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
$13,762 - total investment return of 37.62% 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
