CENTURION T.A.A. FUND, INC.
Portfolio Review
as of December 31, 1998
Fund Highlights Top Ten Holdings
12/31/97 12/31/98 Hershey Creamery 4.1%
Net Assets: $8,268,736 $4,935,360 Cisco Systems 2.3%
Novacare Conv. 5.5% 2.0%
NAV Per Share: United Investors REIT 2.0%
Dow Jones Index Dec 00,90,P 1.9%
Class A: $3.35 $3.04 Transmaritime, 8.5%, 2000 1.8%
Class B: $3.33 $3.00 Rock Bottom Restuarant 1.8%
Class C: $3.33 $2.99 Intel 1.8%
Class D: $3.36 $3.05 Southern Energy Homes 1.6%
United Dominion REIT 1.6%
Share Outstanding: 2,484,106 1,643,245
Portfolio Allocation by Sector
as of December 31, 1998
Graph Top Ten Sectors
Real Estate Investment Trust 13.1%
Cash and Commerial Paper 11.8%
Health 5.6%
Industrial Services 4.7%
Technology 4.7%
Consumer Products 4.5%
Natural Resources 3.7%
Indexes 3.4%
Industrial Products 3.3%
Financial Services 1.4%
TOTAL RETURN
Through December 31, 1998
(Since new management and investment objectives--January 1995)
Last Since Date of
Quarter Twelve Changeor First
Months FirstSales Sale
Class A:(1) -5.04% -8.89% -9.02% 1/07/97
Class B: -5.36% -9.91% -7.54% 1/07/97
Class C: -5.68% -10.21% -3.04% 12/31/94
Class D: -5.28% -8.09% -2.77% 12/06/96
(1) Does not include commission load of 4.75% when purchased
TOTAL RETURN
Through December 31, 1998
(Since inception--January 1982)
Last
Quarter Twelve Five Ten Since
Months Year Year Inception
Class A:(1) -5.04% - 8.89% * * -9.02%
Class B: -5.36% - 9.91% * * -7.54%
Class C: -5.68% -10.21% -8.89% -5.13% 2.07%
Class D: -5.28% - 8.09% * * -2.77%
*Shares of this Class not available for the total period
(1) Does not include commission load of 4.75% when purchased
CENTURION T.A.A. FUND, INC.
1999 Annual Report
Influences on Markets
NASDAQ value is soaring. As of February 2, 1999, the NASDAQ
stock market has traded more than a billion shares for 9 of the
last 21 sessions. Previoulsy, there had never been more than two
straight days with a billion plus shares. Moreover, there were
only nine trading days with over a billion shares traded on the
NASDAQ in all of 1998. What concerns us is that the size of the
average trade is only 1200 shares, down significantly in size
from a year ago. This means that more and more amateurs are
trading and, obviously, they are trading more often. A lot of
this can be chalked up to "net mania" (tulip.com).
The shrinking memories of investors seems almost fantasy-like.
It was only last fall that President Clinton gave warning of the
worst financial crisis World War II when talking about the Asian
meltdown, Russian default and Brazil's problems (of course, it was
an election year). The Asian economic crisis feels like it happened
last century. It seems as though the vastly accelerated pace of
internet time is operating through our collective memories, quickly
pushing bad memories to the distant corners of our mind. Generally,
collective amnesia proves fatal to those who have engaged in it.
What really has changed in a mere four months time? Russis is still
a mess; Brazil blew $41 billion of the IMF's money, and is still a
mess; the fourth largest oil company is Russia defaulted this past
month and less than two years ago, Brisith Petroleum paid over $500
million for 10% ownership of the company; Japan is still reeling with
bad news on a daily basis; one of China's largest corporations defaulted
on its debt. We are concerned with the blind faith of investors who
think the stock market is without risk. As a money manager, I feel
we are watching a disaster in the making. One can just feel that
massive sums of money will be lost.
Two-Tier Market
While there can be no denying that the market index averages
showed that 1998 was an up year, only approximately 40% of the
stocks on the New York Stock Exchange were up, which means 60%
were either unchanged or down. The S&P was up 28% in 1998. It
should be noted though that the average performance of the top
50 stocks in the S&P 500 was up in excess of 55%. At year end
the S&P top 50 was selling at 38 times estimated 1999 earnings
while the small cap index is selling at only 17 times earnings.
While your Fund has performed in line with other "market neutral
funds," it trailed the S&P 500 again in 1998.
Market Volatility
In addition to the two tier market described above, market
volatility returned to the markets in a big way last year. The
decrease in equities in August 1998 was the largest decrease since
October 1987. We anticipate that 1999 will be more of the same
market volatility; however, we believe that "value stocks" will
bring the greatest rewards.
Adapting Investment Strategy to Current Markets
Since the sell off in the third quarter, we have positioned
the Fund around core holding of value oriented equities selling
at reasonable price earning ratios and paying substantial
dividends. A large part of this holding is in real estate
investment trusts. We are also take advantage of the "tulip.com
mania" by shorting those selected stocks that are really nothing
more than an announcement by promoters of some "get rich quick"
scheme. This strategy has led us to outperform the S&P 500 for
the two months ended February 28, 1999. While two months do not
make a year, we feel that tremendous advantage can be gained by
keeping a cool head and looking at the market realistically.
Over the long run, value wins out.
Sincerely,
CENTURION T.A.A. FUND, INC.
Jack K. Heilbron
Chief Investment Officer
TABLE OF CONTENTS
INDEPENDENTS AUDITOR'S REPORT
FINANCAIL STATEMENTS:
Statement of Assets and Liabilities
Statement of Investment Securities
Statement of Covered Call Options Written
Statement of Securities Sold Short
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
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 statements of investment
securities, covered call options written, and securities sold short as
of December 31, 1998, 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 precedures
included confirmation of securities owned as of December 31, 1998, by
correspondence with custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share 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, 1998,
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 then ended, and
the selected per share data and ratios for the five years then ended in
conformity with generally accepted accounting principles.
Squire & Co.
/s/
February 5, 1999
Poway, California
CENTURION T.A.A. FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS
Investments in Securities, at value,
(identified cost $4,703,475)" $ 4,218,170
Cash and Deposits 308,854
Receivables:
Dividends 7,350
Interest 14,574
Investment securities sold 235,801
Margin Deposit for Securities Sold Short 1,872,161
TOTAL ASSETS 6,656,910
LIABILITIES
Covered Call Options Written, at market value,
(premiums received $107,602) 191,200
Securities Sold Short, at market value,
(sales proceeds received $1,130,461) 1,162,849
Payables:
Accounts payable 46,695
Investment securities purchased 51,739
Fund shares redeemed 270,067
TOTAL LIABILITIES 1,722,550
NET ASSETS $4,934,360
Class A:
Net asset value and offering price per share
($7,757 divided by 2,549 shares outstanding) $ 3.04
Class B:
Net asset value and offering price per share
($431 divided by 144 shares outstanding) $ 3.00
Class C:
Net asset value and offering price per share
($4,166,397 divided by 1,391,770 shares outstanding) $ 2.99
Class D:
Net asset value and offering price per share
($759,775 divided by 248,782 shares outstanding) $ 3.05
The accompanying notes are an integral part of the financial statements.
CENTURION T.A.A. FUND, INC.
STATEMENT OF INVESTMENT SECURITIES
December 31, 1998
Shares or % of Value
Principal Net (Note 1)
Amount Description Notes Assets Security Sector
COMMON STOCKS 46.3%
CONSUMER PRODUCTS 6.0%
1,000 BEATRICE (TLC) (b) $52,000
80 HERSHEY CREAMERY 200,000
2,000 SUNGLASS HUT (a) (b) 14,000
1,200 VLASIC FOODS INTL (b) 28,500
$294,500
CONSUMER SERVICES 1.8%
16,500ROCK BOTTOM (b) 89,718
89,718
FINANCIAL SERVICES 3.4%
2,600 CAL FED LITIGATION WARRANTS (b) 32,175
12,000GOLDEN STATE LITIGATION WARRANTS (b) 54,750
2,500 COAST FEDERAL LITIGATION WARRANTS (b) 16,562
1,000 HANCOCK HOLDING 45,500
900 PIONEER GROUP (b) 17,775
166,762
HEALTH 4.5%
2,000 CARDIAC PATHWAYS (b) 8,500
4,500 CYPROS (b) 13,219
2,000 GELTEX (a),(b) 45,250
4,000 GENZYME TISSUE (b) 9,000
1,500 LIGAND PHARMACTICAL (b) 17,437
5,000 LIPOSOME CO. (a),(b) 77,187
2,500 PERRIGO (b) 22,031
3,000 SCIOS, INC (b) 31,125
223,749
INDUSTRIAL PRODUCTS 3.4%
3,300 BETHLEHEM STEEL (b) 27,637
75 BOSTON SAND & GRAVEL (b) 24,375
1,200 GLATFELTER (PH) (b) 14,775
1,000 JEWETT CAMERON TRADING (b) 5,062
27,600NORTHWEST STEEL & WIRE (b) 17,250
13,200SOUTHERN ENERGY HOMES (b) 80,850
169,949
INDUSTRIAL SERVICES 5.6%
1,000 BAKER HUGHES 17,687
300 BOUYGUES OFFSHORE 3,187
1,100 CHEMED 36,850
2,000 CORRECTIONS CORP (b) 35,000
2,000 EAGLE GEOPHYSICAL (b) 7,750
140 FARMER BROTHERS (b) 29,960
40 GREY ADVERTISING 14,560
2,140 OCTEL (b)29,692
1,500 R&B FALCON (b) 11,437
21,150TRANSCOASTAL MARINE (b) 62,789
2,500UNIFAB INTL (b) 20,000
1,000WORKFLOW MANAGEMENT (b) 6,625
275,537
INTERNATIONAL 1.8%
5,000 EMERGING MEXICO (b) $29,062
11,000LATIN AMERICA SMALLER CO 61,875
$90,937
NATURAL RESOURCES 2.6%
1,000 EURO NEVADA(CN) 16,190
1,220 FRANCO NEVADA(CN) 23,278
300 FREEPORT COPPER & GOLD 3,131
2,000 GULF CANADA RESOURCES (b) 5,875
1,110 HOMESTAKE MINING 10,129
816 NEWMONT MINING 14,739
5,000 PAN AMERICAN SILVER (b) 25,000
58,000SUNSHINE MINING (b) 29,000
127,342
REAL ESTATE 13.5%
1,000 ALICO 18,000
3,000 BODDIE NOELL PROPERTIES 31,313
5,250 CCA PRISON REALTY 71,750
2,800 ENTERTAINMENT PROP TRUST 47,600
2,600 ESSEX PROPERTY TRUST 77,350
185 HORIZON GROUP PROPERTIES 717
1,100 MERIDIAN INDUSTRIAL TRUST 25,575
1,800 MIDAMERICA APARTMENTS 40,838
3,700 PRIME RETAIL 36,306
3,100 STORAGE TRUST REALTY 72,462
7,600 UNITED DOMINION 78,375
14,400UNITED INVESTORS REIT 97,200
1,800 WASHINGTON REIT 33,413
1,200 WEEKS CORP 33,825
664,723
TECHNOLOGY 3.7%
1,500 ADVANCED MICRO DEVICES (b) 43,406
1,000 BRIGHTPOINT (b) 13,750
1,000 EXCITE (a), (b) 42,063
3,300 INTERGRAPH (a), (b) 18,975
2,100 ROGUE WAVE SOFTWARE (b) 18,375
1,600 SYSTEMS & COMPUTERS (b) 22,000
5,000 WESTELL (b) 24,375
182,944
TOTAL COMMON STOCKS (COST $2,688,330) 2,286,160
PREFERRED STOCKS 1.3%
2,900 PATINA OIL & GAS, 7.125% 51,838
400 AMAX GOLD, 3.75% 14,400
TOTAL PREFERRED STOCKS (COST $99,966) 66,238
OPTIONS AND WARRANTS 24.9%
CONSUMER PRODUCTS 3.1%
4,000 CHS ELECT, JAN, 17 1/2, PUTS 5,250
2,800 HON INDUSTRIES, FEB, 30, PUTS 18,900
15,000PIER ONE, MAR, 5, CALLS (a) 67,500
4,000 ROSS STORES, FEB, 35, PUTS 3,750
4,000 TELSAVE, JAN, 15, PUTS 4,500
1,600 UNILEVER, JAN, 50, CALLS (a) 53,200
2,000 ZALE CORP, FEB, 25, PUTS 500
153,600
CONSUMER SERVICES 0.2%
4,000 CBS, JAN, 25, PUTS 250
1,000 FAMILY GOLF, FEB, 20, PUTS 2,625
4,000 KLM, MAR, 30, PUTS 7,000
9,875
FINANCIAL SERVICES 0.9%
4,000 CITIGROUP, JAN (01), 40, PUTS(a) 23,750
4,000 ING, JAN, 55, PUTS 2,250
10,000LEHMAN BROS, APR, 25, PUTS 3,750
2,000 TCF FINANCIAL, JAN, 25, CALLS(a) 1,000
4,000 TORCHMARK, FEB, 45, PUTS 13,750
44,500
HEALTH 3.8%
3,000 BECT DICSON, MAR, 35, CALLS 25,125
2,000 BIOTIME, MAR, 10, PUTS 2,000
3,000 BMC SOFTWARE, FEB, 40, CALLS 21,562
2,500 CENTOCOR, JAN(00), 25, CALLS (a) 57,812
3,000 SCHRING PLH, JAN 00, 30, CALLS(a) 78,750
185,249
INDUSTRIAL PRODUCTS 1.2%
1,100 CORNING GLASS, JAN, 30, CALLS 16,637
2,000 AVNET, FEB, 55, PUTS 3,250
3,000 BOEING, JAN (01), 25, CALLS 37,875
57,762
INDUSTRIAL SERVICES 1.3%
4,000 BURLNGTN NORTH, JAN, 35, PUTS 5,750
4,500 SCHLMBERGER, JAN(00), 40, CALLS(a) 56,250
4,000 WASTE MANAGEMENT, JAN, 45, PUTS 3,750
65,750
INTERNATIONAL 1.0%
2,800 TEL ARGEN, JAN, 37 1/2, PUTS 26,950
2,800 TELCON ARGEN, JAN, 35, PUTS 21,350
48,300
INDEXES 2.7%
5,000 DOW JONES, DEC (00), 80, PUTS 35,625
10,000DOW JONES INDEX, DEC 00, 90, PUTS 95,625
131,250
NATURAL RESOURCES 1.2%
5,000 BARRICK GOLD, JAN(00), 15, CALLS (a) 32,811
10,000HOMESTAKE MINING, JAN(00), 10, CALLS(a) 27,500
26,900SUNSHINE MINING WARRANTS 420
60,731
TECHNOLOGY 9.6%
900 ALLIANT TECH, FEB, 60, CALLS 20,362
2,000 CISCO, JAN (01), 45, CALLS (a) 112,500
2,700 CYPRESS SEMICONDUCTOR, MAR, 10, CALLS 1,181
2,000 HEWLETT PACKARD, JAN(01), 45, CALLS(a) 59,500
2,000 INTEL, JAN (01), 60, CALLS (a) 133,500
1,800 LUCENT, JAN (00), 60, CALLS (a) 98,325
700 RAMBUS, FEB, 55, CALLS (a) 29,531
600 SPRINT, JAN, 65, CALLS 18,225
473,124
TOTAL OPTIONS AND WARRANTS (COST $1,190,428) 1,230,141
FIXED INCOME 7.3%
CORPORATE BONDS 6.0%
100 AGNICO, CONVERTIBLE, 3.5%, DUE 1-27-04 60,000
40 GOLDEN BOOK, 7.65%, DUE 9-15-02 11,800
50 NORTHWEST STEEL & WIRE, 9.5%, DUE 6-15-01 31,500
125 NOVA, CONVERTIBLE, 5.5%, DUE 1-15-00 101,093
1.006 MOUNTAIN STATES GTY MTG, 1-G, 9.4%,DUE 8-1-18 1,000
100 TRANSMARITIME, 8.5%, DUE 10-27-00 91,000
296,393
U.S. GOVERNMENT AGENCY BONDS 1.3%
23.75 FNMA G93-40 ZC, 6.5%, 12-25-23 23,631
25.954FNR 91-56M, 6.75%, 6-25-21 26,270
14.497FNMA 61G, 7.0%, 9-25-20 14,474
64,375
TOTAL FIXED INCOME (COST $449,888) 360,768
COMMERCIAL PAPERS 5.6%
275 GMAC COMMERCIAL PAPER, DUE 1-4-99 274,863
TOTAL COMMERCIAL PAPER (COST $274,863) 274,863
TOTAL INVESTEMENT IN SECURITIES 85.5% 4,218,170
COVERED CALL OPTION SECURITES -3.9% -191,200
SECURITIES SOLD SHORT -23.6% -1,162,849
NET INVESTMENT IN SECURITIES 58.0% 2,864,121
CASH 6.3% 308,854
MARGIN DEPOSIT ON SECURITIES SOLD SHORT 37.9% 1,872,161
OTHER ASSETS LESS LIABILITIES -2.2% -110,776
NET ASSETS 100.0% $4,934,360
(a) Call options have been written against this position.
(b) Non-income producing securities.
(c) Total unrealized depreciation on investments consists of gross
unrealized gains of $582,450 and gross unrealized losses of
$1,186,866.
"CENTURION T.A.A. FUND, INC."
STATEMENT OF COVERED CALL OPTIONS WRITTEN
December 31, 1998
Shares or % of Value
Principal Net (Note 1)
Amount Description Assets Security Sector
CONSUMER PRODUCTS -0.65%
- -10,000PIER ONE, JAN, 10, CALLS $ -4,375
- -5,000 PIER ONE, MAR, 7 1/2, CALLS -13,125
- -2,000 SUNGLASS HUT, JAN, 7 1/2, CALLS -1,125
- -1,600 UNILEVER, JAN, 75, CALLS -13,400
$-32,025
FINANCIAL SERVICES -0.02%
- -4,000 CITIGROUP, JAN, 40, PUTS -750
-750
HEALTH -1.26%
- -2,500 CENTOCOR, JAN, 40, CALLS -13,125
- -2,000 GELTEX, JAN, 17 1/2, CALLS -10,375
- -5,000 LIPOSOME, JAN 7 1/5, CALLS -38,750
-62,250
INDUSTRIAL SERVICES -0.07%
- -1,500 SCHLUMBERGER, MAY, 55, CALLS -3,375
-3,375
NATURAL RESOURCES -0.08%
- -3,000 BARRICK GOLD, JAN, 25, CALLS -188
- -4,000 HOMESTAKE, APR, 12 1/2, CALLS -2,500
- -4,000 HOMESTAKE, JAN(99), 10, CALLS -1,000
- -2,000 HOMESTAKE, JAN(99), 15, CALLS -125
-3,813
TECHNOLOGY -1.80%
- -500 CISCO, JAN (00), 100, CALLS -8,562
- -500 CISCO, JAN (00), 95, CALLS -9,500
- -1,000EXCITE, JAN, 55, CALLS -625
- -500 HEWLETT PACKARD, JAN, 70, CALLS -719
- -1,200INTEL, JAN, 80, CALLS -47,100
- -3,300INTERGRAPH, JAN, 7 1/2, CALLS -412
- -1,000LUCENT, JAN, 90, CALLS -20,625
- -700 RAMBUS, JAN, 105, CALLS -1,444
-88,987
TOTAL -3.87% $-191,200
"CENTURION T.A.A. FUND, INC."
STATEMENT OF SECURITIES SOLD SHORT
December 31, 1998
Shares or % of Value
Principal Net (Note 1)
Amount Description Assets Security Sector
CONSUMER PRODUCTS -4.29%
- -2,000 EXIDE, JAN, 15, PUTS $-1,125
- -5,000 EXIDE -81,250
- -2,100 JOSTENS -54,862
- -4,300 SEATTLE FILM WORKS -19,887
- -4,300 SEATTLE FILM, JAN, 5, PUTS -2,687
- -4,000 BOOKS A MILLION -52,000
$-211,811
CONSUMER SERVICES -3.66%
- -2,000 DATA TRANS NETWORK, FEB 25, PUTS -2,625
- -2,000 DATA TRANS NETWORK, JAN, 25, PUTS -875
- -4,000 DATA TRANSMISSION NETWORK -115,500
- -2,000 SYLVAN -61,000
- -2,000 SYLVAN, JAN, 25, PUTS -500
-180,500
FINANCIAL SERVICES -2.83%
- -2,000 ASTORIA FINANCIAL -91,500
- -2,000 TCF FINANCIAL -48,375
-139,875
HEALTH -1.03%
- -1,500 CURATIVE -50,250
- -3,000 SCHERING PLOUG JAN 60 C -750
-51,000
INDUSTRIAL PRODUCTS -1.49%
- -1,800YORK INTERNATIONAL -73,463
-73,463
INDEXES -1.08%
- -10,000DOW JONES INDEX, JAN, 85, PUTS -1,875
- -5,000 WEBS - MEXICO -51,250
- -5,000 DOW JONES INDEX, JAN, 80, PUTS -313
-53,438
INDUSTRIAL SERVICES -1.97%
- -2,400 INTERNATIONAL SPEEDWAY -97,200
-97,200
TECHNOLOGY -7.21%
- -3,000 APPLE COMPUTER, JAN, 32 1/2, PUTS -750
- -3,000 APPLE COMPUTER -122,813
- -4,800 CYBERIAN OUTPOST -132,000
- -2,000 CYBERCASH, JAN 15, PUTS -3,250
- -4,100 CYBERCASH -61,500
- -2,000 MULTIPLE ZONE -35,250
-355,563
TOTAL -23.57% $-1,162,849
CENTURION T.A.A. FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
Dividends $ 75,042
Interest 149,089
Total investment income 224,131
EXPENSES
Investment advisory fees $ 72,126
Distribution expenses 62,985
Registration and filing fees 9,806
Fund accounting fees 23,982
Custodian fees and expenses 40,441
Audit fees and expenses 5,400
Directors' fees and expenses 12,014
Transfer agent fees 2,830
Insurance 1,953
Other expenses 5,693
Total expenses 237,230
Fees and Expenses Absorbed by Investment Advisor -
Net expenses 237,230
Net investment income (loss) -13,099
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net realized loss on investments -538,729
Change in unrealized depreciation of investments for the year-101,802
Net loss on investments -640,531
Net Decrease in Net Assets Resulting from Operations $ -653,630
The accompanying notes are an integral part of the financial statements.
CENTURION T.A.A. FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) $-13,099 $3,312
Net realized gain (loss) on investments -538,729 -60,487
Net change in unrealized depreciation of investments -101,802 -406,598
Net increase (decrease) in net assets resulting
from operations -653,630 -463,773
Class C:
Distribution to shareholders:
Net investment income -12,145 -
CAPITAL SHARE TRANSACTIONS: (NOTE 5)
Increase from capital shares sold 365,679 1,783,727
Increase from capital shares reinvested 12,145 -
Decrease from capital shares repurchased -3,047,343 -2,744,423
Net increase (decrease) from capital share
transactions -2,669,519 -960,696
Total increase (decrease) in net assets -3,335,294 -1,424,469
NET ASSETS
Beginning of period 8,269,654 9,694,123
End of period (includes no undistributed investment
income) $4,934,360 $8,269,654
The accompanying notes are an integral part of the 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 December 31, 1998 the Fund had cash on deposit at one financial institution
of $308,854. 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, 1998, net assets consisted of:
Net proceeds from capital stock $ 6,622,910
Unrealized depreciation of securities (520,818)
Unrealized depreciation of covered call options written (83,598)
Excess distributions over accumulated net income (349,520)
Undistributed net realized loss from security transactions (734,614)
$ 4,934,360
NOTE 3. COVERED CALL OPTIONS WRITTEN
As of December 31, 1998, portfolio securities valued at $1,162,849 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, 1998 Centurion received investment management fees
of $72,126.
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 year ended December 31, 1998, 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
year ended December 31, 1998, 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 year ended
December 31, 1998, CISI received servicing and distribution fees from the
Fund of $62,985.
CISI also executes some of the Fund's portfolio transactions. During the
year ended December 31, 1998, CISI received commissions of $100,811 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, 1998, CGI received transfer fees of
$2,830 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, 1998,
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 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 $23,041,000 and $25,885,000, respectively. Net loss on investments for
the year ended December 31, 1998 was $640,531. That amount represents the net
decrease in value of investments held during the year. The components are
as follows:
Realized Unrealized Net
Long Position $ (84,887) $ 37,806 $ (47,081)
Covered Calls Written (448,500) (107,220) (552,720)
Short Position (5,342) (32,388) (37,730)
$ (538,729) $ (101,802) $ (640,531)
As of December 31, 1998, the unrealized depreciation on investments
consists of gross unrealized gains of $582,450 and gross unrealized losses
of $1,186,866.
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 December 31, 1998, 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 years ended December 31, 1998 and 1997 were
as follows:
December 31, 1998 December 31, 1997
Shares Amount Shares Amount
Class A shares:
Shares sold 0 $ 0 2,563 $8,664
Shares issued in
reinvestment
of dividends 0 0 0 0
0 0 2,563 8,864
Shares redeemed 0 0 (14) (88)
Net increase 0 $ 0 2,549 $ 8,576
Class B shares:
Shares sold 0 $ 0 144 $ 500
Shares issued in
reinvestment
of dividends 0 0 0 0
0 0 144 500
Shares redeemed 0 0 0 0
Net increase 0 $ 0 144 $ 500
Class C shares:
Shares sold 55,157 $188,539 385,499 $ 1,341,181
Shares issued in
reinvestment
of dividends 0 0 0 0
55,157 188,539 385,499 1,341,181
Shares redeemed (854,747) (2,722,413) (434,885) (1,494,774)
Net decrease (799,590)$(2,533,874) (49,386) $(153,593)
Class D shares:
Shares sold 54,073 $177,140 123,388 $433,381
Shares issued in
reinvestment
of dividends 3,520 12,145 0 0
57,593 189,285 123,388 433,381
Shares redeemed (98,505) (324,929) (359,188) (1,249,561)
Net decrease (40,912) $(135,644) (235,800) ($816,180)
NOTE 7. PER SHARE INFORMATION
Selected data for each share of capital stock outstanding throughout
the period is as follows:
Class A Class B
Shares Shares
Per Share Operating Performance: 1998 1997 (c) 1998 1997 (c)
"Net asset value, beginning of period" $3.35 $3.65 $ 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) -0.33 -0.30 -0.32 -0.32
Total From Investment Operation -0.31 -0.30 -0.33 -0.32
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - - - -
Distributions from capital gains - - - -
al Distributions - - - -
Net asset value, end of period $3.04 $3.35 $3.00 $3.33
TOTAL RETURN (e) -8.28% -8.47% -9.91% -4.39%
RATIOS AND SUPPLEMENTAL DATA
"Net Assets, End of Period
($000 Omitted) $ 8 $ 8 $ 1 $ 1
Ratios to net assets
Expenses, before waiver of fees 3.47% 2.38% 4.14% 2.84%
Expenses, after waiver of fees 3.47% 2.15% 4.14% 2.60%
Net investment income 0.67% 0.64% 0.04% 0.19%
Portfolio Turnover Rate 522.88% 234.67% 522.88% 234.67%
Number of Shares Outstanding
at End of Period (000 Omitted) 3 3 0 0
Class C Shares (a)
For the years ended December 31,
Per Share Operating Performance: 1998 1997 1996 1995 1994
"Net asset value, beginning of period" $3.33 $3.51 $3.34 $3.43 $4.55
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) -0.01 -0.01 -0.03 -0.05 -0.18
Net gains (losses) on investments
(both realized and unrealized) (d) -0.33 -0.17 0.20 -0.04 -0.94
Total From Investment Operation -0.34 -0.18 0.17 -0.09 -1.12
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - - - - -
Distributions from capital gains - - - - -
Total Distributions - - - - -
"Net asset value, end of period $2.99 $3.33 $3.51 $3.34 $3.43
TOTAL RETURN (e) -10.25% -5.13% 5.16% -2.62% -28.01%
RATIOS AND SUPPLEMENTAL DATA
"Net Assets, End of Period
($000 Omitted) $4,166 $7,288 $7,855 $4,370 $ 452
Ratios to net assets
Expenses, before waiver of fees 3.34% 3.14% 3.54% 4.82% 9.04%
Expenses, after waiver of fees 3.34% 2.91% 3.54% 3.53% 6.00%
Net investment income 33.00% -0.11% -0.43% 17.00% -4.78%
Portfolio Turnover Rate 522.88% 234.67% 129.20% 57.20% 148.21%
Number of Shares Outstanding
At End of Period (000 Omitted) 1,392 2,191 2,241 1,309 132
Class D
Shares
Per Share Operating Performance: 1998 1997 1996 (b)
Net asset value, beginning of period $3.36 $3.51 $3.46
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) 0.02 0.01 -
Net gains (losses) on investments
(both realized and unrealized) (d) (0.33) (0.16) 0.05
Total From Investment Operation (0.31) (0.15) 0.05
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income - - -
Distributions from capital gains - - -
Total Distributions - - -
Net asset value, end of period $3.05 $ 3.36 $3.51
TOTAL RETURN (e) -8.09% -4.27% -5.16%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period ($000 Omitted) $760 $972 $1,839
Ratios to net assets
Expenses, before waiver of fees 2.96% 2.20% 2.13%
Expenses, after waiver of fees 2.96% 1.97% 2.13%
Net investment income 0.85% 0.82% 0.00%
Portfolio Turnover Rate 522.38% 234.67% 129.20%
Number of Shares Outstanding
at End of Period (000 Omitted) 249 290 524
(a) All capital shares issued and outstanding as of
November 6, 1996 were reclassified as Class C Shares
(b) For the period December 9, 1996 (effective date) to December 31, 1996.
(c) For the period January 7, 1997 (first sale date) to December 31, 1997.
(d) Allocated between Net Investment Income and Net Gains or (Losses)
on Securities based on monthly weighted average shares outstanding.
(e) 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.
