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
