As filed with the Securities and Exchange Commission on
April 30, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Centurion T.A.A. Fund, Inc., formerly Excel Value Fund, Inc.
(File No. 2-73955): Post-Effective Amendment No. 26
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
[X]
Centurion T.A.A. Fund, Inc., formerly Excel Value Fund, Inc.
(File No. 811-3257): Post-Effective Amendment No. 26
CENTURION T.A.A. FUND, INC.
(Exact Name of Registrant as Specified in Charter)
11545 W. Bernardo Court, Suite 100, San Diego, California 92127
(Address of Principal Executive Offices) (Zip Code)
(619) 673-8536
(Registrant's Telephone Number, including Area Code)
Jack K. Heilbron
11545 W. Bernardo Court, Suite 100, San Diego, California 92127
(Name and Address of Agent for Service)
Copy to:
Bruce J. Rushall, Esq.
Rushall & McGeever
2111 Palomar Airport Road, Suite 200
Carlsbad, California 92009
It is proposed that this filing will become effective on filing pursuant to
Paragraph (b) of Rule 485 and pursuant to Rule 485(b)(1)(iii). The
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent
fiscal year was filed with the Securities and Exchange Commission on .
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N 1A
Item No.
of Form
N-1A Caption in Prospectus
1 Cover Page
2 "Summary of Contents"; "Expense Synopsis"
3 "Financial Highlights"; "Performance Data"
4 "Summary of Contents"; "Investment Objective and Policies
of the Fund"; "Investments the Fund Will Not Make;
Restrictions on Investments"; "Other Information";
"Appendix A"
5 "Summary of Contents"; "Management"; "Other Information"
6 "Investment Income"; "Taxes"; "Other Information"
7 "Multiple Pricing System"; "Valuing Shares"; "Buying Shares";
"Sales Charge"; "Plans of Distribution"; "Reinvestments";
"Shareholder Services/Transfers"
8 "Redeeming Shares"; "Shareholder Services/Transfers"
9 Not Applicable
Caption in Statement of Additional Information
10 Cover Page
11 "Table of Contents"
12 "Additional Information"
13 Investment Restrictions; See also "Investment Objectives
and Policies of the Fund"; "Investments the Fund Will Not Make;
Restrictions on Investments" in Prospectus
14 "Fund Management"
15 "Ownership of Shares"
16 "Centurion Counsel, Inc., Centurion Group, Inc. and
Centurion Institutional Services, Inc."; "Custodian;
General Counsel; Auditors"
17 "Brokerage"
18 See "Multiple Class Share Plan", "Investment Income" and
"Other Information" in Prospectus
19 "Additional Purchase and Redemption Information"; See
"Buying Shares"; "Sales Charge"; "Redeeming Shares" and
"Shareholder Services/Transfers" in the Prospectus
20 "Taxes"
21 "Centurion Counsel, Inc., Centurion Group, Inc. and
Centurion Institutional Services, Inc."
22 "Calculation of Performance Data"
23 "Financial Statements"
PROSPECTUS
CENTURION T.A.A. FUND, INC.
Centurion T.A.A. Fund, Inc. ("the Fund") is a mutual fund
that continuously offers its shares for sale. The investment
objectives of the Fund are long-term, high-level, total return
consistent with reasonable risk by pursuing a tactical asset
allocation strategy whereby the Fund's investments are allocated,
based on changes in market conditions, among three asset classes --
common stocks, bonds and money market instruments. In pursuing its
objectives, the Fund will invest in common stocks and corporate bonds,
including options thereon and will employ certain special investment
techniques such as short sales and investments in futures contracts,
stock index contracts and options thereon. The Fund will not borrow
funds to finance its investments (that is the Fund will not leverage
its investments or invest on margin).
There can be no assurance that the Fund will achieve its
investment objectives.
This Prospectus sets forth concisely the information about
the Fund that you should know before investing. You should read it to
decide if an investment in the Fund is right for you. Please keep it
with your investment records for future reference. The Fund has filed a
Statement of Additional Information (dated as of the date of this
Prospectus) with the Securities and Exchange Commission. The
Statement of Additional Information is available free of charge from the
Fund at the mailing address and telephone number below, and is incorporated
by reference into this Prospectus in accordance with the Commission's rules.
To invest, you may fill out the application that accompanies
this Prospectus, or simply contact Centurion Institutional Services,
Inc. or one of the broker-dealers that have sales agreements with
Centurion Institutional Services, Inc. For more information or
assistance in opening an account, please contact:
CENTURION INSTITUTIONAL SERVICES, INC.
11545 W. Bernardo Court, Suite 100
San Diego, California 92127
(619) 673-8536
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSIONS NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSIONS PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THESE SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION AND THE SHARES
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER FEDERAL OR STATE AGENCY.
PROSPECTUS DATED April 30, 1997
No dealer, sales representative or other person has been
authorized to give any information or to make any representations
other than those contained in this Prospectus (and/or in the Statement
of Additional Information referred to on the cover page of this
Prospectus), and, if given or made, such information or representations
must not be relied upon as having been authorized by the Fund or
Centurion Institutional Services, Inc. This Prospectus does not
constitute an offer or solicitation by anyone in the state in which
such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such offer or solicitation.
SUMMARY OF CONTENTS
This summary describes some important facts concerning an
investment in the Fund. It also tells you where a more detailed
discussion may be found in the text of this Prospectus or the Fund's
Statement of Additional Information.
The Fund is an open-end, diversified management investment
company that only issues shares of common stock. By purchasing shares
in the Fund, you and the other investors in the Fund are pooling your
money to acquire a diversified portfolio of securities and other assets.
Objective Prospectus, page 1
The investment objective of the Fund is set forth in the cover
page of this Prospectus.
Valuing Shares Prospectus, page 19
Generally the value of a share of the Fund is determined each
day. Such values may fluctuate from day to day as the values of the
Fund's investments fluctuate.
Dividends; Investment Income; Reinvestments Prospectus, page 24 and 25
The Fund intends to pay out substantially all of its net investment
income on at least an annual basis and net realized capital gains, if any,
prior to the end of each fiscal year (December 31). Income dividends and
capital gains distributions may be reinvested.
Buying Shares Prospectus, page 20
You can start your investment in the Fund with $500. Just
fill out the application that accompanies this Prospectus or call a
sales representative of Centurion Institutional Services, Inc. ("CIS")
at (619) 673-8536. You can also buy shares through other
broker-dealers that have sales agreements with CIS.
Once you have made your initial investment, you can make
additional investments of $25 or more at any time.
Risk Considerations Prospectus, page 6,
pages 13-18
Appendix A
Your investment in the Fund involves several risk
considerations, including:
-The Fund's small size and limited investment portfolio
size.
-The level of the Fund's expenses before waivers of expense
reimbursements and fees.
-The inexperience of the Fund's investment advisor,
Centurion Counsel, Inc. ("Centurion Counsel"), in managing
registered investment companies.
-The Fund's investment policies which include unleveraged,
short-term investments in put and call options, index
futures and index options.
Centurion Counsel, Inc.; and Prospectus, pages 29-30
Centurion Institutional Services, Inc. Statement of Additional
Information, page B-9
Your investment is professionally managed. Centurion Counsel
is the Fund's investment advisor (the Advisor"). The Fund pays
Centurion Counsel a fee based on a percentage of its net asset value.
The total fees (expressed as a percentage of average daily net assets)
payable by the Fund for these services equal 1% (annualized) of the
first $200-million of the Fund's average daily net assets and thereafter
decline as a percentage of average daily net assets as the size of the
Fund increases. The fees paid by the Fund for advisory services are
higher than the advisory fees of most other mutual funds.
CIS is the principal underwriter (the "Distributor") of the
Fund's shares.
The address and phone number of Centurion Counsel and CIS is
the same as the Fund's, which are on the cover page of this Prospectus.
Multiple Pricing System Prospectus, page 11
Statement of Additional
Information, page B-6
The Fund offers four classes of shares. Class A shares,
Class B shares and Class C shares are offered to the general public
and each has its own sales charge structure. Each of these classes
of shares has 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
represents an interest in the same portfolio of investments of the
Fund. The per share dividends on Class B and Class C shares will be
lower than the per share dividends on Class A shares. In addition,
the Fund offers Class D shares to investors who qualify as an Advisor
Professionals, Eligible Employees, or Eligible Account. There are no
sales charges with respect to Class D shares.
Class A Shares. These shares are offered at their net asset
value per share plus a maximum initial sales charge ("front-end charge")
of 4.75% of the offering price. Class A Shares are charged an annual Rule
12b-1 fee of 0.25% of its average daily net assets attributable to Class A
shares.
Class B Shares. These shares are offered at their net asset
value per share and are subject to a maximum contingent deferred sales
charge of up to 4% of redemption proceeds during the first year,
declining each year thereafter to 0% after the fifth year. Class B shares
are charged an annual Rule 12b-1 fees of 1.0% of its average daily net
assets attributable to Class B shares. The Class B shares 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. These Shares are offered at their net asset
value per share. No front-end charge or deferred sales charge will be
charged by the Fund with respect to the Class C shares. Class C shares
will be charged an annual Rule 12b-1 fees of 1.0% of its average daily net
assets attributable to Class C shares.
Class D Shares. These shares are offered at their net asset
value per share only to Advisor Professionals, Eligible Employees, and
Eligible Accounts, as defined under "Purchase of Shares - Class D
Shares" herein. No front-end charge or deferred sales charge will be charged
by the Fund with respect to Class D shares. The Fund will not pay 12b-1 fees
with respect to Class D shares.
Sales Charge Prospectus, pages 6 and pages 21 and 23
There is no front-end sales charge on the Class C or Class D
shares. The Fund charges a front-end sales charge of 4.75% of the
Offering Price on the Class A shares and charges a maximum contingent
deferred sales charge of 4.0% on Class B shares during the first year,
which amount declines each year thereafter to 0% after the fifth year.
Sales Expenses Prospectus, page 6 and pages 24-26
The Fund charges Class A shares an annual 12b-1 fees equal to 0.25%
of the Fund's average daily net assets of Class A shares, 1.0% of the Fund's
average daily net assets attributable to the Class B shares charges Class B
share and 1.0% of the Fund's average daily net assets attributable to the
Class C shares, respectively. No. Rule 12b-1 expenses are charged with
respect to the Class D shares.
Fund Brokerage Statement of Additional Information, page B-15
The Fund's investment adviser may consider sales of shares
of the Fund and of any other funds the adviser may advise as a factor
in the selection of the broker-dealers to execute the Fund's portfolio
transactions. The Fund expects to use affiliates of Centurion Counsel
(including CIS and PIM Financial Services, Inc.) as a broker of its
portfolio securities but only if the provisions of Section 17(e) of
the Investment Company Act of 1940 (and the rules thereunder) are
complied with and only when, in the judgment of Centurion Counsel,
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.
Taxes Prospectus, page 25
The Fund intends to meet the requirements for regulated
investment companies under Subchapter M of the Internal Revenue Code,
and if so qualified, the Fund will not be taxed on the income or
capital gains it distributes. Each shareholder must report his or her
own income dividends and any capital gains distributions, whether
received in cash or additional shares.
Retirement Accounts Statement of Additional
Information, page B-16
Given the Fund's objectives, an investment in the Fund may
be appropriate for Individual Retirement Accounts ("IRAs"), Keogh
Plans, Tax-Deferred Investment Plans and other similar plans. For
information about the available IRAs or about any other of such
plans, contact the Fund.
Redeeming Shares Prospectus, page 26
Shareholders of the Fund can redeem their shares at any
time by mailing a request to the Fund in the care of Centurion
Counsel, or by having a broker-dealer that has a sales agreement
with CIS telephone or telegraph the redemption request to the Fund.
Shareholder Services/Exchanges Prospectus, pages 27-29
Shareholders may make systematic investments automatically
on a monthly, quarterly or semiannual basis. This type of
arrangement helps the shareholder put money aside regularly. The
Fund also offers a plan for redeeming your investment in regular
installments. Shareholders selecting the periodic pay-out plan must
reinvest any dividends and capital gains distributions. Shareholders
may exchange all or a portion of their investment from the Fund for
an investment in the Cash Equivalent Fund - Money Market Portfolio,
a money market fund offered through CIS without incurring a sales
charge.
The following Tables are intended to assist investors in
understanding the expenses applicable to each Class of the Fund's
Shares.
<TABLE>
EXPENSE SYNOPSIS
<CAPTION>
Class A Shares Class B Shares Class C Shares Class D Shares
<S> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Charge
Imposed on Purchases
(as a Percentage of
Offering Price) 4.75% None None None
Sales charge imposed on
dividend reinvestments None None None None
Deferred Sales Charge (as a
percentage of original purchase
price on redemption proceeds,
whichever is lower) None 4% during the None None
first and second
year, 3% during
the third year,
2.5% during the
fourth year,
1.5% during the
fifth year, and
0% after the
fifth year(a)<F1>
Exchange Fee(b)<F2> $7.50 $7.50 $7.50 $7.50
Annual Fund Operating
Expenses (as a percentage of
Average net Assets)
Management (Advisory) Fees 1.0% 1.0% 1.0% 1.0%
12b-1 Fees(c) 0.25% 1.0% 1.0% None
Other Expenses(d) 1.54% 1.54% 1.54% 1.54%
Total Fund Operating
Expenses(c) 2.79% 3.54% 3.54% 2.54%
</TABLE>
<TABLE>
Cumulative Expenses Paid for Period of:
<CAPTION
Example: 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
An investor would pay the following expenses on
a $1,000 investment including, for Class
A shares, the maximum $47.50 front-end
sales charge and for Class B, a contingent
deferred sales charge, assuming (1) an
operating expense ratio of 2.79% for
Class A shares 3.54% for Class B shares,
3.54% for Class C shares, and 2.54% for
Class D shares; (2) a 5% annual return
throughout the period and (3) redemption
at the end of the period:
Class A . . . . . . . . . . . . . . . . . . $75 $133 $192 $353
Class B . . . . . . . . . . . . . . . . . . $77 $143 $205 $376*<F1>
Class C . . . . . . . . . . . . . . . . . . $37 $113 $190 $393
Class D . . . . . . . . . . . . . . . . . . $27 $ 82 $139 $295
An investor would pay the following expenses on
the same $1,000 investment assuming no
redemption at the end of the period:
Class A . . . . . . . . . . . . . . . . . . $75 $133 $192 $353
Class B . . . . . . . . . . . . . . . . . . $37 $113 $190 $376*<F1>
Class C . . . . . . . . . . . . . . . . . . $37 $113 $190 $393
Class D . . . . . . . . . . . . . . . . . . $27 $ 82 $139 $295
<FN>
<F1> * Based on conversion to Class A shares after eight years.
(a) See "Purchase of Shares - Class B Shares".
(b) There is a $7.50 transfer agent's fee per exchange.
(c) Up to 0.25% for Class A and 1.0% for Class B and Class C Shares.
</FN>
</TABLE>
The purpose of the above table is to assist the investor in
understanding the various costs and expenses that investors in the
Fund will bear directly or indirectly. The above example should not
be considered a representation of past or future expenses of the Fund;
actual expenses may be greater or less than those shown. At least
through December 31, 1997, the Fund's investment advisor has agreed to
waive reimbursement of its expenses by the Fund to the extent such
reimbursements would result in the Fund's expenses, including the
management fee (investment advisory fee), but excluding 12b-1 fees,
interest expense, taxes, brokerage fees and commissions, to exceed
2.625% of the first $200-million of its average daily net assets on an
annual basis. The amounts in the above example may increase if
waivers of expense reimbursements and fees are reduced or eliminated.
The Fund does not charge shareholders a front-end sales charge on
Class B, C and D shares. However, because the Fund will pay
continuing 12b-1 fees at an annualized rate of up to 1.0% of the Fund's
average daily net assets attributable to Class B Shares and Class C
shares placed, long-term shareholders may pay more with respect to
Class B shares and Class C shares than the economic equivalent of the
current maximum front-end sales charges or the maximum front-end sales
charges permitted by the Conduct Rules of the National Association of
Security Dealers (the "NASD").
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class D Shares Class C Shares (b)
12/09/96 Year Ended December 31 (Audited)
Through
12/31/96(a)1996<F1>1995<F1> 1994<F1> 1993<F1> 1992<F1>
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $3.46 $3.34 $3.43 $4.55 $4.96 $5.17
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.00 (0.01) (0.05) (0.18) (0.21) (0.03)
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.05 0.30 (0.04) (0.94) (0.20) (0.18)
Total From Investment Operations 0.05 0.29 (0.09) (1.12) (0.41) (0.21)
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00
Returns of Capital Total Distributions 0.00 0.00 0.00 0.00 0.00 0.00
Net Asset Value, End of Period $3.51 $3.63 $3.34 $3.43 $4.55 $4.96
TOTAL RETURN***<F2> Nil 8.68% -2.62% -28.01% -12.39% -8.38%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) 1.839 $5,010 $4,370 $452 $757 $1,273
Ratio of Expenses, before waiver of
Fees and reimbursement, to average
Net Assets 2.13%(d) 3.42% 4.82% 9.04% 6.19% 4.51%
Ratio of Expenses, after waiver of
Fees and reimbursement, to average
Net Asset 2.13%(e) 3.42% 3.53% 6.00% 5.19% 3.51%
Ratio of Net Investment Income to
average Net Assets 0.00%(d) -0.43% 0.17% -4.78% -4.50% -0.78%
Portfolio Turnover Rate 129.20% 76.31% 57.20% 148.21% 143.11% 151.12%
Average Commission Rate Paid $0.00 .045
Number of Shares outstanding at
End of Period (000) 524 1,379 1,309 132 166 256
Class C Shares (b)
Year Ended December 31 (Audited)
1991<F1> 1990<F1> 1989<F1> 1988 1987
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $5.11 $7.37 $6.77 $6.59 $9.91
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.11 0.19 0.08 0.11
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.73 (1.77) 1.07 0.32 0.48
Total From Investment Operations 0.77 (1.66) 1.26 0.40 0.59
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.07) (0.17) (0.19) (0.22) (0.23)
Distributions from Capital Gains (0.64) (0.43) (0.47) 0.00 (3.68)
Returns of Capital Total Distributions (0.71) (0.60) (0.66) (0.22) (3.91)
Net Asset Value, End of Period $5.17 $5.11 $7.37 $6.77 $6.59
TOTAL RETURN***<F2> 9.94% -27.09% -3.57% -0.30% -0.33%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $1,593 $1,917 $3,423 $4,869 $7,161
Ratio of Expenses, before waiver of
Fees and reimbursement, to average
Net Assets 4.20% 3.89% 4.12% 3.31% 2.24%
Ratio of Expenses, after waiver of
Fees and reimbursement, to average
Net Asset 3.18% 2.90% 3.12% 2.46% 1.96%
Ratio of Net Investment Income to
average Net Assets 1.20% 1.72% 2.60% 1.67% 0.86%
Portfolio Turnover Rate 161.48% 60.77% 75.53% 39.34% 104.01%
Average Commission Rate Paid
Number of Shares outstanding at
End of Period (000) 308 375 465 719 1,087
<FN>
<F1> (a) The Offering of Class D Shares commenced on December 9, 1996.
<F2> (b) All capital shares issued and outstanding as of November 6, 1996 were reclassified as
Class C Shares.
<F3> (c) Total return is based on the change in net asset value during the period, assumes
reinvestment of all distributions and the maximum front-end sales charge of 4.5% in
effect through 1994. Commencing in 1995, the Fund charges no front-end loan but will
pay 12b-1 fees of up to 1.0% of its net asset value per annum.
<F4> (d) Annualized.
<F5> (e) No fees of reimbursement were waived.
</FN>
</TABLE>
PERFORMANCE GRAPH
Description Of Performance Graph
Graph compares the average total return over a 10-year period
from January 1, 1987 through December 31, 1996 for the fund and the
S&P 500 index. The graph includes a table which states that the average
annual total returns for the Fund over the 1-year, 5-year, and 10-year
periods ending December 31, 1996 were 5.16%, (8.29%), and (2.84%),
respectively. These returns include all dividends and capital gains
distributions and the maximum front end sales load of 4.5% in effect
prior to 1995.
Data used in the Centurion T.A.A. Fund, Inc. Performance Graph
Assumptions:
Date of investment 1/1/86
Amount of investment $10,000
Sales Charge 4.50%
Average Annual Total Return Ended on 12/31/96
1-year 5.16%
5-year -8.29%
10-year -2.84%
Total Return $10,000 Investment
-------------------- --------------------
Centurion S&P 500 Centurion S&P 500
T.A.A. Index T.A.A. Index
Year Ended Fund Fund
1/86 30.780% 31.740% $9,550 $10,000
12/86 11.320 18.680 10,631 11,868
12/87 -0.330 5.26 10,596 12,492
12/88 -0.300 16.610 10,564 14,567
12/89 -3.570 31.680 10,187 19,182
12/90 -27.090 -3.120 7,427 18,584
12/91 9.940 30.480 8,166 24,248
12/92 -8.380 7.620 7,481 26,096
12/93 -12.390 10.060 6,554 28,721
12/94 -28.010 1.320 4,719 29,100
12/95 -2.860 34.110 4,584 39,026
12/96 5.160 20.260 4,330 39,546
Past performance is not predictive of future performance.
The above illustration compares a $10,000 investment made in
the Fund on January 1, 1987 to a $10,000 investment made in the
Standard & Poor's 500 Stock Index on that date. For comparative
purposes, the value of the Index on December 31, 1986 is used as the
beginning value on January 1, 1987. All dividends and capital gain
distributions are reinvested.
The graph and related data concerning the Fund reflect costs
after the advisor's waiver of fees and reimbursements. Unlike the Fund,
the Standard & Poor's 500 Stock Index is an unmanaged total return
performance benchmark consisting of a broad-based basket of 500
securities. The index does not take into account charges, fees and
other expenses. Further information relating to Fund performance,
including expense reimbursements, if applicable, is contained in the
Financial Highlights section of this Prospectus and elsewhere herein.
PERFORMANCE DATA
Advertisements and other sales literature for the Fund may
refer to the Fund's "average annual total return" and "cumulative total
return." All such quotations are based upon historical earnings and are
not intended to indicate future performance. The investment return on
and principal value of an investment in the Fund will fluctuate, so that
the investor's shares when redeemed may be worth more or less than their
original cost. In addition to advertising average annual total return
and cumulative total return, comparative performance information may be
used from time-to-time in advertising the Fund's shares, including data
from Lipper Analytical Services, Inc., the Dow Jones Industrial Average,
the Standard & Poor's 500 Stock Index and other industry publications.
"Average annual total return" is the average annual compounded
rate of return on a hypothetical $1,000 investment made at the beginning
of the advertised period. In calculating average annual total return,
the maximum sales charge is deducted from the hypothetical investment
and all dividends and distributions are assumed to be reinvested.
"Cumulative total return" is calculated by subtracting a
hypothetical $1,000 payment to the Fund from the ending redeemable value
of such payment (at the end of the relevant advertised period), dividing
such difference by $1,000 and multiplying the quotient by 100. In
calculating ending redeemable value, all income and capital gain
distributions are assumed to be reinvested in additional Fund shares and
the maximum sales load is deducted.
For more information regarding how the Fund's average annual
total return and cumulative total return is calculated, see "Calculation
of Performance Data" in the Statement of Additional Information.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Fund Performance
For the year ended December 31, 1996, the Fund experienced a
total return of 5.16%. This compared to a positive 20.3% experienced
by the S&P 500 Index, which broadly reflects the performance of common
stock, and a negative 3.4% return on the Merrill Lynch Investment Grade
Corporate Bond Index. During the first five months of 1995 the Fund's
net assets continued to decline due to the redemptions of the Fund shares.
During 1996, the Fund's net assets increased from $4,370,000 to $9,694,000.
The Fund's total return for 1996 increased by 7.78% from a total return of
(2.62%) for 1995. During the latter part of 1996, the Advisor's assett
allocation model continued to indicate an overbought signal for equities;
therefore, the Fund hedged the equity position with OEX options. As the
overall market increased, the losses on these options mitigated the profits
on the equity positions.
As a result of the Fund's asset base growth and certain cost
saving measures instituted by management, the Fund's expense ratio
was 3.54% in 1996. The Advisor did not waive any expense reimbursements
in 1996. This compared to an expense ratio in 1995 4.82% before waiver
by the Advisor or reimbursements for its expenses and an expense ratio of
3.53% after the Advisor's waiver of such amounts. Even though it was not
required to waive any expense reimbursement in 1996, the Advisor
has again agreed, for 1997, to waive its expense reimbursements and, if
necessary, to reimburse the Fund, to the extent the Fund's expenses,
other than 12b-1 fees, interest expense, taxes and brokerage fees and
commissions exceed 2.625% of the first $200-million of the Fund's average
daily net assets. There is no dollar limit to the amount of expense
reimbursements which will be waived. Thus, so long as these waivers are
in effect, Centurion Counsel will bear the Fund's total operating expenses
to the extent they exceed 3.625% of the Fund's daily average net assets.
Centurion Counsel has agreed to maintain this waiver at least through 1997.
The waiver of reimbursements will be calculated and made at the same time
as the advisory fee is payable.
MULTIPLE PRICING SYSTEM
The Fund's Multiple Pricing System permits an investor to choose
the method of purchasing shares. This is most beneficial for that
investor's circumstances, including the amount to be purchased and the
length of time the investor expects to hold the shares.
Class A Shares. Class A shares are sold at net asset value
plus a maximum front-end sales charge of 4.75% of the offering price.
Class A shares are subject to an ongoing service fee (shareholder
services fee) at an annual rate of up to 0.25 of the Fund's aggregate
average daily net assets attributable to the Class A shares. See
"Purchase of Shares--Class A Shares".
Class B Shares. Class B shares are sold at net asset value and
are subject to a deferred sales charge if they are redeemed within five
years of purchase. Class B shares are subject to an ongoing service fee
at an annual rate of up to 0.25% of the Fund's aggregate average daily
net assets attributable to the Class B shares and an ongoing distribution
fee at an annual rate of up to 0.75% of the Fund's aggregate average
daily net assets attributable to the Class B shares. Class B shares
enjoy the benefit of permitting all of the investor's dollars to work
from the time the investment is made. The ongoing distribution fee paid
by Class B shares will cause such shares to have a higher expense ratio
and to pay lower dividends than those related to Class A shares. See
"Purchase of Shares--Class B Shares." Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month
in which the shareholder's order to purchase was accepted. See "Conversion
Feature" below for discussion on applicability of the conversion feature
to Class B shares.
Class C Shares. Class C shares are sold at net asset value and
are not subject to a front-end or a deferred sales charge. Class C
shares are subject to an ongoing service fee at an annual rate of up to
0.25% of the Fund's aggregate average daily net assets attributable to
the Class C shares and an ongoing distribution fee at an annual rate of
up to 0.75% of the Fund's aggregate average daily net assets attributable
to the Class C shares. Class C shares enjoy the benefit of permitting
all of the investor's dollars to work from the time the investment is
made. The ongoing distribution fee paid by Class C shares will cause such
shares to have a higher expense ratio and to pay lower dividends than
those related to Class A shares. See "Purchase of Shares--Class C
Shares."
Class D Shares. Class D shares are sold at net asset value
only to persons who qualify as an Advisor Professional, Eligible
Employee, or Eligible Account, each of which is defined in "Purchase of
Shares - Class D Shares". No front-end charge, deferred sales charge,
service fees or distribution fees will be paid by the Fund with respect
to the Class D shares. Class D shares are offered at net asset value to
such persons because of anticipated economies in sales efforts and
sales-related expenses.
Conversion Feature. Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month in
which they were purchased and, a Class A share, will no longer be subject
to the distribution fee. Such conversion will be on the basis of the
relative net asset value per share, without the imposition of any sales
load, fee or other charge. The purpose of the conversion feature is to
relieve the holders of Class B shares that have been outstanding for a
period of time sufficient for the Distributor to have been substantially
compensated for distribution expenses related to the Class B shares from
most of the burden of the ongoing distribution fee.
For the purpose of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions paid
on Class B shares in a shareholder's Fund account will be considered to
be held in a separate sub-account. Each time any Class B shares in the
shareholder's Fund account (other than those in the sub-account) convert
to Class A, an equal pro rata portion of the Class B shares in the
sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject
to the continuing availability of an opinion of counsel to the effect
that (i) the assessment of the distribution fee and any higher transfer
agency costs with respect to Class B shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under
the Internal Revenue Code, as amended (the "Code"), and (ii) the
conversion of shares does not constitute a taxable event under federal
income tax law. The conversions of Class B shares may be suspended if
such an opinion is no longer available. In that event, no further
conversions of Class B shares would occur, and such Class B shares might
continue to be subject to the distribution fee for an indefinite period
which may extend beyond the period ending eight years after the end of
the calendar month in which the shareholder's order to purchase was
accepted.
Factors for Consideration. In deciding which class of shares
to purchase investors should take into consideration their investment
goals, amounts of present and anticipated investments and their
individual investment time horizon and temperaments. Investors should
consider whether, during the anticipated life of their investment in the
Fund the accumulated distribution fees and contingent deferred sales
charges on Class B shares prior to conversion would be less than the
initial sales charge on Class A shares purchased at the same time and to
what extent such differential would be offset by the higher dividends per
share on Class A shares. To assist investors in making this
determination, the table under the caption "Expense Synopsis" sets forth
examples of the charges applicable to each class of shares.
Class A shares are not subject to an ongoing distribution fee
and, accordingly, receive correspondingly higher dividends per share.
However, because initial sales charges are deducted at the time of
purchase, investors in Class A shares do not have all their funds
invested initially and, therefore, initially own fewer shares. Other
investors might determine that it is more advantageous to purchase
either Class B shares or Class C shares and have all their funds invested
initially, although remaining subject to ongoing distribution fees and,
for a five year period, being subject to a contingent deferred sales
charge. Ongoing distribution fees on Class B shares and Class C shares
will be offset to the extent of the additional funds originally invested
(resulting from the non-payment of an initial sales charge) and any return
realized on those funds. However, there can be no assurance as to the
return, if any, which will be realized on such additional funds. For
investments held for ten years or more, the relative value upon
liquidation of the three classes tends to favor Class A or Class B
shares, rather than Class C shares.
Class A shares may be appropriate for investors who prefer to
pay the sales charge up front, wish to maximize their current income from
the start, prefer not to pay redemption charges and/or have a longer-term
investment horizon. Class C shares may be appropriate for investors who
wish to avoid a front-end sales charge, put 100% of their investment
dollars to work immediately, and have a shorter-term investment horizon.
Under most circumstances, investments originally made in Class C
shares will tend to have a slightly higher value upon liquidation than
investments originally made in either Class A or Class B shares, if
liquidated within the first six (6) years after the date of the original
investment due to the front-end sales charge on Class A shares and the
contingent deferred sales charges on Class B shares. Under most
circumstances investments origninally made in Class A shares will tend to
have a slightly higher value upon liquidation than investments originally
made in Class C shares, if held for and liquidated, after approximately
seven (7) years after the date of original investment because of higher
Rule 12b-1 expenses charged to Class C shares. This would also tend to be
true for investments originally made in Class B shares which are liquidated
after eight years when they convert to Class A shares. However, this will
not be true in all cases and in the event the Fund experiences inconsistently
negative widely fluctuating total returns, may differ.
The distribution expenses incurred by the Distributor in
connection with the sale of the shares will be reimbursed, in the case of
Class A shares, from the proceeds of the initial sales charge and, in the
case of Class B shares from the proceeds of the ongoing distribution fee
and any contingent deferred sales charge incurred upon redemption within
five years of purchase. In the case of Class C shares, such distribution
expenses will be reimbursed from the proceeds of the ongoing distribution
fee. Sales personnel of broker-dealers distributing the Fund's shares
and other persons entitled to receive compensation for selling such
shares may receive differing compensation for selling Class A, Class B or
Class C shares. Investors should understand that the purpose and
function of the contingent deferred sales charge and ongoing distribution
fee with respect to Class B shares and the ongoing distribution fee with
respect to Class C shares are the same as those of the initial sales
charge with respect to Class A shares. See "Distribution Plans". Class
D shares will be more beneficial to the investor who qualifies for the
purchase thereof.
General. Dividends paid by the Fund with respect to Class A,
Class B, Class C and Class D shares will be calculated in the same manner
at the same time on the same day, except that theon going service fees,
distribution fees and/or any incremental transfer agency costs relating
to Class A, Class B or Class C shares will be borne by the respective
class. Shares of the Fund may be exchanged, subject to certain
limitations, for shares of the same class or other mutual funds advised
by the Adviser. See "Shareholder Services/Transfers - Exchange
Privilege."
The Directors of the Fund have determined that currently no
conflict of interest exists between the classes of shares. On an
ongoing basis, the Directors of the Fund, pursuant to their fiduciary
duties under the Investment Company Act of 1940 (the "1940 Act") and
state laws, will seek to ensure that no such conflict arises.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The Fund provides investors with a professionally managed,
diversified portfolio, which its investment adviser believes offer the
potential to earn over the long-term a high level of total investment
return (that is, both capital appreciation and current income) consistent
with the assumption of reasonable risk, by pursuing a tactical asset
strategy whereby the Fund's investments are allocated, based on changes
in market conditions, among three asset classes -- common stocks, bonds
and money market instruments.
The Fund also employs certain non-traditional investment
techniques, including engaging in transactions in futures contracts,
options on futures contracts, and short sales. Each of these investment
techniques is described under "Special Investment Techniques" below. For
the purposes of the Fund's TAA strategy, transactions in options and
futures contracts will be considered of the same asset class as the
security underlying such rights. Thus, put or call options for common
stocks would be considered in the common stock asset class, interest rate
futures would be considered in the bond asset class, and futures
contracts on stock market indexes would be considered in the common stock
class.
Only the holders of a "majority" of the outstanding shares of
the Fund (as defined in the Investment Company Act of 1940) can change
its investment objectives. Policies not designated as "fundamental" may
be changed by the board of directors of the Fund if, in the board's
discretion, it believes it is in the best interests of the Fund to do so.
Investments The Fund Will Make
Common Stock Investments. Under its TAA strategy, the
Fund, from time to time has substantial amounts of its assets invested in
common stocks. The Fund invests in common stocks which are individually
selected after considering a number of factors, including price earning
ratios, historical stock price movements and perceived under valuation or
over valuation. The goal is not necessarily to achieve a portfolio of
publicly traded common stocks which is representative of any index or
industry wide sampling. Thus, the Fund does not seek to make
representative or pro rata investments in the stocks of any single
index such as the S&P index on a capitalized weighted basis or otherwise.
However, the Fund may make such representative investments in individual
industry components. For instance, where specific industries are judged
to be undervalued in general in relation to other industries or segments.
Mortgage-Related Securities. The Fund may from time to time
have substantial amounts of its assets invested in mortgage-related
securities including, but not limited to, obligations issued or
guaranteed by Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC"). GNMA is a wholly-owned corporate
instrumentality of the United States whose securities and guarantees are
backed by the full faith and credit of the United States. The securities
and the guarantees of FNMA and the FHLMC are not backed, directly or
indirectly, by the full faith and credit of the United States. Although
the Secretary of the Treasury of the United States has discretionary
authority to lend funds to FNMA, neither the United States nor any agency
thereof is obligated to finance the operations of either FNMA or FHLMC or
to assist either in any other manner. See Appendix A for a description
of mortgage-backed securities.
Money Market Instrument Investments. From time to time
the Fund has substantial amounts of its assets invested in money
market instruments. In general, these investments are in one or a
combination of two or the following that have remaining maturities not
exceeding one year: (i) obligations issued and guaranteed by the U.S.
Government, its agencies or instrumentalities; (ii) negotiable
certificates of deposit, bankers' acceptances and fixed time deposits and
other obligations of domestic banks (including foreign branches) that
have more than $1-billion in total assets at the time of investment and
are members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by the Federal
Deposit Insurance Corporation; (iii) commercial paper rated at the date
of purchase "P-1" by Moody's Investors Services, Inc. ("Moody's") or an
"A-1" or "A-1+" by S&P; (iv) certain repurchase agreements; and (v)
high-quality municipal obligations, the income from which may or may not
be exempt from federal income taxes. The Fund may also invest in
short-term U.S. dollar-dominated obligations of foreign banks (including
U.S. branches) that at the time of investment: (i) have more than
$10-billion, or the equivalent in other currencies, in total assets;
(ii) are among the 75 largest foreign banks in the world as determined
on the basis of assets; and (iii) have branches or agencies in the
United States. The value of the money market instruments in which the
Fund may invest will vary adversely with changes in market interest
rates.
Investments in Debt Securities. From time to time the
Fund has substantial amounts of its assets invested in debt securities
issued by governments and/or private entitles such as corporations and
trusts. 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 Standard
& Poors Corporation (the "S&P"), or rated Baa or lower by Moody's
Investors Service, Inc. ("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. See Appendix A for a description of the kinds of debt
securities in which the Fund may invest.
Securities of Foreign Issuers. The Fund may invest in
securities of foreign issuers, including securities issued or guaranteed
by foreign corporations and governments. Investing in securities of
foreign issuers involves considerations and risks not typically
associated with investing in securities issued by domestic issuers.
The values of such 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 issuers 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.
Options. The Fund may from time to time 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. See
Appendix A to this Prospectus.
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.
Futures Contracts on Indexes and Options Thereupon and
other Special Investment Techniques. In pursuing its investment
objective, the Fund utilizes investment techniques index futures
contracts, options thereupon, and short sales each of which is described
in Appendix A to this Prospectus.
These reinvestment techniques are highly technical, highly
specialized, and involve risks not traditionally associated with
investment companies. In using techniques, the Fund would generally
incur a loss if the price of the underlying security or index increases
between the date the Fund takes a position (e.g., the date of the writing
or the purchase of the put or call option, the sale of the futures
contract or the short sale) and the date on which the Fund terminates the
position (e.g., closes the futures contract or option contract position
or replaces the borrowed security in the case of a short sale). The Fund
would generally realize a gain if the underlying security or index
declines in price between those dates. This result is the opposite of
what one would expect from a cash purchase of a long position in a
security. The amount of any gain or loss on an investment technique may
be affected by any premium or amounts in lieu of dividends or interest
the Fund pays or receives as the result of the transaction.
Participation in the options or futures markets involves
investment risks and transaction costs to which the Fund would not be
subject absent the use of options, futures contracts, and options on
futures contracts including: (1) adverse changes in the value of such
instruments; (2) imperfect correlation between the price of options and
futures contracts and options thereon and movements in the price of the
securities being hedged; (3) the fact that skills needed to use these
strategies are different from those needed to select portfolio
securities; (4) the possible absence of a liquid secondary market for
any particular instrument at any time; and (5) the possible need to
defer closing out certain positions to avoid adverse tax consequences.
Consistent with the Fund's Investment Objective, the Fund may
lend some of its securities to brokers and other financial institutions
and earn interest on them, provided they are 100% secured. See Appendix
A for a description of Futures Contracts on indexes and options
thereupon.
How The Fund's General Tactical Asset Allocation Strategy Is
Implemented.
Under its tactical asset allocation strategy (the "TAA
strategy"), the Fund allocates its investments based on changes in
market conditions among three asset classes - common stock, bonds, and
money market instruments. The premise underlying its TAA strategy is
that, from time to time, certain asset classes offer more attractive
long-term investments than others and thus, timely shifts among these
classes, common stocks, bonds and money market instruments, can produce
superior long-term investment returns. The determination as to when to
shift between classes will be based on perceived relative over-evaluation
or under-evaluation of each asset class in comparison with the other
classes. TAA strategies are often contrarian in nature. Typically, the
expected return on common stock investments is based on the relationship
between the current level of the stock market index and justified price
or intrinsic value based on projections of dividends or earnings for its
component stocks. Variations in valuations based on projected dividends
and earnings are usually smaller than corresponding variations in stock
prices. Accordingly, expected returns tend to fall when prices rise and
values change little, if at all, leading to a tactical asset allocation
decrease in common stock holdings. Expected returns rise when prices
fall and values fall less, leading the Fund to increase in its common
stock holdings. With its TAA strategy, the Fund intends to take into
account changes in expected returns, risks and correlations so that its
investment portfolio can be concentrated in the appropriate asset class.
Centurion Counsel, consistent with the investment parameters
and restrictions, selects Fund investments in each of the asset classes.
Centurion Counsel has developed computer program models and related
systems pertaining to the tactical allocation of assets among the three
investment asset classes. Centurion Counsel, however, has not previously
served as an investment advisor to a registered investment company. The
computer model analyzes extensive financial data from numerous public and
private sources, and, based on such data, recommends percentage
allocations among the three asset classes. Centurion Counsel developed
its computer model over more than a decade based on its experience in
managing individual, small business and institutional investment
portfolios.
The principal financial data used in connection with the
computer model currently are: (i) Consensus estimates of the earnings,
dividends, free cash flow and payout ratios on a broad cross-section of
common stocks as reported by independent financial reporting services
that survey over 1,000 Wall Street analysts; (ii) the estimated current
yield to maturity on long-term corporate bonds rated "AA" by
Standard & Poors Corporation ("S&P"); (iii) the present yield on money
market instruments; (iv) historical standards deviation and investment
return for each class of assets; (v) historical standard statistical
correlation of investment return among the various asset classes; and
(vi) technical factors in the market including overbought and oversold
conditions, market momentum and market volume.
Centurion Counsel compares the Fund's investments to the
computer model's recommended asset allocation. Subject to certain
trading policies employed by Centurion Counsel, the Fund will generally
base its allocations among the asset classes on the model's
recommendations, but may not always do so. Centurion Counsel, however,
independently evaluates each recommended allocation and may, under
certain circumstances, vary the allocation from that recommended by the
model. For example, Centurion Counsel may determine not to follow the
model if to do so would result in the Fund's ceasing to be qualified as a
regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), if it believes that the Fund would incur
unreasonable transaction costs in reallocating among the asset classes in
a highly erratic market environment, or if necessary, to satisfy
liquidity requirements. Any recommended allocation will be implemented
in accordance with trading policies designed to take advantage of market
opportunities and to reduce transaction costs. Recommended reallocations
may be implemented promptly upon receipt of recommendations or may not be
acted upon for as long as two to three months thereafter, depending on
the factors such as the percentage change from previous recommendations
and the consistency of recommended reallocations over a period of time.
The Fund generally invests the net proceeds from the sale of
Fund shares and liquidates existing Fund investments to meet net
redemption requirements in a manner that best allows the Fund to follow
the asset allocation then-implemented by the Fund's investment advisor.
The foregoing notwithstanding, the Fund will endeavor to maintain at
least that portion of its assets and money market instruments reasonably
considered necessary to meet redemption requirements. There is no
requirement that the Fund maintain positions in any particular asset
class or classes.
Short-Term Trading
The Fund purchases securities both for investment and for
short-term profits. If the Fund feels it is wise to sell a position in
a security, it will not hesitate even if it has had the security just
a short time. Turnover of the Fund's assets will affect brokerage costs
and may affect the taxes you pay. The Fund calculates its portfolio
turnover as the ratio of the lesser of annual purchases or sales of
portfolio securities to average monthly portfolio value (not including
short-term securities, if any). If the Fund had a 100% turnover rate,
it would mean that the Fund replaced all of its portfolio securities
within a year. During its year ended, December 31, 1996, under the
Fund's previous investment objectives and policies, the Fund's turnover
rate was 129.0%. Under its current TAA strategy, the Fund expects the
Fund's turnover rate to increase to not more than 300%. However, there
is no assurance that a higher turnover rate might not be experienced.
As a result of the portfolio turnover rate the Fund will generally
incur greater brokerage commissions which could also affect federal and
state income taxes. Shorter term investment strategies will also
increase the likelihood that the Fund will incur short-term capital gains
and losses.
Guarantees
The Fund makes no guarantees because any investment involves
risks. In addition, although it will attempt to spread the overall risk
of its investments by investing in companies in a number of different
industries, such strategy will not eliminate the risk. The Fund cannot
predict stock price changes from day to day, and it cannot guarantee
against losses or that it will meet its investment objectives.
INVESTMENTS THE FUND WILL NOT MAKE;
RESTRICTIONS ON INVESTMENTS
The Fund has adopted certain investment restrictions set forth
in their entirety in theStatement of Additional Information, which
restrictions, together with the fundamental investment objectives and
policies of the Fund, cannot be changed without approval by holders of a
majority of the Fund's outstanding voting shares, as explained in the
Statement of Additional Information. These restrictions include, but are
not limited to, the following items:
Not more than 5% of the Fund's net assets will, at any time,
be subject to repurchase agreements which mature in more than seven days
or invested in other illiquid securities.
The Fund will not invest 35% or more of its net assets in debt
obligations which are not rated in one of the four highest debt rating
categories by a nationally recognized statistical rating organization.
The Fund may not invest more than 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.
The Fund may not invest more than 50% of its net assets in
index futures contracts and/or options thereupon.
The Fund may not invest more than 50% of its net assets in
options, including put options and/or call options to purchase or sell on
equity securities.
The Fund will not (i) invest in exploration or development
programs such as oil or gas programs, or (ii) buy or sell foreign
exchange.
If a percentage limitation described above is adhered to at the
time of the investment by the Fund, a later increase or decrease in the
percentage resulting from any change in the value of the Fund's net
assets will not constitute a violation of the restriction.
VALUING SHARES
Shares are offered at the next determined net asset value per
share, plus a front-end or contingent deferred sales charge depending on
the class of shares chosen by the investor, as shown in the
tables herein. The net asset value per share for each class of shares is
determined by dividing the value of the Fund's securities, cash and other
assets (including accrued interest) attributable to such class, less all
liabilities (including accrued expenses) attributable to such class, by
the total number of shares of the class outstanding. Net asset value per
share is determined once daily, Monday through Friday, as of 1:00 p.m.,
Pacific Standard Time (the close of primary trading on the New York Stock
Exchange), except on (i) days on which changes in the value of the Fund's
portfolio securities will not materially affect the current net asset
value of the Fund's shares, (ii) days during which no shares of the Fund
are tendered for redemption and no order to purchase or sell shares of
the Fund is received by the Fund or (iii) customary national business
holidays on which the New York Stock Exchange is closed for trading (as
of the date of this Prospectus, New Year's Day, Washington's Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day). The Fund will value its portfolio securities and
other assets as follows:
The Fund will value stocks, convertible debentures and bonds,
warrants and options traded on major exchanges each day at their last
quoted sales price on their primary exchange as of the close of the
New York Stock Exchange. If a particular security has not been traded
on a certain day, the Fund takes the average price between the last offer
to buy and the last offer to sell. The Fund will value short-term
securities maturing more than 60 days from the valuation date at the
readily available market price or, if unavailable, an approximate
market value based on current interest rates. The board of directors of
the Fund has determined that the determination of value using this method
will result in a fair value of the security is an appropriate means of
valuing such securities. The Fund will value short-term securities
maturing in 60 days or less but which originally had maturities of more
than 60 days at the acquisition date on an amortized cost basis using the
market value on the 61st day before maturity, and the Fund will value
short-term securities maturing in 60 days or less at the acquisition date
at amortized cost unless the board of directors of the Fund determines
that, under the circumstances, the amortized cost method does not
represent fair value. (Amortized cost is an approximation of market
value determined by systematically increasing the carrying value of a
security if acquired at a discount, or systematically reducing the
carrying value if acquired at a premium, so that the carrying value is
equal to maturity value on the maturity date.) The Fund will value any
foreign securities in its portfolio which are traded on major exchanges
at their last quoted sales price (or, if it has not been traded on a
certain day, the average between the last offer to buy and the last
offer to sell) on their primary exchange as of the close of the
New York Stock Exchange. The Fund will value any foreign securities
which are not listed on a major exchange but have readily available
market quotations at the average between the last bid and asked price at
the time of the close of the New York Stock Exchange. Any foreign
securities held by the Fund will be valued in United States dollars. The
Fund will value securities for which market quotations or pricing service
valuations are not readily available at fair value as determined in good
faith by the Fund's Board of Directors. In valuing such securities, the
Fund's directors are responsible for selecting methods that they believe
represent the fair value. The Fund will take into consideration yield,
quality, coupon, maturity, type of issue, trading characteristics and
other market data in determining valuations for such securities.
BUYING SHARES
General
The Fund offers Class A, Class B and Class C shares to the
general public and Class D shares only to Advisor Professionals,
Eligible Employees and Eligible Accounts, as defined. Class A shares
are sold with a front-end sales charge; Class B shares are sold without a
front-end sales charge and are subject to a contingent deferred sales
charge upon certain redemptions. Class C and Class D shares are sold
without either a front-end sales charge or a deferred sales charge.
Generally, the net asset values per share of Class A, Class B, Class C
and Class D shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of
Class A, Class B, Class C and Class D shares may differ from one another,
reflecting the daily expense accruals of the service fees payable with
respect to Class A, Class B and Class C shares and the distribution fees
applicable with respect to the Class B and Class C shares and the
differential in the dividends paid on the classes of shares. The price
paid for shares purchased is based on the next calculation of net asset
value plus applicable Class A front-end sales charges after an order is
received by a dealer provided such order is transmitted to the
Distributor prior to 4:00 P.M. Eastern Standard Time on such day.
Orders received by dealers after the close of the Exchange are priced
based on the next close provided they are received by the Distributor
prior to the Distributor's close of business on such day. It is the
responsibility of dealers to transmit orders received by them to the
Distributor so they will be received prior to such time.
You can start your investment in the Fund with a $500
investment. You can make additional investments at any time of $25 or
more. The Fund may waive the foregoing minimums for sales to a group of
investors with a single agent, such as a corporation acting on behalf of
participating employees, for sales involving spousal IRAs and for shares
being purchased through the Fund's periodic payment plan. For your
initial investment you can complete the Application delivered with this
Prospectus yourself and mail it to CIS, at the address on the cover page
of this Prospectus, along with a check in the amount of your investment,
or, if you desire, you can contact CIS who will see that the investment
is made for you. You can make additional investments by sending a check
in the amount of your investment along with a letter identifying your
account number (or one of the payment stubs provided to shareholders) to
CIS, or you can make additional investments by telephoning CIS. When
purchasing shares, you must specify whether your purchase is for Class A,
Class B, Class C or Class D shares. Orders to purchase Class D shares
must be accompanied by verification of eligibility for purchase
satisfactory to CIS. In addition to buying shares through CIS, you can
also invest in the Fund through certain other broker-dealers which are
members of the National Association of Securities Dealers, Inc. and
which have sales agreements with CIS. Once you have decided to invest
in the Fund, and your purchase order is accepted, the Fund will then
compute the number of shares you will receive by dividing the offering
price of one share into your investment. The Fund will use the offering
price at the close of business on the day the Fund accepts your order.
The Fund's close of business is the closing time of the New York Stock
Exchange on that day. The Fund reserves the right to reject any purchase
order. The Fund will accept or reject your purchase order on the day your
purchase order, containing all required information, is received by the
Fund. The offering price of one share of the Fund is the net asset value
of such share rounded to the nearest whole cent. The net asset value is
the total value of all the Fund's assets minus any outstanding liabilities.
The net assets are divided by the number of shares of the Fund
outstanding before any shareholder transactions, such as purchases or
redemptions, for that day, to determine the net asset value per share of
the Fund.
Each class of shares represents an interest in the same
portfolio of investments of the Fund, has the same rights and is
identical in all respects, except that (i) Class B shares bear the
expenses of the deferred sales arrangement and any expenses (including
the distribution fee and any incremental transfer agency costs)
resulting from such sales arrangement, (ii) each class has exclusive
voting rights with respect to approvals of the Rule 12b-1 distribution
plan pursuant to which its distribution fee and/or service free is paid
which relate to a specific class, and (iii) Class B shares are subject to
a conversion feature. Each class has different exchange privileges and
certain different shareholder service options available. See
"Distribution Plans" and "Shareholder Services/Transfers - Exchange
Privilege." The net income attributable to Class B and Class C shares
and the dividends payable on Class B and Class C shares will be reduced
by the amount of the distribution fee and incremental expenses associated
with such distribution fee. Sales personnel of broker-dealers
distributing the Fund's shares and other persons entitled to receive
compensation for selling such shares may receive differing compensation
for selling Class A, Class B or Class C shares.
Class A Shares
The public offering price of Class A shares is the next
determined net asset value plus a sales charge, as set forth below.
<TABLE>
Front End Sales Charge Table
<CAPTION>
As % of Net As % of Reallowed to dealers
Amount Invested Offering Price (as a % of Offering Price)
<C> <C> <C>
4.99% 4.75% 4.00%
</TABLE>
In addition to the reallowances from the applicable public
offering price described above, the Distributor may, from time to time,
pay or allow additional reallowances or promotional incentives, in the
form of cash or other compensation, to dealers that sell shares of the
Fund. The distributor may pay dealers through whom purchases are made
an amount equal to 0.40% of the amount invested. Dealers which are
reallowed ninety percent (90%) or more of the sales charges may be deemed to
be underwriters for purposes of the Securities Act of 1933.
The Distributor may also pay broker-dealers, registered
investment advisors, financial institutions (which may include banks) and
other financial industry professionals that provide services to
facilitate transactions in shares of the Fund for their clients a
transaction fee up to the level of the reallowance allowable to dealers
described herein. Such financial institutions, other industry
professionals and dealers are hereinafter referred to as "Service
Organizations." Banks are currently prohibited under the Glass-Steagall
Act from providing certain underwriting or distribution services. If
banking firms were further prohibited from acting in any capacity or
providing any of the described services, the Distributor would consider
what action, if any, would be appropriate. The Distributor does not
believe that termination of a relationship with a bank would result in
any material adverse consequences to the Fund. State securities laws
regarding registration of banks and other financial institutions may
differ from the interpretations of federal law expressed herein, and
banks and other financial institutions may be required to register as
dealers pursuant to certain state laws.
Class B Shares
Class B shares are offered at the next determined net asset
value. Class B shares which are redeemed within five years of purchase
are subject to a contingent deferred sales charge at the rates set forth
in the following table charged as a percentage of the dollar amount
subject thereto. The charge is assessed on an amount equal to the lesser
of the then current market value or the cost of the shares being
redeemed. No sales charge is imposed on increases in net
asset value above the initial purchase price or on Class B shares derived
from reinvestment of dividends on capital gains distributions, other than
Rule 12b-1 fees.
The amount of the contingent deferred sales charge, if any,
varies depending on the number of years from the time of payment for the
purchase of Class B shares until the time of redemption of such shares.
Solely for purposes of determining the number of years from the time of
any payment for the purchase of shares, all payments during a month are
aggregated and deemed to have been made on the last day of the month.
<TABLE>
Contingent Deferred Sales Charge Table
<CAPTION>
Contingent Deferred Sales Charge
as a Percentage of
Year Since Purchase Dollar Amount Subject to Charge
<S> <C>
First. . . . . . . . . . . . . . . . . . . . . . . . . . . 4%
Second . . . . . . . . . . . . . . . . . . . . . . . . . . 4%
Third. . . . . . . . . . . . . . . . . . . . . . . . . . . 3%
Fourth . . . . . . . . . . . . . . . . . . . . . . . . . 2.5%
Fifth. . . . . . . . . . . . . . . . . . . . . . . . . . 1.5%
Sixth. . . . . . . . . . . . . . . . . . . . . . . . . . None
</TABLE>
In determining whether a contingent deferred sales charge is
applicable to a redemption, the calculation is determined in the manner
that results in the lowest possible rate being charged. Therefore, it is
assumed that the redemption is first of any shares in the shareholder's
Fund account that are not subject to a contingent deferred sales charge,
second, of shares held for over five years or shares acquired pursuant to
reinvestment of dividends or distributions and third, of shares held
longest during the five-year period.
To provide an example, assume an investor purchased 100 shares
at $10 per share (at a cost of $1,000) and in the second year after
purchase, the net asset value per share is $12 and, during such time,
the investor has acquired 10 additional shares upon divided reinvestment.
If at such time the investor makes his or her first redemption of 50
shares (proceeds of $600), 10 shares will not be subject to charge
because of dividend reinvestment. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per
share and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds is subject to a deferred
sales charge at a rate of 4% (the applicable rate in the second year
after purchase).
The contingent deferred sales charge is waived on redemptions
of Class B shares (i) following the death or disability (as defined in
the Code) of a shareholder, (ii) in connection with certain distributions
from an IRA or other retirement plan, (iii) pursuant to the Fund's
systematic withdrawal plan but limited to 12% annually of the initial
value of the account, and (iv) effected pursuant to the right of the Fund
to liquidate a shareholder's account as described herein under
"Redemption of Shares".
A commission or transaction fee of 4% of the purchase amount
will be paid by the Distributer to broker-dealers and other Service
Organizations at the time of purchase. Additionally, the Distributor may,
from time to time, pay additional promotional incentives in the form of cash
or other compensation, to Service Organizations that sell Class B shares of
the Fund.
Class C Shares
Class C shares are offered at the next determined net asset
value. Other than Rule 12b-1 fees, no front-end, deferred, or other sales
charge is charged with respect to Class C shares.
Class D Shares
The Class D shares are sold at net asset value only to persons
who are Advisor Professionals or Eligible Employees. No front-end,
deferred, other sales charge or Rule 12b-1 fees will be charged by
the Fund with respect to the Class D shares. The Advisor Professionals
will include 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 include (a)
current or retired directors of the Funds, current or retired employees
of Centurion Counsel 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 Centurion Counsel and any of its
affiliated companies; (b)employees and registered representatives of
Service Organizations with selling group agreements with the Distributor,
employees of financial institutions that have arrangements with Service
Organizations having selling group agreements with the Distributor, and
spouses and minor children of such persons and (c) any trust, pension,
profit sharing or other benefit plan for such persons. Class D 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 Distributor if such
redemption has occurred no more than 15 days prior to the purchase of
shares of the Fund and the shareholder paid an initial sales charge and
was not subject to a deferred sales charge on the redeemed account.
DISTRIBUTION PLANS
Rule 12b-1 adopted by the SEC under the 1940 Act permits an
investment company to directly or indirectly pay expenses associated with
the distribution of its shares ("distribution expenses") and servicing
its shareholders in accordance with a plan adopted by the investment
company's board of directors and approved by its shareholders. Pursuant
to such Rule, the Directors of the Fund, and the shareholders of each
class have adopted the Distribution Plan for their class of shares,
hereinafter referred to, respectively, as the "Class A Plan", the
"Class B Plan" and the "Class C Plan". No Rule 12b-1 Distribution Plan
has been adopted with respect to the Class D shares. The Class C Plan
was adopted by the Class C shareholders on December 20, 1994. Each of
the Class A Plan and the Class B Plan was adopted by the Advisor, as the
initial holder of the Class A shares and Class B shares, respectively, on
the date of this Prospectus pursuant to a shareholder meeting duly held
on such date.
Each Distribution Plan is in compliance with NASD Conduct Rules
(formerly the rules of fair practice). The NASD Rules limit the annual
distribution costs and service fees that a mutual fund may impose on a
class of shares. The NASD Rules limit the annual distribution costs and
service fees that a mutual fund may impose on a class of shares. The
NASD Rules also limit the aggregate amount which the Fund may pay for
such distribution costs. Under the Class A Plan, the Fund pays a
shareholder service fee (service fee) to the Distributor at an annual
rate of up to 0.25% of the Fund's aggregate average daily net assets
attributable to the Class A shares. Such payments to the Distributor
under the Class A Plan are based on an annual percentage of the value of
Class A shares held in shareholder accounts for which the Distributor and
other Service Organizations are responsible at the rate of 0.25% annually
with respect to such Class A shares. Under the Class B Plan and the
Class C Plan, the Fund pays a service fee to the Distributor at an annual
rate of up to 0.25% and a distribution fee at an annual rate of up to
0.75% of the Fund's aggregate average daily net assets attributable to
the Class B or Class C shares. These fees compensate the Distributor for
service fees paid by it to Service Organizations and for its distribution
costs and service costs.
The Distributor uses the Class A, Class B and Class C service
fees to compensate Service Organizations for personal service and/or the
maintenance of shareholder accounts of the respective share classes. Under
the Class B Plan, the Distributor receives additional payments from the
Fund in the form of a distribution fee at the annual rate of up to 0.75% of
the Fund's aggregate average daily net assets attributable to the Class B
shares as reimbursement for (i) up-front commissions and transaction fees of
up to 4% of the purchase price for Class B shares purchased by the clients of
broker-dealers and other Service Organizations and (ii) other distribution
expenses such as advertising and promotional costs. Under the Class C Plan,
the Distributor receives additional payments from the Fund in the form of a
distribution fee at the annual rate of up to 0.75% of the net assets of the
Class C shares as reimbursement for other distribution expenses as described
above.
In adopting each of the Class A Plan, Class B Plan and Class C
Plan, the Directors of the Fund determined that there was a reasonable
likelihood that such Plans would benefit the Fund and its shareholders.
Information with respect to distribution and service revenues and
expenses is presented to the Directors each year for their consideration
in connection with their deliberations as to the continuance of each of
these Distribution Plans. In their review of the Distribution Plans, the
Directors are asked to take into consideration expenses incurred in
connection with the distribution and servicing of each class of shares
separately. The sales charge and distribution fee, if any, of a
particular class will not be used to subsidize the sale of shares of the
other classes.
Service expenses accrued by the Distributor in one fiscal year
may not be paid from the Class A service fees received from the Fund in
subsequent fiscal years. Thus, if the Class A Plan were terminated or
not continued, no amounts (other than current amounts accrued but not
yet paid) would be owed by the Fund to the Distributor.
The respective higher Rule 12b-1 fees attributable to Class B and
Class C shares are designed to permit an investor to purchase such shares
without the assessment of a front-end sales load and at the same time
permit the Distributor to compensate the Distributor and other Service
Organizations with respect to such shares. In this regard, the purpose
and function of the combined contingent deferred sales charge and
distribution fee in the case of Class B shares and the distribution fee
in the case of Class C shares are the same as those of the initial sales
charge with respect to the Class A shares in that in each case such
charges provide for the financing of the distribution of the Fund's
shares.
INVESTMENT INCOME
Dividends and Interest
Once a year the Fund distributes substantially all its
investment income, if any, minus its operating expenses. Such
distributions will be payable to shareholders who owned the shares on
the date of record. Investment income includes dividends on stocks and
interest on bonds or other securities the Fund holds. Although dividends
and interest on some of the Fund's investments may be fairly regular, the
Fund cannot guarantee any investment income.
Capital Gains
A capital gain is made by selling a security or other capital
asset for more than its cost. Because capital gains are realized only
when an asset is sold, these gains are quite unpredictable. Before the
end of December 31 of each year, the Fund intends to distribute at least
98% of its net capital gains, if any, for the twelve-month period ending
October 31 of the calendar year.
REINVESTMENTS
Your income dividends and capital gains distributions will be
reinvested in additional shares unless you instruct the Fund to do
otherwise. This allows you to accumulate additional shares of the Fund
without paying a front-end or deferred sales charge. The price you pay
is the net asset value of such Fund's shares, and the dividends and capital
gains distributions are reinvested on the first business day following the
dividend record date.
If you prefer to take your income distributions and capital
gains in cash, you have two other options: You can accept any income
dividends in cash and any capital gains in additional shares at the net
asset value of the Fund's shares, or you can accept any income dividends
and capital gains in cash. Cash distributions will be paid seven to
fourteen days following the dividend record date. Dividend checks which
are returned to the Fund marked "unable to forward" by the postal service
will be placed in the Cash Equivalent Fund until further instructions
from the shareholders.
Indicate your option on the Application delivered with this
Prospectus. You can cancel or change your authorization any time if you
notify the Fund in writing. Any change in your option is effective when
it reaches the Fund in care of Centurion Group, Inc. Only dividends and
distributions declared after your changed authorization has arrived can
be reinvested. A confirmation of the reinvestment will be mailed to you.
TAXES
Since its inception the Fund has met, and the Fund intends to
continue to meet, the requirements for regulated investment companies
under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and, if it meets these requirements, the Fund will not be
liable for federal income taxes to the extent it distributes its taxable
income to its shareholders.
Distributions by the Fund are generally taxable to the
shareholders, whether received in cash or additional shares of the Fund.
Dividends paid from the Fund's net investment income, including net
short-term capital gains, will be taxable to its shareholders as ordinary
income. Dividends paid from the net capital gains of the Fund and
designated as capital gain dividends will be taxable to shareholders as
long-term capital dividends, regardless of the length of time for which
they have held their shares in the Fund. For individuals in 1995,
long-term capital gains are subject to a maximum tax rate of 28% while
ordinary income is subject to a maximum effective rate in excess of 39.6%
(resulting from a combination of a nominal 39.6% rate, a phase-out of
personal exemptions for individuals filing single returns with adjusted
gross income in excess of $111,800 and for married couples filing joint
returns with adjusted gross income in excess of $167,700, and a partial
disallowance of itemized deductions for individuals with adjusted gross
income in excess of $111,800).
If shares of the Fund are sold or otherwise disposed of more
than twelve months from the date of acquisition, the shareholder will
realize a long-term capital gain or loss equal to the difference between
the purchase price and the sale price of the shares disposed of, if, as
is usually the case, the shares are a capital asset in the hands of the
shareholder. In addition, pursuant to a special provision in the Code,
if the Fund's shares with respect to which a long-term capital gain
distribution has been made are held for six months or less, any loss on
the sale or other disposition of such shares will be a long-term capital
loss to the extent of such long-term capital gain distribution.
Shareholders will be notified annually as to the Federal income
tax status of dividends and distributions. Distributions and redemption
payments will also be reported to the Internal Revenue Service. Payors
of interest and dividends must generally withhold 31% of taxable
interest, dividends and certain other payments, including redemption
payments, if the shareholder fails to furnish and certify his correct
taxpayer identification number (for most individuals, their Social
Security number) or as a result of certain other events specified in
Section 3406 of the Code. Payees that are exempt from this "back up
withholding" are generally not individuals, but are corporate, trust or
governmental entities. In order to avoid withholding, a shareholder of
the Fund must provide and certify to the Fund that his taxpayer
identification number is correct and that he is not subject to back up
withholding. The new account application included with this Prospectus
provides for shareholder compliance with these certification
requirements.
The foregoing discussion of Federal income tax consequences is
based on tax laws and regulations in effect on the date of this
Prospectus, and is subject to change by legislative or administrative
action. Further, in those states that have income tax laws, the tax
treatment of the Fund and of shareholders in respect to distributions by
the Fund may differ from Federal tax treatment. For a more detailed
discussion of the federal income tax consequences of investing in shares
of the Fund, see "Taxes" in the Statement of Additional Information.
Prospective investors are advised to consult with their tax advisers
concerning the application of state and local taxes to distributions by
and investments in the Fund which may differ from the Federal income tax
consequences described above.
REDEEMING SHARES
As a shareholder in the Fund, you have a right to redeem your
shares any time. The Fund will redeem your shares at their net asset
value, as of the time net asset value is next determined after receipt of
your redemption request by the Fund in care of Centurion Group, Inc. See
"Valuing Shares." The value of the redeemed shares may be more or less
than what you invested. IF SHARES OF THE FUND ARE REDEEMED IMMEDIATELY
AFTER THEY HAVE BEEN PURCHASED BY NON-GUARANTEED FUNDS (SUCH AS A
PERSONAL CHECK), THE FUND WILL DELAY MAILING THE REDEMPTION CHECK UNTIL
THE FUND HAS VERIFIED YOUR CHECK HAS CLEARED, WHICH MAY TAKE UP TO 15
DAYS FROM THE DATE OF PURCHASE. If the value of shares of the Fund in
your account falls below $500 because of a redemption and not because of
a decrease in market value, the Fund reserves the right to redeem its
shares in your account on 60 days' written notice to you and pay the
proceeds to you, unless you make additional investments to bring the
account value above $500 within 30 days of the written notice.
Therefore, shareholders who invest only $500 (the minimum investment),
and who redeem any amount in excess of any market appreciation, may
have the remaining shares redeemed by the Fund.
As described herein under "Purchase of Shares", redemptions of
Class B shares are subject to a contingent deferred sales charge. The
contingent deferred sales charge incurred upon redemption is paid to the
Distributor in reimbursement for its distribution-related expenses. See
"Purchase of Shares". A custodian of a retirement plan account may
charge fees based on the custodian's independent fee schedule.
You may redeem your shares in writing. A written redemption
request must include a specific request to redeem part or all of your
shares. Any written request must be signed by each registered owner.
All signatures on the redemption request must be guaranteed by one of the
following: a bank or trust company; a broker-dealer; or credit union, a
national securities exchange, registered securities association or
clearing agency, a savings and loan association or a federal savings
bank. Occasionally the Fund, or Centurion Group, Inc. as its agent, may
ask for additional proof of identification and authority to redeem. Such
a request is more likely to happen if the shareholder is a corporate,
partnership or fiduciary account or if redemption is requested by someone
who is not the registered owner. If you have a certificate for shares
you want to redeem, it must accompany your redemption request.
The Fund will accept redemption requests in writing or
facsimile from broker-dealers which have sales agreements with CIS for
the Fund's shares. The Fund will employ reasonable procedures to confirm
that instructions communicated to the Fund by telephone with respect to
redemptions are genuine; if the Fund fails to do so, it may be liable for
any losses due to unauthorized or fraudulent transactions. Your
broker-dealer may require certain documentation from you before executing
a redemption request on your behalf, and may charge a fee for handling
the redemption request for you.
Payment for your redeemed shares will be sent to you within
seven days after receipt of your request in proper form, except that the
Fund may delay the mailing of the redemption check, or a portion thereof,
until the check used to purchase Fund shares has cleared, which may take
up to 15 days from the date of purchase. Although the use of a certified
or cashier's check will generally reduce this delay, shares purchased
with these checks will also be held pending clearance. Shares purchased
by federal funds wire are available for immediate redemption. In
addition, the right of redemption may be suspended or the date of payment
postponed if the Exchange is closed (other than customary closing) or
upon the determination of the SEC that trading on the Exchange is
restricted or an emergency exists, or if the SEC permits it by order for
the protection of shareholders. Of course, the amount you receive may be
more or less than your investment, depending on fluctuations in the
market value of securities owned by the Fund. Certain large redemptions
may be paid in kind. See "Redemptions" in the Statement of Additional
Information.
Should the Fund stop selling shares, the directors of the Fund
may, after notification to shareholders, make a deduction from the value
of the assets it holds to cover the cost of future liquidations of its
assets so as to distribute fairly these costs among all shareholders.
A redemption is considered a taxable transaction by the
Internal Revenue Service. If there is a gain, it may be taxable. If
there is a loss, and shares are reacquired 30 days or less after
redemption, some or all of the loss may be disallowed as a deduction
depending on the number of shares reacquired.
SHAREHOLDER SERVICES/TRANSFERS
For each shareholder, Centurion Group, Inc. establishes an
account to which is credited purchases and dividends and from which is
deducted all redemptions. This procedure makes additional purchases and
redemptions more convenient and makes the issuance of share certificates
unnecessary.
Periodic Payment Plan
After you make your first cash investment, you may arrange to
make additional payments of $25 or more on a regular basis. You decide
how often you want to make them: monthly, quarterly or semi-annually.
You are not obligated to make these payments, so if you cannot make a
payment, you can skip it or you can drop the plan altogether. The
Fund can also change its plan or end it anytime on five days' notice.
You may arrange to have the regular payments described above
automatically invested in the Fund. If you authorize Centurion Counsel
to do so, Centurion Counsel will prepare a check at the time each
periodic payment is to be made, drawn on your account, and payable to
its order. This payment will be used to purchase the Fund's shares in
the same way as if you had written a check and mailed it to Centurion
Counsel, only you do not have to write the check out and mail it. After
each automatic investment, you will receive a confirmation, and the
canceled check will be returned to you in your regular checking account
statement. For information on establishing an automatic investment plan,
you should communicate with your sales representative or contact the
Fund.
The periodic payment plan works as follows: When your payment
is received, all the shares of the Fund which your money can buy will be
purchased at the public offering price. This includes fractions of a
share. Your regular investment amount will purchase more shares when the
net asset value per share decreases, and fewer shares when the net asset
value per share increases.
A plan is not an option or an absolute right to buy shares.
Each purchase is a separate transaction. After each purchase the Fund
will add your new shares to your account. You will receive a
confirmation of shares purchased and total number of shares held.
Shares of the Fund bought through the periodic payment plan are
exactly the same as any other shares of the Fund. They may be redeemed
anytime after the check clears.
If you are interested in this plan, remember the plan itself
cannot assure there will be a profit. Neither can it protect against a
loss in a declining market. If you decide to discontinue the plan and
redeem your shares when their net asset value is less than what you paid
for them, you will suffer a loss. For this reason, you should think
about your ability to continue the plan even during "down" periods in
markets.
Pay-Out Plan
As a shareholder in the Fund, you may use a pay-out plan to
redeem your investment in regular installments at no extra cost to you
and regardless of the size of your investment. All you have to do is
make a written request to Centurion Counsel at least five days before the
date you want your payments to begin and state the amount of the payment
(minimum of $150) and the frequency thereof (monthly, quarterly,
semi-annually or annually). Once your request is received, the Fund will
pay out a fixed amount that you decide on as frequently as you have
requested by redeeming whatever number of shares are necessary to make
the payment at the times requested. The Fund will make regular
installments until the account is closed or you terminate the plan. You
can change or cancel your request by giving the Fund five days' notice in
care of Centurion Counsel. To the extent payments made under this plan
exceed the amount of dividend income and capital gains income that you
have reinvested in shares, such payments will constitute a return of the
capital that you invested.
Exchange Privilege
Subject to the following limitations, you may exchange some or
all of your shares of the Fund for shares of Cash Equivalent Fund -
Money Market Portfolio (amoney market fund) ("CEF"). CEF is managed by
Kemper Financial Services, Inc. and is offered through Centurion
Institutional Services, Inc. If a shareholder wishes to exchange
shares of the Fund for shares of CEF, the shareholder should first
contact CIS and obtain and read the prospectus of CEF.
The Fund may elect a three business day settlement period for
all exchanges before shares may be re-exchanged. Such exchange is
considered a taxable transaction, and gain or loss will be recognized.
The Fund's transfer agent charges a nominal fee of $7.50 per exchange for
this service. The exchange must satisfy the minimum dollar amount
necessary for new purchases. You need not pay any front-end sales
charge for the exchange.
This exchange privilege is available only in states where
shares of the Fund being acquired may legally be offered and sold and may
be modified or terminated at any time by the Fund. Broker-dealers which
have sales agreements with CIS may charge a fee for processing exchange
orders on behalf of their customers.
Telephone Exchanges
By becoming a shareholder of the Fund you will have the
privilege of instructing Centurion Group by telephone to exchange your
shares between any funds managed by Centurion Counsel (but not to
purchase additional shares or redeem shares). Under this Telephone
Exchange privilege, Centurion Group will accept telephone instructions
from you and those persons representing you for the exchange of your
share subject to the conditions described under "Exchange Privilege"
above. Centurion Group and the Fund will employ procedures they consider
reasonable to confirm that instructions communicated by or for you
by telephone are genuine. These procedures may include requiring certain
personal identification information prior to acting upon telephonic
instructions, tape recording telephone communications and providing
written confirmation of telephonic instructions. If reasonable
procedures are employed, neither Centurion Group nor the Fund will be
liable for following telephonic instructions which they reasonably
believe to be genuine. Centurion Counsel and the Fund may be liable
for any losses due to unauthorized or fraudulent instructions if
reasonable procedures are not followed. You may decline or terminate
the Telephone Exchange privilege by written election to the Centurion
Group.
MANAGEMENT
Centurion Counsel, Centurion Group, Inc. and Centurion
Institutional Services, Inc. are each wholly owned subsidiaries of
C I Holding Group, Inc. ("C I Holding"), a California corporation that is
engaged through its subsidiaries in various aspects of the financial
services industry. C I Holding's primary business activities include
investment advisory, securities brokerage services, investment banking
services and due diligence research and analysis services provided to
other financial services firms on a contract basis. Approximately 40% of
C I Holding's common shares, on a fully diluted basis, are owned by
officers and directors of C I Holding.
Centurion Counsel has been the investment adviser to the Fund
since January 1, 1995. The Fund pays Centurion Counsel a fee for
investment advice based on a percentage of the Fund's net assets.
Jack Heilbron is the portfolio manager for the Fund and has been for four
years. Mr. Heilbron served as a director of the Fund from 1989 to 1990.
Since 1989, he has served as Chairman and Chief Executive Officer of CI
Holding Group, Inc. and certain of its affiliates, including Centurion
Institutional Services, Inc. He serves as Chairman and Chief Investment
Officer of Centurion Counsel. Under the Fund's Investment Advisory
Agreement, the fee for these services equals 1.00% (annualized) of the
first $200-million of the Fund's average daily net assets and thereafter
declines as a percentage of average daily net assets as the size of the
Fund increases. The fees paid by the fund for these services are higher
than the fees most other mutual funds pay to investment advisers.
In addition to the investment advisory fees paid to the Fund's
investment adviser, the Fund pays all of its expenses not assumed by its
investment adviser or its distributor, including certain expenses
incurred in the operation of the Fund and the public offering of its
shares.
The Fund has adopted Plans of Distribution pursuant to Rule
l2b-1 under the Investment Company Act of 1940 as described above, which
authorize the plan to pay up to a total of 12b-1 fees. See "Distribution
Plans" above. CIS will receive, as compensation for share distribution-
related services it performs under its Distribution Agreement with the
Fund, a fee from the Fund equal to 0.75 of 1% per year of the Fund's
average daily net assets attributable to the Class B and Class C shares.
In addition, CIS will receive as compensation for shareholder services it
performs under its Shareholder Services Agent Agreement with the Fund a
fee from the Fund equal to 0.25 of 1% of the Fund's average daily net
assets attributable to the Class A, Class B and Class C shares. These
services include receiving and responding to shareholder inquires and
requests for information regarding the Fund. CIS may, at its own
expense, may provide additional compensation to dealers in connection
with sales of Fund shares and servicing of Fund shareholders.
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201-1118
acts as custodian of the Fund's assets.
Centurion Group, Inc. ("CGI") acts as the Fund's accounting
services agent pursuant to an Accounting Services Agreement with the Fund.
As compensation for these services, the Fund pays CGI a monthly fee equal
to an annual rate of .15% of the Fund's average net assets, provided,
however, the Fund has agreed to pay an annual minimum accounting services
fee of $18,000, which, based on the monthly average net asset value of
the Fund in 1996, would equal an annual rate of .034%.
CGI also acts as the Fund's administration agent pursuant to an
Administration Agreement with the Fund. As such CGI acts as the Fund's
transfer agent, disburses Fund distributions and maintains the Fund's
shareholder records. As compensation for these services, the Fund pays
CGI a separate fee per service provided as follows: $0.75 per account
maintenance per month; $7.50 per dealer confirmation; $10.00 per wire
transfer; and $50.00 per 1,000 customer statements. Additionally, the
Fund reimburses CGI for all out-of-pocket expenses incurred by CGI in
connection with the rendering of services under the Administration
Agreement.
Both the accounting services fee and the administrative
services fee paid by the Fund to CGI is in addition to the Fund's
investment advisory fee.
In February, 1994, PIM Financial Services ("PIM"), formerly
Planners' Independent Management, Inc., was named as co-defendant in a
legal action in the State of Oklahoma. Also named as co-defendants were
Mr. Heilbron, Ms. Limoges, a former agent of PIM and two of PIM's
clearing broker-dealer firms. In these actions, the claimants allege
damages of $6,372,000 plus costs against the defendants by reason of
alleged excessive mark-ups in connection with purchases and sales of
U.S. government securities made by the defendants to the Oklahoma State
Treasurer's office during 1991 and 1992. PIM, Mr. Heilbron and Ms.
Limoges deny any wrongdoing and are vigorously defending this litigation.
The liability of these defendants, if any, is not yet determinable.
Management believes that the resolution of these claims will not result
in any material adverse effect on CIC, CGI or CIS or interfere in a
material way with the capacity of these companies to perform under their
respective contracts with the Fund.
OTHER INFORMATION
Shares
All shares issued have a par value of $0.01 a share. They are
fully paid, nonassessable and can be transferred. All shares of the
Fund have equal voting rights, except that only shareholders of a class
may vote on matters affecting only that class. They can be issued as
full shares or fractions. A fraction of a share has the same kind of
rights and privileges a full share has. The shares do not have
cumulative voting or preemptive rights.
The bylaws of the Fund provide that annual shareholder meetings
are not required and that meetings need be held only with such frequency
as required by Minnesota Law or the Investment Company Act of 1940. The
Fund's Articles of Incorporation limit the liability of its directors to
the fullest extent permitted by law.
Financial Reports
As required by the Investment Company Act of 1940, the Fund
will mail annual and semi-annual reports to each of its shareholders.
The Fund's financial statements at the close of its fiscal year
(December 31) will be audited by Squire & Company, independent public
accountants.
Stock Certificates
The Fund will maintain a permanent record of all accounts so
that the issuance of stock certificates is generally not necessary.
However, the Fund will issue you a certificate if so requested in
writing.
Incorporation and Headquarters
The Fund was incorporated on August 27, 1981 in Minnesota. The
business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. The Fund's headquarters are located at the
address set forth on the cover page of this Prospectus. Shareholder
inquiries may be made to the Fund at this address.
APPENDIX A
Mortgage-Backed Securities
Mortgage-related securities are characterized by monthly
payments to the holder, reflecting the monthly payments made by the
borrowers who received the underlying mortgage loans. The payments to
investors in these securities, like payments on the underlying loans,
represent both principal and interest. Although the underlying loans
may have substantial remaining terms, the borrowers can, and typically
do, pay these loans off sooner. Thus, holders of these securities
frequently receive prepayment of principal. A borrower is more likely to
prepay a mortgage which bears a relatively higher interest rate in
relation to those interest rates then currently available. Thus at time
of declining interest rates, some of the Fund's higher yielding
securities might be converted to cash which the Fund would be able
to reinvest only at lower yields. The increased likelihood of prepayment
when interest rates decline also limits market price appreciation of
mortgage-related securities. If the Fund should buy mortgage-related
securities at a premium, mortgage foreclosures or mortgage prepayments
could result in a loss to the Fund of up to the amount of the premium
it paid.
The Fund may also invest in mortgage-backed securities such as
collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs") CMOs are debt securities issued by
U.S. government agencies or by financial institutions and other mortgage
lenders and are collateralized by a pool of mortgages held under an
indenture. CMOs are typically issued in a number of classes or series
with different maturities. The classes or series are retired in sequence
as the underlying mortgages are prepaid. Prepayment may shorten the
stated maturity of the obligation and can result in a loss of premium, if
any has been paid. Certain of these securities may have variable or
floating interest rates and others may be stripped (securities which
provide only the principal or interest feature of the underlying
security). REMICs, which were authorized under the Tax Reform Act of
1986, are private entities formed for the purpose of holding a fixed pool
of mortgages. REMICs are similar to CMOs in that they issue multiple
classes of securities. Mortgage-related securities issued by private
entities, such as certain CMOs and REMICs are not U.S. government
securities and are not directly guaranteed by any government agency.
They are secured by the underlying collateral of the private issuer.
Stripped mortgage-related securities are derivative multi-class
mortgage securities. Stripped mortgage securities may be issued by
agents which are instrumentalities of the U.S. government, or by private
originators of, or investors in, mortgage loans, including savings and
loan associations, mortgage banks, commercial banks, investment banks and
special-purpose subsidiaries of the foregoing. Stripped securities and
mortgage securities are typically structured with two classes that
receive different proportions of interest and principal distributions on
the pool of mortgage assets. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class) while the
other class will receive all of the principal (the principal-only or
"PO" class). The Fund will not invest in IO or PO class securities.
Debt Securities
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.
- Convertible debt securities which may bear interest
payable in cash and/or securities (or may be zero-coupon)
and/or may convert on a specified date to cash equity
securities, debt securities or a combination thereof.
The Fund may invest in lower rated debt securities including
high yielding fixed-income debt securities such as junk bond. 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 Standard
& Poors Corporation (the "S&P"), or rated Baa or lower by Moody's Investors
Services, Inc. ("Moody's"). These securities 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 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.
Options
A call option is a contract which gives a buyer of the option
the right to buy a security at a set price for the length of the
contract. The writer of a call option agrees to sell the security when
the buyer wants to exercise his or her option to buy the security at the
set price no matter what the market price of the security is at that
time. In a covered call option, the writer or seller owns the underlying
security required to be sold by the option contract.
A put option is a contract which gives the buyer of the option
the right to sell a security at a set price for the length of the
contract. The writer of a put option agrees to purchase the security
when the buyer wants to exercise his or her option to sell the security
at the set price no matter what the market price of the security is at
that time.
When an option contract is made it is agreed that the
underlying security will be sold, in the case of a call option, or
purchased, in the case of a put option, at the set price no matter what
the market price of the security is at the time the option is exercised.
For undertaking the obligation to sell or purchase the security, a writer
receives a cash payment (premium) at the time the option is written. The
premium is retained by the writer whether or not the option is exercised.
However, a writer of a call option gives up the opportunity for profit
when an increase in the market price of the security exceeds the option
premium, and the writer of a put option incurs the risk of loss when a
decrease in the market price of the security exceeds the option premium.
Writing Covered Call Options. As an example of writing a
covered call option, assume the Fund owned 200 shares of Alpha Corp.
When the stock was selling at $25 per share, the Fund wrote a call option
agreeing to sell those shares at a price of $25 at any time for the next
six months. The buyer paid $200 for the call option (plus commission,
if any). Should Alpha Corp. stock decline to $20 per share during the
time covered by the call option, the option would not be exercised. The
Fund would have realized a short-term capital gain of about $200. On
the other hand, should Alpha Corp. stock rise to $35 per share, the call
option is likely to be exercised. The Fund would sell the stock at $25
and not at $35. It would not realize the $2,000 gain but only retain the
premium it received at the time it wrote the call option. To some
extent, the risk of not realizing a gain if the price of the security
should go up can be reduced. To do this, the Fund would enter into a
"closing purchase transaction" prior to the end of the call option, by
purchasing a call option with the same terms as the one it wrote, if one
is available. The cost to close the option and terminate the Fund's
obligation to sell the stock may be more or less than the premium
received when it originally wrote the call option. This would result in
a short-term capital gain or loss. If the Fund would not enter into a
closing purchase transaction, it may be required to hold a security that
it may otherwise have sold to protect against depreciation. The Fund's
portfolio turnover may increase through the exercise of the option if the
market price of the underlying securities goes up and the Fund has not
entered into a closing purchase transaction. The brokerage commissions
associated with the buying and selling of call options are normally
proportionately higher than those associated with general securities
transactions.
Writing a covered call option can serve various purposes. For
example, it can be an alternate method of selling securities because the
Fund, in effect, sets the price in advance at which it intends to sell
securities in its portfolio. It may provide some additional funds which
in turn may provide some additional investment opportunities. The Fund
will write covered call options when it is appropriate and will follow
these guidelines.
Underlying securities will continue to be bought or sold
solely on the basis of investment considerations consistent with the
Fund's objective.
All equity options written by the Fund will be "covered." In
other words, the Fund will own the securities required to be sold by the
call option. If a decision is made to sell the security, the Fund will
attempt to terminate the option contract through a closing purchase
transaction.
The Fund intends to deal only in standard option contracts
traded on national securities exchanges. The Fund will only write
options as permitted under federal or state laws or regulations. For
example, some state regulations limit the amount of total assets subject
to options. While no limit has been set by the Fund, it will conform to
the requirements of those states. When a covered call option is written,
the custodian segregates the underlying securities and issues a receipt.
There are certain rules regarding banks issuing such receipts which may
restrict the amount of covered call options written. Besides these
limitations, net premiums on call options which are closed or premiums
on lapsed call options are treated as short-term capital gain. Since
the Fund will be taxed as a regulated investment company under the
Internal Revenue Code, any gains on options and other securities held
less than three months must be limited to less than 30% of annual gross
gains.
Purchase of Options Written by Others. The purchase of put and
call options written by others may be used as a trading technique to
facilitate buying and selling securities, or for investment purposes if,
as a result, no more than 5% of the Fund's net assets would be invested
in options. When the option is bought, the Fund pays a premium and a
commission. It then pays a second commission on the purchase or sale of
the underlying stock when the option is exercised. For record keeping
and tax purposes, the price obtained on the purchase or sale of the
underlying security will be the combination of the exercise price, the
premium and both of the commissions.
The purchase of put and call options as a trading technique
would involve the sale of a call option or the purchase of a put option
with the expectation that the option would be exercised immediately and
would be used to take advantage of any disparity which might exist
between the price of the underlying stock on the stock market and its
price on the options market. It is anticipated that the proposed trading
technique will be utilized to effect a stock transaction when the price
of the security plus the option price will be as good or better than the
price at which the stock could be bought or sold directly. Options
purchased as a trading technique will not be included as a separate
security for the purpose of portfolio valuation.
When the Fund purchases a call option for investment purposes,
it will realize a profit (loss) if and to the extent the market price of
the underlying security at the time of exercise of the option is greater
than (less than) the fixed exercise price plus the option premium and
commissions paid. When the Fund purchases a put option for investment
purposes, it will realize a profit (loss) if and to the extent the
market price of the underlying security at the time of exercise of the
option is less than (greater than) the fixed exercise price minus the
option premium and commissions paid. When the Fund fails to exercise an
option it has purchased, the Fund will realize a loss in the amount of
the premium and commission it has paid. The purchase of put and call
options written by others may involve risks not encountered with
investments in other securities. Such risks include the possibility that
a liquid secondary market might not exist at a particular time, in which
event it might not be possible to close an option position when it is
desirable to do so. Dealing in options could result in increases in the
Fund's portfolio turnover rate, especially during periods when market
prices of the underlying securities are fluctuating. Purchasing options
also limits the use of monies which might otherwise be available for
long-term investments. Options purchased for investment purposes will be
valued in the Fund's portfolio like any other security. See "Valuing
Shares."
Futures Contracts on Indexes and Options Thereupon
In furtherance of its investment objectives, the Fund may sell
stock index futures contracts on indexes (index futures contracts), write
call options, and/or purchase put options on stock index futures
contracts. 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 loss from investing in futures transactions is potentially
unlimited. The Fund will engage in transactions on stock index futures
contracts and options thereon 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.
However, when buying or selling a stock index futures contract,
or selling an option on a stock index futures contract, the Fund will
cover its position. To cover its position, the Fund may maintain with
its custodian bank (and mark-to-market on a daily basis) a segregated
account consisting of cash or U.S. Government securities or repurchase
agreements secured by U.S. Government securities that, when added to
any amounts deposited with a futures commission merchant as margin, are
equal to the market value of the futures contract or otherwise "cover"
its position. The Fund may cover its short position in a futures
contract by owning the instruments underlying the futures contract (or
instruments the prices of which are expected to move relatively
consistently with the instruments underlying the futures contract).
The Fund may cover its sale of a call option on a futures contract by
taking a long position on the underlying futures contract at a price no
higher than the strike price of the call option or, if lower, the Fund
maintains in a segregated account cash or liquid high-grade debt
securities equal in value to the difference between the two strike
prices.
There are a number of risks associated with the use of futures
contracts and options. Although the Fund intends to sell futures
contracts, no assurance can be given that a liquid market will exist for
any particular contract any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at
a price beyond that limit or trading may be suspended for specified
periods during the day. Futures contract prices could move to the limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions an potentially
subjecting the Fund to substantial losses. The risk that the Fund will
be unable to close out a futures position will be minimized by entering
into such transactions on a national exchange with an active and liquid
secondary market. Also, the effect of certain of these risks will be
reduced as the Fund will not engage in these transactions on margin and
thus will not be required to make daily cash payments of variation
margin.
Index Options Transactions. 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 transactions 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.
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 mark-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 Options above.
Short Sales
In seeking its investment objective, the Fund may make short
sales. A short sale of a security is a transaction in which the Fund
sells a security it does not own. To complete such a transaction, the
Fund must own the security so as to make delivery to the buyer. The Fund
will not borrow the security which it sells short.
Until the Fund closes its short position, the Fund will: (a)
maintain a segregated account containing the securities sold short, or
cash or liquid high-grade debt securities at such a level that (i) the
amount deposited in the account equal the current value of the security
sold short and (ii) the amount deposited in the segregated account will
not be less than the market value of the security at the time it was
sold short; or (b) otherwise cover its short position. For example,
through the purchase of a put option for the security sold short.
Investment Advisor
Prospectus and Application
April 30, 1996
Centurion T.A.A. Fund, Inc.
Centurion Counsel, Inc.
11545 West Bernardo Court, Suite 100
San Diego, CA 92127
Distributor
Centurion Institutional Services, Inc.
11545 West Bernardo Court, Suite 100
San Diego, CA 92127
Shareholder Servicing Agent
Centurion Institutional Services, Inc.
11545 West Bernardo Court, Suite 100
San Diego, CA 92127
Auditors
Squire & Company
14458 Crestwood Avenue
Poway, CA 92084
Legal Counsel
Rushall & McGeever
2111 Palomar Airport Road, Suite 200
Carlsbad, CA 92009
Officers
Jack K. Heilbron
Chairman of the Board
Kenneth W. Elsberry
Chief Executive Officer, President and
Chief Financial Officer
Mary R. Limoges
Secretary
Directors
Carol Ann Freeland
Richard E. Hall
Jack K. Heilbron
Russell W. Ketron
Douglas Werner
CENTURION T.A.A. FUND, INC.
11545 West Bernardo Court, Suite 100
San Diego, CA 92127
[back of back cover]
APPLICATION AND INSTRUCTIONS
Opening Your Account
You may purchase shares of Centurion T.A.A. Fund, Inc. (the
"Fund") with an initial investment of $500 or more. Once you are a
shareholder in the Fund you can make additional investments of $25 or
more by mail.
To Invest By Mail
Complete this application and mail it with your check payable
to the Fund at the address set forth on the cover page of the prospectus.
If you are currently a shareholder, you may mail additional investments
at any time. Please enclose one of the payment stubs that is provided to
shareholders or enclose a brief note indicating your account number.
To Invest By Phone
If you are already a shareholder, you may purchase additional
shares by telephone and receive that day's closing public offering price.
Simply call Centurion Institutional Services, Inc. prior to the close of
the New York Stock Exchange (normally 4:00 p.m. Eastern Standard Time)
at (619) 673-8536 or call the broker through whom you made your
original investment. Payments must be received within five days of your
order.
Withdrawals
You have a right to redeem your shares at any time in writing
through your broker. All written requests for withdrawals must be
signed by each shareholder, and all signatures on requests for
withdrawals must be guaranteed by a national bank or state chartered
commercial bank or trust company (except a savings bank) or a member of
the New York or American Stock Exchange, the National Association of
Securities Dealers, Inc. or any regional stock exchange.
The Fund will require certain legal documents from corporations
or other organizations, executors, and trustees, or if anyone other than
the shareholder of record requests redemption. If you have any questions
concerning a redemption, telephone the Fund's transfer agent, Centurion
Counsel, Inc. at (619) 673-8536.
The Fund also offers a systematic withdrawal plan whereby you
can authorize periodic automatic redemptions. Contact the broker through
whom you made your original investment or the Fund for further
information.
Exchange With Other Fund
You may exchange some or all of your shares of the Fund for
shares of Cash Equivalent Fund Money Market Portfolio. You need not pay
any front-end sales charge for the exchange. There is a service charge
of $7.50 each time you use the exchange privilege. To be able to use
the exchange feature over the telephone you will need to complete the
Telephone Exchange Authorization Form included with the application.
APPLICATION Mail to: CENTURION GROUP, INC.
Shareholder Services
11545 W. Bernardo, Suite 100
San Diego, CA 92127
1. Type of Account (Check one only)
[]Individual
First Name ________________________________________________
Middle Initial
Last Name
Social Security No.
Birthdate
[]Joint Tenant
First Name ________________________________________________
Middle Initial
Last Name
Social Security
No.Birthdate
[]Gifts/Transfer to Minors _____________ as custodian ______________________
Name of Custodian (One Only) Name of Minor (One Only)
under the _____________
State
Uniform Gifts to Minors__________________________ ________________
Minor's Social Security No. Minor's Birthdate
[]Corporation __________________________________________________________
Partnership, Exact Name of Corporation, Partnership, other Organization
Trust or Other _________________________
Organization Tax Identification Number
_________________________________________________________
Trustee Accounts Only: Name of all Trustees required by
trust agreement to sell/purchase shares
_______________________ _____________ ________________
Date of Trust Agreement Name of Trust Tax Identification #
[] Under penalty of perjury I/we certify that the Taxpayer Indentification
Number (Social Sercurity Number or Employer Indentification Number)
contained herein in true, correct, and complete and I (we) am (are) not
subject to backup withholding under the provision of Section 3406(a)(1)(c)
of the Internal Revenue Code.
[] Check here if you are subject to backup withholding
2. Mailing Address
______________ ______________ ________________
Street Home Telephone Office Telephone
______________ Citizen of: ___ U.S. ___ Other
City State ZIP (please specify)
3.I (We) apply to invest $ ____________(payment attached) in common
shares of CENTURION T.A.A. FUND, INC. ($500 Minimum)
CLASS OF SHARES (Must select one only)
[]CLASS A Shares (front-end sales charge)
[]CLASS B Shares (contingent deferred sales charge)
[]CLASS C Shares (no sales charge)
[]CLASS D Shares (eligible purchasers only)
[]CASH EQUIVALENT FUND MONEY MARKET PORTFOLIO ($500 Minimum)
(Prior to investing in Cash Equivalent Fund, you must acquire the
Fund's prospectus from Centurion Institutional Services, Inc. and read
such prospectus.)
(Please make checks payable to the appropriate Fund.)
This is my (our) initial investment: ___ Yes ___ No
Additional Investments can be made at any time. Please see
instructions on the reverse side of this application.
4.Distribution Options
(Check one only-If no option is selected, all distributions will be
reinvested into the Fund that pays them.)
[]Reinvest all dividends and capital gains into the Fund that pays them.
[]Pay all dividends and reinvest capital gains.
or
[]Pay all dividends and capital gains.
(If either pay option is selected,
complete Information at right.)
5.Investment Professional
Broker/Dealer Name Investment Professional name
Branch Office Address Investment Professional Rep. Number
City State Zip Code
Investment Professional's Phone Authorized Signature of Broker/Dealer
6.Account Options
For account options, please complete the rest of this application.
Accounts options are:
*Pre-Authorization Check Plan (PAC) *Telephone Exchange
*Interested Party Mail *Systematic Exchange
*Dividend Mail *Systematic Withdrawal
7.Purchase Options
Pre-Authorization Check Plan (PAC)-Automatic Monthly Investing
Fund Name Fund Name Fund Name
Amount $____________, to start ____________ of ___________, __________
Minimum $25 Day Month Year
8.Additional Options
Telephone Exchange-If accepted, accounts must have the same account
information, options and class of shares.
[]I decline telephone exchange, and do not want this privilege.
(See Telephone Transaction Authorization section for procedures.)
Systematic Withdrawal Plan
[] I wish to automatically withdraw $________ from this account.
[]Monthly []Quarterly []Semi-Annually []Annually
I request this distribution be: (check one)
[] Sent to the address lisbed in Section 2. To begin ______of____.
(Will occur about the 21st of the month.)
[] Sent to the special payee listed below. To begin ______of_____.
Name
Street Address
[] Directly deposited in my bank account.(Please attach a voided check
to section 10.)
To begin _______ of _______, ____.
day month year
9.Interest Party Mail/Dividend
[]I wish to have my distributions sent to the address listed below.
Name
Street Address City State Zip Code
[]I wish to have duplicate confirmation statements sent to the interested
party listed below.
Name
Street Address City State Zip Code
10.Signatures
I have read the prospectus and application for the Fund in which I am
investing and agree to their terms. I am also aware that a Telephone
Exchange Privilege exists and that this privilege is automatically
available unless affirmatively declined. I also understand that if the
Fund fails to follow the procedures outlined in the prospectus and in the
Telephone Transaction Authorization hereto, it may be liable for any losses
due to unauthorized or fraudulent instructions. See Telephone Transaction
Authorization section for procedures. I am of legal age. Sign below
exactly as printed in registration. For joint registration, both must
sign. Under penalty of perjury, I certify with my signature below that
the number shown in section one is my correct taxpayer indentification
number. Also, I have not been notified by the Internal Revenue Service
that I am currently subject to backup withholding unless otherwise
indicated.
__________________________
Signature
__________________________
Signature
For corporations, Trusts, or partnerships: We hereby certify that each
of the persons listed below has been duly elected, and is now legally
holding the office set forth opposite his/her name and has the authority
to make this authorization. Please print titles below if signing on
behalf of a business or trust to establish this account.
__________________________________________________
President, Trustee, General Partner or Title
__________________________________________________
Co-owner,Secretary of Corporation, Co-trustee, etc.
TELEPHONE TRANSACTION AUTHORIZATION
Authorization and Agreement
The registrant hereby authorizes Centurion T.A.A. Fund, Inc. to accept and act
conclusively upon telephone instructions from me, anyone other than me
representing himself to be me, or any person purporting to represent me in
effecting exchanges of shares of one (or more) Centurion Group, Inc. managed
fund(s) (the "Fund" or "Fund(s)" or "Funds") for which such an exchange is
available. Centurion Group Inc. and it subsidiaries, and the Fund employ
procedures consideration by them to be reasonable to confirm that
instructions communicated by telephone are genuine. Such procedures may
include requiring certain personal indentification information prior to
acting upon telephone instructions, tape recording telephone communications
or providing written confirmation of instructions communicated by telephone.
If reasonable procedures are employed, neither Centurion Group Inc. nor the
Fund will be liable for following telephone instructions which it reasonably
believes to be genuine. Centurion Group Inc. may be liable for any losses
due to unauthorized or fraudulent instructions if reasonable procedures are
not followed. I understand and agree to indemnify and hold harmless Centurion
Group, Inc. and the Funds from any liability (including attorney's fees)
arising directly or indirectly from any act or omission to act hereunder not
occasioned by their gross negligence or willful misconduct. I understand that
the exchange privilege may be modified or terminated at any time. I also
understand that these privileges are subject to the conditions and provisiions
set forth herein and in the currect prospectuses of the Funds. For each
exchange, I will ahve received and perused a copy fo the then current
prospectus fo the Fund being purchased. In the case of a registrant other
than an individual, I certify that the organization has the authority to
tranact telephone exchanges. I will notify Centurion T.A.A. Fund of any
changes in such authority. Telephone exchanges may be executed on
individual, joint tenant and Uniform Gifts to Minors or Uniform Transfer
to Minors accounts (with the custodian acting) only.
This Authorization shall be effective upon receipt by Centurion
Group, Inc. It shall in all respects be interpreted, enforced and
governed under the laws of the State of California. Any suit, claim
or action hereunder against Centurion group, Inc. and the Funds shall
have as it sole venue the County of San Diego, State of California.
If any provision fo the Authorization is declared by and court
to illegal or invalid, the validity of the remaining parts shall not be
affected thereby.
Conditions
1. Telephone exchange instruction received before the pricing of the
Fund on any day on which tbe New York Stock Exchange is open for
business (a "Business Day"), but no later then 1:00p.m. Pacific
time, will be processed at the day's closing net asset value.
For each exchange my account shall be charged an exchange fee
noted in the then current prospectus.
2. Telephone exchange instructions should be made by dialing
1-800-878-8536.
3. A waiting period as described in each Fund's prospectus may apply to
exchanges. Exchanges will not be requested prior to the expiration
of any waiting period or in violation of any of the terms and
conditions of any of the Fund's prospectus and I agree to indemnify
Centurion Group, Inc. and the Fund against any harm occasioned by
their compliance with an improper order under any of the Fund's
prospectus.
4. If the exchange involves the establishment of a new account, the
dollar amount being exchanged must at least equal the minimum
investment requirement of the Fund being acquired.
5. Any new account established throught the exchange privilege will
have the same account information and options except as stated in
the currect prospectus and be subject to this authorization.
6. Certificated shares cannot be redeemed or exchanged by telephone
but must be forwarded to Centurion Group, Inc. and deposited into
the customer's account before any transaction may be processed.
7. Shares may not be exchanged and/or redeemed unless an exchange and/
or redemption privilege is offered pursuant to each Fund's current
prospectus.
8. I agree that my ability to exchange under this authorization may be
cancelled, modified or restricted at any time indiscriminately at
the sole discretion of Centurion Group, Inc. or by the Fund(s).
Dealer Agreement
Under these plans, the dealer signing the application acts as principal
in all purchases of Fund shares and appoints Centurion Group, Inc. as its
agent to execute the purchases and to confirm each purchase to the
investor. The dealer hereby guarantees the genuineness of the
signature(s) on the application and represents that he is a duly licensed
dealer and may lawfully sell Fund shares in the state designated by the
investor's mailing address, and that he has entered into a Selling Group
Agreement with the Distributor with respect to the sale of Fund shares.
The dealer signature on the Application, signifies acceptance of the
concession terms, and acceptance of responsibility for obtaining
additional sales charges if specified purchases are not completed.
<PAGE>
CENTURION T.A.A. FUND, INC.
Statement of Additional Information
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the Prospectus of Centurion T.A.A.
Fund, Inc. (the "Fund") dated April 30, 1997 (the "Prospectus"). A copy
of the Prospectus may be obtained by contacting the Fund's principal
underwriter, Centurion Institutional Services, Inc. ("CISI"), at
11545 W. Bernardo Court, Suite 100, San Diego, California 92127
(Telephone: (619) 673-8536).
TABLE OF CONTENTS
Page
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . .2
FUND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . .3
OWNERSHIP OF SHARES. . . . . . . . . . . . . . . . . . . . . .6
MULTIPLE CLASS SHARE PLAN. . . . . . . . . . . . . . . . . . .6
CENTURION COUNSEL, INC., CENTURION GROUP, INC. AND
CENTURION INSTITUTIONAL SERVICES, INC. . . . . . . . . . . .9
CUSTODIAN; GENERAL COUNSEL; AUDITORS . . . . . . . . . . . . 15
BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . 15
RETIREMENT ACCOUNTS. . . . . . . . . . . . . . . . . . . . . 16
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . 17
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . 19
LIMITATION OF DIRECTOR LIABILITY . . . . . . . . . . . . . . 20
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 21
Dated April 30, 1997
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions set forth below
which, together with the fundamental investment objective and policies of
the Fund, cannot be changed without approval by holders of a majority of
the outstanding voting shares of the Fund. As defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), this means the lesser
of the vote of (a) 67% of the shares of the Fund at a meeting where more
than 50% of the outstanding shares of the Fund are present in person or
by proxy or (b) more than 50% of the outstanding shares of the Fund.
These investment restrictions are set forth below:
(1) The Fund will not invest more than 5% of its net assets (taken
at the lower of cost or value) in securities of any one company. The
Fund will also limit its investment in a single company to not more than
10% of that company's outstanding voting securities. Further, the Fund
will not invest more than 25% of its total assets in securities issued by
companies in any single industry.
(2) The Fund will not invest more than 5% of its total assets in
securities of companies, including any predecessors, less than three
years old.
(3) The Fund will not invest in another investment company except as
a part of a plan of merger, acquisition or consolidation.
(4) The Fund will not buy or sell real estate, commodities or
commodity contracts, except the Fund may invest up to 50% of its net
assets in index futures contracts and options thereupon.
(5) The Fund will not buy on margin.
(6) The Fund will not pledge or mortgage its assets, except to the
extent that writing covered call options or future contracts or options
may be deemed to be pledging or mortgaging assets.
(7) The Fund will not borrow money or property (for example,
securities), except that as a temporary measure for extraordinary
purposes or emergencies, the Fund may borrow from banks up to 5% of the
value of its total assets.
(8) The Fund will not make cash loans. However, the Fund may
purchase bonds or other debt securities sold publicly, including
short-term securities which may be acquired under agreements by the
sellers to repurchase; provided that not more than 10% of the Fund's
net assets will, at any time, be subject to repurchase agreements which
mature in more than seven days. The Fund does not consider these debt
securities and other short-term investments to be loans.
(9) The Fund may not invest more than 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.
(10) The Fund will not act as an underwriter.
(11) The Fund will not buy any securities of a company if it knows
that the officers or directors of the Fund, who own 1/2 of 1% or more of
the company's securities, together own more than 5% of the company's
securities.
(12) The Fund will not invest in exploration or development
programs, such as oil or gas programs.
(13) The Fund will not invest 35% or more of its net assets in debt
obligations of corporations and other issuers which are not rated in one
of the four highest rating categories by a nationally recognized
statistical rating organization.
(14) The Fund will not buy or sell foreign currency exchange
securities.
(15)The Fund will not invest more than 50% of its net assets in
options contracts, including put options and/or call options to
purchase or sell equity securities.
If a percentage limitation described above is adhered to at the time
of the investment by the Fund, a later increase or decrease in the
percentage resulting from any change in the value of the Fund's net
assets will not constitute a violation of the restriction.
The names, addresses and principal occupations of directors and
executive officers of the Fund for the past five years are given below:
<TABLE>
FUND MANAGEMENT
<CAPTION>
Positions with the Fund and Principal
Name and (Age) Occupations During Past 5 Years Business Address
<S> <C> <C>
Carol Ann Freeland (59)<F1> Has served as a director of the Fund since 4015 Beltline Road, #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. She has served as a
registered representative of World Invest
Corporation, a licensed broker-dealer
since 1994.
Richard E. Hall (71) Has served as a director of the Fund since 10 Carson Drive
December 20, 1994. Since 1989, a retired Grant's Pass, OR 97526
financial planner and securities salesman.
Served as registered representative and
director of PIM Financial Services, Inc.
("PIM"), an affiliate of Centurion Counsel,
Inc., from 1983 to 1989. Until July, 1994,
Mr. Hall owned approximately 3% of the
shares of CI Holding Group, Inc.,
Centurion Counsel, Inc.'s parent
corporation. At that time he sold his
shares for fair value to an Affiliate of
Centurion Counsel, Inc. There is no
agreement or understanding between Mr.
Hall and Centurion Counsel, Inc. or its
Affiliates regarding his service as a director
of the Fund.
Jack K. Heilbron (46)<F2> Has served as a director of the Fund since 11545 W. Bernardo Court, #100
December 20, 1994. Also served as a San Diego, CA 92127
Director of the Fund from 1989 to 1990.
He has served as portfolio manager for the
Fund since 1990. Since 1984 he has served
as Chairman and Chief Executive Officer
of C I Holding Group, Inc. and PIM.
Since 1989, he served Chairman and Chief
Investment Officer of Centurion Counsel,
Inc. For the period 1988 until 1989, he
served as an officer and director of Excel
Interfinancial Corporation, the parent of
Excel Advisors, Inc.
Russell W. Ketron (53)<F2> Has served as a director of the Fund since 1701 Novato Blvd., # 204
December 20, 1994. A Certified Financial Novato, CA 94947
Planner 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 (46) Has served as a director of the Fund since 140 Brightwood Ave.
December 20, 1994. Since 1993 has been Chula Vista, CA 92010
President of Tracks Publishing, a printing
firm located in Chula Vista, California.
Since 1980, has served as President and
owner of Werner Graphics, a graphic
design firm located in San Diego, California.
<FN>
<F1> Although this Director 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 is not an "interested person"
of the Fund, Centurion Counsel, Inc. or its Affiliates, as defined
under the Investment Company Act of 1940 by reason of Rule 2a19-1
promulgated thereunder.
<F2> This Director is an "interested person" of Centurion Counsel, Inc.,
the Fund, or a registered broker/dealer, as defined under the
Investment Company Act of 1940, as amended.
</FN>
</TABLE>
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 in person by each
director not affiliated with Centurion Counsel and reimburses such
nonaffiliated directors for their travel expenses to attend directors'
meetings.
Fund Executive and Director Compensation
The following Table sets forth information for each of the directors
of the Fund, all members of any advisory board of the Fund, and for each
of the three highest paid executive officers or any affiliated person of
the Fund whose aggregate compensation from the Fund for the Fund's year
ended December 31, 1996.
<TABLE>
COMPENSATION TABLE
<CAPTION>
(1) (2) (3) (4) (5)
Total
Pension or Compensation
Retirement Estimated From
Aggregate Benefits Annual Registrant
Name of Compensation Accrued As Benefits and Fund
Person, From Part of Fund Upon Complex Paid
Position Registrant Expenses Retirement to Directors
<S> <C> <C> <C> <C>
Jack K. Heilbron, -0-** -0- -0- -0-
Chairman of the
Board
Carol Ann Freeland, $750* -0- -0- $750*
Director
Richard E. Hall, $750* -0- -0- $750*
Director
Russell W. Ketron, $500* -0- -0- $500*
Director
Douglas Werner, $750* -0- -0- $750*
Director
<F1>* Directors are paid $250 per meeting. There are four scheduled
quarterly meetings for 1996.
<F2>** Mr. Heilbron receives no compensation, including no director
fees, for his service to the Fund either directly or indirectly
from the Fund or any other investment company in a Fund Complex
which includes the Fund.
OWNERSHIP OF SHARES
As of December 31, 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 28, 1997, beneficially owned shares of the Fund, except
Mr. Heilbron, Mr. Werner, Mr. Ketron and Mr. Hall who owned beneficially
2,992, 521, 22,803 and 22,780 shares, respectively, of the Fund on such date
(representing approximately 0.103%, 0.018%, 0.788% and 0.788%, respectively,
of the outstanding shares of the Fund).
MULTIPLE CLASS SHARE PLAN
The Articles of Incorporation of the Fund authorize the Fund to issue
Class A, Class B, Class C and Class D shares pursuant to the Fund's
Multiple Class Share Plan (this "Plan"). The Plan was adopted by the
Fund's Board of Directors and approved by a majority vote of the Fund's
shareholders on August 6, 1996.
Under the 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
accordance 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,
the 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, services 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 shareholder'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
he 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.
The income and expenses of the Fund must be allocated among each
Class of Shares as follow:
Separate Distribution Expenses. Each Class of Shares must, at all
times, maintain a separate arrangement for shareholder services or the
distribution services or both, and shall pay all of the expenses of that
arrangement ("distribution expenses"). Allocation of Income, Realized
and Unrealized Capital gains and Losses, and Expenses. Each Class of
Shares must 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 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 Fund's Board of Directors 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 a
Class, or if a 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.
Advisory Fees. Each Class of Shares shall pay the same advisory fee.
Waiver of Expenses. Expenses may be waived or reimbursed by the
Fund's adviser, underwritten, or any other provider of services to the
Fund.
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 1940
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, principal
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 of
the Fund.
The Shares shall have the following voting rights: (i) Each Class
of Shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement; (ii) Each Class of
Shares has separate voting rights on any matter submitted to shareholders
in which the interests of one class differ from the interests of any
other class; (iii) Each Class of Shares, except as provided herein, has
in all other aspects the same rights and obligations as each other class.
Nothing in the Plan prohibits the Fund's Board of Directors from
issuing 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) 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.
Currently, only the Class B shares have such a conversion right.
(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.
The Plan is intended to meet the requirements of Rule 270.18f-3
promulgated under the 1940 Act.
CENTURION COUNSEL, INC., CENTURION GROUP, INC. AND
CENTURION INSTITUTIONAL SERVICES, INC.
General
Centurion Counsel, Inc. ("Centurion Counsel") was incorporated in the
State of California in 1984. Centurion Counsel has acted as the Fund's
investment advisor since January 1, 1995. Centurion Group, Inc. ("CGI")
was incorporated in the State of California in 1984. CGI has acted as
the Fund's accounting services agent, transfer agent, dividend disbursing
agent and administrative services agent since January 1, 1995. In
addition to its services to the Fund, Centurion Counsel's primary
business activities include investment consulting to individuals,
corporations, and institutions, sponsoring of investment limited
partnerships (primarily in the real estate industry) and the providing
of investment banking services and other activities related to the
investment and securities industries. Centurion Counsel is an
SEC-registered investment advisor.
Centurion Institutional Services, Inc. was incorporated in the State
of California in 1991. CISI has acted as the distributor of the Fund's
shares since January 1, 1995. CISI has been an SEC-registered
broker-dealer since July 1991. Since then, CISI has been engaged
primarily in the business of clearing securities trades for its
corporate and institutional clients. Centurion Counsel, CGI and CISI are
wholly owned subsidiaries of C I Holding Group, Inc. ("C I Holding"), a
California corporation that is engaged through its subsidiaries in
various aspects of the financial services industry. C I Holding's
primary business activities have included investment advisory series,
securities brokerage services, and due diligence research and analysis
services provided to other financial services firms on a contract basis.
Approximately 40% of C I Holding's common shares, on a fully diluted
basis, are owned by officers and directors of C I Holding.
Investment Advisory Agreement
The Fund does not maintain its own research department. The Fund has
contracted with Centurion Counsel for investment advice and management
services. Pursuant to the Fund's Investment Advisory Agreement,
Centurion Counsel has the sole and exclusive responsibility for the
management of the Fund's portfolio and the making and execution of all
investment decisions for the Fund subject to the objectives and
investment restrictions of the Fund and subject to the supervision of the
Fund's board of directors. Under the Fund's Investment Advisory
Agreement, Centurion Counsel also furnishes, at its own expense, office
facilities, equipment and personnel for servicing the investments of the
Fund. Centurion Counsel has agreed to arrange for the Fund's officers or
employees to serve without compensation from the Fund if duly elected to
such positions by the shareholders or directors of the Fund.
As compensation for its services, Centurion Counsel is entitled to a
fee, payable within five days after the end of each fiscal quarter based
on the Fund's average daily net assets as follows:
1.00% of the first $200-million of the Fund's average daily net assets
0.85% of average daily net assets between $200-million and $400-million
0.80% of average daily net assets between $400-million and $600-million
0.75% of average daily net assets between $600-million and $800-million
0.60% of average daily net assets between $800-million and $1-billion
0.50% of average daily net assets over $1-billion.
The percentage fee is calculated on the daily value of the Fund's net
assets at the close of each business day. The foregoing fees are higher
than fees paid by most other investment companies.
All costs and expenses (other than those specifically referred to as
being borne by Centurion Counsel) incurred in the operation of the Fund
are borne by the Fund. These expenses include, among others, interest,
taxes, brokerage fees and commissions, fees of the directors who are not
full-time employees of Centurion Counsel, CGI, CISI or any of their
affiliates, expenses of directors' and shareholders' meetings, including
the cost of printing and mailing proxies, expenses of insurance premiums
for fidelity and other coverage, expenses of repurchase and redemption of
shares, expenses of issue and sale of shares (to the extent not borne by
CISI under its Distribution Agreement or its Shareholder Services Agent
Agreement with the Fund), expenses of printing and mailing stock
certificates representing shares of the Fund, association membership
dues, charges of custodians, transfer agents, dividend disbursing agents
and accounting services agents, and bookkeeping, auditing and legal
expenses. The Fund will also pay the fees and bear the expense of
registering and maintaining the registration of the Fund and its shares
with the Securities and Exchange Commission, the expense of registering
or qualifying its shares under state or other securities laws and the
expense of preparing and mailing prospectuses and reports to existing Fund
shareholders.
Centurion Counsel shall reimburse the Fund, in an amount not in excess of
the advisor fee otherwise payable by the Fund to the advisor for such period,
if and to the extent that the aggregate operating expenses of the Fund,
including such fee but excluding interest expense, Rule 12b-1 Plan of
Distribution fees, taxes, and brokerage fees and commissions, are in excess
of 2.625% of the first $10 million of average net assets of the Fund, plus
1-1/2% of the next $20 million of average net assets, plus 1-1/4% of average
net assets above $30 million. Centurion Counsel has agreed to
waive such reimbursements for any fiscal year of the Fund in which this
Advisory Agreement is last effective, subject to the investment advisor's
right to end this obligation at the end of any Fund fiscal year.
The Investment Advisory Agreement dated January 1, 1995 between
Centurion Counsel and the Fund was approved by the shareholders of the
Fund on December 20, 1994 and was last approved by the board of directors
of the Fund (including a majority of the directors who are not parties to
the agreement, or interested persons of any such party, other than as
directors of the Fund) on February 2, 1996. The Fund's Investment
Advisory Agreement continues from year to year only if a majority of the
Fund's directors (including a majority of disinterested directors as
described above) approve. The Fund's Investment Advisory Agreement may
be terminated by either the Fund or Centurion Counsel on 60 days' written
notice to the other, and terminates automatically in certain situations.
For the year ended December 31, 1994, the Fund's former
investment advisor Excel Advisors, Inc. ("Excel") earned $5,840 in fees
from the Fund before reimbursement of certain expenses. For the year
ended December 31, 1995 and 1996, Centurion Counsel, the Fund's current
investment advisor, earned $20,820 and $60,766 in advisory fees from the
Fund. For the year ended December 31, 1994, Excel reimbursed the Fund
$5,840, for expenses in excess of the expense limitations under its
investment advisory agreement with the Fund. For the year ended
December 31, 1995, Centurion Counsel reimbursed the Fund $20,821 for
expenses in excess of the expense limitations under its advisory
agreement with the Fund.
Accounting Services Agreement
Centurion Group, Inc. acts as the Fund's accounting services agent
pursuant to the Accounting Services Agreement with the Fund dated
January 1, 1995. Pursuant to this agreement, CGI maintains the books,
accounts, records, journals and other records of original entry relating
to the business of the Fund and performs certain daily functions in
connection therewith.
The Fund pays CGI a monthly fee equal on a annual basis to 0.15% of
average net assets, provided that the Fund has agreed to pay an annual
minimum accounting services fee of $18,000. The Fund paid CGI accounting
service fees of $18,000 for the year ended December 31, 1995 and 1996.
This fee is in addition to the fee payable by the Fund to Centurion Counsel
pursuant to the Fund's investment advisory agreement. For the year
ended December 31, 1994, the Fund paid its former accounting
services agent, Excel, $6,000, in accounting services fees. Excel had
waived $12,000 of its fee for the year ended December 31, 1994. For the
year ended December 31, 1995, CGI waived $6,000 of its fee.
The Accounting Services Agreement between CGI and the Fund was
approved by the board of directors of the Fund (including a majority of
the directors of the Fund who are not parties to the Agreement, or
interested persons of any such party, other than as directors of the
Fund) and by the shareholders of the Fund approved such Agreement on
December 20, 1994. A majority of the disinterested directors of the Fund
specifically found, in the course of their review of the Agreement, that
the Agreement is in the best interests of the Fund and its shareholders,
the services to be performed pursuant to the Agreement are services
required for the operation of the Fund, CGI can provide services the
nature and quality of which are at least equal to those provided by
others offering the same or similar services, and the fees for such
services are fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality. The
Agreement continues from year to year only if the Fund's directors
approve it in the same way they approve the Fund's Investment Advisory
Agreement. The Accounting Services Agreement may be terminated by
either the Fund or CGI on 60 days' written notice to the other, and the
Agreement terminates automatically in certain situations.
Administrative Agreement
CGI acts as transfer agent, dividend disbursing agent and
administrative services agent for the Fund pursuant to Administration
Agreement effective January 1, 1995. Pursuant to this agreement, CGI
will maintain the Fund's stock registers, process requested account
registration changes, issue stock certificates, record redemptions and
administer the payments of dividends by the Fund.
As compensation for these services, the Fund will pay CGI a separate
fee per service provided as follows: $0.75 per account maintenance per
month; $7.50 per dealer confirmation; $10.00 per wire transfer; and
$50.00 per 1,000 customer statements per month. In addition, all out of
pocket expenses incurred by CGI in connection with the rendering of
services pursuant to the Administration Agreement will be reimbursed to
CGI by the Fund. Such expenses will include, without limitation,
postage, stationery, telephone service, and any other expense involved in
the handling of correspondence. These fees are in addition to the fees
paid by the Fund to Centurion Counsel pursuant to the Fund's Investment
Advisory Agreement. For the year ended December 31, 1995 and 1996, the
Fund paid CGI, its administrative services agent, a fee of $2,124 and
$3,417, respectively. For the year ended December 31, 1994, the Fund
paid Excel, its former administrative services agent, administrative
fees of $1,406.
The Administration Agreement between CGI and the Fund was approved by
the Board of Directors of the Fund (including a majority of the directors
of the Fund who are not parties to the agreement, or interested persons
of any such party, other than as directors of the Fund) and by the
shareholders of the Fund on December 20, 1994. A majority of the
disinterested directors of the Fund specifically found, in the course of
their review of the agreement, that the agreement is in the best
interests of the Fund and its shareholders, the services to be performed
pursuant to the agreement are services required for the operation of the
Fund, CGI can provide services the nature and quality of which are at
least equal to those provided by others offering the same or similar
services, and the fees for such services are fair and reasonable in light
of the usual and customary charges made by others for services of the
same nature and quality. The agreement continues from year to year only
if the Fund's directors approve them in the same way they approve the
Fund's Investment Advisory Agreement. The Administration Agreement may
be terminated by either the Fund or by CGI on 60 days' written notice to
the other, and the Agreement terminates automatically in certain
situations.
Distribution Agreement
Representatives of CISI, as the Fund's principal underwriter, sell
the Fund's shares under the Distribution Agreement with the Fund dated
January 1, 1995, as amended November 6, 1996, CISI receives, as
compensation for services it performs under the Distribution Agreement, a
distribution fee. See "Payment of Certain Distribution Expenses" below.
CISI bears all advertising and promotion expenses in connection with the
distribution of the Fund's shares (except those expenses assumed by the
Fund's investment advisor). The Distribution Agreement was last approved
by the board of directors of the Fund (including a majority of the
directors who are not parties to the agreement, or interested persons of
any such party, other than as directors of the Fund) on
February 2, 1996. The Fund's Distribution Agreement may be
terminated by either CISI or the Fund on 60 days' written notice to the
other, and terminates automatically in certain situations. No front-end
sales charges were paid in connection with the sales of the Fund's shares
during the year ended December 31, 1995 and 1996. For the year ended December
31, 1994, the Fund's prior principal underwriter, Warner Beck
Incorporated, received gross amounts equal to $57, from the Fund in sales
commission through the sale of the Fund's shares. No sales commissions
were received by the Fund's principal underwriter for sales of the Fund's
shares in 1995 or 1996.
Under the Distribution Agreement, CISI agrees to indemnify the Fund
against all costs of litigation and other legal proceedings and against
any liability incurred by or imposed on the Fund in any way arising out
of or in connection with the sale or distribution of the Fund's shares,
except to the extent that such liability is the result of information
which was obtainable by CISI only from persons affiliated with the Fund
but not CISI.
Shareholder Services Agent Agreement
Pursuant to its Plan of Distribution for each Class A shares, Class
B shares and Class C Shares, the Fund has entered into a Shareholder
Servicing Agreement with CISI dated January 1, 1995 for the Class C
shares and dated November 6, 1996 for the Class A and Class B shares,
the first date on which the Fund offered Class A and Class B shares.
Pursuant to these agreements, as provided under the respective Plan
of Distribution, CISI and it representatives provide shareholder
liaison services ofr the Fund, including responding to customer
inquires and providing information on their investments, and
such other related services as the Fund or the holders of the
respective Class may reasonably request. Under each of the Shareholder
Services Agent Agreements, CISI and its shareholder servicing costs,
CISI received a Rule 12b-1 fee in the form of a Servicing Agree fee.
The Servicing Agent fee is calculated and payable quarterly, at an
annualized rate of 0.25% of the average daily net assets of the
Fund represented by the shares of the respective Class owned by
shareholders with whom CISI and its representatives maintain a
servicing relationship, or an amount which equals the maximum amount
payable to the Servicing Agent under applicable laws, regulations or
rules, whichever is less. CISI may reallow all or a portion of its
Servicing Agent fee to its representatives or to other broker-dealers
who contract to provide shareholder services to their customers
holding shares of the shares of the respective Class.
Payment of Certain Distribution Expenses
Pursuant to the payment of 12b-1 fees authorized by its Plans of
Distribution for the Class A, Class B and Class C shares, respectively,
the Fund has included in its Distribution Agreement with CISI provisions
for the payment to CISI of distribution fees with respect to each of the
Class A, Class B and Class C shares. With respect to each of the Class B
and Class C shares, CISI receives, a distribution fee which will be equal
to an annual rate of 0.75 of 1% of the Fund's average daily net assets
attributable to each of the Class B shares and Class C shares. This fee
is to compensate broker-dealers, including CISI, and CISI's registered
representatives, for their sales of the Fund's shares of the respective
Class to which the agreement relates, based on a percentage of the net
assets of the Fund relating to the respective Class for which such
broker-dealers or registered representatives are responsible by reason of
their sale of shares of the respective Class, and to pay other
advertising and promotional expenses in connection with the distribution
of the shares of the respective Class. CISI, at its expense, may also
provide additional compensation to dealers in connection with sales of
such shares of the Fund. Such compensation may include financial
assistance to dealers in connection with conferences, sales or training
programs for their employees, seminars for the public, advertising
campaigns regarding the Fund and/or dealer-sponsored special events. In
some instances, these incentives may be made available only to certain
dealers whose representatives have sold or are expected to sell
significant amounts of such shares. Such compensation may include
payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives and members of
their families to locations within or outside of the United States for
meetings or seminars of a business nature. Dealers may not use sales of
the Fund's shares to qualify for the incentives to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such
as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by the Fund or its shareholders.
Each of the Fund's Plans of Distribution provide for the indirect
payment of distribution expenses by the Fund only as described in the
preceding paragraph. The advertising and/or promotional expenses that
may be paid for pursuant to the Fund's Plan of Distribution include, by
way of example but not limitation, the costs of printing the prospectus,
statement of additional information and shareholder reports provided
to prospective investors; the preparation and distribution of sales
literature; advertising of any type; allocated overhead and other
expenses of the principal underwriter related to the distribution of the
Fund's shares; and payments to and expenses of, officers, employees or
representatives of the principal underwriter, of other broker-dealers,
banks or other financial institutions, and of any other persons who
provide support services in connection with the distribution of the
Fund's shares, including travel, entertainment, and telephone expenses.
Banks are currently prohibited under the Glass-Steagall Act from
providing certain underwriting or distribution services. If banking
firms were prohibited from acting in any capacity or providing any of the
described services, the Underwriter would consider what action, if any,
would be appropriate. The Underwriter does not believe that termination
of a relationship with a bank would result in any material adverse
consequences to the Fund. State securities laws regarding registration
of banks and other financial institutions may differ from the
interpretations of federal law expressed herein, and bank and
other financial institutions may be required to register as dealers
pursuant to certain state laws.
Indirect or reimbursable expenses under the Plan do not include
interest paid on amounts borrowed by Centurion Counsel to make the
payments for which reimbursement is made. Also, there is no provision
in any of the Plans limiting payments to the amounts of actual
distribution expenses or actual shareholder servicing expenses expended
by CISI. If the Plan were terminated or not continued, the Fund is not
contractually obligated to pay CISI for any expenses not previously
reimbursed by the Fund. However, the Fund could, in the sole discretion
of its Board of Directors, determine to reimburse all or a portion of any
such amounts.
Each of the Fund's Plans of Distribution contains, among other things,
provisions complying with the requirements of Rule l2b-1 discussed below.
Rule l2b-1(b) provides that any payments made by the Fund in connection
with the distribution of its shares may only be made pursuant to a
written plan describing all material aspects of the proposed financing of
distribution and also requires that all agreements with any person
relating to implementation of the plan must be in writing. In addition,
Rule l2b-1(b)(1) requires that such plan be approved by a vote of at
least a majority of the Fund's outstanding shares, and Rule l2b-1(b)(2)
requires that such plan, together with any related agreements, be
approved by a vote of the board of directors of the Fund and of the
directors of the Fund who are not interested persons of the Fund and have
no direct or indirect financial interest in the operation of the plan or
in any agreements related to the plan, cast in person at a meeting called
for the purpose of voting on such plan or agreements. Rule l2b-1(b)(3)
requires that the plan or agreement provide, in substance: (1) that it
shall continue in effect for a period of more than one year from the date
of its execution or adoption only so long as such continuance is
specifically approved at least annually in the manner described in
paragraph (b)(2) of Rule l2b-1; (2) that any person authorized to direct
the disposition of monies paid or payable by the Fund pursuant to the
plan or any related agreement shall provide to the Fund's board of
directors, and the directors shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made; and (3) in the case of a plan, that it may be
terminated at any time by vote of a majority of the members of the board
of directors of the Fund who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the
plan or in any agreements related to the plan or by vote of a majority of
the outstanding voting securities of the Fund. Rule l2b-1(b)(4) requires
that such plans may not be amended to increase materially the amount to
be spent for distribution without shareholder approval and that all
material amendments of the plan must be approved in the manner described
in paragraph (b)(2) of Rule l2b-1. Rule l2b-1(c) provides that the Fund
may rely upon Rule l2b-1(b) only if selection and nomination of the
Fund's disinterested directors are committed to the discretion of such
disinterested directors. Rule l2b-1(e) provides that the Fund may
implement or continue a plan pursuant to Rule l2b-1(b) only if the
directors who vote to approve such implementation or continuation
conclude, in the exercise of reasonable business judgment and in light
of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the 1940 Act, that there is a reasonable likelihood that the
plan will benefit the Fund and its shareholders. For the years ended
December 31, 1995 and 1996 , CISI, the Fund's principal underwriter, received
$10,088 and $49,449 in distribution service fees, pursuant to the Fund's Class C
Plan of Distribution, the only Plan of Distribution in effect prior to
1996. During the year ended December 31, 1994, the Fund's former principal
underwriter, Warner Beck Incorporated, received $0 from the Fund pursuant to the Fund's Class C share
Plan of Distribution.
CUSTODIAN; GENERAL COUNSEL; AUDITORS
Star Bank, NA, 425 Walnut Street, Cincinnati, Ohio, 45202-1118 acts
as custodian of the Fund's assets. The custodian may, in conformity
with applicable rules of the Securities and Exchange Commission, enter
into sub-custodial arrangements with eligible foreign sub-custodians for
the custody of any foreign securities held by the Fund.
Rushall & McGeever acts as the general counsel for the Fund. Squire
& Company acts as the Fund's independent public accountants.
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.
The Fund expects to use affiliates of Centurion Counsel, including
CISI, as brokers of the Fund's portfolio securities but only if the
provisions of Section 17(e) of the 1940 Act (and the rules thereunder)
are complied with and only when, in the judgment of Centurion Counsel,
the firm will be able to obtain a price and execution at least as
favorable as other qualified brokers, and the transactions effected by
the firm, including the frequency thereof, the receipt of commissions
payable in connection therewith and the selection of the 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 the
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 Centurion Counsel or its
affiliates. 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 these
persons to supplement their own investment research activities and
enables them 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, Centurion Counsel receives a benefit, not capable of
evaluation in dollar amounts, without providing any direct monetary
benefit to the Fund from these commissions. Centurion Counsel 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, Centurion Counsel 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 the list, if any, is merely a general guide which is to 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. Centurion Counsel 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 it determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by the broker-dealer viewed in
terms of either that particular transaction or its overall
responsibilities with respect to the accounts as to which it exercises
investment discretion. Generally, the Fund pays higher 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, Centurion Counsel
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 the 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. During 1994, all of these
transactions were effected through brokers or banks unaffiliated with
the Fund. During 1995 and 1996, $66,200 and $146,700, respectively, of
such transactions were effected through CISI and/or its affiliate, PIM.
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 the years ended
December 31, 1995 and 1996, $6,726 and $25,973, respectively, of total
commissions were paid to CISI, the Fund's principal underwriter, and to
its affiliate, PIM. During 1994, 1995 and 1996 commissions of -0-, $3,271
and $9,051, respectively, were paid to broker-dealer who provided
investment research to the Fund's Advisor. During 1994, 1995 and 1996,
PIM and CISI, together, effected 90%, 87% and 75%, respectively, of the
total dollar volume of transactions in which commission were paid and
received 89%, 67% and 74%, respectively, of such commissions.
RETIREMENT ACCOUNTS
The objectives of the Fund may make the shares of the Fund an
appropriate investment for Tax-Sheltered Retirement Plans, including
Individual Retirement Accounts ("IRAs"), Keogh (HR-10) Plans (for
self-employed individuals), qualified corporate pension or profit sharing
plans (for employees) and Tax-Deferred Investment Plans (for employees of
public school systems and certain types of charitable organizations).
IRAs are available from the Fund. Persons desiring information about
the available IRAs or about any other of the plans referred to above
should communicate with a CISI representative. All tax-sheltered
retirement plans referred to above involve a long-term commitment of
assets and are subject to various legal requirements and restrictions.
The legal and tax implications may vary according to the circumstances of
the individual investor. Therefore, the investor is urged to consult
with an attorney or tax advisor prior to the establishment of such a
plan.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
On December 31, 1996, the net asset value per share for the Class C
Shares and Class D Shares of the Fund was calculated as follows:
Class C Shares: Net Assets ($7,855,177) =Net Asset Value Per Share ($3.51)
-------------------------
Shares
Outstanding ($2,241,071)
Class D Shares: Net Assets ($1,838,946) =Net Asset Value Per Share ($3.51)
------------------------
Shares
Outstanding ($ 524,409)
As disclosed in the Prospectus, during certain emergencies, the board
of directors of the Fund can suspend the computation of net asset value
of the Fund, stop accepting payments for purchase of the Fund's shares or
suspend the duty of the Fund to redeem its shares. There are only a few
such emergency situations:
- The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings, or trading on the Exchange is
restricted as defined by the Securities and Exchange Commission.
- The Securities and Exchange Commission decides that for a certain
period of time, disposal of the Fund's securities is not
practical, or that it is not practical for the Fund to fairly
value its net assets.
- Other emergency periods declared by the Securities and Exchange
Commission under the provisions of the Investment Company Act of
1940.
The Fund will pay in cash all redemption requests by any shareholder
of record, limited in amount during any 90-day period to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of
such period. When redemption requests exceed such amount, however, the
Fund reserves the right to make part or all of the payment in the form
of securities or other assets of the Fund. An example of when this might
be done is in case of emergency, such as in those situations enumerated
above, or at any time a cash distribution would impair the liquidity of
the Fund to the detriment of existing shareholders. Any securities being
so distributed would be valued in the same manner as the portfolio of
the Fund is valued. If the recipient sold such securities, he or she
probably would incur brokerage charges. The Fund has filed with the
Securities and Exchange Commission a notification of election pursuant to
Rule 18f-1 under the Investment Company Act of 1940 in order to make such
redemptions in kind.
TAXES
Since its inception the Fund has met, and the Fund intends to
continue to meet, the requirements for regulated investment companies
under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and, if it meets these requirements, the Fund will not be
liable for federal income taxes to the extent the Fund distributes its
taxable income to its shareholders. To qualify as a regulated investment
company, the Fund must meet certain tests of diversification of assets,
source of income and other requirements of the Code. However, the Fund's
management reserves the right to depart from this policy whenever, in its
sole judgment, it is deemed in the best interest of the Fund and its
shareholders to do so. If the Fund fails to meet any of the Code
requirements, the Fund will be subject to tax on its income as a regular
corporation whether or not its income is distributed to its shareholders,
and any such distributions will be taxable to the Fund's shareholders as
ordinary dividends to the extent of its current and accumulated earnings
and profits, regardless of whether such distributions were derived from
the Fund's net long-term capital gains.
Under the Code, the Fund will be subject to a non-deductible excise
tax equal to 4% of the excess, if any, of the amount required to be
distributed pursuant to the Act for the calendar year over the amount
actually distributed. Any undistributed amounts subject to
corporate-level income tax, however, will not be subject to the excise
tax. In order to avoid the imposition of the excise tax, the Fund must
generally declare dividends by the end of the calendar year representing
98% of the Fund's ordinary income for the calendar year and 98% of its
capital gain net income (both long-term and short-term capital gains) for
the twelve-month period ending October 31 of the calendar year.
Currently, individual shareholders are not able to exclude
distributions by the Fund which are attributable to dividends earned by
the Fund, and corporate shareholders are allowed to deduct 70% of such
dividend distributions. Such a deduction by a corporate shareholder is
limited to the portion of the Fund's gross income which is derived from
dividends received from domestic corporations. Since it is anticipated
that a portion of the Fund's net investment income may be derived from
sources other than dividends from domestic corporations, a portion of its
dividends may not qualify for this exclusion. Distributions designated
as long-term capital gain distributions will be taxable as long-term
capital gains, regardless of how long shares have been held, and will not
be eligible for the dividends received deduction for corporate
shareholders referred to above.
For federal tax purposes, if a shareholder transfers shares of the
Fund for shares of Cash Equivalent Fund-Money Market Portfolio, such
transfer will be considered a taxable sale of the first-purchased shares.
Furthermore, if a shareholder uses the exchange privilege within ninety
days of the purchase of the first-purchased shares, any sales charge
incurred on the purchase of those shares cannot be taken into account for
determining the shareholder's gain or loss on the sale of those shares to
the extent any sales charge on the purchase of the later-acquired shares
is reduced because of the exchange privilege. However, the amount of any
sales charge that may not be taken into account in determining the
shareholder's gain or loss on the sale of the first-purchased shares may
be taken into account in determining his gain or loss on the eventual
sale or exchange of the later-acquired shares.
The foregoing discussion of Federal income tax consequences is based
on tax laws and regulations in effect on the date of this Prospectus, and
is subject to change by legislative or administrative action. Further,
in those states that have income tax laws, the tax treatment of the Fund
and of shareholders in respect to distributions by the Fund may differ
from Federal tax treatment. Prospective investors are advised to consult
with their tax advisors concerning the application of state and local
taxes to distributions by and investments in the Fund which may differ
from the Federal income tax consequences described above.
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to
the Fund's "average annual total return" and "cumulative total return."
All such quotations are based upon historical earnings and are not
intended to indicate future performance. The investment return on and
principal value of an investment in the Fund will fluctuate, so that the
investor's shares when redeemed may be worth more or less than their
original cost.
Average Annual Total Return
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the
advertisement that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of
a hypothetical $1,000 payment made at the beginning
of such period.
This calculation deducts the maximum sales charge from the initial
hypothetical $1,000 investment,
assumes all dividends and capital gains distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The following table sets forth the average annual total return for
the Fund for the periods ended December 31, 1996, as set forth below:
PERIODS ENDED DECEMBER 31, 1996
Since inception
One Year Five Years Ten Years (Jan. 18, 1982)
5.16% (8.29)% (2.84)% 4.60%
Cumulative Total Return
Cumulative total return is calculated by finding the cumulative
compounded rate of return over the period indicated in the advertisement
that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
ERV-P
CTR = (---------)100
P
CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period
P = initial payment of $1,000
This calculation deducts the maximum sales charge from the initial
hypothetical $1,000 investment, assumes all dividends and capital gains
distributions are reinvested at net asset value on the appropriate
reinvestment dates as described in the Prospectus, and includes all
recurring fees, such as investment advisory and management fees, charged
to all shareholder accounts.
The cumulative return for the Fund for the ten year period
beginning on January 1, 1986 and ending on December 31, 1996 was 92.26%.
LIMITATION OF DIRECTOR LIABILITY
Under Minnesota law, the director of the Fund owes certain fiduciary
duties to the Fund and to its shareholders. Minnesota law provides that
a director "shall discharge the duties of the position of director in
good faith, in a manner the director reasonably believes to be in the
best interest of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances."
Fiduciary duties of a director of a Minnesota corporation include,
therefore, both a duty of "loyalty" (to act in good faith and act in a
manner reasonably believed to be in the best interests of the
corporation) and a duty of "care" (to act with the care an ordinarily
prudent person in a like position would exercise under similar
circumstances). In February, 1987, Minnesota enacted legislation which
authorizes corporations to eliminate or limit the personal liability of a
director to the corporation or its shareholders for monetary damages for
breach of the fiduciary duty of "care." Minnesota law does not, however,
permit a corporation to eliminate or limit the liability of a director
(i) for any breach of the directors' duty of "loyalty" to the corporation
or its shareholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for
authorizing a dividend, stock repurchase or redemption or other
distribution in violation of Minnesota law or for violation of certain
provisions of Minnesota securities laws, or (iv) for any transaction from
which the director derived an improper personal benefit. The Articles of
Incorporation of the Fund were amended on April 28, 1988, to limit the
liability of directors to the fullest extent permitted by Minnesota
statutes, except to the extent that such liability cannot be limited as
provided in the 1940 Act (which Act prohibits any provisions which
purport to limit the liability of directors arising from such directors'
willful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of their role as directors).
Minnesota law does not eliminate the duty of "care" imposed upon a
director. It only authorizes a corporation to eliminate monetary
liability for violations of that duty. Minnesota law, further, does not
permit elimination or limitation of liability of "officers" to the
corporation for breach of their duties as officers (including the
liability of directors who serve as officers for breach of their duties
as officers). Minnesota law does not permit elimination or limitation of
the availability of equitable relief, such as injunctive or rescissionary
relief. Further, Minnesota law does not permit elimination or limitation
of a director's liability under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and it is uncertain whether and to what
extent the elimination of monetary liability would extend to violations
of duties imposed on directors by the 1940 Act and the rules and
regulations adopted under such Act.
ADDITIONAL INFORMATION
The Fund was incorporated under the name "IRI Stock Fund, Inc." The
shareholders of the Fund, at a meeting held on May 10, 1989, approved an
amendment to the Articles of Incorporation (the "Articles") of the Fund
providing that the name "IRI Stock Fund, Inc." be changed to "Excel
Value Fund, Inc." The shareholders of the Fund, at a meeting held on
December 20, 1994, approved an amendment to the Articles providing that
the name "Excel Value Fund, Inc." be changed to "Centurion T.A.A. Fund,
Inc."
The Fund is not required under Minnesota law to hold annual or
periodically scheduled regular meetings of shareholders. Regular and
special shareholder meetings are held only at such times and with such
frequency as required by law. Minnesota corporation law provides
for the Board of Directors to convene shareholder meetings when it deems
appropriate. In addition, if a regular meeting of shareholders has not
been held during the immediately preceding 15 months, a shareholder or
shareholders holding 3% or more of the voting shares of the Fund may
demand a regular meeting of shareholders of the Fund by written notice of
demand given to the chief executive officer or the chief financial
officer of the Fund. Within 90 days after receipt of the demand, a
regular meeting of shareholders must be held at the expense of the Fund.
Additionally, the 1940 Act requires shareholder votes for all amendments
to fundamental investment policies and restrictions and for all
investment advisory contracts and amendments thereto.
The Fund has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act
of 1933 and the 1940 Act, with respect to the common stock offered
hereby. This Statement of Additional Information does not contain all of
the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with rules and regulations of the
Commission. The Registration Statement may be inspected at the principal
office of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and copies thereof may be obtained from the Commission at
prescribed rates.
FINANCIAL STATEMENTS
The Fund's unaudited Statement of Assets and Liabilities dated
June 30, 1996 the Fund's unaudited Statement of Operations and the
Fund's unaudited Statement of Changes in Net Assets for the six months
ended June 30, 1996 are included in the Fund's Semi-Annual Report to
Shareholders dated June 30, 1996, which are hereby incorporated by
reference there to.
The Fund's Financial Statements for the year ended December 31, 1996
are set forth below.
CENTURION T.A.A. FUND, INC.
(Formerly Excel Value Fund, Inc.)
FINANCIAL STATEMENTS
For the Year Ended December 31, 1996
CENTURION T.A.A. FUND, INC.
11545 WEST BERNARDO COURT, #100
SAN DIEGO, CALIFORNIA 92127
1996 Annual Report
As you may recall our investment posture for 1996 was based on our belief that
the market was over valued and therefore we would follow a cautionary
position, including maintaining significant cash reserves and hedges. Even
though the market did not correct in 1996, we believe more so now in the
overvaluation theory, as you may have noticed in the papers does
Mr. Greenspan. Notwithstanding that our investment approach was geared for
a market correction, which has not happened yet, the results for the year
were gratifying in some ways even though your Fund earned a lower return
than those of major indexes. The Fund's return for the first six months
and for the year ended December 31, 1996 was 8.7% and 5.1%, respectively.
During the first six months of 1996 the market was very volatile and our
investment approach resulted in a return for your Fund of 8.7%. In fact, in
mid-July 1996, the DJII actually dropped one day so that it was the same as
the beginning of the year while your Fund was up 9% for the year on that
date. However, during the second half of the year when approximatley 30%
of the portfolio was in cash and commerical paper, the market made a major
increase. During 1996 the larger-capitalization stocks had the
greater return and accounted for most of the increase in the indexes. Our
studies (see the chart of the 1996 NASDAQ Returns By Decile) show that the
return declines almost in direct proportion from larger capitalization
stocks to small capitalization stocks. The Fund's portfolio was more heavily
weighted in small to mid-capitalization stocks and, therefore last year the
Fund did not benefit from the market's bias toward larger-capitalization
stocks.
<CHART>
Despite the fact that some major market indices showed impressive gains, the
majority of the gains were the result of a few select stocks. For 1996, the
NASDAQ composite was up 21.95%. Although this gain appears spectacular,
79% of the total was due to the following four stocks: Intel, Microsoft,
Oracle and Cisco Systems. Without these four stocks, the balance of the
NASDAQ was up only 4.55%. To a typical investor, these market indices can
be very deceiving. As indicated above, an investor's portfolio may have had
100% exposure to NASDAQ stocks but only been up 4.55%.
Significant progress has been made in increasing the size of the Fund from
$4,370,000 at December 31, 1995 to $9,694,123 at December 31, 1996. At the
shareholders meeting on August 6, 1996, a multi-class share arrangement was
approved which should provide the impetus for continued sales of the Fund
shares. We beleive that the increased size will benefit the shareholders in
the future by reducing the expense ratio and allowing for more portfolio
diversification.
MARKET PERSPECTIVE
In the last quarter of 1996, the economy strengthened while inflation remained
subdued. Although ecomonic growth is the best environment for profits, we
expect 1996's fourth quarter corporate earnings to be flat versus 1995.
Going into 1997, what are the hurdles for corporate profits? Poor pricing
power and less room to shed interest and labor costs are the greatest concerns.
While most likely everyone is impressed with American Management's commitment
to the bottom line, their cost cutting strategies they have been pursuing
cannot be extended indefinitely. Inevitably the Federal Reserve will raise
interest rates. When will rates start to go up and by how much? The
Federal Reserve has been looking at classic signals of bottlenecks in both goods
and labor markets. (History will never forgive Greenspan if he lets the wage
genie out of the bottle). Additionally, in response to worldwide ecomonic
expansion, stronger demand for commodities may contribute to some inflation in
metals, energy, paper and chemicals. However, in order to sustain our current
inflation level over the long-term, a recession may have to occur next year.
When the Federal Reserve initiates the first interest rate hike, the markets
may perceive many more rate hikes to follow. Therefore, equity prices could
be bid down since equities tend to be less attractive in a rising short-term
interest rate environment. In addition, a higher federal funds rate may raise
banks' funding costs, thereby acceleratng banks' credit tightening, bringing
forward the unwinding of consumer leverage. The worry over the long-term is
that Fed tightening could trigger an abrupt pullback. Specifically, the vast
majority of investors are not anticipating a "1997 downturn" in the ecomony.
However, this type of risk increases when leverage is present, and the house-
hold sector is leveraged in both consumer debt, now at $64 trillion, is
growing at an annual rate that is two time larger than wages. Essentially,
this means that for every $1 that household incomes rise, Americans are
spending $1.10." (Donaldson, Lufkin, & Jenrette, Dec. 20, 1996)
Besides looking at next year's overall economy, it is important to review the
overall makeup of the market indices. Actually, some of our very popular
market averages have had small increases for the year 1996.
As an investor, it is very important to keep in perspective your long-term
goals and frequently review your tolerance for risk. Although it is tempting
to look at the overall market returns and perhaps decide to increase your
level of risk, it is equally important to review your initial goals, compare
your returns to the type of funds that you have chosen, and then calculate
your risk tolerance level.
It is hard to dispute the wisdom of diversificiation. In the investment
world, the economy's ups and downs, political developments and shifting
interest rates mean different things for different portfolios. To a
performance and risk covering many asset classes, your investments will
compliment one another. Although your returns may lag in a straight up
market, a diversified portfolio spreads the risk and opportunity over
several markets and investment stratagies, such as equity, cash, fixed
income, etc.
The Fund may hold three classes of financial assets in its allocation
strategy: stocks, bonds and cash reserves. Because we believe there
continues to be a substantial risk of market correction (and, in general,
a significant drop in market prices), we expect to continue the Fund's
cautionary positions which include maintaining significant cash reserves.
IN SUMMARY
The U.S. stock market has been rising uninterrupted for nearly seven years,
and has gone the longest period in history without a 10% downward correction.
The risk of investing in stocks is higher now than ever. We believe that
there will be a correction. However, we believe that you should continue to
be invested in a flexible fund, such as your Fund, with the flexibility to
alter the portfolio according to market conditions in order to decrease market
volatility.
Jack K. Heilbron Kenneth W. Elsberry
Chief Executive Officer President
Chief Investment Officer Chief Financial Officer
<PAGE>
TEN LARGEST HOLDINGS (% OF NET ASSESTS)
1/1/97
Occidental Petroleum 2.41%
Westinghouse 2.05%
Noble Drilling 2.05%
Hershery Creamery 1.95%
Rockshox 1.94%
First National Bank of Anchorage 1.72%
Indochina Gold 1.21%
Pier One 1.09%
National Bancorp of Alaska 1.06%
Navistar 1.04%
SECTOR DIVERSIFICATION (% OF NET ASSETS)
1/1/97
Commerical Paper 17.50%
Cash 11.34%
Mining & Precious Metals 8.94%
Energy 6.42%
Retail-Specialty 5.01%
Real Estate 4.98%
Restaurants 3.59%
Auto & Auto Parts 3.45%
Consumer Durables 3.40%
Home Building 2.80%
Finance/Regional Banking 2.79%
Consumer/Defensive 2.73%
<PAGE>
</TABLE>
<TABLE>
CENTURION T.A..A. FUND, INC.
STATEMENT OF INVESTMENT SECURITIES
December 31, 1996
(Audited) CENTURION TAA FUND
<CAPTION>
Shares or % OF
Principal Net Market
Amount Description Assets COST (a) PRICE Value (b)
COMMON STOCKS 64.19%
<S> <C> <C> <C> <C> <C>
AEROSPACE 0.44%
1000 SUNDSTRAND $,39,935 $,42,500
39,935 42,500
AUTO AND AUTO PARTS 3.45%
1000 ECHLIN 32,195 31,750
2500 FEDERAL MOGUL 47,838 (d) 55,000
500 GENUINE PARTS 22,863 22,250
3000 MODINE MANUFACTURING 83,625 80,250
11100 NAVISTAR INTERNATIONAL 125,680 (d) 101,288 (e)
1500 STEWART & STEVENSON SERVICES 36,638 43,688
348,838 334,226
BICYCLES 1.94%
13000 ROCKSHOX 171,875 188,500 (e)
171,875 188,500
BIOTECHNOLOGY 1.48%
2200 CELGENE 17,573 (d) 24,475 (e)
3000 COR THERAPEUTICS 29,400 (d) 29,625 (e)
1000 CYGNUS 16,560 (d) 14,500 (e)
10000 NEOTHERAPEUTICS 50,825 41,250 (e)
2000 SEPRACOR 32,320 (d) 33,250 (e)
146,678 143,100
CHEMICALS 0.97%
2873 CROMPTON & KNOWLES 46,275 (d) 55,305
2200 MILLENNIUM CHEM 46,330 39,050 (e)
92,605 94,355
COMPUTER AND RELATED 1.69%
2720 ANACOMP 26,090 23,120 (e)
1000 INGRAM MICRO 21,695 23,000 (e)
500 INTEL 67,040 65,469
3200 S3 INC 43,200 52,000 (e)
158,025 163,589
COMMUNICATIONS 1.06%
3000 FRONTIER 62,400 (d) 67,875
2500 BEL FUSE 32,288 35,313 (e)
94,688 103,188
COMPUTER/SOFTWARE 1.14%
5000 DIGITAL SOLUTIONS 23,125 17,188 (e)
3000 HNC SOFTWARE 108,920 (d) 93,750 (e)
132,045 110,938
CONSUMER SERVICE 0.19%
400 FIRST VIRTUAL 3,600 3,600 (e)
1000 OLSTEN 14,675 15,125
<PAGE> 18,275 18,725
CONSUMER/DEFENSIVE 2.73%
1000 BEATRICE (TLC) 61,000 27,000
1200 CERVECERIA UNIDAS 19,385 19,350
100 HERSHEY CREAMERY 180,000 189,250
1000 PEPSICO 31,070 29,375 (e)
291,455 264,975
CONSUMBER/DURABLES 3.40%
3000 BLACK & DECKER 100,170 (d) 90,375
1000 CHART INDUSTRIES 16,935 17,125
500 LANCASTER COLONY 21,170 23,000
10000 WESTINGHOUSE ELECTRIC 187,750 (d) 198,750
326,025 329,250
ENERGY 6.42%
4000 BASIN EXPLORATION 27,500 25,000 (e)
3000 GLOBAL MARINE 50,370 (d) 61,875 (e)
10000 NOBLE DRILLING 146,550 (d) 198,750 (e)
10000 OCCIDENTAL PETEROLEUM 241,550 (d) 233,750
13000 PEASE OIL AND GAS 23,663 39,407 (e)
2020 ULTRA DIAMOND SHAMROCK 57,755 (d) 63,883 (e)
547,388 622,665
ENVIRONMENTAL 1.73%
6000 MOLTEN METAL TECHNOLOGIES 102,175 (d) 70,500 (e)
1400 SAFETY-KLEEN 24,570 22,925
10000 TRC COMPANIES INC. 47,700 45,000 (e)
900 WMX TECH 30,983 29,250
205,428 167,675
FINANCE/REGIONAL BANKING 2.79%
100 FIRST NATIONAL BANK ANCHORAGE 154,250 167,500
1500 NATIONAL BANCORP ALASKA 93,425 102,750
247,675 270,250
GAMING 0.91%
2000 AZITAR 13,850 14,250 (e)
1700 INTERNATIONAL GAME TECHNOLOGY 33,235 (d) 31,025
1000 ITT CORP 42,435 43,375 (e)
89,520 88,650
<PAGE>
HEALTHCARE/MEDICAL 1.57%
2500 CAPSTONE PHARMACY 29,163 (d) 28,438 (e)
2000 CARDIAC PATHWAYS 22,250 23,750 (e)
3400 MARINER HEALTH GROUP 46,085 (d) 28,475 (e)
900 MERCK 56,970 (d) 71,550
154,468 152,213
HOME BUILDING 2.80%
2000 CAVCO IND 41,250 51,500 (e)
300 CENTEX CORP 10,005 11,288
2000 CHAMPION ENT 40,350 39,000 (e)
1700 CROSSMANN COMM 30,255 28,900 (e)
3300 FALCON BUILDING 41,400 48,675 (e)
2000 OAKWOOD HOMES 42,600 (d) 45,750
4000 SOUTHERN ENERGY HOMES 56,000 46,000 (e)
261,860 271,113
INDUSTRIAL/STEEL 0.39%
4300 BETHLEHEM STEEL 45,322 38,163 (e)
45,322 38,163
INSURANCE 0.10%
500 HIGHLANDS INSURANCE 10,428 10,125 (e)
10,428 10,125
MANUFACTURING/TOYS 0.58%
4000 GALOOB 69,700 56,500 (e)
<PAGE> 69,700 56,500
MINING AND PRECIOUS METALS 8.94%
1500 AEGNICO EAGLE MINES 20,700 21,000
2400 ALTA GOLD 9,390 8,476 (e)
10000 AMAX GOLD 57,700 63,750 (e)
3000 BARRICK GOLD 85,985 (d) 86,250
6200 BEMA GOLD 37,653 36,813 (e)
1000 CAMBIOR 15,310 14,625
1000 COEUR D'ALENE MINES 15,560 15,125
1200 ECHO BAY MINES 10,050 7,950
1000 FRANCO NEVADA MNG (CN) 39,610 45,790
300 FREEPORT COP & GOLD 10,690 8,963
300 GETCHELL GOLD 13,240 11,513 (e)
1400 GLAMIS GOLD 10,935 9,800 (e)
1100 GOLDEN STAR RES 20,965 14,300 (e)
4000 HECLA MINING 23,660 22,500 (e)
6300 HOMESTAKE MINING 109,203 (d) 89,775
10000 INDOCHINA GOLD (CN) 71,500 117,500 (e)
3900 KINROSS GOLD 28,293 27,788 (e)
2000 NEWMONT GOLD 102,005 87,500
300 NEWMONT MINING 14,103 13,425
1000 PEGASUS GOLD 10,310 7,563 (e)
1000 REYNOLDS METALS 56,925 56,375
1400 ROYAL GOLD 19,593 18,725 (e)
5800 ROYAL OAK MINES 22,238 18,850 (e)
1800 SANTA FE GOLD 21,455 27,675 (e)
13800 SUNSHINE MINING 17,390 12,938 (e)
2800 TVX GOLD 21,100 21,700 (e)
865,560 866,669
PACKAGING AND CONTAINERS 1.91%
9000 GAYLORD CONTAINER 66,263 55,125 (e)
1000 INTERNATIONAL PAPER 40,185 40,500
2000 SPECIALTY PAPER BOARD 38,350 40,000 (e)
700 TEMPLE-INLAND 37,849 37,888
240 UNION CAMP CORP 11,845 11,460
194,492 184,973
PUBLISHING 0.29%
2500 GOLDEN BOOKS FAMILY ENTERTAINMENT 28,850 27,813 (e)
28,850 27,813
REAL ESTATE 4.98%
1400 AMLI RESIDENTIAL PROPERTIES 28,580 32,725
1600 APARTMENT INVESTMENT 30,080 45,200
2100 BRADLEY RE 31,648 37,800
1300 CBL & ASSOC 29,640 33,638
1000 DUKE REALTY 29,305 38,500
500 LIBERTY PROPERTIES 9,915 12,875
1200 MID-AMERICA APARTMENT 30,060 34,650
5000 PRIME RETAIL 60,313 62,500
1000 RECKSON ASSOC REALTY 33,070 42,250
2500 UNITED DOMINION REALTY 34,813 38,750
2600 US RESTAURANT PROP 59,141 72,150
1800 WASHINGTON REIT 28,665 31,500
405,229 482,538
RESTAURANTS 3.59%
2500 APPLE SOUTH 33,850 33,750
2500 FOODMAKER 17,906 22,187 (e)
3000 LANDRY'S SEAFOOD 60,875 64,125 (e)
5000 NPC INTERNATIONAL 47,500 41,250 (e)
3900 ROCK BOTTOM 58,413 40,462 (e)
5000 RYAN FAMILY STEAKHOUSE 38,325 34,375 (e)
1500 SBARRO 37,778 38,250
1641 SHONEY'S 13,207 11,487 (e)
5000 TPI ENTERPRISES 543 469 (e)
3000 WENDY'S INTERNATIONAL 55,680 61,500
<PAGE> 364,076 347,855
RETAIL-SPECIALTY 5.01%
2000 BROWN GROUP 45,245 36,750
500 DONNA KARAN INTERNATIONAL 7,165 7,062 (e)
1000 J.C. PENNY 52,824 48,750
3000 OFFICE DEPOT 58,650 (d) 54,000 (e)
6000 PIER ONE IMPORTS 91,050 (d) 105,750
1000 QUALITY FOOD CENTERS 34,050 33,750 (e)
4000 QUIKSILVER (f) 82,000 85,500 (e)
5000 WEST COAST ENTERTAINMENT 44,375 43,750 (e)
1500 WHOLEFOODS MARKET 33,050 33,750 (e)
1000 WILLIAMS-SONOMA 30,810 (d) 36,375 (e)
479,219 485,437
TRANSPORTATION/TRUCKING 1.93%
1350 HEARTLAND EXPRESS 25,763 32,906 (e)
1300 MS CARRIER 27,300 20,800 (e)
2800 SMITHWAY MOTOR 25,200 22,750 (e)
2000 SWIFT TRANS 37,250 47,000 (e)
3500 WERNER ENTERPRISES 60,425 63,438
175,938 186,894
UTILITIES 1.75%
500 AMERICAN ELECTRIC POWER 20,800 20,562
900 BOSTON EDISON 21,690 24,187
600 CMS ENERGY 19,167 20,175
650 DTE CORP 19,240 21,044
400 FPL GROUP 18,440 18,400
600 HAWAIIAN ELECTRIC 21,285 21,675
800 IPALCO ENTERPRISE 21,680 21,800
200 NORTHEAST UTILITY 2,656 2,650
800 TECO ENERGY 19,580 19,300
164,538 169,793
TOTAL COMMON STOCKS 64.19% 6,130,130 6,130,130 6,222,672 6,222,672
PREFERRED STOCKS 0.63%
6000 TYCO TOYS - PFD 34,110 60,750
TOTAL PREFERRED STOCKS 34,110 60,750
<PAGE>
OPTIONS AND WARRANTS 7.56%
2000 ADTRAN, FEB, 45, Puts 21,189 13,375
2000 ADVANCE TECH, APR, 35, Puts 12,064 12,250
2000 ADVANTA, APR, 50, Puts 13,814 16,000
1500 ARMSTRNG WLD, MAR, 55, Calls 22,741 21,562
5000 ASM LITHO, APR, 40, Puts(BEAR) 37,653 10,312
1000 BIOTECH INDEX, APR, 140, Puts 14,919 8,375
5000 C-CUBE, FEB, 40, Puts (B. STRN) 45,775 30,000
12000 CABLETRON, JAN(98), 60, P (B/S) 48,207 49,500
2000 CANADIAN PACIFIC, APR, 20, Calls 11,064 13,500
2000 COHERENT INC, FEB, 35, Puts 8,814 1,750
2000 DEERE, MAR, 35, Calls 12,564 12,375
3000 EXABYTE, FEB, 15, Puts(J) 7,590 5,812
2000 GARTNER GRP, APR, 35, Puts 15,814 6,625
2500 GEOWORKS, MAY, 25, Puts 18,199 12,031
1000 GOLD/SILVER INDEX, JAN,(98), Calls 22,919 21,000
2000 HEARTPORT, APR, 22.5, Calls 9,564 7,250
2000 INGERSOLL-RAND, MAR, 40, Calls 11,064 10,500
500 INTEL, JAN, 150, (99) Puts 14,534 15,500
2000 MEAD, APR, 50, Calls 17,814 18,000
1500 MEDTRONIC, MAY, 55, Calls 22,929 21,000
10000 MICRON, JAN, 35, Puts 51,550 60,000
7000 MOTOROLA, APR, 55, Puts (B/S) 46,585 11,812
2000 NATURE'S SUNSHINE, MAR, 25, Puts 9,064 13,750
1000 OEX, FEB, 720, Puts 20,794 19,500
1000 OEX, JAN, 660, Puts 13,544 1,437
1000 OEX, JAN, 670, Puts 13,794 2,125
1500 PAGING NETWORK, MAR, 22.5, Puts 7,357 10,875
8000 PAIRGAIN, APR, 35, Puts 54,620 59,500
2500 PETSMART, MAY, 22.5, Calls 13,511 7,031
2000 QUALCOM, APR, 45, Puts 21,314 15,250
2500 ROTEC MED, MAR, 17.5, Puts 9,449 1,406
3200 S-3, JAN, 25, Puts 15,288 28,000
1000 SEMICNDCTR, MAR, 205, Puts 18,794 4,813
3500 STONE CON, MAR, 12.5, Calls 12,373 9,406
2500 STRUCTURAL DYN, MAY, 25, Puts 18,199 15,000
26900 SUNSHINE MINING - WARRANTS 23,672 8,406
2000 TELCOM NEW ZEALAND, MAR, 80, Calls 15,314 7,625
2500 TRIMBLE NAV, JUN, 10, Calls 8,199 7,344
5000 TRIQUINT, MAY, 30, Puts 56,400 33,437
2000 US SATELLITE BROADCAST,JUN, 10, Calls 8,314 4,750
5000 VANGUARD CEL, MAR, 17.5, Puts 11,463 12,187
10000 VITEL, JUL, 7 1/2, Calls 34,050 33,750
4000 WESTERN NATIONAL, APR, 15, Calls 14,620 17,500
2500 WYLE ELECTRONICS, MAR, 35, Puts 14,761 2,500
1500 YORK INTERNATIONAL, FEB, 45, Calls 10,544 16,687
7500 ZITEL, JAN, 55, Calls 35,850 22,500
TOTAL OPTIONS AND WARRANTS 948,639 733,308
<PAGE>
FIXED INCOME SECURITIES
CORPORATE BONDS 2.44%
200 FOODMAKER CORP, 9.25%, DUE 9/25/99 199,251 204,160
1.199 MTN STS GTY MTG 1-G, 9.4%, DUE 8/1/18 1,242 1,273
25 NOVA CARE, 5.5%, DUE 1/15/00 25,000 22,875
20 TIME WARNER, 0%, DUE 6/22/13 8,680 8,600
234,173 236,908
U.S. GOVERNMENT AND AGENCY BONDS 0.99%
2.032 FHLMC 1294 A, 6.5%, DUE 4/15/21 1,729 2,028
75.784 FNMA 61G, 7.0%, DUE 1/1/01 75,432 76,163
21.948 FNMA G93-40 ZC, 6.5%, DUE 12/25/23 18,768 18,087
95,929 96,278
COMMERCIAL PAPER 17.50%
600 FORD MOTOR CP, DUE 1/19/97 598,822 598,822
350 GE CREDIT CORPC, CP, DUE 1/2/97 349,950 349,950
400 IBM CREDIT, CP, DUE 1/16/97 399,103 399,103
350 TEXACO, CP, DUE 1/23/97 348,834 348,834
1,696,709 1,696,709
TOTAL INVESTMENTS $,9,139,690 9,046,625
COVERED CALL OPTIONS WRITTEN -1.46% -141,932
SECURITIES SOLD SHORT -3.19% -309,407
EXCESS OF CASH AND OTHER
ASSETS OVER LIABILITIES 11.34% 1,098,837
NET ASSETS 100.00% $,9,694,123
NOTES:
(a) Also represents cost for federal income tax purposes
(b) See Note 1 of Notes to Financial Statements
(c) Total unrealized appreciation on investments consists of gross unrealized gains
of $514,718 and gross unrealized losses of $607,784
(d) Call options have been written against these positions
(e) Non-income producing securities
(f) Security is segregated as collateral for securities sold short against the box.
<PAGE>
CENTURION T.A.A. FUND, INC.
STATEMENT OF COVERED CALL OPTIONS WRITTEN
December 31, 1996
Shares
Subject Premium Market
to Call Stock/Expiration date/Exercise price Received Value
2500 BARRICK GOLD, JAN, 30, Calls $,5,249 $,938
1000 BLACK & DECK, FEB, 40, Calls 3,456 125
2000 BLACK & DECK, MAY, 35, Calls 2,811 2,000
1000 CAPSTONE PHAR, JAN, 12.5, Calls 281 188
800 CELEGENE, JAN, 12 1/2, Calls 1,060 200
2000 CROMPTON & KNOWLES, FEB, 17 1/2, Calls 1,811 3,625
3000 COR THERAPEUTICS, JAN, 10, Calls 1,604 1,875
1000 CYGNUS, JAN, 17.5, Calls 581 250
1000 DIAMOND SHAMROCK, JAN, 35,Calls 2,394 125
2500 FEDERAL MOGUL,JAN, 20,Calls 3,996 5,156
3000 FRONTIER, APR, 22.5, Calls 5,354 6,750
3000 GLOBAL MARINE, JAN, 17 1/2, Calls 3,854 9,375
1000 HNC SOFT, APR, 30, Calls 5,331 5,875
1000 HNC SOFT, JAN, 40, Calls 6,370 125
1000 HNC SOFT, JAN, 45, Calls 4,081 125
2000 HOMESTAKE MINING, JAN, 20, Calls 3,818 125
1700 INTL GAMING TECH, JAN, 22.5, Calls 1,005 106
1000 MARINER HEALTH, FEB, 10, Calls 720 250
900 MERCK, JAN, 75, Calls 3,219 4,500
2500 MOLTEN METAL, APR, 17.5, Calls 4,278 1,406
1000 MOLTEN METAL, JAN, 17.5, Calls 1,519 125
10000 NAVISTAR, JAN,10,Calls 4,821 1,250
10000 NOBLE DRILL, MAR, 15, Calls 13,446 48,750
2000 OAKWOOD HOMES, MAR, 22.5, Calls 3,561 4,250
3000 OFFICE DEPOT, APR, 20, Calls 5,166 3,188
10000 OXY PETROLEUM, FEB, 25, Calls 9,075 2,500
6000 PIER ONE, MAR, 15, Calls 10,695 17,250
2000 SEPRACOR, APR, 17.5, Calls 3,186 3,625
10000 WESTINGHOUSE, APR, 20, Calls 12,200 13,750
1000 WILLIAMS-SONOMA, FEB, 35, Calls 2,956 4,125
$,127,902 $,141,932
<PAGE>
CENTURION T.A.A. FUND, INC.
STATEMENT OF SECURITIES SOLD SHORT
December 31, 1996
Proceeds Market
Shares Description Received Value
COMMON STOCK
4000 QUIKSILVER, short against box $,95,750 $,85,500
7000 TEMPLETON RUSSIA 147,083 154,000
OPTIONS
3000 MICRON, JAN, 30, Puts 7,222 6,000
2500 TRIMBLE NAV, MAR, 12.5, Calls 2,583 2,656
2500 TRIQUINT, FEB, 15, Puts 2,737 313
10000 VITEL, JUL, 12 1/2, Calls 10,950 9,375
7500 ZITEL, JAN, 45, Calls 54,150 51,563
$,320,475 $,309,407
<PAGE>
</TABLE>
CENTURION T.A.A. FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
ASSETS
Investments in Securities, at value,
(identified cost $9,139,690) $9,046,625
Cash 566,578
Receivables:
Dividends 3,169
Interest 7,910
Investment Securities Sold 491,028
Prepaid Expenses 6,008
Deposit on short sales 389,981
TOTAL ASSETS $10,511,299
LIABILITIES
Covered Call Options Written, at market value,
(premiums received $127,902) $,141,932
Securities sold short
(proceeds received $320,475) 309,407
Payables:
Accounts Payable 52,785
Investment Securities Purchased 313,052
TOTAL LIABILITIES 817,176
NET ASSETS $9,694,123
Class C:
Net asset value and offering price per share
($7,855,190 divided by 2,241,074 shares
outstanding) $3.51
Class D:
Net asset value and offering price per share
($1,838,933 divided by 524,405 shares
outstanding) $3.51
The accompanying notes are an integral part of the financial statements.
<PAGE>
CENTURION T.A.A FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
INVESTMENT REVENUE
Dividends $ 53,631
Interest 109,885
Total Investment Revenue 163,516
EXPENSES
Investment Advisory Fees $,60,766
Distributuion expenses 59,587
Registration and filing fees 36,622
Fund accounting fees(Note 4) 18,000
Custodian fees and expenses 12,713
Audit fees and expenses 6,345
Directors fees and expenses 4,186
Transfer agent fees 3,417
Insurance 2,058
Other expenses 7,892
Total Expenses 211,586
Fees and Expenses Absorbed by Investment Advisor 0
Net Expenses 211,586
Net Investment Income (Loss) (48,070)
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain from Securities Transactions 264,245
Net change in unrealized depreciation of investments (106,453)
Net change in unrealized appreciation of
securities sold short 11,068
Net change in unrealized appreciation of call options
written (8,727)
Net realized gain and unrealized depreciation of
investments 160,133
Net increase in net assets from operations $112,063
The accompanying notes are an integral part of the financial statements.
<PAGE>
CENTURION T.A.A. FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
<S>
OPERATIONS <C> <C>
Net Investment income (loss) -$ 48,070 $ 3,638
Net Realized Gain from Securities Transactions 264,245 - 62,931
Net change in unrealized appreciation (depreciation)
of investment -106,453 110,721
Net change in unrealized appreciation of securities
sold short 11,068 0
Net change in unrealized depreciation of investments
of covered call options written -8,727 -3,616
Net Increase (Decrease) in Net Assets from Operations 112,063 47,812
Class C:
Distribution to shareholders
Ordinary income dividend ($0.0024 per share) -3,637 0
CAPITAL SHARE TRANSACTIONS:(NOTE 5)
Increase from capital shares sold 6,424,359 4,283,465
Increase from capital shares reinvested 3,597 0
Decrease from capital shares repurchased (1,212,546) (413,054)
Net increase from capital share transactions 5,215,410 3,870,411
Total increase in net assets 5,323,836 3,918,223
NET ASSETS
Beginning of Period 4,370,287 452,064
End of period (includes no undistributed investment
income) 9,694,123 4,370,287
</TABLE>
<TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
CENTURION T.A.A. FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund commenced operations in January 1982. At the shareholder meeting
on December 20, 1994, the shareholders voted to change the name of the fund to
Centurion T.A.A. Fund, Inc. ("Fund") from Excel Value Fund, Inc. The Fund is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The objective of the Fund is to achieve long-term
investment return, including both capital appreciation and current income,
consistent with reasonable risk.
At the shareholder meeting on August 6, 1996, the shareholders approved
the Fund to offer Class A, Class B, Class C and Class D shares, each of which
has equal rights as to assets and voting privileges. Class A and Class B each
has exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund allocated on a prorata bases to each class based on the
relative net assets of each class to the total net assets of the Fund. Each
class of shares differ in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
Portfolio Valuation:
The Fund calculates its net asset value and completes orders to purchase,
exchange or repurchase its shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Investments in securities traded on major exchanges are valued at the
last quoted sales price on that exchange where such securities are primarily
traded. Securities traded in the over-the-counter market are valued at the
last sales price. Over-the-counter and listed securities that have not been
traded on a certain day are valued at the average between the last bid and
asked price. If market quotations or pricing service valuations are not
readily available, securities are valued at fair value as determined in good
faith by the Fund's Board of Directors. Debt securities are valued in
accordance with the procedures above. Short-term securities are stated at
amortized cost (which approximates market value) if maturity is 60 days or
less, or at market value if maturity is greater than 60 days.
Security Transactions and Related Investment Income:
Security transactions are accounted for on the trade date (date the order
to buy or sell is executed). The cost of securities sold is determined on a
first-in, first-out basis, unless otherwise specified. Dividends are recorded
on the ex-dividend date. Interest income, which may be comprised of stated
coupon rate, market discount and original issue discount, is recorded on the
accrual basis. Discounts on debt securities purchased are amortized over the
life of the respective security as adjustments to interest income.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes:
It is the policy of the Fund to meet the requirements for
qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Fund to
make distributions sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no provision has been made for Federal
taxes on income, capital gains, or unrealized appreciation of securities
held, and excise tax on income and capital gains. The Fund currently has a
capital loss carryforward of $90,807 which expires in 2003.
<PAGE>
CENTURION T.A.A. FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
Distributions to Shareholders:
Distributions to shareholders are recorded by the Fund on the
ex-dividend date. Income and capital gain distributions are determined
in accordance with Federal income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment
securities held by the Fund and timing differences.
Restricited Securities:
The Fund is permitted to invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal
of these securities may involve time-consuming negotiations and expense,
and prompt sale at an acceptable price may be difficult.
Cash Deposits:
At December 31, 1996 the Fund had cash on deposit at one financial
institution of $565,213. Thus, all cash amounts over the maximum Federal
Deposit Insurance Corporation coverage are not insured. From time to time,
the Fund evaluates the credit worthiness of the financial institution and
considers alternatives.
NOTE 2 - NET ASSETS
At December 31, 1996, net assets consisted of:
Net proceeds from capital stock $10,253,125
Unrealized depreciation of securities (93,065)
Unrealized appreciation of securities sold short 11,068
Unrealized depreciation of covered call options written (14,030)
Excess distributions over accumulated net income (327,575)
Undistributed net realized loss from securities
transactions (135,400)
----------
$ 9,694,123
==========
NOTE 3 - COVERED CALL OPTIONS WRITTEN
As of December 31, 1996, portfolio securities valued at $1,763,488 were held
by the custodian in connection with covered call options written by the Fund.
NOTE 4 - PAYMENTS TO RELATED PARTIES
Centurion Counsel, Inc. ("Centurion") is the Fund's investment manager.
The Fund pays investment management fees to Centurion at the annualized rate of
1.00% on the first $200 million of average daily net assets of the Fund, 0.85%
on the next $200 million, 0.80% on the next $200 million, 0.75% on the next $200
million, 0.60% on the next $200 million and 0.50% on amounts over $1 billion.
These fees are computed daily and paid quarterly and are subject to reduction in
any year to the extent that the Fund's expenses (exclusive of brokerage
commissions, taxes, interest, distribution-related expenses and extraordinary
expenses) exceed 3.625% based on the average total net asset value of the Fund.
During the year ended December 31, 1996 Centurion received investment management
fees of $60,766 and was not required to waive any of the fee.
Centurion Institutional Services, Inc. ("CISI"), an affiliate of Centurion,
serves as the Fund's distributor. The Fund offers Class A, Class B, Class C and
Class D shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. CISI collects the sales charges imposed on the sale of Class A
shares, and reallows a portion of such charges to dealers who sold the shares.
During the year ended December 31, 1996 no shares of Class A shares were sold
and, accordingly, CISI did not retain any such charges. CISI also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B
shares are sold, CISI from its own resources pays commissions to dealers who
sell these shares. Certain redemptions of Class B shares made within six years
of purchase are subject to contingent deferred sales charges ("CDSC") upon
redemption, in accordance with the Fund's current prospectus. During the year
ended December 31, 1996 no shares of Class B shares were sold and, accordingly,
CISI did not collect any CDSC charges. In addition, CISI makes ongoing share-
holder servicing and trail commission payments to dealers whose clients hold
Class B Shares.
Class D shares are not subject to initial sales charges, CDSC, service
fees or distribution fees. These shares are only available to Advisor
professionals and eligible employees of the Fund, Centurion and its affiliates
or service organizations.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of
Directors has adopted separate plans of distribution with respect to the Fund's
Class A shares ("Class A Plan"), Class B shares ("Class B Plan"), and Class C
shares ("Class C Plan"), pursuant to which the Fund reimburses CISI for a
portion of its shareholder servicing and distribution expenses. Under Class
A Plan, the Fund may pay CISI a service fee at the annualized rate of up to
.025% of the average daily net assets of the Fund's Class A shares for CISI's
expenditures incurred in servicing and maintaining shareholder accounts.
Pursuant to the Fund's Class B Plan, the Fund may pay CISI a service fee
at the annualized rate of up to 0.25% of the average daily net assets of the
Fund's Class B shares for CISI's expenditures incurred in servicing and main-
taining shareholder accounts, and may pay CISI a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for CISI's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long
as that Plan continues in effect.
Pursuant to the Fund's Class C Plan, the Fund may pay CISI a service fee
at the annualized rate of up to 0.25% of the average daily net assets of the
Fund's Class C shares for CISI's expenditures incurred in servicing and main-
taining shareholder accounts, and may pay CISI a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class C shares for CISI's expenditures incurred in providing services as
distributor. Expenses incurred under the Class C Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long
as that Plan continues in effect. During the year ended December 31, 1996,
CISI received servicing and distribution fees from the Fund of $60,193 pursuant
to the Class C Plan.
CISI also executes some of the Fund's portfolio transactions. During the
year ended December 31, 1996, CISI received commissions of $16,538 from the
Fund for this service.
Centurion Group, Inc. ("CGI"), an affiliate of Centurion and CISI, is
the administrator and transfer agent of the Fund. CGI is paid an account
maintenance fee of $0.75 per account per month, a customer statement fee of
$50 per 1,000 statements and other miscellaneous charges and expenses.
During the year ended December 31, 1996, CGI received transfer fees of
$3,417 from the Fund.
CGI is also the accounting agent for the Fund. The monthly fee for
these services paid to CGI is 0.15% of the Fund's average daily net assets
with a minimum fee of $18,000 per year. During the year ended December 31,
1996, CGI received accounting fees of $18,000 from the Fund.
The Fund pays each of its Directors who is not an employee, officer
or director of Centurion or any affiliate $250 for each meeting of the
Board or any committee thereof attended by the Director. In addition the
Fund pays each Director's expenses to attend the meetings.
<PAGE>
CENTURION T.A.A. FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5 - CAPITAL SHARE TRANSACTION
As of December 31, 1996, there were 100,000,000 shares of the Company's
common stock authorized, at $0.01 par value. Transactions in capital stock
of the Fund for the year ended December 31, 1996 were as follows:
1996 1995
Shares Amount Shares Amount
Shares sold 1,800,452 $6,424,359 198,030 $4,283,465
Shares issued in
reinvestment of
dividends 983 3,597
1,801,435 6,427,956 198,030 4,283,465
Shares redeeme d 344,840 1,212,546 128,322 413,054
Net Increase 1,456,595 $5,215,410 69,708 $3,870,411
NOTE 6 - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
securities) were $12,077,197 and $8,173,439, respectively. Net gain on
investments for the year ended December 31, 1996 was $160,133. That amount
represents the net increase in value of investment held during the year.
The components are a follows:
Long transactions $166,895
Short sale transactions 23,866
Covered call options written (30,628)
---------
$160,133
As of December 31, 1996, the unrealized appreciation on investments
consists of gross unrealized gains of $514,718 and gross unrealized losses
of $607,784.
NOTE 7 - PER SHARE INFORMATION
Selected data for each share of capital stock outstanding throughout the
period is as follows:
<TABLE
Year Ended December 31,
<CAPTION>
Class D
12/9/96
Through Class C Shares
12/31/96 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period 3.46 3.34 3.43 4.55 4.96 5.17
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.00 -0.03 -0.05 -0.18 -0.21 -0.03
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 0.05 0.20 -0.04 -0.94 -0.20 -0.18
Total From Investment OperationsNote 0.05 0.17 -0.09 -1.12 -0.41 -0.21
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00
Returns of Capital Total Distributions0.00 0.00 0.00 0.00 0.00 0.00
Net Asset Value, End of Period $,3.51 $,3.51 $,3.34$,3.43$,4.55,$4.96
TOTAL RETURN 5.16% 5.16%-2.62%-28.01%-12.39%-8.38%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $,1,839 $,7,855 $4,370$,452 $ ,757
Ratio to net assets
Expenses,before waiver of fees 2.13%(d) 3.54% 4.82%9.04% 6.19%
Expenses,after waiver of fees 2.13%(d) 3.54% 3.53%6.00% 5.19%
Net investment income 0.00%(d) -0.43% 0.17%-4.78%-4.50%
Portfolio Turnover Rate 129.2% 129.2% 57.20%148.21%143.11%
Number of Shares Outstanding
at End of Period (000 Omitted) 524 2,241 1,309 132 166
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Centurion T.A.A. Fund, Inc.
(formerly Excel Value Fund, Inc.)
We have audited the accompanying statement of assets and liabilities of
Centurion T.A.A. Fund, Inc., including the statement of investments and
covered call options written, as of December 31, 1996, and the related
statement of operations for the year ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
selected per share data and ratios for the five years then ended. These
financial statements and per share data and ratios are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements and per share data and ratios based on our
audit.
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 statements and
per share data and ratios are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence
with the custodian. An audit also includes assessing the accounting
principles used and significant estimates mady by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis in our opinion.
In our opinion, the financial statements and selected per shara data and
ratios referred to above present fairly, in all material respects, the
financial position of Centurion T.A.A. Fund, Inc., as of December 31, 1996,
and the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period ended, and the
selected per share data and ratios for the five years then ended in
conformity with generally accepted accounting principles.
Squire & Co.
February 6, 1997
Poway, California
PART C --- OTHER INFORMTION
Item 24. Financial Statement and Exhibits
(a) Financial Statements: Financial statements if the Registrant are
included in the Registrant's combined Statement of Additional
Information filed as Part B of this Registration Statement.
(b) Exhibits.
1 Articles of Incorporation of IRI Stock Fund, Inc.(1)
Articles of Amendment of IRI Stock Fund, Inc.(3)
Articles of Amendment of IRI Stock FUnd, Inc. to change name to "Excel
Value Fund, Inc."(5)
Articles of Amdendment of Excel Value Fund, Inc. to change name to
"Centurion T.A.A. Fund, Inc."(7)
1.1 Articles of Amendment of Centurion T.A.A. Fund authorizing multiple
classes of shares.(10)
2 Restated Bylaws of Centurion T.A.A. Fund, Inc.(5)
2.1 Multiple Class Share Plan.(10)
3 Not applicable.
4 Specimen copy of share certificate of Centurion T.A.A. Fund, Inc.(7)
5 Form of Investment Advisory Agreement of Centurion T.A.A. Fund, Inc.(8)
6 Form of Distribution Agreement of Centurion T.A.A. Fund, Inc.(10)
7 Not applicable.
8 Custodian Agreement.(10)
9(a) Form of Administration Agreement of Centurion T.A.A. Fund, Inc.(7)
9(b) Form of Accounting Services Agreement of Centurion T.A.A. Fund, Inc.(7)
9(c) Form of Shareholder Services Agent Agreement of Centurion T.A.A. Fund,
Inc.(10)
10 Opinion and Consent with respect to Centurion T.A.A. Fund, Inc.(2)
11 Consent of Squire & Company.(9)
12 Not applicable.
13 Letter of Investment Intent with respect to Centurion T.A.A. Fund,
Inc.(1)
14 Forms of Tax-Sheltered Retirement Plans.(2)
15.1 Form of Rule 12b-1 Plan of Distribution (Class C Share Plan).(10)
15.2 Form of Rule 12b-1 Plan of Distribution for Class A Shares.(10)
15.3 Form of Rule 12b-1 Plan of Distribution for Class B Shares.(10)
16 Calculations of Total returns of Centurion T.A.A. Fund, Inc.(3)
- ----------------------------------------
(1) Incorporated herein by reference to Registration Statement on Form N-1A
of IRI Stock Fund, Inc. filed with the Securities and Exchange Commission
on September 4, 1981.
(2) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Registration Statement of Form N-1A of IRI Stock Fund, Inc. filed with
the Securities and Exchange Commission on January 6, 1982.
(3) Incorporated by reference to Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of IRI Stock Fund, Inc. and Post-
Effective Amendment No. 8 to the Registration Statement on Form N-1A of
Midas Gold Shares and Bullion, Inc. filed with the Securities and
Exchange Commission on May 2, 1988.
(4) Incorporated by reference to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A of IRI Stock Fund, Inc. and Post-
Effective Amendment No. 9 to the Registration Statement on Form N-1A of
Midas Gold Shares & Bullion, Inc. filed with the Securities and Exchange
Commission on March 30, 1989.
(5) Incorporated by reference to Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A of Excel Value Fund, Inc. and Post-
Effective Amendment No. 10 to the Registration Statement on Form N-1A of
Excel Midas Gold Shares, Inc. filed with the Securities and Exchange
Commission on May 1, 1990.
(6) Incorporated by reference to Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A of Excel Value Fund, Inc. filed with
the Securities and Exchange Commission on May 1, 1992.
(7) Incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement on Form N-1A of Centurion T.A.A. Fund, Inc. filed
with the Securities and Exchange Commission on February 2, 1995.
(8) Incoporated by reference to Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A of Centurion T.A.A. Fund, Inc. filed
with the Securities and Exchange Commission on April 27, 1995.
(9) Incorporated by reference to Post-Effective Amendment No. 22 to the
Registration Statement on Form N-1A of Centurion T.A.A. Fund, Inc. filed
with the Securities and Exchange Commission on April 9, 1996.
(10) Incorporated by reference to Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A of Centurion T.A.A. Fund, Inc. filed
with the Securities and Exchange Commission on August 27, 1996.
Item 25. Persons Controlled by or Under Common Control with Registrant.
Not applicable.
Item 26. The following table sets forth the number of holders of shares of
Centurion T.A.A. Fund, Inc. as of February 28. 1997.
Title of Class Number of Record Holders
Class A Common Stock 1
Class B Common Stock 1
Class C Common Stock 301
Class D Common Stock 91
Item 27. Indemnification
Indemnification. Article 7(d) of the Registrant's Articles of Incorporation
and Article VIII of its Bylaws provide that the Registrant shall indemnify such
persons, for such expenses and liabilities, in such manner, under such
circumstances, and to such extent as permitted by Section 302A.521 of the
Minnesota Statutes, as now enacted or hereafter amended; provided, however,
that no such indeminification may be made if it would be in violation of
Section 17(h) of the Investment Company Act of 1940, as now enacted or
hereinafter amended, and any rules, regulations or releases premulgated
thereunder.
The Registrant may indemnify its officers and directors and other "persons"
acting in an "official capacity" (as such terms are defined in Section
302A.521) pursuant to a determination by the board of directors or shareholders
of the Registrant as set forth in Section 302A.521, by special legal counsel
selected by the obard or a committee thereof for the purpose of making such
a determination, or by a Minnesota court upon application of the person
seeking indemnification. If a director is seeking indemnification for conduct
in the capacity of director or officer of the Registrant, then such director
generally may not be counted for the purpose of determining iether the
presence of a quorum or such director's eligibility to be indemnified.
In any case, indemnification is proper only if the eligibility doby decides
that the person seeking indemnification:
(a) has not received indemnification for the same conduct from any other
party or organization;
(b) acted in good faith;
(c) received no improper personal benefit;
(d) in the case of criminal proceedings, has no reasonable cause to believe
the conduct was unlawful;
(e) reasonable believed that the conduct was in the best interest of the
Registrant, or in certain contexts, was not opposed to the best interest
of the Registrant; and
(f) had not otherwise engaged in conduct which precludes indemnification
under either Minnesota or Federal law (including, without limitation,
conduct constituting willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties as set forth in Section 17(h) and (i) of
the Investment Company Act of 1940.
Advances. If a person is made or threatened to be made a party to a
proceeding, the person is entitled, upon written request to the Registrant, to
payment or reimbursement by the Registrant of reasonable expenses, including
attorneys' fees and disbursements, incurred by the person in advance of the
final disposition of the proceeding, (a) upon receipt by the Registrant of a
written affirmation by the person of good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant if it is ultimately determined that the criteria for indemnification
have not been satisfied, and (b) after a preclude indemnification under Section
302A.521. The written undertaking required by clause (a) is an unlimited
general obligation of the person making it, but need not be secured and shall
be accepted without reference to financial ability to make the repayment.
Undertaking. The Registrant undertakes that insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless, in the opinion of its counsel, the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Other. Reference is made to Section 9 of the Distribution Agreement filed
as Exhibit (6) to this Registration Statement.
Item 28. Business and Other Connections of Investment Advisor
Information on the business of the Registrant's investment advisor is
described in the section of the Statement of Additional Information entitled
"Centurion Counsel, Inc., Centurion Group, Inc. and Centurion Institutional
Services, Inc." filed as part of this Registration Statement.
The following table includes a listing of the name and principal business
address of each director and executive officer of Centurion Counsel, Inc.,
the Registrant's investment advisory, the position(s) held with Centurion
Counsel, Inc. and any other business, profession, vocation or employment of a
substantial nature in which such persons currently engage or have engaged (in
the capacity of director, officer, employee, partner or trustee) during the
past two years.
<TABLE>
<CAPTION>
Name and Principle Position(s) with Other Occupations
Business Address Centurion Counsel, Inc. During Past Two Years
<C> <C> <C>
Jack K. Heilbron Chairman of the Board and Chairman of the Board and Chief
11545 W. Bernardo Court Chief Investment Officer Executive Officer of the Registrant.
Suite 100 Chairman of the Board of Directors of
San Diego, CA 92127 CI Holding Group, Inc. ("CI Holding"),
the parent corporation of Centurion
Counsel, Inc. Mr. Heilbron also serves
as the Chairman and a Director of other
operating subsidiaries of CI Holding.
Kenneth W. Elsberry President, Chief Financial President, Chief Financial Officer and
11545 W. Bernardo Court, Officer and Director Treasurer of the Registrant. Chief
Suite 100 Financial Officer and Director of C I
San Diego, CA 92127 Holding and other of its operating
subsidiaries.
Mary R. Limoges Executive Vice President, Secretary of Registrant. Executive Vice
11545 W. Bernardo Court, Secretary and Director President, Secretary and Director of C I
Suite 100 Holding and serves as Executive Officer of
San Diego, CA 92127 of other of its operating subsidiaries.
</TABLE>
Item 29. Principle Underwriters
The following table sets forth the name and principle adress of
each director and officer of Centurion Institutional Services, Inc., the
Registrant's principle underwriter, and the positions, if any, such
persons hold with Centurion T.A.A. Fund, Inc.
Position(s) and Office(s)
Name and Principle with Centurion Institutional Positions and Offices
Business Address Services, Inc. with the Registrant
Mary R. Limoges President, Chief Executive Secretary
11545 W. Bernard Court Officer and Director
Suite 100
San Diego, CA 92127
Kenneth W. Elsberry Chief Financial Officer and President, Chief
11545 W. Bernardo Court Director Executive Officer,
Suite 100 Treasurer, Chief
San Diego, CA 92127 Financial Officer
Item 30. Location of Accounts and Records
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio, 45202-1118,
acts as the custodian of the Registrant's portfolio securities and cash.
Centurion Group, Inc., 11545 W. Beranrdo Court, Suite 100, San Diego,
California 92127, acts as Registrant's transfer agent, dividend disbursing
agent, administrative services agent and accounting services agent. Star
Bank, N.A. and Centurion Group, Inc. will maintain certain books and records
in connection with their respective duties. All other records, including
the Registrant's minute books, will be kept by the Registrant.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Post-Effective Amendment to
the Registration Statement pursuant to Rule 495(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of San Diego, State of California,
on the day of April 1997.
CENTURION T.A.A. FUND, INC.
By: /s/
Kenneth W. Elsberry
Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on hte dates indicated.
Signature Title Date
/s/ Chairman of the Board of April , 1997
Jack K. Heilbron the Registrant.
/s/ President, Chief Executive April , 1997
Kenneth W. Elsberry Officer, Chief Financial
Officer and Director of the
Registrant
/s/ Director of the Registrant April , 1997
Carol Ann Freeland
/s/ Director of the Registrant April , 1997
Richard E. Hall
/s/ Director of the Registrant April , 1997
Russell W. Ketron
/s/ Director of the Registrant April 30, 1997
Douglas Werner
