As Filed with the Securities and Exchange Commission on February 13,1998
Registration Nos. 33-75926
811-8384
================================================================================
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. 10 [X}
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X}
Amendment No. 12 [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 with Zip Code)
Registrant's Telephone Number, including Area Code: (800) 442-3688
William Tomko
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
1775 Eye Street, N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
on (date) pursuant to paragraph (a)(i)
X 75 days after filing pursuant to paragraph (a)(ii) on
(date) pursuant to paragraph (a)(ii) of rule 485
_____ 60 days after filing pursuant to paragraph (a)(i)
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
<PAGE>
CENTURA FUNDS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 495
under the Securities Act of 1933
The prospectus in the enclosed materials relates only to Centura Money
Market Fund. The prospectuses for the other series of Registrant are included in
previously filed Post-Effective Amendments.
N-1A Item No. Location
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
Information to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
<PAGE>
CENTURA FUNDS, INC.
CENTURA MONEY MARKET FUND
CLASS A SHARES AND 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 Centura Money Market Fund ("Fund"), one of six
portfolios ("Portfolios") comprising Centura Funds, Inc. (the "Company"), a
registered open-end management investment company advised by Centura Bank (the
"Adviser").
This Prospectus relates to Class A shares, which are sold to the public as an
investment vehicle for individuals, institutions, corporations and fiduciaries,
and Class C shares, which are available only to certain institutional investors.
Class A shares bear certain expenses related to their distribution, calculated
at an annual rate and based on a percentage of the average daily net assets of
the class. Class C shares do not bear such expenses.
SHARES OF THE FUND 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. THE FUND ATTEMPTS TO MAINTAIN THE VALUE OF ITS SHARES AT A
CONSTANT $1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCES THAT IT WILL
ALWAYS BE ABLE TO DO SO.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund and should be read and retained for
information about the Fund.
A Statement of Additional Information (the "SAI"), dated ___________,
containing additional and more detailed information about the Fund and the other
Portfolios, 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 _______________
<PAGE>
TABLE OF CONTENTS
Page
HIGHLIGHTS...........................................................
FUND EXPENSES........................................................
FINANCIAL HIGHLIGHTS.................................................
THE FUND.............................................................
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES...................
INVESTMENT RESTRICTIONS..............................................
RISKS OF INVESTING IN THE FUND.......................................
MANAGEMENT OF THE FUND...............................................
PRICING OF FUND SHARES...............................................
MINIMUM PURCHASE REQUIREMENTS........................................
PURCHASE OF FUND SHARES..............................................
RETIREMENT PLAN ACCOUNTS.............................................
EXCHANGE OF FUND SHARES..............................................
REDEMPTION OF FUND SHARES............................................
PORTFOLIO TRANSACTIONS...............................................
FUND SHARE VALUATION.................................................
DIVIDENDS, DISTRIBUTIONS, AND FEDERAL INCOME TAXATION................
OTHER INFORMATION....................................................
APPENDIX.............................................................
<PAGE>
HIGHLIGHTS
The Fund
The Fund's investment objective is to provide investors with as high a level
of current income as is consistent with preservation of capital and liquidity.
The Fund pursues this objective by investing in a broad range of high quality,
short-term, money market instruments that have remaining maturities not
exceeding 397 days. The Fund is required to maintain a dollar-weighted average
portfolio maturity no greater than 90 days.
Risks Of Investing In The Fund
There is no assurance that the Fund will achieve its investment objective or
that it will be successful in maintaining a constant $1.00 per share net asset
value.
The Adviser
Management of the Fund is provided by Centura Bank (the "Adviser "),
headquartered in Rocky Mount, North Carolina. For its advisory services, the
Adviser, receives from the Fund a fee at an annual rate of 0.30% based on the
Fund's average daily net assets.
The Distributor, Administrator And Sponsor
Centura Funds Distributor, Inc. (the "Distributor") distributes the Fund's
shares and may be reimbursed for certain of its distribution-related expenses.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS") acts
as Sponsor and Administrator to the Funds. For its services as Administrator,
the 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
Fund, for which it receives additional fees.
Classes Of Shares
Class A shares are available to all investors. Class C shares are available
only to accounts managed by the Adviser's Trust Department.
Class A shares and Class C shares differ with respect to investors to whom
they are available and the rate of expenses to which they are subject. Class A
shares are subject to service and distribution fees, calculated as a percentage
of the net asset value of Class A shares, which may not exceed an annual rate of
0.25% for Class A shares of each of the Funds (pursuant to a voluntary limit set
by the Distributor for the current fiscal year; the maximum fee for Class A
shares would, without this limit, be 0.50%. Class C shares are not subject to
such service and distribution fees.
Investors should be aware that other expenses attributable to each class may
differ slightly due to the allocation to each class of certain "class specific"
expenses, including distribution and mailing expenses and federal and state
securities registration and notice filing fees. Finally, investors should be
aware that persons selling shares of the Fund may receive different levels of
compensation for sales of Class A and Class C shares.
Guide To Investing In The Fund
Purchase orders for the Fund received by your broker or Service Organization
in proper order and transmitted to the Fund prior to 4:00 p.m. Eastern time will
become effective that day.
oMinimum Initial Investment.................................. $1,000
oMinimum Initial Investment for IRAs
and other qualified retirement plans...................... $250
oMinimum Subsequent Investment................................ $250
(except for IRA and other qualified retirement plans)
Minimum amount for check writing.............................. $100
oMinimum Investment per pay period for
Payroll Deduction Plan.................................... $50
(No investment is required to initiate this plan.)
oMinimum Amount Per Investment Under Automatic
Investment Plan........................................... $50
(No investment is required to initiate this plan.)
Shareholders may exchange shares of a particular class in one fund for
shares of The same class in another fund by telephone or mail.
oMinimum exchange............................................. NONE
(However, an investor must satisfy the $1,000 minimum investment for each
Fund into which he or she exchanges.)
Shareholders may redeem shares by telephone, mail or wire.
The Fund reserves the right to redeem upon not less than 30 days' notice all
shares in an account which have an aggregate value of less than $1,000.
All dividends and distributions will be automatically reinvested at net asset
value in additional shares of the same class of the Fund unless cash payment is
requested. the Fund pays dividends from income, if any, monthly.
See "Purchase Of Fund Shares," "Redemption Of Fund Shares" And "Dividends,
Distributions And Federal Income Taxation" for more information.
<PAGE>
FUND EXPENSES
The following expense tables indicate costs and expenses that an investor in
Class A shares or Class C shares should anticipate incurring either
directly or indirectly as a
shareholder in the Fund.
FEE TABLE
Class A Class C
Shareholder Transaction
Expenses
Maximum Sales Charge Imposed
on Purchases (as a
percentage of offering price) None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering price) None None
Deferred Sales Charge (as a
percentage of redemption
proceeds)* None None
Exchange Fees None None
Annual Fund Operating Expenses
(as a percentage of average
net assets annualized)
Management Fees 0.30% 0.30%
12b-1 Fees (after waiver)** 0.25% None
Other Expenses (After
Waiver)** 0.32% 0.32%
Total Portfolio Operating
Expenses*** 0.87% 0.62%
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* 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.")
** Under rules of the National Association of Securities Dealers, Inc. (the
"NASD"), a 12b-1 fee may be treated as a sales charge for certain
purposes under those rules. Because the 12b-1 fee is an annual fee
charge against the assets of a Fund, long-term shareholders may pay
more sales charges in the form of 12b-1 fees than the economic
equivalent of the maximum front-end sales charge permitted by rules of
the NASD. The 12b-1 fees in the above Fee Table represent fees
anticipated to be paid by the Fund. Class A shares of each Fund are
permitted to pay 12b-1 fees up to 0.50%. However, the Distributor has
undertaken to limit 12b-1 fees to 0.25% for Class A shares of the Fund
for the current fiscal year. See "Management of the Funds -- The
Distributor."
*** Absent the reduction of the limitation applicable to 12b-1 fees, "Total
Portfolio Operating Expenses" for Class A shares would be 1.12%,.
Example*
An investor would pay the following expenses on a $1,000 investment,
assuming 5% annual return:
Class A Class C
Assuming complete redemption at the end of each time period:
1 year $ 9 $ 6
3 years $28 $20
- ------------
* 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.
THE FUND
The Fund is a separate diversified investment fund or portfolio (commonly
known as a mutual fund) of the Company. The Company was organized under the laws
of the State of Maryland on March 1, 1994 as an open-end, management investment
company. The Fund was established as a new Portfolio on _____________. The
Company's Board of Directors oversees the overall management of the Funds and
elects the Funds' officers.
Investment Objectives and Policies of the Fund
The Fund's investment objective is to provide investors with as high a
level of current income as is consistent with preservation of capital and
liquidity. The investment objective is a fundamental policy of the Fund and may
not be changed without approval of the Fund's shareholders. The Fund pursues
this objective by investing in a broad range of high quality, short-term, money
market instruments that have remaining maturities not exceeding 397 days. The
Fund is required to maintain a dollar-weighted average portfolio maturity no
greater than 90 days. The Fund's investments may include: U.S. Government
securities; bank obligations; commercial paper, corporate debt securities,
variable rate demand notes and repurchase agreements. Generally, securities in
which the Fund may invest will not earn as high a yield as securities with
longer maturities or of lower quality. The Fund attempts to maintain the value
of its shares at a constant $1.00 per share, although there can be no assurance
that the Fund will always be able to do so.
The Adviser selects only those U.S. dollar-denominated debt instruments
that meet the high quality and credit risk standards established by the Board of
Directors and consistent with Federal requirements applicable to money market
funds. In accordance with such requirements, the Fund will purchase securities
that are rated within the top two rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs") or, if only one NRSRO has
rated the security, by that NRSRO, or if not rated, the securities are deemed of
comparable quality pursuant to standards adopted by the Board of Directors. The
Fund will purchase commercial paper only if, at the time of the investment, the
paper is rated within the top rating category or deemed of comparable quality
pursuant to standards adopted by the Board of Directors. The Fund will invest no
more than 5% of its total assets in securities rated below the highest rating
category or, if unrated, deemed of comparable quality
The Fund 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 the Fund. The Fund will
incur additional expenses due to the duplication of expenses as a result of
investing in other mutual funds.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities. 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. These obligations include negotiable certificates of
deposit and bankers' acceptances. The Fund limits its 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. 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. The 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."
Loans of Portfolio Securities. To increase current income, the Fund may lend
its portfolio securities in an amount up to 5% of its 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.
Repurchase Agreements. Securities held by the Fund 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 Fund 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 will be fully
collateralized at all times and the collateral will be marked-to-market daily.
The Fund 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, the 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.
Variable And Floating Rate Demand And Master Demand Notes. The Fund may 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. The 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 the Fund's net
assets.
The Fund may also buy variable rate master demand notes. The terms of these
obligations permit the 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 Fund has 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, the 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 the Fund's other investments.
Illiquid Investments. It is the policy of the Fund that restricted
securities and other illiquid securities (including variable and floating rated
demand and master demand notes not requiring receipt of the principal note
amount within seven days' notice) may not constitute, at the time of purchase or
at any time, more than 10% of the value of the net assets of the Fund.
Notwithstanding the above, the Fund may purchase securities which are
eligible for purchase and sale under Rule 144A ("Rule 144A Securities") under
the Securities Act of 1933 ("1933 Act"). Rule 144A permits certain qualified
institutional investors, such as the Fund, to trade in privately placed
securities even though such securities are not registered under the 1933 Act and
thus may not be publicly sold. The Adviser, under the supervision of the Board
of Directors, will consider whether Rule 144A Securities intended to be
purchased, or held by the Fund, are illiquid and thus subject to the Fund's 10%
limit on illiquid investments. Factors considered would include frequency of
trades and quotes, dealer undertakings to make a market in the security, number
of dealers and potential purchasers, and the nature and mechanics of the market
for the security. These factors will be monitored and if changing conditions
lead to a determination that the securities are no longer liquid, the Fund's
holdings of illiquid securities will be reviewed to determine what steps are
advisable to maintain compliance with the Fund's limit on illiquid investments.
If a purchaser for the security cannot be found, the Fund may be unable to
maintain compliance with this limit.
Asset-Backed Securities. Asset-backed securities (in addition to mortgage
loans, which are referred to above under U.S. Government securities) in which
the Fund may invest include Certificates for Automobile Receivables ("CARS").
CARS represent undivided fractional interests in a trust whose assets consist of
a pool of motor vehicle retail installment sales contracts and security
interests in the vehicles securing the contracts. Payments of principal and
interest on CARS are passed-through monthly to certificate holders and are
guaranteed up to certain amounts and for a certain period of time by a letter of
credit issued by a financial institution unaffiliated with the trustee or
originator of the trust. Underlying sales contracts are subject to prepayment,
which may reduce the overall return to certificate holders. If the letter of
credit is exhausted, certificate holders may also experience delays in payment
or losses on CARS if the full amounts due on underlying sales contracts are not
realized by the trust because of unanticipated legal or administrative costs of
enforcing the contracts, or because of depreciation, damage or loss of the
vehicles securing the contracts, or other factors. For asset-backed securities,
the industry standard uses a principal prepayment model, the ABS model, which is
similar to the PSA model described under "Mortgage-Related Securities" in the
SAI. Either the PSA model, the ABS model, or other similar models that are
standard in the industry will be used by the Fund in calculating maturity for
purposes of its investments in asset-backed securities. Other asset-backed
securities are developed from time to time and may be purchased by the 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.
Interest Rate Futures Contracts. The Fund may purchase and sell interest rate
futures contracts as a hedge against changes in interest rates, provided that
not more than 5% of a Fund's net assets may be committed to margin deposits on
futures contracts that are not for "bona fide". hedging purposes for purposes of
applicable rules of the Commodity Futures Trading Commission. An interest rate
futures contract is an agreement between two parties to buy and sell a debt
obligation for a set price on a future date. These contracts are traded on
designated "contracts markets" that, through their clearing corporations,
guarantee performance of the contracts. Currently there are interest rate
futures contracts based on such securities as long-term U.S. Treasury bonds,
U.S. Treasury notes, GNMA Certificates and three-month U.S. Treasury bills.
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 the Fund holds U.S. Government securities of a
particular term, and the Adviser anticipates a rise in interest rates for
securities of that term, the Fund could, in lieu of selling its portfolio
securities, enter into futures contracts for the sale of securities of a similar
term. If rates were to increase and the value of the Fund's portfolio securities
declined, the value of the Fund's futures contracts would increased, thereby
protecting the Fund by preventing its net asset value from declining as much as
it might otherwise have. Similarly, entering into futures contract for the
purchase of securities has an effect similar to actual purchase of the
securities, but permits the Fund to continue to be invested in other securities.
Thus, if the Adviser expected interest rates for securities of a certain term to
rise, the Fund might enter into futures contracts for the purchase of securities
of that term, so that it could gain rapid market exposure which could offset
anticipated increases in the cost of securities it intends to purchase. In this
case, the Fund would continue to earn interest on the securities it holds and
the Adviser would gain time to evaluate how the market would stabilize. The Fund
will maintain a segregated account in an amount sufficient to cover its
obligations under any outstanding futures contracts.
Zero Coupon Securities. The Fund may invest in zero coupon securities.
Instead of paying interest to its holder during its term, a zero coupon security
is purchased at a discount to its face value at maturity. The market prices of
zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are more sensitive to changes in
interest rates than non-zero coupon securities with similar maturities and
credit qualities.
IO/PO Securities. The Fund may invest in separately traded principal and
interest participations in securities guaranteed or issued by the U.S. Treasury.
Under the STRIPS (Separate Trading of Registered Interest and Principal of
Securities) program, the principal and interest components are individually
numbered and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the components parts independently.
Investment Company Securities. The Fund may invest up to 10% of its total
assets in securities issued by other investment companies. Investors should
recognize that the purchase of securities of other investment companies results
in duplication of expenses such that investors indirectly bear a proportionate
share of the expenses of such companies, including operating costs, and
investment advisory and administration fees.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed with respect to a Fund, or
class, as applicable, without the approval of a majority of the outstanding
voting securities of the Fund or class, as applicable. As defined in the 1940
Act, a majority of the outstanding voting securities of the Fund or a class
means the lesser of (1) 67% of the shares of the Fund or class, as applicable,
present at a meeting if the holders of more than 50% of the outstanding shares
of the Fund or class, as applicable, are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Fund or class, as applicable.
(1) The Fund has elected to be qualified as a diversified series of an
open-end investment company.
(2) The Fund may not 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 (including repurchase
agreements with respect to such investments) and provided also that the
Fund may invest more than 25% of its assets in instruments issued by
domestic banks.
(3)The Fund may not borrow money, except as permitted under the Investment
Company Act to 1940, as amended, and as interpreted from time to time by
regulatory authority having jurisdiction, from time to time.
(4) The Fund may not make loans to other persons, except (i) loans of
portfolio securities, and (ii) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in indebtedness in
accordance with the Fund's investment objective and policies may be deemedto be
loans.
Additionally, as a non-fundamental policy, the Fund may not invest more than
10% 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.
RISKS OF INVESTING IN THE FUND
The Fund will attempt to maintain the net asset value of its shares at a
constant value of $1.00, but there can be no assurance that the Fund will be
successful in that effort.
Zero Coupon Securities. Zero coupon bonds (which do not pay interest until
maturity) may be more speculative and may fluctuate more in value than
securities which pay income periodically and in cash. In addition, although the
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).
Risks Of Futures Transactions. There are several risks associated with the
use of futures contracts. While the Fund's use of futures contracts for hedging
may protect the 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 may differ from the skills required to manage other
assets in the Fund's portfolio. An incorrect forecast or imperfect correlation
could result in a loss on both the hedged securities in the 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 of loss to the
Fund from a futures transaction is unlimited.
The Fund will only enter into futures contracts that are standardized and
traded on a U.S. exchange or board of trade, or similar entity, or are quoted on
an automated quotation system. The Fund will not enter into a futures contract
for other than bona fide hedging purposes if immediately thereafter the initial
margin deposits for such futures contracts held by the Fund less the amount by
which any such positions are "in-the-money," would exceed 5% of the Fund's total
assets.
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 average daily net assets, at an annual
rate of 0.30% based on the Fund's average net assets. The Adviser also serves as
Custodian for the assets of the, for which it receives additional fees. The
Adviser also serves in those same capacities, and receives fees, for each other
Portfolio.
C. Nathaniel Siewers serves as portfolio manager of the Fund. Mr. Siewers
also acts as portfolio manager for 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.
The Distributor
Centura Funds Distributor, Inc., 3435 Stelzer Road, Columbus, Ohio 43219,
acts as Distributor for the Fund and the other Portfolios. The Distributor is an
affiliate of the Fund's Administrator, BISYS Fund Services, and was formed
specifically to distribute the Portfolios.
The Fund has adopted a Service and Distribution plan ("Plan") with respect to
its Class A shares. The Plan provides that, as reimbursement for its costs
incurred in financing certain distribution and shareholder service activities
related to that class, Class A shares will pay the Distributor a fee, calculated
as a percentage of the value of average daily net assets of that class, 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 the 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.
The Distributor has undertaken to limit 12b-1 fees for Class A shares to 0.25%
during its current fiscal year.
Under the Plan, the Fund pays the Distributor and other securities dealers
and other financial institutions and organizations for certain shareholder
service or distribution activities. Subject to overall limits applicable under
the Plan and any undertakings by the Distributor to limit fees, selling dealers
may be paid amounts totaling up to 0.50% of the value of average daily net
assets of Fund shares annually. Amounts received by the Distributor may,
additionally, subject to the Plan maximums and voluntary limits, be used to
cover certain other costs and expenses related to the distribution of Fund
shares and provision of service to Fund shareholders, including: (a) advertising
by radio, television, newspapers, magazines, brochures, sales literature, direct
mail or any other form of advertising; (b) expenses of sales employees or agents
of the Distributor, including salary, commissions, travel and related expenses;
(c) costs of printing prospectuses and other materials to be given or sent to
prospective investors; and (d) such other similar services as the Directors
determine to be reasonably calculated to result in the sale of Class A shares of
the Fund. The Fund will pay all costs and expenses in connection with the
preparation, printing and distribution of the Prospectus to current
shareholders, including related legal and accounting fees, and expenses of
operating the Plan will be borne by Class A shares. The Fund and Class A shares
will not be liable for distribution expenditures made by the Distributor in any
given year in excess of the maximum amount payable under the Plan in that year.
Service Organizations
Payments may be made by the Fund or by the Adviser to various banks, trust
companies, broker-dealers or other financial organizations (collectively,
"Service Organizations") for providing administrative services for the Fund and
its shareholders, such as maintaining shareholder records, answering shareholder
inquiries and forwarding materials and information to shareholders. The Fund 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 Class A shares 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 clients to invest more than the 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 Fund. 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 possible activities of banks and their 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 Fund 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
Company. BISYS, headquartered in Little Falls, New Jersey, 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 450 portfolios, and
provides 401(k) marketing support, administration, and recordkeeping services in
partnership with banking institutions and investment management companies. From
the Company's inception to January 1, 1997, Furman Selz LLC ("Furman Selz")
acted as the Company's Sponsor and Administrator. Furman Selz transferred its
mutual fund business to BISYS pursuant to a definitive agreement announced June
28, 1996.
Pursuant to an Administration Agreement with the Company, BISYS provides
certain management and administrative services necessary for the Fund's
operations including: (a) general supervision of the operation of the Fund
including coordination of the services performed by the Company's 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 Company; (c) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Company's officers and Board of Directors; and (d)
furnishing office space and certain facilities required for conducting the
business of the Company. For these services with respect to the Fund, the
Administrator receives from the Fund a fee, payable monthly, at the annual rate
of 0.15% of the Fund's average daily net assets.
BISYS Fund Services, Inc. ("BFSI") acts as the Fund's transfer agent (for
which it receives a fee of $15 per account per year, plus out-of-pocket
expenses) and, as Fund accounting agent, provides assistance in calculating the
Fund's net asset values and provides other accounting services for the Fund (for
an annual fee of $30,000 plus out-of-pocket expenses).
Other Expenses
The 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 service providers described above, the costs borne by the Fund,
some of which may vary between 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 Fund's portfolio securities; expenses of registering the Fund's
shares for sale with the SEC and of satisfying requirements of various state
securities commissions; expenses of maintaining the Fund's legal existence and
of shareholders' meetings; and expenses of preparing and distributing reports,
proxy statements and prospectuses to existing shareholders. The 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
the Fund's operations. Company expenses directly attributable to the Fund or a
class are charged to the Fund or class; other expenses are allocated
proportionately among all of the Portfolios and their classes in relation to the
net assets of each Portfolio and class.
<PAGE>
PRICING OF FUND SHARES
Class A Shares
Orders for the purchase of Class A shares will be executed at the net asset
value per share of that class next determined after an order has been received
Class C Shares
The Funds offer their Class C shares at their net asset value next determined
after a purchase order has been received.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $1,000, except that the minimum
investment required 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 unless otherwise agreed upon when purchases are
made through an authorized securities dealer or financial institution. A
Purchase Application accompanies this Prospectus. However, a separate
application is required for IRA and other qualified retirement plan investments.
The Fund reserves the right to reject purchase orders.
PURCHASE OF FUND SHARES
All consideration received by the Fund for the purchase of shares is invested
in full and fractional shares of the indicated class of the 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.
An investment may be made using any of the following methods:
Through an Authorized Broker, Investment Adviser or Service Organization.
Shares are available to new and existing shareholders through authorized
brokers, investment advisers and Service Organizations. To make an investment
using this method, a Purchase Application must have been completed and the
customer must notify the broker, investment adviser or Service Organization of
the amount to be invested. The broker will then contact the Fund to place the
order.
Orders received by the broker or Service Organization in proper order prior
to the determination of net asset value and transmitted to the Fund prior to the
close of its business day (which is currently 1:00 p.m., Eastern time), will
become effective that day. Brokers who receive orders are obligated to transmit
them promptly. Written confirmation of an order should be received a few days
after the broker has placed the order.
Through The Fund. Orders may be placed directly with the Fund. For an initial
investment, the investor should submit a completed Purchase Application together
with a check or other negotiable bank draft for at least $1,000 (or any lower
applicable minimum required for an initial investment) to:
Centura Funds, Inc.
P.O. Box 182485
Columbus, Ohio 43218-2485
No third party or foreign checks will be accepted.
Subsequent investments may be made by sending a check or other negotiable
bank draft for at least $250 (or any lower applicable minimum for a subsequent
investment) to the same address. The investor's letter of instruction should
include: (a) the name of the Fund and class of shares to be purchased; and (b)
the account number.
If orders placed through the Fund's Distributor are paid for by check, the
order becomes effective on the day on which funds are made available with
respect to the check, which will be the same day of receipt of the check if the
check is received by 2:00 p.m., Eastern time. A customer who purchases Fund
shares through the Distributor by personal check will be permitted to redeem
those shares only after the purchase check has been collected, which may take up
to 15 days or more. Customers who anticipate the need for more immediate access
to their investment should purchase shares with federal funds. A customer
purchasing Fund shares through a Shareholder Servicing Agent should contact his
or her Shareholder Servicing Agent with respect to the ability to purchase
shares by check and the related procedures.
By Wire. Investments may be made directly through the use of wire transfers
of Federal funds. An investor's bank may wire Federal funds to the Fund. In most
cases, the bank will either be a member of the Federal Reserve Banking System or
have a relationship with a bank that is a member. The bank will normally charge
a fee for handling the transaction. A completed Account Application must be
overnighted to the Fund at Centura Funds, Inc., 3435 Stelzer Road, Columbus,
Ohio 43219-8021. Notification must be given to the Fund at 1-800-442-3688 prior
to 4:00 p.m., Eastern Time, of the wire date. Federal funds purchases will be
accepted only on a day on which the Fund, the Distributor and the custodian bank
are all open for business. To purchase shares by a federal funds wire, investors
should first contact the Fund at 1-800-442-3688 for complete instructions.
Investors who have read the Prospectus may establish a new regular account
through the Wire Desk; IRAs and other qualified retirement plan accounts may not
be opened in this way. When new accounts are established by wire, the
distribution options will be set to reinvest all dividends and the social
security or tax identification number ("TIN") will not be certified until a
signed application is received. Completed applications should be forwarded
immediately to the Fund. By using the Purchase Application, an investor may
specify other distribution options and may add any special features offered by
the Fund. Should any dividend distributions or redemptions be paid before the
TIN is certified, they will be subject to 31% federal tax withholding.
Institutional Accounts. Bank trust departments and other institutional
accounts, not subject to sales charges, may place orders directly with the Fund
by telephone at 1-800-44CENTURA (442-3688).
Automatic Investment Program. An eligible shareholder may also participate in
the Centura Automatic Investment Program, an investment plan that automatically
debits money from the shareholder's bank account and invests it in the Fund
through the use of electronic funds transfers or automatic bank drafts. No
investment is required to initiate this Program. Shareholders may elect to make
investments by transfers of a minimum of $50 on either the fifth or twentieth
day of each month or calendar quarter into their established Fund account.
Contact the Fund for more information about the Centura Automatic Investment
Program.
By Payroll Direct Deposits. Investors may set up a payroll direct deposit
arrangement for amounts to be automatically invested in the Fund. Participants
in the Payroll Direct Deposit Program may make periodic investments of at least
$50 per pay period. Contact the Fund for more information about Payroll Direct
Deposits.
RETIREMENT PLAN ACCOUNTS
The Fund may be used as a funding medium for IRAs and other qualified
retirement plans ("Retirement Plans"). The minimum initial investment for an IRA
or a Retirement Plan is $250, with no minimum for subsequent investments.
Completion of a special application is required in order to create such an
account. Fund shares may also be purchased for IRAs and Retirement Plans
established with other authorized custodians. contributions to IRAs are subject
to prevailing amount limits set by the Internal Revenue Service. For more
information about IRAs and other Retirement Plan accounts, call the Fund at
1-800-44CENTURA (442-3688).
EXCHANGE OF FUND SHARES
Shares of a particular class of the Fund may be exchanged for shares of
another Portfolio, subject to certain conditions. Shareholders wishing to
exchange their shares for shares of another Portfolio should obtain and
carefully read the current prospectus for that Portfolio before making the
exchange. If Class A Shares of the Fund that are being exchanged were initially
purchased other than by an exchange from another Portfolio, the exchange, if for
Class A shares of the other Portfolio, will be subject to any sales charge that
may be imposed by the Portfolio into which the exchange is to be made; if the
exchange is for Class B shares of the other Portfolio, a charge may be imposed
on the subsequent redemption of the shares from that Portfolio. If Class A
shares of the Fund that are being exchanged were initially acquired by exchange
from another Portfolio, any initial sales charge due will be reduced by the
amount of any sales charge already paid with respect to those shares. No sales
charge is assessed on an exchange of Class A shares that have been held for more
than two years. If the shares to be acquired are Class B shares of the other
Portfolio, periods during which Fund shares are held will not count for purposes
of determining any contingent deferred sales charge that may be applicable upon
redemption of the Class B shares. Class C shareholders of the Fund may exchange
their Fund shares, whether initially acquired by direct purchase or by an
exchange from another Portfolio of the Company, for Class C shares for another
Portfolio of the Company with no initial sales charge and no charge at the time
of redemption. A shareholder may not exchange shares the Fund for shares of
another Fund that are not eligible for sale in the state of the shareholder's
residence. There is no minimum for exchanges, provided the investor has
satisfied the minimum investment requirement for the portfolio into which he or
she is exchanging, and no service fee is imposed for an exchange. The Fund and
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 of the Fund and the applicable
Portfolio next determined following receipt of the request by the Fund in good
order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. There would generally be no gain recognized upon an exchange of
shares out of the Fund. 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. Shareholders should receive written
confirmation of the exchange within a few days of the completion of the
transaction.
Exchange By Mail. To exchange Fund shares by mail, shareholders should simply
send a letter of instruction to the Fund. The letter of instruction must
include: (a) the investor's account number; (b) the class of shares to be
exchanged; (c) the Portfolio from and the Portfolio into which the exchange is
to be made; (d) the class into which the exchange is to be made; (e) the dollar
or share amount to be exchanged; and (f) 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 Portfolio from which and
the Portfolio into which the exchange is to be made; and (d) the class into
which the shares are to be exchanged; (e) 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 Fund
employs procedures, including recording telephone calls, testing 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 the Fund does not follow
such procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine. The Fund
reserves 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 the 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 A and 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
Fund
Where the shares to be redeemed 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 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, the 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 Fund has no
present intention to do so, the Fund reserves 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 Fund's services and their provisions may
be modified or terminated at any time by the Fund. If the Fund terminates 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 estates, 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 Fund
and place a redemption trade. The broker may charge a fee for this service.
Check-Writing. A check redemption ($100 minimum, no maximum) feature is
available with respect to the Fund. Checks are free and may be obtained from the
Fund. It is not possible to use a check to close out your account since
additional shares accrue daily.
By Mail. Shareholders may redeem shares by sending a letter directly to the
Fund. 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 Fund 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 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 Fund employs 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 the Fund does not follow such procedures, it may be liable for
losses due to unauthorized or fraudulent telephone instructions. The 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.
By Wire. Shareholders may redeem shares by contacting the Fund by mail or
telephone and instructing the Fund 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 the Fund
may elect to have periodic redemptions made from his 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.
Dollar-Cost-Averaging Option. Automatic transfers are available from the Fund
to other Portfolios. Transfer may be made of interest only from the Fund to
other Portfolios ($10,000 money market account minimum) or a fixed amount with
the minimum being $100 per transaction.
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) to $1,000 or less. If during the 30-day notice period the
shareholder purchases sufficient shares to bring the value of the account above
$1,000, the account will not be redeemed.
Redemption In Kind. All redemptions of shares of the Fund shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder 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 the 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 the 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 Fund and the
Administrator from fraud, signature guarantees are required to enable the Fund
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 Fund 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 Fund's accounts with
brokers or dealers it selects in its discretion.
In effecting purchases and sales of portfolio securities for the account of
the Fund, the Adviser will seek the best execution of the Fund's orders.
Purchases and sales of the Fund's portfolio securities 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 Fund. Trading does, however,
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices. The Fund may
purchase securities during an underwriting, which will include an underwriting
fee paid to the underwriter. 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.
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 Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
FUND SHARE VALUATION
The net asset value per share for each class of shares of the Fund is
calculated at 4:00 pm. (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 Fund
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's
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.
The Fund values its portfolio securities using the amortized cost method
permitted by a rule of the Securities and Exchange Commission. This method
facilitates the Fund's maintenance of a constant net asset value per share of
$1.00, although there can be no assurance that this value can be maintained. The
amortized cost method values a security at its cost and amortizes any discount
or premium over the period to the security's maturity, regardless of the impact
of fluctuating interest rates on the market value of the security. See the SAI
for a more complete description of the amortized cost method.
DIVIDENDS, DISTRIBUTIONS, AND FEDERAL INCOME TAXATION
The Fund intends to qualify annually to elect to be treated as a regulated
investment company pursuant to the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). To qualify, the Fund must meet
certain income, distribution and diversification requirements. In any year in
which the 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.
The 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 daily and paid monthly. The
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.
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. 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. Net investment income for a Saturday, Sunday or holiday will be
declared as a dividend on the previous business day.
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. No portion of the dividends paid by the Fund is
expected to qualify for the corporate dividends received deduction.
Distributions of net long-term capital gains, if any, designated by the Fund as
capital gain dividends will be taxable as long-term capital gains, regardless of
how long a shareholder has held the shares. Distributions are taxable in the
same manner whether received in additional shares or in cash.
A distribution will be treated as paid on December 31 of the calendar year if
it is declared by the 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.
If any gain or loss were to be realized by a shareholder upon the sale or
other disposition of shares of Fund, although this is not anticipated, or upon
receipt of a distribution in complete liquidation of the Fund, such gain
generally would 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 distributions 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 checks 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 Fund 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. 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. Shareholders should consult their own tax advisers as to the
federal, state and local tax consequences of ownership of shares of the Fund in
their particular circumstances.
<PAGE>
OTHER INFORMATION
Capitalization
Centura Funds, Inc. was organized as a Maryland corporation on March 1, 1994
and currently consists of six separately managed portfolios. The Board of
Directors may establish additional portfolios in the future. The capitalization
of the Company consists solely of nine hundred million (900,000,000) shares of
common stock with a par value of $0.001 per share. When issued, shares of the
Fund are fully paid, non-assessable and freely transferable.
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 Fund's shareholders and does not
intend to do so. The Fund's shareholders vote as a group with shareholders of
other Portfolios on matters affecting the Company generally or all Funds
similarly. Shareholders of the Fund vote separately on items affecting only the
Fund, or affecting the Fund differently than other Portfolios, and shareholders
of each class vote separately on matters affecting only that class, or affecting
that class differently from other classes.
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 a Director either by a 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 the 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).
PERFORMANCE INFORMATION
The Fund may, from time to time, include its yield and effective yield in
advertisements or reports to shareholders or prospective investors. Shareholders
of Class A shares may experience lower yields than shareholders of Class C
shares because of service and distribution fees paid by Class A shareholders.
The methods used to calculate the yield and effective yield of the Fund are
mandated by the SEC.
Quotations of "yield" for the Fund will be based on the income received by
a hypothetical investment (less a pro-rata share of Fund expenses) over a
particular seven-day period, which is then "annualized" (i.e., assuming that the
seven-day yield would be received for 52 weeks, stated in terms of an annual
percentage return on the investment).
Effective yield" for the Fund is calculated in a manner similar to that
used to calculate yield, but includes the compounding effect of earnings on
reinvested dividends. Quotations of yield and effective yield reflect only the
Fund's performance during the particular seven-day period on which the
calculations are based. Yield and effective yield for the Fund will vary based
on changes in market conditions, the level of interest rates and the level of
the Fund's expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
The performance of the Fund may be compared to various appropriate unmanaged
indexes, indexes prepared by Lipper Analytical Services and other entities or
organizations which track the performance of investment companies. Indexes that
are unmanaged reflect no management fees or 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 form
those held by the Fund, various factors that can affect performance may affect
the Fund in different ways than an index to which it is compared. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund's portfolio
securities, 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 effective
yield for the Fund, see the SAI.
Account Services
All transactions in shares of the Fund 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 Fund has-been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
BISYS provides fund accounting functions for the Fund, 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).
<PAGE>
- -1-
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 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 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.
<PAGE>
Address for:
General Shareholder Inquiries
Centura Funds, Inc.
P.O. Box 182485
Columbus, Ohio 43218-2485
Investment Adviser And Custodian
Centura Bank
131 North Church Street
Rocky Mount, North Carolina 27802
Administrator And Sponsor
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Distributor
Centura Funds Distributor, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
N.W. Washington, D.C. 20006
Independent Accountants
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
CENTURA FUNDS, INC.
PROSPECTUS
CLASS A SHARES AND CLASS C SHARES
Centura Bank
Adviser
BISYS Fund Services, Inc.
Administrator And Sponsor
Centura Funds Distributor, Inc.
Distributor
<PAGE>
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 six 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
-- Centura Money Market 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. The Money Market Fund offers Class A shares but does not offer Class
B shares. Each Fund, including the Money Market 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 other than the Money
Market Fund dated August 28, 1997 or the prospectus for the Money Market Fund
dated ______________, 1998 (the "Prospectuses"). This SAI contains additional
and more detailed information than that set forth in the Prospectuses and should
be read in conjunction with the Prospectuses. The Prospectuses may be obtained
without charge by writing or calling the Funds at the address and information
numbers printed above.
_____________________, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
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
-ii-
<PAGE>
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
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 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, Centura North Carolina Tax-Free Bond Fund and
Centura Money Market 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 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 except Centura Money Market Fund).
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 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 except Centura Money Market Fund).
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 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 Bond Fund and Centura Money Market 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 (other than Centura Money Market 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 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.
With respect to Centura Money Market Fund, only:
(1) The Fund has elected to be qualified as a diversified series of an
open-end investment company.
(2) The Fund may not 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 (including
repurchase agreements with respect to such investments) and provided
also that the Fund may invest more than 25% of its assets in
instruments issued by domestic banks.
(3) The Fund may not borrow money, except as permitted under the
Investment Company Act to 1940, as amended, and as interpreted from
time to time by regulatory authority having jurisdiction, from time to
time.
(4) The Fund may not make loans to other persons, except (i) loans of
portfolio securities, and (ii) to the extent that entry into
repurchase agreements and the purchase of debt instruments or
interests in indebtedness in accordance with the Fund's investment
objective and policies may be deemed to be loans.
(5) The Fund may not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(6) The Fund may not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(7) The Fund may not purchase or sell real estate, which term does not
include securities of companies that deal in real estate or mortgages
or investment secured by real estate or interests therein, except that
the Fund reserves freedom of action to hold and to sell real estate
acquired as a result of the Fund's ownership of securities.
(8) The Fund may not purchase physical commodities or contracts relating
to physical commodities.
The following policies apply to each of the Funds other than Centura Money
Market Fund. These 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.
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>
<S> <C> <C>
POSITION
WITH PRINCIPAL
NAME, ADDRESS AND AGE COMPANY OCCUPATION
- -------------------- -------- ----------
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
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.
<TABLE>
<S> <C> <C> <C> <C>
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
- ------ -------- ----------- ----------- ------------
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
[To be updated]
</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.
[To be updated]
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>
<S> <C> <C>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
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
<TABLE>
<S> <C> <C>
CENTURA SOUTHEAST EQUITY FUND
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
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>
<S> <C> <C>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
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
- ------ ---------- -------------
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>
<S> <C> <C>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
Stephens Inc for Exclusive 430,978.417 97.47%*
Benefit of our Customers
111 Center Street
Little Rock, AR 72201-4402
*Disclaims beneficial ownership.
CLASS B SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
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>
<S> <C> <C>
CLASS A SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
Stephens Inc 73,081.189 94.86%*
for Exclusive Benefit
of Our Customers
P.O. Box 34127
Little Rock, AR 72203-4127
Little Rock, AR 72203-4127
*Disclaims beneficial ownership.
CLASS B SHARES OWNED PERCENTAGE OWNED
- ------ ---------- -------------
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,
0.70% for Centura Southeast Equity Fund, and 0.30% for Centura Money Market
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,
Centura Southeast Equity Fund and Centura Money Market 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, Centura Southeast Equity Fund
and Centura Money Market 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), January 29, 1997
(for Southeast Equity Fund) and __________, 1998 (for Centura Money Market Fund)
and by the sole shareholder of each such Fund on July 24, 1996 (for Equity
Income Fund), January 29, 1997 (for Southeast Equity Fund) and __________, 1998
(for Centura Money Market Fund). This Agreement, as it relates to all Centura
Funds (except Centura Money Market Fund), 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 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, Centura
Southeast Equity Fund and Centura Money Market 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, January 29, 1997 and __________, 1998 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, January 29, 1997 and
__________, 1998. 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 $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 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>
<S> <C> <C>
FURMAN SELZ FURMAN SELZ
ENTITLED WAIVED
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
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
</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 and __________, 1998. 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 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 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.
TAXATION
[To be updated]
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.
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 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.
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 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 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 six separately
managed portfolios, each of which offers three classes of shares, except that
Centura Money Market Fund offers only two classes of shares. The capitalization
of the Company consists solely of nine hundred million (900,000,000) 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 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.
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.
[To be updated]
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.
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, 1775 Eye Street, N.W., Washington, D.C., 20006,
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") and unaudited financial statements of the Funds included in their
Semi-Annual Report for the period ended October 31, 1997 ("Semi-Annual Report")
are incorporated herein by reference to such Reports. Copies of such Annual
Report and Semi-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 in the Annual Report 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.
<PAGE>
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 six 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
-- Centura Money Market 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, Centura Money Market Fund also offers
Class A shares with no front-end sales charge. Each other Fund also offers Class
A 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 other than the Money
Market Fund dated August 28, 1997 or the prospectus for the Money Market Fund
dated __________, 1998 (the "Prospectuses"). This SAI contains additional and
more detailed information than that set forth in the Prospectuses and should be
read in conjunction with the Prospectuses. The Prospectuses may be obtained
without charge by writing or calling the Funds at the address and information
numbers printed above.
__________, 1998
Supplemented November 25, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
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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
2
<PAGE>
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
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 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, Centura North Carolina Tax-Free Bond Fund and
Centura Money Market 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 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 except Centura Money Market Fund).
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 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 except Centura Money Market Fund).
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 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 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 and Centura Money Market 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 (other than Centura Money Market 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 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.
With respect to Centura Money Market Fund, only:
(1) The Fund has elected to be qualified as a diversified series of an
open-end investment company.
(2) The Fund may not 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 (including
repurchase agreements with respect to such investments) and provided
also that the Fund may invest more than 25% of its assets in
instruments issued by domestic banks.
(3) The Fund may not borrow money, except as permitted under the
Investment Company Act to 1940, as amended, and as interpreted from
time to time by regulatory authority having jurisdiction, from time to
time.
(4) The Fund may not make loans to other persons, except (i) loans of
portfolio securities, and (ii) to the extent that entry into
repurchase agreements and the purchase of debt instruments or
interests in indebtedness in accordance with the Fund's investment
objective and policies may be deemed to be loans.
(5) The Fund may not issue senior securities, except as permitted under
the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to
time.
(6) The Fund may not engage in the business of underwriting securities
issued by others, except to the extent that the Fund may be deemed to
be an underwriter in connection with the disposition of portfolio
securities.
(7) The Fund may not purchase or sell real estate, which term does not
include securities of companies that deal in real estate or mortgages
or investment secured by real estate or interests therein, except that
the Fund reserves freedom of action to hold and to sell real estate
acquired as a result of the Fund's ownership of securities.
(8) The Fund may not purchase physical commodities or contracts relating
to physical commodities.
The following policies apply to each of the Funds other than Centura Money
Market Fund. These 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.
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>
<S> <C> <C>
POSITION
WITH PRINCIPAL
NAME, ADDRESS AND AGE COMPANY OCCUPATION
- --------------------- ------- ----------
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)
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>
<S> <C> <C> <C> <C>
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
- -------- ---------- ---------------- ---------------- -----------------
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
[To be updated]
</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.
[To be updated]
As of November 19, 1997, the following individuals owned 5% or more of the
Class C shares of the Funds:
CENTURA EQUITY GROWTH FUND
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
Centura Bank 3,645,946.300 31.14%*
Cash Account
Attn Trust Operations
P.O. Box 1220
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.
CENTURA FEDERAL SECURITIES INCOME FUND
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
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
*Disclaims beneficial ownership.
NORTH CAROLINA TAX-FREE BOND FUND
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
Centura Bank 3,196,618.081 95.28%*
Cash Account
Attn Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
*Disclaims beneficial ownership
CENTURA EQUITY INCOME FUND
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
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
*Disclaims beneficial ownership.
CENTURA SOUTHEAST EQUITY INCOME FUND
SHARES OWNED PERCENTAGE OWNED
------------ ----------------
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
*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,
0.70% for Centura Southeast Equity Fund and 0.30% for Centura Money Market 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,
Centura Southeast Equity Fund and Centura Money Market 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, Centura Southeast Equity Fund
and Centura Money Market 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), January 29, 1997
(for Southeast Equity Fund) and __________, 1998 (for Centura Money Market Fund)
and by the sole shareholder of each such Fund on July 24, 1996 (for Equity
Income Fund), January 29, 1997 (for Southeast Equity Fund) and ________, 1998
(for Centura Money Market Fund). This Agreement, as it relates to all Centura
Funds (except Centura Money Market Fund), 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 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 by each Fund (except Centura Money Market Fund)
for 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 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.
<PAGE>
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, January 29,
1997 and __________, 1998. 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 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 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.
TAXATION
[To be updated]
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 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
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 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.
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 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 six separately
managed portfolios, each of which offers three classes of shares, except that
Centura Money Market Fund offers only two classes of shares. The capitalization
of the Company consists solely of nine hundred million (900,000,000) 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 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 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.
[To be updated]
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.
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, 1775 Eye Street, N.W., Washington, D.C., 20006,
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") and unaudited financial statements of the Funds included in their
Semi-Annual Report for the period ended October 31, 1997 ("Semi-Annual Report")
are incorporated herein by reference to such Reports. Copies of such Annual
Report and Semi-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 in the Annual Report 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.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
(1) None.
Included in Part B:
(1) Portfolio of Investments dated April 30, 1997 (audited)* (2)
Statement of Assets and Liabilities dated April 30, 1997
(audited)
(3) Statement of Operations for year end April 30, 1997 (audited)
Financial Highlights for the Year Ended April 30, 1997
(audited)*
(4) Statement of Changes in Net Assets for year ended April 30,
1997 (audited)*
(5) Notes to Financial Statements dated April 30, 1997 (audited)*
(6) Statement of Assets and Liabilities dated October 31, 1997
(unaudited)
(7) Statement of Operations dated October 31, 1997 (unaudited) (8)
Statement of Changes in Net Assets dated October 31, 1997
(unaudited)*
(9) Schedule of Portfolio Investments dated October 31, 1997
(unaudited)*
(10) Notes to Financial Statements dated October 31, 1997
(unaudited)*
* Incorporated by reference 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)
1(e) -- Form of Articles Supplementary - filed herewith
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)
5(d) -- Form of Investment Advisory Contract Supplement --
filed herewith
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)
15(d) -- Form of Distribution Plan Supplement--filed herewith
16(a) -- Schedule of Computation for the Southeast Equity
Fund(11)
16(b) -- Schedule of Computation (all other Funds)(6)(10)
17 -- Financial data Schedules - filed herewith
18(a) -- Plan Pursuant to Rule 18f-3 (7)
18(b) -- Form of Amended Plan Pursuant to Rule 18f-3 - filed
herewith
- ---------------
1. Filed as part of Post-Effective No. 4 to Registrant's Registration
Statement on June 14, 1996.
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.
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.
9. Filed as part of Post-Effective Amendment 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.
11. Filed as part of Post-Effective Amendment No. 9 to Registrant's
Registration Statement on November 25, 1997 and incorporated by
reference herein.
25. Persons Controlled by or Under Common Control with Registrant
None
26. Number of Holders of Securities
Number of Record
Holders at
Title of Class Title of Class February , 1998
Shares of Centura Equity
Growth Fund par value
$.001 per share
Class A:
Class B:
Class C:
Shares of Centura Federal
Securities Fund, par value
$.001 per share
Class A:
Class B:
Class C:
Shares of Centura North Carolina
Tax Free Bond Fund,
par value $.001 per share
Class A:
Class B:
Class C:
Shares of Centura Equity
Income Fund,
par value $.001 per share
Class A:
Class B:
Class C:
Shares of Southeast Equity
Income Fund, par value $.001 per
share
Class A:
Class B:
Class C:
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 Registrant 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.
<PAGE>
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
Name Title Business and Other
Connections
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.
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, and Operating Officer, and
Director Director, Centura Bank.
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
Banks.
Charles P. Wilkins Director Director, Centura Bank;
Attorney, Broughton,
Wilkins & Webb, P.A.
- ----------------------
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.
Positions and
Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
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
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 Treasurer
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
3435 Stelzer Road Secretary
Columbus, Ohio 43219
Annamaria Porcaro Assistant Secretary None
150 Clove Road
Little Falls, NJ 07424
(c) None
30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
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 agency).
31. Management Services
Not applicable.
32. Undertakings
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements for Centura Money Market Fund which need not be certified,
within four to six months from the effective date of this Post-Effective
Amendment No. 10 to registrant's registration statement under the Securities Act
of 1933.
(c) Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of Registrant's latest annual report and semi-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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Amendment to the 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 13th day of February, 1998.
CENTURA FUNDS, INC.
By /s/ GEORGE LANDRETH
George Landreth, 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 13th day of February, 1998.
/s/ George Landreth President
George Landreth
/s/ Thomas Line* Treasurer
Thomas Line
/s/ Leslie H. Garner, Jr.* Director and Chairman of the Board of
Leslie Garner Directors
/s/ James H. Speed, Jr.* Director
James H. Speed, Jr.
/s/ Frederick E. Turnage* Director
Frederick E. Turnage
/s/ Lucy Hancock Bode* Director
Lucy Hancock Bode
*By:/s/Olivia Adler
Olivia Adler
Attorney-in-Fact
<PAGE>
CENTURA FUNDS, INC.
INDEX TO EXHIBITS
Exhibit Sequentially
Number Description of Exhibit
1(e) Form of Articles Supplementary
5(d) Form of Investment Advisory Contract Supplement
11(a) Consent of McGladrey & Pullen, LLP
15(d) Form of Distribution Plan Supplement
17 Financial Data Schedules
18(b) Form of Amended Plan Pursuant to Rule 18f-3
CENTURA FUNDS, INC.
ARTICLES SUPPLEMENTARY
CENTURA FUNDS, INC., a Maryland corporation registered as an open-end
investment company under the Investment Company Act of 1940 and having its
principal office in the State of Maryland in Baltimore City, Maryland
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting duly
convened and held on January 28, 1998, adopted a resolution to increase the
Corporation's authorized capital of Common Shares and to classify such
additional Common Shares as a new series of Common Shares having two classes, as
described in Article THIRD, below.
SECOND:As of immediately prior to such increase in authorized capital of
the Corporation, the total number of shares of all classes that the Corporation
was authorized to issue was seven hundred fifty million (750,000,000) shares of
common stock, par value $0.001 per share and having an aggregate par value of
six hundred thousand dollars ($750,000), classified as follows:
Name of Series Number of Shares Allocated
Class A Class B Class C
Centura Equity Growth Fund 50,000,000 50,000,000 50,000,000
Centura Equity Income Fund 50,000,000 50,000,000 50,000,000
Centura Federal Securities
Income Fund 50,000,000 50,000,000 50,000,000
Centura North Carolina
Tax-Free Bond Fund 50,000,000 50,000,000 50,000,000
Centura Southeast Equity
Fund 50,000,000 50,000,000 50,000,000
THIRD: As of immediately subsequent to such increase in authorized
capital of the Corporation, the total number of shares of all classes that the
Corporation was authorized to issue was nine hundred million (900,000,000)
shares of common stock, par value $0.001 per share and having an aggregate par
value of six hundred thousand dollars ($900,000), classified as follows:
Class A Class B Class C
Centura Equity Growth Fund 50,000,000 50,000,000 50,000,000
Centura Equity Income Fund 50,000,000 50,000,000 50,000,000
Centura Federal Securities
Income Fund 50,000,000 50,000,000 50,000,000
Centura North Carolina
Tax-Free Bond Fund 50,000,000 50,000,000 50,000,000
Centura Southeast Equity
Fund 50,000,000 50,000,000 50,000,000
Centura Money Market Fund 75,000,000..None 75,000,000
FOURTH:The shares of the Corporation authorized and classified pursuant
to these Articles Supplementary have been so authorized and classified by the
Board of Directors under the authority contained in the charter of the
Corporation. The number of Shares of capital stock of the various classes that
the Corporation has authority to issue has been increased by the Board of
Directors in accordance with Section 2-105(c) of the Maryland General
Corporation Law. The Corporation is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").
FIFTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the series and classes of Common Shares described in
Article THIRD hereof shall be as set forth in the Corporation's charter and
shall be subject to all provisions of the charter relating to shares of the
Corporation generally, including those set forth in Article 5.5 of such charter.
IN WITNESS WHEREOF, Centura Funds, Inc. has caused these Articles
Supplementary to be signed in its name on its behalf by its authorized officers
who acknowledge that these Articles Supplementary are the act of the
Corporation, that to the best of their knowledge, information and belief, all
matters and facts set forth herein relating to the authorization and approval of
these Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
Date: ____________, 1998 CENTURA FUNDS, INC.
By:
George Landreth
President
ATTEST:
Ellen Stoutamire
Secretary
INVESTMENT ADVISORY CONTRACT SUPPLEMENT
CENTURA FUNDS, INC.
237 Park Avenue
New York, New York 10017
Centura Bank
131 North Church Street
Rocky Mount, North Carolina 27802
Re: Centura Money Market Fund
Dear Sirs:
This will confirm the agreement between the undersigned (the
"Company") and Centura Bank (the "Advisor") as follows:
1. The Company is an open-end investment company organized as a
Maryland corporation, and consists of one or more separate investment portfolios
as have been or may be established by the Directors of the Company from time to
time. A separate class of shares of common stock of the Company is offered to
investors with respect to each investment portfolio. Centura Money Market Fund
(the "Fund") is a separate investment portfolio of the Company.
2. The Company and the Advisor have entered into a Master Investment
Advisory Contract ("Master Advisory Contract") pursuant to which the Company has
employed the Advisor to provide investment advisory and other services specified
in that Contract and the Advisor has accepted such
employment.
3. As provided in paragraph 1 of the Master Advisory Contract, the
Company hereby adopts the Master Advisory Contract with respect to the Fund and
the Advisor hereby acknowledges that the Master Advisory Contract shall pertain
to the Fund, the terms and conditions of such Master Advisory Contract being
hereby incorporated herein by reference.
4. The term "Funds" as used in the Master Advisory Contract shall
for purposes of this Supplement pertain to the Fund.
5. As provided in paragraph 6 of the Master Advisory Contract and
subject to further conditions as set forth therein, the Company shall with
respect to the Fund pay the Advisor a monthly fee on the first business day of
each month at the annual rate of 0.30% of the Fund's average daily net assets
(as determined on each business day at the time set forth in the Prospectus for
determining net asset value per share).
6. Because the state expense limitations referred to in paragraph 7
of the Master Advisory Contract are no longer applicable to the Company, by
virtue of Section 18(b)(2) of the Securities Act of 1933, no percentage is
specified as the "Advisor's reimbursement" amount pursuant to that paragraph 7.
7. This Supplement and the Master Advisory Contract (together, the
"Contract") became effective with respect to the Fund on
, 1998 and shall continue thereafter in effect with respect to
the Fund for a period of more than two years from such date only so long as the
continuance is specifically approved at least annually (a) by the vote of a
majority of the outstanding voting securities of the Fund (as defined in the
1940 Act) or by a majority of the Company's Board of Directors and (b) by the
vote, cast in person at a meeting called for that purpose, of a majority of the
Company's Directors who are not parties to this contract or "interested persons"
(as defined in the Investment Company Act of 1940 ("1940 Act")) of any such
party. This contract may be terminated with respect to the Fund at any time,
without the payment of any penalty, by vote of a majority of the outstanding
voting securities of the Fund (as defined in the 1940 Act) or by a vote of a
majority of the Company's entire Board of Directors on 60 days written notice to
the Advisor and by Advisor on 60 days written notice to the Company. This
contract shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
If the foregoing correctly sets forth the agreement between the
Company and the Advisor, please do indicate by signing and returning to the
Company the enclosed copy hereof.
Very truly yours,
CENTURA FUNDS, INC.
By:___________________________
Name:___________________________
Title:___________________________
ACCEPTED:
CENTURA BANK
By:___________________________
Name:___________________________
Title:___________________________
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. 10 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 captions "Independent Accountants" and
"Financial Statements" and in the Prospectus under the caption "Financial
Highlights."
New York, New York
February 10, 1998
CENTURA FUNDS, INC.
Distribution Plan Supplement
Centura Money Market Fund
_______________, 1998
WHEREAS, Centura Funds, Inc. (the "Company") is an open-end investment
company organized as a Maryland corporation and consists of one or more separate
investment portfolios, as may be established and designated by the Directors
from time to time;
WHEREAS, a separate series of shares of common stock of the Company is
offered to investors with respect to each investment portfolio; and
WHEREAS, each investment portfolio offers one or more classes of shares;
WHEREAS, the Company has adopted a Master Distribution Plan ("Plan")
which provides that it shall pertain to such investment portfolios and classes
of shares as shall be designated from time to time by the Directors of the
Company in any Supplement to the Plan; and
WHEREAS, Centura Money Market Fund (the "Fund") is a separate investment
portfolio of the Company and offers two classes of shares ("Classes"):
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1.As provided in paragraph 1 of the Plan, the Company
hereby adopts the Plan on behalf of the Fund and its Class A
shares, the terms and conditions of such Plan being hereby
incorporated herein by reference;
2.The terms "Fund" or "Funds" and "Class" or "Classes" as
used in the Plan shall refer to the Fund and its Classes,
respectively; and
3.As provided in paragraph 2 of the Plan, reimbursements
by the Fund with respect to its Class A shares shall be subject
to the following annual limits: 0.50% of the average daily net
assets attributable to Class A shares; provided that up to 0.25%
of such average daily net assets may be designated out of such
reimbursements as a "service fee," as defined in rules and policy
statements of the National Association of Securities Dealers.
<PAGE>
CENTURA FUNDS, INC.
(the "Company")
PLAN PURSUANT TO RULE 18F-3
under the
INVESTMENT COMPANY ACT OF 1940
The Plan
(as amended January 29, 1997)
I. Introduction
As required by Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act"), this Plan describes the multi- class system for the
Company, including the separate class arrangements for shareholder services
and/or distribution of shares, the method for allocating expenses to classes and
any related conversion features or exchange privileges applicable to the
classes.
Upon the initial effective date of this Plan, on October 11, 1995, the
Company elected to offer multiple classes of shares, as described herein,
pursuant to Rule 18f-3 and this Plan. The Plan, including this Amendment, does
not make material changes to the multi-class arrangements, including expense
allocations, previously approved by the Board and in effect for the Company
pursuant to an exemptive order issued to Furman Selz Incorporated, the Company's
administrator ("Administrator") on July 20, 1993.
II. The Multi-Class System
Each current series of the Company as of the Effective Date of this
Plan, including this Amendment, and each subsequent series specifically added to
this Plan as indicated on Schedule A hereto, (all such series referred to herein
as "Multi-Class Funds" or "Funds") shall offer two or more of Class A, Class B
or Class C shares, subject to such offering restrictions or limitations as may
be approved from time to time for one or more classes by the Board of Directors.
Shares of each class of a Multi-Class Fund shall represent an equal pro rata
interest in that Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (a) each class shall have
a different designation; (b) each class of shares shall bear any Class Expenses,
as defined in Section C, below; (c) each class shall have exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution arrangement; and (d) each class shall have separate voting rights
on any matter submitted to
<PAGE>
shareholders in which the interests of one class differ from the interests of
any other class. In addition, Class A, Class B and Class C shares shall have the
features described in Sections A, B, C, D and E, below.
A. Sales Charge Structure
1. Class A Shares. Class A shares of each Multi- Class Fund that
offers Class A shares shall be offered at the then-current net asset value plus
a front-end sales charge in such amount as is disclosed in the current
prospectus for that Fund, including any prospectus supplements, and shall be
subject to such reductions and waivers as are determined or approved by the
Company's Board of Directors. Class A shares shall generally not be subject to a
contingent deferred sales charge provided, however, that such a charge may be
imposed in such cases as the Board may approve and as disclosed in a future
prospectus or prospectus supplement for a Fund.
2. Class B Shares. Class B shares of each Multi- Class Fund that
offers Class B shares shall be offered at the then-current net asset value and
shall generally not be subject to a front-end sales charge provided, however,
that such a charge may be imposed in such cases as the Board may approve and as
disclosed in a future prospectus or prospectus supplement for a Fund. Class B
shareholders who redeem within such time period as is specified in the current
prospectus for the relevant Fund shall, under conditions described in the
prospectus, be subject to a contingent deferred sales charge which may vary with
the time period such Class B shares were held and may be waived or reduced under
conditions approved by the Company's Board of Directors and disclosed in the
then-current prospectus.
3. Class C Shares. Class C shares that are offered by a Fund
shall be available only to such categories of investors as are specified from
time to time in the then-current prospectus for the relevant Fund. Class C
shares shall be offered at net asset value with no initial sales charge and
shall not be subject to a contingent deferred sales charge provided, however,
that such charge(s) may be imposed in such cases as the Board may approve and as
disclosed in a future prospectus or prospectus supplement for a Fund.
B. Service and Distribution Plans
The Company has adopted a Master Distribution Plan pursuant to
Rule 12b-1 under which Supplements were approved with
<PAGE>
respect to such of Class A, Class B and Class C shares as are offered by each
Multi-Class Fund, containing the following terms:
1. Class A Shares. Class A shares of each Fund offering Class A
shares shall reimburse the Distributor for costs and expenses incurred in
connection with distribution and marketing of shares of the Company, as provided
in the Master Distribution Plan and Supplements thereto, subject to an annual
limit of 0.50% of the average daily net assets of a Fund attributable to its
Class A shares, provided that up to 0.25% of such average daily net assets may
be designated out of such reimbursements as a "service fee," as defined in rules
and policy statements of the National Association of Securities Dealers. The
Adviser has undertaken to limit the total of the foregoing fees to no more than
0.25% of a Fund's average annual daily net assets for at least the first year of
the Funds' operations.
2. Class B Shares. Class B shares of each Fund offering Class B
shares shall reimburse the Distributor for costs and expenses incurred in
connection with distribution and marketing of shares of the Company, as provided
in the Master Distribution Plan and Supplements thereto, subject to an annual
limit of 1.00% of the average daily net assets of Centura Equity Growth Fund,
Centura Equity Income Fund and Centura Southeast Equity Fund and 0.75% of the
average daily net assets of Centura Federal Securities Income Fund and Centura
North Carolina Tax- Free Bond Fund attributable to their respective Class B
shares, provided that up to 0.25% of such average daily net assets may be
designated out of such reimbursements as a "service fee," as defined in rules
and policy statements of the National Association of Securities Dealers.
3. Class C Shares. No Supplement to the Master Distribution
Plan has been adopted for Class C shares of any Fund.
C. Allocation of Income and Expenses
1. General
a. Daily Dividend Funds
Funds that declare distributions of net
investment income daily and that maintain the same net asset value per share in
each class ("Daily Dividend Funds") will allocate gross income, realized and
unrealized capital gains and losses and expenses (other than Class Expenses, as
defined below)
<PAGE>
to each class on the basis of relative net assets (settled shares). "Relative
net assets (settled shares)," for this purpose, are net assets valued in
accordance with generally accepted accounting principles but excluding the value
of subscriptions receivable, in relation to the net assets of the particular
Daily Dividend Fund. Expenses to be so allocated also include expenses of the
Company that are allocated to a Fund and are not attributable to a particular
Fund or class of a Fund ("Company Expenses") and expenses of the particular Fund
that are not attributable to a particular class of the Fund ("Fund Expenses").
Company Expenses include, but are not limited to, Directors' fees, insurance
costs and certain legal fees. Fund Expenses include, but are not limited to,
certain registration fees, advisory fees, custodial fees, and other expenses
relating to the management of the Fund's assets.
b. Non-Daily Dividend Funds
The gross income, realized and unrealized
capital gains and losses and expenses (other than Class Expenses, as defined
below) of each Fund, other than the Daily Dividend Funds, shall be allocated to
each class on the basis of its net asset value relative to the net asset value
of the Fund. Expenses to be so allocated also include expenses of the Company
that are allocated to a Fund and are not attributable to a particular Fund or
class of a Fund ("Company Expenses") and expenses of the particular Fund that
are not attributable to a particular class of the Fund ("Fund Expenses").
Company Expenses include, but are not limited to, Directors' fees, insurance
costs and certain legal fees. Fund Expenses include, but are not limited to,
certain registration fees, advisory fees, custodial fees, and other expenses
relating to the management of the Fund's assets.
<PAGE>
2. Class Expenses
Expenses attributable to a particular class
("Class Expenses") shall be limited to: (a) payments pursuant to the Master
Distribution Plan and Supplement by that class; (b) transfer agent fees
attributable to that class; (c) printing and postage expenses related to
preparing and distributing material such as shareholder reports, prospectuses
and proxy materials to current shareholders of that class; (d) registration fees
for shares of that class; (e) the expense of administrative personnel and
services as required to support the shareholders of that class; (f) litigation
or other legal expenses relating solely to that class; and (g) Directors' fees
incurred as a result of issues relating to that class. Expenses described in (a)
of this paragraph must be allocated to the class for which they are incurred.
All other expenses described in this paragraph may be allocated as Class
Expenses, but only if the Company's President and Treasurer have determined,
subject to Board approval or ratification, which of such categories of expenses
will be treated as Class Expenses, consistent with applicable legal principles
under the 1940 Act and the Internal Revenue Code of 1986, as amended ("Code").
In the event a particular expense is no longer
reasonably allocable by class or to a particular class, it shall be treated as a
Company Expense or Fund Expense, and in the event a Company Expense or Fund
Expense becomes allocable at a different level, including as a Class Expense, it
shall be so allocated, subject to compliance with Rule 18f-3 and to approval or
ratification by the Board of Directors.
The initial determination of expenses that will be
allocated as Class Expenses and any subsequent changes thereto shall be reviewed
by the Board of Directors and approved by such Board and by a majority of the
Directors who are not "interested persons" of the Company, as defined in the
1940 Act.
3. Waivers or Reimbursements of Expenses
Expenses may be waived r reimbursed by the Adviser,
the Distributor or any other provider of services to a Fund or the Company
without the prior approval of the Board of Directors.
D. Exchange Privileges
Shareholders of a Multi-Class Fund may exchange shares
<PAGE>
of a particular class for shares of the same class in another Multi-Class Fund
at relative net asset value and with the payment of any excess of the sales
charge applicable to the shares to be acquired over the sales charge previously
paid on the shares being exchanged, provided the shares to be acquired in the
exchange are qualified for sale in the shareholder's state of residence and
subject to the applicable requirements as to minimum amount.
E. Conversion Feature
Following the seventh anniversary of their purchase date, Class B
shares shall automatically convert to Class A shares of the same Fund.
F. Board Review
1. Approval of Amended Plan
The Board of Directors, including a majority of
the Directors who are not interested persons (as defined in the 1940 Act) of the
Company or a Fund ("Independent Directors"), at a meeting held _________, 1998
approved this amended Plan based on a determination that the Plan, as amended,
including the expense allocation, is in the best interests of each class and
Fund individually and of the Company. Their determination was based on their
review of information furnished to them which they deemed reasonably necessary
and sufficient to evaluate the Plan, as amended.
2. Approval of Further Amendments
This amended Plan may not be further amended
materially unless the Board of Directors, including a majority of the
Independent Directors, have found that the proposed amendment, including any
proposed related expense allocation, is in the best interests of each class and
Fund individually and of the Company. Such finding shall be based on information
requested by the Board and furnished to them which the Board deems reasonably
necessary to evaluate the proposed amendment.
3. Periodic Review
The Board shall review reports of expense
allocations and such other information as they request at such times, or
pursuant to such schedule, as they may determine consistent with applicable
legal requirements.
<PAGE>
G. Contracts
Any agreement related to the Multi-Class System shall require the
parties thereto to furnish to the Board of Directors, upon their request, such
information as is reasonably necessary to permit the Directors to evaluate the
Plan or any proposed amendment.
H. Effective Date
The Plan, as amended, having been reviewed and approved by the
Board of Directors and by a majority of the Independent Directors as indicated
in Section F1 of the Plan, shall take effect as of ___________, 1998.
<PAGE>
SCHEDULE A
Centura Equity Growth Fund
Centura Equity Income Fund
Centura Southeast Equity Fund
Centura Federal Securities Income Fund
Centura North Carolina Tax-Free Bond Fund
Centura Money Market Fund
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 011
<NAME> CENTURA EQUITY GROWTH 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> 150170926
<INVESTMENTS-AT-VALUE> 190471714
<RECEIVABLES> 288334
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 15651
<TOTAL-ASSETS> 190775699
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 379336
<TOTAL-LIABILITIES> 379336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107048537
<SHARES-COMMON-STOCK> 606087<F1>
<SHARES-COMMON-PRIOR> 554682<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 3792
<ACCUMULATED-NET-GAINS> 43070306
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40300788
<NET-ASSETS> 190415839
<DIVIDEND-INCOME> 1537620
<INTEREST-INCOME> 14991
<OTHER-INCOME> 0
<EXPENSES-NET> 1131699
<NET-INVESTMENT-INCOME> 420912
<REALIZED-GAINS-CURRENT> 16538306
<APPREC-INCREASE-CURRENT> 14256950
<NET-CHANGE-FROM-OPS> 31216168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13931<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 78973<F1>
<NUMBER-OF-SHARES-REDEEMED> 28393<F1>
<SHARES-REINVESTED> 825<F1>
<NET-CHANGE-IN-ASSETS> 24940545
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 26532000
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 669162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1144566
<AVERAGE-NET-ASSETS> 10213754<F1>
<PER-SHARE-NAV-BEGIN> 15.33<F1>
<PER-SHARE-NII> 0.02<F1>
<PER-SHARE-GAIN-APPREC> 2.84<F1>
<PER-SHARE-DIVIDEND> 0.02<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.17<F1>
<EXPENSE-RATIO> 1.36<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 012
<NAME> CENTURA EQUITY GROWTH 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> 150170926
<INVESTMENTS-AT-VALUE> 190471714
<RECEIVABLES> 288334
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 15651
<TOTAL-ASSETS> 190775699
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 379336
<TOTAL-LIABILITIES> 379336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107048537
<SHARES-COMMON-STOCK> 742354<F1>
<SHARES-COMMON-PRIOR> 642044<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 3792
<ACCUMULATED-NET-GAINS> 43070306
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40300788
<NET-ASSETS> 190415839
<DIVIDEND-INCOME> 1537620
<INTEREST-INCOME> 14991
<OTHER-INCOME> 0
<EXPENSES-NET> 1131699
<NET-INVESTMENT-INCOME> 420912
<REALIZED-GAINS-CURRENT> 16538306
<APPREC-INCREASE-CURRENT> 14256950
<NET-CHANGE-FROM-OPS> 31216168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 941<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 124168<F1>
<NUMBER-OF-SHARES-REDEEMED> 23915<F1>
<SHARES-REINVESTED> 57<F1>
<NET-CHANGE-IN-ASSETS> 24940545
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 26532000
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 669162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1144566
<AVERAGE-NET-ASSETS> 11997496<F1>
<PER-SHARE-NAV-BEGIN> 15.20<F1>
<PER-SHARE-NII> (0.04)<F1>
<PER-SHARE-GAIN-APPREC> 2.82<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.98<F1>
<EXPENSE-RATIO> 2.11<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 013
<NAME> CENTURA EQUITY GROWTH 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> 150170926
<INVESTMENTS-AT-VALUE> 190471714
<RECEIVABLES> 288334
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 15651
<TOTAL-ASSETS> 190775699
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 379336
<TOTAL-LIABILITIES> 379336
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107048537
<SHARES-COMMON-STOCK> 9131123<F1>
<SHARES-COMMON-PRIOR> 9600522<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 3792
<ACCUMULATED-NET-GAINS> 43070306
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40300788
<NET-ASSETS> 190415839
<DIVIDEND-INCOME> 1537620
<INTEREST-INCOME> 14991
<OTHER-INCOME> 0
<EXPENSES-NET> 1131699
<NET-INVESTMENT-INCOME> 420912
<REALIZED-GAINS-CURRENT> 16538306
<APPREC-INCREASE-CURRENT> 14256950
<NET-CHANGE-FROM-OPS> 31216168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 409832<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 762290<F1>
<NUMBER-OF-SHARES-REDEEMED> 1248975<F1>
<SHARES-REINVESTED> 17286<F1>
<NET-CHANGE-IN-ASSETS> 24940545
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 26532000
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 669162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1144566
<AVERAGE-NET-ASSETS> 167423298<F1>
<PER-SHARE-NAV-BEGIN> 15.33<F1>
<PER-SHARE-NII> 0.04<F1>
<PER-SHARE-GAIN-APPREC> 2.86<F1>
<PER-SHARE-DIVIDEND> 0.04<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.19<F1>
<EXPENSE-RATIO> 1.11<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 021
<NAME> CENTURA EQUITY INCOME 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> 46692947
<INVESTMENTS-AT-VALUE> 61970737
<RECEIVABLES> 150976
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1155
<TOTAL-ASSETS> 62122868
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 201101
<TOTAL-LIABILITIES> 201101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40709922
<SHARES-COMMON-STOCK> 68315<F1>
<SHARES-COMMON-PRIOR> 30972<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 480
<ACCUMULATED-NET-GAINS> 5934535
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15277790
<NET-ASSETS> 61921767
<DIVIDEND-INCOME> 970167
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 234391
<NET-INVESTMENT-INCOME> 735776
<REALIZED-GAINS-CURRENT> 2069986
<APPREC-INCREASE-CURRENT> 6311449
<NET-CHANGE-FROM-OPS> 9117211
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6788<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 40963<F1>
<NUMBER-OF-SHARES-REDEEMED> 4131<F1>
<SHARES-REINVESTED> 511<F1>
<NET-CHANGE-IN-ASSETS> 8671070
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3864549
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 211536
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 361159
<AVERAGE-NET-ASSETS> 599106<F1>
<PER-SHARE-NAV-BEGIN> 10.91<F1>
<PER-SHARE-NII> 0.13<F1>
<PER-SHARE-GAIN-APPREC> 1.71<F1>
<PER-SHARE-DIVIDEND> 0.14<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.61<F1>
<EXPENSE-RATIO> 0.98<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 022
<NAME> CENTURA EQUITY INCOME 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> 46692947
<INVESTMENTS-AT-VALUE> 61970737
<RECEIVABLES> 150976
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1155
<TOTAL-ASSETS> 62122868
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 201101
<TOTAL-LIABILITIES> 201101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40709922
<SHARES-COMMON-STOCK> 100371<F1>
<SHARES-COMMON-PRIOR> 39225<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 480
<ACCUMULATED-NET-GAINS> 5934535
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15277790
<NET-ASSETS> 61921767
<DIVIDEND-INCOME> 970167
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 234391
<NET-INVESTMENT-INCOME> 735776
<REALIZED-GAINS-CURRENT> 2069986
<APPREC-INCREASE-CURRENT> 6311449
<NET-CHANGE-FROM-OPS> 9117211
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6435<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 62657<F1>
<NUMBER-OF-SHARES-REDEEMED> 2012<F1>
<SHARES-REINVESTED> 501<F1>
<NET-CHANGE-IN-ASSETS> 8671070
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3864549
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 211536
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 361159
<AVERAGE-NET-ASSETS> 823823<F1>
<PER-SHARE-NAV-BEGIN> 10.88<F1>
<PER-SHARE-NII> 0.09<F1>
<PER-SHARE-GAIN-APPREC> 1.70<F1>
<PER-SHARE-DIVIDEND> 0.10<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.57<F1>
<EXPENSE-RATIO> 1.73<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 023
<NAME> CENTURA EQUITY INCOME 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> 46692947
<INVESTMENTS-AT-VALUE> 61970737
<RECEIVABLES> 150976
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1155
<TOTAL-ASSETS> 62122868
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 201101
<TOTAL-LIABILITIES> 201101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40709922
<SHARES-COMMON-STOCK> 4746763<F1>
<SHARES-COMMON-PRIOR> 4817568<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 480
<ACCUMULATED-NET-GAINS> 5934535
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15277790
<NET-ASSETS> 61921767
<DIVIDEND-INCOME> 970167
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 234391
<NET-INVESTMENT-INCOME> 735776
<REALIZED-GAINS-CURRENT> 2069986
<APPREC-INCREASE-CURRENT> 6311449
<NET-CHANGE-FROM-OPS> 9117211
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 723033<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 433204<F1>
<NUMBER-OF-SHARES-REDEEMED> 534358<F1>
<SHARES-REINVESTED> 30349<F1>
<NET-CHANGE-IN-ASSETS> 8671070
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3864549
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 211536
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 361159
<AVERAGE-NET-ASSETS> 58533713<F1>
<PER-SHARE-NAV-BEGIN> 10.89<F1>
<PER-SHARE-NII> 0.15<F1>
<PER-SHARE-GAIN-APPREC> 1.71<F1>
<PER-SHARE-DIVIDEND> 0.15<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.60<F1>
<EXPENSE-RATIO> 0.73<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 031
<NAME> CENTURA FEDERAL SECURITIES INCOME 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> 130998062
<INVESTMENTS-AT-VALUE> 133153203
<RECEIVABLES> 1705790
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 19987
<TOTAL-ASSETS> 134878980
<PAYABLE-FOR-SECURITIES> 5012500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 797204
<TOTAL-LIABILITIES> 5809704
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127103262
<SHARES-COMMON-STOCK> 50757<F1>
<SHARES-COMMON-PRIOR> 48378<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 229752
<ACCUM-APPREC-OR-DEPREC> 2195766
<NET-ASSETS> 129069276
<DIVIDEND-INCOME> 156238
<INTEREST-INCOME> 3867688
<OTHER-INCOME> 0
<EXPENSES-NET> 443375
<NET-INVESTMENT-INCOME> 3580551
<REALIZED-GAINS-CURRENT> 191531
<APPREC-INCREASE-CURRENT> 2604744
<NET-CHANGE-FROM-OPS> 6376826
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13093<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 16532<F1>
<NUMBER-OF-SHARES-REDEEMED> 15456<F1>
<SHARES-REINVESTED> 1303<F1>
<NET-CHANGE-IN-ASSETS> 8960476
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<F1>Class A
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<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 032
<NAME> CENTURA FEDERAL SECURITIES INCOME FUND
<S> <C>
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<F1>Class B
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<TABLE> <S> <C>
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<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 033
<NAME> CENTURA FEDERAL SECURITIES INCOME FUND
<S> <C>
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<F1>Class C
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 041
<NAME> CENTURA NORTH CAROLINA TAX-FREE BOND FUND
<S> <C>
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<F1>Class A
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<TABLE> <S> <C>
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<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 042
<NAME> CENTURA NORTH CAROLINA TAX-FREE BOND FUND
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<F1>Class B
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<TABLE> <S> <C>
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<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 043
<NAME> CENTURA NORTH CAROLINA TAX-FREE BOND FUND
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<F1>Class C
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<TABLE> <S> <C>
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<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
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<NUMBER>051
<NAME> CENTURA SOUTHEAST EQUITY FUND
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<TABLE> <S> <C>
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<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
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<NAME> CENTURA SOUTHEAST EQUITY FUND
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<TABLE> <S> <C>
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<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
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<NAME> CENTURA SOUTHEAST EQUITY FUND
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<FN>
<F1>Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 011
<NAME> CENTURA EQUITY GROWTH FUND
<S> <C>
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<F1>Class A
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</TABLE>
<TABLE> <S> <C>
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<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 012
<NAME> CENTURA EQUITY GROWTH FUND
<S> <C>
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<F1>Class B
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</TABLE>
<TABLE> <S> <C>
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<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 013
<NAME> CENTURA EQUITY GROWTH FUND
<S> <C>
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<F1>Class C
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<TABLE> <S> <C>
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<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 021
<NAME> CENTURA FEDERAL SECURITIES INCOME FUND
<S> <C>
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<F1>Class A
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<TABLE> <S> <C>
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<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 022
<NAME> CENTURA FEDERAL SECURITIES INCOME FUND
<S> <C>
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<F1>Class B
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<TABLE> <S> <C>
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<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
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<NAME> CENTURA FEDERAL SECURITIES INCOME FUND
<S> <C>
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<F1>Class C
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 031
<NAME> CENTURA NORTH CAROLINA TAX-FREE BOND FUND
<S> <C>
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<F1>Class A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 032
<NAME> CENTURA NORTH CAROLINA TAX-FREE BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
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<F1>Class B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 033
<NAME> CENTURA NORTH CAROLINA TAX-FREE BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 36434877
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<FN>
<F1>Class C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 041
<NAME> CENTURA EQUITY INCOME FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 44243663
<INVESTMENTS-AT-VALUE> 53210004
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<TOTAL-LIABILITIES> 211339
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<AVERAGE-NET-ASSETS> 180764<F1>
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<EXPENSE-RATIO> 0.99<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 042
<NAME> CENTURA EQUITY INCOME FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> OCT-01-1996
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<INVESTMENTS-AT-VALUE> 53210004
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<PAID-IN-CAPITAL-COMMON> 40419807
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<DISTRIBUTIONS-OF-INCOME> 1604<F1>
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<NUMBER-OF-SHARES-SOLD> 5662614
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<SHARES-REINVESTED> 31912
<NET-CHANGE-IN-ASSETS> 53250697
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<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<AVERAGE-NET-ASSETS> 122245<F1>
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> 0.11<F1>
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<PER-SHARE-NAV-END> 10.88<F1>
<EXPENSE-RATIO> 1.71<F1>
<AVG-DEBT-OUTSTANDING> 0
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<FN>
<F1>Class B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000919706
<NAME> CENTURA FUNDS INC.
<SERIES>
<NUMBER> 043
<NAME> CENTURA EQUITY INCOME FUND
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 44243663
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<SHARES-COMMON-PRIOR> 0<F1>
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<DISTRIBUTIONS-OF-GAINS> 102459<F1>
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<SHARES-REINVESTED> 31912
<NET-CHANGE-IN-ASSETS> 53250697
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 363868
<AVERAGE-NET-ASSETS> 53095624<F1>
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> 0.15<F1>
<PER-SHARE-GAIN-APPREC> 0.91<F1>
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<EXPENSE-RATIO> 0.75<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class C
</FN>
</TABLE>
