As filed with the Securities and Exchange Commission on August 1, 1996
File Nos. 33-89628
811-8978
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 2
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
GRANDVIEW INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
105 North Washington St., Rocky Mount, NC 27802
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 800-525-3863
Winsor H. Aylesworth, 127 Grandview Drive,
Glastonbury, CT 06033
(Name and Address of Agent for Service)
Copy to:
Roger P. Joseph, Bingham, Dana & Gould, 150 Federal Street,
Boston, MA 02110
It is proposed that this filing will become effective immediately upon filing
pursuant to paragraph (b) of Rule 485.
Registrant has registered an indefinite number of shares of Registrant and any
series thereof hereinafter created, under the Securities Act of 1933, as
amended, pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Rule 24f-2 Notice for the year ended March 31, 1996 was filed on
May 30, 1996.
<PAGE>
PART A
PROSPECTUS
<PAGE>
PROSPECTUS
THE GRANDVIEW FUNDS
Series of the GrandView(SM) Investment Trust
GrandView Investment Trust (the "Trust") is an open-end, registered management
investment company offering three mutual funds which are described in this
Prospectus: GrandView REIT Index Fund, GrandView Realty Growth Fund, and
GrandView Healthcare Realty Income Fund (the "Funds"). Each of the Funds (other
than the GrandView REIT Index Fund) is a non-diversified fund. The Funds'
investment adviser is GrandView Advisers, Inc. (the "Adviser").
The Funds are designed to provide an investor with focused investment
alternatives within the real estate industry. Each Fund invests primarily in
securities of companies in the real estate industry, including real estate
investment trusts ("REITs"). The Funds differ in the degree to which they
emphasize income or capital growth, and employ different policies to achieve
their objectives:
GrandView REIT Index Fund seeks to provide investment results corresponding to
the performance of the GrandView REIT Index by investing primarily in the equity
securities comprising the Index. The GrandView REIT Index was developed and is
maintained by the Adviser and currently consists of the equity securities of 60
REITs.
GrandView Realty Growth Fund seeks long-term growth of capital, with current
income as a secondary objective, by investing primarily in equity securities of
real estate companies.
GrandView Healthcare Realty Income Fund seeks to provide current income, with
long-term growth of capital as a secondary objective, by investing primarily in
debt and equity securities of companies in the healthcare sector of the real
estate industry.
Mutual fund shares are not deposits or obligations of, or endorsed or guaranteed
by, any bank or insured depositary institution, nor are they insured or
otherwise protected by the Federal Deposit Insurance Corporation or any other
agency. Investments in mutual funds involve investment risk, including possible
loss of principal.
This Prospectus sets forth concisely the basic information about the Trust and
the Funds that a prospective investor should know before investing. Investors
are advised to read this Prospectus and retain it for future reference. A
Statement of Additional Information dated the same date as this Prospectus has
been filed with the Securities and Exchange Commission and is available without
charge through the Distributor, Capital Investment Group, Inc., 17 Glenwood
Avenue, Raleigh, North Carolina 27622, or by calling (919) 831-2370. The
Statement of Additional Information is incorporated into this Prospectus by
reference.
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. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
August 1, 1996
<PAGE>
TABLE OF CONTENTS
EXPENSE INFORMATION............................................... 3
FINANCIAL HIGHLIGHTS.............................................. 4
ADVANTAGES OF INVESTING........................................... 6
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS...................7
MANAGEMENT OF THE FUNDS...........................................11
INFORMATION ABOUT FUND SHARES.....................................14
How to Purchase Shares............................ 14
Net Asset Value and Pricing of Orders............. 17
How to Exchange Shares............................ 17
How to Redeem Shares.............................. 17
Dividends and Distributions....................... 19
Tax Matters....................................... 19
Description of Shares and Voting Rights........... 21
APPENDIX A: DESCRIPTION OF BOND RATINGS..........................22
APPENDIX B: CERTAIN INVESTMENT PRACTICES.........................25
4
<PAGE>
EXPENSE INFORMATION
The following table is designed to help you understand the charges and expenses
that you, as a shareholder, will bear directly or indirectly when you invest in
a Fund.
<TABLE>
<CAPTION>
Healthcare
REIT Realty Realty
Index Growth Income
Fund Fund Fund
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchases (1) 3.00% 4.50% 4.50%
Maximum Sales Charge on
Reinvestment of Dividends None None None
Deferred Sales Charge None None None
Redemption Fee 1.00% (2) None None
Exchange Fee None None None
ANNUAL OPERATING EXPENSES
(after fee waivers and expense reimbursements)
(as a percentage of average net assets)
Management Fees (3) 0.00% 0.00% 0.00%
12b-1 Fees None (4) 0.25% 0.25%
Other Expenses (3) 1.05% 1.75% 1.50%
----- ----- -----
Total Operating Expenses (3) 1.05% 2.00% 1.75%
</TABLE>
(1) Reduced for larger purchases. Certain purchases by participants in a
"Group Plan" and certain other investors are not subject to an initial sales
charge. See "Information About Fund Shares -- How to Purchase Shares."
(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. See "Information About Fund Shares -- How to Redeem Shares."
(3) The "Total Operating Expenses" shown above are based on actual operating
expenses incurred by each Fund for the period from July 3, 1995 (commencement of
operations) to March 31, 1996, which, after fee waivers and expense
reimbursements, were 1.05%, 2.00%, and 1.75% of average net assets of the
GrandView REIT Index, Realty Growth, and Healthcare Realty Income Funds,
respectively, but restated to reflect the expenses anticipated to be incurred by
the Funds for the current fiscal year (assuming payment of the 12b-1 fees
described under footnote 4 below). Absent such waivers and reimbursements, the
percentages for "Management Fees" and "Total Operating Expenses" (annualized)
for the fiscal year ended March 31, 1996 would have been 0.35% and 20.63%,
respectively, for the REIT Index Fund, 1.00% and 31.34%, respectively, for the
Realty Growth Fund, and 0.70% and 34.51%, respectively, for the Healthcare
Realty Income Fund. The Adviser has voluntarily agreed to limit the expenses of
each Fund. Under this arrangement, the Adviser will waive management fees and
reimburse other operating expenses to the extent needed to limit each Fund's
expenses to the percentage of its average net assets shown above as "Total
Operating Expenses." This agreement applies for the fiscal year ending March 31,
1997, and there is no assurance that it will be extended after that date.
(4) The Trust's Distribution Plan permits the imposition of a 12b-1 fee not to
exceed 0.25% of each Fund's net assets. There is no current intention to impose
this fee with respect to the REIT Index Fund, and shareholders of that Fund will
be given at least 60 days written notice before any such fee is imposed.
3
<PAGE>
Example: You would pay the following fees and expenses on a $1,000 investment in
a Fund, assuming a 5% annual return, reinvestment of all dividends and
distributions, and constant expenses, with or without redemption at the end of
each time period:
Fund 1 Year 3 Years 5 Years 10 Years
- ---- ------ ------- ------- --------
REIT Index Fund $40 $ 62 $ 86 $154
Realty Growth Fund $64 $105 $148 $267
Healthcare Realty
Income Fund $62 $ 98 $136 $242
The example is designed for information purposes only, and should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
For further information regarding investment advisory fees, l2b-1 fees and other
expenses of the Funds, see "Management of the Funds -- Adviser," "Management of
the Funds -- Distributor" and "Information about Fund Shares--How to Purchase
Shares."
FINANCIAL HIGHLIGHTS
The financial data included in the tables below has been derived from audited
financial statements of the Funds. The financial data for the period from July
3, 1995 (commencement of operations) to March 31, 1996 has been audited by KPMG
Peat Marwick LLP, independent auditors, whose reports covering such period are
included in the Statement of Additional Information. The information in the
tables below should be read in conjunction with each Fund's latest audited
financial statements and notes thereto, which are also included in the Statement
of Additional Information, a copy of which may be obtained at no charge by
calling the Funds at (800) 525-3863. Further information about the performance
of the Funds is contained in the Annual Report of the Funds, a copy of which may
be obtained at no charge by calling the Funds.
GRANDVIEW REIT INDEX FUND
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Period Ended
March 31, 1996(a)
-----------------
<S> <C>
Net asset value, beginning of period (initial offering price) $10.00
Income from investment operations
Net investment income 0.33
Net realized and unrealized gain on investments 0.32
--------
Total from investment operations 0.65
--------
Distributions to shareholders from
Net investment income (0.33)
Net realized gain from investment transactions (0.11)
--------
Total distributions (0.44)
--------
Net asset value, end of period $10.21
========
Total return (b) 6.40%
========
Ratios/supplemental data
Net assets, end of period $252,793
========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 20.63%(c)
After expense reimbursements and waived fees 1.05%(c)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (13.66)%(c)
After expense reimbursements and waived fees 5.86%(c)
Portfolio turnover rate 47.46%
</TABLE>
GRANDVIEW REALTY GROWTH FUND
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Period Ended
March 31, 1996(a)
-----------------
<S> <C>
Net asset value, beginning of period (initial offering price) $10.00
Income from investment operations
Net investment income 0.20
Net realized and unrealized gain on investments 0.36
--------
Total from investment operations 0.56
--------
Distributions to shareholders from
Net investment income (0.20)
Net realized gain from investment transactions (0.22)
Tax return of capital (0.05)
--------
Total distributions (0.47)
--------
Net asset value, end of period $10.09
========
Total return (b) 5.70 %
========
Ratios/supplemental data
Net assets, end of period $182,022
========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 31.34 %(c)
After expense reimbursements and waived fees 2.00 %(c)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (25.55)%(c)
After expense reimbursements and waived fees 3.62 % (c)
Portfolio turnover rate 44.44 %
</TABLE>
7
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
(For a Share Outstanding Throughout the Period)
<TABLE>
<CAPTION>
Period Ended
March 31, 1996(a)
-----------------
<S> <C>
Net asset value, beginning of period (initial offering price) $10.00
Income from investment operations
Net investment income 0.38
Net realized and unrealized gain on investments 1.10
--------
Total from investment operations 1.48
--------
Distributions to shareholders from
Net investment income (0.38)
Net realized gain from investment transactions (0.20)
Tax return of capital (0.02)
--------
Total distributions (0.60)
--------
Net asset value, end of period $10.88
========
Total return (b) 15.08 %
========
Ratios/supplemental data
Net assets, end of period $146,720
Ratio of expenses to average net assets ========
Before expense reimbursements and waived fees 34.51 %(c)
After expense reimbursements and waived fees 1.75 %(c)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (26.86)%(c)
After expense reimbursements and waived fees 5.81 %(c)
Portfolio turnover rate 52.74 %
</TABLE>
(a) For the period from July 3, 1995 (commencement of operations) to March 31,
1996.
(b) Total return does not reflect payment of a sales charge. Annualized total
return for the period is 8.69%, 7.73%, and 20.75%, for the REIT Index Fund,
Realty Growth Fund, and Healthcare Realty Income Fund, respectively.
(c) Annualized.
ADVANTAGES OF INVESTING
Investing in the Funds is a convenient way to participate in the real estate
industry or in particular sectors of the real estate industry. The Trust
believes that for most investors the Funds afford a number of advantages over
direct investment in real estate, including:
o greater diversification;
o continuous professional management;
o convenience; and
o liquidity.
8
<PAGE>
However, investment in the Funds also involves risks, and investment in any of
the Funds, or even in all of the Funds, should not be viewed as a complete
investment program. See "Investment Objectives and Policies--Risks of
Investing."
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Funds are designed to provide an investor with focused investment
alternatives within the real estate industry. Each Fund invests primarily in
securities of real estate investment trusts ("REITs") and other real estate
industry companies. The Funds differ in the degree to which they emphasize
income or capital growth, and employ different policies to achieve their
objectives.
As a fundamental policy (which cannot be changed without shareholder approval),
each Fund will invest at least 25% of its assets in the real estate industry.
Under normal circumstances, the assets of the Funds are invested as follows: the
assets of the REIT Index Fund are invested primarily in equity securities of
REITs comprising the GrandView REIT Index; at least 65% of the total assets of
the Realty Growth Fund are invested in equity securities of REITs and other real
estate industry companies; and at least 65% of the total assets of the
Healthcare Reality Income Fund are invested in debt and equity securities of
REITs and of other real estate industry companies and in mortgage-backed
securities. For these purposes, 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
Funds will invest 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 Funds will invest include bonds, notes
and other short-term debt obligations. The mortgage-backed securities in which
the Funds will invest include mortgage pass-through certificates, real estate
mortgage investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs").
Each Fund (other than the REIT Index Fund) may also invest up to 35% of its
total assets in securities of issuers which are or affiliated with companies
whose products or services are related to the real estate industry like building
supplies, mortgage servicing or the provision of utility or transportation
services. In addition, these Funds 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 the Adviser believes to be undervalued or to provide income or
the opportunity for capital appreciation. In pursuit of its objectives, a Fund
may employ various management techniques, certain of which may be used in an
attempt to hedge risks associated with the Fund's investments. See "Certain
Other Investment Practices."
For temporary defensive purposes, each Fund (other than the REIT Index Fund) may
invest up to 100% of its total assets in short-term investments, as described
below under "Other Eligible Investments." A Fund would assume a temporary
defensive posture only when economic and other factors affect the real estate
industry market to such an extent that the Adviser believes there to be undue
risk in being substantially invested in real estate industry companies. Each
Fund (including the REIT Index Fund) may also make short-term investments for
liquidity purposes (e.g., in anticipation of redemptions or purchases of
securities).
The investment objective of each Fund may be changed without approval by that
Fund's shareholders, but shareholders will be given written notice at least 30
days before any change is implemented.
REIT Index Fund
The investment objective of the REIT Index Fund is to provide its investors with
investment results which correspond to the performance of the GrandView REIT
Index (the "Index"). The Fund seeks to achieve its objective by investing in the
equity securities of the REITs comprising the Index. The Fund intends to be as
fully invested at all times as is reasonably practicable and will attempt to
approximate the weightings of the securities held in its portfolio to the
weightings of the securities in the Index.
9
<PAGE>
The Trust expects there will be a close correlation between the Fund's
performance and that of the Index in both rising and falling markets. Over the
long term, the Adviser will seek a correlation of 0.90 or better. A correlation
of 1.0 would indicate a perfect correlation. In the event a correlation of 0.90
or better is not achieved, the Board of Trustees of the Trust will review with
the Adviser methods for increasing the correlation, such as through adjustments
in securities holdings of the Fund. Factors such as the size of the Fund's
securities holdings, transaction costs, management fees and expenses, brokerage
commissions and fees, and the extent and timing of cash flows into and out of
the Fund, are expected to account for the differences between the Fund's
performance and that of the Index.
The Index was developed and is maintained by the Adviser. It currently consists
of the equity securities of 60 REITs which, as of March 31, 1996, represented
approximately 65% of the total market capitalization of all REITs which are
publicly traded in the United States and includes REITs within each of thirteen
industry sectors identified by the Adviser. The Adviser reviews and revises the
composition of the Index no less frequently than semiannually based on objective
market capitalization criteria. More information about the Index appears in
"Investment Policies" in the Statement of Additional Information.
The REIT Index Fund is not managed in the traditional investment sense, since
changes in the composition of its securities holdings are made in order to track
the changes in the composition of the securities included in the Index.
Moreover, inclusion of a security in the Index does not imply an opinion by the
Adviser as to the merits of that specific security as an investment.
Realty Growth Fund
The primary investment objective of the Realty Growth Fund is long-term growth
of capital. Current income is a secondary objective. In selecting investments
for the Fund, the Adviser will emphasize equity securities of real estate
industry companies which it believes are undervalued or which it believes to
have significant "turnaround" potential. In determining whether a security is
undervalued, the Adviser may take into account price-earnings ratios, cash
flows, relationships of asset value to market prices of the securities, interest
or dividend payment histories and other factors which it believes to be
relevant. The Adviser may determine that a company has "turnaround" potential
based on, for example, changes in management or financial restructurings.
Healthcare Realty Income Fund
The primary investment objective of the Healthcare Realty Income Fund is current
income. Long-term growth of capital is a secondary objective of the Fund.
Under normal circumstances, at least 65% of the total assets of the Fund are
invested in debt and equity securities of REITs and other companies in the
healthcare sector of the real estate industry. For these purposes, a company
will be deemed to be in the healthcare sector of the real estate industry if it
derives at least 50% of its gross revenues or net profits from the ownership,
development, construction, financing, management or sale of real estate used
primarily for healthcare purposes. Properties used for healthcare purposes
include hospitals, nursing homes, medical office buildings and rehabilitation
and other long-term care facilities. In selecting investments for the Fund, the
Adviser will emphasize securities of companies offering current income while
providing opportunities for growth of capital.
Other Eligible Investments
Debt Securities of Real Estate Industry Companies. The Funds (other than the
REIT Index Fund) may invest in debt securities of real estate industry
companies, but a Fund may not invest more than 10% of its assets (25% for the
Realty Growth Fund) in debt securities rated lower than Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group ("Standard &
Poor's") or Fitch Investors Service, Inc. ("Fitch") or securities not rated by
Moody's, Standard & Poor's or Fitch which the Adviser deems to be of equivalent
quality. Debt securities rated Ba or below by Moody's or BB or below by Standard
& Poor's or Fitch (or comparable unrated securities), are commonly called "junk
bonds" and are considered speculative, and payment of principal and interest
thereon may be questionable. In some cases, such securities may be highly
speculative, have poor prospects for reaching investment grade standing and be
in default. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment in investment-
10
<PAGE>
grade debt securities (i.e., debt securities rated Baa or higher by Moody's or
BBB or higher by Standard & Poor's or Fitch). The Funds 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. These securities may present significant elements of
danger with respect to the repayment of principal or interest. See Appendix B
for a description of the characteristics of lower-rated debt securities and
associated risks. A description of the corporate debt ratings assigned by
Moody's, Standard & Poor's and Fitch is contained in Appendix A.
Mortgage-Backed Securities. The Funds (other than the REIT Index Fund) may
invest in securities that directly or indirectly represent participations in, or
are collateralized by and payable from, mortgage loans secured by real property
("Mortgage-Backed Securities"). See Appendix B for a description of the
characteristics of Mortgage-Backed Securities and associated risks.
Short-Term Investments. The Funds 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-l, 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-l, Aa or better by Moody's or A-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 Investment Company Act of 1940; and repurchase agreements. These
investments may result in a lower yield than would be available from investments
with a lower quality or longer term.
Certain Other Investment Practices
See Appendix B for more information about the Funds' permitted investments and
investment practices and associated risks. The Funds will not necessarily invest
or engage in each of the investments and investment practices described in
Appendix B but reserve the right to do so. Investors should note that certain of
the investments and investment practices described in Appendix B may be
considered to be, or involve the use of, derivatives. See "Risks of Investing -
Derivatives" below.
Risks of Investing
An investment in each of the Funds involves risks. There is no assurance that a
Fund will achieve its investment objectives. An investment in a Fund, and even
an investment in all of the Funds, should not be viewed as a complete investment
program. Some of the risks of investing in the Funds are summarized below.
Changes In Net Asset Value. Each Fund's net asset value will fluctuate based
on changes in the values of its underlying portfolio securities. This means that
an investor's shares may be worth more or less at redemption than at the time of
purchase. Equity securities fluctuate in response to general market and economic
conditions and other factors, including actual and anticipated earnings, changes
in management, political developments and the potential for takeovers and
acquisitions. During periods of rising interest rates, the value of debt and
other income-producing securities generally declines, and during periods of
falling interest rates, the value of these securities generally increases.
Changes by recognized rating agencies in the rating of any debt security, and
actual or perceived changes in an issuer's ability to make principal or interest
payments, also affect the value of these investments.
The Real Estate Industry. Although the Funds do not invest directly in real
estate, each Fund invests primarily in securities of real estate industry
companies, and, therefore, an investment in each of the Funds is subject to
risks associated with the ownership of real estate. These risks include, among
others: possible declines in the value of real estate; risks related to general
and local economic conditions; possible lack of availability of mortgage funds;
overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages resulting from,
environmental problems; casualty or condemnation losses; uninsured damages from
floods, earthquakes or other natural disasters; limitations on and variations in
rents; and changes in interest rates.
11
<PAGE>
Real Estate Investment Trusts. Each Fund may invest without limitation in
shares of REITs. REITs are pooled investment vehicles which invest primarily in
income-producing real estate or real estate related loans or interests. REITs
are generally classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs. Equity REITs invest the majority of their assets
directly in real property and derive income primarily from the collection of
rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. Like investment companies such as the Funds, REITs are not taxed on
income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code.
Investing in REITs involves certain risks in addition to those risks associated
with investing in the real estate industry in general. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while mortgage REITs may be affected by the quality of any credit extended
(which may also be affected by changes in the value of the underlying property).
REITs are dependent upon management skills, often have limited diversification,
and are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Internal Revenue Code and failing to maintain their exemptions
from the Investment Company Act of 1940. Certain REITs have relatively small
market capitalizations, which may result in less market liquidity and greater
price volatility of their securities. When a shareholder invests in real estate
indirectly through a Fund, the shareholder's return will be reduced not only by
his or her proportionate share of the expenses of the Fund, but also,
indirectly, by similar expenses of the REITs in which the Fund invests.
Realty Growth Fund: Growth-Oriented Investments. Securities such as those in
which the Realty Growth Fund may invest which offer the potential for
significant capital appreciation may also be subject to greater risks and
volatility than other securities. Equity securities which the Adviser believes
are undervalued may fail to increase or may decline in value. Similarly,
companies which the Adviser believes have "turnaround" potential may fail to do
so, as a result of many factors, including economic conditions, inadequate
financing and actions taken by creditors.
Healthcare Realty Income Fund: Sector Concentration. Investors should note
that the Healthcare Realty Income Fund concentrates its investments in a
particular sector of the real estate industry, meaning that its investments will
not be diversified over a broad range of issuers representing all aspects of the
real estate industry. Because of its concentration in a particular sector of the
real estate industry, the Fund may be subject to greater volatility and risk.
The healthcare industry is highly regulated by federal, state and local law.
Changes in laws or regulations or new interpretations of existing laws or
regulations can have a dramatic affect on methods of doing business, costs and
revenues. Healthcare facilities typically rely on government and other third
party reimbursement for a significant portion of their revenues. Changes in
reimbursement policies as a result of regulatory action or otherwise could
adversely affect an operator's revenues and financial viability.
Derivatives. As noted above, each Fund may invest or engage in the
investments and investment practices described in Appendix B. Certain of those
investments and investment practices may be considered to be, or involve the use
of, derivatives. Investment in derivatives may involve concepts that have not
been fully tested by market events. Investment in derivatives may also have the
effect of increasing a Fund's exposure to interest rate risk, or of altering the
Fund's portfolio composition. For example, a relatively small investment in
futures contracts on an index can allow the Fund to control a substantial block
of stock, and the Fund will be subject to fluctuations in the prices of such
stocks out of proportion to its investment in the contract. Some derivative
instruments may be illiquid, particularly in the case of more specialized
derivatives, or derivatives linked to relatively illiquid markets. Investment in
derivatives may present a risk of counterparty default, i.e. that the other
party to the transaction will default on its obligations with respect to the
derivative instruments. Although the Adviser will consider the creditworthiness
of counterparties, and try to minimize the Fund's exposure to any particular
counterparty, this may be difficult or impossible to accomplish.
Certain Investment Practices. The Funds may invest or engage in the
investments and investment practices described in Appendix B. These investments
and investment practices involve risks, certain of which are described in
Appendix B.
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Non-Diversified Status
Each of the Funds (other than the REIT Index Fund) is "non-diversified" for
purposes of the Investment Company Act of 1940. As a non-diversified mutual
fund, a Fund may be more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified fund might be. Like most
other registered investment companies, however, each Fund intends to qualify as
a "regulated investment company" under the Internal Revenue Code and therefore
will be subject to diversification limits, which generally require that, as of
the close of each quarter of its taxable year, (i) no more than 25% of its
assets may be invested in the securities of a single issuer (except for U.S.
Government securities) and (ii) with respect to 50% of its total assets, no more
than 5% of those assets may be invested in the securities of a single issuer
(except for U.S. Government securities) or invested in more than 10% of the
outstanding voting securities of a single issuer.
Portfolio Turnover
The Adviser generally avoids market-timing or speculating on broad market
fluctuations. Therefore, the Funds will generally be substantially fully
invested at all times. It is anticipated that the portfolio turnover rate of the
REIT Index Fund and each of the other Funds will not exceed 75% and 100%,
respectively, in the coming year. Changes in the portfolio of the REIT Index
Fund will be effected primarily to accommodate cash flows into and out of the
Fund and changes in the GrandView REIT Index. Although each of the Funds
generally seeks to invest for the long term, changes in a Fund's portfolio will
be made when determined to be advisable, and usually without reference to the
length of time a security has been held. The amount of a Fund's brokerage
commissions and realization of taxable capital gains will tend to increase as
the level of portfolio activity increases. The portfolio turnover rate for each
Fund since inception is set forth under "Financial Highlights" above.
Portfolio Transactions
Orders for the Funds' portfolio securities transactions are placed by the
Adviser, which strives to obtain the best price and execution for each
transaction. In circumstances in which two or more broker-dealers are in a
position to offer comparable prices and execution, consideration may be given to
whether a broker-dealer provides investment research or brokerage services or
sells shares of the Funds. See the Statement of Additional Information for a
further description of the Adviser's brokerage allocation practices.
Investment Restrictions
The Statement of Additional Information contains a list of specific investment
restrictions which govern the investment policies of the Funds, including a
limitation that each Fund may borrow from banks and enter into reverse
repurchase agreements in an amount not to exceed 33 1/3% of the Fund's total
assets for extraordinary or emergency purposes (e.g., to meet redemption
requests) and a limitation that no Fund may purchase securities at any time at
which borrowings exceed 5% of the total assets of the Fund, taken at market
value. Certain of these specific restrictions may not be changed without
shareholder approval. Except as otherwise indicated, a Fund's investment
objectives and policies may be changed by the Board of Trustees without
shareholder approval. If a percentage restriction (other than a restriction as
to borrowing) is adhered to at the time an investment is made, a later change in
percentage resulting from changes in a Fund's portfolio securities will not be a
violation of policy.
MANAGEMENT OF THE FUNDS
The Trust's Board of Trustees has overall responsibility for the management and
supervision of the Funds. A majority of the Trustees are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940. The
Statement of Additional Information contains more information about the Trustees
and executive officers of the Trust.
Adviser
GrandView Advisers, Inc. (the "Adviser") manages the Funds' assets pursuant to
separate investment advisory agreements (the "Advisory Agreements"). Subject to
policies set by the Trust's Board of Trustees, the Adviser makes the investment
decisions for the Funds.
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Winsor H. Aylesworth, Lucille C. Carlson and David F. Wolf own, respectively,
60%, 20% and 20% of the outstanding capital stock of the Adviser, and serve as
co-portfolio managers 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 50 years experience in the commercial real estate finance
and management and securities businesses.
Winsor H. Aylesworth, President, Treasurer and Director of the Adviser, 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, a Director of the Adviser, 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. David F. Wolf, a Director of the Adviser, has over eight years
of experience as a financial consultant, serving as a consultant for John
Hancock Financial Services and Shearson Lehman Brothers. Mr. Wolf has acted as
an account executive for NCNB Securities and has professional experience in the
areas of real estate developing, lending, workouts and asset management.
Mr. Aylesworth, Ms. Carlson and Mr. Wolf also own all of the outstanding
capital stock of WHA Enterprises, Inc., which since 1991 has published a monthly
newsletter on the REIT industry known as The Winsor Report. The Adviser was
organized in March, 1995 and has no previous experience as an investment
adviser.
For its services under the Advisory Agreements, the Adviser 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:
REIT Index Fund 0.35%
Realty Growth Fund 1.00%
Healthcare Realty Income Fund 0.70%
The investment advisory fee payable by the Realty Growth Fund is higher than the
investment advisory fees currently being paid by most other investment
companies, but the Trustees have determined that it is reasonable in light of
that Fund's investment policy of seeking to invest in securities of companies
which the Adviser believes are undervalued or have significant "turnaround"
potential and the additional expenses associated with analyzing the securities
of such companies and their underlying real estate investments. The Adviser 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:
REIT Index Fund 1.05%
Realty Growth Fund 2.00%
Healthcare Realty Income Fund 1.75%
This agreement applies for the fiscal year ending March 31, 1997 and there is no
assurance that it will be extended after that date.
The Adviser has voluntarily waived its fee and reimbursed a portion of each
Fund's operating expenses for the fiscal year ended March 31, 1996. The total
fees waived amounted to $314, $675, and $396, respectively, and expenses
reimbursed amounted to $17,159, $18,489, and $17,872, respectively, for the REIT
Index Fund, Realty Growth Fund, and Healthcare Realty Income Fund, respectively.
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Administrator
The Nottingham Company (the "Administrator") serves as the administrator and
fund accounting, dividend disbursing and transfer agent for the Funds. These
administrative services include providing general office facilities; supervising
the overall administration of the Funds; maintaining books of account and
calculating the daily net asset value of shares of the Fund; providing dividend
disbursing and transfer agency services; and providing persons satisfactory to
the Trustees to serve as officers of the Trust. Such officers may be directors,
officers or employees of the Administrator. For these services, the
Administrator receives Fund administration fees accrued daily and paid monthly
of 0.225% of the average daily net assets of the REIT Index Fund up to
$25,000,000, 0.200% of such average daily net assets in excess of $25,000,000 up
to $50,000,000 and 0.175% of such average daily net assets in excess of
$50,000,000, and 0.300% of the average daily net assets of each other Fund up to
$25,000,000, 0.275% of such average daily net assets in excess of $25,000,000 up
to $50,000,000 and 0.225% of such average daily net assets in excess of
$50,000,000. The Administrator receives, in addition, for its transfer agency,
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 (for each Fund other than the REIT Index Fund) and $150 per year for each
state in which the Trust's shares are registered or qualified. The Administrator
charges a minimum fee of $800 per Fund per month for all of its fees taken in
the aggregate, analyzed monthly. Frank P. Meadows, III is the managing director
and controlling member of the Administrator.
Custodian
The Custodian of the assets of each of the Funds is Wachovia Bank of North
Carolina, N.A. Securities of the Funds may also be held by a sub-custodian bank
approved by the Trustees.
Distributor
Capital Investment Group, Inc. is the distributor of shares of each of the
Funds. The Distributor receives commissions on the sale of shares of the Funds
and may also receive fees and reimbursement for certain expenses under the
Trust's Distribution Plan described below. See "Information About Fund
Shares--How to Purchase Shares."
The Trust has adopted a Plan of Distribution (the "Distribution Plan") in
accordance with Rule 12b-l under the Investment Company Act of 1940, which
provides that each of the Funds may pay the Distributor a fee, which is accrued
daily and paid monthly, at an annual rate not to exceed 0.25% of the average
daily net assets of that Fund. The Trustees do not currently intend to authorize
the payment of any such fee from the REIT Index Fund, although they have the
authority under the Distribution Plan to do so in the future. Shareholders of
the REIT Index Fund will be given at least 60 days written notice before any
12b-1 fee is imposed. The Distributor may use such fee to pay costs related to
distribution activities, including employee salaries, bonuses and other overhead
expenses, service fees to be paid to certain banks and broker-dealers which
provide certain services to their customers who hold Fund shares, and other
activities primarily intended to result in sale of shares of the Funds. 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. For the fiscal year ended
March 31, 1996, the Distributor voluntarily waived its fee under the
Distribution Plan in the amount of $225 and $141, respectively, for the Realty
Growth Fund and Healthcare Realty Income Fund, respectively.
David F. Wolf, a registered representative of the Funds' Distributor, may
receive brokerage commissions from the Distributor in connection with sales of
shares of the Funds. Mr. Wolf is a Vice President of the Trust and a Director of
GrandView Advisers, Inc.
Expenses
In addition to amounts payable as described above under the Advisory Agreements,
the Administrative Agreement and the Distribution Plan, each Fund is responsible
for its own expenses and its allocable share of the expenses of the Trust,
including, among other things the costs of securities transactions, the
compensation of Trustees that are not affiliated with the Adviser, governmental
fees, taxes, accounting and legal fees, expenses of communicating with
shareholders, interest expense and insurance premiums. As described above under
"Adviser," the Adviser has voluntarily agreed to waive investment advisory fees
and reimburse other operating expenses to the extent needed to limit each Fund's
expenses for the fiscal year ending March 31, 1997.
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INFORMATION ABOUT FUND SHARES
How to Purchase Shares
An investor may purchase shares of any Fund at the public offering price
directly through the Distributor or from a securities firm or broker-dealer
having a sales agreement with the Distributor or a bank having an agency
agreement with the Distributor. Except as provided below, the minimum initial
investment is $1,000 ($5,000 for the REIT Index Fund). The minimum initial
investment for a tax-deferred retirement plan (such as an Individual Retirement
Account (IRA), Keogh or 401(k) Plan) is $250. The minimum initial purchase under
the Trust's Automatic Investment Plan is $50. The minimum additional investment
for any account is $50.
Purchases by Mail. Investors may purchase shares of any Fund by completing
and signing the Account Application accompanying this Prospectus and mailing it,
along with a check (or other negotiable bank instrument or money order) payable
to the Fund in which shares are being purchased, to:
GrandView Investment Trust
c/o The Nottingham Company
105 North Washington Street
P.O. Drawer 69
Rocky Mount, North Carolina 27802-0069
Purchase orders will not be processed until the purchase price has been received
in federal or other immediately available funds. If Fund shares are purchased by
check, there will be a delay (usually not longer than two business days) in
processing the purchase order until the check is converted into federal funds.
Purchases by Wire. Investors may also purchase shares of any Fund by bank
wire. Prior to making an initial or additional investment by wire, an investor
should telephone the Administrator at 1-800-525-3863. Investments by wire will
not be accepted until an Account Application has been received by mail or
facsimile. Federal funds and registration instructions should be wired through
the Federal Reserve System to:
Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA No. 053100494
For credit to Rocky Mount Office
For:
REIT Index Fund Acct# 6768-021391
Realty Growth Fund Acct# 6766-021392
Healthcare Realty Income Fund Acct# 6769-021395
For further credit to: [shareholder name and social security or tax
identification number]
Automatic Investment Plan. The Trust's Automatic Investment Plan enables
shareholders to make regular or quarterly investment in shares of the Fund
through automatic charges to their checking accounts. The minimum amount for
initial and additional investments under the Automatic Investment Plan is
$50.00. An investor may elect to participate in the Automatic Investment Plan by
completing the appropriate section of the Account Application. A shareholder may
change the amount of the investment or discontinue his or her participation in
the Automatic Investment Plan at any time by writing to the Administrator at the
address shown on the back cover of this prospectus.
Public Offering Price. The public offering price is the net asset value per
share next computed after receipt of a purchase order, plus a sales charge as
follows:
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REIT Index Fund
Sales
Charge As Sales
% of Net Charge As Dealer Allowance
Amount of Offering % of Amount As % of Public
Purchase Price Invested Offering Price
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 million 0.75% 0.76% 0.25%
$1 million or more 0.35% 0.35% 0.35%
Realty Growth Fund
Healthcare Realty Income Fund
Sales
Charge As Sales
% of Net Charge As Dealer Allowance
Amount of Offering % of Amount As % of Public
Purchase Price Invested Offering Price
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 million 2.00% 2.04% 1.50%
$1 million or more 0.75% 0.76% 0.76%
A redemption fee of 1.00% is imposed in the event of a redemption of shares of
the REIT Index Fund within six months after purchase, and of 0.50% in the event
of a redemption of shares of the REIT Index Fund after six months but within
twelve months of purchase. See "How to Redeem Shares."
At times the Distributor may reallow the entire sales charge to dealers. From
time to time dealers who receive dealer discounts and brokerage commissions from
the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. Dealers who receive 90% or
more of the sales charge may be deemed to be "underwriters" under the Securities
Act of 1933, as amended.
Elimination of Sales Charges. No sales charge is payable for investments by
certain group plans (see "Group Plans" below).
Shares of each Fund may also be sold at net asset value per share without a
sales charge to: (a) current or former Trustees and officers of the Trust; (b)
current or former directors, officers, employees or sales representatives of the
Adviser, the Administrator or the 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 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 the Adviser
or of any of its affiliates; (g) current subscribers to The Winsor Report, a
report published by an affiliate of the Adviser; (h) clients of fee-based
financial planners; (i) 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; (j) governmental agencies and authorities; (k) employee benefit plans
qualified under Section 401 or 403 of the Internal Revenue Code, including
salary 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 Trust; (l) tax-exempt organizations under Section 501(c)(3-
13) of the Code; and (m) those investors who purchase shares without the
services of a commissioned securities broker.
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Shares of a Fund so purchased are purchased for investment purposes and may not
be resold except through redemption or repurchase by or on behalf of the Fund.
Elimination of a sales charge is conditioned on the receipt by the Distributor
of written notification of eligibility. Shares of the Fund may also be sold at
net asset value without a sales charge in connection with certain
reorganization, liquidation or acquisition transactions involving other
investment companies or personal holding companies.
Reduced Sales Charge Plans.
Purchases by Family Members. Purchases of shares of the Funds by (i) an
individual, (ii) an individual, his or her spouse and children under the age of
21 and (iii) a trustee or other fiduciary of a trust, estate or fiduciary
account or related trusts or accounts, including pension, profit-sharing and
other employee benefit trusts qualified under Section 401 or 408 of the Internal
Revenue Code, may be aggregated for purposes of determining eligibility for
reduced sales charges even though more than one beneficiary is involved.
Rights of Accumulation. The sales charge applicable to a current purchase of
shares of a Fund by a person listed above is determined by adding the purchase
price of shares to be purchased to the aggregate value (at current offering
price) of shares of the Funds previously purchased and then owned, provided the
Distributor is notified by such person or his or her broker-dealer each time a
purchase is made which would so qualify. For example, a person who is purchasing
Realty Growth Fund shares with an aggregate value of $50,000 and who currently
owns shares of the Funds with a value of $50,000 would pay a sales charge of
3.75% of the offering price on the new investment.
Letter of Intent. Sales charges may also be reduced through an agreement to
purchase a specified quantity of shares over a designated thirteen-month period
by completing the "Letter of Intent" section of the Account Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the back of the Account Application as well as in the Statement of
Additional Information.
Group Plans. Shares of the Funds may be sold at a reduced or eliminated sales
charge to certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members or participants. Information about such
arrangements is available from the Distributor.
Additional Information About Purchases. In order to promote selling efforts
and to compensate dealers and banks for providing continuous services for their
clients, including processing purchase and redemptions transactions,
establishing shareholder accounts and providing certain information and
assistance with respect to the Funds, the Distributor will pay a periodic
service fee to qualified broker-dealers and banks. Payment of the service fee is
conditioned upon agreement by the broker-dealer or banks to assign an active
representative to each account and to meet other conditions designed to ensure
continuing service. The service fee may be discontinued or revised at any time,
and it will automatically terminate upon the termination of the Distribution
Plan described under "Distribution Plan." The service fee, which will not exceed
0.25% of the value of the client's account, will be accrued daily and paid
quarterly. Banks are currently prohibited under the GlassSteagall Act from
providing certain underwriting or distribution services. If a bank were
prohibited from acting in any capacity or providing any of the described
services, the Trust would consider what action, if any, would be appropriate.
An order to purchase shares is not binding on, and may be rejected by, the Trust
or the Distributor until it is confirmed in writing by the Distributor and
payment has been received. The Trust and the Distributor reserve the right to
reject any purchase order and to suspend the offering of shares of any Fund for
a period of time. Under certain circumstances, the Trust may permit an investor
to pay for the purchase of Fund shares by delivering securities to the Trust, if
in the judgment of the Adviser such securities are suitable for investment by
the applicable Fund. For this purpose, securities will be valued as set forth
below under "Net Asset Value and Pricing of Orders" as of the day on which the
purchase order is accepted.
Shares of the Funds may be purchased by all types of tax-deferred retirement
plans, including IRAs, SEP-IRA plans, 401(k) plans, 403(b) plans and other
corporate pension and profit-sharing plans. Documentation for these types of
plans is available from the Funds' Custodian. Investors should consult with
their tax advisers before establishing any of the tax-deferred retirement plans
described above.
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Net Asset Value and Pricing of Orders
Shares of each Fund are sold at their public offering price, which is the net
asset value per share plus the applicable sales charge, if any. Net asset value
per share of a Fund is determined by dividing the value of its assets, less
liabilities, by the number of shares outstanding. The net asset value is
computed once daily, on each day the New York Stock Exchange (the "Exchange") is
open, at 4:00 p.m. New York time.
Securities are valued at the last quoted sale price, at the time the valuation
is made, on the principal exchange or market where they are traded. Securities
which have not traded on the date of valuation, or securities for which sales
prices are not generally reported, are valued at the mean between the current
bid and asked prices. All assets of the Fund for which there is no other readily
available valuation method are valued at their fair value as determined in good
faith at the direction of the Trustees.
An order for shares received by a broker-dealer or bank prior to 4:00 p.m. New
York time is effected at the offering price determined at such time on the day
the order is received. It is the responsibility of broker-dealers and banks to
transmit orders promptly so that they will be received by the Distributor. An
order received by a broker-dealer or bank after 4:00 p.m. New York time will be
confirmed at the offering price as of 4:00 p.m. New York time on the next
trading day.
An order to purchase shares is not binding on, and may be rejected by, the Trust
or the Distributor until it has been confirmed in writing by the Distributor and
payment has been received.
How to Exchange Shares
Shares of each Fund may be exchanged for shares of each of the other Funds. No
initial sales charge is imposed on shares being acquired through an exchange
unless the sales charge of the Fund being exchanged into is greater than the
current sales charge of the Fund (in which case an initial sales charge will be
imposed at a rate equal to the difference). No redemption fee is imposed on
shares being disposed of through an exchange; however, a redemption fee may
apply to redemptions of shares acquired through an exchange of shares of the
REIT Index Fund at the rate which would have been applicable if the shareholder
had continued to hold shares of the REIT Index Fund.
Shareholders must place exchange orders through the Administrator and may do so
by telephone if their Account Applications so permit. For more information on
telephone transactions see "How to Redeem Shares" below. All exchanges will be
effected based on the relative net asset values per share next determined after
the exchange order is received by the Distributor. See "Net Asset Value and
Pricing of Orders" above. Shares of the Funds may be exchanged only after
payment for the shares in good funds has been made.
This exchange privilege may be modified or terminated at any time, upon at least
60 days' notice when such notice is required by SEC rules, and is available only
in those jurisdictions where such exchanges legally may be made. See the
Statement of Additional Information for further details.
An exchange is treated as a sale of the shares exchanged and could result in
taxable gain or loss to the shareholder making the exchange.
How to Redeem Shares
Shares of any of the Funds may be redeemed at their net asset value next
determined after a redemption request in proper form is received by the
Administrator, subject to any applicable redemption fee. Shares may also be
redeemed through a broker-dealer or bank which may charge a fee for its
services.
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Redemption by Mail. A written request for redemption must be received by the
Administrator, 105 North Washington Street, P.O. Drawer 69, Rocky Mount, North
Carolina 27802-0069, and must include:
1. your letter of instruction or a stock assignment specifying the Fund from
which shares are to be redeemed, the account number and the number of shares
or dollar amount to be redeemed, signed by all registered shareholders in
the exact names in which they are registered.
2. Any required signature guarantees.
Redemption By Telephone. Shares may be redeemed by telephone if the
shareholder elects that option on the Account Application and if the shareholder
confirms redemption instructions in writing. Telephone redemption requests may
be made by calling the Administrator at (800) 525-3863. Written confirmation of
redemption requests may be made by facsimile at (919) 972-1908. Confirmations
should include all of the information specified above for redemptions by mail.
A shareholder may not close his or her account by telephone. During periods of
drastic economic or market changes or severe weather or other emergencies, a
shareholder may find it difficult to implement a telephone redemption. If such a
case should occur, another method of redemption, such as written requests sent
via an overnight delivery service, should be considered. The Administrator will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. These procedures may include recording of the telephone
instructions and verification of a caller's identity by asking his or her name,
address, telephone number, Social Security number and account number. If these
or other reasonable procedures are not followed, the applicable Fund or the
Administrator may be liable for any losses to a shareholder due to unauthorized
or fraudulent instructions. Otherwise, the shareholder will bear all risk of
loss relating to redemption by telephone.
Signature Guarantees. If a shareholder requests a redemption for an amount
in excess of $50,000, a redemption of any amount to be payable to anyone other
than the shareholder of record, or a redemption of any amount to be sent to any
address other than the shareholder's address of record (or in the case of
redemptions by wire, other than as provided in the shareholder's Account
Application), all account holders must sign a written redemption request and the
signatures must be guaranteed by a member bank of the Federal Reserve System, a
savings and loan association or credit union (if authorized under state law), or
by a member firm of a domestic stock exchange.
Payment of Redemptions. Redemption proceeds are normally paid by check
within seven days after receipt of a redemption request. If a shareholder
requests a redemption of shares which were purchased recently, the Fund may
delay payment until it is assured that good payment has been received. In the
case of purchases by check, this can take up to fifteen days.
Proceeds of redemption can also be wired to a shareholder's bank ($5,000
minimum), subject to a wire transfer charge of $15.00 which can be subtracted
from redemption proceeds. Shares may not be redeemed by wire on days on which
the shareholder's bank is not open for business.
Reinstatement Privilege. Shareholders who have redeemed shares of any of the
Funds may reinstate their account without a sales charge up to the dollar amount
redeemed (but without any credit for any redemption fee paid on redemptions on
shares of the REIT Index Fund) by purchasing shares of the same Fund within 30
days after the redemption. The availability of this privilege is conditioned on
the receipt by the Distributor of written notification of eligibility.
Systematic Withdrawal Plan. A shareholder who holds shares of the Funds
having a net asset value of at least $10,000 may direct the Administrator to
send him or her a regular monthly or quarterly check in a designated amount of
not less than $100. To establish a Systematic Withdrawal Plan, a shareholder
should complete the appropriate section of the Account Application or write or
call the Administrator (see back cover for address and telephone number).
Redemption Fee--REIT Index Fund. Redemptions of shares of the REIT Index
Fund made within six months of purchase are subject to a redemption fee in the
amount of 1% of the net asset value of the shares redeemed. Redemptions of
shares of the REIT Index Fund made between six and twelve months after purchase
will be subject to a redemption fee of 0.50% of the net asset value of the
shares redeemed. No redemption fee is imposed if the proceeds are immediately
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invested in shares of one or more of the other Funds, but a further redemption
of shares of the other Fund may result in a redemption fee at the rate which
would have been applicable if the shareholder had continued to hold shares of
the REIT Index Fund. A redemption fee that would otherwise be imposed will be
waived if the redemption is made within 60 days of notice being given to the
shareholder that the applicable Fund is changing its investment objective. A
redemption fee will also be waived for accounts set up as "omnibus" accounts by
various organizations approved by the Trust and may be reduced or waived under
other circumstances if approved by the Trust. All redemption fees are payable to
the applicable Fund.
Other Information About Redemptions. Due to the relatively high costs of
handling small investments, each Fund reserves the right to redeem, at net asset
value, the shares of any shareholder if, because of redemptions of shares by or
on behalf of the shareholder (and not solely because of market declines), the
account of the shareholder in the Fund has a value of less than the minimum
initial purchase amount (normally $1,000, or $5,000 for the REIT Index Fund).
Accordingly, an investor purchasing shares of the Fund in only the minimum
investment amount may be subject to such involuntary redemption if he or she
thereafter redeems any of these shares. This redemption provision will not apply
to shareholders who currently are participants in the Trust's Automatic
Investment Plan. Before the Fund exercises its right to redeem such shares and
to send the proceeds to the shareholder, the shareholder will be given notice
that the value of the shares in his or her account is less than the minimum
amount and will be allowed 60 days to make an additional investment in the Fund
in an amount which will increase the value of the account to at least the
minimum amount. An account established under a tax-deferred retirement program
may be subject to involuntary redemption as described above only if the account
has a value of less than $250, the minimum initial purchase amount for such
accounts.
The right of any shareholder to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed during any
period in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on the Exchange is restricted or, to the extent otherwise
permitted by the Investment Company Act of 1940, if an emergency exists.
Dividends and Distributions
Substantially all of each Fund's net income is paid to its shareholders of
record as a dividend as follows:
For the Healthcare Realty Income Fund, monthly on or about the last business day
of each month.
For the REIT Index Fund and the Realty Growth Fund, quarterly on or about the
last business day of each March, June, September and December.
Each Fund's net realized short-term and long-term capital gains, if any, will
generally be distributed to the Fund's shareholders at least annually, in
December. Each Fund may also make additional distributions to its shareholders
to the extent necessary to avoid the application of the 4% non-deductible excise
tax on certain undistributed income and net capital gains of mutual funds. There
is no fixed dividend rate for any of the Funds, and there can be no assurance as
to the payment of any dividends or the realization of any gains.
Unless shareholders specify otherwise, all distributions from a Fund will be
automatically reinvested in additional shares of the Fund at their net asset
value without a sales charge.
A redemption is treated as a sale of the shares redeemed and could result in
taxable gain or loss to the shareholder making the redemption.
Tax Matters
This discussion of taxes if for general information only. Investors should
consult their own tax advisers about their particular situations.
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Each Fund intends to meet requirements of the Internal Revenue Code (the "Code")
applicable to regulated investment companies so that it will not be liable for
any federal income or excise taxes. Each Fund will generally distribute all of
its net investment income and realized gains at least annually.
For the fiscal year ended March 31, 1996, each Fund was considered a "personal
holding company" under the Code since 50% of the value of each Fund's shares was
owned directly or indirectly by five or fewer individuals at certain times
during the last half of the year. As a result, each Fund was unable to meet the
requirements for taxation as a regulated investment company and will be unable
to meet such requirements as long as it is classified as a personal holding
company. As a personal holding company, each Fund is subject to federal income
taxes on undistributed personal holding company income at the maximum individual
income tax rate. For the fiscal year ended March 31, 1996, however, no provision
was made for federal income taxes since substantially all taxable income was
distributed to shareholders. For the current fiscal year, each Fund anticipates
that either it will qualify as a regulated investment company under the Code or,
if still considered a personal holding company, it will distribute substantially
all of its taxable income for the current fiscal year to shareholders in order
to avoid federal income taxes.
Fund dividends and capital gain distributions are subject to federal income tax,
and may also be subject to state and local taxes. Dividends and distributions
are treated in the same manner for federal tax purposes whether they are paid in
cash or as additional shares. Generally, distributions from a Fund's net
investment income and short-term capital gains will be taxed as ordinary income.
A portion of distributions from net investment income may be eligible for the
dividends-received deduction available to corporations. Distributions of
long-term net capital gains will be taxed as such regardless of how long the
shares of a Fund have been held.
Fund distributions will reduce the distributing Fund's net asset value per
share. Shareholders who buy shares just before a Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
Early each year, each Fund will notify its shareholders of the amount and tax
status of distributions paid to shareholders for the preceding year, including
the portion, if any, taxable as ordinary income, the portion taxable as
long-term capital gain, the portion representing a return of capital (which is
generally free from income tax, but results in a basis adjustment) and the
amount, if any, of federal income tax withheld.
Investors should consult their own tax advisers regarding the status of their
accounts under state and local laws.
Fund performance may be quoted in advertising, shareholder reports and other
communications in terms of yield, effective yield or total rate of return. All
performance information is historical and is not intended to indicate future
performance. Yields and total rates of return fluctuate in response to market
conditions and other factors and the value of a Fund's shares when redeemed may
be more or less than their original cost.
Each Fund may provide its period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a stated period which was made at the maximum public offering
price and reflects any change in net asset value per share and is compounded to
include the value of any shares purchased with any dividends or capital gains
declared during such period. Period total rates of return may be "annualized."
An "annualized" total rate of return assumes that the period total rate of
return is generated over a one-year period. These total rates of return
quotations may be accompanied by quotations which do not reflect the reduction
in value of the investment due to the initial or contingent deferred sales
charges, and which are thus higher.
Each Fund may provide annualized "yield" and "effective yield" quotations. The
"yield" of a Fund refers to the income generated by an investment in the Fund
over a 30-day or one-month period (which period is stated in any such
advertisement or communication). This income is then annualized; that is, the
amount of income generated by the investment over that period is assumed to be
generated each month over a one-year period and is shown as a percentage of the
maximum public offering price on the last day of that period. The "effective
yield" is calculated similarly, but when annualized the income earned by the
investment during that 30-day or one-month period is assumed to be reinvested.
The effective yield is slightly higher than the yield because of the compounding
effect of this assumed reinvestment. A "yield" quotation, unlike a total rate of
return quotation, does not reflect changes in net asset value.
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Description of Shares and Voting Rights
The Trust is an open-end management investment company which was organized on
February 6, 1995, as a Massachusetts business trust under a Declaration of Trust
(the "Declaration of Trust"). Under the Declaration of Trust, the Trustees are
authorized to issue an unlimited number of shares of beneficial interest. The
Trustees of the Trust are responsible for the overall management and supervision
of its affairs. The Trustees of the Trust have authority under the Declaration
of Trust to create and classify shares of beneficial interest in separate series
without further action by shareholders. The Funds are the only current series of
the Trust. Additional series may be added in the future. The Trustees also have
authority to classify or reclassify shares of any series or portfolio into one
or more classes.
When issued, shares are fully paid and nonassessable. In the event of
liquidation, shareholders of a Fund are entitled to share pro rata the net
proceeds of the sale of the Fund's assets after payment of the liabilities of
the Fund. All shares entitle their holders to one vote per share and have no
preemptive, subscription or conversion rights.
Under Massachusetts law, there is a remote possibility that shareholders of a
business trust could, under certain circumstances, be held personally liable as
partners for the obligations of such trust. The Declaration of Trust contains
provisions intended to limit such liability and to provide indemnification out
of property of a Fund of any shareholder charged or held personally liable for
obligations or liabilities of that Fund solely by reason of being or having been
a shareholder of that Fund and not because of such shareholder's acts or
omissions or for some other reason. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations.
Unless otherwise required by the Investment Company Act of 1940, ordinarily it
will not be necessary for the Trust or any Fund to hold annual meetings of
shareholders. Shareholders may remove a Trustee by the affirmative vote of at
least two-thirds of the Trust's outstanding shares and the Trustees must
promptly call a meeting for such purpose when requested to do so in writing by
the record holders of not less than 10% of the outstanding shares of the Trust.
Shareholders may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting of shareholders.
The Board of Trustees, however, will call a special meeting for the purpose of
electing Trustees if, at any time, less than a majority of Trustees holding
office at the time were elected by shareholders.
As of July 12, 1996, the following persons owned of record or beneficially more
than 25% of the shares of the Funds: Chuck and Elizabeth Chan, 2146 Woodley Way,
Mountain View, California 94040, record holder with respect to 26.945% of the
Realty Growth Fund. Accordingly, these persons may be deemed to be "controlling
persons" of such Fund within the meaning of the Investment Company Act of 1940.
In the interest of economy and convenience, the Funds do not issue certificates
representing Fund shares. Instead, the Administrator maintains a record of each
shareholder's ownership.
The Statement of Additional Information dated the date hereof contains more
detailed information about the Funds, including information related to (i)
investment policies and restrictions; (ii) Trustees, officers, the Adviser and
Administrator; (iii) securities transactions; (iv) the Funds' shares, including
rights and liabilities of shareholders; (v) the method used to calculate
performance information; (vi) programs for the purchase of shares; and (vii) the
determination of net asset value.
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APPENDIX A: DESCRIPTION OF BOND RATINGS
The following descriptions of ratings of Moody's Investors Service, Inc.,
Standard & Poor's Rating Group and Fitch Investors Service, Inc. are based on
descriptions published by the rating agencies. Ratings are not absolute
standards of quality. Consequently, debt securities with the same maturity,
coupon and rating may have different yields while debt securities of the same
maturity and coupon with different ratings may have the same yield. Ratings are
generally given to securities at the time of issuance. While the rating agencies
may from time to time revise such ratings, they undertake no obligation to do
so.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
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Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believe
possess the strongest investment attributes are designated by the symbols Aa1,
Al, Baa1 and B1.
Standard & Poor's Ratings Group (1)
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.
D: Bonds rated D are in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Unrated: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligations as a matter of policy.
Fitch Investors Service, Inc.
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
- --------
(1) Rates all governmental bodies having $1,000,000 or more of debt outstanding,
unless adequate information is not available.
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AA: Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
Plus (+) Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
NR: Indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful completion
of a project or the occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for a potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.
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APPENDIX B: CERTAIN INVESTMENT PRACTICES
This Appendix provides a brief description of certain securities in which each
Fund may invest and certain practices in which it may engage. For a more
complete discussion of certain of these securities and practices, see
"Investment Objectives and Policies" in this Prospectus and "Investment Policies
and Restrictions" in the Statement of Additional Information.
Mortgage-Backed Securities and Associated Risks
Each Fund (other than the REIT Index Fund) may invest in mortgage pass-through
certificates and multiple-class pass-through securities, such as real estate
mortgage investment conduits ("REMIC") pass-through certificates, collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities ("SMBS").
Each of these Funds also may invest in other types of Mortgage-Backed Securities
that may be available in the future, but not without first amending this
Prospectus to disclose the specific types of securities and their attendant
risks.
Guaranteed Mortgage Pass-Through Securities. Each Fund (other than the REIT
Index Fund) may invest in guaranteed mortgage pass-through securities which
represent participation interests in pools of residential mortgage loans and are
issued by U.S. Governmental or private lenders and guaranteed by the U.S.
Government or one of its agencies or instrumentalities, including but not
limited to the Government National Mortgage Association ("Ginnie Mae"), the
Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by
the full faith and credit of the United States government for timely payment of
principal and interest on the certificates. Fannie Mae certificates are
guaranteed by Fannie Mae, a federally chartered and privately-owned corporation
for full and timely payment of principal and interest on the certificates.
Freddie Mac certificates are guaranteed by Freddie Mac, a corporate
instrumentality of the United States government, for timely payment of interest
and the ultimate collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage
Obligations. Each Fund (other than the REIT Index Fund) may also invest in CMOs
and REMIC pass-through or participation certificates, which may be issued by,
among others, U.S Government agencies and instrumentalities. CMOs and REMIC
certificates are issued in multiple classes and the principal of and interest on
the mortgage assets may be allocated among the several classes of CMOs or REMIC
certificates in various ways. Each class of CMOs or REMIC certificates, often
referred to as a "tranche," is issued at a specific adjustable or fixed interest
rate and must be fully retired no later than its final distribution date.
Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass-through securities. Debt service on CMOs is
provided from payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Funds do not
intend to invest in residual interests.
Stripped Mortgage-Backed Securities. Each Fund (other than the REIT Index
Fund) may invest in SMBS, which are derivative multiple-class mortgage-backed
securities. SMBS are usually structured with two classes that receive different
proportions of interest and principal distributions on a pool of mortgage
assets. A typical SMBS will have one class receiving some of the interest and
most of the principal, while the other class will receive most of the interest
and the remaining principal. In the most extreme case, one class will receive
all of the interest (the interest only class) while the other class will receive
all of the principal (the principal only class). The staff of the SEC considers
privately issued SMBS to be illiquid.
Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. These
risks include the failure of a counter-party to meet its commitments, adverse
interest rate changes and the effects of prepayments on mortgage cash flows. In
addition, investing in the lowest tranche of CMOs and REMIC certificates
involves risks similar to those associated with investing in equity securities.
When interest rates decline, the value of an investment in fixed rate
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obligations can be expected to rise. Conversely, when interest rates rise, the
value of an investment in fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate mortgage loans are reset
periodically, yields on investments in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which a Fund may invest, differ from those of traditional fixed income
securities. The major differences typically include more frequent interest and
principal payments (usually monthly), the adjustability of interest rates, and
the possibility that prepayments of principal may be made substantially earlier
than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When a Fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than other
types of U.S. Government securities as a means of "locking in" interest rates.
Lower-Rated Debt Securities and Associated Risk Factors
Each Fund other than the REIT Index Fund) may invest up to 10% of its total
assets (25% for the Realty Growth Fund) in debt securities which may be rated
below Baa by Moody's or BBB by Standard & Poor's or Fitch or which, if unrated,
are of comparable quality as determined by the Advisor. Debt securities rated Ba
or below by Moody's or BB or below by Standard & Poor's or Fitch (or comparable
unrated securities), commonly called "junk bonds," are considered speculative
and payment of principal and interest thereon may be questionable. In some
cases, such securities may be highly speculative, have poor prospects for
reaching investment grade standing and be in default. As a result, investment in
such bonds will entail greater speculative risks than those associated with
investment in investment-grade debt securities (i.e., debt securities rated Baa
or higher by Moody's or BBB or higher by Standard & Poor's or Fitch). The Funds
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. These securities may
present significant elements of danger with respect to the repayment of
principal or interest.
Corporate debt securities are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and general
market liquidity (market risk). Lower rated or unrated (i.e., junk bond)
securities are more likely to react to developments affecting market and credit
risk than are more highly rated securities, which react primarily to movements
in the general level of interest rates. The Adviser considers both credit risk
and market risk in making investment decisions for each Fund.
Foreign Investments
Each Fund (other than the REIT Index Fund) may invest up to 5% of its total
assets (10% for the Realty Growth Fund) in equity and debt securities of foreign
real estate companies. See "Foreign Real Estate Companies and Associated Risks"
in the Statement of Additional Information.
Repurchase Agreements
Each Fund may enter into repurchase agreements in order to earn a return on
temporarily available cash. Repurchase agreements are transactions in which an
institution sells the Fund a security at one price, subject to the Fund's
obligation
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to resell and the selling institution's obligation to repurchase that security
at a higher price normally within a seven day period. There may be delays and
risks of loss if the seller is unable to met its obligation to repurchase.
Reverse Repurchase Agreements
Each Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by the Fund and the agreement by
the Fund to repurchase the securities at an agreed upon price, date and interest
payment. When a Fund enters into reverse repurchase transactions, securities of
a dollar amount equal in value to the securities subject to the agreement will
be maintained in a segregated account with the Fund's custodian. The segregation
of assets could impair the Fund's ability to meet it current obligations or
impede investment management if a large portion of the Fund's assets are
involved. Reverse repurchase agreements are considered to be a form of
borrowing.
Lending of Portfolio Securities
Consistent with applicable regulatory requirements and in order to generate
additional income, each Fund may lend its portfolio securities to broker-dealers
and other institutional borrowers. Such loans may be callable at any time and
continuously secured by collateral (cash or U.S. Government securities) in an
amount not less than the market value, determined daily, of the securities
loaned. It is intended that the value of securities loaned by a Fund would not
exceed 30% of the Fund's net assets.
In the event of the bankruptcy of the other party to a securities loan, a
repurchase agreement or a reverse repurchase agreement, a Fund could experience
delays in recovering either the securities lent or cash. The extent that in the
meantime the value of the securities lent has increased or the value of the
securities purchase has decreased, the Fund could experience a loss.
Illiquid Securities
Each Fund may invest up to 15% of its net assets in illiquid securities. An
illiquid security is any security that may not be sold or disposed of in the
ordinary course of business within seven days at approximately the value at
which the Fund has valued the investment. The absence of a trading market can
make it difficult to ascertain a market value for illiquid securities. The Board
of Trustees of the Trust has ultimate responsibility of ascertaining a fair
value for illiquid securities in which a Fund invests. Disposing of illiquid
securities may involve time-consuming negotiation and legal expenses, and it may
be difficult or impossible for the Fund to sell them promptly at an acceptable
price. Illiquid securities may include privately placed restricted securities
for which no institutional market exists.
Restricted Securities and Private Placements. Each Fund may purchase
restricted securities that are not registered for sale to the general public,
but which can be resold to "qualified institutional buyers." Qualified
institutional buyers must meet certain size tests. Institutional trading in
restricted securities is relatively new, and the liquidity of the Fund's
investments could be impaired if trading declines. The Board of Trustees of the
Trust will determine the liquidity of such restricted securities, based on the
trading market for the specific security. Provided that the Board retains
oversight, the Board may delegate this task to the Adviser. If the Board or the
Adviser determines that a sufficient trading market in such securities exists,
restricted securities will not be treated as illiquid securities for purposes of
the Fund's investment limitations.
"When-Issued" Securities
In order to ensure the availability of suitable securities, each Fund may
purchase securities on a "when-issued" or on a "forward delivery" basis, which
means that the securities would be delivered to the Fund at a future date beyond
customary settlement time. Under normal circumstances, the Fund takes delivery
of the securities. In general, a Fund does not pay for the securities until
received and does not start earning interest until the contractual settlement
date. While awaiting delivery of the securities, a Fund establishes a segregated
account consisting of cash, cash equivalents or high quality debt securities
equal to the amount of the Fund's commitments to purchase "when-issued"
securities. Furthermore, in purchasing securities on a "when-issued" basis, the
Fund bears the risk that the value of the securities at the time of its purchase
may
29
<PAGE>
be lower than the cost which the Fund must pay for the securities. An increase
in the percentage of the Fund's assets committed to the purchase of securities
on a "when-issued" basis may increase the volatility of its net asset value.
Limitations and Risks Associated with Transactions in Options and Futures
Contracts
Each Fund may employ certain management techniques including options on
securities indices, futures contracts and options on futures contacts. Each of
these management techniques involves transaction costs as well as (1) liquidity
risk that contractual positions cannot be easily closed out in the event of
market changes or generally in the absence of a liquid secondary market, (2)
correlation risk that changes in the value of hedging positions may not match
the securities market fluctuations intended to be hedged, and (3) market risk
that an incorrect prediction of securities prices by the Adviser may cause the
Fund to perform less well than if such positions had not been entered. The
ability to terminate over-the-counter options is more limited than with exchange
traded options and may involve the risk that the counter-party to the Option
will not fulfill its obligations. A Fund will treat purchased over-the-counter
options as illiquid securities. The use of options and futures contracts are
highly specialized activities which involve investment techniques and risks that
are different from those associated with ordinary portfolio transactions. The
loss that may be incurred by a Fund in entering into futures contracts and
written options thereon is potentially unlimited. Except as set forth below
under "Futures Contracts and Options on Futures Contracts" there is no limit on
the percentage of a Fund's assets that may be invested in futures contracts and
related options. A Fund may not invest more than 5% of its total assets in
purchased options other than protective put options.
A Fund's transactions in options, futures contracts and options on futures
contracts may be limited by the requirements for qualification of the Fund as a
regulated investment company for tax purposes. See "Tax Status" in the Statement
of Additional Information.
Options on Securities Indices. Each Fund may purchase put and call options
on securities indices that are based on securities in which it may invest to
manage cash flow and to manage its exposure to stocks instead of or in addition
to, buying and selling stock. A Fund may also purchase options in order to hedge
against risks of market-wide price fluctuations.
A Fund may purchase put options in order to hedge against an anticipated decline
in securities prices that might adversely affect the value of the Fund's
portfolio securities. If the Fund purchases a put option on a securities index,
the amount of the payment it would receive upon exercising the option would
depend on the extent of any decline in the level of the securities index below
the exercise price. Such payments would tend to offset a decline in the value of
the Fund's portfolio securities. However, if the level of the securities index
increases and remains above the exercise price while the put option is
outstanding, the Fund will not be able to profitably exercise the option and
will lose the amount of the premium and any transaction costs. Such loss may be
partially offset by an increase in the value of the Fund's portfolio securities.
A Fund may purchase call options on securities indices in order to remain fully
invested in a particular stock market or to lock in a favorable price on
securities that it intends to buy in the future. If the Fund purchases a call
option on a securities index, the amount of the payment it receives upon
exercising the option depends on the extent of an increase in the level of other
securities indices above the exercise price. Such payments would in effect allow
the Fund to benefit from securities market appreciation even though it may not
have had sufficient cash to purchase the underlying securities. Such payments
may also offset increases in the price of securities that the Fund intends to
purchase. If, however, the level of the securities index declines and remains
below the exercise price while the call option is outstanding, the Fund will not
be able to exercise the option profitably and will lose the amount of the
premium and transaction costs. Such loss may be partially offset by a reduction
in the price the Fund pays to buy additional securities for its portfolio.
A Fund may sell an option it has purchased or a similar option prior to the
expiration of the purchased option in order to close out its position in an
option which it has purchased. The Fund may also allow options to expire
unexercised, which would result in the loss of the premium paid.
Futures Contracts and Options on Futures Contracts. To hedge against changes
in securities prices or interest rates, each Fund may purchase and sell various
kinds of futures contracts, and purchase and write call and put options on any
of such futures contracts. A Fund may also enter into closing purchase and sale
transactions with respect to any of such
30
<PAGE>
contracts and options. The futures contracts may be based on various securities
and other financial instruments and indices. A Fund will engage in futures and
related options transactions for bona fide hedging or other non-hedging purposes
as are permitted by regulations of the Commodity Futures Trading Commission.
A Fund may not 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 nonhedging
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. These transactions
involve brokerage costs, require margin deposits and, in the case of contracts
and options obligating a Fund to purchase securities and currencies, require the
Fund to segregate assets to cover such contracts and options.
31
<PAGE>
THE GRANDVIEW FUNDS
Series of GrandView(SM) Investment Trust
PROSPECTUS
August 1, 1996
GrandView REIT Index Fund
GrandView Realty Growth Fund
GrandView Healthcare Realty Income Fund
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-525-3863
INVESTMENT ADVISER
Grandview Advisers, Inc.
Post Office Box 164
East Glastonbury, Connecticut 06025-0164
ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622
CUSTODIAN
Wachovia Bank of North Carolina, N.A.
301 N. Main Street
Winston-Salem, North Carolina 27102
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023
LEGAL COUNSEL
Bingham, Dana & Gould
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
GrandView REIT Index Fund
GrandView Realty Growth Fund
GrandView Healthcare Realty Income Fund
August 1, 1996
Series of
GrandViewSM Investment Trust
105 North Washington Street,
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-525-FUND
Table of Contents
1. THE FUNDS...................................................... 2
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............... 2
3. PERFORMANCE INFORMATION........................................ 14
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..... 15
5. MANAGEMENT..................................................... 17
6. PORTFOLIO TRANSACTIONS......................................... 24
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES........... 25
8. CERTAIN ADDITIONAL TAX MATTERS................................. 26
9. SPECIAL SHAREHOLDER SERVICES....................................27
10. FINANCIAL STATEMENTS........................................... 28
GrandView Investment Trust (the "Trust") is an open-end, registered management
investment company offering three mutual funds which are described in this
Statement of Additional Information: GrandView REIT Index Fund, GrandView Realty
Growth Fund, and GrandView Healthcare Realty Income Fund (the "Funds"). Each of
the Funds (other than the GrandView REIT Index Fund) is a non-diversified fund.
The address and telephone number of the Trust are 105 North Washington St.,
Rocky Mount, North Carolina 27802, 1-800-525-3863.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY, ANY BANK OR INSURED DEPOSITARY INSTITUTION, NOR ARE THEY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
AGENCY. INVESTMENTS IN MUTUAL FUNDS INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Trust's
Prospectus dated August 1, 1996 by which shares of the Funds are offered. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting the Funds' Distributor (see inside back cover for address and phone
number).
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by an
effective prospectus.
<PAGE>
1. THE FUNDS
GrandView Investment Trust (the "Trust") is an open-end management investment
company that was organized as a business trust under the laws of the
Commonwealth of Massachusetts on February 6, 1995. This Statement of Additional
Information describes shares of the GrandView REIT Index Fund ("REIT Index
Fund"), GrandView Realty Growth Fund ("Realty Growth Fund"), and GrandView
Healthcare Realty Income Fund ("Healthcare Realty Income Fund"), which are
series of the Trust. References in this Statement of Additional Information to
the "Prospectus" are to the Prospectus, dated August 1, 1996, of the Trust by
which shares of the Funds are offered. Organized in 1995, the Funds have no
prior operating history.
GrandView Advisers, Inc. (the "Adviser") is investment adviser to each of the
Funds. The Adviser manages the investments of the Funds from day to day in
accordance with each Fund's investment objective and policies. The selection of
investments for the Funds and the way they are managed depend on the conditions
and trends in the economy and the financial marketplaces.
The Board of Trustees of the Trust provides broad supervision over the affairs
of the Funds. The Nottingham Company, the administrator and fund accounting,
dividend disbursing and transfer agent of each Fund ("Nottingham" or the
"Administrator"), supervises the overall administration of the Funds. Shares of
the Funds are continuously sold by Capital Investment Group, Inc., the Funds'
distributor ("Capital Investment Group" or the "Distributor"). Shares of each
Fund are sold at net asset value, plus any applicable sales charge. The sales
charge may be reduced on purchases involving substantial amounts and may be
eliminated in certain circumstances. The Trust has adopted a Distribution Plan
(the "Distribution Plan") in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), which provides for payment of
a distribution fee to Capital Investment Group from each Fund. The Board of
Trustees does not currently intend to authorize the payment of any such fee from
the REIT Index Fund, although they have the authority under the Distribution
Plan to do so in the future.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives
The REIT Index Fund, the Realty Growth Fund, and the Healthcare Realty Income
Fund seek both current income and long-term growth of capital. Each Fund invests
primarily in securities of real estate investment trusts ("REITs") and other
real estate industry companies. The Funds differ in the degree to which they
emphasize income or capital growth, and employ different policies to achieve
their objectives.
The investment objective of the REIT Index Fund is to provide its investors with
investment results which correspond to the performance of the GrandView REIT
Index. The Fund seeks to achieve its objective by investing in the equity
securities of the REITs comprising the Index.
The primary investment objective of the Realty Growth Fund is long-term growth
of capital. Current income is a secondary objective.
The primary investment objective of the Healthcare Realty Income Fund is current
income. Long-term growth of capital is a secondary objective.
The investment objective of each Fund may be changed without approval by that
Fund's shareholders, but shareholders will be given written notice at least 30
days before any change is implemented. Of course, there can be no assurance that
any Fund will achieve its investment objective.
Investment Policies
The Prospectus contains a discussion of the various types of securities in which
each Fund may invest and the risks involved in such investments. The following
supplements the information contained in the Prospectus concerning the
investment objective, policies and techniques of each Fund.
The investment objective of the REIT Index Fund is to provide its investors with
investment results which correspond to the performance of the GrandView REIT
Index (the "Index"). The Fund seeks to achieve its objective by investing in the
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<PAGE>
equity securities of the REITs comprising the Index. The REIT Index Fund intends
to be as fully invested at all times as is reasonably practicable and will
attempt to approximate the weightings of the securities held in its portfolio to
the weightings of the securities in the Index.
The Index was developed and is maintained by the Adviser. It currently consists
of the equity securities of 60 REITs which, as of March 31, 1996, represented
approximately 65% of the total market capitalization of all REITs which are
publicly traded in the United States and includes REITs within each of thirteen
industry sectors identified by the Adviser. Any changes made to the composition
of the Index by the Adviser will be based solely on market capitalization
criteria. The Index is weighted by market capitalization, and in formulating the
list of REITs which comprise the Index, the Adviser chooses REITs which
represent all sectors of the REIT industry as identified by the Adviser. The
Index is reset as needed in order to reflect changes in the market, and in any
event, at least semiannually. The Index is presently comprised of the following
REITs:
GrandView REIT Index Composition
3/96 Market
Sector/Name Exchange Capitalization
- -------------------------------- -------- --------------
Apartment
Security Capital Pacific Trust NYSE 1,588,642,000
Equity Residential Prop. NYSE 1,388,281,250
United Dominion Realty NYSE 826,414,875
Merry Land & Inv. Co. NYSE 736,803,000
Post Properties Inc. NYSE 703,518,010
Avalon Properties NYSE 610,007,503
BRE Properties, Inc. NYSE 568,000,000
Summit Properties NYSE 408,060,000
Oasis Residential, Inc. NYSE 381,584,681
Evans Withycombe Res. NYSE 374,534,785
Wellsford Residential Tr. NYSE 370,518,750
-------------
7,956,364,854
Hotel
Felcor Suite Hotels, Inc. NYSE 666,500,000
Starwood Lodging Trust NYSE 466,593,750
Patriot American Hospitality, Inc. NYSE 388,598,515
-------------
1,521,692,265
Industrial/Warehouse
Security Capital Ind. Trust NYSE 1,424,990,000
First Industrial Rlty. Trust NYSE 594,750,000
Liberty Property Trust NYSE 583,687,500
-------------
2,603,427,500
Manufactured Housing
Manufacturer Home Com. NYSE 437,786,000
ROC Communities, Inc. NYSE 291,952,250
Sun Communities NYSE 270,429,000
-------------
1,000,167,250
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<PAGE>
Medical
Meditrust NYSE 1,998,625,000
Health & Retirement Properties NYSE 1,132,904,375
Health Care Property Investors NYSE 898,758,000
Nationwide Health Prop. NYSE 813,267,000
National Health Investors NYSE 622,992,500
Omega HealthCare Investors NYSE 568,673,839
American Health Properties NYSE 526,905,000
-------------
6,562,125,714
Mixed
Spieker Properties NYSE 839,557,250
Duke Realty Investments, Inc. NYSE 731,555,500
Washington REIT SBI ASE 508,027,744
TriNet Corporate Realty Tr. NYSE 397,947,926
-------------
2,477,088,420
Mortgage
CWM Mortgage Holdings, Inc. NYSE 668,909,279
Capstead Mortgage Corporation NYSE 576,750,000
Resource Mortgage Capital, Inc. NYSE 413,649,000
-------------
1,659,308,279
Office
Crescent R. E. Equities, Inc. NYSE 791,364,375
Cousins Properties NYSE 548,125,500
Highwood Properties, Inc. NYSE 540,942,250
Beacon Properties Corp. NYSE 507,718,750
-------------
2,388,150,875
Retail-Mall
Simon Property Group NYSE 1,347,123,750
Debartolo Realty Corp. NYSE 829,937,430
General Growth Properties, Inc. NYSE 640,905,160
CBL & Associates Prop. NYSE 437,787,000
Taubman Centers, Inc. NYSE 435,598,416
Macerich Company NYSE 392,068,250
-------------
4,083,420,006
Retail-Outlet
HGI Realty NYSE 389,163,461
Chelsea GCA Realty NYSE 338,807,500
Mills Corp. NYSE 297,967,422
-------------
1,025,938,383
4
<PAGE>
Retail-Strip
New Plan Realty Trust NYSE 1,182,225,000
Weingarten Realty Investors NYSE 952,373,625
Kimco Realty Corp. NYSE 950,400,000
Vornado Realty Trust NYSE 929,650,164
Federal Realty Investment Trust NYSE 717,896,250
Developers Diversified Realty NYSE 631,562,500
Glimcher Realty Trust NYSE 371,992,657
-------------
5,736,100,196
Self Storage
Public Storage, Inc. NYSE 1,460,194,750
Storage USA Inc. REIT NYSE 612,803,125
Shurgard Storage Centers, Inc. NYSE 608,842,500
-------------
2,681,840,375
Specialty
Franchise Finance Corp. NYSE 808,498,040
Realty Income Corp. NYSE 476,770,488
National Golf Properties, Inc. NYSE 269,533,250
--------------
1,554,801,778
--------------
41,250,425,896
REITs pool investors' funds for investment primarily in income producing real
estate or real estate related loans or interests. A REIT is not taxed on income
distributed to its shareholders or unitholders if it complies with regulatory
requirements relating to its organization, ownership, assets and income and a
regulatory requirement that it distribute to its shareholders or unitholders at
least 95% of its taxable income for each taxable year. Generally, REITs can be
classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive their income
primarily from rents and capital gains from appreciation realized through
property sales. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive their income primarily from
interest payments. Mortgage REITs are sensitive to the credit quality of the
underlying borrowers. Hybrid REITs combine the characteristics of both Equity
and Mortgage REITs. The value of REITs may be affected by management skill, cash
flow and tax and regulatory requirements.
The investment objective of the Realty Growth Fund is long-term growth of
capital. Current income is a secondary objective. In selecting investments for
the Fund, the Adviser will emphasize equity securities of real estate industry
companies which it believes are undervalued or which it believes to have
significant "turnaround" potential. For purposes of the 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. The equity securities in which the Fund will invest may include common
stocks, 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 in which the Fund will invest
may include bonds, notes and other short-term debt obligations. In determining
whether a security is undervalued, the Adviser may take into account
price-earnings ratios, cash flows, relationships of asset value to market prices
of the securities, interest or dividend payment histories and other factors
which it believes to be relevant. The Adviser may determine that a company has
"turnaround" potential based on, for example, changes in management or financial
restructurings. The Fund's performance depends on conditions in the real estate
industry.
The investment objective of the Healthcare Realty Income Fund is current income.
Long-term growth of capital is a secondary objective of the Fund. Under normal
circumstances, at least 65% of the Fund's total assets are invested in debt and
equity securities of REITs and other companies in the healthcare sector of the
real estate industry. A company will be deemed to be in the healthcare sector of
the real estate industry if it derives at least 50% of its gross revenues or net
profits from the ownership, development, construction, financing, management or
sale of real estate used primarily for healthcare purposes.
5
<PAGE>
Because the Funds invest primarily in the real estate industry, their
investments may be subject to certain risks associated with the direct ownership
of real estate. These risks include: declines in the value of real estate; risks
related to general and local economic conditions, overbuilding and increased
competition; increases in property taxes and operating expenses; and variations
in rental income. For more information on these and other risks of investing in
the real estate industry, see "INVESTMENT OBJECTIVE AND POLICIES - Risks of
Investing" in the Prospectus.
The policies described above and those described below are not fundamental and
may be changed without shareholder approval.
Mortgage-Backed Securities
The Funds (other than the REIT Index Fund) may invest in securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities").
Mortgage-Backed Securities represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as the Government National
Mortgage Association ("Ginnie Mae") and government-related organizations such as
the Federal National Mortgage Association ("Fannie Mae") and the Federal Home
Loan Mortgage Corporation ("Freddie Mac"), as well as by nongovernmental issuers
such as commercial banks, savings and loan institutions, mortgage bankers, and
private mortgage insurance companies. Although certain Mortgage-Backed
Securities are guaranteed by a third party or otherwise similarly secured, the
market value of the security, which may fluctuate, is not so secured. If the
Adviser purchases a Mortgage-Backed Security at a premium, that portion may be
lost if there is a decline in the market value of the security whether resulting
from changes in interest rates or prepayments in the underlying mortgage
collateral. As with other interest-bearing securities, the prices of such
securities are inversely affected by changes in interest rates. However, though
the value of a Mortgage-Backed Security may decline when interest rates rise,
the converse is not necessarily true since in periods of declining interest
rates the mortgages underlying the securities are prone to prepayment. For this
and other reasons, a Mortgage-Backed Security's stated maturity may be shortened
by unscheduled prepayments on the underlying mortgages and, therefore, it is not
possible to predict accurately the securities' return to a Fund. In addition,
regular payments received in respect of Mortgage-Backed Securities include both
interest and principal. No assurance can be given as to the return a Fund will
receive when these amounts are reinvested.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue Mortgage-Backed Securities
and among the securities that they issue. Mortgage-Backed Securities issued by
Ginnie Mae include Ginnie Mae Mortgage Pass-Through Certificates which are
guaranteed as to the timely payment of principal and interest by Ginnie Mae.
This guarantee is backed by the full faith and credit of the United States.
Ginnie Mae is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. Ginnie Mae certificates also are supported by
the authority of Ginnie Mae to borrow funds from the U.S. Treasury to make
payments under its guarantee. Mortgage-Backed Securities issued by Fannie Mae
include Fannie Mae Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are guaranteed as to timely payment of the principal and
interest by Fannie Mae. Fannie Maes are solely the obligations of Fannie Mae and
are not backed by or entitled to the full faith and credit of the United States.
Fannie Mae is a government-sponsored organization owned entirely by private
stockholders. MortgageBacked Securities issued by Freddie Mac include Freddie
Mac Mortgage Participation Certificates (also known as "Freddie Macs" or
"PC's"). Freddie Mac is a corporate instrumentality of the United States,
created pursuant to an Act of Congress, which is owned entirely by Federal Home
Loan Banks. Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Banks and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to
timely payment of interest, which is guaranteed by Freddie Mac. Freddie Mac
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When Freddie Mac does not guarantee
timely payment of principal, Freddie Mac may remit the amount due on account of
its guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
The Funds (other than the REIT Index Fund) may also invest in Mortgage-Backed
Securities which are collateralized mortgage obligations structured on pools of
mortgage pass-through certificates or mortgage loans ("CMOs" and "REMICs") and
derivative multiple-class mortgage-backed securities ("Stripped Mortgage-Backed
Securities" or "SMBSs").
6
<PAGE>
Short-Term Investments
For temporary defensive purposes, each Fund (other than the REIT Index Fund) may
invest up to 100% of its total assets in short-term investments. Each Fund
(including the REIT Index Fund) may also make short-term investments for
liquidity purposes (e.g., in anticipation of redemptions or purchases of
securities). The Funds 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-l, Aa or better by Moody's Investors Service, Inc. ("Moody's") or
A-1, AA or better by Standard & Poor's Ratings Group ("Standard & Poor's");
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances) of banks with securities outstanding that are rated
Prime-l, Aa or better by Moody's, or A-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, subject to the provisions of the 1940 Act;
and repurchase agreements. These investments may have a lower yield than would
be available from investments with a lower quality or longer term.
Lower Rated Debt Securities
The Funds (other than the REIT Index Fund) may invest in debt securities which
are rated Caa or higher by Moody's or CCC or higher by Standard & Poor's or
Fitch Investors Service, Inc. ("Fitch") or equivalent unrated securities.
However, no Fund may invest more than 10% of its assets (25% for the Realty
Growth Fund) in debt securities rated lower than Baa by Moody's or BBB by
Standard & Poor's or Fitch or securities not rated by Moody's, Standard & Poor's
or Fitch which the Adviser deems to be of equivalent quality. Bonds rated BB or
Ba or below (or comparable unrated securities) are commonly referred to as "junk
bonds" and are considered speculative and may be questionable as to principal
and interest payments. In some cases, such bonds may be highly speculative, have
poor prospects for reaching investment standing and be in default. As a result,
investment in such bonds will entail greater risks than those associated with
investment in investment-grade bonds (i.e., bonds rated BBB or better by
Standard & Poor's or Fitch or Baa or better by Moody's).
An economic downturn could severely affect the ability of highly leveraged
issuers to service their debt obligations or to repay their obligations upon
maturity. Factors having an adverse impact on the market value of lower rated
securities will have an adverse effect on a Fund's net asset value to the extent
it invests in such securities. In addition, the Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in payment
of principal or interest on its portfolio holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on a
Fund's ability to dispose of a particular security when necessary to meet its
liquidity needs. Under adverse market or economic conditions, the secondary
market for junk bond securities could contract further, independent of any
specific adverse changes in the condition of a particular issuer. As a result,
the Adviser could find it more difficult to sell these securities or may be able
to sell the securities only at prices lower than if such securities were widely
traded. Prices realized upon the sale of such lower rated or unrated securities,
under these circumstances, may be less than the prices used in calculating the
Fund's net asset value.
Since investors generally perceive that there are greater risks associated with
the medium to lower rated securities of the type in which certain of the Funds
may invest, the yields and prices of such securities may tend to fluctuate more
than those for higher rated securities. In the lower quality segments of the
fixed-income securities market, changes in perceptions of issuers'
creditworthiness tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the fixed-income securities market
resulting in greater yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in a Fund's net asset value.
Medium to lower rated and comparable non-rated securities tend to offer higher
yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as
7
<PAGE>
that of other issuers. In addition to the risk of default, there are the related
costs of recovery on defaulted issues. The Adviser will attempt to reduce these
risks through diversification of each Fund's portfolio and by analysis of each
issuer and its ability to make timely payments of income and principal, as well
as broad economic trends in corporate developments.
Foreign Real Estate Companies and Associated Risks
Each Fund (other than the REIT Index Fund) may invest in securities of non-U.S.
real estate companies. The risks of investing in real estate and real estate
companies are described in the Prospectus and above under "Investment Policies."
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in U.S.
investments. For example, the value of these securities fluctuates based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about non-U.S. issuers, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Non-U.S. issuers are generally not bound by uniform accounting, auditing
and financial reporting requirements comparable to those applicable to U.S.
issuers. Investments in securities of non-U.S. issuers also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of a Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.
It is anticipated that in most cases the best available market for securities of
non-U.S. real estate companies would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the U.S.,
and securities of some non-U.S. real estate companies (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. Non-U.S. security trading practices,
including those involving securities settlement where Fund assets may be
released prior to receipt of payments, may expose the Funds to increased risk in
the event of a failed trade or the insolvency of a non-U.S. broker-dealer. In
addition, non-U.S. brokerage commissions are generally higher than commissions
on securities traded in the U.S. and may be non-negotiable. In general, there
is less overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other forms of depositary receipts for
securities of non-U.S. issuers provide an alternative method for the Funds to
make non-U.S. investments. These securities are not usually denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are designed for use in U.S. securities markets and
EDRs and GDRs, in bearer form, are designed for use in European and global
securities markets. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. EDRs and GDRs are
European and global receipts, respectively, evidencing a similar arrangement.
The Funds may invest in securities of non-U.S. real estate companies that impose
restrictions on transfer within the United States or to United States persons.
Although securities subject to such transfer restrictions may be marketable
abroad, they may be less liquid than securities of non-U.S. real estate
companies of the same class that are not subject to such restrictions.
Repurchase Agreements
Each Fund may invest in repurchase agreements collateralized by securities in
which that Fund may otherwise invest. Repurchase agreements are agreements by
which the Fund purchases a security and simultaneously commits to resell that
security to the seller (which is usually a member bank of the U.S. Federal
Reserve System or a member firm of the New York Stock Exchange (or a subsidiary
thereof)) at an agreed-upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed-upon market rate of interest which is unrelated to the coupon
rate or maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security, usually U.S. Government
or Government agency issues. Under the 1940 Act, repurchase agreements may be
considered to be loans by the buyer. The Fund's risk is limited to the ability
of the seller to pay the agreed-upon amount on the delivery date. If the seller
defaults, the underlying security constitutes collateral for the seller's
obligation to pay although that Fund may incur certain costs in liquidating this
collateral and in certain cases may not be permitted to liquidate this
collateral. All repurchase agreements entered into by the Funds are fully
collateralized, with such collateral being marked to market daily.
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Reverse Repurchase Agreements
Each Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by the Fund and the agreement by
the Fund to repurchase the securities at an agreed upon price, date and interest
payment. When the Fund enters into reverse repurchase transactions, securities
of a dollar amount equal in value to the securities subject to the agreement
will be maintained in a segregated account with the Fund's custodian. The
segregation of assets could impair the Fund's ability to meet its current
obligations or impede investment management if a large portion of the Fund's
assets are involved. Reverse repurchase agreements are considered to be a form
of borrowing.
Lending of Portfolio Securities
Consistent with applicable regulatory requirements and in order to generate
income, each Fund may lend its securities to broker-dealers and other
institutional borrowers. Such loans will usually be made only to member banks of
the U.S. Federal Reserve System and to member firms of the New York Stock
Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. The Fund would have the right to call a
loan and obtain the securities loaned at any time on customary industry
settlement notice (which will not usually exceed five days). During the
existence of a loan, the Fund would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would also
receive compensation based on investment of the collateral. The Fund would not,
however, have the right to vote any securities having voting rights during the
existence of the loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or of the giving or withholding
of their consent on a material matter affecting the investment. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower fail financially. However, the
loans would be made only to entities deemed by the Adviser to be of good
standing, and when, in the judgment of the Adviser, the consideration which can
be earned currently from loans of this type justifies the attendant risk. If the
Adviser determines to make loans, it is not intended that the value of the
securities loaned by the Fund would exceed 30% of the value of its net assets.
Restricted Securities and Illiquid Investments
The Trust may purchase securities for the Funds that are not registered
("restricted securities") under the Securities Act of 1933 (the "Securities
Act"), but can be offered and sold to "qualified institutional buyers" under
Rule 144A under the Securities Act. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are not
treated as illiquid securities for purposes of the Fund's investment
limitations.
The Trust does not invest more than 15% of any Fund's net assets in illiquid
investments, which include securities for which there is no readily available
market, securities subject to contractual restrictions on resale and restricted
securities, unless the Trustees determine, based on the trading markets for the
specific restricted security, that it is liquid. The Trust's Trustees may adopt
guidelines and delegate to the Adviser the daily function of determining and
monitoring liquidity of restricted securities. The Trust's Trustees, however,
retain sufficient oversight and are ultimately responsible for the
determinations.
"When-Issued" Securities
Each Fund may purchase securities on a "when-issued" or on a "forward delivery"
basis. It is expected that, under normal circumstances, the applicable Fund
would take delivery of such securities. When the Fund commits to purchase a
security on a "when-issued" or on a "forward delivery" basis, it sets up
procedures consistent with SEC policies. Since those policies currently require
that an amount of the Fund's assets equal to the amount of the purchase be held
aside or segregated to be used to pay for the commitment, the Fund will always
have cash, cash equivalents or high quality debt securities sufficient to cover
any commitments or to limit any potential risk. However, even though the Funds
do not intend to make such purchases for speculative purposes and intend to
adhere to the provisions of SEC policies, purchases of securities on such bases
may involve more risk than other types of purchases. For example, the Fund may
have to sell assets which have been set aside in order to meet redemptions.
Also, if the Adviser determines it is advisable as a matter of investment
strategy to sell the "when-issued" or "forward delivery" securities, the Fund
would be required to meet its obligations from the then available cash flow or
the sale of securities, or, although it would not normally expect to do so, from
the sale of the "when-
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issued" or "forward delivery" securities themselves (which may have a value
greater or less than the Fund's payment obligation).
Options and Futures Contracts
To hedge against changes in securities prices, each Fund may purchase and sell
various kinds of futures contracts, and purchase and write (sell) call and put
options on any of such futures contracts. Each Fund may also purchase put and
call options on securities indices that are based on securities in which it may
invest. The futures contracts may be based on various securities (such as U.S.
Government securities), securities indices and other financial instruments and
indices. A Fund may engage in futures and related options transactions for bona
fide hedging and non-hedging purposes as described below. All futures contracts
entered into by a Fund are traded on U.S. exchanges or boards of trade that are
licensed and regulated by the Commodity Futures Trading Commission (the "CFTC")
or on foreign exchanges.
A futures contract may generally be described as an agreement between two
parties to buy and sell particular financial instruments for an agreed price
during a designated month (or to deliver the final cash settlement price, in the
case of a contract relating to an index or otherwise not calling for physical
delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, a Fund can seek
to offset a decline in the value of its current portfolio securities through the
sale of futures contracts. When interest rates are falling or securities prices
are rising, a Fund, through the purchase of futures contracts, can attempt to
secure better rates or prices than might later be available in the market when
it effects anticipated purchases.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. A clearing corporation associated with the exchange on which futures
on securities are traded guarantees that, if still open, the sale or purchase
will be performed on the settlement date.
Hedging, by use of futures contracts, seeks to establish with more certainty the
effective price and rate of return on portfolio securities and securities that a
Fund owns or proposes to acquire. A Fund may, for example, take a "short"
position in the futures market by selling futures contracts in order to hedge
against an anticipated rise in interest rates that would adversely affect the
value of the Fund's portfolio securities. Such futures contracts may include
contracts for the future delivery of securities held by a Fund or securities
with characteristics similar to those of a Fund's portfolio securities. If, in
the opinion of the Adviser, there is a sufficient degree of correlation between
price trends for a Fund's portfolio securities and futures contracts based on
securities indices, a Fund may also enter into such futures contracts as part of
its hedging strategy. Although under some circumstances prices of securities in
a Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Adviser will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any such differential
by having a Fund enter into a greater or lesser number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting a
Fund's securities portfolio. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of a Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.
On other occasions, a Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices or rates that are currently available.
The acquisition of put and call options on futures contracts will give a Fund
the right (but not the obligation) for a specified price to sell or to purchase,
respectively, the underlying futures contract at any time during the option
period. As the purchaser of an option on a futures contract, a Fund obtains the
benefit of the futures position if prices move in a favorable direction but
limits its risk of loss in the event of an unfavorable price movement to the
loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium, to sell a futures
contract, which may have a value higher than the exercise price. Conversely, the
writing of a put option on a futures
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contract generates a premium which may partially offset an increase in the price
of securities that a Fund intends to purchase. However, a Fund becomes obligated
to purchase a futures contract which may have a value lower than the exercise
price. Thus, the loss incurred by a Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received. A Fund
will incur transaction costs in connection with the writing of options on
futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.
A Fund may use options on futures contracts for bona fide hedging or non-hedging
purposes as discussed below.
A Fund will engage in futures and related options transactions only for bona
fide hedging or non-hedging purposes in accordance with CFTC regulations which
permit investment companies registered under the 1940 Act to engage in such
transactions without requiring their sponsors to be registered as commodity pool
operators. No Fund is permitted to engage in speculative futures trading. A Fund
will determine that the price fluctuations in the futures contracts and options
on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or in securities which it expects to
purchase. Except as stated below, a Fund's futures transactions will be entered
into for traditional hedging purposes -- i.e., futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns, or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. In particular cases, when it is
economically advantageous for a Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.
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 nonhedging 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. These transactions involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities and currencies, require the
Fund to segregate assets to cover such contracts and options.
Transaction costs associated with futures contracts and related options involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require a Fund
to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while a Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for a Fund than if it had not entered into any
futures contracts or options transactions. In the event of an imperfect
correlation between a futures position and a portfolio position which is
intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss.
Investment Restrictions
Fundamental Restrictions
The Trust, on behalf of the Funds, has adopted the following policies which may
not be changed with respect to any Fund without approval by holders of a
majority of the outstanding voting securities of that Fund, which as used in
this Statement of Additional Information means the vote of the lesser of (i) 67%
or more of the outstanding voting securities of the respective Fund present at a
meeting at which the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy, or (ii) more than
50% of the outstanding voting securities of the respective Fund. The term
"voting securities" as used in this paragraph has the same meaning as in the
1940 Act.
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A Fund may not:
(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow from banks and enter into reverse
repurchase agreements in an amount not to exceed 33 1/3% of the current
value of its respective net assets, including the amount borrowed (and no
Fund may purchase any securities at any time at which borrowings exceed
5% of the total assets of the Fund, taken at market value). It is
intended that a Fund would borrow money only from banks and only to
accommodate requests for the repurchase of shares of the Fund while
effecting an orderly liquidation of portfolio securities.
(2) Make short sales of securities or purchase securities on margin, except
that the Trust may purchase and sell various types of futures contracts
and may obtain short term credits as necessary for the clearance of
security transactions.
(3) Underwrite securities issued by other persons, except to the extent that
the Fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities.
(4) Make loans to other persons except (a) through the lending of its
portfolio securities, but not in excess of 33 1/3% of the Fund's net
assets, (b) through the use of fixed time deposits or repurchase
agreements or the purchase of short-term obligations or (c) by purchasing
all or a portion of an issue of debt securities; for purposes of this
paragraph 4 the purchase of short-term commercial paper or a portion of
an issue of debt securities which are part of an issue to the public
shall not be considered the making of a loan.
(5) Purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity
contracts in the ordinary course of business, except that the Fund may
purchase and sell mortgage-related securities and may hold and sell real
estate acquired as a result of the ownership of securities by the Fund.
(6) Issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a
debt incurred without violating Investment Restriction (1) above.
(7) In the case of the REIT Index Fund, 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.
(8) In the case of the REIT Index Fund, 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.
(9) Invest 25% or more of its assets in securities of issuers in any one
industry (other than securities or obligations issued or guaranteed by
the United States government or any agency or instrumentality thereof),
except that it will invest at least 25% of its assets in securities of
issuers in the real estate industry.
State and Federal Restrictions
In order to comply with certain state and federal statutes and policies each
Fund does not as a matter of operating policy: (i) borrow money for any purpose
in excess of 10% of the net assets of the Fund (taken at cost) (the Fund will
not purchase any securities for the Fund at any time at which borrowings exceed
5% of the total assets of the Fund (taken at market value)), (ii) sell any
security which the Fund does not own unless by virtue of the ownership of other
securities there is at the time of sale a right to obtain securities, without
payment of further consideration, equivalent in kind and amount to the
securities sold and provided that if such right is conditional the sale is made
upon the same conditions, (iii) invest for the purpose of exercising control or
management, (iv) purchase securities issued by any registered investment
company, except by purchase in the open market where no commission or profit to
a sponsor or dealer results from such purchase other than
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the customary broker's commission, or except when such purchase, though not made
in the open market, is part of a plan of merger or consolidation; provided,
however, that the Fund will not purchase the securities of any registered
investment company if such purchase at the time thereof would cause more than
10% of the total assets of the Fund (taken in each case at the greater of cost
or market value) to be invested in the securities of such issuers or would cause
more than 3% of the outstanding voting securities of any such issuer to be held
for the Fund, (v) invest more than 15% of the net assets of the Fund in
securities that are not readily marketable or which are subject to legal or
contractual restrictions on resale including debt securities for which there is
no established market and fixed time deposits and repurchase agreements maturing
in more than seven days, (vi) purchase or retain any securities issued by an
issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust, or is an officer or director of the Adviser, if
after the purchase of the securities of such issuer by the Fund, one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or securities,
or both, all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more than
5% of such shares or securities, or both, all taken at market value, (vii) make
short sales of securities, except that the Trust may purchase and sell various
types of futures contracts and may obtain short term credits as necessary for
the clearance of security transactions, (viii) invest more than 5% of the Fund's
net assets in warrants (valued at the lower of cost or market), but not more
than 2% of the Fund's net assets may be invested in warrants not listed on the
New York Stock Exchange or the American Stock Exchange, (ix) with respect to 50%
of the Fund's total assets, invest more than 5% of its total assets in the
securities of any one issuer and, as to the remaining 50% of the Fund's total
assets, invest more than 25% in the securities of any one issuer, (x) purchase
securities of any issuer if, as to 75% of the assets of the Fund at the time of
purchase, more than 10% of the voting securities of any issuer would be held by
the Fund, or (xi) invest more than 15% of the Fund's total assets in the
securities of issuers which together with any predecessors (including public and
private predecessor operating companies) have a record of less than three years
of continuous operating or securities of issuers which are restricted as to
disposition, despite any determinations made by the Board of Trustees that such
securities are liquid.
Except as provided below, in order to comply with Rule 260.140.85(b) of Title 10
of the California Code of Regulations, a Fund will not engage in short sales
(other than sales against the box) or margin purchases, in writing, buying or
selling puts and calls on securities, stock index futures, options on stock
index futures, securities, stock index futures, options on stock index futures,
financial futures contracts or options thereon, or in other investment practices
which, in the opinion of the California Commissioner of Corporations, are highly
speculative, unless the securities of the Fund are offered only to a limited
class of purchasers and are subject to other sales limitations as the California
Commissioner of corporations may require, and adequate disclosure is made of the
speculative nature of the security. However, a Fund may engage in writing puts
or calls if each of the following conditions are met: (i) the security
underlying the put or call is within the investment policies of the Fund and the
option is issued by the Options Clearing Corporation, (ii) the aggregate value
of the securities underlying the calls or obligations underlying the puts
determined as of the date the options are sold shall not exceed 25% of the net
assets of the Fund, (iii) the securities subject to the exercise of a call
written by the Fund must be owned by the Fund at the time the call is sold and
must continue to be owned by the Fund until the call has been exercised, has
lapsed, or the Fund has purchased a closing call, and such purchase has been
confirmed, thereby extinguishing the Fund's obligation to deliver securities
pursuant to the call it has sold, and (iv) at the time a put is written the Fund
must establish a segregated account with its custodian consisting of cash or
short term United States Government securities equal in value to the amount the
Fund will be obligated to pay upon exercise of the put; this account must be
maintained until the put is exercised, has expired, or the Fund has purchased a
closing put, which is a put of the same series as the one previously written. A
Fund may buy and sell puts and calls on securities, stock index futures or
options on stock index futures, or financial futures or options on financial
futures, if such options are written by other persons and if (i) the options or
futures are offered through the facilities of a national securities association
approved by the California Commissioner of Corporations or are listed on a
national securities or commodities exchange, (ii) the aggregate premiums paid on
all such options which are held at any time do not exceed 20% of the Fund's
total net assets, and (iii) the aggregate margin deposits required on all such
futures or options thereon held at any time do not exceed 5% of the Fund's total
assets.
These policies are not fundamental and may be changed by each Fund without the
approval of its shareholders in response to changes in state and federal
requirements.
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Percentage Restrictions
If a percentage restriction on investment or utilization of assets set forth
above or referred to in the Prospectus is adhered to at the time an investment
is made or assets are so utilized, a later change in percentage resulting from
changes in the value of the securities held for a Fund will not be considered a
violation of policy.
3. PERFORMANCE INFORMATION
From time to time, the total return and yield of each Fund may be quoted in
advertisements, sales literature, shareholder reports, or other communications.
A total rate of return quotation for each Fund is calculated for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains distributions declared during such
period with respect to a share held at the beginning of such period and with
respect to shares purchased with such dividends and capital gains distributions,
by (ii) the public offering price per share on the first day of such period, and
(b) subtracting 1 from the result. Any annualized total rate of return quotation
is calculated by (x) adding 1 to the period total rate of return quotation
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
Total rates of return may also be calculated on investments at various sales
charge levels or at net asset value. Any performance data which is based on a
reduced sales charge or net asset value per share would be reduced if the
maximum sales charge were taken into account.
Any current yield quotation for a Fund consists of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a 30
calendar day or one month period and is calculated by (a) raising to the sixth
power the sum of 1 plus the quotient obtained by dividing the Fund's net
investment income earned during the period by the product of the average daily
number of shares outstanding during the period that were entitled to receive
dividends and the maximum public offering price per share on the last day of the
period, (b) subtracting 1 from the result, and (c) multiplying the result by 2.
The aggregate total return for the REIT Index Fund for the period from
commencement of operations (July 3, 1995) through March 31, 1996 was 3.21%.
Without the deduction of the 3.0% maximum sales load, the aggregate total return
for such Fund for such period was 6.40%. The aggregate total return for the
Realty Growth Fund for the period from commencement of operations (July 3, 1995)
through March 31, 1996 was 0.95%. Without the deduction of the 4.5% maximum
sales load, the aggregate total return for such Fund for such period was 5.70%.
The aggregate total return for the Healthcare Realty Income Fund for the period
from commencement of operations (July 3, 1995) through March 31, 1996 was 9.91%.
Without the deduction of the 4.5% maximum sales load, the aggregate total return
for such Fund for such period was 15.08%. These performance quotations should
not be considered as representative of the Fund's performance for any specific
period in the future. Aggregate total return is calculated similarly to annual
total return, except that the return is aggregated rather than annualized.
Each Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, each Fund may compare its performance to
the S&P 500 Index, as a comparison to the overall market, the Dow Jones Utility
Index, as a comparison to another income-oriented equity group, and the
GrandView REIT Index (see "Investment Policies" above), as a comparison to the
Funds' investment benchmark as described in the Prospectus. Comparative
performance may also be expressed by reference to a ranking prepared by a mutual
fund monitoring service or by one or more newspapers, newsletters or financial
periodicals. Each Fund may also occasionally cite statistics to reflect its
volatility and risk. Each Fund may also compare its performance to other
published reports of the performance of unmanaged portfolios of companies. The
performance of such unmanaged portfolios generally does not reflect the effects
of dividends or dividend reinvestment. Of course, there can be no assurance that
any Fund will experience the same results. Performance comparisons may be useful
to investors who wish to compare a Fund's past performance to that of other
mutual funds and investment products. Of course, past performance is not a
guarantee of future results.
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Each Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, each Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in net asset value over a specific period of
time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Investors may use such indices in addition to the Funds' Prospectus to obtain a
more complete view of each Fund's performance before investing. Of course, when
comparing a Fund's performance to any index, factors such as composition of the
index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for each Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time each Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. Each Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). Each Fund may also depict the historical performance
of the securities in which the Fund may invest over periods reflecting a variety
of market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
Each Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The net asset value of each share of each Fund is determined each day during
which the New York Stock Exchange is open for trading (a "Business Day"). As of
the date of this Statement of Additional Information, the New York Stock
Exchange is open for trading every weekday except for the following holidays (or
the days on which they are observed): New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. This determination of net asset value of shares of a Fund is made
once each day at 4 p.m. New York time by dividing the value of each Fund's net
assets (i.e., the value of its assets less its liabilities, including expenses
payable or accrued) by the number of shares of the Fund outstanding at the time
the determination is made. A share's net asset value is effective for orders
received by the Distributor prior to its calculation and prior to the close of
the Business Day on which such net asset value is determined.
For the fiscal year ended March 31, 1996, the total expenses of the Funds after
fee waivers and expense reimbursements were $997 for the REIT Index Fund, $1,436
for the Realty Growth Fund, and $1,043 for the Healthcare Realty Income Fund.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the principal exchange or market
where they are traded. Securities which have not traded on the date of
15
<PAGE>
valuation, or securities for which sales prices are not generally reported, are
valued at the mean between the current bid and asked prices. Securities listed
on a non-U.S. exchange are valued at the last quoted sale price available before
the time when net assets are valued. Bonds and other fixed income securities
(other than short-term obligations) are valued on the basis of valuations
furnished by a pricing service, use of which has been approved by the Board of
Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations (maturing in 60 days or less) are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures contracts are normally valued at the settlement price on the exchange on
which they are traded. Securities for which there are no such valuations are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees.
Trading in securities on most non-U.S. exchanges and over-the-counter markets is
normally completed before the close of regular trading on the New York Stock
Exchange and may also take place on days on which the New York Stock Exchange is
closed. If events materially affecting the value of non-U.S. securities occur
between the time when the exchange on which they are traded closes and the time
when a Fund's net asset value is calculated, such securities will be valued at
fair value in accordance with procedures established by and under the general
supervision of the Board of Trustees.
Interest income on long-term obligations held for a Fund is determined on the
basis of interest accrued plus amortization of "original issue discount"
(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued less amortization of any premium.
Subject to compliance with applicable regulations, the Trust has reserved the
right to pay the redemption price of shares of each Fund, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares being
sold. If a holder of shares received a distribution in kind, that holder could
incur brokerage or other charges in converting the securities to cash.
Redemptions of shares of the REIT Index Fund made within six months of purchase
are subject to a redemption fee in the amount of 1% of the net asset value of
the shares redeemed. Redemptions of shares of the REIT Index Fund made between
six and twelve months after purchase will be subject to a redemption fee of
0.50% of the net asset value of the shares redeemed. No redemption fee is
imposed if the proceeds are immediately invested in shares of one or more of the
other Funds, but a further redemption of shares of the other Fund may result in
a redemption fee at the rate which would have been applicable if the shareholder
had continued to hold shares of the REIT Index Fund. Redemption fees may also be
waived or reduced for "omnibus" accounts or in other circumstances as described
in the Prospectus. All redemption fees are payable to the applicable Fund.
Redemption proceeds are normally paid by check within seven days after receipt
of a redemption request. However, the right of any shareholder to receive
payment with respect to any redemption may be suspended or the payment of the
redemption proceeds postponed during any period in which (a) trading in the
markets a Fund normally utilizes is restricted, or an emergency, as defined by
the rules and regulations of the SEC, exists making disposal of a Fund's
investments or determination of its net asset value not reasonably practicable;
(b) the New York Stock Exchange is closed (other than customary weekend and
holiday closings); or (c) the SEC has by order permitted such suspension.
Letter of Intent
If an investor anticipates purchasing sufficient shares to entitle the investor
to a quantity discount alone or in combination with any shares of other series
of the Trust within a 13-month period, the investor may obtain such shares at
the same reduced sales charge as though the total quantity were invested in one
lump sum by completing a Letter of Intent on the terms described below. Subject
to acceptance by the Distributor and the conditions mentioned below, each
purchase will be made at a public offering price applicable to a single
transaction of the dollar amount specified in the Letter of Intent. The
shareholder must inform the Distributor that the Letter of Intent is in effect
each time shares are purchased. The shareholder makes no commitment to purchase
additional shares, but if his or her purchases within 13 months plus the value
of shares
16
<PAGE>
credited toward completion of the Letter of Intent do not total the sum
specified, an increased sales charge will apply as described below. A purchase
not originally made pursuant to a Letter of Intent may be included under a
subsequent Letter of Intent executed within 90 days of the original purchase if
the Distributor is informed in writing of this intent within the 90-day period.
The value of shares of a Fund held prior to the commencement of a Letter of
Intent may be included, at their cost or maximum offering price (whichever is
higher), as a credit toward the completion of a Letter of Intent, but the
reduced sales charge applicable to the amount covered by such Letter is applied
only to new purchases. Neither income dividends nor capital gain distributions
taken in additional shares will apply toward the completion of the Letter of
Intent. The value of any shares redeemed or otherwise disposed of by the
purchaser prior to termination or completion of the Letter of Intent is deducted
from the total purchases made under such Letter.
If the investment specified in the Letter of Intent is not completed (either
prior to or by the end of the 13-month period), the Administrator will redeem,
within 20 days of the expiration of the Letter of Intent, an appropriate number
of the shares in order to realize the difference between the reduced sales
charge that would apply if the investment under the Letter of Intent had been
completed and the sales charge that would normally apply to the number of shares
actually purchased. By completing and signing the Letter of Intent, the
shareholder irrevocably appoints the Administrator his or her attorney to
surrender for redemption any or all shares purchased under the Letter of Intent
with full power of substitution in the premises.
Right of Accumulation
A shareholder qualifies for cumulative quantity discounts on the purchase of
shares when his or her new investment, together with the current offering price
value of all holdings of that shareholder in the Funds, reaches a discount
level. See "INFORMATION ABOUT FUND SHARES - How to Purchase Shares" in the
Prospectus for the sales charges on quantity discounts. A shareholder must
provide the Distributor with information to verify that the quantity sales
charge discount is applicable at the time the investment is made.
Exchange Privilege
Shares of each Fund for which payment has been received (i.e., an established
account) may be exchanged at their net asset value for shares of each other
Fund. No initial sales charge is imposed on shares being acquired through an
exchange unless the sales charge of the Fund being exchanged into is greater
than the current sales charge of the Fund (in which case an initial sales charge
will be imposed at a rate equal to the difference). No redemption fee is imposed
on shares being disposed of through an exchange; however, a redemption fee may
apply to redemptions of shares acquired through an exchange of shares of the
REIT Index Fund at the rate which would have been applicable if the shareholder
had continued to hold shares of the REIT Index Fund. Exchanges will be made only
after proper instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Distributor.
Each Exchange Request must be in proper form (see "How to Redeem Shares" in the
Prospectus), and each exchange must involve either shares having an aggregate
value of at least $1,000 ($5,000 for the REIT Index Fund) or all the shares in
the shareholder's account. Each exchange involves the redemption of the shares
of a Fund to be exchanged and the purchase at net asset value of the shares of
the other Fund. Any gain or loss on the redemption of the shares exchanged is
reportable on the shareholder's Federal income tax return, unless such shares
were held in a tax-deferred retirement plan or other tax-exempt account. If the
Exchange Request is received by the Distributor in writing or by telephone on
any business day prior to 4:00 p.m., New York time, the exchange usually will
occur on that day if all the restrictions set forth above have been complied
with at that time. However, payment of the redemption proceeds by a Fund, and
thus the purchase of shares of the other Fund, may be delayed for up to seven
days if the Fund determines that such delay would be in the best interest of all
of its shareholders.
5. MANAGEMENT
The Trustees and officers of the Trust, their ages, and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period. Asterisks indicate that those Trustees and
officers are "interested persons" (as defined in the 1940 Act) of the Trust.
17
<PAGE>
Trustees of the Trust
Winsor H. Aylesworth* (age 48) - President and Treasurer of the Trust; President
and Director, GrandView Advisers, Inc. (since March, 1995); President and
Director, WHA Enterprises, Inc. (since September, 1991); Executive Vice
President, Loan Review Department, Bank of Boston Connecticut (1990 - 1993).
His address is 127 Grandview Drive, Glastonbury CT 06033.
Arthur Collins (age 66) - Trustee of the Trust; President, Collins Enterprises
LLC/Collins Development Corporation (since 1972); Director, Connecticut National
Bank (1986 - 1992). His address is 53 Forest Avenue, Old Greenwich, CT 06870.
Richard W. Jagolta (age 61) - Trustee of the Trust; Business Development
Manager, Polaroid Corporation (1957 - April, 1995). His address is 40 Blueridge
Avenue, Saugus, MA 01906.
Raymond H. Weaving (age 54) - Trustee of the Trust; Director of Lending,
Massachusetts Housing Investment Corporation (since November, 1993); Vice
President and Team Leader, Baybank Boston, Inc. (1992 - 1993); Consultant,
Malden Trust Co. (1991 - 1992); Division Executive, Bank of Boston (1965 -
1991). His address is 11 Perry Henderson Drive, Framingham, MA 01701.
Officers of the Trust
Winsor H. Aylesworth* (age 48) - President and Treasurer of the Trust; President
and Director, GrandView Advisers, Inc. (since March, 1995); President and
Director, WHA Enterprises, Inc. (since September, 1991); Executive Vice
President, Loan Review Department, Bank of Boston Connecticut (1990 - 1993).
His address is 127 Grandview Drive, Glastonbury CT 06033.
Lucille C. Carlson* (age 37) - Vice President of the Trust; Director, GrandView
Advisers, Inc. (since March, 1995); Director of Research, WHA Enterprises, Inc.
(since July, 1993) Assistant Vice President, Loan Review Department, Bank of
Boston Connecticut (1991 - April, 1995); Real Estate Management Officer, John
Hancock Properties, Inc. (1987 - 1990). Her address is 127 Grandview Drive,
Glastonbury CT 06033.
David F. Wolf* (age 48) - Vice President of the Trust; Director, GrandView
Advisers, Inc. (since March, 1995); Director of Marketing, WHA Enterprises, Inc.
(since July, 1993); Financial Planning Consultant, John Hancock Financial
Services, Inc. (1992 - May, 1995); real estate developer (1991 - 1992); Account
Executive, NCNB Securities, Inc. (1990 - 1991); Stock Broker, Shearson Lehman
Brothers, Inc. (1983 - 1990). Mr. Wolf is a registered representative of the
Funds' Distributor, Capital Investment Group, Inc. His address is 127 Grandview
Drive, Glastonbury CT 06033.
Frank P. Meadows, III* (age 35) - Secretary of the Trust; Commission Based
Broker, Capital Investment Group, Inc. (since October, 1993); Managing Director,
The Nottingham Company (since January, 1988); Commission Based Broker,
MidAtlantic Securities (1989 - 1993). His address is 105 North Washington
Street, Rocky Mount, NC 27802.
The Declaration of Trust of the Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to any
other matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested Trustees of the
Trust, or in a written opinion of independent counsel, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
Compensation of Trustees and Officers
Each Trustee who is not an "interested person" of the Trust receives a retainer
fee of $25 per Fund per meeting, plus a fee per meeting based on the amount of
assets of each Fund. The asset-based fee is waived if Fund assets do not exceed
$5 million. For assets between $5 million and $10 million, the fee is $100 per
meeting per Fund ($50 per meeting for the REIT
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<PAGE>
Index Fund). For assets between $10 million and $25 million, the fee is $200 per
meeting per Fund ($100 per meeting for the REIT Index Fund). For assets between
$25 million and $50 million, the fee is $400 per meeting per Fund ($200 per
meeting for the REIT Index Fund). For assets between $50 million and $75
million, the fee is $600 per meeting per Fund ($300 per meeting for the REIT
Index Fund). Finally, for assets greater than $75 million, the fee is $800 per
meeting per Fund ($400 per meeting for the REIT Index Fund). In addition, a
Trustee who is a member of the Audit or Nominating Committee will be paid $500
for attendance at each meeting of such committee not held in conjunction with a
meeting of the Board of Trustees of the Trust. The officers of the Trust will
not receive compensation from the Trust for performing the duties of their
offices. All Trustees are reimbursed for any out-of-pocket expenses incurred in
connection with attendance at meetings.
Compensation Table*
<TABLE>
<CAPTION>
Pension
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
--------------- ------------- ------------- -------------- ---------------
<S> <C>
Winsor H. Aylesworth None None None None
Trustee
Arthur Collins None None None None
Trustee
Richard W. Jagolta None None None None
Trustee
Raymond H. Weaving None None None None
Trustee
</TABLE>
*Figures are for the fiscal year ended March 31, 1996.
Principal Holders of Voting Securities
As of July 12, 1996, the Trustees and officers of the Trust as a group owned
beneficially (i.e. had voting and/or investment power) 14%, 19%, and 22%,
respectively, of the then outstanding shares of the REIT Index Fund, Realty
Growth Fund, and Healthcare Realty Income Fund, respectively. On the same date
the following shareholders owned of record more than 5% of the outstanding
shares of beneficial interest of the Funds. Except as provided below, no person
is known by the Trust to be the beneficial owner of more than 5% of the
outstanding shares of the Funds as of July 12, 1996.
REIT INDEX FUND
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership* Percent
------------------- ---------------------- -------
GrandView Advisers, Inc. 2,773.694 7.726%
127 GrandView Drive
Glastonbury, Connecticut 06033
Maryanne S. Aylesworth 2,719.199 7.574%
127 GrandView Drive
Glastonbury, Connecticut 06033
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<PAGE>
Winsor H. Aylesworth 3,333.031 9.284%
127 GrandView Drive
Glastonbury, Connecticut 06033
DLJ/Albert Silverman 3,032.175 8.446%
Post Office Box 2052
Jersey City, NJ 07303-9998
DLJ/Tom Bailif 2,994.012 8.340%
Post Office Box 2052
Jersey City, NJ 07303-9998
FSW/Howard Kessler Trust 1,948.657 5.428%
1700 Pacific Avenue Suite 500
Dallas, Texas 75201
* The shares indicated are believed by the Trust to be owned both of record
and beneficially by the indicated shareholders, except for shares held of
record by DLJ and FSW for the benefit of their indicated client.
REALTY GROWTH FUND
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership* Percent
------------------- --------------------- -------
GrandView Advisers, Inc. 2,457.649 10.047%
127 GrandView Drive
Glastonbury, Connecticut 06033
Maryanne S. Aylesworth 2,925.760 11.960%
127 GrandView Drive
Glastonbury, Connecticut 06033
Winsor H. Aylesworth 3,604.776 14.736%
127 GrandView Drive
Glastonbury, Connecticut 06033
Chuck & Elizabeth Chan 6,591.337 26.945%**
2146 Woodley Way
Mountain View, California 94040
* The shares indicated are believed by the Trust to be owned both of record
and beneficially by the indicated shareholders.
** Pursuant to applicable SEC regulations, this shareholder is deemed to
control the Fund.
HEALTHCARE REALTY INCOME FUND
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership* Percent
------------------- ---------------------- -------
GrandView Advisers, Inc. 2,714.924 15.786%
127 GrandView Drive
Glastonbury, Connecticut 06033
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<PAGE>
D. Jean Wolf 973.279 5.659%
P.O. Box 116
Conegtoga, Pennsylvania 17516
Maryanne S. Aylesworth 2,704.177 15.723%
127 GrandView Drive
Glastonbury, Connecticut 06033
Winsor H. Aylesworth 3,324.760 19.332%
127 GrandView Drive
Glastonbury, Connecticut 06033
Chuck & Elizabeth Chan 2,749.771 15.988%
2146 Woodley Way
Mountain View, California 94040
* The shares indicated are believed by the Trust to be owned both of record
and beneficially by the indicated shareholders.
Adviser
GrandView Advisers, Inc. manages the assets of each Fund pursuant to separate
investment advisory agreements (the "Advisory Agreements"). Subject to such
policies as the Board of Trustees may determine, the Adviser manages the
securities of each Fund and makes investment decisions for each Fund. The
Adviser furnishes at its own expense all services, facilities and personnel
necessary in connection with managing each Fund's investments and effecting
securities transactions for each Fund. Each of the Advisory Agreements will
continue in effect until April 26, 1997 and thereafter as long as such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of a majority of the outstanding voting securities of the
applicable Fund, and, in either case, by a majority of the Trustees of the Trust
who are not parties to the Advisory Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on the Advisory Agreement.
Winsor H. Aylesworth, Lucille C. Carlson and David F. Wolf own, respectively,
60%, 20% and 20% of the outstanding capital stock of the Adviser, and serve as
co-portfolio managers for the Funds. They collectively have over 50 years
experience in the commercial real estate finance and management and securities
businesses. Winsor H. Aylesworth, President, Treasurer and Director of the
Adviser, 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, a
Director of the Adviser, 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. David F. Wolf, a Director of the Adviser, has
over eight years of experience as a financial consultant, serving as a
consultant for John Hancock Financial Services and Shearson Lehman Brothers. Mr.
Wolf has acted as an account executive for NCNB Securities and has professional
experience in the areas of real estate developing, lending, workouts and asset
management. Mr. Aylesworth, Ms. Carlson and Mr. Wolf also own all of the
outstanding capital stock of WHA Enterprises, Inc., which since 1991 has
published a monthly newsletter on the REIT industry known as The Winsor Report.
The Adviser was organized in March, 1995 and has no previous experience as an
investment adviser.
Each of the Advisory Agreements provides that the Adviser may render services to
others. Each Advisory Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Trust when authorized
either by a vote of a majority of the outstanding voting securities of the
applicable Fund or by a vote of a majority of the Board of Trustees, or by the
Adviser on not more than 60 days' nor less than 30 days' written notice, and
will automatically
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<PAGE>
terminate in the event of its assignment. Each Advisory Agreement provides that
neither the Adviser nor its personnel shall be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution of security transactions for the applicable Fund,
except for willful misfeasance, bad faith or gross negligence or reckless
disregard of its or their obligations and duties under the Advisory Agreement.
Upon termination of any contract with GrandView Advisers, Inc., or any
corporation affiliated therewith, acting as investment adviser or manager, the
Board of Trustees will promptly change the name of the Trust and of each of the
Funds to a name which does not include "GrandView" or any approximation or
abbreviation thereof.
The Prospectus contains a description of the fees payable to the Adviser for
services under the Advisory Agreements.
For the period from July 3, 1995 to March 31, 1996, the Adviser voluntarily
waived its advisory fee for the REIT Index Fund in the amount of $314 and
voluntarily reimbursed $17,159 of the Fund's operating expenses. For the period
from July 3, 1995 to March 31, 1996, the Adviser voluntarily waived its advisory
fee for the Realty Growth Fund in the amount of $675 and voluntarily reimbursed
$18,489 of the Fund's operating expenses. For the period from July 3, 1995 to
March 31, 1996, the Adviser voluntarily waived its advisory fee for the
Healthcare Realty Income Fund in the amount of $396 and voluntarily reimbursed
$17,872 of the Fund's operating expenses.
Administrator
Pursuant to an administrative services agreement (the "Administrative Services
Agreement"), Nottingham serves as the administrator and fund accounting,
dividend disbursing and transfer agent for the Funds. Under the Administrative
Services Agreement Nottingham provides the Trust with general office facilities
and supervises the overall administration of the Trust, including, among other
responsibilities, the negotiation of contracts and fees with, and the monitoring
of performance and billings of, the Trust's independent contractors and agents;
the preparation and filing of all documents required for compliance by the Trust
with applicable laws and regulations; and arranging for the maintenance of books
and records of the Trust. The Administrator provides persons satisfactory to the
Board of Trustees to serve as Trustees and officers of the Trust. Such Trustees
and officers, as well as certain other employees and Trustees of the Trust, may
be directors, officers or employees of Nottingham or its affiliates.
The Administrative Services Agreement with the Trust provides that Nottingham
may render administrative services to others. The Administrative Services
Agreement with the Trust terminates automatically if it is assigned and may be
terminated without penalty by vote of a majority of the outstanding voting
securities of the Trust or by either party on not more than 90 days' written
notice. The Administrative Services Agreement with the Trust also provides that
neither Nottingham, as the Administrator, nor its personnel shall be liable for
any error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by reason
of reckless disregard of its or their obligations and duties under the Trust's
Administrative Services Agreement.
The Prospectus contains a description of the fees payable to the Administrator
under the Administrative Services Agreement.
For the period from July 3, 1995 to March 31, 1996, the Administrator received
registration and filing administration fees of $786 and Fund administration fees
of $198 from the REIT Index Fund, in addition to reimbursement for various
securities pricing, registration, filing, shareholder servicing, and other Fund
expenses. For the period from July 3, 1995 to March 31, 1996, the Administrator
received registration and filing administration fees of $794 and Fund
administration fees of $186 from the Realty Growth Fund (having waived $43 of
such fees), in addition to reimbursement for various securities pricing,
registration, filing, shareholder servicing, and other Fund expenses. For the
period from July 3, 1995 to March 31, 1996, the Administration received
registration and filing administration fees of $784 and Fund administration fees
of $166 from the Healthcare Realty Income Fund (having waived $4 of such fees),
in addition to reimbursement for various securities pricing, registration,
filing, shareholder servicing, and other Fund expenses.
Distributor
Capital Investment Group serves as the Distributor of each Fund's shares
pursuant to a Distribution Agreement (the "Distribution Agreement") with the
Trust. Unless otherwise terminated, the Distribution Agreement for the Funds
remains
22
<PAGE>
in effect until April 26, 1997 and, for each Fund, thereafter will continue from
year to year upon annual approval by the Trust's Board of Trustees, or by the
vote of a majority of the outstanding voting securities of the Trust and by the
vote of a majority of the Board of Trustees who are not parties to the Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. The Agreement will terminate in the
event of its assignment, as defined in the 1940 Act.
The Trust has adopted a Distribution Plan in accordance with Rule 12b-1 under
the 1940 Act with respect to shares of the Funds after concluding that there is
a reasonable likelihood that the Distribution Plan will benefit each Fund and
its shareholders. The Distribution Plan provides that each Fund will pay a
monthly distribution fee to the Distributor at an annual rate not to exceed
0.25% of such Fund's average daily net assets. The Board of Trustees does not
currently intend to authorize the payment of any such fee from the REIT Index
Fund, although they have the authority under the Distribution Plan to do so in
the future.
The Distributor may use all or any portion of any such distribution fee to pay
for employee salaries, bonuses and other overhead expenses, service fees to be
paid to certain banks and broker-dealers which provide certain services to their
customers who hold Fund shares, and other such distribution-related expenses.
The Distribution Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the Trust's Trustees
and a majority of the Trustees who are not "interested persons" of the Trust and
who have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreement related to the Plan (for purposes of this
paragraph "Qualified Trustees"). The Distribution Plan requires that the Trust
and the Distributor provide to the Board of Trustees, and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Distribution Plan. The Distribution Plan further
provides that the selection and nomination of the Qualified Trustees is
committed to the discretion of the disinterested Trustees (as defined in the
1940 Act) then in office. The Distribution Plan may be terminated with respect
to any Fund at any time by a vote of a majority of the Trust's Qualified
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Distribution Plan may not be amended to increase materially the amount
of a Fund's permitted expenses thereunder without the approval of a majority of
the outstanding securities of that Fund and may not be materially amended in any
case without a vote of a majority of both the Trustees and Qualified Trustees.
The Distributor will preserve copies of any plan, agreement or report made
pursuant to the Distribution Plan for a period of not less than six years from
the date of the Plan, and for the first two years the Distributor will preserve
such copies in an easily accessible place.
As contemplated by the Distribution Plan, Capital Investment Group acts as the
agent of the Trust in connection with the offering of shares of the Funds
pursuant to the Distribution Agreement. After the prospectuses and periodic
reports of the Funds have been prepared, set in type and mailed to existing
shareholders, the Distributor pays for the printing and distribution of copies
thereof which are used in connection with the offering of shares of the Funds to
prospective investors.
David F. Wolf, a registered representative of the Funds' Distributor, may
receive brokerage commissions from the Distributor in connection with sales of
shares of the Funds. Mr. Wolf is a Vice President of the Trust and a Director of
GrandView Advisers, Inc.
For the period from July 3, 1995 to March 31, 1996, the Distributor retained
sales charges in the amount of $52, $10, and $60, respectively, from the REIT
Index Fund, Realty Growth Fund, and Healthcare Realty Income Fund, respectively.
For the period from July 3, 1995 to March 31, 1996, the Distributor voluntarily
waived all amounts accrued by the Trust under the Distribution Plan in the
amount of $225 for the Realty Growth Fund and $141 for the Healthcare Realty
Income Fund.
Custodian
The Trust has entered into a Custodian Agreement with Wachovia Bank of North
Carolina, N.A., pursuant to which custodial services are provided for the Trust
and the Funds. The address of Wachovia Bank of North Carolina, N.A. is 301 North
Main Street, Winston-Salem, North Carolina 27102.
23
<PAGE>
Independent Auditors.
The firm of KPMG Peat Marwick LLP, 1021 East Cary Street, Richmond, Virginia
23219-4023, serves as independent auditors for the Fund, and will audit the
annual financial statements of the Fund and prepare the Fund's federal and state
tax returns. A copy of the most recent annual report of the Fund will accompany
this Additional Statement whenever it is requested by a shareholder or
prospective investor.
Counsel
Bingham, Dana & Gould serve as counsel for the Trust. The address of Bingham,
Dana & Gould is 150 Federal Street, Boston, Massachusetts 02110.
6. PORTFOLIO TRANSACTIONS
The Trust trades securities for a Fund if it believes that a transaction net of
costs (including custodian charges) will help achieve the Fund's investment
objective. Changes in the portfolio of the REIT Index Fund will be effected
primarily to accommodate cash flows into and out of the Fund and changes in the
GrandView REIT Index. Changes in a Fund's investments are generally made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. It is anticipated that
the portfolio turnover rate of the REIT Index Fund and of each of the other
Funds will not exceed 75% and 100%, respectively, in the coming year. The amount
of a Fund's brokerage commissions and realization of taxable capital gains will
tend to increase as the level of portfolio activity increases.
The primary consideration in placing portfolio securities transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of each Fund on the basis of
their professional capability, the value and quality of their brokerage
services, and the level of their brokerage commissions. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the Adviser
normally seeks to deal directly with the primary market makers, unless in its
opinion, best execution is available elsewhere. In the case of securities
purchased from underwriters, the cost of such securities generally includes a
fixed underwriting commission or concession. From time to time, soliciting
dealer fees are available to the Adviser on the tender of a Fund's securities in
so-called tender or exchange offers. Such soliciting dealer fees are in effect
recaptured for the Funds by the Adviser. At present no other recapture
arrangements are in effect.
Under the Advisory Agreements, in connection with the selection of such brokers
or dealers and the placing of such orders, the Adviser is directed to seek for
each Fund in its best judgment, prompt execution in an effective manner at the
most favorable price. Subject to this requirement of seeking the most favorable
price, securities may be bought from or sold to broker-dealers who have
furnished statistical, research and other information or services to the Adviser
or the Funds, subject to any applicable laws, rules and regulations.
The investment advisory fee that each Fund pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff.
In certain instances there may be securities that are suitable as an investment
for a Fund, as well as for one or more of the Adviser's other clients (including
other Funds). When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could adversely affect the price of or the size of the
position obtainable in a security for a Fund. When purchases or sales of the
same security for a Fund and for other portfolios managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large volume purchases or sales.
24
<PAGE>
For the period from July 3, 1995 to March 31, 1996, the REIT Index Fund paid
brokerage commissions of $1,931, the Realty Growth Fund paid brokerage
commissions of $3,149 and the Healthcare Realty Income Fund paid brokerage
commissions of $1,022.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Shares of Beneficial Interest of each series and
to divide or combine the shares of any series into a greater or lesser number of
shares of that series without thereby changing the proportionate beneficial
interests in that series. While there are at present no series of the Trust
other than the Funds, the Trust has reserved the right to create and issue
additional series of shares, as well as classes of shares within each series.
Each share of each Fund represents an equal proportionate interest in the Fund
with each other share. Shares of each series participate equally in the
earnings, dividends and distribution of net assets of the particular series upon
liquidation or dissolution. Shares of each series are entitled to vote
separately to approve advisory agreements or changes in investment policy, but
shares of all series may vote together in the election or selection of Trustees
and accountants for the Trust. In matters affecting only a particular Fund, only
shares of that particular Fund are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on which
they are entitled to vote. Shareholders in the Trust do not have cumulative
voting rights, and shareholders owning more than 50% of the outstanding shares
of the Trust may elect all of the Trustees of the Trust if they choose to do so
and in such event the other shareholders in the Trust would not be able to elect
any Trustee. The Trust is not required to hold, and has no present intention of
holding, annual meetings of shareholders, but the Trust will hold special
meetings of shareholders when in the judgment of the Trustees it is necessary or
desirable to submit matters for a shareholder vote. Shareholders have, under
certain circumstances (e.g., upon the application and submission of certain
specified documents to the Trustees by a specified number of shareholders), the
right to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have under certain circumstances the right to remove one or
more Trustees without a meeting by a declaration in writing by a specified
number of shareholders. No material amendment may be made to the Trust's
Declaration of Trust without the affirmative vote of the holders of a majority
of the outstanding shares of each series affected by the amendment. Shares have
no preference, pre-emptive, conversion or similar rights. Shares, when issued,
are fully paid and non-assessable, except as set forth below.
The Trust may enter into a merger or consolidation, or sell all or substantially
all of its assets (or all or substantially all of the assets belonging to any
series of the Trust), if approved by a vote of the holders of two-thirds of the
Trust's outstanding shares, voting as a single class, or of the affected series
of the Trust, as the case may be, except that if the Trustees of the Trust
recommend such sale of assets, merger or consolidation, the approval by vote of
the holders of a majority of the Trust's outstanding shares, or of the affected
series, would be sufficient. The Trust or any series of the Trust, as the case
may be, may be terminated (i) by a vote of a majority of the outstanding voting
securities of the Trust or the affected series or (ii) by the Trustees by
written notice to the shareholders of the Trust or the affected series. If not
so terminated, the Trust will continue indefinitely.
It is not contemplated that share certificates will be issued for the shares.
However, upon the written request of a shareholder, the Trustees, in their
discretion, may authorize the issuance of share certificates and promulgate
appropriate rules and regulations as to their use.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust of the Trust also provides that the Trust may
maintain appropriate insurance (e.g., fidelity bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees and agents covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
25
<PAGE>
The Trust's Declaration of Trust further provides that obligations of the Trust
are not binding upon the Trustees individually but only upon the property of the
Trust and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Trust of the Trust protects a Trustee against
any liability to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
8. CERTAIN ADDITIONAL TAX MATTERS
Each of the Funds has elected to be treated and intends to qualify each year as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of a Fund's gross income,
the amount of Fund distributions, and the composition and holding period of a
Fund's portfolio assets. Provided all such requirements are met, no U.S. federal
income or excise taxes will be required to be paid by the Funds, although
non-U.S. source income earned by each Fund may be subject to non-U.S.
withholding taxes. If a Fund should fail to qualify as a "regulated investment
company" for any year, the Fund would incur a regular corporate federal income
tax upon its taxable income, and distributions by that Fund would generally be
taxable as ordinary income to shareholders.
The portion of each Fund's ordinary income dividends attributable to dividends
received in respect of equity securities of U.S. issuers is normally eligible
for the dividends received deduction for corporations subject to U.S. federal
income taxes. Availability of the deduction for particular shareholders is
subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Any dividend
that is declared by a Fund in October, November or December of any calendar
year, that is payable to shareholders of record in such a month and that is paid
the following January will be treated as if received by the shareholders on
December 31 of the year in which the dividend is declared.
Any Fund distribution will have the effect of reducing the per share net asset
value of shares in the Fund by the amount of the distribution. Shareholders
purchasing shares shortly before the record date of any distribution may thus
pay the full price for the shares and then effectively receive a portion of the
purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
any of the Funds by a shareholder that holds such shares as a capital asset will
be treated as long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in a Fund held for six
months or less will be treated as long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of shares of a Fund within 90 days after their purchase followed by
any purchase (including purchases by exchange or by reinvestment) of shares of
that same Fund.
The Funds' transactions in forward contracts will be subject to special tax
rules that may affect the amount, timing and character of Fund income and
distributions to shareholders. For example, certain positions held by a Fund on
the last business day of each taxable year will be marked to market (i.e.,
treated as if closed out) on that day, and any gain or loss associated with the
positions will be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by a Fund that substantially diminish its risk of
loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Fund losses, adjustments in the holding periods of Fund securities and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles that may alter the effects of these rules. The Funds will
limit their activities in forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
Special tax considerations apply with respect to non-U.S. investments of the
Funds. Investment income received by a Fund from non-U.S. securities may be
subject to non-U.S. income taxes withheld at the source. The United States has
entered into tax treaties with many other countries that may entitle a Fund to a
reduced rate of tax or an exemption from tax on such income. The Funds intend to
qualify for treaty-reduced rates where available. It is not possible, however,
to determine the Funds' effective rate of non-U.S. tax in advance since the
amount of the Funds' respective assets to be invested within various countries
is not known.
26
<PAGE>
9. SPECIAL SHAREHOLDER SERVICES
Each Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Administrator will automatically charge the checking account for the amount
specified ($50 minimum) which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Administrator.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. Each Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Funds. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Funds. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the
Funds upon sixty days written notice or by a shareholder upon written notice to
the Funds. Applications and further details may be obtained by calling the Funds
at 1-800-525-3863, or by writing to:
The GrandView Funds
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Purchases in Kind. Each Fund may accept securities in lieu of cash in payment
for the purchase of shares in the Fund. The acceptance of such securities is at
the sole discretion of the Adviser based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Adviser may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "Net Asset Value and Pricing of Orders" in the Prospectus.
Transactions involving the issuance of shares in a Fund for securities in lieu
of cash will be limited to acquisitions of securities (except for municipal debt
securities issued by state political subdivisions or their agencies or
instrumentalities) which: (a) meet the investment objectives and policies of the
Fund; (b) are acquired for investment and not for resale; (c) are liquid
securities which are not restricted as to transfer either by law or liquidity of
market; and (d) have a value which is readily ascertainable (and not established
only by evaluation procedures) as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange, or NASDAQ.
27
<PAGE>
Redemptions in Kind. The Funds do not intend, under normal circumstances, to
redeem their securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustee,
make it undesirable for the Funds to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein each Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the applicable Fund at the address shown herein. Your request should
include the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (See the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Funds.
10. FINANCIAL STATEMENTS
1995 ANNUAL REPORT
GRANDVIEW HEALTHCARE REALTY INCOME FUND
This report marks our first annual report to the shareholders of The GrandView
Realty Growth Fund. This first report covers the period from June 28, 1996
(inception date) to March 31, 1996 which is the end of our fiscal year.
We will routinely use the following measures as a way of reporting our results
to you: The S&P 500 index as a comparison to the overall market, The Dow Jones
Utility Index as a comparison to another income oriented equity group, and The
GrandView REIT Index, the funds investment benchmark as per the prospectus.
<TABLE>
<CAPTION>
- --------------------- ------------------- -------------------- ------------------- ------------------------- -----------------------
QUARTER ENDING DOW JONES S&P 500 GRANDVIEW GRANDVIEW HEALTHCARE GRANDVIEW HEALTHCARE
UTILITY INDEX INDEX REIT INDEX REALTY INCOME FUND (NAV) REALTY INCOME FUND(MOP)
(TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN)
<S> <C>
- --------------------- ------------------- -------------------- ------------------- ------------------------- -----------------------
SEP. 30, 1995 6.1% 7.9% 4.8% 0.92% -3.42
- --------------------- ------------------- -------------------- ------------------- ------------------------- -----------------------
DEC. 31, 1995 6.6% 6.0% 4.5% 7.17% 7.17%
- --------------------- ------------------- -------------------- ------------------- ------------------------- -----------------------
MAR. 31, 1996 -4.1% 5.3% 1.9% 6.24% 6.24%
- --------------------- ------------------- -------------------- ------------------- ------------------------- -----------------------
</TABLE>
Most investment professionals indicate that investments in mutual funds should
not be considered as short term investments. Therefore it is somewhat unusual to
look at the above performance measures on a quarterly basis. However, since The
GrandView Healthcare Realty Income Fund is a new fund, these shorter periods are
all that are available. With time, we will lengthen the periods for performance
comparisons to the more customarily used annual basis.
We are very pleased with our first nine months of performance. After a slow
first quarter, the Fund has outperformed the S&P 500, the Dow Jones Utility
Index and The REIT sector as a whole for the last two quarters. The Fund's
concentration on the healthcare sector of the REIT industry allows us to
participate in the aging demographics of the nation's population and the real
estate properties that cater to that market. These companies have historically
had good yields and a history of routine dividend increases. We would expect
this to continue. To provide proper diversification, we have added some
additional investments that complement the philosophy of investing in those
securities that will benefit with the aging population. Roughly ten percent of
our assets are in non or low yielding health related securities which we feel
have above average growth prospects. Companies included in this group include
Walgreens, Healthsouth Corporation and Ornda Corporation. In addition, another
ten percent of the assets have been invested in apartment REITs that cater to
the more affluent, adult renter. These investments include Merry Land, Columbus
Realty, Irving Company and Summit Properties. Finally we have invested in the
only golf course REIT as a way of participating in one of the fastest growing
recreational markets. With little chance of golf course over building, we think
National Golf Properties offers our portfolio diversification and above average
growth in price and distributions.
As we look forward, we will continue to concentrate the bulk of our investments
in the healthcare industry. We will complement those holdings with other income
oriented securities that serve the ever growing adult market. The inherit
benefits of investment liquidity, professional management, high current income
and quality real estate assets makes the GrandView Healthcare Realty Income Fund
a very rational way for investors to participate in the healthcare industry
while receiving a monthly dividend check. Although we have experienced better
than expected short term results, we expect that a long term investment in the
fund will be just as rewarding. We welcome you as our first shareholders and
thank you for your trust.
Winsor H. Aylesworth
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
Performance Update - $10,000 Investment
For the period from July 3, 1995 (commencement
of operations) to March 31, 1996
[GRAPH]
<TABLE>
<CAPTION>
GrandView Healthcare Realty Income Fund S&P 500 Index Dow Jones Utility Index GrandView REIT Index
<S> <C>
07/03/95 9,550 9,550 9,550 9,550
07/31/95 9,560 9,867 9,640 9,645
09/30/95 9,638 10,309 10,127 10,001
12/31/95 10,339 10,930 10,652 10,452
03/31/96 10,991 11,516 10,055 10,655
</TABLE>
This graph depicts the performance of the GrandView Healthcare Realty Income
Fund versus the S&P 500 Index, Dow Jones Utility Index, and GrandView REIT
Index. It is important to note that the GrandView Healthcare Realty Income Fund
is a professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
ANNUALIZED TOTAL RETURN
COMMENCEMENT OF
OPERATIONS THROUGH 3/31/96
No Sales Load 20.75%
Maximum 4.5%
Sales Load 13.51%
(bullet) The graph assumes an initial $10,000 investment at July 3, 1995
($9,550 after maximum sales load of 4.5%). All dividends and
distributions are reinvested.
(bullet) At March 31, 1996, the GrandView Healthcare Realty Income Fund
would have grown to $10,991 - total investment return of 9.91%
since July 3, 1995. Without the deduction of the 4.5% maximum sales
load, the GrandView Healthcare Realty Income Fund would have grown
to $11,508 - total investment return of 15.08% since July 3, 1995.
(bullet) At March 31, 1996, a similar investment in the S&P 500 Index (after
maximum sales load of 4.5%) would have grown to $11,516 - total
investment return of 15.16%; the Dow Jones Utility Index would have
grown to $10,055 - total investment return of 0.55%; the GrandView
REIT Index would have grown to $10,655 - total investment return
of 6.55%, since July 3, 1995.
(bullet) Past performance is not a guarantee of future results. A mutual fund's
share price and investment return will vary with market conditions, and
the principal value of shares, when redeemed, may be worth more or less
than the original cost. Average annual returns are historical in nature
and measure net investment income and capital gain or loss from
portfolio investments assuming reinvestments of dividends.
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
PORTFOLIO OF INVESTMENTS
March 31, 1996
<TABLE>
<CAPTION>
Number of Value
Shares (note 1)
--------- --------
<S> <C> <C>
COMMON STOCKS - 78.37%
Medical - Hospital Management & Service - 6.24%
(a) HEALTHSOUTH Corporation 100 $3,400
(a) OrNda HealthCorp 200 5,750
-------
9,150
-------
Real Estate Investment Trust - 69.91%
American Health Properties, Inc. 250 5,625
Capstone Capital Trust, Inc. 200 4,300
Columbus Realty Trust 250 4,875
G&L Realty Corporation 400 5,000
Health and Retirement Property Trust 500 8,563
Health Care Property Investors, Inc. 300 9,450
Health Care REIT, Inc. 250 5,531
Healthcare Realty Trust, Inc. 300 6,562
Irvine Apartment Communities, Inc. 250 4,781
LTC Properties, Inc. 200 3,250
Meditrust Corporation 100 3,388
Merry Land & Investment Company, Inc. 200 4,350
National Golf Properties, Inc. 200 5,075
National Health Investors, Inc. 300 9,750
Nationwide Health Properties, Inc. 200 4,200
OMEGA Healthcare Investors, Inc. 350 10,019
Universal Health Realty Income Trust 400 7,850
-------
102,569
-------
Retail - Drug Stores - 2.22%
Walgreen Company 100 3,262
-------
Total Common Stocks (Cost $108,962) 114,981
-------
Principal
Amount
---------
REPURCHASE AGREEMENT (b) - 22.11%
Wachovia Bank
5.38%, due April 1, 1996 $32,437 32,437
-------
(Cost $32,437)
Total Value of Investments (Cost $141,399 (c)) 100.48% 147,418
Liabilities In Excess of Other Assets (0.48)% (698)
--------- --------
Net Assets 100.00% $146,720
========= ========
</TABLE>
(Continued)
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
PORTFOLIO OF INVESTMENTS
March 31, 1996
(a) Non-income producing investment.
(b) Joint repurchase agreement entered into March 31, 1996, with a maturity
value of $54,221,391 collateralized by $46,275,000 U.S. Treasury Notes,
due February 15, 2020. The aggregate market value of the collateral at
March 31, 1996 was $54,871,024. The Fund's pro rata interest in the
market value of the collateral at March 31, 1996 was $32,813. The
Fund's pro rata interest in the joint repurchase agreement collateral
is taken into possession by the Fund's custodian upon entering into the
repurchase agreement.
(c) Aggregate cost for financial reporting and federal income tax purposes
is the same. Unrealized appreciation (depreciation) of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $7,191
Unrealized depreciation (1,172)
--------
Net unrealized appreciation $6,019
========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
ASSETS
Investments in common stocks, at value (cost $108,962) $114,981
Repurchase agreement (cost $32,437) 32,437
Dividends receivable 401
Interest receivable 84
Receivable for fund shares sold 8,000
Deferred organization expenses, net (note 4) 23,137
Other asset 50
--------
Total assets 179,090
--------
LIABILITIES
Accrued expenses 5,511
Payable for investment purchases 14,854
Due to advisor 11,161
Disbursements in excess of cash on demand deposit 844
--------
Total liabilities 32,370
--------
NET ASSETS
(applicable to 13,481 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $146,720
========
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($146,720 / 13,481 shares) $ 10.88
========
OFFERING PRICE PER SHARE
(100 / 95.5 of $10.88) $ 11.39
========
NET ASSETS CONSIST OF
Paid-in capital $140,701
Net unrealized appreciation on investments 6,019
--------
$146,720
========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
STATEMENT OF OPERATIONS
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends $3,795
Interest 521
--------
Total income 4,316
--------
Expenses
Professional fees 5,806
Custody fees 2,742
Securities pricing fees 962
Registration and filing administration fees 784
Investment advisory fees (note 2) 396
Fund administration fees (note 2) 170
Distribution and service fees (note 3) 141
Shareholder recordkeeping fees 56
Amortization of deferred organization expenses (note 4) 4,070
Shareholder servicing expenses 1,818
Printing expenses 596
Registration and filing expenses 183
Trustee fees and meeting expenses 113
Other operating expenses 1,619
--------
Total expenses 19,456
--------
Less:
Expense reimbursements (note 2) (17,872)
Investment advisory fees waived (note 2) (396)
Fund administration fees waived (note 2) (4)
Distribution and service fees waived (note 3) (141)
--------
Net expenses 1,043
--------
Net investment income 3,273
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 2,608
Increase in unrealized appreciation on investments 6,019
--------
Net realized and unrealized gain on investments 8,627
--------
Net increase in net assets resulting from operations $11,900
========
</TABLE>
See accompanying notes to financial statements
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
<TABLE>
<CAPTION>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income $3,273
Net realized gain from investment transactions 2,608
Increase in unrealized appreciation on investments 6,019
----------
Net increase in net assets resulting from operations 11,900
----------
Distributions to shareholders from
Net investment income (3,273)
Net realized gain from investment transactions (2,608)
Tax return of capital (279)
----------
Decrease in net assets resulting from distributions (6,160)
----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 140,980
----------
Total increase in net assets 146,720
NET ASSETS
Beginning of period 0
----------
End of period $146,720
==========
</TABLE>
(a) A summary of capital share activity follows:
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
Shares Value
-------- ---------
Shares sold 14,145 $148,513
Shares issued for reinvestment
of distributions 330 3,551
-------- ---------
14,475 152,064
Shares redeemed (994) (11,084)
-------- ---------
Net increase 13,481 $140,980
======== =========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
<TABLE>
<S> <C>
Net asset value, beginning of period (initial offering price) $10.00
Income from investment operations
Net investment income 0.38
Net realized and unrealized gain on investments 1.10
--------------
Total from investment operations 1.48
--------------
Distributions to shareholders from
Net investment income (0.38)
Net realized gain from investment transactions (0.20)
Tax return of capital (0.02)
--------------
Total distributions (0.60)
--------------
Net asset value, end of period $10.88
==============
Total return (a) 15.08%
==============
Ratios/supplemental data
Net assets, end of period $146,720
==============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 34.51% (b)
After expense reimbursements and waived fees 1.75% (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (26.86)% (b)
After expense reimbursements and waived fees 5.81% (b)
Portfolio turnover rate 52.74%
</TABLE>
(a) Total return does not reflect payment of a sales charge. Annualized total
return for the period is 20.75%
(b) Annualized.
See accompanying notes to financial statements
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The GrandView Healthcare Realty Income Fund (the "FUND") is a
non-diversified series of shares of beneficial interest of the GrandView
Investment Trust (the "TRUST"). The Trust, an open-end investment
company, was organized on February 6, 1995 as a Massachusetts Business
Trust and is registered under the Investment Company Act of 1940. The
Fund began operations on July 3, 1995. The following is a summary of
significant accounting policies followed by the Fund.
A. SECURITY VALUATION - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on a
national market system are valued at the last sales price as of
4:00 p.m., New York time on the day of valuation. Other
securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued
at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using
an independent pricing service or by following procedures
approved by the Board of Trustees. Short-term investments are
valued at cost which approximates value.
B FEDERAL INCOME TAXES - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly
or indirectly by five or fewer individuals at certain times
during the last half of the year. As a personal holding company
the Fund is subject to federal income taxes on undistributed
personal holding company income at the maximum individual income
tax rate. No provision has been made for federal income taxes
since all taxable income has been distributed to shareholders.
It is the policy of the Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income
to relieve it from all federal income taxes.
The character of distributions made during the year from net
investment income or net realized gains from investment
transactions may differ from their ultimate characterization for
federal income tax purposes. Also, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains are
recorded by the Fund.
C. INVESTMENT TRANSACTIONS - Investment transactions are recorded on
the trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on the accrual basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend
date.
The Fund records distributions received from its investments in
real estate investment trusts that represent a tax return of
capital as a reduction of the cost basis of investments.
D. DISTRIBUTIONS TO SHAREHOLDERS - The Fund generally declares
dividends monthly, payable on a date selected by the Trust's
Trustees. In addition, distributions may be made annually in
December out of net realized gains through October 31 of that
year. The Fund may make a supplemental distribution subsequent to
the end of its fiscal year ending March 31.
E. USE OF ESTIMATES - Management makes a number of estimates in the
preparation of the Fund's financial statements. Actual results
could differ significantly from those estimates.
(CONTINUED)
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, GrandView Advisers, Inc.
(the "ADVISOR") provides the Fund with a continuous program of
supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to
investments, investment policies and the purchase and sale of
securities. As compensation for its services, the Advisor receives a fee
at the annual rate of 0.70% of the Fund's average daily net assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor currently
intends to voluntarily waive all or a portion of its fee and reimburse
expenses of the Fund to limit total Fund operating expenses to 1.75% of
the average daily net assets of the Fund. There can be no assurance that
the foregoing voluntary fee waivers or reimbursements will continue. The
Advisor has voluntarily waived its fee amounting to $396 ($0.05 per
share) and has voluntarily reimbursed $17,872 of the Fund's operating
expenses for the period from July 3, 1995 (commencement of operations)
to March 31, 1996.
The Fund's administrator, The Nottingham Company (the "ADMINISTRATOR"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation
for its services, the Administrator receives a fee at the annual rate of
0.30% of the Fund's first $25 million of average daily net assets,
0.275% of the next $25 million of average daily net assets, and 0.225%
of average daily net assets over $50 million. Additionally, the
Administrator charges the Fund for servicing of shareholder accounts and
registration of the Fund's shares. The Administrator also charges the
Fund for certain expenses involved with the daily valuation of portfolio
securities.
Capital Investment Group, Inc. (the "DISTRIBUTOR") serves as the Fund's
principal underwriter and distributor. The Distributor receives any
sales charges imposed on purchases of shares and re-allocates a portion
of such charges to dealers through whom the sale was made, if any. For
the period from July 3, 1995 (commencement of operations) to March 31,
1996, the Distributor retained sales charges in the amount of $60.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
At March 31, 1996, the Advisor, its officers, and Trustees of the Fund
held 9,163 shares or 68% of the Fund shares outstanding.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company
Act of 1940 (the "ACT"), adopted a distribution plan pursuant to Rule
12b-1 of the Act (the "PLAN"). The Act regulates the manner in which a
regulated investment company may assume expenses of distributing and
promoting the sales of its shares and servicing of its shareholder
accounts.
(CONTINUED)
<PAGE>
GRANDVIEW HEALTHCARE REALTY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
The Plan provides that the Fund may incur certain expenses, which may
not exceed 0.25% per annum of the Fund's average daily net assets for
each year elapsed subsequent to adoption of the Plan, for payment to the
Distributor and others for items such as advertising expenses, selling
expenses, commissions, travel or other expenses reasonably intended to
result in sales of shares of the Fund or support servicing of
shareholder accounts. The Distributor has voluntarily waived all of such
expenses under the Plan for the period from July 3, 1995 (commencement
of operations) to March 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only
as they are amortized against the Fund's investment income.
In the event any of the initial shares of the Fund are redeemed during
the amortization period, the redemption proceeds will be reduced by a
pro rata portion of any unamortized organization expenses in the same
proportion as the number of initial shares being redeemed bears to the
number of initial shares of the Fund outstanding at the time of the
redemption.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $142,301 and $35,947, respectively, for the period from July
3, 1995 (commencement of operations) to March 31, 1996.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
All distributions from net realized gain from investment transactions
for the period from July 3, 1995 (commencement of operations) to March
31, 1996 represent short-term capital gain distributions, and are
taxable as ordinary income to shareholders for federal income tax
purposes. Shareholders should consult a tax advisor on how to report
distributions for state and local income tax purposes.
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders
GrandView Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the GrandView Healthcare Realty Income Fund
(the "Fund"), a series of the GrandView Investment Trust, as of March 31, 1996,
and the related statement of operations, statement of changes in net assets and
financial highlights for the period from July 3, 1995 (commencement of
operations) to March 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 1996 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
GrandView Healthcare Realty Income Fund as of March 31, 1996, and the results of
its operations, the changes in its net assets and financial highlights for the
period from July 3, 1995 (commencement of operations) to March 31, 1996 in
conformity with generally accepted accounting principles.
Richmond, Virginia
May 14, 1996
<PAGE>
1995 ANNUAL REPORT
GRANDVIEW REALTY GROWTH FUND
This report marks our first annual report to the shareholders of The GrandView
Realty Growth Fund. This first report covers the period from June 28, 1996
(inception date) to March 31, 1996 which is the end of our fiscal year.
We will routinely use the following measures as a way of reporting our results
to you: The S&P 500 index as a comparison to the overall market, The Dow Jones
Utility Index as a comparison to another income oriented equity group, and The
GrandView REIT Index, the funds investment benchmark as per the prospectus.
<TABLE>
<CAPTION>
- ----------------- ----------------- ------------------ ----------------- ---------------------- ------------------------
QUARTER ENDING DOW JONES S&P 500 GRANDVIEW GRANDVIEW REALTY GRANDVIEW REALTY GROWTH
UTILITY INDEX INDEX REIT INDEX GROWTH FUND (NAV) FUND (MOP)
(TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN)
- ----------------- ----------------- ------------------ ----------------- ---------------------- ------------------------
<S> <C>
SEP. 30, 1995 6.1% 7.9% 4.8% -1.75% -5.98%
- ----------------- ----------------- ------------------ ----------------- ---------------------- ------------------------
DEC. 31, 1995 6.6% 6.0% 4.5% 1.37% 1.37%
- ----------------- ----------------- ------------------ ----------------- ---------------------- ------------------------
MAR. 31, 1996 -4.1% 5.3% 1.9% 6.02% 6.02%
- ----------------- ----------------- ------------------ ----------------- ---------------------- ------------------------
</TABLE>
Most investment professionals indicate that investments in mutual funds should
not be considered as short term investments. Therefore it is somewhat unusual to
look at the above performance measures on a quarterly basis. However, since The
GrandView Realty Growth Fund is a new fund, these shorter periods are all that
are available. With time, we will lengthen the periods for performance
comparisons to the more customarily used annual basis.
The REIT Industry is comprised of over 200 individual securities specializing in
many different property types and in many different geographical locations. Your
fund's objective is to find REITs which will provide above average capital
gains. In creating the portfolio, we are concentrating on three different
investment philosophies to achieve our objectives. The first is to concentrate
on those high quality REITs that have exceptionally strong balance sheets,
generally low distribution yields, sell at above average pricing multiples and
have above average growth prospects. This would include our holdings in Starwood
lodging, (HOT, NYSE); Public Storage, (PSA, NYSE); Crescent Realty, (CEI, NYSE);
and Merry Land, (MRY, NYSE). We perceive that companies like these have good
long term prospects and carry a minimal amount of risk.
A second category of investments are those REITs that represent property sectors
that may be currently out of favor. Characteristics may include recent or
prospective distribution reductions, stock prices that are at below average
pricing multiples and may be undergoing or have recently had management changes.
Investments in this group that your fund has made include First Union Mortgage,
(FUR, NYSE); Factory Stores of America, (FAC, NYSE); Crown American Realty,
(CWN, NYSE) and Burnham Pacific Realty, (BPP, NYSE). The risk level of this
group could be considered moderate. We perceive that REITs such as these carry
more risk than the first group but also offer more potential reward if
managements are able to show improved performance.
<PAGE>
Finally there is a group of REITs whose risk level we considered to be the
highest due to the uncertainty of the REITs future. This group of distressed
companies feature small market capitalization, have few if any assets other than
cash and pay no dividends. Their value lies in their REIT structure and their
tax position. These companies may have hired third party consultants to find new
capital and to help them develop new strategic plans. This part of the REIT
market is probably the least efficient and offers investors significant rewards
for patient and diversified investing. Investments we have made in this group
include Rymac Mortgage, (RM, ASE); Homplex Mortgage, (HPX, NYSE); Angeles
Participating Mortgage, (APT, ASE); TIS Mortgage (TIS, NYSE) and Banyon Hotel,
(VHT, ASE).
By acquiring assets following these three investment philosophies in a
diversified portfolio, provides the shareholders of our fund prospects of
significant gains while modifying the risk level. We believe investors started
to reap this philosophy in the quarter ending March 31, 1996 as the fund
outperformed the S&P 500, The Dow Jones Utility Index and The REIT Industry as a
whole. We look forward to the future and want to thank our initial shareholders
for their trust and support.
Winsor H. Aylesworth
<PAGE>
GRANDVIEW REALTY GROWTH FUND
Performance Update - $10,000 Investment
For the period from July 3, 1995 (commencement of operations) to
March 31, 1996
[GRAPH]
<TABLE>
GrandView REIT Dow Jones
Index Fund S&P 500 Index Utility Index GrandView REIT Index
<S> <C>
07/03/95 9,550 9,550 9,550 9,550
07/31/95 9,283 9,867 9,640 9,645
09/30/95 9,383 10,309 10,127 10,001
12/31/95 9,513 10,930 10,652 10,452
03/31/96 10,095 11,516 10,055 10,655
</TABLE>
This graph depicts the performance of the GrandView Realty Growth Fund versus
the S&P 500 Index, Dow Jones Utility Index, and GrandView REIT Index. It is
important to note that the GrandView Realty Growth Fund is a professionally
managed mutual fund while the indexes are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
Annualized Total Return
Commencement
of operations
through 3/31/96
No Sales Load 7.73%
Maximum 4.5%
Sales Load 1.27%
* The graph assumes an initial $10,000 investment at July 3, 1995 ($9,550 after
maximum sales load of 4.5%). All dividends and distributions are reinvested.
* At March 31, 1996, the GrandView Realty Growth Fund would have grown to
$10,095 - total investment return of 0.95% since July 3, 1995. Without the
deduction of the 4.5% maximum sales load, the Grandview Realty Fund would have
grown to $10,570 - total investment return of 5.70% since July 3, 1995.
* At March 31, 1996, a similar investment in the S&P 500 Index (after maximum
sales load of 4.5%) would have grown to $11,516 - total investment return of
15.16%; the Dow Jones Utility Index would have grown to $10,055 - total
investment return of 0.55%; the GrandView REIT Index would have grown to
$10,655 - total investment return of 6.55%, since July 3, 1995.
* Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the
principal value of shares, when redeemed, may be worth more or less than the
original cost. Average annual returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestment of dividends.
<PAGE>
GRANDVIEW REALTY GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1996
<TABLE>
<CAPTION>
Number of Value
Shares (note 1)
----------------- --------------
<S> <C>
COMMON STOCKS - 64.28%
Real Estate Investment Trust
(a) Angeles Participating Mortgage Trust 6,000 $3,375
(a) Banyan Hotel Investment Fund 4,500 3,094
Bedford Property Investors, Inc. 400 3,050
Burnham Pacific Properties, Inc. 400 4,400
Capstead Mortgage Corporation 300 7,500
Crescent Real Estate Equities, Inc. 200 6,725
Crocker Realty Trust, Inc. 400 3,900
Crown American Realty Trust 600 4,575
Factory Stores of America, Inc. 800 7,900
First Union Real Estate Investments 800 5,800
Homeplex Mortgage Investments Corporation 2,000 3,250
Innkeepers USA Trust 600 5,625
(a) Koger Equity, Inc. 400 4,350
MGI Properties, Inc. 300 5,025
RYMAC Mortgage Investment Corporation 6,700 8,794
Sizeler Property Investors, Inc. 1,100 8,663
Starwood Lodging Trust 150 5,062
Sunstone Hotel Investors, Inc. 200 2,050
(a) TIS Mortgage Investment Company 4,600 7,475
United Mobile Homes, Inc. 300 3,900
(a) Value Property Trust 200 2,475
(a) Vinland Property Trust 780 3,900
Winston Hotels, Inc. 500 6,125
--------------
Total Common Stocks (Cost $112,813) 117,013
--------------
Principal
Amount
-----------------
REPURCHASE AGREEMENT (b) - 24.45%
Wachovia Bank
5.38%, due April 1, 1996 $44,504 44,504
------------
(Cost $44,504)
Total Value of Investments (Cost $157,317(c)) 88.73% $161,517
Other Assets Less Liabilities 11.27% 20,505
-------- --------------
Net Assets 100.00% $182,022
======== ==============
(Continued)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1996
(a) Non-income producing investment.
(b) Joint repurchase agreement entered into March 31, 1996, with a
maturity value of $54,221,391 collateralized by $46,275,000 U.S.
Treasury Notes, due February 15, 2020. The aggregate market value
of the collateral at March 31, 1996 was $54,871,024. The Fund's
pro rata interest in the market value of the collateral at March
31, 1996 was $45,708. The Fund's pro rata interest in the joint
repurchase agreement collateral is taken into possession by the
Fund's custodian upon entering into the repurchase agreement.
(c) Aggregate cost for financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income tax purposes
is as follows:
Unrealized appreciation $7,278
Unrealized depreciation (3,078)
-----------
Net unrealized appreciation $4,200
===========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
ASSETS
Investments in common stocks, at value (cost $112,813) $117,013
Repurchase agreement (cost $44,504) 44,504
Dividends receivable 331
Interest receivable 27
Receivable for fund shares sold 18,550
Deferred organization expenses, net (note 4) 23,137
Other assets 70
--------
Total assets 203,632
--------
LIABILITIES
Accrued expenses 5,540
Due to advisor 10,641
Disbursements in excess of cash on demand deposit 5,429
--------
Total liabilities 21,610
--------
NET ASSETS
(applicable to 18,040 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $182,022
========
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($182,022 / 18,040 shares) $ 10.09
========
OFFERING PRICE PER SHARE
(100 / 95.5 of $10.09) $ 10.57
========
NET ASSETS CONSIST OF
Paid-in capital $177,822
Net unrealized appreciation on investments 4,200
--------
$182,022
========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENT OF OPERATIONS
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
</TABLE>
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends $3,422
Interest 428
--------------
Total income 3,850
--------------
Expenses
Professional fees 5,806
Custody fees 3,252
Securities pricing fees 1,365
Registration and filing administration fees 794
Investment advisory fees (note 2) 675
Fund administration fees (note 2) 229
Distribution and service fees (note 3) 225
Shareholder recordkeeping fees 80
Amortization of deferred organization expenses (note 4) 4,070
Shareholder servicing expenses 1,904
Printing expenses 602
Registration and filing expenses 134
Trustee fees and meeting expenses 113
Other operating expenses 1,619
--------------
Total expenses 20,868
--------------
Less:
Expense reimbursements (note 2) (18,489)
Investment advisory fees waived (note 2) (675)
Fund administration fees waived (note 2) (43)
Distribution and service fees waived (note 3) (225)
--------------
Net expenses 1,436
--------------
Net investment income 2,414
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 3,462
Increase in unrealized appreciation on investments 4,200
--------------
Net realized and unrealized gain on investments 7,662
--------------
Net increase in net assets resulting from operations $10,076
==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income $2,414
Net realized gain from investment transactions 3,462
Increase in unrealized appreciation on investments 4,200
------------------------
Net increase in net assets resulting from operations 10,076
------------------------
Distributions to shareholders from
Net investment income (2,414)
Net realized gain from investment transactions (3,462)
Tax return of capital (851)
------------------------
Decrease in net assets resulting from distributions (6,727)
------------------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a 178,673
------------------------
Total increase in net assets 182,022
NET ASSETS
Beginning of period 0
------------------------
End of period $182,022
========================
(a) A summary of capital share activity follows:
</TABLE>
<TABLE>
Caption>
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
Shares Value
--------- --------------
<S> <C>
Shares sold 18,289 $181,279
Shares issued for reinvestment of distributions 526 5,247
--------- --------------
18,815 186,526
Shares redeemed (775) (7,853)
--------- --------------
Net increase 18,040 $178,673
========= ==============
</TABLE>
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
<TABLE>
<S> <C>
Net asset value, beginning of period (initial offering price) $10.00
Income from investment operations
Net investment income 0.20
Net realized and unrealized gain on investments 0.36
------------
Total from investment operations 0.56
------------
Distributions to shareholders from
Net investment income (0.20)
Net realized gain from investment transactions (0.22)
Tax return of capital (0.05)
------------
Total distributions (0.47)
------------
Net asset value, end of period $10.09
============
Total return (a) 5.70%
============
Ratios/supplemental data
Net assets, end of period $182,022
============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 31.34 %(b)
After expense reimbursements and waived fees 2.00 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (25.55)%(b)
After expense reimbursements and waived fees 3.62 %(b)
Portfolio turnover rate 44.44 %
(a) Total return does not reflect payment of a sales charge. Annualized total return for the period is 7.73%
(b) Annualized.
</TABLE>
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The GrandView Realty Growth Fund (the "FUND") is a non-diversified
series of shares of beneficial interest of the GrandView
Investment Trust (the "TRUST"). The Trust, an open-end registered
management investment company, was organized on February 6, 1995
as a Massachusetts Business Trust and is registered under the
Investment Company Act of 1940. The Fund began operations on July
3, 1995. The following is a summary of significant accounting
policies followed by the Fund.
A. SECURITY VALUATION - The Fund's investments in securities
are carried at value. Securities listed on an exchange or
quoted on a national market system are valued at the last
sales price as of 4:00 p.m., New York time on the day of
valuation. Other securities traded in the over-the-counter
market and listed securities for which no sale was reported
on that date are valued at the most recent bid price.
Securities for which market quotations are not readily
available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.
B. FEDERAL INCOME TAXES - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares
were owned directly or indirectly by five or fewer
individuals at certain times during the last half of the
year. As a personal holding company the Fund is subject to
federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate.
No provision has been made for federal income taxes since
all taxable income has been distributed to shareholders. It
is the policy of the Fund to comply with the provisions of
the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable
income to relieve it from all federal income taxes.
The character of distributions made during the year from net
investment income or net realized gains from investment
transactions may differ from their ultimate characterization
for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or
realized gains are recorded by the Fund.
C. INVESTMENT TRANSACTIONS - Investment transactions are
recorded on the trade date. Realized gains and losses are
determined using the specific identification cost method.
Interest income is recorded daily on the accrual basis.
Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
The Fund records distributions received from its investments
in real estate investment trusts that represent a tax return
of capital as a reduction of the cost basis of investments.
D. DISTRIBUTIONS TO SHAREHOLDERS - The Fund generally declares
dividends semi-annually, payable on a date selected by the
Trust's Trustees. In addition, distributions may be made
annually in December out of net realized gains through
October 31 of that year. The Fund may make a supplemental
distribution subsequent to the end of its fiscal year ending
March 31.
E. USE OF ESTIMATES - Management makes a number of estimates in
the preparation of the Fund's financial statements. Actual
results could differ significantly from those estimates.
(CONTINUED)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, GrandView Advisers,
Inc. (the "ADVISOR") provides the Fund with a continuous program
of supervision of the Fund's assets, including the composition of
its portfolio, and furnishes advice and recommendations with
respect to investments, investment policies and the purchase and
sale of securities. As compensation for its services, the Advisor
receives a fee at the annual rate of 1.00% of the Fund's average
daily net assets.
Currently, the Fund does not offer its shares for sale in states
which require limitations to be placed on its expenses. The
Advisor currently intends to voluntarily waive all or a portion of
its fee and reimburse expenses of the Fund to limit total Fund
operating expenses to 2.00% of the average daily net assets of the
Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Advisor has
voluntarily waived its fee amounting to $675 ($0.04 per share) and
has voluntarily reimbursed $18,489 of the Fund's operating
expenses for the period from July 3, 1995 (commencement of
operations) to March 31, 1996.
The Fund's administrator, The Nottingham Company
(the "ADMINISTRATOR"), provides administrative services to and is
generally responsible for the overall management and day-to-day
operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its
services, the Administrator receives a fee at the annual rate of
0.30% of the Fund's first $25 million of average daily net assets,
0.275% of the next $25 million of average daily net assets, and
0.225% of average daily net assets over $50 million. Additionally,
the Administrator charges the Fund for servicing of shareholder
accounts and registration of the Fund's shares. The Administrator
also charges the Fund for certain expenses involved with the daily
valuation of portfolio securities.
Capital Investment Group, Inc. (the "DISTRIBUTOR") serves as the
Fund's principal underwriter and distributor. The Distributor
receives any sales charges imposed on purchases of shares and
re-allocates a portion of such charges to dealers through whom the
sale was made, if any. For the period from July 3, 1995
(commencement of operations) to March 31, 1996, the Distributor
retained sales charges of $10.
Certain Trustees and officers of the Trust are also officers of
the Advisor, the Distributor or the Administrator.
At March 31, 1996, the Advisor, its officers, and Trustees of the
Fund held 11,811 shares or 65% of the Fund shares outstanding.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust as defined in the
Investment Company Act of 1940 (the "ACT"), adopted a distribution
plan pursuant to Rule 12b-1 of the Act (the "PLAN"). The Act
regulates the manner in which a regulated investment company may
assume expenses of distributing and promoting the sales of its
shares and servicing of its shareholder accounts.
(CONTINUED)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
The Plan provides that the Fund may incur certain expenses, which
may not exceed 0.25% per annum of the Fund's average daily net
assets for each year elapsed subsequent to adoption of the Plan,
for payment to the Distributor and others for items such as
advertising expenses, selling expenses, commissions, travel or
other expenses reasonably intended to result in sales of shares of
the Fund or support servicing of shareholder accounts. The
Distributor has voluntarily waived all of such expenses under the
Plan for the period from July 3, 1995 (commencement of operations)
to March 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its
organization and the registration of its shares have been assumed
by the Fund.
The organization expenses are being amortized over a period of
sixty months. Investors purchasing shares of the Fund bear such
expenses only as they are amortized against the Fund's investment
income.
In the event any of the initial shares of the Fund are redeemed
during the amortization period, the redemption proceeds will be
reduced by a pro rata portion of any unamortized organization
expenses in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares of the Fund
outstanding at the time of the redemption.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term
investments, aggregated $146,113 and $36,762, respectively, for
the period from July 3, 1995 (commencement of operations) to March
31, 1996.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
All distributions from net realized gain from investment
transactions for the period from July 3, 1995 (commencement of
operations) to March 31, 1996 represent short-term capital gain
distributions, and are taxable as ordinary income to shareholders
for federal income tax purposes. Shareholders should consult a tax
advisor on how to report distributions for state and local income
tax purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders
GrandView Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the GrandView Realty Growth Fund (the "Fund"),
a series of the GrandView Investment Trust, as of March 31, 1996, and the
related statement of operations, statement of changes in net assets and
financial highlights for the period from July 3, 1995 (commencement of
operations) to March 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 1996 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
GrandView Realty Growth Fund as of March 31, 1996, and the results of its
operations, the changes in its net assets and financial highlights for the
period from July 3, 1995 (commencement of operations) to March 31, 1996 in
conformity with generally accepted accounting principles.
Richmond, Virginia
May 14, 1996
<PAGE>
1995 ANNUAL REPORT
GRANDVIEW REIT INDEX FUND
This report marks our first annual report to the shareholders of The GrandView
REIT Index Fund. This first report covers the period from June 28, 1996
(inception date) to March 31, 1996 which is the end of our fiscal year.
We will routinely use the following measures as a way of reporting our results
to you: The S&P 500 index as a comparison to the overall market, The Dow Jones
Utility Index as a comparison to another income oriented equity group, and The
GrandView REIT Index, the funds investment benchmark as per the prospectus.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
QUARTER ENDING DOW JONES S&P 500 GRANDVIEW GRANDVIEW REIT GRANDVIEW REIT
UTILITY INDEX INDEX REIT INDEX INDEX FUND (NAV) INDEX FUND
(TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN) (TOTAL RETURN) (MOP)
(TOTAL RETURN)
- ----------------------------------------------------------------------------------------------------------
<S><C>
SEP. 30, 1995 6.1% 7.9% 4.8% 3.0% 0.0%
- ----------------------------------------------------------------------------------------------------------
DEC. 31, 1995 6.6% 6.0% 4.5% 3.5% 3.5%
- ----------------------------------------------------------------------------------------------------------
MAR. 31, 1996 -4.1% 5.3% 1.9% -0.3% -0.3%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Most investment professionals indicate that investments in mutual funds should
not be considered as short term investments. Therefore, it is unusual to look at
performance measures on a quarterly basis. However, since The GrandView REIT
Index Fund is new, these shorter periods are all that are available. With time,
we will lengthen the periods for performance comparisons to the more customarily
used annual basis.
The first nine months of performance shows mixed results for REIT securities as
a whole. While the general stock market continues at a record setting pace,
defensive, income oriented securities (including REITs) continued to lag general
market returns. In the most recent quarter, as interest rates firmed, REITs
outperformed their utility stock counterparts.
With regards to specific fund performance, we completed our first nine months
under performing our benchmark index. The primary reason for this result is that
our current size does not allow us to effectively duplicate the index. As of
March 31, 1996 the fund owned 36 of the 60 securities that comprised the index.
This will correct itself as we grow in asset size. It is our goal, to be fully
invested in the entire index and in the approximate weightings at the $1 million
dollar level. We are, however, obtaining our investment objective of obtaining a
correlation of more than 90% between fund performance and index performance for
the nine month period. We would expect this to continue as assets grow.
Within the REIT sector, there has been a wide range of total returns between
various REIT subsectors. An advantage of an "Index" approach is that it allows
an investor to buy the industry in a diversified way with minimal expenses and
participate when a particular subsection moves dramatically. Since the fund's
inception, the REIT industry has had three subsectors gain in excess of 20%.
These subsectors are manufactured housing, office, and hotels. The funds current
holdings in these groups are Manufactured Housing Communities (MHC, NYSE), ROC
Communities (RCI, NYSE), Crescent Realty (CEI, NYSE), Starwood Lodging (HOT,
NYSE) and Felcor Suite Hotels (FCH, NYSE). On the negative side, the retail
grouping in all its different forms (mall, strip and outlet) were the worst
performers. This was generally due to investor concern over weak retail sales
figures and a general belief that America may be overstored. Since roughly a
third of all REIT capitalization is represented by retail companies, the poor
performance of this sector was the major negative contributor to overall
performance of both the index and consequently your fund.
As we look forward, we are extremely optimistic about the REIT industry and the
"Index" approach of investing in the industry. The inherit benefits of
investment liquidity, professional management, high current income and quality
real estate assets makes the security class a very rational way for investors to
participate in owning commercial real estate. As more and more investors invest
in the market, the market will become increasingly efficient. This market
efficiency will make index investing one of the best and most economical way for
investors to participate in the REIT industry. While The GrandView REIT Index
Fund doesn't expect to lead the fund industry in total returns in any given
quarter, we do expect, with time, to consistently provide to you, our
shareholders, above average returns with minimal expenses. We welcome you as our
first shareholders and thank you for your trust and support.
Winsor H. Aylesworth
<PAGE>
GRANDVIEW REIT INDEX FUND
Performance Update - $10,000 Investment
For the period from July 3, 1995 (commencement of operations) to
March 31, 1996
[GRAPH]
GrandView Dow Jones
REIT Index S&P 500 Utility GrandView
Fund Index Index REIT Index
07/03/95 9,700 9,700 9,700 9,700
07/31/95 9,690 10,022 9,792 9,797
09/30/95 9,991 10,471 10,286 10,158
12/31/95 10,351 11,101 10,819 10,616
03/31/96 10,321 11,697 10,213 10,822
This graph depicts the performance of the GrandView REIT Index Fund versus the
S&P 500 Index, Dow Jones Utility Index, and GrandView REIT Index. It is
important to note that the GrandView REIT Index Fund is a professionally managed
mutual fund while the indexes are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
Annualized Total Return
Commencement
of operations
through 3/31/96
No Sales Load 8.69%
Maximum 3.0% 4.33%
Sales Load
* The graph assumes an initial $10,000 investment at July 3, 1995 ($9,700 after
maximum sales load of 3.0%). All dividends and distributions are reinvested.
* At March 31, 1996, the GrandView REIT Index Fund would have grown to $10,321 -
total investment return of 3.21% since July 3, 1995. Without the deduction of
the 3.0% maximum sales load, the GrandView REIT Index Fund would have grown to
$10,640 - total investment return of 6.40% since July 3, 1995.
* At March 31, 1996, a similar investment in the S&P 500 Index (after maximum
sales load of 3.0%) would have grown to $11,697 - total investment return of
16.97%; the Dow Jones Utility Index would have grown to $10,213 - total
investment return of 2.13%; the GrandView REIT Index would have grown to
$10,822 - total investment return of 8.22%, since July 3, 1995.
* Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the
principal value of shares, when redeemed, may be worth more or less than the
original cost. Average annual returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
GRANDVIEW REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
March 31, 1996
<TABLE>
<CAPTION>
Number of Value
Shares (note 1)
----------------- -------------------
<S> <C>
COMMON STOCKS - 95.36%
Real Estate Investment Trust
American Health Properties, Inc. 300 $6,750
Avalon Properties, Inc. 300 6,450
CWM Mortgage Holdings, Inc. 300 4,838
Chelsea GCA Realty, Inc. 300 8,850
Crescent Real Estate Equities, Inc. 200 6,725
Duke Realty Investments, Inc. 200 6,025
Equity Residential Properties Trust 300 9,375
Factory Stores of America, Inc. 300 2,962
Federal Realty Investment Trust 200 4,450
FelCor Suite Hotels, Inc. 150 4,650
First Industrial Realty Trust, Inc. 150 3,432
Franchise Finance Corporation 350 7,000
Health and Retirement Property 500 8,562
Health Care Property Investors, Inc. 250 7,875
Kimco Realty Corporation 300 8,100
Liberty Property Trust 300 6,188
Manufactured Home Communities, Inc. 200 3,550
Meditrust Corporation 400 13,550
Merry Land & Investment Company, Inc. 200 4,350
Mills Corporation 100 1,762
Nationwide Health Properties, Inc. 400 8,400
New Plan Realty Trust 450 9,281
Oasis Residential, Inc. 300 7,050
Public Storage, Inc. 300 6,112
RFS Hotel Investors, Inc. 200 3,475
ROC Communities, Inc. 300 7,050
Realty Income Corporation 500 10,375
Resource Mortgage Capital Corporation 500 10,250
Security Capital Industrial Trust 550 9,625
Security Capital Pacific Trust 500 11,000
Simon Property Group, Inc. 450 10,406
Starwood Lodging Trust 100 3,375
United Dominion Realty Trust 300 4,388
Weingarten Realty Investors 200 7,175
Wellsford Residential Property Trust 350 7,656
-----------
Total Common Stocks (Cost $241,943) 241,062
-----------
</TABLE>
(Continued)
<PAGE>
GRANDVIEW REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
March 31, 1996
Principal Value
Amount (note 1)
----------------- ----------------
REPURCHASE AGREEMENT (a) - 8.02%
Wachovia Bank $20,287 $20,287
5.38%, due April 1, 1996 ----------------
(Cost $20,287)
Total Value of Investments (Cost $262,230 (b)) 103.38% 261,349
Liabilities In Excess of Other Assets (3.38)% (8,556)
------- -----------
Net Assets 100.00% $252,793
======= ===========
(a) Joint repurchase agreement entered into March 31, 1996, with a
maturity value of $54,221,391 collateralized by $46,275,000 U.S.
Treasury Notes, due February 15, 2020. The aggregate market value
of the collateral at March 31, 1996 was $54,871,024. The Fund's
pro rata interest in the market value of the collateral at March
31, 1996 was $20,522. The Fund's pro rata interest in the joint
repurchase agreement collateral is taken into possession by the
Fund's custodian upon entering into the repurchase agreement.
(b) Aggregate cost for financial reporting and federal income tax
purposes is the same. Unrealized appreciation (depreciation) of
investments for financial reporting and federal income tax purposes
is as follows:
Unrealized appreciation $6,094
Unrealized depreciation (6,975)
----------
Net unrealized depreciation ($881)
==========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REIT INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
ASSETS
Investments, at value (cost $262,230) $ 261,349
Dividends receivable 1,794
Interest receivable 56
Receivable for fund shares sold 8,000
Deferred organization expenses, net (note 4) 23,137
Other assets 205
---------
Total assets 294,541
---------
LIABILITIES
Accrued expenses 4,500
Payable for investment purchases 23,449
Due to advisor 11,803
Disbursements in excess of cash on demand deposit 1,996
---------
Total liabilities 41,748
---------
NET ASSETS
(applicable to 24,763 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $ 252,793
=========
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($252,793 / 24,763 shares) $ 10.21
=========
OFFERING PRICE PER SHARE
(100 / 97 of $10.21) $ 10.53
=========
NET ASSETS CONSIST OF
Paid-in capital $ 253,577
Undistributed net realized gain on investments 97
Net unrealized depreciation on investments (881)
---------
$ 252,793
=========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REIT INDEX FUND
STATEMENT OF OPERATIONS
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividends $5,797
Interest 440
----------
Total income 6,237
----------
Expenses
Professional fees 5,787
Custody fees 2,711
Registration and filing administration fees 786
Securities pricing fees 348
Investment advisory fees (note 2) 314
Fund administration fees (note 2) 198
Shareholder recordkeeping fees 86
Amortization of deferred organization expenses (note 4) 4,070
Shareholder servicing expenses 1,664
Registration and filing expenses 484
Printing expenses 337
Trustee fees and meeting expenses 113
Other operating expenses 1,572
----------
Total expenses 18,470
----------
Less:
Expense reimbursements (note 2) (17,159)
Investment advisory fees waived (note 2) (314)
----------
Net expenses 997
----------
Net investment income 5,240
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investment transactions 1,665
Increase in unrealized depreciation on investments (881)
----------
Net realized and unrealized gain on investments 784
----------
Net increase in net assets resulting from operations $6,024
==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REIT INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income $5,240
Net realized gain from investment transactions 1,665
Increase in unrealized depreciation on investments (881)
----------
Net increase in net assets resulting from operations 6,024
----------
Distributions to shareholders from
Net investment income (5,240)
Net realized gain from investment transactions (1,568)
----------
Decrease in net assets resulting from distributions (6,808)
----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 253,577
----------
Total increase in net assets 252,793
NET ASSETS
Beginning of period 0
----------
End of period $252,793
==========
</TABLE>
(a) A summary of capital share activity follows:
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
Shares Value
---------- ----------
Shares sold 25,257 $258,779
Shares issued for reinvestment of distributions 482 4,916
---------- ------------
25,739 263,695
Shares redeemed (976) (10,118)
---------- ------------
Net increase 24,763 $253,577
========== ============
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REIT INDEX FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from July 3, 1995
(commencement of operations)
to March 31, 1996
Net asset value, beginning of period (initial offering price) $10.00
Income from investment operations
Net investment income 0.33
Net realized and unrealized gain on investments 0.32
--------
Total from investment operations 0.65
--------
Distributions to shareholders from
Net investment income (0.33)
Net realized gain from investment transactions (0.11)
---------
Total distributions (0.44)
---------
Net asset value, end of period $10.21
=========
Total return (a) 6.40%
=========
Ratios/supplemental data
Net assets, end of period $252,793
=========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 20.63%(b)
After expense reimbursements and waived fees 1.05%(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (13.66)%(b)
After expense reimbursements and waived fees 5.86%(b)
Portfolio turnover rate 47.46%
(a) Total return does not reflect payment of a sales charge. Annualized total
return for the period is 8.69%.
(b) Annualized.
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The GrandView REIT Index Fund (the "Fund") is a diversified series of
shares of beneficial interest of the GrandView Investment Trust (the
"Trust"). The Trust, an open-end investment company, was organized on
February 6, 1995 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940. The Fund began operations
on July 3, 1995. Shares of the Fund purchased are subject to a
maximum sales charge of 3.00%. Shares of the Fund redeemed are subject
to a 1.00% redemption fee, which applies to redemptions during the
first six months after share purchases. The redemption fee is
subsequently reduced after the first six months and is eliminated
after one year. The following is a summary of significant accounting
policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on
a national market system are valued at the last sales price as of
4:00 p.m., New York time on the day of valuation. Other
securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued
at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using
an independent pricing service or by following procedures
approved by the Board of Trustees. Short-term investments are
valued at cost which approximates value.
B. Federal Income Taxes - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly
or indirectly by five or fewer individuals at certain times
during the last half of the year. As a personal holding company
the Fund is subject to federal income taxes on undistributed
personal holding company income at the maximum individual income
tax rate. No provision has been made for federal income taxes
since all taxable income has been distributed to shareholders.
It is the policy of the Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions to taxable income
to relieve it from all federal income taxes.
The character of distributions made during the year from net
investment income or net realized gains from investment
transactions may differ from their ultimate characterization for
federal income tax purposes. Also, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains are
recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on
the trade date. Realized gains and losses are determined using
the specific identification cost method. Interest income is
recorded daily on the accrual basis. Dividend income and distri-
butions to shareholders are recorded on the ex-dividend date.
The Fund records distributions received from its investments in
real estate investment trusts (REIT's) that represent a tax
return of capital as a reduction of the cost basis of
investments. During the period from July 3, 1995 (commencement
of operations) to March 31, 1996, the Fund received approximately
$1,350 of distributions from REIT's that represent a tax return
of capital.
(Continued)
<PAGE>
GRANDVIEW REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
D. Distributions to Shareholders - The Fund generally declares
dividends quarterly, payable on a date selected by the Trust's
Trustees. In addition, distributions may be made annually in
December out of net realized gains through October 31 of that
year. The Fund may make a supplemental distribution subsequent
to the end of its fiscal year ending March 31.
E. Use of Estimates - Management makes a number of estimates in the
preparation of the Fund's financial statements. Actual results
could differ significantly from those estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, GrandView Advisers, Inc.
(the "Advisor") provides the Fund with a continuous program of
supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to
investments, investment policies and the purchase and sale of
securities. As compensation for its services, the Advisor receives a
fee at the annual rate of 0.35% of the Fund's average daily net
assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor
currently intends to voluntarily waive all or a portion of its fee and
reimburse expenses of the Fund to limit total Fund operating expenses
to 1.05% of the average daily net assets of the Fund. There can be no
assurance that the foregoing voluntary fee waivers or reimbursements
will continue. The Advisor has voluntarily waived its fee amounting
to $314 ($0.01 per share) and has voluntarily reimbursed $17,159 of
the Fund's operating expenses for the period from July 3, 1995
(commencement of operations) to March 31, 1996.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation
for its services, the Administrator receives a fee at the annual rate of
0.225% of the Fund's first $25 million of average daily net assets, 0.20%
of the next $25 million of average daily net assets, and 0.175% of average
daily net assets over $50 million. Additionally, the Administrator charges
the Fund for servicing of shareholder accounts and registration of the
Fund's shares. The Administrator also charges the Fund for certain expenses
involved with the daily valuation of portfolio securities.
Capital Investment Group, Inc. (the "Distributor") serves as the
Fund's principal underwriter and distributor. The Distributor
receives any sales charges imposed on purchases of shares and re-
allocates a portion of such charges to dealers through whom the sale
was made, if any. For the period from July 3, 1995 (commencement of
operations) to March 31, 1996, the Distributor retained sales charges
in the amount of $52.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
At March 31, 1996, the Advisor, its officers, and Trustees of the Fund
held 9,784 shares or 40% of the Fund shares outstanding.
(Continued)
<PAGE>
GRANDVIEW REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are
not "interested persons" of the Trust as defined in the Investment
Company Act of 1940 (the "Act"), adopted a distribution plan pursuant
to Rule 12b-1 of the Act (the "Plan"). The Act regulates the manner
in which a regulated investment company may assume expenses of
distributing and promoting the sales of its shares and servicing of
its shareholder accounts.
The Plan provides that the Fund may incur certain expenses, which may
not exceed 0.25% per annum of the Fund's average daily net assets for
each year elapsed subsequent to adoption of the Plan, for payment to
the Distributor and others for items such as advertising expenses,
selling expenses, commissions, travel or other expenses reasonably
intended to result in sales of shares of the Fund or support servicing
of shareholder accounts.
The Trustees of the Trust do not currently intend to authorize the
payment of any such distribution and service fees from the Fund,
although they have authority under the Plan to do so in the future.
Shareholders of the Fund will be given at least sixty days written
notice before any distribution and service fees are imposed.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization
and the registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses
only as they are amortized against the Fund's investment income.
In the event any of the initial shares of the Fund are redeemed during
the amortization period, the redemption proceeds will be reduced by a
pro rata portion of any unamortized organization expenses in the same
proportion as the number of initial shares being redeemed bears to the
number of initial shares of the Fund outstanding at the time of the
redemption.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $299,747 and $58,102, respectively, for the period from
July 3, 1995 (commencement of operations) to March 31, 1996.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
All distributions from net realized gain from investment transactions
for the period from July 3, 1995 (commencement of operations) to March
31, 1996 represent short-term capital gain distributions, and are
taxable as ordinary income to shareholders for federal income tax
purposes. Shareholders should consult a tax advisor on how to report
distributions for state and local income tax purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders
GrandView Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the GrandView REIT Index Fund (the "Fund"), a
series of the GrandView Investment Trust, as of March 31, 1996, and the related
statement of operations, statement of changes in net assets and financial
highlights for the period from July 3, 1995 (commencement of operations) to
March 31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 1996 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
GrandView REIT Index Fund as of March 31, 1996, and the results of its
operations, the changes in its net assets and financial highlights for the
period from July 3, 1995 (commencement of operations) to March 31, 1996 in
conformity with generally accepted accounting principles.
Richmond, Virginia
May 14, 1996
28
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements:
Financial Statements Included in Part A:
Financial Highlights
Financial Statements Included in Part B:
Annual Report for the fiscal year ended March 31, 1996 for each series
of Registrant
b) Exhibits Filed Herewith:
* (1) (a) Declaration of Trust of Registrant
*** (b) Amendment to Declaration of Trust of Registration
* (2) By-Laws of Registrant
** (5) Investment Advisory Agreements between the Registrant and GrandView
Advisers, Inc., as adviser
** (6) Form of Distribution Agreement between the Registrant and Capital
Investment Group, Inc., as distributor
** (8) Form of Custodian Agreement between the Registrant and Wachovia Bank
of North Carolina, N.A., as custodian
** (9) (a) Fund Accounting, Dividend Disbursing & Transfer Agent and
Administration Agreement between the Registrant and The Nottingham
Company, as administrator (the "Administration Agreement")
(b) Admendment to Administration Agreement
** (10) (a) Opinion and consent of Bingham, Dana & Gould, counsel to the
Registrant
**** (b) Opinion and consent of Poyner and Spruill, LLP, counsel to the
Registrant
** (11) Consent of KPMG Peat Marwick LLP, independent auditors of the
Registrant
** (13) Initial Share Purchase Agreement
** (15) Distribution Plan of the Registrant
(16) Performance Calculation Schedules
(17) Financial Data Schedules
** (25) Powers of Attorney for the Registrant
- ---------------------
* Incorporated by reference to the Registrant's initial Registration
Statement on Form N-1A (File No. 33-89628, 811-8978), as filed with the
Securities and Exchange Commission on February 22, 1995.
** Incorporated by reference to the Registrant's Pre-Effective Amendment No. 1
to its Registration Statement on Form N-1A (File No. 33-89628, 811-8978),
as filed with the Securities and Exchange Commission on May 31, 1995.
*** Incorporated by reference to the Registrant's Post-Effective Amendment No.1
to its Registration Statment on Form N-1A (File No. 33-89628, 811-8978), as
filed with the Securities and Exchange Commission on January 9, 1996.
**** Incorporated by reference to the Registrant's Rule 24f-2 Notice for the
year ended March 31, 1996 as filed with the Securities and Exchange
Commission on May 30, 1996.
29
<PAGE>
ITEM 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
ITEM 26. Number of Record Holders of Securities
Number of
Title of Class Record Holders
Shares of Beneficial Interest
(par value $0.0001 per share) As of July 25, 1996
GrandView REIT Index Fund 32
GrandView Realty Growth Fund 19
GrandView Healthcare Realty Income Fund 20
ITEM 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as Exhibit 1 herein.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the Investment
Company Act of 1940.
ITEM 28. Business and other Connections of Investment Advisor
Winsor H. Aylesworth is the President, Treasurer and Director of GrandView
Advisers, Inc. During the period from 1990 to 1993 Mr. Aylesworth served as
the Executive Vice President in the Loan Review Department of the Bank of
Boston Connecticut. From 1991 to the present Mr. Aylesworth has served as
President and Director of WHA Enterprises, Inc. ("WHA"). The principal
business address of WHA is 127 Grandview Drive, Glastonbury, Connecticut
06033. At WHA Mr. Aylesworth is responsible for publishing a financial
newsletter on the REIT industry. Lucille C. Carlson is a Director of
GrandView Advisers, Inc. During the period from 1991 to April, 1995 Ms.
Carlson served as Assistant Vice President in the Loan Review Department at
the Bank of Boston Connecticut. From 1993 to the present, Ms. Carlson has
acted as Director of Research at WHA. David F. Wolf is a Director of
GrandView Advisers, Inc. During the period from 1992 to May, 1995 Mr. Wolf
was employed as a financial planning consultant for John Hancock Financial
Services, Inc. From 1993 to the present, Mr. Wolf has served as Director of
Marketing for WHA. Maryanne S. Aylesworth is the Secretary of GrandView
Advisers, Inc. During the period from 1993 to 1994 Ms. Aylesworth served as
a substitute teacher in the Glastonbury, Connecticut School District. From
1991 to the present Ms. Aylesworth has served as Secretary of WHA, and from
1994 to the present, Ms. Aylesworth has served as a medical laboratory
technician.
ITEM 29. Principal Underwriter
30
<PAGE>
(a) Capital Investment Group, Inc., the Registrant's distributor, is also
the underwriter and distributor for The Chesapeake Growth Fund, The
Chesapeake Fund, Capital Value Fund, ZSA Equity Fund, ZSA Asset
Allocation Fund, ZSA Social Conscience Fund, The Brown Capital Management
Equity Fund, The Brown Capital Management Balanced Fund, and The Brown
Capital Management Small Company Fund.
(b)
Position(s) and Position(s) and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
Richard K. Bryant President No position with
17 Glenwood Avenue the Registrant or its
Raleigh, North Carolina Series
Elmer O. Edgerton, Jr. Vice President No position with
17 Glenwood Avenue the Registrant or its
Raleigh, North Carolina Series
(c) Not applicable.
ITEM 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Name Address
The Nottingham Company 105 North Washington Street
(administrator, disbursing and Rocky Mount, NC 27802
transfer agent)
Wachovia Bank of North Carolina N.A. 301 North Main Street
(custodian) Winston-Salem, NC 27102
GrandView Advisers, Inc. 127 Grandview Drive
(investment advisor) Glastonbury, CT 06033
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
The Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of one or more of the
Trust's Trustees when requested in writing to do so by the holders of at
least 10% of the Registrant's outstanding shares, and in connection
therewith to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communication.
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
31
<PAGE>
NOTICE
A copy of the Declaration of Trust for GrandView Investment Trust (the "Trust")
is on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Registration Statement has been executed on
behalf of the Trust by an officer of the Trust as an officer and by its Trustees
as trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts on the 1st day of August, 1996.
GRANDVIEW INVESTMENT TRUST
By: /s/ Winsor H. Aylesworth
Winsor H. Aylesworth
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated below on August 1, 1996.
President, Treasurer and Trustee
Winsor H. Aylesworth* (Chief Executive Officer, Chief
Financial Officer and Chief
Accounting Officer)
Officer
Arthur Collins* Trustee
Richard W. Jagolta* Trustee
32
<PAGE>
Raymond H. Weaving Trustee
* By: /s/ Winsor H. Aylesworth
Winsor H. Aylesworth, Attorney-in-Fact
GRANDVIEW INVESTMENT TRUST
EXHIBIT INDEX
SEQUENTIAL PAGE
EXHIBIT NUMBER DESCRIPTION NUMBER
9(b) Amendment to Administration Agreement
11 Consent of KPMG Peat Marwick LLP,
independent auditors of the Registrant
16 Performance Calculation Schedules
17 Financial Data Schedules
[GRANDVIEW LETTERHEAD]
MEMORANDUM
To: Frank Meadows - The Nottingham Companies
From: Skip Aylesworth
Date: 03/18/96
Re: Memo of Understanding
This memo is to document our understanding concerning the changes to our current
agreement pertaining to "Fund Accounting, Dividend Disbursing & Transfer Agent,
and Administrative Agreement" approved previously by the GrandView Board of
Trustees on April 26, 1995.
The following changes have been agreed to by the parties:
Fee Arrangement: Beginning April 1, 1996, the three remaining funds of The
GrandView Investment Trust will pay a minimum monthly fee of $500.00 each. This
fee will be increased to $800.00 per month for each fund effective May 1, 1996.
This minimum fee arrangement will remain at $800.00 per month per fund for
remainder of 12 month period ending March 31, 1997 unless otherwise agreed to by
the parties.
Fund Allocations: The Nottingham Company has agreed that the monthly costs that
are calculated via an allocation system and then subsequently charged to the
funds of The GrandView Investment Trust will now have a maximum amount that the
allocated costs will not exceed. This maximum amount will be calculated by
taking the average of the previously monthly amount for each allocated cost
category for the six month period ending March 31, 1996. This new allocation cap
will become effective beginning in April 1, 1996 and continue for the extent of
our contract or unless otherwise agreed to by the parties.
Contract Termination: The termination provision of the original contract are
reaffirmed by both parties. If for whatever reason, The Nottingham Company
resigns or otherwise wishes to terminate the contract without ninety day notice,
the minimum fee schedule in effect at the time is deemed waived by the parties.
There are no other changes to the original agreement.
Agreed to on March 18, 1996 by:
/s/ FRANK MEADOWS, III /s/ WINSOR H. AYLESWORTH
------------------ --------------------
Frank Meadows, III Winsor H. Aylesworth
The Nottingham Company GrandView Investment Trust
INDEPENDENT AUDITORS' CONSENT
The Trustees and Shareholders
GrandView REIT Index Fund:
GrandView Realty Growth Fund:
GrandView Healthcare Realty Income Fund:
We consent to the use of our report dated May 14, 1996 included in the
registration statement on Form N-1A and to the reference to our firm under the
heading "Financial Highlights" in the prospectus.
KPMG Peat Marwick LLP
Richmond, Virginia
July 25, 1996
Computation of Performance
THE GRANDVIEW FUNDS
Exhibit 16
Computation of Performance
THE GRANDVIEW FUNDS
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment.
This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms of
years.
The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.
The aggregate total return for the REIT Index Fund, Realty Growth Fund, and
Healthcare Realty Income Fund since inception (July 3, 1995 to March 31, 1996)
was 3.21%, 0.95%, and 9.91%, respectively. Without reflecting the effects of the
maximum sales load, the aggregate total return for the REIT Index Fund, Realty
Growth Fund, and Healthcare Realty Income Fund since inception (July 3, 1995 to
March 31, 1996) was 6.40%, 5.70%, and 15.08%, respectively
Any current yield quotation for a Fund consists of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a 30
calendar day or one month period and is calculated by (a) raising to the sixth
power the sum of 1 plus the quotient obtained by dividing the Fund's net
investment income earned during the period by the product of the average daily
number of shares outstanding during the period that were entitled to receive
dividends and the maximum public offering price per share on the last day of the
period, (b) subtracting 1 from the result, and (c) multiplying the result by 2.
Yield =2[(A - B + 1)6-1]
CD
Where: A equals dividends and interest earned during the period; B equals
expenses accrued for the period (net of reimbursements); C equals average daily
number of shares outstanding during the period that were entitled to receive
dividends; D equals the maximum offering price per share on the last day of the
period. For the thirty day period ended March 31, 1996, the yield for the REIT
Index Fund, Realty Growth Fund, and Healthcare Realty Income Fund was 5.69%,
3.44%, and 4.53%, respectively.
Aggregate Total Return
(ERV - P)/P = TR
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted
TR = total return
<PAGE>
REIT Index Fund:
Inception through March 31, 1996 - Including sales load of 3.0%
(1032.10 - 1,000)/1,000 = .0321
ERV = $1,032.10
P = $1,000
TR = 3.21%
Inception through March 31, 1996 - Excluding sales load of 3.0%
(1064.00 - 1,000)/1,000 = .0640
ERV = $1,064.00
P = $1,000
TR = 6.40%
Yield for the thirty day period ended March 31, 1996:
Yield =2[(A - B + 1)6-1]
CD
A = $1,220.66
B = $175.03
C = 21,202.95
D = $10.52
Yield = 2[((1,220.66 - 175.03 + 1)6-1]
(21,202.95*10.52)
Yield = 5.69%
<PAGE>
Realty Growth Fund:
Inception through March 31, 1996 - Including sales load of 4.5%
(1009.50 - 1,000)/1,000 = .0095
ERV = $1,009.50
P = $1,000
TR = 0.95%
Inception through March 31, 1996 - Excluding sales load of 4.5%
(1057.00 - 1,000)/1,000 = .0570
ERV = $1,057.00
P = $1,000
TR = 5.70%
Yield for the thirty day period ended March 31, 1996:
Yield =2[(A - B + 1)6-1]
CD
A = $614.64
B = $214.81
C = 13,276.06
D = $10.57
Yield = 2[((614.64-214.81 + 1)6-1]
(13,276.06*10.57)
Yield = 3.44%
<PAGE>
Healthcare Realty Income Fund:
Inception through March 31, 1996 - Including sales load of 4.5%
(1099.10 - 1,000)/1,000 = .0991
ERV = $1,099.10
P = $1,000
TR = 9.91%
Inception through March 31, 1996 - Excluding sales load of 4.5%
(1150.80 - 1,000)/1,000 = .1508
ERV = $1,150.80
P = $1,000
TR = 15.08%
Yield for the thirty day period ended March 31, 1996:
Yield =2[(A - B + 1)6-1]
CD
A = $631.77
B = $165.19
C = 10,949.49
D = $11.39
Yield = 2[((631.77 - 165.19 + 1)6-1]
(10,949.49*11.39)
Yield = 4.53%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> GRADVIEW REIT INDEX FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 262,230
<INVESTMENTS-AT-VALUE> 261,349
<RECEIVABLES> 1,850
<ASSETS-OTHER> 31,342
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 294,541
<PAYABLE-FOR-SECURITIES> 23,449
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,299
<TOTAL-LIABILITIES> 41,748
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 253,577
<SHARES-COMMON-STOCK> 24,763
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 97
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (881)
<NET-ASSETS> 252,793
<DIVIDEND-INCOME> 5,797
<INTEREST-INCOME> 440
<OTHER-INCOME> 0
<EXPENSES-NET> 997
<NET-INVESTMENT-INCOME> 5,240
<REALIZED-GAINS-CURRENT> 1,665
<APPREC-INCREASE-CURRENT> (881)
<NET-CHANGE-FROM-OPS> 6,024
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,240)
<DISTRIBUTIONS-OF-GAINS> (1,568)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,257
<NUMBER-OF-SHARES-REDEEMED> (976)
<SHARES-REINVESTED> 482
<NET-CHANGE-IN-ASSETS> 252,793
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 314
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,470
<AVERAGE-NET-ASSETS> 120,049
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> (0.33)
<PER-SHARE-DISTRIBUTIONS> (0.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> GRADVIEW REALTY GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 157,317
<INVESTMENTS-AT-VALUE> 161,517
<RECEIVABLES> 358
<ASSETS-OTHER> 41,757
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 203,632
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,610
<TOTAL-LIABILITIES> 21,610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 177,822
<SHARES-COMMON-STOCK> 18,040
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (43)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (808)
<ACCUM-APPREC-OR-DEPREC> 4,200
<NET-ASSETS> 182,022
<DIVIDEND-INCOME> 3,422
<INTEREST-INCOME> 428
<OTHER-INCOME> 0
<EXPENSES-NET> 1,436
<NET-INVESTMENT-INCOME> 2,414
<REALIZED-GAINS-CURRENT> 3,462
<APPREC-INCREASE-CURRENT> 4,200
<NET-CHANGE-FROM-OPS> 10,076
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,414)
<DISTRIBUTIONS-OF-GAINS> (3,462)
<DISTRIBUTIONS-OTHER> (851)
<NUMBER-OF-SHARES-SOLD> 18,289
<NUMBER-OF-SHARES-REDEEMED> (775)
<SHARES-REINVESTED> 526
<NET-CHANGE-IN-ASSETS> 182,022
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 675
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 20,868
<AVERAGE-NET-ASSETS> 89,617
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 0.36
<PER-SHARE-DIVIDEND> (0.20)
<PER-SHARE-DISTRIBUTIONS> (0.22)
<RETURNS-OF-CAPITAL> (0.05)
<PER-SHARE-NAV-END> 10.09
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> GRADVIEW HEALTHCARE REALTY INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 141,399
<INVESTMENTS-AT-VALUE> 147,418
<RECEIVABLES> 485
<ASSETS-OTHER> 31,187
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 179,090
<PAYABLE-FOR-SECURITIES> 14,854
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,516
<TOTAL-LIABILITIES> 32,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 140,701
<SHARES-COMMON-STOCK> 13,481
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (279)
<ACCUM-APPREC-OR-DEPREC> 6,019
<NET-ASSETS> 146,720
<DIVIDEND-INCOME> 3,795
<INTEREST-INCOME> 521
<OTHER-INCOME> 0
<EXPENSES-NET> 1,043
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<REALIZED-GAINS-CURRENT> 2,608
<APPREC-INCREASE-CURRENT> 6,019
<NET-CHANGE-FROM-OPS> 11,900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,273)
<DISTRIBUTIONS-OF-GAINS> (2,608)
<DISTRIBUTIONS-OTHER> (279)
<NUMBER-OF-SHARES-SOLD> 14,145
<NUMBER-OF-SHARES-REDEEMED> (994)
<SHARES-REINVESTED> 330
<NET-CHANGE-IN-ASSETS> 146,720
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 19,456
<AVERAGE-NET-ASSETS> 75,849
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> 1.10
<PER-SHARE-DIVIDEND> (0.38)
<PER-SHARE-DISTRIBUTIONS> (0.20)
<RETURNS-OF-CAPITAL> (0.02)
<PER-SHARE-NAV-END> 10.88
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
