CENTURION COUNSEL MARKET NEUTRAL FUND
Portfolio Review
as of June 30, 1999
Fund Highlights Top Ten Holdings
12/31/98 06/30/99 Cisco Systems, Jan 01,45, C 5.3%
Net Assets: $4,935,360 $2,191,238 Dow Jones Index,Dec 00,90 P 4.7%
United Investors REIT 4.4%
NAV Per Share: United Dominion REIT 4.0%
Rock Bottom Restaurants 3.5%
Class A: $3.04 $3.00 Essex Property Trust 3.5%
Class B: $3.00 $2.94 Southern Energy Homes 3.2%
Class C: $2.99 $2.94 Schlumberger, Aug 65, C 2.9%
Class D: $3.05 $3.01 Agnico, cnvtble bond 3.5% 2.9%
Home Depot 2.8%
Share Outstanding: 1,643,245 744,700
Portfolio Allocation by Sector
as of June 30, 1999
Graph Top Ten Sectors
Real Estate Investment Trust 16.0%
Cash and Commerial Paper 12.4%
Industrial Services 7.6%
Consumer Products 6.0%
Corporate Bonds 5.0%
Indexes 4.8%
Natural Resources 4.0%
Industrial Products 3.2%
Technology 3.0%
Consumer Services(Short) 2.7%
TOTAL RETURN
Through June 30, 1999
(Since new management and investment objectives--January 1995)
Last Since Date of
Quarter Twelve Changeor First
Months FirstSales Sale
Class A:(1) -1.96% -10.59% -5.52% 1/07/97
Class B: -2.33% -11.71% -6.81% 1/07/97
Class C: -2.33% -11.71% -3.07% 12/31/94
Class D: -1.95% -9.84% -4.78% 12/06/96
(1) Does not include commission load of 4.75% when purchased
TOTAL RETURN
Through June 30, 1999
(Since inception--January 1982)
Last
Quarter Twelve Five Ten Since
Months Year Year Inception
Class A:(1) -1.96% -10.59% * * -5.52%
Class B: -2.33% -11.71% * * -6.81%
Class C: -2.33% -11.71% -8.89% -5.13% 3.20%
Class D: -1.95% - 9.84% * * -4.78%
*Shares of this Class not available for the total period
(1) Does not include commission load of 4.75% when purchased
CENTURION COUNSEL MARKET NEUTRAL FUND
ADVISER'S REPORT
The basic premise of a market neutral funds is to allocate its
investments between long positions (owning the stock in
anticipation of the price increasing) in securities the adviser
believes are undervalued and short positions (selling stock not
owned in anticipation of the price decreasing) in securities the
adviser believes are overvalued. In addition Centurion Counsel
Market Neutral Fund uses an asset allocation strategy to place the
investments among equity stocks, bonds and money market
instruments. The market environment plays a big part in the
results of this strategy especially on a short term basis. The
less correlated the market is to historical fundamentals, which
happens during short term periods but usually not over a long
term, the more difficult the strategy will have in succeeding
Performance Review
Centurion Counsel Market Neutral Fund's return for the six months
ended June 30, 1999 was a negative 1.7% for the C shares and 1.3%
for the D shares. Our under performance occurred primarily during
the February through April period. Since then, the fund has
recovered nicely, but not enough to recapture the full drop in
price by June 30. Although this was disappointing when you hear
and read about the S&P 500 index being up 12.2% (strongly
influenced by extraordinary growth in technology stocks) during
that same period, you must keep in mind that the market neutral
fund strategy is not similar to the S&P 500 index. In relation to
the five other Market Neutral Funds which we track our fund beat
three of those and the other two posted returns of only .84% and
negative .20%.
In relation to the index performances, we were hurt by our bias
toward value stocks and a small stake in technology and to some
extent our short positions in technology stocks. The Fund sold a
number of these overvalued stocks short in anticipation of lower
market prices. The Fund experienced some losses as the positions
are marked to market. The final results of these short positions
will not be known until the short positions are closed. Overall,
our short positions have been positive on a realized basis for the
quarter and for the six months ended.
The tremendous changes in technology, driven by the sharp
acceptance of the Internet, have created significant opportunities
for new creative and well managed companies. Even though we have
sold short some of those technology stocks we believe are over
priced we have also included in the portfolio such technology
stocks as Oracle, Valence Technology, E-music and Real Network.
While the past six months have hardly been remarkably positive for
market neutral funds, they have at least represented something of
a recovery from the very disappointing performance of the last few
years. Indeed, they may be signaling that the overall market is
returning to historical patterns rather than the continuous up
market of the previous seven years. The volatility of the market
and market reaction to fundamentals, and the involvement of more
stocks in the market performance, rather than a just few stocks,
provides the basis for the market neutral concepts to function and
be rewarding to the investors. While we believe that this dismal
performance was due to unusual market influences such as the
volatile of net stocks and unprecedented trading by amateur on
line traders, we remain optimistic that over a long term the
market neutral concepts will reward those investors who include
such funds in their portfolios.
Market and Economic Comments
Alan " the Wise" Greenspan giveth and taketh during the second
quarter; he seemingly did both at one time. In anticipation of the
interest rate increase, the market was flat for most of the quarter,
but once the dirty deed was done, all major U.S. equity markets
reached new highs. It seems that the markets like the "Flu shot"
that was administered by the "Wise One". Bonds also liked the vaccine
after retreating in anticipation of the pain. They, too, decided that
it did not feel bad at all and rallied, albeit not all the way back as
the equities did.
However the most important trend during the quarter was the rotation of the
equity markets into value stocks and away from .com's with seemly little or
not value. In fact, the "Street.Com index" for the quarter was down 4.2%.
We have warned for some time about the bubble valuations of the Net Stocks but
last week saw an extreme example of how far a company will go to give the
illusion of earnings. Yahoo reported earnings for the quarter of $0.11 per
share compared with $0.01 a share in the previous year. On the surface, this
may seem to justify Yahoo's selling for 900 times estimated earnings for the
year 2002. We believe it is important to look a company fundamentals which
means looking beneath the surface of the earning reports, of which Yahoo is a
prime example. The first thing that came to our attention was that the
earnings were reported as pro forma. According to the Bloomberg Financial
Dictionary, pro forma, in this case, means "A financial statement reflecting
the company's financial condition using hypothetical data to determine the
effects of an idea that has been proposed but not yet consummated." In fact,
Yahoo, on a GAAP basis, did not earn $0.11; rather they lost $0.07 per share
and the quarter's loss of $15,062,000 was greater than the previous years
quarter loss of $14,248,000.
The business media only reported the $0.11 number and did not even mention
that it was pro forma; so, once again, the average investor was only aware
that Yahoo beat earnings' estimates instead of falling far short. We intend
to stay with value rather than chase investment fads, regardless how sure they
may seem at the time.
By many measures the stock market is extremely over valued and in a very
speculative environment at this time. The following measures support that
theory: S&P dividend yield is at an all time low, mutual funds appear to be
fully vested, S&P Industrial average price to sales and cash flow is at an all
time high, DJIA and S&P Industrial price to book value is at an all time high,
and margin debt as a percentage of GDP is at an all time high and Long
Treasury Bond yields compared to S&P 500 earnings are at an all time high.
Summary
During the semi annual period, the stock market once again demonstrated its
unpredictability. Price fluctuations were substantial both for individual
stocks and for broader sectors of the market. Value sectors appeared to make
a move to the front. These events reaffirm the wisdom of holding a broadly
diversified portfolio comprised of growth and value funds as well as bonds and
money market funds. The market neutral concept takes advantage of an
overvalued market. We believe that the market neutral fund has a place in your
portfolio.
Jack K. Heilbron
Chief Investment Officer
CENTURION COUNSEL MARKET NEUTRAL
FINANCIAL HIGHLIGHTS
Class A Shares
Six Month
Ended
Per Share Operating Performance: 30-Jun-99 1998 1997 (c)
Net asset value, beginning of period $ 3.04 $ 3.35 $ 3.65
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) (0.01) (0.02) -
Net gains (losses) on investments
(both realized and unrealized) (d) (0.03) (0.33) (0.30)
Total From Investment Operation (0.04) (0.31) (0.30)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - - -
Distributions from capital gains - - -
Total Distributions - - -
Net asset value, end of period $ 3.00 $ 3.04 $ 3.35
TOTAL RETURN (e) -1.45% -8.28% -8.47%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $ 8 $ 8 $ 8
Ratios to net assets
Expenses, before waiver of fees 1.83% 2.67% 2.38%
Expenses, after waiver of fees 1.55% 2.67% 2.15%
Net investment income -2.10% -2.85% 0.64%
Portfolio Turnover Rate 653.35% 522.88% 234.67%
Number of Shares Outstanding
at End of Period (000 Omitted) 3 3 3
Class B Shares
Six Month
Ended
Per Share Operating Performance: 30-Jun-99 1998 1997 (c)
Net asset value, beginning of period $ 3.00 $ 3.33 $ 3.65
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) (0.02) (0.01) -
Net gains (losses) on investments
(both realized and unrealized) (d) (0.04) (0.32) (0.32)
Total From Investment Operation (0.06) (0.33) (0.32)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - - -
Distributions from capital gains - - -
Total Distributions - - -
Net asset value, end of period $ 2.94 $ 3.00 $ 3.33
TOTAL RETURN (e) -1.81% -9.91% -4.39%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $ 1 $ 1 $ 1
Ratios to net assets
Expenses, before waiver of fees 2.21% 3.42% 2.84%
Expenses, after waiver of fees 1.93% 3.42% 2.60%
Net investment income -2.47% -3.60% 0.19%
Portfolio Turnover Rate 653.35% 522.88% 234.67%
Number of Shares Outstanding
at End of Period (000 Omitted) 0 0 0
CENTURION COUNSEL MARKET NEUTRAL
FINANCIAL HIGHLIGHTS
Class C Shares (a)
Six Months For the years
Ended ended December 31,
Per Share Operating Performance: 30-Jun-99 1998 1997
Net asset value, beginning of period $ 2.99 $ 3.33 $ 3.51
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) (0.01) (0.01) (0.01)
Net gains (losses) on investments
(both realized and unrealized) (d) (0.04) (0.33) (0.17)
Total From Invesment Operation (0.05) (0.34) (0.18)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - - -
Distributions from capital gains - - -
Total Distributions - - -
Net asset value end of period $ 2.94 $ 2.99 $ 3.33
TOTAL RETURN (e) -1.91% -10.25% -5.13%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $ 1,706 $ 4,166 $ 7,288
Ratios to net assets
Expenses, before waiver of fees 2.21% 3.42% 3.14%
Expenses, after waiver of fees 1.93% 3.42% 2.91%
Net investment income -2.47% -3.60% -0.11%
Portfolio Turnover Rate 653.35% 522.88% 234.67%
Number of Shares Outstanding
at End of Period (000 Omitted) 581 1,392 2,191
Class C Shares (a)
For the years ended December 31,
Per Share Operating Performance: 1996 1995
Net asset value, beginning of period $ 3.34 $ 3.43
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) (0.03) (0.05)
Net gains (losses) on investments
(both realized and unrealized) (d) 0.20 (0.04)
Total From Investment Operation 0.17 (0.09)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - -
Distributions from capital gains - -
Total Distributions - -
Net asset value, end of period $ 3.51 $ 3.34
TOTAL RETURN (e) 5.16% -2.62%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $ 7,855 $ 4,370
Ratios to net assets
Expenses, before waiver of fees 3.54% 4.82%
Expenses, after waiver of fees 3.54% 3.53%
Net investment income -0.43% 17.00%
Portfolio Turnover Rate 129.20% 57.20%
Number of Shares Outstanding
at End of Period (000 Omitted) 2,241 1,309
CENTURION COUNSEL MARKET NEUTRAL
FINANCIAL HIGHLIGHTS
Class D Shares
Six Months
Ended
Per Share Operating Performance: 30-Jun-99 1998
Net asset value, beginning of period $ 3.05 $ 3.36
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) (0.01) 0.02
Net gains (losses) on investments
(both realized and unrealized) (d) (0.04) (0.33)
Total From Investment Operation (0.05) (0.31)
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - -
Distributions from capital gains - -
Total Distributions - -
Net asset value, end of period $ 3.01 $ 3.05
TOTAL RETURN (e) -1.35% -8.09%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $ 477 $ 760
Ratios to net assets
Expenses, before waiver of fees 1.72% 2.42%
Expenses, after waiver of fees 1.44% 2.42%
Net investment income -1.98% -2.60%
Portfolio Turnover Rate 653.35% 522.38%
Number of Shares Outstanding
at End of Period (000 Omitted) 158 249
Class D Shares
Per Share Operating Performance: 1997 1996 (b)
Net asset value, beginning of period $ 3.51 $ 3.46
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) 0.01 -
Net gains (losses) on investments
(both realized and unrealized) (d) (0.16) 0.05
Total From Investment Operation (0.15) 0.05
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - -
Distributions from capital gains - -
Total Distributions - -
Net asset value, end of period $ 3.36 $ 3.51
TOTAL RETURN (e) -4.27% -5.16%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
($000 Omitted) $ 972 $ 1,839
Ratios to net assets
Expenses, before waiver of fees 2.20% 2.13%
Expenses, after waiver of fees 1.97% 2.13%
Net investment income 0.82% 0.00%
Portfolio Turnover Rate 234.67% 129.20%
Number of Shares Outstanding
at End of Period (000 Omitted) 290 524
All capital shares issued and outstanding as of November 6, 1996
were reclassified as Class C Shares.
For the period December 9, 1996 (effective date) to
December 31, 1996.
For the period January 7, 1997 (first sale date) to
December 31, 1997.
Allocated between Net Investment Income and Net Gains or (Losses) on
Securities based on monthly weighted average shares outstanding.
Total return measures the change in value of an investment over the
periods indicated. It is not annualized.
It does not include the maximum front end sales charge or contingent
deferred sales charge.
CENTURION COUNSEL MARKET NEUTRAL, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
ASSETS
Investments in Securities, at value $1,801,099
(indentified cost $2,015,856)
Cash and Deposits 243,853
Receivables:
Dividends 7,533
Interest 507
Investment securities sold 52,986
Margin Deposit for Securities Sold Short 851,886
__________
TOTAL ASSETS 2,957,864
LIABILITIES
Covered Call Options Written, at market value,
(premiums received $112,706) 100,875
Securities Sold Short, at market value,
(sales proceeds received $569,209) 631,594
Payables:
Accounts payable 7,315
Investment securities purchased 26,843
Fund shares redeemed 0
__________
TOTAL LIABILITIES 766,627
__________
NET ASSETS $2,191,238
Class A:
Net asset value and offering price per share
($7,646 divided by 2,549 shares outstanding) $ 3.00
Class B:
Net asset value and offering price per share
($423 divided by 144 shares outstanding) $ 2.94
Class C:
Net asset value and offering price per share
($1,705,979 divided by 580,651 shares outstanding)$ 2.94
Class D:
Net asset value and offering price per share
($477,190 divided by 158,356 shares outstanding) $ 3.01
CENTURION COUNSEL FUNDS, INC.
STATEMENT OF INVESTMENT SECURITIES
June 30, 1999
Shares of % of Value
Principal Net (Note 1)
Amount Description Notes Assets Security Sector
COMMON STOCK 47.4%
CONSUMER PRODUCTS 3.2%
1000 ALICO $ 15,500
1000 BEATRICE (TLC) (b) 45,000
1200 VLASIC FOODS INTL (b) 9,000
69,500
CONSUMER SERVICES 5.5%
1000 CUMULUS MEDIA (b) $ 21,875
200 GENERAL ELECTRIC 22,225
8000 ROCK BOTTOM (b) 77,500
121,600
FINANCIAL SERVICES 0.7%
12000 GOLDEN STATE LIT WARR (b) $ 15,750
15,750
HEALTH 2.1%
4500 CYPROS (b) $ 10,688
1500 LIGAND PHARM (b) 16,688
2500 PERRIGO (b) 19,063
46,438
INDUSTRIAL PRODUCTS 3.2%
13200 SO. ENERGY HOMES (b) $ 70,125
70,125
INDUSTRIAL SERVICES 3.9%
140 FARMER BROTHERS $ 28,350
40 GREY ADVERTISING 13,320
2140 OCTEL (b) 27,018
3500 TRANSCOASTAL MARINE (b) 17,063
85,750
NATURAL RESOURCES 3.5%
1000 EURO NEVADA (CN) $ 11,890
1220 FRANCO NEVADA (CN) 19,105
5000 PAN AMERICAN SILVER (b) 30,000
40000 SUNSHINE MINING (b) 15,000
75,995
REAL ESTATE INVESTMENT TRUST 16.0%
5000 PRISON REALTY $ 49,063
2300 ENTERTAINMENT PROP TR 40,538
2100 ESSEX PROPERTY TRUST 73,763
7600 UNITED DOMINION 89,300
11900 UNITED INVESTORS TRUST 98,175
350,838
TECHNOLOGY 9.3%
1000 ACT MANUFACTURING (b) $ 14,000
1500 ECSOFT GROUP (b) 23,531
1000 GOODNOSE (EMUSIC.COM) (b) 20,625
2500 MOBIUS MANAGEMENT (b) 20,625
1100 ORACLE (b) 40,838
400 REAL NETWORKS (b) 27,550
200 TELESCAN (b) 4,863
7000 VALENCE TECH (b) 51,625
203,656
TOTAL COMMON STOCKS (COST $1,304,071) 1,039,651
PREFERRED STOCKS 0.6%
400 AMAX GOLD 3.75 PR $ 13,350
TOTAL PREFERRED STOCKS (COST $18,355) 13,350
OPTIONS AND WARRANTS 27.3%
CONSUMER PRODUCTS 3.0%
3000 HOME DEPOT JAN (01) 50 s (a) $ 66,000
66,000
CONSUMER SERVICES 1.2%
2000 ALASKA AIRE JUL 50 C s $ 250
4000 QWEST COMM OCT 30 C s (a) 25,000
25,250
FINANCIAL SERVICES 0.3%
1200 INVESTMENT TECH OCT 30 C s $ 6,825
6,825
HEALTH 0.1%
2000 HLTH MGMT SYS JUL5 C(R) $ 1,250
1,250
INDEXES 5.1%
10000 DJ INDX DEC O1 104 P s $ 112,500
112,500
INDUSTRIAL SERVICES 4.2%
3000 DIAMOND TECH OCT 25 P s $ 17,063
3000 SCHLMBRGR JAN (00) 40 C s (a) 74,625
91,688
NATURAL RESOURCES 0.7%
2000 BARCK GOLD JAN (00) 15 C s (a) $ 10,750
6000 HOMESTAKE JAN (00) 10 C s (a) 4,875
15,625
TECHNOLOGY 12.7%
4000 CISCO JAN (01) 22.5 C s (a) $ 178,500
2000 INTEL JAN (01) 30 C s (a) 64,750
1800 SECRTY FRST TCH JAN 30 Cs 35,325
278,575
TOTAL OPTIONS AND WARRANTS (COST $485,182) 597,713
FIXED INCOME 6.9%
CORPORATE BONDS 5.0%
100 AGNICO CVT 3 1/2 1-27-04 $ 63,500
40 GOLDEN BOOKS 7.65 9-15-02 16,000
50 N. WEST S&W 9.5 6-15-01 30,000
109,500
U.S. GOVERNMENT AGENCY BONDS 1.9%
20.023 FNMA G93-40 ZC $ 18,934
0.815 MOUNTAIN STATES 815
21.225 FNR 91-56M 21,126
40,875
TOTAL FIXED INCOME (COST $208,248) 150,375
TOTAL INVESTMENT IN SECURITIES 82.2 % 1,801,099
COVERED CALL OPTION SECURITIES -4.6% -100,875
SECURITIES SOLD SHORT -28.8% -631,594
NET INVESTMENT IN SECURITIES 48.8% 1,068,630
CASH 11.1% 243,853
MARGIN DEPOSIT ON SECURITIES
SOLD SHORT 38.9% 851,886
OTHER ASSETS LESS LIABILITIES 1.2% 26,869
NET ASSETS 100.0% $ 2,191,238
CENTURION COUNSEL FUNDS, INC.
STATEMENT OF COVERED CALL OPTIONS WRITTEN
June 30, 1999
Shares of % of Value
Principal Net (Note 1)
Amount Description Notes Assets Security Sector
CONSUMER PRODUCTS -0.65%
- -10,000 PIER ONE, JAN, 10, C s $ -4,375
-5,000 PIER ONE, MAR, 7.5, C s -13,125
-2,000 SUNGLASS HUT, JUN, 7.5 C s -1,125
-1,600 UNILEVER, JAN, 75, C s -13,400
$32,025
FINANCIAL SERVICES -0.02%
-4,000 CITIGROUP, JAN, 40, P s -750
-750
HEALTH -1.26%
-2,500 CENTOCOR, JAN, 40, C s -13,125
-2,000 GELTEX, JAN, 17.5, C s -10,375
-5,000 LIPOSOME, JAN, 7.5, C s -38,750
-62,250
INDUSTRIAL SERVICES -0.07%
CENTURION COUNSEL FUNDS, INC.
STATEMENT OF COVERED CALL OPTIONS WRITTEN
June 30, 1999
Shares of % of Value
Principal Net (Note 1)
Amount Description Notes Assets Security Sector
CONSUMER PRODUCTS -1.1%
- -1,500 BIG ENTERTAINMENT $ (23,438)
$ (23,438)
CONSUMER SERVICES -8.4%
- -4,100 FAIRFIELD COMMUNITIES (66,113)
- -4,500 MARKETING SERVICES GROUP (117,844)
(183,956)
FINANCIAL SERVICES -3.7%
- -2,100 JWGENSIS (29,663)
- -1,350 NETBANK (51,300)
(80,963)
TECHNOLOGY -15.7%
- -1,200 ANCOR COMMUNICATIONS (38,850)
- -6,000 ASHTON TECH (75,000)
- -2,700 BEYOND.COM (77,456)
- -1,300 HEI INC (8,531)
- -2,200 PEGASUS SYSTEMS (83,050)
- -1,700 SPORTSLINE (60,350)
(343,238)
TOTAL -28.8% $ (631,594)
CENTURION COUNSEL MARKET NEUTRAL, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
INVESTMETN INCOME
Dividends $ 29,077
Interest 14,724
__________
Total investment income 43,801
EXPENSES
Investment advisory fees $ 16,625
Distribution expenses 13,651
Registration and filing fees 8,240
Fund accounting fees 13,034
Custodian fees and expenses 4,792
Audit fees and expenses 2,950
Directors' fees and expenses 6,936
Transfer agent fees 1,254
Insurance 881
Other expenses 3,061
__________
Total expenses 71,424
Fees and Expenses Absorbed by Investment
Advisor (9,400)
Net expenses 62,024
___________
Net investment income (loss) (18,223)
___________
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net realized loss on investments (348,561)
Change in unrealized depreciation of
investments for the year 333,508
___________
Net loss on investments (15,053)
___________
Net Decrease in Net Assets Resulting from
Operations $ (33,276)
===========
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
June 30, December 31,
1999 1998
___________ _____________
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ (18,223) $ (13,099)
Net realized gain (loss) on
investments (348,561) (538,729)
Net change in unrealized depreciation
on investments 333,508 (101,802)
____________ _____________
Net increase (decrease) in net
assets resulting from operations $ (33,276) $ (653,630)
Class C:
Distribution to shareholders:
Net investment income 0 (12,145)
CAPITAL SHARE TRANSACTIONS: (NOTE 5)
Increase from capital shares sold 13,881 365,679
Increase from capital shares reinvested 12,145
Increase from capital shares repurchased (2,723,719) (3,047,343)
___________ ___________
Net increase (decrease) from capital
shares transaction (2,709,838) (2,669,519)
___________ ___________
Total increase (decrease) in net assets (2,743,122) (3,335,294)
NET ASSETS
Beginning of period 4,934,360 8,269,654
___________ ___________
End of period (includes no undistributed
investment income $ 2,191,238 $ 4,934,360
=========== ===========
CENTURION COUNSEL MARKET NEUTRAL FUND
NOTE 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 amended, 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 are
allocated on a pro rata basis 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.
At the shareholder meeting on January 15, 1999, the shareholders
voted to change the name of the fund to Centurion Counsel Funds, Inc.
from Centurion T.A.A. Fund, Inc. Also, shareholders approved to
reclassify each of the Fund's outstanding Class A shares, Class B shares,
Class C shares, and Class D shares as the series entitled Centurion
Market Neutral Fund Class A shares, Class B shares, Class C shares, and
Class D shares, respectively.
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
carryforwards totaling $313,324 which begin to expire in 2002.
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.
Restricted 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 June 30, 1999 the Fund had cash on deposit at one financial institution
of $243,853. 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 June 30, 1999, net assets consisted of:
Net proceeds from capital stock $ 3,913,073
Unrealized depreciation of securities (282,708)
Unrealized depreciation of covered call options written 11,830
Excess distributions over accumulated net income (367,783)
Undistributed net realized loss from security transactions (1,083,174)
$ 2,191,238
NOTE 3. COVERED CALL OPTIONS WRITTEN
As of June 30, 1999, portfolio securities valued at $100,875 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 six
months ended June 30, 1999 Centurion received investment management fees
of $7,225, and, it waived $9,400 of the advisory 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 re-allows a portion of such charges to dealers who sold the
shares. During the six months ended June 30,1999, no shares of Class A shares
were sold. 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
six months ended June 30, 1999, no shares were sold and there were no
redemptions of Class B shares, accordingly, CISI did not collect any
CDSC charges. In addition, CISI makes ongoing shareholder 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
the Class A 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 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
maintaining 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 maintaining 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 six months ended
June 30, 1999, CISI received servicing and distribution fees from the
Fund of $13,651.
CISI also executes some of the Fund's portfolio transactions. During the
six months ended June 30, 1999, CISI received commissions of $36,412 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 six months ended June 30, 1999, CGI received transfer fees of
$1,254 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 six months ended June 30,1999
CGI received accounting fees of $9,000 from the Fund.
The Fund pays each of its Directors who is not an employee, officer or
director of Centurion or any affiliate a $200 annual retainer and $400 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.
NOTE 5. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term securities)
were $12,057,637 and $13,773,221, respectively. Net loss on investments for
the six months ended June 30, 1999 was $15,053. That amount represents the net
decrease in value of investments held during the year. The components are
as follows:
Realized Unrealized Net
Long Position $ (372,934) $ 384,061 $ 11,127
Covered Calls Written 2,154 11,831 13,985
Short Position 22,220 (62,384) (40,165)
$ (348,560) $ 333,508 $ (15,053)
As of June 30, 1999, the unrealized depreciation on investments
consists of gross unrealized gains of $317,982 and gross unrealized losses
of $588,996.
As of December 31, 1998, securities sold short (at market value) totaled
$1,162,849. The Fund has established a segregated margin deposit to account
for cash greater or equal in value to the securities sold short. The margin
deposit is held be the Fund's custodian and totals $1,872,161 at
December 31, 1998.
NOTE 6. CAPITAL SHARE TRANSACTIONS
As of June 30, 1999, 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 six months ended June 30, 1999 and year ended
December 31, 1998 as follows:
June 30, 1999 December 31, 1998
Shares Amount Shares Amount
Class A shares:
Shares sold 0 $ 0 0 $ 0
Shares issued in
reinvestment
of dividends 0 0 0 0
0 0 0 0
Shares redeemed 0 0 0 0
Net increase 0 $ 0 0 0
Class B shares:
Shares sold 0 $ 0 0 $ 0
Shares issued in
reinvestment
of dividends 0 0 0 0
0 0 0 0
Shares redeemed 0 0 0 0
Net increase 0 $ 0 0 $ 0
Class C shares:
Shares sold 433 $ 1,300 55,157 $ 188,539
Shares issued in
reinvestment
of dividends 0 0 0 0
433 1,300 55,157 188,539
Shares redeemed (811,553) (2,431,236) (854,747) (2,722,413)
Net decrease (811,120)$(2,429,936) (799,590) $(2,533,874)
Class D shares:
Shares sold 4,039 $ 12,581 54,073 $ 177,140
Shares issued in
reinvestment
of dividends 0 0 3,520 12,145
4,039 12,581 57,593 189,285
Shares redeemed (94,466) (292,482) (98,505) (324,929)
Net decrease (90,427) $(279,901) (40,912) $(135,644)
