<PAGE>
As filed with the U.S. Securities and Exchange Commission
on November 30, 1998
Securities Act File No. 333-61973
Investment Company Act File No. 811-8977
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. 1
[x]
Post-Effective Amendment No. ___ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [x]
Amendment No. 1 [x]
(Check appropriate box or boxes)
Centurion Funds, Inc.
.......................................
(Exact Name of Registrant as Specified in Charter)
2425 East Camelback Road, Suite 530
Phoenix, Arizona 85016-4228
........................................................
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (602) 957-9789
Gerard P. Dipoto, Jr.
Centurion Funds, Inc.
2425 East Camelback Road, Suite 530
Phoenix, Arizona 85016-4228
......................................
(Name and Address of Agent for Service)
Copy to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended (the "1933 Act"), or until the Registration
Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
<PAGE>
CENTURION FUNDS, INC.
PROSPECTUS
December 4, 1998
Centurion U.S. Equity Fund
CENTURION INTERNATIONAL EQUITY FUND
CENTURION U.S. CONTRA FUND
Centurion International Contra Fund
As with all mutual funds, the Securities and Exchange Commission ("SEC") does
not guarantee that the information in this Prospectus is accurate or complete,
nor has it judged the above funds for investment merit. It is a criminal
offense to state otherwise.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Overview................................................................... 1
Risk/Return Summary........................................................ 2
Investor Expenses.......................................................... 6
Centurion U.S. Equity Fund................................................. 7
Centurion International Equity Fund........................................ 8
Centurion U.S. Contra Fund................................................. 9
Centurion International Contra Fund........................................ 11
More About Risk............................................................ 12
Management................................................................. 13
Account Policies........................................................... 15
Shareholder Services....................................................... 16
Distribution Policies and Taxes............................................ 17
Fund Details............................................................... 18
For Additional Information......................................... Back Cover
</TABLE>
<PAGE>
OVERVIEW
Centurion Funds, Inc. (the "Company") is a newly organized no-load mutual fund
complex with four separate diversified investment portfolios (each a "Fund").
The Funds are designed for professional money managers and knowledgeable
investors who intend to invest in the Funds as part of a strategic or tactical
asset allocation investment strategy. The Funds are not designed to be stand-
alone investment vehicles, but rather, are to be used with certain other
investments to provide a balance to the risks inherent in those investments.
Only investors who have entered into an investment management agreement with
certain registered investment advisers ("Investment Professionals") and have a
custodial relationship with Centurion Trust Company ("Centurion") are currently
eligible to buy shares of the Funds. Investment Professionals provide investors
asset allocation recommendations with respect to the Funds and other mutual
funds based on an evaluation of an investor's investment goals, risk preferences
and investment time horizons. The Funds were developed to afford Investment
Professionals ready access to certain strategies designed to facilitate their
management of the risks inherent in allocating their clients' assets among other
available investment options. Fees paid to Investment Professionals for their
services are in addition to the operating expenses of the Funds discussed in
this Prospectus. Investors should consult their Investment Professional if in
doubt about their fees.
Centurion currently serves as custodial agent for investors who are eligible to
invest in the Funds. Centurion also serves as investment manager to each of the
four Funds that make up the Company. Centurion has engaged the following sub-
adviser(s) to manage all or a portion of a Fund's portfolio according to its
investment goal and strategies.
<TABLE>
<S> <C>
U.S. EQUITY FUND . PARAMETRIC PORTFOLIO ASSOCIATES ("PARAMETRIC")
. BEA ASSOCIATES ("BEA")
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INTERNATIONAL EQUITY FUND . FRIENDS IVORY & SIME, INC. ("FISI")
. BEA
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U.S. CONTRA FUND . BEA
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INTERNATIONAL CONTRA FUND . BEA
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</TABLE>
INVESTMENT IN THE FUNDS INVOLVES SPECIAL RISKS, SOME NOT TRADITIONALLY
ASSOCIATED WITH MUTUAL FUNDS. INVESTORS SHOULD CAREFULLY REVIEW AND EVALUATE
THESE RISKS WHEN CONSIDERING AN INVESTMENT IN THE FUNDS. NONE OF THE FUNDS
ALONE CONSTITUTES A BALANCED INVESTMENT PLAN.
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOALS AND PRINCIPAL STRATEGIES
Each Fund has adopted its own investment goal and employs certain strategies
that result in its own risk/reward profile. Because you can lose money by
investing in these Funds, be sure to read all risk disclosure carefully before
investing.
<TABLE>
<CAPTION>
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FUND / RISK FACTORS Investment Goal / Principal Strategies
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<S> <C>
U.S. Equity Fund SEEKS TO PROVIDE LONG-TERM AFTER-TAX GROWTH CONSISTENT WITH REASONABLE
. Market Risk EFFORTS TO PRESERVE CAPITAL.
. Tracking Error Risk . Parametric seeks to provide investment returns that, over the long
In order to achieve the Fund's term, correspond to the performance of the Russell 3000(R) Index (the
investment goal, Centurion has "Russell Index").
selected two sub-advisers, . Parametric invests primarily in common stocks and other equity
Parametric and BEA, to conduct the securities of U.S. issuers with total market capitalizations greater
Fund's investment program. than $1 billion at the time of purchase.
. Parametric utilizes certain strategies designed to minimize the
impact of taxes on investors' returns.
. BEA uses certain hedging techniques designed to protect against or
otherwise cushion price declines in the value of the Fund's portfolio.
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INTERNATIONAL EQUITY FUND Seeks to provide long-term after-tax growth consistent with reasonable
. Foreign Securities Risk efforts to preserve capital.
. Market Risk . FISI seeks to provide investment returns that, over the long term,
. Tracking Error Risk correspond to the performance of the Morgan Stanley Capital
In order to achieve the Fund's International Europe, Australasia, Far East (EAFE) Index (the "EAFE
investment goal, Centurion has Index").
selected two sub-advisers, FISI . FISI invests primarily in common stocks and other equity securities
and BEA, to conduct the Fund's of non-U.S. issuers with total market capitalizations greater than $1
investment program. billion at the time of purchase.
. FISI utilizes certain strategies designed to minimize the impact of
taxes on investors' returns.
. BEA uses certain hedging techniques designed to protect against or
otherwise cushion price declines in the value of the Fund's portfolio.
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</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
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FUND / RISK FACTORS Investment Goal / Principal Strategies
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<S> <C>
U.S. CONTRA FUND Seeks to provide protection against declines in the value of the U.S.
. Available Information Risk equity allocation of certain assets custodied with Centurion (the "US
. Derivatives Risk Equity Benchmark").
. Exposure Risk . Centurion advises BEA of the level and nature of the downside
. Market Risk protection desired for the U.S. Equity Benchmark and BEA, using
. Portfolio Turnover Rate Risk statistical and quantitative analysis, selects the specific investments
. Regulatory Risk designed to provide this protection.
. Trading Halt Risk . Centurion and BEA intend to pursue the Fund's investment goal
In order to achieve the Fund's regardless of market conditions and will not invest the Fund's
investment goal, Centurion has portfolio, in the aggregate, in anticipation of rising U.S. equity
selected BEA to assist it in prices.
conducting the Fund's investment . BEA trades primarily in (i) options on securities and stock indexes,
program. (ii) stock index futures contracts, (iii) options on stock index futures
contracts and (iv) Dow Jones Industrial Average Model New Depositary
Shares ("DIAMONDS") and Standard & Poor's Depositary Receipts ("SPDRs").
- ---------------------------------------------------------------------------------------------------------------
INTERNATIONAL CONTRA FUND Seeks to provide protection against declines in the value of the
. Available Information Risk non-U.S. equity allocation of certain assets custodied with Centurion
. Derivatives Risk (the "International Equity Benchmark").
. Exposure Risk . Centurion advises BEA of the level and nature of the downside
. Foreign Securities Risk protection desired for the International Equity Benchmark and BEA, using
. Market Risk statistical and quantitative analysis, selects the specific investments
. Portfolio Turnover Rate Risk designed to provide this protection.
. Regulatory Risk . Centurion and BEA intend to pursue the Fund's investment goal
. Trading Halt Risk regardless of market conditions and will not invest the Fund's
In order to achieve the Fund's portfolio, in the aggregate, in anticipation of rising international
investment goal, Centurion has equity prices.
selected BEA to assist it in . BEA engages in forward currency contracts and trades primarily in (i)
conducting the Fund's investment options on securities, currencies and stock indexes, (ii) stock index
program. futures contracts, (iii) options on stock index futures contracts and
(iv) World Equity Benchmark Shares ("WEBS").
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</TABLE>
The Russell Index is an unmanaged index composed of the 3000 largest U.S.
publicly traded stocks, as determined by market capitalization. The EAFE Index
is a broadly diversified international index composed of the equity securities
of approximately 1,000 companies located outside the United States. Please read
"Fund Details Benchmark Information" for more information about these
securities indexes.
None of the Funds will invest 25% or more of its total assets in the securities
of one or more issuers conducting their principal business activities in the
same industry, except that, to the extent the benchmarks of the Centurion U.S.
Equity Fund or the Centurion International Equity Fund are concentrated in a
particular industry, these Funds will be concentrated in that industry. This
limitation does not apply to investments or obligations of the U.S. Government
or any of its agencies or instrumentalities.
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<PAGE>
A WORD ABOUT RISK
The principal risks of investing in the Funds are discussed below. Before you
invest, please make sure you understand the risks that apply to your Fund. As
with any mutual fund, there is no guarantee that you will make money over any
period of time and you could lose money by investing in a Fund. All investments
involve some level of risk. Simply defined, risk is the possibility that you
may lose money and not make money.
Investments in the Funds are not bank deposits. They are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
AVAILABLE INFORMATION RISK. Because the mutual funds held by Centurion's
clients are not required to report their securities holdings to Centurion,
Centurion may be unable to determine current market exposure of the U.S. Equity
Benchmark and the International Equity Benchmark, and thus may have imperfect
knowledge of the exact risks to be hedged.
Derivatives Risk. A Fund's use of options, futures and options on futures
("derivatives") involves additional risks and transaction costs, such as, (i)
adverse changes in the value of these instruments, (ii) imperfect correlation
between the price of derivatives and movements in the price of the underlying
securities, index or futures contracts, (iii) the fact that use of derivatives
requires different skills than those needed to select portfolio securities, and
(iv) the possible absence of a liquid secondary market for a particular
derivative at any moment in time.
Exposure Risk. Certain investments (such as options and futures) and certain
practices may have the effect of magnifying declines as well as increases in a
Fund's net asset value. Losses from buying and selling futures can be
unlimited.
FOREIGN SECURITIES RISK. Foreign securities markets generally have less trading
volume and less liquidity than U.S. markets. Investments in foreign countries
also involve a risk of local political, economic or social instability.
Additionally, fluctuations in the exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign currency-
denominated investments and may widen any losses.
MARKET RISK. The market value of a security may move up and down, sometimes
rapidly and unpredictably. Stock markets tend to move in cycles, with periods
of rising stock prices and periods of falling stock prices. These fluctuations
may cause a security to be worth less than the price originally paid for it, or
less than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. Market risk
is common to most investments, including stocks and bonds, and the mutual funds
that invest in them.
PORTFOLIO TURNOVER RATE RISK. The Company anticipates that investors that are
part of a tactical or strategic asset allocation strategy may frequently redeem
or exchange shares of the Centurion U.S. Contra Fund and/or the Centurion
International Contra Fund, which will cause these Funds to experience higher
portfolio turnover. A higher portfolio turnover rate may result in the Funds
paying more brokerage commissions and generating greater tax liabilities for
shareholders. Additionally, high portfolio turnover may adversely affect the
ability of the Funds to meet their investment goals.
REGULATORY RISK. Positions in futures and related options will be entered into
only to the extent they constitute permissible positions for a Fund according to
applicable rules of the Commodity Futures Trading Commission. At times, a Fund
may be constrained in its ability to use futures, options on futures or other
derivatives by an unanticipated inability to close positions when it would be
most advantageous to do so. Additionally, to the extent that a Fund engages in
futures and related options for other than "bona fide" hedging purposes,
aggregate initial margin and premiums required to establish these positions may
not exceed 5% of the Fund's net asset value.
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<PAGE>
TRACKING ERROR RISK. Factors such as Fund expenses, imperfect correlation
between a Fund's investments and those of its benchmark, rounding of share
prices, changes to the benchmark, and regulatory policies may affect the
Centurion U.S. Equity Fund and the Centurion International Equity Fund's ability
to provide investment returns that correspond to the performance of their
respective benchmarks. Additionally, because these Funds may at times sell
securities at a loss in order to reduce the Funds' capital gains distributions,
these Funds should not be expected to achieve perfect correlation. The
magnitude of any tracking error may be affected by a higher portfolio turnover
rate.
TRADING HALT RISK. Certain major exchanges on which options and futures
contracts are traded, such as the Chicago Mercantile Exchange, have established
limits on how much an option or futures contract may decline over various time
periods within a day. If an option or futures contract's price declines more
than the established limits, trading on the exchange is halted on that
instrument. If a trading halt occurs before the close of a trading day, a Fund
may not be able to purchase or sell options or futures contracts. In such an
event, the Fund also may be required to use a "fair-value" method to price its
outstanding contracts.
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<PAGE>
INVESTOR EXPENSES
FEE TABLE
As an investor, you pay certain fees and expenses in connection with each Fund,
which are described in the table below. "Shareholder Fees" are paid from your
account. "Annual Fund Operating Expenses" are paid out of Fund assets, so their
effect is included in the share price.
<TABLE>
<CAPTION>
CENTURION
SHAREHOLDER FEES CENTURION INTERNATIONAL
(paid directly from your investment) CENTURION INTERNATIONAL CENTURION CONTRA FUND
U.S. EQUITY EQUITY FUND U.S. CONTRA
FUND FUND
<S> <C> <C> <C> <C>
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Sales charge "load" on purchases None None None None
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Deferred sales charge "load" None None None None
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Redemption fees None None None None
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ANNUAL FUND OPERATING EXPENSES
(deducted from Fund assets)
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Management fees .75% .75% 1.20% 1.20%
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Distribution and service (12b-1) fees None None None None
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Other expenses* .60% .65% .59% .64%
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TOTAL ANNUAL FUND OPERATING EXPENSES** 1.35% 1.40% 1.79% 1.84%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* "Other expenses" are based on estimated amounts for each Fund's first full
fiscal year since the Funds have recently commenced operations.
** "Total annual fund operating expenses" do not reflect fee waivers and expense
reimbursements. Centurion has voluntarily agreed to reduce or otherwise limit
its "Management fee" for each of the Centurion U.S. Contra Fund and Centurion
International Contra Fund as described below until further notice. Centurion
is under no obligation to continue these waivers.
<TABLE>
<CAPTION>
TOTAL ANNUAL FUND OPERATING
MANAGEMENT FEES EXPENSES
------------------------------ ------------------------------
<S> <C> <C>
Centurion U.S. Contra Fund .91% 1.50%
Centurion International Contra Fund .86% 1.50%
</TABLE>
EXPENSE EXAMPLES
This example is intended to help you compare the cost of investing in the funds
with the cost of investing in other mutual funds. the example, however, is only
hypothetical and your actual costs may be higher or lower.
The example assumes that you invest $10,000 in a fund for the time periods
indicated and then redeem all of your shares at the end of those periods. the
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR: 3 YEARS:
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<S> <C> <C>
CENTURION U.S. EQUITY FUND 137 428
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CENTURION INTERNATIONAL EQUITY FUND 143 443
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CENTURION U.S. CONTRA FUND 182 563
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CENTURION INTERNATIONAL CONTRA FUND 187 579
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</TABLE>
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<PAGE>
CENTURION U.S. EQUITY FUND
GOAL AND STRATEGIES
The Fund seeks to provide long-term after-tax growth consistent with reasonable
efforts to preserve capital. The Fund is sub-advised by Parametric, which
manages approximately 90% of the Fund's assets, and BEA, which manages the
remaining 10% of the Fund's assets. This allocation of the Fund's assets
between Parametric and BEA may vary from time to time. The Fund's investment
goal may be changed by the Board of Directors without shareholder approval.
Parametric seeks to provide investment returns that, over the long term,
correspond to the performance of the Russell Index. Parametric invests in
domestic companies that it believes are undervalued and demonstrate long-term
revenue and earnings growth potential. In evaluating companies for purchase,
Parametric uses a proprietary quantitative model that ranks companies based on
long-term price appreciation potential through analysis of such factors as
growth of sustainable earnings and dividend behavior.
Parametric utilizes certain strategies designed to minimize the impact of taxes
on investors' returns. The Fund seeks to minimize portfolio turnover in order
to defer the realization, and minimize the distribution, of capital gains.
Parametric considers the negative tax impact of realizing capital gains and the
positive tax impact of realizing capital losses when deciding whether to sell
portfolio securities. Parametric may, when appropriate, sell securities in
order to realize capital losses. Realized capital losses can be used to offset
realized capital gains and thus reduce the Fund's capital gains distributions.
Additionally, Parametric will attempt to sell shares on which it has the highest
cost basis in order to minimize capital gains distributions.
BEA uses certain hedging techniques designed to protect against or otherwise
cushion price declines in the value of the Fund's portfolio. Because of the
nature of the investments made by BEA on behalf of the Fund, BEA's trading could
have an impact on Fund performance that is proportionately greater than the
portion of Fund assets it manages.
PORTFOLIO INVESTMENTS
To achieve its investment goal, the Fund intends to invest at least 80% of its
assets in common stocks and other equity securities of U.S. issuers with total
market capitalizations greater than $1 billion at the time of purchase.
Normally, the Fund invests substantially all of its assets in equity securities,
including:
. common stocks;
. securities convertible into common stocks; and
. securities such as rights and warrants, whose values are based on common
stocks.
Additionally, in an attempt to provide downside protection for the Fund's
portfolio, BEA will trade in:
. options on securities and stock indexes;
. stock index futures contracts; and
. options on stock index futures contracts.
As a cash reserve, for liquidity purposes or as "cover" for positions it has
taken, the Fund may temporarily invest all or part of the Fund's assets in cash
or cash equivalents. The Fund may also invest in preferred stocks and non-
convertible debt securities such as bonds, debentures and notes, and engage, to
a limited extent, in other investment practices in order to achieve its
investment goal.
-7-
<PAGE>
RISK FACTORS
The Fund is subject to the following principal risk factors (discussed in the
Fund's "Risk/Return Summary"):
. Market Risk . Tracking Error Risk
Because the Fund seeks to provide attractive after-tax returns it may not
provide as high a return before taxes as other funds with similar investment
strategies that do not consider these tax implications. As such, investors who
are not subject to current income tax should consider whether the Fund's
investment strategies, in view of its tax-sensitive policies, are appropriate
for their needs.
The value of your investment in the Fund will tend to increase during times when
the value of the securities in the Russell Index is increasing. When the value
of the securities in the Russell Index decreases, however, the value of your
investment in the Fund should decrease as well. In both instances, the
investment techniques employed by BEA on behalf of the Fund are designed to
reduce the amount of these increases and decreases. To the extent that the Fund
invests in certain securities, the Fund may be affected by additional risks as
discussed in "More About Risk." Please read "More About Risk" carefully before
you invest in the Fund.
CENTURION INTERNATIONAL EQUITY FUND
GOAL AND STRATEGIES
The Fund seeks to provide long-term after-tax growth consistent with reasonable
efforts to preserve capital. The Fund is sub-advised by FISI, which manages
approximately 90% of the Fund's assets, and BEA, which manages the remaining 10%
of the Fund's assets. This allocation of the Fund's assets between FISI and BEA
may vary from time to time. The Fund's investment goal may be changed by the
Board of Directors without shareholder approval.
FISI seeks to provide investment returns that, over the long term, correspond to
the performance of the EAFE Index. FISI invests in companies located outside
the United States that it believes demonstrate long-term revenue and earnings
growth potential. In evaluating companies for purchase, FISI conducts extensive
financial screening and follows up with in-depth company analysis. FISI will
allocate the Fund's assets in countries that are broadly in line with the
country allocation of the EAFE Index, but may at times adjust the Fund's country
allocation towards those countries that it believes will produce superior
economic growth.
FISI utilizes certain strategies designed to minimize the impact of taxes on
investors' returns. The Fund seeks to minimize portfolio turnover in order to
defer the realization, and minimize the distribution, of capital gains. FISI
considers the negative tax impact of realizing capital gains and the positive
tax impact of realizing capital losses when deciding whether to sell portfolio
securities. FISI may, when appropriate, sell securities in order to realize
capital losses. Realized capital losses can be used to offset realized capital
gains and thus reduce the Fund's capital gains distributions. Additionally,
FISI will attempt to sell shares on which it has the highest cost basis in order
to minimize capital gains distributions.
BEA uses certain hedging techniques designed to protect against or otherwise
cushion price declines in the value of the Fund's portfolio. Because of the
nature of the investments made by BEA on behalf of the Fund, BEA's trading could
have an impact on Fund performance that is proportionately greater than the
portion of Fund assets it manages.
-8-
<PAGE>
PORTFOLIO INVESTMENTS
To achieve its investment goal, the Fund intends to invest at least 80% of its
assets in common stocks and other equity securities of non-U.S. issuers with
total market capitalizations greater than $1 billion at the time of purchase.
Normally, the Fund invests substantially all of its assets in equity securities,
including:
. common stocks;
. securities convertible into common stocks; and
. securities such as rights and warrants, whose values are based on common
stocks.
Additionally, in an attempt to provide downside protection for the Fund's
portfolio, BEA will trade in:
. options on securities, currencies and stock indexes;
. stock index futures contracts; and
. options on stock index futures contracts; and engage in
. forward currency contracts.
As a cash reserve, for liquidity purposes or as "cover" for positions it has
taken, the Fund may temporarily invest all or part of the Fund's assets in cash
or cash equivalents. The Fund may also invest in preferred stocks and non-
convertible debt securities such as bonds, debentures and notes, and engage, to
a limited extent, in other investment practices in order to achieve its
investment goal.
RISK FACTORS
The Fund is subject to the following principal risk factors (discussed in the
Fund's "Risk/Return Summary"):
<TABLE>
<CAPTION>
<S> <C>
. Foreign Securities Risk . Tracking Error Risk
. Market Risk
</TABLE>
Because the Fund seeks to provide attractive after-tax returns it may not
provide as high a return before taxes as other funds with similar investment
strategies that do not consider these tax implications. As such, investors who
are not subject to current income tax should consider whether the Fund's
investment strategies, in view of its tax-sensitive policies, are appropriate
for their needs.
The value of your investment in the Fund will tend to increase during times when
the value of the securities in the EAFE Index is increasing. When the value of
the securities in the EAFE Index decreases, however, the value of your
investment in the Fund should decrease as well. In both instances, the
investment techniques employed by BEA on behalf of the Fund are designed to
reduce the amount of these increases and decreases. To the extent that the Fund
invests in certain securities, the Fund may be affected by additional risks as
discussed in "More About Risk." Please read "More About Risk" carefully before
you invest in the Fund.
CENTURION U.S. CONTRA FUND
GOAL AND STRATEGIES
The Fund seeks to provide protection against declines in the value of the U.S.
equity allocation of certain assets custodied with Centurion (the "U.S. Equity
Benchmark"). This investment goal may be changed by the Board of Directors
without shareholder approval.
Centurion analyzes the various mutual funds held by certain of its clients (the
"Custodied Funds"), as well as the portfolio securities of these funds.
Centurion performs its analysis based on information provided by the Custodied
Funds and/or, because these funds are not required to report their securities
holdings to Centurion, by reviewing the historic securities holdings of the
Custodied Funds as described in public documents (which are required to be made
available at least semi-annually within 60 days after the close of the
applicable reporting
-9-
<PAGE>
period). Based on the information available, Centurion attempts to determine the
composition of the U.S. Equity Benchmark, including the relative proportion of
the underlying assets maintained in various asset classes, geographic locations
and industries, in order to advise BEA, the Fund's sub-adviser, of the level and
nature of the downside protection specifically desired for the U.S. Equity
Benchmark at any moment in time. BEA then uses statistical and quantitative
analysis to select investments designed to provide protection against declines
in the performance of the U.S. Equity Benchmark.
Centurion and BEA intend to pursue the Fund's investment goal regardless of
market conditions and will not invest the Fund's portfolio, in the aggregate, in
anticipation of rising U.S. equity prices.
PORTFOLIO INVESTMENTS
To achieve its investment goal, the Fund intends to use the following
instruments:
. options on securities and stock indexes;
. stock index futures contracts;
. options on stock index futures contracts; and
. DIAMONDS and SPDRs (securities issued by investment companies holding a
portfolio of securities linked to the Dow Jones Industrial Average and the
S&P 500 Index, respectively).
To the extent that the Fund invests in DIAMONDS or SPDRs, the Fund will
indirectly bear its proportionate share of the expenses of the underlying
investment vehicle issuing these instruments. The Fund's investments in
securities of other investment companies, such as DIAMONDS or SPDRs, are subject
to limitations under the Investment Company Act of 1940.
As a cash reserve, for liquidity purposes or as "cover" for positions it has
taken, the Fund may temporarily invest all or part of the Fund's assets in cash
or cash equivalents. The Fund may also engage, to a limited extent, in other
investment practices in order to achieve its investment goal.
RISK FACTORS
The Fund is subject to the following principal risk factors (discussed in the
Fund's "Risk/Return Summary"):
<TABLE>
<CAPTION>
<S> <C>
. Available Information Risk . Portfolio Turnover Rate Risk
. Derivatives Risk . Regulatory Risk
. Exposure Risk . Trading Halt Risk
. Market Risk
</TABLE>
The value of your investment in the Fund is designed to increase during times
when the value of the U.S. Equity Benchmark is decreasing. Conversely, when the
value of the U.S. Equity Benchmark increases, the value of your investment in
the Fund should decrease. To the extent that the Fund invests in certain
securities, the Fund may be affected by additional risks as discussed in "More
About Risk." Please read "More About Risk" carefully before you invest in the
Fund.
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<PAGE>
CENTURION INTERNATIONAL CONTRA FUND
GOAL AND STRATEGIES
The Fund seeks to provide protection against declines in the value of the non-
U.S. equity allocation of certain assets custodied with Centurion (the
"International Equity Benchmark"). This investment goal may be changed by the
Board of Directors without shareholder approval.
Centurion analyzes the various mutual funds held by certain of its clients (the
"Custodied Funds"), as well as the portfolio securities of these funds.
Centurion performs its analysis based on information provided by the Custodied
Funds and/or, because these funds are not required to report their securities
holdings to Centurion, by reviewing the historic securities holdings of the
Custodied Funds as described in public documents (which are required to be made
available at least semi-annually within 60 days after the close of the
applicable reporting period). Based on the information available, Centurion
attempts to determine the composition of the International Equity Benchmark,
including the relative proportion of the underlying assets maintained in various
asset classes, geographic locations and industries, in order to advise BEA, the
Fund's sub-adviser, of the level and nature of the downside protection
specifically desired for the International Equity Benchmark at any moment in
time. BEA then uses statistical and quantitative analysis to select investments
designed to provide protection against declines in the performance of the
International Equity Benchmark.
Centurion and BEA intend to pursue the Fund's investment goal regardless of
market conditions and will not invest the Fund's portfolio, in the aggregate, in
anticipation of rising international equity prices.
PORTFOLIO INVESTMENTS
To achieve its investment goal, the Fund intends to use the following
instruments:
. options on securities, currencies and stock indexes;
. stock index futures contracts;
. options on stock index futures contracts;
. WEBS (securities of an investment company designed to replicate the
composition and performance of selected issuers in particular foreign
countries); and
. forward currency contracts.
To the extent that the Fund invests in WEBS, the Fund will indirectly bear its
proportionate share of the expenses of the underlying investment vehicle issuing
these instruments. The Fund's investments in securities of other investment
companies, such as WEBS, are subject to limitations under the Investment Company
Act of 1940.
As a cash reserve, for liquidity purposes or as "cover" for positions it has
taken, the Fund may temporarily invest all or part of the Fund's assets in cash
or cash equivalents. The Fund may also engage, to a limited extent, in other
investment practices in order to achieve its investment goal.
RISK FACTORS
The Fund is subject to the following principal risk factors (discussed in the
Fund's "Risk/Return Summary"):
<TABLE>
<CAPTION>
<S> <C>
. Available Information Risk . Market Risk
. Derivatives Risk . Portfolio Turnover Rate Risk
. Exposure Risk . Regulatory Risk
. Foreign Securities Risk . Trading Halt Risk
</TABLE>
The value of your investment in the Fund is designed to increase during times
when the value of the International Equity Benchmark is decreasing. Conversely,
when the value of the International Equity Benchmark increases,
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<PAGE>
the value of your investment in the Fund should decrease. To the extent that the
Fund invests in certain securities, the Fund may be affected by additional risks
as discussed in "More About Risk." Please read "More About Risk" carefully
before you invest in the Fund.
MORE ABOUT RISK
GENERALLY
A Fund's risk profile is largely defined by the Fund's investment goal and
principal strategies. You will find a concise description of each Fund's risk
profile in "Risk/Return Summary." The Fund-by-Fund discussions contain more
detailed information about each Fund.
The Funds may use certain investment practices that have higher risks and
opportunities associated with them. However, each Fund has limitations and
policies designed to reduce these risks. To the extent a Fund utilizes these
securities or practices, its overall performance may be affected, either
positively or negatively.
TYPES OF INVESTMENT RISK
CORRELATION RISK. The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged. Hedging is the use of one
investment to offset the effects of another. Incomplete correlation can result
in unanticipated risks.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
EARLY CLOSING RISK. The risk that unanticipated early closings of securities
exchanges will result in a Fund being unable to sell or buy securities on that
day. If an exchange closes early on a day when a Fund needs to execute a high
volume of securities trades late in a trading day, the Fund might incur
substantial trading losses.
EURO CONVERSION RISK. The risk that the planned introduction of a single
European currency, the Euro, on January 1, 1999 for participating European
nations may result in complex conversion calculations and present other unique
uncertainties, including, whether payment and operational systems of financial
institutions will be ready by the scheduled launch date and the creation of
suitable clearing and settlement payment systems for the new currency.
Additional questions are raised by the fact that certain participating nations,
including the United Kingdom, will not officially implement the Euro on January
1, 1999. Centurion and the sub-advisers are working to address Euro-related
issues and understand that other key service providers are taking similar steps.
INFORMATION RISK. The risk that key information about an issuer, security or
market is inaccurate or unavailable.
INTEREST RATE RISK. The risk of a decline in an investment's market value
attributable to changes in interest rates. With bonds and other fixed income
securities, a rise in interest rates typically causes a fall in values, while a
fall in interest rates typically causes a rise in values.
LIQUIDITY RISK. The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on Fund management or
performance.
MANAGEMENT RISK. The risk that a strategy used by a Fund may fail to produce
the intended result. This risk is common to all mutual funds.
NATURAL EVENT RISK. The risk of losses attributable to natural disasters and
similar events.
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<PAGE>
OPPORTUNITY RISK. The risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in other investments.
POLITICAL RISK. The risk of losses attributable to government or political
instability, such as changes in tax or trade statutes, nationalization,
expropriation, currency blockage or governmental collapse and war.
VALUATION RISK. The risk that a Fund has valued certain of its securities at a
higher price that it can sell them for.
YEAR 2000 RISK. The risk that a Fund is adversely affected if the computer
systems used by the Fund's investment manager, sub-adviser(s) and other service
providers do not correctly handle the change from "99" to "00" on January 1,
2000. This problem may also adversely affect the issuers in which the Funds
invest. Centurion and the sub-advisers are working to avoid problems associated
with the Year 2000 and to obtain assurances from key service providers that they
are taking similar steps. There can be no assurance, however, that these
efforts will be sufficient.
MANAGEMENT
ABOUT THE BOARD OF DIRECTORS
The Board of Directors of the Company supervises each Fund's business affairs.
The Board approves all significant agreements between a Fund and the Fund's
service providers.
ABOUT THE INVESTMENT ADVISERS
The Investment Manager. The Board has selected Centurion, located at 2425 East
Camelback Road, Suite 530, Phoenix, AZ 85016-4228, to serve as investment
manager to the Funds. As investment manager to the Funds, Centurion is
responsible for:
. managing the day-to-day operations and business activities of the Funds;
. determining the level and nature of the downside protection desired for the
U.S. Contra Fund and the International Contra Fund;
. evaluating and selecting qualified investment sub-advisers to manage each
Fund's assets according to its investment goal and strategies;
. monitoring the activities of the Funds' sub-advisers; and
. providing office space and equipment.
Centurion, an independent trust company organized under the laws of the State of
Arizona in 1994, is exempt from registration under the Investment Advisers Act
of 1940. With more than $1.2 billion of assets under management and
administration as of September 30, 1998, Centurion and its affiliates provide a
full range of custodial, investment and trust products and services to their
customers.
THE SUB-ADVISERS. Centurion has engaged the following sub-adviser(s) to manage
all or a portion of a Fund's portfolio according to its investment goal and
strategies:
<TABLE>
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- ----------------------------------------------------------------------------------------------------------------------------
CENTURION U.S. EQUITY . PARAMETRIC PORTFOLIO ASSOCIATES, located at 7310 Columbia Center, 701 Fifth Avenue,
FUND Seattle, WA 98104-7090, is an investment management firm organized as a general
partnership. PIMCO Advisors, L.P., a publicly traded investment management organization,
is Parametric's supervisory partner and Parametric Management Inc. is the partnership's
managing partner. Parametric Portfolio Associates, Inc., the predecessor company,
commenced operations in 1987. Accounts managed by Parametric had combined assets of
approximately $3.1 billion as of
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------
September 30, 1998.
. BEA ASSOCIATES. See below.
- ------------------------------------------------------------------------------------------------------------------
CENTURION INT'L . Friends Ivory & Sime, Inc., located at One World Trade Center, Suite 2101, New York,
EQUITY FUND NY 10048-0080, is an investment management firm organized in 1978. FISI has entered
into a sub-advisory arrangement with Friends Ivory & Sime plc ("Friends"), its parent
company, whereby Friends will perform certain investment advisory and portfolio transaction
services for the Fund. Friends, located at Princes Court, 7 Princes Street, London,
England EC2R8AQ, is one of the leading independent investment managers in the United
Kingdom. As of September 30, 1998, FISI and its affiliates managed approximately $[ ]
billion, including approximately $[ ] billion of global equity and equity-related
investments.
. BEA ASSOCIATES. See below.
- ------------------------------------------------------------------------------------------------------------------
CENTURION U.S. CONTRA . BEA ASSOCIATES, located at One Citicorp Center, 153 East 53rd Street, New York, NY
FUND 10022, is a general partnership organized under the laws of the State of New York in
1990. BEA is a diversified investment adviser managing global equity, fixed income and
derivative securities accounts for corporate pension and profit-sharing plans, state
pension funds, union funds, endowments and other charitable institutions. Together with
its predecessor firms, BEA has been engaged in the investment advisory business for over
60 years. As of September 30, 1998, BEA managed approximately $[ ] billion in assets.
- ------------------------------------------------------------------------------------------------------------------
CENTURION INT'L . BEA ASSOCIATES. See above.
CONTRA FUND
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Management Fees. For services provided to the Funds, each Fund pays Centurion
the annual investment management fee described below (based on a percentage of
the Fund's average daily net assets):
<TABLE>
<CAPTION>
<S> <C>
CENTURION U.S. EQUITY FUND: 0.75% of the first $25 million of the average daily net assets of the Fund and 0.70%
of the amount in excess of $25 million
CENTURION INTERNATIONAL 0.75% of the first $50 million of the average daily net assets of the Fund, 0.725%
EQUITY FUND: of the next $50 million and 0.70% of the amount in excess of $100 million
CENTURION U.S. CONTRA
FUND: 1.20%
CENTURION INTERNATIONAL
CONTRA FUND: 1.20%
</TABLE>
From this amount, Centurion pays each sub-adviser an annual sub-advisory fee for
its services to the Fund. None of the Funds are responsible for payment of the
annual sub-advisory fee.
MEET THE MANAGERS
Each portfolio manager or advisory committee indicated below is primarily
responsible for the day-to-day management of the Fund.
<TABLE>
<CAPTION>
<S> <C>
CENTURION U.S. EQUITY FUND . (PARAMETRIC) David Stein, Managing Director
and Chief Investment Officer, and Thomas
Seto, Vice President, have served as co-
portfolio managers since the Fund's
inception. Prior to joining Parametric in
1996, Mr. Stein was the Director of
Investment Research at GTE Investment
Management from 1995 to 1996. Before then,
Mr. Stein served as the Director of Active
Equity Strategies at the Vanguard Group and
the Director of Quantitative Portfolio
Management and Research at IBM Retirement
Funds. Mr. Seto is responsible for
management of Parametric's
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
active U.S. equity strategies. Prior to joining Parametric in October 1998,
Mr. Seto served as the Head of U.S. Equity Index Investments at Barclays
Global Investors.
. (BEA) BEA utilizes a team of portfolio managers, assistant portfolio
managers and analysts acting together to manage the Fund (the "BEA Committee").
The BEA Committee -- which consists of Jeffrey A. Geller, Executive Director,
Mario Montoyo, Senior Vice President, Julian Emanuel, Vice President, Waiman
Leung, Vice President, and Anthony Antonucci, Assistant Vice President -- has
served as portfolio manager since the Fund's inception.
- ------------------------------------------------------------------------------------------------------------------
CENTURION INT'L EQUITY FUND . (FISI) Julie Dent, Head of International Equities at Friends, has served as
portfolio manager since the Fund's inception. Ms. Dent, who joined Friends
in 1986, has extensive experience in research and investing in Asian markets,
and has been involved in country asset allocation for the past seven years.
. (BEA) The BEA Committee (discussed above under "U.S. Equity Fund") has
served as portfolio manager since the Fund's inception.
- ------------------------------------------------------------------------------------------------------------------
CENTURION U.S. CONTRA FUND . (BEA) The BEA Committee (discussed above under "U.S. Equity Fund") has
served as portfolio manager since the Fund's inception.
- ------------------------------------------------------------------------------------------------------------------
CENTURION INT'L CONTRA FUND . (BEA) The BEA Committee (discussed above under "U.S. Equity Fund") has
served as portfolio manager since the Fund's inception.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
ACCOUNT POLICIES
PRICING OF SHARES
You pay no sales charges on initial or subsequent investments in the funds.
your price for fund shares is the fund's net asset value ("NAV") per share,
which is generally calculated at the later of the close of regular trading on
the new york stock exchange (typically 4 p.m. eastern time) or the time for
settlement of the funds' options and futures contracts, if any (typically 4:15
p.m. eastern time), each day the exchange is open for business. your purchase
order will be priced at the next NAV calculated after your order is accepted by
the fund. your redemption request will be priced at the next NAV calculated
after the fund receives the request in proper form.
Options and futures contracts purchased and held by a fund are valued at the
close of the securities or commodities exchanges on which they are traded
(typically 4:15 p.m. eastern time). these times are referred to as "valuation
times." each fund values its securities based on market value or, where market
quotations are not readily available or are believed not to reflect market value
at valuation times, based on fair value as determined in good faith using
consistently applied procedures established by the fund's board. debt
obligations that will mature in 60 days or less are valued on the basis of
amortized cost, unless the board determines that using this method would not
reflect the investments' value.
Some fund securities may be listed on foreign exchanges that are open on days
(such as saturdays) when the funds do not compute their prices. this could cause
the value of a fund's portfolio investments to be affected by trading on days
when you cannot buy or sell shares.
BUYING SHARES
Currently, only investors who have entered into an investment management
agreement with an investment professional and have a custodial relationship with
centurion are eligible to buy shares of the funds. investment professionals may
charge fees for their services in addition to the expenses charged by the funds
and may set
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<PAGE>
different minimum investments or limitations on buying or selling
shares than those described below. investors should consult their investment
professional if in doubt.
MINIMUM INITIAL INVESTMENT: $2,500
MINIMUM SUBSEQUENT INVESTMENT: $250
All investments must be in U.S. dollars. Third-Party checks cannot be accepted.
you may be charged a fee for any check that does not clear. In its discretion,
subject to review by the Board, Centurion may waive the above minimum investment
requirements.
Selling Shares
When selling shares, your order will be processed promptly and you will
generally receive the proceeds within a week. Before selling recently purchased
shares, please note that if the fund has not yet collected payment for the
shares you are selling, it may delay sending the proceeds for up to eight
business days.
Some circumstances require written sell orders, along with signature guarantees.
These include:
. amounts of $100,000 or more;
. amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days; or
. requests to send the proceeds to a different payee or address.
A signature guarantee helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. Please call us to
ensure that your signature guarantee will be processed correctly.
GENERAL POLICIES
If your account falls below $2,000, the Fund may ask you to increase your
balance. If it still remains below $2,000 after 60 days, the Fund may close
your account and send you the proceeds.
Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as the Fund takes
reasonable measures to verify the order.
Each Fund reserves the right to:
. refuse any purchase or exchange request that could adversely affect the Fund
or its operations, including those from any individual or group who, in the
Fund's view, is likely to engage in excessive trading;
. refuse any purchase or exchange request in excess of 1% of the Fund's total
assets;
. change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions;
. change its minimum investment amounts;
. delay sending out redemption proceeds for up to seven days if doing so sooner
would adversely affect the Fund (generally applies only in cases of very
large redemptions, excessive trading or during unusual market conditions);
and
. make a "redemption in kind" (payment in portfolio securities rather than
cash) if the amount you are redeeming is large enough to affect Fund
operations.
SHAREHOLDER SERVICES
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<PAGE>
EXCHANGE PRIVILEGE
You can exchange $2,500 or more from one Fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the Fund description in this Prospectus for any Fund into which you
are exchanging. Any new account established through an exchange will have the
same privileges as your original account (as long as they are available). No
fee is currently charged on exchanges.
TELEPHONE PRIVILEGE
To move money between your bank account and your Fund account with a phone call,
use the telephone privilege. You can set up this privilege on your account by
providing bank account information and following the instructions on your
application.
ACCOUNT STATEMENTS
You will automatically receive regular account statements. You will also be
sent a yearly statement detailing the tax characteristics of any dividends and
distributions you have received.
DISTRIBUTION POLICIES AND TAXES
DISTRIBUTIONS
As a Fund investor, you are entitled to your share of the Fund's net income and
gains on its investments. The Fund passes these earnings along to its
shareholders as distributions.
Each Fund earns dividends from stocks and interest from bond, money market and
other investments. These are passed along as dividend distributions. A Fund
realizes capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital gains distributions, a portion
of which may be taxable to you as ordinary income.
Each Fund declares and pays its net income and capital gains annually. A Fund's
capital gains are usually distributed in November or December.
When you open an account, specify on your account application how you want to
receive your distributions. Most investors have their distributions reinvested
in additional shares of the same Fund. Distributions will be automatically
reinvested unless you choose on your account application to have your
distributions mailed to you by check or sent by electronic transfer.
For retirement accounts, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash.
TAXES
As with any investment, you should consider how your investment in a Fund will
be taxed. Unless your account is an IRA or other tax-advantaged account, you
should be aware of the potential tax implications. Please consult your tax
professional concerning your own tax situation.
TAXES ON DISTRIBUTIONS. As long as a Fund continues to meet the requirements
for being a tax-qualified regulated investment company, it pays no federal
income tax on the earnings it distributes to shareholders.
Consequently, distributions you receive from a Fund, whether reinvested or taken
in cash, are generally considered taxable. Distributions from a Fund's long-
term capital gains are taxed as capital gains; distributions from other sources
are generally taxed as ordinary income.
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<PAGE>
Some dividends paid in January may be taxable as if they had been paid the
previous December. If you buy shares shortly before or on the "record date"
(the date that establishes you as the person to receive the upcoming
distribution) you will receive a portion of the money you just invested in the
form of a taxable distribution.
If you fail to provide your correct taxpayer identification number on your
application, or you have been notified by the IRS that you are subject to backup
withholding, the Funds may withhold 31% of all distributions to you for federal
taxes. In the case of an individual, your taxpayer identification number is
your social security number.
The form 1099 that is mailed to you every January details your distributions and
their federal tax category.
TAXES ON TRANSACTIONS. Any time you sell or exchange shares, it is considered a
taxable event for you. Depending on the purchase price and the sale price of
the shares you sell or exchange, you may have a gain or loss on the transaction.
You are responsible for any tax liabilities generated by your transactions.
FUND DETAILS
ABOUT THE DISTRIBUTOR
CFBDS, Inc. serves as the distributor for the Company and is responsible for
making shares of the Funds available to you. The distributor provides
shareholder and distribution services to Fund shareholders at no charge.
ABOUT THE ADMINISTRATOR AND CONSULTANT
Mutual Management Corp. ("MMC") serves as the administrator for the Company and
is responsible for overseeing all aspects of the Company's administration and
operations. MMC provides investment management and administration services to
investment companies that had aggregate assets under management, as of September
30, 1998, over $108 billion.
Salomon Smith Barney Inc. ("SSB"), an affiliate of MMC, provides consulting
services to the Funds through its Consulting Group division. As a consultant,
SSB furnishes statistical and other factual information to the Funds, as well as
advice regarding general economic factors and market trends.
BENCHMARK INFORMATION
None of the Funds is sponsored, endorsed, sold or promoted by Frank Russell
Company ("Frank Russell") or Morgan Stanley, Dean Witter & Co. ("Morgan
Stanley"), which own service mark rights to the Russell Index and EAFE Index,
respectively. Neither Frank Russell nor Morgan Stanley make any representations
or warranty, implied or express, to investors in the Funds, or any member of the
public, regarding the advisability of investing in the Funds or the ability of
the russell index or the EAFE Index, respectively, to track general stock market
performance.
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<PAGE>
FOR ADDITIONAL INFORMATION
More information about the Funds is available free upon request, including the
following:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
These reports include financial statements, portfolio investments and detailed
performance information. The annual report also provides a discussion of the
market conditions and investment strategies that significantly affected fund
performance during the last fiscal year and includes the independent
accountants' report.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more details about the funds and their investments. A current
SAI has been filed with the SEC and is incorporated by reference (is legally
considered part of this prospectus).
Please contact the Company to obtain more information about the Funds, inquire
about your account or request a free copy of the current annual/semi-annual
report or SAI:
. By telephone: 800-451-2010
. By mail: Centurion Funds, Inc.
2425 East Camelback Road, Suite 530
Phoenix, AZ 85016-4228
You can also obtain copies of the SAI and other information about the Funds from
your Investment Professional.
You may visit the SEC's Internet Website (www.sec.gov) to view the SAI, material
incorporated by reference and other information. You can also obtain copies of
this information by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, D.C. 20549-6009. You may review and copy
information about the Funds, including the SAI, at the SEC's Public Reference
Room in Washington, D.C. To find out more about the public reference room, call
the SEC at 1-800-SEC-0330.
<TABLE>
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INVESTMENT MANAGER: ADMINISTRATOR: INDEPENDENT ACCOUNTANT:
Centurion Trust Company Mutual Management Corp. KPMG Peat Marwick LLP
2425 E. Camelback Rd., Suite 530 388 Greenwich St. 345 Park Ave.
Phoenix, AZ 85016-4228 New York, NY 10013 New York, NY 10154
SUB-ADVISERS: DISTRIBUTOR: CUSTODIANS:
BEA Associates CFBDS, Inc. PNC Bank, National Association
One Citicorp Center, 153 E. 53rd St. 21 Milk St., 5th Flr. 17th and Chestnut Sts.
New York, NY 10022 Boston, MA 02109 Philadelphia, PA 19103
Friends Ivory & Sime, Inc. TRANSFER AGENT: The Chase Manhattan Bank
One World Trade Center, Suite 2101 First Data Investor Services 4 Chase MetroTech Center
New York, NY 10048-0080 Group, Inc. Brooklyn, NY 11245
Exchange Place
Parametric Portfolio Associates Boston, MA 02109 COUNSEL:
7310 Columbia Center Willkie Farr & Gallagher
701 Fifth Avenue 787 Seventh Ave.
Seattle, WA 98104-7090 New York, NY 10019-6099
</TABLE>
SEC File No. 811-8977
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
December 4, 1998
-----------------------
CENTURION FUNDS, INC.
__________________________
CENTURION U.S. EQUITY FUND
CENTURION INTERNATIONAL EQUITY FUND
CENTURION U.S. CONTRA FUND
CENTURION INTERNATIONAL CONTRA FUND
__________________________
CONTENTS
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PAGE
----
Organization of the Company............................................... 2
Investment Goals and Policies............................................. 2
Management of the Funds................................................... 27
Additional Purchase and Redemption Information............................ 30
Exchange Privilege........................................................ 31
Additional Information Concerning Taxes................................... 31
Determination of Performance.............................................. 36
Principal Stockholders.................................................... 37
Other Information......................................................... 37
Financial Statements...................................................... 38
Appendix Description of Ratings.......................................... A-1
This Statement of Additional Information is meant to be read in conjunction
with the Prospectus for Centurion Funds, Inc. (the "Company") dated December
4, 1998, as amended or supplemented from time to time (the "Prospectus"), and
is incorporated by reference in its entirety into the Prospectus. The Company
currently offers four separately managed portfolios: Centurion U.S. Equity Fund
(the "U.S. Equity Fund"), Centurion International Equity Fund (the
"International Equity Fund"), Centurion U.S. Contra Fund (the "U.S. Contra
Fund") and Centurion International Contra Fund (the "International Contra Fund")
(together, the "Funds," and each, a "Fund"). Because this Statement of
Additional Information is not itself a prospectus, no investment in shares of a
Fund should be made solely upon the information contained herein. Copies of the
Prospectus and information regarding the Funds' current performance, when
available, may be obtained by calling the Company at (800) 451-2010. Information
regarding the status of shareholder accounts may be obtained by calling the
Company at (800) 451-2010 or by writing to the Company at 2425 East Camelback
Road, Phoenix, Arizona 85016-4228.
<PAGE>
ORGANIZATION OF THE COMPANY
The Company is a diversified open-end management investment company that
was organized as a corporation on August 20, 1998 under the laws of the State of
Maryland. The Company's Charter authorizes the Board of Directors (the "Board")
to issue 500,000,000 full and fractional shares of capital stock, $.001 par
value, of which 100,000,000 shares are designated a series called the "Centurion
U.S. Equity Fund," 100,000,000 shares are designated a series called the
"Centurion International Equity Fund," 150,000,000 shares are designated a
series called the "Centurion U.S. Contra Fund," and 150,000,000 shares are
designated a series called the "Centurion International Contra Fund."
INVESTMENT GOALS AND POLICIES
As stated in the Prospectus, the investment goal of the U.S. Equity Fund
and the International Equity Fund (together, the "Equity Funds") is to provide
long-term after-tax growth consistent with reasonable efforts to preserve
capital. The investment goal of the U.S. Contra Fund is to provide protection
against declines in the value of the U.S. equity allocation of certain assets
custodied with Centurion Trust Company ("Centurion"). The investment goal of
the International Contra Fund is to provide protection against declines in the
value of the non-U.S. equity allocation of certain assets custodied with
Centurion. The following information supplements the discussion of each Fund's
investment goal and policies in the Prospectus. There are no assurances that a
Fund will achieve its investment goal.
Centurion serves as investment manager to each Fund. Centurion has engaged
Parametric Portfolio Associates ("Parametric") and BEA Associates ("BEA") as
sub-advisers to the U.S. Equity Fund, Friends Ivory & Sime, Inc. ("FISI") and
BEA as sub-advisers to the International Equity Fund, and BEA as sub-adviser to
both the U.S. Contra Fund and the International Contra Fund (together, the
"Contra Funds"). The term "Adviser," as used in this Statement of Additional
Information, shall refer to Centurion, Parametric, FISI and/or BEA, as
applicable.
Options, Futures and Currency Exchange Transactions
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Securities Options. Each Fund may write covered call options on stock and
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debt securities and may purchase U.S. exchanged-traded and over-the counter
("OTC") put and call options.
A Fund realizes fees (referred to as "premiums") for granting the rights
evidenced by the options it has written. A put option embodies the right of its
purchaser to compel the writer of the option to purchase from the option holder
an underlying security at a specified price for a specified time period or at a
specified time. In contrast, a call option embodies the right of its purchaser
to compel the writer of the option to sell to the option holder an underlying
security at a specified price for a specified time period or at a specified
time.
The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities
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alone. In return for a premium, a Fund as the writer of a covered call option
forfeits the right to any appreciation in the value of the underlying security
above the strike price for the life of the option (or until a closing purchase
transaction can be effected). Nevertheless, a Fund as a call writer retains the
risk of a decline in the price of the underlying security. The size of the
premiums that a Fund may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or increase their
option-writing activities.
In the case of options written by a Fund that are deemed covered by virtue
of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, a Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, a Fund will not bear any market risk, since the Fund will have the
absolute right to receive from the issuer of the underlying security an equal
number of shares to replace the borrowed securities, but the Fund may incur
additional transaction costs or interest expenses in connection with any such
purchase or borrowing.
Additional risks exist with respect to certain of the securities for which
a Fund may write covered call options. For example, if a Fund writes covered
call options on mortgage-backed securities, the mortgage-backed securities that
it holds as cover may, because of scheduled amortization or unscheduled
prepayments, cease to be sufficient cover. If this occurs, a Fund will
compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.
Options written by a Fund will normally have expiration dates between one
and twelve months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities at
the times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. A Fund may write (i) in-the-money call options when the Adviser
expects that the price of the underlying security will remain flat or decline
moderately during the option period, (ii) at-the-money call options when the
Adviser expects that the price of the underlying security will remain flat or
advance moderately during the option period and (iii) out-of-the-money call
options when the Adviser expects that the premiums received from writing the
call option plus the appreciation in market price of the underlying security
up to the exercise price will be greater than the appreciation in the price of
the underlying security alone. In any of the preceding situations, if the market
price of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by the
premium received. To secure its obligation to deliver the underlying security
when it writes a call option, a Fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation (the "Clearing Corporation") and of the securities exchange
on which the option is written.
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Prior to their expirations, put and call options may be sold in closing
sale or purchase transactions (sales or purchases by a Fund prior to the
exercise of options that it has purchased or written, respectively, of options
of the same series) in which a Fund may realize a profit or loss from the sale.
An option position may be closed out only where there exists a secondary market
for an option of the same series on a recognized securities exchange or in the
over-the-counter market. When a Fund has purchased an option and engages in a
closing sale transaction, whether the Fund realizes a profit or loss will depend
upon whether the amount received in the closing sale transaction is more or less
than the premium the Fund initially paid for the original option plus the
related transaction costs. Similarly, in cases where a Fund has written an
option, it will realize a profit if the cost of the closing purchase transaction
is less than the premium received upon writing the original option and will
incur a loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option. A Fund may engage in a closing
purchase transaction to realize a profit, to prevent an underlying security with
respect to which it has written an option from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the outstanding
option's expiration). The obligation of a Fund under an option it has written
would be terminated by a closing purchase transaction, but the Fund would not be
deemed to own an option as a result of the transaction. So long as the
obligation of a Fund as the writer of an option continues, the Fund may be
assigned an exercise notice by the broker-dealer through which the option was
sold, requiring the Fund to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or a
Fund effects a closing purchase transaction. A Fund can no longer effect a
closing purchase transaction with respect to an option once it has been assigned
an exercise notice.
There is no assurance that sufficient trading interest will exist to create
a liquid secondary market on a securities exchange for any particular option or
at any particular time, and for some options no such secondary market may exist.
A liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow or other unforeseen events have at times rendered certain of the
facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, a Fund's ability
to terminate options positions established in the over-the-counter market may be
more limited than for exchange-traded options and may also involve the risk that
securities dealers participating in over-the-counter transactions would fail to
meet their obligations to the Fund. Each Fund, however, intends to purchase
over-the-counter options only from dealers whose debt securities, as determined
by the Adviser, are considered to be investment grade. If, as a covered call
option writer, a Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise. In either
case, a Fund would continue to be at market risk on the security and could face
higher transaction costs, including brokerage commissions.
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Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or written, or
exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that a Fund and other
clients of the Adviser and certain of its affiliates may be considered to be
such a group. A securities exchange may order the liquidation of positions
found to be in violation of these limits and it may impose certain other
sanctions. These limits may restrict the number of options a Fund will be able
to purchase on a particular security.
Stock Index Options. Each Fund may purchase and write exchange-listed and
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OTC put and call options on stock indexes. A stock index measures the movement
of a certain group of stocks by assigning relative values to the common stocks
included in the index, fluctuating with changes in the market values of the
stocks included in the index. Some stock index options are based on a broad
market index, such as the NYSE Composite Index, or a narrower market index such
as the Standard & Poor's 100. Indexes may also be based on a particular
industry or market segment.
Options on stock indexes are similar to options on stock except that (i)
the expiration cycles of stock index options are monthly, while those of stock
options are currently quarterly, and (ii) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (a) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (b) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the index and the exercise
price of the option times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Stock index options may be offset by entering into closing transactions as
described above for securities options.
OTC Options. Each Fund may purchase OTC or dealer options or sell OTC
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options. Unlike exchange-listed options where an intermediary or clearing
corporation, such as the Clearing Corporation, assures that all transactions in
such options are properly executed, the responsibility for performing all
transactions with respect to OTC options rests solely with the writer and the
holder of those options. A listed call option writer, for example, is obligated
to deliver the underlying stock to the clearing organization if the option is
exercised, and the clearing organization is then obligated to pay the writer the
exercise price of the option. If a Fund were to purchase a dealer option,
however, it would rely on the dealer from whom it purchased the option to
perform if the option were exercised. If the dealer fails to honor the exercise
of the option by a Fund, the Fund would lose the premium it paid for the option
and the expected benefit of the transaction.
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Listed options generally have a continuous liquid market while dealer
options have none. Consequently, a Fund will generally be able to realize the
value of a dealer option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when a Fund writes a dealer option, it
generally will be able to close out the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which the Fund
originally wrote the option. Although a Fund will seek to enter into dealer
options only with dealers who will agree to and that are expected to be capable
of entering into closing transactions with the Fund, there can be no assurance
that the Fund will be able to liquidate a dealer option at a favorable price at
any time prior to expiration. The inability to enter into a closing transaction
may result in material losses to a Fund. Until a Fund, as a covered OTC call
option writer, is able to effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used to cover the written option
until the option expires or is exercised. This requirement may impair a Fund's
ability to sell portfolio securities or, with respect to currency options,
currencies at a time when such sale might be advantageous. In the event of
insolvency of the other party, a Fund may be unable to liquidate a dealer
option.
Futures Activities. Each Fund may enter into foreign currency, interest
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rate and stock index futures contracts and purchase and write (sell) related
options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return.
A Fund will not enter into futures contracts and related options for which
the aggregate initial margin and premiums (discussed below) required to
establish positions other than those considered to be "bona fide hedging" by the
CFTC exceed 5% of the Fund's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. Each Fund reserves the right to engage in transactions involving futures
contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with the Fund's
policies. There is no overall limit on the percentage of Fund assets that may
be at risk with respect to futures activities.
The over the counter market in forward foreign currency exchange contracts
offers less protection against defaults by the other party to such instruments
than is available for currency instruments traded on an exchange. Such
contracts are subject to the risk that the counterparty to the contract will
default on its obligations. Since these contracts are not guaranteed by an
exchange or clearinghouse, a default on the contract would deprive a Fund of
unrealized profits, transaction costs or the benefits of a currency hedge or
force the Fund to cover its purchase or sale commitments, if any, at the current
market price. Currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks, or
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the failure to intervene, or by currency controls or political developments in
the U.S. or abroad.
Futures Contracts. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specified non-U.S. currency at a specified price, date, time and place. An
interest rate futures contract provides for the future sale by one party and the
purchase by the other party of a certain amount of a specific interest rate
sensitive financial instrument (debt security) at a specified price, date, time
and place. Stock indexes are capitalization weighted indexes which reflect the
market value of the stock listed on the indexes. A stock index futures contract
is an agreement to be settled by delivery of an amount of cash equal to a
specified multiplier times the difference between the value of the index at the
close of the last trading day on the contract and the price at which the
agreement is made.
No consideration is paid or received by a Fund upon entering into a futures
contract. Instead, a Fund is required to deposit in a segregated account with
its custodian an amount of cash or liquid securities acceptable to the broker,
equal to approximately 1% to 10% of the contract amount (this amount is subject
to change by the exchange on which the contract is traded, and brokers may
charge a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to a Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. The broker will have access to
amounts in the margin account if a Fund fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from the
broker, will be made daily as the currency, financial instrument or stock index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as "marking-to-
market." A Fund will also incur brokerage costs in connection with entering
into futures transactions.
At any time prior to the expiration of a futures contract, a Fund may elect
to close the position by taking an opposite position, which will operate to
terminate the Fund's existing position in the contract. Positions in futures
contracts and options on futures contracts (described below) may be closed out
only on the exchange on which they were entered into (or through a linked
exchange). No secondary market for such contracts exists. Although each Fund
intends to enter into futures contracts only if there is an active market for
such contracts, there is no assurance that an active market will exist at any
particular time. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended for specified
periods during the day. It is possible that futures contract prices could move
to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions at an
advantageous price and subjecting a Fund to substantial losses. In such event,
and in the event of adverse price movements, a Fund would be required to make
daily cash payments of variation margin. In such situations, if a Fund had
insufficient cash, it might have to sell securities to meet daily variation
margin requirements at a time when it would be disadvantageous to do so. In
addition, if the transaction is entered into for
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hedging purposes, in such circumstances a Fund may realize a loss on a futures
contract or option that is not offset by an increase in the value of the hedged
position. Losses incurred in futures transactions and the costs of these
transactions will affect a Fund's performance.
Options on Futures Contracts. Each Fund may purchase and write put and
call options on foreign currency, interest rate and stock index futures
contracts and may enter into closing transactions with respect to such options
to terminate existing positions. There is no guarantee that such closing
transactions can be effected; the ability to establish and close out positions
on such options will be subject to the existence of a liquid market.
An option on a currency, interest rate or stock index futures contract, as
contrasted with the direct investment in such a contract, gives the purchaser
the right, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time prior to the expiration date
of the option. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a long
position if the option is a put). Upon exercise of an option, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures margin account, which represents the amount by which the market price of
the futures contract exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract. The
potential loss related to the purchase of an option on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because
the value of the option is fixed at the point of sale, there are no daily cash
payments by the purchaser to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Fund.
Currency Exchange Transactions. The value in U.S. dollars of the assets of
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a Fund that are invested in foreign securities may be affected favorably or
unfavorably by changes in exchange control regulations, and the Fund may incur
costs in connection with conversion between various currencies. Currency
exchange transactions may be from any non-U.S. currency into U.S. dollars or
into other appropriate currencies. A Fund will conduct its currrency exchange
transactions (i) on a spot (i.e., cash) basis at the rate prevailing in the
currency exchange market, (ii) through entering into futures contracts or
options on such contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing
exchange-traded currency options.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks and brokers) and their customers. Forward
currency contracts are similar to currency futures contracts, except that
futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.
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At or before the maturity of a forward contract, a Fund may either sell a
portfolio security and make delivery of the currency, or retain the security and
fully or partially offset its contractual obligation to deliver the currency by
negotiating with its trading partner to purchase a second, offsetting contract.
If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices.
Currency Options. Each Fund may purchase exchange-traded put and call
options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.
Currency Hedging. A Fund's currency hedging will be limited to hedging
involving either specific transactions or portfolio positions in the aggregate.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of a Fund generally accruing in connection with
the purchase or sale of its portfolio securities. Position hedging is the sale
of forward currency with respect to portfolio security positions. A Fund may
not position hedge to an extent greater than the aggregate market value (at the
time of entering into the hedge) of the hedged securities.
A decline in the U.S. dollar value of a foreign currency in which a Fund's
securities are denominated will reduce the U.S. dollar value of the securities,
even if their value in the foreign currency remains constant. The use of
currency hedges does not eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that can be achieved in the
future. For example, in order to protect against diminutions in the U.S. dollar
value of securities it holds, a Fund may purchase currency put options. If the
value of the currency does decline, a Fund will have the right to sell the
currency for a fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on the U.S. dollar value of its securities that
otherwise would have resulted. Conversely, if a rise in the U.S. dollar value
of a currency in which securities to be acquired are denominated is projected,
thereby potentially increasing the cost of the securities, a Fund may purchase
call options on the particular currency. The purchase of these options could
offset, at least partially, the effects of the adverse movements in exchange
rates. The benefit to a Fund derived from purchases of currency options, like
the benefit derived from other types of options, will be reduced by premiums and
other transaction costs. Because transactions in currency exchange are
generally conducted on a principal basis, no fees or commissions are generally
involved. Currency hedging involves some of the same risks and considerations
as other transactions with similar instruments. Although currency hedges limit
the risk of loss due to a decline in the value of a hedged currency, at the same
time, they also limit any potential gain that might result should the value of
the currency increase. If a devaluation is generally anticipated, a Fund may
not be able to contract to sell a currency at a price above the devaluation
level it anticipates.
While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect
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other factors that may affect the value of a Fund's investments and a currency
hedge may not be entirely successful in mitigating changes in the value of the
Fund's investments denominated in that currency. A currency hedge, for example,
should protect a Yen-denominated bond against a decline in the Yen, but will not
protect a Fund against a price decline if the issuer's creditworthiness
deteriorates.
Swaps. Each Fund may enter into swaps relating to indexes, currencies and
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equity interests of foreign issuers. A swap transaction is an agreement between
a Fund and a counterparty to act in accordance with the terms of the swap
contract. Index swaps involve the exchange by a Fund with another party of the
respective amounts payable with respect to a notional principal amount related
to one or more indexes. Currency swaps involve the exchange of cash flows on a
notional amount of two or more currencies based on their relative future values.
An equity swap is an agreement to exchange streams of payments computed by
reference to a notional amount based on the performance of a basket of stocks or
a single stock. A Fund may enter into these transactions to preserve a return
or spread on a particular investment or portion of its assets, to protect
against currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. A Fund may also use these transactions for speculative
purposes, such as to obtain the price performance of a security without actually
purchasing the security in circumstances, for example, the subject security is
illiquid, is unavailable for direct investment or available only on less
attractive terms. Swaps have risks associated with them including possible
default by the counterparty to the transaction, illiquidity and, where swaps are
used as hedges, the risk that the use of a swap could result in losses greater
than if the swap had not been employed.
A Fund will usually enter into swaps on a net basis (i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the agreement, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments). Swaps do not involve the delivery
of securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps is limited to the net amount of payments that a Fund
is contractually obligated to make. If the counterparty to a swap defaults, a
Fund's risk of loss consists of the net amount of payments that the Fund is
contractually entitled to receive. Where swaps are entered into for good faith
hedging purposes, the Adviser believes such obligations do not constitute senior
securities under the Investment Company Act of 1940, as amended (the "1940
Act"), and, accordingly, will not treat them as being subject to a Fund's
borrowing restrictions. Where swaps are entered into for other than hedging
purposes, a Fund will segregate an amount of cash or liquid securities having a
value equal to the accrued excess of its obligations over entitlements with
respect to each swap on a daily basis.
Hedging. In addition to entering into options, futures and currency
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exchange transactions for other purposes, including generating current income to
offset expenses or increase return, a Fund may enter into these transactions as
hedges to reduce investment risk, generally by making an investment expected to
move in the opposite direction of a portfolio position. A hedge is designed to
offset a loss in a portfolio position with a gain in the hedged
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position; at the same time, however, a properly correlated hedge will result in
a gain in the portfolio position being offset by a loss in the hedged position.
As a result, the use of options, futures, contracts and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in the value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. With respect to futures contracts, since the value of portfolio
securities will far exceed the value of the futures contracts sold by a Fund, an
increase in the value of the futures contracts could only mitigate, but not
totally offset, the decline in the value of the Fund's assets.
In hedging transactions based on an index, whether a Fund will realize a
gain or loss from the purchase or writing of options on an index depends upon
movements in the level of stock prices in the stock market generally or, in the
case of certain indexes, in an industry or market segment, rather than movements
in the price of a particular stock. The risk of imperfect correlation increases
as the composition of a Fund's portfolio varies from the composition of the
index. In an effort to compensate for imperfect correlation of relative
movements in the hedged position and the hedge, a Fund's hedge positions may be
in a greater or lesser dollar amount than the dollar amount of the hedged
position. Such "over hedging" or "under hedging" may adversely affect a Fund's
net investment results if market movements are not as anticipated when the hedge
is established. Stock index futures transactions may be subject to additional
correlation risks. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
stock index and futures markets. Secondly, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market also may cause temporary
price distortions. Because of the possibility of price distortions in the
futures market and the imperfect correlation between movements in the stock
index and movements in the price of stock index futures, a correct forecast of
general market trends by the Adviser still may not result in a successful
hedging transaction.
A Fund will engage in hedging transactions only when deemed advisable by
the Adviser, and successful use by a Fund of hedging transactions will be
subject to the Adviser's ability to predict trends in currency, interest rate or
securities markets, as the case may be, and to correctly predict movements in
the directions of the hedge and the hedged position and the correlation between
them, which predictions could prove to be inaccurate. This requires different
skills and techniques than predicting changes in the price of individual
securities, and there can be no assurance that the use of these strategies will
be successful. Even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or trends. Losses incurred in hedging
transactions and the costs of these transactions will affect a Fund's
performance.
Asset Coverage for Forward Contracts, Options, Futures and Options on
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Futures. Each Fund will comply with guidelines established by the U.S.
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Securities and Exchange Commission (the "SEC") with respect to coverage of
forward currency contracts; options
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written by a Fund on securities and indexes; and currency, interest rate and
index futures contracts and options on these futures contracts. These guidelines
may, in certain instances, require segregation by a Fund of cash or liquid
securities.
For example, a call option written by a Fund on securities may require the
Fund to hold the securities subject to the call (or securities convertible into
the securities without additional consideration) or to segregate assets (as
described above) sufficient to purchase and deliver the securities if the call
is exercised. A call option written by a Fund on an index may require the Fund
to own portfolio securities that correlate with the index or to segregate assets
(as described above) equal to the excess of the index value over the exercise
price on a current basis. A Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. If a Fund holds a futures or forward contract, the Fund could
purchase a put option on the same futures or forward contract with a strike
price as high or higher than the price of the contract held. A Fund may enter
into fully or partially offsetting transactions so that its net position,
coupled with any segregated assets (equal to any remaining obligation), equals
its net obligation. Asset coverage may be achieved by other means when
consistent with applicable regulatory policies.
Additional Information on Other Investment Practices
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Foreign Investments. Investors should recognize that investing in foreign
-------------------
companies involves certain risks, including those discussed below, which are not
typically associated with investing in U.S. issuers.
Foreign Currency Exchange. Since a Fund may invest in securities
denominated in currencies other than the U.S. dollar, and since a Fund may
temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, a Fund may be affected favorably or
unfavorably by exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of a foreign
currency relative to the U.S. dollar will result in a corresponding change in
the dollar value of Fund assets denominated in that foreign currency. Changes
in foreign currency exchange rates may also affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to shareholders by a
Fund. The rate of exchange between the U.S. dollar and other currencies is
determined by the forces of supply and demand in the foreign exchange markets.
Changes in the exchange rate may result over time from the interaction of many
factors directly or indirectly affecting economic and political conditions in
the United States and a particular foreign country, including economic and
political developments in other countries. Of particular importance are rates
of inflation, interest rate levels, the balance of payments and the extent of
government surpluses or deficits in the United States and the particular foreign
country, all of which are in turn sensitive to the monetary, fiscal and trade
policies pursued by the governments of the United States and foreign countries
important to international trade and finance. Governmental intervention may
also play a significant role. National governments rarely voluntarily allow
their currencies to float freely in response to economic forces. Sovereign
governments use a variety of techniques, such as intervention by a country's
central
12
<PAGE>
bank or imposition of regulatory controls or taxes, to affect the exchange rates
of their currencies. A Fund may use hedging techniques with the objective of
protecting against loss through the fluctuation of the value of the yen against
the U.S. dollar, particularly the forward market in foreign exchange, currency
options and currency futures. See "Currency Exchange Transactions" and "Futures
Activities" above.
Euro Conversion. The planned introduction of a single European currency,
the Euro, on January 1, 1999 for participating European nations in the Economic
and Monetary Union may present unique risks and uncertainties for investors in
those countries, including (i) whether the payment and operational systems of
banks and other financial institutions will be ready by the scheduled launch
date; (ii) the creation of suitable clearing and settlement payment schemes for
the Euro; (iii) the legal treatment of outstanding financial contracts after
January 1, 1999 that refer to existing currencies rather than the Euro; (iv) the
fluctuation of the Euro relative to non-Euro currencies during the transition
period from January 1, 1999 to December 31, 2000 and beyond; and (v) whether the
interest rate, tax and labor regimes of the European countries participating in
the Euro will converge over time. Further, the conversion of the currencies of
other Economic and Monetary Union countries, such as the United Kingdom, and the
admission of other countries, including Central and Eastern European countries,
to the Economic and Monetary Union could adversely affect the Euro. These or
other factors may cause market disruptions before or after the introduction of
the Euro and could adversely affect the value of foreign securities and
currencies held by the Funds. The Euro conversion also raises tax issues such
as whether the conversion of a non-Euro currency to the Euro creates a
"realization event" for a financial instrument denominated in the non-Euro
currency and the appropriate time to recognize any gain or loss. Depending on
how the tax authorities rule on these issues, the Euro conversion may result in
taxable gain or loss on non-Euro denominated instruments that have not been sold
by the Funds at the time of conversion.
Information. There may be less publicly available information about
foreign securities and about the foreign company or government issuing them than
is available about a domestic company or government entity. Foreign companies
are generally not subject to uniform financial reporting standards, practices
and requirements comparable to those applicable to U.S. companies.
Political Instability. With respect to some foreign countries, there is
the possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of a Fund, political or social instability, or
domestic developments which could affect U.S. investments in those and
neighboring countries.
Delays. Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold.
13
<PAGE>
Foreign Debt Securities. The returns on foreign debt securities reflect
interest rates and other market conditions prevailing in those countries and the
effect of gains and losses in the denominated currencies against the U.S.
dollar, which have had a substantial impact on investment in foreign fixed-
income securities. The relative performance of various countries' fixed-income
markets historically has reflected wide variations relating to the unique
characteristics of each country's economy. Year-to-year fluctuations in certain
markets have been significant, and negative returns have been experienced in
various markets from time to time.
The foreign government securities in which a Fund may invest generally
consist of obligations issued or backed by national, state or provincial
governments or similar political subdivisions or central banks in foreign
countries. Foreign government securities also include debt obligations of
supranational entities, which include international organizations designated or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.
Foreign government securities also include debt securities of "quasi-
governmental agencies" and debt securities denominated in multinational currency
units of an issuer (including supranational issuers). Debt securities of quasi-
governmental agencies are issued by entities owned by either a national, state
or equivalent government or are obligations of a political unit that is not
backed by the national government's full faith and credit and general taxing
powers. An example of a multinational currency unit is the European Currency
Unit ("ECU"). An ECU represents specified amounts of the currencies of certain
member states of the European Economic Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies.
General. Individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national product, rate
of inflation, capital reinvestment, resource self-sufficiency, and balance of
payments positions. A Fund may invest in securities of foreign governments (or
agencies or instrumentalities thereof), and many, if not all, of the foregoing
considerations apply to such investments as well.
Depositary Receipts. The assets of a Fund may be invested in the
-------------------
securities of foreign issuers in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and International Depositary
Receipts ("IDRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts, are receipts
issued in Europe, and IDRs, which are sometimes referred to as Global Depositary
Receipts, are issued outside the United States. EDRs and IDRs are typically
issued by non-U.S. banks and trust companies
14
<PAGE>
and evidence ownership of either foreign or domestic securities. Generally, ADRs
in registered form are designed for use in U.S. securities markets and EDRs and
IDRs in bearer form are designed for use in European and non-U.S. securities
markets, respectively.
U.S. Government Securities. Each Fund may invest in debt obligations of
--------------------------
varying maturities issued or guaranteed by the United States government, its
agencies or instrumentalities ("U.S. Government Securities"). Direct
obligations of the U.S. Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance. U.S. Government
Securities also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association ("GNMA"), General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal
Land Banks, Federal National Mortgage Association ("FNMA"), Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board
and Student Loan Marketing Association. A Fund may also invest in instruments
that are supported by the right of the issuer to borrow from the U.S. Treasury
and instruments that are supported by the credit of the instrumentality.
Because the U.S. government is not obligated by law to provide support to an
instrumentality it sponsors, a Fund will invest in obligations issued by such an
instrumentality only if the Adviser determines that the credit risk with respect
to the instrumentality does not make its securities unsuitable for investment by
the Fund.
Below Investment Grade Securities. The market values of below investment
---------------------------------
grade securities and unrated securities of comparable quality tend to react less
to fluctuations in interest rate levels than do those of investment grade
securities and the market values of certain of these securities also tend to be
more sensitive to individual corporate developments and changes in economic
conditions than below investment grade securities. In addition, these
securities generally present a higher degree of credit risk. Issuers of these
securities are often highly leveraged and may not have more traditional methods
of financing available to them so that their ability to service their
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such issuers
is significantly greater because below investment grade securities generally are
unsecured and frequently are subordinated to prior payment of senior
indebtedness.
A Fund may have difficulty disposing of certain of these securities because
there may be a thin trading market. Because there is no established retail
secondary market for many of these securities, the Funds anticipate that these
securities could be sold only to a limited number of dealers or institutional
investors. To the extent a secondary trading market for these securities does
exist, it generally is not as liquid as the secondary market for investment
grade securities. The lack of a liquid secondary market, as well as adverse
publicity and investor perception with respect to these securities, may have an
adverse impact on market price and a Fund's ability to dispose of particular
issues when necessary to meet liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
The lack of a liquid secondary market for certain securities also
15
<PAGE>
may make it more difficult for a Fund to obtain accurate market quotations for
purposes of valuing the Fund and calculating net asset value.
The market value of securities rated below investment grade is more
volatile than that of investment grade securities. Factors adversely impacting
the market value of these securities will adversely impact a Fund's net asset
value. A Fund will rely on the judgment, analysis and experience of the Adviser
in evaluating the creditworthiness of an issuer. In this evaluation, the
Adviser will take into consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its operating
history, the quality of the issuer's management and regulatory matters.
Normally, below investment grade securities and comparable unrated securities
are not intended for short-term investment. A Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings of such securities.
Securities of Other Investment Companies. Each Fund may invest in
----------------------------------------
securities of other investment companies to the extent permitted under the 1940
Act. Presently, under the 1940 Act, a Fund may hold securities of another
investment company in amounts which (i) do not exceed 3% of the total
outstanding voting stock of such company, (ii) do not exceed 5% of the value of
the Fund's total assets and (iii) when added to all other investment company
securities held by the Fund, do not exceed 10% of the value of the Fund's total
assets.
DIAMONDS, SPDRs and WEBS ("Equity Equivalents"). DIAMONDS ("Dow Jones
-----------------------------------------------
Industrial Average Model New Depositary Shares") and SPDRs ("Standard & Poor's
Depositary Receipts") are exchange-traded securities that represent ownership in
long-term unit investment trusts established to accumulate and hold a portfolio
of common stocks that is intended to track the price performance and dividend
yield of the Dow Jones Industrial Average and the Standard & Poor's Composite
Stock Price Index, respectively. WEBS ("World Equity Benchmark Shares") are
exchange-traded shares of series of an investment company that are designed to
replicate the performance of a particular foreign equity market index.
Equity Equivalents may be used for several purposes, including, to simulate
full investment in the underlying index while retaining a cash balance for fund
management purposes, to facilitate trading, to reduce transaction costs or to
seek higher investment returns where an Equity Equivalent is priced more
attractively than securities in the underlying index. Because the expense
associated with an investment in Equity Equivalents may be substantially lower
than the expense of small investments directly in the securities comprising the
indices they seek to track, investments in Equity Equivalents may provide a
cost-effective means of diversifying a Fund's assets across a broad range of
equity securities.
To the extent a Fund invests in securities of other investment companies,
Fund shareholders would indirectly pay a portion of the operating costs of such
companies in addition to the expenses of its own operation. These costs include
management, brokerage, shareholder servicing and other operational expenses.
Indirectly, then, shareholders of a Fund that invests in Equity Equivalents may
pay higher operational costs than if they owned the underlying investment
companies directly. Additionally, a Fund's investments in such investment
companies are subject to limitations under the 1940 Act and market availability.
The prices of Equity Equivalents are derived and based upon the securities
held by the particular investment company. Accordingly, the level of risk
involved in the purchase or sale of an Equity Equivalent is similar to the risk
involved in the purchase or sale of traditional common stock, with the exception
that the pricing mechanism for such instruments is based on a basket of stocks.
The market prices of Equity Equivalents are expected to fluctuate in accordance
with both changes in the net asset values of their underlying indices and the
supply and demand for the instruments on the exchanges on which they are traded.
Substantial market or other disruptions affecting an Equity Equivalent could
adversely affect the liquidity and value of the shares of a Fund investing in
such instruments.
Lending of Portfolio Securities. Each Fund may lend portfolio securities
-------------------------------
to brokers, dealers and other financial organizations that meet capital and
other credit requirements or other criteria established by the Board. These
loans, if and when made, may not exceed 33-1/3% of a Fund's total assets taken
at value. A Fund will not lend portfolio securities to affiliates of the
Adviser unless they have applied for and received specific authority to do so
from the SEC. Loans of portfolio securities will be collateralized by cash,
letters of credit or U.S. Government Securities, which are maintained at all
times in an amount equal to at least 102% of the current market value of the
loaned securities. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Fund. From time to time, a Fund may return a part of the interest earned
from the investment of collateral received for securities loaned to the borrower
and/or a third party that is unaffiliated with the Fund and that is acting as a
"finder."
By lending its securities, a Fund can increase its income by continuing to
receive interest and any dividends on the loaned securities as well as by either
investing the collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid by the borrower when
U.S. Government Securities are used as collateral. Although the generation of
income is not the primary investment goal of the Funds, income received could be
used to pay a Fund's expenses and would increase an investor's total return.
Each Fund will adhere to the following conditions whenever its portfolio
securities are loaned: (i) the Fund must receive at least 102% cash collateral
or equivalent securities of the type discussed in the preceding paragraph from
the borrower; (ii) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral; (iii)
the Fund must be able to terminate the loan at any time; (iv) the Fund must
receive
16
<PAGE>
reasonable interest on the loan, as well as any dividends, interest or other
distributions on the loaned securities and any increase in market value; (v) the
Fund may pay only reasonable custodian fees in connection with the loan; and
(vi) voting rights on the loaned securities may pass to the borrower, provided,
however, that if a material event adversely affecting the investment occurs, the
Board must terminate the loan and regain the right to vote the securities. Loan
agreements involve certain risks in the event of default or insolvency of the
other party including possible delays or restrictions upon a Fund's ability to
recover the loaned securities or dispose of the collateral for the loan.
When-Issued Securities, Delayed-Delivery Transactions and Forward
-----------------------------------------------------------------
Commitments. Each Fund may purchase securities on a "when-issued" basis, for
- -----------
delayed delivery (i.e., payment or delivery occur beyond the normal settlement
date at a stated price and yield) or on a forward commitment basis. Each Fund
does not intend to engage in these transactions for speculative purposes, but
only in furtherance of its investment goal. These transactions occur when
securities are purchased or sold by a Fund with payment and delivery taking
place in the future to secure what is considered an advantageous yield and price
to a Fund at the time of entering into the transaction. The payment obligation
and the interest rate that will be received on when-issued securities are fixed
at the time the buyer enters into the commitment. Due to fluctuations in the
value of securities purchased or sold on a when-issued, delayed-delivery basis
or forward commitment basis, the prices obtained on such securities may be
higher or lower than the prices available in the market on the dates when the
investments are actually delivered to the buyers.
When a Fund agrees to purchase when-issued, delayed-delivery securities or
securities on a forward commitment basis, its custodian will set aside cash or
liquid securities equal to the amount of the commitment in a segregated account.
Normally, the custodian will set aside portfolio securities to satisfy a
purchase commitment, and in such a case a Fund may be required subsequently to
place additional assets in the segregated account in order to ensure that the
value of the account remains equal to the amount of the Fund's commitment. The
assets contained in the segregated account will be marked-to-market daily. It
may be expected that a Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. When a Fund engages in when-issued, delayed-delivery or
forward commitment transactions, it relies on the other party to consummate the
trade. Failure of the seller to do so may result in a Fund's incurring a loss
or missing an opportunity to obtain a price considered to be advantageous.
Repurchase Agreements. Each Fund may agree to purchase securities from a
---------------------
bank or recognized securities dealer and simultaneously commit to resell the
securities to the bank or dealer at an agreed-upon date and price reflecting a
market rate of interest unrelated to the coupon rate or maturity of the
purchased securities ("repurchase agreements"). A Fund would maintain custody
of the underlying securities prior to their repurchase; thus, the obligation of
the bank or dealer to pay the repurchase price on the date agreed to would be,
in effect, secured by such securities. If the value of such securities were
less than the repurchase price, plus interest, the other party to the agreement
would be required to provide additional collateral so that at all times the
collateral is at least 102% of the repurchase price plus accrued
17
<PAGE>
interest. Default by or bankruptcy of a seller would expose a Fund to possible
loss because of adverse market action, expenses and/or delays in connection with
the disposition of the underlying obligations. The financial institutions with
which a Fund may enter into repurchase agreements will be banks and non-bank
dealers of U.S. Government securities that are listed on the Federal Reserve
Bank of New York's list of reporting dealers, if such banks and non-bank dealers
are deemed creditworthy by the Fund's Adviser. The Adviser will continue to
monitor creditworthiness of the seller under a repurchase agreement, and will
require the seller to maintain during the term of the agreement the value of the
securities subject to the agreement to equal at least 102% of the repurchase
price (including accrued interest). In addition, the Adviser will require that
the value of this collateral, after transaction costs (including loss of
interest) reasonably expected to be incurred on a default, be equal to 102% or
greater than the repurchase price (including accrued premium) provided in the
repurchase agreement or the daily amortization of the difference between the
purchase price and the repurchase price specified in the repurchase agreement.
The Adviser will mark-to-market daily the value of the securities. Repurchase
agreements are considered to be loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements and Dollar Rolls. Each Fund may enter into
----------------------------------------------
reverse repurchase agreements with the same parties with whom it may enter into
repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by a Fund pursuant to its agreement to repurchase them at a
mutually agreed upon date, price and rate of interest. At the time a Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing cash or liquid
securities having a value not less than the repurchase price (including accrued
interest). The assets contained in the segregated account will be marked-to-
market daily and additional assets will be placed in such account on any day in
which the assets fall below the repurchase price (plus accrued interest). A
Fund's liquidity and ability to manage its assets might be affected when it sets
aside cash or portfolio securities to cover such commitments. Reverse
repurchase agreements involve the risk that the market value of the securities
retained in lieu of sale may decline below the price of the securities a Fund
has sold but is obligated to repurchase. In the event the buyer of securities
under a reverse repurchase agreement files for bankruptcy or becomes insolvent,
such buyer or its trustee or receiver may receive an extension of time to
determine whether to enforce a Fund's obligation to repurchase the securities,
and the Fund's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decision.
Each Fund also may enter into "dollar rolls," in which a Fund sells fixed-
income securities for delivery in the current month and simultaneously contracts
to repurchase similar but not identical (same type, coupon and maturity)
securities on a specified future date. During the roll period, the Fund would
forego principal and interest paid on such securities. The Fund would be
compensated by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. At the time a Fund enters into a dollar roll
transaction, it will place in a segregated account maintained with an approved
custodian cash or liquid securities having a value not less than the repurchase
price (including accrued interest) and will subsequently
18
<PAGE>
monitor the account to ensure that its value is maintained. Reverse repurchase
agreements and dollar rolls that are accounted for as financings are considered
to be borrowings under the 1940 Act.
Convertible Securities. Convertible securities in which a Fund may invest,
----------------------
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an
investor to benefit from increases in the market price of the underlying common
stock. Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock.
Structured Notes. Each Fund may invest in structured notes. The
----------------
distinguishing feature of a structured note is that the amount of interest
and/or principal payable on the notes is based on the performance of a benchmark
asset or market other than fixed-income securities or interest rates. Examples
of a benchmark include stock prices, currency exchange rates and physical
commodity prices. Investing in a structured note allows a Fund to gain exposure
to the benchmark asset or market, such as investments in certain emerging
markets that restrict investment by foreigners. The structured note fixes the
maximum loss that a Fund may experience in the event that the market does not
perform as expected. The performance tie can be a straight relationship or
leveraged, although the Adviser generally will not use leverage in its
structured note strategies. Depending on the terms of the note, a Fund may
forego all or part of the interest and principal that would be payable on a
comparable conventional note; a Fund's loss cannot exceed this foregone interest
and/or principal. An investment in a structured note involves risks similar to
those associated with a direct investment in the benchmark asset. Structured
notes will be treated as illiquid securities for investment limitation purposes.
Non-Publicly Traded and Illiquid Securities. Each Fund may not invest more
-------------------------------------------
than 15% of its net assets in non-publicly traded and illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market, repurchase agreements which have a maturity of longer than
seven days, certain Rule 144A Securities (as described below) and time deposits
maturing in more than seven days. Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.
Under current guidelines of the staff of the SEC, illiquid securities are
considered to include, among other securities, purchased OTC options, certain
cover for OTC options, securities subject to contractual or legal restrictions
on resale because they have not been registered under the Securities Act of
1933, as amended (the "Securities 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 Securities Act
are referred to as private placements or restricted securities and are purchased
directly from the
19
<PAGE>
issuer or in the secondary market. 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 without borrowing. 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 Securities 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.
Rule 144A Securities. Rule 144A under the Securities Act adopted by the
SEC allows for a broader institutional trading market for securities otherwise
subject to restriction on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act for
resales of certain securities to qualified institutional buyers. The Adviser
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.
An investment in Rule 144A Securities will be considered illiquid and
therefore subject to the Fund's limit on the purchase of illiquid securities
unless the Board or its delegates determines that the Rule 144A Securities are
liquid. In reaching liquidity decisions, the Board and its delegates may
consider, inter alia, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
Emerging Growth and Smaller Capitalization Companies; Unseasoned Issuers.
------------------------------------------------------------------------
Investments in securities of small- and medium-sized, emerging growth companies
and companies with continuous operations of less than three years ("unseasoned
issuers") involve considerations that are not applicable to investing in
securities of established, larger-capitalization issuers, including reduced and
less reliable information about issuers and markets, less stringent financial
disclosure requirements, illiquidity of securities and markets, higher brokerage
commissions and fees and greater market risk in general. Securities of these
companies may also involve greater risks since these securities may have limited
marketability and, thus, may be more volatile. Because such companies normally
have fewer shares
20
<PAGE>
outstanding than larger, more established companies, it may be more difficult
for a Fund to buy or sell significant amounts of such shares without an
unfavorable impact on prevailing prices. These companies may have limited
product lines, markets or financial resources and may lack management depth. In
addition, these companies are typically subject to a greater degree of changes
in earnings and business prospects than are larger, more established companies.
Although investing in securities of these companies offers potential for above-
average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value.
Rights Offerings and Purchase Warrants. Each Fund may invest in rights and
--------------------------------------
warrants to purchase newly created equity securities consisting of common and
preferred stock. The equity security underlying a right or warrant is
outstanding at the time the right or warrant is issued or is issued together
with the right or warrant.
Investing in rights and warrants can provide a greater potential for profit
or loss than an equivalent investment in the underlying security, and, thus, can
be a speculative investment. The value of a right or warrant may decline
because of a decline in the value of the underlying security, the passage of
time, changes in interest rates or in the dividend or other policies of the
company whose equity underlies the warrant or a change in the perception as to
the future price of the underlying security, or any combination thereof. Rights
and warrants generally pay no dividends and confer no voting or other rights
other than to purchase the underlying security.
Borrowing. Each Fund may borrow up to 33-1/3% of its total assets for
---------
temporary or emergency purposes, including to meet portfolio redemption requests
so as to permit the orderly disposition of portfolio securities or to facilitate
settlement transactions on portfolio securities. Investments (including roll-
overs) will not be made when borrowings exceed 5% of a Fund's net assets.
Although the principal of such borrowings will be fixed, a Fund's assets may
change in value during the time the borrowing is outstanding. Each Fund expects
that some of its borrowings may be made on a secured basis. In such situations,
either the custodian will segregate the pledged assets for the benefit of the
lender or arrangements will be made with a suitable subcustodian, which may
include the lender.
Other Investment Limitations
- ----------------------------
The investment limitations numbered 1 through 8 may not be changed without
the affirmative vote of the holders of a majority of the Fund's outstanding
shares. Such majority is defined as the lesser of (i) 67% or more of the shares
present at the meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the outstanding shares. Investment limitations 9 through 14 may be changed by a
vote of the Board at any time.
Each Fund may not:
1. Borrow money except that a Fund may (a) borrow from banks for temporary or
emergency purposes and (b) enter into reverse repurchase agreements; provided
that reverse
21
<PAGE>
repurchase agreements, dollar roll transactions that are accounted for as
financings and any other transactions constituting borrowing by the Fund may not
exceed 33-1/3% of the value of the Fund's total assets at the time of such
borrowing. For purposes of this restriction, the entry into currency
transactions, options, futures contracts, options on futures contracts, forward
commitment transactions and dollar roll transactions that are not accounted for
as financings (and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.
2. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the securities of
issuers conducting their principal business activities in the same industry;
provided that to the extent the benchmark of the Equity Funds is concentrated in
a particular industry, these Funds will be concentrated in that industry. This
limitation shall not apply to the purchase of U.S. Government Securities.
3. Purchase the securities of any issuer if as a result more than 5% of the
value of the Fund's total assets would be invested in the securities of such
issuer, except that this 5% limitation does not apply to U.S. Government
Securities and except that up to 25% of the value of the Fund's total assets may
be invested without regard to this 5% limitation.
4. Make loans, except that a Fund may purchase or hold fixed-income securities,
including structured securities, lend portfolio securities and enter into
repurchase agreements.
5. Underwrite any securities issued by others except to the extent that
investment in restricted securities and the sale of securities in accordance
with the Fund's investment goal, policies and limitations may be deemed to be
underwriting.
6. Purchase or sell real estate or invest in oil, gas or mineral exploration or
development programs, except that a Fund may invest in (a) securities secured by
real estate, mortgages or interests therein and (b) securities of companies that
invest in or sponsor oil, gas or mineral exploration or development programs.
7. Invest in commodities, except that a Fund may purchase and sell futures
contracts, including those relating to securities, currencies and indices, and
options on futures contracts, securities, currencies or indices, and purchase
and sell currencies on a forward commitment or delayed-delivery basis.
8. Issue any senior security except as permitted in the Fund's investment
limitations.
9. Purchase securities on margin, except that a Fund may obtain any short-term
credits necessary for the clearance of purchases and sales of securities. For
purposes of this restriction, the deposit or payment of initial or variation
margin in connection with transactions in currencies, options, futures contracts
or related options will not be deemed to be a purchase of securities on margin.
22
<PAGE>
10. Purchase securities of other investment companies except in connection with
a merger, consolidation, acquisition, reorganization or offer of exchange, or as
otherwise permitted under the 1940 Act.
11. Pledge, mortgage or hypothecate its assets, except to the extent necessary
to secure permitted borrowings and to the extent related to the deposit of
assets in escrow and in connection with the writing of covered put and call
options and purchase of securities on a forward commitment or delayed-delivery
basis and collateral and initial or variation margin arrangements with respect
to currency transactions, options, futures contracts, and options on futures
contracts.
12. Invest more than 15% of the Fund's net assets in securities which may be
illiquid because of legal or contractual restrictions on resale or securities
for which there are no readily available market quotations. For purposes of
this limitation, repurchase agreements with maturities greater than seven days
shall be considered illiquid securities.
13. Invest in rights and warrants (other than rights and warrants acquired by
the Fund as part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or market) would
exceed 10% of the value of the Fund's net assets.
14. Make additional investments (including roll-overs) if the Fund's borrowings
exceed 5% of its net assets.
If a percentage restriction (other than the percentage limitation set forth
in No. 1 and No. 12) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in the
values of portfolio securities or in the amount of a Fund's assets will not
constitute a violation of such restriction.
Portfolio Valuation
- -------------------
The Prospectus discusses the time at which the net asset value of each Fund
is determined for purposes of sales and redemptions. The following is a
description of the procedures used by each Fund in valuing its assets.
Securities listed on a U.S. securities exchange (including securities
traded through the NASDAQ National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
as of the time the valuation is made or, in the absence of sales, at the mean
between the bid and asked quotations. If there are no such quotations, the
value of the securities will be taken to be the highest bid quotation on the
exchange or market. Options or futures contracts will be valued similarly. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board.
Amortized cost involves valuing a portfolio instrument at its initial cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless
23
<PAGE>
of the impact of fluctuating interest rates on the market value of the
instrument. The amortized cost method of valuation may also be used with respect
to other debt obligations with 60 days or less remaining to maturity.
Notwithstanding the foregoing, in determining the market value of portfolio
investments, a Fund may employ outside organizations (a "Price Service") which
may use a matrix, formula or other objective method that takes into
consideration market indexes, matrices, yield curves and other specific
adjustments. The procedures of Pricing Services are reviewed periodically by the
officers of a Fund under the general supervision and responsibility of the
Board, which may replace a Pricing Service at any time. Securities, options and
futures contracts for which market quotations are not available and certain
other assets of a Fund will be valued at their fair value as determined in good
faith pursuant to consistently applied procedures established by the Board. In
addition, the Board or its delegates may value a security at fair value if it
determines that such security's value determined by the methodology set forth
above does not reflect its fair value.
Trading in securities in certain foreign countries is completed at various
times prior to the close of business on each business day in New York (i.e., a
day on which the New York Stock Exchange (the "NYSE") is open for trading). In
addition, securities trading in a particular country or countries may not take
place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and
days on which a Fund's net asset value is not calculated. As a result,
calculation of a Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain foreign portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of regular
trading on the NYSE will not be reflected in a Fund's calculation of net asset
value unless the Board or its delegates deems that the particular event would
materially affect net asset value, in which case an adjustment may be made. All
assets and liabilities initially expressed in foreign currency values will be
converted into U.S. dollar values at the prevailing rate as quoted by a Pricing
Service. If such quotations are not available, the rate of exchange will be
determined in good faith pursuant to consistently applied procedures established
by the Board.
Portfolio Transactions
- ----------------------
Each Fund's Adviser is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
goal. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Other purchases and sales
may be effected on a securities exchange or over-the-counter, depending on where
it appears that the best price or execution will be obtained. The purchase
price paid by a Fund to underwriters of newly issued securities usually includes
a concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among
24
<PAGE>
different brokers. On most foreign exchanges, commissions are generally fixed.
There is generally no stated commission in the case of securities traded in
domestic or foreign over-the-counter markets, but the price of securities traded
in over-the-counter markets includes an undisclosed commission or mark-up. U.S.
Government Securities are generally purchased from underwriters or dealers,
although certain newly issued U.S. Government Securities may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.
The Adviser will select specific portfolio investments and effect
transactions for a Fund and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions, the
Adviser will consider the factors it deems relevant, which may include the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of a broker or dealer and the reasonableness
of the commission, if any, for the specific transaction and on a continuing
basis. The Adviser may, in its discretion, effect transactions in portfolio
securities with dealers who provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to a
Fund and/or other accounts over which the Adviser exercises investment
discretion. The Adviser may place portfolio transactions with a broker or
dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if the Adviser determines in good faith that the amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of either that
particular transaction or of the overall responsibilities of the Adviser.
Research and other services received may be useful to the Adviser in serving
both a Fund and the Adviser's other clients and, conversely, research or other
services obtained by the placement of business of other clients may be useful to
the Adviser in carrying out its obligations to a Fund. Research may include
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities; furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends and
portfolio strategy; access to research analysts, corporate management personnel,
industry experts, economists and government officials; comparative performance
evaluation and technical measurement services and quotation services; and
products and other services (such as third party publications, reports and
analyses, and computer and electronic access, equipment, software, information
and accessories that deliver, process or otherwise utilize information,
including the research described above) that assist the Adviser in carrying out
its responsibilities. Research received from brokers or dealers is supplemental
to the Adviser's own research program. The fees payable to Centurion under its
advisory agreement with each Fund, and the fees payable to the sub-advisers
under their respective sub-advisory agreements with Centurion, are not reduced
by reason of the Adviser receiving any brokerage and research services.
Investment decisions for a Fund concerning specific portfolio securities
are made independently from those for other clients advised by the Adviser.
Such other investment clients may invest in the same securities as the
applicable Fund. When purchases or sales of
25
<PAGE>
the same security are made at substantially the same time on behalf of such
other clients, transactions are averaged as to price and available investments
allocated as to amount, in a manner which the Adviser believes to be equitable
to each client, including the applicable Fund. In some instances, this
investment procedure may adversely affect the price paid or received by the Fund
or the size of the position obtained or sold for the Fund. To the extent
permitted by law, the Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for such other
investment clients in order to obtain best execution. In no instance will
portfolio securities be purchased from or sold to the Adviser or its affiliates.
Transactions for a Fund may be effected on foreign securities exchanges.
In transactions for securities not actively traded on a foreign securities
exchange, each Fund will deal directly with the dealers who make a market in the
securities involved, except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually are acting as principal
for their own account. On occasion, securities may be purchased directly from
the issuer. Such portfolio securities are generally traded on a net basis and
do not normally involve brokerage commissions. Securities firms may receive
brokerage commissions on certain portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon exercise of options.
Each Fund may participate, if and when practicable, in bidding for the
purchase of securities for its portfolio directly from an issuer in order to
take advantage of the lower purchase price available to members of such a group.
A Fund will engage in this practice, however, only when the Adviser, in its sole
discretion, believes such practice to be otherwise in the Fund's interest.
Portfolio Turnover
------------------
As discussed in the Prospectus, the Company anticipates that investors in
the Contra Funds, as part of a tactical or strategic asset allocation strategy,
may frequently redeem or exchange shares of these Funds. The Contra Funds may
have to dispose of certain portfolio investments to maintain sufficient liquid
assets to meet such redemption and exchange requests, thereby resulting in
higher portfolio turnover. Because each Contra Fund's portfolio turnover rate
to a great extent will depend on the purchase, redemption and exchange activity
of the Fund's investors, it is difficult to estimate what the Fund's actual
turnover rate will be in the future. Additionally, because of the investment
techniques employed by the U.S. Equity Fund and the International Equity Fund to
reduce the realization of capital gains, it is anticipated that the annual
portfolio turnover rate for the these Funds will not exceed 50% and 100%,
respectively, under normal market conditions.
A Fund's portfolio turnover rate is calculated by the value of the
securities purchased or sold, excluding all securities whose maturities at the
time of acquisition were one year or less, divided by the average monthly value
of such securities owned during the year. Based on this calculation,
instruments, including options and futures contracts, with remaining maturities
of less than one year are excluded from the portfolio turnover rate. In any
given period, all of
26
<PAGE>
a Contra Fund's investments may have a remaining maturity of less than one year;
in which case, the portfolio turnover rate for that period would be equal to
zero.
MANAGEMENT OF THE FUNDS
Officers and Board of Directors
- -------------------------------
The business and affairs of each Fund is managed by the Company's Board in
accordance with the laws of the State of Maryland. The Board elects officers
who are responsible for the day-to-day operations of the Funds and who execute
policies formulated by the Board. Under the Company's Charter, the Board may
classify or reclassify any unissued shares of the Company into one or more
additional classes by setting or changing in any one or more respects their
relative rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption. The Board may similarly
classify or reclassify any class of the Company's shares into one or more series
and, without shareholder approval, may increase the number of authorized shares
of the Company.
The names (and ages) of the Company's directors and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below. An asterisk appears after the
name of each director who is an "interested person" of the Company, as defined
in the 1940 Act.
<TABLE>
<CAPTION>
Name (Age) and Address Position and Principal Occupation(s)
- ---------------------- -----------------------------------
<S> <C>
Charles P. Dickinson (60) Director. President of The Dickinson Co., a
5219 N. Casa Blanca Dr. #54 farming company, since 1972.
Paradise Valley, AZ 85253
Gerard P. Dipoto, Jr.* (52) Chairman of the Board, President and Chief Executive Officer.
2425 E. Camelback Rd, Suite 530 President of Centurion since 1997; Executive Vice President of
Phoenix, AZ 85016-4228 Sales, Marketing and Relationship Management at Investors
Fiduciary Trust Company from 1987 to 1997.
Timothy E. Kloenne (53) Director. President of Klontech Industrial Sales, Inc., a
5730 E. Leith Ln. quality control and inspection equipment sales company, since 1971.
Scottsdale, AZ 85254
Joseph F. Smith (50) Director. Owner of Compunet Engineering, a computer networking
9736 Legler St. company, since 1995; Executive Vice President and Director at
Lenexa, KS 66212 Investors Fiduciary Trust Company from 1993 to 1995.
Thomas M. Smith (55) Director. Realtor at Coldwell Banker Success Realty since 1990.
2525 E. Camelback Rd., Suite 150
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Phoenix, AZ 85016
Ron A. Link (34) Treasurer. Information Systems Manager at Centurion since March
2425 E. Camelback Rd, Suite 530 1998; Senior Staff CPA at Ferraro & McMurthy, P.C. from 1995 to
Phoenix, AZ 85016-4228 1998; Staff CPA at Zolondek, Blumenthal, Green, Freed &
Strossels, P.C. from 1993 to 1995.
Irving P. David (37) Controller. Director of Salomon Smith Barney Inc. and Mutual
388 Greenwich Street Management Corp. since 1994; Controller of several investment
New York, NY 10013 companies associated with Salomon Smith Barney Inc.; Assistant
Treasurer at First Investment Management Company from 1988 to
1994.
Paul A. Monroe (38) Vice President. Operations Manager at Centurion since 1997;
2425 E. Camelback Rd, Suite 530 Project Manager at Bank One, NA from 1996 to 1997; Assistant Vice
Phoenix, AZ 85016-4228 President and Manager at First Interstate Bank of Arizona,
NA/Wells Fargo from February 1996 to September 1996; Assistant
Vice President and Manager at Bank One, NA from 1977 to 1996.
Jennifer L. Stecker (30) Secretary. Finance Manager at Centurion since March 1998;
2425 E. Camelback Rd, Suite 530 Financial Analyst at MicroAge, Inc. from 1997 to 1998; Securities
Phoenix, AZ 85016-4228 Specialist at Centurion from 1994 to 1997; Sales Assistant at
Principal Financial Group from 1993 to 1994.
</TABLE>
No employee of Centurion or any of its affiliates receives compensation
from the Company for acting as an officer or director of the Company. The
Company pays each director who is not an "affiliated person" (as defined in the
1940 Act) of the Adviser, administrator or distributor an annual fee of $5,000
and $1,250 for each meeting of the Board attended by him for his services as
director, and reimburses such director for expenses incurred with his attendance
at Board meetings.
Directors' Total Compensation:
- -----------------------------
<TABLE>
NAME OF DIRECTOR TOTAL COMPENSATION FROM THE COMPANY+
<S> <C>
Charles P. Dickinson $ 8,750
- ------------------------------------------------------------------------------------------------------------------
Gerard P. Dipoto, Jr. None*
- ------------------------------------------------------------------------------------------------------------------
Timothy E. Kloenne $ 8,750
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph F. Smith $ 8,750
- ------------------------------------------------------------------------------------------------------------------
Thomas M. Smith $ 8,750
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Amounts shown are estimates of payments to be made, pursuant to existing
arrangements, for the remaining period of the Company's fiscal year ending
September 30, 1999.
* Mr. Dipoto receives compensation as an affiliate of Centurion and,
accordingly, receives no compensation from the Company.
As of the date of this Statement of Additional Information, the
directors and officers of the Company as a group owned less than 1% of the
outstanding shares of each Fund.
Investment Advisers
- -------------------
Centurion, located at 2425 East Camelback Road, Suite 530, Phoenix, AZ
85016-4228, serves as investment manager to the Funds. Centurion is a wholly-
owned subsidiary of CCM Group Inc., a holding company organized under the laws
of the State of Arizona. For a description of the fees paid to Centurion for
its services as investment manager to each of the Funds, see the
Prospectus.
Parametric, located at 7310 Columbia Center, 710 Fifth Avenue, Seattle,
Washington 98104-7090, serves as co-sub-adviser to the U.S. Equity Fund. PIMCO
Advisors, L.P., a publicly traded investment management organization, is
Parametric's supervisory partner and Parametric Management Inc. is the
partnership's managing partner. For its services as co-sub-adviser to the U.S.
Equity Fund, Centurion pays Parametric 0.30% of the first $25 million of the
average daily net assets of the Fund allocated to Parametric and 0.25% of the
amount in excess of $25 million.
FISI, located at One World Trade Center, Suite 2101, New York, NY 10048-
0080, effectively serves as co-sub-adviser to the International Equity Fund.
FISI is a wholly-owned subsidiary of Friends Ivory & Sime plc ("Friends"), a
global investment management company, which in turn is majority-owned by Friends
Provident Life Office, a mutual life assurance company registered in England. As
discussed in the Prospectus, FISI has entered into a sub-advisory arrangement
with Friends whereby Friends will perform certain investment advisory and
portfolio transaction services for the International Equity Fund, as may be
agreed upon from time to time by FISI and Friends. Currently, Friends is
responsible for the day-to-day management of the International Equity Fund's
assets allocated to FISI, and FISI reviews investment performance, policies and
guidelines, maintains certain books and records, and facilitates communication
between Friends and Centurion. For its services as co-sub-adviser to the
International Equity Fund, Centurion pays FISI 0.30% of the first $50 million of
the average daily net assets of the Fund allocated to FISI, 0.275% of the next
$50 million and 0.25% of the amount in excess of $100 million.
BEA Associates, located at One Citicorp Center, 153 East 53rd Street, New
York, NY 10022, serves as sub-adviser to the Contra Funds and co-sub-adviser to
each of the Equity Funds. BEA is a general partnership that is wholly-owned by
Credit Suisse Group, the second largest Swiss bank. For its services as sub-
adviser to the Contra Funds, Centurion pays BEA 0.85% of the average daily net
assets of each Contra Fund. For its services as co-sub-adviser to the Equity
Funds, Centurion pays BEA 0.10% of the average daily net assets of each Equity
Fund.
29
<PAGE>
Centurion serves as investment manager to the Funds pursuant to separate
investment management agreements ("Management Agreements"). Centurion, in turn,
has entered into separate sub-advisory agreements ("Sub-Advisory Agreements")
with each sub-adviser selected to manage all or a portion of a particular
Fund's portfolio according to its investment goal and strategies. Each Adviser
bears all expenses in connection with the performance of its services under the
applicable Management Agreement or Sub-Advisory Agreement. Each Fund pays
Centurion a fee for services provided under the Management Agreement that is
computed daily and paid monthly based on the value of the Fund's average net
assets. From this amount, Centurion pays the Fund's sub-adviser(s) a fee for
services provided under the Sub-Advisory Agreement that is likewise computed
daily and paid monthly based on the value of the Fund's average net assets.
Centurion and/or each Fund's sub-adviser may voluntarily waive a portion of its
fees from time to time and temporarily limit the expenses to be borne by a
Fund.
Administrator
- -------------
Mutual Management Corp. ("MMC"), located at 388 Greenwich Street, New York,
NY 10013, serves as administrator for the Company pursuant to an administration
agreement ("Administration Agreement"). As administrator, MMC generally
oversees all aspects of the Company's administration and operations. MMC
furnishes the Company with statistical and research data, clerical help,
accounting, data processing, bookkeeping, internal auditing and legal services
and certain other services required by the Company; prepares tax returns and
reports to the Company's shareholders; and prepares reports to and filings with
the SEC and state blue sky authorities. Each Fund pays MMC a fee for services
provided under the Administration Agreement that is computed daily and paid
monthly at an annual rate of 0.20% of the Fund's average daily net assets or
$50,000, whichever amount is greater. MMC may voluntarily waive a portion of its
fees from time to time and temporarily limit the expenses to be borne by a
Fund.
Distributor
- -----------
CFBDS, Inc., located at 21 Milk Street, 5th Floor, Boston, MA 02109, serves
as the distributor for the Company and is responsible for making shares of the
Funds available to investors. The distributor provides shareholder and
distribution services to the Funds at no charge.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of each Fund's shares is equal to the Fund's per share
net asset value. Information on how to purchase and redeem Fund shares and how
such shares are priced is included in the Prospectus.
Under the 1940 Act, each Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods
30
<PAGE>
as the SEC may permit. (Each Fund may also suspend or postpone the recordation
of an exchange of its shares upon the occurrence of any of the foregoing
conditions.)
If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, a Fund may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds. Each Fund intends to comply with Rule 18f-1 promulgated under the
1940 Act with respect to redemptions in kind.
EXCHANGE PRIVILEGE
An exchange privilege among the Funds is available to investors in each
Fund. The exchange privilege enables shareholders to acquire shares in a Fund
with a different investment goal when they believe that a shift between Funds is
an appropriate investment decision. This privilege is available to shareholders
residing in any state in which the shares being acquired may legally be sold.
Prior to any exchange, shareholders should review a copy of the current
prospectus of each Fund into which an exchange is being considered.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset value
of the Fund and the proceeds are invested on the same day, at a price as
described above, in shares of the Fund being acquired. The exchange privilege
may be modified or terminated at any time upon 30 days' notice to shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is a summary of the material United States federal income tax
considerations regarding the purchase, ownership and disposition of shares of a
Fund. Each prospective shareholder is urged to consult his own tax adviser with
respect to the specific federal, state, local and foreign tax consequences of
investing in a Fund. The summary is based on the laws in effect on the date of
this Statement of Additional Information, which are subject to change.
The Funds and Their Investments
- -------------------------------
Each Fund intends to qualify to be treated as a regulated investment
company each taxable year under the Internal Revenue Code of 1986, as amended
(the "Code"). To so qualify, a Fund must, among other things: (a) derive at
least 90% of its gross income in each taxable year from dividends, interest,
payments with respect to securities, loans and gains from the sale or other
disposition of stock or securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end of
each quarter of a Fund's taxable year, (i) at least 50% of the market value of a
Fund's assets is represented by cash, securities of other regulated investment
31
<PAGE>
companies, United States government securities and other securities, with such
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of a Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its assets
is invested in the securities (other than United States government securities or
securities of other regulated investment companies) of any one issuer or any two
or more issuers that a Fund controls and are determined to be engaged in the
same or similar trades or businesses or related trades or businesses. Each Fund
expects that all of its foreign currency gains will be directly related to its
principal business of investing in stocks and securities.
As a regulated investment company, each Fund will not be subject to United
States federal income tax on its net investment income (i.e., income other than
its net realized long- and short-term capital gains) and its net realized long-
and short-term capital gains, if any, that it distributes to its shareholders,
provided that an amount equal to at least 90% of the sum of its investment
company taxable income (i.e., 90% of its taxable income minus the excess, if
any, of its net realized long-term capital gains over its net realized short-
term capital losses (including any capital loss carryovers), plus or minus
certain other adjustments as specified in the Code) and its net tax-exempt
income for the taxable year is distributed, but will be subject to tax at
regular corporate rates on any taxable income or gains that it does not
distribute. Furthermore, each Fund will be subject to a United States corporate
income tax with respect to such distributed amounts in any year that it fails to
qualify as a regulated investment company or fails to meet this distribution
requirement.
The Code imposes a 4% nondeductible excise tax on each Fund to the extent a
Fund does not distribute by the end of any calendar year at least 98% of its net
investment income for that year and 98% of the net amount of its capital gains
(both long-and short-term) for the one-year period ending, as a general rule, on
October 31 of that year. For this purpose, however, any income or gain retained
by a Fund that is subject to corporate income tax will be considered to have
been distributed by year-end. In addition, the minimum amounts that must be
distributed in any year to avoid the excise tax will be increased or decreased
to reflect any underdistribution or overdistribution, as the case may be, from
the previous year. Each Fund anticipates that it will pay such dividends and
will make such distributions as are necessary in order to avoid the application
of this tax.
With regard to a Fund's investments in foreign securities, exchange control
regulations may restrict repatriations of investment income and capital or the
proceeds of securities sales by foreign investors such as a Fund and may limit a
Fund's ability to pay sufficient dividends and to make sufficient distributions
to satisfy the 90% and excise tax distribution requirements.
If, in any taxable year, a Fund fails to qualify as a regulated investment
company under the Code or fails to meet the distribution requirement, it would
be taxed in the same manner as an ordinary corporation and distributions to its
shareholders would not be deductible by a Fund in computing its taxable income.
In addition, in the event of a failure to qualify, a Fund's distributions, to
the extent derived from a Fund's current or accumulated earnings and profits
would constitute dividends (eligible for the corporate dividends-received
deduction)
32
<PAGE>
which are taxable to shareholders as ordinary income, even though those
distributions might otherwise (at least in part) have been treated in the
shareholders' hands as long-term capital gains. If a Fund fails to qualify as a
regulated investment company in any year, it must pay out its earnings and
profits accumulated in that year in order to qualify again as a regulated
investment company. In addition, if a Fund failed to qualify as a regulated
investment company for a period greater than one taxable year, a Fund may be
required to recognize any net built-in gains (the excess of the aggregate gains,
including items of income, over aggregate losses that would have been realized
if it had been liquidated) in order to qualify as a regulated investment company
in a subsequent year.
A Fund's transactions in foreign currencies, forward contracts, options and
futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by a Fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to a Fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require a Fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat them as if they
were closed out) and (b) may cause a Fund to recognize income without receiving
cash with which to pay dividends or make distributions in amounts necessary to
satisfy the distribution requirements for avoiding income and excise taxes.
Each Fund will monitor its transactions, will make the appropriate tax elections
and will make the appropriate entries in its books and records when it acquires
any foreign currency, forward contract, option, futures contract or hedged
investment in order to mitigate the effect of these rules and prevent
disqualification of a Fund as a regulated investment company.
Passive Foreign Investment Companies. If a Fund purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United States federal income tax on
a portion of any "excess distribution" or gain from the disposition of such
shares even if such income is distributed as a taxable dividend by a Fund to its
shareholders. Additional charges in the nature of interest may be imposed on a
Fund in respect of deferred taxes arising from such distributions or gains. If
a Fund were to invest in a PFIC and elected to treat the PFIC as a "qualified
electing fund" under the Code, in lieu of the foregoing requirements, a Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if not
distributed to a Fund, and such amounts would be subject to the 90% and excise
tax distribution requirements described above. In order to make this election,
a Fund would be required to obtain certain annual information from the passive
foreign investment companies in which it invests, which may be difficult or not
possible to obtain.
Recently, legislation was enacted that provides a mark-to-market election
for regulated investment companies effective for taxable years beginning after
December 31, 1997. This election would result in a Fund being treated as if it
had sold and repurchased all of the PFIC stock at the end of each year. In this
case, a Fund would report gains as ordinary income and would deduct losses as
ordinary losses to the extent of previously recognized gains. The election,
once made, would be effective for all subsequent taxable years of a Fund, unless
33
<PAGE>
revoked with the consent of the IRS. By making the election, a Fund could
potentially ameliorate the adverse tax consequences with respect to its
ownership of shares in a PFIC, but in any particular year may be required to
recognize income in excess of the distributions it receives from PFICs and its
proceeds from dispositions of PFIC company stock. A Fund may have to distribute
this "phantom" income and gain to satisfy its distribution requirement and to
avoid imposition of the 4% excise tax. Each Fund will make the appropriate tax
elections, if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.
Taxation of United States Shareholders
- --------------------------------------
Dividends and Distributions. Any dividend declared by a Fund in October,
November or December of any calendar year and payable to shareholders of record
on a specified date in such a month shall be deemed to have been received by
each shareholder on December 31 of such calendar year and to have been paid by a
Fund not later than such December 31, provided that such dividend is actually
paid by a Fund during January of the following calendar year. Each Fund intends
to distribute annually to its shareholders substantially all of its investment
company taxable income, and any net realized long-term capital gains in excess
of net realized short-term capital losses (including any capital loss
carryovers). Each Fund currently expects to distribute any excess annually to
its shareholders. However, if a Fund retains for investment an amount equal to
all or a portion of its net long-term capital gains in excess of its net short-
term capital losses and capital loss carryovers, it will be subject to a
corporate tax (currently at a rate of 35%) on the amount retained. In that
event, a Fund will designate such retained amounts as undistributed capital
gains in a notice to its shareholders who (a) will be required to include in
income for United Stares federal income tax purposes, as long-term capital
gains, their proportionate shares of the undistributed amount, (b) will be
entitled to credit their proportionate shares of the 35% tax paid by the Fund on
the undistributed amount against their United States federal income tax
liabilities, if any, and to claim refunds to the extent their credits exceed
their liabilities, if any, and (c) will be entitled to increase their tax basis,
for United States federal income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed capital gains included in the
shareholder's income. Organizations or persons not subject to federal income
tax on such capital gains will be entitled to a refund of their pro rata share
of such taxes paid by a Fund upon filing appropriate returns or claims for
refund with the Internal Revenue Service (the "IRS").
Dividends of net investment income and distributions of net realized short-
term capital gains are taxable to a United States shareholder as ordinary
income, whether paid in cash or in shares. Distributions of net-long-term
capital gains, if any, that a Fund designates as capital gains dividends are
taxable as long-term capital gains, whether paid in cash or in shares and
regardless of how long a shareholder has held shares of a Fund. Dividends and
distributions paid by a Fund (except for the portion thereof, if any,
attributable to dividends on stock of U.S. corporations received by a Fund) will
not qualify for the deduction for dividends received by corporations.
Distributions in excess of a Fund's current and accumulated earnings and profits
will, as to each shareholder, be treated as a tax-free return of capital, to the
extent of a shareholder's basis in his shares of a Fund, and as a capital gain
thereafter (if the shareholder holds his shares of a Fund as capital assets).
34
<PAGE>
Shareholders receiving dividends or distributions in the form of additional
shares should be treated for United States federal income tax purposes as
receiving a distribution in the amount equal to the amount of money that the
shareholders receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount.
Investors considering buying shares just prior to a dividend or capital
gain distribution should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming distribution,
such dividend or distribution may nevertheless be taxable to them.
If a Fund is the holder of record of any stock on the record date for any
dividends payable with respect to such stock, such dividends are included in a
Fund's gross income not as of the date received but as of the later of (a) the
date such stock became ex-dividend with respect to such dividends (i.e., the
date on which a buyer of the stock would not be entitled to receive the
declared, but unpaid, dividends) or (b) the date a Fund acquired such stock.
Accordingly, in order to satisfy its income distribution requirements, a Fund
may be required to pay dividends based on anticipated earnings, and shareholders
may receive dividends in an earlier year than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of his shares, a shareholder
will realize a taxable gain or loss equal to the difference between the amount
realized and his basis in his shares. Such gain or loss will be treated as
capital gain or loss, if the shares are capital assets in the shareholder's
hands, and will be long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if the shares are held
for one year or less. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital gains distributions
in a Fund, within a 61-day period beginning 30 days before and ending 30 days
after the disposition of the shares. In such a case, the basis of the shares
acquired will be increased to reflect the disallowed loss. Any loss realized by
a shareholder on the sale of a Fund share held by the shareholder for six months
or less will be treated for United States federal income tax purposes as a long-
term capital loss to the extent of any distributions or deemed distributions of
long-term capital gains received by the shareholder with respect to such share.
Backup Withholding. Each Fund may be required to withhold, for United
States federal income tax purposes, 31% of the dividends and distributions
payable to shareholders who fail to provide a Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup withholding is not an
additional tax and any amount withheld may be credited against a shareholder's
United States federal income tax liabilities.
Notices. Shareholders will be notified annually by a Fund as to the United
States federal income tax status of the dividends, distributions and deemed
distributions attributable
35
<PAGE>
to undistributed capital gains (discussed above in "Dividends and
Distributions") made by a Fund to its shareholders. Furthermore, shareholders
will also receive, if appropriate, various written notices after the close of a
Fund's taxable year regarding the United States federal income tax status of
certain dividends, distributions and deemed distributions that were paid (or
that are treated as having been paid) by a Fund to its shareholders during the
preceding taxable year.
Other Taxation
- --------------
Distributions also may be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
THE FUND AND ITS SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE FUNDS.
DETERMINATION OF PERFORMANCE
From time to time, a Fund may quote the total return of its shares in
advertisements or in reports and other communications to shareholders. These
figures are calculated by finding the average annual compounded rates of return
for the one-, five- and ten- (or such shorter period as the shares have been
offered) year periods that would equate the initial amount invested to the
ending redeemable value according to the following formula: P (1 + T)n = ERV.
For purposes of this formula, "P" is a hypothetical investment of $1,000; "T" is
average annual total return; "n" is number of years; and "ERV" is the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
one-, five- or ten-year periods (or fractional portion thereof). Total return
or "T" is computed by finding the average annual change in the value of an
initial $1,000 investment over the period and assumes that all dividends and
distributions are reinvested during the period.
A Fund may advertise, from time to time, comparisons of the performance of
its shares with that of one or more other mutual funds with similar investment
goals. A Fund may advertise average annual calendar year-to-date and calendar
quarter returns, which are calculated according to the formula set forth in the
preceding paragraph, except that the relevant measuring period would be the
number of months that have elapsed in the current calendar year or most recent
three months, as the case may be. Investors should note that this performance
may not be representative of a Fund's total return in longer market cycles.
The performance of Fund shares will vary from time to time depending upon
market conditions, the composition of a Fund's portfolio and operating expenses
allocable to it. As described above, total return is based on historical
earnings and is not intended to indicate future performance. Consequently, any
given performance quotation should not be considered as representative of
performance for any specified period in the future. Performance information may
be useful as a basis for comparison with other investment alternatives.
However, a Fund's performance will fluctuate, unlike certain bank deposits or
other investments which pay a fixed yield for a stated period of time. Any fees
charged by
36
<PAGE>
investment professionals or other financial intermediaries directly to their
customers in connection with investments in Fund shares are not reflected in a
Fund's total return, and such fees, if charged, will reduce the actual return
received by customers on their investments.
PRINCIPAL STOCKHOLDERS
As of the date of this Statement of Additional Information, Centurion owned
100% of the outstanding shares of each Fund. The shares were issued to
Centurion for providing the initial seed capital to the Company. So long as
Centurion owns more than 25% of the outstanding voting securities of a Fund, it
may be deemed to control the Fund.
OTHER INFORMATION
Capital Stock
- -------------
Investors in a Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Shareholders of a Fund will vote
in the aggregate except where otherwise required by law. There will normally be
no meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any director of the Company may be removed from
office upon the vote of shareholders holding at least a majority of the
Company's outstanding shares, at a meeting called for that purpose. A meeting
will be called for the purpose of voting on the removal of a Board member at the
written request of holders of 10% of the outstanding shares of the Company.
All shareholders of a Fund, upon liquidation, will participate ratably in
the Fund's net assets. Shares do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of directors
can elect all directors. Shares are transferable but have no preemptive,
conversion or subscription rights.
Independent Accountant
- ----------------------
KPMG Peat Marwick LLP ("KPMG"), with principal offices located at 345 Park
Avenue, New York, NY 10154, serves as the independent accountant for the
Company. The Statements of Assets and Liabilities, as of November 19, 1998, and
the Statements of Operations, for the period ended November 19, 1998, of each
Fund that appear in this Statement of Additional Information have been audited
by KPMG, whose report thereon appears elsewhere herein and has been included
herein in reliance upon the report of such firm of independent accountants given
upon their authority as experts in accounting and auditing.
Counsel
- -------
Willkie Farr & Gallagher serves as counsel for the Company, as well as
counsel to Centurion.
Custodians and Transfer Agent
- -----------------------------
37
<PAGE>
PNC Bank, National Association ("PNC"), located at 17th and Chestnut
Streets, Philadelphia, PA 19103, and The Chase Manhattan Bank ("Chase"), located
at 4 Chase MetroTech Center, Brooklyn, NY 11245, serve as co-custodians of each
Fund's assets. Under their respective custody agreements with the Company, PNC
and Chase are authorized to establish separate accounts for foreign securities
owned by the Funds to be held with foreign branches of U.S. banks as well as
certain foreign banks and securities depositories as sub-custodians of assets
owned by the Funds.
First Data Investor Services Group, Inc., located at Exchange Place,
Boston, MA 02109, serves as the Company's transfer agent.
FINANCIAL STATEMENTS
The Company's financial statement follows the Report of Independent
Accountants.
38
<PAGE>
APPENDIX
DESCRIPTION OF RATINGS
Commercial Paper Ratings
- ------------------------
Commercial paper rated A-1 by Standard and Poor's Ratings Services ("S&P")
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
with a plus sign designation. Capacity for timely payment on commercial paper
rated A-2 is satisfactory, but the relative degree of safety is not as high as
for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.
Corporate Bond Ratings
- ----------------------
The following summarizes the ratings used by S&P for corporate bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB - This is the lowest investment grade. Debt rated BBB is regarded as
having an adequate capacity to pay interest and repay principal. Although it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in higher
rated categories.
BB, B and CCC - Debt rated BB and B are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective
<PAGE>
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions, which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC - This rating is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt rated
D.
To provide more detailed indications of credit quality, the ratings may be
modified by the addition of a plus or minus sign to show relative standing
within this major rating category.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The following summarizes the ratings used by Moody's for corporate bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure.
A-2
<PAGE>
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the bonds
rated "Aa" through "B." The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
Caa - Bonds that are rated Caa are of poor standing. These issues may be
in default or present elements of danger may exist with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C comprise the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
A-3
<PAGE>
Centurion U.S. Equity Fund
Statement of Assets and Liabilities
November 19, 1998
Assets:
Cash $ 99,970
Receivable from Advisor 37,000
--------
Total Assets 136,970
Liabilities:
Accrued Organization Expenses (Note 4) 37,000
------
Net Assets (9,997 shares of $.001 par value shares of common stock
issued and outstanding; 100,000,000 shares authorized) $ 99,970
======
Net Asset Value per share $ 10.00
=====
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion U.S. Equity Fund
Statement of Operations
For the period ended November 19, 1998
Investment Income $ -
Expenses:
Legal 34,000
Audit 3,000
-------
Total Expenses 37,000
Reimbursement from Advisor (37,000)
--------
Net Investment Income $ -
======
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion U.S. Equity Fund
Notes to Statement of Assets and Liabilities
November 19, 1998
NOTE 1
The Centurion U.S. Equity Fund (the "Fund") is one of four portfolios of
Centurion Funds, Inc. (the "Company"). The Company was incorporated in Maryland
on August 20, 1998 and is registered under the Investment Company Act of 1940,
as amended, as a open-end diversified management investment company.
The only transactions of the Fund have been the initial sale of 9,997
shares of the Fund to Centurion Trust Company ("Centurion").
NOTE 2
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all of the investment company taxable income to the shareholders
of the Fund. Accordingly, no federal tax provisions are required.
NOTE 3
The Fund has entered into an investment management and administrative
agreement (the "Advisory Agreement") with Centurion (the "Advisor"). Pursuant
to the terms of the Advisory Agreement, the Advisor will manage the investments
and make investment decisions for the Fund. For these services, the Advisor is
entitled to a monthly fee calculated at the annual rate of 0.75% on the first
$25 million of the Fund's average daily net assets and 0.70% on the Fund's
average daily net assets in excess of $25 million.
The Fund has entered into an administration agreement with Mutual
Management Corporation ("the "Administrator") to provide administrative services
to the Fund. For these services, the Administrator is entitled to a monthly fee
calculated at the annual rate of 0.20% of the Fund's average daily net assets.
NOTE 4
The Advisor has set an expense cap of 1.50% of the Fund's average weekly
net assets. Accordingly, the Advisor has agreed to reimburse the Fund for
organizational expenses to the extent such expenses exceed the expense cap.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors of
Centurion Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
Centurion U.S. Equity Fund as of November 19, 1998, and the related statement of
operations for the period then ended. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of assets and liabilities. 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, the financial statements referred to above presents fairly, in
all material respects, the financial position of Centurion U.S. Equity Fund as
of November 19, 1998, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
November 19, 1998
<PAGE>
Centurion International Equity Fund
Statement of Assets and Liabilities
November 19, 1998
Assets:
Cash $ 10
Receivable from Advisor 36,000
-------
Total Assets 36,010
Liabilities:
Accrued Organization Expenses (Note 4) 36,000
------
Net Assets (1 share of $.001 par value share of common stock
issued and outstanding; 100,000,000 shares authorized) $ 10
==
Net Asset Value per share $ 10.00
=====
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion International Equity Fund
Statement of Operations
For the period ended November 19, 1998
Investment Income $ -
Expenses:
Legal 33,000
Audit 3,000
-------
Total Expenses 36,000
Reimbursement from Advisor (36,000)
--------
Net Investment Income $ -
=======
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion International Equity Fund
Notes to Statement of Assets and Liabilities
November 19, 1998
NOTE 1
The Centurion International Equity Fund (the "Fund") is one of four
portfolios of Centurion Funds, Inc. (the "Company"). The Company was
incorporated in Maryland on August 20, 1998 and is registered under the
Investment Company Act of 1940, as amended, as a open-end diversified management
investment company.
The only transactions of the Fund have been the initial sale of one share
of the Fund to Centurion Trust Company ("Centurion").
NOTE 2
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all of the investment company taxable income to the shareholders
of the Fund. Accordingly, no federal tax provisions are required.
NOTE 3
The Fund has entered into an investment management and administrative
agreement (the "Advisory Agreement") with Centurion (the "Advisor"). Pursuant
to the terms of the Advisory Agreement, the Advisor will manage the investments
and make investment decisions for the Fund. For these services, the Advisor is
entitled to a monthly fee calculated at the annual rate of 0.750% on the first
$50 million of the Fund's average daily net assets, 0.725% of the next $50
million of the Fund's average daily net assets, and 0.700% on the Fund's average
daily net assets in excess of $100 million.
The Fund has entered into an administration agreement with Mutual
Management Corporation ("the "Administrator") to provide administrative services
to the Fund. For these services, the Administrator is entitled to a monthly fee
calculated at the annual rate of 0.20% of the Fund's average daily net assets.
NOTE 4
The Advisor has set an expense cap of 1.50% of the Fund's average weekly
net assets. Accordingly, the Advisor has agreed to reimburse the Fund for
organizational expenses to the extent such expenses exceed the expense cap.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors of
Centurion Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
Centurion International Equity Fund as of November 19, 1998, and the related
statement of operations for the period then ended. These financial statements
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of assets and liabilities. 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, the financial statements referred to above presents fairly, in
all material respects, the financial position of Centurion International Equity
Fund as of November 19, 1998, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
November 19, 1998
<PAGE>
Centurion U.S. Contra Fund
Statement of Assets and Liabilities
November 19, 1998
Assets:
Cash $ 10
Receivable from Advisor 36,000
-------
Total Assets 36,010
Liabilities:
Accrued Organization Expenses (Note 4) 36,000
------
Net Assets (1 share of $.001 par value share of common stock
issued and outstanding; 150,000,000 shares authorized) $ 10
==
Net Asset Value per share $ 10.00
=====
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion U.S. Contra Fund
Statement of Operations
For the period ended November 19, 1998
Investment Income $ -
Expenses:
Legal 33,000
Audit 3,000
-------
Total Expenses 36,000
Reimbursement from Advisor (36,000)
-------
Net Investment Income $ -
=======
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion U.S. Contra Fund
Notes to Statement of Assets and Liabilities
November 19, 1998
NOTE 1
The Centurion U.S. Contra Fund (the "Fund") is one of four portfolios of
Centurion Funds, Inc. (the "Company"). The Company was incorporated in Maryland
on August 20, 1998 and is registered under the Investment Company Act of 1940,
as amended, as a open-end diversified management investment company.
The only transactions of the Fund have been the initial sale of one share
of the Fund to Centurion Trust Company ("Centurion").
NOTE 2
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all of the investment company taxable income to the shareholders
of the Fund. Accordingly, no federal tax provisions are required.
NOTE 3
The Fund has entered into an investment management and administrative
agreement (the "Advisory Agreement") with Centurion (the "Advisor"). Pursuant
to the terms of the Advisory Agreement, the Advisor will manage the investments
and make investment decisions for the Fund. For these services, the Advisor is
entitled to a monthly fee calculated at the annual rate of 1.20% of the Fund's
average daily net assets.
The Fund has entered into an administration agreement with Mutual
Management Corporation ("the "Administrator") to provide administrative services
to the Fund. For these services, the Administrator is entitled to a monthly fee
calculated at the annual rate of 0.20% of the Fund's average daily net assets.
NOTE 4
The Advisor has set an expense cap of 1.50% of the Fund's average weekly
net assets. Accordingly, the Advisor has agreed to reimburse the Fund for
organizational expenses to the extent such expenses exceed the expense cap.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors of
Centurion Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
Centurion U.S. Contra Fund as of November 19, 1998, and the related statement of
operations for the period then ended. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of assets and liabilities. 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, the financial statements referred to above presents fairly, in
all material respects, the financial position of Centurion U.S. Contra Fund as
of November 19, 1998, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
November 19, 1998
<PAGE>
Centurion International Contra Fund
Statement of Assets and Liabilities
November 19, 1998
Assets:
Cash $ 10
Receivable from Advisor 36,000
-------
Total Assets 36,010
Liabilities:
Accrued Organization Expenses (Note 4) 36,000
------
Net Assets (1 share of $.001 par value share of common stock
issued and outstanding; 150,000,000 shares authorized) $ 10
==
Net Asset Value per share $ 10.00
=====
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion International Contra Fund
Statement of Operations
For the period ended November 19, 1998
Investment Income $ -
Expenses:
Legal 33,000
Audit 3,000
-------
Total Expenses 36,000
Reimbursement from Advisor (36,000)
-------
Net Investment Income $ -
=======
The accompanying notes are an integral part of these financial statements.
<PAGE>
Centurion International Contra Fund
Notes to Statement of Assets and Liabilities
November 19, 1998
NOTE 1
The Centurion International Contra Fund (the "Fund") is one of four
portfolios of Centurion Funds, Inc. (the "Company"). The Company was
incorporated in Maryland on August 20, 1998 and is registered under the
Investment Company Act of 1940, as amended, as a open-end diversified management
investment company.
The only transactions of the Fund have been the initial sale of one share
of the Fund to Centurion Trust Company ("Centurion").
NOTE 2
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all of the investment company taxable income to the shareholders
of the Fund. Accordingly, no federal tax provisions are required.
NOTE 3
The Fund has entered into an investment management and administrative
agreement (the "Advisory Agreement") with Centurion (the "Advisor"). Pursuant
to the terms of the Advisory Agreement, the Advisor will manage the investments
and make investment decisions for the Fund. For these services, the Advisor is
entitled to a monthly fee calculated at the annual rate of 1.20% of the Fund's
average daily net assets.
The Fund has entered into an administration agreement with Mutual
Management Corporation ("the "Administrator") to provide administrative services
to the Fund. For these services, the Administrator is entitled to a monthly fee
calculated at the annual rate of 0.20% of the Fund's average daily net assets.
NOTE 4
The Advisor has set an expense cap of 1.50% of the Fund's average weekly
net assets. Accordingly, the Advisor has agreed to reimburse the Fund for
organizational expenses to the extent such expenses exceed the expense cap.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors of
Centurion Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
Centurion International Contra Fund as of November 19, 1998, and the related
statement of operations for the period then ended. These financial statements
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of assets and liabilities. 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, the financial statements referred to above presents fairly, in
all material respects, the financial position of Centurion International Contra
Fund as of November 19, 1998, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
November 19, 1998
<PAGE>
<TABLE>
<CAPTION>
PART C
OTHER INFORMATION
-----------------
Item 23. Exhibits
--------
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
(a)(1) Articles of Incorporation.*
(2) Articles of Amendment of Articles of Incorporation.
(b) By-laws.*
(c) Form of Stock Certificate.
(d)(1) Form of Investment Advisory Agreement with Centurion Trust
Company ("Centurion") for the Centurion U.S. Equity Fund (the
"U.S. Equity Fund").
(2) Form of Investment Advisory Agreement with Centurion for the
Centurion International Equity Fund (the "International Equity
Fund").
(3) Form of Investment Advisory Agreement with Centurion for the
Centurion U.S. Contra Fund (the "U.S. Contra Fund").
(4) Form of Investment Advisory Agreement with Centurion for the
Centurion International Contra Fund (the "International Contra
Fund").
(5) Form of Sub-Advisory Agreement with Parametric Portfolio
Associates ("Parametric") for the U.S. Equity Fund.
(6) Form of Sub-Advisory Agreement with BEA Associates ("BEA") for
the U.S. Equity Fund.
(7) Form of Sub-Advisory Agreement with Friends Ivory & Sime, Inc.
("FISI") for the International Equity Fund.
(8) Form of Sub-Advisory Agreement with BEA for the International
Equity Fund.
(9) Form of Sub-Advisory Agreement with BEA for the U.S. Contra
Fund.
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(10) Form of Sub-Advisory Agreement with BEA for the International
Contra Fund.
(e) Form of Distribution Agreement with CFBDS, Inc. ("CFBDS").
(f) Not applicable.
(g)(1) Form of Custodian Agreement with PNC Bank, National
Association.
(2) Form of Custodian Agreement with The Chase Manhattan Bank.
(h)(1) Form of Transfer Agency and Service Agreement with First Data
Investor Services Group Inc.
(2) Form of Administration Agreement with Mutual Management
Corp.
(3) Form of Consulting Agreement with Salomon Smith Barney Inc.
(i)(1) Opinion and Consent of Willkie Farr & Gallagher, counsel to
Registrant.
(2) Opinion and Consent of Venable, Baetjer and Howard, LLP,
Maryland counsel to Registrant.
(j) Consent of KPMG Peat Marwick LLP, Independent Accountants.
(k) Not applicable.
(l) Purchase Agreement.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
_____________
* Incorporated by reference to Registrant's Registration Statement on Form
N-1A filed on August 21, 1998.
</TABLE>
Item 24. Persons Controlled by or Under Common Control
with Registrant
---------------------------------------------
All of the outstanding shares of common stock of Registrant on the
date Registrant's Registration Statement
C-2
<PAGE>
becomes effective will be owned by Centurion, which will have contributed
Registrant's initial seed capital.
Item 25. Indemnification
---------------
Under Article VIII of the Articles of Incorporation (the "Articles"),
the Directors and officers of Registrant shall not have any liability to
Registrant or its stockholders for money damages, to the fullest extent
permitted by Maryland law. This limitation on liability applies to events
occurring at the time a person serves as a Director or officer of Registrant
whether or not such person is a Director or officer at the time of any
proceeding in which liability is asserted. No provision of Article VIII shall
protect or purport to protect any Director or officer of Registrant against any
liability to Registrant or its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Registrant shall indemnify and advance expenses to its currently acting and its
former Director to the fullest extent that indemnification of Directors and
advancement of expenses to Directors is permitted by the Maryland General
Corporation Law.
Registrant shall indemnify and advance expenses to its officers to the
same extent as its Directors and to such further extent as is consistent with
such law. The Board of Directors may, through a by-law, resolution or
agreement, make further provisions for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law.
Article V of the By-laws further limits the liability of the Directors
by providing that any person who was or is a party or is threatened to be made a
party in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is a current or former director or officer of Registrant, or is
or was serving while a director or officer of Registrant at the request of
Registrant as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by Registrant against judgments,
penalties, fines, excise taxes, settlements and reasonable expenses (including
attorneys' fees)actually incurred by such person in connection with such action,
suit or proceeding to the full extent permissible under the Maryland General
Corporation Law, the 1993 Act and the 1940 Act, as such statutes are now or
hereafter in force, except that such indemnity shall not protect any such person
against any liability to Registrant or any stockholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
this office.
C-3
<PAGE>
Additionally, with respect to indemnification against liability
incurred by Registrant's distributor, reference is made to Paragraph 4.1 of the
form of Distribution Agreement filed herewith. With respect to indemnification
against liability incurred by Registrant's investment manager and sub-advisers,
reference is made to Section 5 of each form of Investment Advisory Agreement and
to Section 9 of each form of Sub-Advisory Agreement, respectively, filed
herewith.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
Centurion, an independent trust company organized under the laws of
the State of Arizona, serves as investment manager to each of Registrant's
Funds. Centurion also serves as a custodian to financial service companies and
their clients. Gerard P. Dipoto, Jr. serves as President of Centurion, and
Robert W. Doede, Werner E. Keller, Frank C. Meyer and Marcy C. Leonard serve on
Centurion's board of directors. Mr. Dipoto has been President of Centurion
since February 1997, before which he served as Executive Vice President of
Investors Fiduciary Trust Company. In addition to serving as a Director of
Centurion, Mr. Doede has been (i) Chairman of Centurion Capital Corporation, an
affiliate of Centurion, since 1985; (ii) a Director of FundMinder Inc., an
affiliate of Centurion, since 1991; (iii) Chairman of CCM Group Inc., an
affiliate of Centurion, since 1997; and (iv) a representative of Managing Member
of Schabacker/FundMinder Investment Advisors, LLC, an affiliate of Centurion,
from 1995 to 1996. In addition to serving as a Director of Centurion, Mr.
Keller has been (i) a Director of CCM Group Inc. since 1997; (ii) Chairman of
FundMinder Inc. since June 1998; (iii) President of FundMinder Inc. from 1984 to
June 1998; and (iv) a representative of Managing Member of Schabacker/FundMinder
Investment Advisors, LLC from 1995 to 1996. In addition to serving as a
Director of Centurion, Mr. Meyer is also President of Glenwood Investment Corp.
Lastly, in addition to serving as a Director of Centurion, Ms. Leonard is also
President of Compliance Dynamics.
Parametric serves as co-sub-adviser to the U.S. Equity Fund. The list
required by this Item 26 of officers and directors of Parametric, together with
information as to their other businesses, professions, vocations or employment
of a substantial nature during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by Parametric (SEC File No. 801-48184)
pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers
Act").
FISI serves as co-sub-adviser to the International Equity Fund. The
list required by this Item 26 of officers and directors of FISI, together with
information as to their other businesses, professions, vocations or employment
of a substantial nature during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by FISI (SEC File No. 801-13750) pursuant
to the Advisers Act.
C-4
<PAGE>
BEA serves as co-sub-adviser to each of the U.S. Equity Fund and the
International Equity Fund, as well as sub-adviser to each of the U.S. Contra
Fund and the International Contra Fund. The list required by this Item 26 of
officers and directors of BEA, together with information as to their other
businesses, professions, vocations or employment of a substantial nature during
the past two years, is incorporated by reference to Schedules A and D of Form
ADV filed by BEA (SEC File No. 801-37170) pursuant to the Advisers Act.
Item 27. Principal Underwriter
---------------------
(a) CFBDS serves as distributor for Registrant, as well as for the
following Smith Barney funds: Concert Investment Series, Consulting Group
Capital Markets Funds, Global Horizons Investment Series (Cayman Island),
Greenwich Street California Municipal Fund Inc., Greenwich Street Municipal Fund
Inc., Greenwich Street Series Fund, High Income Opportunity Fund Inc., The Italy
Fund Inc., Managed High Income Portfolio Inc., Managed Municipals Portfolio II
Inc., Managed Municipals Portfolio Inc., Municipal High Income Fund Inc., Puerto
Rico Daily Liquidity Fund Inc., Puerto Rico Equity Index and Income Fund Inc.,
Smith Barney Adjustable Rate Government Income Fund, Smith Barney Aggressive
Growth Fund Inc., Smith Barney Appreciation Fund Inc., Smith Barney Arizona
Municipals Fund Inc., Smith Barney California Municipals Fund Inc., Smith Barney
Concert Allocation Series Inc., Smith Barney Equity Funds, Smith Barney
Fundamental Value Fund Inc., Smith Barney Funds, Inc., Smith Barney Income
Funds, Smith Barney Institutional Cash Management Fund, Inc., Smith Barney
Intermediate Municipal Fund, Inc., Smith Barney Investment Funds Inc., Smith
Barney Investment Trust, Smith Barney Managed Governments Fund Inc., Smith
Barney Managed Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni Funds, Smith Barney Municipal
Fund, Inc., Smith Barney Municipal Money Market Fund, Inc., Smith Barney Natural
Resources Fund Inc., Smith Barney New Jersey Municipals Fund Inc., Smith Barney
Oregon Municipals Fund Inc., Smith Barney Principal Return Fund, Smith Barney
Small Cap Blend Fund, Inc., Smith Barney Telecommunications Trust, Smith Barney
Variable Account Funds, Smith Barney World Funds, Inc., Smith Barney Worldwide
Special Fund N.V. (Netherlands Antilles), Travelers Series Fund Inc., The USA
High Yield Fund N.V. (Netherlands Antilles), Worldwide Securities Limited
(Bermuda), Zenix Income Fund Inc. and various series of unit investment trusts.
In addition, CFBDS is also the distributor for CitiFunds(SM)
International Growth & Income Portfolio, CitiFunds(SM) International Growth
Portfolio, CitiFunds(SM) Intermediate Income Portfolio, CitiFunds(SM) Short-Term
U.S. Government Income Portfolio, CitiFunds(SM) Large Cap Growth Portfolio,
CitiFunds(SM) Cash Reserves, CitiFunds(SM) U.S. Treasury Reserves, CitiFunds(SM)
Premium U.S. Treasury Reserves, CitiFunds(SM) Premium Liquid Reserves,
CitiFunds(SM) Tax Free
C-5
<PAGE>
Reserves, CitiFunds(SM) California Tax Free Reserves, CitiFunds(SM) Connecticut
Tax Free Reserves, CitiFunds(SM) New York Tax Free Reserves, CitiFunds(SM)
Balanced Portfolio, CitiFunds(SM) Small Cap Value Portfolio, CitiFunds(SM)
Growth & Income Portfolio, CitiFunds(SM) Small Cap Growth Portfolio,
CitiFunds(SM) National Tax Free Income Portfolio, CitiFunds(SM) New York Tax
Free Income Portfolio, California Tax Free Income Portfolio, CitiSelect(R) VIP
Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio, CitiSelect(R)
VIP Folio 500, CitiFunds(SM) Small Cap Growth VIP Portfolio, CitiSelect(R) Folio
200, CitiSelect(R) Folio 300, CitiSelect(R) Folio 400, and CitiSelect(R) Folio
500. CFBDS is also the placement agent for Large Cap Value Portfolio, Small Cap
Value Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate
Income Portfolio, Short-Term Portfolio, Growth & Income Portfolio, Large Cap
Growth Portfolio, Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Tax Free Reserves Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio.
In addition, CFBDS is also the distributor for the following Salomon
Brothers funds: Salomon Brothers Opportunity Fund Inc., Salomon Brothers
Investors Fund Inc., Salomon Brothers Capital Fund Inc., Salomon Brothers Series
Funds Inc., Salomon Brothers Institutional Series Funds Inc. and Salomon
Brothers Variable Series Funds Inc.
(b) The information required by this Item 27 relating to each
director and officer of CFBDS is incorporated by reference to Schedule A of Form
BD filed by CFBDS (SEC File No. 8-32417) pursuant to the Securities Exchange Act
of 1934.
(c) None.
Item 28. Location of Accounts and Records
--------------------------------
(1) Centurion Trust Company
2425 East Camelback Road -- Suite 530
Phoenix, Arizona 85016-4228
(records relating to its functions as
investment adviser)
(2) Parametric Portfolio Associates
7310 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104-7090
(records relating to its functions as sub-adviser)
(3) Friends Ivory & Sime, Inc.
One World Trade Center -- Suite 2101
New York, New York 10048-0080
(records relating to its functions as sub-adviser)
(4) BEA Associates
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(records relating to its functions as sub-adviser)
C-6
<PAGE>
(5) Mutual Management Corp.
388 Greenwich Street
New York, New York 10013
(records relating to its functions as
administrator; Fund's Articles of Incorporation, By-laws and
minute books)
(6) CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, Massachusetts 02109
(records relating to its functions as distributor)
(7) PNC Bank, National Association
7th and Chestnut Streets
Philadelphia, Pennsylvania 19103
(records relating to its functions as co-custodian)
(8) The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
(records relating to its functions as co-custodian)
(9) First Data Investor Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
(records relating to its functions as transfer agent)
Item 29. Management Services
-------------------
Not applicable.
Item 30. Undertakings.
------------
Not applicable.
C-7
<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 Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Phoenix and
the State of Arizona, on this 30th day of November, 1998.
CENTURION FUNDS, INC.
By:/s/ Gerard P. Dipoto, Jr.
----------------------------------
Gerard P. Dipoto, Jr.
President & Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------- ----------------------------------- -------------------
- ----------------------------------------
<S> <C> <C>
/s/ Gerard P. Dipoto, Jr. Chairman of the Board, President & 11/30/98
- ---------------------------------------- Chief Executive Officer --------
Gerard P. Dipoto, Jr.
/s/ Ron A. Link Treasurer 11/30/98
- ---------------------------------------- --------
Ron A. Link
/s/ Irving P. David Controller 11/30/98
- ---------------------------------------- --------
Irving P. David
/s/ Paul A. Monroe Vice President 11/30/98
- ---------------------------------------- --------
Paul A. Monroe
/s/ Charles P. Dickinson Director 11/30/98
- ---------------------------------------- --------
Charles P. Dickinson
/s/ Timothy E. Kloenne Director 11/30/98
- ---------------------------------------- --------
Timothy E. Kloenne
/s/ Joseph F. Smith Director 11/30/98
- ---------------------------------------- --------
Joseph F. Smith
/s/ Thomas M. Smith Director 11/30/98
- ---------------------------------------- --------
Thomas M. Smith
</TABLE>
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
(a)(2) Articles of Amendment of Articles of Incorporation
(c) Form of Stock Certificate
(d)(1) Form of Investment Advisory Agreement with
Centurion Trust Company ("Centurion") for the
Centurion U.S. Equity Fund (the "U.S. Equity Fund")
(2) Form of Investment Advisory Agreement with
Centurion for the Centurion International Equity
Fund (the "International Equity Fund")
(3) Form of Investment Advisory Agreement with
Centurion for the Centurion U.S. Contra Fund (the
"U.S. Contra Fund")
(4) Form of Investment Advisory Agreement with
Centurion for the Centurion International Contra
Fund (the "International Contra Fund")
(5) Form of Sub-Advisory Agreement with Parametric
Portfolio Associates for the U.S. Equity Fund
(6) Form of Sub-Advisory Agreement with BEA Associates
("BEA") for the U.S. Equity Fund
(7) Form of Sub-Advisory Agreement with Friends Ivory &
Sime, Inc. for the International Equity Fund
(8) Form of Sub-Advisory Agreement with BEA for the
International Equity Fund
(9) Form of Sub-Advisory Agreement with BEA for the
U.S. Contra Fund
(10) Form of Sub-Advisory Agreement with BEA for the
International Contra Fund
(e) Form of Distribution Agreement with CFBDS, Inc.
(g)(1) Form of Custodian Agreement with PNC Bank, National
Association
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(2) Form of Custodian Agreement with The Chase
Manhattan Bank
(h)(1) Form of Transfer Agency and Service Agreement with
First Data Investor Services Group Inc.
(2) Form of Administration Agreement with Mutual
Management Corp.
(3) Form of Consulting Agreement with Salomon Smith
Barney Inc.
(i)(1) Opinion and Consent of Willkie Farr & Gallagher,
counsel to Registrant
(2) Opinion and Consent of Venable, Baetjer and Howard,
LLP, Maryland counsel to Registrant
(j) Consent of KPMG Peat Marwick LLP, Independent
Accountants
(l) Purchase Agreement
</TABLE>
<PAGE>
EXHIBIT 99(a)(2)
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CENTURION FUNDS, INC.
GERARD P. DIPOTO, JR., being President of CENTURION FUNDS, INC. (the
"Corporation"), a corporation organized and existing under and by virtue of the
Maryland Corporation Law, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation at a meeting on
November 24, 1998 at which a quorum was present and acting throughout, adopted
the following resolution authorizing the Corporation to change its name:
RESOLVED, that the Fund be, and it hereby is, authorized to change the
names of its current series of common stock from "Centurion Tax-Managed U.S.
Equity Fund" to "Centurion U.S. Equity Fund," from "Centurion Tax-Managed
International Equity Fund" to "Centurion International Equity Fund," from
"Centurion U.S. Protection Fund" to "Centurion U.S. Contra Fund" and from
"Centurion International Protection Fund" to "Centurion International Contra
Fund," and that the officers of the Fund, or their designees, be, and each of
them hereby is, authorized to execute and file Articles of Amendment to the
Fund's Articles of Incorporation and to do any and all other lawful acts as may
be necessary and appropriate to perform and carry out the above stated name
changes.
SECOND: That pursuant to the above resolution of the Board of
Directors of the Corporation, the name of each series of common stock of the
Corporation listed below be, and hereby is, changed as follows:
<TABLE>
<CAPTION>
Current Name: Proposed Name:
- ------------- --------------
<S> <C>
CENTURION TAX-MANAGED U.S. EQUITY FUND CENTURION U.S. EQUITY FUND
CENTURION TAX-MANAGED INTERNATIONAL EQUITY CENTURION INTERNATIONAL EQUITY FUND
FUND
CENTURION U.S. PROTECTION FUND CENTURION U.S. CONTRA FUND
CENTURION INTERNATIONAL PROTECTION FUND CENTURION INTERNATIONAL CONTRA FUND
</TABLE>
THIRD: That the amendment is limited to a change expressly permitted
by (S) 2-605 of the Maryland General Corporation Law to be made without action
by the stockholders and that the Corporation is registered as an open-end
company under the Investment Company Act of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment and does hereby acknowledge that it is his act and deed and, under
penalty of perjury, to the best of his knowledge, information and belief, the
matters and facts contained herein are true in all material respects.
DATE: November 24, 1998 /s/ Gerard P. Dipoto, Jr.
-------------------------
Gerard P. Dipoto, Jr.
President
ATTEST:
/s/ Michael Kocur
- -----------------
Michael Kocur
Assistant Secretary
<PAGE>
EXHIBIT 99(c)
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
CENTURION FUNDS, INC.
[NAME OF PORTFOLIO]
THE CORPORATION IS AUTHORIZED TO ISSUE FIVE HUNDRED MILLION SHARES, PAR VALUE
$.001.
SPECIMEN
<PAGE>
The Corporation is authorized to issue four or more series of stock. The
Corporation will furnish to any stockholder on request and without charge a
full statement of the designation and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the stock of each
series which the Corporation is authorized to issue and, if the Corporation
is authorized to issue any preferred or special class in such series, of
the differences in the relative rights and preferences among the shares of
each series to the extent they have been set and the authority of the Board
of Directors to set the relative rights and preferences of subsequent
series.
<PAGE>
EXHIBIT 99(d)(1)
FORM OF
CENTURION FUNDS, INC.
ON BEHALF OF
CENTURION U.S. EQUITY FUND
INVESTMENT MANAGEMENT AGREEMENT
November , 1998
Centurion Trust Company
2425 East Camelback Road - Suite 530
Phoenix, Arizona 85016-4228
Dear Sirs:
Centurion Funds, Inc. (the "Fund"), a corporation formed under the
laws of the State of Maryland, confirms its agreement with Centurion Trust
Company (the "Manager") with respect to the Manager's serving as investment
manager of the Centurion U.S. Equity Fund (the "Portfolio") as set forth below.
SECTION 1. INVESTMENT DESCRIPTION; APPOINTMENT
The Fund desires to employ the Portfolio's capital by investing and
reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Charter dated
August 20, 1998, as amended from time to time (the "Charter"), in the prospectus
(the "Prospectus") and in the statement of additional information (the
"Statement of Additional Information") filed with the Securities and Exchange
Commission (the "SEC") as part of the Fund's Registration Statement on Form N-
1A, as amended from time to time and in the manner and to the extent as may from
time to time be approved in the manner set forth in the Charter. Copies of the
Fund's Prospectus, the Statement of Additional Information and the Charter have
been or will be submitted to the Manager. The Fund desires to employ and hereby
appoints the Manager to act as the Portfolio's investment manager. The Manager
accepts the appointment and agrees to furnish the services described in Section
2 of this Agreement for the compensation set forth in Section 6 of this
Agreement.
SECTION 2. SERVICES AS MANAGER; APPOINTMENT OF SUB-ADVISERS
Subject to the supervision and direction of the Board of Directors
of the Fund, the Manager will:
(a) act in strict conformity with the Fund's Articles of
Incorporation, the Investment Company Act of 1940, as amended (the "Act"), and
the Investment Advisers Act of 1940, as amended (the "Advisers Act");
(b) manage the Portfolio's assets in accordance with the
Portfolio's investment objective and policies as stated in the Prospectus and
Statement of Additional Information;
<PAGE>
(c) make investment decisions for the Portfolio;
(d) place purchase and sale orders for securities on behalf of the
Portfolio;
(e) exercise voting rights in respect of portfolio securities and
other investments for the Portfolio; and
(f) monitor and evaluate the services provided by the Portfolio's
investment sub-adviser(s) (the "Sub-adviser(s)"), if any, under the terms of the
applicable investment sub-advisory agreement(s).
In providing these services, the Manager will provide investment
research and supervision of the Portfolio's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Portfolio's assets. In addition, the Manager will furnish the Portfolio
with whatever statistical information the Portfolio may reasonably request with
respect to the securities that the Portfolio may hold or contemplate purchasing.
Subject to the approval of the Directors of the Fund and, where
required by law, the Portfolio's shareholders, the Manager may engage an
investment sub-adviser or sub-advisers to provide advisory services in respect
of the Portfolio and may delegate to such investment sub-adviser(s) the
responsibilities described in subparagraphs (b), (c), (d) and (e) above. In the
event that a Sub-adviser's engagement has been terminated, the Manager shall be
responsible for furnishing the Portfolio with the services required to be
performed by such investment sub-adviser under the applicable investment sub-
advisory agreement(s) or arranging for a successor investment sub-adviser to
provide such services on terms and conditions acceptable to the Portfolio and
the Fund's Board of Directors and subject to the requirements of the Act.
SECTION 3. BROKERAGE
In executing transactions for the Portfolio and selecting brokers or
dealers, the Sub-adviser(s) will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any portfolio
transaction, the Sub-adviser will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security or
commodity interest, the price of the security or commodity interest, the
financial condition and execution capability of the broker or dealer and the
reasonableness of any commission for the specific transaction and for
transactions executed through the broker or dealer in the aggregate. In
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Sub-adviser may consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Portfolio and/or other
accounts over which the Sub-adviser or an affiliate exercises investment
discretion.
SECTION 4. INFORMATION PROVIDED TO THE FUND
The Manager will keep the Fund informed of developments materially
affecting the Portfolio and the Manager will, on its own initiative, furnish the
Fund from time to time with whatever information the Manager believes is
appropriate for this purpose.
SECTION 5. STANDARD OF CARE
<PAGE>
The Manager shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Manager shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport to
protect the Manager against any liability to the Portfolio or to holders of the
Portfolio's shares of beneficial interest to which the Manager would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Manager's reckless
disregard of its obligations and duties under this Agreement.
SECTION 6. COMPENSATION
(a) In consideration of services rendered pursuant to this Agreement,
the Portfolio will accrue daily and pay monthly a fee to the Manager at the
annual rate of 0.75% of the first $25 million of the average daily net assets of
the Portfolio and 0.70% of the amount in excess of $25 million.
(b) The fee for the period from the commencement of investment
operations to the end of the month during which investment operations commence
will be prorated according to the proportion that such period bears to the full
monthly period, and will be payable that month. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and will be payable upon the date of termination of this
Agreement.
(c) For the purpose of determining fees payable to the Manager under
this Agreement, the value of the Portfolio's net assets will be computed in the
manner described in the Fund's current Prospectus and/or Statement of Additional
Information.
SECTION 7. COSTS AND EXPENSES
The Manager will bear all expenses in connection with the
performance of its services under this Agreement, including the payment of
salaries of all officers and employees who are employed by it as well as the
payment of the fees of the Sub-adviser(s). The Portfolio will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Manager or any of its affiliates;
fees of any pricing service employed to value shares of the Portfolio; SEC fees
and state blue sky qualification fees; charges of custodians and transfer and
dividend disbursing agents; the Portfolio's proportionate share of insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Portfolio's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the Portfolio's shareholders and of the officers or
Directors of the Fund; and any extraordinary expenses.
The Portfolio will be responsible for nonrecurring expenses which
may arise, including costs of litigation to which the Portfolio is a party and
of indemnifying officers and Directors of the Fund with respect to such
litigation and other expenses as determined by the Directors.
<PAGE>
SECTION 8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Fund understands that the Manager and the Sub-adviser(s) may act
as investment advisers to fiduciary and other managed accounts, including other
investment companies, and the Fund has no objection to the Manager and Sub-
adviser(s) so acting, provided that whenever the Portfolio and one or more other
accounts advised by the Manager or Sub-adviser(s) have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each account or company.
The Fund recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for the Portfolio. In addition, the Fund
understands and acknowledges that the persons employed by the Manager to assist
in the performance of the Manager's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Manager or any affiliate of the
Manager to engage in and devote time and attention to other businesses or to
render services of any kind or nature.
SECTION 9. TERM OF AGREEMENT
(a) This Agreement will become effective as of November ___, 1998
("Effective Date"), and shall continue for an initial term of two years from the
Effective Date. Thereafter, this Agreement shall continue automatically for
successive annual periods, provided such continuance is specifically approved at
least annually by (i) the Fund's Board of Directors or (ii) a vote of a
"majority" of the Portfolio's outstanding voting securities (as defined in the
Act), provided that in either event the continuance is also approved by a
majority of Directors who are not "interested persons" (as defined in the Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Agreement is terminable, without penalty, on 60 days' written
notice, by the Fund's Directors or by vote of holders of a majority of the
Portfolio's outstanding voting securities, or upon 90 days' written notice, by
the Manager.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act or in rules adopted under the Act).
SECTION 10. MISCELLANEOUS
(a) The Fund recognizes that directors, officers and employees of the
Manager may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Centurion" as part of their names, and that the Manager or its affiliates may
enter into advisory or other agreements with such other corporations and trusts.
If the Manager ceases to act as the investment manager of the Fund's shares, the
Fund agrees that, at the Manager's request, the Fund's license to use the word
"Centurion" will terminate and that the Fund will take all necessary action to
change the name of the Fund to a name that does not include the word
"Centurion."
(b) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Advisers Act or rules or orders of the SEC.
<PAGE>
(c) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(d) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Manager as an
agent of the Fund.
(f) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance of this Agreement by signing and returning the enclosed copy of
this Agreement.
Very truly yours,
CENTURION FUNDS, INC.
on behalf of the
CENTURION U.S. EQUITY FUND
By: ________________________________
Name: Gerard P. DiPoto, Jr.
Title: President
Accepted:
CENTURION TRUST COMPANY
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(2)
FORM OF
CENTURION FUNDS, INC.
ON BEHALF OF
CENTURION INTERNATIONAL EQUITY FUND
INVESTMENT MANAGEMENT AGREEMENT
November , 1998
Centurion Trust Company
2425 East Camelback Road - Suite 530
Phoenix, Arizona 85016-4228
Dear Sirs:
Centurion Funds, Inc. (the "Fund"), a corporation formed under the
laws of the State of Maryland, confirms its agreement with Centurion Trust
Company (the "Manager") with respect to the Manager's serving as investment
manager of the Centurion International Equity Fund (the "Portfolio") as set
forth below.
SECTION 1. INVESTMENT DESCRIPTION; APPOINTMENT
The Fund desires to employ the Portfolio's capital by investing and
reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Charter dated
August 20, 1998, as amended from time to time (the "Charter"), in the prospectus
(the "Prospectus") and in the statement of additional information (the
"Statement of Additional Information") filed with the Securities and Exchange
Commission (the "SEC") as part of the Fund's Registration Statement on Form N-
1A, as amended from time to time and in the manner and to the extent as may from
time to time be approved in the manner set forth in the Charter. Copies of the
Fund's Prospectus, the Statement of Additional Information and the Charter have
been or will be submitted to the Manager. The Fund desires to employ and hereby
appoints the Manager to act as the Portfolio's investment manager. The Manager
accepts the appointment and agrees to furnish the services described in Section
2 of this Agreement for the compensation set forth in Section 6 of this
Agreement.
SECTION 2. SERVICES AS MANAGER; APPOINTMENT OF SUB-ADVISERS
Subject to the supervision and direction of the Board of Directors
of the Fund, the Manager will:
(a) act in strict conformity with the Fund's Articles of
Incorporation, the Investment Company Act of 1940, as amended (the "Act"), and
the Investment Advisers Act of 1940, as amended (the "Advisers Act");
(b) manage the Portfolio's assets in accordance with the
Portfolio's investment objective and policies as stated in the Prospectus and
Statement of Additional Information;
<PAGE>
(c) make investment decisions for the Portfolio;
(d) place purchase and sale orders for securities on behalf of the
Portfolio;
(e) exercise voting rights in respect of portfolio securities and
other investments for the Portfolio; and
(f) monitor and evaluate the services provided by the Portfolio's
investment sub-adviser(s) (the "Sub-adviser(s)"), if any, under the terms of the
applicable investment sub-advisory agreement(s).
In providing these services, the Manager will provide investment
research and supervision of the Portfolio's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Portfolio's assets. In addition, the Manager will furnish the Portfolio
with whatever statistical information the Portfolio may reasonably request with
respect to the securities that the Portfolio may hold or contemplate purchasing.
Subject to the approval of the Directors of the Fund and, where
required by law, the Portfolio's shareholders, the Manager may engage an
investment sub-adviser or sub-advisers to provide advisory services in respect
of the Portfolio and may delegate to such investment sub-adviser(s) the
responsibilities described in subparagraphs (b), (c), (d) and (e) above. In the
event that a Sub-adviser's engagement has been terminated, the Manager shall be
responsible for furnishing the Portfolio with the services required to be
performed by such investment sub-adviser under the applicable investment sub-
advisory agreement or arranging for a successor investment sub-adviser(s) to
provide such services on terms and conditions acceptable to the Portfolio and
the Fund's Board of Directors and subject to the requirements of the Act.
SECTION 3. BROKERAGE
In executing transactions for the Portfolio and selecting brokers or
dealers, the Sub-adviser(s) will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any portfolio
transaction, the Sub-adviser will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security or
commodity interest, the price of the security or commodity interest, the
financial condition and execution capability of the broker or dealer and the
reasonableness of any commission for the specific transaction and for
transactions executed through the broker or dealer in the aggregate. In
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Sub-adviser may consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Portfolio and/or other
accounts over which the Sub-adviser or an affiliate exercises investment
discretion.
SECTION 4. INFORMATION PROVIDED TO THE FUND
The Manager will keep the Fund informed of developments materially
affecting the Portfolio and the Manager will, on its own initiative, furnish the
Fund from time to time with whatever information the Manager believes is
appropriate for this purpose.
<PAGE>
SECTION 5. STANDARD OF CARE
The Manager shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Manager shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport to
protect the Manager against any liability to the Portfolio or to holders of the
Portfolio's shares of beneficial interest to which the Manager would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Manager's reckless
disregard of its obligations and duties under this Agreement.
SECTION 6. COMPENSATION
(a) In consideration of services rendered pursuant to this Agreement,
the Portfolio will accrue daily and pay monthly a fee to the Manager at the
annual rate of 0.75% of the first $50 million average daily net assets of the
Portfolio, 0.725% of the next $50 million and 0.70% of the amount in excess of
$100 million.
(b) The fee for the period from the commencement of investment
operations to the end of the month during which investment operations commence
will be prorated according to the proportion that such period bears to the full
monthly period, and will be payable that month. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and will be payable upon the date of termination of this
Agreement.
(c) For the purpose of determining fees payable to the Manager under
this Agreement, the value of the Portfolio's net assets will be computed in the
manner described in the Fund's current Prospectus and/or Statement of Additional
Information.
SECTION 7. COSTS AND EXPENSES
The Manager will bear all expenses in connection with the
performance of its services under this Agreement, including the payment of
salaries of all officers and employees who are employed by it as well as the
payment of the fees of the Sub-adviser(s). The Portfolio will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Manager or any of its affiliates;
fees of any pricing service employed to value shares of the Portfolio; SEC fees
and state blue sky qualification fees; charges of custodians and transfer and
dividend disbursing agents; the Portfolio's proportionate share of insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Portfolio's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the Portfolio's shareholders and of the officers or
Directors of the Fund; and any extraordinary expenses.
The Portfolio will be responsible for nonrecurring expenses which
may arise, including costs of litigation to which the Portfolio is a party and
of indemnifying officers and
<PAGE>
Directors of the Fund with respect to such litigation and other expenses as
determined by the Directors.
SECTION 8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Fund understands that the Manager and the Sub-adviser(s) may act
as investment advisers to fiduciary and other managed accounts, including other
investment companies, and the Fund has no objection to the Manager and Sub-
adviser(s) so acting, provided that whenever the Portfolio and one or more other
accounts advised by the Manager or Sub-adviser(s) have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each account or company.
The Fund recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for the Portfolio. In addition, the Fund
understands and acknowledges that the persons employed by the Manager to assist
in the performance of the Manager's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Manager or any affiliate of the
Manager to engage in and devote time and attention to other businesses or to
render services of any kind or nature.
SECTION 9. TERM OF AGREEMENT
(a) This Agreement will become effective as of November ___, 1998
("Effective Date"), and shall continue for an initial term of two years from the
Effective Date. Thereafter, this Agreement shall continue automatically for
successive annual periods, provided such continuance is specifically approved at
least annually by (i) the Fund's Board of Directors or (ii) a vote of a
"majority" of the Portfolio's outstanding voting securities (as defined in the
Act), provided that in either event the continuance is also approved by a
majority of Directors who are not "interested persons" (as defined in the Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Agreement is terminable, without penalty, on 60 days' written
notice, by the Fund's Directors or by vote of holders of a majority of the
Portfolio's outstanding voting securities, or upon 90 days' written notice, by
the Manager.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act or in rules adopted under the Act).
SECTION 10. MISCELLANEOUS
(a) The Fund recognizes that directors, officers and employees of the
Manager may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Centurion" as part of their names, and that the Manager or its affiliates may
enter into advisory or other agreements with such other corporations and trusts.
If the Manager ceases to act as the investment manager of the Fund's shares, the
Fund agrees that, at the Manager's request, the Fund's license to use the word
"Centurion" will terminate and that the Fund will take all necessary action to
change the name of the Fund to a name that does not include the word
"Centurion."
<PAGE>
(b) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Advisers Act or rules or orders of the SEC.
(c) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(d) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Manager as an
agent of the Fund.
(f) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
CENTURION FUNDS, INC.
on behalf of the
CENTURION INTERNATIONAL EQUITY FUND
By: ________________________________
Name: Gerard P. DiPoto, Jr.
Title: President
Accepted:
CENTURION TRUST COMPANY
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(3)
FORM OF
CENTURION FUNDS, INC.
ON BEHALF OF
CENTURION U.S. CONTRA FUND
INVESTMENT MANAGEMENT AGREEMENT
November , 1998
Centurion Trust Company
2425 East Camelback Road - Suite 530
Phoenix, Arizona 85016-4228
Dear Sirs:
Centurion Funds, Inc. (the "Fund"), a corporation formed under the
laws of the State of Maryland, confirms its agreement with Centurion Trust
Company (the "Manager") with respect to the Manager's serving as investment
manager of the Centurion U.S. Contra Fund (the "Portfolio") as set forth below.
SECTION 1. INVESTMENT DESCRIPTION; APPOINTMENT
The Fund desires to employ the Portfolio's capital by investing and
reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Charter dated
August 20, 1998, as amended from time to time (the "Charter"), in the prospectus
(the "Prospectus") and in the statement of additional information (the
"Statement of Additional Information") filed with the Securities and Exchange
Commission (the "SEC") as part of the Fund's Registration Statement on Form N-
1A, as amended from time to time and in the manner and to the extent as may from
time to time be approved in the manner set forth in the Charter. Copies of the
Fund's Prospectus, the Statement of Additional Information and the Charter have
been or will be submitted to the Manager. The Fund desires to employ and hereby
appoints the Manager to act as the Portfolio's investment manager. The Manager
accepts the appointment and agrees to furnish the services described in Section
2 of this Agreement for the compensation set forth in Section 6 of this
Agreement.
SECTION 2. SERVICES AS MANAGER; APPOINTMENT OF SUB-ADVISERS
Subject to the supervision and direction of the Board of Directors
of the Fund, the Manager will:
(a) act in strict conformity with the Fund's Articles of
Incorporation, the Investment Company Act of 1940, as amended (the "Act"), and
the Investment Advisers Act of 1940, as amended (the "Advisers Act");
(b) manage the Portfolio's assets in accordance with the
Portfolio's investment objective and policies as stated in the Prospectus and
Statement of Additional Information;
<PAGE>
(c) make investment decisions for the Portfolio;
(d) place purchase and sale orders for securities on behalf of
the Portfolio;
(e) exercise voting rights in respect of portfolio securities and
other investments for the Portfolio; and
(f) monitor and evaluate the services provided by the Portfolio's
investment sub-adviser(s) (the "Sub-adviser(s)"), if any, under the terms of the
applicable investment sub-advisory agreement(s).
In providing these services, the Manager will provide investment
research and supervision of the Portfolio's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Portfolio's assets. In addition, the Manager will furnish the Portfolio
with whatever statistical information the Portfolio may reasonably request with
respect to the securities that the Portfolio may hold or contemplate purchasing.
Subject to the approval of the Directors of the Fund and, where
required by law, the Portfolio's shareholders, the Manager may engage an
investment sub-adviser or sub-advisers to provide advisory services in respect
of the Portfolio and may delegate to such investment sub-adviser(s) the
responsibilities described in subparagraphs (b), (c), (d) and (e) above. In the
event that a Sub-adviser's engagement has been terminated, the Manager shall be
responsible for furnishing the Portfolio with the services required to be
performed by such investment sub-adviser under the applicable investment sub-
advisory agreement or arranging for a successor investment sub-adviser(s) to
provide such services on terms and conditions acceptable to the Portfolio and
the Fund's Board of Directors and subject to the requirements of the Act.
SECTION 3. BROKERAGE
In executing transactions for the Portfolio and selecting brokers or
dealers, the Sub-adviser(s) will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any portfolio
transaction, the Sub-adviser will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security or
commodity interest, the price of the security or commodity interest, the
financial condition and execution capability of the broker or dealer and the
reasonableness of any commission for the specific transaction and for
transactions executed through the broker or dealer in the aggregate. In
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Sub-adviser may consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Portfolio and/or other
accounts over which the Sub-adviser or an affiliate exercises investment
discretion.
SECTION 4. INFORMATION PROVIDED TO THE FUND
The Manager will keep the Fund informed of developments materially
affecting the Portfolio and the Manager will, on its own initiative, furnish the
Fund from time to time with whatever information the Manager believes is
appropriate for this purpose.
SECTION 5. STANDARD OF CARE
<PAGE>
The Manager shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Manager shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport to
protect the Manager against any liability to the Portfolio or to holders of the
Portfolio's shares of beneficial interest to which the Manager would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Manager's reckless
disregard of its obligations and duties under this Agreement.
SECTION 6. COMPENSATION
(a) In consideration of services rendered pursuant to this Agreement,
the Portfolio will accrue daily and pay monthly a fee to the Manager at the
annual rate of 1.20% of the average daily net assets of the Portfolio.
(b) The fee for the period from the commencement of investment
operations to the end of the month during which investment operations commence
will be prorated according to the proportion that such period bears to the full
monthly period, and will be payable that month. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and will be payable upon the date of termination of this
Agreement.
(c) For the purpose of determining fees payable to the Manager under
this Agreement, the value of the Portfolio's net assets will be computed in the
manner described in the Fund's current Prospectus and/or Statement of Additional
Information.
SECTION 7. COSTS AND EXPENSES
The Manager will bear all expenses in connection with the
performance of its services under this Agreement, including the payment of
salaries of all officers and employees who are employed by it as well as the
payment of the fees of the Sub-adviser(s). The Portfolio will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Manager or any of its affiliates;
fees of any pricing service employed to value shares of the Portfolio; SEC fees
and state blue sky qualification fees; charges of custodians and transfer and
dividend disbursing agents; the Portfolio's proportionate share of insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Portfolio's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the Portfolio's shareholders and of the officers or
Directors of the Fund; and any extraordinary expenses.
The Portfolio will be responsible for nonrecurring expenses which
may arise, including costs of litigation to which the Portfolio is a party and
of indemnifying officers and Directors of the Fund with respect to such
litigation and other expenses as determined by the Directors.
SECTION 8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
<PAGE>
The Fund understands that the Manager and the Sub-adviser(s) may act
as investment advisers to fiduciary and other managed accounts, including other
investment companies, and the Fund has no objection to the Manager and Sub-
adviser(s) so acting, provided that whenever the Portfolio and one or more other
accounts advised by the Manager or Sub-adviser(s) have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each account or company.
The Fund recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for the Portfolio. In addition, the Fund
understands and acknowledges that the persons employed by the Manager to assist
in the performance of the Manager's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Manager or any affiliate of the
Manager to engage in and devote time and attention to other businesses or to
render services of any kind or nature.
SECTION 9. TERM OF AGREEMENT
(a) This Agreement will become effective as of November ___, 1998
("Effective Date"), and shall continue for an initial term of two years from the
Effective Date. Thereafter, this Agreement shall continue automatically for
successive annual periods, provided such continuance is specifically approved at
least annually by (i) the Fund's Board of Directors or (ii) a vote of a
"majority" of the Portfolio's outstanding voting securities (as defined in the
Act), provided that in either event the continuance is also approved by a
majority of Directors who are not "interested persons" (as defined in the Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Agreement is terminable, without penalty, on 60 days' written
notice, by the Fund's Directors or by vote of holders of a majority of the
Portfolio's outstanding voting securities, or upon 90 days' written notice, by
the Manager.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act or in rules adopted under the Act).
SECTION 10. MISCELLANEOUS
(a) The Fund recognizes that directors, officers and employees of the
Manager may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Centurion" as part of their names, and that the Manager or its affiliates may
enter into advisory or other agreements with such other corporations and trusts.
If the Manager ceases to act as the investment manager of the Fund's shares, the
Fund agrees that, at the Manager's request, the Fund's license to use the word
"Centurion" will terminate and that the Fund will take all necessary action to
change the name of the Fund to a name that does not include the word
"Centurion."
(b) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Advisers Act or rules or orders of the SEC.
(c) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
<PAGE>
(d) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Manager as an
agent of the Fund.
(f) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
CENTURION FUNDS, INC.
on behalf of the
CENTURION U.S. CONTRA FUND
By: ________________________________
Name: Gerard P. DiPoto, Jr.
Title: President
Accepted:
CENTURION TRUST COMPANY
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(4)
FORM OF
CENTURION FUNDS, INC.
ON BEHALF OF
CENTURION INTERNATIONAL CONTRA FUND
INVESTMENT MANAGEMENT AGREEMENT
November , 1998
Centurion Trust Company
2425 East Camelback Road - Suite 530
Phoenix, Arizona 85016-4228
Dear Sirs:
Centurion Funds, Inc. (the "Fund"), a corporation formed under the
laws of the State of Maryland, confirms its agreement with Centurion Trust
Company (the "Manager") with respect to the Manager's serving as investment
manager of the Centurion International Contra Fund (the "Portfolio") as set
forth below.
SECTION 1. INVESTMENT DESCRIPTION; APPOINTMENT
The Fund desires to employ the Portfolio's capital by investing and
reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Charter dated
August 20, 1998, as amended from time to time (the "Charter"), in the prospectus
(the "Prospectus") and in the statement of additional information (the
"Statement of Additional Information") filed with the Securities and Exchange
Commission (the "SEC") as part of the Fund's Registration Statement on Form N-
1A, as amended from time to time and in the manner and to the extent as may from
time to time be approved in the manner set forth in the Charter. Copies of the
Fund's Prospectus, the Statement of Additional Information and the Charter have
been or will be submitted to the Manager. The Fund desires to employ and hereby
appoints the Manager to act as the Portfolio's investment manager. The Manager
accepts the appointment and agrees to furnish the services described in Section
2 of this Agreement for the compensation set forth in Section 6 of this
Agreement.
SECTION 2. SERVICES AS MANAGER; APPOINTMENT OF SUB-ADVISERS
Subject to the supervision and direction of the Board of Directors
of the Fund, the Manager will:
(a) act in strict conformity with the Fund's Articles of Incorporation,
the Investment Company Act of 1940, as amended (the "Act"), and the Investment
Advisers Act of 1940, as amended (the "Advisers Act");
(b) manage the Portfolio's assets in accordance with the Portfolio's
investment objective and policies as stated in the Prospectus and Statement of
Additional Information;
<PAGE>
(c) make investment decisions for the Portfolio;
(d) place purchase and sale orders for securities on behalf of the
Portfolio;
(e) exercise voting rights in respect of portfolio securities and other
investments for the Portfolio; and
(f) monitor and evaluate the services provided by the Portfolio's
investment sub-adviser(s) (the "Sub-adviser(s)"), if any, under the terms of the
applicable investment sub-advisory agreement(s).
In providing these services, the Manager will provide investment
research and supervision of the Portfolio's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Portfolio's assets. In addition, the Manager will furnish the Portfolio
with whatever statistical information the Portfolio may reasonably request with
respect to the securities that the Portfolio may hold or contemplate purchasing.
Subject to the approval of the Directors of the Fund and, where
required by law, the Portfolio's shareholders, the Manager may engage an
investment sub-adviser or sub-advisers to provide advisory services in respect
of the Portfolio and may delegate to such investment sub-adviser(s) the
responsibilities described in subparagraphs (b), (c), (d) and (e) above. In the
event that a Sub-adviser's engagement has been terminated, the Manager shall be
responsible for furnishing the Portfolio with the services required to be
performed by such investment sub-adviser under the applicable investment sub-
advisory agreement(s) or arranging for a successor investment sub-adviser to
provide such services on terms and conditions acceptable to the Portfolio and
the Fund's Board of Directors and subject to the requirements of the Act.
SECTION 3. BROKERAGE
In executing transactions for the Portfolio and selecting brokers or
dealers, the Sub-adviser(s) will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any portfolio
transaction, the Sub-adviser will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security or
commodity interest, the price of the security or commodity interest, the
financial condition and execution capability of the broker or dealer and the
reasonableness of any commission for the specific transaction and for
transactions executed through the broker or dealer in the aggregate. In
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Sub-adviser may consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to the Portfolio and/or other
accounts over which the Sub-adviser or an affiliate exercises investment
discretion.
SECTION 4. INFORMATION PROVIDED TO THE FUND
The Manager will keep the Fund informed of developments materially
affecting the Portfolio and the Manager will, on its own initiative, furnish the
Fund from time to time with whatever information the Manager believes is
appropriate for this purpose.
<PAGE>
SECTION 5. STANDARD OF CARE
The Manager shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Manager shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport to
protect the Manager against any liability to the Portfolio or to holders of the
Portfolio's shares of beneficial interest to which the Manager would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Manager's reckless
disregard of its obligations and duties under this Agreement.
SECTION 6. COMPENSATION
(a) In consideration of services rendered pursuant to this Agreement,
the Portfolio will accrue daily and pay monthly a fee to the Manager at the
annual rate of 1.20% of the average daily net assets of the Portfolio.
(b) The fee for the period from the commencement of investment
operations to the end of the month during which investment operations commence
will be prorated according to the proportion that such period bears to the full
monthly period, and will be payable that month. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and will be payable upon the date of termination of this
Agreement.
(c) For the purpose of determining fees payable to the Manager under
this Agreement, the value of the Portfolio's net assets will be computed in the
manner described in the Fund's current Prospectus and/or Statement of Additional
Information.
SECTION 7. COSTS AND EXPENSES
The Manager will bear all expenses in connection with the
performance of its services under this Agreement, including the payment of
salaries of all officers and employees who are employed by it as well as the
payment of the fees of the Sub-adviser(s). The Portfolio will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Manager or any of its affiliates;
fees of any pricing service employed to value shares of the Portfolio; SEC fees
and state blue sky qualification fees; charges of custodians and transfer and
dividend disbursing agents; the Portfolio's proportionate share of insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Portfolio's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the Portfolio's shareholders and of the officers or
Directors of the Fund; and any extraordinary expenses.
The Portfolio will be responsible for nonrecurring expenses which
may arise, including costs of litigation to which the Portfolio is a party and
of indemnifying officers and Directors of the Fund with respect to such
litigation and other expenses as determined by the Directors.
<PAGE>
SECTION 8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Fund understands that the Manager and the Sub-adviser(s) may act
as investment advisers to fiduciary and other managed accounts, including other
investment companies, and the Fund has no objection to the Manager and Sub-
adviser(s) so acting, provided that whenever the Portfolio and one or more other
accounts advised by the Manager or Sub-adviser(s) have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each account or company.
The Fund recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for the Portfolio. In addition, the Fund
understands and acknowledges that the persons employed by the Manager to assist
in the performance of the Manager's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Manager or any affiliate of the
Manager to engage in and devote time and attention to other businesses or to
render services of any kind or nature.
SECTION 9. TERM OF AGREEMENT
(a) This Agreement will become effective as of November ___, 1998
("Effective Date"), and shall continue for an initial term of two years from the
Effective Date. Thereafter, this Agreement shall continue automatically for
successive annual periods, provided such continuance is specifically approved at
least annually by (i) the Fund's Board of Directors or (ii) a vote of a
"majority" of the Portfolio's outstanding voting securities (as defined in the
Act), provided that in either event the continuance is also approved by a
majority of Directors who are not "interested persons" (as defined in the Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval.
(b) This Agreement is terminable, without penalty, on 60 days' written
notice, by the Fund's Directors or by vote of holders of a majority of the
Portfolio's outstanding voting securities, or upon 90 days' written notice, by
the Manager.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act or in rules adopted under the Act).
SECTION 10. MISCELLANEOUS
(a) The Fund recognizes that directors, officers and employees of the
Manager may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Centurion" as part of their names, and that the Manager or its affiliates may
enter into advisory or other agreements with such other corporations and trusts.
If the Manager ceases to act as the investment manager of the Fund's shares, the
Fund agrees that, at the Manager's request, the Fund's license to use the word
"Centurion" will terminate and that the Fund will take all necessary action to
change the name of the Fund to a name that does not include the word
"Centurion."
(b) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Advisers Act or rules or orders of the SEC.
<PAGE>
(c) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(d) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Manager as an
agent of the Fund.
(f) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance of this Agreement by signing and returning the enclosed copy of
this Agreement.
Very truly yours,
CENTURION FUNDS, INC.
on behalf of the
CENTURION INTERNATIONAL CONTRA FUND
By: ________________________________
Name: Gerard P. DiPoto, Jr.
Title: President
Accepted:
CENTURION TRUST COMPANY
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(5)
CENTURION FUNDS, INC
ON BEHALF OF THE
Centurion U.S. Equity Fund
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
November , 1998
Parametric Portfolio Associates
7310 Columbus Center
701 Fifth Avenue
Seattle, Washington 98104-7090
Dear Sirs:
Under an investment management agreement (the "Management Agreement")
between Centurion Funds, Inc., a Maryland corporation (the "Fund"), and
Centurion Trust Company (the "Manager"), the Manager serves as investment
manager to the Centurion U.S. Equity Fund (the "Portfolio"), a series of the
Fund. The Manager hereby confirms its agreement with Parametric Portfolio
Associates (the "Sub-adviser") with respect to the Sub-adviser's serving as an
investment sub-adviser to the Portfolio, as follows:
Section 1. Investment Description; Appointment
-----------------------------------
(a) The Fund desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Articles of
Incorporation dated August 20, 1998, as amended from time to time (the
"Articles"), in the prospectus (the "Prospectus") and in the statement of
additional information (the "Statement of Additional Information") filed with
the Securities and Exchange Commission (the "SEC") as part of the Fund's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"), and in such manner and to such extent as may from
time to time be approved by the Fund's Board of Directors. Copies of the
Prospectus, the Statement of Additional Information and the Articles have been
or will be submitted to the Sub-adviser.
(b) The Manager, with the approval of the Fund, hereby appoints the
Sub-adviser to act as an investment sub-adviser to the Portfolio for the periods
and on the terms set forth in this Agreement. The Sub-adviser accepts such
appointment and agrees to furnish the services set forth below for the
compensation herein provided.
Section 2. Services as Sub-adviser
-----------------------
(a) Subject to the supervision and direction of the Manager, the Sub-
adviser will manage the portion of the Portfolio's assets allocated to the Sub-
adviser upon the recommendation of the Manager and the review of the Fund's
Directors ("Allocated Assets") in accordance with: (1) the Articles, (2) the
Investment Company Act of 1940, as amended (the
<PAGE>
"Act"), the Investment Advisers Act of 1940, as amended (the "Advisers Act"),
all applicable rules and regulations thereunder and all other applicable laws
and regulations, (3) the Portfolio's investment objective and policies as stated
in the Prospectus and Statement of Additional Information, and (4) investment
parameters provided by the Manager from time to time and procedures adopted by
the Fund's Directors. The Manager may, in its absolute discretion and upon
notice to the Sub-adviser, increase or decrease the Allocated Assets. In
connection therewith, the Sub-adviser will:
(i) provide a continuous investment program for the Allocated
Assets, including investment research and determining whether to purchase,
retain or sell securities and other investments on behalf of the Portfolio.
The Sub-adviser is hereby authorized to execute, or place orders for the
execution of, all transactions on behalf of the Portfolio with respect to
the Allocated Assets;
(ii) assist the Fund's custodians and accounting agent in
determining or confirming, consistent with the procedures and policies
stated in the Prospectus and Statement of Additional Information, the value
of any portfolio securities or other portfolio assets represented in the
Allocated Assets for which the custodians and accounting agent seek
assistance from or identify for review by the Sub-adviser;
(iii) monitor the execution of transactions and the settlement
and clearance of the Portfolio's securities transactions represented in the
Allocated Assets;
(iv) exercise voting rights in respect of portfolio securities
represented in the Allocated Assets; and
(v) provide reports to the Fund's Directors for consideration
at quarterly meetings of the Board on the investment program for the
Allocated Assets and the issuers and securities represented in the
Allocated Assets, and furnish the Manager and the Fund's Directors with
such periodic and special reports as the Fund or the Manager may reasonably
request.
(b) In connection with the performance of the services of the Sub-
adviser provided for herein, the Sub-adviser may contract at its own expense
with third parties for the acquisition of research, clerical services and other
administrative services that would not require such parties to be required to
register as an investment adviser under the Advisers Act; provided that the Sub-
adviser shall remain responsible and liable for the performance of its duties
hereunder.
Section 3. Execution of Transactions
-------------------------
(a) The Sub-adviser agrees that it will execute transactions for the
Portfolio with respect to Allocated Assets only through brokers or dealers
appearing on a list of brokers and dealers approved by the Manager. The Sub-
adviser may place orders with respect to Allocated Assets with Mutual Management
Corp. or its affiliates in accordance with Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, Section 17(e) of the Act and
Rule 17e-1 thereunder and other applicable laws and regulations.
(b) In executing transactions for the Portfolio, selecting brokers or
dealers and negotiating any brokerage commission rates, the Sub-adviser will use
its best efforts to seek the best overall terms available. In assessing the
best overall terms available for any portfolio
<PAGE>
transaction, the Sub-adviser will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and for transactions executed through the broker or dealer in the
aggregate.
(c) In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to the extent
that the execution and price offered by more than one broker or dealer are
comparable the Sub-adviser may consider any brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Sub-adviser or to the Manager for use on behalf of the Portfolio
and/or other accounts over which the Sub-adviser or Manager, or an affiliate of
either, exercise investment discretion.
(d) The Sub-adviser will not effect orders for the purchase or sale of
securities on behalf of the Portfolio through brokers or dealers as agents.
(e) In connection with the purchase and sale of securities for the
Portfolio, the Sub-adviser will provide such information as may be reasonably
necessary to enable the Fund's custodians and administrator to perform their
administrative and recordkeeping responsibilities with respect to the Portfolio.
Section 4. Information Provided to the Manager and the Fund; Certain
---------------------------------------------------------
Representations of the Sub-adviser
- ----------------------------------
(a) The Sub-adviser agrees that it will make available to the Manager
and the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Portfolio, including without limitation records
relating to trading by employees of the Sub-adviser for their own accounts and
on behalf of other clients, to assist the Manager and the Fund in monitoring
compliance with the Act and the Advisers Act, as well as other applicable laws
and guidelines. The Sub-adviser agrees to cooperate with the Fund and the
Manager and their respective representatives in connection with any such
monitoring efforts. The Sub-adviser will furnish the Fund's Directors with
respect to the Portfolio such periodic and special reports as the Manager and
the Directors may reasonably request.
(b) The Sub-adviser agrees that it will immediately notify the Manager
and the Fund: (i) in the event that the Sub-adviser or any of its affiliates
becomes subject to a statutory disqualification that prevents the Sub-adviser
from serving as an investment sub-adviser pursuant to this Agreement, or becomes
or expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority; (ii) of a change in the Sub-
adviser, financial or otherwise, that adversely affects its ability to perform
services under this Agreement; (iii) of any reorganization or change in the Sub-
adviser, including any change in its ownership or key employees; or (iv) upon
having a reasonable basis for believing that, as a result of the Sub-adviser's
managing the Allocated Assets, the Portfolio's investment portfolio has ceased
to adhere to the Portfolio's investment objectives, policies and restrictions as
stated in the Prospectus or Statement of Additional Information or is otherwise
in violation of applicable law.
(c) The Sub-adviser has provided the information about itself set forth
in the Registration Statement and has reviewed the description of its
operations, duties and responsibilities as stated therein and acknowledges that
they are true and correct and contain no material misstatement or omission; and
it further agrees to notify the Manager and the Fund immediately of any material
fact known to the Sub-adviser respecting or relating to the Sub-
<PAGE>
adviser that is not contained in the Prospectus or Statement of Additional
Information, or any amendment or supplement thereto, or any statement contained
therein that becomes untrue in any material respect.
(d) The Sub-adviser represents and warrants that it is an investment
adviser registered under the Advisers Act and other applicable laws and has
obtained all necessary licenses and approvals in order to perform the services
provided in this Agreement. The Sub-adviser has supplied the Manager and the
Fund copies of its Form ADV with all exhibits and attachments thereto and will
hereinafter supply the Manager and the Fund, promptly upon preparation thereof,
copies of all amendments or restatements of such document. The Sub-adviser
further represents that the statements contained in its Form ADV, as of the date
hereof, are true and correct and do not omit to state any material fact required
to be stated therein or necessary in order to make the statement therein not
misleading. The Sub-adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form and to maintain all necessary registrations, licenses and approvals
in effect during the term of this Agreement. The Sub-adviser acknowledges that
it is an "investment adviser" to the Portfolio within the meaning of the Act and
the Advisers Act.
(e) The Sub-adviser represents that it has adopted a written Code of
Ethics in compliance with Rule 17j-1 under the Act and will provide the Fund
with any amendments to such Code.
Section 5. Books and Records
-----------------
(a) In compliance with the requirements of Rule 31a-3 under the Act,
the Sub-adviser hereby agrees that all records that it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund copies of any such records upon the Fund's request. The Sub-adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
Act the records required to be maintained by Rule 31a-1 under the Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified therein
(b) The Sub-adviser hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in connection with
services that the Sub-adviser renders pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Portfolio are
being conducted in a manner consistent with applicable laws and regulations.
Section 6. Proprietary and Confidential Information
----------------------------------------
(a) The Sub-adviser agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Fund all records and
other information relative to the Portfolio, the Manager and prior, present or
potential shareholders of the Fund and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder except after prior notification to and approval in writing of the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Sub-adviser may be exposed to civil or criminal contempt proceedings
for failure to comply or when requested to divulge such information by duly
constituted authorities.
(b) The Sub-adviser represents and warrants that neither it nor any
affiliate will use the name of the Fund, the Portfolio, the Manager or any of
their affiliates in any prospectus, sales
<PAGE>
literature or other material in any manner without the prior written approval of
the Fund or the Manager, as applicable.
Section 7. Compensation
------------
(a) In consideration of services rendered pursuant to this Agreement,
the Manager will pay the Sub-adviser a fee that is computed daily and paid
monthly at the following annual rates of average daily net assets of the
Portfolio: 0.30% of the Portfolio's average daily net assets up to $25 million
and 0.25% of the Portfolio's average daily net assets in excess of $25 million,
multiplied by a fraction, the numerator of which is the average daily value of
Allocated Assets and the denominator of which is the average daily value of the
Portfolio's total assets (the "Portfolio Advisory Fee").
(b) The Portfolio Advisory Fee for the period from the date of this
Agreement becomes effective to the end of the month during which this Agreement
becomes effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Sub-adviser,
the value of the Portfolio's net assets shall be computed at the time and in the
manner specified in the Prospectus and/or the Statement of Additional
Information.
(d) The Sub-adviser shall have no right to obtain compensation directly
from the Portfolio or the Fund for services provided hereunder and agrees to
look solely to the Manager for payment of fees due.
Section 8. Costs and Expenses
------------------
During the term of this Agreement, the Sub-adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it and the Fund.
Section 9. Standard of Care
----------------
The Sub-adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Sub-adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Manager or the Fund in connection with the matter to which this Agreement
relates, except that the Sub-adviser shall be liable for a loss resulting from a
breach of fiduciary duty by the Sub-adviser with respect to the receipt of
compensation for services; provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-adviser against any liability to
the Manager or the Fund or to holders of the Fund's shares representing
interests in the Portfolio to which the Sub-adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Sub-adviser's reckless
disregard of its obligations and duties under this Agreement.
Section 10. Services to Other Companies or Accounts
------------------------------_--------
(a) It is understood that the services of the Sub-adviser are not
exclusive, and nothing in this Agreement shall prevent the Sub-adviser from
providing similar services to other
<PAGE>
investment companies (whether or not their investment objectives and policies
are similar to those of the Portfolio) or from engaging in other activities,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
(b) On occasions when the Sub-adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of other
investment advisory clients of the Sub-adviser, the Sub-adviser may, to the
extent permitted by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be so sold or purchased with those of its other
clients. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Sub-
adviser in a manner that is fair and equitable in the exercise of its fiduciary
obligations to the Portfolio and to such other clients. The Sub-adviser shall
provide to the Manager and the Fund all information reasonably requested by the
Manager and the Fund relating to the decisions made by the Sub-adviser regarding
allocation of securities purchased or sold, as well as the expenses incurred in
a transaction, among the Portfolio and the Sub-adviser's other investment
advisory clients.
(c) The Fund and the Manager understand and acknowledge that the
persons employed by the Sub-adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service. Nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-adviser or any affiliate of the Sub-adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
Section 11. Duration and Termination
------------------------
(a) This Agreement shall become effective on November , 1998 or, if
a later date, the date it is approved by shareholders of the Portfolio, and
shall continue for two years from that date, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
(ii) a vote of a majority of the Portfolio's outstanding voting securities (as
defined in the Act), provided that the continuance is also approved by a
majority of the Directors who are not "interested persons" (as defined in the
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated,
without penalty (i) by the Manager at any time, upon sixty (60) days' written
notice to the Sub-adviser and the Fund, (ii) at any time by vote of a majority
of the Fund's Directors or by vote of the majority of the Portfolio's
outstanding voting securities, upon notice to the Manager and the Sub-adviser,
or (iii) by the Sub-adviser at any time upon sixty (60) days' written notice to
the Manager and the Fund.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act) by any
party hereto.
(d) In the event of termination of this Agreement for any reason, all
records relating to the Portfolio kept by the Sub-adviser shall promptly be
returned to the Manager or the Fund, free from any claim or retention of rights
in such records by the Sub-adviser.
<PAGE>
Section 12. Amendments
----------
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
Section 13. Notices
-------
All communications hereunder shall be given (a) if to the Sub-adviser,
to Parametric Portfolio Associates, 7310 Columbus Center, 701 Fifth Avenue,
Seattle, Washington 98104-7090 (Attention: David Stein.), telephone: 206-386-
5575, telecopy: 206-386-5581, and (b) if to the Manager or the Fund, c/o
Centurion Trust Company, 2425 East Camelback Road, Suite 530, Phoenix, Arizona
85016-4228 (Attention: Gerard P. Dipoto, Jr.), telephone: (602)957-9789 (x236),
telecopy: (602)957-9788.
Section 14. Miscellaneous
-------------
(a) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Sub-advisers Act, or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions thereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Sub-adviser as
an agent of the Fund or the Manager.
(e) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
CENTURION TRUST COMPANY
By: ____________________________
Name: Gerard P. DiPoto, Jr.
Title: President
Accepted:
Parametric Portfolio Associates
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(6)
CENTURION FUNDS, INC
ON BEHALF OF THE
Centurion U.S. Equity Fund
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
November , 1998
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Dear Sirs:
Under an investment management agreement (the "Management Agreement")
between Centurion Funds, Inc., a Maryland corporation (the "Fund"), and
Centurion Trust Company (the "Manager"), the Manager serves as investment
manager to the Centurion U.S. Equity Fund (the "Portfolio"), a series of the
Fund. The Manager hereby confirms its agreement with BEA Associates (the "Sub-
adviser") with respect to the Sub-adviser's serving as an investment sub-adviser
to the Portfolio, as follows:
Section 1. Investment Description; Appointment
-----------------------------------
(a) The Fund desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Articles of
Incorporation dated August 20, 1998, as amended from time to time (the
"Articles"), in the prospectus (the "Prospectus") and in the statement of
additional information (the "Statement of Additional Information") filed with
the Securities and Exchange Commission (the "SEC") as part of the Fund's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"), and in such manner and to such extent as may from
time to time be approved by the Fund's Board of Directors. Copies of the
Prospectus, the Statement of Additional Information and the Articles have been
or will be submitted to the Sub-adviser.
(b) The Manager, with the approval of the Fund, hereby appoints the
Sub-adviser to act as an investment sub-adviser to the Portfolio for the periods
and on the terms set forth in this Agreement. The Sub-adviser accepts such
appointment and agrees to furnish the services set forth below for the
compensation herein provided.
Section 2. Services as Sub-adviser
------------------------
(a) Subject to the supervision and direction of the Manager, the Sub-
adviser will manage the portion of the Portfolio's assets allocated to the Sub-
adviser upon the recommendation of the Manager and the review of the Fund's
Directors ("Allocated Assets") in accordance with: (1) the Articles, (2) the
Investment Company Act of 1940, as amended (the "Act"), the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), all applicable rules and
regulations thereunder and all other applicable laws and regulations, (3) the
Portfolio's investment objective and policies as stated in the Prospectus and
Statement of Additional
<PAGE>
Information, and (4) investment parameters provided by the Manager from time to
time and procedures adopted by the Fund's Directors. The Manager may, in its
absolute discretion and upon notice to the Sub-adviser, increase or decrease the
Allocated Assets. In connection therewith, the Sub-adviser will:
(i) provide a continuous investment program for the
Allocated Assets, including investment research and determining whether to
purchase, retain or sell securities and other investments on behalf of the
Portfolio. The Sub-adviser is hereby authorized to execute, or place orders
for the execution of, all transactions on behalf of the Portfolio with
respect to the Allocated Assets;
(ii) assist the Fund's custodians and accounting agent in
determining or confirming, consistent with the procedures and policies
stated in the Prospectus and Statement of Additional Information, the value
of any portfolio securities or other portfolio assets represented in the
Allocated Assets for which the custodians and accounting agent seek
assistance from or identify for review by the Sub-adviser;
(iii) monitor the execution of transactions and the settlement
and clearance of the Portfolio's securities transactions represented in the
Allocated Assets;
(iv) exercise voting rights in respect of portfolio
securities represented in the Allocated Assets; and
(v) provide reports to the Fund's Directors for
consideration at quarterly meetings of the Board on the investment program
for the Allocated Assets and the issuers and securities represented in the
Allocated Assets, and furnish the Manager and the Fund's Directors with
such periodic and special reports as the Fund or the Manager may reasonably
request.
(b) In connection with the performance of the services of the Sub-
adviser provided for herein, the Sub-adviser may contract at its own expense
with third parties for the acquisition of research, clerical services and other
administrative services that would not require such parties to be required to
register as an investment adviser under the Advisers Act; provided that the Sub-
adviser shall remain responsible and liable for the performance of its duties
hereunder.
Section 3. Execution of Transactions
-------------------------
(a) The Sub-adviser agrees that it will execute transactions for the
Portfolio with respect to Allocated Assets only through brokers or dealers
appearing on a list of brokers and dealers approved by the Manager. The Sub-
adviser may place orders with respect to Allocated Assets with Mutual Management
Corp. or its affiliates in accordance with Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, Section 17(e) of the Act and
Rule 17e-1 thereunder and other applicable laws and regulations.
(b) In executing transactions for the Portfolio, selecting brokers or
dealers and negotiating any brokerage commission rates, the Sub-adviser will use
its best efforts to seek the best overall terms available. In assessing the
best overall terms available for any portfolio transaction, the Sub-adviser will
consider all factors it deems relevant including, but not limited to, the
breadth of the market in the security, the price of the security, the financial
condition and
<PAGE>
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and for transactions executed through
the broker or dealer in the aggregate.
(c) In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to the extent
that the execution and price offered by more than one broker or dealer are
comparable the Sub-adviser may consider any brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Sub-adviser or to the Manager for use on behalf of the Portfolio
and/or other accounts over which the Sub-adviser or Manager or an affiliate of
either, exercise investment discretion.
(d) The Sub-adviser will not effect orders for the purchase or sale of
securities on behalf of the Portfolio through brokers or dealers as agents.
(e) In connection with the purchase and sale of securities for the
Portfolio, the Sub-adviser will provide such information as may be reasonably
necessary to enable the Fund's custodians and administrator to perform their
administrative and recordkeeping responsibilities with respect to the Portfolio.
Section 4. Information Provided to the Manager and the Fund; Certain
---------------------------------------------------------
Representations of the Sub-adviser
- ----------------------------------
(a) The Sub-adviser agrees that it will make available to the Manager
and the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Portfolio, including without limitation records
relating to trading by employees of the Sub-adviser for their own accounts and
on behalf of other clients, to assist the Manager and the Fund in monitoring
compliance with the Act and the Advisers Act, as well as other applicable laws
and guidelines. The Sub-adviser agrees to cooperate with the Fund and the
Manager and their respective representatives in connection with any such
monitoring efforts. The Sub-adviser will furnish the Fund's Directors with
respect to the Portfolio such periodic and special reports as the Manager and
the Directors may reasonably request.
(b) The Sub-adviser agrees that it will immediately notify the Manager
and the Fund: (i) in the event that the Sub-adviser or any of its affiliates
becomes subject to a statutory disqualification that prevents the Sub-adviser
from serving as an investment sub-adviser pursuant to this Agreement, or becomes
or expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority; (ii) of a change in the Sub-
adviser, financial or otherwise, that adversely affects its ability to perform
services under this Agreement; (iii) of any reorganization or change in the Sub-
adviser, including any change in its ownership or key employees; or (iv) upon
having a reasonable basis for believing that, as a result of the Sub-adviser's
managing the Allocated Assets, the Portfolio's investment portfolio has ceased
to adhere to the Portfolio's investment objectives, policies and restrictions as
stated in the Prospectus or Statement of Additional Information or is otherwise
in violation of applicable law.
(c) The Sub-adviser has provided the information about itself set forth
in the Registration Statement and has reviewed the description of its
operations, duties and responsibilities as stated therein and acknowledges that
they are true and correct and contain no material misstatement or omission; and
it further agrees to notify the Manager and the Fund immediately of any material
fact known to the Sub-adviser respecting or relating to the Sub-adviser that is
not contained in the Prospectus or Statement of Additional Information, or any
<PAGE>
amendment or supplement thereto, or any statement contained therein that becomes
untrue in any material respect.
(d) The Sub-adviser represents and warrants that it is an investment
adviser registered under the Advisers Act and other applicable laws and has
obtained all necessary licenses and approvals in order to perform the services
provided in this Agreement. The Sub-adviser has supplied the Manager and the
Fund copies of its Form ADV with all exhibits and attachments thereto and will
hereinafter supply the Manager and the Fund, promptly upon preparation thereof,
copies of all amendments or restatements of such document. The Sub-adviser
further represents that the statements contained in its Form ADV, as of the date
hereof, are true and correct and do not omit to state any material fact required
to be stated therein or necessary in order to make the statement therein not
misleading. The Sub-adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form and to maintain all necessary registrations, licenses and approvals
in effect during the term of this Agreement. The Sub-adviser acknowledges that
it is an "investment adviser" to the Portfolio within the meaning of the Act and
the Advisers Act.
(e) The Sub-adviser represents that it has adopted a written Code of
Ethics in compliance with Rule 17j-1 under the Act and will provide the Fund
with any amendments to such Code.
Section 5. Books and Records
-----------------
(a) In compliance with the requirements of Rule 31a-3 under the Act,
the Sub-adviser hereby agrees that all records that it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund copies of any such records upon the Fund's request. The Sub-adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
Act the records required to be maintained by Rule 31a-1 under the Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified therein
(b) The Sub-adviser hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in connection with
services that the Sub-adviser renders pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Portfolio are
being conducted in a manner consistent with applicable laws and regulations.
Section 6. Proprietary and Confidential Information
----------------------------------------
(a) The Sub-adviser agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Fund all records and
other information relative to the Portfolio, the Manager and prior, present or
potential shareholders of the Fund and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder except after prior notification to and approval in writing of the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Sub-adviser may be exposed to civil or criminal contempt proceedings
for failure to comply or when requested to divulge such information by duly
constituted authorities.
(b) The Sub-adviser represents and warrants that neither it nor any
affiliate will use the name of the Fund, the Portfolio, the Manager or any of
their affiliates in any prospectus, sales literature or other material in any
manner without the prior written approval of the Fund or the Manager, as
applicable.
<PAGE>
Section 7. Compensation
------------
(a) In consideration of services rendered pursuant to this Agreement,
the Manager will pay the Sub-adviser a fee that is computed daily and paid
monthly at the annual rate of 0.10% of the average daily net assets of the
Portfolio (the "Portfolio Advisory Fee").
(b) The Portfolio Advisory Fee for the period from the date of this
Agreement becomes effective to the end of the month during which this Agreement
becomes effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Sub-adviser,
the value of the Portfolio's net assets shall be computed at the time and in the
manner specified in the Prospectus and/or the Statement of Additional
Information.
(d) The Sub-adviser shall have no right to obtain compensation directly
from the Portfolio or the Fund for services provided hereunder and agrees to
look solely to the Manager for payment of fees due.
Section 8. Costs and Expenses
------------------
During the term of this Agreement, the Sub-adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it and the Fund.
Section 9. Standard of Care
----------------
The Sub-adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Sub-adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Manager or the Fund in connection with the matter to which this Agreement
relates, except that the Sub-adviser shall be liable for a loss resulting from a
breach of fiduciary duty by the Sub-adviser with respect to the receipt of
compensation for services; provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-adviser against any liability to
the Manager or the Fund or to holders of the Fund's shares representing
interests in the Portfolio to which the Sub-adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Sub-adviser's reckless
disregard of its obligations and duties under this Agreement.
Section 10. Services to Other Companies or Accounts
---------------------------------------
(a) It is understood that the services of the Sub-adviser are not
exclusive, and nothing in this Agreement shall prevent the Sub-adviser from
providing similar services to other investment companies (whether or not their
investment objectives and policies are similar to
<PAGE>
those of the Portfolio) or from engaging in other activities, provided that
those activities do not adversely affect the ability of the Sub-adviser to
perform its services under this Agreement.
(b) On occasions when the Sub-adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of other
investment advisory clients of the Sub-adviser, the Sub-adviser may, to the
extent permitted by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be so sold or purchased with those of its other
clients. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Sub-
adviser in a manner that is fair and equitable in the exercise of its fiduciary
obligations to the Portfolio and to such other clients. The Sub-adviser shall
provide to the Manager and the Fund all information reasonably requested by the
Manager and the Fund relating to the decisions made by the Sub-adviser regarding
allocation of securities purchased or sold, as well as the expenses incurred in
a transaction, among the Portfolio and the Sub-adviser's other investment
advisory clients.
(c) The Fund and the Manager understand and acknowledge that the
persons employed by the Sub-adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service. Nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-adviser or any affiliate of the Sub-adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
Section 11. Duration and Termination
------------------------
(a) This Agreement shall become effective on November , 1998 or, if
a later date, the date it is approved by shareholders of the Portfolio, and
shall continue for two years from that date, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
(ii) a vote of a majority of the Portfolio's outstanding voting securities (as
defined in the Act), provided that the continuance is also approved by a
majority of the Directors who are not "interested persons" (as defined in the
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated,
without penalty (i) by the Manager at any time, upon sixty (60) days' written
notice to the Sub-adviser and the Fund, (ii) at any time by vote of a majority
of the Fund's Directors or by vote of the majority of the Portfolio's
outstanding voting securities, upon notice to the Manager and the Sub-adviser,
or (iii) by the Sub-adviser at any time upon sixty (60) days' written notice to
the Manager and the Fund.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act) by any
party hereto.
(d) In the event of termination of this Agreement for any reason, all
records relating to the Portfolio kept by the Sub-adviser shall promptly be
returned to the Manager or the Fund, free from any claim or retention of rights
in such records by the Sub-adviser.
Section 12. Amendments
----------
<PAGE>
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
Section 13. Notices
-------
All communications hereunder shall be given (a) if to the Sub-adviser,
to BEA Associates, One Citicorp Center, 153 East 53rd Street, New York, NY 10022
(Attention: Hal Liebes, Esq.), telephone: 212-326-5454, telecopy: 212-888-6773,
and (b) if to the Manager or the Fund, c/o Centurion Trust Company, 2425 East
Camelback Road, Suite 530, Phoenix, Arizona 85016-4228 (Attention: Gerard P.
Dipoto, Jr.), telephone: (602)957-9789 (x236), telecopy: (602)957-9788.
Section 14. Miscellaneous
-------------
(a) This Agreement shall be governed by the laws of the State of New
York, provided that nothing herein shall be construed in a manner inconsistent
with the Act, the Sub-advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions thereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Sub-adviser as
an agent of the Fund or the Manager.
(e) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
CENTURION TRUST COMPANY
By: ____________________________
Name: Gerard P. DiPoto, Jr.
Title:
Accepted:
BEA Associates
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(7)
CENTURION FUNDS, INC
ON BEHALF OF THE
Centurion International Equity Fund
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
November , 1998
Friends Ivory & Sime, Inc
One World Trade Center - Suite 2101
New York, New York 10048-0080
Dear Sirs:
Under an investment management agreement (the "Management Agreement")
between Centurion Funds, Inc., a Maryland corporation (the "Fund"), and
Centurion Trust Company (the "Manager"), the Manager serves as investment
manager to the Centurion International Equity Fund (the "Portfolio"), a series
of the Fund. The Manager hereby confirms its agreement with Friends Ivory &
Sime, Inc. (the "Sub-adviser") with respect to the Sub-adviser's serving as an
investment sub-adviser to the Portfolio, as follows:
Section 1. Investment Description; Appointment
-----------------------------------
(a) The Fund desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Articles of
Incorporation dated August 20, 1998, as amended from time to time (the
"Articles"), in the prospectus (the "Prospectus") and in the statement of
additional information (the "Statement of Additional Information") filed with
the Securities and Exchange Commission (the "SEC") as part of the Fund's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"), and in such manner and to such extent as may from
time to time be approved by the Fund's Board of Directors. Copies of the
Prospectus, the Statement of Additional Information and the Articles have been
or will be submitted to the Sub-adviser.
(b) The Manager, with the approval of the Fund, hereby appoints the
Sub-adviser to act as an investment sub-adviser to the Portfolio for the periods
and on the terms set forth in this Agreement. The Sub-adviser accepts such
appointment and agrees to furnish the services set forth below for the
compensation herein provided.
Section 2. Services as Sub-adviser
-----------------------
(a) Subject to the supervision and direction of the Manager, the Sub-
adviser will manage the portion of the Portfolio's assets allocated to the Sub-
adviser upon the recommendation of the Manager and the review of the Fund's
Directors ("Allocated Assets") in accordance with: (1) the Articles, (2) the
Investment Company Act of 1940, as amended (the "Act"), the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), all applicable rules and
regulations thereunder and all other applicable laws and regulations, (3) the
Portfolio's investment objective and policies as stated in the Prospectus and
Statement of Additional
<PAGE>
Information, and (4) investment parameters provided by the Manager from time to
time and procedures adopted by the Fund's Directors. The Manager may, in its
absolute discretion and upon notice to the Sub-adviser, increase or decrease the
Allocated Assets. In connection therewith, the Sub-adviser will:
(i) provide a continuous investment program for the Allocated
Assets, including investment research and determining whether to purchase,
retain or sell securities and other investments on behalf of the Portfolio.
The Sub-adviser is hereby authorized to execute, or place orders for the
execution of, all transactions on behalf of the Portfolio with respect to
the Allocated Assets;
(ii) assist the Fund's custodians and accounting agent in
determining or confirming, consistent with the procedures and policies
stated in the Prospectus and Statement of Additional Information, the value
of any portfolio securities or other portfolio assets represented in the
Allocated Assets for which the custodians and accounting agent seek
assistance from or identify for review by the Sub-adviser;
(iii) monitor the execution of transactions and the settlement
and clearance of the Portfolio's securities transactions represented in the
Allocated Assets;
(iv) exercise voting rights in respect of portfolio securities
represented in the Allocated Assets; and
(v) provide reports to the Fund's Directors for consideration at
quarterly meetings of the Board on the investment program for the Allocated
Assets and the issuers and securities represented in the Allocated Assets,
and furnish the Manager and the Fund's Directors with such periodic and
special reports as the Fund or the Manager may reasonably request.
(b) In connection with the performance of the services of the Sub-
adviser provided for herein, the Sub-adviser may contract at its own expense
with third parties for the acquisition of research, clerical services and other
administrative services that would not require such parties to be required to
register as an investment adviser under the Advisers Act; provided that the Sub-
adviser shall remain responsible and liable for the performance of its duties
hereunder.
Section 3. Execution of Transactions
-------------------------
(a) The Sub-adviser agrees that it will execute transactions for the
Portfolio with respect to Allocated Assets only through brokers or dealers
appearing on a list of brokers and dealers approved by the Manager. The Sub-
adviser may place orders with respect to Allocated Assets with Mutual Management
Corp. or its affiliates in accordance with Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, Section 17(e) of the Act and
Rule 17e-1 thereunder and other applicable laws and regulations.
(b) In executing transactions for the Portfolio, selecting brokers or
dealers and negotiating any brokerage commission rates, the Sub-adviser will use
its best efforts to seek the best overall terms available. In assessing the
best overall terms available for any portfolio transaction, the Sub-adviser will
consider all factors it deems relevant including, but not limited to, the
breadth of the market in the security, the price of the security, the financial
condition and
<PAGE>
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and for transactions executed through
the broker or dealer in the aggregate.
(c) In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to the extent
that the execution and price offered by more than one broker or dealer are
comparable the Sub-adviser may consider any brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Sub-adviser or to the Manager for use on behalf of the Portfolio
and/or other accounts over which the Sub-adviser or the Manager, or an affiliate
of either, exercise investment discretion.
(d) The Sub-adviser will not effect orders for the purchase or sale of
securities on behalf of the Portfolio through brokers or dealers as agents.
(e) In connection with the purchase and sale of securities for the
Portfolio, the Sub-adviser will provide such information as may be reasonably
necessary to enable the Fund's custodians and administrator to perform their
administrative and recordkeeping responsibilities with respect to the Portfolio.
Section 4. Information Provided to the Manager and the Fund; Certain
---------------------------------------------------------
Representations of the Sub-adviser
- ----------------------------------
(a) The Sub-adviser agrees that it will make available to the Manager
and the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Portfolio, including without limitation records
relating to trading by employees of the Sub-adviser for their own accounts and
on behalf of other clients, to assist the Manager and the Fund in monitoring
compliance with the Act and the Advisers Act, as well as other applicable laws
and guidelines. The Sub-adviser agrees to cooperate with the Fund and the
Manager and their respective representatives in connection with any such
monitoring efforts. The Sub-adviser will furnish the Fund's Directors with
respect to the Portfolio such periodic and special reports as the Manager and
the Directors may reasonably request.
(b) The Sub-adviser agrees that it will immediately notify the Manager
and the Fund: (i) in the event that the Sub-adviser or any of its affiliates
becomes subject to a statutory disqualification that prevents the Sub-adviser
from serving as an investment sub-adviser pursuant to this Agreement, or becomes
or expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority; (ii) of a change in the Sub-
adviser, financial or otherwise, that adversely affects its ability to perform
services under this Agreement; (iii) of any reorganization or change in the Sub-
adviser, including any change in its ownership or key employees; or (iv) upon
having a reasonable basis for believing that, as a result of the Sub-adviser's
managing the Allocated Assets, the Portfolio's investment portfolio has ceased
to adhere to the Portfolio's investment objectives, policies and restrictions as
stated in the Prospectus or Statement of Additional Information or is otherwise
in violation of applicable law.
(c) The Sub-adviser has provided the information about itself set forth
in the Registration Statement and has reviewed the description of its
operations, duties and responsibilities as stated therein and acknowledges that
they are true and correct and contain no material misstatement or omission; and
it further agrees to notify the Manager and the Fund immediately of any material
fact known to the Sub-adviser respecting or relating to the Sub-adviser that is
not contained in the Prospectus or Statement of Additional Information, or any
amendment or supplement thereto, or any statement contained therein that becomes
untrue in any material respect.
<PAGE>
(d) The Sub-adviser represents and warrants that it is an investment
adviser registered under the Advisers Act and other applicable laws and has
obtained all necessary licenses and approvals in order to perform the services
provided in this Agreement. The Sub-adviser has supplied the Manager and the
Fund copies of its Form ADV with all exhibits and attachments thereto and will
hereinafter supply the Manager and the Fund, promptly upon preparation thereof,
copies of all amendments or restatements of such document. The Sub-adviser
further represents that the statements contained in its Form ADV, as of the date
hereof, are true and correct and do not omit to state any material fact required
to be stated therein or necessary in order to make the statement therein not
misleading. The Sub-adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form and to maintain all necessary registrations, licenses and approvals
in effect during the term of this Agreement. The Sub-adviser acknowledges that
it is an "investment adviser" to the Portfolio within the meaning of the Act and
the Advisers Act.
(e) The Sub-adviser represents that it has adopted a written Code of
Ethics in compliance with Rule 17j-1 under the Act and will provide the Fund
with any amendments to such Code.
Section 5. Books and Records
-----------------
(a) In compliance with the requirements of Rule 31a-3 under the Act,
the Sub-adviser hereby agrees that all records that it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund copies of any such records upon the Fund's request. The Sub-adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
Act the records required to be maintained by Rule 31a-1 under the Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified therein
(b) The Sub-adviser hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in connection with
services that the Sub-adviser renders pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Portfolio are
being conducted in a manner consistent with applicable laws and regulations.
Section 6. Proprietary and Confidential Information
----------------------------------------
(a) The Sub-adviser agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Fund all records and
other information relative to the Portfolio, the Manager and prior, present or
potential shareholders of the Fund and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder except after prior notification to and approval in writing of the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Sub-adviser may be exposed to civil or criminal contempt proceedings
for failure to comply or when requested to divulge such information by duly
constituted authorities.
(b) The Sub-adviser represents and warrants that neither it nor any
affiliate will use the name of the Fund, the Portfolio, the Manager or any of
their affiliates in any prospectus, sales literature or other material in any
manner without the prior written approval of the Fund or the Manager, as
applicable.
<PAGE>
Section 7. Compensation
------------
(a) In consideration of services rendered pursuant to this Agreement,
the Manager will pay the Sub-adviser a fee that is computed daily and paid
monthly at the following annual rates of average daily net assets of the
Portfolio: 0.30% of the Portfolio's average daily net assets up to $50 million,
0.275% of the Portfolio's average daily net assets up to $100 million and 0.25%
of the Portfolio's average daily net assets in excess of $100 million,
multiplied by a fraction, the numerator of which is the average daily value of
Allocated Assets and the denominator of which is the average daily value of the
Portfolio's total assets (the "Portfolio Advisory Fee").
(b) The Portfolio Advisory Fee for the period from the date of this
Agreement becomes effective to the end of the month during which this Agreement
becomes effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Sub-adviser,
the value of the Portfolio's net assets shall be computed at the time and in the
manner specified in the Prospectus and/or the Statement of Additional
Information.
(d) The Sub-adviser shall have no right to obtain compensation directly
from the Portfolio or the Fund for services provided hereunder and agrees to
look solely to the Manager for payment of fees due.
Section 8. Costs and Expenses
------------------
During the term of this Agreement, the Sub-adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it and the Fund.
Section 9. Standard of Care
----------------
The Sub-adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Sub-adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Manager or the Fund in connection with the matter to which this Agreement
relates, except that the Sub-adviser shall be liable for a loss resulting from a
breach of fiduciary duty by the Sub-adviser with respect to the receipt of
compensation for services; provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-adviser against any liability to
the Manager or the Fund or to holders of the Fund's shares representing
interests in the Portfolio to which the Sub-adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Sub-adviser's reckless
disregard of its obligations and duties under this Agreement.
Section 10. Services to Other Companies or Accounts
---------------------------------------
(a) It is understood that the services of the Sub-adviser are not
exclusive, and nothing in this Agreement shall prevent the Sub-adviser from
providing similar services to other
<PAGE>
investment companies (whether or not their investment objectives and policies
are similar to those of the Portfolio) or from engaging in other activities,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
(b) On occasions when the Sub-adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of other
investment advisory clients of the Sub-adviser, the Sub-adviser may, to the
extent permitted by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be so sold or purchased with those of its other
clients. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Sub-
adviser in a manner that is fair and equitable in the exercise of its fiduciary
obligations to the Portfolio and to such other clients. The Sub-adviser shall
provide to the Manager and the Fund all information reasonably requested by the
Manager and the Fund relating to the decisions made by the Sub-adviser regarding
allocation of securities purchased or sold, as well as the expenses incurred in
a transaction, among the Portfolio and the Sub-adviser's other investment
advisory clients.
(c) The Fund and the Manager understand and acknowledge that the
persons employed by the Sub-adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service. Nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-adviser or any affiliate of the Sub-adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
Section 11. Duration and Termination
------------------------
(a) This Agreement shall become effective on November , 1998 or, if
a later date, the date it is approved by shareholders of the Portfolio, and
shall continue for two years from that date, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
(ii) a vote of a majority of the Portfolio's outstanding voting securities (as
defined in the Act), provided that the continuance is also approved by a
majority of the Directors who are not "interested persons" (as defined in the
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated,
without penalty (i) by the Manager at any time, upon sixty (60) days' written
notice to the Sub-adviser and the Fund, (ii) at any time by vote of a majority
of the Fund's Directors or by vote of the majority of the Portfolio's
outstanding voting securities, upon notice to the Manager and the Sub-adviser,
or (iii) by the Sub-adviser at any time upon sixty (60) days' written notice to
the Manager and the Fund.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act) by any
party hereto.
(d) In the event of termination of this Agreement for any reason, all
records relating to the Portfolio kept by the Sub-adviser shall promptly be
returned to the Manager or the Fund, free from any claim or retention of rights
in such records by the Sub-adviser.
<PAGE>
Section 12. Amendments
----------
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
Section 13. Notices
-------
All communications hereunder shall be given (a) if to the Sub-adviser,
to Friends Ivory & Sime, Inc., One World Trade Center Suite 2101, New York, NY
10022 (Attention: George Walker), telephone: 212-390-1895, telecopy: 212-321-
2085, and (b) if to the Manager or the Fund, c/o Centurion Trust Company, 2425
East Camelback Road, Suite 530, Phoenix, Arizona 85016-4228 (Attention: Gerard
P. Dipoto, Jr.), telephone: (602)957-9789 (x236), telecopy: (602)957-9788.
Section 14. Miscellaneous
-------------
(a) This Agreement shall be governed by the laws of the State of New
York, provided that nothing herein shall be construed in a manner inconsistent
with the Act, the Sub-advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions thereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Sub-adviser as
an agent of the Fund or the Manager.
(e) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
CENTURION TRUST COMPANY
By: ____________________________
Name: Gerard P. DiPoto, Jr.
Title: President
Accepted:
Friends Ivory & Sime, Inc.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(8)
CENTURION FUNDS, INC
ON BEHALF OF THE
Centurion International Equity Fund
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
November , 1998
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Dear Sirs:
Under an investment management agreement (the "Management Agreement")
between Centurion Funds, Inc., a Maryland corporation (the "Fund"), and
Centurion Trust Company (the "Manager"), the Manager serves as investment
manager to the Centurion U.S. Equity Fund (the "Portfolio"), a series of the
Fund. The Manager hereby confirms its agreement with BEA Associates (the "Sub-
adviser") with respect to the Sub-adviser's serving as an investment sub-adviser
to the Portfolio, as follows:
Section 1. Investment Description; Appointment
-----------------------------------
(a) The Fund desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Articles of
Incorporation dated August 20, 1998, as amended from time to time (the
"Articles"), in the prospectus (the "Prospectus") and in the statement of
additional information (the "Statement of Additional Information") filed with
the Securities and Exchange Commission (the "SEC") as part of the Fund's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"), and in such manner and to such extent as may from
time to time be approved by the Fund's Board of Directors. Copies of the
Prospectus, the Statement of Additional Information and the Articles have been
or will be submitted to the Sub-adviser.
(b) The Manager, with the approval of the Fund, hereby appoints the
Sub-adviser to act as an investment sub-adviser to the Portfolio for the periods
and on the terms set forth in this Agreement. The Sub-adviser accepts such
appointment and agrees to furnish the services set forth below for the
compensation herein provided.
Section 2. Services as Sub-adviser
-----------------------
(a) Subject to the supervision and direction of the Manager, the Sub-
adviser will manage the portion of the Portfolio's assets allocated to the Sub-
adviser upon the recommendation of the Manager and the review of the Fund's
Directors ("Allocated Assets") in accordance with: (1) the Articles, (2) the
Investment Company Act of 1940, as amended (the
<PAGE>
"Act"), the Investment Advisers Act of 1940, as amended (the "Advisers Act"),
all applicable rules and regulations thereunder and all other applicable laws
and regulations, (3) the Portfolio's investment objective and policies as stated
in the Prospectus and Statement of Additional Information, and (4) investment
parameters provided by the Manager from time to time and procedures adopted by
the Fund's Directors. The Manager may, in its absolute discretion and upon
notice to the Sub-adviser, increase or decrease the Allocated Assets. In
connection therewith, the Sub-adviser will:
(i) provide a continuous investment program for the Allocated
Assets, including investment research and determining whether to purchase,
retain or sell securities and other investments on behalf of the Portfolio.
The Sub-adviser is hereby authorized to execute, or place orders for the
execution of, all transactions on behalf of the Portfolio with respect to
the Allocated Assets;
(ii) assist the Fund's custodians and accounting agent in
determining or confirming, consistent with the procedures and policies
stated in the Prospectus and Statement of Additional Information, the value
of any portfolio securities or other portfolio assets represented in the
Allocated Assets for which the custodians and accounting agent seek
assistance from or identify for review by the Sub-adviser;
(iii) monitor the execution of transactions and the settlement
and clearance of the Portfolio's securities transactions represented in the
Allocated Assets;
(iv) exercise voting rights in respect of portfolio securities
represented in the Allocated Assets; and
(v) provide reports to the Fund's Directors for consideration
at quarterly meetings of the Board on the investment program for the
Allocated Assets and the issuers and securities represented in the
Allocated Assets, and furnish the Manager and the Fund's Directors with
such periodic and special reports as the Fund or the Manager may reasonably
request.
(b) In connection with the performance of the services of the Sub-
adviser provided for herein, the Sub-adviser may contract at its own expense
with third parties for the acquisition of research, clerical services and other
administrative services that would not require such parties to be required to
register as an investment adviser under the Advisers Act; provided that the Sub-
adviser shall remain responsible and liable for the performance of its duties
hereunder.
Section 3. Execution of Transactions
-------------------------
(a) The Sub-adviser agrees that it will execute transactions for the
Portfolio with respect to Allocated Assets only through brokers or dealers
appearing on a list of brokers and dealers approved by the Manager. The Sub-
adviser may place orders with respect to Allocated Assets with Mutual Management
Corp. or its affiliates in accordance with Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, Section 17(e) of the Act and
Rule 17e-1 thereunder and other applicable laws and regulations.
(b) In executing transactions for the Portfolio, selecting brokers or
dealers and negotiating any brokerage commission rates, the Sub-adviser will use
its best efforts to seek the best overall terms available. In assessing the
best overall terms available for any portfolio
<PAGE>
transaction, the Sub-adviser will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and for transactions executed through the broker or dealer in the
aggregate.
(c) In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to the extent
that the execution and price offered by more than one broker or dealer are
comparable the Sub-adviser may consider any brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Sub-adviser or to the Manager for use on behalf of the Portfolio
and/or other accounts over which the Sub-adviser or Manager, or an affiliate of
either, exercise investment discretion.
(d) The Sub-adviser will not effect orders for the purchase or sale of
securities on behalf of the Portfolio through brokers or dealers as agents.
(e) In connection with the purchase and sale of securities for the
Portfolio, the Sub-adviser will provide such information as may be reasonably
necessary to enable the Fund's custodians and administrator to perform their
administrative and recordkeeping responsibilities with respect to the Portfolio.
Section 4. Information Provided to the Manager and the Fund; Certain
---------------------------------------------------------
Representations of the Sub-adviser
- ----------------------------------
(a) The Sub-adviser agrees that it will make available to the Manager
and the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Portfolio, including without limitation records
relating to trading by employees of the Sub-adviser for their own accounts and
on behalf of other clients, to assist the Manager and the Fund in monitoring
compliance with the Act and the Advisers Act, as well as other applicable laws
and guidelines. The Sub-adviser agrees to cooperate with the Fund and the
Manager and their respective representatives in connection with any such
monitoring efforts. The Sub-adviser will furnish the Fund's Directors with
respect to the Portfolio such periodic and special reports as the Manager and
the Directors may reasonably request.
(b) The Sub-adviser agrees that it will immediately notify the Manager
and the Fund: (i) in the event that the Sub-adviser or any of its affiliates
becomes subject to a statutory disqualification that prevents the Sub-adviser
from serving as an investment sub-adviser pursuant to this Agreement, or becomes
or expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority; (ii) of a change in the Sub-
adviser, financial or otherwise, that adversely affects its ability to perform
services under this Agreement; (iii) of any reorganization or change in the Sub-
adviser, including any change in its ownership or key employees; or (iv) upon
having a reasonable basis for believing that, as a result of the Sub-adviser's
managing the Allocated Assets, the Portfolio's investment portfolio has ceased
to adhere to the Portfolio's investment objectives, policies and restrictions as
stated in the Prospectus or Statement of Additional Information or is otherwise
in violation of applicable law.
(c) The Sub-adviser has provided the information about itself set forth
in the Registration Statement and has reviewed the description of its
operations, duties and responsibilities as stated therein and acknowledges that
they are true and correct and contain no material misstatement or omission; and
it further agrees to notify the Manager and the Fund immediately of any material
fact known to the Sub-adviser respecting or relating to the Sub-
<PAGE>
adviser that is not contained in the Prospectus or Statement of Additional
Information, or any amendment or supplement thereto, or any statement contained
therein that becomes untrue in any material respect.
(d) The Sub-adviser represents and warrants that it is an investment
adviser registered under the Advisers Act and other applicable laws and has
obtained all necessary licenses and approvals in order to perform the services
provided in this Agreement. The Sub-adviser has supplied the Manager and the
Fund copies of its Form ADV with all exhibits and attachments thereto and will
hereinafter supply the Manager and the Fund, promptly upon preparation thereof,
copies of all amendments or restatements of such document. The Sub-adviser
further represents that the statements contained in its Form ADV, as of the date
hereof, are true and correct and do not omit to state any material fact required
to be stated therein or necessary in order to make the statement therein not
misleading. The Sub-adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form and to maintain all necessary registrations, licenses and approvals
in effect during the term of this Agreement. The Sub-adviser acknowledges that
it is an "investment adviser" to the Portfolio within the meaning of the Act and
the Advisers Act.
(e) The Sub-adviser represents that it has adopted a written Code of
Ethics in compliance with Rule 17j-1 under the Act and will provide the Fund
with any amendments to such Code.
Section 5. Books and Records
-----------------
(a) In compliance with the requirements of Rule 31a-3 under the Act,
the Sub-adviser hereby agrees that all records that it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund copies of any such records upon the Fund's request. The Sub-adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
Act the records required to be maintained by Rule 31a-1 under the Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified therein
(b) The Sub-adviser hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in connection with
services that the Sub-adviser renders pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Portfolio are
being conducted in a manner consistent with applicable laws and regulations.
Section 6. Proprietary and Confidential Information
----------------------------------------
(a) The Sub-adviser agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Fund all records and
other information relative to the Portfolio, the Manager and prior, present or
potential shareholders of the Fund and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder except after prior notification to and approval in writing of the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Sub-adviser may be exposed to civil or criminal contempt proceedings
for failure to comply or when requested to divulge such information by duly
constituted authorities.
(b) The Sub-adviser represents and warrants that neither it nor any
affiliate will use the name of the Fund, the Portfolio, the Manager or any of
their affiliates in any prospectus, sales
<PAGE>
literature or other material in any manner without the prior written approval of
the Fund or the Manager, as applicable.
Section 7. Compensation
------------
(a) In consideration of services rendered pursuant to this Agreement,
the Manager will pay the Sub-adviser a fee that is computed daily and paid
monthly at the annual rate of 0.10% of the average daily net assets of the
Portfolio (the "Portfolio Advisory Fee").
(b) The Portfolio Advisory Fee for the period from the date of this
Agreement becomes effective to the end of the month during which this Agreement
becomes effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Sub-adviser,
the value of the Portfolio's net assets shall be computed at the time and in the
manner specified in the Prospectus and/or the Statement of Additional
Information.
(d) The Sub-adviser shall have no right to obtain compensation directly
from the Portfolio or the Fund for services provided hereunder and agrees to
look solely to the Manager for payment of fees due.
Section 8. Costs and Expenses
------------------
During the term of this Agreement, the Sub-adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it and the Fund.
Section 9. Standard of Care
----------------
The Sub-adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Sub-adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Manager or the Fund in connection with the matter to which this Agreement
relates, except that the Sub-adviser shall be liable for a loss resulting from a
breach of fiduciary duty by the Sub-adviser with respect to the receipt of
compensation for services; provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-adviser against any liability to
the Manager or the Fund or to holders of the Fund's shares representing
interests in the Portfolio to which the Sub-adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Sub-adviser's reckless
disregard of its obligations and duties under this Agreement.
Section 10. Services to Other Companies or Accounts
---------------------------------------
(a) It is understood that the services of the Sub-adviser are not
exclusive, and nothing in this Agreement shall prevent the Sub-adviser from
providing similar services to other investment companies (whether or not their
investment objectives and policies are similar to
<PAGE>
those of the Portfolio) or from engaging in other activities, provided that
those activities do not adversely affect the ability of the Sub-adviser to
perform its services under this Agreement.
(b) On occasions when the Sub-adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of other
investment advisory clients of the Sub-adviser, the Sub-adviser may, to the
extent permitted by applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be so sold or purchased with those of its other
clients. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Sub-
adviser in a manner that is fair and equitable in the exercise of its fiduciary
obligations to the Portfolio and to such other clients. The Sub-adviser shall
provide to the Manager and the Fund all information reasonably requested by the
Manager and the Fund relating to the decisions made by the Sub-adviser regarding
allocation of securities purchased or sold, as well as the expenses incurred in
a transaction, among the Portfolio and the Sub-adviser's other investment
advisory clients.
(c) The Fund and the Manager understand and acknowledge that the
persons employed by the Sub-adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service. Nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-adviser or any affiliate of the Sub-adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
Section 11. Duration and Termination
------------------------
(a) This Agreement shall become effective on November , 1998 or, if
a later date, the date it is approved by shareholders of the Portfolio, and
shall continue for two years from that date, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
(ii) a vote of a majority of the Portfolio's outstanding voting securities (as
defined in the Act), provided that the continuance is also approved by a
majority of the Directors who are not "interested persons" (as defined in the
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated,
without penalty (i) by the Manager at any time, upon sixty (60) days' written
notice to the Sub-adviser and the Fund, (ii) at any time by vote of a majority
of the Fund's Directors or by vote of the majority of the Portfolio's
outstanding voting securities, upon notice to the Manager and the Sub-adviser,
or (iii) by the Sub-adviser at any time upon sixty (60) days' written notice to
the Manager and the Fund.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act) by any
party hereto.
(d) In the event of termination of this Agreement for any reason, all
records relating to the Portfolio kept by the Sub-adviser shall promptly be
returned to the Manager or the Fund, free from any claim or retention of rights
in such records by the Sub-adviser.
Section 12. Amendments
----------
<PAGE>
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
Section 13. Notices
-------
All communications hereunder shall be given (a) if to the Sub-adviser,
to BEA Associates, One Citicorp Center, 153 East 53rd Street, New York, NY 10022
(Attention: Hal Liebes, Esq.), telephone: 212-326-5454, telecopy: 212-888-6773,
and (b) if to the Manager or the Fund, c/o Centurion Trust Company, 2425 East
Camelback Road, Suite 530, Phoenix, Arizona 85016-4228 (Attention: Gerard P.
Dipoto, Jr.), telephone: (602)957-9789 (x236), telecopy: (602)957-9788.
Section 14. Miscellaneous
-------------
(a) This Agreement shall be governed by the laws of the State of New
York, provided that nothing herein shall be construed in a manner inconsistent
with the Act, the Sub-advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions thereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Sub-adviser as
an agent of the Fund or the Manager.
(e) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
CENTURION TRUST COMPANY
By: ____________________________
Name: Gerard P. DiPoto, Jr.
Title: President
Accepted:
BEA Associates
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(9)
CENTURION FUNDS, INC
ON BEHALF OF THE
Centurion U.S. Contra Fund
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
November , 1998
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Dear Sirs:
Under an investment management agreement (the "Management Agreement")
between Centurion Funds, Inc., a Maryland corporation (the "Fund"), and
Centurion Trust Company (the "Manager"), the Manager serves as investment
manager to the Centurion U.S. Contra Fund (the "Portfolio"), a series of the
Fund. The Manager hereby confirms its agreement with BEA Associates (the "Sub-
adviser") with respect to the Sub-adviser's serving as an investment sub-adviser
to the Portfolio, as follows:
Section 1. Investment Description; Appointment
-----------------------------------
(a) The Fund desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Articles of
Incorporation dated August 20, 1998, as amended from time to time (the
"Articles"), in the prospectus (the "Prospectus") and in the statement of
additional information (the "Statement of Additional Information") filed with
the Securities and Exchange Commission (the "SEC") as part of the Fund's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"), and in such manner and to such extent as may from
time to time be approved by the Fund's Board of Directors. Copies of the
Prospectus, the Statement of Additional Information and the Articles have been
or will be submitted to the Sub-adviser.
(b) The Manager, with the approval of the Fund, hereby appoints the
Sub-adviser to act as an investment sub-adviser to the Portfolio for the periods
and on the terms set forth in this Agreement. The Sub-adviser accepts such
appointment and agrees to furnish the services set forth below for the
compensation herein provided.
Section 2. Services as Sub-adviser
-----------------------
(a) Subject to the supervision and written direction of the Manager, the
Sub-adviser will manage the Portfolio's assets ("Assets") in accordance with:
(1) the Articles, (2) the Investment Company Act of 1940, as amended (the
"Act"), the Investment Advisers Act of 1940, as amended (the "Advisers Act"),
all applicable rules and regulations thereunder and all other applicable laws
and regulations, (3) the Portfolio's investment objective and policies as stated
in the Prospectus
<PAGE>
and Statement of Additional Information, and (4) investment parameters provided
in writing by the Manager from time to time and procedures adopted by the Fund's
Directors. In connection therewith, the Sub-adviser will:
(i) provide a continuous investment program for the Assets,
including investment research and determining whether to purchase, retain
or sell securities and other investments on behalf of the Portfolio. The
Sub-adviser is hereby authorized to execute, or place orders for the
execution of, all transactions on behalf of the Portfolio;
(ii) assist the Fund's custodians and accounting agent in
determining or confirming, consistent with the procedures and policies
stated in the Prospectus and Statement of Additional Information, the value
of any portfolio securities or other portfolio assets represented in the
Portfolio for which the custodians and accounting agent seek assistance
from or identify for review by the Sub-adviser;
(iii)monitor the execution of transactions and the settlement
and clearance of the Portfolio's securities transactions;
(iv) exercise voting rights in respect of the Portfolio's
portfolio securities; and
(v) provide reports to the Fund's Directors for consideration at
quarterly meetings of the Board on the investment program for the Portfolio
and the issuers and securities represented in the Portfolio, and furnish
the Manager and the Fund's Directors with such periodic and special reports
as the Fund or the Manager may reasonably request.
(b) In connection with the performance of the services of the Sub-
adviser provided for herein, the Sub-adviser may contract at its own expense
with third parties for the acquisition of research, clerical services and other
administrative services that would not require such parties to be required to
register as an investment adviser under the Advisers Act; provided that the Sub-
adviser shall remain responsible and liable for the performance of its duties
hereunder.
Section 3. Execution of Transactions
-------------------------
(a) The Sub-adviser agrees that it will execute transactions for the
Portfolio only through brokers or dealers appearing on a list of brokers and
dealers approved by the Manager. The Sub-adviser may place orders with respect
to the Portfolio with Mutual Management Corp. or its affiliates in accordance
with Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, Section 17(e) of the Act and Rule 17e-1 thereunder and other
applicable laws and regulations.
(b) In executing transactions for the Portfolio, selecting brokers or
dealers and negotiating any brokerage commission rates, the Sub-adviser will use
its best efforts to seek the best overall terms available. In assessing the
best overall terms available for any portfolio transaction, the Sub-adviser will
consider all factors it deems relevant including, but not limited to, the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of any commission for the specific transaction and for
transactions executed through the broker or dealer in the aggregate.
<PAGE>
(c) In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to the extent
that the execution and price offered by more than one broker or dealer are
comparable the Sub-adviser may consider any brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Sub-adviser or to the Manager for use on behalf of the Portfolio
and/or other accounts over which the Sub-adviser or Manager, or an affiliate of
either, exercise investment discretion.
(d) The Sub-adviser will not effect orders for the purchase or sale of
securities on behalf of the Portfolio through brokers or dealers as agents.
(e) In connection with the purchase and sale of securities for the
Portfolio, the Sub-adviser will provide such information as may be reasonably
necessary to enable the Fund's custodians and administrator to perform their
administrative and recordkeeping responsibilities with respect to the Portfolio.
Section 4. Information Provided to the Manager and the Fund; Certain
---------------------------------------------------------
Representations of the Sub-adviser
- ----------------------------------
(a) The Sub-adviser agrees that it will make available to the Manager
and the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Portfolio, including without limitation records
relating to trading by employees of the Sub-adviser for their own accounts and
on behalf of other clients, to assist the Manager and the Fund in monitoring
compliance with the Act and the Advisers Act, as well as other applicable laws
and guidelines. The Sub-adviser agrees to cooperate with the Fund and the
Manager and their respective representatives in connection with any such
monitoring efforts. The Sub-adviser will furnish the Fund's Directors with
respect to the Portfolio such periodic and special reports as the Manager and
the Directors may reasonably request.
(b) The Sub-adviser agrees that it will immediately notify the Manager
and the Fund: (i) in the event that the Sub-adviser or any of its affiliates
becomes subject to a statutory disqualification that prevents the Sub-adviser
from serving as an investment sub-adviser pursuant to this Agreement, or becomes
or expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority; (ii) of a change in the Sub-
adviser, financial or otherwise, that adversely affects its ability to perform
services under this Agreement; (iii) of any reorganization or change in the Sub-
adviser, including any change in its ownership or key employees; or (iv) upon
having a reasonable basis for believing that, as a result of the Sub-adviser's
managing the Assets, the Portfolio's investment portfolio has ceased to adhere
to the Portfolio's investment objectives, policies and restrictions as stated in
the Prospectus or Statement of Additional Information or is otherwise in
violation of applicable law.
(c) The Sub-adviser has provided the information about itself set forth
in the Registration Statement and has reviewed the description of its
operations, duties and responsibilities as stated therein and acknowledges that
they are true and correct and contain no material misstatement or omission; and
it further agrees to notify the Manager and the Fund immediately of any material
fact known to the Sub-adviser respecting or relating to the Sub-adviser that is
not contained in the Prospectus or Statement of Additional Information, or any
amendment or supplement thereto, or any statement contained therein that becomes
untrue in any material respect.
<PAGE>
(d) The Sub-adviser represents and warrants that it is an investment
adviser registered under the Advisers Act and other applicable laws and has
obtained all necessary licenses and approvals in order to perform the services
provided in this Agreement. The Sub-adviser has supplied the Manager and the
Fund copies of its Form ADV with all exhibits and attachments thereto and will
hereinafter supply the Manager and the Fund, promptly upon preparation thereof,
copies of all amendments or restatements of such document. The Sub-adviser
further represents that the statements contained in its Form ADV, as of the date
hereof, are true and correct and do not omit to state any material fact required
to be stated therein or necessary in order to make the statement therein not
misleading. The Sub-adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form and to maintain all necessary registrations, licenses and approvals
in effect during the term of this Agreement. The Sub-adviser acknowledges that
it is an "investment adviser" to the Portfolio within the meaning of the Act and
the Advisers Act.
(e) The Sub-adviser represents that it has adopted a written Code of
Ethics in compliance with Rule 17j-1 under the Act and will provide the Fund
with any amendments to such Code.
Section 5. Books and Records
-----------------
(a) In compliance with the requirements of Rule 31a-3 under the Act,
the Sub-adviser hereby agrees that all records that it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund copies of any such records upon the Fund's request. The Sub-adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
Act the records required to be maintained by Rule 31a-1 under the Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified therein
(b) The Sub-adviser hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in connection with
services that the Sub-adviser renders pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Portfolio are
being conducted in a manner consistent with applicable laws and regulations.
Section 6. Proprietary and Confidential Information
----------------------------------------
(a) The Sub-adviser agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Fund all records and
other information relative to the Portfolio, the Manager and prior, present or
potential shareholders of the Fund and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder except after prior notification to and approval in writing of the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Sub-adviser may be exposed to civil or criminal contempt proceedings
for failure to comply or when requested to divulge such information by duly
constituted authorities.
(b) The Sub-adviser represents and warrants that neither it nor any
affiliate will use the name of the Fund, the Portfolio, the Manager or any of
their affiliates in any prospectus, sales literature or other material in any
manner without the prior written approval of the Fund or the Manager, as
applicable.
<PAGE>
Section 7. Compensation
------------
(a) In consideration of services rendered pursuant to this Agreement,
the Manager will pay the Sub-adviser a fee that is computed daily and paid
monthly at the annual rate of 0.85% of the average daily net assets of the
Portfolio (the "Portfolio Advisory Fee").
(b) The Portfolio Advisory Fee for the period from the date of this
Agreement becomes effective to the end of the month during which this Agreement
becomes effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Sub-adviser,
the value of the Portfolio's net assets shall be computed at the time and in the
manner specified in the Prospectus and/or the Statement of Additional
Information.
(d) The Sub-adviser shall have no right to obtain compensation directly
from the Portfolio or the Fund for services provided hereunder and agrees to
look solely to the Manager for payment of fees due.
Section 8. Costs and Expenses
------------------
During the term of this Agreement, the Sub-adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it and the Fund.
Section 9. Standard of Care
----------------
The Sub-adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Sub-adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Manager or the Fund in connection with the matter to which this Agreement
relates, except that the Sub-adviser shall be liable for a loss resulting from a
breach of fiduciary duty by the Sub-adviser with respect to the receipt of
compensation for services; provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-adviser against any liability to
the Manager or the Fund or to holders of the Fund's shares representing
interests in the Portfolio to which the Sub-adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Sub-adviser's reckless
disregard of its obligations and duties under this Agreement.
Section 10. Services to Other Companies or Accounts
---------------------------------------
(a) It is understood that the services of the Sub-adviser are not
exclusive, and nothing in this Agreement shall prevent the Sub-adviser from
providing similar services to other investment companies (whether or not their
investment objectives and policies are similar to those of the Portfolio) or
from engaging in other activities, provided that those activities do not
adversely affect the ability of the Sub-adviser to perform its services under
this Agreement.
(b) On occasions when the Sub-adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of other
investment advisory clients of the Sub-
<PAGE>
adviser, the Sub-adviser may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be so
sold or purchased with those of its other clients. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-adviser in a manner that is fair and
equitable in the exercise of its fiduciary obligations to the Portfolio and to
such other clients. The Sub-adviser shall provide to the Manager and the Fund
all information reasonably requested by the Manager and the Fund relating to the
decisions made by the Sub-adviser regarding allocation of securities purchased
or sold, as well as the expenses incurred in a transaction, among the Portfolio
and the Sub-adviser's other investment advisory clients.
(c) The Fund and the Manager understand and acknowledge that the
persons employed by the Sub-adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service. Nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-adviser or any affiliate of the Sub-adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
Section 11. Duration and Termination
------------------------
(a) This Agreement shall become effective on November , 1998 or, if
a later date, the date it is approved by shareholders of the Portfolio, and
shall continue for two years from that date, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
(ii) a vote of a majority of the Portfolio's outstanding voting securities (as
defined in the Act), provided that the continuance is also approved by a
majority of the Directors who are not "interested persons" (as defined in the
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated,
without penalty (i) by the Manager at any time, upon sixty (60) days' written
notice to the Sub-adviser and the Fund, (ii) at any time by vote of a majority
of the Fund's Directors or by vote of the majority of the Portfolio's
outstanding voting securities, upon notice to the Manager and the Sub-adviser,
or (iii) by the Sub-adviser at any time upon sixty (60) days' written notice to
the Manager and the Fund.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act) by any
party hereto.
(d) In the event of termination of this Agreement for any reason, all
records relating to the Portfolio kept by the Sub-adviser shall promptly be
returned to the Manager or the Fund, free from any claim or retention of rights
in such records by the Sub-adviser.
Section 12. Amendments
----------
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
<PAGE>
Section 13. Notices
-------
All communications hereunder shall be given (a) if to the Sub-adviser,
to BEA Associates, One Citicorp Center, 153 East 53rd Street, New York, NY 10022
(Attention: Hal Liebes, Esq.), telephone: 212-326-5454, telecopy: 212-888-6773,
and (b) if to the Manager or the Fund, c/o Centurion Trust Company, 2425 East
Camelback Road, Suite 530, Phoenix, Arizona 85016-4228 (Attention: Gerard P.
Dipoto, Jr.), telephone: (602)957-9789 (x236), telecopy: (602)957-9788.
Section 14. Miscellaneous
-------------
(a) This Agreement shall be governed by the laws of the State of New
York, provided that nothing herein shall be construed in a manner inconsistent
with the Act, the Sub-advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions thereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Sub-adviser as
an agent of the Fund or the Manager.
(e) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
CENTURION TRUST COMPANY
By: ____________________________
Name: Gerard P. DiPoto, Jr.
Title:
Accepted:
BEA Associates
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 99(d)(10)
CENTURION FUNDS, INC
ON BEHALF OF THE
Centurion International Contra Fund
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
November , 1998
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Dear Sirs:
Under an investment management agreement (the "Management Agreement")
between Centurion Funds, Inc., a Maryland corporation (the "Fund"), and
Centurion Trust Company (the "Manager"), the Manager serves as investment
manager to the Centurion U.S. Contra Fund (the "Portfolio"), a series of the
Fund. The Manager hereby confirms its agreement with BEA Associates (the "Sub-
adviser") with respect to the Sub-adviser's serving as an investment sub-adviser
to the Portfolio, as follows:
Section 1. Investment Description; Appointment
-----------------------------------
(a) The Fund desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the Fund's Articles of
Incorporation dated August 20, 1998, as amended from time to time (the
"Articles"), in the prospectus (the "Prospectus") and in the statement of
additional information (the "Statement of Additional Information") filed with
the Securities and Exchange Commission (the "SEC") as part of the Fund's
Registration Statement on Form N-1A, as amended from time to time (the
"Registration Statement"), and in such manner and to such extent as may from
time to time be approved by the Fund's Board of Directors. Copies of the
Prospectus, the Statement of Additional Information and the Articles have been
or will be submitted to the Sub-adviser.
(b) The Manager, with the approval of the Fund, hereby appoints the
Sub-adviser to act as an investment sub-adviser to the Portfolio for the periods
and on the terms set forth in this Agreement. The Sub-adviser accepts such
appointment and agrees to furnish the services set forth below for the
compensation herein provided.
Section 2. Services as Sub-adviser
------------------------
(a) Subject to the supervision and written direction of the Manager, the
Sub-adviser will manage the Portfolio's assets ("Assets") in accordance with:
(1) the Articles, (2) the Investment Company Act of 1940, as amended (the
"Act"), the Investment Advisers Act of 1940, as amended (the "Advisers Act"),
all applicable rules and regulations thereunder and all other applicable laws
and regulations, (3) the Portfolio's investment objective and policies as stated
in the Prospectus
<PAGE>
and Statement of Additional Information, and (4) investment parameters provided
in writing by the Manager from time to time and procedures adopted by the Fund's
Directors. In connection therewith, the Sub-adviser will:
(i) provide a continuous investment program for the Assets,
including investment research and determining whether to purchase, retain
or sell securities and other investments on behalf of the Portfolio. The
Sub-adviser is hereby authorized to execute, or place orders for the
execution of, all transactions on behalf of the Portfolio;
(ii) assist the Fund's custodians and accounting agent in
determining or confirming, consistent with the procedures and policies
stated in the Prospectus and Statement of Additional Information, the value
of any portfolio securities or other portfolio assets represented in the
Portfolio for which the custodians and accounting agent seek assistance
from or identify for review by the Sub-adviser;
(iii) monitor the execution of transactions and the settlement
and clearance of the Portfolio's securities transactions;
(iv) exercise voting rights in respect of the Portfolio's
portfolio securities; and
(v) provide reports to the Fund's Directors for consideration
at quarterly meetings of the Board on the investment program for the
Portfolio and the issuers and securities represented in the Portfolio, and
furnish the Manager and the Fund's Directors with such periodic and special
reports as the Fund or the Manager may reasonably request.
(b) In connection with the performance of the services of the Sub-
adviser provided for herein, the Sub-adviser may contract at its own expense
with third parties for the acquisition of research, clerical services and other
administrative services that would not require such parties to be required to
register as an investment adviser under the Advisers Act; provided that the Sub-
adviser shall remain responsible and liable for the performance of its duties
hereunder.
Section 3. Execution of Transactions
-------------------------
(a) The Sub-adviser agrees that it will execute transactions for the
Portfolio only through brokers or dealers appearing on a list of brokers and
dealers approved by the Manager. The Sub-adviser may place orders with respect
to the Portfolio with Mutual Management Corp. or its affiliates in accordance
with Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, Section 17(e) of the Act and Rule 17e-1 thereunder and other
applicable laws and regulations.
(b) In executing transactions for the Portfolio, selecting brokers or
dealers and negotiating any brokerage commission rates, the Sub-adviser will use
its best efforts to seek the best overall terms available. In assessing the
best overall terms available for any portfolio transaction, the Sub-adviser will
consider all factors it deems relevant including, but not limited to, the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of any commission for the specific transaction and for
transactions executed through the broker or dealer in the aggregate.
<PAGE>
(c) In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to the extent
that the execution and price offered by more than one broker or dealer are
comparable the Sub-adviser may consider any brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Sub-adviser or to the Manager for use on behalf of the Portfolio
and/or other accounts over which the Sub-adviser or Manager, or an affiliate of
either, exercise investment discretion.
(d) The Sub-adviser will not effect orders for the purchase or sale of
securities on behalf of the Portfolio through brokers or dealers as agents.
(e) In connection with the purchase and sale of securities for the
Portfolio, the Sub-adviser will provide such information as may be reasonably
necessary to enable the Fund's custodians and administrator to perform their
administrative and recordkeeping responsibilities with respect to the Portfolio.
Section 4. Information Provided to the Manager and the Fund; Certain
---------------------------------------------------------
Representations of the Sub-adviser
- ----------------------------------
(a) The Sub-adviser agrees that it will make available to the Manager
and the Fund promptly upon their request copies of all of its investment records
and ledgers with respect to the Portfolio, including without limitation records
relating to trading by employees of the Sub-adviser for their own accounts and
on behalf of other clients, to assist the Manager and the Fund in monitoring
compliance with the Act and the Advisers Act, as well as other applicable laws
and guidelines. The Sub-adviser agrees to cooperate with the Fund and the
Manager and their respective representatives in connection with any such
monitoring efforts. The Sub-adviser will furnish the Fund's Directors with
respect to the Portfolio such periodic and special reports as the Manager and
the Directors may reasonably request.
(b) The Sub-adviser agrees that it will immediately notify the Manager
and the Fund: (i) in the event that the Sub-adviser or any of its affiliates
becomes subject to a statutory disqualification that prevents the Sub-adviser
from serving as an investment sub-adviser pursuant to this Agreement, or becomes
or expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority; (ii) of a change in the Sub-
adviser, financial or otherwise, that adversely affects its ability to perform
services under this Agreement; (iii) of any reorganization or change in the Sub-
adviser, including any change in its ownership or key employees; or (iv) upon
having a reasonable basis for believing that, as a result of the Sub-adviser's
managing the Assets, the Portfolio's investment portfolio has ceased to adhere
to the Portfolio's investment objectives, policies and restrictions as stated in
the Prospectus or Statement of Additional Information or is otherwise in
violation of applicable law.
(c) The Sub-adviser has provided the information about itself set forth
in the Registration Statement and has reviewed the description of its
operations, duties and responsibilities as stated therein and acknowledges that
they are true and correct and contain no material misstatement or omission; and
it further agrees to notify the Manager and the Fund immediately of any material
fact known to the Sub-adviser respecting or relating to the Sub-adviser that is
not contained in the Prospectus or Statement of Additional Information, or any
amendment or supplement thereto, or any statement contained therein that becomes
untrue in any material respect.
<PAGE>
(d) The Sub-adviser represents and warrants that it is an investment
adviser registered under the Advisers Act and other applicable laws and has
obtained all necessary licenses and approvals in order to perform the services
provided in this Agreement. The Sub-adviser has supplied the Manager and the
Fund copies of its Form ADV with all exhibits and attachments thereto and will
hereinafter supply the Manager and the Fund, promptly upon preparation thereof,
copies of all amendments or restatements of such document. The Sub-adviser
further represents that the statements contained in its Form ADV, as of the date
hereof, are true and correct and do not omit to state any material fact required
to be stated therein or necessary in order to make the statement therein not
misleading. The Sub-adviser agrees to maintain the completeness and accuracy of
its registration on Form ADV in accordance with all legal requirements relating
to that Form and to maintain all necessary registrations, licenses and approvals
in effect during the term of this Agreement. The Sub-adviser acknowledges that
it is an "investment adviser" to the Portfolio within the meaning of the Act and
the Advisers Act.
(e) The Sub-adviser represents that it has adopted a written Code of
Ethics in compliance with Rule 17j-1 under the Act and will provide the Fund
with any amendments to such Code.
Section 5. Books and Records
-----------------
(a) In compliance with the requirements of Rule 31a-3 under the Act,
the Sub-adviser hereby agrees that all records that it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund copies of any such records upon the Fund's request. The Sub-adviser
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
Act the records required to be maintained by Rule 31a-1 under the Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified therein
(b) The Sub-adviser hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in connection with
services that the Sub-adviser renders pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Portfolio are
being conducted in a manner consistent with applicable laws and regulations.
Section 6. Proprietary and Confidential Information
----------------------------------------
(a) The Sub-adviser agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Fund all records and
other information relative to the Portfolio, the Manager and prior, present or
potential shareholders of the Fund and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder except after prior notification to and approval in writing of the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Sub-adviser may be exposed to civil or criminal contempt proceedings
for failure to comply or when requested to divulge such information by duly
constituted authorities.
(b) The Sub-adviser represents and warrants that neither it nor any
affiliate will use the name of the Fund, the Portfolio, the Manager or any of
their affiliates in any prospectus, sales literature or other material in any
manner without the prior written approval of the Fund or the Manager, as
applicable.
<PAGE>
Section 7. Compensation
------------
(a) In consideration of services rendered pursuant to this Agreement,
the Manager will pay the Sub-adviser a fee that is computed daily and paid
monthly at the annual rate of 0.85% of the average daily net assets of the
Portfolio (the "Portfolio Advisory Fee").
(b) The Portfolio Advisory Fee for the period from the date of this
Agreement becomes effective to the end of the month during which this Agreement
becomes effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement before
the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Sub-adviser,
the value of the Portfolio's net assets shall be computed at the time and in the
manner specified in the Prospectus and/or the Statement of Additional
Information.
(d) The Sub-adviser shall have no right to obtain compensation directly
from the Portfolio or the Fund for services provided hereunder and agrees to
look solely to the Manager for payment of fees due.
Section 8. Costs and Expenses
------------------
During the term of this Agreement, the Sub-adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it and the Fund.
Section 9. Standard of Care
----------------
The Sub-adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Sub-adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Manager or the Fund in connection with the matter to which this Agreement
relates, except that the Sub-adviser shall be liable for a loss resulting from a
breach of fiduciary duty by the Sub-adviser with respect to the receipt of
compensation for services; provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-adviser against any liability to
the Manager or the Fund or to holders of the Fund's shares representing
interests in the Portfolio to which the Sub-adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Sub-adviser's reckless
disregard of its obligations and duties under this Agreement.
Section 10. Services to Other Companies or Accounts
---------------------------------------
(a) It is understood that the services of the Sub-adviser are not
exclusive, and nothing in this Agreement shall prevent the Sub-adviser from
providing similar services to other investment companies (whether or not their
investment objectives and policies are similar to those of the Portfolio) or
from engaging in other activities, provided that those activities do not
adversely affect the ability of the Sub-adviser to perform its services under
this Agreement.
(b) On occasions when the Sub-adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of other
investment advisory clients of the Sub-
<PAGE>
adviser, the Sub-adviser may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be so
sold or purchased with those of its other clients. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-adviser in a manner that is fair and
equitable in the exercise of its fiduciary obligations to the Portfolio and to
such other clients. The Sub-adviser shall provide to the Manager and the Fund
all information reasonably requested by the Manager and the Fund relating to the
decisions made by the Sub-adviser regarding allocation of securities purchased
or sold, as well as the expenses incurred in a transaction, among the Portfolio
and the Sub-adviser's other investment advisory clients.
(c) The Fund and the Manager understand and acknowledge that the
persons employed by the Sub-adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service. Nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-adviser or any affiliate of the Sub-adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
provided that those activities do not adversely affect the ability of the Sub-
adviser to perform its services under this Agreement.
Section 11. Duration and Termination
------------------------
(a) This Agreement shall become effective on November , 1998 or, if
a later date, the date it is approved by shareholders of the Portfolio, and
shall continue for two years from that date, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
(ii) a vote of a majority of the Portfolio's outstanding voting securities (as
defined in the Act), provided that the continuance is also approved by a
majority of the Directors who are not "interested persons" (as defined in the
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated,
without penalty (i) by the Manager at any time, upon sixty (60) days' written
notice to the Sub-adviser and the Fund, (ii) at any time by vote of a majority
of the Fund's Directors or by vote of the majority of the Portfolio's
outstanding voting securities, upon notice to the Manager and the Sub-adviser,
or (iii) by the Sub-adviser at any time upon sixty (60) days' written notice to
the Manager and the Fund.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act) by any
party hereto.
(d) In the event of termination of this Agreement for any reason, all
records relating to the Portfolio kept by the Sub-adviser shall promptly be
returned to the Manager or the Fund, free from any claim or retention of rights
in such records by the Sub-adviser.
Section 12. Amendments
----------
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
<PAGE>
Section 13. Notices
-------
All communications hereunder shall be given (a) if to the Sub-adviser,
to BEA Associates, One Citicorp Center, 153 East 53rd Street, New York, NY 10022
(Attention: Hal Liebes, Esq.), telephone: 212-326-5454, telecopy: 212-888-6773,
and (b) if to the Manager or the Fund, c/o Centurion Trust Company, 2425 East
Camelback Road, Suite 530, Phoenix, Arizona 85016-4228 (Attention: Gerard P.
Dipoto, Jr.), telephone: (602)957-9789 (x236), telecopy: (602)957-9788.
Section 14. Miscellaneous
-------------
(a) This Agreement shall be governed by the laws of the State of New
York, provided that nothing herein shall be construed in a manner inconsistent
with the Act, the Sub-advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions thereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Sub-adviser as
an agent of the Fund or the Manager.
(e) This Agreement may be executed in counterparts, with the same effect
as if the signatures were upon the same instrument.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
CENTURION TRUST COMPANY
By: ___________________________
Name: Gerard P. DiPoto, Jr.
Accepted:
BEA Associates
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 99(e)
CENTURION FUNDS, INC.
FORM OF
DISTRIBUTION AGREEMENT
November , 1998
CFBDS, Inc.
21 Milk Street
Boston, MA 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Fund") has agreed that you
shall be, for the period of this Agreement, the non-exclusive principal
underwriter and distributor of shares of the Fund and each Series of the Fund
set forth on Exhibit A hereto, as such Exhibit may be revised from time to time
(each, including any shares of the Fund not designated by series, a "Series").
For purposes of this Agreement, the term "Shares" shall mean shares of the each
Series, or one or more Series, as the context may require.
1. Services as Principal Underwriter and Distributor
-------------------------------------------------
1.1 You will act as agent for the distribution of Shares covered by, and
in accordance with, the registration statement, prospectus and statement of
additional information then in effect under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act"), and will transmit or cause to be transmitted promptly any
orders received by you or those with whom you have sales or servicing agreements
for purchase or redemption of Shares to the Transfer and Dividend Disbursing
Agent for the Fund of which the Fund has notified you in writing.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares. It is contemplated that you will enter into sales or servicing
agreements with registered securities dealers and banks and into servicing
agreements with financial institutions and other industry professionals, such as
investment advisers, accountants and estate planning firms. In entering into
such agreements, you will act only on your own behalf as principal underwriter
and distributor. You will not be responsible for making any distribution plan
or service fee payments pursuant to any plans the Fund may adopt or agreements
it may enter into.
1.3 You shall act as principal underwriter and distributor of Shares in
compliance with all applicable laws, rules, and regulations, including, without
limitation, all rules and regulations made or adopted from time to time by the
Securities and Exchange Commission (the "SEC") pursuant to the 1933 Act or the
1940 Act or by any securities association registered under the Securities
Exchange Act of 1934, as amended.
<PAGE>
1.4 Whenever in their judgment such action is warranted for any
reason, including, without limitation, market, economic or political conditions,
the Fund's officers may decline to accept any orders for, or make any sales of,
any Shares until such time as those officers deem it advisable to accept such
orders and to make such sales and the Fund shall advise you promptly of such
determination.
2. Duties of the Fund
------------------
2.1 The Fund agrees to pay all costs and expenses in connection with
the registration of Shares under the 1933 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of Shares and for
supplying information, prices and other data to be furnished by the Fund
hereunder, and all expenses in connection with the preparation and printing of
the Fund's prospectuses and statements of additional information for regulatory
purposes and for distribution to shareholders; provided however, that nothing
-------- -------
contained herein shall be deemed to require the Fund to pay any of the costs of
advertising or marketing the sale of Shares.
2.2 The Fund agrees to execute any and all documents and to furnish
any and all information and otherwise to take any other actions that may be
reasonably necessary in the discretion of the Fund's officers in connection with
the qualification of Shares for sale in such states and other U.S. jurisdictions
as the Fund may approve and designate to you from time to time, and the Fund
agrees to pay all expenses that may be incurred in connection with such
qualification. You shall pay all expenses connected with your own qualification
as a securities broker or dealer under state or Federal laws and, except as
otherwise specifically provided in this Agreement, all other expenses incurred
by you in connection with the sale of Shares as contemplated in this Agreement.
2.3 The Fund shall furnish you from time to time, for use in
connection with the sale of Shares, such information reports with respect to the
Fund or any relevant Series and the Shares as you may reasonably request, all of
which shall be signed by one or more of the Fund's duly authorized officers; and
the Fund warrants that the statements contained in any such reports, when so
signed by the Fund's officers, shall be true and correct. The Fund also shall
furnish you upon request with (a) the reports of annual audits of the financial
statements of the Fund for each Series made by independent certified public
accountants retained by the Fund for such purpose; (b) semi-annual unaudited
financial statements pertaining to each Series; (c) quarterly earnings
statements prepared by the Fund; (d) a monthly itemized list of the securities
in each Series' portfolio; (e) monthly balance sheets as soon as practicable
after the end of each month; (f) the current net asset value and offering
price per share for each Series on each day such net asset value is computed and
(g) from time to time such additional information regarding the financial
condition of each Series of the Fund as you may reasonably request.
3. Representations and Warranties
------------------------------
The Fund represents to you that all registration statements,
prospectuses and statements of additional information filed by the Fund with the
SEC under the 1933 Act and the 1940 Act with respect to the Shares have been
prepared in conformity with the requirements of said Acts and the rules and
regulations of the SEC thereunder. As used in this Agreement, the terms
"registration statement", "prospectus" and "statement of additional information"
shall mean any
2
<PAGE>
registration statement, prospectus and statement of additional information filed
by the Fund with the SEC and any amendments and supplements thereto filed by the
Fund with the SEC. The Fund represents and warrants to you that any registration
statement, prospectus and statement of additional information, when such
registration statement becomes effective and as such prospectus and statement of
additional information are amended or supplemented, will include at the time of
such effectiveness, amendment or supplement all statements required to be
contained therein in conformance with the 1933 Act, the 1940 Act and the rules
and regulations of the SEC; that all statements of material fact contained in
any registration statement, prospectus or statement of additional information
will be true and correct when such registration statement becomes effective; and
that neither any registration statement nor any prospectus or statement of
additional information when such registration statement becomes effective will
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of the Fund's Shares. The Fund may, but shall not be
obligated to, propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus or
statement of additional information as, in the light of future developments,
may, in the opinion of the Fund, be necessary or advisable. If the Fund shall
not propose such amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Fund of a written request from you to do so,
you may, at your option, terminate this Agreement or decline to make offers of
the Fund's Shares until such amendments are made. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus or
statement of additional information without giving you reasonable notice thereof
in advance; provided, however, that nothing contained in this Agreement shall in
any way limit the Fund's right to file at any time such amendments to any
registration statement and/or supplements to any prospectus or statement of
additional information, of whatever character, as the Fund may deem advisable,
such right being in all respects absolute and unconditional.
4. Indemnification
---------------
4.1 The Fund authorizes you to use any prospectus or statement of
additional information furnished by the Fund from time to time, in connection
with the sale of Shares. The Fund agrees to indemnify, defend and hold you,
your several officers and directors, and any person who controls you within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any such
counsel fees incurred in connection therewith) which you, your officers and
directors, or any such controlling person, may incur under the 1933 Act or under
common law or otherwise, arising out of or based upon any untrue statement, or
alleged untrue statement, of a material fact contained in any registration
statement, any prospectus or any statement of additional information or arising
out of or based upon any omission, or alleged omission, to state a material fact
required to be stated in any registration statement, any prospectus or any
statement of additional information or necessary to make the statements in any
of them not misleading; provided, however, that the Fund's agreement to
indemnify you, your officers or directors, and any such controlling person shall
not be deemed to cover any claims, demands, liabilities or expenses arising out
of any statements or representations made by you or your representatives or
agents other than such statements and representations as are contained in any
prospectus or statement of additional information and in such financial and
other statements as are furnished to you pursuant to paragraph 2.3 of this
Agreement; and further provided that the Fund's agreement to indemnify you and
the Fund's
3
<PAGE>
representations and warranties herein before set forth in paragraph 3 of this
Agreement shall not be deemed to cover any liability to the Fund or its
shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties under this
Agreement. The Fund's agreement to indemnify you, your officers and directors,
and any such controlling person, as aforesaid, is expressly conditioned upon the
Fund's being notified of any action brought against you, your officers or
directors, or any such controlling person, such notification to be given by
letter or by telegram addressed to the Fund at its principal office in New York,
New York and sent to the Fund by the person against whom such action is brought,
within ten days after the summons or other first legal process shall have been
served. The failure so to notify the Fund of any such action shall not relieve
the Fund from any liability that the Fund may have to the person against whom
such action is brought by reason of any such untrue, or alleged untrue,
statement or omission, or alleged omission, otherwise than on account of the
Fund's indemnity agreement contained in this paragraph 4.1. The Fund will be
entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Fund. In the event the Fund elects to
assume the defense of any such suit and retains counsel of good standing, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but if the Fund does not elect to
assume the defense of any such suit, the Fund will reimburse you, your officers
and directors, or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
you or them. The Fund's indemnification agreement contained in this paragraph
4.1 and the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of you, your officers and directors, or any controlling person, and
shall survive the delivery of any of the Fund's Shares. This agreement of
indemnity will inure exclusively to your benefit, to the benefit of your several
officers and directors, and their respective estates, and to the benefit of the
controlling persons and their successors. The Fund agrees to notify you
promptly of the commencement of any litigation or proceedings against the Fund
or any of its officers or Board members in connection with the issuance and sale
of any of the Fund's Shares.
4.2 You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) that the Fund, its officers or Board
members or any such controlling person may incur under the 1933 Act, or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or Board members, or such controlling person
resulting from such claims or demands shall arise out of or be based upon (a)
any unauthorized sales literature, advertisements, information, statements or
representations or (b) any untrue, or alleged untrue, statement of a material
fact contained in information furnished in writing by you to the Fund and used
in the answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of additional
information, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by you to the Fund and required to be stated in such answers or
necessary to make such information not misleading. Your agreement to indemnify
the Fund, its officers or Board members, and any such controlling person, as
aforesaid, is expressly conditioned upon
4
<PAGE>
your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter or telegram addressed to you at your principal office in Boston,
Massachusetts and sent to you by the person against whom such action is brought,
within ten days after the summons or other first legal process shall have been
served. You shall have the right to control the defense of such action, with
counsel of your own choosing, satisfactory to the Fund, if such action is based
solely upon such alleged misstatement or omission on your part or with the
Fund's consent, and in any event the Fund, its officers or Board members or such
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action with counsel of its own choosing
reasonably acceptable to you but shall not have the right to settle any such
action without your consent, which will not be unreasonably withheld. The
failure to so notify you of any such action shall not relieve you from any
liability that you may have to the Fund, its officers or Board members, or to
such controlling person by reason of any such untrue, or alleged untrue,
statement or omission, or alleged omission, otherwise than on account of your
indemnity agreement contained in this paragraph 4.2. You agree to notify the
Fund promptly of the commencement of any litigation or proceedings against you
or any of your officers or directors in connection with the issuance and sale of
any of the Fund's Shares.
5. Effectiveness of Registration
-----------------------------
No Shares shall be offered by either you or the Fund under any of the
provisions of this Agreement and no orders for the purchase or sale of such
Shares under this Agreement shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act, or if and so long as a current prospectus as required by Section 5(b) (2)
of the 1933 Act is not on file with the SEC; provided, however, that nothing
-------- -------
contained in this paragraph 5 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to repurchase its Shares from any
shareholder in accordance with the provisions of the Fund's prospectus,
statement of additional information or charter documents, as amended from time
to time.
6. Offering Price
--------------
Shares of any class of any Series of the Fund offered for sale by you shall
be offered for sale at a price per share (the "offering price") equal to (a)
their net asset value (determined in the manner set forth in the Fund's charter
documents and the then-current prospectus and statement of additional
information) plus (b) a sales charge, if applicable, which shall be the
percentage of the offering price of such Shares as set forth in the Fund's then-
current prospectus relating to such Series. In addition to or in lieu of any
sales charge applicable at the time of sale, Shares of any class of any Series
of the Fund offered for sale by you may be subject to a contingent deferred
sales charge as set forth in the Fund's then-current prospectus and statement of
additional information. You shall be entitled to receive any sales charge
levied at the time of sale in respect of the Shares without remitting any
portion to the Fund. Any payments to a broker or dealer through whom you sell
Shares shall be governed by a separate agreement between you and such broker or
dealer and the Fund's then-current prospectus and statement of additional
information
5
<PAGE>
7. Notice to You
-------------
The Fund agrees to advise you immediately in writing:
(a) of any request by the SEC for amendments to the
registration statement, prospectus or statement of additional
information then in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus
or statement of additional information then in effect or the
initiation of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement,
prospectus or statement of additional information then in effect or
that requires the making of a change in such registration statement,
prospectus or statement of additional information in order to make the
statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment
to the registration statement, or any supplement to the prospectus or
statement of additional information which may from time to time be
filed with the SEC.
8. Term of the Agreement
---------------------
This Agreement shall become effective on the date hereof, shall have
an initial term of one year from the date hereof, and shall continue for
successive annual periods thereafter so long as such continuance is specifically
approved at least annually by (a) the Fund's Board or (b) by a vote of a
majority (as defined in the 1940 Act) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
--------
majority of the Board members of the Fund who are not interested persons (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. This Agreement
is terminable, without penalty, on 30 days' notice by the Fund's Board or by
vote of holders of a majority of the relevant Series outstanding voting
securities, or on 90 days' notice by you. This Agreement will also terminate
automatically, as to the relevant Series, in the event of its assignment (as
defined in the 1940 Act and the rules and regulations thereunder).
9. Arbitration
-----------
Any claim, controversy, dispute or deadlock arising under this
Agreement (collectively, a "Dispute") shall be settled by arbitration
administered under the rules of the American Arbitration Association ("AAA") in
New York, New York. Any arbitration and award of the arbitrators, or a majority
of them, shall be final and the judgment upon the award rendered
6
<PAGE>
may be entered in any state or federal court having jurisdiction. No punitive
damages are to be awarded.
10. Miscellaneous
-------------
So long as you act as a principal underwriter and distributor of
Shares, you shall not perform any services for any entity other than investment
companies advised or administered by Centurion Trust Company, Citigroup Inc. or
their affiliates and subsidiaries. The Fund recognizes that the persons employed
by you to assist in the performance of your duties under this Agreement may not
devote their full time to such service and nothing contained in this Agreement
shall be deemed to limit or restrict your or any of your affiliates right to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature. This Agreement and the terms and
conditions set forth herein shall be governed by, and construed in accordance
with, the laws of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning to us the
enclosed copy, whereupon this Agreement will become binding on you.
Very truly yours,
CENTURION FUNDS, INC.
By:
-------------------------
Authorized Officer
Accepted:
CFBDS, INC.
By:
--------------------------
Authorized Officer
7
<PAGE>
EXHIBIT 99(g)(1)
FORM OF
--------
CUSTODIAN SERVICES AGREEMENT
----------------------------
This Agreement is made as of _________, 1998 by and between CENTURION FUNDS,
INC., a Maryland corporation (the "Fund") and PNC BANK, NATIONAL ASSOCIATION, a
national banking association ("PNC Bank").
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund wishes to
retain PNC Bank to provide custodian services to its investment portfolios
listed on Exhibit A attached hereto and made a part hereof, as such Exhibit A
may be amended from time to time (each, a "Portfolio"), and PNC Bank wishes to
furnish such services, either directly or through an affiliate or affiliates, as
more fully described herein. In consideration of the premises and mutual
covenants herein contained, the parties agree as follows:
1. Definitions.
-----------
(a) "Authorized Person". The term "Authorized Person" shall mean any
-----------------
officer of the Fund and any other person, who is duly authorized by the Fund's
Governing Board, to give Oral and Written Instructions on behalf of the Fund.
Such persons are listed in the Certificate attached hereto as the Authorized
Persons Appendix, as such Appendix may be amended in writing by the Fund's
Governing Board from time to time.
(b) "Book-Entry System". The term "Book-Entry System" means Federal
------------------
Reserve Treasury book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or nominees and any
book-entry system maintained by an exchange registered with the SEC under the
1934 Act .
(c) "CFTC". The term "CFTC" shall mean the Commodities Futures Trading
------
Commission.
<PAGE>
(d) "Governing Board". The term "Governing Board" shall mean the Fund's
-----------------
Board of Directors if the Fund is a corporation or the Fund's Board of Trustees
if the Fund is a trust, or, where duly authorized, a competent committee
thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall mean oral
-------------------
instructions received by PNC Bank from an Authorized Person or from a
person reasonably believed by PNC Bank to be an Authorized Person.
(f) "SEC". The term "SEC" shall mean the Securities and Exchange
-----
Commission.
(g) "Securities and Commodities Laws". The term "Securities and
--------------------------------
Commodities Laws" shall mean the "1933 Act" which shall mean the Securities Act
of 1933, the "1934 Act" which shall mean the Securities Exchange Act of 1934,
the 1940 Act, and the "CEA" which shall mean the Commodities Exchange Act, each
as amended.
(h) "Shares". The term "Shares" shall mean the shares of stock of any
--------
series or class of the Fund, or, where appropriate, units of beneficial interest
in a trust where the Fund is organized as a Trust.
(i) "Property". The term "Property" shall mean:
----------
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or
cause to be deposited, with PNC Bank or which PNC
Bank may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by
the Fund, which are received by PNC Bank from time
to time, from or on behalf of the Fund.
(j) "Written Instructions". The term "Written Instructions" shall mean
----------------------
written instructions signed by one Authorized Person and received by PNC Bank.
The instructions may be delivered by hand, mail, tested telegram, cable, telex
or facsimile sending device.
<PAGE>
2. Appointment. The Fund hereby appoints PNC Bank to provide custodian
-----------
services to the Fund, and PNC Bank accepts such appointment and agrees to
furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable,
---------------------
will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PNC Bank or its affiliates
to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration agreements if PNC Bank is
not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect
of the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. Compliance with Government Rules and Regulations. PNC Bank
------------------------------------------------
undertakes to comply with all applicable requirements of the Securities and
Commodities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to all duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund.
5. Instructions. Unless otherwise provided in this Agreement, PNC Bank
------------
shall act only upon Oral and Written Instructions. PNC Bank shall be entitled to
rely upon any Oral and Written Instructions it receives from an Authorized
Person (or from a person reasonably believed by PNC Bank to be an Authorized
Person) pursuant to this Agreement. PNC Bank may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with the
provisions of organizational
<PAGE>
documents or this Agreement or of any vote, resolution or proceeding of the
Fund's Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PNC Bank Written Instructions confirming Oral
Instructions so that PNC Bank receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by PNC Bank shall in no
way invalidate the transactions or enforceability of the transactions authorized
by the Oral Instructions.
The Fund further agrees that PNC Bank shall incur no liability to the Fund
in acting upon Oral or Written Instructions provided such instructions
reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
-----------------------
(a) Advice of the Fund. If PNC Bank is in doubt as to any action it should
------------------
or should not take, PNC Bank may request directions or advice, including Oral or
Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any questions
-----------------
of law pertaining to any action it should or should not take, PNC Bank may
request advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's advisor or PNC Bank, at the option of PNC
Bank).
(c) Conflicting Advice. In the event of a conflict between directions,
------------------
advice or Oral or Written Instructions PNC Bank receives from the Fund, and the
advice it receives from counsel, PNC Bank shall be entitled to rely upon and
follow the advice of counsel.
(d) Protection of PNC Bank. PNC Bank shall be protected in any action it
----------------------
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PNC Bank
believes, in good faith, to be consistent with those directions, advice or Oral
or Written Instructions.
<PAGE>
Nothing in this paragraph shall be construed so as to impose an obligation upon
PNC Bank (i) to seek such directions, advice or oral or Written Instructions, or
(ii) to act in accordance with such directions, advice or Oral or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PNC Bank's properly taking or not taking such action.
7. Records. The books and records pertaining to the Fund which are in the
-------
possession of PNC Bank, shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund, or the Fund's
Authorized Persons, shall have access to such books and records at all time
during PNC Bank's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PNC Bank to the
Fund or to an Authorized Person of the Fund, at the Fund's expense.
8. Confidentiality. PNC Bank agrees to keep confidential all records of
---------------
the Fund and information relative to the Fund and its shareholders (past,
present and potential), unless the release of such records or information is
otherwise consented to, in writing, by the Fund. The Fund agrees that such
consent shall not be unreasonably withheld and may not be withheld where PNC
Bank may be exposed to civil or criminal contempt proceedings or when required
to divulge. The Fund further agrees that, should PNC Bank be required to provide
such information or records to duly constituted authorities (who may institute
civil or criminal contempt proceedings for failure to comply), PNC Bank shall
not be required to seek the Fund's consent prior to disclosing such information.
9. Cooperation with Accountants. PNC Bank shall cooperate with the Fund's
----------------------------
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. Disaster Recovery. PNC Bank shall enter into and shall maintain in
-----------------
effect with appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data
<PAGE>
processing equipment to the extent appropriate equipment is available. In the
event of equipment failures, PNC Bank shall, at no additional expense to the
Fund, take reasonable steps to minimize service interruptions but shall have no
liability with respect thereto.
11. Year 2000 Readiness Disclosure. PNC (a) has reviewed its business and
------------------------------
operations as they relate to the services provided hereunder, (b) has developed
or is developing a program to remediate or replace computer applications and
systems, and (c) has developed a testing plan to test the remediation or
replacement of computer applications/systems, in each case, to address on a
timely basis the risk that certain computer applications/systems used by PNC may
be unable to recognize and perform properly date sensitive functions involving
dates prior to, including and after December 31, 1999, including dates such as
February 29, 2000 (the "Year 2000 Challenge"). To the best of PNC's knowledge
and belief, the reasonably foreseeable consequences of the Year 2000 Challenge
will not adversely effect PNC's ability to perform its duties and obligations
under this Agreement.
12. Compensation. As compensation for custody services rendered by PNC
------------
Bank during the term of this Agreement, the Fund will pay to PNC Bank a fee or
fees as may be agreed to from time to time in writing by the Fund and PNC Bank.
13. Indemnification. The Fund agrees to indemnify and hold harmless PNC
---------------
Bank and its nominees from all taxes, charges, expenses, assessment, claims and
liabilities (including, without limitation, liabilities arising under the
Securities and Commodities Laws and any state and foreign securities and blue
sky laws, and amendments thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action which PNC Bank takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PNC Bank, nor any of its nominees, shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of PNC Bank's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
<PAGE>
14. Responsibility of PNC Bank. PNC Bank shall be under no duty to take
--------------------------
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PNC Bank, in writing. PNC Bank shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best effort, within reasonable
limits, in performing services provided for under this Agreement. PNC Bank shall
be responsible for its own negligent failure to perform its duties under this
Agreement. Notwithstanding the foregoing, PNC Bank shall not be responsible for
losses beyond its control, provided that PNC Bank has acted in accordance with
the standard of care set forth above; and provided further that PNC Bank shall
only be responsible for that portion of losses or damages suffered by the Fund
that are attributable to the negligence of PNC Bank.
Without limiting the generality of the foregoing or of any other provision
of this Agreement, PNC Bank, in connection with its duties under this Agreement,
shall not be under any duty or obligation to inquire into and shall not be
liable for (a) the validity or invalidity or authority or lack thereof of any
Oral or Written Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PNC Bank reasonably
believes to be genuine; or (b) delays or errors or loss of data occurring by
reason of circumstances beyond PNC Bank's control, including acts of civil or
military authority, national emergencies, labor difficulties, fire, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PNC Bank shall
have no liability to the Fund for any consequential, special or indirect losses
or damages which the Fund may incur or suffer by or as a consequence of PNC
Bank's performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PNC Bank.
15. Description of Services.
-----------------------
(a) Delivery of the Property. The Fund will deliver or arrange for
------------------------
delivery to PNC Bank, all the property owned by the Fund, including cash
received as a result of the distribution of its Shares,
<PAGE>
during the period that is set forth in this Agreement. PNC Bank will not be
responsible for such property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
---------------------------------
Instructions, shall open and maintain separate account(s) in the Fund's name
using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC Bank shall
open separate custodial accounts for each separate series, class or portfolio of
the Fund and shall hold in such account(s) all cash received from or for the
accounts of the Fund specifically designated to each separate series, class or
portfolio. PNC Bank shall make cash payments from or for the account of the Fund
only for:
(i) purchases of securities in the name of the Fund or PNC
Bank or PNC Bank's nominee as provided in sub-paragraph j
and for which PNC Bank has received a copy of the broker's
or dealer's confirmation or payee's invoice, as
appropriate ;
(ii) purchase or redemption of Shares of the Fund delivered to
PNC Bank;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution, advisory,
management fees or similar expenses which are to be borne
by the Fund;
(iv) payment to, subject to receipt of Written Instructions,
the Fund's transfer agent, as agent for the shareholders,
an amount equal to the amount of dividends and
distributions stated in the Written Instructions to be
distributed in cash by the transfer agent to shareholders,
or, in lieu of paying the Fund's transfer agent, PNC Bank
may arrange for the direct payment of cash dividends and
distributions to shareholders in accordance with
procedures mutually agreed upon from time to time by and
among the Fund, PNC Bank and the Fund's transfer agent;
<PAGE>
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Fund and held by
or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with respect
to securities sold short; payments made to a sub-custodian
pursuant to provisions in sub-paragraph c of this
Paragraph; and
(vii) payments, upon Written Instructions made for other proper
Fund purposes. PNC Bank is hereby authorized to endorse
and collect all checks, drafts or other orders for the
payment of money received as custodian for the account of
the Fund.
(c) Receipt of Securities.
---------------------
(i) PNC Bank shall hold all securities received by it for the
account of the Fund in a separate account that physically
segregates such securities from those of any other
persons, firms or corporations, except for securities held
in a Book-Entry System. All such securities shall be held
or disposed of only upon Written Instructions of the Fund
pursuant to the terms of this Agreement. PNC Bank shall
have no power or authority to assign, hypothecate, pledge
or otherwise dispose of any such securities or investment,
except upon the express terms of this Agreement and upon
Written Instructions, accompanied by a certified
resolution of the Fund's Governing Board, authorizing the
transaction. In no case may any member of the Fund's
Governing Board, or any officer, employee or agent of the
Fund withdraw any securities. At PNC Bank's own expense
and for its own convenience, PNC Bank may enter into sub-
custodian agreements with other banks or trust companies
to perform duties described in this sub-
<PAGE>
paragraph c. Such bank or trust company shall have an
aggregate capital, surplus and undivided profits,
according to its last published report, of at least one
million dollars ($1,000,000), if it is a subsidiary or
affiliate of PNC Bank, or at least twenty million dollars
($20,000,000) if such bank or trust company is not a
subsidiary or affiliate of PNC Bank. In addition, such
bank or trust company must agree to comply with the
relevant provisions of the 1940 Act and other applicable
rules and regulations. PNC Bank shall remain responsible
for the performance of all of its duties as described in
this Agreement and shall hold the Fund harmless from PNC
Bank's own (or any sub-custodian chosen by PNC Bank under
the terms of this sub-paragraph c) acts or omissions,
under the standards of care provided for herein .
(d) Transactions Requiring Instructions. Upon receipt of Oral or Written
-----------------------------------
Instructions and not otherwise, PNC Bank, directly or through the use of
the Book-Entry System, shall:
(i) deliver any securities held for the Fund against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated
in such Oral or Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the
authority of the Fund as owner of any securities may be
exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed, retired
or otherwise become payable; provided that, in any such
case, the cash or other consideration is to be delivered
to PNC Bank;
<PAGE>
(iv) deliver any securities held for the Fund against receipt
of other securities or cash issued or paid in connection
with the 1iquidation, reorganization, refinancing, tender
offer, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(v) deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts
or other instruments or documents as may be issued to it
to evidence such delivery;
(vi) make such transfer or exchanges of the assets of the Fund
and take such other steps as shall be stated in said Oral
or Written Instructions to be for the purpose of
effectuating a duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Fund;
(vii) release securities belonging to the Fund to any bank or
trust company for the purpose of a pledge or hypothecation
to secure any loan incurred by the Fund; provided,
however, that securities shall be released only upon
payment to PNC Bank of the monies borrowed, except that in
cases where additional collateral is required to secure a
borrowing already made subject to proper prior
authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan;
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered into on
behalf of the Fund, but only on
<PAGE>
receipt of payment therefor; and pay out moneys of the
Fund in connection with such repurchase agreements, but
only upon the delivery of the securities;
(ix) release and deliver or exchange securities owned by the
Fund in connection with any conversion of such securities,
pursuant to their terms, into other securities;
(x) release and deliver securities owned by the Fund for the
purpose of redeeming in kind shares of the Fund upon
delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by the
Fund for other corporate purposes. PNC Bank must also
receive a certified resolution describing the nature of
the corporate purpose and the name and address of the
person(s) to whom delivery shall be made when such action
is pursuant to sub-paragraph d above.
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank
------------------------
certified resolutions of the Fund's Governing Board approving, authorizing and
instructing PNC Bank on a continuous and on-going basis, to deposit in the Book-
Entry System all securities belonging to the Fund eligible for deposit therein
and to utilize the Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Fund, and deliveries and
returns of securities loaned, subject to repurchase agreements or used as
collateral in connection with borrowings. PNC Bank shall continue to perform
such duties until it receives Written or Oral Instructions authorizing contrary
actions(s).
To administer the Book-Entry System properly, the following provisions
shall apply:
(i) With respect to securities of the Fund which are
maintained in the Book-Entry system, established
pursuant to this sub-paragraph e hereof, the
records of PNC Bank shall identify by Book-Entry or
otherwise those
<PAGE>
securities belonging to the Fund. PNC Bank shall furnish the Fund
a detailed statement of the Property held for the Fund under this
Agreement at least monthly and from time to time and upon written
request.
(ii) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash
controlled by PNC Bank in other than a fiduciary or custodian
capacity but may be commingled with other assets held in such
capacities. PNC Bank and its sub-custodian, if any, will pay out
money only upon receipt of securities and will deliver securities
only upon the receipt of money.
(iii) All books and records maintained by PNC Bank which relate to the
Fund's participation in the Book-Entry System will at all times
during PNC Bank's regular business hours be open to the
inspection of the Fund's duly authorized employees or agents, and
the Fund will be furnished with all information in respect of the
services rendered to it as it may require.
(iv) PNC Bank will provide the Fund with copies of any report obtained
by PNC Bank on the system of internal accounting control of the
Book-Entry System promptly after receipt of such a report by PNC
Bank. PNC Bank will also provide the Fund with such reports on
its own system of internal control as the Fund may reasonably
request from time to time.
(f) Registration of Securities. All Securities held for the Fund which
--------------------------
are issued or issuable only in bearer form, except such securities held in the
Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for the Fund may be registered in the name of the Fund; PNC
Bank; the Book-Entry System; a sub-custodian; or any duly appointed nominee(s)
of the Fund, PNC Bank, Book-Entry system or sub-custodian. The Fund reserves the
right to instruct PNC Bank as to the method of registration and safekeeping of
the securities of the Fund. The Fund agrees to furnish to PNC Bank
<PAGE>
appropriate instruments to enable PNC Bank to hold or deliver in proper form for
transfer, or to register its registered nominee or in the name of the Book-Entry
System, any securities which it may hold for the account of the Fund and which
may from time to time be registered in the name of the Fund. PNC Bank shall hold
all such securities which are not held in the Book-Entry System in a separate
account for the Fund in the name of the Fund physically segregated at all times
from those of any other person or persons.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall
-----------------------
vote any of the securities held pursuant to this Agreement by or for the account
of the Fund, except in accordance with Written Instructions. PNC Bank, directly
or through the use of the Book-Entry System, shall execute in blank and promptly
deliver all notice, proxies, and proxy soliciting materials to the registered
holder of such securities. If the registered holder is not the Fund then Written
or Oral Instructions must designate the person(s) who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of contrary
---------------------------------------
Written Instructions, PNC Bank is authorized to take the following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the Fund, all income,
dividends, distributions, coupons, option premiums, other
payments and similar items, included or to be included in the
Property, and, in addition, promptly advise the Fund of such
receipt and credit such income, as collected, to the Fund's
custodian account;
(B) endorse and deposit for collection, in the name of the Fund,
checks, drafts, or other orders for the payment of money;
(C) receive and hold for the account of the Fund all securities
received as a distribution on the Fund's portfolio securities
as a result of a
<PAGE>
stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with
respect to any portfolio securities belonging to the Fund held
by PNC Bank hereunder;
(D) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or
retired, or otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such income and
other payments and the endorsement for collection of checks,
drafts, and other negotiable instruments.
(ii) Miscellaneous Transactions.
--------------------------
(A) PNC Bank is authorized to deliver or cause to be delivered
Property against payment or other consideration or written
receipt therefor in the following cases:
(1) for examination by a broker or dealer selling for the
account of the Fund in accordance with street delivery
custom;
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the Fund or
PNC Bank or nominee of either, or for exchange of
securities for a different number of bonds,
certificates, or other
<PAGE>
evidence, representing the same aggregate face amount or
number of units bearing the same interest rate, maturity
date and call provisions, if any; provided that, in any
such case, the new securities are to be delivered to PNC
Bank.
(B) Unless and until PNC Bank receives Oral or Written
Instructions to the contrary, PNC Bank shall:
(1) pay all income items held by it which call for payment
upon presentation and hold the cash received by it upon
such payment for the account of the Fund;
(2) collect interest and cash dividends received, with notice
to the Fund, to the Fund's account;
(3) hold for the account of the Fund all stock dividends,
rights and similar securities issued with respect to any
securities held by PNC Bank; and
(4) execute as agent on behalf of the Fund all necessary
ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any State now or
hereafter in effect, inserting the Fund's name, such
certificate as the owner of the securities covered
thereby, to the extent it may lawfully do so.
(i) Segregated Accounts.
-------------------
(i) PNC Bank shall upon receipt of Written or Oral Instructions
establish and maintain segregated account(s) on its records
for and on behalf of the Fund.
<PAGE>
Such account(s) may be used to transfer cash and securities,
including securities in the Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option
exchange, providing such procedures comply with the
1940 Act and any releases of the SEC relating to
the maintenance of segregated accounts by
registered investment companies; and
(B) Upon receipt of Written Instructions, for other
proper corporate purposes.
(ii) PNC Bank may enter into separate custodial agreements
with various futures commission merchants ("FCMs") that
the Fund uses ("FCM Agreement"). Pursuant to an FCM
Agreement, the Fund's margin deposits in any transactions
involving futures contracts and options on futures
contracts will be held by PNC Bank in accounts ("FCM
Account") subject to the disposition by the FCM involved
in such contracts and in accordance with the customer
contract between FCM and the Fund ("FCM Contract"), SEC
rules and the rules of the applicable commodities
exchange. Such FCM Agreements shall only be entered into
upon receipt of Written Instructions from the Fund which
state that:
(A) a customer agreement between the FCM and the Fund
has been entered into; and
(B) the Fund is in compliance with all the rules and
regulations of the CFTC. Transfers of initial
margin shall be made into a FCM Account only upon
Written Instructions; transfers of premium and
variation margin may be made into a
<PAGE>
FCM Account pursuant to Oral Instructions.
Transfers of funds from a FCM Account to the FCM
for which PNC Bank holds such an account may
only occur upon certification by the FCM to PNC
Bank that pursuant to the FCM Agreement and the
FCM Contract, all conditions precedent to its
right to give PNC Bank such instructions have
been satisfied.
(iii) PNC Bank shall arrange for the establishment of IRA
custodian accounts for such shareholders holding
Shares through IRA accounts, in accordance with the
Fund's prospectuses, the Internal Revenue Code
(including regulations), and with such other
procedures as are mutually agreed upon from time to
time by and among the Fund, PNC Bank and the Fund's
transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased securities
-----------------------
upon receipt of Oral or Written Instructions from the Fund or its investment
advisor(s) that specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker through
whom the purchase was made. PNC Bank shall upon receipt of
securities purchased by or for the Fund pay out of the
moneys held for the account of the Fund the total amount
payable to the person from whom or the broker through
<PAGE>
whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such
Oral or Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities upon
-------------------
receipt of Oral or Written Instructions from the Fund that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom
the sale was made; and
(vii) the location to which the security must be delivered and
delivery deadline, if any. PNC Bank shall deliver the
securities upon receipt of the total amount payable to the
Fund upon such sale, provided that the total amount
payable is the same as was set forth in the Oral or
Written Instructions. Subject to the foregoing, PNC Bank
may accept payment in such form as shall be satisfactory
to it, and may deliver securities and arrange for payment
in accordance with the customs prevailing among dealers in
securities.
(l) Reports.
-------
(i) PNC Bank shall furnish the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
<PAGE>
(B) a monthly statement summarizing all transactions and
entries for the account of the Fund, listing the portfolio
securities belonging to the Fund with the adjusted average
cost of each issue and the market value at the end of such
month, and stating the cash account of the Fund including
disbursement;
(C) the reports to be furnished to the Fund pursuant to Rule
17f-4; and
(D) such other information as may be agreed upon from time to
time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy statement,
proxy material, notice of a call or conversion or similar
communication received by it as custodian of the Property. PNC
Bank shall be under no other obligation to inform the Fund as to
such actions or events.
(m) Collections. All collections of monies or other property, in
-----------
respect, or which are to become part of the Property (but not the safekeeping
thereof upon receipt by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time after proper
demands have been made, PNC Bank shall notify the Fund in writing, including
copies of all demand letters, any written responses, memoranda of all oral
responses and telephonic demands thereto, and await instructions from the Fund.
PNC Bank shall not be obliged to take legal action for collection unless and
until reasonably indemnified to its satisfaction. PNC Bank shall also notify the
Fund as soon as reasonably practicable whenever income due on securities is not
collected in due course.
16. Duration and Termination. This Agreement shall continue until
------------------------
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Fund to the Fund. It may deliver them to a bank or trust
<PAGE>
company of PNC Bank's choice, having an aggregate capital, surplus and undivided
profits, as shown by its last published report, of not less than twenty million
dollars ($20,000,000), as a custodian for the Fund to be held under terms
similar to those of this Agreement. PNC Bank shall not be required to make any
such delivery or payment until full payment shall have been made to PNC Bank of
all of its fees, compensation, costs and expenses. PNC Bank shall have a
security interest in and shall have a right of setoff against Property in the
Fund's possession as security for the payment of such fees, compensation, costs
and expenses.
17. Notices. All notices and other communications, including Written
-------
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at PNC
Bank's address: Airport Business Center, International Court 2, 200 Stevens
Drive, Lester, Pennsylvania 19113, marked for the attention of the Custodian
Services Department (or its successor); (b) if to the Fund, at the address of
the Fund; or (c) if to neither of the foregoing, at such other address as shall
have been notified to the sender of any such notice or other communication. If
notice is sent by confirming telegram, cable, telex or facsimile sending device,
it shall be deemed to have been given immediately. If notice is sent by first-
class mail, it shall be deemed to have been given five days after it has been
mailed. If notice is sent by messenger, it shall be deemed to have been given on
the day it is delivered.
18. Amendments. This Agreement, or any term hereof, may be changed or
----------
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. Delegation. PNC Bank may assign its rights and delegate its duties
----------
hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PNC Bank gives the
Fund thirty (30) days prior written notice; (ii) the delegate agrees with PNC
Bank to comply with all relevant provisions of the 1940 Act; and (iii) PNC Bank
and such delegate promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the assignment,
including (without limitation) the capabilities of the delegate.
<PAGE>
20. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. Further Actions. Each party agrees to perform such further acts and
---------------
execute such further documents as are necessary to effectuate the purposes
hereof.
22. Miscellaneous. This Agreement embodies the entire agreement and
-------------
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and/or Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect.
This Agreement shall be deemed to be a contract made in Pennsylvania
and governed by Pennsylvania law, without regard to principles of conflicts of
law. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By:
-------------------------------
Title: Vice President
CENTURION FUNDS, INC.
By:
-------------------------------
Title:
<PAGE>
EXHIBIT A
Portfolios
----------
Centurion U.S. Equity Fund
Centurion International Equity Fund
Centurion U.S. Contra Fund
Centurion International Contra Fund
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
____________________________ _____________________________
<PAGE>
November 24, 1998
CENTURION FUNDS, INC.
Re: Custodian Services Fees
-----------------------
Dear Sir/Madam:
This letter constitutes the agreement between us with respect to compensation to
be paid to PNC Bank, National Association ("PNC Bank") under the terms of a
Custodian Services Agreement dated November 24, 1998 between PNC Bank and you
(the "Fund"). Pursuant to Paragraph 11 of that agreement, and in consideration
of the services to be provided to you, you will pay PNC Bank the following:
1. An annual custody fee in the amount of the Fund's pro rata share of the
total fees that would be payable with respect to the aggregate gross assets of
the portfolios listed on Appendix A attached hereto, as such Appendix A may be
revised from time to time, pursuant to the following schedule: .007% of the
first $1 billion of aggregate average gross assets; .006% of the next $4 billion
of aggregate average gross assets; .004% of the next $5 billion of aggregate
average gross assets; and .0035% of the aggregate average gross assets in excess
of $10 billion. Such fees are exclusive of out-of-pocket expenses and
transaction charges. Custody fees shall be calculated daily and paid monthly.
2. A transaction charge of $7.50 for each purchase or sale of a physical
security or delivery of a physical security upon its maturity date or delivery
of a physical security for reissuance; for each purchase, sale, free receive or
free deliver, or maturity of a book-entry security or DTC eligible security or
other book-entry transaction; for each purchase, sale, exercise or expiration of
an option contract position (round trip); and for each sale, purchase, exercise
or expiration of a futures contract position (round trip). A transaction charge
of $4.50 for each repurchase trade collateral tranche received from PNC Bank or
an institution other than PNC Bank (round trip). A prorated transaction charge
for participation in a Joint Repurchase agreement, which is executed on a master
level at $50 per broker (round trip).
3. PNC Bank's out-of-pocket expenses related to global sub-custody fees.
The fee for the period from the day of the year this fee letter is entered into
until the end of that year shall be prorated according to the proportion which
such period bears to the full annual period.
If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to us.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By:____________________________________________
Title: Vice President
Accepted:
CENTURION FUNDS, INC.
By: /s/
______________________________________________
Title:
<PAGE>
APPENDIX A
CENTURION FUNDS, INC.
Centurion U.S. Equity Fund
Centurion International Equity Fund
Centurion U.S. Contra Fund
Centurion International Contra Fund
<PAGE>
EXHIBIT 99(g)(2)
[LOGO] CHASE
FORM OF
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective November ______ , 1998, and is between THE
CHASE MANHATTAN BANK ("Bank") and CENTURION FUNDS, INC. ("Customer").
1. CUSTOMER ACCOUNTS.
Bank, acting as "Securities Intermediary" (as defined in Section 15(g)
hereof) shall establish and maintain the following accounts ("Accounts"):
(a) a Custody Account (as defined in Section 15(b) hereof) in the name
of Customer for Financial Assets, which shall, except as modified by Section
15(d) hereof, mean stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by Bank or its Subcustodian (as defined in
Section 3 hereof) for the account of Customer, including as an "Entitlement
Holder" as defined in Section 15(c) hereof); and
(b) an account in the name of Customer ("Deposit Account") for any and
all cash in any currency received by Bank or its Subcustodian for the account of
Customer, which cash shall not be subject to withdrawal by draft or check.
Customer warrants its authority to: 1) deposit the cash and Financial
Assets (collectively "Assets") received in the Accounts and 2) give Instructions
(as defined in Section 11 hereof) concerning the Accounts. Bank may deliver
Financial Assets of the same class in place of those deposited in the Custody
Account.
Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.
2. MAINTENANCE OF FINANCIAL ASSETS AND CASH AT BANK AND SUBCUSTODIAN
LOCATIONS.
Unless Instructions specifically require another location acceptable to
Bank:
(a) Financial Assets shall be held in the country or other jurisdiction
in which the principal trading market for such Financial Assets is located,
where such Financial Assets are to be presented for payment or where such
Financial Assets are acquired; and
(b) Cash shall be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
<PAGE>
Cash may be held pursuant to Instructions in either interest or non-
interest bearing accounts as may be available for the particular currency. To
the extent Instructions are issued and Bank can comply with such Instructions,
Bank is authorized to maintain cash balances on deposit for Customer with itself
or one of its "Affiliates" at such reasonable rates of interest as may from time
to time be paid on such accounts, or in non-interest bearing accounts as
Customer may direct, if acceptable to Bank. For purposes hereof, the term
"Affiliate" shall mean an entity controlling, controlled by, or under common
control with, Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Bank may act hereunder through the subcustodians listed in Schedule A
hereof with which Bank has entered into subcustodial agreements
("Subcustodians"). Customer authorizes Bank to hold Assets in the Accounts in
accounts which Bank has established with one or more of its branches or
Subcustodians. Bank and Subcustodians are authorized to hold any of Financial
Assets in their account with any securities depository in which they
participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
A. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) Bank shall identify the Assets on its books as belonging to
Customer.
(b) A Subcustodian shall hold such Assets together with assets belonging
to other customers of Bank in accounts identified on such Subcustodian's books
as custody accounts for the exclusive benefit of customers of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject
only to the instructions of Bank or its agent. Any Financial Assets held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets shall provide that such assets shall not be subject to
any right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration, or, in the case of
cash deposits, except for liens or rights in favor of creditors of the
Subcustodian arising under bankruptcy, insolvency or similar laws. Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank, as
agent, the Securities shown on the Subcustodian's account on the books of such
securities depository. The foregoing shall not apply to the extent of any
special agreement or arrangement made by Customer with any particular
Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) Bank or its Subcustodians shall make payments from the Deposit
Account upon receipt of Instructions which include all information required by
Bank.
2
<PAGE>
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, Bank, in its discretion, may
advance Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by Bank on similar
loans.
(c) If Bank credits the Deposit Account on a payable date, or at any
time prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Financial Assets shall be transferred, exchanged or delivered by
Bank or its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Financial Assets
received for, and delivery of Financial Assets out of, the Custody Account may
be made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Financial Assets to a purchaser, dealer or their agents against a receipt with
the expectation of receiving later payment and free delivery. Delivery of
Financial Assets out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Financial Assets with respect to any
sale, exchange or purchase of Financial Assets. Otherwise, such transactions
shall be credited or debited to the Accounts on the date cash or Financial
Assets are actually received by Bank and reconciled to the Account.
(i) Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a
reasonable period, determined by Bank in its discretion, after the
contractual settlement date for the related transaction.
(ii) If any Financial Assets delivered pursuant to this Section 6
are returned by the recipient thereof, Bank may reverse the credits and
debits of the particular transaction at any time.
7. ACTIONS OF BANK.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(a) Present for payment any Financial Assets which are called, redeemed
or retired or otherwise become payable and all coupons and other income items
which call for payment upon presentation, to the extent that Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of Customer such ownership and other
certificates as may be required to obtain payments in respect of Financial
Assets.
(c) Exchange interim receipts or temporary Financial Assets for
definitive Financial Assets.
3
<PAGE>
(d) Appoint brokers and agents for any transaction involving the
Financial Assets, including, without limitation, Affiliates of Bank or any
Subcustodian.
(e) Issue statements to Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any such
statement, Bank shall, to the extent permitted by law, be released, relieved and
discharged with respect to all matters set forth in such statement or reasonably
implied therefrom as though it had been settled by the decree of a court of
competent jurisdiction in an action where Customer and all persons having or
claiming an interest in Customer or Customer's Accounts were parties.
All collections of funds or other property paid or distributed in
respect of Financial Assets in the Custody Account shall be made at the risk of
Customer. Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Financial Assets in the Custody
Account in respect of which Bank has agreed to take any action hereunder.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
(a) Corporate Actions. Whenever Bank receives information concerning
-----------------
the Financial Assets which requires discretionary action by the beneficial owner
of the Financial Assets (other than a proxy), such as subscription rights, bonus
issues, stock repurchase plans and rights offerings, or legal notices or other
material intended to be transmitted to securities holders ("Corporate Actions"),
Bank shall give Customer notice of such Corporate Actions to the extent that
Bank's central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, Bank shall endeavor to obtain
Instructions from Customer or its Authorized Person (as defined in Section 10
hereof), but if Instructions are not received in time for Bank to take timely
action, or actual notice of such Corporate Action was received too late to seek
Instructions, Bank is authorized to sell such rights entitlement or fractional
interest and to credit the Deposit Account with the proceeds or take any other
action it deems, in good faith, to be appropriate in which case it shall be held
harmless for any such action.
(b) Proxy Voting. Bank shall provide proxy voting services, if elected
------------
by Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) Tax Reclaims.
------------
(i) Subject to the provisions hereof, Bank shall apply for a
reduction of withholding tax and any refund of any tax paid or tax credits which
apply in each applicable market in respect of income payments on Financial
Assets for the benefit of Customer which Bank believes may be available to such
Customer.
4
<PAGE>
(ii) The provision of tax reclaim services by Bank is conditional
upon Bank receiving from the beneficial owner of Financial Assets (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from Bank). Customer
acknowledges that, if Bank does not receive such declarations, documentation and
information, additional United Kingdom taxation shall be deducted from all
income received in respect of Financial Assets issued outside the United Kingdom
and that U.S. non-resident alien tax or U.S. backup withholding tax shall be
deducted from U.S. source income. Customer shall provide to Bank such
documentation and information as it may require in connection with taxation, and
warrants that, when given, this information shall be true and correct in every
respect, not misleading in any way, and contain all material information.
Customer undertakes to notify Bank immediately if any such information requires
updating or amendment.
(iii) Bank shall not be liable to Customer or any third party for
any taxes, fines or penalties payable by Bank or Customer, and shall be
indemnified accordingly, whether these result from the inaccurate completion of
documents by Customer or any third party acting as agent for Customer, or as a
result of the provision to Bank or any third party of inaccurate or misleading
information or the withholding of material information by Customer or any other
third party, or as a result of any delay of any revenue authority or any other
matter beyond the control of Bank.
(iv) Customer confirms that Bank is authorized to deduct from any
cash received or credited to the Deposit Account any taxes or levies required by
any revenue or governmental authority for whatever reason in respect of the
Securities or Cash Accounts.
(v) Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to Customer
from time to time and Bank may, by notification in writing, at its absolute
discretion, supplement or amend the markets in which the tax reclaim services
are offered. Other than as expressly provided in this sub-clause, Bank shall
have no responsibility with regard to Customer's tax position or status in any
jurisdiction.
(vi) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body in
relation to Customer or the Financial Assets and/or Cash held for Customer.
(vii) Tax reclaim services may be provided by Bank or, in whole or
in part, by one or more third parties appointed by Bank (which may be Affiliates
of Bank); provided that Bank shall be liable for the performance of any such
third party to the same extent as Bank would have been if it performed such
services itself.
9. NOMINEES.
Financial Assets which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Financial
Assets to cease to be registered in the name of any such nominee and to be
registered in the name of Customer. In the event that any Financial Assets
registered in a nominee name are called for partial redemption by the issuer,
Bank may allot the called portion to the respective beneficial holders of such
class of security in any manner Bank deems to be fair and equitable. Customer
shall hold Bank, Subcustodians, and their respective nominees harmless from any
liability arising directly or indirectly from their status as a mere record
holder of Financial Assets in the Custody Account.
5
<PAGE>
10. AUTHORIZED PERSONS.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded. The term "Instructions" includes, without
limitation, instructions to sell, assign, transfer, deliver, purchase or receive
for the Custody Account, any and all stocks, bonds and other Financial Assets or
to transfer funds in the Cash Account.)
Any Instructions delivered to Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but Customer shall hold Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or Bank's failure to produce such confirmation at any
subsequent time. Bank may electronically record any Instructions given by
telephone, and any other telephone discussions with respect to the Custody
Account. Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which Bank shall make available
to Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) Bank shall be responsible for the performance of only such duties
as are set forth herein or expressly contained in Instructions which are
consistent with the provisions hereof as follows:
(i) Bank shall use reasonable care with respect to its obligations
hereunder and the safekeeping of Assets. The Bank shall be liable to the
Customer for any loss which shall occur as the result of the failure of
a Subcustodian to exercise reasonable care with respect to the
safekeeping of such Assets to the same extent that the Bank would be
liable to the Customer if the Bank were holding such Assets in New York.
In the event of any loss to Customer by reason of the failure of Bank or
its Subcustodian to utilize reasonable care, Bank shall be liable to
Customer only to the extent of Customer's direct damages, to be
determined based on the market value of the property which is the
subject of the loss at the date of discovery of such loss and without
reference to any special conditions or circumstances. Bank shall have no
liability whatsoever for any consequential, special, indirect or
speculative loss or damages (including, but not limited to, lost
profits) suffered by Customer in connection with the transactions
contemplated hereby and the relationship established hereby even if Bank
has been advised as to the possibility of the same and regardless of the
form of the action.
(ii) Bank shall not be responsible for the insolvency of any
Subcustodian which is not a branch or Affiliate of Bank. Bank shall not
be responsible for any act, omission, default or the solvency of any
broker or agent which it or a Subcustodian appoints unless such
appointment was made negligently or in bad faith.
6
<PAGE>
(iii) Bank shall be indemnified by, and without liability to
Customer for any action taken or omitted by Bank whether pursuant to
Instructions or otherwise within the scope hereof if such act or
omission was in good faith, without negligence. In performing its
obligations hereunder, Bank may rely on the genuineness of any document
which it believes in good faith to have been validly executed.
(iv) Customer shall pay for and hold Bank harmless from any
liability or loss resulting from the imposition or assessment of any
taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the advice
of counsel (who may be counsel for Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) Bank need not maintain any insurance for the benefit of
Customer.
(vii) Without limiting the foregoing, Bank shall not be liable for
any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from malfunction, interruption of or error
in the transmission of information caused by any machines or system or
interruption of communication facilities, abnormal operating conditions,
nationalization, expropriation or other governmental actions; regulation
of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the
orderly execution of securities transactions or affect the value of
Assets.
(viii) Neither party shall be liable to the other for any loss due
to forces beyond their control including, but not limited to strikes or
work stoppages, acts of war (whether declared or undeclared) or
terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments
or the retention of Financial Assets;
(iii) advise Customer or an Authorized Person regarding any default
in the payment of principal or income of any security other than as
provided in Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to
which Financial Assets are delivered or payments are made pursuant
hereto; and
(v) review or reconcile trade confirmations received from
brokers. Customer or its Authorized Persons issuing Instructions shall
bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank
or any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Financial
7
<PAGE>
Assets, act as a lender to the issuer of Financial Assets, act in the same
transaction as agent for more than one customer, have a material interest in the
issue of Financial Assets, or earn profits from any of the activities listed
herein.
13. FEES AND EXPENSES.
Customer shall pay Bank for its services hereunder the fees set forth in
Schedule B hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, including,
but not limited to, legal fees. Bank shall have a lien on and is authorized to
charge any Accounts of Customer for any amount owing to Bank under any provision
hereof
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of
------------------------------
Customer's trading and investment activity, Bank is authorized to enter into
spot or forward foreign exchange contracts with Customer or an Authorized Person
for Customer and may also provide foreign exchange through its subsidiaries,
Affiliates or Subcustodians. Instructions, including standing instructions, may
be issued with respect to such contracts but Bank may establish rules or
limitations concerning any foreign exchange facility made available. In all
cases where Bank, its subsidiaries, Affiliates or Subcustodians enter into a
foreign exchange contract related to Accounts, the terms and conditions of the
then current foreign exchange contract of Bank, its subsidiary, Affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply to
such transaction.
(b) Certification of Residency, etc. Customer certifies that it is a
--------------------------------
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) Access to Records. Bank shall allow Customer's independent public
------------------
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) Governing Law; Successors and Assigns, Captions THIS AGREEMENT
-----------------------------------------------
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN NEW YORK and shall not be assignable by either
party, but shall bind the successors in interest of Customer and Bank. The
captions given to the sections and subsections of this Agreement are for
convenience of reference only and are not to be used to interpret this
Agreement.
(e) Entire Agreement; Applicable Riders. Customer represents that the
------------------------------------
Assets deposited in the Accounts are (Check one):
____ Investment Company assets subject to certain U.S. Securities and
Exchange Commission rules and regulations;
____ Other (specify)
This Agreement consists exclusively of this document together with
Schedules A and B, Exhibits I - _______ and the following Rider(s)
[Check applicable rider(s)]:
8
<PAGE>
____ INVESTMENT COMPANY
____ PROXY VOTING
____ SPECIAL TERMS AND CONDITIONS
There are no other provisions hereof and this Agreement supersedes any
other agreements, whether written or oral, between the parties. Any amendment
hereto must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions hereof are
-------------
held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions shall not in any way be
affected or impaired.
(g) Waiver. Except as otherwise provided herein, no failure or delay on
-------
the part of either party in exercising any power or right hereunder operates as
a waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) Representations and Warranties. (i) Customer hereby represents and
------------------------------
warrants to Bank that: (A) it has full authority and power to deposit and
control the Financial Assets and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement
constitutes its legal, valid and binding obligation, enforceable in accordance
with its terms; (D) it shall have full authority and power to borrow moneys and
enter into foreign exchange transactions; and (E) it has not relied on any oral
or written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank. (ii) Bank hereby represents and warrants to Customer that: (A) it has the
full power and authority to perform its obligations hereunder, (B) this
Agreement constitutes its legal, valid and binding obligation; enforceable in
accordance with its terms; and (C) that it has taken all necessary action to
authorize the execution and delivery hereof.
(i) Notices. All notices hereunder shall be effective when actually
--------
received. Any notices or other communications which may be required hereunder
are to be sent to the parties at the following addresses or such other addresses
as may subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, N.Y. 11245, Attention:
Global Investor Services, Investment Management Group; and (b)
Customer:________________________________________.
________________________________________________________________________________
(j) Termination. This Agreement may be terminated by Customer or Bank
------------
by giving sixty (60) days written notice to the other, provided that such notice
to Bank shall specify the names of the persons to whom Bank shall deliver the
Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within sixty (60) days following receipt of the notice, deliver to Bank
Instructions specifying the names of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to the persons so
specified, after deducting any amounts which Bank determines in good faith to be
owed to it under Section 13. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets, Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions hereof, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to Bank.
9
<PAGE>
(k) Money Laundering. Customer warrants and undertakes to Bank for
----------------
itself and its agents that all Customer's customers are properly identified in
accordance with U.S. Money Laundering Regulations as in effect from time to
time.
(l) Imputation of certain information. Bank shall not be held
---------------------------------
responsible for and shall not be required to have regard to information held by
any person by imputation or information of which Bank is not aware by virtue of
a "Chinese Wall" arrangement. If Bank becomes aware of confidential information
which in good faith it feels inhibits it from effecting a transaction hereunder
Bank may refrain from effecting it.
15. DEFINITIONS.
As used herein, the following terms shall have the meaning hereinafter
stated:
a) "Certificated Security" shall mean a security that is represented
by a certificate.
b) "Custody Account" means each Securities custody account on Bank's
records to which Financial Assets are or may be credited pursuant hereto.
c) "Entitlement Holder" shall mean the person on the records of a
Securities Intermediary as the person having a Securities Entitlement
against the Securities Intermediary.
d) "Financial Asset" shall mean, as the context requires, either the asset
itself or the means by which a person's claim to it is evidenced, including
a Certificated Security or Uncertificated Security, a security certificate,
or a Securities Entitlement.
e) "Securities" means stocks, bonds, rights, warrants and other negotiable
and non-negotiable paper whether issued as Certificated Securities or
Uncertificated Securities and commonly traded or dealt in on securities
exchanges or financial markets, and other obligations of an issuer, or
shares, participations and interests in an issuer recognized in an area in
which it is issued or dealt in as a medium for investment and any other
property as shall be acceptable to Bank for the Custody Account.
f) "Securities Entitlement" shall mean the rights and property interest of
an Entitlement Holder with respect to a Financial Asset as set forth in Part
5 of the Uniform Commercial Code.
g) "Securities Intermediary" shall mean Bank, a Subcustodian, a securities
depository, and any other financial institution which in the ordinary course
of business maintains custody accounts for others and acts in that capacity.
h) "Uncertificated Security" shall mean a security that is not represented
by a certificate.
i) "Uniform Commercial Code" means Article 8 of the Uniform Commercial Code
of the State of New York, as the same may be amended from time to time.
10
<PAGE>
WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first-above written.
CUSTOMER
By:__________________________________
Title:
Date:
THE CHASE MANHATTAN BANK
By:__________________________________
Title:
Date:
11
<PAGE>
STATE OF )
: ss.
COUNTY OF )
On this day of , 199 ,
before me personally came , to me
known, who being by me duly sworn, did depose and say that he/she resides in
at that he/she
is of , the entity described in and which
executed the foregoing instrument; that he/she knows the seal of said entity,
that the seal affixed to said instrument is such seal, that it was so affixed by
order of said entity, and that he/she signed his/her name thereto by like order.
Sworn to before me this ______________
day of ______________, 199_.
Notary
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this day of
, 199 , before me personally came ,
to me known, who being by me duly sworn, did depose and say that he/she resides
in at
; that he/she is a Vice President of THE CHASE MANHATTAN BANK, the corporation
described in and which executed the foregoing instrument; that he/she knows the
seal of said corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of Directors of
said corporation, and that he/she signed his/her name thereto by like order.
Sworn to before me this ___________________
day of ________________, 199_.
Notary
<PAGE>
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
_________________________________________
effective __________________
The following modifications are made to the Agreement:
A. Add a new Section 16 to the Agreement as follows:
"16. COMPLIANCE WITH SEC RULE 17F-5.
------------------------------
(a) Customer's board of directors (or equivalent body) (hereinafter
`Board') hereby delegates to Bank, and, except as to the country or countries as
to which Bank may, from time to time, advise Customer that it does not accept
such delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's `Foreign Custody Manager' (as that term is defined in SEC
rule 17f-5(a)(2)), both for the purpose of selecting Eligible Foreign Custodians
(as that term is defined in SEC rule 17f-5(a)(1), and as the same may be amended
from time to time, or that have otherwise been made exempt pursuant to an SEC
exemptive order) to hold Assets and of evaluating the contractual arrangements
with such Eligible Foreign Custodians (as set forth in SEC rule 17f-5(c)(2));
provided that, the term Eligible Foreign Custodian shall not include any
`Compulsory Depository.' A Compulsory Depository shall mean a securities
depository or clearing agency the use of which is compulsory because: (1) its
use is required by law or regulation, (2) securities cannot be withdrawn from
the depository, or (3) maintaining securities outside the depository is not
consistent with prevailing custodial practices in the country which the
depository serves. Compulsory Depositories used by Chase as of the date hereof
are set forth in Appendix 1-A hereto, and as the same may be amended on notice
to Customer from time to time.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the
placement of Assets with particular Eligible Foreign Custodians and of
any material change in the arrangements with such Eligible Foreign
Custodians, with such reports to be provided to Customer's Board at such
times as the Board deems reasonable and appropriate based on the
circumstances of Customer's foreign custody arrangements (and until
further notice from Customer such reports shall be provided not less
than quarterly with respect to the placement of Assets with particular
Eligible Foreign Custodians and with reasonable promptness upon the
occurrence of any material change in the arrangements with such Eligible
Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person having
responsibility for the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Assets placed and maintained in the safekeeping of such Eligible
Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in SEC rule 17f-
5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodians that is a
securities depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any
combination of the foregoing) requires
<PAGE>
that the Eligible Foreign Custodian will provide reasonable care for
Assets based on the standards applicable to custodians in the relevant
market. In making this determination, Bank shall consider the provisions
of Rule 17f-5(c)(2), together with whether Bank shall be liable to
Customer for any loss which shall occur as the result of the failure of
the Eligible Foreign Custodian to exercise reasonable care with respect
to the safekeeping of such Assets to the same extent that Bank would be
liable to Customer if Bank were holding such Assets in New York; and
(v) have established a system to monitor the continued appropriateness
of maintaining Assets with particular Eligible Foreign Custodians and of
the governing contractual arrangements; it being understood, however,
that in the event that Bank shall have determined that the existing
Eligible Foreign Custodian in a given country would no longer afford
Assets reasonable care and that no other Eligible Foreign Custodian in
that country would afford reasonable care, Bank shall promptly so advise
Customer and shall then act in accordance with the Instructions of
Customer with respect to the disposition of the affected Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in
Rule 17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed
and maintained in Bank's custody are subject to the Investment Company Act of
1940, as amended (the `1940 Act'), as the same may be amended from time to time;
(2) its Board: (i) has determined that it is reasonable to rely on Bank to
perform as Customer's Foreign Custody Manager (ii) or its Foreign Custody
Manager (other than Bank) shall have determined that Customer may maintain
Assets in each country in which Customer's Assets shall be held hereunder and
determined to accept the risks arising therefrom (including, but not limited to,
a country's financial infrastructure (and including any Compulsory Depository
operating in such country), prevailing custody and settlement practices, laws
applicable to the safekeeping and recovery of Assets held in custody, and the
likelihood of nationalization, currency controls and the like)."
(e) Bank shall provide to Customer such information relating to Country
Risk as is specified in Appendix 1-B hereto. Customer hereby acknowledges that:
(i) such information is solely designed to inform Customer of market conditions
and procedures and is not intended as a recommendation to invest or not invest
in particular markets; and (ii) Bank has gathered the information from sources
it considers reliable, but that Bank shall have no responsibility for
inaccuracies or incomplete information.
B. Add the following after the first sentence of Section 3 of the
Agreement: "At the request of Customer, Bank may, but need not, add to Schedule
A an Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect to
the selection thereof. Bank shall notify Customer in the event that it elects
not to add any such entity."
C. Add the following language to the end of Section 3 of the Agreement:
"The term Subcustodian as used herein shall mean the following:
(a) a `U.S. Bank,' which shall mean a U.S. bank as defined in SEC rule
17f-5(a)(7);
2
<PAGE>
(b) an `Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws
of a country other than the United States, that is regulated as such by
that country's government or an agency thereof, (ii) a majority-owned
direct or indirect subsidiary of a U.S. bank or bank holding company
which subsidiary is incorporated or organized under the laws of a
country other than the United States; (iii) a securities depository or
clearing agency, incorporated or organized under the laws of a country
other than the United States, that acts as a system for the central
handling of securities or equivalent book-entries in that country and
that is regulated by a foreign financial regulatory authority as defined
under section 2(a)(5) of the 1940 Act, (iv) a securities depository or
clearing agency organized under the laws of a country other than the
United States to the extent acting as a transnational system for the
central handling of securities or equivalent book-entries, and (v) any
other entity that shall have been so qualified by exemptive order, rule
or other appropriate action of the SEC.
For purposes of clarity, it is agreed that as used in Section 12(a)(i), the term
Subcustodian shall include neither any Eligible Foreign Custodian as to which
Bank has not acted as Foreign Custody Manager nor any Compulsory Depository."
3
<PAGE>
Appendix 1-A
COMPULSORY DEPOSITORIES
Appendix 1-B
Information Regarding Country Risk
----------------------------------
1. To aid Customer in its determinations regarding Country Risk, Bank
shall furnish annually and upon the initial placing of Assets into a country the
following information (check items applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access afforded
Customer's independent public accountants to books and records kept by
an eligible foreign custodian located in that country.
___ ii. Whether applicable foreign law would restrict the Customer's ability
to recover its assets in the event of the bankruptcy of an Eligible
Foreign Custodian located in that country.
___ iii. Whether applicable foreign law would restrict the Customer's ability
to recover assets that are lost while under the control of an Eligible
Foreign Custodian located in the country.
B. Written information concerning:
___ i. The foreseeability of expropriation, nationalization, freezes, or
confiscation of Customer's assets.
___ ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership restrictions,
(iii) foreign exchange, (iv) securities settlement and registration, (v)
taxation, and (vi) compulsory depositories (including depository
evaluation).
2. To aid Customer in monitoring Country Risk, Bank shall furnish board
the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
<PAGE>
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
____________________________________
dated 199_.
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures") furnished
to Customer, as the same may be amended by Bank from time to time on prior
notice to Customer. The Procedures are incorporated by reference herein
and form a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by Bank
to Customer of the dates of pending shareholder meetings, resolutions to be
voted upon and the return dates as may be received by Bank or provided to
Bank by its Subcustodians or third parties, and (b) voting by Bank of
proxies based on Customer Instructions. Original proxy materials or copies
thereof shall not be provided. Notifications shall generally be in English
and, where necessary, shall be summarized and translated from such non-
English materials as have been made available to Bank or its Subcustodian.
In this respect Bank's only obligation is to provide information from
sources it believes to be reliable and/or to provide materials summarized
and/or translated in good faith. Bank reserves the right to provide
Notifications, or parts thereof, in the language received. Upon reasonable
advance request by Customer, backup information relative to Notifications,
such as annual reports, explanatory material concerning resolutions,
management recommendations or other material relevant to the exercise of
proxy voting rights shall be provided as available, but without
translation.
3. While Bank shall attempt to provide accurate and complete Notifications,
whether or not translated, Bank shall not be liable for any losses or other
consequences that may result from reliance by Customer upon Notifications
where Bank prepared the same in good faith.
4 Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as the
agent of Customer, and shall not exercise any discretion with regard to
such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of circumstances,
including, without limitation, where the relevant Financial Assets are: (i)
on loan; (ii) at registrar for registration or reregistration; (iii) the
subject of a conversion or other corporate action; (iv) not held in a name
subject to the control of Bank or its Subcustodian or are otherwise held in
a manner which precludes voting; (v) not capable of being voted on account
of local market regulations or practices or restrictions by the issuer; or
(vi) held in a margin or collateral account.
6 Customer acknowledges that in certain countries Bank may be unable to
vote individual proxies but shall only be able to vote proxies on a net
basis (e.g., a net yes or no vote given the voting instructions received
---
from all customers).
<PAGE>
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall in
no event sell, license, give or otherwise make the information provided
hereunder available, to any third party, and shall not directly or
indirectly compete with Bank or diminish the market for Proxy Services by
provision of such information, in whole or in part, for compensation or
otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be furnished to
Bank in accordance with (S)10 of the Agreement. Proxy Services fees shall
be as set forth in (S)13 of the Agreement or as separately agreed.
2
<PAGE>
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
GLOBAL CUSTODY AGREEMENT
WITH ___________________________________
DATE ___________________________________
<PAGE>
DOMESTIC ONLY
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in DTC), the following provisions shall apply rather than the provisions of
Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody Account,
such proxies (signed in blank, if issued in the name of Bank's nominee or
the nominee of a central depository) and communications with respect to
Financial Assets in the Custody Account as call for voting or relate to
legal proceedings within a reasonable time after sufficient copies are
received by Bank for forwarding to its customers. In addition, Bank shall
follow coupon payments, redemptions, exchanges or similar matters with
respect to Financial Assets in the Custody Account and advise Customer or
the Authorized Person for such Account of rights issued, tender offers or
any other discretionary rights with respect to such Financial Assets, in
each case, of which Bank has received notice from the issuer of the
Financial Assets, or as to which notice is published in publications
routinely utilized by Bank for this purpose.
Fees
- ----
The fees referenced in Section 13 hereof cover only domestic and euro-dollar
holdings. There shall be no Schedule A hereto, as there are no foreign assets
in the Accounts.
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
----------------------------------
Domestic Corporate Actions and Proxies
- --------------------------------------
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in DTC), the following provisions shall apply rather than the pertinent
provisions of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody Account,
such proxies (signed in blank, if issued in the name of Bank's nominee or
the nominee of a central depository) and communications with respect to
Financial Assets in the Custody Account as call for voting or relate to
legal proceedings within a reasonable time after sufficient copies are
received by Bank for forwarding to its customers. In addition, Bank shall
follow coupon payments, redemptions, exchanges or similar matters with
respect to Financial Assets in the Custody Account and advise Customer or
the Authorized Person for such Account of rights issued, tender offers or
any other discretionary rights with respect to such Financial Assets, in
each case, of which Bank has received notice from the issuer of the
Financial Assets, or as to which notice is published in publications
routinely utilized by Bank for this purpose.
<PAGE>
FEE AGREEMENT
CENTURION FUNDS, INC AND
THE CHASE MANHATTAN BANK
DATED: NOVEMBER 25, 1998
- -------------------------------------------------------------------------
COUNTRY SAFEKEEPING TRANSACTION
FEES (BPS) CHARGES ($)
Argentina 35 100
Australia 5 35
Austria 7 40
Cedel 2 25
Belgium 8 40
Brazil 35 100
Canada 4 35
Chile 30 75
China 35 100
Colombia 35 100
Czech Republic 35 100
Denmark 7 50
Ecuador 40 100
Finland 7 75
France 4 35
Germany 4 35
Greece 40 100
Hong Kong 5 60
Hungary 40 100
India 40 100
Indonesia 35 100
Ireland 6 60
Israel 35 100
Italy 8 40
Japan 3 35
Jordan 40 100
Malaysia 7 75
Mauritius 40 100
Mexico 10 100
Morocco 40 100
Netherlands 5 35
Norway 8 50
New Zealand 7 75
Pakistan 35 100
Peru 40 100
<PAGE>
Philippines 30 75
Poland 40 100
Portugal 15 100
Russia
. European Russia 100 500
. Moscow 100 150
. Urals, Siberia 100 1,000
Singapore 6 75
Slovakia 40 100
South Africa 10 100
South Korea 20 50
Spain 9 60
Sri Lanka 40 100
Sweden 5 60
Switzerland 6 60
Taiwan 35 100
Thailand 10 100
Turkey 40 100
UK 3 40
US 3 40
Uruguay 40 100
Venezuela 40 100
Accepted:
_______________________________________
Salomon Smith Barney, Inc.
______________________________________
The Chase Manhattan Bank
<PAGE>
EXHIBIT 99(h)(1)
TRANSFER AGENCY AND SERVICES AGREEMEENT
THIS AGREEMENT, dated as of this __ day of ________, 1998 between Centurion
Funds, Inc. (the "Fund"), a _________ corporation having its principal place of
business at _____ and FIRST DATA INVESTOR SERVICES GROUP, INC. ("Investor
Services Group"), a Massachusetts corporation with principal offices at 4400
Computer Drive, Westboro, Massachusetts 01581.
WITNESSETH
----------
WHEREAS, the Fund is authorized to issue Shares in separate series, with
each such series representing interests in a separate portfolio of securities or
other assets.
WHEREAS, the Fund initially intends to offer Shares in those Portfolios
identified in the attached Schedule A, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint Investor
Services Group as, its transfer agent, dividend disbursing agent and agent in
connection with certain other activities and Investor Services Group desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and Investor Services Group agree as follows:
Article I Definitions.
-----------
1.1 Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended from
time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund- or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give Oral
Instructions or Written Instructions on behalf of the Fund as indicated in
writing to Investor Services Group from time to time.
(c) "Board Members" shall mean the Directors or Trustees of the
governing body of the Fund, as the case may be.
(d) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
-1-
<PAGE>
(e) "Commission" shall mean the Securities and Exchange
Commission.
(f) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time, to time
deposit, or cause to be deposited or held under the name or account of such
a custodian pursuant to a Custodian Agreement.
(g) "1934 Act" shall mean the Securities Exchange, Act of 1934
and the rules and regulations promulgated thereunder, all as amended from
time to time.
(h) "1940 Act" shall mean the Investment Company Act of l940
and the rules and regulations promulgated thereunder, all as amended from
time to time.
(i) "Oral Instractions" shall mean instructions, other than
Written Instructions, actually received by Investor Services Group from a
person reasonably believed by Investor Services Group to be an Authorized
Person;
(j) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interests in a separate portfolio of
securities and other assets;
(k) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the Securities
Act of 1933 and the 1940 Act.
(1) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of each
respective Portfolio of the Fund as may be issued from time to time.
(m) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(n) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by Investor Services Group to be an
Authorized Person and actually received by Investor Services Group. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
Article 2 Appointment of Investor Services Group.
--------------------------------------
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
Investor Services Group as its sole and exclusive transfer agent and dividend
disbursing agent for Shares of each respective Portfolio of the Fund and as
shareholder servicing agent for the Fund and Investor Services Group hereby
accepts such appointments and agrees to perform the duties hereinafter set
forth.
-2-
<PAGE>
Article 3 Duties of Investor Services Group.
---------------------------------
3.1 Investor Services Group shall be responsible for:
(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares of each Portfolio, as more fully described in the written schedule
of Duties of Investor Services Group annexed hereto as Schedule B and
incorporated herein, and in accordance with the terms of the Prospectus of
the Fund on behalf of the applicable Portfolio, applicable law and the
procedures established from time to time between Investor Services Group
and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of Shares
of each Portfolio which are authorized, based upon data provided to it by
the Fund, and issued and outstanding. Investor Services Group shall provide
the Fund on a regular basis with the total number of Shares of each
Portfolio which are authorized and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to monitor the issuance
of such Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole responsibility of
the Fund.
(c) In addition to providing the foregoing services, the Fund
hereby engages Investor Services Group as its exclusive print/mail service
provider with respect to the print/mail items identified in Schedule C for
the fees also set forth in Schedule C. Investor Services Group agrees to
perform the services and its obligations subject to the terms and
conditions of this Agreement.
(d) Notwithstanding any of the foregoing provisions of this
Agreement, Investor Services Group shall be under no duty or obligation to
inquire into, and shall not be liable for: (i) the legality of the issuance
or sale of any Shares or the sufficiency of the amount to be received
therefor, (ii) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor, (iii) the legality of the
declaration of any dividend by the Board of Directors, or the legality of
the issuance of any Shares in payment of any dividend; or (iv) the legality
of any recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to Investor Services
Group in writing those transactions and assets to be treated as exempt from blue
sky reporting for each State and (ii) verify the establishment of transactions
for each State on the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of Investor Services Group for
the Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
-3-
<PAGE>
3.3 In addition to the duties set forth herein, Investor Services
Group shall perform such other duties and functions, and shall be paid such
amounts therefor, as may from time to time be agreed upon in writing between the
Fund and Investor Services Group.
Article 4 Recordkeeping and Other Information.
-----------------------------------
4.1 Investor Services Group shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule B
in accordance with all applicable laws , rules and regulations, including
records required by Section 3l(a) of the l940 Act. Where applicable, such
records shall be maintained by Investor Services Group for the periods and in
the places required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, Investor
Services Group agrees that all such records prepared or maintained by Investor
Services Group relating to the services to be performed by Investor Services
Group hereunder are the property of the Fund and will be preserved, maintained
and made available in accordance with such section, and will, at the expense of
the Fund, be surrendered promptly to the Fund on and in accordance with the
Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, Investor Services Group will endeavor to notify
the Fund of such request and secure Written Instructions as to the handling of
such request. Investor Services Group reserves the right, however, to exhibit
the Shareholder records to any person whenever it is advised by its counsel that
it may be held liable for the failure to comply with such request.
Article 5 Fund Instructions.
-----------------
5.1 Investor Services Group will have no liability when acting
upon Written or Oral Instructions believed to have been executed or orally
communicated-by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. Investor Services Group will also have no liability when
processing Share certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and the proper
countersignature of Investor Services Group.
5.2 At any time, Investor Services Group may request Written
Instructions from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in connection with
this Agreement, and it shall not be liable for any action taken or not taken or
suffered by it in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for Investor Services
Group. Written Instructions requested by Investor Services Group will be
provided by the Fund within a reasonable period of time.
-4-
<PAGE>
5.3 Investor Services Group, its officers, agents or employees,
shall accept Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the Fund only if said representative
is an Authorized Person. The Fund agrees that all Oral Instructions shall be
followed within one business day by confirming Written Instructions, and that
the Fund's failure to so confirm shall not impair in any respect Investor
Services Group's right to rely on Oral Instructions.
Article 6 Compensation.
------------
6.1 The Fund on behalf of each of the Portfolios will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto as
Schedule C and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the
Fund on behalf of each of the Portfolios agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred .by Investor Services Group in
the performance of its duties hereunder. Out-of-pocket expenses shall include,
but shall not be limited to, the items specified in the written schedule of out-
of-pocket charges annexed hereto as Schedule D and incorporated herein. Schedule
D may be modified by written agreement between the parties. Unspecified out-of-
pocket expenses shall be limited to those out-of-pocket expenses reasonably
incurred by Investor Services Group in the performance of its obligations
hereunder.
6.3 The Fund on behalf of each of the Portfolios agrees to pay
all fees and out-of-pocket expenses to Investor Services Group by Federal Funds
Wire within fifteen (15) business days following the receipt of the respective
invoice. In addition, with respect to all fees under this Agreement, Investor
Services Group may charge a service fee equal to the lesser of (i) one and one
half percent (1 1/2%) per month or (ii) the highest interest rate legally
permitted on any past due invoiced amounts, provided however, the foregoing
service fee shall not apply if the Fund in good faith legitimately disputes any
invoice amount in which case the Fund shall do the following within thirty (30)
days of the postmark date: (a) pay Investor Services Group the undisputed amount
of the invoice; and (b) provide Investor Services Group a detailed written
description of the disputed amount and the basis for the Fund's dispute with
such amount. In addition, the Fund shall cooperate with Investor Services Group
m resolving disputed invoice amounts and then promptly paying such amounts
determined to be due.
6.4 Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule C, a revised Fee Schedule executed and
dated by the parties hereto.
6.5 The Fund acknowledges that the fees that Investor Services
Group charges the Fund under this Agreement reflect the allocation of risk
between the parties, including the disclaimer of warranties in Section 9.3 and
the limitations on liability and exclusion of remedies in Section 11.2 and
Article 12. Modifying the allocation of risk from what is stated here would
affect the fees that Investor Services charges, and in consideration of those
fees, the Fund agrees to the stated allocation of risk.
-5-
<PAGE>
Article 7 Documents.
---------
In connection with the appointment of Investor Services Group, the Fund
shall, on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for Investor Services Group to prepare to
perform its duties hereunder, deliver or caused to be delivered to Investor
Services Group the documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule E.
Article 8 Transfer Agent System.
---------------------
8.1 Investor Services Group shall retain title to and ownership of any
and all data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions, discoveries,
patentable or copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by Investor Services
Group in connection with the services provided by Investor Services Group to the
Fund herein (the "Investor Services Group System").
8.2 Investor Services Group hereby grants to the Fund a limited
license to the Investor Services Group System for the sole and limited purpose
of having Investor Services Group provide the services contemplated hereunder
and nothing contained in this Agreement shall be construed or interpreted
otherwise and such license shall immediately terminate with the termination of
this Agreement.
8.3 In the event that the Fund, including any affiliate or agent of
the Fund or any third party acting on behalf of the Fund is provided with direct
access to the Investor Services Group System for either account inquiry or to
transmit transaction information, including but not limited to maintenance,
exchanges, purchases and redemptions, such direct access capability shall be
limited to direct entry to the Investor Services Group System by means of on-
line m e terminal entry or PC emulation of such m e terminal entry and any other
non-conforming method of transmission of information to the Investor Services
Group System is strictly prohibited without the prior written consent of
Investor Services Group.
Article 9 Representations and Warranties.
------------------------------
9.1 Investor Services Group represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to
authorize it to enter into this Agreement;
-6-
<PAGE>
(d) it is duly registered with its appropriate regulatory agency
as a transfer agent and such registration will remain in effect for the
duration of this Agreement; and
(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
9.2 The Fund represents and warrants to Investor Services Group that:
(a) it is duly organized, existing and in good standing under the
laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to authorize it
to enter into this Agreement;
(d) a registration statement under the Securities Act of 1933, as
amended, and the 1940 Act on behalf of each of the Portfolios is currently
effective and will remain effective, and all appropriate state securities
law filings have been made and will continue to be made, with respect to
all Shares of the Fund being offered for sale; and
(e) all outstanding Shares are validly issued, fully paid and non-
assessable and when Shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its Prospectus with
respect to each Portfolio, such Shares shall be validly issued, fully paid
and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIODED IN TIES
AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL OTHER REPRESENTANONS OR
WARRANTIES, EXPRESS OR MPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABELITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE, OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. INVESTOR
SERVICES GROUP DISCLAIMS ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS
OTHERWISE SET FORTH IN THIS AGREEMENT.
Article 10 Indemnification.
---------------
10.1 Investor Services Group shall not be responsible for and the Fund
on behalf of each Portfolio shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable (a "Claim") arising out
of or attributable to any of the following:
-7-
<PAGE>
(a) any actions of Investor Services Group required to be taken
pursuant to this Agreement unless such Claim resulted from a negligent act
or omission to act or bad faith by Investor Services Group in the
performance of its duties hereunder;
(b) Investor Services Group's reasonable reliance on, or
reasonable. use of information, data, records and documents (including but
not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) received by Investor Services Group from the Fund, or any
authorized third party acting on behalf of the Fund, including but not
limited to the prior transfer agent for the Fund, in the performance of
Investor Services Group's duties and obligations hereunder;
(e) the reliance on, or the implementation of, any Written or Oral
Instructions or any other instructions or requests of the Fund on behalf of
the applicable Portfolio;
(d) the offer or sales of shares in violation of any requirement
under the securities laws or regulations of any state that such shares be
registered in such state or in violation of any stop order or other
determination or ruling by any state with respect to the offer or sale of
such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of this
Agreement, or any Claim which arises out of the Fund's negligence or
misconduct or the breach of any representation or warranty of the Fund made
herein.
10.2 In any case in which the Fund may be asked to indemnify or hold
Investor Services Group harmless, Investor Services Group will notify the Fund
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by Investor Services Group and shall
keep the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend Investor Services Group
against any Claim which may be the subject of this indemnification, and, in the
event that the Fund so elects, such defense shall be conducted by counsel chosen
by the Fund and satisfactory to Investor Services Group, and thereupon the Fund
shall take over complete defense of the Claim and Investor Services Group shall
sustain no further legal or other expenses in respect of such Claim. Investor
Services Group will not confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification, except with the Fund's
prior written consent. The obligations of the parties hereto under this Article
10 shall survive the termination of this Agreement.
10.3 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
(a) one year after the Fund becomes aware of the event for which
indemnification is claimed, or
-8-
<PAGE>
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
Investor Services Group's sole and exclusive remedy for claims or other actions
or proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
----------------
11.1 Investor Services Group shall at all times act in good faith and
agrees to use its best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement, but assumes no
responsibility for loss or damage to the Fund unless said errors are caused by
Investor Services Group's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
Investor Services Group's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages for any cause whatsoever
(including but not limited to those arising out of or related to this Agreement)
and regardless of the form of action or legal theory shall not exceed the lesser
of (i) $500,000 or (ii) the fees received by Investor Services Group for
services provided under this Agreement during the twelve months immediately
prior to the date of such loss or damage. Fund understands the limitation on
Investor Services Group's damages to be a reasonable allocation of risk and Fund
expressly consents with respect to such allocation of risk. In allocating risk
under the Agreement, the parties agree that the damage limitation set forth
above shall apply to any alternative remedy ordered by a court in the event such
court determines that sole and exclusive remedy provided for in the Agreement
fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
---------------------
NOTWITHSTANDING ANYTHNG IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EWLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF TORT,
CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST PROFITS,
EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES,
EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF
WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS
BEEN ADVISED OF THE POSSMILITY OF SUCH DAMAGES.
-9-
<PAGE>
Article 13 Term and Termination.
--------------------
13.1 This Agreement shall be effective on the date first written above
and shall continue until May 31, 1999 (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or Investor Services Group provides written notice to the
other of its intent not to renew. Such notice must be received not less than
ninety (90) days and not more than one-hundred eighty (180) days prior to the
expiration of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party. If Investor Services Group is the Non-Defaulting Party,
its termination of this Agreement shall not constitute a waiver of any other
rights or remedies of Investor Services Group with respect to services performed
prior to such termination of rights of Investor Services Group to be reimbursed
for out-of-pocket expenses. In all cases, termination by the -Non-Defaulting
Party shall not constitute a waiver by the Non-Defaulting Party of any other
rights it might have under this Agreement or otherwise against the Defaulting
Party.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, should the Fund desire to move any of the services provided by
Investor Services Group hereunder to a successor- service provider prior to the
expiration of the then current Initial or Renewal Term, or without the required
notice period, Investor Services Group shall make a good faith effort to
facilitate the conversion on such prior date, however, there can be no guarantee
that Investor Services Group will be able to facilitate a conversion of services
on such prior date. In connection with the foregoing, should services be
converted to a successor service provider, or if the Fund or any Portfolio is
liquidated or its assets merged or purchased or the like with another entity
which does not utilize the services of Investor Services Group, the payment of
fees to Investor Services Group as set forth herein shall be accelerated to a
date prior to the conversion or termination of services and calculated as if the
services had remained with Investor Services Group until the expiration of the
then current Initial or Renewal Term and calculated at the asset and/or
Shareholder account levels, as the case may be, on the date notice of
termination was given to Investor Services Group.
Article 14 Additional Portfolios.
---------------------
14.1 In the event that the Fund establishes one or more Portfolios in
addition to those identified in Schedule A, with respect to which the Fund
desires to have Investor Services Group render services as transfer agent under
the terms hereof, the Fund shall so notify Investor
-10-
<PAGE>
Services Group in writing, and if Investor Services Group agrees in writing to
provide such services, Exhibit I shall be amended to include such additional
Portfolios.
Article 15 Confidentiality,
---------------
15.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and Investor Services Group shall exercise at least the same degree of care, but
not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and Investor Services
Group shall not duplicate, sell or disclose to others the Confidential
information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and Investor Services Group may,
however, disclose Confidential Information to their respective parent
corporation, their respective affiliates, their subsidiaries and affiliated
companies and employees, provided that each shall use reasonable efforts to
ensure that the Confidential Information is not duplicated or disclosed in
breach of this Agreement. The Fund and Investor Services Group may also disclose
the Confidential Information to independent contractors, auditors, and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or Investor
Services Group, their respective subsidiaries and affiliated companies
and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or
Investor Services Group a competitive advantage over its competitors;
and
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
-11-
<PAGE>
15.4 The obligations of confidentiality and restriction on use herein
shall not apply to any Confidential Information that a party proves:
(a) Was in the public domain prior to the date of this Agreement
or subsequently came into the public domain through no fault of such
party; or
(b) Was lawfully received by the party from a third party free of
any obligation of confidence to such third party; or
(c) Was already in the possession of the party prior to receipt
thereof, directly or indirectly, from the other party; or
(d) Is required to be disclosed in a judicial or administrative
proceeding after all reasonable legal remedies for maintaining such
information in confidence have been exhausted including, but not limited
to, giving the other party as much advance notice of the possibility of
such disclosure as practical so the other party may attempt to stop such
disclosure or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by employees,
consultants or agents of the party without reference to the Confidential
Information disclosed under this Agreement.
Article 16 Force Majeure.
-------------
No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands are reasonable or within the party's power to satisfy); or
(v) nonperformance by a third party or any similar cause beyond the reasonable
control of such party, including without limitation, failures or fluctuations in
telecommunications or other equipment. In any such event, the nonperforming
party shall be excused from any further performance and observance of the
obligations so affected only for as long as such circumstances prevail and such
party continues to use commercially reasonable efforts to recommence performance
or observance as soon as practicable.
Article 17 Assigmnent and Subcontracting.
-----------------------------
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
Investor Services Group may, in its sole discretion, assign all its right, title
and interest in this Agreement to an affiliate, parent or subsidiary, or to the
purchaser of substantially all of its business. Investor Services Group may, in
its sole discretion, engage subcontractors to perform any of the obligations
contained in this Agreement to be performed by Investor Services Group.
-12-
<PAGE>
Article 18 Arbitration.
-----------
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration administered by
the American Arbitration Association in Boston, Massachusetts in accordance with
its applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
------
Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or Investor Services Group, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Attention: _________________
-13-
<PAGE>
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a COPY to Investor Services Group's General Counsel
Article 20 Governing Law/Venue.
-------------------
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and
Investor Services Group and the Fund hereby submit themselves to the exclusive
jurisdiction of those courts.
Article 21 Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
--------
The captions of this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
Article 23 Publicity,
---------
Neither Investor Services Group nor the Fund shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without the prior
review and written approval of the other party; provided, however, that either
party may make such disclosures as are required by legal, accounting or
regulatory requirements after making reasonable efforts in the circumstances to
consult in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
----------------------------------------
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage. for the Fund or others,
Investor Services Group's employees.
-14-
<PAGE>
Article 25 Entire Agreement; Severability.
------------------------------
25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations and understandings, whether written or
oral, between the parties with respect to the subject matter hereof No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing shall be
effective as against Investor Services Group unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of Investor
Services Group. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
Article 26 Miscellaneous.
-------------
The Fund and Investor Services Group agree that the obligations of the
Fund under the Agreement shall not be binding upon any of the Board Members,
shareholders, nominees, officers, employees or agents, whether past, present or
future, of the Fund individually, but are binding only upon the assets and
property of the Fund, as provided in the Articles of Incorporation. The
execution and delivery of this Agreement have been authorized by the Board
Members of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither such authorization by such Board Members nor such execution
and delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any of
them or any shareholder of the Fund personally, but shall bind only the assets
and property of the Fund as provided in the Articles of Incorporation.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers, as of the day and year first above written.
CENTURION FUNDS, INC.
By: _____________________________
Title: __________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: ______________________________
Title: ___________________________
-16-
<PAGE>
SCHEDULE A
----------
LIST OF PORTFOLIOS
Centurion U.S. Equity Fund
Centurion International Equity Fund
Centurion U.S. Contra Fund
Centurion International Contra Fund
-17-
<PAGE>
SCHEDULE B
----------
DUTIES OF INVESTOR SERVICES GROUP
1. Shareholder Information. Investor Services Group shall maintain a
-----------------------
record of the number of Shares held by each Shareholder of record which shall
include name, address, taxpayer identification and which shall indicate whether
such Shares are held in certificates or uncertificated form.
2. Shareholder Services. Investor Services Group shall respond as
--------------------
appropriate to all inquiries and communications from Shareholders relating to
Shareholder accounts with respect to its duties hereunder and as may be from
time to time mutually agreed upon between Investor Services Group and the Fund.
3. Share Certificates.
------------------
(a) At the expense of the Fund, the Fund shall supply Investor Services
Group with an adequate supply of blank share certificates to meet Investor
Services Group requirements therefor. Such Share certificates shall be properly
signed by facsimile. The Fund agrees that, notwithstanding the death,
resignation, or removal of any officer of the Fund whose signature appears on
such certificates, Investor Services Group or its agent may continue to
countersign certificates which bear such signatures until otherwise directed by
Written Instructions.
(b) Investor Services Group shall issue replacement Share certificates in
lieu of certificates which have been lost, stolen or destroyed, upon receipt by
Investor Services Group of properly executed affidavits and lost certificate
bonds, in form satisfactory to Investor Services Group, with the Fund and
Investor Services Group as obligees under the bond.
(c) Investor Services Group shall also maintain a record of each
certificate issued, the number of Shares represented thereby and the Shareholder
of record. With respect to Shares held in open accounts or uncertificated form
(i.e., no certificate being issued with respect thereto) Investor Services Group
shall maintain comparable records of the Shareholders thereof, including their
names,, addresses and taxpayer identification. Investor Services Group shall
further maintain a stop transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy Materials. Investor
-------------------------------------------------------
Services Group will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. . In connection with meetings of Shareholders,
Investor Services Group will prepare Shareholder lists, mail and certify as to
the mailing of proxy materials, process and tabulate returned proxy cards,
report on proxies voted prior to meetings, act as inspector of election at
meetings and certify Shares voted at meetings.
-18-
<PAGE>
5. Sales of Shares.
---------------
(a) Investor Services Group shall not be required to issue any Shares of
the Fund where it has received a Written Instruction from the Fund or official
notice from any appropriate authority that the sale of the Shares of the Fund
has been suspended or discontinued. The existence of such Written Instructions
or such official notice shall be conclusive evidence of the right of Investor
Services Group to rely on such Written Instructions or official notice.
(b) In the event that any check or other order for the payment of money is
returned unpaid for any reason, Investor Services Group will endeavor to: (i)
give prompt notice of such return to the Fund or its designee; (ii) place a stop
transfer order against all Shares issued as a result of such check or order; and
(iii) take such actions as Investor Services Group may from time to time deem
appropriate.
6. Transfer and Repurchase.
-----------------------
(a) Investor Services Group shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase procedures set forth
in the Fund's Prospectus.
(b) Investor Services Group will transfer or repurchase Shares upon receipt
of Oral or Written Instructions or otherwise pursuant to the Prospectus and
Share certificates, if any, properly endorsed for transfer or redemption
accompanied by such documents as Investor Services Group reasonably may deem
necessary.
(c) Investor Services Group reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the instructions
is valid and genuine. Investor Services Group also reserves the right to refuse
to transfer or repurchase Shares until it is satisfied that the requested
transfer or repurchase is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or repurchases which Investor
Services Group, in its good judgment, deems improper or unauthorized, or until
it is reasonably satisfied that there is no basis to any claims adverse to such
transfer or repurchase.
(d) When Shares are redeemed, Investor Services Group shall, upon receipt
of the instructions and documents in proper form, deliver to the Custodian and
the Fund or its designee a notification setting forth the number of Shares to be
repurchased. Such repurchased shares shall be reflected on appropriate accounts
maintained by Investor Services Group reflecting outstanding Shares of the Fund
and Shares attributed to individual accounts.
(e) Investor Services Group shall upon receipt of the monies provided to it
by the Custodian for the repurchase of Shares, pay such monies as are received
from the Custodian, all in accordance with the procedures described in the
written instruction received by Investor Services Group from the Fund.
(f) Investor Services Group shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by Investor Services Group or its
agent of notification of the suspension of the determination of the net asset
value of the Fund.
-19-
<PAGE>
7. Dividends.
---------
(a) Upon the declaration of each dividend and each capital gains
distribution by the 'Board of Directors of the Fund with respect to Shares of
the Fund, the Fund shall furnish or cause to be furnished to Investor Services
Group Written Instructions setting forth the date of the declaration of such
dividend or distribution, the ex-dividend date, the date of payment thereof, the
record date as of which Shareholders entitled to payment shall be determined,
the amount payable per Share to the Shareholders of record as of that date, the
total amount payable on the payment date and whether such dividend or
distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution of the Board
of Directors, the Fund will provide Investor Services Group with sufficient cash
to make payment to the Shareholders of record as of such payment date.
(c) If Investor Services Group does not receive sufficient cash from the
Fund to make total dividend and/or distribution payments to all Shareholders of
the Fund as of the record date, Investor Services Group will, upon notifying the
Fund, withhold payment to all Shareholders of record as of the record date until
sufficient cash is provided to Investor Services Group.
8. Retirement Plans. In connection with the individual retirement
----------------
account, simplified employee pension plan, rollover individual retirement plan,
educational IRA and ROTH individual retirement account (each hereinafter
referred to as an "IRA" and, collectively, the "IRAs") within the meaning of
Section 408 of the Internal Revenue Code of 1986, as amended (the "Code")
offered by the Fund for which contributions of the Funds' shareholders (the
"Participants") in the IRA's are invested in shares of the Fund, Investor
Services Group shall provide the following administrative services in addition
to those services described herein:
(a) Establish a record of types and reasons for distributions (i.e.,
attainment of age 59-1/2, disability, death, return of excess
contributions, etc.);
(b) Record method of distribution requested and/or made;
(c) Receive and process designation of the beneficiary forms;
(d) Examine and process requests for direct transfers between
custodians/trustees, transfer and pay over to the successor assets in
the account and records pertaining thereto as requested;
(e) Prepare any annual reports required to be prepared and/or filed by a
custodian of an IRA including, but not limited to, an annual fair
market value report, Forms 1099R and 5498 and file with the IRS and
provide to Participant/Beneficiary; and
(f) Perform applicable federal withholding and send
Participants/Beneficiaries an annual TEFRA notice regarding required
federal tax withholding.
9 Cash Management Services. Funds received by Investor Services Group in
------------------------
the course of performing its services hereunder will be held in demand deposit
bank accounts or money market fund accounts in the name of Investor Services
Group (or its nominee) as agent for the FuncL Investor Services Group shall be
entitled to retain any interest, dividends, balance credits or fee reductions or
other concessions or benefits earned or generated by or associated with such
accounts or made available by the institution with which such accounts are
maintained.
-20-
<PAGE>
10. Lost Shareholders. Investor Services Group shall perform such
-----------------
services as are required in order to comply with Rules 17a-24 and 17Ad-17 of the
34 Act (the "Lost Shareholder Rules"), including, but not limited to those set
forth below. Investor Services Group may, in its sole discretion, use the
services of a third party to perform the some or all such services.
(a) documentation of electronic search policies and procedures;
(b) execution of required searches;
(c) creation and mailing of confirmation letters;
(d) taking receipt of returned verification forms;
(e) providing confirmed address corrections in batch via electronic media;
(f) tracking results and maintaining data sufficient to comply with the
Lost Shareholder Rules; and
(g) preparation and submission of data required under the Lost Shareholder
Rules.
11. In addition to and neither in lieu nor in contravention of the
services set forth above, Investor Services Group shall perform all the
customary services of a transfer agent, registrar, dividend disbursing agent and
agent of the dividend reinvestment and cash purchase plan as described herein
consistent with those requirements in effect as at the date of this Agreement.
The detailed definition, frequency, limitations and associated costs (if any)
set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, tabulating proxies, mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien accounts
where applicable, preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders.
-21-
<PAGE>
SCHEDULE C
----------
FEE SCHEDULE
1. Standard Fees.
$15.00 per account/per Portfolio
2. Lost Shareholder Search/Reporting: $2.75 per account search*
* The per account search fee shall be waived until June 2000 so long
as the Fund retains Keane Tracers, Inc. ("KTI") to provide the Fund
with KTI's "In-Depth Research Program" services.
3. Print/Mail Fees.
After the one year anniversary of the effective date of this Agreement, Investor
Services Group may adjust the fees described in the above sections once per
calendar year, upon thirty (30) days prior written notice in an amount not to
exceed the cumulative percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U) U.S. City Average, All items (unadjusted) - (1981-
84=100), published by the U.S. Department of Labor since the last such
adjustment in the Client's monthly fees (or the Effective Date absent a prior
such adjustment).
2. Programming Costs
(a) Dedicated Team:
Programmer $ 1 00,000 per annum
BSA $ 85,000 per annum
Tester $ 65,000 per annum
(b) System Enhancements (Non Dedicated Team):
Programmer $150.00 per hour
The above programming rates are subject to an annual 5% increase after the one
year anniversary of the effective date of this Agreement.
-22-
<PAGE>
SCHEDULE D
----------
OUT-OF-POCIKET EXPENSES
The Fund shall reimburse Investor Services Group monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
. Microfiche/microfilm production
. Magnetic media tapes and freight
. Printing costs, including certificates, envelopes, checks and stationery
. Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass through
to the Fund
. Due diligence mailings
. Telephone and telecommunication costs, including all lease, maintenance and
line costs
. Ad hoc reports
. Proxy solicitations, mailings and tabulations
. Daily & Distribution advice mailings
. Shipping, Certified and Overnight mail and insurance o Year-end form
production and mailings
. Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
. Duplicating services
. Courier services
. Incoming and outgoing wire charges
. Federal Reserve charges for check clearance
. Overtime, as approved by the Fund
. Temporary staff, as approved by the Fund
. Travel and entertainment, as approved by the Fund
. Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
. Third party audit reviews
. Ad hoc SQL time
. Insurance
. Such other miscellaneous expenses reasonably incurred by Investor Services
Group in performing its duties and responsibilities under this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with Investor Services Group. In addition, the
Fund will promptly reimburse Investor Services Group for any other unscheduled
expenses incurred by Investor Services Group whenever the Fund and Investor
Services Group mutually agree that such expenses are not otherwise properly
borne by Investor Services Group as part of its duties and obligations under the
Agreement.
-23-
<PAGE>
SCHEDULE E
----------
FUND DOCUMENTS
. Certified copy of the Articles of Incorporation of the Fund, as amended
. Certified cop of the By-laws of the Fund, as amended
. Copy of the resolution of the Board of Directors authorizing the execution
and delivery of this Agreement
. Specimens of the certificates for Shares of the Fund, if applicable, in the
form approved by the Board of Directors of the Fund, with a certificate of
the Secretary of the Fund as to such approval
. All account application forms and other documents relating to Shareholder
accounts or to any plan, program or service offered by the Fund
. Certified list of Shareholders of the Fund with the name, address and
taxpayer identification number of each Shareholder, and the number of Shares
of the Fund held by each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and
the number of Shares redeemed by the Fund
. All notices issued by the Fund with respect to the Shares in accordance with
and pursuant to the Articles of Incorporation or By-laws of the Fund or as
required by law and shall perform such other specific duties as are set
forth in the Articles of Incorporation including the giving of notice of any
special or annual meetings of shareholders and any other notices required
thereby.
-24-
<PAGE>
EXHIBIT 99(h)(2)
FORM OF
ADMINISTRATION AGREEMENT
November ___, 1998
Mutual Management Corp.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Centurion Funds, Inc (the "Fund"), a corporation organized under the laws
of the State of Maryland, confirms its agreement with Mutual Management Corp.
("MMC") with respect to Series of the Fund that may be offered from time to time
(each a "Portfolio" and collectively the "Portfolios"), as follows:
1. Investment Description; Appointment
The Fund desires to employ the Portfolios' capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Charter dated August 20, 1998 as amended from time to time (the
"Charter"), in its Prospectus and Statement of Additional Information as from
time to time in effect and in such manner and to such extent as may from time to
time be approved by the Board of Directors of the Fund (the "Board"). Copies of
the Fund's Prospectus, Statement of Additional Information and Charter have been
or will be submitted to MMC. Centurion Trust Company ("The Adviser") serves as
the Fund's investment adviser; BEA Associates and Parametric Portfolio
Associates serve as the sub-investment advisers of the Centurion U.S. Equity
Fund; BEA Associates and Friends Ivory & Sime, Inc. serve as the sub-investment
advisers to the Centurion International Equity Fund; BEA Associates serves as
the sub-investment adviser to the Centurion U.S. Contra Fund; and BEA Associates
serves as the sub-investment adviser to the Centurion International Contra Fund,
respectively; and the Fund desires to employ and hereby appoints MMC to act as
its administrator. MMC accepts this appointment and agrees to furnish the
services to the Fund for the compensation set forth below. MMC is hereby
authorized to retain third parties and is hereby authorized to delegate some or
all of its duties and obligations hereunder to such persons provided that such
persons shall remain under the general supervision of MMC.
2. Services as Administrator
Subject to the supervision and direction of the Board, MMC will: (a)
assist in supervising all aspects of the Portfolio's operations except those
performed by other parties pursuant to written agreements with the Fund; (b)
supply the Fund with office facilities (which may be in MMC's own offices),
statistical and research data, data processing services, clerical, accounting
and bookkeeping services, including, but not limited to, the calculation of (i)
the net asset value of shares of the Portfolios, (ii) distribution fees,
internal auditing and legal services,
<PAGE>
internal executive and administrative services, and stationary and office
supplies; and (c) prepare reports to shareholders of the Portfolios, tax returns
and reports to and filings with the Securities and Exchange Commission (the
"SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this Agreement, the
Fund will pay MMC on the first business day of each month a fee for the previous
month at an annual rate of 0.20% of each Portfolio's average daily net assets or
a minimum of $50,000 for each Portfolio depending upon which amount is greater.
The fee for the period from the date the Fund's initial registration statement
is declared effective by the SEC to the end of the month during which the
initial registration statement is declared effective shall be prorated according
to the proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of any month, the fee for such part
of a month shall be prorated according to the proportion which such period bears
to the full monthly period and shall be payable upon the date of termination of
this Agreement. For the purpose of determining fees payable to MMC, the value
of the each Portfolio's net assets shall be computed at the times and in the
manner specified in the Fund's Prospectus and Statement of Additional
Information as from time to time in effect.
4. Expenses
MMC will bear all expenses in connection with the performance of its
services under this Agreement. The Fund will bear certain other expenses
incurred by it in connection with operation of the Portfolios, including:
taxes, interest, brokerage fees and commissions, if any; fees of the members of
the Board of the Fund who are not officers, directors or employees of Centurion
or its affiliates or any person who is an affiliate of any person to whom duties
may be delegated hereunder; SEC fees and state blue sky qualification fees;
charges of custodians and transfer and dividend disbursing agents; the Fund's
and Board members' proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and legal expenses; costs
of maintaining the Fund's existence; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses
5 Standard of Care
MMC shall exercise its best judgment in rendering the services listed
in paragraph 2 above, and MMC shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund or the Portfolios in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect MMC against
liability to the Fund or the Portfolios or to the Fund's shareholders to which
MMC would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or by reason of
MMC's reckless disregard of its obligations and duties under this Agreement.
<PAGE>
6 Term of Agreement
This Agreement shall continue automatically (unless terminated as
provided herein) for successive annual periods, provided that such continuance
is specifically approved at least annually by the Board. This Agreeement is
terminable, without penalty, on 90 days' written notice, by the Board or by vote
of holders of a majority of the Fund's shares, or upon 60 days' written notice,
by MMC.
7 Service to Other Companies or Accounts
The Fund understands that MMC now acts, will continue to act and may
act in the future as administrator to one or more other investment companies,
and the Fund has no objection to MMC so acting. In addition, the Fund
understands that the persons employed by MMC or its affiliates to assist in the
performance of its duties hereunder will not devote their full time to such
service and nothing contained herein shall be deemed to limit or restrict the
right of MMC or its affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
8 Indemnification
The Fund agrees to indemnify MMC and its officers, directors,
employees, affiliates, controlling persons, agents (including persons to whom
responsibilities are delegated hereunder) ("indemnitees") against any loss,
claim, expense or cost of any kind (including reasonable attorney's fees)
resulting or arising in connection with this Agreement or from the performance
or failure to perform any act hereunder, provided that no such indemnification
shall be available if the indemnitee violated the standard of care in paragraph
5 above. This indemnification shall be limited by the Investment Company Act of
1940 and relevant state law. Each indemnitee shall be entitled to advancement
of its expenses in accordance with the requirements of the 1940 Act and the
rules, regulations and interpretations thereof as in effect from time to time.
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance hereof by singing and returning to us the enclosed copy hereof.
Very truly yours,
Centurion Funds, Inc.
By: ________________________________
Title:
Accepted:
Mutual Management Corp.
By: _________________________________
Title:
<PAGE>
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive accrual-based
- ---------------
recordkeeping and management information. They include maintaining the Fund's
books and records in accordance with the Investment Company Act of 1940, as
amended (the "1940 Act"), net asset value calculation, daily dividend
calculation, tax accounting and portfolio accounting.
The designated fund accountants interact with the Fund's custodians,
transfer agent and investment adviser daily. As required, the responsibilities
of each fund accountant may include:
. Cash Reconciliation - Reconcile prior day's ending cash balance per
-------------------
custodians' records and the accounting system to the prior day's
ending cash balance per fund accounting's cash availability report;
. Cash Availability - Combine all activity affecting the Fund's cash
-----------------
account and produce a net cash amount available for investment;
. Formal Reconciliations - Reconcile system generated reports to prior
----------------------
day's calculations of interest, dividends, amortization, accretion,
distributions, capital stock and net assets;
. Trade Processing - Upon receipt of instructions from the investment
----------------
adviser review, record and transmit buys and sells to the custodian;
. Journal Entries - Input entries to the accounting system reflecting
---------------
shareholder activity and Fund expense accruals;
. Reconcile and Calculate N.O.A. (net other assets) - Compile all
-------------------------------------------------
activity affecting asset and liability accounts other than investment
account;
. Calculate Net Income, Mil Rate and Yield for Daily Distribution
----------------------------------------------------------------
Funds - Calculate income on purchase and sales, calculate change in
-----
income due to variable rate change, combine all daily income less
expenses to arrive at net income, calculate mil rate and yields (1
day, 7 day and 30 day);
. Mini-Cycle (except for Money Market Funds) - Review intra day trial
------------------------------------------
balance and reports, review trial balance N.O.A.;
. Holdings Reconciliation - Reconcile the portfolio holdings per the
-----------------------
system to custodian records;
<PAGE>
. Pricing - Determine N.A.V. for Portfolios using market value of all
-------
securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
. System Check-Back - Verify the change in market value of securities
-----------------
which saw trading activity per the system;
. Net Asset Value Reconciliation - Identify the impact of current day's
------------------------------
Portfolio activity on a per share basis;
. Reporting of Price to NASDAQ - 5:30 P.M. is the final deadline for
-----------------------------
Fund prices being reported to the newspaper;
. Reporting of Price to Transfer Agent- N.A.V.s are reported to transfer
------------------------------------
agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate actions of
portfolio holdings to portfolio managers; initiate notification to custodian
procedures on outstanding income receivables; provide information to the Fund's
treasurer for reports to shareholders, SEC, Board members, tax authorities,
statistical and performance reporting companies and the Fund's auditors;
interface with the Fund's auditors; prepare monthly reconciliation packages,
including expense pro forma; prepare amortization schedules for premium and
discount bonds based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made available
- ------------------------
to the Fund fall within three main categories: Financial Reporting; Statistical
Reporting; and Publications. The following is a summary of the services made
available to the Fund by the Financial Administration Division:
Financial Reporting
. Coordinate the preparation and review of the annual, semi-annual
and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
. Total return reporting;
. SEC 30-day yield reporting;
. Prepare dividend summary;
. Prepare quarter-end reports;
. Communicate statistical data to the financial media (Donoghue,
Lipper, Morningstar, et al.)
-----
<PAGE>
Publications
. Coordinate the printing and mailing process with outside printers
for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
. Provide graphics and design assistance relating to the creation
of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available to the
- --------
Fund:
. Provide a Controller for the Fund;
. Determine expenses properly chargeable to the Fund;
. Authorize payment of bills for expenses of the Fund;
. Establish and monitor the rate of expense accruals;
. Prepare financial materials for review by the Fund's Board (e.g.,
10f-3, 17a-7 and 17e-1 reports, repurchase agreement dealer
lists, securities transactions);
. Recommend dividends to be voted by the Fund's Board;
. Monitor mark-to-market comparisons for money market funds;
. Recommend valuation to be used for securities which are not
readily saleable;
. Function as a liaison with the Fund's outside auditors and
arrange for audits;
. Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the Fund's
structure or operations;
. Prepare and file forms with the Internal Revenue Service
. Form 8613
. Form 1120-RIC
. Board Members' and Shareholders' 1099s
. Mailings in connection with Section 852 and related
regulations.
<PAGE>
Legal and Regulatory Services. The legal and regulatory services made available
- -----------------------------
to the Fund fall within four main areas: SEC and Public Disclosure Assistance;
Corporate and Secretarial Services; Compliance Services; and Blue Sky
Registration. The following is a summary of the legal and regulatory services
available to the Fund:
SEC and Public Disclosure Assistance
. File annual amendments to the Fund's registration statements,
including updating the prospectus and statement of additional
information where applicable;
. File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
. Prepare and file proxy statements;
. Review marketing material for SEC and NASD clearance;
. Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
. Provide an Assistant Secretary for the Fund;
. Maintain general corporate calendar;
. Prepare agenda and background materials for Fund board meetings,
make presentations where appropriate, prepare minutes and follow-
up matters raised at Board meetings;
. Organize, attend and keep minutes of shareholder meetings;
. Maintain Articles of Incorporation and By-Laws of the Fund.
Legal Consultation and Business Planning
. Provide general legal advice on matters relating to portfolio
management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
. Maintain continuing awareness of significant emerging regulatory
and legislative developments which may affect the Fund, update
the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or
appropriate;
. Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
<PAGE>
. Manage Fund litigation matters and assume full responsibility for
the handling of routine Fund examinations and investigations by
regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and performing on-going testing
of the Fund's portfolio to assist the Fund's investment adviser in complying
with prospectus guidelines and limitations, 1940 Act requirements and Internal
Revenue Code requirements. The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
<PAGE>
EXHIBIT 99(h)(3)
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of this [ ] day of December, 1998,
between Centurion Funds, Inc. (the "Fund"), a Maryland corporation, and Salomon
Smith Barney Inc., a Delaware corporation (the "Consultant"), acting through its
Consulting Services Division.
R E C I T A L S:
---------------
WHEREAS, the Company is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Company is currently comprised of four series, the
Centurion U.S. Equity Fund, Centurion International Equity Fund, Centurion U.S.
Protection Fund and Centurion International Protection Fund (collectively, the
"Funds"); and
WHEREAS, the Company, on behalf of each Fund, wishes to obtain certain
services of the Consultant as more particularly described below, and the
Consultant is willing to provide such services on the terms and for the
consideration set forth below; and
WHEREAS, the Company and the Consultant intend for the consulting
services to be provided under this Agreement to be limited such that the
Consultant will not be treated as an "investment adviser" of the Company or any
Fund under the 1940 Act.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, it is hereby agreed as follows:
SECTION 1. Appointment. The Company hereby appoints the Consultant
-----------
and the Consultant hereby agrees to serve the Company in the capacity described
herein and for the compensation set forth below.
SECTION 2. Services.
--------
(a) For the period and on the terms and conditions of this Agreement,
the Consultant agrees to provide the Company, at such reasonable times as the
latter may request, with (i) certain statistical and other factual information,
and (ii) advice regarding economic factors and trends (the "Consulting
Services"). The Company shall not request and the Consultant shall not provide
any advice or make any recommendations regarding the purchase or sale of
securities on behalf of the Funds, or provide any other services to the Company,
that would cause the Consultant to be an "investment adviser" within the
<PAGE>
meaning of that term not entitled to rely on exclusions from the term, as used
in the 1940 Act.
(b) The Consultant shall perform faithfully and efficiently to the
best of its ability the responsibilities and duties assigned to it under this
Agreement to the satisfaction of the Company and shall in all respects conform
to and comply with the directions and instructions given to it by the Company.
SECTION 3. Relationship; Authority.
-----------------------
(a) The Consultant shall be an independent contractor and not an
employee, officer or agent of the Company within the meaning of all applicable
federal, state and local laws and regulations.
(b) The Consultant shall have no authority or discretion whatsoever to
make commitments or enter into contracts on behalf of, bind or otherwise
obligate the Company, its employees, officers or agents in any manner
whatsoever.
SECTION 4. Fees.
----
(a) In consideration for and as compensation for all Consulting
Services provided under this Agreement, the Company agrees to pay the Consultant
a quarterly fee at an annual rate equal to .05% of the average daily nets assets
of each Fund ("Consulting Fee").
(b) The Consultant shall be reimbursed for reasonable out-of-pocket
expenses incurred related to the Consultant's attendance at meetings requested
by the Company's Board of Directors ("Consulting Expenses"); provided, however,
that such expenses shall not exceed $1,000 per month without the prior written
approval of an officer of the Company. Expenses shall be reimbursed within
thirty (30) days following receipt by the Company of expense reports with
accompanying supporting documentation in detail reasonably acceptable to the
Company.
(c) Except as expressly provided herein, the Consultant shall not be
entitled to receive any other compensation or benefits from the Company. The
Company may withhold from any amounts payable to the Consultant under this
Agreement such federal, state or local taxes or other amounts as shall be
required to be withheld pursuant to any applicable law or regulation.
SECTION 5. Confidential Information. Each party hereto agrees to
------------------------
hold in a fiduciary capacity for the benefit of the other and not to disclose to
third parties, other than as expressly authorized in order to perform this
Agreement or as required by law or judicial process, all confidential
information, knowledge or data which it or any of its affiliates obtained during
the term of this Agreement and which is not
2
<PAGE>
public knowledge or which becomes public knowledge solely by its actions in
violation of this Agreement. After termination of this Agreement, neither party
shall, without the prior written consent of the other, communicate or divulge
any such confidential information, knowledge or data to anyone other than the
other party and those designated by the other party.
SECTION 6. Right to Engage in Other Activities. The Consulting
-----------------------------------
Services provided by the Consultant under this Agreement are not exclusive. The
Company understands that the Consultant may act in the future in a similar
capacity with other investment companies, entities or individuals, and the
Company has no objection to the Consultant so acting. The Company understands
that the persons employed by the Consultant to assist in the performance of the
Consulting Services hereunder will not devote their full time to such service
and nothing contained herein shall be deemed to limit or restrict the right of
the Consultant or any of its affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
SECTION 7. Term.
----
(a) Either party may terminate this Agreement at any time and for any
reason by giving not less than thirty (30) calendar days' written notice to the
other party.
(b) Any termination of this Agreement in accordance with the
provisions hereunder shall be without penalty or liability to the other party,
and neither party shall have any further obligations under this Agreement
thereafter, except: (i) the Company shall pay the Consultant any unpaid
Consulting Fee earned and accrued through the date of termination; (ii) the
Company shall reimburse the Consultant for reasonable Consulting Expenses
incurred prior to the date of termination; and (iii) as otherwise provided in
Section 5 of this Agreement.
(c) The Consultant shall not be entitled to any other payments upon
termination of this Agreement.
SECTION 8. Representations and Warranties. Each party hereto
------------------------------
represents and warrants to the other that:
(a) It is duly organized, validly existing and in good standing under
the laws of its state of organization and has full power and authority to enter
into this Agreement;
(b) It will not, by entering into this Agreement, breach or cause to
be breached any undertaking, agreement, contract, statute, rule or regulation to
which it is a party or by which it is bound; and
3
<PAGE>
(c) This Agreement has been duly and validly authorized, executed and
delivered and is a valid and binding agreement enforceable in accordance with
its terms.
SECTION 9. Disputes; Arbitration.
---------------------
(a) The parties shall use their best efforts to resolve any disputes
between them within a thirty (30) day period, and with respect to any disputed
amount of payment due hereunder, payment in full of such amount within ninety
(90) days shall be deemed to satisfactorily resolve such dispute.
(b) The parties hereto expressly agree that arbitration shall be the
sole and exclusive means of determining any controversy or question arising
under this Agreement which shall not have been determined to the satisfaction of
the party (or his legal representatives) considering arbitration. Such
arbitration shall be conducted in Phoenix, Arizona pursuant to the rules of the
American Arbitration Association ("AAA") before a panel of at least three (3)
arbitrators. Each party shall select one arbitrator and the two arbitrators so
selected shall select the third arbitrator; provided that if the two arbitrators
so selected are unable to agree on the third arbitrator within fifteen (15)
calendar days after the date of their appointment, the third arbitrator shall be
selected by the AAA in accordance with its rules. The written decision of a
majority of said arbitrators shall be binding, final and conclusive upon the
parties, and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction, upon application of any party thereto.
SECTION 10. Miscellaneous.
-------------
(a) This Agreement constitutes the entire agreement between the
parties pertaining to the subject matter hereof, and no representation, promise,
inducement or statement of intention relating to the relationship contemplated
by this Agreement has been made by either party which is not set forth in this
Agreement.
(b) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same agreement.
(c) This Agreement may not be assigned, transferred, sold or in any
manner hypothecated or pledged by either party without the written consent of
the other party.
(d) This Agreement, including any exhibits that may be attached
hereto, may be amended, superseded, canceled, renewed or extended, and the terms
hereof may be waived, only by a written instrument signed by the parties or, in
the case of a waiver, by the party waiving compliance.
4
<PAGE>
(e) In the event that any term or condition contained in this
Agreement shall for any reason be held by a court of competent jurisdiction to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other term or condition of this
Agreement, but this Agreement shall be construed as if such invalid or illegal
or unenforceable term or condition had never been contained herein.
(f) All notices, demands, requests or other communications required or
permitted under this Agreement shall be in writing and delivered personally,
sent by facsimile transmission or sent by registered, certified or express mail,
postage prepaid, to the addresses below or to such other addresses as may be
designated by the party entitled to receive the same by notice similarly given:
If to the Company:
CENTURION FUNDS, INC.
2425 East Camelback Road, Suite 530
Phoenix, Arizona 85016-4228
Attention: Gerard P. Dipoto, Jr.
If to the Consultant:
SALOMON SMITH BARNEY INC.
71 Monroe Avenue
Pittsford, New York 14534
Attention: Jennifer D. Hartman
(g) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Arizona without giving effect to the
conflicts of laws principles thereof. In interpreting the provisions of this
Agreement, no presumption shall attach against the party responsible for
preparing and drafting this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the day and year first above written.
CENTURION FUNDS, INC.
By: _____________________________
Name: Gerard P. Dipoto, Jr.
Title: President
SALOMON SMITH BARNEY INC.
By: _____________________________
Name: Jennifer D. Hartman
Title: Vice President
6
<PAGE>
EXHIBIT 99(i)(1)
November 30, 1998
Centurion Funds, Inc.
2425 East Camelback Road, Suite 530
Phoenix, Arizona 85016-4228
Ladies and Gentlemen:
We have acted as counsel to Centurion Funds, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland, in connection with the
preparation of a registration statement on Form N-1A covering the offer and sale
of an indefinite number of shares of Common Stock of the Fund (the "Common
Stock"), one hundred million to be designated a series called "Centurion U.S.
Equity Fund," one hundred million to be designated a series called "Centurion
International Equity Fund," one hundred and fifty million to be designated a
series called "Centurion U.S. Contra Fund," and one hundred and fifty million to
be designated a series called "Centurion International Contra Fund," par value
$.001 per share (collectively, the "Shares").
We have examined copies of the Charter and By-Laws of the Fund, the Fund's
Prospectus and Statement of Additional Information included in its Registration
Statement on Form N-1A, Securities Act File No. 333-61973 and Investment Company
Act File No. 811-8977 (the "Registration Statement"), consents of the Board and
other records, documents and papers that we have deemed necessary for the
purpose of this opinion. We have also examined such other statutes and
authorities as we have deemed necessary to form a basis for the opinion
hereinafter expressed.
In our examination of the above material, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us. As to various questions of fact material to our opinion, we have relied
upon statements and certificates of officers and representatives of the Fund and
others.
<PAGE>
Centurion Funds, Inc.
November 30, 1998
Page 2
Based upon the foregoing, we are of the opinion that:
1. The Fund is duly organized and validly existing as a corporation in
good standing under the laws of the State of Maryland.
2. 10,000 shares of Common Stock of the Fund have been duly authorized
for sale to Centurion Trust Company, representing 9,997 Shares of the
Centurion U.S. Equity Fund, 1 Share of the Centurion International
Equity Fund, 1 Share of the Centurion U.S. Contra Fund and 1 Share of
the Centurion International Contra Fund and when paid for will be
validly issued, fully paid and nonassessable.
3. The Shares of the Fund to be offered for sale pursuant to the
Registration Statement are, to the extent of the number of Shares
authorized to be issued by the Fund in its Charter, duly authorized
and, when sold, issued and paid for as contemplated by the
Registration Statement, will have been validly and legally issued and
will be fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to us in the Fund's Prospectus and
Statement of Additional Information and to the filing of this opinion as an
exhibit to any application made by or on behalf of the Fund or any distributor
or dealer in connection with the registration or qualification of the Fund or
the Shares under the securities laws of any state or other jurisdiction.
We are members of the Bar of the State of New York only and do not opine as to
the laws of any jurisdiction other than the laws of the State of New York and
the laws of the United States, and the opinions set forth above are,
accordingly, limited to the laws of those jurisdictions. As to matters
involving the application of the laws of the State of Maryland, we have relied
on the opinion of Messrs. Venable, Baetjer and Howard, LLP.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
EXHIBIT 99(i)(2)
November 30, 1998
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
RE: CENTURION FUNDS, INC.
---------------------
Ladies and Gentlemen:
We have acted as special Maryland counsel for Centurion Funds, Inc., a
Maryland corporation (the "Fund"), in connection with the organization of the
Fund and the issuance of shares of its common stock, par value $.001 per share,
including the Centurion U. S. Equity Fund Shares, the Centurion International
Equity Fund Shares, the Centurion U.S. Contra Fund Shares and the Centurion
International Contra Fund Shares.
As special Maryland counsel for the Fund, we are familiar with its
Charter and Bylaws. We have examined its Registration Statement on Form N-1A
Securities Act File No. 333-61973 and Investment Company Act File No 811-8977,
including the prospectus and statement of additional information contained
therein, substantially in the form in which it is to become effective (the
"Registration Statement"). We have also examined and relied upon a certificate
of the Maryland State Department of Assessments and Taxation to the effect that
the Fund is duly incorporated and existing under the laws of the State of
Maryland and is in good standing and duly authorized to transact business in the
State of Maryland
We have also examined and relied upon such corporate records of the
Fund and other documents and certificates with respect to factual matters as we
have deemed necessary to render the opinion expressed herein. We have assumed,
without independent verification, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
with originals of all documents submitted to us as copies
Based on such examination, we are of the opinion and so advise you
that:
1. The Fund is a corporation duly organized and validly existing in
good standing under the laws of the State of Maryland.
<PAGE>
Willkie Farr & Gallagher
November 30, 1998
Page 2
2. 9,997 shares of Centurion U.S. Equity Fund, 1 share of
Centurion International Equity Fund, 1 share of
Centurion U.S. Contra Fund and 1 share of Centurion
International Contra Fund have been duly authorized for
sale to Centurion Trust Company and when paid for will
be validly issued, fully paid and nonassessable.
3. The Centurion U.S. Equity Fund shares, the Centurion
International Equity Fund shares, the Centurion U.S.
Contra Fund shares and the Centurion International
Contra Fund shares to be offered for sale pursuant to
the Registration Statement are, to the extent of the
number of shares authorized to be issued by the Fund in
its Charter, duly authorized and, when sold, issued and
paid for as contemplated by the Registration Statement,
will have been validly and legally issued and will be
fully paid and nonassessable.
This letter expresses our opinion with respect to the Maryland
General Corporation Law governing matters such as due organization and the
authorization and issuance of stock. It does not extend to the securities or
"blue sky" laws of Maryland, to federal securities laws or to other laws.
You may rely upon our foregoing opinion in rendering your
opinion to the Fund that is to be filed as an exhibit to the Registration
Statement. We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
<PAGE>
EXHIBIT 99(j)
INDEPENDENT AUDITORS' CONSENT
To the Shareholders and Board of Directors of
Centurion Funds, Inc.:
We consent to the use of our reports dated November 19, 1998, with respect to
the Funds listed below of Centurion Funds, Inc., included herein and to the
reference to our firm under the heading "Independent Accountant" in the
Statement of Additional Information.
Fund
- ----
Centurion International Equity Fund
Centurion U.S. Equity Fund
Centurion U.S. Contra Fund
Centurion International Contra Fund
KPMG Peat Marwick LLP
New York, New York
November 30, 1998
<PAGE>
EXHIBIT 99(l)
CENTURION FUNDS, INC.
---------------------
PURCHASE AGREEMENT
------------------
Centurion Funds, Inc. (the "Fund"), a corporation formed under the
laws of the State of Maryland and Centurion Trust Company ("Centurion Trust"), a
trust company organized under the laws of the State of Arizona, agree as
follows:
1. Offer and Purchase. The Fund offers Centurion Trust and
------------------
Centurion Trust purchases 10,000 shares of the Fund's authorized shares of
beneficial interest, $.001 par value per share (the "Shares") representing 9,997
Shares of the Centurion U.S. Equity Fund, 1 Share of the Centurion International
Equity Fund, 1 Share of the Centurion U.S. Contra Fund and 1 Share of the
Centurion International Contra Fund at a price of $10 per Share (the "Initial
Shares"). Each of these four Portfolios is an existing series of the Fund.
Centurion Trust acknowledges receipt of certificates representing the Initial
Shares and the Fund acknowledges receipt from Centurion Trust of $100,000.00 in
full payment for the Initial Shares.
2. Representation by Centurion Trust. Centurion Trust represents
---------------------------------
and warrants to the Fund that the Initial Shares are being acquired for
investment purposes and not with a view to resale or further distribution.
3. Redemption of Shares by Centurion Trust. Centurion Trust agrees
---------------------------------------
that if it redeems the Initial Shares the redemption proceeds will be reduced by
the amount of unamortized organizational expenses, in the same proportion as the
Initial Shares being redeemed bears to the Initial Shares outstanding at the
time of redemption. The parties acknowledge that any Shares acquired by
Centurion Trust other than the Initial Shares have not been acquired to fulfill
the requirements of Section 14 of the Investment Company Act of 1940, as
amended, and, if redeemed, their redemption proceeds will not be subject to
reduction based on the unamortized organizational expenses of the Fund.
4. No Right of Assignment. Centurion Trust's right under this
----------------------
Purchase Agreement to purchase the Initial Shares is not assignable.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the 24th day of November, 1998.
CENTURION FUNDS, INC.
By:
-----------------------------
Name:
Title:
CENTURION TRUST COMPANY
By:
-----------------------------
Name:
Title:
