<PAGE> PAGE 1
000 A000000 09/18/98
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001 A000000 GRANDVIEW INVESTMENT TRUST
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<PAGE> PAGE 2
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<PAGE> PAGE 4
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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SIGNATURE C FRANK WATSON III
TITLE SECRETARY
77 C) Submission of Matters to a Vote of Security Holders
(a) A Special Meeting of Shareholders of the GrandView Realty Growth Fund
and the GrandView S&P REIT Index Fund (collectively, the "Funds"),
series of the GrandView Investment Trust, was held at 10:00 a.m. on
September 11, 1998 at the offices of the FBR Family of Funds, 1001
Nineteenth Street North, Arlington, Virginia 22209.
(b) n/a
(c) The meeting was held for the following purposes:
1. To consider and vote on approval of an Agreement and Plan of
Reorganization providing for the acquisition of all or substantially
all of the assets of the Funds by the FBR Realty Growth Fund ("FBR
Realty Fund"), a series of the FBR Family of Funds, in exchange for
shares of FBR Realty Fund and assumption of certain identified
liabilities of the Funds by FBR Realty Fund, and for the distribution
of such shares to shareholders of the Funds in liquidation of the
Funds; and
2. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The following represents voted shares on the Plan of Reorganization.
(The Board of Trustees had fixed the close of business on July 30, 1998
as Record Date for determination of shareholders entitled to notice of,
and to vote at, the meeting.)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Record Shares Affirmative Negative Abstain
GrandView S&P REIT Index Fund
84,638.592 50,520.449 5,598.935 2,504.000
GrandView Realty Growth Fund
198,813.192 120,467.534 1,005.628 5,176.274
</TABLE>
(d) n/a
Attached is a copy of the filing made to the Securities and Exchange Commission
by FBR Family of Funds on August 18, 1998 regarding the acquisition of the
GrandView Funds by the FBR Realty Fund:
<PAGE>
GRANDVIEW(SM) INVESTMENT TRUST
GRANDVIEW(SM) REALITY GROWTH FUND
GRANDVIEW(SM) S&P-Registered Trademark- REIT INDEX FUND
107 NORTH WASHINGTON STREET
ROCKY MOUNT, NORTH CAROLINA 27803
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 11, 1998
To the shareholders of
GrandView Realty Growth Fund and
GrandView S&P REIT Index Fund, series
of GrandView Investment Trust:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of GrandView
Realty Growth Fund and GrandView S&P REIT Index Fund (collectively, the
"Funds"), series of GrandView Investment Trust will be held at the offices of
the FBR Family of Funds, 1001 Nineteenth Street North, Arlington, Virginia 22209
on September 11, 1998 at 10:00 a.m. for the following purposes:
1. To consider and vote on approval of an Agreement and Plan of
Reorganization providing for the acquisition of all or substantially all of the
assets of the Funds by the FBR Realty Growth Fund ("FBR Realty Fund"), a series
of the FBR Family of Funds, in exchange for shares of FBR Realty Fund and
assumption of certain identified liabilities of the Funds by FBR Realty Fund,
and for the distribution of such shares to shareholders of the Funds in
liquidation of the Funds; and
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Trustees has fixed the close of business on July 30, 1998, as
the Record Date for determination of shareholders entitled to notice of, and to
vote at, the meeting.
EACH SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IN PERSON IS
REQUESTED TO DATE, FILL IN, SIGN AND RETURN PROMPTLY THE ENCLOSED FORM OF PROXY
IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Trustees
C. Frank Watson III
Secretary, GrandView Investment Trust
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED AUGUST 14, 1998
ACQUISITION OF THE ASSETS OF
GRANDVIEW(SM) REALTY GROWTH FUND
AND
GRANDVIEW(SM) S&P-REGISTERED TRADEMARK- REIT INDEX FUND
107 NORTH WASHINGTON STREET
ROCKY MOUNT, NORTH CAROLINA 27803
(800) 773-3863
BY AND IN EXCHANGE FOR
SHARES OF
FBR REALTY GROWTH FUND
1001 NINETEENTH STREET NORTH
ARLINGTON, VIRGINIA 22209
(800) 239-3334
This Prospectus/Proxy Statement is being furnished to shareholders of the
GrandView Realty Growth Fund (the "GrandView Realty Fund") and the GrandView S&P
REIT Index Fund (the "GrandView Index Fund", and collectively with the GrandView
Realty Fund, the "Funds"), each a series of GrandView Investment Trust (the
"GrandView Trust"), in connection with a proposed Agreement and Plan of
Reorganization (the "Plan"), which includes liquidation and the termination of
the Funds following the transfer of all or substantially all of the assets of
the Funds. The Plan is being submitted to shareholders of the Funds for
consideration at a Special Meeting of Shareholders to be held at 1001 Nineteenth
Street North, Arlington, Virginia, 22209 on September 11, 1998 at 10:00 a.m.
(the "Meeting"). The Plan provides for the acquisition of all or substantially
all of the assets of the Funds by the FBR Realty Growth Fund ("FBR Realty
Fund"), a series of the FBR Family of Funds, (the "FBR Trust") in exchange for
shares of FBR Realty Fund and the assumption by FBR Realty Fund of certain
identified liabilities of the Funds. Following this acquisition, the Funds will
be liquidated, all remaining liabilities of the Funds will be satisfied (whether
by payment or the establishment of reasonable reserves for payment) and shares
of FBR Realty Fund will be distributed to shareholders of each of the Funds in
liquidation of the Funds (these transactions are collectively referred to as the
"Reorganization").
As a result of the proposed Reorganization, each shareholder of the Funds
will receive that number of shares of FBR Realty Fund having an aggregate net
asset value equal to the aggregate net asset value of such shareholder's shares
of each Fund. Shareholders in the Funds will receive Class A shares of FBR
Realty Fund, and no sales charge will be imposed on the Class A shares of FBR
Realty Fund received by Fund shareholders.
<PAGE>
This transaction is being structured as a tax-free reorganization. See
"Information About the Reorganization - Federal Income Tax Consequences."
Shareholders should consult their tax advisers to determine the actual impact of
the Reorganization in light of their individual tax circumstances.
FBR Realty Fund is a newly-formed series of the FBR Trust, a registered
open-end management investment company. FBR Realty Fund currently has no assets
or shareholders. Prior to the reorganization, FBR Realty Fund will adopt
investment objectives, policies and restrictions substantially similar to those
of the GrandView Realty Fund. Therefore, the proposed Reorganization will not
result in any material change of investment objectives or policies for the
GrandView Realty Fund. The GrandView Realty Fund's primary investment objective
is long-term growth of capital. Current income is a secondary objective. The
GrandView Realty Fund seeks to achieve its objectives by investing primarily in
equity securities of real estate companies. While the investment objectives and
policies of the GrandView Index Fund and the FBR Realty Fund are generally
similar, the GrandView Index Fund sought to achieve those objectives by
adherence to an investment policy which closely approximated the S&P REIT Index.
The GrandView Index Fund, when reorganized into the FBR Realty Fund, will change
its essentially unmanaged investment strategy to the fully managed investment
policy of the FBR Realty Fund, which is essentially similar to the GrandView
Realty Fund. This change will result in a higher expense ratio for shareholders
of the GrandView Index Fund, but in the opinion of the adviser and the trustees,
should yield better overall investment results. (Please see Q&A response at
p.5.)
GrandView Advisers, Inc. ("GrandView Advisers") serves as investment
adviser for the Funds. FBR Fund Advisers ("FBR Advisers") is the investment
adviser to FBR Realty Fund and will remain the investment adviser following the
proposed Reorganization. However, the portfolio management personnel of
GrandView Advisers currently responsible for the management of the Funds will
manage FBR Realty Fund as employees of FBR Advisers. GrandView Advisers and FBR
Advisers are described in more detail under "Information About Management of FBR
Realty Fund and the Funds."
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about FBR Realty Fund that a
prospective investor should know before investing. A Statement of Additional
Information dated August 14, 1998, relating to this Prospectus/Proxy Statement
and the proposed Reorganization, has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated by reference into this Prospectus/Proxy
Statement. A copy of the Statement of Additional Information is available upon
request and without charge by calling or writing to the Funds at the telephone
number or address listed for the Funds on the cover page of this
Prospectus/Proxy Statement. In addition, the Prospectus for the Funds dated
January 1, 1998 has been filed with the SEC and is incorporated herein 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 FBR Realty Fund and the Funds.
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a copy of
the Agreement and Plan of Reorganization pertaining to the transaction.
-2-
<PAGE>
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/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-3-
<PAGE>
TABLE OF CONTENTS
Page
----
Common Questions and Answers About the Proposed Reorganization. . . . . . .5
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Reasons for the Reorganization. . . . . . . . . . . . . . . . . . . . . . 14
Information About the Reorganization. . . . . . . . . . . . . . . . . . . 15
Comparison of Investment Objectives and Policies. . . . . . . . . . . . . 17
Comparative Information on Shareholders' Rights . . . . . . . . . . . . . 21
Information About Management of FBR Realty Fund and the Funds . . . . . . 23
Additional Information About FBR Realty Fund and the Funds. . . . . . . . 26
Other Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Voting Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Financial Statements and Experts. . . . . . . . . . . . . . . . . . . . . 36
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
EXHIBIT A: Agreement and Plan of Reorganization. . . . . . . . . . . . . A1
-4-
<PAGE>
COMMON QUESTIONS AND ANSWERS
ABOUT THE PROPOSED REORGANIZATION
Q. HOW WILL THE REORGANIZATION AFFECT ME?
A. The assets of the Funds will be transferred to FBR Realty Fund and you
will become a shareholder of FBR Realty Fund. You will receive Class
A shares of FBR Realty Fund equal in value at the time of issuance to
the shares of each Fund that you hold immediately prior to the
Reorganization.
Q. WHY IS THE REORGANIZATION BEING RECOMMENDED?
A. The primary purposes of the proposed Reorganization is to form a
strategic alliance with FBR Advisers and the FBR Family of Funds and
to seek to achieve future economies of scale. This alliance would
allow the combined Funds to tap into and take advantage of FBR's
distribution network, which is expected to increase asset levels of
the combined Funds. Combining the assets of the Funds is intended to
provide various benefits to shareholders of the Funds who become
shareholders of FBR Realty Fund (as well as to future investors in FBR
Realty Fund). For example, higher asset levels should enable FBR
Realty Fund to spread fixed and relatively fixed costs, such as
accounting, legal, and printing expenses, over a larger asset base,
thereby reducing per-share expense levels. (See also next question
regarding operating expenses of the Funds.) Higher asset levels also
should benefit portfolio management by permitting larger individual
portfolio investments that may result in reduced transaction costs
and/or more favorable pricing and by providing the opportunity for
greater portfolio diversity.
Q. WHY IS THE GRANDVIEW INDEX FUND BEING MERGED WITH THE GRANDVIEW REALTY
FUND INTO THE FBR REALTY FUND?
A. The primary reason is economics. The GrandView Index Fund was started
at the same time as the GrandView Realty Fund. The GrandView
organization believed that the real estate securities market would
lend itself to a passive management concept (i.e. indexing) which
would result in performance that exceeded that obtained by most active
real estate fund managers. While meeting the GrandView Index Fund's
objective of tracking its benchmark index with a high degree of
correlation, the GrandView Index Fund's returns were exceeded by most
active fund managers. The reasons for the failure of indexing to
provide consistently superior returns are complex, but the end result
was that the GrandView Index Fund never grew to a sufficient size so
that its expense ratio could be competitive with other real estate
index products. For investors, the GrandView Realty Fund, even with a
higher expense ratio and using its active management philosophy, has
been historically a better investment. If this Plan of Reorganization
were not adopted, then GrandView Advisers would have to consider other
alternatives with regard to the GrandView Index Fund including
possibly liquidating the Fund.
-5-
<PAGE>
Q. HOW WILL THE FEES PAID BY FBR REALTY FUND COMPARE TO THOSE PAYABLE BY
THE FUNDS?
A. The total per share operating expenses of FBR Realty Fund (after
waivers and/or reimbursements) are expected to be equal to those of
the GrandView Realty Fund and, initially, will be higher than those of
the GrandView Index Fund. FBR Advisers has agreed to waive its fees
and/or reimburse FBR Realty Fund for expenses until at least October
31, 1999 so that the expense ratio of FBR Realty Fund will not exceed
that of the GrandView Realty Fund as of its most recent fiscal year
ended March 31, 1998. In addition, FBR Advisers anticipates that the
aggregate fees and expenses of FBR Realty Fund will, over time, be
reduced further due to increased economies of scale resulting from the
larger aggregate net asset base of the combined entity. However,
there can be no assurance that these economies will be achieved.
Q. WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER TRANSACTION FEE
IN CONNECTION WITH THE REORGANIZATION?
A. No. The full value of your shares of the Funds will be exchanged for
Class A shares of the FBR Realty Fund without any sales load,
commission or other transaction fee being imposed. In addition, if
you are currently eligible to purchase GrandView Fund shares on a no-
load basis, you will be able to make subsequent purchases of FBR
Realty Fund and all other FBR Funds without any sales load. However,
GrandView Fund shareholders who paid a sales load in connection with
their purchase of shares will pay a sales load on any subsequent
purchases of FBR Realty Fund shares and shares of other FBR Funds.
Q. WHO WILL SERVE AS INVESTMENT ADVISER AND PROVIDE OTHER SERVICES TO FBR
REALTY FUND?
A. The investment adviser for the Funds is GrandView Advisers. The
investment adviser for FBR Realty Fund will be FBR Advisers; however,
the Funds' current co-portfolio managers, Winsor Aylesworth and
Lucille Carlson, will continue to be the portfolio managers for FBR
Realty Fund as employees of FBR Advisers. The Nottingham Company and
Capital Investment Group, Inc. are the administrator and distributor,
respectively, for the Funds. For the FBR Realty Fund, the
administrator will be Bear Stearns Funds Management Inc. and the
Distributors will be Friedman, Billings, Ramsey & Co., Inc. and FBR
Investment Services, Inc.
Q. WILL I HAVE TO PAY ANY FEDERAL INCOME TAXES AS A RESULT OF THE
REORGANIZATION?
A. The transaction is intended to qualify as a tax-free reorganization
for federal income tax purposes. Assuming qualification for such
treatment, shareholders would not recognize taxable gain or loss
pursuant to the Reorganization. As a condition to the closing of the
Reorganization, the Funds will receive an opinion of counsel to the
effect that the Reorganization will qualify as a tax-free
reorganization for federal income tax purposes. You should separately
consider any state, local and other tax consequences in consultation
with your tax adviser. Opinions of counsel are not binding on the IRS
or the courts.
-6-
<PAGE>
SUMMARY
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement, the
Prospectus of the Funds dated January 1, 1998, the Statement of Additional
Information of the Funds dated July 25, 1997 and supplemented January 1, 1998
and the Agreement and Plan of Reorganization, a copy of which is attached to
this Prospectus/Proxy Statement as Exhibit A.
PROPOSED REORGANIZATION
The Plan provides for the transfer of all or substantially all of the
assets of the Funds in exchange for shares of FBR Realty Fund and the assumption
by FBR Realty Fund of certain identified liabilities of the Funds (as reflected
on the respective statements of assets and liabilities of the Funds prior to the
Closing Date). The Plan also calls for the liquidation of the Funds and the
distribution of shares of FBR Realty Fund to shareholders of the Funds in
liquidation. (This proposed transaction is referred to in this Prospectus/Proxy
Statement as the "Reorganization.") As a result of the Reorganization, each
shareholder of the Funds will become the owner of that number of full and
fractional Class A shares of FBR Realty Fund having an aggregate net asset value
equal to the aggregate net asset value of the shareholder's shares of each Fund
as of the close of business on the date that the Funds' assets are exchanged for
Class A shares of FBR Realty Fund. See "Information About the Reorganization."
For the reasons set forth below under "Reasons for the Reorganization," the
Trustees of the GrandView Trust, including all of the Trustees who are not
"interested persons", as that term is defined in the Investment Company Act of
1940, as amended (the "1940 Act"), have concluded that the Reorganization would
be in the best interests of the shareholders of the Funds and that the interests
of the Funds' existing shareholders would not be diluted as a result of the
Reorganization, and therefore have submitted the Plan for approval to the Funds'
shareholders. The Trustees of the GrandView Trust recommend approval of the
Plan effecting the Reorganization. The Board of Trustees of the FBR Trust has
also approved the Reorganization on behalf of FBR Realty Fund.
Approval of the Reorganization will require a "Majority Shareholder Vote,"
as defined in the GrandView Trust's Declaration of Trust. See "Voting
Information."
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The FBR Realty Fund, a newly-formed series of the FBR Trust, will adopt
investment objectives, policies and restrictions substantially similar to those
of the GrandView Realty Fund. The primary investment objective of the GrandView
Realty Fund is long-term growth of capital. Current income is a secondary
objective. The GrandView Realty Fund seeks to achieve these objectives by
investing primarily in equity securities of issuers in the real estate industry
which it believes exhibit above average growth prospects. The investment
objective of the GrandView Index Fund is to provide its investors with
investment results corresponding to the performance of the S&P REIT Index by
investing in the stocks included in the Index. This involves a passive
investment approach, as compared to the active portfolio management employed for
the GrandView Realty Fund.
-7-
<PAGE>
Both the GrandView Realty Fund and the GrandView Index Fund seek capital
growth. Although the respective investment policies of the GrandView Realty
Fund and the GrandView Index Fund are generally similar, shareholders of the
Funds should consider certain differences in the investment policies and
restrictions of, and portfolio securities held by, each Fund. See "Comparison
of Investment Objectives and Policies."
SUMMARY COMPARISON OF FEES AND EXPENSES
The following tables compare the fees and expenses of FBR Realty Fund, the
GrandView Realty Fund and the GrandView Index Fund and show the estimated fees
and expenses on a pro forma basis, giving effect to the proposed Reorganization.
Additional information regarding the performance of the Funds is contained in
the Annual Report to shareholders of the GrandView Index Fund and the GrandView
Realty Fund for the fiscal year ended March 31, 1998 (previously provided to
Fund Shareholders), which is incorporated by reference into this
Prospectus/Proxy Statement.
<TABLE>
<CAPTION>
FBR REALTY
GRANDVIEW FUND
REALTY GRANDVIEW (CLASS A
FUND INDEX FUND SHARES)
---- ---------- -------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Initial Sales Charge (as a percentage of
offering price)(1). . . . . . . . . . . . . . . . . . . . . . . . 4.50% 3.00% 5.50%
Maximum contingent deferred sales charge (as a
percentage of redemption proceeds) . . . . . . . . . . . . . . . . . None None None(2)
Redemption fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None 1.00% (3) None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory fee (after waiver)(4) . . . . . . . . . . . . . . . . . . . 0.00% 0.00% 0.00%
12b-1 fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25% 0.25% 0.25%
Other expenses (after expense reimbursement)(4). . . . . . . . . . . 1.75% 0.80% 1.75%
---- ---- ----
Total Fund Operating Expenses (after waiver and
expense reimbursement)(4) . . . . . . . . . . . . . . . . . . . . 2.00% 1.05% 2.00%
---- ---- ----
---- ---- ----
</TABLE>
________________
(1) Reduced for larger purchases.
(2) Investments of $1 million or more in Class A shares of FBR Realty Fund are
not subject to an initial sales charge; however, a CDSC of 1% is imposed in
the event of certain redemption transactions within one year following such
investments. A CDSC will not be imposed on Class A shares of FBR Realty
Fund acquired in the Reorganization by shareholders of the Funds.
(3) The maximum redemption fee applies to redemptions in the first six months
after waiver and purchase. These fees are subsequently reduced and after
one year are eliminated.
(4) The "Total Fund Operating Expenses" shown above are based on actual
operating expenses incurred by each Fund for the fiscal year ended March
31, 1998. Absent waivers and
-8-
<PAGE>
reimbursements, the percentages for "Advisory Fee" , "Other Expenses" and
"Total Fund Operating Expenses" would have been 0.35%, 4.24% and 4.84%,
respectively, for the GrandView Index Fund and 1.00%, 3.59% and 5.68%,
respectively, for the GrandView Realty Fund. FBR Fund Advisers, Inc. will
continue the expense limitation currently in effect for GrandView Realty
Fund with respect to FBR Realty Fund until October 31, 1999.
EXAMPLE: You would pay the following expenses on a hypothetical $1,000
investment (including the maximum sales charge) assuming a 5% annual
return:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
GrandView Realty Fund $64 $105 $148 $267
GrandView Index Fund $40 $62 $86 $154
FBR Realty Fund, Class A shares $74 $114 $157 $275
</TABLE>
PURCHASE AND REDEMPTION PROCEDURES
The following discussion describes differences in the minimum investment
requirements, charges, and waivers of charges applicable to shares of the Funds
and Class A shares of FBR Realty Fund. For details on how to purchase or redeem
shares of the Funds, see the Prospectus. The Funds, but not the FBR Realty
Fund, reserve the right to involuntarily redeem an investor's Class A shares if
the net asset value of such shares is less than $1,000 by reason of redemption.
The minimum initial investment for Class A shares of FBR Realty Fund and
shares of the Funds is $1,000 (or $500 and $250 for FBR Realty Fund and the
Funds, respectively, if the investment is for IRAs, or pension, profit-sharing
or other employee benefit plans) and subsequent investments must be at least
$50. Additionally, for the Funds, but not FBR Realty Fund, the minimum initial
investment is $50 for shares purchased through GrandView Trust's Automatic
Investment Plan.
Class A shares of FBR Realty Fund are sold to investors at net asset value
plus an initial sales charge at a maximum rate of 5.5% of the offering price.
Shares of the GrandView Realty Fund and GrandView Index Fund are sold to
investors at net asset value plus an initial sales charge at a maximum rate of
4.5% and 3.0%, respectively. No initial sales charge will be imposed on the
Class A shares of FBR Realty Fund received by holders of the Funds' shares in
the Reorganization. With regard to subsequent purchases, shareholders of the
Funds who are currently eligible to purchase shares of the Funds without a sales
charge will be "grandfathered" to buy FBR Realty Fund shares and shares of all
other FBR Funds without a sales charge. However, shareholders who paid a sales
load in connection with their purchase of shares of the GrandView Funds will pay
a sales load on any subsequent purchase of shares of FBR Realty Fund and shares
of other FBR Funds.
The following tables show the initial sales charge schedule for Class A
shares of FBR Realty Fund and shares of the Funds.
-9-
<PAGE>
<TABLE>
<CAPTION>
FBR Realty Fund
Sales Charge as a Percentage of
-------------------------------
Discount
Net to Selected
Amount Invested Dealers as a
Offering (Net Asset Percentage of
Amount of Purchase Price Value) Offering Price***
------------------ -------- --------------- -----------------
<S> <C> <C> <C>
Less than $50,000 5.50% 5.82% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None* None* (see below)**
</TABLE>
_________________
* No sales charge is payable at the time of purchase of Class A shares of $1
million or more, but a CDSC may be imposed in the event of certain
redemption transactions made within 12 months of purchase. This charge
will not apply to shares acquired in the Reorganization.
** Authorized dealers (as defined below) who initiate or are responsible for
purchases of $1 million or more of shares of FBR Realty Fund are paid a
commission equal to 1.00% of the amount under $ 3 million, 0.50% of the
next $2 million, and 0.25% thereafter. With respect to all or a portion of
the amount purchased, a commission in accordance with the foregoing
schedule may be paid to authorized dealers who initiate or are responsible
for purchases of $500,000 or more by plans or $1 million or more by "wrap"
accounts satisfying the criteria set forth in (h) or (j) below. Purchases
by such plans will be made at net asset value with no initial sales charge.
In addition, authorized dealers shall remit to the Distributor such
payments received in connection with "wrap" accounts in the event that
shares are redeemed within 12 months after the end of the calendar month in
which the purchase was made.
*** During special promotions, the entire sales charge may be reallowed to
Authorized Dealers. Authorized Dealers to whom substantially the entire
sales charge is reallowed may be deemed to be "underwriters" under the
Securities Act of 1933.
-10-
<PAGE>
<TABLE>
<CAPTION>
GrandView Index Fund
--------------------
Sales
Charge As
% of Net Dealer Allowance
Offering Sales Charge As % As % of Public
Amount of Purchase Price* of Amount Invested Offering Price
------------------ -------- ------------------ --------------
<S> <C> <C> <C>
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 $1,000,000 0.75% 0.76% 0.25%
$1,000,000 or more 0.35% 0.35% 0.35%
</TABLE>
* A redemption fee of 1.00% is imposed in the event of a redemption
of shares of the GrandView Index Fund within six months after
purchase, and of 0.50% in the event of a redemption of shares of the
GrandView Index Fund after six months but within twelve months of
purchase.
<TABLE>
<CAPTION>
GrandView Realty Fund
---------------------
Sales
Charge As
% of Net Dealer Allowance
Offering Sales Charge As % As % of Public
Amount of Purchase Price* of Amount Invested Offering Price
------------------ -------- ------------------ --------------
<S> <C> <C> <C>
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 $1,000,000 2.00% 2.04% 1.50%
$1,000,000 or more 0.75% 0.76% 0.75%
</TABLE>
Purchases of Class A shares of any other funds of the FBR Trust will be
aggregated in determining the initial sales charge for the FBR Realty Fund,
which may result in a reduced initial sales charge.
The initial sales charge on Class A shares of FBR Realty Fund and shares of
the Funds are currently waived on shares that are acquired through the exchange
of Class A shares of another fund of the FBR Trust or shares of another fund of
the GrandView Trust, respectively.
For the FBR Realty Fund, the initial sales charge is also waived on sales
of Class A shares to the following types of purchasers: (a) Friedman, Billings,
Ramsey & Co., Inc. ("FBR"), FBR Investment Services, Inc. ("FBR Services"),
their affiliates or their respective officers, partners, directors or employees
(including retired employees and former partners), any partnership of which FBR
or FBR Services is a general partner, any Trustee or officer of the FBR Trust
and designated family members of any of the above individuals; (b) qualified
retirement plans of FBR or FBR Services; (c) trustees or directors of investment
companies for which FBR or FBR Services or an affiliate acts as sponsor; (d) any
-11-
<PAGE>
employee or registered representative of any authorized dealer or their
respective spouses and children; (e) banks, trust companies or other types of
depository institutions investing for their own account or investing for
customer accounts; (f) any institutional investment clients including corporate
sponsored pension and profit-sharing plans, other benefit plans and insurance
companies; (g) any pension funds, state and municipal governments or funds,
Taft-Hartley plans and qualified non-profit organizations, foundations and
endowments; (h) "wrap" accounts for the benefit of clients of broker-dealers,
financial institutions or financial planners, provided that they have entered
into an agreement with the Distributor specifying aggregate minimums and certain
operating policies and standards; (i) registered investment advisers and
financial planners, investing for themselves or for accounts for which they
receive asset-based fees; (j) accounts over which FBR Advisers or its advisory
affiliates have investment discretion; (k) shareholders receiving distributions
from a qualified retirement plan invested in the FBR Trust and reinvesting such
proceeds in an IRA for which FBR or FBR Services, or an affiliate thereof,
serves as custodian or trustee ("FBR IRA"); and (l) accounts established in the
Reorganization that were eligible to purchase GrandView Fund shares on a no-load
basis.
For the Funds, the initial sales charge is waived on investments by certain
group plans and on sales of shares of the following types of purchasers: (a)
current or former Trustees and officers of the GrandView Trust; (b) current or
former directors, officers, employees or sales representatives of GrandView
Advisers, Inc. or the Funds' administrator, transfer agent or 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 Funds' 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 GrandView Advisers, Inc. or of any of its
affiliates; (g) clients of fee-based financial planners; (h) 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; (i) governmental agencies and
authorities; (j) 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 GrandView Trust; (k)
tax-exempt organizations under Section 501(c)(3-13) of the Code; and (l) those
investors who purchase shares without the services of a commissioned broker or
agent.
The sales charges on Class A shares of FBR Realty Fund and shares of the
Funds may be reduced through a letter of intent, quantity discounts and the
right of accumulation.
Both shares of the Funds and Class A shares of FBR Realty Fund may be
redeemed without the imposition of a contingent deferred sales charge ("CDSC"),
except that a CDSC of 1% applies to certain redemptions of Class A shares of FBR
Realty Fund that were purchased without a sales charge by reason of a purchase
of $1 million or more, if such redemptions are made within the first year after
investing. Neither the Funds nor FBR Realty Fund charge redemption fees, except
that a redemption fee of 1.00% is imposed in the event of a redemption of shares
of the GrandView Index Fund within six months after purchase, and of 0.50% in
the event of a redemption of shares of the GrandView Index Fund after six
months, but within 1 year of
-12-
<PAGE>
purchase. No CDSC or redemption fee will apply to shares of FBR Realty Fund
acquired by shareholders of the Funds in the Reorganization.
EXCHANGE PRIVILEGES
Class A shareholders of FBR Realty Fund may exchange shares for Class A
shares of the other funds of the FBR Trust. No exchange fee will be imposed.
Any exchange will be a taxable event for which a shareholder may have to
recognize a gain or loss under Federal income tax provisions.
DIVIDENDS
FBR Realty Fund, like the Funds, intends to declare and pay dividends from
net investment income, if any, quarterly, and distribute net realized capital
gains, if any, at least annually. All dividends and distributions will be
reinvested automatically in additional shares of FBR Realty Fund at net asset
value, without a sales charge or CDSC, unless the shareholder elects to be paid
in cash or to receive shares of the same class of any other fund advised by FBR
Advisers, or the FBR Money Market Portfolio of The RBB Fund, Inc. Fund
shareholders that have elected to receive distributions in cash will continue to
receive distributions in such manner from FBR Realty Fund.
Distributions from each of the Funds are currently paid in additional
shares of the applicable Fund, without a sales charge, unless a shareholder
requests to be paid in cash.
TAX CONSEQUENCES
Prior to completion of the Reorganization, the Funds will have received
from counsel an opinion to the effect that the Reorganization will qualify as a
tax-free reorganization for Federal income tax purposes. See "Information about
the Reorganization - Federal Income Tax Consequences."
SHAREHOLDER VOTING RIGHTS
Neither FBR Realty Fund, a series of a Delaware business trust, nor the
Funds, each a series of a Massachusetts business trust, holds annual shareholder
meetings. The 1940 Act requires that a shareholder meeting be called for the
purpose of electing Trustees at such time as fewer than a majority of Trustees
holding office have been elected by shareholders. The FBR Trust will hold a
shareholder meeting upon the written request of shareholders holding at least
10% of the Trust's outstanding shares. See "Comparative Information on
Shareholders' Rights - Voting Rights."
APPRAISAL RIGHTS
[Under the laws of the State of Delaware, shareholders of FBR Realty Fund
do not have appraisal rights in connection with a combination or acquisition of
the assets of another fund. Under the laws of the Commonwealth of Massachusetts
and the GrandView Trust's Declaration
-13-
<PAGE>
of Trust, shareholders of the Funds do not have appraisal rights in connection
with a combination or acquisition of the assets of the Funds by another entity.]
RISK FACTORS
Because FBR Realty Fund and the Funds have generally similar investment
objectives and investment policies, they are subject to similar investment
risks. These risks include those that are generally associated with investing
in equity securities. See "Comparison of Investment Objectives and Policies"
herein and "Risk Factors" in the Funds' Prospectus.
REASONS FOR THE REORGANIZATION
Currently, the Funds are investment portfolios of the GrandView Trust.
Although the Funds have substantially similar investment policies and
restrictions, each must separately bear the costs of its operations.
Consolidating their separate operations should generally benefit the
shareholders of the Funds by promoting more efficient operations on a more cost-
effective basis. Additionally, by reorganizing as a part of the FBR
organization, the Funds will be able to take advantage of FBR's distribution
network, which is expected to attract new investors in the combined entity,
resulting in economies of scale. However, there can be no assurance that the
combination of the Funds will produce more efficient operations on a cost-
effective basis. Because of the similarities between the Funds, the
considerations and risks involved with an investment in FBR Realty Fund are
expected to be comparable to those associated with an investment in the Funds.
The Reorganization, therefore, is expected to permit the GrandView Realty
Fund's shareholders to pursue substantially the same investment goals in a
larger fund, and to permit the GrandView Index Fund's shareholders to pursue
similar investment goals in a larger fund. A larger fund should enhance the
ability of FBR Advisers to effect portfolio transactions on more favorable terms
and give greater investment flexibility and the ability to select a larger
number of portfolio securities with the attendant benefits of increased
diversification. A larger fund should not be as significantly affected by high
levels of shareholder redemptions. In addition, the larger aggregate net assets
should enable the combined entity to obtain the benefits of economies of scale,
permitting the reduction of certain costs and expenses which may result in lower
overall expense ratios through the spreading of fixed costs of operations over a
larger asset base. As a general rule, economies of scale can be expected to be
realized with respect to fixed expenses, such as costs of printing and fees for
professional services, although expenses that are based on the value of assets
or the number of shareholder accounts, such as custody fees, would not
necessarily be reduced by the Reorganization. In addition, because the
investment advisory fee and certain other expenses of the GrandView Realty Fund
(and correspondingly of FBR Realty Fund) are higher than those of the GrandView
Index Fund, the expense ratio of FBR Realty Fund after the Reorganization, net
of fee waivers and expense reimbursements, is expected to be higher than that of
the GrandView Index Fund. It is noted in this regard that GrandView Advisers
currently limits total expenses of the GrandView Index Fund and the GrandView
Realty Fund to an annual rate of 1.05% and 2.00%, respectively, of average daily
net assets. FBR Advisers has agreed to limit FBR Realty Fund's expenses to an
annual rate of 2.00% of the Fund's average daily net assets until October 31,
1999. Moreover, there can be no assurance that economies of scale can be
realized as to either Fund as a result of the Reorganization.
-14-
<PAGE>
In considering the fact that the expense ratio of FBR Realty Fund will be
higher than that of the GrandView Index Fund, the Trustees noted that index
funds do not require the same degree of active portfolio management as other
equity funds, and that a higher advisory fee for the GrandView Realty Fund (and
correspondingly for the FBR Realty Fund) was therefore appropriate. In light of
the foregoing considerations, the Trustees of the GrandView Trust unanimously
concluded that the Reorganization is in the best interests of the Funds and
their shareholders and that the Reorganization would not result in a dilution of
shareholders' interests.
Upon consideration of the factors described above, the Board of Trustees of
the FBR Trust also approved the Reorganization and determined that it is in the
best interests of FBR Realty Fund to acquire the assets of the Funds.
INFORMATION ABOUT THE REORGANIZATION
PLAN OF REORGANIZATION
The following summary of the Plan is qualified in its entirety by reference
to the Plan which is attached as Exhibit A hereto. The Plan provides that (1)
FBR Realty Fund will acquire all or substantially all of the assets of the Funds
in exchange for Class A shares of FBR Realty Fund, (2) FBR Realty Fund will
assume certain identified liabilities of the Funds on September 18, 1998 or such
later date as may be agreed upon by the parties (the "Closing Date"), (3) the
Funds will be liquidated in accordance with the terms of the Declaration of
Trust of the GrandView Trust, (4) all remaining liabilities of the Funds will be
satisfied whether by payment or the making of reasonable provision for payment
thereof, and (5) FBR Realty Fund Class A shares will be distributed to
shareholders of the Funds in liquidation. Prior to the Closing Date, the Funds
will endeavor to discharge all of their known liabilities and obligations. FBR
Realty Fund will not assume any liabilities or obligations of the Funds other
than (i) those reflected in an unaudited statement of assets and liabilities of
the Funds prepared as of the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE") on the Closing Date and (ii) certain indemnification
obligations of the Funds with respect to the GrandView Trust trustees. The
number of full and fractional Class A shares of FBR Realty Fund to be issued to
shareholders of each Fund will be determined on the basis of the relative net
asset values of Class A shares of FBR Realty Fund and shares of each Fund,
computed as of the close of regular trading on the NYSE on the Closing Date.
The Funds and FBR Realty Fund will utilize PFPC Inc. as agent to determine
the value of their respective portfolio securities. The method of valuation
employed will be as set forth in the Funds' Prospectus which is consistent with
Rule 22c-1 under the 1940 Act and with the interpretations of such rule by the
SEC's Division of Investment Management.
As soon after the Closing Date as conveniently practicable, each Fund will
liquidate and will distribute pro rata to shareholders of record as of the close
of business on the Closing Date the full and fractional Class A shares of FBR
Realty Fund received by the Fund. Such distribution will be accomplished by the
establishment of accounts in the names of the Funds' shareholders on the share
records of FBR Realty Fund's transfer agent. Each account will represent the
respective pro rata number of full and fractional Class A shares of FBR Realty
Fund due to the Funds'
-15-
<PAGE>
respective shareholders. After such distribution and the winding up of its
affairs, the GrandView Trust will be terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan. Notwithstanding approval of the Funds' shareholders, the
Plan may be terminated at any time at or prior to the Closing Date by (1) mutual
agreement of the GrandView Trust and FBR Trust or (2) either the GrandView Trust
or FBR Trust upon a material breach by the other party of any representation,
warranty or agreement contained therein or the failure to meet closing
conditions.
The Funds and FBR Realty Fund shall each be liable for its respective
expenses incurred in connection with entering into and carrying out the Plan,
whether or not the Reorganization is consummated, subject to applicable expense
limitation arrangements with GrandView Advisers and FBR Advisers.
Approval of the Plan with respect to each Fund will require a "Majority
Shareholder Vote" of the Fund as defined in the GrandView Trust's Declaration of
Trust, with shareholders of each Fund voting separately. If the Reorganization
is not approved by shareholders of either Fund, the Reorganization may
nonetheless proceed with respect to the other Fund, and GrandView Advisers, Inc.
may recommend to the Trustees of the GrandView Trust other possible courses of
action for their consideration.
DESCRIPTION OF FBR REALTY FUND'S SHARES
Full and fractional Class A shares of beneficial interest of FBR Realty
Fund will be issued to the Funds' shareholders in accordance with the procedures
detailed in the Plan. Generally, FBR Realty Fund does not issue share
certificates to shareholders unless a specific request is submitted to FBR
Realty Fund's transfer agent. The Class A shares of FBR Realty Fund to be
issued to Fund shareholders and registered on the shareholder records of the
transfer agent will have no pre-exemptive or conversion rights. See
"Comparative Information on Shareholders' Rights" for additional information
with respect to the shares of FBR Realty Fund.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify for federal income tax purposes
as a tax-free reorganization described in Section 368(a) of the Internal Revenue
Code of 1986, as amended ("Code"), with no gain or loss recognized as a
consequence of the Reorganization by FBR Realty Fund, the Funds, or the
shareholders of the Funds. As a condition to the closing of the Reorganization,
FBR Realty Fund and the Funds will receive an opinion from the law firm of
Dechert Price & Rhoads to that effect. That opinion will be based upon certain
assumptions and representations made by the FBR Trust, the GrandView Trust, the
Funds and FBR Realty Fund.
Shareholders of the Funds should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, shareholders of the Funds should
also consult their tax advisers as to state and other local tax consequences, if
any, of the Reorganization.
-16-
<PAGE>
CAPITALIZATION
The following table shows the capitalization of the Funds as of March 31,
1998, giving effect to the proposed acquisition of assets at net asset value.
<TABLE>
<CAPTION>
FBR REALTY PRO FORMA
GRANDVIEW FUND FBR REALTY
REALTY GRANDVIEW (CLASS A FUND (CLASS
FUND INDEX FUND SHARES) A SHARES)
---- ---------- ------- ---------
<S> <C> <C> <C> <C>
Net Assets $2,376,221 $955,067 -- $3,331,288
Net asset value per share $14.51 $11.06 $14.51 $14.51
Shares outstanding 163,820 86,343 -- $229,641
</TABLE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies and
restrictions of the Funds and the FBR Realty Fund is based upon and qualified in
its entirety by the investment objectives, policies and restrictions section of
the Prospectus of the Funds.
INVESTMENT OBJECTIVES
FBR Realty Fund is a newly-formed series of the FBR Trust. FBR Realty Fund
will adopt investment objectives, policies and restrictions identical to those
of the GrandView Realty Fund. The primary investment objective of the GrandView
Realty Fund is long-term growth of capital; current income is a secondary
objective. The investment objective of the GrandView Index Fund is investment
results corresponding to the performance of the S&P REIT Index by investing in
stocks included in the Index. The Funds differ in the degree to which they
emphasize active or passive account management and employ different policies to
achieve their objectives. The Funds' investment objectives may be changed by
the GrandView Trust's Board of Trustees without shareholder approval; however,
shareholders will be given written notification of any such change at least 30
days in advance.
PRIMARY INVESTMENTS
Under normal circumstances, the assets of the GrandView Index Fund are
invested primarily in equity securities of REITs included in the S&P REIT Index,
which is made up of approximately 100 stocks constituting a representative
sample of all publicly-traded REITs. The GrandView Index Fund tries to be as
fully invested at all times as is reasonably practicable and attempts to
approximate the weightings of the stocks held in its portfolio to the weightings
of the stocks in the S&P REIT Index. The proportion of the GrandView Index
Fund's assets invested in each stock held in the Fund's portfolio will generally
be substantially similar to the proportion of the S&P REIT Index represented by
the stock. The GrandView Index Fund seeks to maintain a correlation of at least
95% between the composition of the S&P REIT Index and its portfolio.
-17-
<PAGE>
Under normal circumstances, at least 65% of the FBR Realty Fund's total
assets will be invested in equity securities of REITs and other real estate
industry companies. FBR Realty 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 the utility or transportation
services. In addition, the FBR Realty 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 FBR Advisers believes to be undervalued or to provide income
or the opportunity for capital appreciation.
For purposes of the FBR Realty 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. 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 FBR Realty Fund invests 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 FBR Realty
Fund may invest include bonds, notes and other short-term debt obligations. The
mortgage-backed securities in which the FBR Realty Fund may invest include
mortgage pass-through certificates, real estate mortgage investment conduit
("REMIC") certificates and collateralized mortgage obligations ("CMOs"). As a
fundamental policy, each GrandView Fund and the FBR Realty Fund invests at least
25% of its assets in the real estate industry.
PORTFOLIO INSTRUMENTS AND PRACTICES
In pursuit of its objectives, each GrandView Fund and the FBR Realty Fund
may employ various management techniques, certain of which may be used in an
attempt to hedge risks associated with portfolio investments.
DEBT SECURITIES OF REAL ESTATE INDUSTRY COMPANIES. The FBR Realty 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 Service ("Standard & Poor's") or Fitch IBCA, Inc. ("Fitch") or
securities not rated by Moody's, Standard & Poor's or Fitch which FBR Fund
Advisers deems to be of equivalent quality (I.E., "junk bonds"). The FBR Realty
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.
MORTGAGE-BACKED SECURITIES. The FBR Realty Fund may invest in securities
that directly or indirectly represent participations in, or are collaterized by
and payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities").
-18-
<PAGE>
SHORT-TERM INVESTMENTS. Each GrandView Fund and the FBR Realty 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-1, 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-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 1940 Act; and repurchase agreements.
BORROWING. Each GrandView Fund and the FBR Realty Fund may borrow money in
an amount up to one-third of its assets (including the amount borrowed) as a
temporary measure for extraordinary or emergency purposes. Whenever borrowings
exceed 5% of a Fund's total assets, that Fund will not make any additional
investments.
LENDING. Each GrandView Fund and the FBR Realty Fund may lend securities
in its portfolio representing up to 30% of net assets, taken at market value, to
securities firms and financial institutions, provided that each loan is secured
continuously by collateral in the form of cash or liquid securities with market
value at least equal (on a daily mark-to-market basis) to the current market
value of the securities loaned.
FOREIGN SECURITIES. FBR Realty Fund may invest in the equity securities of
non-U.S. real estate companies. FBR Realty Fund may also purchase foreign
securities that are represented by American Depository Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and
other forms of depositary receipts for securities of non-U.S. issuers.
Investing in foreign securities may involve more risk than investing in
securities of U.S. companies for the following reasons: (1) there may be less
public information available about foreign companies than is available about
U.S. companies; (2) foreign companies are not generally subject to the uniform
accounting, auditing and financial reporting standards and practices applicable
to U.S. companies; (3) foreign markets have less volume than U.S. markets, and
the securities of some foreign companies are less liquid and more volatile than
the securities of comparable U.S. companies; (4) there may be less government
regulation of stock exchanges, brokers, listed companies and banks in foreign
countries than in the United States; (5) the Fund may incur fees on currency
exchanges when it changes investments from one country to another; (6) the
Fund's foreign investments could be affected by expropriation, confiscatory
taxation, nationalization of bank deposits, establishment of exchange controls,
political or social instability or diplomatic developments; (7) fluctuations in
foreign exchange rates will affect the value of the Fund's portfolio securities,
the value of dividends and interest earned, gains and losses realized on the
sale of securities, net investment income and unrealized appreciation or
depreciation of investments; and (8) possible imposition of dividend or interest
withholding by a foreign country.
FUTURES CONTRACTS AND OPTIONS. Each GrandView Fund and the FBR Realty Fund
may purchase and sell futures contracts on securities, and other financial
instruments and indices. Like the GrandView Funds, the FRB Realty Fund will not
commit more than 5% of its total assets to initial margin deposits on futures
contracts. The GrandView Funds and the FBR Realty Fund may not purchase or sell
non-hedging futures contracts or purchase or sell related non-hedging
-19-
<PAGE>
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.
REPURCHASE AGREEMENTS, REVERSE REPURCHASE AGREEMENT, AND WHEN-ISSUED
TRANSACTIONS. Each GrandView Fund and the FBR Realty Fund may enter into
repurchase agreements collateralized by securities in which that Fund may
otherwise invest. Repurchase agreements that mature in more than seven days are
considered to be illiquid. Like the GrandView Funds, the FBR Realty Fund may
not invest more than 15% of its net assets in illiquid securities.
Each GrandView Fund and the FBR Realty Fund may also engage in reverse
repurchase agreements, i.e., selling portfolio securities to financial
institutions such as banks and broker/dealers and agreeing to repurchase them at
a mutually specified date and price. In addition, in order to secure prices
deemed advantageous at the time, each Fund may purchase securities on a when-
issued or a delayed-delivery basis. The Funds do not intend to enter into when-
issued or delayed-delivery transactions for speculative purposes.
RESTRICTED SECURITIES. Each GrandView Fund and the FBR Realty Fund may
invest in restricted securities. Restricted securities are securities subject
to legal or contractual restrictions on their resale. Like the GrandView Funds
the FBR Realty Fund limits its investment in restricted securities to no more
than 15% of its net assets, excluding restricted securities that are eligible
for resale under Rule 144A under the Securities Act of 1933 and other securities
determined by the trustees to be liquid.
PORTFOLIO TURNOVER RATE. It is anticipated that FBR Realty Fund's annual
portfolio turnover rate, like that of the GrandView Realty Fund, normally will
not exceed 200%. The GrandView Realty Fund's portfolio turnover rate for the
fiscal year ended March 31, 1998 was 170.19%. GrandView Index Fund's portfolio
turnover rate for the same period was 63.15%.
INVESTMENT RESTRICTIONS. In addition to the restrictions described above,
each Fund has adopted certain fundamental investment restrictions that may be
changed only with the approval of a majority of the outstanding securities (as
defined in the 1940 Act) of that Fund. These restrictions are set forth in the
Statement of Additional Information for the Funds. With the exception of the
following, the investment restrictions for the Funds are identical: (1) the
GrandView Index Fund may not, 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; and (2) the GrandView Index Fund may
not, 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.
-20-
<PAGE>
In addition, each of the Funds has adopted certain non-fundamental
investment restrictions that may be changed without the approval of its
shareholders. These non-fundamental investment restrictions are identical for
each Fund. After the proposed Reorganization, FBR Realty Fund will have the
same fundamental and non-fundamental investment restriction as those of the
GrandView Realty Fund.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
GENERAL
FBR Realty Fund is a non-diversified series of the FBR Trust, a management
investment company registered under the 1940 Act, which continuously offers
shares of its series. The FBR Trust is a Delaware business trust and is
governed by its Declaration of Trust, By-laws and Board of Trustees.
The GrandView Realty Fund is a non-diversified series, and the GrandView
Index Fund is a diversified series, of the GrandView Trust, an open-end
management investment company registered under the 1940 Act, which continuously
offers shares of its series. The GrandView Trust is a Massachusetts business
trust and is governed by its Declaration of Trust, By-Laws and Board of
Trustees. The Funds and FBR Realty Fund are also governed by applicable state
and Federal law. Certain differences and similarities between shareholder
rights associated with Delaware business trusts and Massachusetts business
trusts are summarized below.
SHAREHOLDER LIABILITY
The FBR Realty Fund is organized as a series of a Delaware business trust,
and its shareholders generally have no personal liability for its acts or
obligations.
The Funds are organized as a series of a Massachusetts business trust.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for the obligations of
the trust. However, the GrandView Trust's Declaration of Trust states that
shareholders shall not be subject to any personal liability in connection with
the assets of the GrandView Trust for the acts or obligations of the GrandView
Trust. The Declaration of Trust provides for indemnification out of the assets
belonging to the series of the GrandView Trust with respect to which such
shareholder's shares are issued, for all losses and expenses of any shareholder
held personally liable for the obligations of the GrandView Trust solely by
reason of his or her being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which a disclaimer is
not made or is ineffective and the Funds themselves would be unable to meet
their obligations.
VOTING RIGHTS
Neither the Funds nor FBR Realty Fund holds annual meetings of
shareholders, although each may hold special meetings for purposes of voting on
certain matters as required under the 1940 Act. Special meetings of
shareholders of either of the Funds or FBR Realty Fund may be called upon the
written request of holders of not less than 10% of that fund's then outstanding
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<PAGE>
voting securities. On each matter submitted to a vote of the shareholders of
FBR Realty Fund or the Funds, each shareholder is entitled to one vote for each
whole share owned and a proportionate fractional vote for any fractional share
outstanding in the shareholder's name on the fund's books. Shareholders of all
classes of the FBR Realty Fund vote together as a fund, and not by class, except
as otherwise required by applicable law or by the FBR Trust's charter documents,
or when the matter affects only the interests of a particular class.
LIQUIDATION OR DISSOLUTION
In the event of the liquidation or dissolution of either the Funds or FBR
Realty Fund, the shareholders of that fund are entitled to receive, when and as
declared by the Trustees, the excess of the assets over the liabilities
belonging to the fund. The assets so distributed to shareholders of a fund
would be distributed among the shareholders in proportion to the number of
shares of that fund held by them and recorded on the books of the fund.
LIABILITY OF TRUSTEES
The By-laws of the FBR Trust provide that the FBR Trust will indemnify
Trustees and officers of the FBR Trust to the fullest extent permitted by
Delaware law and the 1940 Act. The Declaration of Trust of the GrandView Trust
provides for similar indemnification of Trustees and officers of the GrandView
Trust. However, neither the Declaration of Trust of the GrandView Trust nor the
By-laws of the FBR Trust purport to protect or indemnify a trustee or officer
against any liability to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.
RIGHTS OF INSPECTION
Except as required by Delaware law, shareholders of the FBR Realty Fund
have only such right to inspect the records, documents, accounts and books of
FBR Realty Fund as may be granted by the Trustees of the FBR Trust.
Shareholders of the Funds generally have the same rights to inspect the
records, accounts and books of the GrandView Trust as are permitted shareholders
of a Massachusetts corporation under Massachusetts corporation law. Currently,
each shareholder of a Massachusetts corporation is permitted to inspect the
records, accounts and books of a corporation for any legitimate business purpose
relative to the affairs of the corporation.
The foregoing is only a summary of certain characteristics of the
operations of FBR Realty Fund and the Funds, the Declaration of Trust and By-
laws of the FBR Trust, the Declaration of Trust and By-laws of the GrandView
Trust, and Delaware and Massachusetts law. The foregoing is not a complete
description of the documents cited. Shareholders should refer to the provisions
of such documents and state laws governing each fund for a more thorough
description.
-22-
<PAGE>
INFORMATION ABOUT MANAGEMENT OF FBR
REALTY FUND AND THE FUNDS
Overall responsibility for management of the FBR Trust and the GrandView
Trust rests with their respective Boards of Trustees.
INVESTMENT ADVISERS
The investment adviser of the Funds is GrandView Advisers. GrandView
Advisers. is a Connecticut corporation with principal offices at 127 Grandview
Drive, Glastonbury, Connecticut 06033. Subject to policies set by the GrandView
Trust's Board of Trustees, GrandView Advisers makes the investment decisions for
the Funds. GrandView Advisers 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 provides certain
executive personnel to the Funds.
Winsor H. Aylesworth and Lucille C. Carlson serve as co-portfolio mangers
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 40 years experience in the commercial real estate finance and management
and securities businesses.
For its services, GrandView Advisers 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:
<TABLE>
<S> <C>
GrandView Index Fund 0.35%
GrandView Realty Fund 1.00%
</TABLE>
GrandView Advisers 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:
<TABLE>
<S> <C>
GrandView Index Fund 1.05%
GrandView Realty Fund 2.00%
</TABLE>
GrandView Advisers has voluntarily waived its advisory fee and reimbursed a
portion of each Fund's operating expenses for the fiscal year ended March 31,
1998. The total fees waived amounted to $5,370 and $16,842, respectively, and
expenses reimbursed amounted to $49,107 and $42,126, respectively, for the
GrandView Index Fund and the GrandView Realty Fund, respectively.
The investment adviser for FBR Realty Fund will be FBR Advisers. FBR
Advisers was organized as a Delaware corporation on September 30, 1996 and is
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. It is an affiliate of Friedman, Billings, Ramsey Investment
Management, Inc. and FBR Offshore Management, Inc. FBR Advisers and its
affiliates manage in excess of $700 million for numerous clients including
individuals, banks and thrift institutions, investment companies, pension and
profit sharing plans
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<PAGE>
and trusts, estates and charitable organizations. FBR Advisers is a new company
and therefore has a short operating history as an investment manager of mutual
funds. However, the current portfolio managers of the Funds, whose experience
is discussed below, will manage the FBR Realty Fund as employees of FBR
Advisers. Each of the Portfolio Managers has entered into a three-year
employment contract with FBR Advisers. FBR Advisers will be paid for its
services a fee accrued daily and paid monthly, equal to 1.00% of FBR Realty
Fund's average daily net assets on an annualized basis. This is identical to
the fee currently payable by the GrandView Realty Fund. In addition, FBR
Advisers has agreed to voluntarily waive the investment advisory fee payable by
FBR Realty Fund and reimburse other operating expenses to the extent needed to
limit FBR Realty Fund's expenses to 2.00% of its average net assets until
October 31, 1999.
PORTFOLIO MANAGERS
Winsor H. Aylesworth, President, Treasurer, Director, and the controlling
shareholder of GrandView Advisers, Inc. has had over ten years of experience
with Bank of Boston Corporation and Bank of Boston Connecticut (1983 to 1993).
At Bank of Boston, Mr. Aylesworth's responsibilities included forming and
managing workout and other real estate owned operations ("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 GrandView Advisers, Inc. 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.
ADMINISTRATOR
The Nottingham Company ( "Nottingham") currently serves as the
administrator and fund accounting agent for the Funds. For these services,
Nottingham receives Fund administration fees accrued daily and paid monthly of
0.225% of the average daily net assets of the GrandView Index Fund, and 0.300%
of the average daily net assets of the GrandView Realty Fund, with breakpoints
at certain asset levels. Nottingham 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 GrandView Index Fund) and $150 per year for each
state in which the Trust's shares are registered or qualified. Nottingham also
charges a minimum fund accounting fee of $1,500 per Fund per month.
The Administrator for FBR Realty Fund will be Bear Stearns Funds Management
Inc. ("BSFM"), a wholly-owned subsidiary of The Bear Stearns Companies Inc.
Under the terms of the Administration Agreement, BSFM will be paid a monthly fee
at the annual rate of 0.075% on the first $250 million of FBR Realty Fund's
average daily net assets and 0.050% of net assets in excess of $250 million,
subject to a minimum annual fee of $75,000, payable monthly by the Fund. From
time to time, BSFM may waive receipt of its fees, which would have the effect of
lowering
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<PAGE>
the Fund's expense ratio and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The FBR Realty Fund will not
pay BSFM at a later time for any amounts it may waive.
Under the terms of an Administration and Accounting Services Agreement with
the FBR Trust on behalf of FBR Realty Fund, PFPC Inc. will provide certain
administration and accounting services to FBR Realty Fund.
CUSTODIAN AND TRANSFER AGENT
First Union National Bank of North Carolina serves as the Funds' custodian.
NC Shareholder Services, LLC serves as dividend disbursing and transfer agent
for the Funds.
Custodial Trust Company, a wholly-owned subsidiary of The Bear Stearns
Companies Inc. and an affiliate of BSFM, will service as FBR Realty Fund's
custodian. PFPC Inc. (the "Transfer Agent") will serve as FBR Realty Fund's
transfer agent, dividend disbursing agent and registrar.
DISTRIBUTION AND SERVICE PLAN
The GrandView Trust has adopted a Distribution Plan (the "Distribution
Plan") in accordance with Rule 12b-1 under the 1940 Act. Under the Distribution
Plan, the Trustees may authorize the periodic payment of up to 0.25% annually of
each Fund's average daily net asset value for each year elapsed subsequent to
adoption of the Plan. Such expenditures paid as service fees to any person who
sells shares of the Funds may not exceed 0.25% of the shares' average annual net
asset value. Payments under the Distribution Plan 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. For the fiscal year ended
March 31, 1998, the GrandView Realty Fund paid $4,211 and the GrandView Index
Fund paid $1,912 under the Plan.
FBR Realty Fund has adopted a Rule 12b-1 Distribution Plan with respect to
its Class A shares (the "Plan"). Under the Plan, FBR Realty Fund uses its
assets to finance activities relating to the distribution of its shares to
investors and the provision of certain shareholder services. FBR Services is
paid a distribution fee at an annual rate of up to 0.25% of the value of average
daily net assets of FBR Realty Fund's Class A shares for which it is the
distributor of record. Distribution fees may be used by FBR Services for: (a)
costs of printing and distributing FBR Realty Fund's prospectus, statement of
additional information and reports to prospective investors in the Fund; (b)
costs involved in preparation, printing and distributing sales literature
pertaining to FBR Realty Fund; (c) an allocation of overhead and other branch
office distribution-related expenses of FBR Services; (d) payments to persons
who provide support services in connection with the distribution of FBR Realty
Fund's shares, including but not limited to, office space and equipment,
telephone facilities, answering routine inquiries regarding FBR Realty Fund,
processing shareholder services not otherwise provided by a FBR Realty Fund's
transfer agent; (e) accruals for interest on the amount of the foregoing
expenses that exceed the
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<PAGE>
distribution fee; and (f) any other expense primarily intended to result in the
sale of FBR Realty Fund's shares, including, without limitation, payments to
salesmen and selling dealers who have entered into selected dealer agreements
with the Distributors, at the time of the sale of shares, if applicable, and
continuing fees to selling dealers.
ADDITIONAL INFORMATION ABOUT
FBR REALTY FUND AND THE FUNDS
Information about the Funds is included in the current Prospectus for the
Funds dated January 1, 1998 and Statement of Additional Information dated July
25, 1997 and supplemented on January 1, 1998, each of which is available upon
request, and which have been filed with the SEC and are incorporated herein by
reference. Copies of the Prospectus and the Statement of Additional Information
are available upon request and without charge by writing or calling the Funds at
the address or toll-free number listed on the cover page of this
Prospectus/Proxy Statement.
Both the Funds and FBR Realty Fund are subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance therewith
file reports and other information including proxy material, reports and charter
documents with the SEC. These reports and other information can be inspected
and copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549 at prescribed rates. In
addition, such information is available by accessing the SEC's web site at
http://www.sec.gov.
BROKERAGE ALLOCATION
Subject to the supervision of the Trustees of the FBR Trust, FBR Advisers
is authorized to allocate brokerage to affiliated broker-dealers on an agency
basis to effect portfolio transactions for FBR Realty Fund. The Trustees have
adopted procedures incorporating the standards of Rule 17e-1 under the 1940 Act,
which require that the commission paid to affiliated broker-dealers must be
reasonable and fair compared to the commission, fee or other remuneration
received, or to be received, by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time. It
is expected that brokerage will be allocated to FBR and FBR Services
(collectively, the "Distributors"), both of which are affiliates of FBR
Advisers.
SUBSEQUENT PURCHASES OF FBR REALTY FUND
Subsequent investments in FBR Realty Fund ordinarily must be at least $50.
The FBR Trust reserves the right to reject any purchase order. The FBR Trust
reserves the right to vary the initial and subsequent investment minimum
requirements at any time. FBR Realty Fund, at its own discretion, reserves the
right to suspend purchases of its shares. Purchases of FBR Realty Fund shares
may be made through a brokerage account maintained with the Distributor or
through certain investment dealers who are members of the National Association
of Securities Dealers, Inc. and who have sales agreements with the Distributors
(an "Authorized Dealer"). Purchases of FBR Realty Fund shares also may be made
directly through the Transfer Agent.
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<PAGE>
Purchases are effected at a Fund's net asset value, subject to any
applicable sales charge, next determined after a purchase order is received by
the Distributors, another Authorized Dealer or the Transfer Agent (the "trade
date"). Shareholders of the Funds who are currently eligible to purchase shares
of the Funds without a sales charge will be "grandfathered" to buy FBR Realty
Fund shares without a sales charge. Payment for Fund shares generally is due to
the Distributors or another Authorized Dealer on the third business day (the
"settlement date") after the trade date.
Shares of FBR Realty Fund may be purchased on any Business Day. A "Business
Day" is any day that the New York Stock Exchange (the "NYSE") is open for
business. Currently, the NYSE is closed on weekends and New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day (observed), Labor Day, Thanksgiving Day and Christmas Day (observed). Such
shares are offered at the next determined net asset value per share, subject to
any applicable sales charge. In those cases where an investor pays for shares by
check, the purchase will be effected at the net asset value next determined
after the Transfer Agent receives payment in good order. Shareholders may not
purchase shares of FBR Realty Fund with a check issued by a third party and
endorsed over to FBR Realty Fund.
Net asset value is computed daily as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., New York time) on each business
day. Shares of FBR Realty Fund are sold on a continuous basis. The net asset
value per share of FBR Realty Fund is computed by dividing the value of FBR
Realty Fund's net assets (i.e., the value of its assets less liabilities) by the
total number of shares outstanding. FBR Realty Fund's investments are valued
based on market value or, where market quotations are not readily available,
based on fair value as determined in good faith by, or in accordance with
procedures established by, the Trustees of the FBR Trust.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
A shareholder may elect to cross-reinvest dividends and capital gain
distributions paid by FBR Realty Fund in shares of the same class of any other
of the funds advised by FBR Advisers and the FBR Money Market Portfolio of The
RBB Fund, Inc. Shares acquired through cross-reinvestment of dividends will be
purchased at net asset value and will not be subject to any initial or
contingent deferred sales charge as a result of the cross-reinvestment. Cross-
reinvestments are subject to the following conditions: (i) the value of the
shareholder's account(s) in the fund which is paying the dividend must equal or
exceed $5,000 and (ii) the value of the account in the acquired fund must equal
or exceed the acquired fund's minimum initial investment requirement or the
shareholder must elect to continue cross-reinvestment until the value of
acquired fund shares in the shareholder's account equals or exceeds the acquired
fund's minimum initial investment requirement. A fund shareholder may elect
cross-reinvestment into an identical account or an account registered in a
different name or with a different address, social security or other taxpayer
identification number, provided that the account in the acquired fund has been
established, appropriate signatures have been obtained and the minimum initial
investment requirement has been satisfied.
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<PAGE>
TAX-SHELTERED RETIREMENT PLANS
FBR Realty Fund offers its shares for purchase by retirement plans,
including IRA plans for individuals and their non-employed spouses, IRA plans
for employees in connection with employer sponsored SEP, SAR-SEP and SIMPLE IRA
plans, 403(b) plans and defined contribution plans such as 401(k) Salary
Reduction Plans. Detailed information concerning these plans may be obtained
from the Transfer Agent. This information should be read carefully, and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan.
EXCHANGE PRIVILEGE
The exchange privilege is available to shareholders residing in any state
in which the shares being acquired may be legally sold. Shares of FBR Realty
Fund may be exchanged at net asset value without the imposition of a sales
charge at the time of exchange for shares of the same class of any other fund
advised by FBR Advisers and the FBR Money Market Portfolio of The RBB Fund, Inc.
A shareholder needs to obtain and read the prospectus of the fund into which the
exchange is made. The shares of these other funds acquired by an exchange may
later be exchanged for shares of the same class of FBR Realty Fund at the next
determined net asset value without the imposition of an initial or contingent
deferred sales charge if the dollar amount in the Fund resulting from such
exchanges is below the shareholder's all-time highest dollar amount on which it
has previously paid the applicable sales charge. Shares of these other funds
purchased through dividends and/or capital gains reinvestment may be exchanged
for shares of FBR Realty Fund without a sales charge. The exchange privilege
may be modified or withdrawn at any time upon sixty (60) days' notice to
shareholders and is subject to certain limitations. In addition, FBR Realty
Fund reserves the right to impose an administrative fee for each exchange.
A shareholder wishing to make an exchange may do so by sending a written
request to the Transfer Agent. To add a telephone exchange feature to an
account established in the Reorganization, a Telephone Exchange Authorization
Form must be filed with the Transfer Agent. This form is available from the
Transfer Agent. Once this election has been made, the shareholder may simply
contact the Transfer Agent by telephone to request the exchange by calling 1-
800-821-3460. The FBR Trust will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if the FBR Trust does
not employ such procedures, it may be liable for any losses due to unauthorized
or fraudulent telephone instructions. Neither the FBR Trust nor the Transfer
Agent will be liable for any loss, liability, cost or expense for following the
Trust's telephone transaction procedures described below or for following
instructions communicated by telephone that it reasonably believes to be
genuine.
The Trust's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of Fund, all of which must match the FBR Trust's
records; (3) requiring the FBR Trust's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) permitting exchanges only if the two account registrations are
identical; (5) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of
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<PAGE>
record, or by wire only to the owners of record at the bank account of record;
(6) sending a written confirmation for each telephone transaction to the owners
of record within five (5) business days of the call; and (7) maintaining tapes
of telephone transactions for six months, if the FBR Trust elects to record
shareholder telephone transactions.
For accounts held of record by investment professionals, additional
documentation or information regarding the scope of a caller's authority is
required. Finally, for telephone transactions in accounts held jointly,
additional information regarding other account holders is required.
If the exchanging shareholder does not currently own shares of the fund
whose shares are being acquired, a new account will be established with the same
registration, dividend and capital gain options as the account from which shares
are exchanged, unless otherwise specified in writing by the shareholder with all
signatures guaranteed by an Eligible Guarantor Institution, as defined by rules
issued by the Securities and Exchange Commission (the "SEC"), including banks,
brokers, dealers, credit unions, national securities exchanges and savings
associations. The exchange privilege may be modified or terminated at any time,
or from time to time, by the FBR Trust, upon 60 days written notice to
shareholders.
For federal income tax purposes, an exchange is treated as a redemption of
the shares surrendered in the exchange, on which an investor may be subject to
tax, followed by a purchase of shares received in the exchange. If such
redemption occurs within ninety (90) days after the purchase of such shares, to
the extent a sales charge that would otherwise apply to the shares received in
the exchange is not imposed, the sales charge paid on such purchase of Class A
shares cannot be taken into account by the exchanging shareholder for purposes
of determining gain or loss, if any, realized on such redemption for federal
income tax purposes, but instead will be added to the tax basis for the shares
received in the exchange. Shareholders should consult their own tax advisers
concerning the tax consequences of an exchange.
REDEMPTION OF FBR REALTY FUND SHARES
Investors may request redemption of FBR Realty Fund shares at any time.
Redemption requests may be made as described below. When a request is received
in proper form, FBR Realty Fund will redeem the shares at the next determined
net asset value, subject to any applicable contingent deferred sales charge
("CDSC"). Shares acquired in the Reorganization will not be subject to a CDSC.
FBR Realty Fund ordinarily will make payment for all shares redeemed within
three days after receipt by the Transfer Agent of a redemption request in proper
form, except as provided by the rules of the SEC. However, if an investor has
purchased Fund shares by check and subsequently submits a redemption request by
mail, the redemption proceeds will not be transmitted until the check used for
investment has cleared, which may take up to 15 days. The FBR Trust will reject
requests to redeem shares by telephone or wire for a period of 15 days after
receipt by the Transfer Agent of the purchase check against which such
redemption is requested. This procedure does not apply to shares purchased by
wire payment.
-29-
<PAGE>
REDEMPTION THROUGH THE DISTRIBUTORS AND OTHER AUTHORIZED DEALERS
Clients with a brokerage account may submit redemption requests to their
account executives or Authorized Dealers in person or by telephone, mail or
wire. As the FBR Trust's agent, the Distributor or another Authorized Dealer may
honor a redemption request by repurchasing shares from a redeeming shareholder
at the shares' net asset value next computed after receipt of the request by the
Authorized Dealer, subject to any applicable CDSC. Under normal circumstances,
redemption proceeds will be paid within three days by check or credited to the
shareholder's brokerage account at the election of the shareholder. Distributor
account executives or other Authorized Dealers are responsible for promptly
forwarding redemption requests to the Transfer Agent.
REDEMPTION THROUGH THE TRANSFER AGENT
REDEMPTION IN WRITING. Shareholders who are not clients with a brokerage
account and who wish to redeem shares must redeem their shares through the
Transfer Agent by mail; other shareholders also may redeem FBR Realty Fund
shares through the Transfer Agent. To do so, a written request in proper form
must be sent directly to: FBR Family of Funds c/o PFPC Inc., P.O. Box 8994,
Wilmington, Delaware 19899-8994. Shareholders may also place redemption requests
through an Investment Professional, but such Investment Professional might
charge a fee for this service.
A request for redemption must be signed by all persons in whose names the
shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption would exceed $10,000, or if the
proceeds are not to be paid to the record owner at the address of record, or if
the shareholder is a corporation, partnership, trust or fiduciary, signatures
must be guaranteed by an Eligible Guarantor Institution. (See "Additional
Information About Redemptions.") If a redemption is effected within 30 days of a
change in the shareholder's address of record, a signature guarantee will be
required. A signature guarantee verifies your signature. You may call the
Transfer Agent at 1-800-821-3460 to determine whether the entity that will
guarantee the signature is an Eligible Guarantor Institution.
Generally, a properly signed written request with any required signature
guarantee is all that is required for a redemption. In some cases, however,
other documents may be necessary. Additional documentary evidence of authority
is also required in the event redemption is requested by a corporation,
partnership, trust, fiduciary, executor or administrator.
REDEMPTION BY TELEPHONE. Investors may redeem shares without charge by
telephone if they have filed a Telephone Authorization with the Transfer Agent.
An investor may obtain a Telephone Authorization from the Transfer Agent by
calling 1-800-821-3460. The FBR Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and if the FBR
Trust does not employ such procedures, it may be liable for any losses due to
unauthorized or fraudulent telephone instructions. The proceeds will be mailed
by check to an investor's registered address unless he has designated in his
Application or Telephone Authorization that such proceeds are to be sent by wire
transfer to a specified checking or savings account. If proceeds are to be sent
by wire transfer, a telephone redemption request received prior to the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., New York
-30-
<PAGE>
time), will result in redemption proceeds being wired to the investor's bank
account on the next day that a wire transfer can be effected. The minimum
redemption for proceeds sent by wire transfer is $10,000. There is no maximum
for proceeds sent by wire transfer. FBR Realty Fund may modify this redemption
service at any time. A transaction fee of $15.00 will be charged for payments by
wire. The Distributor and the Transfer Agent reserve the right to refuse a
telephone redemption if they deem it advisable to do so. Neither the FBR Trust,
the Transfer Agent nor the Distributor will be liable for any loss, liability,
cost or expense for following these procedures or for following instructions
communicated by telephone that it reasonably believes to be genuine. These
procedures are set forth under "Shareholder Services -- Exchange Privilege"
above.
If an investor authorizes telephone redemption, the Transfer Agent may act
on telephone instructions from any person representing himself or herself to be
a representative of the Distributor or an Authorized Dealer and reasonably
believed by the Transfer Agent to be genuine. The FBR Trust will require the
Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine and, if it
does not follow such procedures, the Transfer Agent or the Trust may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the FBR
Trust nor the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
OTHER INFORMATION ON REDEMPTIONS. FBR Realty Fund is not responsible for
the efficiency of the Federal Wire System or a shareholder's investment adviser,
broker-dealer or bank. The shareholder is responsible for any charges imposed by
the shareholder's bank. To change the name of the single designated bank account
to receive redemptions, it is necessary to send a written request (with a
signature guaranteed by an Eligible Guarantor Institution) to The FBR Family of
Funds, c/o PFPC Inc., P.O. Box 8994, Wilmington, Delaware 19899-8994.
Payment of Redemption Proceeds. In all cases, the redemption price is the
net asset value per share next determined after the request for redemption is
received in proper form by the Transfer Agent, subject to any applicable CDSC.
Shares acquired in the Reorganization will not be subject to a CDSC. Payment
for shares redeemed is made by check mailed within three days after acceptance
by the Transfer Agent of the request and any other necessary documents in proper
order. Such payment may be postponed or the right of redemption suspended as
provided by the rules of the SEC. If the shares to be redeemed have been
recently purchased by check, the Transfer Agent may delay mailing a redemption
check, which may be a period of up to 15 days, pending a determination that the
check has cleared.
REDEMPTION IN-KIND. FBR Realty Fund reserves the right, if conditions
exist which make cash payments undesirable, to honor any request for redemption
of shares by making payment in whole or in part in securities chosen by the Fund
and valued in the same way as they would be valued for purposes of computing the
Fund's net asset value. If payment is made in securities, a shareholder may
incur transaction costs in converting these securities into cash after they have
redeemed their shares. FBR Realty Fund has elected, however, to be governed by
Rule 18f-1 under the 1940 Act, so that the Fund is obligated to redeem its
shares solely in cash up to the lesser of $250,000 or 1% of its net asset value
during any 90 day period for any one shareholder of the Fund.
-31-
<PAGE>
ADDITIONAL INFORMATION ABOUT REDEMPTIONS. A shareholder may have redemption
proceeds of $10,000 or more wired to the shareholder's brokerage account or a
commercial bank account designated by the shareholder. A transaction fee of $15
will be charged for payments by wire. Questions about this option, or redemption
requirements generally, should be referred to the shareholder's Distributor
account executive, to another Authorized Dealer, or to the Transfer Agent if the
shares are not held in a brokerage account.
Written redemption instructions must be received by the Transfer Agent in
proper form and must be signed exactly as the shares are registered. If the
proceeds of the redemption would exceed $10,000, if the proceeds are not to be
paid to the record owner at the record address, if the record address has
changed within the past 30 days, or if the shareholder is a corporation,
partnership, trust or fiduciary, signatures must be guaranteed by an Eligible
Guarantor Institution. Eligible Guarantor Institutions are domestic banks,
brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations
participating in a medallion program. The three recognized medallion programs
are Securities Transfer Agent Medallion Program (STAMP), Stock Exchanges
Medallion Program (SEMP), and New York Stock Exchange, Inc. Medallion Signature
Program (MSP). Signature guarantees received from institutions not participating
will not be accepted.
During times of drastic economic or market conditions, investors may
experience difficulty in contacting the Distributor or Authorized Dealers by
telephone to request a redemption of Fund shares. In such cases, investors
should consider using the other redemption procedures described herein. Use of
these other redemption procedures may result in the redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, FBR Realty Fund's net asset value may fluctuate.
FEDERAL TAXES.
FBR Realty Fund intends to qualify as a regulated investment company by
satisfying the requirements under Subchapter M of the Internal Revenue Code of
1986, as amended (the "IRS Code"). FBR Realty Fund contemplates the
distribution of all of its net investment income and capital gains, if any, in
accordance with the timing requirements imposed by the IRS Code, so that the
Fund will not be subject to U.S. federal income taxes or the 4% U.S. federal
excise tax on undistributed income.
Distributions by FBR Realty Fund of its net investment income and the
excess, if any, of its net realized short-term capital gain over its net
realized long-term capital loss are taxable to shareholders as ordinary income.
These distributions are treated as dividends for federal income tax purposes,
but only a portion thereof may qualify for the 70% dividends-received deduction
for corporate shareholders (which portion may not exceed the aggregate amount of
qualifying dividends from domestic corporations received by FBR Realty Fund and
must be designated by the Fund as so qualifying). Distributions by FBR Realty
Fund of the excess, if any, of its net realized long-term capital gain over its
net realized short-term capital loss are designated as capital gain
distributions and are taxable to shareholders as long-term capital gain,
regardless of the length of time shareholders have held their shares. Such
distributions are not eligible for the dividends-received deduction. If a
shareholder disposes of shares in FBR Realty Fund at a loss
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<PAGE>
before holding such shares for more than six months, the loss will be treated as
a long-term capital loss to the extent that the shareholder has received a
capital gain distribution on those shares.
Distributions to shareholders of FBR Realty Fund will be treated in the
same manner for U.S. federal income tax purposes whether received in cash or in
additional shares. Distributions received by shareholders of FBR Realty Fund in
January of a given year will be treated as received on December 31 of the
preceding year provided that they were declared to shareholders of record on a
date in October, November, or December of such preceding year. Like the
GrandView Funds, the FBR Realty Fund sends tax statements to its shareholders
(with copies to the IRS) by January 31 showing the amounts and tax status of
distributions made (or deemed made) during the preceding calendar year.
Income from securities of foreign issuers may be subject to foreign
withholding taxes. Credit for such foreign taxes, if any, will not pass through
to the shareholders.
OTHER BUSINESS
The Trustees of the GrandView Trust do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Trustees of the GrandView Trust to be used at the
Meeting. This Prospectus/Proxy Statement, along with a Notice of the Meeting
and a proxy card, is first being mailed to shareholders of the Funds on or about
August 12, 1998. Only shareholders of record as of the close of business on the
Record Date, July 30, 1998, will be entitled to notice of, and to vote at, the
Meeting. The holders of a majority of the shares of each of the Funds
outstanding at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting. Approval of the
Plan will require a "Majority Shareholder Vote" of each Fund as defined in the
GrandView Trust's Declaration of Trust, which means the affirmative vote of the
holders of the lesser of either (i) 67% or more of a Fund's shares present at
the meeting if the holders of more than 50% of the outstanding shares of that
Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. Shareholders of the Funds are entitled to one
vote for each share. Fractional shares are entitled to proportional voting
rights.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted FOR the proposed Reorganization and FOR any other
matters deemed appropriate. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions and broker "non-
votes" (that is, proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owner or other persons
entitled to vote shares on a particular matter with respect to which the brokers
or nominees do not have discretionary power) will be treated as shares that are
present but which have not been voted. A proxy may be revoked at any time on or
before the Meeting by written notice to the Secretary of the GrandView Trust or
by
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<PAGE>
attending and voting at the Meeting. Unless revoked, all valid proxies will be
voted in accordance with the specifications thereon or, in the absence of such
specifications, for approval of the Plan and the Reorganization contemplated
thereby.
The chart below lists the number of shares of each Fund that were
outstanding as of the close of business on the Record Date:
<TABLE>
<CAPTION>
SHARES OUTSTANDING
------------------
<S> <C>
GrandView Realty Fund 198,813
GrandView Index Fund 84,639
</TABLE>
As of the Record Date, there were no shares of the FBR Realty Fund
outstanding.
As of the Record, Date, the Trustees and officers of the GrandView Trust as
a group owned beneficially (i.e. had voting and/or investment power) 22.51% and
7.78%, respectively, of the then outstanding shares of the GrandView Index Fund
and the GrandView Realty 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 GrandView Trust to be the beneficial owner of more than 5% of the
outstanding shares of the Funds as of the Record Date.
<TABLE>
<CAPTION>
GRANDVIEW REALTY FUND
- - ---------------------
TOTAL SHARES OWNED PERCENT
------------------ -------
<S> <C> <C>
Charles Schwab Omnibus 33,342 16.54%
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
Chuck K. Chan and Elizabeth F. Chan 11,344 5.63%
2146 Woodleaf Way
Mountain View, CA 94040
<CAPTION>
GRANDVIEW INDEX FUND
- - --------------------
TOTAL SHARES OWNED PERCENT
------------------ -------
<S> <C> <C>
Charles Schwab Omnibus 10,247 11.81%
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
-34-
<PAGE>
<CAPTION>
TOTAL SHARES OWNED PERCENT
------------------ -------
<S> <C> <C>
First Union National Bank, NC 6,774 7.81%
Winsor H. Aylesworth IRA
127 Grandview Drive
Glastonbury, CT 06033
Lucille C. Carlson & Suk-Ying Chan 6,584 7.59%
99 Westmont
West Hartford, CT 06107
First Union National Bank, NC 5,456 6.29%
Maryanne S. Aylesworth IRA
127 Grandview Drive
Glastonbury, CT 06033
FTC & Co. 4,683 5.40%
Attn: DataLynx #155
P.O. Box 173736
Denver, CO 80217
First Union National Bank, NC 4,472 5.16%
Frank P. Meadows, Jr. IRA
P.O. Box 353
Rocky Mount, NC 27802-0353
Ellen S. Nusblatt 4,379 5.05%
2182 NW Hoyt Street #2
Portland, OR 97210
</TABLE>
Proxies are solicited by mail. Additional solicitations may be made by
telephone or personal contact by officers or employees of GrandView Advisers and
its affiliates or by proxy soliciting firms retained by GrandView Advisers.
GrandView Advisers has retained Shareholder Communications Corporation to
provide proxy solicitation services in connection with the Meeting at an
estimated cost of $1,500. The cost of the solicitation will be borne by the
Funds and FBR Realty Funds, subject to applicable expense limitation
arrangements with GrandView Advisers, Inc. and FBR Advisers, respectively.
In the event that sufficient votes to approve the Reorganization are not
received by 10:00 a.m. on September 11, 1998, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. In determining whether to adjourn the Meeting, the following
factors may be considered: the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any such adjournment will require an
affirmative vote by the holders of a majority of the shares present in person or
by proxy and entitled to vote at the Meeting. The persons named as proxies
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<PAGE>
will vote upon such adjournment after consideration of the best interests of all
shareholders of the Funds.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Funds as of March 31, 1998 have
been incorporated by reference into this Prospectus/Proxy Statement in reliance
on the reports of Deloitte & Touche LLP, independent auditors and independent
accountants for the Funds and given on the authority of such firm as expert in
accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of FBR Realty Fund
will be passed upon by Dechert Price & Rhoads, 1775 Eye Street, N.W.,
Washington, D.C. 20006.
THE TRUSTEES OF THE GRANDVIEW TRUST, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND APPROVAL OF THE PLAN INCLUDING THE SALE OF ALL OR SUBSTANTIALLY ALL OF
THE ASSETS OF THE FUNDS TO FBR REALTY FUND, THE TERMINATION OF THE FUND AND THE
DISTRIBUTION OF SHARES OF FBR REALTY FUND TO SHAREHOLDERS OF THE FUND AND ANY
UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF
APPROVAL OF THE PLAN.
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 14th day of August, 1998, by and between the FBR Family of Funds (the
"Company"), a Delaware business trust, on behalf of the FBR Realty Growth Fund
(the "Acquiring Fund"), a separate investment series of the Company, and
GrandView Investment Trust (the "Trust"), a Massachusetts business trust, on
behalf of the GrandView Realty Growth Fund (the "Realty Growth Fund") and the
GrandView S&P REIT Index Fund (the "Index Fund")(collectively, the "Acquired
Funds"), which are separate investment series of the Trust.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all or substantially all of
the assets of each Acquired Fund in exchange solely for Class A shares of
beneficial interest (the "Shares") of the Acquiring Fund, the assumption by the
Acquiring Fund of certain identified liabilities of the Acquired Funds, and the
distribution of the Acquiring Fund Shares to the shareholders of the Acquired
Funds in liquidation of the Acquired Funds as provided herein, all upon the
terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Company and the Trust are registered investment companies of
the management type and the Acquired Funds own securities that generally are
assets of the character in which the Acquiring Fund is permitted to invest; and
WHEREAS, the Company is authorized to issue its shares of beneficial
interest in separate series, including the Acquiring Fund, each of which
maintains a separate and distinct portfolio of assets; and
WHEREAS, the Trust is authorized to issue its shares of beneficial interest
in separate series, including each of the Acquired Funds, each of which
maintains a separate and distinct portfolio of assets; and
WHEREAS, the Board of Trustees of the Trust on behalf of the Acquired Funds
has determined that the exchange of all or substantially all of the assets of
the Acquired Funds for Acquiring Fund Shares and the assumption of certain
identified liabilities of the Acquired Funds by the Acquiring Fund is in the
best interests of each Acquired Fund and its shareholders and that the interests
of the existing shareholders of the Acquired Fund would not be diluted as a
result of this transaction; and
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
<PAGE>
1. TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE ACQUIRED FUNDS IN
EXCHANGE FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF CERTAIN IDENTIFIED
ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUNDS
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, each Acquired Fund
agrees to transfer all or substantially all of its assets as set forth in
paragraph 1.2 to the Acquiring Fund, and the Acquiring Fund agrees in exchange
therefor, to deliver to each Acquired Fund the number of Class A Acquiring Fund
Shares, including fractional Class A Acquiring Fund Shares, determined by
dividing the value of the Acquired Fund's net assets, computed in the manner and
as of the time and date set forth in paragraph 2.1, by the net asset value of
one Acquiring Fund Class A Share computed in the manner and as of the time and
date set forth in paragraph 2.2. Such transactions shall take place at the
closing provided for in paragraph 3.1 (the "Closing").
1.2 (a) The assets of each Acquired Fund to be acquired by the Acquiring
Fund shall consist of all or substantially all of the property including,
without limitation, such cash, securities, and dividend or interest receivables
which are owned by the Acquired Fund and any deferred or prepaid expenses shown
as an asset on the books of the Acquired Fund on the closing date provided in
paragraph 3.1 (the "Closing Date").
(b) The Trust has provided the Company with a list of each Acquired
Fund's assets as of the date of execution of this Agreement. The Acquired Funds
reserve the right to sell any of these securities as part of the ordinary course
of their investment activity (but not in contemplation of this Agreement), but
will not, without the prior approval of the Acquiring Fund, acquire any
additional securities other than securities of the type in which they are
permitted to invest.
1.3 Each Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
assume all liabilities, expenses, costs, charges and reserves reflected on an
unaudited statement of assets and liabilities of the Acquired Fund prepared by
Bear Stearns Funds Management, Inc. ("Bear Stearns"), as administrator of the
Acquiring Fund, as of the Valuation Date (as defined in paragraph 2.1), in
accordance with generally accepted accounting principles consistently applied
from the prior audited period. The Acquiring Fund shall assume only those
liabilities of the Acquired Funds reflected in those unaudited statements of
assets and liabilities and, except as provided in paragraph 5.8, shall not
assume any other liabilities not reflected thereon.
1.4 As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), each Acquired Fund will
liquidate and distribute pro rata to its shareholders of record determined as of
the close of business on the Closing Date (the "Acquired Fund Shareholders") the
Acquiring Fund Shares it receives pursuant to paragraph 1.1. Such liquidation
and distribution will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of each Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the name of the Acquired Fund's shareholders and representing the respective pro
rata number of the Acquiring Fund Shares due such shareholders. All issued and
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<PAGE>
outstanding shares of each Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund. The Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares in connection with such exchange.
1.5 Any reporting responsibility of the Acquired Funds is and shall remain
the responsibility of the Acquired Funds up to and including the Closing Date
and such later dates on which the Acquired Funds are terminated.
2. VALUATION
2.1 The value of the Acquired Funds' assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of regular trading on the New York Stock Exchange, Inc. (the "NYSE") on
the Closing Date (such time and date being hereinafter called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's then
current prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed as of the close of regular trading on the NYSE on the
Valuation Date, using the valuation procedures set forth in the Acquiring Fund's
then current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for each Acquired Fund's net assets shall
be determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value per share of an Acquiring Fund share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made by Bear Stearns in accordance
with its regular practice as pricing agents for the Acquiring Fund.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be September 11, 1998, or such later date as
the parties may agree to in writing. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 5:00
p.m., at the offices of FBR Fund Advisers, Inc., 1001 Nineteenth Street North,
Arlington, Virginia 22209, or at such other time and/or place as the parties
may agree.
3.2 Custodial Trust Company, as custodian for the Acquiring Fund (the
"Custodian"), shall deliver at the Closing a certificate of an authorized
officer stating that the Acquired Funds' portfolio securities, cash and any
other assets shall have been delivered in proper form to the Acquiring Fund
within two business days prior to or on the Closing Date.
3.3 In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of either Acquired Fund shall be
closed to trading or trading thereon
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<PAGE>
shall be restricted or (b) trading or the reporting of trading on the NYSE or
elsewhere shall be disrupted so that accurate appraisal of the value of the net
assets of either Acquired Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
3.4 The Trust shall deliver at the Closing a list of the names and
addresses of each Acquired Fund's shareholders and the number and percentage
ownership of outstanding Shares owned by each such shareholder immediately prior
to the Closing, certified on behalf of the Trust by its President. The
Acquiring Fund shall issue and deliver a confirmation evidencing the Acquiring
Fund Shares to be credited on the Closing Date to the Secretary of the Trust or
provide evidence satisfactory to the Trust that such Acquiring Fund Shares have
been credited to each Acquired Fund's account on the books of the Acquiring
Funds. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Trust and the Acquired Funds represent and warrant to the Company
and the Acquiring Fund as follows:
(a) The Trust is a Massachusetts business trust, duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts;
(b) The Trust is a registered investment company classified as a
management company of the open-end type and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940 (the "1940 Act") is in
full force and effect;
(c) The Trust is not, and the execution, delivery and performance of
this Agreement will not result, in a material violation of its Declaration
of Trust or Bylaws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Trust or either Acquired Fund is a
party or by which it is bound;
(d) The Trust and the Acquired Funds have no material contracts or
other commitments (other than this Agreement) which will be terminated with
liability prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and accepted by the
Company and the Acquiring Fund, no litigation or administrative proceeding
or investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Trust, either Acquired
Fund or any of their properties or assets (other than that previously
disclosed to the other party to the Agreement) which, if adversely
determined, would materially and adversely affect their financial condition
or the conduct of their business. The Trust and the Acquired Funds know of
no facts which might form the basis for the institution of such proceedings
and are not parties to or subject to the provisions of any order, decree or
judgment
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<PAGE>
of any court or governmental body which materially and adversely affects
their business or their ability to consummate the transactions herein
contemplated;
(f) The statements of assets and liabilities of the Acquired Funds
for the period ended March 31, 1996 and for the fiscal year ended March 31,
1997 have been audited by KPMG Peat Marwick LLP and for the fiscal year
ended March 31, 1998, have been audited by Deloitte & Touche LLP, certified
public accountants, and are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Funds as of such dates, and there are
no known contingent liabilities of either Acquired Fund as of such dates
not disclosed therein;
(g) Since March 31, 1998, there has not been any material adverse
change in the financial condition, assets, liabilities or business of
either Acquired Fund other than changes occurring in the ordinary course of
business, or any incurrence by either Acquired Fund of indebtedness
maturing more than one year from the date that such indebtedness was
incurred, except as otherwise disclosed to and accepted by the Acquiring
Fund. For the purposes of this subparagraph (g), a decline in net asset
value per share of an Acquired Fund Share shall not constitute a material
adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports (including information returns) of the Acquired Funds required by
law to have been filed by such date shall have been filed, and all federal
and other taxes shall have been paid so far as due, or provision shall have
been made for the payment thereof and, to the best of the Trust's
knowledge, no such return or report is currently under audit and no
assessment has been asserted with respect to such returns or reports;
(i) For each taxable year of its operation (including the taxable
year that ends on the Closing Date), each Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has elected to be treated as such and
will have distributed all of its investment company taxable income and net
realized capital gains that have accrued through the Closing Date;
(j) All issued and outstanding Shares of the Acquired Funds are, and
at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding Shares of the
Acquired Funds will, at the time of Closing, be held of record by the
persons and in the amounts set forth in the records of the transfer agent
as provided in paragraph 3.4. Neither Acquired Fund has outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquired Fund's Shares, nor is there outstanding any security convertible
into shares of either Acquired Fund;
(k) At the Closing Date, each Acquired Fund will have good and
marketable title to its assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and
marketable
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<PAGE>
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the Securities Act of
1933, as amended (the "1933 Act"), other than as disclosed to the Acquiring
Fund;
(l) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary actions on the part of the Trust's
Board of Trustees, and subject to the approval of each Acquired Fund's
shareholders, this Agreement will constitute a valid and binding obligation
of the Trust and each Acquired Fund, enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(m) The information to be furnished by the Trust and the Acquired
Funds for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto;
(n) The proxy statement of the Acquired Funds (the "Proxy Statement")
to be included in the registration statement (the "Registration Statement")
referred to in paragraph 5.7 (only insofar as it relates to the Acquired
Funds) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
4.2 The Company and the Acquiring Fund represent and warrant to the Trust
and the Acquired Funds as follows:
(a) The Company is a Delaware business trust, duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Company is registered as an open-end management investment
company and its registration with the Commission as an investment company
under the 1940 Act is in full force and effect;
(c) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) The Company is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of its
Declaration of Trust or By-Laws or of
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<PAGE>
any agreement, indenture, instrument, contract, lease or other undertaking
to which the Company or the Acquiring Fund is a party or by which it is
bound;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or threatened against the Company or the Acquiring Fund or any of
its properties or assets, except as previously disclosed in writing to the
Trust. The Company and the Acquiring Fund know of no facts which might
form the basis for the institution of such proceedings and neither is a
party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein;
(f) All federal and other tax returns and reports (including
information returns) of the Acquiring Fund required by law to have been
filed by such date shall have been filed, and all federal and other taxes
shall have been paid so far as due, or provision shall have been made for
the payment thereof and, to the best of the Acquiring Fund's knowledge, no
such return or report is currently under audit and no assessment has been
asserted with respect to such returns or reports;
(g) The Acquiring Fund intends to meet the requirements of Subchapter
M of the Code for qualification and treatment as a regulated investment
company;
(h) At the date hereof, all issued and outstanding Acquiring Fund
Shares are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund Shares, nor is there outstanding any security
other than Class B shares, convertible into any Acquiring Fund Shares. On
the Closing Date the Acquiring Fund will have only nominal assets and no
material liabilities and will not have commenced investment operations;
(i) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary
actions, if any, on the part of the Company's Board of Trustees, and this
Agreement will constitute a valid and binding obligation of the Company and
the Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(j) The Acquiring Fund Shares to be issued and delivered to the
Acquired Funds, for the account of the Acquired Funds' shareholders,
pursuant to the terms of this Agreement, will at the Closing Date have been
duly authorized and, when so issued and delivered, will be duly and validly
issued Acquiring Fund Shares, and will be fully paid and non-assessable
with no personal liability attaching to the ownership thereof;
(k) The information to be furnished by the Acquiring Fund for use in
no-action letters, applications for exemptive orders, registration
statements, proxy materials and other
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<PAGE>
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects
and shall comply in all material respects with federal securities and other
laws and regulations applicable thereto;
(l) The Company's registration statement on Form N-14 with regard to
the Reorganization, and the Proxy Statement to be included therein (only
insofar as it relates to the Acquiring Fund) will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not materially
misleading.
5. COVENANTS OF THE ACQUIRING FUND, THE COMPANY, THE ACQUIRED FUNDS AND THE
TRUST
5.1 The Acquiring Fund and the Acquired Funds each will operate its
business in the ordinary course between the date hereof and the Closing Date.
It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions.
5.2 The Trust will call a meeting of the Acquired Funds' shareholders to
consider and act upon this Agreement and any other matters necessary or
appropriate in connection with the transactions contemplated herein.
5.3 Each of the Acquired Funds covenants that the Acquiring Fund Shares to
be issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.4 The Trust and the Acquired Funds will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the record ownership of the Acquired Funds' Shares.
5.5 Subject to the provisions of this Agreement, the Company, the
Acquiring Fund, the Trust and the Acquired Funds each will take, or cause to be
taken, all action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.6 As promptly as practicable, but in any case within sixty days after
the Closing Date, each Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for federal income tax purposes which
will be carried over to the Acquiring Fund as a result of Section 381 of the
Code, and which will be certified by the Trust's President or Vice President and
its Treasurer.
5.7 Each Acquired Fund will provide the Acquiring Fund with information
about the Acquired Fund reasonably necessary for the preparation of a prospectus
(the "Prospectus") which will include the Proxy Statement referred to in
paragraph 4.l(n), all to be included in a registration statement on Form N-14 of
the Acquiring Fund (the "Registration Statement"), in compliance with the
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<PAGE>
1933 Act, the Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act
in connection with the meeting of the Acquired Funds' shareholders to consider
approval of this Agreement and the transactions contemplated herein.
5.8 The Acquiring Fund will, with respect to any claims arising within
three years from the Closing Date, indemnify the Trustees and officers of the
Trust, to the same extent, and subject to the same limitations, as such Trustees
and officers are indemnified under the Trust's Declaration of Trust as of the
date hereof.
5.9 Each of the Acquiring Fund, the Acquired Fund, the Company, and the
Trust agrees to make such representations and warranties as may be necessary to
assure that the transactions described in this Agreement shall constitute a tax-
free reorganization.
5.10 The Acquiring Fund agrees that it has no plan or intention to sell or
otherwise dispose of the assets of the Acquired Fund to be acquired in the
Reorganization, except for sales and dispositions made in the ordinary course of
business.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE ACQUIRED FUNDS
The obligations of the Trust and the Acquired Funds to consummate the
transactions provided for herein shall be subject, at its election, to the
performance by the Company and the Acquiring Fund of all of the obligations to
be performed by them hereunder on or before the Closing Date and, in addition
thereto, the following further conditions:
6.1 All representations and warranties of the Company and the Acquiring
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
6.2 The Company shall have delivered to the Trust a certificate executed
in its name by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to the Trust and dated as of the
Closing Date, to the effect that the representations and warranties of the
Company and the Acquiring Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement and as to such other matters as the Acquired Fund
shall reasonably request; and
6.3 The Trust shall have received on the Closing Date a favorable opinion
from Dechert Price & Rhoads, counsel to the Company and the Acquiring Fund,
dated as of the Closing Date, covering the following points:
That (a) the Acquiring Fund is a series of the Company which is a business
trust duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power to own all of its
properties and assets and to carry on its business as presently conducted;
(b) the Agreement has been duly authorized, executed and delivered by the
Company on behalf of the
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<PAGE>
Acquiring Fund and, assuming that the Prospectus, Registration Statement
and Proxy Statement comply with the 1933 Act, the 1934 Act and the 1940 Act
and the rules and regulations thereunder and, assuming due authorization,
execution and delivery of the Agreement by the Trust on behalf of the
Acquired Funds, is a valid and binding obligation of the Company
enforceable against the Company and the Acquiring Fund in accordance with
its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general equity principles; (c) the
Acquiring Fund Shares to be issued to the Acquired Funds' shareholders as
provided by this Agreement are duly authorized and upon such delivery will
be validly issued and outstanding and are fully paid and non-assessable,
and no shareholder of the Acquiring Fund has any preemptive rights to
subscription or purchase in respect thereof; (d) the execution and delivery
of this Agreement did not, and the consummation of the transactions
contemplated hereby will not, result in a material violation of the
Company's Declaration of Trust or By-Laws or any provision of any agreement
(known to such counsel) to which the Company or the Acquiring Fund is a
party or by which it is bound or, to the knowledge of such counsel, result
in the acceleration of any obligation or the imposition of any penalty,
under any agreement, judgment or decree to which the Acquiring Fund is a
party or by which it is bound; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental
authority of the United States or the State of Delaware is required for the
consummation by the Company and the Acquiring Fund of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act, and such as may be required under state
securities law; (f) only insofar as they relate to the Acquiring Fund, the
descriptions in the Proxy Statement of statutes, legal and governmental
proceedings and contracts and other documents, if any, are accurate and
fairly present the information required to be shown; (g) such counsel does
not know of any legal or governmental proceedings, only insofar as they
relate to the Acquiring Fund, existing on or before the effective date of
the Registration Statement or the Closing Date required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement which are not described or filed as required; (h) the Company is
registered as an investment company under the 1940 Act and its registration
with the Commission as an investment company under the 1940 Act is in full
force and effect; and (i) to the best knowledge of such counsel, no
litigation or administrative proceeding or investigation of or before any
court or governmental body is presently pending or threatened as to the
Company or the Acquiring Fund or any of their properties or assets and
neither the Company nor the Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body, which materially and adversely affects its business, other than as
previously disclosed in the Registration Statement. In addition, such
counsel also shall state that they have participated in conferences with
officers of the Company at which the contents of the Proxy Statement and
related matters were discussed and, although they are not passing upon and
do not assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Proxy Statement (except to the extent
indicated in paragraph (f) of their above opinion), on the
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basis of the foregoing (relying as to materiality to a large extent upon
the opinions of officers and other representatives of the Company and the
Acquiring Fund), no facts have come to their attention that lead them to
believe that the Proxy Statement as of its date, as of the date of the
Acquired Fund shareholders' meeting and as of the Closing Date, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein regarding the Acquiring Fund or necessary to
make the statements therein regarding the Acquiring Fund, in light of the
circumstances under which they were made, not misleading. Such opinion may
state that such counsel does not express any opinion or belief as to the
financial statements or other financial data, or as to the information
relating to the Trust and the Acquired Fund, contained in the Proxy
Statement or Registration Statement, and that such opinion is solely for
the benefit of the Trust, its Trustees and its officers and the Acquired
Funds. (Such counsel may rely as to matters governed by the laws of the
State of Delaware on an opinion of Delaware counsel.) Such opinion also
shall include such other matters incident to the transaction contemplated
hereby as the Acquired Funds may reasonably request.
In this paragraph 6.3, references to the Proxy Statement include and relate
only to the text of such Proxy Statement and not to any exhibits or attachments
thereto or to any documents incorporated by reference therein.
6.4 Prior to the Closing Date, the Acquired Funds shall have declared and
paid a dividend which, together with previous dividends, shall have the effect
of distributing all of their investment company taxable income and net capital
gains accruing through and including the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE ACQUIRING FUND
The obligations of the Company and the Acquiring Fund to complete the
transactions provided for herein shall be subject, at their election, to the
performance by the Trust and the Acquired Funds of all the obligations to be
performed by them hereunder on or before the Closing Date and, in addition
thereto, the following conditions:
7.1 All representations and warranties of the Trust and the Acquired Funds
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Trust shall have delivered to the Acquiring Fund a statement of
each Acquired Fund's assets and liabilities, together with a list of each
Acquired Fund's portfolio securities showing the tax costs of such securities by
lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer or Assistant Treasurer of the Trust;
7.3 The Trust shall have delivered to the Acquiring Fund on the Closing
Date a certificate executed in its name and on behalf of the Acquired Funds by
its President or Executive Vice President and its Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Company and the Acquiring
Fund and dated as of the Closing Date, to the effect that the representations
and warranties
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of the Trust and the Acquired Funds made in this Agreement are true and correct
at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as the
Acquiring Fund shall reasonably request; and
7.4 The Company shall have received on the Closing Date a favorable
opinion of Bingham Dana LLP, counsel to the Acquired Funds, covering the
following points:
That (a) each Acquired Fund is a series of the Trust which is a
Massachusetts business trust, legally existing under the laws of the
Commonwealth of Massachusetts, and has the power under the Trust's
Declaration of Trust to own its properties and assets and to carry on its
business as presently conducted as such properties, assets and business are
described in its most recent prospectus and statement of additional
information; (b) the Agreement has been duly authorized, executed and
delivered by the Trust on behalf of the Acquired Funds and, assuming that
the Prospectus, the Registration Statement and the Proxy Statement comply
with the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder and, assuming due authorization, execution and
delivery of the Agreement by the Company on behalf of the Acquiring Fund,
is a valid and binding obligation of the Trust and the Acquired Funds
enforceable against the Trust and the Acquired Funds in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws relating to or affecting
creditors' rights generally and to general equity principles, and such
counsel shall express no opinion with respect to the availability of
specific performance or other equitable relief or with respect to
provisions of this Agreement intended to limit liability for particular
matters to an Acquired Fund and its assets; (c) the execution and delivery
of the Agreement did not, and the consummation of the transactions
contemplated hereby will not, result in a material violation of the Trust's
Declaration of Trust or Bylaws or any provision of any agreement (known to
such counsel) to which the Trust or the Acquired Funds is a party or by
which it is bound or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition of any penalty, under any
agreement, judgment or decree to which the Trust or either Acquired Fund is
a party or by which it is bound; (d) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental
authority of the United States or the Commonwealth of Massachusetts is
required for the consummation by the Trust and the Acquired Funds of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required
under state securities laws; (e) only insofar as they relate to the Trust
and the Acquired Funds, the descriptions in the Proxy Statement of
statutes, legal and governmental proceedings and contracts and other
documents, if any, fairly present in all material respects the information
required to be shown; (f) such counsel does not know of any legal or
governmental proceedings, only insofar as they relate to the Trust and the
Acquired Funds existing on or before the effective date of the Registration
Statement or the Closing Date, required to be described in the Proxy
Statement which are not described as required; (g) the Trust is registered
as an investment company under the 1940 Act and, to the best of such
counsel's knowledge, its registration with the Commission as an investment
company under the 1940 Act is in full force and effect; and (h) to the best
knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or
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governmental body is presently pending or threatened as to the Trust or
either Acquired Fund or any of their respective properties or assets and
neither the Trust nor either Acquired Fund is a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body, which materially and adversely affects its business other than as
previously disclosed in the Proxy Statement. Such counsel also shall state
that they have participated in conferences with officers of the Trust at
which the contents of the Proxy Statement and related matters were
discussed and, although they are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Proxy Statement (except to the extent indicated in
paragraph (e) of their above opinion), on the basis of the foregoing
(relying as to materiality to a large extent upon the opinions of officers
and other representatives of the Trust and the Acquired Fund), no facts
have come to their attention that cause them to believe that the Proxy
Statement as of its date, as of the date of the Acquired Funds' shareholder
meeting, and as of the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein regarding the Trust or the Acquired Funds or necessary in the light
of the circumstances under which they were made, to make the statements
therein regarding the Trust or the Acquired Funds not misleading. Such
opinion may state that such counsel does not express any opinion or belief
as to the financial statements, notes and schedules thereto or other
financial or statistical data, or as to the information relating to the
Acquiring Fund, contained in the Proxy Statement or Registration Statement,
and that such opinion is solely for the benefit of the Company, its
Trustees and its officers. Such opinion also shall include such other
matters incident to the transaction contemplated hereby as the Company or
the Acquiring Fund may reasonably request.
In this paragraph 7.4, references to the Proxy Statement include and relate
to only the text of such Proxy Statement and not to any exhibits or attachments
thereto or to any documents incorporated by reference therein.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY, THE ACQUIRING
FUND, THE TRUST AND THE ACQUIRED FUNDS
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Funds or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding Shares of each
Acquired Fund in accordance with the provisions of the Trust's Declaration of
Trust and Bylaws and certified copies of the votes evidencing such approval
shall have been delivered to the Company and the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor
the Acquired Funds may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
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8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including "no-
action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or the Acquired Funds to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Acquired Funds,
provided that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;
8.5 Each Acquired Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the Acquired Fund's shareholders all of the Fund's investment company taxable
income for all taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net capital
gain realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carryforward);
8.6 The parties shall have received an opinion of Dechert Price & Rhoads,
addressed to the Company and the Trust, substantially to the effect that the
transaction contemplated by this Agreement constitutes a tax-free reorganization
for federal income tax purposes. The delivery of such opinion is conditioned
upon receipt by Dechert Price & Rhoads of representations it shall request of
the Company and the Trust. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the conditions set
forth in this paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Acquired Fund each represents and warrants
to the other that there are no brokers or finders entitled to receive any
payments in connection with the transactions provided for herein.
9.2 (a) Except as may be otherwise provided herein, and subject to any
expense limitation arrangements applicable to the Acquired Funds or the
Acquiring Fund and the provisions of the Asset Purchase Agreement dated June __,
1998 by and between FBR Fund Advisers, Inc. and GrandView Advisers, Inc. with
respect thereto, the Acquired Fund and the Acquiring Fund shall each be liable
for its expenses incurred in connection with entering into and carrying out the
provisions of this Agreement, whether or not the transactions contemplated
hereby are consummated. The expenses payable by the Acquired Funds hereunder
shall include the expenses of: (i) its counsel and independent accountants
associated with the Reorganization; (ii) printing and mailing the
Prospectus/Proxy Statement and soliciting proxies in connection with the meeting
of shareholders of the Acquired Funds referred to in paragraph 5.2 hereof; (iii)
all fees and expenses related to the liquidation of the Acquired Funds; (iv)
fees and expenses of the Acquired Funds' custodian and transfer agent incurred
in
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connection with the Reorganization; and (v) any special pricing fees associated
with the valuation of an Acquired Fund's portfolio on the Closing Date. The
expenses payable by the Acquiring Fund hereunder shall include: (i) fees and
expenses of its counsel and independent accountants associated with the
Reorganization; (ii) expenses associated with preparing this Agreement and
preparing and filing the Registration Statement under the 1933 Act covering the
Acquiring Fund Shares to be issued in the Reorganization; (iii) registration or
qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection with the Reorganization; and (iv) any fees and
expenses of the Acquiring Fund's custodian and transfer agent incurred in
connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the Acquired Funds,
prior to the Closing, shall pay for or include in the unaudited statement of
assets and liabilities prepared pursuant to paragraph 1.3 all of its known and
reasonably estimated expenses associated with the transactions contemplated by
this Agreement.
10. ENTIRE AGREEMENT, SURVIVAL OF WARRANTIES
10.1 The Company, the Acquiring Fund, the Trust and the Acquired Fund agree
that no party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement between the
parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated at any time at or prior to the
Closing Date: (1) by mutual agreement of the Trust and the Company; (2) by the
Trust in the event the Acquiring Fund or the Company shall, or by the Company in
the event an Acquired Fund or the Trust shall, materially breach any
representation, warranty or agreement contained herein to be performed at or
prior to the Closing Date; or (3) if a condition herein expressed to be
precedent to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of either the Trust or the Company, or their respective
Trustees, or officers, or to the other party, but each shall bear the expenses
incurred by it incidental to the preparation and carrying out of this Agreement
as provided in paragraph 9.
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12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Company
and the Trust; provided, however, that following the meeting of the Acquired
Fund's shareholders called by the Trust pursuant to paragraph 5.2 of this
Agreement, no such amendment may have the effect of changing the provisions for
determining the number of the Acquiring Fund Shares to be issued to the Acquired
Funds' shareholders under this Agreement to the detriment of such shareholders
without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by or
certified mail addressed to the Company, 1001 Nineteenth Street North,
Arlington, Virginia 22209, attention Eric C. Brugel; or to the Trust, P.O. Box
164, East Glastonbury, Connecticut 06025-0164, attention Winsor Aylesworth.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW, ASSIGNMENT, LIMITATION OF LIABILITY
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.5 It is understood and expressly stipulated that neither the holders of
shares of the Acquired Funds nor any trustee, officer, agent, or employee of the
Trust shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
each of the Acquired Funds only shall be liable for its respective liabilities
hereunder.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President as of the date written above.
THE FBR FAMILY OF FUNDS
on behalf of FBR Realty Growth Fund
By:
------------------------------------------
C. Eric Brugel
President
GRANDVIEW INVESTMENT TRUST
on behalf of GrandView Realty Growth Fund and
GrandView S&P REIT Index Fund
By:
------------------------------------------
Winsor H. Aylesworth
President
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<PAGE>
THE GRANDVIEW INVESTMENT TRUST
GRANDVIEW REALTY GROWTH FUND
This Proxy is Solicited on Behalf of the Board of Trustees. The undersigned
revoke(s) all previous proxies and appoint(s) Winsor H. Aylesworth and Lucille
C. Carlson, or either one of them, attorneys, with full power of substitution to
vote all shares of the GrandView Realty Growth Fund (the "Fund") of the
GrandView Investment Trust (the "Trust") which the undersigned is entitled to
vote at the Special Meeting of Shareholders of the Fund to be held at the
offices of the FBR Family of Funds, 1001 Nineteenth Street North, Arlington,
Virginia 22209 on September 11, 1998 at 10:00 a.m. Eastern Time, and at any
adjournments thereof.
Please refer to the Proxy Statement for a discussion of this matter. Complete,
sign, and date this proxy card and return it promptly in the postage-paid
envelope.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOX BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL. As to
any other matter, said attorneys will vote in accordance with their best
judgment. THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE PROPOSAL.
1. To approve an Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization providing for the acquisition
of all or substantially all of the assets of
the Fund by the FBR Realty Growth Fund ("FBR / / / / / /
Realty Fund"), a series of the FBR Family of
Funds, in exchange for shares of FBR Realty
Fund and assumption of certain identified
liabilities of the Fund by FBR Realty Fund,
and for the distribution of such shares to
shareholders of the Fund in liquidation of
the Fund.
____________ I plan to attend the Meeting.
Receipt of the Notice of the Meeting and the accompanying Proxy Statement is
hereby acknowledged.
Please sign your name exactly as it appears in the registration. If shares are
held in the name of two or more persons, in whatever capacity, only ONE need
sign. When signing in a fiduciary capacity, such as executor or attorney,
please so indicate. When signing on behalf of a partnership or corporation,
please indicate title.
Dated: , 1998
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Signatures
<PAGE>
THE GRANDVIEW INVESTMENT TRUST
GRANDVIEW S&P-Registered Trademark- REIT INDEX FUND
This Proxy is Solicited on Behalf of the Board of Trustees. The undersigned
revoke(s) all previous proxies and appoint(s) Winsor H. Aylesworth and Lucille
C. Carlson, or either one of them, attorneys, with full power of substitution to
vote all shares of the GrandView S&P-Registered Trademark- REIT Index Fund (the
"Fund") of the GrandView Investment Trust (the "Trust") which the undersigned is
entitled to vote at the Special Meeting of Shareholders of the Fund to be held
at the offices of the FBR Family of Funds, 1001 Nineteenth Street North,
Arlington, Virginia 22209 on September 11, 1998 at 10:00 a.m. Eastern Time, and
at any adjournments thereof.
Please refer to the Proxy Statement for a discussion of this matter. Complete,
sign, and date this proxy card and return it promptly in the postage-paid
envelope.
PLEASE INDICATE YOUR VOTES BY AN "X" IN THE APPROPRIATE BOX BELOW.
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL. As to
any other matter, said attorneys will vote in accordance with their best
judgment. THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE PROPOSAL.
1. To approve an Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization providing for the acquisition
of all or substantially all of the assets of
the Fund by the FBR Realty Growth Fund ("FBR / / / / / /
Realty Fund"), a series of the FBR Family of
Funds, in exchange for shares of FBR Realty
Fund and assumption of certain identified
liabilities of the Fund by FBR Realty Fund,
and for the distribution of such shares to
shareholders of the Fund in liquidation of
the Fund.
____________ I plan to attend the Meeting.
Receipt of the Notice of the Meeting and the accompanying Proxy Statement is
hereby acknowledged.
Please sign your name exactly as it appears in the registration. If shares are
held in the name of two or more persons, in whatever capacity, only ONE need
sign. When signing in a fiduciary capacity, such as executor or attorney,
please so indicate. When signing on behalf of a partnership or corporation,
please indicate title.
Dated: , 1998
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Signatures
