CENTURION MARKET NEUTRAL FUND
(formerly CENTURION T.A.A. FUND, INC.)
11545 West Bernardo Court, Suite 100
San Diego, California 92127
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1999
TO THE SHAREHOLDERS OF CENTURION MARKET NEUTRAL FUND:
The annual meeting of the shareholders of Centurion Market Neutral Fund
(the "Fund") will be held at 11545 West Bernardo Court, Suite 100, San Diego,
California 92127, on May 14, 1999, at 10:00 a.m. for the following
purpose:
1. To elect a Board of Directors for the Fund.
2. To approve the selection of Squire & Company as the Fund's
independent public accountants for the fiscal year ending
December 31, 1999.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE FOR EACH OF
THE NOMINEES TO THE BOARD OF DIRECTORS AND RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF EACH OTHER ITEM LISTED ON THIS NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS.
Shareholders of record at the close of business on April 7, 1999, are
the only persons entitled to notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. WHETHER OR
NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN, SIGN, DATE
AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO SAVE THE FUND
FURTHER SOLICITATION EXPENSE. If you are present at the meeting, you may then
revoke your proxy and vote in person, as explained in the Proxy Statement in the
section entitled "ANNUAL MEETING OF SHAREHOLDERS - MAY 14,1999." A return
envelope is enclosed for your convenience.
Mary R. Limoges
Secretary
Dated: April 14, 1999
________________________________________
PROXY STATEMENT
________________________________________
CENTURION COUNSEL MARKET NEUTRAL FUND
(formerly CENTURION T.A.A. FUND, INC.)
11545 West Bernardo Court, Suite 100
San Diego, California 92127
ANNUAL MEETING OF SHAREHOLDERS - MAY 14, 1999
The enclosed Proxy is solicited by the Board of Directors of Centurion
Counsel Market Neutral Fund (the "Board") in connection with the annual
meeting of shareholders of Centurion Counsel Market Neutral (the "Fund")
to be held on May 14, 1999 at 10:00 A.M. at 11545 West Bernardo Court,
Suite 100, San Diego, California 92127, and at any adjournments thereof.
The cost of solicitation, including the cost of preparing and mailing the
Notice of Shareholders' Meeting and this Proxy Statement, will be paid by
Centurion Counsel, Inc.("Centurion Counsel"), the Advisor to the Fund.
Such mailing took place on approximately April 14, 1999 Representatives of
the Fund and Centurion Counsel may, without cost to the Fund, solicit
Proxies for the management of the Fund by means of mail, telephone or
personal calls.
A Proxy with respect to the Fund may be revoked before the meeting by
giving written notice of revocation to the Secretary of the Fund, or may be
revoked at the meeting, prior to voting. Unless revoked, properly executed
Proxies with respect to the Fund will be voted as indicated in this Proxy
Statement. In instances where choices are specified by the shareholders in
the Proxy, those Proxies will be voted or the vote will be withheld in
accordance with each shareholder's choice. An "abstention" on any proposal
will be counted as present for purposes of determining whether a quorum of
shares is present at the meeting with respect to the proposal on which the
abstention is noted, but will be counted as a vote "against" such proposal.
Should any other matters come before the meeting, it is the intention of the
persons named as proxies in the enclosed Proxy to act upon them according to
their best judgment.
Only shareholders of record at the close of business on March 20, 1998
may vote at the meeting or any adjournments thereof. As of that date there
were issued and outstanding approximately 944,452 common shares of all
classes, $0.01 par value, of the Fund. Each shareholder of the Fund is
entitled to one vote for each share of the Fund held. Voting for the election
of directors is not cumulative, which means that the holders of a majority of
the Fund's outstanding shares have the power to elect the entire board of
directors of the Fund. None of the matters to be presented at the meeting
will entitle any shareholder of the Fund to appraisal rights. In the event
that Proxies which are sufficient in number to constitute a quorum are not
received by May 10, 1999, the persons named as Proxies may propose one or
more adjournments of the meeting to permit further solicitation of Proxies.
Such adjournments will require the affirmative vote of the holders of a
majority of the shares present in person or by Proxy at the meeting. The
persons named as proxies will vote in favor of such adjournment. At the
annual meeting, the shareholders of the Fund will be asked to reelect the
current members of the Board and to approve the selection of the independent
public accountant for the Fund.
SHARE OWNERSHIP
As of April 7, 1999, to the knowledge of management, only one person owned
beneficially more than 5% of the outstanding shares of the Fund. The Carlisle
Family Trust owned 5.16% of the outstanding shares.
The following directors or nominees for the position of director or
officers, as of April 7, 1999, beneficially owned shares of the Fund:
Number of % of Total
Shares Outstanding Shares*
Richard E. Hall 16,769 1.78%%
Jack K. Heilbron 3,005 .32%
Russell W. Ketron 12,440 1.32%
Doug Werner 521 .06%
* All classes on a combined basis.
ANNUAL, SEMIANNUAL REPORTS OF THE FUND
The semiannual report of the Fund containing unaudited financial
statements for the six months ended June 30, 1998 was mailed to the
shareholders on or about August 5, 1998 and the annual report of the Fund
containing financial statements for the fiscal year ended December 31, 1998,
was mailed to shareholders of the Fund on or about February 26, 1999.
PROPOSAL 1
ELECTION OF DIRECTORS
It is intended that the enclosed Proxy will be voted for the election of
the five (5) persons named below as directors for the Fund unless such
authority has been withheld in the respective Proxy. The term of office of
each person elected to be a director of the Fund will be until the next
regular or annual meeting of the shareholders at which election of directors
is an agenda item and until his successor is duly elected and shall qualify.
Pertinent information regarding each nominee for the past five years is set
forth following his name below.
Position with the fund
Name and (Age) and Principal Occupations Business Address
Carol Ann Freeland (61) Has served as a director 4015 Beltline Rd.
of the Fund Since Ste. 200
December 20, 1994.Since 1992, Dallas, TX 75244
Executive Vice President, Collateral
Equity Management, of Dallas, Texas.
From 1987 to 1992, Executive Vice
President, Financial Services
Exchange, Irving, Texas; from 1985 to
1986, Vice President, Marketing
Property Co. of America, Dallas, Texas.
Richard E. Hall (73) Has served as a director of the 10 Carson Drive
Fund since December 20, 1994. Grant's Pass,OR
Since 1989, a retired financial 97526
planner and securities salesman.
Served as registered representative
with Planners Independent Management,
Inc. ("PIM") from 1983 to 1989 and
also as a director of PIM during that
period. Until July, 1994, Mr. Hall
owned approximately 3% of the shares
of CI Holding Group, Inc., Centurion
Counsel's parentcorporation. At that
time he sold his shares for fair value
to an Affiliate of Centurion Counsel.
There is no agreement or understanding
between Mr. Hall and Centurion Counsel
or its Affiliates regarding his service
as a director of the Fund. Mr. Hall was
a shareholder of Centurion until 1989.
Jack K. Heilbron (48) Has served as a director of the 11545 W. Bernardo
Fund since December 20, 1994. Ct., Suite 100
Previously, served as a Director San Diego, CA 92127
of the Fund from 1989 to 1990.
Has served as portfolio manager
for the Fund since 1990. Since
1984 has served as Chairman and Chief
Executive Officer of CI Holding Group,
Inc. and of its affiliate, PIM and since
1989, Chairman and Chief Investment Officer
of Centurion Counsel, Inc. Until 1989, a
shareholder, officer and director of Excel
Interfinancial Corporation, the parent of
the Advisor for the Fund from 1988 to
December 20, 1994.
Russell W. Ketron (55) Has served as a director of the 1701 Novato Blvd.
Fund since December 20, 1994. Suite 204
A Certified Financial Planner Novato, CA 94947
since 1977. Since 1979 has been
a registered principal with
Protected Investors of America,
a national broker-dealer firm.
Has been an instructor at Sierra
Nevada College since 1985 and at
the College of Marin since 1991.
Douglas Werner (48) Has served as a director of the 140 Brightwood Ave.
Fund since December 20, 1994. Chula Vista, Ca
Since 1993 has been President 92010
of Tracks Publishing, a printing
firm located in Chula Vista,
California. Since 1980, has been
President and owner of Werner
Graphics, a graphic design firm
located in San Diego, California.
(1) Directors who are "interested persons" of Centurion Counsel, Centurion,
the Fund, or a registered broker-dealer, as defined under the
Investment Company Act of 1940, as amended.
(2) Even though this person may be an "affiliated person" of a broker-
dealer registered under the Securities and Exchange Act of 1934, as
defined under the Investment Company Act of 1940, the Fund has
determined that this person will not thereby be considered an
"interested person" of the Fund, Centurion Counsel, Centurion, CIS or
PIM, as defined under the Investment Company Act of 1940 by reason of
Rule 2a19-1(a) promulgated thereunder.
None of the persons named as nominees for the Fund are directors of
any Reporting Companies. "Reporting Companies" include companies with a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "1934 Act")or subject to the
requirements of Section 15(d) of the 1934 Act, or any company registered as
an investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").
The Fund does not have a standing audit or nominating committee of its
board of directors, or committees performing similar functions. The Fund
pays no compensation to any of its officers and directors, except for a fee
of $250 for each meeting attended (other than telephonically) by each director
not affiliated with Centurion Counsel and reimburses such nonaffiliated
directors for their travel expenses to attend directors' meetings. The board
of directors for the Fund held a total of four (4) regular meetings during
its last fiscal year.
The following table discloses the compensation paid by the Fund in its
most recently completed fiscal year to its directors. The Fund does not
maintain any pension, retirement or other arrangement other than as
disclosed in the following table for compensating its Directors. The Fund
has no advisory board.
Aggregate Pension or Total Compensation
Name of Person; Compensation Retirement From the Fund
Position Paid by the Fund Benefits Accrued Complex
Carol A. Freeland $ 1,800 -0- $ 1,800
Richard E. Hall 1,800 -0- 1,800
Russell W. Ketron 1,800 -0- 1,800
Douglas Werner 1,400 -0- 1,400
Jack K. Heilbron -0- -0- -0-
In voting for directors, you must vote all of your shares
noncumulatively. This means that the owners of a majority of the Fund's
outstanding shares have the power to elect the Fund's entire board of
directors. The vote of a majority of shares of the Fund represented at the
meeting, provided at least a quorum (a majority of the outstanding shares)
is represented in person or by proxy, is sufficient for the election of the
above nominees to the Board. By completing the Proxy, you give the proxy
the right to vote for the persons named in the table above. If you elect to
withhold authority for any individual nominee or nominees, you may do so by
making an "X" in the box marked "VOTE FOR NOMINEE(S) NOT LINED OUT," and by
striking a line through the nominees' name or names on the Proxy that you
do not vote for.
Each of the nominees has agreed to serve as a director of the Fund
until his or her replacement is elected and qualified. If any unforeseen event
prevents one or more of the nominees from serving as a director, your votes
will be cast for the election of a substitute or substitutes selected by the
Board. In no event, however, can the Proxies be voted for a greater number
of persons than the number of nominees named. Unless otherwise instructed,
the proxies will vote for the election of each nominee to serve as a director
of the Fund.
Each of the Fund's current directors is a nominee for director.
Pertinent information regarding each is set forth following his or her
name above.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE TO ELECT
EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS OF THE FUND.
PROPOSAL 2
RATIFICATION OR REJECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
At the annual meeting, the shareholders of the Fund will be asked to
ratify the selection of the accounting firm of Squire & Co. as the Fund's
independent public accountants.
Background and General Information. The 1940 Act provides that
every registered investment company shall be audited at least once each
year by independent public accountants selected by a majority of the
directors of the investment company who are not interested persons of the
investment company. The 1940 Act requires that such selection be submitted
for ratification or rejection by the shareholders at their next meeting
following such selection. Squire & Co. has served as the Fund's independent
public accountants since 1989. None of the principal accountants' reports
on the financial statements for the past two years contained an adverse
opinion or disclaimer of opinion nor were they qualified or modified as
to uncertainty, audit scope or accounting principles. Squire & Co. has
no material direct or indirect financial interest in the Fund, other
than the receipt of fees for services to the Fund. The selection of
Squire & Co. to be the Fund's independent public accountants for the fiscal
year ended December 31, 1999 has been approved by a majority of the directors
of the Fund, including a majority who are not interested persons of Centurion
Counsel, or the Fund. A representative of Squire & Co. is not expected to be
present at the meeting.
At the annual meeting, the shareholders of the Fund will be asked to
approve the selection of Squire & Co. to be the Fund's independent public
accountants for the fiscal year ended December 31, 1999.
Shareholder Approval. The vote of a majority of the shares of the Fund
represented at the meeting, provided at least a quorum (a majority of the
outstanding shares) is represented in person or by proxy, is sufficient for
the ratification of the selection of the independent public accountants.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THE PROPOSAL. UNLESS
OTHERWISE INSTRUCTED, THE PROXIES WILL VOTE IN FAVOR OF THE
PROPOSAL TO RATIFY THE SELECTION OF THE FUND'S INDEPENDENT PUBLIC
ACCOUNTANTS.
OTHER MATTERS
Management does not intend to present any business at the meeting not
mentioned in this Proxy Statement, and currently knows of no other business to
be presented. If any other matters are brought before the meeting, the
appointed proxies will vote all Proxies on such matters in accordance with
their judgment of the best interests of the Fund.
BROKERAGE
In effecting securities and commodities transactions, the Fund's
investment advisor seeks to obtain the best price and execution of orders.
Commission rates, being a component of price, are considered together with
other relevant factors.
After the annual meeting of shareholders, the Fund intends to continue
to use its principal underwriter Centurion Institutional Services, Inc.
("CISI"), CISI's affiliate, PIM Financial Services, Inc. ("PIM"), or other
broker-dealers affiliated with Centurion Counsel as brokers for the Fund,
but only if the provisions of Section 17(e) of the Act (and the rules
thereunder) are complied with and only where, in the judgment of the Fund's
investment advisor, such firm will be able to obtain a price and execution
at least as favorable as other qualified brokers, and the transactions effected
by such firm, including the frequency thereof, the receipt of commissions
payable in connection therewith and the selection of such firm, are not
unfair or unreasonable to the shareholders of the Fund.
In determining the commissions to be paid to an affiliated broker-
dealer, it is the policy of the Fund that such commissions will, in the
judgment of the Fund's investment advisor, be both at least as favorable as
those which would be charged by other qualified brokers having comparable
execution capability and at least as favorable as commissions contemporaneously
charged by such broker-dealer on comparable transactions for its most favored
unaffiliated customers, except for any customers of such broker-dealer
considered by a majority of the disinterested directors not to be comparable
to the Fund. While the Fund does not deem it practicable and in its best
interest to solicit competitive bids for commission rates on each transaction,
consideration will regularly be given to posted commission rates as well as
to other information concerning the level of commissions charged on comparable
transactions by other qualified brokers.
When selecting brokers, business may be placed with broker-dealers
who furnish investment research services to the Fund's investment advisor.
Such research services include advice, both directly and in writing, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities, as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts. This allows the advisor to supplement its own
investment research activities and enables it to obtain the views and
information of individuals and research staffs of many different securities
research firms prior to making investment decisions for the Fund. To the extent
such commissions are directed to these other broker-dealers who furnish
research services, the advisor receives a benefit, not capable of evaluation in
dollar amounts, without providing any direct monetary benefit to the Fund
from these commissions. The advisor has not entered into any formal or
informal agreements with any broker-dealers, and it does not maintain any
"formula" which must be followed in connection with the placement of the Fund's
portfolio transactions in exchange for research services, except as noted
below. However, the advisor may maintain an informal list of broker-dealers
which it may use as a general guide in the placement of the Fund's business,
in order to encourage certain broker-dealers to provide it with research
services which it anticipates will be useful to it. Because any such list
would merely be a general guide which would be used only after the primary
criteria for the selection of broker-dealers have been met, substantial
deviations from the list are permissible and may be expected to occur. The
advisor will authorize the Fund to pay an amount of commission for effecting
a securities transaction in excess of the amount of commission another
broker-dealer would have charged only if the advisor determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker-dealer viewed
in terms of either that particular transaction or its overall
responsibilities with respect to the accounts as to which the advisor
exercises investment discretion. Generally, the Fund pays more than the
lowest commission rates available.
Subject to the policies set forth in the preceding paragraph and such
other policies as the Fund's directors may determine, the advisor may consider
sales of shares of the Fund and of other funds it may advise as a factor in
the selection of broker-dealers to execute such Fund's portfolio transactions.
During the years ended December 31, 1996, 1997 and 1998, $1,810,232,
$2,670,128 and $1,258,091 respectively, of the Fund's portfolio securities
were purchased and sold through brokers or banks acting on a principal basis
for which no commissions were charged, all of which were effected through
brokers or banks unaffiliated with the Fund. During the years ended December
31, 1996, 1997 and 1998, the Fund paid a total of $34,994, $83,956 and $115,426
respectively, in brokerage commissions in connection with agency transactions;
during 1996, 1997 and 1998, $9,051, $27,075 and $15,486 respectively, were
paid to broker-dealers who furnished investment research to the Fund's
investment advisor. During 1996, 1997 and 1998, CISI, and its affiliate, PIM,
together effected 75%, 82% and 82% respectively, of the total volume of
transactions in which commissions were paid and CISI received 74%, 66% and
87% respectively, of such commissions.
SUPPLEMENTAL INFORMATION WITH RESPECT TO THE FUND
Certain information about the current executive officers of the Fund is
set forth below. Each executive officer of the Fund may be removed from office
at any time by a majority of the Fund's Board of Directors with or without
cause.
Name of Officer (Age) Anticipated Position Prinicpal Occupations
With The Fund
Jack K. Heilbron (48) Chairman of the Board Director,Treasurer and Vice
and Chief Investment President; Chairman and
Officer and Director of CI Holding,
Centurion Counsel and PIM.
Mary R. Limoges (44) Secretary Secretary and Director of
C I Holding, Centurion
Counsel and President and
a director of PIM and
CISI.
Kenneth W. Elsberry(60) President, Chief Chief Financial Officer of
Financial Officer and C I Holding and PIM, and
Assistant Secretary President and Chief President and Chief
Financial Officer of
Centurion Counsel.
Jack K. Heilbron and Mary R. Limoges are husband and wife. There are
no other family relationships between the proposed executive officers or
directors. Centurion Counsel's address is: 11545 West Bernardo Court,
Suite 100, San Diego, California 92127.
None of these executive officers or directors have family
relationships with other executive officers or directors.
During the fiscal years ended December 31, 1995, 1996, and 1997, the
Fund did not pay compensation to any of its executive officers.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's next Annual Meeting of
Shareholders must be received by the Company no later than November 10, 1998
in order to be considered for inclusion in the Company's proxy statement and
form of proxy relating to that meeting.
BALANCE SHEET OF CENTURION COUNSEL, INC.
Attached hereto as Appendix A is the latest audited balance sheet of
Centurion Counsel as of March 31, 1998.
MARY R. LIMOGES,
Secretary
Dated: April 14, 1999
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Consolidated Statements of Financial Condition
and
Independent Auditor's Report
March 31,1998 and 1997
APPENDEX B
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Page
Independent Auditor's Report 1
Audited Financial Statements:
Consolidated Statements of Financial Condition 2
Notes to Consolidated Statements of Financial Condition 3-7
INDEPENDENT AUDITOR'S REPORT
Board of Directors
CENTURION Counsel, Inc. and Subsidiaries
We have audited the accompanying consolidated statements of financial condition
of CENTURION Counsel, Inc. and Subsidiaries (subsidiaries of Centurion Group,
Inc.) as of March 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility os to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financil statements referred to above present fairly,
in all material respects the consolidated financial position of
CENTURION Counsel, Inc. and Subsidiaries at March 31, 1998 and 1997,
in conformity with generally accepted accounting principles.
Boros & Farrington
/s/
May 15, 1998
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Consolidated Statements of Financial Condition
March 31, 1998 and 1997
ASSETS
Current assets 1998 1997
Cash $ 83,916 $133,756
Securities owned 8,703 8,692
Receivables, net 60,255 111,398
Due from affiliates 7,278
Prepaid expenses 9,522 20,323
Total current assets 169,674 274,169
Note receivable from affiliate, less current
portion 353,877 375,877
Furniture and equipment, net 3,738 5,677
Intangibles, net 59,355 64,669
$586,644 $720,392
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ad other accrued expense $ 77,853 $ 82,996
Due to affiliates 18,185
Deferred revenue 1,646 40,968
Current portion of long-term debt 21,599
Accrued dividends 18,660 17,939
Accrued participating certificate fees 7,974 10,885
Total current liabilites 106,133 192,572
Stockholders' equity
Preferred Stock, $10,000 par value 888,000 888,000
Common stock, no par value; 10,000
shares authorized 10,000 10,000
Additional paid-in capital 90,640 90,640
Accumulated deficit (508,129) (460,820)
Total stockholders' equity 480,511 527,820
$586,644 $720,392
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Notes to Consolidated Statements of Financial Condition
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
The Company. The financial statements include the accounts of
CENTURION Counsel, Inc. ("CCI") and its wholly-owned subsidiaries:
Centurion Institutional Services, Inc. ("CIS") and CHG Properties,
Inc. ("CHG"). All signifiant inter-company balances and
transactions have been eliminated in consolidation.
CCI and its Subsidiaries (the "Company") are in the business of
providing financial services. CCI operates as a registered investment
advisor with its customers geographically dispersed across the United
States of America. CIS began operations in fiscal 1996 as an
introducing broker-dealer clearing customer transactions through
another broker-dealer on a fully disclosed basis. CHG provides
property management services primarily to affiliates.
CCI is wholly-owned subsidiary of Centurion Group, Inc. ("CGI").
CGI is engaged in the business of providing diversified financial
services to the public. By common ownership, the Company is also
related to PIM Financial Services, Inc.; PIM Insurance Services,Inc.;
Bishop Crown Investment Research, Inc.; CI Holding Group, Inc.; and
Wyoming Casa Grande Associates, a California limited partnership.
Accouting Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results may deffer from those estimates.
Revenue recognition. Investment advisor fees are recognized over
the term of the investment advisory agreement. Deferred revenue
results from the billing in advance of investment advisory fees on
a quarterly or annual basis. Property management and other service
income is recognized when the services are rendered. Commission
revenue is recorded on a trade date basis.
Advertising Costs. Advertising and promotion costs are expensed
as incurred.
Marketing incentives. Referral fees are paid to other registered
investment advisors and broker/dealers. Such fees are amortized
over the life of the investment advisory contract, which generally is a
month, a quarter, or a year.
Securities owned. Securities owned are stated at market value, based
on quoted market prices.
Furniture and equipment. Furniture and equipment are stated at cost
less accumulated depreciation. Additions, renovations, and improvements
are capitalized. Maintenance and repairs which do not extend asset lives
are expensed as incurred. Depreciation is provided on the straight-line
method over the estimated useful lives of the assets.
Intangible assets. Intangible assets are amortized using the straight-
line method over 5 years for organization costs and 15 years for the
investment in a mutual fund advisory and administrative contract.
Income taxes. The Company files consolidated federal and state income tax
returns with CI Holding Group, Inc. and subsidiaries. The subsidiaries
record their deferred and current taxes on a seperate company basis. The
agreement provides that the subsidiaries are given credit in the year
incurred for any deductions, net operating losses, and credits that are
subject to consolidated tax return rules and limitations.
The Company uses the liability method of accounting for income taxes
whereby deferred tax asset and liability account balances are calculated
at the balance sheet date using the current tax laws and rates in effect.
Concentration of Credit Risk. The Company maintains cash balances with
various financial institutions. Management performs periodic evaluations
of the relative credit standing of these institutions. The Company has
not sustained any material credit losses from these instruments.
The Company's customers are individuals, corporations, a mutual fund, and
individual retirement accounts. The Company provides investment advisory
services under contracts that can be terminated with notice. Should
investment results or other matters fall below customer expectations, it
is possible that the Company would not retain the business of those
customers and the Company's operating results could be adversely affected.
Financial Instruments. The carrying values reflected in the statements of
financial condition at March 31, 1998 and 1997 reasonably approximate the
fair values for cash, securities owned, receivables, accounts payable, and
long-term debt. In making such assessment, the Company has utilized
discounted cash flow analyses, estimates, and quoted market prices as
appropriate.
Reclassifications. Certain prior year financial statement classifications
have been reclassified to conform with the current year's presentation.
CENTURION COUNSEL, INC. AND SUBSIDIARIES
(Subsidiaries of Centurion Group, Inc.)
Notes to Consolidated Statements of Financial Condition
2. RECEIVABLES
1998 1997
Investment advisory services $37,350 $ 62,571
Commissions 18,057 21,476
Other 4,848 27,351
$60,255 $111,398
Due from affiliates. The balance due from affiliates arises from
transactions among the affiliated group of companies including cash
advances and loans, transfer of assets, allocation of expenses, and
recognition of income tax benefits. The amounts are non-interest
bearing and due on demand.
Note receivable from affiliate. The Company has a promissory note
receivable from CI Holding Group, Inc. ("CIH"), the affiliated group's
parent, which requires annual payments of $83,790 through 2007 including
interest at 9% per annum. CIH has no operating revenues of its own and
depends on profits of its subsidiaries to make the payments on this note.
During the fiscal 1997, CIH paid in advance four annual installments.
3. FURNITURE AND EQUIPMENT
1998 1997
Furniture and equipment $15,823 $15,823
Accumulated depreciation (12,085) (10,146)
$ 3,738 $ 5,677
4. INTANGIBLE ASSETS
1998 1997
Organization costs, net of accumulated
amortization of $6,678 and $6,344 $ $ 344
Investment in a mutual fund advisory and
administration contract, net of accumulated
amortization of $14,942 and $9,961 59,355 64,335
$59,355 $64,669
5. LONG-TERM DEBT
Long term debt consists of a note payable issued to finance the
purchase of the investment in a mutual fund advisory and administrative
contract. The note provides for monthly payments of $2,250, with
interest imputed a 9% per annum. During fiscal 1998 this note was
repaid in full.
6. PREFERRED STOCK
Authorization. The Company is authorized to issue 1,000 shares of
preferred stock, issuable from time to time in one or more series.
The Board of Directors shall determine and fix the rights, preferences,
privileges, and restrictions relating to the preferred stock and the
number of share constituting and the disignation of said shares. The
Board of Directors has authorized 100 shares of Serier A Preferred Stock
and 75 shares of Serie B Preferred Stock. Except as noted below with
respect to sinking fund requirements, the Series A and Series B share
are of equal rank.
The following summarizes preferred stock transactions and balances:
Series A Series B
Shares Amount Shares Amount
Balance April 1, 1996 73.3 $733.000 13.5 $135,000
Preferred stock for cash 2.0 20,000
Balance March 31, 1997` 73.3 $733,000 15.5 $155,000
Gross revenue participation certificates. For each share of Series A
and Series B Preferred Stock issued by the Company, the Company also
issued a gross revenue participation certificate. Each participation
certificate (i) will expire 36 months following the date the related
preferred share is redeemed (the "Expiration Date"); (ii) entitles the
holder to a quaterly payment equal to a percentage of the Company's
quaterly gross revenues until the Expiration Date (this percentage
shall decrease after the Expiration Date as follows: 0.03% first
12 months, 0.02% second 12 months, and 0.01% third 12 months); (iii)
is transferable separately from the related preferred share; and (iv)
is non-redeemable.
Voting rights. The Series A and Series B Preferred Stock is non-
voting.
Dividends. The holder of the preferred shares are entitled to quarterly
cumulative cash dividends equal to the average annual prime rate posted
by the federal reserve, if declared the board of directors. The preferred
stock shall receive any cumulative unpaid dividends before the payment of
any dividends to common stockholders.
Liquidation preferences. The liquidation preference is $10,000 per share
plus accrued and unpaid dividends before any liquidation payments to
common stockholders.
Redemption and sinking fund requirements. The Series A and Series B
Preferred Stock is reedeemable at the election of the company and is
subject to a mandatory redemption on and after April 30, 1999 and 2000,
respectively, pursuant to the sinking fund requirements. The Company
will establish a sinking fund account with a third-party broker/dealer
or a federally insured financial institution for the benefit of the
preferred stockholders and for the sole purpose of repaying and/or
repurchasing the preferred stock. Commencing on April 30, 1999
(Series A) and April 30, 2000 (Series B) and on each succeeding
April 30, the Company will be required to deposit cash and or preferred
stock having a par value equal to 20% of the par value of the preferred
shares outstanding on each such date.
Based on current shares outstanding, sinking fund payments will be
as follows:
Year ending March 31:
1999 $146,600
2000 177,600
2001 177,600
2002 177,600
2003 177,600
2004 31,000
$888,000
7. REGULATORY REQUIREMENTS
Registered investment advisor. CCI is a registered investment
advisor in various states which generally require, among other rules
and regulations, that CCI maintain minimum levels of net capital (as
defined) and minimum financial ratios. Management believes that it
is in compliance with all such requirements.
Net capital for broker/dealers in securities. Under Rule 15c3-1 of the
Securities Exchange Act of 1934, the Company's broker/dealer subsidiary
is required to maintain a minimum net capital (as defined) and a ratio
of aggregate indebtedness to net capital (as defined) not exceeding 15
to 1.
The Company's ratio at March 31, 1998 was 0.38 to 1. The basic concept
of the Rule is liquidity, its object being to require a broker/dealer
in securities to have at all times sufficient liquid assets to cover
its current indebtedness. At March 31, 1998, the Company had net
capital of $69,097 which was $64,097 in excess of the amount required
by the Securities and Exchange Commission.
