As filed with the Securities and Exchange Commission on July 25, 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. 3
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 4
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:
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|X| Immediately upon filing |_| on , 1997 pursuant
to Rule 485(b), or to Rule 485(b), or
|_| 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
</TABLE>
Registrant has registered an indefinite number of shares of Registrant and any
series thereof hereinafter created, under the Securities Act of 1933, as
amended, pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Rule 24f-2 Notice for the year ended March 31, 1997 was filed on
May 29, 1997.
<PAGE>
PART A
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 REIT Index Fund and GrandView Realty Growth Fund (the "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 REIT Index Fund seeks to provide investment results that exhibit a
high correlation and resemble those of the National Association of Real Estate
Investment Trust's ("NAREIT") Total Return Index. The Fund seeks to achieve its
objective by investing in the equity securities that compose The GrandView REIT
Index, an Index developed and maintained by the Adviser, which currently
consists of the equity securities of 60 REITs.
GrandView Realty Growth Fund seeks long-term growth of capital, with current
income as a secondary objective, by investing primarily in equity securities of
real estate companies.
Mutual fund shares are not deposits or obligations of, or endorsed or guaranteed
by, any bank or insured depositary institution, nor are they insured or
otherwise protected by the Federal Deposit Insurance Corporation or any other
agency. Investments in mutual funds involve investment risk, including possible
loss of principal.
This Prospectus sets forth concisely the basic information about the Trust and
the Funds that a prospective investor should know before investing. Investors
are advised to read this Prospectus and retain it for future reference. A
Statement of Additional Information dated the same date as this Prospectus has
been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request and without charge by writing the Funds or by calling
(800) 525-3863. 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.
July 25, 1997
<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......................................... 10
INFORMATION ABOUT FUND SHARES................................... 13
How to Purchase Shares................................. 13
Net Asset Value and Pricing of Orders.................. 16
How to Exchange Shares................................. 16
How to Redeem Shares................................... 17
Dividends and Distributions............................ 18
Tax Matters............................................ 19
Performance Information................................ 19
Description of Shares and Voting Rights................ 20
APPENDIX A: DESCRIPTION OF BOND RATINGS........................ 21
APPENDIX B: CERTAIN INVESTMENT PRACTICES....................... 24
<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.
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REIT Realty
Index Growth
Fund 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% 4 0.25%
Other Expenses3 0.80% 1.75%
----- -----
Total Operating Expenses3 1.05% 2.00%
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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 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 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. The Trust has not imposed this fee
previously with respect to the REIT Index Fund. The Trust intends to begin
imposing this fee with respect to the REIT Index Fund, effectively 60 days
from the date of this Prospectus.
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:
Fund 1 Year 3 Years 5 Years 10 Years
REIT Index Fund $40 $ 62 $ 86 $154
Realty Growth Fund $64 $105 $148 $267
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) 525-3863. Further information about the
performance of the Funds is contained in the Annual Report of the Funds, a copy
of which may be obtained at no charge by calling the Funds.
GRANDVIEW REIT INDEX FUND
(For a Share Outstanding Throughout the Period)
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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% 20.63%(c)
After expense reimbursements and waived fees 1.04% 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
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GRANDVIEW REALTY GROWTH FUND
(For a Share Outstanding Throughout the Period)
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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
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(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 REIT Index Fund are invested
primarily in equity securities of REITs comprising the GrandView 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. 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 REIT Index Fund) may also make short-term investments for liquidity purposes
(e.g., in anticipation of redemptions or purchases of securities).
The investment objective of each Fund may be changed without approval by that
Fund's shareholders, but shareholders will be given written notice at least 30
days before any change is implemented.
REIT Index Fund
The investment objective of the REIT Index Fund is to provide its investors with
investment results that exhibit a high correlation and resemble those of the
National Association of Real Estate Investment Trust's ("NAREIT") Total Return
Index (the "Index"). The Fund seeks to achieve its objective by investing in the
equity securities that comprise a proprietary sub-index developed and maintained
by the Adviser known as The GrandView REIT Index (the "Sub-Index"). The Fund
intends to be as fully invested at all times as is reasonably practicable and
will attempt to approximate the weightings of the securities held in its
portfolio to the weightings of the securities in the Sub-Index.
The Trust expects there will be a close correlation between the Fund's
performance and that of the Index and Sub-Index in both rising and falling
markets. Over the long term, the Adviser will seek a correlation of 0.90 or
better. A correlation of 1.0 would indicate a perfect correlation. If a
correlation of 0.90 or better is not achieved, the Board of Trustees of the
Trust will review with the Adviser methods for increasing the correlation, such
as through adjustments in securities holdings of the Fund. Factors such as the
size of the Fund's securities holdings, transaction costs, management fees and
expenses, brokerage commissions and fees, and the extent and timing of cash
flows into and out of the Fund, are expected to account for the differences
between the Fund's performance and that of the Index and Sub-Index.
The Sub-Index was developed and is maintained by the Adviser. It currently
consists of the equity securities of 60 REITs which, as of March 31, 1997,
represented approximately 69% of the total market capitalization of all REITs
which are publicly traded in the United States and includes REITs within each of
thirteen industry sectors identified by the Adviser. The Adviser reviews and
revises the composition of the Sub-Index no less frequently than semiannually
based on objective market capitalization criteria. More information about the
Sub-Index appears in "Investment Policies" in the Statement of Additional
Information.
The REIT Index Fund is not managed in the traditional investment sense, since
changes in the composition of its securities holdings are made in order to track
the changes in the composition of the securities included in the Sub-Index.
Moreover, inclusion of a security in the Sub-Index does not imply an opinion by
the Adviser as to the merits of that specific security as an investment.
Realty Growth Fund
The primary investment objective of the Realty Growth Fund is long-term growth
of capital. Current income is a secondary objective. In selecting investments
for the Fund, the Adviser will emphasize equity securities of 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 Group ("Standard & Poor's") or Fitch Investors Service, Inc. ("Fitch")
or securities not rated by Moody's, Standard & Poor's or Fitch which the Adviser
deems to be of equivalent quality. Debt securities rated Ba or below by Moody's
or BB or below by Standard & Poor's or Fitch (or comparable unrated securities),
are commonly called "junk bonds" and are considered speculative, and payment of
principal and interest thereon may be questionable. In some cases, such
securities may be highly speculative, have poor prospects for reaching
investment grade standing and be in default. As a result, investment in such
bonds will entail greater speculative risks than those associated with
investment in investment-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 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 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
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 REIT Index
Fund will be effected primarily to accommodate cash flows into and out of the
Fund and changes in the GrandView REIT Index. Although each of the Funds
generally seeks to invest for the long term, changes in a Fund's portfolio will
be made when determined to be advisable, and usually without reference to the
length of time a security has been held. The amount of a Fund's brokerage
commissions and realization of taxable capital gains will tend to increase as
the level of portfolio activity increases. The portfolio turnover rate for each
Fund since inception is set forth under "Financial Highlights" above.
Portfolio Transactions
Orders for the Funds' portfolio securities transactions are placed by the
Adviser, which strives to obtain the best price and execution for each
transaction. In circumstances in which two or more broker-dealers are in a
position to offer comparable prices and execution, consideration may be given to
whether a broker-dealer provides investment research or brokerage services or
sells shares of the Funds. See the Statement of Additional Information for a
further description of the Adviser's brokerage allocation practices.
Investment Restrictions
The Statement of Additional Information contains a list of specific investment
restrictions which govern the investment policies of the Funds, including a
limitation that each Fund may borrow from banks and enter into reverse
repurchase agreements in an amount not to exceed 33 1/3% of the Fund's total
assets for extraordinary or emergency purposes (e.g., to meet redemption
requests) and a limitation that no Fund may purchase securities at any time at
which borrowings exceed 5% of the total assets of the Fund, taken at market
value. Certain of these specific restrictions may not be changed without
shareholder approval. Except as otherwise indicated, a Fund's investment
objectives and policies may be changed by the Board of Trustees without
shareholder approval. If a percentage restriction (other than a restriction as
to borrowing) is adhered to at the time an investment is made, a later change in
percentage resulting from changes in a Fund's portfolio securities will not be a
violation of policy.
MANAGEMENT OF THE FUNDS
The Trust's Board of Trustees has overall responsibility for the management and
supervision of the Funds. A majority of the Trustees are not "interested
persons" of the Trust as defined in the Investment Company Act of 1940. The
Statement of Additional Information contains more information about the Trustees
and executive officers of the Trust.
Adviser
GrandView Advisers, Inc. (the "Adviser") manages the Funds' assets pursuant to
separate investment advisory agreements (the "Advisory Agreements"). Subject to
policies set by the Trust's Board of Trustees, the Adviser makes the investment
decisions for the Funds. 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, who are all
directors, officers, and shareholders of the Adviser, 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:
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:
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 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 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 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 $1,200 per Fund per
month (which base fee is scheduled to increase to $1,500 per Fund per month
beginning October 1, 1997). 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. The Trust has not imposed this fee
previously with respect to the REIT Index Fund. The Trust intends to begin
imposing this fee with respect to the REIT Index Fund, effectively 60 days from
the date of this Prospectus.
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
Post Office 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 1-800-525-3863. Investments by wire will not be
accepted until an Account Application has been received by mail or facsimile.
Federal funds and registration instructions should be wired through the Federal
Reserve System to:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA No. 053000219
FBO:
GrandView 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:
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 REIT Index Fund within six months after purchase, and of 0.50% in the event
of a redemption of shares of the REIT Index Fund after six months but within
twelve months of purchase. See "How to Redeem Shares."
At times the Distributor may reallow the entire sales charge to dealers. From
time to time dealers who receive dealer discounts and brokerage commissions from
the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. 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.
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 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
REIT Index Fund at the rate which would have been applicable if the shareholder
had continued to hold shares of the REIT Index Fund.
Shareholders must place exchange orders through the 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, Post Office 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) 525-3863. Written confirmation of
redemption requests may be made by facsimile at (919) 972-1908. Confirmations
should include all of the information specified above for redemptions by mail.
A shareholder may not close his or her account by telephone. During periods of
drastic economic or market changes or severe weather or other emergencies, a
shareholder may find it difficult to implement a telephone redemption. If such a
case should occur, another method of redemption, such as written requests sent
via an overnight delivery service, should be considered. The 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 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--REIT Index Fund. Redemptions of shares of the REIT Index
Fund made within six months of purchase are subject to a redemption fee in the
amount of 1% of the net asset value of the shares redeemed. Redemptions of
shares of the REIT Index Fund made between six and twelve months after purchase
will be subject to a redemption fee of 0.50% of the net asset value of the
shares redeemed. No redemption fee is imposed if the proceeds are immediately
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 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.
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 Rating Group and Fitch Investors Service, Inc. are based on
descriptions published by the rating agencies. Ratings are not absolute
standards of quality. Consequently, debt securities with the same maturity,
coupon and rating may have different yields while debt securities of the same
maturity and coupon with different ratings may have the same yield. Ratings are
generally given to securities at the time of issuance. While the rating agencies
may from time to time revise such ratings, they undertake no obligation to do
so.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best 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 Group1
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.
1Rates all governmental bodies having $1,000,000 or more of debt
outstanding, unless adequate information is not available.
<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 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
July 25, 1997
GrandView REIT Index Fund
GrandView Realty Growth Fund
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-525-3863
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
1-800-525-3863
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
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
GrandView REIT Index Fund
GrandView Realty Growth Fund
July 25, 1997
Series of
GrandViewSM Investment Trust
107 North Washington Street,
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-525-3863
Table of Contents
1. THE FUNDS.................................................... 2
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............. 2
3. PERFORMANCE INFORMATION...................................... 13
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION... 15
5. MANAGEMENT................................................... 17
6. PORTFOLIO TRANSACTIONS....................................... 23
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES......... 24
8. CERTAIN ADDITIONAL TAX MATTERS............................... 25
9. SPECIAL SHAREHOLDER SERVICES................................. 26
10. FINANCIAL STATEMENTS......................................... 27
GrandView Investment Trust (the "Trust") is an open-end, registered management
investment company offering two mutual funds which are described in this
Statement of Additional Information: GrandView REIT Index Fund and GrandView
Realty Growth Fund (the "Funds"). The GrandView Realty Growth Fund is a
non-diversified fund. The address and telephone number of the Trust are 107
North Washington Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365, 1-800-525-3863.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY, ANY BANK OR INSURED DEPOSITARY INSTITUTION, NOR ARE THEY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
AGENCY. INVESTMENTS IN MUTUAL FUNDS INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Trust's
Prospectus, dated the same date as this Statement of Additional Information, by
which shares of the Funds are offered. This Statement of Additional Information
should be read in conjunction with the Prospectus, a copy of which may be
obtained by an investor without charge by contacting the Funds at
1-800-525-3863.
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by an
effective prospectus.
<PAGE>
1. THE FUNDS
GrandView Investment Trust (the "Trust") is an open-end management investment
company that was organized as a business trust under the laws of the
Commonwealth of Massachusetts on February 6, 1995. This Statement of Additional
Information describes shares of the GrandView REIT Index Fund ("REIT Index
Fund") and the GrandView Realty Growth Fund ("Realty Growth Fund"), which are
series of the Trust. References in this Statement of Additional Information to
the "Prospectus" are to the Trust's Prospectus, dated the same date as this
Statement of Additional Information, by which shares of the Funds are offered.
Organized in 1995, the Funds have no prior operating history.
GrandView Advisers, Inc. (the "Adviser") is investment adviser to each of the
Funds. The Adviser manages the investments of the Funds from day to day in
accordance with each Fund's investment objective and policies. The selection of
investments for the Funds and the way they are managed depend on the conditions
and trends in the economy and the financial marketplaces.
The Board of Trustees of the Trust provides broad supervision over the affairs
of the Funds. The Nottingham Company, the administrator and fund accounting
agent of each Fund ("Nottingham" or the "Administrator"), supervises the overall
administration of the Funds. NC Shareholder Services, LLC serves as dividend
disbursing and transfer agent of each Fund (the "Transfer Agent"). Shares of the
Funds are continuously sold by Capital Investment Group, Inc., the Funds'
distributor ("Capital Investment Group" or the "Distributor"). Shares of each
Fund are sold at net asset value, plus any applicable sales charge. The sales
charge may be reduced on purchases involving substantial amounts and may be
eliminated in certain circumstances. The Trust has adopted a Distribution Plan
(the "Distribution Plan") in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), which provides for the
possible payment, as approved by the Board of Trustees, of distribution and/or
service fees from each Fund to the Distributor and others to compensate and
reimburse them for activities intended to result in the sale of shares of the
Fund and/or the servicing of shareholder accounts.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives
The REIT Index Fund and the Realty Growth Fund seek both current income and
long-term growth of capital. Each Fund invests primarily in securities of real
estate investment trusts ("REITs") and other real estate industry companies. The
Funds differ in the degree to which they emphasize active or passive account
management and employ different policies to achieve their objectives.
The investment objective of the REIT Index Fund is to provide its investors with
investment results that exhibit a high correlation and resemble those of the
National Association of Real Estate Investment Trust's ("NAREIT") Total Return
Index. The Fund seeks to achieve its objective by investing in the equity
securities that comprise the GrandView REIT Index.
The primary investment objective of the Realty Growth Fund is long-term growth
of capital. Current income is a secondary objective.
The investment objective of each Fund may be changed without approval by that
Fund's shareholders, but shareholders will be given written notice at least 30
days before any change is implemented. Of course, there can be no assurance that
either Fund will achieve its investment objective.
Investment Policies
The Prospectus contains a discussion of the various types of securities in which
each Fund may invest and the risks involved in such investments. The following
supplements the information contained in the Prospectus concerning the
investment objective, policies and techniques of each Fund.
The investment objective of the REIT Index Fund is to provide its investors with
investment results that exhibit a high correlation and resemble those of the
National Association of Real Estate Investment Trust's ("NAREIT") Total Return
Index (the "Index"). The Fund seeks to achieve its objective by investing in the
equity securities that comprise the GrandView REIT Index (the "Sub-Index"). The
REIT Index Fund intends to be as fully invested at all times as is reasonably
practicable and will attempt to approximate the weightings of the securities
held in its portfolio to the weightings of the securities in the Sub-Index.
The Sub-Index was developed and is maintained by the Adviser. It currently
consists of the equity securities of 60 REITs which, as of March 31, 1997,
represented approximately 69% of the total market capitalization of all REITs
which are publicly traded in the United States and includes REITs within each of
thirteen industry sectors identified by the Adviser. Any changes made to the
composition of the Sub-Index by the Adviser will be based solely on market
capitalization criteria. The Sub-Index is weighted by market capitalization, and
in formulating the list of REITs which comprise the Sub-Index, the Adviser
chooses REITs which represent all sectors of the REIT industry as identified by
the Adviser. The Sub-Index is reset as needed in order to reflect changes in the
market, and in any event, at least semiannually. The Sub-Index is presently
comprised of the following REITs:
GrandView REIT Index Composition
3/97 Market
Sector/Name Exchange Capitalization
Apartment
Equity Residential Prop. NYSE 2,235,444,750
Security Capital Pacific Trust NYSE 1,758,471,250
United Dominion Realty NYSE 1,219,073,250
Avalon Properties NYSE 921,017,875
Post Properties Inc. NYSE 829,879,125
Security Capital Atlantic NYSE 828,887,500
BRE Properties, Inc. NYSE 814,747,552
Merry Land & Inv. Co. NYSE 784,018,000
Bay Apartment Communities NYSE 674,361,124
Charles Smith Residential NYSE 588,473,250
--------------
10,654,373,676
Hotel
Starwood Lodging Trust NYSE 1,527,973,750
Patriot American Hospitality, Inc. NYSE 981,315,000
Felcor Suite Hotels, Inc. NYSE 947,375,000
Hospitality Property Trust NYSE 815,775,300
--------------
4,277,439,050
Industrial/Warehouse
Security Capital Ind. Trust NYSE 1,966,353,375
Liberty Property Trust NYSE 946,608,000
First Industrial Rlty. Trust NYSE 919,056,000
Centerpoint Properties NYSE 585,865,875
--------------
4,417,883,250
Manufactured Housing
Chateau Properties NYSE 659,951,250
Manufacturer Home Com. NYSE 546,765,625
Sun Communities NYSE 488,061,254
--------------
1,694,778,129
Medical
Meditrust NYSE 2,235,025,500
Health & Retirement Properties NYSE 1,678,102,750
Health Care Property Investors NYSE 942,775,245
Nationwide Health Prop. NYSE 883,109,500
National Health Investors NYSE 856,828,412
American Health Properties NYSE 586,475,000
--------------
7,182,316,407
Mixed
Spieker Properties NYSE 1,596,300,750
Duke Realty Investments, Inc. NYSE 1,210,097,125
Washington REIT SBI ASE 572,904,000
--------------
3,379,301,875
Mortgage
CWM Mortgage Holdings, Inc. NYSE 952,214,375
Capstead Mortgage Corporation NYSE 917,231,500
Resource Mortgage Capital, Inc. NYSE 549,901,914
--------------
2,419,347,789
Office
Crescent R. E. Equities, Inc. NYSE 1,951,884,000
Beacon Properties Corp. NYSE 1,487,034,875
CarrAmerica Realty NYSE 1,259,030,500
Highwood Properties, Inc. NYSE 1,163,747,500
Cali Realty NYSE 1,148,588,375
Cousins Properties NYSE 762,431,500
Reckson Associates NYSE 728,620,500
--------------
8,501,337,250
Retail-Mall
Simon Property Group NYSE 3,044,876,000
General Growth Properties, Inc. NYSE 934,156,250
Macerich Company NYSE 687,307,500
Taubman Centers, Inc. NYSE 675,918,000
CBL & Associates Prop. NYSE 586,138,000
--------------
5,928,395,750
Retail-Outlet
Mills Corp. NYSE 540,930,750
Chelsea GCA Realty NYSE 434,165,000
HGI Realty NYSE 277,598,500
--------------
1,252,694,250
Retail-Strip
Vornado Realty Trust NYSE 1,705,709,000
New Plan Realty Trust NYSE 1,333,406,625
Kimco Realty Corp. NYSE 1,132,250,000
Weingarten Realty Investors NYSE 1,117,368,000
Federal Realty Investment Trust NYSE 983,083,500
Developers Diversified Realty NYSE 904,051,500
--------------
7,175,868,625
Self Storage
Public Storage, Inc. NYSE 2,696,321,250
Storage USA Inc. REIT NYSE 960,593,750
Shurgard Storage Centers, Inc. NYSE 769,383,875
--------------
4,426,298,875
Specialty
Franchise Finance Corp. NYSE 983,678,843
TriNet Realty NYSE 665,291,375
Realty Income Corp. NYSE 539,956,939
--------------
2,188,927,157
64,493,962,083
REITs pool investors' funds for investment primarily in income producing real
estate or real estate related loans or interests. A REIT is not taxed on income
distributed to its shareholders or unitholders if it complies with regulatory
requirements relating to its organization, ownership, assets and income and a
regulatory requirement that it distribute to its shareholders or unitholders at
least 95% of its taxable income for each taxable year. Generally, REITs can be
classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive their income
primarily from rents and capital gains from appreciation realized through
property sales. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive their income primarily from
interest payments. Mortgage REITs are sensitive to the credit quality of the
underlying borrowers. Hybrid REITs combine the characteristics of both Equity
and Mortgage REITs. The value of REITs may be affected by management skill, cash
flow and tax and regulatory requirements.
The investment objective of the Realty Growth Fund is long-term growth of
capital. Current income is a secondary objective. In selecting investments for
the Fund, the Adviser will emphasize equity securities of 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. The
Fund's performance depends on conditions in the real estate industry.
For purposes of the Fund's investments, a "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate. The equity securities in
which the Fund will invest may include common stocks, shares of beneficial
interest and securities with common stock characteristics, such as preferred
stock, warrants and debt securities convertible into common stock. The debt
securities in which the Fund will invest may include bonds, notes and other
short-term debt obligations.
Because the Funds invest primarily in the real estate industry, their
investments may be subject to certain risks associated with the direct ownership
of real estate. These risks include: declines in the value of real estate; risks
related to general and local economic conditions, overbuilding and increased
competition; increases in property taxes and operating expenses; and variations
in rental income. For more information on these and other risks of investing in
the real estate industry, see "INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
- - Risks of Investing" in the Prospectus.
The policies described above and those described below are not fundamental and
may be changed without shareholder approval.
Mortgage-Backed Securities
The 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").
Mortgage-Backed Securities represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as the Government National
Mortgage Association ("Ginnie Mae") and government-related organizations such as
the Federal National Mortgage Association ("Fannie Mae") and the Federal Home
Loan Mortgage Corporation ("Freddie Mac"), as well as by nongovernmental issuers
such as commercial banks, savings and loan institutions, mortgage bankers, and
private mortgage insurance companies. Although certain Mortgage-Backed
Securities are guaranteed by a third party or otherwise similarly secured, the
market value of the security, which may fluctuate, is not so secured. If the
Adviser purchases a Mortgage-Backed Security at a premium, that portion may be
lost if there is a decline in the market value of the security whether resulting
from changes in interest rates or prepayments in the underlying mortgage
collateral. As with other interest-bearing securities, the prices of such
securities are inversely affected by changes in interest rates. However, though
the value of a Mortgage-Backed Security may decline when interest rates rise,
the converse is not necessarily true since in periods of declining interest
rates the mortgages underlying the securities are prone to prepayment. For this
and other reasons, a Mortgage-Backed Security's stated maturity may be shortened
by unscheduled prepayments on the underlying mortgages and, therefore, it is not
possible to predict accurately the securities' return to the Realty Growth Fund.
In addition, regular payments received in respect of Mortgage-Backed Securities
include both interest and principal. No assurance can be given as to the return
the Realty Growth Fund will receive when these amounts are reinvested.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue Mortgage-Backed Securities
and among the securities that they issue. Mortgage-Backed Securities issued by
Ginnie Mae include Ginnie Mae Mortgage Pass-Through Certificates which are
guaranteed as to the timely payment of principal and interest by Ginnie Mae.
This guarantee is backed by the full faith and credit of the United States.
Ginnie Mae is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. Ginnie Mae certificates also are supported by
the authority of Ginnie Mae to borrow funds from the U.S. Treasury to make
payments under its guarantee. Mortgage-Backed Securities issued by Fannie Mae
include Fannie Mae Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are guaranteed as to timely payment of the principal and
interest by Fannie Mae. Fannie Maes are solely the obligations of Fannie Mae and
are not backed by or entitled to the full faith and credit of the United States.
Fannie Mae is a government-sponsored organization owned entirely by private
stockholders. Mortgage-Backed Securities issued by Freddie Mac include Freddie
Mac Mortgage Participation Certificates (also known as "Freddie Macs" or
"PC's"). Freddie Mac is a corporate instrumentality of the United States,
created pursuant to an Act of Congress, which is owned entirely by Federal Home
Loan Banks. Freddie Macs are not guaranteed by the United States or by any
Federal Home Loan Banks and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to
timely payment of interest, which is guaranteed by Freddie Mac. Freddie Mac
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. When Freddie Mac does not guarantee
timely payment of principal, Freddie Mac may remit the amount due on account of
its guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after it becomes
payable.
The Realty Growth Fund may also invest in Mortgage-Backed Securities which are
collateralized mortgage obligations structured on pools of mortgage pass-through
certificates or mortgage loans ("CMOs" and "REMICs") and derivative
multiple-class mortgage-backed securities ("Stripped Mortgage-Backed Securities"
or "SMBSs").
Short-Term Investments
For temporary defensive purposes, the Realty Growth Fund may invest up to 100%
of its total assets in short-term investments. Each Fund (including the REIT
Index Fund) may also make short-term investments for liquidity purposes (e.g.,
in anticipation of redemptions or purchases of securities). The Funds may invest
in short-term investments consisting of corporate commercial paper and other
short-term commercial obligations, in each case rated or issued by companies
with similar securities outstanding that are rated Prime-l, Aa or better by
Moody's Investors Service, Inc. ("Moody's") or A-1, AA or better by Standard &
Poor's Ratings Group ("Standard & Poor's"); obligations (including certificates
of deposit, time deposits, demand deposits and bankers' acceptances) of banks
with securities outstanding that are rated Prime-l, Aa or better by Moody's, or
A-1, AA or better by Standard & Poor's; obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities with remaining maturities
not exceeding 18 months; securities of registered investment companies, subject
to the provisions of the 1940 Act; and repurchase agreements. These investments
may have a lower yield than would be available from investments with a lower
quality or longer term.
Lower Rated Debt Securities
The Realty Growth Fund may invest in debt securities which are rated Caa or
higher by Moody's or CCC or higher by Standard & Poor's or Fitch Investors
Service, Inc. ("Fitch") or equivalent unrated securities. However, the Realty
Growth Fund may not invest more than 25% of its assets in debt securities rated
lower than Baa by Moody's or BBB by Standard & Poor's or Fitch or securities not
rated by Moody's, Standard & Poor's or Fitch which the Adviser deems to be of
equivalent quality. Bonds rated BB or Ba or below (or comparable unrated
securities) are commonly referred to as "junk bonds" and are considered
speculative and may be questionable as to principal and interest payments. In
some cases, such bonds may be highly speculative, have poor prospects for
reaching investment standing and be in default. As a result, investment in such
bonds will entail greater risks than those associated with investment in
investment-grade bonds (i.e., bonds rated BBB or better by Standard & Poor's or
Fitch or Baa or better by Moody's).
An economic downturn could severely affect the ability of highly leveraged
issuers to service their debt obligations or to repay their obligations upon
maturity. Factors having an adverse impact on the market value of lower rated
securities will have an adverse effect on the Realty Growth Fund's net asset
value to the extent it invests in such securities. In addition, the Realty
Growth Fund may incur additional expenses to the extent it is required to seek
recovery upon a default in payment of principal or interest on its portfolio
holdings.
The secondary market for junk bond securities, which is concentrated in
relatively few market makers, may not be as liquid as the secondary market for
more highly rated securities, a factor which may have an adverse effect on the
Realty Growth Fund's ability to dispose of a particular security when necessary
to meet its liquidity needs. Under adverse market or economic conditions, the
secondary market for junk bond securities could contract further, independent of
any specific adverse changes in the condition of a particular issuer. As a
result, the Adviser could find it more difficult to sell these securities or may
be able to sell the securities only at prices lower than if such securities were
widely traded. Prices realized upon the sale of such lower rated or unrated
securities, under these circumstances, may be less than the prices used in
calculating the Realty Growth Fund's net asset value.
Since investors generally perceive that there are greater risks associated with
the medium to lower rated securities of the type in which the Realty Growth Fund
may invest, the yields and prices of such securities may tend to fluctuate more
than those for higher rated securities. In the lower quality segments of the
fixed-income securities market, changes in perceptions of issuers'
creditworthiness tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the fixed-income securities market
resulting in greater yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In addition,
the prices of fixed-income securities fluctuate in response to the general level
of interest rates. Fluctuations in the prices of portfolio securities subsequent
to their acquisition will not affect cash income from such securities but will
be reflected in a Fund's net asset value.
Medium to lower rated and comparable non-rated securities tend to offer higher
yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of other issuers. In addition to the risk of default,
there are the related costs of recovery on defaulted issues. The Adviser will
attempt to reduce these risks through diversification of the Realty Growth
Fund's portfolio and by analysis of each issuer and its ability to make timely
payments of income and principal, as well as broad economic trends in corporate
developments.
Foreign Real Estate Companies and Associated Risks
The Realty Growth Fund may invest in securities of non-U.S. real estate
companies. The risks of investing in real estate and real estate companies are
described in the Prospectus and above under "Investment Policies." Investing in
securities issued by companies whose principal business activities are outside
the United States may involve significant risks not present in U.S. investments.
For example, the value of these securities fluctuates based on the relative
strength of the U.S. dollar. In addition, there is generally less publicly
available information about non-U.S. issuers, particularly those not subject to
the disclosure and reporting requirements of the U.S. securities laws. Non-U.S.
issuers are generally not bound by uniform accounting, auditing and financial
reporting requirements comparable to those applicable to U.S. issuers.
Investments in securities of non-U.S. issuers also involve the risk of possible
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of a
Fund, political or financial instability or diplomatic and other developments
which would affect such investments. Further, economies of other countries or
areas of the world may differ favorably or unfavorably from the economy of the
U.S.
It is anticipated that in most cases the best available market for securities of
non-U.S. real estate companies would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the U.S.,
and securities of some non-U.S. real estate companies (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. Non-U.S. security trading practices,
including those involving securities settlement where Realty Growth Fund assets
may be released prior to receipt of payments, may expose the Realty Growth Fund
to increased risk in the event of a failed trade or the insolvency of a non-U.S.
broker-dealer. In addition, non-U.S. brokerage commissions are generally higher
than commissions on securities traded in the U.S. and may be non-negotiable. In
general, there is less overall governmental supervision and regulation of
non-U.S. securities exchanges, brokers and listed companies than in the U.S.
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other forms of depositary receipts for
securities of non-U.S. issuers provide an alternative method for the Realty
Growth Fund to make non-U.S. investments. These securities are not usually
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs and GDRs, in bearer form, are designed for use in
European and global securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
EDRs and GDRs are European and global receipts, respectively, evidencing a
similar arrangement.
The Realty Growth Fund may invest in securities of non-U.S. real estate
companies that impose restrictions on transfer within the United States or to
United States persons. Although securities subject to such transfer restrictions
may be marketable abroad, they may be less liquid than securities of non-U.S.
real estate companies of the same class that are not subject to such
restrictions.
Repurchase Agreements
Each Fund may invest in repurchase agreements collateralized by securities in
which that Fund may otherwise invest. Repurchase agreements are agreements by
which the Fund purchases a security and simultaneously commits to resell that
security to the seller (which is usually a member bank of the U.S. Federal
Reserve System or a member firm of the New York Stock Exchange (or a subsidiary
thereof)) at an agreed-upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed-upon market rate of interest which is unrelated to the coupon
rate or maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security, usually U.S. Government
or Government agency issues. Under the 1940 Act, repurchase agreements may be
considered to be loans by the buyer. The Fund's risk is limited to the ability
of the seller to pay the agreed-upon amount on the delivery date. If the seller
defaults, the underlying security constitutes collateral for the seller's
obligation to pay although that Fund may incur certain costs in liquidating this
collateral and in certain cases may not be permitted to liquidate this
collateral. All repurchase agreements entered into by the Funds are fully
collateralized, with such collateral being marked to market daily.
Reverse Repurchase Agreements
Each Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by the Fund and the agreement by
the Fund to repurchase the securities at an agreed upon price, date and interest
payment. When the Fund enters into reverse repurchase transactions, securities
of a dollar amount equal in value to the securities subject to the agreement
will be maintained in a segregated account with the Fund's custodian. The
segregation of assets could impair the Fund's ability to meet its current
obligations or impede investment management if a large portion of the Fund's
assets are involved. Reverse repurchase agreements are considered to be a form
of borrowing.
Lending of Portfolio Securities
Consistent with applicable regulatory requirements and in order to generate
income, each Fund may lend its securities to broker-dealers and other
institutional borrowers. Such loans will usually be made only to member banks of
the U.S. Federal Reserve System and to member firms of the New York Stock
Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. The Fund would have the right to call a
loan and obtain the securities loaned at any time on customary industry
settlement notice (which will not usually exceed five days). During the
existence of a loan, the Fund would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would also
receive compensation based on investment of the collateral. The Fund would not,
however, have the right to vote any securities having voting rights during the
existence of the loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or of the giving or withholding
of their consent on a material matter affecting the investment. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower fail financially. However, the
loans would be made only to entities deemed by the Adviser to be of good
standing, and when, in the judgment of the Adviser, the consideration which can
be earned currently from loans of this type justifies the attendant risk. If the
Adviser determines to make loans, it is not intended that the value of the
securities loaned by the Fund would exceed 30% of the value of its net assets.
Restricted Securities and Illiquid Investments
The Trust may purchase securities for the Funds that are not registered
("restricted securities") under the Securities Act of 1933 (the "Securities
Act"), but can be offered and sold to "qualified institutional buyers" under
Rule 144A under the Securities Act. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are not
treated as illiquid securities for purposes of the Fund's investment
limitations.
The Trust does not invest more than 15% of either Fund's net assets in illiquid
investments, which include securities for which there is no readily available
market, securities subject to contractual restrictions on resale and restricted
securities, unless the Trustees determine, based on the trading markets for the
specific restricted security, that it is liquid. The Trust's Trustees may adopt
guidelines and delegate to the Adviser the daily function of determining and
monitoring liquidity of restricted securities. The Trust's Trustees, however,
retain sufficient oversight and are ultimately responsible for the
determinations.
"When-Issued" Securities
Each Fund may purchase securities on a "when-issued" or on a "forward delivery"
basis. It is expected that, under normal circumstances, the applicable Fund
would take delivery of such securities. When the Fund commits to purchase a
security on a "when-issued" or on a "forward delivery" basis, it sets up
procedures consistent with SEC policies. Since those policies currently require
that an amount of the Fund's assets equal to the amount of the purchase be held
aside or segregated to be used to pay for the commitment, the Fund will always
have cash, cash equivalents or high quality debt securities sufficient to cover
any commitments or to limit any potential risk. However, even though the Funds
do not intend to make such purchases for speculative purposes and intend to
adhere to the provisions of SEC policies, purchases of securities on such bases
may involve more risk than other types of purchases. For example, the Fund may
have to sell assets which have been set aside in order to meet redemptions.
Also, if the Adviser determines it is advisable as a matter of investment
strategy to sell the "when-issued" or "forward delivery" securities, the Fund
would be required to meet its obligations from the then available cash flow or
the sale of securities, or, although it would not normally expect to do so, from
the sale of the "when-issued" or "forward delivery" securities themselves (which
may have a value greater or less than the Fund's payment obligation).
Options and Futures Contracts
To hedge against changes in securities prices, each Fund may purchase and sell
various kinds of futures contracts, and purchase and write (sell) call and put
options on any of such futures contracts. Each Fund may also purchase put and
call options on securities indices that are based on securities in which it may
invest. The futures contracts may be based on various securities (such as U.S.
Government securities), securities indices and other financial instruments and
indices. A Fund may engage in futures and related options transactions for bona
fide hedging and non-hedging purposes as described below. All futures contracts
entered into by a Fund are traded on U.S. exchanges or boards of trade that are
licensed and regulated by the Commodity Futures Trading Commission (the "CFTC")
or on foreign exchanges.
A futures contract may generally be described as an agreement between two
parties to buy and sell particular financial instruments for an agreed price
during a designated month (or to deliver the final cash settlement price, in the
case of a contract relating to an index or otherwise not calling for physical
delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, a Fund can seek
to offset a decline in the value of its current portfolio securities through the
sale of futures contracts. When interest rates are falling or securities prices
are rising, a Fund, through the purchase of futures contracts, can attempt to
secure better rates or prices than might later be available in the market when
it effects anticipated purchases.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. A clearing corporation associated with the exchange on which futures
on securities are traded guarantees that, if still open, the sale or purchase
will be performed on the settlement date.
Hedging, by use of futures contracts, seeks to establish with more certainty the
effective price and rate of return on portfolio securities and securities that a
Fund owns or proposes to acquire. A Fund may, for example, take a "short"
position in the futures market by selling futures contracts in order to hedge
against an anticipated rise in interest rates that would adversely affect the
value of the Fund's portfolio securities. Such futures contracts may include
contracts for the future delivery of securities held by a Fund or securities
with characteristics similar to those of a Fund's portfolio securities. If, in
the opinion of the Adviser, there is a sufficient degree of correlation between
price trends for a Fund's portfolio securities and futures contracts based on
securities indices, a Fund may also enter into such futures contracts as part of
its hedging strategy. Although under some circumstances prices of securities in
a Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Adviser will attempt to estimate the extent of this volatility
difference based on historical patterns and compensate for any such differential
by having a Fund enter into a greater or lesser number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting a
Fund's securities portfolio. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position. On the other hand, any
unanticipated appreciation in the value of a Fund's portfolio securities would
be substantially offset by a decline in the value of the futures position.
On other occasions, a Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices or rates that are currently available.
The acquisition of put and call options on futures contracts will give a Fund
the right (but not the obligation) for a specified price to sell or to purchase,
respectively, the underlying futures contract at any time during the option
period. As the purchaser of an option on a futures contract, a Fund obtains the
benefit of the futures position if prices move in a favorable direction but
limits its risk of loss in the event of an unfavorable price movement to the
loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium, to sell a futures
contract, which may have a value higher than the exercise price. Conversely, the
writing of a put option on a futures contract generates a premium which may
partially offset an increase in the price of securities that a Fund intends to
purchase; however, a Fund becomes obligated to purchase a futures contract which
may have a value lower than the exercise price. Thus, the loss incurred by a
Fund in writing options on futures is potentially unlimited and may exceed the
amount of the premium received. A Fund will incur transaction costs in
connection with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.
A Fund may use options on futures contracts for bona fide hedging or non-hedging
purposes as discussed below.
A Fund will engage in futures and related options transactions only for bona
fide hedging or non-hedging purposes in accordance with CFTC regulations which
permit investment companies registered under the 1940 Act to engage in such
transactions without requiring their sponsors to be registered as commodity pool
operators. No Fund is permitted to engage in speculative futures trading. A Fund
will determine that the price fluctuations in the futures contracts and options
on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or in securities which it expects to
purchase. Except as stated below, a Fund's futures transactions will be entered
into for traditional hedging purposes -- i.e., futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns, or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. In particular cases, when it is
economically advantageous for a Fund to do so, a long futures position may be
terminated or an option may expire without the corresponding purchase of
securities or other assets.
No Fund may purchase or sell non-hedging futures contracts or purchase or sell
related non-hedging options, except for closing purchase or sale transactions,
if immediately thereafter the sum of the amount of initial margin deposits on
the Fund's existing non-hedging futures and related non-hedging options
positions and the amount of premiums paid for existing 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.
Transaction costs associated with futures contracts and related options involve
brokerage costs, require margin deposits and, in the case of contracts and
options obligating a Fund to purchase securities or currencies, require a Fund
to segregate assets to cover such contracts and options.
While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while a Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for a Fund than if it had not entered into any
futures contracts or options transactions. In the event of an imperfect
correlation between a futures position and a portfolio position which is
intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss.
Investment Restrictions
Fundamental Restrictions
The Trust, on behalf of the Funds, has adopted the following policies which may
not be changed with respect to either Fund without approval by holders of a
majority of the outstanding voting securities of that Fund, which as used in
this Statement of Additional Information means the vote of the lesser of (i) 67%
or more of the outstanding voting securities of the respective Fund present at a
meeting at which the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy, or (ii) more than
50% of the outstanding voting securities of the respective Fund. The term
"voting securities" as used in this paragraph has the same meaning as in the
1940 Act.
A Fund may not:
(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow from banks and enter into reverse
repurchase agreements in an amount not to exceed 33 1/3% of the current
value of its respective net assets, including the amount borrowed (and
no Fund may purchase any securities at any time at which borrowings
exceed 5% of the total assets of the Fund, taken at market value). It
is intended that a Fund would borrow money only from banks and only to
accommodate requests for the repurchase of shares of the Fund while
effecting an orderly liquidation of portfolio securities.
(2) Make short sales of securities or purchase securities on margin, except
that the Trust may purchase and sell various types of futures contracts
and may obtain short term credits as necessary for the clearance of
security transactions.
(3) Underwrite securities issued by other persons, except to the extent
that the Fund may be considered an underwriter within the meaning of
the Securities Act of 1933 in the disposition of restricted securities.
(4) Make loans to other persons except (a) through the lending of its
portfolio securities, but not in excess of 33 1/3% of the Fund's net
assets, (b) through the use of fixed time deposits or repurchase
agreements or the purchase of short-term obligations or (c) by
purchasing all or a portion of an issue of debt securities; for
purposes of this paragraph 4 the purchase of short-term commercial
paper or a portion of an issue of debt securities which are part of an
issue to the public shall not be considered the making of a loan.
(5) Purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity
contracts in the ordinary course of business, except that the Fund may
purchase and sell mortgage-related securities and may hold and sell
real estate acquired as a result of the ownership of securities by the
Fund.
(6) Issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder, except as appropriate to
evidence a debt incurred without violating Investment Restriction (1)
above.
(7) In the case of the REIT Index Fund, with respect to 75% of its total
assets, purchase securities of any issuer if such purchase at the time
thereof would cause more than 5% of the Fund's assets (taken at market
value) to be invested in the securities of such issuer (other than
securities or obligations issued or guaranteed by the United States
government or any agency or instrumentality thereof); provided that,
for purposes of this restriction the issuer of an option or futures
contract shall not be deemed to be the issuer of the security or
securities underlying such contract.
(8) In the case of the REIT Index Fund, with respect to 75% of its total
assets, purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such
issuer to be held by the Fund.
(9) Invest 25% or more of its assets in securities of issuers in any one
industry (other than securities or obligations issued or guaranteed by
the United States government or any agency or instrumentality thereof),
except that it will invest at least 25% of its assets in securities of
issuers in the real estate industry.
Non-Fundamental Restrictions
Each Fund does not as a matter of operating policy: (i) borrow money for any
purpose in excess of 10% of the net assets of the Fund (taken at cost) (the Fund
will not purchase any securities for the Fund at any time at which borrowings
exceed 5% of the total assets of the Fund (taken at market value)), (ii) sell
any security which the Fund does not own unless by virtue of the ownership of
other securities there is at the time of sale a right to obtain securities,
without payment of further consideration, equivalent in kind and amount to the
securities sold and provided that if such right is conditional the sale is made
upon the same conditions, (iii) invest for the purpose of exercising control or
management, (iv) purchase securities issued by any registered investment
company, except by purchase in the open market where no commission or profit to
a sponsor or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open market, is
part of a plan of merger or consolidation; provided, however, that the Fund will
not purchase the securities of any registered investment company if such
purchase at the time thereof would cause more than 10% of the total assets of
the Fund (taken in each case at the greater of cost or market value) to be
invested in the securities of such issuers or would cause more than 3% of the
outstanding voting securities of any such issuer to be held for the Fund, (v)
invest more than 15% of the net assets of the Fund in securities that are not
readily marketable or which are subject to legal or contractual restrictions on
resale including debt securities for which there is no established market and
fixed time deposits and repurchase agreements maturing in more than seven days,
(vi) purchase or retain any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer or Trustee of
the Trust, or is an officer or director of the Adviser, if after the purchase of
the securities of such issuer by the Fund, one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both, all taken
at market value, of such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than 5% of such shares
or securities, or both, all taken at market value, (vii) make short sales of
securities, except that the Trust may purchase and sell various types of futures
contracts and may obtain short term credits as necessary for the clearance of
security transactions, (viii) invest more than 5% of the Fund's net assets in
warrants (valued at the lower of cost or market), but not more than 2% of the
Fund's net assets may be invested in warrants not listed on the New York Stock
Exchange or the American Stock Exchange, (ix) with respect to 50% of the Fund's
total assets, invest more than 5% of its total assets in the securities of any
one issuer and, as to the remaining 50% of the Fund's total assets, invest more
than 25% in the securities of any one issuer, (x) purchase securities of any
issuer if, as to 75% of the assets of the Fund at the time of purchase, more
than 10% of the voting securities of any issuer would be held by the Fund, or
(xi) invest more than 15% of the Fund's total assets in the securities of
issuers which together with any predecessors (including public and private
predecessor operating companies) have a record of less than three years of
continuous operating or securities of issuers which are restricted as to
disposition, despite any determinations made by the Board of Trustees that such
securities are liquid.
These policies are not fundamental and may be changed by each Fund without the
approval of its shareholders in response to changes in state and federal
requirements.
Percentage Restrictions
If a percentage restriction on investment or utilization of assets set forth
above or referred to in the Prospectus is adhered to at the time an investment
is made or assets are so utilized, a later change in percentage resulting from
changes in the value of the securities held for a Fund will not be considered a
violation of policy.
3. PERFORMANCE INFORMATION
From time to time, the total return and yield of each Fund may be quoted in
advertisements, sales literature, shareholder reports, or other communications.
A total rate of return quotation for each Fund is calculated for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains distributions declared during such
period with respect to a share held at the beginning of such period and with
respect to shares purchased with such dividends and capital gains distributions,
by (ii) the public offering price per share on the first day of such period, and
(b) subtracting 1 from the result. Any annualized total rate of return quotation
is calculated by (x) adding 1 to the period total rate of return quotation
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
Total rates of return may also be calculated on investments at various sales
charge levels or at net asset value. Any performance data which is based on a
reduced sales charge or net asset value per share would be reduced if the
maximum sales charge were taken into account.
Any current yield quotation for a Fund consists of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a 30
calendar day or one month period and is calculated by (a) raising to the sixth
power the sum of 1 plus the quotient obtained by dividing the Fund's net
investment income earned during the period by the product of the average daily
number of shares outstanding during the period that were entitled to receive
dividends and the maximum public offering price per share on the last day of the
period, (b) subtracting 1 from the result, and (c) multiplying the result by 2.
The average annual total return for the REIT Index Fund for the fiscal year
ended March 31, 1997, and for the period from commencement of operations (July
3, 1995) through March 31, 1997, was 24.98% and 17.74%, respectively. The
cumulative total return for such Fund from commencement of operations through
March 31, 1997, was 32.98%. These quotations assume the 3.0% maximum sales load
was deducted from the initial investment. Without the deduction of the 3.0%
maximum sales load, the average annual total return for the fiscal year ended
March 31, 1997, and from the commencement of operations through March 31, 1997,
for such Fund was 28.85% and 19.82%, respectively. The cumulative total return
for such Fund from commencement of operations through March 31, 1997, without
the deduction of the 3.0% maximum sales load, was 37.62%.
The average annual total return for the Realty Growth Fund for the fiscal year
ended March 31, 1997, and for the period from commencement of operations (July
3, 1995) through March 31, 1997, was 38.59% and 24.45%, respectively. The
cumulative total return for such Fund from commencement of operations through
March 31, 1997, was 46.49%. These quotations assume the maximum 4.5% sales load
was deducted from the initial investment. Without the deduction of the 4.5%
maximum sales load, the average annual total return for the fiscal year ended
March 31, 1997, and from the commencement of operations through March 31, 1997,
for such Fund was 45.12% and 27.78%, respectively. The cumulative total return
for such Fund from commencement of operations to March 31, 1997, without the
deduction of the 4.5% maximum sales load, was 52.19%.
These performance quotations should not be considered as representative of the
Fund's performance for any specific period in the future.
Each Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, each Fund may compare its performance to
the S&P 500 Index, as a comparison to the overall market, the Dow Jones Utility
Index, as a comparison to another income-oriented equity group, and the
GrandView REIT Index (see "Investment Policies" above), as a comparison to the
Funds' investment benchmark as described in the Prospectus. Each Fund may also
compare its performance to the National Association of Real Estate Investment
Trust's ("NAREIT") Total Return Index, as a comparison to the REIT market.
Comparative performance may also be expressed by reference to a ranking prepared
by a mutual fund monitoring service or by one or more newspapers, newsletters or
financial periodicals. Each Fund may also occasionally cite statistics to
reflect its volatility and risk. Each Fund may also compare its performance to
other published reports of the performance of unmanaged portfolios of companies.
The performance of such unmanaged portfolios generally does not reflect the
effects of dividends or dividend reinvestment. Of course, there can be no
assurance that any Fund will experience the same results. Performance
comparisons may be useful to investors who wish to compare a Fund's past
performance to that of other mutual funds and investment products. Of course,
past performance is not a guarantee of future results.
Each Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, each Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Funds' Prospectus to obtain a
more complete view of each Fund's performance before investing. Of course, when
comparing a Fund's performance to any index, factors such as composition of the
index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for each Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time each Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. Each Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). Each Fund may also depict the historical performance
of the securities in which the Fund may invest over periods reflecting a variety
of market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
Each Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The net asset value of each share of each Fund is determined each day during
which the New York Stock Exchange is open for trading (a "Business Day"). As of
the date of this Statement of Additional Information, the New York Stock
Exchange is open for trading every weekday except for the following holidays (or
the days on which they are observed): New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. This determination of net asset value of shares of a Fund is made
once each day at 4 p.m. New York time by dividing the value of each Fund's net
assets (i.e., the value of its assets less its liabilities, including expenses
payable or accrued) by the number of shares of the Fund outstanding at the time
the determination is made. A share's net asset value is effective for orders
received by the Distributor prior to its calculation and prior to the close of
the Business Day on which such net asset value is determined.
For the fiscal year ended March 31, 1997, the total expenses of the Funds after
fee waivers and expense reimbursements were $6,342 for the REIT Index Fund and
$10,437 for the Realty Growth Fund.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the principal exchange or market
where they are traded. Securities which have not traded on the date of
valuation, or securities for which sales prices are not generally reported, are
valued at the mean between the current bid and asked prices. Securities listed
on a non-U.S. exchange are valued at the last quoted sale price available before
the time when net assets are valued. Bonds and other fixed income securities
(other than short-term obligations) are valued on the basis of valuations
furnished by a pricing service, use of which has been approved by the Board of
Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations (maturing in 60 days or less) are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures contracts are normally valued at the settlement price on the exchange on
which they are traded. Securities for which there are no such valuations are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees.
Trading in securities on most non-U.S. exchanges and over-the-counter markets is
normally completed before the close of regular trading on the New York Stock
Exchange and may also take place on days on which the New York Stock Exchange is
closed. If events materially affecting the value of non-U.S. securities occur
between the time when the exchange on which they are traded closes and the time
when a Fund's net asset value is calculated, such securities will be valued at
fair value in accordance with procedures established by and under the general
supervision of the Board of Trustees.
Interest income on long-term obligations held for a Fund is determined on the
basis of interest accrued plus amortization of "original issue discount"
(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued less amortization of any premium.
Subject to compliance with applicable regulations, the Trust has reserved the
right to pay the redemption price of shares of each Fund, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares being
sold. If a holder of shares received a distribution in kind, that holder could
incur brokerage or other charges in converting the securities to cash.
Redemptions of shares of the REIT Index Fund made within six months of purchase
are subject to a redemption fee in the amount of 1% of the net asset value of
the shares redeemed. Redemptions of shares of the REIT Index Fund made between
six and twelve months after purchase will be subject to a redemption fee of
0.50% of the net asset value of the shares redeemed. No redemption fee is
imposed if the proceeds are immediately invested in shares of 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 REIT Index Fund. Redemption fees may also be
waived or reduced for "omnibus" accounts or in other circumstances as described
in the Prospectus. All redemption fees are payable to the applicable Fund.
Redemption proceeds are normally paid by check within seven days after receipt
of a redemption request. However, the right of any shareholder to receive
payment with respect to any redemption may be suspended or the payment of the
redemption proceeds postponed during any period in which (a) trading in the
markets a Fund normally utilizes is restricted, or an emergency, as defined by
the rules and regulations of the SEC, exists making disposal of a Fund's
investments or determination of its net asset value not reasonably practicable;
(b) the New York Stock Exchange is closed (other than customary weekend and
holiday closings); or (c) the SEC has by order permitted such suspension.
Letter of Intent
If an investor anticipates purchasing sufficient shares to entitle the investor
to a quantity discount alone or in combination with any shares of other series
of the Trust within a 13-month period, the investor may obtain such shares at
the same reduced sales charge as though the total quantity were invested in one
lump sum by completing a Letter of Intent on the terms described below. Subject
to acceptance by the Distributor and the conditions mentioned below, each
purchase will be made at a public offering price applicable to a single
transaction of the dollar amount specified in the Letter of Intent. The
shareholder must inform the Distributor that the Letter of Intent is in effect
each time shares are purchased. The shareholder makes no commitment to purchase
additional shares, but if his or her purchases within 13 months plus the value
of shares credited toward completion of the Letter of Intent do not total the
sum specified, an increased sales charge will apply as described below. A
purchase not originally made pursuant to a Letter of Intent may be included
under a subsequent Letter of Intent executed within 90 days of the original
purchase if the Distributor is informed in writing of this intent within the
90-day period. The value of shares of a Fund held prior to the commencement of a
Letter of Intent may be included, at their cost or maximum offering price
(whichever is higher), as a credit toward the completion of a Letter of Intent,
but the reduced sales charge applicable to the amount covered by such Letter is
applied only to new purchases. Neither income dividends nor capital gain
distributions taken in additional shares will apply toward the completion of the
Letter of Intent. The value of any shares redeemed or otherwise disposed of by
the purchaser prior to termination or completion of the Letter of Intent is
deducted from the total purchases made under such Letter.
If the investment specified in the Letter of Intent is not completed (either
prior to or by the end of the 13-month period), the Distributor will redeem,
within 20 days of the expiration of the Letter of Intent, an appropriate number
of the shares in order to realize the difference between the reduced sales
charge that would apply if the investment under the Letter of Intent had been
completed and the sales charge that would normally apply to the number of shares
actually purchased. By completing and signing the Letter of Intent, the
shareholder irrevocably appoints the Distributor his or her attorney to
surrender for redemption any or all shares purchased under the Letter of Intent
with full power of substitution in the premises.
Right of Accumulation
A shareholder qualifies for cumulative quantity discounts on the purchase of
shares when his or her new investment, together with the current offering price
value of all holdings of that shareholder in the Funds, reaches a discount
level. See "INFORMATION ABOUT FUND SHARES - How to Purchase Shares" in the
Prospectus for the sales charges on quantity discounts. A shareholder must
provide the Distributor with information to verify that the quantity sales
charge discount is applicable at the time the investment is made.
Exchange Privilege
Shares of each Fund for which payment has been received (i.e., an established
account) may be exchanged at their net asset value for shares of 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 Fund (in which case an initial sales charge will be
imposed at a rate equal to the difference). No redemption fee is imposed on
shares being disposed of through an exchange; however, a redemption fee may
apply to redemptions of shares acquired through an exchange of shares of the
REIT Index Fund at the rate which would have been applicable if the shareholder
had continued to hold shares of the REIT Index Fund. Exchanges will be made only
after proper instructions in writing or by telephone (an "Exchange Request") are
received for an established account by the Distributor.
Each Exchange Request must be in proper form (see "How to Redeem Shares" in the
Prospectus), and each exchange must involve either shares having an aggregate
value of at least $1,000 or all the shares in the shareholder's account. Each
exchange involves the redemption of the shares of a Fund to be exchanged and the
purchase at net asset value of the shares of the other Fund. Any gain or loss on
the redemption of the shares exchanged is reportable on the shareholder's
Federal income tax return, unless such shares were held in a tax-deferred
retirement plan or other tax-exempt account. If the Exchange Request is received
by the Distributor in writing or by telephone on any business day prior to 4:00
p.m., New York time, the exchange usually will occur on that day if all the
restrictions set forth above have been complied with at that time. However,
payment of the redemption proceeds by a Fund, and thus the purchase of shares of
the other Fund, may be delayed for up to seven days if the Fund determines that
such delay would be in the best interest of all of its shareholders.
5. MANAGEMENT
The Trustees and officers of the Trust, their addresses and ages, and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate that those
Trustees are "interested persons" (as defined in the 1940 Act) of the Trust.
Trustees of the Trust
Winsor H. Aylesworth* (age 49) - President and Trustee of the Trust; President,
Treasurer, Director, and controlling shareholder, GrandView Advisers, Inc.
(since March, 1995); President, Director, and controlling shareholder, WHA
Enterprises, Inc. (since September, 1991); Executive Vice President, Loan Review
Department, Bank of Boston Connecticut (1990 - 1993). His address is 127
Grandview Drive, Glastonbury CT 06033.
Arthur Collins (age 67) - Trustee of the Trust; President, Collins Enterprises
LLC/Collins Development Corporation (since 1972); Director, Connecticut National
Bank (1986 - 1992). His address is 53 Forest Avenue, Old Greenwich, CT 06870.
Richard W. Jagolta (age 62) - Trustee of the Trust; Business Development
Manager, Polaroid Corporation (1957 - April, 1995). His address is 40 Blueridge
Avenue, Saugus, MA 01906.
Raymond H. Weaving (age 55) - Trustee of the Trust; Director of Lending,
Massachusetts Housing Investment Corporation (since November, 1993); Vice
President and Team Leader, Baybank Boston, Inc. (1992 - 1993); Consultant,
Malden Trust Co. (1991 - 1992). His address is 11 Perry Henderson Drive,
Framingham, MA 01701.
Officers of the Trust
Winsor H. Aylesworth (age 49) - President of the Trust; President, Treasurer,
Director, and controlling shareholder, GrandView Advisers, Inc. (since March,
1995); President, Director, and controlling shareholder, WHA Enterprises, Inc.
(since September, 1991); Executive Vice President, Loan Review Department, Bank
of Boston Connecticut (1990 - 1993). His address is 127 Grandview Drive,
Glastonbury CT 06033.
Lucille C. Carlson (age 38) - Vice President of the Trust; Executive Vice
President and Director, GrandView Advisers, Inc. (since March, 1995); Director
of Research, WHA Enterprises, Inc. (since July, 1993); Assistant Vice President,
Loan Review Department, Bank of Boston Connecticut (1991 - April, 1995). Her
address is 127 Grandview Drive, Glastonbury CT 06033.
David F. Wolf (age 49) - Vice President of the Trust; Executive Vice President
and Director, GrandView Advisers, Inc. (since March, 1995); Director of
Marketing, WHA Enterprises, Inc. (since July, 1993); Financial Planning
Consultant, John Hancock Financial Services, Inc. (1992 - May, 1995); real
estate developer (1991 - 1992). Mr. Wolf is a registered representative of the
Funds' Distributor, Capital Investment Group, Inc. His address is 127 Grandview
Drive, Glastonbury CT 06033.
C. Frank Watson III (age 26) - Secretary of the Trust; Vice President, The
Nottingham Company (since 1992). His address is 105 North Washington Street,
Rocky Mount, NC 27802.
J. Hope Reese (age 36) - Treasurer of the Trust; Comptroller, The Nottingham
Company (since 1995); Cash Manager, Law Companies Group (since 1993); Financial
Manager, MGR Food Services (since 1992). Her address is 105 North Washington
Street, Rocky Mount, NC 27802.
The Declaration of Trust of the Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect to any
other matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined by a court or other body approving the settlement
or other disposition, or by a reasonable determination, based upon a review of
readily available facts, by vote of a majority of disinterested Trustees of the
Trust, or in a written opinion of independent counsel, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
Compensation of Trustees and Officers
Each Trustee who is not an "interested person" of the Trust receives a retainer
fee of $25 per Fund per meeting, plus a fee per meeting based on the amount of
assets of each Fund. The asset-based fee is waived if Fund assets do not exceed
$5 million. For assets between $5 million and $10 million, the fee is $100 per
meeting per Fund ($50 per meeting for the REIT Index Fund). For assets between
$10 million and $25 million, the fee is $200 per meeting per Fund ($100 per
meeting for the REIT Index Fund). For assets between $25 million and $50
million, the fee is $400 per meeting per Fund ($200 per meeting for the REIT
Index Fund). For assets between $50 million and $75 million, the fee is $600 per
meeting per Fund ($300 per meeting for the REIT Index Fund). Finally, for assets
greater than $75 million, the fee is $800 per meeting per Fund ($400 per meeting
for the REIT Index Fund). In addition, a Trustee who is a member of the Audit or
Nominating Committee will be paid $500 for attendance at each meeting of such
committee not held in conjunction with a meeting of the Board of Trustees of the
Trust. The officers of the Trust will not receive compensation from the Trust
for performing the duties of their offices. All Trustees are reimbursed for any
out-of-pocket expenses incurred in connection with attendance at meetings.
Compensation Table*
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Pension Total
Aggregate Retirement Benefits Estimated Compensation
Compensation Accrued As Annual from the Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
-------- ----- -------- ---------- --------
Winsor H. Aylesworth None None None None
Trustee
Arthur Collins $0 None None $0
Trustee
Richard W. Jagolta $75 None None $75
Trustee
Raymond H. Weaving $75 None None $75
Trustee
</TABLE>
*Figures are for the fiscal year ended March 31, 1997.
Principal Holders of Voting Securities
As of July 22, 1997, the Trustees and officers of the Trust as a group owned
beneficially (i.e. had voting and/or investment power) 17.51% and 19.28%,
respectively, of the then outstanding shares of the REIT Index Fund and the
Realty Growth Fund, respectively. On the same date the following shareholders
owned of record more than 5% of the outstanding shares of beneficial interest of
the Funds. Except as provided below, no person is known by the Trust to be the
beneficial owner of more than 5% of the outstanding shares of the Funds as of
July 22, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
REIT INDEX FUND
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership* Percent
FTC & Co. 31,419.301 24.780%**
P. O. Box 173736
Denver, CO 80217
Donaldson Lufkin Jenrette 11,659.039 9.195%
Securities Corp., Inc.
Lynn D. Rathjen, Tr.
Post Office Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 11,659.039 9.195%
Securities Corp, Inc.
Thomas D. Bednar, Tr.
Post Office Box 2052
Jersey City, NJ 07303-9998
* The shares indicated are believed by the Trust to be owned both of record
and beneficially by the indicated shareholders, except for shares held of
record by Donaldson Lufkin Jenrette Securities Corp., Inc. for the benefit
of its indicated clients.
** Pursuant to applicable SEC regulations, this shareholder is deemed to control
the Fund.
REALTY GROWTH FUND
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership* Percent
Chuck & Elizabeth Chan 10,405.029 9.753%
2146 Woodleaf
Mountain View, California 94040
Donaldson Lufkin Jenrette 6,344.916 5.947%
Securities Corp, Inc.
Union Bank of CA, Trustee
Post Office Box 2052
Jersey City, NJ 07303-9998
Christine R. Cox 6,060.606 5.681%
6310 NE 165 Court
Bothell, Washington 98011
First Union National Bank, NC 5,886.281 5.517%
Winsor H. Aylesworth, IRA
127 GrandView Drive
Glastonbury, Connecticut 06033
</TABLE>
* The shares indicated are believed by the Trust to be owned both of record
and beneficially by the indicated shareholders, except for shares held of
record by Donaldson Lufkin Jenrette Securities Corp, Inc. for the benefit
of its indicated client.
Adviser
GrandView Advisers, Inc. manages the assets of each Fund pursuant to separate
investment advisory agreements (the "Advisory Agreements"). Subject to such
policies as the Board of Trustees may determine, the Adviser manages the
securities of each Fund and makes investment decisions for each Fund. The
Adviser furnishes at its own expense all services, facilities and personnel
necessary in connection with managing each Fund's investments and effecting
securities transactions for each Fund. Each of the Advisory Agreements will
continue in effect until April 26, 1998, and thereafter as long as such
continuance is specifically approved at least annually by the Board of Trustees
or by a vote of a majority of the outstanding voting securities of the
applicable Fund, and, in either case, by a majority of the Trustees of the Trust
who are not parties to the Advisory Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on the Advisory Agreement.
Winsor H. Aylesworth, Lucille C. Carlson and David F. Wolf, who are all
directors, officers, and shareholders of the Adviser, serve as co-portfolio
managers for the Funds. They collectively have over 50 years experience in the
commercial real estate finance and management and securities businesses. Winsor
H. Aylesworth, President, Treasurer, 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.
Each of the Advisory Agreements provides that the Adviser may render services to
others. Each Advisory Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Trust when authorized
either by a vote of a majority of the outstanding voting securities of the
applicable Fund or by a vote of a majority of the Board of Trustees, or by the
Adviser on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. Each Advisory
Agreement provides that neither the Adviser nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of security transactions
for the applicable Fund, except for willful misfeasance, bad faith or gross
negligence or reckless disregard of its or their obligations and duties under
the Advisory Agreement.
Upon termination of any contract with GrandView Advisers, Inc., or any
corporation affiliated therewith, acting as investment adviser or manager, the
Board of Trustees will promptly change the name of the Trust and of each of the
Funds to a name which does not include "GrandView" or any approximation or
abbreviation thereof.
The Prospectus contains a description of the fees payable to the Adviser for
services under the Advisory Agreements.
For the fiscal year ended March 31, 1997, and the period from July 3, 1995, to
March 31, 1996, the Adviser voluntarily waived its advisory fee for the REIT
Index Fund in the amount of $2,126 and $314, respectively, and voluntarily
reimbursed $37,598 and $17,159, respectively, of the Fund's operating expenses.
For the fiscal year ended March 31, 1997, and the period from July 3, 1995, to
March 31, 1996, the Adviser voluntarily waived its advisory fee for the Realty
Growth Fund in the amount of $5,537 and $675, respectively, and voluntarily
reimbursed $35,736 and $18,489, respectively, of the Fund's operating expenses.
Administrator and Transfer Agent
Pursuant to an administrative services agreement (the "Administrative Services
Agreement"), Nottingham serves as the administrator and fund accounting agent
for the Funds. Under the Administrative Services Agreement Nottingham provides
the Trust with general office facilities and supervises the overall
administration of the Trust, including, among other responsibilities, the
negotiation of contracts and fees with, and the monitoring of performance and
billings of, the Trust's independent contractors and agents; the preparation and
filing of all documents required for compliance by the Trust with applicable
laws and regulations; and arranging for the maintenance of books and records of
the Trust. The Administrator provides persons satisfactory to the Board of
Trustees to serve as Trustees and officers of the Trust. Such Trustees and
officers, as well as certain other employees and Trustees of the Trust, may be
directors, officers or employees of Nottingham or its affiliates.
The Administrative Services Agreement with the Trust provides that Nottingham
may render administrative services to others. The Administrative Services
Agreement with the Trust terminates automatically if it is assigned and may be
terminated without penalty by vote of a majority of the outstanding voting
securities of the Trust or by either party on not more than 90 days' written
notice. The Administrative Services Agreement with the Trust also provides that
neither Nottingham, as the Administrator, nor its personnel shall be liable for
any error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by reason
of reckless disregard of its or their obligations and duties under the Trust's
Administrative Services Agreement.
The Prospectus contains a description of the fees payable to the Administrator
under the Administrative Services Agreement.
For the fiscal year ended March 31, 1997, and the period from July 3, 1995, to
March 31, 1996, the Administrator received registration and filing
administration fees of $1,699 and $786, respectively, Fund administration fees
of $1,366 and $198, respectively, and Fund accounting fees of $9,300 and $0,
respectively, from the REIT Index Fund, in addition to reimbursement for various
securities pricing, registration, filing, shareholder servicing, and other Fund
expenses. For the fiscal year ended March 31, 1997, and the period from July 3,
1995, to March 31, 1996, the Administrator received registration and filing
administration fees of $1,694 and $794, respectively, Fund administration fees
of $1,661 and $186, respectively, and Fund accounting fees of $9,300 and $0,
respectively, from the Realty Growth Fund (having waived $43 of such fees for
the period from July 3, 1995 to March 31, 1996), in addition to reimbursement
for various securities pricing, registration, filing, shareholder servicing, and
other Fund expenses.
With the approval of the Trust, the Administrator has contracted with NC
Shareholder Services, LLC (the "Transfer Agent"), a North Carolina limited
liability company, to serve as transfer, dividend paying, and shareholder
servicing agent for the Funds. The Transfer Agent is compensated for its
services by the Administrator and not directly by the Funds.
Distributor
Capital Investment Group serves as the Distributor of each Fund's shares
pursuant to a Distribution Agreement (the "Distribution Agreement") with the
Trust. Unless otherwise terminated, the Distribution Agreement for the Funds
remains in effect until April 26, 1998, and, for each Fund, thereafter will
continue from year to year upon annual approval by the Trust's Board of
Trustees, or by the vote of a majority of the outstanding voting securities of
the Trust and by the vote of a majority of the Board of Trustees who are not
parties to the Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Agreement
will terminate in the event of its assignment, as defined in the 1940 Act.
The Trust has adopted a Distribution Plan in accordance with Rule 12b-1 under
the 1940 Act with respect to shares of the Funds after concluding that there is
a reasonable likelihood that the Distribution Plan will benefit each Fund and
its shareholders. The Distribution Plan provides that each Fund may expend up to
0.25% of such Fund's average daily net assets annually to finance any activity
primarily intended to result in the sale of shares of the Fund and/or the
servicing of shareholder accounts, provided the Board of Trustees has approved
the category of expenses for which payment is being made. Such expenditures paid
as service fees to any person who sells shares of the Funds may not exceed 0.25%
of the shares' average net asset value.
Potential benefits of the Distribution Plan to the Funds include improved
shareholder services, savings to the Funds in transfer agency costs, benefits to
the investment process through growth and stability of assets, and maintenance
of a financially healthy management organization.
The Distribution Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the Trust's Trustees
and a majority of the Trustees who are not "interested persons" of the Trust and
who have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreement related to the Plan (for purposes of this
paragraph "Qualified Trustees"). The Distribution Plan requires that the Trust
and the Distributor provide to the Board of Trustees, and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Distribution Plan. The Distribution Plan further
provides that the selection and nomination of the Qualified Trustees is
committed to the discretion of the disinterested Trustees (as defined in the
1940 Act) then in office. The Distribution Plan may be terminated with respect
to any Fund at any time by a vote of a majority of the Trust's Qualified
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Distribution Plan may not be amended to increase materially the amount
of a Fund's permitted expenses thereunder without the approval of a majority of
the outstanding securities of that Fund and may not be materially amended in any
case without a vote of a majority of both the Trustees and Qualified Trustees.
The Distributor will preserve copies of any plan, agreement or report made
pursuant to the Distribution Plan for a period of not less than six years from
the date of the Plan, and for the first two years the Distributor will preserve
such copies in an easily accessible place.
David F. Wolf, a registered representative of the Funds' Distributor, may
receive brokerage commissions from the Distributor in connection with sales of
shares of the Funds. He may also receive payments under the Distribution Plan in
connection with the sale 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 GrandView Advisers, Inc.
For the fiscal year ended March 31, 1997, and the period from July 3, 1995, to
March 31, 1996, the aggregate dollar amount of sales charges paid on the sale of
shares of the REIT Index Fund was $2,138 and $259, respectively, of which the
Distributor retained $426 and $52, respectively, after reallowances to
broker-dealers and sales representatives.
For the fiscal year ended March 31, 1997, and the period from July 3, 1995, to
March 31, 1996, the aggregate dollar amount of sales charges paid on the sale of
shares of the Realty Growth Fund was $220 and $79, respectively, of which the
Distributor retained $0 and $10, respectively, after reallowances to
broker-dealers and sales representatives.
Custodian
The Trust has entered into a Custodian Agreement with First Union National Bank
of North Carolina, Two First Union Center, Charlotte, North Carolina 28288,
pursuant to which custodial services are provided for the Trust and the Funds.
Independent Auditors
The firm of KPMG Peat Marwick LLP, 1021 East Cary Street, Richmond, Virginia
23219-4023, serves as independent auditors for the Funds, audits the annual
financial statements of the Funds, and prepares the Funds' federal and state tax
returns. A copy of the most recent annual report of each Fund will accompany
this Statement of Additional Information whenever it is requested by a
shareholder or prospective investor.
6. PORTFOLIO TRANSACTIONS
The Trust trades securities for a Fund if it believes that a transaction net of
costs (including custodian charges) will help achieve the Fund's investment
objective. Changes in the portfolio of the REIT Index Fund will be effected
primarily to accommodate cash flows into and out of the Fund and changes in the
GrandView REIT Index. Changes in a Fund's investments are generally made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. It is anticipated that
the portfolio turnover rate of the REIT Index Fund and of the Realty Growth Fund
will not exceed 50% and 100%, respectively, in the coming year. The amount of a
Fund's brokerage commissions and realization of taxable capital gains will tend
to increase as the level of portfolio activity increases.
The primary consideration in placing portfolio securities transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of each Fund on the basis of
their professional capability, the value and quality of their brokerage
services, and the level of their brokerage commissions. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the Adviser
normally seeks to deal directly with the primary market makers, unless in its
opinion, best execution is available elsewhere. In the case of securities
purchased from underwriters, the cost of such securities generally includes a
fixed underwriting commission or concession. From time to time, soliciting
dealer fees are available to the Adviser on the tender of a Fund's securities in
so-called tender or exchange offers. Such soliciting dealer fees are in effect
recaptured for the Funds by the Adviser. At present no other recapture
arrangements are in effect.
Under the Advisory Agreements, in connection with the selection of such brokers
or dealers and the placing of such orders, the Adviser is directed to seek for
each Fund in its best judgment, prompt execution in an effective manner at the
most favorable price. Subject to this requirement of seeking the most favorable
price, securities may be bought from or sold to broker-dealers who have
furnished statistical, research and other information or services to the Adviser
or the Funds, subject to any applicable laws, rules and regulations.
The investment advisory fee that each Fund pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff.
In certain instances there may be securities that are suitable as an investment
for a Fund, as well as for one or more of the Adviser's other clients (including
other Funds). When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could adversely affect the price of or the size of the
position obtainable in a security for a Fund. When purchases or sales of the
same security for a Fund and for other portfolios managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large volume purchases or sales.
For the fiscal year ended March 31, 1997, and the period from July 3, 1995, to
March 31, 1996, the REIT Index Fund paid brokerage commissions of $3,502 and
$1,931, respectively, and the Realty Growth Fund paid brokerage commissions of
$12,994 and $3,149, respectively.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of each series and
to divide or combine the shares of any series into a greater or lesser number of
shares of that series without thereby changing the proportionate beneficial
interests in that series. While there are at present no series of the Trust
other than the Funds, the Trust has reserved the right to create and issue
additional series of shares, as well as classes of shares within each series.
Each share of each Fund represents an equal proportionate interest in the Fund
with each other share. Shares of each series participate equally in the
earnings, dividends and distribution of net assets of the particular series upon
liquidation or dissolution. Shares of each series are entitled to vote
separately to approve advisory agreements or changes in investment policy, but
shares of all series may vote together in the election or selection of Trustees
and accountants for the Trust. In matters affecting only a particular Fund, only
shares of that particular Fund are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on which
they are entitled to vote. Shareholders in the Trust do not have cumulative
voting rights, and shareholders owning more than 50% of the outstanding shares
of the Trust may elect all of the Trustees of the Trust if they choose to do so
and in such event the other shareholders in the Trust would not be able to elect
any Trustee. The Trust is not required to hold, and has no present intention of
holding, annual meetings of shareholders, but the Trust will hold special
meetings of shareholders when in the judgment of the Trustees it is necessary or
desirable to submit matters for a shareholder vote. Shareholders have, under
certain circumstances (e.g., upon the application and submission of certain
specified documents to the Trustees by a specified number of shareholders), the
right to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have under certain circumstances the right to remove one or
more Trustees without a meeting by a declaration in writing by a specified
number of shareholders. No material amendment may be made to the Trust's
Declaration of Trust without the affirmative vote of the holders of a majority
of the outstanding shares of each series affected by the amendment. Shares have
no preference, pre-emptive, conversion or similar rights. Shares, when issued,
are fully paid and non-assessable, except as set forth below.
The Trust may enter into a merger or consolidation, or sell all or substantially
all of its assets (or all or substantially all of the assets belonging to any
series of the Trust), if approved by a vote of the holders of two-thirds of the
Trust's outstanding shares, voting as a single class, or of the affected series
of the Trust, as the case may be, except that if the Trustees of the Trust
recommend such sale of assets, merger or consolidation, the approval by vote of
the holders of a majority of the Trust's outstanding shares, or of the affected
series, would be sufficient. The Trust or any series of the Trust, as the case
may be, may be terminated (i) by a vote of a majority of the outstanding voting
securities of the Trust or the affected series or (ii) by the Trustees by
written notice to the shareholders of the Trust or the affected series. If not
so terminated, the Trust will continue indefinitely.
It is not contemplated that share certificates will be issued for the shares.
However, upon the written request of a shareholder, the Trustees, in their
discretion, may authorize the issuance of share certificates and promulgate
appropriate rules and regulations as to their use.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust may maintain
appropriate insurance (e.g., fidelity bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees and agents covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the Trust
are not binding upon the Trustees individually but only upon the property of the
Trust and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Trust protects a Trustee against any liability
to which he or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
8. CERTAIN ADDITIONAL TAX MATTERS
Each of the Funds has elected to be treated and intends to qualify each year as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of a Fund's gross income,
the amount of Fund distributions, and the composition and holding period of a
Fund's portfolio assets. Provided all such requirements are met, no U.S. federal
income or excise taxes will be required to be paid by the Funds, although
non-U.S. source income earned by each Fund may be subject to non-U.S.
withholding taxes. If a Fund should fail to qualify as a "regulated investment
company" for any year, the Fund would incur a regular corporate federal income
tax upon its taxable income, and distributions by that Fund would generally be
taxable as ordinary income to shareholders.
The portion of each Fund's ordinary income dividends attributable to dividends
received in respect of equity securities of U.S. issuers is normally eligible
for the dividends received deduction for corporations subject to U.S. federal
income taxes. Availability of the deduction for particular shareholders is
subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Any dividend
that is declared by a Fund in October, November or December of any calendar
year, that is payable to shareholders of record in such a month and that is paid
the following January will be treated as if received by the shareholders on
December 31 of the year in which the dividend is declared.
Any Fund distribution will have the effect of reducing the per share net asset
value of shares in the Fund by the amount of the distribution. Shareholders
purchasing shares shortly before the record date of any distribution may thus
pay the full price for the shares and then effectively receive a portion of the
purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares of
any of the Funds by a shareholder that holds such shares as a capital asset will
be treated as long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in a Fund held for six
months or less will be treated as long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of shares of a Fund within 90 days after their purchase followed by
any purchase (including purchases by exchange or by reinvestment) of shares of
that same Fund.
The Funds' transactions in forward contracts will be subject to special tax
rules that may affect the amount, timing and character of Fund income and
distributions to shareholders. For example, certain positions held by a Fund on
the last business day of each taxable year will be marked to market (i.e.,
treated as if closed out) on that day, and any gain or loss associated with the
positions will be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by a Fund that substantially diminish its risk of
loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Fund losses, adjustments in the holding periods of Fund securities and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles that may alter the effects of these rules. The Funds will
limit their activities in forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
Special tax considerations apply with respect to non-U.S. investments of the
Funds. Investment income received by a Fund from non-U.S. securities may be
subject to non-U.S. income taxes withheld at the source. The United States has
entered into tax treaties with many other countries that may entitle a Fund to a
reduced rate of tax or an exemption from tax on such income. The Funds intend to
qualify for treaty-reduced rates where available. It is not possible, however,
to determine the Funds' effective rate of non-U.S. tax in advance since the
amount of the Funds' respective assets to be invested within various countries
is not known.
9. SPECIAL SHAREHOLDER SERVICES
Each Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Funds, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year-to-date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Funds will automatically charge the checking account for the amount specified
($50 minimum) which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Funds.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Funds to redeem the necessary number of shares periodically
(each month, or quarterly in the months of March, June, September and December)
in order to make the payments requested. Each Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Funds. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Funds. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the
Funds upon sixty days written notice or by a shareholder upon written notice to
the Funds. Applications and further details may be obtained by calling the Funds
at 1-800-525-3863, or by writing to:
The GrandView Funds
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. Each Fund may accept securities in lieu of cash in payment
for the purchase of shares in the Fund. The acceptance of such securities is at
the sole discretion of the Adviser based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Adviser may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "Net Asset Value and Pricing of Orders" in the Prospectus.
Redemptions in Kind. The Funds do not intend, under normal circumstances, to
redeem their securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Board of
Trustees, make it undesirable for the Funds to pay for all redemptions in cash.
In such case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Funds. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein each Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the applicable Fund at the address shown above. Your request should
include the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (See the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Funds.
10. FINANCIAL STATEMENTS
Attached.
1997 Annual Report
GrandView Investment Trust
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
May 26, 1997
Telephone 919-972-9922
U.S. WATS 800-525-FUND
Facsimile 919-442-4226
To the Shareholders of the GrandView REIT Index Fund:
We are pleased to present our second annual report for the GrandView REIT Index
Fund. As is our custom, we present our results in the table below along with
appropriate market benchmarks.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Period Ending Dow Jones S&P 500 GrandView REIT GrandView REIT GrandView REIT
Utility Index Index Index Index Fund (NAV) Index Fund
(Total Return ) (Total Return) (Total Return) (Total Return) (MOP)
(Total Return)
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Three Month -4.71% -3.23% -0.13% -0.85% -3.83%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Six Months 3.61% 11.25% 18.46% 17.32% 13.80%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
One Year 8.60% 19.63% 31.16% 28.85% 24.98%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Since Inception 19.15% 43.71% 44.57% 37.10% 32.94%
From 07/03/95
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
</TABLE>
NAV= Net Asset Value (Without Sales Load)
MOP = Maximum Offering Price (With Sales Load)
As can be seen by the numbers above, it has been a good 12 month period for our
investors. Our three, six and twelve month performance totals have exceeded both
the general market as measured by the S&P 500 as well as comparable income
oriented sector as represented by the Dow Jones Utility Index. The Fund is now
over 5 times bigger than it was a year ago and is now fully invested in its
benchmark index consisting of 60 REIT securities. As we have increased in size,
we have continually narrowed the gap between the Fund's performance and the
performance of its benchmark index. Investors are reminded that the Fund will
never exactly duplicate the index's performance as a result of Fund expenses and
timing of Fund purchases or redemptions. However, investors should anticipated
returns that fall between 1-2% below that of the index on an annual basis. The
Fund's correlation with its benchmark index continues to run at or above 99.9%.
Finally, the Fund paid out $0.5512 per share in dividends and $0.0103 per share
in capital gains over the 12 month period. We anticipate continuing to pay
quarterly dividends in 1997 with any capital gains being paid in December 1997
and March 1998.
We think investors choose real estate securities for many reasons. Some of these
reason include income, appreciation, and defensive diversification. We believe
that an investment in The GrandView REIT Index Fund is a well diversified, lower
risk, cost efficient way to achieve these objectives. This year's dividend
distribution was above the average for the real estate mutual fund industry
while the total return has provided excellent growth of principal. But one of
the more unique aspects of real estate securities is their defensive
characteristics in times of overall market volatility. The stock market in 1997
has seen wide swings both positive and negative in such indices as the Dow Jones
Industrial Average and the S&P 500.
<PAGE>
Although not unscathed by market corrections, real estate securities should not
be as volatile. This is primarily due to the income nature of the security. We
think the 1997 performance to date of your investment in the GrandView REIT
Index Fund shows the stabilizing influence a well diversified real estate fund
can add to an investment portfolio.
Finally, since the last 12 months has been so good for the security class and
your investment in particular, we are asked what the future holds and what
should an investor expect going forward. This reminds us of the "What have you
done for us lately?" question. First, it is impossible to predict the future but
we can make some general observations. With minor exception, the real estate
recovery is continuing. Supply and demand pressures are still on the demand side
which should be bullish for rents and REIT earnings. Next, the overall economy
of the country continues to display growth with low to moderate inflation. This
has historically been characteristics that are kind to commercial real estate.
Third, many large private holders of real estate such as pension funds and other
institutional investors want to securitize their real estate holdings. This
should mean that the REIT industry should continue to grow in size. Negatives
include further interest rate increases by the Federal Reserve and historically
high market valuations for individual REITs. Factoring all this together, it is
our opinion, that if interest rates remain moderate, REIT investors should be
expecting low to mid teen type annual total returns over a prolonged investment
period. Remember, that one of the joys of an investment in the GrandView REIT
Index Fund is that your investment will provide you the same general return as
the overall REIT market regardless of what it is.
As always we thank you for your support and look forward to the future. Should
you have any questions or desire additional information, please feel free to
contact the Fund Administrator at 1-800-525-3863, or the offices of GrandView
Advisers at 1-800-578-4301
Winsor H. Aylesworth
President
GrandView Advisers, Inc.
<PAGE>
GrandView REIT Index Fund
Performance Update - $10,000 Investment
For the period from July 3, 1995 (commencement of operations) to
March 31, 1997
GrandView S&P 500 Dow Jones GrandView
REIT Fund Index Utility REIT Index
03-Jul-95 9,700.00 10,000.00 10,000.00 10,000.00
30-Sep-95 9,991.00 10,748.00 10,722.00 10,463.00
31-Dec-95 10,351.00 11,395.00 11,451.00 10,935.00
31-Mar-96 10,321.00 12,007.00 10,963.00 11,147.00
30-Jun-96 10,726.00 12,545.00 11,503.00 11,636.00
30-Sep-96 11,335.00 12,933.00 11,491.00 12,343.00
31-Dec-96 13,413.00 14,011.00 12,488.00 14,481.00
31-Mar-97 13,298.00 14,387.00 11,890.00 14,447.00
This graph depicts the performance of the GrandView REIT Index Fund versus the
S&P 500 Index, Dow Jones Utility Index, and GrandView REIT Index. It is
important to note that the GrandView REIT Index Fund is a professionally managed
mutual fund while the indexes are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
Annualized Total Return
- ----------------------------------------------------------------------
Since Inception One Year
- ----------------------------------------------------------------------
No Sales Load 19.82% 28.85%
- ----------------------------------------------------------------------
Maximum 3% Sales Load 17.74% 24.98%
- ----------------------------------------------------------------------
The graph assumes an initial $10,000 investment at July 3, 1995 ($9,700 after
maximum sales load of 3.0%). All dividends and distributions are reinvested.
At March 31, 1997, the GrandView REIT Index Fund would have grown to $13,298 -
total investment return of 32.98% since July 3, 1995. Without the deduction of
the 3.0% maximum sales load, the GrandView REIT Index Fund would have grown to
$13,710 - total investment return of 37.10% since July 3, 1995.
At March 31, 1997, a similar investment in the S&P 500 Index would have grown to
$14,387 - total investment return of 43.87%; the Dow Jones Utility Index would
have grown to $11,890 - total investment return of 18.90%; the GrandView REIT
Index would have grown to $14,447 - total investment return of 44.47% since July
3, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
GRANDVIEW REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.68%
Real Estate Investment Trusts
American Health Properties, Inc. 402 $9,899
Arden Realty Group, Inc. 393 10,709
Avalon Properties, Inc. 897 24,667
Bay Apartment Communities, Inc. 338 12,125
Beacon Properties Corporation 1,144 37,895
BRE Properties, Inc. 845 20,914
Cali Realty Corporation 753 24,096
Capstead Mortgage Corporation 1,045 21,291
CarrAmerica Realty Corporation 1,070 32,902
CBL & Associates Properties, Inc. 374 9,163
Chateau Properties, Inc. 205 5,406
Chelsea GCA Realty, Inc. 208 7,462
Cousins Properties, Inc. 750 20,438
Crescent Real Estate Equities Comp 1,868 49,969
CWM Mortgage Holdings, Inc. 1,208 23,405
Developers Diversified Realty Corp 567 21,333
Duke Realty Investments, Inc. 604 24,538
Equity Residential Properties Trus 1,286 57,066
Federal Realty Investment Trust 942 24,257
FelCor Suite Hotels, Inc. 409 15,031
First Industrial Realty Trust, Inc 777 24,476
Franchise Corporation of America 1,014 24,209
Gables Residential Trust 332 8,466
General Growth Properties 790 25,083
Health Care Property Investors, In 725 24,016
Health and Retirement Property Tru 1,379 24,822
Highwoods Properties Inc. 929 31,122
Horizon Group, Inc. 386 4,970
Hospitality Properties Trust 697 21,346
Kimco Realty Corporation 742 24,115
Liberty Property Trust 519 12,716
The Macerich Company 434 12,152
Manufactured Home Communities, Inc 434 9,494
Meditrust Corporation 1,567 58,371
Merry Land & Investment Company, I 634 12,997
Mills Corp. 319 8,055
National Health Investors, Inc. 402 14,924
Nationwide Health Properties, Inc. 1,072 22,914
New Plan Realty Trust 1,192 26,969
OMEGA Healthcare Investors, Inc. 294 9,224
Patriot American Hospitality, Inc. 1,092 26,481
Post Properties, Inc. 554 21,121
Public Storage, Inc. 2,446 70,934
(Continued)
<PAGE>
GRANDVIEW REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Realty Income Corporation 398 $9,154
Resource Mortgage Capital, Inc. 348 9,005
Security Capital Pacific Trust 1,923 46,873
Security Capital Atlantic Incorpor 968 21,538
Security Capital Industrial Trust 2,424 50,601
Shurgard Storage Centers, Inc. 444 12,265
Simon DeBartolo Group, Inc. 2,558 77,379
Spieker Properties, Inc. 743 28,977
Starwood Lodging Trust 1,008 39,312
Storage USA, Inc. 647 23,858
Sun Communities, Inc. 264 8,448
Taubman Centers, Inc. 868 11,284
TriNet Corporate Realty Trust, Inc 238 7,527
United Dominion Realty Trust 1,529 22,553
Vornado Realty Trust 669 44,656
Washington Real Estate Investment 566 10,117
Weingarten Realty Investors 551 23,349
--- ------
Total Common Stocks (Cost $1,327,639) 1,418,439
---------
Principal
Amount
------------
REPURCHASE AGREEMENT (a) - 1.42%
Wachovia Bank $20,729 20,729
6.50%, due April 1, 1997 ------
(Cost $20,729)
Total Value of Investments (Cost $1,348,368 (b)) 98.10% $1,439,168
Other Assets Less Liabilities 1.90% 27,930
---- ------
Net Assets 100.00% $1,467,098
====== ==========
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other funds administered by The Nottingham Company.
(Continued)
<PAGE>
GRANDVIEW REIT INDEX FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997
(b) Aggregate cost for financial reporting and federal income tax purposes is
the same. Unrealized appreciation (depreciation) of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $106,826
Unrealized depreciation (16,026)
--------
Net unrealized appreciation $90,800
========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REIT INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
ASSETS
Investments, at value (cost $1,348,368) $1,439,168
Cash 6,479
Income receivable 6,646
Prepaid expenses 2,865
Deferred organization expenses, net (note 4) 17,695
Due from advisor (note 2) 59
Other assets 50
----------
Total assets 1,472,962
----------
LIABILITIES
Accrued expenses 5,864
----------
NET ASSETS
(applicable to 117,053 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $1,467,098
==========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($1,467,098 \ 117,053 shares) $12.53
==========
MAXIMUM OFFERING PRICE PER SHARE
(100 \ 97 of $12.53) $12.92
==========
NET ASSETS CONSIST OF
Paid-in capital $1,380,082
Accumulated net realized loss on investments (3,784)
Net unrealized appreciation on investments 90,800
----------
$1,467,098
==========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REIT INDEX FUND
STATEMENT OF OPERATIONS
Year ended March 31, 1997
INVESTMENT INCOME
Income
Dividends $32,233
Interest 715
--------
Total income 32,948
--------
Expenses
Investment advisory fees (note 2) 2,126
Fund administration fees (note 2) 1,366
Custody fees 5,370
Registration and filing administration fees (note 2) 1,699
Fund accounting fees (note 2) 9,300
Audit fees 6,471
Legal fees 2,533
Securities pricing fees 570
Shareholder recordkeeping fees 286
Shareholder servicing expenses 2,261
Registration and filing expenses 4,915
Printing expenses 261
Amortization of deferred organization expenses (note 4) 5,442
Trustee fees and meeting expenses 101
Other operating expenses 3,365
--------
Total expenses 46,066
--------
Less:
Expense reimbursements (note 2) (37,598)
Investment advisory fees waived (note 2) (2,126)
--------
Net expenses 6,342
--------
Net investment income 26,606
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions (3,402)
Increase in unrealized appreciation on investments 91,681
--------
Net realized and unrealized gain on investments 88,279
--------
Net increase in net assets resulting from operations $114,885
========
See accompanying notes to financial statements
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
GRANDVIEW REIT INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------
For the
period from
July 3, 1995
(commencement
Year ended of operations)
March 31, to March 31,
1997 1996
- ------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income $26,606 $5,240
Net realized gain (loss) from investment transactions (3,402) 1,665
Increase (decrease) in unrealized appreciation on investments 91,681 (881)
------ ----
Net increase in net assets resulting from operations 114,885 6,024
------- -----
Distributions to shareholders from
Net investment income (26,606) (5,240)
Tax return of capital (5,692) 0
Net realized gain from investment transactions (479) (1,568)
---- ------
Decrease in net assets resulting from distributions (32,777) (6,808)
------- ------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 1,132,197 253,577
--------- -------
Total increase in net assets 1,214,305 252,793
========= =======
NET ASSETS
Beginning of period 252,793 0
------- -------
End of period $1,467,098 $252,793
========== ========
(a) A summary of capital share activity follows:
-----------------------------------------------------------------
For the period from July 3, 1996
Year ended (commencement of operations)
March 31, 1997 to March 31, 1996
-----------------------------------------------------------------
Shares Value Shares Value
---------- ---------- --------- ---------
Shares sold 100,474 $1,238,757 25,257 $258,779
Shares issued for reinvestment
of distributions 2,066 24,781 482 4,916
----- ------ --- -----
102,540 1,263,538 25,739 263,695
Shares redeemed (10,250) (131,341) (976) (10,118)
------- -------- ---- -------
Net increase 92,290 $1,132,197 24,763 $253,577
====== ========== ====== ========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
GRANDVIEW REIT INDEX FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
- ----------------------------------------------------------------------------------------
For the
period from
July 3, 1995
(commencement of
Year ended operations)
March 31, to March 31,
1997 1996
- ----------------------------------------------------------------------------------------
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 (a) 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 % 20.63 %(b)
After expense reimbursements and waived fees 1.04 % 1.05 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (2.16)% (13.66)%(b)
After expense reimbursements and waived fees 4.38 % 5.86 %(b)
Portfolio turnover rate 23.38 % 47.46 %
Average broker commissions per share $0.07
(a) Total return does not reflect payment of sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
GRANDVIEW REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The GrandView REIT Index Fund (the "Fund") is a diversified series of shares of
beneficial interest of the GrandView Investment Trust (the "Trust"). The Trust,
an open-ended investment company, was organized on February 6, 1995 as a
Massachusetts Business Trust and is registered under the Investment Company Act
of 1940, as amended. The primary objective of the Fund is long-term growth of
capital by selecting investments which are equity securities of real estate
industry companies which are undervalued or have significant "turnaround"
potential. The Fund began operations on July 3, 1995. Shares of the Fund
purchased are subject to a maximum sales charge of 3.00%. Shares of the Fund
redeemed are subject to a 1.00% redemption fee, which applies to redemptions
during the first six months after share purchases. The redemption fee is
subsequently reduced after the first six months and is eliminated after one
year. The following is a summary of significant accounting policies followed by
the Fund.
A. Security Valuation - The Fund's investments in securities are carried at
value. Securities listed on an exchange or quoted on a national market
system are valued at the last sales price as of 4:00 p.m., New York time on
the day of valuation. Other securities traded in the over-the-counter
market and listed securities for which no sale was reported on that date
are valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - At March 31, 1997, the Fund was considered a
personal holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares were owned
directly or indirectly by five or fewer individuals at certain times during
the last half of the year. As a personal holding company the Fund is
subject to federal income taxes on undistributed personal holding company
income at the maximum individual income tax rate. No provision has been
made for federal income taxes since all taxable income has been distributed
to shareholders. It is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies
and to make sufficient distributions of taxable income to relieve it from
all federal income taxes.
The character of distributions made during the year from net investment
income or net realized gains from investment transactions may differ from
their ultimate characterization for federal income tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in which amounts
are distributed may differ from the year that the income or realized gains
are recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the trade
date. Realized gains and losses are determined using the specific
identification cost method. Interest income is recorded daily on an accrual
basis. Dividend income is recorded on the ex-dividend date.
The Fund records distributions received from its investments in real estate
investment trusts that represent a tax return of capital as a reduction of
the cost basis of investments.
D. Distributions to Shareholders - The Fund generally declares dividends
quarterly, payable on a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net realized gains
through October 31 of that year. Distributions to shareholders are recorded
on the ex-dividend date. The Fund may make a supplemental distribution
subsequent to the end of its fiscal year ending March 31.
(Continued)
<PAGE>
GRANDVIEW REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
E. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amount of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
F. Repurchase Agreements - The Fund may acquire U. S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the
Federal Reserve or a registered Government Securities dealer) for delivery
on an agreed upon future date. The repurchase price exceeds the purchase
price by an amount which reflects an agreed upon market interest rate
earned by the Fund effective for the period of time during which the
repurchase agreement is in effect. Delivery pursuant to the resale
typically will occur within one to five days of the purchase. The Fund will
not enter into a repurchase agreement which will cause more than 10% of its
net assets to be invested in repurchase agreements which extend beyond
seven days. In the event of the bankruptcy of the other party to a
repurchase agreement, the Fund could experience delays in recovering its
cash or the securities loaned. To the extent that in the interim the value
of the securities purchased may have declined, the Fund could experience a
loss. In all cases, the creditworthiness of the other party to a
transaction is reviewed and found satisfactory by the Advisor. Repurchase
agreements are, in effect, loans of Fund assets. The Fund will not engage
in reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, GrandView Advisers, Inc. (the
"Advisor") provides the Fund with a continuous program of supervision of the
Fund's assets, including the composition of its portfolio, and furnishes advice
and recommendations with respect to investments, investment policies and the
purchase and sale of securities. As compensation for its services, the Advisor
receives a fee at the annual rate of 0.35% of the Fund's average daily net
assets.
Currently, the Fund does not offer its shares for sale in states which require
limitations to be placed on its expenses. The Advisor currently intends to
voluntarily waive all or a portion of its fee and reimburse expenses of the Fund
to limit total Fund operating expenses to 1.05% of the average daily net assets
of the Fund. There can be no assurance that the foregoing voluntary fee waivers
or reimbursements will continue. The Advisor has voluntarily waived its fee
amounting to $2,126 ($0.04 per share) and has voluntarily reimbursed $37,598 of
the Fund's operating expenses for the year ended March 31, 1997.
The Fund's administrator, The Nottingham Company (the "Administrator"), provides
administrative services to and is generally responsible for the overall
management and day-to-day operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its services, the
Administrator receives a fee at the annual rate of 0.225% of the Fund's first
$25 million of average daily net assets, 0.20% of the next $25 million of
average daily net assets, and 0.175% of average daily net assets over $50
million. The Administrator also receives a monthly fee of $800 for accounting
and recordkeeping services. Additionally, the Administrator charges the Fund for
servicing of shareholder accounts and registration of the Fund's shares. The
Administrator also charges the Fund for certain expenses involved with the daily
valuation of portfolio securities.
(Continued)
<PAGE>
GRANDVIEW REIT INDEX FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. The Distributor receives any sales
charges imposed on purchases of shares and re-allocates a portion of such
charges to dealers through whom the sale was made, if any. For the year ended
March 31, 1997, the Distributor retained sales charges in the amount of $426.
Certain Trustees and officers of the Trust are also officers of the Advisor, the
Distributor or the Administrator.
At March 31, 1997, the Advisor, its officers, and Trustees of the Fund held
20,197 shares or 17% of the Fund shares outstanding.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act of
1940 (the "Act"), adopted a distribution plan pursuant to Rule 12b-1 of the Act
(the "Plan"). The Act regulates the manner in which a regulated investment
company may assume expenses of distributing and promoting the sales of its
shares and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain expenses, which may not exceed
0.25% per annum of the Fund's average daily net assets for each year elapsed
subsequent to adoption of the Plan, for payment to the Distributor and others
for items such as advertising expenses, selling expenses, commissions, travel or
other expenses reasonably intended to result in sales of shares of the Fund or
support servicing of shareholder accounts.
The Trustees of the Trust do not currently intend to authorize the payment of
any such distribution and service fees from the Fund, although they have
authority under the Plan to do so in the future. Shareholders of the Fund will
be given at least sixty days written notice before any distribution and service
fees are imposed.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization and the
registration of its shares have been assumed by the Fund. The organization
expenses are being amortized over a period of sixty months. Investors purchasing
shares of the Fund bear such expenses only as they are amortized against the
Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $1,232,281 and $137,495, respectively, for the year ended March 31,
1997.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, The Fund must report distributions from net
realized gains from investment transactions that represent long-term capital
gains to its shareholders. All of the $0.01 per share of such distributions for
the year ended March 31, 1997, represent long-term capital gains. Shareholders
should consult a tax advisor on how to report distributions for state and local
income tax purposes.
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders
GrandView Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the GrandView REIT Index Fund (the "Fund"), a
series of the GrandView Investment Trust, as of March 31, 1997, and the related
statement of operations for the year then ended, and the sta tements of changes
in net assets and financial highlights for the year then ended and for the
period from July 3, 1995 (commencement of operations) to March 31, 1996. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to expr ess an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examinin g, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and sign ificant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
GrandView REIT Index Fund as of March 31, 1997, the results of its operations
for the year then ended, and the changes in its net assets and fi nancial
highlights for the year then ended and for the period from July 3, 1995
(commencement of operations) to March 31, 1996 in conformity with generally
accepted accounting principles.
Richmond, Virginia
April 25, 1997
<PAGE>
1997 Annual Report
GrandView Investment Trust
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
May 26, 1997
Telephone 919-972-9922
U.S. WATS 800-525-FUND
Facsimile 919-442-4226
To the Shareholders of the GrandView Realty Growth Fund:
We are pleased to present our second annual report for the GrandView Realty
Growth Fund. As is our custom, we present our results in the table below along
with appropriate market benchmarks.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Period Ending Dow Jones S&P 500 GrandView REIT GrandView Realty GrandView Realty
Utility Index Index Index Growth Fund (NAV) Growth Fund
(Total Return ) (Total Return) (Total Return) (Total Return) (MOP)
(Total Return)
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Three Month -4.71% -3.23% -0.13% 9.67% 6.38%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Six Months 3.61% 11.25% 18.46% 22.51% 18.83%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
One Year 8.60% 19.63% 31.16% 45.12% 40.75%
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
Since Inception 19.15% 43.71% 44.57% 53.39% 48.75%
From 07/03/95
Ending 3/31/97
- ------------------- ----------------- ---------------- ----------------- ==================== -------------------
NAV= Net Asset Value (Without Sales Load)
MOP = Maximum Offering Price (With Sales Load)
</TABLE>
It has been an excellent year for the GrandView Realty Growth Fund. As can be
seen above, our performance has been outstanding by any measure. As ranked by
Lipper Analytical Services, your fund was ranked the number one (1) performing
real estate fund for the twelve month period ending March 31, 1997.* This
performance has lead to several timely articles about the real estate security
industry and your fund in particular. The most recent article was in Mutual Fund
Magazine under "Undiscovered Funds". If any investor would like a reprint of the
article, please feel free to call us at 1-800-578-4301. Finally, the Fund paid
out $0.3380 per share in dividends and $1.5303 per share in capital gains over
the 12 month period. We anticipate continuing to pay quarterly dividends in 1997
with any capital gains being paid in December 1997 and March 1998.
* Ranked 1st out of 50 real estate funds based on total return for the 52 week
period ending March 31, 1997, as reported by Lipper Analytical Services, Inc.
Past performance is no guarantee of future results. During the period covered by
the rankings, the Fund's Advisor waived its fee and reimbursed a portion of the
Fund's expenses, which increased the stated return of the Fund.
<PAGE>
Last year's performance was a result of many factors. As a whole, the real
estate industry continued to recover from the overbuilding of the late eighties
and early nineties. As oversupplies dwindled, rents began to rise which led to
increased earnings for most REITs. Inflation continued to remain moderate and
interest rates remained stable with only a small increase occurring late in the
time period. This environment led Wall Street to be receptive to REIT's need for
capital and fueled their continued growth. The Fund was in a good position to
take advantage of this environment as it was generally liquid due to increasing
asset size. This liquidity allowed the Fund to invest as opportunities presented
themselves. The Fund's modest size also allowed it to buy or sell significant
positions in various REITs without impacting the underlying securities price.
Finally, we believe that the management's approach of investing in a diversified
portfolio of real estate oriented securities that meet our requirements for
quality, value and opportunity rewarded us well throughout the period. To
provide you some further understanding on your Fund's investments and
philosophy, a review of our five largest holdings as of March 31, 1997 follows:
Vinland Property Trust (NASDAQ, Symbol: VIPTS, Yield: 0.0%): This overlooked
apartment REIT specializes in older apartments in the Florida market place.
These type of properties sell at much lower prices than their more luxurious
brethren and can be quit profitable. GrandView has owned this REIT from the
beginning and it has rewarded shareholders well. The priced has doubled since
July 1995. This REIT currently isn't required to pay out cash flow due to
previous losses and hence is retaining capital to grow the asset base.
Management also owns a large stake in the REIT and has many reasons to continue
to grow shareholder value.
MGI Properties (NYSE, Symbol: MGI, Yield: 5.1%): This is an old line establish
REIT with a diversified portfolio centered around office and industrial
properties in the northeast. The REIT's balance sheet is a model for other REITs
in that it is only modestly leveraged, not overly cluttered with complicated
business arrangements such joint ventures, minority interests and preferred
stock. Along with a conservative dividend policy, MGI is in a strong position to
continue to grow.
Angeles Participating Mortgage (ASE, Symbol APT, Yield: 0.0%): This is a
GrandView favorite as it was an original purchase in July of 1995 at $0.50 and
closed on March 31, 1997 at $2.875. This former REIT shell is now controlled by
one of the most successful REIT management teams of the last few years, Starwood
Capital and Barry Sternlicht. The company has been partially recapitalized by
the new management team to pursue mezzanine lending opportunities in the real
estate world. This type of lending carries a higher level of risk but if done
properly, can be quite profitable. With APT's previous tax losses, this REIT
will be able to shield much of these profits from dividend requirements and grow
the asset base. Finally, management owns most of the stock of the company and
hence has the most to gain in increasing shareholder value.
Royale Investments (NASDAQ, Symbol: RLIN, Yield: 10.0%): Royale is another
generally overlooked REIT that owns several stand alone grocery stores
throughout the upper midwest. Being modest in size and appropriately leveraged,
it will be difficult for Royale to sustain large scale asset growth. However,
Royal does offer an attractive yield of 10% with only moderate risk. In
addition, this REIT could also be a possible player in the merger and
acquisition world of REITs.
Burnham Pacific (NYSE, Symbol BPP, Yield: 7.8%): This California based retail
REIT was one of the first REITs to cut its dividend in the nineties. Facing
increasing cash flow needs and wanting to grow, a new management team came in
and cut the dividend and refocused the REIT on West Coast Retail. At the time,
the stock took a nose dive, but it was a correct decision. Now with a secure and
relatively conservative dividend policy, the company is on a growth cycle. In
addition, with the bulk of the company's assets in California, it is a good way
for GrandView to participate in the improving California economy.
<PAGE>
Finally, since the last 12 months have been so good for the security class and
your investment in particular, we are asked what the future holds and what
should an investor expect going forward. This reminds us of the "What have you
done for us lately?" question. First, it is impossible to predict the future but
we can make some general observations. With minor exception, the real estate
recovery is continuing. Supply and demand pressures are still on the demand
side, which should be bullish for rents and REIT earnings. Next, the overall
economy of the country continues to display growth with low to moderate
inflation. These have historically been characteristics that are kind to
commercial real estate. Third, many large private holders of real estate such as
pension funds and other institutional investors want to securitize their real
estate holdings. This should mean that the REIT industry should continue to grow
in size. With this expected growth, we think an area of exceptional opportunity
continues to be the overlooked, out of favor and lesser researched REITs.
Negatives include further interest rate increases by the Federal Reserve and
historically high market valuations for individual REITs. Factoring all this
together, it is our opinion, that if interest rates remain moderate, the overall
REIT market should return investors low to mid teen type annual total returns
over a prolonged investment period. It is the goal of the GrandView Realty
Growth Fund to provide investors superior returns to the general REIT market.
As always, we thank you for your support and look forward to the future. Should
you have any questions or desire additional information, please feel free to
contact the Fund Administrator at 1-800-525-3863, or the offices of GrandView
Advisers at 1-800-578-4301.
Winsor H. Aylesworth
President
GrandView Advisers, Inc.
<PAGE>
GrandView Realty Growth Fund
Performance Update - $10,000 Investment
For the period from July 3, 1995 (commencement of operations) to
March 31, 1997
GrandView Realty S&P 500 Dow Jones GrandView
Growth Fund Index Utility Index REIT Index
03-Jul-95 9,550.00 10,000.00 10,000.00 10,000.00
30-Sep-95 9,383.00 10,748.00 10,722.00 10,463.00
31-Dec-95 9,513.00 11,395.00 11,451.00 10,935.00
31-Mar-96 10,095.00 12,007.00 10,963.00 11,147.00
30-Jun-96 10,825.00 12,545.00 11,503.00 11,636.00
30-Sep-96 11,957.00 12,933.00 11,491.00 12,343.00
31-Dec-96 13,358.00 14,011.00 12,488.00 14,481.00
31-Mar-97 14,649.00 14,387.00 11,890.00 14,447.00
This graph depicts the performance of the GrandView Realty Growth Fund versus
the S&P 500 Index, Dow Jones Utility Index, and GrandView REIT Index. It is
important to note that the GrandView Realty Growth Fund is a professionally
managed mutual fund while the indexes are not available for investme
Annualized Total Return
- ---------------------------------------------------------------------------
Since Inception One Year
- ---------------------------------------------------------------------------
No Sales Load 27.78% 45.12%
- ---------------------------------------------------------------------------
Maximum 4.5% Sales Load 24.45% 38.59%
- ---------------------------------------------------------------------------
The graph assumes an initial $10,000 investment at July 3, 1995 ($9,550 after
maximum sales load of 4.5%). All dividends and distributions are reinvested.
At March 31, 1997, the GrandView Realty Growth Fund would have grown to $14,649
- - total investment return of 46.49% since July 3, 1995. Without the deduction of
the 4.5% maximum sales load, the GrandView Realty Growth Fund would have grown
to $15,339 - total investment return of 53.39% since July 3, 1995.
At March 31, 1997, a similar investment in the S&P 500 Index would have grown to
$14,387 - total investment return of 43.87%; the Dow Jones Utility Index would
have grown to $11,890 - total investment return of 18.90%; the GrandView REIT
Index would have grown to $ 14,447 - total investment return of 44.47% since
July 3, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
GRANDVIEW REALTY GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.08%
Real Estate Investment Trusts
(a)American Industrial Property REIT 12,000 $31,500
American Real Estate Investment Corporation 300 3,000
(a)Angeles Participating Mortgage Trust 20,400 58,650
Asset Investors Corporation 5,000 16,250
Avalon Properties, Inc. 700 19,250
(a)BRT Realty Trust 5,600 38,500
Bay Apartment Communities, Inc. 500 17,938
Bedford Property Investors, Inc. 1,500 29,625
Bradley Real Estate, Inc. 2,400 45,900
Brandywine Realty Trust 800 16,200
Burnham Pacific Properties, Inc. 3,800 48,450
(a)California Real Estate Investment Trust 5,300 26,500
Crescent Real Estate Equities Company 600 16,050
Dames & Moore, Inc. 1,200 15,600
(a)EQK Realty Investors 1 5,000 7,500
Eastgroup Properties 1,100 30,388
Evans Withycombe Residential, Inc. 800 16,500
FAC Realty Inc. 6,000 34,500
First Union Real Estate Investments 1,400 18,725
Gables Residential Trust 1,400 35,700
Health and Retirement Property Trust 1,250 22,500
Horizon Group, Inc. 100 1,295
Humphrey Hospitality Trust, Inc. 4,200 42,525
JDN Realty Corporation 1,100 29,837
JP Realty, Inc. 600 15,900
(a)Liberte Investors, Inc. 10,500 42,000
MGI Properties, Inc. 3,000 63,750
Merry Land & Investment Company, Inc. 400 8,200
National Income Realty Trust 1,200 18,300
Oasis Residential, Inc. 500 11,150
Pacific Gulf Properties, Inc. 600 13,050
Patriot American Hospitality, Inc. 1,100 26,675
Post Properties, Inc. 400 15,250
(a)Resort Income Investors, Inc. 60,000 16,200
Royale Investments, Inc. 11,600 58,000
Sizeler Property Investors, Inc. 1,500 15,562
Spieker Properties, Inc. 900 35,100
Starwood Lodging Trust 300 11,700
Summit Properties, Inc. 1,000 20,250
TIS Mortgage Investment Company 26,600 29,925
USP Real Estate Investment Trust 3,000 13,500
(a)Vinland Property Trust 7,000 73,500
Vornado Realty Trust 200 13,350
--- ------
Total Common Stocks (Cost $1,033,639) 1,124,245
---------
(Continued)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
PORTFOLIO OF INVESTMENTS
March 31, 1997
- ------------------------------------------------------------------------------------------------
Principal Value
Amount (note 1)
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (b) - 9.68%
Wachovia Bank $112,089 $112,089
6.50%, due April 1, 1997
(Cost $112,089)
Total Value of Investments (Cost $1,145,728 (c)) 106.76%$ 1,236,334
Liabilities In Excess of Other Assets (6.76)% (78,311)
----- ----------
Net Assets 100.00% $1,158,023
====== ==========
(a) Non-income producing investment.
(b) The repurchase agreement is fully collateralized by U. S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other funds administered by The Nottingham Company.
(c) Aggregate cost for financial reporting and federal income tax purposes is
the same. Unrealized appreciation (depreciation) of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $104,160
Unrealized depreciation (13,554)
--------
Net unrealized appreciation 90,606
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
ASSETS
Investments, at value (cost $1,145,728) $1,236,334
Cash 13,195
Income receivable 5,900
Prepaid expenses 1,773
Deferred organization expenses, net (note 4) 17,695
Other assets 50
----------
Total assets 1,274,947
----------
LIABILITIES
Accrued expenses 5,170
Payable for investment purchases 109,620
Due to investment advisor 2,134
----------
Total liabilities 116,924
----------
NET ASSETS
(applicable to 91,277 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $1,158,023
==========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($1,158,023 \ 91,277 shares) $12.69
==========
MAXIMUM OFFERING PRICE PER SHARE
(100 \ 95.5 of $12.69) $13.29
==========
NET ASSETS CONSIST OF
Paid-in capital $1,067,417
Net unrealized appreciation on investments 90,606
----------
$1,158,023
==========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENT OF OPERATIONS
Year ended March 31, 1997
INVESTMENT INCOME
Income
Dividends $24,688
Interest 3,023
--------
Total income 27,711
--------
Expenses
Investment advisory fees (note 2) 5,537
Fund administration fees (note 2) 1,661
Distribution fees (note 3) 1,384
Custody fees 6,150
Registration and filing administration fees (note 2) 1,694
Fund accounting fees (note 2) 9,300
Audit fees 5,480
Legal fees 2,532
Securities pricing fees 2,633
Shareholder recordkeeping fees 242
Shareholder servicing expenses 2,230
Registration and filing expenses 5,020
Printing expenses 256
Amortization of deferred organization expenses (note 4) 5,442
Trustee fees and meeting expenses 175
Other operating expenses 3,358
--------
Total expenses 53,094
--------
Less:
Expense reimbursements (note 2) (35,736)
Investment advisory fees waived (note 2) (5,537)
Distribution fees waived (note 3) (1,384)
--------
Net expenses 10,437
--------
Net investment income 17,274
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 125,083
Increase in unrealized appreciation on investments 86,406
--------
Net realized and unrealized gain on investments 211,489
--------
Net increase in net assets resulting from operations $228,763
========
See accompanying notes to financial statements
<PAGE>
GRANDVIEW REALTY GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
For the
period from
July 3, 1995
(commencement
Year ended of operations) to
March 31, March 31,
1997 1996
- ------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income $17,274 $2,414
Net realized gain from investment transactions 125,083 3,462
Increase in unrealized appreciation on investments 86,406 4,200
------ -----
Net increase in net assets resulting from operations 228,763 10,076
------- ------
Distributions to shareholders from
Net investment income (17,274) (2,414)
Net realized gain from investment transactions (125,083) (3,462)
Tax return of capital (948) (851)
---- ----
Decrease in net assets resulting from distributions (143,305) (6,727)
-------- ------
Capital share transactions
Increase in net assets resulting from capital share transactions 890,543 178,673
------- -------
Total increase in net assets 976,001 182,022
NET ASSETS
Beginning of period 182,022 0
------- -------
End of period $1,158,023 $182,022
========= ========
(a) A summary of capital share activity follows:
------------------------------------------------------------------
For the period from July 3, 1995
Year ended (commencement of operations)
March 31, 1997 to March 31, 1996
------------------------------------------------------------------
Shares Value Shares Value
--------- ---------- --------- --------
Shares sold 120,300 $1,552,510 18,289 $181,279
Shares issued for reinvestment
of distributions 9,716 123,136 526 5,247
----- ------- --- -----
130,016 1,675,646 18,815 186,526
Shares redeemed (56,779) (785,103) (775) (7,853)
------- -------- ---- ------
Net increase 73,237 $890,543 18,040 $178,673
====== ======== ====== ========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
GRANDVIEW REALTY GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
- ---------------------------------------------------------------------------------------------------
For the
period from
July 3, 1995
(commencement
Year ended of operations)
March 31, to March 31,
1997 1996
- ---------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.09 $10.00
Income from investment operations
Net investment income 0.33 0.20
Net realized and unrealized gain on investments 4.14 0.36
---- ----
Total from investment operations 4.47 0.56
---- ----
Distributions to shareholders from
Net investment income (0.33) (0.20)
Net realized gain from investment transactions (1.53) (0.22)
Tax return of capital (0.01) (0.05)
----- -----
Total distributions (1.87) (0.47)
----- -----
Net asset value, end of period $12.69 $10.09
====== ======
Total return 45.12 % 5.70 % (a)
===== ====
Ratios/supplemental data
Net assets, end of period $1,158,023 $182,022
========== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 9.59 % 31.34 % (b)
After expense reimbursements and waived fees 1.89 % 2.00 % (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (4.58)% (25.55)% (b)
After expense reimbursements and waived fees 3.12 % 3.62 % (b)
Portfolio turnover rate 197.90 % 44.44 %
Average broker commission per share $0.04
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The GrandView Realty Growth Fund (the "Fund") is a non-diversified series of
shares of beneficial interest of the GrandView Investment Trust (the "Trust").
The Trust, an open-ended investment company, was organized on February 6, 1995
as a Massachusetts Business Trust and is registered under the Investment Company
Act of 1940, as amended. The Fund began operations on July 3, 1995. The
following is a summary of significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried at
value. Securities listed on an exchange or quoted on a national market
system are valued at 4:00 p.m., New York time on the day of valuation.
Other securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued at the
most recent bid price. Securities for which market quotations are not
readily available, if any, are valued by using an independent pricing
service or by following procedures approved by the Board of Trustees.
Short- term investments are valued at cost which approximates value.
B Federal Income Taxes - At March 31, 1997, the Fund was considered a
personal holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares were owned
directly or indirectly by five or fewer individuals at certain times during
the last half of the year. As a personal holding company the Fund is
subject to federal income taxes on undistributed personal holding company
income at the maximum individual income tax rate. No provision has been
made for federal income taxes since it is the policy of the Fund to comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and to make sufficient distributions of taxable income
to relieve it from all federal income taxes.
The character of distributions made during the year from net investment
income or net realized gains from investment transactions may differ from
their ultimate characterization for federal income tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in which amounts
are distributed may differ from the year that the income or realized gains
are recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the trade
date. Realized gains and losses are determined using the specific
identification cost method. Interest income is recorded daily on the
accrual basis. Dividend income is recorded on the ex-dividend date.
The Fund records distributions received from its investments in real estate
investment trusts that represent a tax return of capital as a reduction of
the cost basis of investments.
D. Distributions to Shareholders - The Fund generally declares dividends
quarterly, payable in March, June, September and December, on a date
selected by the Trust's Trustees. In addition, distributions may be made
annually in December out of net realized gains through October 31 of that
year. Distributions to shareholders are recorded on the ex-dividend date.
The Fund may make a supplemental distribution subsequent to the end of its
fiscal year ending March 31.
E. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the
(Continued)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
F. Repurchase Agreements - The Fund may acquire U. S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the
Federal Reserve or a registered Government Securities dealer) for delivery
on an agreed upon future date. The repurchase price exceeds the purchase
price by an amount which reflects an agreed upon market interest rate
earned by the Fund effective for the period of time during which the
repurchase agreement is in effect. Delivery pursuant to the resale
typically will occur within one to five days of the purchase. The Fund will
not enter into a repurchase agreement which will cause more than 10% of its
net assets to be invested in repurchase agreements which extend beyond
seven days. In the event of the bankruptcy of the other party to a
repurchase agreement, the Fund could experience delays in recovering its
cash or the securities loaned. To the extent that in the interim the value
of the securities purchased may have declined, the Fund could experience a
loss. In all cases, the creditworthiness of the other party to a
transaction is reviewed and found satisfactory by the Advisor. Repurchase
agreements are, in effect, loans of Fund assets. The Fund will not engage
in reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, GrandView Advisers, Inc. (the
"Advisor") provides the Fund with a continuous program of supervision of the
Fund's assets, including the composition of its portfolio, and furnishes advice
and recommendations with respect to investments, investment policies and the
purchase and sale of securities. As compensation for its services, the Advisor
receives a fee at the annual rate of 1.00% of the Fund's average daily net
assets.
Currently, the Fund does not offer its shares for sale in states which require
limitations to be placed on its expenses. The Advisor currently intends to
voluntarily waive all or a portion of its fee and reimburse expenses of the Fund
to limit total Fund operating expenses to 2.00% of the average daily net assets
of the Fund. There can be no assurance that the foregoing voluntary fee waivers
or reimbursements will continue. The Advisor has voluntarily waived its fee
amounting to $5,537 ($0.13 per share) and has voluntarily reimbursed $35,736 of
the Fund's operating expenses for the year ended March 31, 1997.
The Fund's administrator, The Nottingham Company (the "Administrator"), provides
administrative services to and is generally responsible for the overall
management and day-to-day operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its services, the
Administrator receives a fee at the annual rate of 0.30% of the Fund's first $25
million of average daily net assets, 0.275% of the next $25 million of average
daily net assets, and 0.225% of average daily net assets over $50 million. The
Administrator also receives a monthly fee of $800 for accounting and
recordkeeping services. Additionally, the Administrator charges the Fund for
servicing of shareholder accounts and registration of the Fund's shares. The
Administrator also charges the Fund for certain expenses involved with the daily
valuation of portfolio securities.
(Continued)
<PAGE>
GRANDVIEW REALTY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. The Distributor receives any sales
charges imposed on purchases of shares and re-allocates a portion of such
charges to dealers through whom the sale was made, if any. For the year ended
March 31, 1997, the Distributor retained no sales charges.
Certain Trustees and officers of the Trust are also officers of the Advisor, the
Distributor or the Administrator.
At March 31, 1997, the Advisor, its officers, and Trustees of the Fund held
9,986 shares or 10.94% of the Fund shares outstanding.
NOTE 3 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act of
1940 (the "Act"), adopted a distribution plan pursuant to Rule 12b-1 of the Act
(the "Plan"). The Act regulates the manner in which a regulated investment
company may assume expenses of distributing and promoting the sales of its
shares and servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain expenses, which may not exceed
0.25% per annum of the Fund's average daily net assets for each year elapsed
subsequent to adoption of the Plan, for payment to the Distributor and others
for items such as advertising expenses, selling expenses, commissions, travel or
other expenses reasonably intended to result in sales of shares of the Fund or
support servicing of shareholder accounts.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
All expenses of the Fund incurred in connection with its organization and the
registration of its shares have been assumed by the Fund. The organization
expenses are being amortized over a period of sixty months. Investors purchasing
shares of the Fund bear such expenses only as they are amortized against the
Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $1,847,665 and $1,050,985, respectively, for the year ended March 31,
1997.
NOTE 6 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions from net
realized gains from investment transactions that represent long-term capital
gain to its shareholders. Of the total $1.53 per share of such distributions for
the year ended March 31, 1997, $.11 per share represents long-term capital gains
and $1.42 per share represents short-term capital gains. Shareholders should
consult a tax advisor on how to report distributions for state and local income
tax purposes.
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders
GrandView Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the GrandView Realty Growth Fund (the "Fund"),
a series of the GrandView Investment Trust, as of March 31, 1997, and the
related statement of operations for the year then ended, and the statements of
changes in net assets and financial highlights for the year then ended and for
the period from July 3, 1995 (commencement of operations) to March 31, 1996.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to e xpress an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examinin g, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and sign ificant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
GrandView Realty Growth Fund as of March 31, 1997, the results of its operations
for the year then ended, and the changes in its net assets and financial
highlights for the year then ended and for the period from July 3, 1995
(commencement of operations) to March 31, 1996 in conformity with generally
accepted accounting principles.
Richmond, Virginia
April 25, 1997
<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 - Enclosed Exhibit 8
(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 - 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, -- Enclosed Exhibit
11
(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 - Enclosed Exhibit 16
(24) Copies of Powers of Attorney - Enclosed Exhibit 24
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 July 21, 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 ..................... 72
GrandView Realty Growth Fund................... 152
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, Capital Value Fund, ZSA Equity Fund, ZSA Asset
Allocation Fund, ZSA Social Conscience Fund, The Brown Capital
Management Equity Fund, The Brown Capital Management Balanced Fund,
and The Brown Capital Management Small Company Fund.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(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
</TABLE>
(c) Not applicable.
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, North Carolina 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.
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts on the 25th day of July, 1997.
GRANDVIEW INVESTMENT TRUST
By: /s/ C. Frank Watson, III
C. Frank Watson, III
Secretary
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 July 25, 1997.
*
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/ C. Frank Watson, III
C. Frank Watson, III
Attorney-in-Fact Dated: July 25, 1997
<PAGE>
GRANDVIEW INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 8 Custody Agreement
EXHIBIT 9 Amended Administration Agreement
EXHIBIT 11 Consent of Auditors
EXHIBIT 16 Computation of Performance
EXHIBIT 24 Powers of Attorney
EXHIBIT 27 Financial Data Schedules
EXHIBIT 8
CUSTODY AGREEMENT
(Mutual Funds)
THIS AGREEMENT is made as of April 10, 1997, by and between GrandView Investment
Trust (the "Trust"), a Massachusetts business trust, with respect to its
existing series as of the date of this Agreement, and such other series as shall
be designated from time to time by the Trust (the "Fund" or "Funds"), and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association (the
"Custodian").
The Trust desires that its securities and funds shall be hereafter held and
administered by the Custodian pursuant to the terms of this Agreement, and,
pursuant to a separate agreement, The Nottingham Company, Inc., a North Carolina
corporation ("Nottingham"), has agreed to perform the duties of Transfer Agent,
Accounting Services Agent, Dividend Disbursing Agent and Administrator for the
Fund.
In consideration of the mutual agreements herein, the Trust and the Custodian
agree as follows:
1. DEFINITIONS.
As used herein, the following words and phrases shall have the meanings
shown in this Section 1:
"Securities" includes stocks, shares, bonds, debentures, bills, notes,
mortgages, certificates of deposit, bank time deposits, bankers'
acceptances, commercial paper, scrip, warrants, participation certificates,
evidences of indebtedness, or other obligations and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase, or subscribe for the same, or evidencing or representing any
other rights or interests therein, or in any property or assets.
"Oral Instructions" shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the
Custodian in person or by telephone, telegram, telecopy or other mechanical
or documentary means lacking original signature, by an officer or employee
of the Trust or an employee of Nottingham in its capacity as Transfer
Agent, Accounting Services Agent, Administrator and Dividend Disbursing
Agent who has been authorized by a resolution of the Board of Trustees of
the Trust or the Board of Directors of Nottingham, as the case may be, to
give Written Instructions on behalf of the Trust.
"Written Instructions" shall mean an authorization, instruction, approval,
item or set of data, or information of any kind transmitted to the
Custodian containing original signatures or a copy of such document
transmitted by telecopy including transmission of such signature,
reasonably believed by the Custodian to be the signature of an officer or
employee of the Trust or an employee of Nottingham in its capacity as
Transfer Agent, Accounting Services Agent, Administrator or Dividend
Disbursing Agent who has been authorized by a resolution of the Board of
Trustees of the Trust or Board of Directors of Nottingham, as the case may
be, to give Written Instructions on behalf of the Trust.
"Securities Depository" shall mean a system for the central handling of
securities where all securities of any particular class or series of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of
securities.
"Officers' Certificate" shall mean a direction, instruction or
certification in writing signed in the name of the Trust by the President,
Secretary or Assistant Secretary, or the Treasurer or Assistant Treasurer
of the Trust, or any other persons duly authorized to sign by the Board of
Trustees or the Executive Committee of the Trust.
"Book-Entry Securities" shall mean securities issued by the Treasury of the
United States of America and federal agencies of the United States of
America which are maintained in the book-entry system as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR
Part 350, and the book-entry regulations of federal agencies substantially
in the form of Subpart O, and the term Book-Entry Account shall mean an
account maintained by a Federal Reserve Bank in accordance with the
aforesaid Circular and regulations.
2. DOCUMENTS TO BE FILED BY TRUST.
The Trust shall from time to time file with the Custodian a certified copy
of each resolution of its Board of Trustees authorizing execution of
Written Instructions and the number of signatories required, together with
certified signatures of the officers and other signatories authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and other signatories designated therein to act, and shall be
considered in full force and effect and the Custodian shall be fully
protected in acting in reliance thereon until it receives a new certified
copy of a resolution adding or deleting a person or persons with authority
to give Written Instructions. If the certifying officer is authorized to
sign Written Instructions, the certification shall also be signed by a
second officer of the Trust. The Trust also agrees that the Custodian may
rely on Written Instructions received from Nottingham as Agent for the
Trust if those Written Instructions are given by persons having authority
pursuant to resolutions of the Board of Trustees of the Trust.
The Trust shall from time to time file with the Custodian a certified copy
of each resolution of the Board of Trustees authorizing the transmittal of
Oral Instructions and specifying the person or persons authorized to give
Oral Instructions in accordance with this Agreement. The Trust agrees that
the Custodian may rely on Oral Instructions received from Nottingham, as
agent for the Trust, if those instructions are given by persons reasonably
believed by the Custodian to have such authority. Any resolution so filed
with the Custodian shall be considered in full force and effect and the
Custodian shall be fully protected in acting in reliance thereon until it
actually receives a new certified copy of a resolution adding or deleting a
person or persons with authority to give Oral Instructions. If the
certifying officer is authorized to give Oral Instructions, the
certification shall also be signed by a second officer of the Trust.
3. RECEIPT AND DISBURSEMENT OF FUNDS.
(a) The Custodian shall open and maintain a separate account or accounts
in the name of each Fund of the Trust, subject only to draft or order
by the Custodian acting pursuant to the terms of this Agreement. The
Custodian shall hold in safekeeping in such account or accounts,
subject to the provisions hereof, all funds received by it from or for
the account of the Trust. The Trust will deliver or cause to be
delivered to the Custodian all funds owned by the Trust, including
cash received for the issuance of its shares during the period of this
Agreement. The Custodian shall make payments of funds to, or for the
account of, the Trust from such funds only:
(i) for the purchase of securities for the portfolio of the Trust
upon the delivery of such securities to the Custodian (or to any
bank, banking firm or trust company doing business in the United
States and designated by the Custodian as its sub-custodian or
agent for this purpose or any foreign bank qualified under Rule
17f-5 of the Investment Company Act of 1940 and acting as
sub-custodian), registered (if registerable) in the name of the
Trust or of the nominee of the Custodian referred to in Section 8
or in proper form for transfer, or, in the case of repurchase
agreements entered into between the Trust and the Custodian or
other bank or broker dealer (A) against delivery of the
securities either in certificate form or through an entity
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (B) upon delivery of the receipt
evidencing purchase by the Trust of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian bank to repurchase such securities from the Trust;
(ii) for the payment of interest, dividends, taxes, management or
supervisory fees, or operating expenses (including, without
limitation, Board of Trustees' fees and expenses, and fees for
legal, accounting and auditing services) and for redemption or
repurchase of shares of the Trust;
(iii)for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Trust held
by or to be delivered to the Custodian;
(iv) for the payment to any bank of interest on all or any portion of
the principal of any loan made by such bank to the Trust;
(v) for the payment to any person, firm or corporation who has
borrowed the Trust's portfolio securities the amount deposited
with the Custodian as collateral for such borrowing upon the
delivery of such securities to the Custodian, registered (if
registerable) in the name of the Trust or of the nominee of the
Custodian referred to in Section 8 or in proper form for
transfer; or
(vi) for other proper purposes of the Trust.
Before making any such payment the Custodian shall receive (and may
rely upon) Written Instructions or Oral Instructions directing such
payment and stating that it is for a purpose permitted under the terms
of this subsection (a). In respect of item (vi), the Custodian will
take such action only upon receipt of an Officers' Certificate and a
certified copy of a resolution of the Board of Trustees or the
Executive Committee of the Trust signed by an officer of the Trust and
certified by the Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made. In respect of item (v), the Custodian shall
make payment to the borrower of securities loaned by the Trust of part
of the collateral deposited with the Custodian upon receipt of Written
Instructions from the Trust or Nottingham stating that the market
value of the securities loaned has declined and specifying the amount
to be paid by the Custodian without receipt or return of any of the
securities loaned by the Trust. In respect of item (i), in the case of
repurchase agreements entered into with a bank which is a member of
the Federal Reserve System, the Custodian may transfer funds to the
account of such bank, which may be itself, prior to receipt of written
evidence that the securities subject to such repurchase agreement have
been transferred by book-entry to the Custodian's non-proprietary
account at the Federal Reserve Bank, or in the case of repurchase
agreements entered into with the Custodian, of the safekeeping receipt
and repurchase agreement, provided that such securities have in fact
been so transferred by book-entry, or in the case of repurchase
agreements entered into with the Custodian, the safekeeping receipt is
received prior to the close of business on the same day.
(b) Notwithstanding anything herein to the contrary, the Custodian may at
any time or times with the written approval of the Board of Trustees,
appoint (and may at any time remove without the written approval of
the Trust) any other bank or trust company as its sub-custodian or
agent to carry out such of the provisions of Subsection (a) of this
Section 3 as instructions from the Trust may from time to time
request; provided, however, that the appointment of such sub-custodian
or agent shall not relieve the Custodian of any of its
responsibilities hereunder; and provided, further, that the Custodian
shall not enter into any arrangement with any subcustodian unless such
sub-custodian meets the requirements of Section 26 of the Investment
Company Act of 1940 and Rule 17f-5 thereunder, if applicable.
(c) The Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by the
Custodian for the accounts of the Trust.
4. RECEIPT OF SECURITIES.
(a) The Custodian shall hold in safekeeping in a separate account, and
physically segregated at all times from those of any other persons,
firms, corporations or trusts or any other series of the Trust,
pursuant to the provisions hereof, all securities received by it from
or for the account of each series of the Trust, and the Trust will
deliver or cause to be delivered to the Custodian all securities owned
by the Trust. All such securities are to be held or disposed of by the
Custodian under, and subject at all times to the instructions pursuant
to, the terms of this Agreement. The Custodian shall have no power or
authority to assign, hypothecate, pledge, lend or otherwise dispose of
any such securities and investments, except pursuant to instructions
and only for the account of the Trust as set forth in Section 5 of
this Agreement.
(b) Notwithstanding anything herein to the contrary, the Custodian may at
any time or times with the written approval of the Board of Trustees,
appoint (and may at any time without the written approval of such
Board of Trustees remove) any other bank or trust company as its
sub-custodian or agent to carry out such of the provisions of
Subsection (a) of this Section 4 and of Section 5 of this Agreement,
as instructions may from time to time request, provided, however, that
the appointment of such sub-custodian or agent shall not relieve the
Custodian of any of its responsibilities hereunder, and provided,
further, that the Custodian shall not enter into arrangement with any
sub-custodian unless such sub-custodian meets the requirements of
Section 26 of the Investment Company Act of 1940 or Rule 17f-5
thereunder, if applicable.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES.
The Custodian shall have sole power to release or deliver any Securities of
the Trust held by it pursuant to this Agreement. The Custodian agrees to
transfer, exchange or deliver Securities held by it on behalf of the Trust
hereunder only:
(a) for sales of such Securities for the account of the Trust upon receipt
by the Custodian of Payment therefor;
(b) when such securities mature or are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for or upon conversion into other Securities alone or
other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such Securities pursuant to their terms into other
Securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
(g) for the purpose of exchanging interim receipts for temporary
Securities for definitive securities;
(h) for the purpose of effecting a loan of the portfolio Securities to any
person, firm, corporation or trust upon the receipt by the Custodian
of cash or cash equivalent collateral at least equal to the market
value of the securities loaned;
(i) to any bank for the purpose of collateralizing the obligation of the
Trust to repay any moneys borrowed by the Trust from such bank;
provided, however, that the Custodian may at the option of such
lending bank keep such collateral in its possession, subject to the
rights of such bank given to it by virtue of any promissory note or
agreement executed and delivered by the Trust to such bank; or
(j) for other proper purposes of the Trust.
As to any deliveries made by the Custodian pursuant to items (a), (b), (c),
(d), (e), (f), (g) and (h), Securities or funds receivable in exchange
therefor shall be deliverable to the Custodian. Before making any such
transfer, exchange or delivery, the Custodian shall receive (and may rely
upon) instructions requesting such transfer, exchange, or delivery and
stating that it is for a purpose permitted under the terms (a), (b), (c),
(d), (e), (f), (g), (h), or (i) of this Section 5, and, in respect of item
(j), upon receipt of instructions of a certified copy of a resolution of
the Board of Trustees of the Trust, signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary, specifying the
Securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper purpose of
the Trust, and naming the person or persons to whom delivery of such
Securities shall be made. In respect of item (h), the instructions shall
state the market value of the Securities to be loaned and the corresponding
amount of collateral to be deposited with the Custodian; thereafter, upon
receipt of instructions stating that the market value of the Securities
loaned has increased and specifying the amount of increase, the Custodian
shall collect from the borrower additional cash collateral in such amount.
6. FEDERAL RESERVE BOOK-ENTRY SYSTEM.
Notwithstanding any other provisions of this Agreement, it is expressly
understood and agreed that the Custodian is authorized in the performance
of its duties hereunder to deposit in the book-entry deposit system
operated by the Federal Reserve Bank (the "System"), United States
government, instrumentality and agency securities and any other Securities
deposited in the System and to use the facilities of the System, as
permitted by Rule 17f-4 under the Investment Company Act of 1940, in
accordance with the following terms and provisions:
(a) The Custodian may keep Securities of the Trust in the System provided
that such Securities are represented in an account ("Account") of the
Custodian's in the System which shall not include any assets of the
Custodian other than assets held in a fiduciary or custodian capacity.
(b) The records of the Custodian with respect to the participation in the
System through the Custodian shall identify by Book-Entry Securities
belonging to the Trust which are included with other Securities
deposited in the Account and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the Securities and Exchange Commission.
(c) The Custodian shall pay for Securities purchased for the account of
the Trust upon:
(i) receipt of advice from the System that such Securities have been
transferred to the Account; and
(ii) the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Trust. The
Custodian shall transfer Securities sold for the account of the
Trust upon:
(1) receipt of advice from the System that payment for such
Securities has been transferred to the Account; and
(2) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Trust. The Custodian shall send the Trust a confirmation of
any transfers to or from the account of the Trust.
(d) The Custodian will provide the Trust with any report obtained by the
Custodian on the System's accounting system, internal accounting
control and procedures for safeguarding Securities deposited in the
System. The Custodian will provide the Trust with reports by
independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding Securities,
including Securities deposited in the System relating to the services
provided by the Custodian under this Agreement; such reports shall
detail material inadequacies disclosed by such examination, and, if
there are no such inadequacies, shall so state, and shall be of such
scope and in such detail as the Trust may reasonably require and shall
be of sufficient scope to provide reasonable assurance that any
material inadequacies would be disclosed.
7. USE OF CLEARING FACILITIES.
Notwithstanding any other provisions of the Agreement, the Custodian may,
in connection with transactions in portfolio Securities by the Trust, use
the facilities of the Depository Trust Company ("DTC"), and the
Participants Trust Company ("PTC"), as permitted by Rule 17f-4 under the
Investment Company Act of 1940, if such facilities have been approved by
the Board of Trustees of the Trust in accordance with the following:
(a) DTC and PTC may be used to receive and hold eligible Securities owned
by the Trust;
(b) payment for Securities purchased may be made through the clearing
medium employed by DTC and PTC for transactions of participants acting
through them;
(c) Securities of the Trust deposited in DTC and PTC will at all times be
segregated from any assets and cash controlled by the Custodian in
other than a fiduciary or custodian capacity but may be commingled
with other assets held in such capacities. Subject to the provisions
of the Agreement with regard to instructions, the Custodian will pay
out money only upon receipt of Securities or notification thereof and
will deliver Securities only upon the receipt of money or notification
thereof;
(d) all books and records maintained by the Custodian which relate to the
participation in DTC and PTC shall identify by Book-Entry Securities
belonging to the Trust which are deposited in DTC and PTC and shall at
all times during the Custodian's regular business hours be open to
inspection by the duly authorized officers, employees, agents and
auditors, and the Trust will be furnished with all the information in
respect of the services rendered to it as it may require;
(e) the Custodian will make available to the Trust copies of any internal
control reports concerning DTC and PTC delivered to it by either
internal or external auditors within ten days after receipt of such a
report by the Custodian; and
(f) confirmations of transactions using the facilities of DTC and PTC
shall be provided as set forth in Rule 17f-4 of the Investment Company
Act of 1940.
8. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS.
Unless and until the Custodian receives instructions to the contrary, the
Custodian shall on behalf of the Trust:
(a) Present for payment all coupons and other income items held by it for
the account of the Trust which call for payment upon presentation and
hold the funds received by it upon such payment for the Trust;
(b) collect interest and cash dividends received, with notice to the
Trust, for the accounts of the Trust;
(c) hold for the accounts of the Trust hereunder all stock dividends,
rights and similar Securities issued with respect to any securities
held by it hereunder;
(d) execute as agent on behalf of the Trust all necessary ownership
certificates required by the Internal Revenue Code or the Income Tax
Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the name of such
certificates as the owner of the Securities covered thereby, to the
extent it may lawfully do so;
(e) transmit promptly to the Trust all reports, notices and other written
information received by the Custodian from or concerning issuers of
the portfolio Securities; and
(f) collect from the borrower the Securities loaned and delivered by the
Custodian pursuant to item (h) of Section 5 hereof, any interest or
cash dividends paid on such Securities, and all stock dividends,
rights and similar Securities issued with respect to any such loaned
Securities.
With respect to Securities of foreign issuers, it is expected that the
Custodian will use its best efforts to effect collection of dividends,
interest and other income, and to notify the Trust of any call for
redemption, offer of exchange, right of subscription, reorganization, or
other proceedings affecting such Securities, or any default in payments due
thereon. It is understood, however, that the Custodian shall be under no
responsibility for any failure or delay in effecting such collections or
giving such notice with respect to Securities of foreign issuers,
regardless of whether or not the relevant information is published in any
financial service available to it unless (a) such failure or delay is due
to the Custodians' or any sub-custodians' negligence or (b) any relevant
sub-custodian has acted in accordance with established industry practices.
Collections of income in foreign currency are, to the extent possible, to
be converted into United States dollars unless otherwise instructed in
writing, and in effecting such conversion the Custodian may use such
methods or agencies as it may see fit, including the facilities of its own
foreign division at customary rates. All risk and expenses incident to such
collection and conversion is for the accounts of the Trust and the
Custodian shall have no responsibility for fluctuations in exchange rates
affecting any such conversion.
9. REGISTRATION OF SECURITIES.
Except as otherwise directed by instructions, the Custodian shall register
all Securities, except such as are in bearer form, in the name of a
registered nominee of the Custodian, as defined in the Internal Revenue
Code and any Regulation of the Treasury Department issued thereunder or in
any provision of any subsequent Federal tax law exempting such transaction
from liability for stock transfer taxes, and shall execute and deliver all
such certificates in connection therewith as may be required by such laws
or Regulations or under the laws of any State. The Custodian shall use its
best efforts to the end that the specific securities held by it hereunder
shall be at all times identifiable in its records.
The Trust or Nottingham shall from time to time furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered
nominee, any securities which it may hold for the accounts of the Trust and
which may from time to time be registered in the name of the Trust.
10. SEGREGATED ACCOUNT.
The Custodian shall upon receipt of written instructions from the Trust or
Nottingham establish and maintain a segregated account or accounts for and
on behalf of the Trust, into which account or accounts may be transferred
cash and/or Securities, including Securities maintained in an account by
the Custodian pursuant to Section 4 hereof,
(i) in accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under the
Securities and Exchange Act of 1934 and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Trust;
(ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Trust
or commodity futures contracts or options thereon purchased or
sold by the Trust;
(iii)for the purposes of compliance by the Trust with the procedures
required by the Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies; and
(iv) for other proper corporate purposes, but only, in the case of
clause (iv), upon receipt of, in addition to an Officer's
Certificate, a certified copy of a resolution of the Board of
Trustees signed by an officer of the Trust and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes
to be proper corporate purposes.
11. VOTING AND OTHER ACTIONS.
Neither the Custodian nor any nominee of the Custodian shall vote any
of the Securities held hereunder by or for the accounts of the Trust,
except in accordance with instructions. The Custodian shall execute and
deliver, or cause to be executed and delivered, to the appropriate
investment advisor of each series of the Trust, all notices, proxies
and proxy soliciting materials with relation to such Securities
(excluding any Securities loaned and delivered by the Custodian
pursuant to item (h) of Section 5 hereof), such proxies to be executed
by the registered holder of such Securities (if registered otherwise
than in the name of the Trust), but without indicating the manner in
which such proxies are to be voted. Such proxies shall be delivered by
regular mail to the appropriate investment advisor of each series of
the Trust.
12. TRANSFER TAX AND OTHER DISBURSEMENTS.
The Trust shall pay or reimburse the Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder
and for all other necessary and proper disbursements and expenses made
or incurred by the Custodian in the performance of this Agreement. The
Custodian shall execute and deliver such certificates in connection
with Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the
laws of any State, to exempt from taxation any exemptible transfers
and/or deliveries of any such securities.
13. CONCERNING THE CUSTODIAN.
(a) The Custodian's compensation shall be paid by the Trust. The
Custodian shall not be liable for any action taken in good faith
upon receipt of instructions as herein defined or a certified
copy of any resolution of the Board of Trustees, and may rely on
the genuineness of any such document which it may in good faith
believe to have been validly executed.
(b) The Custodian shall not be liable for any loss or damage,
resulting from its action or omission to act or otherwise, except
for any such loss or damage arising out of its own negligence or
willful misconduct and except that the Custodian shall be
responsible for the acts of any sub-custodian, or agent appointed
hereunder and approved by the Board of Trustees of the Trust. At
any time, the Custodian may seek advice from legal counsel for
the Trust whose legal fees shall be paid at the sole expense of
the Trust, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken
or not taken or suffered by it in good faith in accordance with
the opinion of counsel for the Trust. The Trust and not the
Custodian shall be responsible for any fee or charges by counsel
for the Trust in connection with any such opinion rendered to the
Custodian.
(c) Without limiting the generality of the foregoing, the Custodian
shall be under no duty or obligation to inquire into, and shall
not be liable for:
(i) The validity of the issue of any Securities purchased by or
for the Trust, the legality of the purchase thereof, or the
propriety of the amount paid therefor;
(ii) The legality of the issue or sale of any Securities by or
for the Trust, or the propriety of the amount for which the
same are sold;
(iii)The legality of the issue or sale of any shares of the
Trust, or the sufficiency of the amount to be received
therefor;
(iv) The legality of the redemption of any shares of the Trust,
or the propriety of the amount to be paid therefor;
(v) The legality of the declaration of any dividend or
distribution by the Trust, or the legality of the issue of
any Securities of the Trust in payment of any dividend or
distribution in shares;
(vi) The legality of the delivery of any Securities held for the
Trust for the purpose of collateralizing the obligation of
the Trust to repay any moneys borrowed by the Trust; or
(vii)The legality of the delivery of any Securities held for the
Trust for the purpose of lending said securities to any
person, firm or corporation.
(d) The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount, if the Securities upon
which such amount is payable are in default, or if payment is
refused after due demand or presentation by the Custodian on
behalf of the Trust, unless and until
(i) the Custodian shall be directed to take such action by
written instructions signed in the name of the Trust on
behalf of the Trust by one of its executive officers; and
(ii) the Custodian shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with
any such action.
(e) The Custodian shall not be under any duty or obligation to
ascertain whether any securities at any time delivered to or held
by it for the account of the Trust, are such as may properly be
held by the Trust under the provisions of the Trust's Declaration
of Trust or By-Laws as amended from time to time.
(f) The Trust agrees to indemnify and hold harmless the Custodian and
its nominees, sub-custodians, depositories and agent from all
taxes, charges, expenses, assessments, liabilities, and losses
(including counsel fees) incurred or assessed against it or its
nominees, sub-custodians, depositories and agents in connection
with the performance of this Agreement, except such as may arise
from its or its nominee's, sub-custodian's, depositories' and
agent's own negligent action, negligent failure to act, breach of
this agreement or willful misconduct. The Custodian is authorized
to charge any account of the Trust for such items; provided,
however, that, except for overdrafts as to which the Custodian
shall have the immediate right of offset, prior to charging any
such account for such items, the Custodian shall first have
forwarded an invoice for such item to the Trust and 30 days shall
have elapsed from the date of such invoice to the Trust without
payment of the same having been received by the Custodian. In the
event of any advance of funds for any purpose made by the
Custodian resulting from orders or instructions of the Trust, or
in the event that the Custodian or its nominees, sub-custodians,
depositories and agents shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct any property at
any time held for the accounts of the Trust shall be security
therefor. Nothing in this paragraph, however, shall be deemed to
apply to transaction and asset holding fees or out of pocket
expenses of the Custodian which are payable by Nottingham, and as
to such fees and expenses the Custodian shall have no right of
offset or security under this paragraph.
(g) The Custodian agrees to indemnify and hold harmless the Trust and
Trust's Trustees and officers from all taxes, charges, expenses,
assessments, claims liabilities, and losses (including counsel
fees) incurred or assumed against any of them as a result of any
breach or violation of this Agreement by the Custodian or any act
or omission by the Custodian or its Trustees, officers, employees
and agents and resulting from their negligence or willful
misconduct.
(h) In the event that, pursuant to this Agreement, instructions
direct the Custodian to pay for securities on behalf of the
Trust, the Trust hereby grants to the Custodian a security
interest in such Securities, until the Custodian has been
reimbursed by the Trust in immediately available funds. The
instructions designating the Securities to be paid for shall be
considered the requisite description and designation of the
Securities pledged to the Custodian for purposes of the
requirements of the Uniform Commercial Code.
(i) The Custodian represents that it is qualified to act as such
under section 26(a) of the Investment Company Act of 1940.
14. REPORTS BY THE CUSTODIAN.
(a) The Custodian shall furnish the Trust and the appropriate
investment advisor of each series of the Trust, daily with a
statement summarizing all transactions and entries for the
accounts of the Trust. The Custodian shall furnish the Trust at
the end of every month with a list of the portfolio Securities
held by it as Custodian for the Trust, adjusted for all
commitments confirmed by instructions as of such time. The books
and records of the Custodian pertaining to its actions under this
Agreement shall be open to inspection and audit at reasonable
times by officers of the Trust, its independent public
accountants and officers of its investment advisers.
(b) The Custodian will maintain such books and records relating to
transactions effected by it as are required by the Investment
Company Act of 1940, as amended, and any rule or regulation
thereunder; or by any other applicable provision of the law to be
maintained by the Trust or its Custodian, with respect to such
transactions, and preserving or causing to be preserved, any such
books and records for such periods as may be required by any such
rule or regulation.
15. TERMINATION OR ASSIGNMENT.
This agreement may be terminated by the Trust, or by the Custodian, on
sixty (60) days' notice, given in writing and sent by registered mail
to the Custodian, or to the Trust, as the case may be, at the address
hereinafter set forth. Upon any termination of this Agreement, pending
appointment by the Trust of a successor to the Custodian or a vote of
the shareholders of the Trust to dissolve or to function without a
Custodian of its funds, the Custodian shall not deliver funds,
Securities or other property of the Trust to the Trust, but may deliver
them to a bank or trust company of its own selection having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report of not less than ten million dollars ($10,000,000) and
otherwise qualified to act as a custodian to a registered investment
company as a Custodian for the Trust to be held under terms similar to
those of this Agreement; provided, however, that the Custodian shall
not be required to make any such delivery or payment until full payment
shall have been made to the Custodian of all its contractual fees,
compensations, costs and expenses, except for fees and expenses all as
set forth in Section 13 of this Agreement.
16. MISCELLANEOUS.
(a) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its office at First Union National Bank of
North Carolina, 401 South Tryon Street, Charlotte, North Carolina
28288, or at such other place as the Custodian may from time to
time designate in writing.
(b) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Trust, shall be sufficiently
given if addressed to the Trust and mailed or delivered to it at
105 N. Washington Street, Rocky Mount, North Carolina 27802, or
at-such other place as the Trust may from time to time designate
in writing.
(c) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the
same formality as this Agreement, and authorized or approved by a
resolution of the Board of Trustees of the Trust.
(d) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns,
provided, however, that this Agreement shall not be assignable by
the Trust without the written consent of the Custodian or by the
Custodian without the written consent of the Trust, authorized or
approved by a resolution of its Board of Trustees.
(e) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such
counterparts shall, together, constitute but one instrument.
(f) This Agreement and the rights and obligations of the Trust and
the Custodian hereunder shall be construed and interpreted in
accordance with the laws of the State of North Carolina.
(g) The Declaration of Trust of the Trust has been filed with the
Secretary of State of the Commonwealth of Massachusetts. The
obligations of the Trust on behalf of the Funds are not
personally binding upon, nor shall resort be had to the private
property of any of the Trustees, shareholders, officers,
employees or agents of the Trust, but only the Trust's property
shall be bound.
<PAGE>
IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to be
signed and witnessed by duly authorized persons as of the date first written
above. Executed in several counterparts, each of which is an original.
Attest: FIRST UNION NATIONAL BANK OF NORTH CAROLINA
- ----------------------------
By:__________________________________________
Title:_______________________________________
Attest: GrandView Investment Trust
- ----------------------------
By: /s/ J. Hope Reese
Title: TREASURER
AMENDED AND RESTATED FUND ACCOUNTING,
DIVIDEND DISBURSING & TRANSFER AGENT,
AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of April, 1997, by and
between GRANDVIEW INVESTMENT TRUST, a Massachusetts business trust (the
"Trust"), and THE NOTTINGHAM COMPANY, a North Carolina corporation (the
"Administrator").
WHEREAS, the Trust is an open-end management investment company of the series
type which is registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Administrator is in the business of providing administrative
services to investment companies.
NOW THEREFORE, the Trust and the Administrator do mutually promise and agree as
follows:
1. Employment. The Trust hereby employs Administrator to act as fund
accountant, dividend disbursing and transfer agent and fund administrator
for each Fund of the Trust, unless the Administrator and an individual Fund
of the Trust determine it is in the best interests of that individual Fund
to negotiate a separate Schedule of Compensation under Exhibit C.
Administrator, at its own expense, shall render the services and assume the
obligations herein set forth subject to being compensated therefore as
herein provided.
2. Delivery of Documents. The Trust has furnished the Administrator with
copies properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and as they
shall from time to time be amended, are herein called the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Administrator and approving this Agreement; and
(d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933 as amended, (the "1933 Act"),
including all exhibits, relating to shares of beneficial interest of,
and containing the Prospectus of, each Fund of the Trust (herein
called the "Shares") as filed with the Securities and Exchange
Commission and all amendments thereto.
The Trust will furnish the Administrator with copies, properly certified or
authenticated, of all amendments of or supplements to the foregoing.
3. Duties of the Administrator. Subject to the policies and direction of the
Trust's Board of Trustees, the Administrator will provide a continuous
executive management program and day to day supervision for each of the
Trust's Funds. Services to be provided shall be in accordance with the
Trust's organizational and registration documents as listed in paragraph 2
hereof and with the Prospectus of each Fund of the Trust. The Administrator
further agrees that it:
(a) Will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and will, in addition, conduct its
activities under this Agreement in accordance with regulations of any
other Federal and State agencies which may now or in the future have
jurisdiction over its activities;
(b) Will maintain, except as may be required to be maintained by third
parties hired by the Trust under Rule 31a-3 of the 1940 Act, the
account books and records of the Trust and each Fund of the Trust as
required by Rule 31a-1 of the 1940 Act and will preserve such records
in accordance with Rule 31a-2 of the 1940 Act;
(c) Will provide, at its expense the necessary non-executive personnel and
data processing equipment and software to perform the Portfolio
Accounting Services, Expense Accrual and Payment Services, Fund
Valuation and Financial Reporting Services, Tax Accounting Services,
Compliance Control Services Registration Services, SEC Filing
Services, Drafting of Board of Trustee Meeting Minutes, and Proxy
Material Services shown on Exhibit A hereof;
(d) Will provide, at its expense the non-executive personnel and data
processing equipment and software necessary to perform the Shareholder
Servicing functions shown on Exhibit B hereof;
(e) Will provide, at its expense, certain executive personnel for the
Trust as may be agreed upon from time to time with the Board of
Trustees; and
(f) Will provide all office space and general office equipment necessary
for the activities of the Trust except as may be provided by third
parties pursuant to separate agreements with the Trust.
Notwithstanding anything contained in this Agreement to the contrary, the
Administrator (including its directors, officers, employees and agents) shall
not be required to perform any of the duties of, assume any of the obligations
or expenses of, or be liable for any of the acts or omissions of, any investment
advisor of a Fund of the Trust or other third party subject to separate
agreements with the Trust. The Administrator shall not be responsible hereunder
for the administration of the Code of Ethics of the Trust which shall be under
the responsibility of the investment advisors, except insofar as the Code of
Ethics applies to the personnel of the Administrator. It is the express intent
of the parties hereto that the Administrator shall not have control over or be
responsible for the placement (except as specifically directed by a Shareholder
of the Trust), investment or reinvestment of the assets of any Fund of the
Trust. The Administrator may from time to time, subject to the approval of the
Trustees, obtain at its own expense the services of consultants or other third
parties to perform part or all of its duties hereunder, and such parties may be
affiliates of the Administrator.
4. Services Not Exclusive. The management and administrative services
furnished by the Administrator hereunder are not to be deemed exclusive,
and the Administrator shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Administrator hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's
request.
6. Expenses. During the term of this Agreement, the Administrator will pay all
expenses incurred by it in connection with the performance of its
obligations under this Agreement.
Notwithstanding the foregoing, the Trust shall pay the expenses and costs of the
following:
(a) Taxes incurred by the Trust and Funds of the Trust;
(b) Brokerage fees and commissions with regard to portfolio transaction of
the Funds;
(c) Interest charges, fees and expenses of the custodian of the Funds'
portfolio securities (as of the date of this agreement, the Adviser to
the Funds has not been presented or approved any costs under this
item);
(d) Fees and expenses of the Trust's dividend disbursing and transfer
agent, fund accounting agent and administrator, in accordance with
paragraph 7 herein;
(e) Costs, as may be allocable to and agreed upon in advance by the
Trustees and the Administrator, of all non-executive and clerical
personnel and all data processing equipment and software in connection
with the provision of fund accounting and recordkeeping services and
shareholder servicing functions as contemplated herein (as of the date
of this agreement, the Adviser to the Funds has not been presented or
approved any costs under this item);
(f) Auditing and legal expenses of the Trust;
(g) Cost of maintenance of the Trust's existence as a legal entity;
(h) Cost of special forms, stationery and telephone services (but not
telephone equipment) for the Trust and agreed upon in advance (as of
the date of this agreement, the Adviser to the Funds has not been
presented or approved any additional costs under this item);
(i) Compensation of Independent Trustees who are not interested persons of
the Trust as that term is defined by law;
(j) Costs of Trust meetings;
(k) Federal and State registration fees and expenses;
(l) Costs of setting in type, printing and mailing Prospectuses, reports
and notices to existing shareholders;
(m) The Advisory fees payable to each Funds' Investment Advisor;
(n) Direct out-of-pocket costs in connection with Trust activities, such
as the costs of long distance telephone and wire charges (not relating
to a shareholder purchase), postage and the printing of special forms
and stationery, copying charges, financial publications used in
connection with Trust activities, etc., and
(o) Other actual out-of-pocket expenses of the Administrator as may be
agreed upon in writing from time to time by the Administrator and the
Trustees (at this time, the Adviser to the Funds has not been
presented or approved any additional costs under this item).
7. Compensation. For the services provided and the expenses assumed by the
Administrator pursuant to this Agreement, the Trust will pay the
Administrator and the Administrator will accept as full compensation the
administrative fees and expenses as set forth on Exhibit C attached hereto.
Special projects, not included herein and requested in writing by the
Trustees, shall be completed by the Administrator and invoiced to the Trust
as mutually agreed upon.
8. Limitation of Liability and Indemnification.
(a) The Administrator may rely on information reasonably believed by it to
be accurate and reliable. Except as may otherwise be required by the
1940 Act and the rules thereunder, neither the Administrator nor its
officers, directors, employees, agents, control persons, or affiliates
of any thereof shall be subject to any liability for, or any damages,
expenses or losses incurred by the Trust in connection with, any error
of judgment, mistake of law, any act or omission connected with or
arising out of any services rendered under or payments made pursuant
to this Agreement or any other matter to which this Agreement relates;
except by reason or any willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the
duties of the Administrator under this Agreement or by reason of
reckless disregard by any of such persons of the obligations and
duties of the Administrator under this Agreement.
(b) Any person, even though also a director, officer, employee,
shareholder or agent of the Administrator, or any of its affiliates,
who may be or become an officer, trustee, employee of the Trust shall
be deemed, when rendering services to the Trust or acting on any
business of the Trust, to be rendering such services to or acting
solely as an officer, trustee, employee or agent of the Trust and not
as a director, officer, employee, or agent of or one under the control
or direction of the Administrator or any of its affiliates, even
though paid by one of these entities.
(c) The Trust shall indemnify and hold harmless the Administrator, its
directors, officers, employees, agents, control persons and affiliates
from and against any and all claims, demands, expenses and liabilities
of any and every nature which the Administrator may sustain or incur
by reason of, or as a result of: (i) any action taken or omitted to be
taken by the Administrator 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 the Trust or upon the
opinion of legal counsel for the Trust or its own counsel; or (ii) any
action taken or omitted to be taken by the Administration 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.
However, indemnification under this subparagraph shall not apply to
actions or omissions of the Administrator or its directors, officers,
employees, or agents in cases of its or their own gross negligence,
willful misconduct, bad faith, or reckless disregard of its or their
own duties hereunder.
(d) The Administrator shall indemnify and hold harmless the Trust, its
trustees, officers and employees from and against any and all claims,
demands, expenses and liabilities of any and every nature which the
Trust or such persons may sustain or incur by reason of, or as a
result of the Administrator's gross negligence, willful misconduct,
bad faith, or reckless disregard of its duties hereunder.
9. Duration and Termination. This Agreement shall become effective as of the
date first above written, and shall continue in force and effect for a
period of two years thereafter and shall be continued on its terms from
year to year thereafter unless sooner terminated as permitted herein. This
Agreement may be terminated at any time, without payment of any penalty, by
the Trust or the Administrator upon ninety days' written notice to the
other party.
10. Amendment. This Agreement may be amended by mutual written consent of the
parties. If, at any time during the existence of this Agreement, the Trust
deems it necessary or advisable in the best interests of the Trust that any
amendment of this Agreement be made in order to comply with the
recommendations or requirements of the Securities and Exchange Commission
or state regulatory agencies or other governmental authority, or to obtain
any advantage under state or federal laws, and shall notify the
Administrator of the form of Amendment which it deems necessary or
advisable and the reasons therefor, and if the Administrator declines to
assent to such amendment, the Trust may terminate this Agreement forthwith.
11. Notice. Any notice that is required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed or
delivered, or mailed postpaid to the other party at the principal place of
business of such party.
12. 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, 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. If any provision of this Agreement, or
portion thereof, is capable of two interpretations, one of which would
render the provision, or portion thereof, void and the other of which would
render the provision, or portion thereof, valid, then the provision, or
portion thereof, shall have the meaning which renders it valid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers effective as of the date indicated above.
Attest: GRANDVIEW INVESTMENT TRUST
By: /s/ Winsor H. Alyesworth
(SEAL)
Attest: THE NOTTINGHAM COMPANY
By: /s/ Frank P. Meadows III
(SEAL)
<PAGE>
Exhibit A
FUND ACCOUNTING AND RECORDKEEPING SERVICES
I. Provide all necessary or appropriate accounting services, including:
A. Portfolio Accounting Services:
1. Maintain portfolio records on a trade date basis using securities
trade information communicated from the investment manager on a
timely basis.
2. For each valuation date, obtain prices from a pricing source
approved by the Board of Trustees and apply those prices to
portfolio positions. For those securities where market quotations
are not readily available, the Board of Trustees shall approve,
in good faith, the method for determining the fair market value
for such securities.
3. Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for
the accounting period.
4. Determine gain/loss on security sales and identify them as to
short-short, short or long term status. Account for periodic
distributions of gain to shareholders and maintain undistributed
gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
1. For each valuation date, calculate the expense accrual amounts as
directed by the Trust as to methodology, rate, or dollar amount.
2. Issue payments for Fund expenses upon receipt of funds from the
Trust's Custodian.
3. Account for Fund expenditures and maintain expense accrual
balances at the level of accounting detail specified by each
Fund.
4. Support periodic expense accrual review, i.e., comparison of
actual expense activity versus accrual amount.
5. Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
1. Account for Fund share purchases, sales, exchanges, transfers,
dividend reinvestments, and other Fund share activity, for each
of the Funds, as reported by the Trust on a timely basis.
2. Determine net investment income (earnings) for each of the Funds
as of each valuation date. Account for periodic distributions of
earnings to shareholders and maintain undistributed net
investment income balances as of each valuation date.
3. Maintain a general ledger for each of the Funds in the form
defined by the Trust and produce a set of financial statements as
may be agreed upon from time to time as of each valuation date.
4. For each day the Funds are opened as defined in the prospectuses,
determine the net asset value of each of the Funds according to
the accounting policies and procedures set forth in the
prospectuses.
5. Calculate per share net asset value, per share net earnings, and
other per share amounts reflective of fund operation at such time
as required by the nature and characteristics of each Fund.
Performs the calculations using the number of shares outstanding
reported by the Trust to be applicable at the time of
calculation.
6. Communicate, at an agreed upon time, the per share price for each
valuation date to parties as agreed upon from time to time.
7. Prepare monthly reports which document the adequacy of accounting
detail to support month-end ledger balances.
D. Tax Accounting Services:
1. Maintain tax accounting records for each of the Funds' investment
portfolio so as to support tax reporting required for IRS defined
regulated investment companies.
2. Maintain tax lot detail for the investment portfolio.
3. Calculate taxable gain/loss on security sales using the tax cost
basis defined for each Fund.
4. Report the taxable components of income and capital gains
distributed to the Trust to support tax reporting to the
shareholders.
II. Provide such services as may be reasonably required for compliance with
applicable legal requirements and maintaining the records of the trust,
including:
A. Compliance Control Services:
1. Maintain accounting records to support compliance monitoring by
the Trust.
2. Support reporting to regulatory bodies and support financial
statement preparation by making the Fund accounting records
available to the Trust, SEC, and outside auditors.
3. Maintain accounting records according to the Investment Company
Act of 1940 and regulations provided thereunder.
B. Registration Services:
1. Prepare all reports and filings required to maintain the
registration and qualifications of each Fund and its shares under
federal and state securities laws, including the initial 4-6
month update and the annual amendment to its Registration
Statement on Form N-1A containing an updated Prospectus and
Statement of Additional Information.
C. SEC Filing Services:
1. Prepare and make periodic SEC filings, including Form N-SAR,
annual and semi-annual shareholder reports, other shareholder
reports, and fidelity bond amendments but not including
preparation and filing of any sales literature and preparation of
President's letter contained in shareholder reports.
D. Minutes, Proxy Material Services:
1. Preparation and maintenance of agendas, (other than the agenda
for the initial meeting for the Board of Trustees), board agenda
materials and all appropriate meeting notification requirements
as per the Trust Bylaws, minutes and other records of meetings of
the Board of Trustees, committees thereof, and shareholders.
Preparation and maintenance of any proxy material and related
shareholder meetings and records, including records as to voting.
<PAGE>
Exhibit B
SHAREHOLDER SERVICING FUNCTIONS
Provide all necessary and appropriate shareholder servicing, transfer agent and
dividend disbursing agent services including:
1. Process new accounts.
2. Process purchases, both initial and subsequent in accordance with
conditions set forth in the Funds' 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 Fund 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
Fund 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
ADMINISTRATOR'S COMPENSATION SCHEDULE
For the services delineated in the Fund Accounting, Dividend Disbursing &
Transfer Agent and Administration Agreement, the Administrator shall be
compensated monthly, as of the last day of each month, within five business days
of the month end, a base fee plus a fee based upon net assets according to the
following schedule. The fee is calculated based upon the Trust's average daily
net assets of each Fund:
Fund Accounting Fee:
$1,200 per month per Fund for the period from April 1, 1997 to
September 30, 1997 $1,500 per month per Fund beginning October
1, 1997
Asset Based Fee:
GrandView Realty Growth Fund
Annual
Net Assets Fee
On the first $25 million 0.300%
On the next $25 million 0.275%
On all assets over $50 million 0.225%
Grandview REIT Index Fund
Annual
Net Assets Fee
On the first $25 million 0.225%
On the next $25 million 0.200%
On all assets over $50 million 0.175%
Shareholder Recordkeeping
$9 per shareholder per year
Blue Sky Administration
$100 per state registration per year
IRA Accounts
$15 per year
Securities Pricing (waived for the Index Fund)
$0.15 per equity security per pricing day
$0.20 per corporate bond, government bond, medium-term bond or mortgage backed
security per pricing day $0.40 per CMO or asset backed securities per pricing
day $0.40 per municipal security per pricing day $2.00 per equity per month for
corporate action coverage
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholders
The GrandView Investment Trust
We consent to the use of our reports dated April 25, 1997 included in the
registration statement on Form N-1A of the GrandView REIT Index Fund and
GrandView Realty Growth Fund, each of which is a series of the GrandView
Investment Trust, and to the reference to our firm under the heading "Financial
Highlights" in the prospectus.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
July 24, 1997
Exhibit 16
Computation of Performance
THE GRANDVIEW FUNDS
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms
of years.
The Fund may also compute the "cumulative total return" of the Fund, which is
calculated in a similar manner, except that the results are not annualized. This
calculation is as follows:
(ERV - P)/P = TR
Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the period
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted
TR = total return
The calculation of average annual total return and cumulative total return
assume that the maximum sales load is deducted from the initial $1,000
investment at the time it is made and that there is a reinvestment of all
dividends and capital gain distributions on the reinvestment dates during the
period. The ending redeemable value is determined by assuming complete
redemption of the hypothetical investment and the deduction of all nonrecurring
charges at the end of the period covered by the computations. The Fund may also
quote other total return information that does not reflect the effects of the
sales load.
The average annual total return for the REIT Index Fund and the Realty Growth
Fund for the fiscal year ended March 31, 1997 was 24.98%, and 38.59%,
respectively. Without reflecting the effects of the maximum sales load the
average annual return for the period was 28.85%, and 45.12%, respectively. The
average annual total return for the REIT Index Fund and the Realty Growth Fund
since inception (July 3,1995 to March 31, 1997) was 17.74%, and 24.45%,
respectively. Without reflecting the effects of the maximum sales load the
average annual return for the period was 19.82%, and 27.78%, respectively.
The cumulative total return for the REIT Index Fund and the Realty Growth Fund
since inception (July 3, 1995 to March 31, 1997) was 32.98%, and 46.49%,
respectively. Without reflecting the effects of the maximum sales load, the
cumulative total return for the period was 37.10%, and 53.39%, respectively.
REIT Index Fund:
Average Annual Total Return for the 12 months ended March 31, 1997 including
3.0% sales load:
1,000(1+T)1 = 1,249.80
T = .2498
T = 24.98%
ERV = $1,249.80
P = $1,000
n = 1
Average Annual Total Return since inception through March 31, 1997 including
3.0% sales load:
1,000(1+T)1.75 = 1,329.83
T = .1774
T = 17.74%
ERV = $1,329.83
P = $1,000
n = 1.75
Cumulative Total Return since inception through March 31, 1997 including 3.0%
sales load:
(1,329.83-1,000)/1,000 = .3298
ERV = $1,329,83
P = $1,000
TR = 32.98%
Average Annual Total Return for the 12 months ended March 31, 1997 excluding
3.0% sales load:
1,000(1+T)1 = 1,288.45
T = .2885
T = 28.85%
ERV = $1,288.45
P = $1,000
n = 1
Average Annual Total Return since inception through March 31, 1997 excluding
3.0% sales load:
1,000(1+T)1.75 = 1,370.96
T = .1982
T = 19.82%
ERV = $1,370.96
P = $1,000
n = 1.75
Cumulative Total Return since inception through March 31, 1997 excluding 3.0%
sales load:
(1,370.96-1,000)/1,000 = .3710
ERV = $1,370.96
P = $1,000
TR = 37.10%
Realty Growth Fund:
Average Annual Total Return for the 12 months ended March 31, 1997 including
4.5% sales load:
1,000(1+T)1 = 1,385.86
T = .3859
T = 38.59%
ERV = $1,385.86
P = $1,000
n = 1
Average Annual Total Return since inception through March 31, 1997 including
4.5% sales load:
1,000(1+T)1.75 = 1,464.91
T = .2445
T = 24.45%
ERV = $1,464.91
P = $1,000
n = 1.75
Cumulative Total Return since inception through March 31, 1997 including 4.5%
sales load:
(1,464.91-1,000)/1,000 = .4649
ERV = $1,464.91
P = $1,000
TR = 46.49%
Average Annual Total Return for the 12 months ended March 31, 1997 excluding
4.5% sales load:
1,000(1+T)1 = 1,451.16
T = .4512
T = 45.12%
ERV = $1,451.16
P = $1,000
n = 1
Average Annual Total Return since inception through March 31, 1997 excluding
4.5% sales load:
1,000(1+T)1.75 = 1,533.94
T = .2778
T = 27.78%
ERV = $1,533.94
P = $1,000
n = 1.75
Cumulative Total Return since inception through March 31, 1997 excluding 4.5%
sales load:
(1,533.94-1,000)/1,000 = .5339
ERV = $1,533.94
P = $1,000
TR = 53.39%
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of GrandView Investment Trust hereby appoints Winsor H. Aylesworth, J. Hope
Reese, and/or C. Frank Watson, III, with full power of substitution, his true
and lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration, pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940, of said Trust's
shares of beneficial interest, and any and all amendments to said Registration
Statement (including post-effective amendments), and all instruments necessary
or incidental in connection therewith and to file the same with the U.S.
Securities and Exchange Commission. Said attorneys shall have full power and
authority, with full power of substitution, to do and perform in the name and on
behalf of the undersigned every act whatsoever requisite or desirable to be done
in the premises, as fully and to all intents and purposes as the undersigned
might or could do, the undersigned hereby ratifying and approving all such acts
of such attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th
day of November, 1996.
_______________________________ /s/ Arthur Collins
Witness
-----------------------------------
Arthur Collins
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of GrandView Investment Trust hereby appoints Winsor H. Aylesworth, J. Hope
Reese, and/or C. Frank Watson, III, with full power of substitution, his true
and lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration, pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940, of said Trust's
shares of beneficial interest, and any and all amendments to said Registration
Statement (including post-effective amendments), and all instruments necessary
or incidental in connection therewith and to file the same with the U.S.
Securities and Exchange Commission. Said attorneys shall have full power and
authority, with full power of substitution, to do and perform in the name and on
behalf of the undersigned every act whatsoever requisite or desirable to be done
in the premises, as fully and to all intents and purposes as the undersigned
might or could do, the undersigned hereby ratifying and approving all such acts
of such attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th
day of November, 1996.
_______________________________ /s/ Richard W. Jagolta
Witness
-----------------------------------
Richard W. Jagolta
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of GrandView Investment Trust hereby appoints Winsor H. Aylesworth, J. Hope
Reese, and/or C. Frank Watson, III, with full power of substitution, his true
and lawful attorney to execute in his name, place and stead and on his behalf a
registration statement on Form N-1A for the registration, pursuant to the
Securities Act of 1933 and the Investment Company Act of 1940, of said Trust's
shares of beneficial interest, and any and all amendments to said Registration
Statement (including post-effective amendments), and all instruments necessary
or incidental in connection therewith and to file the same with the U.S.
Securities and Exchange Commission. Said attorneys shall have full power and
authority, with full power of substitution, to do and perform in the name and on
behalf of the undersigned every act whatsoever requisite or desirable to be done
in the premises, as fully and to all intents and purposes as the undersigned
might or could do, the undersigned hereby ratifying and approving all such acts
of such attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 26th
day of November, 1996.
_______________________________ /s/ Raymond H. Weaving
Witness
-----------------------------------
Raymond H. Weaving
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GRANDVIEW REIT INDEX FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1,348,368
<INVESTMENTS-AT-VALUE> 1,439,168
<RECEIVABLES> 6,646
<ASSETS-OTHER> 27,148
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,472,962
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<OTHER-ITEMS-LIABILITIES> 5,864
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<OVERDISTRIBUTION-NII> 5692
<ACCUMULATED-NET-GAINS> (3,784)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 1,467,098
<DIVIDEND-INCOME> 32,233
<INTEREST-INCOME> 715
<OTHER-INCOME> 0
<EXPENSES-NET> 6,342
<NET-INVESTMENT-INCOME> 26,606
<REALIZED-GAINS-CURRENT> (3,402)
<APPREC-INCREASE-CURRENT> 91,681
<NET-CHANGE-FROM-OPS> 114,885
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 26606
<DISTRIBUTIONS-OF-GAINS> 479
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100,474
<NUMBER-OF-SHARES-REDEEMED> 10,250
<SHARES-REINVESTED> 2,066
<NET-CHANGE-IN-ASSETS> 1,214,305
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 97
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,126
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,066
<AVERAGE-NET-ASSETS> 607,258
<PER-SHARE-NAV-BEGIN> 10.21
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 2.38
<PER-SHARE-DIVIDEND> 0.50
<PER-SHARE-DISTRIBUTIONS> 0.01
<RETURNS-OF-CAPITAL> 0.05
<PER-SHARE-NAV-END> 12.53
<EXPENSE-RATIO> 1.04
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> GRANDVIEW REALTY GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1,145,728
<INVESTMENTS-AT-VALUE> 1,236,334
<RECEIVABLES> 5,900
<ASSETS-OTHER> 32,713
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,274,947
<PAYABLE-FOR-SECURITIES> 109,620
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,304
<TOTAL-LIABILITIES> 116,924
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,067,417
<SHARES-COMMON-STOCK> 91,277
<SHARES-COMMON-PRIOR> 18,040
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 948
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 90,606
<NET-ASSETS> 1,158,023
<DIVIDEND-INCOME> 24,688
<INTEREST-INCOME> 3,023
<OTHER-INCOME> 0
<EXPENSES-NET> 10,437
<NET-INVESTMENT-INCOME> 17,274
<REALIZED-GAINS-CURRENT> 125,083
<APPREC-INCREASE-CURRENT> 86,406
<NET-CHANGE-FROM-OPS> 228,763
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17274
<DISTRIBUTIONS-OF-GAINS> 125,083
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 120,300
<NUMBER-OF-SHARES-REDEEMED> 56,779
<SHARES-REINVESTED> 9,716
<NET-CHANGE-IN-ASSETS> 976,001
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 851
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,537
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 53,094
<AVERAGE-NET-ASSETS> 553,661
<PER-SHARE-NAV-BEGIN> 10.09
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 4.14
<PER-SHARE-DIVIDEND> 0.33
<PER-SHARE-DISTRIBUTIONS> 1.53
<RETURNS-OF-CAPITAL> 0.01
<PER-SHARE-NAV-END> 12.69
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
