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CENTURY
SHARES
TRUST
SIXTY-NINTH ANNUAL REPORT
DECEMBER 31, 1996
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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.
STRUCTURE AND OBJECTIVE OF THE TRUST
Organized in 1928, Century Shares Trust operates as a
diversified open-end management investment company. It
is a no-load mutual fund, which means that the Trust
offers shares 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.
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DEAR FELLOW SHAREHOLDERS:
The past year was remarkable in many ways, not the least being the extraordinary
performance of the general stock market. In this favorable environment, the
Trust had an excellent year, rising 17.16%, following the 35.23% increase in
1995. Additional performance details for the Trust and the market as a whole are
shown on pages 6 and 7. While there are no particular signs of any investor mood
change at this writing, it is always important to remember that the stock market
is not a one-way street and that over time, stock prices of individual companies
must reflect underlying growth, profitability and value.
Continuing a long tradition, twenty-two of twenty-four portfolio companies
raised their dividends last year. The cumulative effect of increases in the past
two years enabled the Trust to increase its income dividend to $0.46 per share
in 1996, up from $0.41 a year earlier. For the 92% of shareholders who have
chosen to take capital gain distributions in shares, the increase is 15.9%.
During 1996, the Trust's portfolio transactions produced realized capital gains
of $1.11 ($1.09 long term; $0.02 short term), which were distributed on December
30, 1996. Since inception, the Trust has paid $362 million in dividends and
capital gain distributions.
FOCUS
The Trust's investment objective is long-term growth of principal and income. In
our view the best approach to achieving this objective is to own shares of
companies whose managements believe in running their enterprises focused on
producing above-average growth and profitability over the long term. While none
of us are immune to external pressures and the economic environment in which we
operate, focus can help produce superior results. Our focus is on selecting
excellent companies in a growing industry. That means owning shares in
businesses where management has produced in the past, but even more importantly,
where we believe management will produce above-average results in the future.
Normally, we allow some portion of the account to be in companies where growth
rates may be lower but which appear to represent exceptional value.
OPPORTUNITIES FROM CHANGE
The overall environment in the global insurance industry is one of enormous
structural change and consolidation in various sub-sectors, superimposed on the
industry's long-term pattern of expansion at rates in excess of the growth of
the underlying economies. Many of our companies are leaders in driving change
and creating opportunity. There are issues and challenges, of course, which are
well articulated by observers of the industry. For investors, the tasks are to
sort out real versus theoretical issues, understand the impact on various
sectors of the business and on individual companies, and then ultimately make
judgments about which managements and enterprises have the necessary combination
of competence and critical mass to create value. Later sections of this report
discuss growth and change and how our portfolio companies are building value. In
our opinion, there have been few times presenting greater opportunity for
well-run insurance businesses than today.
THE SHAREHOLDER SURVEY
We are extremely gratified by the extraordinary response of shareholders to the
survey we sent out at various times over the past six months and summarize
highlights on page 9. We are truly appreciative of your support and shall do our
best to be responsive to your needs and priorities.
For the Trustees,
/s/ Allan W. Fulkerson
Allan W. Fulkerson
Chairman
February 10, 1997
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SUSTAINED GROWTH - SIGNIFICANT CHANGE
The centuries-old global insurance industry serves as a major underpinning to
every expanding modern economy. For example, the U.S. insurance industry, by
virtually any measure, has achieved worthwhile long-term growth. The chart
below shows clearly that revenue growth has consistently outpaced growth of
the U.S. economy in every ten-year period during the last thirty years. At the
end of the twentieth century, however, this enduring industry is experiencing
challenges throughout the world to its products, methods of distribution, and
historical ways of doing business.
TEN-YEAR GROWTH OF U.S. INSURANCE INDUSTRY
REVENUES VS. GROSS DOMESTIC PRODUCT
Insurance Industry Gross Domestic Product
------------------ ----------------------
1965 7.0% 5.7%
1966 7.2% 6.1%
1967 7.2% 6.1%
1968 7.5% 6.9%
1969 7.7% 6.8%
1970 8.0% 7.0%
1971 8.5% 7.5%
1972 8.9% 7.8%
1973 9.0% 8.4%
1974 9.0% 8.5%
1975 9.3% 8.0%
1976 10.0% 8.7%
1977 10.7% 9.3%
1978 11.1% 9.7%
1979 11.1% 10.0%
1980 11.0% 10.4%
1981 11.1% 10.7%
1982 11.1% 10.1%
1983 10.5% 9.8%
1984 11.1% 10.1%
1985 11.6% 9.9%
1986 12.0% 9.3%
1987 11.6% 8.8%
1988 11.1% 8.2%
1989 10.7% 7.8%
1990 10.6% 7.5%
1991 9.6% 6.6%
1992 8.9% 6.8%
1993 9.3% 6.4%
1994 8.3% 5.9%
1995 7.3% 5.7%
Source: A.M. Best Co., American Council of Life Insurance
U.S. Department of Commerce.
In the United States, great pressure is being placed on the forms and costs of
distribution both at the local agent and operating company level. In personal
lines, direct and Internet marketing are being tested by companies once wed
exclusively to the independent agent. And today, roughly one third of the
revenues needed to fund commercial property-liability claims in the U.S. are now
handled outside the traditional insurance structure.
Life insurance product evolution over the years has moved from providing death
payments to providing benefits geared to those who live. Health care delivery
continues to undergo great change and challenge affecting insurance. Meanwhile,
banks are actively seeking to participate in the opportunities by marketing a
variety of insurance products.
Outside the U.S., Bermuda has emerged as a major global insurance center for
certain property-casualty lines that were unavailable during the hard market in
the mid-1980s. More recently, the many difficulties at Lloyd's culminated last
year in what became known as "Reconstruction and Renewal" - a complete resetting
of Lloyd's business going forward with significant corporate capital replacing
the historical tradition of unlimited personal liability.
These combined upheavals have continued to reinforce the need for capital
strength, critical mass and operating efficiency. At the same time, technology
is a great enabler, making it possible for small numbers of individuals to
compete effectively with much larger organizations. Imagination, innovation and
creativity are being rewarded far better than has often been the case
historically in this industry. However, it is a more hostile environment for
businesses which are less efficient or which lack the critical ingredients
needed to compete. One result of these conflicting forces has been a significant
pickup in the ongoing trend toward consolidation as shown in the chart below.
MERGER & ACQUISITION ACTIVITY
AGGREGATE VALUE OF DISCLOSED TRANSACTIONS ($ BILLIONS)
Insurance Industry
------------------
1987 4.27
1988 9.11
1989 5.93
1990 12.94
1991 7.14
1992 4.63
1993 13.62
1994 7.28
1995 33.56
1996 36.20
Source: Securities Data Company
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Our portfolio of insurance companies has been participating actively in the
industry's consolidation. Of the twenty-one insurance companies in the
portfolio, twenty were engaged in some type of capital transaction, merger or
acquisition in 1996. These activities included acquisitions adding geographic
or product diversification, divestitures of certain lines of business, and
international joint ventures. In this dynamic environment, change means
opportunity and risk. We believe our companies are well positioned to continue
benefiting from change.
THE CREATION OF VALUE
Investors benefit when companies build value through generation of profits that
increase underlying net worth. Over the years we have found that comparing
growth of shareholders' equity (book value) per share adjusted for dividend
payments is a simple, but meaningful way to separate superior businesses from
the rest of the industry.
The graph below shows that the Trust's portfolio companies have produced faster
growth of shareholders' equity than the leading American companies comprising
the Standard and Poor's 500 Stock Index in every five- year period since S&P
began calculating equity per share for the index.
GROWTH OF BOOK VALUE PLUS DIVIDENDS
Century S&P 500
------- -------
1976 11.2%
1977 10.5%
1978 15.1% 14.4%
1979 19.8% 15.6%
1980 21.4% 15.3%
1981 19.5% 14.8%
1982 18.1% 13.6%
1983 16.1% 12.7%
1984 13.9% 11.8%
1985 14.2% 11.1%
1986 17.0% 10.5%
1987 16.5% 11.3%
1988 16.7% 12.2%
1989 18.3% 12.3%
1990 17.2% 12.8%
1991 15.9% 12.8%
1992 16.4% 10.5%
1993 16.6% 9.3%
1994 14.3% 9.5%
1995 18.9% 11.2%
1996 17.3% 12.8%
During the last five years, the Trust's portfolio companies grew book value an
estimated 17.3% per year versus 12.8% for the S&P 500.
CENTURY SHARES TRUST
VALUATION ADVANTAGE
BASED ON BOOK VALUE
Century Shares Trust
--------------------
1976
1977 11.2%
1978 14.1%
1979 24.5%
1980 35.8%
1981 17.4%
1982 25.1%
1983 20.5%
1984 10.3%
1985 4.0%
1986 16.9%
1987 25.7%
1988 31.4%
1989 27.2%
1990 27.0%
1991 30.0%
1992 26.1%
1993 38.4%
1994 35.2%
1995 41.7%
1996 39.3%
VALUATION On December 31, 1976, the market price of the Standard & Poor's 500
stock index was 117% of shareholders' equity compared with 104% for the Trust's
portfolio. Both valuation ratios have climbed over the intervening years, but
the gap has widened considerably as shown above. In fact, at the end of 1996,
the market value of the S&P had climbed to 3.0 times shareholders' equity
compared with 1.8 times for the Trust's portfolio. This valuation gap is
positive for the Trust looking forward, particularly if the Trust's portfolio
companies continue to grow shareholders' equity faster than the S&P.
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REWARDING SHAREHOLDERS
Dividend increases reflect both a management's view of sharing improved
operating results with shareholders, as well as optimism about future
prospects. Consistent increases year after year can only be declared by well-
managed companies whose results support such actions.
Stock repurchase programs are used by managements when they believe their
stock is underpriced and when such actions can add value to investors by
increasing per share book values and earnings. Below we show for our
investments those companies which have declared dividend increases, produced
annual compound gains over five-year periods of per share book value plus
dividends of at least 15%, and bought back their own shares. All such actions
reward investors directly. We believe this data illustrates the excellence of
the companies in which you own a stake.
Securities markets can be cyclical in their ability to reflect intrinsic value
of businesses, an inefficiency often occurring in the universe of insurance
stocks. Over time, however, stock prices reflect underlying values.
<TABLE>
<CAPTION>
COMPANY NAME BUSINESS DESCRIPTION
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<S> <C>
AFLAC Inc Supplemental health insurance
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American General Corp. Life insurance, annuities, and consumer finance
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American Heritage Life Investment Corp. Group life and health, ordinary life, payroll
deduction
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American International Group, Inc. Largest U.S. international multi-line insurer
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AON Corp. Insurance and insurance brokerage
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Banc One Corp. Superregional bank
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The Chubb Corp. Major international insurer
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Cincinnati Financial Corp. Large regional property and casualty underwriter
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General Re Corp. Largest United States reinsurer
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Marsh & McClennan Companies Insurance brokerage and investment management
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MBIA Inc. Largest municipal bond insurer
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Mercury General Corp. Regional auto insurance underwriter
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J.P. Morgan & Co., Inc. Leading international bank
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Ohio Casualty Corp. Major property and casualty underwriter
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The Progressive Corp. Specialty auto insurance underwriter
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Protective Life Corp. Life and health insurance, annuities
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Providian Corp. Diversified financial services
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SAFECO Corp. Major multi-line insurer
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St. Paul Companies, Inc. Major property and casualty underwriter
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Torchmark Corp. Life insurance and financial services
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UNUM Corp Disability insurer
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USF&G Corp. Major property and casualty underwriter
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USLIFE Corp. Life and health insurance, annuities
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Wachovia Corp. Superregional bank
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</TABLE>
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With interest in insurance investments having wide cyclical fluctuations, what
may be less apparent is the ability to provide consistent opportunities for
investment gains. The chart to the right shows the amount of capital gains
realized by the Trust and paid out to shareholders over the past thirty years.
Naturally, there can be no guarantee with respect to an ability to produce and
realize gains in the future. This historical illustration simply shows actual
past results during varied but generally improving economic conditions.
TOTAL CENTURY SHARES TRUST
CAPITAL GAINS DISTRIBUTIONS ($ MILLIONS)
Century Shares Trust
--------------------
1965 2.78
1966 3.39
1967 2.78
1968 2.57
1969 3.32
1970 3.03
1971 2.59
1972 2.85
1973 4.11
1974 3.77
1975 2.09
1976 0.00
1977 1.85
1978 3.47
1979 4.40
1980 5.24
1981 3.88
1982 2.78
1983 2.50
1984 4.97
1985 4.99
1986 7.84
1987 10.95
1988 13.03
1989 5.27
1990 4.37
1991 4.20
1992 5.54
1993 10.70
1994 8.03
1995 8.52
1996 9.34
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GROWTH OF BOOK VALUE DIVIDEND STOCK
PLUS DIVIDENDS INCREASES IN REPURCHASES YEARS
15% OR MORE EACH OF THE IN THE IN
5 YEARS TO 12/31/95 LAST 5 YEARS LAST 5 YEARS BUSINESS
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o o o 24
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o o 69
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o o o 38
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o o o 75
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o o o 76
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o o o 29
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o o o 113
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o o o 44
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o o o 74
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o o o 124
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o o o 21
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o o o 34
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o o o 157
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o o o 76
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o o 58
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o o o 88
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o o o 91
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o o o 72
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o o o 142
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o o 66
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o o 147
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o 99
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o o 145
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o o o 116
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INVESTMENT RESULTS
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 per share details.
PERFORMANCE OF $10,000 INVESTMENT IN CENTURY SHARES TRUST AND THE S&P 500
Average Annual Total Return
1 Year 5 Year 10 Year
17.16% 14.01% 13.41%
10 Year Performance
Century Shares S&P 500
-------------- -------
1986 10,000 10,000
1987 9,198 10,525
1988 10,641 12,272
1989 15,072 16,150
1990 13,890 15,649
1991 18,266 20,407
1992 23,195 21,960
1993 23,112 24,169
1994 22,211 24,486
1995 30,036 33,675
1996 35,192 41,485
Average Annual Total Return
20 Year
14.25%
20 Year Performance
Century Shares S&P 500
-------------- -------
1976 10,000.00 10,000.00
1977 9,788.73 9,287.00
1978 10,758.99 9,898.08
1979 13,090.84 11,768.82
1980 13,928.48 15,588.98
1981 16,739.01 14,822.00
1982 18,579.60 18,016.15
1983 22,480.46 22,080.59
1984 25,961.41 23,469.46
1985 37,229.67 30,921.01
1986 40,807.17 36,706.33
1987 37,533.75 38,633.41
1988 43,423.36 45,046.56
1989 61,503.00 59,281.27
1990 56,679.71 57,443.56
1991 74,538.29 74,906.40
1992 94,653.82 80,606.77
1993 94,317.99 88,715.81
1994 90,638.11 89,877.99
1995 122,569.23 123,609.20
1996 143,607.89 151,776.00
Past Performance is not predictive of future performance.
<PAGE>
TWENTY-YEAR INVESTMENT RECORD PER SHARE
INITIAL ONE SHARE INVESTMENT -- ALL DISTRIBUTIONS REINVESTED
<TABLE>
<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
- -------- ---------- -------- ------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1976 1.000 12.05 12.05
1977 1.056 11.17 0.29 0.34 11.80 -2.1% -7.2%
1978 1.158 11.20 0.97 0.79 12.96 9.9% 6.6%
1979 1.298 12.15 2.12 1.50 15.77 21.7% 18.6%
1980 1.483 11.32 3.25 2.21 16.78 6.4% 32.5%
1981 1.657 12.17 4.68 3.32 20.17 20.2% -4.9%
1982 1.828 12.25 5.56 4.57 22.39 11.0% 21.6%
1983 1.989 13.62 7.14 6.33 27.09 21.0% 22.6%
1984 2.231 14.02 9.35 7.91 31.28 15.5% 6.3%
1985 2.462 18.22 14.99 11.65 44.86 43.4% 31.7%
1986 2.687 18.30 17.95 12.92 49.17 9.6% 18.7%
1987 3.064 14.76 18.86 11.61 45.23 -8.0% 5.3%
1988 3.579 14.62 24.71 12.99 52.32 15.7% 16.6%
1989 3.816 19.42 35.49 19.20 74.11 41.6% 31.7%
1990 4.061 16.82 33.03 18.45 68.30 -7.8% -3.1%
1991 4.271 21.03 43.68 25.10 89.82 31.5% 30.5%
1992 4.442 25.68 55.77 32.60 114.06 27.0% 7.6%
1993 4.728 24.04 57.18 32.43 113.65 -0.4% 10.1%
1994 5.017 21.77 56.03 31.42 109.22 -3.9% 1.3%
1995 5.262 28.07 76.93 42.70 147.70 35.2% 37.6%
1996 5.529 31.30 91.63 50.12 173.05 17.2% 23.0%
20-year total return 1336.1% 1417.8%
</TABLE>
The dollar amount of shares accepted at the time reinvestment occurred was
$52.29 for capital gains and $28.58 for income dividends. If capital gains
distributions and dividends had been withdrawn in cash, the total dollar
amount received would have been $17.16 and $10.03, respectively. Computation
of results assumes that all 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.
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DOLLAR COST AVERAGING
Dollar cost averaging can be a useful tool. 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. Listed below are the results of
hypothetical $100 investments made in the Trust at the end of each month for
the last ten years.
TEN-YEAR INVESTMENT RECORD
MONTHLY $100 INVESTMENTS -- ALL DISTRIBUTIONS REINVESTED
<TABLE>
<CAPTION>
CUMULATIVE VALUE OF SHARES ACQUIRED
----------------------------------------------------------
YEAR CUMULATIVE THROUGH + AS CAPITAL + AS = TOTAL
ENDED ANNUAL ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL GAIN DIVIDEND VALUE OF
12/31 INVESTMENTS DIVIDENDS DIVIDENDS CAPITAL GAINS CAPITAL GAINS INVESTMENTS + DISTRIBUTIONS + DISTRIBUTIONS = INVESTMENT
- ----- ----------- --------- ---------- ------------- ------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 $ 1,200 $ 24 $ 24 $102 $ 102 $ 927 $ 102 $ 22 $ 1,051
1988 2,400 70 94 283 385 1,996 385 84 2,465
1989 3,600 112 206 171 556 3,988 688 232 4,908
1990 4,800 156 362 191 747 4,605 789 346 5,740
1991 6,000 183 545 236 983 7,079 1,223 628 8,929
1992 7,200 197 742 273 1,255 10,035 1,766 979 12,779
1993 8,400 241 983 608 1,863 10,482 2,261 1,144 13,887
1994 9,600 279 1,262 565 2,428 10,622 2,612 1,305 14,539
1995 10,800 290 1,552 669 3,097 15,058 4,037 1,989 21,084
1996 12,000 362 1,914 894 3,991 18,106 5,383 2,590 26,079
</TABLE>
CHECK-A-MONTH
We would like to remind shareholders of the Trust's Check-A-Month Plan. Since
such a program can involve use of capital (through the taxable sale of shares
needed to make payments in excess of investment income), caution is advised in
matching the amounts taken out with an investor's overall financial picture
and long-term needs. The table below covers an assumed plan period from
December 31, 1986 to December 31, 1996. The results reflect the operation of
the plan under the terms of which all dividend and capital gain distributions
are reinvested, and monthly redemption payments occur as of the 25th of each
month, or the next business day thereafter. The hypothetical results shown
should not be considered as a representation of results expected from an
investment made in the Trust today. Importantly, continued withdrawals in
excess of current income will eventually exhaust principal, particularly in a
period of declining market prices.
TEN-YEAR INVESTMENT RECORD MONTHLY $50 WITHDRAWALS
ON AN INITIAL $12,000 INVESTMENT -- ALL DISTRIBUTIONS REINVESTED
<TABLE>
<CAPTION>
CUMULATIVE VALUE OF SHARES ACQUIRED
----------------------------------------------------------
YEAR CUMULATIVE THROUGH + AS CAPITAL + AS = TOTAL
ENDED ANNUAL ANNUAL CUMULATIVE ANNUAL CUMULATIVE INITIAL GAIN DIVIDEND VALUE OF
12/31 WITHDRAWALS DIVIDENDS DIVIDENDS CAPITAL GAINS CAPITAL GAINS INVESTMENT + DISTRIBUTIONS + DISTRIBUTIONS = INVESTMENT
- ----- ----------- --------- ---------- ------------- ------------- ----------- ------------- ------------- ----------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 $12,000 $12,000
1987 $ (600) $319 $ 319 $1,022 $1,022 9,205 $1,023 $ 280 10,508
1988 (1,200) 374 693 1,333 2,355 8,579 2,349 612 11,540
1989 (1,800) 386 1,079 546 2,901 10,744 3,687 1,227 15,657
1990 (2,400) 402 1,481 462 3,363 8,723 3,658 1,436 13,817
1991 (3,000) 379 1,860 463 3,826 10,258 5,039 2,198 17,496
1992 (3,600) 343 2,203 460 4,286 11,842 6,613 3,056 21,511
1993 (4,200) 372 2,575 915 5,201 10,539 7,105 3,213 20,857
1994 (4,800) 384 2,959 757 5,958 8,974 7,192 3,279 19,445
1995 (5,400) 361 3,320 814 6,772 10,904 10,087 4,610 25,602
1996 (6,000) 415 3,735 1,006 7,778 11,507 12,241 5,568 29,316
</TABLE>
Note: 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. 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 redemption.
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SHAREHOLDER QUESTIONS AND INFORMATION
MANAGEMENT PHILOSOPHY AND FUND CHARACTERISTICS
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 average stock market valuations.
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.
Q. Why does the Trust specialize in the insurance industry?
A. The insurance industry is a major growth industry, having grown at a pace
22% faster than that of the overall U.S. economy during the past twenty years.
Assets of the industry are over $3 trillion. By concentrating on the best
companies in such a market, the Trust has been able to generate returns of
17.16%, 92.66%, 251.92%, 757.92% and 1,336.08% for the past one, five, ten,
fifteen and twenty year periods ending December 31, 1996.
INVESTOR INFORMATION AND SERVICES
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. 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. The 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. 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. See page 7 for results
of such a program.
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SHAREHOLDER QUESTIONNAIRE
We have had an overwhelming response to our 1996 shareholder questionnaire
mailing. The results are currently being analyzed to find ways of improving
the Trust's services to meet the changing needs of our shareholders. Below are
some highlights:
o 74% of respondents are married.
o 89% of respondents own a home.
* 62% of respondents have annual income between $31,000-$100,000.
* 67% of respondents have a personal computer at home and over 50% of those
use the Internet.
o 44% of respondents under the age of 56 are saving for retirement.
o 62% of respondents use a securities broker and more than 50% of those use a
discount broker.
* 77% of respondents consider seven years or more to be long-term investing.
* 61% of respondents only own no-load mutual funds.
o THE average value of respondents' total investments is $430,000.
o THE TOP FIVE types of funds that respondents are invested in are: (1) growth
and income; (2) growth; (3) aggressive growth; (4) money market; and (5)
tax-exempt.
It is interesting to note the respondents' reasons for investing in the Trust
and the number of years they have been invested. The charts below reveal that
over 60% of respondents invested in the Trust because of its historical
record. Sixty-seven percent of respondents have been shareholders of the Trust
for over six years and 17% of those have been shareholders for over two
decades.
TOP FIVE REASONS FOR INVESTING NUMBER OF YEARS INVESTED
1. The Trust's Historical Record 5 years & under 33%
2. Objective of Growth and Income 6 to 20 years 50%
3. The Trust's Low Expense Ratio 21 years & over 17%
4. Best Return for its Risk
5. Exposure to Financial Services
We appreciate your continued interest in Century Shares Trust. Representatives
of the Trust are committed to offering exceptional service and are available
to take calls if you have questions or would like a prospectus. The Trust's
toll free number is (800)321-1928; or call the shareholder hotline at
(800)303-1928 for questions about your account.
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<PAGE>
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MANAGEMENT
Century Shares Trust is managed by its investment advisor, Century Capital
Management, Inc., which provides all investment advisory and management
functions. The Trust's activities, including its agreement with the advisor,
are supervised by the Trustees: Messrs. Fulkerson and Dyer (who make the day-
to-day decisions concerning the Trust), William O. Bailey, John E. Beard, and
Ernest E. Monrad. Listed below are biographical sketches of the Advisor's
principal officers.
ALLAN W. FULKERSON
Mr. Fulkerson is President 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 serves as a director of various
insurance 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. He serves as a director of several 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 previously worked 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 held various investment
positions with Kemper Financial Services, including serving as a 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 an 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.
JAMES B. STRADTNER
Mr. Stradtner is Vice President of Century Capital Management, Inc. and
President of its subsidiary, Century Capital Management of Maryland LLC. Prior
to joining Century in 1996, Mr. Stradtner was a Managing Director at Alex.
Brown & Sons. Mr. Stradtner received a B.S. from the University of Maryland
and an LLB from the University of Maryland School of Law. Mr. Stradtner is a
Chartered Financial Analyst and serves as a director of several insurance
companies.
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<PAGE>
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PORTFOLIO OF INVESTMENTS -- December 31, 1996
COMMON STOCKS: INSURANCE COMPANIES -- 91.7%
SHARES VALUE
------ -----
50,000 AFLAC Inc. ........................................... $ 2,137,500
60,000 American General Corp. ............................... 2,452,500
225,000 American Heritage Life Investment Corp. .............. 5,906,250
210,000 American International Group, Inc. ................... 22,732,500
345,000 AON Corp. ............................................ 21,433,125
280,000 The Chubb Corp. ...................................... 15,050,000
253,575 Cincinnati Financial Corp. ........................... 16,450,678
120,000 General Re Corp. ..................................... 18,930,000
75,000 Marsh & McLennan Companies ........................... 7,800,000
195,000 MBIA, Inc. ........................................... 19,743,750
180,000 Mercury General Corp. ................................ 9,450,000
285,000 Ohio Casualty Corp. .................................. 10,117,500
300,000 The Progressive Corp. ................................ 20,212,500
170,000 Protective Life Corp. ................................ 6,778,750
165,000 Providian Corp. ...................................... 8,476,875
380,000 SAFECO Corp. ......................................... 14,986,250
250,000 St. Paul Companies, Inc. ............................. 14,656,250
265,000 Torchmark Corp. ...................................... 13,382,500
100,000 UNUM Corp. ........................................... 7,225,000
250,000 USF&G Corp. .......................................... 5,218,750
150,000 USLIFE Corp. ......................................... 4,987,500
------------
248,128,178
------------
COMMON STOCKS: BANKING INSTITUTIONS -- 7.1%
50,000 Banc One Corp. ....................................... 2,150,000
100,000 J.P. Morgan & Co., Inc. .............................. 9,762,500
130,000 Wachovia Corp. ....................................... 7,345,000
------------
19,257,500
------------
TOTAL INVESTMENTS IN COMMON STOCKS -- 98.8%
(Identified cost, $79,230,442) ............................... 267,385,678
------------
FIXED INCOME -- 0.4%
U.S. Treasury Note, 5.625%, due 8/31/97 ...................... 998,437
------------
TOTAL FIXED INCOME (Identified cost, $1,030,625) ............... 998,437
------------
CASH EQUIVALENTS -- 0.8%
State Street Bank and Trust Eurodollar Time Deposit, at cost
approximating value, maturity 1/2/97 2,261,000
------------
TOTAL INVESTMENTS -- 100% (Identified cost, $82,522,067) ....... $270,645,115
============
See notes to financial statements.
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<PAGE>
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<TABLE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES -- December 31, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (Identified cost, $82,522,067) .............. $270,645,115
Dividends and interest receivable ........................................... 547,968
Receivable for Trust shares sold ............................................ 39,267
Prepaid expenses ............................................................ 10,795
-----------
Total assets ........................................................ 271,243,145
LIABILITIES:
Payable for investments purchased ................................ $177,500
Payable for Trust shares repurchased ............................. 65,239
Accrued investment adviser fee (Note 5) .......................... 150,836
Accrued expenses and other liabilities ........................... 68,125
--------
Total liabilities ................................................... 461,700
-----------
NET ASSETS (Note 3) ......................................................... $270,781,445
============
Per share net asset value, offering price and redemption price
($270,781,445 / 8,652,111 shares of $1.00 par value capital stock
outstanding) (Note 2) ................................................... $31.30
======
<CAPTION>
STATEMENT OF OPERATIONS -- Year Ended December 31, 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends ................................................................. $ 5,677,587
Interest .................................................................. 540,741
-----------
Total income .......................................................... 6,218,328
Expenses:
Investment adviser fee ........................................ $1,756,532
Non-interested trustees' remuneration (Note 5) ................ 49,500
Transfer agent ................................................ 149,798
Custodian ..................................................... 47,009
Insurance ..................................................... 22,088
Audit ......................................................... 52,702
Legal ......................................................... 21,646
Registration costs ............................................ 44,929
Printing and other ............................................ 61,944
----------
Total expenses ........................................................ 2,206,148
-----------
Net investment income ............................................. 4,012,180
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions .............................. 9,627,266
Increase in net unrealized appreciation of investments ...................... 26,491,322
-----------
Net realized and unrealized gain on investments ................... 36,118,588
-----------
Net increase in net assets resulting from operations .......................... $40,130,768
===========
</TABLE>
See notes to financial statements.
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<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................................. $ 4,012,180 $ 3,656,236
Net realized gain on investment transactions ........... 9,627,266 8,638,210
Increase in net unrealized appreciation of investments . 26,491,322 56,383,215
------------ ------------
Net increase in net assets resulting from operations ... 40,130,768 68,677,661
Net equalization (Note 1C) ............................... (88,887) (16,684)
Distributions to shareholders from:
Net investment income .................................. (3,903,632) (3,698,990)
Realized gain from investment transactions ............. (9,336,444) (8,521,998)
Trust share transactions -- net (Note 2) ................. (23,201,195) 4,837,054
------------ ------------
Total increase ............................... 3,600,610 61,277,043
NET ASSETS:
At beginning of year ................................... 267,180,835 205,903,792
------------ ------------
At end of year (including accumulated distributions in
excess of net investment income of $323,276 and
$234,389, respectively) .............................. $270,781,445 $267,180,835
============ ============
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $28.07 $21.77 $24.04 $25.68 $21.03
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........... $ 0.46 $ 0.41 $ 0.44 $ 0.43 $ 0.48
Net realized and unrealized gain
(loss) on investments ......... 4.34 7.22 (1.38) (0.52) 5.15
------ ------ ------ ------ ------
Total income from investment
operations ................ $ 4.80 $ 7.63 $(0.94) $(0.09) $ 5.63
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ........... $(0.46) $(0.41) $(0.45) $(0.45) $(0.42)
Net realized gain on investment
transactions .................. (1.11) (0.92) (0.88) (1.10) (0.56)
------ ------ ------ ------ ------
Total distributions ......... $(1.57) $(1.33) $(1.33) $(1.55) $(0.98)
------ ------ ------ ------ ------
NET ASSET VALUE, end of year ...... $31.30 $28.07 $21.77 $24.04 $25.68
====== ====== ====== ====== ======
TOTAL RETURN ...................... 17.2% 35.2% (3.9)% (0.4)% 27.0%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000
omitted) ...................... $270,781 $267,181 $205,904 $242,781 $260,265
Ratio of expenses to average net
assets ........................ 0.82% 0.94% 1.01% 0.82% 0.84%
Ratio of net investment income to
average net assets ............ 1.49% 1.60% 1.93% 1.72% 1.84%
PORTFOLIO TURNOVER RATE ........... 3% 5% 2% 19% 5%
AVERAGE COMMISSION RATE PAID ...... $.0400
</TABLE>
See notes to financial statements.
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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. In preparing the Financial Statements in
conformity with generally accepted accounting principles, management uses
estimates in determining the reported amounts of assets, liabilities, revenues
and expenses. Actual amounts could differ from those estimates.
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, 1996, 8,652,111 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, 1996 DECEMBER 31, 1995
---------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold .............................. 699,331 $ 20,345,429 1,797,676 $47,919,634
Issued to shareholders in
reinvestment of distributions
from:
Net investment income ........... 88,021 2,669,827 96,658 2,568,585
Realized gain on investment
transactions ...................... 242,250 7,684,171 257,855 7,237,989
---------- ------------ ---------- -----------
1,029,602 30,699,427 2,152,189 57,726,208
Repurchased ....................... (1,896,822) (53,900,622) (2,093,096) (52,889,154)
---------- ------------ ---------- -----------
Net increase (decrease) ....... (867,220) $(23,201,195) 59,093 $ 4,837,054
========== ============ ========== ===========
<CAPTION>
(3) SOURCES OF NET ASSETS -- At December 31, 1996, net assets consisted of:
<S> <C>
Capital paid-in ........................................................................ $ 83,069,913
Accumulated distributions in excess of net investment income ........................... (323,276)
Accumulated distributions in excess of net realized gains on investment transactions ... (88,240)
Unrealized appreciation in value of investments ........................................ 188,123,048
------------
Net assets applicable to outstanding capital stock ................................. $270,781,445
============
</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, 1996 was to increase distributions in excess of net
investment income by $108,548, increase accumulated distributions in excess of
net realized gains by $92,246, and increase capital paid-in by $200,794. 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.
(4) INVESTMENT SECURITY TRANSACTIONS -- Other than U.S. Government obligations
and certificates of deposit, purchases and sales of investment securities
aggregated $6,705,559 and $28,702,232, respectively, during the year ended
December 31, 1996. At December 31, 1996, the cost of investments for federal
tax purposes was $82,610,307. Net unrealized appreciation for all securities
at that date was $188,034,808. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost of $188,066,996 and aggregate gross unrealized depreciation for
all securities in which there was an excess tax cost over market value of
$32,188.
(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, 1996, the fee amounted to $1,756,532. Officers and
Trustees of the Trust who are employed by CCM receive remuneration for their
services out of such investment adviser fee.
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, 1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended December 31, 1996 and
1995, and the financial highlights for each of the years in the five-year
period ended December 31, 1996. 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, 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 December 31, 1996, 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 17, 1997
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FEDERAL INCOME TAX INFORMATION
The federal tax status of distributions per share in 1996 is as follows:
<TABLE>
<CAPTION>
TAXABLE AS TAXABLE AS LONG- TAXABLE AS SHORT-
DATE PAID DIVIDENDS TERM CAPITAL GAIN TERM CAPITAL GAIN
- --------- ---------- ----------------- -----------------
<S> <C> <C> <C>
June 27, 1996 ................................ $.21
December 19, 1996 ............................ .25
December 30, 1996 ............................ $1.09 $.02
---- ----- ----
Total .................................... $.46 $1.09 $.02
==== ===== ====
</TABLE>
An amount equal to $.46 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 $1.09 per share is
taxable as a long-term capital gain and the capital gain distribution of $.02
per share is taxable as a short-term distribution in 1996, 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 1996 1.11 31.72
------
Total since 1952 $23.90
(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.
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