As Filed with the Securities and Exchange Commission on June 1,1998
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. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940[X]
Amendment No. 14 [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
Ellen F. Stoutamire, Esq.
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
with a copy to:
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
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 April 29, 1998
pursuant to paragraph (b) ___ on (date) pursuant to paragraph (a)(i)
___75 days after filing pursuant to paragraph (a)(ii) on (date) pursuant to
paragraph (a)(ii) of rule 485
X 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.
CLASS A SHARES AND CLASS B 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 five of the six Funds (the "Funds") comprising Centura
Funds, Inc. (the "Company"), a registered open-end management investment company
advised by Centura Bank (the "Adviser"). Each Fund is a separate portfolio of
the Company. The Funds described in this Prospectus are:
Centura Mid Cap Equity Fund
Centura Large Cap Equity Fund
Centura Southeast Equity Fund
Centura Federal Securities Income Fund
Centura North Carolina Tax-Free Bond Fund
(A sixth fund, Centura Money Market Fund, is offered through a separate
prospectus dated ___________, 1998.
This Prospectus relates to Class A shares and Class B shares which are sold to
the public as an investment vehicle for individuals, institutions, corporations
and fiduciaries. Class C shares, available only to certain institutional
investors, are not offered hereby. (See "Other Information -- Capitalization").
Class A shares and Class B shares each 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.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND FUND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN MUTUAL FUNDS, SUCH AS THE FUNDS, INVOLVE RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund.
A Statement of Additional Information (the "SAI"), dated _________, 1998,
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into the Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and
information numbers printed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Date of this Prospectus is _________, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
HIGHLIGHTS ..........................................................
FUND EXPENSES ......................................................
FINANCIAL HIGHLIGHTS ................................................
THE FUNDS ...........................................................
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES ..................
INVESTMENT RESTRICTIONS .............................................
RISKS OF INVESTING IN THE FUNDS .....................................
MANAGEMENT OF THE FUNDS .............................................
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 FUNDS
This prospectus describes five of the six Funds comprising Centura Funds, Inc.
(the "Company"). Each Fund has a distinct investment objective and policies, as
described below. (The sixth Fund, Centura Money Market Fund, is offered by a
separate prospectus dated _________, 1998.) The investment objective of each
Fund is a fundamental policy of that Fund and may not be changed without
approval of the Fund's shareholders. See "The Funds." The Funds and their
investment objectives and policies are as follows:
-- Centura Mid Cap Equity Fund (formerly, Centura Equity Growth Fund)--
This Fund's objective is long-term capital appreciation. It invests in
a diversified portfolio comprised mainly of publicly traded common and
preferred stocks and securities convertible into or exchangeable for
common stock of mid-sized companies. Its investments will be
principally in securities of U.S.-based companies, but it may also
invest in securities of foreign issuers, generally in the form of
American Depositary Receipts ("ADRs").
-- Centura Large Cap Equity Fund (formerly, Centura Equity Income Fund)--
This Fund's objective is to provide long-term capital appreciation. The
Fund invests primarily in common stocks, convertible preferred stocks,
and convertible bonds, notes and debentures of companies with market
capitalization in excess of $1 billion. It may also invest in
securities believed to offer special capital appreciation
opportunities. The Fund will invest primarily in securities of
U.S.-based companies, but it may also invest in securities of non-U.S.
issuers, generally through ADRs.
-- Centura Southeast Equity Fund -- This Fund's investment objective is
long-term capital appreciation. The Fund invests primarily in a
diversified portfolio of common and preferred stocks and securities
convertible into common stock of companies that are headquartered or
have substantial operations in the southeastern region of the United
States.
-- Centura Federal Securities Income Fund -- This Fund seeks to provide
relatively high current income consistent with relative stability of
principal and safety. The Fund invests primarily in securities
issued by the U.S. Government, its agencies and instrumentalities. The
maximum maturity of any such security will be 10 years.
-- Centura North Carolina Tax-Free Bond Fund -- This Fund seeks to
provide relatively high current income that is free of both regular
Federal and North Carolina personal income tax, together with
relative safety of principal. It invests primarily in a portfolio of
high quality municipal securities with a maximum maturity of 15
years and an average portfolio maturity of 5 to 10 years.
RISKS OF INVESTING IN THE FUNDS
Investment in each of the Funds involves certain risks. There can, of course, be
no assurance that a Fund will achieve its investment objective or be successful
in preventing or minimizing the risk of loss that is inherent in certain types
of investments. Fund investments in securities of foreign issuers involve
special risks not usually associated with investing in U.S. companies.
Concentration of Centura North Carolina Tax-Free Bond Fund and Centura Southeast
Equity Fund in securities of a single state or region, respectively, makes each
of those Funds particularly vulnerable to events affecting that state or region,
respectively. The Funds have authority, which they presently do not intend to
use, to invest in various types of derivative instruments, which would entail
special risks. Investors should be aware that the value of each Fund's shares
will fluctuate, which may cause a loss in the principal value of the investment.
See "Risks of Investing in the Funds."
<PAGE>
THE ADVISER
Management of the Funds is provided by Centura Bank (the "Adviser"),
headquartered in Rocky Mount, North Carolina. For its advisory services, the
Adviser, receives from each Fund a fee at an annual rate based on the Fund's
average daily net assets. This fee is at an annual rate of 0.70% for Centura Mid
Cap Equity Fund, 0.70% for Centura Large Cap Equity Fund, 0.70% for Centura
Southeast Equity Fund, 0.30% for Centura Federal Securities Income Fund and
0.35% for Centura North Carolina Tax-Free Bond Fund. Fees to the Adviser may be
reduced pursuant to expense limitations. See "Management of the Funds."
THE DISTRIBUTOR, ADMINISTRATOR AND SPONSOR
Centura Funds Distributor, Inc. (the "Distributor") distributes the Funds'
shares 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,
each Fund pays BISYS a fee at the annual rate of 0.15% of its average daily net
assets. BISYS Fund Services, Inc., an affiliate of BISYS, also acts as transfer
agent and fund accounting agent for the Funds, for which it receives additional
fees.
CLASSES OF SHARES
Class A shares and Class B shares differ principally with respect to sales
charges and the rate of expenses to which they are subject. Investors may select
the class that best suits their investment needs. Class A shares are offered
with a maximum front-end sales charge of 4.50% for Centura Mid Cap Equity Fund,
Centura Large Cap Equity Fund and Centura Southeast Equity Fund, and 2.75% for
Centura Federal Securities Income Fund and Centura North Carolina Tax-Free Bond
Fund. The initial sales charge for a Fund may be reduced or waived in certain
cases. See "Purchase of Fund Shares." Class B shares are offered at net asset
value, with no front-end sales charge. Shares of each class are also subject to
service and distribution fees calculated as a percentage of the net asset value
of each class which may not exceed the following annual rates: 0.25% for Class A
shares of each of the Funds (pursuant to voluntary limits set by the Distributor
for the current fiscal year; the maximum fee for Class A shares of each Fund
would, without this limit, be 0.50%); 1.00% for Class B shares of Centura Mid
Cap Equity Fund, Centura Large Cap Equity Fund and Centura Southeast Equity
Fund, and 0.75% for Class B shares of Centura Federal Securities Income Fund and
Centura North Carolina Tax-Free Bond Fund (pursuant to a voluntary limit set by
the Adviser for the current fiscal year; the maximum fee for Class B shares of
the last two funds would, without this limit, be 1.00%). Shareholders who redeem
Class B shares within five years from the date of purchase will be assessed a
contingent deferred sales charge ("CDSC") declining from a maximum in the first
year after purchase of 5.00% for Centura Mid Cap Equity Fund, Centura Large Cap
Equity Fund and Centura Southeast Equity Fund, and 3.00% for each of the other
Funds to a minimum in the fifth year after purchase of 1.00% for each of the
Funds. The CDSC may be waived in certain cases. On the seventh anniversary of
their purchase date, Class B shares convert automatically to Class A shares,
which bear a lower Service and Distribution Fee. See "Management of The Funds --
The Distributor." Class C shares of the Funds, not offered by this Prospectus,
are available only to certain institutional investors. See "Other Information --
Capitalization."
A prospective investor in Class A or Class B shares, in selecting between these
classes, should consider the respective impact of the sales charge or CDSC
together with the cumulative effect of the Service and Distribution Fees for
each class over the anticipated period of investment, as well as the effect of
any sales charge or CDSC waivers to which the investor may be entitled. For
purchasers (other than those eligible to invest in Class C shares) contemplating
an investment of at least $250,000, the Funds believe it is preferable to
purchase Class A shares. 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 fees. Finally, investors
should be aware that persons selling shares of the Funds may receive different
levels of compensation for sales of Class A and Class B shares.
GUIDE TO INVESTING IN CENTURA FUNDS, INC.
Purchase orders for the Funds received by your broker or Service Organization in
proper order and transmitted to the Funds prior to 4:00 p.m. Eastern time will
become effective that day.
Minimum Initial Investment ....................................$1,000
Minimum Initial Investment for IRAs and other qualified
retirement plans .............................................. $250
Minimum Subsequent Investment ................................. $250
(except for IRA and other qualified retirement plans)
Minimum Investment per pay period for Payroll Deduction Plan.. $50
(No investment is required to initiate this plan.)
Minimum 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.
Minimum 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 Funds reserve the right to redeem upon not less than 30 days'
notice all shares in a Fund's account which have an aggregate
value of 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
applicable Fund unless cash payment is requested. Each of the
funds 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.
FUND EXPENSES
The following expense tables indicate costs and expenses that an investor in
Class A shares or Class B shares should anticipate incurring either directly or
indirectly as a shareholder in the Funds.
<PAGE>
FEE TABLE*
[TO BE REVISED]
Centura Mid Cap Centura Large
Equity Fund Cap Equity Fund
Class A Class B Class A Class B
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage 4.50% -- 4.50% --
of offering price)
Maximum Sales Charge Imposed on reinvested
Dividends (as a -- -- -- --
percentage of offering price)
Deferred Sales Charge (as a percentage of -- 5.00% -- 5.00%
redemption proceeds)**
Exchange Fees -- -- -- --
ANNUAL FUND OPERATING EXPENSES
as a percentage of average net
assets annualized)
Management Fees (After Waiver)*** 0.70% 0.70% 0.36% 0.36%
12b-1 Fees**** 0.25% 1.00% 0.25% 1.00%
Other Expenses (After Waiver)*** 0.35% 0.35% 0.39% 0.39%
Total Portfolio Operating Expenses***** 1.30% 2.05% 1.00% 1.75%
Centura Centura Federal
Southeast Securities
Equity Fund Income Fund
Class A Class B Class A Class B
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% -- 2.75% --
Maximum Sales Charge Imposed on reinvested
Dividends (as a percentage of offering
price) -- -- -- --
Deferred Sales Charge (as a percentage of
redemption proceeds)** -- 5.00% -- 3.00%
Exchange Fees -- -- -- --
ANNUAL FUND OPERATING EXPENSES
as a percentage of average net
assets annualized)
Management Fees (After Waiver)*** 0.42% 0.42% 0.30% 0.30%
12b-1 Fees**** 0.25% 1.00% 0.25% 0.75%
Other Expenses (After Waiver)*** 0.83% 0.83% 0.28% 0.28%
Total Portfolio Operating Expenses***** 1.50% 2.25% 0.83% 1.33%
<PAGE>
Centura North Carolina
Tax-Free Fund
Class A Class B
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) 2.75% --
Maximum Sales Charge Imposed on reinvested
Dividends (as a percentage of offering price) -- --
Deferred Sales Charge (as a percentage of
redemption proceeds)** -- 3.00%
Exchange Fees -- --
ANNUAL FUND OPERATING EXPENSES
as a percentage of average net assets
annualized)
Management Fees (After Waiver)*** 0.10% 0.10%
12b-1 Fees**** 0.25% 0.75%
Other Expenses (After Waiver)*** 0.34% 0.34%
Total Portfolio Operating Expenses***** 0.69% 1.19%
----------
*The information in the Fee Table relates only to Class A shares and Class
B shares. Class C shares pay no Sales Charge, Deferred Sales Charge or
12b-1 fees. (See "Other Information -- Capitalization.")
** Shareholders who redeem shares by wire may be charged a fee by the
banks receiving the wire payments on their behalf. (See "Redemption of
Fund Shares.")
*** Amounts shown for "Management Fees" and "Other Expenses" for the Large
Cap Equity Fund and the North Carolina Tax-Free Bond Fund reflect
reductions of fees payable to the Adviser and fees payable for
administrative and transfer agent services pursuant to agreements to limit
fund expenses. Without these reductions, "Management Fees" for the Large
Cap Equity Fund and the North Carolina Tax-Free Bond Fund, respectively,
would be 0.70% and 0.35% and "Other Expenses " would be 0.47% and 0.45%.
"Management Fees" and "Other Expenses" for Centura Southeast Equity Fund
reflect anticipated waivers. Without these reductions, this Fund's
"Management Fees" and "Other Expenses" would be 0.70% and 0.89%,
respectively.
**** Total Portfolio Operating Expenses for Class B Shares for each Fund
(except for the Mid Cap Equity Fund) have been restated to reflect current
expenses. 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 initial
sales charges 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 Funds. Class A shares of
each Fund are permitted to pay 12b-1 fees up to 0.50%, and Class B shares
are permitted to pay 12b-1 fees up to 1.00%. However, the Distributor has
undertaken to limit 12b-1 fees to 0.25% for Class A shares of each Fund and
0.75% for Class B shares of Centura Federal Securities Income Fund and
Centura North Carolina Tax-Free Bond Fund for the current fiscal year. See
"Management of the Funds -- The Distributor."
***** Absent the reductions of management, administrative, and transfer
agent fees, and the limitation applicable to 12b-1 fees, "Total Portfolio
Operating Expenses" for Class A shares would be 1.55% for the Mid Cap
Equity Fund, 1.67% for the Large Cap Equity Fund, 1.08% for the Federal
Securities Income Fund, 1.30% for the North Carolina Tax-Free Bond Fund,
and 2.09% for Centura Southeast Equity Fund, and "Total Portfolio Operating
Expenses" for Class B shares of the Mid Cap Equity Fund, the Large Cap
Equity Fund, the Federal Securities Income Fund, the North Carolina
Tax-Free Bond Fund, and Centura Southeast Equity Fund, respectively, would
be 2.051%, 2.17%, 1.58%, 1.80% and 2.59%.
EXAMPLE*
An investor would pay the following expenses on a $1,000 investment, assuming 5%
annual return:
Centura Mid Cap Centura Large Cap
Equity Fund Equity Fund
Class A Class B Class A Class B
Assuming complete redemption
at the end of each time period:
1 year $ 58 $ 71 $ 55 $ 68
3 years $ 84 $ 94 $ 75 $ 85
5 years $113 $120 $ 98 $105
10 years $195 $238 $162 $206
Class B Shares assuming no redemption:
1 year -- $ 21 -- $ 18
3 years -- $ 64 -- $ 55
5 years -- $120 -- $ 95
10 years -- $238 -- $206
Centura Federal Centura North
Securities Income Carolina Tax-Free
Fund Fund
Class A Class B Class A Class B
Assuming complete redemption at the end of each time period:
1 year $ 36 $ 44 $ 34 $ 42
3 years $ 53 $ 72 $ 49 $ 68
5 years $ 72 $ 83 $ 65 $ 75
10 years $ 127 $ 160 $ 111 $ 144
Class B Shares assuming no redemption:
1 year -- $ 14 -- $ 12
3 years -- $ 42 -- $ 38
5 years -- $ 73 -- $ 65
10 years -- $ 160 -- $ 144
Centura Southeast
Equity Fund
Class A Class B
Assuming complete redemption at the end of each time period:
1 year $ 60 $ 73
3 years $ 90 $ 100
Class B Shares assuming no redemption:
1 year -- $ 23
3 years -- $ 70
* 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.
FINANCIAL HIGHLIGHTS
The following table sets forth certain information for each Fund's fiscal
periods ended April 30, 1998 April 30, 1997 and April 30, 1996. The information
set forth in this table has been audited by McGladrey & Pullen LLP, the Funds'
independent accountant whose report on the financial statements is included in
the Funds' Annual Report. The Annual Report also includes Management's
Discussion of Fund Performance. The Annual Report may be obtained without
charge. The financial statements from the Annual Report is also contained in the
Statement of Additional Information, which is available without charge upon
request. This information should be read in conjunction with the financial
statements.
[TO BE UPDATED]
MID CAP EQUITY FUND*
Year Ended Year Ended Year Ended
April 30, April 30, Arpil 30,
1998 1997 1996
Class Class Class Class Class Class
A B A B A B
NET ASSET VALUE, BEGINNING OF $ $ $14.31 $14.24 $10.70 $10.69
PERIOD
INVESTMENT ACTIVITIES
Net investment income 0.06 (0.04) 0.03 (0.06)
Net realized and unrealized 1.58 1.57 3.67 3.35
gains from investments
Total from Investment Activities 1.64 1.53 3.70 3.59
DISTRIBUTIONS
Net investment income (0.06) (0.01) (0.05) ----
Net realized gains (0.56) (0.56) (0.04) (0.04)
Total Distributions (0.62) (0.57) (0.09) (0.04)
NET ASSET VALUE, END OF PERIOD $15.33 $15.20 $14.31 $14.24
Total return (excludes sales and 11.55% 10.78% 34.72% 33.73%
redemption charges
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period $8,501 $9,761 $5,740 $6,194
(000)
Ratio of expenses to average net assets 1.30% 2.05% 1.26% 2.02%
Ratio of net investment income (loss) to
average net assets 0.42% (0.33%) 0.27% (0.48%)
Ratio of expenses to average net assets** 1.55% 2.05% (d) (d)
Ratio of net investment income (loss) to
average net assets 0.17% (0.33%)(d) (d)
Portfolio Turnover 67%(c) 67%(c) 46%(c) 46%(c)
Average Commission on Rate Paid(f) $0.0805 $0.0805 --- ---
- ----------
* This Fund's name and investment policies changed, effective ___________,
1998. Prior to that date, the Fund's name was Centura Equity Growth Fund and
it invested generally in growth stocks without a specific emphasis on stocks
of mid-sized companies.
<PAGE>
** During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a)For the period from June 1, 1994 (commencement of operations) to April 30,
1995.
(b) Annualized.
(c)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(d) There were no waivers or reimbursements during the period.
(e) Not annualized.
(f)Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased and
sold by the Fund for which commissions were charged. Disclosure is not
required for prior periods.
LARGE CAP EQUITY FUND*
Period Ended
April 30, 1997(a)
-------------------------
Class A Class B
----- -----
Net Asset Value, Beginning Of Period....... $ 10.00 $ 10.00
Investment Activities
Net investment income.................... 0.14 0.11
Net realized and unrealized gains
from investments....................... 0.93 0.90
Total from Investment Activities......... 1.07 1.01
Distributions
Net investment income.................... (0.14) (0.11)
Net realized gains....................... (0.02) (0.02)
Total Distributions...................... (0.16) (0.13)
Net Asset Value, End Of Period............. $ 10.91 $ 10.88
Total return (excludes sales and
redemption charges)(d)................... 10.69% 10.15%
Ratios/Supplementary Data:
Net assets at end of period (000)........ $ 338 $ 427
Ratio of expenses to average net assets(b) .. 0.99 1.71%
Ratio of net investment income (loss)
to average net assets(b)............... 2.15% 1.52%
Ratio of expenses to average net assets**(b) . 1.65% 2.12%
Ratio of net investment income (loss)
to average net assets**(b)............. 1.48% 1.10%
Portfolio Turnover......................... 24%(c) 24%(c)
Average Commission Rate Paid(e)............ $ 0.0898 $ 0.0898
----------
* This Fund's name and investment objective and policies changed, effective
___________, 1998. Prior to that date, the Fund's name was Centura Equity
Income Fund, its investment objective was long-term capital appreciation and
income, and it invested primarily in dividend-paying stocks.
** During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a)For the period from October 1, 1996 (commencement of operations) to April
30, 1997.
(b) Annualized.
(c)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(d) Not annualized.
(e)Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased and
sold by the Fund for which commissions where charged.
<TABLE>
FEDERAL SECURITIES INCOME FUND
<CAPTION>
Year Ended Year Ended Period Ended
April 30, 1997 April 30, 1996 April 30, 1995(a)
------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B
----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning Of Period $10.01 $10.01 $9.97 $9.97 $10.00 $10.00
Investment Activities
Net investment income 0.56 0.50 0.57 0.50 0.52 0.45
Net realized and unrealized
gains from investments (0.07) (0.07) 0.04 0.04 (0.03) (0.03)
Total from Investment Activities 0.49 0.43 0.61 0.54 0.49 0.42
Distributions
Net investment income (0.56) (0.50) (0.57) (0.50) (0.52) (0.45)
Total Distributions (0.56) (0.50) (0.57) (0.50) (0.52) (0.45)
Net Asset Value,
End Of Period $9.94 $9.94 $10.01 $10.01 $9.97 $9.97
Total return (excludes sales and
redemption charges).. 5.07% 4.46% 6.20% 5.40% 5.02%(e) 4.32%(e)
Ratios/Supplementary Data:
Net assets at end of period (000) $481 $194 $526 $176 $247 $118
Ratio of expenses to average
net assets 0.82% 1.40% 0.85% 1.61% 0.86%(b) 1.61%(b)
Ratio of net investment income (loss)
to average net assets 5.63% 5.04% 5.61% 4.84% 5.58%(b) 4.86%(b)
Ratio of expenses to
average net assets* 1.07% 1.65% (d) (d) 0.89%(b) 1.64%(b)
Ratio of net investment income (loss)
to average net assets* 5.38 4.79% (d) (d) 5.55%(b) 4.83%(b)
Portfolio Turnover 26%(c) 26%(c) 34%(c) 34%(c) 42%(c) 42%(c)
----------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a)For the period from June 1, 1994 (commencement of operations) to April 30,
1995.
(b) Annualized.
(c)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(d) There were no waivers or reimbursements during the period.
(e) Not annualized.
</FN>
</TABLE>
<PAGE>
<TABLE>
NORTH CAROLINA TAX-FREE BOND FUND
<CAPTION>
Year Ended Year Ended Period Ended
April 30, 1997 April 30, 1996 April 30, 1995(a)
--------------------------------------------------------------------------------------
Class A Class B Class A Class B Class A Class B
----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning Of Period $10.04 $10.04 $9.98 $9.98 $10.00 $10.00
Investment Activities
Net investment income 0.43 0.37 0.42 0.34 0.39 0.32
Net realized and unrealized
gains from investments 0.03 0.03 0.13 0.13 (0.02) (0.02)
Total from Investment Activities 0.46 0.40 0.55 0.47 0.37 0.30
Distributions
Net investment income (0.43) (0.37) (0.42) (0.34) (0.39) (0.32)
Net realized gains (0.09) (0.09) (0.07) (0.07) -- --
Total Distributions (0.52) (0.46) (0.49) (0.41) (0.39) (0.32)
Net Asset Value,
End Of Period $9.98 $9.98 $10.04 $10.04 $9.98 $9.98
Total return (excludes sales and
redemption charges) 4.71% 4.11% 5.50% 4.72% 3.77%(d) 3.09%(d)
Ratios/Supplementary Data:
Net assets at end of period (000) $3.823 $430 $3,927 $393 $429 $275
Ratio of expenses to average
net assets 0.69% 1.27% 0.68% 1.44% 0.42%(b) 0.99%(b)
Ratio of net investment income
(loss) to average net assets 4.31% 3.73% 3.98% 3.30% 4.46%(b) 3.89%(b)
Ratio of expenses to average
net assets* 1.30% 1.88% 1.04% 1.80% 0.92%(b) 1.49%(b)
Ratio of net investment income (loss)
to average net assets* 3.70% 3.12% 3.62% 2.94% 53.96%(b) 3.39%(b)
Portfolio Turnover 34%(c) 34%(c) 80%(c) 80%(c) 121%(c) 121%(c)
- ----------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a)For the period from June 1, 1994 (commencement of operations) to April 30,
1995.
(b) Annualized.
(c)Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(d) Not annualized.
</FN>
</TABLE>
THE FUNDS
Each Fund is a separate diversified investment fund or portfolio, commonly known
as a mutual fund. The Funds are portfolios of the Company, which was organized
under the laws of the State of Maryland on March 1, 1994 as an open-end,
management investment company. Centura Large Cap Equity Fund and Centura
Southeast Equity Fund were established as new portfolios of the Company on
August 28, 1996 and March 28, 1997, respectively. The Company's Board of
Directors oversees the overall management of the Funds and elects the Funds'
officers.
Centura Mid Cap Equity Fund (formerly, Centura Equity Growth Fund). Investors
seeking long-term growth of capital and for whom current income is not an
objective should consider investing in Centura Mid Cap Equity Fund.
The investment objective of Centura Mid Cap Equity Fund is long-term capital
appreciation. The Fund invests primarily in a diversified portfolio of publicly
traded common and preferred stocks and securities convertible into or
exchangeable for common stock. The Adviser uses fundamental analysis to select
stocks for the Fund's portfolio that the Adviser believes are undervalued
relative to their industry or to their historical valuation ranges. However, the
Adviser may also invest in companies which it believes have improving prospects
whose equity securities are currently selling below their estimated intrinsic
value. In addition, out-of-favor growth cyclicals may be used if the adviser
anticipates a sustainable earnings recovery for these companies. The Fund
expects to invest primarily in securities of U.S.-based companies, but it may
also invest in securities of non-U.S. companies, generally through American
Depository Receipts ("ADRs"). Under normal circumstances, at least 65% of the
Fund's total assets will be invested in equity securities of mid-sized
companies. Mid-sized companies are defined as those with market capitalizations
that fall within the range of companies in the S&P 400 Mid Cap Index at the time
of investment. The S&P 400 Mid Cap Index is an unmanaged index that is designed
to track the performance of medium sized companies. The index is updated
quarterly, and the companies included in the index, as well as their
capitalization ranges, change from time to time. As of March 31, 1998, the range
of market capitalization of companies within the S&P 400 Mid Cap Index was $201
million to $14.3 billion. A company that was within the range of the index at
the time its stock was purchased by the Fund will continue to be considered
mid-sized for purposes of the 65% test even if its capitalization subsequently
falls outside the range of the index. The Fund may invest without limit in debt
instruments for temporary defensive purposes when the Adviser has determined
that abnormal market or economic conditions so warrant. These debt obligations
may include U.S. Government securities; certificates of deposit, bankers'
acceptances and other short-term debt obligations of banks with total assets of
at least $1,000,000,000; debt obligations of corporations (corporate bonds,
debentures, notes and other similar corporate debt instruments); commercial
paper; and repurchase agreements with respect to securities in which the Fund is
authorized to invest. Although the Fund's investments in such debt securities
and in convertible and preferred stock will generally be rated A, A-1, or better
by Standard & Poor's Corporation ("S&P") or A, Prime-1 or better by Moody's
Investors Service, Inc. ("Moody's"), or deemed of comparable quality by the
Adviser, the Fund is authorized to invest up to 15% of its assets in securities
rated as low as BBB by S&P or Baa by Moody's, or deemed of comparable quality by
the Adviser. Securities rated BBB or Baa, or deemed equivalent to such
securities, may have speculative characteristics. See "Risks of Investing in the
Funds." If any security held by the Fund is downgraded below BBB/Baa (or so
deemed by the Adviser), the securities will generally be sold unless it is
determined that such sale is not in the best interest of the Fund. The Fund will
invest in no securities rated below BBB or Baa.
Centura Large Cap Equity Fund (formerly, Centura Equity Income Fund). Investors
seeking long-term growth and income should consider an investment in Centura
Large Cap Equity Fund.
The investment objective of Centura Large Cap Equity Fund is to provide
long-term capital appreciation. This Fund invests primarily in common stocks,
convertible preferred stocks, and convertible bonds, notes and debentures. In
managing this Fund, the Adviser uses fundamental analysis to select stocks for
the Fund's portfolios that the Adviser believes are undervalued in the
marketplace based on such factors as price/earnings ratios or the ratio of stock
price to the company's inherent asset value, book value, cash flow or underlying
franchise value. The Fund expects to invest primarily in securities of
U.S.-based companies, but it may also invest in securities of non-U.S.
companies, generally through ADRs. Under normal circumstances, at least 65% of
the Fund's total assets will be invested in equity securities of large U.S.
companies. Large companies are defined as those with market capitalization in
excess of $1 billion at the time of purchase. Companies that satisfy this test
at the time of purchase will continue to be considered "large" for purposes of
the 65% test even if they subsequently fall below this range. For temporary
defensive purposes when the Adviser has determined that abnormal market or
economic conditions so warrant, the Fund may invest without limit in debt
instruments of the same types, and subject to the same conditions, as Centura
Mid Cap Equity Fund under such circumstances.
Centura Southeast Equity Fund. Investors seeking long-term growth of capital
through investment in companies of the southeastern United States should
consider investing in Centura Southeast Equity Fund.
The investment objective of the Centura Southeast Equity Fund is long-term
capital appreciation. The Fund invests primarily in a diversified portfolio of
common and preferred stocks and securities convertible into common stock of
companies headquartered or with substantial operations in the southeastern
region of the United States. For a company to qualify as having "substantial
operations" in the southeastern United States, it must derive at least 50% of
its income from or have at least 50% of its physical assets located within the
region. The southeastern region includes Alabama, Arkansas, Florida, Georgia,
Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and
Virginia. From time to time the Fund may also invest substantially in companies
headquartered or with substantial operations in the state of Texas.
The Adviser uses fundamental analysis to select stocks of issuers the Adviser
believes are undervalued relative to their industry or their historical
valuation ranges. However, the Adviser may also invest in companies which it
believes have improving prospects, whose equity securities are selling below
their estimated intrinsic value. In addition, out-of-favor cyclicals may be
purchased if the Adviser anticipates a sustainable earnings recovery for these
companies. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in securities of southeastern issuers, and at least 65%
of its total assets will be invested in equity securities or securities
convertible into equity securities. Under normal market conditions, the Adviser
anticipates investing a majority of the Fund's assets in securities of small to
medium sized companies. Subject to the foregoing, the Fund also has authority to
invest in equity and debt securities of non-southeastern issuers and non-U.S.
issuers. Its investments in non-U.S. issuers will generally be in the form of
American Depository Receipts ("ADRs"). For temporary defensive purposes during
abnormal market or economic conditions, the Fund may invest without limit in
debt instruments of the same type, and subject to the same conditions, as
Centura Mid Cap Equity Fund under such circumstances.
Centura Federal Securities Income Fund. Investors seeking relatively high
current income from a portfolio of U.S. Government securities should consider
investing in Centura Federal Securities Income Fund.
The investment objective of Centura Federal Securities Income Fund is to provide
relatively high current income consistent with relative stability of principal
and safety. It pursues this objective by investing primarily in securities
issued by the U.S. Government, its agencies and instrumentalities with maximum
maturities of 10 years. These securities typically display greater price
stability and safety than debt securities of longer maturity and lower quality,
although the latter generally offer higher income. In addition to limiting the
maturity of its portfolio securities, the Fund attempts to moderate principal
fluctuations by using a modified "laddering" approach to structuring the Fund's
portfolio -- i.e., by investing in securities with different maturities and
adjusting their relative proportions, as well as the maximum and average
maturity of its portfolio securities, to adapt to various market conditions.
Using this approach, the Fund hopes both to capture a high proportion of the
currently available return on fixed income securities and to limit volatility.
To permit desirable flexibility, the Fund has authority to invest in corporate
debt securities rated A or better by S&P or Moody's (or deemed of comparable
quality by the Adviser) and high quality money market instruments including
commercial paper rated A-1 or better by S&P or Prime or better by Moody's (or
deemed by the Adviser to be of comparable quality); certificates of deposit,
bankers' acceptances and other short-term debt obligations of banks with total
assets of at least $1,000,000,000; and repurchase agreements with respect to
securities in which the Fund is authorized to invest.
Centura North Carolina Tax-Free Bond Fund. Investors seeking dividend income
that is generally free of regular federal and North Carolina personal income
taxes should consider investing in the Centura North Carolina Tax-Free Bond
Fund.
The investment objective of Centura North Carolina Tax-Free Bond Fund is
relatively high current income that is free of both regular federal and North
Carolina personal income tax, together with relative safety of principal. This
Fund invests primarily in a portfolio of obligations issued by the state of
North Carolina, its political subdivisions, and their agencies and
instrumentalities, the income from which, in the opinion of the issuer's bond
counsel, is exempt from regular federal and North Carolina personal income taxes
("North Carolina Municipal Obligations"). By limiting the Fund's average
portfolio maturity to between 5 and 10 years, with a maximum maturity for any
portfolio security of 15 years, the Fund seeks to capture a high proportion of
the currently available return on North Carolina Municipal Obligations while
providing greater safety of principal than would be available from longer term
municipal securities. It also seeks to moderate price fluctuations by
diversifying its investments among different municipal issuers and by limiting
its investments to securities of high quality.
The Fund seeks to provide income that is fully free from regular federal and
North Carolina personal income taxes, as well as from the federal alternative
minimum tax. To provide the flexibility to deal with a variety of market
circumstances, however, the Fund has limited authority (a) to invest in
municipal obligations of other states ("Municipal Obligations"), the income from
which would not be free from North Carolina personal income tax, (b) to invest
up to 10% of its assets in Municipal Obligations subject to the federal
alternative minimum tax ("AMT Obligations"), and (c) to invest up to 20% of its
assets in AMT Obligations plus cash reserves and other obligations producing
taxable income, including obligations of the U.S. Government, its agencies and
instrumentalities; certificates of deposit, bankers' acceptances and other
short-term debt obligations of U.S banks with total assets of at least
$1,000,000,000; commercial paper rated A-1 or better by S&P or Prime-1 or better
by Moody's (or deemed by the Adviser to be of comparable quality); and
repurchase agreements relating to underlying securities in which the Fund is
authorized to invest. For temporary defensive purposes when the Adviser has
determined that abnormal market and economic conditions so warrant the Fund may
invest up to 50% of its assets in investments producing taxable income and AMT
Obligations. Any distributions by the Fund of capital gains and other income
that are not designated by the Fund as "exempt-interest dividends" will normally
be subject to federal, state and, in some cases, local tax. As a fundamental
policy, during periods of normal market conditions, at least 80% of the Fund's
net assets will be invested in securities the interest income from which is
exempt from the regular federal income tax. Additionally, under normal
circumstances, (a) at least 65% of the value of the Fund's total assets will be
invested in "bonds" -- i.e., debt obligations with a duration of at least one
year from the date of issue, and (b) at least 65% of the value of the Fund's
total assets will be invested in bonds that are North Carolina Municipal
Obligations. Tax advisers should be consulted regarding tax effects for
particular investors.
The Fund's quality criteria require that the Fund purchase Municipal Obligations
rated A, SP-1 or better by S&P or A, MIG-1 or better by Moody's; commercial
paper rated A-1 or better by S&P or Prime-1 or better by Moody's; corporate debt
securities rated A or better by S&P or Moody's (or debt securities given
equivalent ratings by at least two other nationally recognized statistical
rating organizations ("NRSROs")) or, if any of such securities are not rated,
that they be of comparable quality in the Adviser's opinion. For more
information on Municipal Obligations and North Carolina Municipal Obligations,
see "Description of Securities and Investment Practices" and "Risks of Investing
in the Funds."
In determining to invest in a particular Municipal Obligation, the Adviser will
rely on the opinion of bond counsel for the issuer as to the validity of the
security and the exemption of interest on such security from federal and
relevant state income taxes, and the Adviser will not make an independent
investigation of the basis for any such opinion.
OTHER INVESTMENT POLICIES OF THE FUNDS
Each of the Funds may also invest up to 5% of its total assets in another
investment company, not to exceed 10% of the value of its total assets in the
securities of other investment companies. Subject to obtaining exemptive relief
from the Securities and Exchange Commission, the Funds may invest in shares of
Centura Money Market Fund, another series of Centura Funds, Inc. Taxable
distributions earned from other investment companies will, likewise, represent
taxable income to a Fund. A Fund will incur additional expenses due to the
duplication of expenses as a result of investing in other mutual funds because
investors bear indirectly a proportionate share of the expenses of such
companies, including operating costs, and investment advisory and administration
fees. Each of the Funds has authority, which it does not presently intend to
exercise, to invest in futures and options contracts and to lend its portfolio
securities. For information concerning these practices, see "Investment
Policies" in the SAI.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities (All Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Treasury bills, which have a maturity of up to one year,
are direct obligations of the United States and are the most frequently issued
marketable U.S. Government security. The U.S. Treasury also issues securities
with longer maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates
issued by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Banks, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment.
Bank Obligations (All Funds). These obligations include negotiable certificates
of deposit and bankers' acceptances. The Funds limit their bank investments to
dollar-denominated obligations of U.S. or foreign banks which have more than $1
billion in total assets at the time of investment and, in the case of U.S.
banks, are members of the Federal Reserve System or are examined by the
Comptroller of the Currency, or whose deposits are insured by the Federal
Deposit Insurance Corporation.
Commercial Paper (All Funds). Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities.
Corporate Debt Securities (All Funds). A Fund's investments in corporate debt
securities are limited to corporate debt securities (corporate bonds,
debentures, notes and other similar corporate debt instruments) which meet the
previously disclosed minimum ratings and maturity criteria established for the
Fund under the direction of the Board of Directors and the Fund's Adviser or, if
unrated, are in the Adviser's opinion comparable in quality to corporate debt
securities in which the Fund may invest. See "The Funds."
Repurchase Agreements (All Funds). Securities held by the Funds may be subject
to repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed-upon time and price. These
agreements permit the Funds to earn income for periods as short as overnight.
Repurchase agreements may be considered to be loans by the purchaser
collateralized by the underlying securities. These agreements will be fully
collateralized at all times and the collateral will be marked-to-market daily.
The Funds will enter into repurchase agreements only with dealers, domestic
banks or recognized financial institutions which, in the opinion of the Adviser,
present minimal credit risks in accordance with guidelines adopted by the Board
of Directors. In the event of default by the seller under the repurchase
agreement, a Fund may have problems in exercising its rights to the underlying
securities and may experience time delays in connection with the disposition of
such securities.
Loans Of Portfolio Securities (All Funds). To increase current income each Fund
may lend its portfolio securities worth up to 5% of that Fund's total assets to
brokers, dealers and financial institutions, provided certain conditions are
met, including the condition that each loan is secured continuously by
collateral maintained on a daily mark-to-market basis in an amount at least
equal to the current market value of the securities loaned. For further
information, see the SAI.
Variable And Floating Rate Demand And Master Demand Notes (All Funds). The Funds
may, from time to time, buy variable or floating rate demand notes issued by
corporations, bank holding companies and financial institutions and similar
instruments issued by government agencies and instrumentalities. These
securities will typically have a maturity over one year but carry with them the
right of the holder to put the securities to a remarketing agent or other entity
at designated time intervals and on specified notice. The obligation of the
issuer of the put to repurchase the securities may be backed by a letter of
credit or other obligation issued by a financial institution. The repurchase
price is ordinarily par plus accrued and unpaid interest. Generally, the
remarketing agent will adjust the interest rate every seven days (or at other
specified intervals) in order to maintain the interest rate at the prevailing
rate for securities with a seven-day or other designated maturity. A Fund's
investment in demand instruments which provide that the Fund will not receive
the principal note amount within seven days' notice, in combination with the
Fund's other investments in illiquid instruments, will be limited to an
aggregate total of 15% of that Fund's net assets.
The Funds may also buy variable rate master demand notes. The terms of these
obligations permit a Fund to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. The Funds have the right to increase the amount under
the note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the Fund and
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and, thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. In connection with any such purchase and on an ongoing
basis, the Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes make demand
simultaneously. While master demand notes, as such, are not typically rated by
credit rating agencies, a Fund may, under its minimum rating standards, invest
in them only if, at the time of an investment, the issuer meets the criteria set
forth in this Prospectus for commercial paper obligations.
Forward Commitments And When-Issued Securities (All Funds). A Fund may purchase
when-issued securities and make contracts to purchase securities for a fixed
price at a future date beyond customary settlement time if the Fund holds, and
maintains until the settlement date in a segregated account cash, U.S.
Government securities or high-grade debt obligations in an amount sufficient to
meet the purchase price, or if the Fund enters into offsetting contracts for the
forward sale of other securities it owns. Purchasing securities on a when-issued
basis and forward commitments involves a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of a Fund's other assets. No income
accrues on securities purchased on a when-issued basis prior to the time
delivery of the securities is made, although a Fund may earn interest on
securities it has deposited in the segregated account because it does not pay
for the when-issued securities until they are delivered. Investing in
when-issued securities has the effect of (but is not the same as) leveraging the
Fund's assets. Although a Fund would generally purchase securities on a
when-issued basis or enter into forward commitments with the intention of
actually acquiring securities, that Fund may dispose of a when-issued security
or forward commitment prior to settlement if the Adviser deems it appropriate to
do so. A Fund may realize short-term profits or losses upon such sales.
Mortgage-Related Securities (Centura Federal Securities Income Fund and Centura
North Carolina Tax-Free Bond Fund). Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Centura North Carolina Tax-Free Bond
Fund may invest only in those mortgage pass-through securities whose payments
are tax-exempt. Early repayment of principal on mortgage pass-through securities
(arising from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose a Fund to a lower rate of return upon reinvestment of principal. Also, if
a security subject to prepayment has been purchased at a premium, in the event
of prepayment the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates decline, the value of
mortgage-related securities with prepayment features may not increase as much as
other fixed-income securities. In recognition of this prepayment risk to
investors, the Public Securities Association (the "PSA") has standardized the
method of measuring the rate of mortgage loan principal prepayments. The PSA
formula, the Constant Prepayment Rate (the "CPR"), or other similar models that
are standard in the industry will be used by a Fund in calculating maturity for
purposes of its investment in mortgage-related securities. Upward trends in
interest rates tend to lengthen the average life of mortgage-related securities
and also cause the value of outstanding securities to drop. Thus, during periods
of rising interest rates, the value of these securities held by a Fund would
tend to drop and the portfolio-weighted average life of such securities held by
a Fund may tend to lengthen due to this effect. Longer-term securities tend to
experience more price volatility. Under these circumstances, a Manager may, but
is not required to, sell securities in part in order to maintain an appropriate
portfolio-weighted average life.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (such as securities guaranteed by the
Government National Mortgage Association ("GNMA")); or guaranteed by agencies or
instrumentalities of the U.S. Government (such as securities guaranteed by the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"), which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations. Mortgage
pass-through securities created by nongovernmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance, and letters of credit, which may be issued by governmental
entities, private insurers or the mortgage poolers.
A Fund may also invest in investment grade Collateralized Mortgage Obligations
("CMOs") which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, semiannually.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC or FNMA. CMOs are structured into multiple classes, with each class
bearing a different stated maturity. Monthly payments of principal, including
prepayments, are first returned to investors holding the shortest maturity
class; investors holding longer maturity classes receive principal only after
the first class has been retired. CMOs may be issued by government and
nongovernmental entities. Some CMOs are debt obligations of FHLMC issued in
multiple classes with different maturity dates secured by the pledge of a pool
of conventional mortgages purchased by FHLMC. Other types of CMOs are issued by
corporate issuers in several series, with the proceeds used to purchase
mortgages or mortgage pass-through certificates. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios. To the extent a
particular CMO is issued by an investment company, a Fund's ability to invest in
such CMOs will be limited. See "Investment Restrictions" in the SAI.
Assumptions generally accepted by the industry concerning the probability of
early payment may be used in the calculation of maturities for debt securities
that contain put or call provisions, sometimes resulting in a calculated
maturity different from the stated maturity of the security.
It is anticipated that governmental, government-related or private entities may
create mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. As new types of mortgage-related securities are developed
and offered to investors, the Adviser will, consistent with a Fund's investment
objectives, policies and quality standards, consider making investments in such
new types of mortgage-related securities, but no investments will be made in
such securities until the Fund's prospectus and/or SAI have been revised to
reflect such securities.
Other Asset-Backed Securities (Centura Federal Securities Income Fund and
Centura North Carolina Tax-Free Bond Fund). Other asset-backed securities
(unrelated to mortgage loans) are developed from time to time and may be
purchased by a Fund to the extent consistent with its investment objective and
policies, but only after disclosure reflecting such securities has been added to
the Fund's prospectus and/or SAI.
Foreign Securities (Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund
and Centura Southeast Equity Fund). These Funds may invest in securities
represented by American Depositary Receipts ("ADRs"). ADRs are
dollar-denominated receipts generally issued by domestic banks, which represent
the deposit with the bank of a security of a foreign issuer, and which are
publicly traded on exchanges or over-the-counter in the United States. There are
certain risks associated with investments in unsponsored ADR programs. Because
the non-U.S. company does not actively participate in the creation of the ADR
program, the underlying agreement for service and payment will be between the
depositary and the shareholders. The company issuing the stock underlying the
ADRs pays nothing to establish the unsponsored facility, as fees for ADR
issuance and cancellation are paid by brokers. Investors directly bear the
expenses associated with certificate transfer, custody and dividend payment. In
addition, in an unsponsored ADR program, there may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. For more information, see "Risks of
Investing in the Funds."
Forward Foreign Currency Transactions (Centura Mid Cap Equity Fund, Centura
Large Cap Equity Fund and Centura Southeast Equity Fund). These Funds may enter
into forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates. These contracts,
which involve costs, permit a Fund to purchase or sell a specific amount of a
particular currency at a specified price on a specified future date. A Fund will
realize a benefit from this type of contract only to the extent that the
relevant currencies move as anticipated. If the currencies do not move as
anticipated, the contracts may cause greater loss to a Fund than if they had not
been used. See the SAI for further information concerning forward foreign
currency transactions.
Futures Contracts And Options (All Funds). The Funds may purchase and sell
futures contracts on securities, currencies, and indices of securities, and
write and sell put and call options on securities, currencies and indices of
securities as a hedge against changes in interest rates, stock prices, currency
fluctuations and other market developments, provided that not more than 5% of a
Fund's net assets are committed to margin deposits on futures contracts and
premiums for options. See the SAI for further information about futures and
options. See "Risks of Investing in the Funds" for a discussion of risks related
to investing in futures and options.
Municipal Obligations (Centura North Carolina Tax-Free Bond Fund). The Fund may
invest in securities issued by states, their political subdivisions and agencies
and instrumentalities of the foregoing, the income from which, in the opinion of
bond counsel for the issuer, is exempt from regular income taxes by the federal
government and state of the issuing entity ("Municipal Obligations"). Such
Municipal Obligations include municipal bonds, floating rate and variable rate
Municipal Obligations, participation interests in municipal bonds, tax-exempt
asset-backed certificates, tax-exempt commercial paper, short-term municipal
notes, and stand-by commitments. It may be anticipated that governmental,
government-related or private entities will create other tax-exempt investments
in addition to those described above. As new types of tax-exempt vehicles are
developed, the Adviser will, consistent with the Fund's investment objectives,
policies and quality standards, consider making investments in such types of
Municipal Obligations, but will not make such investments until they are
reflected in the Fund's prospectus and/or SAI. The Fund will purchase only
Municipal Obligations rated A, SP-1 or better by S&P or A, MIG-1 or better by
Moody's (or given equivalent ratings by another NRSRO) or, if the securities are
not rated, are of comparable quality in the Adviser's opinion. Municipal
Obligations in which the Fund may invest include "general obligation" and
"revenue" securities. General obligation securities are backed by the issuer's
full faith, credit and taxing power for the payment of principal and interest.
The taxes that can be levied for the payment of debt service may be limited or
unlimited in terms of rate or amount or special assessments. Revenue securities
are secured primarily by net revenues generated by a particular facility or
group of facilities, or by the proceeds of a special excise or other specific
revenue source. Additional security may be provided by a debt service reserve
fund. Municipal bonds include industrial development bonds ("IDBs"), moral
obligation bonds, put bonds and private activity bonds ("PABs"). PABs generally
relate to the financing of a facility used by a private entity or entities. The
credit quality of such bonds is usually directly related to that of the users of
the facilities. The interest on most PABs is an item of tax preference for
purposes of the federal alternative minimum tax and Fund distributions
attributable to such interest likewise, constitute an item of tax preference.
For information on the risks related to the Fund's concentration in North
Carolina Municipal Obligations, see "Risks of Investing in the Funds."
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund). The
Fund may invest in municipal lease obligations including certificates of
participation ("COPs"), which finance a variety of public projects. Because of
the way these instruments are structured, they may carry a greater risk than
other types of Municipal Obligations. The Fund may invest in lease obligations
only when they are rated by a rating agency or, if unrated, are deemed by the
Adviser, to be of a quality comparable to the Fund's quality standards. With
respect to any such unrated municipal lease obligations in which the Fund
invests, the Company's Board of Directors will be responsible for determining
their credit quality, on an ongoing basis, including assessing the likelihood
that the lease will not be canceled. Prior to purchasing a municipal lease
obligation and on a regular basis thereafter, the Adviser will evaluate the
credit quality and, pursuant to guidelines adopted by the Directors, the
liquidity of the security. In making its evaluation, the Adviser will consider
various credit factors, such as the necessity of the project the municipality's
credit quality, future borrowing plans, and sources of revenue pledged for lease
repayment, general economic conditions in the region where the security is
issued, and liquidity factors, such as dealer activity. For further discussion
regarding municipal lease obligations, see "Risks of Investing in the Funds" in
this Prospectus and "Investment Policies" in the SAI.
Stand-By Commitments (Centura North Carolina Tax-Free Bond Fund). The Fund may
acquire "stand-by commitments," which will enable it to improve its portfolio
liquidity by making available same-day settlements on sales of its securities. A
stand-by commitment gives the Fund, when it purchases a Municipal Obligation
from a broker, dealer or other financial institution ("seller"), the right to
sell up to the same principal amount of such securities back to the seller, at
the Fund's option, at a specified price. Stand-by commitments are also known as
"puts." The Fund may acquire stand-by commitments solely to facilitate portfolio
liquidity and not to protect against changes in the market price of the Fund's
portfolio securities. The exercise by the Fund of a stand-by commitment is
subject to the ability of the other party to fulfill its contractual commitment.
The Fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary or
advisable, the Fund will pay for stand-by commitments, either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the commitments.
It is difficult to evaluate the likelihood of use or the potential benefit of a
stand-by commitment. Therefore, it is expected that the Directors will determine
that stand-by commitments ordinarily have a "fair value" of zero, regardless of
whether any direct or indirect consideration was paid. However, if the market
price of the security subject to the stand-by commitment is less than the
exercise price of the stand-by commitment, such security will ordinarily be
valued at such exercise price. Where the Fund has paid for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held.
There is no assurance that stand-by commitments will be available to the Fund
nor does the Fund assume that such commitments would continue to be available
under all market conditions.
Third Party Puts (Centura North Carolina Tax-Free Bond Fund). The Fund may also
purchase long-term fixed rate bonds that have been coupled with an option
granted by a third party financial institution allowing the Fund at specified
intervals to tender (or "put") the bonds to the institution and receive the face
value thereof (plus accrued interest). These third party puts are available in
several different forms, may be represented by custodial receipts or trust
certificates and may be combined with other features such as interest rate
swaps. The Fund receives a short-term rate of interest (which is periodically
reset), and the interest rate differential between that rate and the fixed rate
on the bond is retained by the financial institution. The financial institution
granting the option does not provide credit enhancement. In the event that there
is a default in the payment of principal or interest, or downgrading of a bond
to below investment grade, or a loss of the bond's tax-exempt status, the put
option will terminate automatically. The risk to the Fund in this case will be
that of holding a long-term bond which would tend to lengthen the weighted
average maturity of the Fund's portfolio.
These bonds coupled with puts may present tax issues also associated with
stand-by commitments. As with any stand-by commitments acquired by the Fund, the
Fund intends to take the position that it is the owner of any Municipal
Obligation acquired subject to a third-party put, and that tax-exempt interest
earned with respect to such Municipal Obligations will be tax-exempt in its
hands. There is no assurance that the Internal Revenue Service will agree with
such position in any particular case. Additionally, the federal income tax
treatment of certain other aspects of these investments, including the treatment
of tender fees and swap payments, in relation to various regulated investment
company tax provisions is unclear. However, the Adviser intends to manage the
Fund's portfolio in a manner designed to minimize any adverse impact from these
investments.
Participation Interests (Centura North Carolina Tax-Free Bond Fund). The Fund
may purchase from banks participation interests in all or part of specific
holdings of Municipal Obligations. Each participation is backed by an
irrevocable letter of credit or guarantee of the selling bank that the Fund's
Adviser has determined meets the prescribed quality standards of the Fund. Thus
either the credit of the issuer of the Municipal Obligation or the selling bank,
or both, will meet the quality standards of the Fund. The Fund has the right to
sell the participation back to the bank after seven days' notice for the full
principal amount of the Fund's interest in the Municipal Obligation plus accrued
interest, but only (a) as required to provide liquidity to the Fund, (b) to
maintain a high quality investment portfolio or (c) upon a default under the
terms of the Municipal Obligation. The selling bank will receive a fee from the
Fund in connection with the arrangement. The Fund will not purchase
participation interests unless it receives an opinion of counsel or a ruling of
the Internal Revenue Service satisfactory to the Adviser that interest earned by
the Fund on Municipal Obligations on which it holds participation interests is
exempt from federal income tax.
INVESTMENT RESTRICTIONS
The following restrictions are applicable to each of the Funds, except as
otherwise indicated.
(1) No Fund may, with respect to 75% of its total assets, purchase more
than 10% of the voting securities of any one issuer or invest more than 5%
of the value of such assets in the securities or instruments of any one
issuer, except securities or instruments issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
(2) No Fund may purchase securities or instruments which would cause 25%
or more of the market value of its total assets at the time of such
purchase to be invested in securities or instruments of one or more
issuers having their principal business activities in the same industry,
provided that there is no limit with respect to investments in the U.S.
Government, its agencies and instrumentalities.
(3) No Fund may borrow money, except that a Fund may borrow from banks up
to 10% of the current value of its total net assets for temporary or
emergency purposes. A Fund will make no purchases if its outstanding
borrowings exceed 5% of its total assets.
(4) No Fund may make loans, except that a Fund may (a) lend its portfolio
securities, (b) enter into repurchase agreements with respect to its
portfolio securities, and (c) purchase the types of debt instruments
described in this Prospectus or the SAI.
For purposes of investment restriction number (1), Centura North Carolina
Tax-Free Bond Fund considers a Municipal Obligation to be issued by the
government entity (or entities) whose assets and revenues back the Municipal
Obligation. For a Municipal Obligation backed only by the assets and revenues of
a nongovernmental user, such user is deemed to be the issuer; such issuers to
the extent their principal business activities are in the same industry, are
also subject to investment restriction (2). For purposes of investment
restriction (2), public utilities are not deemed to be a single industry but are
separated by industrial categories, such as telephone or gas utilities.
The foregoing investment restrictions and those described in the SAI as
fundamental are policies of each Fund which may be changed with respect to that
Fund only when permitted by law and approved by the holders of a majority of the
applicable Fund's outstanding voting securities as described under "Other
Information -- Voting."
Additionally, as a non-fundamental policy, no Fund may invest more than 15% of
the aggregate value of its net assets in investments which are illiquid, or not
readily marketable (including repurchase agreements having maturities of more
than seven calendar days and variable and floating rate demand and master demand
notes not requiring receipt of the principal note amount within seven days'
notice).
If a percentage restriction on investment policies or the investment or use of
assets set forth in this Prospectus are adhered to at the time a transaction is
effected, later changes in percentage resulting from changing values will not be
considered a violation.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in the
value of the investments held by the Fund. Shareholders of a Fund should expect
the value of their shares to fluctuate with changes in the value of the
securities owned by that Fund. There is, of course, no assurance that a Fund
will achieve its investment objective or be successful in preventing or
minimizing the risk of loss that is inherent in investing in particular types of
investment products. In order to attempt to minimize that risk, the Adviser
monitors developments in the economy, the securities markets, and with each
particular issuer. Also, as noted earlier, each Fund is managed within certain
limitations that restrict the amount of a Fund's investment in any single
issuer.
Foreign Securities (Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund
and Centura Southeast Equity Fund). Investing in the securities of issuers in
any foreign country, including ADRs, involves special risks and considerations
not typically associated with investing in securities of U.S. issuers. These
include differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. A Fund's objective may be affected either
unfavorably or favorably by fluctuations in the relative rates of exchange
between the currencies of different nations, by exchange control regulations and
by indigenous economic and political developments. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of a Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in the Fund's net asset value and
any net investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund. The rate of exchange between the U.S. dollar and other
currencies is determined by several factors including the supply and demand for
particular currencies, central bank efforts to support particular currencies,
the movement of interest rates, the pace of business activity in certain other
countries and the United States, and other economic and financial conditions
affecting the world economy. Although a Fund may engage in forward foreign
currency transactions and foreign currency options to protect its portfolio
against fluctuations in currency exchange rates in relation to the U.S. dollar,
there is no assurance that these techniques will be successful. See "Description
of Securities and Investment Practices" and below for additional information
about these kinds of transactions.
Although the Funds value their assets daily in terms of U.S. dollars, the Funds
do not intend to convert their holdings of foreign currencies into U.S. dollars
on a daily basis. The Funds will do so from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
Through the Funds' flexible policies, the Adviser endeavors to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it may place the Funds' investments. See the
SAI for information about foreign securities.
Zero Coupon And Pay-In-Kind Securities (Centura Federal Securities Income Fund
and Centura North Carolina Tax-Free Bond Fund). Zero coupon bonds (which do not
pay interest until maturity) and pay-in-kind securities (which pay interest in
the form of additional securities) may be more speculative and may fluctuate
more in value than securities which pay income periodically and in cash. In
addition, although a Fund receives no periodic cash payments from such
investments, applicable tax rules require the Fund to accrue and pay out its
income from such securities annually as income dividends and require
stockholders to pay tax on such dividends (except if such dividends qualify as
exempt-interest dividends).
North Carolina Municipal Obligations (Centura North Carolina Tax-Free Bond
Fund). Because this Fund will concentrate its investments in North Carolina
Municipal Obligations, it may be affected by political, economic or regulatory
factors that may impair the ability of North Carolina issuers to pay interest on
or to repay the principal of their debt obligations. Thus, the net asset value
of the shares may be particularly impacted by the general economic situation
within North Carolina. The concentration of the Fund's investments in a single
state may involve greater risk than if the Fund invested in Municipal
Obligations throughout the country, due to the possibility of an economic or
political development which could uniquely affect the ability of issuers to meet
the debt obligations of the securities.
The economy of North Carolina is supported by industry, agricultural products,
and tourism, with the largest segment of its work force employed in
manufacturing. From 1980 to 1995, the state's per capita income grew 133.8%,
from $7,999 to $20,604. The state has the nation's tenth highest population, and
its unemployment rate in March, 1995 was 3.9% of the labor force (versus a
national rate of 5.5%). The state's labor force grew 26.4% between 1980 and
1994, while its complexion shifted from agriculture to the production of goods
and services. In 1993, North Carolina nevertheless ranked tenth in the nation in
gross agricultural income. Although 20% of its agricultural income comes from
tobacco, 34% comes from a diversified poultry industry and the remainder from a
relatively large variety of other agricultural plant and animal products. North
Carolina is the third most diversified state in the country in terms of its
agriculture.
Obligations of issuers of North Carolina Municipal Obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bank Reform Act of 1978. In addition,
the obligations of such issuers may become subject to the laws enacted in the
future by Congress or the North Carolina legislature or by referenda extending
the time for payment of principal and/or interest, or imposing other constraints
upon enforcement of such obligations or upon municipalities to levy taxes. There
is also the possibility that, as a result of legislation or other conditions,
the power or ability of any issuer to pay, when due, the principal of and
interest on its North Carolina Municipal Obligations may be materially affected.
Additional considerations relating to the risks of investing in North Carolina
Municipal Obligations are presented in the SAI.
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund).
Municipal lease obligations have special risks not normally associated with
municipal bonds. These obligations frequently contain "non-appropriation"
clauses that provide that the governmental issuer of the obligation has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purposes by the legislative body on a yearly or other
periodic basis. For more information on risks of municipal lease investments,
see the SAI.
Risks Of Options Transactions (All Funds). The purchase and writing of options
involves certain risks. During the option period, the covered call writer has,
in return for the premium on the option, given up the opportunity to profit from
a price increase in the underlying securities above the exercise price, but, as
long as its obligation as a writer continues, has retained the risk of loss
should the price of the underlying security decline. The writer of an option has
no control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price. If a put or call option purchased by a Fund is not sold when it
has remaining value, and if the market price of the underlying security, in the
case of a put, remains equal to or greater than the exercise price, or in the
case of a call, remains less than or equal to the exercise price, the Fund will
lose its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no assurance that a liquid market
will exist when a Fund seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options market, a Fund
may be unable to close out a position. If a Fund cannot effect a closing
transaction, it will not be able to sell the underlying security while the
previously written option remains outstanding, even if it might otherwise be
advantageous to do so.
Risks Of Foreign Currency Options (Centura Mid Cap Equity Fund, Centura Large
Cap Equity Fund and Centura Southeast Equity Fund). Currency options traded on
U.S. or other exchanges may be subject to position limits which may limit the
ability of a Fund to reduce foreign currency risk using such options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller and generally do not have as much market liquidity as exchange-traded
options. Employing hedging strategies with options on currencies does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Furthermore, such hedging transactions
reduce or preclude the opportunity for gain if the value of the hedged currency
should change relative to the U.S. dollar. The Funds will not speculate in
options on foreign currencies.
There is no assurance that a liquid secondary market will exist for any
particular foreign currency option, or at any particular time. In the event no
liquid secondary market exists. it might not be possible to effect closing
transactions in particular options. If a Fund cannot close out an option which
it holds, it would have to exercise its option in order to realize any profit
and would incur transactional costs on the sale of the underlying assets.
Risks Of Futures And Related Options Transactions (All Funds). There are several
risks associated with the use of futures contracts and options on futures
contracts. While a Fund's use of futures contracts and related options for
hedging may protect a Fund against adverse movements in the general level of
interest rates or securities prices, such transactions could also preclude the
opportunity to benefit from favorable movements in the level of interest rates
or securities prices. There can be no guarantee that the Adviser's forecasts
about market value, interest rates and other applicable factors will be correct
or that there will be a correlation between price movements in the hedging
vehicle and in the securities being hedged. The skills required to invest
successfully in futures and options may differ from the skills required to
manage other assets in a Fund's portfolio. An incorrect forecast or imperfect
correlation could result in a loss on both the hedged securities in a Fund and
the hedging vehicle so that the Fund's return might have been better had hedging
not been attempted.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures contract or futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed. The potential risk of loss to a Fund
from a futures transaction is unlimited. Therefore, although the Funds have
authority to engage in futures transactions, they have no present intention to
do so and will engage in such transactions only when disclosure to that effect
has been added to the Prospectus.
A Fund will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or are quoted on an automated quotation system. A Fund will not
enter into a futures contract if immediately thereafter the initial margin
deposits for futures contracts held by the Fund plus premiums paid by it for
open futures options positions, less the amount by which any such positions are
"in-the-money," would exceed 5% of the Fund's total assets.
The Funds may trade futures contracts and options on futures contracts on U.S.
domestic markets and, for Centura Mid Cap Equity Fund, Centura Large Cap Equity
Fund and Centura Southeast Equity Fund, also on exchanges located outside of the
United States. Foreign markets may offer advantages such as trading in indices
that are not currently traded in the United States. Foreign markets, however,
may have greater risk potential than domestic markets. Unlike trading on
domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the Commodity Futures Trading Commission and may be subject to
greater risk than trading on domestic exchanges. For example, some foreign
exchanges are principal markets so that no common clearing facility exists and a
trader may look only to the broker for performance of the contract. In addition,
any profits that the Fund might realize in trading could be eliminated by
adverse changes in the exchange rate of the currency in which the transaction is
denominated, or the Fund could incur losses as a result of changes in the
exchange rate. Transactions on foreign exchanges may include both commodities
that are traded on domestic exchanges or boards of trade and those that are not.
Risks Of Forward Foreign Currency Contracts (Centura Mid Cap Equity Fund,
Centura Large Cap Equity Fund and Centura Southeast Equity Fund). The precise
matching of forward contracts and the value of the securities involved will not
generally be possible since the future value of the securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. Projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. There can be no assurance that new forward contracts or
offsets will always be available to the Funds.
Risks Of Concentrating Investments In Southeastern Issuers (Centura Southeast
Equity Fund). Because Centura Southeast Equity Fund will normally invest
primarily in equity securities of southeastern issuers, its portfolio will be
more vulnerable to negative economic developments and natural disasters
affecting the region than a fund with a more geographically diversified
portfolio. There can, of course, be no assurance that southeastern issuers will
outperform, or perform as well as, issuers of other regions, and there can be no
assurance that southeastern issuers whose securities are held by the Fund will
outperform, or perform as well as, those of the region generally, other issuers
of the region, or issuers of any other U.S. or foreign region.
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.
[TO BE UPDATED}
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
based on the Fund's average net assets. Fees are 0.70% for Centura Mid Cap
Equity Fund, 0.70% for Centura Large Cap Equity Fund, 0.70% for Centura
Southeast Equity Fund, 0.30% for Centura Federal Securities Income Fund, and
0.35% for Centura North Carolina Tax-Free Bond Fund. The Adviser also serves as
Custodian for the Funds' assets, for which it receives additional fees. For the
fiscal year ended April 30, 1997, the Adviser received $1,127,435 in Advisory
fees from the Mid Cap Equity Fund and $358,174 from the Federal Securities
Income Fund. The advisory fees for the North Carolina Tax-Free Bond Fund
amounted to $140,821 however, the Adviser waived $100,587. For the period from
October 1, 1996 (the commencement of operations) to April 30, 1997, the advisory
fees for the Large Cap Equity Fund were $217,106, however, the Adviser waived
$105,451.
Frank Jolley has primary responsibility for management of the Centura Large Cap
Equity Fund and the Centura Mid Cap Equity Fund. Mr. Jolley has over 17 years
experience in investments and financial analysis. He graduated from the
University of North Carolina with a Bachelor of Science in business
administration. Mr. Jolley began his investment career with Dean Witter Reynolds
in retail sales and later served as a branch manager for a regional securities
firm. Primary duties at Centura have included the management of common and
collective funds along with personal trust and pension fund investment
responsibilities. In August 1996, Mr. Jolley was named Chief Investment Officer
of Centura's asset management area. As Chief Investment Officer, his duties
include oversight of all Centura's mutual funds. Mr. Jolley is a Chartered
Financial Analyst and a member of the North Carolina Society of Financial
Analysts where he currently serves as the Secretary and member of the Board.
C. Nathaniel Siewers serves as portfolio manager of Centura North Carolina
Tax-Free Bond Fund and Centura Federal Securities Income Fund. Mr. Siewers has
over twelve years of experience managing fixed income securities. His most
recent experience involved managing Centura Bank's fixed income portfolio of
both taxable and tax-free securities, with assets of approximately $1.6 billion
at June 30, 1997. Mr. Siewers graduated from Wake Forest University with a
Bachelor of Arts degree in economics and from East Carolina University with a
Masters in Business Administration. He is a Certified Public Accountant and a
Fellow in the North Carolina Association of Certified Public Accountants. Mr.
Siewers has been a faculty member of the North Carolina School of Banking since
1987; he is the Associate Dean for the 1997 term and has been named Dean for the
1998 and 1999 terms.
Daniel Cole serves as portfolio manager for Centura Southeast Equity Fund. Mr.
Cole joined Centura Bank in November, 1996 where he has previously managed the
Centura Southeast Common Trust Funds and has personal and pension fund
investment responsibilities. Mr. Cole has four years experience in investments
and portfolio management. He began his investment career with Southern National
Bank in Winston-Salem, North Carolina as an investment analyst and portfolio
manager in Trust Investments. In 1995, Mr. Cole joined Central Carolina Bank in
Durham, North Carolina as a portfolio manager and trust investment officer where
he was primarily responsible for personal trust and endowment fund investment
management. He graduated from Guilford College in Greensboro, North Carolina
with a Bachelor of Science degree and from Virginia Polytechnic Institute and
State University in Blacksburg, Virginia with an M.B.A. in Finance. Mr. Cole is
a level III Chartered Financial Analyst candidate and a member of the
Association for Investment Management and Research and the North Carolina
Society of Financial Analysts.
THE DISTRIBUTOR
Centura Funds Distributor, Inc., 3435 Stelzer Road, Columbus, Ohio 43219, acts
as the Funds' Distributor. The Distributor is an affiliate of the Funds'
Administrator, BISYS, and was formed specifically to distribute the Funds.
Each of the Funds has adopted a Service and Distribution plan ("Plan") with
respect to its Class A and Class B shares. The Plans provide that each class of
shares will pay the Distributor a fee calculated as a percentage of the value of
average daily net assets of that class as reimbursement for its costs incurred
in financing certain distribution and shareholder service activities related to
that class.
Class A Plans. The Class A Plans provide for payments by each Fund to the
Distributor at an annual rate not to exceed 0.50% of the Fund's average net
assets attributable to its Class A shares. Such fees may include a Service Fee
totaling up to 0.25% of the average annual net assets attributable to a Fund's
Class A shares. Service Fees are paid to securities dealers and other financial
institutions for maintaining shareholder accounts and providing related services
to shareholders. The Distributor may also retain portions of the sales charges
paid on Class A shares. The Funds limited Plan fees for Class A shares to 0.25%
during the past fiscal year and will continue to do so for its current fiscal
year. For the period year ended April 30, 1997, the Distributor received
$36,184, $2,690 and $19,193 for the Mid Cap Equity Fund, the Federal Securities
Income Fund and the North Carolina Tax-Free Bond Fund, respectively, pursuant to
Class A Plans. For the period from October 1, 1996 (commencement of operations)
to April 30, 1997, distribution fees incurred by the Large Cap Equity Fund
(Class A Shares) were $525. [TO BE UPDATED}
Class B Plans. The Class B Plans provide for payments by each Fund to the
Distributor at an annual rate not to exceed 1.00% of the Fund's average net
assets attributable to its Class B shares. For the current fiscal year, the
Distributor has agreed to limit fees for Class B shares of Centura Federal
Securities Income Fund and Centura North Carolina Tax-Free Bond Fund to 0.75%.
Such fees may include a Service Fee totaling up to 0.25% of the average annual
net assets attributable to a Fund's Class B shares. The Distributor also
receives the proceeds of any CDSC imposed on redemptions of Class B shares.
Although Class B shares are sold without an initial sales charge, the
Distributor pays a sales commission equal to 4.00% of the amounts invested in
Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund and Centura Southeast
Equity Fund and 2.50% of the amounts invested in each of the other Funds to
securities dealers and other financial institutions who sell Class B shares. The
Distributor may, at times, pay sales commissions higher than the above on sales
of Class B shares. These commissions are not paid on exchanges from other Funds
and sales to investors for whom the CDSC is waived. For the fiscal year ended
April 30, 1997, the Distributor received $80,683, $1,931 and $4,199 for the Mid
Cap Equity Fund, the Federal Securities Income Fund and the North Carolina
Tax-Free Bond Fund, respectively, pursuant to Class B Plans. For the period from
October 1, 1996 (commencement of operations) to April 30, 1997, distribution
fees incurred by the Large Cap Equity Fund (Class B Shares) were $710. [TO BE
UPDATED]
Under each Plan, each 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 to each class,
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, 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 shares of the
Funds. Each Fund will pay all costs and expenses in connection with the
preparation, printing and distribution of the Prospectus to current shareholders
and the operation of its Plan(s), including related legal and accounting fees. A
Fund will not be liable for distribution expenditures made by the Distributor in
any given year in excess of the maximum amount payable under a Plan for that
Fund in that year.
SERVICE ORGANIZATIONS
Payments may be made by the Funds or by the Adviser to various banks, trust
companies, broker-dealers or other financial organizations (collectively,
"Service Organizations") for providing administrative services for the Funds and
their shareholders, such as maintaining shareholder records, answering
shareholder inquiries and forwarding materials and information to shareholders.
The Funds may pay fees to Service Organizations (which vary depending upon the
services provided) in amounts up to an annual rate of 0.25% of the daily net
asset value of the shares of either class owned by shareholders with whom the
Service Organization has a servicing relationship.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring clients to invest more than a Fund's minimum
initial or subsequent investments or charging a direct fee for servicing. If
imposed, these fees would be in addition to any amounts which might be paid to
the Service Organization by the Funds. Each Service Organization has agreed to
transmit to its clients a schedule of any such fees. Shareholders using Service
Organizations are urged to consult with them regarding any such fees or
conditions.
The Glass-Steagall Act and other applicable laws provide that among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either federal or state regulations relating
to the 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 Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
THE ADMINISTRATOR AND SPONSOR
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
3435 Stelzer Road, Columbus, Ohio 43219 acts as Sponsor and Administrator of the
Company. BISYS is a subsidiary of BISYS Group, Inc., which is headquartered in
Little Falls, New Jersey, and supports more than 5,000 financial institutions
and corporate clients through two strategic business units. BISYS Information
Services Group provides image and data processing outsourcing, and pricing
analysis to more than 600 banks nationwide. BISYS Investment Services Group
designs, administers and distributes over 60 families of proprietary mutual
funds consisting of more than 450 portfolios, and provides 401(k) marketing
support, administration, and recordkeeping services in partnership with banking
institutions and investment management companies.
Pursuant to an Administration Agreement with the Company, BISYS provides certain
management and administrative services necessary for the Funds' operations
including: (a) general supervision of the operation of the Funds including
coordination of the services performed by the Funds' Adviser, custodian,
independent accountants and legal counsel; (b) regulatory compliance, including
the compilation of information for documents such as reports to, and filings
with, the SEC and state securities commissions, and preparation of proxy
statements and shareholder reports for the Funds; (c) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Funds' officers and Board of Directors; and (d)
furnishing office space and certain facilities required for conducting the
business of the Funds. For these services, the Administrator receives from each
Fund a fee, payable monthly, at the annual rate of 0.15% of each Fund's average
daily net assets. Prior to January 1, 1997, Furman Selz LLC served as the Funds'
Administrator under a contract substantially similar to the Administration
Agreement with BISYS. For 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 Mid Cap Equity Fund and the Federal Securities Income Fund,
respectively. For the fiscal year ended April 30, 1997, Furman Selz and BISYS
earned $60,352 from the North Carolina Tax-Free Bond Fund of which $43,051 was
waived. For the period from October 1, 1996 (commencement of operations) through
April 30, 1997, Furman Selz and BISYS earned $46,523 from the Large Cap Equity
Fund of which $23,882 was waived. [TO BE UPDATED]
Prior to January 1, 1997, Furman Selz also acted as the Funds' transfer and fund
accounting agent and effective January 1, 1997, BISYS Fund Services, Inc.
("BFSI") serves in that capacity (for which it receives a fee of $15 per account
per year, plus out-of-pocket expenses) and provides assistance in calculating
the Funds' net asset values and provides other accounting services for the Funds
(for an annual fee of $30,000 per Fund plus out-of-pocket expenses). For the
fiscal year ended April 30, 1997, Furman Selz and BFSI earned $101,541, $13,117
and $11,109 for the Mid Cap Equity Fund, Federal Securities Income Fund and
North Carolina Tax-Free Bond Fund, respectively, for transfer agent fees. For
the period from October 1, 1996 (commencement of operations) to April 30, 1997,
Furman Selz and BFSI earned $16,260 in transfer agent fees from the Large Cap
Equity Fund. [TO BE UPDATED]
BFSI and Furman Selz earned $28,792, $31,735 and $39,742 in fund accounting fees
for the Mid Cap Equity Fund, the Federal Securities Income Fund and the North
Carolina Tax-Free Bond Fund, respectively, for the same period. For the period
from October 1, 1996 (commencement of operations) to April 30, 1997, BFSI and
Furman Selz earned $19,212 in fund accounting fees for the Large Cap Equity
Fund. [TO BE UPDATED]
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses specifically the
responsibility of the Administrator, the Adviser or other service providers. In
addition to service fees paid to providers described above, the costs borne by
the Funds, some of which may vary among the classes, as noted above, include:
legal and accounting expenses; Directors' fees and expenses; insurance premiums;
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Funds' portfolio securities; expenses of registering the
Funds' shares for sale with the SEC and of satisfying requirements of various
state securities commissions; expenses of maintaining the Funds' legal existence
and of shareholders' meetings; and expenses of preparing and distributing
reports, proxy statements and prospectuses to existing shareholders. Each Fund
bears its own expenses associated with its establishment as a portfolio of the
Company; these expenses are amortized over a five-year period from the
commencement of a Fund's operations. Company expenses directly attributable to a
Fund or class are charged to that Fund or class; other expenses are allocated
proportionately among all of the Funds and classes in the Company in relation to
the net assets of each Fund and class.
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,
plus any applicable sales charge (the "public offering price"). The sales charge
on purchases of Class A shares of the Funds is as follows:
<TABLE>
<CAPTION>
Amount Of Sales
Charge Reallowed
Sales Charge As A To Dealers
Percentage Of As A Percentage
Public Net Amount Of Public
Offering Price Invested Offering Price*
-------------- ---------- ---------------
<S> <C> <C> <C>
CLASS A SHARES -- Mid Cap Equity
Fund, Centura Large Cap Equity Fund
and Centura Southeast Equity Fund
AMOUNT OF INVESTMENT
Less than $50,000 .................. 4.50% 4.71% 4.50%
$50,000 but less than $100,000...... 4.00% 4.17% 4.00%
$100,000 but less than $250,000..... 3.50% 3.63% 3.50%
$250,000 but less than $500,000..... 2.50% 2.56% 2.50%
$500,000 but less than $1,000,000... 1.50% 1.52% 1.50%
$1,000,000 and over................. 0.00%** 0.00%** (See below)
CLASS A SHARES -- Centura Federal
Securities Income Fund and Centura
North Carolina Municipal Bond Fund
AMOUNT OF INVESTMENT
Less than $50,000 .................. 2.75% 2.83% 2.75%
$50,000 but less than $100,000...... 2.50% 2.56% 2.50%
$100,000 but less than $250,000..... 2.25% 2.30% 2.50%
$250,000 but less than $500,000..... 1.75% 1.78% 1.75%
$500,000 but less than $1,000,000... 1.00% 1.01% 1.00%
$1,000,000 and over................. 0.00%*** 0.00%*** (See below)
- ----------
<FN>
* The staff of the Securities and Exchange Commission has indicated that
dealers who receive more than 90% of the sales charge may be considered
underwriters.
** A 1.00% CDSC will be assessed on shares redeemed within 18 months of
purchase (excluding shares purchased with reinvested dividends and/or
distributions).
*** A 0.75% CDSC will be assessed on shares redeemed within 18 months of
purchase (excluding shares purchased with reinvested dividends and/or
distributions).
</FN>
</TABLE>
Although no sales charge is applied to purchases of $1,000,000 or more, Centura
Funds Distributor, Inc. may pay the following dealer concessions for such
purchases: for Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund and
Centura Southeast Equity Fund, up to 1.00% on purchases of $1,000,000 to
$1,999,999, plus an additional 0.75% on amounts from $2,000,000 to $2,999,999,
plus an additional 0.50% on amounts from $3,000,000 to $9,999,999, plus an
additional 0.25% for amounts of $10,000,000 or more; for Centura Federal
Securities Income Fund and Centura North Carolina Tax-Free Bond Fund, up to
0.75% on purchases of $1,000,000 to $1,999,999, plus an additional 0.50% on
amounts from $2,000,000 to $4,999,999, plus an additional 0.25% on amounts of
$5,000,000 or more.
The sales charge will not apply to purchases of Class A shares by: (a) trust,
investment management and other fiduciary accounts managed by the Adviser
pursuant to a written agreement; (b) any person purchasing shares with the
proceeds of a distribution from a trust, investment management or other
fiduciary account managed by the Adviser pursuant to a written agreement; (c)
BISYS or any of its affiliates; (d) Directors or officers of the Funds; (e)
directors or officers of BISYS or the Adviser, or affiliates or bona fide
full-time employees of any of the foregoing who have acted as such for not less
than 90 days (including members of their immediate families and their retirement
plans or accounts); or (f) retirement accounts or plans (or monies from
retirement accounts or plans) for which there is a written service agreement
between the Company and the plan sponsor, so long as such shares are purchased
through the Funds; or (g) any person purchasing shares within an approved asset
allocation program sponsored by a financial services organization. The sales
charge also does not apply to shares sold to representatives of selling brokers
and members of their immediate families. In addition, the sales charge does not
apply to sales to bank trust departments, acting on behalf of one or more
clients, of shares having an aggregate value equal to or exceeding $200,000.
For purchases of $250,000 or more, the Funds believe that it is preferable for
an investor (other than an institutional investor eligible to purchase Class C
shares) to purchase Class A rather than Class B shares. This belief is based on
an assessment of the relative costs of the two classes, including applicable
sales charge or CDSC and Service and Distribution Fees. Accordingly, the Funds
have adopted guidelines directing authorized brokers, investment advisers and
Service Organizations that purchases of $250,000 or more by their
non-institutional clients should be of Class A shares. The Funds reserve the
right to vary these guidelines at any time.
CLASS B SHARES
The Funds offer their Class B shares at their net asset value next determined
after a purchase order has been received. No sales charge is imposed at the time
of purchase. A CDSC is, however, imposed on certain redemptions of Class B
shares. See "Redemption of Fund Shares" for more information on the CDSC. On the
seventh anniversary of their purchase date, Class B shares automatically convert
to Class A shares. See "Management of the Funds -- the Distributor."
See "Dividends, Distributions and Federal Income Taxation," for an explanation
of circumstances in which a sales charge paid to acquire shares of a mutual fund
may not be taken into account in determining gain or loss on the disposition of
those shares.
QUANTITY DISCOUNTS IN THE SALES CHARGES
Right Of Accumulation
The Funds permit sales charges on Class A shares to be reduced through rights
of accumulation. For Class A shares, the schedule of reduced sales charges will
be applicable once the accumulated value of the account has reached $50,000. For
this purpose, the dollar amount of the qualifying concurrent or subsequent
purchase is added to the net asset value of any other Class A shares of those
Funds in the Company owned at the time by the investor. The sales charge imposed
on the Class A shares being purchased will then be at the rate applicable to the
aggregate of Class A shares purchased. For example, if the investor held Class A
shares of these Funds valued at $100,000 and purchased an additional $20,000 of
shares of these Funds (totalling an investment of $120,000), the sales charge
for the $20,000 purchase would be at the next lower sales charge on the schedule
(i.e., the sales charge for purchases over $100,000 but less than $250,000).
There can be no assurance that investors will receive the cumulative discounts
to which they may be entitled unless, at the time of placing their purchase
order, the investors, their dealers, or Service Organizations make a written
request for the discount. The cumulative discount program may be amended or
terminated at any time. This particular privilege does not entitle the investor
to any adjustment in the sales charge paid previously on purchases of shares of
the Funds. If the investor knows that he will be making additional purchases of
shares in the future, he may wish to consider executing a Letter of Intent.
Letter Of Intent
The schedule of reduced sales charges is also available to Class A investors
who enter into a written Letter of Intent providing for the purchase, within a
13-month period, of Class A shares of a particular Fund. Shares of such Fund
previously purchased during a 90-day period prior to the date of receipt by the
Fund of the Letter of Intent which are still owned by the shareholder may also
be included in determining the applicable reduction, provided the shareholder,
dealer, or Service Organization notifies the Fund of such prior purchases.
A Letter of Intent permits an investor in Class A shares to establish a total
investment goal to be achieved by any number of investments over a 13-month
period. Each investment made during the period will receive the reduced sales
commission applicable to the amount represented by the goal as if it were a
single investment. A number of shares totalling 5% of the dollar amount of the
Letter of Intent will be held in escrow by the Fund in the name of the
shareholder. The initial purchase under a Letter of Intent must be equal to at
least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or a Fund to
sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is authorized by
the shareholder to liquidate a sufficient number of escrowed shares to obtain
such difference. If the goal is exceeded and purchases pass the next sales
charge level, the sales charge on the entire amount of the purchase that results
in passing that level and on subsequent purchases will be subject to further
reduced sales charges in the same manner as set forth under "Right of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. At any time while a Letter of Intent is in effect, a
shareholder may, by written notice to the Fund, increase the amount of the
stated goal. In that event, shares purchased during the previous 90-day period
and still owned by the shareholder will be included in determining the
applicable sales charge reduction. The 5% escrow and minimum purchase
requirements will be applicable to the new stated goal. Investors electing to
purchase Fund shares pursuant to a Letter of Intent should carefully read the
application for Letter of Intent which is available from the Fund.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in each of the Funds 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. Centura North Carolina Tax-Free Bond Fund is not a recommended
investment for an IRA or other qualified retirement plan. The Funds reserve the
right to reject purchase orders.
<PAGE>
PURCHASE OF FUND SHARES
All consideration received by the Funds for the purchase of shares is invested
in full and fractional shares of the indicated class of the appropriate Fund.
Certificates for shares are not issued. BISYS maintains records of each
shareholder's holdings of Fund shares, and each shareholder receives a monthly
statement of transactions, holdings and dividends.
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 Funds 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 Funds prior to the
close of its business day (which is currently 4:00 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 Funds. Orders may be placed directly with the Funds. 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 Funds' 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 applicable 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 Funds at Centura Funds, Inc., 3435
Stelzer Road, Columbus, Ohio 43219-8021. Notification must be given to the Funds
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 Funds, the
Distributor and the custodian bank are all open for business. To purchase shares
by a federal funds wire, investors should first contact the Funds 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 Funds. By using the Purchase Application, an investor may
specify other distribution options and may add any special features offered by a
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 Funds 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 one or more
of the Funds 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 Funds 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 any of the Funds.
Participants in the Payroll Direct Deposit Program may make periodic investments
of at least $50 per pay period. Contact the Funds for more information about
Payroll Direct Deposits.
RETIREMENT PLAN ACCOUNTS
Each of the Funds may be used as a funding medium for IRAs and other qualified
retirement plans ("Retirement Plans"), except that Centura North Carolina
Tax-Free Bond Fund is not recommended for IRA or Retirement Plan investments.
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 Funds a 1-800-44CENTURA (442-3688).
EXCHANGE OF FUND SHARES
The Funds offer two convenient ways to exchange shares in one Fund for shares of
another Fund in the Company. Shares of a particular class of a Fund may be
exchanged only for shares of that same class in another Fund. Before engaging in
an exchange transaction, a shareholder should read carefully the information in
the Prospectus describing the Fund into which the exchange will occur. A
shareholder may not exchange shares of a class of one Fund for shares of the
same class of another Fund that has not satisfied applicable requirements for
sale in the state of the shareholder's residence. There is no minimum for
exchanges, provided the investor has satisfied the $1,000 minimum investment
requirement for the Fund into which he or she is exchanging, and no service fee
is imposed for an exchange. The Company may terminate or amend the terms of the
exchange privilege at any time upon 60 days notice to shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the respective net asset values next determined following
receipt of the request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction.
In the case of transactions subject to a sales charge, the sales charge will be
assessed on an exchange of shares, equal to the excess of the sales load
applicable to the shares to be acquired, over the amount of any sales load
previously paid on the shares to be exchanged. No sales charge is assessed on an
exchange of Class A shares that have been held for more than two years. No
service fee is imposed on any exchange. See "Dividends, Distributions and
Federal Income Taxation" for an explanation of circumstances in which a sales
charge paid to acquire shares of the Funds may not be taken into account in
determining gain or loss on the disposition of those shares.
Exchange By Mail. To exchange Fund shares by mail, shareholders should simply
send a letter of instruction to the Funds. The letter of instruction must
include: (a) the investor's account number; (b) the class of shares to be
exchanged; (c) the Fund from and the Fund into which the exchange is to be made;
(d) the dollar or share amount to be exchanged; and (e) the signatures of all
registered owners or authorized parties.
Exchange By Telephone. To exchange Fund shares by telephone or to ask any
questions, shareholders may call the Fund at 1-800-44CENTURA (442-3688). Please
be prepared to give the telephone representative the following information: (a)
the account number, social security number and account registration; (b) the
class of shares to be exchanged; (c) the name of the Fund from which and the
Fund into which the exchange is to be made; and (d) the dollar or share amount
to be exchanged. Telephone exchanges are provided automatically to each
shareholder unless otherwise specifically indicated on the Purchase Application.
The Funds employ procedures, including recording telephone calls, testing
caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that a Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. A Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Funds reserve the right to suspend or terminate the privilege of
exchanging by mail or by telephone at any time. Telephone Redemption and
Telephone Exchange will be suspended for a period of 10 days following a
telephonic address change.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part on any business day.
If a shareholder holds shares in more than one class of a Fund, any request for
redemption must specify the class from which shares are to be redeemed. In the
event a shareholder fails to make such a specification or if there are
insufficient shares of the specified class to satisfy the redemption order, the
redemption order will be delayed until the Fund's transfer agent receives
further instructions from the shareholder.
Class A and Class B shares will be redeemed at the net asset value next
determined after a redemption request in good order has been received by the
applicable Fund, provided that for Class B shares, redemption proceeds will be
reduced by any applicable CDSC. A CDSC payable to the Distributor is imposed on
any redemption of Class B shares that causes the current value of a Class B
shareholder's account to fall below the dollar amount of all payments by the
shareholder for the purchase of Class B shares ("purchase payments") during the
preceding five years. No charge is imposed to the extent the net asset value of
the Class B shares to be redeemed does not exceed (a) the current net asset
value of the Class B shares purchased through the reinvestment of dividends or
capital gains distributions, plus (b) increases in the net asset value of the
shareholder's Class B shares above the purchase payments made during the
preceding five years.
In circumstances in which the CDSC is imposed, the amount of the charge will
depend on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed. With respect to Class B share
redemptions only, the purchase payment from which a redemption is made is
assumed to be the earliest purchase payment from which a full redemption has not
already been effected. Solely for purposes of determining the number of years
since a purchase payment, all purchase payments during a month will be
aggregated and deemed to have been made on the last day of the preceding month.
The following table sets forth the rates of the charge for redemptions of Class
B shares of each Fund.
CONTINGENT DEFERRED SALES CHARGE
Centura Mid Cap Equity
Fund, Centura Large Cap
Equity Fund And Centura Federal Securities
Centura Southeast Income Fund And Centura North
Years Since Purchase Equity Fund Carolina Tax-Free Bond Fund
-------------------- -------------------- -----------------------------
1 15.0% 3.0%
2 24.0% 3.0%
3 33.0% 3.0%
4 42.0% 2.0%
5 51.0% 1.0%
6 60% 0%
Following the seventh anniversary of their purchase date, Class B shares will
convert automatically to Class A shares and thereafter will be subject to the
lower service and distribution plan fees applicable to Class A shares. See
"Management of the Funds -- The Distributor."
Waivers Of CDSC. The Class B CDSC will be waived on (a) involuntary redemptions;
and (b) redemptions of shares in connection with a combination of any investment
company with the Company or a Fund by merger, acquisition of assets or
otherwise. The CDSC will also be waived for the classes of investors for which
the initial sales charge is waived on purchases of Class A shares. (See "Pricing
of Fund Shares -- Class A Shares.")
Where the shares of any class 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, a Fund will ordinarily send the proceeds by check
to the shareholder at the address of record on the next business day. The Fund
may, however, take up to seven days to make payment, although this will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates. A
redemption may be a taxable transaction on which gain or loss may be recognized.
REDEMPTION METHODS
To ensure acceptance of a redemption request, it is important that shareholders
follow the procedures described below. Although the Funds have no present
intention to do so, the Funds reserve the right to refuse or to limit the
frequency of any telephone or wire redemptions. Of course, it may be difficult
to place orders by telephone during periods of severe market or economic change,
and a shareholder should consider alternative methods of communications, such as
couriers. The Funds' services and their provisions may be modified or terminated
at any time by the Funds. If the Funds terminate any particular service, they
will do so only after giving written notice to shareholders. Redemption by mail
will always be available to shareholders. Requests in "proper order" must
include the following documentation: (a) a letter of instruction, if required,
signed by all registered owners of the shares in the exact names in which they
are registered; (b) any required signature guarantees (see "Signature
Guarantees" below); and (c) other supporting legal documents, if required, in
the case of 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 Funds
and place a redemption trade. The broker may charge a fee for this service.
By Mail. Shareholders may redeem shares by sending a letter directly to the
Funds. To be accepted, a letter requesting redemption must include: (a) the Fund
name, class of shares and account registration from which shares are being
redeemed; (b) the account number; (c) the amount to be redeemed; (d) the
signatures of all registered owners; and (e) a signature guarantee by any
eligible guarantor institution including members of national securities
exchanges, commercial banks or trust companies, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. Shareholders may redeem shares by calling the Funds toll free at
1-800-44CENTURA (442-3688). Be prepared to give the telephone representative the
following information: (a) the account number, social security number and
account registration; (b) the name of the class and the Fund from which shares
are being redeemed; and (c) the amount to be redeemed. Telephone redemptions are
available unless otherwise indicated on the Purchase Application or on the
Optional Services Form. The Funds employ procedures, including recording
telephone calls, testing a caller's identity, and sending written confirmation
of telephone transactions, designed to give reasonable assurance that
instructions communicated by telephone are genuine, and to discourage fraud. To
the extent that a Fund does not follow such procedures, it may be liable for
losses due to unauthorized or fraudulent telephone instructions. A Fund will not
be liable for acting upon instructions communicated by telephone that it
reasonably believes to be genuine. Telephone Redemption and Telephone Exchange
will be suspended for a period of 10 days following a telephonic address change.
By Wire. Shareholders may redeem shares by contacting the Funds by mail or
telephone and instructing the Funds to send a wire transmission to the
shareholder's bank.
The shareholder's instructions should include: (a) the account number, social
security number and account registration; (b) the name of the class and the Fund
from which shares are being redeemed; and (c) the amount to be redeemed. Wire
redemptions can be made unless otherwise indicated on the shareholder's Purchase
Application, and a copy is attached of a void check on an account where proceeds
are to be wired. The bank may charge a fee for receiving a wire payment on
behalf of its customer.
Systematic Withdrawal Plan. An owner of $12,000 or more of shares of a Fund may
elect to have periodic redemptions made from his account to be paid on a
monthly, quarterly, semiannual or annual basis. No CDSC will be imposed on
redemptions of Class B shares pursuant to a systematic withdrawal plan. 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.
Reinstatement Privilege. A shareholder who has redeemed Class A shares on which
a sales charge was paid may reinvest, without a sales charge, up to the full
amount of such redemption at the net asset value determined at the time of the
reinvestment within 30 days of the original redemption. This privilege is not
applicable with respect to any CDSC imposed on redemptions of Class B shares.
The shareholder must reinvest in the same Fund, same class, and the same account
from which the shares were redeemed. A redemption is a taxable transaction and
gain may be recognized for federal income tax purposes even if the reinstatement
privilege is exercised. Any loss realized upon the redemption will not be
recognized as to the number of shares acquired by reinstatement, except through
an adjustment in the tax basis of the shares so acquired. See "Dividends,
Distributions and Federal Income Taxation" for an explanation of circumstances
in which a sales charge paid to acquire shares of a Fund may not be taken into
account in determining gain or loss on the disposition of those shares.
Redemption Of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Funds reserve the right to redeem on not less than
30 days' notice, an account in a Fund that has been reduced by a shareholder
(not by market action) below $1,000. No CDSC will be imposed on Class B shares
so redeemed. Moreover, 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 Funds shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of a Fund during any 90-day period
of up to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have a Fund
make payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued generally in the same manner as the securities of that Fund are
valued generally. The value of securities payable in kind for a redemption of
Class B shares would reflect the deduction of any applicable CDSC. If the
recipient were to sell such securities, he or she would incur brokerage charges.
Signature Guarantees. To protect shareholder accounts, the Funds and the
Administrator from fraud, signature guarantees are required to enable the Funds
to verify the identity of the person who has authorized a redemption by mail
from an account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareholder(s) and
the registered address, (2) a redemption of $25,000 or more, and (3) share
transfer requests. Signature guarantees may be obtained from certain eligible
financial institutions, including but not limited to, the following: banks,
trust companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities and Transfer Association
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP") or
the New York Stock Exchange Medallion Signature Program ("MSP"). Shareholders
may contact the Funds at 1-800-442-3688 for further details.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement the Adviser places orders for the
purchase and sale of portfolio investments for the Funds' accounts with brokers
or dealers it selects in its discretion.
In effecting purchases and sales of portfolio securities for the account of a
Fund, the Adviser will seek the best execution of the Fund's orders. Purchases
and sales of portfolio debt securities for the Funds are generally placed by the
Adviser with primary market makers for these securities on a net basis, without
any brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. The Funds may purchase
securities during an underwriting, which will include an underwriting fee paid
to the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the judgment of the Adviser, provide
prompt and reliable execution at favorable security prices and reasonable
commission rates. Broker-dealers are selected on the basis of a variety of
factors such as reputation, capital strength, size and difficulty of order, sale
of Fund shares and research provided to the Adviser. The Adviser may cause a
Fund to pay commissions higher than another broker-dealer would have charged if
the Adviser believes the commission paid is reasonable in relation to the value
of the brokerage and research services received by the Adviser.
A Fund may buy and sell securities to take advantage of investment opportunities
when such transactions are consistent with a Fund's investment objectives and
policies and when the Adviser believes such transactions may improve a Fund's
overall investment return. These transactions involve costs in the form of
spreads or brokerage commissions. The Funds are not normally expected to have
portfolio turnover rates in excess of 50%.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Adviser may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.
FUND SHARE VALUATION
The net asset value per share for each class of shares of each Fund is
calculated at 4:00 p.m. (Eastern time), Monday through Friday, on each day the
New York Stock Exchange is open for trading, which excludes the following
business holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each class of shares of the
Funds is computed by dividing the value of net assets of each class (i.e., the
value of the assets less the liabilities) by the total number of such class'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.
Securities listed on an exchange are valued on the basis of the last sale prior
to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken from the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Directors. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Directors.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Directors. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
DIVIDENDS, DISTRIBUTIONS, AND FEDERAL INCOME TAXATION
Each Fund intends to qualify annually to elect to be treated as a regulated
investment company pursuant to the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). To qualify, each Fund must meet
certain income, distribution and diversification requirements. In any year in
which a Fund qualifies as a regulated investment company and timely distributes
all of its taxable income and substantially all of its net tax-exempt interest
income, the Fund generally will not pay any U.S. federal income or excise tax.
Each Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains over net
long-term capital losses). Investment company taxable income (other than the
capital gain component thereof) will be declared and paid monthly by Centura Mid
Cap Equity Fund, Centura Large Cap Equity Fund and Centura Southeast Equity
Fund. Centura Federal Securities Income Fund and Centura North Carolina Tax-Free
Bond Fund will declare dividends daily and pay them out monthly. Each Fund
intends to distribute, at least annually, substantially all net realized longand
short-term capital gain. In determining amounts of capital gains to be
distributed, any capital loss carryovers from prior years will be applied
against capital gains.
In the case of Centura Federal Securities Income Fund and Centura North Carolina
Tax-Free Bond Fund, the amount declared each day as a dividend may be based on
projections of estimated monthly net investment income and may differ from the
actual investment income determined in accordance with generally accepted
accounting principles. An adjustment will be made to the dividend each month to
account for any difference between the projected and actual monthly investment
income.
Distributions will be paid in additional Fund shares of the relevant class based
on the net asset value of shares of that class at the close of business of the
payment date of the distribution, unless the shareholder elects in writing, not
less than five full business days prior to the record date, to receive such
distributions in cash. Dividends declared in, and attributable to, the preceding
month will be paid within five business days after the end of each month. In the
case of the Funds that declare daily dividends, shares purchased will begin
earning dividends on the day after the purchase order is executed, and shares
redeemed will earn dividends through the day the redemption is executed. Net
investment income for a Saturday, Sunday or holiday will be declared as a
dividend on the previous business day.
Any dividend or other distribution paid by a Fund has the effect of reducing the
net asset value per share on the record date by the amount thereof. Therefore,
in the case of Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund and
Centura Southeast Equity Fund, which do not declare dividends daily, a dividend
or other distribution paid shortly after a purchase of shares would represent,
in substance, a return of capital to the shareholder (to the extent it is paid
on the shares so purchased), even though subject to income taxes, as discussed
below.
Dividends distributed by Centura North Carolina Tax-Free Bond Fund that are
derived from interest income exempt from federal income tax and are designated
by the Fund as "exempt-interest dividends" will be exempt from the regular
federal income tax. Capital gains distributions and any other distributions of
Fund earnings not designated by the Fund as exempt-interest dividends will,
however, generally be subject to federal, state and local tax. The Fund's
investment policies permit it to earn income which cannot be designated as
exempt-interest dividends.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) will be taxable to
shareholders as ordinary income. If a portion of the income of Centura Mid Cap
Equity Fund, Centura Large Cap Equity Fund or Centura Southeast Equity Fund
consists of dividends paid by U.S. corporations, a portion of the dividends paid
by that Fund may qualify for the deduction for dividends received by
corporations. No portion of the dividends paid by Centura Federal Securities
Income Fund or Centura North Carolina Tax-Free Bond Fund is expected to so
qualify. Distributions of net long-term capital gains designated by a Fund as
capital gain dividends will be taxable as long-term capital gains, regardless of
how long a shareholder has held his Fund shares. Distributions are taxable in
the same manner whether received in additional shares or in cash.
A distribution, including an "exempt-interest dividend," will be treated as paid
on December 31 of the calendar year if it is declared by a Fund during October,
November, or December of that year to shareholders of record in such a month and
paid by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Any gain or loss realized by a shareholder upon the sale or other disposition of
shares of a Fund, or upon receipt of a distribution in complete liquidation of a
Fund, generally will be a capital gain or loss which will be long-term or
short-term generally depending upon the shareholder's holding period for the
shares.
If a shareholder elects to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
the shareholder's cash election will be changed automatically and future
dividend and capital gains 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 timing of a shareholder's investment could have undesirable tax
consequences. If a shareholder opens a new account or buys more shares for his
or her current account just before the day a capital gain distribution is
reflected in the Fund's share price, the shareholder would receive a portion of
his or her investment back as a taxable capital gain distribution.
Shareholders should also be aware that redeeming shares of Centura North
Carolina Tax-Free Bond Fund after tax-exempt interest income has been accrued by
the Fund but before that income has been distributed as a dividend may be
disadvantageous. This is because the gain, if any, on the redemption will be
taxable, even though such gain may be attributable in part to the accrued
tax-exempt interest, which, if distributed to the shareholder as a dividend
rather than as redemption proceeds, might have qualified as an exempt-interest
dividend.
Under certain circumstances, the sales charge incurred in acquiring Class A
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 when Class A shares of a
Fund are exchanged within 90 days after the date they were purchased and new
Class A 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 Class A 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 Class A shares is reduced as a result of having
incurred a sales charge initially. The portion of the sales charge affected by
this rule will be treated as a sales charge paid for the new Class A shares.
The Funds may be required to withhold federal income tax of 31% ("backup
withholding") of the distributions and the proceeds of redemptions payable to
shareholders who fail to provide a correct taxpayer identification number or to
make required certifications, or where a Fund or shareholder has been notified
by the Internal Revenue Service that the shareholder is subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code are exempt from backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against the shareholder's
U.S. federal income tax liability.
Further information relating to tax consequences is contained in the SAI.
Shareholders will be notified annually by the Company as to the federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may also be subject to special withholding requirements. Special
tax treatment including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. With respect to Centura North Carolina
Tax-Free Bond Fund, North Carolina law exempts from income taxation dividends
received from a regulated investment company in proportion to the income of the
regulated investment company that is attributable to interest on bonds or
securities of the U.S. government or any agency or instrumentality thereof or on
bonds of the State of North Carolina or any county, municipality or political
subdivision thereof. Shareholders should consult their own tax advisers as to
the federal, state and local tax consequences of ownership of shares of the
Funds in their particular circumstances.
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 Funds are
fully paid, non-assessable and freely transferable.
This Prospectus relates to Class A shares and Class B shares of the Funds. Each
Fund also offers Class C shares which are offered at net asset value with no
sales charge or CDSC only to accounts managed by the Adviser's Trust Department
and to non-profit institutions that invest at least $100,000. Because Class C
shares are not subject to service and distribution fees, their performance will
typically differ from that of Class A or Class B shares. Information about Class
C shares may be obtained from your sales representative or the Funds by calling
(800) 442- 3688.
VOTING
Shareholders have the right to vote in the election of Directors and on any and
all matters on which, by law or under the provisions of the Company's Articles
of Incorporation, they may be entitled to vote. The Company is not required to
hold regular annual meetings of the Funds' shareholders and does not intend to
do so. Each Fund's shareholders vote separately on items affecting only that
Fund, and shareholders of each class within a Fund vote separately on matters
affecting only that class, such as the service and distribution plan for that
class.
The Articles of Incorporation provide that the holders of not less than
two-thirds of the outstanding shares of the Company may remove a person serving
as 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 a Fund, a class or the Company, as
applicable, means the vote of the lesser of: (1) 67% of the shares of the Fund a
class or the Company) present at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy; or (2) more than 50%
of the outstanding shares of the Fund (a class or the Company).
<PAGE>
PERFORMANCE INFORMATION
[TO BE UPDATED]
TOTAL RETURN SUMMARY
THE CENTURA FUNDS (A CLASS)
PERIOD ENDED JUNE 30, 1997
NO LOAD TOTAL RETURN
<TABLE>
<CAPTION>
Inception Aggregate Since Average Annual Returns
Fund Date Return Ytd. Quarterly Inception 1 Year 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Mid Cap 12/31/90 14.72% 14.82% 29.86% 24.91% 24.91% 18.30% NA
Equity Fund
The Centura Large 12/31/90 11.69% 10.67% 15.73% 23.93% 21.16% 16.09% NA
Cap Equity Fund
The Centura 12/31/90 13.47% 17.58% 21.58% 26.87% 19.72% 18.58% NA
Southeast Equity Fund
The Centura Federal
Securities Fund 12/31/90 2.26% 2.61% 6.04% 5.74% 5.97% 5.12% NA
The Centura North
Carolina Tax-Free
Fund 01/31/91 3.03% 3.20% 5.05% 6.91% 5.84% 4.81% NA
</TABLE>
SUBJECT TO SALES LOAD
<TABLE>
<CAPTION>
Inception Aggregate Since Average Annual Returns
Fund Date Return Ytd. Quarterly Inception 1 Year 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Mid Cap
Equity Fund 12/31/90 9.56% 9.66% 18.47% 24.04% 23.02% 17.23% NA
The Centura Large Cap
Equity Fund 12/31/90 6.69% 5.56% 14.92% 18.33% 19.32% 15.01% NA
The Centura Southeast
Equity Fund 12/31/90 8.36% 12.24% 20.72% 21.15% 17.88% 17.49% NA
The Centura Federal
Securities Fund 12/31/90 (0.51%) (0.22%) 5.59% 2.87% 5.00% 4.54% NA
The Centura North
Carolina Tax-Free
Fund 01/31/91 0.15% 0.37% 4.60% 6.91% 4.87% 4.24% NA
</TABLE>
Sales Load
The Centura Mid Cap Equity Fund 4.50%
The Centura Large Cap Equity Fund 4.50%
The Centura Southeast Equity Fund 4.50%
The Centura Federal Securities 2.75%
Fund
The Centura North Carolina 2.75%
Tax-Free Fund
The performance data quoted represents past performance and is not an indication
of future results as yields fluctuate daily.
Centura Funds Distributor, Inc. is the Distributor for The Centura Group of
Funds.
<PAGE>
TOTAL RETURN SUMMARY
THE CENTURA FUNDS (B CLASS)
PERIOD ENDED JUNE 30, 1997
NO CDSC TOTAL RETURN
<TABLE>
<CAPTION>
Inception Aggregate Since Average Annual Returns
Fund Date Return Ytd. Quarterly Inception 1 Year 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Mid
Cap Equity Fund 12/31/90 14.33% 14.67% 18.48% 29.03% 24.13% 15.52% NA
The Centura Large
Cap Equity Fund 12/31/90 11.19% 10.35% 14.85% 22.89% 20.22% 15.20% NA
The Centura
Southeast Equity Fund 12/31/90 13.12% 17.45% 20.72% 26.02% 18.86% 17.71% NA
The Centura Federal
Securities Fund 12/31/90 2.02% 2.49% 5.29% 5.18% 5.26% 4.38% NA
The Centura North
Carolina Tax-Free
Fund 01/31/91 2.88% 3.07% 4.35% 6.33% 5.11% 4.13% NA
</TABLE>
CDSC TOTAL RETURN
<TABLE>
<CAPTION>
Inception Aggregate Since Average Annual Returns
Fund Date Return Ytd. Quarterly Inception 1 Year 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Mid Cap
Equity Fund 12/31/90 9.33% 9.67% 18.48% 24.03% 23.48% 17.42% NA
The Centura Large
Cap Equity Fund 12/31/90 6.19% 5.35% 14.85% 17.89% 19.53% 15.09% NA
The Centura Southeast
Equity Fund 12/31/90 8.12% 12.45% 20.72% 21.02% 18.15% 17.61% NA
The Centura Federal
Securities Fund 12/31/90 (0.97%) (0.51%) 5.29% 2.18% 4.34% 4.21% NA
The Centura North
Carolina Tax-Free
Fund 01/31/91 (0.12%) 0.07% 4.35% 3.33% 4.20% 3.96% NA
</TABLE>
CONTINGENT DEFERRED SALES CHARGE:
Shares redeemed within 5 years of purchase are subject to a CDSC equal to a
percentage of the lesser of the purchase NAV or the redemption NAV. The
contingent deferred sales charge will not be imposed on increases above the
beginning NAV or shares purchased through the reinvestment of dividends or
capital gains.
Centura Mid Cap Equity Fund Centura Large Cap Equity
and Centura Southeast Equity Fund, Centura Federal
Income Fund Securities Income Fund and
Centura North Carolina
Tax-Free Bond Fund
First 5.0% 3.0%
Second 4.0% 3.0%
Third 3.0% 3.0%
Fourth 2.0% 2.0%
Fifth 1.0% 1.0%
The performance data quoted represents past performance and is not an indication
of future results as yields fluctuate daily.
Centura Funds Distributor, Inc. is the Distributor for Centura Funds.
<PAGE>
NOTES ABOUT THE PERFORMANCE INFORMATION
(a) Background of the Funds
From 1/1/91 to 5/31/94, Centura Mid Cap Equity Fund and Centura Federal
Securities Income Fund were bank collective trust funds maintained and managed
by Centura Bank, and from 2/1/91 to 5/31/94, Centura North Carolina Tax-Free
Bond Fund was a common trust fund maintained and managed by Centura Bank. From
1/91 to 9/30/96, Centura Large Cap Equity Fund was a common trust fund
maintained and managed by Centura Bank. From 1/1/91 to 4/30/97, Centura
Southeast Equity Fund was a bank common trust fund maintained and managed by
Centura Bank. The investment objectives and policies of each of these Funds
prior to its conversion to a registered mutual fund were substantially
comparable to those of its successor registered mutual fund. Prior to 1/1/95,
however, the predecessor common trust fund to Centura Southeast Equity Fund was
known as the Centura Carolinas Fund, with investments limited to companies
headquartered or with substantial operations in North Carolina or South
Carolina. That common trust fund's name was changed to Centura Southeast Equity
Fund as of 1/1/95, when its investment policies were expanded to include all the
southeastern states, which policies are continued with the successor registered
mutual fund.
(b) How the Performance Information was Calculated
Investment performance for the Funds during their maintenance as common or
collective trust funds has been calculated on a monthly basis utilizing the Bank
Administration Institute's recommended time-weighted rate of return method to
compute the investment performance reflected in the above Schedule.
The performance figures assume reinvestment of dividends and interest and
include the cost of brokerage commissions. The investment performance excludes
taxes an investor might have incurred as a result of taxable ordinary income and
capital gains realized by the accounts. Bank common and collective trust funds
are not subject to certain expenses normally incurred by a mutual fund. Thus,
the performance figures, for periods prior to conversion to registered funds
have been adjusted, on a quarterly basis, to reflect the impact of the estimated
expense ratios for the registered funds at the time of the conversion.
It should be noted, however, that the bank-maintained common and
collective trust funds are not subject to the same tax and regulatory
requirements, including certain investment restrictions, applicable to
registered mutual funds. These regulatory and tax requirements could have
adversely affected the performance of the Funds' collective and common trust
fund predecessors.
The performance of the Funds may be compared to various widely recognized
indexes of market performance. The indexes are unmanaged and thus reflect no
management fees. They also do not reflect the transaction costs that would be
incurred by an investor to acquire the included securities. Because the
securities reflected in an index will typically differ in many respects from
those held by a Fund, various factors that can affect performance may affect a
Fund in different ways than an index to which it is compared.
Indexes to which the Funds' performance may be compared may include:
-- Standard & Poor's 500 Composite Stock Price Index -- an index of
market activity based on the aggregate performance of a selected
portfolio of publicly traded common stocks, including monthly
adjustments to reflect the reinvestment of dividends. The Index thus
reflects the total return of its portfolio, including changes in
market prices as well as accrued income interest;
-- The Russell 2000 Index -- an index comprised of the smallest 2000
companies in the Russell 3000 Index, representing approximately 11%
of the Russell 3000 total market capitalization. The Index was
developed with the base value of 135.00 as of December 31, 1986;
-- Merrill Lynch Government, U.S. Treasury Short-Term Index -- this
index shows total return for all outstanding U.S. Treasury
securities maturing in from one to 2.99 years. Price, coupon and
total return are reported using market weighted value including
accrued interest; and
-- Lehman Brothers Municipal Bond Index -- a total return performance
index of approximately 21,000 municipal bonds that meet certain
criteria. Price, coupon, and total return are reported using market
weighted value including accrued interest.
<PAGE>
In addition to those indexes listed above, the following indexes to which
the Funds' performance may be compared may include:
-- Lehman Brothers Intermediate Government Index
-- Lipper Short U.S. Treasury Funds Index
-- Lipper Growth Index
-- Lipper Equity Income Index
-- S&P Mid-Cap 400 Index
-- Valueline Index
When performance records are developed by the Funds, they may, from time to
time, include the yield and total return for shares (including each class, as
applicable) in advertisements or reports to shareholders or prospective
investors. The methods used to calculate the yield and total return of the Funds
are mandated by the SEC. In general, the performance of the classes of each Fund
will differ due to (a) differences in the level of class specific expenses,
including service and distribution fees and (b) the fact that total return
figures for Class A shares will reflect the deduction of the maximum front-end
sales charge applicable for each Fund while the total return figures for Class B
shares will reflect the maximum CDSC for each Fund. Performance figures for
Class C shares will reflect the absence of any service and distribution fee,
front-end sales charge or CDSC. Due to these differences in fees and/or expenses
borne by Class A, Class B and Class C shares, yield and total return on Class A
and Class B shares can be expected to be lower than the yield and total return
on Class C shares for the same period.
Quotations of "yield" will be based on the investment income per share during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share (for each class, as applicable) on the last day of the period.
Quotations of yield reflect a Fund's (and its classes') performance only during
the particular period on which the calculations are based. Yields will vary
based on changes in market conditions, the level of interest rates and the level
of the Fund's expenses, including class-specific expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future. Quotations of average annual total return will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in shares of a Fund (or class) over periods of 1, 5 and
10 years (up to the life of the Fund), reflect the deduction of a proportional
share of Fund and class-specific expenses, as applicable, on an annual basis,
and assume that all dividends and distributions are reinvested when paid.
Centura North Carolina Tax-Free Bond Fund may also advertise its "taxable
equivalent yield." Taxable equivalent yield is the yield that an investment,
subject to regular federal and North Carolina personal income taxes, would need
to earn in order to equal, on an after-tax basis, the yield on an investment
exempt from such taxes (normally calculated assuming the maximum combined
federal and North Carolina marginal tax rate). A taxable equivalent yield
quotation for the Fund will be higher than the yield quotations for the Fund.
The following table shows how to translate the yield of an investment that is
exempt from regular federal and North Carolina personal income taxes into a
taxable equivalent yield for the 1997 taxable year. The last five columns of the
table show approximately how much a taxable investment would have to yield in
order to generate an after-tax (regular federal and North Carolina personal
income taxes) yield of 4%, 5%, 6%, 7% or 8%. For example, the table shows that a
married taxpayer filing a joint return with taxable income of $80,000 would have
to earn a yield of approximately 10.45% before regular federal and North
Carolina personal income taxes in order to earn a yield after such taxes of 7%.
<PAGE>
1997 Taxable Year
Taxable Equivalent Yield Table (1) -- Federal And
North Carolina Personal Income Taxes
<TABLE>
<CAPTION>
To Equal Hypothetical Tax-Free Yield of
Combined 4%, 5%, 6%, 7% or 8%, A Taxable
Taxable Income ( 2) Marginal Investment Would Have to Yield
approximately
Single Return Joint Return Rate 4% 5% 6% 7% 8%
<S> <C> <C> <C> <C> <C> <C> <C>
up to $ 24,650 up to 41,200 20.95% 5.06% 6.33% 7.59% 8.86% 10.12%
$24,651-$59,750 $40,201-$99,600 33.04% 5.97% 7.47% 8.96% 10.45% 11.95%
$59,151-$60,000 $99,601-$100,000 35.83% 6.23% 7.79% 9.35% 10.91% 12.47%
$60,001-$124,650 $100,001-$147,700 36.35% 6.28% 7.86% 9.43% 11.00% 12.57%
$124,651-$271,050 $147,701-$271,050 40.96% 6.78% 8.47% 10.16% 11.86% 13.55%
$271,051 and over $271,051 and over 44.28% 7.18% 8.98% 10.77% 12.57% 14.36%
----------
<FN>
(1) The chart is presented for information purposes only. Tax equivalent
yields are a useful tool in determining the desirability of a tax exempt
investment; tax equivalent yields should not be regarded as determinative
of the desirability of such an investment. In addition, this chart is
based on a number of assumptions which may not apply in your case. You
should, therefore, consult a competent tax adviser regarding tax
equivalent yields in your situation.
(2) Assuming the federal alternative minimum tax is not applicable.
(3) The combined marginal rates were calculated using federal and North
Carolina tax rate tables for the 1997 taxable year. The federal tax rate
tables are indexed each year to reflect changes in the Consumer Price
Index. The combined federal and North Carolina personal income tax
marginal rates assume the North Carolina personal income taxes are fully
deductible for federal income tax purposes as an itemized deduction.
However, the ability to deduct itemized deductions (including state
income taxes) for federal income tax purposes is limited for those
taxpayers whose federal adjusted gross income for 1997 exceeds $121,200
($60,600 in the case of a married individual filing a separate return).
In addition, for federal income tax purposes that tax benefit of personal
exemptions is phased out for taxpayers whose adjusted gross incomes
exceed specified thresholds (for 1997, $121,200 in the case of single
individuals and $181,800 in the case of married individuals filing a
joint return).
</FN>
</TABLE>
Performance information for the Funds may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones
Industrial Average, indices prepared by Lipper Analytical Services, and other
entities or organizations which track the performance of investment companies.
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 from those held by a 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 each Fund's
investment objectives and policies, characteristics and quality of the Fund and
the market conditions during the time period indicated, and should not be
considered to be representative of what may be achieved in the future. For a
description of the methods used to determine yield and total return for the
Funds, see the SAI.
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Funds have been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
BISYS provides fund accounting functions for the Funds, and provides personnel
and facilities to perform shareholder servicing and transfer agency-related
services for the Company.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Centura Funds, P.O. Box 182485,
Columbus, Ohio 43218-2485.
General and Account Information: (800) 44CENTURA (442-3688).
<PAGE>
APPENDIX
DESCRIPTION OF BOND RATINGS
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its bond ratings are listed as follows: AAA
- -- judged to be the best quality and they carry the smallest degree of
investment risk; AA -- judged to be of high quality by all standards -- together
with the AAA group, they comprise what are generally known as high grade bonds;
A -- possess many favorable investment attributes and are to be considered as
"upper medium grade obligations;" BAA -- considered to be medium grade
obligations, i.e., they are neither highly protected nor poorly secured --
interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time; BA -- judged to have speculative
elements, their future cannot be considered as well assured; B -- generally lack
characteristics of the desirable investment; CAA -- are of poor standing -- such
issues may be in default or there may be present elements of danger with respect
to principal or interest; CA -- speculative in a high degree, often in default;
C -- lowest rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its bond ratings are listed as follows: AAA
- -- highest grade obligations, in which capacity to pay interest and repay
principal is extremely strong: AA -- has a very strong capacity to pay interest
and repay principal, and differs from AAA issues only in a small degree; A --
has a strong capacity to pay interest and repay principal, although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories; BBB -- regarded as
having an adequate capacity to pay interest and repay principal; whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. This group is the lowest which qualifies for commercial bank
investment. BB, B, CCC, CC, C -- predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and C the lowest within the
speculative rating categories. D -- interest or principal payments are in
default.
S&P applies indicators "+," no character, and "-" to its rating categories. The
indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF SHORT-TERM MUNICIPAL OBLIGATIONS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity. Ratings categories for securities in these groups
are as follows: MIG 1/VMIG 1 -- denotes best quality, there is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing; MIG2/VMIG 2 -- denotes high
quality, margins of protection are ample although not as large as in the
preceding group; MIG 3/VMIG 3 -- denotes high quality, all security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades; MIG 4/VMIG 4 -- denotes adequate quality, protection commonly regarded
as required of an investment security is present, but there is specific risk; SQ
- -- denotes speculative quality, instruments in this category lack margins of
protection.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
Excerpts from Moody's commercial paper ratings are listed as follows: PRIME-1 --
- -- issuers (or supporting institutions) have a superior ability for repayment of
senior short-term debt obligations; PRIME-2 -- issuers (or supporting
institutions) have a strong ability for repayment of senior short-term debt
obligations; PRIME-3 -- issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations; NOT PRIME --
issuers do not fall within any of the Prime categories.
DESCRIPTION OF S&P'S RATINGS FOR CORPORATE AND MUNICIPAL BONDS:
Investment Grade Ratings: Aaa -- the highest rating assigned by S&P, capacity to
pay interest and repay principal is extremely strong; AA -- has a very strong
capacity to pay interest and repay principal and differs from the highest rated
issues only in a small degree; A -- has strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories; BBB -- regarded as having an adequate capacity to pay interest and
repay principal -- whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Speculative Grade Ratings: Bb, B, Ccc, Cc, C -- debt rated in these categories
is regarded as having predominantly speculative characteristics with respect to
capacity to pay interest and repay principal -- while such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions; CI -- reserved for
income bonds on which no interest is being paid; D -- in default, and payment of
interest and/or repayment of principal is in arrears. Plus (+) OR Minus (-) --
the ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
DESCRIPTION OF S&P'S RATING FOR MUNICIPAL NOTES AND SHORT-TERM MUNICIPAL DEMAND
OBLIGATIONS:
Rating categories are as follows: SP-1 -- has a very strong or strong capacity
to pay principal and interest -- those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation; SP-2 -- -- has a
satisfactory capacity to pay principal and interest; SP-3 -- issues carrying
this designation have a speculative capacity to pay principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR SHORT-TERM CORPORATE DEMAND OBLIGATIONS AND
COMMERCIAL PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
Excerpts from S&P's description of its commercial paper ratings are listed as
follows: A-1 -- the degree of safety regarding timely payment is strong -- those
issues determined to possess extremely strong safety characteristics will be
denoted with a plus (+) designation; A-2 -- capacity for timely payment is
satisfactory -- however, the relative degree of safety is not as high as for
issues designated "A-1;" A-3 -- has adequate capacity for timely payment --
however, is more vulnerable to the adverse effects of changes in circumstances
than obligations carrying the higher designations; B -- regarded as having only
speculative capacity for timely payment; C -- a doubtful capacity for payment; D
- -- -- in payment default -- the "D" rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
<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
3435 Stelzer Road
Columbus, Ohio 43219
DISTRIBUTOR
Centura Funds Distributor, Inc.
125 West 55th Street
New York, New York 10019
COUNSEL
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
INDEPENDENT ACCOUNTANTS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
CENTURA FUNDS, INC.
PROSPECTUS
CLASS A SHARES AND CLASS B SHARES
CENTURA BANK
ADVISER
BISYS FUND SERVICES
ADMINISTRATOR AND SPONSOR
CENTURA FUNDS DISTRIBUTOR, INC.
DISTRIBUTOR
<PAGE>
CENTURA FUNDS, INC.
CLASS C SHARES
3435 STELZER ROAD
COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION:
(800) 442-3688
CENTURA BANK -- ADVISER
BISYS FUND SERVICES -- ADMINISTRATOR AND SPONSOR
CENTURA FUNDS DISTRIBUTOR, INC. -- DISTRIBUTOR
This Prospectus describes five of the six Funds (the "Funds") comprising Centura
Funds, Inc. (the "Company"), a registered open-end management investment company
advised by Centura Bank (the "Adviser"). Each Fund is a separate portfolio of
the Company. The Funds described in this Prospectus are:
Centura Mid Cap Equity Fund
Centura Large Cap Equity Fund
Centura Southeast Equity Fund
Centura Federal Securities Income Fund
Centura North Carolina Tax-Free Bond Fund
(A sixth fund, Centura Money Market Fund, is offered through a separate
prospectus dated _________, 1998.)
This Prospectus relates to Class C shares which are offered only to accounts
managed by the Adviser's Trust Department and to non-profit institutions
investing at least $100,000. Each Fund also has Class A shares and Class B
shares. (See "Other Information -- Capitalization.")
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND FUND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN MUTUAL FUNDS, SUCH AS THE FUNDS, INVOLVE RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the Funds and should be read and retained
for information about each Fund.
A Statement of Additional Information (the "SAI"), dated ____________, 1998,
containing additional and more detailed information about the Funds, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into the Prospectus. It is available without charge
and can be obtained by writing or calling the Funds at the address and
information numbers printed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is _________, 1998
<PAGE>
136
TABLE OF CONTENTS
Page
----
Highlights ..........................................................
Fund Expenses .......................................................
Financial Highlights ................................................
The Funds ...........................................................
Description Of Securities And Investment Practices ..................
Investment Restrictions .............................................
Risks Of Investing In The Funds .....................................
Management Of The Funds .............................................
Minimum Purchase Requirements .......................................
Pricing And Purchase Of Fund Shares .................................
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 FUNDS
This prospectus describes five of the six funds comprising Centura Funds, Inc.
(the "Company"). (The sixth fund, Centura Money Market Fund, is offered by a
separate prospectus dated ___________, 1998.) Each Fund has a distinct
investment objective and policies, as described below. The investment objective
of each Fund is a fundamental policy of the Fund and may not be changed without
approval of the Fund's shareholders. See "The Funds." The Funds and their
investment objectives and policies are as follows:
-- Centura Mid Cap Equity Fund (formerly, Centura Equity Growth Fund)--
This Fund's objective is long-term capital appreciation. It invests in
a diversified portfolio comprised mainly of publicly traded common and
preferred stocks and securities convertible into or exchangeable for
common stock of mid-sized companies. Its investments will be
principally in securities of U.S.-based companies, but it may also
invest in securities of foreign issuers, generally in the form of
American Depositary Receipts ("ADRs").
-- Centura Large Cap Equity Fund (formerly, Centura Equity Income Fund)--
This Fund's objective is to provide long-term capital appreciation.
The Fund invests primarily in common stocks, convertible preferred
stocks, and convertible bonds, notes and debentures of companies with
market capitalization in excess of $1 billion. It may also invest in
securities believed to offer special capital appreciation
opportunities. The Fund will invest primarily in securities of
U.S.-based companies, but it may also invest in securities of non-U.S.
issuers, generally through ADRs.
-- Centura Southeast Equity Fund -- This Fund's investment objective is
long-term capital appreciation. The Fund invests primarily in a
diversified portfolio of common and preferred stocks and securities
convertible into common stock of companies that are headquartered or
have substantial operations in the southeastern region of the United
States.
-- Centura Federal Securities Income Fund -- This Fund seeks to provide
relatively high current income consistent with relative stability of
principal and safety. The Fund invests primarily in securities issued
by the U.S. Government, its agencies and instrumentalities. The
maximum maturity of any such security will be 10 years.
-- Centura North Carolina Tax-Free Bond Fund -- This Fund seeks to
provide relatively high current income that is free of both regular
Federal and North Carolina personal income tax, together with relative
safety of principal. It invests primarily in a portfolio of high
quality municipal securities with a maximum maturity of 15 years and
an average portfolio maturity of 5 to 10 years.
RISKS OF INVESTING IN THE FUNDS
Investment in each of the Funds involves certain risks. There can, of course, be
no assurance that a Fund will achieve its investment objective or be successful
in preventing or minimizing the risk of loss that is inherent in certain types
of investments. Fund investments in securities of foreign issuers involves
special risks not usually associated with investing in U.S. companies.
Concentration of Centura North Carolina Tax-Free Bond Fund and Centura Southeast
Equity Fund in securities of a single state or region, respectively, makes each
of these Funds particularly vulnerable to events affecting that state or region,
respectively. The Funds have authority, which they do not presently intend to
use, to invest in various types of derivative instruments, which would entail
special risks. Investors should be aware that the value of each Fund's shares
will fluctuate, which may cause a loss in the principal value of the investment.
See "Risks of Investing in the Funds."
THE ADVISER
Management of the Funds is provided by Centura Bank (the "Adviser"),
headquartered in Rocky Mount, North Carolina. For its advisory services, the
Adviser, receives from each Fund a fee at an annual rate based on the Fund's
average daily net assets. This fee is at an annual rate of 0.70% for Centura Mid
Cap Equity Fund, 0.70% for Centura Large Cap Equity Fund, 0.70% for Centura
Southeast Equity Fund, 0.30% for Centura Federal Securities Income Fund, and
0.35% for Centura North Carolina Tax-Free Bond Fund. Fees to the Adviser may be
reduced pursuant to expense limitations. See "Management of the Funds."
THE DISTRIBUTOR, ADMINISTRATOR AND SPONSOR
Centura Funds Distributor, Inc. (the "Distributor") distributes the Funds'
shares. BISYS Fund Services, Inc. ("BISYS") acts as Sponsor and Administrator to
the Funds. For its services as Administrator, each Fund pays BISYS a fee at the
annual rate of 0.15% of its average daily net assets. BISYS also acts as
transfer agent and fund accounting agent for the Funds, for which it receives
additional fees.
CLASSES OF SHARES
Class C shares are offered at net asset value with no sales charge, and no
contingent deferred sales charge ("CDSC") is imposed on redemptions. Class C
shares are available only to accounts managed by the Adviser's Trust Department
and to non-profit institutions investing at least $100,000. See "Pricing and
Purchase of Fund Shares" and "Redemption of Fund Shares." Each of the Funds also
offers Class A shares (subject to a front-end sales charge, unless waived) and
Class B shares (subject to a CDSC, unless waived). See "Other Information
- --Capitalization."
The Funds reserve the right to redeem upon not less than 30 days' notice all
shares in a Fund's account which have an aggregate value of $1,000 or less.
ALL DIVIDENDS AND DISTRIBUTIONS WILL BE AUTOMATICALLY REINVESTED AT NET ASSET
VALUE IN ADDITIONAL SHARES OF THE SAME CLASS OF THE APPLICABLE FUND UNLESS CASH
PAYMENT IS REQUESTED. EACH OF THE FUNDS PAYS DIVIDENDS FROM INCOME, IF ANY,
MONTHLY.
SEE "PRICING AND PURCHASE OF FUND SHARES," "REDEMPTION OF FUND SHARES" AND
"DIVIDENDS, DISTRIBUTIONS AND FEDERAL INCOME TAXATION" FOR MORE INFORMATION.
FUND EXPENSES
The following expense table indicates costs and expenses that an investor in
Class C shares should anticipate incurring either directly or indirectly as a
shareholder in the Funds.
<PAGE>
FEE TABLE*
<TABLE>
<CAPTION>
Centura
Centura North
Centura Centura Centura Federal Carolina
Mid Cap Large Cap Southeast Securities Tax-Free
Equity Equity Equity Income Bond
Fund Fund Fund Fund Fund
Class C Class C Class C Class C Class C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses None None None None None
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price)
Maximum Sales Charge Imposed on None None None None None
Reinvested Dividends (as a
percentage of offering price)
Deferred Sales Charge (as a None None None None None
percentage of redemption
proceeds)**
Exchange Fees None None None None None
Annual Fund Operating Expenses 0.70 0.36 0.42 0.30 0.10
(as a percentage of average net
assets annualized) Management Fees
(After Waiver)***
12b-1 Fees -- -- -- -- --
Other Expenses (After Waiver)*** 0.35 0.39 0.83 0.28 0.34
Total Portfolio Operating Expenses*** 1.05 0.75 1.25 0.58 0.44
- --------------
<FN>
* Class A shares of each Fund are subject to a maximum 12b-1 fee of 0.50% and
a maximum front-end load of 4.50% for Centura Mid Cap Equity Fund, Centura
Large Cap Equity Fund, and Centura Southeast Equity Fund, and 2.75% for each
of the other Funds (unless waived). Class B shares of each Fund are subject
to a 12b-1 fee of 1.00%, and a maximum contingent deferred sales charge
("CDSC") of 5.00% for Centura Mid Cap Equity Fund, Centura Large Cap Equity
Fund, and Centura Southeast Equity Fund, and 3.00% for each of the other
Funds (unless waived) for redemptions within five years of purchase.
** Shareholders who redeem shares by wire may be charged a fee by the banks
receiving the wire payments on their behalf. (See "Redemption of Fund Shares.")
*** Amounts shown for "Management Fees," "Other Expenses" and "Total
Portfolio Operating Expenses" for the Large Cap Equity Fund and the North
Carolina Tax-Free Bond Fund reflect reductions of fees payable by those Funds
to the Adviser and for administrative and transfer agent services pursuant to
agreements to limit fund expenses. Without these reductions, "Management
Fees" for Large Cap Equity Fund and North Carolina Tax-Free Bond Fund,
respectively, would be 0.70% and 0.35%, "Other Expenses" would be 0.47% and
0.45%, and "Total Portfolio Operating Expenses" would be 1.17% and 0.80%.
"Management Fees," "Other Expenses" and Total Portfolio Operating Expenses
for Centura Southeast Equity Fund reflect anticipated waivers. Without these
reductions, "Management Fees," "Other Expenses" and "Total Portfolio
Operating Expenses" for this Fund would be 0.70%, 0.89%, and 1.59%,
respectively.
</FN>
</TABLE>
EXAMPLE:*
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<PAGE>
Centura
Centura Centura Centura Federal Centura North
Mid Cap Large Cap Southeast Securities Carolina
Equity Equity Equity Income Tax-Free Bond
Fund Fund Fund Fund Fund
Class C Class C Class C Class C Class C
3 Years $ 33 $ 24 $ 40 $ 19 $ 14
5 Years $ 58 $ 42 $ 69 $ 32 $ 25
10 Years $128 $ 93 $151 $ 73 $ 55
* 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.
FINANCIAL HIGHLIGHTS
The following table sets forth certain information for each Fund's fiscal
periods ended April 30, 1998, April 30, 1997 and April 30, 1996. The information
set forth in this table has been audited by McGladrey & Pullen LLP, the Funds'
independent accountant whose report on the financial statements is included in
the Funds' Annual Report. The Annual Report also includes Management's
Discussion of Fund Performance. The Annual Report may be obtained without
charge. The financial statements from the Annual Report are also contained in
the Statement of Additional Information, which is available without charge upon
request. This information should be read in conjunction with the financial
statements.
[TO BE UPDATED]
<PAGE>
MID CAP EQUITY FUND*
Year Ended April Year Ended April Year Ended April 30,
30, 1998 30, 1997 1996(a)
Class Class B Class Class Class Class C Class Class B Class
A C A B A C
Net Asset Value,
Beginning of $14.31$14.24$14.31 $10.70 $10.69 $10.70
Period
Investment
Activities 0.06 (0.04)0.09 0.06 (0.06) 0.07
Net investment
income
Net realized
and unrealized 1.58 1.57 1.58 3.67 3.65 3.65
gains from
investments
Total from
investment 1.64 1.53 1.67 3.70 3.59 3.72
activities
Distributions
Net investment (0.06)(0.01)(0.09) (0.05) -- (0.07)
income
Net realized (0.56)(0.56)(0.56) (0.04) (0.04) (0.04)
gains
Total (0.62)(0.57)(0.65) (0.09) (0.04) (0.110)
Distributions
Net Asset Value,
End of Period $15.33 $15.20 $15.33 $14.31 $14.24 $14.31
Total Return
(excludes sales 11.55% 10.78% 11.82% 34.72% 33.73% 34.97%
and redemption
charges
Ratios/Supplementary
Data:
Net Assets at
end of period $8,501 $9,761 $147,213 $5,740 $6,194 $133,714
(000)
Ratio of
expenses to 1.30% 2.05% 1.05% 1.25^ 2.02% 1.04%
average
net assets**
Ratio of net
investment
income (loss) 0.42% (0.33%0.67% 0.27% (0.48%) 0.55%
to average net
assets
Ratio of
expenses to 1.55% 2.05% 1.05% (d) (d) (d)
average
net assets**
Ratio of net
investment
income (loss) 0.17% (0.33%0.67% (d) (d) (d)
to average net
assets**
Portfolio 67%(c)67%(c)67%(c) 46%(c) 46%(c) 46%(c)
Turnover
Average
Commission Rate $0.080 $0.080 $0.0805 -- -- --
Paid (f)
- ---------------
* This Fund's name and investment policies changed, effective ________, 1998.
Prior to that date, the Fund's name was Centura Equity Growth Fund and it
invested generally in growth stocks without a specific emphasis on stocks of
mid-sized companies.
** During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from June 1, 1994 (commencement of operations) to April
30, 1995.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) There were no waivers or reimbursements during the period.
(e) Not annualized.
(f) Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased and
sold by the Fund for which commissions were charged. Disclosure is not
required for prior periods.
LARGE CAP EQUITY FUND*
Year Ended April Year Ended April 30,
30, 1998 1997(a)
Class Class Class C Class Class Class C
A B A B
Net Asset Value,
Beginning of Period $10.00$10.00 $10.00
Investment Activities
Net investment income 0.14 0.11 0.15
Net realized and 0.93 0.90 0.91
unrealized gains from
investments
Total from investment 1.07 1.01 1.06
activities
Distributions
Net investment income (0.14)(0.11) (0.15)
Net realized gains (0.02)(0.02) (0.02)
Total Distributions (0.16)(0.13) (0.17)
(0.09)(0.04)
Net Asset Value,
End of Period $10.91$10.88 $10.89
Total Return (excludes sales 10.69^10.15% 0.65%
and redemption charges
Ratios/Supplementary Data:
Net Assets at end of period $338 $427 $52,486
(000)
Ratio of expenses to average 0.99% 1.71% 0.75%
net assets(b)
Ratio of net investment
income (loss) to average net 2.15% 1.52% 2.45%
asset(b)s
Ratio of expenses to average 1.65% 2.12% 1.17%
net assets**(b)
Ratio of net investment
income (loss) to average net 1.48% 1.10% 2.03%
assets**(b)
Portfolio Turnover 24%(c)24%(c) 24%(c)
Average Commission Rate Paid $0.089$0.0898 $0.0898
- ------------------
* This Fund's name and investment objective and policies changed effective
_________, 1998. Prior to that date, the Fund's name was Centura Equity
Income Fund, its investment objective was long-term capital appreciation and
it invested primarily in dividend-paying stocks.
** During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) For the period from October 1, 1996 (commencement of operations) to April
30, 1997.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Not annualized.
(e) Represents the total dollar amount of commissions paid on portfolio
transactions divided by the total number of portfolio shares purchased and
sold by the Fund for which commissions where charged.
FEDERAL SECURITIES INCOME FUND
Year Ended April Year Ended April Year Ended April 30,
30, 1998 30, 1997 1996(a)
Class Class B Class Class Class Class C Class Class B Class
A C A B A C
Net Asset Value, $10.01$10.01$10.01 $9.97 $9.97 $9.97
Beginning of
Period 0.56 0.50 0.59 0.57 0.50 0.60
Investment
Activities (0.07)(0.07)(0.07) 0.04 0.04 0.04
Net investment
income
Net realized
and unrealized 0.49 0.43 0.52 0.61 0.54 0.64
gains from
investments
Total from
investment
activities
Distributions (0.56)(0.50)(0.59) (0.57) (0.50) (0.60)
Net investment (0.56)(0.50)(0.59) (0.57) (0.50) (0.60)
income
Total
Distributions
Net Asset Value, $9.94 $9.94 $9.94 $10.01 $10.01 $10.01
End of Period
5.07% 4.46^ $5.33% 6.20% 5.40% 6.47%
Total Return
(excludes sales
and redemption
charges
Ratios/Supplementary
Data: $481 $194 $119,434 $526 $176 $109,775
Net Assets at
end of period 0.82% 1.40% 0.58% 0.85% 1.61% 0.61%
(000)
Ratio of
expenses to
average 5.63% 5.04% 5.88% 5.61% 4.84% 5.88%
net assets*
Ratio of net
investment 1.07% 1.65% 0.58% (d) (d) (d)
income (loss)
to average net
assets
Ratio of
expenses to
average 5.38% 4.79% 5.88% (d) (d) (d)
net assets*
Ratio of net 26%(c) 26%(c) 26%(c) 34%(c) 34%(c) 34%(c)
investment
income (loss)
to average net
assets*
Portfolio
Turnover
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from June 1, 1994 (commencement of operations) to April
30, 1995.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) There were no waivers or reimbursements during the period.
(e) Not annualized.
<PAGE>
NORTH CAROLINA TAX-FREE FUND
<TABLE>
<CAPTION>
Year Ended April 30, 1998 Year Ended April 30, 1997 Year Ended April 30, 1996(a)
Class A Class B Class C Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period $10.04 $10.04 $10.04 $9.98 $9.98 $9.98
Investment
Activities 0.43 0.37 0.46 0.42 0.34 0.44
Net investment
income
Net realized
and unrealized 0.03 0.03 0.03 0.13 0.13 0.13
gains from
investments
Total from
investment 0.46 0.40 0.49 0.55 0.47 0.57
activities
Distributions
Net investment (0.43) (0.37) (0.46) (0.42) (0.34) (0.44)
income
Net realized (0.09) (0.09) (0.09) (0.07) (0.07) (0.07)
gains
Total (0.49) (0.46) (0.55) (0.49) (0.41) (0.51)
Distributions
Net Asset Value,
End of Period $9.98 $9.98 $9.98 $10.04 $10.04 $10.04
Total Return
(excludes sales 4.71% 4.11% 4.97% 5.50% 4.72% 5.78%
and redemption
charges
Ratios/Supplementary
Data:
Net Assets at
end of period $3,823 $430 $32,159 $3,927 $393 $37,009
(000)
Ratio of
expenses to 0.69% 1.27% 0.44% 0.68% 1.44% 0.44%
average
net assets*
Ratio of net
investment
income (loss) 4.31% 3.73% 4.56% 3.98% 3.30% 4.32%
to average net
assets
Ratio of
expenses to 3.70% 3.12% 4.20% 3.62% 2.94% 3.96%
average
net assets*
Ratio of net
investment
income (loss) 3.70% 3.12% 4.20% 3.62% 2.94% 3.96%
to average net
assets*
Portfolio 34%(c) 34%(c) 34%(c) 80%(c) 80%(c) 80%(c)
Turnover
- --------------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) For the period from June 1, 1994 (commencement of operations) to April
30, 1995.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(d) Not annualized.
</FN>
</TABLE>
THE FUNDS
Each Fund is a separate diversified investment fund or portfolio, commonly known
as a mutual fund. The Funds are portfolios of the Company, which was organized
under the laws of the State of Maryland on March 1, 1994 as an open-end,
management investment company. Centura Large Cap Equity Fund and Centura
Southeast Equity Fund were established as new portfolios of the Company on
August 28, 1996 and March 28, 1997, respectively. The Company's Board of
Directors oversees the overall management of the Funds and elects the Funds'
officers.
Centura Mid Cap Equity Fund (formerly, Centura Equity Growth Fund). Investors
seeking long-term growth of capital and for whom current income is not an
objective should consider investing in Centura Mid Cap Equity Fund.
The investment objective of Centura Mid Cap Equity Fund is long-term capital
appreciation. The Fund invests primarily in a diversified portfolio of publicly
traded common and preferred stocks and securities convertible into or
exchangeable for common stock. The Adviser uses fundamental analysis to select
stocks for the Fund's portfolio that the Adviser believes are undervalued
relative to their industry or to their historical valuation ranges. However, the
Adviser may also invest in companies which it believes have improving prospects
whose equity securities are currently selling below their estimated intrinsic
value. In addition, out-of-favor growth cyclicals may be used if the adviser
anticipates a sustainable earnings recovery for these companies. The Fund
expects to invest primarily in securities of U.S.-based companies, but it may
also invest in securities of non-U.S. companies, generally through American
Depository Receipts ("ADRs"). Under normal circumstances, at least 65% of the
Fund's total assets will be invested in equity securities of mid-sized
companies. Mid-sized companies are defined as those with market capitalizations
that fall within the range of companies in the S&P 400 Mid Cap Index at the time
of investment. The S&P Mid Cap Index is an unmanaged index that is designed to
track the performance of medium sized companies. The index is updated quarterly,
and the companies included in the index, as well as their capitalization ranges,
change from time to time. As of March 31, 1998, the range of market
capitalization of the companies within the S&P Mid Cap 400 Index was $201
million to $14.3 billion. A company that was within the range of the index at
the time its stock was purchased by the Fund will continue to be considered
mid-sized for purposes of the 65% test even if its capitalization subsequently
falls outside the range of the index. The Fund may invest without limit in debt
instruments for temporary defensive purposes when the Adviser has determined
that abnormal market or economic conditions so warrant. These debt obligations
may include U.S. Government securities; certificates of deposit, bankers'
acceptances and other short-term debt obligations of banks with total assets of
at least $1,000,000,000; debt obligations of corporations (corporate bonds,
debentures, notes and other similar corporate debt instruments); commercial
paper; and repurchase agreements with respect to securities in which the Fund is
authorized to invest. Although the Fund's investments in such debt securities
and in convertible and preferred stock will generally be rated A, A-1, or better
by Standard & Poor's Corporation ("S&P") or A, Prime-1 or better by Moody's
Investors Service, Inc. ("Moody's"), or deemed of comparable quality by the
Adviser, the Fund is authorized to invest up to 15% of its assets in securities
rated as low as BBB by S&P or Baa by Moody's, or deemed of comparable quality by
the Adviser. Securities rated BBB or Baa, or deemed equivalent to such
securities, may have speculative characteristics. See "Risks of Investing in the
Funds." If any security held by the Fund is downgraded below BBB/Baa (or so
deemed by the Adviser), the securities will generally be sold unless it is
determined that such sale is not in the best interest of the Fund. The Fund will
invest in no securities rated below BBB or Baa.
Centura Large Cap Equity Fund (formerly Centura Equity Income Fund). Investors
seeking long-term growth and income should consider an investment in Centura
Large Cap Equity Fund. The investment objective of Centura Large Cap Equity Fund
is to provide long-term capital appreciation. This Fund invests primarily in
common stocks, convertible preferred stocks, and convertible bonds, notes and
debentures. In managing this Fund, the Adviser uses fundamental analysis to
select stocks for the Fund's portfolio that the Adviser believes are undervalued
in the marketplace based on such factors as price/earnings ratios or the ratio
of stock price to the company's inherent asset value, book value, cash flow or
underlying franchise value. The Fund expects to invest primarily in securities
of U.S.-based companies, but it may also invest in securities of non-U.S.
companies, generally through ADRs. Under normal circumstances, at least 65% of
the Fund's total assets will be invested in equity securities of large U.S.
companies. Large companies are defined as those with market capitalization in
excess of $1 billion at the time of purchase. Companies that satisfy this test
at the time of purchase will continue to be considered "large" for purposes of
the 65% test even if they subsequently fall below this range. For temporary
defensive purposes when the Adviser has determined that abnormal market or
economic conditions so warrant, the Fund may invest without limit in debt
instruments of the same types, and subject to the same conditions, as Centura
Mid Cap Equity Fund under such circumstances.
Centura Southeast Equity Fund. Investors seeking long-term growth of capital
through investment in companies of the southeastern United States should
consider investing in Centura Southeast Equity Fund.
The investment objective of the Centura Southeast Equity Fund is long-term
capital appreciation. The Fund invests primarily in a diversified portfolio of
common and preferred stocks and securities convertible into common stock of
companies headquartered or with substantial operations in the southeastern
region of the United States. For a company to qualify as having "substantial
operations" in the southeastern United States, it must derive at least 50% of
its income from or have at least 50% of its physical assets located within the
region. The southeastern region includes Alabama, Arkansas, Florida, Georgia,
Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and
Virginia. From time to time the Fund may also invest substantially in companies
headquartered or with substantial operations in the state of Texas.
The Adviser uses fundamental analysis to select stocks of issuers that are
undervalued relative to their industry or their historical valuation ranges.
However, the Adviser may also invest in companies which it believes have
improving prospects, whose equity securities are selling below their estimated
intrinsic value. In addition, out-of-favor cyclicals may be purchased if the
Adviser anticipates a sustainable earnings recovery. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
securities of southeastern issuers, and at least 65% of its total assets will be
invested in equity securities or securities convertible into equity securities.
Under normal market conditions, the Adviser anticipates investing a majority of
the Fund's assets in securities of small to medium sized companies. Subject to
the foregoing, the Fund also has authority to invest in equity and debt
securities of non-southeastern issuers and non-U.S. issuers. Its investments in
non-U.S. issuers will generally be in the form of American Depository Receipts
("ADRs"). For temporary defensive purposes during abnormal market or economic
conditions, the Fund may invest without limit in debt instruments of the same
type, and subject to the same conditions, as Centura Mid Cap Equity Fund under
such circumstances.
Centura Federal Securities Income Fund. Investors seeking relatively high
current income from a portfolio of U.S. Government securities should consider
investing in Centura Federal Securities Income Fund.
The investment objective of Centura Federal Securities Income Fund is to provide
relatively high current income consistent with relative stability of principal
and safety. It pursues this objective by investing primarily in securities
issued by the U.S. Government, its agencies and instrumentalities with maximum
maturities of ten years. These securities typically display greater price
stability and safety than debt securities of longer maturity and lower quality,
although the latter generally offer higher income. In addition to limiting the
maturity of its portfolio securities, the Fund attempts to moderate principal
fluctuations by using a modified "laddering" approach to structuring the Fund's
portfolio -- i.e., by investing in securities with different maturities and
adjusting their relative proportions, as well as the maximum and average
maturity of its portfolio securities, to adapt to various market conditions.
Using this approach, the Fund hopes both to capture a high proportion of the
currently available yield on fixed income securities and to limit volatility.
To permit desirable flexibility, the Fund has authority to invest in corporate
debt securities rated A or better by S&P or Moody's (or deemed of comparable
quality by the Adviser) and high quality money market instruments including
commercial paper rated A-1 or better by S&P or Prime-1 or better by Moody's (or
deemed by the Adviser to be of comparable quality); certificates of deposit,
bankers' acceptances and other short-term debt obligations of banks with total
assets of at least $1,000,000,000; and repurchase agreements with respect to
securities in which the Fund is authorized to invest.
Centura North Carolina Tax-Free Bond Fund. Investors seeking dividend income
that is generally free of regular federal and North Carolina personal income
taxes should consider investing in the Centura North Carolina Tax-Free Bond
Fund.
The investment objective of Centura North Carolina Tax-Free Bond Fund is
relatively high current income that is free of both regular federal and North
Carolina personal income tax, together with relative safety of principal. This
Fund invests primarily in a portfolio of obligations issued by the state of
North Carolina, its political subdivisions, and their agencies and
instrumentalities, the income from which, in the opinion of the issuer's bond
counsel, is exempt from regular federal and North Carolina personal income taxes
("North Carolina Municipal Obligations"). By limiting the Fund's average
portfolio maturity to between 5 and 10 years, with a maximum maturity for any
portfolio security of 15 years, the Fund seeks to capture a high proportion of
the currently available return on North Carolina Municipal Obligations while
providing greater safety of principal than would be available from longer term
municipal securities. It also seeks to moderate price fluctuations by
diversifying its investments among different municipal issuers and by limiting
its investments to securities of high quality.
The Fund seeks to provide income that is fully free from regular federal and
North Carolina personal income taxes, as well as from the federal alternative
minimum tax. To provide the flexibility to deal with a variety of market
circumstances, however, the Fund has limited authority (a) to invest in
municipal obligations of other states ("Municipal Obligations"), the income from
which would not be free from North Carolina income tax, (b) to invest up to 10%
of its assets in municipal obligations subject to the federal alternative
minimum tax ("AMT Obligations"), and (c) to invest up to 20% of its assets in
AMT Obligations plus cash reserves and obligations producing taxable income,
including obligations of the U.S. Government, its agencies and
instrumentalities; certificates of deposit, bankers' acceptances and other
short-term debt obligations of U.S banks with total assets of at least
$1,000,000,000; commercial paper rated A-1 or better by S&P or Prime-1 or better
by Moody's (or deemed by the Adviser to be of comparable quality); and
repurchase agreements relating to underlying securities in which the Fund is
authorized to invest. For temporary defensive purposes when the Adviser has
determined that abnormal market and economic conditions so warrant, the Fund may
invest up to 50% of its assets in investments producing taxable income and AMT
Obligations. Any distributions by the Fund of capital gains and other income
that are not designated by the Fund as "exempt-interest" dividends will normally
be subject to federal, state and, in some cases, local tax. As a fundamental
policy, during periods of normal market conditions, at least 80% of the Fund's
net assets will be invested in securities the interest income from which is
exempt from the regular federal income tax. Additionally, under normal
circumstances, (a) at least 65% of the Fund's total assets will be invested in
"bonds" -- i.e. debt obligations with a duration of at least one year from the
date of issue, and (b) at least 65% of the value of the Fund's total assets will
be invested in bonds that are North Carolina Municipal Obligations. Tax advisers
should be consulted regarding tax effects for particular investors.
The Fund's quality criteria require that the Fund purchase Municipal Obligations
rated A, SP-1 or better by S&P or A, MIG-1 or better by Moody's; commercial
paper rated A-1 or better by S&P or Prime-1 or better by Moody's; corporate debt
securities rated A or better by S&P or Moody's (or debt securities given
equivalent ratings by at least two other nationally recognized statistical
rating organizations ("NRSROs")) or, if any of such securities are not rated,
that they be of comparable quality in the Adviser's opinion. For more
information on Municipal Obligations and North Carolina Municipal Obligations,
see "Description of Securities and Investment Practices" and "Risks of Investing
in the Funds."
In determining to invest in a particular Municipal Obligation, the Adviser will
rely on the opinion of bond counsel for the issuer as to the validity of the
security and the exemption of interest on such security from federal and
relevant state income taxes, and the Adviser will not make an independent
investigation of the basis for any such opinion.
OTHER INVESTMENT POLICIES OF THE FUNDS
Each of the Funds may also invest up to 5% of its total assets in another
investment company, not to exceed 10% of the value of its total assets in the
securities of other investment companies. (Subject to obtaining exemptive relief
from the Securities and Exchange Commission, the Funds may invest in shares of
Centura Money Market Fund, a separate series of Centura Funds, Inc.) Taxable
distributions earned from other investment companies will, likewise, represent
taxable income to a Fund. A Fund will incur additional expenses due to the
duplication of expenses as a result of investing in other mutual funds because
investors bear indirectly a proportionate share of the expenses of such
companies, including operating costs, and investment advisory and administration
fees. Each of the Funds has authority, which it does not presently intend to
exercise, to invest in futures and options contracts and to lend its portfolio
securities. For information concerning these practices, see "Investment
Policies" in the SAI.
DESCRIPTION OF SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities (All Funds). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Treasury bills, which have a maturity of up to one year,
are direct obligations of the United States and are the most frequently issued
marketable U.S. Government security. The U.S. Treasury also issues securities
with longer maturities in the form of notes and bonds.
U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates
issued by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Banks, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment.
Bank Obligations (All Funds). These obligations include negotiable certificates
of deposit and bankers' acceptances. The Funds limit their bank investments to
dollar-denominated obligations of U.S. or foreign banks which have more than $1
billion in total assets at the time of investment and, in the case of U.S.
banks, are members of the Federal Reserve System or are examined by the
Comptroller of the Currency, or whose deposits are insured by the Federal
Deposit Insurance Corporation.
Commercial Paper (All Funds). Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions, as well as similar instruments issued by government
agencies and instrumentalities.
Corporate Debt Securities (All Funds). A Fund's investments in corporate debt
securities are limited to corporate debt securities (corporate bonds,
debentures, notes and other similar corporate debt instruments) which meet the
previously disclosed minimum ratings and maturity criteria established for the
Fund under the direction of the Board of Directors and the Fund's Adviser or, if
unrated, are in the Adviser's opinion comparable in quality to corporate debt
securities in which the Fund may invest. See "The Funds."
Repurchase Agreements (All Funds). Securities held by the Funds may be subject
to repurchase agreements. A repurchase agreement is a transaction in which the
seller of a security commits itself at the time of the sale to repurchase that
security from the buyer at a mutually agreed-upon time and price. These
agreements permit the Funds to earn income for periods as short as overnight.
Repurchase agreements may be considered to be loans by the purchaser
collateralized by the underlying securities. These agreements will be fully
collateralized at all times and the collateral will be marked-to-market daily.
The Funds will enter into repurchase agreements only with dealers, domestic
banks or recognized financial institutions which in the opinion of the Adviser,
present minimal credit risks in accordance with guidelines adopted by the Board
of Directors. In the event of default by the seller under the repurchase
agreement a Fund may have problems in exercising its rights to the underlying
securities and may experience time delays in connection with the disposition of
such securities.
Loans Of Portfolio Securities (All Funds). To increase current income each Fund
may lend its portfolio securities worth up to 5% of that Fund's total assets to
brokers, dealers and financial institutions, provided certain conditions are
met, including the condition that each loan is secured continuously by
collateral maintained on a daily mark-to-market basis in an amount at least
equal to the current market value of the securities loaned. For further
information, see the SAI.
Variable And Floating Rate Demand And Master Demand Notes (All Funds). The Funds
may, from time to time, buy variable or floating rate demand notes issued by
corporations, bank holding companies and financial institutions and similar
instruments issued by government agencies and instrumentalities. These
securities will typically have a maturity over one year but carry with them the
right of the holder to put the securities to a remarketing agent or other entity
at designated time intervals and on specified notice. The obligation of the
issuer of the put to repurchase the securities may be backed by a letter of
credit or other obligation issued by a financial institution. The repurchase
price is ordinarily par plus accrued and unpaid interest. Generally, the
remarketing agent will adjust the interest rate every seven days (or at other
specified intervals) in order to maintain the interest rate at the prevailing
rate for securities with a seven-day or other designated maturity. A Fund's
investment in demand instruments which provide that the Fund will not receive
the principal note amount within seven days' notice, in combination with the
Fund's other investments in illiquid instruments, will be limited to an
aggregate total of 15% of that Fund's net assets.
The Funds may also buy variable rate master demand notes. The terms of these
obligations permit a Fund to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. These instruments permit weekly and, in some instances, daily changes
in the amounts borrowed. The Funds have the right to increase the amount under
the note at any time up to the full amount provided by the note agreement, or to
decrease the amount, and the borrower may repay up to the full amount of the
note without penalty. The notes may or may not be backed by bank letters of
credit. Because the notes are direct lending arrangements between the Fund and
borrower, it is not generally contemplated that they will be traded, and there
is no secondary market for them, although they are redeemable (and, thus,
immediately repayable by the borrower) at principal amount, plus accrued
interest, at any time. In connection with any such purchase and on an ongoing
basis, the Adviser will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes make demand
simultaneously. While master demand notes, as such, are not typically rated by
credit rating agencies, a Fund may, under its minimum rating standards, invest
in them only if, at the time of an investment, the issuer meets the criteria set
forth in this Prospectus for commercial paper obligations.
Forward Commitments And When-Issued Securities (All Funds). A Fund may purchase
when-issued securities and make contracts to purchase securities for a fixed
price at a future date beyond customary settlement time if the Fund holds, and
maintains until the settlement date in a segregated account cash, U.S.
Government securities or high-grade debt obligations in an amount sufficient to
meet the purchase price, or if the Fund enters into offsetting contracts for the
forward sale of other securities it owns. Purchasing securities on a when-issued
basis and forward commitments involves a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of a Fund's other assets. No income
accrues on securities purchased on a when-issued basis prior to the time
delivery of the securities is made, although a Fund may earn interest on
securities it has deposited in the segregated account because it does not pay
for the when-issued securities until they are delivered. Investing in
when-issued securities has the effect of (but is not the same as) leveraging the
Fund's assets. Although a Fund would generally purchase securities on a
when-issued basis or enter into forward commitments with the intention of
actually acquiring securities, that Fund may dispose of a when-issued security
or forward commitment prior to settlement if the Adviser deems it appropriate to
do so. A Fund may realize short-term profits or losses upon such sales.
Mortgage-Related Securities (Centura Federal Securities Income Fund and
Centura North Carolina Tax-Free Bond Fund). Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments of
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities (net of fees paid to
the issuer or guarantor of the securities). Centura North Carolina Tax-Free Bond
Fund may invest only in those mortgage pass-through securities whose payments
are tax-exempt. Early repayment of principal on mortgage pass-through securities
(arising from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose a Fund to a lower rate of return upon reinvestment of principal. Also, if
a security subject to prepayment has been purchased at a premium, in the event
of prepayment the value of the premium would be lost. Like other fixed-income
securities, when interest rates rise, the value of a mortgage-related security
generally will decline; however, when interest rates decline, the value of
mortgage-related securities with prepayment features may not increase as much as
other fixed-income securities. In recognition of this prepayment risk to
investors, the Public Securities Association (the "PSA") has standardized the
method of measuring the rate of mortgage loan principal prepayments. The PSA
formula, the Constant Prepayment Rate (the "CPR"), or other similar models that
are standard in the industry will be used by a Fund in calculating maturity for
purposes of its investment in mortgage-related securities. Upward trends in
interest rates tend to lengthen the average life of mortgage-related activities
and also cause the value of outstanding securities to drop. Thus, during periods
of rising interest rates, the value of these securities held by a Fund would
tend to drop and the portfolio-weighted average life of the securities held by a
Fund may tend to lengthen due to this effect. Longer-term securities tend to
experience more price volatility. Under these circumstances, a Manager may, but
is not required to, sell securities in part in order to maintain an appropriate
portfolio-weighted average life.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (such as securities guaranteed by the
Government National Mortgage Association ("GNMA"); or guaranteed by agencies or
instrumentalities of the U.S. Government (such as securities guaranteed by the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"), which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations). Mortgage
pass-through securities created by nongovernmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance, and letters of credit, which may be issued by governmental
entities, private insurers or the mortgage poolers.
A Fund may also invest in investment grade Collateralized Mortgage Obligations
("CMOs") which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, semi-annually.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC or FNMA. CMOs are structured into multiple classes, with each class
bearing a different stated maturity. Monthly payments of principal, including
prepayments, are first returned to investors holding the shortest maturity
class; investors holding longer maturity classes receive principal only after
the first class has been retired. CMOs may be issued by government and
non-governmental entities. Some CMOs are debt obligations of FHLMC issued in
multiple classes with different maturity dates secured by the pledge of a pool
of conventional mortgages purchased by FHLMC. Other types of CMOs are issued by
corporate issuers in several series, with the proceeds used to purchase
mortgages or mortgage pass-through certificates. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios. To the extent a
particular CMO is issued by an investment company, a Fund's ability to invest in
such CMOs will be limited. See "The Funds --Other Investment Policies of the
Funds."
Assumptions generally accepted by the industry concerning the probability of
early payment may be used in the calculation of maturities for debt securities
that contain put or call provisions, sometimes resulting in a calculated
maturity different from the stated maturity of the security.
It is anticipated that governmental, government-related or private entities may
create mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in addition to
those described above. As new types of mortgage-related securities are developed
and offered to investors, the Adviser will, consistent with a Fund's investment
objectives, policies and quality standards, consider making investments in such
new types of mortgage-related securities, but no investments will be made in
such securities until the Fund's prospectus and/or SAI have been revised to
reflect such securities.
Other Asset-Backed Securities (Centura Federal Securities Income Fund and
Centura North Carolina Tax-Free Bond Fund). Other asset-backed securities
(unrelated to mortgage loans) are developed from time to time and may be
purchased by a Fund to the extent consistent with its investment objective and
policies, but only after disclosure reflecting such securities has been added to
the Fund's prospectus and/or SAI.
Foreign Securities (Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund
and Centura Southeast Equity Fund). These Funds may invest in securities
represented by American Depositary Receipts ("ADRs"). ADRs are
dollar-denominated receipts generally issued by domestic banks, which represent
the deposit with the bank of a security of a foreign issuer, and which are
publicly traded on exchanges or over-the-counter in the United States. There are
certain risks associated with investments in unsponsored ADR programs. Because
the non-U.S. company does not actively participate in the creation of the ADR
program, the underlying agreement for service and payment will be between the
depositary and the shareholders. The company issuing the stock underlying the
ADRs pays nothing to establish the unsponsored facility, as fees for ADR
issuance and cancellation are paid by brokers. Investors directly bear the
expenses associated with certificate transfer, custody and dividend payment. In
addition, in an unsponsored ADR program, there may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. For more information, see "Risks of
Investing in the Funds."
Forward Foreign Currency Transactions (Centura Mid Cap Equity Fund, Centura
Large Cap Equity Fund and Centura Southeast Equity Fund). These Funds may enter
into forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates. These contracts,
which involve costs, permit a Fund to purchase or sell a specific amount of a
particular currency at a specified price on a specified future date. A Fund will
realize a benefit from this type of contract only to the extent that the
relevant currencies move as anticipated. If the currencies do not move as
anticipated, the contracts may cause greater loss to a Fund than if they had not
been used. See the SAI for further information concerning forward foreign
currency transactions.
Futures Contracts And Options (All Funds). The Funds may purchase and sell
futures contracts on securities, currencies, and indices of securities, and
write and sell put and call options on securities, currencies and indices of
securities as a hedge against changes in interest rates, stock prices, currency
fluctuations and other market developments, provided that not more than 5% of a
Fund's net assets are committed to margin deposits on futures contracts and
premiums for options. See the SAI for information about futures and options. See
"Risks of Investing in the Funds" for a discussion of risks related to investing
in futures and options.
Municipal Obligations (Centura North Carolina Tax-Free Bond Fund). The Fund may
invest in securities issued by states, their political subdivisions and agencies
and instrumentalities of the foregoing, the income from which, in the opinion of
bond counsel for the issuer, is exempt from regular income taxes by the federal
government and state of the issuing entity ("Municipal Obligations"). Such
Municipal Obligations include municipal bonds, floating rate and variable rate
Municipal Obligations, participation interests in municipal bonds, tax-exempt
asset-backed certificates, tax-exempt commercial paper, short-term municipal
notes, and stand-by commitments. It may be anticipated that governmental,
government-related or private entities will create other tax-exempt investments
in addition to those described above. As new types of tax-exempt vehicles are
developed, the Adviser will, consistent with the Fund's investment objectives,
policies and quality standards, consider making investments in such types of
Municipal Obligations, but will not make such investments until they are
reflected in the Fund's prospectus and/or SAI. The Fund will purchase only
Municipal Obligations rated A, SP-1 or better by S&P or A, MIG-1 or better by
Moody's (or given equivalent ratings by another NRSRO) or, if the securities are
not rated, are of comparable quality in the Adviser's opinion. Municipal
Obligations in which the Fund may invest include "general obligation" and
"revenue" securities. General obligation securities are backed by the issuer's
full faith, credit and taxing power for the payment of principal and interest.
The taxes that can be levied for the payment of debt service may be limited or
unlimited in terms of rate or amount or special assessments. Revenue securities
are secured primarily by net revenues generated by a particular facility or
group of facilities, or by the proceeds of a special excise or other specific
revenue source. Additional security may be provided by a debt service reserve
fund. Municipal bonds include industrial development bonds ("IDBs"), moral
obligation bonds, put bonds and private activity bonds ("PABs"). PABs generally
relate to the financing of a facility used by a private entity or entities. The
credit quality of such bonds is usually directly related to that of the users of
the facilities. The interest on most PABs is an item of tax preference for
purposes of the Federal alternative minimum tax and Fund distributions
attributable to such interest likewise, constitute an item of tax preference.
For information on the risks related to the Fund's concentration in North
Carolina Municipal Obligations, see "Risks of Investing in the Funds."
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund). The
Fund may invest in municipal lease obligations including certificates of
participation ("COPs"), which finance a variety of public projects. Because of
the way these instruments are structured, they may carry a greater risk than
other types of Municipal Obligations. The Fund may invest in lease obligations
only when they are rated by a rating agency or, if unrated, are deemed by the
Adviser, to be of a quality comparable to the Fund's quality standards. With
respect to any such unrated municipal lease obligations in which the Fund
invests, the Company's Board of Directors will be responsible for determining
their credit quality, on an ongoing basis, including assessing the likelihood
that the lease will not be canceled. Prior to purchasing a municipal lease
obligation and on a regular basis thereafter, the Adviser will evaluate the
credit quality and, pursuant to guidelines adopted by the Directors, the
liquidity of the security. In making its evaluation, the Adviser will consider
various credit factors, such as the necessity of the project, the municipality's
credit quality, future borrowing plans, and sources of revenue pledged for lease
repayment, general economic conditions in the region where the security is
issued, and liquidity factors, such as dealer activity. For discussion regarding
municipal lease obligations, see "Risks of Investing in the Funds" in this
Prospectus and "Investment Policies" in the SAI.
Stand-By Commitments (Centura North Carolina Tax-Free Bond Fund). The Fund may
acquire "stand-by commitments," which will enable it to improve its portfolio
liquidity by making available same-day settlements on sales of its securities. A
stand-by commitment gives the Fund, when it purchases a Municipal Obligation
from a broker, dealer or other financial institution ("seller"), the right to
sell up to the same principal amount of such securities back to the seller, at
the Fund's option, at a specified price. Stand-by commitments are also known as
"puts." The Fund may acquire stand-by commitments solely to facilitate portfolio
liquidity and not to protect against changes in the market price of the Fund's
portfolio securities. The exercise by the Fund of a stand-by commitment is
subject to the ability of the other party to fulfill its contractual commitment.
The Fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary or
advisable, the Fund will pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to the commitments.
It is difficult to evaluate the likelihood of use or the potential benefit of a
stand-by commitment. Therefore, it is expected that the Directors will determine
that stand-by commitments ordinarily have a "fair value" of zero, regardless of
whether any direct or indirect consideration was paid. However, if the market
price of the security subject to the stand-by commitment is less than the
exercise price of the stand-by commitment, such security win ordinarily be
valued at such exercise price. Where the Fund has paid for a stand-by
commitment, its cost will be reflected as unrealized depreciation for the period
during which the commitment is held.
There is no assurance that stand-by commitments will be available to the Fund
nor does the Fund assume that such commitments would continue to be available
under all market conditions.
Third Party Puts (Centura North Carolina Tax-Free Bond Fund). The Fund may also
purchase long-term fixed rate bonds that have been coupled with an option
granted by a third party financial institution allowing the Fund at specified
intervals to tender (or "put") the bonds to the institution and receive the face
value thereof (plus accrued interest). These third party puts are available in
several different forms, may be represented by custodial receipts or trust
certificates and may be combined with other features such as interest rate
swaps. The Fund receives a short-term rate of interest (which is periodically
reset), and the interest rate differential between that rate and the fixed rate
on the bond is retained by the financial institution. The financial institution
granting the option does not provide credit enhancement. In the event that there
is a default in the payment of principal or interest, or downgrading of a bond
to below investment grade, or a loss of the bond's tax-exempt status, the put
option will terminate automatically. The risk to the Fund in this case will be
that of holding a long-term bond which would tend to lengthen the weighted
average maturity of the Fund's portfolio.
These bonds coupled with puts may present tax issues also associated with
stand-by commitments. As with any stand-by commitments acquired by the Fund, the
Fund intends to take the position that it is the owner of any Municipal
Obligation acquired subject to a third-party put, and that tax-exempt interest
earned with respect to such Municipal Obligations will be tax-exempt in its
hands. There is no assurance that the Internal Revenue Service will agree with
such position in any particular case. Additionally, the federal income tax
treatment of certain other aspects of these investments, including the treatment
of tender fees and swap payments, in relation to various regulated investment
company tax provisions is unclear. However, the Adviser intends to manage the
Fund's portfolio in a manner designed to minimize any adverse impact from these
investments.
Participation Interests (Centura North Carolina Tax-Free Bond Fund). The Fund
may purchase from banks participation interests in all or part of specific
holdings of Municipal Obligations. Each participation is backed by an
irrevocable letter of credit or guarantee of the selling bank that the Fund's
Adviser has determined meets the prescribed quality standards of the Fund. Thus
either the credit of the issuer of the Municipal Obligation or the selling bank,
or both, will meet the quality standards of the Fund. The Fund has the right to
sell the participation back to the bank after seven days' notice for the full
principal amount of the Fund's interest in the Municipal Obligation plus accrued
interest, but only (a) as required to provide liquidity to the Fund, (b) to
maintain a high quality investment portfolio or (c) upon a default under the
terms of the Municipal Obligation. The selling bank will receive a fee from the
Fund in connection with the arrangement. The Fund will not purchase
participation interests unless it receives an opinion of counsel or a ruling of
the Internal Revenue Service satisfactory to the Adviser that interest earned by
the Fund on Municipal Obligations on which it holds participation interests is
exempt from federal income tax.
INVESTMENT RESTRICTIONS
The following restrictions are applicable to each of the Funds, except as
otherwise indicated.
(1) No Fund may, with respect to 75% of its total assets, purchase more
than 10% of the voting securities of any one issuer or invest more than 5%
of the value of such assets in the securities or instruments of any one
issuer, except securities or instruments issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
(2) No Fund may purchase securities or instruments which would cause 25%
or more of the market value of its total assets at the time of such
purchase to be invested in securities or instruments of one or more
issuers having their principal business activities in the same industry,
provided that there is no limit with respect to investments in the U.S.
Government, its agencies and instrumentalities.
(3) No Fund may borrow money, except that a Fund may borrow from banks up
to 10% of the current value of its total net assets for temporary or
emergency purposes. A Fund will make no purchase if its outstanding
borrowings exceed 5% of its total assets.
(4) No Fund may make loans, except that a Fund may (a) lend its portfolio
securities, (b) enter into repurchase agreements with respect to its
portfolio securities, and (c) purchase the types of debt instruments
described in this Prospectus or the SAI.
For purposes of investment restriction number (1), Centura North Carolina
Tax-Free Bond Fund considers a Municipal Obligation to be issued by the
governmental entity (or entities) whose assets and revenues back the Municipal
Obligation. For a Municipal Obligation backed only by the assets and revenues of
a nongovernmental user, such user is deemed to be the issuer; such issuers, to
the extent their principal business activities are in the same industry, are
also subject to investment restriction (2). For purposes of investment
restriction (2), public utilities are not deemed to be a single industry but are
separated by industrial categories, such as telephone or gas utilities.
The foregoing investment restrictions and those described in the SAI as
fundamental are policies of each Fund which may be changed with respect to that
Fund only when permitted by law and approved by the holders of a majority of the
applicable Fund's outstanding voting securities as described under "Other
Information -- Voting."
Additionally, as a non-fundamental policy, no Fund may invest more than 15% of
the aggregate value of its net assets in investments which are illiquid, or not
readily marketable (including repurchase agreements having maturities of more
than seven calendar days and variable and floating rate demand and master demand
notes not requiring receipt of the principal note amount within seven days'
notice). If a percentage restriction on investment policies or the investment or
use of assets set forth in this Prospectus are adhered to at the time a
transaction is effected, later changes in percentage resulting from changing
values will not be considered a violation.
RISKS OF INVESTING IN THE FUNDS
The price per share of each of the Funds will fluctuate with changes in the
value of the investments held by the Fund. Shareholders of a Fund should expect
the value of their shares to fluctuate with changes in the value of the
securities owned by that Fund. There is, of course, no assurance that a Fund
will achieve its investment objective or be successful in preventing or
minimizing the risk of loss that is inherent in investing in particular types of
investment products. In order to attempt to minimize that risk, the Adviser
monitors developments in the economy, the securities markets, and with each
particular issuer. Also, as noted earlier, each Fund is managed within certain
limitations that restrict the amount of a Fund's investment in any single
issuer.
Foreign Securities (Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund
and Centura Southeast Equity Fund). Investing in the securities of issuers in
any foreign country, including ADRS, involves special risks and considerations
not typically associated with investing in securities of U.S. issuers. These
include differences in accounting, auditing and financial reporting standards;
generally higher commission rates on foreign portfolio transactions; the
possibility of nationalization, expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations (which may include
suspension of the ability to transfer currency from a country); and political
instability which could affect U.S. investments in foreign countries.
Additionally, foreign securities and dividends and interest payable on those
securities may be subject to foreign taxes, including taxes withheld from
payments on those securities. Foreign securities often trade with less frequency
and volume than domestic securities and, therefore, may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. A Fund's objective may be affected either
unfavorably or favorably by fluctuations in the relative rates of exchange
between the currencies of different nations, by exchange control regulations and
by indigenous economic and political developments. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of a Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in a Fund's net asset value and
any net investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund. The rate of exchange between the U.S. dollar and other
currencies is determined by several factors including the supply and demand for
particular currencies, central bank efforts to support particular currencies,
the movement of interest rates, the pace of business activity in certain other
countries and the United States, and other economic and financial conditions
affecting the world economy. Although a Fund may engage in forward foreign
currency transactions and foreign currency options to protect its portfolio
against fluctuations in currency exchange rates in relation to the U.S. dollar,
there is no assurance that these techniques will be successful. See "Description
of Securities and Investment Practices" and below for additional information
about these kinds of transactions.
Although the Funds value their assets daily in terms of U.S. dollars, the Funds
do not intend to convert their holdings of foreign currencies into U.S. dollars
on a daily basis. The Funds will do so from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
Through the Funds' flexible policies, the Adviser endeavors to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it may place the Funds' investments. See the
SAI for further information about foreign securities.
Zero Coupon And Pay-In-Kind Securities (Centura Federal Securities Income Fund
and Centura North Carolina Tax-Free Bond Fund). Zero coupon bonds (which do not
pay interest until maturity) and pay-in-kind securities (which pay interest in
the form of additional securities) may be more speculative and may fluctuate
more in value than securities which pay income periodically and in cash. In
addition, although a Fund receives no periodic cash payments from such
investments, applicable tax rules require the Fund to accrue and pay out its
income from such securities annually as income dividends and require
stockholders to pay tax on such dividends (except if such dividends qualify as
exempt-interest dividends).
North Carolina Municipal Obligations (Centura North Carolina Tax-Free Bond
Fund). Because this Fund will concentrate its investments in North Carolina
Municipal Obligations, it may be affected by political, economic or regulatory
factors that may impair the ability of North Carolina issuers to pay interest on
or to repay the principal of their debt obligations. Thus, the net asset value
of the shares may be particularly impacted by the general economic situation
within North Carolina. The concentration of the Fund's investments in a single
state may involve greater risk than if the Fund invested in Municipal
Obligations throughout the country, due to the possibility of an economic or
political development which could uniquely affect the ability of issuers to meet
the debt obligations of the securities.
The economy of North Carolina is supported by industry, agricultural products,
and tourism, with the largest segment of its work force employed in
manufacturing. From 1980 to 1995, the state's per capita income grew 133.8%,
from $7,999 to $20,604. The state has the nation's tenth highest population, and
its unemployment rate in March 1995 was 3.9% of the labor force (versus a
national rate of 5.5%). The state's labor force grew 26.4% between 1980 and
1994, while its complexion shifted from agriculture to the production of goods
and services. In 1993, North Carolina nevertheless ranked tenth in the nation in
gross agricultural income. Although 20% of its agricultural income comes from
tobacco, 34% comes from a diversified poultry industry and the remainder from a
relatively large variety of other agricultural plant and animal products. North
Carolina is the third most diversified state in the country in terms of its
agriculture.
Obligations of issuers of North Carolina Municipal Obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bank Reform Act of 1978. In addition,
the obligations of such issuers may become subject to the laws enacted in the
future by Congress or the North Carolina legislature or by referenda extending
the time for payment of principal and/or interest, or imposing other constraints
upon enforcement of such obligations or upon municipalities to levy taxes. There
is also the possibility that, as a result of legislation or other conditions,
the power or ability of any issuer to pay, when due, the principal of and
interest on its North Carolina Municipal Obligations may be materially affected.
Additional considerations relating to the risks of investing in North Carolina
Municipal Obligations are presented in the SAI.
Municipal Lease Obligations (Centura North Carolina Tax-Free Bond Fund).
Municipal lease obligations have special risks not normally associated with
municipal bonds. These obligations frequently contain "non-appropriation"
clauses that provide that the governmental issuer of the obligation has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purposes by the legislative body on a yearly or other
periodic basis. For more information on risks of municipal lease investments,
see the SAI.
Risks Of Options Transactions (All Funds). The purchase and writing of options
involves certain risks. During the option period, the covered call writer has,
in return for the premium on the option, given up the opportunity to profit from
a price increase in the underlying securities above the exercise price, but, as
long as its obligation as a writer continues, has retained the risk of loss
should the price of the underlying security decline. The writer of an option has
no control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price. If a put or call option purchased by a Fund is not sold when it
has remaining value, and if the market price of the underlying security, in the
case of a put, remains equal to or greater than the exercise price, or in the
case of a call, remains less than or equal to the exercise price, the Fund will
lose its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no assurance that a liquid market
will exist when a Fund seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options market, a Fund
may be unable to close out a position. If a Fund cannot effect a closing
transaction, it will not be able to sell the underlying security while the
previously written option remains outstanding, even if it might otherwise be
advantageous to do so.
Risks Of Foreign Currency Options (Centura Mid Cap Equity Fund, Centura Large
Cap Equity Fund and Centura Southeast Equity Fund). Currency options traded on
U.S. or other exchanges may be subject to position limits which may limit the
ability of a Fund to reduce foreign currency risk using such options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller and generally do not have as much market liquidity as exchange-traded
options. Employing hedging strategies with options on currencies does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Furthermore, such hedging transactions
reduce or preclude the opportunity for gain if the value of the hedged currency
should change relative to the U.S dollar. A Fund will not speculate in options
on foreign currencies.
There is no assurance that a liquid secondary market will exist for any
particular foreign currency option, or at any particular time. In the event no
liquid secondary market exists, it might not be possible to effect closing
transactions in particular options. If a Fund cannot close out an option which
it holds, it would have to exercise its option in order to realize any profit
and would incur transactional costs on the sale of the underlying assets.
Risks Of Futures And Related Options Transactions (All Funds). There are several
risks associated with the use of futures contracts and options on futures
contracts. While a Fund's use of futures contracts and related options for
hedging may protect a Fund against adverse movements in the general level of
interest rates or securities prices, such transactions could also preclude the
opportunity to benefit from favorable movements in the level of interest rates
or securities prices. There can be no guarantee that the Adviser's forecasts
about market value interest rates and other applicable factors will be correct
or that there will be a correlation between price movements in the hedging
vehicle and in the securities being hedged. The skills required to invest
successfully in futures and options may differ from the skills required to
manage other assets in a Fund's portfolio. An incorrect forecast or imperfect
correlation could result in a loss on both the hedged securities in a Fund and
the hedging vehicle so that the Fund's return might have been better had hedging
not been attempted.
There can be no assurance that a liquid market will exist at a time when a Fund
seeks to close out a futures contract or futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed. The potential risk to a Fund from a
futures transaction is unlimited. Therefore, although the Funds have authority
to engage in futures transactions, they have no present intention to do so and
will engage in such transactions only when disclosure to that affect has been
added to the Prospectus.
A Fund will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or are quoted on an automated quotation system. A Fund will not
enter into a futures contract if immediately thereafter the initial margin
deposits for futures contracts held by the Fund plus premiums paid by it for
open futures options positions, less the amount by which any such positions are
"in-the-money," would exceed 5% of the Fund's total assets.
The Funds may trade futures contracts and options on futures contracts on U.S.
domestic markets and, except for Centura North Carolina Tax-Free Bond Fund, also
on exchanges located outside of the United States. Foreign markets, however, may
have greater risk potential than domestic markets. Unlike trading on domestic
commodity exchanges, trading on foreign commodity exchanges is not regulated by
the Commodity Futures Trading Commission and may be subject to greater risk than
trading on domestic exchanges. For example, some foreign exchanges are principal
markets so that no common clearing facility exists and a trader may look only to
the broker for performance of the contract. In addition, any profits that a Fund
might realize in trading could be eliminated by adverse changes in the exchange
rate of the currency in which the transaction is denominated, or the Fund could
incur losses as a result of changes in the exchange rate. Transactions on
foreign exchanges may include both commodities that are traded on domestic
exchanges or boards of trade and those that are not.
Risks Of Forward Foreign Currency Contracts (Centura Mid Cap Equity Fund,
Centura Large Cap Equity Fund and Centura Southeast Equity Fund). The precise
matching of forward contracts and the value of the securities involved will not
generally be possible since the future value of the securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. Projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. There can be no assurance that new forward contracts or
offsets will always be available to the Funds.
Risks Of Concentrating Investments In Southeastern Issuers (Centura Southeast
Equity Fund). Because Centura Southeast Equity Fund will normally invest
primarily in equity securities of southeastern issuers, its portfolio will be
more vulnerable to negative economic developments and natural disasters
affecting the region than a fund with a more geographically diversified
portfolio. There can, of course, be no assurance that southeastern issuers will
outperform, or perform as well as, issuers of other regions, and there can be no
assurance that southeastern issuers whose securities are held by the Fund will
outperform, or perform as well as, those of the region generally, other issuers
of the region, or issuers of any other U.S. or foreign region.
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.
[TO BE UPDATED] For the advisory services it provides the Funds, the Adviser
receives from each Fund fees, payable monthly based on the average daily net
assets, at an annual rate based on the Fund's average net assets. Fees are 0.70%
for Centura Mid Cap Equity Fund, 0.70% for Centura Large Cap Equity Fund, 0.30%
for Centura Federal Securities Income Fund, 0.35% for Centura North Carolina
Tax-Free Bond Fund and 0.70% for Centura Southeast Equity Fund. The Adviser also
serves as Custodian for the Funds' assets, for which it receives additional
fees. For the fiscal year ended April 30, 1997, the Adviser received $1,127,435
in advisory fees from the Mid Cap Equity Fund and $358,174 from the Federal
Securities Income Fund. The advisory fees for the North Carolina Tax-Free Bond
Fund amounted to $140,821; however, the Adviser waived $100,587. For the period
from October 1, 1996 (the commencement of operations) to April 30, 1997, the
advisory fees for the Large Cap Equity Fund were $217,106; however, the Adviser
waived $105,451.
Frank Jolley has primary responsibility for management of the Centura Large Cap
Equity Fund and the Centura Mid Cap Equity Fund. Mr. Jolley has over 17 years
experience in investments and financial analysis. He graduated from the
University of North Carolina with a Bachelor of Science in business
administration. Mr. Jolley began his investment career with Dean Witter Reynolds
in retail sales and later served as a branch manager for a regional securities
firm. Primary duties at Centura have included the management of common and
collective funds along with personal trust and pension fund investment
responsibilities. In August 1996, Mr. Jolley was named Chief Investment Officer
of Centura's asset management area. As Chief Investment Officer, his duties
include oversight of all Centura's mutual funds. Mr. Jolley is a Chartered
Financial Analyst and a member of the North Carolina Society of Financial
Analysts where he currently serves as the Secretary and member of the Board.
C. Nathaniel Siewers serves as portfolio manager of Centura North Carolina
Tax-Free Bond Fund and Centura Federal Securities Income Fund. Mr. Siewers has
over twelve years of experience managing fixed income securities. His most
recent experience involved managing Centura Bank's fixed income portfolio of
both taxable and tax-free securities, with assets of approximately $1.6 billion
at June 30, 1997. Mr. Siewers graduated from Wake Forest University with a
Bachelor of Arts degree in economics and from East Carolina University with a
Masters in Business Administration. He is a Certified Public Accountant and a
Fellow in the North Carolina Association of Certified Public Accountants. Mr.
Siewers has been a faculty member of the North Carolina School of Banking since
1987; he is the Associate Dean for the 1997 term and has been named Dean for the
1998 and 1999 terms.
Daniel Cole serves as portfolio manager for Centura Southeast Equity Fund. Mr.
Cole joined Centura Bank in November, 1996 where he has managed the Centura
Southeast Common Trust Funds and has personal and pension fund investment
responsibilities. Mr. Cole has four years experience in investments and
portfolio management. He began his investment career with Southern National Bank
in Winston-Salem, North Carolina as an investment analyst and portfolio manager
in Trust Investments. In 1995, Mr. Cole joined Central Carolina Bank in Durham,
North Carolina as a portfolio manager and trust investment officer where he was
primarily responsible for personal trust and endowment fund investment
management. He graduated from Guilford College in Greensboro, North Carolina
with a Bachelor of Science degree and from Virginia Polytechnic Institute and
State University in Blacksburg, Virginia with an M.B.A. in Finance. Mr. Cole is
a Level III Chartered Financial Analyst candidate and a member of the
Association for Investment Management and Research and the North Carolina
Society of Financial Analysts.
THE DISTRIBUTOR
Centura Funds Distributor, Inc., 3435 Stelzer Road, Columbus, Ohio 43219, acts
as the Funds' Distributor. The Distributor is an affiliate of the Funds'
Administrator, BISYS, was formed specifically to distribute the Funds.
SERVICE ORGANIZATIONS
Payments may be made by the Funds or by the Adviser to various banks, trust
companies, broker-dealers or other financial organizations (collectively,
"Service Organizations") for providing administrative services for the Funds and
their shareholders, such as maintaining shareholder records, answering
shareholder inquiries and forwarding materials and information to shareholders.
The Funds may pay fees to Service Organizations (which vary depending upon the
services provided) in amounts up to an annual rate of 0.25% of the daily net
asset value of the shares of either class owned by shareholders with whom the
Service Organization has a servicing relationship.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than a Fund's
minimum initial or subsequent investments or charging a direct fee for
servicing. If imposed, these fees would be in addition to any amounts which
might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult with them
regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws provide that, among other
things, banks may not engage in the business of underwriting, selling or
distributing securities. There is currently no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either federal or state regulations relating
to the permissible activities of banks and their subsidiaries or affiliates,
could prevent a bank Service Organization from continuing to perform all or a
part of its servicing activities. If a bank were prohibited from so acting, its
shareholder clients would be permitted to remain shareholders of the Funds and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
THE ADMINISTRATOR AND SPONSOR
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
3435 Stelzer Road, Columbus, Ohio 43219, acts as Sponsor and Administrator of
the Funds. BISYS is a subsidiary of BISYS Group, Inc., which is headquartered in
Little Falls, New Jersey and supports more than 5,000 financial institutions and
corporate clients through two strategic business units. BISYS Information
Services Group provides image and data processing outsourcing, and pricing
analysis to more than 600 banks nationwide. BISYS Investment Services Group
designs, administers and distributes over 60 families of proprietary mutual
funds consisting of more than 365 portfolios, and provides 401(k) marketing
support, administration, and recordkeeping services in partnership with banking
institutions and investment management companies.
Pursuant to an Administration Agreement with the Company, BISYS provides certain
management and administrative services necessary for the Funds' operations
including: (a) general supervision of the operation of the Funds including
coordination of the services performed by the Funds' Adviser, custodian,
independent accountants and legal counsel; (b) regulatory compliance, including
the compilation of information for documents such as reports to, and filings
with, the SEC and state securities commissions, and preparation of proxy
statements and shareholder reports for the Funds; (c) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Funds' officers and Board of Directors; and (d)
furnishing office space and certain facilities required for conducting the
business of the Funds. For these services, BISYS receives from each Fund a fee,
payable monthly, at the annual rate of 0.15% of each Fund's average daily net
assets. Prior to January 1, 1997, Furman Selz LLC served as the Funds'
Administrator under a contract substantially similar to the Administration
Agreement with BISYS. For the fiscal year ended April 30, 1997, BISYS and Furman
Selz received a total of $241,593 and $179,087 in administrative services fees
from the Mid Cap Equity Fund and the Federal Securities Income Fund,
respectively. For the fiscal year ended April 30, 1997, Furman Selz and BISYS
earned $60,352 from the North Carolina Tax-Free Bond Fund of which $43,051 was
waived. For the period from October 1, 1996 (commencement of operations) through
April 30, 1997, Furman Selz and BISYS earned $46,523 from the Large Cap Equity
Fund of which $23,882 was waived.
[TO BE UPDATED]
Prior to January 1, 1997, Furman Selz also acted as the Funds' transfer and fund
accounting agent and effective January 1, 1997, BISYS Fund Services, Inc.
("BFSI") serves in that capacity (for which it receives a fee of $15 per account
per year, plus out-of-pocket expenses) and provides assistance in calculating
the Funds' net asset values and provides other accounting services for the Funds
(for an annual fee of $30,000 per Fund plus out-of-pocket expenses). For the
fiscal year ended April 30, 1997, Furman Selz and BFSI earned $101,541, $13,117
and $11,109 for the Mid Cap Equity Fund, Federal Securities Income Fund and
North Carolina Tax-Free Bond Fund, respectively, for transfer agent fees. For
the period from October 1, 1996 (commencement of operations) to April 30, 1997,
Furman Selz and BFSI earned $16,260 in transfer agent fees from the Large Cap
Equity Fund. [TO BE UPDATED]
BFSI and Furman Selz earned $28,792, $31,735 and $39,742 in fund accounting fees
for the Mid Cap Equity Fund, the Federal Securities Income Fund and the North
Carolina Tax-Free Bond Fund, respectively, for the same period. For the period
from October 1, 1996 (commencement of operations) to April 30, 1997, BFSI and
Furman Selz earned $19,212 in fund accounting fees for the Large Cap Equity
Fund. [TO BE UPDATED]
OTHER EXPENSES
Each Fund bears all costs of its operations other than expenses specifically the
responsibility of the Administrator, the Adviser or other service providers. In
addition to fees paid to service providers described above, the costs borne by
the Funds, some of which may vary among the classes, as noted above, include:
legal and accounting expenses; Directors' fees and expenses; insurance premiums;
custodian and transfer agent fees and expenses; expenses incurred in acquiring
or disposing of the Funds' portfolio securities; expenses of registering the
Funds' shares for sale with the SEC and of satisfying requirements of various
state securities commissions; expenses of maintaining the Funds' legal existence
and of shareholders' meetings; and expenses of preparing and distributing
reports, proxy statements and prospectuses to existing shareholders. Each Fund
bears its own expenses associated with its establishment as a portfolio of the
Company; these expenses are amortized over a five-year period from the
commencement of a Fund's operations. Company expenses directly attributable to a
Fund or class are charged to that Fund or class; other expenses are allocated
proportionately among all of the Funds and classes in the Company in relation to
the net assets of each Fund and class.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in each of the Funds is $1,000, except that the
minimum investment requirement for an IRA or other qualified retirement plan is
$250. Any subsequent investments must be at least $250, except for an IRA or
qualified retirement plan investment. All initial investments should be
accompanied by a completed Purchase Application. A Purchase Application may be
obtained by calling Fund Services at 1-800-44CENTURA (442-3688). However, a
separate application is required for IRA and other qualified retirement plan
investments. Centura North Carolina Tax-Free Bond Fund is not a recommended
investment for an IRA or other qualified retirement plan. The Funds reserve the
right to reject purchase orders.
PRICING AND PURCHASE OF FUND SHARES
Each Fund offers its Class C shares at their net asset value next determined
after a purchase order has been received. All consideration received by the
Funds for the purchase of Class C shares is invested in full and fractional
Class C shares of the appropriate Fund. Certificates for shares are not issued.
BISYS maintains records of each shareholder's holdings of Fund shares, and each
shareholder receives a monthly statement of transactions, holdings and
dividends. The Funds reserve the right to reject any purchase.
EXCHANGE OF FUND SHARES
The Funds offer two convenient ways to exchange Class C shares in one Fund for
Class C shares of another Fund in the Company. Before engaging in an exchange
transaction, a shareholder should read carefully the information in the
Prospectus describing the Fund into which the exchange will occur. A Class C
shareholder may not exchange shares of one Fund for Class C shares of another
Fund unless the latter Fund's Class C shares have satisfied applicable
requirements for sale in the state of the shareholder's residence. There is no
minimum amount required for exchanges, provided the investor has satisfied the
$1,000 minimum investment requirement for the Fund into which he or she is
exchanging, and no service fee is imposed for an exchange. The Company may
terminate or amend the terms of the exchange privilege at any time upon 60 days
notice to shareholders.
A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the respective net asset values next determined following
receipt of the request by a Fund in good order.
An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction. See "Dividends,
Distributions and Federal Income Taxation" for an explanation of circumstances
in which a sales charge paid to acquire shares of the Funds may not be taken
into account in determining gain or loss on the disposition of those shares.
Exchange By Mail. To exchange Fund shares by mail, shareholders should simply
send a letter of instruction to the Funds. The letter of instruction must
include: (a) the investor's account number; (b) the class of shares to be
exchanged; (c) the Fund from and the Fund into which the exchange is to be made;
(d) the dollar or share amount to be exchanged; and (e) the signatures of all
registered owners or authorized parties.
Exchange By Telephone. To exchange Fund shares by telephone or to ask any
questions, shareholders may call the Fund at 1-800-44CENTURA (442-3688). Please
be prepared to give the telephone representative the following information: (a)
the account number, social security number and account registration; (b) the
class of shares to be exchanged; (c) the name of the Fund from which and the
Fund into which the exchange is to be made; and (d) the dollar or share amount
to be exchanged. Telephone exchanges are provided automatically to each
shareholder unless otherwise specifically indicated on the Purchase Application.
The Funds employ procedures, including recording telephone calls, testing a
caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that a Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. A Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Funds reserve the right to suspend or terminate the privilege of
exchanging by mail or by telephone at any time. Telephone Redemption and
Telephone Exchange will be suspended for a period of 10 days following a
telephonic address change.
REDEMPTION OF FUND SHARES
Shareholders may redeem their shares, in whole or in part, on any business day.
If a shareholder holds shares in more than one class of a Fund, any request for
redemption must specify the class from which shares are to be redeemed. In the
event a shareholder fails to make such a specification or if there are
insufficient shares of the specified class to satisfy the redemption order, the
redemption order will be delayed until the Fund's transfer agent receives
further instructions from the shareholder.
Class C shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received by the applicable Fund. See
"Pricing and Purchase of Fund Shares."
Where the shares have been purchased by check, the redemption request will be
held until the purchasing check has cleared, which may take up to 15 days.
Shareholders may avoid this delay by investing through wire transfers of Federal
funds. During the period prior to the time the shares are redeemed, dividends on
the shares will continue to accrue and be payable and the shareholder will be
entitled to exercise all other beneficial rights of ownership.
Once the shares are redeemed, a Fund will ordinarily send the proceeds by check
to the shareholder at the address of record on the next business day. The Fund
may, however, take up to seven days to make payment although this will not be
the customary practice. Also, if the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Funds may suspend redemptions or postpone payment dates. A
redemption may be a taxable transaction on which gain or loss may be recognized.
Redemption Methods
To ensure acceptance of a redemption request, it is important that shareholders
follow the procedures described below. Although the Funds have no present
intention to do so, the Funds reserve the right to refuse or to limit the
frequency of any telephone or wire redemptions. Of course, it may be difficult
to place orders by telephone during periods of severe market or economic change,
and a shareholder should consider alternative methods of communications, such as
couriers. The Funds' services and their provisions may be modified or terminated
at any time by the Funds. If the Funds terminate any particular service, they
will do so only after giving written notice to shareholders. Redemption by mail
will always be available to shareholders. Requests in "proper order" must
include the following documentation: (a) a letter of instruction, if required,
signed by all registered owners of the shares in the exact names in which they
are registered; (b) any required signature guarantees (see "Signature
Guarantees" below); and (c) other supporting legal documents, if required, in
the case of estate, trusts, guardianships, custodianships, corporations, pension
and profit sharing plans and other organizations.
A shareholder may redeem shares using any of the following methods:
Through An Authorized Broker, Investment Adviser Or Service Organization. The
shareholder should contact his or her broker, investment adviser or Service
Organization and provide instructions to redeem shares. Such organizations are
responsible for prompt transmission of orders. The broker will contact the Funds
and place a redemption trade. The broker may charge a fee for this service.
By Mail. Shareholders may redeem shares by sending a letter directly to the
Funds. To be accepted, a letter requesting redemption must include: (a) the Fund
name, class of shares and account registration from which shares are being
redeemed; (b) the account number; (c) the amount to be redeemed; (d) the
signatures of all registered owners; and (e) a signature guarantee by any
eligible guarantor institution including members of national securities
exchanges, commercial banks or trust companies, broker-dealers, credit unions
and savings associations. Corporations, partnerships, trusts or other legal
entities will be required to submit additional documentation.
By Telephone. Shareholders may redeem shares by calling the Funds toll free at
1-800-44CENTURA (442-3688). Be prepared to give the telephone representative the
following information: (a) the account number, social security number and
account registration; (b) the name of the class (if applicable) and the Fund
from which shares are being redeemed; and (c) the amount to be redeemed.
Telephone redemptions are available unless otherwise indicated on the Purchase
Application or on the Optional Services Form. The Funds employ procedures,
including recording telephone calls, testing a caller's identity, and sending
written confirmation of telephone transactions, designed to give reasonable
assurance that instructions communicated by telephone are genuine, and to
discourage fraud. To the extent that a Fund does not follow such procedures, it
may be liable for losses due to unauthorized or fraudulent telephone
instructions. A Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine. Telephone
Redemption and Telephone Exchange will be suspended for a period of 10 days
following a telephonic address change.
By Wire. Shareholders may redeem shares by contacting the Funds by mail or
telephone and instructing the Funds to send a wire transmission to the
shareholder's bank.
The shareholder's instructions should include: (a) the account number, social
security number and account registration; (b) the name of the class and the Fund
from which shares are being redeemed; and (c) the amount to be redeemed. Wire
redemptions can be made unless otherwise indicated on the shareholder's Purchase
Application, and a copy is attached of a void check on an account where proceeds
are to be wired. The bank may charge a fee for receiving a wire payment on
behalf of its customer.
Systematic Withdrawal Plan. An owner of $12,000 or more of shares of a Fund may
elect to have periodic redemptions made from this account to be paid on a
monthly, quarterly, semiannual or annual basis. The maximum withdrawal per year
is 12% of the account value at the time of the election. A sufficient number of
shares to make the scheduled redemption will normally be redeemed on the date
selected by the shareholder. Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated bank or
other designated party. Capital gains and dividend distributions paid to the
account will automatically be reinvested at net asset value on the distribution
payment date.
Redemption Of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Funds reserve the right to redeem, on not less
than 30 days' notice, an account in a Fund that has been reduced by a
shareholder (not by market action) below $1,000. If during the 30-day notice
period the shareholder purchases sufficient shares to bring the value of the
account to $1,000, the account will not be redeemed.
Redemption In Kind. All redemptions of shares of the Funds shall be made in
cash, except that the commitment to redeem shares in cash extends only to
redemption requests made by each shareholder of a Fund during any 90-day period
of up to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. In the case of redemption requests by shareholders in
excess of such amounts, the Board of Directors reserves the right to have a Fund
make payment, in whole or in part, in securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued generally in the same manner as the securities of that Fund are
valued generally. If the recipient were to sell such securities, he or she would
incur brokerage charges.
Signature Guarantees. To protect shareholder accounts, the Funds and the
Administrator from fraud, signature guarantees are required to enable the Funds
to verify the identity of the person who has authorized a redemption by mail
from an account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareholder(s) and
the registered address, (2) a redemption of $25,000 or more, and (3) share
transfer requests. Signature guarantees may be obtained from certain eligible
financial institutions, including but not limited to, the following: banks,
trust companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities and Transfer Association
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP") or
the New York Stock Exchange Medallion Signature Program ("MSP"). Shareholders
may contact the Funds at 1-800-442-3688 for further details.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser places orders for the
purchase and sale of portfolio investments for the Funds' accounts with brokers
or dealers it selects in its discretion.
In effecting purchases and sales of portfolio securities for the account of a
Fund, the Adviser will seek the best execution of the Fund's orders. Purchases
and sales of portfolio debt securities for the Funds are generally placed by the
Adviser with primary market makers for these securities on a net basis, without
any brokerage commission being paid by the Funds. Trading does, however, involve
transaction costs. Transactions with dealers serving as primary market makers
reflect the spread between the bid and asked prices. The Funds may purchase
securities during an underwriting, which will include an underwriting fee paid
to the underwriter. Purchases and sales of common stocks are generally placed by
the Adviser with broker-dealers which, in the judgment of the Adviser, provide
prompt and reliable execution at favorable security prices and reasonable
commission rates. Broker-dealers are selected on the basis of a variety of
factors such as reputation, capital strength, size and difficulty of order, sale
of Fund shares and research provided to the Adviser. The Adviser may cause a
Fund to pay commissions higher than another broker-dealer would have charged if
the Adviser believes the commission paid is reasonable in relation to the value
of the brokerage and research services received by the Adviser.
A Fund may buy and sell securities to take advantage of investment opportunities
when such transactions are consistent with a Fund's investment objectives and
policies and when the Adviser believes such transactions may improve a Fund's
overall investment return. These transactions involve costs in the form of
spreads or brokerage commissions. The Funds are not normally expected to have
portfolio turnover rates in excess of 50%.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Adviser may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to execute portfolio transactions for the Funds.
FUND SHARE VALUATION
The net asset value per share for each class of shares of each Fund is
calculated at 4:00 p.m. (Eastern time), Monday through Friday, on each day the
New York Stock Exchange is open for trading, which excludes the following
business holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each class of shares of the
Funds is computed by dividing the value of net assets of each class (i.e., the
value of the assets less the liabilities) by the total number of such class'
outstanding shares. All expenses, including fees paid to the Adviser and
Administrator, are accrued daily and taken into account for the purpose of
determining the net asset value.
Securities listed on an exchange are valued on the basis of the last sale prior
to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken for the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are generally valued at the preceding
closing values of such securities on their respective exchanges, except that
when an occurrence subsequent to the time a foreign security is valued is likely
to have changed such value, then the fair value of those securities will be
determined by consideration of other factors by or under the direction of the
Board of Directors. Over-the-counter securities are valued on the basis of the
bid price at the close of business on each business day. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or at the direction of the Board of Directors.
Notwithstanding the above, bonds and other fixed-income securities are valued by
using market quotations and may be valued on the basis of prices provided by a
pricing service approved by the Board of Directors. All assets and liabilities
initially expressed in foreign currencies will be converted into U.S. dollars at
the mean between the bid and asked prices of such currencies against U.S.
dollars as last quoted by any major bank.
DIVIDENDS, DISTRIBUTIONS, AND FEDERAL INCOME TAXATION
Each Fund intends to qualify annually to elect to be treated as a regulated
investment company pursuant to the provisions of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). To qualify, each Fund must meet
certain income, distribution and diversification requirements. In any year in
which a Fund qualifies as a regulated investment company and timely distributes
all of its taxable income and substantially all of its net tax-exempt interest
income, the Fund generally will not pay any U.S. federal income or excise tax.
Each Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of net short-term capital gains over net
long-term capital losses). Investment company taxable income (other than the
capital gain component thereof) will be declared and paid monthly by Centura Mid
Cap Equity Fund, Centura Large Cap Equity Fund and Centura Southeast Equity
Fund. Centura Federal Securities Income Fund and Centura North Carolina Tax-Free
Bond Fund will declare dividends daily and pay them out monthly. Each Fund
intends to distribute, at least annually, substantially all net realized andg-
and short-term capital gain. In determining amounts of capital gains to be
distributed, any capital loss carryovers from prior years will be applied
against capital gains.
In the case of Centura Federal Securities Income Fund and Centura North Carolina
Tax-Free Bond Fund, the amount declared each day as a dividend may be based on
projections of estimated monthly net investment income and may differ from the
actual investment income determined in accordance with generally accepted
accounting principles. An adjustment will be made to the dividend each month to
account for any difference between the projected and actual monthly investment
income.
Distributions will be paid in additional Fund shares of the relevant class based
on the net asset value of shares of that class at the close of business of the
payment date of the distribution, unless the shareholder elects in writing, not
less than five full business days prior to the record date, to receive such
distributions in cash. Dividends declared in, and attributable to, the preceding
month will be paid within five business days after the end of each month. In the
case of the Funds that declare daily dividends, shares purchased will begin
earning dividends on the day after the purchase order is executed, and shares
redeemed will earn dividends through the day the redemption is executed. Net
investment income for a Saturday, Sunday or holiday will be declared as a
dividend on the previous business day.
Any dividend or other distribution paid by a Fund has the effect of reducing the
net asset value per share on the record date by the amount thereof. Therefore,
in the case of Centura Mid Cap Equity Fund, Centura Large Cap Equity Fund and
Centura Southeast Equity Fund, which do not declare dividends daily, a dividend
or other distribution paid shortly after a purchase of shares would represent,
in substance, a return of capital to the shareholder (to the extent it is paid
on the shares so purchased), even though subject to income taxes, as discussed
below.
Dividends distributed by Centura North Carolina Tax-Free Bond Fund that are
derived from interest income exempt from federal income tax and are designated
by the Fund as "exempt-interest dividends" will be exempt from the regular
federal income tax. Capital gains distributions and any other distributions of
Fund earnings not designated by the Fund as exempt-interest dividends will,
however, generally be subject to federal, state and local tax. The Fund's
investment policies permit it to earn income which cannot be designated as
exempt-interest dividends.
Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) will be taxable to
shareholders as ordinary income. If a portion of the income of Centura Mid Cap
Equity Fund, Centura Large Cap Equity Fund or Centura Southeast Equity Fund
consists of dividends paid by U.S. corporations, a portion of the dividends paid
by that Fund may qualify for the deduction for dividends received by
corporations. No portion of the dividends paid by Centura Federal Securities
Income Fund or Centura North Carolina Tax-Free Bond Fund is expected to so
qualify. Distributions of net long-term capital gains designated by a Fund as
capital gain dividends will be taxable as long-term capital gains, regardless of
how long a shareholder has held the Fund shares. Distributions are taxable in
the same manner whether received in additional shares or in cash.
A distribution, including an "exempt-interest dividend," will be treated as paid
on December 31 of the calendar year if it is declared by a Fund during October,
November, or December of that year to shareholders of record in such a month and
paid by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
Any gain or loss realized by a shareholder upon the sale or other disposition of
shares of a Fund, or upon receipt of a distribution in complete liquidation of a
Fund, generally will be a capital gain or loss which will be long-term or
short-term generally depending upon the shareholder's holding period for the
shares. If a shareholder elects to receive distributions in cash, and checks (1)
are returned and marked as "undeliverable" or (2) remain uncashed for six
months, the shareholder's cash election will be changed automatically and future
dividend and capital gains contributions will be reinvested in the Fund at the
per share net asset value determined as of date of payment of the distribution.
In addition, any undeliverable check or check that remain uncashed for six
months will be canceled and will be reinvested in the Fund at the per share net
asset value determined as of the date of cancellation.
The timing of a shareholder's investment could have undesirable tax
consequences. If a shareholder opens a new account or buys more shares for his
or her current account just before the day a capital gain distribution was
reflected in the Fund's share price, the shareholder would receive a portion of
his or her investment back as a taxable capital gain distribution.
Shareholders should also be aware that redeeming shares of the Centura North
Carolina Tax-Free Bond Fund after tax-exempt interest income has been accrued by
the Fund but before that income has been distributed as a dividend may be
disadvantageous. This is because the gain, if any, on the redemption will be
taxable, even though such gain may be attributable in part to the accrued
tax-exempt interest, which, if distributed to the shareholder as a dividend
rather than as redemption proceeds, might have qualified as an exempt-interest
dividend.
The Funds may be required to withhold federal income tax of 31% ("backup
withholding") of the distributions and the proceeds of redemptions payable to
shareholders who fail to provide a correct taxpayer identification number or to
make required certifications, or where a Fund or shareholder has been notified
by the Internal Revenue Service that the shareholder is subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code are exempt from backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against the shareholder's
U.S. federal income tax liability.
Further information relating to tax consequences is contained in the SAI.
Shareholders will be notified annually by the Company as to the federal tax
status of distributions made by the Fund(s) in which they invest. Depending on
the residence of the shareholder for tax purposes, distributions also may be
subject to state and local taxes, including withholding taxes. Foreign
shareholders may also be subject to special withholding requirements. Special
tax treatment, including a penalty on certain pre-retirement distributions, is
accorded to accounts maintained as IRAs. With respect to Centura North Carolina
Tax-Free Bond Fund, North Carolina law exempts from income taxation dividends
received from a regulated investment company in proportion to the income of the
regulated investment company that is attributable to interest on bonds or
securities of the U.S. government or any agency or instrumentality thereof or on
bonds of the State of North Carolina or any county, municipality or political
subdivision thereof. Shareholders should consult their own tax advisers as to
the federal, state and local tax consequences of ownership of shares of the
Funds in their particular circumstances.
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 Funds are
fully paid, non-assessable and freely transferable.
This Prospectus relates to Class C shares of the Funds. Each Fund also offers
Class A and Class B shares. Class A shares are offered with a front-end sales
charge (unless waived), and a contingent deferred sales charge is imposed
(unless waived) on redemptions of Class B shares within five years of purchase.
Because of differences in expenses, the performance of each class will typically
be different. Information about Class A and Class B shares may be obtained from
your sales representative or by calling the Funds at (800) 442-3688.
VOTING
Shareholders have the right to vote in the election of Directors and on any and
all matters on which, by law or under the provisions of the Company's Articles
of Incorporation, they may be entitled to vote. The Company is not required to
hold regular annual meetings of the Funds' shareholders and does not intend to
do so. Each Fund's shareholders vote separately on items affecting only that
Fund, and shareholders of each class within a Fund vote separately on matters
affecting only that class.
The Articles of Incorporation provide that the holders of not less than
two-thirds of the outstanding shares of the Company may remove a person serving
as Director either by declaration in writing or at a meeting called for such
purpose. The Directors are required to call a meeting for the purpose of
considering the removal of a person serving as Director if requested in writing
to do so by the holders of not less than 10% of the outstanding shares of the
Company. See "Other Information -- Voting Rights" in the SAI.
Shares entitle their holders to one vote per share (with proportionate voting
for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of a Fund, a class or the Company, as
applicable, means the vote of the lesser of: (1) 67% of the shares of the Fund
(a class or the Company) present at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy; or (2) more than 50%
of the outstanding shares of the Fund (a class or the Company).
TOTAL RETURN SUMMARY
THE CENTURA FUNDS (C CLASS)
MONTH END: JUNE 30, 1997
<TABLE>
<CAPTION>
NO LOAD TOTAL RETURN
Inception Aggregate Returns Since Average Annual Returns
Date YTD Quarterly Monthly Inception 1 Year 2 Year 3 Year 5 Year 10 Year
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Centura Mid 12/31/90 14.92% 14.96% 4.05% 19.55% 30.24% 25.89 25.16% 18.56% NA
Cap Equity Fund
The Centura Large 12/31/90 11.73% 10.65% 2.17% 15.99% 24.03% 23.98 21.39% 16.33% NA
Cap Equity Fund
The Centura 12/31/90 13.70% 17.75% 6.45% 21.89% 27.29% 23.8 20.05% 18.89% NA
Southeast Equity
Fund
The Centura 12/31/90 2.29% 2.68% 0.78% 6.31% 6.02% 5.10% 6.24% 5.39% NA
Federal
Securities Fund
The Centura North
Carolina Tax-Free 01/31/91 3.16% 3.26% 1.06% 5.32% 7.17% 5.78% 6.11% 5.08 NA
Fund
</TABLE>
The performance data quoted represents past performance and is not an indication
of future results as yields fluctuate daily.
Centura Funds Distributor, Inc. is the Distributor for The Centura Group of
Funds.
NOTES ABOUT THE PERFORMANCE INFORMATION
(a) Background of the Funds
From 1/1/91 to 5/31/94, Centura Mid Cap Equity Fund and Centura Federal
Securities Income Fund were bank collective trust funds maintained and managed
by Centura Bank, and from 2/1/91 to 5/31/94, Centura North Carolina Tax-Free
Bond Fund was a common trust fund maintained and managed by Centura Bank. From
1/1/91 to 9/30/96, Centura Large Cap Equity Fund was a common trust fund
maintained and managed by Centura Bank. From 1/1/91 to 4/30/97, Centura
Southeast Equity Fund was a bank common trust fund maintained and managed by
Centura Bank. Bank collective and common trust funds are not required to
register as investment companies under the Investment Company Act of 1940.
Accordingly, performance achieved by a Fund's predecessor collective or common
trust fund reflects performance prior to the Fund's commencement of operations
as a series of a registered investment company.
The investment objectives and policies of each of these Funds prior to its
conversion to a registered mutual fund were substantially comparable to those of
its successor registered mutual fund. Prior to 1/1/95, however, the predecessor
common trust fund to Centura Southeast Equity Fund was known as the Centura
Carolinas Fund, with investments limited to companies headquartered or with
substantial operations in North Carolina or South Carolina. That common trust
fund's name was changed to Centura Southeast Equity Fund as of 1/1/95, when its
investment policies were expanded to include all the southeastern states, which
policies are continued with the successor registered mutual fund.
(b) How the Performance Information was Calculated
Investment performance for the Funds during their maintenance as common or
collective trust funds has been calculated on a monthly basis utilizing the Bank
Administration Institute's recommended time-weighted rate of return method to
compute the investment performance reflected in the above Schedule.
The performance figures assume reinvestment of dividends and interest and
include the cost of brokerage commissions. The investment performance excludes
taxes an investor might have incurred as a result of taxable ordinary income and
capital gains realized by the accounts. Bank common and collective trust funds
are not subject to certain expenses normally incurred by a mutual fund. Thus,
the performance figures, for periods prior to conversion to registered funds
have been adjusted, on a quarterly basis, to reflect the impact of the estimated
expense ratios for the registered funds at the time of the conversion. It should
be noted, however, that the bank-maintained common and collective trust funds
are not subject to the same tax and regulatory requirements, including certain
investment restrictions, applicable to registered mutual funds. These regulatory
and tax requirements could have adversely affected performance of the Funds'
collective and common trust Fund predecessors.
The performance of the Funds may be compared to various widely recognized
indexes of market performance. The indexes are unmanaged and thus reflect no
management fees. They also do not reflect the transaction costs that would be
incurred by an investor to acquire the included securities. Because the
securities reflected in an index will typically differ in many respects from
those held by a Fund, various factors that can affect performance may affect a
Fund in different ways than an index to which it is compared.
Indexes to which the Funds' performance may be compared may include:
-- Standard & Poor's 500 composite Stock Price Index -- an index of
market activity based on the aggregate performance of a selected
portfolio of publicly traded common stocks, including monthly
adjustments to reflect the reinvestment of dividends. The Index thus
reflects the total return of its portfolio, including changes in
market prices as well as accrued income interest;
-- The Russell 2000 Index -- an index comprised of the smallest 2000
companies in the Russell 3000 Index, representing approximately 11%
of the Russell 3000 total market capitalization. The Index was
developed with the base value of 135.00 as of December 31, 1986;
-- Merrill Lynch Government, U.S. Treasury Short-Term Index -- this
index shows total return for all outstanding U.S. Treasury
securities maturing in from one to 2.99 years. Price, coupon and
total return are reported using market weighted value including
accrued interest; and
-- Lehman Brothers Municipal Bond Index -- a total return performance
index of approximately 21,000 municipal bonds that meet certain
criteria. Price, coupon, and total return are reported using market
weighted value including accrued interest.
In addition to those indexes listed above, the following indexes to which
the Funds' performance may be compared may include:
-- Lehman Brothers Intermediate Government Index
-- Lipper Short U.S. Treasury Funds Index
-- Lipper Growth Index
-- Lipper Equity Income Index
-- S&P Mid-Cap 400 Index
-- Valueline Index
When performance records are developed by the Funds, they may, from time to
time, include the yield and total return for shares (including each class, as
applicable) in advertisements or reports to shareholders or prospective
investors. The methods used to calculate the yield and total return of the Funds
are mandated by the SEC. In general, the performance of the classes of each Fund
will differ due to (a) differences in the level of class specific expenses,
including service and distribution fees and (b) the fact that total return
figures for Class A shares will reflect the deduction of the maximum front-end
sales charge applicable for each Fund while the total return figures for Class B
shares will reflect the maximum CDSC for the particular Fund. Performance
figures for Class C shares will reflect the absence of any service and
distribution fee, front-end sales charge or CDSC. Due to these differences in
fees and/or expenses borne by Class A, Class B and Class C shares, yield and
total return on Class A and Class B shares can be expected to be lower than the
yield and total return on Class C shares for the same period.
Quotations of "yield" will be based on the investment income per share during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share (for each class, as applicable) on the last day of the period.
Quotations of yield reflect a Fund's (and its classes') performance only during
the particular period on which the calculations are based. Yields will vary
based on changes in market conditions, the level of interest rates and the level
of the particular Fund's expenses, including class-specific expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future. Quotations of average annual total return
will be expressed in terms of the average annual compounded rate of return of a
hypothetical investment in shares of a Fund (or class) over periods of 1, 5 and
10 years (up to the life of the Fund), reflect the deduction of a proportional
share of Fund and class-specific expenses, as applicable, on an annual basis,
and assume that all dividends and distributions are reinvested when paid.
Centura North Carolina Tax-Free Bond Fund may also advertise its "taxable
equivalent yield." Taxable equivalent yield is the yield that an investment,
subject to regular federal and North Carolina personal income taxes, would need
to earn in order to equal, on an after-tax basis, the yield on an investment
exempt from such taxes (normally calculated assuming the maximum combined
federal and North Carolina marginal tax rate). A taxable equivalent yield
quotation for the Fund will be higher than the yield quotations for the Fund.
The following table shows how to translate the yield of an investment that is
exempt from regular federal and North Carolina personal income taxes into a
taxable equivalent yield for the 1997 taxable year. The last five columns of the
table show approximately how much a taxable investment would have to yield in
order to generate an after-tax (regular federal and North Carolina personal
income taxes) yield of 4%, 5%, 6%, 7% or 8%. For example, the table shows that a
married taxpayer filing a joint return with taxable income of $80,000 would have
to earn a yield of approximately 10.45% before regular federal and North
Carolina personal income taxes in order to earn a yield after such taxes of 7%.
1997 Taxable Year
Taxable Equivalent Yield Table (1) -- Federal And
North Carolina Personal Income Taxes
To Equal Hypothetical Tax-Free Yield of
Combined 4%, 5%, 6%, 7% or 8%, A Taxable
Taxable Income (2) Marginal Investment Would Have to Yield
approximately
Single Return Joint Return Rate 4% 5% 6% 7% 8%
up to $ 24,650 up to $ 20.95% 5.06% 6.33% 7.59% 8.86% 10.12%
41,200
$24,651-$ $40,201-$ 33.04% 5.97% 7.47% 8.96% 10.45% 11.95%
59,750 99,600
$59,151-$ $99,601-$100,0035.83% 6.23% 7.79% 9.35% 10.91% 12.47%
60,000
$60,001-$124,65$100,001-$147,736.35% 6.28% 7.86% 9.43% 11.00% 12.57%
$124,651-$271,0$147,701-$271,040.96% 6.78% 8.47% 10.16% 11.86% 13.55%
$271,051 and $271,051 and 44.28% 7.18% 8.98% 10.77% 12.57% 14.36%
over over
----------
(1)This chart is presented for general information purposes only. Tax
equivalent yields are a useful tool in determining the desirability of a
tax-exempt investment; tax equivalent yields should not be regarded as
determinative of the of such an investment. In addition, this chart is
based on a number of assumptions which may not apply in your case. You
should, therefore, consult a competent tax advisor regarding
tax-equivalent yields in your situation.
(2)Assuming the federal alternative minimum tax is not applicable. (3) The
combined marginal rates were calculated using federal and North Carolina
tax rate tables for the 1997 taxable year. The federal tax rate tables are
indexed each year to reflect changes in the Consumer Price Index. The
combined federal and North Carolina income tax marginal rates assume that
North Carolina personal income taxes are fully deductible for federal
income tax purposes as an itemized deduction. However, the ability to
deduct itemized deductions (including state income taxes) for federal
income tax purposes is limited for those taxpayers whose federal adjusted
gross income for 1997 exceeds $121,200 ($60,600 in the case of a married
individual filing a separate return). In addition, for federal income tax
purposes the tax benefit of personal exemptions is phased out for
taxpayers whose adjusted gross incomes exceed specified thresholds (for
1997, $121,200 in the case of single individuals and $181,800 in the case
of married individuals filing a joint return).
ACCOUNT SERVICES
All transactions in shares of the Funds will be reflected in a statement for
each shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Funds have been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.
BISYS Fund Services, Inc. provides fund accounting functions for the Funds, and
provides personnel and facilities to perform shareholder servicing and transfer
agency-related services for the Company.
SHAREHOLDER INQUIRIES
All shareholder inquiries should be directed to Centura Funds, P.O. Box 182485,
Columbus, Ohio 43218-2485.
General and Account Information: (800) 44CENTURA (442-3688).
<PAGE>
APPENDIX
DESCRIPTION OF BOND RATINGS
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its bond ratings are listed as follows: AAA
- -- judged to be the best quality and they carry the smallest degree of
investment risk; AA -- judged to be of high quality by all standards -- together
with the Aaa group, they comprise what are generally known as high grade bonds;
A -- possess many favorable investment attributes and are to be considered as
"upper medium grade obligations"; BAA -- considered to be medium grade
obligations, i.e., they are neither highly protected nor poorly secured --
interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time; BA -- judged to have speculative
elements, their future cannot be considered as well assured; B -- generally lack
characteristics of the desirable investment; CAA -- are of poor standing -- such
issues may be in default or there may be present elements of danger with respect
to principal or interest; CA -- speculative in a high degree, often in default;
C -- lowest rated class of bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its bond ratings are listed as follows: AAA
- -- highest grade obligations, in which capacity to pay interest and repay
principal is extremely strong; AA -- has a very strong capacity to pay interest
and repay principal, and differs from AAA issues only in a small degree; A --
has a strong capacity to pay interest and repay principal, although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories; BBB -- regarded as
having an adequate capacity to pay interest and repay principal; whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. This group is the lowest which qualifies for commercial bank
investment. BB, B, CCC, CC, C -- predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and C the lowest within the
speculative rating categories. D -- interest or principal payments are in
default.
S&P applies indicators "+," no character, and "-" to its rating categories. The
indicators show relative standing within the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF SHORT-TERM MUNICIPAL OBLIGATIONS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity. Ratings categories for securities in these groups
are as follows: MIG 1/VMIG 1 -- denotes best quality, there is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing; MIG 2/VMIG 2 -- denotes high
quality, margins of protection are ample although not as large as in the
preceding group; MIG 3/VMIG 3 -- denotes high quality, all security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades; MIG 4/VMIG 4 -- denotes adequate quality, protection commonly regarded
as required of an investment security is present, but there is specific risk; SQ
- -- denotes speculative quality, instruments in this category lack margins of
protection.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
Excerpts from Moody's commercial paper ratings are listed as follows: PRIME-1 --
issuers (or supporting institutions) have a superior ability for repayment of
senior short-term debt obligations; PRIME-2 -- issuers (or supporting
institutions) have a strong ability for repayment of senior short-term debt
obligations; PRIME-3 -- issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations; NOT PRIME --
issuers do not fall within any of the Prime categories.
DESCRIPTION OF S&P'S RATINGS FOR CORPORATE AND MUNICIPAL BONDS:
Investment grade ratings: AAA -- the highest rating assigned by S&P, capacity to
pay interest and repay principal is extremely strong; AA -- has a very strong
capacity to pay interest and repay principal and differs from the highest rated
issues only in a small degree; A -- has strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories; BBB -- regarded as having an adequate capacity to pay interest and
repay principal -- whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Speculative grade ratings: BB, B, CCC, CC, C -- debt rated in these categories
is regarded as having predominantly speculative characteristics with respect to
capacity to pay interest and repay principal -- while such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions; CI --reserved for
income bonds on which no interest is being paid; D -- in default, and payment of
interest and/or repayment of principal is in arrears. Plus (+) or Minus (-) --
the ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Description of S&P's rating for municipal notes and short-term municipal demand
obligations:
Rating categories are as follows: SP-1 -- has a very strong or strong capacity
to pay principal and interest -- those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation; SP-2 -- -- has a
satisfactory capacity to pay principal and interest; SP-3 -- issues carrying
this designation have a speculative capacity to pay principal and interest.
DESCRIPTION OF S&P'S RATINGS FOR SHORT-TERM CORPORATE DEMAND OBLIGATIONS AND
COMMERCIAL PAPER:
An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
Excerpts from S&P's description of its commercial paper ratings are listed as
follows: A-1 --the degree of safety regarding timely payment is strong -- those
issues determined to possess extremely strong safety characteristics will be
denoted with a plus (+) designation; A-2 -- capacity for timely payment is
satisfactory -- however, the relative degree of safety is not as high as for
issues designated "A-1;" A-3 -- has adequate capacity for timely payment --
- --however, is more vulnerable to the adverse effects of changes in circumstances
than obligations carrying the higher designations; B -- regarded as having only
speculative capacity for timely payment; C -- a doubtful capacity for payment; D
- -- -- in payment default -- the "D" rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
<PAGE>
ADDRESS FOR:
GENERAL SHAREHOLDER INQUIRIES
Centura Funds, Inc.
P.O. Box 182485
Columbus, Ohio 43219-2485
INVESTMENT ADVISER AND CUSTODIAN
Centura Bank
131 North Church Street
Rocky Mount, North Carolina 27802
ADMINISTRATOR AND SPONSOR
BISYS Fund Services.
3435 Stelzer Road
Columbus, Ohio 43219
DISTRIBUTOR
Centura Funds Distributor, Inc.
125 West 55th Street
New York, New York 10019
COUNSEL
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
INDEPENDENT ACCOUNTANTS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
CENTURA FUNDS, INC.
PROSPECTUS
CLASS C SHARES
CENTURA BANK
ADVISER
BISYS FUND SERVICES.
ADMINISTRATOR AND SPONSOR
CENTURA FUNDS DISTRIBUTOR, INC.
DISTRIBUTOR
<PAGE>
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 FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND FUND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN MUTUAL FUNDS, SUCH AS THE FUNDS, INVOLVE RISK, INCLUDING POSSIBLE
LOSS OF PRINCIPAL. THE MONEY MARKET 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 _________, 1998,
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 ______________, 1998
<PAGE>
TABLE OF CONTENTS
Page
Highlights ....................................................
Fund Expenses .................................................
Fee Table .....................................................
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 .............................................
Performance Information .......................................
Appendix ......................................................
<PAGE>
HIGHLIGHTS
THE FUNDS
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 and to non-profit
institutions investing at least $100,000.
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.
<PAGE>
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.
Minimum Initial Investment .................................... $1,000
Minimum Initial Investment for IRAs and other qualified retirement plans
$ 250 Minimum Subsequent Investment........................... $ 250
(except for IRA and other qualified retirement plans)
Minimum amount for check writing............................... $ 100
Minimum Investment per pay period for Payroll
Deduction Plan................................................. $ 50
(No investment is required to initiate this plan.)
Minimum 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.
Minimum 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 None None
Imposed on
Purchase (as a percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends None None
(as a percentage of
offering price)
Deferred Sales Charge (as a percentage of redemption None None
proceeds)*
Exchange Fees None None
Annual Fund Operating Expenses (as a percentage of 0.10% 0.10%
average net assets
annualized) Management Fees (after waiver)**
12b-1 Fees (after waiver)** 0.40% None
Other Expenses (after waiver)** 0.42% 0.10%
Total Portfolio Operating Expenses*** 0.92% 0.20%
* 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.")
** Management fees have been revised to reflect voluntary fee waivers. Without
the waiver, Management fees would be .30% for both classes of 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 up to 0.50% in 12b-1 fees. However, the Distributor has undertaken to
limit 12b-1 fees to 0.40% for Class A shares of the Fund for the current fiscal
year. See "Management of the Funds--The Distributor." Included in Other Expenses
of Class A is 0.20% shareholder servicing fees. This amount reflects a voluntary
reduction of 0.05% from the maximum shareholder servicing fee of 0.25%. Absent
waivers and reimbursements other expenses would be 0.44% and 0.32% for class A
and class C respectively.
*** Investment Advisor has agreed to waive and/or reimburse expenses so that
total portfolio operating expenses do not exceed .92% for class A and .20 for
class C. Absent the voluntary fee waivers and/or reimbursements, "Total
Portfolio Operating Expenses" for Class A shares would be 1.49%, and for Class C
shares would be 0.62%.
<PAGE>
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 $ 2
3 years................................ $29 $ 6
--- --
* 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 February 24, 1998. 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 any investments permitted under federal rules
governing money market funds, including: U.S. Government securities; bank
obligations; commercial paper, corporate debt securities, variable rate demand
notes and repurchase agreements and other high quality short-term securities.
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 10% 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.
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 the Fund, or a
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 deemed
to be loans.
Other fundamental policies of the Fund are contained in the SAI. 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.
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.
Lawrence R. Allen serves as portfolio manager of the Fund. Mr. Allen has five
years of experience managing fixed income securities. He graduated from Campbell
University in 1993 with a Bachelor of Business Administration degree and a Trust
Management certificate. Mr. Allen began his career with United Carolina Bank in
trust investments before joining Centura in 1994. He managed the Centura Federal
Securities Income Fund from June 1994 through August 1997. Mr. Allen's other
duties at Centura include management of personal trust and pension investment
accounts.
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.
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 p.m. (Eastern time), Monday through Friday, on each day the New York
Stock Exchange is open for trading, which excludes the following business
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each class of shares of the 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.
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.
<PAGE>
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>
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 debt obligations; PRIME-2 -- issuers (or supporting
institutions) have a strong ability for repayment of senior short-term debt
obligations; PRIME-3 -- issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt 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.
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<PAGE>
[CENTURA LOGO]
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
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.
Washington, D.C. 20006
INDEPENDENT ACCOUNTANTS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
[CENTURA LOGO]
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
____________, 1998
<PAGE>
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 Mid Cap Equity Fund
-- Centura Large Cap Equity 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 prospectuses for the Funds dated ____________,
1998 (collectively, the "Prospectus"). This SAI contains additional and more
detailed information than that set forth in the Prospectus and should be read in
conjunction with the Prospectus. The Prospectus may be obtained without charge
by writing or calling the Funds at the address and information numbers printed
above.
______________, 1998
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES ...........................................
Bank Obligations ..............................................
Commercial Paper ..............................................
Convertible Securities ........................................
Corporate Debt Securities .....................................
Repurchase Agreements .........................................
Variable and Floating Rate Demand and Master Demand Notes......
Loans of Portfolio Securities..................................
Foreign Securities.............................................
Forward Foreign Currency Exchange Contracts....................
Interest Rate Futures Contracts................................
Stock Index Futures Contracts..................................
Option Writing and Purchasing..................................
Options on Futures Contracts...................................
Risks of Futures and Options Investments.......................
Limitations on Futures Contracts and Options on Futures Contracts
North Carolina Municipal Obligations...........................
Municipal Lease Obligations....................................
Securities of Other Investment Companies.......................
INVESTMENT RESTRICTIONS .......................................
MANAGEMENT ....................................................
Directors and Officers ........................................
Distribution of Fund Shares ...................................
Administrative Services .......................................
Service Organizations .........................................
DETERMINATION OF NET ASSET VALUE ..............................
PORTFOLIO TRANSACTIONS ........................................
Portfolio Turnover ............................................
TAXATION .....................................................
Centura North Carolina Tax-Free Bond Fund .....................
OTHER INFORMATION .............................................
Capitalization ................................................
Voting Rights .................................................
Custodian, Transfer Agent and Dividend Disbursing Agent........
Independent Accountants........................................
Counsel........................................................
Registration Statement.........................................
Financial Statements...........................................
<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 Mid Cap Equity Fund, Centura Large Cap Equity
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 Mid Cap Equity Fund, Centura Large Cap Equity 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 Mid Cap Equity Fund, Centura Large Cap Equity 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 Mid Cap Equity Fund,
Centura Large Cap Equity Fund and Centura Southeast Equity Fund). Centura Mid
Cap Equity Fund, Centura Large Cap Equity 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 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 Mid Cap Equity Fund, Centura Large Cap
Equity 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 Mid Cap Equity Fund, Centura Large Cap Equity 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
except Centura Money Market Fund). 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.
<PAGE>
POSITION WITH
NAME, ADDRESS AND AGE COMPANY PRINCIPAL 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,
1233 Hardee's Blvd. Inc. - Vice President
Rocky Mount, NC 27802 Controller (1991-present);
Age: 43 Deloitte & Touche - Senior
Audit Manager (1979-1991).
Frederick E. Turnage Director Attorney.
149 North Franklin St.
Rocky Mount, NC 27628
Age: 60
*Lucy Hancock Bode Director Lobbyist.
P.O. Box 6338
Raleigh, NC 27628
Age: 44
*J. Franklin Martin Director President of LandCraft
LandCraft Properties Properties (1978-present).
227 W. Trade Street, Suite
2730
Charlotte, NC 28202
Age: 51
George R. Landreth President BISYS -- Senior Vice
Age: President of Client
Services (1993-present).
Ellen Stoutamire (1) Secretary BISYS - Registration and
Age: 48 Compliance Officer
(1995-present); Attorney -
private practice
(1990-1995).
Tom Line (1) Treasurer BISYS - Vice
Age: 30 President/Treasurer
(December 1996-present); KPMG Peat
Marwick LLP Audit Senior Manager
(September 1989-December 1996).
(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.
<PAGE>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM
AGGREGATE BENEFITS ESTIMATED REGISTRANT
NAME OF PERSON, COMPENSATION ACCRUED AS ANNUAL AND FUND
POSITION FROM PART OF FUND BENEFITS COMPLEX PAID
REGISTRANT EXPENSES UPON TO DIRECTORS
RETIREMENT
Leslie H. $5,500 -0- -0- $5,500
Garner, Jr
James H. Speed, $5,500 -0- -0- $5,500
Jr.
Frederick E. $5,500 -0- -0- $5,500
Turnage
Lucy Hancock $4,000 -0- -0- $4,000
Bode
J. Franklin $4,000 -0- -0- $4,000
Martin
As of March 26, 1998, the Officers and Directors of the Company, as a group, own
less than 1% of the outstanding shares of the Funds.
As of March 26, 1998, the following individuals owned 5% or more of the Class A
and Class B shares of the Funds:
CENTURA MID CAP EQUITY FUND
CLASS A OWNED SHARES OWNED PERCENTAGE OWNED
- ------------------------ -------------- ----------------
None
CLASS B OWNED SHARES OWNED PERCENTAGE OWNED
- ------------------------ ------------ ----------------
None
CENTURA SOUTHEAST EQUITY FUND
CLASS A OWNED SHARES OWNED PERCENTAGE OWNED
- ------------------------ ------------- ----------------
Donaldson Lufkin Jenrette 10,952.042 6.26%
Securities Corporation Inc.
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
CLASS B OWNED SHARES OWNED PERCENTAGE OWNED
- ------------------------ ------------ ----------------
None
<PAGE>
CENTURA FEDERAL SECURITIES INCOME FUND
CLASS A OWNED SHARES OWNED PERCENTAGE OWNED
- ------------------------ ------------ ----------------
Centura Bank 8,275.996 15.75%
Trust Department
131 N. Church Street
Rocky Mount, NC 27801
Joel S. Kestler 2,775.403 5.28%
421 Wedgewood Street
Charleston, SC 27858
Henry Forman 6,314.696 12.02%
203 Williamsburg Drive
Greenville, NC 27858
Donaldson Lufkin Jenrette 3,754.573 7.14%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 3,713.425 7.07%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 2,858.922 5.44%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
<PAGE>
CLASS B OWNED SHARES OWNED PERCENTAGE OWNED
- ----------------------- ------------ ----------------
Donaldson Lufkin Jenrette 1,293.295 10.48%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 1,054.013 8.54%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 2,599.030 12.96%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 2,008.324 16.28%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 649.264 5.261%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 1,065.941 8.64%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 1,607.285 13.03%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
BISYS Fund Services, Inc. 990.345 8.03%
3435 Stelzer Rd.
Columbus, OH 43219
<PAGE>
CENTURA NORTH CAROLINA TAX-FREE BOND FUND
CLASS A OWNED SHARES OWNED PERCENTAGE OWNED
- ------------------------ ------------ ----------------
Donaldson Lufkin Jenrette 73,564.031 16.43%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 30,423.232 6.80%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 243,999.483 54.28%*
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Josephine J. Walker 2,376.834 5.33%
2213 Lockwood Folly Lane
Raleigh, NC 27610
Donaldson Lufkin Jenrette 3,516.324 7.89%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 3,451.700 7.74%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 9,873.450 22.15%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 5,817.655 13.05%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 5,264.501 11.808%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
* Disclaims beneficial ownership.
<PAGE>
CENTURA LARGE CAP EQUITY FUND
CLASS A OWNED SHARES OWNED PERCENTAGE OWNED
- ----------------------- ------------- ----------------
None
CLASS B OWNED SHARES OWNED PERCENTAGE OWNED
- ------------------------ ------------ ----------------
Donaldson Lufkin Jenrette 16,663.059 10.40%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
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 Mid Cap
Equity Fund, 0.70% for Centura Large Cap Equity 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 Large Cap Equity 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 Large Cap Equity 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 Large Cap Equity Fund), January 29, 1997 (for
Southeast Equity Fund) and April 27, 1998 (for Centura Money Market Fund) and by
the sole shareholder of each such Fund on July 24, 1996 (for Large Cap Equity
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 27,
1998 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 Mid Cap Equity 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 Large Cap Equity 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 Mid Cap
Equity 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 Mid Cap
Equity 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 of any Fund, and the Plan applies only
to Class A shares of Centura Money Market Fund. 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 Large Cap Equity 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 27, 1998 Board
of Directors Meeting. The Plan with respect to Centura Large Cap Equity 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 April 27, 1998
called for the purpose of voting on that Plan, and by the sole shareholder of
each class of shares of Centura Large Cap Equity Fund and Centura Southeast
Equity Fund on July 24, 1996 and January 29, 1997. (Shareholder approval was not
required for Centura Money Market Fund.) 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 Mid Cap Equity
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 Large Cap Equity Fund. With respect to
Class B shares, the Distributor received $80,683 for the Mid Cap Equity 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 Large Cap Equity 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 Mid Cap Equity
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 Mid Cap Equity 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 Mid Cap Equity 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 Mid Cap Equity
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 Mid Cap Equity
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 Large Cap Equity 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:
<PAGE>
FURMAN SELZ FURMAN SELZ
ENTITLED WAIVED
Centura Mid Cap Equity Fund $172,047 $0
Centura Federal Securities Income $156,049 $0
Fund
Centura North Carolina Tax-Free $ 59,260 $42,761
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 Mid Cap Equity Fund $105,945 $19,669
Centura Federal Securities Income $117,881 $23,780
Fund
Centura North Carolina Tax-Free $ 45,419 $40,371
Bond Fund
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 April 27, 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 Mid Cap Equity Fund. For the period from October 1, 1996
(commencement of operations) through April 30, 1997, $44,399 was paid in
brokerage commissions by the Large Cap Equity 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 Mid Cap Equity Fund. Of this
amount, none was paid to any affiliated brokers. For the period ended April 30,
1995, the Mid Cap Equity 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 Mid Cap Equity 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 Large Cap Equity Fund.
The portfolio turnover rate for the fiscal year ended April 30, 1996 was 46%,
34%, and 80% for the Mid Cap Equity Fund, the Federal Securities Income Fund and
the North Carolina Tax-Free Bond Fund, respectively.
TAXATION
The Funds intend to qualify and elect annually to be treated as regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, a Fund must
for each taxable year (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items, dividends,
taxable interest and the excess of net short-term capital gains over net
long-term capital losses); (b) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; and (c) 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 (the excess of net long-term capital gains
over short-term capital losses), if any, designated by a Fund as capital gain
dividends will generally be taxable to shareholders as either "20% Rate Gain" or
"28% Rate Gain," depending upon the Fund's holding period for the assets sold.
"20% Rate Gains" arise from sales of assets held by a Fund for more than 18
months and are subject to a maximum tax rate of 20%; "28% Rate Gains" arise from
sales of assets held by a Fund for more than one year but no more than 18 months
and are subject to a maximum tax rate of 28%. Net capital gains from assets held
for one year or less will be taxed as ordinary income. Distributions will be
subject to these capital gains rates regardless of how long a shareholder has
held Fund shares. 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 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.
Recently enacted rules may affect the timing and character of gain if a Fund
engages in transactions that reduce or liminate its risk of loss with respect to
appreciated financial positions. If a Fund enteres into certain transactions in
property while holding substantially identical property, the Fund would be
treated as if it had sold and immediately repurchased the property and would be
taxed on any gain (but not loss) from the constructive sale. The character of
gain from a constructive sale would depend upon the Fund's holding period in the
property. Loss from a constructive sale would be recognized when the property
was subsequently disposed of, and its character would depend on the Fund's
holding period and the application of various loss deferral provisions of the
Code.
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, with the result that unrealized gains
are treated as though they were realized and reported as ordinary income. Any
mark-to-market losses and any loss from an actual disposition of PFIC shares
would be deductible as ordinary losses to the extent of any net mark-to-market
gains included in income in prior years. 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 Mid Cap Equity 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 Large Cap Equity 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 Mid Cap Equity 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
Large Cap Equity 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
Mid Cap Equity 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 Mid Cap Equity 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
Mid Cap Equity 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 Large Cap Equity 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
Mid Cap Equity 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 Mid Cap Equity 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.
Centura Money Market Fund
The current yield is the net annualized yield based on a specific 7
calendar-days calculated at simple interest rates. Current yield is calculated
by determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period and dividing such change by the value of the account at the
beginning of the base period to obtain the base-period return. The base-period
return is then annualized by multiplying it by 365/7; the resultant product
equals net annualized current yield. The current yield figure is stated to the
nearest hundredth of one percent.
The effective yield is the net annualized yield for a specified 7 calendar-days
assuming a reinvestment in Fund shares of all dividends during the period, i.e.,
compounding. Effective yield is calculated by using the same base-period return
used in the calculation of current yield except that the base-period return is
compounded by adding 1, raising the sum to a power equal to 365 divided by 7,
and subtracting 1 from the result according to the following formula:
Effective Yield - [(Base Period Return+ 1)365/7] - 1.
As described above, current yield and effective yield are based on historical
earnings, show the performance of a hypothetical investment and are not intended
to indicate future performance. Current yield and effective yield will vary
based on changes in market conditions and the level of Fund expenses.
Other Centura Funds
Quotations of yield for each class of shares of the Funds will be based on the
investment income per share earned during a particular 30-day period, less
expenses accrued with respect to that class during a period ("net investment
income"), and will be computed by dividing net investment income for the class
by the maximum offering price per share of that class on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1)#6-1]/ cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares of the class outstanding during the period that were entitled to receive
dividends, and d = the maximum offering price per share of the class on the last
day of the period; the # indicates that the following single character is an
exponent.
The 30-day yield for the period ended October 31, 1997 was as follows: 5.34% and
4.22% for the Class A shares of the Federal Securities Income Fund and the North
Carolina Tax-Free Bond Fund, respectively, and 4.83% and 3.72% 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, 1998 (the "Annual
Report") are incorporated herein by reference to such Report. Copies of such
Annual Report are available without charge upon request by writing to Centura
Funds, Inc., 3435 Stelzer Road, Columbus, Ohio 43219-8006 or telephoning (800)
442-3688.
The financial statements 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
<PAGE>
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 Mid Cap Equity Fund
-- Centura Large Cap Equity 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 prospectuses for the Funds dated ______________,
1998 (collectively, the "Prospectus"). This SAI contains additional and more
detailed information than that set forth in the Prospectus and should be read in
conjunction with the Prospectus. The Prospectus may be obtained without charge
by writing or calling the Funds at the address and information numbers printed
above.
______________, 1998
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES ...........................................
Bank Obligations ...........................................
Commercial Paper ...........................................
Convertible Securities .....................................
Corporate Debt Securities ..................................
Repurchase Agreements ......................................
Repurchase Agreements ......................................
Variable and Floating Rate Demand and Master Demand Notes...
Loans of Portfolio Securities...............................
Foreign Securities..........................................
Forward Foreign Currency Exchange Contracts.................
Interest Rate Futures Contracts.............................
Stock Index Futures Contracts...............................
Option Writing and Purchasing...............................
Options on Futures Contracts................................
Risks of Futures and Options Investments....................
Limitations on Futures Contracts and Options on Futures Contracts
North Carolina Municipal Obligations........................
Securities of Other Investment Companies....................
INVESTMENT RESTRICTIONS........................................
MANAGEMENT.....................................................
Directors and Officers......................................
Investment Adviser..........................................
Distribution of Fund Shares.................................
Administrative Services.....................................
Service Organizations.......................................
DETERMINATION OF NET ASSET VALUE...............................
PORTFOLIO TRANSACTIONS.........................................
Portfolio Turnover..........................................
TAXATION.......................................................
Centura North Carolina Tax-Free Bond Fund...................
OTHER INFORMATION..............................................
Capitalization..............................................
Voting Rights...............................................
Custodian, Transfer Agent and Dividend Disbursing Agent.....
Yield and Performance Information...........................
Independent Accountants.....................................
Counsel.....................................................
Registration Statement......................................
Financial Statements........................................
<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 Mid Cap Equity Fund, Centura Large Cap Equity
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 Mid Cap Equity Fund, Centura Large Cap Equity 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 Mid Cap Equity Fund, Centura Large Cap Equity 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 Mid Cap Equity Fund,
Centura Large Cap Equity Fund and Centura Southeast Equity Fund). Centura Mid
Cap Equity Fund, Centura Large Cap Equity 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 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 Mid Cap Equity Fund, Centura Large Cap
Equity 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 Mid Cap Equity Fund, Centura Large Cap Equity 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 tradedge- 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
except Centura Money Market Fund). 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 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.
POSITION WITH
NAME, ADDRESS AND AGE COMPANY PRINCIPAL 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,
1233 Hardee's Blvd. Inc. - Vice President
Rocky Mount, NC 27802 Controller (1991-present);
Age: 43 Deloitte & Touche - Senior
Audit Manager (1979-1991).
Frederick E. Turnage Director Attorney.
149 North Franklin St.
Rocky Mount, NC 27628
Age: 60
*Lucy Hancock Bode Director Lobbyist.
P.O. Box 6338
Raleigh, NC 27628
Age: 44
*J. Franklin Martin Director President of LandCraft
LandCraft Properties Properties (1978-present).
227 W. Trade Street, Suite
2730
Charlotte, NC 28202
Age: 51
George R. Landreth President BISYS - Senior Vice
Age: 56 President of Client
Services (1993-present).
Ellen Stoutamire (1) Secretary BISYS - Registration and
Age: 48 Compliance Officer
(1995-present); Attorney -
private practice
(1990-1995).
Tom Line (1) Treasurer BISYS - Vice
Age: 30 President/Treasurer
(December 1996-present); KPMG Peat
Marwick LLP Audit Senior Manager
(September 1989-December 1996).
(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.
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM
AGGREGATE BENEFITS ESTIMATED REGISTRANT
NAME OF PERSON, COMPENSATION ACCRUED AS ANNUAL AND FUND
POSITION FROM PART OF FUND BENEFITS COMPLEX PAID
REGISTRANT EXPENSES UPON TO DIRECTORS
RETIREMENT
Leslie H. $5,500 -0- -0- $5,500
Garner, Jr
James H. Speed, $5,500 -0- -0- $5,500
Jr.
Frederick E. $5,500 -0- -0- $5,500
Turnage
Lucy Hancock $4,000 -0- -0- $4,000
Bode
J. Franklin $4,000 -0- -0- $4,000
Martin
As of March 26, 1998, the Officers and Directors of the Company, as a group, own
less than 1% of the outstanding shares of the Funds.
As of March 26, 1998, the following individuals owned 5% or more of the Class C
shares of the Funds:
CENTURA MID CAP EQUITY FUND
SHARES OWNED PERCENTAGE OWNED
-------------- ----------------
Centura Bank 3,403,075.650 30.24%
Cash Account
Attn: Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
Centura Bank 7,677,087.590 68.22%
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 5,220,960.820 41.13%*
Cash Account
Attn: Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
Centura Bank 7,393,272.988 58.24%
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 3,436,986.756 95.41%
Cash Account
Attn: Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
* Disclaims beneficial ownership.
CENTURA LARGE CAP EQUITY FUND
SHARES OWNED PERCENTAGE OWNED
-------------- ----------------
Centura Bank 2,788,585.394 53.12%
Reinvest Account
Attn: Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
Centura Bank 2,430,901.180 46.31%*
Cash Account
Attn: Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
* Disclaims beneficial ownership.
CENTURA SOUTHEAST EQUITY FUND
SHARES OWNED PERCENTAGE OWNED
-------------- ----------------
Centura Bank 1,084,227.126 52.04%
Reinvest Account
Attn: Trust Operations
P.O. Box 1220
Rocky Mount, NC 27802-1220
Centura Bank 975,662.503 46.83%
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 Mid Cap
Equity Fund, 0.70% for Centura Large Cap Equity 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 Large Cap Equity 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 Large Cap Equity 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 Large Cap Equity Fund), January 29, 1997 (for
Southeast Equity Fund) and April 27, 1998 (for Centura Money Market Fund) and by
the sole shareholder of each such Fund on July 24, 1996 (for Large Cap Equity
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 27,
1998 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 Mid Cap Equity 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 Large Cap Equity 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 Mid Cap
Equity 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 Mid Cap
Equity 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 Mid Cap Equity
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 Large Cap Equity Fund of which $23,882 was waived.
For the period ended April 30, 1996, Furman Selz, the Administrator for that
fiscal period, was entitled to the following administrative services fees:
FURMAN SELZ FURMAN SELZ
ENTITLED WAIVED
Centura Mid Cap Equity Fund $172,047 $0
Centura Federal Securities Income $156,049 $0
Fund
Centura North Carolina Tax-Free $ 59,260 $42,761
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 Mid Cap Equity Fund $105,945 $19,669
Centura Federal Securities Income $117,881 $23,780
Fund
Centura North Carolina Tax-Free $ 45,419 $40,371
Bond Fund
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
April 27, 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 Mid Cap Equity Fund. For the period from October 1, 1996 (commencement of
operations) through April 30, 1997, $44,399 was paid in brokerage commissions by
the Large Cap Equity Fund. Of these amounts, none were paid to any affiliated
brokers. For the period ended April 30, 1996, the Mid Cap Equity 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 Mid Cap
Equity 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 Mid Cap Equity 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 Large Cap Equity Fund. The
portfolio turnover rate for the fiscal period ended April 30, 1996 was 46%, 34%,
and 80% for the Mid Cap Equity Fund, the Federal Securities Income Fund and the
North Carolina Tax-Free Bond Fund, respectively.
TAXATION
The Funds intend to qualify and elect annually to be treated as regulated
investment companies under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify as a regulated investment company, a Fund must
for each taxable year (a) distribute to shareholders at least 90% of its
investment company taxable income (which includes, among other items, dividends,
taxable interest and the excess of net short-term capital gains over net
long-term capital losses); (b) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; and (c) 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 (the excess of net long-term capital gains
over short-term capital losses) if any, designated by a Fund as capital gain
dividends will generally be taxable to shareholders as either "20% Rate Gain" or
"28% Rate Gain," depending upon the Fund's holding period for the assets sold.
"20% Rate Gains" arise from sales of assets held by a Fund for more than 18
months and are subject to a maximum tax rate of 20%; "28% Rate Gains" arise from
sales of assets held by a Fund for more than one year but no more than 18 months
and are subject to a maximum tax rate of 28%. Net capital gains from assets held
for one year or less will be taxed as ordinary income. Distriubtions will be
subject to these capital gains rates regardless of how long a shareholder has
held Fund shares. 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 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 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.
Recently enacted rules may affect the timing and character of gain if a Fund
engages in transactions that reduce or eliminate its risk of loss with respect
to appreciated financial positions. If a Fund enters into certain transactions
in property while holding substantially identical property, the Fund would be
treated as if it had sold and immediately repurchased the property and would be
taxed on any gain (but not loss) from the constructive sale. The character of
gain from a constructive sale would depend upon the Fund's holding period in the
property. Loss from a constructive sale would be recognized when the property
was subsequently disposed of, and its character would depend on the Fund's
holding period and the application of various loss deferral provisions of the
Code.
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, with the result that unrealized gains
are treated as though they were realized and reported as ordinary income. Any
mark-to-market losses and any loss from an actual disposition of PFIC shares
would be deductible as ordinary losses to the extent of any net mark-to-market
gains included in income in prior years. 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 of net capital gains (the excess of net long-term
capital gains over short-term capital losses), if any, designated by a Fund as
capital gain dividends will generally be taxable to shareholders as either "20%
Rate Gain" or "28% Rate Gain," depending upon the Fund's holding period for the
assets sold. "20% Rate Gains" arise from sales of assets held by a Fund for more
than 18 months and are subject to a maximum tax rate of 20%; "28% Rate Gains"
arise from sales of assets held by a Fund for more than one year but no more
than 18 months and are subject to a maximum tax rate of 28%. Net capital gains
from assets held for one year or less will be taxed as ordinary income.
Distributions will be subject to these capital gains rates regardless of how
long a shareholder has held Fund shares.
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 Mid Cap Equity 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 Large Cap Equity 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 Mid Cap Equity
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 Large Cap Equity 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 Mid Cap Equity 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 Mid Cap Equity 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 Mid Cap Equity 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 Large Cap Equity
Fund. For the fiscal year ended April 30, 1996, Furman Selz, earned the
following fees for their fund accounting services: $32,848 for the Mid Cap
Equity 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 Mid Cap Equity 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.
Centura Money Market Fund
The current yield is the net annualized yield based on a specific 7
calendar-days calculated at simple interest rates. Current yield is calculated
by determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period and dividing such change by the value of the account at the
beginning of the base period to obtain the base-period return. The base-period
return is then annualized by multiplying it by 365/7; the resultant product
equals net annualized current yield. The current yield figure is stated to the
nearest hundredth of one percent.
The effective yield is the net annualized yield for a specified 7 calendar-days
assuming a reinvestment in Fund shares of all dividends during the period, i.e.,
compounding. Effective yield is calculated by using the same base-period return
used in the calculation of current yield except that the base-period return is
compounded by adding 1, raising the sum to a power equal to 365 divided by 7,
and subtracting 1 from the result according to the following formula:
Effective Yield - [(Base Period Return+ 1)365/7] - 1.
As described above, current yield and effective yield are based on historical
earnings, show the performance of a hypothetical investment and are not intended
to indicate future performance. Current yield and effective yield will vary
based on changes in market conditions and the level of Fund expenses.
Other Centura Funds
Quotations of yield for each class of shares of the Funds will be based on the
investment income per share earned during a particular 30-day period, less
expenses accrued with respect to that class during a period ("net investment
income"), and will be computed by dividing net investment income for the class
by the maximum offering price per share of that class on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1)#6-1]/cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares of the class outstanding during the period that were entitled to receive
dividends, and d = the maximum offering price per share of the class on the last
day of the period; the # indicates that the following single character is an
exponent.
The 30-day yield for Class C shares for the period ended October 31, 1997 was as
follows: 5.59% for the Federal Securities Income Fund and 4.47% 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, 1998 (the "Annual
Report") are incorporated herein by reference to such Report. Copies of such
Annual Report are available without charge upon request by writing to Centura
Funds, Inc., 3435 Stelzer Road, Columbus, Ohio 43219-8006 or telephoning (800)
442-3688.
The financial statements 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
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit Description
Number
1(a) -- Articles of Incorporation of Registrant(1) 1(b) -- Articles
Supplementary(7) 1(c) -- Articles of Amendment (6) 1(d) -- Form of Articles
Supplementary (6) 1(e) -- Form of Articles Supplementary -(9) 1(f) --Form of
Articles Supplementary - filed herewith 2 -- ByLaws of Registrant(2) 3 -- Not
applicable 4(a) -- Form of Master Investment Advisory Contract(4) 4(b) --
Form of Investment Advisory Contract Supplement(7) 4(c) -- Form of Investment
Advisory Contract Supplement(6) 4(d) -- Form of Investment Advisory Contract
Supplement (9) 4(e) -- Form of Investment Advisory Contract Supplement -
filed herewith 5(a) -- Form of Distribution Contract (6) 5(b) -- Form of
Dealer and Selling Group Agreement(9) 6 -- Not applicable 7 -- Form of
Custody Agreement(7) 8(a) -- Form of Administration Agreement (6) 8(c) --
Form of Transfer Agency Agreement (6) 8(d) -- Form of Sub-Transfer Agency
Agreement(7) 8(e) -- Form of Fund Accounting Agreement (6) 8(f) -- Form of
Services Agreement(7) 9 -- Opinion of Counsel(4) 10(a) --Consent of
Independent Auditors--to be filed by amendment 10(b) --Powers of Attorney(8)
11 -- Not Applicable 12 -- Purchase Agreement(3) 13(a) --Form of Master
Distribution Plan (4) 13(b) --Form of Distribution Plan Supplement (3) 13(c)
--Form of Distribution Plan Supplement (8) 13(d) --Form of Distribution Plan
Supplement (12) 13(e) --Form of Distribution Plan Supplement - filed herewith
13(f) --Form of Shareholders Services Plan - filed herewith 13(g) --Form of
Shareholder Services Agreement - filed herewith 14 -- Financial data
Schedules - to be filed by amendment 15 -- Form of Amended Plan Pursuant to
Rule 18f-3 (9)
--------------
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. 6 to Registrant's Registration
Statement on January 15, 1997.
7. Filed as part of Post-Effective Amendment No. 7 to Registrant's
Registration Statement on March 27, 1997 and incorporated by reference
herein.
8. Filed as part of Post-Effective No. 8 to Registrant's Registration
statement on August 28, 1997 and incorporated by reference herein.
9. Filed as part of Post-Effective Amendment No. 10 to Registrant's
Registration Statement on February 13, 1998 and incorporated by reference
herein.
24. Persons Controlled by or Under Common Control with Registrant
None
25. 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.
26. 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
BUSINESS AND OTHER
NAME TITLE 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.
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, Chairman, Executive Director, Centura Bank;
Officer and Director Chairman, Chief Executive
Officer 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 Executive Vice President
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 Director, Centura Bank;
Executive Officer Chairman, Chief
and Director 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 Director, Centura Bank;
Officer, Chief Group Executive Officer
Financial Officer and Chief Financial
and Director 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 Group Executive Officer
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.
<PAGE>
27. Principal Underwriters
(a) Not applicable.
(b) Centura Funds Distributor, Inc.
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND
BUSINESS ADDRESS WITH UNDERWRITER OFFICES WITH
REGISTRANT
Lynn J. Mangum Chairman/CEO None
150 Clove Road
Little Falls, NJ 07424
Robert J. McMullen Executive Vice None
150 Clove Road President/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
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
Annamaria Porcaro Assistant Secretary None
150 Clove Road
Little Falls, NJ 07424
(c) None
28. 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).
29. Management Services
Not applicable.
30. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of Registrant's latest annual report 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 and the Investment
Company Act of 1940, 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 1st
day of June, 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 1st day of June, 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
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 50,000,000 50,000,000 50,000,000
Fund
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 50,000,000 50,000,000 50,000,000
Fund
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:__________________________
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.
CENTURA FUNDS, INC.
Centura Money Market Fund
Shareholder Services Plan
This Shareholder Services Plan ("Plan") is adopted as of this ___ day of
__________, 1998, by the Board of Directors of Centura Funds, Inc. ("Company"),
a Maryland corporation, with respect to certain classes ("Classes") of its
series, Centura Money Market Fund ("Fund") set forth in Exhibit A hereto.
1. This Plan is adopted to allow the Fund to make payments as
contemplated herein to obtain certain personal services for shareholders and/or
the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate broker/dealers and other
participating financial institutions and other persons ("Providers") for
providing Services to the Fund and its shareholders. The Plan will be
administered by BISYS Fund Services, L.P. ("BISYS"). In compensation for the
Services provided pursuant to this Plan, Providers will be paid a monthly fee
computed at an annual rate not to exceed the rate set forth in Exhibit A based
on the average aggregate net asset value of the shares of each Class held during
the month.
3. Any payments made by the Fund to any Provider pursuant to this Plan
will be made pursuant to the "Shareholder Services Agreement" entered into by
BISYS, on behalf of the Company with respect to the Fund, and the Provider.
4. The Company has the right (i) to select, in its sole discretion, the
Providers to participate in the Plan and (ii) to terminate without cause and in
its sole discretion any Shareholder Services Agreement.
5. Quarterly in each year that this Plan remains in effect, BISYS shall
prepare and furnish to the Board of Directors of the Company, and the Board of
Directors shall review, a written report of the amounts expended under the Plan.
6. This Plan shall become effective after approval by majority votes of:
(a) the Company's Board of Directors; and (b) the members of the Board of the
Company who are not interested persons of the Company and have no direct or
indirect financial interest in the operation of this Plan, in the Distribution
Plan for the Fund, or in any agreements related to the Plan or the Distribution
Plan ("Disinterested Directors"), cast in person at a meeting called for the
purpose of voting on the Plan. If the Plan is adopted for another class of the
Fund, or for another series of the Company or class thereof, after any public
offering of shares or sales of shares of such series or class to persons not
affiliated with the Company, its promoter or affiliates of either, the Plan, in
addition to the foregoing approvals, must all be approved by vote of a majority
of the outstanding voting securities of such series, or class, as applicable, as
defined in the Investment Company Act of 1940 (following which, each such series
and/or class will be a Fund and/or Class, respectively, hereunder).
7. This Plan shall remain in effect with respect to each Class presently
set forth on Exhibit A and any subsequent Classes added to the Plan during the
initial year of the Plan for the period of one year from the date set forth
above and may be continued thereafter if this Plan is approved with respect to
each Class at least annually by a majority of the Company's Board of Directors
and a majority of the Disinterested Directors, cast in person at a meeting
called for the purpose of voting on such Plan. If this Plan is adopted with
respect to a Class after the first annual approval by the Directors as described
above, this Plan will be effective as to that Class upon approval as provided in
Paragraph 6 hereof, or as of each later date as the Directors may determine and
will continue in effect until the next annual approval of this Plan by the
Directors and the Disinterested Directors and thereafter for successive periods
of one year subject to approval by the Directors and Disinterested Directors as
described above.
8. All material amendments to this Plan must be approved by a vote of
majorities of the Board of Directors of the Company and of the Disinterested
Directors, cast in person at a meeting called for the purpose of voting on such
amendments.
9. This Plan may not be amended to increase materially the costs which a
Fund or Class may bear pursuant to this Plan without approval by vote of a
majority of the outstanding voting securities of the Fund or Class, as
applicable, as defined in the Investment Company Act of 1940.
10. This Plan may be terminated at any time with respect to a Fund or
Class by: (a) a majority vote of the Disinterested Directors; or (b) a vote of a
majority of the outstanding voting securities of the Fund or Class, as
applicable, as defined in Section 2(a)(42) of the Investment Company Act of
1940, as amended.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Directors of the Company shall be committed to the discretion of
the Disinterested Directors then in office.
12. All agreements with any person relating to the implementation of this
Plan shall be in writing and any agreement related to this Plan shall be subject
to termination, without penalty, pursuant to the provisions of Paragraph 9
herein.
13. This Plan shall be construed in accordance with and governed by the
laws of the State of Ohio.
<PAGE>
EXHIBIT A
to Shareholder Services Plan of
CENTURA FUNDS, INC.
Centura Money Market Fund
This Plan is adopted by the Company with respect to the Classes of Shares
of the Fund of the Company as set forth below.
In compensation for the services provided pursuant to this Plan, Providers
will be paid a monthly fee computed at the annual rate indicated below based on
the average aggregate net asset value of each Class of the Fund indicated below.
Fund Rate Effective Date
Centura Money Market Fund
Class A and Class C 0.25%
SHAREHOLDER SERVICES AGREEMENT
Dated as of
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219-3035
Ladies and Gentlemen:
We wish to enter into an Agreement with you, in your capacity as principal
underwriter of the Class A and Class C shares of the Centura Money Market Fund
(the "Fund"), a series of Centura Funds, Inc. (the "Company"), an open-end
investment company registered under the Investment Company Act of 1940 (the
"Act"). The terms and conditions of this Agreement are as follows:
1. We shall provide shareholder and administrative services for
shareholders of the Fund who are also our clients ("clients"), which services
may include, without limitation and to the extent we are permitted by applicable
statute, rule or regulation: (a) providing necessary personnel and facilities to
establish and maintain certain shareholder accounts and records, as requested
from time to time by the Company; (b) assisting in processing purchase and
redemption transactions; (c) arranging for the wiring of funds; (d) transmitting
and receiving funds in connection with client orders to purchase or redeem Fund
shares; (e) verifying and guaranteeing client signatures in connection with
redemption orders, transfers among and changes in client-designated accounts;
(f) providing periodic statements showing a client's account balances and, to
the extent practicable, integrating such information with other client
transactions otherwise effected with or through us; (g) furnishing (either
separately or on an integrated basis with other reports sent to a client by us)
periodic and annual statements and confirmations of all purchases and
redemptions of Fund shares in a client's account; (h) transmitting proxy
statements, annual reports, and updating prospectuses and other communications
from the Company to clients; and (i) such other services as the Company or a
client reasonably may request. We shall provide such office space and equipment,
telephone facilities and personnel (which may be all or any part of the space,
equipment and facilities currently used in our business, or all or any personnel
employed by us) as is necessary or beneficial for providing information and
services to shareholders of the Company.
2. Neither we nor any of our employees or agents shall be authorized to
make any representation concerning shares of the Fund except those contained in
the then current Prospectus for the Fund, copies of which will be supplied by
you to us; and we shall have no authority to act as agent for the Company.
3. In consideration of the services and facilities described herein, we
shall be entitled to receive from you fees to be paid periodically (but in no
event less frequently than semiannually) as set forth in Exhibit A attached
hereto; provided that such fees shall not exceed during any period the amount
payable at an annual rate of .25% of the average daily net assets of the Fund
represented by Class A and Class C shares owned by clients with whom we maintain
a servicing relationship.
It is agreed that we may impose certain conditions on clients, in
addition to or different from those imposed by the Company, such as requiring a
minimum initial investment or charging clients direct fees for the same or
similar services as are provided hereunder by us as agent (which fees either may
relate specifically to our services with respect to the Company or generally
over services not limited to those with respect to the Company). We shall bill
clients directly for such fees. In the event we charge clients such fees, to the
extent permissible by applicable statues, rules and regulations, we shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to clients both of any direct fees charged to clients and
of the fees received or to be received by us from the Company pursuant to this
Agreement. It is understood, however, that in no event shall we have recourse or
access to the account of any shareholder of the Fund except to the extent
expressly authorized by law or by such shareholder, or to any assets of the
Company, for payment of any direct fees referred to in this Agreement.
4. To the extent requested by you from time to time, we agree that we will
provide the Treasurer of the Company with a written report of the amounts
expended by us and the purposes for which such expenditures were made. Such
written reports shall be in a form satisfactory to you and the Company and shall
supply all information necessary for the Company to discharge its
responsibilities under applicable laws and regulations.
5. We shall maintain records in a form acceptable to you and in compliance
with applicable laws and the rules and regulations of the Securities and
Exchange Commission including, but not limited to, the record-keeping
requirements of Section 31(a) of the Act and the rules thereunder. Such records
shall be deemed to be the property of the Company and will be made available, at
the Company's request, for inspection and use by the Company, representatives of
the Company and governmental bodies. We agreed that, for so long as we retain
any records of the Company, we will meet all reporting requirements pursuant to
the Act with respect to such records.
6. We shall maintain accurate and complete records with respect to
services performed by us in connection with the purchase and redemption of
shares. Such records shall be maintained in a form satisfactory to you and in
compliance with the requirements of Rules 17a-3 and 17a-4 under the Securities
Exchange Act of 1934, as amended, pursuant to which any dealer of the shares
must maintain certain records. All such records maintained by us shall be the
property of such dealer and will be made available for inspection and use by you
or such dealer upon the request of either. We shall file, and furnish to you and
any such dealer, copies of all reports and undertakings required by the
Securities and Exchange Commission pertaining to the above transactions in
compliance with the said rules. If so requested by any such dealer, we shall
confirm to such dealer its obligations under this paragraph by a writing
reasonably satisfactory to such dealer. The Company shall specify to us, as we
shall periodically review with the Company, the records to be maintained and the
procedures to be followed by us in complying with this paragraph.
7. You agree to indemnify, defend and hold us (including our officers,
directors, employees and agents and any person who controls us) free and
harmless from and against any and all claims, demands, liabilities and expenses
( including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which we may
incur under the Securities Act of 1933, as amended, or under common law or
otherwise, arising out of or based upon (i) any breach of any representation,
warranty or covenant made by you herein, (ii) any failure by you to perform your
obligations as set forth herein, or (iii) any untrue statement, or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus of the Fund, or arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in any such
Registration Statement or Prospectus, or necessary to make any statement in such
Registration Statement or Prospectus not misleading.
In any case in which you may be asked to indemnify or hold us
harmless, you shall be advised of all pertinent facts concerning the situation
in question and we shall use reasonable care to identify and notify you promptly
concerning any situation which presents or appears likely to present a claim for
indemnification against you. You shall have the option to defend us against any
Claim which may be the subject of indemnification hereunder. In the event that
you elect to defend against such Claim, the defense shall be conducted by
counsel chosen by you and satisfactory to us. We may retain additional counsel
at our expense. Except with your prior written consent, we shall not confess any
Claim or make any compromise in any case in which you will be asked to indemnify
us.
8. We agree to indemnify, defend and hold you and the Company (including
officers, directors, employees and agents and any person who controls you or the
Company) free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) which you or the Company may incur under the Securities Act of 1933,
as amended, or under common law or otherwise, arising out of or based upon (i)
any breach of any representation, warranty or covenant made by us herein, or
(ii) any failure by us to perform our obligations as set forth herein.
In any case in which we may be asked to indemnify or hold you or the
Company harmless, we shall be advised of all pertinent facts concerning the
situation in question and you shall use reasonable care to identify and notify
us promptly concerning any situation which presents or appears likely to present
a claim for indemnification against us. We shall have the option to defend you
or the Company against any Claim which may be the subject of indemnification
hereunder. In the event that we elect to defend against such Claim, the defense
shall be conducted by counsel chosen by us and satisfactory to you and the
Company . You and the Company may retain additional counsel at your expense.
Except with our prior written consent, neither you nor the Company shall confess
any Claim or make any compromise in any case in which we will be asked to
provide indemnification. The indemnities granted by the parties in this
Agreement shall survive the termination of this Agreement.
9. This Agreement may be terminated by the Company without the payment of
any penalty, at any time upon not more than 60 days' nor less than 30 days'
notice, by a vote of a majority of the Board of Directors who are not
"interested persons" of the Company (as defined in the Act) or by "a vote of a
majority of the outstanding voting securities" (as defined in the Act) of the
Company. In addition, either of us may terminate this Agreement upon not more
than 60 days' nor less than 30 days' notice. Notwithstanding anything herein to
the contrary, this Agreement may not be assigned and shall terminate
automatically without notice to either party upon any assignment. Upon
termination hereof, you shall pay such compensation as may be due us as of the
date of such termination.
10. Our appointment as shareholder servicing agent hereunder is
nonexclusive, and the parties hereto recognize and agree that, from time to
time, you or the Company may enter into other shareholder servicing agreements,
in writing, with other financial institutions.
11. This Agreement may be changed or amended only by written instrument
signed by both parties.
12. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
Very truly yours,
By:____________________________
Name:
Title:
Accepted:
BISYS FUND SERVICES LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: ______________________
<PAGE>
EXHIBIT A
to
SHAREHOLDER SERVICES AGREEMENT
In compensation for the services provided pursuant to this Agreement, the
service organization executing this Agreement shall be paid a monthly fee
computed at the annual rate indicated below based on the average aggregate net
asset value of each Class of the Fund below.
Fund Rate
Centura Money Market Fund
Class A and Class C 0.25%
