<PAGE>
CENTURY
SHARES
TRUST
SEMI-ANNUAL REPORT
JUNE 30, 1996
<PAGE>
DEAR FELLOW SHAREHOLDERS:
In the 1990s the volatility of investor fashions has increased markedly,
becoming even more impacted by short-term horizons. The pace of information
dissemination has picked up so rapidly that all too much attention is given to
"late-breaking" news or untried concepts which appear to have exciting
potential. A by-product of this environment is that many investors pay scant
heed to longer-term fundamentals and bypass many strong companies which are
building value in their enterprises without fanfare.
Importantly, such short-term excesses create attractive opportunities in the
securities of companies which are overlooked. We believe the current period is a
prime example. Although 1995 was an excellent year for the Trust, and 1996 is
witnessing a continuation of highly favorable operating results for our
companies, net asset value is virtually unchanged from year end. That makes no
sense and yet, it is a reality.
Observers are quick to provide a host of reasons, such as continuing competition
in commercial property-casualty lines of insurance, or the 1996 rise in interest
rates which, since year end, has led to declines in the value of most
fixed-income portfolios. What many investors and observers are overlooking,
however, is that the current period is one of the most exciting in the global
business of insurance in decades. Change, consolidation, restructuring,
innovation and entrepreneurship are all descriptive of the present. Little
noticed in the euphoria of high-tech companies' stream of IPOs and fantasizing
about the Internet, has been both the continued steady progress of well-run
insurance companies and an unusually large number of insurance company
acquisitions and business combinations. The table below lists some of the more
noteworthy 1996 events that have taken place so far.
As long-time shareholders know, our philosophy is to own shares of the best
companies -- companies whose managements year-in, year-out turn in superior
absolute and relative performance. This investment strategy, long-term in
nature, becomes focused company-by-company on faster growth, higher
profitability, rising earnings, increasing dividends, and greater value. We seek
to own companies which not only have produced excellent results in the past, but
which we believe have the management, business strategy and capability of
continuing to produce superior results in the future.
The charts on the following page depict the performance of our portfolio
companies. The data illustrate clearly the extent to which our portfolio
companies produce consistently favorable results relative to the companies
represented by the Standard & Poor's 500 Stock Index, a measure of the stock
market as a whole.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
ACQUIRER ACQUIRED COMPANY
-------- ----------------
<S> <C>
ACE LTD. TEMPEST REINSURANCE CO.
AMERICAN GENERAL CORP. INDEPENDENT INSURANCE GROUP, INC.
BERKSHIRE HATHAWAY, INC. GEICO CORP.
CONSECO, INC. LIFE PARTNERS GROUP, INC.
GE CAPITAL CORP. LIFE INSURANCE CO. OF VIRGINIA
GE CAPITAL CORP. UNION FIDELITY LIFE
GENERAL RE CORP. NATIONAL RE CORP.
KOHLBERG, KRAVIS & ROBERTS TALEGEN HOLDINGS, INC.
MASSACHUSETTS MUTUAL INSURANCE COMPANY CONNECTICUT MUTUAL LIFE INSURANCE COMPANY
METROPOLITAN LIFE INSURANCE COMPANY NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY
PROVIDENT COMPANIES, INC. THE PAUL REVERE CORP., INC.
ST. PAUL COMPANIES, INC. NORTHBROOK HOLDINGS, INC.
TRAVELERS GROUP, INC. AETNA CASUALTY AND SURETY COMPANY
ZURICH INSURANCE GROUP KEMPER CORPORATION
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FASTER GROWTH
Growth of Book Value Plus Dividends
For Five Years Ended
------------------------
1985 1990 1995
---- ---- ----
Century Shares Trust 14.2% 17.2% 18.9%
S&P 500 11.1% 12.8% 10.6%
HIGHER PROFITABILITY
Return on Equity
For Five Years Ended
------------------------
1985 1990 1995
---- ---- ----
Century Shares Trust 13.1% 17.3% 15.4%
S&P 500 13.2% 13.8% 14.1%
Over the past five years, the median price-earnings ratio for the Trust's
portfolio companies has been 14.3. Currently, our companies are selling at
approximately 12.6 times estimated 1996 earnings and only 11.2 times estimated
1997 earnings, valuations which represent discounts to the market's valuation of
25% and 29%, respectively.
This combination for our companies of low absolute price-earnings multiples, low
valuations relative to the overall stock market, and strong operating results
has been seen in few other periods.
The group most knowledgeable about the macro-changes occurring in insurance, as
well as the specific positioning of their individual companies, is management.
We show below 1996 portfolio company actions to date. The table illustrates that
61% of our portfolio investments have already raised their dividends in 1996,
and that 74% of the companies have ongoing buy-back programs. Both are strong
positive statements by those most knowledgeable.
1996 PORTFOLIO COMPANY ACTIONS
------------------------------
DIVIDEND STOCK BUYBACK
INCREASES PROGRAM
--------- -------
American General Corp. X X
American Heritage Life Invt. Corp. X X
American International Group, Inc. X X
AON Corp. X
The Chubb Corp. X X
Cincinnati Financial Corp. X
General Re Corp. X X
Hartford Steam Boiler Insp. and Ins. Co. X
Marsh & McLennan Companies X
Mercury General Corp. X
Ohio Casualty Corp. X X
The Progressive Corp. X X
Protective Life Corp. X
Providian Corp. X
SAFECO Corp. X X
St. Paul Companies, Inc. X X
Torchmark Corp. X
UNUM Corp. X X
USF&G Corp. X
USLIFE Corp. X
Wachovia Corp. X
We share the view of these managements - that stock prices of well-run insurance
enterprises are highly attractive. While the overall stock market has been at
all-time highs and appears vulnerable to a correction, we believe that any
downwards impact on our securities will, in time, be outweighed by solid
earnings and book value growth. Over time, continued good operating results by
our portfolio companies should be reflected in both better absolute and relative
valuations.
Respectfully submitted,
/s/ Allan W. Fulkerson
----------------------
Allan W. Fulkerson, Chairman
August 12, 1996
<PAGE>
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1996
COMMON STOCKS: INSURANCE COMPANIES -- 91.0%
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
100,000 American General Corp. ...................................... $ 3,637,500
225,000 American Heritage Life Investment Corp. ..................... 4,921,875
210,000 American International Group, Inc. .......................... 20,711,250
345,000 AON Corp. ................................................... 17,508,750
280,000 The Chubb Corp. ............................................. 13,965,000
253,575 Cincinnati Financial Corp. .................................. 14,548,866
120,000 General Re Corp. ............................................ 18,270,000
107,500 Hartford Steam Boiler Inspection and Insurance Company ...... 5,280,937
75,000 Marsh & McLennan Companies .................................. 7,237,500
195,000 MBIA Inc. ................................................... 15,185,625
165,000 Mercury General Corp. ....................................... 7,218,750
348,000 Ohio Casualty Corp. ......................................... 12,093,000
300,000 The Progressive Corp. ....................................... 13,875,000
170,000 Protective Life Corp. ....................................... 5,971,250
170,000 Providian Corp. ............................................. 7,288,750
380,000 SAFECO Corp. ................................................ 13,442,500
250,000 St. Paul Companies, Inc. .................................... 13,375,000
265,000 Torchmark Corp. ............................................. 11,593,750
100,000 UNUM Corp. .................................................. 6,225,000
240,000 USF&G Corp. ................................................. 3,930,000
150,000 USLIFE Corp. ................................................ 4,931,250
------------
221,211,553
------------
COMMON STOCKS: BANKING INSTITUTIONS -- 5.8%
100,000 J.P. Morgan & Co., Inc. ..................................... 8,462,500
130,000 Wachovia Corp. .............................................. 5,687,500
------------
14,150,000
------------
MISCELLANEOUS SECURITIES -- .9% ........................................... 2,277,500
TOTAL INVESTMENTS IN COMMON STOCK -- 97.7%
(Identified cost, $82,931,200) .......................................... 237,639,053
------------
FIXED INCOME -- .4%
FACE AMOUNT
- -----------
$1,000,000 U.S. Treasury Note, 5.625%, due 8/31/97 ................... 996,561
------------
TOTAL FIXED INCOME (Identified cost, $1,030,625) .......................... 996,561
------------
CASH EQUIVALENTS -- 1.9%
$4,548,000 State Street Bank and Trust Eurodollar Time Deposit,
at cost approximating value, maturity 7/1/96 ............ 4,548,000
------------
TOTAL INVESTMENTS -- 100% (Identified cost, $88,509,825) .................. $243,183,614
============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES -- June 30, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (Identified cost, $88,509,825) . $243,183,614
Cash ........................................................... 44,552
Dividends and interest receivable .............................. 464,704
Receivable for Trust shares sold ............................... 15,284
Prepaid expenses ............................................... 5,703
------------
Total assets ........................................... 243,713,857
LIABILITIES:
Payable for investments purchased ................... $ 43,875
Payable for Trust shares repurchased ................ 216,055
Accrued investment adviser fee (Note 5) ............. 137,742
Accrued expenses and other liabilities .............. 78,536
--------
Total liabilities ...................................... 476,208
------------
NET ASSETS (Note 3) ............................................ $243,237,649
============
Per share net asset value, offering price and redemption price
($243,237,649 / 8,655,341 shares of $1.00 par value capital
stock outstanding) (Note 2) .................................. $28.10
======
STATEMENT OF OPERATIONS -- Six Months Ended June 30, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends ................................................ $ 2,810,337
Interest ................................................. 419,249
-----------
Total income ......................................... 3,229,586
Expenses:
Investment adviser fee (Note 5) ................ $880,104
Non-interested trustees' remuneration .......... 24,832
Transfer agent ................................. 83,379
Custodian ...................................... 25,662
Insurance ...................................... 11,531
Audit .......................................... 24,749
Legal .......................................... 10,146
Registration costs ............................. 27,450
Printing and other ............................. 33,207
--------
Total expenses ....................................... 1,121,060
-----------
Net investment income ............................ 2,108,526
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions ............. 6,943,800
Decrease in net unrealized appreciation of investments ..... (6,957,937)
-----------
Net realized and unrealized loss on investments .. (14,137)
-----------
Net increase in net assets resulting from operations ......... $ 2,094,389
===========
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................... $ 2,108,526 $ 3,656,236
Net realized gain on investment transactions ............ 6,943,800 8,638,210
Increase (decrease) in net unrealized appreciation of
investments ........................................... (6,957,937) 56,383,215
------------ ------------
Net increase in net assets resulting from operations .... 2,094,389 68,677,661
------------ ------------
Net equalization (Note 1C) ................................ (71,405) (16,684)
------------ ------------
Distributions to shareholders:
Net investment income ................................... (1,809,837) (3,698,990)
Realized gain from investment transactions .............. -- (8,521,998)
Trust share transactions -- net (Note 2) .................. (24,156,333) 4,837,054
------------ ------------
Total increase (decrease) ........................... (23,943,186) 61,277,043
NET ASSETS:
At beginning of period .................................. 267,180,835 205,903,792
------------ ------------
At end of period (including accumulated distributions in
excess of net investment income of $7,105 and $234,389,
respectively) ......................................... $243,237,649 $267,180,835
============ ============
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- -----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
period ...................... $28.07 $21.77 $21.77 $24.04 $25.68 $21.03 $16.82
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....... $ 0.24 $ 0.19 $ 0.41 $ 0.44 $ 0.43 $ 0.48 $ 0.44
Net realized and unrealized
gain (loss) on investments 0.00 2.79 7.22 (1.38) (0.52) 5.15 4.81
------ ------ ------ ------ ------ ------ ------
Total income from
investment operations $ 0.24 $ 2.98 $ 7.63 $(0.94) $(0.09) $ 5.63 $ 5.25
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income .. $(0.21) $(0.21) $(0.41) $(0.45) $(0.45) $(0.42) $(0.47)
From net realized gain on
investment transactions ... -- -- (0.92) (0.88) (1.10) (0.56) (0.57)
In excess of net realized
gain on investment
transactions .............. -- -- -- -- * -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions ..... $(0.21) $(0.21) $(1.33) $(1.33) $(1.55) $(0.98) $(1.04)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, end of period $28.10 $24.54 $28.07 $21.77 $24.04 $25.68 $21.03
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN .................. 0.9% 13.7% 35.2% (3.9)% (0.4)% 27.0% 31.5%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) ............. $243,238 $219,915 $267,181 $205,904 $242,781 $260,265 $157,942
Ratio of expenses to average
net assets ................ 0.89%+ 1.01%+ 0.94% 1.01% 0.82% 0.84% 0.95%
Ratio of net investment
income to average
net assets ................ 1.68%+ 1.59%+ 1.60% 1.93% 1.72% 1.84% 2.28%
PORTFOLIO TURNOVER RATE ....... 1% 3% 5% 2% 19% 5% 0%
AVERAGE COMMISSION RATE PAID .. $.0400
<FN>
*Distributions in excess of net realized gain on investment transactions were $.004
+Annualized
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES -- The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A. Investment Security Valuations -- Securities listed on national securities
exchanges are valued at closing prices. Unlisted securities or listed securities
for which closing prices are not available are valued at the latest bid prices.
Short-term obligations, maturing in 60 days or less, are valued at amortized
cost, which approximates value.
B. Federal Taxes -- It is the Trust's policy to comply with the provisions of
the Internal Revenue Code applicable to investment companies and to distribute
to shareholders each year all of its taxable income, including any net realized
gain on investments. Accordingly, no provision for Federal income or excise tax
is necessary.
C. Equalization -- The Trust follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Trust shares equivalent, on a per-share basis, to the amount of
undistributed net investment income on the date of the transaction, is credited
or charged to undistributed net investment income. As a result, undistributed
net investment income per share is unaffected by sales or repurchases of Trust
shares.
D. Other -- Investment security transactions are accounted for on the date the
securities are purchased or sold. Gain or loss on sales is determined on the
basis of identified cost. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Shares issuable to shareholders electing to
receive income dividends and capital gain distributions in shares are recorded
on the ex-dividend date.
(2) TRUST SHARES -- At June 30, 1996, 8,655,341 shares were outstanding. The
number of authorized shares of $1.00 par value is unlimited. Transactions in
Trust shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold .......................................... 439,936 $ 12,397,283 1,797,676 $ 47,919,634
Issued to shareholders in reinvestment of
distributions from:
Net investment income ..................... 48,021 1,346,498 96,658 2,568,585
Realized gain on investment transactions .. -- -- 257,855 7,237,989
---------- ------------ --------- ------------
487,957 13,743,781 2,152,189 57,726,208
Repurchased ................................... (1,351,947) (37,900,114) (2,093,096) (52,889,154)
---------- ------------ --------- ------------
Net increase (decrease) ............... (863,990) $(24,156,333) 59,093 $ 4,837,054
========== ============ ========= ============
<CAPTION>
(3) SOURCES OF NET ASSETS -- At June 30, 1996, net assets consisted of:
<S> <C>
Capital paid-in .................................................................................. $ 81,913,981
Accumulated distributions in excess of net investment income ..................................... (7,105)
Accumulated undistributed net realized gains on investment transactions .......................... 6,656,984
Unrealized appreciation in value of investments .................................................. 154,673,789
------------
Net assets applicable to outstanding capital stock ...................................... $243,237,649
============
</TABLE>
(4) INVESTMENT SECURITY TRANSACTIONS -- Other than U.S. Government obligations
and certificates of deposit, purchases and sales of investment securities
aggregated $2,927,425 and $11,596,074, respectively, during the six months ended
June 30, 1996. At June 30, 1996, the cost of investments for federal tax
purposes was $88,509,825. Net unrealized appreciation for all securities at that
date was $154,673,789. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax cost of
$155,548,045 and aggregate gross unrealized depreciation for all securities in
which there was an excess tax cost over market value of $874,256. Additionally,
the Trust has elected to treat capital losses of $198,576, attributable to
securities transactions after October 31, 1995, as having been incurred on the
first day of the Trust's current taxable year.
(5) INVESTMENT ADVISER FEE -- The investment adviser fee is earned by Century
Capital Management, Inc. ("CCM"), as compensation for providing investment
advisory, management and administrative services to the Trust. CCM receives a
monthly fee equal on an annualized basis to 0.7% of the first $250 million and
0.6% of the amounts exceeding $250 million of the Trust's net asset value. For
the six months ended June 30, 1996, the fee amounted to $880,104. Officers and
Trustees of the Trust who are employed by CCM receive remuneration for their
services out of such investment adviser fee.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of Century Shares Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Century Shares Trust as of June 30, 1996, the
related statement of operations for the six months then ended, the statement of
changes in net assets for the six months then ended and for the year ended
December 31, 1995, and the financial highlights for the six months ended June
30, 1996 and 1995 and for each of the years in the five-year period ended
December 31, 1995. These financial statements and financial highlights are the
responsibility of the Trust'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. Our procedures included confirmation of the securities owned as of
June 30, 1996 by correspondence with the custodian and brokers. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Century Shares Trust
at June 30, 1996, and the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 2, 1996
<PAGE>
INVESTMENT ADVISER
Century Capital Management, Inc.
CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT
Boston Financial Data Services
LEGAL COUNSEL
Palmer & Dodge LLP
AUDITORS
Deloitte & Touche LLP
TELEPHONE
617-482-3060
800-321-1928
800-303-1928 (Shareholder Hotline)
AVERAGE ANNUAL TOTAL RETURNS
The average annual total returns for the Trust for the indicated investment
periods ended June 30, 1996, were as follows: (i) one year = 19.97%, (ii) five
years = 13.42%, (iii) ten years = 10.60%. These data represent past performance.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
This report is submitted for the general information of the shareholders of the
Trust. It is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus.
