DEFINITIVE PROXY MATERIAL
CENTURION T.A.A. FUND, INC.
11545 West Bernardo Court, Suite 100
San Diego, California 92127
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 6, 1996
TO THE SHAREHOLDERS OF CENTURION T.A.A. FUND, INC.:
The annual meeting of the shareholders of Centurion T.A.A. Fund,
Inc. (the "Fund") will be held at 11545 West Bernardo Court, Suite 100,
San Diego, California 92127, on August 6, 1996, at 10:00 a.m. for the
following purposes:
1. To elect a Board of Directors for the Fund.
2. To approve the change to the Fund's fundamental investment
policy regarding investments in debt securities.
3. To approve the change to the Fund's fundamental investment
policy regarding investments in securities of foreign issuers.
4. To approve the change in the Fund's fundamental investment
policy regarding investments in options.
5. To approve the change in the Fund's fundamental investment
policy regarding investments in futures contracts on stock
indexes and options thereupon.
6. To approve the change in the Fund's fundamental investment
policy to allow investments in illiquid securities.
7. To approve the adoption of the Fund's multiple class share
plan.
8. To approve the selection of Squire & Company as the Fund's
independent public accountants for the fiscal year ending
December 31, 1995.
9. To transact such other business as may properly come before
the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE
FOR EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS AND RECOMMENDS
THAT YOU VOTE "FOR" APPROVAL OF EACH OTHER ITEM LISTED ON THIS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS.
Shareholders of record at the close of business on June 26, 1996,
are the only persons entitled to notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
FILL IN, SIGN, DATE AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
IN ORDER TO SAVE THE FUND FURTHER SOLICITATION EXPENSE. If you are
present at the meeting, you may then revoke your proxy and vote in
person, as explained in the Proxy Statement in the section entitled
"ANNUAL MEETING OF SHAREHOLDERS - AUGUST 6, 1996." A return envelope
is enclosed for your convenience.
Kenneth W. Elsberry
Secretary
Dated: July 5, 1996
APPENDIX A
CENTURION T.A.A., INC.
MULTIPLE CLASS SHARE PLAN
This Multiple Class Share Plan (this "Plan") is adopted by the Board of
Directors of Centurion T.A.A., Inc. (the "Fund"), an investment company
registered under the Investment Company Act of 1940 (the "Act"), on the date
last shown below subject to the approval by a majority vote of its share-
holders.
1. Authorized Classes of Shares.
Under this Plan, the Fund is authorized to issue the Class A shares,
the Class B. shares, the Class C Shares, and the Class D Shares in accord-
ance with the following.
Class A Shares. The Class A Shares shall be sold at their net
asset value per share plus a maximum initial sales charge ("front-end
charge") set from time to time by the Board of Directors of the Fund (the
"Board"). Initially, the front-end charge on the Class A Shares shall be
4.75% of the offering price of the Class A Shares. The Board shall approve
and, subject to the required approval of the Fund's shareholders, put into
effect a Rule 12b-1 plan of distribution for the Class A Shares pursuant to
which the Fund may pay an annual shareholder services fees of up to 0.25%
of its average daily net assets attributable to the Class A Shares.
Class B Shares. The Class B Shares shall be sold at their net
asset value per share and shall be subject to a maximum contingent deferred
sales charge as determined from time to time by the Board. Initially,
maximum deferred sales charge shall be 4% of the redemption proceeds during
the first year, declining each year thereafter to 0% after the fifth year.
The Board shall approve and, subject to the required approval of the Fund's
shareholders, put into effect a Rule 12b-1 plan of distribution for the
Class B Shares pursuant to which the Fund would pay annual distribution fees
and shareholder services fees of up to 0.75% and 0.25%, respectively, of the
Fund's average daily net assets attributable to the Class B Shares. The
Class B shares shall convert automatically to Class A shares on the date
eight years following the last day of the calendar month in which a share-
holder's order to purchase Class B Shares is accepted by the Fund.
Class C Shares. The Class C Shares shall be sold at their net
asset value per share. Upon the effective date of this Plan, each share of
the Fund then outstanding shall be designated and reclassified a Class C
share. The Fund shall pay annual distribution fees and shareholder services
fees of up to 0.75% and 0.25%, respectively, of the Fund's average daily
net assets attributable to these shares pursuant to the Funds Rule 12b-1
plan of distribution in effect on the date hereof, which shall upon the
effective date of this plan be designated the "Class C Plan".
Class D Shares. The Class D Shares shall be sold at their net
asset value per share. No front-end charge or deferred sales charge shall
be charged with respect to the Class D Shares. The Fund shall not pay
distribution services fees or shareholder services fees with respect to the
Class D Shares. The Class D Shares shall be sold only to persons who are
Advisor Professionals or Eligible Employees. The Advisor Professionals
shall mean investment advisors, trust companies and bank trust departments
exercising discretionary investment authority with respect to the money to
be invested in the Fund. Eligible Employees shall mean (a) current or
retired directors of the Funds, current or retired employees of the Fund's
advisor, and any of its affiliated companies, spouses, minor children and
grandchildren of the above persons, and parents of employees and parents of
spouses of employees of the Fund's advisor and any of its affiliated
companies; (b) employees and registered representatives of Advisor
professionals, banks and other financial institutions with selling group
agreements with the Fund's principal underwriter, employees of such persons,
and spouses and minor children of any such persons and (c) any trust,
pension, profit sharing or other benefit plan for such persons. Shares are
also offered at net asset value to Eligible Accounts. Eligible Accounts are
accounts opened for shareholders by dealers where the amounts invested
represent the redemption proceeds from investment companies distributed by
an entity other than the Fund's principal underwriter if such redemption has
occurred no more than 15 days prior to the purchase of the Class D Shares
and the shareholder paid an initial sales charge and was not subject to a
deferred sales charge on the redeemed account.
2. Allocation of Fund Income and Expenses Among Classes.
The income and expenses of the Fund shall be allocated among the
classes of Shares as set forth below.
(a) Separate Distribution Expenses. In accordance with Section 1
above, each Class of Shares has, at all times, maintain a different
arrangement for shareholder services or the distribution services or both,
and shall pay all of the expenses of that arrangement ("distribution
expenses").
(b) Allocation of Income, Realized and Unrealized Capital Gains and
Losses, and Expenses. Each Class of Shares shall be allocated its pro rata
share of the Fund's income, realized and unrealized capital gains and losses,
and expenses not allocated to a particular class pursuant to (a) above on
the basis of the net asset value of that class in relation to the net asset
value of the Company. In the future, the Board may require one or more
classes of Shares to pay a different share of expenses (other than advisory
or custodial fees or other expenses related to the management of the Fund's
assets) if such expenses are actually incurred in a different amount by the
Class, or if the Class receives services of a different kind or to a
different degree than other classes, provided any payments made pursuant to
the foregoing shall be made pursuant to a written plan setting forth the
separate arrangement and expense allocation of each class, and any related
conversion features or exchange privileges.
(c) Advisory Fees. Each Class of Shares shall pay the same advisory
fee.
(d) Waiver of Expenses. Expenses may be waived or reimbursed by the
Fund's adviser, underwritten, or any other provider of services to the Fund.
(e) Income, Capital Gains and Losses. Income, realized and unrealized
capital gains and losses, and expenses of the Fund not allocated to a
particular Class pursuant to the foregoing:
(i) Except as permitted in paragraph (ii) below, shall be
allocated to each Class on the basis of the net asset value of that Class
in relation to the net asset value of the Fund;
(ii) If the Fund operates pursuant to Rule 270.2a-7 under the
Act (including the provision allowing the calculation of net assets on an
amortized cost basis), or declares distributions of net investment income
daily and maintains the same net asset value per share in each class, may be
allocated:
(aa) To each Share without regard to Class, provided that the
Fund has received undertakings from its adviser, underwriter or
any other provider of services to the Fund, agreeing to waive or
reimburse the Fund for payments to such service provider by one
or more classes, as allocated under paragraph (i) above, to the
extent necessary to assure that all classes of the Fund maintain
the same net asset value per share; or
(bb) On the basis of relative net assets (settled shares).
For purposes of this subsection (e), "relative net assets
(settled shares)" are net assets valued in accordance with
generally accepted accounting principles but excluding the
value of subscriptions receivable, in relation to the net
assets of the Fund.
3. Class Voting Rights.
The Shares shall have the following voting rights set forth below.
(a) Each Class of Shares shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its arrangement;
(b) Each Class of Shares shall have separate voting rights on any
matter submitted to shareholders in which the interests of one class differ
from the interests of any other class;
(c) Each Class of Shares shall, except as provided herein, have in all
other aspects the same rights and obligations as each other class.
4. Permitted Acts.
Nothing in this Plan shall prohibit the Board from issuing the Shares
of any class with any of the following rights or provisions.
(a) An exchange privilege providing that Shares of a Class may be
exchanged for certain securities of another company.
(b) The Board may from time to time, in its discretion, authorize and
effect a conversion whereby the Shares of one Class (the "purchase class")
will be exchanged automatically for Shares of another Class (the "target
class") after a specified period of time, provided that:
(i) The conversion is effected on the basis of the relative net
asset values of the two classes without the imposition of any sales load,
fee, or other charge;
(ii) The expenses, including payments authorized under a plan
adopted pursuant to 270.12b-1 ("rule 12b-1 plan"), for the target
class are not higher than the expenses, including payments authorized
under a rule 12b-1 plan, for the purchase class; and
(iii) If the amount of expenses, including payments authorized
under a rule 12b-1 plan, for the target class is increased materially
without approval of the shareholders of the purchase class, the Fund
will establish a new target class for the purchase class on the same
terms as applied to the target class before that increase.
(c) A conversion feature providing that shares of a Class in which an
investor is no longer eligible to participate may be converted to shares of
a class in which that investor is eligible to participate, provided that:
(i) The shareholder is given prior notice of the proposed
conversion; and
(ii) The conversion is effected on the basis of the relative net
asset values of the two classes without the imposition of any sales
load, fee, or other charge.
5. Compliance With Rule 270.18f-3.
This Plan is intended to meet the requirements of Rule 270.18f-3
promulgated under the Act.
6. Effective Date of Plan.
This Plan shall be effective, subject to the approval by a majority
vote of the Funds shareholders, on the date the Articles of Incorporation of
the Fund are amended as required to authorize the issuance of the Funds
shares pursuant hereto.
IN WITNESS WHEREOF:
This Plan was unanimously approved and adopted by the Board on
February 2, 1996, which in doing so, specifically made the following
determinations:
1. The Board has requested and evaluated such agreements relating to
the Class arrangements under this Plan and such other information as they
deemed reasonably necessary to evaluate the Plan; and
2. This Plan as proposed to be adopted, including the expense
allocations hereunder, is in the best interests of each Class of Shares
hereunder individually and the Fund as a whole.
July 5, 1996
San Diego, California Secretary
DEFINITIVE PROXY MATERIAL
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CENTURION T.A.A. FUND, INC.
Annual Meeting of Shareholders - August 6, 1996
The undersigned shareholder of CENTURION T.A.A. FUND, INC., a
Minnesota corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement for the Annual Meeting of
Shareholders to be held on August 6, 1996 at 10:00 a.m. Local Time, at 11545
West Bernardo Court, Suite 100, San Diego, California 92127 (telephone no.
(619) 485-9400), and hereby appoints Jack K. Heilbron and Kenneth W.
Elsberry, and each of them, proxies and attorneys-in-fact, with full power
to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at said Annual Meeting and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present,
on the matters set forth on the reverse side.
Either of such attorneys or their substitutes has and may exercise all
of the powers of said attorneys-in-fact hereunder.
[SEE REVERSE SIDE]
________________________________________
CONTINUED AND TO BE SIGNED ON REVERSE SIDE<PAGE>
[ X ] Please mark
votes as in this example.
This Proxy will be voted as directed or, if no direction is indicated, will
be voted FOR proposals 1 through 10, inclusive, below, and as said proxies
deem advisable on such other matters as may properly come before themeeting.
1. ELECTION OF DIRECTORS Nominees: C.A. Freeland, R.E. Hall,
J.K. Heilbron, R. W. Ketron, D. Werner
[ ] FOR ALL [ ] WITHHELD
NOMINEES FROM ALL
NOMINEES
(Instruction: You may withhold authority to vote for any individual nominee,
by striking a line through the nominee's name above.)
2. PROPOSAL TO APPROVE CHANGE TO FUNDAMENTAL INVESTMENT POLICY OF THE FUND
REGARDING INVESTMENTS IN DEBT SECURITIES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE CHANGE TO FUNDAMENTAL INVESTMENT POLICY OF THE FUND
REGARDING INVESTMENTS IN SECURITIES OF FOREIGN ISSUERS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO APPROVE CHANGE TO FUNDAMENTAL INVESTMENT POLICY OF THE FUND
REGARDING INVESTMENTS IN OPTIONS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. PROPOSAL TO APPROVE CHANGE TO FUNDAMENTAL INVESTMENT POLICY OF THE FUND
REGARDING INVESTMENTS IN FUTURES CONTRACTS ON STOCK INDEXES AND OPTIONS
THEREUPON.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. PROPOSAL TO APPROVE CHANGE TO FUNDAMENTAL INVESTMENT POLICY OF THE FUND
TO ALLOW INVESTMENTS IN ILLIQUID SECURITIES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. PROPOSAL TO APPROVE THE CENTURION T.A.A. FUND, INC. MULTIPLE CLASS
SHARE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. PROPOSAL TO RATIFY THE APPOINTMENT OF SQUIRE & COMPANY AS THE
INDEPENDENT AUDITORS OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(This proxy should be marked, dated, signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.)
Signature: Date:
Signature: Date:
DEFINITIVE PROXY MATERIAL
________________________________________
PROXY STATEMENT
________________________________________
CENTURION T.A.A. FUND, INC.
11545 West Bernardo Court, Suite 100
San Diego, California 92127
ANNUAL MEETING OF SHAREHOLDERS - AUGUST 6, 1996
The enclosed Proxy is solicited by the Board of Directors of Centurion
T.A.A. Fund, Inc. (the "Board") in connection with the annual meeting of
shareholders of Centurion T.A.A. Fund, Inc. (the "Fund") to be held on
August 6, 1996, and at any adjournments thereof. The cost of solicitation,
including the cost of preparing and mailing the Notice of Shareholders'
Meeting and this Proxy Statement, will be paid by Centurion Counsel, Inc.
("Centurion Counsel"), the Advisor to the Fund. Such mailing took place on
approximately July 5, 1996. Representatives of the Fund and Centurion
Counsel may, without cost to the Fund, solicit Proxies for the management of
the Fund by means of mail, telephone or personal calls.
A Proxy with respect to the Fund may be revoked before the meeting by
giving written notice of revocation to the Secretary of the Fund, or may be
revoked at the meeting, prior to voting. Unless revoked, properly executed
Proxies with respect to the Fund will be voted as indicated in this Proxy
Statement. In instances where choices are specified by the shareholders in
the Proxy, those Proxies will be voted or the vote will be withheld in
accordance with each shareholder's choice. An "abstention" on any proposal
will be counted as present for purposes of determining whether a quorum of
shares is present at the meeting with respect to the proposal on which the
abstention is noted, but will be counted as a vote "against" such proposal.
Should any other matters come before the meeting, it is the intention of the
persons named as proxies in the enclosed Proxy to act upon them according to
their best judgment.
Only shareholders of record at the close of business on June 26, 1996
may vote at the meeting or any adjournments thereof. As of that date there
were issued and outstanding approximately 1,380,605 common shares, $0.01 par
value, of the Fund. Each shareholder of the Fund is entitled to one vote
for each share of the Fund held. Voting for the election of directors is
not cumulative, which means that the holders of a majority of the Fund's
outstanding shares have the power to elect the entire board of directors of
the Fund. None of the matters to be presented at the meeting will entitle
any shareholder of the Fund to appraisal rights. In the event that
sufficient Proxy votes in favor of the proposals set forth in Items 2
through 8 of the Notice of Annual Shareholders' Meeting are not received by
August 5, 1996, the persons named as Proxies may propose one or more
adjournments of the meeting to permit further solicitation of Proxies. Such
adjournments will require the affirmative vote of the holders of a majority
of the shares present in person or by Proxy at the meeting. The persons
named as proxies will vote in favor of such adjournment if they are
instructed to vote for the proposals set forth in Items 2 through 8 of the
Notice of Annual Shareholders' Meeting.
SHARE OWNERSHIP
As of June 26, 1996, to the knowledge of management, no person owned
beneficially more than 5% of the outstanding shares of the Fund. None of
the directors or nominees for the position of director or officers, as of
February 29, 1996, beneficially owned shares of the Fund, except
Mr. Heilbron, Mr. Werner and Mr. Ketron who owned beneficially 2,990; 520
and 36,575 shares, respectively, of the Fund on such date (representing
approximately 0.22%, 0.04% and 2.73%, respectively, of the outstanding
shares of the Fund).
ANNUAL, SEMIANNUAL REPORTS OF THE FUND
Semiannual report of the Fund containing unaudited financial statements
for the six months ended June 30, 1995 was mailed to the shareholders on or
about July 8, 1995 and the annual report of the Fund containing financial
statements for the fiscal year ended December 31, 1995, was mailed to
shareholders of the Fund on or about March 7, 1996.
CHANGES IN FUNDAMENTAL INVESTMENT POLICIES, CLASSIFICATION
OF SHARES AND ADOPTION OF SHARE DISTRIBUTION PLANS
At the annual meeting, the shareholders of the Fund will be asked to
reelect the current members of the Board and to approve various measures,
including (i) certain changes to the Fund's fundamental investment policies
and (ii) the approval of the Fund's Multiple Class Share Plan whereby the
Fund's current shares would be reclassified as the Class C Shares and the
Fund would be authorized to issue Class A, Class B and Class D Shares.
If the changes to the Fund's fundamental investment policies are
approved by the shareholders, the Fund will be authorized to invest in debt
securities without limitation as to term or rating, to invest in securities
of foreign issuers, to invest up to 50% of its assets in options, futures
contracts on stock indexes and/or options thereupon; and/or to invest up to
5% of its assets in illiquid securities.
If the shareholders ratify and approve the adoption of the Multiple
Class Share Plan, the Fund's current shares would be reclassified as the
Class C Shares and would continue to be distributed without the imposition
of a front-end charge pursuant to the Fund's current Rule 12b-1 plan of
distribution, which will be redesignated the "Class C Plan." Also, in such
event, the Fund would be authorized to issue class A shares, Class B Shares,
and Class D Shares. The Class A Shares would be offered with an initial
sales charge (front-end fee) charged to the purchaser of up to 4.75% of the
offering price. The Class B Shares would be offered with a maximum
contingent deferred sales charge equal to 5.0% of the redemption proceeds
from such shares. The Class D Shares would be offered only to certain
registered investment advisors and other securities professionals and to
certain eligible employees of the Fund, the Advisor and certain other
persons associated with the Fund. The Class D Shares will be sold without
the payment of front-end fees or contingent deferred sale charges.
Each proposed change to the Fund's fundamental investment policies is
independent of and not conditional upon the approval of the other proposal.
As more fully described below, even if the proposed changes to the Fund's
investment policies are approved by the shareholders, the Fund's investment
objective will not be changed. It will continue to emphasize long-term
total return on investment based on a tactical asset allocation ("TAA")
strategy implemented by the Fund's Advisor, Centurion Counsel. Each member
of the Board voted to approve each of these measures at the meeting of the
board of directors held on February 2, 1996. The Board believes each
proposed change in fundamental investment policies will help the Fund to
achieve its investment objective. The Board believes that the proposed
Multiple Class Share Plan would allow the Fund to more effectively attract
new investors for its shares. Each of the nominees for the board of
directors is a current director of the Fund.
PROPOSAL 1.
ELECTION OF DIRECTORS
It is intended that the enclosed Proxy will be voted for the election
of the five (5) persons named below as directors for the Fund unless such
authority has been withheld in the respective Proxy. The term of office of
each person elected to be a director of the Fund will be until the next
regular or annual meeting of the shareholders at which election of
directors is an agenda item and until his successor is duly elected and
shall qualify. Pertinent information regarding each nominee for the past
five years is set forth following his name below.
Position with the fund
Name and (Age) and Principal Occupations Business Address
Carol Ann Freeland (56) Has served as a director 4015 Beltline Rd.
of the Fund Since Ste. 200
December 20, 1994. Since 1992, Dallas, TX 75244
Executive Vice President, Collateral
Equity Management, of Dallas, Texas.
From 1987 to 1992, Executive Vice
President, Financial Services
Exchange, Irving, Texas; from 1985 to
1986, Vice President, Marketing
Property Co. of America, Dallas, Texas.
Richard E. Hall (69) Has served as a director of the 10 Carson Drive
Fund since December 20, 1994. Grant's Pass,OR
Since 1989, a retired financial 97526
planner and securities salesman.
Served as registered representative
with Planners Independent Management,
Inc. ("PIM") from 1983 to 1989 and
also as a director of PIM during that
period. Until July, 1994, Mr. Hall
owned approximately 3% of the shares
of CI Holding Group, Inc., Centurion
Counsel's parentcorporation. At that
time he sold his shares for fair value
to an Affiliate of Centurion Counsel.
There is no agreement or understanding
between Mr. Hall and Centurion Counsel
or its Affiliates regarding his service
as a director of the Fund. Mr. Hall was
a shareholder of Centurion until 1989.
Jack K. Heilbron (44) Has served as a director of the 11545 W. Bernardo
Fund since December 20, 1994. Ct., Suite 100
Previously, served as a Director San Diego, CA 92127
of the Fund from 1989 to 1990.
Has served as portfolio manager
for the Fund since 1990. Since
1984 has served as Chairman and Chief
Executive Officer of CI Holding Group,
Inc. and of its affiliate, PIM and since
1989, Chairman and Chief Investment Officer
of Centurion Counsel, Inc. Until 1989, a
shareholder, officer and director of Excel
Interfinancial Corporation, the parent of
the Advisor for the Fund from 1988 to
December 20, 1994.
Russell W. Ketron (50) Has served as a director of the 1701 Novato Blvd.
Fund since December 20, 1994. Suite 204
A Certified Financial Planner Novato, CA 94947
since 1977. Since 1979 has been
a registered principal with
Protected Investors of America,
a national broker-dealer firm.
Has been an instructor at Sierra
Nevada College since 1985 and at
the College of Marin since 1991.
Douglas Werner (43) Has served as a director of the 140 Brightwood Ave.
Fund since December 20, 1994. Chula Vista, Ca
Since 1993 has been President 92010
of Tracks Publishing, a printing
firm located in Chula Vista,
California. Since 1980, has been
President and owner of Werner
Graphics, a graphic design firm
located in San Diego, California.
(1) Directors who are "interested persons" of Centurion Counsel, Centurion,
the Fund, or a registered broker-dealer, as defined under the
Investment Company Act of 1940, as amended.
(2) Even though this person may be an "affiliated person" of a broker-
dealer registered under the Securities and Exchange Act of 1934, as
defined under the Investment Company Act of 1940, the Fund has
determined that this person will not thereby be considered an
"interested person" of the Fund, Centurion Counsel, Centurion, CIS or
PIM, as defined under the Investment Company Act of 1940 by reason of
Rule 2a19-1(a) promulgated thereunder.
None of the persons named as nominees for the Fund are directors of any
Reporting Companies. "Reporting Companies" include companies with a class
of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "1934 Act") or subject to the requirements of
Section 15(d) of the 1934 Act, or any company registered as an investment
company under the Investment Company Act of 1940, as amended (the "1940
Act").
The Fund does not have a standing audit or nominating committee of its
board of directors, or committees performing similar functions. The Fund
pays no compensation to any of its officers and directors, except for a fee
of $250 for each meeting attended by each director not affiliated with
Centurion Counsel and reimburses such nonaffiliated directors for their
travel expenses to attend directors' meetings.
The following table discloses the compensation paid by the Fund in its
most recently completed fiscal year to its directors. The Fund does not
maintain any pension, retirement or other arrangement other than as
disclosed in the following table for compensating its Directors. The Fund
has no advisory board.
Aggregate Pension or Total Compensation
Name of Person; Compensation Retirement From the Fund
Position Paid by the Fund Benefits Accrued Complex
Carol A. Freeland $ 1,000 -0- $ 1,000
Richard E. Hall 1,000 -0- 1,000
Russell W. Ketron 1,000 -0- 1,000
Douglas Werner 1,000 -0- 1,000
Jack K. Heilbron -0- -0- -0-
In voting for directors, you must vote all of your shares
noncumulatively. This means that the owners of a majority of the Fund's
outstanding shares have the power to elect the Fund's entire board of
directors. The vote of a majority of shares of the Fund represented at the
meeting, provided at least a quorum (a majority of the outstanding shares)
is represented in person or by proxy, is sufficient for the election of the
above nominees to the Board. By completing the Proxy, you give the proxy
the right to vote for the persons named in the table above. If you elect to
withhold authority for any individual nominee or nominees, you may do so by
making an "X" in the box marked "FOR," and by striking a line through the
nominees' name or names on the Proxy, as further explained on the Proxy
itself.
Each of the nominees has agreed to serve as a director of the Fund
until his or her replacement is elected and qualified. If any unforeseen
event prevents one or more of the nominees from serving as a director, your
votes will be cast for the election of a substitute or substitutes selected
by the Board. In no event, however, can the Proxies be voted for a greater
number of persons than the number of nominees named. Unless otherwise
instructed, the proxies will vote for the election of each nominee to serve
as a director of the Fund.
Each of the Fund's current directors is a nominee for director.
Pertinent information regarding each is set forth following his or her
name above.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE TO ELECT EACH OF
THE NOMINEES TO THE BOARD OF DIRECTORS OF THE FUND.
PROPOSAL 2.
APPROVAL OF CHANGE IN FUNDAMENTAL INVESTMENT POLICY
REGARDING PERMITTED INVESTMENTS IN DEBT SECURITIES
At the Annual Meeting, the shareholders of the Fund will be asked to
approve the following proposal to change the Fund's current fundamental
investment policy regarding investments in debt securities.
Proposal: To allow the Fund to invest an unlimited amount of its net
assets in debt obligations of corporations or other issuers which are rated
lower than AA by Standard & Poors ("S&P") or a comparable recognized rating
agency or service, or not rated at all; provided, however, the Fund must
invest less than 35% of its net assets in junk bonds, as defined below.
Current Investment Restriction: The Fund may invest Corporate debt
obligations rated AA or better by S&P or a comparable rating by another
recognized rating agency or service.
Background and General Information. Currently, bonds and other
debt securities purchased by the Fund must be either U.S. Treasury bonds
with maturities generally, ranging up to 30 years or U.S. Corporate bonds
rated AA or higher by the Standard & Poors Corporation (the "S&P"),or have
a comparable rating by Moody's Investors Service, Inc. ("Moodys") or another
nationally recognized statistical rating organization (NRSRO.). The
proposed change in investment policy was approved by the Fund's Board of
Directors at their meeting on February 2, 1996. The proposed change
to the Fund's fundamental investment policies will not become effective
unless or until it is approved by the shareholders. This proposal is not
contingent upon shareholder approval of any of the other proposals set forth
in this Proxy Statement.
Consequences of Change. If approved, the Fund will be able to
invest in bonds and other indebtedness issued by corporations and other
issuers regardless of the term or investment rating of such security. If
the proposal is approved, the Fund may from time to time invest a
substantial portion of its assets in debt securities of less than investment
grade; provided the Fund must invest less than 35% of its net assets in junk
bonds. Junk bonds are bonds not rated in one of the four highest rating
categories by a NRSRO. Thus Junk bonds would include bonds rated lower than
BBB by S&P or rated Baa or lower by Moody's. Investments in Junk bonds
would generally expose the Fund to greater risks of loss by reason of
default on these bonds. Although having greater risk, junk bonds or lower
rated debt securities generally sell at substantially greater yields than
investment quality debt securities and generally offer greater potential
returns. Debt securities in which the Fund may thereafter invest include
both convertible and non-convertible debt securities including:
Straight fixed-income debt securities which include bonds and
other debt obligations which bear a fixed or variable rate of
interest payable at regular intervals and have a fixed or
resettable maturity date. The particular terms of such
securities vary and may include features such as call
provisions and sinking funds.
Zero-coupon debt securities which bear no interest obligation
but are issued at a discount from their value at maturity.
When held to maturity, their entire return equals the
difference between their issue price and their maturity value.
Zero-fixed coupon debt securities which are zero-coupon debt
securities which convert on a specified date to interest-
bearing debt securities.
The Fund may invest in lower rated debt securities including high
yielding fixed-income debt securities (commonly referred to as junk bonds),
which are subject to high risk as described below. Fixed-income securities
rated below B by S&P and Moody's include debt obligations or other securities
of companies that are financially troubled, in default or are in bankruptcy
or reorganization. Such debt securities are usually available at a deep
discount from the face value of the instrument.
Lower rated debt securities are in general regarded as speculative with
respect to their issuer's continuing ability to meet required principal and
interest payments. Also, debt securities rated in the lower categories by
recognized rating services are generally subordinated to the prior claims of
banks and other senior lenders. The ratings of S&P, Moody's, and other
rating services represent opinions of the quality of the debt securities
they rated by these services, but not the market value risk of such
securities. Ratings are general and are not absolute standards of quality
and, consequently, debt securities with the same maturity, coupon and rating
may have different yields while debt securities of the same maturity and
coupon with different ratings may have the same yield. The Fund may also
invest in debt securities which do not produce immediate cash income, such
as zero-coupon securities.
A debt security purchased at a deep discount may currently pay a very
high effective yield. In addition, if the financial condition of the issuer
improves, the underlying value of the security may increase, resulting in a
capital gain. However, if the company defaults on its obligations or
remains in default, or if the plan of reorganization is insufficient for
debtholders, the Deep Discount Securities may stop generating income and
lose value or become worthless. The Adviser will balance the benefits of
Deep Discount Securities with their risks. While a diversified portfolio
may reduce the overall impact of a Deep Discount Security that is in default
or loses its value, the risk cannot be eliminated.
At times during which the Fund has substantial investments in lower
rated debt securities, an investment in the Fund may be considered more
speculative than investment in a fund which invests primarily in higher
rated debt securities. An economic downturn or increase in interest rates
is likely to have a greater negative effect on this market, the value of
lower rated debt securities in the Fund's portfolio, the Fund's net asset
value, and the ability of the bonds' issuers to repay principal and interest,
meet projected business goals and obtain additional financing than on higher
rated securities. These circumstances also may result in a higher incidence
of defaults than with respect to higher rated securities. Also, prices on
non-cash-paying instruments or zero coupon securities may be more sensitive
to changes in the issuer's financial condition, fluctuations in interest
rates and market demand/supply imbalances than cash-paying securities with
similar credit ratings, and thus may be more speculative. Prices of lower
rated debt securities tend to be more sensitive to adverse economic changes
or corporate developments than higher rated investments. Market prices of
lower rated debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and
may be more volatile than securities which pay interest periodically and
in cash.
The Fund's ability to liquidate investments in lower rated debt
securities may be limited. Because the market for lower rated debt
securities may be thinner and less active than for higher rated debt
securities, there may be market price volatility for these securities and
limited liquidity in the resale market. Nonrated securities are usually
not as attractive to as many buyers as rated securities are, a factor which
may make nonrated securities less marketable. These factors may have the
effect of limiting the availability of the securities for purchase by the
Fund and may also limit the ability of the Fund to sell such securities at
their fair value either to meet redemption requests or in response to
changes in the economy or the financial markets. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of lower rated debt securities,
especially in a thinly traded market.
Special tax considerations are associated with investing in lower
rated debt securities structured as zero coupon or pay-in-kind securities.
The Fund accrues income on these securities prior to the receipt of cash
payments. Moreover, the non-cash interest income earned on such
instruments is included in investment company taxable income, thereby
increasing the minimum required distributions to shareholders (without
providing the corresponding cash flow with which to pay such distributions).
The Fund must distribute substantially all of its income to its shareholders
to qualify for pass-through treatment under the tax laws and may, therefore,
have to dispose of its portfolio securities to satisfy distribution
requirements.
Shareholder Approval. Under the Act, approval of the shareholders
of the Fund requires the Affirmative vote by the holders of a majority of
the outstanding voting securities of the Fund. For this purpose, the term
"majority of the outstanding voting securities" means the vote of (i) 67%
or more of the voting securities of the Fund present at the annual meeting,
if the holders of more than 50% of the Fund's outstanding voting securities
are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund, whichever is less.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE
INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO PERMIT THE
FUND TO INVEST IN DEBT SECURITIES WITHOUT LIMITATION BY TERM OR RATING.
If the shareholders of the Fund fail to approve this proposal, the
Board will immediately consider what action to take and could request the
shareholders of the Fund to reconsider an amendment to the fundamental
policy regarding investments in debt securities.
PROPOSAL 3.
APPROVAL OF END TO FUNDAMENTAL INVESTMENT POLICY
RESTRICTING INVESTMENT IN SECURITIES OF FOREIGN ISSUERS
At the Annual Meeting, the shareholders of the Fund will be asked to
approve the removal of the Fund's current fundamental investment policy
restriction regarding investments in securities of foreign issuers.
Proposal: To allow the Fund to invest an unlimited amount of its net
assets in securities of foreign issuers.
Current Investment Restriction: The Fund may invest up to 10% of its
total assets in securities of foreign corporations.
Background and General Information. Currently, the Fund is
restricted from investing more than 10% of its total assets in securities
of foreign issuers. The removal of this investment restriction was
approved by the Fund's Board of Directors at its meeting on
February 2, 1996. The removal of this restriction will not become
effective unless and until it is approved by the Fund's shareholders.
This proposal is not contingent upon shareholder approval of any of the
other proposals set forth in this Proxy Statement.
Consequences of Termination of Restriction. If this restriction
is removed, there would be no limitation on the amount of the Fund's
assets which could be invested in stock, bonds or other securities of
non-United States issuers (foreign investments). Foreign investments are
subject to numerous risks. For example, the values of foreign investments
are affected by changes in currency rates and exchange control regulations,
the application of foreign tax laws, including withholding taxes, changes
in governmental administration or economic or monetary policy (both in
the United States and abroad) and changed circumstances in relationships
between nations. Foreign securities markets may be less liquid, more
volatile and less subject to governmental supervision than those in the
United States. Costs incurred in connection with conversions between
the currencies of different nations can be significant. Investments in
securities of foreign corporations could be affected by other factors
not present in the United States, including expropriation, confiscatory
taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations. Also the
foreign brokerage commissions are generally higher than in the United
States and trades could be subject to extended settlement periods.
Shareholder Approval. Under the Act, approval of the share-
holders of the Fund requires the Affirmative vote by the holders of a
majority of the outstanding voting securities of the Fund. For this
purpose, the term "majority of the outstanding voting securities" means
the vote of (i) 67% or more of the voting securities of the Fund present
at the annual meeting, if the holders of more than 50% of the Fund's
outstanding voting securities are present or represented by proxy; or
(ii) more than 50% of the outstanding voting securities of the Fund,
whichever is less.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE
INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO TERMINATE THE
FUND'S FUNDAMENTAL POLICY RESTRICTING INVESTMENTS IN SECURITIES OF FOREIGN
ISSUERS.
If the shareholders of the Fund fail to approve this proposal, the
Board will immediately consider what action to take and could request the
shareholders of the Fund to reconsider the termination of its fundamental
investment policy restricting investments in securities of foreign issuers.
PROPOSAL 4.
APPROVAL OF CHANGE TO FUNDAMENTAL INVESTMENT POLICY
REGARDING INVESTMENTS IN OPTIONS
At the Annual Meeting, the shareholders of the Fund will be asked to
approve the following Proposal to amend the Fund's current fundamental
investment policy regarding investments in option securities.
Proposal: To allow the Fund to invest up to 50% of its net assets in
options, including put options and/or call options to purchase or sell on
equity securities.
Current Investment Restriction: The Fund may not invest more than
5% of its net assets in options.
Background and General Information. Currently, the Fund is
restricted from investing more than 5% of its net assets in options. The
Board of Directors approved the proposed change at its meeting on
February 2, 1996. The proposed change will not take effect unless and
until it is approved by the Fund's shareholders. This proposal is not
contingent upon shareholder approval of any of the other proposals set
forth in this Proxy Statement.
Consequences of Amendment of Restriction. As a consequence of
the proposed amendment, the Fund would be able to invest up to 50% of its
assets in investments in options contracts. The Fund will continue to
purchase and sell call and put options in its efforts to enhance performance
and/or to hedge the Fund's risk exposure. The Fund will invest in options
at such time and from time to time, as Centurion Counsel determines to be
appropriate and consistent with the investment objective of the Fund. In
addition to purchasing such options written by others, the Fund may also
write (sell) covered call and secured put options with respect to certain
of its portfolio securities. A covered call option means that the Fund
owns the underlying securities on which the option is written. By writing
a call option the Fund may become obligated during the term of the option
to deliver the securities underling the option at the exercise price if
the option is exercised. A secured put option means that the Fund has
and maintains on deposit with its custodian bank cash or U.S. Government
securities having a value equal to the exercise value of the option. By
writing a put option, the Fund may become obligated during the term of
the option to purchase the securities underlying the option at the exercise
price. Options written by the Fund will be conducted on recognized
securities exchanges.
The principal reason for writing call options on stocks held by the
Fund is to attempt to realize, through the receipt of premiums, a greater
return than would be realized on the underlying securities alone. In
return for the premium, the call option writer has given up the opportunity
for profit from a price increase in the underlying security above the
exercise price so long as the option remains open, but retains the risk
of loss should the price of the security decline. Conversely, the put
option writer gains a profit, in the form of the premium, so long as the
price of the underlying security remains above the exercise price, but
assumes an obligation to purchase the underlying security from the buyer
of the put option at the exercise price, even though the security may fall
below the exercise price, at any time
during the option period. If an option expires, the writer realizes a
gain in the amount of the premium. Such a gain, in the case of a covered
call option, may be offset by a decline in the market value of the
underlying security during the option period. If a call option is
exercised, the writer realizes a gain or loss from the sale of the
underlying securities. If a put option is exercised, the writer must
fulfill his obligation to purchase the underlying security at the exercise
price, which usually will exceed the then market value of the underlying
security.
The writing of option contracts is a highly specialized activity which
involves investment techniques and risks different from those ordinarily
associated with investment companies, although Centurion Counsel believes
that the writing of covered call options listed on an exchange, where the
Fund owns the underlying security, tends to reduce such risks. The option
writer forgoes the opportunity to profit from an increase in market price
of the underlying security above the exercise price so long as the option
remains open. Securities for the Fund's portfolio will continue to be
bought and sold solely on the basis of investment considerations and
appropriateness to the fulfillment of the Fund's objectives, without regard
to the Fund's policy on writing options.
Options contracts are considered derivative securities ("Derivatives").
In general, a Derivative is a security whose value is linked to or derived
from an underlying security or index. The Fund may make such investments
either for hedging purposes or non-hedging purposes. A hedge, for example,
would be where the Fund sells a stock index future for protection against a
future decline in the stock market so if the market drops, the value of the
futures position would rise, thereby offsetting the decline in value of the
Fund's stock holdings. A non-hedge investment would be where the Fund
purchased a stock index future in order to profit by reason of an increase
in the market. In such event, if the market declined, the Fund would
realize a loss from the stock index future and incur a decline in value of
its stock holdings. Investments in Derivatives for non-hedging purposes
can subject the Fund to substantial risks, including, but not limited to,
imperfect correlation between the change in market value of the underlying
stocks or bonds held by the Fund and the prices of futures, contracts and
options, and possible lack of a liquid secondary market for the Derivative
security resulting in the Fund's inability to close a position in a
Derivative security prior to its maturity or expiration date. The Fund will
attempt to diminish the risk of imperfect market correlation by investing
in contracts whose price fluctuations are expected to resemble those of the
Fund's underlying securities. Risks of illiquidity of Derivative
investments will be minimized by entering into transactions on national
exchanges with an active and liquid secondary market. Also, risks in the
Fund's acquisition of Derivative investments will not include the risk of
leverage inasmuch as the Fund may not and will not purchase Derivative
investments on credit or with borrowed funds.
The Fund's increased participation in the option markets, and, if
Proposal 5 below is approved by the shareholders, the futures markets will
involve a greater degree of investment risks and transaction costs to the
Fund than those to which it is currently subject. Risks inherent in
investments in Derivatives include: (1) adverse changes in the value of
such instruments; (2) imperfect correlation between the price of the
Derivative Security and movements in the price of the securities or indexes
being hedged; (3) the fact that skills needed to use Derivative investment
strategies are different from those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
Derivative Security at any time; and (5) the possible need to defer closing
out certain positions to avoid adverse tax consequences.
Shareholder Approval. Under the Act, approval of the shareholders
of the Fund requires the Affirmative vote by the holders of a majority of
the outstanding voting securities of the Fund. For this purpose, the term
"majority of the outstanding voting securities" means the vote of (i) 67%
or more of the voting securities of the Fund present at the annual meeting,
if the holders of more than 50% of the Fund's outstanding voting securities
are present or represented by proxy; or (ii) more than 50% of the out-
standing voting securities of the Fund, whichever is less.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE
INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO CHANGE THE
FUND'S FUNDAMENTAL INVESTMENT POLICY TO INCREASE THE PERMITTED
INVESTMENTS IN OPTIONS.
If the shareholders of the Fund fail to approve this proposal, the
Board will immediately consider what action to take and could request the
shareholders of the Fund to reconsider the change to the fundamental
investment policy to increase the permitted amount of investments in
options.
PROPOSAL 5.
APPROVAL OF CHANGE TO FUNDAMENTAL INVESTMENT
POLICY REGARDING INVESTMENTS IN FUTURES
CONTRACTS ON STOCK INDEXES AND OPTIONS THEREUPON
At the annual meeting, the shareholders of the Fund will be asked to
approve the following Proposal to the Fund's current fundamental investment
policy regarding investments in futures contracts on stock indexes and/or
options thereupon.
Proposal: To allow the Fund to invest up to 50% of its net assets in
index futures contracts and/or options thereupon.
Current Investment Restriction: The Fund may not invest more than 5%
of its assets in stock index futures contracts and/or options thereupon.
Background and General Information. Currently, the Fund may not
in general, for non-hedging purposes, invest more than 5% of the liquidation
value of its portfolio in futures contracts on indexes and/or call or put
options contracts thereupon, whether written by the Fund or by others. The
proposed change was approved by the Fund's Board of Directors at its meeting
on February 2, 1996. The proposed change will not take effect unless and
until it is approved by the Fund's shareholders. This proposal is not
contingent upon shareholder approval of any of the other proposals set forth
in this Proxy Statement.
Consequences of Termination of Restriction. As a consequence of
this amendment, the Fund will be able to invest up to 50% of its assets in
futures contracts on indexes and/or options thereupon. The Fund intends to
continue to invest primarily in futures contracts on stock price indexes
and options thereupon. The Fund may also, generally for hedging purposes,
invest in futures contracts on bond indexes and/or interest rate indexes or
options thereupon. The Fund's investments in options on futures contracts
will also be subject to the Funds restriction on Option investments
discussed in Proposal 4 above.
An index futures contract obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount
times the difference between the value of a specific index at the close of
the last trading day of the contract and the price at which the agreement
is made. No physical delivery of the underlying securities instruments in
the index is made. In general, the fund intends to invest in stock index
futures contracts but may invest in futures contracts or interest rate
indexes for hedging purposes. The Fund will endeavor to purchase and sell
futures contracts on the Indexes for which the Fund can obtain the best
value with consideration also given to liquidity.
The Fund may purchase put and call options on index futures contracts,
which options give the Fund the right to sell or purchase the underlying
futures contract for a specified price upon exercise at any time during the
option period. The Fund also may write (sell) put and call options on index
futures contracts. The Fund receives a premium in return for granting to
the purchaser of the option the right to sell to or buy from the Fund the
underlying futures contract for a specified price upon exercise at any time
during the option period. The Fund may engage in related closing trans-
actions with respect to options on index futures. The Fund will purchase
or write options only on futures contracts that are traded on a United
States exchange or board of trade. Whether the Fund realizes a gain or
loss from futures activities depends generally upon movements in the level
of stock prices in the stock market and the advisor's ability to predict
correctly the direction of stock prices, interest rates, and other economic
factors. In contrast to a long position, where the Fund's loss from the
position cannot exceed the cost of that position, the extent of the Fund's
loss from investing in futures transactions is potentially unlimited.
The Fund also may purchase and write put and call options on indexes
listed on national securities exchanges or traded in the over-the-counter
market as an investment vehicle for the purpose of realizing the Fund's
investment objective or for the purpose of hedging the Fund's portfolio.
A stock index fluctuates with changes in the market values of the stocks
included in the index. Options on indexes give the holder the right to
receive an amount of cash upon exercise of the option. Receipt of this
cash amount will depend upon the closing level of the index upon which the
option is based being greater than (in the case of a call) or less than (in
the case of a put) the exercise price of the option. The amount of cash
received will be the difference between the closing price of the index and
the exercise price of the option, multiplied by a specified dollar multiple.
The writer (seller) of the option is obligated, in return for the premiums
received, to make delivery of this amount. Unlike the options on securities
discussed above, all settlements are in cash. The Fund will, in general,
invest or write index options which one traded in a national exchange.
Over-the-counter index options, purchased over-the-counter options, and
the cover for written over-the-counter options will be subject to the Fund's
5% limitation on investment in illiquid investments. See Proposal No. 6
below.
Each of the Exchanges has established limitations governing the
maximum number of call or put options on the same index which may be bought
or written (sold) by a single investor, whether acting alone or in concert
with others (regardless of whether such options are written on the same or
different Exchanges or are held or written on one or more accounts or
through one or more brokers). Option positions of all investment companies
advised by the same investment advisor are combined for purposes of these
limits. An Exchange may order the liquidation of positions and may impose
other sanctions or restrictions. These position limits may restrict the
number of listed options which the Fund may buy or sell; however, the
Centurion Counsel intends to comply with all limitations.
Index options are subject to substantial risks, including the risk of
imperfect correlations between the option price and the value of the
underlying securities comprising the index and the risk that there might
not be a liquid secondary market for the option. The Fund will not enter
into an option position that exposes the Fund to an obligation to another
party, unless the Fund either (i) owns an offsetting position in securities
or other options and/or (ii) maintains with its custodian bank (and marks-
to-market on a daily basis) a segregated account consisting of cash, U.S.
Government securities, or other liquid high-grade debt securities that,
when added to the premiums deposited with respect to the option, are
equal to the market value of the underlying stock index not otherwise
covered.
Centurion Counsel intends to utilize index options as a technique to
leverage the Fund's portfolio. If Centurion Counsel is correct in its
assessment of the future direction of stock prices, the Fund share price
will be enhanced. If the Fund takes a position in options and stock prices
move in a direction contrary to Centurion Counsel's forecast, however, the
Fund would incur greater loss than the Fund would have incurred without
the options position.
The fund will engage in transactions on stock index futures contracts
(and/or options thereupon) only to the extent its activities would exclude
it from the definition of "commodity pool operator" under the requirements
of Section 4.5 of the regulations under the Commodity Exchange Act
promulgated by the Commodity Futures Trading Commission (the "CFTC
Regulations"). Under Section 4.5 of the CFTC Regulations, the Fund may
engage in futures transactions, either for "bona fide hedging" purposes, as
this term is defined in the CFTC Regulations, or for non-hedging purposes
to the extent that the aggregate initial margins and premiums required to
establish such non-hedging positions do not exceed 5% of the liquidation
value of the Fund's portfolio. In the case of an option on futures
contracts that is "in-the-money" at the time of purchase (i.e., the amount
by which the exercise price of the put option exceeds the current market
value of the underlying security), the in-the-money amount may be excluded
in calculating this 5% limitation.
Futures contracts on stock indexes and options thereupon and Derivative
Securities involve substantial risks. See the discussion of Derivatives
under Proposal 4 above.
Shareholder Approval. Under the Act, approval of the shareholders
of the Fund requires the Affirmative vote by the holders of a majority of
the outstanding voting securities of the Fund. For this purpose, the term
"majority of the outstanding voting securities" means the vote of (i) 67%
or more of the voting securities of the Fund present at the annual meeting,
if the holders of more than 50% of the Fund's outstanding voting securities
are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund, whichever is less.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE
INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO CHANGE THE
FUND'S FUNDAMENTAL INVESTMENT POLICIES TO INCREASE THE AMOUNT THE FUND
MAY INVEST IN FUTURES CONTRACTS ON STOCK INDEXES AND OPTIONS THEREUPON.
If the shareholders of the Fund fail to approve this proposal, the
Board of Directors will immediately consider what action to take and could
request the shareholders of the Fund to reconsider an amendment to permit
increased Fund investments in futures contracts on stock indexes and
options thereupon.
PROPOSAL 6.
APPROVAL OF CHANGE TO FUNDAMENTAL INVESTMENT POLICIES
TO ALLOW INVESTMENTS IN ILLIQUID SECURITIES
At the Annual Meeting, the shareholders of the Fund will be asked to
approve the following Proposal to change the Fund's current fundamental
investment policy regarding investments in illiquid securities.
Proposal: To allow the Fund to invest up to 5% of its net assets in
illiquid investments. For the purposes of this restriction, "Illiquid
investments" are Restricted Securities or securities which cannot be
disposed of within seven (7) days in the normal course of the Fund's
business at approximately the amount at which the Fund has valued such
securities.
Current Investment Restriction. The Fund may not invest in Restricted
Securities. Restricted Securities are those the sale of which is limited
by contract or law.
Background and General Information. Currently, the Fund may not
invest in restricted securities and does not invest in illiquid investments.
The proposal to allow the Fund to invest up to 5% of its net assets in
these illiquid investments which (including Restricted Securities) was
approved by the Fund's Board of Directors at its meeting on February 2, 1996.
This Proposal will not become effective unless and until it is approved by
the Fund's shareholders. This proposal is not contingent upon shareholder
approval of any of the other proposals set forth in this Proxy Statement.
Consequences of Removal of Restriction. If the amendment to the
restriction is approved by the shareholders, the Fund will be able to
invest up to 5% of its assets in illiquid securities. For the purposes of
this restriction, illiquid investments mean Restricted Securities and
securities which cannot be disposed of within seven (7) days in the normal
course of the Fund's business at approximately the amount at which the
Fund has valued the securities. Illiquid investments include those which
are illiquid by virtue of the absence of a readily available market or
contractual restrictions on resale, repurchase agreements which are not
terminable within seven (7) days and possibly certain options purchased in
the over-the-counter market. The Fund will invest in illiquid investments
where such investment is consistent with the Fund's investment objective.
To the extent the Fund owns or may acquire restricted securities or other
illiquid investments, such securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. The Advisor will monitor the liquidity of such restricted
securities with respect to the Fund's portfolio investments, subject to
supervision by the Fund's Board of Directors.
Shareholder Approval. Under the Act, approval of the
shareholders of the Fund requires the Affirmative vote by the holders of
a majority of the outstanding voting securities of the Fund. For this
purpose, the term "majority of the outstanding voting securities" means
the vote of (i) 67% or more of the voting securities of the Fund present
at the annual meeting, if the holders of more than 50% of the Fund's
outstanding voting securities are present or represented by proxy; or
(ii) more than 50% of the outstanding voting securities of the Fund,
whichever is less.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE
INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO CHANGE THE
FUND'S FUNDAMENTAL INVESTMENT POLICIES TO ALLOW THE FUND TO INVEST UP TO
5% OF ITS TOTAL ASSETS IN ILLIQUID SECURITIES.
If the shareholders of the Fund fail to approve this proposal, the
Board will immediately consider what action to take and could request the
shareholders of the Fund to reconsider a change in the Fund's fundamental
investment policies to allow the Fund to invest in illiquid securities.
PROPOSAL 7.
APPROVAL OF MULTICLASS SHARE PLAN
At the Annual Meeting, the shareholders will be asked to approve a
Multiple Class Share Plan to authorize the Fund to issue four classes of
Shares.
Proposal. To approve (1) the adoption of the Centurion T.A.A. Fund,
Inc. Multiple Class Share Plan whereby the Fund's current shares would be
designated and reclassified as the "Class C Shares" and the Fund would be
authorized to issue in addition to the Class C Shares, Class A Shares,
Class B Shares and the Class D Shares as described below; and (2) an
amendment to the Fund's Articles of Incorporation to authorize the Fund
to issue Shares in accordance with the Multiple Class Share Plan. A copy
of the Centurion T.A.A. Multiple Share Class Plan is attached as Appendix
A to this Proxy Statement.
Current Share Structure. The Fund is currently authorized to issue
only one class of shares. Set forth below is a summary of the Multiple
Class Share Plan. A copy of the Multiple Class Share Plan is attached
hereto as Exhibit A. Under the Multiple Class Plan, the Fund would be
authorized to issue the following shares.
Class A Shares. These shares would be offered at net
asset value per share plus a maximum initial sales charge ("front-end
charge") of 4.75% of the offering price.
Class B Shares. These shares would be offered at net asset
value per share and are subject to a maximum contingent deferred sales
charge of 4% of redemption proceeds during the first year, declining each
year thereafter to 0% after the fifth year. Class B shares would convert
automatically to Class A shares eight years after the end of the calendar
month in which the shareholder's purchase of the Class B Share was accepted.
Class C Shares. Reclassified as Class C Shares, the Fund's
currently authorized shares would continue to be offered at their net
asset value per share. Under its existing Rule 12b-1 Plan, the Fund would
continue to pay an annual Distribution Fee and a Shareholder Services Fee
of 0.75% and 0.25%, respectively, of the Fund's average daily net assets
attributable to these shares.
Class D Shares. These shares are offered at net asset value
per share. No front-end charge or deferred sales charge or distribution
services fees will be paid by the Fund with respect to these shares. These
shares are offered only to persons who are registered under the Investment
Advisors Act of 1940 ("Registered Investment Advisors" or "RIAs") and
certain banks and other providers of financial services ("Advisor
Professionals") and certain employees of the Fund and others associated
with the Fund ("Eligible Employees").
Expenses. The Fund will allocate Rule 12b-1 Plan of Distribution
and/or shareholder services expenses, if any, incurred with respect to
Class Shares only to that Class of Shares. Also, payments made by the
Fund pursuant to any Rule 12b-1 Plan of distribution adopted in the future
with respect to any class of shares would be allocated only to the class
to which such plan relates. All other expenses are allocated pro rata to
each Class of Shares.
Voting. All Shares will vote as a single class for Directors and
all other matters except matters affecting only a certain class or classes
shall be voted upon only by Shares of such Class or Classes.
Background and General Information. The Board has determined
that it would improve the Fund's ability to attract investors if it could
offer multiple classes of shares each of which provided for a different
sales charge structure. At its meeting in February 2, 1996, the Board
approved the Multiple Class Share Plan reclassification of the Fund's
current authorized shares to Class C Shares and approved the issuance of
Class A, Class B and Class D Shares, as follows:
Consequences of Multiple Class Shares. If the proposal is
approved by the shareholders, would amend its Articles of Incorporation
to implement the Multi-Class Share Plan under which the Fund's current
Shares would be designated Class C Shares and would continue to bear
expenses of the Fund in the same manner and amount as they do currently.
The Fund would be authorized to offer three classes of shares to the
general public, Class A shares, Class B shares, and the Class C shares.
The Class D Shares would be offered only to registered investment advisors
and eligible employees. Each Class will have its own sales charge
structure. Each class would have distinct advantages and disadvantages
for different investors, and investors may choose the class of shares that
best suits their circumstances and objectives. Each class of shares would
represent an interest in the same portfolio of investments of the Fund.
Because of the multiple pricing system, the per share dividends on Class A,
Class B and Class C shares will be lower than the per share dividends on
Class D shares.
Shareholder Approval. Under the Act, approval of the shareholders
of the Fund requires the Affirmative vote by the holders of a majority of
the outstanding voting securities of the Fund. For this purpose, the term
"majority of the outstanding voting securities" means the vote of (i) 67%
or more of the voting securities of the Fund present at the annual meeting,
if the holders of more than 50% of the Fund's outstanding voting securities
are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund, whichever is less.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE
INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO RECLASSIFY
THE FUND'S SHARES.
If the shareholders of the Fund fail to approve this proposal, the
Board will immediately consider what action to take and could request
the shareholders of the Fund to reconsider the reclassification of
the Fund's shares.
PROPOSAL 8.
RATIFICATION OR REJECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
At the annual meeting, the shareholders of the Fund will be asked to
ratify the selection of the accounting firm of Squire & Co. as the Fund's
independent public accountants.
Background and General Information. The 1940 Act provides that every
registered investment company shall be audited at least once each year by
independent public accountants selected by a majority of the directors of
the investment company who are not interested persons of the investment
company. The 1940 Act requires that such selection be submitted for
ratification or rejection by the shareholders at their next meeting
following such selection. Squire & Co. have served as the Fund's
independent public accountants since 1989. At the special meeting of
shareholders held on December 20, 1994, the shareholders approved the
Fund's engagement of the accounting firm of Goodsell, Morris & Lofgren to
replace Squire & Co. However, the proposed engagement of Goodsell, Morris
and Lofgren and dismissal of Squire & Co. did not occur. None of the
principal accountants' reports on the financial statements for the past
two years contained an adverse opinion or disclaimer of opinion nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles. Squire & Co. has no material direct or indirect financial
interest in the Fund, other than the receipt of fees for services to the
Fund. The selection of Squire & Co. to be the Fund's independent public
accountants for the fiscal years ended December 31, 1994 and 1995 has
been approved by a majority of the directors of the Fund, including a
majority who are not interested persons of Centurion Counsel, or the Fund.
A representative of Squire & Co. is not expected to be present at the
meeting.
At the annual meeting, the shareholders of the Fund will be asked to
ratify the selection of Squire & Co. as the Fund's independent public
accountants for the fiscal year ended December 31, 1994 and to approve
the selection of Squire & Co. to be the Fund's independent public
accountants for the fiscal year ended December 31, 1995.
Shareholder Approval. The vote of a majority of the shares of the
Fund represented at the meeting, provided at least a quorum (a majority
of the outstanding shares) is represented in person or by proxy, is
sufficient for the ratification of the selection of the independent
public accountants.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS OTHERWISE
INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE PROPOSAL TO RATIFY THE
SELECTION OF THE FUND'S INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER MATTERS
Management does not intend to present any business at the meeting not
mentioned in this Proxy Statement, and currently knows of no other business
to be presented. If any other matters are brought before the meeting, the
appointed proxies will vote all Proxies on such matters in accordance with
their judgment of the best interests of the Fund.
BROKERAGE
In effecting securities and commodities transactions, the Fund's
investment advisor seeks to obtain the best price and execution of orders.
Commission rates, being a component of price, are considered together with
other relevant factors.
After the annual meeting of shareholders, the Fund intends to continue
to use in addition to CISI, PIM Financial Services, Inc. ("PIM") or other
broker-dealers affiliated with Centurion Counsel as brokers for the Fund,
but only if the provisions of Section 17(e) of the Act (and the rules
thereunder) are complied with and only where, in the judgment of the Fund's
investment advisor, such firm will be able to obtain a price and execution
at least as favorable as other qualified brokers, and the transactions
effected by such firm, including the frequency thereof, the receipt of
commissions payable in connection therewith and the selection of such
firm, are not unfair or unreasonable to the shareholders of the Fund.
In determining the commissions to be paid to an affiliated broker-
dealer, it is the policy of the Fund that such commissions will, in the
judgment of the Fund's investment advisor, be both at least as favorable
as those which would be charged by other qualified brokers having
comparable execution capability and at least as favorable as commissions
contemporaneously charged by such broker-dealer on comparable transactions
for its most favored unaffiliated customers, except for any customers of
such broker-dealer considered by a majority of the disinterested directors
(as described above) not to be comparable to the Fund. While the Fund
does not deem it practicable and in its best interest to solicit
competitive bids for commission rates on each transaction, consideration
will regularly be given to posted commission rates as well as to other
information concerning the level of commissions charged on comparable
transactions by other qualified brokers.
When selecting brokers, business may be placed with broker-dealers
who furnish investment research services to the Fund's investment advisor.
Such research services include advice, both directly and in writing, as to
the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or
sellers of securities, as well as analyses and reports concerning issues,
industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts. This allows the advisor to supplement
its own investment research activities and enables it to obtain the views
and information of individuals and research staffs of many different
securities research firms prior to making investment decisions for the Fund.
To the extent such commissions are directed to these other broker-dealers
who furnish research services, the advisor receives a benefit, not capable
of evaluation in dollar amounts, without providing any direct monetary
benefit to the Fund from these commissions. The advisor has not entered
into any formal or informal agreements with any broker-dealers (except as
noted above), and it does not maintain any "formula" which must be followed
in connection with the placement of the Fund's portfolio transactions in
exchange for research services, except as noted below. However, the
advisor may maintain an informal list of broker-dealers which it may use
as a general guide in the placement of the Fund's business, in order to
encourage certain broker-dealers to provide it with research services
which it anticipates will be useful to it. Because any such list would
merely be a general guide which would be used only after the primary
criteria for the selection of broker-dealers (discussed above) have been
met, substantial deviations from the list are permissible and may be
expected to occur. The advisor will authorize the Fund to pay an amount
of commission for effecting a securities transaction in excess of the
amount of commission another broker-dealer would have charged only if
the advisor determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts
as to which the advisor exercises investment discretion. Generally, the
Fund pays more than the lowest commission rates available.
Subject to the policies set forth in the preceding paragraph and
such other policies as the Fund's directors may determine, the advisor
may consider sales of shares of the Fund and of other funds it may
advise as a factor in the selection of broker-dealers to execute such
Fund's portfolio transactions.
During the years ended December 31, 1993, 1994 and 1995, $1,216,169,
$617,652 and $1,275,276, respectively, of the Fund's portfolio securities
were purchased and sold through brokers or banks acting on a principal
basis for which no commissions were charged, all of which were effected
through brokers or banks unaffiliated with the Fund. During the years
ended December 31, 1993, 1994 and 1995, the Fund paid a total of $16,372,
$9,141 and $9,997, respectively, in brokerage commissions in connection
with agency transactions; during 1993, 1994 and 1995, $7,968, $-0- and
$9,997, respectively, were paid to broker-dealers who furnished investment
research to the Fund's investment advisor. During 1993, Warner Beck, the
Fund's former principal underwriter, effected 65% of the total dollar
volume of transactions in which commissions were paid and received 49% of
such commissions. During 1994 and 1995, CISI, the Fund's principal
underwriter, and its affiliate, PIM, together effected 90% and 91%,
respectively, of the total volume of transactions in which commissions
were paid and received 89% and 87%, respectively, of such commissions.
SUPPLEMENTAL INFORMATION WITH RESPECT TO THE FUND
Certain information about the current executive officers of the Fund
is set forth below. Each executive officer of the Fund may be removed
from office at any time by a majority of the Fund's Board of Directors
with or without cause.
Name of Officer (Age) Anticipated Position Prinicpal Occupations
With The Fund
Jack K. Heilbron (44) Chairman of the Board Director,Treasurer and Vice
and Chief Investment President; Chairman and
Officer and Director of CI Holding,
Centurion Counsel and PIM.
Mary R. Limoges (40) Secretary Secretary and Director of
C I Holding, Centurion
Counsel and President and
a director of PIM and
CISI.
Kenneth W. Elsberry (56)President, Chief Chief Financial Officer of
Financial Officer and C I Holding and PIM, and
Assistant Secretary President and Chief President and Chief
Financial Officer of
Centurion Counsel.
Jack K. Heilbron and Mary R. Limoges are husband and wife. There are
no other family relationships between the proposed executive officers or
directors. Centurion Counsel's address is: 11545 West Bernardo Court,
Suite 100, San Diego, California 92127.
None of these executive officers or directors have family
relationships with other executive officers or directors.
During the fiscal years ended December 31, 1993, 1994, and 1995, the
Fund did not pay compensation to any of its executive officers.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's next Annual Meeting of
Shareholders must be received by the Company no later than December 10,
1996 in order to be considered for inclusion in the Company's proxy
statement and form of proxy relating to that meeting.
BALANCE SHEET OF CENTURION COUNSEL, INC.
Attached hereto as Appendix B is the audited balance sheet of
Centurion Counsel as of March 31, 1996.
KENNETH W. ELSBERRY,
Secretary
Dated: July 5, 1996
