CENTRAL ASSET FUND, INC.
Statement of Assets and Liabilities
June 30, 1998
(Unaudited)
Assets
Investments, at value (@ cost $457,956,631) $ 474,374,490
Dividends receivable 583,619
Interest receivable 1,552
Deferred Organizational Costs 7,206
Prepaid expenses 4,386
Total Assets 474,971,253
Liabilities
AMPS Dividends Payable 1,049,178
Cash 10
Accrued expenses 181,166
Notes payable 475,500
Accrued interest expense 12,812
Total Liabilities 1,718,666
Net Assets $ 473,252,587
Net assets are represented by:
Series A Auction Market Preferred Stock, $.01 par value
at liquidation preference $100,000 per share, 1,000 shares
authorized, issued and outstanding 100,000,000
Series B Auction Market Preferred Stock, $.01 par value
at liquidation preference $100,000 per share, 1,000 shares
authorized, issued and outstanding 100,000,000
Common stock at par value, $.01 per share, 199,998,000 shares
authorized, 25,742,144.95 shares issued and outstanding 257,421
Additional paid-in capital 256,591,825
Overdistributed Net Gains (14,518)
Net unrealized appreciation of investments 16,417,859
Net Assets $ 473,252,587
Net asset value per common shares outstanding $ 10.61
See accompanying notes to the financial statements.
CENTRAL ASSET FUND, INC.
Statement of Operations
For the period from March 24, 1998 (commencement of operatons) to
June 30, 1998
(Unaudited)
Investment income:
Dividend income $ 2,093,306
Interest income 6,370
Total investment income 2,099,676
Expenses:
Administration fees 75,200
Investment management fee 12,533
Broker dealer fee 129,504
Rating agencies fees 14,959
Legal fees 13,065
Interest expense 12,812
Independent auditors 10,098
Insurance 7,438
Directors fees and expenses 4,314
Auction agent fee 4,755
Amortization of Organizational Cost 794
Total expenses 285,472
Net investment income 1,814,204
Net realized and unrealized gains on investments:
Net realized gain on investments:
Proceeds from sales $ 78,204
Cost of securities sold (92,722)
(14,518)
Unrealized appreciation of investments:
Beginning of period 0
End of period 16,417,859
Increase in net unrealized appreciation of investments 16,417,859
Net increase in net assets resulting
from operations $ 18,217,545
See accompanying notes to the financial statements.
CENTRAL ASSET FUND, INC.
Statement of Changes in Net Assets
For the period from March 24, 1998 (commencement of operatons) to
June 30, 1998
(Unaudited)
For the
period ended
June 30, 1998
(UNAUDITED)
From operations:
Net investment income $ 1,814,204
Net realized loss on investments (14,518)
Net change in unrealized appreciation
on investments 16,417,859
Increase in net assets resulting from operations 18,217,545
Dividends from net investment income:
Auction market preferred stock (1,814,204)
Common stock 0
(1,814,204)
Distributions from net realized gains:
Auction market preferred stock 0
Common stock 0
0
Decrease in net assets resulting from distributions (1,814,204)
to stockholders
Increase (decrease) from capital share transactions:
Issuance of auction market preferred stock 200,000,000
Issuance of common stock 257,421,450
Distribution of capital to preferred stockholder (572,204)
456,849,246
Total increase in net assets 473,252,587
Net assets:
Beginning of period 0
End of period $ 473,252,587
See accompanying notes to the financial statements.
CENTRAL ASSET FUND, INC.
Notes to the Financial Statements
June 30, 1998
(Unaudited)
1. Organization and Significant Accounting Policies
The Central Asset Fund, Inc. (the "Fund") is registered as a
diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended. The Fund
commenced investment operations on March 24, 1998.
The Fund's objective is long-term capital appreciation with
income as a secondary objective. The Fund's investments
consist primarily of common stocks of large and medium
capitalization U.S. companies. The Fund's investment
portfolio must conform to certain rating agency asset coverage
tests so long as the Fund has preferred stock outstanding.
On the date of commencement, the Fund issued $200 million of
Auction Market Preferred Stock ("AMPS") and received
securities with an aggregate fair value of $457,421,449.50
from a collective trust fund for employee benefit plans in
exchange for 25,742,144.95 shares of common stock and $200
million in cash.
The following is a summary of significant accounting policies
consistently followed by the Fund in preparation of its
financial statements.
Security Valuation
Investments in securities traded on a national securities
exchange (or reported on the Nasdaq National Market) are
valued at the last reported sales price on the primary
exchange. Temporary investments are valued at amortized cost
which approximates fair value.
Security Transactions
Security transactions are accounted for on a trade date plus
one business day basis which does not differ materially from a
trade date basis. The cost of securities sold is determined
using the identified cost method. Dividend income is recorded
on ex-dividend date and interest income is recorded on the
accrual basis.
Federal Income Taxes
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment
companies and distribute its taxable income to stockholders.
Therefore, no provision for Federal income tax is required.
Distribution of Income and Gains
The Fund distributes substantially all of its taxable income
in excess of the dividends paid to the preferred stockholders
to the common stockholder. Dividends to the common
stockholder are declared and paid at least annually. Net
capital gains, if any, are generally distributed annually.
1. Organization and Significant Accounting Policies
(continued)
The character of income and gains to be distributed are
determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Amounts
distributed in excess of taxable income and net realized
capital gains, if any, are considered a return of capital.
Use of Estimates
Estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in
the economic environment, financial markets and any other
parameters used in determining these estimates could cause
actual results to differ from these amounts.
Organization Costs
Organization costs have been deferred and are being amortized
by the Fund on a straight-line basis over five years.
2. Related Party Transactions
A collective trust fund for employee benefit plans is the sole
common stockholder of the Fund. Certain officers and
directors of the Fund are affiliated with the common
stockholder. No fees or expenses were paid to the affiliated
officers and directors.
Comerica Bank serves as both custodian and administrator for
the Fund and receives a fee based on a percentage of net
assets outstanding at the end of the fiscal year. An
affiliate of Comerica Bank serves as investment advisor to the
Fund. The annual investment management fee is 0.01% of
average equity investments. The administration and management
fees are calculated and accrued on a monthly basis and
generally paid on a quarterly basis.
3. Investment Transactions
The aggregate cost of securities purchased and the aggregate
proceeds of securities sold excluding short-term securities,
for the period March 24, 1998 (commencement of operation) to
June 30, 1998 were $0 and $78,204, respectively.
As of June 30, 1998, the aggregate gross unrealized
appreciation and depreciation of investments for Federal
income tax purposes, were $29,879,112 and $13,461,253,
respectively.
4. Auction Market Preferred Stock
The Fund has outstanding at June 30, 1998, 1000 shares of
Series A and Series B Auction Market Preferred Stock. The
AMPS rates in effect on June 30, 1998 were 4.15% and 4.20% for
Series A and Series B, respectively.
In March 1998, the Fund issued $200 million of AMPS.
Each series of AMPS is redeemable at the option of the Fund in
whole, but not in part, at a price of $100,000 per share plus
accumulated and unpaid dividends. Dividends are cumulative
from the date of original issue and are paid every 49 days at
a rate set through Dutch Auction. The Fund is subject to
certain asset coverage tests, and the AMPS are subject to
mandatory redemption if the tests are not met.
In addition, the AMPS are subject to mandatory redemption if
the Fund ceases to qualify as a regulated investment company
or if Merrill Lynch, Pierce, Fenner & Smith Incorporated
ceases to be the broker dealer. The liquidation value under
mandatory redemption of the AMPS is $100,000 per share plus
accumulated and unpaid dividends.
5. Notes Payable
As of June 30, 1998, the Fund had $475,500 of principal notes
outstanding to investors. The notes are due on March 24, 2023,
bear interest at a floating rate. The interest rate, which
resets annually, is set at the one-year U.S. Treasury bill
rate plus 3.50%. As of June 30, 1998, the Fund was paying
interest at 10% per annum.
6. Year 2000 (Unaudited)
Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely
affected if the computer systems used by the
advisor/administrator and other service providers do not
properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known
as the "Year 2000 Problem". The advisor/administrator is
taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems
that it uses and to obtain reasonable assurances that
comparable steps are being taken by the Fund's other major
service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any
adverse impact to the Fund.
CENTRAL ASSET FUND, INC.
Financial Highlights
(Unaudited)
For the
period ended
June 30, 1998 (1)
For a share of common stock outstanding
throughout the period:
Net asset value, beginning of period 10.00
Net investment income 0.07
Net realized and unrealized gains
on investments 0.63
Total from investment operations 0.70
Capital contribution 0.00
Less distributions from net investment income:
Common stock equivalent of dividends
paid to AMPS holders (0.07)
Dividends paid to common shareholders 0.00
Less distributions from net realized gains:
Common stock equivalent of dividends
paid to AMPS holders 0.00
Distribution paid to common shareholders 0.00
Less distributions from paid-in capital:
Common stock equivalent of dividends
paid to AMPS holders (0.02)
Distribution of capital to common stockholder 0.00
Total distributions (0.09)
Net asset value, end of period $10.61
Total investment return 7.00%(2)
Ratios/supplemental data:
Net assets at end of period (000s) 473,253
Average net assets (000s) 464,591
Ratio of expenses to average net assets
applicable to common stock (4) 0.06%(3)
Ratio of net investment income to average net
assets applicable to common stock (4) 0.39%(3)
Portfolio turnover 0.00%
Average commissions paid on equity
securities transactions (4) $0.0002
Asset coverage per AMPS share
end of period 236,626
AMPS shares outstanding 2,000
Asset coverage for notes payable,
end of period 99527%
Notes payable, end of period $475,500
(1)For the period March 24, 1998 (commencement of operations) to June 30,
1998.
(2)Total investment return for the period; not annualized.
(3)Annualized.
(4)Ratios are calculated on the basis of income and expenses applicable to
both the common and preferred stock relative to the average net assets
of the common stockholder. Ratios do not reflect the effect of
dividend payments to AMPS holders.
See accompanying notes to financial statements.
CENTRAL ASSET FUND, INC.
Portfolio of Investments
June 30, 1998
(Unaudited)
No. of
Shares Market Value
COMMON STOCK
BUILDING AND CONSTRUCTION 1.41%
BUILDING MATERIALS
7,000 GEORGIA PACIFIC CORP 412,562.50
55,300 HOME DEPOT 4,593,356.25
12,500 MASCO CORP 756,250.00
INDUSTRIAL CHEMICALS
13,500 PPG INDUS INC 939,093.75
TOTAL BUILDING AND CONSTRUCTION $6,701,262.50
CHEMICALS AND DRUGS 15.68%
CHEMICALS
17,100 DOW CHEMICAL CO 1,653,356.25
85,600 DUPONT DENEMOURS & CO 6,387,900.00
5,900 EASTMAN CHEMICAL 367,275.00
DRUGS
115,600 ABBOT LABS 4,725,150.00
6,500 ALZA CORP CL A 281,125.00
98,200 AMERICAN HOME PRODUCTS 5,081,850.00
75,200 BRISTOL MYERS SQUIBB CO 8,643,300.00
83,900 LILLY ELI & CO 5,542,643.75
90,600 MERCK & CO., INC 12,117,750.00
97,800 PFIZER INC 10,629,637.50
38,400 PHARMACIA & UPJOHN INC 1,771,200.00
55,400 SCHERING PLOUGH 5,076,025.00
61,800 WARNER-LAMBERT 4,287,375.00
COSMETICS
10,000 AVON PRODUCTS INC 775,000.00
8,300 INTL FLAVORS & FRAGRANCES 360,531.25
HEALTH PRODUCTS/CARE
21,200 BAXTER INTL INC. 1,140,825.00
84,800 GILLETTE CO 4,807,100.00
23,200 TENET HEALTHCARE CORP 725,000.00
TOTAL CHEMICALS AND DRUGS $74,373,043.75
CONSUMER PRODUCTS 13.58%
CONFECTIONS AND BEVERAGES
37,000 ANHEUSER-BUSCH COS 1,745,937.50
187,000 COCA COLA CO 15,988,500.00
114,700 PEPSICO INC 4,724,206.25
PACKAGED FOOD
34,500 CAMPBELL SOUP CO 1,832,812.50
36,000 CONAGRA 1,140,750.00
27,600 HEINZ H J CO 1,549,050.00
31,100 KELLOGG CO 1,168,193.75
183,300 PHILLIP MORRIS CO INC 7,217,437.50
10,500 QUAKER OATS CO 576,843.75
35,800 SARA LEE CORP 2,002,562.50
PAPER
22,900 INTERNATIONAL PAPER CO 984,700.00
42,000 KIMBERLY CLARK CORP 1,926,750.00
15,100 WEYERHAEUSER CO 697,431.25
PRINTING AND PUBLISHING
21,500 GANNETT CO., INC 1,527,843.75
7,500 MCGRAW-HILL COMPANIES INC 611,718.75
43,700 TIME WARNER INC 3,733,618.75
OTHER CONSUMER PRODUCTS
22,400 COLGATE PALMOLIVE CO 1,971,200.00
30,900 MINNESOTA MNG & MFR 2,539,593.75
101,500 PROCTER & GAMBLE CO 9,242,843.75
13,900 UST INC 375,300.00
PHOTOGRAPHY
24,600 EASTMAN KODAK CO. 1,797,337.50
APPAREL
22,000 NIKE INC CL B 1,071,125.00
TOTAL CONSUMER PRODUCTS $64,425,756.25
DURABLE GOODS 20.21%
AEROSPACE-AIRCRAFT
75,600 BOEING CO 3,368,925.00
14,700 LOCKHEED MARTIN CORP 1,556,362.50
12,400 TEXTRON INC 888,925.00
17,600 UNITED TECHNOLOGIES CORP 1,628,000.00
AGRICULTURAL MACHINERY
28,200 CATERPILLAR INC 1,491,075.00
18,900 DEERE & CO 999,337.50
AUTOMOBILE AND PARTS
49,000 CHRYSLER CORP 2,762,375.00
90,700 FORD MTR CO 5,351,300.00
53,500 GENERAL MTRS CORP 3,574,468.75
13,500 GENUINE PARTS CO 466,593.75
12,900 TENNECO INC 491,006.25
9,300 TRW INC 508,012.50
ELECTRICAL
16,600 AMP INC 570,625.00
33,500 EMERSON ELEC CO 2,020,468.75
9,600 HONEYWELL INC 802,200.00
ELECTRONICS
5,800 EATON CORP 450,950.00
247,500 GENERAL ELECTRIC CO 22,522,500.00
12,000 GENERAL MILLS INC 820,500.00
123,700 INTEL CORP 9,169,262.50
45,100 MOTOROLA INC 2,370,568.75
INDUSTRIAL MACHINERY
9,100 COOPER INDUS INC 499,931.25
OFFICE EQUIPMENT AND SUPPLIES
73,500 IBM COMMON 8,438,718.75
21,900 PITNEY BOWES INC 1,053,937.50
24,600 XEROX CORP. 2,499,975.00
RUBBER
11,800 GOODYEAR TIRE & RUBBER 760,362.50
OTHER DURABLE GOODS
42,700 ALLIED-SIGNAL INC 1,894,812.50
17,500 CORNING INCORPORATED 608,125.00
COMPUTERS AND SOFTWARE
22,600 AUTOMATIC DATA PROC 1,646,975.00
114,500 COMPAQ COMPUTER CORP 3,248,937.50
78,600 HEWLETT PACKARD CO 4,706,175.00
18,900 UNISYS CORP 533,925.00
TELECOMMUNICATIONS
98,400 LUCENT TECHNOLOGIES INC 8,185,650.00
TOTAL DURABLE GOODS $95,890,981.25
FINANCIAL 21.10%
BANKS
48,800 BANC ONE CORP 2,723,650.00
28,500 BANK NEW YORK INC 1,729,593.75
52,400 BANKAMERICA CORP 4,529,325.00
22,000 BANKBOSTON CORPORATION 1,223,750.00
7,400 BANKERS TR NY CORP 858,862.50
63,800 CHASE MANHATTAN CORP NEW 4,816,900.00
34,500 CITICORP 5,149,125.00
22,000 FIRST CHICAGO NBD CORP 1,949,750.00
73,200 FIRST UNION CORP 4,263,900.00
20,600 FLEET FINANCIAL GROUP INC 1,720,100.00
14,500 HUNTINGTON BANCSHARES INC 485,750.00
33,200 KEYCORP 1,182,750.00
37,900 MBNA CORP 1,250,700.00
19,200 MELLON BANK CORP 1,336,800.00
13,400 MORGAN J P & CO 1,569,475.00
16,000 NATIONAL CITY CORP 1,136,000.00
71,100 NATIONSBANK CORP 5,439,150.00
57,100 NORWEST CORP 2,134,112.50
15,900 SUNTRUST BANKS INC 1,292,868.75
55,800 U.S. BANCORP 2,399,400.00
15,600 WACHOVIA CORP 1,318,200.00
29,250 WASHINGTON MUTUAL INC 1,270,546.88
6,600 WELLS FARGO & CO 2,435,400.00
FINANCE COMPANIES
35,100 AMERICAN EXPRESS CO 4,001,400.00
23,771 ASSOCIATES FIRST CAPITAL 1,827,395.63
52,600 FED HOME LN MTG CORP 2,475,487.50
80,200 FEDERAL NATL MTGE ASSN 4,872,150.00
24,300 HOUSEHOLD INTL CORP 1,208,925.00
44,800 MORGAN ST DE WTR DISC 4,093,600.00
23,100 PNC FINANCIAL 1,243,068.75
FIRE AND CASUALTY INSURANCE
12,900 CHUBB CORP 1,036,837.50
5,900 GENERAL RE CORP 1,495,650.00
10,700 SAFECO CORP 486,181.25
INSURANCE
32,400 ALLSTATE CORP. 2,966,625.00
53,000 AMERICAN INTL GROUP 7,738,000.00
12,700 AON CORP 892,175.00
16,800 CIGNA CORP 1,159,200.00
8,900 HARTFORD FINANCIAL SVCS 1,017,937.50
19,200 MARSH & MCLENNAN CO. 1,160,400.00
12,600 ST PAUL COS INC 529,987.50
86,700 TRAVELERS INC. 5,256,187.50
LIFE INSURANCE
19,200 AMERICAN GENERAL CORP 1,366,800.00
7,700 LINCOLN NATL CORP IND 703,587.50
BROKERAGE
25,200 MERRILL LYNCH & CO 2,324,700.00
TOTAL FINANCIAL $100,072,405.01
METALS AND MINING 0.23%
ALUMINUM
13,000 ALUMINUM CO AMER 857,187.50
OTHER METALS
14,600 FREEPORT-MCMORAN COPPER-B 221,737.50
TOTAL METALS AND MINING $1,078,925.00
OIL-ENERGY 7.13%
OIL & GAS PRODUCERS
73,600 AMOCO CORP 3,063,600.00
25,600 OCCIDENTAL PETROLEUM 691,200.00
21,800 USX-MARTHON GROUP COM NEW 748,012.50
NATURAL RESOURCES
24,200 WILLIAMS COS INC-DEL 816,750.00
OIL - DOMESTIC
19,900 PHILLIPS PETE CO 958,931.25
18,600 UNOCAL CORP 664,950.00
OIL - INTERNATIONAL
24,300 ATLANTIC RICHFIELD CO 1,898,437.50
49,700 CHEVRON CORP 4,128,206.25
186,500 EXXON CORP. 13,299,781.25
59,300 MOBIL CORP 4,543,862.50
41,400 TEXACO INC 2,471,062.50
MISCELLANEOUS
17,400 FIRSTENERGY CORP 535,050.00
TOTAL OIL-ENERGY $33,819,843.75
RETAIL 3.78%
DEPARTMENT STORES
33,000 DAYTON HUDSON CORP 1,600,500.00
36,900 K MART 710,325.00
17,500 MAY DEPT STORES CO 1,146,250.00
18,900 PENNEY JC INC 1,366,706.25
29,600 SEARS ROEBUCK & CO 1,807,450.00
GROCERY
18,600 ALBERTSON'S INC 963,712.50
OTHER RETAIL
169,800 WAL MART STORES INC 10,315,350.00
TOTAL RETAIL $17,910,293.75
UTILITIES 10.31%
ELECTRIC
14,300 AMERICAN ELEC PWR INC 648,862.50
11,200 BALTIMORE GAS & ELEC 347,900.00
11,400 CAROLINA PWR & LT CO 494,475.00
16,000 CENTRAL & SOUTH WEST CORP 430,000.00
11,900 CINERGY CORP 416,500.00
17,800 CONSOLIDATED EDISON INC 819,912.50
14,600 DOMINION RES INC-VA 594,950.00
11,000 DTE ENERGY CO 444,125.00
27,200 DUKE POWER CO 1,611,600.00
28,800 EDISON INTERNATIONAL 851,400.00
18,400 ENTERGY CORP NEW 529,000.00
13,800 FPL GROUP INC 869,400.00
9,600 GPU INC 363,000.00
21,400 HOUSTON INDS INC 660,725.00
10,900 NIAGARA MOHAWK PWR 162,818.75
11,200 NORTHERN STS PWR CO 320,600.00
12,500 P P & L RESOURCES INC 283,593.75
22,400 PACIFICORP 506,800.00
16,800 PECO ENERGY CO 490,350.00
33,200 PG&E CORP 1,047,875.00
17,500 PUBLIC SVC ENTERPRISE GRP 602,656.25
52,200 SOUTHERN CO 1,445,287.50
16,400 UNICOM CORPORATION 575,025.00
GAS
7,200 CONSOLIDATED NATL GAS 423,900.00
18,600 TEXAS UTILITIES CO 774,225.00
TELEPHONE
122,800 A T & T 7,014,950.00
13,900 ALLTEL CORP 646,350.00
82,800 AMERITECH CORP NEW 3,715,650.00
117,400 BELL ATLANTIC CORP 5,356,375.00
75,000 BELLSOUTH CORP 5,034,375.00
23,500 ENRON CORP 1,270,468.75
12,400 FRONTIER CORP 390,600.00
72,400 GTE CORP 4,027,250.00
32,500 SPRINT CORP 2,291,250.00
36,500 US WEST INC (NEW) 1,715,500.00
WASTE DESPOSAL
14,700 BROWNING FERRIS IND 510,825.00
34,400 WASTE MANAGEMENT INC 1,204,000.00
TOTAL UTILITIES $48,892,575.00
MISCELLANEOUS 6.45%
BROADCAST/COMMUNICATIONS
53,800 CBS CORP 1,708,150.00
51,100 DISNEY WALT CO 5,368,693.75
BUSINESS SERVICES
61,300 CENDANT CORP 1,279,637.50
12,900 DUN & BRADSTREET 466,012.50
FOOD SERVICE
52,100 MCDONALDS CORP 3,594,900.00
MED SERV & SUPPLIES
12,400 HUMANA INC 386,725.00
TRANSPORTATION
13,800 AMR CORP 1,148,850.00
11,800 BURLINGTON NRTHN SANTA FE 1,158,612.50
16,500 CSX CORP 750,750.00
28,500 NORFOLK SOUTHERN CORP 849,656.25
18,700 UNION PACIFIC CORP 825,137.50
MISCELLANEOUS
101,700 JOHNSON & JOHNSON 7,500,375.00
TELECOMMUNICATIONS
138,600 SBC COMMUNICATIONS INC 5,544,000.00
TOTAL MISCELLANEOUS $30,581,500.00
TOTAL COMMON STOCK $473,746,586.26
OTHER
0.13%
CASH EQUIVALENTS
627,904 AIM SHORT TERM INV SER 2 627,903.95
TOTAL $627,903.95
TOTAL OTHER $627,903.95
TOTAL INVESTMENTS - 100.00% $474,374,490.21
(cost $457,956,631)
See accompanying notes
