As filed with the Securities and Exchange Commission on October 31, 1997
Securities Act File No. 33-89628
Investment Company Act File No. 811-8978
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
POST-EFFECTIVE AMENDMENT NO. 4
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 5
GRANDVIEW INVESTMENT TRUST
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone (919) 972-9922
AGENT FOR SERVICE:
C. Frank Watson, III, Secretary
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
With copies to:
M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612
It is proposed that this filing will become effective:
|_| Immediately upon filing |_| on , 1997 pursuant
to Rule 485(b), or to Rule 485(b), or
|X| 60 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(1), to Rule 485(a)(1), or
|_| 75 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(2), to Rule 485(a)(2), or
This filing includes the Statement of Additional Information of The GrandView
Funds, which are incorporated herein by reference to Post-Effective Amendment
No. 3 to the Registrant's Registration Statement on Form N-1A filed with the
Commission on July 25, 1997.
<PAGE>
PROSPECTUS
THE GRANDVIEW FUNDS
Series of the GrandViewSM Investment Trust
GrandView Investment Trust (the "Trust") is an open-end, registered management
investment company offering two mutual funds described in this Prospectus:
GrandView S&P(R) REIT Index Fund and GrandView Realty Growth Fund (the "S&P REIT
Index Fund" and the "Realty Growth Fund" and together "Funds"). The GrandView
Realty Growth 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 active or passive account management and employ different policies to
achieve their objectives:
GrandView S&P(R) REIT Index Fund (formerly called the GrandView REIT Index Fund)
seeks to provide investment results corresponding to the performance of the
S&P(R) REIT Index (the "Index") by investing in the stocks included in the
Index. 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.
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 July 25, 1997, as supplemented January
1, 1998, has been filed with the Securities and Exchange Commission (the "SEC")
and is available upon request and without charge by writing the Funds or by
calling (800) 773-3863. The Statement of Additional Information is incorporated
into this Prospectus by reference. The SEC also maintains an Internet Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Funds.
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.
January 1, 1998
<PAGE>
TABLE OF CONTENTS
FEE TABLE.................................................................. 3
FINANCIAL HIGHLIGHTS....................................................... 4
ADVANTAGES OF INVESTING.................................................... 6
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS........................... 6
MANAGEMENT OF THE FUNDS.................................................... 11
INFORMATION ABOUT FUND SHARES.............................................. 13
How to Purchase Shares............................................ 13
Net Asset Value and Pricing of Orders............................. 17
How to Exchange Shares............................................ 17
How to Redeem Shares.............................................. 18
Dividends and Distributions....................................... 19
Tax Matters....................................................... 20
Performance Information........................................... 21
Description of Shares and Voting Rights........................... 21
APPENDIX A: DESCRIPTION OF BOND RATINGS................................... 23
APPENDIX B: CERTAIN INVESTMENT PRACTICES.................................. 26
<PAGE>
FEE TABLE
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.
S&P
REIT Realty
Index Growth
Fund5 Fund
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge on Purchases1 3.00% 4.50%
(as a percentage of offering price)
Maximum Sales Charge on
Reinvestment of Dividends None None
Deferred Sales Charge None None
Redemption Fee* 1.00% 2 None
(as a percentage of amount redeemed, if applicable)
Exchange Fee None None
* The Funds in their discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Funds $7.00 per transaction
for wiring redemption proceeds.
ANNUAL OPERATING EXPENSES:
(after fee waivers and expense reimbursements)
(as a percentage of average net assets)
Management Fees3 0.00% 0.00%
12b-1 Fees4 0.25% 0.25%
Other Expenses3 0.80% 1.75%
----- -----
Total Operating Expenses3 1.05% 2.00%
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 fiscal year ended March 31, 1997,
which, after fee waivers and expense reimbursements, were 1.04% and 1.89%
of average net assets of the GrandView S&P REIT Index and Realty Growth
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" for the fiscal year ended March 31, 1997 would have been 0.35%
and 7.59%, respectively, for the S&P REIT Index Fund and 1.00% and 9.59%,
respectively, for the Realty Growth 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, 1998, 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.
5 The investment objective of the S&P REIT Index Fund was changed, effective
January 1, 1998, to its current investment objective. See "Investment
Objectives, Policies and Risk Factors." From the inception of the Fund
until that date, the Fund had sought to provide investment results that
exhibited a high correlation and resembled those of the National
Association of Real Estate Investment Trust's Total Return Index. The Fund
had sought this investment objective by investing in the equity securities
that composed The GrandView REIT Index, an index developed and maintained
by the Adviser. Effective January 1, 1998, the focus of the Fund was
shifted to the S&P REIT Index.
Example: You would pay the following fees and expenses (including the maximum
initial sales charge) 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:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Fund 1 Year 3 Years 5 Years 10 Years
---- ------ ------- ------- --------
S&P REIT Index Fund $40 $ 62 $ 86 $154
Realty Growth Fund $64 $105 $148 $267
</TABLE>
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, 12b-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 fiscal year ended
March 31, 1997, and for the period from July 3, 1995 (commencement of
operations) to March 31, 1996, has been derived from financial statements
audited by KPMG Peat Marwick LLP, independent auditors, whose reports covering
such periods 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) 773-3863. 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. For information on a
change in the investment objective of the S&P REIT Index Fund, effective January
1, 1998, see footnote 5 to the Fee Table.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
GRANDVIEW S&P(R) REIT INDEX FUND
(For a Share Outstanding Throughout the Period)
Year Ended Period Ended
March 31, 1997 March 31, 1996(a)
Net asset value, beginning of period $10.21 $10.00
Income from investment operations
Net investment income 0.50 0.33
Net realized and unrealized gain on investments 2.38 0.32
---- ----
Total from investment operations 2.88 0.65
---- ----
Distributions to shareholders from
Net investment income (0.50) (0.33)
Tax return of capital (0.05) 0.00
Net realized gain from investment transactions (0.01) (0.11)
------ ------
Total distributions (0.56) (0.44)
------ ------
Net asset value, end of period $12.53 $10.21
====== ======
Total return (b) 28.85% 6.40%
====== =====
Ratios/supplemental data
Net assets, end of period $1,467,098 $252,793
========== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 7.59%
After expense reimbursements and waived fees 1.04% 20.63%(c)
1.05%(c)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (2.16)% (13.66)%(c)
After expense reimbursements and waived fees 4.38% 5.86%(c)
Portfolio turnover rate 23.38% 47.46%
Average commission rate paid (d) $0.0698
GRANDVIEW REALTY GROWTH FUND
(For a Share Outstanding Throughout the Period)
Year Ended Period Ended
March 31, 1997 March 31, 1996(a)
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 (b) 45.12% 5.70%
====== =====
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%(c)
After expense reimbursements and waived fees 1.89% 2.00%(c)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (4.58)% (25.55)%(c)
After expense reimbursements and waived fees 3.12% 3.62% (c)
Portfolio turnover rate 197.90% 44.44%
Average commission rate paid (d) $0.0367
</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.
(c) Annualized.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure was not required for fiscal years of the Funds prior to March
31, 1997.
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.
However, investment in the Funds also involves risks, and investment in either
Fund, or even in both Funds, should not be viewed as a complete investment
program. See "Investment Objectives, Policies and Risk Factors--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
active or passive account management 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 S&P REIT Index Fund are invested
primarily in equity securities of REITs included in the S&P(R) REIT Index, while
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. See "Risks
of Investing -Real Estate Investment Trusts" for a description of the various
types of REITs. 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
Realty Growth Fund 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 Realty Growth Fund may
invest include bonds, notes and other short-term debt obligations. The
mortgage-backed securities in which the Realty Growth Fund may invest include
mortgage pass-through certificates, real estate mortgage investment conduit
("REMIC") certificates and collateralized mortgage obligations ("CMOs").
The Realty Growth Fund may also invest up to 35% of its total assets in
securities of issuers which are or are affiliated with companies whose products
or services are related to the real estate industry like building supplies,
mortgage servicing or the provision of utility or transportation services. In
addition, the Realty Growth Fund may, from time to time, invest in the
securities of companies unrelated to the real estate industry whose real estate
assets are substantial relative to the price of the companies' securities or
whose securities the Adviser believes to be undervalued or to provide income or
the opportunity for capital appreciation. In pursuit of its objectives, either
Fund may employ various management techniques, certain of which may be used in
an attempt to hedge risks associated with the Fund's investments. See "Certain
Other Investment Practices."
For temporary defensive purposes, the Realty Growth Fund may invest up to 100%
of its total assets in short-term investments, as described below under "Other
Eligible Investments." The 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 S&P 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.
S&P REIT Index Fund
The investment objective of the S&P REIT Index Fund is to provide investment
results corresponding to the performance of the S&P REIT Index by investing in
the stocks included in the Index.
The Fund attempts to duplicate the investment results of the S&P(R) Real Estate
Investment Trust Composite Price Index (the "S&P REIT Index" or the "Index").
The Index is made up of approximately 100 stocks which constitute a
representative sample of all publicly-traded REITs. To be included in the Index,
a REIT must be traded on a major U.S. stock exchange and must have a total
market capitalization of at least $100 million. As of September 30, 1997, 100
REITs were included in the Index. The Index is rebalanced every calendar quarter
as well as each time that a REIT is removed from the Index because of corporate
activity such as a merger, acquisition, leveraged buyout, bankruptcy, IRS
removal of REIT status, fundamental change in business, or a change in shares
outstanding.
The S&P REIT Index Fund is not sponsored, endorsed, sold, or promoted by
Standard & Poor's Corporation ("S&P"). S&P makes no representation or warranty,
express or implied, to the purchasers of the Fund or any member of the public
regarding the advisability of investing in securities generally, or in the Fund
particularly, or the ability of the Index to track the market performance of
real estate investment trusts. S&P's only relationship to the Fund is the
licensing of certain trademarks and trade names of S&P and of the S&P REIT
Index, which is determined, composed, and calculated by S&P without regard to
the Fund. S&P has no obligation to take the needs of the Fund or the purchasers
of the Fund into consideration in determining, composing, or calculating the
REIT Index. S&P is not responsible for and has not participated in the
determination of the prices and amount of the shares of the Fund or the timing
of the issuance or sale of the shares of the Fund or in the determination or
calculation of the equation by which the shares of the Fund are to be converted
into cash. S&P has no obligation or liability in connection with the
administration, marketing, or trading of the Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P REIT
INDEX OR ANY DATA INCLUDED THEREIN, AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE S&P REIT INDEX FUND, PURCHASERS OF
THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P REIT INDEX OR
ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P REIT INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The S&P REIT Index Fund attempts to achieve its investment objective by
investing primarily in the stocks included in the S&P REIT 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 stocks held in its portfolio
to the weightings of the stocks in the Index. Thus, the proportion of the Fund's
assets invested in each stock held in the Fund's portfolio will generally be
substantially similar to the proportion of the Index represented by the stock.
For example, if a stock represents 2% of the value of the Index, the Fund
invests approximately 2% of its assets in the stock. The Adviser seeks to
maintain a correlation of at least 95% between the composition of the Index and
the Fund's portfolio. The Adviser monitors the composition of the Index and
makes adjustments to the Fund's portfolio as necessary in order to correlate
with the Index.
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 95% or better. A correlation
of 100% would indicate a perfect correlation. If a correlation of 95% 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 S&P 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.
For information on a change in the investment objective of the S&P REIT Index
Fund, effective January 1, 1998, see footnote 5 to the Fee Table.
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 the real estate
industry which it believes exhibit above average growth prospects. Such
securities may include securities of real estate industry companies or REITs
that are large, well capitalized, and in favor; real estate industry companies
or REITs that are out of favor and/or the Adviser believes are undervalued; and
real estate industry companies or REITs that the Adviser believes have
significant "turnaround" potential. In determining whether a security meets any
of these requirements, 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.
Other Eligible Investments
Debt Securities of Real Estate Industry Companies. The Realty Growth Fund
may invest in debt securities of real estate industry companies, but the Fund
may not invest more than 25% of its assets in debt securities rated lower than
Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Services ("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-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 Realty
Growth Fund will not invest in debt securities rated lower than Caa by Moody's
or CCC by Standard & Poor's or Fitch or equivalent unrated securities. Debt
securities rated Caa by Moody's or CCC by Standard & Poor's or Fitch, and
equivalent unrated securities, are speculative and may be in default. 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 Realty Growth 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. Each Fund may invest in short-term investments
consisting of corporate commercial paper and other short-term commercial
obligations, in each case rated or issued by companies with similar securities
outstanding that are rated Prime-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 to the extent applicable to each Fund.
Some of the investments and investment practices described in Appendix B are
limited to the Realty Growth Fund and will not be engaged in by the S&P REIT
Index Fund. 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
either Fund will achieve its investment objectives. An investment in either
Fund, and even an investment in both 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.
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.
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 to the extent
applicable to each Fund. These investments and investment practices involve
risks, certain of which are described in Appendix B.
Realty Growth Fund: Non-Diversified Status
The Realty Growth Fund is "non-diversified" for purposes of the Investment
Company Act of 1940. As a non-diversified mutual fund, this 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, this Fund, like the S&P REIT Index 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
S&P REIT Index Fund and the Realty Growth Fund will not exceed 50% and 200%,
respectively, in the coming year. Changes in the portfolio of the S&P REIT Index
Fund will be effected primarily to accommodate cash flows into and out of the
Fund and changes in the S&P 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. The Adviser is also responsible for the selection of
broker-dealers through which the Funds execute portfolio transactions, subject
to brokerage policies established by the Board of Trustees, and it provides
certain executive personnel to the Funds.
Winsor H. Aylesworth, Lucille C. Carlson, and David F. Wolf are all directors,
officers, and shareholders of the Adviser. Winsor H. Aylesworth and Lucille C.
Carlson 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, Director, and the controlling
shareholder 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, Executive Vice President and 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, Executive Vice President and 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 control 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:
S&P REIT Index Fund 0.35%
Realty Growth Fund 1.00%
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:
S&P REIT Index Fund 1.05%
Realty Growth Fund 2.00%
This agreement applies for the fiscal year ending March 31, 1998, 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, 1997. The total
fees waived amounted to $2,126 and $5,537, respectively, and expenses reimbursed
amounted to $37,598 and $35,736, respectively, for the S&P REIT Index Fund and
the Realty Growth Fund, respectively.
Administrator
The Nottingham Company (the "Administrator") serves as the administrator and
fund accounting 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 Funds; 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 S&P 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 the Realty
Growth 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
shareholder recordkeeping, securities pricing and blue sky administration
services, a fee from each Fund equal to $9.00 per shareholder per year, $0.15
per equity holding per pricing day (with slightly higher fees per debt and asset
or mortgage-backed securities) (waived for the S&P REIT Index Fund) and $150 per
year for each state in which the Trust's shares are registered or qualified. The
Administrator also charges a minimum fund accounting fee of $1,500 per Fund per
month.
The Administrator was established as a North Carolina corporation in 1988. Frank
P. Meadows, III is the managing director and controlling shareholder of the
Administrator.
Transfer Agent
NC Shareholder Services, LLC (the "Transfer Agent") serves as the Funds'
transfer, dividend paying, and shareholder servicing agent. The Transfer Agent,
subject to the authority of the Board of Trustees, provides transfer agency
services pursuant to an agreement with the Administrator, which has been
approved by the Trust. The Transfer Agent maintains the records of each
shareholder's account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of the Funds' shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions. The Transfer Agent is compensated for its services by the
Administrator and not directly by the Funds.
The Transfer Agent was established as a North Carolina limited liability company
in 1997. John D. Marriott, Jr., is the firm's controlling member.
Custodian
The custodian of the assets of each of the Funds is First Union National Bank of
North Carolina (the "Custodian"). Securities of the Funds may also be held by a
sub-custodian bank approved by the Trustees.
Distributor
Capital Investment Group, Inc. (the "Distributor") 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 Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-l under the Investment Company Act of 1940. Under the
Distribution Plan, the Trustees may authorize the periodic payment of up to
0.25% annually of each Fund's average daily net asset value for each year
elapsed subsequent to adoption of the Plan. Such expenditures paid as service
fees to any person who sells shares of the Funds may not exceed 0.25% of the
shares' average annual net asset value.
Payments under the Distribution Plan will be made to the Distributor and others
to finance activities primarily intended to result in the sale of shares of the
Funds and/or the servicing of shareholder accounts. The Distribution Plan may
not be amended to increase materially the amount that may be paid pursuant to
the Distribution Plan from the assets of a particular Fund without the approval
of the shareholders of that Fund. The continuation of the Distribution Plan must
be considered by the Board of Trustees annually. For the fiscal year ended March
31, 1997, the Funds expended no amounts under the Distribution Plan.
David F. Wolf, a registered representative of the Funds' Distributor, may
receive brokerage commissions from the Distributor, and may receive payments
under the Distribution Plan, in connection with sales of shares of the Funds
and/or the servicing of shareholder accounts. Mr. Wolf is a Vice President of
the Trust and is an Executive Vice President and a Director of the Adviser.
Expenses
In addition to amounts payable as described above, 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. Each Fund is also liable
for any nonrecurring expenses as may arise, such as litigation to which a Fund
may be a party. Each Fund may be obligated to indemnify the Trustees and
officers of the Trust with respect to such litigation. 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, 1998.
INFORMATION ABOUT FUND SHARES
How to Purchase Shares
An investor may purchase shares of each 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. 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. The Funds may, in the Adviser's sole discretion, accept accounts or
investments with less than the stated minimum investment.
Purchases by Mail. Investors may purchase shares of a 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
107 North Washington Street
P.O. Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases by Wire. Investors may also purchase shares of a Fund by bank
wire. Prior to making an initial or additional investment by wire, an investor
should telephone the Fund at 1-800-773-3863. 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:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA No. 053000219
FBO:
GrandView S&P REIT Index Fund
Account No. 2000000861865
or
GrandView Realty Growth Fund
Account No. 2000000861784
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 a 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 Fund at the address
shown on the back cover of this prospectus.
Public Offering Price. The public offering price per share of a Fund is the
net asset value per share next computed after receipt of a purchase order, plus
a sales charge as follows:
S&P REIT Index Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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
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% 0.75%
</TABLE>
A redemption fee of 1.00% is imposed in the event of a redemption of shares of
the S&P REIT Index Fund within six months after purchase, and of 0.50% in the
event of a redemption of shares of the S&P 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. Pursuant to the terms of the
Distribution Agreement, the sales charge payable to the Distributor and the
dealer allowance may be suspended, terminated, or amended. Dealers who receive
90% or more of the sales charge may be deemed to be "underwriters" under the
federal securities laws.
The dealer allowance schedule above applies to all dealers who have agreements
with the Distributor. The Distributor, at its expense, may also provide
additional compensation to dealers in connection with sales of shares of the
Funds. Compensation may include financial assistance to dealers in connection
with conferences, sales, or training programs for their employees; seminars for
the public; advertising campaigns regarding the Funds; and/or other
dealer-sponsored special events. In some instances, this compensation may be
made available only to certain dealers whose representatives have sold or are
expected to sell a significant amount of such shares. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to locations within or outside of the United States for meetings or seminars of
a business nature. Dealers may not use sales of the Funds' shares to qualify for
this compensation to the extent such may be prohibited by the laws of any state
or any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. None of the aforementioned compensation is paid for by the Funds
or their shareholders.
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,
the Transfer Agent, 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 broker or agent. However, if purchased through
various so-called "Fund Supermarkets" using the services of a broker or agent,
investors may be subject to various fees and charges. 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 a 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 may 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." If authorized by the Board of
Trustees, 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 Glass-Steagall 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 a 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.
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 a 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.
The Funds may enter into agreements with one or more brokers, including discount
brokers and other brokers associated with investment programs, including mutual
fund "supermarkets," pursuant to which such brokers may be authorized to accept
on the Funds' behalf purchase and redemption orders that are in "good form."
Such brokers may be authorized to designate other intermediaries to accept
purchase and redemption orders on the Funds' behalf. Under such circumstances,
the Funds will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Such orders will be priced at each Fund's net asset value next determined
after they are accepted by an authorized broker or the broker's designee.
How to Exchange Shares
Shares of each Fund may be exchanged for shares of the 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 original Fund, such as an exchange of shares of the S&P REIT Index
Fund for shares of the Realty Growth 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 S&P
REIT Index Fund at the rate which would have been applicable if the shareholder
had continued to hold shares of the S&P REIT Index Fund.
Shareholders must place exchange orders through the Funds 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 Funds. 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 the Funds may be redeemed at their net asset value next determined
after a redemption request in proper form is received by the Funds, subject to
any applicable redemption fee and possible charges for wiring redemption
proceeds. Shares may also be redeemed through a broker-dealer or bank, which may
charge a fee for its services. Any redemption proceeds may be more or less than
the original purchase price for the shares, depending on the market value of the
Funds' portfolio securities.
Redemption by Mail. A written request for redemption must be addressed to
the applicable Fund, 107 North Washington Street, P.O. Box 4365, Rocky Mount,
North Carolina 27803-0365, 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 Funds at (800) 773-3863. 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 Funds 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 Transfer
Agent 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 from the date of
purchase.
Proceeds of redemption can also be wired to a shareholder's bank ($5,000
minimum). Shares may not be redeemed by wire on days on which the shareholder's
bank is not open for business. The Funds in their discretion may choose to pass
through to redeeming shareholders any charges imposed by the Custodian for wire
redemptions. The Custodian currently charges the Funds $7.00 per transaction for
wiring redemption proceeds. If this cost is passed through to redeeming
shareholders by the Funds, the charge will be deducted automatically from a
shareholder's account by redemption of shares in the shareholder's account. A
shareholder's bank or brokerage firm may also impose a charge for processing the
wire. If wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Reinstatement Privilege. Shareholders who have redeemed shares of any Fund
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 S&P 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 Funds 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 Funds
(see back cover for address and telephone number).
Redemption Fee--S&P REIT Index Fund. Redemptions of shares of the S&P 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 S&P 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 the Realty Growth Fund, but a further
redemption of shares of the Realty Growth 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 S&P 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 $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of a
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 a 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 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 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 is for general information only. Investors should
consult their own tax advisers about their particular situations.
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, 1997, 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, 1997, 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.
Recent legislation creates additional categories of capital gains taxable at
different rates.
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.
Each Fund is required by federal law to withhold and remit to the Internal
Revenue Service 31% of the dividends, capital gain distributions, and in certain
cases, proceeds of redemptions paid to any shareholder who fails to furnish the
Funds with a correct taxpayer identification number, who under-reports dividends
or interest income, or who fails to provide certification of a tax
identification number. Instructions to exchange or transfer shares held in
established accounts will be refused until the certification has been provided.
To avoid this withholding requirement, shareholders must certify on their
Account Application, or on a separate W-9 Form supplied by the Funds, that their
taxpayer identification number is correct and that they are not currently
subject to backup withholding, or they are exempt from backup withholding. For
individuals, their taxpayer identification number is their social security
number.
Investors should consult their own tax advisers regarding the status of their
accounts under state and local laws.
Performance Information
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 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.
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.
In the interest of economy and convenience, the Funds do not issue certificates
representing Fund shares. Instead, the Funds maintain 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,
Administrator, Transfer Agent, Distributor, and Custodian; (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.
<PAGE>
APPENDIX A: DESCRIPTION OF BOND RATINGS
The following descriptions of ratings of Moody's Investors Service, Inc.,
Standard & Poor's Ratings Services 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 of bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of 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.
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 Services1
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.
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.
<PAGE>
APPENDIX B: CERTAIN INVESTMENT PRACTICES
This Appendix provides a brief description of certain securities in which the
Funds may invest and certain practices in which they may engage. Some of the
investments and investment practices described in Appendix B are limited to the
Realty Growth Fund and will not be engaged in by the S&P REIT Index Fund. For a
more complete discussion of certain of these securities and practices, see
"Investment Objectives, Policies and Risk Factors" in this Prospectus and
"Investment Policies and Restrictions" in the Statement of Additional
Information.
Mortgage-Backed Securities and Associated Risks
The Realty Growth 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"). The
Realty Growth Fund 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. The Realty Growth 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. The Realty Growth 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. The Realty Growth 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
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 the Realty Growth 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, the Realty Growth Fund may fail to recoup
fully its investment in Mortgage-Backed Securities notwithstanding any direct or
indirect governmental or agency guarantee. When the Realty Growth 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
The Realty Growth Fund may invest up to 25% of its total assets 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
Adviser. 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 Realty Growth Fund will not invest in debt securities rated lower
than Caa by Moody's or CCC by Standard & Poor's or Fitch or equivalent unrated
securities. Debt securities rated Caa by Moody's or CCC by Standard & Poor's or
Fitch, and equivalent unrated securities, are speculative and may be in default.
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 the Realty Growth Fund.
Foreign Investments
The Realty Growth Fund may invest up to 10% of its total assets 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 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 meet 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
must be 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 Fund could
experience a loss to the extent that the value of the securities lent has
increased or the value of the securities purchased has decreased in the
meantime.
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 a 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
a 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 a 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 be lower than the cost which the Fund must pay for the securities. An
increase in the percentage of a 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 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 non-hedging
options on futures (net of the amount the positions are "in the money") would
exceed 5% of the market value of the Fund's total assets. 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.
<PAGE>
THE GRANDVIEW FUNDS
Series of GrandViewSM Investment Trust
PROSPECTUS
January 1, 1998
GrandView S&P(R) REIT Index Fund
GrandView Realty Growth Fund
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-773-3863
INVESTMENT ADVISER
Grandview Advisers, Inc.
Post Office Box 164
East Glastonbury, Connecticut 06025-0164
ADMINISTRATOR & FUND ACCOUNTING AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
DIVIDEND DISBURSING & TRANSFER AGENT
NC Shareholder Services, LLC
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-773-3863
DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622
CUSTODIAN
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023
1Rates all governmental bodies having $1,000,000 or more of debt outstanding,
unless adequate information is not available.
<PAGE>
PART B
SUPPLEMENT DATED JANUARY 1, 1998 TO
STATEMENT OF ADDITIONAL INFORMATION
DATED JULY 25, 1997
GrandView S&P(R) REIT Index Fund
GrandView Realty Growth Fund
Series of
GrandViewSM Investment Trust
105 North Washington Street,
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-773-3863
The Statement of Additional Information dated July 25, 1997 of the GrandView
Investment Trust is hereby amended as follows:
1. The name of the GrandView REIT Index Fund is changed to the GrandView S&P(R)
REIT Index Fund.
2. The date of the Prospectus is January 1, 1998.
3. The second paragraph under "Investment Objectives, Policies and
Restrictions--Investment Objectives" is deleted and there is substituted in lieu
thereof the following:
"The investment objective of the S&P(R) REIT Index Fund is to provide its
investors with investment results corresponding to the performance of the S&P(R)
REIT Index by investing in the stocks included in the Index."
4. The second and third paragraphs and the GrandView REIT Index Composition
under "Investment Objectives, Policies and Restrictions--Investment Policies"
are deleted and there is substituted in lieu thereof the following:
"The investment objective of the S&P(R) REIT Index Fund is to provide investment
results corresponding to the performance of the S&P(R) REIT Index (the "Index")
by investing in the stocks included in the Index. The Fund attempts to duplicate
the investment results of the Index, which is made up of approximately 100
stocks constituting a representative sample of all publicly-traded REITs."
5. The seventh paragraph under "Performance Information" is hereby supplemented
with the following additional information:
"Each Fund may also compare its performance to the S&P(R) Real Estate Investment
Trust Composite Price Index (the "S&P REIT Index" or the "Index"), as a
comparison to the REIT market."
<PAGE>
PART C
GRANDVIEW INVESTMENT TRUST
FORM N1-A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements: Financial Highlights included in Part A for
each series of the Registrant for the latest fiscal year.
(b) Exhibits: Annual Report included in Part B for each series of the
Registrant for the latest fiscal year.
(1) (a) Declaration of Trust - Incorporated by reference; filed 2/22/95
(b) Amendment to Declaration of Trust - Incorporated by reference; filed
1/9/96
(2) By-Laws - Incorporated by reference; filed 2/22/95
(3) Not Applicable
(4) Not Applicable
(5) Investment Advisory Agreements - Incorporated by reference; filed 5/31/95
(6) Distribution Agreement - Incorporated by reference; filed 5/31/95
(7) Not Applicable
(8) Custodian Agreement - Incorporated by reference; filed 7/25/97
(9) (a) Fund Accounting, Dividend Disbursing & Transfer Agent and
Administration Agreement - Incorporated by reference; filed 5/31/95
(b) Amendment to Administration Agreement - Incorporated by reference;
filed 5/31/95
(c) Amendment to Administration Agreement - Incorporated by reference;
filed 7/25/97
(d) Amendment to Administration Agreement - Enclosed Exhibit 9
(10) (a) Opinion and consent of Counsel, Bingham, Dana & Gould, -- Incorporated
by reference; filed 5/31/95
(b) Opinion and consent of Counsel, Poyner and Spruill, LLP, --
Incorporated by reference; filed 5/30/96 and 5/29/97 with 24f-2
notices
(11) Consent of Independent Auditors, KPMG Peat Marwick LLP, -- Incorporated by
reference; filed 7/25/97
(12) Not Applicable
(13) Initial Share Purchase Agreement - Incorporated by reference; filed 5/31/95
(14) Not Applicable
(15) Distribution Plan - Incorporated by reference; filed 5/31/95
(16) Computation of Performance - Incorporated by reference; filed 7/25/97
(24) Copies of Powers of Attorney - Incorporated by reference; filed 7/25/97
ITEM 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with the Registrant.
ITEM 26. Number of Record Holders of Securities
As of October 29, 1997, the number of record holders of each class of securities
of Registrant was as follows:
Number of
Title of Class Record Holders
GrandView REIT Index Fund 73
GrandView Realty Growth Fund 201
<PAGE>
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
(a) Capital Investment Group, Inc., the Registrant's distributor, is also the
underwriter and distributor for The Chesapeake Growth Fund, The Chesapeake Fund,
The Chesapeake Core Growth Fund, Capital Value Fund, WST Growth & Income Fund,
ZSA Asset Allocation 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.
<PAGE>
ITEM 30. Location of Accounts and Records
All account books and records not normally held by First Union National Bank of
North Carolina, the Custodian to the Registrant, are held by the Registrant, in
the offices of The Nottingham Company, Fund Accountant and Administrator, NC
Shareholder Services, Transfer Agent to the Registrant, or by GrandView
Advisers, Inc., the Advisor to the Registrant.
The address of The Nottingham Company is 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 17802-0069. The address of NC
Shareholder Services is 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365. The address of GrandView Advisers, Inc. is 127
Grandview Drive, Glastonbury, Connecticut 06033. The address of First Union
National Bank of North Carolina is Two First Union Center, Charlotte, North
Carolina 28288-1151.
ITEM 31. Management Services
The substantive provisions of the Fund Accounting, Dividend Disbursing &
Transfer Agent and Administration Agreement between the Registrant and The
Nottingham Company are discussed in Part B hereof.
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.
<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(a)(ii) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 4 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 31st day of October, 1997.
GRANDVIEW INVESTMENT TRUST
By: /S/ Winsor H. Aylesworth
Winsor H. Aylesworth
President and Trustee
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 October 31, 1997.
/S/ Winsor H. Aylesworth
Winsor H. Aylesworth, President and Trustee (Principal Executive Officer)
*
Arthur Collins, Trustee
*
Richard W. Jagolta, Trustee
*
Raymond H. Weaving, Trustee
*
J. Hope Reese, Treasurer (Principal Financial Officer and
Principal Accounting Officer)
* By: /S/ Winsor H. Aylesworth
Winsor H. Aylesworth
Attorney-in-Fact Dated: October 31, 1997
<PAGE>
GRANDVIEW INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 9 Amended Administration Agreement
EXHIBIT 9
TRANSFER AGENT SERVICES AGREEMENT
THIS IS A TRANSFER AGENT SERVICES AGREEMENT (herein "Agreement"), made
effective as of the 1st day of September, 1997, between THE NOTTINGHAM
MANAGEMENT COMPANY, a North Carolina corporation doing business as The
Nottingham Company (herein "TNC") and NORTH CAROLINA SHAREHOLDER SERVICES, LLC,
a North Carolina limited liability company (herein "NCSS").
RECITALS
A. TNC has entered into six (6) agreements to provide certain
administrative services for investment trusts that include, but are not limited
to, transfer agent services, and anticipates entering into similar agreements in
the future.
B. The parties desire to enter into this Agreement to document the
subcontracting of all those transfer agent services to NCSS and to reflect the
performance of those services under the terms and conditions of this Agreement.
COVENANTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, IT IS AGREED:
1. Services. A. During the term of this Agreement NCSS agrees to perform
all of the transfer agent functions TNC is obligated to perform under the Fund
Accounting, Dividend Disbursing & Transfer Agent, and Administration Agreements
with the trusts listed on Exhibit A attached hereto (the "Administration
Agreements"), including, without limitation, those transfer agent services
described on Exhibit B attached hereto. If TNC enters into additional agreements
in the future and desires to have NCSS provide the transfer agent services
thereunder, TNC shall notify NCSS in writing of the additional agreement and the
proposed date upon which NCSS shall begin its services under the new agreement.
NCSS shall have thirty (30) days after receipt of such notice to accept or
reject the additional agreement as an addendum to Exhibit A. If NCSS accepts
such additional agreement, such agreement shall then be deemed as one of the
Administration Agreements. As set forth in Section 9 hereof, TNC shall be under
no obligation to offer NCSS and NCSS shall be under no obligation to accept the
transfer agent services under any additional agreement.
B. In connection with the transfer agent functions, NCSS shall use its
reasonable best efforts to handle customer calls and inquiries as follows:
(1) NCSS shall process transactions on the next business day on which the
New York Stock Exchange is open that follows the date of receipt of net asset
value ("NAV") supplied by TNC or such entity then processing the NAV for each
fund; provided,
however, all transactions shall be processed as of the date received if received
prior to the time of determination of NAV for that date, and if not, such
transaction shall be processed as of the next business day on which the New York
Stock Exchange is open for business.
(2) NCSS shall print and prepare for mailing all confirms and statements on
the date processed. Confirms shall be printed following all transactions.
(3) NCSS shall generate shareholder confirm/statements quarterly, within
five (5) business days of the end of the calendar quarter.
(4) NCSS shall prepare and issue redemption and dividend checks.
C. In connection with shareholder recordkeeping, all shareholder files
shall be maintained pursuant to the rules of reporting under the Investment
Company Act of 1940 (the "1940 Act"), the Securities Act of 1933, and rules for
reporting on annual Form TA-2. All records which NCSS maintains for each trust
shall be the property of such trust, and NCSS further agrees to surrender
promptly to TNC or such trust any such records upon such trust's or TNC's
request.
D. NCSS shall assist TNC with distributor-related functions by doing the
12b- 1 calculations and payments and dealer commission calculations and
payments.
E. NCSS shall process FundServ and Networking shareholder transactions
remitted via National Securities Clearing Corporation.
F. NCSS shall maintain computer files necessary to keep the IVR system
current within a reasonable period of time after daily and/or intraday
processing (as applicable).
G. NCSS shall print and mail annual shareholder tax reporting forms (Forms
1099R, 1099D and 5498, and such other forms as may become applicable by
agreement of the parties) on or before the date required by law for their
remittance.
2. Term. A. The term of this Agreement shall begin on the date hereof and,
unless terminated as herein provided, shall continue until December 31, 1998.
Thereafter the term shall be automatically renewed for one (1) year renewal
periods (January 1 through December 31) unless either TNC or NCSS notifies the
other in writing, no later than October 1 of the existing term, that it does not
desire to continue the contract, in which case this Agreement shall terminate at
the end of the then current term. Unless such notice is given, this contract
shall be automatically extended from year to year and shall remain in full force
and effect.
B. Notwithstanding anything herein contained to the contrary, the parties
shall have the right to terminate this Agreement as follows:
1. TNC shall have the right to terminate this Agreement if NCSS is in
default hereunder and NCSS fails to cure the default within thirty (30) days
after written notice from TNC.
2. NCSS shall have the right to terminate this Agreement if TNC does not
make the compensation payments when due hereunder and fails to cure such payment
default within ten (10) days after notice thereof from NCSS, or is otherwise in
default hereunder and fails to cure the default within thirty (30) days after
written notice from NCSS.
3. Either party may terminate this Agreement as provided in Section 3
hereof or at anytime upon ninety (90) days prior written notice.
4. NCSS may terminate this Agreement as provided in Section 7 hereof.
5. Either party may terminate this Agreement in the event of the
termination by the other party of the Sublease Agreement by and between the
parties hereto of even date herewith attached as Exhibit C.
Termination of this Agreement shall not affect any liability of the parties
accruing prior to such termination.
C. In addition to the foregoing, if TNC determines in the exercise of its
reasonable judgment that NCSS is not providing the services under this Agreement
in a fashion that will fully perform TNC's obligations under the Administration
Agreements or that NCSS is acting or failing to act in a fashion that would
otherwise result in liability to TNC under or in connection with the
Administration Agreements, TNC may require NCSS to suspend its activities
hereunder until TNC is satisfied that such services will be performed as
required under this Agreement.
3. Compensation. As full payment for the services to be performed by NCSS
hereunder, TNC shall pay NCSS a monthly payment which shall be the greater of
$____________ or 85(cent) per shareholder serviced per month. In the event
either: (i) the "per shareholder" fee is greater than the set monthly fee, or
(ii) the actual costs of TNC in connection with this Agreement begin to exceed
the greater of the set monthly fee or the per shareholder fee set forth above as
a result of NCSS providing services to third parties, then the parties shall
negotiate in good faith to reduce the set monthly fee to an amount which will
equitably compensate TNC for providing facilities and equipment under this
Agreement. If the parties are unable to agree on a decreased rate within ten
(10) days after beginning to negotiate the same, either party may terminate this
Agreement upon thirty (30) days written notice. NCSS hereby agrees to permit TNC
access to its books, records and facilities as may be reasonably necessary for
TNC to perform its obligations under this Agreement and to assess the accuracy
and completeness of the representations and warranties of NCSS.
4. Additional Covenants of TNC. A. Simultaneously with the execution of
this Agreement, TNC will lease certain office space to NCSS under the Sublease
Agreement attached hereto as Exhibit C.
B. During the term of this Agreement, TNC will use its good faith efforts
to provide reasonable programming assistance from its existing staff on an as
needed, "on call", basis during normal business hours on days when the New York
Stock Exchange is open for business.
C. During the term of this Agreement, TNC will also maintain and make
available to NCSS, at TNC's expense, the following:
1. All hardware necessary to run the then current volume of business
serviced by TNC as listed on Exhibit D attached hereto.
2. Dedicated drives on its networked computer system, including electronic
password protections.
3. Software necessary to process all shareholder services to be performed
by NCSS as set forth on Exhibit E attached hereto.
4. All telephone equipment and long distance services under TNC's then
current contractual arrangement(s) with telephone hardware and service
providers. NCSS shall provide TNC with an accounting of those calls attributable
to specific funds.
5. Complaints. NCSS shall immediately notify TNC of all known complaints,
notices of default or other communications received or otherwise known by NCSS
other than those involved in the normal provision of the services hereunder by
NCSS, if any, from the other contracting parties under the Administration
Agreements or any other third party that relates to the rights or obligations of
TNC.
6. Employee Benefit Plans. During the term of this Agreement, NCSS, at its
cost and expense, shall adopt and participate as an additional employer
thereunder all employee benefit programs TNC has existing on the date of this
Agreement, including, but not limited to: (i) health insurance, (ii) disability
insurance, (iii) retirement plan(s) and (iv) dental insurance. The plans shall
provide the employees of each party with credit for services while in the employ
of the other party.
7. Liability Insurance. TNC agrees to use its good faith efforts to add
NCSS as an additional named insured on all property and liability, including,
but not limited to, errors and omissions insurance, policies, if any, on the
date of this Agreement covering TNC or its property; provided, however, that
such efforts shall not require TNC to increase the premiums it pays on such
insurance. If NCSS is not added as an additional named insured on all such
property and liability policies, NCSS shall have the right to terminate this
Agreement
immediately upon written notice to TNC. If, after NCSS has been placed under
coverage of any of such insurance policies, such policies are canceled or expire
without renewal, NCSS shall have the option to terminate this Agreement upon
thirty (30) days prior written notice to TNC.
8. Representations and Warranties of NCSS. A. NCSS acknowledges that TNC
makes no representations or warranties, express, implied or otherwise,
concerning the results of NCSS's operations under this Agreement.
B. At all times during the term of this Agreement, John D. Marriott
("Marriott") shall own at least eighty (80%) percent of the interests in profits
and capital of NCSS and shall retain full and complete management
responsibilities for its operations.
9. Non-Exclusivity-Conflicts of Interest. The parties hereto agree that
this Agreement shall not be considered exclusive by either party. TNC retains
the right to subcontract services to be provided under contracts other than the
Administration Agreements, including, without limitation, those of the type
provided by NCSS hereunder, to other firms capable of providing such services.
NCSS retains the right to market its services to other parties and to collect
fees and compensation for such services, as long as its services under this
Agreement are not impaired thereby.
10. Limitation of Liability and Indemnification. A. NCSS may rely on
information from TNC reasonably believed by it to be accurate and reliable.
Except as may otherwise be required by the 1940 Act and the rules thereunder,
neither NCSS nor its officers, directors, members, employees, agents, control
persons, or affiliates of any thereof shall be liable for any error of judgment
or mistake of law or for any loss or damage suffered by TNC in connection with
the performance of services by NCSS under this Agreement, except a loss
resulting directly from the willful misfeasance, bad faith or gross negligence
on the part of NCSS in the performance of its duties or from reckless disregard
by NCSS of its duties under this Agreement.
B. To the extent permitted by law, TNC shall indemnify and hold harmless
NCSS, its directors, officers, members, employees and agents from and against
any and all claims, demands, expenses, fees (including, without limitation,
reasonable attorney's and accountant's fees), fines, penalties, loss and
liabilities of any and every nature which NCSS may sustain or incur by reason
of, or as a direct result of: (i) any action taken or omitted to be taken by
NCSS in good faith in reliance upon any certificate, instrument, order or share
certificate reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the oral
instructions or written instructions of an authorized person of TNC or upon the
opinion of legal counsel for TNC; (ii) any action taken or omitted to be taken
by NCSS in connection with its appointment in good faith in reliance upon any
law, act, regulation, or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed; or (iii) TNC's gross
negligence, willful misfeasance, bad faith, or reckless disregard of or in
regard to its duties or services hereunder. However, indemnification under this
subparagraph shall not apply to actions or omissions of NCSS or its
directors, officers, employees, or agents in cases of its or their own gross
negligence, willful misfeasance, bad faith, or reckless disregard of its or
their own duties hereunder.
C. To the extent permitted by law, NCSS shall indemnify and hold harmless
TNC, its officers, agents, directors, shareholders and employees from and
against any and all claims, demands, expenses, fees (including, without
limitation, reasonable attorney's and accountant's fees), fines, penalties, loss
and liabilities of any and every nature which TNC or such persons may sustain or
incur by reason of, or as a result of NCSS's gross negligence, willful
misfeasance, bad faith, or reckless disregard of or in regard to its duties or
services hereunder.
11. Cross-Employment. Until the expiration or earlier termination of this
Agreement, no employee of NCSS may be employed by TNC.
12. No Partnership or Joint Venture. Nothing herein contained shall be
deemed or construed to create a partnership or joint venture between the parties
hereto. Neither party shall have the power or right to bind or act for the other
except as expressly provided herein. NCSS shall pay all salaries, compensation,
and other benefits of its employees, and TNC shall have no responsibility
whatsoever for the same. NCSS shall keep in full force and effect all required
worker's compensation insurance for its employees, shall be responsible for all
social security and unemployment compensation payments and benefits, and shall
be responsible for all withholding taxes due and becoming due upon the
compensation of such employees. All contracts of employment of the NCSS
employees shall be made directly with NCSS, and TNC shall have no control
whatsoever over any such person or persons or authority to direct their activity
in any manner whatsoever. The provisions of this Section 12 shall not restrict
TNC's right to enforce the provisions of this Agreement.
13. Force Majeure. Performance hereunder shall be extended for a period of
time equal to the delay caused by or resulting from an act of God, war, civil
disruption, casualty, shortages of energy, materials or equipment, government
regulations, delays caused by either party to the other, or causes beyond the
control of such party.
14. Waiver. The failure of either party to enforce at any time any of the
provisions of this Agreement, to require at any time performance by the other
party of any of the provisions hereof, or to resort to any remedy or to exercise
one or more remedies, shall in no way be construed to be a waiver of such
provisions, nor in any way to affect the validity of this Agreement or any part
hereof, or the right of such party thereafter to enforce each and every such
provision.
15. Compliance With Laws. NCSS and TNC shall obtain, each at its own
expense, all necessary authorizations, licenses and permits necessary for it to
perform under this Agreement. NCSS hereby covenants and agrees that it shall
comply with all federal, state and local laws, rules and regulations applicable
to the services performed by it hereunder. TNC hereby covenants and agrees that
it shall comply with all federal, state and local laws, rules and
regulations applicable to the services performed by it pursuant to the
Administration Agreements.
16. Assignment by TNC. TNC reserves the right to assign this Agreement and
its interest hereunder with the prior written consent of NCSS, which consent
shall not be unreasonably withheld. Upon any such assignment, TNC shall have no
further obligations or liabilities under this Agreement except to satisfy
obligations and payments then owed to NCSS.
17. Non-Assignability by NCSS. The rights, duties and obligations under
this Agreement may not be assigned or subcontracted by NCSS, without the prior
written consent of TNC, which consent may be withheld for any reason. Any
assignment or subcontracting by NCSS with the consent of TNC shall relieve NCSS
from any of its obligations or liabilities hereunder. For the purposes of this
Section a sale, gift or other transfer of Marriott's controlling interest in, or
control of, NCSS shall be deemed an assignment of this Agreement.
18. Benefit. Subject to NCSS's and TNC's restrictions on assignment
contained herein, the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns.
19. Notice. Any notice, consent or other communication permitted or
required by this Agreement to be given to a party shall be in writing and
addressed to such party at the following address or transmitted via facsimile
machine (provided documentation of completed transmission is retained) to the
following facsimile number:
If to TNC:
Post Office Box 69
Rocky Mount, N.C. 27802-0069
Attn: Frank P. Meadows, III
Facsimile No: (919) 442-4226
If to NCSS:
Post Office Box 4365
Rocky Mount, N.C. 27803-0365
Attn: John D. Marriott
Facsimile No: (919) 972-1908
unless a different individual, address or facsimile number shall have been
designated by the respective party by notice in writing in accordance herewith.
Any notice given hereunder shall be deemed given when delivered by hand, one (1)
day after being transmitted by facsimile or three (3) days after being deposited
in the United States mail, postage prepaid, certified mail (return receipt
requested).
20. Severability. If any provision of this Agreement, or portion thereof,
shall be determined to be void or unenforceable by any court of competent
jurisdiction, then such determination shall not affect any other provision of
this Agreement, or portion thereof, all of which other provisions and portions
thereof shall remain in full force and effect.
21. Survivorship. Where any covenants, indemnities or other provision
contained in this Agreement, by its context or otherwise, evidences the intent
of the parties that such provision should survive the expiration or other
termination of this Agreement, the provision shall survive the expiration or
other termination of this Agreement, including, without limitation, the
provisions of Section 10 hereof.
22. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina, notwithstanding the
principles of conflicts of law.
23. Headings. The section headings provided herein are for convenience only
and are not intended to define or limit the contents of the provisions of the
paragraphs herein.
24. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter described hereof
and this Agreement may not be modified except by a writing executed by the
parties hereto. All exhibits and schedules (current and supplemental) are hereby
incorporated in this Agreement by reference.
IN WITNESS WHEREOF, TNC and NCSS each has caused this Agreement to be
executed in its name and sealed by its duly authorized representative, with NCSS
adopting the word "SEAL" following its name as its seal, all as of the day and
year first above written.
THE NOTTINGHAM MANAGEMENT COMPANY
BY:_______________________________
President
ATTEST:
Secretary
NORTH CAROLINA SHAREHOLDER
SERVICES, LLC (SEAL)
BY:________________________________
Manager
<PAGE>
EXHIBIT A
Quaker Investment Trust
Nottingham Investment Trust II
Gardner Lewis Investment Trust
Albemarle Investment Trust
Capital Management Investment Trust
GrandView Investment Trust
<PAGE>
EXHIBIT B
TRANSFER AGENT SERVICING FUNCTIONS
1. Process new accounts.
2. Process purchases, both initial and subsequent in accordance with
conditions set forth in each fund's prospectus.
3. Transfer shares of capital stock to an existing account or to a new account
upon receipt of required documentation in good order.
4. Distribute dividends and/or capital gain distributions. This includes
disbursement as cash or reinvestment and to change the disbursement option
at the request of shareholders.
5. Process exchanges between funds (process and direct purchase/redemption and
initiate new account or process to existing account).
6. Make miscellaneous changes to records, including, but not necessarily
limited to, address changes and changes in plans (such as systematic
withdrawal, dividend reinvestment, etc.).
7. Prepare and mail a year-to-date confirmation and statement as each
transaction is recorded in a shareholder account.
8. Handle telephone calls and correspondence in reply to shareholder requests
except those items otherwise set forth herein.
9. Daily control and reconciliation of each fund's shares.
10. Prepare address labels or confirmations for four reports to shareholders
per year.
11. Mail and tabulate proxies for meetings of shareholders as required,
including preparation of certified shareholder list and daily report to
each fund's management, if required.
12. Prepare and mail annual Form 1099, Form W-2P and 5498 to shareholders to
whom dividends or distributions are paid, with a copy for the IRS.
13. Provide readily obtainable data which may from time to time be requested
for audit purposes.
14. Replace lost or destroyed checks.
15. Continuously maintain all records for active and closed accounts.
16. Furnish shareholder data information for a current calendar year in
connection with IRA and Keogh Plans in a format suitable for mailing to
shareholders.
<PAGE>
EXHIBIT C
NORTH CAROLINA
EDGECOMBE COUNTY
SUBLEASE AGREEMENT
WITNESS THIS SUBLEASE AGREEMENT, executed in duplicate originals, made
effective as of the 1st day of September, 1997 by and between THE NOTTINGHAM
MANAGEMENT COMPANY (herein the "LESSOR"), and NORTH CAROLINA SHAREHOLDER
SERVICES, LLC, a North Carolina limited liability company (herein the "LESSEE").
In consideration of the rent stated and the covenants, terms and
conditions hereinafter provided, the LESSOR does demise, let and lease unto the
LESSEE, and the LESSEE rents from the LESSOR, a certain tract or parcel of land
together with the improvements situated thereon and all rights appurtenant
thereto, situated in Edgecombe County, North Carolina, and being more
particularly described as 107 North Washington Street.
The certain tract or parcel of land hereinabove described, together
with the improvements thereon and all rights appurtenant thereto, shall
hereinafter be referred to as the "Premises."
TO HAVE AND TO HOLD, the Premises unto the LESSEE, for and during the
term hereinafter set forth and any extension thereof as herein provided.
1. TERM. The term of this Agreement (herein the "Agreement") shall
commence on the date hereof and, unless sooner terminated as herein provided,
shall end on December 31, 1998.
2. RIGHT TO EXTEND. The LESSEE shall have the right to extend the term
of this Agreement for three additional one (1) year terms, such extensions to be
on the same terms, covenants and conditions as the original term, unless
otherwise specifically provided for, and such shall commence upon the expiration
of the then current term and shall end one year from said date. The option to
extend the term for the additional terms shall be exercised by the LESSEE giving
the LESSOR written notice of such desire to do the same, not later than sixty
(60) days prior to the expiration of the then current term.
3. RENT. The monthly rental for the original term hereof shall be TWO
HUNDRED FIFTY DOLLARS ($250). Such rental shall be paid (in advance) in cash or
by company check and shall be due the first day of each month, throughout the
term of this Agreement. The first and last payment of rental hereunder, if made
for a period of less than one month, shall be prorated on the basis of the total
number of days for which lease is due during either such month. Monthly rental
for any additional term shall be as follows: 1st add'l.
term-$300; 2nd add'l. term-$350; third add'l. term-$400.
4. HARDWARE AND SOFTWARE. In connection with the lease and use of the
Premises, the LESSOR hereby leases and sublicenses to the LESSEE the personal
property listed on Schedule A attached hereto (herein the "Hardware") and the
software listed on Schedule B
attached hereto (herein the "Software"). Herein the Hardware and Software are
referred to collectively as the "Leased Equipment".
5. USE OF PREMISES AND LEASED EQUIPMENT. (a) The LESSEE may occupy and
use the Premises and Leased Equipment only for use as a transfer agent service's
business and for general office purposes. The LESSEE shall not permit, allow or
cause any act or deed to be performed or any practice to be adopted or followed
in or about the Premises which shall be illegal or constitutes a nuisance.
(b) LESSEE agrees that during the term of this Agreement and
thereafter, except as permitted by LESSOR or as required by law, LESSEE shall
not copy, sublicense or disclose to any person, firm or entity the Software or
any of the information regarding the Software.
(c) Representatives of the LESSEE have inspected the Premises and the
Leased Equipment and found them suitable for the LESSEE's purposes. BY THE
EXECUTION OF THIS AGREEMENT, THE LESSEE SHALL BE DEEMED TO HAVE ACCEPTED THE
PREMISES AND THE USE OF THE LEASED EQUIPMENT IN AN AS-IS CONDITION AND
ACKNOWLEDGED THAT THE LESSOR HAS MADE NO REPRESENTATIONS OR WARRANTIES (EXPRESS,
IMPLIED OR OTHERWISE) WITH RESPECT TO THE PREMISES, THE LEASED EQUIPMENT OR THE
LESSEE'S BUSINESS, INCLUDING, WITHOUT LIMITATION, A WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
6. IMPROVEMENTS. The LESSEE shall make no modifications, alterations or
additions in or to the Premises or the Leased Equipment without obtaining the
prior written consent of the LESSOR, which consent may be withheld for any
reason. Notwithstanding anything contained herein to the contrary, the LESSEE
shall erect and maintain an appropriate sign upon the Premises in order to
identify itself as the operator of the LESSEE's Business located upon the
Premises.
7. LOSS OF PROPERTY OR DAMAGE. The LESSOR shall not be liable for any
damage to any other property of the LESSEE or others, located on the Premises,
nor for the loss of or damage to any property of the LESSEE or of others, by
theft or otherwise, unless caused by the intentional or grossly negligent
actions or omissions of LESSOR.
8. TAXES AND ASSESSMENTS. The LESSOR shall pay all ad valorem taxes,
special assessments and all other governmental assessments or impositions of
every kind and character charged or assessed against the Premises or the Leased
Equipment during the term of this Agreement and any extension thereof. The
LESSEE shall pay all ad valorem taxes on its personal property during the term
of this Agreement.
9. ASSIGNMENT AND SUBLETTING. The LESSEE shall not assign this lease or
any interest herein, or let the Premises or the Leased Property or any part
thereof, or any right or privilege appurtenant thereto, nor permit the occupancy
or use of any part thereof, by any other person without the prior written
consent of the LESSOR, which consent may be withheld for any reason.
10. LIABILITY INSURANCE. During the original term of this Agreement and
any extension thereof, the LESSOR shall maintain with an insurance company
approved by the LESSEE, at the LESSOR's sole cost and expense, general business
and public liability insurance against personal injury growing out of LESSEE's
use of the Premises; such coverage shall be maintained with minimum liability
limits of $500,000 for general business, public liability and personal injury.
The LESSOR and the LESSEE shall be named as a party insured on any such policy.
The LESSOR shall maintain property and casualty insurance on the building in
which the Premises are located and the Hardware, to the extent it, in its sole
discretion, deems appropriate.
11. LESSOR'S INDEMNITY. The LESSEE shall Indemnify, Defend and Hold
Harmless the LESSOR, and its officers, agents and employees against any and all
loss, damage, costs (including but not limited to reasonable attorney's fees),
claims, liabilities, demands, expenses, fines, penalties, clean-up costs and
other pollution related items, judgments and executions (whether arising out of
a third party claim or one made by LESSOR) arising out of any failure of the
LESSEE in any respect to comply with the provisions of this Agreement, or
arising out of the LESSEE's use or occupancy of the Premises or the Leased
Equipment during the original term of this Agreement and any extension thereof.
The LESSEE's maintenance of insurance shall in no way limit its responsibility
under this Section 11 which shall survive the expiration or earlier termination
of this Agreement and, nothing in this Section 11 shall change the rights or
obligations of the parties under the Transfer Agent Services Agreement of even
date herewith between the LESSOR and the LESSEE.
12. UTILITIES AND SERVICES. The LESSOR shall pay for all water, fuel,
gas, oil heat, electricity, power, materials and services which may be furnished
the LESSEE or used in or about the Premises. The LESSEE shall not take any
action which would result in the imposition of any lien or encumbrance of any
kind whatsoever created on the Premises or the Leased Equipment.
13. REPAIR AND MAINTENANCE. The LESSOR shall, at the LESSOR's sole cost
and expense, use its good faith efforts to maintain the improvements on the
Premises during the original term of this Agreement and any extension thereof.
At the end of the lease term or sooner termination hereof, the LESSEE shall
return the improvements on the Premises and the Leased Equipment to the LESSOR
in as good condition as at the beginning of the lease term, ordinary wear and
tear excepted. LESSOR shall, at LESSOR'S sole cost and expense, use its good
faith efforts to maintain the Leased Equipment.
14. DEFAULT OF LESSEE. Any one or more of the following events shall
constitute events of default;
(i) The LESSEE'S failure to make payment of rent when the same shall be
due and payable;
(ii) The LESSEE'S failure to perform any of the other covenants,
conditions or agreements imposed upon the LESSEE under this Agreement and the
continuance of such failure without the curing of same for a period of fifteen
(15) days after mailing or delivery to the LESSEE of notice in writing from the
LESSOR specifying the nature of such failure;
(iii) If the LESSEE shall be adjudicated as bankrupt, or if a receiver
or trustee shall be appointed for the LESSEE's property and affairs, or they or
any of them shall make an assignment for the benefit of creditors or shall
voluntarily file in bankruptcy or insolvency or for reorganization or shall make
application for the appointment of a receiver and such adjudication,
appointment, assignment of petition shall not be set aside, vacated or
discharged within One Hundred Twenty (120) days after the issuance of the same;
(iv) The levy or execution, attachment or other taking of the LESSEE's
assets which are on the Premises or the leasehold interest of the LESSEE
hereunder, by process of law or otherwise in satisfaction of any judgment, debt
or claim;
(v) The abandonment of the Premises, or
(vi) The termination for any reason of the Transfer Agent Services
Agreement of even date herewith between the LESSOR and the LESSEE.
Upon the occurrence of any of the above events of default, the LESSOR may, at
the LESSOR's option, give the LESSEE written notice of the LESSOR's election to
end the term of this Agreement upon a date specified in such notice, which date
shall be not less than five (5) days after the date of delivery or mailing by
the LESSOR of such notice. On the date specified in said notice, the term and
estate hereby vested in the LESSEE shall cease and any and all other right,
title and interest of the LESSEE hereunder shall likewise cease without further
notice or lapse of time as fully and with like effect as if the entire term of
this Agreement had expired; provided, however, that the LESSEE shall continue to
be liable to the LESSOR as hereinafter provided. Upon termination of this
Agreement, the LESSEE shall return to the LESSOR all of the Leased Equipment and
shall not retain any copies of the Software.
Upon any termination of the term of this Agreement pursuant to this
Section, or at any time thereafter, the LESSOR may exercise and pursue any and
all rights and remedies the LESSOR shall have at law or in equity. In addition,
and without prejudice to any other rights and remedies the LESSOR shall have at
law or in equity, the LESSOR may re-enter the Premises and dispossess any or all
occupants of the Premises in the manner prescribed by law, and the LESSEE in
such case shall remain liable to the LESSOR as hereinafter provided.
In case of any such default, re-entry, expiration and/or dispossession;
(i) The LESSOR shall retain all rental paid up to the time of such
re-entry, expiration and/or dispossession; and
(ii) The LESSOR may, at its sole option, relet the Premises and/or the
Leased Equipment or any part hereof, either in the name of the LESSOR or
otherwise, for a term or terms which may, at the LESSOR's option, be less than
or exceed the period which would otherwise have constituted the balance of the
term of this Agreement and retain all rental payments received for such term or
terms.
(iii) The LESSEE shall also pay to the LESSOR as liquidated damages for
the failure of LESSEE to observe and perform LESSEE's covenants herein contained
the deficiency, if any,
between the rents hereby reserved and covenanted to be paid and the amount of
the rents collected on account of the reletting of the Premises or the Leased
Equipment for each month of the period which would otherwise have constituted
the balance of the term of this Agreement. In computing such liquidated damages
there shall be added to the said deficiency such sums as are required to pay
reasonable expenses the LESSOR may incur in connection with reletting, such as
brokerage fees, attorney's fees and preparation for reletting. If such reletting
is for a period equal to or in excess of the balance of the term of this
Agreement, any such liquidated damages shall be due and payable upon the date
the Premises and/or Leased Equipment are relet, otherwise payment shall be made
in monthly installments by LESSEE on the rent date specified in this Agreement.
Any suit brought for any month shall not prejudice in any way the
rights of the LESSOR to collect the deficiency month by a similar proceeding. If
the institution of suit is necessary to enforce the LESSOR's right to collect
liquidated damages, the LESSOR shall have the option to institute suit, (a) when
the Premises and/or Leased Equipment are relet, (b) as such damages accrue, (c)
periodically for such accrued liquidated damages at such intervals as it shall
desire, or (d) on the date fixed herein for the expiration of the lease term.
15. EMINENT DOMAIN. In the event the Premises are made subject to a
proceeding by which the right of eminent domain is exercised, or any like
proceeding, if such resistance is feasible, the parties hereto shall join and
cooperate in prosecuting their respective claims for damages incurred from the
successful exercise of such right or proceeding.
If the whole of the Premises is taken in any proceeding by which the
right of eminent domain is exercised, or any like proceeding, this Agreement
shall terminate; provided, however, that the parties hereto shall remain liable
for any and all liabilities or obligations incurred under this Agreement prior
to such termination. Any condemnation award shall be apportioned as the interest
of the parties shall appear.
If, however, the aforesaid exercise of the right of eminent domain, or
other like proceeding, results in the taking of less than the whole of the
Premises:
(a) If the Premises are condemned to the extent that it is no longer
feasible for the LESSEE to effectively use the Premises for the uses
contemplated, the LESSEE may terminate this lease by written notice to the
LESSOR. Such written notice must be mailed to the LESSOR within thirty (30) days
after the happening of such event and must specify the termination date, which
date must be within one hundred twenty (120) days of such taking. The lease will
then terminate on the date specified; provided, however, that the parties hereto
shall remain liable for any and all liabilities and obligations incurred under
this Agreement prior to such termination. The award made for such taking shall
be apportioned between the LESSOR and the LESSEE as their interests shall
appear. If the LESSEE does not exercise the privilege of termination within the
time herein specified, this lease shall continue in full force and effect
subject to the provisions of Paragraph (b) of this Section.
(b) If the Premises are partially condemned but the LESSEE can continue
to effectively use the Premises for the use contemplated, this lease shall not
terminate but shall continue with such abatement of rent and other adjustments
as shall be just and equitable.
16. HOLDING OVER, In the event the LESSEE continues to occupy the
Premises and/or use the Leased Equipment after the last day of the original term
of this Agreement and any extension thereof and the LESSOR agrees to accept rent
thereafter, the LESSEE shall occupy the Premises and/or the Leased Equipment as
a LESSEE from month to month, subject to all the conditions of this Agreement
consistent with such a tenancy.
17. SURRENDER OF PREMISES. At the expiration of the original term of
this Agreement and any extension thereof or other termination of this Agreement
as herein provided, the LESSEE shall peaceably surrender possession of the
Premises and the Leased Equipment to the LESSOR.
18. ENTRY AND INSPECTION. The LESSEE shall permit the LESSOR to enter
the Premises at any reasonable time to inspect the Premises and Leased Equipment
or to take any other actions to which the LESSOR is reasonably obligated to take
under this Agreement or under any governmental law or regulation. LESSEE shall
at all times provide the LESSOR with a current copy of any keys used in the
Premises to ensure the right of Entry and Inspection.
19. DESTRUCTION OF THE PREMISES OR THE LEASED PROPERTY. In the
event of a total or partial destruction of the improvements upon the Premises or
substantially all of the Leased Equipment during the original term of this
Agreement or any extension thereof, by any cause, the LESSOR may at the LESSOR'S
option repair or replace such improvements and or Leased Equipment at the
LESSOR's own cost and expense and the LESSOR may, but is not obligated to, use
any insurance proceeds for such purpose. If the LESSOR repairs or replaces such
improvements or Leased Equipment this Agreement shall remain in full force and
effect; provided, however, the rent payable hereunder shall abate for the time
during which, and to the extent to which, the Premises or such substantial
portion of the Leased Equipment cannot be used by the LESSEE for its intended
use. If LESSOR chooses not to elect to repair or replace such improvements or
Leased Equipment, this Agreement shall terminate; provided, however, that the
parties hereto shall remain liable for any and all liabilities or obligations
incurred under this Agreement prior to such termination.
20. LAWS AND REGULATIONS. The LESSEE, at the LESSEE's own cost and
expense, shall comply promptly with all laws, rules and orders of all
governmental authorities which may be applicable to the Premises or any business
conducted thereon during the original term of this Agreement and any extension
thereof.
21. NOTICES. All notices to be given hereunder shall be made in
writing. Such notices shall be deemed given when delivered or deposited in the
United States Mail, Certified or Registered, with postage prepaid, addressed to
the respective parties or their representatives as follows:
If to the LESSOR: The Nottingham Management Company
Post Office Box 69
105 North Washington Street
Rocky Mount, North Carolina 27802
If to the LESSEE: North Carolina Shareholder Services, LLC
Post Office Box 4365
107 North Washington Street
Rocky Mount, North Carolina 27802
or to such other address as either party may have directed to the other in
writing.
22. QUIET ENJOYMENT. The LESSOR covenants and warrants that the LESSEE
shall, by paying the rent herein reserved and by performing the covenants and
conditions herein contained, at all times during the term of this Agreement and
any extension thereof, peaceably have, hold and quietly enjoy the Premises for
such term and any extension thereof, and the LESSOR shall defend the same
against all persons whomsoever.
23. RELATIONSHIP OF THE PARTIES. It is hereby understood and agreed
that the relationship of the parties hereto is strictly that of landlord and
tenant of the Premises and the LESSOR has no ownership in the LESSEE'S
enterprise and that this Agreement shall not be construed as a joint venture or
partnership. The LESSEE is not and shall not be deemed to be an agent or
representative of the LESSOR.
24. BINDING EFFECT. Subject to the provisions of Section 29 hereof, all
the terms, covenants, and conditions hereof shall be binding upon the parties
hereto and shall bind and inure to the benefit of their successors and assigns.
25. WAIVERS. Failure of the LESSOR or the LESSEE to complain of any act
or omission on the part of the other party, no matter how long the same may
continue, shall not be deemed to be a waiver by said party of any of its rights
hereunder. No waiver by the LESSOR or the LESSEE at any time, express or
implied, of any breach of any of the provisions of this Agreement shall be
deemed a consent to any subsequent breach or the same or any other provisions.
No acceptance by the LESSOR of any partial payment shall constitute an accord or
satisfaction but shall only be deemed a part payment hereunder.
26. RECORDING. The LESSEE may record a memorandum hereof, and the cost
of any and all fees or charges attendant with such recordation shall be paid by
the LESSEE.
27. CONSTRUCTION. This Agreement shall be governed and enforced in
accordance with the laws of the State of North Carolina. If any provision of
this Agreement shall be determined to be void by any court of competent
jurisdiction, then such determination shall not affect any other provision of
this Agreement, all of which other provisions shall remain in full force and
effect. If any provision of this Agreement is capable of two interpretations,
one of which would render the provision void and the other of which would render
the provision valid, then the provision shall have the meaning which renders it
valid.
28. CAPTIONS. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience and in define, limit,
construe or describe the scope or intent of such sections.
29. ASSIGNMENT. LESSOR reserves the right to assign this Agreement and
any of its interests hereunder without the prior consent of LESSEE. Upon such
assignment,
LESSOR shall have no further obligations or liabilities under this Agreement.
LESSEE may not assign or sublease this Agreement or any interest therein, or
sublet the Premises or the Hardware, or any interest therein, or sublicense the
Software or any interest therein, without the prior written consent of LESSOR,
which consent may be withheld for any reason. Any assignment or subletting by
LESSEE, even with the consent of LESSOR, shall not relieve LESSEE from any and
all of its obligations or liabilities hereunder. For the purposes of this
Section, a sale, gift or other transfer of a controlling interest in or control
of LESSEE shall be deemed an assignment of this Agreement.
30. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties. It may be changed only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought. All exhibits and schedules attached hereto are incorporated
herein by reference.
IN WITNESS WHEREOF, the LESSOR and the LESSEE each has caused this
Agreement to be executed in its name and sealed by its duly authorized
representatives, with the LESSEE adopting the word "SEAL" following its name as
its seal, all as of the day and year first above written.
THE NOTTINGHAM MANAGEMENT COMPANY
BY:_______________________________
President
ATTEST:
Secretary
(CORPORATE SEAL)
NORTH CAROLINA SHAREHOLDER
SERVICES, LLC
(SEAL)
BY:________________________________
Manager
<PAGE>
SCHEDULE A
4 486 or better CPU's
4 Color Monitors
4 Laser Printers
1 Dot Matrix Printer
4 Adding Machines
2 External Modems
4 Atcom Phone Units with display
4 Modular 3 piece desk units
1 Fax machine
1 Copy machine
5 Large filing cabinets
5 Office Chairs
3 Individual filing cabinets
1 Windows NT Server (or connection to TNC server)
<PAGE>
SCHEDULE B
Windows 95 or better
Microsoft Word
Microsoft Excel
Word Perfect (to be phased out) Lotus 123 (to be phased out) MAS 90 Bottom Line
Check writing program TA Program suitable for business volume
Software (individually loaded or network accessible)
<PAGE>
EXHIBIT D
4 486 or better CPU's
4 Color Monitors
4 Laser Printers
1 Dot Matrix Printer
4 Adding Machines
2 External Modems
4 Atcom Phone Units with display
4 Modular 3 piece desk units
1 Fax machine
1 Copy machine
5 Large filing cabinets
5 Office Chairs
3 Individual filing cabinets
1 Windows NT Server (or connection to TNC server)
<PAGE>
EXHIBIT E
Windows 95 or better
Microsoft Word
Microsoft Excel
Word Perfect (to be phased out) Lotus 123 (to be phased out) MAS 90 Bottom Line
Check writing program TA Program suitable for business volume
Software (individually loaded or network accessible)
