 205 9,174
-----------
2,870,100
-----------
UTILITIES - WATER - 2.47%
Western Water Company (a) . . . . . . . . . . . . . . . . . . . . 7800 81,900
-----------
Total Common Stocks (Cost $3,070,374) . . . . . . . . . . . . . 3,231,381
-----------
-----------
SHORT-TERM INVESTMENT - 3.40%
INVESTMENT COMPANY - 3.40%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares (Cost $112,839). . . . . 112,839 112,839
-----------
Total Investments (Cost $3,183,213 (b)) - 100.83%. . . . . . . . . . . 3,344,220
Liabilities In Excess of Other Assets - (0.83)%. . . . . . . . . . . . (27,506)
-----------
Net Assets - 100.00% . . . . . . . . . . . . . . . . . . . . . . . . . $3,316,714
-----------
-----------
</TABLE>
- --------------------
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $3,219,924. Unrealized
appreciation/(depreciation) of investments for federal income tax purposes
is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $202,119
Unrealized depreciation (77,823)
--------
Net unrealized appreciation $124,296
--------
--------
</TABLE>
See Notes to Pro Forma Financial Information.
<PAGE>
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GRANDVIEW
GRANDVIEW S&P-Registered FBR REALTY
REALTY GROWTH Trademark- REIT GROWTH
FUND INDEX FUND ADJUSTMENTS FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost $2,271,491, $911,722 and $3,183,213,
respectively) $2,387,808 $956,412 - $3,344,220
Cash 28,795 - (6,724)(a) 22,071
Income receivable 5,032 5,139 - 10,171
Receivable for investments sold 23,929 19,432 - 43,361
Receivable for Fund shares sold 2,500 - - 2,500
Due from adviser 5,849 4,735 7,915 (b) 18,499
Prepaid expenses 2,547 - - 2,547
Other assets - 1,232 - 1,232
Deferred offering expenses, net 12,253 12,253 33,394 (c) 57,900
------------ ------------ ------------ ------------
TOTAL ASSETS 2,468,713 999,203 34,585 3,502,501
------------ ------------ ------------ ------------
LIABILITIES
Payable for investments purchased 79,550 8,789 - 88,339
Payable for Fund shares redeemed 4,405 - - 4,405
Offering expenses payable - - 57,900 (c) 57,900
Distributions payable - 21,395 - 21,395
Disbursements in excess of cash on demand deposit - 6,724 (6,724)(a) -
Accrued expenses 8,537 7,228 (2,017)(b) 13,748
------------ ------------ ------------ ------------
TOTAL LIABILITIES 92,492 44,136 49,159 185,787
------------ ------------ ------------ ------------
NET ASSETS (APPLICABLE TO 163,820, 86,343 AND 228,637* SHARES
OUTSTANDING, RESPECTIVELY; UNLIMITED SHARES OF NO PAR VALUE
BENEFICIAL INTEREST AUTHORIZED) $2,376,221 $955,067 ($14,574)(d) $3,316,714
------------ ------------ ------------ ------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $14.51 $11.06 N/A $14.51
------ ------ --- ------
MAXIMUM OFFERING PRICE PER SHARE** $15.19 $11.40 N/A $15.35
------ ------ --- ------
NET ASSETS CONSISTS OF
Paid-in capital $2,090,161 $911,481 ($14,574)(d) $2,987,068
Distribution in excess of net realized loss - (1,104) - (1,104)
Undistributed net realized gain on investments 169,743 - - 169,743
Net unrealized appreciation on investments 116,317 44,690 - 161,007
------------ ------------ ------------ ------------
NET ASSETS $2,376,221 $955,067 ($14,574) $3,316,714
------------ ------------ ------------ ------------
</TABLE>
- --------------------
* The number of shares outstanding for the FBR Realty Growth Fund were
adjusted to arrive at the same net asset value per shares of the GrandView
Realty Growth Fund.
** Net asset value plus a maximum sales charge of 4.50%, 3.00% and 5.50%,
respectively, of the offering price.
(a) Reclassification of an overdraft to "Cash".
(b) Adjustment to reflect decrease in expenses.
(c) Unamortized organization expense for the existing GrandView funds have been
written-off. Adjustment includes estimated organization
expenses for the FBR Realty Growth Fund of $57,900.
(d) Reflects additional estimated expenses expected to be incurred by the FBR
Realty Growth Fund net of any fee waivers and expense
reimbursements.
See Notes to Pro Forma Financial Information.
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GRANDVIEW
GRANDVIEW S&P-Registered FBR REALTY
REALTY GROWTH Trademark- REIT GROWTH
FUND INDEX FUND ADJUSTMENTS FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $43,596 $72,221 - $115,817
------------ ------------ ------------ ------------
EXPENSES
Investment advisory fees 16,842 5,370 9,968 (a) 32,180
Fund administration fees 5,053 3,452 (6,092)(b) 2,413
Distribution and service fees 4,211 1,912 1,922 (c) 8,045
Custody fees 8,883 5,866 (3,749)(d) 11,000
Registration and filing administration fees 3,099 2,425 (5,524)(e) 0
Registration and filing expenses 9,190 8,710 13,305 (e) 31,205
Fund accounting fees 16,200 16,200 (28,243)(f) 4,157
Securities pricing fees 2,878 2,595 (5,473)(f) 0
Audit fees 7,500 7,500 (12,000)(g) 3,000
Legal fees 5,095 5,254 (349)(h) 10,000
Shareholder recordkeeping fees 1,475 629 42,896 (i) 45,000
Shareholder servicing expenses 4,473 3,464 (7,937)(i) 0
Printing expenses 1,846 1,585 5,569 (j) 9,000
Amortization of deferred organization expenses 5,442 5,442 24,506 (k) 35,390
Trustees fees and meeting expenses 410 512 8,078 (l) 9,000
Other operating expenses 3,103 3,318 (4,421)(m) 2,000
------------ ------------ ------------ ------------
TOTAL EXPENSES 95,700 74,234 32,457 202,391
------------ ------------ ------------ ------------
LESS:
Expense reimbursements (42,126) (49,107) (7,915)(n) (99,148)
Investment advisory fees waived (16,842) (5,370) (9,968)(o) (32,180)
Securities pricing fees waived - (2,595) 0 (2,595)
Distribution fees waived (3,054) (1,054) 0 (4,108)
------------ ------------ ------------ ------------
NET EXPENSES 33,678 16,108 14,574 64,360
------------ ------------ ------------ ------------
NET INVESTMENT INCOME 9,918 56,113 (14,574) 51,457
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 327,769 232,663 0 560,432
Increase/(Decrease) in unrealized appreciation
on investments 25,711 (46,110) 0 (20,399)
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 353,480 186,553 0 540,033
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $363,398 $242,666 ($14,574) $591,490
------------ ------------ ------------ ------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.00% 1.05% N/A 2.00%
------------ ------------ ------------ ------------
</TABLE>
- ------------------------------
(a) Total combined average net assets for March 31, 1998, multiplied by the
1.00% investment advisory fee.
(b) Total combined average net assets for March 31, 1998, multiplied by the
0.075% fund administration fee.
(c) Total combined average net assets for March 31, 1998, multiplied by the
0.25% distribution and service fee.
(d) Custody fees are based on minimum annual fee of $6,000 plus transaction
charges.
(e) "Registration and filing administration fees" and "Registration and filing
expenses" will be combined for the FBR Realty Growth Fund and assumes Blue
Sky registration for three classes of shares.
(f) "Fund accounting fees" and "Securities pricing fees" will be combined for
the FBR Realty Growth Fund. Total combined average net assets for March
31, 1998, multiplied by 0.095% plus out-of-pocket charges.
(g) Audit fees are based on $50,000 for the entire FBR Family of Funds and
allocated to each fund based on each Fund's relative net assets.
(h) Legal fees are based on $105,000 for the entire FBR Family of Funds and
allocated to each fund based on each Fund's relative net assets.
(i) "Shareholder recordkeeping fees" and "Shareholder servicing expenses" will
be combined for the FBR Realty Growth Fund and redesignated as transfer
agency fees. The fees are based on a monthly minimum of $9,000 for the
ntire FBR Family of Funds and allocated based on each fund's relative net
assets plus out-of-pocket charges.
(j) Printing expenses are based on $65,000 for the entire FBR Family of Funds
and allocated to each fund based on each Fund's relative net assets.
(k) Unamortized organization expenses for the existing GrandView funds have
been written-off.
(l) Trustees fees and meeting expenses are based on $34,125 for the entire FBR
Family of Funds and are allocated equally to each fund.
(m) Adjustment to reflect expected savings due to economies of scale.
(n) Adjustment to limit the annual expenses of the FBR Realty Growth Fund to an
operating expense ratio of 2.00% of its average net assets.
(o) Adjustment to reflect the additional waivers due to an increase in the
investment advisory fees over that charged to the GrandView S&P-Registered
Trademark- REIT Index Fund.
See Notes to Pro Forma Financial Information.
<PAGE>
PRO FORMA STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GRANDVIEW S&P FBR REALTY
GRANDVIEW REALTY -Registered Trademark- GROWTH FUND
GROWTH FUND REIT INDEX FUND ADJUSTMENTS ---------------
-------------------- --------------------- -------------- Year Ended
Year Ended March 31, Year Ended March 31, Year Ended March 31, 1998
1998 1997 1998 1997 March 31, 1998 (unaudited)
-------------------- --------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS
Operations
Net investment income $9,918 $17,274 $56,113 $26,606 ($14,574) $51,457
Net realized gain/(loss) from investment
transactions 327,769 125,083 232,663 (3,402) - 560,432
Increase/(Decrease) in unrealized
appreciation on investments 25,711 86,406 (46,110) 91,681 - (20,399)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations 363,398 228,763 242,666 114,885 (14,574) 591,490
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (9,918) (17,274) (56,113) (26,606) - (66,031)
Tax return of capital - (948) (14,856) (5,692) - (14,856)
Net realized gain from investment
transactions (158,026) (125,083) (229,983) (479) - (388,009)
---------- ---------- ---------- ---------- ---------- ----------
Decrease in net assets resulting
from distributions (167,944) (143,305) (300,952) (32,777) - (468,896)
---------- ---------- ---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Increase in net assets resulting from
capital share transactions 1,022,744 890,543 (453,745) 1,132,197 - 568,999
---------- ---------- ---------- ---------- ---------- ----------
Total increase/(decrease) in net assets 1,218,198 976,001 (512,031) 1,214,305 (14,574) 691,593
NET ASSETS
Beginning of year 1,158,023 182,022 1,467,098 252,793 - 2,625,121
---------- ---------- ---------- ---------- ---------- ----------
End of year $2,376,221 $1,158,023 $955,067 $1,467,098 ($14,574) $3,316,714
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
See Notes to Pro Forma Financial Information.
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF COMBINATION
The unaudited Pro Forma Portfolio of Investments, Pro Forma Statement of
Assets and Liabilities, Pro Forma Statement of Operations and Pro Forma
Statement of Changes in Net Assets reflect accounts of the GrandView Realty
Growth Fund (the "Growth Fund") and GrandView S&P-Registered Trademark-
REIT Index Fund ("Index Fund") (each a "GrandView Fund" and collectively,
the "GrandView Funds") for the year ended March 31, 1998. These statements
have been derived from the GrandView Funds' audited financial statements
for the year ended March 31, 1998
The pro forma statements gives effect to the proposed transfer of assets
and stated liabilities of the Growth Fund and Index Fund in a tax free
exchange for shares of the FBR Realty Growth Fund (the 'Fund"). In
accordance with generally accepted accounting principles, the historical
cost of investment securities will be carried forward as the cost basis to
the Fund and the results of operations for pre-combinations periods for the
GrandView Funds will not be restated.
The Pro Forma Portfolio of Investments, Pro Forma Statement of Assets and
Liabilities, Pro Forma Statements of Operations and Pro Forma Statement of
Changes in Net Assets should be read in conjunction with the historical
financial statements of the GrandView Funds included or incorporated by
reference in the Statement of Additional Information.
2. SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates.
PORTFOLIO VALUATION
The net asset value of the Fund will be determined as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., New
York time) on each business day. The Fund's securities will be valued at
the last sale price on the securities exchange or national securities
market on which such securities primarily are traded. Securities not listed
on an exchange or national securities market, or securities in which there
were no transactions, will be valued at the average of the most recent bid
and asked prices, except in the case of open short positions where the
asked price is used for valuation purposes. Bid price will be used when no
asked price is available. Short-term investments will be carried at
amortized cost, which approximates value. Any securities or other assets
for which recent market quotations are not readily available will be valued
at fair value as determined in good faith by the Fund's Board of Trustees.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Trustees, will be valued at fair value in
good faith by the Board of Trustees. The Board of Trustees will review the
method of valuations on a current basis. Expenses and fees, including the
investment advisory fee and distribution fee, will be accrued daily and
taken into account for the purpose of determining the net asset value of
the Fund's shares. Because of the differences in operating expenses
incurred by each class, the per share net asset value of each class will
differ.
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)(CONTINUED)
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Transactions will be accounted for on the trade date (the day in which the
order to buy or sell is executed). The cost of investments sold will be
determined by use of the specific identification method for both financial
reporting and income tax purposes in determining realized gains and losses
on investments. Interest income will be recorded on the accrual basis.
Dividend income will be recorded on the ex-dividend date. Expenses not
directly attributable to a specific fund will be allocated based on
relative net assets of each fund comprising the FBR Family of Funds. The
Fund's net investment income (other than distribution fees) and unrealized
and realized gains or losses will be allocated daily to each class of
shares based upon the relative proportion of net assets of each class at
the beginning of the day (after adjusting for current capital share
activity of the respective classes).
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income, if any, will be declared and paid at
least annually to shareholders. Distributions from net realized capital
gains, if any, will be distributed at least annually. Dividends and
distributions to shareholders will be recorded on the ex-dividend date.
Income and capital gain distributions will be determined in accordance with
U.S. federal income tax regulations which may differ from generally
accepted accounting principles. These "book/tax" differences will be either
considered temporary or permanent in nature. To the extent differences are
permanent in nature, such amounts will be reclassified within capital
accounts based on their U.S. federal tax-basis treatment, temporary
differences do not require reclassification.
U.S. FEDERAL TAX STATUS
No provision is made for U.S. federal income taxes as it is the Fund's
intention to continue to qualify for and elect the tax treatment applicable
to regulated investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended, and make the requisite distributions to
its shareholders which will be sufficient to relieve it from U.S. federal
income and excise taxes.
3. ORGANIZATION AND OFFERING EXPENSES
Estimated offering expenses for the Fund will be written-off during the
current fiscal year ending October 31, 1998. Organizational costs of the
Growth Fund and Index Fund have been written-off in conjunction with the
adjustments made to the Pro Forma Statement of Assets and Liabilities.
4. CAPITAL SHARES
The pro forma net asset value per share assumes the issuance of shares of
the Fund at March 31, 1998, in connection with the proposed reorganization.
The number of shares assumed to be issued is equal to the net asset value
of the Growth Fund and Index Fund as of March 31, 1998, after adjustments
for the proposed reorganization, divided by the net asset value per share
of the Growth Fund as of March 31, 1998.
<PAGE>
PART C. OTHER INFORMATION
Item 15. Indemnification
Article X, Section 10.02 of the Registrant's Delaware Trust Instrument,
filed as Exhibit 2 hereto, provides for the indemnification of Registrant's
Trustees and officers, as follows:
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection 10.02(b):
(i) every person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against
all expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and
against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and
the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office or (B) not to
have acted in good faith in the reasonable belief that his action was in the
best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office, (A) by the court or other body approving the
settlement; (B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parities to the matter based upon a
review of readily available facts (as opposed to a full trail-type inquiry);
or (C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons, and other
persons may be
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<PAGE>
entitled by Contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described
in Subsection (a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the Trust or Series if it is ultimately determined that
he is not entitled to indemnification under this Section 10.02; provided,
however, that either (i) such Covered Person shall have provided appropriate
security for such undertaking, (ii) the Trust is insured against losses
arising out of any such advance payments or (iii) either a majority of the
Trustees who are neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
trail-type inquiry or full investigation), that there is reason to believe
that such Covered Person will be found entitled to indemnification under this
Section 10.02."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers, and controlling persons or
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Investment
Company Act of 1940, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such trustee, officer, or controlling
person in connection with the securities being registered, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 16. Exhibits.
(1) (a) Certificate of Trust. (1)
(1) (b) Delaware Trust Instrument dated April 30,1 996. (1)
(2) By-laws. (1)
(3) Not Applicable.
(4) Agreement and Plan of Reorganization. (See Exhibit A to the Combined Proxy
Statement and Prospectus.)
(5) See Exhibits 1 and 2.
(6) (a) Form of Investment Advisory Agreement between the Registrant and FBR
Fund Advisers, Inc. (2)
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<PAGE>
(6) (b) Form of Notice to Investment Advisory Agreement with respect to the
FBR Realty Growth Fund. (5)
(7) (a) Form of Amended Distribution Agreement between the Registrant and
Friedman, Billings, Ramsey & Co., Inc. (5)
(7) (b) Form of Amended Distribution Agreement between the Registrant and FBR
Investment Services, Inc. (5)
(7) (c) Form of Notice to Distribution Agreements with respect to the FBR
Realty Growth Fund. (5)
(8) Not Applicable.
(9) (a) Form of Custodian Agreement between the Registrant and Custodial Trust
Company. (2)
(9) (b) Form of Sub-Custodian Agreement between Custodial Trust Company and
Citibank N.A. (2)
(9) (c) Form of Notice to Custodian Agreement with respect to the FBR Realty
Growth Fund. (5)
(10) (a) Form of Rule 12b-1 Distribution Plan for Class A. (4)
(10) (b) Form of Amended Rule 12b-1 Service and Distribution Plan for
Class B. (5)
(10) (c) Form of Rule 12b-1 Service and Distribution Plan for Class C. (4)
(10) (d) Multi-class Plan. (4)
(11) Opinion of counsel that shares of Registrant are validly issued, fully
paid, and non-assessable (including consent of such firm).
(12) Opinion of counsel as to tax matters and consequences to shareholders
(including consent of such firm).
(13) Not Applicable.
(14) Consent of Independent Accountants
(15) None.
(16) Powers of Attorney. (3)
(17) Form of Proxy Card.
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<PAGE>
- ------------------------------------
(1) Incorporated by reference to the Registrant's Initial Registration
Statement on Form N-1A as filed on June 11, 1996.
(2) Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement as filed on December 20, 1996.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement as filed on June 27, 1997.
(4) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement as filed on April 17, 1998.
(5) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement as filed on July 1, 1998.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended, the reoffering prospectus will
contain the information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
-38-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, D.C. on
the 10th day of July, 1998.
FBR Family of Funds
By: *
-----------------------
C. Eric Brugel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated:
Name Title Date
C. Eric Brugel * President and Trustee (Chief July 10, 1998
Executive Officer)
Eric F. Billings * Chairman, Trustee, July 10, 1998
Chief Financial Officer and Treasurer
F. David Fowler * Trustee July 10, 1998
Michael A. Willner * Trustee July 10, 1998
George W. Grosz Trustee July 10, 1998
* By: /s/ Paul F. Roye
Paul E. Roye
Attorney-in-Fact
-39-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(11) Opinion of Counsel that shares of
Registrant are validly issued, fully
paid and non-assessable (including
consent of such firm)
(12) Opinion of Counsel regarding tax matters
(14) Consent of Independent Accountant
(17) Form of Proxy Card
-40-
<PAGE>
EXHIBIT 11
DECHERT PRICE & RHOADS
1775 Eye Street, N.W.
Washington, D.C. 20006
July 10, 1998
The FBR Family of Funds
1001 Nineteenth Street North
Arlington, Virginia 22209
Dear Sirs:
We have acted as counsel to the FBR Family of Funds, a Delaware
business trust, (the "Company"), and we have a general familiarity with the
Company's business operations, practices and procedures. You have asked for
our opinion regarding the issuance of Class A shares of beneficial interest
by the Company in connection with the acquisition by the FBR Realty Growth
Fund, a series of the Company, of the assets of the GrandView Realty Growth
Fund and the GrandView S&P REIT Index Fund, series of the GrandView
Investment Trust, which will be registered on a Form N-14 Registration
Statement (the "Registration Statement") to be filed by the Company with the
Securities and Exchange Commission.
We have examined originals or certified copies, or copies otherwise
identified to our satisfaction as being true copies, of various records of
the Company and such other instruments, documents and records as we have
deemed necessary in order to render this opinion. We have assumed the
genuineness of all signatures, the authenticity of all documents examined by
us and the correctness of all statements of fact contained in those documents.
On the basis of the foregoing, we are of the opinion that the Class
A shares of beneficial interest of the Company being registered under the
Securities Act of 1933 in the Registration Statement will be legally and
validly issued, fully paid and non-assessable by the Company, upon transfer
of the assets of the GrandView Realty Growth Fund and the GrandView S&P REIT
Index Fund pursuant to the terms of the Agreement and Plan of Reorganization
included in the Registration Statement.
We hereby consent to the filing of this opinion with and as part of
the Registration Statement.
Very truly yours,
/s/ Dechert Price & Rhoads
DECHERT PRICE & RHOADS
<PAGE>
EXHIBIT 12
DECHERT PRICE & RHOADS
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
July 10,1998
Grandview Investment Trust
on behalf of GrandView Realty Growth Fund and GrandView S&P REIT Index Fund
107 North Washington Street
Rocky Mountain, North Carolina 27803
The FBR Family Of Funds
on behalf of FBR Realty Growth Fund
1001 Nineteenth Street North
Arlington, Virginia 22209
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences to the FBR Realty Growth Fund (the "Acquiring Fund"), a separate
investment series of the FBR Family of Funds (the "Company"), a Delaware
business trust, to the GrandView Realty Growth Fund (the "Realty Growth Fund")
and the GrandView S&P REIT Index Fund (the "Index Fund") (collectively, the
"Acquired Funds"), which are separate investment series of GrandView Investment
Trust (the "Trust"), a Massachusetts business trust in connection with the
proposed transfer of substantially all of the assets of the Acquired Funds to
Acquiring Fund and the assumption by Acquiring Fund of certain Liabilities of
the Acquired Funds, followed by the distribution of such Acquiring Fund Shares
received by the Acquired Funds in complete liquidation of the Acquired Funds,
all pursuant to the proposed reorganization (the "Reorganization") described in
the Agreement and Plan of Reorganization (the "Plan") to be executed by Company
on behalf of Acquiring Fund and by the Trust on behalf of the Acquired Funds and
included as an exhibit to Form N-14.
For purposes of this opinion, we have examined and rely upon (1) the Plan,
(2) the Form N-14, filed by Acquiring Fund on [July 10, 1998], with the
Securities and Exchange Commission, and (3) such other documents and instruments
as we have deemed necessary or appropriate for purposes of rendering this
opinion.
This opinion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), United States Treasury regulations, judicial decisions and
administrative rulings and pronouncements of the Internal Revenue Service, all
as in effect on the date hereof. This opinion is conditioned upon (a) the
Reorganization taking place in the manner described in the Plan and the Form
N-14 referred to above, (b) the facts and representations contained in the
representation letters referred to below being true and accurate as of the
closing date of the Reorganization, and (c) there being no change in the Code,
United States Treasury regulations, judicial decisions, or
<PAGE>
Grandview Investment Trust
The FBR Family Of Funds
July 10, 1998
Page 2
administrative rulings and pronouncements of the Internal Revenue Service
between the date hereof and the closing date of the Reorganization.
This opinion is further conditioned upon our receiving such executed
letters of representation from Company, the Trust, the Acquired Funds, and
Acquiring Fund as we shall request. This opinion shall be effective only at
such time as we receive those letters and confirm our opinion in writing on the
closing date of the Reorganization and, in the absence of such confirmation,
will be deemed to have been withdrawn.
Based upon the foregoing, it is our opinion that:
(1) The acquisition by Acquiring Fund of substantially all of the assets
of the Acquired Funds in exchange solely for Acquiring Fund shares and
the assumption by Acquiring Fund of certain liabilities of the
Acquired Funds, followed by the distribution of such Acquiring Fund
shares to the Acquired Funds shareholders in exchange for their
Acquired Funds shares in complete liquidation of the Acquired Funds,
will constitute a reorganization within the meaning of Section 368(a)
of the Code. Acquiring Fund and the Acquired Funds will each be "a
party to a reorganization" within the meaning of Section 368(b) of the
Code.
(2) No gain or loss will be recognized to the Acquired Funds upon the
transfer of substantially all of its assets to Acquiring Fund in
exchange solely for Acquiring Fund shares and the assumption by
Acquiring Fund of certain liabilities of the Acquired Funds, or upon
the distribution to the Acquired Funds shareholders of the Acquiring
Fund shares.
(3) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the Acquired Funds' assets in exchange for Acquiring Fund shares.
(4) The basis of the assets of the Acquired Funds in the hands of
Acquiring Fund will be, in each instance, the same as the basis of
those assets in the hands of the Acquired Funds immediately prior to
the Reorganization exchange.
(5) The holding period of the Acquired Funds' assets in the hands of
Acquiring Fund will include the period during which the assets were
held by the Acquired Funds.
(6) No gain or loss will be recognized to the Acquired Funds shareholders
upon the receipt of Acquiring Fund shares solely in exchange for the
Acquired Funds shares.
<PAGE>
Grandview Investment Trust
The FBR Family Of Funds
July 10, 1998
Page 3
(7) The basis of the Acquiring Fund shares received by the Acquired Funds
shareholders will be the same as the basis of the Acquired Funds
shares surrendered in exchange therefor.
(8) The holding period of the Acquiring Fund shares received by the
Acquired Funds shareholders will include the holding period of the
Acquired Funds shares surrendered in exchange therefor, provided that
such Acquired Funds shares were held as capital assets in the hands of
the Acquired Funds shareholders upon the date of the exchange.
We express no opinion as to the federal income tax consequences of the
Reorganization except as expressly set forth above, or as to any transaction
except those consummated in accordance with the Plan.
This opinion must be confirmed by us in writing on the closing date of the
Reorganization or will be deemed to have been withdrawn.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-14 filed by Acquiring Fund with the Securities
and Exchange Commission.
Very truly yours,
/s/ Dechert Price & Rhoads
DECHERT PRICE & RHOADS
<PAGE>
EXHIBIT 14
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
FBR Family of Funds on Form N-14 of our reports on GrandView S&P REIT Index Fund
and GrandView Realty Growth Fund dated April 24, 1998 appearing in the Annual
Reports for the year ended March 31, 1998, and to the reference to us under the
heading "Financial Statements and Experts" in the Prospectus/Proxy Statement,
which is part of this Registration Statement.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
July 10, 1998
<PAGE>
EXHIBIT 17a
THE GRANDVIEW INVESTMENT TRUST
GrandView Realty Growth Fund
This Proxy is Solicited on Behalf of the Board of Trustees. The undersigned
revoke(s) all previous proxies and appoint(s) Winsor H. Aylesworth and
Lucille C. Carlson, or either one of them, attorneys, with full power of
substitution to vote all shares of the GrandView Realty Growth Fund (Fund) of
the GrandView Investment Trust (Trust) which the undersigned is entitled to
vote at the Special Meeting of Shareholders of the Fund to be held at
_________ on September __, 1998 at __ a.m. (Eastern Time), and at any
adjournments thereof.
Please refer to the Proxy Statement for a discussion of this matter.
Complete, sign, and date this proxy card and return it promptly in the
postage-paid envelope provided to ______________.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOX BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL. As
to any other matter, said attorneys will vote in accordance with their best
judgment. THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE PROPOSAL.
1. To approve an Agreement and Plan FOR AGAINST ABSTAIN
of Reorganization providing for the
acquisition of all or substantially
all of the assets of the Fund by the
FBR Realty Growth Fund ("FBR Growth
Fund"), a series of the FBR Family of
Funds, in exchange for shares of FBR
Growth Fund and assumption of certain
identified liabilities of the Fund by --- --- ---
FBR Growth Fund, and for the
distribution of such shares to
shareholders of the Fund in
liquidation of the Fund.
____________ I plan to attend the Meeting.
Receipt of the Notice of the Meeting and the accompanying Proxy Statement is
hereby acknowledged.
Please sign your name exactly as it appears in the registration. If shares
are held in the name of two or more persons, in whatever capacity, only ONE
need sign. When signing in a fiduciary capacity, such as executor or
attorney, please so indicate. When signing on behalf of a partnership or
corporation, please indicate title.
Dated: , 1998
---------------------------
Signatures
<PAGE>
EXHIBIT 17b
THE GRANDVIEW INVESTMENT TRUST
GrandView S&P REIT Index Fund
This Proxy is Solicited on Behalf of the Board of Trustees. The undersigned
revoke(s) all previous proxies and appoint(s) Winsor H. Aylesworth and
Lucille C. Carlson, or either one of them, attorneys, with full power of
substitution to vote all shares of the GrandView S&P REIT Index Fund (Fund)
of the GrandView Investment Trust (Trust) which the undersigned is entitled
to vote at the Special Meeting of Shareholders of the Fund to be held at
_________ on September __, 1998 at __ a.m. (Eastern Time), and at any
adjournments thereof.
Please refer to the Proxy Statement for a discussion of this matter.
Complete, sign, and date this proxy card and return it promptly in the
postage-paid envelope provided to ______________.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOX BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL. As
to any other matter, said attorneys will vote in accordance with their best
judgment. THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE PROPOSAL.
1. To approve an Agreement and Plan FOR AGAINST ABSTAIN
of Reorganization providing for the
acquisition of all or substantially
all of the assets of the Fund by the
FBR Realty Growth Fund ("FBR Growth
Fund"), a series of the FBR Family of
Funds, in exchange for shares of FBR
Growth Fund and assumption of certain
identified liabilities of the Fund by --- --- ---
FBR Growth Fund, and for the
distribution of such shares to
shareholders of the Fund in
liquidation of the Fund.
____________ I plan to attend the Meeting.
Receipt of the Notice of the Meeting and the accompanying Proxy Statement is
hereby acknowledged.
Please sign your name exactly as it appears in the registration. If shares
are held in the name of two or more persons, in whatever capacity, only ONE
need sign. When signing in a fiduciary capacity, such as executor or
attorney, please so indicate. When signing on behalf of a partnership or
corporation, please indicate title.
Dated: , 1998
---------------------------
Signatures
