Financial Statements
and Financial Highlights
Central Asset Fund, Inc.
August 31, 1999
with Report of Independent Auditors
Report of Independent Auditors
Board of Directors and Stockholder
Central Asset Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Central Asset Fund, Inc. as of August 31, 1999, and the related statement of
operations for the eight month period ended August 31, 1999, and the
statements of changes in net assets and the financial highlights for the eight
month period ended August 31, 1999 and for the period from March 24, 1998
(commencement of operations) to December 31, 1998. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits 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
financial highlights 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Central Assets Fund, Inc., at August 31, 1999, the results of its operations
for the eight month period ended August 31, 1999, and the changes in its net
assets and its financial highlights for the eight month period ended
August 31, 1999 and for the period from March 24, 1998 (commencement of
operations) to December 31, 1998, in conformity with generally accepted
accounting principles.
September 30, 1999
Central Asset Fund, Inc.
Statement of Assets and Liabilities
August 31, 1999
Assets
Net asset value $0
Central Asset Fund, Inc.
Statement of Operations
For the eight month period ended August 31, 1999
Investment income:
Dividend income $266,205
Interest income 16,802
Total investment income 283,007
Expenses:
Administration fees (Note 2) 36,736
Investment management fee (Note 2) 6,968
Independent auditors 6,517
Interest expense 9,907
Directors fees and expenses 3,000
Legal fees 7,014
Other expenses 564
Total expenses 70,706
Net investment income 212,301
Net realized gain on investments 2,194,031
Net realized gain on in-kind transfer (Note 1) 55,412,297
Net decrease in unrealized appreciation (55,412,297)
Net increase in net assets resulting from operations $2,406,332
See accompanying notes.
Central Asset Fund, Inc.
Statements of Changes in Net Assets
For the
For the eight month period from
period ended March 24, 1998 to
August 31, 1999 December 31, 1998
From operations:
Net investment income $212,301 $5,555,053
Net realized gain on investments 2,194,031 386,994
Net realized gain on in-kind transfer 55,412,397 0
Net change in unrealized appreciation
on investments (55,412,397) 55,412,397
Increase in net assets resulting from
operations 2,406,332 61,354,444
Dividends from net investment income:
Auction market preferred stock 0 (5,555,053)
Common stock (212,301) 0
(212,301) (5,555,053)
Distributions from net realized gains:
Auction market preferred stock 0 (385,437)
Common stock (2,194,031) (1,557)
In-kind transfer (55,412,397) 0
(57,606,428) (386,994)
Decrease in net assets resulting from
distributions to stockholder (57,818,729) (5,942,047)
Increase (decrease) from capital transactions:
Issuance of auction market preferred stoc 0 200,000,000
Redemption of acution market preferred st 0 (200,000,000)
Issuance of common stock 0 257,421
Redemption of common stock (257,421) 0
Additional paid-in-capital 0 459,165,586
Distribution of capital to common stockho (459,165,586) 0
(459,423,007) 459,423,007
Total increase (decrease) in net assets (514,835,404) 514,835,404
Net assets:
Beginning of period 514,835,404 0
End of period $0 $514,835,404
See accompanying notes.
Central Assets Fund, Inc.
Notes to Financial Statements
August 31, 1999
1. Organization and Significant Accounting Policies
On January 7, 1999 the Board of Directors approved a Plan of Liquidation and
Dissolution for the Central Asset Fund, Inc. ("the Fund"). As of August 31,
1999 the Fund was fully liquidated and all remaining assets had been
distributed to the common stockholder through an in-kind distribution. For
purposes of these financial statements, in accordance with generally accepted
accounting principles, the in-kind distribution was treated as a realized
gain. For tax purposes the distribution would not result in a realized gain
until the securities were actually sold.
The Fund was registered as a diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended. The Fund
commenced investment operations on March 24, 1998. The fund received
notification from the Securities Exchange Commission ("SEC") that it was de-
registered effective September 24, 1999.
On the date of commencement, the Fund issued $200 million of Auction Market
Preferred Stock ("AMPS") and received securities with an aggregate fair value
of $457,421,449 from a collective trust fund for employee benefit plans in
exchange for 25,742,144.95 shares of common stock and $200 million in cash.
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements.
Security Transactions
Security transactions were accounted for on a trade date plus one business day
basis which does not differ materially from a trade date basis. The cost of
securities sold was determined using the identified cost method. Dividend
income was recorded on ex-dividend date and interest income was recorded on
the accrual basis.
Federal Income Taxes
It was the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and distribute its
taxable income to shareholders. Therefore, no provision for Federal income tax
was required.
Distribution of Income and Gains
The Fund distributed substantially all of its taxable income in excess of the
dividends paid to the preferred stockholders to the common stockholder.
Dividends to the common stockholder were declared and paid at least annually.
Net capital gains, if any, were generally distributed annually.
The character of income and gains to be distributed was determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Amounts distributed in excess of taxable
income and net realized gains, if any, were considered a return of capital.
Use of Estimates
Estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial
markets and any other parameters used in determining these estimates could
cause actual results to differ from these amounts.
2. Related Party Transactions
A collective trust fund for employee benefit plans was the sole common
stockholder of the Fund. Certain officers and directors of the Fund were
affiliated with the common stockholder. No fees or expenses were paid to the
affiliated officers and directors.
For the eight month period ended August 31, 1999 and the period from March 24,
1998 (commencement of operations) to December 31, 1998, dividend and capital
gain distributions to the common stockholder were $2,406,332 and $1,557,
respectively.
For the year ended December 31, 1998, the common stockholder made capital
contributions to the Fund in the amount of $459,165,586.
Comerica Bank served as both custodian and administrator for the Fund and
received a fee based on a percentage of net assets outstanding at the end of
the fiscal year. An affiliate of Comerica Bank served as investment advisor to
the Fund. The annual investment management fee was 0.01% of average equity
investments. The administration and management fees were calculated and
accrued on a monthly basis and generally were paid on a quarterly basis.
3. Investment Transactions
The aggregate cost of securities purchased and the aggregate proceeds of
securities sold, excluding short-term securities, for the eight month period
ended August 31, 1999 were $6,161,950 and $7,304,903, respectively.
Central Asset Fund, Inc.
Financial Highlights
1999 (1) 1998(2)
For a share of common stock outstanding
throughout the period:
Net asset value, beginning of period $20.00 $0
Net investment income 0.01 0.22
Net realized and unrealized gains
(losses) on investments 0.08 2.17
Total from investment operations 0.09 2.39
Capital contribution 0.00 17.85
Less dividends from net investment income:
Common stock equivalent of dividends
paid to AMPS holders 0.00 (0.22)
Dividends paid to common shareholder (0.01) 0.00
Less distributions from net realized gains:
Common stock equivalent of distributions
paid to AMPS holders 0.00 (0.02)
Distributions paid to common shareholder (0.09) 0.00
Distributions from in-kind transfer paid to
common shareholder (2.15) 0.00
Less distributions from paid-in capital:
Return of capital to common stockholder (17.84) 0.00
Total distributions 20.09 (0.24)
Net asset value, end of period $0.00 $20.00
Total investment return (3) 0.47% 23.80%
Ratios/supplemental data:
Net assets at end of period (000s) 0 $514,835
Average net assets (000s) $57,246 $463,966
Ratio of expenses to average net assets
applicable to common stock (4) 0.12% 0.15%
Ratio of net investment income to average net
assets applicable to common stock (4) 0.37% 1.20%
Portfolio turnover 10.76% 0.32%
Asset coverage per AMPS share,
end of period 0 0
AMPS shares outstanding 0 0
Asset coverage for notes payable,
end of period 0 108272%
Notes payable, end of period 0 $475,500
(1)For eight month period ended August 31, 1999.
(2)For the period from March 24, 1998 (commencement of operations) t
(3)Total investment return for the period, not annualized.
(4)Ratios are calculated on the basis of income and expenses applica
common and preferred stock relative to the average net assets of
stockholder. Ratios do not reflect the effect of dividend paymen
See accompanying notes.