1997 Annual Report
GrandView Investment Trust
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
May 26, 1997
Telephone 919-972-9922
U.S. WATS 800-525-FUND
Facsimile 919-442-4226
To the Shareholders of the GrandView Realty Growth Fund:
We are pleased to present our second annual report for the GrandView Realty
Growth Fund. As is our custom, we present our results in the table below along
with appropriate market benchmarks.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Period Ending Dow Jones S&P 500 GrandView REIT GrandView Realty GrandView Realty
Utility Index Index Index Growth Fund (NAV) Growth Fund
(Total Return ) (Total Return) (Total Return) (Total Return) (MOP)
(Total Return)
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Three Month -4.71% -3.23% -0.13% 9.67% 6.38%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Six Months 3.61% 11.25% 18.46% 22.51% 18.83%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
One Year 8.60% 19.63% 31.16% 45.12% 40.75%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Since Inception 19.15% 43.71% 44.57% 53.39% 48.75%
From 07/03/95
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
NAV= Net Asset Value (Without Sales Load)
MOP = Maximum Offering Price (With Sales Load)
</TABLE>
It has been an excellent year for the GrandView Realty Growth Fund. As can be
seen above, our performance has been outstanding by any measure. As ranked by
Lipper Analytical Services, your fund was ranked the number one (1) performing
real estate fund for the twelve month period ending March 31, 1997.* This
performance has lead to several timely articles about the real estate security
industry and your fund in particular. The most recent article was in Mutual Fund
Magazine under "Undiscovered Funds". If any investor would like a reprint of the
article, please feel free to call us at 1-800-578-4301. Finally, the Fund paid
out $0.3380 per share in dividends and $1.5303 per share in capital gains over
the 12 month period. We anticipate continuing to pay quarterly dividends in 1997
with any capital gains being paid in December 1997 and March 1998.
* Ranked 1st out of 50 real estate funds based on total return for the 52 week
period ending March 31, 1997, as reported by Lipper Analytical Services, Inc.
Past performance is no guarantee of future results. During the period covered by
the rankings, the Fund's Advisor waived its fee and reimbursed a portion of the
Fund's expenses, which increased the stated return of the Fund.
<PAGE>
Last year's performance was a result of many factors. As a whole, the real
estate industry continued to recover from the overbuilding of the late eighties
and early nineties. As oversupplies dwindled, rents began to rise which led to
increased earnings for most REITs. Inflation continued to remain moderate and
interest rates remained stable with only a small increase occurring late in the
time period. This environment led Wall Street to be receptive to REIT's need for
capital and fueled their continued growth. The Fund was in a good position to
take advantage of this environment as it was generally liquid due to increasing
asset size. This liquidity allowed the Fund to invest as opportunities presented
themselves. The Fund's modest size also allowed it to buy or sell significant
positions in various REITs without impacting the underlying securities price.
Finally, we believe that the management's approach of investing in a diversified
portfolio of real estate oriented securities that meet our requirements for
quality, value and opportunity rewarded us well throughout the period. To
provide you some further understanding on your Fund's investments and
philosophy, a review of our five largest holdings as of March 31, 1997 follows:
Vinland Property Trust (NASDAQ, Symbol: VIPTS, Yield: 0.0%): This overlooked
apartment REIT specializes in older apartments in the Florida market place.
These type of properties sell at much lower prices than their more luxurious
brethren and can be quit profitable. GrandView has owned this REIT from the
beginning and it has rewarded shareholders well. The priced has doubled since
July 1995. This REIT currently isn't required to pay out cash flow due to
previous losses and hence is retaining capital to grow the asset base.
Management also owns a large stake in the REIT and has many reasons to continue
to grow shareholder value.
MGI Properties (NYSE, Symbol: MGI, Yield: 5.1%): This is an old line establish
REIT with a diversified portfolio centered around office and industrial
properties in the northeast. The REIT's balance sheet is a model for other REITs
in that it is only modestly leveraged, not overly cluttered with complicated
business arrangements such joint ventures, minority interests and preferred
stock. Along with a conservative dividend policy, MGI is in a strong position to
continue to grow.
Angeles Participating Mortgage (ASE, Symbol APT, Yield: 0.0%): This is a
GrandView favorite as it was an original purchase in July of 1995 at $0.50 and
closed on March 31, 1997 at $2.875. This former REIT shell is now controlled by
one of the most successful REIT management teams of the last few years, Starwood
Capital and Barry Sternlicht. The company has been partially recapitalized by
the new management team to pursue mezzanine lending opportunities in the real
estate world. This type of lending carries a higher level of risk but if done
properly, can be quite profitable. With APT's previous tax losses, this REIT
will be able to shield much of these profits from dividend requirements and grow
the asset base. Finally, management owns most of the stock of the company and
hence has the most to gain in increasing shareholder value.
Royale Investments (NASDAQ, Symbol: RLIN, Yield: 10.0%): Royale is another
generally overlooked REIT that owns several stand alone grocery stores
throughout the upper midwest. Being modest in size and appropriately leveraged,
it will be difficult for Royale to sustain large scale asset growth. However,
Royal does offer an attractive yield of 10% with only moderate risk. In
addition, this REIT could also be a possible player in the merger and
acquisition world of REITs.
Burnham Pacific (NYSE, Symbol BPP, Yield: 7.8%): This California based retail
REIT was one of the first REITs to cut its dividend in the nineties. Facing
increasing cash flow needs and wanting to grow, a new management team came in
and cut the dividend and refocused the REIT on West Coast Retail. At the time,
the stock took a nose dive, but it was a correct decision. Now with a secure and
relatively conservative dividend policy, the company is on a growth cycle. In
addition, with the bulk of the company's assets in California, it is a good way
for GrandView to participate in the improving California economy.
<PAGE>
Finally, since the last 12 months have been so good for the security class and
your investment in particular, we are asked what the future holds and what
should an investor expect going forward. This reminds us of the "What have you
done for us lately?" question. First, it is impossible to predict the future but
we can make some general observations. With minor exception, the real estate
recovery is continuing. Supply and demand pressures are still on the demand
side, which should be bullish for rents and REIT earnings. Next, the overall
economy of the country continues to display growth with low to moderate
inflation. These have historically been characteristics that are kind to
commercial real estate. Third, many large private holders of real estate such as
pension funds and other institutional investors want to securitize their real
estate holdings. This should mean that the REIT industry should continue to grow
in size. With this expected growth, we think an area of exceptional opportunity
continues to be the overlooked, out of favor and lesser researched REITs.
Negatives include further interest rate increases by the Federal Reserve and
historically high market valuations for individual REITs. Factoring all this
together, it is our opinion, that if interest rates remain moderate, the overall
REIT market should return investors low to mid teen type annual total returns
over a prolonged investment period. It is the goal of the GrandView Realty
Growth Fund to provide investors superior returns to the general REIT market.
As always, we thank you for your support and look forward to the future. Should
you have any questions or desire additional information, please feel free to
contact the Fund Administrator at 1-800-525-3863, or the offices of GrandView
Advisers at 1-800-578-4301.
Winsor H. Aylesworth
President
GrandView Advisers, Inc.
<PAGE>
GrandView Realty Growth Fund
Performance Update - $10,000 Investment
For the period from July 3, 1995 (commencement of operations) to
March 31, 1997
GrandView Realty S&P 500 Dow Jones GrandView
Growth Fund Index Utility Index REIT Index
03-Jul-95 9,550.00 10,000.00 10,000.00 10,000.00
30-Sep-95 9,383.00 10,748.00 10,722.00 10,463.00
31-Dec-95 9,513.00 11,395.00 11,451.00 10,935.00
31-Mar-96 10,095.00 12,007.00 10,963.00 11,147.00
30-Jun-96 10,825.00 12,545.00 11,503.00 11,636.00
30-Sep-96 11,957.00 12,933.00 11,491.00 12,343.00
31-Dec-96 13,358.00 14,011.00 12,488.00 14,481.00
31-Mar-97 14,649.00 14,387.00 11,890.00 14,447.00
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 investme
Annualized Total Return
- ---------------------------------------------------------------------------
Since Inception One Year
- ---------------------------------------------------------------------------
No Sales Load 27.78% 45.12%
- ---------------------------------------------------------------------------
Maximum 4.5% Sales Load 24.45% 38.59%
- ---------------------------------------------------------------------------
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, 1997, the GrandView Realty Growth Fund would have grown to $14,649
- - total investment return of 46.49% since July 3, 1995. Without the deduction of
the 4.5% maximum sales load, the GrandView Realty Growth Fund would have grown
to $15,219 - total investment return of 52.19% since July 3, 1995.
At March 31, 1997, a similar investment in the S&P 500 Index would have grown to
$14,387 - total investment return of 43.87%; the Dow Jones Utility Index would
have grown to $11,890 - total investment return of 18.90%; the GrandView REIT
Index would have grown to $ 14,447 - total investment return of 44.47% 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 REALTY GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.08%
Real Estate Investment Trusts
(a)American Industrial Property REIT 12,000 $31,500
American Real Estate Investment Corporation 300 3,000
(a)Angeles Participating Mortgage Trust 20,400 58,650
Asset Investors Corporation 5,000 16,250
Avalon Properties, Inc. 700 19,250
(a)BRT Realty Trust 5,600 38,500
Bay Apartment Communities, Inc. 500 17,938
Bedford Property Investors, Inc. 1,500 29,625
Bradley Real Estate, Inc. 2,400 45,900
Brandywine Realty Trust 800 16,200
Burnham Pacific Properties, Inc. 3,800 48,450
(a)California Real Estate Investment Trust 5,300 26,500
Crescent Real Estate Equities Company 600 16,050
Dames & Moore, Inc. 1,200 15,600
(a)EQK Realty Investors 1 5,000 7,500
Eastgroup Properties 1,100 30,388
Evans Withycombe Residential, Inc. 800 16,500
FAC Realty Inc. 6,000 34,500
First Union Real Estate Investments 1,400 18,725
Gables Residential Trust 1,400 35,700
Health and Retirement Property Trust 1,250 22,500
Horizon Group, Inc. 100 1,295
Humphrey Hospitality Trust, Inc. 4,200 42,525
JDN Realty Corporation 1,100 29,837
JP Realty, Inc. 600 15,900
(a)Liberte Investors, Inc. 10,500 42,000
MGI Properties, Inc. 3,000 63,750
Merry Land & Investment Company, Inc. 400 8,200
National Income Realty Trust 1,200 18,300
Oasis Residential, Inc. 500 11,150
Pacific Gulf Properties, Inc. 600 13,050
Patriot American Hospitality, Inc. 1,100 26,675
Post Properties, Inc. 400 15,250
(a)Resort Income Investors, Inc. 60,000 16,200
Royale Investments, Inc. 11,600 58,000
Sizeler Property Investors, Inc. 1,500 15,562
Spieker Properties, Inc. 900 35,100
Starwood Lodging Trust 300 11,700
Summit Properties, Inc. 1,000 20,250
TIS Mortgage Investment Company 26,600 29,925
USP Real Estate Investment Trust 3,000 13,500
(a)Vinland Property Trust 7,000 73,500
Vornado Realty Trust 200 13,350
--- ------
Total Common Stocks (Cost $1,033,639) 1,124,245
---------
(Continued)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997
- ------------------------------------------------------------------------------------------------
Principal Value
Amount (note 1)
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (b) - 9.68%
Wachovia Bank $112,089 $112,089
6.50%, due April 1, 1997
(Cost $112,089)
Total Value of Investments (Cost $1,145,728 (c)) 106.76%$ 1,236,334
Liabilities In Excess of Other Assets (6.76)% (78,311)
----- ----------
Net Assets 100.00% $1,158,023
====== ==========
(a) Non-income producing investment.
(b) The repurchase agreement is fully collateralized by U. S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other funds administered by The Nottingham Company.
(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 $104,160
Unrealized depreciation (13,554)
--------
Net unrealized appreciation 90,606
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
ASSETS
Investments, at value (cost $1,145,728) $1,236,334
Cash 13,195
Income receivable 5,900
Prepaid expenses 1,773
Deferred organization expenses, net (note 4) 17,695
Other assets 50
----------
Total assets 1,274,947
----------
LIABILITIES
Accrued expenses 5,170
Payable for investment purchases 109,620
Due to investment advisor 2,134
----------
Total liabilities 116,924
----------
NET ASSETS
(applicable to 91,277 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $1,158,023
==========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($1,158,023 \ 91,277 shares) $12.69
==========
MAXIMUM OFFERING PRICE PER SHARE
(100 \ 95.5 of $12.69) $13.29
==========
NET ASSETS CONSIST OF
Paid-in capital $1,067,417
Net unrealized appreciation on investments 90,606
----------
$1,158,023
==========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENT OF OPERATIONS
Year ended March 31, 1997
INVESTMENT INCOME
Income
Dividends $24,688
Interest 3,023
--------
Total income 27,711
--------
Expenses
Investment advisory fees (note 2) 5,537
Fund administration fees (note 2) 1,661
Distribution fees (note 3) 1,384
Custody fees 6,150
Registration and filing administration fees (note 2) 1,694
Fund accounting fees (note 2) 9,300
Audit fees 5,480
Legal fees 2,532
Securities pricing fees 2,633
Shareholder recordkeeping fees 242
Shareholder servicing expenses 2,230
Registration and filing expenses 5,020
Printing expenses 256
Amortization of deferred organization expenses (note 4) 5,442
Trustee fees and meeting expenses 175
Other operating expenses 3,358
--------
Total expenses 53,094
--------
Less:
Expense reimbursements (note 2) (35,736)
Investment advisory fees waived (note 2) (5,537)
Distribution fees waived (note 3) (1,384)
--------
Net expenses 10,437
--------
Net investment income 17,274
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 125,083
Increase in unrealized appreciation on investments 86,406
--------
Net realized and unrealized gain on investments 211,489
--------
Net increase in net assets resulting from operations $228,763
========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
For the
period from
July 3, 1995
(commencement
Year ended of operations) to
March 31, March 31,
1997 1996
- ------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income $17,274 $2,414
Net realized gain from investment transactions 125,083 3,462
Increase in unrealized appreciation on investments 86,406 4,200
------ -----
Net increase in net assets resulting from operations 228,763 10,076
------- ------
Distributions to shareholders from
Net investment income (17,274) (2,414)
Net realized gain from investment transactions (125,083) (3,462)
Tax return of capital (948) (851)
---- ----
Decrease in net assets resulting from distributions (143,305) (6,727)
-------- ------
Capital share transactions
Increase in net assets resulting from capital share transactions 890,543 178,673
------- -------
Total increase in net assets 976,001 182,022
NET ASSETS
Beginning of period 182,022 0
------- -------
End of period $1,158,023 $182,022
========= ========
(a) A summary of capital share activity follows:
------------------------------------------------------------------
For the period from July 3, 1995
Year ended (commencement of operations)
March 31, 1997 to March 31, 1996
------------------------------------------------------------------
Shares Value Shares Value
--------- ---------- --------- --------
Shares sold 120,300 $1,552,510 18,289 $181,279
Shares issued for reinvestment
of distributions 9,716 123,136 526 5,247
----- ------- --- -----
130,016 1,675,646 18,815 186,526
Shares redeemed (56,779) (785,103) (775) (7,853)
------- -------- ---- ------
Net increase 73,237 $890,543 18,040 $178,673
====== ======== ====== ========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
GRANDVIEW REALTY GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
- ---------------------------------------------------------------------------------------------------
For the
period from
July 3, 1995
(commencement
Year ended of operations)
March 31, to March 31,
1997 1996
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.09 $10.00
Income from investment operations
Net investment income 0.33 0.20
Net realized and unrealized gain on investments 4.14 0.36
---- ----
Total from investment operations 4.47 0.56
---- ----
Distributions to shareholders from
Net investment income (0.33) (0.20)
Net realized gain from investment transactions (1.53) (0.22)
Tax return of capital (0.01) (0.05)
----- -----
Total distributions (1.87) (0.47)
----- -----
Net asset value, end of period $12.69 $10.09
====== ======
Total return 45.12 % 5.70 % (a)
===== ====
Ratios/supplemental data
Net assets, end of period $1,158,023 $182,022
========== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 9.59 % 31.34 % (b)
After expense reimbursements and waived fees 1.89 % 2.00 % (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (4.58)% (25.55)% (b)
After expense reimbursements and waived fees 3.12 % 3.62 % (b)
Portfolio turnover rate 197.90 % 44.44 %
Average broker commission per share $0.04
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
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-ended investment company, was organized on February 6, 1995
as a Massachusetts Business Trust and is registered under the Investment Company
Act of 1940, as amended. 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 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 - At March 31, 1997, the Fund was 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 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 is 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
quarterly, payable in March, June, September and December, 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. Distributions to shareholders are recorded on the ex-dividend date.
The Fund may make a supplemental distribution subsequent to the end of its
fiscal year ending March 31.
E. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the
(Continued)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
F. Repurchase Agreements - The Fund may acquire U. S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the
Federal Reserve or a registered Government Securities dealer) for delivery
on an agreed upon future date. The repurchase price exceeds the purchase
price by an amount which reflects an agreed upon market interest rate
earned by the Fund effective for the period of time during which the
repurchase agreement is in effect. Delivery pursuant to the resale
typically will occur within one to five days of the purchase. The Fund will
not enter into a repurchase agreement which will cause more than 10% of its
net assets to be invested in repurchase agreements which extend beyond
seven days. In the event of the bankruptcy of the other party to a
repurchase agreement, the Fund could experience delays in recovering its
cash or the securities loaned. To the extent that in the interim the value
of the securities purchased may have declined, the Fund could experience a
loss. In all cases, the creditworthiness of the other party to a
transaction is reviewed and found satisfactory by the Advisor. Repurchase
agreements are, in effect, loans of Fund assets. The Fund will not engage
in reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
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 $5,537 ($0.13 per share) and has voluntarily reimbursed $35,736 of
the Fund's operating expenses for the year ended March 31, 1997.
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. The
Administrator also receives a monthly fee of $800 for accounting and
recordkeeping services. 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.
(Continued)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
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 year ended
March 31, 1997, the Distributor retained no sales charges.
Certain Trustees and officers of the Trust are also officers of the Advisor, the
Distributor or the Administrator.
At March 31, 1997, the Advisor, its officers, and Trustees of the Fund held
9,986 shares or 10.94% 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.
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.
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.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $1,847,665 and $1,050,985, respectively, for the year ended March 31,
1997.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions from net
realized gains from investment transactions that represent long-term capital
gain to its shareholders. Of the total $1.53 per share of such distributions for
the year ended March 31, 1997, $.11 per share represents long-term capital gains
and $1.42 per share represents short-term capital gains. Shareholders should
consult a tax advisor on how to report distributions for state and local income
tax purposes.
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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, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and financial highlights for the year then ended and 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 e xpress an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits 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 examinin g, 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, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and sign ificant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
GrandView Realty Growth Fund as of March 31, 1997, the results of its operations
for the year then ended, and the changes in its net assets and financial
highlights for the year then ended and for the period from July 3, 1995
(commencement of operations) to March 31, 1996 in conformity with generally
accepted accounting principles.
Richmond, Virginia
April 25, 1997
