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>
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
Investment Advisor Board of Directors
Centurion Counsel, Inc. Carol Ann Freeland
11545 W. Bernardo Court, #100 Richard E. Hall
San Diego, CA 92127 Jack K. Heilbron
Russell W. Ketron
Doug Werner
Distributor Officers
Centurion Institutional Services, Inc. Jack K. Heilbron
11545 W. Bernardo Court, #100 Chief Executive Officer
San Diego, CA 92127 Chief Investment Officer
Kenneth W. Elsberry
President
Shareholder Chief Financial Officer
Servicing Agent
Centurion Group, Inc. Mary R. Limoges
11545 W. Bernardo Court, #100 Secretary
San Diego, CA 92127
Portfolio Manager
Auditors Jack K. Heilbron
Squire & Co.
1205 Prospect St., Ste. 400
La Jolla, CA 92037
Legal Counsel
Bruce J. Rushall, Esq.
Rushall & McGeever
2111 Palomar Airport Road #200
Carlsbad, CA 92009
CENTURION T.A.A. FUND, INC.
11545 West Bernardo Court #100
San Diego, CA 92127
(619) 673-8536
**A prospectus may be obtained by contacting a Financial Consultant at
Centurion Institutional Services, Inc. The prospectus containing more
complete information should be read carefully before making an investment in
Centurion T.A.A. Fund, Inc.
<PAGE>
