As filed with the Securities and Exchange Commission on January 29, 1999
Securities Act File No. 033-36811
Investment Company Act File No. 811-08391
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
(Check appropriate box or boxes.)
BLUE RIDGE FUNDS TRUST
------------------------------
(Exact Name of Registrant as Specified in Charter)
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (252) 972-9922
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C. Frank Watson, III
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Name and Address of Agent for Service)
With copies to:
---------------
Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
Approximate Date of Proposed Public Offering: As soon as practicable after the
Effective Date of this Amendment
--------------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
________________________________________________________________________________
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<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
Blue Ridge Total Return Fund
-Part A - Prospectus
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
<PAGE>
PART A
======
Cusip Number 095848107
________________________________________________________________________________
BLUE RIDGE TOTAL RETURN FUND
A series of the
Blue Ridge Funds Trust
NL SHARES
________________________________________________________________________________
Prospectus
April 1, 1999
The Blue Ridge Total Return Fund seeks total return from a combination of
capital appreciation and current income.
Manager
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Colonial Asset Management, Inc.
531 East Main Street
Spartanburg, South Carolina 29302
1-800-737-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
Page
----
THE FUND.......................................................................2
- --------
Investment Objective.....................................................2
Principal Investment Strategies..........................................2
Principal Risks Of Investing In The Fund.................................2
Fees And Expenses Of The Fund............................................4
MANAGEMENT OF THE FUND.........................................................5
- ----------------------
The Investment Manager...................................................5
The Administrator........................................................6
The Transfer Agent.......................................................6
The Distributor..........................................................6
INVESTING IN THE FUND..........................................................7
- ---------------------
Minimum Investment.......................................................7
Purchase And Redemption Price............................................7
Purchasing Shares........................................................7
Redeeming Your Shares....................................................9
OTHER IMPORTANT INVESTMENT INFORMATION........................................11
- --------------------------------------
Dividends, Distributions And Taxes......................................11
Year 2000...............................................................12
Financial Highlights....................................................12
Additional Information..........................................Back Cover
<PAGE>
THE FUND
--------
INVESTMENT OBJECTIVE
The Blue Ridge Total Return Fund (the "Fund") seeks total return from a
combination of capital appreciation and current income.
PRINCIPAL INVESTMENT STRATEGIES
In seeking to achieve its objective, the Fund, which is a diversified separate
investment portfolio of the Blue Ridge Funds Trust, 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 convertible securities,
preferred stocks, dividend paying common stocks, and investment-grade debt
securities. For the purpose of determining whether a security is
investment-grade, the Manager will only purchase securities that are rated at
least BBB by Moody's Investor Services, Inc., or Baa by Standard & Poor's Rating
Services, a division of the McGraw-Hill Companies, Inc. or are unrated
securities of similar investment quality.
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 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.
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE FUND
The Fund may invest in both equity and debt securities and, therefor, has some
exposure to the risks of both equities and bonds. Investments in equity
securities (i.e., common stocks and preferred stocks) are particularly subject
to the risk of changing economic, stock market, industry and company conditions
which can adversely affect the value of the Fund's equity holdings. The value of
the Fund's debt holdings (i.e., investment-grade debt securities) will fluctuate
depending on a number of factors. Generally, when interest rates fall, the value
of the Fund's debt holdings rises, and when interest rates rise, the value of
the Fund's debt holdings declines. Other factors such as changes in the
perceived creditworthiness of certain issuers and changes in average maturities
can also affect the value of the Fund's debt holdings. Investment-grade debt
securities, while normally exhibiting adequate protection parameters, may 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. Like debt securities, the value of convertible
securities fluctuates in relation to changes in interest rates. However, the
value of convertible securities also fluctuates in relation to the underlying
common stock.
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 may result in greater
Fund trading costs. High rates of portfolio turnover may also result in the
realization of short-term capital gains. Any distributions resulting from such
gains will be considered ordinary income for federal income tax purposes.
Temporary or Defensive Investments. Under normal market conditions, the Fund
expects to be fully invested in the securities described directly above.
However, for temporary defensive purposes, 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.
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees For NL Shares
(fees paid directly from your investment)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ......................None
Redemption fee ................................................None
Annual Fund Operating Expenses For NL Shares
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees.......................................0.75%
Distribution and/or Service (12b-1) Fees.............. None
Other Expenses........................................0.98%*
-----
Total Annual Fund Operating Expenses.....................1.73%
Fee Waiver and/or Expense Reimbursement.................(0.28%)
------
Net Expenses.............................................1.45%
======
* The expense information in the table above has been restated to
reflect the Fund's current expense structure as provided for
in the Fund's agreements with the Manager and the Fund's other
service providers. The Manager has entered into an Expense
Limitation Agreement with the Fund under which it has agreed
to waive or reduce its fees and to assume other expenses of
the Fund, if necessary, in an amount that limits Total Fund
Operating Expenses (exclusive of interest, taxes, brokerage
fees and commissions, extraordinary expenses, and payments, if
any, under a Rule 12b-1 Plan) to not more than 1.45% of the NL
Shares average daily net assets. See "Expense Limitation
Agreement" for more detailed information.
Example: This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
- ---------------------------- ------------ ------------ ------------ ------------
Period Invested 1 Year 3 Years 5 Years 10 Years
- ---------------------------- ------------ ------------ ------------ ------------
Your Costs $148 $459 $792 $1,735
- ---------------------------- ------------ ------------ ------------ ------------
<PAGE>
MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT MANAGER
On [April 1, 1999], Colonial Asset Management, Inc. (the "Manager") became the
investment manager of the Fund pursuant to a new investment management agreement
approved by the shareholders of the Fund at a meeting held on [March __, 1999].
Under the new investment management agreement, the Manager receives a smaller
management fee than the previous investment manager. However, the Manger no
longer pays for all other services to the Funds, such as custodial, transfer
agency, or administrative services. The new management agreement has an initial
two-year period which begins on [April 1, 1999,] and will be in effect until
[April 1, 2001]. Thereafter, the contract may be renewed on an annual basis
subject to an appropriate review by the Trustees.
Colonial Asset Management, 531 East Main Street, Spartanburg, South Carolina,
29302, is a corporation organized under the laws of South Carolina and solely
owned by Colonial Group, Inc. Colonial Asset Management was formed as the result
of a restructuring of Colonial Trust Company.
The Fund will be primarily managed by an investment team consisting of H. Walter
Barre and Barry D. Winn, Chairman and President, respectively, of the Manager.
Messieurs Barre and Winn have been with the Manager since inception. Prior to
1996, Messieurs Barre and Winn conducted asset management services for Colonial
Trust Company.
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.
The Manager's Compensation. For its services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, as an annual rate of 0.750% of the
Fund's average daily net assets up to and including $20 million, 0.625% of the
Fund's average daily net assets on the next $30 million, and 0.500% of the
Fund's average daily net assets over $50 million.
Expense Limitation Agreement. In the interest of limiting expenses of the Fund,
the Manager has entered into an expense limitation agreement with the Trust,
with respect to the Fund ("Expense Limitation Agreement"), pursuant to which the
Manager has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of the Fund (other than interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, other extraordinary
expenses not incurred in the ordinary course of the Fund's business, and
amounts, if any, payable pursuant to a Rule 12b-1 Plan) are limited to 1.45% of
the average daily assets of the Fund.
<PAGE>
The Fund may at a later date reimburse the Manager the fees waived or limited
and other expenses assumed and paid by the Manager pursuant to the Expense
Limitation Agreement, provided the Fund has reached a sufficient asset size to
permit such reimbursement to be made without causing the total annual expense
ratio of the Fund to exceed the percentage limits stated above. Consequently, no
reimbursement by the Fund will be made unless: (i) the Fund's assets exceed $10
million; (ii) the Fund's total annual expense ratio is less than the percentage
stated above; and (iii) the payment of such reimbursement has been approved by
the Trust's Board of Trustees on a quarterly basis.
THE ADMINISTRATOR
The Nottingham Company, Inc. (the "Administrator") serves as the administrator
and fund accounting agent for the Fund. The Administrator assists the Trust in
the performance of its administrative responsibilities to the Fund, coordinates
the services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund. For
these services, the Administrator is compensated by the Trust pursuant to a Fund
Accounting and Compliance Administration Agreement
THE TRANSFER AGENT
NC Shareholder Services, LLC (the "Transfer Agent") serves as the Fund's
transfer, dividend paying, and shareholder servicing agent. As indicated later
in the section of this Prospectus, "Investing in the Fund," NCSS will handle
your orders to purchase and redeem shares of the Fund, and will disburse
dividends paid by the Fund. The Transfer Agent is compensated for its services
by the Trust pursuant to a Dividend Disbursing and Transfer Agent Agreement.
THE DISTRIBUTOR
Capital Investment Group, Inc. (the "Distributor") serves as the distributor of
the Fund's shares. 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.
Other Expenses. In addition to the management fees, the Fund pays all expenses
not assumed by the Fund's Manager, including, without limitation: the fees and
expenses of its administrator, custodian, transfer agent, independent
accountants and legal counsel; the costs of printing and mailing to shareholders
annual and semi-annual reports, proxy statements, prospectuses, statements of
additional information and supplements thereto; the costs of printing
registration statements; bank transaction charges and custodian's fees; any
proxy solicitors' fees and expenses; filing fees; any federal, state or local
income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
<PAGE>
INVESTING IN THE FUND
---------------------
MINIMUM INVESTMENT
NL Shares are sold and redeemed at net asset value. Shares may be purchased by
any account managed by the Manager and any other institutional investor or any
broker-dealer authorized to sell shares in the Fund. 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. The Fund
may, in the Manager's sole discretion, accept certain accounts with less than
the minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is accepted in good form. The Fund's net asset value per share is calculated by
dividing the value of the Fund's total assets, less liabilities (including Fund
expenses, which are accrued daily), by the total number of outstanding shares of
that Fund. The net asset value per share of the Fund is normally determined at
the time regular trading closes on the New York Stock Exchange (currently 4:00
p.m. Eastern time, Monday through Friday), except on business holidays when the
New York Stock Exchange is closed.
Other Matters. Purchases and redemptions of shares by the same shareholder on
the same day will be netted for the Fund. All redemption requests will be
processed and payment with respect thereto will normally be made within seven
days after tenders. The Fund may suspend redemption, if permitted by the 1940
Act, for any period during which the New York Stock Exchange is closed or during
which trading is restricted by the Securities Exchange Commission ("SEC") or if
the SEC declares that an emergency exists. Redemptions may also be suspended
during other periods permitted by the SEC for the protection of the Fund's
shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
<PAGE>
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "Blue Ridge
Total Return Fund," to:
Blue Ridge Total Return Fund
NL Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your social security number and Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but do not have such
number yet, please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-773-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Blue Ridge Total Return Fund - NL Shares
Acct. # 2000001067846
For further credit to (shareholder's name and SS# or EIN#)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-800-773-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
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 1-800-773-3863. 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 net asset value
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.
<PAGE>
Automatic Investment Plan. The Automatic Investment Plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
fund will automatically charge the checking account for the amount specified
($100 minimum), which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Fund. Investors who establish an Automatic Investment Plan may open an
account with a minimum balance of $1,000. This Automatic Investment Plan must be
established on your account at least fifteen (15) days prior to the intended
date of your first automatic investment.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption requests should be addressed
to:
Blue Ridge Total Return Fund
NL Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption requests should include:
1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
<PAGE>
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
1) Fund name,
2) Shareholder name and account number,
3) Number of shares or dollar amount to be redeemed,
4) Instructions for transmittal of redemption funds to the shareholder, and
5) Shareholder signature as it appears on the application then on
file with the Fund.
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). Shares of the Fund may not be redeemed by wire on
days in which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your 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.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
<PAGE>
Small Accounts. All shares are purchased and redeemed in accordance with the
Fund's Amended and Restated Declaration of Trust and By-Laws. The Board of
Trustees reserves the right to redeem involuntarily any account having a net
asset value of less than $2,000 (due to redemptions, exchanges, or transfers,
and not due to market action) upon 60-days written notice. If the shareholder
brings his account net asset value up to at least $2,000 during the notice
period, the account will not be redeemed. Redemptions from retirement plans may
be subject to federal income tax withholding.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$10,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under current federal income tax law, the Fund believes that it is entitled, and
the Fund intends that it shall be treated as a regulated investment company
("RIC") under Subchapter M of the Code. As a RIC, a Fund will not be subject to
federal tax on its net investment income and net realized capital gains to the
extent such income and gains are timely distributed to its shareholders.
Accordingly, the Fund intends to distribute all of its net investment income and
net realized capital gains to its shareholders. Unless otherwise instructed by
shareholders, all dividend distributions will be reinvested in full and
fractional shares of the Fund to which they relate. Although the Fund intends
that it will be operated so that there will be no federal income or excise tax
liability, if any such liability is incurred as a result of failing to qualify
as a RIC, the investment performance will be adversely affected by the tax
liability incurred and paid.
Certain additional tax information appears in the Statement of Additional
Information.
<PAGE>
YEAR 2000
Like other mutual funds, the Fund and the service providers for the Fund rely
heavily on the reasonably consistent operation of their computer systems. Many
software programs and certain computer hardware in use today, cannot properly
process information after December 31, 1999, because of the method by which
dates are encoded and calculated in such programs and hardware. This problem,
commonly referred to as the "Year 2000 Issue," could, among other things,
negatively impact the processing of trades, the distribution of securities, the
pricing of securities and other investment-related and settlement activities.
The Trust is currently obtaining and assessing information with respect to the
actions that have been taken and the actions that are planned to be taken by
each of its service providers to prepare their computer systems for the Year
2000. While the Trust expects that each of the Trust's service providers will
have adapted their computer systems to address the Year 2000 Issue, there can be
no assurance that this will be the case or that the steps taken by the Trust
will be sufficient to avoid any adverse impact to the Trust and each of its
funds.
FINANCIAL HIGHLIGHTS
The financial data included in the table below has been derived from audited
financial statements of the Fund. The financial data for the fiscal year ended
November 30, 1998 has been audited by Deloitte & Touche LLP, independent
auditors, whose report covering such periods is incorporated into the Statement
of Additional Information. This information should be read in conjunction with
the Fund's latest audited annual financial statements and notes thereto, which
are also incorporated into the Statement of Additional Information, a copy of
which may be obtained at no charge by calling the Fund. Further information
about the performance of the Fund is contained in the Annual Report of the Fund,
a copy of which may also be obtained at no charge by calling the Fund.
(For a Share Outstanding Throughout the Period)
- ------------------------------------------------------ -------------------------
Period from
December 15, 1997
(commencement of
operations) to
November 30, 1998
- ------------------------------------------------------ -------------------------
Net Asset Value, Beginning of Period $10.00
- ------------------------------------------------------ -------------------------
Income from investment operations (a)
Net investment gain (loss) 0.02
Net realized and unrealized gain
(loss) on investments (c) 0.47
----
Total from investment operations 0.49
----
- ------------------------------------------------------ -------------------------
Distributions to shareholders from
Net investment income (0.02)
----
- ------------------------------------------------------ -------------------------
Net Asset Value, End of Period $10.47
======
- ------------------------------------------------------ -------------------------
Total return 4.86%
====
- ------------------------------------------------------ -------------------------
Ratios/supplemental data
- ------------------------------------------------------ -------------------------
Net Assets, End of Period $1,632,407
==========
- ------------------------------------------------------ -------------------------
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.65% (b)
After expense reimbursements and waived fees 1.58% (b)
- ------------------------------------------------------ -------------------------
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees 0.03% (b)
After expense reimbursements and waived fees 0.10% (b)
- ------------------------------------------------------ -------------------------
Portfolio turnover rate 116.16%
- ------------------------------------------------------ -------------------------
(a) Includes undistributed net investment income of $0.00 per share and
undistributed net realized gains and unrealized gains of $0.00 per share,
from December 1, 1997 (initial seed date) through December 15, 1997
(commencement of operations).
(b) Annualized.
(c) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
security transactions for the period ended November 30, 1998 due to the
timing of sales and repurchases of fund shares in relation to fluctuating
market values of the investments of the fund. Net realized and unrealized
loss of investments includes gains of $0.82 per share due to market
appreciation during the period and losses of $0.35 due to market
depreciation during the period.
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
BLUE RIDGE TOTAL RETURN FUND
NL SHARES
________________________________________________________________________________
Additional information about the Fund is available in the Fund's Statement of
Additional Information. The Fund's Annual and Semi-annual Reports include a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
These reports and the Statement of Additional Information are available free of
charge upon request by contacting us:
By telephone: 1-800-773-3863
By mail: Blue Ridge Total Return Fund
NL Shares
c/o NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
---------------
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-800-SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet sit at
http://www.sec.gov and copies of this information may be obtained, upon payment
of a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
Investment Company Act file number 811-08391
<PAGE>
PART B
======
Statement of Additional Information
BLUE RIDGE TOTAL RETURN FUND
April 1, 1999
A series of the
BLUE RIDGE FUNDS TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone: (800) 525-3863
TABLE OF CONTENTS
Page
----
THE TRUST......................................................................1
DESCRIPTION OF PERMITTED INVESTMENTS...........................................1
INVESTMENT LIMITATIONS.........................................................3
THE MANAGER....................................................................5
THE ADMINISTRATOR..............................................................6
THE TRANSFER AGENT.............................................................7
THE DISTRIBUTOR................................................................7
THE CUSTODIAN..................................................................7
THE INDEPENDENT AUDITORS.......................................................7
TRUSTEES AND OFFICERS OF THE TRUST.............................................8
CALCULATION OF TOTAL RETURN....................................................9
PURCHASE AND REDEMPTION OF SHARES.............................................11
DETERMINATION OF NET ASSET VALUE..............................................11
TAXES ........................................................................12
PORTFOLIO TRANSACTIONS........................................................14
DESCRIPTION OF SHARES.........................................................15
FINANCIAL STATEMENTS..........................................................16
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus dated April 1, 1999, for The Blue
Ridge Total Return Fund (the "Fund"), and is incorporated by reference in its
entirety into the Prospectus. Because this Statement of Additional Information
is not itself a prospectus, no investment in shares of the Fund should be made
solely upon the information contained herein. Copies of the Fund's Prospectus
may be obtained at no charge by writing or calling the Fund at the address and
phone number shown above. Capitalized terms used but not defined herein have the
same meanings as in the Prospectus.
<PAGE>
THE TRUST
The Trust is a Delaware business trust registered with the Securities and
Exchange Commission ("SEC") as an 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 Blue Ridge 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. Colonial Asset Management, 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
The primary investment strategies and risks of the Fund are described in the
Prospectus. In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund may also employ the use of the financial instruments
described below in order to achieve its objective. The strategies set forth
below are not principal strategies of the Fund.
Money Market Instruments
The Fund may invest in money market instruments which may include U.S.
Government obligations or corporate debt obligations (including those subject to
repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper,
and Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances
are time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a
time draft, it assumes liability for its payment. When the Fund acquires a
Banker's Acceptance, the bank which "accepted" the time draft is liable for
payment of interest and principal when due. The Banker's Acceptance carries the
full faith and credit of such bank. A Certificate of Deposit ("CD") is an
unsecured, interest bearing debt obligation of a bank. Commercial Paper is an
unsecured, short-term debt obligation of a bank, corporation, or other borrower.
Commercial Paper maturity generally ranges from two to 270 days and is usually
sold on a discounted basis rather than as an interest bearing instrument. The
Fund will invest in Commercial Paper only if it is rated in one of the top two
rating categories by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff &
Phelps ("D&P"), or if not rated, of equivalent quality in the Manager's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Manager will
monitor, on a continuous basis, the earnings' power, cash flow, and other
liquidity ratios of the issuer of a Master Note held by the Fund.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
Non-Fundamental Policies
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.
<PAGE>
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 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
Blue Ridge Advisors, Inc., 84 Villa Road, B37, Greenville, South Carolina 29615,
served as the Manager to the Fund pursuant to an investment management agreement
with the Trust (the "Management Agreement") from commencement of operations
(December 12, 1997) to March 15, 1999. For its services, the Manager was paid
$19,148 after waivers of $820 of the Management fees for the fiscal year ended
November 30, 1998.
On [April 1, 1999], Colonial Asset Management, Inc. (the "Manager") became the
investment manager of the Fund pursuant to a new investment management agreement
approved by the shareholders of the Fund. Subject to the new investment
management agreement and the authority of the Trustees, the Manager provides
guidance and policy direction in connection with its daily management of the
Fund's assets. The Manager coordinates the investment and reinvestment of the
Fund's assets. The Manager is also responsible for the selection of
broker-dealers through which the Fund executes portfolio transactions, subject
to the brokerage policies established by the Trustees, and it provides certain
executive personnel to the Fund.
<PAGE>
The new investment management agreement will be in effect for an initial term
ending [April 1, 2001]. For its services, the Manager is entitled to a fee,
which is calculated daily and paid monthly, at an annual rate of .750% of the
Fund's average daily net assets up to and including $20 million, 0.625% of the
Fund's average daily net assets on the next $30 million, and 0.500% of the
Fund's average daily net assets over $50 million.
Under the investment management agreement, the Manager is not liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of such Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Manager in the performance of its duties or from
its reckless disregard of its duties and obligations under the Agreement.
THE ADMINISTRATOR
The Trust has entered into a Fund Accounting and Compliance Administration
Agreement with The Nottingham Company, Inc. (the "Administrator"), a North
Carolina corporation, whose address is 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069.
The Administrator will perform the following services for the Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) 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; (6) 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; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the Securities and Exchange Commission and other federal and
state regulatory authorities as may be required by applicable law; (8) 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 (9) 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 will also provide certain accounting and
pricing services for the Fund.
Compensation of the Administrator, based upon the average daily net assets of
the Fund, is at the following annual rates: 0.125% of the Fund's first $50
million of average daily net assets, 0.100% on the next $50 million, and 0.075%
on average daily net assets over $100 million. In addition, the Administrator
currently receives a monthly fee of $2,250 for accounting and record-keeping
services. The Administrator also charges the Trust for certain costs involved
with the daily valuation of investment securities and is reimbursed for
out-of-pocket expenses.
<PAGE>
THE TRANSFER AGENT
The Trust has entered into a Dividend Disbursing and Transfer Agent Agreement
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. As compensation for its services, the Transfer Agent receives a
shareholder record-keeping fee of $15.00 per shareholder per year with a minimum
total fee of $750 per month.
THE DISTRIBUTOR
Capital Investment Group, Inc. (the "Distributor"), Post Office Box 32249,
Raleigh, North Carolina 27622, acts as an underwriter and distributor of each
Fund's shares for the purpose of facilitating the registration of shares of the
Fund under state securities laws and to assist in sales of Fund shares pursuant
to a Distribution Agreement (the "Distribution Agreement") approved by the Board
of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
each Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.
THE CUSTODIAN
First Union National Bank of North Carolina (the "Custodian"), Two First Union
Center, Charlotte, North Carolina 28288-1151, serves as custodian for each
Fund's assets. The Custodian acts as the depository for each Fund, safekeeps its
portfolio securities, collects all income and other payments with respect to
portfolio securities, disburses monies at the Fund's request and maintains
records in connection with its duties as Custodian. For its services as
Custodian, the Custodian is entitled to receive from each Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
THE INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP, 2500 One PPG Place, Pittsburgh, Pennsylvania
15222-5401, serves as independent auditors for the Fund. Deloitte & Touche LLP
is responsible for auditing the annual financial statements of the Fund.
<PAGE>
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.
[Information about the Trustees will be provided at a later date]
C. FRANK WATSON (28) - Secretary - Vice President, The Nottingham Company, Inc.,
Rocky Mount, North Carolina, since 1992.
JULIAN G. WINTERS (30) - Treasurer - Legal and Compliance Director, The
Nottingham Company, Inc., Rocky Mount, North Carolina, since 1996. Prior
thereto, Operations Manager, Tar Heel Medical, Inc. (pharmaceutical supplier),
Nashville, North Carolina (1992-1996).
* Trustees who are "interested persons" (as defined in the 1940 Act) by virtue
of their affiliations with the Trust or Manager.
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, 1999:
[amounts to be provided at a later date]
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------- -------------------- ------------------ ---------------- ---------------------
Pension or
Retirement Estimated Total
Aggregate Benefits Accrued Annual Compensation
Name of Person, Compensation As Part Of Benefits Upon from the Trust
Position from the Fund Trust Expenses Retirement Paid to Trustees
- -------------------------------- -------------------- ------------------ ---------------- ---------------------
- -------------------------------- -------------------- ------------------ ---------------- ---------------------
- -------------------------------- -------------------- ------------------ ---------------- ---------------------
</TABLE>
Principal Holders of Voting Securities. As of January 20, 1999, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) 30.410% of the then outstanding Shares of the Fund. Except as
provided below, no person is known by the Trust to be the beneficial owner of
more than 5% of the outstanding shares of the Fund as of January 20, 1999.
<PAGE>
<TABLE>
<S> <C> <C>
- ---------------------------------------- -------------------------------------- --------------------------------------
Name and Address of Amount and Nature of Beneficial Percent
Beneficial Owner Ownership
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
First Union Nation Bank, NC 73,749.287 shares 47.273%*
FBO Marion Gillespie IRA R/O
108 Carter Oaks Drive
Anderson, SC 29621
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Janed Enterprises PSPT 30,688.005 shares 19.671%
DTD 12-31-94
P.O. Box 220
Taylors, SC 29687
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Allen R. Gillespie 21,301.355 shares 13.654%
119 Oregon Street
Greenville, SC 29605
- ---------------------------------------- -------------------------------------- --------------------------------------
- ---------------------------------------- -------------------------------------- --------------------------------------
Blue Ridge Advisors, Inc. 10,015.069 shares 6.420%
P.O. Box 220
Taylors, SC 29687
- ---------------------------------------- -------------------------------------- --------------------------------------
* Deemed a "control person" of the Fund as defined by applicable SEC regulations.
</TABLE>
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.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Total Return Index. Comparative performance may also be expressed by
reference to a ranking prepared by a mutual fund monitoring service or by one or
more newspapers, newsletters or financial periodicals. The Fund may also
occasionally cite statistics to reflect its volatility and risk. The Fund may
also compare its performance to other published reports of the performance of
unmanaged portfolios of companies. The performance of such unmanaged portfolios
generally does not reflect the effects of dividends or dividend reinvestment. Of
course, there can be no assurance that any fund will experience the same
results. Performance comparisons may be useful to investors who wish to compare
a Fund's past performance to that of other mutual funds and investment products.
Of course, past performance is not a guarantee of future results.
<PAGE>
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing a fund's performance to any index, factors such as composition of the
index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
The price at which you purchase or redeem shares is based on the next
calculation of net asset value after an order is accepted in good form. The
Fund's net asset value per share is calculated by dividing the value of the
Fund's total assets, less liabilities (including Fund expenses, which are
accrued daily), by the total number of outstanding shares of that Fund. The net
asset value per share of the Fund is normally determined at the time regular
trading closes on the New York Stock Exchange (currently 4:00 p.m. Eastern time,
Monday through Friday), except on business holidays when the New York Stock
Exchange is closed. 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.
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
In valuing the Fund's total assets, portfolio securities are generally valued at
their market value. Instruments with maturities of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith under policies approved by the Board of
Trustees.
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.
o Equity securities are valued at the last sale price on the
principal exchange or market where they are traded.
o 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.
o 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.
o 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.
<PAGE>
o 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.
o Future contracts are normally valued at the settlement price
on the exchange on which they are traded.
o 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.
If the Trustees determine that it would be detrimental to the best interest of
the Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities. 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.
<PAGE>
Federal Income Tax
The following discussion of federal income tax consequences of the Internal
Revenue Code of 1986, as amended ("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.
<PAGE>
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.
<PAGE>
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.
For the fiscal year ended November 30, 1998, the total dollar amount of
brokerage commissions paid by the Fund was $9,050.
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
The audited financial statements for the period ended November 30, 1998,
including the financial highlights, appearing in the Trust's Annual Report to
Shareholders are incorporated by reference and made a part of this document.
<PAGE>
Blue Ridge Funds Trust
P.O. Drawer 69
Rocky Mount, NC 27802-0069
Dear Shareholder,
As you are aware, 1998 was a very turbulent year in the stock market and the
Blue Ridge Total Return Fund. Unfortunately, I do not believe the world's
economic troubles are over, they have simply been postponed. As we learned in my
last letter, the market was placing an extraordinary premium on earnings
consistency and company size Let's revisit our example from 6/30/98 of Coca-Coke
versus Ingersoll-Rand.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Safe Haven
PerShare Coca-Cola
Data Est. Recession Years Increase
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
1998 1997 1992 1991 1990 1987 87-98
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Sales 8.15 7.64 5.00 4.35 3.83 2.57 317%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Earnings 1.65 1.64 .72 .61 .51 .30 550%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Cash Flow 1.95 1.92 .84 .71 .60 .36 227%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Dividends .60 .56 .28 .24 .20 .14 429%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Book Value 3.40 2.96 1.49 1.67 1.41 1.08 315%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Risky
PerShare Ingersoll-Rand
Data Est. Recession Years Increase
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
1998 1997 1992 1991 1990 1987 87-98
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Sales 51.85 42.43 24.12 23.05 24.09 16.66 311%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Earnings 2.90 2.31 .95 .94 1.18 .66 439%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Cash Flow 4.60 3.54 1.68 1.63 1.81 1.09 305%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Dividends .62 .57 .47 .44 .42 .35 177%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
Book Value 15.15 13.99 8.24 10.50 10.03 7.13 212%
- --------------------- ------------- ------------ ---------------------- -------------- ------------ ------------- ------------
</TABLE>
As we can see, the financial performance of the "safe" Coca-Cola has been
slightly better than the economically sensitive Ingersoll-Rand as measured by
the growth in earnings, dividends, and book value. As investors, however, we
established in June that we needed to answer the additional question of "how
much of a premium price are we willing to pay for this less than certain premium
performance?" The market at 6/30/98 was paying $85.50 for Coca-Cola and $44.07
for Ingersoll-Rand. You will recall we found the 100% premiums for safety too
high.
What has happened since 6/30/98?
In August, the market suddenly realized that there are no absolutes in business
or investing. When Russia defaulted on its debt, the stock market cracked and
fell 20%. The market fell because many of the world's largest players were
investing with the assumption that the U.S. and International Monetary Fund
(IMF) would guarantee Russia's debt. When the U.S. and IMF failed to intervene,
all markets where people had bought without regard to price fell sharply
including the U.S. stock market. The names most vulnerable to such a change in
perception fell most dramatically. Using our example of Coca-Cola (KO) v.
Ingersoll-Rand (IR), KO fell from the $85.50 on 6/30 to a low of $53.625 on
9/25/98 while IR fell $44.07 on 6/30/98 to $34.00 on 10/08/98. This represents a
spread closing of over $22 dollars [$88.50-$44.07 = $44.43 v. $53.625 - $34 =
$19.625]. Obviously, as investors, we would prefer this spread to close by IR
going up while KO stagnates, but that doesn't always happen.
<PAGE>
During August and September, the Federal Reserve felt pressure from the suddenly
collapsing prices to intervene in the U.S. stock and bond markets because they
are closer to home than Russia. The U.S. Federal Reserve and Alan Greenspan
thought the situation was so dire that they cut interest rates three times along
with every other central bank in the world. In total, there were over 60
worldwide interest rate cuts between August and December. As a result, investors
who had paid ridiculous prices based on long-term (10 years or more) values were
bailed out by the rate cuts. Following this Federal Reserve led bailout, the
markets quickly resumed their upward progress with the most speculative stocks
like Internet and technology names leading. The markets have now assumed that
the governments of the world are underwriting risk. Amazon.com, for example,
which has never earned any money has risen from the $70-80 range in August to a
stock split equivalent of over $500 by early January while stocks in mundane
business like Ingersoll-Rand have basically remained flat.
What is the Outcome of the Bailout?
Short-Run
Economics is the study of trade-offs. The Federal Reserve traded-off long term
instability for short-term stability. In the short-run (3 Years of less),
anything can happen. Following the 1987 stock market crash, for example, the
Japanese intervened in their market and the Nikkei then rose from around 17,000
(Yen) in 1987 to over 39,000(Yen) by late 1989.Today you can buy the Nikkei at
13,360(Yen). There was no real economic value there.
Long-Run
Unfortunately, the historical record does not offer a pretty blueprint for an
economy following a market bubble pop. Economic recession tends to follow a
sudden collapse in market prices, unless the bubble is confined to a small
sector of the economy, though the degree of the economic dip is unpredictable.
For example, the recession of the early 1980's followed the collapse of
commodity prices like oil from $40/barrel, gold $900/ounce, etc.. The collapse
of the real estate in the late 1980's led to the 1990 recession. The collapse of
the derivatives market led to the 1994 slowdown. The Japanese stock market
collapse led to that country's prolonged recession. We hope that the recent
speculation has been confined to the Internet stocks, but recent price action in
large names like GM and Gillette suddenly jumping $6 in minutes concerns us.
Conclusions
Value will be recognized, but we as investors, must maintain the appropriate
time frame. Obviously, the sooner that the value of our investments is
recognized the better off we are, but we cannot depend on the market to always
reward us immediately. Thus, we must only commit our capital after the long and
arduous study of both the risk and the potential return of an investment over
the appropriate time frame. For us at Blue Ridge Advisors, the appropriate time
frame depends on the industry and type of company, but in general, seven years
or more is appropriate for most businesses. Once again, thank you for trusting
us with your money and if you have any questions please do not hesitate to call
me at 888-858-8908.
Sincerely,
/s/ Allen R. Gillespie
Portfolio Manager
<PAGE>
BLUE RIDGE TOTAL RETURN FUND
Performance Update - $10,000 Investment
For the period from December 15, 1997 (Commencement of Operations)
to November 30, 1998
- ----------------------------------------------------------------------
Blue Ridge S&P 500
Total Return Total Return
Fund Index
- ----------------------------------------------------------------------
12/15/97 10,000 10,000
12/31/97 10,056 10,080
1/31/98 10,347 10,191
2/28/98 10,927 10,926
3/31/98 11,517 11,486
4/30/98 11,507 11,601
5/31/98 11,147 11,402
6/30/98 11,047 11,865
7/31/98 10,786 11,739
8/31/98 9,454 10,041
9/30/98 10,035 10,685
10/31/98 10,366 11,554
11/30/98 10,486 12,254
This graph depicts the performance of the Blue Ridge Total Return Fund versus
the S&P 500 Total Return Index. It is important to note that the Blue Ridge
Total Return Fund is a professionally managed mutual fund while the index is not
available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
Cumulative Total Return
- -------------------------
Since Commencement
of Operations
- -------------------------
4.86%
- -------------------------
The graph assumes an initial $10,000 investment at December 15, 1997. All
dividends and distributions are reinvested.
At November 30, 1998, the Blue Ridge Total Return Fund would have grown to
$10,486 - total investment return of 4.86% since December 15, 1997.
At November 30, 1998, a similar investment in the S&P 500 Total Return Index
would have grown to $12,254 - total investment return of 22.54%, since December
15, 1997.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
BLUE RIDGE TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
November 30, 1998
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 81.10%
Building Materials - 1.09%
Centex Corporation ..................................................... 500 $ 17,844
--------
Chemicals - 1.80%
Morton International, Inc. ............................................. 1,000 29,438
--------
Commercial Services - 1.14%
Ogden Corporation ...................................................... 700 18,594
--------
Computers - 1.96%
(a) Apple Computer, Inc. ................................................... 1,000 31,937
--------
Computer Software & Services - 7.56%
(a) Computer Sciences Corporation .......................................... 1,000 57,125
First Data Corporation ................................................. 1,200 32,025
(a) Oracle Corporation ..................................................... 1,000 34,250
--------
123,400
--------
Diversified Operations - 3.19%
The Seagram Company Ltd. ............................................... 1,000 34,312
(a) Triarc Companies, Inc. ................................................. 1,100 17,737
--------
52,049
--------
Financial - Banks, Money Center - 6.15%
Citigroup Inc. ......................................................... 2,000 100,375
--------
Food - Wholesale - 5.16%
Richfood Holdings, Inc. ................................................ 3,100 57,350
SYSCO Corporation ...................................................... 1,000 26,938
--------
84,288
--------
Foreign Securities - 0.92% (b)
Pohang Iron & Steel Company Ltd. - ADR ................................. 1,000 15,000
--------
--------
Forest Products & Paper - 2.13%
(d) International Paper Company ............................................ 800 34,750
--------
Insurance - Life & Health - 5.21%
(d) Aetna Inc. ............................................................. 1,100 85,044
--------
Insurance - Multiline - 2.45%
Loews Corporation ...................................................... 400 40,000
--------
Machine - Construction & Mining - 1.43%
(d) Ingersoll-Rand Company ................................................. 500 23,406
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
BLUE RIDGE TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Medical - Biotechnology - 7.94%
Abbott Laboratories ........................................................... 1,000 $ 48,000
(a) Amgen Inc. .................................................................... 600 45,150
Pharmacia & Upjohn, Inc. ...................................................... 700 36,444
--------
129,594
--------
Medical Supplies - 4.83%
Biomet, Inc. .................................................................. 1,000 38,250
Johnson & Johnson ............................................................. 500 40,625
--------
78,875
--------
Metals - Diversified - 1.07%
ASARCO Incorporated ........................................................... 900 17,494
--------
Metals - Fabrication & Hardware - 1.63%
Alcan Aluminum Ltd. ........................................................... 1,000 26,625
--------
Oil & Gas - Equipment & Services - 2.24%
Baker Hughes Incorporated ..................................................... 2,000 36,500
--------
Oil & Gas - Exploration - 5.95%
Pennzoil Company .............................................................. 600 22,275
Texaco Inc. ................................................................... 1,300 74,832
--------
97,107
--------
Restaurants & Food Service - 1.10%
Wendy's International, Inc. ................................................... 900 18,000
--------
Shoes - Leather - 7.15%
Nike, Inc. .................................................................... 1,900 76,000
Wolverine World Wide, Inc. .................................................... 3,000 40,687
--------
116,687
--------
Transportation - Air - 0.99%
Southwest Airlines Co. ........................................................ 750 16,125
--------
Transportation - Miscellaneous - 2.55%
CSX Corporation ............................................................... 1,000 41,687
--------
Transportation - Rail - 4.38%
Union Pacific Corporation ..................................................... 500 24,312
(a) Wisconsin Central Transportation Corporation .................................. 2,600 47,125
--------
71,437
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
BLUE RIDGE TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Utilities - Water - 1.08%
(a) United States Filter Corporation ........................................... 800 $ 17,700
---------
Total Common Stocks (Cost $1,383,783) ...................................... 1,323,956
---------
INVESTMENT COMPANIES - 9.68%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................... 78,950 78,950
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares ............................. 78,950 78,950
---------
Total Investment Companies (Cost $157,900) ................................. 157,900
---------
Total Value of Investments (Cost $1,541,683 (c)) .................................. 90.78% $1,481,856
Other Assets Less Liabilities ..................................................... 9.22% 150,551
------ ----------
Net Assets .................................................................... 100.00% $1,632,407
====== ==========
(a) Non-income producing investment.
(b) Foreign securities represent securities issued in the United States markets by non-domestic companies.
(c) Aggregate cost for financial reporting and federal income tax purposes is the same. Unrealized appreciation
(depreciation) of investments for financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $ 71,381
Unrealized depreciation (127,241)
------------
Net unrealized depreciation $ (55,860)
============
(d) At November 30, 1998, the Fund's open options contracts which are accounted for as a liability on the Statement of
Assets and Liabilities were as follows:
Number of Market
Underlying security/expiration date/exercise price contracts written Value
-------------------------------------------------- ------------------ --------------
Aetna Inc./January 1999/100 3 $ 37
Ingersoll-Rand Company/December 1998/471/2 5 844
International Paper Company/January 1999/55 8 50
------------
Total Call Options (Premiums received $4,898) $ 931
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
BLUE RIDGE TOTAL RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $1,541,683) ........................................................... $ 1,481,856
Cash .............................................................................................. 224,732
Income receivable ................................................................................. 2,622
-----------
Total assets ................................................................................. 1,709,210
-----------
LIABILITIES
Covered call options written, at value (premiums received $4,898) ................................. 931
Accrued expenses .................................................................................. 552
Payable for investment purchases .................................................................. 75,320
-----------
Total liabilities ............................................................................ 76,803
-----------
NET ASSETS
(applicable to 155,970 NL class shares outstanding; unlimited
shares of no par value beneficial interest authorized) .......................................... $ 1,632,407
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER NL CLASS SHARE
($1,632,407 / 155,970 shares) ..................................................................... $ 10.47
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................... $ 1,690,810
Accumulated net realized loss on investments ...................................................... (2,543)
Net unrealized depreciation on investments ........................................................ (55,860)
-----------
$ 1,632,407
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
BLUE RIDGE TOTAL RETURN FUND
STATEMENT OF OPERATIONS
Period from December 1, 1997
(initial seed date) to
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Interest ....................................................................................... $ 193
Dividends ...................................................................................... 20,184
--------
Total income ............................................................................. 20,377
--------
Expenses
Management fees (note 2) ....................................................................... 19,968
--------
Less management fees waived (note 2) ..................................................... (820)
--------
Net expenses ............................................................................. 19,148
--------
Net investment income ............................................................... 1,229
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investment transactions ...................................................... (2,543)
Decrease in unrealized appreciation on investments .................................................. (55,860)
--------
Net realized and unrealized loss on investments ................................................ (58,403)
--------
Net decrease in net assets resulting from operations ..................................... $(57,174)
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
BLUE RIDGE TOTAL RETURN FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from December 1, 1997
(initial seed date) to
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income ........................................................................ $ 1,229
Net realized loss from investment transactions ............................................... (2,543)
Decrease in unrealized appreciation on investments ........................................... (55,860)
-----------
Net decrease in net assets resulting from operations .................................................... (57,174)
-----------
Distributions to shareholders from
Net investment income ................................................................................... (1,229)
-----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .................................... 1,690,810
-----------
Total increase in net assets ............................................................................ 1,632,407
NET ASSETS
Beginning of period ..................................................................................... 0
-----------
End of period ........................................................................................... 1,632,407
===========
(a) A summary of capital share activity follows:
Share Value
------------ -----------
Shares sold ..................................................................................... 155,940 $1,690,441
Shares issued for reinvestment
of distributions ........................................................................... 107 1,229
------------ -----------
156,047 1,691,670
Shares redeemed ................................................................................. (77) (860)
------------ -----------
Net increase ............................................................................... 155,970 1,690,810
============ ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
BLUE RIDGE TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from December 15, 1997
(commencement of operations) to
November 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...................................................................... $ 10.00
Income from investment operations (a)
Net investment income ......................................................................... 0.02
Net realized and unrealized loss on investments (c) ........................................... 0.47
-------------
Total from investment operations ........................................................ 0.49
-------------
Distributions to shareholders from
Net investment income ......................................................................... (0.02)
-------------
Net asset value, end of period ............................................................................ $ 10.47
=============
Total return .............................................................................................. 4.86%
=============
Ratios/supplemental data
Net assets, end of period .......................................................................... $ 1,632,407
=============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ................................................. 1.65% (b)
After expense reimbursements and waived fees .................................................. 1.58% (b)
Ratio of net investment income to average net assets
Before expense reimbursements and waived fees ................................................. 0.03% (b)
After expense reimbursements and waived fees .................................................. 0.10% (b)
Portfolio turnover rate ............................................................................ 116.16%
(a) Includes undistributed net investment income of $0.00 per share and undistributed net realized gains and unrealized
gains of $0.00 per share, from November 1, 1997 (initial seed date) through November 15, 1997 (commencement of
operations).
(b) Annualized.
(c) The amount shown in this caption for a share outstanding does not correspond with the aggregate net realized and
unrealized gain (loss) on security transactions for the period ended November 30, 1998 due to the timing of sales and
repurchases of fund shares in relation to fluctuating market values of the investments of the fund. Net realized and
unrealized loss of investments includes gains of $0.82 per share due to market appreciation during the period and
losses of $0.35 due to market depreciation during the period.
See accompanying notes to financial statements
</TABLE>
<PAGE>
BLUE RIDGE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Blue Ridge Total Return Fund (the "Fund") is a diversified series of shares
of beneficial interest of the Blue Ridge Funds Trust (the "Trust"). The Trust,
an open-ended investment company, was organized on September 30, 1997 as a
Delaware Business Trust and is registered under the Investment Company Act of
1940, as amended. The investment objective of the Fund is to seek total return
from a combination of capital appreciation and current income. The Fund was
initially seeded on December 1, 1997. The Fund had no net investment income, or
net realized and unrealized gains from the seed date through the commencement of
operations, or December 15, 1997. The following is a summary of significant
accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried at
value. Securities listed on an exchange or quoted on a national market
system are valued at the last sales price as of 4:00 p.m. New York time on
the day of valuation. Other securities traded in the over-the-counter
market and listed securities for which no sale was reported on that date
are valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - The Fund is considered a personal holding company as
defined under Section 542 of the Internal Revenue Code since 50% of the
value of the Fund's shares were owned directly or indirectly by five or
fewer individuals at certain times during the last half of the year. As a
personal holding company, the Fund is subject to federal income taxes on
undistributed personal holding company income at the maximum individual
income tax rate. No provision has been made for federal income taxes since
substantially all taxable income has been distributed to shareholders. It
is the policy of the Fund to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income to relieve it from all federal
income taxes.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and income tax purposes primarily because of losses
incurred subsequent to October 31, which are deferred for income tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing
of dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains were recorded by
the Fund.
C. Investment Transactions - Investment transactions are recorded on the trade
date. Realized gains and losses are determined using the specific
identification cost method. Interest income is recorded daily on the
accrual basis. Dividend income is recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
quarterly, payable in March, June, September and December, on a date
selected by the Trust's Trustees. In addition, distributions may be made
annually in December out of net realized gains through October 31 of that
year. Distributions to shareholders are recorded on the ex-dividend date.
The Fund may make a supplemental distribution subsequent to the end of its
fiscal year ending November 30.
<PAGE>
BLUE RIDGE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
E. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amount of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimates.
F. Options Transactions - The Fund may write put and call options only if such
options are considered to be covered. A written call option is considered
to be covered when the writer of the call option owns throughout the option
period the security on which the option is written. A written put option is
considered covered 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 Fund may purchase put options and purchase
call options only to close open positions.
When the Fund writes a covered call or put option, an amount equal to the
premium received is included in the statement of assets and liabilities as
a liability. The amount of the liability is subsequently marked-to-market
to reflect the current market value of the option. If an option expires on
its stipulated expiration date or if the Fund enters into a closing
purchase transaction, a gain or loss is realized. If a written call option
is exercised, a gain or loss is realized for the sale of the underlying
security and the proceeds from the sales are increased by the premium
originally received. If a written put option is exercised, the cost of the
security acquired is decreased by the premium originally received. As
writer of an option, the Fund has no control over whether the underlying
securities are subsequently sold (call) or purchased (put) and, as a
result, bears the market risk of an unfavorable change in the price of the
security underlying the written option.
When the Fund purchases a call or put option, an amount equal to the
premium paid is included in the Fund's statement of assets and liabilities
as an investment, and is subsequently marked-to-market to reflect the
current market value of the option. If an option expires on the stipulated
expiration date or if the Fund enters into a closing sale transaction, a
gain or loss is realized. If the Fund exercises a call the cost of the
security acquired is increased by the premium paid for the call. If a Fund
exercises a put option, a gain or loss is realized from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid. Written and purchased options are non-income
producing securities.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Blue Ridge Advisors, Inc.
(the "Manager") provides the Fund with a continuous program of supervision
of the Fund's assets, including the composition of its portfolio, and
furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities. As
compensation for its services, the Manager receives a fee at the annual
rate of 1.65% of the first $20 million of the average daily net assets of
the Fund and 1.20% of average daily net assets over $20 million. The
Manager currently intends to voluntarily waive a portion of its fee to
limit total Fund operating expenses to 1.65% of the average daily net
assets of the Fund. There can be no assurance that the foregoing voluntary
fee waiver will continue. The manager has voluntarily waived a portion of
its fee amounting to $820 ($0.01 per share) for the year ended November 30,
1998.
<PAGE>
BLUE RIDGE TOTAL RETURN FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
The Fund's administrator, The Nottingham Company (the
"Administrator"), provides administrative services to and is generally
responsible for the overall management and day-to-day operations of
the Fund pursuant to an accounting and administrative agreement with
the Trust. The Administrator is compensated by the Manager and not
directly by the Fund.
North Carolina Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing
agent. The Transfer Agent, subject to the authority of the Board of
Trustees, provides transfer agency services pursuant to an agreement
with the Administrator, which has been approved by the Trust. The
Transfer Agent maintains the records of each shareholder's account,
answers shareholder inquiries concerning accounts, processes purchases
and redemptions of the 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.
Capital Investment Group, Inc. (the "Distributor"), an affiliate of
the Advisor, serves as the Fund's principal underwriter and
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.Certain
Trustees and officers of the Trust are also officers of the Manager,
the Distributor or the Administrator.
NOTE 3 - COVERED CALL OPTIONS
As of November 30, 1998, portfolio securities valued at $143,200 were
segregated by the custodian in connection with covered call options
written by the Fund.
The Fund's activity in written options for the year ended November 30,
1998 was as follows:
<TABLE>
<S> <C> <C> <C>
Number of Contracts Contracts Premium
Options outstanding at beginning of period 0 $ 0
Options sold 101 23,066
Options canceled in closing transactions 29 10,949
Options expired prior to exercise 56 7,219
--------- --------
Options outstanding at end of period 16 $ 4,898
========= ==========
</TABLE>
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $2,499,194 and $1,117,960 respectively, for the year ended
November 30, 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Blue Ridge Funds Trust and Shareholders of the Blue
Ridge Total Return Fund:
We have audited the accompanying statement of assets and liabilities of the Blue
Ridge Total Return Fund (a portfolio of the Blue Ridge Funds Trust), including
the schedule of investments, as of November 30, 1998 and the related statement
of operations, changes in net assets, and financial highlights for the period
from December 15, 1997 (commencement of operations) to November 30, 1998. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
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 statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of November 30,
1998, by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Blue Ridge Total Return Fund as of November 30, 1998, the results of its
operations, the changes in its net assets and its financial highlights for the
period from December 15, 1997 to November 30, 1998 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
December 18, 1998
<PAGE>
PART C
======
BLUE RIDGE FUNDS TRUST
FORM N-1A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a)(1) Declaration of Trust.^1
(a)(2) Certificate of Trust.^1
(b) By-Laws.^1
(c) Certificates for shares are not issued. Articles III and V of the
Declaration of Trust, previously filed as Exhibit (a)(1) hereto, define
the rights of holders of Shares.^1
(d) Investment Management Agreement between the Blue Ridge Funds Trust and
Colonial Asset Management, Inc., as Manager.^3
(e) Distribution Agreement between the Blue Ridge Funds Trust and Capital
Investment Group, Inc., as Distributor.^3
(f) Not Applicable.
(g) Custodian Agreement between the Blue Ridge Funds Trust and First Union
National Bank of North Carolina, as Custodian.^3
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Blue Ridge Funds Trust and The Nottingham Company, Inc., as
Administrator.^3
(h)(2) Dividend Disbursing and Transfer Agent Agreement between the Blue Ridge
Funds Trust and NC Shareholder Services, LLC, as Transfer Agent.^3
(i) Opinion and Consent of Dechert Price & Rhoads regarding the legality of
securities registered.^2
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants.
(k) Not applicable.
(l) Stock Subscription Agreement.^2
(m) Not applicable.
(n) Financial Data Schedules.
(o) Form of Rule 18f-3 Plan.^3
(p) Copy of Power of Attorney.
- -----------------------
1. Incorporated herein by reference to Blue Ridge Funds Trust's Registration
Statement on Form N-1A filed September 30, 1997 (File No. 333-36811).
2. Incorporated herein by reference to Blue Ridge Funds Trust's Registration
Statement on Form N-1A filed December 5, 1997 (File No. 333-36811).
3. To be filed by amendment.
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
No person is controlled by or under common control with the Blue Ridge Funds
Trust.
<PAGE>
ITEM 25. Indemnification
---------------
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."
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.
<PAGE>
ITEM 26. Business and other Connections of the Investment Advisor
--------------------------------------------------------
The description of Colonial Asset Management, Inc. under the caption of
"The Investment 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 Colonial Asset
Management, Inc. as set forth in Colonial Asset Management, 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 27. Principal Underwriter
---------------------
(a) Capital Investment Group, Inc., the Registrant's distributor, is
also the underwriter and distributor for the Chesapeake Aggressive
Growth Fund, Chesapeake Growth Fund, Chesapeake Core Growth Fund, WST
Growth & Income Fund, CarolinasFund, Capital Value Fund, Investek
Fixed Income Trust, ZSA Asset Allocation Fund, The Brown Capital
Management Equity Fund, The Brown Capital Management Balanced Fund,
The Brown Capital Management Small Company Fund, and SCM Strategic
Growth Fund.
(b) Set forth below is certain information regarding the directors and
officers of Capital Investment Group, Inc.
POSITION(S) AND OFFICE(S)
NAME AND PRINCIPAL WITH CAPITAL POSITION(S) AND OFFICE(S)
BUSINESS ADDRESS INVESTMENT GROUP, INC. WITH 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.
(c) Not applicable.
ITEM 28. Location of Accounts and Records
--------------------------------
All account books and records not normally held by First Union National
Bank of North Carolina, the Custodian to the Blue Ridge Funds Trust, are held by
the Blue Ridge Funds Trust, in the offices of The Nottingham Company, Inc., Fund
Accountant and Administrator; NC Shareholder Services, LLC, Transfer Agent to
the Blue Ridge Funds Trust; or Colonial Asset Management, Inc., the Investment
Manager to the Blue Ridge Funds Trust.
The address of The Nottingham Company, Inc. is 105 North Washington
Street, Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069. The
address of NC Shareholder Services, LLC is 107 North Washington Street, Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365. The address of Colonial
Asset Management, Inc. is 531 East Main Street, Spartanburg, South Carolina,
29302. The address of First Union National Bank of North Carolina is Two First
Union Center, Charlotte, North Carolina 28288-1151.
ITEM 29. Management Services
-------------------
Not Applicable.
ITEM 30. Undertakings
------------
None.
<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
Post-Effective Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Rocky Mount,
and State of North Carolina on this 29th day of January, 1999.
BLUE RIDGE FUNDS TRUST
By: /S/ C. Frank Watson, III
____________________________
C. Frank Watson, III
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
* President January 29, 1999
________________________ Chief Financial Officer
Jeffrey M. Doyon
* Trustee January 29, 1999
________________________
Allen R. Gillespie
* Trustee January 29, 1999
________________________
Maria A. Stamoulas
* Trustee January 29, 1999
________________________
Bruce H. Herrick
* Treasurer January 29, 1999
________________________
Julian G. Winters
* By: /s/ C. Frank Watson, III Dated: January 29, 1999
__________________________
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 1)
------------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
(j) Consent of Independent Accountants
(n) Financial Data Schedules
(p) Copy of Power of Attorney
Exhibit (j): Consent of Independent Accountants
------------
Exhibit 11
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of the Blue Ridge Funds Trust and Shareholders of the
Blue Ridge Total Return Fund:
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement (No. 33-36811) of the Blue Ridge Total Return Fund of
our report dated December 18, 1998, appearing in the Prospectus, which is
incorporated by reference in such Registration Statement, and to the reference
to us under the heading "Financial Highlights" in such Prospectus.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 28, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001047050
<NAME> Blue Ridge Funds Trust
<SERIES>
<NUMBER> 1
<NAME> Blue Ridge Total Return Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,536,785
<INVESTMENTS-AT-VALUE> 1,480,925
<RECEIVABLES> 2,622
<ASSETS-OTHER> 224,732
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,708,279
<PAYABLE-FOR-SECURITIES> 75,320
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 552
<TOTAL-LIABILITIES> 75,872
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,690,810
<SHARES-COMMON-STOCK> 155,970
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,543)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (55,860)
<NET-ASSETS> 1,632,407
<DIVIDEND-INCOME> 20,184
<INTEREST-INCOME> 193
<OTHER-INCOME> 0
<EXPENSES-NET> 19,148
<NET-INVESTMENT-INCOME> 1,229
<REALIZED-GAINS-CURRENT> (2,543)
<APPREC-INCREASE-CURRENT> (55,860)
<NET-CHANGE-FROM-OPS> (57,174)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,229)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 155,940
<NUMBER-OF-SHARES-REDEEMED> 77
<SHARES-REINVESTED> 107
<NET-CHANGE-IN-ASSETS> 1,632,407
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,968
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 19,968
<AVERAGE-NET-ASSETS> 1,210,051
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.47
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.47
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit (p): Copy of Power of Attorney
------------
POWER OF ATTORNEY
Each of the undersigned Officers and Trustees of Blue Ridge Funds Trust
(the "Trust") whose signatures appear below hereby makes, constitutes and
appoints C. Frank Watson, III, J. Hope Reese and Jane A. Kanter, and each of
them acting individually, to be their true and lawful attorneys and agents, each
of them with the power to act without any other and with full power of
substitution, to execute, deliver and file in each of the undersigned Officers'
and Trustees' capacity or capacities as shown below, any and all instruments
that said attorneys and agents may deem necessary or advisable to enable the
Trust to comply with the Securities Act of 1933, as amended, including any and
all post-effective amendments to the Fund's registration statement, and any
rules, regulations, orders or other requirements of the Securities and Exchange
Commission thereunder in connection with the registration of shares or
additional shares of common stock of the Trust or any of its series or classes
thereof, and the registration of the Trust or any of its series under the
Investment Company Act of 1940, as amended, including any and all amendments to
the Trust's registration statement; and without limitation of the foregoing, the
power and authority to sign the name of the Trust on its behalf, and to sign the
names of each of such Trustees and Officers on their behalf, and said Officers
and Trustees hereby grant to said attorney or attorneys, full power and
authority to do and perform each and every act and thing whatsoever as said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of this Power of Attorney to the same extent and with the same effect as
each of said Officers and Trustees might or could do personally in his or her
capacity or capacities as aforesaid and each of said Officers and Trustees
ratifies, confirms and approves all acts and things which said attorney or
attorneys might do or cause to be done by virtue of this Power of Attorney and
his or her signature as the same may be signed by said attorney or attorneys.
Signature Title Date
--------- ----- ----
/s/ Jeffrey M. Doyon President, Chief Financial
________________________ Officer and Trustee November 21, 1997
Jeffrey M. Doyon
/s/ Allen R. Gillespie Vice President and Trustee November 21, 1997
________________________
Allen R. Gillespie
/s/ Bruce H. Herrick
________________________ Trustee November 21, 1997
Bruce H. Herrick
/s/ Maria A. Stamoulas
________________________ Trustee November 21, 1997
Maria A. Stamoulas
/s/ William B. West
________________________ Trustee November 21, 1997
William B. West
