<PAGE>
CENTURY
SHARES
TRUST
SIXTY-EIGHTH ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
CENTURY SHARES TRUST
One Liberty Square
Boston, Massachusetts 02109
617-482-3060 800-321-1928
Shareholder Hotline
-------------------
800-303-1928
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INVESTMENT OBJECTIVES
Organized in 1928, Century Shares Trust (the "Trust") operates as a
diversified open-end management investment company. It is a no-load mutual
fund, which means that its shares are offered by the Trust at net asset value
without sales charge. The investment objective of the Trust is long-term
growth of principal and income, obtained through investment in a diversified
portfolio of common stocks, or securities convertible into common stocks, of
insurance companies and banks, insurance brokers, and other companies
providing services to, or closely related to, insurance companies and banks.
- --------------------------------------------------------------------------------
20-YEAR HIGHLIGHTS
Total Returns: December 31, 1975 - December 31, 1995
Century Shares Trust* +1576%
Standard & Poor's 500 Stock Index +1432
Lipper Growth and Income Funds Average +1400
Long-Term Government Bonds + 630
Inflation + 186
Gold + 176
*Full details and notes are shown on Page 7.
- --------------------------------------------------------------------------------
<PAGE>
DEAR FELLOW SHAREHOLDERS:
1995 was an extraordinary year for the Trust and for the stock market as a
whole. At such times, it is especially important to reexamine goals and
strategy.
SETTING THE GOAL
When the Trust's present management assumed day-to-day responsibility in 1976,
we set a goal of producing exceptional long-term total returns by owning
companies which had demonstrated the ability to grow per share book value plus
dividends at an annual compound growth rate of 15% over five-year periods. The
twenty years since then have seen wide fluctuations in interest rates, double-
digit inflation in the late 1970s, highly favorable securities markets during
the 1980s; and, in our area of specialization -- insurance -- endless concerns
about a wide variety of issues. Widespread lack of investor recognition of the
intrinsic values inherent in insurance securities has been the norm. What many
investors have not fully appreciated is the consistently competitive performance
produced by the well-managed insurance enterprises in which we have concentrated
the Trust's investments. Highlighted below are investment results for various
periods over the past twenty years. Full details and important notes are shown
on page 7.
ANNUALIZED COMPOUND RETURNS FOR PERIODS ENDED DECEMBER 31, 1995
1 YEAR 5 YEARS 10 YEARS 15 YEARS 20 YEARS
------ ------- -------- -------- --------
Century Shares Trust +35.2% +16.7% +12.7% +15.6% +15.1%
Lipper Growth and
Income Funds Average +30.8 +15.5 +12.8 +13.7 +14.5
Standard and Poor's
500 Stock Index +37.6 +16.6 +14.9 +14.8 +14.6
IMPLEMENTING THE STRATEGY
What counts for all of us as investors is how to continue to capitalize on
opportunities in the future. As long-time shareholders know, we are investors,
not traders. We firmly believe that the most effective strategy is to invest in
the best managements, regardless of their particular focus. Seeking out the
companies with the best managements, our investment research efforts are both
quantitative and qualitative. Our investment adviser's extensive data base
includes virtually every significant publicly-traded company related to the
insurance industry. We meet regularly with the managements of companies we own,
as well as with many others which might be included in the future. Combining
these approaches gives us an important competitive advantage.
While we often have commented on the absolutely essential role insurance plays
in both the domestic and global economies, we rarely have seen such an exciting
period of fundamental upheaval and opportunity as is the case today. Enormous
changes are occurring in the worldwide distribution of insurance products and
services, to both businesses and individuals. Major consolidations are taking
place among large companies, with well-known brand name companies disappearing
or changing shape dramatically. Technology is making it possible to serve
customers faster and better and allowing entrepreneurs to develop new business
approaches that both challenge and change the ways of the past. We believe that
there will be increasing differentiation between companies with well-defined
business strategies and those which fail to sharpen their focus. Such
differentiations should create significant investment opportunities.
COMPETITIVE RETURNS
During the last prior period of relatively low inflation (1950s-60s), the stocks
of well-run insurance companies often sold at a premium valuation to market
multiples. While we cannot predict when such a positive change in perceptions
will occur, we can restate our conviction that well-managed insurance
enterprises will continue to provide competitive returns.
For the Trustees,
/s/ Allan W. Fulkerson
Allan W. Fulkerson
Chairman
February 9, 1996
<PAGE>
PERSPECTIVE
As the statistics throughout this report indicate, insurance is a rapidly
growing segment of the domestic economy. The industry's superior growth has been
maintained during the past twenty years despite dramatic changes in the economic
environment, demographics and technology. These growth characteristics, combined
with relatively low valuations, have attracted a host of savvy investors
including Warren Buffett and Kohlberg Kravis Roberts & Co., a well-known buyout
firm.
ECONOMIC AND FINANCIAL COMPARISONS
1975 1995 (EST.)
U.S. ECONOMY ---- -----------
Gross Domestic Product ($billions) 1,586 7,113
Gross Federal Debt ($billions) 544 4,989
Prime Rate (%) 7.9 8.5
Yield on Long-Term Government Bonds (%) 7.2 5.9
U.S. INSURANCE INDUSTRY PROFILE
Total Assets ($billions) 377 2,900
Total Revenues ($billions) 132 795
Number of U.S. Insurance Companies 4,632 5,750
CENTURY SHARES TRUST PORTFOLIO COMPANY PROFILE
5-year compound growth of per share
book value + dividends (%) 8.8 17.0
Approximate CST P/E as % of S&P 500 P/E 95.3 82.5
Approximate CST market to book value
as % of S&P 500 ratio 92.0 69.1
% of companies raising dividends 61 92
RESTRUCTURING HIGHLIGHTS 1995 INSURANCE EVENTS
BUSINESS FOCUS
Aetna exits the property and casualty business to focus on health, retirement
and international operations.
AON Corporation sells Union Fidelity and Life of Virginia to GE Capital to
focus on its insurance brokerage and services.
CONSOLIDATION
CNA Financial Corporation acquires Continental Corporation.
Connecticut Mutual and Massachusetts Mutual combine as do New England Mutual
Life and Metropolitan Life.
INVESTMENTS
Berkshire Hathaway Corp. bids $2.3 billion to increase its GEICO holdings to
100%.
Kohlberg Kravis Roberts & Co. proposes a $2.7 billion acquisition of Xerox
Corp.'s insurance operations.
INTERNATIONAL TRANSACTIONS AND EVENTS
General Re acquires Cologne Re.
Zurich Insurance purchases Kemper and Home Insurance.
Lloyd's of London's plan to reorganize and reinsure past environmental and
other liabilities into a new vehicle moves forward to possible resolution.
<PAGE>
MAJOR CHANGES -- MAJOR DIFFERENCES
The driving force behind most of the consolidation activity currently taking
place in the insurance industry is the fact that many companies throughout the
world have poor earnings prospects and/or relatively weak balance sheets. As
such, they become targets for acquirers or turnaround artists, particularly if
their market prices have lagged behind industry norms.
Anticipating if, and especially when, such underperformers may become the
subject of takeover bids or may succeed in turning themselves around has been
a frustrating and low return investment strategy in most periods. Recognizing
how difficult it is to turn around companies that have suffered for decades,
the Trust's holdings are concentrated among the stronger entities in the
insurance industry -- companies that are well-positioned now. Such enterprises
can continue to move ahead aggressively while the "restructurers" must pause
and lose more ground in order to fix problems.
The following graphs compare 1994 profitability for the Trust's portfolio
companies against the aggregate results of 176 other companies in our data
base including virtually all other significant publicly owned insurers.
THE TRUST'S HOLDINGS -- SUPERIOR PROFITABILITY
Pretax Profit Margins Net Income as % of Assets Return on Equity
CST OTHERS CST OTHERS CST OTHERS
- --- ------ --- ------ --- ------
16.7% 6.6% 3.6% 1.2% 16.6% 8.0%
1994 results for Century Shares Trust holdings weighted according to the market
value of securities held in the Trust's portfolio as of December 31, 1995.
1994 aggregate results for the remaining companies in the insurance industry
sample.
The companies selected for the Trust's portfolio outperform their peers by
wide margins. While our holdings have proportionately more property-casualty
and less life-health business than the industry sample, that does not explain
the differences. Management is the answer. Superior management does what is
necessary to get on top and stay there. That is why our companies outperform
their competitors year in and year out. Moreover, the results achieved by
top-flight insurers stand out in the broader universe as well. As an example,
estimated five-year growth of book value per share adjusted for dividends was
17.0% per year for the Trust's holdings through 1995 versus only 10.7% per
year for the Standard & Poor's 500 Stock Index, a widely used proxy for the
market as a whole.
When we do have a stock taken away by an acquirer, the price received is
likely to be at a premium to the market as was the case when Warren Buffett's
Berkshire Hathaway Corp. bid for the portion of GEICO that it did not already
own. This low expense, highly profitable insurer, a substantial holding of the
Trust, had performed very well over the long term on its own even before the
acquisition excitement. As such, it typifies the type of situation the Trust's
management favors most.
<PAGE>
PORTFOLIO COMPANY CHARACTERISTICS
We have listed below the business descriptions and financial characteristics
of companies represented by our common stock holdings. This year we have added
a measure of historical price volatility called Beta. A Beta of less than one
implies lower volatility than the market averages. As a result of the Trust's
focus on well-managed companies in a growth industry, historically, our
investors have been rewarded with above-average long-term returns and
below-average volatility.
At year end, our portfolio consisted of twenty-six companies, with historical
annual growth of book value plus dividends approximating 17% compounded, yet
selling at an attractive 12.5 times estimated 1996 earnings. If interest rates
remain at current levels or go even lower, there will be a reduction in
absolute growth rates for many companies in most industries. On a relative
basis, however, top notch insurance businesses should do very well.
BUSINESS YEARS IN
COMPANY NAME DESCRIPTION BUSINESS
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Life insurance,
annuities, and
American General Corp. consumer finance 69
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Group life and
health, ordinary
life, payroll
American Heritage Life Investment Corp. deduction 38
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Largest U.S.
international
American International Group, Inc. multi-line insurer 75
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Insurance and
AON Corp. insurance brokerage 76
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Specialty aviation
AVEMCO Corp. insurance 35
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Major international
The Chubb Corp. insurer 113
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Major property and
casualty
Cincinnati Financial Corp. underwriter 44
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Personal lines
insurance -- direct
GEICO Corp. writer 59
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Largest United
General Re Corp. States reinsurer 74
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Insurance and
engineering
Hartford Steam Boiler Insp. & Ins. Co. services 129
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Largest municipal
MBIA Inc. bond insurer 21
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World's largest
Marsh & McClennan Companies insurance broker 124
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Regional auto
insurance
Mercury General Corp. underwriter 34
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Leading
J.P. Morgan & Co., Inc. international bank 157
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Major property and
casualty
Ohio Casualty Corp. underwriter 76
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Specialty auto
insurance
The Progressive Corp. underwriter 58
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Life and health
insurance,
Protective Life Corp. annuities 88
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Diversified
Providian Corp. financial services 91
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Major multi-line
SAFECO Corp. insurer 72
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Major property and
casualty
St. Paul Companies, Inc. underwriter 142
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Life insurance and
Torchmark Corp. financial services 66
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UNUM Corp. Disability insurer 147
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Major property and
casualty
USF&G Corp. underwriter 99
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Life and health
insurance,
USLIFE Corp. annuities 145
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Wachovia Corp. Superregional bank 116
----------------------------------------------------------------------------
<PAGE>
<TABLE>
GREATER
VALUE
LESS
VOLATILITY
INCREASING
DIVIDENDS
RISING
EARNINGS
HIGHER
PROFITABILITY
FASTER
GROWTH
<CAPTION>
5-YEAR GROWTH STOCK PRICE
BOOK VALUE 5-YEAR AVERAGE OPERATING INCOME DIVIDEND VOLATILITY (BETA) P/E RATIO
PLUS DIVIDENDS RETURN ON EQUITY INCREASES IN INCREASES IN LESS THAN LOWER THAN
15% OR MORE* 15% OR MORE* 1994 AND 1995* 1994 AND 1995 MARKET AVERAGE S&P 500 P/E
<S> <C> <C> <C> <C> <C>
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*estimated
</TABLE>
<PAGE>
INVESTMENT RESULTS
By any measure, 1995 was an extraordinary year. For the fifth time in the past
twenty years, the Trust rose more than 30% on a total return basis. At such a
time, it is prudent to remind investors of the risks we all take in investing
and suggest how to address those risks. One proven way to make market volatility
an advantage is to dollar cost average investments; below, we show historical
results of this investment strategy.
DOLLAR COST AVERAGING
Dollar cost averaging can be a useful tool whether you are investing to build
savings, fund your children's education, or for retirement. Dollar cost
averaging means investing the same amount of money on a regular schedule. By
investing the same amount each time, your average cost per share will be lower
than the average price paid because you buy more shares at lower prices.
Since dollar-cost averaging involves continuous investing regardless of price
fluctuations, success requires that the investor have the willingness and means
to follow through whatever direction the market takes. Moreover, it cannot
protect against loss if the price of the security being purchased declines and
does not recover. Listed below are the results of hypothetical $10,000
investments made at the beginning of each of the last twenty years. These
results do not include the effect of sales charges prior to 1982 when the Trust
became a 100% no-load fund.
<TABLE>
TWENTY-YEAR INVESTMENT RECORD
ANNUAL $10,000 INVESTMENTS -- ALL DISTRIBUTIONS REINVESTED
<CAPTION>
CUMULATIVE VALUE OF SHARES ACQUIRED
----------------------------------------------------------
YEAR CUMULATIVE ANNUAL CUMULATIVE THROUGH AS CAPITAL AS TOTAL
ENDED ANNUAL ANNUAL CUMULTATIVE CAPITAL CAPITAL ANNUAL GAIN DIVIDEND VALUE OF
12/31 INVESTMENTS DIVIDENDS DIVIDENDS GAINS GAINS INVESTMENTS + DISTRIBUTIONS + DISTRIBUTIONS = INVESTMENT
- ----- ----------- --------- -------- -------- -------- ----------- ------------- ------------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1976 $ 10,000 $ 350 $ 350 $ 13,286 $ 0 $ 386 $ 13,672
1977 20,000 670 1,020 $ 589 $ 589 21,585 567 1,020 23,172
1978 30,000 1,267 2,287 1,782 2,371 31,670 2,485 2,305 36,460
1979 40,000 2,254 4,541 3,277 5,648 45,204 6,524 4,801 56,529
1980 50,000 3,372 7,913 5,257 10,905 51,433 11,459 7,894 70,786
1981 60,000 4,616 12,528 4,996 15,901 66,046 18,033 13,008 97,088
1982 70,000 5,959 18,488 4,312 20,212 76,546 22,666 19,651 118,863
1983 80,000 7,072 25,560 4,734 24,946 96,225 30,707 28,986 155,918
1984 90,000 7,930 33,490 11,086 36,032 109,345 43,856 38,408 191,609
1985 100,000 8,376 41,866 13,086 49,117 155,097 75,278 58,740 289,116
1986 110,000 8,768 50,634 18,669 67,786 165,822 94,879 67,158 327,859
1987 120,000 9,289 59,923 30,083 97,869 141,810 106,628 62,318 310,757
1988 130,000 11,832 71,755 42,666 140,535 150,371 148,400 72,317 371,088
1989 140,000 13,126 84,881 18,762 159,297 213,023 216,576 110,158 539,757
1990 150,000 14,535 99,416 16,885 176,182 193,164 204,566 108,913 506,643
1991 160,000 14,523 113,939 17,927 194,109 254,016 273,798 151,614 679,427
1992 170,000 13,836 127,775 18,685 212,793 322,393 352,993 200,095 875,481
1993 180,000 15,584 143,358 38,606 251,399 311,165 369,056 202,091 882,312
1994 190,000 16,785 160,144 33,317 284,715 290,839 367,524 199,162 857,525
1995 200,000 16,406 176,550 37,230 321,945 387,898 511,111 274,138 1,173,147
</TABLE>
Past performance should not be considered a representation of the income or
capital gain or loss which may be realized from an investment in the Trust
today. 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. Achievement of objectives cannot be assured; however, the
Trust's management seeks to reduce risks and to provide rewarding results
through diversification and careful supervision of investments. The
illustrations throughout this report do not take into account income taxes that
might have been payable by a shareholder on distributions received or
reinvested, or upon sale of the investment.
<PAGE>
The Trust's objective is long-term growth of principal and income obtained
through investment in a diversified portfolio including insurance companies,
insurance brokers, and banks. The following charts compare the performance of
the Trust over the past ten and twenty years, respectively, with the performance
of the S&P 500, a leading unmanaged stock market index. Next, we show details on
a per share basis.
PERFORMANCE OF $10,000 INVESTMENT IN CENTURY SHARES TRUST AND THE S&P 500
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year 10 Year
35.23% 16.68% 12.65%
<TABLE>
Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- -------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Century Shares Trust 10,000 10,961 10,082 11,664 16,520 15,224 20,021 25,424 25,333 24,346 32,922
S&P 500 10,000 11,871 12,494 14,568 19,172 18,578 24,225 26,069 28,691 29,067 39,987
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
20 Year
15.14%
<TABLE>
Year 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985
- -------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Century Shares Trust 10,000 13,672 13,383 14,710 17,898 19,043 22,886 25,402 30,735 35,495 50,901
S&P 500 10,000 12,393 11,509 12,267 14,585 19,319 18,369 22,327 27,364 29,086 38,320
Year 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- -------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Century Shares Trust 55,792 51,316 59,369 84,084 77,493 101,909 129,411 128,948 123,921 167,577
S&P 500 45,490 47,878 55,826 73,467 71,190 92,831 99,896 109,946 111,386 153,233
</TABLE>
<TABLE>
TWENTY-YEAR INVESTMENT RECORD PER SHARE
INITIAL ONE SHARE INVESTMENT -- ALL DISTRIBUTIONS REINVESTED
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE OF
YEAR NUMBER OF VALUE OF REINVESTED VALUE OF TOTAL ANNUAL TOTAL RETURN
ENDED SHARES ORIGINAL CAPITAL REINVESTED VALUE OF -------------------
12/31 OWNED SHARE + DISTRIBUTIONS + DIVIDENDS = INVESTMENT CST S&P
- ----- --------- -------- ------------- ---------- ---------- --- ---
<C> <C> <C> <C> <C> <C> <C> <C>
1975 1.000 $ 9.07 $ -- $ -- $ 9.07 -- % -- %
1976 1.029 12.05 0.00 0.35 12.40 36.7 23.9
1977 1.087 11.17 0.30 0.67 12.14 -2.1 -7.1
1978 1.191 11.20 1.00 1.14 13.34 9.9 6.6
1979 1.336 12.15 2.18 1.90 16.23 21.7 18.9
1980 1.526 11.32 3.35 2.61 17.28 6.4 32.5
1981 1.706 12.17 4.82 3.77 20.76 20.2 -4.9
1982 1.881 12.25 5.73 5.06 23.04 11.0 21.6
1983 2.047 13.62 7.35 6.91 27.88 21.0 22.6
1984 2.296 14.02 9.63 8.55 32.20 15.5 6.3
1985 2.534 18.22 15.43 12.52 46.17 43.4 31.8
1986 2.765 18.30 18.47 13.83 50.60 9.6 18.7
1987 3.154 14.76 19.41 12.38 46.55 -8.0 5.3
1988 3.683 14.62 25.43 13.80 53.85 15.7 16.6
1989 3.927 19.42 36.53 20.32 76.27 41.6 31.6
1990 4.179 16.82 33.99 19.47 70.28 -7.8 -3.1
1991 4.395 21.03 44.95 26.45 92.43 31.5 30.4
1992 4.571 25.68 57.40 34.30 117.38 27.0 7.6
1993 4.865 24.04 58.85 34.07 116.96 -0.4 10.1
1994 5.163 21.77 57.66 32.97 112.40 -3.9 1.3
1995 5.415 28.07 79.17 44.76 151.00 35.2 37.5
20-year total return +1575.8% +1431.9%
</TABLE>
The dollar amount of shares accepted at the time reinvestment occurred was
$47.71 for capital gains and $27.23 for income dividends. If capital gains
distributions and dividends had been withdrawn in cash, the total dollar amount
received would have been $16.05 and $9.89, respectively.
Note: Computation of results throughout this report assumes that initial
purchases were made and income dividends were reinvested at the then effective
net asset value (which is the Trust's current practice as a no-load fund) and
not at offering prices which applied when the Trust's shares were sold with a
sales charge prior to 1982.
<PAGE>
SHAREHOLDER QUESTIONS AND INFORMATION
MANAGEMENT PHILOSOPHY
Q. What is the Trust's investment objective and management style?
A. Established in 1928, Century Shares Trust is a no-load long-term growth of
principal and income fund. Management emphasizes buying the stocks of high
quality companies with above-average growth characteristics selling at a
discount to the stock market's average price-earnings multiple.
Q. What are the advantages of a low turnover?
A. Turnover refers to the switching from one security to another. A low
portfolio turnover rate means that fewer brokerage commissions and trading
costs are incurred. Additionally, other transaction costs, such as the
difference between bid and asked prices, are reduced in a low transaction
environment. Early identification of growth companies combined with low
portfolio turnover may also provide the Trust's investors with higher compound
investment returns and a deferral of capital gain taxes. The longer a growing
investment is held the greater the after-tax advantage to a shareholder.
Q. What is market timing? Is this strategy used in the Century Shares Trust
portfolio?
A. Market timing involves the forecasting of market cycles and the aggressive
use of cash and short-term securities in an attempt to take advantage of
market fluctuations. It is not an investment style practiced at Century Shares
Trust. The management of the Trust focuses on long-term performance and tends
to remain fully invested.
FUND CHARACTERISTICS
Q. Why do some publications classify Century Shares Trust as a specialty or
"sector" fund rather than as a growth and income fund which would be a more
accurate description?
A. Such classifications are determined by mutual fund rating services such as
Lipper Analytical Services, Inc., Morningstar and Value Line. The Trust's
charter requires that funds be invested in the capital stock of foreign or
domestic insurance companies, banks and trust companies, insurance brokerage
firms and other companies engaged in providing services to, or in businesses
closely related to, insurance companies and banks.
Q. Why does the Trust specialize in the insurance industry?
A. The insurance industry is a major growth industry, having grown at a pace
21% faster than that of the overall U.S. economy during the past twenty years.
Assets of the industry are approximately $2.9 trillion. By concentrating on
the best companies in such a market, the Trust has been able to generate
returns of 35.2%, 116.3%, 229.2% and 1,575.8% for the past one, five, ten and
twenty year periods ending December 31, 1995.
Q. How do the Trust's long-term investment results compare with those of
other mutual funds?
A. According to Lipper Analytical Services, Inc., the Trust has outperformed
more than two-thirds of all growth and income mutual funds, 65% of all equity
mutual funds, and more than two-thirds of all mutual funds that have been in
business over the past twenty years. Full details of the Trust's results are
shown on pages 6 and 7 of this report.
Q. Have these results been achieved by investing in volatile stocks?
A. No. While all securities fluctuate in value, 84% of our present holdings
have a lower Beta (less volatility) than the market average as shown on page
5.
INVESTOR INFORMATION AND SERVICES
Q. When I have a question or would like a prospectus, whom do I call?
A. Representatives of Century Shares Trust are committed to offering
exceptional service and are available to take your calls. The Trust's
toll-free number is (800) 321-1928; or call the shareholder hotline at (800)
303- 1928 for questions about your account.
Q. How do I find Century Shares Trust's price per share?
A. The Trust's per share price is listed daily in the Wall Street Journal and
all other newspapers quoting mutual fund prices. The Trust usually appears in
the mutual funds columns as "CNT SHS" or "Century Sh." You may also call the
shareholder hotline, (800) 303-1928, for the daily share price.
Q. What is dollar-cost averaging?
A. Dollar-cost averaging is investing the same amount of money on a regular
schedule. By investing the same amount on a regular basis rather than a lump
sum all at once, your cost per share will be lower than the average price paid
because you buy more shares at lower prices. Thus, you actually take advantage
of price fluctuations. The Trust offers an AUTOMATIC INVESTING plan for
investors who choose to have their investment deducted from their bank account
monthly, quarterly or when making a telephone purchase.
Q. Can I reinvest my Capital Gains and Dividends in additional shares of
the Trust?
A. Automatic reinvestment of distributions easily ranks as the most popular
service offered shareholders. Recognizing the importance of maintaining their
interest in the Trust's assets, income and dividend payments, approximately
92% of shareholders currently elect to accept capital gain distributions in
additional shares. This service is especially appropriate for investors who
want to build their capital investment and future income. Conversion to
automatic reinvestment at no extra cost is simple and can be accomplished by
writing the Trust.
Q. Does the Trust offer Individual Retirement Accounts (IRA)?
A. Century Shares Trust offers a tax-sheltered Individual Retirement
Account. There is no charge to open an IRA, and our low annual maintenance
fee is $10.00.
Q. I need income from my investment every month for budgeting purposes.
Does the Trust offer such a plan?
A. For those investors who need or prefer a check each month for budgeting
purposes, the Trust offers a program called CHECK-A-MONTH.
Q. Does the Trust offer accounts that can help save for my children's
education?
A. With college expenses continually rising, investors may wish to take
advantage of the Trust's Uniform Transfers to Minors Act (UTMA) and Uniform
Gifts to Minors Act (UGMA) custodial accounts.
<PAGE>
MANAGEMENT
Century Shares Trust is managed by its investment adviser, Century Capital
Management, Inc., which provides all investment advisory and management
functions. The Trust's activities are supervised by the Trustees: Chairman,
Allan W. Fulkerson, William O. Bailey, John E. Beard, William W. Dyer, Jr. and
Ernest E. Monrad. Listed below are biographical sketches of the Adviser's
principal officers.
ALLAN W. FULKERSON
Mr. Fulkerson is President and a Director of Century Capital Management, Inc.
and Chairman of Century Shares Trust. After earning a B.A. at Williams College
in 1954, Mr. Fulkerson was associated with H.C. Wainwright & Co. and Vance
Sanders & Company. He joined Century Shares Trust in 1966, became a Trustee in
1969, and was named Chairman in 1976. Mr. Fulkerson's insurance industry
affiliations include serving as a director of numerous companies. He is a
member of the Boston Society of Security Analysts and the Association of
Insurance and Financial Analysts.
WILLIAM W. DYER, JR.
Mr. Dyer is Vice President and a Director of Century Capital Management, Inc.
and a Trustee of Century Shares Trust. He joined Century Shares Trust in 1976
after twenty years with H.C. Wainwright & Co., as the insurance industry
analyst, and became a Trustee in 1977. He earned a B.A. from Brown University
in 1956. Mr. Dyer serves as a director of several insurance-related companies
and is a member of the Boston Security Analysts Society and the Association of
Insurance and Financial Analysts.
RICHARD F. COOK, JR.
Mr. Cook is Vice President and a Director of Century Capital Management, Inc.
Mr. Cook joined Century Shares Trust in 1985, having worked previously with
the General Electric Credit Corporation and the General Electric Mortgage
Insurance Companies. Prior to joining General Electric, he was an attorney
with the law firm of Curtis, Mallet-Prevost, Colt and Mosle. Mr. Cook is a
1973 graduate of Williams College and a member of Phi Beta Kappa. He also
received an M.B.A. from Columbia University and a J.D. from Vanderbilt
University School of Law in 1979.
RICHARD J. FREEMAN
Mr. Freeman is Vice President of Century Capital Management, Inc. Prior to
joining Century Shares Trust in 1993, Mr. Freeman served as Director of
Research at Kemper's Selected Financial Services subsidiary. Mr. Freeman
received a B.A. in 1975 and an M.B.A. in 1977 from Michigan State University.
He also received a M.S. in Accountancy from Western Michigan University in
1980. Mr. Freeman is a Chartered Financial Analyst, a member of the Boston
Security Analysts Society and the Association of Insurance and Financial
Analysts.
[PHOTO]
From left to right: Richard F. Cook, Jr., William W. Dyer, Jr., Allan W.
Fulkerson and Richard J. Freeman.
<PAGE>
PORTFOLIO OF INVESTMENTS -- December 31, 1995
COMMON STOCKS: INSURANCE COMPANIES -- 88.1%
SHARES VALUE
------ -----
100,000 American General Corp. .. $ 3,487,500
American Heritage Life
225,000 Investment Corp. ........ 5,146,875
American International
210,000 Group, Inc. ............. 19,425,000
345,000 AON Corp. ............... 17,206,875
194,600 AVEMCO Corp. ............ 3,113,600
183,000 AVEMCO Corp.* ........... 2,781,600
140,000 The Chubb Corp. ......... 13,545,000
Cincinnati Financial
241,500 Corp. ................... 15,757,875
167,000 GEICO Corp. ............. 11,669,125
120,000 General Re Corp. ........ 18,600,000
107,500 Hartford Steam Boiler
Inspection and Insurance
Company ................. 5,375,000
75,000 Marsh & McLennan
Companies ............... 6,656,250
195,000 MBIA Inc. ............... 14,625,000
150,000 Mercury General Corp. ... 7,162,500
348,000 Ohio Casualty Corp. ..... 13,485,000
300,000 The Progressive Corp. ... 14,662,500
170,000 Protective Life Corp. ... 5,312,500
170,000 Providian Corp. ......... 6,927,500
380,000 SAFECO Corp. ............ 13,110,000
250,000 St. Paul Companies, Inc. 13,906,250
265,000 Torchmark Corp. ......... 11,991,250
100,000 UNUM Corp. .............. 5,500,000
240,000 USF&G Corp. ............. 4,050,000
150,000 USLIFE Corp. ............ 4,481,250
-----------
237,978,450
-----------
COMMON STOCKS: BANKING INSTITUTIONS -- 5.2%
100,000 J.P. Morgan & Co., Inc. . 8,025,000
130,000 Wachovia Corp. .......... 5,947,500
-----------
13,972,500
-----------
MISCELLANEOUS SECURITIES -- .1% .................... 335,000
-----------
TOTAL INVESTMENTS IN COMMON STOCKS -- 93.4%
(Identified cost, $90,599,849) ................... 252,285,950
-----------
CONVERTIBLE SECURITIES -- .3%
FACE AMOUNT
-----------
NAC Re Cv. Deb., 5.25%,
$1,000,000 due 12/15/02** .......... 970,000
-----------
TOTAL CONVERTIBLE SECURITIES (Identified cost,
$1,000,000) ........................................ 970,000
--------------
FIXED INCOME -- .4%
U.S. Treasury Note,
$1,000,000 5.625%, due 8/31/97 ..... 1,006,250
-----------
TOTAL FIXED INCOME (Identified cost, $1,030,625) ... 1,006,250
-----------
CASH EQUIVALENTS -- 5.9%
$15,982,000 State Street Bank and
Trust Eurodollar Time
Deposit, at cost
approximating value,
maturity 1/2/96 ........ 15,982,000
-----------
TOTAL INVESTMENTS -- 100% (Identified cost,
$108,612,474) ...................................... $270,244,200
============
*Restricted security (see Note 6)
**Security exempt from registration under Rule 144A
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES -- December 31, 1995
------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (Identified cost,
$108,612,474) ...................................... $270,244,200
Cash ............................................... 166
Dividends and interest receivable .................. 590,020
Receivable for Trust shares sold ................... 137,405
Prepaid expenses ................................... 10,734
-----------
Total assets ............................... 270,982,525
LIABILITIES:
Capital gain distribution payable $1,284,078
Payable for investments purchased 2,142,611
Payable for Trust shares
repurchased ...................... 149,498
Accrued investment adviser fee
(Note 5) ......................... 149,628
Accrued expenses and other
liabilities ...................... 75,875
--------------
Total liabilities .......................... 3,801,690
-----------
NET ASSETS (Note 3) ................................ $267,180,835
===========
Per share net asset value, offering price and
redemption price ($267,180,835 / 9,519,331 shares
of $1.00 par value capital stock outstanding)
(Note 2) ................ $28.07
======
<PAGE>
STATEMENT OF OPERATIONS -- Year Ended December 31, 1995
------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends ...................................... $ 5,501,199
Interest ....................................... 308,127
------------
Total income ............................... 5,809,326
Expenses:
Investment adviser fee (Note 5) $1,609,254
Non-interested trustees'
remuneration ............... 44,219
Transfer agent ............... 208,343
Custodian .................... 49,739
Insurance .................... 20,280
Audit ........................ 76,348
Legal ........................ 25,803
Registration costs ........... 38,796
Printing and other ........... 80,308
----------
Total expenses ............................. 2,153,090
------------
Net investment income .................. 3,656,236
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions ... 8,638,210
Increase in net unrealized appreciation of
investments .................................... 56,383,215
------------
Net realized and unrealized gain on
investments .......................... 65,021,425
------------
Net increase in net assets resulting from operations $ 68,677,661
============
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994
----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .... $ 3,656,236 $ 4,215,734
Net realized gain on
investment transactions 8,638,210 8,029,478
Increase (decrease) in net
unrealized appreciation of
investments ............ 56,383,215 (21,558,529)
----------- -----------
Net increase (decrease) in
net assets resulting from
operations ............... 68,677,661 (9,313,317)
Net equalization (Note 1C) . (16,684) (125,980)
Distributions to shareholders:
Net investment income .... (3,698,990) (4,151,984)
Realized gain from
investment transactions (8,521,998) (8,029,478)
In excess of net realized
gain on investment
transactions ........... -- (28,953)
Trust share transactions --
net (Note 2) ............. 4,837,054 (15,227,296)
----------- -----------
Total increase (decrease) 61,277,043 (36,877,008)
NET ASSETS:
At beginning of year ..... 205,903,792 242,780,800
----------- -----------
At end of year (including
accumulated distributions
in excess of net investment
income of $234,389 and
$168,466, respectively) .. $267,180,835 $205,903,792
============ ============
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET
VALUE, beginning of year .......................... $21.77 $24.04 $25.68 $21.03 $16.82
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... $ .41 $ .44 $ .43 $ .48 $ .44
Net realized and unrealized gain (loss) on
investments ................................... 7.22 (1.38) (.52) 5.15 4.81
------ ------ ------ ------ ------
Total income from investment operations ....... $ 7.63 $ (.94) $ (.09) $ 5.63 $ 5.25
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income ...................... $ (.41) $ (.45) $ (.45) $ (.42) $ (.47)
From net realized gain on investment
transactions................................... (.92) (.88) (1.10) (.56) (.57)
In excess of net realized gain on investment
transactions .................................. -- --* -- -- --
------ ------ ------ ------ ------
Total distributions ........................... $(1.33) $(1.33) $(1.55) $ (.98) $(1.04)
------ ------ ------ ------ ------
NET ASSET VALUE, end of year ...................... $28.07 $21.77 $24.04 $25.68 $21.03
====== ====== ====== ====== ======
TOTAL RETURN ...................................... 35.2% (3.9)% (0.4)% 27.0% 31.5%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) ........... $267,181 $205,904 $242,781 $260,265 $157,942
Ratio of expenses to average net assets ......... 0.94% 1.01% 0.82% 0.84% 0.95%
Ratio of net investment income to
average net assets ............................ 1.60% 1.93% 1.72% 1.84% 2.28%
PORTFOLIO TURNOVER RATE ........................... 5% 2% 19% 5% 0%
*Distributions in excess of net realized gain on investment transactions were $.004.
See notes to financial statements.
</TABLE>
<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 December 31, 1995, 9,519,331 shares were outstanding. The
number of authorized shares of $1.00 par value is unlimited.
Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold .................. 1,797,676 $47,919,634 942,789 $ 21,839,812
Issued to shareholders in reinvestment
of distributions from:
Net investment income ......... 96,658 2,568,585 128,914 2,899,528
Realized gain on investment
transactions ...... 257,855 7,237,989 312,817 6,810,028
--------- ----------- ------- ------------
2,152,189 57,726,208 1,384,520 31,549,368
Repurchased ........... (2,093,096) (52,889,154) (2,025,359) (46,776,664)
--------- ----------- ------- ------------
Net increase (decrease) ..... 59,093 $ 4,837,054 (640,839) $(15,227,296)
======== =========== ========== ============
(3) SOURCES OF NET ASSETS -- At December 31, 1995, net assets consisted of:
Capital paid-in ................................................................... $106,070,314
Accumulated distributions in excess of net investment income ...................... (234,389)
Accumulated distributions in excess of net realized gain on investment transactions (286,816)
Unrealized appreciation in value of investments .................................... 161,631,726
------------
Net assets applicable to outstanding capital stock ............................... $267,180,835
============
</TABLE>
Statement of Position (SOP) 93-2; Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gains and Return of Capital
Distributions by Investment Companies requires that differences in the
recognition or classification of income between the financial statements and tax
earnings and profits which result in temporary over-distributions for financial
statement purposes are classified as distributions in excess of net investment
income or accumulated net realized gains. The effect of the SOP for the year
ended December 31, 1995 was to increase distributions in excess of net
investment income by $6,485, decrease accumulated undistributed net realized
gains by $374,075, and increase paid-in capital by $380,560. This adjustment
results from permanent differences arising from differing financial statement
and tax treatment of equalization. Net investment income, net realized gains and
net assets were not affected by this change. At December 31, 1995, the
differences in financial statement and tax balances of accumulated distributions
in excess of net investment income and accumulated distributions in excess of
net realized gain on investment transactions result from temporary differences
primarily due to the differing financial statement and tax treatment of
equalization and post-October losses.
(4) INVESTMENT SECURITY TRANSACTIONS -- Other than U.S. Government obligations
and certificates of deposit, purchases and sales of investment securities
aggregated $11,170,738 and $25,296,009, respectively, during the year ended
December 31, 1995. At December 31, 1995, the cost of investments for federal tax
purposes was $108,700,714. Net unrealized appreciation for all securities at
that date was $161,543,486. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost of $162,595,390 and aggregate gross unrealized depreciation for
all securities in which there was an excess tax cost over market value of
$1,051,904. 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 next 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 year ended December 31, 1995, the fee amounted to $1,609,254. Officers and
Trustees of the Trust who are employed by CCM receive remuneration for their
services out of such investment adviser fee.
(6) RESTRICTED SECURITY -- At December 31, 1995, the Trust owned 183,000 shares
of AVEMCO Corp., acquired on October 1, 1993, at a cost of $3,202,500, which are
restricted as to resale. The value of this security, which is approximately 95%
of the market value per share of the valued unrestricted shares of AVEMCO Corp.,
is determined in good faith by or at the direction of the Trustees. The Trust
may not invest more than 15% of its net assets in investments which are not
readily marketable.
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 December 31, 1995,
the related statement of operations for the year then ended, the statement of
changes in net assets for the years ended December 31, 1995 and 1994, and the
financial highlights 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
December 31, 1995 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 December 31, 1995, 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
January 19, 1996
<PAGE>
FEDERAL INCOME TAX INFORMATION
The federal tax status of distributions per share in 1995 is as follows:
TAXABLE AS TAXABLE AS LONG-
DATE PAID DIVIDENDS TERM CAPITAL GAIN
--------- --------- -----------------
June 27, 1995 .......... $.21
December 22, 1995....... .20
December 29, 1995.... $.92
---- ----
Total ............... $.41 $.92
==== ====
An amount equal to $.41 per share of the dividends listed above will qualify for
the dividends received deduction for corporate shareholders provided by the
Internal Revenue Code. The capital gain distribution of $.92 per share is
taxable in 1995 as a long-term capital gain, whether received in cash or shares
and irrespective of the period shareholders may have held shares of the Trust.
----------------
Capital gain distributions since 1952 have been paid, at the option of each
shareholder, either in cash or shares of the Trust. The amount of such
distributions and tax basis of shares issued are shown below.
FEDERAL TAX BASIS OF SHARES ISSUED IN PAYMENT OF CAPITAL GAIN DISTRIBUTIONS
PER SHARE(a) PER SHARE
--------------------------- ---------------------------
AMOUNT OF AMOUNT OF
CAPITAL TAX COST CAPITAL TAX COST
GAIN BASIS OF GAIN BASIS OF
DISTRIBUTION SHARES ISSUED DISTRIBUTION SHARES ISSUED
------------ ------------- ------------ -------------
1952 $.04 1/3 $ 5.25 1/3 1975 $ .29 $ 8.32
1953 -- -- 1976 -- --
1954 .08 1/3 5.62 1977 .30 11.62
1955 .20 2/3 7.91 2/3 1978 .60 10.41
1956 .27 1/3 8.29 1/3 1979 .79 10.40
1957 .26 7.32 2/3 1980 .96 11.06
1958 .21 6.85 1/3 1981 .70 10.64
1959 .16 1/3 9.35 2/3 1982 .49 11.70
1960 .26 9.34 1983 .45 11.71
1961 .41 9.58 1984 .91 12.69
1962 .46 13.35 1985 .91 13.04
1963 .15 13.20 1986(1-2-86) .71 17.43
1964 .23 15.49 1986(12-30-86) .40 18.25
1965 .30 14.89 1987 1.61 14.75
1966 .37 13.67 1988 1.90 14.58
1967 .30 11.09 1989 .71 18.73
1968 .30 9.67 1990 .58 16.72
1969 .38 12.42 1991 .57 20.91
1970 .35 11.05 1992 .56 25.72
1971 .30 11.77 1993 1.10 24.04
1972 .35 13.72 1994 .88 21.77
1973 .54 15.94 1995 .92 28.07
1974 .51 12.85 ______
Total since 1952 $22.79
(a) Adjusted for the 3 for 1 stock split on March 9, 1959
----------------
This annual 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.
<PAGE>
CENTURY SHARES TRUST
One Liberty Square
Boston, Massachusetts 02109
617-482-3060 800-321-1928
Shareholder Hotline
-------------------
800-303-1928
Officers and Trustees
Allan W. Fulkerson, Trustee and Chairman
William O. Bailey, Trustee
John E. Beard, Trustee
William W. Dyer, Jr., Trustee
Ernest E. Monrad, Trustee
Richard F. Cook, Jr., Secretary
Investment Adviser
Century Capital Management, Inc.
Auditors
Deloitte & Touche LLP
Custodian and Transfer Agent
State Street Bank and Trust Company
Legal Counsel
Palmer & Dodge
