Registration Nos. 33-36811
811-8391
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 1997.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. 1 /x/
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 1 /x/
(Check appropriate box or boxes)
BLUE RIDGE FUNDS TRUST
(Exact name of registrant as specified in charter)
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
(Address of principal executive offices)
Registrant's Telephone Number, including area code: 1-800-525-3863
Jeffrey M. Doyon, President
Blue Ridge Advisors, Inc.
84 Villa Road, B37
Greenville, S.C. 29615
(Name and address of agent for service)
Please send copies of all communications to:
Jane A. Kanter, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Suite 500
Washington, D.C. 20005
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of shares of beneficial interest is being registered
by this Registration Statement.
<PAGE>
BLUE RIDGE FUNDS TRUST
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectuses
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
BLUE RIDGE FUNDS TRUST
CROSS REFERENCE SHEET
REGISTRATION STATEMENT
PART A. ITEM NO. AND CAPTIONS CAPTION IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant The Trust and the Fund; Investment Objectives
and Policies; Investment Limitations; General
Information - - The Trust
5. Management of the Fund General Information - - Trustees of the Trust;
General Information - - The Manager; General
Information - - The Administrator; General
Information - - The Transfer Agent. General
Information - - The Distributor
6. Capital Stock and Other Securities General Information - - Voting Rights; General
Information - - Dividends and Distributions;
Taxes
7. Purchase of Securities Being Offered How to Purchase Fund Shares; How to Redeem
Fund Shares; Share Price
8. Redemption or Repurchase How to Purchase Fund Shares; How to Redeem
Fund Shares; Determination of Net Asset Value
9. Pending Legal Proceedings Not Applicable
PART B. ITEM NO. AND CAPTIONS CAPTION IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust
13. Investment Objectives and Policies Description of Permitted Investments;
Investment Limitations; Description of Shares
14. Management of the Fund Trustees and Officers of the Trust; The
Administrator
16. Investment Advisory and Other Services The Manager; The Administrator and Transfer
Agent; The Distributor
17. Brokerage Allocation and Other Practices Portfolio Transactions
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption, and Pricing of Securities Purchase and Redemption of Shares;
Being Offered Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Calculation of Total Return
23. Financial Statements Financial Statements
</TABLE>
PARTC Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration
Statement.
<PAGE>
BLUE RIDGE FUNDS TRUST
PROSPECTUS DATED DECEMBER __, 1997
The Blue Ridge Funds Trust (the "Trust") is an open-end management investment
company currently consisting of one series, the Blue Ridge Total Return Fund (
"Total Return Fund" or "Fund"). The Total Return Fund offers a convenient and
economical means of investing in a professionally managed portfolio of
securities. The investment objective of the Total Return Fund is to seek total
return from a combination of capital appreciation and current income.
The Trust currently offers one class of shares on behalf of the Fund, the Class
NL shares.
This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated December __, 1997 has been filed with the
Securities and Exchange Commission and is available upon request and without
charge by calling 1-800-525-3863. The Statement of Additional Information is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, The Federal Reserve
Board, or any other agency, and are subject to investment risk, including the
possible loss of principal.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary................................. How to Redeem Fund Shares ............
Expense Summary ...................... Other Information About Your
The Trust and the Fund..................
Investment Objectives and Policies...... Account................................
Investment Limitations.................. Determination of Net Asset Value......
How to Purchase Fund Shares............. Performance Advertising...............
Shareholder Services....................
Taxes..................................
General
Information..........................
Glossary of Permitted Investments....
- ------------------------------------------------------------------------------------------
</TABLE>
SUMMARY
The Trust is an open-end management investment company which provides a
convenient way to invest in a professionally managed diversified portfolio of
securities. This summary provides basic information about the Total Return Fund.
This summary is qualified in its entirety by reference to the more detailed
information provided elsewhere in this Prospectus and in the Statement of
Additional Information.
What is the Investment Objective of the Fund? The Total Return Fund seeks total
return from a combination of capital appreciation and current income.
What Are The Principal Risks Involved With An Investment In The Fund? The Fund
invests in securities that fluctuate in value, and investors should expect the
Fund's net asset value per share to fluctuate. The Fund may write covered call
and put options and may purchase put options on securities and stock indices.
The Fund also may enter into futures contracts for hedging purposes only. The
primary risks associated with the use of futures contracts and options are (i)
imperfect correlation between the change in market value of the stocks held by
the Fund and the prices of the futures contracts and options, and (ii) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures position prior to its maturity date. See
"Investment Objectives and Policies" and "Glossary of Permitted Investments."
Who Is The Manager? Blue Ridge Advisors, Inc. ("Manager") serves as the
investment manager to the Fund. The Manager and the principals of the Manager
have experience in providing advisory services to private clients but have no
prior experience in managing investment companies. See "Expense Summary" and
"The Manager."
Who Is The Administrator? The Nottingham Company provides administrative and
fund accounting services to the Fund. See "The Administrator."
Who Is the Transfer Agent? NC Shareholder Services, LLC provides the Fund with
transfer agency, dividend disbursing, and shareholder servicing agent services.
See "The Transfer Agent."
Who Is the Distributor? Capital Investment Group, Inc. provides the Fund with
distribution services. See "The Distributor."
Is There A Sales Load? No, Class NL shares of the Fund are offered on a no-load
basis.
Is There A Minimum Initial Investment? The Fund has a minimum initial investment
of $5,000 for regular accounts and $2,000 for Individual Retirement Accounts
("IRAs") and other tax-deferred retirement plans.
How Do I Purchase And Redeem Shares? Purchases and redemptions may be made on
any day on which the New York Stock Exchange is open for business ("Business
Day"). A purchase order will be effective as of the Business Day the purchase
order is received by the Trust if the Trust receives sufficient information to
execute the purchase order and, except for use of the Telephone Purchase
Authorization, such purchase order is accompanied by a check or readily
available funds. Purchase and redemption orders placed with the Trust prior to
4:00 p.m., Eastern time on any Business Day will be effective that day. The
purchase and redemption price for shares is the net asset value per share of the
Fund determined as of the end of the day (i.e., when the New York Stock Exchange
has closed for trading or trading has been stopped for the day due to
extraordinary circumstances) the order is effective. Purchases and redemptions
also may be made through certain broker-dealers and other financial
institutions. The Trust also offers a Systematic Investment Plan and a
Systematic Withdrawal Plan. See "Shareholder Services."
EXPENSE SUMMARY
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the Fund.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.65%
12b-1 Fees None
Other Expenses* 0.00%
-----
Total Operating Expenses 1.65%
* The Fund's custodian currently charges $8.00 per transaction for wiring
redemption proceeds which the Manager, pursuant to its Investment Management
Agreement with the Trust, will pay on the Fund's behalf. For a more detailed
discussion of the Fund's fees and expenses, see "The Manager." The Manager, not
the Fund, pays for the ordinary expenses of the Fund, including administrative,
fund accounting, transfer agency, dividend disbursing, custodial, distribution,
auditing, and ordinary legal expenses.
Example: An investor in the Fund would pay the following expenses on a $1,000
investment assuming (i) 5% annual return, and (2) redemption at the end of each
period.
--------------------------------------------------
1 year $17
3 years $52
-------------------------------------------------
This example is designed for information purposes only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown. The purposes of this table is to assist an
investor in understanding the various costs and expenses that may be directly or
indirectly borne by investors in the Fund. See "The Manager."
THE TRUST AND THE FUND
The Trust is an open-end management investment company that currently offers
shares in one separate series, the Total Return Fund. Each share of the Total
Return Fund represents an undivided interest in the Total Return Fund.
Additional information pertaining to the Trust or the Total Return Fund may be
obtained by writing the Trust, 105 North Washington Street, Post Office Drawer
69 , Rocky Mount, North Carolina 27802-0069, or by calling 1-800-525-3863.
The Trust currently offers one class of shares on behalf of the Fund: Class
NL shares.
INVESTMENT OBJECTIVES AND POLICIES
Total Return Fund
The Total Return Fund seeks total return from a combination of capital
appreciation and current income. In seeking to achieve its objective, the Fund
may at times emphasize investments that produce capital appreciation and at
other times may emphasize investments that produce income, or it may do both.
The Fund's Manager does not allocate the Fund's assets according to any formula
or fixed ratio. Under normal circumstances, however, the Fund will invest in
securities to seek both capital appreciation and current income.
The Fund's investments are not limited to any specific type of securities. In
general, when seeking capital appreciation, the Fund emphasizes common stocks of
medium to large capitalization companies (i.e., companies having a minimum
market capitalization of at least $1 billion at the time of purchase). When
seeking income, the Fund may purchase a variety of investment grade debt
securities, convertible securities, preferred stocks, and dividend paying common
stocks.
In selecting securities for the Fund, the Manager may employ a variety of
investment techniques and styles. However, under normal circumstances, the
Manager uses a value-oriented investment approach (searching for companies whose
stocks are undervalued or out-of-favor) in selecting common stocks for capital
appreciation purposes.
The Fund may try to hedge against losses in the value of its portfolio
securities by using various derivative securities, including, writing covered
call options on securities and stock indices, purchasing put options on
securities and stock indices, and purchasing or selling stock index future
contracts and options on such contracts. The Fund may also write covered call
options on up to 50% of the Fund's total assets in order to enhance income and
purchase call options to close open positions. In addition, the Fund may write
covered puts to enhanced income (anticipating that during the option period the
price of the underlying security will remain stable or rise) or to acquire the
underlying security at net cost below the current value.
The Fund may also invest up to 5% of its total assets in securities of foreign
issuers. The Fund may also hold high quality commercial paper, short-term
corporate bonds, short-term securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and other cash equivalents for a
variety of purposes, including to provide liquidity, as a temporary investment
pending the purchase of other securities, or when the Manger believes that the
market is unfavorable for other types of investments.
The Fund is designed for investors seeking total return over the long term.
There can be no assurance that the Fund will be successful in meeting its
objective.
For additional information regarding permitted investments for the Fund, and
their risks see "Glossary of Permitted Investments" and the Statement of
Additional Information.
Temporary Defensive Positions
Under normal market conditions, the Fund expects to be fully invested in the
securities described directly above. However, for temporary defensive purposes,
when the Manager determines that market conditions warrant, the Fund may invest
up to 100% of its assets in cash and money market instruments consisting of
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; certificates of deposit, time deposits and bankers'
acceptances issued by banks or savings and loan associations having net assets
of at least $500 million as stated on their most recently published financial
statements; commercial paper rated in one of the two highest rating categories
by at least one nationally recognized statistical rating organization;
repurchase agreements involving such securities; and, to the extent permitted by
applicable law and the Fund's investment restrictions, shares of other
investment companies investing solely in money market securities. Since
investment companies investing in other investment companies pay management fees
and other expenses relating to those investment companies, shareholders of the
Fund would indirectly pay both the Fund's expenses and the expenses relating to
those other investment companies with respect to the Fund's assets invested in
such investment companies. To the extent the Fund is invested in temporary
defensive instruments, it will not be pursuing its investment objective. See
"Glossary of Permitted Investments" and the Statement of Additional Information
for further information about such investments.
Portfolio Turnover
The Fund may sell portfolio securities without regard to the length of time they
have been held in order to take advantage of new investment opportunities.
Portfolio turnover will tend to rise during periods of economic turbulence and
decline during periods of stable growth. It is expected that under normal market
conditions, the annual portfolio turnover rate for the Fund will not exceed
200%. High rates of portfolio turnover necessarily result in correspondingly
greater brokerage and fund trading costs, which are paid by the Fund. In
addition to greater portfolio trading costs, high rates of portfolio turnover
may result in the realization of short-term capital gains. To the extent
short-term capital gains are realized, any distributions resulting from such
gains will be considered ordinary income for federal income tax purposes.
INVESTMENT LIMITATIONS
The investment objective of the Fund, the investment limitations set forth below
and certain investment limitations contained in the Statement of Additional
Information are fundamental policies of the Fund. The Fund's fundamental
policies cannot be changed without the consent of the holders of a majority of
the Fund's outstanding shares.
The Fund, as a fundamental policy, may not:
1. With respect to 75% of the Fund's total assets, purchase securities of any
issuer (except securities issued or guaranteed by the United States, its
agencies or instrumentalities and repurchase agreements involving such
securities) if, as a result, more than 5% of the total assets of the Fund would
be invested in the securities of such issuer.
2. Purchase any securities which would cause 25% or more of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase agreements
involving such securities. For purposes of this limitation, (i) utility
companies will be divided according to their services, for example, gas
distribution, gas transmission, electric and telephone will each be considered a
separate industry, and (ii) financial service companies will be classified
according to the end users of their services, for example, automobile finance,
bank finance and diversified finance will each be considered a separate
industry. For purposes of this limitation, supranational organizations are
deemed to be issuers conducting their principal business activities in the same
industry.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 331/3% of the value of the Fund's total assets. This
borrowing provision is included solely to facilitate the orderly sale of
portfolio securities to accommodate substantial redemption requests if they
should occur and is not for investment purposes. All borrowings in excess of 5%
of the Fund's total assets will be repaid before making investments.
The foregoing percentages will apply at the time of the purchase of a security.
HOW TO PURCHASE FUND SHARES
An investor may purchase shares of the Fund at the public offering price
directly through the Distributor or from a securities firm or broker-dealer
having a sales agreement with the Distributor or a bank having an agency
agreement with the Distributor. Such financial institutions may charge you a fee
for this service in addition to the Fund's public offering price. Except as
provided below, the minimum initial investment for a regular account is $5,000.
The minimum initial investment for a tax-deferred retirement plan (such as IRAs,
SEP-IRAs, Keoghs, 401(k) plans, 403(b) plans and other corporate pension and
profit-sharing plans is $2,000. The minimum initial purchase under the Trust's
Systematic Investment Plan is $1,000. The minimum additional investment for any
account is $100. The Fund, in the Manager's sole discretion, may accept accounts
or investments with less than the stated minimum investment.
You may place orders by mail, wire or telephone. If market conditions are
extraordinarily active, or if severe weather or other emergencies exist, and you
experience difficulties placing orders by telephone, you may wish to consider
placing your order by other means, such as mail or overnight delivery.
Neither the Trust, the Transfer Agent, nor the Distributor will be responsible
for any loss, liability, cost or expenses for acting upon wire instructions or
upon telephone instructions that such entity reasonably believes to be genuine.
The Trust, the Transfer Agent, and the Distributor will each employ reasonable
procedures to confirm that instructions communicated by telephone are genuine
including requiring a form of personal identification prior to acting upon
instructions received by telephone.
Purchases By Mail
Investors may purchase shares of the Fund by completing and signing the Account
Application accompanying this Prospectus and mailing it, along with a check (or
other negotiable bank instrument or money order) payable to the Fund to:
Blue Ridge Funds Trust
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
The Fund will not accept third party checks, i.e., a check not payable to the
Trust or the Fund for initial or subsequent investments.
Purchases By Wire
Investors may also purchase shares of the Fund by bank wire. Investments by wire
will not be accepted until an Account Application, indicating such election has
been made, has been received by the Fund's Transfer Agent by mail or facsimile.
Prior to making an initial or additional investment by wire an investor should
telephone the Fund at 1-800-525-3863. Federal funds and registration
instructions should be wired through the Federal Reserve System to:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA No. 05300219
FBO: Blue Ridge Funds Trust
Account No. [please provide the Trust's account number]
For further credit to: [your name and social security or tax
identification number]
Your bank may impose a fee for investments by wire.
Additional Purchases By Phone (Telephone Purchase Authorization)
If you have made this election on your Account Application, you may purchase
additional shares by telephoning the Fund at 1-800-525-3863. The minimum
telephone purchase is $100 and the maximum is one (1) times the net asset value
of shares held by the shareholder on the day preceding such telephone purchase
for which payment has been received. The telephone purchase will be made at the
public offering price next computed after the receipt of the telephone call by
the Fund. Payment for the telephone purchase must be received by the Fund within
five (5) days. If payment is not received within five (5) days, you will be
liable for all losses incurred as a result of the cancellation of such purchase.
Purchases by ACH
If you have made this election on your Account Application, shares of the Fund
may be purchased via Automated Clearing House ("ACH"). Investors purchasing via
ACH should complete the bank information section on the Account Application and
attach a voided check or deposit slip to the Account Application. This option
must be established on your account at least fifteen (15) days prior to you
initiating an ACH transaction.
General Information Regarding Purchases
A purchase order will be effective as of the day received by the Trust if the
purchase order is received by the Trust prior to 4:00 p.m. Eastern time and is
accompanied by a purchase payment. The purchase order need not be accompanied by
a purchase payment in those instances in which the Telephone Purchase
Authorization has been elected by a shareholder on the Account Application and
is being used for additional purchases. The Purchase payment may be made by
check or readily available funds. The public offering price of shares of the
Fund is the net asset value per share next determined after a purchase order is
effective. Purchases will be made in full and fractional shares of the Fund
calculated to three decimal places. The Trust will not issue certificates
representing shares of the Fund.
In order for your purchase order to be effective on the day you place your order
with your broker-dealer or other financial institution, such broker-dealer or
financial institution must (i) receive your order before 4:00 p.m. Eastern time
and (ii) promptly transmit the order to the Distributor. See "Determination of
Net Asset Value" below. The broker-dealer or financial institution is
responsible for promptly transmitting purchase orders to the Distributor so that
you may receive the same day's net asset value.
If a check received for the purchase of shares does not clear, the purchase will
be canceled, and you could be liable for any losses or fees incurred. The Trust
reserves the right to reject a purchase order when the Trust determines that it
is not in the best interests of the Fund or its shareholders to accept such
order.
SHAREHOLDER SERVICES
Shareholder Inquiries And Services Offered
If you have any questions about the Fund or the shareholder services described
below, please call the Trust at 1-800-525-3863. Written inquiries should be sent
to the Trust at 105 North Washington Street, Post Office Drawer 69 , Rocky
Mount, North Carolina 27802-0069. The Trust reserves the right to amend the
shareholder services described below or to change the terms or conditions
relating to such services upon sixty (60) days' notice to shareholders. You may,
however, discontinue any service you select, provided that the Trust receives
your notification to discontinue such service(s) at least ten (10) days before
the next scheduled investment or withdrawal date.
Systematic Investment and Systematic Withdrawal Plans
For your convenience, the Trust provides plans that enable you to add to your
investment or withdraw from your account(s) with a minimum of paperwork. You can
utilize these plans by simply completing the appropriate sections of the Account
Application.
(1) Systematic Investment Plan. The Systematic Investment Plan is a convenient
way for you to purchase shares in the Fund at regular monthly or quarterly
intervals selected by you. The Systematic Investment Plan enables you to achieve
dollar-cost averaging with respect to investments in the Fund despite its
fluctuating net asset value through regular purchases of a fixed dollar amount
of shares in the Fund. Dollar-cost averaging brings discipline to your
investing. Dollar-cost averaging results in more shares being purchased when the
Fund's net asset value is relatively low and fewer shares being purchased when
the Fund's net asset value is relatively high, thereby helping to decrease the
average price of your shares. Investors who establish a Systematic Investment
Plan may open an account with a minimum balance of $1,000.
Through the Systematic Investment Plan, shares are purchased by transferring
monies (minimum of $100 per transaction) from your designated checking or
savings account. Your systematic investment in the Fund will be processed on a
regular basis at your option beginning on or about either the first or
twenty-first (21) day of the month or quarter you select. This Systematic
Investment Plan must be established on your account at least fifteen (15) days
prior to the intended date of your first systematic investment.
(2) Systematic Withdrawal Plan. The Systematic Withdrawal Plan provides a
convenient way for you to receive current income while maintaining your
investments in the Fund. The Systematic Withdrawal Plan permits you to have
payments of $100 or more automatically transferred from your account(s) in the
Fund to your designated checking or savings account on a monthly, quarterly, or
semi-annual basis. The Systematic Withdrawal Plan also provides the option of
having a check mailed to the address of record for your account. In order to
start this Plan, you must have a minimum balance of $10,000 in any account using
this feature. Your systematic withdrawals will be processed on a regular basis
beginning on or about either the first or fifteenth day of the month, quarter or
semi-annual period you select.
Tax-Sheltered Retirement Plans
Shares of the Fund may be purchased by all types of tax-deferred retirement
plans, including IRAs, SEP-IRA plans, Keoghs, 401(k) plans, 403(b) plans and
other corporate pension and profit-sharing plans. Documentation for these types
of plans is available from the Fund's custodian. Investors should consult with
their tax advisors before establishing any of the tax-deferred retirement plans
described above.
Certain Special Accounts
The Trust offers the following special accounts to meet your needs:
(1) Uniform Gift to Minors/Uniform Transfers to Minors. By establishing a
Uniform Gift to Minors Account/Uniform Transfers to Minors Account with the
Trust you can build a fund for your children's education or a nest egg for their
future and, at the same time, potentially reduce your own income taxes.
(2) Custodial and Fiduciary Accounts. The Trust provides a convenient means of
establishing custodial and fiduciary accounts for investors with fiduciary
responsibilities.
For further information regarding any of the above accounts, please call toll
free at 1-800-525-3863.
HOW TO REDEEM FUND SHARES
Shares of the Fund may be redeemed at their net asset value next determined
after a redemption request in proper form is received by the Trust. Payment of
redemption proceeds will be made as promptly as possible and, in any event,
within seven (7) days after the redemption order is received, provided that
redemption proceeds for shares purchased by check or by ACH will be forwarded
only upon collection of payment for such shares; collection of payment may take
up to ten (10) days. Shares may also be redeemed through certain broker-dealers
and other financial institutions at which you maintain an account. Such
financial institutions may charge you fee for this service. Any redemption
proceeds may be more or less than the public offering price for the shares,
depending on the market value of the Fund's portfolio securities.
In order for your redemption order to be effective on the day you place your
redemption order with your broker-dealer or other financial institution, such
broker-dealer or financial institution must (i) receive your order before 4:00
p.m. Eastern time and (ii) promptly transmit the order to the Distributor. See
"Determination of Net Asset Value" below. The broker-dealer or other financial
institution is responsible for promptly transmitting redemption orders to the
Distributor so that your shares are redeemed at the same day's net asset value
per share.
You may receive redemption payments in the form of a check or by Federal Reserve
or ACH wire transfer.
Redemption By Mail
There is no charge for having a check for redemption proceeds mailed to you.
Your written redemption request should be addressed to the Blue Ridge Funds
Trust, 105 North Washington Street, Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069. Your request for redemption must include:
Your letter of instruction specifying the account number and the number of
shares or dollar amount to be redeemed. This request must be signed by all
registered shareholders in the exact names in which they are registered; Any
required signature guarantees (see "Signature Guarantees" below); and Other
supporting legal documents, if required in the case of estates, trusts,
guardianships, custodianships, corporations, partnerships, pension or profit
sharing plans, and other organizations.
Redemption By Telephone
Shares may be redeemed by telephone if you elect that option on the Account
Application and if you confirm all telephonic redemption requests in writing.
Written confirmation of telephone redemption requests may be made by sending a
facsimile to 1-919-972-1908. Shares held in tax-sheltered or retirement accounts
are not eligible for this option and must be redeemed by written request.
Telephone redemption requests may be made by calling the Trust at
1-800-525-3863. The written confirmation must include:
Shareholder name and account number;
Number of shares or dollar amount to be redeemed;
Instructions for transmittal of redemption funds to the shareholder;
and Shareholder signature as it appears on the Account Application
then on file with the Trust.
The net asset value used in processing the redemption request will be the net
asset value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($1,000 minimum). Redemption proceeds will only be sent to the person
or bank account designated in your Account Application.
You can change your redemption instructions anytime by sending the Trust a
letter including your new redemption instructions. (See "Signature Guarantees"
below). The Trust reserves the right to restrict or cancel telephone and bank
wire redemption privileges for shareholders, without notice, if the Trust
believes it to be in the best interest of the Fund's shareholders to do so.
You may not close your account by telephone; however, you may close your account
by written request. During periods of drastic economic or market changes or
severe weather or other emergencies, you may find it difficult to implement a
telephone redemption request. If such a case should occur, another method of
redemption, such as written requests sent via an overnight delivery service,
should be considered.
Telephone redemption privileges authorize the Trust to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Trust to be genuine. The Trust and the Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures may include recording of
the telephone instructions and verification of a caller's identity by asking his
or her name, address, telephone number, Social Security number, and account
number. If reasonable procedures are not followed, the Trust and the Transfer
Agent may be liable for any losses to a shareholder due to unauthorized or
fraudulent instructions. Otherwise, the shareholder will bear all risk of loss
relating to redemptions by telephone reasonably believed to be genuine.
Redemption By Wire
Proceeds of redemption can also be wired to a shareholder's bank ($1,000
minimum). Shares may not be redeemed by wire on days on which your bank is not
open for business. The Trust in its discretion may choose to pass through to
redeeming shareholders any charges imposed by the Trust's custodian for wire
redemptions. The custodian currently charges $8 per transaction for wiring
redemption proceeds. If this cost is passed through to redeeming shareholders by
the Trust, the charge will be deducted automatically from a shareholder's
account by redemption of shares in the shareholder's account. A shareholder's
bank or brokerage firm may also impose a charge for processing the wire. If wire
transfer of funds is impossible or impractical, the redemption proceeds will be
sent by mail to the designated account.
Redemptions by ACH
The Trust does not charge for ACH transactions; however, such transactions will
not be posted to your bank account until the second Business Day following the
transaction. In order to process a redemption by ACH, banking information must
be established for your account at least fifteen (15) days prior to initiating
an ACH transaction. A voided check or deposit slip must accompany any request to
establish this option.
Signature Guarantees
To protect your account and the Fund from fraud, signature guarantees are
required under certain circumstances. If a shareholder requests a redemption for
an amount in excess of $50,000, a redemption of any amount to be payable to
anyone other than the shareholder of record, or a redemption of any amount to be
sent to any address other than the shareholder's address of record (or in the
case of redemptions by wire, other than as provided in the shareholder's Account
Application), all account holders must sign a written redemption request. In
addition, those signatures must be guaranteed by a member bank of the Federal
Reserve System, a savings and loan association or credit union (if authorized
under state law), or by a member firm of a domestic stock exchange. The Fund
does not accept signature guarantees from notaries public or organizations that
do not provide reimbursement in the case of fraud.
OTHER INFORMATION ABOUT YOUR ACCOUNT
Minimum Account Size
Due to the relatively high costs of handling small investments, the Trust
reserves the right to redeem, at net asset value, the shares of any shareholder
if, because of redemptions of shares by or on behalf of the shareholder (and not
solely because of market declines), the account of the shareholder in the Fund
has a value of less than $5,000 for a period of three consecutive months.
Accordingly, an investor purchasing shares of the Fund in only the minimum
investment amount may be subject to such involuntary redemption if he or she
thereafter redeems any of these shares.
This provision will not apply to shareholders who are participants in the
Trust's Systematic Investment Plan. Before the Trust exercises its right to
redeem such shares and to send the proceeds to the shareholder, the shareholder
will be given notice that the value of the shares in his or her account is less
than the minimum amount and will be allowed sixty (60) days to make an
additional investment in the Fund in an amount that will increase the value of
the account to at least the minimum amount.
Other Information About Redemptions
The right of any shareholder to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed during any
period in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on the New York Stock Exchange is restricted or, to the
extent otherwise permitted by the Investment Company Act of 1940, as amended, if
an emergency exists.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined by dividing the total
market value of the Fund's investments and other assets, less any liabilities,
by the total outstanding shares of the Fund. Net asset value per share is
determined on each Business Day as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time) or when trading has been stopped on
a Business Day due to extraordinary circumstances.
PERFORMANCE ADVERTISING
From time to time, the Fund may advertise its total return. All such total
return figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made regarding actual
future returns.
The total return of the Fund refers to the average compounded rate of return on
a hypothetical investment for designated time periods (including but not limited
to the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each period
and assuming the reinvestment of all dividend and capital gain distributions.
The Fund may periodically compare its performance to that of other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical Services,
Inc.) or by financial and business publications and periodicals, broad groups of
comparable mutual funds, unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs and other investment alternatives. The Fund may quote services
such as Morningstar, Inc., a service that ranks mutual funds on the basis of
risk-adjusted performance, and Ibbotson Associates of Chicago, Illinois, which
provides historical returns of the capital markets in the U.S. The Fund may use
long-term performance of these capital markets to demonstrate general long-term
risk versus reward scenarios and could include the value of a hypothetical
investment in any of the capital markets. The Fund may also quote financial and
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques.
The Fund may quote various measures of volatility and benchmark correlation in
advertisements and may compare these measures to those of other funds. Measures
of volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the Fund or
its shareholders. Accordingly, you are urged to consult your tax advisor
regarding specific questions as to federal, state and local income taxes.
See the Statement of Additional Information for further information.
Tax Status of the Fund
The Fund is treated as a separate entity for federal income tax purposes. The
Fund intends to qualify for the special tax treatment afforded a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code of
1986, as amended. So long as the Fund qualifies for this special tax treatment,
it will be relieved of federal income tax on that part of its net investment
income and net capital gain (the excess of net long-term capital gain over net
short-term capital loss) which it distributes to shareholders.
Tax Status of Distributions
The Fund will distribute all of its net investment income (including, for this
purpose, net short-term capital gain) to shareholders. Dividends from net
investment income will be taxable to shareholders as ordinary income whether
received in cash or in additional shares. Any net capital gains will be
distributed annually and will be taxed to shareholders as long-term capital
gains, regardless of how long the shareholder has held shares and regardless of
whether the distributions are received in cash or in additional shares. The Fund
will make annual reports to shareholders of the federal income tax status of all
distributions.
Certain securities that may be purchased by the Fund (such as U.S Treasury
STRIPS) are sold with original issue discount and thus do not make periodic cash
interest payments. The Fund will be required to include as part of its current
net investment income the accrued discount on such obligations for purposes of
the distribution requirement even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to its shareholders, the Fund may have to sell
portfolio securities to distribute such accrued income, which may occur at a
time when the Manager would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Income received on direct U.S. obligations is exempt from income tax at the
state level when received directly by the Fund and may be exempt, depending on
the state, when received by a shareholder as income dividends from the Fund
provided certain state-specific conditions are satisfied. Not all states permit
such income dividends to be tax exempt and some require that a certain minimum
percentage of an investment company's income be derived from state tax-exempt
interest. The Fund will inform shareholders annually of the percentage of income
and distributions derived from direct U.S. obligations. You should consult your
tax advisor to determine whether any portion of the income dividends received
from the Fund is considered tax exempt in your particular state.
Dividends declared by the Fund in October, November or December of any year and
payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of that year, if paid by the Fund at any time during the following
January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for the federal excise tax applicable to RICs.
Tax Treatment of Transactions
Each sale or redemption of the Fund's shares is a taxable event to the
shareholder. Income derived by the Fund from securities of foreign issuers may
be subject to foreign withholding taxes.
GENERAL INFORMATION
The Trust
The Trust is a registered open-end management investment company that was
organized as a Delaware business trust on September 30, 1997. It currently
consists of one series, the Total Return Fund, which has one class of shares:
Class NL. The Board of Trustees of the Trust has authority to issue an unlimited
number of shares of beneficial interest, without par value. Each share of each
class of the Fund shall be entitled to one vote (or fraction thereof in respect
of a fractional share) on matters that such shares (or class of shares) shall be
entitled to vote. Shareholders of the Fund shall vote together on any matter,
except to the extent otherwise required by the Investment Company Act of 1940,
as amended ("1940 Act"), or when the Board of Trustees of the Trust has
determined that the matter affects only the interest of shareholders of one or
more classes, in which case only the shareholders of such class or classes shall
be entitled to vote thereon. Any matter shall be deemed to have been effectively
acted upon with respect to the Portfolio if acted upon as provided in Rule 18f-2
under the 1940 Act, or any successor rule, and in the Trust's Declaration of
Trust. The Trust is not required to hold annual shareholder meetings, but
special meetings may be called for purposes such as electing or removing
Trustees, changing fundamental policies or approving an investment management or
advisory agreement.
Under the Trust's multi-class system, shares of each class of the Fund represent
an equal pro rata interest in the Fund and, generally, shall have identical
voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except that:
(a) each class shall have a different designation; (b) each class of shares
shall bear its "Class Expenses;" (c) each class shall have exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution arrangements; (d) each class shall have separate voting rights on
any matter submitted to shareholders in which the interests of one class differ
from the interests of any other class; (e) each class may have separate exchange
privileges, although exchange privileges are not currently contemplated; and (f)
each class may have different conversion features, although a conversion feature
is not currently contemplated. Currently the Trust has only one class of
shares.
The Manager
Blue Ridge Advisors, Inc., 84 Villa Road, B37, Greenville, S.C. 29615, serves as
the Manager to the Fund pursuant to an investment management agreement with the
Trust (the "Management Agreement"). The Manager has not previously served as an
investment manager to any other registered investment company. However, the
executives and members of the investment advisory staff of the Manager have
extensive experience in other capacities in managing investments for clients.
Subject to the authority of the Board of Trustees, the Manager supervises and
directs the day-to-day investments and operation of the Fund in accordance with
its investment objective, investment program, polices and restrictions. Pursuant
to the Management Agreement, the Manager is also responsible for providing
administrative and other services necessary for the ordinary operation of the
Fund in addition to investment advisory services. The Manager provides or
procures the overall business management and administrative services and
information necessary for the Fund's operation and the proper conduct of its
business. The Manager is responsible for providing or procuring, at the
Manager's expense, the services reasonably necessary for the ordinary operation
of the Fund, including administrative, fund accounting, transfer agency,
dividend disbursing, custodial, distribution, auditing, and ordinary legal
services. The Manager also acts as liaison among the various services providers
to the Fund. The Manager is also responsible for ensuring that the Fund operates
in compliance with applicable legal requirements. The Manager does not bear the
expense of brokerage fees and other transactional expenses for purchasing or
selling securities or other assets for the Fund, taxes (if any) paid by the
Fund, interest on borrowing, fees and expenses of the independent Trustees, and
extraordinary expenses, such as litigation or indemnification expenses.
For its services, the Manager is entitled to a fee, which is calculated daily
and paid monthly, as an annual rate of : 1.65% of the Fund's average daily net
assets up to and including $20 million and 1.20% of the Fund's average daily net
assets in excess of $20 million.
Jeffrey M. Doyon and Allen R. Gillespie have been primarily responsible for the
day-to-day management of the Total Return Fund's portfolio of securities since
the Fund's inception. Mr. Doyon has served as the President of the Manager since
July, 1997; Chief Financial Officer and General Manager of Janed Enterprises,
Inc., (specialty chemical manufacturing company) since January, 1996; Registered
Representative for Royal Alliance Associates (brokerage firm) from February,
1996 to September, 1997; and a Registered Representative for Smith
Barney/Robinson-Humphrey (brokerage) from 1994 to 1996. Prior to that, Mr. Doyon
served as Project Manager (1990-1992) and General Director (1992-1994) for
Sea-Land CIS Logistics, an international logistics and transport company.
Additionally, Mr. Doyon received his B.A. in Economics from the College of
William and Mary in 1985. Mr. Gillespie, who graduated with a Bachelor of Arts
degree in Economics from Washington & Lee University in 1995, served as a
Registered Representative for Smith Barney/Robinson-Humphrey (brokerage firm)
from July, 1995 to September, 1997. Mr. Gillespie is a Chartered Financial
Analyst Candidate (Level III).
The Trust is distinct in that the expense structure of the Fund is simpler and
more predictable than most mutual funds. Many of the ordinary expenses of the
Fund, including administrative, fund accounting, transfer agency, dividend
disbursing, custodial, distribution, auditing, and ordinary legal expenses are
paid by the Manager; whereas, most mutual funds pay for these expenses directly
from their own assets.
The Administrator
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069 has been retained by
the Manager to serve as the administrator and fund accounting agent for the
Fund. The Administrator was established as a North Carolina corporation in 1988.
Frank P. Meadows, III is the Managing Director and controlling shareholder of
the Administrator. Services provided by the Administrator include: providing
necessary office facilities, equipment, and personnel to perform its
administrative services; supervising the overall administration of the Fund;
making all necessary filings required to be made with federal and state
regulators; maintaining books of account; calculating the daily net asset value
of shares of the Fund; and providing persons satisfactory to the Board of
Trustees to serve as officers of the Trust. Such officers may be directors,
officers or employees of the Administrator.
For these services, the Administrator is compensated by the Manager and not
directly by the Fund.
The Transfer Agent
NC Shareholder Services, LLC (the "Transfer Agent") has been retained by the
Manager to serve as the Fund's transfer, dividend paying, and shareholder
servicing agent. The Transfer Agent, whose address is 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365, was
established as a North Carolina limited liability company in 1997. John D.
Marriott, Jr., is the firm's controlling member. The Transfer Agent maintains
the records of each shareholder's account, answers shareholder inquiries
concerning accounts, processes purchases and redemptions of Fund shares, acts as
dividend and distribution disbursing agent, and performs other shareholder
servicing functions. The Transfer Agent is compensated for its services by the
Manager and not directly by the Fund.
The Distributor
Capital Investment Group, Inc. (the "Distributor"), Post Office Box 32249,
Raleigh, North Carolina, 27622, has been retained by the Manager to serve as the
distributor of the Fund's shares, pursuant to a distribution agreement
("Distribution Agreement") between the Manager and the Distributor. The
Distributor may sell Fund shares to or through qualified securities dealers or
others. With respect to the Class NL shares, the Distributor receives no
compensation from the Fund with respect to the sales of such shares.
Trustees of the Trust
The management and affairs of the Trust are supervised by the Board of Trustees
under the laws of the State of Delaware. The Board of Trustees has approved the
Trust's Management Agreement with the Manager and the Distribution Agreement
between the Manager and the Distributor.
Voting Rights
Each share entitles the shareholder of record to one vote. As a Delaware
business trust, the Trust is not required to hold annual meetings of
shareholders but shareholder approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by shareholders at a special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested, the Trust will provide appropriate
assistance and information to the shareholders requesting the meeting.
Financial Reporting
The Trust issues unaudited financial information semiannually, and audited
financial statements annually for the Fund. The Trust also furnishes periodic
reports and, as necessary, proxy statements to shareholders of record.
Shareholder Inquiries
You may direct inquiries to the Trust by writing to 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069, or by calling
1-800-525-3863.
Dividends and Distributions
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is distributed in the form of quarterly dividends. If any capital gain
is realized, substantially all of it will be distributed by the Fund at least
annually.
Shareholders automatically receive all dividends and capital gain distributions
in additional shares at the net asset value determined on the next Business Day
after the record date, unless the shareholder has elected to take such payment
in cash. Shareholders may change their election by providing written notice to
the Trust at least fifteen (15) days prior to the distribution. Shareholders may
receive payments for cash distributions in the form of a check or by Federal
Reserve wire or ACH transfer.
Dividends and distributions of the Fund are paid on a per share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or distribution of
capital gains, a shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
Counsel and Independent Public Accountants
Dechert Price & Rhoads serves as counsel to the Trust. Deloitte & Touche, LLP
serves as the independent public accountants of the Trust.
Custodian
First Union National Bank of North Carolina, Two First Union Center, Charlotte,
North Carolina 28288-1151, serves as custodian of the Fund's assets. The
custodian acts as the depository for the Fund, safekeeps its portfolio
securities, collects all income and other payments with respect to portfolio
securities, disburses monies at the Trust's request and maintains records in
connection with its duties.
Miscellaneous
As of the date of this Prospectus, Blue Ridge Advisors, Inc., 84 Villa Road,
B37, Greenville, S.C. 29615, as the Fund's initial shareholder, owned of record
or beneficially, all of the outstanding shares of the Fund, and may be deemed to
be a controlling person of the Fund for purposes of the 1940 Act.
GLOSSARY OF PERMITTED INVESTMENTS
The following is a description of certain permitted investments of the Fund:
Bankers' Acceptance A bill of exchange or time draft drawn on and accepted by a
commercial bank. It is used by corporations to finance the shipment and storage
of goods and to furnish dollar exchange. Maturities are generally six months or
less.
Certificate of Deposit A negotiable interest bearing instrument with a specific
maturity. Certificates of deposit are issued by banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. Certificates of deposit generally carry
penalties for early withdrawal.
Commercial Paper The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues
typically vary from a few days to nine months.
Convertible Securities Convertible securities, including both convertible debt
and convertible preferred stock may be converted into shares of the underlying
common stock at either a stated price or stated rate. Because of this feature,
convertible securities enable an investor to benefit from increases in the
market price of the underlying common stock. Convertible securities provide
higher yields than the underlying common stocks, but generally offer lower
yields than nonconvertible securities of similar quality. Like bonds, the value
of convertible securities fluctuates in relation to changes in interest rates
and, in addition, fluctuates in relation to the underlying common stock.
Subsequent to purchase by the Fund, convertible securities may cease to be rated
or a rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require sale of such securities, although the Manager will
consider such event in its determination of whether the Fund should continue to
hold the securities.
Derivatives Derivatives are securities that derive their value from other
securities. The following, among others, may be considered to be derivative
securities: convertible securities, futures contracts, and options. See
"Investment Objectives and Policies" for more information about the investment
policies and limitations applicable to their use.
Forward Commitments, When-Issued and Delayed Delivery Securities Forward
commitments, when-issued and delayed delivery securities are securities subject
to settlement on a future date. For fixed income securities, the interest rate
realized on forward commitments, when-issued or delayed delivery securities is
fixed as of the purchase date and no interest accrues to the Fund before
settlement. These securities are subject to market fluctuation due to changes in
market interest rates and will have the effect of leveraging the Fund's assets.
The Fund is permitted to invest in forward commitments or when-issued or delayed
delivery securities where such purchases are for investment and not for
leveraging purposes. One or more segregated accounts will be established with
the custodian, and the Fund will maintain liquid assets in such accounts in an
amount at least equal in value to the Fund's forward commitments, when-issued or
delayed delivery commitments.
Futures Contracts and Options The Fund may utilize futures contracts, write call
and put options, purchase put options and purchase call options only to close
open positions. Futures contracts (a type of potentially high-risk security)
enable the investor to buy or sell an asset in the future at an agreed upon
price. Options (another type of potentially high-risk security) give the
purchaser of an option the right, but not the obligation, to buy or sell in the
future an asset at a predetermined price during the term of the option. (The
writer of a put or call option would be obligated to buy or sell the underlying
asset at a predetermined price during the term of the option). The Fund will
write put and call options only if such options are considered to be "covered".
A call option on a security is covered, for example, when the writer of the call
option owns throughout the option period the security on which the option is
written (or a security convertible into such a security without the payment of
additional consideration). A put option on a security is covered, for example,
when the writer of the put has deposited and maintained in a segregated account
throughout the option period sufficient cash or other liquid assets in an amount
equal to or greater than the exercise price of the put option. The risk of loss
in trading futures contracts can be substantial because of the low margin
deposits required and the extremely high degree of leveraging involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may cause an immediate and substantial loss or gain. The primary risks
associated with the use of options and futures contracts are: (i) imperfect
correlations between the change in market value of the securities held by the
Fund and the prices of the options or futures contracts purchased or sold by the
Fund; and (ii) possible lack of a liquid secondary market for a futures contract
and the resulting inability to close a futures position prior to its maturity
day, which could have an adverse impact on the Fund's ability to execute futures
strategies.
Illiquid Securities Securities that cannot be disposed of in the ordinary course
of business within seven (7) days at approximately the price at which the Fund
has valued the security.
Investment Grade Debt Securities The Fund may invest in or hold a portion of its
total assets in investment grade debt securities. Investment grade debt
securities are securities rated Baa or higher by Moody's Investors Service, Inc.
or BBB or higher by Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc., and comparable unrated securities. Investment grade debt
securities while normally exhibiting adequate protection parameters, have
speculative characteristics, and, consequently, changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity of such
issuers to make principal and interest payments than is the case for higher
grade debt securities. If any investment grade debt securities purchased by the
Fund are downgraded to below investment grade, the Fund will dispose of such
securities in an orderly manner.
Repurchase Agreements Agreements by which a person obtains a security and
simultaneously commits to return it to the seller at an agreed upon price
(including principal and interest) on an agreed upon date within a number of
days from the date of purchase. The custodian or its agents will hold the
security as collateral for the repurchase agreement. Collateral must be
maintained at a value at least equal to 102% of the purchase price. The Fund
bears a risk of loss in the event the other party defaults on its obligations
and the Fund is delayed or prevented from its right to dispose of the collateral
securities or if the Fund realizes a loss on the sale of the collateral
securities. The Manager will enter into repurchase agreements on behalf of the
Fund only with financial institutions deemed to present minimal risk of
bankruptcy during the term of the agreement based on guidelines established and
periodically reviewed by the Trustees. Repurchase agreements are considered
loans under the 1940 Act, as well as for federal and state income tax purposes.
Restricted Securities Securities that may not be sold freely to the public
absent registration under the Securities Act of 1933, as amended ("1933 Act"),
or an exemption from registration. The Fund may invest in restricted securities
that the Manager determines are not illiquid, based on guidelines and procedures
developed and established by the Board of Trustees of the Trust. The Board of
Trustees will periodically review such procedures and guidelines and will
monitor the Managers' implementation of such procedures and guidelines. Under
these procedures and guidelines, the Manager will consider the frequency of
trades and quotes for the security, the number of dealers in, and potential
purchasers for, the securities, dealer undertakings to make a market in the
security, and the nature of the security and of the marketplace trades.
Restricted securities may be difficult to value because market quotations may
not be readily available. Because of the restrictions on the resale of
restricted securities, they may pose liquidity problems for the Fund.
Time Deposit A nonnegotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market. Time deposits with a withdrawal penalty are considered to be
illiquid securities.
U.S. Government Agency Obligations Certain Federal agencies such as the
Government National Mortgage Association ("GNMA") have been established as
instrumentalities of the United States Government to supervise and finance
certain types of activities. Securities issued by these agencies, while not
direct obligations of the United States Government, are either backed by the
full faith and credit of the United States (e.g., GNMA securities) or supported
by the issuing agencies' right to borrow from the Treasury. The securities
issued by other agencies are supported only by the credit of the instrumentality
(e.g., Tennessee Valley Authority securities).
U.S. Government Securities Bills, notes and bonds issued by the U.S. Government
and backed by the full faith and credit of the United States.
Warrants Warrants are securities that give the holder the right, but not the
obligation to purchase equity issues of the company issuing the warrants, or a
related company, at a fixed price either on a date certain or during a set
period. At the time of issue, the cost of a warrant is substantially less than
the cost of the underlying security itself, and price movements in the
underlying security are generally magnified in the price movements of the
warrant. This effect enables the investor to gain exposure to the underlying
security with a relatively low capital investment but increases an investor's
risk in the event of a decline in the value of the underlying security and can
result in a complete loss of the amount invested in the warrant. In addition,
the price of a warrant tends to be more volatile than, and may not correlate
exactly to, the price of the underlying security. If the market price of the
underlying security is below the exercise price of the warrant on its expiration
date, the warrant will generally expire without value.
<PAGE>
BLUE RIDGE FUNDS TRUST
Blue Ridge Total Return Fund
This Statement of Additional Information is not a prospectus and relates to the
Blue Ridge Total Return Fund ( "Total Return Fund" or "Fund"), a series of the
Blue Ridge Funds Trust ("Trust"). It is intended to provide additional
information regarding the activities and operations of the Trust and the Fund,
and should be read in conjunction with the Fund's Prospectus dated December__,
1997. The Prospectus for the Fund may be obtained without charge by calling
1-800-525-3863.
TABLE OF CONTENTS
THE TRUST.....................................................................1
DESCRIPTION OF PERMITTED INVESTMENTS..........................................1
INVESTMENT LIMITATIONS........................................................1
THE MANAGER..................................................................13
THE ADMINISTRATOR AND TRANSFER AGENT.........................................14
THE DISTRIBUTOR..............................................................14
THE CUSTODIAN................................................................15
INDEPENDENT AUDITORS.........................................................15
TRUSTEES AND OFFICERS OF THE TRUST...........................................15
CALCULATION OF TOTAL RETURN..................................................16
PURCHASE AND REDEMPTION OF SHARES............................................16
DETERMINATION OF NET ASSET VALUE.............................................17
TAXES........................................................................18
PORTFOLIO TRANSACTIONS.......................................................19
DESCRIPTION OF SHARES........................................................21
December __, 1997
<PAGE>
S-3
THE TRUST
The Trust is a Delaware business trust registered with the Securities and
Exchange Commission ("SEC") as a no-load, open-end diversified management
investment company, commonly known as a "mutual fund." It is organized as a
series company and currently consists of one series, the Total Return Fund,
which has one class of shares: Class NL shares. In the future, the Trust may
establish additional series and classes of shares. Blue Ridge Advisors, Inc.
(the "Manager") serves as the investment manager to the Fund and directs the
Fund's day-to-day operations. Capitalized terms not defined herein are defined
in the Fund's Prospectus.
DESCRIPTION OF PERMITTED INVESTMENTS
Foreign Securities
Foreign securities involve currency risks. The value of a foreign security
denominated in foreign currency changes with variations in the exchange rates.
Fluctuations in exchange rates may also affect the earning power and asset value
of the foreign entity issuing a security, even one denominated in U.S. dollars.
Dividend and interest payments will be repatriated based on the exchange rate at
the time of disbursement, and restrictions on capital flows may be imposed.
Losses and other expenses may be incurred in converting between various
currencies in connection with purchases and sales of foreign securities.
Foreign securities may be subject to foreign government taxes which reduce their
attractiveness. Other risks of investing in such securities include political or
economic instability in the country involved, the difficulty of predicting
international trade patterns and the possibility of imposition of exchange
controls. The prices of such securities may be more volatile than those of
domestic securities. In addition, there may be less publicly available
information about a foreign issuer than about a domestic issuer. Foreign issuers
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic issuers. There is
generally less regulation of stock exchanges, brokers, banks and listed
companies abroad than in the United States, and settlements may be slower and
may be subject to failure. With respect to certain foreign countries, there is a
possibility of expropriation of assets or nationalization, imposition of
withholding taxes on dividend or interest payments, difficulty in obtaining and
enforcing judgments against foreign entities or diplomatic developments which
could affect investment in these countries. The Fund may invest up to 5% of its
total assets in the securities of foreign issuers.
Forward Commitments, When-Issued and Delayed Delivery Securities
Forward commitments, when-issued and delayed delivery transactions arise when
securities are purchased by the Fund with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous price or
yield to the Fund at the time of entering into the transaction. However, the
price of or yield on a comparable security available when delivery takes place
may vary from the price of or yield on the security at the time that the forward
commitment or when-issued or delayed delivery transaction was entered into.
Agreements for such purchases might be entered into, for example, when the Fund
anticipates a decline in interest rates and is able to obtain a more
advantageous price or yield by committing currently to purchase securities to be
issued later. When the Fund purchases securities on a forward commitment,
when-issued or delayed delivery basis it does not pay for the securities until
they are received, and the Fund is required to create a segregated account with
the Trust's custodian and to maintain in that account cash or other liquid
securities in an amount equal to or greater than, on a daily basis, the amount
of the Fund's forward commitments, when-issued or delayed delivery commitments.
The Fund will only enter into forward commitments and make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities. However, the Fund may sell these
securities before the settlement date if it is deemed advisable as a matter of
investment strategy. Forward commitments and when-issued and delayed delivery
transactions are generally expected to settle within three months from the date
the transactions are entered into, although the Fund may close out its position
prior to the settlement date by entering into a matching sales transaction.
Although the Fund does not intend to make such purchases for speculative
purposes and the Fund intends to adhere to the policies of the SEC, purchases of
securities on such a basis may involve more risk than other types of purchases.
For example, by committing to purchase securities in the future, the Fund
subjects itself to a risk of loss on such commitments as well as on its
portfolio securities. Also, the Fund may have to sell assets which have been set
aside in order to meet redemptions. In addition, if the Fund determines it is
advisable as a matter of investment strategy to sell the forward commitment or
when-issued or delayed delivery securities before delivery, the Fund may incur a
gain or loss because of market fluctuations since the time the commitment to
purchase such securities was made. Any such gain or loss would be treated as a
capital gain or loss and would be treated for tax purposes as such. When the
time comes to pay for the securities to be purchased under a forward commitment
or on a when-issued or delayed delivery basis, the Fund will meet its
obligations from the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of the forward
commitment or when-issued or delayed delivery securities themselves (which may
have a value greater or less than the Fund's payment obligation).
Futures Contracts
Futures Transactions. A futures contract is a bilateral agreement to buy or sell
a security (or deliver a cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the end
of trading in the contracts) for a set price in the future. Futures contracts
are designated by boards of trade which have been designated "contracts markets"
by the Commodities Futures Trading Commission ("CFTC").
No purchase price is paid or received when the contract is entered into.
Instead, the Fund upon entering into a futures contract (and to maintain the
Fund's open positions in futures contracts) would be required to deposit with
its custodian in a segregated account in the name of the futures broker an
amount of cash, United States Government securities, suitable money market
instruments, or liquid, high-grade debt securities, known as "initial margin."
The margin required for a particular futures contract is set by the exchange on
which the contract is traded, and may be significantly modified from time to
time by the exchange during the term of the contract. Futures contracts are
customarily purchased and sold on margin that may range upward from less than 5%
of the value of the contract being traded. By using futures contracts as a risk
management technique, given the greater liquidity in the futures market than in
the cash market, it may be possible to accomplish certain results more quickly
and with lower transaction costs.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
pay the excess to the Fund. These subsequent payments called "variation margin,"
to and from the futures broker, are made on a daily basis as the price of the
underlying assets fluctuate making the long and short positions in the futures
contract more or less valuable, a process known as "marking to the market." The
Fund expects to earn interest income on their initial and variation margin
deposits.
The Fund will incur brokerage fees when it purchases and sells futures
contracts. Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by the Fund will usually be liquidated in this manner, the Fund
may instead make or take delivery of underlying securities whenever it appears
economically advantageous for the Fund to do so. A clearing organization
associated with the exchange on which futures are traded assumes responsibility
for closing out transactions and guarantees that as between the clearing members
of an exchange, the sale and purchase obligations will be performed with regard
to all positions that remain open at the termination of the contract.
Securities Index Futures Contracts. Purchases or sales of securities index
futures contracts may be used in an attempt to protect the Fund's current or
intended investments from broad fluctuations in securities prices. A securities
index futures contract does not require the physical delivery of securities, but
merely provides for profits and losses resulting from changes in the market
value of the contract to be credited or debited at the close of each trading day
to the respective accounts of the parties to the contract. On the contract's
expiration date a final cash settlement occurs and the futures positions are
simply closed out. Changes in the market value of a particular index futures
contract reflect changes in the specified index of securities on which the
future is based.
By establishing an appropriate "short" position in index futures, the Fund may
also seek to protect the value of its portfolio against an overall decline in
the market for such securities. Alternatively, in anticipation of a generally
rising market, the Fund can seek to avoid losing the benefit of apparently low
current prices by establishing a "long" position in securities index futures and
later liquidating that position as particular securities are in fact acquired.
To the extent that these hedging strategies are successful, the Fund will be
affected to a lesser degree by adverse overall market price movements than would
otherwise be the case.
Options on Futures Contracts. The Fund may purchase exchange-traded call and put
options on futures contracts and write exchange-traded call options on futures
contracts. These options are traded on exchanges that are licensed and regulated
by the CFTC for the purpose of options trading. A call option on a futures
contract gives the purchaser the right, in return for the premium paid, to
purchase a futures contract (assume a "long" position) at a specified exercise
price at any time before the option expires. A put option gives the purchaser
the right, in return for the premium paid, to sell a futures contract (assume a
"short" position), for a specified exercise price, at any time before the option
expires.
The Fund will write only options on futures contracts which are "covered." The
Fund will be considered "covered" with respect to a put option it has written
if, so long as it is obligated as a writer of the put, the Fund segregates with
its custodian cash, United States Government securities or liquid securities at
all times equal to or greater than the aggregate exercise price of the puts it
has written (less any related margin deposited with the futures broker). The
Fund will be considered "covered" with respect to a call option it has written
on a debt security future if, so long as it is obligated as a writer of the
call, the Fund owns a security deliverable under the futures contract. The Fund
will be considered "covered" with respect to a call option it has written on a
securities index future if the Fund owns, so long as the Fund is obligated as
the writer of the call, the Fund of securities the price changes of which are,
in the opinion of the Manager, expected to replicate substantially the movement
of the index upon which the futures contract is based.
Upon the exercise of a call option, the writer of the option is obligated to
sell the futures contract (to deliver a "long" position to the option holder) at
the option exercise price, which will presumably be lower than the current
market price of the contract in the futures market. Upon exercise of a put, the
writer of the option is obligated to purchase the futures contract (deliver a
"short" position to the option holder) at the option exercise price which will
presumably be higher than the current market price of the contract in the
futures market. When the holder of an option exercises it and assumes a long
futures position, in the case of a call, or a short futures position, in the
case of a put, its gain will be credited to its futures margin account, while
the loss suffered by the writer of the option will be debited to its account and
must be immediately paid by the writer. However, as with the trading of futures,
most participants in the options markets do not seek to realize their gains or
losses by exercise of their option rights. Instead, the holder of an option will
usually realize a gain or loss by buying or selling an offsetting option at a
market price that will reflect an increase or a decrease from the premium
originally paid.
If the Fund writes options on futures contracts, the Fund will receive a premium
but will assume a risk of adverse movement in the price of the underlying
futures contract comparable to that involved in holding a futures position. If
the option is not exercised, the Fund will realize a gain in the amount of the
premium, which may partially offset unfavorable changes in the value of
securities held in or to be acquired for the Fund. If the option is exercised,
the Fund will incur a loss in the option transaction, which will be reduced by
the amount of the premium it has received, but which will offset any favorable
changes in the value of its portfolio securities or, in the case of a put, lower
prices of securities it intends to acquire.
Options on futures contracts can be used by the Fund to hedge substantially the
same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If the Fund purchases an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself. Purchases of options on futures contracts may
present less risk in hedging than the purchase and sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs.
The purchase of put options on futures contracts is a means of hedging the Fund
of securities against a general decline in market prices. The purchase of a call
option on a futures contract represents a means of hedging against a market
advance when the Fund is not fully invested.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the underlying securities. If the futures price at
expiration is below the exercise price, the Fund will retain the full amount of
the option premium, which provides a partial hedge against any decline that may
have occurred in the value of the Fund's holdings of securities. The writing of
a put option on a futures contract is analogous to the purchase of a futures
contract in that it hedges against an increase in the price of securities the
Fund intends to acquire. However, the hedge is limited to the amount of premium
received for writing the put.
Limitations on Purchase and Sale of Futures Contracts and Options on Futures
Contracts. The Fund will not engage in transactions in futures contracts and
related options for speculation. In addition, the Fund will not purchase or sell
futures contracts or related options unless either (1) the futures contracts or
options thereon are purchased for "bona fide hedging" purposes (as that term is
defined under the CFTC regulations) or (2) if purchased for other purposes, the
sum of the amounts of initial margin deposits on the Fund's existing futures and
premiums required to establish non-hedging positions, less the amount by which
any such options positions are "in-the-money" (as defined under CFTC
regulations) would not exceed 5% of the liquidation value of the Fund's total
assets. In instances involving the purchase of futures contracts or the writing
of put options thereon by the Fund, an amount of cash and cash equivalents,
equal to the cost of such futures contracts or options written (less any related
margin deposits), will be deposited in a segregated account with its custodian,
thereby insuring that the use of such futures contracts and options is
unleveraged. In instances involving the sale of futures contracts or the writing
of call options thereon by the Fund, the securities underlying such futures
contracts or options will at all times be maintained by the Fund or, in the case
of index futures and related options, the Fund will own securities the price
changes of which are, in the opinion of the Manager, expected to replicate
substantially the movement of the index upon which the futures contract or
option is based. It is the Fund's current intention to limit its use of options
on futures contracts to no more than 5% of its total assets. For information
concerning the risks associated with utilizing options, futures contracts, and
forward foreign currency exchange contracts, please see "Risks of Transactions
in Option and Futures Contracts" on page 8.
Investment Company Shares
The Fund may invest in shares of money market mutual funds, to the extent set
forth under "Investment Limitations" below. Since such funds pay management fees
and other expenses, shareholders of the Fund would indirectly pay both the
Fund's expenses and the expenses of underlying funds with respect to the Fund's
assets invested therein. Applicable regulations prohibit the Fund from acquiring
the securities of other investment companies that are not "part of the same
group of investment companies" if, as a result of such acquisition, the Fund
owns more than 3% of the total voting stock of the company, more than 5% of the
Fund's total assets are invested in securities of any one investment company; or
more than 10% of the total assets of the Fund are invested in securities (other
than treasury stock) issued by all investment companies.
Non-Publicly Traded And Illiquid Securities
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended ("1933 Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the 1933 Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Options
Writing Call Options. A call option is a contract which gives the purchaser of
the option (in return for a premium paid) the right to buy, and the writer of
the option (in return for a premium received) the obligation to sell, the
underlying security at the exercise price at any time prior to the expiration of
the option, regardless of the market price of the security during the option
period. A call option on a security is covered, for example, when the writer of
the call option owns the security on which the option is written (or on a
security convertible into such a security without additional consideration)
throughout the option period.
The Fund will write covered call options both to reduce the risks associated
with certain of its investments and to increase total investment return through
the receipt of premiums. In return for the premium income, the Fund will give up
the opportunity to profit from an increase in the market price of the underlying
security above the exercise price so long as its obligations under the contract
continue, except insofar as the premium represents a profit. Moreover, in
writing the call option, the Fund will retain the risk of loss should the price
of the security decline. The premium is intended to offset that loss in whole or
in part. Unlike the situation in which the Fund owns securities not subject to a
call option, the Fund, in writing call options, must assume that the call may be
exercised at any time prior to the expiration of its obligation as a writer, and
that in such circumstances the net proceeds realized from the sale of the
underlying securities pursuant to the call may be substantially below the
prevailing market price.
The Fund may terminate its obligation under an option it has written by buying
an identical option. Such a transaction is called a "closing purchase
transaction." The Fund will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale of the corresponding call option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the exercise or closing out of a call option is likely to be offset in
whole or part by unrealized appreciation of the underlying security owned by the
Fund. When an underlying security is sold from the Fund's securities portfolio,
the Fund will effect a closing purchase transaction so as to close out any
existing covered call option on that underlying security.
Writing Put Options. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. If the Fund
writes a put option, the Fund will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash, U.S.
Government securities or other liquid securities having a value equal to or
greater than the exercise price of the option.
The Fund may write put options either to earn additional income in the form of
option premiums (anticipating that the price of the underlying security will
remain stable or rise during the option period and the option will therefore not
be exercised) or to acquire the underlying security at a net cost below the
current value (e.g., the option is exercised because of a decline in the price
of the underlying security, but the amount paid by the Fund, offset by the
option premium, is less than the current price). The risk of either strategy is
that the price of the underlying security may decline by an amount greater than
the premium received. The premium which the Fund receives from writing a put
option will reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to that market
price, the historical price volatility of the underlying security, the option
period, supply and demand and interest rates.
The Fund may effect a closing purchase transaction to realize a profit on an
outstanding put option or to prevent an outstanding put option from being
exercised. It is the Fund's current intention to limit its writing of put
options on futures contracts to no more than 5% of its total assets.
Purchasing Put and Call Options. The Fund may purchase put options on securities
to protect their holdings against a substantial decline in market value. The
purchase of put options on securities will enable the Fund to preserve, at least
partially, unrealized gains in an appreciated security in its portfolio without
actually selling the security. In addition, the Fund will continue to receive
interest or dividend income on the security. The Fund may also purchase call
options on securities to close out positions. The Fund may sell put or call
options they have previously purchased, which could result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid on the put or call option which was
bought. The Fund will not commit more than 5% of its total assets to premiums
when purchasing call or put options.
Securities Index Options. The Fund may write covered put and call options and
purchase call and put options on securities indexes for the purpose of hedging
against the risk of unfavorable price movements adversely affecting the value of
the Fund's securities or securities it intends to purchase. The Fund writes only
"covered" options. A call option on a securities index is considered covered,
for example, if, so long as the Fund is obligated as the writer of the call, it
holds securities the price changes of which are, in the opinion of the Manager,
expected to replicate substantially the movement of the index or indexes upon
which the options written by the Fund are based. A put on a securities index
written by the Fund will be considered covered if, so long as it is obligated as
the writer of the put, the Fund segregates with its custodian cash, United
States Government securities or other liquid high-grade debt obligations having
a value equal to or greater than the exercise price of the option. Unlike a
stock option, which gives the holder the right to purchase or sell a specified
stock at a specified price, an option on a securities index gives the holder the
right to receive a cash "exercise settlement amount" equal to (i) the difference
between the exercise price of the option and the value of the underlying stock
index on the exercise date, multiplied by (ii) a fixed "index multiplier."
A securities index fluctuates with changes in the market value of the securities
so included. For example, some securities index options are based on a broad
market index such as the S&P 500 Index or the NYSE Composite Index, or a
narrower market index such as the S&P 100 Index. Indexes may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index.
For information concerning the risks associated with utilizing options and
futures contracts, please see "Risks of Transactions in Options and Futures
Contracts and Forward Currency Contracts" on page 8.
Repurchase Agreements
Under a repurchase agreement, underlying debt instruments are acquired for a
relatively short period (usually not more than one week and never more than a
year) subject to an obligation of the seller to repurchase and the Fund to
resell the instrument at a fixed price and time, thereby determining the yield
during the Fund's holding period. This results in a fixed rate of return
insulated from market fluctuation during that holding period.
Repurchase agreements may have the characteristics of loans by the Fund. During
the term of the repurchase agreement, the Fund retains the security subject to
the repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors on a daily basis the market value of the
security subject to the agreement and requires the seller to deposit with the
Fund collateral equal to any amount by which the market value of the security
subject to the repurchase agreements falls below the resale amount provided
under the repurchase agreement. The Fund will enter into repurchase agreements
(with respect to U.S. Government obligations, certificates of deposit, or
bankers' acceptances) with registered brokers-dealers, U.S. Government
securities dealers or domestic banks whose creditworthiness is determined to be
satisfactory by the Manager, pursuant to guidelines adopted by the Board of
Trustees. Generally, the Fund does not invest in repurchase agreements maturing
in more than seven days. The staff of the SEC currently takes the position that
repurchase agreements maturing in more than seven days are illiquid securities.
If a seller under a repurchase agreement were to default on the agreement and be
unable to repurchase the security subject to the repurchase agreement, the Fund
would look to the collateral underlying the seller's repurchase agreement,
including the security subject to the repurchase agreement, for satisfaction of
the seller's obligation to the Fund. In the event a repurchase agreement is
considered a loan and the seller defaults, the Fund might incur a loss if the
value of the collateral declines and may incur disposition costs in liquidating
the collateral. In addition, if bankruptcy proceedings are commenced with
respect to the seller, realization of the collateral may be delayed or limited
and a loss may be incurred.
Risks Of Transactions In Options and Futures Contracts
Options. A closing purchase transaction for exchange-traded options may be made
only on a national securities exchange ("exchange"). There is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options, such as over-the-counter
options, no secondary market on an exchange may exist. If the Fund is unable to
effect a closing purchase transaction, the Fund will not sell the underlying
security until the option expires or the Fund delivers the underlying security
upon exercise.
The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the selected
securities index. Perfect correlation is not possible because the securities
held or to be acquired by the Fund will not exactly match the composition of the
securities indexes on which options are written. In the purchase of securities
index options the principal risk is that the premium and transaction costs paid
by the Fund in purchasing an option will be lost if the changes (increase in the
case of a call, decrease in the case of a put) in the level of the index do not
exceed the cost of the option.
Futures. The prices of futures contracts are volatile and are influenced, among
other things, by actual and anticipated changes in the market and interest
rates, which in turn are affected by fiscal and monetary policies and national
and international political and economic events.
Most United States futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a subsequent 10%
decrease in the value of the futures contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the futures contract.
A decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior, market trends or interest rate trends. There are
several risks in connection with the use by the Fund of futures contracts as a
hedging device. One risk arises because of the imperfect correlation between
movements in the prices of the futures contracts and movements in the prices of
the underlying instruments which are the subject of the hedge. The Manager will,
however, attempt to reduce this risk by entering into futures contracts whose
movements, in its judgment, will have a significant correlation with movements
in the prices of the Fund's underlying instruments sought to be hedged.
Successful use of futures contracts by the Fund for hedging purposes is also
subject to the Fund's ability to correctly predict movements in the direction of
the market. It is possible that, when the Fund has sold futures to hedge its
portfolio against a decline in the market, the index, indices, or instruments
underlying futures might advance and the value of the underlying instruments
held in the Fund's portfolio might decline. If this were to occur, the Fund
would lose money on the futures and also would experience a decline in value in
its underlying instruments.
Positions in futures contracts may be closed out only on an exchange or a board
of trade which provides the market for such futures. Although the intends to
purchase or sell futures only on exchanges or boards of trade where there
appears to be an active market, there is no guarantee that such will exist for
any particular contract or at any particular time. If there is not a liquid
market at a particular time, it may not be possible to close a futures position
at such time, and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin.
However, in the event futures positions are used to hedge portfolio securities,
the securities will not be sold until the futures positions can be liquidated.
In such circumstances, an increase in the price of securities, if any, may
partially or completely offset losses on the futures contracts.
Warrants
Warrants give the holder, under certain circumstances, the right to purchase
equity securities consisting of common and preferred stock. The equity security
underlying a warrant is authorized at the time the warrant is issued or is
issued together with the warrant. Investing in warrants can provide a greater
potential for profit or loss than an equivalent investment in the underlying
security, and, thus, can be a speculative investment. The value of a warrant may
decline because of a decline in the value of the underlying security, the
passage of time, changes in interest rates or in the dividend or other policies
of the company whose equity underlies the warrant or a change in the perception
as to the future priced of the underlying security, or any combination thereof.
Warrants generally pay no dividends and confer no voting or other rights other
than to purchase the underlying security.
INVESTMENT LIMITATIONS
Fundamental Policies
The Fund has adopted certain investment restrictions which, in addition to those
restrictions in the Prospectus, are fundamental and may not be changed without
approval by a majority vote of the Fund's shareholders. Such majority is defined
in the Investment Company Act of 1940, as amended ("1940 Act") as the lesser of
(i) 67% or more of the voting securities of the Fund present in person or by
proxy at a meeting, if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund.
The Fund:
1. May (i) borrow money from banks and (ii) make other investments or
engage in other transactions permissible under the 1940 Act which may
involve a borrowing, provided that the combination of (i) and (ii)
shall not exceed 33 1/3% of the value of the Fund's total assets
(including the amount borrowed), less the Fund's liabilities (other
than borrowings), except that the Fund may borrow up to an additional
5% of its total assets (not including the amount borrowed) from a bank
for temporary or emergency purposes (but not for leverage or the
purchase of investments).
2. May not issue senior securities, except as permitted under the 1940
Act.
3. May not act as an underwriter of another issuer's securities, except to
the extent that the Fund may be deemed to be an underwriter within the
meaning of the 1933 Act in connection with the purchase and sale of
portfolio securities.
4. May not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall
not prevent the Fund from purchasing or selling options, futures
contracts, or other derivative instruments, or from investing in
securities or other instruments backed by physical commodities).
5. May not make loans if, as a result, more than 33 1/3% of the Fund's
total assets would be lent to other persons, except through (i)
purchases of debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.
6. May not purchase the securities of any issuer if, as a result, more
than 25% of the Fund's total assets would be invested in the securities
of issuers, the principal business activities of which are in the same
industry.
7. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prohibit the Fund from purchasing or selling securities or other
instruments backed by real estate or of issuers engaged in real estate
activities).
8. May, notwithstanding any other fundamental investment policy or
restriction, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and restrictions as the
Fund.
The following are the Fund's non-fundamental operating policies, which may be
changed by the Board of Trustees of the Fund without shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short,
or unless it covers such short sale as required by the current rules
and positions of the SEC or its staff, and provided that transactions
in options, futures contracts, options on futures contracts, or other
derivative instruments are not deemed to constitute selling securities
short.
2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions;
and provided that margin deposits in connection with futures contracts,
options on futures contracts, or other derivative instruments shall not
constitute purchasing securities on margin.
3. Invest in illiquid securities if, as a result of such investment, more
than 15% of its net assets would be invested in illiquid securities, or
such other amounts as may be permitted under the 1940 Act. This
percentage restriction is with respect to the Fund's current holdings
of illiquid securities.
4. Purchase securities of other investment companies except in compliance
with the 1940 Act.
5. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act
and, in accordance with Rule 4.5, will use futures or options on
futures transactions solely for bona fide hedging transactions (within
the meaning of the Commodity Exchange Act); provided, however, that the
Fund may, in addition to bona fide hedging transactions, use futures
and options on futures transactions if the aggregate initial margin and
premiums required to establish non-hedging positions, less the amount
by which any such options positions are in the money (within the
meaning of the Commodity Exchange Act), do not exceed 5% of the
liquidation value of the Fund's total assets.
6. Borrow money except (i) from banks or (ii) through reverse repurchase
agreements or mortgage dollar rolls, and will not purchase securities
when bank borrowing exceed 5% of its total assets.
7. Make any loans other than loans of portfolio securities, except through
(i) purchases of debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.
Except for the fundamental investment limitations listed above and in the
Prospectus and the Fund's investment objective, all other investment policies,
limitations and restrictions described in the Prospectus and this Statement of
Additional Information are not fundamental and may be changed with approval of
the Fund's Board of Trustees. Unless noted otherwise, if a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in percentage resulting from a change in the Fund's assets (i.e., due
to cash inflows or redemptions) or in market value of the investment or the
Fund's assets will not constitute a violation of that restriction.
THE MANAGER
The Trust and Blue Ridge Advisors, Inc. have entered into a management agreement
(the "Management Agreement"). The Management Agreement provides certain
limitations on the Manager's liability, but also provides that the Manager shall
not be protected against any liability to the Trust or its shareholders by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
The Management Agreement obligates the Manager to: (1) provide overall advice
and guidance with respect to the Fund, and provide advice and guidance to the
Trust's Trustees, in accordance with the Fund's investment objective, program,
policies and restrictions; (2) provide investment advice to the Fund, and manage
the investment of the Fund and the composition of the Fund's portfolio
securities and investments; (3) periodically monitor and evaluate the
performance of the Fund with respect to the Fund's investment objective,
program, policies and restrictions; (4) monitor the compliance of the Manager,
and the Manager's employees acting on behalf of the Manager with the investment
objective, program, policies and restrictions of the Fund, the 1940 Act, and
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"); (5)
provide all supervisory and management services reasonably necessary for the
operation of the Fund; (6) provide or procure on behalf of the Trust and the
Fund, and at the expense of the Manager, administrative and fund accounting
services, transfer agency services, dividend disbursing services, custodial
services, distribution services and other services necessary for the ordinary
operation of the Fund; (7) render to the Board of Trustees of the Trust such
periodic and special reports as the Board may reasonably request; and (8) make
available its officers and employees to the Board of Trustees as officers of the
Trust for consultation and discussions regarding the management of the Fund and
services provided to the Trust under the Management Agreement.
The Manager is entitled to a fee which is calculated daily and paid monthly. The
fees to be paid under the Management Agreement are set forth in the Prospectus.
The continuance of the Management Agreement with respect to the Fund after the
first two years must be specifically approved at least annually (i) by the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund and (ii) by the affirmative vote of a majority of the
Trustees who are not parties to the agreement or interested persons of any such
party by votes cast in person at a meeting called for such purpose. The
Management Agreement with respect to the Fund may be terminated (i) at any time
without penalty by the Trust upon the vote of a majority of the Trustees or by
vote of the majority of the outstanding voting securities of the Fund upon sixty
(60) days' written notice to the Manager or (ii) by the Manager at any time
without penalty upon sixty (60) days' written notice to the Trust. The
Management Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act).
THE ADMINISTRATOR AND TRANSFER AGENT
The Manager has entered into an administration agreement with The Nottingham
Company (the "Administrator"), 105 North Washington Street, Post Office Drawer
69, Rocky Mount, North Carolina 27802-0069, pursuant to which the Administrator
is compensated by the Manager and not directly by the Fund.
Under that agreement, the Administrator will perform the following services for
the Fund: (1) coordinate with and monitor the services of all third parties
furnishing services to the Fund; (2) provide the Fund with necessary office
space, telephones and other communications facilities and personnel competent to
perform administrative and clerical functions for the Fund; (3) supervise the
maintenance by third parties of such books and records of the Fund as may be
required by applicable federal or state law; (4) prepare or supervise the
preparation by third parties of all federal, state and local tax returns and
reports of the Fund required by applicable law; (5) prepare and, after approval
by the Trust, file and arrange for the distribution of proxy materials and
periodic reports to shareholders of the Fund as required by applicable law; (6)
prepare and, after approval by the Trust, arrange for the filing of such
registration statements and other documents with the SEC and other federal and
state regulatory authorities as may be required by applicable law; (7) review
and submit to the officers of the Trust for their approval invoices or other
requests for payment of Fund expenses and instruct the Custodian to issue checks
in payment thereof; and (8) take such other action with respect to the Fund as
may be necessary in the opinion of the Administrator to perform its duties under
the agreement. The Administrator also will provide certain accounting and
pricing services for the Fund.
The Manager has also contracted with NC Shareholder Services, LLC (the "Transfer
Agent"), a North Carolina limited liability company, to serve as transfer,
dividend paying, and shareholder servicing agent for the Fund. The address of
the Transfer Agent is 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365. The Transfer Agent is compensated for its
services by the Manager and not directly by the Fund.
THE DISTRIBUTOR
Capital Investment Group, Inc. (the "Distributor"), Post Office Box 32249,
Raleigh, North Carolina 27622, serves as the Distributor of the Fund's shares
pursuant to a distribution Agreement (the "Distribution Agreement") entered into
with the Manager. Unless otherwise terminated, the Distribution Agreement for
the Fund will remain in effect for two years from the date of its execution,
and, thereafter will continue from year to year upon annual approval by the
Trust's Board of Trustees, or by vote of a majority of the outstanding voting
securities of the Trust and by the vote of a majority of the Board of Trustees
who are not parties to the Distribution Agreement or interested persons of any
such part, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement will terminate in the event of its
assignment, as defined in the 1940 Act. With respect to the Fund's current class
of shares, the Distributor is compensated for its services by the Manager and
not directly by the Fund.
THE CUSTODIAN
The Manager has entered into a Custodian Agreement with First Union National
Bank of North Carolina (the "Custodian"), Two First Union Center, Charlotte,
North Carolina 28288-1151, pursuant to which custodial services are provided for
the Fund. The Custodian is compensated for its services by the Manager and not
directly by the Fund.
INDEPENDENT AUDITORS
The firm of Deloitte & Touch LLP, 2500 One PPG Place , Pittsburgh, Pennsylvania
15222-5401, serves as independent auditors for the Fund, and will audit the
annual financial statements of the Fund, prepare the Fund's federal and state
tax returns, and consult with the Fund on matters of accounting and federal and
state income taxation.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the State of Delaware. The Trustees and executive officers of the Trust
and the principal occupations for the last five years are set forth below. Each
may have held other positions with the named companies during that period. The
age of each Trustee and officer is indicated in the parenthesis.
JEFFREY M. DOYON (33) - Trustee and Chief Financial Officer - President, the
Manager since July, 1997 and Chief Financial Officer and General Manager, Janed
Enterprises, Inc. (specialty chemical manufacturing) since January, 1996. Prior
thereto, Registered Representative, Royal Alliance Associates (brokerage) from
February, 1996 to September, 1997; Registered Representative (1994-1996), Smith
Barney/Robinson-Humphrey (brokerage); and Project Manager (1990-1992) and
General Director (1992-1994), Sea-Land CIS Logistics (international logistics &
transport).
ALLEN R. GILLESPIE (25) - Trustee and Vice President - Vice President, the
Manager since September, 1997. Prior thereto, Manufacturer's Rep for Perdido
Vineyards (1997); and Registered Representative (1995-1997), Smith
Barney/Robinson-Humphrey (brokerage).
MARIA A. STAMOULAS (34) - Trustee - Attorney, Facer & Stamoulas, P.C. since June
1996. Prior thereto, Attorney, Zuckerman, Spaeder, Goldstein, Taylor & Kolker,
L.L.P. (1992-1996). Director and President, Macedonian Association of Greater
Washington, DC. since 1990.
BRUCE H. HERRICK (61) - Trustee- Professor and Head, Department of Economics,
Washington and Lee University since 1980.
Each current Trustee of the Trust who is not an "interested person" of the Trust
is expected to receive the following compensation during the fiscal year ending
November 30, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------- ------------------- ------------------- ---------------- -------------------
Pension or
Retirement
Benefits Accrued Estimated Total Compensation
Aggregate as Part Annual from the Trust
Compensation from of Trust Expenses Benefits Upon Paid to Trustees*
Name of Person, the Fund* Retirement
Position
- -------------------------------- ------------------- ------------------- ---------------- --------------------
Maria Stamoulas, $2000
- -------------------------------- ------------------- ------------------- ---------------- --------------------
Bruce H. Herrick $2000
- -------------------
</TABLE>
*The Trust is expected to pay approximately $2000 to each Trustee who is not an
"interested person" of the Trust for the fiscal year ending [insert date].
As the Fund's initial shareholder, Blue Ridge Advisors, Inc. holds all of the
outstanding shares, both beneficially and of record, of the Fund as of the date
of this Statement of Additional Information.
CALCULATION OF TOTAL RETURN
The Fund may advertise its total return. The total return of the Fund refers to
the average compounded rate of return to a hypothetical investment for
designated time periods (including but not limited to, the period from which the
Fund commenced operations through the specified date), assuming that the entire
investment is redeemed at the end of each period. In particular, total return
will be calculated according to the following formula: P (1 + T)n = ERV, where P
= a hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time period as of the end of
such period.
Quotations of total return, which are not annualized, represent historical
earnings and asset value fluctuations. Total return is based on past performance
and is not a guarantee of future results.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of the Fund's classes of shares may be made on any day
on which the New York Stock Exchange is open for business. Currently, the
following holidays are observed by the Trust: New Year's Day, Martin Luther
King's Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Shares of the Fund are offered on
a continuous basis.
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by the Fund in
lieu of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of the Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of the Fund for any period during
which the New York Stock Exchange, the Manager or any of the Trust's third party
service providers are not open for business.
DETERMINATION OF NET ASSET VALUE
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation.
Equity securities are valued at the last sale price on the principal exchange or
market where they are traded.
Securities which have not traded on the date of valuation, or securities for
which sales prices are not generally reported, are valued at the mean between
the current bid and asked prices.
Securities listed on a non-U.S. exchange are valued at the last quoted sale
price available before the time when net assets are valued.
Bond and other fixed income securities (other than short-term obligations) are
valued on the basis of valuations furnished by a pricing service, use of which
has been approved by the Board of Trustees. In making such valuations, the
pricing service utilizes both dealer-supplied valuations and electronic data
processing techniques that take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities.
Short-term obligations (maturing in 60 days or less) are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Future contracts are normally valued at the settlement price on the exchange on
which they are traded.
Securities for which there are no such valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
Trading in securities on most non-U.S. exchanges and over-the-counter markets is
normally completed before the close of regular trading on the New York Stock
Exchange and may also take place on days on which the New York Stock Exchange is
closed. If events materially affecting the value of non-U.S. securities occur
between the time when the exchange on which they are traded closes and the time
when the Fund's net asset value is calculated, such securities will be valued at
fair value in accordance with procedures established by and under the general
supervision of the Board of Trustees.
Interest income on long-term obligations held for the Fund is determined on the
basis of interest accrued plus amortization of "original issue discount"
(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued less amortization of any premium.
Subject to compliance with applicable regulations, the Trust has reserved the
right to pay the redemption price of shares of the Fund, either totally or
partially, by a distribution-in-kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount at
that assigned to them in calculation the net asset value of the shares being
sold. If a holder of shares received a distribution in kind, that holder could
incur brokerage or other charges in converting the securities to cash.
TAXES
The following is only a summary of certain income tax considerations generally
affecting the Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisors with
specific reference to their own tax situations, including their state and local
income tax liabilities.
Federal Income Tax
The following discussion of federal income tax consequences is based on the
Code, and the regulations issued thereunder as in effect on the date of this
Statement of Additional Information. New legislation, as well as administrative
changes or court decisions, may significantly change the conclusions expressed
herein, and may have a retroactive effect with respect to the transactions
contemplated herein.
The Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By maintaining its qualifications as a
RIC, the Fund intends to eliminate or reduce to a nominal amount the federal
taxes to which it may be subject.
In order to qualify for treatment as a RIC under the Code, the Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) at the
close of each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer; and (iii) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of anyone issuer or of two or more
issuers which are engaged in the same, similar or related trades or businesses
if the Fund owns at least 20% of the voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), the
Fund will be subject to a nondeductible 4% federal excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net income (the excess of short- and
long-term capital gains over short- and long-term capital losses) for the
one-year period ending on October 31 of that calendar year, plus certain other
amounts.
In certain cases, the Fund will be required to withhold, and remit to the U.S.
Treasury, 31% of any distributions paid to a shareholder who (1) has failed to
provide a correct taxpayer identification number, (2) is subject to backup
withholding by the Internal Revenue Service, or (3) has not certified to the
Fund that such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates on its net investment income and net capital gain
without any deductions for amounts distributed to shareholders. In such an
event, all distributions (including capital gains distributions) will be taxable
as ordinary dividends to the extent of the Fund's current and accumulated
earnings and profits and such distributions will generally be eligible for the
corporate dividends-received deduction.
State Taxes
Distributions by the Fund to shareholders and the ownership of shares maybe
subject to state and local taxes.
PORTFOLIO TRANSACTIONS
The Manager is authorized to select brokers and dealers to effect securities
transactions for the Fund. The Manager will seek to obtain the most favorable
net results by taking into account various factors, including price, commission,
if any, size of the transactions and difficulty of executions, the firm's
general execution and operational facilities and the firm's risk in positioning
the securities involved. While the Manager generally seek reasonably competitive
commissions, the Trust will not necessarily be paying the lowest spread or
commission available. The Manager seeks to select brokers or dealers that offer
the Fund best price and execution or other services which are of benefit to the
Fund. Certain brokers or dealers assist their clients in the purchase of shares
and charge a fee for this service in addition to the Fund's public offering
price. In the case of securities traded in the over-the-counter market, the
Manager expects normally to seek to select primary market makers.
The Manager may, consistent with the interests of the Fund, select brokers on
the basis of the research services they provide to the Manager. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Manager will be in addition to and not in lieu of the services required to
be performed by the Manager under the Management Agreement. If, in the judgment
of the Manager, the Fund or other accounts managed by the Manager will be
benefited by supplemental research services, the Manager is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining Fund strategy; providing
computer software used in security analyses; and providing Fund performance
evaluation and technical market analyses. The expenses of the Manager will not
necessarily be reduced as a result of the receipt of such information, and such
services may not be used exclusively, or at all, with respect to the Fund or
account generating the brokerage, and there can be no guarantee that the Manager
will find all of such services of value in advising the Fund.
It is expected that the Fund may execute brokerage or other agency transactions
through the Distributor, which is a registered broker-dealer, for a commission
in conformity with the 1940 Act, the Securities Exchange Act of 1934 and rules
promulgated by the SEC. Under these provisions, the Distributor is permitted to
receive and retain compensation for effecting Fund transactions for the Fund on
an exchange if a written contract is in effect between the Distributor and the
Fund expressly permitting the Distributor to receive and retain such
compensation. These rules further require that commissions paid to the
Distributor by the Fund for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "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
being purchased or sold on a securities exchange during a comparable period of
time. The Trustees, including those who are not "interested persons" of the
Trust, have adopted procedures for evaluating the reasonableness of commissions
paid to the Distributor and will review these procedures periodically.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking best execution and such other policies as
the Board of Trustees may determine, the Manager may consider sales of the
Fund's shares as a factor in the selection of broker-dealers to execute Fund
transactions for the Fund.
The Board of Trustees has adopted a Code of Ethics governing personal trading by
persons who manage, or who have access to trading activity by the Fund. The Code
of Ethics allows trades to be made in securities that may be held by the Fund,
however, it prohibits a person from taking advantage of Fund trades or from
acting on inside information.
DESCRIPTION OF SHARES
The Trust is an open-end management investment company - - a type of company
commonly known as a "mutual fund." It is registered as such under the 1940 Act.
The Trust, organized as a Delaware business trust, currently offers one class of
shares on behalf of the Total Return Fund.
Under Delaware law, annual election of Trustees is not required, and, in the
normal course, the Trust does not expect to hold annual meetings of
shareholders. There will normally be no meetings of shareholders for the purpose
of electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Pursuant to the procedures set forth in Section 16(c) of the 1940 Act,
shareholders of record of not less than two-thirds of the outstanding shares of
the Trust may remove a Trustee by a vote cast in person or by proxy at a meeting
called for that purpose.
Except as set forth above, the Trustees will continue to hold office and may
appoint successor Trustees. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in the election of Trustees can,
if they choose to do so, elect all the Trustees of the Trust, in which event the
holders of the remaining shares will be unable to elect any person as a Trustee.
The Declaration of Trust of the Trust requires the affirmative vote of a
majority of the outstanding shares of the Trust.
The shares of the Fund, when issued, will be fully paid and non-assessable and
will have no preference, preemptive, conversion, exchange or similar rights.
FINANCIAL STATEMENTS
Set forth below is the initial audited Statement of Assets and Liabilities at
December 1, 1997 for the Trust.
<PAGE>
Blue Ridge Total Return Fund
Statement of Assets and Liabilities
December 1, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Assets:
- -------------------------------------------------------------------------
Cash $100,000
- ------------------------------------------------------------------------- -------------------
Total Assets 100,000
- ------------------------------------------------------------------------- -------------------
Liabilities: -
- ------------------------------------------------------------------------- -------------------
Net Assets for 10,000 NL shares outstanding $100,000
- ------------------------------------------------------------------------- ===================
Net Assets Consist of:
- -------------------------------------------------------------------------
Paid in Capital $100,000
- ------------------------------------------------------------------------- ===================
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
- -------------------------------------------------------------------------
$100,000 / 10,000 shares outstanding $10.00
- ------------------------------------------------------------------------- ===================
</TABLE>
Notes:
(1) Blue Ridge Total Return Fund (the "Fund") is the only existing open-end
management investment company (a mutual fund) in a diversified series
of Blue Ridge Funds Trust (the "Trust"). The Trust was established as a
Delaware business trust under a Declaration of Trust dated September
30, 1997 and is registered under the Investment Company Act of 1940, as
amended. The Fund has had no operations since that date other than
those relating to organizational matters, including the issuance on
December 1, 1997, of 10,000 of the NL class of shares at $10.00 per
share.
(2) Reference is made to "General Information -the Manager" and "Taxes" in
the prospectus for descriptions of the investment management fee,
administrative and other services and federal tax aspects of the Fund.
(3) Certain Officers and Trustees of the Trust are Officers and Directors
or Trustees of the Advisor and the Administrator.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of THE BLUE RIDGE FUNDS TRUST and the Shareholder of
BLUE RIDGE TOTAL RETURN FUND:
We have audited the accompanying statement of assets and liabilities of Blue
Ridge Total Return Fund as of December 1, 1997. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of Blue Ridge Total Return Fund as of
December 1, 1997, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
December 5, 1997
<PAGE>
C-1
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Part B - Statement of Additional Information Statement of Assets and
Liabilities at December 1, 1997 for Blue Ridge Funds Trust
(b) Exhibits:
1(a). Agreement and Declaration of Trust.1
1(b). Certificate of Trust.1
2. By-Laws of the Trust. 1
3. Not applicable.
4. Not Applicable.
5. Investment Management Agreement between Blue Ridge Funds Trust
and Blue Ridge Advisors, Inc. dated _______, 1997 (to be
provided by amendment).
6. Distribution Agreement between Blue Ridge Advisors, Inc. and
Capital Investment Group, Inc. dated ____________, 1997 (to be
provided by amendment).
7. Not applicable.
8. Custody Agreement between Blue Ridge Advisors, Inc. and First
Union National Bank of North Carolina dated __________, 1997
(to be provided by amendment).
9. Not applicable.
10. Opinion and Consent of Dechert Price & Rhoads regarding the
legality of the securities being registered.
11. Consent of Deloitte & Touche, LLP, Independent Public
Accountants.
12. Not applicable.
13. Stock Subscription Agreement/Letter of Intent.
14. Not applicable.
15. Not applicable.
16. Not applicable.
17. Financial Data Schedule
18. Plan Pursuant to Rule 18f-3 under the 1940 Act - (to be
provided by amendment).
- ------------------
1 Incorporated herein by reference to Registrants's Registration
Statement on Form N-1A filed on September 30, 1997 (File No. 333-36811
Item 25. Persons Controlled by or under Common Control with Registrant.
Blue Ridge Advisors, Inc. controls the Trust by virtue of its ownership of 100%
of the Trust's shares as of December 1, 1997.
Item 26. Number of Holders of Securities.
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF DECEMBER 1, 1997
- ------------------------------ --------------------------
Blue Ridge Total Return Fund 1
Item 27. Indemnification.
Declaration of Trust ("Declaration of Trust") and By-Laws.
Article VII, Section 2 of the Trust's Declaration of Trust of Blue
Ridge Funds Trust ("Trust") states, in relevant part, that a "Trustee, when
acting in such capacity, shall not be personally liable to any Person, other
than the Trust or a Shareholder to the extent provided in this Article VII, for
any act, omission or obligation of the Trust, of such Trustee or of any other
Trustee. The Trustees shall not be responsible or liable in any event for any
neglect or wrongdoing of any officer, agent, employee, Manager, or Distributor
of the Trust. The Trust shall indemnify each Person who is serving or has served
at the Trust's request as a director, officer, trustee, employee, or agent of
another organization in which the Trust has any interest as a shareholder,
creditor, or otherwise to the extent and in the manner provided in the By-Laws."
Article VII, Section 4 of the Trust's Declaration of Trust further states, in
relevant part, that the "Trustees shall be entitled and empowered to the fullest
extent permitted by law to purchase with Trust assets insurance for liability
and for all expenses reasonably incurred or paid or expected to be paid by a
Trustee, officer, employee, or agent of the Trust in connection with any claim,
action, suit, or proceeding in which he or she may become involved by virtue of
his or her capacity or former capacity as a Trustee of the Trust."
Article VI, Section 2 of the Trust's By-Laws states, in relevant part,
that "[s]ubject to the exceptions and limitations contained in Section 3 of this
Article VI, every [Trustee, officer, employee or other agent of the Trust] shall
be indemnified by the Trust to the fullest extent permitted by law against all
liabilities and against all expenses reasonably incurred or paid by him or her
in connection with any proceeding in which he or she becomes involved as a party
or otherwise by virtue of his or her being or having been an agent." Article VI,
Section 3 of the Trust's By-Laws further states, in relevant part, that "[n]o
indemnification shall be provided hereunder to [a Trustee, officer, employee or
other agent of the Trust]: (a) who shall have been adjudicated, by the court or
other body before which the proceeding was brought, to be liable to the Trust or
its Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his or her office
(collectively, "disabling conduct"); or (b) with respect to any proceeding
disposed of (whether by settlement, pursuant to a consent decree or otherwise)
without an adjudication by the court or other body before which the proceeding
was brought that such [Trustee, officer, employee or other agent of the Trust]
was liable to the Trust or its Shareholders by reason of disabling conduct,
unless there has been a determination that such [Trustee, officer, employee or
other agent of the Trust] did not engage in disabling conduct: (i) by the court
or other body before which the proceeding was brought; (ii) by at least a
majority of those Trustees who are neither Interested Persons of the Trust nor
are parties to the proceeding based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts (as
opposed to a full trial-type inquiry); provided, however, that indemnification
shall be provided hereunder to [a Trustee, officer, employee or other agent of
the Trust] with respect to any proceeding in the event of (1) a final decision
on the merits by the court or other body before which the proceeding was brought
that the [Trustee, officer, employee or other agent of the Trust] was not liable
by reason of disabling conduct, or (2) the dismissal of the proceeding by the
court or other body before which it was brought for insufficiency of evidence of
any disabling conduct with which such [Trustee, officer, employee or other agent
of the Trust] has been charged." Article VI, Section 4 of the Trust's By-Laws
also states that the "rights of indemnification herein provided (i) may be
insured against by policies maintained by the Trust on behalf of any [Trustee,
officer, employee or other agent of the Trust], (ii) shall be severable, (iii)
shall not be exclusive of or affect any other rights to which any [Trustee,
officer, employee or other agent of the Trust] may now or hereafter be entitled
and (iv) shall inure to the benefit of [such party's] heirs, executors and
administrators."
UNDERTAKING
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of the Manager.
The description of Blue Ridge Advisors, Inc. under the caption of "General
Information -The Manager" in the Prospectus and under the caption "The Manager"
in the Statement of Additional Information constituting Parts A and B,
respectively, of this Registration Statement are incorporated by reference
herein. Information concerning the directors and officers of Blue Ridge
Advisors, Inc. as set forth in Blue Ridge Advisors, Inc.'s Form ADV filed with
the Securities and Exchange Commission on August 15, 1997 (File No. 801-54829),
and amended through the date hereof, is incorporated by reference herein.
Item 29. Principal Underwriters.
(a) Capital Investment Group, Inc., the Registrant's distributor, is also the
underwriter and distributor for the Chesapeake Growth Fund, The Chesapeake Fund,
Capital Value Fund, ZSA Asset Allocation Fund, The Brown Capital Management
Equity Fund, The Brown Capital Mangement Balanced Fund, The Brown Capital
Management Small Company Fund, The Grandview REIT Index Fund and the Grandview
Reality Growth Fund and the Investek Fixed Income Trust.
(b) Set forth below is certain information regarding the directors and officers
of Capital Investment Group, Inc.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NAME AND PRINCIPAL BUSINESS ADDRESS POSITION(S) AND OFFICE(S) WITH POSITION(S) AND OFFICE(S) WITH
CAPITAL INVESTMENT GROUP, INC. REGISTRANT
Richard K. Bryant President NONE
17 Glenwood Avenue
Raleigh, N.C.
E.O. Edgerton, Jr. Vice President NONE
17 Glenwood Avenue
Raleigh, N.C.
</TABLE>
(c) Not applicable.
Item 30. Location of Accounts and Records.
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained
at the offices of Registrant's Custodian:
First Union National Bank of North Carolina
Two First Union Center
Charlotte, N.C. 28288-1151
(b) With respect to Rules 31a-1(a); 31a-1(b)(1), (4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11) and 31a-1(f), the required books and
records are currently maintained at the offices of the Registrant's
Administrator:
The Nottingham Company
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of
the Registrant's Manager:
Blue Ridge Advisors, Inc.
84 Villa Road, B37
Greenville, S.C. 29615
Item 31. None.
Item 32. Undertakings.
(a) Inapplicable.
(b) The Registrant hereby undertakes to file a post-effective
amendment, including financial statements which need not be
audited, within four to six months from the later of the
commencement of operations of the Registrant or the effective
date of the Registrant's 1933 Act Registration Statement.
(c) Inapplicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Greenville,
and the State of South Carolina on the 5th day of December, 1997.
BLUE RIDGE FUNDS TRUST
By: /s/ Jeffrey M. Doyon
______________________
Jeffrey M. Doyon
President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Signature Title Date
* President and Chief December 5, 1997
- --------------------------------------------------
Jeffrey M. Doyon Financial Officer
* Trustee December 5, 1997
- --------------------------------------------------
Allen R. Gillespie
* Trustee December 5, 1997
- --------------------------------------------------
Maria Stamoulas
* Trustee December 5, 1997
- --------------------------------------------------
Bruce H. Herrick
</TABLE>
*By: /s/ Jane A. Kanter
_____________________________
Jane A. Kanter
(Attorney-in-fact)
<PAGE>
EXHIBIT LIST
EXHIBIT
NUMBER DESCRIPTION
10 Opinion and Consent of Dechert Price & Rhoads regarding the Legality of
the Securities being registered
11 Consent of Deloitte & Touche, LLP, Independent Public Accounts
13 Stock Subscription Agreement/Letter of Intent
17 Financial Data Schedule
[LETTERHEAD]
DECHERT PRICE & ROADS
December 5, 1997
Opinion and Consent of Counsel
Blue Ridge Funds Trust
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Dear Gentlemen:
This opinion is given in connection with the filing by Blue Ridge Funds Trust, a
Delaware business trust ("Trust"), of Pre-Effective Amendment No.1 to its
Registration Statement on Form N-1A (the "Registration Statement") under the
Securities Act of 1933, as amended ("1933 Act") and Amendment No. 1 to the
Trust's Registration Statement on Form N-1A under the Investment Company Act of
1940, as amended ("the "1940 Act") relating to an indefinite amount of its
authorized shares of beneficial interest, at a par value of $.01 per shares. The
Trust's authorized shares of beneficial interest currently relate only to a
separate series of the Trust, the Blue Ridge Total Return Fund, and such
authorized shares are hereinafter referred to as the "Shares."
We have examined the following: the Trust's Certificate of Trust as
filed with the Secretary of State of the State of Delaware on September 30,
1997; the Trust's Declaration of Trust; its By-Laws; its Board of Trustees
resolutions dated November 21, 1997; the form of the Registration Statement
under the 1933 Act and the 1940 Act to be filed on December 5, 1997; pertinent
provisions of the laws of the State of Delaware; and such other corporate
records, certificates, documents and statutes that we have deemed relevant in
order to render the opinion expressed herein.
Based on such examination, we are of the opinion that:
1. The Trust is a Delaware business trust duly organized, validly
existing, and in good standing under the laws of the State of
Delaware; and
2. The Shares to be offered for sale by the Trust, when issued in
the manner contemplate by the Registration Statement, will be
legally issued, fully-paid and non-assessable.
This letter expresses our opinion as to the Delaware Business Trust Act
governing matters such as the due organization of the Trust and the
authorization and issuance of the Shares, but does not extend to the securities
or "Blue Sky" laws of the State of Delaware or to federal securities or other
laws.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to Dechert Price & Rhoads under the caption
"Counsel and Independent Public Accountants " in the Prospectus.
Very truly yours
DECHERT PRICE & RHOADS
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of THE BLUE RIDGE FUNDS TRUST and the Shareholder of
BLUE RIDGE TOTAL RETURN FUND:
We consent to the use in Pre-Effective Amendment No. 1 to Registration Statement
(No. 333-36811) of Blue Ridge Total Return Fund of our report dated December 5,
1997, appearing in the Statement of Additional Information, which is a part of
such Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
December 5, 1997
STOCK SUBSCRIPTION AGREEMENT
THIS AGREEMENT by and between Blue Ridge Advisors, Inc. ("Blue Ridge Advisors")
and the Blue Ridge Funds Trust ("Trust"), a business trust organized and
existing under and by virtue of the laws of the State of Delaware.
In consideration of the mutual promises set forth herein, the parties
agree as follows:
1. The Trust agrees to sell to Blue Ridge Advisors and Blue Ridge Advisors
hereby subscribes to purchase 10,000 shares ("Shares") of beneficial interest of
Blue Ridge Total Return Fund, a series of the Trust, each with a par value of
$.01 per Share, at a price of ten dollars ($10.00) per each Share.
2. Blue Ridge Advisors agrees to pay $100,000 for all such Shares at the time of
their issuance, which shall occur upon call of the President of the Trust, at
any time on or before the effective date of the Trust's Registration Statement
filed by the Trust on Form N-1A with the Securities and Exchange Commission
("Registration Statement") on September 30, 1997.
3. Blue Ridge Advisors acknowledges that the Shares to be purchased hereunder
have not been, and will not be, registered under the federal securities laws and
that, therefore, the Trust is relying on certain exemptions from such
registration requirements, including exemptions dependent on the intent of the
undersigned in acquiring the Shares. Blue Ridge Advisors also understands that
any resale of the Shares, or any part thereof, may be subject to restrictions
under the federal securities laws, and that Blue Ridge Advisors may be required
to bear the economic risk of any investment in the Shares for an indefinite
period of time.
4. Blue Ridge Advisors represents and warrants that it is acquiring the Shares
solely for its own account and solely for investment purposes and not with a
view to the resale or disposition of all or any part thereof, and that it has no
present plan or intention to sell or otherwise dispose of the Shares or any part
thereof.
5. Blue Ridge Advisors agrees that it will not sell or dispose of the Shares or
any part thereof unless the Registration Statement with respect to such Shares
is then in effect under the Securities Act of 1933, as amended.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized representatives this 21st day of November, 1997.
BLUE RIDGE ADVISORS, INC.
By: /s/ Jeffrey M. Doyon
____________________________
Jeffrey M. Doyon
Title: President and Chief Financial
Officer
BLUE RIDGE FUNDS TRUST
By: /s/ Allen R. Gillespie
____________________________
Allen R. Gillespie
Title: Vice President and Trustee
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> BLUE RIDGE TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> DEC-01-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 100,000
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 100,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 100,000
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
