<PAGE> 1
Registration Nos. 33-75926
811-8384
As filed with the Securities and Exchange Commission November 25, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 9 X
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 X
(Check appropriate box or boxes)
CENTURA FUNDS, INC.
(Exact name of Registrant as specified in charter)
3435 Stelzer Road
Columbus, Ohio 43219
------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 1-(800)442-3688
-------------------------------------------------
George O. Martinez, Esq.
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
-------------------------------
(Name and Address of Agent for Service)
with a copy to:
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
It is proposed that this filing will become effective: (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
____ on (date) pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____ on (date) pursuant to paragraph (a)(2) of rule 485
Registrant has registered an indefinite number of shares of its Common Stock
under the Securities Act of 1933 pursuant to the provisions of Rule 24f-2 under
the Investment Company Act of 1940. Registrant filed a Rule 24f-2 Notice for its
fiscal year ended April 30, 1997 with the Securities and Exchange Commission on
June 30, 1997.
<PAGE> 2
CENTURA FUNDS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 495 under the Securities Act of 1933
<TABLE>
<CAPTION>
N-1A Item No. Location
- ------------- --------
<S> <C>
Part A Prospectus Caption
Item 1. Cover Page
Item 2. Highlights
Item 3. N/A
Item 4. The Funds; Description of Securities and Investment
Practices; Investment Restrictions
Item 5. Management of the Funds; Portfolio Transactions
Item 5A N/A
Item 6. Other Information; Dividends, Distributions and
Federal Income Taxation
Item 7. Fund Share Valuation; Purchase of Fund Shares;
Management of the Funds
Item 8. Redemption of Fund Shares
Item 9. N/A
Part B Heading in Statement of Additional Information
Item 10. Cover Page
Item 11. Table of Contents
Item 12. N/A
Item 13. Investment Policies
Item 14. Management
Item 15. Other Information
Item 16. Management
Item 17. Portfolio Transactions
Item 18. Other Information
Item 19. Purchase of Fund Shares; Redemption of Fund Shares
Item 20. Taxation
Item 21. Management
Item 22. Other Information
Item 23. Financial Statements
Part C
</TABLE>
<PAGE> 3
PRELIMINARY NOTE
The Registrant's Prospectuses for Class A and Class B Shares and Class C Shares,
each dated August 28, 1997, to which the interim financial statements contained
herein are added by Post-Effective Amendment No. 9, are incorporated by
reference to the Registrant's filing of definitive copies under Rule 497(c).
<PAGE> 4
CENTURA FUNDS, INC.
SUPPLEMENT DATED NOVEMBER 25, 1997
TO THE CLASS A SHARES AND CLASS B PROSPECTUS DATED AUGUST 28, 1997
The following table of "Financial Highlights (unaudited)" for a share of the
Centura Southeast Equity Fund, a portfolio of Centura Funds, Inc., outstanding
through the period ended October 31, 1997 sets forth certain information
regarding the investment operations of the Centura Southeast Equity Fund for the
period presented. In addition, performance information is updated for each of
the Centura Southeast Equity Fund, the Centura Equity Income Fund, the Centura
Equity Growth Fund, the Centura North Carolina Tax-Free Fund and the Centura
Federal Securities Fund through the month ended October 31, 1997.
This Supplement is provided to update, and should be read in conjunction with,
the information provided in the Prospectus.
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
SOUTHEAST EQUITY FUND
Period ended
October 31, 1997(a)
Class A Class B
------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................... $10.00 $10.00
INVESTMENT ACTIVITIES
Net investment income............................................... 0.04 -0.01
Net realized and unrealized gains from investments.................. 3.58 3.57
---- ----
Total from Investment Activities.................................... 3.62 3.56
DISTRIBUTIONS
Net investment income............................................... -0.04 -0.02
Total Distributions................................................. -0.04 -0.02
----- -----
NET ASSET VALUE, END OF PERIOD......................................... $13.58 $13.54
====== ======
Total return (excludes sales and redemption charges)(d)................ 36.20% 35.58%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)................................... $1,504 $2,365
Ratio of expenses to average net assets(b).......................... 1.30% 2.04%
Ratio of net investment income (loss) to average net assets(b)...... 0.53% -0.20%
Ratio of expenses to average net assets*(b)......................... 1.78% 2.28%
Ratio of net investment income (loss) to average net assets*(b)..... 0.05% -0.44%
Portfolio Turnover..................................................... 36% 36%
Average Commission Rate Paid(e)........................................ $0.0772 $0.0772
</TABLE>
- ----------------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from May 1, 1997 (commencement of operations) to
October 31, 1997.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Not annualized.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased
and sold by the Fund for which commissions were charged.
<PAGE> 5
<TABLE>
<CAPTION>
TOTAL RETURN SUMMARY THE CENTURA FUNDS (A CLASS)
NO LOAD TOTAL RETURN: Aggregate PERIOD ENDED OCTOBER 31, 1997
Inception Returns Since Average Annual Returns
Fund Date* Ytd Qrtly Inception 1 Year 3 Year 5 Year 10 Year
- ---- ----- --- ----- --------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Southeast Equity Fund........... 12/31/90 29.77% 7.03% 22.80% 39.97% 22.87% 20.91% N/A
The Centura Equity Income Fund.............. 12/31/90 20.31% 1.49% -1.71% 16.16% 22.65% 16.94% N/A
The Centura Equity Growth Fund.............. 12/31/90 20.71% -1.63% 19.14% 32.44% 25.86% 18.49% N/A
The Centura North Carolina Tax-Free
Bond Fund................................ 01/31/91 5.94% 0.39% 5.23% 7.33% 6.99% 5.03% N/A
The Centura Federal Securities Fund......... 12/31/90 5.91% 1.77% 6.28% 6.44% 6.98% 5.31% N/A
SUBJECT TO SALES LOAD: Aggregate
Inception Returns Since Average Annual Returns
Fund Date* Ytd Qrtly Inception 1 Year 3 Year 5 Year 10 Year
- ---- ----- --- ----- --------- ------ ------ ------ -------
The Centura Southeast Equity Fund........... 12/31/90 23.93% 2.21% 21.97% 33.66% 20.99% 19.80% N/A
The Centura Equity Income Fund.............. 12/31/90 14.93% -3.09% 15.39% 20.82% 20.80% 15.85% N/A
The Centura Equity Growth Fund.............. 12/31/90 15.29% -6.05% 18.36% 26.51% 23.96% 17.40% N/A
The Centura North Carolina Tax-Free
Bond Fund................................ 01/31/91 2.94% -2.34% 4.79% 4.34% 6.02% 4.44% N/A
The Centura Federal Securities Fund......... 12/31/90 3.04% -1.06% 5.85% 3.47% 5.99% 4.73% N/A
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN SUMMARY THE CENTURA FUNDS (B CLASS)
NO CDSC TOTAL RETURN: Aggregate PERIOD ENDED OCTOBER 31, 1997
Inception Returns Since Average Annual Returns
Fund Date* Ytd Qrtly Inception 1 Year 3 Year 5 Year 10 Year
- ---- ----- --- ------ --------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Southeast Equity Fund........... 12/31/90 28.81% 6.70% 21.87% 38.77% 21.91% 19.98% N/A
The Centura Equity Income Fund.............. 12/31/90 19.53% 1.32% 15.29% 25.56% 21.72% 16.06% N/A
The Centura Equity Growth Fund.............. 12/31/90 20.01% -1.80% 18.33% 31.52% 25.00% 17.71% N/A
The Centura North Carolina Tax-Free
Bond Fund................................ 01/31/91 5.60% 0.26% 4.53% 6.79% 6.30% 4.35% N/A
The Centura Federal Securities Fund......... 12/31/90 5.38% 1.54% 5.52% 5.82% 6.25% 4.57% N/A
CDSC TOTAL RETURN: Aggregate
Inception Returns Since Average Annual Returns
Fund Date* Ytd Qrtly Inception 1 Year 3 Year 5 Year 10 Year
- ---- ----- --- ----- --------- ------ ------ ------ -------
The Centura Southeast Equity Fund........... 12/31/90 23.81% 1.70% 21.87% 33.77% 21.23% 19.88% N/A
The Centura Equity Income Fund.............. 12/31/90 14.53% -3.68% 15.29% 20.56% 21.04% 15.95% N/A
The Centura Equity Growth Fund.............. 12/31/90 15.01% -6.71% 18.33% 26.52% 24.36% 17.61% N/A
The Centura North Carolina Tax-Free
Bond Fund................................ 01/31/91 2.60% -2.72% 4.53% 3.79% 5.41% 4.18% N/A
The Centura Federal Securities Fund......... 12/31/90 2.38% -1.46% 5.52% 2.82% 5.36% 4.40% N/A
</TABLE>
* The quoted performance of the Southeast Equity Fund, the Equity Income
Fund, the Equity Growth Fund, the North Carolina Tax-Free Bond Fund, the
Federal Securities Income Fund, includes performance of certain collective
trust fund accounts advised by Centura Bank, for periods dating back to
December 31, 1990, December 31, 1990, January 31, 1991, December 31, 1990,
respectively, and prior to the mutual funds commencement of operations on
May 1, 1997, October 1, 1996, June 1, 1994, June 1, 1994, respectively, as
adjusted to reflect the expenses associated with the Centura Funds. The
commingled accounts were not registered with the Securities and Exchange
Commission and, therefore, were not subject to the investment restrictions
imposed by law on registered mutual funds. If the commingled accounts had
been registered, the commingled accounts' performance may have been
adversely affected.
<PAGE> 6
CENTURA FUNDS, INC.
SUPPLEMENT DATED NOVEMBER 25, 1997
TO THE CLASS C SHARES PROSPECTUS DATED AUGUST 28, 1997
The following table of "Financial Highlights (unaudited)" for a share of the
Centura Southeast Equity Fund, a portfolio of Centura Funds, Inc., outstanding
through the period ended October 31, 1997 below sets forth certain information
regarding the investment operations of the Centura Southeast Equity Fund for the
period presented. In addition, performance information is updated for each of
the Centura Southeast Equity Fund, the Centura Equity Income Fund, the Centura
Equity Growth Fund, the Centura North Carolina Tax-Free Fund and the Centura
Federal Securities Fund through the month ended October 31, 1997.
This Supplement is provided to update, and should be read in conjunction with,
the information provided in the Prospectus.
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
SOUTHEAST EQUITY FUND
Period ended
October 31, 1997(a)
Class A Class B Class C
------- ------- ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $10.00 $10.00 $10.00
INVESTMENT ACTIVITIES
Net investment income.......................................... 0.04 -0.01 0.05
Net realized and unrealized gains from investments............. 3.58 3.57 3.57
---- ---- ----
Total from Investment Activities............................... 3.62 3.56 3.62
DISTRIBUTIONS
Net investment income.......................................... -0.04 -0.02 -0.05
Total Distributions............................................ -0.04 -0.02 -0.05
----- ----- -----
NET ASSET VALUE, END OF PERIOD.................................... $13.58 $13.54 $13.57
====== ====== ======
Total return (excludes sales and redemption charges)(d)........... 36.20% 35.58% 36.23%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000).............................. $1,504 $2,365 $24,160
Ratio of expenses to average net assets(b)..................... 1.30% 2.04% 1.03%
Ratio of net investment income (loss) to average net assets(b). 0.53% -0.20% 0.81%
Ratio of expenses to average net assets*(b).................... 1.78% 2.28% 1.31%
Ratio of net investment income (loss) to average net assets*(b) 0.05% -0.44% 0.53%
Portfolio Turnover................................................ 36% 36% 36%
Average Commission Rate Paid(e)................................... $0.0772 $0.0772 $0.0772
</TABLE>
- ----------------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(a) For the period from May 1, 1997 (commencement of operations) to October
31, 1997.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Not annualized.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased
and sold by the Fund for which commissions were charged.
<PAGE> 7
<TABLE>
<CAPTION>
TOTAL RETURN SUMMARY
NO LOAD TOTAL RETURN: THE CENTURA FUNDS (C CLASS) PERIOD ENDED OCTOBER 31, 1997
Aggregate Average Annual Returns
Inception Returns Since
Fund Date* Ytd Qrtly Inception 1 Year 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Southeast Equity Fund........... 12/31/90 29.92% 6.93% 23.09% 40.20% 23.14% 21.19% N/A
The Centura Equity Income Fund.............. 12/31/90 20.56% 1.63% 16.43% 26.85% 22.92% 17.21% N/A
The Centura Equity Growth Fund.............. 12/31/90 21.07% -1.53% 19.41% 32.90% 26.15% 18.76% N/A
The Centura North Carolina Tax-Free
Bond Fund................................ 01/31/91 6.15 % 0.45% 5.50% 7.59% 7.26% 5.30% N/A
The Centura Federal Securities Fund......... 12/31/90 6.03 % 1.83% 6.55% 6.71% 7.25% 5.57% N/A
</TABLE>
* The quoted performance of the Southeast Equity, Equity Income, Equity
Growth, North Carolina Tax-Free, Federal Securities Income, includes
performance of certain collective trust fund accounts advised by Centura
Bank, for periods dating back to December 31, 1990, December 31, 1990,
January 31, 1991, December 31, 1990, respectively, and prior to the mutual
funds commencement of operations on May 1, 1997, October 1, 1996, June 1,
1994, June 1, 1994, respectively, as adjusted to reflect the expenses
associated with the Centura Funds. The commingled accounts were not
registered with the Securities and Exchange Commission and, therefore,
were not subject to the investment restrictions imposed by law on
registered mutual funds. If the commingled accounts had been registered,
the commingled accounts' performance may have been adversely affected.
<PAGE> 8
CENTURA FUNDS, INC.
(the "Company")
3435 Stelzer Road
Columbus, Ohio 43218
General and Account Information: (800) 442-3688
Centura Bank
Investment Adviser
BISYS Fund Services
Administrator and Sponsor
Centura Funds Distributor, Inc. --
Distributor
STATEMENT OF ADDITIONAL INFORMATION
Class A Shares and Class B Shares
This Statement of Additional Information ("SAI") describes the five funds
(the "Funds") advised by Centura Bank (the "Adviser"). The Funds are:
-- Centura Equity Growth Fund
-- Centura Equity Income Fund
-- Centura Southeast Equity Fund
-- Centura Federal Securities Income Fund
-- Centura North Carolina Tax-Free Bond Fund
Each Fund has distinct investment objectives and policies. Shares of the
Funds are sold to the public by the Distributor as an investment vehicle for
individuals, institutions, corporations and fiduciaries, including customers of
the Adviser or its affiliates.
The Company is offering an indefinite number of shares of each class of each
Fund. In addition to Class A shares and Class B shares, each Fund also offers
Class C shares, available only to accounts managed by the Adviser's Trust
Department, and non-profit institutions with a minimum investment in the Funds
of at least $100,000. Class C shares have no front-end sales charge or
contingent deferred sales charge. See "Other Information -- Capitalization" in
the prospectus.
This SAI is not a prospectus and is authorized for distribution only when
preceded or accompanied by the prospectus for the Funds dated August 28, 1997
(the "Prospectus"). This SAI contains additional and more detailed information
than that set forth in the Prospectus and should be read in conjunction with the
Prospectus. The Prospectus may be obtained without charge by writing or calling
the Funds at the address and information numbers printed above.
August 28, 1997
Supplemented November 25, 1997
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INVESTMENT POLICIES....................................................................................... 1
Bank Obligations.......................................................................................... 1
Commercial Paper.......................................................................................... 1
Convertible Securities.................................................................................... 1
Corporate Debt Securities................................................................................. 1
Repurchase Agreements..................................................................................... 1
Variable and Floating Rate Demand and Master Demand Notes................................................. 2
Loans of Portfolio Securities............................................................................. 2
Foreign Securities........................................................................................ 2
Forward Foreign Currency Exchange Contracts............................................................... 3
Interest Rate Futures Contracts........................................................................... 3
Stock Index Futures Contracts............................................................................. 3
Option Writing and Purchasing............................................................................. 4
Options on Futures Contracts.............................................................................. 5
Risks of Futures and Options Investments.................................................................. 5
Limitations on Futures Contracts and Options on Futures Contracts......................................... 5
North Carolina Municipal Obligations...................................................................... 6
Municipal Lease Obligations............................................................................... 6
Securities of Other Investment Companies.................................................................. 6
INVESTMENT RESTRICTIONS................................................................................... 7
MANAGEMENT................................................................................................ 9
Directors and Officers.................................................................................... 9
Distribution of Fund Shares............................................................................... 15
Administrative Services................................................................................... 16
Service Organizations..................................................................................... 17
DETERMINATION OF NET ASSET VALUE.......................................................................... 18
PORTFOLIO TRANSACTIONS.................................................................................... 18
Portfolio Turnover........................................................................................ 19
TAXATION ................................................................................................. 20
Centura North Carolina Tax-Free Bond Fund................................................................. 24
OTHER INFORMATION......................................................................................... 25
Capitalization............................................................................................ 25
Voting Rights............................................................................................. 26
Custodian, Transfer Agent and Dividend Disbursing Agent................................................... 27
Independent Accountants................................................................................... 28
Counsel................................................................................................... 28
Registration Statement.................................................................................... 29
Financial Statements...................................................................................... 29
</TABLE>
-ii-
<PAGE> 10
INVESTMENT POLICIES
The Prospectus discusses the investment objectives of the Funds and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and portfolio
strategies that the Funds may utilize, and certain risks attendant to such
investments, policies and strategies.
Bank Obligations (All Funds). These obligations include negotiable
certificates of deposit and bankers' acceptances. A description of the banks the
obligations of which the Funds may purchase are set forth in the Prospectus. A
certificate of deposit is a short-term, interest-bearing negotiable certificate
issued by a commercial bank against funds deposited in the bank. A bankers'
acceptance is a short-term draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction. The borrower
is liable for payment as is the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date.
Commercial Paper (All Funds). Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions and similar taxable instruments issued by government
agencies and instrumentalities. All commercial paper purchased by a Fund must
meet the minimum rating criteria for that Fund.
Convertible Securities (Centura Equity Growth Fund Centura Equity Income Fund
and Centura Southeast Equity Fund). Convertible securities give the holder the
right to exchange the security for a specific number of shares of common stock.
Convertible securities include convertible preferred stocks, convertible bonds,
notes and debentures, and other securities. Convertible securities typically
involve less credit risk than common stock of the same issuer because
convertible securities are "senior" to common stock -- i.e., they have a prior
claim against the issuer's assets. Convertible securities generally pay lower
dividends or interest than non-convertible securities of similar quality. They
may also reflect changes in the value of the underlying common stock.
Corporate Debt Securities (All Funds). Fund investments in these securities
are limited to corporate debt securities (corporate bonds, debentures, notes and
similar corporate debt instruments) which meet the rating criteria established
for each Fund.
After purchase by a Fund, a security may cease to be rated or its rating may
be reduced below the minimum required for purchase by the Fund. Neither event
will require a sale of such security by the Fund. However, the Adviser will
consider such event in its determination of whether the Fund should continue to
hold the security. To the extent the ratings given by Moody's Investors Service,
Inc. ("Moody's"), Standard & Poor's Corporation ("S&P") or another rating agency
may change as a result of changes in such organizations or their rating systems,
the Funds will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus and in this
SAI.
Repurchase Agreements (All Funds). The Funds may invest in securities subject
to repurchase agreements with U.S. banks or broker-dealers. Such agreements may
be considered to be loans by the Funds for purposes of the Investment Company
Act of 1940, as amended (the "1940 Act"). A repurchase agreement is a
transaction in which the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an
agreed-upon interest rate effective for the period the buyer owns the security
subject to repurchase. The agreed-upon rate is unrelated to the interest rate on
that security. The Adviser will monitor the value of the underlying security at
the time the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. In the event of default by the seller under the
repurchase agreement, the Funds may have problems in exercising their rights to
the underlying securities and may incur costs and
1
<PAGE> 11
experience time delays in connection with the disposition of such securities.
Variable and Floating Rate Demand and Master Demand Notes (All Funds). The
Funds may, from time to time, buy variable rate demand notes issued by
corporations, bank holding companies and financial institutions and similar
taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity in the 5 to
20 year range but carry with them the right of the holder to put the securities
to a remarketing agent or other entity on short notice, typically seven days or
less. The obligation of the issuer of the put to repurchase the securities is
backed up by a letter of credit or other obligation issued by a financial
institution. The purchase price is ordinarily par plus accrued and unpaid
interest. Ordinarily, the remarketing agent will adjust the interest rate every
seven days (or at other intervals corresponding to the notice period for the
put), in order to maintain the interest rate at the prevailing rate for
securities with a seven-day maturity.
The Funds may also buy variable rate master demand notes. The terms of these
obligations permit the investment of fluctuating amounts by the Funds at varying
rates of interest pursuant to direct arrangements between a Fund, as lender, and
the borrower. They permit weekly, and in some instances, daily, changes in the
amounts borrowed. The Funds have the right to increase the amount under the note
at any time up to the full amount provided by the note agreement, or to decrease
the amount, and the borrower may prepay up to the full amount of the note
without penalty. The notes may or may not be backed by bank letters of credit.
Because the notes are direct lending arrangements between the lender and the
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. The Funds have no limitations on the type of issuer from
whom the notes will be purchased. However, in connection with such purchase and
on an ongoing basis, the Adviser will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
make demand simultaneously. While master demand notes, as such, are not
typically rated by credit rating agencies, if not so rated, the Funds may, under
their minimum rating standards, invest in them only if at the time of an
investment the issuer meets the criteria set forth in the Prospectus for other
comparable debt obligations.
Loans of Portfolio Securities (All Funds). The Funds may lend their portfolio
securities to brokers, dealers and financial institutions, provided: (1) the
loan is secured continuously by collateral consisting of U.S. Government
securities or cash or letters of credit maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (2) the Funds may at any time call the loan and obtain the return of the
securities loaned within five business days; (3) the Funds will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed 5% of the total
assets of a particular Fund.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay reasonable
finders, administrative and custodial fees. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral.
Foreign Securities (Centura Equity Growth Fund, Centura Equity Income Fund
and Centura Southeast Equity Fund). As described in the Prospectus, changes in
foreign exchange rates will affect the value of securities denominated or quoted
in currencies other than the U.S. dollar.
Since Centura Equity Growth Fund, Centura Equity Income Fund and Centura
Southeast Equity Fund may invest in securities denominated in currencies other
than the U.S. dollar, and since those Funds may temporarily hold funds in bank
deposits or other money market investments denominated in foreign currencies,
the Funds may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates will influence values of
securities in the Funds' portfolios, from the perspective of U.S. investors.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and
2
<PAGE> 12
losses realized on the sale of securities, and net investment income and gains,
if any, to be distributed to shareholders by the Funds. 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. These forces are affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors.
Forward Foreign Currency Exchange Contracts (Centura Equity Growth Fund,
Centura Equity Income Fund and Centura Southeast Equity Fund). Centura Equity
Growth Fund, Centura Equity Income Fund and Centura Southeast Equity Fund may
enter into forward foreign currency exchange contracts in order to protect
against uncertainty in the level of future foreign exchange rates. A forward
foreign currency exchange 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 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 between currency traders (usually large commercial banks) and their
customers. Forward foreign currency exchange contracts may be bought or sold to
protect the Funds against a possible loss resulting from an adverse change in
the relationship between foreign currencies and the U.S. dollar, or between
foreign currencies. Although such contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currency, at the same time,
they tend to limit any potential gain which might result should the value of
such currency increase.
Interest Rate Futures Contracts (Centura Equity Income Fund, Centura Federal
Securities Income Fund and Centura North Carolina Tax-Free Bond Fund). These
Funds may purchase and sell interest rate futures contracts ("futures
contracts") as a hedge against changes in interest rates. A futures contract is
an agreement between two parties to buy and sell a security for a set price on a
future date. Futures contracts are traded on designated "contracts markets"
which, through their clearing corporations, guarantee performance of the
contracts. Currently, there are futures contracts based on securities such as
long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA Certificates and
three-month U.S. Treasury bills. For municipal securities, there is the Bond
Buyer Municipal Bond Index.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a Fund holds long-term U.S. Government securities and
the Adviser anticipates a rise in long-term interest rates, the Fund could, in
lieu of disposing of its portfolio securities, enter into futures contracts for
the sale of similar long-term securities. If rates increased and the value of
the Fund's portfolio securities declined, the value of the Fund's futures
contracts would increase, thereby protecting the Fund by preventing net asset
value from declining as much as it otherwise would have. Similarly, entering
into futures contracts for the purchase of securities has an effect similar to
actual purchase of the underlying securities, but permits the continued holding
of securities other than the underlying securities. For example, if the Adviser
expects long-term interest rates to decline, the Fund might enter into futures
contracts for the purchase of long-term securities, so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase, while continuing to hold higher-yielding short-term
securities or waiting for the long-term market to stabilize.
Stock Index Futures Contracts (Centura Equity Growth Fund, Centura Equity
Income Fund and Centura Southeast Equity Fund). These Funds may enter into stock
index futures contracts in order to protect the value of their common stock
investments. A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. As the aggregate market value of the stocks in the index
changes, the value of the index also will change. In the event that the index
level rises above the level at which the stock index futures contract was sold,
the seller of the stock index futures contract will realize a loss determined by
the difference between the purchase level and the index level at the time of
expiration of the stock index futures contract, and the purchaser will realize a
gain in that amount. In the event the
3
<PAGE> 13
index level falls below the level at which the stock index futures contract was
sold, the seller will recognize a gain determined by the difference between the
two index levels at the expiration of the stock index futures contract, and the
purchaser will realize a loss. Stock index futures contracts expire on a fixed
date, currently one to seven months from the date of the contract, and are
settled upon expiration of the contract.
Centura Equity Growth Fund, Centura Equity Income Fund and Centura Southeast
Equity Fund will utilize stock index futures contracts only for the purpose of
attempting to protect the value of their common stock portfolios in the event of
a decline in stock prices and, therefore, usually will be sellers of stock index
futures contracts. This risk management strategy is an alternative to selling
securities in the portfolio and investing in money market instruments. Also,
stock index futures contracts may be purchased to protect a Fund against an
increase in prices of stocks which that Fund intends to purchase. If the Fund is
unable to invest its cash (or cash equivalents) in stock in an orderly fashion,
the Fund could purchase a stock index futures contract which may be used to
offset any increase in the price of the stock. However, it is possible that the
market may decline instead, resulting in a loss on the stock index futures
contract. If the Fund then concludes not to invest in stock at that time, or if
the price of the securities to be purchased remains constant or increases, the
Fund will realize a loss on the stock index futures contract that is not offset
by a reduction in the price of securities purchased. These Funds also may buy or
sell stock index futures contracts to close out existing futures positions.
Option Writing and Purchasing (All Funds). A Fund may write (or sell) put and
call options on the securities that the Fund is authorized to buy or already
holds in its portfolio. These option contracts may be listed for trading on a
national securities exchange or traded over-the-counter. A Fund may also
purchase put and call options. A Fund will not write covered calls on more than
25% of its portfolio, and a Fund will not write covered calls with strike prices
lower than the underlying securities' cost basis on more than 25% of its total
portfolio. A Fund may not invest more than 5% of its total assets in option
purchases.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security at the agreed upon exercise (or
"strike") price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security at
the strike price during the option period. Purchasers of options pay an amount,
known as a premium, to the option writer in exchange for the right under the
option contract.
A Fund may sell "covered" put and call options as a means of hedging the
price risk of securities in the Fund's portfolio. The sale of a call option
against an amount of cash equal to the put's potential liability constitutes a
"covered put." When a Fund sells an option, if the underlying securities do not
increase (in the case of a call option) or decrease (in the case of a put
option) to a price level that would make the exercise of the option profitable
to the holder of the option, the option will generally expire without being
exercised and the Fund will realize as profit the premium paid for such option.
When a call option of which a Fund is the writer is exercised, the option holder
purchases the underlying security at the strike price and the Fund does not
participate in any increase in the price of such securities above the strike
price. When a put option of which a Fund is the writer is exercised, the Fund
will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities. At the time a
Fund writes a put option or a call option on a security it does not hold in its
portfolio in the amount required under the option, it will establish and
maintain a segregated account with its custodian consisting solely of cash, U.S.
Government securities and other liquid high grade debt obligations equal to its
liability under the option.
Over-the-counter options ("OTC options") differ from exchange-traded options
in several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of non-performance by the dealer. OTC
options are available for a greater variety of securities and for a wider range
of expiration dates and exercise prices than exchange-traded options. Because
OTC options are not traded on an exchange, pricing is normally done by reference
to information from a market marker. This information is carefully monitored by
the Adviser and verified in appropriate cases. OTC options transactions will be
made by a Fund only with recognized U.S. Government securities dealers. OTC
4
<PAGE> 14
options are subject to the Funds' 15% limit on investments in securities which
are illiquid or not readily marketable (see "Investment Restrictions"), provided
that OTC option transactions by a Fund with a primary U.S. Government securities
dealer which has given the Fund an absolute right to repurchase according to a
"repurchase formula" will not be subject to such 15% limit.
It may be a Fund's policy, in order to avoid the exercise of an option sold
by it, to cancel its obligation under the option by entering into a closing
purchase transaction, if available, unless it is determined to be in the Fund's
interest to sell (in the case of a call option) or to purchase (in the case of a
put option) the underlying securities. A closing purchase transaction consists
of a Fund purchasing an option having the same terms as the option sold by the
Fund and has the effect of canceling the Fund's position as a seller. The
premium which a Fund will pay in executing a closing purchase transaction may be
higher than the premium received when the option was sold, depending in large
part upon the relative price of the underlying security at the time of each
transaction. To the extent options sold by a Fund are exercised and the Fund
either delivers portfolio securities to the holder of a call option or
liquidates securities in its portfolio as a source of funds to purchase
securities put to the Fund, the Fund's portfolio turnover rate may increase,
resulting in a possible increase in short-term capital gains and a possible
decrease in long-term capital gains.
Options on Futures Contracts (All Funds). A Fund may purchase and write put
and call options on futures contracts that are traded on a U.S. exchange or
board of trade and enter into related closing transactions to attempt to gain
additional protection against the effects of interest rate, currency or equity
market fluctuations. There can be no assurance that such closing transactions
will be available at all times. In return for the premium paid, such an option
gives the purchaser the right to assume a position in a futures contract at any
time during the option period for a specified exercise price.
A Fund may purchase put options on futures contracts in lieu of, and for the
same purpose as, the sale of a futures contract. It also may purchase such put
options in order to hedge a long position in the underlying futures contract.
The purchase of call options on futures contracts is intended to serve the
same purpose as the actual purchase of the futures contracts. A Fund may
purchase call options on futures contracts in anticipation of a market advance
when it is not fully invested.
A Fund may write a call option on a futures contract in order to hedge
against a decline in the prices of the index or debt securities underlying the
futures contracts. If the price of the futures contract at expiration is below
the exercise price, the Fund would retain the option premium, which would
offset, in part, any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the purchase
of the futures contracts, except that, if market price declines, a Fund would
pay more than the market price for the underlying securities or index units. The
net cost to that Fund would be reduced, however, by the premium received on the
sale of the put, less any transactions costs.
Risks of Futures and Options Investments (All Funds). A Fund will incur
brokerage fees in connection with its futures and options transactions, and it
will be required to segregate funds for the benefit of brokers as margin to
guarantee performance of its futures and options contracts. In addition, while
such contracts will be entered into to reduce certain risks, trading in these
contracts entails certain other risks. Thus, while a Fund may benefit from the
use of futures contracts and related options, unanticipated changes in interest
rates may result in a poorer overall performance for that Fund than if it had
not entered into any such contracts. Additionally, the skills required to invest
successfully in futures and options may differ from skills required for managing
other assets in the Fund's portfolio.
Limitations on Futures Contracts and Options on Futures Contracts (All
Funds). Each Fund will use financial futures contracts and related options only
for "bona fide hedging" purposes, as such term is defined in applicable
regulations of the CFTC, or, with respect to positions in financial futures and
related options that do not qualify as "bona fide hedging" positions, will enter
such non-hedging positions only to the extent that aggregate initial margin
deposits plus premiums paid by it for open futures option positions, less the
amount by which any such positions are "in-the-money," would not exceed 5% of
the Fund's total
5
<PAGE> 15
assets. Futures contracts and related put options written by a Fund will be
offset by assets held in a segregated custodial account sufficient to satisfy
the Fund's obligations under such contracts and options.
North Carolina Municipal Obligations (Centura North Carolina Tax-Free Bond
Fund). The ability of this Fund to achieve its investment objective depends on
the ability of issuers of North Carolina Municipal Obligations to meet their
continuing obligations for the payment of principal and interest.
North Carolina Municipal Obligations are debt securities issued by the state
of North Carolina, its political subdivisions, and the districts, authorities,
agencies and instrumentalities of the state and its political subdivisions, the
interest on which is exempt from regular federal and North Carolina income
taxes.
North Carolina municipal bonds are issued for various public purposes,
including the construction of housing, pollution abatement facilities, health
care and prison facilities, and educational facilities.
Unlike other types of investments, municipal securities have traditionally
not been subject to registration with, or other regulation by, the Securities
and Exchange Commission ("SEC"). However, there have been proposals which could
lead to future regulations of these securities by the SEC.
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund).
Municipal lease obligations are municipal securities that may be supported by a
lease or an installment purchase contract issued by state and local government
authorities to acquire funds to obtain the use of a wide variety of equipment
and facilities such as fire and sanitation vehicles, computer equipment and
other capital assets. These obligations, which may be secured or unsecured, are
not general obligations and have evolved to make it possible for state and local
government authorities to obtain the use of property and equipment without
meeting constitutional and statutory requirements for the issuance of debt.
Thus, municipal lease obligations have special risks not normally associated
with municipal bonds. These obligations frequently contain "non-appropriation"
clauses that provide that the governmental issuer of the obligation has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purposes by the legislative body on a yearly or other
periodic basis. In addition to the "non-appropriation" risk, many municipal
lease obligations have not yet developed the depth of marketability associated
with municipal bonds; moreover, although the obligations may be secured by the
leased equipment, the disposition of the equipment in the event of foreclosure
might prove difficult. In order to limit certain of these risks, the Fund will
limit its investments in municipal lease obligations that are illiquid, together
with all other illiquid securities in its portfolio, to not more than 15% of its
assets. The liquidity of municipal lease obligations purchased by the Fund will
be determined pursuant to guidelines approved by the Board of Directors. Factors
considered in making such determinations may include; the frequency of trades
and quotes for the obligation; the number of dealers willing to purchase or sell
the security and the number of other potential buyers; the willingness of
dealers to undertake to make a market; the obligation's rating; and, if the
security is unrated, the factors generally considered by a rating agency.
Securities of Other Investment Companies (All Funds). Each Fund may invest in
securities issued by the other investment companies. Each of these Funds
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
any of the Funds; and (d) not more than 10% of the outstanding voting stock of
any one investment company will be owned in the aggregate by the Funds. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
Investment companies in which a Fund may invest may also impose a sales or
distribution charge in connection with the purchase or redemption of their
shares and other types of commissions or charges. Such charges will be payable
by the Funds and, therefore, will be borne indirectly by Shareholders.
Investments in Real Estate Investment Trusts (All Funds except Centura North
Carolina Tax-Free
6
<PAGE> 16
Bond Fund). A Fund may invest to a limited extent in equity or debt real estate
investment trusts ("REITs"). Equity REITs are trusts that sell shares to
investors and use the proceeds to invest in real estate or interests in real
estate. Debt REITs invest in obligations secured by mortgages on real property
or interest in real property. A REIT may focus on particular types of projects,
such as apartment complexes or shopping centers, or on particular geographic
regions, or both. An investment in a REIT may be subject to certain risks
similar to those associated with direct ownership of real estate, including:
declines in the value of real estate; risks related to general and local
economic conditions, overbuilding and competition; increases in property taxes
and operating expenses; and variations in rental income. Also, REITs may not be
diversified. A REIT may fail to qualify for pass-through tax treatment of its
income under the Internal Revenue Code and may also fail to maintain its
exemption from registration under the Investment Company Act of 1940. Also,
REITs (particularly equity REITs) may be dependent upon management skill and
face risks of failing to obtain adequate financing on favorable terms.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies of each Fund, and except
as otherwise indicated, may not be changed with respect to a Fund without the
approval of a majority of the outstanding voting securities of that Fund which,
as defined in the Investment Company Act of 1940 ("1940 Act"), means the lesser
of (1) 67% of the shares of such Fund present at a meeting if the holders of
more than 50% of the outstanding shares of such Fund are present in person or by
proxy, or (2) more than 50% of the outstanding voting shares of such Fund.
Each Fund, except as indicated, may not:
(1) with respect to 75% of its total assets, purchase more than 10% of
the voting securities of any one issuer or invest more than 5% of the value
of such assets in the securities or instruments of any one issuer, except
securities or instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(2) Borrow money except that a Fund may borrow from banks up to 10% of
the current value of its total net assets for temporary or emergency
purposes; a Fund will make no purchases if its outstanding borrowings exceed
5% of its total assets;
(3) Invest in real estate, provided that a Fund may invest in readily
marketable securities (except limited partnership interests) of issuers that
deal in real estate and securities secured by real estate or interests
therein and a Fund may hold and sell real estate (a) used principally for its
own office space or (b) acquired as a result of a Fund's ownership of
securities;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the purchase of securities directly from the issuer
(either alone or as one of a group of bidders) or the disposal of an
investment position may technically cause it to be considered an underwriter
as that term is defined under the Securities Act of 1933;
(5) Make loans, except that a Fund may (a) lend its portfolio
securities, (b) enter into repurchase agreements and (c) purchase the types
of debt instruments described in the Prospectus or the SAI;
(6) Purchase securities or instruments which would cause 25% or more of
the market value of the Fund's total assets at the time of such purchase to
be invested in securities or instruments of one or more issuers having their
principal business activities in the same industry, provided that there is no
limit with respect to investments in the U.S. Government, its agencies and
instrumentalities;
(7) Issue any senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and provided that collateral
arrangements with respect to forward contracts, futures contracts or options,
including deposits of initial and variation margin, are not considered to be
the issuance of a senior security for purposes of this restriction; or
(8) Purchase or sell commodity contracts, except that the Fund may
invest in futures contracts and in options related to such contracts (for
purposes of this restriction, forward foreign
7
<PAGE> 17
currency exchange contracts are not deemed to be commodities).
For restriction number 1, above, with respect to Centura North Carolina
Tax-Free Bond Fund, the state of North Carolina and each of its political
subdivisions, as well as each district, authority, agency or instrumentality of
North Carolina or of its political subdivisions will be deemed to be a separate
issuer, and all indebtedness of any issuer will be deemed to be a single class
of securities. Securities backed only by the assets of a non-governmental user
will be deemed to be issued by that user. Restriction number 6, above, will
prevent Centura North Carolina Tax-Free Bond Fund from investing 25% or more of
its total assets in industrial building revenue bonds issued to finance
facilities for non-governmental issuers in any one industry, but this
restriction does not apply to any other tax-free Municipal Obligations. For
purposes of investment restriction number 6, public utilities are not deemed to
be a single industry but are separated by industrial categories, such as
telephone or gas utilities. For purposes of restriction number 7, with respect
to its futures transactions and writing of options (other than fully covered
call options), a Fund will maintain a segregated account for the period of its
obligation under such contract or option consisting of cash, U.S. Government
securities and other liquid high grade debt obligations in an amount equal to
its obligations under such contracts or options.
The following policies of the Funds are non-fundamental and may be changed by
the Board of Directors without shareholder approval. These policies provide that
a Fund, except as otherwise specified, may not:
(a) Invest in companies for the purpose of exercising control or
management;
(b) Knowingly purchase securities of other investment companies, except
(i) in connection with a merger, consolidation, acquisition, or
reorganization; and (ii) the equity and fixed income funds may invest up to
10% of their net assets in shares of other investment companies;
(c) Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities;
(d) Mortgage, pledge, or hypothecate any of its assets, except that a
Fund may pledge not more than 15% of the current value of the Fund's total
net assets;
(e) Purchase or retain the securities of any issuer, if those
individual officers and Directors of the Company, the Adviser, the
Administrator, or the Distributor, each owning beneficially more than 1/2 of
1% of the securities of such issuer, together own more than 5% of the
securities of such issuer;
(f) Invest more than 5% of its net assets in warrants which are
unattached to securities; included within that amount, no more than 2% of the
value of the Fund's net assets, may be warrants which are not listed on the
New York or American Stock Exchanges;
(g) Write, purchase or sell puts, calls or combinations thereof, except
as described in the Prospectus or SAI;
(h) Invest more than 5% of the current value of its total assets in the
securities of companies which, including predecessors, have a record of less
than three years' continuous operation;
(i) Invest more than 15% of the value of its net assets in investments
which are illiquid or not readily marketable (including repurchase agreements
having maturities of more than seven calendar days and variable and floating
rate demand and master demand notes not requiring receipt of the principal
note amount within seven days' notice); or
(j) Invest in oil, gas or other mineral exploration or development
programs, although it may invest in issuers that own or invest in such
programs.
8
<PAGE> 18
MANAGEMENT
DIRECTORS AND OFFICERS
The principal occupations of the Directors and executive officers of the
Company for the past five years are listed below. Directors deemed to be
"interested persons" of the Company for purposes of the 1940 Act are indicated
by an asterisk.
<TABLE>
<CAPTION>
POSITION
WITH PRINCIPAL
NAME, ADDRESS AND AGE COMPANY OCCUPATION
- -------------------- -------- ----------
<S> <C> <C>
Leslie H. Garner, Jr. Director President,
Cornell College Cornell College
600 First Street West
Mount Vernon, IA 52314-1098
Age: 45
James H. Speed, Jr. Director Hardee's Food Systems, Inc. -- Vice President
1233 Hardee's Blvd. Controller (1991-present); Deloitte & Touche --
Rocky Mount, NC 27802 Senior Audit Manager (1979-1991)
Age: 43
Frederick E. Turnage Director Attorney
149 North Franklin St.
Rocky Mount, NC 27804
Age: 60
*Lucy Hancock Bode Director Lobbyist
P.O. Box 6338
Raleigh, NC 27628
Age: 44
*J. Franklin Martin Director President of
LandCraft Properties LandCraft Properties
227 W. Trade Street, Suite 2730 (1978 -- President)
Charlotte, NC 28202
Age: 51
</TABLE>
9
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C> <C>
Hugh Fanning(1) President BISYS -- Vice President of Client Services
Age: 43 (1992-present).
Ellen Stoutamire (1) Secretary BISYS -- Registration and Compliance
Age: 48 Officer (1995-present); Attorney
-- private practice (1990-1995).
Tom Line (1) Treasurer BISYS -- Vice President/Treasurer (December
Age 30 1996-present); KPMG Peat Marwick LLP --
Audit Senior Manager (September 1989-
December 1996).
Bruce Treff (1) Assistant Secretary BISYS -- Senior Counsel, Legal Services
Age 30 (September 1995-present); Alliance Capital
Management, Manager, legal and administration (1988-
1995).
Dana Gentile(1) Assistant Secretary BISYS -- Vice President, Administration and
Age 34 Regulatory Services (1993-present); BISYS --
client services (1987-1993).
Alaina Metz(1) Assistant Secretary BISYS -- Blue Sky Department Manager
Age 30 (1995-present); previously, Alliance Capital
Management blue sky department.
Troy Huliba(1) Assistant BISYS -- Associate Manager, Client Services;
Age 26 Secretary formerly Senior Accountant, transfer
agency (1995-present); Safelight Autoglass,
internal auditor (1993-1995).
Jeanette Peplowski(1) Assistant BISYS - Associate Manager, Client Legal
Age 39 Secretary Services (May 1997-present); Legal
Assistant, Baker & Hostetler LLP (1993-1997)
</TABLE>
(1) Address is 3435 Stelzer Road, Columbus, Ohio 43219.
Directors of the Company who are not directors, officers or employees of the
Adviser or the Administrator receive from the Company an annual retainer of
$2000 (plus $500 for serving on the Board's Audit Committee) and a fee of $500
for each Board of Directors and Board committee meeting of the Company attended
and are reimbursed for all out-of-pocket expenses relating to attendance at such
meetings. Directors who are directors, officers or employees of the Adviser or
the Administrator do not receive compensation from the Company. The table below
sets forth the compensation received by each Director from the Company for the
fiscal year ended April 30, 1997.
10
<PAGE> 20
<TABLE>
<CAPTION>
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
NAME OF COMPENSA- BENEFITS ACCRUED ESTIMATED ANNUAL FROM REGISTRANT
PERSON, TION FROM AS PART OF FUND BENEFITS UPON AND FUND COMPLEX
POSITION REGISTRANT EXPENSES RETIREMENT PAID TO DIRECTORS
- ------ -------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Leslie H. Garner, Jr. $5,500 -0- -0- $5,500
James H. Speed, Jr. $5,500 -0- -0- $5,500
Frederick E. Turnage $5,500 -0- -0- $5,500
Lucy Hancock Bode $4,000 -0- -0- $4,000
J. Franklin Martin $4,000 -0- -0- $4,000
</TABLE>
As of November 19, 1997, the Officers and Directors of the Company, as a
group, own less than 1% of the outstanding shares of the Funds.
As of November 19, 1997, the following individuals owned 5% or more of the
Class A and Class B shares of the Funds:
CENTURA EQUITY GROWTH FUND
<TABLE>
<CAPTION>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
<S> <C> <C>
Stephens Inc for the Exclusive 540,027.408 68.748%*
Benefit of our Customers
111 Center Street
Little Rock, AR 72201-4402
CLASS B
- -------
None
</TABLE>
*Disclaims beneficial ownership
CENTURA SOUTHEAST EQUITY FUND
<TABLE>
<CAPTION>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
<S> <C> <C>
Stephens Inc for the Exclusive 105,189.749 82.41%*
Benefit of our Customers
111 Center Street
Little Rock, AR 72201-4402
*Disclaims beneficial ownership
CLASS B
- -------
None
</TABLE>
CENTURA FEDERAL SECURITIES INCOME FUND
<TABLE>
<CAPTION>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
<S> <C> <C>
Stephens Inc for the Exclusive 30,770.088 60.52%*
Benefit of our Customers
111 Center Street
Little Rock, AR 72201-4402
Centura Bank 7,101.345 13.97%
Trust Department
131 N. Church Street
Rocky Mount, NC 27801
Joel S. Kestler 2,727.543 5.36%
421 Wedgewood Street
Charleston, SC 29407
Henry Forman 6,205.802 12.21%
203 Williamsburg Drive
Greenville, NC 27858
*Disclaims beneficial ownership.
CLASS B SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
</TABLE>
11
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C> <C>
Stephens Inc FBO 1,034.080 7.85%
ACCT 83254735
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 1,045.781 7.94%
ACCT 83360137
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 1,179.744 5.93%
A/C 83327930
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 1,268.838 9.63%
A/C 83339985
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 1,568.793 11.91%
A/C 83279514
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 2,100.830 15.95%
A/C 83378482
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 2,316.365 17.59%
A/C 83289669
P.O. Box 34127
Little Rock, AR 72203-4127
BISYS Fund Services Inc. 974.873 7.40%
3435 Stelzer Rd.
Columbus, OH 43219
</TABLE>
CENTURA NORTH CAROLINA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
<S> <C> <C>
Stephens Inc for Exclusive 430,978.417 97.47%*
Benefit of our Customers
111 Center Street
Little Rock, AR 72201-4402
</TABLE>
*Disclaims beneficial ownership.
12
<PAGE> 22
<TABLE>
<CAPTION>
CLASS B SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
<S> <C> <C>
Stephens Inc FBO 2,083.388 5.52%
ACCT 83276577
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 2,497.502 6.62%
A/C 83385411
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 3,466.058 9.19%
A/C 83338132
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 3,868.910 10.26%
A/C 83366040
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 5,189.243 13.76%
A/C 83283728
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 5,734.490 15.21%
A/C 83351331
P.O. Box 34127
Little Rock, AR 72203-4127
Stephens Inc FBO 9,732.307 25.81%*
A/C 83318544
P.O. Box 34127
Little Rock, AR 72203-4127
</TABLE>
*Disclaims beneficial ownership.
CENTURA EQUITY INCOME FUND
<TABLE>
<CAPTION>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
<S> <C> <C>
Stephens Inc 73,081.189 94.86%*
for Exclusive Benefit
of Our Customers
P.O. Box 34127
Little Rock, AR 72203-4127
</TABLE>
13
<PAGE> 23
Little Rock, AR 72203-4127
*Disclaims beneficial ownership.
<TABLE>
<CAPTION>
CLASS B SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
<S> <C> <C>
Stephens Inc 16,572.901 14.39%
A/C 83434416
P.O. Box 34127
Little Rock, AR 72203
</TABLE>
INVESTMENT ADVISER
Centura Bank (the "Adviser") 131 North Church Street, Rocky Mountain, North
Carolina 27802, serves as investment adviser to the Funds. For these services,
the Adviser receives from each Fund a fee at an annual rate based on each Fund's
average daily net assets. The rates for each Fund are 0.70% for Centura Equity
Growth Fund, 0.70% for Centura Equity Income Fund, 0.30% for Centura Federal
Securities Income Fund, 0.35% for Centura North Carolina Tax-Free Bond Fund, and
0.70% for Centura Southeast Equity Fund.
Under the terms of the Investment Advisory Agreement for the Funds between
the Company and the Adviser ("Agreement"), the investment advisory services of
the Adviser to the Funds are not exclusive. The Adviser is free to, and does,
render investment advisory services to others.
The Agreement will continue in effect with respect to each Fund for a period
more than two years from the date of its execution, only as long as such
continuance is approved at least annually (i)by vote of the holders of a
majority of the outstanding voting securities of each Fund or by the Board of
Directors and (ii)by a majority of the Directors who are not parties to the
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party. With respect to all the Funds other than Centura Equity Income Fund
and Centura Southeast Equity Fund, the Agreement was approved by the Board
of Directors, including a majority of the Directors who are not parties to
the Agreement or interested persons of any such parties, at a meeting called
for the purpose of voting on the Agreement, held on April 26, 1994, and by the
sole shareholder of the Funds on April 26, 1994.
With respect to Centura Equity Income Fund and Centura Southeast Equity
Fund, respectively, the Agreement was approved by the Board of Directors,
including a majority of the Directors who are not parties to the Agreement or
interested persons of any such parties, at meetings called for such purpose
held on July 24, 1996 (for Equity Income Fund) and January 29, 1997 (for
Southeast Equity Fund) and by the sole shareholder of each such Fund on July
24, 1996 (for Equity Income Fund) and January 29, 1997 (for Southeast Equity
Fund). This Agreement, as it relates to all Centura Funds, was recently
re-approved at the April 23, 1997 Board of Directors Meeting. The Agreement may
be terminated at any time without penalty by vote of the Directors (with
respect to the Company or a Fund) or, with respect to any Fund, by vote of the
Directors or the shareholders of that fund, or by the Adviser, on 60 days
written notice by either party to the Agreement and will terminate
automatically if assigned.
14
<PAGE> 24
For the fiscal year ended April 30, 1997, the Adviser received $1,127,435
from the Equity Growth Fund and $358,174 from the Federal Securities Income Fund
in advisory fees. The Adviser was entitled to $140,821 from the North Carolina
Tax-Free Bond Fund and $217,106 from the Equity Income Fund, but waived $100,587
and $105,451, respectively. For the fiscal year ended April 30, 1996, the
Adviser received the following in advisory fees: $802,888 from the Equity Growth
Fund, $312,098 from the Federal Securities Income Fund and was entitled to
$138,274 from the North Carolina Tax-Free Bond Fund but waived $99,774. For the
period June 1, 1994 (commencement of operations) through April 30, 1995, the
Adviser received the following in advisory fees: $458,424 from the Equity Growth
Fund, $236,139 from the Federal Securities Income Fund and the Adviser was
entitled to $98,015 from the North Carolina Tax-Free Bond Fund but waived
$83,311.
DISTRIBUTION OF FUND SHARES
Centura Funds Distributor, Inc. (the "Distributor") serves as principal
underwriter for the shares of the Funds pursuant to a Distribution Contract. The
Distribution Contract provides that the Distributor will use its best efforts to
maintain a broad distribution of the Funds' shares among bona fide investors and
may enter into selling group agreements with responsible dealers and dealer
managers as well as sell the Funds' shares to individual investors. The
Distributor is not obligated to sell any specific amount of shares.
Service and distribution plans (the "Plans") have been adopted by each of the
Funds. The Plan for each Fund provides for different rates of fee payment with
respect to Class A shares and Class B shares, as described in the Prospectus. No
Plan has been adopted for Class C shares. Pursuant to the Plans, the Funds may
pay directly or reimburse the Distributor monthly in amounts described in the
Prospectus for costs and expenses of marketing the shares, or classes of shares,
of the Funds. The Board of Directors has concluded that there is a reasonable
likelihood that the Plans will benefit the Funds and their shareholders.
Each Plan provides that it may not be amended to increase materially the
costs which the Funds or a class of shares may bear pursuant to the Plan without
shareholder approval and that other material amendments of the Plans must be
approved by the Board of Directors, and by the Directors who are neither
"interested persons" (as defined in the 1940 Act) of the Company nor have any
direct or indirect financial interest in the operation of the particular Plan or
any related agreement, by vote cast in person at a meeting called for the
purpose of considering such amendments. The selection and nomination of the
Directors of the Company have been committed to the discretion of the Directors
who are not "interested persons" of the Company. The Plans with respect to each
of the Funds except Centura Equity Income Fund and Centura Southeast Equity Fund
were approved by the Board of Directors and by the Directors who are neither
"interested persons" nor have any direct or indirect financial interest in the
operation of any Plan ("Plan Director"), by vote cast in person at a April 26,
1994 meeting called for the purpose of voting on the Plans, and by the sole
shareholder of each class of shares of each of the Funds on April 26, 1994. The
Plans for these Funds were recently re-approved at the April 23, 1997 Board of
Directors Meeting. The Plan with respect to Centura Equity Income Fund and
Centura Southeast Equity Fund, respectively, was approved by the Board of
Directors and by the Plan Directors by vote cast in person at meetings held July
24, 1996 and January 29, 1997 called for the purpose of voting on that Plan, and
by the sole shareholder of each class of shares of the respective Funds on July
24, 1996 and January 29, 1997. The continuance of the Plans is subject to
similar annual approval by the Directors and the Plan Directors. Each Plan is
terminable with respect to a class of shares of a Fund at any time by a vote of
a majority of the Plan Directors or by vote of the holders of a majority of the
shares of the class.
For the fiscal year ended April 30, 1997 the following fees with respect to
Class A shares were received by the Distributor: $36,184 for the Equity Growth
Fund, $2,690 for the Federal Securities Income Fund and $19,193 for the North
Carolina Tax-Free Bond Fund. For the period from October 1, 1996 (commencement
of operations) through April 30, 1997, the Distributor received $525 in fees
relating to the Class A shares of the Equity Income Fund. With respect to Class
B shares, the Distributor received
15
<PAGE> 25
$80,683 for the Equity Growth Fund, $1,931 for the Federal Securities Income
Fund and $4,199 for the North Carolina Tax-Free Bond Fund; for the period from
October 1, 1996 (commencement of operations) through April 30, 1997, the
Distributor received $710 in fees relating to Class B shares of the Equity
Income Fund. All expenditures were for compensation to the Distributor for its
services as underwriter of the Funds.
For the fiscal year ended April 30, 1996 the following fees with respect to
Class A shares were received by the Distributor: $7,215 for the Equity Growth
Fund, $888 for the Federal Securities Income Fund and $5,259 for the North
Carolina Tax-Free Bond Fund. For the same fiscal year, with respect to Class B
shares, the Distributor received $33,942 for the Equity Growth Fund, $1,696 for
the Federal Securities Income Fund and $3,168 for the North Carolina Tax-Free
Bond Fund. All expenditures were for compensation to the Distributor for its
services as Underwriter of the Funds.
For the period ended April 30, 1995, the Distributor received the following
fees with respect to Class A shares: $1,106 for the Equity Growth Fund, $422 for
the Federal Securities Income Fund and $1,018 for the North Carolina Tax-Free
Bond Fund. For the period ended April 30, 1995, the Distributor received the
following fees with respect to Class B shares: $4,705 for the Equity Growth
Fund, $412 for the Federal Securities Income Fund and $2,322 for the North
Carolina Tax-Free Bond Fund. All expenditures were for compensation to the
Distributor for its services as Underwriter of the Funds.
ADMINISTRATIVE SERVICES
Prior to January 1, 1997, Furman Selz LLC ("Furman Selz") served as Sponsor
and Administrator of the Funds. On January 1, 1997, BISYS Fund Services Limited
Partnership d/b/a BISYS Fund Services ("BYSIS") became the Sponsor and
Administrator of the Funds and provides administrative services necessary for
the operation of the Funds, including among other things, (i) preparation of
shareholder reports and communications, (ii) regulatory compliance, such as
reports to and filings with the Securities and Exchange Commission ("SEC") and
state securities commissions and (iii) general supervision of the operation of
the Funds, including coordination of the services performed by the Funds'
Adviser, Distributor, custodians, independent accountants, legal counsel and
others. In addition, BISYS furnishes office space and facilities required for
conducting the business of the Funds and pays the compensation of the Funds'
officers, employees and Directors affiliated with BISYS. For these services,
BISYS receives from each Fund a fee, payable monthly, at the annual rate of
0.15% of each Fund's average daily net assets.
BISYS is a subsidiary of BISYS Group, Inc, which is headquartered in Little
Falls, New Jersey and supports more than 5,000 financial institutions and
corporate clients through two strategic business units. BISYS Information
Services Group provides image and data processing outsourcing, and pricing
analysis to more than 600 banks nationwide. BISYS Investment Services Group
designs, administers and distributes over 30 families of proprietary mutual
funds consisting of more than 365 portfolios, and provides 401(k) marketing
support, administration, and recordkeeping services in partnership with banking
institutions and investment management companies. At a meeting held on July 24,
1996, the Directors reviewed and approved an Administration Agreement with
BISYS, a Transfer Agency Agreement and a Fund Accounting Agreement with BISYS
Fund Services, Inc. Both BISYS companies have their principal place of business
at 3435 Stelzer Road, Columbus, Ohio 43219.
For the fiscal year ended April 30, 1997, BISYS and Furman Selz
received a total of $241,593 and $179,087 in administrative services fees from
the Equity Growth Fund and the Federal Securities Income Fund, respectively. For
the fiscal year ended April 30, 1997, Furman Selz and BISYS earned $60,352 in
administrative services fees from the North Carolina Tax-Free Bond Fund of which
$43,051
16
<PAGE> 26
was waived. For the period from October 1, 1996 (commencement of operations)
through April 30, 1997, Furman Selz and BISYS earned $46,523 in administrative
services fees from the Equity Income Fund of which $23,882 was waived.
For the fiscal year ended April 30, 1996, Furman Selz, the Administrator for
that fiscal period, was entitled to the following administrative services fees:
<TABLE>
<CAPTION>
FURMAN SELZ FURMAN SELZ
ENTITLED WAIVED
<S> <C> <C>
Centura Equity Growth Fund $172,047 $0
Centura Federal Securities Income Fund $156,049 $0
Centura North Carolina $ 59,260 $ 42,761
Tax-Free Bond Fund
</TABLE>
For the period ended April 30, 1995, Furman Selz, the Administrator for that
fiscal period, was entitled to the following administrative services fees:
<TABLE>
<CAPTION>
FURMAN SELZ FURMAN SELZ
ENTITLED WAIVED
<S> <C> <C>
Centura Equity Growth Fund $105,945 $ 19,669
Centura Federal Securities Income Fund $117,881 $ 23,780
Centura North Carolina Tax-Free Bond Fund $ 45,419 $ 40,371
</TABLE>
The Administration Agreement for each was approved by the Board of Directors,
including a majority of the Directors who are not parties to the Agreement or
interested persons of such parties, at meetings held July 24, 1996 and January
29, 1997. The Administration Agreement is terminable with respect to a Fund or
the Company without penalty, at any time, by vote of a majority of the Directors
or, with respect to a Fund, by vote of the holders of a majority of the shares
of the Fund, each upon not more than 90 days written notice to the
Administrator, and upon 90 days notice, by the Administrator.
SERVICE ORGANIZATIONS
The Company may also contract with banks, trust companies, broker-dealers
(other than BISYS) or other financial organizations ("Service Organizations") to
provide certain administrative services for the Funds. Services provided by
Service Organizations may include among other things: providing necessary
personnel and facilities to establish and maintain certain shareholder accounts
and records; assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving funds in
connection with client orders to purchase or redeem shares; verifying and
guaranteeing client signatures in connection with redemption orders, transfers
among and changes in client-designating accounts; providing periodic statements
showing a client's account balance and, to the extent practicable, integrating
such information with other client transactions; furnishing periodic and annual
statements and confirmations of all purchases and redemptions of shares in a
client's account; transmitting proxy statements, annual reports, and updating
prospectuses and other communications from the Funds to clients; and providing
such other services as the Funds or a client reasonably may request, to the
extent permitted
17
<PAGE> 27
by applicable statute, rule or regulation. Neither BISYS nor the Adviser will be
a Service Organization or receive fees for servicing.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the minimum
initial or subsequent investments specified by the Funds or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
that might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders of the Funds and alternative
means for continuing the servicing of such shareholders would be sought. In that
event, changes in the operation of the Funds might occur and a shareholder
serviced by such a bank might no longer be able to avail itself of any services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
DETERMINATION OF NET ASSET VALUE
The Funds value their portfolio securities in accordance with the procedures
described in the Prospectus.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other investment advisory
clients of the Adviser are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as possible, averaged as
to price and allocated between such clients in a manner which in the Adviser's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
The Funds have no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, the Adviser is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Funds to obtain the best results
taking into account the broker-dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of securities will often be principal transactions in the
case of debt securities and
18
<PAGE> 28
equity securities traded otherwise than on an exchange. The purchase or sale of
equity securities will frequently involve the payment of a commission to a
broker-dealer who effects the transaction on behalf of a Fund. Debt securities
normally will be purchased or sold from or to issuers directly or to dealers
serving as market makers for the securities at a net price. Generally, money
market securities are traded on a net basis and do not involve brokerage
commissions. Under the 1940 Act, persons affiliated with the Funds, the Adviser
or BISYS are prohibited from dealing with the Funds as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the SEC.
The Adviser may, in circumstances in which two or more broker-dealers are in
a position to offer comparable results, give preference to a dealer that has
provided statistical or other research services to the Adviser. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of securities firms. These items, which
in some cases may also be purchased for cash, include such matters as general
economic and securities market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to the Adviser in advising
various of its clients (including the Funds), although not all of these services
are necessarily useful and of value in managing the Funds. The advisory fees
paid by the Funds are not reduced because the Adviser and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), the Adviser may cause a Fund to pay a broker-dealer that provides
"brokerage and research services" (as defined in the Act) to the Adviser an
amount of disclosed commission for effecting a securities transaction for the
Fund in excess of the commission which another broker-dealer would have charged
for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Adviser may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.
For the fiscal year ended April 30, 1997, $344,359 was paid in brokerage
commissions by the Equity Growth Fund. For the period from October 1, 1996
(commencement of operations) through April 30, 1997, $44,399 was paid in
brokerage commissions by the Equity Income Fund. Of these amounts, none were
paid to any affiliated brokers. For the fiscal year ended April 30, 1996,
$192,075 was paid in brokerage commissions by the Equity Growth Fund. Of this
amount, none was paid to any affiliated brokers. For the period ended April 30,
1995, the Equity Growth Fund paid brokerage commissions, in the amount of
$115,342. Of this amount, none was paid to any affiliated brokers. None of the
other Funds paid any brokerage commissions for such periods.
PORTFOLIO TURNOVER
Changes may be made in the portfolio consistent with the investment
objectives and policies of the Funds whenever such changes are believed to be in
the best interests of the Funds and their shareholders. It is anticipated that
the annual portfolio turnover rate for a Fund normally will not exceed the
amount stated in the Funds' Prospectus. The portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of portfolio securities
by the average monthly value of the Fund's portfolio securities. For purposes of
this calculation, portfolio securities exclude all securities having a maturity
when purchased of one year or less. The portfolio turnover rate for the fiscal
year ended April 30, 1997 was 67%, 26%, and 34% for the Equity Growth Fund, the
Federal Securities Income Fund and the North Carolina Tax-Free Bond Fund,
respectively. For the period from October 1, 1996 (commencement of operations)
through April 30, 1997, the portfolio turnover rate was 24% for the Equity
Income Fund.
The portfolio turnover rate for the fiscal year ended April 30, 1996 was 46%,
34%, and 80% for the Equity Growth Fund, the Federal Securities Income Fund and
the North Carolina Tax-Free Bond Fund, respectively.
19
<PAGE> 29
TAXATION
The Funds intend to qualify and elect annually to be treated as regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, a Fund must
for each taxable year (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items, dividends,
taxable interest and the excess of net short-term capital gains over net
long-term capital losses); (b) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (c) except for taxable years beginning after August 5,
1997 derive less than 30% of its gross income from the sale or other disposition
of certain assets (namely, in the case of a Fund, (i) stock or securities; (ii)
options, futures, and forward contracts (other than those on foreign
currencies), and (iii) foreign currencies (including options, futures, and
forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities)) held less than 3 months; and (d)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by cash
and cash items (including receivables), U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
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 total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies, or of any two or more
issuers which the Fund controls and which are engaged in the same or similar or
related trades or businesses). In addition, a Fund earning tax-exempt interest
must, in each year, distribute at least 90% of its net tax-exempt income. By
meeting these requirements, a Fund generally will not be subject to Federal
income tax on its investment company taxable income and net capital gains which
are distributed to shareholders. If the Funds do not meet all of these Code
requirements, they will be taxed as ordinary corporations and their
distributions will be taxed to shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund
must distribute for each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and (3) all ordinary income and capital gain net income
(adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution, including an "exempt-interest
dividend," will be treated as paid on December 31 of a calendar year if it is
declared by a Fund during October, November or December of that year to
shareholders of record on a date in such a month and paid by the Fund during
January of the following year. Such distributions will be reportable by
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions from certain of the Funds may be
eligible for the dividends-received deduction available to corporations.
Distributions of net capital gains, if any, designated by the Funds as capital
gain dividends are taxable to shareholders as long-term capital gain, regardless
of the length of time the Funds' shares have been held by a shareholder. The
federal tax rules governing capital gains were revised substantially in tax
legislation enacted on August 5, 1997. In some respects, the revised rules are
not entirely clear and the Treasury Department may issue clarifying guidance.
Accordingly, the Funds will monitor developments and shareholders should be
aware that the tax treatment of capital gains may differ from that presently
described herein. All distributions are taxable to the shareholder in the same
manner whether reinvested in additional shares or received in cash. Shareholders
will be notified annually as to the Federal tax status of distributions.
20
<PAGE> 30
Distributions by a Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a stockholder's cost
basis, such distribution, nevertheless, would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Funds. The price of shares
purchased at that time includes the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will receive a distribution which
will nevertheless generally be taxable to them.
Upon the taxable disposition (including a sale or redemption) of shares of a
Fund, a shareholder may realize a gain or loss depending upon his basis in his
shares. Such gain or loss generally will be treated as capital gain or loss if
the shares are capital assets in the shareholder's hands. Such gain or loss will
be mid-term, long-term or short-term, generally depending upon the shareholder's
holding period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital gain dividends have
been paid will, to the extent of such capital gain dividends, be treated as
long-term capital loss if such shares have been held by the shareholder for six
months or less. A loss realized on the redemption, sale or exchange of Fund
shares will be disallowed to the extent an exempt-interest dividend was received
with respect to those shares if the shares have been held by the shareholder for
six months or less. Further, a loss realized on a disposition will be disallowed
to the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for Federal income tax purposes in each share received equal to the
net asset value of a share of the Funds on the reinvestment date.
Under certain circumstances, the sales charge incurred in acquiring shares of
a Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies where shares of a Fund are
exchanged within 90 days after the date they were purchased and new shares of a
Fund are acquired without a sales charge or at a reduced sales charge. In that
case, the gain or loss recognized on the exchange will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred the sales charge
initially. Instead, the portion of the sales charge affected by this rule will
be treated as a sales charge paid for the new shares.
Certain of the options, futures contracts, and forward foreign currency
exchange contracts that several of the Funds may invest in are so-called
"section 1256 contracts." With certain exceptions, gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by a Fund at the
end of each taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to-market" with the
21
<PAGE> 31
result that unrealized gains or losses are treated as though they were realized
and the resulting gain or loss is treated as 60/40 gain or loss. It is unclear
at this time whether the long-term portion of gain will be regarded as mid-term
gain or as gain from an asset held more than eighteen months.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on a position that is part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to a Fund of hedging transactions are not entirely clear. Hedging
transactions may increase the amount of short-term capital gain realized by a
Fund which is taxed as ordinary income when distributed to stockholders.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.
Certain requirements that must be met under the Code in order for a Fund to
qualify as a regulated investment company may limit the extent to which a Fund
will be able to engage in transactions in options, futures, forward contracts
and similar instruments.
Certain of the debt securities acquired by a Fund may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Fund, original issue discount on a taxable debt
security earned in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code. Original issue discount on an obligation,
the interest from which is exempt from Federal income tax, generally will
constitute tax-exempt interest income.
Some of the debt securities may be purchased by a Fund at a discount which
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any debt security, including a
tax-exempt debt security, having market discount will be treated as ordinary
income to the extent it does not exceed the accrued market discount on such debt
security. Generally, market discount accrues on a daily basis for each day the
debt security is held by the Fund at a constant rate over the time remaining to
the debt security's maturity or, at the election of the Fund, at a constant
yield to maturity which takes into account the semi-annual compounding of
interest.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time the Fund actually collects such receivables or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain options and forward and futures contracts, gains or
losses attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "section 988" gains or losses, may increase, decrease, or eliminate
the amount of a Fund's investment company taxable income to be distributed to
its shareholders as ordinary income.
22
<PAGE> 32
Some Funds may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC under the Code if at least one-half of
its assets constitute investment-type assets or 75% or more of its gross income
is investment-type income. Under the PFIC rules, an "excess distribution"
received with respect to PFIC stock is treated as having been realized ratably
over the period during which the Fund held the PFIC stock. A Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to stockholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking to market the Fund's PFIC
shares at the end of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as though they were
realized. If this election were made, tax at the Fund level under the PFIC rules
would generally be eliminated, but the Fund could, in limited circumstances,
incur nondeductible interest charges. Under recent tax legislation, the PFIC
mark-to-market regime will be modified for taxable years beginning after 1997.
Each Fund's intention to qualify annually as a regulated investment company may
limit its elections with respect to PFIC stock.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other similar income taxes imposed by the foreign
country. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign governments and corporations,
the Fund will be eligible and intends to elect to "pass-through" to its
shareholders the amount of such foreign taxes paid by the Fund. Pursuant to this
election, a shareholder would be required to include in gross income (in
addition to taxable dividends actually received) his pro rata share of the
foreign taxes paid by a Fund, and would be entitled either to deduct (as an
itemized deduction) his pro rata share of foreign taxes in computing his taxable
income or to use it as a foreign tax credit against his U.S. Federal income tax
liability, subject to limitations. No deduction for foreign taxes may be claimed
by a shareholder who does not itemize deductions, but such a shareholder may be
eligible to claim the foreign tax credit (see below). Each shareholder will be
notified within 60 days after the close of a Fund's taxable year whether the
foreign taxes paid by a Fund will "pass-through" for that year and, if so, such
notification will designate (a) the shareholder's portion of the foreign taxes
paid to each such country and (b) the portion of the dividend which represents
income derived from foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. With respect to a Fund, gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuations gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income (as defined for purposes of the foreign tax
credit) including foreign source passive income of a Fund. The foreign tax
credit may offset only 90% of the alternative minimum tax imposed on
corporations and individuals, and foreign taxes generally may not be deducted in
computing alternative minimum taxable income. The ability to claim foreign tax
credits also is subject to holding period requirements.
The Funds are required to report to the Internal Revenue Service ("IRS") all
distributions except in the case of certain exempt shareholders. All such
distributions generally are subject to withholding of Federal income tax at a
rate of 31% ("backup withholding") in the case of non-exempt shareholders if (1)
the shareholder fails to furnish the Funds with and to certify the shareholder's
correct taxpayer identification
23
<PAGE> 33
number or social security number, (2) the IRS notifies the Funds or a
shareholder that the shareholder has failed to report properly certain interest
and dividend income to the IRS and to respond to notices to that effect, or (3)
when required to do so, the shareholder fails to certify that he is not subject
to backup withholding. If the withholding provisions are applicable, any such
distributions, whether reinvested in additional shares or taken in cash, will be
reduced by the amounts required to be withheld. Backup withholding is not an
additional tax. Any amount withheld may be credited against the shareholder's
U.S. Federal income tax liability. Investors may wish to consult their tax
advisors about the applicability of the backup withholding provisions.
The foregoing discussion relates only to Federal income tax law as applicable
to U.S. persons (i.e., U.S. citizens and residents and U.S. corporations,
partnerships, trusts and estates). Distributions by the Funds also may be
subject to state and local taxes and their treatment under state and local
income tax laws may differ from the Federal income tax treatment. Distributions
of a Fund which are derived from interest on obligations of the U.S. Government
and certain of its agencies and instrumentalities may be exempt from state and
local taxes in certain states. Shareholders should consult their tax advisors
with respect to particular questions of Federal, state and local taxation.
Shareholders who are not U.S. persons should consult their tax advisors
regarding U.S. and foreign tax consequences of ownership of shares of the Funds
including the likelihood that distributions to them would be subject to
withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
Centura North Carolina Tax-Free Bond Fund. The Fund intends to manage its
portfolio so that it will be eligible to pay "exempt-interest dividends" to
shareholders. The Fund will so qualify if, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets consists of state,
municipal, and certain other securities, the interest on which is exempt from
the regular Federal income tax. To the extent that the Fund's dividends
distributed to shareholders are derived from such interest income and are
designated as exempt-interest dividends by the Fund, they will be excludable
from a shareholder's gross income for Federal income tax purposes.
Exempt-interest dividends, however, must be taken into account by shareholders
in determining whether their total incomes are large enough to result in
taxation of up to one-half (85% for taxable years beginning after 1993) of their
social security benefits and certain railroad retirement benefits. The Fund will
inform shareholders annually as to the portion of the distributions from the
Fund which constitute exempt-interest dividends. In addition, for corporate
shareholders of the Fund, exempt-interest dividends may comprise part or all of
an adjustment to alternative minimum taxable income for purposes of the
alternative minimum tax and the environmental tax under sections 55 and 59A.
Exempt-interest dividends that are attributable to certain private activity
bonds, while not subject to the regular Federal income tax, may constitute an
item of tax preference for purposes of the alternative minimum tax.
To the extent that the Fund's dividends are derived from its investment
company taxable income (which includes interest on its temporary taxable
investments and the excess of net short-term capital gain over net long-term
capital loss), they are considered ordinary (taxable) income for Federal income
tax purposes. Such dividends will not qualify for the dividends-received
deduction for corporations. Distributions, if any, of net capital gains (the
excess of net long-term capital gain over net short-term capital loss)
designated by a Fund as capital gain dividends are taxable to shareholders as
long-term capital gain regardless of the length of time the shareholder has
owned shares of the Fund. Under recent tax legislation, the federal tax rates
on long-term capital gain differ, depending on the length of time the asset
giving rise to the capital gain has been held.
Upon redemption, sale or exchange of shares of the Fund, a shareholder will
realize a taxable gain or loss, depending on whether the gross proceeds are more
or less than the shareholder's tax basis for the shares. The discussion above
provides additional detail about the income tax consequences of disposing of
Fund shares.
Deductions for interest expense incurred to acquire or carry shares of the
Fund may be subject to limitations that reduce, defer, or eliminate such
deductions. This includes limitations on deducting interest on indebtedness
properly allocable to investment property (which may include shares of the
Fund). In addition, a shareholder may not deduct a portion of interest on
indebtedness incurred or continued to
24
<PAGE> 34
purchase or carry shares of an investment company (such as this Fund) paying
exempt-interest dividends. Such disallowance would be in an amount which bears
the same ratio to the total of such interest as the exempt-interest dividends
bear to the total dividends, excluding net capital gain dividends received by
the shareholder. Under rules issued by the IRS for determining when borrowed
funds are considered used for the purposes of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with borrowed
funds even though the borrowed funds are not directly traceable to the purchase
of shares.
North Carolina law exempts from income taxation dividends received from a
regulated investment company in proportion to the income of the regulated
investment company that is attributable to interest on bonds or securities of
the U.S. government or any agency or instrumentality thereof or on bonds of the
State of North Carolina or any county, municipality or political subdivision
thereof, including any agency, board, authority or commission of any of the
above.
Opinions relating to the validity of municipal securities and the exemption
of interest thereon from Federal income tax are rendered by bond counsel to the
issuers. The Fund, the Adviser and their affiliates, and the Fund's counsel make
no review of proceedings relating to the issuance of state or municipal
securities or the bases of such opinions.
Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by private activity bonds should consult their tax
advisers before purchasing shares of Centura North Carolina Tax-Free Bond Fund
since the acquisition of shares of the Fund may result in adverse tax
consequences to them. In addition, all shareholders of the Fund should consult
their tax advisers about the tax consequences to them of their investments in
the Fund.
Changes in the tax law, including provisions relating to tax-exempt income,
frequently come under consideration. If such changes are enacted, the tax
consequences arising from an investment in Centura North Carolina Tax-Free Bond
Fund may be affected. Since the Funds do not undertake to furnish tax advice, it
is important for shareholders to consult their tax advisers regularly about the
tax consequences to them of investing in one or more of the Funds.
OTHER INFORMATION
CAPITALIZATION
The Company is a Maryland corporation established under Articles of
Incorporation dated March 1, 1994 and currently consists of five separately
managed portfolios, each of which offers three classes of shares. The
capitalization of the Company consists solely of seven hundred fifty million
(750,000,000) shares of common stock with a par value of $0.001 per share. The
Board of Directors may establish additional Funds (with different investment
objectives and fundamental policies), or additional classes of shares, at any
time in the future. Establishment and offering of additional Funds or classes
will not alter the rights of the Company's shareholders. When issued, shares are
fully paid, non-assessable, redeemable and freely transferable. Shares do not
have preemptive rights or subscription rights. In any liquidation of a Fund or
class, each shareholder is entitled to receive his pro rata share of the net
assets of that Fund or class.
25
<PAGE> 35
VOTING RIGHTS
Under the Articles of Incorporation, the Company is not required to hold
annual meetings of each Fund's shareholders to elect Directors or for other
purposes. It is not anticipated that the Company will hold shareholders'
meetings unless required by law or the Articles of Incorporation. In this
regard, the Company will be required to hold a meeting to elect Directors to
fill any existing vacancies on the Board if, at any time, fewer than a majority
of the Directors have been elected by the shareholders of the Company. In
addition, the Articles of Incorporation provide that the holders of not less
than a majority of the outstanding shares of the Company may remove persons
serving as Director.
Each Fund may vote separately on matters affecting only that Fund, and each
class of shares of each Fund may vote separately on matters affecting only that
class or affecting that class differently from other classes.
The Company's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Directors, in which case the holders of the remaining shares would not be able
to elect any Directors.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Centura Bank, 131 North Church Street, Rocky Mount, North Carolina 27802,
acts as custodian of the Company's assets. For the periods ended April 30, 1995,
April 30, 1996 and April 30, 1997, respectively, the custodian earned fees of
$17,188, $28,109 and $59,019 for the Equity Growth Fund; $19,585, $24,580 and
$31,324 for the Federal Securities Income Fund; and $10,192, $12,503 and $15,400
for the North Carolina Tax-Free Bond Fund, respectively. For the period from
October 1, 1996 (commencement of operations) to April 30, 1997 the custodian
earned fees of $23,036 for the Equity Income Fund.
BISYS Fund Services, Inc. ("BFSI") serves as the Company's transfer agent
pursuant to a Transfer Agency Agreement. For its services rendered during the
fiscal year ended April 30, 1997, BFSI and Furman Selz LLC ("Furman Selz"), the
Company's transfer agent prior to January 1, 1997, earned $101,541, $13,117 and
$11,109 in transfer agent fees for the Equity Growth Fund, the Federal
Securities Income Fund and the North Carolina Tax-Free Bond Fund, respectively.
For the period from October 1, 1996 (commencement of operations) through April
30, 1997, BFSI and Furman Selz earned $16,260 in transfer agent fees for the
Equity Income Fund. For the fiscal year ended April 30, 1996, the Company's
prior transfer agent, Furman Selz, earned transfer agent fees of $38,623 for the
Equity Growth Fund, $7,326 for the Federal Securities Income Fund and $6,452 for
the North Carolina Tax-Free Bond Fund. For the period ended April 30, 1995,
Furman Selz earned transfer agent fees of $9,897 for the Equity Growth Fund,
$5,034 for the Federal Securities Income Fund and $4,275 for the North Carolina
Tax-Free Bond Fund.
Pursuant to a Fund Accounting Agreement, each Fund compensates BFSI $2,500
per month for providing fund accounting services for the Funds. For the fiscal
year ended April 30, 1997, BFSI and Furman Selz, the Company's prior fund
accounting servicer, earned $28,792, $31,735 and $39,742 in fund accounting fees
for the Equity Growth Fund, the Federal Securities Income Fund and the North
Carolina Tax-Free Bond Fund, respectively. For the period from October 1, 1996
(commencement of operations) through April 30, 1997, BFSI and Furman Selz earned
$19,212 in fund accounting fees for the Equity Income Fund. For the fiscal year
ended April 30, 1996, the Fund's prior accounting agent, Furman Selz, earned the
following fees for their fund accounting services: $32,848 for the Equity Growth
Fund, $33,981 for the Federal Securities Income Fund and $41,369 for the North
Carolina Tax-Free Bond Fund. For the period ended April 30, 1995, Furman Selz
earned the following fees for their fund accounting services: $29,727 for the
Equity Growth Fund, $32,231 for the Federal Securities Income Fund and $34,948
for the North Carolina Tax-Free Bond Fund.
26
<PAGE> 36
YIELD AND PERFORMANCE INFORMATION
The Funds may, from time to time, include their yield, effective yield, tax
equivalent yield and average annual total return in advertisements or reports to
shareholders or prospective investors.
Quotations of yield for each class of shares of the Funds will be based on
the investment income per share earned during a particular 30-day period, less
expenses accrued with respect to that class during a period ("net investment
income"), and will be computed by dividing net investment income for the class
by the maximum offering price per share of that class on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1)#6-1]/ cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares of the class outstanding during the period that were entitled to receive
dividends, and d = the maximum offering price per share of the class on the last
day of the period; the # indicates that the following single character is an
exponent.
The 30-day yield for the period ended April 30, 1997 was as follows: 5.55%
and 4.24% for the Class A shares of the Federal Securities Income Fund and the
North Carolina Tax-Free Bond Fund, respectively, and 5.22% and 3.86% for the
Class B shares of the Federal Securities Income Fund and the North Carolina
Tax-Free Bond Fund, respectively.
Quotations of tax-equivalent yield for each class of shares of Centura North
Carolina Tax-Free Bond Fund will be calculated according to the following
formula:
TAX EQUIVALENT YIELD = ( E ) / l-p
E = tax-exempt yield p = stated income tax rate
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in each
class of shares of a Fund over periods of 1, 5 and 10 years (up to the life of
the Fund), calculated pursuant to the following formula:
P (1 + T)#n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return for the class, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures will reflect the deduction of the maximum
sales charge and a proportional share of Fund and class-specific expenses (net
of certain reimbursed expenses) on an annual basis, and will assume that all
dividends and distributions are reinvested when paid; the # indicates that the
following single character is an exponent.
27
<PAGE> 37
Quotations of yield and total return will reflect only the performance of a
hypothetical investment in a class of shares of the Funds during the particular
time period shown. Yield and total return for the Funds will vary based on
changes in the market conditions and the level of the Fund's (and classes')
expenses, and no reported performance figure should be considered an indication
of performance which may be expected in the future.
Please refer to the Total Return Summary under the section entitled Other
Information in the Prospectus for average annual total returns for Class A and B
shares.
In connection with communicating its yields or total return to current or
prospective unit holders, the Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare the
Funds' results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund.
Investors who purchase and redeem shares of the Funds through a customer
account maintained at a Service Organization may be charged one or more of the
following types of fees as agreed upon by the Service Organization and the
investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and average
annual total return of the Funds for those investors.
INDEPENDENT ACCOUNTANTS
McGladrey & Pullen LLP serves as the independent accountants for the Company.
McGladrey & Pullen LLP provides audit services, tax return preparation and
assistance and consultation in connection with review of SEC filings.
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C., 20005, passes
upon certain legal
28
<PAGE> 38
matters in connection with the shares offered by the Company and also acts as
Counsel to the Company.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in
the Company's Registration Statement filed with the SEC under the Securities Act
of 1933 with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
Registration Statement, including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Report of Independent Accountants and financial statements of the Funds
included in their Annual Report for the period ended April 30, 1997 (the "Annual
Report") are incorporated herein by reference to such Annual Report. Copies of
such Annual Report are available without charge upon request by writing to
Centura Funds, Inc., 3435 Stelzer Road, Columbus, Ohio 43219-8006 or telephoning
(800) 442-3688.
The financial statements incorporated by reference into this Statement of
Additional Information have been audited by McGladrey & Pullen LLP, independent
accountants, and have been so included and incorporated by reference in reliance
upon the report of said firm, which report is given upon their authority as
experts in auditing and accounting.
The unaudited financial statements for the Southeast Equity Fund for the
period ended October 31, 1997 are included herein.
29
<PAGE> 39
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
COMMON STOCKS (91.6%):
Airlines (1.4%):
14,000 Atlantic Southeast Airlines, Inc. $ 390,250
-----------
Apparel (0.9%):
20,000 Tropical Sportswear International (b) 240,000
-----------
Banking & Financial Services (9.4%):
8,500 CCB Financial Corp. 773,499
8,000 Cenit Bancorp, Inc. 520,000
20,000 First Financial Holdings, Inc. 772,500
12,500 First Liberty Financial Corp. 329,688
10,000 LSB Bancshares, Inc. 252,500
-----------
2,648,187
-----------
Chemicals (1.2%):
30,000 JLM Industries, Inc. (b) 341,250
-----------
Commercial Services (2.0%):
26,000 Rollins, Inc. 555,750
-----------
Computer Software (2.7%):
38,000 Broadway & Seymour, Inc. (b) 370,500
750 Choicepoint Inc. (b) 27,938
12,000 Datastream Systems, Inc. (b) 366,000
-----------
764,438
Distribution/Wholesale (1.7%):
35,500 Aviall Inc. (b) 474,813
-----------
Electrical & Electronics (3.8%):
17,000 AVX Corp. 480,250
24,000 Benchmark Electronics, Inc. (b) 598,500
-----------
1,078,750
-----------
Electrical Equipment (3.9%):
15,000 General Cable 485,625
81,500 Insteel Industries, Inc. 621,437
-----------
1,107,062
Financial Services (0.8%):
7,500 Equifax, Inc. 232,969
-----------
Food (3.7%):
25,000 Goodmark Foods, Inc. 412,500
29,000 Lance Inc. 619,875
-----------
1,032,375
-----------
Forest Products (1.8%):
18,000 Deltic Timber Corp. 507,375
-----------
Health Care (6.4%):
20,000 Coventry Corp. (b) 278,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 40
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
25,000 Medcath, Inc. (b) $ 393,750
36,200 Owens & Minor Inc. Holding Co. 506,800
25,000 Trigon Healthcare, Inc. (b) 610,937
----------
1,790,237
----------
Home Furnishings (0.6%):
5,600 Bassett Furniture Industries, Inc. 156,800
----------
Hotels & Lodging (0.5%):
10,000 Winston Hotels, Inc. 136,250
----------
Insurance (7.4%):
9,700 American Heritage Life Insurance 343,138
25,000 FPIC Insurance Group, Inc. (b) 743,749
18,000 Highlands Insurance Group (b) 414,000
17,400 Provident Companies, Inc. 580,725
----------
2,081,612
----------
Machinery & Equipment (1.0%):
10,000 Roper Industries, Inc. 266,875
----------
Media (4.2%):
30,000 Cadmus Communications Corp. 629,999
18,000 Cox Communications (b) 553,500
----------
1,183,499
----------
Medical - Biotechnology (1.6%):
25,000 Pharmaceutical Product Development, Inc. (b) 443,750
----------
Medical Equipment & Supplies (1.0%):
13,000 Maxxim Medical, Inc. (b) 290,875
----------
Metal Fabricate/Hardware (1.7%):
16,000 Kaydon Corp. 486,000
----------
Metals (1.2%):
18,500 Commonwealth Industries, Inc. 326,063
----------
Natural Gas Utility (1.0%):
10,000 Piedmont Natural Gas Co., Inc. 280,000
----------
Oil/Gas Exploration (5.3%):
41,500 Dailey Petroleum Services (b) 529,124
8,000 Forcenergy, Inc. (b) 261,000
10,000 Marine Drilling Companies, Inc. (b) 296,250
12,000 Pride International, Inc. (b) 396,000
----------
1,482,374
----------
Oil/Gas Services (3.7%):
30,400 American Oilfield Divers, Inc. (b) 516,800
26,000 Global Industries Ltd. (b) 523,250
----------
1,040,050
----------
Packaging (1.1%):
10,000 Sonoco Products Co. 321,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 41
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
Paper/Pulp (1.3%):
9,000 Buckeye Cellulose Corp. (b) $ 373,500
----------
Pollution Control (1.4%):
76,100 Trion Inc. 380,500
----------
Publishing & Printing (1.0%):
23,100 Nelson (Thomas), Inc. 268,538
----------
Real Estate Investment Trust (2.3%):
20,000 Capstone Capital Corp. 472,500
5,000 Prison Realty Trust 172,500
----------
645,000
----------
Restaurants (0.8%):
25,000 Rare Hospitality International, Inc. (b) 234,375
----------
Retail (3.4%):
40,000 Cato Corp. 342,500
15,000 Heilig Meyers Co. 200,625
10,000 Lowes Co. 416,250
----------
959,375
----------
Retail - Grocery (1.4%):
30,000 Ingles Markets Inc., Class A 393,750
----------
Retial-Computer Software (0.6%):
10,000 Southern Electronic Corp. (b) 165,000
----------
Steel/Iron (1.1%):
6,000 Nucor Corp. 313,500
----------
Telecommunications (1.2%):
25,000 Vanguard Cellular System - Class A (b) 345,313
----------
Textiles (2.2%):
9,300 Guilford Mills, Inc. 222,038
10,000 Unifi, Inc. 384,375
----------
606,413
----------
Tobacco (3.5%):
35,000 Standard Commercial Corp. (b) 584,063
10,000 Universal Corp. 384,375
----------
968,438
----------
Utilities (1.4%):
15,000 Scana Corp. 378,750
----------
TOTAL COMMON STOCKS 25,691,931
----------
U.S. TREASURY BILLS (3.6%):
1,000,000 5.16%, 11/6/97 999,354
----------
TOTAL U.S. TREASURY BILLS 999,354
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 42
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
INVESTMENT COMPANIES (6.8%):
961,442 Financial Square Prime Money Market Fund $ 961,442
939,018 Temporary Investment Fund 939,018
-----------
TOTAL INVESTMENT COMPANIES 1,900,460
-----------
TOTAL INVESTMENTS (COST $23,805,542) (a) - 102.0% 28,591,745
LIABILITIES IN EXCESS OF OTHER ASSETS (2.0)% (562,667)
-----------
TOTAL NET ASSETS - 100.0% $28,029,078
===========
</TABLE>
- ----------------
(a) Represents cost for federal income tax purposes and differs from value
by net unrealized appreciation of securities as follows (amounts in
thousands):
<TABLE>
<S> <C>
Unrealized appreciation $ 5,382,193
Unrealized depreciation (595,990)
Net unrealized appreciation $ 4,786,203
</TABLE>
(b) Non-income producing securities.
(c) 144a Security which is restricted as to resale only to qualified
institutional investors.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 43
CENTURA FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SOUTHEAST
EQUITY FUND
-----------
FOR THE PERIOD
ENDED
OCTOBER 31, 1997
----------------
<S> <C>
Assets:
Investments, at value (Cost 23,805,542) $28,591,745
Interest and dividends receivable 37,376
Receivable for capital shares issued 30,258
Receivable from brokers for investments sold 0
Unamortized organization costs 14,961
Prepaid expenses 568
-----------
Total Assets 28,674,908
-----------
Liabilities:
Dividends payable 17,394
Payable to brokers for investments purchased 598,750
Payable for capital shares issued 877
Accrued expenses and other payables:
Investment advisory fees 16,700
Administration fees 342
Distribution fees--Class A 304
Distribution fees--Class B 1,924
Trustee Fees 568
Custodiam fees 6,469
Other 2,502
-----------
Total Liabilities 645,830
-----------
Net Assets:
Shares of beneficial interest outstanding (par value $.001
per share) shares authorized
Additional paid-in-capital 21,422,392
Distribution in excess of net investment income (657)
Accumulated undistributed net realized gains (losses)
from investment transactions 1,821,140
Net realized appreciation (depreciation) from
investments 4,786,203
-----------
Net Assets $28,029,078
-----------
Class A:
Net Assets 1,504,075
Shares Outstanding 110,770
Net Asset Value Per Share $ 13.58
-----------
Maximum Sales Charge 4.50%
-----------
Maximum Offering Price Per Share (100%-100%-
Maximum Sales Charge) of net asset value adjusted
to the nearest cent per share $ 14.21
-----------
Class B:
Net Assets 2,364,829
Shares Outstanding 174,636
Net Asset Value Per Share* $ 13.54
-----------
Class C:
Net Assets 24,160,173
Shares Outstanding 1,780,681
Net Asset Value Per Share $ 13.57
-----------
</TABLE>
*Redemption price varies by length of time
See notes to financial statements
<PAGE> 44
CENTURA FUNDS, INC.
STATEMENT OF OPERATIONS
(Unaudited) October 31, 1997
<TABLE>
<CAPTION>
SOUTHEAST
EQUITY FUND
-----------
FOR THE PERIOD
ENDED
OCTOBER 31, 1997
-----------------
<S> <C>
Investment Income:
Interest income $ 7,195
Dividend income 202,781
-----------
Total income 209,976
-----------
Expenses:
Investment advisory fees 79,594
Administration fees 17,056
Distribution fees--Class A 1,846
Distribution fees--Class B 5,700
Custodian fees 8,067
Accounting fees 16,928
Legal fees 816
Audit fees 8,172
Trustees' fees and expenses 1,161
Transfer agent fees 6,288
Registration and filing fees 7,536
Printing costs 1,668
Amortization of organization costs 720
Other expenses 532
-----------
Total expenses before voluntary fee
reductions 156,084
Less: Expenses voluntarily reduced 31,472
-----------
Total Net Expenses 124,612
-----------
Net Investment Income 85,364
-----------
Realized/Unrealized Gains (losses) from
Investments:
Net realized gains (losses) from investment
transactions 1,821,140
Net change in unrealized appreciation/
depreciation from investments 4,786,203
----------
Net realized/unrealized gains (losses) from
investments 6,607,343
----------
Increase in Net Assets Resulting from
Operations $6,692,707
</TABLE>
See notes to financial statements.
<PAGE> 45
CENTURA FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited) October 31, 1997
<TABLE>
<CAPTION>
SOUTHEAST
EQUITY FUND
-----------
FOR THE PERIOD
ENDED
OCTOBER 31, 1997 (b)
---------------------
<S> <C>
OPERATIONS:
Net investment income $ 85,364
Net realized gains from investment transactions 1,821,140
Net change in unrealized appreciation/(depreciation)
from investments 4,007,490
------------
Change in net assets resulting from operations 5,913,994
------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Class A (2,116)
Class B (1,083)
Class C (82,822)
------------
Total distributions from net investment income (86,021)
------------
DISTRIBUTIONS FROM CAPITAL GAINS:
Class A 0
Class B 0
Class C 0
------------
Total distributions from capital gains 0
------------
Total Distributions (86,021)
------------
CAPITAL SHARE TRANSACTIONS:
Total proceeds from sales of shares: 24,370,261
Total proceeds of shares issued in reinvestment
of dividends: 32,310
Total cost of shares redeemed: (2,201,466)
------------
Change in net assets from
share transactions 22,201,105
------------
Change in net assets $ 28,029,078
NET ASSETS:
Beginning of period 0
------------
End of period $ 28,029,078
============
</TABLE>
- ----------
(a) For the period from October 1, 1996 (commencement of operations) to
April 30, 1997
(b) For the period from May 1, 1997 (commencement of operations) to
October 31, 1997
See notes to financial statements
<PAGE> 46
CENTURA FUNDS, INC.
Notes to Financial Statements (unaudited)
October 31, 1997
1. DESCRIPTION -- Centura Funds, Inc. (the "Company") is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company, organized under the laws of the State of Maryland on March
1, 1994. The company currently consists of four separate investment portfolios:
Centura Equity Growth Fund, Centura Federal Securities Income Fund, Centura
North Carolina Tax-Free Bond Fund, and Centura Equity Income Fund
(collectively, the "Funds"). The Funds, with the exception of Equity Income
Fund and Southeast Equity Fund, which commenced operations on October 1, 1996
and May 1, 1997, respectively, commenced operations on June 1, 1994, and prior
to that date had no operations other than organizational matters.
The Equity Growth Fund seeks to achieve its investment objective of
long-term capital appreciation by investing in a diversified portfolio
comprised mainly of publicly traded common and preferred stocks and securities
convertible into or exchangeable for common stock. The Federal Securities Fund
seeks to achieve its investment objective of providing relatively high current
income consistent with relative stability of principal and safety by investing
primarily in securities issued by the U.S. Government, its agencies and
instrumentalities. The North Carolina Tax-Free Bond Fund seeks to achieve its
investment objective of providing relatively high current income that is free
of both federal and North Carolina personal income tax together with relative
safety of principal by investing primarily in a portfolio of high quality North
Carolina municipal securities. The Equity Income Fund seeks to achieve its
investment objective of providing long-term capital appreciation and income by
investing primarily in dividend-paying common stocks, convertible preferred
stocks, and convertible bonds, notes and debentures. The Southeast Equity
Fund's investment objective is to provide long-term capital appreciation and
income.
The Funds each have three classes of shares known as Class A, Class B
and Class C Shares. Class A Shares are offered with a maximum front-end sales
charge of 4.50% for the Equity Growth Fund and Equity Income Fund and 2.75% for
the Federal Securities Income Fund and North Carolina Tax-Free Bond Fund. Class
B Shares are offered with a contingent deferred sales charge ("CDSC") declining
from a maximum in the first year after purchase of 5.00% for the Equity Income
Fund and the Centura Equity Growth Fund and 3.00% for each of the other Funds
to a minimum in the fifth year after purchase of 1.00% for all of the Funds.
This charge is imposed if shareholders redeem their shares within five years
from the date of purchase. On the seventh anniversary of their purchase date,
Class B Shares convert automatically to Class A Shares. Class C Shares are
offered to accounts managed by the Adviser's Trust Department and to non-profit
Institutions who invest at least $100,000, and there is no sales charge or CDSC
imposed on this class.
2. SIGNIFICANT ACCOUNTING POLICIES -- The following is a summary of
significant accounting policies followed by the Funds in the preparation of
their financial statements. The policies are in conformity with generally
accepted accounting principles. The preparation of financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses for the period. Actual results
could differ from those estimates.
a. Security Valuation Securities listed on an exchange are valued on
the basis of the last sale prior to the time the valuation is made. If there
has been no sale since the immediately previous valuation, then the current bid
price is used. Quotations are taken from the exchange where the security is
primarily traded. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Directors.
Notwithstanding the above, bonds and other fixed-income securities are valued
by using market quotations and may be valued on the basis of prices provided by
a pricing service approved by the Board of Directors. Short-term securities
with remaining maturities of 60 days or less are valued at amortized cost.
b. Investment Transactions Transactions are recorded on the trade
date. Identified cost of investments sold is used for both financial statement
and federal income tax purposes. Interest income, including the amortization of
discount or premium, is recorded as accrued. Dividends are recorded on the
ex-dividend date.
<PAGE> 47
c. Federal Income Taxes Each Fund's policy is to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, the Funds will not be subject to federal
income taxes to the extent that they distribute taxable and tax-exempt income
for their fiscal year. The Funds also intend to meet the distribution
requirements to avoid the payment of an excise tax.
d. Dividends To Shareholders The Equity Growth Fund and Equity Income
Fund declare and pay dividends of substantially all of its net investment
income monthly. The Federal Securities Income Fund and North Carolina Tax-Free
Bond Fund declare dividends of substantially all of their net investment income
daily and pay those dividends monthly. Each Fund will distribute, at least
annually, substantially all net capital gains, if any, earned by such Fund.
Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains.
e. Organization Expenses Costs incurred in connection with the
organization and initial registration of the Company, which have been allocated
among the Funds, have been deferred and are being amortized over a three or
five year period, beginning with each Fund's commencement of operations.
f. Determination of Net Asset Value and Allocation of Expenses
Expenses directly attributable to a Fund are charged to that Fund; other
expenses are allocated proportionately among each Fund within the Company in
relation to the net assets of each Fund or on another reasonable basis. In
calculating net asset value per share of each class, investment income,
realized and unrealized gains and losses and expenses other than class specific
expenses, are allocated daily to each class of shares based upon the proportion
of net assets of each class at the beginning of each day. Class specific
expenses, as determined under applicable law and regulatory policy, are borne
by the class incurring the expense.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES -- Centura Bank
("Adviser") serves as the Company's investment adviser. Pursuant to the
Advisory Contracts, the Adviser manages the investments of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Adviser is responsible for placing orders for the purchase and sale of
investment securities directly with brokers and dealers selected at its
discretion. The terms of the Advisory Contracts provide for annual fees at the
following percentages of average daily net assets:
Southeast Equity Fund ...........................................0.70%
For the year ended October 31, 1997, gross advisory fees and the
corresponding waived fees are listed below:
<TABLE>
<CAPTION>
GROSS FEES WAIVED FEES
---------- -----------
<S> <C> <C>
SOUTHEAST EQUITY FUND................... $79,594 $25,157
</TABLE>
<PAGE> 48
- ----------------
(a) For the period from October 1, 1996 (commencement of operations) to October
31, 1997.
Furman Selz LLC ("Furman Selz") provided the Funds with
administrative, fund accounting and transfer agency services for the period
from May 1, 1996 through September 30, 1996. Effective October 1, 1996, BISYS
Fund Services, Inc. ("BISYS") became the Funds' transfer agent and fund
accounting agent. Also effective October 1, 1996, BISYS Fund Services
("Administrator") became the Funds' administrator.
Services provided under the Administrative Services Contracts include
providing day-to-day administration of matters related to the corporate
existence of the Company, maintenance of its records and the preparation of
reports. The terms of the Administrative Services Contracts provide for annual
fees of 0.15% of average daily net assets of each Fund.
For the year ended October 31, 1997, gross administration fees and the
corresponding waived fees are listed below:
<TABLE>
<CAPTION>
GROSS FEES WAIVED FEES
---------- -----------
<S> <C> <C>
SOUTHEAST EQUITY FUND ....................... $17,056 $5,391
</TABLE>
Services provided under the Transfer Agency Agreements include providing
personnel and facilities to perform shareholder servicing and transfer agency
related services. The Transfer Agency Agreements provide for a per account fee
and reimbursement for out-of-pocket expenses in connection with shareholder
servicing. For the period from May 1, 1997 (commencement of operations) to
October 31, 1997, transfer agent expenses incurred by the Southeast Equity Fund
were $6,288.
The terms of the Fund Accounting Agreements provide for each of the
Funds to pay $2,500 per month to BISYS Fund Services. For the period from May
1, 1997 (commencement of operations) to October 31, 1997, fund accounting fees
incurred by the Southeast Equity Fund were $16,928.
Centura Funds Distributor, Inc. acts as the Funds' Distributor. The
Distributor is an affiliate of the Funds' Administrator and was formed
specifically to distribute the Funds.
Each of the Funds has adopted a Service and Distribution Plan (the
"Plan") with respect to its Class A and Class B Shares. The Plans provide that
each class of shares will pay the Distributor a fee calculated as a percentage
of the value of average daily net assets of that class as reimbursement for its
costs incurred in financing certain distribution and shareholder service
activities related to that class.
The Class A Plan provides for payments by each Fund to the Distributor
at an annual rate not to exceed 0.50% of the Fund's average net assets
attributable to its Class A Shares. Such fees may include a Service Fee
totaling up to 0.25% of the average annual net assets attributable to a Fund's
Class A Shares. Service Fees are paid to securities dealers and other financial
institutions for maintaining shareholder accounts and providing related
services to shareholders. During the current fiscal year the Adviser has
undertaken to limit 12b-1 fees for Class A Shares to 0.25%. For the period from
May 1, 1997 (commencement of operations) to October 31, 1997, distribution fees
incurred by the Southeast Equity Fund (Class A Shares) were $1,846. In
addition, the Distributor also retains a portion of the front-end sales charge.
The Class B Plan provides for payments by the Fund to the Distributor
at an annual rate not to exceed 1.00% of the Fund's average net assets
attributable to its Class B Shares. Such fees may include a Service Fee
totaling up to 0.25% of the
<PAGE> 49
average annual net assets attributable to a Fund's Class B Shares. For the
period from May 1, 1997 (commencement of operations) to October 31, 1997,
distribution fees incurred by the Southeast Equity Fund (Class B Shares) were
$5,700. The Distributor also receives the proceeds of any CDSC imposed on
redemptions of Class B Shares.
Centura Bank acts as custodian for the Funds. For furnishing custodial
services, Centura Bank is paid a monthly fee with respect to the Funds at an
annual rate based on a percentage of average daily net assets plus certain
transaction and out-of-pocket expenses. For the period from May 1, 1997
(commencement of operations) to October 31, 1997, custodian fees and
out-of-pocket expenses incurred by the Southeast Equity Fund were $8,067.
4. CONCENTRATION OF CREDIT RISK -- The North Carolina Tax-Free Bond
Fund invests substantially all of its assets in a varied portfolio of debt
obligations issued by the State of North Carolina and its authorities and
agencies. The issuers' abilities to meet their obligations may be affected by
economic or political developments in the state of North Carolina.
5. ACQUISITION OF CENTURA SOUTHEAST FUND AND CENTURA SOUTHEAST
EMPLOYEES BENEFIT FUND -- On May 2, 1997, the Southeast Equity Fund issued
Class C Shares to acquire all of the assets and liabilities of the Centura
Southeast Fund and Centura Southeast Employees Benefit Fund. The following is a
summary of shares issued, net assets acquired, net asset value per share and
unrealized appreciation as of the date acquired:
<TABLE>
<S> <C>
Shares 1,592,422
Net Assets $15,924,220
Net Asset Value $10.00
Unrealized Appreciation $778,713
</TABLE>
6. SECURITIES TRANSACTIONS -- The cost of securities purchased and
proceeds from securities sold (excluding short-term securities) for the year
ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
SOUTHEAST EQUITY FUND.................... $12,047,284 $7,583,920
</TABLE>
- ------
(a) For the period from October 1, 1996 (commencement of operations) to October
31, 1997.
<PAGE> 50
Notes to Financial Statements
October 31, 1997
CENTURA FUNDS, INC.
5. CAPITAL SHARE TRANSACTIONS (CONTINUED):
<TABLE>
<CAPTION>
SOUTHEAST EQUITY FUND
---------------------------------
AMOUNT SHARES
FOR THE PERIOD ENDED
OCTOBER 31, 1997
---------------------------------
<S> <C> <C>
CLASS A SHARES:
Shares issued $ 1,387,946 111,487
Dividends reinvested 1,537 122
Shares redeemed (11,726) (838)
----------------- ------------
Net Decrease - Class A Shares $ 1,377,757 110,771
================= ============
CLASS B SHARES:
Shares issued $ 2,183,576 174,869
Dividends reinvested 1,082 87
Shares redeemed (4,330) (319)
----------------- ------------
Net Increase - Class B Shares $ 2,180,328 174,637
================= ============
CLASS C SHARES:
Shares issued $ 20,302,975 1,911,258
Dividends reinvested 29,691 2,391
Shares redeemed (1,689,646) (132,971)
----------------- ------------
Net Increase (Decrease) -
Class C Shares 18,643,020 1,780,678
================= =============
Total Net Increase (Decrease) $ 22,201,105 2,066,086
================= =============
</TABLE>
<PAGE> 51
CENTURA FUNDS, INC.
CLASS C SHARES
3435 STELZER ROAD
COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION:
(800) 442-3688
CENTURA BANK -- ADVISER
BISYS FUND SERVICES -- ADMINISTRATOR AND SPONSOR
CENTURA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes the five Funds (the "Funds") comprising Centura
Funds, Inc. (the "Company"), a registered open-end management investment company
advised by Centura Bank (the "Adviser"). Each Fund is a separate portfolio of
the Company. The Funds described in this Prospectus are:
CENTURA EQUITY GROWTH FUND
CENTURA EQUITY INCOME FUND
CENTURA SOUTHEAST EQUITY FUND
CENTURA FEDERAL SECURITIES INCOME FUND
CENTURA NORTH CAROLINA TAX-FREE BOND FUND
This Prospectus relates to Class C shares which only certain investors are
eligible to purchase. Each Fund also has Class A shares and Class B shares. (See
"Other Information -- Capitalization.")
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND FUND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN MUTUAL FUNDS, SUCH AS THE FUNDS, INVOLVE RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund.
A Statement of Additional Information (the "SAI"), dated August 28, 1997,
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into the Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and
information numbers printed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is August 28, 1997.
<PAGE> 52
TABLE OF CONTENTS
PAGE
----
Highlights................................................................. 3
Fund Expenses.............................................................. 5
Financial Highlights....................................................... 6
The Funds.................................................................. 11
Description Of Securities And Investment Practices......................... 14
Investment Restrictions.................................................... 20
Risks Of Investing In The Funds............................................ 21
Management Of The Funds.................................................... 25
Minimum Purchase Requirements.............................................. 28
Pricing And Purchase Of Fund Shares........................................ 28
Exchange Of Fund Shares.................................................... 28
Redemption Of Fund Shares.................................................. 29
Portfolio Transactions..................................................... 31
Fund Share Valuation....................................................... 32
Dividends, Distributions, And Federal Income Taxation...................... 32
Other Information.......................................................... 35
Appendix................................................................... i
2
<PAGE> 53
HIGHLIGHTS
THE FUNDS
This prospectus describes the five funds comprising Centura Funds, Inc.
(the "Company"). Each Fund has a distinct investment objective and policies, as
described below. The investment objective of each Fund is a fundamental policy
of the Fund and may not be changed without approval of the Fund's shareholders.
See "The Funds." The Funds and their investment objectives and policies are as
follows:
- Centura Equity Growth Fund -- This Fund's objective is long-term
capital appreciation. It invests in a diversified portfolio comprised
mainly of publicly traded common and preferred stocks and securities
convertible into or exchangeable for common stock. Although its
investments will be principally in securities of U.S.-based companies;
it may also invest in securities of foreign issuers, generally in the
form of American Depositary Receipts ("ADRs").
- Centura Equity Income Fund -- This Fund's objective is to provide
long-term capital appreciation and income. The Fund invests primarily
in dividend-paying common stocks, convertible preferred stocks, and
convertible bonds, notes and debentures. It may also invest in
securities believed to offer special capital appreciation
opportunities. The Fund will invest primarily in securities of
U.S.-based companies, but it may also invest in securities of non-U.S.
issuers, generally through ADRs.
- Centura Southeast Equity Fund -- This Fund's investment objective is
long-term capital appreciation. The Fund invests primarily in a
diversified portfolio of common and preferred stocks and securities
convertible into common stock of companies that are headquartered or
have substantial operations in the Southeastern region of the United
States.
- Centura Federal Securities Income Fund -- This Fund seeks to provide
relatively high current income consistent with relative stability of
principal and safety. The Fund invests primarily in securities issued
by the U.S. Government, its agencies and instrumentalities. The maximum
maturity of any such security will be 10 years. Generally, at least 70%
of the Fund's portfolio will consist of direct obligations of the U.S.
Treasury, with no more than 30% in securities of U.S. Government
agencies and instrumentalities.
- Centura North Carolina Tax-Free Bond Fund -- This Fund seeks to provide
relatively high current income that is free of both Federal and North
Carolina personal income tax, together with relative safety of
principal. It invests primarily in a portfolio of high quality
municipal securities with a maximum maturity of 15 years and an average
portfolio maturity of 5 to 10 years.
RISKS OF INVESTING IN THE FUNDS
Investment in each of the Funds involves certain risks. There can, of
course, be no assurance that a Fund will achieve its investment objective or be
successful in preventing or minimizing the risk of loss that is inherent in
certain types of investments. Fund investments in securities of foreign issuers
involves special risks not usually associated with investing in U.S. companies.
Concentration of Centura North Carolina Tax-Free Bond Fund and Centura Southeast
Equity Fund in securities of a single state or region, respectively, makes each
of these Funds particularly vulnerable to events affecting that state or region,
respectively. The Funds have authority, which they do not presently intend to
use, to invest in various types of derivative instruments, which would entail
special risks. Investors should be aware that the value of each Fund's shares
will fluctuate, which may cause a loss in the principal value of the investment.
See "Risks of Investing in the Funds."
3
<PAGE> 54
THE ADVISER
Management of the Funds is provided by Centura Bank (the "Adviser"),
headquartered in Rocky Mount, North Carolina. For its advisory services, the
Adviser, receives from each Fund a fee at an annual rate based on the Fund's
average daily net assets. This fee is at an annual rate of 0.70% for Centura
Equity Growth Fund, 0.70% for Centura Equity Income Fund, 0.70% for Centura
Southeast Equity Fund, 0.30% for Centura Federal Securities Income Fund, and
0.35% for Centura North Carolina Tax-Free Bond Fund. Fees to the Adviser may be
reduced pursuant to expense limitations. See "Management of the Funds."
THE DISTRIBUTOR, ADMINISTRATOR AND SPONSOR
Centura Funds Distributor, Inc. (the "Distributor") distributes the Funds'
shares. BISYS Fund Services, Inc. ("BISYS") acts as Sponsor and Administrator to
the Funds. For its services as Administrator, each Fund pays BISYS a fee at the
annual rate of 0.15% of its average daily net assets. BISYS also acts as
transfer agent and fund accounting agent for the Funds, for which it receives
additional fees.
CLASSES OF SHARES
Class C shares are offered at net asset value with no sales charge, and no
contingent deferred sales charge ("CDSC") is imposed on redemptions. Class C
shares are available only to accounts managed by the Adviser's Trust Department.
See "Pricing and Purchase of Fund Shares" and "Redemption of Fund Shares." Each
of the Funds also offers Class A shares (subject to a front-end sales charge,
unless waived) and Class B shares (subject to a CDSC, unless waived). See "Other
Information --Capitalization."
The Funds reserve the right to redeem upon not less than 30 days' notice
all shares in a Fund's account which have an aggregate value of $1,000 or less.
ALL DIVIDENDS AND DISTRIBUTIONS WILL BE AUTOMATICALLY REINVESTED AT NET
ASSET VALUE IN ADDITIONAL SHARES OF THE SAME CLASS OF THE APPLICABLE FUND UNLESS
CASH PAYMENT IS REQUESTED. EACH OF THE FUNDS PAYS DIVIDENDS FROM INCOME, IF ANY,
MONTHLY.
SEE "PRICING AND PURCHASE OF FUND SHARES," "REDEMPTION OF FUND SHARES" AND
"DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION" FOR MORE INFORMATION.
4
<PAGE> 55
FUND EXPENSES
The following expense table indicates costs and expenses that an investor
in Class C shares should anticipate incurring either directly or indirectly as a
shareholder in the Funds.
FEE TABLE*
<TABLE>
<CAPTION>
CENTURA
CENTURA NORTH
CENTURA CENTURA CENTURA FEDERAL CAROLINA
EQUITY EQUITY SOUTHEAST SECURITIES TAX-FREE
GROWTH INCOME EQUITY INCOME BOND
FUND FUND FUND FUND FUND
CLASS C CLASS C CLASS C CLASS C CLASS C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None None None None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering
price) None None None None None
Deferred Sales Charge (as a percentage of
redemption proceeds)** None None None None None
Exchange Fees None None None None None
Annual Fund Operating Expenses
(as a percentage of average
net assets annualized)
Management Fees (After Waiver)*** 0.70 0.36 0.42 0.30 0.10
12b-1 Fees -- -- -- -- --
Other Expenses (After Waiver)*** 0.35 0.39 0.83 0.28 0.34
Total Portfolio Operating Expenses*** 1.05 0.75 1.25 0.58 0.44
</TABLE>
- ----------
* Class A shares of each Fund are subject to a maximum 12b-1 fee of 0.50% and
a maximum front-end load of 4.50% for Centura Equity Growth Fund, Centura
Equity Income Fund, and Centura Southeast Equity Fund, and 2.75% for each
of the other Funds (unless waived). Class B shares of each Fund are subject
to a 12b-1 fee of 1.00%, and a maximum contingent deferred sales charge
("CDSC") of 5.00% for Centura Equity Growth Fund, Centura Equity Income
Fund, and Centura Southeast Equity Fund, and 3.00% for each of the other
Funds (unless waived) for redemptions within five years of purchase.
** Shareholders who redeem shares by wire may be charged a fee by the banks
receiving the wire payments on their behalf. (See "Redemption of Fund
Shares.")
*** Amounts shown for "Management Fees," "Other Expenses" and "Total Portfolio
Operating Expenses" for the Equity Income Fund and the North Carolina
Tax-Free Bond Fund reflect reductions of fees payable by those Funds to the
Adviser and for administrative and transfer agent services pursuant to
agreements to limit fund expenses. Without these reductions, "Management
Fees" for the Equity Income Fund and North Carolina Tax-Free Bond Fund,
respectively, would be 0.70% and 0.35%, "Other Expenses" would be 0.47% and
0.45%, and "Total Portfolio Operating Expenses" would be 1.17% and 0.80%.
"Management Fees," "Other Expenses" and Total Portfolio Operating Expenses
for Centura Southeast Equity Fund reflect anticipated waivers. Without
these reductions, "Management Fees," "Other Expenses" and "Total Portfolio
Operating Expenses" for this Fund would be 0.70%, 0.89%, and 1.59%,
respectively.
EXAMPLE:*
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
CENTURA
CENTURA NORTH
CENTURA CENTURA CENTURA FEDERAL CAROLINA
EQUITY EQUITY SOUTHEAST SECURITIES TAX-FREE
GROWTH INCOME EQUITY INCOME BOND
FUND FUND FUND FUND FUND
CLASS C CLASS C CLASS C CLASS C CLASS C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1 Year $ 11 $ 8 $ 13 $ 6 $ 5
3 Years $ 33 $ 24 $ 40 $ 19 $ 14
5 years $ 58 $ 42 $ 69 $ 32 $ 25
10 Years $ 128 $ 93 $ 151 $ 73 $ 55
</TABLE>
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return. Actual return may be greater or less than the assumed
amount.
5
<PAGE> 56
FINANCIAL HIGHLIGHTS
The following table sets forth certain information for each Fund's fiscal
periods ended April 30, 1997, April 30, 1996 and April 30, 1995. (No information
is shown for Centura Southeast Equity Fund, which commenced operations on May 1,
1997.) The information set forth in this table has been audited by McGladrey &
Pullen LLP, the Funds' independent accountant whose report on the financial
statements is included in the Funds' Annual Report. The Annual Report also
includes Management's Discussion of Fund Performance. The Annual Report may be
obtained without charge. The financial statements from the Annual Report are
also contained in the Statement of Additional Information, which is available
without charge upon request. This information should be read in conjunction with
the financial statements.
6
<PAGE> 57
CENTURA EQUITY GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1997 YEAR ENDED APRIL 30, 1996
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 14.31 $ 14.24 $ 14.31 $ 10.70 $ 10.69 $ 10.70
INVESTMENT ACTIVITIES
Net investment income 0.06 (0.04) 0.09 0.06 (0.06) 0.07
Net realized and unrealized
gains from investments 1.58 1.57 15.58 3.67 3.65 3.65
Total from Investment
activities 1.64 1.53 1.67 3.70 3.59 3.72
DISTRIBUTIONS
Net investment income (0.06) (0.01) (0.09) (0.05) -- (0.07)
Net realized gains (0.56) (0.56) (0.56) (0.04) (0.04) (0.04)
Total Distributions (0.62) (0.57) (0.65) (0.09) (0.04) (0.11)
NET ASSET VALUE, END
OF PERIOD $ 15.33 $ 15.20 $ 15.33 $ 14.31 $ 14.24 $ 14.31
Total Return (excludes sales
and redemption charges) 11.55% 10.78% 11.82% 34.72% 33.73% 34.97%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 8,501 $ 9,761 $ 147,213 $ 5,740 $ 6,194 $ 133,714
Ratio of expenses to
average net assets 1.30% 2.05% 1.05% 1.25% 2.02% 1.04%
Ratio of net investment
income (loss) to average
net assets 0.42% (0.33)% 0.67% 0.27% (0.48)% 0.55%
Ratio of expenses to
average net assets* 1.55% 2.05% 1.05% (d) (d) (d)
Ratio of net investment
income (loss) to average
net assets* 0.17% (0.33)% 0.67% (d) (d) (d)
Portfolio Turnover 67%(c) 67 %(c) 67%(c) 46%(c) 46 %(c) 46%(c)
Average Commission
Rate Paid(f) $ 0.0805 $ 0.0805 $ 0.0805 -- -- --
<CAPTION>
PERIOD ENDED APRIL 30, 1995(A)
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.00 $ 10.00 $ 10.00
INVESTMENT ACTIVITIES
Net investment income 0.06 0.03 0.07
Net realized and unrealized
gains from investments 0.70 0.69 0.70
Total from Investment
activities 0.76 0.72 0.77
DISTRIBUTIONS
Net investment income (0.06) (0.03) (0.07)
Net realized gains -- -- --
Total Distributions (0.06) (0.03) (0.07)
NET ASSET VALUE, END
OF PERIOD $ 10.70 $ 10.69 $ 10.70
Total Return (excludes sales
and redemption charges) 7.64%(e) 7.23%(e) 7.71%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 968 $ 1,362 $ 84,004
Ratio of expenses to
average net assets 1.25%(b) 2.03%(b) 1.04%(b)
Ratio of net investment
income (loss) to average
net assets 0.63%(b) 0.00%(b) 0.79%(b)
Ratio of expenses to
average net assets* 1.32%(b) 2.06%(b) 1.07%(b)
Ratio of net investment
income (loss) to average
net assets* 0.60%(b) (0.03)%(b) 0.76%(b)
Portfolio Turnover 44%(c) 44%(c) 44%(c)
Average Commission
Rate Paid(f) -- -- --
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from June 1, 1994 (commencement of operations) to April 30,
1995.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) There were no waivers or reimbursements during the period.
(e) Not annualized.
(f) Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased and
sold by the Fund for which commissions were charged. Disclosure is not
required for prior periods.
7
<PAGE> 58
<TABLE>
<CAPTION>
EQUITY INCOME FUND
PERIOD ENDED
APRIL 30, 1997(A)
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
INVESTMENT ACTIVITIES
Net investment income 0.14 0.11 0.15
Net realized and unrealized gains
from investments 0.93 0.90 0.91
Total from Investment Activities 1.07 1.01 1.06
DISTRIBUTIONS
Net investment income (0.14) (0.11) (0.15)
Net realized gains (0.02) (0.02) (0.02)
Total Distributions (0.16) (0.13) (0.17)
NET ASSET VALUE, END OF PERIOD $ 10.91 $ 10.88 $ 10.89
Total return (excludes sales and
redemption charges)(d) 10.69% 10.15% 10.65%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 338 $ 427 $ 52,486
Ratio of expenses to average net assets(b) 0.99% 1.71% 0.75%
Ratio of net investment income (loss)
to average net assets(b) 2.15% 1.52% 2.45%
Ratio of expenses to average net assets*(b) . 1.65% 2.12% 1.17%
Ratio of net investment income (loss)
to average net assets*(b) 1.48% 1.10% 2.03%
Portfolio Turnover 24%(c) 24%(c) 24%(c)
Average Commission Rate Paid(e) $ 0.0898 $ 0.0898 $ 0.0898
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from October 1, 1996 (commencement of operations) to April
30, 1997.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Not annualized.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased and
sold by the Fund for which commissions where charged.
8
<PAGE> 59
FEDERAL SECURITIES INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1997 YEAR ENDED APRIL 30, 1996
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.01 $ 10.01 $ 10.01 $ 9.97 $ 9.97 $ 9.97
INVESTMENT ACTIVITIES
Net investment income 0.56 0.50 0.59 0.57 0.50 0.60
Net realized and unrealized
gains from investments (0.07) (0.07) (0.07) 0.04 0.04 0.04
Total from Investment
activities 0.49 0.43 0.52 0.61 0.54 0.64
DISTRIBUTIONS
Net investment income (0.56) (0.50) (0.59) (0.57) (0.50) (0.60)
Total Distributions (0.56) (0.50) (0.59) (0.57) (0.50) (0.60)
NET ASSET VALUE, END
OF PERIOD $ 9.94 $ 9.94 $ 9.94 $ 10.01 $ 10.01 $ 10.01
Total Return (excludes sales
and redemption charges) 5.07% 4.46% 5.33% 6.20% 5.40% 6.47%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 481 $ 194 $ 119,434 $ 526 $ 176 $ 109,775
Ratio of expenses to
average net assets 0.82% 1.40% 0.58% 0.85% 1.61% 0.61%
Ratio of net investment
income (loss) to average
net assets 5.63% 5.04% 5.88% 5.61% 4.84% 5.88%
Ratio of expenses to
average net assets* 1.07% 1.65% 0.58% (d) (d) (d)
Ratio of net investment
income (loss) to average
net assets* 5.38% 4.79% 5.88% (d) (d) (d)
Portfolio Turnover 26%(c) 26%(c) 26%(c) 34%(c) 34%(c) 34%(c)
<CAPTION>
PERIOD ENDED APRIL 30, 1995(A)
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.00 $ 10.00 $ 10.00
INVESTMENT ACTIVITIES
Net investment income 0.52 0.45 0.54
Net realized and unrealized
gains from investments (0.03) (0.03) (0.03)
Total from Investment
activities 0.49 0.42 0.51
DISTRIBUTIONS
Net investment income (0.52) (0.45) (0.54)
Total Distributions (0.52) (0.45) (0.54)
NET ASSET VALUE, END
OF PERIOD $ 9.97 $ 9.97 $ 9.97
Total Return (excludes sales
and redemption charges) 5.02%(e) 4.32%(e) 5.28%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 247 $ 118 $ 93,807
Ratio of expenses to
average net assets 0.86%(b) 1.61%(b) 0.63%(b)
Ratio of net investment
income (loss) to average
net assets 5.58%(b) 4.86%(b) 5.97%(b)
Ratio of expenses to
average net assets* 0.89%(b) 1.64%(b) 0.66%(b)
Ratio of net investment
income (loss) to average
net assets* 5.55%(b) 4.83%(b) 5.94%(b)
Portfolio Turnover 42%(c) 42%(c) 42%(c)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from June 1, 1994 (commencement of operations) to April 30,
1995.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) There were no waivers or reimbursements during the period.
(e) Not annualized.
9
<PAGE> 60
NORTH CAROLINA TAX-FREE FUND
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1997 YEAR ENDED APRIL 30, 1996
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.04 $ 10.04 $ 10.04 $ 9.98 $ 9.98 $ 9.98
INVESTMENT ACTIVITIES
Net investment income 0.43 0.37 0.46 0.42 0.34 0.44
Net realized and unrealized
gains from investments 0.03 0.03 0.03 0.13 0.13 0.13
Total from Investment
activities 0.46 0.40 0.49 0.55 0.47 0.57
DISTRIBUTIONS
Net investment income (0.43) (0.37) (0.46) (0.42) (0.34) (0.44)
Net realized gains (0.09) (0.09) (0.09) (0.07) (0.07) (0.07)
Total Distributions (0.52) (0.46) (0.55) (0.49) (0.41) (0.51)
NET ASSET VALUE, END
OF PERIOD $ 9.98 $ 9.98 $ 9.98 $ 10.04 $ 10.04 $ 10.04
Total Return (excludes sales
and redemption charges) 4.71% 4.11% 4.97% 5.50% 4.72% 5.78%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 3,823 $ 430 $ 32,159 $ 3,927 $ 393 $ 37,009
Ratio of expenses to
average net assets 0.69% 1.27% 0.44% 0.68% 1.44% 0.44%
Ratio of net investment
income (loss) to average
net assets 4.31% 3.73% 4.56% 3.98% 3.30% 4.32%
Ratio of expenses to
average net assets* 3.70% 3.12% 4.20% 3.62% 2.94% 3.96%
Ratio of net investment
income (loss) to average
net assets* 3.70% 3.12% 4.20% 3.62% 2.94% 3.96%
Portfolio Turnover 34%(c) 34%(c) 34%(c) 80%(c) 80%(c) 80%(c)
<CAPTION>
PERIOD ENDED APRIL 30, 1995(A)
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.00 $ 10.00 $ 10.00
INVESTMENT ACTIVITIES
Net investment income 0.39 0.32 0.41
Net realized and unrealized
gains from investments (0.02) (0.02) (0.02)
Total from Investment
activities 0.37 0.30 0.39
DISTRIBUTIONS
Net investment income (0.39) (0.32) (0.41)
Net realized gains -- -- --
Total Distributions (0.39) (0.32) (0.41)
NET ASSET VALUE, END
OF PERIOD $ 9.98 $ 9.98 $ 9.98
Total Return (excludes sales
and redemption charges) 3.77%(e) 3.09%(e) 4.08%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 429 $ 275 $ 34,885
Ratio of expenses to
average net assets 0.42%(b) 0.99%(b) 0.41%(b)
Ratio of net investment
income (loss) to average
net assets 4.46%(b) 3.89%(b) 4.64%(b)
Ratio of expenses to
average net assets* 3.96%(b) 3.39%(b) 4.14%(b)
Ratio of net investment
income (loss) to average
net assets* 3.96%(b) 3.39%(b) 4.14%(b)
Portfolio Turnover 121%(c) 121%(c) 121%(c)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from June 1, 1994 (commencement of operations) to April 30,
1995.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Not annualized.
10
<PAGE> 61
THE FUNDS
Each Fund is a separate diversified investment fund or portfolio, commonly
known as a mutual fund. The Funds are portfolios of the Company, which was
organized under the laws of the State of Maryland on March 1, 1994 as an
open-end, management investment company. Centura Equity Income Fund and Centura
Southeast Equity Fund were established as new portfolios of the Company on
August 28, 1996 and March 28, 1997, respectively. The Company's Board of
Directors oversees the overall management of the Funds and elects the Funds'
officers.
Centura Equity Growth Fund. Investors seeking long-term growth of capital
and for whom current income is not an objective should consider investing in
Centura Equity Growth Fund.
The investment objective of Centura Equity Growth Fund is long-term capital
appreciation. The Fund invests primarily in a diversified portfolio of publicly
traded common and preferred stocks and securities convertible into or
exchangeable for common stock. The Adviser uses fundamental analysis to select
stocks for the Fund's portfolio and the Fund will invest primarily in stocks of
established growth companies that are undervalued relative to their industry or
to their historical valuation ranges. However, the Adviser may also invest in
companies which it believes have improving prospects whose equity securities are
currently selling below their estimated intrinsic value. In addition,
out-of-favor growth cyclicals may be used if the adviser anticipates a
sustainable earnings recovery for these companies. The Fund expects to invest
primarily in securities of U.S.-based companies, but it may also invest in
securities of non-U.S. companies, generally through American Depository Receipts
("ADRs"). Under normal circumstances, at least 65% of the Fund's total assets
will be invested in equity securities and convertible securities. However, the
Fund may invest without limit in debt instruments for temporary defensive
purposes when the Adviser has determined that abnormal market or economic
conditions so warrant. These debt obligations may include U.S. Government
securities; certificates of deposit, bankers' acceptances and other short-term
debt obligations of banks with total assets of at least $1,000,000,000; debt
obligations of corporations (corporate bonds, debentures, notes and other
similar corporate debt instruments); commercial paper; and repurchase agreements
with respect to securities in which the Fund is authorized to invest. Although
the Fund's investments in such debt securities and in convertible and preferred
stock will generally be rated A, A-1, or better by Standard & Poor's Corporation
("S&P") or A, Prime-1 or better by Moody's Investors Service, Inc. ("Moody's"),
or deemed of comparable quality by the Adviser, the Fund is authorized to invest
up to 15% of its assets in securities rated as low as BBB by S&P or Baa by
Moody's, or deemed of comparable quality by the Adviser. Securities rated BBB or
Baa, or deemed equivalent to such securities, may have speculative
characteristics. See "Risks of Investing in the Funds." If any security held by
the Fund is downgraded below BBB/Baa (or so deemed by the Adviser), the
securities will generally be sold unless it is determined that such sale is not
in the best interest of the Fund. The Fund will invest in no securities rated
below BBB or Baa.
Centura Equity Income Fund. Investors seeking long-term growth and income
should consider an investment in Centura Equity Income Fund.
The investment objective of Centura Equity Income Fund is to provide
long-term capital appreciation and income. This Fund invests primarily in
dividend-paying common stocks, convertible preferred stocks, and convertible
bonds, notes and debentures. In managing this Fund, the Adviser uses fundamental
analysis to select stocks for the Fund's portfolio. The Fund will invest
primarily in the stocks of established companies with above average dividend
yields and/or prospects for increasing dividends. However, the Adviser may also
select stocks (or convertible securities) of companies that it believes offer
special appreciation opportunities because they are undervalued in the
marketplace based on such factors as price/earnings ratios or the ratio of stock
price to the company's inherent asset value, book value, cash flow or underlying
franchise value. The Fund expects to invest primarily in securities of
U.S.-based companies, but it may also invest in securities of non-U.S.
companies, generally through ADRs. Under normal circumstances, at least 65% of
the Fund's total assets will be invested in equity securities and convertible
securities and at least 65% of such assets will be invested in income producing
securities.
11
<PAGE> 62
However, for temporary defensive purposes when the Adviser has determined that
abnormal market or economic conditions so warrant, the Fund may invest without
limit in debt instruments of the same types, and subject to the same conditions,
as Centura Equity Growth Fund under such circumstances.
Centura Southeast Equity Fund. Investors seeking long-term growth of
capital through investment in companies of the southeastern United States should
consider investing in Centura Southeast Equity Fund.
The investment objective of the Centura Southeast Equity Fund is long-term
capital appreciation. The Fund invests primarily in a diversified portfolio of
common and preferred stocks and securities convertible into common stock of
companies headquartered or with substantial operations in the southeastern
region of the United States. For a company to qualify as having "substantial
operations" in the southeastern United States, it must derive at least 50% of
its income from or have at least 50% of its physical assets located within the
region. The southeastern region includes Alabama, Arkansas, Florida, Georgia,
Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and
Virginia. From time to time the Fund may also invest substantially in companies
headquartered or with substantial operations in the state of Texas.
The Adviser uses fundamental analysis to select stocks of issuers that are
undervalued relative to their industry or their historical valuation ranges.
However, the Adviser may also invest in companies which it believes have
improving prospects, whose equity securities are selling below their estimated
intrinsic value. In addition, out-of-favor cyclicals may be purchased if the
Adviser anticipates a sustainable earnings recovery. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
securities of southeastern issuers, and at least 65% of its total assets will be
invested in equity securities or securities convertible into equity securities.
Under normal market conditions, the Adviser anticipates investing a majority of
the Fund's assets in securities of small to medium sized companies. Subject to
the foregoing, the Fund also has authority to invest in equity and debt
securities of non-southeastern issuers and non-U.S. issuers. Its investments in
non-U.S. issuers will generally be in the form of American Depository Receipts
("ADRs"). For temporary defensive purposes during abnormal market or economic
conditions, the Fund may invest without limit in debt instruments of the same
type, and subject to the same conditions, as Centura Equity Growth Fund under
such circumstances.
Centura Federal Securities Income Fund. Investors seeking relatively high
current income from a portfolio of U.S. Government securities should consider
investing in Centura Federal Securities Income Fund.
The investment objective of Centura Federal Securities Income Fund is to
provide high current income consistent with relative stability of principal and
safety. It pursues this objective by investing primarily in securities issued by
the U.S. Government, its agencies and instrumentalities with maximum maturities
of ten years. These securities typically display greater price stability and
safety than debt securities of longer maturity and lower quality, although the
latter generally offer higher income. In addition to limiting the maturity of
its portfolio securities, the Fund attempts to moderate principal fluctuations
by investing at least 70% of its portfolio in direct obligations of the U.S.
Treasury, with no more than 30% in securities of U.S. Government agencies and
instrumentalities, and by using a modified "laddering" approach to structuring
the Fund's portfolio -- i.e., by investing in securities with different
maturities and adjusting their relative proportions, as well as the maximum and
average maturity of its portfolio securities, to adapt to various market
conditions. Using this approach, the Fund hopes both to capture a high
proportion of the currently available yield on fixed income securities and to
limit volatility.
To permit desirable flexibility, the Fund has authority to invest in
corporate debt securities rated A or better by S&P or Moody's (or deemed of
comparable quality by the Adviser) and high quality money market instruments
including commercial paper rated A-1 or better by S&P or Prime-1 or better by
Moody's (or deemed by the Adviser to be of comparable quality); certificates of
deposit, bankers' acceptances and other short-term debt obligations of banks
with total assets of at least $1,000,000,000; and repurchase agreements with
respect to securities in which the Fund is authorized to invest.
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Centura North Carolina Tax-Free Bond Fund. Investors seeking dividend
income that is generally free of regular federal and North Carolina personal
income taxes should consider investing in the Centura North Carolina Tax-Free
Bond Fund.
The investment objective of Centura North Carolina Tax-Free Bond Fund is
relatively high current income that is free of both regular federal and North
Carolina personal income tax, together with relative safety of principal. This
Fund invests primarily in a portfolio of obligations issued by the state of
North Carolina, its political subdivisions, and their agencies and
instrumentalities, the income from which, in the opinion of the issuer's bond
counsel, is exempt from regular federal and North Carolina personal income taxes
("North Carolina Municipal Obligations"). By limiting the Fund's average
portfolio maturity to between 5 and 10 years, with a maximum maturity for any
portfolio security of 15 years, the Fund seeks to capture a high proportion of
the currently available return on North Carolina Municipal Obligations while
providing greater safety of principal than would be available from longer term
municipal securities. It also seeks to moderate price fluctuations by
diversifying its investments among different municipal issuers and by limiting
its investments to securities of high quality.
The Fund seeks to provide income that is fully free from regular federal
and North Carolina personal income taxes, as well as from the federal
alternative minimum tax. To provide the flexibility to deal with a variety of
market circumstances, however, the Fund has limited authority (a) to invest in
municipal obligations of other states ("Municipal Obligations"), the income from
which would not be free from North Carolina income tax, (b) to invest up to 10%
of its assets in municipal obligations subject to the federal alternative
minimum tax ("AMT Obligations"), and (c) to invest up to 20% of its assets in
AMT Obligations plus cash reserves and obligations producing taxable income,
including obligations of the U.S. Government, its agencies and
instrumentalities; certificates of deposit, bankers' acceptances and other
short-term debt obligations of U.S banks with total assets of at least
$1,000,000,000; commercial paper rated A-1 or better by S&P or Prime-1 or better
by Moody's (or deemed by the Adviser to be of comparable quality); and
repurchase agreements relating to underlying securities in which the Fund is
authorized to invest. For temporary defensive purposes when the Adviser has
determined that abnormal market and economic conditions so warrant, the Fund may
invest up to 50% of its assets in investments producing taxable income and AMT
Obligations. Any distributions by the Fund of capital gains and other income
that are not designated by the Fund as "exempt-interest" dividends will normally
be subject to federal, state and, in some cases, local tax. As a fundamental
policy, during periods of normal market conditions, at least 80% of the Fund's
net assets will be invested in securities the interest income from which is
exempt from the regular federal income tax. Additionally, under normal
circumstances, (a) at least 65% of the Fund's total assets will be invested in
"bonds" -- i.e. debt obligations with a duration of at least one year from the
date of issue, and (b) at least 65% of the value of the Fund's total assets will
be invested in bonds that are North Carolina Municipal Obligations. Tax advisers
should be consulted regarding tax effects for particular investors.
The Fund's quality criteria require that the Fund purchase Municipal
Obligations rated A, SP-1 or better by S&P or A, MIG-1 or better by Moody's;
commercial paper rated A-1 or better by S&P or Prime-1 or better by Moody's;
corporate debt securities rated A or better by S&P or Moody's (or debt
securities given equivalent ratings by at least two other nationally recognized
statistical rating organizations ("NRSROs")) or, if any of such securities are
not rated, that they be of comparable quality in the Adviser's opinion. For more
information on Municipal Obligations and North Carolina Municipal Obligations,
see "Description of Securities and Investment Practices" and "Risks of Investing
in the Funds."
In determining to invest in a particular Municipal Obligation, the Adviser
will rely on the opinion of bond counsel for the issuer as to the validity of
the security and the exemption of interest on such security from federal and
relevant state income taxes, and the Adviser will not make an independent
investigation of the basis for any such opinion.
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OTHER INVESTMENT POLICIES OF THE FUNDS
Each of the Funds may also invest up to 5% of its total assets in another
investment company, not to exceed 10% of the value of its total assets in the
securities of other investment companies. Taxable distributions earned from
other investment companies will, likewise, represent taxable income to a Fund. A
Fund will incur additional expenses due to the duplication of expenses as a
result of investing in funds other than the Funds. Each of the Funds has
authority, which it does not presently intend to exercise, to invest in futures
and options contracts and to lend its portfolio securities. For information
concerning these practices, see "Investment Policies" in the SAI.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. GOVERNMENT SECURITIES (All Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Treasury bills, which have a maturity of up to one year,
are direct obligations of the United States and are the most frequently issued
marketable U.S. Government security. The U.S. Treasury also issues securities
with longer maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates
issued by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Banks, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment.
Bank Obligations (All Funds). These obligations include negotiable
certificates of deposit and bankers' acceptances. The Funds limit their bank
investments to dollar-denominated obligations of U.S. or foreign banks which
have more than $1 billion in total assets at the time of investment and, in the
case of U.S. banks, are members of the Federal Reserve System or are examined by
the Comptroller of the Currency, or whose deposits are insured by the Federal
Deposit Insurance Corporation.
Commercial Paper (All Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions, as well as similar instruments issued by government
agencies and instrumentalities.
Corporate Debt Securities (All Funds). A Fund's investments in corporate
debt securities are limited to corporate debt securities (corporate bonds,
debentures, notes and other similar corporate debt instruments) which meet the
previously disclosed minimum ratings and maturity criteria established for the
Fund under the direction of the Board of Directors and the Fund's Adviser or, if
unrated, are in the Adviser's opinion comparable in quality to corporate debt
securities in which the Fund may invest. See "The Funds."
Repurchase Agreements (All Funds). Securities held by the Funds may be
subject to repurchase agreements. A repurchase agreement is a transaction in
which the seller of a security commits itself at the time of the sale to
repurchase that security from the buyer at a mutually agreed-upon time and
price. These agreements permit the Funds to earn income for periods as short as
overnight. Repurchase agreements may be considered to be loans by the purchaser
collateralized by the underlying securities. These agreements
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will be fully collateralized at all times and the collateral will be
marked-to-market daily. The Funds will enter into repurchase agreements only
with dealers, domestic banks or recognized financial institutions which in the
opinion of the Adviser, present minimal credit risks in accordance with
guidelines adopted by the Board of Directors. In the event of default by the
seller under the repurchase agreement a Fund may have problems in exercising its
rights to the underlying securities and may experience time delays in connection
with the disposition of such securities.
Loans Of Portfolio Securities (All Funds). To increase current income each
Fund may lend its portfolio securities worth up to 5% of that Fund's total
assets to brokers, dealers and financial institutions, provided certain
conditions are met, including the condition that each loan is secured
continuously by collateral maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned. For
further information, see the SAI.
Variable And Floating Rate Demand And Master Demand Notes (All Funds). The
Funds may, from time to time, buy variable or floating rate demand notes issued
by corporations, bank holding companies and financial institutions and similar
instruments issued by government agencies and instrumentalities. These
securities will typically have a maturity over one year but carry with them the
right of the holder to put the securities to a remarketing agent or other entity
at designated time intervals and on specified notice. The obligation of the
issuer of the put to repurchase the securities may be backed by a letter of
credit or other obligation issued by a financial institution. The repurchase
price is ordinarily par plus accrued and unpaid interest. Generally, the
remarketing agent will adjust the interest rate every seven days (or at other
specified intervals) in order to maintain the interest rate at the prevailing
rate for securities with a seven-day or other designated maturity. A Fund's
investment in demand instruments which provide that the Fund will not receive
the principal note amount within seven days' notice, in combination with the
Fund's other investments in illiquid instruments, will be limited to an
aggregate total of 15% of that Fund's net assets.
The Funds may also buy variable rate master demand notes. The terms of
these obligations permit a Fund to invest fluctuating amounts at varying rates
of interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. The Funds have the right to increase the amount under
the note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the Fund and
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and, thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. In connection with any such purchase and on an ongoing
basis, the Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes make demand
simultaneously. While master demand notes, as such, are not typically rated by
credit rating agencies, a Fund may, under its minimum rating standards, invest
in them only if, at the time of an investment, the issuer meets the criteria set
forth in this Prospectus for commercial paper obligations.
Forward Commitments And When-Issued Securities (All Funds). A Fund may
purchase when-issued securities and make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time if the Fund holds,
and maintains until the settlement date in a segregated account cash, U.S.
Government securities or high-grade debt obligations in an amount sufficient to
meet the purchase price, or if the Fund enters into offsetting contracts for the
forward sale of other securities it owns. Purchasing securities on a when-issued
basis and forward commitments involves a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of a Fund's other assets. No income
accrues on securities purchased on a when-issued basis prior to the time
delivery of the securities is made, although a Fund may earn interest on
securities it has deposited in the segregated account because it does not pay
for the when-issued securities until they are delivered. Investing in
when-issued securities has the effect of (but is not the same as) leveraging the
Fund's assets. Although a Fund would generally purchase securities on a
when-issued basis or enter into
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forward commitments with the intention of actually acquiring securities, that
Fund may dispose of a when-issued security or forward commitment prior to
settlement if the Adviser deems it appropriate to do so. A Fund may realize
short-term profits or losses upon such sales.
Mortgage-Related Securities (Centura Equity Income Fund, Centura Federal
Securities Income Fund and Centura North Carolina Tax-Free Bond Fund). Mortgage
pass-through securities are securities representing interests in "pools" of
mortgages in which payments of both interest and principal on the securities are
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Centura North Carolina Tax-Free Bond Fund may invest only in those mortgage
pass-through securities whose payments are tax-exempt. Early repayment of
principal on mortgage pass-through securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of a mortgage-related security generally will decline;
however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other fixed-income
securities. In recognition of this prepayment risk to investors, the Public
Securities Association (the "PSA") has standardized the method of measuring the
rate of mortgage loan principal prepayments. The PSA formula, the Constant
Prepayment Rate (the "CPR"), or other similar models that are standard in the
industry will be used by a Fund in calculating maturity for purposes of its
investment in mortgage-related securities. Upward trends in interest rates tend
to lengthen the average life of mortgage-related activities and also cause the
value of outstanding securities to drop. Thus, during periods of rising interest
rates, the value of these securities held by a Fund would tend to drop and the
portfolio-weighted average life of the securities held by a Fund may tend to
lengthen due to this effect. Longer-term securities tend to experience more
price volatility. Under these circumstances, a Manager may, but is not required
to, sell securities in part in order to maintain an appropriate
portfolio-weighted average life.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (such as securities guaranteed by
the Government National Mortgage Association ("GNMA"); or guaranteed by agencies
or instrumentalities of the U.S. Government (such as securities guaranteed by
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"), which are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations). Mortgage
pass-through securities created by nongovernmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance, and letters of credit, which may be issued by governmental
entities, private insurers or the mortgage poolers.
A Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs") which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, semi-annually.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC or FNMA. CMOs are structured into multiple classes, with each class
bearing a different stated maturity. Monthly payments of principal, including
prepayments, are first returned to investors holding the shortest maturity
class; investors holding longer maturity classes receive principal only after
the first class has been retired. CMOs may be issued by government and
non-governmental entities. Some CMOs are debt obligations of FHLMC issued in
multiple classes with different maturity dates secured by the pledge of a pool
of conventional mortgages purchased by FHLMC. Other types of CMOs are issued by
corporate issuers in several series, with the proceeds used to purchase
mortgages or mortgage pass-through certificates. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan
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associations) to borrow against their loan portfolios. To the extent a
particular CMO is issued by an investment company, a Fund's ability to invest in
such CMOs will be limited. See "The Funds --Other Investment Policies of the
Funds."
Assumptions generally accepted by the industry concerning the probability
of early payment may be used in the calculation of maturities for debt
securities that contain put or call provisions, sometimes resulting in a
calculated maturity different from the stated maturity of the security.
It is anticipated that governmental, government-related or private entities
may create mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. As new types of mortgage-related securities are developed
and offered to investors, the Adviser will, consistent with a Fund's investment
objectives, policies and quality standards, consider making investments in such
new types of mortgage-related securities, but no investments will be made in
such securities until the Fund's prospectus and/or SAI have been revised to
reflect such securities.
Other Asset-Backed Securities (Centura Equity Income Fund, Centura Federal
Securities Income Fund and Centura North Carolina Tax-Free Bond Fund). Other
asset-backed securities (unrelated to mortgage loans) are developed from time to
time and may be purchased by a Fund to the extent consistent with its investment
objective and policies, but only after disclosure reflecting such securities has
been added to the Fund's prospectus and/or SAI.
Foreign Securities (Centura Equity Growth Fund, Centura Equity Income Fund
and Centura Southeast Equity Fund). These Funds may invest in securities
represented by American Depositary Receipts ("ADRs"). ADRs are
dollar-denominated receipts generally issued by domestic banks, which represent
the deposit with the bank of a security of a foreign issuer, and which are
publicly traded on exchanges or over-the-counter in the United States. There are
certain risks associated with investments in unsponsored ADR programs. Because
the non-U.S. company does not actively participate in the creation of the ADR
program, the underlying agreement for service and payment will be between the
depositary and the shareholders. The company issuing the stock underlying the
ADRs pays nothing to establish the unsponsored facility, as fees for ADR
issuance and cancellation are paid by brokers. Investors directly bear the
expenses associated with certificate transfer, custody and dividend payment. In
addition, in an unsponsored ADR program, there may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. For more information, see "Risks of
Investing in the Funds."
Forward Foreign Currency Transactions (Centura Equity Growth Fund, Centura
Equity Income Fund and Centura Southeast Equity Fund). These Funds may enter
into forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates. These contracts,
which involve costs, permit a Fund to purchase or sell a specific amount of a
particular currency at a specified price on a specified future date. A Fund will
realize a benefit from this type of contract only to the extent that the
relevant currencies move as anticipated. If the currencies do not move as
anticipated, the contracts may cause greater loss to a Fund than if they had not
been used. See the SAI for further information concerning forward foreign
currency transactions.
Futures Contracts And Options (All Funds). The Funds may purchase and sell
futures contracts on securities, currencies, and indices of securities, and
write and sell put and call options on securities, currencies and indices of
securities as a hedge against changes in interest rates, stock prices, currency
fluctuations and other market developments, provided that not more than 5% of a
Fund's net assets are committed to margin deposits on futures contracts and
premiums for options. See the SAI for information about futures and options. See
"Risks of Investing in the Funds" for a discussion of risks related to investing
in futures and options.
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Municipal Obligations (Centura North Carolina Tax-Free Bond Fund). The Fund
may invest in securities issued by states, their political subdivisions and
agencies and instrumentalities of the foregoing, the income from which, in the
opinion of bond counsel for the issuer, is exempt from regular income taxes by
the federal government and state of the issuing entity ("Municipal
Obligations"). Such Municipal Obligations include municipal bonds, floating rate
and variable rate Municipal Obligations, participation interests in municipal
bonds, tax-exempt asset-backed certificates, tax-exempt commercial paper,
short-term municipal notes, and stand-by commitments. It may be anticipated that
governmental, government-related or private entities will create other
tax-exempt investments in addition to those described above. As new types of
tax-exempt vehicles are developed, the Adviser will, consistent with the Fund's
investment objectives, policies and quality standards, consider making
investments in such types of Municipal Obligations, but will not make such
investments until they are reflected in the Fund's prospectus and/or SAI. The
Fund will purchase only Municipal Obligations rated A, SP-1 or better by S&P or
A, MIG-1 or better by Moody's (or given equivalent ratings by another NRSRO) or,
if the securities are not rated, are of comparable quality in the Adviser's
opinion. Municipal Obligations in which the Fund may invest include "general
obligation" and "revenue" securities. General obligation securities are backed
by the issuer's full faith, credit and taxing power for the payment of principal
and interest. The taxes that can be levied for the payment of debt service may
be limited or unlimited in terms of rate or amount or special assessments.
Revenue securities are secured primarily by net revenues generated by a
particular facility or group of facilities, or by the proceeds of a special
excise or other specific revenue source. Additional security may be provided by
a debt service reserve fund. Municipal bonds include industrial development
bonds ("IDBs"), moral obligation bonds, put bonds and private activity bonds
("PABs"). PABs generally relate to the financing of a facility used by a private
entity or entities. The credit quality of such bonds is usually directly related
to that of the users of the facilities. The interest on most PABs is an item of
tax preference for purposes of the Federal alternative minimum tax and Fund
distributions attributable to such interest likewise, constitute an item of tax
preference. For information on the risks related to the Fund's concentration in
North Carolina Municipal Obligations, see "Risks of Investing in the Funds."
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund).
The Fund may invest in municipal lease obligations including certificates of
participation ("COPs"), which finance a variety of public projects. Because of
the way these instruments are structured, they may carry a greater risk than
other types of Municipal Obligations. The Fund may invest in lease obligations
only when they are rated by a rating agency or, if unrated, are deemed by the
Adviser, to be of a quality comparable to the Fund's quality standards. With
respect to any such unrated municipal lease obligations in which the Fund
invests, the Company's Board of Directors will be responsible for determining
their credit quality, on an ongoing basis, including assessing the likelihood
that the lease will not be canceled. Prior to purchasing a municipal lease
obligation and on a regular basis thereafter, the Adviser will evaluate the
credit quality and, pursuant to guidelines adopted by the Directors, the
liquidity of the security. In making its evaluation, the Adviser will consider
various credit factors, such as the necessity of the project, the municipality's
credit quality, future borrowing plans, and sources of revenue pledged for lease
repayment, general economic conditions in the region where the security is
issued, and liquidity factors, such as dealer activity. For discussion regarding
municipal lease obligations, see "Risks of Investing in the Funds" in this
Prospectus and "Investment Policies" in the SAI.
Stand-By Commitments (Centura North Carolina Tax-Free Bond Fund). The Fund
may acquire "stand-by commitments," which will enable it to improve its
portfolio liquidity by making available same-day settlements on sales of its
securities. A stand-by commitment gives the Fund, when it purchases a Municipal
Obligation from a broker, dealer or other financial institution ("seller"), the
right to sell up to the same principal amount of such securities back to the
seller, at the Fund's option, at a specified price. Stand-by commitments are
also known as "puts." The Fund may acquire stand-by commitments solely to
facilitate portfolio liquidity and not to protect against changes in the market
price of the Fund's portfolio securities. The exercise by the Fund of a stand-by
commitment is subject to the ability of the other party to fulfill its
contractual commitment.
The Fund expects that stand-by commitments generally will be available
without the payment of any
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direct or indirect consideration. However, if necessary or advisable, the Fund
will pay for stand-by commitments either separately in cash or by paying a
higher price for portfolio securities which are acquired subject to the
commitments.
It is difficult to evaluate the likelihood of use or the potential benefit
of a stand-by commitment. Therefore, it is expected that the Directors will
determine that stand-by commitments ordinarily have a "fair value" of zero,
regardless of whether any direct or indirect consideration was paid. However, if
the market price of the security subject to the stand-by commitment is less than
the exercise price of the stand-by commitment, such security win ordinarily be
valued at such exercise price. Where the Fund has paid for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held.
There is no assurance that stand-by commitments will be available to the
Fund nor does the Fund assume that such commitments would continue to be
available under all market conditions.
Third Party Puts (Centura North Carolina Tax-Free Bond Fund). The Fund may
also purchase long-term fixed rate bonds that have been coupled with an option
granted by a third party financial institution allowing the Fund at specified
intervals to tender (or "put") the bonds to the institution and receive the face
value thereof (plus accrued interest). These third party puts are available in
several different forms, may be represented by custodial receipts or trust
certificates and may be combined with other features such as interest rate
swaps. The Fund receives a short-term rate of interest (which is periodically
reset), and the interest rate differential between that rate and the fixed rate
on the bond is retained by the financial institution. The financial institution
granting the option does not provide credit enhancement. In the event that there
is a default in the payment of principal or interest, or downgrading of a bond
to below investment grade, or a loss of the bond's tax-exempt status, the put
option will terminate automatically. The risk to the Fund in this case will be
that of holding a long-term bond which would tend to lengthen the weighted
average maturity of the Fund's portfolio.
These bonds coupled with puts may present tax issues also associated with
stand-by commitments. As with any stand-by commitments acquired by the Fund, the
Fund intends to take the position that it is the owner of any Municipal
Obligation acquired subject to a third-party put, and that tax-exempt interest
earned with respect to such Municipal Obligations will be tax-exempt in its
hands. There is no assurance that the Internal Revenue Service will agree with
such position in any particular case. Additionally, the federal income tax
treatment of certain other aspects of these investments, including the treatment
of tender fees and swap payments, in relation to various regulated investment
company tax provisions is unclear. However, the Adviser intends to manage the
Fund's portfolio in a manner designed to minimize any adverse impact from these
investments.
Participation Interests (Centura North Carolina Tax-Free Bond Fund). The
Fund may purchase from banks participation interests in all or part of specific
holdings of Municipal Obligations. Each participation is backed by an
irrevocable letter of credit or guarantee of the selling bank that the Fund's
Adviser has determined meets the prescribed quality standards of the Fund. Thus
either the credit of the issuer of the Municipal Obligation or the selling bank,
or both, will meet the quality standards of the Fund. The Fund has the right to
sell the participation back to the bank after seven days' notice for the full
principal amount of the Fund's interest in the Municipal Obligation plus accrued
interest, but only (a) as required to provide liquidity to the Fund, (b) to
maintain a high quality investment portfolio or (c) upon a default under the
terms of the Municipal Obligation. The selling bank will receive a fee from the
Fund in connection with the arrangement. The Fund will not purchase
participation interests unless it receives an opinion of counsel or a ruling of
the Internal Revenue Service satisfactory to the Adviser that interest earned by
the Fund on Municipal Obligations on which it holds participation interests is
exempt from federal income tax.
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INVESTMENT RESTRICTIONS
The following restrictions are applicable to each of the Funds, except as
otherwise indicated.
(1) No Fund may, with respect to 75% of its total assets, purchase more
than 10% of the voting securities of any one issuer or invest more than
5% of the value of such assets in the securities or instruments of any
one issuer, except securities or instruments issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
(2) No Fund may purchase securities or instruments which would cause 25% or
more of the market value of its total assets at the time of such
purchase to be invested in securities or instruments of one or more
issuers having their principal business activities in the same
industry, provided that there is no limit with respect to investments
in the U.S. Government, its agencies and instrumentalities.
(3) No Fund may borrow money, except that a Fund may borrow from banks up
to 10% of the current value of its total net assets for temporary or
emergency purposes. A Fund will make no purchase if its outstanding
borrowings exceed 5% of its total assets.
(4) No Fund may make loans, except that a Fund may (a) lend its portfolio
securities, (b) enter into repurchase agreements with respect to its
portfolio securities, and (c) purchase the types of debt instruments
described in this Prospectus or the SAI.
For purposes of investment restriction number (1), Centura North Carolina
Tax-Free Bond Fund considers a Municipal Obligation to be issued by the
governmental entity (or entities) whose assets and revenues back the Municipal
Obligation. For a Municipal Obligation backed only by the assets and revenues of
a nongovernmental user, such user is deemed to be the issuer; such issuers, to
the extent their principal business activities are in the same industry, are
also subject to investment restriction (2). For purposes of investment
restriction (2), public utilities are not deemed to be a single industry but are
separated by industrial categories, such as telephone or gas utilities.
The foregoing investment restrictions and those described in the SAI as
fundamental are policies of each Fund which may be changed with respect to that
Fund only when permitted by law and approved by the holders of a majority of the
applicable Fund's outstanding voting securities as described under "Other
Information -- Voting."
Additionally, as a non-fundamental policy, no Fund may invest more than 15%
of the aggregate value of its net assets in investments which are illiquid, or
not readily marketable (including repurchase agreements having maturities of
more than seven calendar days and variable and floating rate demand and master
demand notes not requiring receipt of the principal note amount within seven
days' notice).
If a percentage restriction on investment policies or the investment or use
of assets set forth in this Prospectus are adhered to at the time a transaction
is effected, later changes in percentage resulting from changing values will not
be considered a violation.
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RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in the
value of the investments held by the Fund. Shareholders of a Fund should expect
the value of their shares to fluctuate with changes in the value of the
securities owned by that Fund. There is, of course, no assurance that a Fund
will achieve its investment objective or be successful in preventing or
minimizing the risk of loss that is inherent in investing in particular types of
investment products. In order to attempt to minimize that risk, the Adviser
monitors developments in the economy, the securities markets, and with each
particular issuer. Also, as noted earlier, each Fund is managed within certain
limitations that restrict the amount of a Fund's investment in any single
issuer.
Foreign Securities (Centura Equity Growth Fund, Centura Equity Income Fund
and Centura Southeast Equity Fund). Investing in the securities of issuers in
any foreign country, including ADRS, involves special risks and considerations
not typically associated with investing in securities of U.S. issuers. These
include differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. A Fund's objective may be affected either
unfavorably or favorably by fluctuations in the relative rates of exchange
between the currencies of different nations, by exchange control regulations and
by indigenous economic and political developments. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of a Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in a Fund's net asset value and
any net investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund. The rate of exchange between the U.S. dollar and other
currencies is determined by several factors including the supply and demand for
particular currencies, central bank efforts to support particular currencies,
the movement of interest rates, the pace of business activity in certain other
countries and the United States, and other economic and financial conditions
affecting the world economy. Although a Fund may engage in forward foreign
currency transactions and foreign currency options to protect its portfolio
against fluctuations in currency exchange rates in relation to the U.S. dollar,
there is no assurance that these techniques will be successful. See "Description
of Securities and Investment Practices" and below for additional information
about these kinds of transactions.
Although the Funds value their assets daily in terms of U.S. dollars, the
Funds do not intend to convert their holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference ("spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to a Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
Through the Funds' flexible policies, the Adviser endeavors to avoid
unfavorable consequences and to take advantage of favorable developments in
particular nations where, from time to time, it may place the Funds'
investments. See the SAI for further information about foreign securities.
Zero Coupon And Pay-In-Kind Securities (Centura Equity Income Fund, Centura
Federal Securities Income Fund and Centura North Carolina Tax-Free Bond Fund).
Zero coupon bonds (which do not pay
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interest until maturity) and pay-in-kind securities (which pay interest in the
form of additional securities) may be more speculative and may fluctuate more in
value than securities which pay income periodically and in cash. In addition,
although a Fund receives no periodic cash payments from such investments,
applicable tax rules require the Fund to accrue and pay out its income from such
securities annually as income dividends and require stockholders to pay tax on
such dividends (except if such dividends qualify as exempt-interest dividends).
North Carolina Municipal Obligations (Centura North Carolina Tax-Free Bond
Fund). Because this Fund will concentrate its investments in North Carolina
Municipal Obligations, it may be affected by political, economic or regulatory
factors that may impair the ability of North Carolina issuers to pay interest on
or to repay the principal of their debt obligations. Thus, the net asset value
of the shares may be particularly impacted by the general economic situation
within North Carolina. The concentration of the Fund's investments in a single
state may involve greater risk than if the Fund invested in Municipal
Obligations throughout the country, due to the possibility of an economic or
political development which could uniquely affect the ability of issuers to meet
the debt obligations of the securities.
The economy of North Carolina is supported by industry, agricultural
products, and tourism, with the largest segment of its work force employed in
manufacturing. From 1980 to 1995, the state's per capita income grew 133.8%,
from $7,999 to $20,604. The state has the nation's tenth highest population, and
its unemployment rate in March 1995 was 3.9% of the labor force (versus a
national rate of 5.5%). The state's labor force grew 26.4% between 1980 and
1994, while its complexion shifted from agriculture to the production of goods
and services. In 1993, North Carolina nevertheless ranked tenth in the nation in
gross agricultural income. Although 20% of its agricultural income comes from
tobacco, 34% comes from a diversified poultry industry and the remainder from a
relatively large variety of other agricultural plant and animal products. North
Carolina is the third most diversified state in the country in terms of its
agriculture.
Obligations of issuers of North Carolina Municipal Obligations are subject
to the provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors, such as the Federal Bank Reform Act of 1978. In
addition, the obligations of such issuers may become subject to the laws enacted
in the future by Congress or the North Carolina legislature or by referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other
conditions, the power or ability of any issuer to pay, when due, the principal
of and interest on its North Carolina Municipal Obligations may be materially
affected. Additional considerations relating to the risks of investing in North
Carolina Municipal Obligations are presented in the SAI.
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund).
Municipal lease obligations have special risks not normally associated with
municipal bonds. These obligations frequently contain "non-appropriation"
clauses that provide that the governmental issuer of the obligation has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purposes by the legislative body on a yearly or other
periodic basis. For more information on risks of municipal lease investments,
see the SAI.
Risks Of Options Transactions (All Funds). The purchase and writing of
options involves certain risks. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity to
profit from a price increase in the underlying securities above the exercise
price, but, as long as its obligation as a writer continues, has retained the
risk of loss should the price of the underlying security decline. The writer of
an option has no control over the time when it may be required to fulfill its
obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the underlying
securities at the exercise price. If a put or call option purchased by a Fund is
not sold when it has remaining value, and if the market price of the underlying
security, in the case of a put, remains equal to or greater than the exercise
price, or in the case of a call, remains less than or equal to the exercise
price,
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the Fund will lose its entire investment in the option. Also, where a put or
call option on a particular security is purchased to hedge against price
movements in a related security, the price of the put or call option may move
more or less than the price of the related security. There can be no assurance
that a liquid market will exist when a Fund seeks to close out an option
position. Furthermore, if trading restrictions or suspensions are imposed on the
options market, a Fund may be unable to close out a position. If a Fund cannot
effect a closing transaction, it will not be able to sell the underlying
security while the previously written option remains outstanding, even if it
might otherwise be advantageous to do so.
Risks Of Foreign Currency Options (Centura Equity Growth Fund, Centura
Equity Income Fund and Centura Southeast Equity Fund). Currency options traded
on U.S. or other exchanges may be subject to position limits which may limit the
ability of a Fund to reduce foreign currency risk using such options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller and generally do not have as much market liquidity as exchange-traded
options. Employing hedging strategies with options on currencies does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Furthermore, such hedging transactions
reduce or preclude the opportunity for gain if the value of the hedged currency
should change relative to the U.S dollar. A Fund will not speculate in options
on foreign currencies.
There is no assurance that a liquid secondary market will exist for any
particular foreign currency option, or at any particular time. In the event no
liquid secondary market exists, it might not be possible to effect closing
transactions in particular options. If a Fund cannot close out an option which
it holds, it would have to exercise its option in order to realize any profit
and would incur transactional costs on the sale of the underlying assets.
Risks Of Futures And Related Options Transactions (All Funds). There are
several risks associated with the use of futures contracts and options on
futures contracts. While a Fund's use of futures contracts and related options
for hedging may protect a Fund against adverse movements in the general level of
interest rates or securities prices, such transactions could also preclude the
opportunity to benefit from favorable movements in the level of interest rates
or securities prices. There can be no guarantee that the Adviser's forecasts
about market value interest rates and other applicable factors will be correct
or that there will be a correlation between price movements in the hedging
vehicle and in the securities being hedged. The skills required to invest
successfully in futures and options may differ from the skills required to
manage other assets in a Fund's portfolio. An incorrect forecast or imperfect
correlation could result in a loss on both the hedged securities in a Fund and
the hedging vehicle so that the Fund's return might have been better had hedging
not been attempted.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures contract or futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed. The potential risk to a Fund from a
futures transaction is unlimited. Therefore, although the Funds have authority
to engage in futures transactions, they have no present intention to do so and
will engage in such transactions only when disclosure to that affect has been
added to the Prospectus.
A Fund will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or are quoted on an automated quotation system. A Fund will not
enter into a futures contract if immediately thereafter the initial margin
deposits for futures contracts held by the Fund plus premiums paid by it for
open futures options positions, less the amount by which any such positions are
"in-the-money," would exceed 5% of the Fund's total assets.
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The Funds may trade futures contracts and options on futures contracts on
U.S. domestic markets and, except for Centura North Carolina Tax-Free Bond Fund,
also on exchanges located outside of the United States. Foreign markets,
however, may have greater risk potential than domestic markets. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the Commodity Futures Trading Commission and may be subject to
greater risk than trading on domestic exchanges. For example, some foreign
exchanges are principal markets so that no common clearing facility exists and a
trader may look only to the broker for performance of the contract. In addition,
any profits that a Fund might realize in trading could be eliminated by adverse
changes in the exchange rate of the currency in which the transaction is
denominated, or the Fund could incur losses as a result of changes in the
exchange rate. Transactions on foreign exchanges may include both commodities
that are traded on domestic exchanges or boards of trade and those that are not.
Risks Of Forward Foreign Currency Contracts (Centura Equity Growth Fund,
Centura Equity Income Fund and Centura Southeast Equity Fund). The precise
matching of forward contracts and the value of the securities involved will not
generally be possible since the future value of the securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. Projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. There can be no assurance that new forward contracts or
offsets will always be available to the Funds.
Risks Of Concentrating Investments In Southeastern Issuers (Centura
Southeast Equity Fund). Because Centura Southeast Equity Fund will normally
invest primarily in equity securities of southeastern issuers, its portfolio
will be more vulnerable to negative economic developments and natural disasters
affecting the region than a fund with a more geographically diversified
portfolio. There can, of course, be no assurance that southeastern issuers will
outperform, or perform as well as, issuers of other regions, and there can be no
assurance that southeastern issuers whose securities are held by the Fund will
outperform, or perform as well as, those of the region generally, other issuers
of the region, or issuers of any other U.S. or foreign region.
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MANAGEMENT OF THE FUNDS
The business and affairs of each Fund are managed under the direction of
the Board of Directors. The Directors are Leslie H. Garner, Jr., James H. Speed,
Jr., Frederick E. Turnage, Lucy Hancock Bode and J. Franklin Martin. Additional
information about the Directors, as well as the Company's executive officers,
may be found in the SAI under the heading "Management -- Directors and
Officers."
THE ADVISER: CENTURA BANK
Centura Bank, 131 North Church Street, Rocky Mount, North Carolina 27802,
is a member bank of the Federal Reserve System. Centura Bank and its parent,
Centura Banks, Inc., were formed in 1990 through a merger of two other Rocky
Mount, North Carolina bank holding companies and their subsidiary banks.
For the advisory services it provides the Funds, the Adviser receives from
each Fund fees, payable monthly based on the average daily net assets, at an
annual rate based on the Fund's average net assets. Fees are 0.70% for Centura
Equity Growth Fund, 0.70% for Centura Equity Income Fund, 0.30% for Centura
Federal Securities Income Fund, 0.35% for Centura North Carolina Tax-Free Bond
Fund and 0.70% for Centura Southeast Equity Fund. The Adviser also serves as
Custodian for the Funds' assets, for which it receives additional fees. For the
fiscal year ended April 30, 1997, the Adviser received $1,127,435 in advisory
fees from the Equity Growth Fund and $358,174 from the Federal Securities Income
Fund. The advisory fees for the North Carolina Tax-Free Bond Fund amounted to
$140,821; however, the Adviser waived $100,587. For the period from October 1,
1996 (the commencement of operations) to April 30, 1997, the advisory fees for
the Equity Income Fund were $217,106; however, the Adviser waived $105,451.
Frank Jolley has primary responsibility for management of the Centura
Equity Income Fund and the Centura Equity Growth Fund. Mr. Jolley has over 17
years experience in investments and financial analysis. He graduated from the
University of North Carolina with a Bachelor of Science in business
administration. Mr. Jolley began his investment career with Dean Witter Reynolds
in retail sales and later served as a branch manager for a regional securities
firm. Primary duties at Centura have included the management of common and
collective funds along with personal trust and pension fund investment
responsibilities. In August 1996, Mr. Jolley was named Chief Investment Officer
of Centura's asset management area. As Chief Investment Officer, his duties
include oversight of all Centura's mutual funds. Mr. Jolley is a Chartered
Financial Analyst and a member of the North Carolina Society of Financial
Analysts where he currently serves as the Secretary and member of the Board.
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C. Nathaniel Siewers serves as portfolio manager of Centura North Carolina
Tax-Free Bond Fund and Centura Federal Securities Income Fund. Mr. Siewers has
over twelve years of experience managing fixed income securities. His most
recent experience involved managing Centura Bank's fixed income portfolio of
both taxable and tax-free securities, with assets of approximately $1.6 billion
at June 30, 1997. Mr. Siewers graduated from Wake Forest University with a
Bachelor of Arts degree in economics and from East Carolina University with a
Masters in Business Administration. He is a Certified Public Accountant and a
Fellow in the North Carolina Association of Certified Public Accountants. Mr.
Siewers has been a faculty member of the North Carolina School of Banking since
1987; he is the Associate Dean for the 1997 term and has been named Dean for the
1998 and 1999 terms.
Daniel Cole serves as portfolio manager for Centura Southeast Equity Fund.
Mr. Cole joined Centura Bank in November, 1996 where he has managed the Centura
Southeast Common Trust Funds and has personal and pension fund investment
responsibilities. Mr. Cole has four years experience in investments and
portfolio management. He began his investment career with Southern National Bank
in Winston-Salem, North Carolina as an investment analyst and portfolio manager
in Trust Investments. In 1995, Mr. Cole joined Central Carolina Bank in Durham,
North Carolina as a portfolio manager and trust investment officer where he was
primarily responsible for personal trust and endowment fund investment
management. He graduated from Guilford College in Greensboro, North Carolina
with a Bachelor of Science degree and from Virginia Polytechnic Institute and
State University in Blacksburg, Virginia with an M.B.A. in Finance. Mr. Cole is
a Level III Chartered Financial Analyst candidate and a member of the
Association for Investment Management and Research and the North Carolina
Society of Financial Analysts.
THE DISTRIBUTOR
Centura Funds Distributor, Inc., 125 West 55th Street, New York, New York
10019, acts as the Funds' Distributor. The Distributor is an affiliate of the
Funds' Administrator, BISYS, was formed specifically to distribute the Funds.
SERVICE ORGANIZATIONS
Payments may be made by the Funds or by the Adviser to various banks, trust
companies, broker-dealers or other financial organizations (collectively,
"Service Organizations") for providing administrative services for the Funds and
their shareholders, such as maintaining shareholder records, answering
shareholder inquiries and forwarding materials and information to shareholders.
The Funds may pay fees to Service Organizations (which vary depending upon the
services provided) in amounts up to an annual rate of 0.25% of the daily net
asset value of the shares of either class owned by shareholders with whom the
Service Organization has a servicing relationship.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than a Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult with them
regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either federal or state regulations relating
to the permissible activities of banks and their
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<PAGE> 77
subsidiaries or affiliates, could prevent a bank Service Organization from
continuing to perform all or a part of its servicing activities. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders of the Funds and alternative means for continuing the servicing of
such shareholders would be sought. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
THE ADMINISTRATOR AND SPONSOR
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), 3435 Stelzer Road, Columbus, Ohio 43219, acts as Sponsor and
Administrator of the Funds. BISYS is a subsidiary of BISYS Group, Inc., which is
headquartered in Little Falls, New Jersey and supports more than 5,000 financial
institutions and corporate clients through two strategic business units. BISYS
Information Services Group provides image and data processing outsourcing, and
pricing analysis to more than 600 banks nationwide. BISYS Investment Services
Group designs, administers and distributes over 60 families of proprietary
mutual funds consisting of more than 365 portfolios, and provides 401(k)
marketing support, administration, and recordkeeping services in partnership
with banking institutions and investment management companies.
Pursuant to an Administration Agreement with the Company, BISYS provides
certain management and administrative services necessary for the Funds'
operations including: (a) general supervision of the operation of the Funds
including coordination of the services performed by the Funds' Adviser,
custodian, independent accountants and legal counsel; (b) regulatory compliance,
including the compilation of information for documents such as reports to, and
filings with, the SEC and state securities commissions, and preparation of proxy
statements and shareholder reports for the Funds; (c) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Funds' officers and Board of Directors; and (d)
furnishing office space and certain facilities required for conducting the
business of the Funds. For these services, BISYS receives from each Fund a fee,
payable monthly, at the annual rate of 0.15% of each Fund's average daily net
assets. Prior to January 1, 1997, Furman Selz LLC served as the Funds'
Administrator under a contract substantially similar to the Administration
Agreement with BISYS. For the fiscal year ended April 30, 1997, BISYS and Furman
Selz received a total of $241,593 and $179,087 in administrative services fees
from the Equity Growth Fund and the Federal Securities Income Fund,
respectively. For the fiscal year ended April 30, 1997, Furman Selz and BISYS
earned $60,352 from the North Carolina Tax-Free Bond Fund of which $43,051 was
waived. For the period from October 1, 1996 (commencement of operations) through
April 30, 1997, Furman Selz and BISYS earned $46,523 from the Equity Income Fund
of which $23,882 was waived.
Prior to January 1, 1997, Furman Selz also acted as the Funds' transfer and
fund accounting agent and effective January 1, 1997, BISYS Fund Services, Inc.
("BFSI") serves in that capacity (for which it receives a fee of $15 per account
per year, plus out-of-pocket expenses) and provides assistance in calculating
the Funds' net asset values and provides other accounting
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services for the Funds (for an annual fee of $30,000 per Fund plus out-of-pocket
expenses). For the fiscal year ended April 30, 1997, Furman Selz and BFSI earned
$101,541, $13,117 and $11,109 for the Equity Growth Fund, Federal Securities
Income Fund and North Carolina Tax-Free Bond Fund, respectively, for transfer
agent fees. For the period from October 1, 1996 (commencement of operations) to
April 30, 1997, Furman Selz and BFSI earned $16,260 in transfer agent fees from
the Equity Income Fund.
BFSI and Furman Selz earned $28,792, $31,735 and $39,742 in fund accounting
fees for the Equity Growth Fund, the Federal Securities Income Fund and the
North Carolina Tax-Free Bond Fund, respectively, for the same period. For the
period from October 1, 1996 (commencement of operations) to April 30, 1997, BFSI
and Furman Selz earned $19,212 in fund accounting fees for the Equity Income
Fund.
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses
specifically the responsibility of the Administrator, the Adviser or other
service providers. In addition to fees paid to service providers described
above, the costs borne by the Funds, some of which may vary among the classes,
as noted above, include: legal and accounting expenses; Directors' fees and
expenses; insurance premiums; custodian and transfer agent fees and expenses;
expenses incurred in acquiring or disposing of the Funds' portfolio securities;
expenses of registering the Funds' shares for sale with the SEC and of
satisfying requirements of various state securities commissions; expenses of
maintaining the Funds' legal existence and of shareholders' meetings; and
expenses of preparing and distributing reports, proxy statements and
prospectuses to existing shareholders. Each Fund bears its own expenses
associated with its establishment as a portfolio of the Company; these expenses
are amortized over a five-year period from the commencement of a Fund's
operations. Company expenses directly attributable to a Fund or class are
charged to that Fund or class; other expenses are allocated proportionately
among all of the Funds and classes in the Company in relation to the net assets
of each Fund and class.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in each of the Funds is $1,000, except that
the minimum investment requirement for an IRA or other qualified retirement plan
is $250. Any subsequent investments must be at least $250, except for an IRA or
qualified retirement plan investment. All initial investments should be
accompanied by a completed Purchase Application. A Purchase Application may be
obtained by calling Fund Services at 1-800-44CENTURA (442-3688). However, a
separate application is required for IRA and other qualified retirement plan
investments. Centura North Carolina Tax-Free Bond Fund is not a recommended
investment for an IRA or other qualified retirement plan. The Funds reserve the
right to reject purchase orders.
PRICING AND PURCHASE OF FUND SHARES
Each Fund offers its Class C shares at their net asset value next
determined after a purchase order has been received. All consideration received
by the Funds for the purchase of Class C shares is invested in full and
fractional Class C shares of the appropriate Fund. Certificates for shares are
not issued. BISYS maintains records of each shareholder's holdings of Fund
shares, and each shareholder receives a monthly statement of transactions,
holdings and dividends. The Funds reserve the right to reject any purchase.
EXCHANGE OF FUND SHARES
The Funds offer two convenient ways to exchange Class C shares in one Fund
for Class C shares of another Fund in the Company. Before engaging in an
exchange transaction, a shareholder should read
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<PAGE> 79
carefully the information in the Prospectus describing the Fund into which the
exchange will occur. A Class C shareholder may not exchange shares of one Fund
for Class C shares of another Fund unless the latter Fund's Class C shares have
satisfied applicable requirements for sale in the state of the shareholder's
residence. There is no minimum amount required for exchanges, provided the
investor has satisfied the $1,000 minimum investment requirement for the Fund
into which he or she is exchanging, and no service fee is imposed for an
exchange. The Company may terminate or amend the terms of the exchange privilege
at any time upon 60 days notice to shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the respective net asset values next determined following
receipt of the request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may
be recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction. See "Dividends,
Distributions and Federal Income Taxation" for an explanation of circumstances
in which a sales charge paid to acquire shares of the Funds may not be taken
into account in determining gain or loss on the disposition of those shares.
Exchange By Mail. To exchange Fund shares by mail, shareholders should
simply send a letter of instruction to the Funds. The letter of instruction must
include: (a) the investor's account number; (b) the class of shares to be
exchanged; (c) the Fund from and the Fund into which the exchange is to be made;
(d) the dollar or share amount to be exchanged; and (e) the signatures of all
registered owners or authorized parties.
Exchange By Telephone. To exchange Fund shares by telephone or to ask any
questions, shareholders may call the Fund at 1-800-44CENTURA (442-3688). Please
be prepared to give the telephone representative the following information: (a)
the account number, social security number and account registration; (b) the
class of shares to be exchanged; (c) the name of the Fund from which and the
Fund into which the exchange is to be made; and (d) the dollar or share amount
to be exchanged. Telephone exchanges are provided automatically to each
shareholder unless otherwise specifically indicated on the Purchase Application.
The Funds employ procedures, including recording telephone calls, testing a
caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that a Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. A Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Funds reserve the right to suspend or terminate the privilege of
exchanging by mail or by telephone at any time. Telephone Redemption and
Telephone Exchange will be suspended for a period of 10 days following a
telephonic address change.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any business
day. If a shareholder holds shares in more than one class of a Fund, any request
for redemption must specify the class from which shares are to be redeemed. In
the event a shareholder fails to make such a specification or if there are
insufficient shares of the specified class to satisfy the redemption order, the
redemption order will be delayed until the Fund's transfer agent receives
further instructions from the shareholder.
Class C shares will be redeemed at the net asset value next determined
after a redemption request in good order has been received by the applicable
Fund. See "Pricing and Purchase of Fund Shares."
Where the shares have been purchased by check, the redemption request will
be held until the purchasing check has cleared, which may take up to 15 days.
Shareholders may avoid this delay by
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<PAGE> 80
investing through wire transfers of Federal funds. During the period prior to
the time the shares are redeemed, dividends on the shares will continue to
accrue and be payable and the shareholder will be entitled to exercise all other
beneficial rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day. The
Fund may, however, take up to seven days to make payment although this will not
be the customary practice. Also, if the New York Stock Exchange is closed (or
when trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates. A
redemption may be a taxable transaction on which gain or loss may be recognized.
REDEMPTION METHODS
To ensure acceptance of a redemption request, it is important that
shareholders follow the procedures described below. Although the Funds have no
present intention to do so, the Funds reserve the right to refuse or to limit
the frequency of any telephone or wire redemptions. Of course, it may be
difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Funds' services and their provisions may
be modified or terminated at any time by the Funds. If the Funds terminate any
particular service, they will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
Requests in "proper order" must include the following documentation: (a) a
letter of instruction, if required, signed by all registered owners of the
shares in the exact names in which they are registered; (b) any required
signature guarantees (see "Signature Guarantees" below); and (c) other
supporting legal documents, if required, in the case of estate, trusts,
guardianships, custodianships, corporations, pension and profit sharing plans
and other organizations.
A shareholder may redeem shares using any of the following methods:
Through An Authorized Broker, Investment Adviser Or Service Organization.
The shareholder should contact his or her broker, investment adviser or Service
Organization and provide instructions to redeem shares. Such organizations are
responsible for prompt transmission of orders. The broker will contact the Funds
and place a redemption trade. The broker may charge a fee for this service.
By Mail. Shareholders may redeem shares by sending a letter directly to the
Funds. To be accepted, a letter requesting redemption must include: (a) the Fund
name, class of shares and account registration from which shares are being
redeemed; (b) the account number; (c) the amount to be redeemed; (d) the
signatures of all registered owners; and (e) a signature guarantee by any
eligible guarantor institution including members of national securities
exchanges, commercial banks or trust companies, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. Shareholders may redeem shares by calling the Funds toll free
at 1-800-44CENTURA (442-3688). Be prepared to give the telephone representative
the following information: (a) the account number, social security number and
account registration; (b) the name of the class (if applicable) and the Fund
from which shares are being redeemed; and (c) the amount to be redeemed.
Telephone redemptions are available unless otherwise indicated on the Purchase
Application or on the Optional Services Form. The Funds employ procedures,
including recording telephone calls, testing a caller's identity, and sending
written confirmation of telephone transactions, designed to give reasonable
assurance that instructions communicated by telephone are genuine, and to
discourage fraud. To the extent that a Fund does not follow such procedures, it
may be liable for losses due to unauthorized or fraudulent telephone
instructions. A Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine. Telephone
Redemption and Telephone Exchange will be suspended for a period of 10 days
following a telephonic address change.
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<PAGE> 81
By Wire. Shareholders may redeem shares by contacting the Funds by mail or
telephone and instructing the Funds to send a wire transmission to the
shareholder's bank.
The shareholder's instructions should include: (a) the account number,
social security number and account registration; (b) the name of the class and
the Fund from which shares are being redeemed; and (c) the amount to be
redeemed. Wire redemptions can be made unless otherwise indicated on the
shareholder's Purchase Application, and a copy is attached of a void check on an
account where proceeds are to be wired. The bank may charge a fee for receiving
a wire payment on behalf of its customer.
Systematic Withdrawal Plan. An owner of $12,000 or more of shares of a Fund
may elect to have periodic redemptions made from this account to be paid on a
monthly, quarterly, semiannual or annual basis. The maximum withdrawal per year
is 12% of the account value at the time of the election. A sufficient number of
shares to make the scheduled redemption will normally be redeemed on the date
selected by the shareholder. Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. Capital gains and dividend distributions paid to the
account will automatically be reinvested at net asset value on the distribution
payment date.
Redemption Of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Funds reserve the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder (not by market action) below $1,000. If during the 30-day notice
period the shareholder purchases sufficient shares to bring the value of the
account to $1,000, the account will not be redeemed.
Redemption In Kind. All redemptions of shares of the Funds shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of a Fund during any 90-day period
of up to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have a Fund
make payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued generally in the same manner as the securities of that Fund are
valued generally. If the recipient were to sell such securities, he or she would
incur brokerage charges.
Signature Guarantees. To protect shareholder accounts, the Funds and the
Administrator from fraud, signature guarantees are required to enable the Funds
to verify the identity of the person who has authorized a redemption by mail
from an account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareholder(s) and
the registered address, (2) a redemption of $25,000 or more, and (3) share
transfer requests. Signature guarantees may be obtained from certain eligible
financial institutions, including but not limited to, the following: banks,
trust companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities and Transfer Association
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP") or
the New York Stock Exchange Medallion Signature Program ("MSP"). Shareholders
may contact the Funds at 1-800-442-3688 for further details.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser places orders
for the purchase and sale of portfolio investments for the Funds' accounts with
brokers or dealers it selects in its discretion.
In effecting purchases and sales of portfolio securities for the account of
a Fund, the Adviser will seek
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<PAGE> 82
the best execution of the Fund's orders. Purchases and sales of portfolio debt
securities for the Funds are generally placed by the Adviser with primary market
makers for these securities on a net basis, without any brokerage commission
being paid by the Funds. Trading does, however, involve transaction costs.
Transactions with dealers serving as primary market makers reflect the spread
between the bid and asked prices. The Funds may purchase securities during an
underwriting, which will include an underwriting fee paid to the underwriter.
Purchases and sales of common stocks are generally placed by the Adviser with
broker-dealers which, in the judgment of the Adviser, provide prompt and
reliable execution at favorable security prices and reasonable commission rates.
Broker-dealers are selected on the basis of a variety of factors such as
reputation, capital strength, size and difficulty of order, sale of Fund shares
and research provided to the Adviser. The Adviser may cause a Fund to pay
commissions higher than another broker-dealer would have charged if the Adviser
believes the commission paid is reasonable in relation to the value of the
brokerage and research services received by the Adviser.
Each of the Funds may buy and sell securities to take advantage of
investment opportunities when such transactions are consistent with a Fund's
investment objectives and policies and when the Adviser believes such
transactions may improve a Fund's overall investment return. These transactions
involve costs in the form of spreads or brokerage commissions. The Funds are not
normally expected to have portfolio turnover rates in excess of 50%.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Adviser may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.
FUND SHARE VALUATION
The net asset value per share for each class of shares of each Fund is
calculated at 4:00 p.m. (Eastern time), Monday through Friday, on each day the
New York Stock Exchange is open for trading, which excludes the following
business holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each class of shares of the
Funds is computed by dividing the value of net assets of each class (i.e., the
value of the assets less the liabilities) by the total number of such class'
outstanding shares. All expenses, including fees paid to the Adviser and
Administrator, are accrued daily and taken into account for the purpose of
determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale
prior to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken for the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Directors. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Directors.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Directors. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
DIVIDENDS, DISTRIBUTIONS, AND FEDERAL INCOME TAXATION
Each Fund intends to qualify annually to elect to be treated as a regulated
investment company
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<PAGE> 83
pursuant to the provisions of Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). To qualify, each Fund must meet certain income,
distribution and diversification requirements. In any year in which a Fund
qualifies as a regulated investment company and timely distributes all of its
taxable income and substantially all of its net tax-exempt interest income, the
Fund generally will not pay any U.S. federal income or excise tax.
Each Fund intends to distribute to its shareholders substantially all of
its investment company taxable income (which includes, among other items,
dividends and interest and the excess, if any, of net short-term capital gains
over net long-term capital losses). Investment company taxable income (other
than the capital gain component thereof) will be declared and paid monthly by
Centura Equity Growth Fund, Centura Equity Income Fund and Centura Southeast
Equity Fund. Centura Federal Securities Income Fund and Centura North Carolina
Tax-Free Bond Fund will declare dividends daily and pay them out monthly. Each
Fund intends to distribute, at least annually, substantially all net realized
long- and short-term capital gain. In determining amounts of capital gains to be
distributed, any capital loss carryovers from prior years will be applied
against capital gains.
In the case of Centura Federal Securities Income Fund and Centura North
Carolina Tax-Free Bond Fund, the amount declared each day as a dividend may be
based on projections of estimated monthly net investment income and may differ
from the actual investment income determined in accordance with generally
accepted accounting principles. An adjustment will be made to the dividend each
month to account for any difference between the projected and actual monthly
investment income.
Distributions will be paid in additional Fund shares of the relevant class
based on the net asset value of shares of that class at the close of business of
the payment date of the distribution, unless the shareholder elects in writing,
not less than five full business days prior to the record date, to receive such
distributions in cash. Dividends declared in, and attributable to, the preceding
month will be paid within five business days after the end of each month. In the
case of the Funds that declare daily dividends, shares purchased will begin
earning dividends on the day after the purchase order is executed, and shares
redeemed will earn dividends through the day the redemption is executed.
Any dividend or other distribution paid by a Fund has the effect of
reducing the net asset value per share on the record date by the amount thereof.
Therefore, in the case of Centura Equity Growth Fund, Centura Equity Income Fund
and Centura Southeast Equity Fund, which do not declare dividends daily, a
dividend or other distribution paid shortly after a purchase of shares would
represent, in substance, a return of capital to the shareholder (to the extent
it is paid on the shares so purchased), even though subject to income taxes, as
discussed below.
Dividends distributed by Centura North Carolina Tax-Free Bond Fund that are
derived from interest income exempt from federal income tax and are designated
by the Fund as "exempt-interest dividends" will be exempt from the regular
federal income tax. Capital gains distributions and any other distributions of
Fund earnings not designated by the Fund as exempt-interest dividends will,
however, generally be subject to federal, state and local tax. The Fund's
investment policies permit it to earn income which cannot be designated as
exempt-interest dividends.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) will be taxable to
shareholders as ordinary income. If a portion of the income of Centura Equity
Growth Fund, Centura Equity Income Fund or Centura Southeast Equity Fund
consists of dividends paid by U.S. corporations, a portion of the dividends paid
by that Fund may qualify for the deduction for dividends received by
corporations. No portion of the dividends paid by Centura Federal Securities
Income Fund or Centura North Carolina Tax-Free Bond Fund is expected to so
qualify. Distributions of net long-term capital gains designated by a Fund as
capital gain dividends will be taxable as long-term capital gains, regardless of
how long a shareholder has held the Fund shares. Distributions are taxable in
the same manner whether received in additional shares or in cash.
A distribution, including an "exempt-interest dividend," will be treated as
paid on December 31 of the
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calendar year if it is declared by a Fund during October, November, or December
of that year to shareholders of record in such a month and paid by the Fund
during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term generally depending upon the shareholder's holding
period for the shares.
If a shareholder elects to receive distributions in cash, and checks (1)
are returned and marked as "undeliverable" or (2) remain uncashed for six
months, the shareholder's cash election will be changed automatically and future
dividend and capital gains contributions will be reinvested in the Fund at the
per share net asset value determined as of date of payment of the distribution.
In addition, any undeliverable check or check that remain uncashed for six
months will be canceled and will be reinvested in the Fund at the per share net
asset value determined as of the date of cancellation.
The timing of a shareholder's investment could have undesirable tax
consequences. If a shareholder opens a new account or buys more shares for his
or her current account just before the day a capital gain distribution was
reflected in the Fund's share price, the shareholder would receive a portion of
his or her investment back as a taxable capital gain distribution.
Shareholders should also be aware that redeeming shares of the Centura
North Carolina Tax-Free Bond Fund after tax-exempt interest income has been
accrued by the Fund but before that income has been distributed as a dividend
may be disadvantageous. This is because the gain, if any, on the redemption will
be taxable, even though such gain may be attributable in part to the accrued
tax-exempt interest, which, if distributed to the shareholder as a dividend
rather than as redemption proceeds, might have qualified as an exempt-interest
dividend.
The Funds may be required to withhold federal income tax of 31% ("backup
withholding") of the distributions and the proceeds of redemptions payable to
shareholders who fail to provide a correct taxpayer identification number or to
make required certifications, or where a Fund or shareholder has been notified
by the Internal Revenue Service that the shareholder is subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code are exempt from backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against the shareholder's
U.S. federal income tax liability.
Further information relating to tax consequences is contained in the SAI.
Shareholders will be notified annually by the Company as to the federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may also be subject to special withholding requirements. Special
tax treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. With respect to Centura North Carolina
Tax-Free Bond Fund, North Carolina law exempts from income taxation dividends
received from a regulated investment company in proportion to the income of the
regulated investment company that is attributable to interest on bonds or
securities of the U.S. government or any agency or instrumentality thereof or on
bonds of the State of North Carolina or any county, municipality or political
subdivision thereof. Shareholders should consult their own tax advisers as to
the federal, state and local tax consequences of ownership of shares of the
Funds in their particular circumstances.
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OTHER INFORMATION
CAPITALIZATION
Centura Funds, Inc. was organized as a Maryland corporation on March 1,
1994 and currently consists of five separately managed portfolios. The Board of
Directors may establish additional portfolios in the future. The capitalization
of the Company consists solely of seven hundred fifty million (750,000,000)
shares of common stock with a par value of $0.001 per share. When issued, shares
of the Funds are fully paid, non-assessable and freely transferable.
This Prospectus relates to Class C shares of the Funds. Each Fund also
offers Class A and Class B shares. Class A shares are offered with a front-end
sales charge (unless waived), and a contingent deferred sales charge is imposed
(unless waived) on redemptions of Class B shares within five years of purchase.
Because of differences in expenses, the performance of each class will typically
be different. Information about Class A and Class B shares may be obtained from
your sales representative or by calling the Funds at (800) 442-3688.
VOTING
Shareholders have the right to vote in the election of Directors and on any
and all matters on which, by law or under the provisions of the Company's
Articles of Incorporation, they may be entitled to vote. The Company is not
required to hold regular annual meetings of the Funds' shareholders and does not
intend to do so. Each Fund's shareholders vote separately on items affecting
only that Fund, and shareholders of each class within a Fund vote separately on
matters affecting only that class.
The Articles of Incorporation provide that the holders of not less than
two-thirds of the outstanding shares of the Company may remove a person serving
as Director either by declaration in writing or at a meeting called for such
purpose. The Directors are required to call a meeting for the purpose of
considering the removal of a person serving as Director if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Company. See "Other Information -- Voting Rights" in the SAI.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund, a class or the Company, as
applicable, means the vote of the lesser of: (1) 67% of the shares of the Fund
(a class or the Company) present at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy; or (2) more than 50%
of the outstanding shares of the Fund (a class or the Company).
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<PAGE> 86
TOTAL RETURN SUMMARY
THE CENTURA FUNDS (C CLASS)
MONTH END: JUNE 30, 1997
NO LOAD TOTAL RETURN
<TABLE>
<CAPTION>
INCEPTION AGGREGATE RETURNS SINCE AVERAGE ANNUAL RETURNS
FUND DATE YTD QTRLY MONTHLY INCEPTION 1 YEAR 2 YEAR 3 YEAR 5 YEAR 10 YEAR
- ---- --------- --- ----- ------- --------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Equity Growth Fund 12/31/90 14.92% 14.96% 4.05% 19.55% 30.24% 25.89% 25.16% 18.56% NA
The Centura Equity Income Fund 12/31/90 11.73% 10.65% 2.17% 15.99% 24.03% 23.98% 21.39% 16.33% NA
The Centura Southeast Equity Fund 12/31/90 13.70% 17.75% 6.45% 21.89% 27.29% 23.84% 20.05% 18.89% NA
The Centura Federal Securities Fund 12/31/90 2.29% 2.68% 0.78% 6.31% 6.02% 5.10% 6.24% 5.39% NA
The Centura North Carolina Tax-
Free Fund 01/31/91 3.16% 3.26% 1.06% 5.32% 7.17% 5.78% 6.11% 5.08% NA
</TABLE>
The performance data quoted represents past performance and is not an indication
of future results as yields fluctuate daily.
Centura Funds Distributor, Inc. is the Distributor for The Centura Group of
Funds.
NOTES ABOUT THE PERFORMANCE INFORMATION
(a) Background of the Funds
From 1/1/91 to 5/31/94, Centura Equity Growth Fund and Centura Federal
Securities Income Fund were bank collective trust funds maintained and managed
by Centura Bank, and from 2/1/91 to 5/31/94, Centura North Carolina Tax-Free
Bond Fund was a common trust fund maintained and managed by Centura Bank. From
1/1/91 to 9/30/96, Centura Equity Income Fund was a common trust fund maintained
and managed by Centura Bank. From 1/1/91 to 4/30/97, Centura Southeast Equity
Fund was a bank common trust fund maintained and managed by Centura Bank. Bank
collective and common trust funds are not required to register as investment
companies under the Investment Company Act of 1940. Accordingly, performance
achieved by a Fund's predecessor collective or common trust fund reflects
performance prior to the Fund's commencement of operations as a series of a
registered investment company.
The investment objectives and policies of each of these Funds prior to its
conversion to a registered mutual fund were substantially comparable to those of
its successor registered mutual fund. Prior to 1/1/95, however, the predecessor
common trust fund to Centura Southeast Equity Fund was known as the Centura
Carolinas Fund, with investments limited to companies headquartered or with
substantial operations in North Carolina or South Carolina. That common trust
fund's name was changed to Centura Southeast Equity Fund as of 1/1/95, when its
investment policies were expanded to include all the southeastern states, which
policies are continued with the successor registered mutual fund.
(b) How the Performance Information was Calculated
Investment performance for the Funds during their maintenance as common or
collective trust funds has been calculated on a monthly basis utilizing the Bank
Administration Institute's recommended time-weighted rate of return method to
compute the investment performance reflected in the above Schedule.
The performance figures assume reinvestment of dividends and interest and
include the cost of
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<PAGE> 87
brokerage commissions. The investment performance excludes taxes an investor
might have incurred as a result of taxable ordinary income and capital gains
realized by the accounts. Bank common and collective trust funds are not subject
to certain expenses normally incurred by a mutual fund. Thus, the performance
figures, for periods prior to conversion to registered funds have been adjusted,
on a quarterly basis, to reflect the impact of the estimated expense ratios for
the registered funds at the time of the conversion.
It should be noted, however, that the bank-maintained common and collective
trust funds are not subject to the same tax and regulatory requirements,
including certain investment restrictions, applicable to registered mutual
funds. These regulatory and tax requirements could have adversely affected
performance of the Funds' collective and common trust Fund predecessors.
The performance of the Funds may be compared to various widely recognized
indexes of market performance. The indexes are unmanaged and thus reflect no
management fees. They also do not reflect the transaction costs that would be
incurred by an investor to acquire the included securities. Because the
securities reflected in an index will typically differ in many respects from
those held by a Fund, various factors that can affect performance may affect a
Fund in different ways than an index to which it is compared.
Indexes to which the Funds' performance may be compared may include:
- Standard & Poor's 500 composite Stock Price Index -- an index of market
activity based on the aggregate performance of a selected portfolio of
publicly traded common stocks, including monthly adjustments to reflect
the reinvestment of dividends. The Index thus reflects the total return
of its portfolio, including changes in market prices as well as accrued
income interest;
- The Russell 2000 Index -- an index comprised of the smallest 2000
companies in the Russell 3000 Index, representing approximately 11% of
the Russell 3000 total market capitalization. The Index was developed
with the base value of 135.00 as of December 31, 1986;
- Merrill Lynch Government, U.S. Treasury Short-Term Index -- this index
shows total return for all outstanding U.S. Treasury securities
maturing in from one to 2.99 years. Price, coupon and total return are
reported using market weighted value including accrued interest; and
- Lehman Brothers Municipal Bond Index -- a total return performance
index of approximately 21,000 municipal bonds that meet certain
criteria. Price, coupon, and total return are reported using market
weighted value including accrued interest.
In addition to those indexes listed above, the following indexes to which
the Funds' performance may be compared may include:
- Lehman Brothers Intermediate Government Index
- Lipper Short U.S. Treasury Funds Index
- Lipper Growth Index
- Lipper Equity Income Index
- S&P Mid-Cap 400 Index
- Valueline Index
When performance records are developed by the Funds, they may, from time to
time, include the yield and total return for shares (including each class, as
applicable) in advertisements or reports to shareholders or prospective
investors. The methods used to calculate the yield and total return of the Funds
are mandated by the SEC. In general, the performance of the classes of each Fund
will differ due to (a) differences in the level of class specific expenses,
including service and distribution fees and (b) the fact that total return
figures for Class A shares will reflect the deduction of the maximum front-end
sales charge applicable for each Fund while the total return figures for Class B
shares will reflect the maximum CDSC for the particular Fund. Performance
figures for Class C shares will reflect the absence of any service and
37
<PAGE> 88
distribution fee, front-end sales charge or CDSC. Due to these differences in
fees and/or expenses borne by Class A, Class B and Class C shares, yield and
total return on Class A and Class B shares can be expected to be lower than the
yield and total return on Class C shares for the same period.
Quotations of "yield" will be based on the investment income per share
during a particular 30-day (or one month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share (for each class, as applicable) on the last day of the
period.
Quotations of yield reflect a Fund's (and its classes') performance only
during the particular period on which the calculations are based. Yields will
vary based on changes in market conditions, the level of interest rates and the
level of the particular Fund's expenses, including class-specific expenses, and
no reported performance figure should be considered an indication of performance
which may be expected in the future. Quotations of average annual total return
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in shares of a Fund (or class) over periods of 1, 5 and
10 years (up to the life of the Fund), reflect the deduction of a proportional
share of Fund and class-specific expenses, as applicable, on an annual basis,
and assume that all dividends and distributions are reinvested when paid.
Centura North Carolina Tax-Free Bond Fund may also advertise its "taxable
equivalent yield." Taxable equivalent yield is the yield that an investment,
subject to regular federal and North Carolina personal income taxes, would need
to earn in order to equal, on an after-tax basis, the yield on an investment
exempt from such taxes (normally calculated assuming the maximum combined
federal and North Carolina marginal tax rate). A taxable equivalent yield
quotation for the Fund will be higher than the yield quotations for the Fund.
The following table shows how to translate the yield of an investment that
is exempt from regular federal and North Carolina personal income taxes into a
taxable equivalent yield for the 1997 taxable year. The last five columns of the
table show approximately how much a taxable investment would have to yield in
order to generate an after-tax (regular federal and North Carolina personal
income taxes) yield of 4%, 5%, 6%, 7% or 8%. For example, the table shows that a
married taxpayer filing a joint return with taxable income of $80,000 would have
to earn a yield of approximately 10.45% before regular federal and North
Carolina personal income taxes in order to earn a yield after such taxes of 7%.
1997 TAXABLE YEAR
TAXABLE EQUIVALENT YIELD TABLE (1) -- FEDERAL AND
NORTH CAROLINA PERSONAL INCOME TAXES
<TABLE>
<CAPTION>
TO EQUAL HYPOTHETICAL TAX-FREE YIELD OF
COMBINED 4%, 5%, 6%, 7% OR 8%, A TAXABLE INVESTMENT
TAXABLE INCOME (2) MARGINAL WOULD HAVE TO YIELD APPROXIMATELY
SINGLE RETURN JOINT RETURN RATE 4% 5% 6% 7% 8%
- ----------------- ----------------- -------- ----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
up to -$24,650 up to $41,200 20.95% 5.06% 6.33% 7.59% 8.86% 10.12%
$ 24,651-$59,750 $ 41,201-$99,600 33.04% 5.97% 7.47% 8.96% 10.45% 11.95%
$ 59,751-$60,000 $ 99,601-$100,000 35.83% 6.23% 7.79% 9.35% 10.91% 12.47%
$ 60,001-$124,650 $100,001-$147,700 36.35% 6.28% 7.86% 9.43% 11.00% 12.57%
$124,650-$271,050 $147,701-$271,050 40.96% 6.78% 8.47% 10.16% 11.86% 13.55%
$271,051 and over $271,051 and over 44.28% 7.18% 8.98% 10.77% 12.57% 14.36%
</TABLE>
- ----------
(1) This chart is presented for general information purposes only. Tax
equivalent yields are a useful tool in determining the desirability of a
tax-exempt investment; tax equivalent yields should not be regarded as
determinative of the of such an investment. In addition, this chart is
based on a number of assumptions which may not apply in your case. You
should, therefore, consult a competent tax advisor regarding tax-equivalent
yields in your situation.
38
<PAGE> 89
(2) Assuming the federal alternative minimum tax is not applicable. (3) The
combined marginal rates were calculated using federal and North Carolina
tax rate tables for the 1997 taxable year. The federal tax rate tables are
indexed each year to reflect changes in the Consumer Price Index. The
combined federal and North Carolina income tax marginal rates assume that
North Carolina personal income taxes are fully deductible for federal
income tax purposes as an itemized deduction. However, the ability to
deduct itemized deductions (including state income taxes) for federal
income tax purposes is limited for those taxpayers whose federal adjusted
gross income for 1997 exceeds $121,200 ($60,600 in the case of a married
individual filing a separate return). In addition, for federal income tax
purposes the tax benefit of personal exemptions is phased out for taxpayers
whose adjusted gross incomes exceed specified thresholds (for 1997,
$121,200 in the case of single individuals and $181,800 in the case of
married individuals filing a joint return).
Performance information for the Funds may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of each Fund's investment
objectives and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Funds, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement
for each shareholder. In those cases where a Service Organization or its nominee
is shareholder of record of shares purchased for its customer, the Funds have
been advised that the statement may be transmitted to the customer at the
discretion of the Service Organization.
BISYS Fund Services, Inc. provides fund accounting functions for the Funds,
and provides personnel and facilities to perform shareholder servicing and
transfer agency-related services for the Company.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Centura Funds, P.O. Box
182485, Columbus, Ohio 43218-2485.
General and Account Information: (800) 44CENTURA (442-3688).
39
<PAGE> 90
APPENDIX
DESCRIPTION OF BOND RATINGS
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its bond ratings are listed as
follows: AAA -- judged to be the best quality and they carry the smallest degree
of investment risk; AA -- judged to be of high quality by all standards --
together with the Aaa group, they comprise what are generally known as high
grade bonds; A -- possess many favorable investment attributes and are to be
considered as "upper medium grade obligations"; BAA -- considered to be 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; BA -- judged to have speculative
elements, their future cannot be considered as well assured; B -- generally lack
characteristics of the desirable investment; CAA -- are of poor standing -- such
issues may be in default or there may be present elements of danger with respect
to principal or interest; CA -- speculative in a high degree, often in default;
C -- lowest rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its bond ratings are listed as follows:
AAA -- highest grade obligations, in which capacity to pay interest and repay
principal is extremely strong; AA -- has a very strong capacity to pay interest
and repay principal, and differs from AAA issues only in a small degree; A --
has a strong capacity to pay interest and repay principal, although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories; BBB -- regarded as
having an adequate capacity to pay interest and repay principal; whereas 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 debt in this category than in higher rated
categories. This group is the lowest which qualifies for commercial bank
investment. BB, B, CCC, CC, C -- predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and C the lowest within the
speculative rating categories. D -- interest or principal payments are in
default.
S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF SHORT-TERM MUNICIPAL OBLIGATIONS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity. Ratings categories for securities in these groups
are as follows: MIG 1/VMIG 1 -- denotes best quality, there is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing; MIG 2/VMIG 2 -- denotes high
quality, margins of protection are ample although not as large as in the
preceding group; MIG 3/VMIG 3 -- denotes high quality, all security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades; MIG 4/VMIG 4 -- denotes adequate quality, protection commonly regarded
as required of an investment security is present, but there is specific risk;
i
<PAGE> 91
SQ -- denotes speculative quality, instruments in this category lack margins of
protection.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
Excerpts from Moody's commercial paper ratings are listed as follows:
PRIME-1 -- issuers (or supporting institutions) have a superior ability for
repayment of senior short-term promissory obligations; PRIME-2 -- issuers (or
supporting institutions) have a strong ability for repayment of senior
short-term promissory obligations; PRIME-3 -- issuers (or supporting
institutions) have an acceptable ability for repayment of senior short-term
promissory obligations; NOT PRIME -- issuers do not fall within any of the Prime
categories.
DESCRIPTION OF S&P'S RATINGS FOR CORPORATE AND MUNICIPAL BONDS:
Investment grade ratings: AAA -- the highest rating assigned by S&P,
capacity to pay interest and repay principal is extremely strong; AA -- has a
very strong capacity to pay interest and repay principal and differs from the
highest rated issues only in a small degree; A -- has 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 -- regarded as having an adequate capacity to pay
interest and repay principal -- whereas 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
debt in this category than in higher rated categories.
Speculative grade ratings: BB, B, CCC, CC, C -- debt rated in these
categories is regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal -- while such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; CI --reserved
for income bonds on which no interest is being paid; D -- in default, and
payment of interest and/or repayment of principal is in arrears. Plus (+) or
Minus (-) -- the ratings from "AA" to "CCC" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Description of S&P's rating for municipal notes and short-term municipal demand
obligations:
Rating categories are as follows: SP-1 -- has a very strong or strong
capacity to pay principal and interest -- those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation; SP-2
- -- has a satisfactory capacity to pay principal and interest; SP-3 -- issues
carrying this designation have a speculative capacity to pay principal and
interest.
DESCRIPTION OF S&P'S RATINGS FOR SHORT-TERM CORPORATE DEMAND OBLIGATIONS AND
COMMERCIAL PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
Excerpts from S&P's description of its commercial paper ratings are listed as
follows: A-1 --the degree of safety regarding timely payment is strong -- those
issues determined to possess extremely strong safety characteristics will be
denoted with a plus (+) designation; A-2 -- capacity for timely payment is
satisfactory -- however, the relative degree of safety is not as high as for
issues designated "A-1;" A-3 -- has adequate capacity for timely payment
- --however, is more vulnerable to the adverse effects of changes in circumstances
than obligations carrying the higher designations; B -- regarded as having only
speculative capacity for timely payment; C -- a doubtful capacity for payment; D
- -- 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.
ii
<PAGE> 92
ADDRESS FOR:
GENERAL SHAREHOLDER INQUIRIES
Centura Funds, Inc.
P.O. Box 182485
Columbus, Ohio 43219-2485
INVESTMENT ADVISER AND CUSTODIAN
Centura Bank
131 North Church Street
Rocky Mount, North Carolina 27802
ADMINISTRATOR AND SPONSOR
BISYS Fund Services.
3435 Stelzer Road
Columbus, Ohio 43219
DISTRIBUTOR
Centura Funds Distributor, Inc.
125 West 55th Street
New York, New York 10019
COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
CENTURA FUNDS, INC.
PROSPECTUS
CLASS C SHARES
CENTURA BANK
ADVISER
BISYS FUND SERVICES.
ADMINISTRATOR AND SPONSOR
CENTURA FUNDS DISTRIBUTOR, INC.
DISTRIBUTOR
<PAGE> 93
CENTURA FUNDS, INC.
(THE "COMPANY")
3435 STELZER ROAD
COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION: (800) 442-3688
CENTURA BANK
INVESTMENT ADVISER
BISYS FUND SERVICES
ADMINISTRATOR AND SPONSOR
CENTURA FUNDS DISTRIBUTOR, INC.
DISTRIBUTOR
STATEMENT OF ADDITIONAL INFORMATION
CLASS C SHARES
This Statement of Additional Information ("SAI") describes Class C shares
of the five funds (the "Funds") advised by Centura Bank (the "Adviser"). The
Funds are:
-- Centura Equity Growth Fund
-- Centura Equity Income Fund
-- Centura Southeast Equity Fund
-- Centura Federal Securities Income Fund
-- Centura North Carolina Tax-Free Bond Fund
Each Fund has distinct investment objectives and policies. Shares of the
Funds are sold to the public by the Distributor as an investment vehicle for
individuals, institutions, corporations and fiduciaries, including customers of
the Adviser or its affiliates.
The Company is offering an indefinite number of shares of each class of
each Fund. In addition to Class C shares, each Fund also offers Class A and
Class B shares, subject to a front-end sales charge (unless waived) and Class B
shares subject to a contingent deferred sales charge (unless waived) on
redemptions within five years of purchase. See "Other Information
Capitalization" in the prospectus.
This SAI is not a prospectus and is authorized for distribution only when
preceded or accompanied by the prospectus for the Funds dated August 28, 1997
(the "Prospectus"). This SAI contains additional and more detailed information
than that set forth in the Prospectus and should be read in conjunction with the
Prospectus. The Prospectus may be obtained without charge by writing or calling
the Funds at the address and information numbers printed above.
August 28, 1997
Supplemented November 25, 1997
<PAGE> 94
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTMENT POLICIES....................................................... 3
Bank Obligations........................................................ 3
Commercial Paper........................................................ 3
Convertible Securities.................................................. 3
Corporate Debt Securities............................................... 3
Repurchase Agreements................................................... 3
Repurchase Agreements................................................... 3
Variable and Floating Rate Demand and Master Demand Notes............... 4
Loans of Portfolio Securities........................................... 4
Foreign Securities...................................................... 4
Forward Foreign Currency Exchange Contracts............................. 5
Interest Rate Futures Contracts......................................... 5
Stock Index Futures Contracts......................................... 5
Option Writing and Purchasing........................................... 6
Options on Futures Contracts............................................ 7
Risks of Futures and Options Investments................................ 7
Limitations on Futures Contracts and Options on Futures Contracts....... 7
North Carolina Municipal Obligations.................................... 8
Securities of Other Investment Companies................................ 8
INVESTMENT RESTRICTIONS................................................... 9
MANAGEMENT................................................................ 12
Directors and Officers.................................................. 12
Investment Adviser...................................................... 15
Distribution of Fund Shares............................................. 16
Administrative Services................................................. 16
Service Organizations................................................... 17
DETERMINATION OF NET ASSET VALUE.......................................... 18
PORTFOLIO TRANSACTIONS.................................................... 18
Portfolio Turnover...................................................... 19
TAXATION.................................................................. 20
Centura North Carolina Tax-Free Bond Fund............................... 24
OTHER INFORMATION......................................................... 26
Capitalization.......................................................... 26
Voting Rights........................................................... 26
Custodian, Transfer Agent and Dividend Disbursing Agent................. 26
Yield and Performance Information....................................... 27
Independent Accountants................................................. 29
Counsel................................................................. 29
Registration Statement.................................................. 29
Financial Statements.................................................... 29
</TABLE>
2
<PAGE> 95
INVESTMENT POLICIES
The Prospectus discusses the investment objectives of the Funds and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Funds may invest, the investment policies and portfolio
strategies that the Funds may utilize, and certain risks attendant to such
investments, policies and strategies.
Bank Obligations (All Funds). These obligations include negotiable
certificates of deposit and bankers' acceptances. A description of the banks the
obligations of which the Funds may purchase are set forth in the Prospectus. A
certificate of deposit is a short-term, interest-bearing negotiable certificate
issued by a commercial bank against funds deposited in the bank. A bankers'
acceptance is a short-term draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction. The borrower
is liable for payment as is the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date.
Commercial Paper (All Funds). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by domestic and foreign bank holding companies, corporations
and financial institutions and similar taxable instruments issued by government
agencies and instrumentalities. All commercial paper purchased by a Fund must
meet the minimum rating criteria for that Fund.
Convertible Securities (Centura Equity Growth Fund, Centura Equity Income
Fund and Centura Southeast Equity Fund). Convertible securities give the holder
the right to exchange the security for a specific number of shares of common
stock. Convertible securities include convertible preferred stocks, convertible
bonds, notes and debentures, and other securities. Convertible securities
typically involve less credit risk than common stock of the same issuer because
convertible securities are "senior" to common stock -- i.e., they have a prior
claim against the issuer's assets. Convertible securities generally pay lower
dividends or interest than non-convertible securities of similar quality. They
may also reflect changes in the value of the underlying common stock.
Corporate Debt Securities (All Funds). Fund investments in these securities
are limited to corporate debt securities (corporate bonds, debentures, notes and
similar corporate debt instruments) which meet the rating criteria established
for each Fund.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the Adviser
will consider such event in its determination of whether the Fund should
continue to hold the security. To the extent the ratings given by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P") or
another rating agency may change as a result of changes in such organizations or
their rating systems, the Funds will attempt to use comparable ratings as
standards for investments in accordance with the investment policies contained
in the Prospectus and in this SAI.
Repurchase Agreements (All Funds). The Funds may invest in securities
subject to repurchase agreements with U.S. banks or broker-dealers. Such
agreements may be considered to be loans by the Funds for purposes of the
Investment Company Act of 1940, as amended (the "1940 Act"). A repurchase
agreement is a transaction in which the seller of a security commits itself at
the time of the sale to repurchase that security from the buyer at a mutually
agreed-upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed-upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. The Adviser will monitor the value of the
underlying security at the time the transaction is entered into and at all times
during the term of the repurchase agreement to insure that the value of the
security always equals or exceeds the repurchase price. In the event of default
by the seller under the repurchase agreement, the Funds may have problems in
exercising their rights to the underlying securities and may incur costs and
3
<PAGE> 96
experience time delays in connection with the disposition of such securities.
Variable and Floating Rate Demand and Master Demand Notes (All Funds). The
Funds may, from time to time, buy variable rate demand notes issued by
corporations, bank holding companies and financial institutions and similar
taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity in the 5 to
20 year range but carry with them the right of the holder to put the securities
to a remarketing agent or other entity on short notice, typically seven days or
less. The obligation of the issuer of the put to repurchase the securities is
backed up by a letter of credit or other obligation issued by a financial
institution. The purchase price is ordinarily par plus accrued and unpaid
interest. Ordinarily, the remarketing agent will adjust the interest rate every
seven days (or at other intervals corresponding to the notice period for the
put), in order to maintain the interest rate at the prevailing rate for
securities with a seven-day maturity.
The Funds may also buy variable rate master demand notes. The terms of
these obligations permit the investment of fluctuating amounts by the Funds at
varying rates of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. They permit weekly, and in some instances, daily,
changes in the amounts borrowed. The Funds have the right to increase the amount
under the note at any time up to the full amount provided by the note agreement,
or to decrease the amount, and the borrower may prepay up to the full amount of
the note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the lender and
the borrower, it is not generally contemplated that they will be traded, and
there is no secondary market for them, although they are redeemable (and thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. The Funds have no limitations on the type of issuer from
whom the notes will be purchased. However, in connection with such purchase and
on an ongoing basis, the Adviser will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
make demand simultaneously. While master demand notes, as such, are not
typically rated by credit rating agencies, if not so rated, the Funds may, under
their minimum rating standards, invest in them only if at the time of an
investment the issuer meets the criteria set forth in the Prospectus for other
comparable debt obligations.
Loans of Portfolio Securities (All Funds). The Funds may lend their
portfolio securities to brokers, dealers and financial institutions, provided:
(1) the loan is secured continuously by collateral consisting of U.S. Government
securities or cash or letters of credit maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (2) the Funds may at any time call the loan and obtain the return of the
securities loaned within five business days; (3) the Funds will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed 5% of the total
assets of a particular Fund.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay reasonable
finders, administrative and custodial fees. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral.
Foreign Securities (Centura Equity Growth Fund, Centura Equity Income Fund
and Centura Southeast Equity Fund). As described in the Prospectus, changes in
foreign exchange rates will affect the value of securities denominated or quoted
in currencies other than the U.S. dollar.
Since Centura Equity Growth Fund, Centura Equity Income Fund and Centura
Southeast Equity Fund may invest in securities denominated in currencies other
than the U.S. dollar, and since those Funds may temporarily hold funds in bank
deposits or other money market investments denominated in foreign currencies,
the Funds may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. Changes in foreign currency exchange rates will influence values of
securities in the Funds' portfolios, from the perspective of U.S. investors.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and
4
<PAGE> 97
losses realized on the sale of securities, and net investment income and gains,
if any, to be distributed to shareholders by the Funds. 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. These forces are affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors.
Forward Foreign Currency Exchange Contracts (Centura Equity Growth Fund,
Centura Equity Income Fund and Centura Southeast Equity Fund). Centura Equity
Growth Fund, Centura Equity Income Fund and Centura Southeast Equity Fund may
enter into forward foreign currency exchange contracts in order to protect
against uncertainty in the level of future foreign exchange rates. A forward
foreign currency exchange 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 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 between currency traders (usually large commercial banks) and their
customers. Forward foreign currency exchange contracts may be bought or sold to
protect the Funds against a possible loss resulting from an adverse change in
the relationship between foreign currencies and the U.S. dollar, or between
foreign currencies. Although such contracts are intended to minimize the risk of
loss due to a decline in the value of the hedged currency, at the same time,
they tend to limit any potential gain which might result should the value of
such currency increase.
Interest Rate Futures Contracts (Centura Equity Income Fund, Centura
Federal Securities Income Fund and Centura North Carolina Tax-Free Bond Fund).
These Funds may purchase and sell interest rate futures contracts ("futures
contracts") as a hedge against changes in interest rates. A futures contract is
an agreement between two parties to buy and sell a security for a set price on a
future date. Futures contracts are traded on designated "contracts markets"
which, through their clearing corporations, guarantee performance of the
contracts. Currently, there are futures contracts based on securities such as
long-term U.S. Treasury bonds, U.S. Treasury notes, GNMA Certificates and
three-month U.S. Treasury bills. For municipal securities, there is the Bond
Buyer Municipal Bond Index.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a Fund holds long-term U.S. Government securities and
the Adviser anticipates a rise in long-term interest rates, the Fund could, in
lieu of disposing of its portfolio securities, enter into futures contracts for
the sale of similar long-term securities. If rates increased and the value of
the Fund's portfolio securities declined, the value of the Fund's futures
contracts would increase, thereby protecting the Fund by preventing net asset
value from declining as much as it otherwise would have. Similarly, entering
into futures contracts for the purchase of securities has an effect similar to
actual purchase of the underlying securities, but permits the continued holding
of securities other than the underlying securities. For example, if the Adviser
expects long-term interest rates to decline, the Fund might enter into futures
contracts for the purchase of long-term securities, so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase, while continuing to hold higher-yielding short-term
securities or waiting for the long-term market to stabilize.
Stock Index Futures Contracts (Centura Equity Growth Fund, Centura Equity
Income Fund and Centura Southeast Equity Fund). These Funds may enter into stock
index futures contracts in order to protect the value of their common stock
investments. A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. As the aggregate market value of the stocks in the index
changes, the value of the index also will change. In the event that the index
level rises above the level at which the stock index futures contract was sold,
the seller of the stock index futures contract will realize a loss determined by
the difference between the purchase level and the index level at the time of
expiration of the stock index futures contract, and the purchaser will realize a
gain in that amount. In the event the
5
<PAGE> 98
index level falls below the level at which the stock index futures contract was
sold, the seller will recognize a gain determined by the difference between the
two index levels at the expiration of the stock index futures contract, and the
purchaser will realize a loss. Stock index futures contracts expire on a fixed
date, currently one to seven months from the date of the contract, and are
settled upon expiration of the contract.
Century Growth Fund, Centura Equity Income Fund and Centura Southeast
Equity Fund will utilize stock index futures contracts only for the purpose of
attempting to protect the value of their common stock portfolios in the event of
a decline in stock prices and, therefore, usually will be sellers of stock index
futures contracts. This risk management strategy is an alternative to selling
securities in the portfolio and investing in money market instruments. Also,
stock index futures contracts may be purchased to protect a Fund against an
increase in prices of stocks which that Fund intends to purchase. If the Fund is
unable to invest its cash (or cash equivalents) in stock in an orderly fashion,
the Fund could purchase a stock index futures contract which may be used to
offset any increase in the price of the stock. However, it is possible that the
market may decline instead, resulting in a loss on the stock index futures
contract. If the Fund then concludes not to invest in stock at that time, or if
the price of the securities to be purchased remains constant or increases, the
Fund will realize a loss on the stock index futures contract that is not offset
by a reduction in the price of securities purchased. These Funds also may buy or
sell stock index futures contracts to close out existing futures positions.
Option Writing and Purchasing (All Funds). A Fund may write (or sell) put
and call options on the securities that the Fund is authorized to buy or already
holds in its portfolio. These option contracts may be listed for trading on a
national securities exchange or traded over-the-counter. A Fund may also
purchase put and call options. A Fund will not write covered calls on more than
25% of its portfolio, and a Fund will not write covered calls with strike prices
lower than the underlying securities' cost basis on more than 25% of its total
portfolio. A Fund may not invest more than 5% of its total assets in option
purchases.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security at the agreed upon exercise (or
"strike") price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security at
the strike price during the option period. Purchasers of options pay an amount,
known as a premium, to the option writer in exchange for the right under the
option contract.
A Fund may sell "covered" put and call options as a means of hedging the
price risk of securities in the Fund's portfolio. The sale of a call option
against an amount of cash equal to the put's potential liability constitutes a
"covered put." When a Fund sells an option, if the underlying securities do not
increase (in the case of a call option) or decrease (in the case of a put
option) to a price level that would make the exercise of the option profitable
to the holder of the option, the option will generally expire without being
exercised and the Fund will realize as profit the premium paid for such option.
When a call option of which a Fund is the writer is exercised, the option holder
purchases the underlying security at the strike price and the Fund does not
participate in any increase in the price of such securities above the strike
price. When a put option of which a Fund is the writer is exercised, the Fund
will be required to purchase the underlying securities at the strike price,
which may be in excess of the market value of such securities. At the time a
Fund writes a put option or a call option on a security it does not hold in its
portfolio in the amount required under the option, it will establish and
maintain a segregated account with its custodian consisting solely of cash, U.S.
Government securities and other liquid high grade debt obligations equal to its
liability under the option.
Over-the-counter options ("OTC options") differ from exchange-traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than exchange- traded
options. Because OTC options are not traded on an exchange, pricing is normally
done by reference to information from a market marker. This information is
carefully monitored by the Adviser and verified in appropriate cases. OTC
options transactions will be made by a Fund only with recognized U.S. Government
securities dealers. OTC
6
<PAGE> 99
options are subject to the Funds' 15% limit on investments in securities which
are illiquid or not readily marketable (see "Investment Restrictions"), provided
that OTC option transactions by a Fund with a primary U.S. Government securities
dealer which has given the Fund an absolute right to repurchase according to a
"repurchase formula" will not be subject to such 15% limit.
It may be a Fund's policy, in order to avoid the exercise of an option sold
by it, to cancel its obligation under the option by entering into a closing
purchase transaction, if available, unless it is determined to be in the Fund's
interest to sell (in the case of a call option) or to purchase (in the case of a
put option) the underlying securities. A closing purchase transaction consists
of a Fund purchasing an option having the same terms as the option sold by the
Fund and has the effect of canceling the Fund's position as a seller. The
premium which a Fund will pay in executing a closing purchase transaction may be
higher than the premium received when the option was sold, depending in large
part upon the relative price of the underlying security at the time of each
transaction. To the extent options sold by a Fund are exercised and the Fund
either delivers portfolio securities to the holder of a call option or
liquidates securities in its portfolio as a source of funds to purchase
securities put to the Fund, the Fund's portfolio turnover rate may increase,
resulting in a possible increase in short-term capital gains and a possible
decrease in long-term capital gains.
Options on Futures Contracts (All Funds). A Fund may purchase and write put
and call options on futures contracts that are traded on a U.S. exchange or
board of trade and enter into related closing transactions to attempt to gain
additional protection against the effects of interest rate, currency or equity
market fluctuations. There can be no assurance that such closing transactions
will be available at all times. In return for the premium paid, such an option
gives the purchaser the right to assume a position in a futures contract at any
time during the option period for a specified exercise price.
A Fund may purchase put options on futures contracts in lieu of, and for
the same purpose as, the sale of a futures contract. It also may purchase such
put options in order to hedge a long position in the underlying futures
contract.
The purchase of call options on futures contracts is intended to serve the
same purpose as the actual purchase of the futures contracts. A Fund may
purchase call options on futures contracts in anticipation of a market advance
when it is not fully invested.
A Fund may write a call option on a futures contract in order to hedge
against a decline in the prices of the index or debt securities underlying the
futures contracts. If the price of the futures contract at expiration is below
the exercise price, the Fund would retain the option premium, which would
offset, in part, any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the
purchase of the futures contracts, except that, if market price declines, a Fund
would pay more than the market price for the underlying securities or index
units. The net cost to that Fund would be reduced, however, by the premium
received on the sale of the put, less any transactions costs.
Risks of Futures and Options Investments (All Funds). A Fund will incur
brokerage fees in connection with its futures and options transactions, and it
will be required to segregate funds for the benefit of brokers as margin to
guarantee performance of its futures and options contracts. In addition, while
such contracts will be entered into to reduce certain risks, trading in these
contracts entails certain other risks. Thus, while a Fund may benefit from the
use of futures contracts and related options, unanticipated changes in interest
rates may result in a poorer overall performance for that Fund than if it had
not entered into any such contracts. Additionally, the skills required to invest
successfully in futures and options may differ from skills required for managing
other assets in the Fund's portfolio.
Limitations on Futures Contracts and Options on Futures Contracts (All
Funds). Each Fund will use financial futures contracts and related options only
for "bona fide hedging" purposes, as such term is defined in applicable
regulations of the CFTC, or, with respect to positions in financial futures and
related
7
<PAGE> 100
options that do not qualify as "bona fide hedging" positions, will enter such
non-hedging positions only to the extent that aggregate initial margin deposits
plus premiums paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money," would not exceed 5% of the Fund's
total assets. Futures contracts and related put options written by a Fund will
be offset by assets held in a segregated custodial account sufficient to satisfy
the Fund's obligations under such contracts and options.
North Carolina Municipal Obligations (Centura North Carolina Tax-Free Bond
Fund). The ability of this Fund to achieve its investment objective depends on
the ability of issuers of North Carolina Municipal Obligations to meet their
continuing obligations for the payment of principal and interest.
North Carolina Municipal Obligations are debt securities issued by the
state of North Carolina, its political subdivisions, and the districts,
authorities, agencies and instrumentalities of the state and its political
subdivisions, the interest on which is exempt from regular federal and North
Carolina income taxes.
North Carolina municipal bonds are issued for various public purposes,
including the construction of housing, pollution abatement facilities, health
care and prison facilities, and educational facilities.
Unlike other types of investments, municipal securities have traditionally
not been subject to registration with, or other regulation by, the Securities
and Exchange Commission ("SEC"). However, there have been proposals which could
lead to future regulations of these securities by the SEC.
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund).
Municipal lease obligations are municipal securities that may be supported by a
lease or an installment purchase contract issued by state and local government
authorities to acquire funds to obtain the use of a wide variety of equipment
and facilities such as fire and sanitation vehicles, computer equipment and
other capital assets. These obligations, which may be secured or unsecured, are
not general obligations and have evolved to make it possible for state and local
government authorities to obtain the use of property and equipment without
meeting constitutional and statutory requirements for the issuance of debt.
Thus, municipal lease obligations have special risks not normally associated
with municipal bonds. These obligations frequently contain "nonappropriation"
clauses that provide that the governmental issuer of the obligation has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purposes by the legislative body on a yearly or other
periodic basis. In addition to the "non-appropriation" risk, many municipal
lease obligations have not yet developed the depth of marketability associated
with municipal bonds; moreover, although the obligations may be secured by the
leased equipment, the disposition of the equipment in the event of foreclosure
might prove difficult. In order to limit certain of these risks, the Fund will
limit its investments in municipal lease obligations that are illiquid, together
with all other illiquid securities in its portfolio, to not more than 15% of its
assets. The liquidity of municipal lease obligations purchased by the Fund will
be determined pursuant to guidelines approved by the Board of Directors. Factors
considered in making such determinations may include; the frequency of trades
and quotes for the obligation; the number of dealers willing to purchase or sell
the security and the number of other potential buyers; the willingness of
dealers to undertake to make a market; the obligation's rating; and, if the
security is unrated, the factors generally considered by a rating agency.
Securities of Other Investment Companies (All Funds). Each Fund may invest
in securities issued by the other investment companies. Each of these Funds
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
any of the Funds; and (d) not more than 10% of the outstanding voting stock of
any one investment company will be owned in the aggregate by the Funds. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory
8
<PAGE> 101
fees. These expenses would be in addition to the advisory and other expenses
that the Fund bears directly in connection with its own operations. Investment
companies in which a Fund may invest may also impose a sales or distribution
charge in connection with the purchase or redemption of their shares and other
types of commissions or charges. Such charges will be payable by the Funds and,
therefore, will be borne indirectly by Shareholders.
Investments in Real Estate Investment Trusts (All Funds except Centura
North Carolina Tax-Free Bond Fund). A Fund may invest to a limited extent in
equity or debt real estate investment trusts ("REITs"). Equity REITs are trusts
that sell shares to investors and use the proceeds to invest in real estate or
interests in real estate. Debt REITs invest in obligations secured by mortgages
on real property or interest in real property. A REIT may focus on particular
types of projects, such as apartment complexes or shopping centers, or on
particular geographic regions, or both. An investment in a REIT may be subject
to certain risks similar to those associated with direct ownership of real
estate, including: declines in the value of real estate; risks related to
general and local economic conditions, overbuilding and competition; increases
in property taxes and operating expenses; and variations in rental income. Also,
REITs may not be diversified. A REIT may fail to qualify for pass-through tax
treatment of its income under the Internal Revenue Code and may also fail to
maintain its exemption from registration under the Investment Company Act of
1940. Also, REITs (particularly equity REITs) may be dependent upon management
skill and face risks of failing to obtain adequate financing on favorable terms.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies of each Fund, and
except as otherwise indicated, may not be changed with respect to a Fund without
the approval of a majority of the outstanding voting securities of that Fund
which, as defined in the Investment Company Act of 1940 ("1940 Act"), means the
lesser of (1) 67% of the shares of such Fund present at a meeting if the holders
of more than 50% of the outstanding shares of such Fund are present in person or
by proxy, or (2) more than 50% of the outstanding voting shares of such Fund.
Each Fund, except as indicated, may not:
(1) with respect to 75% of its total assets, purchase more than 10% of the
voting securities of any one issuer or invest more than 5% of the value
of such assets in the securities or instruments of any one issuer,
except securities or instruments issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
(2) Borrow money except that a Fund may borrow from banks up to 10% of the
current value of its total net assets for temporary or emergency
purposes; a Fund will make no purchase if its outstanding borrowings
exceed 5% of its total assets;
(3) Invest in real estate, provided that a Fund may invest in readily
marketable securities (except limited partnership interests) of issuers
that deal in real estate and securities secured by real estate or
interests therein and a Fund may hold and sell real estate (a) used
principally for its own office space or (b) acquired as a result of a
Fund's ownership of securities;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the purchase of securities directly from the
issuer (either alone or as one of a group of bidders) or the disposal
of an investment position may technically cause it to be considered an
underwriter as that term is defined under the Securities Act of 1933;
(5) Make loans, except that a Fund may (a) lend its portfolio securities,
(b) enter into repurchase agreements and (c) purchase the types of debt
instruments described in the Prospectus or the SAI;
(6) Purchase securities or instruments which would cause 25% or more of the
market value of the
9
<PAGE> 102
Fund's total assets at the time of such purchase to be invested in
securities or instruments of one or more issuers having their principal
business activities in the same industry, provided that there is no
limit with respect to investments in the U.S. Government, its agencies
and instrumentalities;
(7) Issue any senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and provided that
collateral arrangements with respect to forward contracts, futures
contracts or options, including deposits of initial and variation
margin, are not considered to be the issuance of a senior security for
purposes of this restriction; or
(8) Purchase or sell commodity contracts, except that the Fund may invest
in futures contracts and in options related to such contracts (for
purposes of this restriction, forward foreign currency exchange
contracts are not deemed to be commodities).
For restriction number 1, above, with respect to Centura North Carolina
Tax-Free Bond Fund, the state of North Carolina and each of its political
subdivisions, as well as each district, authority, agency or instrumentality of
North Carolina or of its political subdivisions will be deemed to be a separate
issuer, and all indebtedness of any issuer will be deemed to be a single class
of securities. Securities backed only by the assets of a non-governmental user
will be deemed to be issued by that user. Restriction number 6, above, will
prevent Centura North Carolina Tax-Free Bond Fund from investing 25% or more of
its total assets in industrial building revenue bonds issued to finance
facilities for non-governmental issuers in any one industry, but this
restriction does not apply to any other tax-free Municipal Obligations. For
purposes of investment restriction number 6, public utilities are not deemed to
be a single industry but are separated by industrial categories, such as
telephone or gas utilities. For purposes of restriction number 7, with respect
to its futures transactions and writing of options (other than fully covered
call options), a Fund will maintain a segregated account for the period of its
obligation under such contract or option consisting of cash, U.S. Government
securities and other liquid high grade debt obligations in an amount equal to
its obligations under such contracts or options.
The following policies of the Funds are non-fundamental and may be changed
by the Board of Directors without shareholder approval. These policies provide
that a Fund, except as otherwise specified, may not:
(a) Invest in companies for the purpose of exercising control or
management;
(b) Knowingly purchase securities of other investment companies, except (i)
in connection with a merger, consolidation, acquisition, or reorganization; and
(ii) the equity and fixed income funds may invest up to 10% of their net assets
in shares of other investment companies;
(c) Purchase securities on margin, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
(d) Mortgage, pledge, or hypothecate any of its assets, except that a Fund
may pledge not more than 15% of the current value of the Fund's total net
assets;
(e) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Adviser, the Administrator, or the
Distributor, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer;
(f) Invest more than 5% of its net assets in warrants which are unattached
to securities; included within that amount, no more than 2% of the value of the
Fund's net assets, may be warrants which are not listed on the New York or
American Stock Exchanges;
(g) Write, purchase or sell puts, calls or combinations thereof, except as
described in the Prospectus or
10
<PAGE> 103
SAI;
(h) Invest more than 5% of the current value of its total assets in the
securities of companies which, including predecessors, have a record of less
than three years' continuous operation;
(i) Invest more than 15% of the value of its net assets in investments
which are illiquid or not readily marketable (including repurchase agreements
having maturities of more than seven calendar days and variable and floating
rate demand and master demand notes not requiring receipt of the principal note
amount within seven days' notice); or
(j) Invest in oil, gas or other mineral exploration or development
programs, although it may invest in issuers that own or invest in such programs.
11
<PAGE> 104
MANAGEMENT
DIRECTORS AND OFFICERS
The principal occupations of the Directors and executive officers of the
Company for the past five years are listed below. Directors deemed to be
"interested persons" of the Company for purposes of the 1940 Act are indicated
by an asterisk.
<TABLE>
<CAPTION>
POSITION
WITH PRINCIPAL
NAME, ADDRESS AND AGE COMPANY OCCUPATION
- --------------------- ------- ----------
<S> <C> <C>
Leslie H. Garner, Jr Director President,
Cornell College Cornell College
600 First Street West
Mount Vernon, IA 52314-1098
Age: 45
James H. Speed, Jr Director Hardee's Food Systems, Inc. - Vice President
1233 Hardee's Blvd Controller (1991-present); Deloitte & Touche -
Rocky Mount, NC 27802 Senior Audit Manager (1979-1991)
Age: 43
Frederick E. Turnage Director Attorney
149 North Franklin St
Rocky Mount, NC 27804
Age: 60
*Lucy Hancock Bode Director Lobbyist
P.O. Box 6338
Raleigh, NC 27628
Age: 44
J. Franklin Martin Director President of LandCraft Properties (1978 -
LandCraft Properties President)
227 W. Trade Street
Suite 2730
Charlotte, NC 28202
Age: 51
Hugh Fanning(1) President BISYS - Vice President of Client Services
Age: 43 (1992-present); previously with Ketchum, an
advertising agency
Ellen Stoutamire (1) Secretary BISYS - Registration and Compliance Officer
Age: 48 (1995-present); Attorney - private practice
(1990-1995)
Tom Line (1) Treasurer BISYS - Vice President/Treasurer (December
Age 30 1996-present); KPMG Peat Marwick LLP -
Audit Senior Manager (September 1989-
December 1996)
Bruce Treff (1) Assistant BISYS - Senior Counsel, Legal Services
Age 30 Secretary (September 1995-present); Alliance Capital
Management, legal and administration
(1988-1995)
Dana Gentile(1) Assistant BISYS - Vice President, Administration and
Age 34 Secretary Regulatory Services (1993-present); BISYS -
client services (1987-1993)
</TABLE>
12
<PAGE> 105
<TABLE>
<S> <C> <C>
Alaina Metz(1) Assistant BISYS - Blue Sky Department Manager
Age 30 Secretary (1995-present); previously, Alliance Capital
Management blue sky department
Troy Huliba(1) Assistant BISYS - Associate Manager, Client Services;
Age 26 Secretary formerly Senior Accountant, transfer agency
(1995-present); Safelight Autoglass, internal
auditor (1993-1995); formerly, student
Jeanette Peplowski(1) Assistant BISYS - Associate Manager, Client Legal
Age 39 Secretary Services (May 1997-present); Legal
Assistant, Baker & Hostetler LLP (1993-1997)
</TABLE>
- ----------
(1) Address is 3435 Stelzer Road, Columbus, Ohio 43219.
Directors of the Company who are not directors, officers or employees of
the Adviser or the Administrator receive from the Company an annual retainer of
$2000 (plus $500 for serving on the Board's Audit Committee) and a fee of $500
for each Board of Directors and Board committee meeting of the Company attended
and are reimbursed for all out-of-pocket expenses relating to attendance at such
meetings. Directors who are directors, officers or employees of the Adviser or
the Administrator do not receive compensation from the Company. The table below
sets forth the compensation received by each Director from the Company for the
fiscal year ended April 30, 1997.
<TABLE>
<CAPTION>
PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
NAME OF COMPENSA- BENEFITS ACCRUED ESTIMATED ANNUAL FROM REGISTRANT
PERSON, TION AS PART OF FUND BENEFITS UPON AND FUND COMPLEX
POSITION REGISTRANT EXPENSES RETIREMENT PAID TO DIRECTORS
- -------- ---------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Leslie H. Garner, Jr. $5,500 -0- -0- $5,500
James H. Speed, Jr $5,500 -0- -0- $5,500
Frederick E. Turnage $5,500 -0- -0- $5,500
Lucy Hancock Bode $4,000 -0- -0- $4,000
J. Franklin Martin $4,000 -0- -0- $4,000
</TABLE>
As of November 19, 1997, the Officers and Directors of the Company, as a
group, own less than 1% of the outstanding shares of the Funds.
As of November 19, 1997, the following individuals owned 5% or more of the
Class C shares of the Funds:
CENTURA EQUITY GROWTH FUND
<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
<S> <C> <C>
Centura Bank 3,645,946.300 31.14%*
Cash Account
Attn Trust Operations
P.O. Box 1220
</TABLE>
13
<PAGE> 106
<TABLE>
<S> <C> <C>
Rocky Mount, N.C 27802-1220
Centura Bank 7,893,200.730 67.42%*
Reinvest Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
*Disclaims beneficial ownership.
</TABLE>
CENTURA FEDERAL SECURITIES INCOME FUND
<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
<S> <C> <C>
Centura Bank 5,140,223.170 40.21%*
Cash Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
Centura Bank 7,561,791.084 59.15%*
Reinvest Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
</TABLE>
*Disclaims beneficial ownership.
NORTH CAROLINA TAX-FREE BOND FUND
<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
<S> <C> <C>
Centura Bank 3,196,618.081 95.28%*
Cash Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
</TABLE>
*Disclaims beneficial ownership
CENTURA EQUITY INCOME FUND
<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
<S> <C> <C>
Centura Bank 2,681,050.791 51.49%*
Reinvest Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
Centura Bank 2,460,564.219 47.25%*
Cash Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
</TABLE>
*Disclaims beneficial ownership.
14
<PAGE> 107
CENTURA SOUTHEAST EQUITY INCOME FUND
<TABLE>
<CAPTION>
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
<S> <C> <C>
Centura Bank 871,910.342 46.35%*
Reinvest Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
Centura Bank 992,155.536 52.74%*
Cash Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
</TABLE>
*Disclaims beneficial ownership.
INVESTMENT ADVISER
Centura Bank (the "Adviser") 131 North Church Street, Rocky Mountain, North
Carolina 27802, serves as investment adviser to the Funds. For these services,
the Adviser receives from each Fund a fee at an annual rate based on each Fund's
average daily net assets. The rates for each Fund are 0.70% for Centura Equity
Growth Fund, 0.70% for Centura Equity Income Fund, 0.30% for Centura Federal
Securities Income Fund, 0.35% for Centura North Carolina Tax-Free Bond Fund, and
0.70% for Centura Southeast Equity Fund.
Under the terms of the Investment Advisory Agreement for the Funds between
the Company and the Adviser ("Agreement"), the investment advisory services of
the Adviser to the Funds are not exclusive. The Adviser is free to, and does,
render investment advisory services to others.
The Agreement will continue in effect with respect to each Fund for a
period more than two years from the date of its execution, only as long as such
continuance is approved at least annually (i) by vote of the holders of a
majority of the outstanding voting securities of each Fund or by the Board of
Directors and (ii) by a majority of the Directors who are not parties to the
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party. With respect to all the Funds other than Centura Equity Income Fund and
Centura Southeast Equity Fund, the Agreement was approved by the Board of
Directors, including a majority of the Directors who are not parties to the
Agreement or interested persons of any such parties, at a meeting called for
the purpose of voting on the Agreement, held on April 26, 1994, and by the sole
shareholder of the Funds on April 26, 1994.
With respect to Centura Equity Income Fund and Centura Southeast Equity
Fund, respectively, the Agreement was approved by the Board of Directors,
including a majority of the Directors who are not parties to the Agreement or
interested persons of any such parties, at meetings called for such purpose
held on July 24, 1996 (for Equity Income Fund) and January 29, 1997 (for
Southeast Equity Fund) and by the sole shareholder of each such Fund on July
24, 1996 (for Equity Income Fund) and January 29, 1997 (for Southeast Equity
Fund). This Agreement, as it relates to all Centura Funds, was recently
re-approved at the April 23, 1997 Board of Directors Meeting. The Agreement may
be terminated at any time without penalty by vote of the Directors (with
respect to the Company or a Fund) or, with respect to any Fund, by vote of the
Directors or the shareholders of that fund, or by the Adviser, on 60 days
written notice by either party to the Agreement and will terminate
automatically if assigned.
For the fiscal year ended April 30, 1997, the Adviser received $1,127,435
from the Equity Growth Fund and $358,174 from the Federal Securities Income Fund
in advisory fees. The Adviser was entitled to $140,821 from the North Carolina
Tax-Free Bond Fund and $217,106 from the Equity Income Fund, but
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waived $100,587 and $105,451, respectively. For the fiscal year ended April 30,
1996, the Adviser received the following in advisory fees: $802,888 from the
Equity Growth Fund, $312,098 from the Federal Securities Income Fund and was
entitled to $138,274 from the North Carolina Tax-Free Bond Fund but waived
$99,774. For the period June 1, 1994 (commencement of operations) through April
30, 1995, the Adviser received the following in advisory fees: $458,424 from the
Equity Growth Fund, $236,139 from the Federal Securities Income Fund and the
Adviser was entitled to $98,015 for the North Carolina Tax-Free Bond Fund but
waived $83,311.
DISTRIBUTION OF FUND SHARES
Centura Funds Distributor, Inc. (the "Distributor") serves as principal
underwriter for the shares of the Funds pursuant to a Distribution Contract. The
Distribution Contract provides that the Distributor will use its best efforts to
maintain a broad distribution of the Funds' shares among bona fide investors and
may enter into selling group agreements with responsible dealers and dealer
managers as well as sell the Funds' shares to individual investors. The
Distributor is not obligated to sell any specific amount of shares.
Service and distribution plans (the "Plans") have been adopted by each of
the Funds for Class A shares and Class B shares providing for different rates of
fee payment with respect to each of those classes of shares, as described in the
Prospectus. No Plan has been adopted for Class C shares.
ADMINISTRATIVE SERVICES
On January 1, 1997, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS") succeeded Furman Selz LLC ("Furman Selz") as Sponsor and
Administrator of the Funds. Pursuant to an Administration Agreement, BISYS
provides administrative services necessary for the operation of the Funds,
including among other things, (i) preparation of shareholder reports and
communications, (ii) regulatory compliance, such as reports to and filings with
the Securities and Exchange Commission ("SEC") and state securities commissions
and (iii) general supervision of the operation of the Funds, including
coordination of the services performed by the Funds' Adviser, Distributor,
custodians, independent accountants, legal counsel and others. In addition,
BISYS furnishes office space and facilities required for conducting the business
of the Funds and pays the compensation of the Funds' officers, employees and
Directors affiliated with BISYS. For these services, BISYS receives from each
Fund a fee, payable monthly, at the annual rate of 0.15% of each Fund's average
daily net assets.
BISYS is a subsidiary of BISYS Group, Inc. which is headquartered in Little
Falls, New Jersey and supports more than 5,000 financial institutions and
corporate clients through two strategic business units. BISYS Information
Services Group provides image and data processing outsourcing, and pricing
analysis to more than 600 banks nationwide. BISYS Investment Services Group
designs, administers and distributes over 30 families of proprietary mutual
funds consisting of more than 365 portfolios, and provides 401(k) marketing
support, administration, and recordkeeping services in partnership with banking
institutions and investment management companies. At a meeting held on July 24,
1996, the Directors reviewed and approved an Administration Agreement with
BISYS, a Transfer Agency Agreement and a Fund Accounting Agreement with BISYS
Fund Services, Inc. Both BISYS companies have their principal place of business
at 3435 Stelzer Road, Columbus, Ohio 43219.
For the fiscal year ended April 30, 1997, BISYS and Furman Selz
received a total of $241,593 and $179,087 in administrative services fees from
the Equity Growth Fund and the Federal Securities Income Fund, respectively. For
the
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fiscal year ended April 30, 1997, Furman Selz and BISYS earned $60,352 in
administrative services fees from the North Carolina Tax-Free Bond Fund of which
$43,051 was waived. For the period from October 1, 1996 (commencement of
operations) through April 30, 1997, Furman Selz and BISYS earned $46,523 in
administrative services fee from the Equity Income Fund of which $23,882 was
waived.
For the period ended April 30, 1996, Furman Selz, the Administrator for
that fiscal period, was entitled to the following administrative services fees:
FURMAN SELZ FURMAN SELZ
ENTITLED WAIVED
----------- -----------
Centura Equity Growth Fund $172,047 $ 0
Centura Federal Securities Income Fund $156,049 $ 0
Centura North Carolina Tax Free
Bond Fund $ 59,260 $ 42,761
For the period ended April 30, 1995, Furman Selz, the Administrator for
that fiscal period, was entitled to the following administrative services fees:
FURMAN SELZ FURMAN SELZ
ENTITLED WAIVED
----------- -----------
Centura Equity Growth Fund $105,945 $ 19,669
Centura Federal Securities Income Fund $117,881 $ 23,780
Centura North Carolina Tax-Free Bond Fund $ 45,419 $ 40,371
The Administration Agreement was approved by the Board of Directors,
including a majority of the Directors who are not parties to the Contract or
interested persons of such parties, at meetings held July 24, 1996 and January
29, 1997. The Administration Agreement is terminable with respect to a Fund or
the Company without penalty, at any time, by vote of a majority of the Directors
or, with respect to a Fund, by vote of the holders of a majority of the shares
of the Fund, each upon not more than 60 days written notice to the
Administrator, and upon 60 days notice, by the Administrator.
SERVICE ORGANIZATIONS
The Company may also contract with banks, trust companies, broker-dealers
or other financial organizations ("Service Organizations") to provide certain
administrative services for the Funds. Services provided by Service
Organizations may include among other things: providing necessary personnel and
facilities to establish and maintain certain shareholder accounts and records;
assisting in processing purchase and redemption transactions; arranging for the
wiring of funds; transmitting and receiving funds in connection with client
orders to purchase or redeem shares; verifying and guaranteeing client
signatures in connection with redemption orders, transfers among and changes in
client-designating accounts; providing periodic statements showing a client's
account balance and, to the extent practicable, integrating such information
with other client transactions; furnishing periodic and annual statements and
confirmations of all purchases and redemptions of shares in a client's account;
transmitting proxy statements, annual reports, and updating prospectuses and
other communications from the Funds to clients; and providing such other
services as the Funds or a client reasonably may request, to the extent
permitted
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by applicable statute, rule or regulation. Neither BISYS nor the Adviser will be
a Service Organization or receive fees for servicing.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the minimum
initial or subsequent investments specified by the Funds or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
that might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state statutes or
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. In addition, state securities laws on
this issue may differ from the interpretations of federal law expressed herein
and banks and financial institutions may be required to register as dealers
pursuant to state law. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders of the Funds and alternative
means for continuing the servicing of such shareholders would be sought. In that
event, changes in the operation of the Funds might occur and a shareholder
serviced by such a bank might no longer be able to avail itself of any services
then being provided by the bank. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any of these
occurrences.
DETERMINATION OF NET ASSET VALUE
The Funds value their portfolio securities in accordance with the
procedures described in the Prospectus.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and for the other investment advisory
clients of the Adviser are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients simultaneously purchase or sell the same security, in which event
each day's transactions in such security are, insofar as possible, averaged as
to price and allocated between such clients in a manner which in the Adviser's
opinion is equitable to each and in accordance with the amount being purchased
or sold by each. There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on other clients.
The Funds have no obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, the Adviser is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Funds to obtain the best results
taking into account the broker-dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily be
paying the lowest spread or commission available.
Purchases and sales of securities will often be principal transactions in
the case of debt securities and
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equity securities traded otherwise than on an exchange. The purchase or sale of
equity securities will frequently involve the payment of a commission to a
broker-dealer who effects the transaction on behalf of a Fund. Debt securities
normally will be purchased or sold from or to issuers directly or to dealers
serving as market makers for the securities at a net price. Generally, money
market securities are traded on a net basis and do not involve brokerage
commissions. Under the 1940 Act, persons affiliated with the Funds, the Adviser
or BISYS are prohibited from dealing with the Funds as a principal in the
purchase and sale of securities unless a permissive order allowing such
transactions is obtained from the SEC.
The Adviser may, in circumstances in which two or more broker-dealers are
in a position to offer comparable results, give preference to a dealer that has
provided statistical or other research services to the Adviser. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of securities firms. These items, which
in some cases may also be purchased for cash, include such matters as general
economic and securities market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services are of value to the Adviser in advising
various of its clients (including the Funds), although not all of these services
are necessarily useful and of value in managing the Funds. The advisory fees
paid by the Funds are not reduced because the Adviser and its affiliates receive
such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), the Adviser may cause a Fund to pay a broker-dealer that provides
"brokerage and research services" (as defined in the Act) to the Adviser an
amount of disclosed commission for effecting a securities transaction for the
Fund in excess of the commission which another broker-dealer would have charged
for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Adviser may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds. For the
fiscal year ended April 30, 1997, $344,359 was paid in brokerage commissions by
the Equity Growth Fund. For the period from October 1, 1996 (commencement of
operations) through April 30, 1997, $44,399 was paid in brokerage commissions by
the Equity Income Fund. Of these amounts, none were paid to any affiliated
brokers. For the period ended April 30, 1996, the Equity Growth Fund paid
brokerage commissions in the amount of $192,705. Of this amount, none was paid
to any affiliated brokers. For the period ended April 30, 1995, the Equity
Growth Fund paid brokerage commissions, in the amount of $115,342. Of this
amount, none was paid to any affiliated brokers.
PORTFOLIO TURNOVER
Changes may be made in the portfolio consistent with the investment
objectives and policies of the Funds whenever such changes are believed to be in
the best interests of the Funds and their shareholders. It is anticipated that
the annual portfolio turnover rate for a Fund normally will not exceed the
amount stated in the Funds' Prospectus. The portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of portfolio securities
by the average monthly value of the Fund's portfolio securities. For purposes of
this calculation, portfolio securities exclude all securities having a maturity
when purchased of one year or less. The portfolio turnover rate for the fiscal
year ended April 30, 1997 was 67%, 26%, and 34% for the Equity Growth Fund, the
Federal Securities Income Fund and the North Carolina Tax-Free Bond Fund,
respectively. For the period from October 1, 1996 (commencement of operations)
through April 30, 1997, the portfolio turnover rate was 24% for the Equity
Income Fund. The portfolio turnover rate for the fiscal period ended April 30,
1996 was 46%, 34%, and 80% for the Equity Growth Fund, the Federal Securities
Income Fund and the North Carolina Tax-Free Bond Fund, respectively.
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TAXATION
The Funds intend to qualify and elect annually to be treated as regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, a Fund must
for each taxable year (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items, dividends,
taxable interest and the excess of net short-term capital gains over net
long-term capital losses); (b) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (c) derive less than 30% of its gross income from the
sale or other disposition of certain assets (namely, in the case of a Fund, (i)
stock or securities; (ii) options, futures, and forward contracts (other than
those on foreign currencies), and (iii) foreign currencies (including options,
futures, and forward contracts on such currencies) not directly related to the
Fund's principal business of investing in stock or securities (or options and
futures with respect to stocks or securities)) held less than 3 months; and (d)
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by cash
and cash items (including receivables), U.S. Government securities, the
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
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 total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies), or of two or more
issuers which the Fund controls and which are engaged in the same or similar or
related trades or businesses. In addition, a Fund earning tax-exempt interest
must, in each year, distribute at least 90% of its net tax-exempt income. By
meeting these requirements, a Fund generally will not be subject to Federal
income tax on its investment company taxable income and net capital gains which
are distributed to shareholders. If the Funds do not meet all of these Code
requirements, they will be taxed as ordinary corporations and their
distributions will be taxed to shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a timely basis
in accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund
must distribute for each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and (3) all ordinary income and capital gain net income
(adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution, including an "exempt-interest
dividend," will be treated as paid on December 31 of a calendar year if it is
declared by a Fund during October, November or December of that year to
shareholders of record on a date in such a month and paid by the Fund during
January of the following year. Such distributions will be reportable by
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions from certain of the Funds may be
eligible for the dividends-received deduction available to corporations.
Distributions of net capital gains, if any, designated by the Funds as capital
gain dividends are taxable to shareholders as long-term capital gain, regardless
of the length of time the Funds' shares have been held by a shareholder. All
distributions are taxable to the shareholder in the same manner whether
reinvested in additional shares or received in cash. Shareholders will be
notified annually as to the Federal tax status of distributions.
Distributions by a Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a stockholder's cost
basis, such distribution, nevertheless, would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment
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standpoint, it may constitute a partial return of capital. In particular,
investors should be careful to consider the tax implications of buying shares
just prior to a distribution by the Funds. The price of shares purchased at that
time includes the amount of the forthcoming distribution. Those purchasing just
prior to a distribution will receive a distribution which will nevertheless
generally be taxable to them.
Upon the taxable disposition (including a sale or redemption) of shares of
a Fund, a shareholder may realize a gain or loss depending upon his basis in his
shares. Such gain or loss generally will be treated as capital gain or loss if
the shares are capital assets in the shareholder's hands. Such gain or loss will
be mid-term, long-term or short-term, generally depending upon the shareholder's
holding period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital gain dividends have
been paid will, to the extent of such capital gain dividends, be treated as
long-term capital loss if such shares have been held by the shareholder for six
months or less. A loss realized on the redemption, sale or exchange of Fund
shares will be disallowed to the extent an exempt-interest dividend was received
with respect to those shares if the shares have been held by the shareholder for
six months or less. Further, a loss realized on a disposition will be disallowed
to the extent the shares disposed of are replaced (whether by reinvestment of
distributions or otherwise) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. In some
circumstances, basis adjustments are required in computing gains or loss on
dispositions of Fund shares within 90 days after their acquisition where new
shares of a regulated investment company are then acquired with a reduced sales
load. Shareholders receiving distributions in the form of additional shares will
have a cost basis for Federal income tax purposes in each share received equal
to the net asset value of a share of the Funds on the reinvestment date.
Certain of the options, futures contracts, and forward foreign currency
exchange contracts that several of the Funds may invest in are so-called
"section 1256 contracts." With certain exceptions, gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by a Fund at the
end of each taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to-market" with the result that unrealized
gains or losses are treated as though they were realized and the resulting gain
or loss is treated as 60/40 gain or loss. It is unclear at this time whether
the long-term portion of gain will be regarded as mid-term gain or as gain from
an asset held more than eighteen months.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on a position that is part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to a Fund of hedging transactions are not entirely clear. Hedging
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transactions may increase the amount of short-term capital gain realized by a
Fund which is taxed as ordinary income when distributed to stockholders.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.
Certain requirements that must be met under the Code in order for a Fund to
qualify as a regulated investment company may limit the extent to which a Fund
will be able to engage in transactions in options, futures, forward contracts
and similar instruments.
Certain of the debt securities acquired by a Fund may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Fund, original issue discount on a taxable debt
security earned in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code. Original issue discount on an obligation,
the interest from which is exempt from Federal income tax, generally will
constitute tax-exempt interest income.
Some of the debt securities may be purchased by a Fund at a discount which
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any debt security, including a
tax-exempt debt security, having market discount will be treated as taxable
income to the extent it does not exceed the accrued market discount on such debt
security. Generally, market discount accrues on a daily basis for each day the
debt security is held by the Fund at a constant rate over the time remaining to
the debt security's maturity or, at the election of the Fund, at a constant
yield to maturity which takes into account the semi-annual compounding of
interest.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time the Fund actually collects such receivables or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain options and forward and futures contracts, gains or
losses attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "section 988" gains or losses, may increase, decrease, or eliminate
the amount of a Fund's investment company taxable income to be distributed to
its shareholders as ordinary income.
Some Funds may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC under the Code if at least one-half of
its assets constitute investment-type assets or 75% or more of its gross income
is investment-type income. Under the PFIC rules, an "excess distribution"
received with respect to PFIC stock is treated as having been realized ratably
over the period during which the Fund held the PFIC stock. A Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to the Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding
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income to stockholders. Excess distributions include any gain from the sale of
PFIC stock as well as certain distributions from a PFIC. All excess
distributions are taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking to market the Funds' PFIC
shares at the end of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as though they were
realized. If this election were made, tax at the Fund level under the PFIC rules
would generally be eliminated, but the Fund could, in limited circumstances,
incur nondeductible interest charges. Under recent tax legislation, the federal
tax rates on long-term capital gain differ, depending on the length of time the
asset giving rise to the capital gain has been held. Each Fund's intention to
qualify annually as a regulated investment company may limit its elections with
respect to PFIC stock.
Income received by a Fund from sources within foreign countries may be
subject to withholding and other similar income taxes imposed by the foreign
country. If more than 50% of the value of a Fund's total assets at the close of
its taxable year consists of securities of foreign governments and corporations,
the Fund will be eligible and intends to elect to "pass-through" to its
shareholders the amount of such foreign taxes paid by the Fund. Pursuant to this
election, a shareholder would be required to include in gross income (in
addition to taxable dividends actually received) his pro rata share of the
foreign taxes paid by a Fund, and would be entitled either to deduct (as an
itemized deduction) his pro rata share of foreign taxes in computing his taxable
income or to use it as a foreign tax credit against his U.S. Federal income tax
liability, subject to limitations. No deduction for foreign taxes may be claimed
by a shareholder who does not itemize deductions, but such a shareholder may be
eligible to claim the foreign tax credit (see below). Each shareholder will be
notified within 60 days after the close of a Fund's taxable year whether the
foreign taxes paid by a Fund will "pass-through" for that year and, if so, such
notification will designate (a) the shareholder's portion of the foreign taxes
paid to each such country and (b) the portion of the dividend which represents
income derived from foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. With respect to a Fund, gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuations gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables, will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income (as defined for purposes of the foreign tax
credit) including foreign source passive income of a Fund. The foreign tax
credit may offset only 90% of the alternative minimum tax imposed on
corporations and individuals, and foreign taxes generally may not be deducted in
computing alternative minimum taxable income. The ability to claim foreign tax
credits also is subject to holding period requirements.
The Funds are required to report to the Internal Revenue Service ("IRS")
all distributions except in the case of certain exempt shareholders. All such
distributions generally are subject to withholding of Federal income tax at a
rate of 31% ("backup withholding") in the case of non-exempt shareholders if (1)
the shareholder fails to furnish the Funds with and to certify the shareholder's
correct taxpayer identification number or social security number, (2) the IRS
notifies the Funds or a shareholder that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (3) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding. If the withholding
provisions are applicable, any such distributions, whether reinvested in
additional shares or taken in cash, will be reduced by the amounts required to
be withheld. Backup withholding is not an additional tax. Any amount withheld
may be credited against the shareholder's U.S. Federal income tax liability.
Investors may wish to consult their tax advisors about the applicability of the
backup withholding provisions.
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The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisors with respect to particular questions of Federal, state and local
taxation. Shareholders who are not U.S. persons should consult their tax
advisors regarding U.S. and foreign tax consequences of ownership of shares of
the Funds including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
Centura North Carolina Tax-Free Bond Fund. The Fund intends to manage its
portfolio so that it will be eligible to pay "exempt-interest dividends" to
shareholders. The Fund will so qualify if, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets consists of state,
municipal, and certain other securities, the interest on which is exempt from
the regular Federal income tax. To the extent that the Fund's dividends
distributed to shareholders are derived from such interest income and are
designated as exempt-interest dividends by the Fund, they will be excludable
from a shareholder's gross income for Federal income tax purposes.
Exempt-interest dividends, however, must be taken into account by shareholders
in determining whether their total incomes are large enough to result in
taxation of up to one-half (85% for taxable years beginning after 1993) of their
social security benefits and certain railroad retirement benefits. The Fund will
inform shareholders annually as to the portion of the distributions from the
Fund which constitute exempt-interest dividends. In addition, for corporate
shareholders of the Fund, exempt-interest dividends may comprise part or all of
an adjustment to alternative minimum taxable income for purposes of the
alternative minimum tax and the environmental tax under sections 55 and 59A.
Exempt-interest dividends that are attributable to certain private activity
bonds, while not subject to the regular Federal income tax, may constitute an
item of tax preference for purposes of the alternative minimum tax.
To the extent that the Fund's dividends are derived from its investment
company taxable income (which includes interest on its temporary taxable
investments and the excess of net short-term capital gain over net long-term
capital loss), they are considered ordinary (taxable) income for Federal income
tax purposes. Such dividends will not qualify for the dividends-received
deduction for corporations. Distributions, if any, of net capital gains (the
excess of net long-term capital gain over net short-term capital loss)
designated by a Fund as capital gain dividends are taxable to shareholders as
long-term capital gain regardless of the length of time the shareholder has
owned shares of the Fund. Under recent tax legislation, the federal tax rates
on long-term capital gain differ, depending on the length of time the asset
giving rise to the capital gain has been held.
Upon redemption, sale or exchange of shares of the Fund, a shareholder will
realize a taxable gain or loss, depending on whether the gross proceeds are more
or less than the shareholder's tax basis for the shares. The discussion above
provides additional detail about the income tax consequences of disposing of
Fund shares.
Deductions for interest expense incurred to acquire or carry shares of the
Fund may be subject to limitations that reduce, defer, or eliminate such
deductions. This includes limitations on deducting interest on indebtedness
properly allocable to investment property (which may include shares of the
Fund). In addition, a shareholder may not deduct a portion of interest on
indebtedness incurred or continued to purchase or carry shares of an investment
company (such as this Fund) paying exempt-interest dividends. Such disallowance
would be in an amount which bears the same ratio to the total of such interest
as the exempt-interest dividends bear to the total dividends, excluding net
capital gain dividends received by the shareholder. Under rules issued by the
IRS for determining when borrowed funds are considered used for the purposes of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of shares.
North Carolina law exempts from income taxation dividends received from a
regulated investment
24
<PAGE> 117
company in proportion to the income of the regulated investment company that is
attributable to interest on bonds or securities of the U.S. government or any
agency or instrumentality thereof or on bonds of the State of North Carolina or
any county, municipality or political subdivision thereof, including any agency,
board, authority or commission of any of the above.
Opinions relating to the validity of municipal securities and the exemption
of interest thereon from Federal income tax are rendered by bond counsel to the
issuers. The Fund, the Adviser and their affiliates, and the Fund's counsel make
no review of proceedings relating to the issuance of state or municipal
securities or the bases of such opinions.
Persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by private activity bonds should consult their tax
advisers before purchasing shares of Centura North Carolina Tax-Free Bond Fund
since the acquisition of shares of the Fund may result in adverse tax
consequences to them. In addition, all shareholders of the Fund should consult
their tax advisers about the tax consequences to them of their investments in
the Fund.
Changes in the tax law, including provisions relating to tax-exempt income,
frequently come under consideration. If such changes are enacted, the tax
consequences arising from an investment in Centura North Carolina Tax-Free Bond
Fund may be affected. Since the Funds do not undertake to furnish tax advice, it
is important for shareholders to consult their tax advisers regularly about the
tax consequences to them of investing in one or more of the Funds.
25
<PAGE> 118
OTHER INFORMATION
CAPITALIZATION
The Company is a Maryland corporation established under Articles of
Incorporation dated March 1, 1994 and currently consists of five separately
managed portfolios, each of which offers three classes of shares. The
capitalization of the Company consists solely of seven hundred fifty million
(750,000,000) shares of common stock with a par value of $0.001 per share. The
Board of Directors may establish additional Funds (with different investment
objectives and fundamental policies), or additional classes of shares, at any
time in the future. Establishment and offering of additional Funds or classes
will not alter the rights of the Company's shareholders. When issued, shares are
fully paid, non-assessable, redeemable and freely transferable. Shares do not
have preemptive rights or subscription rights. In any liquidation of a Fund or
class, each shareholder is entitled to receive his pro rata share of the net
assets of that Fund or class.
VOTING RIGHTS
Under the Articles of Incorporation, the Company is not required to hold
annual meetings of each Fund's shareholders to elect Directors or for other
purposes. It is not anticipated that the Company will hold shareholders'
meetings unless required by law or the Articles of Incorporation. In this
regard, the Company will be required to hold a meeting to elect Directors to
fill any existing vacancies on the Board if, at any time, fewer than a majority
of the Directors have been elected by the shareholders of the Company. In
addition, the Articles of Incorporation provide that the holders of not less
than a majority of the outstanding shares of the Company may remove persons
serving as Director.
Each Fund may vote separately on items affecting only that Fund, and each
class of shares of each Fund may vote separately on matters affecting only that
class or affecting that class differently from other classes.
The Company's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Directors, in which case the holders of the remaining shares would not be able
to elect any Directors.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Centura Bank, 131 North Church Street, Rocky Mount, North Carolina 27802,
acts as Custodian of the Company's assets. For the periods ended April 30, 1995,
April 30, 1996 and April 30, 1997, respectively, the
26
<PAGE> 119
Custodian earned fees of $17,188, $28,109 and $59,019 for the Equity Growth
Fund; $19,585, $24,580 and $31,324 for the Federal Securities Income Fund; and
$10,192, $12,503 and $15,400 for the North Carolina Tax-Free Bond Fund,
respectively. For the period from October 1, 1996 (commencement of operations)
to April 30, 1997 the custodian earned fees of $23,036 for the Equity Income
Fund.
BISYS Fund Services, Inc. ("BFSI") serves as the Company's transfer agent
pursuant to a Transfer Agency Agreement; prior to January 1, 1997, Furman Selz
served as Transfer Agent. For its services rendered during the fiscal year ended
April 30, 1997, BFSI and Furman Selz, the Company's prior transfer agent, earned
$101,541, $13,117 and $11,109 in transfer agent fees for the Equity Growth Fund,
the Federal Securities Income Fund and the North Carolina Tax-Free Bond Fund,
respectively. For the period from October 1, 1996 (commencement of operations)
through April 30, 1997, BFSI and Furman Selz earned $16,260 in transfer agent
fees for the Equity Income Fund. For the fiscal year ended April 30, 1996, the
Company's prior transfer agent, Furman Selz, earned transfer agent fees of
$38,623 for the Equity Growth Fund, $7,326 for the Federal Securities Income
Fund and $6,452 for the North Carolina Tax-Free Bond Fund. For the period ended
April 30, 1995, Furman Selz earned transfer agent fees of $9,897 for the Equity
Growth Fund, $5,034 for the Federal Securities Income Fund and $4,275 for the
North Carolina Tax-Free Bond Fund.
Pursuant to a Fund Accounting Agreement, each Fund compensates BFSI $2,500
per month for providing fund accounting services for the Funds. For the fiscal
year ended April 30, 1997, BFSI and Furman Selz, the Company's fund accounting
servicer prior to January 1, 1997, earned $28,792, $31,735 and $39,742 in fund
accounting fees for the Equity Growth Fund, the Federal Securities Income Fund
and the North Carolina Tax-Free Bond Fund, respectively. For the period from
October 1, 1996 (commencement of operations) through April 30, 1997, BFSI and
Furman Selz earned $19,212 in fund accounting fees for the Equity Income Fund.
For the fiscal year ended April 30, 1996, Furman Selz, earned the following fees
for their fund accounting services: $32,848 for the Equity Growth Fund, $33,981
for the Federal Securities Income Fund and $41,369 for the North Carolina
Tax-Free Bond Fund. For the period ended April 30, 1995, Furman Selz earned the
following fees for their fund accounting services: $29,727 for the Equity Growth
Fund, $32,231 for the Federal Securities Income Fund and $34,948 for the North
Carolina Tax-Free Bond Fund.
YIELD AND PERFORMANCE INFORMATION
The Funds may, from time to time, include their yield, effective yield, tax
equivalent yield and average annual total return in advertisements or reports to
shareholders or prospective investors.
Quotations of yield for each class of shares of the Funds will be based on
the investment income per share earned during a particular 30-day period, less
expenses accrued with respect to that class during a period ("net investment
income"), and will be computed by dividing net investment income for the class
by
27
<PAGE> 120
the maximum offering price per share of that class on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1)#6-1]/cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares of the class outstanding during the period that were entitled to receive
dividends, and d = the maximum offering price per share of the class on the last
day of the period; the # indicates that the following single character is an
exponent.
The 30-day yield for Class C shares for the period ended April 30, 1997 was
as follows: 5.96% for the Federal Securities Income Fund and 4.61% for the North
Carolina Tax Free Bond Fund.
Quotations of tax-equivalent yield for each class of shares of Centura
North Carolina Tax-Free Bond Fund will be calculated according to the following
formula:
TAX EQUIVALENT YIELD = (E)/l-p
E = tax-exempt yield p = stated income tax rate
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in each
class of shares of a Fund over periods of 1, 5 and 10 years (up to the life of
the Fund), calculated pursuant to the following formula:
YIELD = 2[(a-b + 1)#6-1]/ cd
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return for the class, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures will reflect the deduction of the maximum
sales charge and a proportional share of Fund and class-specific expenses (net
of certain reimbursed expenses) on an annual basis, and will assume that all
dividends and distributions are reinvested when paid; the # indicates that the
following single character is an exponent.
Quotations of yield and total return will reflect only the performance of a
hypothetical investment in a class of shares of the Funds during the particular
time period shown. Yield and total return for the Funds will vary based on
changes in the market conditions and the level of the Fund's (and classes')
expenses, and no reported performance figure should be considered an indication
of performance which may be expected in the future.
In connection with communicating its yields or total return to current or
prospective unit holders, the Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Please refer to the Total Return Summary under the section entitled Other
Information in the Prospectus for average annual total returns for Class C
shares.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare the
Funds' results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund.
28
<PAGE> 121
Investors who purchase and redeem shares of the Funds through a customer
account maintained at a Service Organization may be charged one or more of the
following types of fees as agreed upon by the Service Organization and the
investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and average
annual total return of the Funds for those investors.
INDEPENDENT ACCOUNTANTS
McGladrey & Pullen LLP serves as the independent accountants for the
Company. McGladrey & Pullen LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of SEC filings.
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C., 20005,
passes upon certain legal matters in connection with the shares offered by the
Company and also acts as Counsel to the Company.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in
the Company's Registration Statement filed with the SEC under the Securities Act
of 1933 with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
Registration Statement, including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Report of Independent Accountants and financial statements of the
Funds included in their Annual Report for the period ended April 30, 1997 (the
"Annual Report") are incorporated herein by reference to such Annual Report.
Copies of such Annual Report are available without charge upon request by
writing to Centura Funds, Inc., 3435 Stelzer Road, Columbus, Ohio 43219-8006 or
telephoning (800) 442-3688.
The financial statements incorporated by reference into this Statement
of Additional Information have been audited by McGladrey & Pullen LLP,
independent accountants, and have been so included and incorporated by reference
in reliance upon the report of said firm, which report is given upon their
authority as experts in auditing and accounting.
The unaudited financial statements for the Southeast Equity Fund for
the period ended October 31, 1997 are included herein.
29
<PAGE> 122
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
COMMON STOCKS (91.6%):
Airlines (1.4%):
14,000 Atlantic Southeast Airlines, Inc. $ 390,250
-----------
Apparel (0.9%):
20,000 Tropical Sportswear International (b) 240,000
-----------
Banking & Financial Services (9.4%):
8,500 CCB Financial Corp. 773,499
8,000 Cenit Bancorp, Inc. 520,000
20,000 First Financial Holdings, Inc. 772,500
12,500 First Liberty Financial Corp. 329,688
10,000 LSB Bancshares, Inc. 252,500
-----------
2,648,187
-----------
Chemicals (1.2%):
30,000 JLM Industries, Inc. (b) 341,250
-----------
Commercial Services (2.0%):
26,000 Rollins, Inc. 555,750
-----------
Computer Software (2.7%):
38,000 Broadway & Seymour, Inc. (b) 370,500
750 Choicepoint Inc. (b) 27,938
12,000 Datastream Systems, Inc. (b) 366,000
-----------
764,438
Distribution/Wholesale (1.7%):
35,500 Aviall Inc. (b) 474,813
-----------
Electrical & Electronics (3.8%):
17,000 AVX Corp. 480,250
24,000 Benchmark Electronics, Inc. (b) 598,500
-----------
1,078,750
-----------
Electrical Equipment (3.9%):
15,000 General Cable 485,625
81,500 Insteel Industries, Inc. 621,437
-----------
1,107,062
Financial Services (0.8%):
7,500 Equifax, Inc. 232,969
-----------
Food (3.7%):
25,000 Goodmark Foods, Inc. 412,500
29,000 Lance Inc. 619,875
-----------
1,032,375
-----------
Forest Products (1.8%):
18,000 Deltic Timber Corp. 507,375
-----------
Health Care (6.4%):
20,000 Coventry Corp. (b) 278,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 123
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
25,000 Medcath, Inc. (b) $ 393,750
36,200 Owens & Minor Inc. Holding Co. 506,800
25,000 Trigon Healthcare, Inc. (b) 610,937
----------
1,790,237
----------
Home Furnishings (0.6%):
5,600 Bassett Furniture Industries, Inc. 156,800
----------
Hotels & Lodging (0.5%):
10,000 Winston Hotels, Inc. 136,250
----------
Insurance (7.4%):
9,700 American Heritage Life Insurance 343,138
25,000 FPIC Insurance Group, Inc. (b) 743,749
18,000 Highlands Insurance Group (b) 414,000
17,400 Provident Companies, Inc. 580,725
----------
2,081,612
----------
Machinery & Equipment (1.0%):
10,000 Roper Industries, Inc. 266,875
----------
Media (4.2%):
30,000 Cadmus Communications Corp. 629,999
18,000 Cox Communications (b) 553,500
----------
1,183,499
----------
Medical - Biotechnology (1.6%):
25,000 Pharmaceutical Product Development, Inc. (b) 443,750
----------
Medical Equipment & Supplies (1.0%):
13,000 Maxxim Medical, Inc. (b) 290,875
----------
Metal Fabricate/Hardware (1.7%):
16,000 Kaydon Corp. 486,000
----------
Metals (1.2%):
18,500 Commonwealth Industries, Inc. 326,063
----------
Natural Gas Utility (1.0%):
10,000 Piedmont Natural Gas Co., Inc. 280,000
----------
Oil/Gas Exploration (5.3%):
41,500 Dailey Petroleum Services (b) 529,124
8,000 Forcenergy, Inc. (b) 261,000
10,000 Marine Drilling Companies, Inc. (b) 296,250
12,000 Pride International, Inc. (b) 396,000
----------
1,482,374
----------
Oil/Gas Services (3.7%):
30,400 American Oilfield Divers, Inc. (b) 516,800
26,000 Global Industries Ltd. (b) 523,250
----------
1,040,050
----------
Packaging (1.1%):
10,000 Sonoco Products Co. 321,875
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 124
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
Paper/Pulp (1.3%):
9,000 Buckeye Cellulose Corp. (b) $ 373,500
----------
Pollution Control (1.4%):
76,100 Trion Inc. 380,500
----------
Publishing & Printing (1.0%):
23,100 Nelson (Thomas), Inc. 268,538
----------
Real Estate Investment Trust (2.3%):
20,000 Capstone Capital Corp. 472,500
5,000 Prison Realty Trust 172,500
----------
645,000
----------
Restaurants (0.8%):
25,000 Rare Hospitality International, Inc. (b) 234,375
----------
Retail (3.4%):
40,000 Cato Corp. 342,500
15,000 Heilig Meyers Co. 200,625
10,000 Lowes Co. 416,250
----------
959,375
----------
Retail - Grocery (1.4%):
30,000 Ingles Markets Inc., Class A 393,750
----------
Retial-Computer Software (0.6%):
10,000 Southern Electronic Corp. (b) 165,000
----------
Steel/Iron (1.1%):
6,000 Nucor Corp. 313,500
----------
Telecommunications (1.2%):
25,000 Vanguard Cellular System - Class A (b) 345,313
----------
Textiles (2.2%):
9,300 Guilford Mills, Inc. 222,038
10,000 Unifi, Inc. 384,375
----------
606,413
----------
Tobacco (3.5%):
35,000 Standard Commercial Corp. (b) 584,063
10,000 Universal Corp. 384,375
----------
968,438
----------
Utilities (1.4%):
15,000 Scana Corp. 378,750
----------
TOTAL COMMON STOCKS 25,691,931
----------
U.S. TREASURY BILLS (3.6%):
1,000,000 5.16%, 11/6/97 999,354
----------
TOTAL U.S. TREASURY BILLS 999,354
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 125
CENTURA FUNDS, INC.
SOUTHEAST EQUITY FUND
- -------------------------------------------------------------------------------
Schedule of Portfolio Investments October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
INVESTMENT COMPANIES (6.8%):
961,442 Financial Square Prime Money Market Fund $ 961,442
939,018 Temporary Investment Fund 939,018
-----------
TOTAL INVESTMENT COMPANIES 1,900,460
-----------
TOTAL INVESTMENTS (COST $23,805,542) (a) - 102.0% 28,591,745
LIABILITIES IN EXCESS OF OTHER ASSETS (2.0)% (562,667)
-----------
TOTAL NET ASSETS - 100.0% $28,029,078
===========
</TABLE>
- ----------------
(a) Represents cost for federal income tax purposes and differs from value
by net unrealized appreciation of securities as follows (amounts in
thousands):
<TABLE>
<S> <C>
Unrealized appreciation $ 5,382,193
Unrealized depreciation (595,990)
Net unrealized appreciation $ 4,786,203
</TABLE>
(b) Non-income producing securities.
(c) 144a Security which is restricted as to resale only to qualified
institutional investors.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 126
CENTURA FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SOUTHEAST
EQUITY FUND
-----------
FOR THE PERIOD
ENDED
OCTOBER 31, 1997
----------------
<S> <C>
Assets:
Investments, at value (Cost 23,805,542) $28,591,745
Interest and dividends receivable 37,376
Receivable for capital shares issued 30,258
Receivable from brokers for investments sold 0
Unamortized organization costs 14,961
Prepaid expenses 568
-----------
Total Assets 28,674,908
-----------
Liabilities:
Dividends payable 17,394
Payable to brokers for investments purchased 598,750
Payable for capital shares issued 877
Accrued expenses and other payables:
Investment advisory fees 16,700
Administration fees 342
Distribution fees--Class A 304
Distribution fees--Class B 1,924
Trustee Fees 568
Custodiam fees 6,469
Other 2,502
-----------
Total Liabilities 645,830
-----------
Net Assets:
Shares of beneficial interest outstanding (par value $.001
per share) shares authorized
Additional paid-in-capital 21,422,392
Distribution in excess of net investment income (657)
Accumulated undistributed net realized gains (losses)
from investment transactions 1,821,140
Net realized appreciation (depreciation) from
investments 4,786,203
-----------
Net Assets $28,029,078
-----------
Class A:
Net Assets 1,504,075
Shares Outstanding 110,770
Net Asset Value Per Share $ 13.58
-----------
Maximum Sales Charge 4.50%
-----------
Maximum Offering Price Per Share (100%-100%-
Maximum Sales Charge) of net asset value adjusted
to the nearest cent per share $ 14.21
-----------
Class B:
Net Assets 2,364,829
Shares Outstanding 174,636
Net Asset Value Per Share* $ 13.54
-----------
Class C:
Net Assets 24,160,173
Shares Outstanding 1,780,681
Net Asset Value Per Share $ 13.57
-----------
</TABLE>
*Redemption price varies by length of time
See notes to financial statements
<PAGE> 127
CENTURA FUNDS, INC.
STATEMENT OF OPERATIONS
(Unaudited) October 31, 1997
<TABLE>
<CAPTION>
SOUTHEAST
EQUITY FUND
-----------
FOR THE PERIOD
ENDED
OCTOBER 31, 1997
-----------------
<S> <C>
Investment Income:
Interest income $ 7,195
Dividend income 202,781
-----------
Total income 209,976
-----------
Expenses:
Investment advisory fees 79,594
Administration fees 17,056
Distribution fees--Class A 1,846
Distribution fees--Class B 5,700
Custodian fees 8,067
Accounting fees 16,928
Legal fees 816
Audit fees 8,172
Trustees' fees and expenses 1,161
Transfer agent fees 6,288
Registration and filing fees 7,536
Printing costs 1,668
Amortization of organization costs 720
Other expenses 532
-----------
Total expenses before voluntary fee
reductions 156,084
Less: Expenses voluntarily reduced 31,472
-----------
Total Net Expenses 124,612
-----------
Net Investment Income 85,364
-----------
Realized/Unrealized Gains (losses) from
Investments:
Net realized gains (losses) from investment
transactions 1,821,140
Net change in unrealized appreciation/
depreciation from investments 4,786,203
----------
Net realized/unrealized gains (losses) from
investments 6,607,343
----------
Increase in Net Assets Resulting from
Operations $6,692,707
</TABLE>
See notes to financial statements.
<PAGE> 128
CENTURA FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited) October 31, 1997
<TABLE>
<CAPTION>
SOUTHEAST
EQUITY FUND
-----------
FOR THE PERIOD
ENDED
OCTOBER 31, 1997 (b)
---------------------
<S> <C>
OPERATIONS:
Net investment income $ 85,364
Net realized gains from investment transactions 1,821,140
Net change in unrealized appreciation/(depreciation)
from investments 4,007,490
------------
Change in net assets resulting from operations 5,913,994
------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Class A (2,116)
Class B (1,083)
Class C (82,822)
------------
Total distributions from net investment income (86,021)
------------
DISTRIBUTIONS FROM CAPITAL GAINS:
Class A 0
Class B 0
Class C 0
------------
Total distributions from capital gains 0
------------
Total Distributions (86,021)
------------
CAPITAL SHARE TRANSACTIONS:
Total proceeds from sales of shares: 24,370,261
Total proceeds of shares issued in reinvestment
of dividends: 32,310
Total cost of shares redeemed: (2,201,466)
------------
Change in net assets from
share transactions 22,201,105
------------
Change in net assets $ 28,029,078
NET ASSETS:
Beginning of period 0
------------
End of period $ 28,029,078
============
</TABLE>
- ----------
(a) For the period from October 1, 1996 (commencement of operations) to
April 30, 1997
(b) For the period from May 1, 1997 (commencement of operations) to
October 31, 1997
See notes to financial statements
<PAGE> 129
CENTURA FUNDS, INC.
Notes to Financial Statements (unaudited)
October 31, 1997
1. DESCRIPTION -- Centura Funds, Inc. (the "Company") is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company, organized under the laws of the State of Maryland on March
1, 1994. The company currently consists of four separate investment portfolios:
Centura Equity Growth Fund, Centura Federal Securities Income Fund, Centura
North Carolina Tax-Free Bond Fund, and Centura Equity Income Fund
(collectively, the "Funds"). The Funds, with the exception of Equity Income
Fund and Southeast Equity Fund, which commenced operations on October 1, 1996
and May 1, 1997, respectively, commenced operations on June 1, 1994, and prior
to that date had no operations other than organizational matters.
The Equity Growth Fund seeks to achieve its investment objective of
long-term capital appreciation by investing in a diversified portfolio
comprised mainly of publicly traded common and preferred stocks and securities
convertible into or exchangeable for common stock. The Federal Securities Fund
seeks to achieve its investment objective of providing relatively high current
income consistent with relative stability of principal and safety by investing
primarily in securities issued by the U.S. Government, its agencies and
instrumentalities. The North Carolina Tax-Free Bond Fund seeks to achieve its
investment objective of providing relatively high current income that is free
of both federal and North Carolina personal income tax together with relative
safety of principal by investing primarily in a portfolio of high quality North
Carolina municipal securities. The Equity Income Fund seeks to achieve its
investment objective of providing long-term capital appreciation and income by
investing primarily in dividend-paying common stocks, convertible preferred
stocks, and convertible bonds, notes and debentures. The Southeast Equity
Fund's investment objective is to provide long-term capital appreciation and
income.
The Funds each have three classes of shares known as Class A, Class B
and Class C Shares. Class A Shares are offered with a maximum front-end sales
charge of 4.50% for the Equity Growth Fund and Equity Income Fund and 2.75% for
the Federal Securities Income Fund and North Carolina Tax-Free Bond Fund. Class
B Shares are offered with a contingent deferred sales charge ("CDSC") declining
from a maximum in the first year after purchase of 5.00% for the Equity Income
Fund and the Centura Equity Growth Fund and 3.00% for each of the other Funds
to a minimum in the fifth year after purchase of 1.00% for all of the Funds.
This charge is imposed if shareholders redeem their shares within five years
from the date of purchase. On the seventh anniversary of their purchase date,
Class B Shares convert automatically to Class A Shares. Class C Shares are
offered to accounts managed by the Adviser's Trust Department and to non-profit
Institutions who invest at least $100,000, and there is no sales charge or CDSC
imposed on this class.
2. SIGNIFICANT ACCOUNTING POLICIES -- The following is a summary of
significant accounting policies followed by the Funds in the preparation of
their financial statements. The policies are in conformity with generally
accepted accounting principles. The preparation of financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses for the period. Actual results
could differ from those estimates.
a. Security Valuation Securities listed on an exchange are valued on
the basis of the last sale prior to the time the valuation is made. If there
has been no sale since the immediately previous valuation, then the current bid
price is used. Quotations are taken from the exchange where the security is
primarily traded. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Directors.
Notwithstanding the above, bonds and other fixed-income securities are valued
by using market quotations and may be valued on the basis of prices provided by
a pricing service approved by the Board of Directors. Short-term securities
with remaining maturities of 60 days or less are valued at amortized cost.
b. Investment Transactions Transactions are recorded on the trade
date. Identified cost of investments sold is used for both financial statement
and federal income tax purposes. Interest income, including the amortization of
discount or premium, is recorded as accrued. Dividends are recorded on the
ex-dividend date.
<PAGE> 130
c. Federal Income Taxes Each Fund's policy is to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, the Funds will not be subject to federal
income taxes to the extent that they distribute taxable and tax-exempt income
for their fiscal year. The Funds also intend to meet the distribution
requirements to avoid the payment of an excise tax.
d. Dividends To Shareholders The Equity Growth Fund and Equity Income
Fund declare and pay dividends of substantially all of its net investment
income monthly. The Federal Securities Income Fund and North Carolina Tax-Free
Bond Fund declare dividends of substantially all of their net investment income
daily and pay those dividends monthly. Each Fund will distribute, at least
annually, substantially all net capital gains, if any, earned by such Fund.
Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains.
e. Organization Expenses Costs incurred in connection with the
organization and initial registration of the Company, which have been allocated
among the Funds, have been deferred and are being amortized over a three or
five year period, beginning with each Fund's commencement of operations.
f. Determination of Net Asset Value and Allocation of Expenses
Expenses directly attributable to a Fund are charged to that Fund; other
expenses are allocated proportionately among each Fund within the Company in
relation to the net assets of each Fund or on another reasonable basis. In
calculating net asset value per share of each class, investment income,
realized and unrealized gains and losses and expenses other than class specific
expenses, are allocated daily to each class of shares based upon the proportion
of net assets of each class at the beginning of each day. Class specific
expenses, as determined under applicable law and regulatory policy, are borne
by the class incurring the expense.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES -- Centura Bank
("Adviser") serves as the Company's investment adviser. Pursuant to the
Advisory Contracts, the Adviser manages the investments of the Funds and
continuously reviews, supervises and administers the Funds' investments. The
Adviser is responsible for placing orders for the purchase and sale of
investment securities directly with brokers and dealers selected at its
discretion. The terms of the Advisory Contracts provide for annual fees at the
following percentages of average daily net assets:
Southeast Equity Fund ...........................................0.70%
For the year ended October 31, 1997, gross advisory fees and the
corresponding waived fees are listed below:
<TABLE>
<CAPTION>
GROSS FEES WAIVED FEES
---------- -----------
<S> <C> <C>
SOUTHEAST EQUITY FUND................... $79,594 $25,157
</TABLE>
<PAGE> 131
- ----------------
(a) For the period from October 1, 1996 (commencement of operations) to October
31, 1997.
Furman Selz LLC ("Furman Selz") provided the Funds with
administrative, fund accounting and transfer agency services for the period
from May 1, 1996 through September 30, 1996. Effective October 1, 1996, BISYS
Fund Services, Inc. ("BISYS") became the Funds' transfer agent and fund
accounting agent. Also effective October 1, 1996, BISYS Fund Services
("Administrator") became the Funds' administrator.
Services provided under the Administrative Services Contracts include
providing day-to-day administration of matters related to the corporate
existence of the Company, maintenance of its records and the preparation of
reports. The terms of the Administrative Services Contracts provide for annual
fees of 0.15% of average daily net assets of each Fund.
For the year ended October 31, 1997, gross administration fees and the
corresponding waived fees are listed below:
<TABLE>
<CAPTION>
GROSS FEES WAIVED FEES
---------- -----------
<S> <C> <C>
SOUTHEAST EQUITY FUND ....................... $17,056 $5,391
</TABLE>
Services provided under the Transfer Agency Agreements include providing
personnel and facilities to perform shareholder servicing and transfer agency
related services. The Transfer Agency Agreements provide for a per account fee
and reimbursement for out-of-pocket expenses in connection with shareholder
servicing. For the period from May 1, 1997 (commencement of operations) to
October 31, 1997, transfer agent expenses incurred by the Southeast Equity Fund
were $6,288.
The terms of the Fund Accounting Agreements provide for each of the
Funds to pay $2,500 per month to BISYS Fund Services. For the period from May
1, 1997 (commencement of operations) to October 31, 1997, fund accounting fees
incurred by the Southeast Equity Fund were $16,928.
Centura Funds Distributor, Inc. acts as the Funds' Distributor. The
Distributor is an affiliate of the Funds' Administrator and was formed
specifically to distribute the Funds.
Each of the Funds has adopted a Service and Distribution Plan (the
"Plan") with respect to its Class A and Class B Shares. The Plans provide that
each class of shares will pay the Distributor a fee calculated as a percentage
of the value of average daily net assets of that class as reimbursement for its
costs incurred in financing certain distribution and shareholder service
activities related to that class.
The Class A Plan provides for payments by each Fund to the Distributor
at an annual rate not to exceed 0.50% of the Fund's average net assets
attributable to its Class A Shares. Such fees may include a Service Fee
totaling up to 0.25% of the average annual net assets attributable to a Fund's
Class A Shares. Service Fees are paid to securities dealers and other financial
institutions for maintaining shareholder accounts and providing related
services to shareholders. During the current fiscal year the Adviser has
undertaken to limit 12b-1 fees for Class A Shares to 0.25%. For the period from
May 1, 1997 (commencement of operations) to October 31, 1997, distribution fees
incurred by the Southeast Equity Fund (Class A Shares) were $1,846. In
addition, the Distributor also retains a portion of the front-end sales charge.
The Class B Plan provides for payments by the Fund to the Distributor
at an annual rate not to exceed 1.00% of the Fund's average net assets
attributable to its Class B Shares. Such fees may include a Service Fee
totaling up to 0.25% of the
<PAGE> 132
average annual net assets attributable to a Fund's Class B Shares. For the
period from May 1, 1997 (commencement of operations) to October 31, 1997,
distribution fees incurred by the Southeast Equity Fund (Class B Shares) were
$5,700. The Distributor also receives the proceeds of any CDSC imposed on
redemptions of Class B Shares.
Centura Bank acts as custodian for the Funds. For furnishing custodial
services, Centura Bank is paid a monthly fee with respect to the Funds at an
annual rate based on a percentage of average daily net assets plus certain
transaction and out-of-pocket expenses. For the period from May 1, 1997
(commencement of operations) to October 31, 1997, custodian fees and
out-of-pocket expenses incurred by the Southeast Equity Fund were $8,067.
4. CONCENTRATION OF CREDIT RISK -- The North Carolina Tax-Free Bond
Fund invests substantially all of its assets in a varied portfolio of debt
obligations issued by the State of North Carolina and its authorities and
agencies. The issuers' abilities to meet their obligations may be affected by
economic or political developments in the state of North Carolina.
5. ACQUISITION OF CENTURA SOUTHEAST FUND AND CENTURA SOUTHEAST
EMPLOYEES BENEFIT FUND -- On May 2, 1997, the Southeast Equity Fund issued
Class C Shares to acquire all of the assets and liabilities of the Centura
Southeast Fund and Centura Southeast Employees Benefit Fund. The following is a
summary of shares issued, net assets acquired, net asset value per share and
unrealized appreciation as of the date acquired:
<TABLE>
<S> <C>
Shares 1,592,422
Net Assets $15,924,220
Net Asset Value $10.00
Unrealized Appreciation $778,713
</TABLE>
6. SECURITIES TRANSACTIONS -- The cost of securities purchased and
proceeds from securities sold (excluding short-term securities) for the year
ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
SOUTHEAST EQUITY FUND.................... $12,047,284 $7,583,920
</TABLE>
- ------
(a) For the period from October 1, 1996 (commencement of operations) to October
31, 1997.
<PAGE> 133
Notes to Financial Statements
October 31, 1997
CENTURA FUNDS, INC.
5. CAPITAL SHARE TRANSACTIONS (CONTINUED):
<TABLE>
<CAPTION>
SOUTHEAST EQUITY FUND
---------------------------------
AMOUNT SHARES
FOR THE PERIOD ENDED
OCTOBER 31, 1997
---------------------------------
<S> <C> <C>
CLASS A SHARES:
Shares issued $ 1,387,946 111,487
Dividends reinvested 1,537 122
Shares redeemed (11,726) (838)
----------------- ------------
Net Decrease - Class A Shares $ 1,377,757 110,771
================= ============
CLASS B SHARES:
Shares issued $ 2,183,576 174,869
Dividends reinvested 1,082 87
Shares redeemed (4,330) (319)
----------------- ------------
Net Increase - Class B Shares $ 2,180,328 174,637
================= ============
CLASS C SHARES:
Shares issued $ 20,302,975 1,911,258
Dividends reinvested 29,691 2,391
Shares redeemed (1,689,646) (132,971)
----------------- ------------
Net Increase (Decrease) -
Class C Shares 18,643,020 1,780,678
================= =============
Total Net Increase (Decrease) $ 22,201,105 2,066,086
================= =============
</TABLE>
<PAGE> 134
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Included in Part A:
Financial Highlights for the period ended April 30, 1997.
Included in Part B:
(1) Portfolios of Investments dated April 30, 1997*
(2) Statements of Assets and Liabilities dated April 30, 1997*
(3) Statements of Operations for the Year Ended April 30, 1997*
(4) Statement of Changes in Net Assets for the Year Ended April
30, 1997*
(5) Financial Highlights for the Year Ended April 30, 1997*
(6) Notes to Financial Statements dated April 30, 1997*
(7) Portfolio of Investments for the Southeast Equity Fund dated
October 31, 1997 (unaudited)
(8) Statements of Assets and Liabilities for the Southeast
Equity Fund dated October 31, 1997 (unaudited)
(9) Statements of Operations for the Southeast Equity Fund
dated October 31, 1997 (unaudited)
(10)Statements of Changes in Net Assets for the Southeast
Equity Fund dated October 31, 1997 (unaudited)
(11)Notes to Financial Statements dated October 31, 1997
(unaudited)
* Incorporated by references in Part B herein.
(b) Exhibits:
Exhibit Description
Number
1(a) -- Articles of Incorporation of Registrant(1)
1(b) -- Articles Supplementary(9)
1(c) -- Articles of Amendment (8)
1(d) -- Form of Articles Supplementary (8)
2 -- ByLaws of Registrant(2)
3 -- Not applicable
4 -- Specimen certificates of shares of common stock of Registrant(3)
5(a) -- Form of Master Investment Advisory Contract(4)
5(b) -- Form of Investment Advisory Contract Supplement(9)
5(c) -- Form of Investment Advisory Contract Supplement (8)
6(a) -- Form of Distribution Contract (8)
6(b) -- Form of Dealer and Selling Group Agreement(9)
7 -- Not applicable
8 -- Form of Custody Agreement(9)
9(a) -- Form of Administration Agreement (8)
9(c) -- Form of Transfer Agency Agreement (8)
9(d) -- Form of Sub-Transfer Agency Agreement(9)
9(e) -- Form of Fund Accounting Agreement (8)
9(f) -- Form of Services Agreement(9)
10 -- Opinion of Counsel(4)
11(a) -- Consent of Independent Auditors -- filed herewith
11(b) -- Powers of Attorney (10)
12 -- Not Applicable
13 -- Purchase Agreement(3)
14 -- Not Applicable
15(a) -- Form of Master Distribution Plan(4)
15(b) -- Form of Distribution Plan Supplement(4)
15(c) -- Form of Distribution Plan Supplement (8)
16(a) -- Schedule of Computation for the Southeast Equity Fund --
filed herewith
<PAGE> 135
16(b) -- Schedule of Computation (all other Funds)(6) (10)
17 -- Financial Data Schedule - filed herewith
18 -- Plan Pursuant to Rule 18f-3(7)
- ----------
1. Filed as part of Post-Effective No. 4 to Registrant's Registration
Statement on June 14, 1996 and incorporated by reference herein.
2. Filed as part of Registrant's initial Registration Statement on March 1,
1994.
3. Filed as part of Post-Effective No. 2 to Registrant's Registration
Statement on June 30, 1995.
4. Filed as part of Post-Effective Amendment No. 1 to Registrant's
Registration Statement on April 14, 1994.
5. Filed as part of Post-Effective No. 1 to Registrant's Registration
Statement on November 30, 1994.
6. Filed as part of Post-Effective No. 5 to Registrant's Registration
Statement on August 28, 1996 and incorporated by reference herein.
7. Filed as part of Post-Effective No. 3 to Registrant's Registration
Statement on August 29, 1995.
8. Filed as part of Post-Effective No. 6 to Registrant's Registration
Statement on January 15, 1997 and incorporated by reference herein.
9. Filed as part of Post-Effective No. 7 to Registrant's Registration
Statement on March 27, 1997 and incorporated by reference herein.
10. Filed as part of Post-Effective No. 8 to Registrant's Registration
Statement on August 28, 1997 and incorporated by reference herein.
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number Of Record
Holders At November 19, 1997
Title Of Class Title Of Class
<S> <C> <C>
Shares of Centura Equity Growth
Fund par value $.001 per share
Class A: 893
Class B: 1371
Class C: 43
Shares of Centura Federal Securities
Fund, par value $.001 per share
Class A: 17
Class B: 15
Class C: 18
Shares of Centura North Carolina Tax
Tree Bond Fund, par value $.001 per share
Class A: 12
Class B: 14
Class C: 18
Shares of Centura Equity Income Fund,
par value $.001 per share
Class A: 20
Class B: 108
Class C: 11
</TABLE>
<PAGE> 136
<TABLE>
<S> <C> <C>
Shares of Southeast Equity Income Fund,
par value $.001 per share
Class A: 108
Class B: 295
Class C: 10
</TABLE>
27. Indemnification
Reference is made to Article VII of Registrant's Articles of
Incorporation.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the fRegistrant pursuant to the Articles of Incorporation or otherwise, the
Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Investment Company Act of 1940 and, therefore, is unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such directors, officers or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Investment Company Act of 1940 and will be governed by the
final adjudication of such issues.
28. Business and Other Connections of Investment Adviser
Centura Bank, the investment adviser to Centura Funds, Inc., is a
registered investment adviser and a member of the Federal Reserve System. The
names of Centura Bank's directors and officers and their business and other
connections for at least the past two years are as follows:(1)
<TABLE>
<CAPTION>
NAME TITLE BUSINESS AND OTHER
CONNECTIONS
<S> <C> <C>
Richard H. Barnhardt Director Director, Centura Bank; President,
Properties, Inc.
C. Wood Beasley Director Director, Centura Bank; President,
Wood Beasley Farms, Inc.
Thomas A. Betts, Jr. Director Director, Centura Bank; Partner,
Betts and Company.
H. Tate Bowers Director Director, Centura Bank; Chief
Executive Officer, Bowers Fibers,
Inc.
Ernest L. Evans Director Director, Centura Bank; President,
ELE, Inc.
J. Richard Futrell, Jr. Chairman, Executive Director, Centura Bank;
Committee and Director Chairman, Executive Committee
and Director, Centura Banks, Inc.
</TABLE>
<PAGE> 137
<TABLE>
<S> <C> <C>
John H. High Director Director, Centura Bank;
President, John H. High
& Co., Inc.
Dr. Michael K. Hooker Director Director, Centura Bank;
Chancellor, University of North
Carolina at Chapel Hill.
William D. Hoover Executive Vice President Executive Vice President and
Director, Centura Bank.
Robert L. Hubbard Director Director, Centura Bank; Vice
Chairman, Americal Corp.
William H. Kincheloe Director Director, Centura Bank; President,
Bullock Furniture Co., Inc.
Charles T. Lane Director Director, Centura Bank; Partner,
Poyner Spruill, L.L.P.
Robert R. Mauldin Chairman, Chief Executive Director, Centura Bank; Officer
and Director Chairman and Chief
Executive Officer, and Director,
Centura Banks, Inc.
Jack A. Moody Director Director, Centura Bank.
Joseph H. Nelson Director Director, Centura Bank; President,
Davenport Motor Company.
Dean E. Painter, Jr. Director Director, Centura Bank; Chairman,
CLG, Inc.
D. Earl Purdue Director Director, Centura Bank; President,
Brightwood Farm, Inc.
O. Tracy Parks III Director Director, Centura Bank; Partner,
Brown & Robbins, L.L.P.
Frank L. Pattillo Group Executive Officer, Director, Centura Bank;
Chief Financial Officer Group Executive Officer
and Director and Chief Financial Officer,
Centura Bank.
William H. Redding, Jr. Director Director, Centura Bank; President,
Acme-McCrary Corporation.
Charles M. Reeves III Director Director, Centura Bank; President,
Reeves Properties, Inc.
Cecil W. Sewill, Jr. President, Chief President, Chief Operating Officer,
Operating Officer, and Director, Centura Bank.
and Director
</TABLE>
<PAGE> 138
<TABLE>
<S> <C> <C>
George T. Stronach III Director Director, Centura Bank; Real
Estate Developer
Alexander P. Thorpe III Director Director, Centura Bank; President,
Thorpe & Co., Inc.
Joseph L. Wallace, Jr. Director Director, Centura Bank.
William H. Wilkerson Group Executive Officer Group Executive Officer
and Director and Director, Centura Bank.
Charles P. Wilkins Director Director, Centura Bank; Attorney,
Broughton, Wilkins & Webb, P.A.
</TABLE>
- ----------
1. The above Directors and Officers of Centura Bank can be reached at 131
North Church Street, Rocky Mount, North Carolina 27802.
29. Principal Underwriters
(a) Not applicable.
(b) Centura Funds Distributor, Inc.
<TABLE>
<CAPTION>
Positions and
Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
- ------------------ --------------------- ------------
<S> <C> <C>
Lynn J Mangum Chairman/CEO None
150 Clove Road
Little Falls, NJ 07424
Robert J McMullan Executive Vice President/ None
150 Clove Road Treasurer
Little Falls, NJ 07424
J David Huber President None
3435 Stelzer Road
Columbus, Ohio 43219
Kevin J Dell Vice President/General None
150 Clove Road Counsel/Secretary
Little Falls, NJ 07424
Mark J Rybarczyk Senior Vice President None
11 Greenway Plaza
Suite 300
Houston, TX 77046
Dennis Sheehan Senior Vice President None
150 Clove Road
Little Falls, NJ 07424
</TABLE>
<PAGE> 139
<TABLE>
<S> <C> <C>
William Tomko Senior Vice President None
3435 Stelzer Road
Columbus, Ohio 43219
George Martinez Senior Vice President None
3435 Stelzer Road
Columbus, Ohio 43219
Hugh Fanning Vice President President
3435 Stelzer Road
Columbus, Ohio 43219
Dale Smith Vice President None
3435 Stelzer Road
Columbus, Ohio 43219
Michael Burns Vice President None
3435 Stelzer Road
Columbus, Ohio 43219
Bruce Treff Assistant Secretary Assistant Secretary
3435 Stelzer Road
Columbus, Ohio 43219
Annamaria Porcaro Assistant Secretary None
150 Clove Road
Little Falls, NJ 07424
</TABLE>
(c) None
30. Location of Accounts and Records
All accounts, books, and records required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940,
and the Rules thereunder, will be kept by the Registrant at:
(1) Centura Bank, 131 North Church Street, Rocky Mount, North Carolina
27802 (records relating to its functions as investment adviser and records
relating to its function as Custodian); and
(2) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio (records
relating to the administrator, fund accountant and transfer and ageny).
31. Management Services
Not applicable.
32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of Registrant's latest annual report to
shareholders upon request and without charge.
(d) If requested to do so by holders of at least 10% of Registrant's
outstanding shares, a meeting of shareholders will be called for the purpose of
voting upon the question of removal of a director or directors and to assist in
communications with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933, as amended,
and has duly caused this Post-Effective Amendment No. 9 to Registrant's
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Columbus within the State of Ohio on the 25th
day of November, 1997.
CENTURA FUNDS, INC.
By /s/ HUGH FANNING
Hugh Fanning
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the 25th day of November, 1997.
SIGNATURE TITLE
/s/ Hugh Fanning
- ----------------------------
Hugh Fanning President
/s/ Thomas Line* Treasurer
- ----------------------------
Thomas Line
/s/ Leslie H. Garner, Jr.* Director and Chairman of the Board of Directors
- ----------------------------
Leslie H. Garner
/s/ James H. Speed, Jr.* Director
- ----------------------------
James H. Speed
/s/ Frederick E. Turnage* Director
- ----------------------------
Frederick E. Turnage
/s/ Lucy Hancock Bode* Director
- ----------------------------
Lucy Hancock Bode
By: /s/ Hugh Fanning
- ----------------------------
Hugh Fanning,
Attorney-in-fact
<PAGE> 141
CENTURA FUNDS, INC.
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
11(a) Consent of Price Waterhouse LLP
16(a) Schedule of Computation for the Southeast Equity Fund
17 Financial Data Schedule for period ended October 31, 1997
<PAGE> 1
Exhibit 11(a)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated May 23, 1997 on the
financial statements of Centura Equity Growth Fund, Centura Equity Income Fund,
Centura Federal Securities Income Fund and Centura North Carolina Tax-Free Bond
Fund, series of Centura Funds, Inc., referred to therein in Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A File No. 33-75926 as
filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in each Statement of
Additional Information under the caption "Independent Accountants" and in each
Prospectus under the caption "Financial Highlights."
McGladrey & Pullen, LLP
New York, New York
November 21, 1997
<PAGE> 1
CENTURA FUNDS
EXHIBIT 16
TOTAL RETURN
CLASS A SHARES
SOUTHEAST EQUITY FUND
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 4.50%
- -------------------------------------
T = (ERV/P) 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD
OF A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 12/31/90 TO 10/31/97 ):
( 3,891.34 /1,000 (1/(2497 /365))-1) = 21.97%
ONE YEAR: ( 10/31/96 TO 10/31/97 ):
( 1,336.56 /1,000) - 1 = 33.66%
TWO YEAR: ( 10/31/95 TO 10/31/97 ):
( 1,611.78 /1,000 (1/( 730 /365))-1) = 26.96%
THREE YEAR: ( 10/31/94 TO 10/31/97 ):
( 1,771.09 /1,000 (1/(1095 /365))-1) = 20.99%
FIVE YEAR: ( 10/31/92 TO 10/31/97 ):
( 2,467.32 /1,000 (1/(1825 /365))-1) = 19.80%
TEN YEAR: ( 10/31/87 TO 10/31/97 ):
( 0./1,000 (1/(3650 /365))-1) = n/a
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 4.50%
- -------------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD
OF A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 12/31/96 TO 10/31/97 ):
1239.27 /1,000) - 1 = 23.93%
QUARTERLY: ( 07/31/97 TO 10/31/97 ):
1022.06 /1,000) - 1 = 2.21%
MONTHLY: ( 09/30/97 TO 10/31/97 ):
931.86 /1,000) - 1 = -6.81%
SIX MONTH: ( 04/30/97 TO 10/31/97 ):
1302.01 /1,000) - 1 = 30.20%
SINCE INCEPTION: ( 12/31/90 TO 10/31/97 ):
3,891.34 /1,000) - 1 = 289.13%
<PAGE> 2
CENTURA FUNDS
EXHIBIT 16
TOTAL RETURN
CLASS B SHARES
SOUTHEAST EQUITY FUND
YEAR OF
REDEMPTION CDSC
---------- -------
FIRST 5.00%
SECOND 4.00%
THIRD 3.00%
FOURTH 2.00%
FIFTH 1.00%
T = (ERV/P) 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD
OF A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 12/31/90 TO 10/31/97 ):
( 3,868.91 /1,000 (1/(2497 /365))-1) = 21.87%
ONE YEAR: ( 10/31/96 TO 10/31/97 ):
( 1,337.72 /1,000 (1/( 365 /365))-1) = 33.77%
TWO YEAR: ( 10/31/95 TO 10/31/97 ):
( 1,620.85 /1,000 (1/( 731 /365))-1) = 27.27%
THREE YEAR: ( 10/31/94 TO 10/31/97 ):
( 1,781.85 /1,000 (1/(1096 /365))-1) = 21.21%
FIVE YEAR: ( 10/31/92 TO 10/31/97 ):
( 2,467.40 /1,000 (1/(1826 /365))-1) = 19.87%
YEAR OF
REDEMPTION CDSC
---------- -------
FIRST 5.00%
SECOND 4.00%
THIRD 3.00%
FOURTH 2.00%
FIFTH 1.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD
OF A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 12/31/96 TO 10/31/97 ):
( 1,238.12 /1,000) - 1 = 23.81%
QUARTERLY: ( 07/31/97 TO 10/31/97 ):
( 1,016.99 /1,000) - 1 = 1.70%
MONTHLY: ( 09/30/97 TO 10/31/97 ):
( 926.65 /1,000) - 1 = -7.33%
SINCE INCEPTION: ( 12/31/90 TO 10/31/97 ):
( 3,868.91 /1,000) - 1 = 286.89%
SIX MONTH: ( 04/30/97 TO 10/31/97 ):
( 1,311.10 /1,000) - 1 = 31.11%
<PAGE> 3
CENTURA FUNDS
EXHIBIT 16
TOTAL RETURN
CLASS C SHARES
SOUTHEAST EQUITY FUND
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
- -------------------------------------
T = (ERV/P) 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD
OF A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 12/31/90 TO 10/31/97 ):
( 4,141.14 /1,000 (1/(2497 /365))-1) = 23.09%
ONE YEAR: ( 10/31/96 TO 10/31/97 ):
( 1,401.96 /1,000) - 1 = 40.20%
TWO YEAR: ( 10/31/95 TO 10/31/97 ):
( 1,694.64 /1,000 (1/( 730 /365))-1) = 30.18%
THREE YEAR: ( 10/31/94 TO 10/31/97 ):
( 1,867.23 /1,000 (1/(1095 /365))-1) = 23.14%
FIVE YEAR: ( 10/31/92 TO 10/31/97 ):
( 2,613.83 /1,000 (1/(1825 /365))-1) = 21.19%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
- -------------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END OF THE PERIOD
OF A HYPOTHETICAL $1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 12/31/96 TO 10/31/97 ):
( 1,299.20 /1,000) - 1 = 29.92%
QUARTERLY: ( 10/31/96 TO 10/31/97 ):
( 1,069.29 /1,000) - 1 = 6.93%
MONTHLY: ( 10/31/95 TO 10/31/97 ):
( 976.23 /1,000) - 1 = -2.38%
SIX MONTH: ( 10/31/94 TO 10/31/97 ):
( 1,368.22 /1,000) - 1 = 36.82%
SINCE INCEPTION: ( 12/31/90 TO 10/31/97 ):
( 4,141.14 /1,000) - 1 = 314.11%
<PAGE> 4
THE CENTURA FUNDS INC.
EXHIBIT 16
CLASS A SHARES
30-DAY S.E.C. YIELD CALCULATIONS
SOUTHEAST EQUITY FUND
(a-b)
---------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) 6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of
reimbursements)
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price (NAV for No Load)
per share on the last day of the period
WITH 4.50% LOAD:
( 2,184.50 - 1,854.68 )
-------------------------------------
2 *{[( +1) 6]-1} = 0.27%
( 101,412.116 * 14.22 )
WITHOUT 4.50% LOAD:
( 2,184.50 - 1,854.68 )
-------------------------------------
2 *{[( +1) 6]-1} = 0.29%
( 101,412.116 * 13.58 )
The performance was computed based on the thirty day period ending
October 31, 1997
<PAGE> 5
THE CENTURA FUNDS INC.
EXHIBIT 16
CLASS C SHARES
30-DAY S.E.C. YIELD CALCULATIONS
SOUTHEAST EQUITY FUND
(a-b)
---------
30-Day S.E.C. Yield Equation = 2 *{[( (cd) +1) 6]-1} =
WHERE a = Dividends and interest earned during the period
b = Expenses accrued for the period (net of
reimbursements)
c = The average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = The maximum offering price (NAV for No Load)
per share on the last day of the period
================================================================================
( 36,359.10 - 26,390.65 )
-------------------------------------
2 *{[( +1) 6]-1} = 0.51%
( 1,739,958.293 * 13.57 )
The performance was computed based on the thirty day period ending
October 31, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> THE CENTURA FUNDS INC.
<SERIES>
<NUMBER> 041
<NAME> THE CENTURA SOUTHEAST EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 23,805,542
<INVESTMENTS-AT-VALUE> 28,591,745
<RECEIVABLES> 67,634
<ASSETS-OTHER> 15,529
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,674,908
<PAYABLE-FOR-SECURITIES> 598,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,080
<TOTAL-LIABILITIES> 645,830
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,421,735
<SHARES-COMMON-STOCK> 110,770<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,821,140
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,786,203
<NET-ASSETS> 28,029,078
<DIVIDEND-INCOME> 202,781
<INTEREST-INCOME> 7,195
<OTHER-INCOME> 0
<EXPENSES-NET> 124,612
<NET-INVESTMENT-INCOME> 85,364
<REALIZED-GAINS-CURRENT> 1,821,140
<APPREC-INCREASE-CURRENT> 4,786,203
<NET-CHANGE-FROM-OPS> 6,692,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,116<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 24,370,261
<NUMBER-OF-SHARES-REDEEMED> 32,310
<SHARES-REINVESTED> 2,201,466
<NET-CHANGE-IN-ASSETS> 28,029,078
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 79,594
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 156,084
<AVERAGE-NET-ASSETS> 22,708,177
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> 0.04<F1>
<PER-SHARE-GAIN-APPREC> 3.58<F1>
<PER-SHARE-DIVIDEND> 0.04<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.58<F1>
<EXPENSE-RATIO> 1.30<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> THE CENTURA FUNDS INC.
<SERIES>
<NUMBER> 042
<NAME> THE CENTURA SOUTHEAST EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 23,805,542
<INVESTMENTS-AT-VALUE> 28,591,745
<RECEIVABLES> 67,634
<ASSETS-OTHER> 15,529
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,674,908
<PAYABLE-FOR-SECURITIES> 598,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,080
<TOTAL-LIABILITIES> 645,830
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,421,735
<SHARES-COMMON-STOCK> 174,636<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,821,140
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,786,203
<NET-ASSETS> 28,029,078
<DIVIDEND-INCOME> 202,781
<INTEREST-INCOME> 7,195
<OTHER-INCOME> 0
<EXPENSES-NET> 124,612
<NET-INVESTMENT-INCOME> 85,364
<REALIZED-GAINS-CURRENT> 1,821,140
<APPREC-INCREASE-CURRENT> 4,786,203
<NET-CHANGE-FROM-OPS> 6,692,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,083<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 24,370,261
<NUMBER-OF-SHARES-REDEEMED> 32,310
<SHARES-REINVESTED> 2,201,466
<NET-CHANGE-IN-ASSETS> 28,029,078
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 79,594
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 156,084
<AVERAGE-NET-ASSETS> 22,708,177
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> (0.01)<F1>
<PER-SHARE-GAIN-APPREC> 3.57<F1>
<PER-SHARE-DIVIDEND> 0.02<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.54<F1>
<EXPENSE-RATIO> 2.04<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> THE CENTURA FUNDS INC.
<SERIES>
<NUMBER> 043
<NAME> THE CENTURA SOUTHEAST EQUITY FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 23,805,542
<INVESTMENTS-AT-VALUE> 28,591,745
<RECEIVABLES> 67,634
<ASSETS-OTHER> 15,529
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,674,908
<PAYABLE-FOR-SECURITIES> 598,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47,080
<TOTAL-LIABILITIES> 645,830
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,421,735
<SHARES-COMMON-STOCK> 1,780,681<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,821,140
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,786,203
<NET-ASSETS> 28,029,078
<DIVIDEND-INCOME> 202,781
<INTEREST-INCOME> 7,195
<OTHER-INCOME> 0
<EXPENSES-NET> 124,612
<NET-INVESTMENT-INCOME> 85,364
<REALIZED-GAINS-CURRENT> 1,821,140
<APPREC-INCREASE-CURRENT> 4,786,203
<NET-CHANGE-FROM-OPS> 6,692,707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 82,822<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 24,370,261
<NUMBER-OF-SHARES-REDEEMED> 32,310
<SHARES-REINVESTED> 2,201,466
<NET-CHANGE-IN-ASSETS> 28,029,078
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 79,594
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 156,084
<AVERAGE-NET-ASSETS> 22,708,177
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> 0.05<F1>
<PER-SHARE-GAIN-APPREC> 3.57<F1>
<PER-SHARE-DIVIDEND> 0.05<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.57<F1>
<EXPENSE-RATIO> 1.03<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class C
</FN>
</TABLE>
