PRELIMINARY PROXY MATERIAL
Dated March 14, 1997
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 MAY 2, 1997
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 May 2, 1997, at 10:00 a.m. for the following
purposes:
1. To elect a Board of Directors for the Fund.
2. To approve the selection of Squire & Company as the Fund's
independent public accountants for the fiscal years ending December 31, 1996
and 1997.
3. 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 February 28, 1997,
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 -
MAY 2, 1997." A return envelope is enclosed for your convenience.
Kenneth W. Elsberry
Secretary
Dated: March 14, 1997
PRELIMINARY PROXY MATERIAL
Dated March 13, 1997
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CENTURION T.A.A. FUND, INC.
Annual Meeting of Shareholders - May 2, 1997
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 May 2, 1997 at 10:00 a.m. Local Time, at 11545
West Bernardo Court, Suite 100, San Diego, California 92127 (telephone no.
(619) 673-8536), 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
[ 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 and 2, inclusive, below, and as said proxies deem
advisable on such other matters as may properly come before the meeting.
1. ELECTION OF DIRECTORS Nominees: C.A. Freeland, R.E. Hall,
J.K. Heilbron, R. W. Ketron, D. Werner
[ ] VOTE FOR ALL [ ] WITHHELD VOTE [ ] VOTE FOR
NOMINEES FROM ALL NOMINEES NOT
NOMINEES LINED OUT
(Instruction: You may withhold authority to vote for any individual nominee,
by striking a line through the nominee's name above.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF SQUIRE & COMPANY AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEARS ENDED
DECEMBER 31, 1996 AND 1997.
[ ] 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:
PRELIMINARY PROXY MATERIAL
Dated March 13, 1997
________________________________________
PROXY STATEMENT
________________________________________
CENTURION T.A.A. FUND, INC.
11545 West Bernardo Court, Suite 100
San Diego, California 92127
ANNUAL MEETING OF SHAREHOLDERS - MAY 2, 1997
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 May 2, 1997 at 10:00 A.M. at 11545 West Bernardo Court,
Suite 100, San Diego, California 92127, 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 March
27, 1997 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 February
28, 1997 may vote at the meeting or any adjournments thereof. As of
that date there were issued and outstanding approximately
2,895,149 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 proposal set forth in Item 2 of the Notice of Annual
Shareholders' Meeting are not received by May 2, 1997, 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
proposal set forth in Item 2 of the Notice of Annual Shareholders'
Meeting. At the annual meeting, the shareholders of the Fund will be
asked to reelect the current members of the Board and to approve the
selection of the independent public accountant for the Fund.
SHARE OWNERSHIP
As of March 12, 1997, 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 28, 1997, beneficially owned shares of the Fund,
except Mr. Heilbron, Mr. Werner and Mr. Ketron who owned
beneficially 2,992; ,521 and 22,803 shares, respectively, of the Fund on
such date (representing approximately 0.1%, 0.018% and 0.7876%,
respectively, of the outstanding shares of the Fund).
ANNUAL, SEMIANNUAL REPORTS OF THE FUND
The semi-annual report of the Fund containing unaudited
financial statements for the six months ended June 30, 1996 was mailed
to the shareholders on or about July 15, 1996 and the annual report of
the Fund containing financial statements for the fiscal year ended
December 31, 1996, was mailed to shareholders of the Fund on or about
March 14, 1997.
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.<PAGE>
Positions with the Fund
Name and (Age) and Principal Occupations Business Address
Carol Ann Freeland (57) Has served as a director of 4015 Beltline Road
the Fund since December 20, Suite 200
1994. Since 1992, Executive Dallas, TX 75244
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 (70) 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 parent corporation. 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 (45)(1) Has served as a director of the 11545 W. Bernardo
Fund since December 20, 1994. Court, 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(51)(1),(2)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 (44) Has served as a director of 140 Brightwood Ave.
the Fund since December 20, Chula Vista, CA 92010
1994. Since 1993 has been
President 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, CISI 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 board of directors for the Fund held a total of four (4)
regular meetings during its last fiscal year.
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 Benfits Accrued Complex
Carol A. Freeland $ 750 -0- $ 750
Richard E. Hall 750 -0- 750
Russell W. Ketron 500 -0- 500
Douglas Werner 750 -0- 750
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 "WITHHELD," "VOTE FOR NOMINEES NOT LINED
OUT,and by striking a line through the nominees' name or names on the
Proxy, that you do not vote for.
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
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. 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, 1996 and
1997 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 approve the selection of Squire & Co. to be the Fund's
independent public accountants for the fiscal years ended December 31,
1996 and 1997.
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 Centurion Institutional Services, Inc. ("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 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, 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 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, 1994, 1995 and 1996,
$617,652, $1,275,276 and $1,810,232, 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, 1994, 1995 and 1996, the
Fund paid a total of $9,141, $9,997 and $34,994 respectively, in
brokerage commissions in connection with agency transactions; during
1994, 1995 and 1996, $-0- $3,271 and $9,051, respectively,
were paid to broker-dealers who furnished investment research to the
Fund's investment advisor. During 1994, 1995 and 1996, CISI, the
Fund's principal underwriter, and its affiliate, PIM, together effected
90%, 87% and 75%, respectively, of the total volume of transactions
in which commissions were paid and received 89%, 67% and 74%,
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.
Anticipated Position
Name of Officer (Age) With The Fund Principal Occupations
Jack K. Heilbron (45) Chairman of the Board Director, Treasurer and Vice
and Chief Investment President; Chairman and
Officer Director of CI Holdings,
Centurion Counsel and PIM.
Mary R. Limoges (41) Secretary Secretary and Director of
CI Holding, Centurion
Counsel and President and a
director of PIM and CISI.
Kenneth W. Elsberry (58) President, Chief Chief Financial Officer of
Financial Officer and CI Holding and PIM, and
Assistant Secretary President and Chief Financial
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, 1994, 1995, and
1996, 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
November 10, 1997 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: March 13, 1997
Appendix B
<PAGE>
CENTURION COUNSEL, INC.
AND
SUBSIDIARIES
(Subsidiaries of
Centurion Group, Inc.)
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
AND
INDEPENDENT AUDITOR'S REPORT
March 31, 1996 and 1995
<PAGE>
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Table of Contents
March 31, 1996 and 1995
Page
Independent Auditor's Report 1
Audited Financial Statements:
Consolidated Statements of Financial Condition 2
Notes to Consolidated Statements of Financial Condition 3-8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
CENTURION Counsel, Inc. and Subsidiaries
We have audited the accompanying solidated statement of financial condition of
CENTURION Counsel, Inc. and Subsidiaries (subsidiaries of Centurion Group, Inc.)
as of March 31, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statement based on our audit. The statement of financial condition
of CENTURION Counsel, Inc. and Subsidiaries as of March 31, 1995 was audited by
other auditors whose report dated May 25, 1995, expressed an unqualified
opinion on the financial statement.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the statement of financial condition referred to above
presents fairly, in all material respects, the consolidated financial position
of CENTURION Counsel, Inc. and Subsidiaries at March 31, 1996, in conformity
with general accepted accounting principles.
Boros & Farrington
San Diego, CA
<PAGE>
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Consolidated Statements of Financial Condition
March 31, 1996 and 1995
ASSETS
1996 1995
Current assets
Cash $ 66,829 $ 69,498
Securities owned 3,448 26,206
Receivables, net 119,063 107,305
Due from affiliates 22,374 41,159
Current portion of note receivable from affiliate 32,472 29,470
Prepaid expenses 46,852 94,611
Total current assets 291,038 368,569
Note receivable from affilite, less current portion 537,738 570,210
Stock exchange seat 32,000
Furniture and equipment, net 9,243
Intangibles, net 70,986 77,302
$909,005 $1,048,081
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable and other accrued expenses $ 94,430 $ 74,154
Deferred revenue 74,803 189,111
Current portion of long-term debt 23,876 21,829
Accrued participating certificate fees 12,313 7,992
Total current liabilities 205,442 293,086
Long-term debt, less current portion 21,599 45,475
Total liabilities 227,021 338,561
Stockholder's equity
Preferred Stock, $10,000 par value 868,000 773,000
Common Stock, no par value;10,000 share authorized 10,000 10,000
Additional paid-in capital 92,440 104,590
Accumulated deficit (288,456) (138,070)
Total stockholder's equity 681,984 709,520
$909,005 $1,048,081
See notes to consolidated statement of financial condition
<PAGE>
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Notes to Consolidated Statements of Financial Condition
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
The Company
The financial statement includes the accounts of CENTURION Counsel, Inc.
("CCI") and its wholly-owned subsidiaries: CENTURION Institutional
Services, Inc. ("CISI") and CHG Properties, Inc. ("CHG"). All
significant inter-company balances have been eliminated in consolidation.
CCI and its Subisdiaries (the "Company") are in the business of providing
financial services. CCI operates as a registered investment advisor with
its customers geographically dispersed across the United States of
America. CIS began operations in fiscal 1996 as an introducing broker-
dealer clearing customer transactions through another broker-dealer on a
fully disclosed basis. CHG provides property management services
primarily to affiliates.
CCI is a wholly-owned subsidiary of Centurion Group, Inc. ("CGI"). CGI is
engaged in the business of providing diversified financial services to
the public. By common ownership, the Company is also related to PIM
Financial Services, Inc.; PIM Insurance Services, Inc.; Bishop-Crown
Investment Research, Inc.; CI Holding Group, Inc.; and Wyoming Casa Grande
Associates, a California limited partnership.
Revenue recognition
Investment advisor fees are recognized over the term of the investment
advisory agreement. Deferred revenue results from the billing in
advance of investment advisory fees on a quarterly or annual basis.
Property management and other service income is recognized when the
services are rendered. Commission revenue is recorded on a trade date
basis.
Marketing incentives
Referral fees are paid to other registered investment advisors and broker/
dealer. Such fees are amortized over the life of the investment advisory
contract, which generally is a month, a quarter, or a year.
Securities owned
Securities owned are stated at market value, based on quoted market prices.
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Membership in exchange
CIS purchased a membership in the Pacific Stock Exchange in October 1994
from an affiliate for $32,000 based on comparable sales. The membership
was carried at cost. During fiscal 1996, the CIS sold the membership to
an unrelated party.
Furniture and equipment
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets.
Intangible assets
Intagible assets are amortized using the straight-line method over 5 years
for organization costs and 15 years for the investment in a mutual fund
advisory and administrative contract.
Income taxes
The Company fines consolidated federal and state income tax returns with
CI Holding Group, Inc. and Subsidiaries. The subsidiaries record their
deferred and current taxes on a separate company basis. The agreement
provides that the subsidiaries are given credit in the year incurred for
any deductions, net operating losses, and credits that are subject to
consolidated tax return rules and limitations.
The Company uses the liability method of accounting for income taxes
whereby deferred tax asset and liability account balances are calculated
at the balance sheet date using the current tax laws and rates in effect.
Reclassifications
Certain prior year financial statement classifications have been
reclassified to conform with the current year's presentation.
2. FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following at March 31:
1996
Furniture and equipment $15,823
Accumulated depreciation (6,580)
$ 9,243
3. INTANGIBLE ASSETS
Intangilbe assets consist of the following at March 31:
1996 1995
Organization costs, net of accumulated $ 1,669 $ 3,005
amortization of $15,452 and $14,116
Investment in a mutual fund advisory and
administration contract, net of accumulated
amortization of $5,395 and $415 69,317 74,297
$70,986 $77,302
4. RECEIVABLES
Receivables
Receivables consist of the following at March 31:
1996 1995
Investment advisory services $108,377 $116,542
Commissions 19,259
Sales representatives 15,000
Other 3,927 763
131,563 132,305
Less allowance for doubtful accounts 12,500 25,000
$119,063 $107,305
Due from affilates
The balance due from affilates arises from transactions among the
affiliated group of companies including cash advances and loans,
transfer of assets, allocation of expenses, and recognition of income
tax benefits. The amounts are non-interest bearing and due on demand.
Note receivable from affilate
The Company has a promissory note receivable from CI Holding Group, Inc.
("CIH"), the affilated group's parent, which requires annual payments of
$83,790 through 2007 including interest at 9% per annum. CIH has no
operating revenues of its own and depends on profits of its subsidiaries
to make the payments on this note.
5. LONG-TERM DEBT
Long-term debt consists of a note payable issued to finance the purchase
of the investment in a mutual fund advisory and administrative contract.
The note provides for monthly payments of $2,250, with interest imputed
a 9% per annum.
Maturities of long-term debt are as follows:
Amortization
Year ending March 31: Payments of Discount Net
1997 $27,000 $(3,124) $23,876
1998 22,500 (901) 21,599
$49,500 $(4,025) $45,475
6. PREFERRED STOCK
Authorization
The Company is authorized to issue 1,000 shares of preferred stock,
issuable from time to time in one or more series. The Board of Directors
shall determine and fix the rights, preferences, privileges, and
restrictions relating to the preferred stock and the number of shares
constituting and the disignation of said shares. The Board of Directors
has authorized 100 shares of Series A Preferred Stock and 75 shares of
Series B Preferred Stock. Except as noted below with respect to sinking
fund requirements, the Series A and Series B shares are of equal rank.
The following summarized preferred stock transcations and balances:
Series A Series B
Shares Amount Shares Amount
Balance March 31, 1994 24.0 $240,000
Preferred stock for cash 49.3 493,000
Balance March 31, 1995 73.3 733,000
Preferred stock for cash 13.5 $135,000
Balance March 31, 1996 73.3 $733,000 13.5 $135,000
Gross revenue participation certifictes
For each share of Series A and Series B Preferred Stock issued by the
Company, the Company also issued a gross revenue participation
certificate. Each participation certificate (i) will expire 36 months
following the date the related preferred share is redeemed (the
"Expiration Date"); (ii) entitles the holder to a quarterly payment
equal to a percentage of the Company's quarterly gross revenue until the
Expiration Date (this percentage shall decrease after the Expiration
Date (this percentage shall decrease after the Expiration Date as follows:
0.03% first 12 months, 0.02% second 12 months, and 0.01% third 12
months); (iii) is transferable separately from the related preferred
share; and (iv) is non-redeemable.
Voting rights
The Series A and Series B Preferred Stock is non-voting.
Dividends
The holders of the preferred shares are entitled to quarterly cumulative
cash dividends equal to the average prime rate posted by the federal
reserve, if declared by the board of directors. The preferred stock
shall receive any cumulative unpaid dividends before the payment of any
dividends to common stockholders.
Liquidation preferences
The liquidation preference is $10,000 per share plus accrued and unpaid
dividends before any liquidation payments to common stockholders.
Redemption and sinking fund requirements
The Series A and Series B Preferred Stock is redeemable at the election
of the company and is subject to a mandatory redemption on and after
April 30, 1999 and 2000, respectively, pursuant to the sinking fund
requirements. The Company will establish a sinking fund account with
a third-party broker/dealer or a federally insured financial institution
for the benefit of the preferred stockholders and for the sole purpose
of repaying and/or repurchasing the preferred stock. Commencing on
April 30, 1999 (Series A) and April 30, 2000 (Series B) and on each
succeeding April 30, the Company will be required to deposit cash and or
preferred stock having a par value equal to 20% of the par value of the
preferred shares outstanding on each such date.
Based on current shares outstanding, sinking fund payments will be
as follows:
Year ending March 31:
1999 $146,600
2000 173,600
2001 173,600
2002 173,600
2003 173,600
2004 27,000
$868,000
7. REGULATORY REQUIREMENTS
Regulatory investment advisor
CCI is a registered investment advisor in various states which generally
require, among other rules and regulations, that CCI maintain minimum
levels of net capital (as defined) and minimum financial ratios.
Management believes that it is in compliance with all such requirements.
Net capital for broker/dealers in securities
Under Rule 15c3-1 of the Securities Exchange Act of 1934, the CIS is
required to maintain a minimum net capital (as defined) and a ratio of
aggregate indebtedness to net capital (as defined) not exceeding 15 to 1.
The Company's ratio at March 31, 1996 was 1.35 to 1. The basic concept of
the Rule is liquidity, its object being to require a broker/dealer in
securities to have at all times sifficient liquid assets to cover its
current indebtedness. At March 31, 1996, CIS had net capital of $218,951
which was $118,951 in excess of the amount required by the SEC.
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CORPORATE PROFILE
Founded 1984
ASSETS MANAGED
$90 Million
PORTFOLIO MANAGEMENT
Jack K. Heilbron/Chief Investment Officer
Christine Ashjian/Investment Analyst
PROFESSION STAFF
8
TOTAL STAFF
21
SERVICES
Strategic Asset Allocation
Portfolio Management
Mutual Fund Management
Auditors
Boros & Farrington
11770 Bernardo Plaza Court, Suite 210
San Diego, CA 92127
Legal Counsel
Bruce J. Rushall, Esq.
Rushall & McGeever
2111 Palomar Airport Road #200
Carlsbad, CA 92009
CENTURION COUNSEL, INC.
1154 West Bernardo Court #100
San Diego, CA 92127
(619) 673-8536
